Edward Welsch, Wall Street Journal, 16 August 2011
Enbridge Inc. (ENB) is entering the electricity transmission business for the first time with its planned acquisition of Tonbridge Power Inc. (TBZ.V) and a C$300 million powerline project between Montana and Alberta.
The Montana-Alberta Tie-Line project is a 214-mile, 300-megawatt line that will send renewable wind energy from Montana to Alberta, which is seeing increasing electricity demand due to the growth of its oil and gas industry.
Enbridge will pay C$20 million to buy Toronto-based Tonbridge and also repay about C$50 million of debt Tonbridge acquired during the project's construction, which is expected to be completed next year. Enbridge, based in Calgary, said it will provide C$300 million to fund the project and an expansion to up to 600 megawatts coming in 2014.
Both the U.S. and Canadian energy infrastructure business need several billion dollars worth of new investment a year for decades to come, said Lino Luison, Enbridge's vice-president of financial partnerships.
"We thought it made a lot of sense to get into the business given the growth potential it offers," Luison said. "The potential is enormous and we think we can tap into that, and this is step one."
Alberta is an underserved power market with very few interconnections with other jurisdictions, but its demand for power is growing rapidly along with its petroleum industry, which exports the majority of its production to the U.S.
The 300-megawatt line will add extra capacity roughly equal to just one year's growth in Alberta's electricity demand, Luison said, so there's a lot of need for even more power infrastructure.
"It's not a game changer for Alberta but it does assist on addressing the immediate needs of the province," he said.
Tonbridge has met resistance from some Montana landonwers who are fighting the company's placement of the line and in some cases holding out for more compensation under eminent domain laws. But Montana's Supreme Court issued a decision favorable to the company in June.
Luison said a settlement between Tonbridge and the landowners is likely to come soon. Enbridge had been watching the legal situation around the line and is confident that Tonbridge is making progress and will resolve the issue, he said.
About half of Enbridge's funding for the project will come from a low-cost 30-year loan provided by the U.S. Energy Department.
A two-thirds vote by Tonbridge shareholders at a Sept. 26 meeting is required for the acquisition to be approved. Holders of more than 20% of Tonbridge's common have agreed to vote in favor of Enbridge's offer, which is at 54 Canadian cents a Tonbridge share.
