ALTAGAS REPORTS STRONG THIRD QUARTER 2024 RESULTS

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Oct 31, 2024, 06:00 ET

The Company Expects 2024 Normalized EBITDA to be in the Upper End of Guidance Range, Based on Strong Utilities and Midstream Performance

CALGARY, AB, Oct. 31, 2024 /CNW/ - AltaGas Ltd. ("AltaGas" or the "Company") (TSX: ALA) reported third quarter 2024 financial results and provided an update on its operations and other corporate developments.

HIGHLIGHTS

(all financial figures are unaudited and in Canadian dollars unless otherwise noted)

Normalized EPS¹ was $0.14 in the third quarter of 2024 compared to $0.08 in the third quarter of 2023, while GAAP EPS² was $0.03 in the third quarter of 2024 compared to a loss of $0.18 in the third quarter of 2023. Year-over-year normalized EPS growth was primarily driven by strong Utilities performance.
Normalized EBITDA¹was $294 million in the third quarter of 2024 compared to $252 million in the third quarter of 2023, while income before income taxes was $20 million in the third quarter of 2024 compared to a loss before income taxes of $51 million in the third quarter of 2023. The 17 percent year-over-year growth in normalized EBITDA was principally driven by strong Utilities performance, as outlined below.
Normalized FFO per share¹ was $0.35 in the third quarter of 2024 compared to $0.50 in the third quarter of 2023, while cash from operations per share³ was $0.07 in the third quarter of 2024 compared to $0.01 in the third quarter of 2023.
The Utilities segment reported normalized EBITDA of $117 million in the third quarter of 2024 compared to $71 million in the third quarter of 2023, while income before taxes was $24 million in the third quarter of 2024 compared to a loss of $16 million in the third quarter of 2023. Strong year-over-year growth was principally driven by the partial settlement of Washington Gas' post-retirement benefit pension plan, contributions from rate base and accelerated replacement programs ("ARP") investment, and enhanced cost controls.
The Midstream segment reported normalized EBITDA of $181 million in the third quarter of 2024 compared to $185 million in the third quarter of 2023, while income before taxes was $123 million in the third quarter of 2024 compared to $61 million in the third quarter of 2023. Despite rail outages due to the Alberta wildfires and national rail strike that drove higher one-time operating costs, AltaGas was able to deliver strong financial performance due to operational execution.
AltaGas exported a record of 128,272 Bbl/d of liquified petroleum gases ("LPGs") to Asia in the quarter, a nine percent year-over-year increase. Strong export volumes and contributions from the Pipestone assets were offset by lower export margins (including the impact of higher percentage of tolling contracts), higher long-term incentive costs due to AltaGas' rising share price, and a lower year-over-year contribution from the Mountain Valley Pipeline ("MVP") as the asset was placed into service with equity earnings below the Allowance for Funds Used During Construction ("AFUDC") in the third quarter of 2023.
AltaGas continued to advance key Midstream commercial priorities during and subsequent to the quarter, including:
- Entering two agreements that have a high-single digit average contract length with a large investment grade international energy company in Northeastern B.C. ("NEBC") for a total of 100 Mmcf/d of gas processing capacity at the Townsend facility, along with associated liquids handling and fractionation services;
- Extending the contract term with a large Canadian investment grade producer at the Pipestone I gas processing facility in the Alberta Montney for an additional five years, including gas processing, liquids handling and marketing services; and
- Advancing long-term tolling arrangements across the global exports platform with a number of agreements now in definitive documentation stages. This includes AltaGas having contracts in hand or being in active negotiations for more than 100 percent of first phase capacity for the Ridley Island Energy Export Facility ("REEF"). AltaGas continues to target having 60 percent of its export volumes under long-term tolling agreements by the start of the 2027 NGL year.
- The ongoing commercial success reiterates the strategic advantages of AltaGas' assets across NEBC, the Alberta Montney, and the global exports value chain. The Company continues to look forward to leveraging its assets to connect upstream and downstream customers and markets and drive the best collective outcomes for all stakeholders.
AltaGas remained active from a regulatory perspective during the third quarter, including filing a rate case and proposed accelerated replacement program ("ARP") extension in the District of Columbia ("D.C."). The District Strategic Accelerated Facility Enhancement ("District SAFE") is Washington Gas' third modernization program in D.C. and is focused on long-term safety and reliability.
AltaGas continued to advance key Midstream growth projects during the third quarter. Strong progress was made on REEF's in-water piling work for the jetty and the site's overburden activities, while compression, refrigeration and vessel fabrication work is advancing in controlled operating environments at offsite manufacturing facilities. At Pipestone II, construction is progressing to plan, including completion of the two acid gas injection wells and the majority of the gas gathering system, while compression, processing and fabrication work is progressing at offsite manufacturing facilities. Both midstream growth projects remain on schedule and on budget with 50 percent of REEF and 92 percent of Pipestone II project costs either incurred or under fixed price contracts.
MVP in the Appalachian Basin moved into full commercial operations in the quarter with 20-year firm service contracts with investment grade counterparties coming into effect July 1, 2024. The 2.0 Bcf/d pipeline is fully subscribed and is expandable by an additional 475 MMcf/d through low cost compression with extension into North Carolina through the Southgate project. AltaGas' 10 percent, non-operated equity stake in the pipeline remains non-core and is a divestiture candidate for the coming period.
AltaGas had two financings in the third quarter of 2024, including:
- On July 9, 2024, AltaGas issued $250 million of senior unsecured medium-term notes with a 5.60 percent coupon, due on March 14, 2054. The net proceeds were used to pay down amounts drawn on the syndicated credit facility, which was incurred when the Company repaid its term loan on June 28, 2024.
- On September 23, 2024, AltaGas issued US$900 million of 7.20 percent Fixed-to-Fixed Rate Junior Subordinated Hybrid Notes, due 2054 (the "Hybrid Notes"). The Hybrid Notes are callable at the first reset date of October 15, 2034. AltaGas also executed a cross-currency swap arrangement to convert the underlying proceeds and interest costs into Canadian dollars, resulting in an effective annual interest rate of 6.90 percent over the initial ten year period of the notes. AltaGas intends to use the net proceeds of the Hybrid Notes to reduce the Company's outstanding senior notes and bank debt, and will receive 50 percent equity treatment for credit rating metrics.
On September 30, 2024, AltaGas announced the conversion of the Cumulative Redeemable Floating Rate Preferred Shares, Series H (the "Series H Shares") into Cumulative Redeemable Five-Year Rate Reset Preferred Shares, Series G (the "Series G Shares") on a one for one basis and the subsequent cancellation and de-listing of the Series H Shares from the Toronto Stock Exchange ("TSX").
On October 1, 2024, Washington Gas executed a note purchase agreement to issue US$200 million in private placement notes. US$100 million of these notes were issued on October 1, 2024 at 5.40 percent with a maturity date of October 1, 2054 and the remaining US$100 million will be issued on April 1, 2025 at 4.84 percent with a maturity date of April 1, 2035. The proceeds will be used for general corporate purposes.
Following a strong third quarter, AltaGas anticipates delivering fiscal 2024 results that will include normalized EBITDA¹ in the upper end of the guidance range of $1,675 million to $1,775 million while normalized EPS¹ is expected to be around the midpoint of the guidance range of $2.05 to $2.25.

(1) Non-GAAP measure; see discussion and reconciliation to US GAAP financial measures in the advisories of this news release or in AltaGas' Management's Discussion and Analysis (MD&A) as at and for the period ended September 30, 2024, which is available on www.sedarplus.ca. (2) GAAP EPS is equivalent to Net income applicable to common shares divided by shares outstanding. (3) GAAP FFO per share is equivalent to cash from operations divided by shares outstanding.

CEO MESSAGE

"We're pleased with our strong third quarter results, which reflect the strength of our assets, strong demand for natural gas and NGLs and the continued execution of our strategic priorities," said Vern Yu, President and Chief Executive Officer. "Following the strong performance in the first nine months of the year, we are well positioned to deliver on our 2024 guidance and expect to produce normalized EBITDA towards the upper end of our guidance range while normalized EPS is expected to be closer to the midpoint of the guidance range."

"Performance in our Utilities business was ahead of our expectations and continues to deliver strong earnings, despite warmer-than-normal weather in Michigan and D.C. Strong year-over-year growth was driven by the partial settlement of Washington Gas' post-retirement benefit pension plan, continued capital investments across the network, and active cost management. We remain active advancing our regulatory priorities and ensuring rates are current and reflective of current capital investments and operating costs.

"Midstream performance was in line with our expectations, despite the rail interruptions due to the Alberta wildfires and the national rail strikes. The quarter included record global export volumes and double digit year-over-year growth in gas processing, fractionation and liquids handling, and extraction volumes. We continued to advance key Midstream commercial priorities, including a two new long-term agreements for gas processing, liquids handling and fractionation services at the Townsend facility, and extending the contract term for a marquee Canadian investment grade customer for an additional five years at Pipestone I. We also continued to advance long-term tolling arrangements across the global exports platform and expect to exceed previously committed tolling targets and will likely need to shift certain tolling volumes to the second phase of REEF.

"The fundamentals of our businesses are robust. Our gas utilities continue to realize strong growth from new customer additions, asset modernization investments, and system expansion. These robust demand trends are being augmented from the rapid rise in energy draws from data center growth in our service territory, which is providing AltaGas with incremental rate base growth opportunities in Northern Virginia and reinforcing the need for even more natural gas over the long-term.

"The outlook for our Midstream business is equally strong. Canadian natural gas supply will increase significantly through 2030 due to Canadian LNG exports and rising local demand. This will deliver strong associated natural gas liquids ("NGLs") supply that will need to be exported to global markets. Asia will continue to be the best market for Canadian LPGs where demand is expected to grow 45 percent through 2040.

"As we look ahead, we continue to expect the strategic importance of our assets to grow as they serve to link increasing energy supply to high demand centers, enabling AltaGas to deliver continued value for our customers."

RESULTS BY SEGMENT

Normalized EBITDA ⁽¹⁾	Three Months Ended September 30
($ millions)	2024	2023
Utilities	$ 117	$ 71
Midstream	181	185
Corporate/Other	(4)	(4)
Normalized EBITDA ⁽¹⁾	$ 294	$ 252

(1) Non–GAAP financial measure; see discussion in Non–GAAP Financial Measures section of this news release.

Income (Loss) Before Income Taxes	Three Months Ended September 30
($ millions)	2024	2023
Utilities	$ 24	$ (16)
Midstream	123	61
Corporate/Other	(127)	(96)
Income (Loss) Before Income Taxes	$ 20	$ (51)

BUSINESS PERFORMANCE

Midstream

The Midstream segment reported normalized EBITDA of $181 million in the third quarter of 2024 compared to $185 million in the third quarter of 2023, while income before income taxes was $123 million in the third quarter of 2024 compared to $61 million in the third quarter of 2023. These results were strong and in line with our expectations, despite the rail interruptions in Canada due to the Alberta wildfires and national rail strikes, which caused business interruptions and higher one-time operating costs. The quarter included record global export volumes and strong performance across the balance of the value chain, including double digit year-over-year growth in gas processing, fractionation and liquids handling, and extraction volumes.

AltaGas exported 128,272 Bbls/d of LPGs to Asia in the third quarter of 2024, including 11 Very Large Gas Carriers ("VLGCs") at RIPET, and 10 VLGCs at Ferndale. This represented a nine percent increase from the third quarter of 2023, which was principally driven by Ferndale volumes increasing by 22 percent and offsetting the majority of rail interruptions which largely impacted RIPET. This strong operating performance, despite these interruptions, reiterates the value of having multiple export terminals to overcome short-term impacts.

Despite extremely low Canadian natural gas prices during the third quarter of 2024, AltaGas did not experience any decline in throughput volumes due to production shut-ins. Year-over-year performance included a 10 percent increase in gas processing volumes, 12 percent increase in fractionation and liquids handling volumes, and 29 percent increase in extraction volumes. Volume growth was heavily weighted to AltaGas' Montney footprint, a trend we expect will continue in the years ahead. The strong fractionation volume growth was seen at North Pine, Harmattan and Younger. At North Pine, AltaGas completed optimization work that should allow the facility to consistently operate near 25,000 Bbls/d and meet our NEBC customers' desire for increased fractionation capacity.

MVP moved into full commercial operations in the quarter with 20-year firm service contracts with investment grade counterparties coming into effect July 1, 2024. The 2.0 Bcf/d pipeline is fully subscribed and is expandable by an additional 475 MMcf/d through low cost compression with extension into North Carolina through the Southgate project. MVP's financial contribution was modestly lower on a year-over-year basis in the third quarter of 2024, due to the larger AFUDC booked in the third quarter of 2023 versus the equity earnings that AltaGas is now recording with the pipeline in service.

AltaGas continued to advance key Midstream growth projects during the third quarter. Strong progress was made on REEF's in-water piling work for the jetty and the site's overburden activities, while compression, refrigeration and vessel fabrication work is advancing in controlled operating environments at offsite manufacturing facilities. At Pipestone II, construction is progressing to plan, including completion of the two acid gas injection wells and the majority of the gas gathering system, while compression, processing and fabrication work is progressing at offsite manufacturing facilities. Both midstream growth projects remain on schedule and on budget with 50 percent of REEF and 92 percent of Pipestone II project costs either incurred or under fixed price contracts.

Consistent with the Company's de-risking focus, AltaGas' Midstream operations are well-hedged for 2024 with approximately 87 percent of the remaining 2024 expected global export volumes tolled or financially hedged. Merchant volumes are hedged at an average Far East Index ("FEI") to North American financial hedge price of US$18.06/Bbl. Tolling volumes are in line with historical tolls. Approximately 80 percent of the Company's 2024 expected frac exposed volumes are hedged at US$24.54/Bbl, prior to transportation costs.

In line with AltaGas' traditional risk management activities, the Company expects to be actively locking in margins and further reducing commodity exposure over the fourth quarter of 2024 and first quarter of 2025 as we move into the 2025 NGL season, which runs from April 1, 2025 to March 31, 2026.

Midstream Hedge Program	Q4 2024	Q1 2025
Global Exports volumes hedged (%) ⁽¹⁾	87	86
Average propane/butane FEI to North America hedge (US$/Bbl) ^{(2) (3)}	18.06	19.28
Fractionation volume hedged (%) ⁽³⁾	80	18
Frac spread hedge rate - (US$/Bbl) ⁽³⁾	24.54	26.79

(1)	Approximate expected volumes hedged. Includes contracted tolling volumes and financial hedges. Based on AltaGas' internally assumed export volumes. AltaGas is hedged at a higher percentage for firmly committed volumes.
(2)	Does not include physical differential to FSK for C3 volumes. Butane is hedged as a percentage of WTI.
(3)	Approximate average for the period.

Utilities

Utilities reported normalized EBITDA of $117 million in the third quarter of 2024 compared to $71 million in the third quarter of 2023, while income before income taxes was $24 million in the third quarter of 2024 compared to a loss of $16 million in the third quarter of 2023. Strong year-over-year growth was principally driven by the partial settlement of Washington Gas' post-retirement benefit pension plan, which was a de-risking activity that should reduce volatility of pension income in the years ahead, as well as contributions from continued capital investments focused on safety and reliability of the network, and active cost management. These positive factors were partially offset by the negative impact of the Maryland rate case, decreased asset optimization activities at Washington Gas and lower contributions from Retail due to the outsized performance present in the same quarter last year.

During the third quarter of 2024, AltaGas continued efforts on ensuring long-term operating costs are aligned with existing rate structures and allowed costs in each jurisdiction. These cost efficiencies will provide additional room for AltaGas to continue to make ongoing rate base investments to expand and modernize the network while minimizing the increase to customer bills. The Company will continue to prioritize cost management for the long-term benefit of our customers while maintaining regulatory and capital discipline.

AltaGas continued to actively invest across its Utilities assets during the third quarter of 2024 with $187 million of capital deployed across the Company's Utilities networks. This included investing nearly $100 million in the quarter through the Company's various asset modernization programs and an additional $70 million for system betterment. These investments continue to be directed towards improving the safety and reliability of the system and connecting customers to the critical energy they require to carry out everyday life. AltaGas remains committed to making these investments, while balancing the need for ongoing customer affordability.

During the quarter, Washington Gas filed a rate case application to the Public Service Commission ("PSC") of D.C., seeking a US$46 million increase to base rates, including the transfer of US$12 million from the PROJECTpipes 2 rate rider. Included in the filing was a proposed weather normalization adjustment that seeks to remove fluctuations in weather-related usage. Washington Gas also submitted its District SAFE ARP application, which aims to invest US$215 million over three years beginning May 2025. A final order for the ARP program is anticipated to align with the expiry of PROJECTpipes 2, which would allow for uninterrupted pipeline modernization work to ensure the ongoing safety of our customers while ensuring the timely recovery of capital.

Corporate/Other

In the Corporate/Other segment, normalized EBITDA was a loss of $4 million in the third quarter of 2024, consistent with the same quarter of 2023, while loss before income taxes was $127 million in the third quarter of 2024 compared to a loss of $96 million in the third quarter of 2023. Normalized EBITDA in the quarter was impacted by higher year-over-year contributions from Blythe, offset by higher expenses related to employee incentive plans, primarily as a result of the increasing share price in the third quarter of 2024.

CONSOLIDATED FINANCIAL RESULTS

	Three Months Ended September 30
($ millions)	2024	2023
Normalized EBITDA ⁽¹⁾	$ 294	$ 252
Add (deduct):
Depreciation and amortization	(119)	(109)
Interest expense	(110)	(95)
Normalized income tax expense	(13)	(10)
Preferred share dividends	(5)	(7)
Other ⁽²⁾	(5)	(8)
Normalized net income ⁽¹⁾⁽³⁾	$ 42	$ 23

Net income (loss) applicable to common shares	$ 9	$ (50)
Normalized funds from operations ⁽¹⁾	$ 105	$ 142

($ per share, except shares outstanding)
Shares outstanding - basic (millions)
During the period ⁽⁴⁾	298	282
End of period	298	282

Normalized net income - basic ⁽¹⁾⁽³⁾	0.14	0.08
Normalized net income - diluted ⁽¹⁾⁽³⁾	0.14	0.08

Net loss per common share - basic	0.03	(0.18)
Net loss per common share - diluted	0.03	(0.18)

(1)	Non–GAAP financial measure; see discussion in Non-GAAP Financial Measures section at the end of this news release.
(2)	"Other" includes accretion expense, net income applicable to non-controlling interests, foreign exchange gains (losses), unrealized foreign exchange losses on intercompany balances and NCI portion of non-GAAP adjustments. The portion of non-GAAP adjustments applicable to non-controlling interests are excluded in the computation of normalized net income to ensure consistency of normalizations applied to controlling and non-controlling interests. These amounts are included in the "net income applicable to non-controlling interests" line item on the Consolidated Statements of Income.
(3)	In the fourth quarter of 2023, AltaGas changed its non-GAAP policy to exclude the impact of unrealized foreign exchange losses (gains) on intercompany balances between Canadian and U.S. entities. Prior periods have been restated to reflect this change. Please refer to the Q3 2024 MD&A for additional details.
(4)	Weighted average.

Normalized EBITDA for the third quarter of 2024 was $294 million compared to $252 million for the same quarter in 2023. The largest factors contributing to the year-over-year increase are described in the Business Performance sections above.

Income before income taxes was $20 million for the third quarter of 2024 compared to loss before income taxes of $51 million for the same quarter in 2023. The decrease in loss was mainly due to lower unrealized losses on risk management contracts, the same previously referenced factors impacting normalized EBITDA, proceeds received from an escrow account related to the 2019 disposition of AltaGas' investment in Meade Pipeline Co. LLC ("Meade"), which held WGL Midstream's indirect, non-operating interest in Central Penn pipeline ("Central Penn"), and lower transaction costs related to acquisitions and dispositions, partially offset by higher transition and restructuring costs, higher interest expense, higher depreciation and amortization expense, and lower foreign exchange gains. Please refer to the "Three Months Ended September 30" section of the Q3 2024 management's discussion and analysis ("MD&A") for further details on the variance in loss before income taxes and net income applicable to common shareholders.

Normalized net income was $42 million or $0.14 per share for the third quarter of 2024, compared to $23 million or $0.08 per share reported for the same quarter of 2023.

Normalized FFO was $105 million or $0.35 per share for the third quarter of 2024, compared to $142 million or $0.50 per share for the same quarter in 2023. The decrease was mainly due to the impact of non-cash items included in normalized EBITDA, higher normalized current income tax expense, higher interest expense, and foreign exchange losses compared to foreign exchange gains in the third quarter of 2023, partially offset by the same previously referenced factors impacting normalized EBITDA.

Interest expense for the third quarter of 2024 was $110 million, compared to $95 million for the same quarter in 2023. The increase was mainly due to higher average debt balances, incremental hybrid interest costs due to the issuance of additional Hybrid Notes in the third quarter of 2024 as well as the fourth quarter of 2023, higher average interest rates, and a higher average Canadian/U.S. dollar exchange rate, partially offset by higher capitalized interest. Interest expense recorded on the Hybrid Notes in the third quarter of 2024 was $15 million, compared to $9 million in the third quarter of 2023.

Income tax expense was $3 million for the third quarter of 2024, compared to an income tax recovery of $12 million for the same quarter of 2023. The decrease in income tax recovery was mainly due to higher income before income taxes.

FORWARD FOCUS, GUIDANCE AND FUNDING

AltaGas continues to execute on its long-term strategy of building a diversified platform that operates long-life energy infrastructure assets that connect customers and markets and are positioned to provide resilient and growing value for the Company's stakeholders.

Following a strong third quarter of 2024, AltaGas is reiterating its previously disclosed 2024 guidance and expects to deliver results in the upper end of the normalized EBITDA range and near the midpoint of the normalized EPS range, as follows:

2024 normalized EPS guidance of $2.05 - $2.25, compared to normalized EPS of $1.90 and GAAP EPS of $2.27 in 2023; and
2024 normalized EBITDA guidance of $1,675 million - $1,775 million, compared to normalized EBITDA of $1,575 million and income before taxes of $912 million in 2023.

AltaGas is focused on delivering resilient and growing normalized EPS and normalized FFO per share while targeting lower leverage ratios. This strategy is designed to support steady dividend growth and provide the opportunity for ongoing capital appreciation for long-term shareholders.

AltaGas is maintaining a disciplined, self-funded 2024 capital program of approximately $1.3 billion, excluding asset retirement obligations ("ARO"). The Company is allocating approximately 53 percent of AltaGas' consolidated 2024 capital to its Utilities business, approximately 43 percent to the Midstream business and the balance to the Corporate/Other segment.

The Company expects to maintain an equity self-funding model in 2024, for the fifth consecutive year, and will fund capital requirements through a combination of internally generated cash flows and investment capacity associated with rising EBITDA levels. Asset sales will be considered on an opportunistic basis, with any potential proceeds to be used to reduce outstanding debt and continue to increase the financial flexibility of AltaGas.

QUARTERLY COMMON SHARE DIVIDEND AND PREFERRED SHARE DIVIDENDS

The Board of Directors approved the following schedule of Dividends:

Type ⁽¹⁾	Dividend (per share)	Period	Payment Date	Record
Common Shares	$0.2975	n.a.	31-Dec-24	16-Dec-24
Series A Preferred Shares	$0.19125	30-Sep-24 to 30-Dec-24	31-Dec-24	16-Dec-24
Series B Preferred Shares	$0.43141	30-Sep-24 to 30-Dec-24	31-Dec-24	16-Dec-24
Series G Preferred Shares	$0.376063	30-Sep-24 to 30-Dec-24	31-Dec-24	16-Dec-24

(1) Dividends on common shares and preferred shares are eligible dividends for Canadian income tax purposes.

CONFERENCE CALL AND WEBCAST

AltaGas will hold a conference call today, October 31, 2024, at 9:00 a.m. MT (11:00 a.m. ET) to discuss third quarter of 2024 results and other corporate developments.

Date: Thursday, October 31, 2024

Time: 9:00 a.m. MT (11:00 a.m. ET)

Webcast: https://app.webinar.net/5lXWpwZbZJM

Dial-in (Audio only): +1 437-900-0527 or toll free at +1 888-510-2154

Shortly after the conclusion of the call a replay will be available on the Company's website or by dialing +1 289 819 1450 or toll free +1 888 660 6345. Passcode 13027 #.

AltaGas' Consolidated Financial Statements and accompanying notes for the third quarter of 2024, as well as its related MD&A, are now available online at www.altagas.ca. All documents will be filed with the Canadian securities regulatory authorities and will be posted under AltaGas' SEDAR+ profile at www.sedarplus.ca.

NON-GAAP MEASURES

This news release contains references to certain financial measures that do not have a standardized meaning prescribed by U.S. GAAP and may not be comparable to similar measures presented by other entities. The non-GAAP measures and their reconciliation to U.S. GAAP financial measures are shown below and within AltaGas' Management's Discussion and Analysis (MD&A) as at and for the period ended September 30, 2024. These non-GAAP measures provide additional information that Management believes is meaningful regarding AltaGas' operational performance, liquidity and capacity to fund dividends, capital expenditures, and other investing activities. 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.

Change in Composition of Non-GAAP Measures

In the fourth quarter of 2023, Management changed the composition of certain of AltaGas' non-GAAP measures such that normalized net income now excludes the impact of unrealized intercompany foreign exchange gains (losses) resulting from intercompany balances between a U.S. subsidiary and a Canadian entity, where the foreign exchange impact in the U.S. subsidiary is recorded through gain (loss) on foreign currency translation in the Consolidated Statements of Comprehensive Income (Loss) and the Canadian entity revaluation is recorded through the foreign exchange gain (loss) line item on the Consolidated Statements of Income (Loss). This change was made as a result of Management's assessment that excluding these intercompany foreign exchange impacts from normalized net income is more representative of the Company's ongoing financial performance. Prior period calculations of the relevant non-GAAP measures have been restated to reflect this change. The following table summarizes the impact of this change on the periods presented in this news release:

Increase as result of change	Three Months Ended September 30		Nine Months Ended September 30
($ millions, except where noted)	2024	2023	2024	2023
Normalized net income ⁽¹⁾	$ —	$ (5)	$ —	$ 1
Normalized income tax expense	$ —	$ (2)	$ —	$ —
Normalized effective tax rate (%)	— %	(0.8) %	— %	— %

(1) Corresponding per share amounts have also been adjusted.

Normalized EBITDA

	Three Months Ended September 30		Nine Months Ended September 30
($ millions)	2024	2023	2024	2023
Income (loss) before income taxes (GAAP financial measure)	$ 20	$ (51)	$ 515	$ 751
Add:
Depreciation and amortization	119	109	352	331
Interest expense	110	95	327	293
EBITDA	$ 249	$ 153	$ 1,194	$ 1,375
Add (deduct):
Transaction costs related to acquisitions and dispositions ⁽¹⁾	2	10	9	31
Unrealized losses (gains) on risk management contracts ⁽²⁾	37	91	10	(24)
Gains on sale of assets ⁽³⁾	(14)	—	(12)	(319)
Transition and restructuring costs ⁽⁴⁾	17	1	49	6
Wind-up of pension plan ⁽⁵⁾	—	—	—	2
Accretion expenses	2	3	4	8
Foreign exchange losses (gains) ⁽⁶⁾	1	(6)	(5)	(6)
Normalized EBITDA	$ 294	$ 252	$ 1,249	$ 1,073

(1)	Comprised of transaction costs related to acquisitions and dispositions of assets and/or equity investments in the period. These costs are included in the "cost of sales" and "operating and administrative" line items on the Consolidated Statements of Income (Loss). Transaction costs include expenses, such as legal fees, that are directly attributable to the acquisition or disposition.
(2)	Included in the "revenue", "cost of sales", and "foreign exchange gains (losses)" line items on the Consolidated Statements of Income (Loss). Please refer to Note 13 of the unaudited condensed interim Consolidated Financial Statements as at and for the three and nine months ended September 30, 2024 for further details regarding AltaGas' risk management activities.
(3)	Included in the "other income" line item on the Consolidated Statements of Income (Loss).
(4)	Comprised of transition and restructuring costs (including CEO transition). These costs are included in the "operating and administrative" line item on the Consolidated Statements of Income (Loss).
(5)	Relates to the completion of the wind-up of the Canadian defined benefit pension plan in the second quarter of 2023. The associated costs are included in the "other income" line on the Consolidated Statements of Income (Loss).
(6)	Excludes unrealized losses (gains) on foreign exchange forward contracts that have been entered into for the purpose of cash management. These losses (gains) are included above in the line "unrealized losses (gains) on risk management contracts".

EBITDA is a measure of AltaGas' operating profitability prior to how business activities are financed, assets are amortized, or earnings are taxed. EBITDA is calculated from the Consolidated Statements of Income (Loss) using income (loss) before income taxes adjusted for pre–tax depreciation and amortization and interest expense.

AltaGas presents normalized EBITDA as a supplemental measure. Normalized EBITDA is used by Management to enhance the understanding of AltaGas' earnings over periods, as well as for budgeting and compensation related purposes. The metric 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 Net Income

	Three Months Ended September 30		Nine Months Ended September 30
($ millions)	2024	2023	2024	2023
Net income (loss) applicable to common shares (GAAP financial measure)	$ 9	$ (50)	$ 375	$ 528
Add (deduct) after-tax:
Transaction costs related to acquisitions and dispositions ⁽¹⁾	1	7	7	22
Unrealized losses (gains) on risk management contracts ⁽²⁾	28	70	7	(19)
Gains on sale of assets ⁽³⁾	(10)	—	(6)	(217)
Transition and restructuring costs ⁽⁴⁾	13	1	37	5
Wind-up of pension plan⁽⁵⁾	—	—	—	2
Unrealized foreign exchange losses (gains) on intercompany balances⁽⁶⁾	1	(5)	1	1
Normalized net income	$ 42	$ 23	$ 421	$ 322

(1)	Comprised of transaction costs related to acquisitions and dispositions of assets and/or equity investments in the period. The pre-tax costs are included in the "cost of sales" and "operating and administrative" line items on the Consolidated Statements of Income (Loss). Transaction costs include expenses, such as legal fees, which are directly attributable to the acquisition or disposition.
(2)	The pre-tax amounts are included in the "revenue", "cost of sales", and "foreign exchange gains (losses)" line items on the Consolidated Statements of Income (Loss). Please refer to Note 13 of the unaudited condensed interim Consolidated Financial Statements as at and for the three and nine months ended September 30, 2024 for further details regarding AltaGas' risk management activities.
(3)	The pre-tax amounts are included in the "other income" line item on the Consolidated Statements of Income (Loss).
(4)	Comprised of transition and restructuring costs (including CEO transition). The pre-tax costs are included in the "operating and administrative" line item on the Consolidated Statements of Income (Loss).
(5)	Relates to the completion of the wind-up of the Canadian defined benefit pension plan in the second quarter of 2023. The associated costs are included in the "other income" line on the Consolidated Statements of Income.
(6)	Relates to unrealized foreign exchange losses (gains) on intercompany accounts receivable and accounts payable balances between a U.S. subsidiary and a Canadian entity, where the impact to the U.S. subsidiary is recorded through accumulated other comprehensive income as a loss on foreign currency translation, and the impact to the Canadian entity is recorded through the "foreign exchange gains" line item on the Consolidated Statements of Income (Loss). In the fourth quarter of 2023, AltaGas changed its non-GAAP policy to exclude the impact of unrealized foreign exchange losses (gains) on intercompany balances between Canadian and U.S. entities. The amounts presented in this table reflect the restated figures to align with the revised policy. Please refer to the Q3 2024 MD&A for further details.

Normalized net income and normalized net income per share are used by Management to enhance the comparability of AltaGas' earnings, as these metrics reflect the underlying performance of AltaGas' business activities.

Normalized Funds from Operations

	Three Months Ended September 30		Nine Months Ended September 30
($ millions)	2024	2023	2024	2023
Cash from operations (GAAP financial measure)	$ 21	$ 3	$ 1,030	$ 967
Add (deduct):
Net change in operating assets and liabilities	64	124	(301)	(298)
Asset retirement obligations settled	1	7	1	12
Funds from operations	$ 86	$ 134	$ 730	$ 681
Add (deduct):
Transaction costs related to acquisitions and dispositions ⁽¹⁾	2	10	9	31
Transition and restructuring costs ⁽²⁾	17	1	49	6
Current tax expense (recovery) on asset sales ⁽³⁾	—	(3)	7	34
Normalized funds from operations	$ 105	$ 142	$ 795	$ 752

(1)	Comprised of transaction costs related to acquisitions and dispositions of assets and/or equity investments in the period. These costs exclude non-cash amounts and are included in the "cost of sales" and "operating and administrative" line items on the Consolidated Statements of Income (Loss). Transaction costs include expenses, such as legal fees, which are directly attributable to the acquisition or disposition.
(2)	Comprised of transition and restructuring costs (including CEO transition). The pre-tax costs are included in the "operating and administrative" line item on the Consolidated Statements of Income (Loss).
(3)	Included in the "current income tax expense (recovery)" line item on the Consolidated Statements of Income (Loss).

Normalized funds from operations and funds from operations are used to assist Management and investors in analyzing the liquidity of the Corporation. Management uses these measures to understand the ability to generate funds for capital investments, debt repayment, dividend payments, and other investing activities.

Invested Capital and Net Invested Capital

	Three Months Ended September 30		Nine Months Ended September 30
($ millions)	2024	2023	2024	2023
Cash used in (from) investing activities (GAAP financial measure)	$ 393	$ 243	$ 973	$ (395)
Add (deduct):
Net change in non-cash capital expenditures ⁽¹⁾	23	12	20	(23)
Contributions from non-controlling interests	(56)	—	(73)	—
Net Invested Capital	$ 360	$ 255	$ 920	$ (418)
Asset dispositions	—	1	2	1,073
Disposal of equity method investments ⁽²⁾	14	1	14	1
Invested capital	$ 374	$ 257	$ 936	$ 656

(1)	Comprised of non-cash capital expenditures included in the "accounts payable and accrued liabilities" line item on the Consolidated Balance Sheets. Please refer to Note 20 of the unaudited condensed interim Consolidated Financial Statements as at and for the three and nine months ended September 30, 2024 for further details.
(2)	Relates to escrow account proceeds received from AltaGas' previous investment in Meade which held WGL Midstream's indirect, non-operating interest in Central Penn. Upon close of the sale in 2019, various escrow accounts were established to provide the purchaser a form of recourse for the settlement of indemnification obligations.

Invested capital is a measure of AltaGas' use of funds for capital expenditure activities. It includes expenditures relating to property, plant, and equipment and intangible assets, capital contributed to long term investments, and contributions from non-controlling interests. Net invested capital is invested capital presented net of proceeds from disposals of assets in the period. Net invested capital is calculated based on the investing activities section in the Consolidated Statements of Cash Flows, adjusted for items including the net change in non-cash capital expenditures and contributions from non-controlling interests. Invested capital and net invested capital are used by Management, investors, and analysts to enhance the understanding of AltaGas' capital expenditures from period to period and provide additional detail on the Company's use of capital.

CONSOLIDATED FINANCIAL REVIEW

	Three Months Ended September 30		Nine Months Ended September 30
($ millions, except effective income tax rates)	2024	2023	2024	2023
Revenue	2,759	3,030	9,189	9,709
Normalized EBITDA ⁽¹⁾	294	252	1,249	1,073
Income (loss) before income taxes	20	(51)	515	751
Net income (loss) applicable to common shares	9	(50)	375	528
Normalized net income ^{(1) (2)}	42	23	421	322
Total assets	24,748	22,183	24,748	22,183
Total long-term liabilities	13,467	11,073	13,467	11,073
Invested capital⁽¹⁾	374	257	936	656
Cash from (used in) investing activities	(393)	(243)	(973)	395
Dividends declared ⁽³⁾	89	79	265	237
Cash from operations	21	3	1,030	967
Normalized funds from operations ⁽¹⁾	105	142	795	752
Normalized effective income tax rate (%)^{(1) (2)}	20.6	22.7	22.2	20.6
Effective income tax rate (%) ⁽⁴⁾	16.7	23.2	22.6	25.3

	Three Months Ended September 30		Nine Months Ended September 30
($ per share, except shares outstanding)	2024	2023	2024	2023
Net income (loss) per common share - basic	0.03	(0.18)	1.26	1.87
Net income (loss) per common share - diluted	0.03	(0.18)	1.26	1.86
Normalized net income - basic ^{(1) (2)}	0.14	0.08	1.42	1.14
Normalized net income - diluted ^{(1) (2)}	0.14	0.08	1.41	1.14
Dividends declared ⁽³⁾	0.30	0.28	0.89	0.84
Cash from operations	0.07	0.01	3.48	3.43
Normalized funds from operations ⁽¹⁾	0.35	0.50	2.69	2.67
Shares outstanding - basic (millions)
During the period ⁽⁵⁾	298	282	296	282
End of period	298	282	298	282

(1)	Non–GAAP financial measure or non-GAAP financial ratio; see discussion in Non-GAAP Financial Measures section of the MD&A.
(2)	In the fourth quarter of 2023, AltaGas changed its non-GAAP policy to exclude the impact of unrealized foreign exchange losses (gains) on intercompany balances between Canadian and U.S. entities. Prior periods have been restated to reflect this change. Please refer to the Q2 2024 MD&A for additional details.
(3)	Dividends declared per common share per quarter: $0.28 per share beginning March 2023, increased to $0.2975 per share effective March 2024.
(4)	The decrease in the effective income tax rate for the three months ended September 30, 2024 is due to the composition of income before income taxes.
(5)	Weighted average.

ABOUT ALTAGAS

AltaGas is a leading North American infrastructure company that connects customers and markets to affordable and reliable sources of energy. The Company operates a diversified, lower-risk, high-growth Utilities and Midstream business that is focused on delivering resilient and durable value for its stakeholders.

For more information visit www.altagas.ca or reach out to one of the following:

Jon Morrison
Senior Vice President, Corporate Development and Investor Relations
[email protected]

Aaron Swanson
Vice President, Investor Relations
[email protected]

Investor Inquiries
1-877-691-7199
[email protected]

Media Inquiries
1-403-206-2841
[email protected]

FORWARD-LOOKING INFORMATION

This news release contains forward-looking information (forward-looking statements). Words such as "may", "can", "would", "could", "should", "likely", "will", "intend", "plan", "anticipate", "believe", "aim", "seek", "future", "commit", "propose", "contemplate", "estimate", "focus", "strive", "forecast", "expect", "project", "potential", "target", "guarantee", "potential", "objective", "continue", "outlook", "guidance", "growth", "long-term", "vision", "opportunity" and similar expressions suggesting future events or future performance, as they relate to the Company or any affiliate of the Company, 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, statements with respect to the following: the Company's 2024 guidance including normalized earnings per share of $2.05 to $2.25 and normalized EBITDA of $1,675 to $1,775 million; the Company's expectation that it will deliver fiscal 2024 results toward the upper end of the guidance range for normalized EBITDA and toward the midpoint of the guidance range for normalized EPS; the status of negotiations and long-term tolling agreements for the first phase capacity for REEF; the expectation that the Company will enter into definitive agreements for long-term tolling arrangements; AltaGas' target of 60 percent of it export volumes being under long-term tolling agreements and the timing thereof; the Company's commitment to driving the best collective outcomes for stakeholders through leveraging its assets to connect upstream and downstream customers and markets; progress on the construction and de-risking of REEF and the project remaining on schedule and on budget; progress on the construction of the Pipestone II expansion project and the project remaining on schedule and on budget; AltaGas' intention to divest its 10 percent interest in MVP; the anticipated use of proceeds of the Hybrid Notes; Washington Gas' issuance of US$100 million 4.84 percent private placement notes on April 1, 2025 and the anticipated use of proceeds therefrom; AltaGas' ability to execute on its strategic priorities; the Company actively advancing its regulatory priorities in the Utilities business; the advancement of long-term tolling arrangements across the global exports platform and the expectation that AltaGas will exceed its previously committed tolling targets and need to shift certain tolling volumes to the second phase of REEF; expected growth opportunities in Northern Virginia and long-term demand for natural gas; the expectation that Canadian natural gas supply will increase through 2030, associated NGL supply and the need to export to global markets; the expectation that demand for Canadian LPGs in Asia will grow 45 percent through 2040; the expectation that AltaGas' assets will link growing energy supply and demand; anticipated volume growth in AltaGas' Montney footprint; the Company's focus on de-risking its business, actively locking in margins and further reducing commodity exposure over the fourth quarter of 2024 and the first quarter of 2025; the Company's hedging program and AltaGas' 2024 Midstream Hedge Program quarterly estimates; the Company's ability to continue making rate base investments and the benefits therefrom; AltaGas' continued investment in its Utilities business, the benefits therefrom and its ability to deliver energy to its customers; AltaGas' intention to manage costs for the long-term benefits of its customers while maintaining regulatory and capital discipline; the anticipated benefits of the final order for the ARP program; AltaGas' ability to execute its long-term corporate strategy; AltaGas' focus on growing normalized EPS and FFO per share while targeting lower leverage ratios; AltaGas' commitment to maintaining an disciplined, self-funded 2024 capital program of approximately $1.3 billion, excluding ARO; the allocation of consolidated 2024 capital to the Company's Utilities, Midstream and Corporate/Other segments; AltaGas' commitment to maintaining an equity self-funding model in 2024 and that it will fund capital requirements through a combination of internally generated cash flows and investment capacity associated with rising EBITDA; consideration of opportunistic asset sales and the anticipated use of proceeds therefrom; and AltaGas' dividend policy.

These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events, and achievements to differ materially from those expressed or implied by such statements. Such statements reflect AltaGas' current expectations, estimates, and projections based on certain material factors and assumptions at the time the statement was made. Material assumptions include: effective tax rates; U.S./Canadian dollar exchange rates; inflation; interest rates, credit ratings, regulatory approvals and policies; expected commodity supply, demand and pricing; volumes and rates; propane price differentials; degree day variance from normal; pension discount rate; financing initiatives; the performance of the businesses underlying each sector; impacts of the hedging program; weather; frac spread; access to capital; future operating and capital costs; timing and receipt of regulatory approvals; seasonality; planned and unplanned plant outages; timing of in-service dates of new projects and acquisition and divestiture activities; taxes; operational expenses; returns on investments; dividend levels; and transaction costs.

AltaGas' forward-looking statements are subject to certain risks and uncertainties which could cause results or events to differ from current expectations, including, without limitation: health and safety risks; operating risks; infrastructure; natural gas supply risks; volume throughput; service interruptions; transportation of petroleum products; market risk; inflation; general economic conditions; cybersecurity, information, and control systems; climate-related risks; environmental regulation risks; regulatory risks; litigation; changes in law; Indigenous and treaty rights; dependence on certain partners; political uncertainty and civil unrest; risks related to conflict, including the conflicts in Eastern Europe and the Middle East; decommissioning, abandonment and reclamation costs; reputation risk; weather data; capital market and liquidity risks; interest rates; internal credit risk; foreign exchange risk; debt financing, refinancing, and debt service risk; counterparty and supplier risk; technical systems and processes incidents; growth strategy risk; construction and development; underinsured and uninsured losses; impact of competition in AltaGas' businesses; counterparty credit risk; composition risk; collateral; rep agreements; market value of common shares and other securities; variability of dividends; potential sales of additional shares; labor relations; key personnel; risk management costs and limitations; cost of providing retirement plan benefits; failure of service providers; risks related to pandemics, epidemics or disease outbreaks; and the other factors discussed under the heading "Risk Factors" in the Company's Annual Information Form for the year ended December 31, 2023 ("AIF") and set out in AltaGas' other continuous disclosure documents.

Many factors could cause AltaGas' or any particular business segment's actual results, performance or achievements to vary from those described in this press 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, planned, anticipated, believed, sought, proposed, estimated, forecasted, 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 AltaGas' 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. AltaGas 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 AltaGas 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.

Additional information relating to AltaGas, including its quarterly and annual MD&A and Consolidated Financial Statements, AIF, and press releases are available through AltaGas' website at www.altagas.ca or through SEDAR+ at www.sedarplus.ca.

SOURCE AltaGas Ltd.

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