AltaGas completes $460-million public offering

Executive Summary

• AltaGas Ltd. completed a bought deal equity offering of 11,615,000 common shares (including overallotment) at $39.65 per share, generating approximately $460 million in gross proceeds.
• The company elected to retain ownership of the Mountain Valley Pipeline (MVP) as a long-term investment rather than monetizing it, citing superior long-term value and strong project performance.
• Credit rating agencies S&P and Fitch updated their outlooks to "positive" and "stable" respectively (from "negative"), affirming ratings and citing improved leverage metrics and cash flow expectations from MVP expansions.

Key Details

• Financing Structure: Bought deal offering of 11,615,000 common shares, including 1,515,000 shares from the exercise of the overallotment option.
• Pricing: $39.65 per common share.
• Gross Proceeds: Approximately $460 million.
• Use of Proceeds: To reduce leverage and finance future growth; expected to deliver net near-term deleveraging comparable to a full monetization of MVP, with stronger long-term leverage reduction.
• Strategic Decision: Retention of ownership in MVP (MVP Mainline, MVP Boost, and MVP Southgate) after a comprehensive sales process.
• Rationale for Retention:
  • MVP Boost exceeding expectations with strong project-level returns.
  • Constructive progress on MVP Southgate.
  • MVP Mainline showing strong outperformance.
  • Projected EBITDA increase by H2 2028 following expansion completion.
• Financial Impact of Retention vs. Divestiture:
  • Expected two-cent higher normalized EPS in 2026.
  • Expected three-cent higher normalized EPS in 2027.
  • Expected five-cent higher normalized EPS in 2028 and onward.
• Credit Rating Updates:
  • S&P Global Ratings: Outlook revised to "positive" from "negative"; ratings affirmed at BBB-minus. Supported by improved funds-flow-from-operations-to-debt outlook over 24 months.
  • Fitch Ratings: Outlook revised to "stable" from "negative"; ratings affirmed at BBB. Supported by improving FFO leverage, stable utility cash flows, strong LPG export demand, and retained 10% ownership in MVP.
• Underwriters: Syndicate led by CIBC Capital Markets, TD Securities Inc., RBC Capital Markets, and Scotiabank.

Notable Quotes

• "AltaGas is excited to retain MVP as long-term investment... retaining the assets will deliver superior value to its shareholders."
• "Retaining MVP with its attractive near-term expansion projects will enhance shareholder value."
• "By raising equity to achieve the same near-term leverage reduction as a monetization, AltaGas anticipates two-cent higher normalized EPS (earnings per share) in 2026, three-cent higher normalized EPS in 2027 and five-cent higher normalized EPS in 2028 and onward... than what would have been achieved through a divestiture."