AltaGas Inc. shares surged Monday after the company said it is selling some of its U.S. power-generation assets to Brookfield Asset Management Inc. for $940-million, putting it within reach of its full-year sale proceeds target.
Shares of Calgary-based AltaGas jumped 6 per cent to their highest in nine months as investors cheered the latest deal, which will help alleviate long-standing concerns about debt. In December, the company set a goal of jettisoning $1.5-billion to $2-billion worth of assets, and the sale to Brookfield puts the tally at more than $1.3-billion.
The deal includes generation assets comprising 322 megawatts in 20 states and the District of Columbia: 291 megawatts of commercial and industrial solar units, including wholly owned assets and interests in tax equity partnerships, as well as 10 megawatts of fuel cells and 21 megawatts of residential solar assets.
The sale follows the divestiture in the spring of the company’s stake in the Stonewall Gas Gathering System in West Virginia to DTE Energy Co. for $379-million.
In 2018, investor worries about AltaGas’s debt after its $6-billion acquisition of WGL Holdings Inc. prompted a months-long sell-off of AltaGas shares. WGL represented a major expansion for the company. It runs the gas utility in Washington as well as natural-gas gathering and processing assets in the Marcellus shale-gas region of the northeastern United States.
AltaGas bought WGL during an $80-billion buying spree in the U.S. by Canadian energy infrastructure and utility companies from 2015 to 2017. In some cases, the benefits of expansion and higher cash flows were overshadowed by debt worries.
Through the year, AltaGas sold a number of assets and spun off several Canadian utility assets into a new publicly traded entity called AltaGas Canada Inc.
Now, under chief executive officer Randy Crawford, who signed on in late 2018, debt worries are beginning to subside, said David Galison, an analyst at Canaccord Genuity. In the first quarter, the company reduced its debt by $1.7-billion to $8.4-billion.
“Leverage is still elevated for the company, so that is ultimately still a concern,” said Mr. Galison, who rates the stock as a buy. “But it takes some of the higher burden off the near-term operations to start to reduce debt over time.”
It is not known which assets remain earmarked for sale, but AltaGas has said it intends to focus on its core utility and natural-gas gathering and processing businesses.
In May, Mr. Crawford said he was not prepared to speculate about the company exceeding its target for divestitures with a number of sales processes under way. However, he stressed that some of the proceeds will go back into the remaining businesses.
“It’s a dual approach – clearly maintaining our investment grade and reducing our cost to capital is key," he told analysts after the release of first-quarter results. “But we also want to ensure that we can deploy these funds in these higher-returning assets.”
AltaGas is scheduled to release its second-quarter financials on Aug. 1.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.