AltaGas Canada Inc. Announces Strong First Quarter 2019 Financial Results
Calgary, Alberta--(Newsfile Corp. - May 8, 2019) - AltaGas Canada Inc. (TSX:ACI.TO) ("ACI") today announced its first quarter 2019 financial results.
- Achieved normalized net income 1 of $20.4 million ($0.68 per share) for the first quarter 2019 compared to adjusted normalized net income 2 of $18.5 million ($0.62 per share) in the first quarter 2018;
- Achieved net income after tax of $19.2 million ($0.64) per share in the first quarter 2019;
- Expects commercial development related to energy exports to drive increased economic activity throughout Pacific Northern Gas' (PNG) service territory with an additional $2 million investment in 2019 to provide natural gas utility service to LNG related projects;
- Expects 2019 capital spend in the range of $75 - $85 million;
- Declared quarterly dividend of $0.2375 per share; and
- Successfully issued $250 million 7-year Medium Term Notes at 3.15%, lowering ACI's overall interest expense expectations within its 5-year outlook.
"We had a very strong start to 2019 with first quarter earnings from our Utilities up approximately 5 percent and our renewables approximately in line compared to the first quarter of 2018," said Jared Green, President and Chief Executive Officer of ACI. "Our steady, stable growth outlook remains intact. We continue to work hard on all growth initiatives, including the re-activation of our PNG transmission line, and expect to have more news to share on this in the second half of the year."
For the first quarter 2019, net income after taxes was $19.2 million ($0.64 per share), compared to $20.2 million ($0.67 per share) in the first quarter 2018. Normalized net income 1 for the first quarter 2019 was $20.4 million ($0.68 per share) compared to adjusted normalized net income of $18.5 million ($0.62 per share) in the first quarter of 2018.
First quarter 2019 normalized net income increased over the first quarter of 2018 primarily driven by colder weather in Alberta and Nova Scotia as well as higher approved rates at the utilities, partially offset by higher operating and administrative expenses and lower wind generation at the Bear Mountain Wind Park.
- Non-GAAP measure; see discussion in the advisories of this news release and reconciliation to U.S. GAAP financial measures shown in ACI’s Management's Discussion and Analysis (MD&A) as at and for the period ended March 31, 2019, which is available on www.sedar.com
- Non-GAAP measure; see discussion in the advisories as well as the reconciliation to U.S. GAAP financial measures in this press release.
2019 Outlook and Capital Program
Over the 2019 - 2023 time period ACI continues to expect approximately 5 percent compound annual normalized net income growth from the adjusted normalized net income of $40.5 million achieved in 2018. Over this period, ACI expects to spend approximately $330 million at its utilities through investments in system betterment projects to maintain the safety and reliability of its utility infrastructure, new business opportunities and technology improvements. ACI expects these investments will grow its rate base to over $1 billion, and expects to fund this capital program utilizing internally generated cash flow and a small amount of incremental debt.
In 2019, ACI expects growth in adjusted normalized net income to be driven primarily by additions to rate base at the utilities, and stronger results from ACI's renewable power assets, partially offset by higher income tax expense. ACI expects 2019 capital spend to be in the range of $75 to $85 million including approximately $10 million for the Etzikom Lateral regulated pipeline project located in southern Alberta, which is expected to be in service in Q4, 2019, and approximately $2 million in spend to provide natural gas utility service to LNG related projects. ACI has received increased interest throughout PNG's service territory from the enhanced economic activity energy export projects bring to the region. ACI expects the growth in economic activity to continue as more export projects reach final investment decisions.
ACI Dividend Declaration
On May 7, 2019 the Board of Directors of ACI declared a dividend of $0.2375 per common share, payable on June 28, 2019 to shareholders of record at the close of business on May 31, 2019. The ex-dividend date is May 30, 2019. This dividend is an eligible dividend for Canadian income tax purposes.
Selected Financial Information
The following tables summarize key financial results:
| || || |
| ||Three Months Ended|
| || ||March 31|
|Normalized EBITDA (1)(2)||38.0||36.7|
|Net income after taxes||19.2||20.2|
|Normalized net income (1)||20.4||19.0|
|Net additions to property, plant and equipment||6.8||5.6|
|Dividends declared (3)||7.1||-|
|Cash from operations||21.0||11.7|
|Normalized funds from operations (1)||30.1||27.6|
| || || |
| ||Three Months Ended|
| || ||March 31|
|($ per Common Share, except Common Shares outstanding)||2019||2018|
|Net income after taxes- basic||0.64||0.67|
|Net income after taxes- diluted||0.64||0.67|
|Normalized net income - basic (1)||0.68||0.63|
|Dividends declared (3)||0.2375||-|
|Cash from operations||0.70||0.39|
|Normalized funds from operations (1)||1.00||0.92|
| Weighted average number of Common Shares outstanding - basic |
- Non-GAAP financial measure; see discussion in the advisories section of this news release and reconciliation to U.S. GAAP financial measures shown in ACI's MD&A as at and for the period ended March 31, 2019, which is available on www.sedar.com .
- Effective January 1, 2019, ACI revised the calculation of normalized EBITDA to incorporate ACI's proportionate share of normalized EBITDA from its equity investments instead of just the equity pick-up. The comparative period has been revised to conform to the current period presentation. Please refer to "Non-GAAP Financial Measures" section of this MD&A.
- Dividends declared per Common Share after the completion of the IPO. On March 6, 2019, the Board of Directors declared a quarterly dividend of $0.2375 per Common Share, which was paid on March 29, 2019.
- For comparative purposes, the Common Shares issued under the IPO including the Over-Allotment Option, have been assumed to be outstanding as of the beginning of each period, including the periods prior to the acquisition of ACI's assets from AltaGas Ltd.
Adjusted Normalized Net Income and Net Income After Taxes
| || || || || || || |
|For the three months ended March 31, 2018 ($ millions)|| ||As reported|| ||Adjustments|| ||Adjusted|
|Interest expense (1)|| ||(6.8)|| ||(0.7)|| ||(7.5)|
|Income tax expense (2)|| ||(2.6)|| ||0.2|| ||(2.4)|
|Net income after taxes||$||20.2||$||(0.5)||$||19.7|
|Unrealized gain on foreign exchange contracts|| ||(1.2)|| ||-|| ||(1.2)|
|Normalized net income (3)||$||19.0||$||(0.5)||$||18.5|
- Adjustment to reflect financing charges and expenses associated with incremental debt additions at the Company as if they had occurred at the beginning of the period. Please refer to the Capital Resources section of the MD&A as at and for the period ended March 31, 2019 for the capital structure subsequent to the acquisition of ACI's assets from AltaGas Ltd. and the IPO.
- Tax shield associated with incremental cost adjustments assuming a 27 percent statutory tax rate.
- Non-GAAP financial Measures. See Non-GAAP Financial Measures section of the MD&A as at and for the period ended March 31, 2019.
ACI is a Canadian company with natural gas distribution utilities and renewable power generation assets. ACI serves approximately 130,000 customers, delivering low carbon energy, safely and reliably. For more information visit: www.altagascanada.ca .
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This news release contains forward-looking information (forward-looking statements). Words such as "may", "can", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "expect", "project", "target", "potential", "objective", "continue", "outlook", "opportunity" and similar expressions suggesting future events or future performance, as they relate to ACI or any affiliate of ACI, 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: expectation that commercial development related to energy exports will drive increased economic activity throughout Pacific Northern Gas' (PNG) service territory; anticipated $2 million investment in 2019 to provide natural gas utility service to LNG related projects; timing of update on reactivation of the PNG transmission line; expected compound annual normalized net income growth of approximately 5 percent between 2019 - 2023 from the 2018 adjusted normalized net income; anticipated drivers of growth in adjusted normalized net income; expected 2019 capital spend in the range of $75 to $85 million; expected capital spend of approximately $10 million on the Etzikom Lateral regulated pipeline project; expected capital spend of approximately $2 million to provide natural gas service to LNG related projects; expected expenditures of approximately $330 million at its utilities between 2019 and 2023 and anticipated sources of funding; expected rate base growth to over $1 billion between 2019 and 2023; expected in-service date for the Etzikom Lateral regulated pipeline project; and timing of June dividend payment. .
ACI's forward-looking statements are subject to certain risks and uncertainties which could cause results or events to differ from current expectations, including, without limitation: legislative and regulatory environment; demand for natural gas; access to and use of capital markets; market value of ACI's securities; ACI's ability to pay dividends; ACI's ability refinance its debt; prevailing economic conditions; the potential for service interruptions and physical damage to infrastructure; natural gas supply; ability of the company to maintain, replace and expand its regulated assets; and impact of labour relations and reliance on key personnel. Applicable risk factors are discussed more fully under the heading "Risk Factors" in ACI's Annual Information Form for the year ended December 31, 2018, which is available on www.sedar.com.
Many factors could cause ACI's actual results, performance or achievements to vary from those described in this news release, including, without limitation, those listed above and the assumptions upon which they are based proving incorrect. 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, expected, projected or targeted and such forward-looking statements included in this news release, should not be unduly relied upon. The impact of any one assumption, risk, uncertainty or other factor on a particular forward-looking statement cannot be determined with certainty because they are interdependent and ACI's future decisions and actions will depend on management's assessment of all information at the relevant time. Such statements speak only as of the date of this news release. ACI does not intend, and does not assume any obligation, to update these forward-looking statements except as required by law. The forward-looking statements contained in this news release are expressly qualified by these cautionary statements.
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 management's assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this news release should not be used for purposes other than for which it is disclosed herein.
This news release contains references to certain financial measures used by ACI that do not have a standardized meaning prescribed by U.S. GAAP and may not be comparable to similar measures presented by other entities. Readers are cautioned that these non-GAAP measures should not be construed as alternatives to other measures of financial performance calculated in accordance with U.S. GAAP. The non-GAAP measures and their reconciliation to US GAAP financial measures are shown in ACI's MD&A as at and for the period ended March 31, 2019. These non-GAAP measures provide additional information that Management believes is meaningful in describing ACI's operational performance, liquidity and capacity to fund dividends, capital expenditures, and other investing activities. The specific rationale for, and incremental information associated with, each non-GAAP measure is discussed below.
Normalized net income represents net income after taxes adjusted for after tax impact of unrealized gain (loss) on foreign exchange contracts and other typically non-recurring items. This measure is presented in order to enhance the comparability of results, as it reflects the underlying performance of the Company. Normalized net income as presented should not be viewed as an alternative to net income after taxes or other measures of income calculated in accordance with U.S. GAAP as an indicator of performance.
Adjusted normalized net income reflects Management's estimates of ACI's normalized net income for the first quarter ended March 31, 2018 assuming the IPO had been closed at the beginning of the period. Although many of the adjustments are estimates and are not objectively determinable, ACI believes that the amounts represent reasonable estimates of its normalized net income for the first quarter ended March 31, 2018 based on the assumptions made. ACI believes adjusted normalized net income is useful to investors and analysts when trying to determine what the results of operations for 2018 would have been if it was under ACI's capital structure going forward.
Normalized EBITDA is a measure of the Company's operating profitability prior to how business activities are financed, assets are amortized, or earnings are taxed. Normalized EBITDA is calculated using operating income adjusted for depreciation and amortization expense, accretion expenses, foreign exchange gain (loss), unrealized gain (loss) on foreign exchange contracts, and other typically non-recurring items. Normalized EBITDA is frequently used by analysts and investors in the evaluation of entities within the industry as it excludes items that can vary substantially between entities depending on the accounting policies chosen, the book value of assets and the capital structure.
Normalized funds from operations is used to assist Management and investors in analyzing the liquidity of the Company without regard to changes in operating assets and liabilities in the period as well as other non-operating related expenses. Management uses this measure to understand the ability to generate funds for use in investing and financing activities.
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