Calgary-based AltaGas (TSX:ALA) subsidiary AltaGas Power Holdings has agreed to GWF Energy Holdings and its three natural gas power plants in California from Highstar Capital IV for (U.S.) $642m.
The deal involves roughly 523 MW of gas-fired generation in Northern California, AltaGas said in a Sept. 21 news release. The transaction includes the 330-MW Tracy facility, the 97-MW Hanford facility and the 96-MW Henrietta facility.
The purchase price is subject to certain closing adjustments.
The facilities located in California’s San Joaquin Valley. The Tracy facility is a 330-MW combined-cycle plant and is recognized for reliability, flexible cycling ability and competitive start costs, AltaGas said. The 97-MW Hanford and 96-MW Henrietta facilities are two flexible peaking facilities with quick-start capabilities. Located in resource constrained areas, the facilities provide reliable backup to numerous intermittent resources located in close proximity, AltaGas said.
“Having a diversified energy infrastructure business across North America gives us more opportunities for growth and for creating shareholder value,” said AltaGas Chairman and CEO David Cornhill. “The acquisition of these power facilities is an important addition to our business. Each asset has a power purchase agreement that will further enhance AltaGas’ stable earnings and cash flow.”
AltaGas called the acquisition a “strategic fit” and noted that the plants have reliable cash flows in the form of power purchase agreements with PG&E for the next seven years.
Tracy’s existing interconnection with PG&E for natural gas supply allows for avoidance of incremental transportation charges resulting in a cost advantage for the facility, AltaGas said. Hanford and Henrietta are connected to the Southern California Gas system for natural gas supply. All Facilities are connected to the PG&E transmission system.
Pursuant to the Offering, AltaGas has agreed to sell, on a bought deal basis, an aggregate of 8,760,000 common shares at a price of $34.25 per common share (the “Offering Price”) for gross proceeds of approximately $300 million. The common shares will be offered through a syndicate of underwriters co-led by TD Securities Inc. and BMO Capital Markets as joint bookrunners.
AltaGas has also granted the underwriters an option to purchase, in whole or part, up to an additional 1,314,000 common shares at the Offering Price to cover over-allotments, if any, for a period of 30 days following the closing of the Offering (the “Over-Allotment Option”). If the Over-Allotment Option is exercised in full, gross proceeds from the Offering will be approximately $345m.
The Offering will be used, in part, to fund the Acquisition as well as to reduce indebtedness and for general corporate purposes.
The common shares will be offered in all provinces of Canada by way of a supplement under AltaGas’ base shelf prospectus. The Offering is subject to the receipt of all necessary regulatory and stock exchange approvals. Closing of the Offering is expected to occur on or about Sept. 30, 2015.
AltaGas is an energy infrastructure business with a focus on natural gas, power and regulated utilities.