In third quarter, AltaGas Ltd. (AltaGas) (TSX:ALA) (TSX:ALA.PR.A) (TSX:ALA.PR.U) achieved several milestones toward adding $1.8 billion in new and expanded assets in 2012. On August 30, 2012, AltaGas closed the acquisition of SEMCO Holding Corporation (SEMCO), the largest acquisition in its eighteen-year history. The acquisition increased Utility customers from just over 100,000 to over 540,000 along with more than a two-fold increase in rate base. During the quarter, construction of the Busch Ranch wind project (Busch Ranch) in southern Colorado was completed successfully ahead of schedule and on budget. In addition, AltaGas commissioned the 50 Mmcf/d expansion of the Blair Creek facility and completed construction of the Gordondale Gas Processing Facility (Gordondale), both of which provide services to producers in the Montney area. As well, the Corporation completed construction of the Harmattan Co-stream project (Co-stream Project). The new and expanded assets in 2012 are underpinned by regulated returns or long-term contracts.
Normalized net income applicable to common shares for the three months ended September 30, 2012 was $12.3 million ($0.13 per share), compared to $14.1 million ($0.17 per share) for the same period 2011. Net income applicable to common shares was $8.0 million ($0.08 per share) for the three months ended September 30, 2012, compared to $11.1 million ($0.13 per share) for the same period 2011. Third quarter results reflect the increased seasonality of earnings from the addition of new natural gas distribution utilities in British Columbia and in the United States. Earnings per share was also impacted by 13.9 million more shares issued to fund the SEMCO acquisition.
Normalized net income for the nine months ended September 30, 2012 was $62.9 million, a six percent increase compared to $59.4 million for the same period 2011. Normalized earnings per share for the nine months ended September 30, 2012 was $0.69, compared to $0.71 for the same period 2011.
Results for the three months ended September 30, 2012 were marked by strong cash flows. Normalized EBITDA was $65.3 million, 16 percent higher compared to $56.3 million for the same quarter 2011. Normalized funds from operations was $54.1 million, 24 percent higher compared to $43.5 million reported for the same quarter 2011.
"This has been a milestone quarter for AltaGas as we added more assets than any other quarter in our history," said David Cornhill, Chairman and CEO of AltaGas. "We remain on track to add approximately $1.8 billion in new assets in 2012 which is expected to add stable earnings from long-term contracts and regulated returns. We continue to be well positioned to deliver long-term earnings, cash flow and sustainable dividend growth into the future. In September we were pleased to announce a 4.3 percent increase in our common share dividend."
The US$1.156 billion acquisition of SEMCO was successfully closed on August 30, 2012. The addition of SEMCO represents a significant step in the execution of AltaGas' strategy and increases stable, regulated cash flows to further support both its dividend and capital growth projects in Canada and the United States.
Construction of the 195 MW Forrest Kerr run-of-river project (Forrest Kerr Project) is progressing well and remains ahead of schedule and on budget. The total project is approximately 70 percent complete. Construction of the intake structure is complete, with powerhouse and in-river work well underway. Forrest Kerr Project construction is expected to be completed by the end of 2013, with commissioning to follow based on the availability of the Northwest Transmission Line. During the third quarter progress continued as expected on the additional Northwest hydroelectric projects, McLymont Creek and Volcano Creek. The two smaller projects are expected to be in service in late 2015. AltaGas has 60-year Electricity Purchase Agreements (EPAs) with BC Hydro which are fully indexed to the Consumer Price Index (CPI) as well as Impact Benefit Agreements (IBAs) with the Tahltan First Nation.
Busch Ranch in southern Colorado was commissioned ahead of schedule and on budget. AltaGas owns a 50 percent interest in the 29 MW wind project with the local utility Black Hills/Colorado Electric Utility Company LP (Black Hills Energy). The power generated is sold pursuant to a 25-year renewable energy purchase agreement with Black Hills Energy. AltaGas added 65 MW of new power assets in 2012, increasing total power generation capacity by 13 percent.
The Co-stream Project, which will use 250 Mmcf/d of existing spare capacity at the Harmattan Complex, is in the final commissioning stages and performance testing is in progress. The project is underpinned by a 20-year cost-of-service contract with NOVA Chemicals Corporation. Construction on AltaGas' 120 Mmcf/d Gordondale deep-cut, natural gas processing facility is complete and AltaGas successfully commenced processing gas on October 28, 2012. The plant is located in the Montney resource area, one of the largest, low-cost, liquids-rich resource plays in the Western Canadian Sedimentary Basin. This plant will allow AltaGas to provide a midstream solution to a number of producers in the area and is underpinned by a long-term natural gas supply contract with Encana. The 50 Mmcf/d expansion at the Blair Creek facility was successfully commissioned and producer gas is being processed. The expansion is underpinned by long-term contracts with three producers.
Monthly Common Share Dividend and Quarterly Preferred Share Dividend
- AltaGas announced that the November common share dividend will be paid on December 17, 2012, to holders of record on November 26, 2012. The ex-dividend date is November 22, 2012. The amount of the dividend will be $0.12 for each common share. This dividend is an eligible dividend for Canadian income tax purposes.
- The Board approved a preferred share dividend of $0.3125 per share for the period commencing October 1, 2012, and ending December 30, 2012, on AltaGas' outstanding Series A Preferred Shares. The dividend will be paid on December 31, 2012, to preferred shareholders of record on December 13, 2012. The ex-dividend date is December 11, 2012.
- The Board approved a preferred share dividend of US$0.275 per share for the period commencing October 1, 2012, and ending December 30, 2012, on AltaGas' outstanding Series C Preferred Shares. The dividend will be paid on December 31, 2012, to preferred shareholders of record on December 13, 2012. The ex-dividend date is December 11, 2012.
- Effective January 1, 2012, AltaGas follows United States Generally Accepted Accounting Principles (US GAAP). All prior comparative information has been restated to US GAAP.
- Net income applicable to common shares for third quarter 2012 was $8.0 million, compared to $11.1 million for same quarter 2011.
- Net income applicable to common shares for third quarter 2012 was adjusted for $5.1 million of after-tax mark-to-market gains and $9.4 million of after-tax transaction costs and foreign exchange losses related to the acquisition of SEMCO, resulting in normalized net income of $12.3 million for third quarter 2012.
- Normalized EBITDA was $65.3 million for third quarter 2012, compared to $56.3 million for same quarter 2011.
- Normalized Funds from operations was $54.1 million ($0.57 per share) for third quarter 2012, compared to $43.5 million ($0.52 per share) for same quarter 2011.
- Net debt as at September 30, 2012 was $2,527.9 million, compared to $1,063.0 million as at September 30, 2011 and $1,334.2 million as at December 31, 2011. AltaGas' debt-to-total capitalization ratio as at September 30, 2012 was 56.0 percent, versus 46.9 percent as at September 30, 2011 and 49.5 percent as at December 31, 2011.
- On August 30, 2012 AltaGas issued 13,915,000 common shares for net proceeds of $378.4 million.
- On September 28, 2012 AltaGas issued $350 million of senior unsecured medium term notes. The notes carry a coupon rate of 3.72 percent and mature on September 28, 2021.
CONSOLIDATED FINANCIAL RESULTS
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