Company Analysis



Table of Contents

Background3

Company Overview3

Business description3

History5

Corporate Structure6

Key Competitors7

Industry ranking9

Major factors9

Valuation Summary9

Current Valuation12

Valuation History13

Earnings Growth13

Financial Conditions14

Sale of PTP15

LNG Industry Potential16

LNG Partners Small-Scale LNG Project17

LNG Industry Potential17

Financial Ratios18

Market and International Outlook19

Industry Outlook19

Key External Drivers24

Risk Factors29

Management Vision`s Analysis33

Cost Structure Benchmarks36

References38

(TOTAL 40 PAGES) Company Analysis

Background

Company Overview

Pacific Northern Gas (PNG) along with its subsidiary, Pacific Northern Gas (PNG), is engaged in the distribution of natural gas. The company currently supplies natural gas to over 40,000 residential, commercial and industrial customers primarily in British Columbia, Canada. PNG, through a 97% interest in McNair Creek Hydro Limited Partnership, which operates the 9.8 megawatt (MW) McNair Creek hydro-electricity generation facility (McNair), is also involved in the generation of hydro-electricity. The company primarily operates in Canada, where it is headquartered in British Columbia. The company recorded revenues of C$95.2 million (approximately $92.4 million) in the fiscal year ended December 2010, a decrease of 8.6% over 2009. The company's operating profit was C$14.4 million (approximately $14 million) in fiscal 2010, a decrease of 6% over 2009. Its net profit was C$7.1 million (approximately $6.9 million) in fiscal 2010, an increase of 8.4% over 2009.

Business description

Pacific Northern Gas (PNG) is a Canada-based natural gas distribution utility company. The company along with its wholly-owned subsidiary, Pacific Northern Gas (PNG), is engaged in the transmission and distribution of natural gas in northern British Columbia, Canada. PNG, in partnership with Skookum Power, is also involved in the generation of hydro-electricity. The company primarily operates through two segments: gas distribution, and electricity. PNG's gas distribution segment is engaged in the transmission and distribution of natural gas in British Columbia, Canada. The company operates a transmission and distribution system in the west-central portion of northern British Columbia (Western system), and PNG NE operates a distribution system in northeastern British Columbia (Northeast system). PNG, together with PNG NE, operates over 2,830 (1,180+160+1,490) kilometres of transmission and distribution pipeline and serve a base of more than 40,000 residential, commercial and industrial customers (Child, 1996).

History

Pacific Northern Gas (PNG) was incorporated as a private company in 1965. The company was converted to a public company in 1968. In the same year, PNG constructed a transmission line from a point 50 kilometers north of Prince George at Summit Lake on the Spectra Energy pipeline system west through to Prince Rupert and Kitimat on the British Columbia coast. In 1969, the company commenced the transmission at the Spectra Energy pipeline system. PNG acquired Northland Utilities (B.C), which served the Dawson Creek and Tumbler Ridge areas and was connected to the Spectra Energy pipeline system in 1993. The company acquired three systems: Centra Gas Fort St. John Inc system; the Granisle grid, a small propane vapour distribution system located adjacent to the company's western service area; and Peace River Transmission Company in 1997.

In 2001, the company completed a restructuring throughout its system and created a customer care centre in Terrace, British Columbia to handle customer inquiries over the telephone. The company's Duke Energy Corp, sold its 40% interest in PNG to ...