The Pacific Northern Gas board is recommending to shareholders a deal that will see the utility swallowed up by AltaGas.
The two companies announced October 31 they had reached an agreement that would see AltaGas pay $230 million, including $85 million in assumed debt and $5 million in preferred shares.
AltaGas is offering $36.75 cash for each PNG share, representing a 28 per cent premium over the average price for the 20 days prior to the announcement.
PNG’s board is recommending acceptance and the transaction is expected to close by December 16 provided 66 per cent of shareholders approve.
That approval has to include a majority of the minority shareholders.
And a number of approvals, notably approval from the BC Utilities Commission, have to be secured as well.
If as expected the takeover goes through, PNG customers won’t notice anything different, says an AltaGas official.
“It’ll be the same company, the same name and have the same management,” said John Lowe, president of the AltaGas Utility Group, part of parent company AltaGas.
Lowe said the sale will not result in higher rates being paid by PNG customers.
He even held out the possibility rates could fall after PNG’s conversion from a publicly-listed company to a privately-held one within a publicly-traded company.
“There are fees associated with being a public company, listing fees and audit fees that would not be an expense they’ll bear,” Lowe explained.
He said PNG’s gas distribution network in Northeastern and Northwestern BC fits in well with other utilities already owned by AltaGas.
The utility holdings of AltaGas already include complete or partial ownership of companies in Nova Scotia, Alberta and Inuvik in the Northwest Territories.
Lowe said PNG’s two run-of-river projects on the Sunshine Coast fit with moves by AltaGas to add to power generation capability.
AltaGas did approximately $1.3 billion in business from its utilities group, from producing power through conventional and renewable means and by delivering gas to customers last year.
Adding PNG’s sales volume will increase the company’s income from regulated utilities by 50 per cent to more than $500 million and increase its customer base from 75,000 to 110,000.
As well, PNG will collect $20 million from the KM LNG ownership group when it announces it will proceed with its planned liquefied natural gas plant near Kitimat.
That comes from PNG selling its ownership interest in the proposed Pacific Trails Pipeline to KM LNG. This pipeline will deliver natural gas to the plant.
PNG will have a continuing financial benefit because it will manage the operations of the Pacific Trails Pipeline.
It also stands to benefit if a second LNG plant proceeds, the BC LNG Export Co-operative.
It will transport gas through PNG’s existing pipeline which is currently running about 80 per cent below capacity.
PNG official Greg Weeres says he expects it will be business as usual once the sale is approved.
He said PNG’s rates will continue to be regulated and any changes need to be approved by the utilities commission.
Weeres, like Lowe, expects there will be cost savings from doing away with PNG as a publicly-listed company, potentially paving the way for lower customer rates.
“How much they might be, I can’t speak to that yet,” said Weeres of the costs.
He did anticipate, however, that PNG will be paying its fair share of AltaGas’ cost of being a publicly listed company.
