Pacific Northern Gas Ltd.
TSX : PNG
TSX : PNG.PR.A

Pacific Northern Gas Ltd.

August 30, 2005 20:54 ET

Pacific Northern Gas Reports Termination of Transportation Service Agreement by Methanex

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Aug. 30, 2005) - Pacific Northern Gas Ltd. ("PNG") (TSX:PNG)(TSX:PNG.PR.A) reported today that Methanex Corporation ("Methanex") has given notice of termination of its Firm and Interruptible Gas Transportation Service Agreement with PNG. The agreement would otherwise have expired on October 31, 2009. Under the terms of the agreement, Methanex is required to make a termination payment to PNG of approximately $23.3 million on February 28, 2006, the effective date of termination.

During 2004, deliveries to Methanex accounted for approximately 67 percent of the volumes delivered by PNG and approximately 9 percent of PNG's operating revenues, or $12.2 million. The termination payment to be received in February 2006 is approximately equal to the net present value of the remaining firm payment obligations under the agreement, net of PNG's avoided costs. The Company does not expect any impact on net income in 2005 resulting from the termination of the agreement. For subsequent years, the impact on net income will depend on future regulatory decisions, including the appropriate regulatory treatment of the termination payment.

As a result of Methanex's termination of the agreement, PNG will shortly be making a filing with the British Columbia Utilities Commission (the "Commission") on the appropriate regulatory treatment of the termination payment.

"While we are disappointed in the decision by Methanex to close their Kitimat facility, we understand the business reasons for it given the extremely high commodity cost of gas in North America compared to Methanex's feedstock costs for methanol facilities operating in other parts of the world," said Roy Dyce, President and CEO of PNG.

PNG will continue to pursue its strategy to convert to an income trust structure. A decision on the Company's income trust application is expected to be issued by the Commission in the third quarter of 2005. Conversion to an income trust structure will also require the approval of the shareholders of the Company, court approval, and acceptable market conditions. The Company can give no assurances that the required approvals will be obtained, or that the conversion to an income trust ownership structure will occur.

Headquartered in Vancouver, British Columbia, Pacific Northern Gas Ltd. (TSX:PNG)(TSX:PNG.PR.A) owns and operates natural gas transmission and distribution systems. The Company's western transmission line extends from the Duke Energy Gas Transmission system north of Prince George to tidewater at Kitimat and Prince Rupert, and provides service to 12 communities and a number of industrial facilities. In the northeast, Pacific Northern's subsidiary Pacific Northern Gas (N.E.) Ltd. provides gas distribution service in the Dawson Creek, Fort St. John and Tumbler Ridge areas. Further information is available on the Company's website at: www.png.ca.

Contact Information

  • Pacific Northern Gas Ltd.
    Elizabeth Fletcher
    Chief Financial Officer
    (604) 691-5684
    www.png.ca