BUFFALO, N.Y., Oct. 15, 2002 — National Fuel Gas Co. has reached agreement to acquire the Empire State Pipeline from a subsidiary of Duke Energy. A stock purchase agreement regarding this transaction was executed Thursday.
Empire is a 24-inch diameter natural gas transmission pipeline that originates at the United States/Canada border at the Chippawa Channel of the Niagara River, and extends easterly 157 miles from Buffalo, N.Y., to near Syracuse, N.Y.
Constructed in 1992 and in service since 1993, Empire delivers natural gas supplies to major industrial companies, utilities (including National Fuel’s utility segment) and power producers. With a design capacity of 525 million cubic feet per day (MMcf/d), Empire currently has firm contracts for almost all of its capacity.
“Empire serves as a critical link in delivering natural gas supplies from Canada to the United States,” said Philip C. Ackerman, Chairman, President and Chief Executive Officer of National Fuel. “As the demand for energy increases along the East Coast, this acquisition allows National Fuel to be better positioned to bring gas supplies to these growing markets.
“National Fuel is constantly seeking opportunities to make investments that complement its existing assets and Empire proved to be an attractive opportunity, especially since the pipeline originates within our existing service area,” Ackerman added. “This acquisition is consistent with our long-term strategy of buying and building real assets, and in particular, enhancing our energy supply and delivery infrastructure.”
Empire was included in Duke Energy’s $8 billion acquisition of Westcoast Energy and its mostly Canadian natural gas-related assets in March 2002. The New York intrastate pipeline has been managed by Duke Energy Gas Transmission (DEGT) since that time.
“As an active manager of a portfolio of energy assets, Duke Energy continually looks at our businesses and assets with an eye on maximizing shareholder value,” said Robert B. Evans, President and Chief Executive Officer of DEGT. “Once the sale is completed, we’ll continue to have a solid pipeline capacity position in the Northeast with our Texas Eastern, Algonquin and Maritimes & Northeast systems expanding to meet growing demand.”
The transaction is valued at approximately $240 million, which includes approximately $60 million in assumed debt.
Pursuant to the stock purchase agreement, National Fuel will acquire all of the outstanding shares of Empire State Pipeline Company, Inc. and St. Clair Pipeline Company, Inc., each of which owns a 50% interest in Empire.
The transaction is subject to a number of conditions, including certain regulatory approvals.
The companies expect to close the deal in December 2002 or during the first quarter of calendar 2003.
National Fuel also indicated that the initial financing for the acquisition will be arranged with short-term debt and then anticipates its permanent financing will be a combination of long-term debt and equity.
The timing of the permanent financing has yet to be determined. As a result of this acquisition, National Fuel expects a near-term 2% to 3% dilutive effect to earnings per share.
“There are opportunities for growth on this system,” Ackerman added. “We believe additional interconnects to other pipelines, utilities and storage facilities will increase the value of this asset and offset the initial impact to earnings.”
National Fuel is an integrated energy company with $3.4 billion in assets comprised of six principal operating segments: Utility, Pipeline and Storage, Exploration and Production, International, Energy Marketing and Timber.
Additional information about National Fuel is available at http://www.nationalfuelgas.com or through its investor information service at 1-800-334-2188.
Duke Energy Gas Transmission is a North American specialist in developing energy infrastructure and connecting major natural gas supply basins to growing markets.
The company’s natural gas operations include more than 18,900 miles of interstate transmission pipeline and 240 billion cubic feet of storage capacity in Canada and the United States. More information on DEGT can be found at http://www.degt.duke-energy.com.
Duke Energy is a diversified multinational energy company with an integrated network of energy assets and expertise.
The company manages a dynamic portfolio of natural gas and electric supply, delivery and trading businesses – meeting the energy needs of customers throughout North America and in key markets around the world.
Duke Energy, headquartered in Charlotte, N.C., is a Fortune 100 company traded on the New York Stock Exchange under the symbol DUK. More information about the company is available on the Internet at: http://www.duke-energy.com.
Source: National Fuel Gas Company; Duke Energy; Empire State Pipeline