Energy distributor UGI to buy some assets of Columbia Midstream for $1.28 billion

(Reuters) - Energy distributor UGI Corp UGI.N said on Tuesday it would buy some assets of Columbia Midstream Group from pipeline operator TC Energy Corp TRP.TO for about $1.28 billion to expand its midstream business.

The Pennsylvania-based company said in a statement that it expected the deal to be neutral to earnings per share in the 2020 fiscal year and accretive from the following year.

Columbia Midstream Group, which operates in the Appalachian Basin, owns four natural gas gathering systems, an interest in a company with gathering, processing and liquids assets, and a pipeline that runs through western Pennsylvania, eastern Ohio and northern West Virginia.

UGI Corp unit UGI Energy Services will acquire these assets from a subsidiary of TC Energy.

The sale does not include any interest in the company’s minerals business in the Appalachian basin, Columbia Energy Ventures Company (CEVCO), TC Energy said in a separate statement.

“This transaction expands our midstream capabilities in the prolific gas producing region of the Southwest Appalachian Basin and provides an initial investment into both wet gas gathering and processing,” John Walsh, the chief executive officer of UGI, said.

Reuters reported in April that TC Energy, formerly known as TransCanada, was exploring a potential sale of its Columbia Midstream unit.

The unit generates around $100 million of earnings before interest, tax, depreciation and amortization (EBITDA) annually, and could be valued at a multiple of 10 times that amount, three sources had told Reuters at the time.

Calgary, Alberta-based TC Energy is offloading parts of its infrastructure assets to help finance the $8 billion it has earmarked to spend on new projects in 2019, such as the high-profile Coastal GasLink system and the Keystone XL pipeline, which are likely to generate higher returns than these legacy assets.

Reporting by Mekhla Raina and Bhargav Acharya in Bengaluru; Editing by Rashmi Aich and Subhranshu Sahu