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AltaGas Ltd. of Canada Puts Foot in Marcellus With WGL Holding Acquisition

Calgary’s AltaGas Ltd. secured a role in Marcellus Shale gas development -- in addition its prominence in the Montney formation in northern British Columbia -- with a friendly takeover Wednesday of Washington, DC-based WGL Holdings Inc.

The C$8.4 billion (US$6.4 billion) purchase was billed as a marriage of “high-growth midstream platforms in two premier basins.”

The combination includes a long-term WGL contract for exports through Dominion Resources’ 1.8 Bcf/d Cove Point liquefied natural gas (LNG) terminal on the Maryland coast of Chesapeake Bay and shares in two Marcellus delivery projects, Constitution Pipeline and Central Penn Pipe Line.

The utility for which WGL is named -- Washington Gas Light Co. -- will not change its brand and will retain all current staff including executives. It will keep regulated public energy services in Maryland, Virginia and the District of Columbia, the merger partners said.

For expansion the combination said it looks forward, “in particular” to “significant opportunities to further grow the midstream business with a meaningful and growing presence in both the Montney and Marcellus-Utica gas formations.”

In the Montney, AltaGas has an expanding processing, storage and transportation network, plus an interest in a propane export terminal called Ferndale on the Pacific Coast of Washington state and a wholly-owned counterpart under construction on Ridley Island near the northernmost BC seaport at Prince Rupert.

The US$3.8 billion Cove Point project is about 80% completed and scheduled to enter service before the end of this year. WGL has a 20-year contract to sell GAIL (India) Ltd. up to 430 MMcf/d of LNG through the Chesapeake terminal. AltaGas has shelved an LNG project in BC but set a 2019 target for completing the 40,000 b/d Ridley Island propane terminal for C$400-500 million (US$300-375 million). A series of smaller gas processing, storage and delivery projects are also under way in the Montney region.

The overall AltaGas-WGL will have 3,300 employees in more than 30 states and provinces in unregulated energy businesses as well as eight gas utility franchises and an array of clean power and energy efficiency ventures in Canada and the United States.

WGL’s current operations ensure the combination “will also be well-positioned to significantly grow in solar, wind, fuel cell, battery storage and other clean technologies, as well as natural gas generation.”

AltaGas President David Harris said, “The strategic fit and compatibility of our two companies is exceptional. Both companies are strong utility operators, have a sweet spot of pipeline and midstream investments in premier supply basins, and have power generation businesses weighted to clean energy and innovations."

WGL Chairman Terry McCallister added, “This is a significant positive event for WGL, and our customers, employees, communities and shareholders. Our leadership team and board of directors are convinced that we have found exactly the right partner.”

AltaGas simultaneously announced fundraising sales of corporate paper to pay for the all-cash deal, which values WGL shares at US$88.25, or a 27.9% premium to their price when reports of a potential merger surfaced on stock exchanges late last November. The financing includes a C$2.1 billion public offering and a C$400 million commitment by one of Canada’s biggest pension funds, Ontario Municipal Employees Retirement Savings.

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