Enbridge has entered into three separate definitive agreements with Dominion Energy to acquire the East Ohio Gas Company (EOG), Questar Gas Company, and Public Service Company of North Carolina, Incorporated (PSNC) for an aggregate purchase price of $14 billion. The purchase agreement is comprised of $9.4 billion of cash consideration and $4.6 billion of assumed debt, subject to customary closing adjustments.
Enbridge will add gas utility operations in Ohio, North Carolina, Utah, Idaho, and Wyoming once the transactions are closed. Furthermore, Enbridge's gas utility business will have a combined rate base of over $19.78 billion, with about 7,000 employees delivering over 9 Bcf/d of gas to approximately 7 million customers in North America.
The company’s purchase price for the acquisitions is anticipated at ~1.3x Enterprise Value-to-Rate Base (based on 2024 estimates) and ~16.5x Price-to-Earnings (based on 2023 estimates). The acquisitions will be accretive to Enbridge's financial DCFPS and adjusted EPS outlook in the first full year of ownership, adding shareholder value.
The acquisitions will not only double the scale of the company's gas utility business to about 22% of its total adjusted EBITDA but also balance its asset mix evenly between natural gas, renewables, and liquids. While the acquisitions will lower Enbridge's business risk and secure visible, low-risk, long-term rate base growth, increased utility earnings will improve its overall cash flow quality and support the dividend profile.
"We will be welcoming over 3,000 new employees into the Enbridge family,” said Michele Harradence, President of GDS and Executive Vice President at Enbridge. “In addition, we intend to continue the robust social, community and diversity, equity, and inclusion initiatives that each Gas utility has committed to."
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.
The acquisition of each utility is expected to be completed in 2024, post federal and state regulatory approvals, which will allow Enbridge to balance financing alternatives before each closing.
Enbridge has received debt financing commitments worth $9.4 billion from Morgan Stanley and Royal Bank of Canada for the cash consideration component of the acquisitions to demonstrate liquidity and the financing capacity to close the transactions.
The funding program for the acquisitions is designed to maintain the company's balance sheet within its target leverage range of 4.5x to 5.0x Debt-to-Adjusted EBITDA to preserve its investment-grade credit ratings.
Enbridge expects the gas utilities to add $1.25 billion of average annual low-risk, long-term capital investment opportunities, with significant built-in rate rider mechanisms for the timely recovery of capital investments.
Morgan Stanley & Co. and RBC Capital Markets were co-lead Financial Advisors, while Sullivan & Cromwell and McCarthy Tetrault were legal advisors to Enbridge.