Fortis Inc. (TSX:FTS) signed an agreement to acquire 66.67% stake in Waneta Dam from Teck Resources Limited (TSX:TECK.B) for CAD 1.2 billion on May 12, 2017. The consideration will be paid in cash and is subject to certain adjustments. Under the terms of the agreement, Teck Metals will be granted a 20-year lease to use Fortis' two-thirds interest in Waneta to produce power for its industrial operations in Trail.

Teck Metals will have an option to extend the lease for a further 10 years at comparable rates. In addition, BC Hydro, which owns one-third of the Waneta Dam assets and currently receives one-third of the Waneta Dam generation, has a right of first offer with respect to the sale of Teck's two-third interest under the 2010 co-ownership and operating agreement between Teck Metals and BC Hydro in relation to Waneta. Fortis will finance the transaction through a combination of cash on hand, debt and equity.

The Waneta Dam will operate as a non-regulated energy infrastructure subsidiary of Fortis Inc. Teck will pay a break-fee to Fortis in the event BC Hydro exercises its right of first offer. The transaction is subject to customary conditions, including receipt of certain regulatory approvals and consents. In addition, certain consents and amendments from BC Hydro are required in connection with the transaction.

The transaction is expected to close in the fourth quarter of 2017. The transaction is expected to be immediately accretive to earnings per share of Fortis. CIBC World Markets Inc. is acting as exclusive financial advisor to Teck Resources with respect to the transaction.