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
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 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
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