Altagas Ltd. · TSX:ALA
Altagas — Scotiabank Energy Infrastructure Conference 2019
36 slides from Altagas's conference presentation, Nov 20, 2019
Slide 1: Scotiabank Energy Infrastructure Conference
Scotiabank Energy Infrastructure Conference November 20 - 21, 2019
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: 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: Highlights
Highlights ($CAD unless otherwise noted) $5.4B $1.2-1.3B $2.2B $21B Market Cap1 2019e Normalized Asset Sales Total Assets EBITDA2 2.3 Bcf/d 34,500 Bbl/d 70,000 Bbl/d Gas Processing3 Fractionation 4 Export5 US$3.7B 5 1.6 Million Rate Base U.S. Jurisdictions Customers 1. As at market close Nov 6, 2019
Slide 5: Our Business Strategies are Straightforward
Our Business Strategies are Straightforward Low-Risk, High-Growth Utility and Midstream Company Low-Risk Regulated Utility Opportunity-Rich Integrated Midstream Utilities Global Distribution Export Leveraging our Core Leveraging our Distribution Footprint Core Export Strategy Steady and predictable
Slide 6: Near-Term Operational Priorities
Near-Term Operational Priorities Priorities Actions First cargo out of ✓ Complete construction and initiate operational phase RIPET early Q2 2019 ✓ Introduce feedstock to fill the LPG tank ✓ First cargo in May 2019 ✓ Volumes delivered to RIPET increased to current capacity of 40,000 Bbl/d Capitalize
Slide 7: Near-Term Financial Priorities
Near-Term Financial Priorities Priorities Actions Execute $1.5 – $2.0 billion of ✓ Executed on $2.2 billion in asset sales as at September 30, 20191: non-core asset sales - US$280 million Stonewall asset sale - US$735 million Distributed Generation asset sale - ~US$657 million Central Penn Pipeline
Slide 8: Announced $2.2 Billion of Non-Core Asset Sales
Announced $2.2 Billion of Non-Core Asset Sales Announced or completed $2.2 billion in asset sales, exceeding the top end of $1.5 - $2.0 billion asset sales targeted for 2019 Central Penn Pipeline Distributed Generation Assets Stonewall Gas Gathering System ▪ 1.7 Bcf/d, 185-mile pipeline from ▪ 322 M
Slide 9: Launching our Inaugural ESG Report
Launching our Inaugural ESG Report To earn the right to grow, we must continue to integrate ESG considerations into the execution of our strategy The report outlines our ongoing efforts to improve our operational performance, manage our environmental impact and deliver social value The best path for
Slide 10: Midstream Update
Midstream Update 10
Slide 11: Our Midstream Strategy is Straightforward
Our Midstream Strategy is Straightforward Maximize utilization of existing assets and pursue capital efficient high-return expansions ▪ Continue to build upon our export competency Midstream Invest ▪ Diversify and grow our customer base to help mitigate counterparty risk Grow ▪ Optimize existing rai
Slide 12: 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 13: Integrated Service Offering with Access to Global Markets
Integrated Service Offering with Access to Global Markets Increasing returns along the integrated value chain Gas Processing & 9X – 10X Gathering Field Fractionation, Liquids Handling Storage and Rail CUMULATIVE CAPEX PER Loading Integrated Economics EBITDA Export Terminal 5X – 6X Potential to ~doub
Slide 14: Abundant North American Natural Gas Supply
Abundant North American Natural Gas Supply Excess propane supports development of incremental export capacity Abundant supply of North American natural gas Propane supply growth continues to outpace demand ▪ U.S. natural gas production expected to grow 30% by 2023 ▪ As NA gas supply continues to shi
Slide 15: Supply/Demand Imbalance Supports Export Capacity Growth
Supply/Demand Imbalance Supports Export Capacity Growth Opportunity to grow Canada’s West Coast LPG export capacity Increasing demand in Asia Supply/demand imbalance supports strong spreads ▪ Natural gas & propane are low cost sources of clean fuel ▪ WCSB growth is constrained by regional market acc
Slide 16: RIPET Netback Advantage
RIPET Netback Advantage RIPET provides enhanced netbacks to producers – at current propane prices1 the RIPET advantage is ~80% increase in realized price Alberta3 RIPET Advantage (US$/bbl) US$9.29/bbl 2019 FWD AFEI1 ~$35.39 Transport & Terminalling4 ~$18.70 Ft. Saskatchewan RIPET Netback ~$16.69 RIP
Slide 17: RIPET – Operational Overview
RIPET – Operational Overview Strong performance positioned for growth RIPET Highlights: ✓ ~40,000 Bbl/d propane receipt volumes Q4 2019e Hedged Volumes ✓ 3 million barrels or 6 ships exported Third Quarter ✓ $37 million in EBITDA (including a $5 million one-time hedging gain1) 28% ✓ ~22,500 Bbl/d he
Slide 18: Initial Investment in Montney Midstream Assets
Initial Investment in Montney Midstream Assets Sets the stage for significant organic EBITDA growth opportunities Montney Operating Capacity Canadian Midstream Normalized EBITDA1 800 24,000 ($ millions) BASE GAS PROCESSING TOWNSEND GAS PROCESSING 700 21,000 AITKEN GAS PROCESSING NORTH PINE FRACTIONA
Slide 19: Utilities Update
Utilities Update 19
Slide 20: Utilities Strategy - Drive Operational Excellence
Utilities Strategy - Drive Operational Excellence Priorities ▪ Maintain safe and reliable infrastructure ▪ Enhance overall returns via complementary businesses and cost reduction initiatives Utilities Distribution ▪ Attract and retain customers through exceptional customer service ▪ Improve asset ma
Slide 21: Our Utility Business Operating Model
Our Utility 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 experience Operational Excellence ▪ Invest in aging infrastructure; grow earnings
Slide 22: 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: Return On Equity & Expected Timeline 1. Capital Discipline: • Accelerated Replacement Programs ensure timely recovery of i
Slide 23: Rate Case Update
Rate Case Update Focused on Timely Recovery of Capital ROE Requested & Equity Thickness Rate Case Revenue Requested Notes Approved Requested & Approved • Rebuttal testimony filed October 18th Filed May 31, 2019, • The hearing is expected to take SEMCO Requested: US$38 MM, includes the Marquette Requ
Slide 24: Financial Update
Financial Update 24
Slide 25: Capital Allocation Focused on Near-Term Returns
Capital Allocation Focused on Near-Term Returns ~$1.3 - $1.36 Billion Top-Quality Projects Identified Projects: ▪ System betterment across all Utilities 2% ▪ Accelerated pipe Mountain replacement Valley 9% programs in Pipeline Michigan, Virginia, Maryland and Washington D.C. ▪ Customer growth Capita
Slide 26: Robust Asset Sales Provide Flexibility in 2019 Funding Plan
Robust Asset Sales Provide Flexibility in 2019 Funding Plan 2019 Sources and Uses1 Secured Capital Program ($ billions) (C$millions unless otherwise specified) ~$4.6 ~$4.6 Expected Target Utility Capital Projects Capex2,3 In-Service1 Utility 2019 Annual Capital ~$625 2019 Marquette Connector Pipelin
Slide 27: De-leveraging Program On Track
De-leveraging Program On Track ~$2.4 billion reduction in net debt1 year-to-date Net Debt1 ($ billions) ~$3 billion in debt 2019 Plan Supports repayment ▪ $2.4 billion reduction to net debt1 to-date $10.1 ▪ Lower debt and stronger Retained cash flow net of dividends and DRIP balance sheet Northwest
Slide 28: 2019 Outlook Unchanged
2019 Outlook Unchanged Significant Opportunity for Rebased Business in 2020 2019 Normalized EBITDA1 2019 Outlook 2020 Drivers Guidance ($ millions) ($ millions) 1600 2019E ▲ Rate base and customer growth $1,200 - $1,300 Normalized EBITDA1 $1,200 - $1,300 at Utilities 1200 Normalized FFO1 $850 - $950
Slide 29: 2020 Outlook Drivers
2020 Outlook Drivers Significant Opportunity for Rebased Business in 2020 2020: Unlocking the growth potential of our assets ▪ Achievement of critical near-term priorities allows management to return its focus to growing the core businesses ▪ Appropriate capital discipline, hurdle rates and business
Slide 30: Appendix
AltaGas Appendix
Slide 31: Q3 Financial Results Summary
Q3 Financial Results Summary Strong Performance from Core Businesses Q3 2019 Normalized EBITDA1 of $178M Q3 2019 Normalized Net Loss1 of $58M Exceeded target with $2.2B in Asset Sales announced or completed in 2019 YTD Reduced Net Debt1 by $2.4B in 2019 YTD First full quarter of RIPET 1 Non-GAAP mea
Slide 32: Q3 Normalized EBITDA Walk Down
Q3 Normalized EBITDA1 Walk Down 2019 Q3 Actuals vs. 2018 Q3 Actuals – Normalized EBITDA1 ($ millions) (12) (30) (93) +1 +16 +70 226 178 Q3 2018 Q3 2019 Midstream Power Utilities Corporate VA Rate Case Asset Sales Actual Actual ▲ RIPET ▲ US Retail Energy ▲ WGL acquisition ▼ Employee costs ▼ Rate refu
Slide 33: Q3 2019 – Normalized EBITDA Variance
Q3 2019 – Normalized EBITDA1 Variance Strong Performance in Midstream Offset by One-Time Adjustment at WGL ($ millions) Q3 2019 Normalized EBITDA1 Q3 2019 Q3 2018 Variance Q3 2019 vs. Q3 2018 Normalized EBITDA1 Drivers + WGL acquisition timing - VA Rate case (-$30 MM) + Stronger U.S. dollar - ACI IP
Slide 34: Supportive Regulatory Environment for Utilities
Supportive Regulatory Environment for Utilities 2018 YE Allowed ROE Average Utility Rate Base and Equity Regulatory Update Customers ($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. ▪ Last
Slide 35: Supportive Regulatory Environment for Utilities
Supportive Regulatory Environment for Utilities 2018 YE Average Allowed ROE and Utility Rate Base Regulatory Update Customers Equity Thickness ($US) ▪ Distribution rates approved under cost of service model. ▪ Rate case filed in July 31, 2018 seeking rate increase of US$37.6M, including transfer of
Slide 36: Accelerated Replacement Program
Accelerated Replacement Program Utility Location Program ▪ Main Replacement Program (MRP) expires in 2020. Rate case filed in May seeks approval for MRP extension for 2021-2025 with total spending to be ~US$60M, and introduction of a new Michigan Infrastructure Reliability Improvement Program (IRIP)
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