Altagas Ltd. · TSX:ALA
Altagas — Investor Presentation (September 2017)
52 slides from Altagas's investor presentation, September 2017
Slide 1: Investor Presentation September 2017
Investor Presentation September 2017
Slide 2: Forward-looking Information
Forward-looking Information This presentation contains forward-looking statements. When used in this presentation, the words “will”, “intend”, “plan”, ”potential”, “generate”, "grow", “deliver”, “can”, “continue”, “drive”, “anticipate”, “target”, “come”, “create”, “position”, “achieve”, “seek”, “pro
Slide 3: AltaGas & WGL Holdings Strategic Combination
AltaGas & WGL Holdings Strategic Combination High-quality, contracted assets with significant organic growth 15-20% ~$18 Funds from Operations per 8-10% Dividend Growth Billion Share2 Accretion (2019 – 2021) Total Enterprise Value1 through 2021 Strong $5 billion investment 8-10% ~7.5% Secured growth
Slide 4: Compelling Benefits
Compelling Benefits Acquisition supports AltaGas’ long-term vision and strategy Business Diversification compatibility (Gas utilities, (3 businesses, 8 utility jurisdictions, in Scale midstream, over 30 states and (~C$22 billion1 contracted power) provinces) combined assets) Accretive to Stable high
Slide 5: AltaGas & WGL Significant Infrastructure Platform
AltaGas & WGL Significant Infrastructure Platform High-quality, contracted assets with attractive organic growth ~2 Bcf/d1 1,078 MW3 ~$4.5B4 of Natural Gas of Power Generation Utility Rate base transacted • ~70,000 Bbls/d liquids • 422 MW Gas • ~1.7 million customers produced • 277 MW Hydro • 8 Juri
Slide 6: Leading North American Diversified Energy Company
Leading North American Diversified Energy Company Premier footprint in Canada and the U.S. Segment normalized EBITDA1 (2017F) Balanced Long-Term Gas Power Utilities Target Business Mix ~25% ~40% ~35% All three business segments Fee / will have a premier footprint PPA / Take-or- Contract Segment norm
Slide 7: WGL Overview
WGL Overview WGL is a leading diversified U.S. energy company EBIT Contribution By Segment5 Seen as a preferred source of clean and efficient energy solutions that produce value for customers, investors and Utility 60% communities Midstream 15% Commercial 15% Disciplined capital allocation str
Slide 8: Larger Scale Enhances AltaGas' Competitive Position
Larger Scale Enhances AltaGas’ Competitive Position TSX: ALA Today $CAD Peer Group Enterprise Value ($ billions) Common shares outstanding1 172 million Common share trading price2 $27.71 50 52-week trading range2 $35.55-$27.31 45 Market capitalization2 $4.8 billion 40 Preferred shares2 $1.3 billion
Slide 9: Attractive Platform for Growth Through 2021
Attractive Platform for Growth Through 2021 ~C$7 billion of identified capital investment opportunities Energy U.S. Midstream Storage Marcellus / Utica Footprint Canadian Midstream Canadian Montney Utilities System Betterment and Customer Large Scale Growth Power Development U.S. Utilities System Be
Slide 10: Combined Midstream in North America's Most Prolific Gas Plays
Combined Midstream in North America’s Most Prolific Gas Plays Strategic infrastructure provides producers with global market access Unique opportunity providing critical infrastructure for energy exports at three sites on both the Pacific and Montney expected to Atlantic grow from ~3 Bcf/d in On
Slide 11: AltaGas' Northeast B.C. Strategy
AltaGas’ Northeast B.C. Strategy Provides new market access for Western Canadian propane producers to Asia Truck Terminal Expected to be Canada’s first Blair Creek Raw gas propane export terminal, located on B.C’s west coast Liquids Pipelines (NGL mix and condensate) Ridley Island Propane Townsend
Slide 12: Marcellus Pipelines
Marcellus Pipelines Connecting low cost producers with U.S. consumption markets and exports ME VT NH NY Stonewall Currently in service MI US$135 Million Designed to gather 1.4 Bcfd from MA 30% Ownership West Virginia CT RI PA Central Penn Designed to transport 1.7 Bcfd as part of the “Atlantic
Slide 13: Combined Utility Business
Combined Utility Business High quality assets underpinned by regulated, low-risk cash flow Delivering clean and affordable natural gas to homes and businesses in 8 jurisdictions Estimated combined rate base more than doubles and estimated combined customer base triples in size Increased divers
Slide 14: Customer Growth and Accelerated Replacements Drive Growth
Customer Growth and Accelerated Replacements Drive Growth High near-term growth Projected Rate Base Growth (C$ billions) Expected near-term growth driven by AltaGas WGL customer additions, accelerated New business Replacements replacement programs and general Other utility system betterment capita
Slide 15: Michigan Growth Opportunity
Michigan Growth Opportunity Marquette Connector Pipeline (MCP) Proposed pipeline that will connect the Great Lakes Gas Transmission pipeline to the Northern Gas pipeline in Marquette, Michigan Approximately 42 miles mainly with 20” diameter pipe Provides needed redundancy and additional supply
Slide 16: Combined Power Business
Combined Power Business Generating clean energy with natural gas and renewable sources Diversified Power Portfolio 1,0781 MW of power generation 2% Storage 3% Biomass Power generation in over 20 states and provinces Contracts with creditworthy counterparties provide long- 19% term stable cash
Slide 17: Governing Financial Principles
Governing Financial Principles Delivering growth and security Principles Targets 50 - 60% FFO1 payout ratio 1 Dividend Sustainability ~90% of dividends underpinned by long-term contracted cash flow2 Enhancing returns on existing assets 2 Target Expected Returns Specified targets for growth p
Slide 18: Highly Contracted, Low-Risk Business Model
Highly Contracted, Low-Risk Business Model Managed Commodity Exposure1 Highly Contracted1,2 2019E (First full year including WGL) 2019E (First full year including WGL) 9% 9% 8% 5% 78% 91% Stable EBITDA Commodity Based EBITDA Commodity Exposed Short-term (< 3 years) Medium-term (3-5 years) Long-term
Slide 19: Yield + Growth Strategy
Yield + Growth Strategy 8% – 10% Growth through 2021 50% - 60% payout ratio1 balances company growth and investor return and positions ALA for further dividend growth Dividend growth2 $2.10 $1.98 $1.77 $1.53 $1.38 $1.44 $1.32 2010 2011 2012 2013 2014 2015 2016 2019 2020 2021 Steady dividend track re
Slide 20: Financing Strategy
Financing Strategy Acquisition financing Future growth financing Long-term financing plan structured to maintain strong Future growth investments to be financed in a manner investment grade credit profile consistent with AltaGas' past practices Committed C$6.6bn acquisition bridge facility, in
Slide 21: Strong Liquidity and Investment Grade Credit Rating
Strong Liquidity and Investment Grade Credit Rating Prudent deal financing enhances balance sheet strength over the long-term FFO1/Debt ~15% Target Combined larger platform and financing plan reinforce a path to improved credit metrics and a strong investment grade balance sheet 2016 2019 Focus on
Slide 22: Transaction Timeline Update
Transaction Timeline Update Anticipate additional positive milestones into 2018 Q1-17 Q2-17 Q3-17 Q4-17 H1-18 Transaction Announcement Expected close WGL Shareholder Approval received Vote May 10, 2017 FERC approval Maryland, Virginia, D.C., regulatory received July 6, outcomes 2017 Wait
Slide 23: Key Takeaways
Key Takeaways Near-term catalysts (Next 12 Months) Q3 2017 Q4 2017 Q1/Q2 2018 Commence asset sales for Completion of 99 Mmcf/d Completion of North Pine 10,000 $1.5 - $2.5B to coincide with WGL Townsend 2A processing facility Bbls/d C3+ processing facility regulatory approvals in October ahead
Slide 24: Appendix
AltaGas Appendix
Slide 25: AltaGas' Key Focus Areas
AltaGas’ Key Focus Areas Greenhouse Gas Total Recordable Injury Emissions* Frequency 1.50 4 3 1.00 2 0.50 1 0.00 0 2013 2014 2015 2016 2013 2014 2015 2016 Million tonnes of CO2 equivalent * Gas Division CDP Scores 2016 AltaGas Ltd. B Industry Average C Sector Average Canada Average Total Average See
Slide 26: Consistent and Diversified EBITDA Growth
Consistent and Diversified EBITDA1 Growth Successful track record of delivering EBITDA1 growth over time $ Millions 800 Low double digit growth2 600 400 200 0 2010 2011 2012 2013 2014 2015 2016 2017F Non-commodity % of EBITDA1 2010 2011 2012 2013 2014 2015 2016 2017F2 50% 43% 70% 69% 79% 93% 98% 96%
Slide 27: Contracted EBITDA
Contracted EBITDA1 Substantial increase in long-term contracted and Regulated Gas Distribution EBITDA Breakdown of Midstream EBITDA1 2010 2017F2 45% Fixed / Take-or-pay No volume or commodity price exposure 34% ~40% 17% 13% ~21% Cost-of-service 4% Provides for recovery of operating costs and a 2
Slide 28: Combined Scale to Deliver Growth
Combined Scale to Deliver Growth FFO per share growth of 15% - 20% on average through 2021 AltaGas (C$mm) WGL (C$mm) 1,5 1 Project Expected Capex 1,2 Target In-Service 1 Project Expected Capex Target In-Service Townsend 2A $80 2017 Constitution Pipeline $123 2019 Townsend Field Equipment $50 2017 Ce
Slide 29: Committed Projects Highly Contracted
Committed Projects Highly Contracted ~60% EBITDA growth from committed projects, and growth in regulated Utilities1,2 2015 San Joaquin Regulated Gas Mclymont Townsend Energy Storage Townsend 2A North Pine Ridley Island Alton 2020F acquisition3 Distribution and incremental Propane Export field Termin
Slide 30: Funding Outlook for 2017
Funding Outlook for 2017 Well funded to support full capital program ~$1 billion ~$1 billion Gas Projects DRIP1 - Ridley Island Balanced funding Propane Export Terminal Bank liquidity, Term debt, Bank liquidity, Term debt, for growth - North Pine NGL Preferred shares, Non- Facility Preferred shares,
Slide 31: Sound Financial Position
Sound Financial Position Debt-to-Capitalization Executed financing history1 $ Millions 80% Covenants 2,500 70% 60% 2,000 50% 1,500 40% 30% 1,000 20% 500 10% 0% 0 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 2017 Common Equity Preferred Equity Debt Free Cash Flow DRIP EBITDA-to-interes
Slide 32: Debt Maturities
Debt Maturities Balanced long-term debt maturities Proforma long-term debt maturities including WGL1 CAD $ Millions CAD $ Millions 600 1,300 1,200 500 1,100 1,000 400 900 800 300 700 600 500 200 400 300 100 200 100 0 0 Q2-Q4 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2032 2044 Q2-Q4 2017
Slide 33: Delivering Growth and Security
Delivering Growth and Security Payout ratio balances company growth and investor return and positions ALA for further dividend growth Dividend growth $1.98 $2.10 $1.77 Dividend payout as a % of 2017F AFFO3 $1.53 $1.32 $1.38 $1.44 8% CAGR 100% 80% Average 60% 2010A 2011A 2012A 2013A 2014A 2015A 2016A
Slide 34: Valuation Multiple
Valuation Multiple Attractive value for AltaGas, combined with sustainable dividend payment. AltaGas has one of the lowest multiples in the entire sector. 2017F Payout Ratios vs. P/AFFO1 Energy infrastructure group yield and growth2 P/AFFO/Sh Yield 18 x 8% ALA-T GEI-T Attractive Valuation 7% IPL-T 1
Slide 35: Gas
Gas
Slide 36: Building Infrastructure to Serve New Markets
Building Infrastructure to Serve New Markets From wellhead to markets Existing assets Growth projects North Pine NGL NGL Fort Sask. Rail, North facility and other truck & American new processing hub2 pipelines2 Markets infrastructure & liquids separation Storage, rail & truck offloading2 Abundant Fe
Slide 37: Stable Production Volumes & Throughput
Stable Production Volumes & Throughput Core plants in sustainable plays Blair Creek 2015 – 62 Mmcf/d 2016 – 66 Mmcf/d Gross Annual Throughput 2017E – 60 – 70 Mmcf/d Mmcf/d 1,600 2017F FG&P: Gordondale 406 Mmcf/d *‡ 2015 – 102 Mmcf/d 1,200 2016 – 90 Mmcf/d 800 2017E – 90 – 100 Mmcf/d 2017F extraction
Slide 38: Montney Competitive at Current Prices
Montney Competitive at Current Prices Competitive Canadian Production1 USD/Mcfe $3.50 $3.00 Painted Pony field cash cost estimated at ~$0.84 USD/Mcfe2 $2.50 $2.00 Avg. CDN producer cash cost3 “From a pure resource $1.50 perspective, we believe the $1.00 Montney compares favorably to $0.50 other Nort
Slide 39: Doubling the Townsend Gas Processing Complex
Doubling the Townsend Gas Processing Complex Received regulatory approval for the doubling of the Townsend Facility to 396 Mmcf/d and to retrofit the existing 198 Mmcf/d shallow-cut Townsend Facility to a deep-cut facility at a future date Townsend phase 2 Townsend Phase 2 will be constructed in t
Slide 40: North Pine NGL Separation Facility to Serve Montney Producers
North Pine NGL Separation Facility to Serve Montney Producers NGL facility to serve Montney producers in northeast British Columbia, near Fort St. John Construction has commenced for the first NGL separation train, with expected on-stream date early in Q1 2018 First train capable of producing
Slide 41: Propane Export Solution to Enhance Producer Netbacks
Propane Export Solution to Enhance Producer Netbacks Truck AltaGas’ propane export terminal at Blair Creek Terminal Ridley Island (RIPET) is poised to create a hub for key global markets North Pine: to the west ~20,000 bbl/d of C3+ >40,000 bbl/d Significant shipping advantages vs. of C3 shipped
Slide 42: Ridley Island Propane Export Terminal
Ridley Island Propane Export Terminal First mover competitive advantage Expected to be Canada’s first West Coast propane export terminal Construction is underway and is expected to be in service by Q1 2019 Facility designed for 40,000 bbls/d of export capacity Brownfield site includes existing
Slide 43: Clear LPG Shipping Cost Advantage to Asia
Clear LPG Shipping Cost Advantage to Asia Terminal Cost Rail Cost North Ft. Saskatchewan America 1 10 days Prince Rupert Demand: Supply: Rail Cost Ocean Freight Cost Japan / Korea 1 Demand: Supply: Ocean Freight Cost Terminal Cost Mt. Belvieu (Includes Canal Fee) 25 days WCSB to Asia Costs (US$/Gal)
Slide 44: Utilities
Utilities
Slide 45: Utilities Portfolio - AltaGas
Utilities Portfolio - AltaGas1 System betterment program and upgrades underway at Utilities SEMCO Main replacement program (MRP) continues to 2020 with associated average spend of ~US$10 MM annually – MRP-1 was first of its kind granted by Michigan regulator in 2011 – Since 2011, SEMCO has amended
Slide 46: Supportive Regulatory Environment for Regulated Gas Utilities
Supportive Regulatory Environment for Regulated Gas Utilities Allowed ROE and Utility Location Regulatory Equity Thickness Next rate case to be filed Q4 2017 for 2018 and 2019 British 9.40%1 Protected from weather related volatility through revenue stabilization adjustment Columbia 45% account
Slide 47: Washington Gas Regulatory Environment
Washington Gas Regulatory Environment Utility Location Regulatory Last rate case was filed in June 2016 with a stipulation issued in April 2017 and final Commission approval still pending Virginia Expedited rate cases anticipated in 2019 and 2020 New 5 year plan for accelerated replacement fil
Slide 48: Power
Power
Slide 49: Northwest B.C. Hydro – Stable Long-Term Financial Returns
Northwest B.C. Hydro – Stable Long-Term Financial Returns Forrest Kerr 195 MW fully contracted to 2074 McLymont Creek 66 MW fully contracted to 2075 Volcano Creek 16 MW fully contracted to 2074 60 Year PPA with high quality credit (BC Hydro) NWH 60-year EBITDA: - 100% indexed to B.C. CPI $ Million
Slide 50: California Power Portfolio - Development
California Power Portfolio - Development Pomona Additional potential battery project Gas re-powering application under review by the California Energy Commission 100 MW fast ramping LMS100 technology to complement renewables Sonoran Energy Project Development of Sonoran investment has value
Slide 51: Existing Permitted Gas Plants in California Have Embedded Value
Existing Permitted Gas Plants in California Have Embedded Value Which Can Grow Over Time High barriers to entry for new gas fired generation. Steel in the ground has significant value New builds are difficult to permit, expensive to build and require long (~10 year) development time horizons. Ther
Slide 52: Key Sensitivities
Key Sensitivities Foreign Exchange Key variables +/- $0.05 US/CAD 2017 Impact EBITDA ~$15 MM Frac Spread Key variables +/- $1/bbl 2017 Impact EBITDA ~$1.5MM Natural Gas Volumes Key variables +/- 10% 2017 Impact EBITDA ~$15 MM Expectations as at July 27, 2017 See "forward-looking information" 52