CALGARY, Alberta — Enbridge Inc. announced that it has entered into three separate definitive agreements with Dominion Energy, Inc. to acquire EOG, Questar and PSNC for an aggregate purchase price of $14 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 gas utilities fit Enbridge’s long-held investor proposition of low-risk businesses with predictable cash flow growth and strong overall returns.
The move comes as Enbridge, North America’s largest pipeline company, is pushing to position itself for the transition toward cleaner energy, according to a report from Bloomberg.
“They’re going for that very fixed cash flow,” Intelligence analyst Talon Custer told Bloomberg.
The transaction is valued at $14 billion including debt. It will be Enbridge’s largest since its acquisition of Spectra Energy Corp. for about $28 billion in 2017, according to data compiled by Bloomberg.
Enbridge said it plans to raise C$4 billion ($2.9 billion) in a share sale underwritten by a group of institutions led by RBC Capital Markets and Morgan Stanley.
The deal to buy the companies, which serve 7 million homes and businesses, will require approvals from regulators, including the Federal Trade Commission to ensure it doesn’t violate antitrust laws. Enbridge said it would start pushing forward to secure the approvals immediately. It expects the deal to close in 2024.
According to Bloomberg, the deal comes nearly two months after the Richmond, Virginia-based Dominion agreed to sell a $3.3 billion stake in a Maryland liquefied natural gas export project to Berkshire Hathaway Energy.
Dominion said Tuesday the sale of its gas distribution utilities would help it improve the company’s funds from operations to debt ratio by 3.4%. Blue said the company will provide an update on its review during the fourth quarter.
Enbridge operates the Line 5 pipeline under the Straits of Mackinac, which the state of Michigan has been trying unsuccessfully to close.
“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,” Greg Ebel, Enbridge President and CEO, said in a release. “Following the closings of the Acquisitions, our Gas Distribution and Storage business will be North America’s largest gas utility franchise.”