National Energy & Gas Transmission Inc. (NEGT) reported late Thursday that it has accepted TransCanada PipeLines’ $1.7 billion bid to acquire Gas Transmission Northwest Corp., which owns an 1,350-mile pipeline in the Pacific Northwest and the 80-mile North Baja system in the Southwest. An NEGT spokeswoman said TransCanada’s bid was the only one submitted.

A hearing before the bankruptcy court to approve the sale will be held on May 12. Pending an affirmative order by the bankruptcy court, NEGT anticipates the sale will be completed during this quarter or early next quarter. NEGT, a subsidiary of PG&E Corp., voluntarily filed for Chapter 11 bankruptcy protection in July 2003.

Natalie Wymer, a spokesperson for NEGT, told NGI that the deal doesn’t require FERC approval and that the antitrust review for the transaction has already been completed.

The purchase would extend TransCanada’s massive Canadian pipeline grid through the Pacific Northwest to California and Nevada. GTN, formerly Pacific Gas Transmission, brings 2.6 Bcf/d of gas from a connection with TransCanada’s BC system near Kingsgate, BC, on the Idaho border to a point near Malin, OR, on the Oregon-California border.

In an interview with NGI last week, TransCanada CEO Hal Kvisle said that GTN was the next logical pipeline asset for the company to buy, given that it owns parts of the Northern Border and Great Lakes Gas Transmission systems, which serve the Midwest, and parts of Iroquois Gas Transmission and Portland Natural Gas Transmission, which serve the Northeast. The Pacific region is the company’s next regional target, and has some attractive market trends because of the likelihood that there will be more Canadian gas headed West in the next decade as the supply of imported liquefied natural gas grows along the East Coast and Gulf Coast regions.

GTN also operates the recently built 80-mile North Baja Pipeline system, which links the Southwest gas grid from a point near Ehrenberg, AZ, to markets in Baja California Norte, Mexico, where multiple liquefied natural gas terminals are expected to be sited. If the LNG terminals are built, GTN could reverse flow and become a significant supply source to the Southwest as well as to Mexico. The sale of North Baja Pipeline, however, is subject to a right of first refusal.

TransCanada has said the purchase of GTN would be accretive to earnings and cash flow. It plans to finance the acquisition with existing lines of credit and equity, but it also may sell off other assets to pay for the pipelines. It has C$1.5 billion of committed credit lines, and C$1.35 billion and US$650 million of debt and/or equity issuance capacity under its Canadian and U.S. shelf prospectuses, respectively. The $1.7 billion purchase price includes $500 million in debt assumption.

It would be TransCanada’s biggest purchase since its C$14 billion (U.S. $11 billion) takeover of Nova Corp. in 1998, but would follow several other recent deals that expand its interest in pipelines to the U.S. Northeast. In December, TransCanada increased its ownership interest in Portland Natural Gas Transmission (PNGTS) to about 62% from 43% by purchasing a stake from El Paso Corp. for US$82 million including US$50 million of assumed debt. Earlier this month, plans were announced to expand its system in Ontario to accommodate volumes to supply the proposed Millennium pipeline via Empire State in New York.

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