Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AltaGas Ltd (ATGFF, Financial) reported a 17% year-over-year growth in normalized EBITDA, reaching $294 million in Q3.
- The company achieved record global export volumes, exporting over 128,000 barrels per day of LPGs to Asia.
- Strong performance in the utilities segment was driven by capital investments and active cost management, despite warmer weather conditions.
- Construction progress on major projects like Reef and Pipestone 2 is on track, with significant portions of capital costs locked in fixed-price EPC contracts.
- AltaGas Ltd (ATGFF) is actively pursuing long-term growth opportunities, including data center energy demands and regulatory filings to support system modernization.
Negative Points
- The company faced challenges from Alberta wildfires and potential national rail strikes, impacting operations and causing higher onetime operating costs.
- Despite strong export volumes, lower export margins and higher LTIP costs due to rising share prices affected financial performance.
- Mild weather in key regions like D.C. and Michigan posed a headwind for the utilities segment, impacting heating degree days.
- The company is still in the early phases of price discovery for its non-core Mountain Valley Pipeline stake, which could affect balance sheet improvements.
- There is uncertainty regarding the approval of weather variance accounts in D.C., which could impact future financial stability.
Q & A Highlights
Q: When can we expect contracts to be secured for the Reef project, and how does this affect the decision on Reef Phase II?
A: Vern D. Yu, President and CEO, stated that they are optimistic about finalizing tolling contracts in the next 3-4 months. The decision on Reef Phase II will depend on these contracts. A small expansion could proceed with minimal permitting, but a larger expansion would require more.
Q: How do you balance maximizing the value of the Mountain Valley Pipeline (MVP) with improving the balance sheet?
A: D. James Harbilas, CFO, mentioned they are in early price discovery for MVP, which is non-core. They expect strong interest due to long-term contracts and cash flow, especially in a falling interest rate environment.
Q: Can you discuss the growth opportunities with data centers and the cautious optimism expressed?
A: Vern D. Yu explained that while data centers present a significant opportunity, the exact demand is still uncertain. They are in discussions with developers and expect to secure contracts in the coming quarters. Blue Jenkins added that they are optimistic about putting rate base investments in place as data centers clarify their energy needs.
Q: How do you ensure economic returns on tolling rates given high export spreads?
A: Aaron Swanson, VP of Investor Relations, stated that they aim for long-term agreements to minimize cash flow volatility. Tolling rates are set based on long-term spread expectations, with higher rates for Reef due to its larger CapEx profile.
Q: What are the next opportunities for cost reduction or earnings stability?
A: Aaron Swanson highlighted that achieving 60% tolling in global exports will reduce cash flow volatility. They will continue cost management in utilities and file rate cases to minimize ROE lag.
Q: What is the status of the weather variance account in D.C.?
A: Donald Jenkins, President of Utilities, stated they are hopeful for approval based on regional precedents, but it's too early in the rate case to be certain.
Q: What are the credit rating agencies focused on, and what levers do you have to manage the balance sheet?
A: D. James Harbilas noted ongoing dialogue with agencies, focusing on commercial and operational derisking. They consider MVP sale and non-core asset sales as levers to achieve credit metrics.
Q: Are there plans to expand storage capacity at Dimsdale due to increased demand?
A: Randy Toone confirmed strong demand for gas storage and ongoing technical and regulatory work for potential expansion, with more details expected in 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
