Kinder Morgan takeover of Terasen - Media medley 2

Proposed U.S. takeover good for Terasen, shareholders
Don Cayo, Vancouver Sun, 03-Aug-2005
Oilpatch abuzz with takeover talk
Paul Haavardsrud, Times Colonist (Victoria), 03-Aug-2005
Kinder Morgan bid for utility applauded
Scott Simpson, Times Colonist (Victoria), 03-Aug-2005
No changes expected after Terasen takeover
Gordon Hoekstra, Prince George Citizen, 03-Aug-2005
Kinder Morgan offer will bolster Terasen
Jon Harding, National Post, 03-Aug-2005
Takeover pushes Terasen shares to 15 per cent gain
Scott Simpson, Vancouver Sun, 03-Aug-2005
Terasen sale has downside
Kent Spencer, The Province, 03-Aug-2005
Natural resources shouldn't be sold off to foreigners
Richard Floyd, Vancouver Sun, 03-Aug-2005
Takeover pushes Terasen shares to 15 per cent gain
Scott Simpson, Vancouver Sun, 03-Aug-2005
Liberal loophole allowed sale of Terasen
Michael Smyth, The Province, 04-Aug-2005

Don Cayo
Vancouver Sun
03-Aug-2005

Despite the predictable gnashing of teeth over what some British Columbians imagine to be a loss of sovereignty, I see little to dislike in Kinder Morgan's offer to buy B.C.'s Terasen Gas for 20 per cent more than the going price for its stock.

The offer is really for two companies -- Terasen Gas, which delivers natural gas to about 875,000 B.C. homes and businesses; and Terasen Inc., which has two key oil pipelines out of Alberta's tarsands area. The gas company is what most British Columbians care about, but it's the pipeline prospects that must be tempting Richard Kinder to offer nearly $7 billion for a company that lists its assets as worth $5 billion.

The purchase has yet to be approved by either the BC Utilities Commission or Terasen's shareholders. But the precedent of American-owned Duke Energy winning approval to take over Westcoast Energy in 2001 suggests the B.C. Utilities Commission is open to such a move. And shareholders are, given the generosity of the offer, unlikely to say no.

If the deal goes ahead, the impact will be nil for customers, almost nil for employees, and potentially sizeable, favourably so, for the pipeline operation.

The distribution side of the business is a regulated monopoly, and exactly the same regulations -- and the same regulator -- will continue to control the cost paid by B.C. consumers. Terasen, whatever owner, must continue to buy natural gas at market prices and pass that cost on, with no markup allowed. And it must continue to cover its costs and make its profit from a charge for delivery that is set by the regulator and is not subject to dramatic swings like the supply-and-demand-driven price of gas.

So even if Kinder Morgan wanted to start gouging its new customers -- and I can't imagine why a company would risk screwing up a good and steadily profitable business that it just bought -- the BC Utilities Commission stands in the way. And there's no reason to believe the commission would treat American owners any more kindly than the mostly Canadian shareholders that own the company now.

As for jobs, the handful of head-office executives who may well find themselves redundant will no doubt negotiate decent exit packages for themselves.

But, aside from those few cuts, a new owner won't have much room to swing the axe. Terasen's work simply doesn't lend itself to jobs that can be whisked away -- its 2,500 workers are almost all tied to a specific patch of geography. You can't lay a pipe or connect a gas fitting by phone from Houston or Bangalore.

There are, to be sure, some "exportable" jobs associated with gas distribution, but Terasen, under its former name of BC Gas, either already ditched them or never had them in the first place.

The company was formed in 1988 when Inland Gas bought BC Hydro's Lower Mainland Gas Division. But for more than a decade, the privately owned company -- it was never a Crown corporation -- farmed out its billing to BC Hydro. In late 2001, it switched that contract, plus an additional one for its 135-employee call centre in Kelowna, to a private company, Accenture.

As for the pipeline side of the business, Terasen is a significant player that's poised to get bigger. It has nearly $3 billion worth of expansions on its wish list awaiting regulatory approval, most notably a proposal to twin its Trans Mountain oil pipeline from Edmonton to the Lower Mainland and Puget Sound or, possibly, to extend it to Prince Rupert to deliver oil for export to Asia. While a new owner will no doubt want to review -- and possibly revise -- these plans, what Kinder Morgan brings to the table is much improved access to capital. The company will have about $30 billion in assets, compared with Terasen's $5 billion, and a better debt-to-equity ratio, which means it can borrow money more cheaply.

As Mines and Energy Minister Richard Neufeld noted when I spoke to him on the phone, "If we just had Canadian companies investing in oil and gas, we'd have a pretty small industry." Companies like Shell from the Netherlands, BP from the U.K. and Exxon from the U.S. have contributed greatly to the Canadian industry's growth.

The Kinder company has enjoyed phenomenal growth since it was formed in the late 1990s, and has built a reputation there as a good employer and a good company to deal with.

So what don't I like about this deal? Only that I don't hold any Terasen stock.

dcayo@png.canwest.com

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Paul Haavardsrud
Times Colonist (Victoria)
03-Aug-2005

CALGARY -- Speculation a big slice of Canada's oilpatch is in the crosshairs of international buyers is driving fresh trading in the sector, helping push a passel of energy names to new highs.

A pair of oilsands-related takeovers, combined with Washington's efforts that helped thwart a $18.4-billion US takeover of Unocal Corp. by a Chinese company, is leaving investors wondering if more bids for Canadian shops are on the way. The benchmark Canadian energy index rose to a record high Tuesday.

The profile of northern Alberta's oilsands, already a hot investment theme for money managers, is being raised even further with pipeline giant Kinder Morgan Inc.'s $6.9-billion bid for Terasen Inc. Monday, followed by Total SA's $1.35-billion offer for Deer Creek Energy Ltd Tuesday.

"Terasen is, I think, the first full takeover of a company based on ... an oilsands exposure strategy," said Wilf Gobert, an analyst at Peters & Co. in Calgary. "Along with the Chinese bowing out of the Unocal deal ... this maybe underscores interest in looking at oilsands. There's a common thread."

With Canadian markets closed for Monday's holiday, energy stocks also spent Tuesday catching up to the U.S. oilpatch, which traded higher on the back of rising oil prices.

NYMEX crude for September delivery rose 33 cents to $61.90 a barrel Tuesday. Monday, the contract hit a record $62.30.

Such buoyancy wasn't lost on the S&P/TSX Energy Index. It rose nearly four per cent in Tuesday's session, pacing the broader index, which jumped nearly 200 points, its biggest gain in 15 months.

Big movers in the oilpatch included: Canadian Natural Resources Ltd., up $2.85, Suncor Energy Inc. ($2.97), Talisman Energy Inc. ($3.29), Petro-Canada ($3.97), Nexen Inc. ($3.76), Imperial Oil Ltd. ($4.50), Husky Energy Inc. ($3.60), and Opti Canada Inc. ($3.95).

"We're continuing to see a lot of interest in the oilsands, and I think yesterday the takeovers certainly added some additional interest," said Kate Warne, Canadian market strategist at Edward Jones in St. Louis. "I think to solely attribute [share price gains Tuesday] to merger and takeover announcements is probably incorrect, but to leave it out would also be incorrect."

Indeed, with the exception of Talisman, each of the biggest movers on the day boast a healthy exposure to the oilsands.

Long-rumoured to be looking at making a further move into the oilsands, Total's decision to finally pull the trigger on Deer Creek also has market players again musing that other major international shops could be readying their own overtures.

Among the energy giants perennially rumoured to be interested in snapping up Canadian companies are BP Plc., Royal Dutch/Shell Group, and Italy's ENI SpA.

CNOOC Ltd., which Tuesday announced its retreat from the politically charged Unocal saga, also means China's state-controlled oil company will see its name added to that well-established list.If the U.S. government is unwilling to see foreign powers invest in its backyard then, the thinking goes, it's easy to envision CNOOC, and its $20 billion in stray cash, turn an eye northward.

"We believe CNOOC is not finished," Thomas Burnett, president of New York-based institutional research firm Merger Insight told Bloomberg News. "They may look at Canada which is more receptive to bids from foreign companies."

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Scott Simpson
Times Colonist (Victoria)
03-Aug-2005

VANCOUVER -- A $6.7-billion bid for Terasen Inc. got warm reviews on Tuesday from analysts and stock markets.

Shares in Terasen, the Vancouver-based operator of British Columbia's primary gas distribution utility, jumped in heavy trading as stock markets began to digest the friendly takeover bid announced a day earlier by Houston-based Kinder Morgan Inc.

Terasen shares jumped $4.60, with more than 12.3 million shares changing hands, and closed at a record $36 on the Toronto Stock Exchange.

In New York, Kinder Morgan rose $6.13 US on a volume of 5.2 million shares, closing at $94.73.

The deal will be voted up by Terasen shareholders in late October and finalized by year's end, assuming it receives all regulatory approvals including that of the B.C. Utilities Commission and federal assent under the Competition Act.

Analysts participating in a Terasen teleconference offered congratulations to president and CEO John Reid, who admitted the deal makes his own future uncertain.

According to Terasen, the company's shares are 60 per cent held by institutions -- such as mutual funds -- and 40 per cent held by retail or individual investors.

"We do believe the offer price from Kinder Morgan provides full and fair value for our shareholders based on both relative and absolute metrics," Reid said.

"We do believe that the opportunity for Terasen shareholders to acquire Kinder Morgan shares will enable our shareholders to hold shares in a larger, more liquid company operating in the North American energy infrastructure space."

The bid to Terasen shareholders is comprised of cash and shares of Kinder, one of the top performers on the S&P-500, and requires the U.S. company to assume more than $3 billion in Terasen debt as part of the transaction.

Kinder chair and CEO Rich Kinder said the deal was motivated by Terasen's pipeline connection to the Alberta oilsands, a sprawling natural resource he described as "hellaciously significant" to North America's energy future.

Dominion Bond Rating Service was more cautious, putting Kinder's debt rating "under review with negative implications."

"The negative implications reflect, among other factors, the higher balance sheet leverage with lower cash flow/debt support resulting from the transaction at KMI, and the relatively high purchase price proposed," DBRS said.

The service described the deal as Kinder's largest-ever financial transaction, but although it was voicing caution in the short term, it said it expects the deal to yield positive longer term benefits.

"Based on its preliminary review, DBRS expects the proposed transaction to have a positive impact on KMI's business risk as a result of the increased scope and scale of its regulated pipeline and gas distribution operations, and growth potential," DBRS said.

Dominion suggested the price offered for Terasen shares, roughly a 14 per cent premium to last Friday's close, was somewhat high -- and that's probably good news for the company's many shareholders.

Bob Hastings, analyst with Canaccord Capital, said the deal took the market by surprise.

"There were no rumours out there that something like that was going to happen, which is the way it's supposed to be, of course."

Hastings said the value of the bid was too great for Terasen directors to reject out of hand and it gives the shareholders the option of taking cash or else staying in the energy sector by acquiring Kinder shares.

"They have a fiduciary responsibility, an obligation, to their shareholders, to look at bids when they come in.

"This is a high price that shareholders wouldn't be able to realize otherwise -- and they still have the ability to participate through taking some stock back."

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Gordon Hoekstra
Prince George Citizen
03-Aug-2005

The $6.9-billion takeover of Terasen is not expected to negatively impact plans to expand pipeline capacity from Alberta's oilsands to B.C.'s west coast, including through northern B.C.

It's also not expected to affect the City of Prince George's deal with Terasen Gas, which is meant to generate about $25 million for the city over 17 years.

U.S.-based Kinder Morgan chairman and CEO Richard Kinder said the driving force for the takeover was to become a player in the expanding Alberta oilsands production. He noted Kinder Morgan's expertise is in pipelines.

"Terasen has identified more than $2.5 billion US of potential expansion and growth opportunities, and less than half of those are in our (buy-out) model," Kinder told analysts on a conference call. "We certainly hope and believe we'll be able to spend at least that much in the next several years and hopefully more as we identify continued growth opportunities," he said.

Terasen is one of two companies with plans to expand pipeline capacity from the Alberta oilsands to B.C.'s west coast. Terasen's $2.5-billion plans includes options for a southern or northern route, either to Prince Rupert or Kitimat. A competing proposal from Enbridge is focused solely on a northern B.C. route, also either to Prince Rupert or Kitimat. Enbridge's $3.6-billion proposal includes a condensate line, which would run parallel to the oil pipeline.

Condensate -- which would return in tankers from Asia -- is a liquid that can be used to dilute heavier oil to make it easier to ship by pipeline.

The proposals are expected to create between 1,200 to 2,000 construction jobs, and another 150 to 200 permanent jobs. Both proposals are meant to provide additional pipeline capacity, needed as crude production from Alberta's oilsands is expected to double by the end of the decade to about two million barrels a day.

Kinder noted that $50 billion US in spending is planned in the Alberta oilsands in the next five to 10 years.

Asked by an analyst about Terasen's, as well as Enbridge's, plans to increase pipeline capacity to B.C.'s coast, Kinder said he expected there to be increased movement of Alberta oilsands crude to the U.S., but also probably to Asia.

Kinder also said he didn't think the two proposals were mutually exclusive.

"We believe there may be opportunities to expand well beyond what we have in our model, and we think there's opportunities to go north," he said. "Enbridge is a fine company, but we certainly think, though, that we'll be able to get our share of the additional production coming out."

Kinder Morgan also said it thinks it has an advantage over Enbridge's proposal because it could phase in expanded pipeline capacity.

Terasen is currently working on a project to expand capacity into B.C., and then will decide on a northern or southerly route, said Terasen spokesman Cam Avery. While Avery said Terasen believes it has a good proposal now, Kinder Morgan's purchase of Terasen will give the plan a boost. "The ability with a bigger company, bigger balance sheet, better access to low-cost capital -- we think it makes it that much more attractive," he said.

The deal is subject to regulatory approval in Canada and the U.S., and it also needs approval from shareholders.

City of Prince George official Kathleen Soltis said Kinder Morgan's buyout of Terasen is not expected to impact its deal with Terasen Gas. The city got the green light in a referendum last summer to borrow $58.6 million to finance a leasing agreement with Terasen Gas designed to generate nearly $25 million over 17 years. Mayor Colin Kinsley said the city realized that utilities often change hands, so it needed language that provided strong protection of its interests. "We've got it covered six ways from Sunday," he said.

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Jon Harding
National Post
03-Aug-2005

CALGARY -- Kinder Morgan Inc.'s $6.9-billion cash, share and debt bid for Canadian natural gas distributor Terasen Inc. packs financial muscle behind Terasen's growth plans and is seen by analysts as a potential trump card in the battle to become the first shipper of oilsands crude from Alberta to the West Coast.

The offer, made Monday, which includes Houston-based Kinder Morgan's assumption of more than $3-billion of Terasen debt, helped push Terasen stock past the $35.91-per-share price at which the bid is valued on a pro-rated basis. The stock jumped 14.65% to close at $36 on the Toronto Stock Exchange in heavy volume.

Vancouver-based Terasen is currently Canada's second-largest pipeliner of oil produced in the northeastern Alberta tarsands, behind Calgary-based Enbridge Inc.

Both are jockeying to expand their separate links to the major U.S. midwest refining hub and in the case of Enbridge, to build a $2.5-billion line, called Gateway, from Edmonton to a West Coast port 1,160 kilometres away in either Prince Rupert or Kitimat.

Terasen moves crude from oilsands projects on its Trans Mountain system to Burnaby, B.C., and Puget Sound on Washington State's coast.

It is proposing to twin the line to Burnaby, an option costing $2.3-billion, or build a line north to a new terminal in either Kitimat or Prince Rupert, an option with a price tag of about $2.57-billion.

Output from the oilsands is expected to double in the next five years from one million barrels a day today to two million and to continue to climb for years after, which means producers need new refining customers.

They have recently looked toward China and its energy-ravenous economy and to refineries in California.

PetroChina agreed in April to become a major shipper on the Gateway project, and in return, Enbridge said it would help China's largest oil company sign agreements with oil companies to secure up to 200,000 barrels a day of Canadian crude.

That development, along with the decision by Enbridge to seek commitments from producers for the remaining 200,000 barrels a day of Gateway capacity, was seen as a giving Enbridge an edge in what is turning into a tight race.

"A company isn't going to build a pipeline, run it half empty and have tolls that aren't economic for producers," said Lanny Pendill, an analyst with Edward Jones.

"If you get there first and secure the commitments, then it's a huge competitive edge."

But Terasen's deal with Kinder Morgan now may give its Trans Mountain expansion project a leg up, Mr. Pendill said.

"I never had concerns about Terasen's ability to do their projects, but maybe it would have meant issuing more equity, which could dilute the earnings benefit," he said. "Kinder Morgan has much deeper pockets."

The offer from Kinder Morgan was a premium of about 20% over the average price of Terasen's stock in the past 20 trading days.

Terasen chief executive John Reid told analysts the offer was too good to refuse.

"Ultimately it comes down to a value proposition and we felt this was a very attractive price," he said when asked why the Vancouver-based firm would sell at a time when its stock price was already at record highs.

Brian Purdy, research analyst at FirstEnergy Capital Corp. in Calgary, Kinder Morgan's long list of relationships with U.S. refiners will be attractive to Canadian producers.

"Refining capacity for heavy oil in the U.S. is pretty tight but if anyone is going to have an opportunity to find customers, it's Kinder Morgan. They're front and centre," he said.

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TERASEN INC.
Ticker: TER/TSX
Closing price: $36, up $4.60
Volume: 12,367,473
Avg. 6 mo. vol.: 229,161

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Scott Simpson
Vancouver Sun
03-Aug-2005

Investors drove up Terasen Inc. shares 15 per cent on Tuesday, fuelled by a $6.9-billion takeover deal by U.S. energy giant Kinder Morgan Inc.

Shares in Terasen, the Vancouver-based operator of British Columbia's primary gas distribution utility, jumped $4.60, with more than 12.3 million shares changing hands, to close at a record $36 in Toronto.

In New York, Kinder Morgan rose $6.13 US on a volume of 5.2 million shares, closing at $94.73.

The surprise deal, announced Monday, was greeted warmly by market-watchers.

Analysts participating in a Terasen teleconference offered congratulations to president and CEO John Reid, for a deal is widely seen as maximizing the value of the company for its investors.

According to Terasen, the company's shares are 60 per cent held by institutions -- such as mutual funds -- and 40 per cent held by retail or individual investors.

The deal offers Terasen shareholders $35.75 per share, or cash and Kinder Morgan shares, or Kinder shares in a proportionate formula of 65 per cent cash and 35 per cent shares.

"We do believe that the offer price from Kinder Morgan provides full and fair value for our shareholders based on both relative and absolute metrics," Reid said.

"We do believe that the opportunity for Terasen shareholders to acquire Kinder Morgan shares will enable our shareholders to hold shares in a larger, more liquid company operating in the North American energy infrastructure space."

The bid to Terasen shareholders is comprised of cash and shares of Kinder, one of the top performers on the S&P 500, and requires the U.S. company to assume more than $3 billion in Terasen debt as part of the transaction.

Kinder chair and CEO Rich Kinder said the deal was motivated by Terasen's pipeline connection to the Alberta oil sands, a sprawling natural resource he described as "hellaciously significant" to North America's energy future.

Dominion Bond Rating Service was more cautious, putting Kinder's debt rating "Under Review with Negative Implications."

"The negative implications reflect, among other factors, the higher balance sheet leverage with lower cash flow/debt support resulting from the transaction at KMI, and the relatively high purchase price proposed," DBRS said.

The service described the deal as Kinder's largest-ever financial transaction, but although it was voicing caution in the short term, it expects the deal to yield positive longer term benefits.

"Based on its preliminary review, DBRS expects the proposed transaction to have a positive impact on KMI's business risk as a result of the increased scope and scale of its regulated pipeline and gas distribution operations, and growth potential," DBRS said.

Dominion suggested the price offered for Terasen shares, roughly a 14-per-cent premium to last Friday's close, was somewhat high -- an interpretation that's probably good news for the company's shareholders.

In a Canaccord Capital letter to investors, energy sector analyst Bob Hastings described the deal as "a positive transaction" for Terasen shareholders and allows Kinder to expand its scale of operations "through stable, regulated, low risk assets."

ssimpson@png.canwest.com

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Kent Spencer
The Province
03-Aug-2005

Terasen Gas's proposed sale to an American company amounts to selling off a piece of Canada, say B.C. consumers worried by the move. But stock market investors liked what they saw yesterday and gave Terasen shares a substantial boost.

"The Americans are definitely looking out for their own good," said Sean Hevesy, 29, of Squamish yesterday.

"There will be serious implications in the coming years if there is an energy shortage."

Shelley Kean, 52, of North Vancouver said British Columbians invested a lot of money into one of Terasen's forerunners when it was part of Crown-owned B.C. Hydro. "Now that money will be spent by a Texas company on an ideology opposite to most Canadians," she said.

The pair were responding to a $6.9-billion bid announced earlier this week by energy giant Kinder Morgan of Houston, Tex., that wants to scoop up Vancouver-based Terasen Inc., an investor-owned pipeline utility which delivers natural gas to most British Columbians and is also involved in pipeline development to transport Alberta oilsands crude to U.S. and to Asian markets. Another subsidiary, Terasen Utilities, delivers water to 90 resorts, universities and airports.

The deal requires the OK of 75 per cent of Terasen shareholders as well as approval by the B.C. Utilities Commission. Kinder Morgan is offering shareholders $35.91 in cash or stock for each Terasen share. Terasen shares closed up $4.60 yesterday to $36.00 on the Toronto Stock Exchange.

And while some consumers were showing concerns about the deal, B.C. Energy Minister Richard Neufeld said the purchase showed confidence in B.C.'s future.

"Kinder Morgan is a pretty big player in the oil and gas industry," he said. "Consumers do not need to be concerned because [natural] gas prices will still be regulated by the B.C. Utilities Commission."

But NDP economic critic Mike Farnworth said the Liberals brought in legislation in 2003 that allowed foreign ownership of Terasen Inc. The company's Lower Mainland operation was part of B.C. Hydro until the Gas Division was sold to investor-owned Inland Natural Gas in 1988. The merged company was renamed B.C. Gas. That name was changed to Terasen a few years ago.

"The interests of B.C. consumers need to be taken into account in whether or not the sale can go through," Farnworth said.

Kinder Morgan chairman Richard Kinder is one of the world's richest individuals with a ranking on the Forbes Top 500 list.

A major supporter of U.S. President George W. Bush, Kinder quit as chairman of Enron in 1996. The energy-trading giant was rocked a few years later by scandal, suffering the largest bankruptcy in U.S. history.

Kinder, described by Forbes business magazine as a "no-nonsense" Vietnam veteran, pays himself $1 per year.

He said yesterday that the combination of Terasen's growth opportunities and his company's financial muscle will provide the scale and scope for the new company to tap Alberta's ever-growing oilsands potential.

Kinder said he expected production from the oilsands to double over the next five to seven years.

kspencer@png.canwest.com

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Richard Floyd
Vancouver Sun
03-Aug-2005

Americans have gone ballistic over the thought of a Chinese oil and gas company buying Unocal Corp., a major energy enterprise. However, Canadians note that Fortune magazine ranks Kinder Morgan, bidding for Terasen Inc., as "one of America's most-admired companies."

Two spins: Americans emphasize that the Chinese National Overseas Oil Corporation is a state-owned (Communist) business. Canadians blithely ignore the hand-in-glove relationship between Big Oil, of which Kinder Morgan is part, and the Bush ("We need an energy bill that encourages consumption") White House.

Two results: Americans fend off an evil takeover by outsiders. Canadians turn over another valuable asset.

Richard Floyd
Crescent Beach

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Scott Simpson
Vancouver Sun
03-Aug-2005

The Texas billionaire behind the surprising bid for Terasen Inc. is bullish on British Columbia.

Kinder Morgan Inc. chair and CEO Rich Kinder reiterated in an analysts conference on Tuesday that his company's main motive in a $6.9-billion friendly bid for British Columbia's biggest natural gas utility is its ownership of pipeline links to the Alberta oil sands.

But Kinder said that as his company began to study Terasen, he began to recognize the value of the Vancouver-based utility's residential gas delivery business.

"We believe this is a stable, regulatory environment in Canada and we will be extraordinarily focused on expanding the infrastructure. We like the location. We think it's strategic," Kinder said.

"We think the whole Vancouver, western British Columbia area is poised for continued high demographic growth. We see steady organic growth there in the range of about two per cent. We see a low risk rate structure."

Neither Terasen nor Kinder Morgan expect significant layoffs as a result of the takeover, which could be finalized by year's end pending regulatory approvals from the B.C. Utilities Commission and federal agencies governing competition and foreign ownership.

Reid said in a Terasen analysts conference that he believes government reaction to the deal -- which still requires shareholder approval -- is generally favorable.

"It's a little early to tell as yet but I think it's positive," Reid told analysts. "We had some phone conversations [Monday] with various political leaders both in this province and in Alberta, and federally, and I didn't see anything coming out of those calls that would represent any sort of major hurdle at this stage. It is very preliminary, these are early reactions, but I don't see any issues."

Some Vancouver Sun readers voiced concern about a non-Canadian company owning the B.C. utility, expressing fears that it could lead to British Columbians being deprived of home heating fuel in favour of U.S. consumers.

However, B.C. Energy and Mines Minister Richard Neufeld said the company remains a regulated monopoly under the control of the B.C. Utilities Commission.

The BCUC will have final say on the conditions under which the deal can proceed.

Neufeld said the decision by a U.S. company to invest such a large sum in B.C. represents more evidence of British Columbia's surging economy.

"We live in a global economy and especially a North American economy when it comes to the energy market."

Neufeld added that foreign-owned companies such as Shell, BP and Exxon have operated in Canada for decades with no adverse impacts on the nation's sovereignty, he added.

Kinder stated that while the parent company would remain Kinder Morgan, headquartered in Houston, "we expect to add Canadian representation on our board."

"The Terasen Gas headquarters will remain in Vancouver, the Terasen Pipeline headquarters will remain in Calgary," he said.

Reid said Terasen will soon enter into discussions with the utilities commission about a transfer of ownership-- and he said the sale earlier in this decade of Westcoast Energy to Houston-based Duke is a precedent in favour of his company's deal.

"This isn't exactly a change in shares of the utility company. It's a change at the parent level which should make it a somewhat easier transaction in terms of regulatory approval.

"If we look back at the Duke-Westcoast precedent we are looking to that as a model on a go-forward so we have a degree of confidence following that route that we will get this done by the end of the year."

David Austin, an energy sector analyst who serves as legal counsel for independent power producers in B.C., said it was uncommon for a Canadian utility to be in the hands of a foreign owner.

"Inevitably what happens is that the foreign owner finds there is nothing sexy about owning a utility in Canada. More importantly, the foreign owner's stockholders and analysts say 'why are you holding a utility in Canada, because we cannot really track its performance very well?' "

It's conceivable, he added, that Kinder Morgan could put Terasen Gas back on the market in a few years while holding onto the company's pipeline assets.

ssimpson@png.canwest.com

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Michael Smyth
The Province
04-Aug-2005

The Gordon Campbell government cleared the decks for the Americanization of Terasen Gas two years ago by passing a law with a rather ironic -- some would say downright sneaky -- name.

The B.C. Hydro Public Power Legacy and Heritage Conservation Act reassured British Columbians that the Liberals had no plans to sell B.C. Hydro to Americans or anyone else.

But Terasen? That was a different story.

Inserted amid all the hype and hoopla about protecting Hydro's owned-by-B.C. heritage, the Liberals added a sub-clause in the law that removed restrictions against the foreign ownership of Terasen.

Terasen, of course, used to be called B.C. Gas. It also used to be owned by the people of the province when it was an arm of B.C. Hydro.

That ended in the 1980s, when Bill Vander Zalm, the Social Credit premier of the day, decided to privatize the government's gas business.

But Vander Zalm, now a fierce critic of foreign takeovers of B.C. Rail and other Crown assets, placed strict rules on the company's ownership and operation.

Under those rules, Terasen could not be sold or merged.

It could not have more than 20-per-cent foreign ownership.

And it could not move its head office out of B.C.

The Liberals quietly threw that all out the window in 2003.

"Terasen Inc. is the only B.C. company subject to these outdated restrictions," Energy Minister Richard Neufeld briefly explained in the legislature.

"The repeal will increase Terasen's access to investment dollars."

The overwhelmed NDP opposition -- all two members -- mustered a five-minute protest in the house.

"Day by day, we're losing control of our utilities," said NDP MLA Jenny Kwan.

Leonard Krog, then running for the NDP leadership, put up the most spirited fight.

"These legislative changes worth potentially millions of dollars are being made on behalf of a company that is a major donor to the Liberal party," said Krog.

"It has been done without a word of notice to British Columbians or Terasen customers."

But the Liberals just swatted away the NDP complainers like pesky fleas.

The Liberals' message: If you really want to own a natural-gas company, just go and buy its stock.

That's exactly what then-Liberal MLA Brian Kerr told a constituent upset about the Liberals' hands-off approach to Terasen.

"I had to inform her that . . . if she did want to continue to own it, she could go on the Toronto Stock Exchange."

Hopefully she took his advice. Terasen stock soared on news of the American takeover, taking the entire TSE along for the giddy ride.

For shareholders in the company, that's hopefully enough to soothe the sting of the latest Yankee intervention in our resource economy.

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Listen to Nightline B.C. with Michael Smyth every weeknight at 7 p.m. on CKNW, AM 980

Voice mail: 604-605-2004

E-mail: msmyth@direct.ca

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