Enbridge to purchase three U.S. utilities for $14 billion in cash and debt

Story by The Canadian Press •


CALGARY — Enbridge Inc. has signed a US$14 billion cash-and-debt deal that represents a major vote of confidence by the Canadian company in the future of natural gas.

The Calgary-based energy infrastructure giant said Tuesday it will purchase three U.S.-based utility companies— The East Ohio Gas Company, Questar Gas Company and its related Wexpro companies, and the Public Service Company of North Carolina — all of which are owned by Virginia-based Dominion Energy Inc.

Enbridge, which plans to finance the deal through a combination of US$9.4 billion of cash consideration and US$4.6 billion of assumed debt, said the deal will double the scale of its gas utility business and will serve to balance its asset mix evenly between natural gas and renewables, and liquids.

In a presentation for investors Tuesday afternoon, Enbridge CEO Greg Ebel said the company's earnings mix is currently about 60 per cent weighted towards crude oil and liquids, and 40 per cent weighted towards natural gas and renewable energy. (Enbridge is currently the only major pipeline company in North America that owns a regulated utility. Enbridge Gas Inc. currently serves about 75 per cent of Ontario residents.)

Following the Dominion deal, which remains subject to regulatory approval and is expected to close in 2024, that balance will be closer to 50-50, Ebel said. The deal will give Enbridge gas utility operations in Ohio, North Carolina, Utah, Idaho and Wyoming, representing a significant presence in the U.S. utility sector.

The acquisition is expected to double the scale of Enbridge's gas utility business to approximately 22 per cent of Enbridge's total adjusted earnings before interest, taxes, depreciation, and amortization.

While the purchase is larger than the more modest "tuck-in" acquisitions Enbridge has been pursuing in recent years, the scale and price of the Dominion assets made them a "once in a generation" opportunity that couldn't be passed up, Ebel said.

The purchase also fits with the company's previously stated bullish outlook on natural gas — even as the world aims to reduce emissions from fossil fuels to tackle climate change.

"We remain firmly of the view that all forms of energy will be required for a safe and reliable energy transition," Ebel said in Tuesday's investor presentation.

"This transaction helps us to achieve greater balance and gives us more exposure to natural gas, which is and will continue to be a critical fuel to help us realize our lower-carbon emissions."

Enbridge said following the transaction, its gas utility business will be the largest by volume in North America with a combined rate base of over C$27 billion and about 7,000 employees delivering over nine billion cubic feet per day of gas to approximately seven million customers.

Ebel said the purchase will be accretive to Enbridge's earnings within the first year, and the utilities will offer long-term, low-risk, predictable cash flow growth.

This report by The Canadian Press was first published Sept. 5, 2023.

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Amanda Stephenson, The Canadian Press

Enbridge set to be top US gas supplier with $14 billion bid for Dominion utilities

Story by Reuters •7h

LNG 2023 energy trade show in Vancouver

By Arunima Kumar and David French

(Reuters) -Enbridge will buy three utilities from Dominion Energy for $14 billion including debt, the Canadian pipeline operator said on Tuesday, creating North America's largest natural gas provider and doubling its gas distribution business.

The deal is seen as a bet on the future of natural gas in a regulated market even as energy companies and consumers are transitioning to a greener future by phasing out fossil fuels.

The deals for East Ohio Gas, Questar Gas, and Public Service Co of North Carolina will consist of $9.4 billion in cash and $4.6 billion of assumed debt.

U.S.-listed shares of Enbridge fell 6.5% to $33.01 in extended trading after the company also announced a C$4 billion ($2.9 billion) bought-share sale to fund a portion of the deal.

The divestments are the latest by Dominion following a strategic refresh announced last year aimed at focusing on its regulated operations. In July, Dominion agreed to sell its 50% stake in Cove Point LNG to the energy arm of Berkshire Hathaway for $3.3 billion.

Enbridge President and CEO Greg Ebel described the assets the company is acquiring as "must-have" infrastructure for providing safe, reliable and affordable energy.

The deal is expected to close in 2024, subject to approvals from the Federal Trade Commission and Committee on Foreign Investment in the United States, among others.

Upon closing, Enbridge would supply over 9 billion cubic feet per day (bcfpd) of gas to about 7 million customers in Ohio, North Carolina, Utah, Idaho and Wyoming, making it the largest gas utility business by volume in North America.

It would give the Calgary-based company access to a bigger chunk of cash from U.S. consumers as they buy gas for cooking and heating from an Enbridge-owned utility.

"Enbridge is currently the only major pipeline and midstream company that owns a regulated gas utility and we've further strengthened that position today by doubling the size of our GDS (gas distribution and storage) business," Enbridge's Chief Financial Officer Patrick Murray said in a statement.

U.S. utilities have zeroed in on their regulated operations as they provide the steady returns preferred by investors, compared with unregulated assets whose returns are dictated by market dynamics.

Morgan Stanley & Co LLC and RBC Capital Markets acted as financial advisors to Enbridge, while Sullivan & Cromwell LLP and McCarthy Tétrault LLP were legal advisors.

($1 = 1.3636 Canadian dollars)

(Reporting by Arunima Kumar in Bengaluru and David French in New York; Editing by Shailesh Kuber, Sriraj Kalluvila and Richard Chang)