CIBC Q3 OUTPERFORMALTAGAS LTD. Q3 2020 Results: Well Positioned To Finish The Year Strong Our Conclusion After reporting stellar Q3 results, we see the company in a position to exceed its 2020 EPS guidance. The continued ramp-up of RIPET, further rate base growth in utilities and the future integration of Petrogas should help the company continue to deliver strong results. We reiterate our Outperformer rating and our EV/EBITDA-based price target of $21. Key Points Results: The company reported a positive quarter, but results come out only slightly ahead of our estimates after making certain adjustments. Reported adjusted EBITDA for the quarter was $213MM compared to our estimate of $179MM and consensus of $172MM. Removing the positive $21MM pension adjustment and $5MM Canada Emergency Wage Subsidy, results are only ahead of our estimates by $8MM. Reported AFFO was slightly above $16MM compared to our estimate of $14MM. During the quarter, the company spent $206MM in capital projects compared to our estimate of $177MM. Guidance: As expected, 2020 guidance remains unchanged, with the company expecting adjusted EBITDA of $1.275B-$1.325B, and adjusted EPS of $1.20-$1.30. The $900MM capex plan for 2020 also remains unchanged. We believe the pension adjustment is included in the guidance, but the wage subsidy is not. Segment Performance: Removing the positive pension adjustment of $21MM would result in the Utilities segment slightly ahead of our $58MM estimate. The company reported an 18% reduction in leaks that has lowered operating expense, although partially offset by COVID-19 impacts such as the cancellation of late fees and service charges. The midstream segment lagged estimates contributing $114MM to adjusted EBITDA compared to our estimate of $122MM, or $8MM lower. Part of the variance can be explained by RIPET performance during the quarter. While RIPET continues to ramp up its volumes with record volumes of 42,736 Bbl/d, the benefit of additional volumes is offset by weaker frac spreads during the quarter. RIPET contributed $23MM to adjusted EBITDA compared to our estimate of $28.9MM. During the conference call, management addressed thoughts on a potential corporate split of its midstream and utilities business. Consistent with our views, this is not a short-term option. We believe the company needs to focus on integrating Petrogas into the business and then deleveraging the balance sheet before this option is further considered. Management also sees further upside in both segments