- Plan to Simplify Structure, Strengthen WPZ Distribution Coverage, Enhance Credit Profile, Improve WPZ Cost of Capital, Remove WPZ Need to Access Public Equity Markets and Optimize Asset Portfolio
- Williams to permanently waive incentive distribution rights and convert its economic general partner interest to a non-economic general partner interest for 289 million Williams Partners common units, increasing Williams’ ownership in Williams Partners to approximately 72%
- Williams and Williams Partners to reset payouts; improve coverage at Williams Partners
- Williams Partners’ quarterly distribution for the quarter ending March 31, 2017 expected to be reduced to $0.60 per unit ($2.40 per unit on an annualized basis), representing a 29% reduction to the current payout, and targeting 5-7% annual growth over the next several years, with expected cash distribution coverage ratio of 1.2x or more in 2017, and maintenance of strong coverage in excess of 1.1x thereafter
- Williams’ quarterly dividend to be paid in March 2017 expected to be increased to $0.30 per share ($1.20 on an annualized basis), representing a 50% increase to the current payout, and targeting 10-15% annual growth over the next several years, with expected dividend coverage ratio of 1.3x in 2017 and coverage in excess of 1.1x thereafter; excess coverage will be used to reduce holding company debt over time
- Williams expects to purchase additional newly issued units of Williams Partners in a private placement
- Williams expects to fund unit purchase with equity
- Williams expects to discontinue participation in Williams Partners’ DRIP program, upon successful completion of the transactions and asset monetizations
- Proceeds to be invested in Williams Partners to reduce debt and fund extensive growth portfolio of fully contracted, regulated expansion projects
- Williams Partners to continue focusing its capital resources on large-scale competitively advantaged positions in the very best natural gas markets and supply basins
- Williams Partners targeting after-tax proceeds of over $2.0Bn from asset monetizations
- In addition to the previously announced Geismar monetization process, we have identified other select assets that do not support the company’s clear strategy, ensuring focus on those assets that are core to Williams’ operations and growth
- For WPZ, this series of transactions will improve its cost of capital, remove its need to access the public equity markets for the next several years, enhance growth, and provide for immediate deleveraging
- This series of transactions solidifies WPZ as an attractive financing vehicle, facilitates a reduction of Williams’ consolidated debt using excess coverage and provides for dividend growth flexibility, while retaining the strategic and financing flexibility afforded by a dual-C-corp/MLP business model
- Williams plans to host an investor conference call today at 3:10PM CT (4:10PM ET)
TULSA, Okla.–(BUSINESS WIRE)–Williams (NYSE: WMB) (“Williams”) and Williams Partners L.P. (NYSE: WPZ) (“Williams Partners”) today announced an agreement to permanently waive payment obligations under the incentive distribution rights held by Williams and convert Williams’ economic general partner interest into a non-economic interest for 289 million newly issued Williams Partners common units (collectively, the “IDR Waiver”). The estimated transaction value is approximately $11.4 billion. Following the IDR Waiver, Williams will hold approximately 660 million Williams Partners common units, representing approximately 72% of the common units outstanding.
Williams also announced that it expects to purchase newly issued common units of Williams Partners at a price of $36.08586 per unit (the “Unit Private Placement”, and together with the funding with Williams equity and the IDR Waiver, the “Transactions”). Williams expects to fund the unit purchase with equity. With respect to units issued to Williams in the private placement, Williams Partners will not be required to pay distributions for the quarter ended December 31, 2016 and the prorated portion of the first quarter of 2017 up to closing of the private placement. Williams expects to discontinue participation in Williams Partners’ DRIP program, upon successful completion of the Transactions and asset monetizations.
Alan Armstrong, Williams’ president and chief executive officer, made the following statements regarding the Transactions:
“Today we announced a comprehensive series of measures to strengthen Williams’ role as North America’s premier natural gas infrastructure company. These actions will deliver immediate and ongoing benefits and position Williams and Williams Partners for long-term, sustainable growth. The improvement of Williams Partners’ cost of capital and simplified organizational structure will better align GP and LP interests as well as solidify Williams Partners’ investment-grade credit ratings. This strong financial position combined with Williams Partners’ high quality, low risk growth portfolio makes Williams a leader amongst peers.”
Effective with the quarterly distribution for the quarter ending March 31, 2017, Williams Partners expects to pay a quarterly distribution of $0.60 ($2.40 per unit on an annualized basis), a reduction of approximately 29% from Williams Partners’ expected fourth quarter 2016 distribution of $0.85 per common unit ($3.40 per unit on an annualized basis). Williams Partners expects distribution growth of 5-7% annually over the next several years. Future quarterly distributions are subject to quarterly approval by Williams Partners’ board of directors.
Williams announced that effective with the quarterly dividend to be paid in March 2017, Williams expects to pay a quarterly dividend of $0.30 per share ($1.20 per share on an annualized basis), an increase of 50% above Williams’ dividend paid in December 2016 of $0.20 per share ($0.80 per share on an annualized basis). Williams expects dividend per share growth of 10-15% annually over the next several years. Future quarterly dividend payments are subject to quarterly approval by Williams’ board of directors.
As a result of the measures announced today, Williams expects that Williams Partners will not be required to access the public equity markets for the next several years. In addition, the Transactions result in debt reduction at Williams Partners and a meaningful increase in its cash coverage ratio to approximately 1.2x in 2017 and maintenance of strong coverage in excess of 1.1x thereafter.
Dividend coverage ratio at Williams will be approximately 1.3x in 2017, with continued coverage in excess of 1.1x thereafter. Excess cash at Williams after dividend payments will be used to reduce leverage over time.
Strengthening Williams Partners’ coverage and credit profile through the Transactions will benefit stakeholders in Williams Partners, including Williams. In addition, maintaining Williams Partners as a strong, separate entity provides on-going strategic and financial flexibility to Williams, enabling it to capitalize on future opportunities to grow both organically and inorganically.
As part of Williams’ ongoing commitment to maximize returns on capital deployed, Williams today announced that, in addition to the previously announced Geismar monetization process, Williams has identified other select assets that do not support the company’s clear strategy, ensuring focus on those assets and regions that are core to Williams’ operations and growth. Williams expects to raise more than $2.0 billion in after-tax proceeds, inclusive of the ongoing Geismar monetization process.
Current guidance for 2017 is set out in the following table:
|Amounts in billions, except per-unit cash distribution and coverage ratio amounts. All income amounts attributable to Williams Partners L.P.||Amounts in billions, except per-share cash dividend and coverage ratio amounts.|
|Net income (1)||$1.7||Per-share Cash Dividend||$1.20|
|Adjusted EBITDA (1) (2) (3)||$4.6||Cash Available for Dividends (2) (5)||$1.3|
|Distributable Cash Flow (2) (4)||$2.8||Dividend Coverage Ratio (2)||~1.3x|
|Cash Distribution Coverage Ratio (2) (4)||~1.2x|
|Per-unit Cash Distribution||$2.40|
|Total Growth Capital Expenditures||$2.1-$2.8|
|Transco Growth Capital Expenditures||$1.4-$1.9|
|(1) Does not include any expected asset sales (e.g., Geismar). Includes amortization of $240 million associated with the $820 million Barnett & MidCon contract restructure prepayments|
(2) For Williams Partners, Adjusted EBITDA, Distributable Cash Flow and Cash Distribution Coverage Ratio are non-GAAP measures and for Williams Cash Available for Dividends and Dividend Coverage Ratio are non-GAAP measures; reconciliations to the most relevant measures are attached in this news release
|(3) Assumes 2017 WTI oil price of approximately $55 per barrel and Henry Hub natural gas price of approximately $3.35 per mmbtu|
|(4) Does not include any expected asset sales (e.g., Geismar). Also, excludes amortization of $240 million associated with the $820 million Barnett & MidCon contract restructure prepayments|
|(5) Williams does not expect to be a U.S. federal income cash taxpayer through at least 2020, excluding taxes on any potential asset monetizations|