FORTIS PICKS UP TERASEN FOR $3.7 BILLION

Energy Processing Canada, Mar/Apr 2007

Power producer Fortis Inc., one of Atlantic Canada's biggest companies, bought the British Columbia natural gas distribution business of Terasen Inc., a wholly owned subsidiary of Houston, Texas-based Kinder Morgan Inc. (KMI), it was announced in late February. The Canadian Competition Bureau cleared the $3.7-billion deal a month later. Approval by the British Columbia Utilities Commission (BCUC) is expected in mid-2007.

The purchase price, including assumption of approximately $2.3 billion in debt, does not include the petroleum transportation assets of Kinder Morgan Canada Inc., formerly Terasen Pipelines (TransMountain Inc.), which comprise primarily refined and crude oil pipelines.

Based in St. John's, Newfoundland and Labrador. Fortis, which already owns electricity distribution utilities in five Canadian provinces and three Caribbean countries, established FortisBC Inc. in 2004 from the acquired assets of Aquila Networks Canada (British Columbia) Ltd. and set up FortisAlberta Inc. after purchasing Aquila Networks Canada (Alberta) Ltd.

"It is clear we have a track record of profitable growth through acquisitions," explains Fortis President and CEO Stan Marshall, an engineer and a lawyer. "This is an acquisition of quality assets on an accretive basis. It complements our existing electric utility operations in B.C. and provides us with a platform for future growth."

Terasen Gas, which owns and operates an overall 44,100 kilometres of gas distribution pipelines and a 4,300-kilometre-long distribution system, will remain autonomous in the Fortis model. Fortis says it expects to retain the existing senior management team.

Overall, Terasen serves approximately 900.000 customers or 95% of all gas customers in B.C. Terasen Gas Inc. accounts for approximately 83% of the total assets being purchased. The remaining utilities are Terasen Gas (Vancouver Island) Inc. and Terasen Gas (Whistler) Inc.

Fortis sees the acquisition of the former BC Gas Inc. as a platform for growth in Canada and in the United States where a number of utilities handle gas and electricity. The company is looking to Terasen to provide it with expertise in the gas area in the say way that Newfoundland Power Inc. enabled it to obtain electrical expertise a number of years ago, says Marshall, who has been the Fortis CEO for the past 11 years.

Terasen Gas (Whistler) Inc. operates an 80-kilometre-long propane distribution system that serves over 2,400 residential and commercial customers.