8-KMaterial AgreementsSecurities & ListingExhibits & Filings

EQT Corp 8-K Report, Material Agreement (Nov 26, 2024)

Filed November 26, 2024For Securities:EQT

Summary

EQT Corporation (EQT) has entered into a material definitive agreement to form a new midstream joint venture (JV) with an affiliate of Blackstone Credit & Insurance (JV Investor). EQT, through its subsidiary EQM Midstream Partners, LP (EQM), will contribute key midstream assets, including its Series A Membership Interests in Mountain Valley Pipeline, LLC (MVP), certain FERC-regulated transmission and storage assets, and the Hammerhead pipeline system, in exchange for Class A Units in the JV. The JV Investor will contribute $3.5 billion in cash in exchange for Class B Units. The JV structure outlines a distribution waterfall that prioritizes a 7.875% unlevered IRR return for the JV Investor's Class B Units for a defined period, after which EQT's Class A Units will receive the vast majority of distributions. The agreement includes provisions for redemption of Class B Units, EQT's buyout rights, and drag-along rights, as well as exit rights for the Class B Unitholders under specific trigger events or after a set period. EQM will serve as the JV operator and will retain operational control, while JV Investor will have minority protections. This transaction is expected to provide significant capital to EQT, with a portion intended to repay existing debt.

Key Highlights

  • 1EQT forms a strategic midstream joint venture with Blackstone Credit & Insurance, contributing significant assets including MVP Series A Interests, FERC-regulated transmission/storage, and the Hammerhead pipeline.
  • 2JV Investor injects $3.5 billion in cash into the JV, receiving Class B Units, while EQT's subsidiary EQM receives Class A Units for its contributed assets.
  • 3A detailed distribution waterfall is established, prioritizing a 7.875% unlevered IRR for Class B Unitholders for a period, before EQT's Class A Units receive the majority of future distributions.
  • 4The JV agreement includes mechanisms for redemption of Class B Units if the Base Return is met early, and EQT's buyout and drag-along rights starting on the 8th anniversary of closing.
  • 5Class B Unitholders have specified exit rights, including a forced sale option under certain EQT breaches and a general exit right after 12 years.
  • 6EQM will operate the JV as JV Operator, maintaining operational control, while JV Investor receives customary minority protections.
  • 7A portion of the cash contributed by JV Investor is earmarked to repay EQT's existing $2.3 billion bridge facility, with the remainder distributed to EQM.

Frequently Asked Questions

EQT is contributing its Series A Membership Interests in Mountain Valley Pipeline, LLC (MVP), certain Federal Energy Regulatory Commission (FERC)-regulated transmission and storage assets, and the Hammerhead pipeline system to the joint venture.

The JV Investor is contributing $3.5 billion in cash. This capital is intended to fund the joint venture and, importantly, a portion of it will be used to repay EQT's $2.3 billion bridge facility, with the remainder distributed to EQM.

Initially, Class A Unitholders (EQT) will receive 40% of distributions, and Class B Unitholders (JV Investor) will receive 60% until the 'Base Return' (7.875% unlevered IRR) for Class B Units is achieved. After the Base Return is met, Class A Unitholders will receive 100% of distributions until the 8th anniversary of closing, and 95% thereafter, with Class B Unitholders receiving 0% and 5% respectively in those periods.

EQT, through EQM, will maintain operational control by appointing a majority of the JV's board of managers. EQM will also serve as the JV Operator responsible for day-to-day operations. EQT retains governance rights associated with the MVP Series A Interests, subject to minority protection rights.