AltaGas Delivers Solid Second Quarter Results; Strategic
Initiatives and Continued Execution of its Long-term Plan Drive
Shareholder Value Creation
CALGARY,
AB, July 28, 2022 /CNW/ - AltaGas Ltd.
("AltaGas" or the "Company") (TSX: ALA) today reported
second quarter 2022 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 of $0.08 and GAAP EPS2 of $0.12 in the second quarter of 2022 compared to
$0.08 and $0.09 in the second quarter of 2021,
respectively.
- Normalized FFO per share1 of $0.60 and GAAP FFO per share3 of
$1.88 in the second quarter of 2022
compared to $0.56 and $0.29 in the second quarter of 2021,
respectively. Strong ongoing FFO per share growth continues to
provide the foundation for increased returns of capital and to fund
accretive expansion.
- Normalized EBITDA1 of $246
million and income before income taxes of $85 million in the second quarter of 2022
compared to $230 million and
$47 million in the second quarter of
2021, respectively. Results were underpinned by stable and
predictable results in the Utilities segment and strong export
volumes in the Midstream segment.
- The Midstream segment reported normalized EBITDA of
$133 million and income before income
taxes of $181 million in the second
quarter of 2022 compared to $142
million and $54 million in the
second quarter of 2021, respectively. Performance included record
Global Exports volumes that averaged 110,845 Bbls/d of liquified
petroleum gases (LPGs) to Asia,
with volume strength offset by hedge timing impacts on export
volumes that were loaded in the first quarter of 2022, as well as
lower margins and commodity price volatility that impacted LPG
spreads on export volumes in the quarter.
- The Utilities segment reported normalized EBITDA of
$116 million and loss before income
taxes4 of $9 million in
the second quarter of 2022 compared to $99
million and income before income taxes of $68 million in the second quarter of 2021,
respectively. Growth was driven by continued capital investments
into the platform, the impact of recent rate cases and strong
performance from the Retail business.
- On May 26, 2022, AltaGas
announced an agreement to sell its Alaskan Utilities to TriSummit
Utilities Inc. ("TriSummit") for US$800
million (approximately CAD$1.03
billion). Cash proceeds will be used to fund long-term
growth opportunities and continue to strengthen the Company's
balance sheet, while concentrating AltaGas' Utilities platform in
the high growth Eastern U.S. region.
- On May 26, 2022, the Virginia
State Corporation Commission (SCC) approved the amendment for
Washington Gas' 2023 to 2027 Steps to Advance Virginia's Energy
(SAVE) Accelerated Replacement Program (ARP), which is focused on
replacing higher risk pipelines and facilities with resilient
infrastructure that is focused on benefiting Washington Gas'
customers over the long-term. The approved program is the largest
in Virginia's history and includes
a new five-year spending cap of approximately US$878 million.
- On June 23, 2022, the Canada
Energy Regulator issued AltaGas a 25-year export license for an
additional 46,000 Bbls/d of butane. The license will allow AltaGas
to export additional Canadian butane volumes through non-seaborne
exports into the U.S. via rail, including deliveries to the
Company's Ferndale export terminal
in Washington State, and seaborne
exports from Ridley Island in
British Columbia over the
long-term.
- On June 29, 2022, Washington Gas
filed an application with the Virginia regulator to increase rates by an
incremental US$48 million and
requested to transfer US$39 million
of costs that are currently being collected through the SAVE ARP
surcharge into base rates. Proposed rates may be implemented on an
interim basis (subject to refund) in November 2022.
- On July 5, 2022, AltaGas
purchased the remaining 25.97 percent of Petrogas Energy Corp.
("Petrogas") from Idemitsu Canada Corporation ("Idemitsu"), for
total cash consideration of $285
million. The acquisition provides AltaGas the ability to
further integrate and optimize the west coast LPG export platform
and solidifies the Company's position as the leading provider of
North American LPGs from the west coast.
- Year-to-date, AltaGas has experienced many of the same
inflationary pressures that are being seen across the global
economy. Although the Company is well-protected against these
inflationary pressures through its cost-of-service operating model
in the Utilities and take-or-pay and fee-for-service contracts
within its Midstream operations, AltaGas has an acute focus on
judiciously managing all controllable costs to protect its
customers and deliver the lowest costs possible.
____________________________
|
(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, 2022,
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 cash
from operations divided by shares outstanding. (4) The largest
drivers behind the reduction in Utilities income (loss) before
taxes in Q2 2022 relative to Q2 2021 was mark-to-market on
unrealized hedging losses.
|
CEO MESSAGE
"AltaGas delivered sound results as we continued to execute on
our strategic plan during the second quarter of 2022" said
Randy Crawford, President and Chief
Executive Officer. "The acquisition of the remaining equity
ownership of Petrogas and our agreement to divest our Alaskan
Utilities, enhances our energy infrastructure platform and
positions AltaGas for continued long-term value creation. Our
ability to recycle capital into strategic growth opportunities and
further improve our balance sheet will ensure that AltaGas is
well-positioned to deliver sustainable future value for our
stakeholders.
"Our Utilities segment delivered strong results in the quarter
with Normalized EBITDA increasing by approximately 17 percent
year-over-year. This reflected the benefit of enhanced investment
across our network, ongoing customer growth and strong contribution
from our Retail business. The approval of an US$878 million extension to our five-year ARP in
Virginia and the filing of rate
cases in the District of Columbia
(D.C.) and Virginia during the
second quarter, will help ensure that AltaGas remains
well-positioned to make continued investments into our network and
provide our customers with safe and reliable service, while
minimizing regulatory lag.
"Our Midstream platform continued to perform well in the second
quarter as we expanded our assets operational performance, which
included Global Exports shipping a record volume of approximately
111,000 Bbls/d of combined propane and butane to Asia. Although financial performance within
the Global Exports business was below our expectations due to hedge
timing and certain inflationary cost pressures in the quarter, our
demonstrated ability to increase throughput at our two west coast
terminals, focus on improving the performance of our supply chain,
and commitment to addressing inflationary impacts, will provide
AltaGas the opportunity to further enhance our financial results as
we continue to connect our upstream and downstream customers for
the best industry outcomes.
"Looking ahead, we remain focused on advancing our corporate
strategy as a leading North American energy infrastructure company.
This includes safely connecting customers to reliable and
affordable sources of energy, for today and tomorrow, and executing
our near-, medium- and long-term strategic priorities, including
our strong environmental, social and governance practices."
RESULTS BY SEGMENT
|
|
Normalized
EBITDA1
|
Three Months
Ended
June
30
|
($
millions)
|
2022
|
2021
|
Utilities
|
116
|
99
|
Midstream
|
133
|
142
|
Corporate/Other
|
(3)
|
(11)
|
Normalized
EBITDA1
|
$246
|
$230
|
(1) Non‑GAAP
financial measure; see discussion in the Non-GAAP Financial
Measures advisories of this news release
|
|
|
|
|
|
|
|
Income (Loss) Before
Income Taxes
|
Three Months
Ended
June
30
|
($
millions)
|
2022
|
2021
|
Utilities
|
(9)
|
68
|
Midstream
|
181
|
54
|
Corporate/Other
|
(87)
|
(75)
|
Income Before Income
Taxes
|
$85
|
$47
|
BUSINESS PERFORMANCE
Utilities
The Utilities segment reported normalized EBITDA of $116 million in the second quarter of 2022
compared to $99 million in the second
quarter of 2021, while loss before taxes was $9 million in the second quarter of 2022 compared
to income before taxes of $68 million
in the second quarter of 2021. Strong year-over-year growth in
normalized EBITDA of 17 percent was driven by the combination of
the ongoing capital investments that AltaGas has made across its
network through ARP programs, the impact of recent rate cases,
strong performance from the Retail business and favorable foreign
exchange. The decrease in income before taxes was principally
related to unrealized mark-to-market hedging losses within
Washington Gas and the Retail business.
AltaGas continued to upgrade critical infrastructure with the
deployment of $190 million of
invested capital1 during the second quarter of 2022 that
was focused on driving better long-term outcomes for its customers,
including $94 million deployed on the
Company's various ARPs, the latter of which are focused on
improving the safety and reliability of the system, while
delivering long-term operating cost and environmental benefits.
This level of capital deployment was in line with expectations for
the second quarter of 2022 and leaves AltaGas well-positioned to
deliver on planned network upgrades with rate base expected to
increase by approximately 8-10 percent year-over-year in 2022.
On May 26, 2022 the Virginia SCC
approved an extension of Washington Gas' ARP program with a total
five-year spending plan of US$878
million that is earmarked to be invested from 2023 to 2027.
This program is designed to replace higher risk pipeline and
facilities that improve the safety and reliability of the network
while reducing leak rates. On June 29,
2022, Washington Gas filed an application to increase rates
in Virginia by US$48 million and requested to transfer
US$39 million of costs that are
currently being collected through the Virginia SAVE surcharge into
base rates. Proposed rates may be implemented on an interim basis
(subject to refund) in November
2022.
The Retail business generated $16
million of normalized EBITDA in the second quarter of 2022
compared to $10 million in the second
quarter of 2021, which included stronger optimization margins,
favourable timing of gas swap impacts, and lower than budgeted gas
costs, which was partially offset by higher PJM costs. Some of this
strong performance is expected to be reduced in future quarters as
a portion of the outperformance is timing related.
Midstream
The Midstream segment reported normalized EBITDA of $133 million in the second quarter of 2022
compared to $142 million in the
second quarter of 2021, while income before taxes was $181 million in the second quarter of 2022
compared to $54 million in the second
quarter of 2021. Results were reflective of strong operating
performance across the platform offset by hedge timing and
lower-than-expected performance from the Global Exports platform
due to tighter Far East Index (FEI) to North America butane spreads and commodity
price volatility on unhedged volumes.
AltaGas exported a new Global Exports volume record of
110,845 Bbls/d of cleaner burning LPGs to Asia in the second quarter of 2022, which was
spread across 18 full and one partially loaded Very Large Gas
Carriers (VLGCs). This included an average of 63,520 Bbls/d of
propane exported at RIPET and an average of 47,325 Bbls/d of
combined butane and propane exported at Ferndale. Strong Global Exports volume growth
was offset by a number of factors, including: 1) a $19 million negative impact from hedge timing on
Global Exports volumes that were loaded at the end of the first
quarter of 2022 with the corresponding hedge loss not recognized
until delivery in the second quarter of 2022; 2) lower margins due
to tighter FEI to North America
spreads, particularly butane; and 3) increased logistical costs due
to higher rail and ocean freight.
AltaGas continues with its strategy to grow and optimize its
Global Export operations at the RIPET and Ferndale export terminals. The Company is
working with its partners to improve efficiencies and drive down
costs, including optimizing rail schedules and debottlenecking
capacity constraints. This is expected to reduce transport times,
usage and rail costs, as well as provide greater operational
flexibility to grow throughput. AltaGas is also expecting the
delivery of two dual-fuel VLGCs in late 2023 and early 2024 that
are expected to reduce total shipping costs to Asia by approximately 25 percent compared to a
standard VLGC. The new vessel deployments are also expected to
reduce pricing volatility for AltaGas and its customers on a
longer-term basis.
Strong underlying fundamentals and commodity prices continue to
underpin AltaGas' Midstream business, with realized frac spreads up
nearly 150 percent year-over-year, offset by slightly lower volumes
due to planned turnarounds. AltaGas' realized frac spread averaged
$28.70/Bbl, after transportation
costs, with most of AltaGas' frac exposed volumes financially
hedged during the quarter. AltaGas is well hedged for 2022 with
approximately 75 percent of the remaining 2022 expected frac
exposed volumes hedged at approximately $34.68/Bbl, prior to transportation costs. In
addition, approximately 51 percent of AltaGas' remaining 2022
expected global export volumes are either tolled or financially
hedged with an average FEI to North American financial hedge price
of US$12.66/Bbl for non-tolled
propane and butane volumes.
2022 Midstream Hedge Program
|
|
|
|
Q3
2022
|
Q4
2022
|
H2
2022
|
Global Exports volumes
hedged (%)(1)
|
75
|
23
|
51
|
Average propane/butane
FEI to North America Average hedge
(US$/Bbl)(2)
|
13.00
|
8.47
|
12.66
|
Fractionation volume
hedged (%)(3)
|
78
|
72
|
75
|
Frac spread hedge rate
- (CAD$/Bbl)(3)
|
34.33
|
35.01
|
34.68
|
|
|
|
|
|
(1)
|
Approximate expected volumes hedged, includes
contracted tolling volumes and financial hedges; based on the
assumption of average exports of 97 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 a normalized EBITDA loss of
$3 million in the second quarter of
2022 compared to an $11 million loss
in the same quarter of 2021, while loss before income taxes was
$87 million in the second quarter of
2022 compared to $75 million in the
second quarter of 2021. The $8
million year-over-year increase in normalized EBITDA was
driven by a decrease in corporate expenses, primarily related to
higher employee incentive plan costs in the second quarter of 2021
due to AltaGas' strong operating performance and rising share price
in 2021.
CONSOLIDATED FINANCIAL RESULTS
|
|
|
|
Three Months
Ended
June
30
|
($
millions)
|
2022
|
2021
|
Normalized EBITDA
(1)
|
$
|
246
|
$
|
230
|
Add
(deduct):
|
|
|
Depreciation and
amortization
|
(108)
|
(108)
|
Interest
expense
|
(76)
|
(69)
|
Normalized income tax
expense
|
(15)
|
(11)
|
Preferred share
dividends
|
(10)
|
(13)
|
Other
(2)
|
(14)
|
(6)
|
Normalized net
income (1)
|
$
|
23
|
$
|
23
|
|
|
|
Net income
applicable to common shares
|
$
|
35
|
$
|
24
|
Normalized funds
from operations (1)
|
$
|
170
|
$
|
157
|
|
|
|
($ per share except
shares outstanding)
|
|
|
Shares outstanding -
basic (millions)
|
|
|
During the period
(3)
|
281
|
280
|
End of
period
|
281
|
280
|
|
|
|
Normalized net
income - basic (1)
|
0.08
|
0.08
|
Normalized net
income - diluted (1)
|
0.08
|
0.08
|
|
|
|
Net income per
common share - basic
|
0.12
|
0.09
|
Net income per
common share - diluted
|
0.12
|
0.09
|
|
|
|
|
|
(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,
and NCI portion of non-GAAP adjustments. The portion of non-GAAP
adjustments applicable to non-controlling interests are excluded in
the computation of normalized net income to ensure consistency of
normalizations applied to controlling and non-controlling
interests. These amounts are included in the "net income applicable
to non-controlling interests" line item on the Consolidated
Statements of Income.
|
(3)
|
Weighted average.
|
Normalized EBITDA for the second quarter of 2022 was
$246 million compared to $230 million for the same quarter in 2021. The
largest factors leading to the variance are described in the
Business Performance sections above.
For the second quarter of 2022, the average Canadian/U.S. dollar
exchange rate increased to 1.28 from an average of 1.23 in the same
period of 2021, resulting in a $4
million increase to normalized EBITDA.
Income before income taxes was $85
million for the second quarter of 2022 compared to
$47 million for the same quarter in
2021. Net income applicable to common shares was $35 million or $0.12 per share for the second quarter of 2022,
compared to $24 million or
$0.09 per share for the same quarter
in 2021. Please refer to the Three Months Ended June 30 Section of the MD&A for further
details on the variance in income before income taxes and net
income applicable to common shareholders.
Normalized net income was $23
million or $0.08 per share for
the second quarter of 2022, consistent with normalized net income
of $23 million or $0.08 per share reported for the same quarter of
2021. Factors impacting normalized net income include higher net
income applicable to non-controlling interests, higher interest
expense and higher normalized income tax expense, partially offset
by the same factors impacting normalized EBITDA.
Normalized FFO was $170 million or
$0.60 per share for the second
quarter of 2022, compared to $157
million or $0.56 per share for
the same quarter in 2021. The increase was mainly due to the same
previously referenced factors impacting normalized EBITDA and lower
current income tax expense, partially offset by higher interest
expense, which included the costs of subordinated hybrid notes
issued in January with proceeds used to redeem the outstanding
Series K cumulative redeemable five-year rate reset preferred
shares.
Cash from operations in the second quarter of 2022 was
$527 million or $1.88 per share, compared to $81 million or $0.29 per share for the same quarter in 2021.
Please refer to the Liquidity Section of the MD&A for
further details on the variance in cash used by
operations.
Depreciation and amortization expense was $108 million for the second quarter of 2022,
consistent with the same quarter in 2021. Factors impacting
depreciation and amortization expense include the new assets placed
in-service and the stronger U.S. dollar, offset by the impact of
the pending sale of the Alaskan Utilities.
Interest expense for the second quarter of 2022 was $76 million, compared to $69 million for the same quarter in 2021. The
increase in interest expense was partially due to $4 million of interest on the subordinated hybrid
notes issued in January.
Income tax expense was $17 million
for the second quarter of 2022, compared to an income tax expense
of $3 million for the same quarter of
2021. The increase was mainly due to higher income before taxes
compared to the second quarter of 2021. Current tax recovery of
$2 million was recorded in the second
quarter of 2022, compared to current tax expense of $27 million recorded in the same quarter of 2021.
The reduction in current tax expense was mainly due to a decrease
in current tax expense on asset sales compared to the same quarter
in 2021.
After tax preferred share dividends were $10 million for the second quarter of 2022,
compared to $13 million for the same
quarter in 2021. The decrease in preferred share dividends was due
to the redemption of the cumulative redeemable five-year rate reset
preferred shares, Series K on March 31,
2022.
FORWARD FOCUS, GUIDANCE AND FUNDING
AltaGas continues to be focused on executing its long-term
corporate strategy of building a diversified platform that operates
long-life energy infrastructure assets that connects customers and
markets and is 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,
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 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. AltaGas has announced
plans to deliver regular, sustainable and annual dividend increases
that compound in the years ahead with an anticipated five to seven
percent compounded annual growth rate through 2026. Annual dividend
increases will be a function of financial performance and
determined by the Board on an annual basis.
AltaGas' 2022 invested capital plan is approximately
$995 million, excluding asset
retirement obligations, compared to $798
million deployed in 2021. The 2022 invested capital plan is
heavily weighted towards the 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 invested
capital to ARPs in its Utilities business, representing
approximately 40 percent of the total 2022 Utilities invested
capital program.
QUARTERLY COMMON SHARE DIVIDEND AND PREFERRED SHARE
DIVIDENDS
The Board of Directors approved the following schedule of
Dividends:
Type1
|
Dividend
(per
share)
|
Period
|
Payment
Date
|
Record
|
Common
Shares
|
$0.265
|
n.a.
|
29-Sep-22
|
16-Sep-22
|
Series A
Preferred Shares
|
$0.19125
|
30-Jun-22 to
29-Sep-22
|
29-Sep-22
|
16-Sep-22
|
Series B
Preferred Shares
|
$0.26069
|
30-Jun-22 to
29-Sep-22
|
29-Sep-22
|
16-Sep-22
|
Series C
Preferred Shares
|
US$0.330625
|
30-Jun-22 to
29-Sep-22
|
29-Sep-22
|
16-Sep-22
|
Series E
Preferred Shares
|
$0.337063
|
30-Jun-22 to
29-Sep-22
|
29-Sep-22
|
16-Sep-22
|
Series G
Preferred Shares
|
$0.265125
|
30-Jun-22 to
29-Sep-22
|
29-Sep-22
|
16-Sep-22
|
Series H
Preferred Shares
|
$0.28589
|
30-Jun-22 to
29-Sep-22
|
29-Sep-22
|
16-Sep-22
|
(1)
|
Dividends on
common shares and preferred shares are eligible dividends for
Canadian income tax purposes.
|
NON-GAAP MEASURES
This news release contains references to certain financial
measures that do not have a standardized meaning prescribed by U.S.
GAAP and may not be comparable to similar measures presented by
other entities. The non-GAAP measures and their reconciliation to
U.S. GAAP financial measures are shown below and within AltaGas'
Management's Discussion and Analysis (MD&A) as at and for the
period ended June 30, 2022. These
non-GAAP measures provide additional information that Management
believes is meaningful regarding AltaGas' operational performance,
liquidity and capacity to fund dividends, capital expenditures, and
other investing activities. Readers are cautioned that these
non-GAAP measures should not be construed as alternatives to other
measures of financial performance calculated in accordance with US
GAAP.
Normalized EBITDA
|
|
|
|
Three Months
Ended
June 30
|
Six Months
Ended
June 30
|
($
millions)
|
2022
|
2021
|
2022
|
2021
|
Income before income
taxes (GAAP financial measure)
|
$
|
85
|
$
|
47
|
590
|
520
|
Add:
|
|
|
|
|
Depreciation and
amortization
|
108
|
108
|
221
|
206
|
Interest
expense
|
76
|
69
|
146
|
139
|
EBITDA
|
$
|
269
|
$
|
224
|
$
|
957
|
$
|
865
|
Add
(deduct):
|
|
|
|
|
Transaction costs and
acquired contingencies (recoveries) related to acquisitions and
dispositions (1)
|
(28)
|
3
|
(28)
|
10
|
Unrealized losses
(gains) on risk management contracts (2)
|
5
|
33
|
(104)
|
(22)
|
Losses (gains) on sale
of assets (3)
|
1
|
(4)
|
(6)
|
(4)
|
Restructuring costs
(4)
|
—
|
—
|
—
|
1
|
Provisions (reversal
of provisions) on assets
|
—
|
(19)
|
—
|
57
|
Accretion
expenses
|
2
|
1
|
3
|
1
|
Foreign exchange
gains
|
(3)
|
(8)
|
(2)
|
(4)
|
Normalized
EBITDA
|
$
|
246
|
$
|
230
|
$
|
820
|
$
|
904
|
(1)
|
Comprised of
transaction costs and acquired contingencies related to
acquisitions and dispositions of assets and/or equity investments
in the period. These costs 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 (recoveries)
in the second quarter of 2022 includes favourable adjustments to
certain accruals related to the acquisition of Petrogas. Please
refer to Note 3 of the unaudited condensed interim Consolidated
Financial Statements as at and for the three and six months ended
June 30, 2022 for further details regarding AltaGas' disposition of
assets in the period.
|
(2)
|
Included in the
"revenue" and "cost of sales" line items on the Consolidated
Statements of Income. Please refer to Note 15 of the unaudited
condensed interim Consolidated Financial Statements as at and for
the three and six months ended June 30, 2022 for further details
regarding AltaGas' risk management activities.
|
(3)
|
Included in the
"other income" line item on the Consolidated Statements of Income.
Please refer to Note 3 of the unaudited condensed interim
Consolidated Financial Statements as at and for the three and six
months ended June 30, 2022 for further details regarding AltaGas'
disposition of assets in the period.
|
(4)
|
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.
|
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
June 30
|
Six Months
Ended
June 30
|
($
millions)
|
2022
|
2021
|
2022
|
2021
|
Net income applicable
to common shares (GAAP financial measure)
|
$
|
35
|
$
|
24
|
$
|
393
|
$
|
361
|
Add (deduct)
after-tax:
|
|
|
|
|
Transaction costs and
acquired contingencies (recoveries) related to acquisitions and
dispositions (1)
|
(23)
|
3
|
(23)
|
8
|
Unrealized losses
(gains) on risk management contracts (2)
|
5
|
27
|
(76)
|
(14)
|
Non-controlling
interest portion of non-GAAP adjustments (3)
|
8
|
(7)
|
11
|
(6)
|
Gains on sale of
assets (4)
|
(2)
|
(12)
|
(7)
|
(12)
|
Provisions (reversal
of provisions) on assets
|
—
|
(12)
|
—
|
46
|
Restructuring costs
(5)
|
—
|
—
|
—
|
1
|
Loss on redemption of
preferred shares
|
—
|
—
|
10
|
—
|
Normalized net
income
|
$
|
23
|
$
|
23
|
$
|
308
|
$
|
384
|
(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 (recoveries) in the second quarter of 2022
includes favourable adjustments to certain accruals related to the
acquisition of Petrogas. Please refer to Note 3 of the unaudited
condensed interim Consolidated Financial Statements as at and for
the three and six months ended June 30, 2022 for further details
regarding AltaGas' disposition of assets in the
period.
|
(2)
|
The pre-tax amounts
are included in the "revenue" and "cost of sales" line items on the
Consolidated Statements of Income. Please refer to Note 15 of the
unaudited condensed interim Consolidated Financial Statements as at
and for the three and six months ended June 30, 2022 for further
details regarding AltaGas' risk management
activities.
|
(3)
|
The portion
of non-GAAP adjustments applicable to non-controlling interests are
excluded in the computation of normalized net income to ensure
consistency of normalizations applied to controlling and
non-controlling interests. The amounts are included in the "net
income applicable to non-controlling interests" line item on the
Consolidated Statements of Income.
|
(4)
|
The pre-tax amounts
are included in the "other income" line item on the Consolidated
Statements of Income Please refer to Note 3 of the unaudited
condensed interim Consolidated Financial Statements as at and for
the three and six months ended June 30, 2022 for further details
regarding AltaGas' disposition of assets in the
period.
|
(5)
|
Comprised of costs
related to a workforce reduction program. The pre-tax costs are
included in the "operating and administrative" 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 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)
|
2022
|
2021
|
2022
|
2021
|
Cash from operations
(GAAP financial measure)
|
$
|
527
|
$
|
81
|
$
|
1,211
|
$
|
686
|
Add
(deduct):
|
|
|
|
|
Net change in
operating assets and liabilities
|
(328)
|
53
|
(553)
|
23
|
Asset retirement
obligations settled
|
1
|
2
|
3
|
3
|
Funds from
operations
|
$
|
200
|
$
|
136
|
$
|
661
|
$
|
712
|
Add
(deduct):
|
|
|
|
|
Transaction costs and
acquired contingencies (recoveries) related to acquisitions and
dispositions (1)
|
(28)
|
3
|
(28)
|
10
|
Restructuring costs
(2)
|
—
|
—
|
—
|
1
|
Current tax
expense (recovery) on asset sales (3)
|
(2)
|
18
|
(1)
|
18
|
Normalized funds from
operations
|
$
|
170
|
$
|
157
|
$
|
632
|
$
|
741
|
(1)
|
Comprised of costs
and acquired contingencies (recoveries) related to acquisitions and
dispositions of assets and/or equity investments in the period.
These costs and contingencies exclude any 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 (recoveries) in the second quarter of
2022 includes favourable adjustments to certain accruals related to
the acquisition of Petrogas. Please refer to Note 3 of the
unaudited condensed interim Consolidated Financial Statements as at
and for the three and six months ended June 30, 2022 for further
details regarding AltaGas' disposition of assets in the
period.
|
(2)
|
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.
|
(3)
|
Included in
the "current income tax expense" line item on the Consolidated
Statements of Income.
|
Normalized funds from operations and funds from operations are
used to assist Management and investors in analyzing the liquidity
of the Corporation. Management uses these measures to understand
the ability to generate funds for capital investments, debt
repayment, dividend payments, and other investing activities.
Invested Capital
|
|
|
|
Three Months
Ended
June 30
|
Six Months
Ended
June 30
|
($
millions)
|
2022
|
2021
(3)
|
2022
|
2021
(3)
|
Cash used in (from)
investing activities (GAAP financial measure)
|
$
|
(31)
|
$
|
(212)
|
$
|
128
|
$
|
(21)
|
Add
(deduct):
|
|
|
|
|
Net change in non-cash
capital expenditures (1)
|
40
|
76
|
3
|
18
|
Contributions from
non-controlling interests (2)
|
—
|
—
|
—
|
(1)
|
Asset
dispositions
|
225
|
344
|
245
|
344
|
Invested
capital
|
$
|
234
|
$
|
208
|
$
|
376
|
$
|
340
|
(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 21 of the unaudited condensed interim
Consolidated Financial Statements as at and for the three and six
months ended June 30, 2022 for further details.
|
(2)
|
Comprised of partner
recoveries for capital expenditures incurred for the Ridley Island
Propane Export Terminal. These recoveries are included in the
"contributions from non-controlling interests" under financing
activities in the Consolidated Statements of Cash Flows, however,
as Management views this as part of AltaGas' invested capital, it
has been included in the calculation of net invested
capital.
|
(3)
|
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. As such, prior periods in 2021 have been restated to reflect
this change.
|
Invested capital is a measure of AltaGas' use of funds for
capital expenditure activities. It includes expenditures relating
to property, plant, and equipment and intangible assets, capital
contributed to long term investments, and contributions from
non-controlling interests. Invested capital is used by Management,
investors, and analysts to enhance the understanding of AltaGas'
capital expenditures from period to period and provide additional
detail on the Company's use of capital.
CONSOLIDATED FINANCIAL REVIEW
|
|
|
|
Three Months
Ended
June 30
|
Six Months
Ended
June 30
|
($ millions, except
effective income tax rates)
|
2022
|
2021
|
2022
|
2021
|
Revenue
|
3,241
|
2,009
|
7,133
|
5,094
|
Normalized EBITDA
(1)
|
246
|
230
|
820
|
904
|
Income before income
taxes
|
85
|
47
|
590
|
520
|
Net income applicable
to common shares
|
35
|
24
|
393
|
361
|
Normalized net income
(1)
|
23
|
23
|
308
|
384
|
Total assets
|
22,206
|
20,315
|
22,206
|
20,315
|
Total long-term
liabilities
|
10,753
|
10,732
|
10,753
|
10,732
|
Invested capital
(1) (2)
|
234
|
208
|
376
|
340
|
Cash from (used by)
investing activities
|
31
|
212
|
(128)
|
21
|
Dividends declared
(3)
|
74
|
70
|
149
|
141
|
Cash from
operations
|
527
|
81
|
1,211
|
686
|
Normalized funds
from operations (1)
|
170
|
157
|
632
|
741
|
Normalized effective
income tax rate (%) (1)
|
23.8
|
18.0
|
20.4
|
21.0
|
Effective income tax
rate (%)
|
20.5
|
6.9
|
21.0
|
20.1
|
|
|
|
|
Three Months
Ended
June 30
|
Six Months
Ended
June 30
|
($ per share, except
shares outstanding)
|
2022
|
2021
|
2022
|
2021
|
Net income per common
share - basic
|
0.12
|
0.09
|
1.40
|
1.29
|
Net income per common
share - diluted
|
0.12
|
0.09
|
1.39
|
1.28
|
Normalized net income -
basic (1)
|
0.08
|
0.08
|
1.10
|
1.37
|
Normalized net income -
diluted (1)
|
0.08
|
0.08
|
1.09
|
1.37
|
Dividends declared
(3)
|
0.27
|
0.25
|
0.53
|
0.50
|
Cash from
operations
|
1.88
|
0.29
|
4.31
|
2.45
|
Normalized funds from
operations (1)
|
0.60
|
0.56
|
2.25
|
2.65
|
Shares outstanding -
basic (millions)
|
|
|
|
|
During the period
(4)
|
281
|
280
|
281
|
280
|
End of
period
|
281
|
280
|
281
|
280
|
(1)
|
Non‑GAAP financial
measure or non-GAAP financial ratio; see discussion in Non-GAAP
Financial Measures section of the MD&A.
|
(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 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)
|
Effective March 31,
2022, common share dividends are declared and paid on a quarterly
basis. The dividend declared each quarter is $0.265 per share
beginning March 2022, which represents a 6 percent increase on an
annual basis from the previous monthly dividends declared of
$0.0833 per share beginning December 2020.
|
(4)
|
Weighted
average.
|
CONFERENCE CALL AND WEBCAST DETAILS
AltaGas will hold a conference call today, July 28, at 8:00 a.m.
MT (10:00 a.m. ET) to discuss
second quarter 2022 results and other corporate developments.
- Date/Time: July 28, 2022,
8:00 a.m. MT (10:00 a.m. ET; 15:00
BST)
- 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 10:00 a.m. MT
(12:00 p.m. ET; 17:00 BST) on July 28,
2022 by dialing 1-416-764-8677 or toll free 1-888-390-0541.
The passcode is 522385#. The replay will expire at 9:59 p.m. MT (11:59 p.m.
ET) on August 4, 2022.
AltaGas' Consolidated Financial Statements and accompanying
notes for the second quarter ended June 30,
2022, 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: focus on AltaGas' near,
medium- and long-term strategic priorities, including ESG
practices; AltaGas' ability to pursue strategic growth
opportunities and improve its balance sheet; expectations for
export of additional butane volumes as a result of Canada Energy
Regulator's issuance of 25-year export license; anticipated
integration and optimization of LPG export platforms following
purchase of remaining 25.97 percent of Petrogas Energy Corp.;
targeted outcomes of AltaGas' deployment of invested capital,
including ARPs; planned network upgrades and increase in rate base
by 8-10 percent year-over-year in 2022; expected spending plan
associated with extension of Washington Gas' ARP program; expected
future performance of Retail business as compared with Q2 results;
AltaGas' strategy to improve efficiencies within its global export
operations at RIPET and Ferndale
export terminals; expected delivery of dual-fuel VLGCs in 2023 and
2024, and anticipated impacts on shipping costs and pricing
volatility; 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; expectations for EPS and FFO per share growth;
expectation for ongoing dividend growth; AltaGas' de-leveraging
strategy; expected invested capital plan of approximately
$995 million; planned segment
allocation and focus 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: the U.S./Canadian dollar
exchange rate, the expected impact of the COVID-19 pandemic,
inflation, impacts of the hedging program, commodity prices,
weather, frac spread, dividend levels, number of ships and export
levels from the Ferndale and RIPET
facilities, effective tax rates, propane price differentials,
degree day variance from normal, pension discount rate, the
performance of the businesses underlying each sector, 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, 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 pandemics, epidemics or disease outbreaks,
including 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; 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.