TransCanada PipeLines and NOVA Corp. completed their C$11billion merger and the spin-off of NOVA’s C$3.4 billion commoditychemicals business last week following affirmative votes from theshareholders of both companies and approval of the Alberta Court ofQueen’s Bench. With assets of $21.4 billion the new TransCanadaPipeLines will be the fourth largest energy services company inNorth America.

“[A]s long and arduous as the process has been so far, we fullyrecognize that we are only now at the beginning of making themerger work for our shareholders, employees, customers, the City ofCalgary, and the people of Canada. We fully intend to be among the15% of mergers that successfully fulfill the expectations initiallycontemplated,” said George Watson, president and CEO of the newlymerged company.

However, the seamless transmission network announced originallyas a major goal of the merger seems to have disappeared in theapproval process. Instead, Nova and TransCanada will continue tooperate as independent pipelines under different jurisdictions. Themerger partners would have faced substantial opposition from theAlberta government had they attempted to create a seamlessinterstate pipeline network that encompassed the Nova system, whichwas originally chartered by Alberta to avoid creating a singlebuyer/transporter.

Nevertheless, the new merged entity probably will succeed increating the perception of a seamless network. From the point ofview of the gas shipper, transportation from wellhead to exportpoint or distribution system may be covered in one contractualtransaction.

Retaining two separate systems should have a positive impact onthe TransCanada and Nova workforce, which still faces somedownsizing. A “rationalization” of the two companies’ 6,300employees is expected over the next four months, but a companyspokesman said not to expect a “large downsizing” because of anumber of proposed business expansions.

Rocco Canonica

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