Enbridge Inc., a Calgary-based energy transportation anddistribution company, entered the midstream business last week withthe purchase of a 35% share in AltaGas Inc., a Calgary-basedmidstream gas company, for $160 million. The deal is expected toclose in September.

“We believe that the outlook for gas prices and demand growth isgoing to stimulate significant expansion of western Canadaproduction and associated gathering and processing requirements,”said Brian MacNeil, CEO of Enbridge. “At the same time, asignificant portion of the existing midstream asset base isshifting from producer ownership to independent midstreamoperators. AltaGas is in an excellent position to capitalize on theresulting opportunities.”

MacNeil also said the deal will help the profitability ofEnbridge’s gas transportation operations. Enbridge is a 21.4%partner in the Alliance Pipeline project and has a 75% interest inthe Vector Pipeline project. “Anything that assists the upstreamproducers to bring more gas on stream more rapidly will enhance thevalue of our significant natural gas pipeline investments as wellas ensuring availability of supplies required by our 1.4 millioncustomers in Ontario.”

AltaGas will undertake all investment and development activitieswith respect to natural gas gathering, processing, upstreamstorage, 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 ofthe investment will be in the form of a liquidity offer for AltaGasshareholders to purchase $70 million worth of Enbridge stock at$10/share. The liquidity offer is expected to be made in June. Ifthe offer attracts less than $70 million, Enbridge will pay AltaGasthe difference.

“The investment by Enbridge will meet our near-term equitycapital requirements and permit us to pursue a long list ofgathering and processing investment and development opportunities,said Cornhill. There are also opportunities to capture value forour customers and shareholders resulting from synergy between ourmidstream capabilities and the significant position which Enbridgeholds in gas pipeline transportation and downstream storage anddistribution businesses.”

John Norris

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