AltaGas Announces Sale Of US Transportation And Storage Assets For $275 Million

Energy infrastructure company AltaGas has sold its US Transportation and Storage business to a unit of Six One Commodities and Vega Energy Partners for a total consideration of £275 million. This transaction is a part of the company’s drive to refocus on its two core businesses and reduce debt while also decreasing cash flow fluctuations. AltaGas (ATGFF) President and Chief Executive Officer, Randy Crawford said, “We are pleased to advance our strategic plan of focusing, de-leveraging, and de-risking our company.

The monetization of the U.S. Transportation and Storage business positions us to accelerate the timeline of getting to our target of being below 5.0x Net debt to normalized EBITDA.”  Crawford added, “We are positioned to reduce our Net Debt to normalized EBITDA ratio by up to 0.5x over the course of 2021 relative to the run-rate level  we exited 2020.” (See AltaGas stock analysis on TipRanks)

The company expects total near-term debt reduction of about £485 million. This comprises proceeds from the sale, reduction in working capital requirements, and profitability that the US Transportation and Storage business generated in 1Q. Notably, this asset sale did not include the company’s 10% stake in the Mountain Valley Pipeline, nor its 5.1% stake in the Mountain Valley Pipeline Southgate expansion.

Recently, Canaccord Genuity analyst John Bereznicki reiterated a Buy rating on the stock with a £20.06 price target (13.3% upside potential). Reacting to the company’s 2021 guidance, Bereznicki said, “AltaGas has reiterated its normalized 2021 EBITDA guidance of £1.4 to £1.5 billion with normalized EPS of £1.45 to £1.55 per share. The company’s 2021 capita program of £910 million is also unchanged.

About 80% to 85% of this will target Utility segment accelerated pipe replacement, customer growth, and system betterment.” Overall, consensus among analysts is a Strong Buy based on 6 unanimous Buys alongside an average analyst price target of £19.39. This implies 9.5% upside potential.

Shares have gained about 66.2% over the past year.

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