Q3 2024 AltaGas Ltd Earnings Call
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Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Outfit Outfit Guest, 3rd quarter 2024 financial results conference call. My name is Ludy and I will be your operator for today's call. All lines have been placed on YouTube event and a background noise.
If you have any difficulties hearing the conference, please press star, zero per operator assistance at any time. After the speaker's remarks, you'll be a question and answer session. As your reminder, this conference call is being broadcast live on the Internet and recorded.
Speaker Change: I would like to turn a conference over to Aaron Swanson, Vice President and Vester Lations. Please go ahead, Mr. Swanson.
I'm not a fan of you.
Good morning, thank you for joining Out to Gasses, third quarter, 2024 results conference call.
Speaker Change: Speaking this morning, we'll be very new President and Chief Executive Officer and James Harvelis, Executive Vice President and Chief Financial Officer.
We're also joined by this morning by Randy Tune, President of our midstream business, Blue Jenkins, President of our Utilities Business, and John Morrison, Senior Vice President of Corporate Development and Investual Relations.
This call is being webcast and we encourage falling along with the supporting slides that can be found on our website.
Lastly, I'll remind everyone that we'll refer to forward-looking information on today's call. This information is subject to certain risks and in certainties, as outlined in the forward-looking information disclosure on slide 2 in our presentation.
As always, prepare remarks we follow by an analyst question and answer period. I'll now turn the call over to Vern.
Thanks Aaron, good morning and thanks for joining us today. It's great to be here to review our strong Q3 results.
Vern: All start with some key highlights from the quarter, provide an update on our major projects, and discuss the supply and demand trends in the energy markets that are providing us with strong growth opportunities.
Then I'll provide an update on our recent regulatory spy links.
and I'll close with an update on our recent customer advocacy efforts at WGL.
Let's move to slide forward. We deliver a normalized deep-to-depth of 294 million in Q3, which represents 17% growth year over year, while normalized EPS was 14 cents, nearly double last year.
Vern: These results are modestly ahead of our expectations.
Vern: We now anticipate 2024 normalized the Buddha to be in the upper end of our guidance range, which James will touch on later.
Vern: We delivered record global export volumes in Q3 with more than 128,000 barrels a day of LPGs exported to Asia.
Vern: The spite, weak natural grass prices are operating performance across our midstream platform as strong. With gas processing, fractionation, liquid handling, and extraction volumes all experiencing double-digit growth year over year.
Vern: Performance in our Utilities Business was ahead of our expectations, despite warmer than normal weather in Michigan and DC.
Vern: Strong performance of the utility was driven by the partial settlement of Washington, Gazz's post-retirement benefit pension plan continued capital investments across the network and active cost management.
These capital investments may have got system safer, more reliable, and add more customers who can take advantage of the affordable and reliable energy that we deliver every day.
We continue to position our business for long-term growth.
Reef and pipes down to our showing strong construction progress, and both projects remain on time and on budget.
Vern: During the quarter we saw the benefit of higher volumes at North Pine with the completion of a 5,000 barrel per day, the bottlenecking project, allowing the facility to deliver 11% growth year over year.
We invested nearly $19 million into our utilities during the quarter, with more than half of that focused on modernization capital to ensure safe and reliable service, while also delivering steady-rate-based growth.
We finalized an advanced, a good number of mainstream commercial agreements during the court.
At Townsend we just finalized two gas prices in contracts for a total of 100 million cubic via day of capacity, with a large global investment grade energy company.
Vern: The contracts have a high single digit average contract length and cover a fractionation in liquid sandlet.
Vern: The customer is already towing through our global exports platform.
This Timron straights how supply is growing in northeast BC for LNG Featstock and how producer activity has accelerated over the past 12 to 18 months.
We also extended a gas processing and liquids marketing contract at Pipe Stone 1 with a large Canadian investment grade producer for five years.
This reiterates the strong demand for deep cut process and capacity in the Alberta Monty, which underpinned our decision to acquire the pipes known assets.
We continue to advance commercial agreements for phase one of Reef.
and are very comfortable in achieving our long-term toll and target across the poor Fulio.
Once we reach our target, some of the towing demand will be satisfied by phase two of Reef.
Vern: Let's now move to the midstream project execution update. I'll start with Reef. Work on the jetty is going well. We now have driven 20 piles of no major weather challenges to date.
On site, we're now six weeks into blasting and overburden removal. We have moved more than 7,000 truckloads of soil and we're about 10% complete.
This site work aligns with our schedule to be in service by late 2026.
Vern: Outsight activities are also moving along nicely with compression, refrigeration, storage and vessel fabrication having been started in controlled manufacturing environments.
Vern: We have fixed price the EPC contracts for approximately 50% of Reeves' total capital cost, and we have plans to reward more fixed price DPC contracts as we move along the execution plan.
at Pipe Stone 2, construction does also progress in the wall.
All of Earth's wrecks are complete and piling in concrete work is advancing.
Vern: The gas gathering system is nearly complete, and the facility construction is moving along nicely. Again, the majority of this work takes place offsite in controlled environments.
Over 90% of the project's capital costs are now locked down with fixed price EPC contracts and the project remains on track for a year and 2025 in service state.
Where 100% of the project's revenues are backed by long-term take-up-a-pave contracts.
We are excited about the long-term outlook for the morning.
and our assets in the region. On slide 6 we highlight our outlook for this, and why we continue to make ongoing investments in the region.
Vern: The Mont News, one of the most prolific resource plays globally, and it will be the center of Canadian National Gas and NGO development for decades to come.
Nearly 70% of all Canadian gas, well, licensing activity is now focused on the play.
Through port volumes that are not in the assets, have grown by double digit percentages over the past two years, and the recent contracts at Townsend and Pipestone reinforced the scroath.
All of this production will naturally want to move to the best markets. This means flying west to Asia, providing long-term structural growth for our global exports platform.
Vern: Turning to utilities, we want to take some time to update you on the emerging data center growth opportunity shown on slide 7.
Current expectations are by 2030, data center power demand will be three times what it is today. And data centers will consume more than 10% of total U.S. power demand by the end of the decade.
The energy requirements for data centers are daunting, and it's becoming increasingly obvious that all forms of energy will need to meet this demand. And that natural gas will play a critical role.
Vern: This opportunity will further support our long-term utilities growth and augment our already robust growth trajectory.
Vern: Within Washington Gas, we're progressing multiple commercial discussions with data center developers, where we're working to provide natural gas as the primary energy source, or have natural gas provide backup energy when there's insufficient power from the grid.
Vern: We are progress in gas supply and engineering work and it's important to know we're doing this on a highly de-risk basis with developers putting the upfront costs.
Vern: Our current expectation is that capital for these projects will be regulated, rate-based investments.
But this rape is will likely have unique and accelerated rape structures.
Vern: Theator centers look to be part of our long-term growth opportunity and we're excited about adding new customers that would be among our largest users of natural gas.
We continue to be active on the regulatory front, where we file the new ray case and submit it a proposed three year ARP Modernization Program Extension in DC.
The latter filing for system modernization includes a request to invest 215 million US over the next three years.
Vern: These filings are part of our ongoing regulatory strategy. While you'll see us actively filing annual ray cases to minimize rate lag, as we invest capital into our network.
Having up to date, ARP programs ensures that we're balancing the need to enhance our system's safety and reliability while ensuring our shareholder's getting an appropriate return on their capital.
Finally, I wanted to discuss a recent advocacy initiatives on behalf of our customers.
Vern: Two weeks ago, Washington Gas, along with local unions, restaurant associations, business councils, housing and building associations, by two statements of claim, challenging proposed gas bands and DC and Maryland.
We strongly believe that customers have the right to choose their energy supply.
and we believe that natural gas is the most affordable, reliable, and missions friendly form of energy in the DMV.
Our actions in conjunction with our partners are necessary to protect the rights of our customers, the choose, the best energy source to meet their everyday needs.
Vern: Our statements are claim or similar to the legal efforts taking place in other jurisdictions in the US where gas fans are being challenged.
A great example is in Berkeley, California, where the federal court recently overturned the gaspin.
That decision affirmed that the federal law preempts at local gas ban and these local gas ban do not fully account for the broader implications of customer wants and needs regarding energy reliability and affordability.
As we said in the past, we're here for customers, we always advocate for their best interests.
Speaker Change: And with that, I'll turn the call over to James to provide more detail on Q3 and our Forward Outlook.
James Harvelis: Thank you, Vern, and good morning, everyone.
The third quarter was another period where we focused on operational excellence, advanced search strategic priorities, and progressed key growth projects, all of which position all the guests were continued value creation in the years ahead.
In terms of the financial operating results for the second quarter, we'll start with the midstream segment on slide 9.
[inaudible] We're going to talk about the number of 111 million in the world.
As we discuss on our second quarter conference call, we expected the Alberto Wilde Fires in the potential for national rail strikes to impact operations in July and August.
While the railstrikes were short-lived, they did drive higher one-time operating costs and the delay of one cargo that slipped into Q4.
Despite these challenges, the organization was able to deliver another record quarter for global export volumes through strong planning, logistics management and execution.
We exported more than 128,000 barrels per day of propane and butane in the quarter, spread across 21 VLGCs, which represents a 9% year-over-year increase.
Vern: This included nearly 70,000 barrels per day being exported at Rippet and more than 58,000 barrels per day at Ferndale.
This was also a record quarter for Ferndale with export volumes up 22% year over year, and largely offset the rail interruptions, which principally impacted RIPIT.
The operational flexibility we demonstrated reinforces the value of owning multiple export terminals to overcome short-term disruptions when they arise.
As a reminder, the summer months are the strongest period for exports at Ferndale due to our pipeline connectivity to local refineries and available beauty and supply, which is not required for summer gasoline specs.
We have also recently benefited from the commissioning of TMX and more Canadian crude in the Washington refining market as it has a higher view-tain content that can be recovered and exported.
Despite extremely low Canadian natural gas prices during the quarter performance across the mainstream platform was strong and speaks to this strategic location of our assets in the most prolific resource plays.
Fraction, extraction and liquids handling volumes were up 20% year-year, supported by the addition of 5-stone 1 and strong volume growth at her matten, Northpine, younger and e.
Gathering and processing volumes were up 10% year over year, underpinned by the addition of five stone one and strong volume growth at our hermaten, towns and Blair Creek facilities.
Vern: In terms of financial performance.
Strong Volume Growth across global exports and the broader midstream value chain was offset by lower export margins, including the impact of higher tolling volumes, higher one-time operating costs, lower contributions from the mountain value pipeline, as well as higher L-tip costs due to all-tigasses rising share price.
Turning to utilities on slide 10, normalized EBITDA was 117 million in the third quarter, representing a 65% increase from Q3 of 23.
Year over year growth was driven primarily by four major factors, the partial settlement of Washington Gas's post-retirement benefit pension plan.
On going investment in our asset modernization programs, ongoing cost management initiatives across Washington, gas and semco, and the benefit of new rates being in place in DC.
These factors were partially offset by the impact of the Maryland rate case. Detraced asset optimization activities at Washington Gas and the number of weather in Michigan and D.C. Where all the gas does not have weather normalization, and heating degree days were 60% below normal levels.
During the quarter, we deployed $187 million of invested capital in the utilities on behalf of our customers.
Vern: This included a hundred million across our various asset modernization programs in the DMV and Michigan, which improves the safety and reliability of our system and reduces leaks.
In addition to our modernization programs, our utilities and investments are focused on new meter growth through servicing customer additions, maintenance on the system, and regional expansion opportunities.
Vern: Within the corporate and other segment, normalized EBITDA was a loss of $4 million to insistence with the same quarter of 2023.
Turning to slide 11, we're excited to be in a period of strong midstream growth, with rising throughput volumes across the platform and the reef and pipe stone tube projects under construction.
We have been here before and reiterate our track record of successful project execution.
We have a strong history of delivering large midstream projects on time and on budget.
Our last series of major mystery and growth projects, total $1.5 billion.
Vern: These projects were all delivered on time and 8% below budget.
Vern: We are seeing strong execution on Reef and Pipestone to the day and we'll continue to update the market on major milestone achievements as the projects progress.
Turning to slide 12, the Mountain Valley Pipeline had a successful first full quarter of operation, with the 20-year firm contract stating a fact on July 1.
The pipeline operated is expected in the quarter and is playing a strong role in connecting upstream production in the Marcellus in Utica to strong and growing downstream demand in key Eastern U.S. markets.
Vern: The 2VCF per day pipeline can be expanded with the partners currently evaluating the addition of another 475 million cubic feet per day of throughput via incremental compression.
This will add required long-term takeaway capacity in a highly capital efficient build.
We believe there will be strong demand for the expansion, with recently proposed power plants requiring the full capacity of the project for projected data center demand.
As we have shared in the past, we do not view our 10% non-operated equity state as core to our long-term strategy, and we are in the early phases of Christ's discovery on the asset.
Vern: We believe demand for MVP State will be very strong given the shipping commitments with investment-grade counter-parties, strong free-cafial generation and highly capital-efficient growth projects, including the mainline expansion and Southgate.
Turning to slide 13, we continue to focus on balance sheet flexibility and
Vern: During the third quarter, we issued $900 million in hybrid notes that will carry an effective interest rate of 6.9% over the initial 10-year period, inclusive of a cross-currency swap that we executed to convert the underlying proceeds and interest costs to Canadian dollars.
The net proceeds will be used to repay senior notes and bank that and provide a significant liquidity and funding capacity.
Vern: These hybrid notes will provide additional headroom to our credit metrics as they receive 50% equity treatment by the rating agencies.
Vern: Post the issuance of these hybrids, we will have a higher level of hybrid and preferred capital than was previously the case and we are recalibrating our long-term leverage targets as a result.
Vern: We previously had a long-term leverage target, a four and a half times adjusted net debt to normalize diva-ta, which excluded hybrid and preferred capital.
Vern: Going forward, we are adjusting this target to reflect the higher use of hybrid and preferred capital. And we'll now have a target of four times adjusted net debt to normalize EBIDA, excluding these instruments.
Vern: which also equates to 4.65 times met that to normalize even though including 50% debt treatment of the hybrid and preferred capital.
These targets will also line with triple v-mid investment grade credit ratings.
On this basis, our trailing adjusted net depth and normalized EBITDA ratio at 23, 2024 was 4.3 times excluding press and hybrids and 5 times including 50% treatment of hybrids and press.
Vern: We continue to view an MVP divestiture as the most immediate path to achieving these leverage targets, as we have made significant progress with our balance sheet since 2019.
On Slide 14 we share our 2024 outlook.
Vern: We have seen a number of tailwinds and headwinds since we first had guide in Flath December.
Vern: Taking these all into account and our year-to-day performance, we now expect to deliver 2024 normalized Eda in the upper end of our guidance range, while we expect normalized EPS to be around the midpoint of the 2020 4 guidance range.
Vern: Our 2024 Capitol budget remains unchanged at 1.3 billion as shown on slide 16.
In closing, we are pleased with a third quarter and year-to-date performance. We continue to execute on our strategic priorities with a focus on compounding long-term value as highlighted on slide 16.
This is a testament to the entire team and to the quality of the enterprise.
Looking ahead, we will remain disciplined, allocate is a capital, as we have demonstrated over the past five years, and driving the best long-term outcomes for all our stakeholders.
and with that, I will turn it over to the operator for the Q&A session.
Thank you, and ladies and gentlemen, we will welcome Dr. Anneles in question and answer session. If you would like to ask a question, please press the star, followed by the number one on your telephone keypad. To be draw your question, please press the star, followed by the number two.
will plus for a guess a moment to compile the kidney roster.
Vern: Thank you for watching!
Vern: Thank you for watching!
Speaker Change: And your first question comes from the line up Robert Ho, with Squishabank, please go ahead.
Morning, everyone.
First question is on recent the contracting. I look there, you know, appears that your confidence is increasing there with some of the agreements moving to the documentation phase.
I guess that's two per question. When do you think we could start to see contract being secure? And then how does the reef to sanctioning decision kind of mesh in with that? And, you know, could you, you know, keep a construction crew rolling from phase one to phase two?
I rob it, Vern here. Yeah, we're um...
Very positive on the commercial discussions that we've been having with our customers on getting some toll and contracts finalized I think
Speaker Change: Over the next three or four months I think we'll be able to announce some of the finalization of some of these contracts.
As you can imagine, these are pretty long-term agreements with lots of detail to go in there, so it does take a little bit longer than people might expect to get these finalized.
with the second phase of reef. I think there is...
Speaker Change: I think it's important for us to see where we end up finalizing these contracts.
We do have the ability to relatively small expansion at reef with minimal environmental permitting, but a larger scale expansion would require more permitting.
Speaker Change: I think it's a bit early to comment on when we would expect the expansion of reef, but it is very much something that's viable at this point.
Alright, thanks for watching.
and then making moving over to the balance sheet and then VP, you know, the hybrid issue in the summer did give you some headroom and, you know, the outlook or evaluation from VP in the potential for expansion is probably improved over the last.
will call it six months. So how do you balance maximizing the value of M.B.D.P. potentially by holding it a little bit longer, versus, you know, fixing or improving the balance sheet in the near term.
Speaker Change: i
Hey Rob, it's James here. Obviously we highlighted on the second quarter call that we wanted to see a couple of things fall into place for us to be able to maximize value and move forward with price discovery. And one of those was the pipeline becoming operational, which happened on July 1st and the other was getting some clarity around the operator, which was...
confirmed by EQT's clothes of the Equatrans transaction and the fact that they've identified that they want to continue to be the operator that that asset, right?
We are in the early phases of price discovery. We're not obviously changing our mind or holding on to the asset. We continue to see it as non-core and obviously we touched on some of the positive attributes that we think are going to...
get a lot of attention from financial buyers on the assets and those are in a falling interest rate environment that we're now as central banks have started to an easing cycle. We expect the 20 year take or pays.
had you rated counterparty strong free cash flow in capital fishing growth projects to attract some financial buyers to this. So I think we're right on track relative to what we set for ourselves in terms of time line and price discovery and some of those getting items have now been taken care of that I touched on.
Alright, appreciate that. Thank you.
Your next question comes from the line of Laura Ritte Tooy with our BC Capital Market, Pisco Head.
Speaker Change: Thank you very much and good morning everyone. I mean you could just start with a discussion about this and as you do have a slide that
Speaker Change: It's about how your cautiously optimistic about the growth opportunity here. Can you speak to the progression of events in the coming chorus in years in order for you to start seeing rapes investments? And also what motivates you to be on a cautious side?
Speaker Change: I'm I'm Maurice, it's Vern Yu, I'll provide some high-level commentary on
Speaker Change: on Deep.
The fundamentals behind data centers as we see them.
and then Blue can chip in and just provide some more detail on how these commercial discussions are going right now.
I think it's fairly early days to figure out what is the true long term demand from data centers.
Like if you go through the various research pieces
the range of incremental gas demand in the U.S. is kind of...
in that 5th, 20 BCF a day.
Speaker Change: Obviously, data centers are a big driver there. More particularly in PJM, our market. There's probably the system operators calling for 10 gigawatts a growth by 2030.
and we are lucky to be the gas provider for Loudon County in Virginia, which is the largest data center concentration in the world.
and there seems to be quite a bit of activity that we're looking from customers looking to add more energy to provide power for these data centers.
The challenges that we have is how do we serve these customers?
on peak days and how does the ability to...
Speaker Change: Provided Energy 24-7-365. So that's what we're working through right now. I know we have a number of smaller data centers in the queue, so I've blew one and took over and provided a little bit of extra color.
Sure, thanks Vern. I think Vern did a nice job of teeing up the opportunity set and some of the conversations.
Speaker Change: We've got a handful of, you know, a few more than you can count on a single hand.
Moving through the process, the scale of these as Vern points out are anywhere from, you know, it would be a BCF a day to some that look or a BCF a year sorry, not a day. BCF a year to some that are more than 10 BCF a year.
And the conversation is about how much do they want for primary energy, IE, how much are they turning from molecular energy into electrons on site?
and again we're just delivering to them right? And then how much of that do they want for back up on what the flexibility and so the conversations to date have really been more about them getting clear on what they need in their particular energy stacks and then the timeframe conversation is actually pretty pretty straightforward. So we're very optimistic that we'll have a couple of these under contract in the next couple of quarters we think.
with several more that are through the queue. So we are optimistic about our ability to put rate-based in the ground. The question will be, as they get clear on their energy mix and their timelines for us.
This is quick for up to that. You know, I look at allocating capital between your two segments. Obviously the reliable and safety investments in you, totally are non-negotiable.
Speaker Change: When you're passing your able to accelerate discretionary investments and utilities, depending around your balance sheet and alternate opportunities and midstream. So when you look at these data-centric investments,
We do characterize them, you know, across spectrum of non-mobitual and discretionary. How would you, where would you please them?
Speaker Change: For us, I think they're more discretionary, Maurice. We they.
There will be, there won't be right down the middle, there will be right down the middle of the fairway as rapesean dustments.
Speaker Change: There may be...
Speaker Change: I accelerated terms on
Speaker Change: the Return of Capital.
and things like that which would be individually negotiated with the...
Speaker Change: Data Center Operator. So then there will be, we'll have to make a capital allocation decision on the, how much premium are we making over?
are risk free rate or hurtal rates, sorry, for these investments relative to midstream investments.
and if I could just finish off with a discussion about the retirement benefits and the guidance.
The benefits and utilities appear to be about $65 million. So how much of this was actually in the guidance? And secondly...
By keeping this in the results, what does that mean in terms of the baseline for utilities for 2024 as we think about the growth in 2025 and beyond.
We're used to it's James here, so obviously when you look at pension income we do have
A base amount of pension income that's always included in our guidance because of the funded surplus within the post retirement benefit plan. It's almost $550 million. So this was, and obviously that, that that does experience some volatility in terms of...
Pass it performance and return on those plant assets within the market. So we decided to basically do risk some of that and to partially settle.
Speaker Change: The portion of the plan, so that's 65 million dollar gain that we recognize on those derisking activities was incremental to what we had in our original guidance. But I do want to point out what I said in my prepared remarks. We have had a number of headwinds that have also impacted the utilities this year and if you add up.
Weather, acid optimization, and the Maryland rate case, you know, you get a value that's pretty much equivalent to where the pension settlement.
said out. So we don't see this changing the run rate, if you will, it will take us to the upper end of guidance. Just given the fact that it's been able to offset some of those headwins.
Speaker Change: Listen, thank you very much.
Speaker Change: Thank you for watching.
Speaker Change: Your next question comes from the line of Jeremy Tonet where a Tipee Morgan sees Gohik.
Speaker Change: Hey, this is Eli on for Jeremy. Thanks for taking my question.
Speaker Change: Maybe to continue on the forward outlook a little bit. It seems like you're headed for the upper end of the guide. We're seeing kind of stronger performance on LPGs and liquid handling. So maybe just on the midstream segment, how should we think about the run rate given kind of recent strength?
Speaker Change: and obviously Northpine obviously operating a little higher, but those optimization. So yeah, just run right guide for this segment or color there.
It's a great question and obviously in our prepared remarks we touch on the fact that the strongest quarters for us from a global exports standpoint tend to be Q2 and Q3 just given the
Connectivity of the Ferndale facility by pipeline to some of the local refineries. So we do take more delivery of more volume.
as a result of that pipeline connectivity during those quarters.
and that doesn't happen in Q4 because obviously, but you've seen the cut out of the refineries they needed for the gas wings spec. I do see that adjusting in Q4 with respect to the midstream business.
and I do want to highlight one other thing in Q4, right? That obviously it's been a headwind for us and it's not midstream related, it's utility related, but the start Q4
Speaker Change: We've already seen mild weather within DC, so that's going to be a continued headwind for us relative to our guidance, but we still feel comfortable getting to the close to the upper end of our range.
Speaker Change: Got it. That's all full there. And then maybe just thinking about CapEx, Run right there. I know...
with the FID at Reeve, you guys revised and added some cap-ex, but as you look out to 2025 and you know, give a large backlog of different organic projects.
How should we think about those levels compared to 2024 and what the business is going to be able to spend in 2025?
Eli, we're just working through our budget process right now and I think we'll provide everyone more color on our look for 2025 in our capital expenditures in 2025, sort of in that early December timeframe. So I think it's just best to say stay tuned for...
Speaker Change: Stay tuned for that.
Speaker Change: I'm going to make a video about the
Your next question comes from the line of Robert Kutiljir with the ABC Capital Market, please go ahead
Speaker Change: i
Yes, good morning. And it's wondered what the recent events in BC, so the election and some changes with the blueberry rubber first nation council, what that means for the development plans and they bought me. Notwithstanding all the business momentum you've shown with this quarterly report.
Speaker Change: A Robb.
Robb: For the most part, our expectation is it's not going to be a material change and how things have been progressing. I think the good news for us is all the development we're doing potentially in Northeast BC is Brownfield.
and we've been in constant communication with that first nation on our activities up there so they're very well informed of anything that we may, we're doing now or we may be doing in the future. Randy, was there anything you wanted to add?
I think you covered it, but yeah, we maintain a strong relationship with all the 3D-8 Personations, including the Blueberry and despite their governance issues.
Robb: We've been working with them and our customer and other stakeholders and you can see that with our recent announcement of a long-term processing agreement. We're confident that that development will still take place.
Okay, and then we've been through up here to hear with some pretty eye-exports friends.
as well as pretty strong edge pricing. I was in some fact that you said to all in rigged, really, are you, what are you doing to ensure that you're getting enough economic ramp for tooling when spreads are this high?
Well, I think we have to take a long-term view of what spreads are going to be over the...
Speaker Change: Over the life of the tolling arrangement, we're obviously targeting for to have our agreements that are as long as possible to minimize the volatility of our cash flows.
Speaker Change: There is always a trade-off when somebody's willing to sign up for more volume and more term.
that they will get a lower...
Toling rate, and somebody who's not as willing to sign up for volume and term.
I think it's fair to say that the what we're tolling.
is a reasonable, well we're striving for and towing, we'll provide it.
Okay, and then the last question for me here is just done. You've done a lot over the last.
A couple of years to take cost and variability out of the business.
Speaker Change: Now I'm including with your decision on the pension in the quarter.
on the postroom department. Benefits, where do you think the next best opportunity is for you to take cost of a business or reduce.
Speaker Change: Volatility and free stability of the Aaron South Look.
Speaker Change: What are you doing?
on the highest level. I think when we reach our goal of...
60% of our global export business told on a long-term basis about...
90% of our EBITDA will be cost-as-service or under under.
Long-term take-or-pay contract, so that...
Speaker Change: I think material he moves up the cascading volatility.
reduces the cash flow volatility of the company as a whole and we're going to continue cost.
Management efforts at the utility. I think we're tracking to be in that 100 basis point range below our allowed. So I think the...
We can't take her eye off the ball there, so...
That along with a serially filing ray cases in our jurisdiction will allow us to minimize the overall our relationship with the entire family.
Okay, and just finally the level of confidence in getting what their variants are count.
Speaker Change: and D.C.
Speaker Change: Would you want to comment on that?
Yeah, I happen to take that. Yeah, we continue to work that process in terms of a confidence level. I don't know that I can give you a great answer on that. We took a look at decoupling and worked that through our last break case. We did get feedback from the commission. They weren't comfortable with a decoupling level.
They gave us some work to do with other counter parties which we have done and we've come back based on that work with a weather and normalization. We think based, we're hopeful based on what we have in the other regional jurisdictions that that will pass muster, but I don't know that I could give you a good view of what I don't think we're far enough into the right case yet.
Well, that's good update. Thanks, everyone.
Your next question comes from the line of Ben Pound with the MO please go ahead.
I can morning. I was wondering, could you update us on your recent conversations with the crediting agencies and what they're gonna focus on?
The NVP monetization, what are the levels you have to match a balance sheet?
I've been at James here, so we have a very important constant conversation with the rating agencies that's an ongoing dialogue.
with respect to some of the targets that they've set for us, those were pretty clear and we've pulled some of those levers already, the hybrid.
I think as we stated, it creates some balance sheet capacity for us and had room relative to those metrics.
Some of the other things that we've been focused on have been obviously commercial derisking a brief, which we're making progress on. And obviously operational derisking of both pipes stone, two and brief, and we continue to progress those projects.
Speaker Change: MVP is the other lever that we have to pull and obviously we've always said that if it makes sense at the right valuation we would consider minority stake or sale of other smaller non-coracits as well. So these are all the things that we continue to look at.
as opportunities for us to be able to achieve those metrics.
Speaker Change: I'll go back to the comments that I made in my prepare-to-mark. The hybrid is in combination with an MVP sale. We feel strongly, we'll get us to the metrics that have been established by Fitch to be able to get to that trip will be, or maintain that trip will be.
and after that the Harvard day, you should once do you have any room left on your balance sheet for more? I've just simply grown your assets over time.
Yeah, I think it's the latter obviously as projects start to come online and we add to our acid base both within the utilities and the midstream business that
That cap that S&P has for hybrid capital continues to grow for us, but obviously with this hybrid issuance, we took advantage of that room that S&P has for hybrid capital to get equity treatment and took full advantage of it in 2024 with the 900 million USD issuance.
and it made us this one clip on a black power. Here, I'm just going to remind us one of the contractifiers and when do you plan to begin in the next round of negotiations?
Yeah, it's, uh, so the contract, uh, the new contract took effect Jan 1 of 24. It runs, uh, four years. So that takes us.
Speaker Change: to the end of 27, so still a little early to be able to start having those kind of extension discussions as we're only a little, a little, little, close to one year into that contract, not even a year yet.
Okay, God, good. Thank you.
Speaker Change: You're welcome.
Here in our question comes from the line of Anthony Lindton with deep Japanese piece of head
Hey, good morning guys and thanks for taking my questions. Just one for me, just wondering what the status of the gas market in Alberta if you're seeing any increased in-bound super producers on increasing storage capacity at DIMSdale and what that potentially looks like as an opportunity. Thanks.
Speaker Change: Anthony, for sure we're seeing lots of interest in dim still led Randy and provides some detail.
Sure, yeah, so yeah, there is strong demand for gas storage and we see that trend continuing definitely when the LNG Canada starts ramping up and so the didn't still ask it that we will card from...
The pipe water is a great asset and it does have expansion abilities and we are going to the technical and regulatory requirements for that as we speak and hopefully we can talk more about that in the 2020-25.
Awesome, thanks guys, we'll turn it back.
The End
and this consists of a Q&A portion of today's call. I will now turn to call back to Mr Swanson. Please do head.
Mr Swanson: Thanks, Leady. Thank you everyone for joining our call this morning and enjoy the rest of your day.