Duke Energy Corp.’s deal to pick up Vancouver-based Westcoast Energy moved close to completion Friday after receiving approval from the Securities and Exchange Commission (SEC) and federal Industry Canada (similar to the U.S.Dept. of Commerce). The cash, stock and debt acquisition, valued at US$8 billion, would allow the Charlotte, NC-based diversified energy company to grow its Canadian business and expand its North American natural gas infrastructure. As part of the transaction, Duke also plans a significant financial investment in its stake, adding several new Canadian offices and donating funds for Canadian educational research.

The SEC is exempting the public utility subsidiaries of Westcoast from the provisions of the Public Utility Holding Company Act of 1935, as amended, following the acquisition’s closing. With the regulatory approvals, Duke and Westcoast intend to close and be effective on Thursday (March 14), subject to the satisfaction of certain customary closing conditions.

Robert Evans, CEO of Duke Energy Gas Transmission, said the Westcoast acquisition “will allow us to move forward in developing major North American natural gas infrastructure. It represents a major commitment by Duke Energy to grow its businesses in Canada and throughout North America.”

First announced last September (see NGI, Sept. 24, 2001), the transaction was recommended by the Westcoast board of directors and endorsed by 96% of Westcoast shareholders at a special meeting on Dec. 13, 2001. The Federal Energy Regulatory Commission has already given its approval of the deal (see NGI, March 4).

Duke also announced several commitments to the Government of Canada related to the deal. Duke will establish Duke Energy Gas Transmission Canada to operate Westcoast’s gas transmission and distribution assets in Canada, and major offices in Vancouver, Chatham, Calgary and Halifax will be retained with “significant resident Canadian leadership” in these businesses. The Halifax office would become the headquarters for the U.S. as well as Canadian portions of the Maritimes & Northeast Pipeline. In addition, several Canadian executives have been named to leadership roles with the company’s gas transmission unit based in Houston and at Duke Energy’s corporate headquarters in Charlotte.

Duke also has committed to accelerate the growth of Westcoast’s gas transmission and distribution businesses to meet producer and market demand for natural gas transmission and storage services. In particular, Duke said it would spend C$621 million in 2002 on Westcoast, and plans to had “significant” capital in 2003 and 2004 on projects such as the British Columbia T South pipeline expansion and the Maritimes & Northeast Pipeline Phase IV expansion. These projects in combination will deliver approximately 600,000 Dth/d of Canadian natural gas to the North American market between 2003 and 2005, which Duke estimates is worth C$1.3 billion.

Westcoast CEO Michael Phelps noted that his company “has a long tradition of extending meaningful support to local communities, universities and research and development initiatives,” and said he was “particularly pleased to note Duke Energy’s commitment to maintaining this tradition.”

In addition to the commitments on capital expenditure, Duke also committed to spend C$4 million to fund research programs, university chairs and professorships. Additional funds will be earmarked to support the research and development efforts sponsored by the Canadian government under the Program for Energy Research & Development. These efforts will focus on increasing the competitiveness of Canada’s energy industry in the North American market.

“This will mean more investment in Canada, more stability and growth in the energy sector and more efficiency in our North American operations with resulting better value for consumers of energy,” said Evans. “In addition, it means greater opportunities for Canadians and a larger contribution to the quality of life of North Americans.”

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