Algonquin Power buys Enbridge Gas New Brunswick for $331M
Algonquin official David Pasieka optimistic the deal can stabilize province's high natural gas rates
Canada's largest natural-gas pipeline company is dumping its once-troubled New Brunswick retail gas system less than two decades after it entered the provincial market.
Calgary-based Enbridge is selling its subsidiary, Enbridge Gas New Brunswick, to Algonquin Power and Utilities for $331 million.
David Pasieka, Algonquin's chief transformation officer, said Tuesday that the company is optimistic that eventually it can stabilize New Brunswick natural gas rates, which are now the highest in Canada.
"We hope that our growth plan will ultimately be able to come up with some other ideas which ultimately will benefit you and the price that's associated with the gas you're paying for," he said during an interview at Enbridge's Fredericton office.
The acquisition comes two years after a legal settlement between Enbridge and the province, designed to address uncertainty about the future of natural gas in the province.
The terms of the settlement meant Enbridge "had been looking forward from 2016," and now Algonquin will inherit the benefits of that agreement, Pasieka said.
With Algonquin's "entrepreneurial spirit" and the local experience Enbridge's employees will bring to the company, "we should be able to do good things together," he said.
Jennifer Rowland, an energy industry analyst, said Enbridge's sale was less about exiting the New Brunswick market and more about the company's selling off of $8 billion in assets to pay down debt from its purchase of another energy company two years ago.
"Enbridge has been selling assets all year," she said.
Enbridge won the franchise to distribute offshore Nova Scotia natural gas from the Maritimes and Northeast pipeline in 1999, beating out Irving Oil.
But it fell short of its goal of signing up the 71,000 customers it hoped to enrol within its first two decades. The much smaller base of 12,000 customers had to be charged more to pay down Enbridge's accumulated debt from building its lines.
That contributed to ever-increasing distribution rates for customers, which the previous PC government tried to stop by passing legislation in 2011 to break Enbridge's contract. The legislation let competitors enter the retail gas market to force rates down.
Enbridge filed lawsuits claiming $800 million, lawsuits the Liberal government settled in 2016.
That settlement capped gas rates for 2018 and 2019 in return for letting Enbridge seek higher rate increases after that, to pay down its deferral account. It also extended Enbridge's franchise agreement by 25 years and restored its near-monopoly.
Now it's up to Algonquin to build on that stability, Pasieka said.
"We have a very optimistic growth plan set up for here. We think we can bring more customers onto the pipe. That will be helpful for everybody. We'll look for diversifying supply and signing longer-term contracts."
One element will be an incentive program to persuade new customers to sign up for natural gas.
Pasieka said Algonquin's shareholders will put up $5 million to fund those incentives, which could include covering "up to 100 per cent" of the costs of converting homes to natural gas. He said the details will be worked out after the sale is finalized.
'An encouraging sign'
Premier Blaine Higgs called the acquisition a good sign for the economy.
"It's an encouraging sign of a company investing in our province, so that's positive," he said.
"They seem to want to grow the market, [for] which the opportunity exists more so if we can develop some of our homegrown resources to supply it."
That's a reference to the PC decision to partially lift a moratorium on shale gas development in the Sussex area if there's local support for it.
Pasieka also said that could "fit into the equation" for the company.
But he said the Enbridge deal has been in the works for about fourth months and is not related to the recent election result or any policy decisions by the new Progressive Conservative government.
"This opportunity came up," he said. "We knocked on their door and the timing was right for Enbridge. … It was just almost happenstance that the situations come together at almost the same time."
Algonquin does not plan to cut any staff in the province.
"Every employee here in New Brunswick will keep their job," Pasieka said. "They'll keep their title, they'll keep their pay and their benefits."
The company will also relocate to Fredericton a handful of Enbridge employees who deal with New Brunswick customer-service calls from an out-of-province office.
The acquisition must be approved by the provincial Energy and Utilities Board.
Algonquin will run the gas operation through its subsidiary, Liberty Utilities. The company operates 39 utilities in the United States.
Previous Canadian dealings
The New Brunswick retail gas system will be the company's first regulated utility in Canada, though it already operates the Tinker Dam, a hydroelectric dam in Victoria County that sells electricity to the municipally owned power utility in the nearby Perth-Andover.
Dan Dionne, the village manager in Perth-Andover, said the company has been good to deal with. Last year, the village signed a 14-year extension on its contract for power from the dam.
"We're certainly looking forward to a long-term relationship with them, and found them very professional and A-1 to work with so far," Dionne said.
Pasieka would not comment on how the carbon-tax debate would affect the company.
The previous Liberal government's climate plan exempted fossil fuels for home heating from its carbon price. But Ottawa rejected that plan and will impose its own carbon tax, which will apply to residential natural gas, starting next year.
"We're just monitoring the situation and we'll see how that unfolds," Pasieka said.