AltaGas Ltd.
TSX : ALA

AltaGas Ltd.

July 30, 2015 07:45 ET

AltaGas Ltd. Reports Second Quarter Results; Advances Its Northeast BC Projects and LPG Exports Off Canada's West Coast

CALGARY, ALBERTA--(Marketwired - July 30, 2015) -

Highlights

  • $1 billion investment in energy infrastructure in British Columbia over the next two years;
  • Began construction of $350 million Townsend gas facility;
  • Exclusivity agreement for LPG export site in British Columbia;
  • Development process underway for liquids hub in Fort St John;
  • Better than expected results from Forrest Kerr and Volcano Creek;
  • Regulatory approval of Main Replacement Program at SEMCO resulting in increased rate base growth; and
  • $107 million in normalized EBITDA.

AltaGas Ltd. ("AltaGas") (TSX:ALA) today reported second quarter normalized EBITDA of $107 million, the same as in second quarter 2014. Normalized funds from operations were $68 million ($0.50 per share) for the second quarter 2015.

"With a stronger second half to 2015 we expect to deliver 10 to 15 percent year-over-year EBITDA growth," said David Cornhill, Chairman and CEO of AltaGas. "We continue to drive near-term growth. We significantly ramped up LPG exports, Forrest Kerr and Volcano Creek are performing better than expected and McLymont will be in service shortly. We are now in the construction phase at Townsend and expect to have it in operation in mid-2016."

AltaGas continues to develop new markets for natural gas liquids as it expands its LPG export capabilities. In addition to expanding LPG export capability at the Ferndale facility located in the State of Washington and owned by Petrogas, AltaGas has entered into an exclusivity agreement to develop an LPG export site in British Columbia. The initial phase of this export facility is expected to ship 25,000 Bbls/d, with significant expansion opportunities.

LPG supply for the proposed export facility in British Columbia is expected to be sourced from AltaGas' natural gas processing infrastructure, as well as through Petrogas' logistics network. AltaGas has begun development of a liquids separation and handling facility near Fort St. John which will serve producers in the Montney region. The site is well connected by rail to Canada's west coast and North American markets. A FEED study is in progress and is expected to be completed by the end of 2015. Consultations with key stakeholders are commencing and the regulatory permitting process will begin shortly. AltaGas expects to make a final investment decision in 2016.

AltaGas is already processing natural gas from the Montney region at its Younger, Blair Creek and Gordondale facilities which are operating at close to full capacity. Additional processing capacity will be added with its new 198Mmcf/d Townsend shallow-cut processing facility. AltaGas has started construction and approximately $100 million of equipment and services have been procured for the project-to-date. The facility is scheduled to be in service by mid-2016.

On the LNG export front, AltaGas along with the other members of the Douglas Channel LNG consortium continue to develop the 0.55 million tonnes per annum project at Kitimat. Producer discussions to supply the project, as well as technical and permitting work, are ongoing. A final investment decision is expected in fourth quarter 2015.

During the quarter, SEMCO's Main Replacement Program application was approved by the Michigan Public Service Commission. The approval allows for the recovery of capital expenditures from 2016 to 2020. The new rates took effect immediately and are expected to result in approximately US$3 million of additional earnings on an annualized basis.

In second quarter 2015, EBITDA was driven by the addition in late 2014 of the Forrest Kerr and Volcano Creek hydroelectric power generation facilities, new US gas-fired power assets acquired in first quarter 2015 and favourable foreign exchange rates. Overall, EBITDA held flat as EBITDA growth was offset by the impact of historically low commodity prices as well as the planned turnarounds at Younger and Harmattan.

Normalized funds from operations were $68 million ($0.50 per share) for the second quarter 2015, compared to $106 million ($0.86 per share) in the same period 2014. Funds from operations decreased primarily due to $28 million dividend received from Petrogas in second quarter 2014 compared to nil in second quarter 2015 and higher interest expense as a result of new assets being placed into service. Cash was retained at Petrogas in order to fund its projects, which will serve to enhance its North American liquids storage and logistics capabilities.

Normalized net income was $9 million ($0.07 per share), compared to $27 million ($0.22 per share) in second quarter 2014. Higher depreciation and higher financing costs partially offset by lower normalized income tax expense resulted in lower net income.

On a GAAP basis, AltaGas reported a net loss applicable to common shares of $22 million ($0.16 per share) in second quarter 2015, compared to net income of $29 million ($0.23 per share) for the same period 2014. The net loss was primarily the result of the recent increase in Alberta's corporate tax rate which impacted net income by $14 million, ($0.10 per share), and unrealized after tax losses of $17 million related primarily to Alberta power hedges.

For the six months ended June 30, 2015, normalized EBITDA was $284 million compared to $287 million for the same period in 2014. Normalized funds from operations were $208 million ($1.54 per share), compared to $238 million ($1.93 per share) for same period 2014. The decrease was primarily due to the discretionary timing of dividend payments from Petrogas. Excluding the impact of the dividends received from Petrogas, normalized funds from operations were $208 million for six months ended 2015, compared to $210 million for the same period 2014.

Normalized net income for six months ended June 30, 2015, was $66 million ($0.49 per share), compared to $101 million ($0.82 per share) for the same period 2014. On a GAAP basis, net income applicable to common shares was $44 million ($0.33 per share) for six months ended June 30, 2015, compared to $69 million ($0.56 per share) for the same period 2014. Net income for six months ended June 30, 2015 was primarily impacted by the recent increase in Alberta's corporate tax rate and by unrealized losses on Alberta power hedges. Net income applicable to common shares for the six months ended June 30, 2014 includes an after-tax gain of $9 million from the sale of assets, offset by a non-cash after-tax provision of $29 million related to assets from the acquisition of Taylor NGL Limited Partnership in 2008, a non-cash after tax provision of $8 million related to a number of small hydro power assets under development, mark-to-market accounting and the cost of early redemption of medium-term notes.

Monthly Common Share Dividend and Quarterly Preferred Share Dividend

  • The Board of Directors approved the August 2015 dividend of $0.16 per common share. The dividend will be paid on September 15, 2015, to common shareholders of record on August 25, 2015. The ex-dividend date is August 21, 2015. This dividend is eligible for Canadian income tax purposes.
  • The Board of Directors approved a dividend of $0.3125 per share for the period commencing July 1, 2015 and ending September 30, 2015, on AltaGas' outstanding Series A Preferred Shares. The dividend will be paid on September 30, 2015 to shareholders of record on September 16, 2015. The ex-dividend date is September 14, 2015;
  • The Board of Directors approved a dividend of US$0.275 per share for the period commencing July 1, 2015 and ending September 30, 2015, on AltaGas' outstanding Series C Preferred Shares. The dividend will be paid on September 30, 2015 to shareholders of record on September 16, 2015. The ex-dividend date is September 14, 2015;
  • The Board of Directors also approved a dividend of $0.3125 per share for the period commencing July 1, 2015, and ending September 30, 2015, on AltaGas' outstanding Series E Preferred Shares. The dividend will be paid on September 30, 2015 to shareholders of record on September 16, 2015. The ex-dividend date is September 14, 2015; and
  • The Board of Directors also approved a dividend of $0.296875 per share for the period commencing July 1, 2015, and ending September 30, 2015, on AltaGas' outstanding Series G Preferred Shares. The dividend will be paid on September 30, 2015 to shareholders of record on September 16, 2015. The ex-dividend date is September 14, 2015.
CONSOLIDATED FINANCIAL REVIEW
(unaudited) Three months ended
June 30
Six months ended
June 30
($ millions) 2015 2014 2015 2014
Revenue 416 471 1,161 1,295
Net revenue(1) 204 220 512 516
Normalized operating income(1) 54 64 179 202
Normalized EBITDA(1) 107 107 284 287
Net income (loss) applicable to common shares (22 ) 29 44 69
Normalized net income(1) 9 27 66 101
Total assets 8,495 7,197 8,495 7,197
Total long-term liabilities 4,155 3,800 4,155 3,800
Net additions to property, plant and equipment 143 132 253 220
Dividends declared(2) 63 52 123 99
Cash flows
Normalized funds from operations(1) 68 106 208 238

Three months ended
June 30

Six months ended
June 30
($ per share, except shares outstanding) 2015 2014 2015 2014
Normalized EBITDA(1) 0.79 0.87 2.10 2.33
Net income (loss) per common shares - basic (0.16 ) 0.23 0.33 0.56
Net income (loss) per common shares - diluted (0.16 ) 0.23 0.33 0.55
Normalized net income(1) 0.07 0.22 0.49 0.82
Dividends declared(2) 0.47 0.42 0.91 0.81
Cash flows
Normalized funds from operations(1) 0.50 0.86 1.54 1.93
Shares outstanding - basic (millions)
During the period(3) 135 123 135 123
End of period 135 124 135 124
(1) Non-GAAP financial measure; see discussion in Non-GAAP Financial Measures section of this MD&A.
(2) Dividends declared per common share per month $0.1475 beginning on May 26, 2014 and $0.16 beginning on May 25, 2015.
(3) Weighted average.

CONFERENCE CALL AND WEBCAST DETAILS:

AltaGas will hold a conference call today at 9:00 a.m. MT (11:00 a.m. ET) to discuss second quarter financial results, progress on construction projects and other corporate developments.

Members of the media, investment communities and other interested parties may dial (416) 340 2218 or call toll free at 1 866 225 2055. There is no passcode. Please note that the conference call will also be webcast. To listen, please go to http://www.altagas.ca/investors/presentations_and_events. The webcast will be archived for one year.

Shortly after the conclusion of the call, a replay will be available by dialing (905) 694 9451 or 1 800 408 3053. The passcode is 7005138. The replay expires at midnight (Eastern) on August 6, 2015.

AltaGas is an energy infrastructure business with a focus on natural gas, power and regulated utilities. AltaGas creates value by acquiring, growing and optimizing its energy infrastructure, including a focus on clean energy sources. For more information visit: www.altagas.ca

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