Williams Partners Signs Agreement to Acquire Williams’ Canadian Assets for $1.2 Billion
- Immediately Accretive to Distributable Cash Flow, Positions WPZ for Growth in Canada
TULSA, Okla.--(BUSINESS WIRE)--Williams Partners L.P. (NYSE: WPZ) today announced that it has signed an agreement to acquire Williams’ (NYSE: WMB) currently in-service Alberta, Canada operations for $1.2 billion (USD). The parties plan to close the transaction on Feb. 28.
The assets include an oil sands offgas processing plant near Fort McMurray, approximately 260 miles of NGL and olefins pipelines, as well as an NGL/olefins fractionation facility and butylene/butane splitter facility at Redwater. Williams Partners also acquired an in-progress expansion project at the Redwater facility. The expansion will provide additional fractionation business to Williams Partners related to development of offgas processing at the CNRL Horizon upgrader facility retained by Williams.
These Canadian operations have unique competitive advantages and long-term contracts that are expected to produce strong cash flows for Williams Partners. The operating results are subject to commodity price fluctuations and are expected to contribute distributable cash flow to Williams Partners of approximately $135 million to $160 million during the remaining 10 months of 2014 and $200 million to $240 million in 2015. The acquisition is immediately accretive to Williams Partners and positions the partnership for future growth in Canada.
Williams Partners plans to fund the acquisition with the issuance to Williams of 25.6 million Class D payment-in-kind (PIK) limited-partner units, $25 million in cash and an increase to the general partner’s capital account to maintain Williams’ 2 percent general-partner interest. In lieu of cash distributions, the PIK units will receive quarterly distributions of additional PIK units. All PIK units will be convertible to common units at a future date no earlier than February 2016. Williams Partners also has an option to issue up to $200 million of additional PIK units to Williams for funding expansions at the Redwater facility.
Williams Partners' Conflicts Committee, consisting wholly of independent directors and their independent legal and financial advisors, represented Williams Partners’ interests in the negotiations of this transaction. Robert W. Baird & Co. advised Williams Partners’ Conflicts Committee with respect to the transaction.
Upon conversion of the PIK units, Williams expects to gain increased distributions from Williams Partners. The increased distributions from Williams Partners support Williams’ dividend growth strategy. Williams currently owns approximately 64 percent of Williams Partners, including the general-partner interest. Barclays advised Williams with respect to the transaction.
This press release includes the financial measure distributable cash flow, which is a non-GAAP financial measure as defined under the rules of the Securities and Exchange Commission. For Williams Partners L.P. we define distributable cash flow as net income plus depreciation and amortization and cash distributions from our equity investments less our earnings from our equity investments, income attributable to noncontrolling interests and maintenance capital expenditures. We also adjust for payments and/or reimbursements under omnibus agreements with Williams and certain other items. Management believes this measure provides investors meaningful insight into the partnership’s operating performance and the cash the business is generating. Distributable cash flow is not intended to represent cash flows for the period, net income or cash flow from operations. It should not be considered in isolation or as a substitute for a measure of performance prepared in accordance with United States generally accepted accounting principles.
|Distributable Cash Flow of Williams' Canadian Operations Acquired by WPZ|
|2014 (10 months)||2015|
|Dollars in millions (USD)||Low||High||Low||High|
|Less: General Corp. Costs & Maintenance Capex||(15||)||(15||)||(12||)||(12||)|
|Distributable Cash Flow||$||135||$||160||$||200||$||240|
|2014 is the 10-month period following the acquisition on Feb. 28.|
|Distributable Cash Flow is a non-GAAP measure.|
About Williams Partners L.P. (NYSE: WPZ)
Williams Partners L.P. is a leading diversified master limited partnership focused on natural gas transportation; gathering, treating, and processing; storage; natural gas liquid (NGL) fractionation; and oil transportation. The partnership owns interests in three major interstate natural gas pipelines that, combined, deliver 14 percent of the natural gas consumed in the United States. The partnership’s gathering and processing assets include large-scale operations in the U.S. Rocky Mountains and both onshore and offshore along the Gulf of Mexico. Williams (NYSE: WMB) owns approximately 64 percent of Williams Partners, including the general-partner interest. More information is available at www.williamslp.com, where the partnership routinely posts important information.
About Williams (NYSE: WMB)
Williams is one of the leading energy infrastructure companies in North America. It owns interests in or operates 15,000 miles of interstate gas pipelines, 1,000 miles of NGL transportation pipelines, and more than 10,000 miles of oil and gas gathering pipelines. The company's facilities have daily gas processing capacity of 6.6 billion cubic feet of natural gas, NGL production of more than 200,000 barrels per day and domestic olefins production capacity of 1.35 billion pounds of ethylene and 90 million pounds of propylene per year. Williams owns approximately 64 percent of Williams Partners L.P. (NYSE: WPZ), one of the largest diversified energy master limited partnerships. Williams Partners owns most of Williams' interstate gas pipeline and domestic midstream assets. Williams also owns Canadian operations and certain domestic olefins pipelines assets, as well as a significant investment in Access Midstream Partners, L.P. (NYSE: ACMP), a midstream natural gas services provider. The company's headquarters is in Tulsa, Okla. For more information, visit www.williams.com, where the company routinely posts important information.
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Investors are urged to closely consider the disclosures and risk factors in our annual report on Form 10-K filed with the SEC on February 27, 2013, and each of our quarterly reports on Form 10-Q available from our offices or from our website at www.williamslp.com.