Altagas increases export capacity of Propane and Acquires Petrogas

  Altagas has made a very large change in it's structure since 2019.It acquired the very large American utility WGL in 2019.And since then it has divested almost $4 billion of non-core assets.The proceeds from these sales have been used to reduce $2 billion of debt.Still many analysts believe that their debt measured at around 5 times debt/EBITDA is a little high.More divestitures are expected in 2021.In addition, ALA has increased it's monthly dividend to.$.0833 or $1.00 a year.

     Midstream Activities

 Altagas does not have excessive downstream gas assets.But it does have substantial midstream processing operations in the Montney area of British Columbia.And it has expanded it's North Pine and Townsend 2B plants to allow greater deliveries of propane and butane exports at it's export terminals.Originally the export capacity of the Ridley Island (RIPET) terminal was 40,000 bbls/day of propane.Now it is 90,000 bbls/day and ALA has added the Ferndale terminal as well which has 30,000 bbls/day capacity.This will increase revenues well above their 2020 level.Altagas has also closed an agreement to acquire majority ownership of Petrogas.This will allow greater deliveries of propane and butane to Ridley Island and Ferndale.Altagas considers this a Midstream operation and Midstream activities account for 42% of their adjusted EBITDA in 2020.Whereas their Utilities division which delivers product directly to consumers accounts for 57% of adjusted EBITDA.For example,deliveries of product to their newly acquired  American utility (WGL) earns adjusted EBITDA for their Utilities division.

                       

   Forward Guidance 

 Altagas is a mid-tier utility in the Canadian scene.It has a market capitalization of almost $6 billion but is well behind the top tier such as Fortis or Emera.It made a bold move in acquiring WGL in Washington D.C. but had to divest assets in order to reduce it's debt. Furthermore WGL is a regulated utility so the growth of revenues and earnings is constrained.Now it is putting considerable effort and investment into it's new venture to export propane to offshore buyers.It's export capacity has tripled in one year -from 40,000 bbls/day to 122,000 bbls/day.ALA management expects $1.45 to $1.55 of e.p.s. for 2021 and EBITDA of $1.4 to $1.5 billion.And the acquisition of Petrogas is seen by this blog as becoming more important to expanding export capacity in an unregulated environment on the B.C. coast.As investors see capacity and revenues rise from exporting propane look for Altagas to move into the $20-$23 share price.       www.vectorvest.comVectorVest | Stock Analysis and Portfolio Management Software