"Although the second quarter included large economic disruptions due to the global pandemic that has impacted us all, we continue to be encouraged with the resiliency and performance of our operations during a period of extraordinary challenge and duress," said
HIGHLIGHTS
(all financial figures are unaudited and in Canadian dollars unless otherwise noted)
- Normalized EBITDA1 was
$206 million for the second quarter. Excluding the$29 million reduction in normalized EBITDA as a result of the asset sales in 2019, second quarter normalized EBITDA would have increased 13 percent as compared to the second quarter of 2019. - Normalized net income1 was
$17 million ($0.06 per share) compared to$1 million ($0.01 per share) in the second quarter of 2019. - Net income applicable to common shares was
$21 million ($0.08 per share) compared to$41 million ($0.15 per share) in the second quarter of 2019. - Net debt decreased to
$6.8 billion as atJune 30, 2020 , compared to$7.2 billion atDecember 31, 2019 . - Strong Midstream segment performance was underpinned by record volumes at the
Ridley Island Propane Export Terminal (RIPET), which continues to see strong operating performance with exports of 41,460 Bbls/d (seven ships) of Canadian propane toAsia during the quarter. - Utilities segment results were representative of the lower demand spring and summer months. Growth in each of the regulated utilities underpinned by 2019 rate cases and accelerated pipe replacement program (ARP) spending was more than offset by lower realized margins in the retail business and COVID-19 related impacts in the quarter.
- During the quarter,
AltaGas successfully refinanced all its remaining 2020 debt maturities across the platform through two debt financings. This included SEMCO completing a private placement ofUS$450 million of first mortgage bonds onApril 21, 2020 andAltaGas closing a$500 million issuance of senior unsecured medium-term notes onJune 10, 2020 . - On
June 15, 2020 ,AltaGas entered into a stock purchase agreement withClarion Energy LLC to sell a 49.5 MW gas fired facility inRipon, California . The transaction is expected to close in the third quarter. OnJuly 20, 2020 ,AltaGas closed the disposition ofAltaGas Pomona Energy Storage Inc. and land related to a gas fired power generation facility in theU.S. The effective date of the sale wasJanuary 1, 2020 , and gross proceeds, before working capital and other adjustments, were approximately$63 million (US$47 million ). Although these transactions were smaller relative to the overall size ofAltaGas , they are a continuation of our efforts to focus the platform and are expected to be credit accretive. - Although there were headwinds in the quarter, the platform continues to show strong resilience and durability. At this stage, the Company expects to land within its previously stated guidance range and is maintaining its 2020 outlook for expected normalized EBITDA in the range of
$1.275 -$1.325 billion and normalized net income1 of$1.20 -$1.30 per share. AltaGas remains committed to protecting the health and safety of its employees while providing essential services to its customers and communities. The Company continues to closely monitor developments related to COVID-19, including the existing and potential impact on global and local economies in the jurisdictions where it operates.
1. | Non-GAAP measure; see discussion in the advisories of this news release and reconciliation to US GAAP financial measures shown in |
CEO MESSAGE
"I am extremely proud of our employees for the work they continue to do to refocus this great Company and I would like to thank them for their dedication, adaptability and hard work during this pandemic. Our people are the heart of this Company and their spirit and resilience ensures my confidence that we will continue to execute our strategy and maintain our commitment to safety and operational excellence.
"Apart from the specific actions we have taken in response to COVID-19, our strategy and focus remains unchanged. We continue to execute on our near-term priorities while operating our businesses in a safe and reliable manner. The measures we took in 2019 to focus the business on our core capabilities and strengthen our balance sheet leave us well positioned to manage the headwinds facing the global economy. We are operating a diversified and enduring business with approximately 85 percent of earnings underpinned by rate-regulated utilities or contracted midstream operations that we believe will demonstrate strong durability through this challenging landscape.
"Our second quarter financial results reflect the stability and resiliency of our diversified business mix which continue to provide predictable and reliable earnings. Our Utilities strategy is centered around providing safe and reliable service to our customers. We maintain a disciplined approach to growing the rate base through our accelerated replacement programs and we continue to make strong progress towards achieving operational excellence and attaining our target returns. Approximately 70 percent of the Utilities earnings is protected through decoupling and fixed-billing charges. All of the jurisdictions where our Utilities operate have allowed us to create regulatory assets to facilitate the recovery of any incremental costs related to COVID-19.
"Our Midstream strategy is designed to leverage our industry leading export capability to access premium pricing in
"Performance at RIPET remains strong. We continue to deliver on our goals, setting a record in the second quarter with 41,460 Bbls/d of Canadian propane exported to
"Our self-funded capital plan of approximately
"We recently expanded our integrated Midstream service offering with the completion of the
"We are well positioned to have significant organic growth opportunities within both of our businesses. We will remain focused on maintaining a strong balance sheet, continuing to de-lever our capital structure and operating with acute capital discipline, which is critical to our long-term strategy.
"We continue to monitor the macro environment and assess the potential impacts that COVID-19 could have on our business. We have seen strong resilience in our business to date and we believe that will endure through the years to come.
"The work we completed in 2019 to focus the business and strengthen our balance sheet provides us with the stability and financial flexibility required to navigate challenging economic environments, like the one that we are in. Despite the headwinds, the platform we developed continues to show resilience, and at this stage we expect to land within our previously stated guidance range and we are maintaining our 2020 outlook for expected normalized EBITDA in the range of
BUSINESS PERFORMANCE
Second quarter Utilities segment results were representative of the lower demand spring and summer months. Growth in each of the regulated Utilities underpinned by 2019 rate cases and ARP spending was more than offset by lower realized margins in the retail business and COVID-19 related impacts.
In the Midstream segment, RIPET contributed
Fractionation volumes in the second quarter increased compared to the second quarter 2019 as the result of the
Q2 2020 FINANCIAL RESULTS | |||||
Three Months Ended | |||||
($ millions) | 2020 | 2019 | |||
Segmented Normalized EBITDA(1) | |||||
Utilities | $ | 80 | $ | 86 | |
Midstream | 111 | 102 | |||
Sub-total: Operating Segments | $ | 191 | $ | 188 | |
Corporate/Other | 15 | 23 | |||
Normalized EBITDA (1)(4) | $ | 206 | $ | 211 | |
Add (deduct): | |||||
Depreciation and amortization | (93) | (107) | |||
Interest expense | (71) | (83) | |||
Normalized income tax recovery (expense) | (6) | 4 | |||
Preferred share dividends | (17) | (18) | |||
Other (3) | (2) | (6) | |||
Normalized net income (1)(4) | $ | 17 | $ | 1 | |
Net income applicable to common shares | $ | 21 | $ | 41 | |
($ per share, except shares outstanding) | 2020 | 2019 | |||
Shares outstanding - basic (millions) | |||||
During the period (2) | 279 | 276 | |||
End of period | 279 | 277 | |||
Normalized net income - basic (1) | 0.06 | 0.01 | |||
Normalized net income - diluted (1) | 0.06 | 0.01 | |||
Net income per common share - basic | 0.08 | 0.15 | |||
Net income per common share - diluted | 0.08 | 0.15 |
(1) | Non–GAAP financial measure; see discussion in Non–GAAP Financial Measures section at the end of this news release |
(2) | Weighted average |
(3) | "Other" includes accretion expense, net income applicable to non-controlling interests, foreign exchange gains (losses), and NCI related to HLBV accounting |
(4) | Beginning in 2020, Management no longer adjusts normalized EBITDA or normalized net income for changes in the fair value of natural gas optimization inventory. Please see the Non-GAAP Financial Measures section of the MD&A for additional detail. As such, comparative periods have been adjusted to reflect the before and after-tax impacts of this change to normalized EBITDA and normalized net income, respectively. |
Normalized EBITDA for the second quarter of 2020 was
Normalized net income was
Net income applicable to common shares for the second quarter of 2020 was
Depreciation and amortization expense for the second quarter of 2020 was
Interest expense for the second quarter of 2020 was
GUIDANCE AND FUNDING
The Company's outlook for 2020 remains unchanged, with anticipated normalized EBITDA in the range of
Approximately 60 percent of 2020 normalized EBITDA is expected to come from the Utilities segment which provides more stable and predictable results. The Utilities segment is largely insulated from earnings volatility through decoupling, fixed components of billing and other tracking mechanisms that offset load variability and incremental COVID-19 related costs. Growth in the Utilities segment is expected to be driven by rate base growth and achieving higher returns through rate case settlements, increased utilization of ARPs as well as operating costs and leak remediation reduction initiatives. The consolidated Utilities rate base is expected to grow at approximately 8 - 10 percent annually in 2020 through to 2024.
The Midstream segment is underpinned by the Company's unique energy export strategy and the distinct ability to handle the molecule through the entire value chain and provide access to premium-priced global markets for western Canadian producers. Overall, the near-term stability in the Midstream segment despite the broader industry headwinds is expected to be driven by a full-year of contributions and increased utilization at RIPET as well as increased volumes at
Midstream earnings are largely underpinned by long-term take-or-pay and fee-for-service agreements and
MONTHLY COMMON SHARE DIVIDEND AND QUARTERLY PREFERRED SHARE DIVIDENDS
- The Board of Directors approved a dividend of
$0.08 per common share. The dividend will be paid onSeptember 15, 2020 , to common shareholders of record onAugust 25, 2020 . The ex–dividend date isAugust 24, 2020 . This dividend is an eligible dividend for Canadian income tax purposes; - The Board of Directors approved a dividend of
$0.21125 per share for the period commencingJune 30, 2020 and endingSeptember 29, 2020 , onAltaGas' outstanding Series A Preferred Shares. The dividend will be paid onSeptember 30, 2020 to shareholders of record onSeptember 16, 2020 . The ex–dividend date isSeptember 15, 2020 ; - The Board of Directors approved a dividend of
$0.18318 per share for the period commencingJune 30, 2020 and endingSeptember 29, 2020 , onAltaGas' outstanding Series B Preferred Shares. The dividend will be paid onSeptember 30, 2020 to shareholders of record onSeptember 16, 2020 . The ex–dividend date isSeptember 15, 2020 ; - The Board of Directors approved a dividend of
US$0.330625 per share for the period commencingJune 30, 2020 and endingSeptember 29, 2020 , onAltaGas' outstanding Series C Preferred Shares. The dividend will be paid onSeptember 30, 2020 to shareholders of record onSeptember 16, 2020 . The ex–dividend date isSeptember 15, 2020 ; - The Board of Directors approved a dividend of
$0.337063 per share for the period commencingJune 30, 2020 and endingSeptember 29, 2020 , onAltaGas' outstanding Series E Preferred Shares. The dividend will be paid onSeptember 30, 2020 to shareholders of record onSeptember 16, 2020 . The ex–dividend date isSeptember 15, 2020 ; - The Board of Directors approved a dividend of
$0.265125 per share for the period commencingJune 30, 2020 and endingSeptember 29, 2020 , onAltaGas' outstanding Series G Preferred Shares. The dividend will be paid onSeptember 30, 2020 to shareholders of record onSeptember 16, 2020 . The ex-dividend date isSeptember 15, 2020 ; - The Board of Directors approved a dividend of
$0.20832 per share for the period commencingJune 30, 2020 and endingSeptember 29, 2020 , onAltaGas' outstanding Series H Preferred Shares. The dividend will be paid onSeptember 30, 2020 to shareholders of record onSeptember 16, 2020 . The ex-dividend date isSeptember 15, 2020 ; - The Board of Directors approved a dividend of
$0.328125 per share for the period commencingJune 30, 2020 and endingSeptember 29, 2020 , onAltaGas' outstanding Series I Preferred Shares. The dividend will be paid onSeptember 30, 2020 to shareholders of record onSeptember 16, 2020 . The ex–dividend date isSeptember 15, 2020 ; and - The Board of Directors approved a dividend of
$0.3125 per share for the period commencingJune 30, 2020 and endingSeptember 29, 2020 , onAltaGas' outstanding Series K Preferred Shares. The dividend will be paid onSeptember 30, 2020 to shareholders of record onSeptember 16, 2020 . The ex-dividend date isSeptember 15, 2020 .
CONSOLIDATED FINANCIAL REVIEW | |||||||
Three Months Ended | Six Months Ended | ||||||
($ millions, except normalized effective income tax rate) | 2020 | 2019 | 2020 | 2019 | |||
Revenue | 1,059 | 1,174 | 2,928 | 3,072 | |||
Normalized EBITDA (1) (2) | 206 | 211 | 705 | 694 | |||
Net income applicable to common shares | 21 | 41 | 484 | 850 | |||
Normalized net income (1) (2) | 17 | 1 | 237 | 215 | |||
Total assets | 20,003 | 21,000 | 20,003 | 21,000 | |||
Total long-term liabilities | 10,083 | 9,494 | 10,083 | 9,494 | |||
Net additions (dispositions) of property, plant and equipment | 188 | 371 | 388 | (829) | |||
Dividends declared (3) | 67 | 66 | 134 | 133 | |||
Cash from operations | 337 | 203 | 812 | 630 | |||
Normalized funds from operations (1) | 141 | 120 | 562 | 496 | |||
Normalized adjusted funds from operations (1) | 117 | 101 | 500 | 469 | |||
Normalized utility adjusted funds from operations (1) | 41 | 36 | 350 | 330 | |||
Normalized effective income tax rate (%) (1) | 13.3 | (21.1) | 23.4 | 11.5 | |||
Three Months Ended | Six Months Ended | ||||||
($ per share, except shares outstanding) | 2020 | 2019 | 2020 | 2019 | |||
Net income per common share - basic | 0.08 | 0.15 | 1.73 | 3.08 | |||
Net income per common share - diluted | 0.08 | 0.15 | 1.73 | 3.08 | |||
Normalized net income - basic (1) | 0.06 | 0.01 | 0.85 | 0.78 | |||
Normalized net income - diluted (1) | 0.06 | 0.01 | 0.85 | 0.78 | |||
Dividends declared (3) | 0.24 | 0.24 | 0.48 | 0.48 | |||
Cash from operations | 1.21 | 0.74 | 2.91 | 2.28 | |||
Normalized funds from operations (1) | 0.51 | 0.43 | 2.01 | 1.80 | |||
Normalized adjusted funds from operations (1) | 0.42 | 0.37 | 1.79 | 1.70 | |||
Normalized utility adjusted funds from operations (1) | 0.15 | 0.13 | 1.25 | 1.20 | |||
Shares outstanding - basic (millions) | |||||||
During the period (4) | 279 | 276 | 279 | 276 | |||
End of period | 279 | 277 | 279 | 277 |
(1) | Non–GAAP financial measure; see discussion in Non-GAAP Financial Measures section of this news release. |
(2) | Beginning in 2020, Management no longer adjusts normalized EBITDA or normalized net income for changes in the fair value of natural gas optimization inventory. Please see the Non-GAAP Financial Measures section of the MD&A for additional detail. As such, comparative periods have been adjusted to reflect the before and after-tax impacts of this change to normalized EBITDA and normalized net income, respectively. |
(3) | Dividends declared per common share per month: |
(4) | Weighted average. |
CONFERENCE CALL AND WEBCAST DETAILS
Members of the investment community and other interested parties may dial 1-647-427-7450 or toll-free at 1-888-231-8191. Please note that the conference call will also be webcast. To listen, please go to http://www.altagas.ca/invest/events-and-presentations. The webcast will be archived for one year.
Shortly after the conclusion of the call, a replay will be available commencing at
ABOUT
FORWARD-LOOKING INFORMATION
This news release contains forward-looking information (forward-looking statements). Words such as "may", "can", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "aim", "seek", "propose", "contemplate", "estimate", "focus", "strive", "forecast", "expect", "project", "target", "potential", "objective", "continue", "outlook", "vision", "opportunity" and similar expressions suggesting future events or future performance, as they relate to the Corporation or any affiliate of the Corporation, are intended to identify forward-looking statements. In particular, this news release contains forward-looking statements with respect to, among other things, business objectives, expected growth, results of operations, performance, business projects and opportunities and financial results. Specifically, such forward-looking statements included in this document include, but are not limited to, statements with respect to the following: accretive effect of Pomona sale; expected normalized EBITDA in the range of
Many factors could cause
Financial outlook information contained in this news release about prospective financial performance, financial position, or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on
Additional information relating to
NON-GAAP MEASURES
This news release contains references to certain financial measures that do not have a standardized meaning prescribed by US GAAP and may not be comparable to similar measures presented by other entities. The non-GAAP measures and their reconciliation to US GAAP financial measures are shown in
EBITDA is a measure of
Normalized EBITDA includes additional adjustments for transaction costs related to acquisitions and dispositions, merger commitment recoveries due to a change in timing related to certain WGL merger commitments, unrealized losses (gains) on risk management contracts, non-controlling interest of certain investments to which HLBV accounting is applied, losses (gains) on investments, gains on sale of assets, restructuring costs, dilution loss on equity investment, COVID-19 related costs, provisions on assets, provisions on investments accounted for by the equity method, distributed generation asset related investment tax credits, foreign exchange losses (gains), and accretion expenses related to asset retirement obligations.
Normalized net income represents net income applicable to common shares adjusted for the after-tax impact of transaction costs related to acquisitions and dispositions, merger commitment recoveries due to a change in timing related to certain WGL merger commitments, unrealized losses (gains) on risk management contracts, losses (gains) on investments, gains on sale of assets, provisions on assets, provisions on investments accounted for by the equity method, restructuring costs, dilution loss on equity investment, COVID-19 related costs, and statutory tax rate change. Normalized net income is used by Management to enhance the comparability of
Normalized funds from operations, normalized adjusted funds from operations, and normalized utility adjusted funds from operations are used to assist Management and investors in analyzing the liquidity of the Corporation. Management uses these measures to understand the ability to generate funds for capital investments, debt repayment, dividend payments, and other investing activities. Funds from operations are calculated from the Consolidated Statements of Cash Flows and are defined as cash from operations before net changes in operating assets and liabilities and expenditures incurred to settle asset retirement obligations. Normalized funds from operations is calculated based on cash from operations and adjusted for changes in operating assets and liabilities in the period and non operating related expenses (net of current taxes) such as transaction and financing costs related to acquisitions and dispositions, merger commitments, COVID-19 related costs, and restructuring costs. Normalized adjusted funds from operations is based on normalized funds from operations, further adjusted to remove the impact of cash transactions with non-controlling interests, non-utility maintenance capital, and preferred share dividends paid. Normalized utility adjusted funds from operations is based on normalized adjusted funds from operations, further adjusted for Utilities segment depreciation and amortization. Funds from operations, normalized funds from operations, normalized adjusted funds from operations, and normalized utility adjusted funds from operations as presented should not be viewed as an alternative to cash from operations or other cash flow measures calculated in accordance with GAAP.
Net debt is used by the corporation to monitor its capital structure and financing requirements. It is also a measure of the Corporation's overall financial strength. Net debt is defined as short-term debt (excluding third-party project financing obtained for the construction of certain energy management services projects), plus current and long-term portions of long-term debt, less cash and cash equivalents.
SOURCE
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