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Dominion Energy, one of America’s largest utilities, has agreed to sell its natural gas distribution business to Canadian pipeline giant Enbridge in a $14 billion deal, marking a major shakeup of North America’s oil sector.
Enbridge will buy Dominion’s three natural gas distribution companies for $9.4 billion plus debt, making it the largest gas utility group in North America.
The transaction is significant because it shows two different approaches to investment as the rush to unwind the U.S. economy gathers steam.
Enbridge is known for operating the world’s longest crude and liquids pipeline to transport oil. After acquiring Dominion Gas’ utilities, Enbridge’s asset mix will be evenly split between gas and renewables and liquids, the company said.
As America’s energy consumption continues to grow, Dominion will focus on government-controlled electric utilities, including a shift to battery-powered vehicles.
“The Proliferation of the Artificial Intelligence-Enhanced Data Center . . . Along with electrification and overall economic activity, they are driving the highest demand growth in our company’s history and show no signs of slowing down, said Dominion CEO Robert Blue.
Natural gas utilities “must have the infrastructure to provide safe, reliable and affordable power,” Enbridge CEO Greg Ebel said.
“Adding natural gas facilities of this scale and quality, with historically attractive multiples, is a once-in-a-generation opportunity,” he said.
Shares of Enbridge fell 5.8 percent in after-hours trading Tuesday, while Dominion fell 0.2 percent.
The sustainability of gas in the fuel mix has become a theme in recent transactions. Oil-focused pipeline group Magellan Midstream Partners has pointed to gas’s “more powerful growth engine” as it chases sales for gas-heavy Oneq.
TC Energy, the Canadian pipeline operator behind the aborted plan to build the controversial Keystone XL crude pipeline, said in July it would focus its oil transportation business on shipping gas.
Enbridge transports 30 percent of North America’s oil production and 20 percent of the continent’s gas consumption. It operates the third largest gas utility by customer numbers, all in Canada.
It will be the largest after taking over the companies involved in the deal – Eastern Ohio Gas Co., North Carolina Public Service Co. and Custar Gas Co. – and their 3mn customers in Ohio, North Carolina, Utah, Wyoming and Idaho.
Dominion’s decision to sell came last year as part of an ongoing business review after its share price took a hit in part due to inflation.
The Virginia-based utility sought to free up capital by offloading “non-core” assets to boost its credit rating. Domion recently sold its 50 per cent stake in Maryland liquefied natural gas terminal Cove Point to Warren Buffett’s Berkshire Hathaway for $3.3bn, focusing on regulated electricity sales.
Berkshire previously owned the company’s long-term gas transmission and storage business in 2020.
