Enbridge closes $14 billion deal for Dominion gas utilities as US energy mix changes

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Dominion Energy, one of the largest utilities in the United States, has agreed to sell its natural gas distribution business to Canadian pipeline giant Enbridge in a $14 billion deal that highlights the dramatic shifts taking place in the North American fuel sector.

Enbridge will buy Dominion’s three natural gas distribution companies for approximately $9.4 billion plus debt in an all-cash deal, making it the largest gas utility group in North America.

This deal is significant because it underscores two distinct investment approaches as the drive to decarbonize the US economy grows.

Enbridge is known for shipping oil, operating the world’s longest pipeline system for crude oil and liquids. The company said that after purchasing Dominion’s gas facilities, Enbridge’s asset mix will be split evenly between gas, renewables and liquids.

Dominion will be left to focus on state-regulated electric utilities at a time when energy consumption is growing in the US, due to factors including the shift to battery-powered vehicles.

“Data Center Expansion Powered by Artificial Intelligence. . . “Increasing energy demand, along with electricity and general economic activity, is driving the most significant demand growth in our company’s history and shows no signs of abating,” said Robert Blue, Dominion’s CEO.

Greg Epple, President of Enbridge, said natural gas facilities have become “a must-have infrastructure for safe, reliable and affordable energy”.

“The addition of natural gas facilities of this size and quality, and at historically attractive multiples, is a once-in-a-generation opportunity,” he said.

Enbridge shares were down 5.8 percent in after-hours trading Tuesday, while Dominion shares were down 0.2 percent.

The continued presence of the gas in the fuel mix has become a topic in recent transactions. Oil-focused pipeline group Magellan Midstream Partners has made clear reference to gas’s “stronger growth engine” in its bid to sell gas to heavy Oneok.

TC Energy, the Canadian pipeline operator behind the aborted plan to build the controversial Keystone XL crude oil pipeline, said in July that it would spin off its oil transportation business to focus on shipping gas.

Enbridge transports about 30 percent of the oil produced in North America and 20 percent of the gas consumed on the continent. It operates the third largest gas utilities by number of customers, all of which are based in Canada.

Absorbing the companies involved in the deal — Eastern Ohio Gas Company, North Carolina Public Service Company and Questar Gas Company — and their three million 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 it launched last year after its share price was hit in part by high inflation.

The Virginia-based company sought to free up capital by offloading “non-core” assets in an effort to boost its credit rating. Dominion recently sold its 50 per cent stake in the 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 acquired ownership of the company’s long-distance gas transportation and storage business in 2020.