Enbridge Takes Regulatory Progress toward US Gas Utilities Takeover

Enbridge Inc. has moved closer to completing the $14 billion acquisition of three United States gas utility companies from Dominion Energy Inc., a takeover that the Canadian company has said would make it the biggest natural gas utility in the United States.

Enbridge said waiting periods for fair competition reviews under the U.S. Hart-Scott-Rodino Antitrust Improvements Act had expired November and that last month it had received the final clearance from the interagency Committee on Foreign Investment.

U.S. law requires parties in certain acquisitions and mergers to notify the FTC and the Department of Justice (DOJ) of the transactions. The two agencies then review such transactions for 30 days—called a waiting period—before these can be consummated. If either agency determines during the waiting period that further inquiry is necessary, the legislation allows the determining agency to request additional information and documentary materials. This second request extends the waiting period for 30 days after all parties have complied with the initial request, according to a legal guide on the FTC website.

Meanwhile the Committee on Foreign Investment scrutinizes national security implications of foreign investments.

“Enbridge and Dominion's regulatory teams are in the process of securing the required U.S. federal and state regulatory approvals to complete the Acquisitions”, Calgary, Alberta-based Enbridge said in an earnings report for the fourth quarter of 2023.

The transaction with Richmond, Virginia-based Dominion is among multi-billion-dollar acquisitions in the US oil and gas industry announced last year.

The FTC has opened anti-trust reviews of the mergers between Chevron Corp. and Hess Corp., Exxon Mobil Corp. and Pioneer Natural Resources Co., and Occidental Petroleum Corp. and CrownRock LP, as confirmed by the companies in earlier regulatory filings.

The pending acquisitions by San Ramon, California-based Chevron and Spring, Texas-based ExxonMobil of their smaller U.S. competitors had prompted a group of senators to ask for an FTC investigation. They warned the US oil and gas industry was already “too concentrated”.

“By allowing Exxon and Chevron to further integrate their extensive operations into important oil-and-gas fields, these deals are likely to harm competition, risking increased consumer prices and reduced output throughout the United States”, the 23 senators wrote in a letter to the FTC November 1. “At the regional level, the deals threaten to harm small operators and suppress wages”.

Gas distribution is a key component of Enbridge’s growth investment. “Enbridge placed over CAD 2 billion [$1.5 billion] of growth projects into service in 2023 primarily made up of Gas Distribution's CAD 1.2 billion [$893.1 million] of 2023 Utility Growth Capital, $0.6 billion of GTM's [gas transmission and midsream segment] 2023 modernization program and Phase I of the Fox Squirrel solar project [in Ohio]”, the company said in the press release on its website. “During 2023, Enbridge added CAD 10 billion [$7.4 billion] of new organic growth capital to its backlog, predominantly from the U.S. Gas Utility growth program (assuming successful closings of the Acquisitions), the addition of the $1.2 billion Rio Bravo Pipeline to the secured growth backlog and the increase to the Sunrise Expansion on T-South [pipeline extension project in British Columbia] of CAD 400 million [$297.7 million]”.

Enbridge president and chief executive Greg Ebel said in a statement, “Our pro-forma gas distribution business will deliver approximately 9.3 Bcf/d [billion cubic feet a day] of natural gas to 7 million customers, making it North America's largest natural gas utility platform”.

Referring to the Dominion assets, Ebel added, “These acquisitions are expected to balance Enbridge's earnings mix to approximately 50 percent natural gas and renewables and 50 percent liquids”.

For 2023 Enbridge posted CAD 5.8 billion ($4.3 billion) in profit—CAD 5.7 billion ($4.2 billion) when adjusted for extraordinary or nonrecurring items. Adjusted earnings before income tax, depreciation and amortization (EBITDA) stood at CAD 16.5 billion ($12.3 billion). Enbridge generated CAD 14.2 billion ($10.6 billion) in cash from operating activities.

Fourth-quarter income came at CAD 1.7 billion ($1.3 billion)—CAD 1.4 billion ($1 billion) adjusted. Adjusted EBITDA for the October–December quarter was CAD 4.1 billion ($3.1 billion). Quarterly operating activities generated CAD 3.8 billion ($2.8 billion).

In per-share terms, adjusted earnings per common share was CAD 0.64 ($0.5) for the fourth quarter and CAD 2.79 ($2.1) for the full year.

Enbridge attributed the year-on-year increases in quarterly and annual earnings to “higher Mainline volumes, higher contributions from the Midcontinent and Gulf Coast segment due to higher FSP [Illionois–Oklahoma Flanagan South Pipeline] volumes and record EIEC [Enbridge Ingleside Energy Center terminal] export volumes, higher Canadian utility rates and customer base, the expiration of certain transportation commitments in the Energy Services business and favorable USD/CAD hedge settlement rates”.

Enbridge, which has stakes in gas storage and distribution, gas and liquids pipeline transmission and renewable energy, expects 2024 adjusted EBITDA at CAD 16.6 billion ($12.4 billion) to CAD 17.2 billion ($12.8 billion), while putting capital guidance at around CAD 6 billion ($4.5 billion). “Growth in 2024 is anticipated to be driven by contributions from recent acquisitions, assets placed into service, and toll escalators, partially offset by lower Mainline tolls, higher financing costs, and higher current income taxes”, it said.

Enbridge raised its 2024 quarterly dividend by 3.1 percent to CAD 0.915 ($0.7) per share, starting with the payout March 1 to shareholders of record on February 15.

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