EQT entered into a definitive agreement with funds managed by Blackstone Credit & Insurance (BXCI) to form a new midstream joint venture (JV) consisting of EQT’s ownership interest in contracted infrastructure assets: Mountain Valley Pipeline – Series A, FERC regulated transmission and storage assets and the Hammerhead Pipeline.
Under the terms of the agreement, BXCI will provide EQT $3.5 billion of cash consideration in exchange for a non-controlling common equity interest in the JV. The investment implies a total JV valuation of approximately $8.8 billion, or 12x EBITDA. The JV is designed to provide EQT with an equity capital solution at an accretive cost of capital. Additionally, EQT aims to retain the rights to growth projects associated with the assets contributed to the JV, including the planned Mountain Valley Pipeline (MVP) expansion and the MVP Southgate project.
EQT plans to use proceeds from this transaction to pay down its term loan and revolving credit facility and redeem and tender for senior notes. Pro-forma for this transaction, along with the recent announcement of the divesture of its remaining non-operated assets in northeast Pennsylvania, EQT expects to exit 2024 with approximately $9 billion of net debt.
“This transaction underscores the ultra-high-quality nature of EQT’s regulated midstream assets, which service one of the strongest power demand growth regions in the United States underpinned by long-term contracts with the region’s leading utilities,” Toby Z. Rice, president and CEO of EQT, said. “Importantly, through this joint venture EQT preserves the benefits of the Equitrans acquisition by retaining the long-term value from synergy capture and growth projects. We look forward to working with Blackstone to optimize the value of these assets and together explore strategic opportunities across its leading portfolio of energy, power and digital infrastructure in the years ahead.”
“Blackstone is a leader in providing capital solutions to large corporations and we are thrilled to partner with them in this unique transaction, crafting a tailor-made equity financing solution at a price significantly below EQT’s equity cost of capital while preserving key tax attributes,” Jeremy Knop, chief financial officer of EQT, said. “When we announced the Equitrans acquisition earlier this year, we made an unwavering commitment to debt reduction. We have now delivered on that promise, with announced divestitures to date totaling $5.25 billion of projected cash proceeds, above the high-end of our $3-$5 billion asset sale target, and several quarters ahead of schedule.”
“EQT is one of the leading energy and infrastructure companies in North America, and we are delighted to partner with them on this transaction and future growth,” Robert Horn, global head of infrastructure and asset-based credit at BXCI, said. “The transaction highlights Blackstone’s focus on providing large scale and flexible high-grade capital solutions to the world’s leading corporations.”
“These critical midstream assets benefit from strong tailwinds as demand for energy, particularly natural gas, continues to grow,” Rick Campbell, managing director at BXCI, said. “Blackstone’s scale and expertise in this high conviction sector allowed us to create what we believe is a compelling opportunity for both EQT and our investors.”
The transaction is subject to customary closing adjustments, required regulatory approvals and clearances, and is expected to close in Q4/24.
RBC Capital Markets acted as financial advisor to EQT. Kirkland & Ellis is serving as EQT’s legal counsel on the transaction. Citi acted as financial advisor to Blackstone. Milbank is serving as Blackstone’s legal counsel on the transaction.
