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TransCanada, Nova Complete Merger

TransCanada, Nova Complete Merger

TransCanada PipeLines and NOVA Corp. completed their C$11 billion merger and the spin-off of NOVA's C$3.4 billion commodity chemicals business last week following affirmative votes from the shareholders of both companies and approval of the Alberta Court of Queen's Bench. With assets of $21.4 billion the new TransCanada PipeLines will be the fourth largest energy services company in North America.

"[A]s long and arduous as the process has been so far, we fully recognize that we are only now at the beginning of making the merger work for our shareholders, employees, customers, the City of Calgary, and the people of Canada. We fully intend to be among the 15% of mergers that successfully fulfill the expectations initially contemplated," said George Watson, president and CEO of the newly merged company.

However, the seamless transmission network announced originally as a major goal of the merger seems to have disappeared in the approval process. Instead, Nova and TransCanada will continue to operate as independent pipelines under different jurisdictions. The merger partners would have faced substantial opposition from the Alberta government had they attempted to create a seamless interstate pipeline network that encompassed the Nova system, which was originally chartered by Alberta to avoid creating a single buyer/transporter.

Nevertheless, the new merged entity probably will succeed in creating the perception of a seamless network. From the point of view of the gas shipper, transportation from wellhead to export point or distribution system may be covered in one contractual transaction.

Retaining two separate systems should have a positive impact on the TransCanada and Nova workforce, which still faces some downsizing. A "rationalization" of the two companies' 6,300 employees is expected over the next four months, but a company spokesman said not to expect a "large downsizing" because of a number of proposed business expansions.

Rocco Canonica

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