AltaGas Ltd. Delivering long-term shareholder value September 20, 2011
Agenda 1:00 1:15 Registration Welcome 1:15 1:20 Julie Puddell Investor Relations Strategic overview 1:20 1:35 David Cornhill Chairman & Chief Executive Officer Gas Business Positioned for success 1:35 2:25 Greg Aarssen…
Strategic Overview David Cornhill Chairman and Chief Executive Officer 1
Were a leading energy infrastructure company 2
Delivering shareholder value Low-risk, long-life assets Strong contracts or regulated returns Stable and growing dividends and capital appreciation Doubling EBITDA Delivering long-term, stable, shareholder value 3
Natural gas is a good place to be Bcf/d North American natural gas demand 90 80 70 60 Pipe/Lease Industrial 50 Electric 40 Commercial Residential 30 20 10 0 2000 2005 2010 2015E 2020E Source: Ziff Energy Group -…
Power generation is a good place to be North American power generation by region North American power generation by source 8,000 8,000 6,000 6,000 Billion kWh Billion kWh 4,000 4,000 2,000 2,000 0 0 2007 2015 2020…
Growing gas supply Source: CAPP - 2011 6
Diversified energy infrastructure We touch 2 Bcf of natural gas per day 2.5 Bcf/d We produce 50,000 Bbls/d of 75,000 Bbls/d Natural Gas Liquids (NGLs) Adding 50 to 60 million in EBITDA by 2013 509 MW generating capacity 1,000…
Weve exceeded our 2B growth target Over 2 billion in projects well in hand today See Forward-Looking Statements & Information 8
Were doubling EBITDA 2010 2017E EBITDA excludes corporate G&A charges 9 See Forward-Looking Statements & Information 9
Growing earnings and cash flow millions 600 0 2010 2011E 2012E 2013E 2014E 2015E 2016E 2017E EBITDA FFO Earnings Delivering long-term shareholder value 10 See Forward-Looking Statements & Information 10
Total shareholder return 1,200 1,178 1,000 800 600 400 200 218 TSX composite 100 0 Aug. 31, 2001 Aug. 31, 2011 Over 1000% total return in the past 10 years 11 11
Delivering shareholder value Strong business Strong projects coming on between 2012 to 2016 Capital program well funded Doubling EBITDA Reducing business risk profile Maintaining or improving credit rating Low cost capital…
Positioned for success Greg Aarssen Co-President Gas Randy Toone Co-President Gas
Delivering shareholder value Low-risk, long-life assets Strong contractual underpinning Integrated assets and services along the natural gas value chain Disciplined hedging strategy Growing processing volumes Growing earnings and…
WCSB is active and profitable High and growing demand for gas as a fuel source High and growing demand for NGLs Technology has unlocked vast gas resources Growing unconventional natural gas supply Well positioned to provide…
Canadian gas reserve replacement 2010 Top 30 producers in Canada % Replacement 150 134 123 108 24 100 90 110 85 85 66 50 31 0 -5 -54 -50 2004 2006 2008 2010 20083yrAvg - 2010 Average Discoveries & Extensions…
Growing Canadian resource picture 2000 2010 Existing Conventional Produced (WCSB) Existing Produced Conventional Northern (WCSB) Offshore Shale Gas Offshore Coalbed Northern Methane Tight Gas 390 TCF 70 years of…
Canadian natural gas supply Price Recovery Case Note: Prices recover to at least a level of 5.50/GJ Continued Low Prices Case Note: Prices do not exceed 4/GJ over the forecast period Note: Prices do not exceed 4/GJ over…
WCSB plays profitable Princess Bantry / 3.5x Central Border Oil Liquids 3.0x Oil Ante Creek Gas Liquids Profit Investment Ratio (PIR) Gas Alder Flats 2.5x Alder Flats Blair Creek Pouce Coupe…
Positioned for success 8
Delivering value along the natural gas value chain We process 1.3 Bcf/d natural gas 2.0 Bcf/d We produce 75,000 Bbl/d 50,000 Bbl/d NGL Target 8% earnings CAGR over next 6 years See Forward-Looking Statements &…
Our competitive advantage Strategically located assets Low cost of capital Fee-for-service / Cost-of-service model Full netback value to customers Integrated assets and services along the natural gas value chain Skid mounted…
Our strategic assets 11
Our strategic assets solution gas Current Assets Bantry Alder Flats Harmattan Kitto Lake Sylvan Lake Shaunavon Central Border Rainbow Lake Existing capacity: 766 Mmcf/d 28% of total capacity Potential Projects Bantry…
Solution gas play Bantry/Princess complex Positioned to grow Opportunities Licensed capacity of 55 Mmcf/d Investing 7 million to capture additional solution gas in Q4 Processing volumes have grown 2011 from 12 Mmcf/d to 30 Mmcf/d…
Solution gas play Alder Flats Positioned to grow Opportunities Licensed capacity of 30 Mmcf/d Producer activity in area is after expansion in April 2011 expected to keep capacity fully utilized over next few years Expansion utilized…
Our strategic assets Liquids-rich gas Current Assets Younger Blair Creek Marlboro Gordondale Pouce Coupe Ante Creek Alder Flats Harmattan Existing capacity: 1,157 Mmcf/d 42% total capacity Potential Projects Near term…
Liquids-rich play Blair Creek Positioned to grow Opportunities Licensed capacity of 24 Mcmf/d 43 million expansion to 70 Mmcf/d kicked off in early Debottleneck work underway September with completion to increase to 32 Mmcf/d by…
Liquids-rich play Ante Creek Positioned to grow Opportunities Licensed sour processing ARC Resources very active capacity of 20 Mmcf/d with 150 well locations in area Redeployed amine treatment unit from Martin Creek Expect full…
Liquids-rich play Marlboro Positioned to grow Opportunities Licensed capacity of 40 Mmcf/d Expanding capacity by 13 (16 Mmcf/d net to ALA) Mmcf/d (5 Mmcf/d net to ALA) in Q4 2011 Plant capacity fully utilized since plant start up in…
Liquids-rich play - Younger Licensed capacity 750 Mmcf/d Processing volumes have increased from 500 Mmcf/d to 650 Mmcf/d in the past 12 months Only fractionation plant in BC Rail, truck and pipeline interconnectivity 30 percent…
Liquids-rich plays Harmattan Positioned to grow Licensed capacity of 490 Mmcf/d Currently processing 155 Mcmf/d of raw gas Deep-cut capabilities make plant very attractive to producers Producers have been focused on Viking oil and…
Liquids-rich play Gordondale 120 Mmcf/d deep cut Encana processing agreement committing long-term supply Capital cost estimate: 236 million Phase I: 15 Mmcf/d processed by Q4 2011 Phase II in service: late-2012 Site construction…
Gordondale deep cut advantage Cdn/Mcf at Wellhead 7.00 6.00 5.00 20% 30% 50% 4.00 3.00 2.00 80% 70% 50% 1.00 0.00 Dewpoint Shallow Cut Deep Cut Recovery Rate 30 40 90 (Bbl/Mmcf) Natural Gas NGLs 22
Gordondale cost certainty ( millions ) Fixed % of Total Project Cost 250 200 71% fixed by end of 2011 150 100% 90% 100 85% 78% 71% 57% 50 35% 2% 8% - 2010 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12…
Gordondale milestones Milestone Status Gas plant ERCB approval Gas Plant Alberta Environment approval Henderson pipeline construction Start of plant construction Processing initial volumes at Pouce Coupe Oct 2011 Gathering system…
Video of virtual model 25
Stripping sub-soils and grading 26
Stockpiling topsoil 27
Grading access road 28
Optimizing assets - Harmattan Co-stream COD late Q1 2012 Equipment ordered, pipeline construction began June 2011 60 percent of capital costs contractually fixed 250 Mmcf/d, 100 km pipeline increases throughput to near full…
Co-stream cost certainty ( millions ) Fixed % of total project cost 175 91% fixed by end of 2011 150 125 100 75 100% 91% 74% 50 25 34% 25% 4% - 2010 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 30 See Forward-Looking Statements…
Co-stream milestones Milestone Status Order of long-lead equipment and pipe Plant construction commenced Pipeline construction commenced Completion of major equipment tie-ins Sep 2011 Oct 2011 (during scheduled turnaround)…
Video of virtual model Aerial picture of Harmattan 32
Serving the Oil Sands Taiga pipeline Positioned to grow Existing gas pipeline infrastructure in the area provided competitive advantage Cold Lake gas transmission system serves a number of SAGD players in the area (Shell,…
2011 milestones Growth Projects Planned accomplishments for 2011 Status Achieve regulatory approvals Gordondale Gas Plant Begin construction of gas plant 60 percent of capital costs contractually fixed On track Complete…
Growing assets ( millions) 400 200 0 2011E 2012E 2013E 2014E 2015E 2016E 2017E Under construction Potential projects See Forward-Looking Statements & Information 41
Growing processing volume Mmcf/d 2,000 1,300 600 2011E 2012E 2013E 2014E 2015E 2016E 2017E Current and under construction Potential growth See Forward-Looking Statements & Information 42
Growing earnings and cash flow millions 450 0 2011E 2012E 2013E 2014E 2015E 2016E 2017E EBITDA EBITDA (potential projects) Operating income Operating income (potential projects) Delivering long-term shareholder value…
Disciplined hedging policy See Forward-Looking Statements & Information 44
Higher and more stable EBITDA Growing earnings Adding highly contracted, long-life infrastructure Enhancing earnings stability 5% 34% 45
Delivering shareholder value Deliver projects on time and on Focus on earnings and cash flow budget stability Hedging Capitalize on throughput and Recovery of operating costs operating efficiencies Long-term, fixed-fee or cost-of-…
Growing rate base Patricia Newson President Utilities
Delivering shareholder value Regulated returns Low-risk, long-life assets Niche utilities Growing rate base Growing earnings and cash flow Led by experienced management and operations teams Delivering long-term, stable,…
Niche utilities in Canada 3
Growing rate base and earnings Grow rate base: Infill expansion in existing franchise areas Expansion into new areas within our franchises Rejuvenation of older infrastructure Active regulatory strategy Acquisitions 4
Bringing natural gas to end-users 286mm rate base 480mm 75,000 customers 90,000 21 PJ gas deliveries 25 PJ See Forward-Looking Statements & Information 5
Alberta utility AltaGas Utilities Inc. (AUI) Alberta customers 70,637 Excellent safety, environmental and reliability record 6
Growing rate base in Alberta See Forward-Looking Statements & Information 7
Leduc steel 8
AUI regulatory update 2010-2012 General Rate Incentive Regulation (IR) Application 2013-2017 Hearing scheduled for 2012 GRA rates will serve as October 11 - 19, 2011 going in rates for IR Decision expected in early Requesting…
Nova Scotia utility Heritage Gas Limited Nova Scotia customers 3,231 Currently serving portions of the Halifax Regional Municipality and Amherst 10
Nova Scotias only natural gas utility 11
Growing rate base in Nova Scotia (1) Heritage Gas at 100% for all years See Forward-Looking Statements & Information 12
Bedford Project expansion began in 2010 30 million, five- year expansion to Fairview, Clayton Park, Bayers Lake & Bedford Access new home and business construction, conversions 1,600 new customers by 2015 See…
Heritage Gas regulatory update 2012-2014 General Tariff Application Hearing scheduled to begin October 17, 2011 Decision expected in late 2011 Applied for: ROE: 12.75% on 45% equity Debt rate: 7.875% Customer rate increases of…
Serving the Northwest Territories Inuvik Gas Ltd. Serving the town of Inuvik Customers: 932 at December 31, 2010 87% market penetration Light-handed regulation Ikhil Joint Venture Provides natural gas to NWTPC and IGL under…
Town of Inuvik 16
Ikhil gas plant and wells 17
Growing rate base (1) 100% AUI for all years; HGL 24.9% to November 2009; 100% thereafter (2) From AUGI public reporting for 2006 to 2008 See Forward-Looking Statements & Information 18
Growing earnings and cash flow Delivering long-term shareholder value See Forward-Looking Statements & Information 19
Acquisition opportunities Over 18,000 electric, natural gas and water/sewer utilities in Canada and US(1) North American utility infrastructure is aging AltaGas actively pursues prudent acquisitions of utility infrastructure…
2011 milestones Growth projects Planned accomplishments for 2011 Status Rate base growth of 16% On track AUI Complete the expansion of AUIs Leduc head office On schedule for second year of multi-year system rejuvenation program On…
Delivering shareholder value Focus on system reliability and Regulatory strategy integrity Ensure the ongoing ability to earn Execute the multi-year system sufficient returns on AltaGas utility betterment program at AUI, maintain…
An evolving portfolio David Harris President Power 1
Delivering shareholder value Low risk, long-life assets Diversified portfolio of renewable and conventional Strong contractual underpinning Disciplined hedging strategy Growing generating capacity Growing earnings and cash flow…
North American portfolio 3
North American power markets Growing demand for power Forward-looking prices are across North America sending build signals North America needs to Emphasis on the economy replace aging fleet of coal (vs the environment) has and…
An evolving power portfolio 509 MW generating capacity 1,000 MW 109 MW clean power generation 500 MW 7 MW run-of-river 275 MW 5
Alberta power market Supply/Demand fundamentals AltaGas generation assets well strong positioned Alberta growing at a rate of 2%- Low cost base-load power from 3% driven by oil and gas sector Sundance B PPAs 560MW of base-load coal…
Declining reserve margins until 2015 Avg Reserve Margin 35% 32% 30% 30% 28% 30% Peak Reserve Margin 19% 15% 14% 13% 10% 13% See Forward-Looking Statements & Information 7
Stability through hedging /MWh 300 250 200 150 100 50 0 Average Alberta pool price Average price received by AltaGas 8
Power hedge update Alberta power generation Q1 Q2 Q3 Q4 2011 2012 2013 % Hedged 63% 66% 68% 58% 63% 41% 29% Avg /MWh 65 67 69 70 68 63 64 Forward prices in Alberta trading in the high 60s Strong prompt month market See…
Bear Mountain Wind Park COD October 2009 102 MW project 15 km southwest of Dawson Creek. 34 Enercon E82 turbines. 97% availability 10
Integrating our Gas and Power businesses Current assets Growth opportunities Bantry peakers Harmattan Cogen II Parkland peakers Gordondale peaker Harmattan Cogen I Extraction at power plant fuel inlet Serving the oil sands 11
Run-of-river projects Forrest Kerr run-of-river 195 MW capacity Under construction In-service estimate: mid-2014 Capital cost estimate: 725 million McLymont and Volcano Creek run-of-river Two developments totaling approximately 80…
Moving the wind portfolio forward Walker Ridge (California) 67 MW project bid into PG&E and SDG&E RFPs Capital cost estimate: 90 million (50% interest) Chateau Hill (New Mexico) 27 MW project bid into Public Service of New Mexico…
Waste-heat and cogeneration projects Crowsnest waste-heat recovery (60% interest) 6 MW project, EPA with BC Hydro Under construction In-service estimate: 2012 Capital cost estimate: 13 million Harmattan Cogeneration II 15 MW…
Emission intensity vs MWh See Forward-Looking Statements & Information 16
Annual emissions in tonnes 17
Forrest Kerr project 195 MW capacity 287 kV, 37 km long transmission line, which interconnects with the 55% capacity factor Northwest Transmission Line at 60 year EPA with BC Hydro Bob Quinn substation 100 percent CPI indexed…
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