DBRS Comments on AltaGas Ltd. Closing Its Acquisition of WGL Holdings, Inc.

DBRS Limited (DBRS) notes that Calgary-based AltaGas Ltd. (AltaGas or the Company; rated BBB, Under Review with Developing Implications, by DBRS) has announced the closing of its approximately $9.0 billion acquisition of Washington, D.C.–based WGL Holdings, Inc. (WGL) after receiving all regulatory approvals, including final approvals from the public utility commissions in Virginia, Maryland, and the District of Columbia.

AltaGas has funded the acquisition by drawing on a USD 3.0 billion bridge facility and the $2.6 billion in equity proceeds raised in February 2017. AltaGas also raised $922 million by monetizing a 35% indirect equity interest in the North West British Columbia Hydro Electric Facilities in June 2018. The Company expects to repay the approximately USD 2.3 billion drawn on the bridge facility through further asset monetization and offerings of senior and hybrid securities over the course of 2018.

DBRS placed the ratings of AltaGas Under Review with Developing Implications following the announcement that the Company agreed to acquire WGL in January 2017. Please refer to the DBRS press releases “DBRS Places AltaGas Ltd. Under Review With Developing Implications Following Announcement of WGL Holdings Acquisition” published on January 26, 2017, and “DBRS Maintains AltaGas Ltd. Under Review with Developing Implications” published on November 6, 2017.

DBRS has maintained the status of Under Review with Developing Implications on the BBB Issuer Rating and Medium-Term Notes rating and the Pfd-3 Preferred Shares - Cumulative rating of AltaGas, as the new debt to be raised and the timing of the planned asset sales to repay the amount drawn on the bridge facility could have an impact on the Company’s credit profile. Credit ratings could be pressured should the timing and amount of asset sales not materialize, as this could result in higher leverage. DBRS will further review the Company’s ratings as more information becomes available and aims to resolve the Under Review with Developing Implications status of the ratings in late Q4 2018 when the financing and full repayment of the amount drawn on the bridge facility are expected to be completed.

AltaGas’s financial performance for Q1 2018 was relatively stable; stronger earnings from the gas segment due to higher frac spreads and the contribution from the Townsend 2A Facility were offset by lower earnings from the power segment due to planned outages and the impact of a weaker U.S. dollar from U.S. business. WGL’s financial performance as at March 31, 2018, has been relatively stable, with Washington Gas benefiting from customer growth and new base rates in the District of Columbia and Virginia.

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

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