Spectra Energy may look to debt markets in 2010 to fund capital needs

By Jennifer Lanning Drey

Portland, Ore., Jan. 22 - Spectra Energy Corp. may choose to fund its expansion capital expenditures and long-term debt maturities by accessing the debt capital markets in 2010 but will be opportunistic in doing so because it has the capacity to handle the funding needs with its existing credit facilities, Pat Reddy, chief financial officer of Spectra, said during a Friday company analyst meeting in New York.

"We have sufficient liquidity to allow us to execute our multi-year capital expansion plans, no matter what happens in the financial markets," Reddy said.

"We'll be opportunistic in our approach to long-term financing, focusing on maintaining the lowest cost of capital, whether using Spectra Energy or Spectra Energy Partners, our MLP [master limited partnership]."

With plans for about $1 billion in expansion capital expenditures in 2010 and $800 million in long-term debt maturing in the year, the company would look to tap the long-term debt markets for about $1.6 billion, if it does go that route, he said.

The company expects to generate nearly $1.6 billion in cash from net income and depreciation and amortization in 2010. The primary uses of that cash are maintenance capital expenditures and payment of the common stock dividend, he said.

Spectra is also committed to maintaining its investment-grade credit rating and expects to see improving credit metrics through 2012 as it begins to earn returns on incremental growth capital expenditures, he said.

"We're in excellent shape to execute on our 2010 plan and to ensure we profitably grow our business as we seek to exceed investor expectations well into 2012 and beyond," Reddy said.

Spectra will only pursue capital projects with expected returns that appropriately balance risk and reward as well as meet or exceed their cost of capital, he said.

"This approach is the fundamental driver of our ability to grow earnings per share," Reddy said.

The company sees expansion opportunities of at least $1 billion annually with returns on capital exceeding its targeted 10% to 12% range.

Spectra is a natural gas company based in Houston.

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