White Knight Expected to Ride in Pan Alberta Deal
The next round of restructuring is about to unfold in Canada's
natural-gas community as a white knight buyer prepares to step
forward for the country's second-biggest supply aggregator,
Pan-Alberta Gas Ltd. In fact, a team of rescuers has emerged.
Senior Canadian industry sources say a producer consortium has come
up with a winning bid that will both keep the mammoth dealer in
home-grown hands and heal the worst remaining sore spot in the
The sources, who requested anonymity, would not reveal names in
advance of an announcement described as likely to come any time.
But it is rated as well-educated guessing to bet that the buyer
group will come from within Pan-Alberta's supply pool. That
includes a who's-who of Canadian producers.
With sales topping 1.6 Bcf/d that fetched C$1.6 billion (US$1.1
billion) in 1997 for 425 producers that have 5 Tcf of reserves in
the supply pool, Pan-Alberta stands out as a Canadian industry
fixture. It ranks second only to TransCanada Gas Services and its
sales of 5 Bcf/d on behalf of more than 700 producers dedicating
reserves of 13 Tcf, many of whom also belong to the Pan-Alberta
Pan-Alberta is said to have attracted strong interest from
major, international-scale marketers based in the United States
such as Duke Energy. But the sale, first announced by owner Nova
Corp. before its merger deal with TransCanada PipeLines last
winter, has been complicated by severe conflicts within the
Pan-Alberta family. Producers and the aggregator have been locked
in a marathon lawsuit over alleged misuse of supplies, which has
escalated into a class-action case involving every corner of the
The course for Pan-Alberta was charted by the Canadian
industry's April "framework" agreement on a gas industry version of
the Queensbury rules. Besides guidelines for rivalry over additions
to the transportation grid that ended months of no-blows-barred
strife over Alliance Pipeline Project, the pact laid out a command
structure for aggregators with TransCanada Gas as the prototype. It
closely follows producer demands in the Pan-Alberta case.
The model makes members of supply pools co-pilots of their
marketing representatives. In TransCanada's case, the structure
includes a "netback steering committee" with strong producer
representation. This group appoints audit and restructuring
subcommittees. The mandate for aggregator overhaul includes
analysis of performance, potentially dating back to the dawn of
deregulation in the mid-1980s, with "an historical audit.conducted
by independent auditors."
With results of the post-mortem in hand, producer and
TransCanada representatives will have a mandate to hold "good-faith
discussions aimed at restructuring the netback pool to provide
improved pricing and delivery options." The gas pact includes an
overall commitment "to undertake a process that will include
review, and possible modification, of existing codes of conduct."
The Pan Alberta case includes damage claims that have escalated
well into the nine-digit range and demands for tighter control by
the producer pool over marketing. The wrangle began with disputes
over relationships between Pan-Alberta and Nova's 26% owned NGC
Corp. (now Dynegy Inc.) at a time when their marketing operations
were closely linked. Nova and NGC broke up their Canadian marketing
relationship but the lawsuit continued. A takeover by a producer
consortium is expected to include a resolution of the feud. Such a
deal is also rated as likely to include some restructuring to make
Pan-Alberta more like the producer-owned co-operative that markets
output from British Columbia, CanWest Gas Supply.
Gordon Jaremko, Calgary
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