DBRS Morningstar Comments on TriSummit Utilities Inc. Closing Its Acquisition of 100% of ENSTAR Natural Gas Company and Its Related Assets and 65% of Cook Inlet Natural Gas Storage Alaska, LLC

DBRS Limited (DBRS Morningstar) notes that TriSummit Utilities Inc. (TSU or the Company; rated BBB (high) with a Stable trend by DBRS Morningstar) closed its acquisition of the Alaska gas distribution, transmission, and storage assets of SEMCO Energy, Inc., a subsidiary of AltaGas Ltd. for approximately $1.1 billion (the Acquisition). The Acquisition includes 100% percent ownership of ENSTAR Natural Gas Company (ENSTAR), Alaska Pipeline Company, and Norstar Pipeline Company, Inc. as well as a 65% indirect interest in Cook Inlet Natural Gas Storage Alaska, LLC (CINGSA). Concurrently with the closing, TSU’s wholly owned indirect subsidiary Alaska Utility Holdings Inc. (AUHI) closed its USD 165 million senior unsecured notes offering. The proceeds from the AUHI notes were partially used to finance the Acquisition.

ENSTAR is the largest regulated natural gas utility in the state of Alaska, servicing approximately 60% of the state’s population. CINGSA, in Kenai, is the only commercial, fully contracted, state-regulated gas storage facility in Alaska. CINGSA provides firm storage service and interruptible storage service to ENSTAR as well as three other electric utilities in Alaska.

As noted in a press release dated May 26, 2022, DBRS Morningstar believes the Acquisition strengthens TSU’s overall business risk profile through increased scale, diversification, and exposure to rate-regulated business. ENSTAR operates under a cost-of-service regulatory framework and primarily serves a growing residential customer base. ENSTAR is the largest regulated natural gas distribution utility in TSU’s portfolio, which resulted in an approximately 40% increase in the Company’s consolidated rate base and a doubled customer base. The Acquisition strengthens TSU’s diversification, which DBRS Morningstar expects to help the Company better mitigate operational and regulatory risks.

DBRS Morningstar notes the improvement in TSU’s business risk profile is partially offset by modest increased weakness in its financial risk profile as a result of debt raised to finance the Acquisition. DBRS Morningstar does not view the Acquisition as affecting TSU’s ratings.

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

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