“In a world where vows are worthless, where making a pledge means nothing, where promises are made to be broken, it would be nice to see words come back into power.” Chuck Palahnikuk (1962 –), Lullaby, American novelist and journalist.
AltaGas takes its vows and pledges seriously. And that’s refreshing. The company offers shareholders a unique investment opportunity by providing critical infrastructure for energy exports at three sites on both the Pacific Ocean – the Ferndale, WA terminal and the Ridley Island Propane Export Terminal (RIPET) off Prince Rupert, BC – and Atlantic Ocean with its $1.8 billion Cove Point LNG terminal in Maryland, located at Chesapeake Bay.
According to David Harris, AltaGas president and CEO, each of its three business units continue to perform extremely well, delivering consistent strong results and keeping the company on track to deliver low double-digit percentage growth. “Our strong operational and financial performance and our dividend increase underscore our commitment to our shareholders.”
Canadian Operations On-time and Under Budget
October 1, 2017 AltaGas commissioned the 99 mmcf/d (million cubic feet per day) Townsend 2A shallow-cut natural gas processing facility, located in northeast British Columbia, ahead of schedule and $5.0 million under the $130.0 million budget. It signed a 20-year take-or-pay agreement with Painted Pony Energy Ltd., effective January 1, 2018, and volumes are expected to progressively ramp up into the new year. Phase 2A doubled the Townsend gas processing complex and Phase 2 consists of two separate gas processing trains.
The company’s 10,000 bbls/d (barrels per day) North Pine NGL Separation Facility was built to serve Montney producers in NE BC. It came onstream as a commercial entity in December 2017, earlier than its target of Q1, 2018. It also under budget. The first train consists of 10,000 bbl/d of propane processing capacity and an additional 6,000 bbl/d gasolines and naptha. AltaGas reports the facility “will be connected by rail to Canada’s west coast, including to RIPET.”
AltaGas signed another long-term supply agreement with Painted Pony for a portion of the total capacity, which includes the dedication of all Painted Pony’s NGL (natural gas liquids) produced at the Townsend and Blair Creek facilities, with the remaining capacity filled from NGLs produced in the area.
RIPET is expected to be Canada’s first propane export terminal and, the company says, “will provide producers with access to key markets to the west, including Asia, with significant shipping cost advantages over the U.S. Gulf coast.”
Construction on the 40,000 bbls/d RIPET is moving along at a very swift pace with the fourth of eight concrete pours on the concrete tank already finished, ensuring the project is on-track for a Q1 2019 launch. The final pour is scheduled for December 2017. Fabrication for the inner steel tank roof is also underway and installation of the inner steel tank will begin as soon as the tank roof is finished. The company reports the balance of plant fabrication and civil work is on track and the first modules are schedule to arrive Q1, 2018. The total construction cost for RIPET is expected to be $450.0 to $500.0 million, owned 100 per cent by AltaGas.
U.S. Connects Low-Cost Producers with Markets + Exports
Last January, AltaGas announced its blockbuster acquisition of WGL Holdings, Inc. which brought $5.0 billion in secured growth projects and approximately $2.0 billion of growth opportunities (from 2017-2021), all in advanced stages of development. The deal is expected to close in the first half, 2018.
“AltaGas plans to fund the WGL acquisition with the proceeds from its aggregate $2.6 billion bought deal and private placement of subscription receipts, which closed Q1, 2017,” it reports in its Q3, 2017 financial statement. “In addition, the company has $3.0 billion (US) under its fully committed bridge facility, which can be drawn at the time of closing. As progress is made towards meeting closing conditions, we are moving forward with our long-term financing plan, the proceeds of which may be used to reduce the bridge facility.” The assets sales on the books are the Blythe and Tracy facilities in California and certain non-core assets.
Through WGL, the company now has a stake in four Marcellus play pipelines. The first gives it a 30 per cent stake in the $135.0 million (US) Stonewall Pipeline, currently gathering up to 1.4 Bcf/d (billion cubic feet per day) from West Virginia. It also has a 21 per cent ownership in the $411.0 million (US) Central Penn Pipeline, with the capacity to transport 1.7 Bcf/d as part of the Atlantic Sunrise project. This line is expected to be ready mid-2018. AltaGas also has a 10 per cent share of the $328.0 million (US) Mountain Valley line, due to come into service Q4, 2018, constructed to transport 2.0 Bcf/d from West Virginia to Virginia. The fourth line, the $95.0 million (US) Constitution Pipeline, is targeted to launch in 2018 and should ship 0.65 Bcf/d to major northeastern markets.
The jewel in AltaGas’s American crown is the GAIL export terminal at Cove Point, Maryland. The project came into service in Q4, 2017 and includes a 20-year natural gas sale and purchase agreement of 2.5 mtpa (million tonnes per annum) of LNG. Most of the export goes to meet the rising gas demand in the Indian market.
The WGL deal will enable AltaGas to “deliver clean and affordable natural gas to homes and businesses, offers an estimated combined rate base that more than doubles, and an estimated combined customer base that triples in size. This increased diversification, across several high growth areas, offers a projected 2021 rate base of more than $8.0 billion from more than 1.7 million customers in eight states and provinces.”
“In a world where vows are worthless, where making a pledge means nothing, where promises are made to be broken,” it’s nice to see that AltaGas’s promises are powerful because of the company’s record of delivering.
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