Altagas Ltd. · TSX:ALA
Altagas — Q1 2020 Earnings Presentation
38 slides from Altagas's earnings presentation, Apr 30, 2020
Slide 1: First Quarter 2020 Results Presentation
First Quarter 2020 Results Presentation April 30, 2020
Slide 2: Forward-Looking Information
Forward-Looking Information FORWARD-LOOKING INFORMATION This document 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", "fo
Slide 3: Our Strategy
Our Strategy We leverage the strength of our assets and expertise along the energy value chain to connect customers with premier energy solutions – from the wellsites of upstream producers to the doorsteps of homes and businesses, to new markets around the world. 3
Slide 4: COVID-19
COVID-19 “ We are committed to doing everything we can to support the communities In response to the COVID-19 pandemic we’re taking action to help our customers and communities, by: Committing $1 million in emergency assistance to support our community partner and those on the organizations during t
Slide 5: Highlights
Highlights ($CAD unless otherwise noted) 2020e Normalized Diversified low-risk, high growth 39% EBITDA2,4 Utilities and Midstream businesses 60% Midstream deliver stable and reliable results Corporate/Other Utilities 1% $1.20 - $1.30 2020e Normalized EPS2 Strong Financial Position Fitch: DBRS: S&P:
Slide 6: Q1 2020 Financial Results Summary
Q1 2020 Financial Results Summary $499M $420M $220M $0.79 Normalized Normalized Normalized Normalized EBITDA1 FFO1 Net Income1 Net Income Per Share1 1. Non-GAAP measure; see discussion in the advisories 6
Slide 7: 2020 Q1 Actuals vs. 2019 Q1 Actuals
2020 Q1 Actuals vs. 2019 Q1 Actuals Strong Growth in Core Businesses Normalized EBITDA1 Over 11% Growth2 in Core Business Assets ($ millions) 499 $34 MM lost due +11 to 2019 482 asset sales +6 +34 448 Q1 2019 Actual Asset Sales Q1 2019 Run Rate Utilities Midstream Corporate/Other Q1 2020 Actual ▼ Di
Slide 8: Q1 2020 – Normalized EBITDA Variance
Q1 2020 – Normalized EBITDA Variance ($ millions) Q1 2020 Normalized EBITDA1 Q1 2020 Q1 2019 Variance Q1 2020 vs Q1 2019 Normalized EBITDA Drivers + Maryland rate case + Virginia rate case + SEMCO rate case Utilities 369 335 34 + Higher ARP spending - Warmer weather in District of Columbia + NGL mar
Slide 9: Rate Regulated Utilities Provide Stability and Growth
Rate Regulated Utilities Provide Stability and Growth ~60% of 2020e normalized EBITDA from Utilities Segment1 2020e Utility Revenues 1 Alaska: ~147,000 customers 1.7 million customers in stable and growing jurisdictions 2 Michigan: ~307,000 customers 30% 3 Maryland: ~493,000 customers r ~70% of Util
Slide 10: COVID-19 Regulatory Update
COVID-19 Regulatory Update State Approach Washington, D.C. § Commission issued an Order on April 15, 2020 to establish regulatory asset to track COVID-19 related costs incurred since March 11, 2020 Maryland § Commission issued an Order on April 9, 2020 to establish regulatory asset to track COVID-19
Slide 11: Premier Midstream Business
Premier Midstream Business Leveraging RIPET’s Structural Advantage to Markets in Asia Leverage RIPET and access to premium global pricing to attract volumes ~60% from investment grade customers ~70% from take-or-pay contracts and fee for service ~86% of 2020 RIPET volumes hedged (includes tolling) 2
Slide 12: Counterparty Credit
Counterparty Credit ~80% of 2020e normalized EBITDA1 from regulated Utilities and investment grade counterparties Credit Quality Counterparty Credit Risk Mitigants: 60% Utilities with ~1.7 million customers Diversified Midstream customer base 14% Utility & A Letters of credit, parental guarantees 66
Slide 13: Strong Commercial Underpinning
Strong Commercial Underpinning ~85% of 2020e normalized EBITDA1 from rate Top 5 producers regulated 2020e utilities and take or pay contracts Contract Type ~70% of 2020e normalized EBITDA1 underpinned by low-risk regulated and contracted U.S. assets 5% 5% 5% Rate Regulated Utilties Merchant EBITDA l
Slide 14: Investment Grade Credit Rating
Investment Grade Credit Rating Business risk assessment underpinned by 60% Utilities business 10.1x Commitment to investment grade credit rating Regained financial flexibility and improving Debt/EBITDA metrics Improved ~5.7x Debt / EBITDA Outlook: 5.5x or less Stronger access to debt markets Issuer
Slide 15: Financial Flexibility
Financial Flexibility Significant excess liquidity minimizes capital market funding risk beyond 2020 Debt Maturity Profile Funding & Liquidity ($ millions) ($ millions) 1,200 6,000 1,000 5,000 800 4,000 ~$780 million ~$4,090 ~$3.6 billion Available Refinanced year-to-date 3,000 Excess Liquidity Liqu
Slide 16: Utilities
Utilities 16
Slide 17: Utilities Strategy - Drive Operational Excellence
Utilities Strategy - Drive Operational Excellence Priorities § Maintain safe and reliable infrastructure § Enhance overall returns via complementary Utilities businesses and cost-reduction initiatives Distribution § Attract and retain customers through exceptional customer service § Improve asset ma
Slide 18: Our Utilities Business Operating Model
Our Utilities Business Operating Model Safe and reliable, high-growth competitive strategy Opportunities § Improve business processes and drive down leak remediation costs, reinvesting savings into improving the customer Operational Excellence experience § Invest in aging infrastructure; grow earnin
Slide 19: Utilities 2020 Growth Drivers
Utilities 2020 Growth Drivers Grow earnings through rate base investment Investment in aging infrastructure and attracting new customers is expected to drive strong rate base growth of 8 - 10% Rate Base Growth (US$ millions) Opportunities § Disciplined approach to maintaining and replacing aging inf
Slide 20: WGL ROE Strategy
WGL ROE Strategy Path to earning our allowed returns at WGL Strategy in place with a clear line of sight to allowed returns in 2021 Key initiatives to achieving allowed returns: Anticipated Return On Equity 1. Capital Discipline: & Expected Timeline § Accelerated Replacement Programs ensure ~9.4% 1
Slide 21: Utilities Segment Capital Spend
Utilities Segment Capital Spend Disciplined approach to capital focused on strategic projects and Accelerated Replacement Programs Designed to earn immediate returns and increase capital efficiency through approximately 25% growth in ARP spending 2019A Utilities Capital 2020e Utilities Capital (US$
Slide 22: Summary of Recent Rate Case Filings
Summary of Recent Rate Case Filings Focused on timely recovery of capital Most Recent Equity Revenue ROE Rate Case Filed Thickness SEMCO (Michigan) Filed May 31, 2019 Received: US$19.9 MM Received: 9.87% Received: 54%1 WGL (Maryland) Filed April 22, 2019 Received: US$27 MM Received: 9.7% Received: 5
Slide 23: Midstream
a Midstream AltaGas | im
Slide 24: Our Midstream Strategy is Straightforward
Our Midstream Strategy is Straightforward Maximize utilization of existing assets and pursue capital efficient high-return expansions Invest § Continue to build upon our export competency Midstream § Diversify and grow our customer base to help mitigate counterparty risk Grow § Optimize existing rai
Slide 25: Premier Midstream Business Connecting Canadian Producers to Global Markets
Premier Midstream Business Connecting Canadian Producers to Global Markets Leverage RIPET and our integrated value chain to attract volumes Montney Basin Key Assets: Strategic Benefits: § Ridley Island Propane § Global demand market access Export Terminal (RIPET) § Leverages existing assets § Fernda
Slide 26: Energy Export Strategy Underpinned by Strong Fundamentals
Energy Export Strategy Underpinned by Strong Fundamentals Lack of economic egress will continue to support ALA’s strategic export advantage Propane demand growth in Asia supported Long-term supply/demand imbalance by appetite for cleaner burning energy supports the need for Canadian exports Montney
Slide 27: RIPET – 2020 Operational Overview
RIPET – 2020 Operational Overview Strong performance; positioned for growth § Increased utilization - strong interest from producers supports volumes ramping up to exit 2020 at ~50,000 bbl/d RIPET 2020e § ~33% of total 2020 volumes under tolling arrangements Hedged Volumes Highlights § ~86% of expec
Slide 28: Processing – 2020 Operational Overview
Processing – 2020 Operational Overview Increased utilization and expansions drive growth Operational Capacity (Fractionation and NEBC Processing Facilities) Processing 800 70,000 700 60,000 § Projects coming online in 2020 add significant volume 600 Fractionation Capacity (bbl/d) 50,000 growth suppo
Slide 29: 2020 Outlook
AltaGas 2020 Outlook
Slide 30: 2020: Outlook Unchanged
2020: Outlook Unchanged Strong growth in base business underpins 2020 outlook 2020 Normalized EBITDA1 Guidance2 2020 Normalized EPS1 Guidance2 ($ millions) (per share) 1600 $1.20 - $1.30 1200 800 400 0 2020e 2020e Utilities Midstream Corp/Other 1. Non-GAAP financial measure; see discussion in the ad
Slide 31: 2020 Normalized EBITDA Drivers
2020 Normalized EBITDA1 Drivers Normalized 2020E EBITDA1 Growth Drivers 2020 Normalized ▲ Rate base growth through disciplined EBITDA1 Guidance2 investment in aging infrastructure ($ millions) ▲ Achieving higher returns on equity Utilities ▲ Cost-reduction initiatives and $1,275 - $1,325 decreasing
Slide 32: 2020 Disciplined Capital Allocation
2020 Disciplined Capital Allocation Strong organic growth drives robust risk adjusted returns ~$9001 million in top-quality projects drive earnings growth Corporate/ Other Capital Allocation Criteria: 4% Identified Projects: Identified Projects: § MVP – Southgate § System betterment Strong organic g
Slide 33: 2020: Self-Funded Model
2020: Self-Funded Model Growth in cash flow eliminates need for common equity and provides funding flexibility 2020 capital plan funded internally and focused on projects with near-term returns 2020e Sources and Uses1 ($ millions) $1,800 ~$1,600 ~$1,600 $1,600 Suspension of the DRIP program Leverage
Slide 34: Appendix
AltaGas Appendix
Slide 35: AltaGas Segments Redefined
AltaGas Segments Redefined To reflect management’s strategic view of the business Management assesses performance and allocate resources between the core business segments of Utilities and Midstream 2020e Normalized EBITDA1 2020e Normalized EBITDA1 Previous Segments Redefined Segments Gas retail ene
Slide 36: Supportive Regulatory Environment for Utilities
Supportive Regulatory Environment for Utilities 2019 YE Average Allowed ROE Utility Rate Base Customers and Equity Regulatory Update ($US) Thickness § Distribution rates approved under cost of service model. § Projected test year used for rate cases with 10 month limit to issue a rate order. § Rate
Slide 37: Supportive Regulatory Environment for Utilities
Supportive Regulatory Environment for Utilities 2019 YE Average Allowed ROE Utility Rate Base Customers and Equity Regulatory Update ($US) Thickness § Distribution rates approved under cost of service model. § Rate case filed in July 31, 2018. On December 20, 2019 the Commission granted US$13.2 mill
Slide 38: Accelerated Replacement Program
Accelerated Replacement Program Utility Location Program § Main Replacement Program (MRP) expires in 2020. 2019 rate case settlement provides for a renewed Michigan MRP for 2021-2025 with total spending of ~US$60 million, and the introduction of a new Infrastructure Reliability Improvement Program (