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AltaGas sells remaining stake in 3 hydro plants for C$1.39B, cuts dividend

AltaGas Ltd. agreed to sell its remaining 55% indirect equity interest in three Northwest British Columbia hydroelectric facilities for approximately C$1.39 billion to a joint venture controlled by Axium Infrastructure Inc. and Manulife Financial Corp.

The transaction is part of the Calgary-based company's asset monetization strategy and follows AltaGas' sale of a 35% stake in the facilities to the same joint venture for C$922 million in June, according to a Dec. 13 news release. TD Securities Inc., J.P. Morgan and RBC Capital Markets are acting as joint financial advisors to AltaGas.

The deal involves the 195-MW Forrest Kerr, 16-MW Volcano Creek and 66-MW McLymont Creek plants, which all have 60-year electricity purchase agreements with British Columbia government-owned electric utility BC Hydro and Power Authority.

With asset sales of C$3.79 billion to-date, the company intends to complete additional asset sales of approximately C$1.5 billion to C$2 billion in 2019. It expects to allocate capital of approximately C$1.3 billion for investments in midstream and U.S. utilities projects in 2019.

AltaGas has "premier assets in strategically located markets across North America," said Randy Crawford, president and CEO of AltaGas. "We need to ensure these assets, combined with capital discipline and a keen focus on delivering timely and superior returns, not only begin to meet our stakeholders' expectations, but exceed them."

AltaGas is targeting 2019 normalized EBITDA in the range of C$1.2 billion to C$1.3 billion and funds from operations in the range of C$850 million to C$950 million.

The company also announced a 56% cut to its annual dividend rate to 96 Canadian cents per share to "improve financial strength and ensure greater funding flexibility." The reset is expected to result in an additional approximate C$1.3 billion in anticipated retained cash dividends through 2023.

The company will pay a monthly dividend of 8 Canadian cents per share on Jan. 15, 2019, to shareholders of record Dec. 27. The ex-dividend date is Dec. 24.