Released on December 18, 1998
After several months of due diligence by SaskEnergy, TransCanada/Nova
and independent consultants, SaskEnergy's Board of Directors has
approved the corporation's participation in a new natural gas
distribution project in Chile. The project will serve an area of
about one million people including the cities of Concepcion and
Talcahuano.
SaskEnergy's participation will have two components:
a $1 million Technical Advisor's agreement, under which
SaskEnergy will provide Saskatchewan expertise in information
technology and operating procedures to Gas Sur S.A., the newly
created natural gas company; and
a 15 per cent equity position in Gas Sur S.A., at a cost of $2.46
million (Canadian) a year for the next three years.
TransCanada/Nova of Calgary, Alberta, a major Canadian company with
extensive experience operating in Chile and South America, will also
take a 15 per cent equity position in the new company. GASCO, a 140
year-old Chilean energy company with annual revenues of more than $200
million, will own the remaining 70 per cent of the new natural gas
distribution company.
"Providing competitive and affordable natural gas service to as
many Saskatchewan families and businesses as possible will always
be SaskEnergy's primary objective," said Frank Proto, Chairman of
SaskEnergy's Board of Directors. "While this opportunity allows
Saskatchewan people a chance to showcase their expertise in the
world market, the long-term benefit is that the investment will
provide new revenues to support that prime objective."
"Chile is a stable, vibrant country, with an economy that is
growing and a business community that is embracing the benefits
of natural gas," said Donald Wishart, Senior Vice President of
TransCanada International, which has already committed to equity
investments of approximately $375 million in the Chilean natural
gas market. "With the convenience of piped natural gas and its
price competitiveness to alternative energy sources, Gas Sur S.A.
is poised to make inroads in the market.
"Our joint due diligence with SaskEnergy supports our decision to
invest in Gas Sur S.A., the distribution company serving the 8th
region of Chile."
"There was an abundance of interest from Chilean energy companies
that wanted to invest in Gas Sur S.A., because they recognized
the outstanding potential," said Teodoro Wigodski, a GASCO
official and Director of Gas Sur S.A. "SaskEnergy won the right
to become our partner, not because of what they brought to the
table financially, but because of their considerable expertise in
natural gas distribution."
The Technical Advisor's agreement is expected to create more than
800 new person days of employment.
The equity investment also gives the utility a long-term revenue
stream from Gas Sur S.A. The projected rate of return on the
investment is in the order of 15 - 16 per cent.
"This exciting new venture will further what's been a thriving
productive trade and investment relationship between Canada and
Chile," said Ralph Goodale, Minister of Natural Resources Canada,
who participated in a trade mission to Chile in November. "With
the outstanding partnership that SaskEnergy has forged with two
international energy leaders, TransCanada/Nova and GASCO, the
corporation will get an unparalleled opportunity to demonstrate
its natural gas expertise on the world stage."
"With the ratification of the Canada/Chile free trade agreement
in 1997, more and more Canadian companies are showing the
foresight to invest in a dynamic and growing economy. Canadians
are now the second largest investors in Chile with an estimated
US $7 billion or Canadian $11 billion of investments," Lawrence
Lederman, Canada's Ambassador to Chile said. "I am confident
that SaskEnergy's participation in this project will reap
benefits for both their customers and their shareholders."
The project complies with the new international investment
guidelines for Saskatchewan Crown corporations. While this
represents the first international equity investment for
SaskEnergy, the corporation has already had success in broadening
its business beyond its core operations.
"Done correctly, these diversified investments can benefit the
people of Saskatchewan," said Ron Clark, President and Chief
Executive Officer. "Since 1992, we've made $16 million from
offering the spare capacity on our network to buyers and sellers.
This extra revenue helped reduce the rates our customers might
otherwise have paid.
"Our responsibility and our obligation to the people of
Saskatchewan is to use our skills to operate this company in
their best interests. That's why we have become involved in this
project.
"We couldn't have asked for a more prudent method to bring our
talents to the international market," Clark said. "Chile's
economy is growing. TransCanada/Nova is an experienced partner
familiar with the South American natural gas market, and the
economics are sound."
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For further information, please call:
David Easton
Vice President
SaskEnergy International
777-9450
Teodoro Wigodski (Please contact SaskEnergy to arrange for
translator.)
Executive Director
GASCO
Chile
(56-9) 338-2786
Lawrence D. Lederman
Ambassador of Canada to the Republic of Chile
Santiago
(56-2) 362-9662
