AltaGas Ltd

TSX:ALA

Earnings Call Transcript

[Operator]

Good

morning, ladies

and

gentlemen.

Thank

you

for

standing

by.

Welcome

to

the

AltaGas

Fourth

Quarter

2021

Financial

Results

Conference

Call.

My

name

is

Michelle

and

I

will

be

your

operator

today.

All

lines

have

been

placed

on

mute

to

prevent

any

background

noise.

[Operator Instructions]



After

the

speakers'

remarks,

there

will

be

a

question-and-answer

session.

I'd

like

to

remind

everyone

this

conference

call

is

being

broadcast

live

on

the

Internet

and

recorded.

I

would

now

like

to

turn

the

call

over

to

Mr.

Adam

McKnight,

Director

of

Investor

Relations.

Please

go

ahead,

Mr.

McKnight.

[Adam McKnight, Director-Investor Relations, AltaGas Ltd.]

Thanks,

Michelle,

and

good

morning

everyone.

Thank

you

for

joining

us

today

for

AltaGas'

fourth

quarter

and

full

year

2021

financial

results

conference

call.

Speaking

on

the

call

this

morning

will

be

Randy

Crawford,

President and

Chief

Executive

Officer and

James

Harbilas,

Executive

Vice

President

and

Chief

Financial

Officer.

We're

also

joined

here

this

morning

by

Randy

Toone,

Executive

Vice

President

and

President

of

our

Midstream

Business;

Blue

Jenkins,

Executive

Vice

President

and

President

of

our

Utilities

Business;

and

Jon

Morrison,

Senior

Vice

President,

Investor

Relations

and

Corporate

Development.

We'll

proceed

on

the

basis

that

everyone

has taken

the

opportunity

to

review

the

press

release

and

our

fourth

quarter

results.

And

similar

to

previous

quarters,

we've

published

an

earnings

summary

presentation

that

you

can

find

on

our

website.

This

presentation

walks

through

the

quarter

and

highlights

some of

the

key

variances

and

nonrecurring

items

that

we

would

assume

will

be

helpful

for

the

market

to

understand.

As

always,

today's

prepared

remarks

will

be

followed

by

an

analyst

question-and-answer

period, and

I'll

remind

everyone

that

we

will

be

available

after

the call

for

any

follow-up

or

detailed

modeling

questions

that

you

might

have.

As

for

the

structure of

the

call,

we'll

start

with

Randy

Crawford

providing

some

comments

on

our

financial

performance

and

progress

on

our

strategic

priorities,

followed

by

James

Harbilas

providing

a

more

detailed

walk-through of

our

fourth

quarter

financial

results,

near-term

outlook,

and

2022

guidance.

And

then

we'll

leave

plenty

of

time

at

the

end

for

Q&A.

So,

just

before

we

begin,

we'll

also

remind

everyone

that

we

will

refer

to

forward-looking

information

on

today's

call.

This

information

is

subject

to

certain

risks

and

uncertainties,

as

outlined

in

the

forward-looking

information

disclosure

on

slide

2

of

our

investor

presentation,

which

can

be

found

on

our

website,

and

more

fully

within

our

public

disclosure

filings

on

both

SEDAR

and

EDGAR.

And

with

that,

I'll

now

turn

the

call

over

to

Randy.

[Randall L. Crawford]

Thank

you,

Adam,

and

good

morning

everyone.

2021

was

a

strong

year

for

AltaGas,

as

we

achieved

a

number

of

significant

milestones

across

our

platform.

I

am

proud

of

the

strong

financial

and

operational

performance

that

we

delivered

over

the

course

of

the

year,

and

the

progress

we

made

on

our

ESG

initiatives.

We

delivered

earnings

per

share

growth

of

25%

year-over-year

and

normalized

EBITDA

growth

of

14%.

These

results

were

well

within

the

ranges

of

our

April

2021

increased

guidance

despite

the

operational

and

financial

impacts

associated

with

the

devastating

flooding

that

impacted

communities

in

British

Columbia

and

Washington

state

during

the

fourth

quarter.

Our

2021

operating

results

built

upon

the

strong

growth

that

we

delivered

the

past

two

years

and

is

a

testament

to

our

diversified

model

that

continues

to

demonstrate

strong

advantages

throughout

market

cycles

and

operating

environments.

We

continued

to

deepen

our

organizational

capacity

and

significantly

advanced

AltaGas'

long-term

corporate

strategy

by

improving

operating

practices

that

are

focused

on

long-term

operational

excellence.

In

our

Utilities,

we

achieved

6%

EBITDA

growth,

despite

milder

weather

in

Michigan

and

D.C.

during

the

fourth

quarter.

We

added

17,000

new

customers

across

our

Utilities

network

in

2021,

while

increasing

our

rate

base

by

approximately

8.5%

year-over-year

through

our

continued

investment

in

our

networks,

enhancing

the

safe

and

reliable

service

we

offer

our

customers.

Our

utility

operations

were

strong

and

we

continued

to center

on

the

same

regulatory

capital

and

cost

discipline

that

we

had

been

focused

on

[indiscernible]



(04:37)

over

the

past

three

years.

Our

continued

investment

in Accelerated

Pipeline

Replacement

has

resulted

in

a

23%

and

13%

reduction

in

leaks

since

2019

and

2020,

respectively.

We

are

now

exceeding

our

customer

service

metrics,

having

overcome

the

initial

challenges

we

faced

by

changing

our

call

center

provider

at

Washington

Gas

in

the

third

quarter.

These

are

foundational

improvements

that

will

continue

to

accrue

benefits

well

into

the

future.

With

our

Midstream segment,

we

delivered

an

exceptionally

strong

performance

this

year,

despite

the

unexpected

headwinds

faced

in

the

fourth

quarter.

We're

extremely

proud

of

the

financial

performance

that

we

delivered

over

2021.

With

more

than CAD

2

billion

of

investment

in

the

recent

years

within

the

Northeast

B.C.

in

our

global

export

platform,

we

are

excited

about

the

egress solutions

that

we

have

been

able

to

provide

to

producers

in

the

region

and

our

ability

to

provide

critical

source

[ph]



and needing (05:33)

natural

gas

liquids

for

key

Asian

markets.

We

also

take

great

pride

that

our

infrastructure and

operations

will

support

better

global

environmental

outcomes

that

align

with

lower

carbon

and

lower

emissions

future

that

is

upon

us.

We

successfully

completed

the

integration

of Petrogas

and

achieved

combined

synergies

that

exceeded

our

CAD 30 million

target.

This

was

a

testament

to

the

strong

talent

we

added

to

complement

the

existing

strengths

of

our

organization.

Through

the

combination

of our

export

assets,

we

were

able

to

average

approximately

90,000

barrels

a

day

of

global

exports

in

2021,

which

was

in

line

with

our

annual

target.

With

the

flooding

behind

us,

the

platform

is

well

positioned

to

achieve

our

2022

export

target

of

97,000

barrels a

day.

Our

gas

gathering and

processing,

and

fractionation and

liquids

handling

operations

also

demonstrated

strong

growth,

which

is

a

testament

to

the

integrated

value

chain

we

operate.

We

continue

to make

strategic

investments

in

our

Montney

and

global

export

platform

with

the

continuous

focus

on

connecting

customers

and

markets

over

the

coming

years.

The

macro

environment

for

energy

fundamentals

continues

to

strengthen

as

the

tightening

supply

and

demand

picture

drives

commodity

prices

to

levels

not

seen

since

2014.

The

unfortunate

events

that

have

been

unfolding

in

Eastern

Europe

illuminate

the

critical

value

of

energy

independence

and

diversity.

These

events

are

already

producing

far-reaching

geopolitical

implications

regarding

energy

security.

Germany

recently

announced

plans

to

further

diversify

its

energy

supply

with

the

recent

announcement

of

planned

additions

for

two

new

LNG

terminals

as

well

as

numerous

discussions

by

foreign

countries

related

to

the

investment

and

long-term

contracting

of

diverse

energy

supply.

We

are

fortunate

in

Canada

and

the

United

States

to

have

access

to

abundant

sources

of

energy,

and

it's imperative

that

we

invest

in

critical

energy

infrastructure

continues

as

we

continue

the

transition

to

the

energy

sources

of

the

future.

AltaGas

is

well-positioned

to

support

the

continued

development

of

energy

resources

such

as

the

Montney

and,

to

a

lesser

extent,

the

Marcellus

Shale

to

facilitate

the

best

outcomes

for

our

customers

in

Canada,

the

US,

and

Asia.

It's

unfortunate

that

the

narrow

view

that

has

been

taken

regarding

MVP

has

caused

significant

delays

to

the

completion

of the

pipeline.

The

pipeline

will

ensure

diversity

and

affordability

of

natural

gas

critical

to

East

Coast

utilities

that

serve

the

energy

needs

of

US

residents

and

businesses.

The

2

Bcf a

day

design

capacity

of

the

pipeline

has

the

potential

to free

up

natural

gas

originating

in

the Gulf

that

could

be

available

for

export

to

Europe.

We

also

take

a

lot

of

pride

that

our

infrastructure and

operations

will

support

better

global

environmental

outcomes

that

align

with

lower

carbon

and

lower

emissions

future

that

is

upon

us.

Our

Midstream

business

will

continue

to

be

centered

around

our

global

export

platform,

which

provides

access

to

key

West

Coast

North

American

ports

that

provide

a

structural

advantage,

which

is

a

60%

advantage

over

US

Gulf

Coast

and

a

45%

advantage

over

the

Middle

East

for

shipping

timing

savings.

This

provides

North

American

producers

and

aggregators

with the

best

netbacks

for

propane

and

butane,

while

providing

diversity

of

critical

LPG

supply

and

contributes

to

the

energy

security

in

Asia.

In

these

uncertain

times

in

which

we

live,

we

take

a

great

pride

in

being

able

to

be

a

steady

and

reliable

energy

provider

to

North

America

as

well

as

Japan,

South

Korea,

and

other

key

Asian

markets.

And

as

I

look

ahead,

I

am

extremely

excited

about

the

position

of

our

company,

and

the

increasingly

constructive

energy

demand

fundamentals

as

the

global

economy

continues

to

recover.

We

remain

steadfast

in

our

strategy,

and

are

firmly

committed

to

leveraging

our

strategically

positioned

Utilities

and

Midstream

assets,

both

with

significant

organic

growth

opportunities.

So,

in

closing,

I

am

proud

of

the

role

that

AltaGas plays

in

supporting

North

American

energy

independence

and

our

ability

to

export

affordable

butane

and

propane

LPGs

to

the

world.

And

with

that,

I

will

turn

the

call

over

to

James

to

review

the

financial

results

in

detail.

[D. James Harbilas]

Thank

you,

Randy,

and

good

morning

everyone.

As

Randy

mentioned,

we

are

very

pleased

with

our

2021

financial

results

and

the

strong

progress

that

we

were

able

to

accomplish

during

the

year.

We

achieved

normalized

EPS

of

CAD

0.38

in

the

fourth

quarter

and

CAD

1.78

for

the

full

year.

This

included

landing

within

the

upper

end

of

our

2021

guidance

range

of

CAD 1.65

to

CAD 1.80,

and

represented

a

25%

year-over-year

increase.

Normalized

EBITDA

for

the

quarter

came

in

at

CAD 341

million

and

CAD

1.49

billion

for

the

full

year,

which

was

slightly

below

the

midpoint

of

our

guidance

range

of

CAD

1.475

billion to

CAD

1.525

billion,

and

represented

a

14%

year-over-year

increase.

You

will

recall

that

both

of

these

guidance

ranges

were

increased

in

April

2021

versus

our

original

expectations

at

the

start

of

the

year.

Normalized

FFO

was

CAD 287

million

for

the

quarter

and

approximately

CAD

1.2

billion

for

the

full

year,

representing

19%

year-over-year

growth.

This

strong

cash

generation

provides

us

with

the

foundation

to

fund

our

strong

ongoing

organic

growth

opportunities

and

increasing

our

returns

of

capital

to

shareholders

over

the

long

term.

Turning

to

our

segmented

results

for

the

fourth

quarter,

normalized

Midstream

EBITDA

came

in

at

CAD 102

million compared

to

CAD 128

million

in

the

fourth

quarter

of

2020.

The

quarter

included

continued

year-over-year

growth

in

our

global

exports

platform,

albeit

at

a

slightly

slower

pace

than

would

have otherwise

been

the

case

due

to

devastating

flooding

that

occurred

during

the

fourth

quarter

and

the

large

rail

outages

on

the

West

Coast.

AltaGas'

gathering

and

processing

volumes

increased

9%

year-over-year

in

the

fourth

quarter

of

2021,

while

fractionation

and

liquids

handling

volumes

increased

37%

year-over-year.

Growth

within

AltaGas'

facilities

continue

to

be

more

heavily

weighted

within

Montney

facilities

and

the

company's

industry-leading

footprints

in

the

region.

These

strong

volume

growth

numbers

were

offset

by

two

major

factors.

The

first

was

the CAD

24

million

timing-related

hedging

loss

that

we

previously

disclosed

in

the

third

quarter.

This

relates

to the

recognition

of

revenue

for

an

LPG

cargo

that

was

loaded

at

the

end

of

the

third

quarter

at

spot

prices

with

the

offsetting

hedge

loss

not

realized

until

delivery

in

the

fourth

quarter

once

the

ship

reached

its

destination.

The

second

factor

was

the

logistical

and

cost

challenges

associated

with the

flooding

on

the

West

Coast

with

the

total

financial

impact

of

approximately CAD

20 million.

Although

we

were

able to

mitigate

some

of

the

transportation

and

supply

chain

outages

by

redirecting

certain

propane

volumes

to

RIPET

that

were

originally

destined

for

Ferndale,

we

were

not

able

to

alleviate

butane

volume

disruptions

with

financial

performance

further

impacted

by

higher

transportation

costs

associated

with

rail

switching

to

handle

the

large

logistical

outages.

Other

factors

that

impacted

the

fourth

quarter

results

include

AFUDC

on

MVP

no

longer being

recorded

throughout

2021,

the

loss

contribution

from

the

US

storage

business

that

was

monetized

in

the

second

quarter

of

2021,

and

the

impact

of

the

Gordondale

blend

and

extend

contract.

Considering

the

size

and

magnitude

of

the

flooding

and

mudslides,

we

were

encouraged

by

the

swift

recovery

by

the

team

to

get

us

back

on

track

in

early

2022.

Looking

ahead,

we

continue

to actively

de-risk

the

Midstream

platform

and

reduce

commodity

price

exposure

and

volatility

where

appropriate.

We're

well

hedged

through

2022

with

approximately

44%

of

global

export

volumes

tolled

or

collectively

hedged.

This

includes

an

average

FEI

to

North

American

financial

hedge

price

of

approximately

$13

per

barrel

between

our

expected

propane

and

butane

volumes.

We

also

have

74%

of

our

expected

frac

exposed volumes

hedged

in

2022

at

CAD 33

per

barrel.

Normalized

Utilities

EBITDA

was CAD

238

million in

the

fourth

quarter

compared

to CAD

259

million

in

the

comparable

quarter

of

last

year.

The

year-over-year

decrease

was

largely

due

to

unfavorable

weather

conditions

and

the

impact

on

retail,

marketing

power

and

gas

margins,

and

higher

PJM

costs

in

2021.

Lastly,

the

continued

weakness

in

the

US

dollar

to

Canadian

exchange

rate

drove

a

further CAD

7

million

year-over-year

impact

during

the

quarter

compared

to

the

fourth

quarter

of

2022.

WGL

reported

normalized

EBITDA

of

CAD

183

million

in the

fourth

quarter,

up 8%

year-over-year,

driven

mainly

by

the

positive

impacts

of

the

Maryland

and

D.C.

rate

cases,

continued

ARP

investments,

as

well

as

higher

returns

on

pension

assets

and

asset

optimization.

The

quarter

also

included

some

costs

associated

with

replacing

the

customer

call

service

provider

at Washington

Gas

following

service

and

performance

issues

with

the

former

provider.

SEMCO

and

ENSTAR's

combined

normalized

EBITDA

was

CAD 60

million

in

the

fourth

quarter,

down CAD

6

million

from

the

same

period

last

year

due

to warmer

weather

in

Michigan,

partially

offset

by

colder

weather

in

Alaska

and

slightly

higher

operating

and

G&A

costs

related

to

employee

benefits.

And

finally,

the

retail

business

generated CAD

27

million

lower

normalized

EBITDA

contribution

on

a

year-over-year

basis

due

to the

combination

of

outsized

performance

in

the

fourth

quarter

of

2020,

which

was

driven

by

the

timing

of

PJM

fixed

costs,

and

the

timing

impact

of

swap

gains

between

the

third

and

fourth

quarters

of

2021,

the

latter

of

which

had

the

effect

of

pulling

profits

into

the

third

quarter

of

2021

rather

than

the

fourth

quarter

of

2021.

The Corporate

and

Other

segment

reported

a

normalized

EBITDA

of

CAD

1

million

compared

to

CAD 5

million

in

the

same

quarter

of

2020. The

CAD 4 million

year-over-year

decrease

was

driven

by

the

combination

of

higher

expenses

related

to

employee

incentive

plans

as

a

result

of

the

AltaGas's

rising

share

price

over

the

course

of

2021

and

the

monetization

of

Pomona

and

Ripon

in

2020.

During

the

quarter,

we

recognized

a CAD

271

million

pre-tax

impairment

on

the

Mountain

Valley

Pipeline

to

reflect

a

heightened

risk

and legal

challenges

associated

with

the

project

given

recent

court

rulings.

We

continue

to

believe

the

pipeline

would

be

completed

and

is

vital

to

long-term

energy

security

on

the

US

East

Coast,

but

the

impairment

reflects

some

of

the

recent

risks

on

the

project.

Subsequent

to

the

quarter-end,

AltaGas

closed the

sale

of

a

60 megawatt

stand-alone

energy

storage

development

project

in Goleta,

California

for

total

proceeds

of

approximately

CAD

15

million. AltaGas

also

agreed

to

sell an

interest

in

certain

Midstream

processing

facilities

to

a

customer

during

the

first

quarter

for

total

consideration

of

approximately

CAD 234

million.

The

transaction

is

expected

to

close

in

the

second

quarter

of

2022.

Turning

to

our

balance

sheet,

we are

maintaining

a

disciplined

approach

to

capital

allocation

within

a

self-funding

model

that

will

continue

to

strengthen

our

balance

sheet

and increase

financial

flexibility

over

the

medium

to

long term.

We

remain

steadfast

in

our

goal

to

reduce

our

net

debt-to-EBITDA

to

below

5

times

in

the

medium term.

2021

year-end

net

debt

was

CAD

8.3

billion

compared

to

CAD

8.2

billion

at

2020

year-end.

This

was

above

our

expected

levels

due

to

a combination

of

factors,

including

larger-than-expected

working

capital,

including

higher

gas

cost,

cost

of

gas

and

storage

within

the

Utilities

which

should

start

to

unwind

in

the

next

few

quarters.

Looking

ahead,

AltaGas

continues

to

focus

on

delivering

durable

and

growing

EPS

and

FFO

per

share

while

lowering

leverage

ratios.

We are

maintaining

our

2022

guidance

ranges,

including

normalized

EPS

of

CAD

1.80

to

CAD

1.95

per

share,

normalized

EBITDA

guidance

of

CAD

1.5

billion to

CAD

1.55

billion, and

a

capital

program

of

approximately

CAD

995

million.

And

with

that,

I

will

turn

it

back

to

the

operator

for

questions.

[Operator]

Thank

you.

Ladies

and

gentlemen,

we

will

now

conduct

the

analyst

question-and-answer

session.

[Operator Instructions]



Your

first

question

comes

from

Linda

Ezergailis

of

TD

Securities.

Please

go

ahead.

[Linda Ezergailis, Analyst, TD Securities, Inc.]

Thank

you.

Just

wondering

beyond

the

broad

industry

implications

on

recent

unfortunate

geopolitical

events

and

the

clear

value

of

Western

Canadian

and

North

American

energy

security

and

supply,

how

are

you

thinking

about

maybe

the

implications

that

might

have

on

AltaGas'

strategy

and

maybe

any

specific

operational

potential

impacts

beyond

constructive

demand

fundamentals?

[Randall L. Crawford]

Hi,

Linda,

good

morning. This

is

Randy.

Thank

you

for

the

question.

Specifically,

on

the

geopolitical

unrest

and

the

impact

on

AltaGas,

specifically,

I

would

say

there's

not

an

impact

overall,

but

as

I

said

in

my

prepared

remarks,

we're

seeing

a

lot

of

interest

from

foreign

markets

that

are

interested

in

controlling

their

destiny

around

energy

and

those

recent

events,

we

believe,

are

only

going to

bolster

that

appetite.

So,

we're

going

to

continue

to

work

with

these

entities

for

contracting

offtake at

the

plants.

And

so,

these

customers

are

looking

to

acquire

the

rights

to

output

and

I

expect

that

to

continue.

So,

that's

one

of

the

impacts

that

we're

clearly

seeing.

From

an

operational

perspective,

we

continue

to

deliver

and

the

team

is

doing

an

excellent

job.

[Linda Ezergailis, Analyst, TD Securities, Inc.]

Great.

And

just as

a

follow-up,

what

about

your

domestic

customers?

Are

you

seeing

rumblings

potentially

of

a

supply

response

to

meet

the

need

for

domestic

demand?

Or

is

it

still

too

early

to

see

that

those

conversations

picking

up?

[Randall L. Crawford]

Well,

I

think

that

definitely

that

we're

seeing

continued

importance

of

natural

gas

and

the

impacts

from

some

of

the

things

in

Europe

overall.

But

overall,

I'll

let

Blue

comment

on

specifically

with

the

utility,

but

we're

continuing

to

see

a

lot

of

activity

around

increasing

request

for

supply. Yeah, Blue?

[Donald M. Jenkins]

Yeah,

happy.

Hi,

Linda.

So,

we are

seeing

an

increased

response

in some

of

the

supply

basins

that

we,

of

course,

access

and

that's

primarily

driven

as

you

alluded

to

the

geopolitical

events.

We're

also

seeing

an

increased

focus

on

those

producers

responding

to

an

increase

in

the

climate

initiatives,

so

certifying

our

gas

and

those

type

of

things.

So,

I

think

it's

quite

positive

from

that.

We

certainly

haven't

had

any

access

issues

to

supply

and

when

we

go

out

to

talk

to

the

markets,

we

have

a

very

robust

response.

So,

we

see

that

all

as

quite

positive.

[Linda Ezergailis, Analyst, TD Securities, Inc.]

Thank

you.

And

maybe this

is a...

[Randall L. Crawford]

And, Linda, I'll

just

add

to

– I'm

sorry,

Linda.

I was

just

going

to add

that

from

a

pipeline

capacity

perspective,

right,

that

we

continue

to

need that infrastructure

to

be

built

out

even

to

have

that

supply

response.

[Linda Ezergailis, Analyst, TD Securities, Inc.]

Yes,

good

point.

And

just

maybe

a

quick

question

for

James.

With

the

asset

sales,

Midstream

and

the

Brush

power

plant,

what

would

be

the

EBITDA

contribution

from

those

sold

assets?

Can

you

confirm

that

this

is

either

credit

neutral

or

positive?

And

are

there –

I'm

just

curious

also

the

rational

for

selling

the

Midstream

assets

and

might

there

be

other

assets

sold

this

year?

[D. James Harbilas]

Thanks for

the question,

Linda.

Look, I

mean

at

the

end

of

the

day

when

we

look

at

the

Midstream

assets,

the

multiple

on

that

sale

is

roughly

9

to

10

times

EBITDA.

So,

you

can

back

into

the

foregone

EBITDA

from

close

to

year-end

on

that

number

and

we

don't

expect

it to

impact

our

guidance

ranges

and

we

see

it

as

credit

neutral.

I

mean

it'll

obviously

bring

down

our

net

debt-to-EBITDA

figure

from

where

it was

at

year-end,

get

us

closer

to

about

5.2

to

5.3

times

versus

where

we

exited

2021.

And

with

respect

to

the

decision

to

sell

it,

I

mean

it's

consistent

with

our

approach

around

creating

value

by

operating

these

assets

and

this

was

a

non-operated

interest.

So,

that

was

some

of

the

strategic

rational

beyond

us

exiting,

but

the

liquids

associated

with

this

plant

continue

to

be

dedicated

to

our

liquids

infrastructure.

[Linda Ezergailis, Analyst, TD Securities, Inc.]

That's

helpful

context.

Thank

you.

I'll

jump

back

in

the

queue.

[Operator]

Your

next

question

comes

from

Dariusz

Lozny

of

Bank

of

America.

Please

go

ahead.

[Dariusz Lozny, Analyst, BofA Securities, Inc.]

Hey,

good

morning

and

thank

you

for

taking

my

question.

I

was

just

wondering

if

you

could

comment

on

– there

was

the

report

in

a

US

news outlet

that

AltaGas

is

taking

bids

for

your

stake

in

one

of

your

Alaska

gas

utilities.

Just

wondering

if

you

could

touch

on

that

at

all

or

potentially

comment

on

whether

you'd

consider

selling

any

other

gas

utility

assets.

[Randall L. Crawford]

Yeah,

thank

you

for your

question. Obviously,

we've

talked

about

our

core

and

non-core

assets

and

utilities

assets

are

core,

and

I

won't

– I

cannot

comment

on

any

specific

asset

sale

as

you

can

appreciate.

But

we

continue

to

look

at

opportunities

and we

have

a

strong

track

record

of

recycling

capital

and

looking

at

ways

to

drive

shareholder

value.

But

philosophically,

our

strategic

objective

is

for

our

invested

capital

to

be

in

the

assets

that

are

always

providing

the

growth

dynamic

and

that's

what

we

look

at

with

all

of

our

assets.

So,

our

objective

is

to

position

our

assets

so

that

we

can

profitably

grow

and

leverage

the

asset

for

growth.

And

so,

that's

how

we

really

approach

this.

I

can't

comment

anything

specific

on

any

rumors

that

are

out

there.

[Dariusz Lozny, Analyst, BofA Securities, Inc.]

Okay.

No,

thank

you.

I

appreciate

that

color.

And

maybe

just

along

similar

lines,

obviously,

the

MVP

pipeline

is

having

some

delays

as

you

alluded

to

in

the

opening

remarks.

In

the

past,

you

had

said

that

you

would

consider

transacting

that

after

it's

in-service.

Any

changes

to

your

outlook

on

that

as

the

in-service

date

now

appears less

clear?

[Randall L. Crawford]

Yeah.

I mean,

I

think

we've said

that

we

would

be

patient

along

those

lines.

And

so,

I

don't

think –

just

a

comment

in

general,

right,

I

think

the

key

area

in

MVP

is

the

biological

opinion

and

once

we

get

clarity

on

that

and

if

that

gets

cleared,

I

think

everything

will

fall

into

place.

But

most

importantly,

the MVP

pipeline

is

consistent

with

what

I've

talked

about,

the

approach

of

the

US

needs

to

take

to

ensuring

access

to

clean

energy

from

burning

energy.

And

it's

not

that

long

ago,

as

you know, that

we're

importing

natural

gas

and

using

significantly

more

amounts

of

coal.

So,

now that

we've

created

the

cleaner

energy,

independent

country,

we

should

not

have

to

worry

about

those

same

concerns

that

they're

having

in

Europe,

but

we

can't

take

it

for

granted.

And

so,

this

is

a

really

important

pipeline,

and

we've

got

to continue

to

recognize

just

how

fortunate

we are

in

energy

in

North

America.

[D. James Harbilas]

Hey,

I wouldn't

mind

just

adding

that

I

don't

want

to remind

people

that

we

always

positioned

MVP

as

a

way

for

us

to

get

below

5

times

debt-to-EBITDA

quickly,

right?

So,

we

continue

to

believe

that

the

pipeline

will

be

built;

and

once

it

is,

we

can

get

to

below

5

times

through

monetizing

that

pipeline.

But

we

haven't

incorporated

into

our

2022

funding

plan,

which

I

think

is

an

important

thing

to

point

out

and

we're

not

reliant

on

the

sale

and

monetization

of

MVP

to

maintain

our

current

ratings.

We

can

continue

to

improve

our

credit

ratings

through

organic

growth

within

our

FFO

and

obviously

EBITDA

on

the

investments

we've

made

in

the

past.

So,

I

just want

to

make

sure

that

we

put

that

into

context

from

a

delay

standpoint

with

respect

to

this

non-core

asset.

[Dariusz Lozny, Analyst, BofA Securities, Inc.]

Got

it. Thank

you

very

much for

those

responses.

Appreciate

it.

[Operator]

Your

next

question

comes

from

Robert

Catellier, CIBC.

Please

go

ahead.

[Robert A. Catellier, Analyst, CIBC Capital Markets]

Yeah.

I

just

like

to

follow up

on

MVP,

some

of

your

equity

partners

have

taken

a

different

approach

on

the

level

of

impairments

they've

taken.

So,

what

does

this

mean

with

respect

to

alignment

on

the

project,

or are

the

partners

still

generally

aligned?

[Randall L. Crawford]

Oh, Rob, thanks

for

the

question.

Well,

absolutely,

I

think

partners

are

focused

to

get

this pipe – in

the

critical

nature

of

this

pipe.

So,

I don't

think

that's

changed

in

any

way.

[Robert A. Catellier, Analyst, CIBC Capital Markets]

Okay.

[D. James Harbilas]

Yeah,

Robert,

it's

James

here.

I

mean,

if

you

look

at

our

approach

to

the

impairment,

it

is

very

consistent

with

the

approach

that

the

operator

took.

So,

we

used

similar

probability

assessments,

obviously,

cash

flow

profiles

and

estimates

around

asset

retirement

obligations

if

the

pipeline

is

decommissioned.

So,

our

impairment

really

followed

the

assumptions

that

the

operator

use,

so

we're

closely

aligned

there

as

well.

[Robert A. Catellier, Analyst, CIBC Capital Markets]

Okay.

That was

going

to be

my

next

question.

Just

what

you

would

estimate

the

ARO

to

be, the

asset

retirement

obligations,

should

things not

work

out

the

way

you

envision

and

the

project ultimately

be

stopped?

[D. James Harbilas]

Well, yeah,

if you

look

at

NextEra's

filing,

I

think

they

disclosed

an

asset

retirement

obligation

of

roughly

[ph]



$400 million (27:31).

Our

obligation

would

be

above

10%

of

that,

which

is

our

equity

ownership

in

the

pipeline

and

that's

what

we

factored

into

our

model

when

we

ran

our

impairment

analyses.

[Robert A. Catellier, Analyst, CIBC Capital Markets]

Okay.

And

then

just couple

more

quick

ones

here,

but

just is

there

any

update

on

the

butane

export

license

progress?

[Randy W. Toone]

Hi,

Robert,

it's

Randy

Toone.

I

believe

right

it's

just

going

through

public

notification

and

that's

a

certain

number

of

days.

And

so,

we

should

have

that

license

here

probably

within

the

next

couple

of months.

[Robert A. Catellier, Analyst, CIBC Capital Markets]

Okay.

And

then

finally,

[ph]



so

a

thinly

available (28:15)

question,

but

how

would

a

non-operated

liquids

pipeline

enhance

your

business

if

one

should

become

available

in

the

market?

[Randall L. Crawford]

Okay.

I'm

sorry, Rob,

I

was

just

trying

to

understand

the

questions

just

like

that.

Look,

I

just –

again,

back

philosophically

that

we have

focused

on

creating

value,

we're

an

operating

company

and

we

add

value

through

our

model

of

operational

excellence

in

controlling

the

asset.

So,

we

think

that's

a

critical

part

of

how

we

operate

and how

we

add

value

to

our

customers

and

I

think

that's

kind of where

we

would

look

at

that.

[Robert A. Catellier, Analyst, CIBC Capital Markets]

Okay.

Thanks

very

much.

[Operator]

Your

next

question

comes

from

Robert

Kwan

of

RBC

Capital

Markets.

Please

go

ahead.

[Robert Kwan, Analyst, RBC Capital Markets]

Great, good

morning.

If

I

can

come

back

to

one of

the

answers,

James,

you

gave

earlier,

just

around

the

leverage

target

of

under

5

times

and

just

with

the

MVP delay,

are

you

really

just

linking

getting

there

with

MVP

only?

Or

if

you

think

about

the

uncertainty

and

the

extended

timeline,

do

you

see

other

assets

that

could

help

you

get

to

that

target,

maybe

if you

can

also

comment

on

just

some

of

the

recent

M&A

that

we've

seen

in

the

past

week

or

so

for

both

Midstream

in

Western

Canada

as

well

as

LDCs

in

the

US?

[D. James Harbilas]

Yeah.

So,

Rob,

my

comments

around

MVP was

that

if

we

were

able

to

– if

the

consortium

was

able

to

hit

its

original

in-service

date,

which

was

estimated

as

Q2

2022,

we

saw

it

as

an

immediate

way

for

us

to

get

below

5

times

and

that's

how

we

positioned

it

when

we

talked

about at

our

Investor

Day

and

rolled

out

our

guidance.

We

still

think

we

can

get

to

5

times

even

without

an

MVP

monetization.

It's

obvious

it's just

going

to take

us

longer

to

get

there

with

the

organic

growth

that

we

would

see

on

the

platform

and

when

we

run

our

models

five

years

out,

we

can

get

below

5 times

net to EBITDA (sic)

[net debt-to-EBITDA]

(30:21),

but

it

takes

time

without

the

monetization

of

MVP.

If

we're

able to

move

forward

with

it

in

2023

assuming

that's

the

new

in-service

date

once

we

go

through

some

of

the

–

once

we

revisit

the

biological

opinion

and

move

that

through

the

process,

then

obviously

we

can

get

there

in

2023.

So,

that's

what

I

meant

with

respect

to

that

asset.

I'll

defer

to

Randy

on

some

of

the

M&A

activity.

[Randall L. Crawford]

Thank

you,

Robert.

Appreciate

the

question.

And

so,

look,

my

comment

in general

about

some

of the LDC and

the

other

activity is

that

I'm

actually

excited

that

the

private

side

is

seeing

the

value

that's

intrinsic

in

these

assets

and

we're

going

to continue

to

work

to

extract

that

additional

value

and

improve

the

overall

value

of

our

utility

assets.

So,

overall,

that's

exciting

to see

that

recognizing

that

intrinsic

value.

[Robert Kwan, Analyst, RBC Capital Markets]

I

guess

just,

Randy,

with

you

mentioning

the

private

side

seeing

the

value

in

terms

of

trying

to

reach

that

leverage

target,

is

there

any

kind

of

thought

of

whether

it's

asset

or

a combination

of

non-MVP

assets

just

to

strike

while

the iron is hot and

get

yourself

to under

5

times?

[Randall L. Crawford]

Like

I

said,

I

don't want

to comment

on

anything

specific,

but

the

fact

is

I

think

our

management

team

has

shown

that

we

focus

on

creating

shareholder

value,

right?

But

we've

got

a

lot

of

additional

value

to

extract

in

investments

in

a

lot

of

these

assets.

So,

I

think

that

we'll

continue

to

look

at

opportunities

to

recycle

capital,

but

in

general,

I

think

we've

got

a pretty

good

track

record

of

that.

But

overall,

excited

about

the

fact

that

the

intrinsic

value

of these assets

is

being

recognized.

[Robert Kwan, Analyst, RBC Capital Markets]

Got

it. If

I

can

just

[indiscernible]

(32:02) a

couple

of

small

questions

on

guidance.

The

guidance

statement

specifically

called

out

that an

effective

21%

tax

rate.

I'm

just

wondering

if

there's something to read into that.

And

the

other

is

you've

highlighted

the

mix,

[ph]



Uts

versus

Midstream

and (32:18)

EBITDA.

Recognizing

it's

a

small

change,

but

Midstream

is

going

up

notwithstanding

MVP is

coming

out

of

this

year

and

you

also

have

the

asset

sale

you

just

announced.

So,

just

is

that

commodity

prices

or

there's

something

else

going

on

in

either of

the

two

segments

that's

changed

since

December?

[D. James Harbilas]

No.

So,

I

just want

to

address

the

first

part

of your

question

with

respect

to

effective

tax

rate.

I

mean,

we've

always

assumed

an

effective

tax

rate

of

roughly

21%

to

22%

when

we've

rolled

out

our

guidance.

So,

I

don't

think

there was

anything

unique

about

that.

We've

disclosed

it in

the

past.

If

I'm

following

your

second

question,

I

mean,

obviously,

we've

reaffirmed

the

guidance

range

that

we

rolled

out

at

our

Investor

Day.

The

asset

sales

that

I

referenced

in

the

past,

yes,

it'll

be

a

bit

of

a

grind

to

our

overall

EBITDA

between

the

close

date

and

the sale

date.

But

there

are

some

tailwinds

around

frac

spread

that

can

more

than

offset

that

and

that's

why

we're

not

going

to move

our

guidance

range.

We're

still

going to

land

within

that

guidance

range

and Midstream

will

benefit

from

some

tailwinds

on

frac

spread

that'll

help

to offset

some

of

the EBITDA

that

we'll

lose

by

closing

this

transaction.

[Robert Kwan, Analyst, RBC Capital Markets]

Got

it.

Okay,

thank

you.

[Operator]

Your

next

question

comes

from

Jeremy

Tonet

of JPMorgan.

Please

go

ahead.

Hi, guys.

This

is

[ph]



Steve (33:47) on

for

Jeremy.

Just

a

couple

from

me.

As

far

as

the

flooding

goes,

are

there

any

long-term

impacts

on

your

strategy

going

forward?

Is

there

any

possible

steps

you're

thinking

about

taking

to

kind

of

help

avoid

repeating

this

in

the

future?

[Randall L. Crawford]

Yeah,

[ph]

Steve (34:08),

thanks

for

the

question,

sir.

Overall,

I

think

the

optimization

of

our

ports

and

the

activities

that

the

team

did

to

manage

through

this

was

excellent

and

we're

always

taking

–

looking

at

a

variety

of

things

around

unit

trains

and

optimization

in

storage

that

can

only

enhance

and

mitigate

some

of

these

impacts.

This

was

quite

a significant

event,

but

certainly

we're

taking a

variety

of

different

optimization

steps

to

ensure

that

we

can

move

our

products

consistently

every

day.

Randy,

do want

to add

anything

else

to

do

that?

[Randy W. Toone]

Sure. Yeah,

the

railroads

are a

very

important

piece

of

the

supply

chain

for

Canada

and

that

was

a

significant

outage

for

them

and

they

are –

the

railroads

are

trying

to

build

their

own

resiliency

into

their

network

and

so

through

force-fires,

through

floods,

they're

trying

to

build

that

resiliency

in

themselves

along

with

what

Randy

said

that

we're

building

in.

Got

it.

And

then

as

far

as

I

know

with

the

blend

and

extend

contract

with

Gordondale

and

then

there're some

contracts

coming

up

again

in

2022.

So,

I

just

wanted

to

see if

a

similar

contract

agreement

would

be

viable

for the

ones

that

are

coming

out

soon.

Would

you

look

to

do just – you're

maintaining

the

[ph]



cost

of

service

on

the ones that have

cost

of

service (35:33)

and

just

how you

think

about

that

going

forward?

[D. James Harbilas]

Yeah.

I

think

that

I

know

the

ones

that

you're

referring

to

that

shows

they're

coming

up

and

unfortunately

our

website

is

a

little

out

of

date,

so

thanks

for

pointing

that

out

and

we

will

update

that.

But

we

don't

have

any

immediate

contracts

that

are

coming

up

for

renegotiation

that

would

subject

us

to

any kind

of

blend

and

extend

discussions

with

customers.

So,

we

apologize

for

that

on

the

website.

Understood.

But beyond

that,

with

the

blend

and

extend

contract

always

on

the

table,

just

how

do

you

favor

contract

terms,

I

guess?

[D. James Harbilas]

So,

when

you

say –

I mean,

look,

typically

the

approach

that

we'll

take

on

a

blend

and

extend

is

obviously

to

try

to

keep

the

same

NPV

on

these

contracts,

right?

So,

if

we're

going to

drop

the

rates,

we're

looking

for

some

extended

terms,

so

that

when

we

do

an

NPV

calculation,

we

can

more

or

less

maintain

the

returns

that

we're

going

to generate

on

those

contracts.

I

mean, if

your

question

is

philosophical,

that's

the

way

we'll

typically

try

to

approach

it

and

obviously

the

rates

on

those

contracts

that

are

coming

up

for

renegotiation

need

to

reflect

where

the

market

is

as

well.

Got

it.

Appreciate

the

color

guys.

[Operator]

Your

next

question

comes

from

Rob

Hope

of

Scotiabank.

Please

go

ahead.

[Robert Hope, Analyst, Scotia Capital, Inc.]

Morning,

everyone.

I

want

to go

back

to

the

gas

processing

sale.

Kind

of

what

was

the

genesis

of

this?

Does

it

change

how

volumes

are

allocated

to

that

specific

facility

and

does

it

also,

I

would

say,

alter

the

fee

structure

for

the

remaining

volumes?

[D. James Harbilas]

So,

Rob,

it's

James

here.

No,

I mean, look,

at

the

end

of the

day,

the

liquids

associated

with

that

processing

facility

continues

to

be

dedicated

to

our

liquids

handling

infrastructure

in

the

region.

So,

what

we're

forgoing

obviously

is

the gas

processing –

our

share

of

the

gas

processing

fee

when

we

had

that

non-operated

investment.

That's

what

we're

forgoing.

It

doesn't

really

change

anything

else

about

the

remaining

footprint

or

the

way

we

run

our

business,

because

it

was a

non-operated

interest.

[Randall L. Crawford]

And

I'll

just

add,

we

just

don't

see

this

transaction

having

any

adverse

impacts

or

impact

on

our

overall

Midstream

and

energy

export

value

supply

chain.

[Robert Hope, Analyst, Scotia Capital, Inc.]

All right.

Appreciate

that. And

then

just

moving

over to

RIPET

and

Ferndale,

we've

seen

FEI kind

of

diverge

here

recently

from

Bellevue

and

even

more

so

from

Edmonton.

So,

as

you

take

a

look

at

your

hedging

profile

through

the

rest of

the

year,

you're

pretty

good

for

Q1,

but

it

goes

down

quite

quickly

for

Q2

and

beyond.

Are

you

looking

to layer

on

more

hedges

here

or

is

this

an

opportunity

to

go

out to

your

longer-term

customers

and

get

more

tolled

volumes

here?

So,

kind

of

how

are you

balancing

duration

for

kind

of

near-term

torque?

[Randy W. Toone]

Rob,

it's

Randy

Toone

here.

We're

going

to

take

advantage

of

the

higher

FEI

prices

and

layer in

more

hedges

when

–

we're

just

looking

at

the

April

1

supply

and

we

just

want to

make

sure

that

those

supply

agreements

are

going to

line

up

with

our

hedging.

So,

you'll

see

more

hedging

come

in

here over the next – probably

over

the

next

few

weeks,

so.

[Randall L. Crawford]

And I

will

also

add,

the

macro,

it

lines

up

obviously

quite

well

and

that

we'll

continue

to

layer those in,

as

Randy

had

said,

but

we'll

focus

on

also

optimizing

our

network

to

get

increased

volumes

and

to

continue

to

meet

the

demands

of

our

customers.

So,

I

think

it

all

goes,

but

I

think

the

macro

is

setting

up

reasonably

strong

for

the

year

for

us.

[Robert Hope, Analyst, Scotia Capital, Inc.]

Thank

you.

[Operator]

Your

next

question

comes

from

Ben

Pham

of

BMO.

Please

go

ahead.

[Ben Pham, Analyst, BMO Capital Markets Corp. (Canada)]

Hi,

thanks.

Good

morning.

I

wanted

to

start

with

your

comments

around

de-risking

your

business

over time,

and

I'm

wondering to

your

comments

around

the geopolitical

risks

and

tight

supply,

commodity

prices

rising,

[ph]

is

that

enough

(39:46) or

has that

changed

your

view

on

maybe

the

pace

at

which

you're

looking

to

de-risk

or

hedge

your

business

over

time

or

it's

status

quo

from

before?

[Randall L. Crawford]

Hey,

thanks.

No,

what

I

was

implying

is

that

we've

been

consistently

having

discussions

with

the

markets

about

wanting

them,

they

want

to reach

back

and

control

our

destiny.

And

the

team

and

Randy

have done

an

excellent

job

of

sort

of

validating the

fact

that

we

can

deliver

consistently

to

Asia, the

energy.

And

so,

I

think

that

as

we

look

forward,

right,

we're

going

to see

the

market

reaching

back

and

entering

the

longer-term

type

of

tolling

arrangements

as

well.

So,

that

really

hasn't

modified

our

strategy,

I

think

it

just

looks

that

it's

sort

of

the

next

step

as

we

validate

this

strategy

for

customers

to

reach

back.

And

I

think

this

tragic

events

that

are

happening

just

underscores

the

importance

of

being

able

to

control

your

destiny

and

have

access

to

energy

from

reliable

sources

and

diversity

of

that.

So,

that's

what

I

was

referring

to

and

I

think

it

just

enhances

our

strategy.

[Ben Pham, Analyst, BMO Capital Markets Corp. (Canada)]

Okay.

And

maybe

I

can

switch

to

Utilities,

you

mentioned

6%

EBITDA

growth,

rate

base

going

up

8%.

Can

you

provide

perhaps

where

earnings

went

for

2021?

And

then

also

where

you

did

land

on

the

ROE?

[Randall L. Crawford]

Sure.

I

think

overall,

right,

what's

been

driven

is

the historical

investments

that

have

lowered

leaks,

reduced

cost

and

such

that

we've

done

and

we've

continued

to

make

improvements

in

the

business,

improving

the

service

levels

and,

as

you

referenced,

the

overall

EBITDA.

And

so,

I

think

we

made

significant

progress

building

this

team

and

improving

return

on

equity,

[ph]



I don't have

that (41:41)

in

front

of

me, but

I

believe

about

0.75

or

so

was

the

improvement

in

the ROE

this

year

in

the

basis

points,

but I'll let

James answer.

[D. James Harbilas]

Yeah. No,

that's

right,

Randy.

We're still

about

0.6

to

0.7

short

of

our

allowed

ROE

and

we

have

made

progress,

as

Randy

touched

upon.

Obviously,

we

had

some

headwinds

in

the

fourth

quarter

that

directly

went to

us

addressing

customer

service

issues

where

we've

made

tremendous

progress

there,

and

we

see

those

costs

as

transitory.

We

don't

see

them

as

ongoing

now

that

we're

starting

to

approach

the

service

levels

that

we

need

to

approach

on

the

customer

service

side.

[Ben Pham, Analyst, BMO Capital Markets Corp. (Canada)]

Okay,

that's

great.

Thank

you.

[Operator]

Your

next

question

comes

from

Andrew

Kuske

of

Credit

Suisse.

Please

go

ahead.

[Andrew M. Kuske, Analyst, Credit Suisse Securities (Canada), Inc]

Thank

you.

Good

morning.

I

guess

this

question

for

one,

if

not

both

of

the

Randy's

on

the

call.

And

it's

really

when

you

think

about

the

transactional

activity

we've

seen

in

Western

Canada

most

recently,

what

do you

think

that

means

for

asset

values,

but

then

also

the

competitive

dynamics?

Greater

presence

of

private

capital

in

the

basin

and

just

competitively

how

does

it

affect

you

and

your

footprint?

[Randall L. Crawford]

Sure. Andrew,

well,

first

of

all,

I

think

that

we are –

our

core

competency

of

being

able

to

export

in

attached

global

markets

makes

us

quite

distinctive

from

that

standpoint.

And

I

think

that

–

and

certainly

with

the

rising

energy

prices

and

the

need

to

get

to

these

valued

markets,

I

think

that

puts

us

in

a

strong

position

vis-à-vis

our

competitors.

I

think

what

you

see

in

the

basin

is

that

a

lot

of

efficiencies

and

consolidation

with

regard

to

that

that

are

driving

those

types

of

transactions.

But

overall,

I

think

that

when you

remain

competitive,

you

look

at

your

cost

structures

and

you

focus

on

your

customers

and

give

better

access

to

markets,

I

think

that

really

will

allow

us

to

be

– continue

to

be

distinctive

and

to

grow

our

footprint

and

increase

shareholder

value.

[Andrew M. Kuske, Analyst, Credit Suisse Securities (Canada), Inc]

That's

helpful.

And

then

maybe

this

is

a

two-parter

for

the

second

part

of the

question

and

it

really

winds

up

being

on

the

hedging

around

those

export-oriented

businesses,

which

you

manage

to

grow,

but

you

also

have

this

interesting

opportunity

to

expand

and

continue

to

optimize

the

cost

structure

of

those

businesses.

So,

how

do

you

think

about

the

hedging

right

now

on

the

current

market

environment

versus

open?

And

do

you

triangulate

for

really

your

capital

projects

in

the

future

on

the

expansion

plans,

whether

it

be

RIPET

or

Ferndale?

[Randall L. Crawford]

When

we

look

at

hedging,

look,

we

focus

on

that

in

terms

of

managing

our

cash

flows

and

then as

we

look

through

at

our

earnings

and

plan,

but

we

always

are

looking

to

optimize

those

assets.

So,

more

broadly, like,

we're

looking

at

improving

our

logistics,

driving

down

our

operating

cost

and

that

comes

with

the

scale

that

we're

building

across

the

entity

going

forward.

So,

we

look – as

we

move

forward

with

our

customers

and

move

more

toward

a demand

pull

and

tolling,

that's

clearly

another

way

of

hedging

overall.

And

so,

I

think

that's

our

strategic

approach

over

time

is

to

continue

to

do

that,

and

to

activate

– actively

monetize

the

merchant

activity

to

the

extent

that

we

can

optimize

the

capacity.

[D. James Harbilas]

And,

Andrew,

I'll

just

add.

I

mean

Randy

Toone

touched

on

one

of

the

critical

factors

that

we

consider

when

we're

looking

to

hedge

and

that's

having

clear

visibility

into

the

supply,

the

quantity

of

supply

that's

available

in

the

market

and

the

timing

of

that

as

well.

So,

that

factors

into

our

decision

making

in

terms

of

when

we're

executing

those

hedges

as

well.

So,

even

though

we're

hedged at

a

lower

percentage

between

Q2

and

Q4,

as

Randy

Toone

touched

on,

you

can

expect

that

to

go

up

as

the

contracting

season

kicks

in

on

April

1,

and

we

get

better

visibility

into

the

timing

and

quantity

of the

volumes

that

are

available.

[Andrew M. Kuske, Analyst, Credit Suisse Securities (Canada), Inc]

Okay,

that's helpful.

And then,

James,

if

I

could

just sneak

in

one

more

and

it

really

is

on

your

comment

on

the

working

capital,

like,

obviously,

with the

gas

prices

moving

upwards

and

generally,

you're

passing

through

their

cost

of

gas

to

the

end

user.

But

just

for

clarity,

you

have

– I

would

assume

you

have

effectively

[ph]



metric

released (46:06)

from

the

debt

raters

just

given

the

current

circumstances.

[D. James Harbilas]

Sorry,

Andrew, I'm

going

to apologize.

I

did

not

catch

the

last

part of

your

question.

It

came

across

a

little

pixilated.

Can

you

repeat

that

last

part,

please?

[Andrew M. Kuske, Analyst, Credit Suisse Securities (Canada), Inc]

Sure.

So,

just

given

the

fact

that

you

pass

through

the

cost

of

natural

gas

to

the

end users

in

the

regulated

utility

businesses,

the

fact

that

your

working

capital's

increasing

right

now

just

given

it's

winter,

given

the

fact

we

got

gas

prices,

like, you're

not

getting

any

negative

blowback

from

the

debt

raters

at

this

point

in

time,

just

given

your

regulatory

protections?

[D. James Harbilas]

No,

no.

Yeah,

no, I

appreciate

that

clarity.

We

aren't,

I

mean,

if,

obviously,

the –

to

put

it

into

perspective,

the

55

Bcf

of

storage

that

we

have,

the

cost

of

that

gas,

our

weighted

average

cost

of

gas

is

75%

to

80%

higher

year-over-year

and

from a –

it

will

unwind.

We'll

start

to

collect

it,

but

the

rating

agencies

specifically

give

us

an

allowance

for

the

cost

of that

gas

because

of

the

pass-through

nature

that

you

touched

on.

So,

it

wouldn't

be

a

drag

to

our

FFO

to

debt

metrics

with

S&P.

[Andrew M. Kuske, Analyst, Credit Suisse Securities (Canada), Inc]

Okay,

that's

great.

Thank

you.

[Operator]

Your

next

question

comes

from

Patrick

Kenny of

National

Bank.

Please

go

ahead.

[Patrick Kenny, Analyst, National Bank Financial, Inc.]

Oh,

thanks

guys.

Just

a

quick

follow-up.

You

touched

on

the

LPG

supply

re-contracting

season

this

spring.

But

just

given

the

pause

on

activity in Northeast B.C.

and

how

tight

fractionation

capacity is

in

Western

Canada

right

now,

if

you

do

have

to

reach,

say,

further

into

the

Bakken

or

other

basins

to

backfill

supply,

just

curious

what

impacts,

if

any,

there

might

be

on

your

export

margins

year-over-year.

[Randall L. Crawford]

I'll

let Randy

comment

on

that

maybe

more

specifically.

But

we're

actively

looking

to

source

volumes

from

the

Bakken

and

other

basins

and

certainly

there

might

be

some

margin

differential

because

of

cost.

But

overall,

having

the

best

markets

for

those

products

is

certainly

helpful

in

that

sense.

So,

I

look at

it

as

incremental

as

we

go

to

the

other

basins

going

forward

from

our

plan,

but

Randy,

answer

that.

[Randy W. Toone]

Yeah. So, look,

we're

quite

confident

in

the

supply

come

April

1

out

of

Western

Canada,

so

either

Northeast

B.C.

or

Fort

Saskatchewan.

The

Bakken

is –

logistically

it's

– we

have

to

get

rail

cost

down

to

really

make

those

economics

work.

But

we

are

working

on

a

number

of

initiatives

to

make

that

happen

over

the

next

one

to

two

years.

But

we

feel

that

we

can

meet

our

targets

sufficiently

with

the

volumes

in

Western

Canada.

[Patrick Kenny, Analyst, National Bank Financial, Inc.]

Okay,

that's

great.

And

then,

James,

just

on

the

recent

hybrid

issuance

and

I

guess

the

associated

redemption

of

the

Series

J

prefs,

looks

like

the

math

was

a no-brainer

on

that

one.

I

know

you have

some

time

here,

but

how

are

you

thinking

about

other

potential

pref

redemptions? I

think

the

Series

C

is

due

this

fall

and

then a

few

more

still

to

come

over

the

next

couple of years.

But

just

curious

how

the

math

might

be

looking

today

assuming

you

can

refi

with

hybrids

along

the

way

on

similar

terms

as

this

most

recent

one.

[D. James Harbilas]

Yeah,

great

question,

Pat,

and

obviously

we

have

been

very

active

in

terms

of

trying

to

replace

hybrid

prefs

with

hybrid

instruments

with

a

cost

advantage

that

you

touched

on.

I

mean

we're

going to

continue

to

monitor

the

markets

in

terms

of

cost

and

accessibility

between

now

and

when

we

have

to

make

that

decision

this

fall

when

Series C

comes

up

for

rate

reset.

I

mean

if

I

look

at

even

where

the

underlyings

have

gone

and

some

of

the

spreads

just

given

interest

rate

pressures

that

everyone is

seeing

across

the

curve,

I

still

think

that

we

can

make

Series C work,

but

I don't

want

to

make

that

determination

now. We'll

have

to

wait

until

we

get

closer

to

that

redemption

date

and

make

the

call

now,

but

we are

open

to

it.

We're

going to

continue

to evaluate

it

and

do

what's

best

from

[indiscernible]



(50:21)

cost

standpoint

between

those

two

instruments.

[Patrick Kenny, Analyst, National Bank Financial, Inc.]

Okay,

that's great.

I'll

leave

it there.

Thanks.

[D. James Harbilas]

Thank

you.

[Operator]

Your

last

question

comes

from

Linda

Ezergailis

of

TD

Securities.

Please

go

ahead.

[Linda Ezergailis, Analyst, TD Securities, Inc.]

Thank

you.

Just

a cleanup

question

on

your

maintenance

capital.

Just

curious

what's

driving

the

increase

year-over-year.

Do you

have

any

facilities

that have

planned

outages?

And

maybe

you

could

give

us

some

context

as

to

what

they

are

in

which

quarter.

And

then

given

that

maintenance

capital

is

going

up

in

2022,

do we

revert

to

a

run

rate

beyond

this

year

looking

more

like

the

last

five

years

of

CAD

20 million

to CAD

35

million?

Or

do

you

expect

due

to

inflationary

factors

that

maybe

there will

be

some

sort

of

a

discrete

step-up

beyond

this

year

as

well?

<: Hey,

Linda,

it's

James.

So,

yeah,

the

maintenance

CapEx

in 2022

is

going

to

be a

little

higher

because

we

had

a

few

turnarounds

that

we

deferred

from

2021

into

2022.

We

expect

to

do

those

between

Q2

and

Q3

of

this

year

and

obviously

under

our

contracts,

we're

able

to

flow

through

the

cost

of

those

turnarounds

to

end use

customers.

So,

we

don't

anticipate

inflation

being

an

issue.

[Linda Ezergailis, Analyst, TD Securities, Inc.]

Okay.

Thank

you.

And

as

another

follow-up,

there

is

the

potential

for

CP

to

go

on

strike

mid-March.

What

impact

might

that

have

on your

operations

and

how

might

you

be

able

to

mitigate

that

if

they

do

go

on

strike,

hopefully

not

for

too

long,

but

just

give

us

a

sense

of

how

you're

thinking

about

that?

[Randy W. Toone]

Hi,

Linda,

it's

Randy

Toone.

We

use

CP

and

so

– but

not

– for a

small

part

of

our

business.

Most

of

our

railcars are

on

CN.

So,

we

do

see

it

having

a

small

impact,

but

we

don't

see

it

as

a

material

impact

and

as

we

saw

with

other

strikes

with

the

railroads,

they

don't

last

very

long.

[Linda Ezergailis, Analyst, TD Securities, Inc.]

Great.

Thank

you.

[Operator]

Ladies

and

gentlemen,

this

concludes

the

Q&A

portion

of

today's

call.

I

will

now

turn

the

conference

back

to

Mr.

McKnight.

Please

go

ahead.

[Adam McKnight, Director-Investor Relations, AltaGas Ltd.]

Thanks,

Michelle.

Thank

you

everyone once

again

for

joining

our

call

today

and

for

your

interest

in

AltaGas.

And

as

a

reminder,

we

will

be

available

after

the

call

for

any

follow-up

questions

that

you

might

have.

That

concludes

our

call

this

morning.

I

hope

you

all

enjoy the rest

of

your

day.

You

may

now

disconnect

your

phone

lines.