AltaGas Ltd. has agreed to pay more than $1.1-billion for natural gas businesses in Alaska and Michigan, which it says are a good fit with its own assets and part of a strategy of becoming a top North American energy infrastructure company.
The Calgary-based gas processor and pipeline operator said Wednesday it has agreed to buy SEMCO Energy of Port Huron, Mich., from Continental Energy Systems LLC, another Michigan company.
“AltaGas’ vision is to be a leading North American energy infrastructure company,” said chairman and chief executive officer David Cornhill in a statement.
“This acquisition establishes a significant foothold in the U.S. in areas with strong growth potential that are near existing AltaGas assets and operations.”
SEMCO owns a regulated natural gas distribution company in Alaska through ENSTAR Natural Gas and part ownership of a gas storage terminal being built in Alaska. It also has gas distribution and storage businesses in Michigan.
ENSTAR is the largest natural gas distributor in Alaska, serving 132,000 mostly residential customers. It has experienced 2.5 per cent compounded annual growth over the past decade, which is expected to continue amid heightened activity in Alaska’s natural resources sector.
Last fall, AltaGas bought Pacific Northern Gas, a utility with operations in northeastern British Columbia, for $230-million.
At the time, the company said that deal would enable it to benefit from booming natural gas drilling in prolific B.C. shale formations like the Horn River Basin.
There are also several proposals in the works to transport the plentiful B.C. gas to energy-hungry Asian markets via a liquefied natural gas terminal on the West Coast, activity from which AltaGas expects to boost its business.
The transaction will add 570 employees in Alaska and Michigan to the AltaGas’ work force.
It’s expected to be 10 per cent accretive to AltaGas’ earnings and cash flow per share and to add about $130-million (U.S.) in earnings before interest, taxes depreciation and amortization in 2013, the first full year of ownership.
AltaGas will take on $355-million in debt as part of the deal, which it will pay for it by issuing a combination of equity and debt securities.
It plans to sell about $350-million (Canadian) in equity through a syndicate of investment dealers, which will have an option to increase the amount by 15 per cent to cover overallotments.
AltaGas will also use a new $300-million (U.S.) credit line and draw on an existing $1-billion credit facility.
AltaGas focuses on natural gas, power and regulated utilities and has its main pipeline, power and gas plant operations in Alberta and B.C.