EQT, a vertically integrated American natural gas company, has entered into an agreement with funds managed by Blackstone Credit & Insurance (BXCI) to form a midstream joint venture (JV) in the US.
Under the terms of the agreement, Blackstone Credit & Insurance will invest $3.5bn in cash in exchange for a non-controlling stake in the JV. The investment implies a total valuation of around $8.8bn for the new venture.
The JV will include EQT’s ownership stakes in multiple contracted infrastructure assets, such as the Mountain Valley Pipeline (MVP), transmission and storage assets regulated by the Federal Energy Regulatory Commission (FERC), and the Hammerhead Pipeline.
The MVP, a natural gas pipeline spanning approximately 487km, connects northwestern West Virginia to southern Virginia and is regulated by the FERC. EQT operates the pipeline through a JV involving affiliates of EQT, NextEra Energy, Consolidated Edison, AltaGas and RGC Resources.
Commercial operations for the MVP began in June 2024.
The Hammerhead Pipeline has a capacity of 1.6 billion cubic feet per day of natural gas. The 103km long pipeline is designed to transport natural gas from production sites in Pennsylvania and West Virginia to systems including MVP, Texas Eastern Transmission, and Eastern Gas Transmission.
EQT stated that the JV provides a large-scale equity capital solution at an accretive cost of capital. Additionally, EQT retains the rights to growth projects associated with the contributed assets, including the MVP expansion and the MVP Southgate project.
Proceeds from the transaction will be used to pay down EQT’s term loan, repay its revolving credit facility, and redeem outstanding senior notes. Alongside the recent divestment of non-operated assets in northeast Pennsylvania, EQT anticipates reducing its net debt to approximately $9bn by the end of 2024.
The transaction, subject to regulatory approvals and standard closing conditions, is expected to close in Q1 2024.
RBC Capital Markets acted as EQT’s financial adviser, with Kirkland & Ellis providing legal counsel. Citi served as financial adviser to Blackstone, with legal representation from Milbank.
In July this year, EQT closed the acquisition of Equitrans Midstream, thereby creating a major vertically integrated natural gas enterprise with an initial enterprise value of over $35bn.
