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Best Canadian Stocks: Ruby pipeline is a big plus for Veresen LNG plans

Income InvestingEvery Tuesday we bring you “Best Canadian Stocks.” You get our specific recommendation on the stocks we profile, with a full explanation of how we arrived at our opinion. You’ll read about stocks making moves you should know about, from coverage in one of our three newsletters featuring Canadian stocks—The Successful Investor, Stock Pickers Digest and Canadian Wealth Advisor.

VERESEN (Toronto symbol VSN; www.vereseninc.com) owns pipelines, power plants and gas-processing facilities across North America.

A major holding is 50% of the Alliance gas line, which runs 3,000 kilometres between Chicago and Fort St. John, B.C. Veresen also owns the Alberta Ethane Gathering System, 42.7% of the Aux Sable NGL plant, and the Hythe/Steeprock natural gas gathering and processing complex in the Cutbank Ridge region of Alberta and B.C.

Veresen has agreed to pay $1.43 billion for Global Infrastructure Partners’ 50% interest in the Ruby pipeline system.

Ruby is a newly built natural gas line that runs 680 miles from Wyoming to Oregon. Right now, it can pump 1.5 billion cubic feet a day, but that could be increased to 2.0 billion. Partner Kinder Morgan will operate the system.


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Dividend stocks: Dividends from Ruby will give Veresen an immediate boost in cash flow

The Ruby pipeline will benefit Veresen in two main ways:

First, the company is buying its interest through preferred shares that it can convert into common shares whenever it chooses. That means it will receive steady preferred dividends that will immediately add to its cash flow per share.

Second, Veresen continues to move ahead with its plan to build the $6.8-billion Jordan Cove liquefied natural gas plant in Oregon. If regulators give the company final approval, the project could start up and begin exporting LNG to Asia in 2019.

The Ruby pipeline terminates at the Malin hub in Oregon, so it will give the company a nearby and assured source of natural gas for Jordan Cove.

To help pay for the purchase, Veresen is selling 56.1 million common shares at $16.40 each to raise $920 million.

Veresen is a buy recommendation of Canadian Wealth Advisor.

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