Energy industry needs infrastructure, distributors have role: Gaz Metro exec

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This article was published 12/10/2006 (7112 days ago), so information in it may no longer be current.

MONTREAL (CP) – The newly appointed CEO of Gaz Metro Inc. (TSX:GZM:UN) says one of the major challenges the energy industry is facing is the need for new infrastructure – a challenge that her company and others will have to meet.

Sophie Brochu, who takes over in February as head of the Quebec natural gas distributor, said pipelines and import terminals will have to be built.

“This is certainly something that we have on our radar screen,” Brochu said in an interview at Gaz Metro’s head office.

“It’s a fascinating time to be in the energy industry right now.”

Gaz Metro has investment interests in the Trans Quebec & Maritimes and Portland Natural Gas pipelines and other infrastructure.

“I am of the perspective that the local distribution companies across Canada are going to be called upon to sign long-term contracts not for the full capacity of the pipeline, but to sign long-term contracts to be what we call the anchor loads that allow the infrastructures to be built.”

Brochu, currently executive vice-president of the company’s distribution business, has been working in the energy industry for nearly 20 years and has held a number of senior posts with Gaz Metro. She’ll take over from Robert Tessier, who will become chairman of Gaz Metro’s board.

Brochu said there are opportunities for Gaz Metro, which distributes gas from Alberta.

“Pipeline will have to be built and people will have to contract for that capacity and it will have a ripple effect on Quebec. So there are many ways to create value for our clients and our shareholders in playing a bigger role.

“You may have a strategic position in a piece of pipe(line) that would connect to storage,” she said.

On another energy front, EnCana Corp (TSX:ECA) and ConocoPhillips (NYSE:COP) recently announced they are teaming up in a $15-billion deal to ship oilsands crude from Alberta to refineries in the United States to meet needs.

Brochu noted that the problem with infrastructure is that “by definition infrastructure either comes in five years too soon or five years too late” and noted there has been opposition in the Quebec City area to a terminal to bring in liquid natural gas.

Gaz Metro distributes natural gas to roughly 170,000 business and residential customers in Quebec, a province historically centred on inexpensive hydroelectricity as its main source of energy for heating.

Since’97, Gaz Metro has been focusing on increasing its share of the residential market, still a small amount of the volume distributed, Brochu said.

She said that while natural gas prices have started to fall recently, the demand has been increasing in the United States.

“It’s the cleanest of the fossil fuels and it has attracted new electricity generation being fuelled by natural gas.”

Last June, a subsidiary of Gaz Metro struck a deal to buy Vermont-based Green Mountain Power Corp. (NYSE:GMP), the second largest electricity distributor in Vermont, for US$187 million.

Brochu said she couldn’t comment on any other possible acquisitions before she takes over as CEO.

Gaz Metro is 27.2 per cent owned by public shareholders and 72.8 per cent by Gaz Metro Inc., a company wholly owned by Noverco Inc.

Noverco is owned by Trencap s.e.c., with 50.4 per cent, Enbridge Inc. (TSX:ENB), with 32.1 per cent, and Gaz de France, with 17.5 per cent.

In August, Gaz Metro reported nine-month earnings of $173.5 million, down from $180.3 million in the same period a year earlier. Income per unit dropped to $1.48 per unit from a year earlier $1.55 per unit.

Units of the fund closed at $18.31, down two cents, Thursday on the Toronto Stock Exchange.