cibc first look: outperform Price Target (12-18 mos.): C$24Q4/20 First Look: Results In Line; RIPET Gaining Traction
Reported results were largely in line with our estimates. Reported adjusted EBITDA was $392MM compared to our estimate of $385MM and consensus of $393MM. The company finishes the year with $1.310B in adjusted EBITDA, at the higher end of its guidance range of between $1.275B - $1.325B, and EPS of $1.42, above the top end of the $1.20-$1.30 guidance range. Normalized EPS for the quarter of $0.53 was slightly ahead of our $0.52 and compares to the street at $0.46. Normalized adjusted utility AFFO/sh was $0.77/share compared to our $0.79/share and $0.70/share consensus.
Previously announced 2021 guidance remains unchanged and includes adjusted EBITDA in the range of $1.4B to $1.5B and normalized EPS of $1.45 to $1.55.
The Utilities segment delivered $259MM in adjusted EBITDA, the same as our estimate. The Midstream segment beat our expectations with $128MM in adjusted EBITDA compared to our $122MM. Third-party logistics issues at the Ridley Island Propane Export Terminal (RIPET) during Q3 and Q4 were a headwind, with Q4 volumes averaging 37,782 Bbl/d compared to our estimate of 38,500 Bbl/d. Once these issues cleared, the company hit the 50,000 Bbl/d exit rate target for 2020. The facility had an average volume of 50,600 Bbl/d in both December 2020 and January 2021.
The company provided disclosures to its 2021 Midstream hedge program, which should increase investor comfort. Contracted tolling volumes and financial hedges total 87% of volumes hedged at RIPET for Q1 2021, and between 65% and 64% are currently hedged for the remainder of the year. On average, the company’s average hedge rate for RIPET propane FEI to Mont Belvieu is between $10.17 - $10.57.
In the Utilities segment, a settlement agreement for the Washington DC franchise was approved on February 24, 2021 to increase rates by US$19.5MM effective April 1, 2021. In Maryland, new rates are expected to take effect around late March 2021, and the Utilities segment rates as a whole will be quite up to date, allowing the company to continue to bridge the ROE gap, which may be entirely closed by the end of 2021.
As previously announced, the company appointed Jon-Al Duplantier to AltaGas’s Board of Directors on February 2, 2021. Jon-Al brings more than 25 years of experience across the energy value chain.
The company will be holding a conference call today at 11:00 a.m. ET. Dialin: 1-888-231-8191, no passcode required.