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Dominion Energy, certainly one of the US’s biggest utilities, has agreed to sell its natural gas distribution business to Canadian pipeline giant Enbridge in a $14bn deal that highlights momentous shifts going down in North America’s fuels sector.
Enbridge will purchase Dominion’s three natural gas distribution firms for about $9.4bn plus debt in an all-cash deal, making it the largest gas utility group in North America.
The transaction is critical since it underlines two distinct investment approaches as the push to decarbonise the US economy gains steam.
Enbridge is best known for shipping oil, operating the world’s longest crude and liquids pipeline system. After buying Dominion’s gas utilities, Enbridge’s asset mix can be evenly split between gas and renewables and liquids, the corporate said.
Dominion can be left to give attention to its state-regulated electric utilities at a time when US power consumption is growing, sparked by aspects including the shift to battery vehicles.
“Data centre expansion, bolstered by artificial intelligence . . . together with electrification, and general economic activity are driving essentially the most significant demand growth in our company’s history and shows no signs of abating,” said Robert Blue, Dominion chief executive.
Enbridge chief Greg Ebel said natural gas utilities had change into “must-have infrastructure for providing protected, reliable and inexpensive energy”.
“Adding natural gas utilities of this scale and quality, at a historically attractive multiple, is a once in a generation opportunity,” he said.
Enbridge shares fell 5.8 per cent in after-hours trading on Tuesday, while Dominion declined 0.2 per cent.
The persistence of gas within the fuel mix has change into a theme in recent transactions. Oil-focused pipeline group Magellan Midstream Partners has explicitly pointed to gas’s “more powerful growth engine” because it pursues a sale to the gas-heavy Oneok.
TC Energy, the Canadian pipeline operator behind the aborted plan to construct the controversial Keystone XL crude pipeline, said in July it was spinning off its oil transportation business to consider shipping gas.
Enbridge transports about 30 per cent of the oil produced in North America and 20 per cent of the gas consumed on the continent. It operates the third-biggest gas utility by customer numbers, all based in Canada.
After absorbing the businesses involved within the deal — the East Ohio Gas Company, Public Service Company of North Carolina and Questar Gas Company — and their 3mn customers across Ohio, North Carolina, Utah, Wyoming and Idaho, it is going to change into the most important.
Dominion’s decision to sell comes as a part of an ongoing business review that it launched last 12 months after its stock price was hit partly attributable to rising inflation.
The Virginia-based utility has sought to liberate capital by offloading “non-core” assets in a bid to spice up its credit standing. Dominion recently sold its 50 per cent stake in a Maryland liquefied natural gas terminal, Cove Point, to Warren Buffett’s Berkshire Hathaway for $3.3bn because it refined its give attention to regulated electricity sales.
Berkshire previously took ownership of the corporate’s long-haul gas transmission and storage business in 2020.