AltaGas to Maintain MVP as a Core Asset
Strong Project Growth Anticipated over Next Three Years
CALGARY, Alberta — AltaGas Ltd. or the "Company" (TSX: ALA) has decided to retain its investment in the Mountain Valley Pipeline (MVP) as a pivotal long-term growth avenue. In tandem, the Company has arranged a $400 million bought deal to boost its equity position. This strategic decision, while relatively modest on a consolidated basis, symbolizes AltaGas’s commitment to maximizing value for shareholders. The anticipated benefits include an increased normalized EPS, positioning the Company favorably compared to alternatives like monetizing MVP.
Details of the Bought Deal Financing
AltaGas has secured an agreement with leading financial institutions, including CIBC Capital Markets, TD Securities Inc., RBC Capital Markets, and Scotiabank, to issue 10,100,000 common shares, expected to raise $400 million at $39.65 per share. Additionally, an over-allotment option allows the underwriters to purchase an extra 1,515,000 shares within 30 days of the offering's close, potentially adding around $60 million.
The funds from this equity deal are earmarked for reducing leverage and enabling future growth opportunities. The immediate financial benefits mirror those expected from a complete monetization of MVP, while longer-term ownership is poised to improve AltaGas’s credit metrics.
Commitment to the MVP Pipeline
Following a thorough evaluation involving potential buyers, AltaGas has opted to retain its stakes in MVP, which include key projects like the MVP Mainline and MVP Boost. Recent favorable market conditions have reaffirmed the decision to keep these assets as they represent significant revenue-generating potential.
Highlights of the Retention Strategy
- MVP Boost Enhancement: The MVP partners have increased the MVP Boost expansion by 20%, upping capacity by 600 MMcf/d, slated for completion by mid-2028, pending regulatory approval. This ramp-up will not incur additional projected costs.
- Long-term Returns from MVP Boost: The entire 600 MMcf/d capacity has been secured under long-term contracts with substantial investment-grade utilities, ensuring profitability without enhancing capital outlay, thus presenting a compelling return profile.
- Advancements with MVP Southgate: With progress on MVP Southgate continuing, the project has cleared a regulatory assessment indicating manageable environmental impacts, enhancing its prospects for profitability.
- MVP Mainline Performance: The MVP Mainline is yielding returns that are exceeding previous forecasts, solidifying its role as an essential provider of Appalachian gas to emerging markets.
With the expected growth from MVP’s expansion projects, AltaGas anticipates a significant escalation in project-level EBITDA by late 2028.
Benefits of Retaining MVP
By keeping its investment in MVP, AltaGas is poised to realize increased profitability and shareholder value. Instead of divesting at this stage, the decision to raise equity for leverage reduction is projected to deliver enhanced EPS in the upcoming years. Specifically, $0.02 higher normalized EPS for 2026, increasing to $0.05 by 2028, highlights the enduring value of retaining these pipeline assets.
Investors can expect enhanced de-leveraging benefits following the service commencement of expansion projects as cash flows increase. AltaGas remains optimistic about the future of MVP and believes this course of action is crucial for delivering maximum value to shareholders.
About AltaGas
As a prominent North American infrastructure company, AltaGas specializes in connecting markets to sustainable energy solutions. Its operations focus on providing stable and growing energy infrastructure, emphasizing the delivery of value for its stakeholders.
For further inquiries, please contact:Jon Morrison
Senior Vice President, Corporate Development and Investor Relations
Jon.Morrison@altagas.ca
Aaron Swanson
Vice President, Investor Relations
Aaron.Swanson@altagas.ca
Investor Inquiries:
1-877-691-7199
investor.relations@altagas.ca
Media Inquiries:
1-403-206-2841
media.relations@altagas.ca
Frequently Asked Questions
Why is AltaGas retaining MVP?
AltaGas believes retaining MVP will enhance shareholder value by leveraging strong project-level returns from the pipeline expansions.
What is the significance of the bought deal financing?
This financing, set at $400 million, will support the company's growth initiatives and leverage reduction strategy.
What are the anticipated benefits of the MVP Boost expansion?
The MVP Boost expansion is expected to increase operational capacity and yield attractive returns under long-term contracts.
What impact does MVP ownership have on AltaGas's financials?
Retaining MVP is projected to enhance EPS, with expected increases in normalized EPS reaching about $0.05 by 2028.
How will the funds from the financing be utilized?
The proceeds will be used for debt reduction and funding upcoming growth projects to reinforce the company's financial positioning.
