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Item 1.01.
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Entry into a Material Definitive Agreement.
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As previously announced, on November 22, 2024, EQT Corporation ("EQT"), through certain of its subsidiaries, including EQM Midstream Partners, LP ("EQM"), entered into a contribution agreement (the "Contribution Agreement" and, the transactions contemplated thereby, the "JV Transaction") with an affiliate of Blackstone Credit & Insurance (such affiliate, "JV Investor" and, collectively with EQM and the other parties to the Contribution Agreement, the "Parties") to form a new midstream joint venture (the "Joint Venture").
Among other things, the Contribution Agreement provides for:
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(i)
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the contribution by EQM and certain of its subsidiaries (collectively, the "EQM Contributors") (through the contribution of certain entities and equity interests) of the following assets to the Joint Venture in exchange for 364,285,715 Class A Units in the Joint Venture (the "Class A Units"): (a) the Series A Membership Interests in Mountain Valley Pipeline, LLC ("MVP" and, such interests therein, the "MVP Series A Interests"), which relate to the mainline facilities owned by MVP (the "MVP Mainline Facilities"), (b) certain transmission and storage assets regulated by the Federal Energy Regulatory Commission and (c) the Hammerhead pipeline system, and
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(ii)
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the contribution by JV Investor of $3.5 billion of cash (net of certain transaction fees and expenses) to the Joint Venture in exchange for 350,000,000 Class B Units in the Joint Venture (the "Class B Units").
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The Contribution Agreement includes customary representations and warranties by the EQM Contributors and JV Investor and covenants of the Parties, and the consummation of the JV Transaction (the "Closing") is subject to customary conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Condition"). The Contribution Agreement also contains specified termination provisions, including, among others, a provision allowing the EQM Contributors or JV Investor to terminate the Contribution Agreement if the Closing has not occurred on or before March 22, 2025 (as such date may be extended under certain circumstances relating to the HSR Condition, but in no event to later than June 20, 2025).
The Contribution Agreement contemplates entry into an amended and restated limited liability company agreement of the Joint Venture (the "JV Agreement"), as well as other ancillary agreements, at the Closing. The JV Agreement will include the following key terms:
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Quarterly Distributions: Subject to certain limitations, until the Base Return (as defined below) is achieved, (i) the holders of the Class A Units (the "Class A Unitholders") will receive 40% of the distributions of available cash flow approved by the Joint Venture's board of managers ("Distributions") and (ii) the holders of the Class B Units (the "Class B Unitholders") will receive 60% of Distributions. After the Base Return has been achieved, (i) until the 8th anniversary of the Closing, 100% of any Distributions, including in a liquidation or sale of the Joint Venture, will be distributed to the Class A Unitholders and 0% to the Class B Unitholders and (ii) from and after the 8th anniversary of the Closing, 95% of any Distributions, including in a liquidation or sale of the Joint Venture, will be distributed to the Class A Unitholders, and 5% will be distributed to the Class B Unitholders.
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Series B Base Return: The "Base Return" means, with respect to any outstanding Class B Unit at any time of determination, an unlevered internal rate of return equal to 7.875%, based on the issuance price of such Class B Unit.
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Redemption; EQM Buyout and Drag Rights:
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o
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Redemption - If the Base Return is achieved prior to the 8th anniversary of the Closing, the Class B Units will be redeemed for no additional consideration.
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Buyout Right - Beginning on the 8th anniversary, and through the 12th anniversary, of the Closing, EQM will have the right to purchase all or a portion (subject to a specified minimum number) of the Class B Units by paying the Class B Unitholders an amount in cash necessary for the purchased Class B Units to achieve the Base Return.
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