Fortis Inc (FTS.TO) said on Friday it would will buy Teck Resources Ltd's (TECKb.TO) two-thirds stake in the Waneta dam in British Columbia as well as any related transmission assets for $1.2 billion in cash.

A Teck unit will then get a 20-year lease to use the assets to produce power for its Trail Operations, the company's zinc and lead smelting and refining complex in southeastern British Columbia, the companies said in a joint statement.

Fortis has been operating the Waneta dam for more than 20 years and owns 51 per cent of the Waneta expansion plant downstream.

“We know this asset really well,” Fortis CEO Barry Perry told BNN in an interview. “Our diligence didn’t last that long in this process.”

Fortis’ acquisition of Teck’s stake is not yet set in stone. B.C. hydro owns the other one-third of the dam and may decide to lay claim to Teck’s assets.

“We have to leave it to them to decide, clearly,” Perry said.

If B.C. Hydro does decide to purchase the rest of the dam, Teck will pay Fortis a break fee of $25 million, according to Perry.

Perry said that if Fortis ends up landing the deal, it will be financed through a mix of sources, “probably in the one-third equity, two-thirds debt range.”

Fortis’ debt has shot up — from $11.2 million in 2015 to $21 million in 2016 —  since its US$11.3-billion acquisition of ITC Holdings Corp (ITC.N) last year. But Perry maintains that Fortis isn’t biting off more than they can chew.

“We have a very prudent approach to debt [and are] clearly working with our rating agencies.” Perry said, further adding that the ITC transaction is “fully financed” and that the integration is going “extremely well.”

Vancouver-based Teck, which primarily mines coal, zinc and copper, said last September it was considering selling some infrastructure assets, including the Waneta Dam and the Ridley coal terminal in British Columbia.

Teck, which has been using cash flow and profit to cut debt, had debt of US$5.1 billion at the end of the first quarter.

With files from BNN