Tireless energy has Fortis cooking with gas

COMMENT: We reported on the Fortis acquisition of Terasen Gas last week when the deal was first announced, but it has barely caused a riff on the keyboards of BC reporters.

Fortis to acquire Terasen Gas for $3.7 billion

Tireless energy has Fortis cooking with gas

GORDON PITTS
Globe and Mail
March 3, 2007

There was no victory cigar, no celebratory dinner. Stanley Marshall doesn't believe in that sort of thing — not even after the biggest deal in the history of his Newfoundland utility company, Fortis Inc.

Last Saturday morning, the Fortis board met in Toronto to approve its $1.4-billion takeover of a B.C. energy distributor, Terasen Gas. Then its no-nonsense CEO did what he usually does – he hit the road.

By late afternoon, Mr. Marshall was home in St. John's, around 2,100 kilometres away, for hard-won downtime with the family.

The following afternoon, he was back in Toronto, in time for the next day's conference call and $1-billion equity financing deal that established Fortis as a North American natural gas player.

Stan Marshall, president and chief executive of Fortis,
has brought a British Columbia natural gas utility
back under Canadian ownership as Fortis Inc. struck
a $1.4-billion deal with US energy giant Kinder Morgan
Inc. (Kevin Van Paassen/Globe and Mail)

It was a typically obsessive travel regimen for Stanley Marshall, 56, who is perhaps the country's most relentless road warrior. The decision-making process in the Terasen deal is typical of Mr. Marshall's approach honed over a dozen smaller deals – direct, patient and nomadic.

Fortis has kept its official headquarters in St. John's but its vision is continental, and for Mr. Marshall, that means his office is the road. Asked what he does for fun, he says simply: “I work.”

He has no CEO-type hobbies, although he is an enthusiastic gardener. He has little life outside his family and the company he has built over the past 15 years from a provincial electrical utility into a multinational energy powerhouse.

Indeed, Mr. Marshall has little time or patience for the back-slapping bonhomie that goes on after many financial deals. “You're too tired after you do these things,” he says, explaining his quick departure from Toronto last Saturday.

St. John's, perched on the northeast edge of North America, is not an easy place from which to run a burgeoning multinational. The negotiations to buy Terasen Gas took place in Houston, the home town of the seller, Kinder Morgan Inc., and in Toronto, but not in St. John's.

“It's a hard place to get to, especially this time of year,” says Mr. Marshall, who spent four weeks on the road clinching the deal. That's not unusual: In the seven weeks before Christmas, he spent only seven days in his Newfoundland office.

Mr. Marshall's schedule isn't going to get any easier, as he builds on the takeover of the Terasen system. The purchase, which awaits regulatory approval, gives Fortis muscle and expertise in natural gas distribution, allowing him to target other North American local gas suppliers in the consolidation sweeping that industry.

He wants to use Terasen as a platform for growth in gas, particularly in the United States, in the same way Fortis's predecessor company, Newfoundland Power, laid the foundation for expansion in electricity. He notes that many gas distribution concerns are also electric distributors and there are strong synergies between the two.

“Not much happens now in the North American utility industry that we don't know about,” says Mr. Marshall, an engineer and lawyer who has worked for the company since 1979, when it was only Newfoundland Power, including the past 11 years as Fortis CEO.

The strategy has not been without personal cost, and even Mr. Marshall admits he gets bone-tired. After his crazy deal-clinching weekend, he flew out to Vancouver to meet employees of his new acquisition. Last night he was scheduled to be back on the Rock again for his Friday-Saturday tonic of family time.

Such is the lot of the CEO of a Newfoundland company. When regulators approve the new deal, it will have less than 10 per cent of its business in its home province. Half its assets will be on the opposite coast, in B.C.

Mr. Marshall runs a very lean shop – only 13 of Fortis's 4,400 employees are at head office. Operations are highly decentralized with considerable authority at the operational level. The network of 10 subsidiaries is held together by the peripatetic CEO, who travels the world looking at acquisitions and fixing problems.

That has been the pattern almost since the mid-1980s when Mr. Marshall, as a rising senior executive, helped convert Fortis from a power utility into a holding company. He acquired non-regulated businesses, such as hotels and commercial real estate, as well as smaller non-regulated electrical companies.

In the late 1980s, “there was only one person who ever thought we could be of this scale and that was me,” he says. He felt the company could build on its regulatory expertise and core of good people, raising its profile and credibility slowly through small deals.

Fortis has made about a dozen acquisitions of power companies in Canada, New York State, Belize , and the Turks and Caicos in the Caribbean.

He had been courting Terasen since back in the days it was known as BC Gas. When Kinder Morgan bought the parent company Terasen Inc. in 2005, it was common knowledge that the U.S. operation wanted Terasen for its oil pipeline, not the gas business.

Fortis saw itself as the natural buyer, having already established itself on the West Coast through the purchase of the Alberta and B.C. electricity assets of Aquila Networks, another U.S. seller.

It put out feelers to Kinder Morgan more than a year ago, indicating that when it ever wanted to sell the gas side, the Newfoundland company was very interested.

But Kinder Morgan had other things on its mind – namely, founder Richard Kinder's $22-billion (U.S.) bid to take the company private. Mr. Marshall patiently waited and, in January, Kinder Morgan said it was ready to talk. Mr. Marshall quickly started negotiating, he says, before other potential bidders even knew it was for sale.

Mr. Marshall loved negotiating with the Texas company. Both parties were experienced in doing deals; there was not a lot of sentiment involved with the assets. They had done business before, and things moved quickly.

But Mr. Marshall admits he couldn't pull off these marathon negotiations if his family were not old enough to get along without their father for extended periods. The three children – twin daughters and a son – are all in university.

Also, his wife, Elizabeth Marshall, has her own career as a member of the Newfoundland and Labrador House of Assembly, following high-profile stints as a cabinet minister and senior public servant. As for her husband, he sees no end in sight for the hyperactive lifestyle. It's hard to give up something he loves so much, he admits.

STANLEY MARSHALL

Title: President and CEO.

Age: 56.

Born: Freshwater, near Carbonear, Nfld.

Educated: Engineering degree from University of Waterloo; law degree from Dalhousie University.

Roots: Father was a carpenter, one in a family of tradespeople who often emigrated to New England for work.

Downtime: Not much, but he loves gardening at his Newfoundland house and in his two-year-old second home in Belize, where Fortis owns a power company.

Power couple: Wife Elizabeth Marshall is a prominent political figure in St. John's, as a Conservative member of the House of Assembly and former auditor-general. She is identified as one of only two MHAs – Premier Danny Williams is the other – to refuse undisclosed provincial bonuses, thus sailing clear of a political scandal.

Road trips: When he gets into a city for a meeting, what does he do? “I go home. Most of the team might go to a hockey game but I'm too tired for that.”