Document:

Exhibit 4.9

 

ALTAGAS LTD.

 

Unaudited Pro Forma Consolidated Financial Statements

 

As at and for the periods ended March 31, 2018

 

and December 31, 2017

 

1

 

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 

The accompanying unaudited pro forma consolidated financial statements give effect to the proposed transaction between AltaGas Ltd. (“AltaGas” or the “Corporation”) and WGL Holdings, Inc. (“WGL”) under the acquisition method of accounting. The unaudited pro forma consolidated balance sheet gives effect to the proposed acquisition (the “Acquisition”) as if it had closed on March 31, 2018. The unaudited pro forma consolidated statements of income for the three months ended March 31, 2018 and for the year ended December 31, 2017 give effect to the Acquisition as if it had closed on January 1, 2017.

 

The unaudited pro forma consolidated financial statements are based on the unaudited and audited consolidated financial statements of AltaGas as at and for the three months ended March 31, 2018 and for the year ended December 31, 2017, respectively, the audited consolidated financial statements of WGL for the year ended September 30, 2017, the unaudited consolidated financial statements of WGL as at and for the six months ended March 31, 2018, and the unaudited consolidated financial statements of WGL for the three months ended December 31, 2017 and 2016.

 

As WGL’s financial year end differs from AltaGas’, the income statement of WGL for the year ended December 31, 2017 was constructed by taking the income statement for the year ended September 30, 2017 and subtracting the income statement for the three months ended December 31, 2016 and adding the income statement for the three months ended December 31, 2017. WGL’s income statement for the three months ended March 31, 2018 was included in the unaudited consolidated financial statements of WGL as at and for the six months ended March 31, 2018.

 

The unaudited pro forma consolidated financial statements are presented for informational purposes only. The pro forma adjustments are based upon available information and certain assumptions that the Corporation believes are reasonable in the circumstances, as described in the notes to the unaudited pro forma consolidated financial statements. The unaudited pro forma consolidated financial statements do not reflect the impact of permanent financing through subsequent offerings and selected AltaGas asset sales and do not give effect to any potential cost savings and operating synergies, if any, that may result from the Acquisition.

 

The unaudited pro forma information presented, including allocation of purchase price, is based on preliminary estimates of fair values of assets acquired and liabilities assumed, available information and assumptions and may be revised as additional information becomes available. The actual adjustments to the consolidated financial statements upon the closing of the Acquisition will depend on a number of factors, including additional information available and the net assets of WGL on the closing date of the Acquisition. Therefore, the actual adjustments will differ from the preliminary pro forma adjustments and the differences may be material. For example, the final purchase price allocation is dependent on, among other things, the finalization of asset and liability valuations. Any final adjustment may change the allocation of purchase price, which could affect the fair value assigned to the assets and liabilities and could result in a change to the unaudited pro forma consolidated financial statements, including a change to goodwill.

 

2

 

ALTAGAS LTD.

Pro Forma Consolidated Statement of Income

For the year ended December 31, 2017

(Unaudited)

 

	
($ millions except per share amounts)
    	
 
    	
AltaGas
   Ltd.
    	
 
    	
WGL
   Holdings,
   Inc.
    	
 
    	
Pro Forma
   Adjustments
    	
 
    	
Note
    	
 
    	
Pro Forma
   Consolidated
   Statement of
   Income
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Note 3(i)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
REVENUE
    	
 
    	
$
    	
2,556.2
    	
 
    	
$
    	
3,113.6
    	
 
    	
$
    	
34.3
    	
 
    	
3
    	
(j)
    	
$
    	
5,704.1
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
EXPENSES
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cost of sales,   exclusive of items shown separately
    	
 
    	
1,357.1
    	
 
    	
1,683.7
    	
 
    	
—
    	
 
    	
 
    	
 
    	
3,040.8
    	
 
    
	
Operating and administrative
    	
 
    	
573.8
    	
 
    	
764.1
    	
 
    	
(17.6
    	
)
    	
3
    	
(j)
    	
1,254.6
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
(65.7
    	
)
    	
3
    	
(j)
    	
 
    	
 
    
	
Accretion   expenses
    	
 
    	
10.9
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
10.9
    	
 
    
	
Depreciation and   amortization
    	
 
    	
282.4
    	
 
    	
207.6
    	
 
    	
22.3
    	
 
    	
3
    	
(b)
    	
512.3
    	
 
    
	
Provision on   assets
    	
 
    	
139.6
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
139.6
    	
 
    
	
 
    	
 
    	
2,363.8
    	
 
    	
2,655.4
    	
 
    	
(61.0
    	
)
    	
 
    	
 
    	
4,958.2
    	
 
    
	
Income   from equity investments
    	
 
    	
31.4
    	
 
    	
33.6
    	
 
    	
—
    	
 
    	
 
    	
 
    	
65.0
    	
 
    
	
Other   Income
    	
 
    	
11.2
    	
 
    	
0.7
    	
 
    	
—
    	
 
    	
 
    	
 
    	
11.9
    	
 
    
	
Foreign   exchange gains
    	
 
    	
1.7
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
1.7
    	
 
    
	
Interest   expense
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Short-term debt
    	
 
    	
(3.7
    	
)
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
(3.7
    	
)
    
	
Long-term debt
    	
 
    	
(166.6
    	
)
    	
(101.3
    	
)
    	
(102.3
    	
)
    	
3
    	
(d)
    	
(338.4
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
12.5
    	
 
    	
3
    	
(b)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
19.3
    	
 
    	
3
    	
(j)
    	
 
    	
 
    
	
Income   before income taxes
    	
 
    	
66.4
    	
 
    	
391.2
    	
 
    	
24.8
    	
 
    	
 
    	
 
    	
482.4
    	
 
    
	
Income   tax expense (recovery)
    	
 
    	
(33.5
    	
)
    	
60.5
    	
 
    	
(27.7
    	
)
    	
3
    	
(d)
    	
19.8
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
(6.3
    	
)
    	
3
    	
(b)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
3.5
    	
 
    	
3
    	
(b)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
5.5
    	
 
    	
3
    	
(j)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
17.8
    	
 
    	
3
    	
(j)
    	
 
    	
 
    
	
Net   income after taxes
    	
 
    	
99.9
    	
 
    	
330.7
    	
 
    	
32.0
    	
 
    	
 
    	
 
    	
462.6
    	
 
    
	
Net income   (loss) applicable to non-controlling interests
    	
 
    	
8.3
    	
 
    	
(25.1
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(16.8
    	
)
    
	
Net   income applicable to controlling interests
    	
 
    	
91.6
    	
 
    	
355.8
    	
 
    	
32.0
    	
 
    	
 
    	
 
    	
479.4
    	
 
    
	
Preferred share   dividends
    	
 
    	
(61.3
    	
)
    	
(1.7
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(63.0
    	
)
    
	
Net   income applicable to common shares
    	
 
    	
$
    	
30.3
    	
 
    	
$
    	
354.1
    	
 
    	
$
    	
32.0
    	
 
    	
 
    	
 
    	
$
    	
416.4
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Weighted average   number of common shares outstanding (millions)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Basic
    	
 
    	
171.0
    	
 
    	
 
    	
 
    	
84.5
    	
 
    	
3
    	
(h)
    	
255.5
    	
 
    
	
Diluted
    	
 
    	
171.3
    	
 
    	
 
    	
 
    	
84.5
    	
 
    	
3
    	
(h)
    	
255.8
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Net income per   common share
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Basic
    	
 
    	
$
    	
0.18
    	
 
    	
 
    	
 
    	
 
    	
 
    	
3
    	
(h)
    	
$
    	
1.63
    	
 
    
	
Diluted
    	
 
    	
$
    	
0.18
    	
 
    	
 
    	
 
    	
 
    	
 
    	
3
    	
(h)
    	
$
    	
1.63
    	
 
    

 

See accompanying notes to the unaudited pro forma consolidated financial statements.

 

3

 

ALTAGAS LTD.

Pro Forma Consolidated Statement of Income

For the three months ended March 31, 2018

(Unaudited)

 

	
($ millions except per share amounts)
    	
 
    	
AltaGas
   Ltd.
    	
 
    	
WGL
   Holdings,
   Inc.
    	
 
    	
Pro Forma
   Adjustments
    	
 
    	
Note
    	
 
    	
Pro Forma
   Consolidated
   Statement of
   Income
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Note 3(i)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
REVENUE
    	
 
    	
$
    	
878.4
    	
 
    	
1,121.1
    	
 
    	
1.2
    	
 
    	
3
    	
(j)
    	
$
    	
2,000.7
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
EXPENSES
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cost of sales,   exclusive of items shown separately
    	
 
    	
538.0
    	
 
    	
612.1
    	
 
    	
—
    	
 
    	
 
    	
 
    	
1,150.1
    	
 
    
	
Operating and   administrative
    	
 
    	
140.8
    	
 
    	
212.0
    	
 
    	
(0.2
    	
)
    	
3
    	
(j)
    	
342.7
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
(9.9
    	
)
    	
3
    	
(j)
    	
 
    	
 
    
	
Accretion   expenses
    	
 
    	
2.7
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
2.7
    	
 
    
	
Depreciation and   amortization
    	
 
    	
72.6
    	
 
    	
51.5
    	
 
    	
5.5
    	
 
    	
3
    	
(b)
    	
129.6
    	
 
    
	
Provision on   assets
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
—
    	
 
    
	
 
    	
 
    	
754.1
    	
 
    	
875.6
    	
 
    	
(4.6
    	
)
    	
 
    	
 
    	
1,625.1
    	
 
    
	
Income   (loss) from equity investments
    	
 
    	
10.1
    	
 
    	
(34.7
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(24.6
    	
)
    
	
Other   loss
    	
 
    	
(5.3
    	
)
    	
(0.5
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(5.8
    	
)
    
	
Interest   expense
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Short-term debt
    	
 
    	
(0.8
    	
)
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
(0.8
    	
)
    
	
Long-term debt
    	
 
    	
(42.3
    	
)
    	
(9.6
    	
)
    	
(29.6
    	
)
    	
3
    	
(d)
    	
(74.4
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
3.0
    	
 
    	
3
    	
(b)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
4.1
    	
 
    	
3
    	
(j)
    	
 
    	
 
    
	
Income   before income taxes
    	
 
    	
86.0
    	
 
    	
200.7
    	
 
    	
(16.7
    	
)
    	
 
    	
 
    	
270.0
    	
 
    
	
Income   tax expense
    	
 
    	
18.5
    	
 
    	
34.4
    	
 
    	
(8.0
    	
)
    	
3
    	
(d)
    	
46.4
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
(1.6
    	
)
    	
3
    	
(b)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
0.9
    	
 
    	
3
    	
(b)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
0.1
    	
 
    	
3
    	
(j)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
2.1
    	
 
    	
3
    	
(j)
    	
 
    	
 
    
	
Net   income after taxes
    	
 
    	
67.5
    	
 
    	
166.3
    	
 
    	
(10.2
    	
)
    	
 
    	
 
    	
223.6
    	
 
    
	
Net income   (loss) applicable to non-controlling interests
    	
 
    	
2.3
    	
 
    	
(5.5
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(3.2
    	
)
    
	
Net   income applicable to controlling interests
    	
 
    	
65.2
    	
 
    	
171.8
    	
 
    	
(10.2
    	
)
    	
 
    	
 
    	
226.8
    	
 
    
	
Preferred share   dividends
    	
 
    	
(16.4
    	
)
    	
(0.4
    	
)
    	
—
    	
 
    	
 
    	
 
    	
(16.8
    	
)
    
	
Net   income applicable to common shares
    	
 
    	
$
    	
48.8
    	
 
    	
$
    	
171.4
    	
 
    	
$
    	
(10.2
    	
)
    	
 
    	
 
    	
$
    	
210.0
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Weighted average   number of common shares outstanding (millions)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Basic
    	
 
    	
176.5
    	
 
    	
 
    	
 
    	
84.5
    	
 
    	
3
    	
(h)
    	
261.0
    	
 
    
	
Diluted
    	
 
    	
176.6
    	
 
    	
 
    	
 
    	
84.5
    	
 
    	
3
    	
(h)
    	
261.1
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Net income per   common share
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Basic
    	
 
    	
$
    	
0.28
    	
 
    	
 
    	
 
    	
 
    	
 
    	
3
    	
(h)
    	
$
    	
0.81
    	
 
    
	
Diluted
    	
 
    	
$
    	
0.28
    	
 
    	
 
    	
 
    	
 
    	
 
    	
3
    	
(h)
    	
$
    	
0.80
    	
 
    
																

 

See accompanying notes to the unaudited pro forma consolidated financial statements.

 

4

 

ALTAGAS LTD.

Pro Forma Consolidated Balance Sheet

As at March 31, 2018

(Unaudited)

 

	
($ millions)
    	
 
    	
AltaGas
   Ltd.
    	
 
    	
WGL
   Holdings,
   Inc.
    	
 
    	
Pro Forma
   Adjustments
    	
 
    	
Note
    	
 
    	
Pro Forma
   Consolidated
   Balance
   Sheet
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Note 3(i)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Assets
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Current   Assets
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash and cash   equivalents
    	
 
    	
$
    	
100.1
    	
 
    	
$
    	
59.7
    	
 
    	
$
    	
(5,834.4
    	
)
    	
3
    	
(a)
    	
$
    	
261.8
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
2,438.6
    	
 
    	
3
    	
(c)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
(98.2
    	
)
    	
3
    	
(c)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
3,839.1
    	
 
    	
3
    	
(d)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
(29.4
    	
)
    	
3
    	
(d)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
(213.7
    	
)
    	
3
    	
(e)
    	
 
    	
 
    
	
Accounts   receivable, net of allowances
    	
 
    	
354.7
    	
 
    	
930.7
    	
 
    	
—
    	
 
    	
 
    	
 
    	
1,285.4
    	
 
    
	
Inventory
    	
 
    	
138.7
    	
 
    	
122.2
    	
 
    	
—
    	
 
    	
 
    	
 
    	
260.9
    	
 
    
	
Restricted cash   holdings from customers
    	
 
    	
5.2
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
5.2
    	
 
    
	
Regulatory   assets
    	
 
    	
1.7
    	
 
    	
11.2
    	
 
    	
—
    	
 
    	
 
    	
 
    	
12.9
    	
 
    
	
Risk management   assets
    	
 
    	
27.7
    	
 
    	
12.9
    	
 
    	
—
    	
 
    	
 
    	
 
    	
40.6
    	
 
    
	
Prepaid expenses   and other current assets
    	
 
    	
37.1
    	
 
    	
179.7
    	
 
    	
—
    	
 
    	
 
    	
 
    	
216.8
    	
 
    
	
Assets held for   sale
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
—
    	
 
    
	
 
    	
 
    	
$
    	
665.2
    	
 
    	
$
    	
1,316.4
    	
 
    	
$
    	
102.0
    	
 
    	
 
    	
 
    	
$
    	
2,083.6
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Property,   plant and equipment
    	
 
    	
6,767.4
    	
 
    	
5,992.7
    	
 
    	
(225.6
    	
)
    	
3
    	
(b)
    	
12,534.5
    	
 
    
	
Intangible   assets
    	
 
    	
587.3
    	
 
    	
—
    	
 
    	
206.3
    	
 
    	
3
    	
(b)
    	
793.6
    	
 
    
	
Goodwill
    	
 
    	
832.5
    	
 
    	
—
    	
 
    	
3,280.1
    	
 
    	
3
    	
(b)
    	
4,112.6
    	
 
    
	
Regulatory   assets
    	
 
    	
326.5
    	
 
    	
405.4
    	
 
    	
—
    	
 
    	
 
    	
 
    	
731.9
    	
 
    
	
Risk   management assets
    	
 
    	
15.3
    	
 
    	
38.1
    	
 
    	
—
    	
 
    	
 
    	
 
    	
53.4
    	
 
    
	
Deferred   income taxes
    	
 
    	
2.8
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
2.8
    	
 
    
	
Prepaid   post-retirement benefits
    	
 
    	
—
    	
 
    	
306.3
    	
 
    	
—
    	
 
    	
 
    	
 
    	
306.3
    	
 
    
	
Restricted   cash holdings from customers
    	
 
    	
5.8
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
5.8
    	
 
    
	
Long-term   investments and other assets
    	
 
    	
310.4
    	
 
    	
15.5
    	
 
    	
(14.1
    	
)
    	
3
    	
(d)
    	
311.8
    	
 
    
	
Investments   accounted for by the equity method
    	
 
    	
593.1
    	
 
    	
753.8
    	
 
    	
671.8
    	
 
    	
3
    	
(b)
    	
2,018.7
    	
 
    
	
 
    	
 
    	
$
    	
10,106.3
    	
 
    	
$
    	
8,828.2
    	
 
    	
$
    	
4,020.5
    	
 
    	
 
    	
 
    	
$
    	
22,955.0
    	
 
    

 

5

 

ALTAGAS LTD.

Pro Forma Consolidated Balance Sheet (Continued)

As at March 31, 2018

(Unaudited)

 

	
($ millions)
    	
 
    	
AltaGas
   Ltd.
    	
 
    	
WGL
   Holdings,
   Inc.
    	
 
    	
Pro Forma
   Adjustments
    	
 
    	
Note
    	
 
    	
Pro Forma
   Consolidated
   Balance
   Sheet
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Note 3(i)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Liabilities   and shareholders’ equity
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Current   liabilities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Accounts payable   and accrued liabilities
    	
 
    	
$
    	
377.1
    	
 
    	
$
    	
549.9
    	
 
    	
$
    	
(12.9
    	
)
    	
3
    	
(d)
    	
$
    	
914.1
    	
 
    
	
Dividends   payable
    	
 
    	
32.5
    	
 
    	
34.5
    	
 
    	
—
    	
 
    	
 
    	
 
    	
67.0
    	
 
    
	
Short-term debt
    	
 
    	
4.9
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
4.9
    	
 
    
	
Current portion   of long-term debt
    	
 
    	
213.9
    	
 
    	
128.9
    	
 
    	
—
    	
 
    	
 
    	
 
    	
342.8
    	
 
    
	
Notes payable   and project financing
    	
 
    	
—
    	
 
    	
547.8
    	
 
    	
—
    	
 
    	
 
    	
 
    	
547.8
    	
 
    
	
Customer   deposits
    	
 
    	
20.7
    	
 
    	
61.8
    	
 
    	
—
    	
 
    	
 
    	
 
    	
82.5
    	
 
    
	
Regulatory   liabilities
    	
 
    	
8.3
    	
 
    	
69.6
    	
 
    	
—
    	
 
    	
 
    	
 
    	
77.9
    	
 
    
	
Risk management   liabilities
    	
 
    	
48.7
    	
 
    	
33.8
    	
 
    	
—
    	
 
    	
 
    	
 
    	
82.5
    	
 
    
	
Other current   liabilities
    	
 
    	
21.6
    	
 
    	
61.5
    	
 
    	
—
    	
 
    	
 
    	
 
    	
83.1
    	
 
    
	
Liabilities   associated with assets held for sale
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
—
    	
 
    
	
 
    	
 
    	
$
    	
727.7
    	
 
    	
$
    	
1,487.8
    	
 
    	
$
    	
(12.9
    	
)
    	
 
    	
 
    	
$
    	
2,202.6
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Long-term   debt
    	
 
    	
3,468.6
    	
 
    	
2,423.2
    	
 
    	
188.2
    	
 
    	
3
    	
(b)
    	
9,919.1
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
3,839.1
    	
 
    	
3
    	
(d)
    	
 
    	
 
    
	
Asset   retirement obligations
    	
 
    	
89.0
    	
 
    	
391.2
    	
 
    	
—
    	
 
    	
 
    	
 
    	
480.2
    	
 
    
	
Deferred   income taxes
    	
 
    	
448.2
    	
 
    	
718.0
    	
 
    	
129.9
    	
 
    	
3
    	
(b)
    	
1,208.2
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
(26.6
    	
)
    	
3
    	
(c)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
(8.2
    	
)
    	
3
    	
(d)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
(53.1
    	
)
    	
3
    	
(e)
    	
 
    	
 
    
	
Regulatory   liabilities
    	
 
    	
278.5
    	
 
    	
1,107.1
    	
 
    	
—
    	
 
    	
 
    	
 
    	
1,385.6
    	
 
    
	
Risk   management liabilities
    	
 
    	
13.6
    	
 
    	
134.1
    	
 
    	
—
    	
 
    	
 
    	
 
    	
147.7
    	
 
    
	
Other long-term   liabilities
    	
 
    	
206.4
    	
 
    	
60.6
    	
 
    	
—
    	
 
    	
 
    	
 
    	
267.0
    	
 
    
	
Future   employee obligations
    	
 
    	
126.4
    	
 
    	
241.1
    	
 
    	
—
    	
 
    	
 
    	
 
    	
367.5
    	
 
    
	
 
    	
 
    	
$
    	
5,358.4
    	
 
    	
$
    	
6,563.1
    	
 
    	
$
    	
4,056.4
    	
 
    	
 
    	
 
    	
$
    	
15,977.9
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Shareholders’   equity
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Common shares
    	
 
    	
4,074.4
    	
 
    	
767.3
    	
 
    	
(767.3
    	
)
    	
3
    	
(g)
    	
6,441.4
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
2,367.0
    	
 
    	
3
    	
(c)
    	
 
    	
 
    
	
Retained   earnings (accumulated deficit)
    	
 
    	
(988.7
    	
)
    	
1,470.8
    	
 
    	
(1,470.8
    	
)
    	
3
    	
(g)
    	
(1,171.7
    	
)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
(22.4
    	
)
    	
3
    	
(d)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
(160.6
    	
)
    	
3
    	
(e)
    	
 
    	
 
    
	
Preferred shares
    	
 
    	
1,277.7
    	
 
    	
—
    	
 
    	
—
    	
 
    	
 
    	
 
    	
1,277.7
    	
 
    
	
Preferred shares   - WGL Holdings, Inc.
    	
 
    	
—
    	
 
    	
36.3
    	
 
    	
—
    	
 
    	
 
    	
 
    	
36.3
    	
 
    
	
Contributed   surplus
    	
 
    	
22.5
    	
 
    	
(11.0
    	
)
    	
11.0
    	
 
    	
3
    	
(g)
    	
22.5
    	
 
    
	
Accumulated   other comprehensive income (loss)
    	
 
    	
280.9
    	
 
    	
(7.2
    	
)
    	
7.2
    	
 
    	
3
    	
(g)
    	
280.9
    	
 
    
	
Total   shareholders’ equity
    	
 
    	
$
    	
4,666.8
    	
 
    	
$
    	
2,256.2
    	
 
    	
$
    	
(35.9
    	
)
    	
 
    	
 
    	
$
    	
6,887.1
    	
 
    
	
Non-controlling   interests
    	
 
    	
81.1
    	
 
    	
8.9
    	
 
    	
—
    	
 
    	
 
    	
 
    	
90.0
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total   equity
    	
 
    	
4,747.9
    	
 
    	
2,265.1
    	
 
    	
(35.9
    	
)
    	
 
    	
 
    	
6,977.1
    	
 
    
	
 
    	
 
    	
$
    	
10,106.3
    	
 
    	
$
    	
8,828.2
    	
 
    	
$
    	
4,020.5
    	
 
    	
 
    	
 
    	
$
    	
22,955.0
    	
 
    

 

See accompanying notes to the unaudited pro forma consolidated financial statements.

 

6

 

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 

As at and for the three months ended March 31, 2018 and for the year ended December 31, 2017

 

(in millions of Canadian dollars unless otherwise noted)

 

1.                  BASIS OF PRESENTATION

 

The accompanying unaudited pro forma consolidated financial statements give effect to the proposed acquisition (the “Acquisition”) by AltaGas Ltd. (“AltaGas” or the “Corporation”) of WGL Holdings, Inc. and its subsidiaries (collectively, “WGL”) as described in the prospectus supplement dated January 27, 2017 (the “Prospectus”). The accompanying unaudited pro forma consolidated financial statements have been prepared by management of AltaGas and are derived from the unaudited and audited consolidated financial statements of AltaGas as at and for the three months ended March 31, 2018 and for the year ended December 31, 2017, respectively, the audited consolidated financial statements of WGL for the year ended September 30, 2017, the unaudited consolidated financial statements of WGL as at and for the six months ended March 31, 2018, and the unaudited consolidated financial statements of WGL for the three months ended December 31, 2017 and 2016.

 

As WGL’s financial year end differs from AltaGas’, the income statement of WGL for the year ended December 31, 2017 was constructed by taking the income statement for the year ended September 30, 2017 and subtracting the income statement for the three months ended December 31, 2016 and adding the income statement for the three months ended December 31, 2017. WGL’s income statement for the three months ended March 31, 2018 was included in the unaudited consolidated financial statements of WGL as at and for the six months ended March 31, 2018.

 

The accompanying unaudited pro forma consolidated financial statements should be read in conjunction with the description of the Acquisition and the financing thereof provided in the Prospectus, the audited and unaudited consolidated financial statements of WGL, including the notes thereto, incorporated by reference in the Prospectus, and the audited and unaudited consolidated financial statements of AltaGas, including the notes thereto, incorporated by reference in the Prospectus.

 

Except for the new accounting standards AltaGas adopted as of January 1, 2018, the accompanying unaudited pro forma consolidated financial statements utilize accounting policies that are consistent with those disclosed in the audited consolidated financial statements of AltaGas as at and for the year ended December 31, 2017 and were prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”).

 

The Acquisition has been accounted for using the acquisition method. Based on the purchase price calculation as detailed in the merger agreement dated January 25, 2017 (the “Merger Agreement”), the estimated net purchase price for WGL is approximately $5.8 billion (see Note 3a).

 

The unaudited pro forma consolidated balance sheet and consolidated statements of income reflect the Acquisition as if it had closed on March 31, 2018 and January 1, 2017, respectively. The accompanying unaudited pro forma consolidated financial statements may not be indicative of the results that would have been achieved if the transactions reflected therein had been completed on the dates indicated or the results which may be obtained in the future. For instance, the actual purchase price allocation will reflect the fair value, at the purchase date, of consideration transferred and the assets acquired and liabilities assumed based upon the Corporation’s evaluation of such assets and liabilities following the closing of the Acquisition. Accordingly, the final purchase price allocation may differ materially from the preliminary allocation reflected herein.

 

The underlying assumptions for the pro forma adjustments provide a reasonable basis for presenting the significant financial effects directly attributable to the Acquisition. These pro forma adjustments are preliminary and are based on currently available financial information and certain estimates and assumptions. AltaGas has performed a preliminary valuation analysis of WGL’s assets to be acquired and liabilities to be assumed. This preliminary valuation has been used to prepare pro forma adjustments in the preliminary purchase price allocation presented in the unaudited pro forma consolidated financial statements. The final purchase price allocation will be determined when the Corporation has completed the

 

7

 

detailed valuations and necessary calculations. The actual adjustments to the unaudited pro forma consolidated financial statements will depend on a number of factors. Therefore, it is expected that the actual adjustments will differ from the preliminary pro forma adjustments, and the differences may be material.

 

2.                  DESCRIPTION OF TRANSACTION

 

Pursuant to the Merger Agreement, AltaGas will indirectly purchase all outstanding common shares of WGL for US$88.25 per share in an all cash transaction. The estimated purchase price, including payment for performance shares and performance units, will be approximately $5.8 billion. AltaGas will also assume WGL’s existing debt and preferred shares, which were approximately $3.3 billion and $36.3 million, respectively, as at March 31, 2018 (see Note 3a).

 

The accompanying unaudited pro forma consolidated financial statements assume that, at closing, the Acquisition will be financed through the net proceeds of (i) the $0.4 billion private placement of subscription receipts (see Note 3c), (ii) net proceeds from a bought subscription receipt public offering of $2.4 billion (see Note 3c), and (iii) a fully committed bridge financing facility (the “Acquisition Credit Facility”) with certain financial institutions in an aggregate principal amount of up to US$3.0 billion (see Note 3d). The unaudited pro forma consolidated financial statements assume that all cash from the issuance of subscription receipts has been received and immediately converted into common shares (see Note 3c). The Acquisition Credit Facility together with the equity issuance will fully fund the purchase price and thereby ensure sufficient liquidity to close the Acquisition.

 

3.                  PRO FORMA ASSUMPTIONS AND ADJUSTMENTS

 

a)             Purchase price and financing structure

 

The following is the estimated purchase price, estimated funding requirements and assumed financing structure for the Acquisition. These estimates have been reflected in the accompanying unaudited pro forma consolidated financial statements.

 

	
Estimated   Purchase Price
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Unadjusted   purchase price
    	
 
    	
 
    	
 
    	
$
    	
9,158.8
    	
 
    
	
Assumed debt of   WGL
    	
 
    	
 
    	
 
    	
(3,288.1
    	
)
    
	
Assumed   preferred shares of WGL
    	
 
    	
 
    	
 
    	
(36.3
    	
)
    
	
Estimated   purchase price
    	
 
    	
Note 3(b)
    	
 
    	
$
    	
5,834.4
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Estimated   Funding Requirements
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Estimated   purchase price
    	
 
    	
 
    	
 
    	
$
    	
5,834.4
    	
 
    
	
Subscription   receipts issuance costs
    	
 
    	
Note 3(c)
    	
 
    	
98.2
    	
 
    
	
Acquisition   credit facility costs
    	
 
    	
Note 3(d)
    	
 
    	
54.1
    	
 
    
	
Estimated   acquisition costs
    	
 
    	
Note 3(e)
    	
 
    	
291.0
    	
 
    
	
Estimated   funding requirements
    	
 
    	
 
    	
 
    	
$
    	
6,277.7
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Assumed   Financing Structure
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Subscription   receipts
    	
 
    	
Note 3(c)
    	
 
    	
$
    	
2,438.6
    	
 
    
	
Acquisition   credit facility
    	
 
    	
Note 3(d)
    	
 
    	
3,839.1
    	
 
    
	
Total
    	
 
    	
 
    	
 
    	
$
    	
6,277.7
    	
 
    

 

8

 

b)             Preliminary purchase price allocation

 

The estimated net purchase price has been allocated to the estimated fair values of WGL net assets and liabilities as at March 31, 2018 in accordance with the acquisition method, as follows:

 

	
 
    	
 
    	
WGL Holdings,
   Inc.
    	
 
    	
Fair Value and
   Other
   Adjustments
    	
 
    	
Fair Value
    	
 
    
	
 
    	
 
    	
Note 3(i)
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Assets   Acquired
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash and cash   equivalents
    	
 
    	
$
    	
59.7
    	
 
    	
$
    	
—
    	
 
    	
$
    	
59.7
    	
 
    
	
Accounts   receivable
    	
 
    	
930.7
    	
 
    	
—
    	
 
    	
930.7
    	
 
    
	
Inventory
    	
 
    	
122.2
    	
 
    	
—
    	
 
    	
122.2
    	
 
    
	
Regulatory   assets
    	
 
    	
11.2
    	
 
    	
—
    	
 
    	
11.2
    	
 
    
	
Risk management   assets
    	
 
    	
12.9
    	
 
    	
—
    	
 
    	
12.9
    	
 
    
	
Prepaid and   other current assets
    	
 
    	
$
    	
179.7
    	
 
    	
$
    	
—
    	
 
    	
$
    	
179.7
    	
 
    
	
Total current   assets
    	
 
    	
1,316.4
    	
 
    	
—
    	
 
    	
1,316.4
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Property, plant   and equipment
    	
 
    	
$
    	
5,992.7
    	
 
    	
$
    	
(225.6
    	
)
    	
$
    	
5,767.1
    	
 
    
	
Intangible   assets
    	
 
    	
—
    	
 
    	
206.3
    	
 
    	
206.3
    	
 
    
	
Regulatory   assets
    	
 
    	
405.4
    	
 
    	
—
    	
 
    	
405.4
    	
 
    
	
Risk management   assets
    	
 
    	
38.1
    	
 
    	
—
    	
 
    	
38.1
    	
 
    
	
Prepaid   post-retirement benefits
    	
 
    	
306.3
    	
 
    	
—
    	
 
    	
306.3
    	
 
    
	
Long-term   investments and other assets
    	
 
    	
15.5
    	
 
    	
—
    	
 
    	
15.5
    	
 
    
	
Investments   accounted for by the equity method
    	
 
    	
753.8
    	
 
    	
671.8
    	
 
    	
1,425.6
    	
 
    
	
 
    	
 
    	
$
    	
8,828.2
    	
 
    	
$
    	
652.5
    	
 
    	
$
    	
9,480.7
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Liabilities   Assumed
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Accounts payable   and accrued liabilities
    	
 
    	
$
    	
549.9
    	
 
    	
$
    	
—
    	
 
    	
$
    	
549.9
    	
 
    
	
Current   maturities of long-term debt
    	
 
    	
128.9
    	
 
    	
—
    	
 
    	
128.9
    	
 
    
	
Dividends   payable
    	
 
    	
34.5
    	
 
    	
—
    	
 
    	
34.5
    	
 
    
	
Notes payable   and project financing
    	
 
    	
547.8
    	
 
    	
—
    	
 
    	
547.8
    	
 
    
	
Customer   deposits
    	
 
    	
61.8
    	
 
    	
—
    	
 
    	
61.8
    	
 
    
	
Regulatory   liabilities
    	
 
    	
69.6
    	
 
    	
—
    	
 
    	
69.6
    	
 
    
	
Risk management   liabilities
    	
 
    	
33.8
    	
 
    	
—
    	
 
    	
33.8
    	
 
    
	
Other current   liabilities
    	
 
    	
61.5
    	
 
    	
—
    	
 
    	
61.5
    	
 
    
	
Total current   liabilities
    	
 
    	
$
    	
1,487.8
    	
 
    	
$
    	
—
    	
 
    	
$
    	
1,487.8
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Long-term debt
    	
 
    	
$
    	
2,423.2
    	
 
    	
$
    	
188.2
    	
 
    	
$
    	
2,611.4
    	
 
    
	
Asset retirement   obligations
    	
 
    	
391.2
    	
 
    	
—
    	
 
    	
391.2
    	
 
    
	
Deferred income   taxes
    	
 
    	
718.0
    	
 
    	
129.9
    	
 
    	
847.9
    	
 
    
	
Regulatory   liabilities
    	
 
    	
1,107.1
    	
 
    	
—
    	
 
    	
1,107.1
    	
 
    
	
Risk management   liabilities
    	
 
    	
134.1
    	
 
    	
—
    	
 
    	
134.1
    	
 
    
	
Other long-term   liabilities
    	
 
    	
60.6
    	
 
    	
—
    	
 
    	
60.6
    	
 
    
	
Future employee   obligations
    	
 
    	
241.1
    	
 
    	
—
    	
 
    	
241.1
    	
 
    
	
 
    	
 
    	
$
    	
6,563.1
    	
 
    	
$
    	
318.1
    	
 
    	
$
    	
6,881.2
    	
 
    
	
Preferred shares
    	
 
    	
$
    	
36.3
    	
 
    	
$
    	
—
    	
 
    	
$
    	
36.3
    	
 
    
	
Non-controlling   interest
    	
 
    	
$
    	
8.9
    	
 
    	
$
    	
—
    	
 
    	
$
    	
8.9
    	
 
    
	
Net assets at   fair value, as at March 31, 2018
    	
 
    	
 
    	
 
    	
 
    	
 
    	
$
    	
2,554.3
    	
 
    
	
Estimated   purchase price
    	
 
    	
 
    	
 
    	
 
    	
 
    	
$
    	
5,834.4
    	
 
    
	
Goodwill
    	
 
    	
 
    	
 
    	
 
    	
 
    	
$
    	
3,280.1
    	
 
    

 

9

 

Under the acquisition method, the acquired tangible and intangible assets and assumed liabilities of the acquired entity are primarily measured at their estimated fair value at the date of acquisition. The excess of the purchase price over the preliminary estimated fair value of net assets acquired is classified as goodwill on the accompanying unaudited pro forma consolidated balance sheet. Such goodwill is not amortized but will be evaluated for impairment on at least an annual basis. AltaGas has performed a preliminary valuation analysis of WGL’s assets to be acquired and liabilities to be assumed. This preliminary valuation has been used to prepare pro forma adjustments in the preliminary purchase price allocation presented in the unaudited pro forma consolidated financial statements. The estimated fair values and useful lives of assets acquired and liabilities assumed are subject to final valuation adjustments which may cause some of the amounts ultimately recorded as goodwill to be materially different from those shown on the unaudited pro forma consolidated balance sheet. The preliminary estimates used to prepare the pro forma information presented will be updated after the closing of the Acquisition based upon AltaGas’ final analysis.

 

In the preliminary valuation analysis, AltaGas identified fair value adjustments for property, plant and equipment, intangible assets, and investments accounted for by the equity method. The preliminary estimate of the fair value of WGL’s property, plant and equipment is approximately $225.6 less than the carrying value. This difference will be amortized over 30 years, the estimated useful life of the assets, resulting in an estimated reduction in depreciation expense for the year ended December 31, 2017 and three months ended March 31, 2018 of approximately $7.6 million ($5.5 million after-tax) and $1.8 million ($1.3 million after-tax), respectively.

 

The preliminary valuation analysis also identified approximately $206.3 million of intangible assets related to customer relationships and certain power purchase contracts. This difference will be amortized over 5-20 years, the estimated useful life of the assets, resulting in an estimated increase in depreciation expense for the year ended December 31, 2017 and three months ended March 31, 2018 of approximately $29.9 million ($21.5 million after-tax) and $7.3 million ($5.2 million after-tax), respectively.

 

The fair value of long-term debt was estimated based on the quoted market prices of the U.S. Treasury issues having a similar term to maturity, adjusted for the credit quality of the debt issuer, WGL or Washington Gas Light Company. The difference of $188.2 million between the fair value and carrying value will be amortized into income as a reduction of interest expense over the remaining term of the long-term debt resulting in an estimated reduction of interest expense for the year ended December 31, 2017 and three months ended March 31, 2018 of approximately $12.5 million ($9.0 million after-tax) and $3.0 million ($2.1 million after-tax), respectively.

 

The adjustments to the fair value of assets and long-term debt based on the preliminary purchase price allocation would result in an increase to the deferred income tax liability of approximately $129.9 million based on AltaGas’ U.S. statutory income tax rate of 28.0 percent.

 

c)              Subscription receipts

 

In the first quarter of 2017, the Corporation completed the sale of 84.5 million subscription receipts in a private placement and on a bought deal basis for total gross proceeds of approximately $2.6 billion including the over-allotment option that was partially exercised. Each subscription receipt will entitle the holder thereof to receive, (i) automatically upon the closing of the Acquisition and without any further action on the part of the holder thereof, and without payment of additional consideration, one common share of the Corporation; and (ii) dividend equivalent payments in respect of any dividends on the common shares for which record dates occur during the period that the subscription receipts remain outstanding. The net proceeds from the sale of the subscription receipts are held by an escrow agent pending satisfaction of conditions precedent to the closing of the Acquisition. For the purpose of the unaudited pro forma consolidated financial statements, all cash from the issuance of subscription receipts has been received and immediately converted into common shares of the Corporation at the assumed

 

10

 

closing date of the Acquisition (see Note 1). Underwriting costs are estimated at approximately $98.2 million ($71.6 million after-tax) and will result in a corresponding deferred income tax asset of approximately $26.6 million based on AltaGas’ Canadian statutory income tax rate of approximately 27.1 percent.

 

For the purpose of determining the net proceeds from the subscription receipts as at March 31, 2018, actual dividend equivalent payments declared through March 31, 2018 of $209.6 million, net of interest earned on the escrowed proceeds from the subscription receipts of $28.3 million through March 31, 2018, have been deducted from the total gross proceeds of $2.6 billion, which yields net proceeds of approximately $2.4 billion as at March 31, 2018. The unaudited pro forma consolidated financial statements do not reflect any additional dividend equivalent payments that may be made subsequent to March 31, 2018 using a portion of the net proceeds from the sale of subscription receipts.

 

d)             Acquisition credit facility

 

For the purpose of the unaudited pro forma consolidated financial statements, the closing of the Acquisition is assumed to be partially financed by a drawdown of $3.9 billion under the Acquisition Credit Facility. The Corporation currently expects that the Acquisition Credit Facility will be repaid through subsequent offerings of senior debt, hybrid securities, equity or equity-linked securities (including preferred shares or convertible debentures), and selected AltaGas asset sales. The subsequent offerings and asset sales have not been reflected in the unaudited pro forma consolidated financial statements.

 

The interest rate on the Acquisition Credit Facility for the year ended December 31, 2017 is estimated at 2.65 percent and would result in incremental interest expense of $102.3 million. Incremental interest expense resulted in a corresponding deferred income tax recovery for the year ended December 31, 2017 of approximately $27.7 million based on AltaGas’ Canadian statutory tax rate of 27.1 percent.

 

The interest rate on the Acquisition Credit Facility for the three months ended March 31, 2018 is estimated at 3.15 percent and would result in incremental interest expense of $29.6 million. This incremental interest expense would result in a corresponding deferred income tax recovery for the three months ended March 31, 2018 of approximately $8.0 million based on AltaGas’ Canadian statutory tax rate of 27.1 percent.

 

Estimated total Acquisition Credit Facility costs are approximately $54.0 million ($39.4 million after-tax). Actual Acquisition Credit Facility costs of $19.3 million ($14.0 million after-tax) and $4.1 million ($3.0 million after-tax) were expensed by the Corporation during the year ended December 31, 2017 and three months ended March 31, 2018, respectively, have been removed from interest expense as a pro forma adjustment as these costs are directly incremental to the Acquisition and non-recurring in nature (see Note 3j). The remaining $30.6 million ($22.4 million after-tax) of Acquisition Credit Facility costs have been included as a pro forma adjustment to retained earnings on the unaudited pro forma consolidated balance sheet as opposed to being reflected in the unaudited pro forma consolidated statements of income on the basis that these expenses are directly incremental to the Acquisition and are non-recurring in nature. The pro forma adjustment of $30.6 million ($22.4 million after-tax) to the unaudited pro forma consolidated balance sheet is comprised of the following:

 

	
 
    	
 
    	
Pre-tax
    	
 
    	
Tax
    	
 
    	
After-tax
    	
 
    
	
Reduction in   cash and cash equivalents
    	
 
    	
$
    	
(29.4
    	
)
    	
$
    	
7.9
    	
 
    	
$
    	
(21.5
    	
)
    
	
Reduction in   long-term investments and other assets
    	
 
    	
(14.1
    	
)
    	
3.8
    	
 
    	
(10.3
    	
)
    
	
Reduction in   accounts payable and accrued liabilities
    	
 
    	
12.9
    	
 
    	
(3.5
    	
)
    	
9.4
    	
 
    
	
Net adjustment   to retained earnings
    	
 
    	
$
    	
(30.6
    	
)
    	
$
    	
8.2
    	
 
    	
$
    	
(22.4
    	
)
    

 

11

 

e)              Acquisition costs

 

Acquisition costs are estimated at approximately $291.0 million ($223.9 million after-tax) of which $65.7 million ($53.2 million after-tax) were incurred in 2017 and $9.9 million ($8.9 million after-tax) were incurred during the three months ended March 31, 2018 (see Note 3j). Acquisition costs are comprised of estimated accounting, legal, tax, financial advisory, and other costs associated with the completion of the Acquisition as well as the estimated costs of certain commitments that have been offered in the regulatory applications. These costs have been included as a pro forma adjustment to retained earnings on the unaudited pro forma consolidated balance sheet as opposed to being reflected in the unaudited pro forma consolidated statements of income on the basis that these expenses are directly incremental to the Acquisition and are non-recurring in nature.

 

f)               Income taxes

 

For the purpose of the accompanying unaudited pro forma consolidated financial statements including pro forma adjustments, average Canadian and U.S. deferred income tax rates of 27.1 percent and 28.0 percent, respectively, have been applied. The deferred income tax asset and liability is the cumulative amount of tax applicable to temporary differences between the accounting and tax values of assets and liabilities. Deferred income tax assets and liabilities are measured at the tax rates expected to apply when these differences reverse.

 

g)             WGL historical shareholders’ equity

 

The historical shareholders’ equity of WGL, which includes retained earnings, accumulated other comprehensive loss, contributed surplus and common shares, has been eliminated on consolidation.

 

h)             Net income per common share

 

Net income per common share is calculated by dividing the pro forma net income applicable to common shares by the weighted average number of common shares outstanding for the year ended December 31, 2017 and three months ended March 31, 2018 and reflects the assumed issuance of 84.5 million AltaGas common shares, as if the issuance had taken place on January 1, 2017.

 

i)                Foreign exchange translation

 

The assets and liabilities of WGL, which has a U.S. dollar reporting and functional currency, are translated at the exchange rate in effect as at the unaudited pro forma consolidated balance sheet date of March 31, 2018. Revenues and expenses of WGL’s operations are translated at the average exchange rate in effect during the reporting period. The following exchange rates were utilized for the unaudited pro forma consolidated financial statements:

 

Balance Sheet (U.S. dollars to Canadian dollars)

 

Closing rate – March 31, 2018: 1.2894

 

Income Statement (U.S. dollars to Canadian dollars)

 

Average rate – January 1, 2017 to December 31, 2017: 1.2986

 

Average rate – January 1, 2018 to March 31, 2018: 1.2647

 

j)                Adjustments for acquisition related costs

 

The mark-to-market loss of $34.3 million for the year ended December 31, 2017 and $1.2 million for the three months ended March 31, 2018 related to foreign exchange option contracts to hedge the cash purchase price of WGL has been removed from unrealized losses on risk management contracts in the unaudited pro forma

 

12

 

consolidated statement of income on the basis that the mark-to-market loss is directly incremental to the Acquisition and is non-recurring in nature.

 

Acquisition costs incurred by WGL of $17.6 million ($12.1 million after-tax) and $0.2 million ($0.1 million after-tax) during the year ended December 31, 2017 and three months ended March 31, 2018, respectively, have been removed from operating and administrative expense in the unaudited pro forma consolidated statement of income as these costs are directly incremental to the Acquisition and are non-recurring in nature.

 

Acquisition related costs incurred by AltaGas totaling $85.0 million ($67.2 million after-tax) and $14.0 million ($11.9 million after-tax) during the year ended December 31, 2017 and three months ended March 31, 2018, respectively, have been removed from the unaudited pro forma consolidated statements of income as these costs are directly incremental to the Acquisition and are non-recurring in nature.

 

Specifically, $19.3 million ($14.0 million after-tax) and $4.1 million ($3.0 million after-tax) of actual Acquisition Credit Facility costs incurred during the year ended December 31, 2017 and three months ended March 31, 2018, respectively, have been removed from interest expense and $65.7 million ($53.2 million after-tax) and $9.9 million ($8.9 million after-tax) of actual acquisition costs incurred during the year ended December 31, 2017 and three months ended March 31, 2018, respectively, have been removed from operating and administrative expense.

 

13Exhibit 4.10

 

FORM 51-102F3

MATERIAL CHANGE REPORT

 

1.                                      Name and Address of Company:

 

AltaGas Ltd. (“AltaGas”) 
 1700, 355 — 4th Avenue S.W.
 Calgary, AB 
 T2P 0J1

 

2.                                      Date of Material Change:

 

June 13, 2018.

 

3.                                      News Release:

 

A news release disclosing the nature and substance of the material change was issued by AltaGas on June 13, 2018 through the news wire services of Cision.

 

4.                                      Summary of Material Change:

 

On June 13, 2018 AltaGas announced that it entered into a definitive agreement to indirectly sell 35 percent of its interest in the Northwest British Columbia Hydro Electric Facilities (the “Northwest Hydro Facilities”) for approximately $922 million subject to customary closing adjustments (the “Transaction”).

 

5.                                      Full Description of Material Change:

 

AltaGas together with its wholly-owned subsidiaries, Northwest Hydro Limited Partnership (“Coast LP”) and Northwest Hydro GP Inc. (“Coast GP” and together with Coast LP, the “Coast Entities”) entered into a contribution and purchase agreement (the “CPA”) in respect of the Transaction with Northwestern Hydro Acquisition Co Inc. (“New Coast Entity”), an entity indirectly owned by Axium Infrastructure Inc., as manager of Axium Infrastructure Canada II Limited Partnership, and Manulife Financial Corporation. The Transaction will be completed by way of cash contribution for limited partner units in the capital of Coast LP (the proceeds of which will subsequently be directed to AltaGas as described in the CPA) and the sale of common shares in the capital of Coast GP by AltaGas. The Coast Entities collectively own a majority of the limited partner units of Coast Mountain Hydro Limited Partnership and all of the securities of its general partners which collectively hold the Northwest Hydro Facilities.

 

AltaGas will remain the majority owner of the Coast Entities and continue to provide all operational and maintenance functions in respect of the Northwest Hydro Facilities. The rights among the partners of Coast LP and the shareholders of Coast GP will be governed by a limited partnership agreement and a unanimous shareholder agreement, respectively, to be entered into in connection with the closing of the Transaction.  The Transaction is subject to customary closing adjustments and closing conditions, and is expected to close prior to the end of June 2018.

 

 

6.                                      Reliance on Subsection 7.1(2) of National Instrument 51-102

 

Not applicable.

 

7.                                      Omitted Information:

 

Not applicable.

 

8.                                      Executive Officer:

 

Inquiries in respect of the material change referred to herein may be made to:

 

Brad Grant
 Vice President and General Counsel 
 AltaGas Ltd.
 Tel:                           (403) 691-7575

 

9.                                      Date of Report:

 

June 13, 2018.

 

Cautionary Statement Regarding Forward-Looking Information

 

This document contains forward-looking information (forward-looking statements). Words such as “may”, “can”, “would”, “could”, “should”, “will”, “expect”, “opportunity” and similar expressions suggesting future events or future performance, as they relate AltaGas or any affiliate of AltaGas, are intended to identify forward-looking statements. Specifically, such forward-looking statements included in this document include, but are not limited to, statements with respect to the expected closing and timing of the closing of the Transaction. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events and achievements to differ materially from those expressed or implied by such statements. Such statements reflect AltaGas’ current expectations, estimates and projections based on certain material factors and assumptions at the time the statement was made.  AltaGas’ forward-looking statements are subject to certain risks and uncertainties which could cause results or events to differ from current expectations. Many factors could cause AltaGas’ performance or achievements to vary from those described in this document. These factors should not be construed as exhaustive. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this document, and such forward-looking statements included in this document, should not be unduly relied upon. The impact of any one assumption, risk, uncertainty or other factor on a particular forward-looking statement cannot be determined with certainty because they are interdependent and AltaGas’ future decisions and actions will depend on management’s assessment of all information at the relevant time. Such statements speak only as of the date of this document. AltaGas does not intend, and does not assume any obligation, to update these forward-looking statements except as required by law. The forward-looking statements contained in this document are expressly qualified by these cautionary statements.

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