Patrick Daniel, president and CEO of Enbridge, prepares to address the company's annual meeting in Calgary, Wednesday.Jeff McIntosh/The Canadian Press
Enbridge Inc. plans to take over a Canada-U.S. power transmission project by buying its cash-strapped developer for $20-million, marking an entry for the pipeline operator into electricity transmission.
Enbridge, best known as the main transporter of Canadian oil to the United States, said Tuesday it had agreed to buy the shares of Tonbridge Power Inc. for 54 cents apiece, giving it control of the Montana Alberta Tie Line project.
The project is a two-phase development that will link Great Falls, Montana, with Lethbridge, Alberta, with a 345 kilometre transmission line.
In June, Tonbridge had said it would need at least $25-million in additional funding to complete the power line, raising concerns over the project's future. It subsequently doubled that estimate.
Following the acquisition, Enbridge will inject the money needed to finish the first 300 megawatt phase and an expansion to 550-600 megawatt.
The total cost to the company is expected to be $300-million, with half of that funded by a 30-year loan from the Western Area Power Administration of the U.S. Department of Energy.
Under a plan of arrangement, Enbridge will also repay about $50-million of debt incurred by Tonbridge.
Tonbridge shareholders are scheduled to vote on the deal on Sept. 26, and holders of more than 20 per cent of the stock have said they will vote in favor.
A special committee of Tonbridge's board said the deal is in shareholders' best interests.
The offer represents a 116 per cent premium over Tonbridge's closing price of 25 cents on Aug. 8, the day before the shares were halted on the TSX Venture Exchange.
The stock was up 28 cents at 53 cents Tuesday. Enbridge was off 38 cents at $31.09 on the Toronto Stock Exchange.
"The MATL project is the first step in Enbridge's plans to develop a power transmission growth platform," Enbridge Chief Financial Officer Richard Bird said in a statement.
Enbridge is a producer of 860 megawatts of renewable energy through a portfolio of wind, solar and geothermal projects.
It will be entitled to get about $9-million if the deal falls through, it said.
Jeffrey Jones