CIBC EQUITY RESEARCH
January 22, 2024 Industry Update
Energy Infrastructure Takeaways – 27th
Annual CIBC Western Investor Conference
Our Conclusion
We had eight companies participate in fireside chats with Q&A at our 27th
Annual Western Institutional Investor Conference. Presenting companies
were ALA, BIP, ENB, GEI, KEY, PPL, TRP, and SPB. Notwithstanding the
recent commodity price volatility, management teams are pleased with 2023
achievements and are optimistic for the industry outlook in light of the
improving egress, consistent with our view.
Overall, the rooms were quite full and we had considerably more questions
than usual, which we take as a sign of increasing investor interest. Investors
mentioned some macro risks, including the pace of central bank rate cuts
and commodity price volatility, although management teams have taken a
number of steps to mitigate these risks. Capex inflation was less of a talking
point this year. Company Highlights
Below we outline notable comments, updates, and key takeaways from the fireside chats and
conversations with presenting companies at the conference.
AltaGas (ALA):
• Highlighted the Pipestone acquisition as really exciting for them, and mentioned the
possibility of an eventual Pipestone 3 plant. Common customers on Pipestone 1 and
2 have renewed 10-year take-or-pay contracts for Pipestone 1.
• The company continues to work towards an H1/24 FID on the REEF project
sanctioning. The biggest initiative is getting a handle on the capital cost and related
risks to ensure it can be built on time and on budget. The buildout will have a similar
model as Pipestone, with fabricated pieces built off-site before shipping onsite to
assemble.
• MVP coming into service provides significant deleveraging potential. Once the project
is up and running and de-risked, then options, including a potential sale, can be
evaluated. Placing this asset into service would also provide an EBITDA bump,
helping deleverage by 0.2x-0.3x.
• On capital allocation, management would like leverage to be below 4.5x longer term
as it’s helpful to have dry power and financial flexibility. Dividend growth is also
expected to continue at the ~6% rate seen in 2024, in line with the 5%-7% earnings
and cash flow growth rate.