Veresen Announces $920 Million Investment in the Montney With Strategic Acquisition of Canadian Midstream Assets and Acquisition Financing

CALGARY, ALBERTA--(Marketwire - Dec. 7, 2011) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Veresen Inc. ("Veresen") (TSX:VSN) is pleased to announce today that, through a wholly-owned subsidiary, it has entered into agreements with Encana Corporation ("Encana") (TSX:ECA)(NYSE:ECA) to acquire the Hythe/Steeprock midstream gas gathering and processing complex for $920 million. These assets are located in the Cutbank Ridge region of Alberta and British Columbia. Natural gas and natural gas liquids in the region are produced from the prolific Montney, Cadomin and other geological formations.

The Hythe/Steeprock complex includes two natural gas processing plants with combined functional capacity of 516 MMcf/d as well as approximately 40,000 hp of compression and 370 km of gas gathering lines. The Hythe plant processes both sour and sweet natural gas, while the Steeprock plant is a sour gas processing facility.

In connection with the transaction, Veresen and Encana have entered into a long-term Midstream Services Agreement under which Encana will provide a competitive, long-term, take-or-pay throughput commitment averaging 370 MMcf/d, representing 72 percent of the functional capacity of the Hythe/Steeprock complex.

Veresen will become the operator of the two interconnected gas processing plants following a transition period between Veresen and Encana. Veresen expects to retain all operational employees at the processing plants. Encana will be the contract operator of the compression and gas gathering system acquired by Veresen. This will allow Encana to coordinate its drilling program and natural gas production in the area with requisite development of the Hythe/Steeprock gathering system.

"This transaction establishes a high-quality, independent natural gas midstream business for Veresen which we expect will generate attractive returns and make a significant contribution to our cash flow," said Stephen White, President and Chief Executive Officer. "The Hythe/ Steeprock complex is strategically located in the heart of a high-growth region focused on Montney drilling, and is underpinned by a competitive, long-term gathering and processing fee agreement with an outstanding producer partner in Encana."

"In an active and highly-competitive midstream landscape, we remain focused on our strategy of growing our business through the selective development and acquisition of contracted, high-quality, long-life infrastructure assets that generate stable cash flows. This acquisition is aligned with our business model and offers strength, stability and growth over the long term."

Mr. White added, "Concurrent with this transaction, we are pleased to announce we have entered into a $303 million bought deal financing which, together with our strong balance sheet and sources of credit, will successfully fund this acquisition."

This transaction is expected to close in the first quarter of 2012 and is subject to normal closing conditions, including receipt of normal course approval under the Competition Act. A small portion of the assets are subject to National Energy Board ("NEB") regulation, and closing for the transaction related to these assets will occur at a later point when NEB approval is obtained.

Acquisition Highlights

Key investment highlights of the Hythe/Steeprock complex acquisition are as follows:

High-Quality Assets

• Establishes an independent midstream business for Veresen in an area focused on the high-growth Montney zone, one of North America's most prolific, low-cost natural gas and NGL plays.
• High-quality, of-scale facilities including the Steeprock gas plant (198 MMcf/d sour), the Hythe gas plant (340 MMcf/d sweet, 176, MMcf/d sour), approximately 40,000 hp of sweet and sour compression, and 370 km of gathering lines.
• Connections to the Alliance and TransCanada pipeline systems.

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Contracted Cash Flow

• Long-life energy infrastructure assets with contracted, stable, fee-for-service cash flow.
• Investment grade counterparty.
• No exposure to commodity price fluctuations.

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Strong Financial Performance/Impact

• Minimum average annual committed gathering and processing fees over the first five years of over $72 million, net of operating and maintenance costs; potential for additional fees from non-committed or third party volumes.
• The transaction is immediately accretive to distributable cash per share, with accretion increasing over time.
• With this transaction, Veresen estimates its Canadian tax horizon will be extended to approximately 2019.

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High Growth Potential

• Cutbank Ridge is one of Encana's key resource plays with more than 1 million acres of land and in excess of 500 MMcf/d of production.
• Total recoverable natural gas in proximity to the Hythe/Steeprock complex, including Encana and third party gas, has been estimated by GLJ Petroleum Consultants ("GLJ"), independent qualified reserves evaluators, to be 26 tcf of best estimate contingent resources.
• Based on GLJ's assessment of best estimate of contingent resources, regional gas production could increase by approximately 2 billion cubic feet per day over the next 20 years, providing significant midstream infrastructure expansion opportunities for Veresen.

2012 Guidance

For 2012, and including the impact of the Hythe/Steeprock acquisition, Veresen is forecasting distributable cash in the range of $1.15 to $1.50 per common share. Based upon a forecast annual dividend payout of $1.00 per common share, the corresponding payout ratio for 2012 will be between 67 and 87 percent.

"The year-over-year increase in our distributable cash demonstrates that our strategy is working," commented Stephen White. "Over the past two years, we have made significant capital investments in our midstream business, including the Palermo Gas Plant, the Prairie Rose Pipeline, and the Heartland off-gas facility, and in our Power business including the York Energy Centre, which are creating long-term shareholder value."

For 2011, Veresen maintains its previously announced guidance for distributable cash of $1.16 to $1.30 per share, resulting in a payout ratio of 82 to 86 percent. Further details regarding 2011 and 2012 guidance can be found in the Investor Information section of Veresen's website at www.vereseninc.com.

Acquisition Funding

Funding for the acquisition is expected to be provided from a combination of equity and debt, specifically: (i) the net proceeds from the subscription receipt offering; (ii) $250 million from new senior credit facilities; (iii) the balance of approximately $370 million under Veresen's existing revolving credit facility; and (iv) ongoing funding derived from equity raised under Veresen's Premium Dividend™ and Dividend Reinvestment Plan. Veresen intends to refinance the acquisition-related borrowings through various capital market instruments during 2012.

Subscription Receipt Offering

Veresen has agreed to sell, on a bought deal basis, an aggregate of 21,500,000 subscription receipts at a price of $14.10 per subscription receipt for gross proceeds of approximately $303 million. The subscription receipts will be offered through a syndicate of investment dealers led by TD Securities Inc., bookrunner, and co-led by CIBC World Markets Inc. and Scotia Capital Inc., under Veresen's Short Form Base Shelf Prospectus dated August 22, 2011, and a prospectus supplement to the Short Form Base Shelf Prospectus to be dated on or about December 9, 2011. Veresen has also granted the underwriters an option to purchase, in whole or part, up to an additional 3,225,000 subscription receipts for a price of $14.10 per subscription agreement to cover over-allotments, if any, for a period of 30 days following the closing of the offering. If the acquisition closes prior to the exercise of the over-allotment option, the over-allotment option will be exercisable in respect of an equivalent number of common shares. If the over-allotment option is exercised in full, gross proceeds from the offering will be approximately $349 million.

Each subscription receipt will entitle the holder thereof to receive, concurrent with closing of the acquisition and upon satisfaction of certain escrow release conditions, one common share of Veresen plus an amount equal to the dividends Veresen declares on the common shares, if any, for record dates which occur during the period from the closing date of the offering to the date of issuance of the common shares issuable on the deemed exercise of the subscription receipts, net of any applicable withholding taxes.

The gross proceeds from the sale of the subscription receipts will be held by an escrow agent pending, among other things, receipt of all regulatory and government approvals required to finalize the Hythe/Steeprock acquisition and fulfillment or waiver of all other outstanding conditions precedent to closing the acquisition. In the event such approvals and conditions are not satisfied prior to 5:00 p.m. (Calgary time) on April 30, 2012, or if the asset purchase agreement is terminated prior to such time, the holders of the subscription receipts will be entitled to receive an amount equal to the full subscription price thereof plus their pro rata share of the interest earned on such amount.

The offering is subject to the receipt of all necessary regulatory and stock exchange approvals. Closing of the offering is expected to occur on or about December 16, 2011.

New Non-Revolving Term Credit Facilities

In connection with the acquisition of the Hythe/Steeprock complex, Veresen has obtained a commitment from a Canadian chartered bank to provide two non-revolving term credit facilities in the aggregate amount of $500 million. These new credit facilities will rank equally with Veresen's senior unsecured obligations and will have a one year term subject to mandatory reductions from the net proceeds of certain debt and equity issuances (including from the net proceeds from the sale of the subscription receipts) and asset dispositions. Subject to the satisfaction of certain conditions precedent customary for a financing of this type, funds will be available by way of a single draw on the closing of the acquisition. The new credit facilities will contain terms that are customary for bank credit facilities of this nature.

Premium Dividend™ and Dividend Reinvestment Plan

Commencing with the cash dividend payable to shareholders of record on December 30, 2011, Veresen intends to permit eligible shareholders who are enrolled in its Premium Dividend™ and Dividend Reinvestment Plan to participate in the Premium Dividend™ component. This will entitle participating shareholders to receive a premium cash payment equal to 102 percent of the cash dividend that such shareholders would otherwise be entitled to receive on the applicable dividend payment date. Further details about how to participate in the Plan will be provided when Veresen announces its December 2011 dividend.

Conference Call Advisory

Veresen will host a conference call and webcast to discuss the Hythe/Steeprock acquisition today at 2:00 p.m. MT (4:00 p.m. ET). A presentation will be available prior to the conference call at www.vereseninc.com.

Dial-in: 1 (888) 231-8191 or 1 (647) 427-7450 conference ID 34701373

Webcast: http://event.on24.com/r.htm?e=387346&s=1&k=9CDE3C7953F2CB1CD49FD0374D26B590

™ denotes trademark of Canaccord Genuity Corp.

A replay of the call will be available from 4:00 p.m. MT (6:00 pm ET) on December 7, 2011 by dialing 1-855-859-2056 and 1-416-849-0833. The passcode is 34701373, followed by the pound sign. The replay will expire at midnight (ET) on December 14, 2011. The webcast will be archived for one year.

This news release does not constitute an offer to sell or the solicitation of an offer to buy the subscription receipts in the United States, in any province or territory of Canada or in any other jurisdiction. The subscription receipts to be offered have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any U.S. state securities laws and may not be offered or sold in the United States absent registration or absent an applicable exemption from the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. There shall be no sale of the subscription receipts in any jurisdiction in which an offer to sell, a solicitation of an offer to buy or a sale would be unlawful.

About Veresen Inc.

Veresen is a publicly-traded dividend paying corporation based in Calgary, Alberta, that owns and operates energy infrastructure assets across North America. Veresen is engaged in three principal businesses: a pipeline transportation business comprised of interests in two pipeline systems, the Alliance Pipeline and the Alberta Ethane Gathering System; a midstream business which includes ownership interests in a world-class natural gas liquids extraction facility near Chicago and other natural gas and NGL processing energy infrastructure; and a power business with renewable and gas-fired facilities and development projects in Canada and the United States, and district energy systems in Ontario and Prince Edward Island. Veresen and each of its pipeline, midstream and power businesses are also actively developing a number of greenfield projects. In the normal course of its business, Veresen and each of its businesses regularly evaluate and pursue acquisition and development opportunities.

Veresen's common shares and 5.75% convertible unsecured subordinated debentures, Series C due July 31, 2017 are listed on the Toronto Stock Exchange under the symbols "VSN" and VSN.DB.C", respectively. For further information, please visit www.vereseninc.com.

Resource Disclosure

Resource estimates in this News Release have an effective date of December 31, 2011 and have been prepared by GLJ, independent qualified reserves evaluators, in accordance with the Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook").

"Resources" are quantities of recoverable natural gas that have not met the reserves requirements at the time of the estimate. "Contingent Resources" are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters, or a lack of markets. Contingent resources are further classified in accordance with the level of certainty associated with the estimates and may be sub-classified based on economic status. There are three categories in evaluating Contingent Resources: Low Estimate, Best Estimate and High Estimate. The resource estimates presented in this News Release all refer to the Best Estimate category. Best Estimate is a classification of resources described in the COGE Handbook as being considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the Best Estimate. If probabilistic methods are used, there should be a 50% probability (P50) that the quantities actually recovered will equal or exceed the Best Estimate. There is no certainty that it will be commercially viable to produce any portion of the contingent resources disclosed in this News Release.

Forward-Looking Information

Certain information contained herein relating to, but not limited to, Veresen and its businesses, the acquisition, the offering of the subscription receipts and the entering into of the new credit facilities, constitutes forward-looking information under applicable securities laws. All statements, other than statements of historical fact, which address activities, events or developments that Veresen expects or anticipates may or will occur in the future, are forward-looking information. Forward-looking information typically contains statements with words such as "may", "estimate", "anticipate", "believe", "expect", "plan", "intend", "target", "project", "forecast" or similar words suggesting future outcomes or outlook. Forward-looking statements in this news release include, but are not limited to, statements with respect to the timing of closing of the acquisition of the Hythe/Steeprock complex, the sources of financing of the acquisition, the timing of the completion of the subscription receipt offering and new credit facilities, the anticipated retention of operational employees, the use of the proceeds of the subscription receipt offering, the average take-or-pay volumes under the Midstream Services Agreement, average annual fees from the Hythe/Steeprock complex over the next five years, expected returns and contributions to cash flow from the acquisition, contingent resources in the Cutbank Ridge region, potential future increases in production in the Cutbank Ridge region, the impact of Hythe/Steeprock complex acquisition on Veresen's tax horizon, opportunities for future midstream infrastructure investment, Veresen's plan to provide for the premium cash payment under its Premium Dividend™ and Dividend Reinvestment Plan and Veresen's forecast of 2012 and 2011 distributable cash, annual dividend payment and dividend payout ratio. The forward-looking information included herein involves significant risks, uncertainties and other factors. Such risks, uncertainties and other factors include, but are not limited to, risks relating to closing of the acquisition, the potential for undisclosed liabilities associated with the acquisition, realizing the expected benefits from the acquisition, increased indebtedness as a result of completing the acquisition and the availability of the new senior credit facilities.
Additional information on risks, uncertainties and factors that could affect the foregoing forward-looking information and/or Veresen's operations or financial results is included in its filings with the securities commissions or similar authorities in each of the provinces of Canada, as may be updated from time to time and will be included in the prospectus supplement relating to the offering. Readers are also cautioned that such additional information is not exhaustive. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these factors are independent and management's future course of action would depend on its assessment of all information at that time. Although Veresen believes that the expectations conveyed by the forward-looking information are reasonable based on information available on the date of preparation, no assurances can be given as to future results, levels of activity and achievements. Undue reliance should not be placed on the information contained herein, as actual results achieved will vary from the information provided herein and the variations may be material. Veresen makes no representation that actual results achieved will be the same in whole or in part as those set out in the forward-looking information. Furthermore, the forward-looking statements contained herein are made as of the date hereof, and Veresen does not undertake any obligation to update publicly or to revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable laws. Any forward-looking information contained herein is expressly qualified by this cautionary statement.