AltaGas Ltd. (ALA) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the AltaGas 2021 Annual Meeting of Shareholders. I would now like to hand the meeting over to Pentti Karkkainen, Chair of the Board. Mr. Karkkainen, please proceed.

Thank you, operator. Good afternoon, ladies and gentlemen. I'm Pentti Karkkainen, the Chair of the Board of AltaGas. And on behalf of the directors, it's my pleasure to welcome you to AltaGas' 2021 Annual Meeting of Shareholders. Last year, at this time, we were all adapting to new ways of doing business with virtual meeting platforms being new and different to most of us. I'd hope then that we would be meeting in person this year, but unfortunately, that's still not the case. Hosting our shareholders' meeting virtually continues to be the best way for us to do our part to protect ourselves and to protect you from the spread of the virus. Fortunately, we are all more familiar with the virtual meeting platform than we were a year ago. So with all that in mind, I'm very pleased that so many of you are able to join us. Our goal today is to ensure that you're able to participate in this meeting as you would at our regular annual in-person gathering. With me on the webcast today are Randy Crawford, President and Chief Executive Officer; James Harbilas, Executive Vice President and Chief Financial Officer; and Shaheen Amirali, Executive Vice President, Chief External Affairs and Sustainability Officer and our Corporate Secretary. The other members of the Board and the executive team are also joining us remotely. We would like to begin by acknowledging the indigenous peoples of all the lands that we are on today. While we meet today on a virtual platform, I would like to take a moment to acknowledge the importance of the lands which we each call home. We do this to reaffirm our commitment and responsibility in improving relationships between nations and to improving our understanding of local indigenous peoples and their cultures. From coast to coast to coast, we acknowledge the ancestral and unceded territory of all the indigenous peoples that call this land home. At AltaGas, we recognize that each community in which we operate is unique. This is the foundation from which we engage with our stakeholders. To meet each community's individual needs, to strive to build long-term collaborative relationships that are based on trust and a willingness to listen, to learn and adapt. We take an inclusive approach to our indigenous partnerships to ensure we respect traditions, culture and perspectives as we work to ensure mutually beneficial solutions to generate long-term value for all our stakeholders. In accordance with our bylaws, I will chair today's meeting, and Shaheen Amirali will serve as secretary. In the unlikely event we experience any technical difficulty or disruption, I hereby appoint Randy Crawford to chair the meeting in my absence so that the meeting may continue as planned. I also appoint Stephen Bandola, who joins us today as a representative of our registrar and transfer agent, Computershare Investor Services, Inc., to act as scrutineer for the meeting. I now call the meeting to order. I have been advised by Computershare that the meeting materials were duly delivered to shareholders and that a quorum is present. Accordingly, I declare that the meeting has been duly called and is properly constituted for the transaction of business. Computershare statutory declaration of mailing and the scrutineer's report on attendance will be filed by the secretary with the minutes of this meeting. After my introductory remarks, we will proceed with the formal business of the meeting. Following the formal proceedings, we will hear from our President and Chief Executive Officer, Randy Crawford. Finally, if time permits, there will be a brief question-and-answer session. [Operator Instructions] I encourage you to submit your questions early. They will be put in the queue and addressed at the appropriate moment during the meeting with questions about meeting business answered during the formal portion of the meeting and others brought forward during the Q&A session. Before we begin, please take a moment to review the advisory statement on your screen regarding forward-looking information and non-GAAP measures. Throughout this meeting, we may make forward-looking statements, which involve certain assumptions and have inherent risks and uncertainties. Actual results could differ from these statements. We may also reference certain financial measures that do not have a standardized meaning prescribed by U.S. GAAP. First, a few introductory remarks. We can't predict, we can only prepare. 2020 was a year where that reality played out in earnest. In addition to the pandemic, our communities faced economic, political and social disruption. It was a year that tested the cultural fiber of our organization and the values by which we live and work. It was though a year that made our organization stronger and more purposeful. As an essential service provider, AltaGas is charged with the responsibility of delivering safe, reliable and affordable energy to 1.7 million utility customers across 5 U.S. jurisdictions, and ensuring our midstream operations, including our export business, connect natural gas and natural gas liquids to domestic and global consumers. What we do is important, and we take this responsibility seriously. Access to safe, reliable and affordable energy is a critical foundation to improving quality of life. Our ability to adapt and deliver continuous services during this period of disruption is attributable to the core values that guide our actions and the dedication and commitment of our workforce. Robust governance and strong leadership are the foundation for sound decision-making, and the Board ensures it is providing the necessary foresight, oversight and insight to steer AltaGas towards a prosperous and sustainable future. Our commitment and focus on the key environment, social and governance factors that are important to our business drive operational excellence and are core to achieving our strategic objectives and delivering sustainable and compounding value for all stakeholders. I would like to take this opportunity on behalf of the Board to recognize and thank our executive team for their leadership and direction through our pandemic response and their focus on the health and safety of our employees, our customers and our communities while ensuring the continuity of our business, and of course, our employees across North America for their dedication and tireless efforts. It's because of you that we have continued to deliver our essential services. I would like to recognize and thank my colleagues on the Board for your stewardship and sound advice for management during these unprecedented times. I'd also like to take a moment to acknowledge and thank our retiring director, Allan Edgeworth, who is not standing for reelection at today's meeting. Thank you, Al, for more than 15 years of service to AltaGas and the leadership, wisdom and extensive industry experience you brought to our Board deliberations. Of particular note, I'd like to recognize Al's leadership most recently as Chair of the Human Resources and Compensation Committee in shaping our compensation philosophy and for his role in shaping AltaGas' culture of safety, and environmental responsibility as past Chair of the Environment, Health and Safety Committee. Al, I know that I speak on behalf of the entire Board when I say that it has been a pleasure serving alongside you. We will miss your presence in our boardroom. While we are saying farewell to 1 director, we have the pleasure of welcoming a new director, who joined us in February of this year. Jon-Al Duplantier is standing for reelection for the first time today. Jon-Al brings over 25 years of experience across the energy value chain. Jon-Al not only brings a wealth of experience as a business leader, but also a natural intellectual curiosity that will enrich the character in depth of the discussion at the board. He brings with him career experiences across a range of disciplines, spanning across complex regulatory settings that will be of significant benefit to all our stakeholders. His expertise complements our existing Board profile and matches the evolving needs of our company. AltaGas is committed to building long-term sustainable stakeholder value, and we are confident that Jon-Al will make tremendous contributions towards that objective. Welcome, Jon-Al. We are here today, though, not only to receive your feedback on our items of business, but also to thank you on behalf of the AltaGas family. We thank you, our shareholders, for your ongoing support and trust in us. And with that, we will now move on to the formal part of these proceedings. I would now ask that our Corporate Secretary, Shaheen, address a few housekeeping matters related to the formal proceedings. Shaheen?

Thank you, Pentti. Good afternoon, everyone. I will now go over a few housekeeping items and the rules of conduct related to asking questions and voting. As is the case for our in-person meetings, only shareholders of record at the close of business on the record date, March 11, 2021, and their duly appointed proxy holders may ask questions and vote on the matters being discussed. [Operator Instructions] We ask that you keep your questions brief so that we can accommodate as many questions from our shareholders as possible. Questions should be of interest to all shareholders and be relevant to the business of the meeting. When reading out a question, I will note the name of the registered shareholder or proxy holder submitting the question. In order to deal with all questions in a timely fashion, questions of a similar nature will be answered only once. Questions relating to the formal part of the meeting will be addressed during the formal proceedings. Following Randy's presentation, there will be a question-and-answer session where we will address questions of a more general nature. Any questions that we are not able to address during the meeting will be referred to our Investor Relations team for a follow-up. [Operator Instructions] To ensure an orderly meeting, the Chair retains the discretion and reserves the right to bring discussion on the topic to an end and to refrain from addressing matters that do not comply with these rules of conduct. Let's move on to voting. All items for shareholder approval today will be conducted by poll, and all items being polled will appear on your screen at once. The resolutions that are being tabled today must be approved by a majority of the votes cast. As in prior years, a significant amount of voting has occurred in advance of the meeting, and the response has been positive. Thank you to our shareholders who have voted in advance. We have received your votes, and your votes have already been included in the final count. You do not need to vote again at this meeting even if the voting items pop up on your screen. Any vote you do cast at this meeting will revoke your prior vote. If you plan to vote at the meeting, you may choose to vote on each resolution immediately when they appear on your screen or wait to cast your vote following the conclusion of discussions. [Operator Instructions] The votes you have submitted on each polling item at the time the poll closes will be what is recorded. Totals for each resolution item will be tallied by the Scrutineer once the polls close, and the Chair will report on the outcome of all motions at the end of the formal meeting. During this meeting, there may be moments of delay in the webcast in our receipt of your questions and moments when the line may be paused while I coordinate with the Chair or Scrutineer. We appreciate your patience and understanding should these circumstances arise. For meeting efficiency, the Chair has asked that I make the motions and that James Harbilas, our CFO, and who is also on the line today, second the motion. We are both shareholders of AltaGas. As noted in the information circular, the Board recommends voting in favor of each resolution. With the housekeeping matters taken care of, I will now turn the meeting back over to the Chair.

Thank you, Shaheen. I now declare the polls open on all resolutions. Each person entitled to vote should see voting choices displayed on their screen. We will now commence with the business of the meeting. The agenda is as set forth in the notice of meeting being: The presentation of financial statements; the appointment of auditors; the election of directors; and the advisory vote on AltaGas' approach to executive compensation. Let's begin with the first item of business. The consolidated financial statements of AltaGas for the year ended December 31, 2020, management's discussion and analysis and the auditor's report thereon have been provided to shareholders. They are available on our website in accordance with notice and access procedures and on AltaGas' page on SEDAR. No action is required by the shareholders on this item. The next item of business is to vote on the appointment of Ernst & Young LLP as auditors of AltaGas to hold office until the next annual meeting. Shaheen, can you please make a motion?

Mr. Chair, I move that Ernst & Young LLP be appointed as the auditors of AltaGas until the next Annual Meeting of Shareholders or until a successor is appointed and that their remuneration be fixed by the directors of AltaGas.

Mr. Chair, this is James Harbilas, and I second the motion.

Thank you, both. You have heard the motion, and it is now open for discussion. Shaheen, have we received any questions on this motion?

Mr. Chair, we have received no questions on this motion.

Thank you, Shaheen. With there being no questions, we will move on to the next item on the agenda. The next item of business is the election of directors. The Board of Directors of AltaGas has fixed the number of directors to be elected at the meeting at 11. As noted in our information circular, our bylaws contain advanced notice provisions which provide a procedure to be followed for the nomination of directors at meetings of shareholders. No other nominations were received. Therefore, the only individuals entitled to be nominated as directors at this meeting are the individuals named as nominees in AltaGas' information circular. In addition to myself and Randy Crawford, the following individuals named as nominees in AltaGas' information circular are standing for election: Victoria Calvert, David Cornhill, Jon-Al Duplantier, Robert Hodgins, Cynthia Johnston, Phillip Knoll, Terry McCallister, Linda Sullivan and Nancy Tower. Each of the nominees has consented to act as a director of AltaGas. With that, the nominees set out in AltaGas' information circular are hereby nominated as directors of AltaGas. In accordance with our majority voting policy, you are being asked to vote for each director separately. Shaheen, can you please make a motion to elect the nominees as directors of AltaGas?

Mr. Chair, I move that the individuals nominated as directors of AltaGas being Pentti Karkkainen, Victoria Calvert, David Cornhill, Randall Crawford, Jon-Al Duplantier, Robert Hodgins, Cynthia Johnston, Phillip Knoll, Terry McCallister, Linda Sullivan and Nancy Tower be elected as directors of AltaGas to hold office until the next Annual Meeting of Shareholders or until they cease to be a director by operation of law or until their resignation becomes effective.

Mr. Chair, I second the motion.

Thank you, Shaheen and James. You've heard the motion, and it is open for discussion. Shaheen, have we received any questions on this motion?

Mr. Chair, we have received no questions on this motion.

Thank you, Shaheen. With there being no questions, we will move on to the next item on the agenda. The next item of business is the consideration of a nonbinding advisory vote on executive compensation. Shaheen, can you please make the motion?

Mr. Chair, I move that, on an advisory basis and not to diminish the roles and responsibilities of the Board of Directors of AltaGas, the shareholders accept the approach to executive compensation disclosed in AltaGas' management information circular dated March 11, 2021.

Mr. Chair, I second the motion.

Thank you, Shaheen and James. You've heard the motion, and it is open for discussion. Shaheen, have we received any questions on this motion?

Mr. Chair, we have received no questions on this motion.

Thank you. That was the final agenda item. For those of you who have not yet cast your votes, please do so now. I will pause briefly closing the polls -- before -- I will pause briefly before closing the polls. [Voting]

Thank you. The polls are now closed. We will take a moment to let the scrutineer finish tabulating. I have now received the preliminary results from the scrutineers and can advise that each of the motions was passed by a majority of the votes cast. In particular, Ernst & Young LLP has been appointed as auditors of AltaGas with approximately 96% of the votes cast in favor of the motion. With respect to the election of directors, each of the nominees was elected with approval levels over 91%. AltaGas' approach to executive compensation was approved with approximately 90% of the votes cast in favor of the motion. I declare that all motions have been carried. Final voting results will be published on SEDAR following the meeting. With the formal proceedings concluded, I hereby adjourn the formal meeting and turn the mic over to Randy Crawford, our President and Chief Executive Officer. Randy?

Thank you, Pentti, and good afternoon, everyone. It's a pleasure to be speaking with you today. I hope you are all doing well and staying safe. As we meet again virtually, I can't help but reflect on the past year since our last AGM. The past year was one like we have not seen before. It included great loss and hardships across our global society. Despite these challenges, we continue to march forward and deliver on our foundational principles as an essential service provider. This includes providing our 1.7 million utility customers with affordable energy safely and reliably and ensuring that our midstream operations continue connecting natural gas and natural gas liquids to domestic and global markets, enabling critical supply chains to remain unabated. Our teams have shown incredible adaptability and resilience in this rapidly changing environment. As the COVID-19 pandemic unfolded, our workforce quickly adapted to new ways of working to ensure our essential services continued with the utmost regard for health and safety of our workforce, their families and the communities in which we operate and live. We embraced new technologies and implemented new tools to help us work safely, remotely and collaboratively to keep our people informed, engaged and connected. I firmly believe that our unwavering commitment to our core values and doing what is right for our employees, customers, communities, shareholders and the environment has guided our success, permitting us to emerge a stronger and a more focused company. As we continue to adapt to what we hope is the tail end of the pandemic, we remain focused on the health and safety of our employees, delivering critical energy to our customers and honoring the social and moral commitment we have with all of our stakeholders. We've come a long way over the past 2 years when we first announced our strategy to refocus and transition to a diversified, low risk, high-growth utilities and midstream business. Our steady progress continues to exceed my expectations, and it is a direct reflection of the hard work and dedication of our employees and the talent we have been able to attract and develop at AltaGas. With our transformation over the last 2 years, we've also integrated throughout our enterprise, our vision, mission and values as these are core to everything we do. It is during these challenging times that our mission and core values that are focused on safety, leadership, innovation, resilience and excellence shine through. Very simply, our mission is to improve quality of life by safely and reliably connecting customers to affordable sources of energy for today and tomorrow. We understand and firmly believe that access to affordable energy reduces poverty and improves quality of life. Through the access to abundant affordable energy, we can fuel economic expansion, which creates jobs. These values are our fuel, our foundation and our guide to how we operate. How we do things is just as important as what we do. We work safely and think responsibly. The fundamental principle of operational excellence is safety. It is the foundational principle that without, we can never achieve excellence. We act with integrity, we make informed decisions, and we achieve results. And we invest in our people, and we foster diversity. These core values reinforce our commitment to integrating strong environmental, health and safety, social and governance performance into all aspects of our business. We have built a culture that is geared to delivering outstanding results for all our stakeholders, and it's focused on performance and it's fueled by accountability. As we look at our business composition today, it is vastly different than it was a few short years ago. We are now 2 businesses with complementary needs that balance each other. We have achieved what we set out to do, becoming a low-risk, high-growth midstream and utility company. We continue to position our midstream business for growth by leveraging our unique core competency in our export capability. At the utility, we are focusing on operational excellent approach to the way we do business, to replace aging infrastructure, improving safety and reliability, lowering our costs and providing value to our customers. We are in this enviable position as a result of some difficult decisions relating to monetizing noncore assets. Our debt-to-EBITDA should approach 5x by the end of 2021 and has the ability to go lower if we continue to execute our plan. We are also positioned to grow EBITDA and earnings per share significantly over the planning horizon. The strategy is working. In 2020, despite the disruptions and economic impact of the global pandemic, we ensured the continuity of our business and the delivery of our essential services. We delivered robust financial and operating results in the upper end of our guidance ranges, while also assisting the communities in which our customers and employees reside with their COVID-19 response. This included the deployment of an additional $1 million in community relief funding. Our utility business demonstrated strong and resilient performance, delivering 14% year-over-year earnings per share growth, and we successfully closed the ROE gap by approximately 150 basis points in 2020, in line with our target. Within our Midstream business, we made significant progress in advancing our global export strategy, including a full year of operations at RIPET. We also continued the advancement of our global export strategy through the successful acquisition and closing of an increased ownership in Petrogas. We have completed the integration, further aligning our midstream strategy and complementing AltaGas' existing operations. The transaction provides scale and the ability to focus on the best of both businesses to capture efficiencies and improve gross margins that will accrue to our shareholders and customers. We also strengthened our position within the Montney region with the completion of North Pine and Townsend expansion, which significantly increased our processing and fractionation capacity. In December, we increased our common share dividend by 4% to provide stronger returns of capital to our shareholders. This represents the first dividend increase since our dividend is recalibrated in 2018 and reflects the actions we have taken the last 2 years to reposition the company and our confidence in the earnings growth and durability over the medium and longer-term horizon. We have successfully delivered on everything that we said, everything we said we were going to do, and we will continue to focus on doing the same in the years ahead. Yesterday, we released our first quarter 2021 results, and I'm pleased to say that we had a very strong start to the year. As an organization, we've undergone significant changes over the past 2 years in terms of focus, process and business optimization. And we believe that the fruits of that labor were demonstrated in our operating results this quarter. We delivered a record quarter with strength across the platform and are well positioned to execute upon our durable 2021 and beyond growth prospects. We performed well across all segments of our business in the quarter. Our global export and midstream platform achieved record throughput and profits. Our utilities platform continue to profitably deploy capital, control costs and improve returns. And our finance team continue to lower our debt cost, and we are well positioned to continue to reduce our leverage ratios over 2021. As a result of these factors, we grew normalized earnings per share by 63% year-over-year in the quarter. We are extremely proud of the fact that for 2 years running, we delivered normalized earnings per share growth as material eclipsed all our gas -- U.S. gas utility and Canadian midstream peers. The strong performance we achieved in the first quarter provided the confidence to increase guidance ranges that now, using the midpoint for 2021, represents 22% year-over-year EPS growth. The progress made during the first quarter positions AltaGas to drive strong stakeholder outcomes in the year ahead and continue to build a platform that is focused on long-term sustainability. As we continue to move towards a more decarbonized ecosystem, we believe natural gas will play a critical role as the transition fuel of the future. We have taken many steps to reduce our carbon footprint through our efforts to reduce GHD emissions across both our utilities and midstream businesses. Most recently, we filed a climate business plan, providing a road map for how we can help the District of Columbia meet its climate goals. We are confident that we are very well positioned for the energy transition that is upon us. There will be more information in the coming quarters as we explore and position ourselves to execute on this promising opportunity. Through leadership, focus and oversight, we are taking purposeful steps to further integrate ESG initiatives into all aspects of our business, including operating, financial, business development and growth plans. We look forward to sharing with you our progress on our initiatives and our full ESG report to be released in the latter half of this year. As I wrap up my comments today, I want to thank our employees who, across North America, are on the front lines maintaining operations and serving our customers and community through these difficult times. I am so incredibly proud of the people we have at our company and how our teams have rallied together to respond to the pandemic. None of the milestones we have achieved to date, nor those we are sure to achieve in the future, would be possible without our very talented and hard working team, and I want to thank them for their incredible efforts. I would also like to extend my thanks to our Board for their stewardship and guidance, and to you, our shareholders, for supporting our company and for taking the time to join us here today. Shaheen, have we received any questions?

Randy, we have received no questions.

So if there are no further questions, we have reached the end of our question-and-answer session. We encourage you to reach out to us throughout the year with your questions by contacting our Investor Relations department or if you have a question that's governance-related, by contacting the Board in accordance with our Board shareholder engagement policy. Once again, thank you all for taking the time to join us today. Stay safe.

That concludes today's shareholder's meeting. You may now disconnect.