UGI to Acquire W Virginia Gas Distributor for $540mn
Pennsylvania-based gas and power distribution group UGI Corp announced on December 30 it had struck a deal to buy Mountaintop Energy Holdings, the owner of West Virginia's largest gas distributor Mountaineer Gas, for $540mn.
The $540mn enterprise value includes around $140mn of debt that UGI will assume, and is about 1.4 times Mountaintop's projected 2021 rate base. UGI intends to finance the deal through debt and/or equity-linked securities and existing liquidity, it said. The company does not expect to issue common equity to raise funds, it said.
The deal should close in the second half of 2021, subject to usual conditions including regulatory approvals.
Mountaineer serves almost 215,000 customers across 50 of West Virginia's 55 counties. Some 90% are residential while the rest are commercial and industrial. The company's network comprises some 9,700 km of distribution, transmission and gathering pipelines.
"We are very pleased to announce this important transaction and expand our core utility operations in the mid-Atlantic region," UGI CEO John Walsh said. "The transaction is immediately accretive to adjusted earnings per share (EPS) and provides us with an opportunity to support our customers in West Virginia with a long-term commitment to ensure safe, reliable, affordable, and environmentally responsible natural gas services."
Mountaineer offers a "secure platform for growth with predictable, regulated investment opportunities over the next several decades," UGI said. These investments will aim to improve distribution grid safety and reliability and expand the reach of gas in West Virginia in both unserved and underserved areas, bringing gas to more customers. They will also target reductions in methane and greenhouse gas emissions.
UGI projects that Mountaineer's rate base would grow by a compound annual growth rate of around 10-12% over the long term.
"Over the past two years, we have indicated our intention to rebalance our business mix by investing more to build out our natural gas businesses," Walsh continued. "This transaction is an important step in the rebalancing efforts and will support UGI’s long-term annual commitments to grow EPS and dividends by 6-10% and 4%, respectively."
UGI expects the acquisition to increase its regulated utility rate base by 14% and its customer base by 30%.