DBRS Places Pacific Northern Gas Under Review with Developing Implications Following AltaGas’s Announcement

DBRS has today placed the BBB (low) Secured Debentures and Pfd-3 (low) Cumulative Redeemable Preferred Shares ratings of Pacific Northern Gas Ltd. (PNG or the Company) Under Review with Developing Implications. This action follows the announcement by AltaGas Ltd. (AltaGas, rated BBB, Stable) that it has offered to acquire PNG in a transaction that would have an enterprise value of approximately $230 million, consisting of an all-cash offer of $36.75 per share and the assumption of approximately $85 million of debt and $5 million of preferred shares. Successful completion of the transaction in mid-December is subject to approval by two-thirds of PNG shareholders as well as regulatory approvals.

PNG’s total balance sheet debt as of June 30, 2011, was approximately $90 million, consisting primarily of secured debentures that total approximately $82 million. DBRS will provide further commentary once additional details of AltaGas’s offer and its potential impact, if any, on PNG are known.

One area of focus will be any potential changes to PNG’s currently conservative capital structure. PNG has historically maintained its debt-to-capital ratio in the 45% to 50% range, which is below regulatory-approved levels. The BBB (low) rating incorporates the assumption of a conservative capital structure in order to offset a level of business risk that DBRS views as higher than PNG’s peer group.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Companies in the North American Energy Utilities (Electric and Natural Gas) Industry, which can be found on our website under Methodologies.