Enbridge Income Fund Holdings Inc.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions -- related party transactions -- income fund to acquire assets from a related party -- issuer to offer subscription receipts for common shares to fund acquisition from related party -- issuer to use proceeds to acquire additional fund units of a related party, which in turn will subscribe for trust units of a related party -- fund jointly owned by issuer and related party -- issuer will provide a valuation and obtain minority approval of asset acquisition -- issuer exempt from valuation requirement in connection with subscription of fund units.

Applicable Legislative Provisions

Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, ss. 5.4, 9.1(2).

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.

November 5, 2012

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(THE "JURISDICTION")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

ENBRIDGE INCOME FUND HOLDINGS INC.

(THE "FILER")

DECISION

Background

The principal regulator in the Jurisdiction (the "Decision Maker") has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") requesting relief (the "Exemptive Relief") from the requirement in section 5.4 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101") that the Filer obtain a formal valuation of the ordinary trust units (the "Fund Units") of Enbridge Income Fund (the "Fund") to be acquired by the Filer in connection with the indirect acquisition by the Fund of certain renewable energy assets situated in the Province of Ontario and certain liquids storage assets situated in the Province of Alberta (collectively, the "Subject Assets") owned indirectly by Enbridge Inc. ("Enbridge").

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in the Province of Québec.

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102 and MI 61-101 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer was incorporated under the laws of the Province of Alberta on March 26, 2010.

2. The Filer's principal and head office is located at Suite 3000, 425 -- 1st Street SW, Calgary, Alberta, T2P 3L8.

3. The Filer's articles of incorporation restrict the Filer's business to acquiring, holding, transferring, disposing of, investing in and otherwise dealing in assets, securities, properties or other interests of, or issued by, the Fund and its associates or affiliates, or any other business entity in which the Fund has an interest, as well as all other business and activities which are necessary, desirable, ancillary or incidental thereto, including but not limited to borrowing funds and incurring indebtedness; guaranteeing of debts or liabilities; and issuing, redeeming or repurchasing securities.

4. The Filer is a reporting issuer in all of the provinces of Canada.

5. The authorized capital of the Filer consists of an unlimited number of common shares of the Filer ("Common Shares"), first preferred shares, issuable in series and limited to one-half of the number of Common Shares issued and outstanding at the relevant time, and one special voting share, of which an aggregate of 39,741,000 Common Shares, no first preferred shares and one special voting share are issued and outstanding as at the date hereof.

6. The Common Shares are listed on the Toronto Stock Exchange.

7. Enbridge holds an aggregate of 7,909,000 Common Shares, representing 19.9% of the outstanding Common Shares.

8. The only assets of the Filer are 39,741,000 Fund Units and as such, the Filer provides to holders of the Common Shares (the "Shareholders") an indirect ownership interest in a Fund Unit for each Common Share held by such Shareholders. The Filer does not have any outstanding debt or material liabilities.

9. Pursuant to the restructuring of the Fund that was completed on December 17, 2010, the then public unitholders of the Fund, and Enbridge (with respect to 5,000,000 Fund Units), exchanged their Fund Units for Common Shares on a one to one basis.

10. The Fund is an unincorporated open-ended trust established under the laws of the Province of Alberta on May 22, 2003.

11. The Fund's principal and head office is located at Suite 3000, 425 -- 1st Street SW, Calgary, Alberta, T2P 3L8.

12. The Fund is a limited purpose trust and, generally speaking, its activities are restricted to acquiring, holding, and dealing with interests in operating investments that are involved in energy infrastructure and related businesses. The Fund's permitted activities also include issuing securities and engaging in financial and other activities ancillary or incidental to its purpose.

13. The Fund is a reporting issuer in all of the provinces of Canada.

14. The authorized capital of the Fund consists of an unlimited number of Fund Units. As at the date hereof, 49,241,000 Fund Units are issued and outstanding, of which 39,741,000 are held by the Filer, representing 80.7% of the outstanding Fund Units, and 9,500,000 are held by Enbridge, representing 19.3% of the outstanding Fund Units. As of the date hereof, on a fully diluted basis (assuming conversion of the ECT Preferred Units described below) the Filer holds a 38.5% interest in the Fund and Enbridge holds a 61.5% interest in the Fund.

15. The Fund Units are not listed on any stock exchange or market.

16. The Fund indirectly owns crude oil and natural gas pipelines in Saskatchewan, a 50% interest in the Canadian portion of the Alliance Pipeline System and various interests in entities that produce electricity from renewable and alternative energy sources.

17. Enbridge Commercial Trust ("ECT") is an unincorporated trust established under the laws of the Province of Alberta on December 20, 2002.

18. ECT's principal and head office is located at Suite 3000, 425 -- 1st Street SW, Calgary, Alberta, T2P 3L8.

19. ECT is not a reporting issuer.

20. The authorized capital of ECT consists of an unlimited number of ECT common units ("ECT Common Units") and an unlimited number of ECT non-voting preferred units ("ECT Preferred Units"). As at the date hereof, there are 84,174,333 ECT Common Units outstanding (all of which are owned by the Fund) and 54,074,750 ECT Preferred Units outstanding (all of which are owned by Enbridge). The ECT Preferred Units are convertible at any time and from time to time into Fund Units on a one to one basis (subject to anti-dilution provisions) at the option of the holder.

21. ECT's activities are restricted to the direct or indirect conduct of the business of, or activities pertaining to, energy infrastructure including the ownership, operation and lease of assets and property, investments, and other rights or interests in companies or other entities involved in the energy infrastructure business and engaging in all activities ancillary or incidental to the foregoing.

22. ECT holds directly and indirectly all of the outstanding securities of the partnerships and corporations that own the assets of the Fund which will be acquiring the entities that own the Subject Assets. All such entities are directly or indirectly wholly-owned by Enbridge.

23. The proposed acquisition of the Subject Assets (the "Transaction") will be effected by: (i) the direct and indirect acquisition from Enbridge by a wholly-owned indirect subsidiary of the Fund of all of the outstanding shares of a corporation and all of the outstanding shares of the general partners of the limited partnerships that collectively hold the Subject Assets; and (ii) the acquisition by wholly-owned indirect subsidiaries of the Fund from wholly-owned indirect subsidiaries of Enbridge of all of the limited partnership units of such limited partnerships, such that the Fund will indirectly be the sole owner of the corporation and the limited partnerships that collectively own all of the Subject Assets as well as the general partners that manage such limited partnerships. The wholly-owned subsidiaries of the Fund that will be acquiring such shares and limited partnership units are hereafter collectively referred to as the "Purchasers".

24. Pursuant to the Transaction, the price for the Subject Assets of $1.164 billion, subject to adjustment, will be financed as follows: (i) the Filer will issue subscription receipts ("Subscription Receipts") to the public pursuant to a prospectus offering and Common Shares, at the same price as the Subscription Receipts, to Enbridge (such that Enbridge will retain its 19.9% interest in the Filer) pursuant to a private placement whereby each Subscription Receipt will automatically be exchanged for Common Shares on a one to one basis (subject to anti-dilution provisions) immediately prior to the completion of the Transaction and after receipt of the approval of the Transaction by a majority of Shareholders who are entitled to vote; (ii) the Filer will use the proceeds therefrom to acquire additional Fund Units; (iii) the Fund will borrow approximately $582 million from Enbridge on commercial terms; (iv) the Fund will use the proceeds from the issuance of Fund Units to the Filer and the loan from Enbridge to acquire additional ECT Common Units; (v) ECT will issue ECT Preferred Units to Enbridge; and (vi) the proceeds received by ECT from the Fund (from the issuance of ECT Common Units and the loan) and from the issuance of the ECT Preferred Units will be invested in or loaned to the Purchasers, which will use such proceeds to acquire the entities that own the Subject Assets.

25. The Transaction contemplates that Enbridge will subscribe for a new series of ECT Preferred Units with a different redemption price and liquidation preference amount, but otherwise having the same terms as the currently outstanding ECT Preferred Units, including the conversion of the ECT Preferred Units for Fund Units on a one to one basis. The issue price of the Fund Units to be issued to the Filer, the issue price of the ECT Common Units to be issued to the Fund, the issue price of the Common Shares and ECT Preferred Units to be issued to Enbridge and the issue price of the Subscription Receipts to be issued to the public will be the same (the "Financing").

26. The Subject Assets to be acquired pursuant to the Transaction are expected to diversify the Fund's overall business mix, sources of earnings and cash flow and generate additional earnings and cash flow for the Fund such that the Transaction is expected to be accretive to the Filer's distributable cash flow on a sustainable basis.

27. Completion of the Transaction is subject to a number of conditions, including completion of the Financing, regulatory approvals, third party consents and any board and shareholder approvals.

28. The Board of Trustees of ECT ("ECT Board") formed a special committee of trustees who are independent of Enbridge (the "Special Committee") to review, consider, negotiate, report and make recommendations regarding the Transaction to the ECT Board. To assist in the discharge of its responsibilities, the Special Committee retained:

(a) BMO Capital Markets to act as its independent financial advisor and, in particular, to prepare and deliver a formal valuation in accordance with MI 61-101 of the Subject Assets and a written opinion as to the fairness of the Transaction, from a financial point of view, to the Fund and the Filer (the "Valuation and Fairness Opinion");

(b) independent legal counsel; and

(c) AMEC Americas Ltd., Black & Veatch Canada Company and WorleyParsons Canada Services Ltd. to prepare and deliver independent engineering reports in respect of the solar energy assets, the wind energy assets and the liquids storage assets, respectively, that comprise the Subject Assets.

29. The members of the ECT Board who are independent of Enbridge have concluded that the Transaction is in the best interests of the Fund, ECT and their respective unitholders (other than Enbridge) and approved the Transaction on behalf of ECT and the Fund.

30. The members of the Board of Directors of the Filer who are independent of Enbridge have considered and approved the acquisition of Fund Units from the Fund and have concluded that the Transaction is in the best interests of the Filer and fair to the Filer, and have recommended approval of the Transaction by the Shareholders.

31. Due to the Board of Directors of the Filer having determined that the Transaction is in the best interests of and fair to the Filer and having recommended approval of the Transaction by the Shareholders, the Filer intends to hold a meeting (the "Meeting") of the Shareholders to obtain approval of, inter alia, the Transaction in accordance with the majority of the minority requirements under MI 61-101. Enbridge, a "related party" of Enbridge and any "joint actor" of Enbridge (as such terms are defined in MI 61-101) will not be entitled to vote on such matter.

32. The materials to be sent to the Shareholders in connection with the Meeting will include particulars of the Transaction as required under applicable securities legislation and the Valuation and Fairness Opinion.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemptive Relief is granted.

"Shannon O'Hearn"
Manager, Corporate Finance
Ontario Securities Commission