Q1 2025 AltaGas Ltd Earnings Call
Good morning, ladies and gentlemen, thank.
Thank you for standing by.
Welcome to the Altra gas first quarter 2025 financial results conference call.
Andrew: My name is Andrew and I will be your operator for today's call.
Andrew: All lines have been placed on mute to prevent any background noise. If you have any difficulties hearing the conference. Please press Star then zero for operator assistance at any time.
Andrew: After the Speakers' remarks, there'll be a question and answer session.
Andrew: As a reminder, this conference call is being broadcast live on the Internet and recorded.
Swanson: I would now like to turn the conference over to Aaron's Watson Vice President Investor Relations. Please go ahead Mr. Swanson.
Speaker Change: Good morning, and thank you for joining Ulta gas as the first quarter of 2025 results conference call.
Swanson: This call is being webcast and we encourage all of the supporting slides that can be found on our website.
James: Speakers this finding won't be hurting you as chief Executive Officer, and James have us exactly.
Executive Vice President and Chief Financial Officer.
Speaker Change: We're also joined by Randy Chesler, President of our midstream business.
Blue Jenkins: Blue Jenkins, President never utilities business.
Speaker Change: John Morrison Senior Vice President corporate development and Investor Relations.
Speaker Change: We refer to forward looking information on today's call. This information is subject to certain risks uncertainties and forward looking information disclosure on slide two of the presentation.
Speaker Change: Prepared remarks will be followed by a question answer session I'll now turn the call over to her.
Speaker Change: Thanks, Terry it's great to be here. This morning to discuss our solid Q1 results, which positions us to deliver our 2025 guidance.
Speaker Change: Our first quarter results reflect good progress on our strategic priorities.
Speaker Change: Derisk, our business and optimized our assets and continue to pursue growth opportunities.
Speaker Change: Drive long term value for our stakeholders.
Speaker Change: This morning, I'll share highlights from the quarter.
Speaker Change: The progress we've made in Derisking the business.
Speaker Change: Putting additional commercial contracting.
Speaker Change: Provided an update on our chip midstream major growth projects.
Speaker Change: Which includes a video for those who've been following on the webcast and I will close by discussing them some macro trends that support our 25 strategic priorities.
Speaker Change: I will then turn it over to James to provide a detailed review of our Q1 financial performance.
Speaker Change: You are at 2025 guidance and our long term.
Speaker Change: Let's start on slide four.
Speaker Change: The first quarter sauce delivered normalized EBITDA of $689 million.
Speaker Change: 4% higher than Q1, 2020 for normalized EPS, but the dollar 15 slightly higher than the $1 14 per share in Q4.
Continue to Derisk, our global exports platform.
Speaker Change: We recently added a long term contract or one of the worlds largest chemical company for 8000 barrels per day of butane exports out right.
Speaker Change: With this additional contract we have now exceeded our global exports tolling target of 100000 barrels per day for 2027 NGL tiers.
Speaker Change: Customer demand to access our terminals are a strong and much strike in the wake of the current global tariff War.
Speaker Change: Global trade uncertainty has reinforced the importance of markets.
Speaker Change: <unk>.
Speaker Change: Reiterating the need to connect Canada, just energy exports to premium markets.
Speaker Change: In midstream, we delivered a record first quarter global export volume up more than 119000 barrels per day of LPG needs to Asia.
Speaker Change: <unk> grew by 8% year over year across the balance of the midstream facilities led by our footprint.
Speaker Change: Utilities performed well in the quarter, which benefited from colder weather compared to Q1 2012 fourth as heating degree days were 13% higher.
Speaker Change: This generated a 32% increase in natural gas deliveries when compared to Q1 'twenty four.
Speaker Change: We continued to advance our organic growth opportunities to meet long term customer gains.
Speaker Change: A good example is the rip it methanol removal project.
Speaker Change: Once completed the project rollout Ripper cargoes to reach all Asian downstream markets, making propane cargoes between rip it and raised fungible.
Speaker Change: Project capital cost estimate of $55 million, which equates to an approximate five times capex to EBITDA.
Speaker Change: The project is.
Speaker Change: That to be online by year end 2026.
Speaker Change: We are making great progress on getting regulatory approval for the <unk> connector.
Speaker Change: U S 128 million Python and will enhance system reliability for existing customers in Michigan and extend service to 14000 customers. Our pipeline is expected to be in service for early 2027.
Speaker Change: Turning to slide five I want to highlight the significant progress we've made moving to a lower risk business model.
Speaker Change: Over the past five years, we have cutter commodity exposure in the house.
We now have 85% of our EBITDA coming from cost of service take or pay and fee for service contracts.
Speaker Change: This increase is to roughly 90% when <unk> comes online or continue to take measurable actions to remove our residual risk by hedging our remaining commodity exposure and by further reducing our financial leverage.
Speaker Change: Let's turn to our major midstream growth projects.
John Chu: Types John Chu.
John Chu: We've made significant progress on the construction of these facilities, which can be seen in the accompanying video, but those of you following the webcast.
John Chu: Let's start with rates.
John Chu: Grateful we are third exports facility and will expand our position as north America's leading west coast LPG export.
John Chu: We'll operate the only three deepwater ports capable of exporting LPG and our proximity to Asia provides us with a structural advantage over the U S and middle Eastern exports.
John Chu: Construction on REIT continues to progress well.
John Chu: We have now completed the earthworks phase of project materially advanced other phases and are executing on other work streams.
John Chu: We remain on track to meet our in service date of 2026 at year end.
John Chu: The airport space was a key project risk and I'm pleased that it's now behind us.
John Chu: It was completed in line with our project execution plan.
John Chu: Our plans work continues to progress with overburden removal now complete and rock blasting won't be completed shortly.
John Chu: Offsite fabrication is progressing according to the execution plan.
John Chu: Fabrication is taking place in Asia, with the LPG storage vessels and bullets over 70% complete.
John Chu: Having this is Phil let me built on a modular basis allows us to limit the amount of stick built work in the field.
John Chu: Compression in refrigeration fabrication is also progressing off site.
John Chu: Bold manufacturing environments in Canada on a modular basis. These components will also be assembled onsite materially reducing project execution risk.
John Chu: Progress I'll, let Judy has accelerated and is recovering from winter weather delays.
John Chu: We now have 88 pilots driven and just as cheap debt.
I've realized increased efficiencies with spring weather.
John Chu: On the ground are starting other work streams, including site prep for rail road and the utilities construction.
John Chu: So I'm only 60% of the total project costs are now incurred or committed further de risking reach capital budget in 2025, we have executed additional long term contracts.
John Chu: And have now exceeded our 2027 totaling target across the global export platform. We are also making excellent progress on our pipestone to project a.
John Chu: The project is in great shape.
John Chu: The facility, we will add critical deep cut gas processing and liquids handling capability.
John Chu: We're gonna market supporting our customers growth plans and strengthening Elsa gas value chain Egypt.
John Chu: We remain on track for a late 2025 in service date.
John Chu: It's a gas injection wells in the gas gathering system.
John Chu: I've now been completed facility construction and assembly is the only major remaining work stream.
John Chu: And it's about 80% complete.
John Chu: Project is fully contracted under long term take or pay agreements on the capital cost for all project work, that's either been executed or is under long term.
John Chu: Contracts.
John Chu: These projects are critical to meet customer demand, but above all else. Our team remains focused on executing these projects safely as we continue to deliver long term value for our stakeholders.
John Chu: Turning to the macro economic outlook for our utilities on slide eight.
John Chu: We continue to see rising demand for all forms of energy.
John Chu: Natural gas remains the most reliable affordable and scalable solution to meet this growing energy demand in North America and globally.
The longer term outlook for our gas utilities, each remains robust Inc.
John Chu: Increased U S natural gas demand coming from coal fired power retire.
John Chu: Increased industrial activity and data centers are all large tailwind.
John Chu: As an example, natural gas demand in the U S is expected to increase by more than 25% for gas fired power generation by 2030.
John Chu: This robust long term outlook combined with our backlog of system modernization opportunities.
John Chu: Positions us to continue our strong track record of rate base growth, which has delivered an 8% rate base CAGR since 2000.
John Chu: The Canadian midstream outlook is equally compelling as shown on slide nine.
John Chu: I don't think gas remains well positioned to benefit from three key trends.
John Chu: First just growing Canadian natural gas and NGL production, which is expected to rise by 25% by 'twenty three.
John Chu: Supported by LNG, Canada, and other LNG export projects.
John Chu: The second is continued Asian, LPG demand, which is expected to grow by more than 30% by 2030.
John Chu: Which will need to be met by increased global imports.
John Chu: Lastly, Asian end markets are seeking to diversify their propane away from the U S and the middle East. This has been highlighted today its tariff war.
John Chu: Alta gas is well positioned to benefit from all these demand trends given our strong footprint in the montney and the structural shipping advantage, we have in our global exports business.
John Chu: Lastly, I wanted to touch on our 2025 strategic priorities, which can be seen on slide 10.
John Chu: Our strategic priorities remain unchanged.
John Chu: Maximize the use of our assets and we will optimize our cost structure to maximize our returns.
John Chu: We remain focused on reducing operational and financial risk.
John Chu: We will also advance our organic growth projects that support our long term growth outlook. All of these actions will deliver strong shareholder value.
James: And with that I'll turn it over to James.
James: Thanks, Brian we are pleased with our first quarter performance with strong execution across the platform and the continued advancement of our strategic plan.
James: I'll start by providing a more in depth review of our operating results across business segments, and then discuss our continued progress on our balance sheet deleveraging.
James: Close with our 2025 outlook and value proposition.
James: Let's start on slide 11.
James: Our utilities delivered normalized EBITDA of $501 million in the first quarter of 2025 compared to $437 million in the same quarter last year, representing a 15% year over year increase.
James: Growth was driven by strong performance from WGS retail business colder weather in Michigan in DC active cost management contributions from modernization investments asset optimization activities and continued customer growth.
James: Specific to weather heating degree days were 13% higher year over year, which positively impacted results for approximately one third of our rate base, including Michigan in DC, which do not have decoupled rate structures.
James: O&M cost of Washington gas were down 11% year over year in the first quarter as we continued to benefit from process efficiencies and centralized functions that we implemented during the first half of 2024.
James: We deployed $127 million of capital within our utilities during the first quarter, which included $52 million of modernization programs and $25 million towards new meter connects.
James: In 2025, we expect to deploy more than $700 million of capital on our utilities as we made critical investments for the future.
James: Asset modernization investments will remain a key focus for the business as these programs improve the safety and reliability of our system reduced rates and lower long term operating costs.
James: We have active modernization programs across all four of our operating jurisdictions, but the runway of $1 $7 billion of preapproved spending which will provide both the gas steady and ratable growth.
James: Turning to the midstream segment on slide 12.
James: Operational execution was strong within the midstream business during the first quarter financial results were down year over year due to a number of factors that I outlined.
James: Normalized EBITDA in the first quarter of 2025 was $197 million compared to $247 million in the first quarter of 2020.
James: Factors contributing to the year over year variances include lower global export margins due to reduced merchant spreads between Asia, and North America in LPG prices and higher tolling volumes.
James: Specific to totally well higher long term contracting improves in stability and predictability.
James: The gas is cash flows it does carry lower absolute margins.
James: In addition, the first quarter of 2024 benefitted from favorable onetime items that were not present in the first quarter of 2025.
James: The first was the monetization of certain hedges to avoid an imbalance of financial and physical merchant barrels over 2024 that we previously disclosed.
James: And the second was related to the reclamation above the gas is open facility, which was completed below budget. After the project was discontinued.
James: Results also included lower contribution from the Mountain Valley pipeline as equity earnings post the pipeline going into service were lower due to DNA.
James: Third to ACDC booked in the first quarter last year when the pipeline was still under construction.
James: The global exports business continues to operate well as Q1 volumes grew 4% year over year.
James: This growth came despite Q1 volumes from sand deliveries being negatively impacted by extremely cold weather to start the year.
James: This quarter saw it shipped more than 119000 barrels per day of LPG to Asia, which included approximately 79000 barrels per day spread across 12 ships.
James: And approximately 40000 barrels per day spread across seven ships Ferndale.
James: This equates to a ship, giving our docs every four and a half days.
James: Within our broader midstream infrastructure footprint, we continue to benefit from our strategically located infrastructure and high quality customer base.
James: This included G&P volumes, increasing by 11% across the asset base led by a 16% increase in Montney volumes. Thanks to strong performance at our northeastern BC complex, including Townsend and Blair Creek.
James: Townsend volumes started to benefit from initial deliveries related to the 100 million cubic feet per day gas processing contracts. We signed in late 2024 with a large international energy company.
James: Currently we have 90% for both the gas as expected 2025 global export volumes, either coal or financially hedged.
James: With an average FBI to north American spread of approximately $20 U S per barrel for the non toll volumes.
James: Given the uncertainty surrounding the LPG market, we have taken a more active approach to reducing risk and have largely hedged all of our merchant exposure over the next few quarters.
James: We have also locked in so Paulo.
James: The gas is 2025 bobek freight exposure through a combination of time charters financial hedges and tolling arrangements.
James: In the corporate and other segment, we reported a normalized EBIT loss of $9 million.
James: Compared to a loss of $24 million in the first quarter of 2024.
James: The year over year improvement was mainly driven by higher contributions from Blake as the plant underwent an extended turnaround in the first quarter of 2024.
James: Turning to our outlook on slide 13, we are reiterating our 2025 guidance.
James: While there has been tailwind and headwind so far in the year. These have largely been balance.
James: As a reminder, our 2025 guidance ranges include a normalized <unk>.
James: A 210 to 30 and normalized EBITDA of $1 775 billion to $1 875 billion.
James: Sure thing no major changes to our 2025 capital budget with details are shown on slide 14, we.
James: We expect to deploy $1 $4 billion of capital in 2025, 51% weighted to utilities and 45% weighted to midstream as we continue to build out our pipestone tube and rice midstream growth projects.
James: The majority of the utility's capital will continue to target AARP programs, insisting Benjamin with the remaining capital targeting new business and customer growth.
James: As shown on slide 15, we reduced our adjusted net debt by approximately $270 million in the first quarter 2025 compared to 2020 for year end.
James: And we remain focused on reaching our leverage targets.
Including 50% debt treatment for preferred shares and subordinated hybrid debt, we exited the first quarter, but the four eight times trailing net debt to normalized EBITDA metric.
James: Relative to our 465 times target.
James: We continue to demonstrate progress on our priority to reduce financial leverage as we have cut our debt metrics by more than half since 2018.
James: As previously disclosed anticipated proceeds from the potential monetization of our 10% stake in the mountain Valley pipeline will be allocated to the balance sheet in order for us to achieve our leverage targets.
James: In closing the first quarter was a solid start to 2025 and to reiterate the value of our diversified infrastructure platform and our strong contract.
James: We have made significant progress on our corporate priorities executing our strategic plan and continuing to create value for our shareholders.
James: As we highlight on slide 16, we believe we have a compelling investor value proposition.
James: We operate a diversified low risk business model and provide visible and industry leading growth in both our businesses.
James: We will remain disciplined allocators of capital as we've demonstrated over the past six years.
James: And with that I will turn it back to the operator for the Q&A session.
James: Thank you.
Speaker Change: Ladies and gentlemen, we will now conduct the analyst question and answer session.
Speaker Change: If you would like to ask a question. Please press Star then the number one on your telephone keypad.
Speaker Change: If you would like to withdraw your question. Please press the pound key.
Speaker Change: There will be a brief pause while we compile the Q&A roster.
Speaker Change: Your first question is from Rob Hope from Scotiabank. Please go ahead.
Speaker Change: Good morning, everyone.
Speaker Change: Global propane pricing says as you noted has been very volatile with the tariffs what's been your experience in contracted in the barrel for the rest of the year and are you seeing increased demand from countries outside of demand outside of Japan, as we could see some flows shift between countries.
Varun: Hi, Rob it's Varun here.
Speaker Change: Cough, and then Randy can chip in if I Miss that.
Speaker Change: I think youre right, you've seen propane prices have been extremely volatile.
Speaker Change: Post the tariff situation.
Speaker Change: And you've seen pretty big shifts in global demand work.
Speaker Change: Obviously, China is not importing much propane from the U S and you've seen U S propane ship to Europe, and other Asian countries.
Speaker Change: One of the things we've seen is that.
Speaker Change: Demand for Canadian propane has remained very strong and robust through this entire period.
Speaker Change: Obviously, FBI pricing has come down and we haven't yet seen.
Speaker Change: Mount Belvieu prices fully reflect the decline.
Speaker Change: Ann.
Speaker Change: Jim.
Chinese demand for U S propane, but alright.
Speaker Change: As of this morning, we've seen on a spot basis Bellevue prices dropped a fair bit.
Speaker Change: So our view is.
Speaker Change: In North American spreads should normalize.
Speaker Change: Todd mentioned becomes clearer on the tariff situation.
Speaker Change: Thank James and our prepared remarks talked about how we're highly hedged in 2025, particularly in the next couple of quarters.
And on the supply side, we procured all the supply that we need.
Speaker Change: We need for our business. This year. So we're in good shape, there and the vast majority of it is that is sold on a term basis. So not a lot of risk. There. So there are a few pockets of opportunities for us as we move out of few spot cargos here at <unk> to.
Speaker Change: Hopefully that answers your question.
Speaker Change: Yes, that's great.
Speaker Change: Maybe as a follow up in this environment. How is your stinking our greif two evolved it'd be clarified youre thinking on the size and scope and our conversations ongoing with the provincial government substantially accelerated.
Speaker Change: Yes, it's a great question.
Speaker Change: The demand we've seen for global exports has been extremely strong as you've seen we've if you will.
Speaker Change: We've now exceeded our 2027 totaling turn yet and wont be very selective as we move forward.
Speaker Change: Signing up more customers for top line.
Speaker Change: There's multiple options for us to expand.
Speaker Change: As you as we've mentioned previously the first phase of brief on the usage is up 10%.
Speaker Change: Total export capacity that we'll have this facility obviously pre we're pre building the rail facility and the dock facility to allow for.
Speaker Change: Much more sizable global exports court ordered.
Speaker Change: The first thing we're focused on right now he is.
Speaker Change: Can we do with Debottlenecking exercise.
Speaker Change: What we're building right now it's kind of similar to what you saw rip it where we worked.
Kit to see that we could increase exports over time so.
Speaker Change: <unk> some of the work that could happen there.
Speaker Change: And we'll have more color on that probably in the middle of the year, but all that to say, it's a pretty low cost.
Speaker Change: Set of Debottlenecking and if we're looking at it.
Speaker Change: The first phase of trying to increase.
Speaker Change: Export capacity there.
Speaker Change: Subsequent phases will.
Speaker Change: Ill require more facilities to be added.
Speaker Change: Those subsequent phases will require permitting and both federally and provincially. So we've kicked off ensuring we understand the full regulatory process between BC and the federal government.
Speaker Change: We started.
Speaker Change: Within the last couple of months detailed engineering and design work on that and started stakeholder consultation with all of the <unk> that would be affected by an expansion. Our brief so that's going to take a little while for us to work through and I'll share more about that probably in the second half of.
Rob: This year Rob.
Speaker Change: Thank you.
Rob: Yeah.
Rob: Your next question is from Ben Pham from BMO. Please go ahead.
Ben Pham: Hey, Thanks, good morning, everybody.
Speaker Change: I'm wondering if follow up on that last topic on.
Ben Pham: Okay your exports.
Ben Pham: Expansion beyond reef phase one.
Ben Pham: Can you talk about any potential.
Ben Pham: Strains on moving expansions beyond the Debottleneck mistaking my boss.
Ben Pham: The rental side of things not on your site, but outside of that.
Ben Pham: And then what are your thoughts on how you think about sanctioning versus contracting do you need a certain number of contracts before sanctioning those potential projects are you seeing your team a little bit more about.
Ben Pham: Underpinning all of it right away.
Ben Pham: Well, maybe I'll start and answer the second half of that question, Ben I think we've seen tremendous customer interest on tolling.
Ben Pham: We continue to talk to a whole bunch of different counterparties.
Ben Pham: Adding incremental contracts I think it really comes down to for US is when do we feel like we have sufficient cash flow stability out of the business right now we're very comfortable.
Ben Pham: For 2027, as we've exceeded our total.
Targets for.
Ben Pham: Tolling contracts I think if we do add.
Ben Pham: More phase III, we'll have ample opportunity to work with more customers to add <unk>. So that's not really a huge gating item for us.
Ben Pham: So I think it's really about getting our head around what is the regulatory path forward. What what is the actual design in the next days and how do we ensure that we have a full engagement of all of our stakeholders along the way.
Ben Pham: I can turn it over to Randy maybe you can just talk about our discussions with CN who's confirm that they have.
Ben Pham: <unk> is a handheld subsequent basis risk sure.
Ben Pham: We have constant conversations with CN about our growth plans so they understand.
Ben Pham: What are your volume expectations when it comes on and potentially look at optimization of reef.
Ben Pham: Even further on.
Ben Pham: Future phases, CN is ready to build up the corridor too.
Ben Pham: Meet that demand there also naturally containership traffic close in.
Patrick: Patrick all that so they have a long term plan has walked through the corridor.
Patrick: So we're not worried about CN capacity too.
Patrick: For future expansions.
Okay got it.
Patrick: And maybe on the balance sheet the debt to EBITDA targets.
Patrick: The slides mentioned that.
Patrick: We expect to achieve your long term targets in 2025.
Patrick: Just to clarify that is that.
Speaker Change: Is that assuming that the MVP cash comes in.
Patrick: The door.
Patrick: And at awards can you used to reach those targets without a sale.
James: Hey, Ben it's James here, obviously those targets.
When we set them would include an anticipated monetization.
James: Of MVP.
James: We've talked about in the past.
James: Basically in the middle to late innings of around two and we continue to see strong interest in that and that process from.
James: Typical global infrastructure funds that have the lowest cost of capital. So we are still tracking for our H, one or first half of 2025 announcements on that transaction, which would help us take a step forward towards our leverage targets.
Speaker Change: Okay got it okay. Thank you.
Speaker Change: Your next question is from Robert <unk> from CIBC capital markets. Please go ahead.
Speaker Change: Maybe I'll start with just a follow up on MVP I Wonder if.
Speaker Change: How the current market turbulence is impacting our progress on the sales process.
Speaker Change: Sorry, Rob you said the current market.
Speaker Change: Yes.
Speaker Change: That was the volatility that the market has seen in the last month impacting the progress on the sale.
Speaker Change: Yes, yes. Thanks, I just wanted to clarify because you broke up a little bit so look we haven't really.
Speaker Change: Seen any impact in terms of our timing.
SaaS or interest levels as a result of some of the.
Speaker Change: Underlying volatility that you've talked about in the market. We continue to see strong demand if anything obviously, we're not we're not the operator.
Speaker Change: When it comes to operational due diligence questions were very dependent on our partner EQT they'd been great to work with but anytime you have an intermediary there's there could be a little bit of a delay in terms of information flow, but we haven't seen any impact as a result of volatility to our timeline or interest stops.
Speaker Change: Okay can.
Speaker Change: Can you just on the utilities.
Speaker Change: Describe what the biggest driver has been on the cost management side.
Speaker Change: Two months.
Speaker Change: We will take some pretty significant cost management gains.
Speaker Change: Whether those are sustainable.
Speaker Change: <unk>.
Speaker Change: The outlook for those going forward.
Blue Jenkins: Yeah, Hey, Rob it's Blue Good question, what you saw what you saw quarter over quarter, if you'll recall last year, we talked a lot about being very focused on our cost management.
Blue Jenkins: Making sure that we had done some detailed process review work and the way, we execute our work and looking at our Org design and and we had adjusted all of those things. So what you saw quarter over quarter was a result of that work and we expect that that's carryforward.
Blue Jenkins: I think what you've seen is the new benchmark for us on how that cost books, and we and we do expect that carry forward and carry that forward in our budget activity. So really a lot of work that came out of last year you saw it come down slowly each quarter and what you saw this quarter was the first full year.
Blue Jenkins: Step change and we do expect that to move forward.
Speaker Change: Okay. Since we have you on the phone maybe are there any updates on your efficacy work related to either gas bands or.
Blue Jenkins: Building efficiency improvement.
Blue Jenkins: Things of that nature.
Blue Jenkins: Yes, good question.
Blue Jenkins: So we continue to work the process as you know these things take a bit of time, there's a lot of back and forth in terms of filings.
Blue Jenkins: On all of those lawsuits I expect that activity will pick up we still we still remain very optimistic in our position and certainly what we've seen come out of.
Blue Jenkins: The federal administration et cetera. So continue to work the process continues to be very engaged.
Blue Jenkins: With with that group and all of those processes I think what I would point to on advocacy as you saw some work come out of you saw some results come out of that work and the legislative sessions. This year, particularly around stride, which is the accelerated pipeline replacement program in Maryland, where there was a bill put forward to to prepare.
Blue Jenkins: <unk>, killing that program and our work.
Blue Jenkins: With our advocates.
Blue Jenkins: But that program continues and remains on the books and carries forward through through the foreseeable future. So I think thats, probably the most tangible result of that work.
Blue Jenkins: Okay, great. Thank you.
Speaker Change: Your next question is from Maurice Choy from RBC capital markets. Please go ahead.
Speaker Change: Thank you and good morning, let's come back to the global exports.
Speaker Change: It seems like the with it.
Speaker Change: The project is obviously trying to cater to.
Speaker Change: Opening up new piece. So just wanted to know if you could speak to.
Speaker Change: Any differences between the risks with tiered or terms and conditions between servicing fee Japanese and South Korean customers visit Smiths in China.
Speaker Change: There is no material difference Morris.
Speaker Change: Going to China versus.
Speaker Change: Japan or Korea, I think obviously the thing is we need to be very mindful of the credit quality.
Speaker Change: Any Chinese offtake Harris as well as the contracts that we have with for those off takers to ensure that we have the proper rule of law in place in governing laws. So we'll be very careful about that typically when we have sold and we have some.
Speaker Change: Carlos in the past China.
Speaker Change: Sold a few more here.
Speaker Change: Reception.
Speaker Change: The key is at four are concerned about the credit quality of the counterparty that we didn't get that letter of credit prior to delivering the product to do that.
Speaker Change: Okay.
Speaker Change: So.
Speaker Change: As I.
Speaker Change: Wrap everything we've heard today it sounds like there is good demand for <unk>.
Speaker Change: Business it sounds like <unk> got capacity. So from this point forward is it just.
Speaker Change: The regulatory and consolidation that you pointed out earlier as being the real close to.
Speaker Change: You know really expanding.
Speaker Change: You're asking your.
Speaker Change: Is there still any commercial versus consumer.
Speaker Change: Considering both.
Speaker Change: Yes, the real gating items from my perspective, Murray sure, making sure that we internally have the best possible.
Speaker Change: Look for the capital cost involved.
Speaker Change: We are going to be very disciplined about not sanctioning debottlenecking projects or expansions.
Speaker Change: Yes, we have all of the capital cost and schedule risks.
Speaker Change: Well well in hand.
Speaker Change: And then.
Speaker Change: After that it would be obviously getting our permits on a timely basis. So I think those are the material gating items.
Speaker Change: As I think I mentioned.
Speaker Change: In the prior Q&A, we expect to be able to talk a little bit more but.
Speaker Change: The first phase of the optimization, which would I would call it the debottlenecking taste or use.
Speaker Change: In the middle of this year and then the subsequent phase of expansion closer to the end of the year.
Kevin: So Kevin given the elevated demand that you have.
Speaker Change: I guess, it's fair to assume that returns are probably going to be better.
Kevin: Then you had an initial phase.
Kevin: Yes, I think we've always said and worries that the first phase.
Kevin: A brief will be probably the highest.
Kevin: <unk>.
Kevin: EBITDA Bill just because we're pre building the war and the rail facilities to subsequent phases, just involve incremental rail offloading.
Kevin: And potentially NGL storage, so they're all they've always been on track to be more profitable for us.
Kevin: Understood. Thank you.
Speaker Change: Your last question is from Jeremy Tonet from Jpmorgan. Please go ahead.
Kevin: Hey, this is Ely on for Jeremy.
Speaker Change: Maybe just on the data center commercialization opportunities across your footprint.
Speaker Change: Yeah, I know, there's meaningful ERP spend but can you just remind us how many opportunities might impact your outlook for the segment overall.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: It's blue.
Speaker Change: So as we've said consistently of course, we do have multi year programs and a PRP and we continue to work our way through those for data centers. We continue to have conversations across both utilities, both in the <unk> area as well as Michigan, We've got a handful of those conversations that are progressing through that capex.
Speaker Change: As we've previously said just to remind.
Speaker Change: Just to remind is rate base focus so youll put do our typical <unk>.
Speaker Change: And our system to those locations and provide fuel to meet the needs of that particular location, where we're thinking about how we would.
Speaker Change: Just those contracts to be more to be.
Speaker Change: More quickly recover if I can use that term so five or 10 year contracts as opposed to the typical 40 year depreciation cycle et cetera. So we feel very confident that in the way those things line up that we can we can add those into our growth profile and not only continue our DRP, but continue to add those as they come through.
Speaker Change: The sweet spot for us in that in that medium sized data centers, it's connected to our systems I think what we've said before it's.
Speaker Change: We can grow rate base by up to 8% per year for the foreseeable future just through customer adds and system modernization programs.
Speaker Change: These data centers.
Speaker Change: Our $10 million to $40 million per per data center as far as incremental rate base that we would be adding so if we are successful.
Speaker Change: And adding a few of these two are our growth profile that we could increase.
Speaker Change: The increase at 8% CAGR to something in the range of 9% per year.
Speaker Change: Copy of that.
Speaker Change: And I know.
Speaker Change: You probably are limited in what you can say, but just thinking about.
Speaker Change: Trigon litigation.
Speaker Change: You know do you have any kind of messaging in terms of how you see that impacting the business what kind of timeline, we should think about.
Speaker Change: Just just that litigations overall impact to altra. Thanks.
Speaker Change: Sure.
Speaker Change: That's a very topical item where.
Speaker Change: The PRP is obviously defending its rate as the regulator and the landlord can determine how the port gets.
Speaker Change: Used and developed and in fact, they are in front of the.
Speaker Change: The judge this morning in BC, how I'm trying to get the trigon lawsuit some early dismissed but.
Speaker Change: In our view, it's a we have exclusive rights to develop the bulk liquids exports at Ridley Island, that's something we will defend vigorously.
Speaker Change: To put a point on it.
Speaker Change: Development of these facilities take a tremendous amount of time and capital to get it off the ground you spent five years in environmental planning and review before we're able to get the appropriate permits for reef. So having this exclusivity.
Allows us to recover the upfront capital and the effort we made in getting these permits so we for sure and the port well bigger slate to defend our rights.
Speaker Change: Great. Thanks for the color.
Speaker Change: We do have one more question. It is from Patrick Kenny from National Bank Financial. Please go ahead.
Patrick Kenny: Thank you good morning, guys.
Patrick Kenny: I guess just on the some steel storage opportunity.
Patrick Kenny: Seeing record receipts GTO, yes, we have west coast LNG exports ramping up over the coming quarters.
Patrick Kenny: Which may provide some near term relief. So I just wanted to check in on.
Patrick Kenny: Where the commercial demand is today for this expansion.
Patrick Kenny: How we should be thinking about the cadence of our dimsdale antibody relative to say.
Patrick Kenny: Pipestone phase III or north north pine expansion.
Randy Chesler: Hi, Patrick it's Randy.
Patrick Kenny: Phil.
Patrick Kenny: Storage expansion is progressing so we're working on detailed engineering and regulatory requirements.
Patrick Kenny: And along with commercial underpinning and we feel that.
Patrick Kenny: Before.
Patrick Kenny: The end of Q2 early Q3 will be disciplined.
Patrick Kenny: On that project. So we do feel that Thats, probably ahead of the north plant expansions, where our pipestone space expansion.
Speaker Change: Okay, and I guess, Randy just in general how.
Randy Chesler: How much white space.
Speaker Change: Do you still have within your Montney gas processing portfolio.
Randy Chesler: How do you think about.
Randy Chesler: How do you think the timing might unfold with respect to customer needs for sanctioning of more of a large scale capacity expansion at any any one of your montney plants.
Randy Chesler: Yes, so good question.
Randy Chesler: Thanks basis, largely at our Townsend facilities, we did sign that agreement last year, we were filling up.
Randy Chesler: That rate space.
Randy Chesler: We're focused really on getting pipestone too.
Randy Chesler: Online, we have strong contracts behind that.
Randy Chesler: Arent out there looking at could we actually look at it either.
Randy Chesler: A lot of demand in that area.
Randy Chesler: And so we do feel that given that we're off me artful.
Dale Thompson: Thompson Gordon Dale Pipestone.
Dale Thompson: We will be able to work on our future gas processing.
Dale Thompson: Persistent factor here.
Dale Thompson: Six.
Dale Thompson: Yes.
Dale Thompson: Okay got it.
Dale Thompson: And last one I guess probably for burn.
Speaker Change: Just on the line of sight to having 85% of EBITDA now being contracted can you just remind us where you see the sweet spot for the company on a consolidated basis.
Dale Thompson: Longer term and.
Speaker Change: Mike Mike This strong performance on the <unk>.
The midstream contracting front.
Speaker Change: Now you to or give you the flexibility to consider any divestitures within the the rate regulated utilities franchise.
Speaker Change: Uh huh.
Patrick Kenny: I think Pat we're comfortable that we're going to get to kind of 90%.
Patrick Kenny: Cost of service take or pay or fee for service by 2027.
Patrick Kenny: That's a nice place to be and we will continue to grow the business and that gives us more flexibility.
This continues to grow.
Patrick Kenny: We have no plans of selling any of the rate regulated assets I think I know people have speculated in the past about us selling semco, but there's tons of create rate base growth in front of us there, particularly now that for.
Patrick Kenny: Getting close to getting regulatory approvals for the <unk> connector, so the growth prospects.
Patrick Kenny: All of our utilities remains very robust and we're very placed on them.
James: It's James here.
James: What Bernd said in terms of growth profile, but we also are fluffy utility business because it is a credit positive for us right and business mix is important and that's why we continue to execute on the ERP plans and Youll see that our EBITDA continues to be weighted towards the utilities in terms of our business mix.
James: Yeah.
Speaker Change: Okay got it I'll leave it there thanks guys.
James: Okay.
James: There are no further questions at this time I will now turn the call back to Mr. Swanson.
Mr. Swanson: Great. Thanks, Andrew and Thanks again, everyone for joining the call. This morning any further questions. The IR team is here to assist.
Speaker Change: Have a great day.
Speaker Change: Yeah.