Enbridge, a Canadian pipeline giant, is set to acquire Dominion Energy’s natural gas distribution in a $14 billion deal. Now it has become North America’s largest gas utility group.
Enbridge will pay around $9.4 billion in an all-cash deal, solidifying its presence in the gas sector alongside renewables and liquids.
This transaction highlights the contrasting investment strategies emerging as the US intensifies efforts to decarbonize its economy. Enbridge, primarily known for its oil transportation, will now have a balanced portfolio of gas and clean energy assets.
Dominion Energy will pivot its focus towards state-regulated electric utilities, responding to the increasing power consumption driven by factors such as the adoption of electric vehicles and data center expansion.
According to Robert Blue, Dominion’s CEO, the electricity demand is surging and shows no signs of slowing down, propelled by artificial intelligence, electrification, and economic activity.
Enbridge’s CEO, Greg Ebel, emphasizes the importance of natural gas utilities as essential infrastructure for delivering safe, reliable, and affordable energy. He sees this acquisition as a rare opportunity given the scale and quality of Dominion’s natural gas utilities.
After the deal, Enbridge’s asset mix will become evenly split between gas, renewables, and liquids, showcasing the evolving energy landscape in North America.
In the wake of this development, Enbridge’s stock dipped 5.8% in after-hours trading, while Dominion saw a minor 0.2% decline.
This transaction underscores the persistent role of natural gas in the energy mix, a trend observed in recent deals. Magellan Midstream Partners, an oil-focused pipeline group, highlighted gas’s robust growth potential in its pursuit of a sale to the gas-heavy Oneok.
TC Energy, the Canadian pipeline operator, also shifted its focus from oil to gas by spinning off its oil transportation business, moving in line with the changing energy landscape.
Enbridge is already a significant player, transporting 30% of North America’s oil and 20% of its gas. With this acquisition, it will further solidify its position as the largest gas utility, serving 3 million customers across Ohio, North Carolina, Utah, Wyoming, and Idaho.
Dominion Energy’s decision to sell its natural gas distribution business is part of a broader strategy to boost its credit rating and free up capital.
It comes after previous asset sales, including a stake in a liquefied natural gas terminal, Cove Point, and its long-haul gas transmission and storage business, both acquired by Warren Buffett’s Berkshire Hathaway.