VALLEY FORGE, PA — UGI Corporation (NYSE: UGI) announced that it has signed a definitive agreement to acquire Mountaintop Energy Holdings LLC, owner of Mountaineer Gas Company, the largest gas local distribution company in West Virginia for an enterprise value of $540 million, which includes the assumption of approximately $140 million of debt.
Mountaineer serves nearly 215,000 customers across 50 of the state’s 55 counties. The customer base is approximately 90% residential, with the remaining 10% comprised of commercial and industrial customers. Mountaineer is fully regulated, and its system has nearly 6,000 miles of distribution, transmission, and gathering pipelines.
“We are very pleased to announce this important transaction and expand our core utility operations in the mid-Atlantic region,” said John L. Walsh, President and Chief Executive Officer of UGI. “The transaction is immediately accretive to adjusted EPS and provides us with an opportunity to support our customers in West Virginia with a long-term commitment to ensure safe, reliable, affordable, and environmentally responsible natural gas services. Our existing Utilities business has shown the value of this long-term commitment to system enhancement and we expect to make a similar commitment in West Virginia. We see significant investment opportunities to continue, if not accelerate, the replacement of over 1,500 miles of bare steel pipelines and expand the reach of natural gas in West Virginia to both unserved and underserved areas. These investments will improve the safety and reliability of the distribution system and align with our environmental efforts to lower methane and other GHG emissions. We expect Mountaineer’s rate base to grow by a compound annual growth rate of approximately 10% – 12% over the long term.
“Over the past two years, we have indicated our intention to rebalance our business mix by investing more to build out our natural gas businesses. This transaction is an important step in the rebalancing efforts and will support UGI’s long-term annual commitments to grow EPS and dividends by 6% – 10% and 4%, respectively,” Mr. Walsh concluded.
Robert F. Beard, Executive Vice President, Natural Gas of UGI, said, “Mountaineer is a great fit for our natural gas businesses and UGI as a whole. The company brings an exceptional management team with significant experience, a track record of safe operations, and strong regulatory relationships. Like UGI Utilities, Mountaineer’s customers are situated in the prolific Marcellus shale production region and have access to clean, abundant, reliable, and affordable natural gas. We look forward to becoming a part of the West Virginia community and investing in the safety and reliability of the Mountaineer system, while maintaining competitive rates for our customers and building on an already strong history of excellent customer service. With UGI’s over 135 years of experience in the gas utilities business, we are confident that we can execute on investment opportunities while providing best-in-class service to our new customers. This transaction makes sense strategically, operationally, and culturally and we look forward to welcoming the Mountaineer employees and customers to the UGI family of companies.”
The transaction is subject to customary regulatory and other closing conditions, including approval by the Public Service Commission of West Virginia. Federal antitrust clearance is also required pursuant to the U.S. Hart-Scott-Rodino Antitrust Improvements Act. Assuming fulfillment of all conditions, the transaction is expected to close in the second half of calendar year 2021.
The transaction is expected to be accretive to adjusted EPS in the first full year of combined operations. UGI expects to finance the acquisition through debt and / or equity-linked securities and existing liquidity to optimize accretion while maintaining a strong balance sheet. UGI does not expect to issue common equity to finance the acquisition.
Goldman Sachs & Co. LLC is serving as UGI’s financial advisor and Latham & Watkins LLP is serving as legal counsel.
Investment Community Call
UGI will hold a live Internet Audio Webcast of its conference call to discuss the acquisition of Mountaintop Energy Holdings, LLC at 9:00 AM ET on Tuesday, January 5, 2021. Interested parties may listen to the audio webcast both live and in replay on the Internet at https://edge.media-server.com/mmc/p/3tbty4tw or at the company website at http://www.ugicorp.com under “Investors – Presentations.” A telephonic replay will be available from 12:00 PM ET on January 5, 2020 through 12:00 PM ET on January 12, 2020. The replay may be accessed at (855) 859-2056, and internationally at (404) 537-3406, conference ID 5662188.
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