Hydro-Quebec has announced the sale of its 50.38% control of Noverco, the holding company that owns nearly 75% of Quebec’s largest natural gas distributor, Gaz Metropolitain, and almost 10% of Canadian pipeline and distribution firm Enbridge Inc., to a consortium led by the Quebec provincial pension fund manager Caisse de depot for C$900 million.

The sale by Hydro-Quebec, wholly-owned by Quebec Province, will help cover the province’s budget deficit, yet keep the distribution system under control of a Quebec manager of private and government funds.

Of the C$900 million, the Quebec fund manager will pay C$625 million for a 69.44% ownership of the newly-formed consortium, Capital Infragaz Ltd. Partnership (“Infragaz”). Other partners include the Montreal-based engineering firm SNC-Lavalin Group Inc., which is putting up C$100 million for an 11.1% consortium ownership stake. British Columbia Investment Management Corp., another provincial pension fund manager will pay C$85 million for 9.44%, and Quebec’s Desjardins credit union group will put up C$75 million for 8.3%.

Hydro-Quebec said it was taking advantage of an opportunity to make a good return on its C$482 million 1997 investment in Noverco.

Ghislain Gauthier, Senior Vice-President, Equity and Infrastructure at the Caisse and Infragaz representative stated: “Noverco is a high-quality asset. Indeed after this transaction, the Caisse will hold a 26.1% interest in Gaz Métro, a limited partnership headed by a solid team recognized as among the best in the industry in North America. For the members of Infragaz, investing in Noverco, which generates much of its income in a regulated sector, ensures stability and a predictable revenue stream. Caisse de dépôt et placement du Québec plans to invest some $2 billion over the next five years in the expanding infrastructure sector in Québec, elsewhere in Canada and the world.”

In 2003, the Caisse de depot et placement du Québec had set an objective to invest some $2 billion over the next five years in the growing infrastructure sector in Quebec, elsewhere in Canada and the world.

Calgary-based Enbridge and Gaz Metro are “regulated, high quality energy businesses that generate stable and growing cash flows, making them low-risk investments,” said Pierre Anctil, vice president at SNC-Lavalin.

Besides the 50% stake in Noverco sold by Hydro-Quebec’s, Enbridge holds 32% of Noverco and Gaz de France has 18%.

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