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Vol. 23, No.18 Week of May 06, 2018
Providing coverage of Alaska and northern Canada's oil and gas industry

RCA approves acquisition of FNG by IGU forming a single utility

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Alan Bailey

Petroleum News

The Regulatory Commission of Alaska has issued an order approving the purchase of Fairbanks Natural Gas by the Interior Gas Utility, a purchase that will combine the utilities into a single entity for the supply of natural gas in the Fairbanks region. The IGU acquisition of FNG comes in conjunction with the purchase by IGU of Pentex Natural Gas Co. from the Alaska Industrial Development and Export Authority, as part of AIDEA’s Interior Energy Project. In addition to FNG, Pentex owns and operates a liquefied natural gas plant near Point Mackenzie on Cook Inlet, and a trucking operation for shipping LNG to Fairbanks. The purpose of the IEP is to bring an expanded supply of affordable natural gas to Fairbanks.

AIDEA and IGU have already agreed on the terms of the Pentex sale, which is expected to complete by the end of May. IGU and FNG both have certificates of public convenience and necessity issued by the RCA - the commission has suggested the possibility of consolidating the certificates after the Pentex sale has completed. IGU is owned by Fairbanks North Star Borough. AIDEA purchased Pentex in 2015 with the eventual aim of facilitating a single, consolidated gas utility in Fairbanks.

Bonds needed

Because IGU will use AIDEA bonds to purchase Pentex and the issuance of those bonds is contingent on RCA approval of the IGU/FNG merger, the utilities had asked the commission for expedited consideration of the approval - there is a deadline of June 30 for the issuance of the required bonds, unless the state Legislature passes a bill to extend the bond timeline. The commission has consented to expedited approval, saying that it sees no benefit to Fairbanks gas utility customers from allowing the financing mechanism for the utility merger to expire without the commission addressing the merits of the case.

The commission, in its order, said that some have claimed that AIDEA paid too much for Pentex and that, in turn, the agency is expecting IGU to pay too high a price for the company. However, IGU’s acquisition of FNG will not increase FNG customers’ financial responsibility for the cost of the gas supply, the commission said. Moreover, IGU has demonstrated sufficient fitness, willingness and ability to maintain FNG’s gas supply service. Integration of the utilities will avoid the duplication of plant and facilities while also reducing operations cost, maintenance costs and overheads, the commission said.

- ALAN BAILEY



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