Incoming President and CEO outlines near-term priorities to drive performance, fund growth and de-lever company
CALGARY, Dec. 13, 2018 /CNW/ – AltaGas Ltd. (AltaGas) (TSX: ALA) today announced the details of its balanced funding plan and outlook for 2019. The plan outlines measures to regain financial strength and flexibility to fund future growth opportunities aligned with the Company’s focus on Midstream and U.S. Utilities.
The Company’s balanced funding plan has been designed to optimize per share cash flow and earnings growth by taking advantage of capital investment and growth opportunities in Midstream and U.S. Utilities, enhancing the value of its asset footprint and improving credit metrics. Through a combination of levers, including asset sales, a focused approach to strategic capital allocation and a reset of the dividend payout, the plan accelerates the de-leveraging of the balance sheet and ensures the Company is well-positioned for future growth.
“My long-term objective is to drive operational excellence, achieve superior returns on invested capital in our midstream business, and enhance our return across our utilities,” said Randy Crawford, President and Chief Executive Officer, AltaGas. “My more immediate focus is to de-lever the balance sheet, create financial flexibility, improve our credit metrics and achieve a self-funded capital plan.
“It is clear to me that AltaGas has premier assets in strategically located markets across North America,” continued Mr. Crawford. “We need to ensure these assets, combined with capital discipline and a keen focus on delivering timely and superior returns, not only begin to meet our stakeholders’ expectations, but exceed them. The plan that we are outlining today is the first step in my mandate. In the weeks and months to come, I expect to provide further clarity on the long-term growth and performance of AltaGas.”
AltaGas will further delineate its plans which are designed to regain its financial strength, position the Company to deliver on its long-term strategy and drive growth, on its conference call today.
The key areas of focus include:
(all financial figures are unaudited and in Canadian dollars unless otherwise noted)
- Solid business outlook with anticipated 2019 normalized earnings before interest, taxes, depreciation and amortization (normalized EBITDA1) in the range of $1.2 – $1.3 billion and normalized Funds from Operations (normalized FFO1) of $850 – $950 million.
- Prudent capital allocation of approximately $1.3 billion in 2019 in primarily Midstream and U.S. Utilities projects with strong risk-adjusted returns and near-term contributions to per share normalized FFO and normalized Earnings Per Share (EPS).
- A comprehensive review of the dividend policy has been completed by the Board of Directors, and approval has been secured to reset the monthly dividend to $0.08 per common share or $0.96 per common share annually, to improve financial strength and ensure greater funding flexibility. This represents a 56 percent reduction.
- Balanced funding plan designed to maintain an investment grade credit rating.
- The combination of asset sales, repayment of the bridge facility and securing additional credit facilities will provide AltaGas with ample liquidity and financial flexibility. The balance of the bridge facility is expected to be refinanced with a new US$1.2 billion revolving credit facility by year end.
- With asset sales of $3.79 billion to-date, the Company intends to complete additional asset sales of approximately $1.5 – $2.0 billion in 2019.
1 |
Non-GAAP measure; see discussion in the advisories of this news release |
Asset Sale |
Sales Proceeds |
Identified Assets |
Phase 1 |
$2.4 |
• Northwest Hydro Facilities (35%) |
Phase 2 |
$1.39 |
• Northwest Hydro Facilities (Approximate 55%)3 |
Phase 3 |
~$1.5 – $2.0 |
• Targeted additional asset sales to be completed in 2019 |
1 |
Before transaction costs. |
2 |
The sale of certain non-core Gas assets to be completed upon receipt of final approval by the National Energy Board. |
3 |
Subject to third party consents and regulatory approval |
Asset Monetization
In a continuation of its asset monetization strategy, AltaGas announced today that it has reached an agreement for the sale of its remaining indirect equity interest of approximately 55 percent in the Northwest Hydro Facilities for approximately $1.39 billion. The valuation achieved for such interest is largely in line with the valuation of the 35 percent interest sold in June 2018.
This sale of AltaGas’ interest in the Northwest Hydro Facilities has been entered into with a joint venture company that is controlled by Axium Infrastructure Inc., as manager of Axium Infrastructure Canada II Limited Partnership, and Manulife Financial Corporation.
TD Securities Inc., J.P. Morgan and RBC Capital Markets are acting as joint financial advisors to AltaGas in connection with this transaction.
Capital Plan
The Company’s 2019 capital investment plan of approximately $1.3 billion is comprised primarily of projects that will deliver strong organic growth in its Midstream and U.S. Utilities segments, with strong risk-adjusted returns and near-term contributions to normalized per share FFO and EPS, and normalized EBITDA. Capital investment will be funded through a combination of asset sales, cash from operations, the dividend reinvestment plan, existing financial capacity and select future debt and hybrid equity capital market issuances.
Consistent with AltaGas’ focus on Midstream and U.S. Utilities, the components of the 2019 capital plan include:
Segment |
% Total Capital |
Identified Projects |
Utilities |
60 – 65% |
• approved system betterment across all utilities |
Midstream |
35 – 40% |
• Ridley Island Propane Export Terminal (RIPET) |
Power |
≤5% |
• select smaller investments in distributed generation and |
Dividend Policy Review
A comprehensive review of the dividend has been completed and the Board of Directors has approved a reset of the dividend to improve financial strength and ensure greater funding flexibility. The Board has declared a January dividend of $0.08 per common share, which equates to $0.96 annually. This represents a 56 percent reduction.
The Company anticipates the reset will have a significant impact on its financial flexibility and credit profile through 2023, ultimately resulting in an additional approximate $1.3 billion in anticipated retained cash dividends, over that period, which provides an efficient source of funding to de-lever and fund growth.
“The Board’s decision to decrease the dividend was an extremely difficult one,” said David Cornhill, Chairman of the Board, AltaGas. “After a comprehensive review of all of the component parts of our balanced funding plan, inclusive of AltaGas’ future outlook and capital requirements, resetting the dividend was necessary to ensure the stability and sustainability of the program moving forward. This action also improves our financial strength and funding flexibility.”
The dividend declared on December 12, 2018 will be paid on January 15, 2019 to common shareholders of record on December 27, 2018. The ex-dividend date is December 24, 2018. The amount of the monthly dividend will be $0.08 for each common share. This dividend is an eligible dividend for Canadian income tax purposes.
In a decision to minimize equity and reduce the cost of capital, on October 30, 2018 AltaGas’ Board of Directors announced the suspension of the Premium Dividend™ Component of the Premium Dividend™, Dividend Reinvestment and Optional Cash Purchase Plan effective December 18, 2018. The dividend to be paid on January 15, 2019 will not be eligible for the Premium Dividend™ Component of the Premium Dividend™, Dividend Reinvestment and Optional Cash Purchase Plan.
2019 Financial & Operational Outlook
AltaGas expects 2019 normalized EBITDA in the range of $1.2 – $1.3 billion and anticipated normalized FFO of $850 – $950 million.
The Utilities segment is anticipated to deliver approximately $650 – $700 million in normalized EBITDA, the Midstream segment approximately $450 – $520 million and the Power segment approximately $140 – $180 million. Corporate costs are expected to be approximately $30 – $40 million. The ranges noted above are before asset sales with the exception that the Power segment factors in the impact of the Northwest Hydro Facilities asset sale. The EBITDA impact of the remaining asset sales is expected to be in the range of $50 – $100 million.
Normalized 2019 EBITDA |
2019E |
% of Segmented EBITDA |
Growth Drivers |
|
Utilities |
$650 – 700 |
51% |
Full year of WGL Utility capital and rate base growth |
|
Midstream |
450 – 520 |
37% |
Full year of WGL (Central Penn, Stonewall pipelines) RIPET and new Canadian assets into service WGL Midstream assets into service (Mountain Valley |
|
Power1 |
140 – 180 |
12% |
Full year of WGL Northwest Hydro Facilities asset sale |
|
Total Segmented EBITDA |
$1,240 – 1,400 |
|||
Corporate |
(30 – 40) |
|||
Asset Sales |
(50 – 100) |
Asset sales expected to close in 2019 |
||
TOTAL |
$1,200 – $1,300 |
1 |
Factors in the impact resulting from the Northwest Hydro Facilities asset sale. |
The primary drivers of normalized EBITDA growth in 2019 include:
- a full-year of earnings from WGL;
- critical Canadian assets including the Ridley Island Propane Export Terminal, and WGL Midstream assets coming into service;
- offset by phase one asset sales completed in 2018, and phase two and three asset sales expected to be completed in 2019.
Conference Call and Webcast Details
AltaGas will hold a conference call today at 7:00 a.m. MT (9:00 a.m. ET) to discuss the 2019 outlook, balanced funding plan, capital plan and update on other strategic and operational items including the dividend policy and asset sales. The call will be led by Randy Crawford, Chief Executive Officer and Tim Watson, Executive Vice President and Chief Financial Officer.
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 12:00 p.m. MT (2:00 p.m. ET) on December 13, 2018 by dialing 403-451-9481 or toll free 1-855-859-2056. The passcode is 6694687. The replay will expire at 9:59 p.m. MT (11:59 p.m. ET) on December 20, 2018.
About AltaGas
AltaGas is an energy infrastructure company with a focus on midstream, regulated utilities and power. AltaGas creates value by growing and optimizing its energy infrastructure, including a focus on clean energy sources. For more information visit: www.altagas.ca.
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