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'A compelling match': Canada's AltaGas to access shale regions with WGL buy

AltaGas Ltd.'s announced purchase of Washington, D.C.-based WGL Holdings Inc. is a "seminal event" in the history of the company, CEO David Harris said in a conference call Jan. 25.

As part of the deal, announced earlier in the day, Calgary, Alberta-based AltaGas will pay US$88.25 in cash for all outstanding shares of WGL, a utility provider with well over a million customers in the District of Columbia, Maryland and Virginia. WGL also has a power marketing business and midstream assets in the Marcellus and Utica shales. AltaGas said the deal should close in the second quarter of 2018, pending regulatory approval.

The acquisition is valued at C$8.4 billion, or, as stated in the announcing news release, US$6.4 billion.

"This is highly transformational for our company … while keeping our company DNA," Harris said, adding that the WGL holdings fit AltaGas' desire to acquire "high quality, long-lived [natural gas] assets."

"These are very stable cash assets," Harris said, noting WGL's presence in the D.C. utility market and its take-or-pay agreements on its existing pipeline systems. The deal, he said, would double the company's EBITDA and more than triple the number of utility customers served by AltaGas.

The Canadian company, which already holds pipeline assets in the Montney Shale of western Canada, will have a stake in four different pipelines in the Marcellus and Utica by 2019 and an agreement to provide 400 MMcf/d to the Cove Point LNG export facility. The pipelines, some of which are still under construction, will provide gas not only to customers in Virginia, but in the Northeast as well.

"It's a compelling match," Harris said. "We'll be growing in two of America's most exciting gas plays [with access to] three export sites. AltaGas will touch 6 Bcf/d in the Marcellus and Utica Shales."

During the first full year after the deal is completed, AltaGas said, as much as 70% of its overall EBITDA will come from assets in the United States. The company will target 8% to 10% annual dividend growth through 2021 as a result of the planned acquisition.

"[The deal is] an undeniable strategic fit," Harris said. "It offers increased scale … and improves the diversity of our midstream sector."