Purchase brings Terasen Water back to B.C.
Vancouver Sun, Monday, May 23, 2006
Fiona Anderson
Terasen Water and Utility Services Inc. — the Vancouver-based company with more than 900 employees and $220 million in annual revenues — is once again a British Columbian company after being bought for $124 million from Kinder Morgan Inc. of Houston, Tex.
Private equity firm CAI Capital Partners and a B.C. public-sector pension fund manager, British Columbia Investment Management Corp., now own a "majority interest" in the former Terasen Inc. subsidiary, which CAI managing director Tracey McVicar described as closer to 100 [per cent] than 50."
The remaining ownership interest is shared by five managers of TWUS and a small private equity fund that did not wish to be named.
"It's a wonderful story for Vancouver," McVicar, who is based in Vancouver, said in an interview. "We're losing head offices, [so] it's such a good news story to be keeping a head office of a pretty big firm."
Kinder Morgan acquired TWUS as part of its friendly $6.9 billion US takeover of Terasen Inc. announced last August. The deal was approved Nov. 20, 2005, despite public concern about a U.S. company taking over the province's main gas provider. But TWUS, which provides infrastructure and products for water, sewer and water treatment systems, did not fit in with Kinder Morgan's business plan.
"When we acquired Terasen Inc. last year, we noted that the water and utility services business was outside of our core asset base of pieplines and terminals," Kinder Morgan's chairman and CEO Richard Kinder said in a news release Monday.
TWUS was started in 1999 as a "third leg" of Terasne Inc.'s infrastructure business, which has previously been limited to the gas business and oil pipelines, TWUS president Brett Hodson said in an interview. The business started with zero revenues, and in seven years has grown to revenues of $220 million annually and more than 900 employees across North America.
But the company was virtually unknown.
"We were only about 10 per cent of Terasen Inc.'s overall size, while we were a third of Terasen's growth over the last few years," Hodson said.
Hodson, one of the management team that has bought into TWUS, expects that growth to continue at a rate of between 30 and 50 percent a year.
"There's literally tens of billions of dollars of infrastructure needed across Canada for sewer-and-water-type infrastructure, and that's the market we're targeting," he said.
TWUS operates about 100 systems mainly in the Pacific Northwest and services well over 100,000 people, Hodson said. Next wekk, the company will expand into Ontario, making it a national organization.
Hodson said the management team looked at six other potential partners but the CAI-BCIMC team was by far the best fit.
"[BCIMC] used to be a very large shareholder of Terasen Inc. so they are very familiar with the investments we have been making over the years," he said. "I can't think of any better partner to have between them and CAI."
We felt it was a great skill set they brought for what we were trying to do here which was to acquire a part of Terasen Inc. and bring it back to Vancouver and take it on its growth path the way it should be," Hodson said.
McVicar noted TWUS's rapid growth and its management team as the reasons CAI wanted to invest in the company.
"They grew spectacularly . . . in six or seven years. [Yet] it went largely unnoticed," McVicar said. "But if you pulled it out [of Terasen] it was a very viable and fast-growing business unit with a great management team."
More than a drop in the bucket
Terasen Water and Utility Services provides water and waste water treatment services. It is headquartered in Vancouver and sells its services to municipalities, resort communities, developers and water and energy utilities in Canada and the United States.
Created: 1999
Employees: more than 900
Annual revenue: $220 million
Projected growth: 30 to 50% a year
Systems operated: about 100
People served: well over 100,000