Pending acquisition will result in combined assets of $22 billion
(EDITOR’S NOTE: Canadian dollars unless otherwise noted.)
AltaGas Ltd. (ticker: ALA) today reported that normalized EBITDA in the first quarter of 2017 increased $50 million to $228 million, compared to the same quarter in 2016. Normalized funds from operations were $170 million ($1.01 per share) for the first quarter of 2017, compared to $132 million ($0.90 per share) in the same period of 2016.
On a U.S. GAAP basis, net income applicable to common shares for the first quarter of 2017 was $32 million ($0.19 per share) compared to $55 million ($0.38 per share) in the first quarter of 2016. Normalized net income1 was $65 million ($0.39 per share) for the first quarter of 2017, compared to $38 million ($0.26 per share) in the same period of 2016.
Q1 highlights:
- Achieved record normalized EBITDA1 of $228 million in the first quarter of 2017, a 28 percent increase compared to the same quarter of 2016;
- Increased normalized funds from operations1 by approximately 29 percent to $170 million in the first quarter of 2017;
- Announced transformational $8.4 billion pending acquisition of WGL Holdings, Inc. (WGL Acquisition) on January 25, 2017, and submitted regulatory applications to the public utility commissions in Maryland, Virginia and Washington D.C. on April 24, 2017;
- Commenced construction of the 99 Mmcf/d Townsend 2a shallow-cut processing facility and continue to advance discussions with other producers to backstop the second train of Townsend Phase 2;
- Made significant progress on the first train of the North Pine NGL Separation Facility, accelerating the expected in-service date of the facility to the first quarter of 2018; and
- Announced a positive Final Investment Decision (FID) on the Ridley Island Propane Export Terminal on January 3, 2017. Site preparation and pre-construction activities are underway, construction is expected to begin in the second quarter of 2017 and the terminal is being designed to ship 40,000 Bbls/d of propane to global markets off the west coast of Canada.
“We are also very excited about the pending acquisition of WGL that will provide us with a robust, complementary set of high quality, low-risk, long-lived assets that complement each of our energy segments and greatly increase our scale and diversity.
“Both companies are working diligently toward closing the acquisition with the submission of the local and federal regulatory filings having been completed on April 24. This marks an important step toward an exciting future with WGL where we expect to have approximately $22 billion in combined assets and over $7 billion of highly attractive organic growth opportunities upon closing,” said AltaGas President and CEO David Harris.
The gas segment benefitted from the commencement of commercial operations at the Townsend Facility in the third quarter of 2016, higher earnings from Petrogas Energy Corp. (Petrogas) including the dividend income from the Petrogas Preferred Shares, higher revenue from NGL marketing, higher realized frac spreads and processed volumes, and higher natural gas storage margins.
Results for the utilities were positively impacted by colder weather experienced at certain of the Utilities and the interim and refundable rate increases at ENSTAR.
The power segment benefitted from a full quarter of contributions from the Pomona Energy Storage Facility which commenced commercial operations on December 31, 2016, and the absence of equity losses from the Sundance B PPAs. These increases were partially offset by the weaker U.S. dollar on reported results of the U.S. assets.
Normalized funds from operations were $170 million ($1.01 per share) in the first quarter of 2017, up from $132 million ($0.90 per share) in the first quarter of 2016. The increase was driven by the increase in normalized EBITDA, partially offset by higher interest expense and lower common share dividends from Petrogas.
Pending $6.8 billion acquisition of WGL Holdings, Inc.
In January 2017, AltaGas entered into a definitive agreement to indirectly acquire WGL Holdings, Inc. (WGL). Pursuant to the Merger Agreement, following the consummation of the WGL Acquisition, WGL common shareholders will receive US$88.25 per common share in cash, which represents a total enterprise value of US$6.8 billion, including the assumption of approximately US$2.1 billion of debt as at December 31, 2016.
WGL is a diversified energy infrastructure company and the sole common shareholder of Washington Gas Light Company (Washington Gas), a regulated natural gas utility headquartered in Washington, D.C., serving more than 1.1 million customers in Maryland, Virginia, and the District of Columbia.
WGL has a growing midstream business with investments in natural gas gathering infrastructure and regulated gas pipelines in the Marcellus/Utica gas formation located in the northeast United States with capabilities for connections to marine-based energy export opportunities via the North American Atlantic coast through the proposed Cove Point LNG terminal in Maryland being developed by a third party, currently expected to be operational in late 2017.
WGL also owns contracted clean power assets, with a focus on distributed generation and energy efficiency assets throughout the United States. In addition, WGL has a retail gas and power marketing business with approximately 260,000 customers in Maryland, Virginia, Delaware, Pennsylvania and the District of Columbia.
Upon completion of the WGL Acquisition, AltaGas will have over $22 billion of assets and more than 1.7 million rate regulated gas customers.
“Our success has been driven by our commitment to clean energy infrastructure assets in midstream, power and utilities, and by maintaining a balance over the long-term in these three segments,” said Harris.”
Funding the WGL acquisition
The WGL acquisition is not subject to any financing contingency. AltaGas expects that cash to close the WGL acquisition will be provided from a combination of the net proceeds from the $400 million private placement of subscription receipts and the $2.2 billion bought deal subscription receipt offering (including the partially exercised over-allotment option) for total gross proceeds of approximately $2.6 billion, subsequent offerings of senior debt, hybrid securities, equity or equity-linked securities (including Preferred Shares or convertible debentures), selected AltaGas asset sales and through a fully committed approximately US$3.0 billion bridge facility, which would be available for 12 to 18 months following closing of the WGL acquisition.
