AltaGas Delivers Strong 2021 Financial Results and Remains
Focused on Executing its Long-term Strategic Plan.
CALGARY, AB, March 4, 2022 /CNW/ - AltaGas Ltd. ("AltaGas"
or the "Company") (TSX: ALA) today reported fourth quarter
and full year 2021 financial results and provided an update on the
Company's operations.
HIGHLIGHTS
(all financial figures are unaudited and in Canadian dollars
unless otherwise noted)
- Normalized EPS1 was $0.38 in the fourth quarter and $1.78 for the full year in 2021 while GAAP
EPS2 was $(0.56) in the
fourth quarter and $0.82 for the full
year in 2021. Full year normalized EPS increased 25 percent
year-over-year and was in the upper end of the Company's
April 2021 increased guidance range
of $1.65 - $1.80.
- Normalized FFO per share1 was $1.03 in the fourth quarter and $4.28 for the full year in 2021 while GAAP
FFO3 per share was $(0.56)
in the fourth quarter and $2.64 for
the full year in 2021. Normalized FFO per share increased 19
percent year-over-year in 2021 and continued to provide the
foundation to fund AltaGas' significant organic growth
opportunities and increase returns of capital to shareholders over
the long-term.
- Normalized EBITDA1 was $341
million in the fourth quarter and $1.490 billion for the full year 2021 while
income before taxes was $(162)
million in the fourth quarter and $446 million for the full year in 2021. Full year
normalized EBITDA increased approximately 14 percent year-over-year
and was slightly below the mid-point of the Company's April 2021 increased guidance range of
$1.475 billion - $1.525 billion.
- The Midstream segment reported normalized EBITDA of
$102 million in the fourth quarter
and $734 million for the full year in
2021 while income before taxes in the segment was $(151) million in the fourth quarter and
$242 million for the full year in
2021. This included AltaGas exporting 76,609 Bbls/d of liquified
petroleum gas (LPG) to Asia during
the fourth quarter of 2021 while the Company's average 2021 LPG
exports were relatively in line with its 90,000 Bbls/d target,
despite logistical challenges during the fourth quarter due to the
devastating impacts of the west coast flooding.
- The Utilities segment reported normalized EBITDA of
$238 million in the fourth quarter
and $771 million for the full year of
2021 while income before taxes in the segment was $64 million in the fourth quarter and
$538 million for the full year in
2021. The Utilities segment continued to focus on modernizing its
network to enhance safety and reliability and provide other
long-term benefits to our customers. As part of this focus, AltaGas
increased the company's 2021 average rate base by approximately 8
percent year-over-year to approximately US$4.7 billion.
- As a result of the ongoing legal and regulatory challenges on
the Mountain Valley Pipeline (MVP), AltaGas recorded a pre-tax
provision on its equity investments in the project by approximately
$271 million ($209 million after-tax) in the fourth quarter of
2021, bringing the carrying value in-line with AltaGas'
US$352 million cost cap.
- AltaGas' subsidiary WGL issued US$200
million of 2.98 percent 30-year senior unsecured notes on
December 15, 2021, and AltaGas issued
$300 million of 5.25 percent
fixed-to-fixed rate subordinated hybrid notes at AltaGas on
January 11, 2022, with plans to
redeem its higher cost Series K Preferred Shares. The latter
issuance and redemption plans continue to reduce the Company's
long-term financing costs while staggering and extending maturities
and de-risking its capital structure.
- AltaGas released its 2021 ESG Report on December 15, 2021, which included a number of
sustainability goals within the core areas of climate, diversity
and inclusion, and safety. These were meaningful steps to mark
AltaGas' progression along the path of continuous improvement.
- AltaGas has agreed to sell an interest in certain Midstream
processing facilities to a customer for total consideration of
approximately $234 million. The
transaction is expected to close in the second quarter of
2022.
- Subsequent to quarter-end, AltaGas closed the sale of the 60 MW
Goleta stand-alone energy storage development project and entered
an agreement to sell the 70 MW combined cycle Brush II power plant.
The divestitures are continuations of AltaGas' ongoing efforts to
streamline the platform and exit non-core assets.
- The Company announces the planned retirement of Terry McCallister from the Board effective
April 1, 2022.
________________________________
|
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 December 31, 2021, which is available on
www.sedar.com. 2. GAAP EPS is equivalent to Net income applicable
to common shares divided by shares outstanding. 3. GAAP FFO
per share is equivalent to funds from operations divided by shares
outstanding.
|
CEO MESSAGE
"We are extremely proud of the financial performance that we
delivered over 2021" said Randy
Crawford, President and Chief Executive Officer. "Normalized
EPS increased 25 percent and normalized EBITDA increased
approximately 14 percent year-over-year with results achieving the
increased guidance ranges that we announced in April. This is a
testament to our diversified business model that continues to
demonstrate the strong advantages that have been shown throughout
market cycles and operating environments.
"Our Midstream platform delivered a very strong year, despite
the large challenges associated with the devastating floods in
British Columbia and Washington state during the fourth quarter. We
continued to build on the momentum that has been demonstrated since
2019 through robust LPG export growth, exceeding our cost synergy
targets at Petrogas, and continuing to fill latent capacity across
the platform. During the quarter, we increased our fractionation
and liquids handling volumes by 37 percent year-over-year and our
gathering and processing volumes by 9 percent year-over-year,
clearly demonstrating the advantage of our industry-leading
footprint in Northeastern B.C. With the logistical challenges
associated with the flooding in the fourth quarter behind us, the
platform is well-positioned to achieve our 2022 export target of
97,000 Bbls/d.
"Our regulated Utilities delivered a solid performance, despite
warmer than normal weather and unfavorable foreign exchange.
Normalized EBITDA was up six percent on a year-over-year basis in
U.S. dollar terms in the fourth quarter of 2021. Our continued
investment in Accelerated Pipeline Replacement (ARP) has resulted
in a 23 percent and 13 percent reduction in
leaks since 2019 and 2020, respectively, and reiterates the
improved safety and reliability of our system and drive to deliver
better long-term customer outcomes. The decision in the third
quarter to change our customer call center provider at Washington
Gas and the corresponding integration into our operations caused
some temporary challenges and transition costs but has produced
meaningful improvements in customer service metrics and we will
focus on delivering continuous improvements in those metrics.
"We continue to believe in the role, benefits, and reliability
that responsibly sourced natural gas will provide to our customers
as we embrace the energy evolution and the alternative fuels of the
future. Given the recent geopolitical upheaval, and the
corresponding impact on energy availability and costs, I am proud
of the role that AltaGas is playing in supporting North American
energy independence and our ability to export affordable butane and
propane to the world."
CHAIR MESSAGE ON BOARD RETIREMENT
"On behalf of the Board of Directors and all our stakeholders, I
want to thank Terry McCallister for
his substantial contributions during his long tenure with the
organization" stated Pentti
Karkkainen, Chair of the Board of AltaGas. "Terry was a
senior leader within WGL for nearly two decades, including being
Chairman and Chief Executive Officer from 2009 until his retirement
in 2018. He has been a valued member of the AltaGas Board since the
WGL acquisition and will be missed across the organization."
Following Mr. McCallister's planned retirement, AltaGas' Board
will be comprised of ten directors.
RESULTS BY SEGMENT
Normalized
EBITDA1
|
Three Months
Ended
December
31
|
Year
Ended
December
31
|
($
millions)
|
2021
|
2020
|
2021
|
2020
|
Utilities
|
238
|
259
|
771
|
788
|
Midstream
|
102
|
128
|
734
|
473
|
Corporate/Other
|
1
|
5
|
(15)
|
49
|
Normalized
EBITDA1
|
341
|
392
|
1,490
|
1,310
|
|
|
|
|
|
Income (Loss) Before
Income Taxes
|
Three Months
Ended
December
31
|
Year
Ended
December
31
|
($
millions)
|
2021
|
2020
|
2021
|
2020
|
Utilities
|
64
|
157
|
538
|
687
|
Midstream
|
(151)
|
(36)
|
242
|
235
|
Corporate/Other
|
(75)
|
(47)
|
(334)
|
(223)
|
Income (Loss)
Before Income Taxes
|
(162)
|
74
|
446
|
699
|
(1)
|
Non–GAAP financial
measure; see discussion in the Non-GAAP Financial Measures
advisories of this news release
|
BUSINESS PERFORMANCE
Utilities
The Utilities segment reported normalized EBITDA of $238 million in the fourth quarter of 2021
compared to $259 million in the
fourth quarter of 2020, while income before taxes was $64 million in the fourth quarter of 2021
compared to $157 million in the
fourth quarter of 2020. Results were reflective of typical
seasonality during the fourth quarter when natural gas demand rises
in the fall and winter heating seasons. Operating results during
the fourth quarter of 2021 included continued contribution from
ongoing ARP investments to upgrade Washington Gas' network, the
benefits of the 2021 D.C. and Maryland rate cases, and higher returns on
pension assets. However, these factors were more than offset by the
combination of lower Retail contribution, warmer-than-normal
weather in Michigan and D.C., a
weaker U.S. dollar, and higher general and administrative expenses.
The latter of which was partially related to replacing the customer
call service provider at Washington Gas following service and
performance issues with the former provider. The Retail business
generated $27 million lower
normalized EBITDA contribution on a year-over-year basis in the
fourth quarter of 2021 due to the combination of: 1) outsized
performance in the fourth quarter of 2020, which was driven by the
timing of energy and PJM fixed costs; and 2) the timing impact of
swap gains between the third and fourth quarters of 2021, the
latter of which had the effect of pulling profits into the third
quarter of 2021 rather than the fourth quarter of 2021. These
timing issues have the effect of creating quarter-over-quarter
variability in financial results with no material impact on the run
rate profitability of the business.
AltaGas continued to execute on the Company's various ARPs in
the quarter with a sustained focus on replacing aging
infrastructure to improve the safety and reliability of the system,
which also brings long-term environmental benefits. This included
deploying $235 million of invested
capital1 into the Utilities in the quarter, with 36
percent of this capital allocated to ARP spending. In December of
2021, AltaGas also filed the largest accelerated pipeline
replacement case in Virginia's
history through the Steps to Advance Virginia's Energy (SAVE) Plan,
with a request of approximately US$890
million in accelerated capital to continue upgrading and
modernizing infrastructure for the period from 2023-2027.
_____________________________
|
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
December 31, 2021, which is available on
www.sedar.com.
|
Midstream
The Midstream segment reported normalized EBITDA of $102 million in the fourth quarter of 2021
compared to $128 million in the
fourth quarter of 2020, while income before taxes was $(151) million in the fourth quarter of 2021
compared to $(36) million in the
fourth quarter of 2020. Results included continued year-over-year
growth in global exports, fractionation and liquids handling, and
gathering and processing volumes. However these factors were more
than offset by the impact of a $24
million hedge loss associated with global exports revenue
recognized in the third quarter of 2021, significant logistical and
operations issues associated with the flooding and rail outages on
the North American west coast during the quarter that impacted
global exports profitability, Allowance for Funds Used During
Construction no longer being recorded on the Mountain Valley
Pipeline, the accounting impact of the Gordondale blend and extend,
and the lost contribution from the U.S. Transportation and Storage
business, which was monetized in the second quarter of 2021.
During the fourth quarter AltaGas exported 76,609 Bbls/d of LPG
to Asia, spread across 13 VLGCs.
This included 48,974 Bbls/d of propane being exported at RIPET
across eight ships, and an average of 27,635 Bbls/d of combined
butane and propane being exported at Ferndale across five ships. Global Export
volumes and margins were negatively impacted by weather and
flooding issues experienced in British
Columbia and Washington
state, which caused extended transportation and rail outages
impacting AltaGas' ability to transport LPGs to its export
terminals on the west coast, particularly at Ferndale. Positively, AltaGas was able to
redirect select propane volumes originally destined for
Ferndale to RIPET during the
quarter, however the Company was unable to alleviate butane volume
disruptions with financial performance further negatively impacted
by higher transportation costs associated with rail switching to
handle the large logistical outages. AltaGas' gathering and
processing volumes increased 9 percent year-over-year in the fourth
quarter of 2021 while fractionation and liquids handling volumes
increased 37 percent year-over-year. Growth within AltaGas'
facilities continued to be more heavily weighted within the
Montney and the Company's
industry-leading footprint in the region.
AltaGas' realized frac spread averaged $9.18/Bbl, after transportation costs, as most of
AltaGas' frac exposed volumes were hedged at approximately
$25.65/Bbl in the fourth quarter of
2021, prior to transportation costs. AltaGas is well hedged for
2022 with approximately 74 percent of its 2022 expected frac
exposed volumes hedged at approximately $33.08/Bbl, prior to transportation costs. In
addition, approximately 44 percent of AltaGas 2022 expected global
export volumes are either tolled or financially hedged with an
average FEI to North American financial hedge price of US$13.17/Bbl for non-tolled propane and butane
volumes.
2022 Midstream Hedge Program
|
Q1
2022
|
Q2
2022
|
Q3
2022
|
Q4
2022
|
FY
2022
|
Global Exports volume
hedged (%)(1)
|
79
|
44
|
31
|
22
|
44
|
Average
propane/butane FEI to North America
Average hedge (US$/Bbl)(2)
|
15.29
|
10.56
|
10.43
|
9.76
|
13.17
|
Fractionation volume
hedged (%)
|
71
|
79
|
75
|
68
|
74
|
Frac spread hedge
rate - (CAD$/Bbl)(3)
|
24.40
|
36.02
|
36.14
|
36.17
|
33.08
|
(1)
|
Approximate expected
volume hedged, includes contracted tolling volumes and financial
hedges; based on the assumption of average exports of 90
MBbls/d.
|
(2)
|
Approximate average
for the period; does not include physical differential to FSK for
C3 volumes. Butane is hedged as a percentage of WTI.
|
(3)
|
Approximate average
for the period.
|
Corporate/Other
The Corporate/Other segment reported normalized EBITDA of
$1 million in the fourth quarter of
2021 compared to $5 million in the
same quarter of 2020 while income before taxes was $(75) million in the fourth quarter of 2021
compared to $(47) million in the
fourth quarter of 2020. The $4
million year-over-year decrease in normalized EBITDA was
driven by the combination of higher corporate expenses, which were
primarily related to employee incentive plans as a result of
AltaGas' strong corporate performance and rising share price over
the course of 2021, lower revenues from energy management services
contracts and the transfer of the remaining distributed generation
assets to the purchaser in the second quarter of 2021.
CONSOLIDATED FINANCIAL RESULTS
|
Three Months
Ended
December
31
|
Year
Ended
December
31
|
($
millions)
|
2021
|
2020
|
2021
|
2020
|
Normalized
EBITDA (1)
|
$
|
341
|
$
|
392
|
$
|
1,490
|
$
|
1,310
|
Add
(deduct):
|
|
|
|
|
Depreciation and
amortization
|
(105)
|
(108)
|
(422)
|
(414)
|
Interest
expense
|
(67)
|
(68)
|
(275)
|
(274)
|
Normalized income tax
expense
|
(39)
|
(46)
|
(175)
|
(138)
|
Preferred share
dividends
|
(13)
|
(16)
|
(53)
|
(66)
|
Other
(3)
|
(10)
|
(6)
|
(68)
|
(21)
|
Normalized net
income (1)
|
$
|
107
|
$
|
147
|
$
|
497
|
$
|
396
|
|
|
|
|
|
Net income (loss)
applicable to common shares
|
$
|
(156)
|
$
|
48
|
$
|
230
|
$
|
486
|
Normalized funds
from operations (1)
|
$
|
287
|
$
|
327
|
$
|
1,198
|
$
|
1,003
|
|
|
|
|
|
($ per share
except shares outstanding)
|
|
|
|
|
Shares outstanding
- basic (millions)
|
|
|
|
|
During the period
(2)
|
280
|
279
|
280
|
279
|
End of
period
|
280
|
279
|
280
|
279
|
|
|
|
|
|
Normalized net
income - basic (1)
|
0.38
|
0.53
|
1.78
|
1.42
|
Normalized net
income - diluted (1)
|
0.38
|
0.53
|
1.76
|
1.42
|
|
|
|
|
|
Net income (loss)
per common share - basic
|
(0.56)
|
0.17
|
0.82
|
1.74
|
Net income (loss)
per common share - diluted
|
(0.56)
|
0.17
|
0.82
|
1.74
|
(1)
|
Non–GAAP financial
measure; see discussion in Non–GAAP Financial Measures section at
the end of this news release.
|
(2)
|
Weighted
average.
|
(3)
|
"Other" includes
accretion expense, net income applicable to non-controlling
interests, foreign exchange gains (losses), and NCI portion of
non-GAAP adjustments. The portion of non-GAAP adjustments
applicable to non-controlling interests are excluded in the
computation of normalized net income to ensure consistency of
normalizations applied to controlling and non-controlling
interests. These amounts are included in the "net income applicable
to non-controlling interests" line item on the Consolidated
Statements of Income.
|
Normalized EBITDA for the fourth quarter of 2021 was
$341 million compared to $392 million for the same quarter in 2020. The
largest factors leading to the variance are described in the
Business Performance sections above. In addition, the average
CAD/USD foreign exchange rate decreased to 1.26 in the fourth
quarter of 2021 from an average of 1.30 in the same quarter of
2020, resulting in a decrease in normalized EBITDA of approximately
$8 million on a consolidated
basis.
Income before income taxes was $(162)
million for the fourth quarter of 2021 compared to
$74 million for the same quarter in
2020. Net income applicable to common shares was $(156) million or $(0.56) per share for the fourth quarter of 2021,
compared to $48 million or
$0.17 per share for the same quarter
in 2020. Please refer to the Three Months Ended Section of the
MD&A for further details on the variance in income before
income taxes and net income.
Normalized net income was $107
million or $0.38 per share for
the fourth quarter of 2021, compared to normalized net income of
$147 million or $0.53 per share reported for the same quarter of
2020. The decrease was mainly due to the same factors impacting
normalized EBITDA, higher income tax expense, and higher net income
applicable to non-controlling interests, partially offset by lower
interest expense and lower depreciation and amortization
expense.
Normalized FFO was $287 million or
$1.03 per share for the fourth
quarter of 2021, compared to $327
million or $1.17 per share for
the same quarter in 2020. The decrease was mainly due to the same
previously referenced factors impacting normalized EBITDA.
Cash used by operations for the fourth quarter of 2021 was
$157 million or $0.56 per share, compared to cash from operations
of $7 million or $0.03 per share for the same quarter in 2020.
Please refer to the Consolidated Financial Results Section of
the MD&A for further details on the variance in cash used by
operations.
Depreciation and amortization expense was $105 million for the fourth quarter of 2021,
compared to $108 million for the same
quarter in 2020. The modest decrease was mainly due to the impact
of the sale of the U.S. Transportation and Storage business,
partially offset by amortization expense on Petrogas assets upon
consolidation.
Interest expense for the fourth quarter of 2021 was $67 million, compared to $68 million for the same quarter in 2020. The
slight decrease in interest expense was mainly due to lower average
interest rates and lower average foreign exchange rates in 2021,
partially offset by higher average debt balances.
FORWARD FOCUS, GUIDANCE AND FUNDING
Looking ahead, AltaGas continues to be focused executing on its
long-term corporate strategy of building a diversified platform
that operates long-life energy infrastructure assets that are
positioned to provide resilient and durable value for the Company's
stakeholders.
AltaGas expects to achieve guidance ranges that were previously
disclosed in December 2021,
including:
- 2022 Normalized EPS guidance of $1.80 - $1.95 per
share, compared to actual normalized EPS of $1.78 and GAAP EPS of $0.82 in 2021.
- 2022 Normalized EBITDA guidance of $1.50
billion - $1.55 billion,
compared to actual normalized EBITDA of $1.49 billion and income before taxes of
$446 million in 2021.
AltaGas continues to focus on delivering durable and growing EPS
and FFO per share while targeting lowering leverage ratios and
increasing margins of safety within the business over time. This
strategy should support steady dividend growth and provide the
opportunity for ongoing capital appreciation for its long-term
shareholders. This includes AltaGas having announced forward plans
to deliver regular, sustainable and annual dividend increases that
compound in the years ahead. This includes an anticipated five to
seven percent compounded annual growth rate in dividends through
2026 with the mid-point of the range expected to solely be
underpinned by anticipated Utilities earnings growth.
AltaGas' 2022 invested capital plan of approximately
$995 million, excluding asset
retirement obligations, compared to $798
million deployed in 2021. The 2022 invested capital plan is
heavily weighted towards the lower-risk Utilities business and is
comprised primarily of ARP and system betterment projects that are
anticipated to deliver stable and transparent rate base growth and
positive risk-adjusted returns. The Company is allocating
approximately 31 percent of AltaGas' consolidated 2022 capital to
ARPs in its Utilities business, representing approximately 40
percent of the total 2022 Utilities capital program.
QUARTERLY COMMON SHARE DIVIDEND AND PREFERRED SHARE
DIVIDENDS
The Board of Directors approved the following schedule of
Dividends:
Type
|
Dividend
(per
share)
|
Period
|
Payment
Date
|
Record
|
Common
Shares1
|
$0.265
|
n.a.
|
31-Mar-22
|
16-Mar-22
|
Series
A Preferred Shares
|
$0.19125
|
31-Dec-21
to
30-Mar-22
|
31-Mar-22
|
16-Mar-22
|
Series B
Preferred Shares
|
$0.17192
|
31-Dec-21
to
30-Mar-22
|
31-Mar-22
|
16-Mar-22
|
Series
C Preferred Shares
|
US$0.330625
|
31-Dec-21
to
30-Mar-22
|
31-Mar-22
|
16-Mar-22
|
Series E
Preferred Shares
|
$0.337063
|
31-Dec-21
to
30-Mar-22
|
31-Mar-22
|
16-Mar-22
|
Series G
Preferred Shares
|
$0.265125
|
31-Dec-21
to
30-Mar-22
|
31-Mar-22
|
16-Mar-22
|
Series
H Preferred Shares
|
$0.196582
|
31-Dec-21
to
30-Mar-22
|
31-Mar-22
|
16-Mar-22
|
Series
K Preferred Shares
|
$0.3125
|
31-Dec-21
to
30-Mar-22
|
31-Mar-22
|
16-Mar-22
|
(1)
|
Eligible dividend
for Canadian income tax purposes
|
NON-GAAP MEASURES
This news release contains references to certain financial
measures that do not have a standardized meaning prescribed by US
GAAP and may not be comparable to similar measures presented by
other entities. The non-GAAP measures and their reconciliation to
US GAAP financial measures are shown below and within AltaGas'
Management's Discussion and Analysis (MD&A) as at and for the
period ended December 30, 2021. These
non-GAAP measures provide additional information that management
believes is meaningful regarding AltaGas' operational performance,
liquidity and capacity to fund dividends, capital expenditures, and
other investing activities. Readers are cautioned that these
non-GAAP measures should not be construed as alternatives to other
measures of financial performance calculated in accordance with US
GAAP.
Normalized EBITDA
|
Three Months
Ended
December
31
|
Year Ended
December
31
|
($
millions)
|
2021
|
2020
|
2021
|
2020
|
Income (loss) before
income taxes (GAAP financial measure)
|
$
|
(162)
|
$
|
74
|
$
|
446
|
$
|
699
|
Add:
|
|
|
|
|
Depreciation and
amortization
|
105
|
108
|
422
|
414
|
Interest
expense
|
67
|
68
|
275
|
274
|
EBITDA
|
$
|
10
|
$
|
250
|
$
|
1,143
|
$
|
1,387
|
Add
(deduct):
|
|
|
|
|
Transaction costs and
acquired contingencies related to acquisitions and dispositions
(1)
|
16
|
5
|
33
|
22
|
Unrealized losses
(gains) on risk management contracts (2)
|
33
|
24
|
(18)
|
(21)
|
Losses (gains) on sale
of assets (3)
|
1
|
—
|
(6)
|
(223)
|
Gain on re-measurement
of previously held equity investment in AIJVLP
(4)
|
—
|
(22)
|
—
|
(22)
|
Dilution loss and
other adjustments to equity investments (4)
|
—
|
26
|
—
|
42
|
Restructuring costs
(5)
|
—
|
4
|
1
|
6
|
COVID-19 related costs
(6)
|
—
|
—
|
—
|
2
|
Provisions on
assets
|
6
|
104
|
64
|
109
|
Provisions on
investments accounted for by the equity method
(7)
|
271
|
—
|
271
|
7
|
Accretion
expenses
|
4
|
2
|
6
|
5
|
Foreign exchange
gains
|
—
|
(1)
|
(4)
|
(4)
|
Normalized
EBITDA
|
$
|
341
|
$
|
392
|
$
|
1,490
|
$
|
1,310
|
(1)
|
Comprised of
transaction costs and acquired contingencies related to
acquisitions and dispositions of assets and/or equity investments
in the period. These costs and contingencies are included in the
"cost of sales", "operating and administrative", and "other income"
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. The acquired
contingencies relate to the acquisition of Petrogas and include
amounts for additional contingent consideration for the purchase of
Petrogas as well as certain acquired indirect tax liabilities.
Please refer to Note 3 and Note 4 of the 2021 Annual Consolidated
Financial Statements for further details regarding AltaGas'
acquisitions and dispositions.
|
(2)
|
Included in the
"revenue" and "cost of sales" line items on the Consolidated
Statements of Income. Please refer to Note 23 of the 2021 Annual
Consolidated Financial Statements for further details regarding
AltaGas' risk management activities.
|
(3)
|
Included in the
"other income" line item on the Consolidated Statements of Income.
Please refer to Note 4 of the 2021 Annual Consolidated Financial
Statements for further details regarding AltaGas' disposition of
assets in the period.
|
(4)
|
Relates to
adjustments to equity income recognized in 2020 related to the
investment in Petrogas. These amounts are included in the "income
(loss) from equity investments" line item on the Consolidated
Statements of Income.
|
(5)
|
Comprised of costs
related to a workforce optimization program. These costs are
included in the "operating and administrative" line item on the
Consolidated Statements of Income.
|
(6)
|
COVID-19 related
costs are primarily comprised of credit losses that were
incremental and directly attributable to the COVID-19 pandemic and
charges incurred to support remote work arrangements. As these
costs would not have otherwise been incurred, it has been included
as a normalizing item. Credit losses are included in the "revenue"
line item as a reduction to revenue, and the additional charges
incurred to support remote work arrangements are included in the
"operating and administrative" line item on the Consolidated
Statements of Income.
|
(7)
|
Relates to the
provisions recorded on AltaGas' investment in MVP in the fourth
quarter of 2021 and the Constitution pipeline project which was
canceled in February 2020. The provisions are included in the
"income (loss) from equity investments" line item 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
December
31
|
Year Ended
December
31
|
($
millions)
|
2021
|
2020
|
2021
|
2020
|
Net income (loss)
applicable to common shares (GAAP financial measure)
|
$
|
(156)
|
$
|
48
|
$
|
230
|
$
|
486
|
Add (deduct)
after-tax:
|
|
|
|
|
Transaction costs and
acquired contingencies related to acquisitions and dispositions
(1)
|
13
|
3
|
28
|
18
|
Unrealized losses
(gains) on risk management contracts (2)
|
21
|
17
|
(10)
|
(18)
|
Losses (gains) on sale
of assets (3)
|
15
|
(7)
|
—
|
(204)
|
Non-controlling
interest portion of non-GAAP adjustments (4)
|
3
|
—
|
(9)
|
—
|
Gain on re-measurement
of previously held equity investment in AIJVLP
(5)
|
—
|
(22)
|
—
|
(22)
|
Dilution loss and
other adjustments to equity investments (5)
|
—
|
26
|
—
|
42
|
Restructuring costs
(6)
|
—
|
3
|
1
|
5
|
COVID-19 related costs
(7)
|
—
|
—
|
—
|
2
|
Provisions on
assets
|
2
|
79
|
48
|
81
|
Provisions on
investments accounted for by the equity method
(8)
|
209
|
—
|
209
|
6
|
Normalized net
income
|
$
|
107
|
$
|
147
|
$
|
497
|
$
|
396
|
(1)
|
Comprised of
transaction costs and acquired contingencies related to
acquisitions and dispositions of assets and/or equity investments
in the period. The pre-tax costs and contingencies are included in
the "cost of sales", "operating and administrative", and "other
income" 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. The
acquired contingencies relate to the acquisition of Petrogas and
include amounts for additional contingent consideration for the
purchase of Petrogas as well as certain acquired indirect tax
liabilities. Please refer to Note 3 and Note 4 of the 2021 Annual
Consolidated Financial Statements for further details regarding
AltaGas' acquisitions and dispositions.
|
(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 23 of the
2021 Annual Consolidated Financial Statements 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. Please refer to Note 4 of the 2021 Annual
Consolidated Financial Statements for further details regarding
AltaGas' disposition of assets in the period. The after-tax amount
also includes the impact of the increase in accumulated state
deferred income tax liabilities caused by the elimination of the
WGL Midstream business from AltaGas' consolidated U.S. tax
group.
|
(4)
|
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.
|
(5)
|
Relates to
adjustments to equity income recognized in 2020 related to the
investment in Petrogas. The pre-tax amounts are included in the
"income (loss) from equity investments" line item on the
Consolidated Statements of Income.
|
(6)
|
Comprised of costs
related to a workforce optimization program. The pre-tax costs are
included in the "operating and administrative" line item on the
Consolidated Statements of Income.
|
(7)
|
COVID-19 related
costs are primarily comprised of credit losses that were
incremental and directly attributable to the COVID-19 pandemic and
charges incurred to support remote work arrangements. As these
costs would not have otherwise been incurred, it has been included
as a normalizing item. Credit losses are included in the "revenue"
line item as a reduction to revenue, and the additional charges
incurred to support remote work arrangements are included in the
"operating and administrative" line item on the Consolidated
Statements of Income.
|
(8)
|
Relates to the
provisions recorded on AltaGas' investment in MVP in the fourth
quarter of 2021 and the Constitution pipeline project which was
canceled in February 2020. The pre-tax provisions are included in
the "income (loss) from equity investments" line item on the
Consolidated Statements of Income.
|
Normalized net income and normalized net income per share are
used by Management to enhance the comparability of AltaGas'
earnings, as it reflects the underlying performance of AltaGas'
business activities. Normalized EPS is calculated as normalized net
income divided by the average number of shares outstanding during
the period.
Normalized Funds From Operations
|
Three Months
Ended
December
31
|
Year Ended
December
31
|
($
millions)
|
2021
|
2020
|
2021
|
2020
|
Cash from (used by)
operations (GAAP financial measure)
|
$
|
(157)
|
$
|
7
|
$
|
738
|
$
|
773
|
Add
(deduct):
|
|
|
|
|
Net change in
operating assets and liabilities
|
437
|
311
|
410
|
203
|
Asset retirement
obligations settled
|
3
|
2
|
10
|
4
|
Funds from
operations
|
$
|
283
|
$
|
320
|
$
|
1,158
|
$
|
980
|
Add
(deduct):
|
|
|
|
|
Transaction costs and
acquired contingencies related to acquisitions and dispositions
(1)
|
16
|
5
|
33
|
17
|
Current tax expense
(recovery) on asset sales (2)
|
(12)
|
(2)
|
6
|
(2)
|
Restructuring costs
(3)
|
—
|
4
|
1
|
6
|
COVID-19 related costs
(4)
|
—
|
—
|
—
|
2
|
Normalized funds from
operations
|
$
|
287
|
$
|
327
|
$
|
1,198
|
$
|
1,003
|
(1)
|
Comprised of costs
and acquired contingencies related to acquisitions and dispositions
of assets and/or equity investments in the period. These costs and
contingencies exclude non-cash amounts and are included in the
"cost of sales", "operating and administrative", and "other income"
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. The acquired
contingencies relate to the acquisition of Petrogas and include
amounts for additional contingent consideration for the purchase of
Petrogas as well as certain acquired indirect tax liabilities.
Please refer to Note 3 and Note 4 of the 2021 Annual Consolidated
Financial Statements for further details regarding AltaGas'
acquisitions and dispositions.
|
(2)
|
Primarily related to
the sale of WGL Midstream's commodity business. These expenses
(recoveries) are included in the "current income tax expense" line
item on the Consolidated Statements of Income.
|
(3)
|
Comprised of costs
related to a workforce optimization program. These costs are
included in the "operating and administrative" line item on the
Consolidated Statements of Income.
|
(4)
|
COVID-19 related
costs are primarily comprised of credit losses that were
incremental and directly attributable to the COVID-19 pandemic and
charges incurred to support remote work arrangements. As these
costs would not have otherwise been incurred, it has been included
as a normalizing item. Credit losses are included in the "revenue"
line item as a reduction to revenue, and the additional charges
incurred to support remote work arrangements are included in the
"operating and administrative" line item on the Consolidated
Statements of Income.
|
Normalized funds from operations and funds from operations are
used to assist Management and investors in analyzing the liquidity
of the Corporation. Management uses these measures to understand
the ability to generate funds for capital investments, debt
repayment, dividend payments, and other investing activities.
Funds from operations and normalized funds from operations as
presented should not be viewed as an alternative to cash from (used
in) operations or other cash flow measures calculated in accordance
with GAAP.
Invested Capital
|
Three Months
Ended
December
31
|
Year
Ended
December
31
|
($
millions)
|
2021
|
2020
(4)
|
2021
|
2020
(4)
|
Cash used in
investing activities (GAAP financial measure)
|
$
|
241
|
$
|
980
|
$
|
483
|
$
|
1,211
|
Add
(deduct):
|
|
|
|
|
Net change in non-cash
capital expenditures(1)
|
11
|
53
|
(33)
|
33
|
Cash acquired in
business acquisitions(2)
|
—
|
40
|
—
|
40
|
Contributions from
non-controlling interests(3)
|
—
|
(2)
|
(1)
|
(7)
|
Asset
dispositions
|
1
|
—
|
346
|
74
|
Equity method
dispositions
|
—
|
—
|
3
|
376
|
Invested
capital
|
$
|
253
|
$
|
1,071
|
$
|
798
|
$
|
1,727
|
(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 31 of the 2021 Annual Consolidated Financial
Statements for further details.
|
(2)
|
Related to the cash
acquired as part of the Petrogas Acquisition. Business acquisitions
are presented net of cash acquired on the Consolidated Statements
of Cash Flows. Please refer to Note 3 of the 2021 Annual
Consolidated Financial Statements for further details regarding the
acquisition.
|
(3)
|
Comprised of partner
recoveries for capital expenditures incurred for the Ridley Island
Propane Export Terminal. These recoveries are included in
"contributions from non-controlling interests" under financing
activities in the Consolidated Statements of Cash Flows, however as
Management views this as a part of AltaGas' invested capital, it
has been included in the calculation of invested
capital.
|
(4)
|
In prior periods,
invested capital did not include adjustments for the cost of
removal of utility assets; however, beginning in the fourth quarter
of 2021, Management has adjusted for these costs to better align
with the investing section of the Consolidated Statements of Cash
Flows. Comparative periods have been restated to reflect this
change. Additionally, 2020 invested capital has been revised to
include the $7 million final payment related to the Constitution
pipeline project that was canceled in February 2020, also to better
align with the investing section of the Consolidated Statements of
Cash Flows.
|
Invested capital is a measure of AltaGas' use of funds for
capital expenditure activities. It includes expenditures relating
to property, plant, and equipment and intangible assets, capital
contributed to long term investments, and contributions from
non-controlling interests. Net invested capital is invested capital
presented net of any proceeds from disposals of assets and equity
investments in the period. Net invested capital is calculated based
on the investing activities section in the Consolidated Statements
of Cash Flows, adjusted for items such as non-cash capital
expenditures, cash acquired in business acquisitions, and
contributions from non-controlling interests. Invested capital and
net invested capital are used by Management, investors, and
analysts to enhance the understanding of AltaGas' capital
expenditures from period to period and provide additional detail on
the Company's use of capital.
CONSOLIDATED FINANCIAL REVIEW
|
Three Months
Ended
December
31
|
Year Ended
December
31
|
($ millions,
except where noted)
|
2021
|
2020
|
2021
|
2020
|
Revenue
|
3,140
|
1,689
|
10,573
|
5,587
|
Normalized EBITDA
(1)
|
341
|
392
|
1,490
|
1,310
|
Income (loss) before
income taxes
|
(162)
|
74
|
446
|
699
|
Net income (loss)
applicable to common shares
|
(156)
|
48
|
230
|
486
|
Normalized net income
(1)
|
107
|
147
|
497
|
396
|
Total
assets
|
21,593
|
21,532
|
21,593
|
21,532
|
Total long-term
liabilities
|
11,335
|
11,264
|
11,335
|
11,264
|
Invested capital
(1) (2)
|
253
|
1,071
|
798
|
1,727
|
Cash flows used by
investing activities
|
(241)
|
(980)
|
(483)
|
(1,211)
|
Dividends declared
(3)
|
71
|
67
|
281
|
268
|
Cash from (used by)
operations
|
(157)
|
7
|
738
|
773
|
Normalized funds from
operations (1)
|
287
|
327
|
1,198
|
1,003
|
Normalized effective
income tax rate (%) (1)
|
23.6
|
21.5
|
22.1
|
22.3
|
Effective income tax
rate (%)
|
17.9
|
8.1
|
23.8
|
18.2
|
|
Three Months
Ended
December
31
|
Year Ended
December
31
|
($ per share,
except shares outstanding)
|
2021
|
2020
|
2021
|
2020
|
Net income (loss) per
common share - basic
|
(0.56)
|
0.17
|
0.82
|
1.74
|
Net income (loss) per
common share - diluted
|
(0.56)
|
0.17
|
0.82
|
1.74
|
Normalized net income
- basic (1)
|
0.38
|
0.53
|
1.78
|
1.42
|
Normalized net income
- diluted (1)
|
0.38
|
0.53
|
1.76
|
1.42
|
Dividends declared
(3)
|
0.25
|
0.24
|
1.00
|
0.96
|
Cash from (used by)
operations
|
(0.56)
|
0.03
|
2.64
|
2.77
|
Normalized funds from
operations (1)
|
1.03
|
1.17
|
4.28
|
3.59
|
Shares outstanding -
basic (millions)
|
|
|
|
|
During the period
(4)
|
280
|
279
|
280
|
279
|
End of
period
|
280
|
279
|
280
|
279
|
(1)
|
Non–GAAP financial
measure; see discussion in the Non-GAAP Financial Measures section
of this news release or in AltaGas' MD&A as at and for the
period ended December 31, 2021, which is available on
www.sedar.com.
|
(2)
|
In prior periods,
invested capital did not include adjustments for the cost of
removal of utility assets; however, beginning in the fourth quarter
of 2021, Management has adjusted for these costs to better align
with the investing section of the Consolidated Statements of Cash
Flows. Comparative periods have been restated to reflect this
change.
|
(3)
|
Dividends declared
per common share per month: $0.08 beginning December 2018,
increased to $0.0833 per share beginning December
2020.
|
(4)
|
Weighted
average.
|
CONFERENCE CALL AND WEBCAST DETAILS
AltaGas will hold a conference call today, March 4, at 9:00 a.m.
MT (11:00 a.m. ET and
15:00 BST) to discuss Fourth quarter
and full year 2021 results and other corporate developments.
- Date/Time: March 4, 2022,
9:00 a.m. MT (11:00 a.m. ET; 16:00
GMT)
- Dial-in: 1-416-764-8659 or toll free at 1-888-664-6392
- Webcast:
http://www.altagas.ca/invest/events-and-presentations.
Shortly after the conclusion of the call, a replay will be
available commencing at 11:00 a.m. MT
(1:00 p.m. ET; 18:00 GMT) on March 4,
2022 by dialing 1-416-764-8677 or toll free 1-888-390-0541.
The passcode is 375501#. The replay will expire at 9:59 p.m. MT (11:59 p.m.
ET) on March 11, 2022.
AltaGas' Consolidated Financial Statements and accompanying
notes for the fourth quarter and full year ended December 31, 2021, as well as its related
Management's Discussion and Analysis, are now available online at
www.altagas.ca. All documents will be filed with the Canadian
securities regulatory authorities and will be posted under AltaGas'
SEDAR profile at www.sedar.com.
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, Investor Relations & Corporate Development
Jon.Morrison@altagas.ca
Adam McKnight
Director,
Investor Relations
Adam.McKnight@altagas.ca
Investor Inquiries
1-877-691-7199
investor.relations@altagas.ca
Media Inquiries
1-403-206-2841
media.relations@altagas.ca
FORWARD-LOOKING INFORMATION
This news release contains forward-looking information
(forward-looking statements). Words such as "may", "can", "would",
"could", "should", "will", "intend", "plan", "anticipate",
"believe", "aim", "seek", "propose", "contemplate", "estimate",
"focus", "strive", "forecast", "expect", "project", "target",
"potential", "objective", "continue", "outlook", "vision",
"opportunity" and similar expressions suggesting future events or
future performance, as they relate to the Corporation or any
affiliate of the Corporation, are intended to identify
forward-looking statements. In particular, this news release
contains forward-looking statements with respect to, among other
things, business objectives, expected growth, results of
operations, performance, business projects and opportunities and
financial results. Specifically, such forward-looking
statements included in this document include, but are not limited
to, statements with respect to the following: redemption of shares;
completion dates of transactions in the midstream business; the
benefits of the Utilities' business new call center platform; focus
on debottlenecking logistics; belief in the role, benefits and
reliability of responsibly sources natural gas; ARP focus and
growth of rate base; lower-carbon focus; focus on AltaGas' long
term strategy; expected frac exposed volumes and hedging
activities; expected 2022 Normalized EPS guidance of $1.80 - $1.95 per
share; expected 2022 Normalized EBITDA guidance of $1.50 billion - $1.55
billion; expectation for ongoing dividend growth;
anticipated utilities earnings growth; expected capital expenditure
plan of approximately $995 million;
planned segment allocation of 2022 capital expenditures; and
expected dividend payments and dates of payment.
These statements involve known and unknown risks,
uncertainties and other factors that may cause actual results,
events and achievements to differ materially from those expressed
or implied by such statements. Such statements reflect AltaGas'
current expectations, estimates, and projections based on certain
material factors and assumptions at the time the statement was
made. Material assumptions include: number of ships and
export levels from the Ferndale
and RIPET facilities, assumptions regarding asset sales anticipated
to close in 2022, effective tax rates, the U.S./Canadian dollar
exchange rate, the expected impact of the COVID-19 pandemic,
inflation, propane price differentials, degree day variance from
normal, pension discount rate, the performance of the businesses
underlying each sector, impacts of the hedging program, commodity
prices, weather, frac spread, access to capital, timing and receipt
of regulatory approvals, planned and unplanned plant outages,
timing of in-service dates of new projects and acquisition and
divestiture activities, 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:
risk related to COVID -19; health and safety risks; operating risk;
natural gas supply risks; volume throughput, infrastructure;
service interruptions; cyber security, information, and control
systems; climate-related risks, including carbon pricing;
regulatory risks; litigation risk; changes in law; political
uncertainty and civil unrest;; decommissioning, abandonment and
reclamation costs; reputation risk; weather data; Indigenous and
treaty rights; capital market and liquidity risks; general economic
conditions; internal credit risk; foreign exchange risk;
integration of Petrogas; debt financing, refinancing, and debt
service risk; interest rates; counterparty and supplier risk;
technical systems and processes incidents; dependence on certain
partners; growth strategy risk; construction and development;
transportation of petroleum products; underinsured and uninsured
losses; impact of competition in AltaGas' businesses; counterparty
credit risk; market risk; composition risk; collateral; rep
agreements; market value of common shares and other securities;
variability of dividends; potential sales of additional shares;
labor relations; key personnel; risk management costs and
limitations; commitments associated with regulatory approvals for
the acquisition of WGL; cost of providing retirement plan benefits;
failure of service providers; and the other factors discussed under
the heading "Risk Factors" in the Corporation's Annual Information
Form for the year ended December 31,
2021 and set out in AltaGas' other continuous disclosure
documents.
Many factors could cause AltaGas' or any particular business
segment's actual results, performance or achievements to vary from
those described in this press release, including, without
limitation, those listed above and the assumptions upon which they
are based proving incorrect. These factors should not be construed
as exhaustive. Should one or more of these risks or uncertainties
materialize, or should assumptions underlying forward-looking
statements prove incorrect, actual results may vary materially from
those described in this news release as intended, planned,
anticipated, believed, sought, proposed, estimated, forecasted,
expected, projected or targeted and such forward-looking statements
included in this news release, should not be unduly relied upon.
The impact of any one assumption, risk, uncertainty, or other
factor on a particular forward-looking statement cannot be
determined with certainty because they are interdependent and
AltaGas' future decisions and actions will depend on management's
assessment of all information at the relevant time. Such statements
speak only as of the date of this news release. AltaGas does not
intend, and does not assume any obligation, to update these
forward-looking statements except as required by law. The
forward-looking statements contained in this news release are
expressly qualified by these cautionary statements.
Financial outlook information contained in this news release
about prospective financial performance, financial position, or
cash flows is based on assumptions about future events, including
economic conditions and proposed courses of action, based on
AltaGas management's (Management) assessment of the relevant
information currently available. Readers are cautioned that such
financial outlook information contained in this news release should
not be used for purposes other than for which it is disclosed
herein.
Additional information relating to AltaGas, including its
quarterly and annual MD&A and Consolidated Financial
Statements, AIF, and press releases are available through AltaGas'
website at www.altagas.ca or through SEDAR at www.sedar.com
SOURCE AltaGas Ltd.