Centrica, best known in the UK through its AA, British Gas and Goldfish Brands, is to acquire the home and business services operation of Canada’s Enbridge Services for $1 billion Canadian dollars. The transaction is subject to regulatory approvals and completion is anticipated in the spring.
The acquisition will more than double the customer base of Centrica’s Canadian business. It offers the potential to market energy and related products and services across a base of over two million households.
Centrica is already the largest unregulated energy retailing company in North America, with over 1.3 million gas customers in Canada and the US. In addition, it has signed up 600,000 electricity customers in Ontario in advance of market opening at the beginning of May.
Enbridge Services has around 1.3 million customers to whom it leases water heaters and provides residential services including heating, ventilation and air conditioning (HVAC) installation and servicing. Approximately 325,000 of these customers also have heating servicing contracts.
The majority of both Centrica’s and Enbridge Services’ North American customers are based in Ontario.
The acquisition will be funded from existing debt programmes. Centrica is exploring alternatives for refinancing the water heater assets and the consumer loan portfolio to add value. These alternatives would be designed to significantly reduce investment by Centrica, whilst retaining the customer relationships and responsibility for installation, repair and servicing activity.
In addition to the home services business, Centrica will acquire 90,000 natural gas contract customers, a national business to business Heating, Ventilation and Air Conditioning (HVAC) operation with more than 50 national accounts, a start up residential HVAC business in Pennsylvania, and a consumer loan business that supports its retail and HVAC business. It will also acquire 14 retail outlets in southern Ontario.
The business had net assets of C$676 million (£295million) at 30 September 2001, including C$122 million (£53million) for the consumer loan portfolio. Earnings attributable to the assets in the nine months to 30 September 2001 were C$55 million (£24million) before interest and tax. Centrica will not be assuming any net debt associated with the business nor the liabilities associated with the finance book.
Enbridge Services has more than 1400 direct employees and has franchise agreements with eight major suppliers outside its core area.