In preparation of its US$8.5 billion merger with Duke Energy (see Daily GPI, Sept. 21), Westcoast Energy Inc. announced two divestitures, including an agreement to sell its Centra Gas units to BC Gas Inc. for C$208 million and another deal worth C$176.7 million, which sends its Ontario-based Union Energy and Westcoast Capital energy services companies to the City of Edmonton’s Epcor Utilities Inc.

The Centra Gas deal would give BC Gas control of all of Centra Gas’ Vancouver Island and Sunshine Coast assets, including 615 kilometers (382 miles) of high pressure transmission mains and more than 3,000 kilometers (1,864 miles) of intermediate pressure transmission and distribution mains. The energy services unit would hand Epcor nearly 1 million customers, creating one of Canada’s largest energy services companies.

The Centra Gas units, which include Centra Gas British Columbia Inc. and Centra Gas Whistler Inc., currently provide natural gas services to about 70,000 homes, businesses and pulp mills on Vancouver Island and Sunshine Coast. Centra’s transmission pipe begins in Coquitlam, runs north to Squamish and long the north shore to How Sound to Sechelt where it travels under the Strait of Georgia to Texada Island. At Texada’s northern tip, the pipeline re-enters the ocean and branches off to Powell River and Vancouver Island where it comes ashore in the Courtenay-Comox area. It then moves north to Campbell River and south to Victoria. Centra Gas Whistler provides piped propane to 2,000 customers in the Resort Municipality of Whistler.

BC Gas CEO John Reid said the Centra Gas deal gives his company the opportunity to significantly expand its core business, including the “opportunity to service gas-fired electricity generating plants on Vancouver Island.” Michael Phelps, CEO of Westcoast, added that the deal would allow the company to “harvest certain assets and invest in others” and provides a “positive contribution to net income of C$33 million, which will be booked at close.”

Along with acquiring the common shares of Centra Gas, BC Gas will pay C$32 million at closing and C$52 million as a deferred payment to purchase the preferred shares of Centra Gas. BC Gas also will assume Centra Gas’ debt of about C$298 million, financing the purchase with about C$180 million raised through a new public common equity offering and C$60 million of new debt. Closing is expected to be completed by the end of 2001.

In the energy services transaction, Westcoast will sell Union Energy and Westcoast Capital to Epcor, which will add more than 900,000 customers, mostly in Ontario, to Epcor’s existing customer base and would create one of Canada’s largest energy and related services companies, according to Westcoast. The transaction also will give Epcor all of Union Energy’s 1,400 employees. The combined entity, said Epcor, plans to become a major retailer of gas and power when the Ontario energy market is deregulated next year and is expected to have annual revenues of C$4 billion.

Union Energy’s primary business is the rental of water heaters. Union Energy and Westcoast Capital also provide heating, ventilation and air conditioning products and servicing, financing and retail sales of natural gas. These businesses contributed C$145 million in revenue to Westcoast last year. Union Energy will continue to conduct business under the Union Energy name.

“This acquisition is a critical step in Epcor’s evolution to become one of the top three providers of energy and energy-related products in Canada,” said Brian Vaasjo, Epcor’s executive vice president. “Starting from this Ontario customer base, we expect to capture 20% or more of the Ontario energy market through cross- marketing our energy offers. Likewise, we may offer our customers in Alberta new products and services next year. The complementary nature of these businesses will provide us the opportunity to improve customer care and better manage costs going forward.”

Epcor is based in Alberta and is headquartered in Edmonton, with more than C$3 billion in assets and a customer base of more than 600,000. With locations in Alberta, British Columbia and the U.S. Pacific Northwest, Epcor owns and operates power plants, electrical transmission and distribution networks, builds and operates water and wastewater treatment facilities and infrastructure, and provides power, water and natural gas.

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