- 28 percent increase in normalized FFO, 19 percent increase in FFO per share;
- 19 percent increase in normalized EBITDA;
- Signed definitive project agreement for a propane export site in British Columbia;
- Announced US$642 million acquisition of 523 MW U.S. natural gas-fired generation facilities;
- Safely commissioned McLymont Creek Hydroelectric Facility; and
- Increased common share dividend by $0.005 per share to $1.98 per share annually; 12 percent overall increase in 2015.
AltaGas Ltd. (AltaGas) today reported third quarter normalized EBITDA of $125 million, compared to $105 million in third quarter 2014. Normalized funds from operations were $102 million ($0.75 per share) for the third quarter 2015 compared to $80 million ($0.63 per share) in third quarter 2014. AltaGas continues to deliver strong results and growth driven by its diversified energy infrastructure across North America.
“We have made significant strides in delivering on our strategic plan with the completion of the Northwest hydroelectric facilities, progress in gas infrastructure to support exports, growing our gas-fired power generation in the U.S. and steady growth in our utilities,” said David Cornhill, Chairman and CEO of AltaGas. “These steps will create growth and long-term shareholder value for years to come.”
AltaGas continues to progress on its integrated northeast British Columbia strategy on several different fronts. Construction is well under way at the new 198 Mmcf/d Townsend shallow-cut processing facility, which will be underpinned by take-or-pay commitments from Painted Pony Petroleum Ltd. The Townsend facility is on track to be in service by mid-2016. Development of a liquids separation and handling facility near Fort St. John, which will provide value-added services for producers in the Montney region, continues to progress. AltaGas expects to receive permits and to reach a final investment decision by mid-2016.
On energy exports, AltaGas has entered into a definitive project agreement for the development of a propane export facility in British Columbia. AltaGas is negotiating other formal agreements and working to progress consultations with First Nations and stakeholders and to commence the regulatory and permitting process for the propane export facility. Preliminary engineering has been completed and a front end engineering and design study will be initiated shortly. This export facility is expected to initially ship up to 1.2 million tonnes per annum. AltaGas will move toward a final investment decision on the propane export facility once consultations with First Nations and stakeholders and regulatory approvals are complete.
AltaGas continues to progress on the permitting process, project design and execution plans on its DC LNG project. AltaGas was notified by Canada Border Services Agency (CBSA) of a 25 percent customs import duty that would apply to the floating LNG facility. AltaGas has filed an appeal with CBSA.
AltaGas also continues to drive its strategy for highly contracted, clean power generation. On September 21, 2015, AltaGas announced that it and its indirect wholly owned subsidiary AltaGas Power Holdings (U.S.) Inc. entered into a purchase and sale agreement to acquire an aggregate of 523 megawatts (MW) of natural gas-fired generation, comprising the Tracy, Hanford and Henrietta facilities located in northern California, for US$642 million (the Acquisition). The Acquisition is expected to drive incremental EBITDA of approximately CAD$95 million per year in the first full year of ownership. The facilities are fully contracted under Power Purchase Agreements through the fourth quarter of 2022. The Acquisition is expected to close late in the fourth quarter 2015.
On October 1, 2015 AltaGas announced the successful start-up of its 66 MW McLymont Creek Hydroelectric Facility and on October 25 had successfully completed all the requirements under the Electricity Purchase Agreement with BC Hydro to achieve commercial operations. Commercial operations of the McLymont Creek Hydroelectric Facility represents the final phase of the $1 billion Northwest hydro projects, including the construction of Forrest Kerr and Volcano Creek hydroelectric facilities, which were commissioned in the second half of 2014. All three facilities are fully contracted under 60-year, fully indexed Electricity Purchase Agreements with BC Hydro.
In third quarter 2015, normalized EBITDA was driven by full quarter contributions from Forrest Kerr and Volcano Creek hydroelectric facilities, new U.S. natural gas-fired power assets acquired in January 2015, favourable foreign exchange rates, higher Utility earnings driven by rate base and customer growth across all Utilities and the early approval of SEMCO Gas’ Main Replacement Program. These increases were partially offset by lower commodity prices and extraction volumes, reduced earnings from Petrogas Energy Corp. (Petrogas) and third party pipeline curtailments downstream of certain AltaGas processing facilities.
Normalized funds from operations increased, driven by the previously discussed increase in EBITDA, partially offset by higher interest costs as a result of new assets being placed into service and current income tax expense.
Normalized net income was $19 million ($0.14 per share), compared to $17 million ($0.13 per share) in third quarter 2014.
On a GAAP basis, AltaGas reported net income applicable to common shares of $20 million ($0.15 per share) in third quarter 2015, compared to net income of $17 million ($0.13 per share) for the same period 2014.
For the nine months ended September 30, 2015, normalized EBITDA was $409 million compared to $392 million for the same period in 2014. The increase was primarily due to earnings from Forrest Kerr, Volcano Creek and the U.S. natural gas-fired power assets, improved results for Energy Services, the stronger US dollar, higher Utility earnings driven by rate base and customer growth across all Utilities and the early approval of SEMCO Gas’ Main Replacement Program. These increases were partially offset by the impact of lower contributions from Alberta power assets and sales of NGL, the turnarounds at Younger and Harmattan in the second quarter 2015, reduced earnings from Petrogas, lower throughput at certain processing facilities and pipeline curtailments downstream of certain AltaGas processing facilities.
Normalized funds from operations for the first nine months ended September 30, 2015 was $311 million ($2.30 per share), compared to $318 million ($2.56 per share) for same period 2014. Funds from operations decreased primarily due to the discretionary timing of dividend payments from Petrogas. A dividend of $28 million was received from Petrogas in second quarter 2014 compared to nil year-to-date 2015. 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 for nine months ended September 30, 2015, was $84 million ($0.62 per share), compared to $117 million ($0.94 per share) for the same period 2014. On a GAAP basis, net income applicable to common shares was $64 million ($0.48 per share) for the nine months ended September 30, 2015, compared to $85 million ($0.69 per share) for the same period 2014. Net income applicable to common shares for the nine months ended September 30, 2015 was normalized for unrealized gains and losses on risk management contracts and long-term investments, provisions on long-lived assets, transaction costs related to acquisitions, development costs incurred for the energy export projects and statutory tax rate changes. In 2014, net income applicable to common shares was normalized for unrealized losses on risk management contracts, provisions on long-lived assets, costs associated with early redemption of medium-term notes (MTNs) and gains on asset dispositions.
Monthly Common Share Dividend and Quarterly Preferred Share Dividend
- The Board of Directors approved the November 2015 dividend of $0.165 per common share. The dividend will be paid on December 15, 2015, to common shareholders of record on November 25, 2015. The ex-dividend date is November 23, 2015. This dividend is eligible for Canadian income tax purposes.
- The Board of Directors approved a dividend of $0.21125 per share for the period commencing October 1, 2015 and ending December 31, 2015, on AltaGas’ outstanding Series A Preferred Shares. The dividend will be paid on December 31, 2015 to shareholders of record on December 15, 2015. The ex-dividend date is December 11, 2015;
- The Board of Directors approved a dividend of $0.19156 per share for the period commencing October 1, 2015 and ending December 31, 2015, on AltaGas’ outstanding Series B Preferred Shares. The dividend will be paid on December 31, 2015 to shareholders of record on December 15, 2015. The ex-dividend date is December 11, 2015;
- The Board of Directors approved a dividend of US$0.275 per share for the period commencing October 1, 2015 and ending December 31, 2015, on AltaGas’ outstanding Series C Preferred Shares. The dividend will be paid on December 31, 2015 to shareholders of record on December 15, 2015. The ex-dividend date is December 11, 2015;
- The Board of Directors also approved a dividend of $0.3125 per share for the period commencing October 1, 2015, and ending December 31, 2015, on AltaGas’ outstanding Series E Preferred Shares. The dividend will be paid on December 31, 2015 to shareholders of record on December 15, 2015. The ex-dividend date is December 11, 2015; and
- The Board of Directors also approved a dividend of $0.296875 per share for the period commencing October 1, 2015, and ending December 31, 2015, on AltaGas’ outstanding Series G Preferred Shares. The dividend will be paid on December 31, 2015 to shareholders of record on December 15, 2015. The ex-dividend date is December 11, 2015.
CONSOLIDATED FINANCIAL REVIEW
|(unaudited)||Three Months Ended
|Nine Months Ended
|Normalized operating income(1)||69||59||248||261|
|Net income applicable to common shares||20||17||64||85|
|Normalized net income(1)||19||17||84||117|
|Total long-term liabilities||4,208||3,973||4,208||3,973|
|Net additions to property, plant and equipment||164||136||417||359|
|Normalized funds from operations(1)||102||80||311||318|
|Three Months Ended
|Nine Months Ended
|($ per share, except shares outstanding)||2015||2014||2015||2014|
|Net income per common share – basic||0.15||0.13||0.48||0.69|
|Net income per common share – diluted||0.14||0.13||0.47||0.68|
|Normalized net income(1)||0.14||0.13||0.62||0.94|
|Normalized funds from operations(1)||0.75||0.63||2.30||2.56|
|Shares outstanding – basic (millions)|
|During the period(3)||136||127||135||124|
|End of period||145||133||145||133|
|(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.|
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 third 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 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 1022285. The replay expires at midnight (Eastern) on November 5, 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.
This news release contains forward-looking statements. When used in this news release, the words “may”, “would”, “could”, “will”, “intend”, “plan”, “anticipate”, “believe”, “seek”, “propose”, “estimate”, “expect”, and similar expressions, as they relate to AltaGas or an affiliate of AltaGas, are intended to identify forward-looking statements. In particular, this news release contains forward-looking statements with respect to, among other things, business objectives, the anticipated benefits of the Acquisition and other major projects, the timing of commercial operations dates, investment decisions, expenditures, permitting and closing of acquisitions and dispositions, expected growth, results of operations, performance, business projects and opportunities and financial results. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Such statements reflect AltaGas’ current views with respect to future events based on certain material factors and assumptions and are subject to certain risks and uncertainties, including without limitation, changes in market, competition, governmental or regulatory developments, general economic conditions and other factors set out in AltaGas’ public disclosure documents. Many factors could cause AltaGas’ actual results, performance or achievements to vary from those described in this news release, including without limitation those listed above. These factors should not be construed as exhaustive. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this news release as intended, planned, anticipated, believed, sought, proposed, estimated or expected, and such forward-looking statements included in, or incorporated by reference in this news release, should not be unduly relied upon. Such statements speak only as of the date of this news release. AltaGas does not intend, and does not assume any obligation, to update these forward-looking statements. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.