Driven by Record Global Export Volumes and Strong Utilities
Cost Management
CALGARY,
AB, Aug 1, 2024 /CNW/ - AltaGas Ltd.
("AltaGas" or the "Company") (TSX: ALA) reported second 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 $0.14 in the second quarter of 2024 compared to
$0.07 in the second quarter of
2023, while GAAP EPS2 was a $0.14 loss in the second quarter of 2024 compared
to $0.47 in the second quarter of
2023. Normalized EPS growth was driven by strong performance across
the enterprise.
- Normalized EBITDA1 was $295
million in the second quarter of 2024 compared to
$239 million in the second quarter of
2023, while loss before income taxes was $46 million in the second quarter of 2024
compared to income before taxes of $182
million in the second quarter of 2023. The quarter included
strong year-over-year growth in the Midstream and Utilities
businesses, driven by record global export volumes, strong cost
management, and the benefit of recent capital investments.
- Normalized FFO per share1 was $0.61 in the second quarter of 2024 compared to
$0.53 in the second quarter of 2023,
while cash from operations per share3 was $1.52 in the second quarter of 2024 compared to
$1.32 in the second quarter of
2023.
- The Utilities segment reported normalized EBITDA of
$122 million in the second quarter of
2024 compared to $102 million in the
second quarter of 2023, while income before taxes was $31 million in the second quarter of 2024
compared to $105 million in the
second quarter of 2023. The largest drivers of the year-over-year
growth in Utilities normalized EBITDA were active cost management,
contribution from continued investments in rate base, and strong
performance from the Retail business.
- The Midstream segment reported normalized EBITDA of
$175 million in the second quarter of
2024 compared to $134 million in the
second quarter of 2023, while income before taxes was $46 million in the second quarter of 2024
compared to $181 million in the
second quarter of 2023. The largest contributors to the
year-over-year increase in Midstream normalized EBITDA were record
global export volumes, strong fractionation and liquids handling
contribution, and the addition of the Pipestone gas processing
and storage assets. AltaGas exported a record of 123,285 Bbl/d of
liquified petroleum gases ("LPGs") to Asia in the quarter, a seven percent
year-over-year increase.
- AltaGas continued to advance key Midstream growth projects in
the second quarter. This included AltaGas and Royal Vopak reaching
a positive final investment decision ("FID") on the Ridley Island
Energy Export Facility ("REEF"), a large-scale LPG and bulk liquids
terminal on Ridley Island, B.C. REEF is a $1.35 billion project slated to come online near
2026 year-end, with an initial export capacity of 55,000 Bbls/d of
propane and butane and will have large expansion opportunities. The
partnership continues to de-risk the project, having executed fixed
price engineering, procurement and construction ("EPC") contracts
for approximately 40 percent of projected costs with an additional
10 percent expected to be awarded in the coming weeks and the
remaining balance to be awarded over the project execution
plan.
- Work continued on the Pipestone II expansion project in
the Alberta Montney during and subsequent to quarter-end with the
two acid gas injection wells drilled, completed and awaiting
tie-in. Work is also currently advancing on the gas gathering
system with cooperative weather conditions to date. 92 percent of
the Pipestone expansion project
costs are now fixed, and we remain on budget and on track for a
late 2025 in-service date.
- The Mountain Valley pipeline ("MVP") in the Appalachian Basin
was completed and placed into service in June of 2024 with firm
service contracts coming into effect July 1,
2024. The 2.0 Bcf/d pipeline is fully subscribed with
20-year contracts with investment grade counterparties. The
pipeline is expandable by an additional 500 MMcf/d through
additional compression. AltaGas has a ten percent non-operated
equity stake in the pipeline and the Company is evaluating a sale
of its interest to accelerate AltaGas' deleveraging strategy.
- During the second quarter of 2024, AltaGas executed an
agreement to construct and contract an additional time charter for
a very large gas carrier ("VLGC") for a ten-year term with optional
extensions. The time charter is expected to be commissioned in late
2026. The agreement represents AltaGas' fifth time charter with
three currently operating and two under construction. This fifth
agreement will further reduce and de-risk AltaGas' shipping costs,
with materially all of AltaGas' expected Baltic freight exposure protected through time
charters, financial hedges, and tolled volumes in 2024.
- Subsequent to the quarter, AltaGas issued $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 pay
down amounts drawn on the syndicated credit facility, which was
incurred when the Company repaid its term loan on June 28, 2024.
- Following a strong second 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 June 30, 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 strong second quarter results, which
reflect the strength of operating businesses and the structural
tailwinds behind them. Performance in the quarter was modestly
ahead of our expectations and positions AltaGas well to deliver on
our 2024 guidance" said Vern Yu,
President and Chief Executive Officer. "As we look ahead we will
continue to execute on our strategic priorities of lowering the
business risk profile, executing on our organic growth projects and
sustainably growing our earnings and cash flows.
"Midstream performance was strong in the second quarter,
including record global export volumes. These volumes highlight the
strength of our export business. Performance across the other parts
of the Midstream segment were also strong with gas processing
volumes up six percent, fractionation and liquids handling volumes
up 14 percent, and extraction volumes up 32 percent on a
year-over-year basis.
"We continue to focus on de-risking our Midstream operations to
generate stable and predictable results. This includes recently
finalizing long-term agreements for an additional 18 percent of
REEF's Phase I throughput capacity. We continue to have advanced
tolling negotiations with multiple counterparties for more than 100
percent of REEF's initial capacity. These agreements build
on AltaGas' previously announced success in securing 56
percent of our expected export volumes under tolling agreements,
which started in the second quarter of 2024. During the second
quarter we also executed an additional agreement to construct a
fifth VLGC time charter, which continues to lock in maritime
shipping costs and de-risk long-term operations.
"Performance in our Utilities business was in line with our
expectations and continued to deliver stable earnings growth for
the enterprise, despite warmer-than-normal weather in Michigan and the District of Columbia ("D.C."). The quarter
included the benefit of active cost management through reduced
operating and administrative costs, increased revenue from ongoing
rate base investments across our network, and strong Retail
performance. Our Utilities capital investment during the quarter
was focused on meeting the needs of our expanding customer base and
supporting long-term safety and reliability needs through our 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.
"We're excited about AltaGas' long-term outlook and the value
that can be created through continuing to execute on our strategic
plan. We remain very positive on the macro fundamentals for natural
gas, natural gas liquids ("NGLs") and the outlook for both our
businesses. We continue to make significant progress optimizing and
expanding our Midstream business, including filling remaining
latent capacity, while constructing the REEF and Pipestone II
projects that support our next phase of growth. We also continue to
make large investments in our Utilities to meet our customers'
long-term needs and ensure that we are positioned to deliver the
critical energy required to keep society moving forward."
RESULTS BY SEGMENT
|
Normalized EBITDA
(1)
|
Three Months
Ended
June 30
|
|
($
millions)
|
2024
|
2023
|
|
Utilities
|
$
122
|
$
102
|
|
Midstream
|
175
|
134
|
|
Corporate/Other
|
(2)
|
3
|
|
Normalized EBITDA
(1)
|
$
295
|
$
239
|
|
(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
June 30
|
|
($
millions)
|
2024
|
2023
|
|
Utilities
|
$
31
|
$
105
|
|
Midstream
|
46
|
181
|
|
Corporate/Other
|
(123)
|
(104)
|
|
Income (Loss) Before
Income Taxes
|
$
(46)
|
$
182
|
BUSINESS PERFORMANCE
Midstream
The Midstream segment reported normalized EBITDA of $175 million in the second quarter of 2024
compared to $134 million in the
second quarter of 2023, while income before income taxes was
$46 million in the second quarter of
2024 compared to $181 million in the
second quarter of 2023. The largest drivers of the year-over-year
increase in Midstream normalized EBITDA included strong performance
from the global exports business driven by record volumes, stronger
contributions from the fractionation and liquids handling business,
the addition of the Pipestone gas
processing and storage assets, and the absence of wildfire impacts
that were present in the second quarter of 2023. These factors were
partially offset by the absence of certain acquisition-related
commercial disputes and contingencies that were present in the
second quarter of 2023, higher operating and administrative
expenses, lower sales of greenhouse gas credits, and lower
contribution at the extraction facilities due to higher
re-injection of ethane volumes.
AltaGas continues to actively de-risk the Midstream platform
with a focus on generating stable and predictable earnings and cash
flow. We have recently finalized long-term agreements for an
additional 18 percent of REEF's Phase I throughput capacity and
continue to have advanced tolling discussions with multiple
counterparties for more than 100 percent of REEF's initial
capacity. A portion of these incremental long-term volumes will be
moved through AltaGas' export platform immediately while
others will be delivered as REEF enters service. These agreements
build on our previously announced success in securing 56 percent of
AltaGas' expected export volumes under tolling agreements starting
in the second quarter of 2024. These announcements are aligned
with AltaGas' long-term target of reaching approximately 60
percent tolling across its global export platform by 2027.
During the second quarter of 2024, AltaGas executed an agreement
to construct and contract an additional VLGC time charter for a
ten-year term with optional extensions. The time charter is
expected to be commissioned during 2026. The agreement represents
AltaGas' fifth time charter with three time charters currently
operating and two under construction. This fifth agreement will
further reduce and de-risk AltaGas' maritime shipping costs, with
materially all of AltaGas' expected Baltic freight exposure protected through time
charters, financial hedges, and tolled volumes in 2024.
AltaGas exported 123,285 Bbls/d of LPGs to Asia in the second quarter of 2024, including
12 VLGCs at RIPET, and 8 VLGCs at Ferndale. This represented a seven percent
year-over-year increase from the second quarter of 2023 and was
underpinned by strong execution at both terminals, increased LPG
supply in Western Canada, and
robust demand in Asia.
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. 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.
Late in the second quarter, MVP was completed and placed into
service with firm service contracts effective July 1, 2024. The interstate natural gas pipeline
spans more than 300 miles from Northwestern West Virginia to Southern Virginia, where it connects into
Transco Pipeline system. MVP has 2.0 Bcf/d of capacity, which
is fully subscribed with 20-year contracts with investment grade
counterparties. The pipeline is expandable by an additional 500
MMcf/d through incremental low-cost compression. As previously
disclosed, AltaGas has a 10 percent non-operated equity stake in
the pipeline and the Company is evaluating a sale of its interest
to accelerate AltaGas' deleveraging strategy.
In line with the Company's de-risking focus, AltaGas' Midstream
operations are well-hedged for 2024 with approximately 87 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$16.96/Bbl. Tolling
volumes are in line with historical tolls. Approximately 86 percent
of the Company's 2024 expected frac exposed volumes are hedged at
approximately US$25.64/Bbl, prior to
transportation costs.
|
Midstream Hedge
Program
|
Q3
2024
|
Q4
2024
|
Remainder of
2024
|
|
Global Exports volumes
hedged (%) (1)
|
93
|
80
|
87
|
|
Average propane/butane
FEI to North America hedge (US$/Bbl) (2) (3)
|
16.66
|
17.28
|
16.96
|
|
Fractionation volume
hedged (%) (3)
|
92
|
80
|
86
|
|
Frac spread hedge rate
- (US$/Bbl) (3)
|
26.75
|
24.54
|
25.64
|
|
(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)
|
Does not include
physical differential to FSK for C3 volumes. Butane is hedged as a
percentage of WTI.
|
|
(3)
|
Approximate average for
the period.
|
Utilities
The Utilities segment reported normalized EBITDA of $122 million in the second quarter of 2024
compared to $102 million in the
second quarter of 2023, while income before income taxes was
$31 million in the second quarter of
2024 compared to $105 million in the
second quarter of 2023. The largest drivers of the year-over-year
growth in Utilities normalized EBITDA included active cost
management, contribution from continued investments in rate base on
behalf of our customers, strong performance from the Retail
business, and the positive impact of the D.C. rate case. These
factors were partially offset by the impact of the Maryland and Virginia rate cases, decreased asset
optimization activities at Washington Gas, and warmer weather in
Michigan, where AltaGas does not
have weather normalization.
During the second quarter of 2024, AltaGas took several active
steps focused on ensuring the Company's long-term operating costs
are aligned with existing rate structures and allowed operations
and maintenance costs in each jurisdiction. These cost efficiencies
will also provide additional room to continue to make ongoing rate
base investments to expand and modernize the network while managing
customer bills. Looking ahead, AltaGas will continue to manage
costs for the long-term benefit of our customers while maintaining
the same regulatory and capital discipline.
AltaGas continued to make investments across its Utilities
assets to improve the safety and reliability of the system on
behalf of customers during the second quarter of 2024. This
included investing $178 million
across the Utilities network, with approximately $92 million through 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.
During the quarter, SEMCO Energy submitted its Main Replacement
Program ("MRP") and Infrastructure Reliability Improvement Program
("IRIP") amendment application, seeking approval from the Michigan
Public Service Commission ("MPSC") to extend these modernization
programs for approximately US$46
million and US$68 million,
respectively, for the period 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.
Corporate/Other
In the Corporate/Other segment, normalized EBITDA was a loss of
$2 million in the second quarter of
2024 compared to normalized EBITDA of $3
million in the same quarter of 2023, while loss before
income taxes was $123 million in the
second quarter of 2024 compared to a loss of $104 million in the second quarter of 2023. After
some extended downtime in the first quarter, the Blythe Power Plant
operated at full capacity in the second quarter of 2024 and is
expected to remain operating at capacity for the remainder of the
year.
CONSOLIDATED FINANCIAL RESULTS
|
Three Months
Ended
June 30
|
|
($
millions)
|
2024
|
2023
|
|
Normalized EBITDA
(1)
|
$
295
|
$
239
|
|
Add
(deduct):
|
|
|
|
Depreciation and
amortization
|
(117)
|
(112)
|
|
Interest
expense
|
(111)
|
(93)
|
|
Normalized income tax
expense
|
(13)
|
(6)
|
|
Preferred share
dividends
|
(4)
|
(7)
|
|
Other
(2)
|
(9)
|
(1)
|
|
Normalized net
income (1)(3)
|
$
41
|
$
20
|
|
|
|
|
Net income (loss)
applicable to common shares
|
$
(42)
|
$
133
|
|
Normalized funds
from operations (1)
|
$
180
|
$
150
|
|
|
|
|
($ per share, except
shares outstanding)
|
|
|
|
Shares outstanding -
basic (millions)
|
|
|
|
During the period
(4)
|
297
|
282
|
|
End of
period
|
297
|
282
|
|
|
|
|
Normalized net income -
basic (1)(3)
|
0.14
|
0.07
|
|
Normalized net income -
diluted (1)(3)
|
0.14
|
0.07
|
|
|
|
|
Net income (loss) per
common share - basic
|
(0.14)
|
0.47
|
|
Net income (loss) per
common share - diluted
|
(0.14)
|
0.47
|
|
(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 Q2 2024
MD&A for additional details.
|
|
(4)
|
Weighted
average.
|
Normalized EBITDA for the second quarter of 2024 was $295 million compared to $239 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.
Loss before income taxes was $46
million for the second quarter of 2024 compared to income
before income taxes of $182 million
for the same quarter in 2023. The decrease was mainly due to
unrealized losses on risk management contracts compared to
unrealized gains in the second quarter of 2023, higher interest
expense, the absence of favourable working capital adjustments
related to the Alaska Utilities Disposition in the second quarter
of 2023, higher transition and restructuring costs, and higher
depreciation and amortization expense, partially offset by the same
previously referenced factors impacting normalized EBITDA. Please
refer to the "Three Months Ended June
30" section of the Q2 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 $41
million or $0.14 per share for
the second quarter of 2024, compared to $20
million or $0.07 per share
reported for the same quarter of 2023.
Normalized FFO was $180 million or
$0.61 per share for the second
quarter of 2024, compared to $150
million or $0.53 per share for
the same quarter in 2023. The increase was mainly due to the same
previously referenced factors impacting normalized EBITDA and the
impact of non-cash items included in normalized EBITDA, partially
offset by higher interest expense and higher normalized current
income tax expense.
Depreciation and amortization expense was $117 million for the second quarter of 2024,
compared to $112 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 second quarter of 2024 was $111 million, compared to $93 million for the same quarter in 2023. The
increase was mainly due to higher average interest rates, higher
average debt balances, and incremental hybrid interest costs due to
the issuance of additional hybrid notes in the third quarter of
2023 which replaced preferred shares, and a higher average
Canadian/U.S. dollar exchange rate, partially offset by higher
capitalized interest. Interest expense recorded on the subordinated
hybrid notes in the second quarter of 2024 was $13 million compared to $8
million in the second quarter of 2023.
Income tax recovery was $12
million for the second quarter of 2024, compared to an
income tax expense of $38 million for
the same quarter of 2023. The decrease in income tax expense was
mainly due to lower income before income taxes.
FORWARD FOCUS, GUIDANCE AND FUNDING
AltaGas continues to execute on its long-term 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 $1.3
billion, excluding asset retirement obligations ("ARO"). The
Company is allocating approximately 54 percent of AltaGas'
consolidated 2024 capital to its Utilities business, approximately
42 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.
Asset sales will be considered on an opportunistic basis, with any
potential proceeds to be used to reduce outstanding debt 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.
|
27-Sep-24
|
16-Sep-24
|
|
Series A
Preferred Shares
|
$0.19125
|
30-Jun-24 to
29-Sep-24
|
27-Sep-24
|
16-Sep-24
|
|
Series B
Preferred Shares
|
$0.47332
|
30-Jun-24 to
29-Sep-24
|
27-Sep-24
|
16-Sep-24
|
|
Series G
Preferred Shares
|
$0.265125
|
30-Jun-24 to
29-Sep-24
|
27-Sep-24
|
16-Sep-24
|
|
Series H
Preferred Shares
|
$0.49846
|
30-Jun-24 to
29-Sep-24
|
27-Sep-24
|
16-Sep-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, August 1, 2024, at 8:00
a.m. MT (10:00 a.m. ET) to
discuss second quarter of 2024 results and other corporate
developments.
|
Date:
|
Thursday, August 1,
2024
|
|
Time:
|
8:00 a.m. MT (10:00
a.m. ET)
|
|
Webcast:
|
https://app.webinar.net/lgkqJE3AQyR
|
|
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 686116#.
AltaGas' Consolidated Financial Statements and accompanying
notes for the second 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 June 30, 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 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 (Loss) and the
Canadian entity revaluation is recorded through the foreign
exchange gain (loss) line item on the Consolidated Statements
of Income (Loss). 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
June 30
|
Six Months
Ended
June 30
|
|
($ millions, except
where noted)
|
2024
|
2023
|
2024
|
2023
|
|
Normalized net income
(1)
|
$
—
|
$
4
|
$
—
|
$
6
|
|
Normalized income tax
expense
|
$
—
|
$
1
|
$
—
|
$
2
|
|
Normalized effective
tax rate (%)
|
— %
|
0.6 %
|
— %
|
— %
|
|
(1)
Corresponding per share amounts have also been adjusted.
|
Normalized EBITDA
|
Three Months
Ended
June 30
|
Six Months
Ended
June 30
|
|
($
millions)
|
2024
|
2023
|
2024
|
2023
|
|
Income (loss) before
income taxes (GAAP financial measure)
|
$
(46)
|
$
182
|
$
495
|
$
802
|
|
Add:
|
|
|
|
|
|
Depreciation and
amortization
|
117
|
112
|
233
|
223
|
|
Interest
expense
|
111
|
93
|
218
|
198
|
|
EBITDA
|
$
182
|
$
387
|
$
946
|
$
1,223
|
|
Add
(deduct):
|
|
|
|
|
|
Transaction costs
related to acquisitions and dispositions (1)
|
2
|
4
|
7
|
20
|
|
Unrealized losses
(gains) on risk management contracts (2)
|
90
|
(150)
|
(27)
|
(115)
|
|
Losses (gains) on sale
of assets (3)
|
3
|
(11)
|
2
|
(319)
|
|
Transition and
restructuring costs (4)
|
18
|
5
|
31
|
5
|
|
Wind-up of pension
plan (5)
|
—
|
2
|
—
|
2
|
|
Accretion
expenses
|
1
|
2
|
2
|
5
|
|
Foreign exchange
gains
|
(1)
|
—
|
(6)
|
—
|
|
Normalized
EBITDA
|
$
295
|
$
239
|
$
955
|
$
821
|
|
(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 (Loss).
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 (Loss). Please refer to Note 13 of the
unaudited condensed interim Consolidated Financial Statements as at
and for the three and six months ended June 30, 2024 for further
details regarding AltaGas' risk management activities.
|
|
(3)
|
Included in the "other
income" line item on the Consolidated Statements of Income
(Loss).
|
|
(4)
|
Comprised of transition
and restructuring costs (including CEO transition). These costs are
included in the "operating and administrative" line item on the
Consolidated Statements of Income (Loss).
|
|
(5)
|
Relates to the
completion of the wind-up of the Canadian defined benefit pension
plan in the second quarter of 2023. The settlement charge is
included in the "other income" line on the Consolidated Statements
of Income (Loss).
|
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 (Loss) using income (loss) 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
June 30
|
Six Months
Ended
June 30
|
|
($
millions)
|
2024
|
2023
|
2024
|
2023
|
|
Net income (loss)
applicable to common shares (GAAP financial
measure)
|
$
(42)
|
$
133
|
$
366
|
$
578
|
|
Add (deduct)
after-tax:
|
|
|
|
|
|
Transaction costs
related to acquisitions and dispositions (1)
|
2
|
2
|
6
|
15
|
|
Unrealized losses
(gains) on risk management contracts (2)
|
68
|
(116)
|
(21)
|
(89)
|
|
Losses (gains) on sale
of assets (3)
|
2
|
(9)
|
4
|
(217)
|
|
Transition and
restructuring costs (4)
|
15
|
4
|
24
|
4
|
|
Wind-up of pension
plan (5)
|
—
|
2
|
—
|
2
|
|
Unrealized foreign
exchange losses (gains) on intercompany
balances (6)
|
(4)
|
4
|
—
|
6
|
|
Normalized net
income
|
$
41
|
$
20
|
$
379
|
$
299
|
|
(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
(Loss). 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 (Loss). Please refer to Note 13
of the unaudited condensed interim Consolidated Financial
Statements as at and for the three and six months ended June 30,
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 (Loss).
|
|
(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 (Loss).
|
|
(5)
|
Relates to the
completion of the wind-up of the Canadian defined benefit pension
plan in the second quarter of 2023. The settlement charge is
included in the "other income" line on the Consolidated Statements
of Income.
|
|
(6)
|
Relates to unrealized
foreign exchange losses (gains) 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 (Loss). 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 Q2 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
June 30
|
Six Months
Ended
June 30
|
|
($
millions)
|
2024
|
2023
|
2024
|
2023
|
|
Cash from operations
(GAAP financial measure)
|
$
452
|
$
373
|
$
1,009
|
$
964
|
|
Add
(deduct):
|
|
|
|
|
|
Net change in
operating assets and liabilities
|
(292)
|
(231)
|
(364)
|
(422)
|
|
Asset retirement
obligations settled
|
—
|
3
|
—
|
5
|
|
Funds from
operations
|
$
160
|
$
145
|
$
645
|
$
547
|
|
Add
(deduct):
|
|
|
|
|
|
Transaction costs
related to acquisitions and dispositions (1)
|
2
|
4
|
7
|
20
|
|
Transition and
restructuring costs (2)
|
18
|
5
|
31
|
5
|
|
Current tax
expense (recovery) on asset sales (3)
|
—
|
(4)
|
7
|
38
|
|
Normalized funds from
operations
|
$
180
|
$
150
|
$
690
|
$
610
|
|
(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 (Loss). 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 (Loss).
|
|
(3)
|
Included in the
"current income tax expense (recovery)" line item on the
Consolidated Statements of Income (Loss).
|
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
June 30
|
Six Months
Ended
June 30
|
|
($
millions)
|
2024
|
2023
|
2024
|
2023
|
|
Cash used in (from)
investing activities (GAAP financial
measure)
|
$
305
|
$
231
|
$
580
|
$
(638)
|
|
Add
(deduct):
|
|
|
|
|
|
Net change in non-cash
capital expenditures (1)
|
11
|
(7)
|
(4)
|
(35)
|
|
AFUDC
(2)
|
1
|
—
|
1
|
—
|
|
Contributions from
non-controlling interests
|
(11)
|
—
|
(17))
|
—
|
|
Net Invested
Capital
|
$
306
|
$
224
|
$
560
|
$
(673)
|
|
Asset
dispositions
|
1
|
—
|
2
|
1,072
|
|
Invested
capital
|
$
307
|
$
224
|
$
562
|
$
399
|
|
(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 and six months ended
June 30, 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. AFUDC is
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, AFUDC, and contributions from non-controlling
interests. 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
June 30
|
Six Months
Ended
June 30
|
|
($ millions, except
effective income tax rates)
|
2024
|
2023
|
2024
|
2023
|
|
Revenue
|
2,775
|
2,631
|
6,430
|
6,679
|
|
Normalized EBITDA
(1)
|
295
|
239
|
955
|
821
|
|
Income (loss) before
income taxes
|
(46)
|
182
|
495
|
802
|
|
Net income (loss)
applicable to common shares
|
(42)
|
133
|
366
|
578
|
|
Normalized net income
(1) (2)
|
41
|
20
|
379
|
299
|
|
Total assets
|
23,932
|
21,336
|
23,932
|
21,336
|
|
Total long-term
liabilities
|
12,524
|
11,196
|
12,524
|
11,196
|
|
Invested capital
(1)
|
307
|
224
|
562
|
399
|
|
Cash from (used in)
investing activities
|
(305)
|
(231)
|
(580)
|
638
|
|
Dividends declared
(3)
|
88
|
79
|
176
|
158
|
|
Cash from
operations
|
452
|
373
|
1,009
|
964
|
|
Normalized funds from
operations (1)
|
180
|
150
|
690
|
610
|
|
Normalized effective
income tax rate (%) (1) (2)
|
21.0
|
16.2
|
22.2
|
20.3
|
|
Effective income tax
rate (%)
|
26.2
|
21.2
|
22.9
|
25.2
|
|
Three Months
Ended
June 30
|
Six Months
Ended
June 30
|
|
($ per share, except
shares outstanding)
|
2024
|
2023
|
2024
|
2023
|
|
Net income (loss) per
common share - basic
|
(0.14)
|
0.47
|
1.24
|
2.05
|
|
Net income (loss) per
common share - diluted
|
(0.14)
|
0.47
|
1.23
|
2.04
|
|
Normalized net income -
basic (1) (2)
|
0.14
|
0.07
|
1.28
|
1.06
|
|
Normalized net income -
diluted (1) (2)
|
0.14
|
0.07
|
1.27
|
1.06
|
|
Dividends declared
(3)
|
0.30
|
0.28
|
0.60
|
0.56
|
|
Cash from
operations
|
1.52
|
1.32
|
3.41
|
3.42
|
|
Normalized funds from
operations (1)
|
0.61
|
0.53
|
2.33
|
2.16
|
|
Shares outstanding -
basic (millions)
|
|
|
|
|
|
During the period
(4)
|
297
|
282
|
296
|
282
|
|
End of
period
|
297
|
282
|
297
|
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 Q2 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; de-risking the REEF project; the status of EPC contracts
for REEF and plans to award additional EPC contracts; the Pipestone
II expansion project including advancing on the gas gathering
system and the anticipated in-service date; AltaGas' intention
to sell its ten percent interest in MVP and the use of proceeds
therefrom; expected timing for the new time charter to be
commissioned and the anticipated benefits of AltaGas' VLGCs;
AltaGas' ability to execute on its strategic priorities; the
Company's focus on de-risking the Midstream operations and the
benefits therefrom; the status of tolling negotiations for REEF's
initial capacity; the role and importance of natural gas utilities
for residential and commercial heating; the Company's focus on
optimizing and expanding its Midstream business; AltaGas' continued
investment in its Utilities business, the benefits therefrom and
its ability to deliver energy to its customers; AltaGas' long-term
target of reaching approximately 60 percent tolling across its
global platform and the timing thereof; the expectation that 56
percent of 2024 global export volumes will be under tolling
agreements starting in the second quarter of 2024 and the
anticipated benefits of such tolling contracts; the Company's
structural shipping advantage to Asia and its effect on demand for LPG exports;
Canada's role in providing
long-term energy security; the Company's hedging program and
AltaGas' 2024 Midstream Hedge Program quarterly estimates; the
Company's ability to continue making rate base investments and the
benefits therefrom; AltaGas' intention to manage costs for the
long-term benefits of its customers while maintaining regulatory
and capital discipline; SEMCO Energy's MRP and IRIP amendment
application and AltaGas' ability to make critical long-term
investments in Michigan should the
MPSC approve the application; the expectation that Blythe will
operate at capacity for the remainder 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 allocation of consolidated 2024 capital to the
Company's Utilities, Midstream and Corporate/Other segments;
AltaGas' commitment to maintaining an equity self-funding model in
2024 and that it will fund capital requirements through a
combination of internally generated cash flows and investment
capacity associated with rising EBITDA; opportunistic consideration
of asset sales and the anticipated 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.