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Terasen Shareholders Vote in Favor of $5.6B Kinder Morgan Purchase

About 96% of Terasen Inc. shareholders voted to approve Kinder Morgan Inc.'s proposed acquisition of all outstanding Terasen shares for about C$35.91/share ($3.1 billion in cash). Kinder Morgan also will assume $2.5 billion in Terasen debt. The transaction is being reviewed by the BC Utilities Commission and the federal Industry Ministry.

At the time of the original announcement the price represented a 20% premium to a 20-day average of share prices for Terasen, a British Columbia-based gas utility and oil and products pipeline company. Since the announcement in late, however, Terasen shares have climbed sharply, closing at $34.65 on Tuesday.

"Today's vote reflects the strong support our shareholders have shown for this transaction," said Terasen CEO John Reid. "It represents exceptional near and long term value for Terasen shareholders, the substantial majority of whom are Canadian individual investors, mutual funds and pension plans."

Reid said the companies' next step will be to continue working with the BC Utilities Commission as it completes its review of the transaction. "On Friday, Kinder Morgan will make its written submission to the commission," he said. The submission will focus on system safety, reliability, financial viability and the management and technical capabilities of the proposed operator of the Terasen assets as well as others topics that have been raised in public meetings and in written submissions over the past 10 weeks.

"We feel this has been a fair, open and thorough process, and we anticipate the commission will allow the application review to proceed on the timeline and basis outlined in its Sept. 14 order," Reid said.

On Thursday federal Industry Minister David L. Emerson revealed that there is an ongoing review of the deal under the Investment Canada Act, Canada's general legislation on foreign investment. The act gives the federal government the ability to negotiate enforceable commitments with the investor during the review process. These commitments assist the minister in determining whether the investment is of "net benefit" to Canada, as the minister is required to determine under the act.

As a former director of Terasen, Emerson said he will recuse himself from ministerial review of this file. This is to ensure there is no perception of conflict of interest in this important case, he said in a statement. He has asked the Lucienne Robillard, president of the Queen's Privy Council for Canada and minister of Intergovernmental Affairs, to substitute for him.

Kinder Morgan came to Terasen with its eyes set on the tremendous oilsands production growth upstream of Terasen's petroleum pipeline business. Canadian oilsands producers already are expecting to invest about $50 billion in the next five years, doubling production there to about two million barrels per day. Kinder Morgan also will come away from the deal with a stable gas utility operation in British Columbia. The combined entity will have 9,000 employees. It will have 13,000 miles of refined product and oil pipeline, and gas utility operations that serve a total of 1.1 million customers in British Columbia, Nebraska, Colorado and Wyoming.

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