Enbridge signs $19B deal to acquire U.S. natural gas assets

Key Takeaways:

• Enbridge has entered into three agreements with Dominion Energy, Inc. to acquire EOG, Questar and PSNC for an aggregate purchase price of $19 billion.
• The acquisitions will add gas utility operations in Ohio, North Carolina, Utah, Idaho and Wyoming.
• Upon closing, Enbridge’s gas utility business will be the largest, by volume, in North America with a combined rate base of over $27 billion and about 7,000 employees delivering over 9 billion cubic feet per day of gas to approximately 7 million customers.

The Whole Story:

Enbridge Inc. has inked a series of deals totaling $19 billion that would make it the largest natural gas utility franchise in North America upon closing.  

The deal involves three separate definitive agreements with Dominion Energy, Inc. to acquire EOG, Questar and PSNC for an aggregate purchase price of $19 billion.

Upon the closings of the three transactions, Enbridge will add gas utility operations in Ohio, North Carolina, Utah, Idaho and Wyoming, representing a significant presence in the U.S. utility sector. 

The company stated that the gas utilities fit Enbridge’s long held investor proposition of low-risk businesses with predictable cash flow growth and strong overall returns. Following the closings, the acquisitions are expected to double the scale of the company’s gas utility business to approximately 22% of Enbridge’s total adjusted EBITDA and balance the company’s asset mix evenly between natural gas and renewables, and liquids.

Following the closings, Enbridge’s gas utility business will be the largest, by volume, in North America with a combined rate base of over $27 billion and about 7,000 employees delivering over 9 billion cubic feet per day of gas to approximately 7 million customers.

“Adding natural gas utilities of this scale and quality, at a historically attractive multiple, is a once in a generation opportunity. The transaction is expected to be accretive to DCFPS and adjusted EPS in the first full year of ownership, increasing over time due to the strong growth profile,” said Greg Ebel, Enbridge president and CEO. “Following the closings of the acquisitions, our Gas Distribution and Storage (GDS) business will be North America’s largest gas utility franchise. These acquisitions further diversify our business, enhance the stable cash flow profile of our assets, and strengthen our long-term dividend growth profile.  The transaction also reinforces our position as the first-choice energy delivery company in North America.”

Ebel noted that the assets have long useful lives and natural gas utilities are “must-have” infrastructure for providing safe, reliable and affordable energy. Ebel noted that the gas utilities have each committed to achieving net-zero greenhouse gas emissions by 2050. 

“We are very excited by today’s announcement as these businesses align with Enbridge’s business risk model and long-term growth targets,” he said. “The entire Enbridge team is committed to working with the EOG, Questar and PSNC teams and to investing in the communities they serve.  We look forward to serving our customers with dedication and to providing them with safe, reliable, and affordable energy service for years to come.”

Following the closings of the acquisitions, EOG, PSNC and Questar each will continue to be regulated by the Public Utility Commission of Ohio, the North Carolina Utilities Commission, and the Public Service Commissions of Utah, Wyoming and Idaho, respectively.

“Acquiring these natural gas utilities makes strong strategic and financial sense. Enbridge is currently the only major pipeline and midstream company that owns a regulated gas utility and we’ve further strengthened that position today by doubling the size of our GDS business. After closings, the acquisitions will extend and diversify our natural gas footprint and importantly add low-risk, ratable investments to our growth portfolio” said Patrick Murray, executive vice president and chief financial officer for Enbridge. “The financing plan for the transaction includes significant equity pre-funding and a suite of financing options that will be optimized to maximize accretion and protect our strong investment grade ratings.”

The acquisitions are expected to close in 2024, subject to the satisfaction of customary closing conditions, including the receipt of certain required U.S. federal and state regulatory approvals.