EQT Midstream Partners, LP has acquired the Allegheny Valley Connector transmission and storage system, along with several Marcellus gathering systems from EQT Corporation for US$275 million in cash. EQM funded the acquisition with borrowings from its revolving credit facility. The acquisition was effective 1 October 2016 and is expected to be immediately accretive to EQM’s distributable cash flow per unit.
The Allegheny Valley Connector (AVC) is regulated by the Federal Energy Regulatory Commission (FERC) and includes approximately 209 miles of transmission pipeline and 11 billion ft3 of working gas storage capacity. The AVC system has 450 million ft3/d of transmission capacity and is fully contracted for the winter season by Peoples Natural Gas, one of Pennsylvania’s largest natural gas distribution companies, through a firm reservation commitment that expires in 2034. EQM expects to invest approximately US$50 million in AVC related growth projects during the remainder of 2016 and into 2017. The AVC is expected to generate Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) of US$31 million in 2017, increasing to US$35 million in 2018. The Non-GAAP Disclosures section of this news release provides important disclosures regarding projected net income and projected EBITDA.
The newly acquired gathering assets, consisting primarily of the Applegate, McIntosh, and Terra systems in Pennsylvania; and the Taurus system in West Virginia, include 87 miles of gathering pipeline, an estimated 7000 hp of compression, and provide 370 million ft3/d of gathering capacity. EQT has committed to a total of 235 million ft3/d of firm capacity under a 10 year contract on the systems. EQM expects to invest approximately US$105 million over the next several years to complete planned expansion projects, including the installation of approximately 20 miles of gathering pipeline and four compressor units with 20 000 hp of compression. Upon completion of the expansion projects, EQT’s total firm capacity will increase to 365 million ft3/d. The gathering systems are expected to generate EBITDA of US$16 million in 2017, increasing to US$30 million in 2018.
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