Centrica to buy Enbridge gas sales division, doubling Canadian base

Centrica PLC, the domestic and commercial gas service company formed from the former UK state monopoly, plans to buy the Canadian Enbridge Inc.'s service division for $1 billion (Can.). The deal is subject to regulatory approvals. Completion is expected in the spring.

Jan. 28, 2002

2 min read

By the OGJ Online Staff

LONDON, Jan. 28 -- Centrica PLC, the domestic and commercial gas service company formed from the former UK state monopoly, plans to buy the Enbridge Inc.'s Canadian service division for $1 billion (Can.).

The deal is subject to regulatory approvals. Completion is expected in the spring.

The acquisition will more than double the customer base of Centrica's Canadian business. It offers the potential to market energy and related products and services across a base of more than 2 million households.

Centrica, which has 70% of the UK gas market and faces losses of as much as $43 million from a supply contract with Enron Corp., has been expanding abroad and into other products to lessen dependency on UK gas. It plans to spend $1.4 billion on acquisitions to quadruple its client base in North America by next year.

Centrica, spun off from British Gas PLC in 1997, when the upstream BG Group PLC was also created, plans to have 10 million customers in North America by the end of next year, CEO Roy Gardner has said.

Centrica said Nov. 29 it might have to write off contracts with Enron.

The company signed a 10-year natural-gas supply contract with Enron's European arm in 1998 for more than 5 billion cu m at prices linked to a London International Petroleum Exchange futures contract.

Centrica has declined to disclose its exposure to Enron. A spokeswoman said the company, which reports full-year earnings next month, has found alternative gas suppliers.

The company agreed last month to buy Enron's British energy supply business and some assets for $150 million in cash.

Centrica is the largest unregulated energy retailing company in North America, with more than 1.3 million gas customers in Canada and the US. In addition, it has signed up 600,000 electricity customers in Ontario in advance of market opening at the beginning of May.

Enbridge Services has around 1.3 million customers to whom it leases water heaters and provides residential services including heating, ventilation, and air conditioning installation and servicing. About 325,000 of these customers also have heating servicing contracts.

The majority of both Centrica's and Enbridge Services' North American customers are in Ontario.

European utilities such as Britain's ScottishPower PLC and RWE AG of Germany are expanding into the fragmented US market. RWE, Europe's fourth-biggest power company, agreed in September to buy American Water Works Co. for $7.6 billion in cash and assumed debt.