Alti Global, Inc. · NASDAQ:ALTI
Alti Global — Energy Income Partners — EIP Tiedemann Webinar March 17, 2022
57 slides from Alti Global's conference presentation, Mar 17, 2022
Slide 1: Disclosures
Disclosures Energy Income Partners, LLC claims compliance with the Global Investment Performance Standards (GIPS®). Energy Income Partners has been independently verified for the periods October 2003 to December 2020. The Firm Energy Income Partners, LLC (EIP) is an independent investment management
Slide 2: Is The Energy Income and Growth Transition Dead?
EIP Is The Energy Income and Growth Transition Dead? from Non‐Cyclical Energy Infrastructure March 17, 2022 Energy Income Partners, LLC claims compliance with Global Investment Performance Standards (GIPS®). For Tiedemann Advisors and Clients do not forward or copy
Slide 3: EIP Overview
EIP Overview The Firm • Founded in 2003 • AUM = $4.8 Billion* • 21 employees, 18 of which have an ownership or profit interest. • Research Team of 7 has 180+ years of experience • Expert testimony – U.S. Senate and U.S. Federal Energy Regulatory Commission Current Tiedemann Model Portfolio** • “Pole
Slide 4: Outline
Outline • Supply & Demand Fundamentals of Energy • Demand • Supply • The Energy Transition • Inflation and Interest Rates • Cost plus regulated utility model • Impact of interest rates on valuation • Our Portfolio • Dividends, earnings and price • Yield, Growth, Valuation CONFIDENTIAL FOR INSTITUTIO
Slide 5: Price Spike in Natural Gas Prices: U.S., European and Asia
Price Spike in Natural Gas Prices: U.S., European and Asia Source: Bloomberg, EIP. Data from 1/1/15‐3/4/22. 3/4/22 AI CONFIDENTIAL FOR INSTITUTIONAL USE ONLY ‐ NOT FOR RETAIL DISTRIBUTION ©2022 ENERGY INCOME PARTNERS 4 For Tiedemann Advisors and Clients do not forward or copy
Slide 6: Coal Prices Respond to Fuel Switching
Coal Prices Respond to Fuel Switching Source: Bloomberg, EIP. Data from 1/1/15‐3/4/22. 3/4/22 AI CONFIDENTIAL FOR INSTITUTIONAL USE ONLY ‐ NOT FOR RETAIL DISTRIBUTION ©2022 ENERGY INCOME PARTNERS 5 For Tiedemann Advisors and Clients do not forward or copy
Slide 7: Pre-Pandemic Demand Trends – Oil and Gas
Pre‐Pandemic Demand Trends – Oil and Gas Global Oil and Liquid Petroleum Demand 2003‐2019 Global Natural Gas Demand 2003‐2019 p 120,000 4% 400 8% Consumption (000's BBL/Day) 100,000 3% 350 6% Consumption (BCF/Day) Year‐over‐Year Change Year‐over‐Year Change 300 80,000 2% 4% 250 60,000 1% 200 2% 150
Slide 8: Petroleum Industry Capital Spending History
Petroleum Industry Capital Spending History Sources: Evercore ISI Research (using a compilation of Company Data, Salomon Brothers, Salomon Smith Barney, Lehman Brothers, Barclays Capital, and Evercore ISI Research estimates), U.S. Bureau of Economic Analysis, EIA, EIP estimates. 9/28/21 AI CONFIDENT
Slide 9: Net Capacity Added Went Negative
Net Capacity Added Went Negative Capital Growth Rate of Large Publicly Traded Oil & Gas Producers 12% 10% 8% (Capex – DD&A) 6% PP&E 4% 2% 0% ‐2% Negative Capital Growth Rate ‐4% ‐6% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: FactSet, Bloomberg, EIP Estima
Slide 10: Shareholder Revolt Caused by Poor Returns
Shareholder Revolt Caused by Poor Returns Return on Capital Employed for S&P 500 Energy Sector 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Average Q4'95 ‐ Q4'04: ROCE = 9.6% WTI = $25.72/bbl Average Q1'15 ‐ Q4'21: ‐5.0% ROCE = 1.6% WTI = $53.97/bbl ‐10.0% Q4 1995 Q3 1996 Q2 1997 Q1 1998 Q4 1998 Q3 1999 Q2 200
Slide 11: Energy Transition: Federal Tax Incentives
Energy Transition: Federal Tax Incentives Cleaner Energy Energy Independence Source: Congressional Research Service: The Value of Energy Tax Incentives for Different Types of Energy Resources ‐ March 19, 2019. Energy tax incentives include the value of (1) energy tax expenditures, as estimated by th
Slide 12: Drilling Permits on Federal Lands
Drilling Permits on Federal Lands Source: U.S. Department of the Interior Bureau of Land Management (BLM), Oil and Gas Statistics ‐ FY 2021, Table 7 Number of Approved APDs. The table contains the total number of Federal Applications for Permit to Drill (APDs ‐ Federal) by state approved by the BLM
Slide 13: Drop in Newly Leased Acreage Due Mostly to Legal Challenges
Drop in Newly Leased Acreage Due Mostly to Legal Challenges New Onshore Acreage Leased 6,000 5,000 4,000 Acres (000) 3,000 2,000 1,000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Challenged Source: Dept of Interior and Declaration of Pet
Slide 14: Energy Transition: Long History
Energy Transition: Long History The modern energy system has been transitioning for 150 years towards fuels that are cheaper, more reliable, safer and cleaner. From 2009‐ 2019, solar (in red) went from 55 TWh to 1,793 TWh a CAGR of over 40% but try to find the red wedge o n this graph. Source: Our W
Slide 15: Energy Transition: Costs vs Reliability
Energy Transition: Costs vs Reliability Selected Historical Mean Costs by Technology 18.0 64% Renewables 16.0 Expensive Levelized Cost of Energy “LCOE” LCOE Values (USD Cents/KWh) 14.0 12.0 does not include 20% the cost of 10.0 making the 8.0 whole system ‐22% reliable. 6.0 ‐77% 4.0 Renewables ‐94%
Slide 16: Energy Transition is not Dead, it's Transitioning
Energy Transition is not Dead, it’s….well…… Transitioning • The Energy Transition is transitioning • It’s [not] just about the carbon, stupid • Costs and performance • Reliability/resilience • Safety • It’s not just about wind, solar, batteries and fuel cells • Seasonal shifts and extreme weather re
Slide 17: Energy Transition – in Their Own Words
Energy Transition is not Dead, it’s….well…… Transitioning – in Their Own Words: • Larry Fink 2020 Letter: “[Blackrock is]exiting investments that present a high sustainability‐ related risk, such as thermal coal producers.” • Larry Fink 2022 Letter: “Divesting from entire sectors – or simply passing
Slide 18: Outline
Outline • Supply & Demand Fundamentals of Energy • Demand • Supply • The Energy Transition • Inflation and Interest Rates • Cost plus regulated utility model • Impact of interest rates on valuation • Our Portfolio • Dividends, earnings and price • Yield, Growth, Valuation CONFIDENTIAL FOR INSTITUTIO
Slide 19: Energy System Market Structure
Energy System Market Structure All industries/systems comprise production, storage and transport The energy system has these parts but also two halves: 1. Regulated monopoly “rate‐base” assets • Cost‐plus monopoly business model • Stable growing rate‐base stable growing earnings • Lower cost of
Slide 20: Profit Driver of Regulated Monopoly Utility
Profit Driver of Regulated Monopoly Utility Typical Legal & Natural Monopoly Business Business Price per Unit Return on Investment (Allowed/Agreed) X Units Sold X Investment = Total Revenue = Profit ‐ Costs + Costs = Profit = Revenue Investment Units Sold = Return on Investment = Price per Unit The
Slide 21: Flat Top Line, Rising Bottom Line
Flat Top Line, Rising Bottom Line While U.S. Electricity demand grows at less than 1% per year, UTY rate base is growing about 6% per year. Source: Bloomberg, Energy Information Administration. Data as of September 30,2021. Please see definition of UTY on slides 53‐54. 1/26/22 FT AI CONFIDENTIAL FOR
Slide 22: PPI Escalator for Interstate Petroleum Pipelines
PPI Escalator for Interstate Petroleum Pipelines PPI Escalator for Interstate Liquids Pipelines Pipeline tariffs 10% increase on 8% July 1 each year. This year 6% will be nearly 4% 9%. Nearly 1/4 of 2% Tied Current 0% Portfolios invested in ‐2% petroleum ‐4% 2003 2004 2005 2006 2007 2008 2009 2010 2
Slide 23: Confirmation Bias – Utility Performance on CPI and Payroll Reporting Days
Confirmation Bias – Utility Performance on CPI and Payroll Reporting Days Regression on Nonfarm Payroll Announcements Dependent variable is plotted on the ordinate (also called the y‐axis or vertical axis) Dependent variable is plotted on the ordinate (also called the y‐axis or vertical axis) Regres
Slide 24: Correlation with 10-Year U.S. Treasury?
Correlation with 10‐Year U.S. Treasury? Regression: 1‐Month Change in 10‐Year Yield vs. Subsequent 6‐ Dependent variable is plotted on the ordinate (also called the y‐axis) Month Relative Total Return of UTY vs. S&P 500 60.0% y = ‐0.0592x ‐ 0.0106 R² = 0.0026 50.0% There has been 1‐Month Relative Pe
Slide 25: This is What a High Correlation Looks Like
This is What a High Correlation Looks Like Compare the weak correlation on the previous graph to the strong correlation between the S&P Oil & Gas Producers Index and oil and gas prices. Data Range: 06/30/04‐9/30/21. This information is for illustrative purposes only and is not intended to represent
Slide 26: Correlation with 10-Year U.S. Treasury?
Correlation with 10‐Year U.S. Treasury? Yield Comparison: 10‐Year U.S. Treasury, Utilities, & S&P 500 6.00 There has 5.00 been virtually 4.00 no correlation between 3.00 utility or S&P 500 yield and 2.00 10 Yr US Treasury yield 1.00 10‐Year Utilities S&P 500 0.00 2003 2004 2005 2006 2007 2008 2009 2
Slide 27: UTY Relative Performance vs Fed Funds Rate
UTY Relative Performance vs Fed Funds Rate Okay, so no correlation to 10‐yr Treas. But we are about to enter a multi‐year FED tightening cycle. In each of the Fed tightening cycles over last 25 years, the utility index has risen and outperformed the S&P 500 Source: Bloomberg. Utilities are represent
Slide 28: Outline
Outline • Supply & Demand Fundamentals of Energy • Demand • Supply • The Energy Transition • Inflation and Interest Rates • Cost plus regulated utility model • Impact of interest rates on valuation • Our Portfolio • Dividends, earnings and price • Yield, Growth, Valuation CONFIDENTIAL FOR INSTITUTIO
Slide 29: Earnings Growth and Stability: Model Portfolio vs Energy Sub-Sectors
Earnings Growth and Stability: Current Tiedemann Model Portfolio vs Energy Sub‐Sectors 13‐year Earnings History for Energy Sub‐sectors Current Tiedemann Model Portfolio: Regulated assets with growth and impact. The utility & MLP sectors: A mix of regulated and competitive businesses The supply‐end c
Slide 30: Global Clean Energy ETF Earnings Trends (ICLN US)
Global Clean Energy ETF Earnings Trends (ICLN US) The information provided above is based on the holdings of ICLN as of March 3, 2022. The data above is for informational purposes only and is not a solicitation to buy or sell a particular security or a recommendation to buy a particular security. Se
Slide 31: Earnings Growth and Stability: Model Portfolio vs S&P 500
Earnings Growth and Stability: Current Tiedemann Model Portfolio vs S&P 500 Source: EIP calculations based upon Bloomberg, FactSet and EIP Estimates as of December 31, 2021. The information provided in this Portfolio Analysis represents the blended historical results of securities held by the Curren
Slide 32: Long Term Earnings, Dividends, and Prices of the Model Portfolio
Long Term Earnings, Dividends, and Prices of the Current Tiedemann Model Portfolio Source: EIP calculations based upon Bloomberg data. The information provided in this Portfolio Analysis represents the blended historical results of securities held by the Current Tiedemann Model Portfolio as of Decem
Slide 33: Yield, Growth and Valuation: Model Portfolio vs. All S&P Sectors
Yield, Growth and Valuation: Current Tiedemann Model Portfolio vs. All S&P Sectors If the “non‐cyclical energy infrastructure” companies in our portfolio were a sector, it would compare favorably to all other S&P sectors on Yield, Growth and Valuation Source: EIP calculations based upon Bloomberg da
Slide 34: Recap
Recap • High prices are explained by a long capital spending cycle • Biden election is a rounding error • Europe’s polices are different than the US • Energy transition will become more bipartisan and more balanced between conventional and alternative energy sources • Inflation and Interest Rates •
Slide 35: EIP Contact Info
EIP Contact Info Jon Ackerhalt Director of Business Development jmackerhalt@eipinvestments.com 650‐727‐2033 Jayme Martino Investor Relations jmartino@eipinvestments.com 203‐349‐8241 Jon Ackerhalt and Jayme Martino are registered with Foreside Fund Services, LLC which is not affiliated with Energy In
Slide 36: Appendix
Appendix 4/16/19 FT AI CONFIDENTIAL FOR INSTITUTIONAL USE ONLY ‐ NOT FOR RETAIL DISTRIBUTION ©2022 ENERGY INCOME PARTNERS 35 For Tiedemann Advisors and Clients do not forward or copy
Slide 37: EV Adoption and Oil Demand
EV Adoption and Oil Demand Annual Global Passenger Vehicle Sales & Fleet Size Mix Forecast This forecast is Global Passenger Vehicles: Annual Sales & Fleet Size based on a (Millions of Vehicles) 140 1,400 hypothetical rapid ramp in worldwide 120 1,200 EV vehicle sales Passenger Vehicle sales (millio
Slide 38: Energy Transition: Recent History (U.S.)
Energy Transition: Recent History (U.S.) Natural gas and renewables are complementary. Nat gas role in backing up wind and solar at lower cost than batteries, drives higher, not lower use. Source: EIA, Bloomberg, SNL Financial, Wolfe Research. Estimates based on Wolfe Research as of Sept 21, 2021. 1
Slide 39: U.S. Carbon Reductions are Leading the World
U.S. Carbon Reductions are Leading the World Low‐cost shale gas has driven a larger reduction in carbon for the United States than in Europe, despite rising electricity production. Source: International Energy Agency, CO2 Emissions from Fuel Combustion: Overview, Statistical Report August 2021. MtCO
Slide 40: Why Natural Gas Has a Future
Why Natural Gas Has a Future California case study shows what happens to the cost of electricity when solar & wind exceed 50% of power generation and are backed up by batteries rather than natural gas. Source: Clean Air Task Force, “Armond Cohen Testimony in Support of the Climate and Community Prot
Slide 41: Evolution of the Power Grid – Now it starts Getting Complicated
Evolution of the Power Grid – Now it starts Getting Complicated Before: Large power plants sit at the center of a radial grid sending power in one direction; more steel than intelligence. Now: Recent changes have been Source: Adapted from National Energy Education Development Project mostly substitu
Slide 42: EIP Blended Portfolio vs. Breakeven Inflation Rate
EIP Blended Portfolio vs. Breakeven Inflation Rate (10‐Year US Treasury – TIPS) Energy Infrastructure Blended Portfolio vs B/E Inflation Rate (TIPS) 2006‐2021 There is a positive correlation between a diversified basket of energy infrastructure companies and Inflation expectations. Source: Bloomberg
Slide 43: Utility Total Returns & Valuations vs. S&P 500
Utility Total Returns & Valuations vs. S&P 500 1‐Month Total Return Indexed P/E Comparison 25.0x 900 800 20.0x 700 600 500 15.0x 400 300 10.0x 200 100 5.0x 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Utilities S&P 500 0.0x 2003 2004 2005 2006
Slide 44: Recent Policy Events
Recent Policy Events Bipartisan Infrastructure Act: • Headline $1.2 trillion • Energy ‐ ~$120 billion • Electricity grid resilience, expansion, security, efficiency, siting • Fuel & Technology including carbon capture & storage • Electric Vehicle Infrastructure Build Back Better Budget Reconcili
Slide 45: EIP's Engagement & Advocacy
EIP’s Engagement & Advocacy Expert testimony U.S. Senate Committee on Energy and Natural Resources Federal Energy Regulatory Commission (FERC) • Allowed returns on equity inquiry. • Pipeline certification inquiry. Advocacy Incentive ratemaking • Cost, safety, reliability, environmental impact
Slide 46: Rate Base Growth Not Driving Customer Bills Higher Due to Lower Costs
Rate Base Growth Not Driving Customer Bills Higher Due to Lower Costs Source: Energy Information Administration, Bloomberg. Data as of September 30, 2021. Rate Base of UTY Constituents is defined as the growth year over year for each market capitalization weighted member of the UTY. Rate Base is cal
Slide 47: Energy Transition: Impact of Power Sector
Energy Transition: Impact of Power Sector Power Generation accounts for about 65% of the reductions to U.S. Carbon Emissions since the 2007 peak. *Carbon Emissions in the Transportation sector dropped significantly in 2020 due to the COVID lockdown. Source: U.S. Dept. of Energy, EIA Monthly Energy R
Slide 48: Carbon Tax and Import Adjustment – Who is for it?
Carbon Tax and Import Adjustment – Who is for it? James A Baker III So which ultra liberal ‐ White House Chief of Staff environmental radicals under Reagan & Bush advocated for a carbon tax ‐ Secretary of State under on both domestic and George H.W. Bush ‐ Secretary of Treasury imported goods? under
Slide 49: Implications of Texas & California Blackouts
Implications of Texas & California Blackouts Investor Perspective: More capital spending and higher growth for gas and power utilities. Re‐center the debate (and therefore sentiment) between renewables and fossil fuels. Policy Perspective: Calls to eliminate natural gas will be met with the co
Slide 50: Poles & Wires, Pipes & Tanks
Poles & Wires, Pipes & Tanks Electric Transmission Lines Natural Gas Pipelines Electric Transmission Lines and Natural Gas Pipelines Source: EIA Energy Mapping System as of November 27, 2019 • The value of our companies derives from the rights‐of‐way and the incumbency of their natural or legal mono
Slide 51: Current Tiedemann Model Portfolio Exposures by Segment
Current Tiedemann Model Portfolio Exposures by Segment Current Tiedemann Model Portfolio Electric Power 33.1% Renewables 12.9% Natural Gas 28.4% Total Petroleum 22.0% Crude Oil 12.3% Petroleum Products & NGLs 9.7% Other 3.6% Total 100% The portfolio exposure to natural gas pipelines and related logi
Slide 52: EIP Investment Team: Extensive Industry and Investment Experience
EIP Investment Team: Extensive Industry and Investment Experience Title Years Exp. Background Jim Murchie PM 38 Rice, Harvard, BP, Bernstein, Tiger, Lawhill Eva Pao PM 23 Rice, Harvard, Enron, Lawhill John Tysseland PM 24 Univ. of Texas, Raymond James, Citigroup Saul Ballesteros Trading 23 Duke, Nor
Slide 53: Tiedemann Performance
Tiedemann Performance Tiedemann EIP Energy Infrastructure and Utility Strategy Updated as of February 28, 2022 Net Returns – Since Inception 2022 2021 2020 2019 2018 2017 2016 Ja nua ry 1.32% 1.88% ‐0.86% 9.73% 1.39% 4.13% ‐‐ Februa ry 2.66% ‐1.06% ‐8.50% 1.42% ‐8.66% 0.64% ‐‐ Ma rch 8.91% ‐27.98% 4
Slide 54: Definitions
Definitions Alerian MLP Index (AMZ): A composite of the most prominent energy master limited partnerships, whose constituents represent approximately 85% of the total float‐adjusted market capitalization, calculated by Standard & Poor's using a float‐adjusted market capitalization methodology on a p
Slide 55: Definitions (cont.)
Definitions (cont.) Materials (S5MATR): Standard and Poor's 500 Materials Index is a capitalization‐weighted index. The index was developed with a base level of 10 for the 1941‐43 base period. The parent index is SPXL1. This is a GICS Level 1 Sector group. Intraday values are calculated by Bloomberg
Slide 56: LCOE Assumptions (Slide 14)
LCOE Assumptions (Slide 14) Lazard’s Levelized Cost of Energy Analysis ‐ Version 15.0 , Levelized Cost of Storage Analysis ‐ Version 7.0, and Levelized Cost of Hydrogen‐ Version 2.0 November 15, 2021. Levelized Cost of Energy (LCOE) Levelized Cost of Energy (LCOE) is a comparative tool to analyze th
Slide 57: LCOE Assumptions (Slide 14 cont)
LCOE Assumptions (Slide 14 cont) Lazard has not manipulated the cost of capital or capital structure for various technologies, as the goal of this analysis is to compare the current levelized cost of various generation technologies, rather than the benefits of financial engineering. The results cont
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