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Enbridge Goes Midstream with 35% Stake in AltaGas

Enbridge Goes Midstream with 35% Stake in AltaGas

Enbridge Inc., a Calgary-based energy transportation and distribution company, entered the midstream business yesterday with the purchase of a 35% share in AltaGas Inc., a Calgary-based midstream gas company, for $160 million. The deal is expected to close in September.

"We believe that the outlook for gas prices and demand growth is going to stimulate significant expansion of western Canada production and associated gathering and processing requirements," said Brian MacNeil, CEO of Enbridge. "At the same time, a significant portion of the existing midstream asset base is shifting from producer ownership to independent midstream operators. AltaGas is in an excellent position to capitalize on the resulting opportunities."

MacNeil also said the deal will help the profitability of Enbridge's gas transportation operations. Enbridge is a 21.4% partner in the Alliance Pipeline project and has a 75% interest in the Vector Pipeline project. "Anything that assists the upstream producers to bring more gas on stream more rapidly will enhance the value of our significant natural gas pipeline investments as well as ensuring availability of supplies required by our 1.4 million customers in Ontario."

AltaGas will undertake all investment and development activities with respect to natural gas gathering, processing, upstream storage, liquids extraction and related services. David Cornhill, CEO of AltaGas, said the deal will help the company expand.

Enbridge, will pay $90 million to AltaGas directly. The rest of the investment will be in the form of a liquidity offer for AltaGas shareholders to purchase $70 million worth of Enbridge stock at $10/share. The liquidity offer is expected to be made in June. If the offer attracts less than $70 million, Enbridge will pay AltaGas the difference.

"The investment by Enbridge will meet our near-term equity capital requirements and permit us to pursue a long list of gathering and processing investment and development opportunities, said Cornhill. There are also opportunities to capture value for our customers and shareholders resulting from synergy between our midstream capabilities and the significant position which Enbridge holds in gas pipeline transportation and downstream storage and distribution businesses."

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