UGI Corp. has announced its UGI Energy Services unit is acquiring Columbia Midstream Group (Cmg) from a subsidiary of TC Energy for roughly $1.28 billion, Kallanish Energy reports.
Cmg holds five gathering systems, with capacity of roughly 2.68 trillion British thermal units per day, and 240 miles of pipeline located in the southwestern Appalachian Basin.
The deal expands UGI’s midstream portfolio and provides an opportunity to invest an additional $300-$500 million over the next five years at “attractive” returns. The company expects the transaction to be earnings-neutral in fiscal year 2020, and accretive beginning in FY 2021, excluding transaction and integration costs.
“We are very pleased to announce this important transaction as we continue to build a midstream business of scale,” said John L. Walsh, president and CEO of UGI. “This transaction expands our midstream capabilities in the prolific gas producing region of the Southwest Appalachian Basin and provides an initial investment into both wet gas gathering and processing.”
UGI said the transaction offers financial and strategic benefits for the near and long term:
* Positions UGI Energy Services as a “significant” operator of midstream assets across the Marcellus and Utica Shale play region, from northeastern Pennsylvania through western Pennsylvania, eastern Ohio, and the panhandle of West Virginia
* Diversifies the business by giving UGI Energy Services access to wet gas gathering and processing, while expanding its base of business partners and customers
*Creates synergies that will benefit UGI Energy Services’ midstream and retail marketing businesses, as well as procurement opportunities for its AmeriGas liquefied petroleum gas unit.
In connection with the deal, UGI Energy Services has secured a commitment from Credit Suisse (USA) to provide a $700 million bridge facility.
The transaction is expected to close in UGI’s fiscal fourth quarter, ending Sept. 30. Credit Suisse is serving as UGI’s financial advisor and Latham & Watkins is acting as legal counsel.
TC Energy (the former TransCanada Energy) retained Wells Fargo Securities to serve as its financial advisor in connection with the sale of Cmg.
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