AltaGas’ Third Quarter Results Saw Strong Performance from the Midstream Business Driven by RIPET and the Advancement of its Energy Export Strategy
Press Release
CALGARY, Oct. 30, 2019 –
HIGHLIGHTS
(all financial figures are unaudited and in Canadian dollars unless otherwise noted)
- Normalized EBITDA1 was $178 million, compared to $226 million in the prior year, with strong contributions from the Ridley Island Propane Export Terminal (RIPET) ($37 million) being more than offset by EBITDA lost due to asset sales ($93 million) and a one-time adjustment related to the Hearing Examiner’s report in Virginia pertaining primarily to the return of excess deferred taxes ($30 million).
- Excluding the impact of the Virginia Hearing Examiner’s report and lost EBITDA from asset sales, normalized EBITDA would have increased by approximately $75 million for the quarter as compared to the same quarter last year.
- Net income applicable to common shares was $22 million ($0.08 per share) in the third quarter compared to a loss of $726 million ($2.78 per share) in the prior year. Normalized net loss1 was $58 million ($0.21 per share) in the third quarter compared to normalized net loss of $17 million ($0.07 per share) in the prior year.
- Normalized funds from operations (FFO)1 were $67 million, compared to $117 million in the third quarter of 2018. Excluding the impact of the Virginia Hearing Examiner’s report and lost FFO from asset sales, FFO would have increased by approximately $39 million for the quarter as compared to the same quarter last year.
- The Company exceeded its 2019 asset monetization program target of $1.5 – $2 billion, with $2.2 billion in asset sales announced year-to-date.
- 2019 outlook remains unchanged with expected normalized EBITDA in the range of $1.2 – $1.3 billion and normalized FFO of $850 – $950 million.
- The 2019 de-leveraging target of $3 billion remains in line with expectations. At quarter end, net debt1 had been reduced by $2.4 billion year-to-date.
- The Midstream segment delivered strong results with normalized EBITDA growing by approximately 95 percent to $127 million compared to $65 million in the prior year. The first full quarter of operations at RIPET contributed approximately $37 million of normalized EBITDA. During the quarter RIPET averaged two ships exported per month to Asian markets. Volumes delivered to RIPET averaged approximately 40,000 bbl/d.
- Subsequent to quarter end, AltaGas’ subsidiary Washington Gas, received an Approved Rate Case Settlement Agreement in Maryland, approving an increase in annual revenues of US$27 million with a return on equity of 9.7 percent. These rates became effective October 15th.
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Non-GAAP measure; see discussion in the advisories of this news release and reconciliation to US GAAP financial measures shown in AltaGas’ Management’s Discussion and Analysis (MD&A) as at and for the period ended September 30, 2019, which is available on www.sedar.com. |
AltaGas Ltd. (AltaGas or the Company) (TSX: ALA) today reported third quarter 2019 financial results which represents the first consolidated quarter-over-quarter results including the acquisition of WGL Holdings, Inc. AltaGas also reaffirmed its 2019 outlook, and provided an update on its business and near-term priorities, which remain on track.
“We continue to execute on all of our operational and financial priorities. We saw continued strong performance from our core businesses and executed on asset sales at attractive multiples that exceeded the top-end of our guidance range,” said Randy Crawford, President and Chief Executive Officer of AltaGas. “The successful execution of our asset monetization program has significantly improved our financial strength and flexibility, and we are well positioned to enter 2020 with a sharpened focus on execution, as well as driving performance and growth across our core Midstream and Utilities businesses.
“Building upon the momentum we achieved in our Midstream business to-date, we will continue to leverage the structural advantage we have at RIPET to attract and handle more molecules in our integrated footprint. At our Utilities, our focus remains squarely on driving performance to lower our cost structure, and deliver exceptional service. These measures will strengthen relationships with our customers and regulators, and create an environment conducive to future growth,” continued Mr. Crawford.
BUSINESS PERFORMANCE
Marking the first full quarter of operations, RIPET contributed $37 million of normalized EBITDA in the third quarter of 2019 and received approximately 40,000 bbl/d for delivery to Asian markets, averaging two ships per month. Third quarter normalized EBITDA from RIPET benefited from a higher average FEI-Mt. Belvieu hedge rate of US$14 per barrel that included second quarter supply hedges that were rolled forward to the third quarter. The resulting impact to third quarter normalized EBITDA is a one-time benefit of approximately $5 million. As the cornerstone asset of our Midstream business, RIPET has extended our integrated value chain in northeast British Columbia, attracting additional volumes to our system, providing strong netbacks, as well as advancing future growth across our platform.
“RIPET has been successful in capturing incremental value for Canadian propane in international markets – a win-win for our producers and AltaGas,” said Mr. Crawford. “Our focus now is execution at the terminal to gain scale and efficiencies that will allow us to grow our export capabilities by further increasing capacity.”
The third quarter is seasonally the weakest quarter in the Utilities segment, with the majority of revenue recognized in the first and fourth quarters, and expenses being somewhat linear in nature throughout the year. The progress we are making in updating rates in our various jurisdictions has minimal effect on earnings in the third quarter as those impacts are driven by higher throughput that occurs in the first and fourth quarters. The Utilities segment in the third quarter was essentially flat as compared to last year excluding the one-time impact related to the Hearing Examiner’s report in Virginia and the impact of the AltaGas Canada Inc. initial public offering.
“We continue to execute on cost reduction initiatives and focused capital investments to improve the customer value proposition by providing lower costs, higher reliability and outstanding customer service,” said Mr. Crawford. “All of our capital projects, including our largest pipeline project, the Marquette Connector at SEMCO, remain on track as we continue to advance our long-term focus on delivering outstanding customer service.”
In the Power segment, AltaGas announced the successful recontracting of the Blythe Facility to Southern California Edison (SCE). Under the Tolling Agreement, SCE has exclusive rights to all capacity, energy, ancillary services, and resource adequacy benefits from August 1, 2020 to December 31, 2023. California Public Utilities Commission approval is required and is expected to occur in the first half of 2020.
REGULATORY UPDATE
Maryland
On August 30, 2019, a settlement agreement was filed in respect of the Maryland Rate Case and on September 30th, the public utility law judge issued a proposed order to approve an unopposed settlement authorizing Washington Gas Light Co. a US$27 million, or 5 percent, gas distribution rate increase, including an allowed return on equity of 9.7 percent and equity thickness of 53.5 percent. The proposed order became final on October 15, 2019 with rates effective immediately. The settlement addresses rate relief necessary to recover costs of providing safe, reliable natural gas service and earn the allowed rate of return.
Virginia
In July 2018, a rate case in Virginia was filed seeking a rate increase of US$37.6 million, 10.6 percent return on equity and 53.3 percent equity thickness. Consistent with the regulatory rate case process in Virginia, interim rates were put into effect in January 2019, subject to true-up or refund. On September 16, 2019, a Hearing Examiner’s report was issued in response to the rate case and recommended the Commission approve a US$11.2 million rate base increase associated with the roll-in of SAVE surcharges, a 9.2 percent return on equity and 53.5 percent equity thickness.
As a result of the Virginia Hearing Examiner’s recommendation, in the third quarter of 2019, the Company recorded a one-time reduction in normalized EBITDA of approximately $30 million. The corresponding impact on net income after taxes in the third quarter of 2019 was a reduction of approximately $14 million due to certain offsetting amounts included in deferred income taxes. On October 21, 2019, Washington Gas filed comments on and exceptions to the Hearing Examiner’s report, recommending the State Corporation Commission of Virginia reject certain of the Hearing Examiner’s findings. A final decision is expected late in the fourth quarter of 2019 or early in the first quarter of 2020.
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