Good morning. My name is Marcella, and I will be your conference operator today. At this time, I'd like to welcome everyone to the UCI After the speakers' remarks, there will be a question and answer session. Thank you. Brad, I'd now like to turn the conference over to Eric.
Thanks, Marcel, and good morning. We'll begin with some prepared remarks and then open up the lines for your questions. Before I turn it over to John, let me remind everyone that our comments today include certain forward looking statements, which management believes to be reasonable as of today's date only. Actual results may differ significantly because of risks and uncertainties that are difficult to predict and many of which are beyond management's control. Please read our annual report on Form 10 ks for an extensive list of factors that could affect results.
We assume no duty to update or revise forward looking statements to reflect events or circumstances that are different from expectations. We'll also describe our business using certain non GAAP financial measures. Reconciliations of these measures to the comparable GAAP measures are available in the appendix of our presentation. John?
Thanks, Brendan. We're very excited about today's announcement and appreciate your time this morning to hear more about the transaction and why we believe it is perfectly aligned with UGI's overall strategy and further supports our long term performance commitments to shareholders. Starting first with an overview of the transaction. As we announced last evening, UGI has executed a definitive agreement to acquire Columbia Midstream Group from a subsidiary of TC Energy for $1,275,000,000 in cash. UGI and TC Energy have agreed to treat the transaction as an asset sale for tax purposes.
This transaction will expand UGI's geographic footprint as the assets are located in Southwestern Pennsylvania, Eastern Ohio and the Panhandle of West Virginia. The network of assets consists of 5 newly built natural gas gathering system and one gas processing plant. Adding this asset network to our existing asset portfolio will enable UGI Energy Services to offer a full scale midstream platform while expanding our base of quality business partners and customers. Excluding transaction related and integration expenses, this transaction will generate just short of $100,000,000 in incremental EBITDA, is EPS neutral in fiscal 2020 and accretive beginning in fiscal 2021. We also expect to be cash flow accretive in year 1 and on average over the next decade will be significantly cash flow accretive.
I will speak in more detail about this in a few moments, but we have identified several projects that provide a clear line of sight to significant EBITDA growth over the next 5 years. We plan to finance this transaction with a combination of new debt at Energy Services and UGI Corporation and will also utilize available liquidity at UGI Corp. As a reminder, Energy Services does not currently have any long term debt on their balance sheet. We don't usually talk about leverage at the corporate level, but I think it's important to touch upon our balance sheet briefly given the scale of this transaction and the AmeriGas merger transaction announced in April. Our pro form a UGI Corp.
Leverage will be between 4.3x and 4.4x at closing and approximately 3 point 5 times by the end of 2021 as we plan to use a portion of our free cash flow to pay down debt. UGI maintains a strong balance sheet and has no plans to issue additional equity beyond what was announced in conjunction with the AmeriGas merger transaction. We expect this transaction to close in our fiscal Q4 and it's subject to customary regulatory and other closing conditions. Overall, we see this acquisition as a great fit operationally, culturally and strategically. This slide outlines UGI's long term strategy to grow and deliver value for our shareholders.
We've identified aspects of our strategy that are directly impacted by this transaction. As you can see, this is a perfect fit for UGI. It ticks almost all the boxes and supports our long term strategy. Let's take a closer look at how this transaction will grow and deliver value. As we evaluated the opportunity, we identified 4 key areas that support our strategy.
1st, it's a scaled platform for midstream growth. It's cash flow supported by take or pay contracts and acreage dedication. We have additional growth opportunities. And finally, there are synergies available to UGI's downstream businesses. The CMG assets add significant scale and scope of operations to UGI's existing natural gas business.
The assets are strategically located in the core of the Southwest Appalachian Basin, one of North America's most prolific natural gas producing regions. The transaction provides UGI with a full suite of midstream services, including in basin transportation, dry and wet gas gathering and natural gas processing and builds a significant footprint across the Appalachian Basin. Ted will cover our cash flow in more detail in a few slides, but it's important to note that 94% of CMG's 2019 revenues are supported by take or pay contracts and acreage dedication. I mentioned earlier that identified growth projects provide a clear line of sight to EBITDA growth. There's an opportunity to invest between $300,000,000 $500,000,000 over the next 5 years at attractive returns to expand and enhance the network of assets.
We expect to fund this CapEx with cash from operations. Lastly, CMG offers synergies with our downstream businesses as well as procurement opportunities for AmeriGas. For our supply and logistics teams, this transaction creates wholesale opportunities to assist producers in optimizing their access to the highest value market. Our retail gas marketing business will benefit from access to local supply sourced from producers shipping gas on the CMG gathering assets. UGI has a long history of integrating and extracting value from acquisitions.
This chart highlights our 20 year M and A history. This disciplined investment approach has driven returns enabled us to outperform the S and P 500 by 3 times, the S and P 500 utilities by more than 2 times and the S and P 400 Mid Cap by nearly 2 times. Here you can see the attributes of CMG's assets. The assets are newly constructed as the oldest system has yet to be in service for 10 years. CMG has a 47% interest in the Pennant system, which is co owned by Hillcorp and Williams Corporation.
The Majorsville and Pennant systems are UGI's first investments into gas gathering and processing. We're excited to enter these new business lines and enhance our product offering. On the previous slide, we highlighted additional investment opportunities. These low risk organic growth projects include pipeline extensions to major interstate pipelines that will enable producers to increase their market optionality with additional delivery points, pipeline extensions upstream to the wellhead and compression expansion, which will allow producers to flow more gas while deploying minimal additional upstream capital. If you look at the map, you can see this transaction creates a significant UGI footprint across the Appalachian Basin, while expanding our base of business partners and customers.
The assets enhance and build upon our existing business from a geographic and product perspective and create new opportunities to leverage UGI's existing network. The CMG assets are strategically located and provide multiple downstream interconnections to interstate pipelines. Before I turn the call over to Ted, I want to reiterate how excited we are about this transaction. In addition to strategic fit, we pay particular attention to operational and cultural fit in transactions like this. CMG and TC Energy have a strong history of operating both efficiently and safely.
Our teams are well aligned in terms of focusing on safety as our highest priority. UGI is excited to welcome the CMG employees to its family of companies. With that, I'll turn it over to Ted.
Thanks, John, and good morning, everyone. Building on John's last slide, the recently constructed assets are underpinned by long term fee based contracts. I'll cover the anticipated growth of our fee based business on the next slide. 94% of CMG's 2019 revenue is from take or pay contracts and acreage dedication with active operators in the Appalachian Basin like Range Resources, Penn Energy, Hillcorp, Chevron and Shell. Production in this region has grown at a CAGR of approximately 15% since the beginning of 2014.
We're pleased to expand our offering in this region and look forward to working with our new business partners. Both the contracts profile and the tenor support stable cash flows. The average tenor is about 9 years. As you can see on the pie chart on the right, 90% of our diversified customer base have contract durations of greater than 5 years and 65% have duration of 8 years or more. John mentioned this a few moments ago, but I think it's important to reiterate the optimization opportunities and strategic location of the assets.
Each of the 5 CMG systems provides connectivity to key market hubs which can enhance producer netbacks and allows customers to fill capacity commitments on interconnecting pipelines. In addition, the strategically located assets are adjacent to long haul pipelines, which allows for low risk future expansion. Let's turn to how this transaction impacts our fee based income at our Energy Services business. Before we get into the numbers, I want to remind everyone that one of our 5 core strategic principles is to minimize our commodity exposure. I mentioned on the previous slide that 94% of CMG's 2019 revenue will be from take or pay contracts and acreage dedications.
This fee based contract structure comes with minimal direct commodity price exposure and aligns perfectly with our principal. We showed this slide in the past to point out the evolution of the Energy Services business. Over time, we've increased our investments into assets that produce fee based income. At our Investor Day in December, our anticipated fee based margin in 2022 would increase to 56%. This slide shows the 10 year evolution of the Energy Services business.
And as you can see, this transaction further increases our anticipated fee based margin to 81% in 2023, 10 years later. This transaction is consistent with our intention to invest in natural gas assets as we utilize the enhanced free cash flow from our AmeriGas merger transaction. Over the next few years, 70% of our planned CapEx is for the natural gas businesses. If you include CNG with our planned CapEx, LPG and natural gas will contribute equally to earnings by 2024 and will be more heavily influenced by the natural gas businesses after that. I want to point out that the 2024 figure is based on the current rate of growth and could be accelerated if summary, I too want to underscore our excitement about this opportunity and to welcome the CMG employees to UGI.
We look forward to you coming on board and helping us grow and deliver value. John?
Thanks, Ted. As you've heard, this is a compelling transaction for UGI and builds on our mission to be the preeminent energy distribution company in our targeted markets. This transaction builds on our history of investing in adjacent markets, so that we can use our expertise and network to expand our capabilities and geographic footprint. CMG clearly complements UGI's existing footprint in Eastern Pennsylvania and creates a full scale midstream platform. We're now able to provide producers with a full suite of midstream services and develop relationships with new partners and customers.
As Ted mentioned, this transaction adds stable visible cash flows that are underpinned by long term take or pay contracts and acreage dedications with well capitalized producers who hold some of the most prolific acreage in the Appalachian Basin. CMG comes with low risk identified growth projects that provide a clear line of sight to significant EBITDA growth over the next few years. We anticipate spending between $300,000,000 $500,000,000 over the next 5 years at very attractive 5 to 7 times CapEx to EBITDA multiples and will fund the CapEx with cash from operations. Additionally, the CMG network of assets provide synergy opportunities for our downstream businesses and procurement opportunities for AmeriGas. CMG's multiple downstream connections to interstate pipelines offers tremendous optionality to our business.
Lastly, we expect the transaction to be neutral in fiscal 2020 and accretive beginning in 2021, excluding transaction related and annuities expenses, and it will close in our fiscal Q4. Thank you. And with that, I'll turn it over back over to Marcella, and we'll open it up for questions.
Your first question comes from the line of Shneur Gershuni. Your line is open.
Hi, good morning guys.
Good morning.
Happy 4th. Happy 4th, yes. Just a couple of questions to start off. In the assets that you're acquiring, I was wondering if you can give us some color about the rig movements year to date or how they've changed, let's say, from the Q4 until now? Are they up, down, flat?
I'm just trying to understand what the producers on your acreage have been doing on the acquired assets.
Yes. Shneur, this is John. I can't talk specifically to the rig movements on the various systems with the specific producers, from looking at the performance of the business and production levels and utilization of capacity, performing in line with the forecast that were included. Performing in line with the forecast that were included in the sort of the transaction memorandum. So no significant changes on a consistent development.
Unfortunately, I don't know the answer in terms of absolute rig count.
Okay. Fair enough. And maybe we can talk about the transaction multiple itself. Do you have a trailing EBITDA number that you can share with us?
Yes. As you they just under $100,000,000 is the trailing EBITDA multiple. The thing that really excited us was as we looked at kind of the status of the assets in the asset network and got some insights into this sort of where things stood in terms of capacity utilization and customer producer activity on those systems, we feel really good about the likelihood of incremental investments to augment capacity on those systems that I referred to briefly in my remarks. So as we think about the impact of adding those, which as you know are very efficient from an EBITDA and returns standpoint, We're looking at this transaction steady state as we build it out as more of an 8 to 9 times EBITDA multiple.
And do you have a cadence on how you're thinking about spending the $300,000,000 to $500,000,000 that you have identified as opportunities?
I think that's something we'll comment on as we move forward in the near term. We said 3 to 5 years, and we believe there are one project that's underway that's a smaller project that's actually begun in the execution phase and there are several others that are pending. But at this point, I don't want to speculate exactly when those projects would kick off, which is why we gave that 3 to 5 year time frame for being in service for the entire 300 to 500.
Okay. One final question, if I may. Just in terms of financing perspective, you sort of highlighted that you'll be at, I think it was 4.4 times and going back down to 3.5. And so just to clarify, there's no equity or preferreds that are being issued. And is it fair to think about it in context of the slide that you put out back with the APU transaction where I believe you talked about $1,100,000,000 to $1,400,000,000 of CFO, less $900,000,000 of CapEx and sort of basically funding this out of the free cash flow that you're kind of expecting as well as the APU distribution reset to the QGI dividend level.
Is that kind of the funding cash flow that's really funding all of this?
So we are this is an all cash deal. To your very first question, we are not issuing any equity with this. And beyond the AmeriGas transaction, we don't have any plans to be issuing equity anytime soon. So it is an all cash transaction. We are financing it primarily from the Energy Services business.
We're also taking on some additional debt at corporate and then we're accessing liquidity that we have in the company. And so those are all incremental to the $500,000,000 in financing that we discussed raising for the AmeriGas transaction. Our paydown of that debt will be coming from the cash we're generating from AmeriGas, the cash generated by this business and that's how we'll be getting our multiples down over the next 2 years.
Sorry, Shar, I was just going to add that, I mean, one of the really attractive elements of this business, it's a great fit for UGI and sort of what we see as prioritized aspects of targets. It's a highly cash flow positive system. There are bumps where we're reinvesting for growth, but over time, it's highly cash positive, highly accretive from a cash flow per share standpoint. So it's really attractive from a cash flow perspective.
All
right, perfect. Well, I really appreciate the color guys. Thank you very much and happy 4th.
Great. Thanks, Shneur. Same to you.
There are no further questions at this time. I turn the call back over to Mr.
Marcelo. Thanks. Thank you all for taking this time on a holiday eve to join us, and we look forward to keeping you updated on developments on our next earnings call. Thank you. We'll speak to you soon.