"DTE's non-utility operations continue to grow, perform well and fit nicely into our planned utility and non-utility mix," said Jerry Norcia, president and CEO of DTE Energy. "This acquisition significantly enhances the strength and diversity of DTE Midstream, adding premium assets in one of the fastest growing and best positioned U.S. shale formations. The successful operation of the Link asset, also purchased from Momentum, demonstrates the operating expertise and value creation DTE Midstream brings to this new system. In addition, the company gains a strong commercial partner in Indigo, one of the nation's largest private natural gas producers supplying the rapidly growing demand in the Gulf Coast region.
"This acquisition is highly accretive, has world-class resources, has excellent access to large markets, and is in the early- to mid-cycle development phase. It checks all of our boxes," Norcia added.Assets in Louisiana's highly-economic Haynesville shale basin will enhance DTE Midstream's business and provide access to growing Gulf Coast markets. The assets serve multiple markets, including Louisiana, the nation's third largest natural gas consumer, and the growing Gulf Coast where demand for natural gas is rapidly increasing in the power, industrial and LNG export sectors. Furthermore, they are strategically located to meet this increasing demand given their proximity and access to multiple major downstream pipelines with bi-directional capability. DTE has a proven track record of creating value in multiple basins starting more than 30 years ago in the Michigan producing basins, then the Texas Barnett Shale and more recently in the Appalachian basin. Haynesville provides the next opportunity for DTE to create significant value with its midstream assets in a very high-quality basin.
Highly and immediately accretive transaction solidifies earnings growth and accelerates achievement of DTE Midstream's five-year investment plan. The transaction, at a project level, is immediately $0.15 accretive to operating earnings per share in 2020, growing to $0.45 per share over five years with a strong cash flow profile.Strong returns, backed by long-term contracts and strong credit provisions, with an experienced producer. Through this acquisition, DTE Midstream is investing in economically strong and strategically situated assets that are supported by long-term contracts. The acquired assets are fully contracted with a remaining tenor of 13.5 years for the existing gathering system and a 10-year contract for the large diameter gathering pipeline that is currently under construction. Strong credit provisions are incorporated into the agreement that position Indigo, the system's primary customer, with a strong balance sheet. Indigo is one of the largest private producers in the U.S., and the largest natural gas producer in Louisiana. It is an independent exploration and production company solely focused on production in the Haynesville basin.
DTE reaffirms commitment to long-term business mix of 70-75% utility. DTE Energy's plan has been to invest $4 billion-$5 billion in the DTE Midstream business from 2019-2023; this acquisition is in line with that plan. Capital investments for the five-year period between 2019 and 2023 will be accelerated, solidifying more than half of DTE Midstream's five-year investment plan.The transaction has been approved by DTE Energy's Board of Directors and is expected to close in the fourth quarter of 2019, subject to customary closing conditions and regulatory approvals, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.
Barclays is serving as financial advisor to DTE Energy. Shearman & Sterling LLP is serving as legal counsel to DTE Energy, with Dechert LLP assisting with DTE Energy's Hart Scott Rodino filing. Jefferies and Credit Suisse are serving as financial advisors to Momentum. Vinson & Elkins is serving as legal counsel to Momentum, and Kirkland & Ellis as legal counsel to Indigo.
For the latest refining and petrochemical industry related videos, subscribe to our YouTube page.