Altagas Ltd. · TSX:ALA
Altagas — Investor Presentation (June 2024)
52 slides from Altagas's investor presentation, June 2024
Slide 1: Fundamentally Focused: Corporate Investor Presentation
Fundamentally Focused Corporate Investor Presentation
Slide 2: Forward-Looking Information
Forward-Looking Information This presentation contains forward-looking information (forward-looking statements). Words such as "may", "can", "would", "could", "should", "likely", "will", "intend", "contemplate", "plan", "anticipate", "believe", "aim", "seek", "future", "commit", "propose", "contempl
Slide 3: Two Core Businesses, One Strong Platform
Two Core Businesses, One Strong Platform Gas Gathering NGL Extraction Transportation, Global Wellhead & Processing & Fractionation Storage & Rail Logistics Export Markets A leading energy infrastructure platform that Midstream GAS NGLs C3 & C4 C3 & C4 C3 & C4 invests in and operates long-life infras
Slide 4: AltaGas Value Proposition
AltaGas Value Proposition Diversified, Low-Risk Business Model with Visible Growth and Disciplined Capital Allocation Low Risk Energy Infrastructure Visible, Industry- Disciplined Capital 1 Platform Providing Stable and 2 3 Leading Growth Allocation Growing Earnings / Cash Flows Robust energy fundam
Slide 5: Our Focus Areas
Our Focus Areas Focus on growing, de-risking, and strengthening the enterprise. 1 2 3 4 5 Equity Self-funding Commercial Continued Optimize Capital Model De-risking De-leveraging Returns Allocation Utilize an equity Increase take-or-pay Achieve 4.5x net Optimize assets for Maintain prudent
Slide 6: A Track Record for Compounding Value
A Track Record for Compounding Value Normalized Earnings Normalized Net Debt / Stock Performance Per Share1 EBITDA1 Normalized EBITDA1 Dec-19 Oct-20 Aug-21 Jun-22 Apr-23 Feb-24 ALA-CA Midstream Index 19 20 21 22 23 24E 19 20 21 22 23 24E 18 19 20 21 22 23 24E LDC Index Blended Index 11.5% 6% 4.5x >1
Slide 7: Our Financial Roadmap
Our Financial Roadmap 1 2 3 4 Leverage and Strengthen Allocate optimize Equity self- balance capital to the existing assets funding model sheet best projects Grow normalized EBITDA1 Drive towards 4.5x or Non-core asset Sufficient internal with no- to- low-capex lower net debt/ monetization i
Slide 8: Low-Risk Energy Infrastructure
Low-Risk Energy Infrastructure Steady and Reliable Growth Low Risk Energy Investment Grade Credit Rating Strong Commercial Constructs Infrastructure Platform Commercial Contract Type2 Credit Ratings 4% Long-life infrastructure S&P Fitch Moody’s 15% Utilities assets that provide durable BBB- BBB Take
Slide 9: Compounding Long-term Dividends at 5-7% CAGR
Compounding Long-term Dividends at 5-7% CAGR Plan to return capital through sustainable dividend $1.19/Share DIVIDEND increases 2024 Dividend PHILOSOPHY Industry leading normalized EPS and FFO growth Represents a 6% increase provides the opportunity to grow DPS at the same rate or a $0.07/share
Slide 10: Strong Investment Capacity
Strong Investment Capacity Cashflow Growth Drives Expanding Investment Capacity Prudent Capital Allocation with Investment Capacity Growing in Years Ahead Net Debt/normalized EBITDA1 target Annual Investment Capacity Balance of 4.5x ~$0.3B ~$1.3-1.5B Sheet Monetization of non-core assets 2024E 2
Slide 11: Capital Allocation Framework
Capital Allocation Framework Disciplined capital allocation within an equity self-funding model delivers shareholder value. Financial Strength Self-funded and Flexibility Organic Growth Strong balance sheet (4.5x) 1 2 Focus on risk adjusted Reasonable dividend payout per share growth Excess
Slide 12: Balance Sheet is Structured to Weather the Current Environment
Balance Sheet is Structured to Weather the Current Environment Floating Rate Exposure Minimized Properly Tenured Maturity Ladder Optimized Preferred Redemptions Interest rate exposure well-hedged with Minimal near-term maturities with debt Redemption of prefs with hybrid issuances has >90% of borrow
Slide 13: Driving Towards Our Targeted Capital Structure
Driving Towards Our Targeted Capital Structure Canadian Midstream – 2024E U.S. Gas LDCs – 2024E Net Net Debt/ Normalized EBITDA Debt/ Normalized EBITDA Sale of MVP is the quickest path to accelerate deleveraging: ~4.5x net debt / normalized EBITDA 8.0x 7.0x Additional financial flexibility also
Slide 14: Commercial De-risking will Drive Long-term Value
Commercial De-risking will Drive Long-term Value Medium-term Global Exports tolling target of 60%+ Active and systematic hedging for residual commodity exposure Focus on take-or-pay and fee-for-service contracting Customer and resource play diversification Long-term cost contracting (Five-
Slide 15: Delivering on Core Objectives
Delivering on Core Objectives Taking Active Steps to Drive an Appropriate Premium Valuation Delivering on these variables is key for long-term energy infrastructure investor demands ~4-5% Regular smaller Dividend Yield brownfield expansion 50-60% Earnings Steady Key Visible optimization wi
Slide 16: Macro Set Up
Macro Set Up Macro Data Points Interest Rates Inflation FX (USD/CAD) 2022 2024 2024 2022 2024 2022 Utility Key Macroeconomic Data Points nil 4x Low High Below Avg Above Avg Low High Cost of Gas Substitution Population Growth Regulatory Jurisdictions Investment Opportunities Midstream Key Macroeconom
Slide 17: Fundamentals for Natural Gas and NGLs are Robust
Fundamentals for Natural Gas and NGLs are Robust Natural Gas and NGL Adoption is Strong Across Emerging Markets, Driving Structural Tailwind Global Natural Gas Demand (1990-2040) Global NGL Demand (1990-2040) 90 18.0 Asia-Pacific Africa 80 16.0 Middle East FSU 70 14.0 Europe Latin America (MMboe/d)
Slide 18: Data Centers Usage Will Alter Use and Cost of Power
Data Centers Usage Will Alter Use and Cost of Power Northern Virginia is the Epicenter for AI and Global Data Centers U.S. Electricity Demand Gas-fired Power Demand & Load Growth Largest Global Data Center Markets 4.50 45.0 GWH per year (millions) Data Center demand 9,000 Operational Load Under Cons
Slide 19: DMV Population and Demographics Provide Strong Tailwind
DMV Population and Demographics Provide Strong Tailwind Population Growth Across WGL Service Territories1 Cumulative Customer Additions Across WGL2 (2012 - 2023) (2012 - 2023) 200,000 16% WGL service territories 180,000 WGL has added new are growing 14% customers at 12% 50% 160,000 ~1% faster than t
Slide 20: Canadian Midstream Set-up is Compelling
Canadian Midstream Set-up is Compelling Rising WCSB Production and Global Connectivity Underpin Strong Multi-year Growth Trajectory WCSB NGL Supply Growth (2020-2030) Asian LPG Demand (2015-2050) 2000 7.00 China India 6.00 Japan 1500 South Korea 5.00 Indonesia Other Asia 4.00 (MMBbl/d) (MBbl/d) 1000
Slide 21: Asian LPG Import Demands to Grow ~45% by 2040
Asian LPG Import Demands to Grow ~45% by 2040 Propane and Butane Imports to Grow from 2.5 MMBbl/d to 4.0 MMBbl/d Asian Propane Import Demand (2022 2040) Asian Butane Import Demand (2022 2040) (Domestic Demand – Domestic Supply = Import Requirements) (Domestic Demand – Domestic Supply = Import Re
Slide 22: Canada: Natural Gas and NGL Outlook is Robust
Canada: Natural Gas and NGL Outlook is Robust Canadian Natural Gas Production (2020-2030) WCSB NGL Outlook, by Product (2020-2030) WCSB NGL Outlook, by Play (2020-2030) 25 2,000 2,000 Cardium Deep Basin Duvernay Cardium Deep Basin Duvernay Ethane Propane Alberta Montney BC Montney Other 1,800 Butane
Slide 23: Alberta: Marked Montney Liquids-rich Growth on Horizon
Alberta: Marked Montney Liquids-rich Growth on Horizon Alberta Montney NGL Outlook (2020-2030) Deep Basin NGL Outlook (2020-2030) 800 250 700 200 600 500 150 MBbl/d MBbl/d 400 100 300 200 50 Pipestone Growth Area Harmattan Growth Area 100 0 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 20
Slide 24: BC: Progressing Resource Stewardship Efforts Supports Development
BC: Progressing Resource Stewardship Efforts Supports Development B.C. Well Permits (2018-2023 YTD) B.C. Montney NGL Supply, by Area (2020-2030) B.C. Montney NGL Supply, by Product (2020-2030) 500 500 1,000 Blueberry/Northern BC 450 Ethane Propane 900 450 Dawson Creek Butane Natural Gasoline 800 400
Slide 25: Canadian LNG Developments Drive Adjacent Opportunities
Canadian LNG Developments Drive Adjacent Opportunities Associated LPGs1 Project Summary Export Capacity (Propane / Butane) Phase 1 Liquids Per Phase $48B Phase 1 LNG export 14 mmtpa facility in Kitimat, BC with ~50 Mbbl/d an expected 2025 in- Phase 2: service date. +14 mmtpa 20-25 Mbbl/d $6.4B LNG e
Slide 26: Excess Canadian LPGs Best Served in Premiere Asian Markets
Excess Canadian LPGs Best Served in Premiere Asian Markets WCSB Propane Supply Available for Exports (2022-2040) 450 400 Traditional Regional Demand Eastern CAD Demand PDH Available to Export 350 WCSB LPG Available for Exports (2022-2040) 300 350 MBbl/d 250 200 300 Total LPG Propane Available Availa
Slide 27: High Growth Rate Regulated Utilities Platform
High Growth Rate Regulated Utilities Platform High Growth Utilities Platform 2024E Utility Revenues ~1.6 million customers with population growing ~40% faster than the national average1 ~70% of revenue from residential customers 70% Residential Limited weather/usage sensitivity across ~70% of
Slide 28: Utilities Strategic Focus
Utilities Strategic Focus 1 2 3 4 Growth Improve Invest in Core Opportunities Policy / Returns Platform related to Advocacy Climate Leadership Initiatives Continue closing the Modernize network Focus on energy Build alliances with ROE gap to enhance safety efficiency programs, multiple advoc
Slide 29: Continuing to Improve Returns at WGL
1 Continuing to Improve Returns at WGL ~$40MM of C Lever to help partially offset D potential annual net income value creation1 C E Allowed ROE B C ~$70MM of D annual net income value creation1 A B 20-40 bps Operational Excellence: Cost D 30-60 bps A ~120 bps and efficiency Regulatory Lag: +220 bps
Slide 30: Address Aging Infrastructure
Address Aging Infrastructure 2 Utilities Positioned for Large Ongoing Investment Opportunities 2,000 Iron Plastic Protected Steel Others 1,500 D.C. 1,000 500 0 2,000 1,500 Maryland 1,000 500 0 2,000 1,500 Michigan 1,000 500 0 2,000 1,500 Virginia 1,000 500 0 Notes: *See "Forward- looking Information
Slide 31: Accelerated Replacement Programs
Accelerated Replacement Programs 2 The Foundation for Improved Safety and Reliability with Better Outcomes for All Stakeholders Approximately US$1.4 billion of System Reinforcement Projects over next 5 years APRP Maturity (Year) 2023 2024 2025 2026 2027 2028 New STRIDE 3 Plan Maryland US$330MM US$33
Slide 32: Invest in Core Platform
2 Invest in Core Platform Investments in WGL since 2018 Material Decline in Leaks1 New Business WGL SEMCO System Betterment/Other C$4.0 billion 55% reduction in ARP investments invested leaks over the in WGL are paying ARP Programs off with material past five years reductions in leaks; which is driv
Slide 33: Advance System Expansion and Reliability Projects
2 Advance System Expansion and Reliability Projects Advance pragmatic extension to service territory to bring natural gas to currently unserved customers A and progress long-term projects focused on improving system reliability B for the long-term. 10% of homes within the states Washington Gas SEMCO
Slide 34: RNG Advancements
3 3 RNG Advancements WGL is advancing several RNG opportunities across Pursuing various RNG interconnect opportunities the DMV within Michigan Currently, five to ten in-territory facilities are being Opportunities are focused on in-territory dairy evaluated farms and landfills WGL’s focus
Slide 35: Premiere, Globally Connected Midstream Platform
Premiere, Globally Connected Midstream Platform Pipestone + Robust long-term fundamentals, supported by West Coast LNG Industry-leading Montney footprint – positioned to attract volumes and value chain opportunities Visible near and long-term growth De-risking commercial framework Strong counter-par
Slide 36: The AltaGas West Coast Advantage
The AltaGas West Coast Advantage AltaGas’ West Coast Advantage results in significant increases in producers’ realized LPG prices and creates tailwinds for the broader energy industry. 10-11 days 25+ 18+ days 1 days North American West Coast LPG exports have a Panama canal 1 congestion can add 10+ d
Slide 37: Battle of the Barrels Leaves Asian Tolling as Clear Winner
Battle of the Barrels Leaves Asian Tolling as Clear Winner RIPET Tolling has Averaged ~US$4/Bbl Netback Premium Over Conway Over the Past Two Years Excess Canadian propane and butane that is available for exports at Fort Saskatchewan A has two options – going to Asia B via rail and AltaGas global ex
Slide 38: North America Balancing the Global LPG Market
North America Balancing the Global LPG Market Global LPG Exports, By Country (2014-2023 YTD) Japan Approximately 4.0 3.5 • Home heating; more 90% environmentally-friendly of global LPG export delivers volumes are 19% alternative to thermal coal. delivered to Japan 3.0 and South Korea. of Japan’s tot
Slide 39: Midstream Strategic Focus
Midstream Strategic Focus 1 2 3 4 Leverage and De-risk Strengthen Evaluate Optimize Existing Operations the Midstream Growth Assets Framework Value Chain Opportunities Focus on growing Increased take- Strengthen Allocate capital to EBITDA through no- to or-pay and tolling footprint across th
Slide 40: Leverage and Optimize Existing Assets
1 Leverage and Optimize Existing Assets Low-to-No- Capital-Intensive Projects Medium Capital-Intensive Projects Larger Capital-Intensive Projects <$25MM $25MM-$200MM >$200MM Capital Spend Capital Spend Capital Spend Townsend: Whitespace Optimization Global Exports Logistics Optimizations Pipestone I
Slide 41: Commercial De-risking
2 Commercial De-risking 2024E Normalized EBITDA1, By Contract Type2 A Minimize Commodity Exposure Increase take-or-pay and fee-for-service contracting Take-or-Pay & Medium-term global exports tolling target of 60%+ Fee-for-Service Active and systematic hedging for any residual commodity expo
Slide 42: Global Exports Tolling
Global Exports Tolling 2 Building the Long-term Commercial Stack Strong fundamentals Global Export Tolling and structural pricing Agreement Commercial 2027+ advantage support tolling agreements as growing production increases the importance of LPG netbacks. Targeting Interest across multiple ~10
Slide 43: Strengthening the AltaGas Value Chain
3 Strengthening the AltaGas Value Chain The Multifaceted Approach to Strengthening the Franchise Gas Gathering NGL Extraction, Transportation, Medium- to- & Processing Fractionation & Storage and Global Exports longer-term Liquids Handling Logistics Growth Potential4 Midstream 2-3% / year 2.1 Bcf/d1
Slide 44: Pipestone II
3 Pipestone II Further Strengthening Alberta Montney Footprint with High-quality Liquid-rich Assets 100 MMcf/d Sour Deep Cut Gas Processing Plant with Liquids Handling Infrastructure – Alberta Montney Commercial Contracting: 100% contracted under long-term take-or-pay contracts with marquee produc
Slide 45: Global Exports Optimization and Growth
3 Global Exports Optimization and Growth 210,000 175+ MMBbls/d Near, medium, and long-term optimization opportunities 180,000 RIPET Ferndale across platform. Will build on track record of growing from 150,000 ~35 MBbls/d in 2019 to 110+ MBbls/d currently. Bbl/d 120,000 90,000 Includes rail, logi
Slide 46: REEF - A Multi-Phased Growth Project
4 REEF - A Multi-Phased Growth Project Large-scale LPG and bulk liquids marine export terminal F Phased construction for a capital-efficient build-out E C B Phase 1: LPG and Dock A A Facility & balance of plant C Rail Offloading and Yard ~55,000 Bbl/d of initial 10 x dual sided rail offloadin
Slide 47: Ridley Island Energy Export Facility (REEF)
4 Ridely Island Energy Export Facility (REEF) $1.35 Billion Gross Capex Project Execution Commercial Capital with Minimized Onsite Work of AltaGas’ global exports Reduces Capital Risk 56% larger field execution will operate under tolling arrangements starting in Q2/24 20% of equipment, packaging, ~9
Slide 48: REEF - Logistical Advantages
4 REEF - Logistical Advantages Marine Deepest natural harbour in North America Ice free port year-round Easy VLGC access and movement Long-term multi vessel loading capabilities Shortest shipping distance to Japan and South Korea Rail Comprehensive logistics network 10 dual sided rail
Slide 49: 2024 Financial Guidance Highlights
2024 Financial Guidance Highlights 6% $2.05-2.25 $1.675 -1.775B ~$1.3B Annual Dividend Increase Anticipated Normalized Anticipated Normalized Planned Capital Program EPS1 EBITDA1 13% Y/Y Growth 10% Y/Y Growth (2023 to 2024 Midpoint) (2023 to 2024 Midpoint) AltaGas is focused on building a low-risk e
Slide 50: 2024 Guidance
2024 Guidance After a strong Q1 2024 AltaGas is well-positioned to achieve its 2024 Guidance Intact 2024 guidance figures of Normalized EPS1 of $2.05 - $2.25 and Normalized EBITDA of $1.675 billion to $1.775 billion. Normalized EBITDA1 Guidance ($ millions) Changes Since Guidance was Set $1,675 - $1
Slide 51: 2024 Capital Spending Allocation
2024 Capital Spending Allocation 2024 Capital Budget: $1.3 Billion Increasing Midstream Allocation Strong organic growth opportunities across both platforms – driving Largest 2024 capital outlays include Utilities ARP, System Betterment, healthy competition for capital. Attractive opportunities and
Slide 52: 2024 Hedging
2024 Hedging Increase tolling and reduce commodity exposure to further stabilize Midstream cashflows Hedging Philosophy Residual commodity exposures actively managed through hedging program NGL Extraction Transportation, Wellhead Gas Gathering & Fractionation Storage & Rail Global & Processing L