Pittsburgh-based energy company EQT Corp. said Monday it signed an agreement to sell a $3.5 billion stake in its midstream assets through a joint venture with Blackstone Credit & Insurance (BXCI).
EQT said the deal will allow it to buy back its debt and will give BXCI stakes in EQT’s Mountain Valley Pipeline LLC, federally regulated transmission and storage assets, and the Hammerhead Pipeline.
“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,” said EQT President and CEO Toby Rice.
“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,” he added.
Under the terms of the agreement, Blackstone will provide EQT $3.5 billion of cash consideration in exchange for a non-controlling common equity interest in EQT’s midstream pipeline assets.
“These critical midstream assets benefit from strong tailwinds as demand for energy, particularly natural gas, continues to grow,” said Rick Campbell, managing director at BXCI. “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 investment implies a total JV valuation of approximately $8.8 billion, or 12x EBITDA, according to a statement EQT released Monday.
The joint venture provides EQT with a large-scale equity capital solution. EQT will also retain the rights to growth projects associated with the assets contributed to the joint venture, including the planned Mountain Valley Pipeline (MVP) expansion and the MVP Southgate project.
EQT said it will use proceeds from the transaction to pay down its term loan and revolving credit facility and redeem and tender for senior notes. EQT expects to exit 2024 with approximately $9 billion of net debt.
EQT Chief Financial Officer Jeremy Knop said the partners have crafted “a tailor-made equity financing solution at a price significantly below EQT’s equity cost of capital while preserving key tax attributes.”
After announcing earlier this year that EQT would purchase Equitrans, Knop said that EQT committed to reducing its debt.
“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,” he 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,” added Rice.
Robert Horn, global head of infrastructure and asset-based credit at Blackstone, noted that the transaction “highlights Blackstone’s focus on providing large scale and flexible high-grade capital solutions to the world’s leading corporations.”
The transaction is subject to customary closing adjustments, required regulatory approvals and clearances, and is expected to close in this year’s fourth quarter.