AltaGas Ltd. announced that it has entered into a definitive agreement to indirectly sell 35 percent of its interest in the Northwest British Columbia Hydro Electric facilities for $922 million. The purchase price implies a 2017 EBITDA multiple of approximately 27 times and a total value of over $2.6 billion on a 100 percent basis for the Facilities. The sale of the interest in the Facilities is part of the larger funding strategy related to AltaGas' acquisition of WGL, and represents almost half of the approximate $2 billion in asset sales to be raised.
"The sale of the minority interest in the Northwest Hydro Facilities is aligned with our asset monetization and funding strategy," said David Harris, President and Chief Executive Officer of AltaGas. "Our criteria include the appropriate value for the assets, shareholder value creation, and credit metric accretion, with the resulting business being consistent with our long-term vision for AltaGas.
"We continue to be very confident in completing our long-term financing plan in the next several months, and with the sale of the Facilities and certain anticipated non-core assets, we expect over half of the $2 billion in targeted asset sales to be completed by mid-summer," stated Mr. Harris. "We also continue to advance discussions for the monetization of certain additional assets, which we expect to conclude in the third quarter.
"We look forward to closing the acquisition of WGL. The business combination is a compelling one, with accretive earnings per share and cash flow per share growth, a business with a strong balance sheet, and a balanced portfolio of high-quality energy infrastructure assets," concluded Mr. Harris.
Funding strategy for WGL
The acquisition of WGL is fully backstopped by a US$3 billion bridge facility and $2.6 billion in equity proceeds raised through the February 2017 subscription receipt offering and private placement. The proceeds of the sale of 35 percent of AltaGas' interest in the Facilities, further asset monetizations, as well as offerings of senior debt and hybrid securities, will allow for the rapid repayment of the bridge facility.
On June 4th, a US$2 billion preliminary short form base shelf prospectus for the issuance of both debt securities and preferred shares was filed in Alberta. AltaGas anticipates filing a final short form base shelf prospectus shortly both in Alberta and the U.S. This will enable AltaGas to access the U.S. capital markets on a timely basis over the following 25 months, subject to market conditions.
Definitive agreement
The definitive agreement to sell the 35 percent stake of AltaGas' interest in the Facilities has been entered into with a joint venture company that is indirectly owned by Axium Infrastructure Inc., as manager of Axium Infrastructure Canada II Limited Partnership, and Manulife Financial Corporation.
Axium Infrastructure is an independent investment firm dedicated to investing in core assets generating stable and predictable cash flows in the energy, transportation, and social infrastructure sectors. Since 2010, the firm has invested in a diversified portfolio of over 100 North American infrastructure assets, having assets and co-investments under management as of March 31, 2018, of approximately $4 billion.
Manulife is a leading international financial services group with assets under management and administration of over $1.1 trillion (US$850 billion) as of March 31, 2018. Manulife is an active investor in renewable energy and infrastructure with equity investments in these sectors totaling over $7 billion.
AltaGas will remain the majority holder of the Facilities and continue to provide all operational, maintenance and management functions. The transaction is subject to closing adjustments and customary closing conditions and is expected to close prior to the end of June 2018. AltaGas anticipates that there will be a negligible amount of current cash taxes resulting from this transaction.
Northwest British Columbia Hydro Electric facilities
Located in Tahltan First Nation territory, the Facilities are comprised of the 195-megawatt Forrest Kerr Hydroelectric Facility which achieved commercial operation ("COD") in October 2014, the 16-megawatt Volcano Creek Hydroelectric Facility which achieved COD in December 2014, and the 66-megawatt McLymont Creek Hydroelectric Facility which achieved COD on October 1, 2015. The Facilities had a total capital cost of approximately $1 billion, and are underpinned by three separate 60-year, fully indexed electricity purchase agreements with BC Hydro.
The Tahltan First Nation continues to play a key role in the success of the Facilities and to work closely with AltaGas to provide clean energy to British Columbia for decades to come.
TD Securities Inc., J.P. Morgan and RBC Capital Markets are acting as joint financial advisors to AltaGas in connection with this transaction.
WGL acquisition next steps
On June 13, 2018, the DC Public Service Commission will hold an additional day of hearing for the purpose of reviewing the unanimous settlement agreement (the "Settlement"). A community hearing will also be held that evening to receive any public comments on the Settlement. It is anticipated that the record will close on June 18, 2018, with a final order expected to be issued the week of June 25, 2018.
