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Jan. 23-27: AltaGas to acquire WGL; FERC without quorum

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Jan. 23-27: AltaGas to acquire WGL; FERC without quorum

A brief look back at successes and setbacks in the energy industry.

Highs

ALTAGAS — AltaGas Ltd. on Jan. 25 announced a deal to acquire WGL Holdings Inc. for US$6.4 billion in cash, marking yet another Canadian company moving to buy energy assets in the U.S. AltaGas said that at closing of the deal, which is expected in the second quarter of 2018, it would own about C$22 billion in assets, with a growth portfolio of more than C$7 billion of opportunities. Analysts judged the terms of the deal as indicative that utility M&A will continue in 2017. "We still think the sector is ripe for consolidation and that there will be enough acquirers willing to pay up for strategic deals," Wells Fargo Securities LLC analyst Sarah Akers said.

TRANSCANADA — TransCanada Corp. reapplied for a presidential permit for the controversial Keystone XL oil pipeline, two days after President Donald Trump signed a memo encouraging and paving the way for a swift review of the project. "We are going to renegotiate some of the terms, and then, if they like, we'll see if we can get that pipeline built," Trump said.

AEP — American Electric Power Co. Inc. released fourth-quarter results Jan. 26 that easily topped consensus estimates. In the fourth quarter of 2016, AEP reported earnings of $330.4 million, or 67 cents per share, up from $232.7 million, or 48 cents per share, in fourth-quarter 2015. S&P Capital IQ's consensus normalized EPS estimate for fourth-quarter 2016 was 55 cents. "For the first time in more than a year, we saw positive retail sales growth in the fourth quarter of 2016, and we expect modest overall load growth in 2017," AEP Chairman, President and CEO Nicholas Akins said.

PLAINS — In yet another Permian Basin deal, Plains All American Pipeline LP announced an agreement to acquire a large-scale crude oil gathering system in the Permian for $1.22 billion, and the separate divestiture of $380 million in assets. "The system is located in one of the most prolific portions of the Permian Basins," CEO Greg Armstrong said Jan. 25.

BECHTEL Bechtel Corp. won a contract to build the 1,100-MW Cricket Valley Energy combined-cycle facility in New York's Hudson Valley, a $1.58 billion project. Cricket Valley is scheduled to begin commercial operations in early 2020, just in time for the planned retirement of nuclear reactors Indian Point 2 in April 2020 and Indian Point 3 in April 2021, barring any reliability extensions.

Between

FERC — Trump named Cheryl LaFleur the acting chairman of FERC, returning her to a position she held from November 2013 to July 2014. Shortly after news broke that LaFleur took the gavel, commissioner and former chairman Norman Bay announced he will leave the agency Feb. 3. Bay's departure will leave FERC without a quorum, thus leaving the commission without the ability to act until Trump nominates and gains Senate approval of a Republican to fill one of the agency's empty seats, a process that has traditionally taken months. LaFleur acknowledged that FERC "is in a state of transition as we await nominations to fill vacant seats at the agency." Several analysts judged Bay's departure as likely to delay four major natural gas pipeline projects that are at vulnerable points in their review as well.

Lows

EPA — The first week of the Trump administration was a chaotic one for the U.S. EPA, with news reports and agency leaks of a gag order imposed on staff, grants for climate change initiatives put on hold and attempts to scrub data from the agency's web page. White House Press Secretary Sean Spicer on Jan. 25 said no directives had been handed down from the administration regarding scrubbing climate data, but an official associated with the Trump administration's EPA "beachhead team" later spoke to the media, announcing that scientific research conducted by the EPA may be subject to "case by case" review, according to NPR. Myron Ebell, one of Trump's early transition advisers for the agency, said the new administration is likely to seek up to $1 billion in budget cuts out of the EPA's $8 billion annual budget. The president may also slash staffing at the agency.

YIELDCOS — 8point3 Energy Partners LP achieved full-year 2016 earnings largely in line with analyst estimates, with EBITDA of $76.19 million, but set investors up for a quiet year as the yieldco digests recent dropdowns. While 8point3 acknowledged that it has a number of options for future dropdowns from its sponsors, it indicated that it is likely to hold off on utility-scale acquisitions in the near term due to market conditions that remain somewhat wary of the yieldco model. "In simple terms, we are currently not getting rewarded for high growth at this point. As a result, we are currently reviewing a number of options to properly position ourselves for success in this environment," 8point3 CEO and Chairman Charles Boynton said. Additionally, NextEra Energy Partners modified its agreement with sponsor NextEra Energy Inc. to, among other objectives, rely less on issuing equity to achieve growth in distributions and provide more cash for limited partner unit holders.