Altagas Ltd. · TSX:ALA
Altagas — Investor Presentation (August 2018)
55 slides from Altagas's investor presentation, August 2018
Slide 1: Investor Presentation August 2018
Investor Presentation August 2018
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
AltaGas Leading North American diversified energy infrastructure company ~$17 Strong Visible Accretion dividend Billion to both EPS and growth Total Enterprise Value1 FFO/share2 metrics (2019 – 2021) $6 Diversification Strong investment ~$23 (3 segments, 8 utility Billion jurisdictions, in over 30 g
Slide 4: Significant Energy Infrastructure Platform
Significant Energy Infrastructure Platform High-quality, contracted assets with attractive organic growth ~2 Bcf/d1 1,930 MW ~$5B3 of Natural Gas of Power Generation Utility Rate base transacted ~70,000 Bbls/d liquids 1,259 MW Gas ~1.8 million customers produced 277 MW Hydro 8 Jurisdiction
Slide 5: Leading North American Diversified Energy Company
Leading North American Diversified Energy Company Premier footprint in Canada and the U.S. Segment normalized EBITDA1 (2017A) Balanced Long-Term Gas Power Utilities Target Business Mix 27% ~37% ~36% All three business segments Fee / will have a premier footprint PPA / Take-or- Contract Segment norma
Slide 6: Financing Strategy
Financing Strategy Prudent plan achieves acquisition accretion metrics and maximizes shareholder value Acquisition financing - Completed Acquisition financing - Outstanding Long-term financing plan structured to maintain Monetization of assets of over C$2bn strong investment grade credit profile
Slide 7: Attractive Platform for Growth Through 2021
Attractive Platform for Growth Through 2021 ~C$6 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 8: Midstream Operations in North America's Most Prolific Gas Plays
Midstream Operations 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 ~4.5 Bcf/d in
Slide 9: 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 10: AltaGas' Position in Marcellus Pipelines
AltaGas’ Position in Marcellus Pipelines Connecting low cost producers with U.S. consumption markets and exports ME VT NH NY Stonewall Currently in service US$135 Million MI Ownership: DTE (55%), ALA (30%), Designed to gather 1.4 Bcf/d from MA Antero (15%) West Virginia CT RI PA Central Penn D
Slide 11: Utility Business
Utility Business High quality assets underpinned by regulated, low-risk cash flow Delivering clean and affordable natural gas to homes and businesses in 8 jurisdictions Estimated combined rate base more than doubles and estimated combined customer base triples in size Increased diversification
Slide 12: Customer Growth and Accelerated Replacements Drive Growth
Customer Growth and Accelerated Replacements Drive Growth High near-term growth Projected Rate Base Growth (C$ billions) Expected near-term growth driven by Rate Base New business customer additions, accelerated Replacements Other utility replacement programs and general system betterment capital
Slide 13: Power Business
Power Business Generating clean energy with natural gas and renewable sources Diversified Power Portfolio Segment normalized EBITDA2 (2019F) 1,930 MW of power generation California Gas-fired Power generation in over 20 states and provinces Utilities generation, 40% - 45% 10% Contracts with cre
Slide 14: Governing Financial Principles
Governing Financial Principles Delivering growth and security Principles Targets 50 - 60% FFO1 payout ratio 1 Dividend Sustainability Expect ~85% of 2019 common dividends to be underpinned by Regulated Utilities Enhancing returns on existing assets 2 Target Expected Returns Specified targets
Slide 15: Strong Investment Grade Credit Rating
Strong 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 stable cash f
Slide 16: 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) 13% 13% 9% 6% 72% 87% Stable EBITDA Commodity Based EBITDA Commodity Exposed Short-term (< 3 years) Medium-term (3-5 years) Long-ter
Slide 17: Valuation Multiple
Valuation Multiple Attractive value for AltaGas, combined with sustainable dividend payment. AltaGas has one of the lowest multiples in the entire sector. 2019E P/AFFO1 Energy infrastructure group yield and growth2 Yield 14 8% AltaGas Gibson Attractive Valuation 12 7% Inter Pipeline Enbridge IF Aver
Slide 18: Key Takeaways
Key Takeaways Near-term catalysts 2018 Debt/Hybrid Financing Further asset monetization initiatives to achieve an additional $1B in proceeds Potential new Gas and Power development initiatives Medium-term catalysts (12 – 24 Months) 2019 - 2020 New battery storage and solar projects New Mid
Slide 19: Appendix
AltaGas Appendix
Slide 20: Larger Scale Enhances AltaGas' Competitive Position
Larger Scale Enhances AltaGas’ Competitive Position TSX: ALA Today $CAD Peer Group Enterprise Value ($ billions) Common shares outstanding1 266 million Common share trading price2 $27.49 50 52-week trading range2 $30.06-$22.82 45 Market capitalization2 $7.0 billion 40 Preferred shares2 $1.3 billion
Slide 21: Base Business Continues to Deliver Solid Financial Results
Base Business Continues to Deliver Solid Financial Results Q2 2018 Achieved normalized EBITDA1 of $166 million and normalized funds from operations1 of $121 million Asset monetization strategy significantly progresses with sale of 35% indirect equity interest in the Northwest Hydro Facilities fo
Slide 22: Successful track record of delivering EBITDA growth over time
Successful track record of delivering EBITDA1 growth over time Significant growth in 2018 driven by WGL Acquisition $ Millions 1,000 25% – 30% growth2 800 600 400 200 0 2010 2011 2012 2013 2014 2015 2016 2017 2018F Non-commodity % of EBITDA1 2010 2011 2012 2013 2014 2015 2016 2017 2018F2 50% 43% 70%
Slide 23: Contracted EBITDA
Contracted EBITDA1 Substantial increase in long-term contracted and Regulated Gas Distribution EBITDA Breakdown of Midstream EBITDA1,2 2010 2018F2 50% Fixed / Take-or-pay No volume or commodity price exposure Average contract length of ~18 years ~35% 34% 13% ~20% 11% 4% Cost-of-service Provide
Slide 24: Sound Financial Position
Sound Financial Position Debt-to-Capitalization $ Millions Executed financing history 80% Covenants 2,500 60% 2,000 1,500 40% 1,000 20% 500 0% 0 2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016 2017 Common Equity Preferred Equity Debt Free Cash Flow DRIP EBITDA-to-interest expense 6x
Slide 25: Debt Maturities
Debt Maturities Proforma long-term debt maturities1 CAD $ Millions 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030+ ALA SEMCO PNG WGL Balanced long-term debt maturities *Moody’s rating, not rated by S&P ** Negative outlook by S&P
Slide 26: Delivering Growth and Security
Delivering Growth and Security Payout ratio balances company growth and investor return and positions ALA for further dividend growth Dividend growth1 Dividend payout2,3 $2.19 $2.10 $1.98 $1.77 58% 55% 57% $1.53 49% 51% $1.38 $1.44 7.5% 46% $1.32 CAGR 42% 45% 2010 2011 2012 2013 2014 2015 2016 2017
Slide 27: WGL Overview
WGL Overview WGL is a leading diversified U.S. energy company EBIT Contribution By Segment5 Seen as a preferred source of clean and efficient energy solutions that produce value for customers, investors and Utility 60% communities Midstream 15% Commercial 15% Disciplined capital allocation str
Slide 28: Combined Scale to Deliver Growth
Combined Scale to Deliver Growth AltaGas (C$mm) Project Expected Capex 1,2 Target In-Service 1 Townsend 2B $80 2019/2020 $6 billion North Pine – Train 2 Ridley Island Propane Export Central Penn Pipeline 3 $50 $333 $547 2019/2020 2019 2018 of identified opportunities Mountain Valley $441 2018 suppor
Slide 29: U.S. Tax Reform – Implications for AltaGas
U.S. Tax Reform – Implications for AltaGas Impact of U.S. tax reform on overall business is not expected to be material Regulated Business: Utilities Non-Regulated Business: Midstream and Power Decrease in customer rates will result in a top line Positive impact on net income driven by lower uti
Slide 30: U.S. Tax Reform – State Regulatory Update
U.S. Tax Reform – State Regulatory Update Michigan Alaska D.C. Virginia Maryland Regulated utilities Regulated utilities have been asked to All regulated utilities shall track the impact of tax reform and provide for Commission have been ordered to submit proposals on appropriate accruals effective
Slide 31: 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 2017 AltaGas Ltd. B Industry Average C Sector Average Canada Average Total Average See
Slide 32: Gas
Gas
Slide 33: 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 34: Key Midstream Assets
Key Midstream Assets Providing customers with integrated market access ALA Key Assets FG&P Extraction Fractionation Terminal Operator Capacity (Inlet) RIPET Export ● 40,000 Bbl/d+ Ferndale Export 30,000 Bbl/d LPG Harmattan ● ● ● Rail ● 490 Mmcf/d Younger ● ● Rail 212 Mmcf/d (net) JEEP ● ● 250 Mmcf/d
Slide 35: Stable Production Volumes & Throughput
Stable Production Volumes & Throughput Core plants in sustainable plays Blair Creek 2016 – 66 Mmcf/d 2017 – 57Mmcf/d 2018E – 60 – 70 Mmcf/d Mmcf/d Gross Annual Throughput 1,600 2018F FG&P: Gordondale ~500 Mmcf/d* 2016 – 90 Mmcf/d 1,200 2017 – 94 Mmcf/d 800 2018E – 100 – 110 Mmcf/d 2018F extraction:
Slide 36: Gordondale: New Long-Term Processing Arrangement
Gordondale: New Long-Term Processing Arrangement Maximizing the long-term value and returns of deep cut facility New long-term take-or-pay agreement for at least 15 years Agreement provides stable long-term cash flow by filling the existing operational capacity of 120 Mmcf/d Enables AltaGas to s
Slide 37: Montney Competitive at Current Prices
Montney Competitive at Current Prices Competitive Canadian Production1,2 USD/Mcfe $2.50 Painted Pony field cash cost estimated at ~$1.30 USD/Mcfe3 $2.00 $1.50 Avg. CDN producer cash cost $1.00 $0.50 $0.00 TOU PEY AAV ECR BNP PNE ARX SRX ECA BXE CKE NVA COG BIR RRC PMT CR VII KEL EQT POU CHK SWN AR P
Slide 38: Painted Pony Strategic Alliance
Painted Pony Strategic Alliance Painted Pony actively markets the vast majority Townsend Facility anchor tenant with 20 year take-or-pay of natural gas volumes away from Station 2 Low cost producer index pricing and into more profitable sales – 1.6x Proved Developed Producing 2017 F&D Recycle Ra
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 On-stream December 1, 2017 First train capable of producing up to 10,000 Bbls/d of C3+ processing capacity, with capacity of 6,000 Bbls/d of C
Slide 41: AltaGas' Northeast B.C. and Energy Export Strategy
AltaGas’ Northeast B.C. and Energy Export Strategy Provides NEW market access for Western Canadian propane producers to Asia AltaGas’ propane export terminal at Ridley Island is poised to create a hub for key global markets to the west Significant shipping advantages vs. Gulf coast, providing pr
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: 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 46: Supportive Regulatory Environment for Regulated Gas Utilities
Supportive Regulatory Environment for Regulated Gas Utilities Allowed ROE and Utility Location Regulatory Equity Thickness Rate case filed in November 2017 for 2018 and 2019 British 9.40%1 Protected from weather related volatility through revenue stabilization adjustment Columbia 45% account O
Slide 47: Washington Gas Regulatory Environment
Washington Gas Regulatory Environment Allowed ROE and Utility Location Regulatory Equity Thickness Settlement reached Rate case was filed in June 2016 with a stipulation issued in April 2017; final based on Commission approval issued June 30 approving stipulation for $34 million annual Virginia re
Slide 48: Power
Power
Slide 49: Increasing optionality at Blythe
Increasing optionality at Blythe Blythe Fully contracted with SCE through Q2 Generation increased by 2020 98% Additional flexibility added with tie in to El in 2017 over 2016 Significant increase in generation following El Paso Gas tie-in and Paso Gas supply in June 2017, and low- MWh completion
Slide 50: 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 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. There are
Slide 51: Duck Curve Becoming More Extreme
Duck Curve Becoming More Extreme Changing California Supply Mix Results in Market Imbalance and Instability Actual net-load and 3-hour ramps are Solutions are necessary to handle the about four years ahead of ISO’s deeper belly and steeper ramps of the original estimate duck curve including: Batte
Slide 52: Energy Storage
Energy Storage Pomona Energy Storage Renewable Integration & Flexibility • 10 year Energy Storage Agreement (ESA) with • California legislators continue to move towards reducing Southern California Edison (SCE) for 20 MW energy fossil fuel reliance which creates new energy storage storage at Pomona
Slide 53: 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 Sold 35% of Northwest Hydro Facilities for $922 million, implying a 2017 EBITDA multiple of ~27 times an
Slide 54: Distributed Generation
Distributed Generation 222 MW 20 STATES + D.C. WITH DISTRIBUTED GENERATION ASSETS CALIFORNIA MINNESOTA GEORGIA MARYLAND 36 Projects in Service 24 Projects in Service 53 Projects in Service 37 Projects in Service 25 MW of DC Capacity 28 MW of DC Capacity 38 MW of DC Capacity 35 MW of DC Capacity 54
Slide 55: Key Sensitivities
Key Sensitivities AltaGas Foreign Exchange Key variables +/- $0.05 US/CAD 2018 Impact EBITDA ~$16 MM1 Frac Spread Key variables +/- $1/bbl 2018 Impact EBITDA ~$1 MM Natural Gas Volumes Key variables +/- 10% 2018 Impact EBITDA ~$16 MM 1 Represents impact to 2H 2018 Expectations as at August 1, 2018 S