Enbridge Launches Bid to be NAM’s Largest Gas Utility with $14B M&A

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Enbridge Inc., already one of largest midstream companies in the U.S. and Canada, is expanding its reach into utilities, announcing deals on Sept. 5 that will the company said would make it the largest natural gas utility in North America.

Enbridge entered into three separate agreements to acquire multiple companies from Dominion Energy Inc. for an aggregate purchase price of US$14 billion, including US$9.4 billion in cash and the assumption of US$4.6 billion in debt, according to a Sept. 5 news release.

Enbridge said it will purchase the East Ohio Gas Co., Questar Gas Co. and its related Wexpro companies and Public Service Co. of North Carolina Inc.

At close, Enbridge's gas utility business will be the largest, by volume, in North America with a combined rate base of over CA$27 billion (US$19.8 billion) and about 7,000 employees delivering more than 9 Bcf/d of gas to approximately 7 million customers.

Enbridge’s utility segment is expected to add around 3,000 new employees through the acquisitions, Ebel said.

"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.

Enbridge said the deals are expected to be accretive to distributable cash flow per share and adjusted earnings per share in the first full year of ownership. Cash flow and earnings will increase over time by the addition of approximately CA$1.7 billion (US$1.25 billion) in “annual, low-risk, quick-cycle rate base investments to Enbridge's secured growth backlog,” the company said.

During a Sept. 5 webcast, Ebel said the $14 billion in M&A isn’t something he would have thought possible just eight months after taking the helm as Enbridge’s chief executive. But, a gas asset package of this size—and at such an attractive valuation—hadn’t hit the market in at least a decade, he said.

The deals add gas utility operations in Ohio, North Carolina, Utah, Idaho and Wyoming to Enbridge’s stable, “representing a significant presence in the U.S. utility sector,” the company said.

Ebel said the states where Enbridge is acquiring assets are projected to see their populations grow at a faster rate than the national average.

“Transparent regulatory regimes in gas-supportive jurisdictions create constructive rate settlements and support the long-term, diversified, rate-based growth and supports the safe delivery of reliable and affordable energy to customers,” Ebel said.

The transaction effectively doubles the scale of the company's gas utility business to approximately 22% of Enbridge's total adjusted EBITDA, the company said. Enbridge’s asset will also balance out evenly between natural gas, renewables and liquids.

Enbridge said the deals also lower the company’s business risk and secure visible, low-risk, long-term rate base growth.

“Increased utility earnings enhance Enbridge's overall cash flow quality and further underpin the longevity of Enbridge's growing dividend profile,” the company said in the news release.

The acquisitions are expected to close in 2024, subject to the satisfaction of customary closing conditions, including U.S. federal and state regulatory approvals. Closing of the purchase of each gas utility acquisition is expected to occur following receipt of regulatory approvals applicable to each utility and are not cross-conditioned across all three transactions.

Morgan Stanley & Co. LLC and RBC Capital Markets acted as co-lead financial advisers. Sullivan & Cromwell LLP and McCarthy Tétrault LLP were legal advisers to Enbridge.