Equitrans: In Debt Limit Deal, the Mountain Valley Pipeline Emerges as a Winner

The recent proposed agreement to lift the debt ceiling, struck between the Biden administration and House Speaker Kevin McCarthy, included key provisions supporting the completion of the Mountain Valley Pipeline. If the bill passes in its current form, the MVP should be able to move forward nearly immediately. The legislation essentially removes all further roadblocks to the pipeline entering service. However, there is uncertainty over whether the bill has enough support to pass the House’s Rules Committee, a full House vote Wednesday, and the final Senate vote.

Given the immediate negative reactions from politicians at each stage of the process for what will likely be a very thin margin for passage, we’re leaving intact for now our $10.80 per share fair value estimate and narrow moat rating for Equitrans ETRN, which still includes a 50% weighting on a scenario where the MVP is canceled. We expect to revisit our fair value estimate if the legislation is signed as it stands into law. In the scenario where the MVP moves forward and into service, our fair value estimate would likely be $15 per share, which is still materially more than the $8.30 per share as of this writing, despite the stock’s upward move of more than 35% today.

The language of the bill states that no court has any jurisdiction to review any action taken by the secretary of the Army, and the Federal Energy Regulatory Commission, among other federal agencies, regarding permits for the MVP, and that all federal permits must be issued within 21 days of the bill’s passage. It also gives the U.S. District Court of Appeals for the District of Columbia jurisdiction over any legal challenges over the 4th Circuit Court of Appeals, which has repeatedly rejected MVP permits in the past.