Commencement of Structure Simplification
Plans, Including Elimination of IDRs
Equitrans Midstream Corporation (NYSE: ETRN) today announced
that it has entered into definitive purchase agreements with
certain unitholders of EQGP Holdings, LP (NYSE: EQGP) to acquire
limited partner interests in EQGP (EQGP Common Units) for $20.00
per unit in cash (Private Purchases), which is a 17.5% premium to
the EQGP closing market price as of November 29, 2018. The Private
Purchases are expected to close on or about December 31, 2018,
after which ETRN and its affiliates will own more than 95% of the
outstanding EQGP Common Units.
Upon closing of the Private Purchases, ETRN intends to exercise
the Limited Call Right under EQGP’s partnership agreement to
acquire all remaining EQGP Common Units not then owned by ETRN and
its affiliates. If the Limited Call Right is exercised, the
remaining holders of EQGP Common Units will receive at least the
same cash price per unit that will be paid in the Private
Purchases. The Limited Call Right is expected to close in January
2019 and will be a taxable transaction for EQGP unitholders.
ETRN intends to use the cash proceeds from a newly issued Term
Loan B to finance the Private Purchases and the purchases pursuant
to the Limited Call Right. ETRN has secured committed financing in
support of these purchases.
ETRN also announced that it has made a proposal to EQM Midstream
Partners, LP (NYSE: EQM) for the exchange of its incentive
distribution rights (IDR) and the economic general partner interest
in EQM for 95 million units in EQM and a non-economic general
partner interest in EQM, subject to the closing of the Private
Purchases and completion of the Limited Call Right (Proposed IDR
Transaction). ETRN expects that a portion of the units received
will be in the form of Payment-In-Kind Units (PIK Units). The PIK
Units would receive distributions in the form of additional PIK
Units and would convert on a one-to-one basis into common units
representing limited partner interests in EQM at a date to be
determined. Final terms of the Proposed IDR Transaction are subject
to negotiation with the board of directors of EQM’s general partner
or its conflicts committee (EQM Conflicts Committee), and assuming
an agreement is reached, ETRN expects that the Proposed IDR
Transaction would close in the first quarter of 2019.
Upon completion of the Private Purchases, the Limited Call
Right, and the Proposed IDR Transaction, ETRN will have
accomplished a full simplification of EQGP and EQM, resulting in a
projected 61% ownership of EQM. Additionally, EQM will be the only
publicly traded partnership under ETRN and is expected to benefit
from the elimination of the IDR burden, as well as stronger
coverage and balance sheet metrics.
“Today’s announcement demonstrates our commitment to addressing
the IDR overhang in a timely manner and executing transactions that
provide significant benefits for all stakeholders,” said Thomas F.
Karam, chief executive officer of ETRN, EQGP, and EQM. “Executing
on these transactions clears the way for a stable EQM, with 6% to
8% annual distribution growth; and is a strong, strategic starting
point for ETRN to grow the annual dividend over the long-term by 8%
to 10%.”
EQM Highlights
- The proposed transactions would not
result in a distribution cut for EQM unitholders
- Targeting 6% – 8% annual distribution
growth beginning in 2019
- 2019 distribution coverage in excess of
1.0x
- Long-term distribution coverage target
in excess of 1.2x beginning in 2020
- Long-term debt to EBITDA target of 3.5x
– 4.0x beginning in 2020
- PIK Units will provide balance sheet
and coverage support
- Improves cost of capital
- No equity issuance is required to fund
capital projects for the next several years
- Reduces corporate overhead associated
with the elimination of a publicly traded entity
Approvals
ETRN expects that the EQM Conflicts Committee will review the
Proposed IDR Transaction. Unitholder voting is not required in
connection with the Private Purchases, the exercise of the Limited
Call Right, or the Proposed IDR Transaction.
Presentation Materials
An investor presentation regarding the transactions will be made
available on the presentations page of the ETRN investor relations
website at www.equitransmidstream.com.
Advisors
Guggenheim Securities, LLC and Goldman Sachs & Co. LLC acted
as financial advisors to ETRN. Both advisors also provided
committed financing in support of the Private Purchases and the
exercise of the Limited Call Right. Baker Botts L.L.P. acted as
legal counsel to ETRN.
About Equitrans Midstream Corporation
Equitrans Midstream Corporation (ETRN) has a premier asset
footprint in the Appalachian Basin and is one of the largest
natural gas gatherers in the United States. With a rich 135-year
history in the energy industry, ETRN was launched as a standalone
company in 2018 and, through its subsidiaries, has an operational
focus on gas gathering systems, transmission and storage systems,
and water services assets that support natural gas producers across
the Basin. ETRN is helping to meet America’s growing need for
clean-burning energy and strives to provide a rewarding workplace
and enrich the communities where its employees live and work. ETRN
owns the general partner interest and a 91.3% limited partner
interest in EQGP Holdings, LP (NYSE: EQGP) and a 12.7% limited
partner interest in EQM Midstream Partners, LP (NYSE: EQM). EQGP
owns the general partner interest, all of the incentive
distribution rights, and a 17.9% limited partner interest in
EQM.
For more information on Equitrans Midstream Corporation, visit
www.equitransmidstream.com
About EQM Midstream Partners
EQM Midstream Partners, LP (EQM) is a growth-oriented limited
partnership formed to own, operate, acquire, and develop midstream
assets in the Appalachian Basin. As the third largest gatherer of
natural gas in the United States, EQM provides midstream services
to producers, utilities, and other customers through its
strategically located natural gas transmission, storage, and
gathering systems, and water services to support energy development
and production in the Marcellus and Utica regions. EQM owns
approximately 950 miles of FERC-regulated interstate pipelines and
approximately 2,130 miles of high- and low-pressure gathering
lines.
For more information on EQM Midstream Partners, LP, visit
www.eqm-midstreampartners.com
About EQGP Holdings
EQGP Holdings, LP (EQGP) is a limited partnership that owns the
general partner interest, all of the incentive distribution rights,
and a portion of the limited partner interests in EQM Midstream
Partners, LP. Equitrans Midstream Corporation owns the general
partner interest and a 91.3% limited partner interest in EQGP.
For more information on EQGP Holdings, LP, visit
www.eqm-midstreampartners.com
Cautionary Statements
Disclosures in this news release contain certain forward-looking
statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, and Section 27A of the Securities
Act of 1933, as amended. Statements that do not relate strictly to
historical or current facts are forward-looking. Without limiting
the generality of the foregoing, forward-looking statements
contained in this news release specifically include the expected
exercise of the Limited Call Right and closing of the Private
Purchases, the Limited Call Right, and the Proposed IDR
Transaction; the expectations regarding the review by the EQM
conflicts committee of the Proposed IDR Transaction; whether the
transactions will provide stability and enhanced long-term growth
for ETRN and EQM equity holders; the benefits of PIK Units; the
expected growth rates for ETRN dividends and EQM distributions;
liquidity and financing requirements, including funding sources and
availability; projected coverage ratio and leverage; and the
expected terms of the Proposed IDR Transaction and ultimate EQM
ownership by ETRN. These statements involve risks and uncertainties
that could cause actual results to differ materially from projected
results. Accordingly, investors should not place undue reliance on
forward-looking statements as a prediction of actual results. ETRN
has based these forward-looking statements on current expectations
and assumptions about future events. While ETRN considers these
expectations and assumptions to be reasonable, they are inherently
subject to significant business, economic, competitive, regulatory
and other risks and uncertainties, many of which are difficult to
predict and beyond ETRN’s control. The risks and uncertainties that
may affect the operations, performance and results of ETRN’s
business and forward-looking statements include, but are not
limited to, those risks discussed in ETRN’s Registration Statement
on Form 10 and other filings with the Securities and Exchange
Commission.
Any forward-looking statement speaks only as of the date on
which such statement is made and ETRN does not intend to correct or
update any forward-looking statement, whether as a result of new
information, future events or otherwise.
Information in this news release regarding EQGP and its
subsidiaries, including EQM, is derived from publicly available
information published by the partnerships.
NON-GAAP DISCLOSURES
As used in this news release, EBITDA means net income
attributable to EQM plus net interest expense, depreciation,
amortization of intangible assets, payments on EQM's preferred
interest in EQT Energy Supply, LLC (Preferred Interest), non-cash
long-term compensation expense and transaction costs less equity
income, AFUDC - equity and adjusted EBITDA of assets prior to
acquisition. Adjusted EBITDA is a non-GAAP supplemental financial
measure that management and external users of ETRN’s consolidated
financial statements, such as industry analysts, investors, lenders
and rating agencies, use to assess:
- EQM’s operating performance as compared
to other publicly traded partnerships in the midstream energy
industry without regard to historical cost basis or financing
methods;
- the ability of EQM’s assets to generate
sufficient cash flow to make distributions to EQM unitholders,
including EQGP and ETRN;
- EQM’s ability to incur and service debt
and fund capital expenditures; and
- the viability of acquisitions and other
capital expenditure projects and the returns on investment of
various investment opportunities.
ETRN believes that EQM adjusted EBITDA provides useful
information to investors in assessing ETRN’s results of operations
and financial condition. EQM adjusted EBITDA should not be
considered as an alternative to EQM net income, operating income or
any other measure of financial performance presented in accordance
with GAAP. EQM adjusted EBITDA has important limitations as an
analytical tool because it excludes some, but not all, items that
affect net income. Additionally, because EQM adjusted EBITDA may be
defined differently by other companies in its industry, ETRN’s
definition of EQM adjusted EBITDA may not be comparable to
similarly titled measures of other companies, thereby diminishing
the utility of the measures.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181130005203/en/
Analyst/Investor inquiries:Nate TetlowVice President,
Corporate Development and Investor
Relations412-553-5834ntetlow@equitransmidstream.com
Media inquiries:Natalie A. CoxDirector, Corporate
Communications412-395-3941ncox@equitransmidstream.com
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