TransCanada to Acquire Columbia Pipeline Group

Merger a "rare opportunity" to access Appalachia basin, boost growth plan

The largest business transaction TransCanada, has undertaken since merging with NOVA in 1998 was unveiled today, as an agreement was reached to acquire Columbia Pipeline Group.

The acquisition will significantly expand our natural gas pipelines business in the United States and provide attractive growth opportunities for our company.

“Columbia Pipeline Group represents a rare opportunity to invest in an extensive, well managed, growing network of natural gas pipeline and storage assets,” TransCanada’s President and CEO Russ Girling said.

“This transaction will provide us with a well-established footprint in North America’s fastest growing natural gas basins, diversifying our regulated natural gas pipeline and storage operations and positioning us for continued growth."

Columbia Pipeline Group operates 26,000 kms (15,000 miles) of natural gas pipelines

Houston-based Columbia Pipeline Group operates a 26,000-kilometre (15,000-mile) network of interstate natural gas pipelines, extending from New York to the Gulf of Mexico, including a broad footprint in the Marcellus and Utica shale gas plays. The company also operates one of the nation's largest underground natural gas storage systems.

“Adding an established, regulated natural gas transmission and storage network in this region will broaden the scope of our operations,” Girling said.

“Columbia’s assets complement our existing North American footprint, which together will create a 91,000-kilometre (57,000-mile) natural gas pipeline system connecting the most prolific supply basins to premium markets across the continent. At the same time, we will be well positioned to transport North America’s abundant natural gas supply to liquefied natural gas terminals for export to international markets.”

Columbia has $9.6 billion in commercially secured growth projects

In addition, Columbia has $9.6 billion in commercially secured growth projects that will increase TransCanada’s portfolio of near-term projects to $23 billion, supporting an annual dividend growth rate of eight to 10 per cent through 2020.

In order to finance this acquisition, we plan to monetize our U.S. Northeast power generation business and a minority interest in our Mexico natural gas pipelines business, as well as issue new common equity proportionate to the size of the transaction.

“An acquisition of this magnitude required us to examine our existing asset base and financial structure and make some changes to our portfolio to both raise funds for the purchase and ensure we are positioned to continue maximizing value for our shareholders,” Girling explained.

Acquisition expected to be finalized in second-half of this year

The acquisition is expected to be finalized in the second half of this year after receiving the necessary regulatory, government and shareholder approvals.

To address some of the questions that our employees, shareholders and community stakeholders may have about the acquisition, we can provide the following answers at this time:

Questions & Answers

What is the purchase price for Columbia Pipeline Group?

The final purchase price is US$13 billion including the assumption of $2.8 billion of Columbia’s debt.

How will this transaction benefit Columbia and its employees?

We expect the merger with TransCanada to significantly strengthen Columbia’s financial foundation and provide even greater resources to support the execution of its long-term business strategy. We believe this transaction will help Columbia better weather risk – such as those associated with today’s historic energy downturn – while maximizing our ability to deliver on key growth, customer service, safety and reliability objectives.

Will there be any job losses as a result of this merger?

At this stage in the transaction no organizational structure or resourcing decisions have been made, so impacts, if any, on existing TransCanada or Columbia employees are unknown. Employees will be informed of developments as the transaction progresses.

What regulatory approvals are required?

The acquisition is expected to close in the second half of 2016 subject to Columbia shareholder approval, along with certain regulatory and government approvals, including compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the satisfaction of customary closing conditions.Upon closing, Columbia will become an indirect wholly-owned subsidiary of TransCanada and will cease to be a publicly held corporation.

Why are you planning to sell your power business in the U.S. Northeast in order to make this acquisition?

In order to complete this transaction, we determined that selling our U.S. Northeast power portfolio provides the best option to help generate the necessary funds. This is a high quality business that has served our shareholders well for many years.

Is TransCanada planning to get out of the power generation business?

No. Power generation will still play a role in TransCanada’s overall strategy and we will pursue new opportunities where they make sense. We continue to be a significant player in power generation and marketing in Canada through our gas-fired generation facilities in Alberta, Ontario, Quebec, and New Brunswick. We recently announced a multi-billion dollar commitment to refurbish six reactors at the Bruce Nuclear facility in Ontario that will extend the life of Bruce for decades to come. We will also continue to operate the Coolidge Generating Station in Arizona.

What will be the impact of bringing on a minority interest in your Mexico natural gas pipelines business?

We will be seeking passive investors for a minority stake, so we do not expect this will have any impact on our operations or projects that are currently under construction. We continue to view Mexico as an important region for future growth and we will explore further opportunities to expand our presence in the country.

Many areas where Columbia operates are new communities for TransCanada. What will you be doing to insert yourself into these communities?

TransCanada has over 65 years of experience building and operating pipelines and other energy infrastructure across North America. We have a solid reputation as a good neighbor and community partner in the communities where we operate and we will continue that in the new communities we are entering with the purchase of the Columbia Pipeline Group. This is not the first time we have acquired significant new pipeline operations in the U.S., and as we have done in the past, we will build on the experience and successes of the previous ownership and respect the unique needs of the communities we are entering respect the relationships that currently exist with Columbia.