By the OGJ Online Staff
HOUSTON, Jan. 28, 2002 — The UK’s Centrica PLC Monday said it will acquire the energy services operations of Canada’s Enbridge Inc. for $1 billion (Can.) cash.
When the transaction is completed and after the Ontario electricity market opens in May, Centrica will have over 3.5 million product relationships with North American households, doubling its Canadian customer base. Centrica said the acquisition has the potential to market energy and related products and services across a base of over 2 million households.
Centrica presently has more than 1.3 million gas customers in Canada and the US. In addition, it has signed up 600,000 electricity customers in Ontario in advance of market opening at the beginning of May.
Enbridge will record a net gain on the sale of energy services of approximately $210 million, after taxes and other costs, upon completion of the transaction. The company said net proceeds from the sale will be used for strategic growth and debt reduction.
Enbridge CEO Patrick D. Daniel the sale also “increases our flexibility to capitalize on infrastructure growth opportunities. Our plans are to invest roughly $5 billion in capital over the next 5 years.” The bulk of the retail energy services business was unbundled from Enbridge Consumers Gas, Canada’s largest natural gas distribution utility, in 1999.
Centrica, which has 70% of the UK gas market, was spun off from British Gas PLC in 1997, when the upstream BG Group PLC was also created, plans to have 10 million customers in North America by the end of next year, CEO Roy Gardner has said. The company plans to spend $1.4 billion on acquisitions to quadruple its client base in North America by next year.
In addition to the home services business, Centrica will acquire 90,000 natural gas contract customers, a national business to business heating, ventilation and air conditioning (HVAC) operation with more than 50 national accounts, a start-up residential HVAC business in Pennsylvania, and a consumer loan business that supports its retail and HVAC business. It will also acquire 14 retail outlets in southern Ontario.
The transaction is subject to regulatory approvals and completion is anticipated in the spring.