AltaGas considers $1.5B in asset sales

Investor distaste for buying equity means AltaGas Ltd.’s best option to fund future growth is selling assets, its founder and acting co-CEO said Tuesday. The Calgary-based gas and power company announced it will sell assets to raise between $1.5 billion and $2 billion by the end of March, despite recently exceeding its earlier target of $2 billion in sales to pay down bridge financing needed to complete its $9-billion purchase of U.S. utility company WGL Holdings.

Changes in the market between when AltaGas announced it would buy WGL in January 2017 and when it was completed about four months ago are responsible for the new strategy, said David Cornhill, the company’s founder, chairman and acting co-CEO.

“If you go back two years ago, ... people were supportive of growth. Today, people want ... growth within that selffunding model,” he said on a conference call to discuss third-quarter results.

“We see the cheapest cost of capital right now as asset sales and we’re pursuing that because we think it’s the best way to long-term enhance shareholder value. We had contemplated $2 billion but we’re announcing almost $4 billion now, with the $2.4 billion already done ... That was not contemplated going into the plan.”

Washington, D.C.-based WGL supplies over one million customers in the District of Columbia, Maryland, and Virginia with natural gas and electricity.

Shares in AltaGas fell by as much as 17 per cent or $3.44 to $16.43 per share on the Toronto Stock Exchange by Tuesday afternoon, a reaction analyst Patrick Kenny of National Bank Financial linked to its decision to cancel by year-end its premium dividend reinvestment plan that gave stockholders access to discount-priced shares.

The stock closed more than twice as high, at $33.32, on the day it announced it was buying WGL.