Performance Due to Strong Midstream Execution, Record First
Quarter Global Export Volumes, and Continued Advancement of Major
Strategic Priorities
CALGARY,
AB, May 2, 2024 /CNW/ - AltaGas Ltd.
("AltaGas" or the "Company") (TSX: ALA) today reported first
quarter 2024 financial results and provided an update on its
operations and other corporate developments.
HIGHLIGHTS
(all financial figures are unaudited and in Canadian dollars
unless otherwise noted)
- Normalized EPS1 was $1.14 in the first quarter of 2024 compared to
$0.99 in the first quarter of 2023,
representing a 15 percent year-over-year increase, while GAAP
EPS2 was $1.38 in the
first quarter of 2024 compared to $1.58 in the first quarter of 2023. Normalized
EPS was ahead of AltaGas' expectations due to strong Midstream
performance, including robust global exports volumes partially due
to favorable timing of ships at the end of the first quarter, and
continued cost management.
- Normalized EBITDA1 was $660
million in the first quarter of 2024 compared to
$582 million in the first quarter of
2023, while income before income taxes was $541 million in the first quarter of 2024
compared to $619 million in the first
quarter of 2023. The quarter included strong Midstream performance
while Utilities results were in line with expectations.
- Normalized FFO per share1 was $1.73 in the first quarter of 2024 compared to
$1.63 in the first quarter of 2023,
while cash from operations per share3 was $1.89 in the first quarter of 2024 compared to
$2.10 in the first quarter of
2023.
- The Utilities segment reported normalized EBITDA of
$437 million in the first quarter of
2024 compared to $401 million in the
first quarter of 2023, while income before income taxes was
$384 million in the first quarter of
2024 compared to $590 million in the
first quarter of 2023. The largest drivers of the year-over-year
growth in Utilities normalized EBITDA included strong performance
from WGL's Retail business, contribution from AltaGas'
continued investment in rate base, customer additions, and the
positive impact of the District of
Columbia ("D.C.") rate case. These positive factors were
partially offset by the lost contribution of the Alaska Utilities
due to its divestiture on March 1,
2023 and associated gain on debt defeasance.
- The Midstream segment reported normalized EBITDA of
$247 million in the first quarter of
2024 compared to $183 million in the
first quarter of 2023, while income before income taxes was
$297 million in the first quarter of
2024 compared to $138 million in the
first quarter of 2023. The largest drivers of the year-over-year
increase in Midstream normalized EBITDA included strong performance
in the global exports business, including record first quarter
volumes, the benefit from Allowance for Funds Used During
Construction ("AFUDC") associated with the construction of the
Mountain Valley Pipeline ("MVP"), strong marketing performance, and
the addition of the newly acquired Pipestone assets.
- AltaGas exported a first quarter record of 115,108 Bbl/d of
liquified petroleum gases ("LPGs") to Asia in the quarter,
which represented a 16 percent year-over-year increase. Growth was
underpinned by strong execution at the Ridley Island Propane Export
Terminal ("RIPET") and Ferndale Terminal ("Ferndale"), continued
strong demand in Asia, and
increased LPG supply in Western
Canada.
- AltaGas continued to advance key Midstream growth projects in
the quarter. This included the Company drilling the first acid gas
injection well for the Pipestone II expansion project and
continuing to advance key activities on the Ridley Island Energy
Export Facility ("REEF"). Site clearing work at REEF has progressed
as expected, while key commercial agreements are progressing.
AltaGas continues to expect a positive final investment decision
("FID") during the second quarter of 2024.
- AltaGas is pleased with the construction progress on MVP. The
pipeline is more than 99 percent complete and is expected to be
placed into service in June of 2024, where it will provide critical
energy security to customers in the Eastern U.S. As previously
disclosed, AltaGas does not consider its equity stake in MVP as
core and will consider value maximizing opportunities once the
pipeline is fully operational.
- In the first quarter of 2024, AltaGas commissioned one new
very large gas carrier ("VLGC"), the Boreal Voyager, under a
seven-year contract with optional extensions, and extended an
existing contract for one VLGC time charter with Astomos, with whom
AltaGas has had a long-standing partnership since RIPET was
commissioned. This follows the commissioning of the Boreal Pioneer
in December 2023, which is also
operating under a seven-year agreement. These three time charters
will reduce and de-risk shipping costs with materially all of
AltaGas' expected Baltic freight
exposure protected through time charters, financial hedges, and
tolled volumes in 2024.
- AltaGas had two financings in the first quarter of 2024,
including:
- On January 8, 2024, AltaGas
issued $400 million of senior
unsecured medium-term notes with a 4.67 percent coupon, due on
January 8, 2029. The net proceeds
were used to pay down existing indebtedness under AltaGas' credit
facilities (part of which was incurred to fund the debt portion of
the Pipestone Acquisition), to fund working capital, and for
general corporate purposes.
- On March 14, 2024, AltaGas
issued $350 million of senior
unsecured medium-term notes with a 5.14 percent coupon, due on
March 14, 2034 and $250 million of senior unsecured medium-term
notes with a 5.60 percent coupon, due on March 14, 2054. The net proceeds were used to
refinance AltaGas' March 2024
medium-term note maturities, pay down other existing indebtedness,
fund working capital, and for general corporate purposes.
- Following a strong first quarter, AltaGas is reiterating
the Company's 2024 full year guidance, including normalized
EPS1 of $2.05 to
$2.25, and normalized
EBITDA1 of $1,675 million
to $1,775 million.
(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, 2024,
which is available on www.sedarplus.ca. (2) GAAP EPS is equivalent
to Net income applicable to common shares divided by shares
outstanding. (3) GAAP FFO per share is equivalent to cash from
operations divided by shares outstanding.
|
CEO MESSAGE
"We're pleased with our first quarter performance and continued
execution of our long-term strategic plan" said Vern Yu, President and Chief Executive Officer
of AltaGas. "Performance in the quarter was ahead of our
expectations and reflected the purposeful actions we have taken to
leverage our growth opportunities, optimize our assets, de-risk the
business commercially and financially, and deliver long-term value
for our stakeholders.
"Performance in our Utilities was in line with our expectations
and continued to deliver stable and growing earnings for the
enterprise, despite warmer-than-normal weather throughout much of
the quarter. In addition to the strong Retail performance, the
quarter included the benefit of continued modernization
investments, customer growth, and the D.C. rate case. We continued
to make strong investments in our Utilities during the quarter to
meet the needs of our expanding customer base and support long-term
safety and reliability needs through ongoing asset modernization
programs. Our natural gas Utilities have a bright future as the
lowest cost and most reliable form of residential and commercial
heating across our jurisdictions.
"Performance in our Midstream segment was robust, including
strong execution in global exports and the addition of the
Pipestone assets. We also
benefited from AFUDC on MVP as the pipeline completes the final
stage of construction and should be brought into service in June.
Long-term fundamentals for the sector remain strong, despite soft
natural gas prices during the quarter, as the industry prepares for
large increases in globally-connected egress for Western Canadian
natural gas. We completed a successful natural gas liquids ("NGL")
re-contracting season on April 1,
2024, with a high level of LPG supply contracted for the
coming year we have made solid progress toward our medium-term
target, with 56 percent of expected global exports volumes now
tolled, starting in the second quarter of 2024. We continue to see
attractive brownfield and greenfield growth opportunities across
the Midstream value chain and look forward to leveraging these
opportunities in the years ahead.
"We remain focused on executing our strategic priorities that
will drive long-term value for our stakeholders. This includes
operating with an equity self-funding model, commercially
de-risking the business through increasing our tolling, take-or-pay
and fee-for-service contracts, continued balance sheet
deleveraging, optimizing our assets for the best risk-adjusted
returns, and executing with a high degree of capital discipline. In
the near-term, we are also focused on executing the construction of
the Pipestone Phase II expansion project, which we reached a
positive FID in December 2023, and
look forward to completing the final milestones to reach a positive
FID on REEF during the second quarter of 2024."
RESULTS BY SEGMENT
Normalized EBITDA
(1)
|
Three Months
Ended
March 31
|
($
millions)
|
2024
|
2023
|
Utilities
|
$
437
|
$
401
|
Midstream
|
247
|
183
|
Corporate/Other
|
(24)
|
(2)
|
Normalized EBITDA
(1)
|
$
660
|
$
582
|
(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)
|
2024
|
2023
|
Utilities
|
$
384
|
$
590
|
Midstream
|
297
|
138
|
Corporate/Other
|
(140)
|
(109)
|
Income Before Income
Taxes
|
$
541
|
$
619
|
BUSINESS PERFORMANCE
Utilities
The Utilities segment reported normalized EBITDA of $437 million in the first quarter of 2024
compared to $401 million in the first
quarter of 2023, while income before income taxes was $384 million in the first quarter of 2024
compared to $590 million in the first
quarter of 2023. The largest drivers of the year-over-year growth
in Utilities normalized EBITDA included strong Retail performance,
contributions from AltaGas' continued investment in rate base on
behalf of its customers through the Company's various Accelerated
Replacement Programs ("ARPs"), new customer additions, and the
positive impact of the D.C. rate case. These positive factors were
partially offset by the lost contribution of the Alaska Utilities
due to its divestiture on March 1,
2023, which had contributed $16
million during the first quarter of 2023, and the absence of
the gain from the debt defeasance associated with the Alaska
Utilities sale.
AltaGas continues to make investments across its Utilities
network to improve the safety and reliability of the system on
behalf of its customers. During the first quarter of 2024 AltaGas
invested $179 million across the
Utilities network, including approximately $85 million within the Company's various asset
modernization programs. These investments continue to be directed
towards improving the safety and reliability of the system and
connecting customers to the critical energy they require to carry
out everyday life. These investments should also reduce leak rates
and bring long-term operating cost benefits to our customers.
AltaGas will continue to make these critical investments, while
balancing the need for ongoing customer affordability, which is
particularly important during the current economic environment of
higher interest rates and affordability challenges. AltaGas
continues to be acutely focused on cost management across the
Utilities platform, managing capital investments, and driving the
best outcomes for its customers and stakeholders.
During the quarter, the Public Service Commission of
Maryland ("PSC of MD") issued an
order to amend Washington Gas' most recent Maryland rate case order that was issued on
December 14, 2023. The amendment
resulted in an increase in rates of approximately US$13MM, instead
of the US$10.0 million increase that
was named in the December 14, 2023
rate order.
On April 1, 2024, SEMCO Energy
submitted its MRP and IRIP amendment application, seeking approval
from the MPSC to extend these modernization programs for
approximately US$46 million and
US$68 million, respectively, for the
period from 2025 to 2027. This will allow AltaGas to make critical
long-term investments in Michigan
to reinforce our network and deliver safe and reliable
operations.
Midstream
The Midstream segment reported normalized EBITDA of $247 million in the first quarter of 2024
compared to $183 million in the first
quarter of 2023, while income before income taxes was $297 million in the first quarter of 2024
compared to $138 million in the first
quarter of 2023. The largest drivers of the year-over-year increase
in Midstream normalized EBITDA was strong performance in the global
exports business, including record first quarter volumes, the
benefit from AFUDC associated with the construction of MVP, strong
marketing performance, and contribution from the Pipestone Assets
that were acquired in the fourth quarter of 2023. These factors
were partially offset by the absence of the favourable resolution
of certain acquisition related commercial disputes and
contingencies in the first quarter of 2023, and lower earnings at
the extraction facilities due to the impact of higher re-injection
of volumes and lower realized frac spreads.
AltaGas has continued to add longer-term contracts in recent
months as part of the Company's strategic focus on increasing
tolling within the global exports business and providing customers
the benefit of direct market access in Asia.
AltaGas exported 115,108 Bbls/d of LPGs to Asia in the first quarter of 2024, including
12 VLGCs at RIPET, and 7 VLGCs at Ferndale. This represented a 16 percent
year-over-year increase from the first quarter of 2024 and was
underpinned by strong execution at both terminals, continued strong
demand in Asia, increased LPG
supply in Western Canada, and
favorable ship timing. On the latter, this included AltaGas
benefiting from one delayed ship in the fourth quarter of 2023 that
was loaded at the beginning of the first quarter of 2024, and one
ship loaded at the end of the first quarter of 2024 that was
previously expected to be loaded at the beginning of the second
quarter of 2024. This latter ship loading had the net impact of
shifting certain profits that were previously expected in the
second quarter of 2024 to the first quarter of 2024 with no net
impact on the full-year volumes or expected profits.
Subsequent to quarter-end, AltaGas completed a successful NGL
re-contracting season on April 1,
2024 with strong LPG supply contracted for the coming year,
while also making considerable tolling progress within our global
exports business in recent months. This includes 56 percent of
expected global exports now tolled, starting in the second quarter
of 2024. These tolling contracts will provide AltaGas' customers
with direct access to Asian markets, which traditionally trade at
strong premiums to the domestic Canadian market, while providing
AltaGas the benefit of stable and predictable contracted cash
flows. As part of this tolling success, AltaGas crystallized
certain financial hedges to avoid an imbalance of financial and
physical merchant barrels in the coming quarters. This resulted in
a positive gain on settlements in the first quarter of 2024, which
had the effect of shifting profits associated with merchant barrels
that would have been realized in the future quarters into the first
quarter of 2024.
Over the longer-term, AltaGas continues to see growing demand
for LPG exports driven by the Company's structural shipping
advantage to Asia and access to
low-cost Canadian supply. This structural advantage was amplified
in recent quarters due to the restricted vessel traffic through the
Panama Canal, which has resulted in additional demand for reliable
and ratably-sourced Canadian LPGs. Although shipping volumes
through the Panama Canal have now normalized, the risk of future
reduced throughput traffic remains. This highlights the mutual
benefits of a growing Canadian-Pacific energy partnership and the
critical role Canada can play in
providing long-term energy security.
Performance across the balance of the Midstream platform was
strong but included partially curtailed gas processing volumes due
to cold weather and maintenance related outages at certain
facilities. The Pipestone assets
have been integrated and AltaGas welcomed its new employees who
joined the Company as part of the transaction. AltaGas is now
focused on leveraging the long-term growth opportunities and
delivering on the returns that can be generated with the
Pipestone assets, which are now
part of AltaGas' value chain. The Company is pleased with the
transition of operatorship and progress realized to date.
AltaGas continued to advance key Midstream growth projects
during and subsequent to the quarter. This included AltaGas having
drilled the first acid gas injection well for the Pipestone II
expansion project during the quarter, having spud the second acid
gas injection well subsequent to the quarter-end, and the Company
continuing to advance key activities on REEF during and subsequent
to the first quarter of 2024. Logging, clearing, and drainage work
at REEF has progressed as expected, while key commercial agreements
also progress. As such, AltaGas continues to expect a positive FID
during the second quarter of 2024.
AltaGas is pleased with the construction progress on MVP. The
pipeline is more than 99 percent complete and expected to be placed
into service in June of 2024, where it will provide critical energy
security to customers in the Eastern U.S. As previously disclosed,
AltaGas does not consider its equity stake in MVP as core and will
consider value maximizing opportunities once the pipeline is fully
operational.
AltaGas is well-hedged for 2024 with approximately 90 percent of
the remaining 2024 expected global export volumes tolled or
financially hedged. Merchant volumes are hedged at an average Far
East Index ("FEI") to North American financial hedge price of
approximately US$16.82/Bbl. This
includes AltaGas entering the year with approximately 40 percent of
forward global export volumes tolled with the expectation of
reaching 50 percent or higher tolling by the end of 2024. Based on
AltaGas' signed deals, the Company expects to exceed these tolling
levels with 56 percent of 2024 expected annual global exports now
tolled, starting in the second quarter of 2024. Approximately 83
percent of the Company's 2024 expected frac exposed volumes are
hedged at approximately $25.84/Bbl,
prior to transportation costs. AltaGas continues to actively manage
risk across the Midstream platform through commercial constructs
and a systematic hedging program that covers key revenue and
operating costs.
Midstream Hedge
Program
|
Q2
2024
|
Q3
2024
|
Q4
2024
|
Remainder
of 2024
|
Global Exports volumes
hedged (%) (1)
|
92
|
96
|
82
|
90
|
Average propane/butane
FEI to North America hedge (US$/Bbl) (2)
|
18.24
|
15.79
|
16.82
|
16.82
|
Fractionation volume
hedged (%) (3)
|
90
|
91
|
71
|
83
|
Frac spread hedge rate
- (CAD$/Bbl) (3)
|
26.66
|
26.66
|
24.21
|
25.84
|
(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
In the Corporate/Other segment, normalized EBITDA was a loss of
$24 million in the first quarter of
2024 compared to a $2 million loss in
the same quarter of 2023, while loss before income taxes was
$140 million in the first quarter of
2024 compared to a loss of $109
million in the first quarter of 2023. Normalized EBITDA
in the quarter was impacted by lower contribution from Blythe
primarily due to a planned turnaround that was extended by 22 days
due to AltaGas electing to undertake additional preventative
maintenance during the outage. Blythe was brought online near the
end of the first quarter of 2024 and is expected to have normal
contribution for the balance of the year. Corporate/Other
Normalized EBITDA was also impacted by higher Corporate expenses
related to employee incentive plans due to AltaGas' share price
appreciation.
CONSOLIDATED FINANCIAL RESULTS
|
Three Months
Ended
March 31
|
($
millions)
|
2024
|
2023
|
Normalized EBITDA
(1)
|
$
660
|
$
582
|
Add
(deduct):
|
|
|
Depreciation and
amortization
|
(116)
|
(111)
|
Interest
expense
|
(107)
|
(105)
|
Normalized income tax
expense
|
(100)
|
(76)
|
Preferred share
dividends
|
(4)
|
(6)
|
Other
(2)
|
5
|
(5)
|
Normalized net
income (1)(3)
|
$
338
|
$
279
|
|
|
|
Net income
applicable to common shares
|
$
408
|
$
445
|
Normalized funds
from operations (1)
|
$
510
|
$
460
|
|
|
|
($ per share, except
shares outstanding)
|
|
|
Shares outstanding -
basic (millions)
|
|
|
During the period
(4)
|
295
|
282
|
End of
period
|
296
|
282
|
|
|
|
Normalized net income -
basic (1)(3)
|
1.14
|
0.99
|
Normalized net income -
diluted (1)(3)
|
1.14
|
0.99
|
|
|
|
Net income per common
share - basic
|
1.38
|
1.58
|
Net income per common
share - diluted
|
1.37
|
1.57
|
(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 gains (losses), unrealized foreign
exchange losses on intercompany balances 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)
|
In the fourth quarter
of 2023, AltaGas changed its non-GAAP policy to exclude the impact
of unrealized foreign exchange losses (gains) on intercompany
balances between Canadian and U.S. entities. Prior periods have
been restated to reflect this change. Please refer to the Q1 2024
MD&A for additional details.
|
(4)
|
Weighted
average.
|
Normalized EBITDA for the first quarter of 2024 was $660 million compared to $582 million for the same quarter in 2023. The
largest factors contributing to the year-over-year increase are
described in the Business Performance sections above.
Income before income taxes was $541
million for the first quarter of 2024 compared to
$619 million for the same quarter in
2023. The decrease was mainly due to the absence of the gain
on the Alaska Utilities Disposition as well as additional proceeds
received in the first quarter of 2023 for the favourable settlement
of contract contingencies related to the sale of the Goleta energy storage development in
Goleta, California in 2022, higher
transition and other restructuring costs, and higher depreciation
and amortization expense, partially offset by higher unrealized
gains on risk management contracts, the same previously referenced
factors impacting normalized EBITDA, lower transaction costs
related to acquisitions and dispositions, and higher foreign
exchange gains. Please refer to the "Three Months Ended
March 31" Section of the Q1 2024
management's discussion and analysis ("MD&A") for further
details on the variance in income before income taxes and net
income applicable to common shareholders.
Normalized net income was $338
million or $1.14 per share for
the first quarter of 2024, compared to $279
million or $0.99 per share
reported for the same quarter of 2023.
Normalized FFO was $510 million or
$1.73 per share for the first quarter
of 2024, compared to $460 million or
$1.63 per share for the same quarter
in 2023. The increase was mainly due to the same previously
referenced factors impacting normalized EBITDA and higher foreign
exchange gains, partially offset by the impact of non-cash items
included in normalized EBITDA and higher normalized current income
tax expense.
Depreciation and amortization expense was $116 million for the first quarter of 2024,
compared to $111 million for the same
quarter in 2023. The increase was mainly due to depreciation
expense on the Pipestone assets
and the impact of new assets placed in-service.
Interest expense for the first quarter of 2024 was $107 million, compared to $105 million for the same quarter in 2023. The
increase was mainly due to higher average interest rates and
incremental hybrid interest costs due to the issuance of additional
hybrid notes in the third quarter of 2023 replacing preferred
shares, partially offset by lower average debt
balances. Interest expense recorded on the subordinated hybrid
notes in the first quarter of 2024 was $13
million compared to $9 million
in the first quarter of 2023.
Income tax expense was $125
million for the first quarter of 2024, compared to an income
tax expense of $163 million for the
same quarter of 2023. The decrease in income tax expense was mainly
due to the tax impact of the Alaska Utilities disposition in the
first quarter of 2023.
FORWARD FOCUS, GUIDANCE AND FUNDING
AltaGas continues to execute 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 growing value for the Company's
stakeholders.
AltaGas expects to achieve its previously disclosed 2024
guidance, including:
- 2024 normalized EPS guidance of $2.05 - $2.25,
compared to normalized EPS of $1.90
and GAAP EPS of $2.27 in 2023;
and
- 2024 normalized EBITDA guidance of $1,675 million - $1,775
million, compared to normalized EBITDA of $1,575 million and income before taxes of
$912 million in 2023.
AltaGas is focused on delivering resilient and growing
normalized EPS and FFO per share while targeting lower leverage
ratios. This strategy is designed to support steady dividend growth
and provide the opportunity for ongoing capital appreciation for
long-term shareholders.
AltaGas is maintaining a disciplined, self-funded capital
program of approximately $1.2
billion, excluding asset retirement obligations ("ARO"). The
Company is allocating approximately 58 percent of AltaGas'
consolidated 2024 capital to its Utilities business, approximately
36 percent to the Midstream business and the balance to the
Corporate/Other segment.
The Company expects to maintain an equity self-funding model in
2024, for the fifth consecutive year, and will fund capital
requirements through a combination of internally generated cash
flows and investment capacity associated with rising EBITDA levels,
with no expectation to issue equity. Asset sales will be considered
on an opportunistic basis, with any potential proceeds to be used
to de-lever and strengthen the balance sheet and continue to
increase the financial flexibility of AltaGas.
QUARTERLY COMMON SHARE DIVIDEND AND PREFERRED SHARE
DIVIDENDS
The Board of Directors approved the following schedule of
Dividends:
Type (1)
|
Dividend
(per
share)
|
Period
|
Payment
Date
|
Record
|
Common
Shares
|
$0.2975
|
n.a.
|
28-Jun-24
|
14-Jun-24
|
Series A
Preferred Shares
|
$0.19125
|
31-Mar-24 to
29-Jun-24
|
28-Jun-24
|
14-Jun-24
|
Series B
Preferred Shares
|
$0.47495
|
31-Mar-24 to
29-Jun-24
|
28-Jun-24
|
14-Jun-24
|
Series G
Preferred Shares
|
$0.265125
|
31-Mar-24 to
29-Jun-24
|
28-Jun-24
|
14-Jun-24
|
Series H
Preferred Shares
|
$0.49982
|
31-Mar-24 to
29-Jun-24
|
28-Jun-24
|
14-Jun-24
|
(1) Dividends on common
shares and preferred shares are eligible dividends for Canadian
income tax purposes.
|
CONFERENCE CALL AND WEBCAST
AltaGas will hold a conference call today, May 2, 2024, at 9:00 a.m.
MT (11:00 a.m. ET) to discuss
first quarter of 2024 results and other corporate developments.
Date:
|
Thursday, May 2,
2024
|
Time:
|
9:00 a.m. MT (11:00
a.m. ET)
|
Webcast:
|
https://app.webinar.net/g1rv70vJnad
|
Dial-in (Audio
only):
|
1-416-764-8659 or toll
free at 1-888-664-6392
|
Shortly after the conclusion of the call a replay will be
available on the Company's website or by dialing 416-764-8677 or
toll free 1-888-390-0541. Passcode 598981#.
AltaGas' Consolidated Financial Statements and accompanying
notes for the first quarter of 2024, as well as its related
MD&A, 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.sedarplus.ca.
NON-GAAP MEASURES
This news release contains references to certain financial
measures that do not have a standardized meaning prescribed by U.S.
GAAP and may not be comparable to similar measures presented by
other entities. The non-GAAP measures and their reconciliation to
U.S. 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, 2024. 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 U.S. GAAP.
Change in Composition of Non-GAAP Measures
In the fourth quarter of 2023, Management has changed the
composition of certain of AltaGas' non-GAAP measures such that
normalized net income now excludes the impact of unrealized
intercompany foreign exchange gains (losses) resulting from
intercompany balances between a U.S. subsidiary and a Canadian
entity, where the foreign exchange impact in the U.S. subsidiary is
recorded through gain (loss) on foreign currency translation in the
Consolidated Statements of Comprehensive Income and the Canadian
entity revaluation is recorded through the foreign exchange gain
(loss) line item on the Consolidated Statements of Income. This
change was made as a result of Management's assessment that
excluding these intercompany foreign exchange impacts from
normalized net income is more representative of the Company's
ongoing financial performance. Prior period calculations of the
relevant non-GAAP measures have been restated to reflect this
change. The following table summarizes the impact of this change on
the periods presented in this news release:
Increase as result
of change
|
Three Months
Ended
March 31
|
($ millions, except
where noted)
|
2024
|
2023
|
Normalized net income
(1)
|
$
—
|
$
2
|
Normalized income tax
expense
|
$
—
|
$
1
|
Normalized effective
tax rate (%)
|
— %
|
0.1 %
|
(1)
Corresponding per share amounts have also been adjusted.
|
Normalized EBITDA
|
Three Months
Ended
March 31
|
($
millions)
|
2024
|
2023
|
Income before income
taxes (GAAP financial measure)
|
$
541
|
$
619
|
Add:
|
|
|
Depreciation and
amortization
|
116
|
111
|
Interest
expense
|
107
|
105
|
EBITDA
|
$
764
|
$
835
|
Add
(deduct):
|
|
|
Transaction costs
related to acquisitions and dispositions (1)
|
5
|
15
|
Unrealized losses
(gains) on risk management contracts (2)
|
(117)
|
36
|
Gains on sale of
assets (3)
|
(1)
|
(307)
|
Transition and
restructuring costs (4)
|
13
|
—
|
Accretion
expenses
|
1
|
3
|
Foreign exchange
gains
|
(5)
|
—
|
Normalized
EBITDA
|
$
660
|
$
582
|
(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, that are directly
attributable to the acquisition or disposition.
|
(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, 2024 for further details regarding
AltaGas' risk management activities.
|
(3)
|
Included in the "other
income" line item on the Consolidated Statements of
Income.
|
(4)
|
Comprised of transition
and restructuring costs (including CEO transition). These costs are
included in the "operating and administrative" line items on the
Consolidated Statements of Income.
|
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 and 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)
|
2024
|
2023
|
Net income applicable
to common shares (GAAP financial measure)
|
$
408
|
$
445
|
Add (deduct)
after-tax:
|
|
|
Transaction costs
related to acquisitions and dispositions (1)
|
4
|
11
|
Unrealized losses
(gains) on risk management contracts (2)
|
(89)
|
28
|
Losses (gains) on sale
of assets (3)
|
2
|
(207)
|
Transition and
restructuring costs (4)
|
9
|
—
|
Unrealized foreign
exchange losses on intercompany balances (5)
|
4
|
2
|
Normalized net
income
|
$
338
|
$
279
|
(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.
|
(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, 2024 for further details
regarding AltaGas' risk management activities.
|
(3)
|
The pre-tax amounts are
included in the "other income" line item on the Consolidated
Statements of Income.
|
(4)
|
Comprised of transition
and restructuring costs (including CEO transition). The pre-tax
costs are included in the "operating and administrative" line item
on the Consolidated Statements of Income.
|
(5)
|
Relates to unrealized
foreign exchange losses on intercompany accounts receivable and
accounts payable balances between a U.S. subsidiary and a Canadian
entity, where the impact to the U.S. subsidiary is recorded through
accumulated other comprehensive income as a loss on foreign
currency translation, and the impact to the Canadian entity is
recorded through the "foreign exchange gains" line item on
the Consolidated Statements of Income. In the fourth quarter
of 2023, AltaGas changed its non-GAAP policy to exclude the impact
of unrealized foreign exchange losses (gains) on intercompany
balances between Canadian and U.S. entities. The amounts presented
in this table reflect the restated figures to align with the
revised policy. Please refer to the Q1 2024 MD&A for further
details.
|
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)
|
2024
|
2023
|
Cash from operations
(GAAP financial measure)
|
$
557
|
$
591
|
Add
(deduct):
|
|
|
Net change in
operating assets and liabilities
|
(71)
|
(190)
|
Asset retirement
obligations settled
|
—
|
2
|
Funds from
operations
|
$
486
|
$
403
|
Add
(deduct):
|
|
|
Transaction costs
related to acquisitions and dispositions (1)
|
5
|
15
|
Transition and
restructuring costs (2)
|
13
|
—
|
Current tax
expense on asset sales (3)
|
6
|
42
|
Normalized funds from
operations
|
$
510
|
$
460
|
(1)
|
Comprised of
transaction costs related to acquisitions and dispositions of
assets and/or equity investments in the period. These costs exclude
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.
|
(2)
|
Comprised of transition
and restructuring costs (including CEO transition). The pre-tax
costs are included in the "operating and administrative" line item
on the Consolidated Statements of Income.
|
(3)
|
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.
Invested Capital and Net Invested Capital
|
Three Months
Ended
March 31
|
($
millions)
|
2024
|
2023
|
Cash used in (from)
investing activities (GAAP financial measure)
|
$
269
|
$
(869)
|
Add
(deduct):
|
|
|
Net change in non-cash
capital expenditures (1)
|
(14)
|
(28)
|
Capitalized interest
and AFUDC (2)
|
1
|
—
|
Net Invested
Capital
|
$
256
|
$
(897)
|
Asset
dispositions
|
1
|
1,072
|
Invested
capital
|
$
257
|
$
175
|
(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,
2024 for further details.
|
(2)
|
AFUDC is the amount
that a rate-regulated enterprise is allowed to recover for its cost
of financing assets under construction, and excludes any AFUDC
within investments accounted for by the equity method. Capitalized
interest and AFUDC are included in the "property, plant and
equipment" line item on the Consolidated Balance Sheets.
|
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. Net invested capital is invested capital
presented net of proceeds from disposals of assets in the
period. Net invested capital is calculated based on the
investing activities section in the Consolidated Statements of Cash
Flows, adjusted for items including the net change in non-cash
capital expenditures and capitalized interest and AFUDC. Invested
capital and net invested capital are 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)
|
2024
|
2023
|
Revenue
|
3,655
|
4,048
|
Normalized EBITDA
(1)
|
660
|
582
|
Income before income
taxes
|
541
|
619
|
Net income applicable
to common shares
|
408
|
445
|
Normalized net income
(1) (2)
|
338
|
279
|
Total assets
|
23,901
|
21,989
|
Total long-term
liabilities
|
12,666
|
11,233
|
Invested capital
(1)
|
257
|
175
|
Cash from (used in)
investing activities
|
(269)
|
869
|
Dividends declared
(3)
|
88
|
79
|
Cash from
operations
|
557
|
591
|
Normalized funds from
operations (1)
|
510
|
460
|
Normalized effective
income tax rate (%) (1) (2)
|
22.4
|
20.8
|
Effective income tax
rate (%)
|
23.1
|
26.4
|
|
Three Months
Ended
March 31
|
($ per share, except
shares outstanding)
|
2024
|
2023
|
Net income per common
share - basic
|
1.38
|
1.58
|
Net income per common
share - diluted
|
1.37
|
1.57
|
Normalized net income -
basic (1) (2)
|
1.14
|
0.99
|
Normalized net income -
diluted (1) (2)
|
1.14
|
0.99
|
Dividends declared
(3)
|
0.30
|
0.28
|
Cash from
operations
|
1.89
|
2.10
|
Normalized funds from
operations (1)
|
1.73
|
1.63
|
Shares outstanding -
basic (millions)
|
|
|
During the period
(4)
|
295
|
282
|
End of
period
|
296
|
282
|
(1)
|
Non‑GAAP financial
measure or non-GAAP financial ratio; see discussion in Non-GAAP
Financial Measures section of the MD&A.
|
(2)
|
In the fourth quarter
of 2023, AltaGas changed its non-GAAP policy to exclude the impact
of unrealized foreign exchange losses (gains) on intercompany
balances between Canadian and U.S. entities. Prior periods have
been restated to reflect this change. Please refer to the Q1 2024
MD&A for additional details.
|
(3)
|
Dividends declared per
common share per quarter: $0.28 per share beginning March 2023,
increased to $0.2975 per share effective March 2024.
|
(4)
|
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
Aaron Swanson
Vice
President, Investor Relations
Aaron.Swanson@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", "likely", "will", "intend", "plan",
"anticipate", "believe", "aim", "seek", "future", "commit",
"propose", "contemplate", "estimate", "focus", "strive",
"forecast", "expect", "project", "potential", "target",
"guarantee", "potential", "objective", "continue", "outlook",
"guidance", "growth", "long-term", "vision", "opportunity" and
similar expressions suggesting future events or future performance,
as they relate to the Company or any affiliate of the Company, 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: the
Company's 2024 guidance including normalized earnings per share of
$2.05 to $2.25 and normalized EBITDA of $1,675 to $1,775
million; the Company's ability to deliver on its 2024
guidance; REEF reaching a positive FID and the timing thereof;
anticipated in-service date of MVP and the benefits thereof;
AltaGas' intention to consider value maximizing opportunities once
MVP is fully operational; anticipated benefits of AltaGas' VLGC
time charters; the expected tolling levels; AltaGas' ability to
leverage growth opportunities; AltaGas' ability to execute its
strategic priorities and drive long-term value for stakeholders;
the Company's focus on and ability to execute the Pipestone Phase
II expansion project; anticipated benefits of AltaGas' investment
in the Utilities network and the Company's intention to continue
making these investments while balancing the need for customer
affordability; the Company's focus on cost management across the
Utilities platform, managing capital investments and driving the
best outcomes for its customers and stakeholders; anticipated
benefits of SEMCO Energy's MRP and IRIP amendment application;
AltaGas' long-term focus on increasing tolling within the global
exports business and providing the benefit of direct market access
in Asia; the expectation that 56%
of 2024 forward global export volumes will be tolled starting in
the second quarter of 2024 and the anticipated benefits of such
tolling contracts; AltaGas' focus on leveraging long-term growth
opportunities and delivering on returns that can be generated with
the Pipestone assets; the Company
actively managing risk across the Midstream platform through
commercial constructs and a systematic hedging program; the
expectation that Blythe will have normal contribution for the
balance of 2024; AltaGas' ability to execute its long-term
corporate strategy; AltaGas' focus on growing normalized EPS and
FFO per share while targeting lower leverage ratios; the
expectation that AltaGas' long-term strategy will support steady
dividend growth and ongoing capital appreciation for its long-term
shareholders; AltaGas' commitment to maintaining an equity
self-funded model in 2024 and will fund capital requirements
through internally generated cash flows and investment capacity
with no expectation to issue equity; opportunistic consideration of
asset sales and the anticipated use of proceeds therefrom; and
AltaGas' dividend policy.
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: effective tax rates;
U.S./Canadian dollar exchange rates; inflation; interest rates,
credit ratings, regulatory approvals and policies; expected
commodity supply, demand and pricing; volumes and rates; propane
price differentials; degree day variance from normal; pension
discount rate; financing initiatives; the performance of the
businesses underlying each sector; impacts of the hedging program;
weather; frac spread; access to capital; future operating and
capital costs; timing and receipt of regulatory approvals;
seasonality; planned and unplanned plant outages; timing of
in-service dates of new projects and acquisition and divestiture
activities; taxes; operational expenses; returns on investments;
dividend levels; and transaction costs.
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:
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; cybersecurity, 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; risks related to conflict, including
the conflicts in Eastern Europe
and the Middle East;
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; cost of providing
retirement plan benefits; failure of service providers; risks
related to pandemics, epidemics or disease outbreaks; and the other
factors discussed under the heading "Risk Factors" in the Company's
Annual Information Form for the year ended December 31, 2023 ("AIF") 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 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.sedarplus.ca.
SOURCE AltaGas Ltd.