AltaGas sells U.S. transport business for $344M
2021-04-23 17:23 ET - News Release
Mr. Randy Crawford reports
ALTAGAS MONETIZES NON-CORE U.S. TRANSPORTATION AND STORAGE BUSINESS AND SIGNIFICANTLY ADVANCES DELEVERAGING PLANS
AltaGas Ltd. has sold and closed a transaction to monetize the company's U.S. transportation and storage business to an entity owned by Six One Commodities LLC and Vega Energy Partners Ltd. for total cash proceeds of approximately $344-million ($275-million (U.S.)). The non-core asset sale represents another important step in advancing AltaGas's strategy of refocusing the company on its two core businesses while continuing to derisk and delever the platform and reduce the volatility of cash flows.
Randy Crawford, president and chief executive officer, commented: "We are pleased to advance our strategic plan of focusing, deleveraging and derisking our company. The monetization of the U.S. transportation and storage business positions us to accelerate the timeline of getting to our target of being below 5.0 times net debt to normalized [earnings before interest, taxes, depreciation and amortization] (1). Specifically, we believe we are positioned to reduce our net debt to normalized EBITDA ratio by up to 0.5 times over the course of 2021 relative to the run-rate level we exited 2020. Ongoing leverage reduction will remain a top priority as we continue to grow the business. We are also fortunate to be selling the U.S. transportation and storage business after a strong financial contribution from the segment in the first quarter related to significant weather-driven natural gas price volatility. This created an incremental deleveraging event that will benefit all of our stakeholders."
AltaGas's total near-term deleveraging is estimated at approximately $485-million and is composed of three main components, including: (1) $344-million of cash proceeds that were received through the divestiture; (2) the reduced working and other capital requirements of the U.S. transportation and storage business that will no longer be required post the sale; and (3) robust profitability from the U.S. transportation and storage business during the first quarter due to strong natural gas prices and volatility seen in the quarter. The third component of the deleveraging will be recorded in AltaGas's first quarter 2021 financial statements that are scheduled to be released on April 29, 2021, before market open. The closing and effective date of the transaction are today, with AltaGas continuing to record the operating results of the business during the first quarter and approximately the first three weeks of the second quarter of 2021.
AltaGas's U.S. transportation and storage business was a smaller component of the company's operations and included a number of natural gas transportation and storage contracts, including approximately 31 billion cubic feet of leased and managed storage capacity. The sale does not include AltaGas's 10-per-cent equity stake in the Mountain Valley pipeline or the company's 5.1-per-cent equity stake in the Mountain Valley pipeline Southgate expansion. The business has been reported as part of AltaGas's mid-stream operations since closing the WGL acquisition in 2018 and did not have any material overlap with AltaGas's U.S. utilities platform. The business produced $21.2-million (U.S.) of normalized EBITDA in 2020 and $16.2-million (U.S.) of average annual normalized EBITDA over the trailing five-year period from 2016 to 2020. The business has fluctuating working capital requirements throughout the year, which typically peak heading into the winter and then hit seasonal lows in March or April, following large natural gas inventory sales over the winter heating season with inventories then being replenished during spring and fall shoulder seasons.
AltaGas continues to execute on the company's strategy and leverage its distinctive utilities and mid-stream businesses that are both well positioned to deliver strong and visible growth. As has been publicly messaged in the past, AltaGas is also focused on continued deleveraging and may consider other incremental non-core asset sales, should the right opportunities and market conditions be available. In the years ahead, AltaGas will remain acutely focused on operating long-life infrastructure assets that provide resilient and durable value for the company's stakeholders. AltaGas is focused on delivering durable and growing earnings per share and funds from operations per share that support steady dividend growth and provide the opportunity for capital appreciation.