The Daley Note: September 28, 2023
ENB Enbridge (ENB) has reached a deal to acquire three natural gas utilities from Dominion Energy (D) for $14.5B, moving the midstream company’s portfolio further downstream.
ENB will purchase utilities East Ohio Gas, Questar Gas, and Public Service Company of North Carolina (PSCNC). The package also includes Wexpro, a Rockies-based producer that delivers gas to Dominion. Under the agreement announced September 5, ENB will pay D $9.4B in cash and assume $4.6B in debt.
The deal price values the Dominion assets at a 16.5x multiple to estimated 2023 earnings, ENB said, or a 1.3x enterprise value to the combined rate base in 2024. The companies expect to close the deal in late 2024.
The three utilities together represent a YE22 rate base of $9.2B from ~3 million customers, according to figures provided by Dominion. The company estimates the assets will deliver $600MM in operator earnings in 2024 (see table).
The acquired properties span the Lower 48 from North Carolina and Ohio to Utah, Wyoming and Idaho. ENB will add nearly 78,000 miles of gas distribution pipelines and 62 Bcf of gas storage capacity to its portfolio. Already Canada’s largest gas utility operator, ENB will become the largest in North America with the additional companies, delivering ~9.3 Bcf/d to 7 million customers.
The acquired assets do not seem integrated with ENB’s other pipelines. East Daley could find only one contract by the targeted utilities on an ENB-owned pipeline, a 15 MMcf/d contract for East Ohio Gas on Nexus Gas Transmission.
Enbridge expects to remain levered between 4.5x and 5.0x after the deal closes. ENB estimates the acquisitions will double the scale of its gas utility business, accounting for ~22% of total adj. EBITDA. In the ENB Financial Blueprint, East Daley estimates the acquisition would add ~C$1.79B in EBITDA in 2025 (see chart above). - Oren Pilant Tickers: D, ENB.
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