VARIABLE INTEREST ENTITIES

3 Months Ended

Mar. 31, 2019

VARIABLE INTEREST ENTITIES

VARIABLE INTEREST ENTITIES

VARIABLE INTEREST ENTITIES

Gray Oak Holdings LLC

In December 2018, Enbridge acquired an effective 22.8% interest in the Gray Oak crude oil pipeline through acquisition of a 35% membership interest in Gray Oak Holdings LLC (Gray Oak Holdings), which will construct and operate the Gray Oak crude oil pipeline from Texas to the Gulf coast of the United States.

Gray Oak Holdings is a variable interest entity (VIE) as it does not have sufficient equity at risk to finance its activities and requires subordinated financial support from Enbridge and other partners. We have determined that we do not have the power to direct the activities of Gray Oak Holdings that most significantly impact the VIE’s economic performance. Specifically, the power to direct the activities of the VIE is shared amongst the partners. Each partner has representatives that make up an executive committee that makes the significant decisions for the VIE and none of the partners may make major decisions unilaterally. Therefore, the VIE is accounted for as an unconsolidated VIE.

As at March 31, 2019 and December 31, 2018, the carrying amount of the investment in Gray Oak Holdings was $455 million and nil, respectively. Enbridge's maximum exposure to loss as at March 31, 2019 was approximately $931 million and primarily consists of our portion of the project construction costs.

On March 29, 2019, we and our partners of the Gray Oak Holdings investment executed a loan agreement to loan up to a maximum of US$1,230 million to the investment to finance the construction of the Gray Oak crude oil pipeline. The amount committed by us is US$280 million, which is proportionate to our effective ownership interest. Loans under this agreement are due on March 31, 2022, with early repayment permitted.