Enbridge in $14bn deal for Dominion gas utilities as US energy mix shifts

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Dominion Energy, 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 taking place in North America’s fuels sector.

Enbridge will purchase Dominion’s three natural gas distribution companies for about $9.4bn plus debt in an all-cash deal, making it the biggest gas utility group in North America.

The transaction is significant because it underlines two distinct investment approaches as the rush 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 will be evenly split between gas and renewables and liquids, the company said.

Dominion will be left to focus on its state-regulated electric utilities at a time when US power consumption is growing, sparked by factors including the shift to battery vehicles.

“Data centre expansion, bolstered by artificial intelligence . . . along with electrification, and general economic activity are driving 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 become “must-have infrastructure for providing safe, reliable and affordable 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 in the fuel mix has become a theme in recent transactions. Oil-focused pipeline group Magellan Midstream Partners has explicitly pointed to gas’s “more powerful growth engine” as it pursues a sale to the gas-heavy Oneok.

TC Energy, the Canadian pipeline operator behind the aborted plan to build the controversial Keystone XL crude pipeline, said in July it was spinning off its oil transportation business to concentrate on 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 companies involved in 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 will become the largest.

Dominion’s decision to sell comes as part of an ongoing business review that it launched last year after its stock price was hit in part due to rising inflation. 

The Virginia-based utility has sought to free up capital by offloading “non-core” assets in a bid to boost its credit rating. 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 as it refined its focus on regulated electricity sales.

Berkshire previously took ownership of the company’s long-haul gas transmission and storage business in 2020.

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