AltaGas Ltd.'s $6.4 billion deal for WGL Holdings Inc. reflects the Canadian energy company's desire to increase its scale and diversity, with President and CEO David Harris saying the WGL assets are a "robust, complementary set of energy businesses." In this Data Dispatch, SNL Energy takes a closer look at each companies' U.S. holdings.
WGL operates a diverse group of subsidiaries, including gas utility Washington Gas Light Co., retail power marketer WGL Energy Services Inc., and gas pipeline operator Hampshire Gas Co. AltaGas, meanwhile, has operations in merchant generation, gas gathering and processing, gas distribution and gas retail sales.
The company's natural gas distribution customer base remained the same from 2014 to 2015, while electric revenue increased from $388 million to $476 million. Despite this, the company saw a 9% decrease in energy operating revenue over the same period.
The core of WGL Holdings' business, its gas utility, has seen an overall increase in both revenue and sales to end users over the past few years. From 2012 to 2015, total natural gas revenue increased 8%. Sales to end users increased from 72 million Dth to 86 million, representing an 18% increase. WGL Holdings's earned ROE, based on earning for the 12 months that ended June 30, 2016, is ranked third in its peer group, according to a report by SNL's Regulatory Research Associates.
Since 2012, WGL Energy Services has seen a decrease in both customers and electricity sold, and, in turn, a decrease in revenue of 11% over the period. This may be due in part to WGL Holdings shift toward growing its renewable generation and midstream business. The company's pipeline operator, Hampshire Gas Co., saw a 28% increase in total natural gas operating revenue from 2012 to 2015.
AltaGas said that when the deal closes, it would own C$22 billion in assets. In the U.S., those assets would include power plants from the East Coast to California, as well as ownership in pipelines in Alaska, New York, Pennsylvania, West Virginia and Virginia.
The company already owns over 2 GW of merchant generating capacity, 91% of which is gas-fired. It also owns 85 MW of wind and biomass and an additional 20 MW of other nonrenewable generation. In contrast, WGL Holdings owns just 3 MW of gas-fired capacity and another 61 MW of solar capacity.
Both AltaGas and WGL Holdings have completed pipeline projects, totaling 150 miles in the U.S. WGL Holdings also has a stake in several major pipelines in development to move gas out of the Marcellus Shale region. The company plans to invest $754 million in its midstream segment through 2020.
SNL Energy and RRA are offerings of S&P Global Market Intelligence.