Calgary-based AltaGas Ltd. on Wednesday agreed to pay US$1.135 billion to acquire Semco Holding Corp., which has stakes in the largest natural gas distributor in Alaska, Enstar Natural Gas Co., as well as a Michigan gas distribution system.

The agreement with Continental Energy Systems LLC also would give AltaGas stakes in Cook Inlet Natural Gas Storage Alaska LLC (CINGSA). Semco is the sole shareholder of Semco Energy Inc., a privately held regulated natural gas utility based in Port Huron, MI, which has an interest in an unregulated gas storage facility in the state.

“AltaGas’ vision is to be a leading North American energy infrastructure company,” said CEO David Cornhill. “This acquisition establishes a significant foothold in the U.S. in areas with strong growth potential that are near existing AltaGas assets and operations.”

Enstar serves about 132,000 mostly residential customers in Alaska. It has about 414 miles of natural gas transmission pipelines and 2,800 miles of gas distribution mains in the Anchorage, AK, and Cook Inlet area.

CINGSA, in which Semco holds a 65% interest, is a regulated gas storage utility scheduled to begin service by mid-year. Once it is completed the storage facility would have an initial capacity of 11 Bcf, with potential future expansion to 18 Bcf. The gas storage capacity would allow Enstar to meet the needs of its customers during peak winter months.

Semco’s gas distribution system in Michigan serves about 286,000 customers through 150 miles of gas pipelines and 5,866 miles of gas distribution mains in the southern part of the state and the Upper Peninsula. The Michigan assets also include a half-stake in a 12.8 Bcf gas storage facility.

According to AltaGas, the purchase would increase its gas distribution rate base by around US$725 million and allow it to continue to add more customers “as natural gas continues to be more competitively priced compared to other fuels used for space heating.”

Almost all of Semco’s revenues are derived from gas distribution and storage utilities, AltaGas noted. There also would be no direct gas cost exposure because of pass-through mechanisms at Semco’s gas distribution utilities.

The purchase allows several growth opportunities, including the potential to expand CINGSA from its currently contemplated 11 Bcf of working natural gas capacity to estimated reservoir potential of 18 Bcf, said AltaGas. In addition, there are “growth projects available in Alaska including various system enhancements and expansions,” as well as the “opportunity to benefit from economic recovery in the state of Michigan and particularly the local economies that Semco serves.”

The acquisition would add around 570 employees and includes “full management and operations teams in Alaska and Michigan,” AltaGas stated. “Each Semco natural gas distribution utility is a stand-alone turn-key operation…” The transaction is subject to various regulatory approvals, including Michigan and Alaska.

Late last year AltaGas agreed to buy Vancouver-based Pacific Northern Gas Ltd., a British Columbia gas pipeline and distribution company for approximately C$230 million (see Daily GPI, Nov. 1, 2011).

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