AltaGas Delivers Solid First Quarter Results, Advances Global
Export Strategy Through New Joint Venture with Vopak, and Announces
a New Seven-year Time Charter Agreement
CALGARY,
AB, April 26, 2023 /CNW/ - AltaGas Ltd.
("AltaGas" or the "Company") (TSX: ALA) today reported
first quarter 2023 financial results and provided an update on the
Company's operations and other corporate developments.
HIGHLIGHTS
(all financial figures are unaudited and
in Canadian dollars unless otherwise noted)
- Normalized EPS1 was $0.98 in the first quarter of 2023 compared to
$1.02 in the first quarter of 2022,
while GAAP EPS2 was $1.58
in the first quarter of 2023 compared $1.27 in the first quarter of 2022.
- Normalized EBITDA1 was $582
million in the first quarter of 2023 compared to
$574 million in the first quarter of
2022, while income before income taxes was $619 million in the first quarter of 2023
compared to $504 million in the first
quarter of 2022.
- Normalized FFO per share1 was $1.63 in the first quarter of 2023 compared to
$1.65 in the first quarter of 2022,
while Cash from Operations per share3 was $2.10 in the first quarter of 2023 compared to
$2.44 in the first quarter of 2022.
Higher normalized EBITDA and lower normalized current income tax
expense1 was offset by higher interest expense.
- The Utilities segment reported normalized EBITDA of
$401 million in the first quarter of
2023 compared to $408 million in the
first quarter of 2022, while income before taxes was $590 million in the first quarter of 2023
compared to $426 million in the first
quarter of 2022. The quarter included AltaGas making strong ongoing
asset investments on behalf of its customers across the network,
favorable foreign exchange rates, offset by warmer weather impacts
in Michigan and the District of Columbia (D.C.), and weaker
year-over-year performance at the Retail gas business, which was
principally driven by the timing of swaps.
- The Midstream segment reported normalized EBITDA of
$183 million in the first quarter of
2023 compared to $174 million in the
first quarter of 2022, while income before taxes in the segment was
$138 million in the first quarter of
2023 compared to income before taxes of $159
million in the first quarter of 2022. There were several
positive and negative contributors underpinning the modest
year-over-year variance. The quarter included strong operations and
year-over-year volume growth across global exports, higher
fractionation volumes and realized pricing, and the favourable
resolution of contingencies, offset by higher rail and ocean
freight costs, modestly lower gas processing volumes due to the
lost contribution of the Aitken Creek gas processing facility that
was divested in the second quarter of 2022, and lower realized
Asian-to-North American butane spreads in the global exports
business. On a forward-looking basis, Asian-to-North American
butane spreads are more constructive for 2023 and 2024 forward
strip pricing.
- In February 2023, AltaGas reached
an agreement with Southern California Edison for the purchase of
resource adequacy attributes from the Blythe facility from
January 1, 2024, through December 31, 2027. AltaGas believes that the
agreement reiterates the long-term demand for Blythe to provide
stable and affordable power supply, and support California's longer-term energy needs.
- In February 2023, AltaGas reached
an agreement with an investment grade counterparty to extend the
existing throughput and marketing agreement at the Ferndale liquefied petroleum gases (LPG)
Export Terminal by five years through 2033. The extension is
aligned with AltaGas' long-term focus of de-risking the global
exports business and operating in strong partnership with its
customers to drive the best collective outcomes for all
parties.
- On March 1, 2023, AltaGas closed
the divestiture of its Alaskan Utilities to TriSummit Utilities
Inc. for US$800 million
(approximately CAD$1.1 billion),
prior to closing adjustments. Sale proceeds were used to reduce
debt while providing AltaGas with the financial flexibility to
advance its strong growth opportunities across the Midstream and
Utilities platforms over the coming years.
- On April 4, 2023, AltaGas and
Royal Vopak (Vopak) executed definitive agreements for a new 50/50
joint venture to further evaluate development of the Ridley Island
Energy Export Facility (REEF), a large-scale LPG and bulk liquids
terminal and marine infrastructure on Ridley Island. Development of REEF would further
bolster AltaGas' first mover advantage and differentiated LPG value
proposition through continuing to connect domestic customers to
premium global downstream markets and add export capacity for
Western Canada's growing LPG
volumes. Should REEF reach a positive final investment decision
(FID), the facility is planned to be developed and brought online
in phases and have the capability to export LPGs, methanol, and
other bulk liquids that are vital for everyday life. Vopak,
AltaGas, and the Prince Rupert Port Authority have been working
closely with First Nations rights holders and key stakeholders,
including the local communities in Northwestern British Columbia and the Federal
and Provincial regulators, to deliver a project that will operate
with industry-leading environmental stewardship and has been
granted the key federal and provincial permits to construct the
first phase of the project.
- Subsequent to quarter end, AltaGas reached an agreement for a
seven-year time charter with two one-year optional extensions for a
new 86,700 cubic meter dual-fuel Very Large Gas Carrier (VLGC) with
delivery expected in the first half of 2026. The agreement extends
AltaGas' value chain reach into Asia, will reduce maritime shipping costs by
approximately 25 percent relative to current Baltic freight forward pricing, and lowers
pricing volatility on a long-term basis. The incremental time
charter builds on the two new dual-fuel VLGCs that AltaGas will be
taking delivery of in late 2023 and early 2024, which will reduce
AltaGas' maritime shipping costs and provides long-term pricing
visibility.
- As announced on November 21,
2022, Randy Crawford,
AltaGas' President and CEO, will retire from the Company in the
first half of 2023 as part of a planned leadership succession
process with a successor to be announced before the end of second
quarter of 2023. The succession process remains on track with
AltaGas expecting to announce a new President and CEO prior to
June 30, 2023.
- Following a solid first quarter, AltaGas is reiterating its
2023 full year guidance ranges for normalized EBITDA of
$1.5 billion to $1.6 billion, and normalized EPS guidance of
$1.85 - $2.05, compared to actual normalized EBITDA of
$1.54 billion, normalized EPS
1 of $1.89 and GAAP EPS
2 of $1.42 in 2022.
AltaGas continues to target delivering regular, sustainable, and
annual dividend increases that compound in the years ahead with an
anticipated five to seven percent compounded annual growth rate
through 2026. Annual dividend increases will be a function of
financial performance and determined by the Board on an annual
basis.
__________________________
|
(1) Non-GAAP
measure; see discussion and reconciliation to US GAAP financial
measures in the advisories of this news release or in AltaGas'
Management's Discussion and Analysis (MD&A) as at and for the
period ended March 31, 2023, which is available on www.sedar.com.
(2) GAAP EPS is equivalent to Net income applicable to common
shares divided by shares outstanding. (3) Cash from
Operations per share is equivalent to cash from operations divided
by shares outstanding.
|
|
CEO MESSAGE
"I am pleased with our strong first quarter results as we
continue to execute our strategic priorities and position the
platform to achieve the Company's 2023 and longer-term growth
plans" said Randy Crawford,
President and Chief Executive Officer. "We are well-positioned to
meet our 2023 guidance ranges, including normalized EPS guidance of
$1.85 - $2.05 and normalized EBITDA guidance of
$1.5 billion - $1.6 billion.
"Through ongoing investment and associated cost reductions, our
regulated Utilities were able to overcome the impact of warmer
weather and the lost contribution from the Alaska Utilities in
March, to deliver solid first quarter earnings results. We continue
to make investments in our network on behalf of our customers and
execute our regulatory strategy to update our rates on a timely
basis to reflect the current operating cost environment, including
cost of capital.
"Our Midstream business delivered strong results which included
the export of approximately 99,444 Bbls/d of LPGs to Asia, delivered across 16 VLGCs. As we look
forward, with the new annual LPG supply contracting completed at
pricing levels reflecting logistics inflationary impacts, a lower
risk profile from increased tolling levels and a significant hedge
portfolio, we are well positioned to achieve our forecasted
profitability. We are excited to reach an agreement with our joint
venture partner for the potential expansion of our export platform
to provide increased LPG export capacity to meet long-term export
demand, while providing cost synergies opportunities, product
optionality and access to a new dedicated dock.
"The closing of the Alaska Utilities sale at the beginning of
March has allowed us to pay down debt and move towards our
medium-term 5x net debt-to-Normalized EBITDA target. These strong
balance sheet improvements position AltaGas with the flexibility to
opportunistically invest in both organic and inorganic growth
opportunities, such as the REEF expansion project upon favorable
FID."
RESULTS BY SEGMENT
Normalized EBITDA
(1)
|
Three Months
Ended
March 31
|
($
millions)
|
2023
|
2022
|
Utilities
|
$
401
|
$
408
|
Midstream
|
183
|
174
|
Corporate/Other
|
(2)
|
(8)
|
Normalized EBITDA
(1)
|
$
582
|
$
574
|
(1)
Non–GAAP financial measure; see discussion in Non–GAAP Financial
Measures section of this news release.
|
Income (Loss) Before
Income Taxes
|
Three Months
Ended
March 31
|
($
millions)
|
2023
|
2022
|
Utilities
|
$
590
|
$
426
|
Midstream
|
138
|
159
|
Corporate/Other
|
(109)
|
(81)
|
Income Before Income
Taxes
|
$
619
|
$
504
|
BUSINESS PERFORMANCE
Utilities
The Utilities segment reported normalized EBITDA of $401 million in the first quarter of 2023
compared to $408 million in the first
quarter of 2022, while income before taxes was $590 million in the first quarter of 2023
compared to $426 million in the first
quarter of 2022. First quarter normalized Utilities EBITDA was in
line with AltaGas' expectations and included select positive and
negative factors which largely offset each other relative to the
first quarter of 2022. The largest positive factors impacting
results on a year-over-year basis included ongoing asset
investments on behalf of its customers across the network,
favorable foreign exchange rates, interim rates being in place in
Virginia due to the current rate
case, and lower operating and administrative expenses. These
positive factors were offset by warmer weather in Michigan and the D.C. which do not have
weather normalization, weaker year-over-year performance at the
Retail gas business which was principally driven by the timing of
swaps, and a decrease in asset optimization at Washington Gas in
the quarter.
AltaGas continued to upgrade critical infrastructure and make
ongoing investments on behalf of its customers during the first
quarter of 2023 with the deployment of $151
million of invested capital1, including
$66 million deployed on the Company's
various Accelerated Replacement Programs (ARPs). These investments
continue to be directed towards improving the safety and
reliability of the system and connecting new customers to the
critical energy they require to carry out everyday life. These
investments should also bring long-term operating cost benefits to
our customers. AltaGas will continue to make these ongoing critical
network upgrades on behalf of our customers, while balancing
ongoing customer affordability. This latter focus is particularly
important during the current economic environment of higher
interest rates and inflation across the broader economy. AltaGas
remains acutely focused on judicious cost management across the
Utilities platform and driving the best outcomes for its customers
and stakeholders.
Midstream
The Midstream segment reported normalized EBITDA of $183 million in the first quarter of 2023
compared to $174 million in the same
quarter of 2022, while income before income taxes was $138 million in the first quarter of 2023
compared to $159 million in the same
quarter of 2022. There were several positive and negative
contributors underpinning the modest year-over-year variance. This
included strong operations and year-over-year volume growth across
global exports, higher fractionation volumes and realized pricing
and the favourable resolution of certain contingencies, offset by
higher rail and ocean freight costs, modestly lower gas processing
volumes due to the lost contribution of the Aitken Creek gas
processing facility that was divested in the second quarter of
2022, and continued lower Asian-to-North American butane spreads in
the global exports business.
AltaGas exported 99,444 Bbls/d of LPGs to Asia during the first quarter of 2023,
including nine VLGCs at RIPET and seven VLGCs at Ferndale. Higher export volumes were driven by
strong ongoing customer demand in Asia, higher available LPG supply, and a lack
of logistical challenges that were partially present in the first
quarter of 2022. AltaGas' gas processing volumes were in line with
the Company's expectations in the first quarter of 2023 with the
year-over-year decrease primarily due to the impact of the Aitken
Creek divestiture in the second quarter of 2022, which was
partially offset by higher throughput volumes at Townsend and Younger. Fractionation volumes
for the first quarter of 2023 increased by approximately 25 percent
on a year-over-year basis due to higher North Pine, Harmattan, and Younger throughput.
AltaGas remains focused on partnering with Western Canadian
producers and aggregators to increase direct global market access
through long-term tolling arrangements that can drive the best
collective outcomes for all parties, while also having an active
hedging program to proactively lock in structural margins and
de-risk cashflows for merchant exports.
AltaGas is encouraged by the B.C. Government and Blueberry River
First Nations historic agreement that was announced in January 2023 that will provide a pathway for a
partnership approach on land, water, and resource stewardship with
the Treaty 8 First Nations. Well licensing activity in the area is
the highest in five years and is supported by the Montney being one of the most prolific
resource plays in North America
and has the potential to provide decades of steady natural gas and
NGLs to support Canada's domestic
demand and play a larger role in meeting global energy needs.
AltaGas looks forward to continuing to work in Northeastern B.C.
with First Nations right holders and stakeholders on sustainable
resource development in partnership with local communities and
delivering on the growing global demand for responsibly developed
energy supplies.
AltaGas' realized frac spread averaged $27/Bbl, after transportation costs, as most of
AltaGas' frac exposed volumes were hedged at approximately
$35/Bbl in the first quarter of 2023,
prior to transportation costs. AltaGas is well hedged for 2023 with
approximately 84 percent of its remaining 2023 expected frac
exposed volumes hedged at approximately US$27/Bbl, prior to transportation costs. In
addition, approximately 68 percent of AltaGas' remaining 2023
expected global export volumes are either tolled or financially
hedged with an average Far East Index (FEI) to North American
financial hedge price of approximately US$12/Bbl for non-tolled propane and butane
volumes.
2023 Midstream Hedge Program
|
|
|
|
|
Q2
2023
|
Q3
2023
|
Q4
2023
|
Remainder
2023
|
Global Exports volume
hedged (%)(1)
|
75
|
90
|
31
|
68
|
Average propane/butane
FEI to North America Average hedge
(US$/Bbl)(2)
|
11.50
|
11.57
|
19.08
|
12.06
|
Fractionation volume
hedged (%)(3)
|
82
|
96
|
72
|
84
|
Frac spread hedge rate
- (US$/Bbl)(3)
|
26.83
|
26.83
|
26.83
|
26.83
|
|
|
|
|
|
|
1)
|
Approximate expected
volumes hedged. Includes contracted tolling volumes and financial
hedges. Based on AltaGas' internally assumed export volumes.
AltaGas is hedged at a higher percentage for firmly committed
volumes.
|
2)
|
Approximate average
for the period. Does not include physical differential to FSK for
C3 volumes. Butane is hedged as a percentage of WTI.
|
3)
|
Approximate average
for the period.
|
Corporate/Other
The Corporate/Other segment reported a normalized EBITDA loss of
$2 million in the first quarter of
2023 compared to a loss of $8 million
in the same quarter of 2022 while income loss before taxes was a
loss of $109 million in the first
quarter of 2023 compared to a loss of $81
million in the first quarter of 2022. The year-over-year
increase in normalized EBITDA was mainly due to lower operating and
administrative expenses.
VOPAK AND ALTAGAS FORM A NEW JOINT VENTURE FOR LARGE-SCALE
LPG AND BULK LIQUIDS EXPORT TERMINAL IN PRINCE RUPERT
Vopak and AltaGas announced the execution of definitive
agreements for a new 50/50 joint venture to further evaluate
development of REEF, a large-scale LPG and bulk liquids terminal
with marine infrastructure on Ridley
Island, British Columbia,
Canada. Development of REEF would further bolster AltaGas'
first mover advantage and differentiated LPG value proposition in
connecting the company's domestic customers to premium global
downstream markets for the growing Western Canadian LPG volumes.
REEF will have the capability to facilitate the export of LPGs,
methanol, and other bulk liquids that are vital for everyday life
and will provide long-term optionality to product exports for
AltaGas. REEF has been granted the key Federal and Provincial
permits to construct storage tanks, a new dedicated jetty, and rail
and other ancillary infrastructure required to operate a
state-of-the-art and highly efficient facility.
Should REEF reach a positive FID, it is planned to be developed
and brought online in phases. This approach will provide the most
capital efficient build out of the project, match energy export
supply with throughput capacity, mitigate the challenges that large
development projects can have on local communities, and provide
local construction and employment opportunities that would extend
over longer time horizons. AltaGas has executed a long-term
commercial agreement with the joint venture for 100% of the
capacity for the first phase of LPG volumes, subject to a positive
FID. AltaGas will also be responsible for the construction and
operational stewardship of the facility. Future phases of the
project will be developed as additional long-term commercial
agreements and critical milestones are achieved to deliver the
maximum value for all stakeholders.
Vopak, AltaGas, and the Prince Rupert Port Authority have been
working closely with First Nations rights holders and key
stakeholders, including the local communities in Northwestern British Columbia and the Federal
and Provincial regulators, to deliver a project that will operate
with industry-leading environmental stewardship and bring the
strongest benefits to all parties involved. Key determinations and
permits have been received from the Federal Government and an
Environmental Assessment Certificate has been received from the
British Columbia Provincial Government.
AltaGas is currently working through front end engineering
design (FEED) activities, where deliverables will include a refined
capital cost estimate, a project execution plan, a construction
schedule, and a projected in-service date, among numerous other
items. FEED and other development activities are expected to be
completed by late 2023, followed by an FID by the joint venture.
Solidifying long-term economic rail agreements in partnership with
the rail operator will also be key for the joint venture to be able
to reach a positive FID and ensure the project advances, and, in
turn, delivers strong benefits to the joint venture partners, First
Nations rights holders, the Prince Rupert Port Authority, local
communities, upstream and downstream customers, and other key
stakeholders.
Vopak and AltaGas are excited to further evaluate the
development of REEF and build on the strong partnership between the
two companies, under this new joint venture agreement. Vopak and
AltaGas thank all stakeholders for the continued embracement and
ongoing partnerships as part of this project. Working with
stakeholders and seeking strong partnerships is part of both
organization's individual and collective DNA and is engrained in
how Vopak and AltaGas approach their businesses every day.
CONSOLIDATED FINANCIAL RESULTS
|
Three Months
Ended
March 31
|
($
millions)
|
2023
|
2022
|
Normalized EBITDA
(1)
|
$
582
|
$
574
|
Add
(deduct):
|
|
|
Depreciation and
amortization
|
(111)
|
(112)
|
Interest
expense
|
(105)
|
(71)
|
Normalized income tax
expense
|
(75)
|
(76)
|
Preferred share
dividends
|
(6)
|
(13)
|
Other
(2)
|
(8)
|
(17)
|
Normalized net
income (1)
|
$
277
|
$
285
|
|
|
|
Net income
applicable to common shares
|
$
445
|
$
357
|
Normalized funds
from operations (1)(2)
|
$
460
|
$
462
|
|
|
|
($ per share, except
shares outstanding)
|
|
|
Shares outstanding -
basic (millions)
|
|
|
During the period
(3)
|
282
|
280
|
End of
period
|
282
|
281
|
|
|
|
Normalized net income -
basic (1)
|
0.98
|
1.02
|
Normalized net income -
diluted (1)
|
0.98
|
1.01
|
|
|
|
Net income per common
share - basic
|
1.58
|
1.27
|
Net income per common
share - diluted
|
1.57
|
1.26
|
(1)
|
Non-GAAP financial
measure; see discussion in Non-GAAP Financial Measures section at
the end of this news release
|
(2)
|
"Other" includes
accretion expense, net income applicable to non-controlling
interests, foreign exchange losses, and NCI portion of non-GAAP
adjustments. The portion of non-GAAP adjustments applicable to
non-controlling interests are excluded in the computation of
normalized net income to ensure consistency of normalizations
applied to controlling and non-controlling interests. These amounts
are included in the "net income applicable to non-controlling
interests" line item on the Consolidated Statements of
Income.
|
(3)
|
Weighted
average.
|
Normalized EBITDA for the first quarter of 2023 was $582 million compared to $574 million for the same quarter in 2022. The
largest factors leading to the variance are described in the
Business Performance sections above.
For the first quarter of 2023, the average Canadian/U.S. dollar
exchange rate increased to 1.35 from an average of 1.27 in the same
period of 2022.
Income before income taxes was $619
million for the first quarter of 2023 compared to
$504 million for the same quarter in
2022. Net income applicable to common shares was $445 million or $1.58 per share for the first quarter of 2023,
compared to net income applicable to common shares of $357 million or $1.27 per share for the same quarter in 2022.
Please refer to the Three Months Ended March
31 Section of the MD&A for further details on the
variance in income before income taxes and net income applicable to
common shareholders.
Normalized net income was $277
million ($0.98 per share) for
the first quarter of 2023, compared to $285
million ($1.02 per share) for
the same quarter of 2022. The decrease was mainly due to higher
interest expense, partially offset by lower net income applicable
to non-controlling interests, the same previously referenced
factors impacting normalized EBITDA, and lower preferred share
dividends.
Normalized funds from operations for the first quarter of 2023
was $460 million or $1.63 per share, compared to $462 million or $1.65 per share for the same quarter in 2022. The
slight decrease was mainly due to higher interest expense,
partially offset lower normalized current income tax expense and
the same previously referenced factors impacting normalized
EBITDA.
Depreciation and amortization expense for the first quarter of
2023 was $111 million, compared to
$112 million for the same quarter in
2022. Factors impacting depreciation and amortization expense in
the first quarter of 2023 included the impact of the Alaska
Utilities disposition, partially offset by the impact of new assets
placed in-service.
Interest expense for the first quarter of 2023 was $105 million, compared to $71 million for the same quarter in 2022. The
increase was mainly due to $9 million
of interest relating to the subordinated hybrid notes, higher
average interest rates, higher average debt balances, and a higher
average Canadian/U.S. dollar exchange rate.
Income tax expense was $163
million for the first quarter of 2023, compared to an income
tax expense of $107 million for the
same quarter of 2022. The increase was mainly due to the tax impact
of the Alaska Utilities Disposition. Current tax expense of
$53 million was recorded in the first
quarter of 2023, compared to current tax expense of $45 million recorded in the same quarter of 2022.
The increase in current tax expense was mainly due to the impact of
the Alaska Utilities disposition in the first quarter of 2023.
FORWARD FOCUS, GUIDANCE AND FUNDING
AltaGas continues to focus on executing on its long-term
corporate strategy of building a diversified platform that operates
long-life energy infrastructure assets that connect customers and
markets and are positioned to provide resilient and durable value
for the Company's stakeholders.
Following the first quarter results, AltaGas expects to achieve
guidance ranges that were previously disclosed in December 2022, including:
- 2023 Normalized EPS guidance of $1.85 - $2.05 per
share, compared to actual normalized EPS of $1.89 and GAAP EPS of $1.42 in 2022; and
- 2023 Normalized EBITDA guidance of $1.5
billion - $1.6 billion,
compared to actual normalized EBITDA of $1.54 billion and income before taxes of
$716 million in 2022.
AltaGas continues to focus on delivering durable and growing
normalized EPS and FFO per share while targeting lowering leverage
ratios. This strategy should support steady dividend growth and
provide the opportunity for ongoing capital appreciation for its
long-term shareholders. This includes AltaGas having announced
plans to deliver regular, sustainable, and annual dividend
increases that compound in the years ahead with an anticipated five
to seven percent compounded annual growth rate through 2026. Annual
dividend increases will be a function of financial performance and
determined by the Board on an annual basis.
AltaGas is maintaining a disciplined, self-funded capital
program of approximately $930 million
in 2023, excluding asset retirement obligations. The Company also
expects approximately $90 million of
capital investments that were approved in 2022 to rollover and be
deployed in early 2023. The 2023 capital program includes continued
strong investments in the Utilities and Midstream businesses that
are focused on ensuring long-term safety and reliability of the
asset base and position AltaGas to meet its customers long-term
needs and drive the best collective outcomes for all
stakeholders.
QUARTERLY COMMON SHARE DIVIDEND AND PREFERRED SHARE
DIVIDENDS
The Board of Directors approved the following schedule of
Dividends:
Type
|
Dividend
(per
share)
|
Period
|
Payment
Date
|
Record
|
Common
Shares1
|
$0.28
|
n.a.
|
30-Jun-23
|
16-Jun-23
|
Series A
Preferred Shares
|
$0.19125
|
31-Mar-23 to
29-Jun-23
|
30-Jun-23
|
16-Jun-23
|
Series B
Preferred Shares
|
$0.45026
|
31-Mar-23 to
29-Jun-23
|
30-Jun-23
|
16-Jun-23
|
Series E
Preferred Shares
|
$0.337063
|
31-Mar-23 to
29-Jun-23
|
30-Jun-23
|
16-Jun-23
|
Series G
Preferred Shares
|
$0.265125
|
31-Mar-23 to
29-Jun-23
|
30-Jun-23
|
16-Jun-23
|
Series H
Preferred Shares
|
$0.47519
|
31-Mar-23 to
29-Jun-23
|
30-Jun-23
|
16-Jun-23
|
1.
|
Dividends on common
shares and preferred shares are eligible dividends for Canadian
income tax purposes.
|
CONFERENCE CALL AND WEBCAST DETAILS
AltaGas will hold a conference call today, April 26, at 9:00 a.m.
MT (11:00 a.m. ET) to discuss
first quarter 2023 results and other corporate developments.
- Date/Time: April 26, 2023,
9:00 a.m. MT (11:00 a.m. ET)
- Dial-in: 1-416-764-8659 or toll free at 1-888-664-6392 or Click
to Join
- Webcast:
https://www.altagas.ca/invest/events-and-presentations
Shortly after the conclusion of the call, a replay will be
available commencing at 12:00 p.m. MT
(2:00 p.m. ET) on April 26, 2023, by dialing 416-764-8677 or toll
free 1-888-390-0541. The passcode is 346734#. The replay will
expire at 11:59 p.m. MT (1:59 p.m. ET) on May 3,
2023.
AltaGas' Consolidated Financial Statements and accompanying
notes for the first quarter 2023, as well as its related
Management's Discussion and Analysis, are now available online at
www.altagas.ca. All documents will be filed with the Canadian
securities regulatory authorities and will be posted under AltaGas'
SEDAR profile at www.sedar.com.
NON-GAAP MEASURES
This news release contains references to certain financial
measures that do not have a standardized meaning prescribed by US
GAAP and may not be comparable to similar measures presented by
other entities. The non-GAAP measures and their reconciliation to
US GAAP financial measures are shown below and within AltaGas'
Management's Discussion and Analysis (MD&A) as at and for the
period ended March 31, 2023. These
non-GAAP measures provide additional information that management
believes is meaningful regarding AltaGas' operational performance,
liquidity and capacity to fund dividends, capital expenditures, and
other investing activities. Readers are cautioned that these
non-GAAP measures should not be construed as alternatives to other
measures of financial performance calculated in accordance with US
GAAP.
Normalized EBITDA
|
Three Months
Ended
March 31
|
($
millions)
|
2023
|
2022
|
Income before income
taxes (GAAP financial measure)
|
$
619
|
$
504
|
Add:
|
|
|
Depreciation and
amortization
|
111
|
112
|
Interest
expense
|
105
|
71
|
EBITDA
|
$
835
|
$
687
|
Add
(deduct):
|
|
|
Transaction costs
related to acquisitions and dispositions (1)
|
15
|
1
|
Unrealized losses
(gains) on risk management contracts (2)
|
36
|
(110)
|
Gains on sale of
assets (3)
|
(307)
|
(7)
|
Accretion
expenses
|
3
|
2
|
Foreign exchange
losses
|
—
|
1
|
Normalized
EBITDA
|
$
582
|
$
574
|
(1)
|
Comprised of
transaction costs related to acquisitions and dispositions of
assets and/or equity investments in the period. These costs are
included in the "cost of sales" and "operating and administrative"
line items on the Consolidated Statements of Income. Transaction
costs include expenses, such as legal fees, which are directly
attributable to the acquisition or disposition. Please refer to
Note 3 of the unaudited condensed interim Consolidated Financial
Statements as at and for the three months ended March 31, 2023 for
further details regarding AltaGas' disposition of assets in the
period.
|
(2)
|
Included in the
"revenue" and "cost of sales" line items on the Consolidated
Statements of Income. Please refer to Note 13 of the unaudited
condensed interim Consolidated Financial Statements as at and for
the three months ended March 31, 2023 for further details regarding
AltaGas' risk management activities.
|
(3)
|
Included in the "other
income" line item on the Consolidated Statements of Income. Please
refer to Note 3 of the unaudited condensed interim Consolidated
Financial Statements as at and for the three months ended March 31,
2023 for further details regarding AltaGas' disposition of assets
in the period.
|
EBITDA is a measure of AltaGas' operating profitability prior to
how business activities are financed, assets are amortized, or
earnings are taxed. EBITDA is calculated from the Consolidated
Statements of Income using income before income taxes adjusted for
pre–tax depreciation and amortization, interest expense.
AltaGas presents normalized EBITDA as a supplemental measure.
Normalized EBITDA is used by Management to enhance the
understanding of AltaGas' earnings over periods, as well as for
budgeting and compensation related purposes. The metric is
frequently used by analysts and investors in the evaluation of
entities within the industry as it excludes items that can vary
substantially between entities depending on the accounting policies
chosen, the book value of assets, and the capital structure.
Normalized Net Income
|
Three Months
Ended
March 31
|
($
millions)
|
2023
|
2022
|
Net income applicable
to common shares (GAAP financial measure)
|
$
445
|
$
357
|
Add (deduct)
after-tax:
|
|
|
Transaction costs
related to acquisitions and dispositions (1)
|
11
|
—
|
Unrealized losses
(gains) on risk management contracts (2)
|
28
|
(81)
|
Non-controlling
interest portion of non-GAAP adjustments (3)
|
—
|
4
|
Gains on sale of
assets (4)
|
(207)
|
(5)
|
Loss on redemption of
preferred shares (5)
|
—
|
10
|
Normalized net
income
|
$
277
|
$
285
|
(1)
|
Comprised of
transaction costs related to acquisitions and dispositions of
assets and/or equity investments in the period. The pre-tax costs
are included in the "cost of sales" and "operating and
administrative" line items on the Consolidated Statements of
Income. Transaction costs include expenses, such as legal fees,
which are directly attributable to the acquisition or disposition.
Please refer to Note 3 of the unaudited condensed interim
Consolidated Financial Statements as at and for the three months
ended March 31, 2023 for further details regarding AltaGas'
disposition of assets in the period.
|
(2)
|
The pre-tax amounts are
included in the "revenue" and "cost of sales" line items on the
Consolidated Statements of Income. Please refer to Note 13 of the
unaudited condensed interim Consolidated Financial Statements as at
and for the three months ended March 31, 2023 for further details
regarding AltaGas' risk management activities.
|
(3)
|
The portion of non-GAAP
adjustments applicable to non-controlling interests are excluded in
the computation of normalized net income to ensure consistency of
normalizations applied to controlling and non-controlling
interests. These amounts are included in the "net income applicable
to non-controlling interests" line item on the Consolidated
Statements of Income.
|
(4)
|
The pre-tax amounts are
included in the "other income" line item on the Consolidated
Statements of Income. Please refer to Note 3 of the unaudited
condensed interim Consolidated Financial Statements as at and for
the three months ended March 31, 2023 for further details regarding
AltaGas' disposition of assets in the period.
|
(5)
|
Comprised of the loss
on the redemption of Series K Preferred Shares on March 31, 2022.
The loss on redemption of preferred shares is recorded on the "loss
of redemption of preferred shares" line on the Consolidated
Statements of Income.
|
Normalized net income and normalized net income per share are used
by Management to enhance the comparability of AltaGas' earnings, as
these metrics reflect the underlying performance of AltaGas'
business activities.
Normalized Funds From Operations
|
Three Months
Ended
March 31
|
($
millions)
|
2023
|
2022
|
Cash from operations
(GAAP financial measure)
|
$
591
|
$
682
|
Add
(deduct):
|
|
|
Net change in
operating assets and liabilities
|
(190)
|
(225)
|
Asset retirement
obligations settled
|
2
|
2
|
Funds from
operations
|
$
403
|
$
459
|
Add
(deduct):
|
|
|
Transaction costs
related to acquisitions and dispositions (1)
|
15
|
1
|
Current tax
expense on asset sales (2)
|
42
|
2
|
Normalized funds from
operations
|
$
460
|
$
462
|
(1)
|
Comprised of costs
related to acquisitions and dispositions of assets and/or equity
investments in the period. These costs exclude any non-cash amounts
and are included in the "cost of sales" and "operating and
administrative" line items on the Consolidated Statements of
Income. Transaction costs include expenses, such as legal fees,
which are directly attributable to the acquisition or disposition.
Please refer to Note 3 of the unaudited condensed interim
Consolidated Financial Statements as at and for the three months
ended March 31, 2023 for further details regarding AltaGas'
disposition of assets in the period.
|
(2)
|
Included in the
"current income tax expense" line item on the Consolidated
Statements of Income.
|
Normalized funds from operations and funds from operations are used
to assist Management and investors in analyzing the liquidity of
the Corporation. Management uses these measures to understand the
ability to generate funds for capital investments, debt repayment,
dividend payments, and other investing activities.
Funds from operations and normalized funds from operations as
presented should not be viewed as an alternative to cash from
operations or other cash flow measures calculated in accordance
with GAAP.
Invested Capital
|
Three Months
Ended
March 31
|
($
millions)
|
2023
|
2022
(3)
|
Cash used in (from)
investing activities (GAAP financial measure)
|
$
(869)
|
$
159
|
Add
(deduct):
|
|
|
Net change in non-cash
capital expenditures (1)
|
(28)
|
(37)
|
Asset
dispositions
|
1,072
|
20
|
Invested
capital
|
$
175
|
$
142
|
(1)
|
Comprised of non-cash
capital expenditures included in the "accounts payable and accrued
liabilities" line item on the Consolidated Balance Sheets. Please
refer to Note 19 of the unaudited condensed interim Consolidated
Financial Statements as at and for the three months ended March 31,
2023 for further details.
|
Invested capital is a measure of AltaGas' use of funds for capital
expenditure activities. It includes expenditures relating to
property, plant, and equipment and intangible assets, capital
contributed to long term investments, and contributions from
non-controlling interests. Invested capital is used by Management,
investors, and analysts to enhance the understanding of AltaGas'
capital expenditures from period to period and provide additional
detail on the Company's use of capital.
CONSOLIDATED FINANCIAL REVIEW
|
Three Months
Ended
March 31
|
($ millions, except
effective income tax rates)
|
2023
|
2022
|
Revenue
|
4,048
|
3,892
|
Normalized EBITDA
(1)
|
582
|
574
|
Income before income
taxes
|
619
|
504
|
Net income applicable
to common shares
|
445
|
357
|
Normalized net income
(1)
|
277
|
285
|
Total assets
|
21,989
|
21,766
|
Total long-term
liabilities
|
11,233
|
11,386
|
Invested capital
(1)
|
175
|
142
|
Cash from (used by)
investing activities
|
869
|
(159)
|
Dividends declared
(2)
|
79
|
74
|
Cash from
operations
|
591
|
682
|
Normalized funds from
operations (1)
|
460
|
462
|
Normalized effective
income tax rate (%) (1)
|
20.7
|
19.6
|
Effective income tax
rate (%)
|
26.4
|
21.2
|
|
Three Months
Ended
March 31
|
($ per share, except
shares outstanding)
|
2023
|
2022
|
Net income per common
share - basic
|
1.58
|
1.27
|
Net income per common
share - diluted
|
1.57
|
1.26
|
Normalized net income -
basic (1)
|
0.98
|
1.02
|
Normalized net income -
diluted (1)
|
0.98
|
1.01
|
Dividends declared
(2)
|
0.28
|
0.27
|
Cash from
operations
|
2.10
|
2.44
|
Normalized funds from
operations (1)
|
1.63
|
1.65
|
Shares outstanding -
basic (millions)
|
|
|
During the period
(3)
|
282
|
280
|
End of
period
|
282
|
281
|
1)
|
Non–GAAP financial
measure or non-GAAP financial ratio; see discussion in Non-GAAP
Financial Measures section of this MD&A.
|
2)
|
Dividend declared per
common share per quarter: $0.265 per share beginning March 2022,
increased to $0.28 per share effective March 31, 2023.
|
3)
|
Weighted
average.
|
ABOUT ALTAGAS
AltaGas is a leading North American infrastructure company that
connects customers and markets to affordable and reliable sources
of energy. The Company operates a diversified, lower-risk,
high-growth Utilities and Midstream business that is focused on
delivering resilient and durable value for its stakeholders.
For more information visit www.altagas.ca or reach out to one of
the following:
Jon Morrison
Senior
Vice President, Corporate Development and Investor Relations
Jon.Morrison@altagas.ca
Adam McKnight
Director,
Investor Relations
Adam.McKnight@altagas.ca
Investor Inquiries
1-877-691-7199
investor.relations@altagas.ca
Media Inquiries
1-403-206-2841
media.relations@altagas.ca
FORWARD-LOOKING INFORMATION
This news release contains forward-looking information
(forward-looking statements). Words such as "may", "can", "would",
"could", "should", "will", "intend", "plan", "anticipate",
"believe", "aim", "seek", "propose", "contemplate", "estimate",
"focus", "strive", "forecast", "expect", "project", "target",
"potential", "objective", "continue", "outlook", "vision",
"opportunity" and similar expressions suggesting future events or
future performance, as they relate to the Corporation or any
affiliate of the Corporation, are intended to identify
forward-looking statements. In particular, this news release
contains forward-looking statements with respect to, among other
things, business objectives, expected growth, results of
operations, performance, business projects and opportunities and
financial results. Specifically, such forward-looking
statements included in this document include, but are not limited
to, statements with respect to the following: AltaGas' belief in
the role and importance of the Blythe facility in meeting
California's long-term energy
needs; AltaGas' ability to de-risk its global export business and
operate in strong partnership with its customers; AltaGas' belief
that REEF will bolster AltaGas' first mover advantage and
differentiated LPG value proposition; potential development of
AltaGas' REEF project and ability to operate with industry-leading
environmental stewardship; anticipated construction, impacts and
in-service date of three new VLGCs; 2023 normalized EBITDA guidance
of $1.5 to $1.6 billion; 2023 normalized EPS guidance of
$1.85 to $2.05; expectation for ongoing dividend growth,
including 5 to 7 percent compounded annual growth rate through
2026; AltaGas' ability to execute its strategic priorities and
achieve its 2023 and longer-term growth plans; AltaGas' Utilities'
ability to execute its regulatory strategy and achieve favourable
rates commensurate with cost of capital; AltaGas' ability to
achieve its forecasted profitability; expectation that REEF will
provide increased LPG export capacity to meet long-term energy
demand, cost synergies, product optionality and dedicated dock
access; expectation of more constructive Asian-to-North American
butane spreads for 2023 and 2024 forward strip pricing; AltaGas'
ability to achieve its medium-term 5x net debt-to-normalized EBITDA
target; AltaGas' ability to achieve its forecasted profitability;
expectation that REEF will provide increased LPG export capacity to
meet long-term energy demand, cost synergies, product optionality
and dedicated dock access; AltaGas' ability to achieve its
medium-term 5x net debt-to-normalized EBITDA target; the impact of
AltaGas' network upgrades on long-term operating costs, the
environment, and customer affordability; AltaGas' ability to
increase long-term tolling arrangements and maintaining an active
hedging program and the expected results therefrom; AltaGas' belief
in the long-term demand and growth opportunities in the
Montney region and the expected
impacts therefrom; AltaGas' ability to collaborate with First
Nations and stakeholders on sustainable resource development and
its belief and role in the growing global demand for responsibly
developed energy sources; expectation for an active hedging program
in 2023 and the expected outcomes therefrom; the percentage of
AltaGas' expected 2023 frac exposed volumes that are hedged; the
percentage of AltaGas' expected 2023 export volumes that are tolled
or financially hedged; expectation that AltaGas' development
approach of REEF will provide the most capital efficient build,
match energy export supply with throughput capacity, mitigate
challenges and provide longer-term local employment
opportunities; anticipation of successful collaboration with
First Nations and other key stakeholders for REEF; the
potential development of REEF and expected project activities,
deliverables and timing thereof; AltaGas' ability to execute its
long-term corporate strategy and achieve the expected outcomes
therefrom; AltaGas' long-term objectives for managing capital;
expected self-funded capital program of $930
million in 2023 including rollover of $90 million capital investments from 2022,
excluding asset retirement obligations; and expected
dividend payments and dates of payment.
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. Material assumptions include: anticipated timing of asset
sale closings, effective tax rates, financing initiatives, degree
day variance from normal, pension discount rate, the performance of
the businesses underlying each sector, impacts of the hedging
program, expected commodity supply, demand and pricing, volumes and
rates, exchange rates, inflation, interest rates, credit ratings,
regulatory approvals and policies, future operating and capital
costs, capacity expectations, weather, frac spread, access to
capital, planned and unplanned plant outages, timing of in-service
dates of new projects and acquisition and divestiture activities,
returns on investments, and dividend levels.
AltaGas' forward-looking statements are subject to
certain risks and uncertainties which could cause results or events
to differ from current expectations, including, without limitation:
risks related to conflict in Eastern
Europe; health and safety risks; operating risks;
infrastructure; natural gas supply risks; volume throughput;
service interruptions; transportation of petroleum products; market
risk; inflation; general economic conditions; cyber security,
information, and control systems; climate-related risks;
environmental regulation risks; regulatory risks; litigation;
changes in law; Indigenous and treaty rights; dependence on certain
partners; political uncertainty and civil unrest; decommissioning,
abandonment and reclamation costs; reputation risk; weather data;
capital market and liquidity risks; interest rates; internal credit
risk; foreign exchange risk; debt financing, refinancing, and debt
service risk; counterparty and supplier risk; technical systems and
processes incidents; growth strategy risk; construction and
development; underinsured and uninsured losses; impact of
competition in AltaGas' businesses; counterparty credit risk;
composition risk; collateral; rep agreements; market value of
common shares and other securities; variability of dividends;
potential sales of additional shares; labor relations; key
personnel; risk management costs and limitations; commitments
associated with regulatory approvals for the acquisition of WGL;
cost of providing retirement plan benefits; failure of service
providers; risks related to pandemics, epidemics or disease
outbreaks, including COVID-19; and the other factors discussed
under the heading "Risk Factors" in the Corporation's Annual
Information Form for the year ended December
31, 2022 and set out in AltaGas' other continuous disclosure
documents.
Many factors could cause AltaGas' or any particular business
segment's actual results, performance or achievements to vary from
those described in this press release, including, without
limitation, those listed above and the assumptions upon which they
are based proving incorrect. 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 news release as intended, planned,
anticipated, believed, sought, proposed, estimated, forecasted,
expected, projected or targeted and such forward-looking statements
included in this news release, 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 news release. 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 news release are
expressly qualified by these cautionary statements.
Financial outlook information contained in this news release
about prospective financial performance, financial position, or
cash flows is based on assumptions about future events, including
economic conditions and proposed courses of action, based on
AltaGas management's (Management) assessment of the relevant
information currently available. Readers are cautioned that such
financial outlook information contained in this news release should
not be used for purposes other than for which it is disclosed
herein.
Additional information relating to AltaGas, including its
quarterly and annual MD&A and Consolidated Financial
Statements, AIF, and press releases are available through AltaGas'
website at www.altagas.ca or through SEDAR at www.sedar.com
SOURCE AltaGas Ltd.