Enbridge in US$14bn deal to acquire three US gas utilities
Canadian midstream and pipeline company Enbridge said September 5 it had entered into definitive agreements to acquire three US natural gas utilities from Dominion Energy for a total cash and debt consideration of US$14bn (C$19.1bn), creating North America’s largest natural gas utility platform delivering 9.3bn ft3/day of gas to about 7mn customers.
The deal, for US$9.4bn of cash and US$4.6bn of assumed debt, will add The East Ohio Gas Company (EOG), Questar Gas and its related Wexpro companies and Public Service Company of North Carolina (PSNC) to Enbridge’s existing Gas Distribution and Storage (GDS) business, which includes Enbridge Gas, Canada's largest natural gas utility serving about 3.8mn customers in Ontario.
The three acquired utilities serve an estimated 3mn homes and businesses in Ohio, North Carolina, Utah, Wyoming, and Idaho through a network comprised of about 78,000 miles of distribution, transmission, gathering and storage pipelines. They operate about 62bn ft3 of working underground and LNG storage capacity and collectively hold about 400bn ft3 of cost-of-service regulated gas reserves.
EOG represents the largest piece of the transaction, with an implied value of US$6.6bn, comprised of a US$4.3bn purchase price and assumption of US$2.3bn of debt. PSNC carries an implied value of US$3.1bn (purchase price of US$2.2bn and assumed debt of US$1bn), while Questar carries a purchase price of US$3bn and assumed debt of US$1.3bn, for an implied transaction value of US$4.3bn.
“Dominion Energy’s best-in-class gas utilities and our incredible employees set the standard for industry reliability, environmental and safety performance, customer service, and community engagement,” Dominion Energy CEO Robert Blue said. “These businesses and employees have been an integral part of the Dominion Energy team which is why we approached this decision with careful and deliberate consideration.”
The sale of the gas utilities, Blue said, will allow Dominion Energy to focus on its state-regulated electric utility operations, including a regulated wind project it is developing offshore Virginia.
Enbridge CEO Greg Ebel called the acquisition a “once in a generation” opportunity that reinforces Enbridge’s position as a “first-choice” energy delivery company in North America.
“Following the closings of the acquisitions, our Gas Distribution and Storage business will be North America’s largest gas utility franchise,” he said. “These acquisitions further diversify our business, enhance the stable cash flow profile of our assets, and strengthen our long-term dividend growth profile.”
EOG, PSNC and Questar will continue to be regulated by the Public Utility Commission of Ohio, the North Carolina Utilities Commission, and the Public Service Commissions of Utah, Wyoming and Idaho, respectively. All three also have lower-carbon initiatives that are aligned with Enbridge’s goals, Ebel said.
“The assets we are acquiring have long useful lives and natural gas utilities are 'must-have' infrastructure for providing safe, reliable and affordable energy,” he said. “In addition, these gas utilities have each committed to achieving net-zero greenhouse gas emissions by 2050 and are expected to play a critical role in enabling a sustainable energy transition.”
Alongside the acquisition agreements, Enbridge entered into a bought deal agreement with a syndicate of underwriters led by RBC Capital Markets and Morgan Stanley that will purchase about 89.5mn Enbridge common shares for aggregate gross proceeds of about C$4bn. Net proceeds will be used to finance a portion of the cash consideration payable under the utilities transactions.
The bought deal offering will close on or about September 8, 2023, while the utilities acquisitions are expected to close in 2024, subject to US federal and state regulatory approvals, including clearances from the Federal Trade Commission and the Committee on Foreign Investment in the United States.