DBRS Comments on AltaGas Limited’s Investment in Petrogas

DBRS notes that AltaGas Ltd. (AltaGas or the Company; rated BBB with a Stable trend) has announced that it has entered into an agreement (the “Purchase Agreement”) to acquire a 25 % strategic interest in Petrogas Energy Corp. (“Petrogas”). The Company is expected to fund the acquisition prudently with a combination of common equity and cash. The acquisition is expected to close on October 1, 2013, and is subject to customary regulatory approvals.

Petrogas is a private North American integrated midstream service company headquartered in Calgary, Alberta, with diversified energy infrastructure and logistics network. Petrogas offers services including terminals, storage, transportation, crude oil blending and well-site fluids to a deep network of product supply and end market customers.

DBRS has assessed the impact of the acquisition on the Company’s (1) business risk profile, and (2) financial risk profile. Overall, DBRS views this transaction as credit neutral.

(1) BUSINESS RISK PROFILE – Neutral
Based on its preliminary review, DBRS views the proposed acquisition as neutral for the business risk profile of the Company. The addition of Petrogas midstream infrastructure assets is expected to diversify AltaGas’s cash flows and enhance the Company’s energy value chain. However, given the relative size, the proposed investment is viewed as non-material to AltaGas’s overall business risk profile.

(2) FINANCIAL RISK PROFILE – Neutral
DBRS notes that the proposed acquisition is being funded with a combination of common equity and cash. DBRS estimates that there will be no material impact on the Company’s pro forma credit metrics. DBRS also notes that AltaGas has the option to purchase an additional 25% of Petrogas equity interest in 2013 and, if exercised, expects the Company to prudently finance the acquisition and maintain credit metrics supporting its current rating.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Companies in the Non-Regulated Electric Generation Industry and Rating North American Pipeline and Diversified Energy Companies, which can be found on our website under Methodologies.