TSX:ALA - Post Discussion
Post by
retiredcf on Sep 01, 2023 9:30am
TD
Just intitated a position. GLTA
AltaGas Ltd.
(ALA-T) C$26.42
Acquisition of Pipestone Assets Event
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12-Month Target Price: C$32.00 |
12-Month Dividend (Est.): C$1.17 |
12-Month Total Return: 25.5% |
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On August 31, 2023, ALA entered into an agreement to acquire the Pipestone Natural Gas Processing Plant Phase I and Phase II expansion project, the adjacent Dimsdale Natural Gas Storage Facility, the Pipestone condensate truck-in/truck-out terminal, and the associated gathering pipeline systems from Tidewater Midstream for $650mm, contingent on a positive Pipestone Phase II FID.
Impact: SLIGHTLY POSITIVE
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EPS Accretive: Management valued the transaction at ~8.5x expected 2024 normalized EBITDA and ~7.2x long-term run-rate normalized EBITDA, inclusive of the operational and other synergies associated with in-servicing of Pipestone Phase II in 2025. ALA expects the transaction to be modestly accretive to EPS in 2024 and 5% accretion in 2025 and beyond. Management expects the transaction to be 0.1x leverage accretive in 2025 forward.
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Strategic Transaction: Although we were surprised by the announcement, given the existing organic growth opportunities and recent addition of a new CEO, we believe this transaction is synergistic as well as in line with ALA's strategy. We also would not expect this acquisition to delay or detract from ALA's deleveraging plans.
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Long-term Value Accretive: We have updated our financial forecasts to reflect this acquisition and a mid-2025 in-service of Pipestone Phase II. The changes are not significant enough to increase our $32.00 target price at this point, although we anticipate that this transaction will be value accretive in the long term.
TD Investment Conclusion
We believe the Pipestone assets will benefit from synergies with ALA's midstream platform, as well as contribute to ALA's medium-term midstream growth outlook and reduce the company's aggregate commercial risk profile. This should bolster the differentiated midstream service offerings ALA can provide WCSB producers, including LPG export capacity off the west coast. In our view, the company is providing a diversified energy infrastructure investment opportunity for investors with a medium risk tolerance looking for above-utility-average potential returns.
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