Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Executives

Dennis Dawson - Vice President, General Counsel, and Corporate Secretary

David Cornhill - Chairman and Chief Executive Officer

David Harris - President, Gas and Power

AltaGas Ltd. (OTCPK:ATGFF) 2013 Annual Meeting of Shareholders Conference Call April 25, 2013 4:30 PM ET

Dennis Dawson - Vice President, General Counsel, and Corporate Secretary

Hello, I would like to welcome all of you to the Annual and Special Meeting of AltaGas Ltd. Both those of you here today in person and of course those listening on our webcast, my name is Dennis Dawson, AltaGas’ Vice President, General Counsel, and Corporate Secretary. Mr. David Cornhill, Chairman and Chief Executive Officer of AltaGas will act as Chairman of the meeting. Mr. Cornhill has requested that I administer the formal part of these proceedings as well as act as Secretary of the meeting. Mr. Cornhill will then make his presentation following the formal portion of the meeting.

So, I’d like to now call the formal part of the Annual and Special Meeting of the Shareholders of AltaGas Ltd. to order. Connor Doyle and Maureen Walker of Computershare Investor Services Inc. will act as scrutineers. For your information and in order to expedite the meeting, I have asked certain shareholders to make certain motions at the appropriate times. Voting recording of the directors and the share auction plan will be by ballot and individual votes shall be recorded and totaled in favor or against will be tallied by the scrutineers. All other motions shall be by show of hands for each person present and entitled to vote shall have one vote.

I have before me a true copy of the notice of Annual and Special Meeting of the Shareholders of AltaGas Ltd. together with the statutory declaration of Computershare as to the mailing of the notice of the Annual and Special Meeting together with the management information circular, the form of proxy, and the form of proxy for the shareholders. The statutory declaration indicates that all documents were mailed within the time periods required by applicable legislation. I have filed a statutory declaration with the minutes of the meeting. I have received a report of the scrutineers with respect to attendance at the meeting, which states that 59,896,258 shares are present. So, I declare that quorum is present at the Annual and Special Meeting of the Shareholders of AltaGas and that the meeting is duly called and properly constituted for the transaction of business. I direct that the scrutineers report in attendance to be next to the minutes of the meeting.

The first item of business is the presentation by the directors of AltaGas of the Annual Report to shareholders, which report consist of the consolidated financial statements of AltaGas Limited for the fiscal year ended December 31, 2012 and the auditor’s report thereon. The consolidated financial statements, the auditor’s report and management’s discussion and analysis with respect thereto are included in AltaGas Annual Report that was mailed to shareholders of record on February 27, 2013. There are extra copies of the Annual Report available to shareholders on request and I think there are some at the back of the room. In addition to report, with respect to the business of AltaGas will be provided after the conclusion of the formal part of the meeting, it is not proposed to ask shareholders to approve the financial statements that have been placed before the meeting, is there any discussion regarding AltaGas’ consolidated financial statements.

The next item of business is to consider the nominees standing for election as Directors of AltaGas Ltd. The Board of Directors of AltaGas Ltd. has been fixed, the number of directors to be elected at the meeting at nine. I declare the meeting open for nominations for the persons to be elected as Directors of AltaGas Ltd. and ask David Harris to place the names of the persons nominated by management of AltaGas before the meeting. Over to you, Dave.

David Harris - President, Gas and Power

I nominate David Cornhill, Catherine Best, Allan Edgeworth, Hugh Fergusson, Daryl Gilbert, Robert Hodgins, Myron Kanik, David Mackie, Neil McCrank as directors of AltaGas Ltd. to hold the office until the next Annual General Meeting of Shareholders or until they cease to be a director by operation of law or until their resignation becomes effective.

Unidentified Company Speaker

I second that nomination.

Dennis Dawson - Vice President, General Counsel, and Corporate Secretary

Thank you, David. Thank you, John. Our eyesight is all failing, and we have to come up and hold our script under the lights, so we can see it. Thank you, David. Thank you, John. All the nominees have filed their consents to act as Director of AltaGas Ltd. Are there any further nominations? I declare the nomination is closed. Please note that only registered shareholders or their proxy holders are entitled to vote on the election of directors. There will be a ballot taken on this resolution for election of the directors. Each of the registered shareholders will have received a blue ballot on coming into the meeting. Each person present at this meeting that is entitled to vote should mark on the ballot where you are in favor of the resolution, if you had not already done so as you entered the room. If you are completing a ballot now, please raise your hand after you had marked your vote on the ballot, so that a scrutineer can pickup your completed ballot for tabulation. So, if there are anyone have the blue ballot, which they didn’t turn in at the start, put up your hand please? Thank you. The scrutineers will tabulate the results of the ballot and we will report the results before the end of the meeting.

The next item of business is the consideration of the appointment of auditors of AltaGas Ltd. and the authorization of the directors of AltaGas Ltd. to fix the remuneration of the auditors. Could I please have a motion to appoint Ernst & Young LLP as the auditors of AltaGas Ltd. until the next Annual Meeting of the Shareholders or until a successor is appointed and that the remuneration of such auditors be fixed by the directors of AltaGas Ltd.

Unidentified Company Speaker

I would make that motion, Mr. Chairman.

Unidentified Company Speaker

I will second that motion.

Dennis Dawson - Vice President, General Counsel, and Corporate Secretary

Thank you, Debbie. Thank you, Jed. You’ve heard the motion. And the motion is now open for discussion. All those in favor of the motion please raise your hand. Opposed if any? I declare the motion carried.

The next item of business is the consideration of the approval of unallocated share options under the share option plan. Could I please have the motion that all unallocated share options entitled to be granted pursuant to the share option plan be approved in our authorized until July 1, 2016?

Unidentified Company Speaker

I would make that motion, Mr. Chairman.

Unidentified Company Speaker

I will second that motion.

Dennis Dawson - Vice President, General Counsel, and Corporate Secretary

Thank you, Kent. Thank you, John. You’ve heard the motion and the motion is now open for discussion. There will be a ballot on this resolution as well. Each of the registered shareholders will have received a yellow ballot on entering the meeting. Each person present at the meeting is entitled to vote, who is entitled to vote should have marked on that ballot, whether you are in favor of the resolution if you did not already so when you entered the meeting. If you are now completing the ballot, please raise your hand after you have marked your vote, so that a scrutineer can pick it up for tabulation. So, please raise your hand if you have a ballot?

In the corner, there is one down here. Did you do it already when you came in? Okay, thank you. Anyone who didn’t do it as they came in? Thank you. The scrutineers will tabulate the results of the ballot and we will report the results before the end of the meeting, which is rapidly approaching. So, I will sit down for just a moment while they tabulate. So, I will just have a short gap here while they tabulate those results. Thank you.

The results have now been tabulated. As the majority of the votes cast by persons entitled to vote on the motion for appointment of directors or in favor, I declare it to be passed. As a motion – as the majority of the votes cast with respect to the share option plan by persons entitled to vote on the motion are in favor, I declare it to be passed. Is there any other business to come before the meeting? As there is no further business, I’d like to call for motion terminating the meeting.

Unidentified Company Speaker

I would make that motion, Mr. Chairman.

Unidentified Company Speaker

I will second that motion.

Dennis Dawson - Vice President, General Counsel, and Corporate Secretary

Thank you, John. Thank you, Debbie. All those in favor of the motion, please raise your hand? Opposed if any? I declare the motion carried in the formal part of the meeting at an end. I’d like to take this opportunity to introduce the AltaGas directors in attendance this afternoon who are in front of the room here, Catherine Best, Myron Kanik, Allan Edgeworth, Hugh Fergusson, Daryl Gilbert, Robert Hodgins, and Neil McCrank. Thank you. And of course, David Cornhill, who will now make his presentation. A question-and-answer session will follow Mr. Cornhill’s presentation. Thank you.

David Cornhill - Chairman and Chief Executive Officer

Thank you, Dennis, and good afternoon everyone. Today, I’d like to talk about our vision, our strategy, and the significant milestones and accomplishments we have achieved in each of our business segments in 2012. I’ll also take you through our 2012 financial results before turning your attention to 2013. 2013 has already been a busy year with several strategic announcements including our joint venture with Idemitsu and the acquisition of Blythe. I’ll talk more about these announcements as well as our strong first quarter results we released this morning.

I draw your attention to the forward-looking statement and if anyone wishes to dialogue on this, Dennis will be more than happy to dialogue with you on this. It’s becoming unreadable in terms of the density of print. It’s Dennis’ favorite slide, you just inform him soon. Our vision is not changed. It is to be a leading North America energy infrastructure company. Through our gas, power and utility business segments, we have built a $7 billion company with a diversified energy infrastructure.

Our portfolio is geographically diverse and allows us to use our competitive advantage to build strategic asset clusters. In 2009, we set a target to achieve $2 billion in growth projects between 2010 and 2015. As of the first quarter of 2013, we have announced over $4 billion on growth and we have approximately $6 billion worth of operating assets across the energy value chain. Our strategy has capitalized on opportunities that the renaissance of natural gas and clean energy are creating. We do this through a disciplined growth in all three business segments. In each of theses segments we are looking for long life assets that provide stable, predicable and growing cash flows.

Our growth, our dividend, and our investment grade balance sheet is how we deliver shareholder value. In 2012, we delivered on our strategy and made significant strides on our journey to be a leading North American energy infrastructure company. When we look at the milestones we set out to achieve, we did exceptionally well. In our gas segment, we added 400 million cubit feet a day of capacity at Gordondale, co-stream – co-streaming at Harmattan and Blair Creek expansion.

In our power segment, we have completed over 75% of our construction at Forrest Kerr run-of-river hydro projects. We have completed the 50% acquisition of Busch Ranch, our first wind farm in the United States. In our utility business, we completed the acquisition of SEMCO in the third quarter for $1.14 billion. We grew the rate base by 8% for our Canadian utilities.

When I look a little closer at the gas segment, we significantly transformed it in 2012. These new and expanded assets are valued over a $0.5 billion. All of these are underpinned by long-term contracts, which enhance our earnings stability. Our Harmattan Co-stream has a 20-year cost of service agreement with NOVA Chemical providing stable and predictable cash flow is currently running at approximately 65% capacity and we expect volumes to increase in the coming months.

Our Gordondale facility has a long-term take-or-pay agreement within Canada. The facility is running as planned at take-or-pay levels which are currently set at approximately 40% of the capacity. We are also expecting to see volume increased as producer activity in this region ramps up and we are seeing some of that this week with additional time. Finally for our Creek expansion is running at full capacity and like Harmattan and Gordondale it is under a long-term take-or-pay arrangement.

In 2012, we saw a good growth and diversification in our power portfolio. We added several assets to our fleet including approximately 35 megawatts of biomass capacity and 50% interest in the 29-megawatt Busch Ranch wind farm in Colorado. We also added both 18 megawatts gas fired capacity in Alberta through the 15 megawatt Harmattan Cogen facility number 2 and the 3.4 megawatt peaking facility at Gordondale.

We made substantial progress in our Northwest run-of-river hydro projects. At the end of 2012 Forrest Kerr was 75% complete. In the first four months of 2013 it advanced for another 5% to be almost 80% completed. The tunneling is complete, the in-river work is complete and the completion of the powerhouse is ahead of schedule. There are no major components that are on the critical path anymore and we expect the plant to be mechanically completed by year end. We expect to commission the plant by mid-2014 once the Northwest transmission line is up and running, the project overall remains on budget and ahead of schedule.

These are some of my favorite slides coming up. This is the picture of the Forrest Kerr intake facility on April 5th and you can see there that the wear is not quite operational, but that changed very quickly and I’ve been waiting I think 4.5 years to see this next picture – set of pictures. This is a wear fully operational and this is 10 days later that is completely operational is a clear example of fast construction is moving along. You can see the picture on the on your right hand side that it’s upstream and downstream picture of the Iskut river at the location of the intake.

Another great picture here is the tunnel. You see that it was a substantial undertaking when you look at the size of people and how big that tunnel is and over three kilometers long. It was one of the hardest part of the overall project and is now complete. And the significant progress we made here gives us confidence that we can deliver on our strategy to meet the growing demand with clean power in North America. In 2012 and through the first quarter of 2013 we also made significant progress on the two other run-of-river hydro projects Northwest projects McLymont and Volcano projects. All material permits are in place and construction is well underway. In the McLymont Creek access road and bridge work were completed in the first quarter. Excavation of the Volcano powerhouse in take site and diversions are currently underway and expected to be completed at the end of the second quarter 2013.

Finally in 2012 our utility segments experienced growth with the acquisition of SEMCO. SEMCO was our largest acquisition in the 18 year history, in our 18 year history. It’s fundamentally changed the size and scale of our utility business. SEMCO more than doubled our rate base to approximately $1.3 billion and added approximately 4000 customers to our portfolio. It was our first significant expansion into the United States market and provides us with strong growth potential. It also enhances our stable earnings and cash flow profile.

So, how did we do financially in 2012, we delivered 27% increase in normalized EBITDA, 28% increase in funds from operation, 21% increase in normalized net income. These results are a clear reflection of our base business in which we continue to optimize and the significant growth that we have completed. We have positioned AltaGas to deliver growth in earnings and cash flow for the next several years.

Now, let me turn to 2013 and how we started the year? On January 29, we announced a strategic partnership with Idemitsu, Japan’s second largest petroleum company. Today, together we are pursuing several opportunities to export LPG and LNG from Canada to Asian markets. We are currently in the process of conducting feasibility studies for both of these initiatives. The partnership opens up new markets for Canada which we believe is critical for the Western Canadian Sedimentary Basin. Currently we have the only natural gas pipeline that ties western producers, right through to Canada’s Northwest Coast. As such, Altagas is best positioned to deliver natural gas for export from Canada ahead of other projects.

I’ll talk more about the future growth opportunities here in a minute. We also started in 2013 with the acquisition of Blythe Energy Center. This is a 507-megawatt natural gas-fired combined cycle power plant located in Blythe, California. It is the asset, David Harris, President of our Gas and Power segment knows well as he has involved in its construction when he was with Florida Power in late back in 2003. The acquisition is on strategy. Blythe is a long-life 40-year asset, a seven-year power purchase arrangement on it was Southern Cal Edison, which provides us with stable and predictable cash flows. The facility is strategically located between California and Arizona and has the ability to serve both markets. And Blythe is consistent with AltaGas’ strategy of increasing its clean energy portfolio and taking advantage of the natural gas renaissance.

So, as we reflect back not just over the last 16 months, but over the last number of years, I think its graph shows the results of our effort. In the last 16 months, our team has grown the enterprise value of AltaGas by close to $3 billion. And since 2009, it’s closer to $5 billion. And as a result of the hard work and dedication of all our employees, we are very proud to deliver this value to our investors and continue to the drive for results.

This morning, we reported our solid first quarter results. It is one of our best quarters ever. When we reported 59% increase in normalized EBITDA achieving $145.8 million compared to $91.6 million in the first quarter of 2012, we reported a 64% increase in funds from operations. Funds from operations came in at $122.3 million compared to $74.7 million a year ago. And finally, we report normalized income of $55.5 million, or $0.53 per common share compared to $40.1 million or $0.45 per common share in the first quarter of 2012.

So, what’s next for our journey? We are going to continue to optimize our gas business and pursue growth in liquids-rich areas. We are focused on delivering the Northwest projects on time and on budget. We’ll continue to focus on rate based growth in our utilities, and we’ll complete the feasibility studies for expanding our P&G pipeline and our LNG/LPG export projects. There is no short each of initiatives, and we continue to position the company to capitalize on changing market dynamics.

As we move forward, we’ll continue to balance our geographic and business segment diversification. In terms of geographic diversification, in 2013, we expect to be 68% of our EBITDA coming from Canada, and that is spread across six provinces. We expect roughly 32% of our EBITDA to come from the United States. In terms of business diversification, we continue to believe in a balanced approach. Although, weightings can shift over time as we capitalize on different growth opportunities. Ultimately, we have the target of one-third of our EBITDA coming from each of our business segments. We will be very close to this once the Northwest projects come on in ‘15.

Finally, in terms of earnings stability, we set out a while go to reduce our exposure to commodity price. We have made great strides on this front. In 2012, we had 70% of our EBITDA with stable earnings, while another 20% was contracted commodity. In 2013, we will have approximately 80% of our EBITDA coming from stable earnings and approximately 12% coming from contracted commodity. This shift to stable earnings is a key for us and our ultimate target is to achieve 85% from stable earnings, and we are well on our way.

So, as we look forward where we are today you can see how our footprint has expanded across North America. We have built significant competitive advantages in strategic locations. These locations and the demand for clean energy provides us with ample opportunity for future growth. We believe we can leverage our expertise in each of our business segments and continue to build asset clusters that will add long-term value for our investors.

Last year, I believe I mentioned that there was estimated $35 billion planned investment in the power, gas and pipeline and other infrastructure to support LNG. Since there I have seen that estimates have risen to approximately $70 billion. We are strategically positioned and have key assets that will allow us to take part in all of this we see potential future investment opportunities between $2 billion and $5 billion to support the LNG initiatives. Looking at 600 million cubic feet expansion of our PNG pipeline is only one part of this also supply of LNG and LPG with our joint venture partners and other.

We see no limits to the opportunities here and do believe that this business will drive significant amount of growth in medium and long-term. As we look at these opportunities we do recognize the importance of working closely with the First Nation’s and communities we touch all our stakeholders are unique, we are not perfect but we are working to understand everyone’s need. We always want to improve the way we and what we do, our objective is to build long-term relationships that provide sustainable benefits for everyone and create real social value. We want to be a trusted partner in community where we work and live, it starts with our employees, making sure that they have rewarding careers. It extends sponsorships of excellent organizations like the Canadian cross country Ski team, the United Way and STARS, these organizations to help us to get back to the communities where we operate day-to-day.

If anything is most important this slide is the most important that safety and environment and we take them very – both very seriously and foremost we want to make sure that our employees are safe. Projecting them ensuring that they have top most safety procedures and training in place at all times is paramount of everything we do. And I can tell you that the AltaGas Board is totally behind us and very supportive of my belief in safety. Looking at our targets, it’s going to be a busy year in gas we want 75% utilization of the assets we added last year, on the power side our target if Forrest Kerr to be mechanically complete, tunneling for McLymont 50% complete and the completion of the road construction, started on the penstock and powerhouse at Volcano & McLymont and closing and integrate Blythe in the second quarter.

On the utilities we are working to complete CNG stations, we’re looking both in BC and Nova Scotia to complete a pipeline expansion to Pictou County in Nova Scotia, complete the feasibility study for PNG environmental applications began collaboration with the First Nations and consultation with the First Nations on the pipeline expansion and increase our rate base by over 6%. The joint – in our joint venture with Idemitsu, we’re hoping to have the LNG and LPG export feasibility studies complete.

Financially, our targets are to maintain our strong balance sheet and access to capital to deliver earnings and cash flow growth and just today we announced the dividend increase. So, we have grown our dividends this year already. So, in wrapping up ultimately everything comes down to delivering value and that’s whether it’s delivering value to the community, to our employees to our shareholders to society at large, that’s the ultimate measure of success for our corporation. We have an attractive and growing portfolio of energy, infrastructure assets. We have a growing earnings and cash flow. We have significant opportunity to leverage the strategic – our strategic portfolio of assets for the future. We have the balance sheet and financial strength to take advantage of that growth and provide growing dividends. Most importantly, we have a proven track record. And thank you very much and I am open for your questions. Yes, please.

Question-and-Answer Session

Unidentified Analyst

(Question Inaudible)

David Cornhill

It’s with – it’s a PPA in TransAlta is the operator and sometimes it’s really important.

Unidentified Analyst

(Question Inaudible)

David Cornhill

There is clearly we could see growing our power business, but natural gas-fired and renewable clean powers, where we are seeing growing, not with coal. Any other questions?

David Cornhill - Chairman and Chief Executive Officer

Well, thank you again for joining and please take a look at the Forrest Kerr pictures. It’s been 4.5 years that we have worked at getting this far, and we are very proud of the progress and how that project is moving forward. So, thank you again for coming today.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: AltaGas' CEO Hosts 2013 Annual Meeting of Shareholders Conference (Transcript)

Check out Seeking Alpha’s new Earnings Center »

This Transcript
All Transcripts