The Canadian pipeline giant Enbridge Inc. agreed to buy three utilities from Dominion Energy Inc. in a $9.4 billion deal that will create North America’s largest natural gas provider.
Enbridge’s deal for the East Ohio Gas Co., Questar Gas Co. and Public Service Co. of North Carolina will double the Calgary-based company’s gas utility business, Calgary-based Enbridge said in a statement Tuesday.
The deal is a bet on the long-term value of gas as a transition fuel as the world seeks to shift away from more polluting forms of energy like coal. While there’s a strong push to deploy more renewable energy to help combat climate change, there’s also a growing recognition that the green transition will take time, ensuring years of demand for gas.
“The assets we are acquiring have long useful lives and natural gas utilities are ‘must-have’ infrastructure for providing safe, reliable and affordable energy,” Greg Ebel, Enbridge’s chief executive officer said in the statement.
The move comes as Enbridge, North America’s largest pipeline company, is pushing to positioning itself for the transition toward lower-carbon sources of energy. The three companies it’s buying serve customers in Ohio, Utah, Wyoming and North Carolina, where the rate base is expected to grow at 8% a year.
“This is, without question, a historically rare rare opportunity,” Ebel said on a call outlining the agreement.
The transaction is valued at $14 billion including debt, and it will be Enbridge’s largest since its acquisition of Spectra Energy Corp. for about $28 billion in 2017, according to data compiled by Bloomberg.
The deal to buy the companies, which serve seven million homes and businesses across multiple states, will require approvals from regulators, including the Federal Trade Commission to ensure it doesn’t violate antitrust laws. Enbridge said it would start pushing forward to secure the approvals immediately. The company said it expected the deal to close in 2024.
The transaction is also the latest to arise from Dominion’s corporate review launched by CEO Bob Blue late last year to reverse a slumping stock price. Executives said they wanted to focus on the company’s growing electric utility business and pay down debt.
The deal with Enbridge comes nearly two months after the Richmond, Virginia-based Dominion agreed to sell a $3.3 billion stake in a Maryland liquefied natural gas export project to Berkshire Hathaway Energy.
Read More: Dominion Begins Review, Replaces CFO as Shares Disappoint
Dominion said Tuesday the sale of its natural gas distribution utilities would help it improve the company’s funds from operations to debt ratio by 3.4%. CEO Blue said the company will provide an update on its review during the fourth quarter of this year.
--With assistance from Ruth Liao.
(Updates with additional details throughout)