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.