Williams to Acquire 2,000 Miles of Gas Pipeline from Southwest Gas for $1.5 Billion

(Reuters/P&GJ) — Southwest Gas Holdings Inc. said on Thursday it would sell its MountainWest Pipelines to Williams Companies Inc. for $1.5 billion including debt, as part of the natural gas utility's plans to simplify its corporate structure.

MountainWest comprises roughly 2,000 miles of interstate natural gas pipeline systems primarily located across Utah, Wyoming and Colorado, totaling approximately 8 Bcf/d of transmission capacity.

MountainWest also holds 56 Bcf of total storage capacity, including the Clay Basin underground storage reservoir, providing valuable service to western markets. The acquisition price represents an approximate 8x estimated 2023 EBITDA multiple.

“Our natural gas focused strategy is anchored in having the right assets in the right places to serve our nation’s growing demand for clean, affordable and abundant natural gas,” Alan Armstrong, Williams president and CEO, said. “MountainWest is complementary to our current footprint, providing us with infrastructure for natural gas deliveries across key demand markets, including into Salt Lake City.”

Las Vegas, Nevada-based Southwest also confirmed on Thursday it will spin off Centuri, its utility infrastructure services business, as a standalone, independent company, a decision it first announced in March.

Southwest had bought MountainWest, formerly known as Questar Pipelines, from Dominion Energy for nearly $2 billion including debt last year. The purchase had sparked a battle between Icahn and Southwest that eventually settled with the ousting of former CEO John Hester and three board seats being awarded to Icahn-appointed directors in May.

The activist investor had said the Questar deal hurts shareholders and referred to Hester and his management team as "a great liability".

Southwest said on Thursday it plans to begin making necessary filings in the first quarter of 2023 to go ahead with the Centuri spin-off and expects the separation to take about a year.

It will use proceeds from the MountainWest sale to pay off its term loan of about $1.1 billion, and will take an estimated loss of $350 million to $425 million on the sale, net of tax.

Williams will assume $430 million of MountainWest's debt as part of the deal.

The news comes months after Southwest's settlement with Carl Icahn that saw the company's CEO replaced and award four board seats to the billionaire investor.

The transaction is expected to close in 2023.

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