2021 Financial Statements and
Management Discussion & Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management's Discussion and Analysis (MD&A) dated March 3, 2022 is provided to enable readers to assess the results
of operations, liquidity, and capital resources of AltaGas Ltd. ("AltaGas", the "Company" or the "Corporation") as at and for the
year ended December 31, 2021. This MD&A should be read in conjunction with the accompanying audited Consolidated
Financial Statements and notes thereto of AltaGas as at and for the year ended December 31, 2021.
The Consolidated Financial Statements and comparative information have been prepared in accordance with United States
(U.S.) generally accepted accounting principles (U.S. GAAP) and in Canadian dollars, unless otherwise indicated. Throughout
this MD&A, references to GAAP refer to U.S. GAAP and dollars refer to Canadian dollars, unless otherwise indicated.
Abbreviations, acronyms and capitalized terms used in this MD&A without express definition shall have the same meanings
given to those terms in the MD&A as at and for the year ended December 31, 2021 or the Annual Information Form for the
year ended December 31, 2021.
This MD&A contains forward-looking information (forward-looking statements). Words such as "may", "can", "would", "could",
"should", "will", "intend", "plan", "anticipate", "believe", "aim", "seek", "propose", "contemplate", "estimate", "focus", "strive",
"forecast", "expect", "project", "target", "potential", "objective", "continue", "outlook", "vision", "opportunity" and similar
expressions suggesting future events or future performance, as they relate to the Corporation or any affiliate of the
Corporation, are intended to identify forward-looking statements. In particular, this MD&A contains forward-looking statements
with respect to, among other things, business objectives, expected growth, results of operations, performance, business
projects and opportunities and financial results. Specifically, such forward-looking statements included in this document
include, but are not limited to, statements with respect to the following: potential post-acquisition contingent payments with
regard to the Petrogas acquisition; upcoming director retirement; AltaGas' core strategy, including with regard to plans for
dividend payments and redemption of shares; 2022 strategic priorities; expectation of 2022 annual consolidated normalized
EBITDA of approximately $1.50 to $1.55 billion; anticipated 2022 normalized earnings per share of approximately $1.80 to
$1.95 per share; assumed effective tax rate of approximately 21 percent in 2022; expectation that the Utilities segment will
contribute approximately 55 percent of normalized EBITDA for 2022; expected growth drivers of normalized EBITDA in the
Utilities segment; drivers of expected growth in the Midstream segment; expected higher normalized EBITDA from the
Corporate/Other segment in 2022; estimated NGLs exposed to frac spreads prior to hedging activities; plans to manage frac
exposed NGL volumes; expected invested capital expenditures of approximately $995 million in 2022; anticipated segment
allocation of capital expenditures; expectation for 2022 committed capital program to be funded through internally-generated
cash flow and normal course borrowings on existing committed credit facilities; the estimated cost, status and expected in-
service dates for growth capital projects in the Midstream and Utilities businesses; expected filing, procedure and decision
dates for rate cases in the Utilities business; timing of material regulatory filings, proceedings and decisions in the Utilities
business; expected impact of the COVID-19 pandemic on AltaGas’ business, operations and results in 2022; Washington Gas'
NGQSS levels; future changes in accounting policies and adoption of new accounting standards; and AltaGas’ long term
strategy.
These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events and
achievements to differ materially from those expressed or implied by such statements. Such statements reflect AltaGas’
current expectations, estimates, and projections based on certain material factors and assumptions at the time the statement
was made. Material assumptions include: assumptions regarding asset sales anticipated to close in 2022, effective tax rate of
approximately 21 percent, U.S./Canadian dollar exchange rates; inflation; interest rates, credit ratings, regulatory approvals
and policies, expected impact of the COVID-19 pandemic; expected commodity supply, demand and pricing; volumes and
rates; propane price differentials; degree day variance from normal; pension discount rate; financing initiatives; the
performance of the businesses underlying each sector; impacts of the hedging program; weather; frac spread; access to
capital; future operating and capital costs; timing and receipt of regulatory approvals; seasonality; planned and unplanned
plant outages; timing of in-service dates of new projects and acquisition and divestiture activities; taxes; operational expenses;
returns on investments; dividend levels; and transaction costs.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 1
AltaGas’ forward-looking statements are subject to certain risks and uncertainties which could cause results or events to differ
from current expectations, including, without limitation: risk related to COVID-19; health and safety risks; operating risks;
natural gas supply risks, volume throughput, infrastructure risks; service interruptions; cyber security, information and control
systems; climate-related risks, including carbon pricing; regulatory risks; litigation; changes in law; political uncertainty and civil
unrest; decommissioning, abandonment and reclamation costs; reputation risk; weather data; Indigenous and treaty rights;
capital market and liquidity risks; general economic conditions; internal credit risk; foreign exchange risk; risk related to the
integration of Petrogas; debt financing, refinancing, and debt service risk; interest rates; counterparty and supplier risk;
technical systems and processes incidents; dependence on certain partners; growth strategy risk; construction and
development; transportation of petroleum products; underinsured and uninsured losses; impact of competition in AltaGas'
businesses; counterparty credit risk; market risk; composition risk; collateral; rep agreements; market value of common shares
and other securities; variability of dividends; potential sales of additional shares; labor relations; key personnel; risk
management costs and limitations; commitments associated with regulatory approvals for the acquisition of WGL; cost of
providing retirement plan benefits; failure of service providers; and the other factors discussed under the heading "Risk
Factors" in the Corporation’s Annual Information Form for the year ended December 31, 2021 (AIF) and set out in AltaGas’
other continuous disclosure documents.
Many factors could cause AltaGas' or any particular business segment's actual results, performance or achievements to vary
from those described in this MD&A, including, without limitation, those listed above and the assumptions upon which they are
based proving incorrect. These factors should not be construed as exhaustive. Should one or more of these risks or
uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may
vary materially from those described in this MD&A as intended, planned, anticipated, believed, sought, proposed, estimated,
forecasted, expected, projected or targeted and such forward-looking statements included in this MD&A, should not be unduly
relied upon. The impact of any one assumption, risk, uncertainty, or other factor on a particular forward-looking statement
cannot be determined with certainty because they are interdependent and AltaGas’ future decisions and actions will depend on
Management’s assessment of all information at the relevant time. Such statements speak only as of the date of this MD&A.
AltaGas does not intend, and does not assume any obligation, to update these forward-looking statements except as required
by law. The forward-looking statements contained in this MD&A are expressly qualified by these cautionary statements.
Financial outlook information contained in this MD&A about prospective financial performance, financial position, or cash flows
is based on assumptions about future events, including economic conditions and proposed courses of action, based on
AltaGas Management's assessment of the relevant information currently available. Readers are cautioned that such financial
outlook information contained in this MD&A should not be used for purposes other than for which it is disclosed herein.
Additional information relating to AltaGas, including its quarterly and annual MD&A and Consolidated Financial Statements,
Annual Information Form, and press releases are available through AltaGas' website at www.altagas.ca or through SEDAR at
www.sedar.com.
AltaGas Business Overview and Organization
AltaGas is a leading energy infrastructure company that connects natural gas and NGLs to domestic and global markets. The
Company operates a diversified, lower-risk, high-growth energy infrastructure business that is focused on delivering resilient
and durable value for its stakeholders. AltaGas has three reporting segments - Utilities, Midstream, and Corporate/Other.
Utilities Segment
AltaGas' Utilities segment owns and operates franchised, cost-of-service, rate-regulated natural gas distribution and storage
utilities that provide safe, reliable, and affordable energy to approximately 1.7 million residential and commercial customers.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 2
This includes operating four utilities that operate across five major U.S. jurisdictions with an average 2021 rate base of
approximately US$4.7 billion. This includes:
▪ Washington Gas, which is the Company’s largest operating utility that serves approximately 1.2 million customers
across Maryland, Virginia and the District of Columbia;
SEMCO Energy, which delivers essential energy to approximately 317,000 customers in Southern Michigan and
Michigan’s Upper Peninsula;
ENSTAR, which is the largest gas utility in Alaska and delivers energy to more than 150,000 customers in Greater
Anchorage and the surrounding Cook Inlet region; and
Cook Inlet Natural Gas Storage Alaska (CINGSA), which is a regulated storage utility that provides reliable access to
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natural gas.
The Utilities business also includes other storage facilities and contracts for interstate natural gas transportation and storage
services, as well as WGL Energy Services, an affiliated retail energy marketing business, which sells natural gas and electricity
directly to approximately 0.5 million residential, commercial, and industrial customers located in Maryland, Virginia, Delaware,
Pennsylvania, Ohio, and the District of Columbia.
Midstream Segment
AltaGas’ Midstream segment is a leading North American platform that connects customers and markets. From wellhead to
tidewater and beyond, the Company is focused on providing its customers with safe and reliable service and connectivity that
facilitates the best outcomes for their businesses. This includes global market access for North American Liquified Petroleum
Gases (LPGs), which provides North American producers and aggregators with attractive netbacks for propane and butane
while delivering diversity of supply and supporting stronger energy security in Asia.
Throughout AltaGas’ Midstream operations, the Company believes it is playing a vital role within the larger energy ecosystem
that keeps the global economy moving forward and is powering the possible within our society, and doing so in a safe, reliable
and affordable manner.
AltaGas’ Midstream platform is heavily focused on the Montney resource play in Northeastern B.C. and centers around global
exports, which is where the Company believes the market is headed for resource development over the long-term. AltaGas
also operates a broader set of midstream infrastructure assets across the Western Canadian Sedimentary Basin (WCSB) and
select regions in the U.S., which are all focused on connecting customers and markets in the most efficient manner possible.
There are three core pillars to AltaGas’ Midstream platform that are integral to each other and facilitate the Company’s
wellhead to tidewater and beyond value chain. These include:
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Global Exports, which includes AltaGas’ two LPG export terminals where the Company has capacity to export up to
150,000 Bbl/d of propane and butane to key markets in Asia;
Natural Gas Gathering and Extraction, which includes 1.2 Bcf/d of extraction processing capacity and approximately
1.2 Bcf/d of raw field gas processing capacity, which is heavily focused on the Montney; and
Fractionation and Liquids Handling platform, which includes 65 MBbl/d of fractionation capacity and a sizable liquids
handling footprint that operates under the AltaGas and Petrogas banners.
The Midstream segment also consists of natural gas and NGL marketing business, domestic logistics, trucking and rail
terminals, and approximately 3.2 million barrels of liquid storage capability through a network of underground salt caverns
through the Company’s Strathcona Storage JV with ATCO Energy Solutions Ltd, as well as AltaGas’ 10 percent interest in the
Mountain Valley Pipeline (MVP).
AltaGas Ltd. – 2021 MD&A and Financial Statements - 3
Corporate/Other Segment
AltaGas’ Corporate/Other segment consists of the Company’s corporate activities and a small portfolio of gas-fired power
generation and distribution assets capable of generating 578 MW of power in California and Colorado.
Subsidiary Entities
The businesses of AltaGas are operated by the Company and a number of its subsidiaries including, without limitation, AltaGas
Services (U.S.) Inc., AltaGas Utility Holdings (U.S.) Inc., WGL Holdings, Inc. (WGL), Wrangler 1 LLC, Wrangler SPE LLC,
Washington Gas Resources Corporation, WGL Energy Services, Inc. (WGL Energy Services), and SEMCO Holding
Corporation; in regard to the Utilities business, Washington Gas Light Company (Washington Gas), Hampshire Gas Company,
and SEMCO Energy, Inc. (SEMCO); and in regard to the Midstream business, AltaGas Extraction and Transmission Limited
Partnership, AltaGas Pipeline Partnership, AltaGas Processing Partnership, AltaGas Northwest Processing Limited
Partnership, Harmattan Gas Processing Limited Partnership, Ridley Island LPG Export Limited Partnership, AltaGas Pacific
Partnership, AltaGas LPG Limited Partnership, Petrogas Energy Corporation (Petrogas), Petrogas Holdings Partnership, and
Petrogas, Inc. In the Corporate/Other segment, subsidiaries include AltaGas Power Holdings (U.S.) Inc., WGL Energy
Systems, Inc. (WGL Energy Systems), and Blythe Energy Inc. (Blythe). SEMCO conducts its Michigan natural gas distribution
business under the name SEMCO Energy Gas Company (SEMCO Gas), its Alaska natural gas distribution business under the
name ENSTAR Natural Gas Company (ENSTAR) and its 65 percent interest in an Alaska regulated gas storage utility under
the name Cook Inlet Natural Gas Storage Alaska LLC (CINGSA).
Fourth Quarter Highlights
(Normalized EBITDA, normalized funds from operations, normalized net income, and net debt are non-GAAP financial measures. Please see Non‑GAAP Financial
Measures section of this MD&A.)
Growth and Operational Highlights
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▪
▪
On December 3, 2021, AltaGas announced that its Board of Directors approved a 6 percent increase to its annual
common share dividends. Concurrently, AltaGas is moving from a monthly to quarterly payment schedule with
dividends expected to be paid in March, June, September and December of the 2022 calendar year at the rate of
$0.265 per common share ($1.06 per common share annually). This change will be effective for the March dividend
that will be paid on March 31, 2022;
Average utilities rate base increased by approximately 8 percent to approximately US$4.7 billion in 2021, compared
to approximately US$4.3 billion in 2020; and
On October 15, 2021, AltaGas filed an application with the Canada Energy Regulator for a 25-year butane export
license for 40,000 Bbl/d. The application positions AltaGas and its partners to continue to connect growing LPG
production volumes from Western Canada to global markets.
Other Highlights
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On December 15, 2021, WGL completed the issuance of US$200 million of senior unsecured private placement notes
with a coupon rate of 2.98 percent, maturing on December 15, 2051. The net proceeds were used to pay down
existing indebtedness and for general corporate purposes; and
As the COVID-19 pandemic persists, AltaGas continues to take proactive steps to effectively prepare for and address
the evolving risks and regulatory mandates in the jurisdictions in which it operates. While the Company is moving
toward reintegration of its workplaces, AltaGas' approach has been, and will continue to be, risk-based and guided by
its core values. The health and safety of AltaGas' employees, customers, contractors, and the communities in which it
operates is the top priority and is integrated into each aspect of AltaGas' response efforts. To date, COVID-19 has
had minimal disruption to AltaGas' operations.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 4
2021 Financial Highlights
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Normalized EBITDA was $1,490 million in 2021 compared to $1,310 million in 2020;
Income before income taxes was $446 million in 2021 compared to $699 million in 2020;
Cash from operations was $738 million ($2.64 per share) in 2021 compared to $773 million ($2.77 per share) in 2020;
Normalized funds from operations were $1,198 million ($4.28 per share) in 2021 compared to $1,003 million ($3.59
per share) in 2020;
Net income applicable to common shares was $230 million ($0.82 per share) in 2021 compared to $486 million
($1.74 per share) in 2020;
Normalized net income was $497 million ($1.78 per share) in 2021 compared to $396 million ($1.42 per share) in
2020;
Net debt was $8.3 billion as at December 31, 2021, compared to $8.2 billion at December 31, 2020; and
Total long-term debt was $8.2 billion as at December 31, 2021, compared to $8.0 billion at December 31, 2020.
Highlights Subsequent to Year End
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On January 11, 2022, AltaGas closed its offering of $300 million of 5.25 percent Fixed-to-Fixed Rate Subordinated
Notes, Series 1, due January 11, 2082. As a result of the offering, based on current rates, AltaGas expects cash
savings of approximately $66 million over the initial ten-year term of the offering due to lower taxes and financing
charges. The subordinated notes were offered under AltaGas' short form base shelf prospectus dated February 22,
2021, as supplemented by a prospectus supplement dated January 5, 2022. On February 16, 2022, AltaGas provided
notice to shareholders of its intention to use the proceeds of this offering to redeem all of its issued and outstanding
Series K Preferred Shares on March 31, 2022 for a redemption price equal to $25.00 per Series K Share, together
with all accrued and unpaid dividends to, but excluding, the redemption date;
In January 2022, AltaGas agreed to sell one of its customers an interest in certain Midstream processing facilities for
total consideration of approximately $234 million. The transaction is expected to close in the second quarter of 2022;
On February 9, 2022, pursuant to the terms of a Membership Interest Purchase Agreement entered into on January
14, 2022 with an undisclosed buyer, AltaGas closed the sale of a 60 MW stand-alone energy storage development
project in Goleta, California for total proceeds of approximately US$15 million, subject to certain contingencies; and
On February 11, 2022, AltaGas entered into a stock purchase agreement to sell a 70MW combined cycle power plant
in Brush, Colorado. The transaction is expected to close in the second quarter of 2022.
2022 Outlook
In 2022, AltaGas expects to achieve annual consolidated normalized EBITDA of approximately $1.50 to $1.55 billion,
compared to actual normalized EBITDA of $1.49 billion in 2021, and normalized earnings per share of approximately $1.80 to
$1.95 per share compared to actual normalized earnings per share and net income per share of $1.78 per share and $0.82 per
share, respectively in 2021, assuming an effective tax rate of approximately 21 percent. For the year ended December 31,
2021, income before income taxes and net income applicable to common shares were $446 million and $230 million,
respectively.
The Utilities segment is expected to contribute approximately 55 percent of normalized EBITDA, with growth driven primarily
by revenue growth from rate cases settled in 2021, increased spend on accelerated capital programs, ongoing operational cost
optimization activities, modest customer growth, and the expected discontinuation of COVID-19 related moratoriums in 2022.
Expected growth in the Midstream segment is primarily driven by the continued volume growth of AltaGas' key assets through
optimization initiatives at LPG export terminals and a favorable NGL and frac commodity price environment together with
AltaGas' commodity hedging programs. Midstream segment earnings are approximately 65 percent underpinned through take-
or-pay, cost-of-service, and fee-for-service contracts at the Midstream facilities and tolling agreements at the export facilities
AltaGas Ltd. – 2021 MD&A and Financial Statements - 5
together with hedged NGL and frac margins. Normalized EBITDA from the Corporate/Other segment, which includes AltaGas'
remaining power assets, is expected to be higher in 2022 mainly due to lower expected expenses related to employee
incentive plans. Overall growth is expected to offset lost normalized EBITDA from a full year impact of asset sales completed
in 2021 and the impact of expected 2022 asset sales.
The forecasted normalized EBITDA and earnings per share include assumptions around the U.S./Canadian dollar exchange
rate. Within each segment, the performance of the underlying businesses has the potential to vary. Any variance from AltaGas’
current assumptions could impact the forecasted normalized EBITDA and normalized earnings per share. Please refer to the
Risk Management section of this MD&A for further discussions of the risks to AltaGas arising from the COVID-19 pandemic.
At RIPET and Ferndale, NGL price margins are protected through AltaGas' comprehensive hedging programs. AltaGas is well
hedged for 2022 with approximately 74 percent of its 2022 expected frac exposed volumes hedged at approximately $33/Bbl,
prior to transportation costs. In addition, approximately 44 percent of AltaGas' 2022 expected export volumes are either tolled
or financially hedged with an average FEI to North American financial hedge price of approximately US$13/Bbl for non-tolled
propane and butane volumes. AltaGas plans to manage the export facilities such that a growing portion of annual capacity will
be underpinned by tolling arrangements, and expects to reach this objective over the next several years.
2022 Midstream Hedge Program
Global Exports volumes hedged (%) (1)
Average propane/butane FEI to North America average
hedge (US$/Bbl) (2)
Fractionation volume hedged (%) (3)
Frac spread hedge rate (CAD$/Bbl) (3)
Q1 2022
79
Q2 2022
44
Q3 2022
Q4 2022
31
22
Full Year
2022
44
15.29
71
24.40
10.56
79
36.02
10.43
9.76
13.17
75
36.14
68
36.17
74
33.08
(1)
(2)
(3)
Approximate expected volume hedged. Includes contracted tolling volumes and financial hedges. Based on assumption of average exports of 90 MBbls/d.
Approximate average for the period. Does not include physical differential to FSK for C3 volumes. Butane is hedged as a percentage of WTI.
Approximate average for the period.
Sensitivity Analysis
AltaGas’ financial performance is affected by factors such as changes in commodity prices, exchange rates, and weather. The
following table illustrates the approximate effect of these key variables on AltaGas’ expected normalized EBITDA for 2022:
Factor
Degree day variance from normal - Utilities (1)
Change in Canadian dollar per U.S. dollar exchange rate
Propane Far East Index to Mont Belvieu spread (2)
Pension discount rate
Increase or
decrease
5 percent
0.05
US$1/Bbl
1 percent
Approximate impact on
normalized annual EBITDA
($ millions)
9
45
22
26
(1) Degree days – Utilities relate to SEMCO Gas, ENSTAR, and District of Columbia service areas. Degree days are a measure of coldness determined daily as
the numbers of degrees the average temperature during the day in question is below 65 degrees Fahrenheit. Degree days for a particular period are the
average of degree days during the prior 15 years for SEMCO Gas, during the prior 10 years for ENSTAR, and during the prior 30 years for Washington Gas.
(2)
The sensitivity is net of hedges currently in place. The impact on EBITDA due to changes in the spread will vary and is being managed through an active
hedging program.
Growth Capital
Based on projects currently under review, development, or construction, AltaGas expects invested capital expenditures of
approximately $995 million in 2022 compared to $798 million in 2021. Actual 2021 invested capital was lower than previous
AltaGas Ltd. – 2021 MD&A and Financial Statements - 6
guidance of $850 million primarily due to the impact of foreign exchange rates and lower Midstream spending on growth
projects and deferral of certain discretionary Midstream maintenance capital to 2022. The majority of 2022 capital expenditures
are expected to focus on projects within the Utilities platform that are anticipated to deliver stable and transparent rate base
growth, positive risk-adjusted returns, and safe, reliable service for customers. The Utilities segment is expected to account for
approximately 75 to 80 percent of total capital expenditures, while the Midstream segment is expected to account for
approximately 20 percent and the Corporate/Other segment is expected to account for any remainder. In 2022, AltaGas’ capital
expenditures for the Utilities segment will focus primarily on accelerated pipe replacement programs, customer growth, and
system betterment. In the Midstream segment, capital expenditures are anticipated to primarily relate to facility turnarounds,
maintenance and administrative capital, optimization of existing assets, investment in Environment, Social & Governance
(ESG) initiatives, and new business development. Maintenance capital related to Midstream assets and remaining power
assets in the Corporate/Other segment is expected to be approximately $90 to $100 million of the total capital expenditures in
2022. The Corporation continues to focus on capital efficient organic growth and disciplined capital allocation while improving
balance sheet strength and flexibility.
AltaGas' 2022 committed capital program is expected to be funded through internally-generated cash flow and normal course
borrowings on existing committed credit facilities.
Please refer to the Invested Capital and Non-GAAP Financial Measures sections of this MD&A for additional information on the
components of AltaGas' invested capital.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 7
Growth Capital Project Updates
The following table summarizes the status of AltaGas’ significant growth projects:
Project
AltaGas'
Ownership
Interest
Midstream Projects
Estimated
Cost (1)
Expenditures
to Date (2)
Status
Expected
In-Service
Date
Nig Creek
Expansion
50% $58 million
$37 million
The Nig Creek facility was expanded in two phases. Phase
one expanded designed capacity by 55 Mmcf/d gross (27.5
Mmcf/d net) by adding inlet compression, sales compression,
and other plant equipment. Construction and commissioning
of Phase I was completed in early July 2021. The second
phase increased capacity by an additional 25 Mmcf/d gross
(12.5 Mmcf/d net) and included a deep cut plant for additional
liquids recoveries. Construction and commissioning of Phase
II was completed in the fourth quarter of 2021 and is now on-
stream.
Phase I
was in-
service
early Q3
and Phase
II was in-
service Q4
2021.
Mountain
Valley
Pipeline
(MVP)
10%
US$352
million
US$352
million
On January 25, 2022, the Fourth Circuit Court of Appeals
vacated U.S. Forest Service and Bureau of Land
Management permits that allow the pipeline to pass through
3.5 miles of the Jefferson National Forest. On February 2,
2022, the Fourth Circuit Court also issued a decision vacating
MVP’s U.S. Fish and Wildlife Service Endangered Species
Act Biological Opinion (Biological Opinion), remanding it on
specific issues. Until the pipeline has a valid Biological
Opinion, the Army Corps has stated they will not approve the
necessary permits. MVP continues to review these decisions
and evaluate the possible paths forward, which include
working with
the
considerations of potential legal appeals. As of December
31, 2021, approximately 94 percent of
is
complete, which
includes construction of all original
interconnects and compressor stations. AltaGas' exposure is
contractually capped to the original estimated contributions of
approximately US$352 million. In the fourth quarter of 2021,
AltaGas impaired its equity investment in MVP to a carrying
value of US$352 million as a result of these ongoing legal
and regulatory challenges. See Note 14 of the 2021 Annual
Consolidated Financial Statements for additional details.
federal agencies and
the project
relevant
the
Completion
date under
review
MVP
Southgate
Project
5%
US$20
million
US$4 million
Due to the evolving regulatory and legal environment for
pipeline construction and ongoing challenges related to MVP
and the MVP Southgate project, MVP is evaluating the MVP
Southgate project, including engaging in discussions with the
shipper regarding options for the project, including potential
changes to the project design and timing in lieu of pursuing
the project as originally contemplated. In the fourth quarter of
2021, AltaGas' impaired its equity investment in the MVP
Southgate project to a carrying value of $nil as a result of
these ongoing legal and regulatory challenges. See Note 14
of the 2021 Annual Consolidated Financial Statements for
additional details.
Completion
date under
review
AltaGas Ltd. – 2021 MD&A and Financial Statements - 8
Project
AltaGas'
Ownership
Interest
Utilities Projects
Estimated
Cost (1)
Expenditures
to Date (2)
Status
Accelerated
Utility Pipe
Replacement
Programs –
District of
Columbia
100%
Estimated US$150
million over the three
year period from
January 2021 to
December 2023, plus
additional
expenditures in
subsequent periods.
US$33
million (3)
The second phase of the accelerated utility
pipe replacement programs in the District of
Columbia
in
January 2021.
(PROJECTpipes 2) began
Accelerated
Utility Pipe
Replacement
Programs –
Maryland
100%
Estimated US$350
million over the five
year period from
January 2019 to
December 2023, plus
additional
expenditures in
subsequent periods.
US$207
million (3)
Accelerated
Utility Pipe
Replacement
Programs –
Virginia
100%
Estimated US$500
million over the five
year period from
January 2018 to
December 2022, plus
additional
expenditures in
subsequent periods.
US$402
million (3)
Accelerated
Replacement
Programs –
Michigan
100%
Estimated US$115
million over five year
period from 2021 to
2025.
US$21
million (3)
replacement programs
The second phase of the accelerated utility
pipe
in Maryland
(STRIDE 2.0) began in January 2019. On
March 2, 2022, the PSC of MD issued an
the calendar year 2022
Order reducing
STRIDE surcharge by 14.7 percent for the
remainder of the year. The Order noted that
Washington Gas filed its revised surcharge in
compliance with the Order on February 11,
2021. Recovery of STRIDE expenditures not
included in this surcharge will be requested
through the normal rate-making process.
The second phase of the accelerated pipe
replacement programs in Virginia (SAVE 2.0)
began in January 2018. On December 1,
2021, Washington Gas filed its proposed
amendment for the 2023 to 2027 SAVE Plan,
proposing to invest approximately US$889
million from 2023 to 2027 to replace higher
risk pipeline and
in Virginia. A
decision from the Commonwealth of Virginia
State Corporation Commission (SCC of VA) is
expected around May 30, 2022.
facilities
A new Main Replacement Program (MRP)
was agreed to in SEMCO’s last rate case
settled in December 2019. The new five-year
MRP program began in 2021 with a total
spend of approximately US$60 million. In
addition to the new MRP program, SEMCO
was also granted a new Infrastructure
Reliability Improvement Program (IRIP) which
is also a five-year program with a total spend
of approximately US$55 million beginning in
2021.
Expected
In-Service
Date
Individual
assets are
placed into
service
throughout
the
program.
Individual
assets are
placed into
service
throughout
the
program.
Individual
assets are
placed into
service
throughout
the
program.
Individual
assets are
placed into
service
throughout
the
program.
(1) These amounts are estimates and are subject to change based on various factors. Where appropriate, the amounts reflect AltaGas’ share of the various
projects.
(2) Expenditures to date reflect total cumulative expenditures incurred from inception of the projects to December 31, 2021. For WGL projects, this also includes
any expenditures prior to the close of the WGL Acquisition on July 6, 2018.
(3) The utility accelerated replacement programs are long-term projects with multiple phases for which expenditures are approved by the regulators and
managed in multi-year increments. Expenditures to date only include amounts for the current programs described above, and exclude any expenditures
made under prior increments of the programs. Actual regulatory filings may differ from reported amounts.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 9
Utilities
Description of Assets
AltaGas owns and operates utility assets that store and deliver natural gas to end-users in Virginia, Maryland, Michigan, the
District of Columbia, and Alaska, serving approximately 1.7 million customers and with a combined average 2021 rate base of
approximately US$4.7 billion.
The utilities are underpinned by regulated returns and regulatory regimes that generally provide stable earnings and cash
flows. The Utilities segment enhances the diversification of AltaGas' portfolio of energy infrastructure assets and strengthens
the Corporation’s business profile, thus allowing the Corporation to meet its objective of operating a diversified low-risk, high-
growth energy infrastructure business that is focused on delivering resilient and durable value for its stakeholders with long-life
assets.
The Utilities segment includes:
SEMCO Gas in Michigan;
Hampshire, providing regulated interstate natural gas storage to Washington Gas;
▪ Washington Gas in Virginia, Maryland, and the District of Columbia;
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▪ WGL's Retail Marketing business, which sells power and natural gas directly to residential, commercial, and industrial
A 65 percent interest in Cook Inlet Natural Gas Storage Alaska LLC (CINGSA) in Alaska; and
ENSTAR in Alaska;
customers in Maryland, Virginia, Delaware, Pennsylvania, Ohio, and the District of Columbia.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 10
All of AltaGas' regulated Utilities are allowed the opportunity to earn regulated returns. This return on rate base is composed of
regulator-allowed financing costs and return on equity (ROE). If actual costs are different from those recoverable through
approved rates, the utility bears the risk of this difference other than for certain costs that are subject to deferral treatment.
Earnings in the Utilities segment are seasonal, as revenues are primarily based on the demand for space heating in the winter
months, mainly from November to March. Costs, on the other hand, are generally incurred more uniformly over the year. This
typically results in stronger first and fourth quarters and weaker second and third quarters. In Michigan, Alaska, and the District
of Columbia, earnings can be impacted by variations from normal weather resulting in delivered gas volumes being different
than anticipated. Increases in the number of customers or changes in customer usage are other factors that might typically
affect delivered volumes, and hence actual earned returns for the Utilities segment. In Virginia and Maryland, Washington Gas
has billing mechanisms in place which are designed to eliminate or mitigate the effects of variance in customer usage caused
by weather and other factors such as conservation.
Washington Gas
Washington Gas is a regulated public utility that has been engaged in the natural gas distribution business since 1848, and
provides regulated gas distribution services to end users in Virginia, Maryland, and the District of Columbia. At the end of
2021, Washington Gas had approximately 1.2 million customers, of which approximately 94 percent were residential. The
number of customers at Washington Gas increased approximately 1 percent in 2021. The average rate base for the year
ended December 31, 2021 was approximately US$3.5 billion. At the end of 2021, the approved regulated ROE for Washington
Gas in its various jurisdictions ranged from 9.2 - 9.7 percent based on an equity ratio ranging from 52.1 - 53.5 percent.
Washington Gas is regulated by the PSC of DC, the PSC of MD, and the SCC of VA, which approve its terms of service and
the billing rates that it charges to customers. The rates charged to Utilities customers are designed to recover Washington Gas’
operating expenses and natural gas commodity costs and to provide a return on its investment in the net assets used in its firm
gas sales and delivery service.
Washington Gas has accelerated pipe replacement programs in place in each of its three jurisdictions. Washington Gas
accelerates pipe replacement in order to reduce risk and further enhance the safety and reliability of the pipeline system. Each
regulatory commission having jurisdiction over Washington Gas’ retail rates has approved accelerated replacement programs
with an associated surcharge mechanism to recover the cost, including a return, on those capital investments. In contrast to
the traditional rate-making approach to capital investments, for the accelerated pipe replacement programs, Washington Gas
is receiving recovery for these investments through the approved surcharges for each program and is authorized to invest in
each of these programs over a three- to five-year period.
Washington Gas’ customers are eligible to purchase their natural gas from unregulated third-party marketers through natural
gas unbundling. As at December 31, 2021, approximately 15 percent of its customers have chosen to purchase gas from
marketers. This does not negatively impact Washington Gas’ net income as the Corporation does not earn a margin on the
sale of natural gas to firm customers, but only from the delivery and distribution of the gas.
Washington Gas obtains natural gas supplies that originate from multiple regions throughout the United States. At
December 31, 2021, it had service agreements with four pipeline companies that provided firm transportation and storage
services with contract expiration dates ranging from 2022 to 2044. Washington Gas has also contracted with various interstate
pipeline and storage companies to add to its storage and transportation capacity. Washington Gas, under its asset optimization
program, makes use of storage and transportation capacity resources when those assets are not required to serve utility
customers. The objective of this program is to derive a profit to be shared with its utility customers. These profits are earned by
entering into commodity-related physical and financial contracts with third parties.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 11
Hampshire
Hampshire owns underground natural gas storage facilities, including pipeline delivery facilities located in and around
Hampshire County, West Virginia, and operates these facilities to serve Washington Gas. Hampshire is regulated by the
FERC. Washington Gas purchases all of the storage services of Hampshire, and includes the cost of the services in the
commodity cost of its regulated energy bills to customers. Hampshire operates under a “pass-through” cost-of-service based
tariff approved by FERC.
SEMCO Gas
SEMCO owns and operates a regulated natural gas distribution utility in Michigan operating under the name SEMCO Gas and
has an interest in a regulated natural gas storage facility in Michigan. At the end of 2021, SEMCO Gas had approximately
317,000 customers. Of these customers, approximately 92 percent were residential. In 2021, SEMCO Gas experienced
customer growth of approximately 1 percent reflecting growth in the franchise areas and customer conversions with the
favorable price of natural gas compared to other heating sources. The average 2021 rate base was approximately US$770
million. In 2021, the approved regulated ROE for SEMCO Gas was 9.87 percent with an approved capital structure based on
45.86 percent equity.
SEMCO Gas is regulated by the MPSC. It operates under cost-of-service regulation and utilizes actual results from the most
recently completed fiscal year along with known and measurable changes in its application for new rates.
SEMCO Gas has an Accelerated MRP surcharge to recover a stated amount of accelerated main replacement capital
expenditures in excess of what is authorized in its current base rates. For the years 2021 to 2025, the anticipated annual
average capital spending is approximately US$12 million. Any MRP revenue associated with unspent capital will be placed into
a regulatory liability account to be addressed in the next general rate base case. Additionally, a new IRIP was approved in the
2019 rate case, pursuant to which SEMCO Gas will complete certain projects totaling US$55 million to improve the reliability of
infrastructure. Customers were billed a surcharge beginning in 2021 for the IRIP.
ENSTAR and CINGSA
SEMCO owns and operates a regulated natural gas distribution utility in Alaska under the name ENSTAR. SEMCO, through a
subsidiary, holds a 65 percent interest in CINGSA, a regulated natural gas storage utility in Alaska. At the end of 2021,
ENSTAR had approximately 150,000 customers including residential, commercial, and transportation, and of these customers,
approximately 91 percent were residential. In 2021, ENSTAR experienced customer growth of approximately 1 percent
reflecting growth in the franchise areas and customer conversions with the favorable price of natural gas compared to other
heating sources. The average 2021 rate base was approximately US$279 million for ENSTAR and US$65 million for CINGSA
(SEMCO's 65 percent share).
ENSTAR and CINGSA are regulated by the Regulatory Commission of Alaska (RCA) and operate under cost-of-service
regulation utilizing actual results from the most recently completed fiscal year along with known and measurable changes in
their application for new rates.
Retail Energy Marketing
The U.S. retail gas marketing business sells natural gas directly to residential, commercial, and industrial customers in
Maryland, Virginia, Delaware, Pennsylvania, and the District of Columbia.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 12
The U.S. retail power marketing business sells power to end users in Maryland, Delaware, Pennsylvania, Ohio, and the District
of Columbia. This area is served by the PJM Interconnection (PJM), a regional transmission organization that regulates and
coordinates generation supply and the wholesale delivery of electricity in these states and jurisdictions.
Natural gas and electricity are purchased with the objective of earning a profit through competitively priced sales contracts with
end users. Requirements to serve retail customers is closely matched with commitments for deliveries, and thus, a secured
supply arrangement expiring in March 2024 has been entered into with Shell Energy North America (US), L.P, which reduces
credit requirements.
Capitalize on Opportunities
While providing safe and reliable service, AltaGas pursues opportunities in the Utilities segment to deliver value to its
customers while enhancing long-term shareholder returns. The Corporation’s objectives are to:
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Ensure safe, reliable operations and infrastructure, providing effective and cost-efficient service for customers;
Upgrade the Utilities platform to enhance the customer value proposition, drive better stakeholder outcomes and
deliver improved environmental benefits;
Enhance returns and capital efficiency and more timely recovery of expenditures through rate cases and increased
utilization of accelerated rate recovery programs;
Enhance and grow the business through asset optimization, cost reduction initiatives, and operational efficiencies to
reduce costs and deliver an improved customer experience;
Improve business processes and drive down leak remediation costs, reinvesting savings into improving the customer
experience;
Provide better stakeholder outcomes and environmental benefits by focusing on accelerated pipelines replacement
and network upgrades which provides optionality for blending of additional cleaner burning fuels;
Attract and retain customers through exceptional customer service;
Invest in opportunities that reflect the emerging lower carbon ecosystem and shifts in the market;
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▪ Maintain strong relationships with local communities, Indigenous peoples, governments, and regulatory bodies; and
▪ Maintain strong community and regulatory relationships while ensuring appropriate returns to shareholders.
Continue to grow the consolidated Utilities rate base;
AltaGas expects to grow its existing utility infrastructure through continued investment and capital improvements in franchise
areas, which will result in rate base growth and continued customer growth including the conversion of users of alternative
energy sources to natural gas. AltaGas' utilities have had annual rate base growth averaging approximately 7 percent over the
past three years after adjusting for the impact of foreign exchange translation. The growth in rate base is a result of prudent
investments in current areas of operations, and the addition of new customers. Customer growth rates for AltaGas’ utilities are
moderate, as is typical with mature utilities, with growth rates generally tied closely to the economic growth of the respective
franchise regions.
Midstream
Description of Assets
AltaGas’ Midstream segment is a leading North American platform that connects customers and markets. From wellhead to
tidewater and beyond, the Company is focused on providing its customers with safe and reliable service and connectivity that
facilitates the best outcomes for their businesses. This includes global market access for North American LPGs, which
AltaGas Ltd. – 2021 MD&A and Financial Statements - 13
provides North American producers and aggregators with attractive netbacks for propane and butane while delivering diversity
of supply and supporting stronger energy security in Asia.
AltaGas’ Midstream platform is heavily focused on the Montney resource play in Northeastern B.C. and centers around global
exports, which is where the Company believes the market is headed for resource development over the long-term. AltaGas
also operates a broader set of midstream infrastructure assets across the Western Canadian Sedimentary Basin (WCSB) and
select regions in the U.S., which are all focused on connecting customers and markets in the most efficient manner possible.
There are three core pillars to AltaGas’ Midstream platform that are integral to each other and facilitate the Company’s
wellhead to tidewater and beyond value chain. These include:
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Global Exports, which includes AltaGas’ two LPG export terminals where the Company has capacity to export up to
150,000 Bbl/d of propane and butane to key markets in Asia;
Natural Gas Gathering and Extraction, which includes 1.2 Bcf/d of extraction processing capacity and approximately
1.2 Bcf/d of raw field gas processing capacity, which is heavily focused on the Montney; and
Fractionation and Liquids Handling platform, which includes 65 MBbl/d of fractionation capacity and a sizable liquids
handling footprint that operates under the AltaGas and Petrogas banners.
The Midstream segment also consists of natural gas and NGL marketing business, domestic logistics, trucking and rail
terminals, and approximately 3.2 million barrels of liquid storage capability though a network of underground salt caverns
through the Company’s Strathcona Storage JV with ATCO Energy Solutions Ltd, as well as AltaGas’ 10 percent interest in the
Mountain Valley Pipeline.
The Midstream segment includes expansion projects under development or construction, as discussed under the Growth
Capital section of this MD&A.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 14
Global Exports
AltaGas’ global export assets include the Company's RIPET and Ferndale export terminals, which are located in Northern B.C.
and Washington State, respectively. These terminals facilitate North American producers and aggregators to access global
markets and provides incremental opportunities for improved price realization for propane and butane production. Between the
two facilities, AltaGas has the ability to ship in excess of 150,000 Bbl/d.
RIPET commenced commercial operations on May 23, 2019, with the first propane shipment departing from the terminal to
Asia. RIPET has storage of 600,000 Bbls and throughput capacity of up to 80,000 Bbls/d at the terminal. As AltaGas builds on
the Company's operational capabilities and continues to align with leading North American producers and global customers in
Asia through long-term tolling agreements, it expects to continue to increase throughput from RIPET. On August 21, 2020,
AltaGas was granted an additional 25-year license to export an additional 46,000 bbl/d of propane to North American and
global markets, bringing its aggregate propane export capacity under 25-year export licenses to 92,000 Bbls/d. For 2022,
AltaGas has in place agreements for the purchase of approximately 75 percent of the propane expected to be shipped from
RIPET. The RIPET dock offers deep draft, sufficient to accommodate loading VLGCs.
AltaGas also operates the Ferndale LPG terminal, which is capable of loading VLGCs, has 800,000 Bbls of on-site storage,
and currently can flow approximately 75,000 Bbls/d. Located approximately 100 miles north of Seattle, the terminal is also
pipeline connected to two regional refineries, providing additional supply, sales, and fee-for-service opportunities for the facility.
For 2022, AltaGas has in place agreements for propane and butane offtake volumes, for the purchase of approximately 76
percent of the product expected to be shipped from Ferndale.
On October 15, 2021, AltaGas filed an application with the Canada Energy Regulator for a 25-year butane export license for
40,000 Bbl/d. The application positions AltaGas and its partners to continue to connect growing LPG production volumes from
AltaGas Ltd. – 2021 MD&A and Financial Statements - 15
Western Canada to global markets. The RIPET and Ferndale export terminals represent strategic outlet points for North
American LPG volumes as they are competitively situated to serve the high-demand Far East market with shorter average
shipping times and competitive arbs as compared to the U.S. Gulf Coast or Arabian Gulf.
Terminal demand is supported through various long-term purchase agreements with Canadian and U.S. suppliers, primarily
from key Northern British Columbia and Alberta gathering facilities and select U.S. producing regions, including the Bakken in
North Dakota. Petrogas also maintains service agreements with numerous Tier 1 rail providers in order to leverage existing rail
networks and secure competitively priced LPGs across North America.
Gas Processing
Gas processing activities are comprised of gathering systems that move raw natural gas and NGLs from producing wells to
processing facilities, where impurities and certain hydrocarbon components are removed, and the product moves down the
energy value chain. The gas is then compressed to meet downstream pipelines' operating specifications for transportation to
North American natural gas markets. All of AltaGas' processing facilities are capable of extracting NGLs and converting the
throughput into usable products. The facilities provide revenues based on take-or-pay contracts and fee-for-service
arrangements with its customers, with the latter based on volumes processed. A significant portion of AltaGas' Midstream
contracts flow the Company's operating costs through to the producers. AltaGas' processing infrastructure includes:
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The Townsend facility, a 550 Mmcf/d gas processing facility, along with the related egress pipelines, truck terminal,
and NGL treatment infrastructure (the Townsend complex), which is wholly owned and operated by AltaGas. The
majority of the processing capacity is contracted with Montney producers in the area under long-term take-or-pay
agreements. In the second quarter of 2020, Townsend 2B and a gas gathering pipeline that connects upstream fields
to AltaGas facilities were commissioned, which added 198 Mmcf/d C3+ deep cut gas processing capacity at the
Townsend Complex;
The Gordondale facility, which has licensed capacity of 150 Mmcf/d of natural gas and is wholly owned and operated
by AltaGas. The Gordondale facility processes gas gathered from Birchcliff Energy Ltd.’s Gordondale Montney
development under a long-term take-or-pay contract. The plant is equipped with liquids extraction facilities to capture
the NGL value for the producer;
The Blair Creek facility, which has licensed capacity of 120 Mmcf/d of natural gas and is wholly owned and operated
by AltaGas. The facility processes gas gathered from producers in the area. The plant is equipped with liquids
extraction facilities to capture the NGL value for the producer;
The Aitken Creek processing facilities, in which AltaGas has a 50 percent ownership interest. These facilities include
Aitken Creek North, an operating shallow gas plant with a current capacity of 110 Mmcf/d (55 Mmcf/d net), and Nig
Creek, a deep cut gas plant with a current capacity of 180 Mmcf/d (90 Mmcf/d net). Phase 1 of Nig Creek GP2B
increased inlet capacity by 55 Mmcf/d (28 Mmcf/d net) by adding inlet compression, sales compression, and other
plant equipment. Phase 1 of Nig Creek GP2B was completed early in the third quarter of 2021 and is now on stream.
The second phase increased capacity by an additional 25 Mmcf/d gross (12.5 Mmcf/d net) and includes a deep cut
plant for additional liquids recoveries. Phase 2 was completed at the end of the fourth quarter of 2021. The Aitken
processing facilities are located in the liquids-rich Montney resource play in NEBC and are operated by Tourmaline.
AltaGas and Tourmaline have long-term processing, transportation, and marketing agreements that include AltaGas
liquids handling infrastructure in NEBC;
The Harmattan facility, which has a natural gas processing capacity of 490 Mmcf/d and is wholly owned and operated
by AltaGas. Harmattan's natural gas processing consists of sour gas treating, co-stream straddle processing, and
NGL extraction. In addition, Harmattan has fractionation and terminalling facilities (see Fractionation and Logistics
section below); and
Interests in four NGL extraction plants with net licensed inlet capacity of 1.0 Bcf/d. The extraction plants consist of
Edmonton Ethane Extraction Plant (EEEP), Joffre Ethane Extraction Plant (JEEP), Pembina Empress Extraction
AltaGas Ltd. – 2021 MD&A and Financial Statements - 16
Plant (PEEP), and the Younger extraction plant (Younger). The extraction assets provide stable fixed-fee or cost-of-
service type revenues and margin based revenues. The natural gas supply to EEEP, JEEP, and PEEP depends on
natural gas demand pull from residential, commercial and industrial usage inside and outside of Western Canada,
and gas liquids demand pull from the Alberta petrochemical market and propane heating. Natural gas supply to
Younger is dependent on the amount of raw natural gas processed at the McMahon gas plant, which is based on the
robust natural gas producing region of NEBC.
Fractionation and Logistics
Fractionation production is a function of NGL mix volumes processed, liquids composition, recovery efficiency of the plants,
and plant on-line time. Due to the integration and inter-connectivity of AltaGas' Midstream assets, the fractionation and logistics
activities provide integral services to the other Midstream businesses and customers by providing access to high value NGL
products with access to North American and global markets through rail networks, pipelines, RIPET, and Ferndale.
AltaGas' logistics infrastructure consists of NGL pipelines, treating, storage, truck, and rail terminal infrastructure centered
around AltaGas’ key Midstream operating assets at RIPET, Harmattan and, in NEBC, Townsend and North Pine. AltaGas'
fractionation and logistics business also includes Petrogas' terminals, wellsite fluids and fuels, and trucking and liquids
handling.
AltaGas’ fractionation and logistics infrastructure includes:
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The North Pine facility, which is the only custom fractionation plant in British Columbia, providing area producers with
a lower cost, higher netback alternative for their NGLs than transporting and fractionating in Edmonton, Alberta. The
first train of the North Pine facility is capable of processing up to 10,000 Bbls/d of NGL mix. The second train,
commissioned in the first quarter of 2020, provides an additional 10,000 Bbls/d of NGL mix. The North Pine facility is
connected to the Townsend truck terminal via the North Pine pipelines, to the Tourmaline Gundy facility, and also has
access to the Canadian National (CN) rail network, allowing the transportation of propane, butane, and condensate to
North American markets and propane to global markets via RIPET and butane via Ferndale;
The Harmattan gas processing complex, which has NGL fractionation capacity of 35,000 Bbls/d, a 450 Bbls/d
capacity frac oil processing facility, and a 200 tonnes/d capacity industrial grade carbon dioxide (CO2) facility.
Harmattan is the only deep‑cut and full fractionation plant in its operating area;
Younger, which has fractionation capacity of 19,500 Bbls/d (9,750 Bbls/d net) and is operated by Pembina. AltaGas
has a 50 percent interest in Younger's fractionation, storage, loading, treating, and terminalling of NGL and the
remaining interest is held by Pembina;
A network of NGL pipelines in the NEBC area that connects upstream gas plant producers to the AltaGas North Pine
facility. The NEBC NGL pipelines consist of three liquids egress lines. The third line, which connects the Townsend
facility to the Townsend truck terminal on the Alaska Highway (30 km) and AltaGas' North Pine facility (70 km), was
commissioned in the third quarter of 2020;
NGL and spec propane lines that connect the Townsend complex in the North, to the Aitken Creek facilities through a
60 km NGL pipeline (Aitken Connector), Canadian Natural Resources Limited's Nig plant through a lateral, and to the
Tourmaline Gundy facility in the West, through a 15 km spec propane line were all commissioned in the first half of
2020;
A rail logistics network consisting of approximately 4,600 rail cars that AltaGas manages to support LPG and NGL
handling, including approximately 3,000 rail cars from Petrogas;
Petrogas' terminals and storage business, which provides support to the LPG exports and distribution business by
providing the ability to source, transport, process, store, and deliver products through strategically located fixed
assets throughout North America. In addition, the terminals business provides various storage and handling services
to third-party customers through take-or-pay and fee-for-service agreements, which provide earnings stability through
AltaGas Ltd. – 2021 MD&A and Financial Statements - 17
volatile commodity price environments. The terminals business consists of strategically located crude and NGL assets
which provide storage, blending, rail, and truck logistical support and waterborne LPG export capabilities. Petrogas'
terminal business includes Griffith LPG Terminal, which is capable of handling approximately 12,000 Bbls/d of NGLs,
700,000 barrels of underground cavern storage and up to 220 railcars rail siding capacity; the Strathcona Storage JV,
which consists of four underground storage salt caverns in service that have a combined storage capacity of
approximately 2,516,000 Bbls and a fifth cavern under development that is expected to be placed in service in the
first half of 2022; and Sarnia Storage and Crude Oil Terminal JV agreement, which provides up to 2.1 million barrels
of crude oil and refined product storage capacity with outbound throughput supported by 10,000 Bbls/d of rail loading
capacity. The right to access the terminal assets under the joint venture arrangement have been recorded as a lease
by Petrogas;
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50 percent ownership of the 6.4 Bcf Sarnia natural gas storage facility, which is connected to the Dawn Hub in
Eastern Canada;
Three primary trucking entities which Petrogas operates, providing transportation related services within the WCSB
and the Pacific Northwest in the U.S. by hauling frac fluid, produced water, crude oil, and NGLs between producers,
terminals, customers and end users; and
Enerchem International Inc., a wholly owned subsidiary of Petrogas, is a Canadian corporation which focuses on the
production of drilling and wellsite fluids and consumer fuels. Through the fractionation of crude oil feedstock,
Enerchem produces and distributes proprietary hydrocarbon fluids for fracturing and drilling of oil and gas wells to
improve productivity and to resolve oilfield production challenges for downstream producers. Enerchem operates two
primary facilities located in Sundre and Slave Lake, Alberta, which are capable of processing over 1.5 million barrels
of finished products per year. These plants are supported by various ancillary storage and distribution facilities
located across the WCSB, providing over 150,000 barrels of storage capacity, strategically placed within the vicinity of
active drilling regions.
Energy Services
In addition to supporting the other Midstream activities within AltaGas, the logistics business identifies opportunities to buy and
resell NGLs for producers, and exchange, reallocate or resell pipeline and storage capacity to earn a profit. Net revenues from
these activities are derived from low risk opportunities based on transportation cost differentials between pipeline systems and
differences in commodity prices from one period to another. Margins are earned by locking in buy and sell transactions in
compliance with AltaGas’ credit and commodity risk policies. AltaGas also provides energy procurement services for utilities
gas users and manages the third-party pipeline transportation requirements for many of its gas marketing customers. In the
second quarter of 2021, AltaGas completed the sale of the majority of WGL Midstream's commodity business. Refer to Note 4
of the 2021 Annual Consolidated Financial Statements for additional details.
Petrogas' marketing business is focused on the purchase, sale, exchange, and distribution of NGLs and crude oil, primarily in
proximity to its strategically owned and leased asset base. By leveraging Petrogas' fully integrated infrastructure base and
extensive logistical capabilities, the marketing team is able to source competitively priced supply at the key hubs and across
various hydrocarbon basins in order to capture arbitrage opportunities derived through regional pricing differentials. Marketing
efforts are driven by two primary focuses: 1) domestic NGL and crude oil wholesale, and 2) LPG waterborne exports.
Additionally, this business provides operational support to the Ferndale export terminal by providing product supply and export
sales agreement negotiation services. Petrogas supports its distribution efforts by maintaining an extensive leased rail fleet.
Leases are established on a staggered maturity schedule with multiple lessors, to ensure railcar integrity and up-to-date DOT
classification and all leases are on a full-service basis.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 18
Pipeline Investments
AltaGas has a 10 percent equity interest in the MVP. The proposed pipeline is planned to transport approximately 2.0 Bcf/d of
natural gas. In April 2018, AltaGas entered into a separate agreement to acquire a 5 percent equity interest in a lateral project
to build an interstate natural gas pipeline (MVP Southgate) which would receive natural gas from MVP. Due to ongoing legal
and regulatory challenges the in-service dates of MVP and MVP Southgate are being reassessed.
Capitalize on Opportunities
To take advantage of opportunities, including the continued Montney LPG growth and the increasing Asian demand for LPG,
AltaGas plans to grow its Midstream business by expanding and optimizing strategically-located assets as well as its global
export platform. New infrastructure consists of larger scale facilities supporting the vast reserves in North America and growing
the footprint and integration of AltaGas' existing assets. While providing safe and reliable service, AltaGas pursues
opportunities in the Midstream segment to deliver value to its customers while enhancing long-term shareholder value. The
Corporation's objectives are to:
▪ Maximize and grow the unique structural advantage within AltaGas' integrated platform in the Montney region,
leveraging RIPET/Ferndale and the integrated value chain to attract volumes;
Increase utilization and export volumes, optimize commercial and operational capability at RIPET and Ferndale, and
continue to build on export competency while positioning the platform to export additional clean burning fuels;
Provide a fully-integrated Midstream service offering including gas processing and NGL extraction, fractionation,
liquids handling facilities, and transportation and marketing services to customers across the energy value chain, with
higher producer netbacks resulting from global export access to higher value global markets, including Asia;
Advance emissions intensity reduction plans and targets;
Advance alternative fuels opportunities and new growth initiatives that are within AltaGas' core markets and
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competencies;
▪ Maintain strong relationships with Indigenous peoples, regulators, customers, partners, and service providers;
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Increase utilization and throughput at existing facilities while maintaining top tier operating costs, high reliability and
Optimize existing rail infrastructure to gain scale and efficiencies;
NGL recovery, highly efficient business administration, and effective safety and environmental programs;
▪ Mitigate commodity risk through tolling agreements and effective hedging and risk management programs;
▪ Mitigate volume risk through contractual structures, redeployment of equipment, and expansion of geographic reach;
and
▪ Mitigate counterparty risk through customer base growth and diversification.
Corporate/Other
Description of Assets
In addition to Corporate activities and assets, AltaGas' Corporate/Other segment includes 578 MW of operational gross
capacity from remaining natural gas-fired and distributed generation power assets located in the U.S., primarily California and
Colorado.
Specifically, the core remaining power assets in the Corporate/Other segment include two natural gas-fired plants with 577
MW of generating capacity in the United States: the 507 MW Blythe Energy Center (Blythe) in California and the 70 MW Brush
II Facility (Brush) in Colorado which is pending sale. Blythe and Brush are both under Power Purchase Arrangements (PPA)
with creditworthy utilities.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 19
In Southern California, the 507 MW Blythe Energy Center utilizes gas-fired generation to produce power and serves the
transmission grid operated by the California Independent System Operator (CAISO) to cover periods of high demand primarily
driven by the Los Angeles area. Due to the structure of the long-term PPA with Southern California Edison (SCE), the majority
of the revenue from the facility is derived from being available to produce and not from actual production, which reduces risk
and provides stable cash flow. The facility is directly connected to an El Paso Gas Company natural gas pipeline for its primary
supply and a Southern California Gas Company pipeline as a secondary supply source, and interconnects to SCE and CAISO
via a 67‑mile transmission line also owned by Blythe and is part of the Blythe Energy Center. In 2019, AltaGas announced the
successful recontracting of the Blythe facility to SCE. With the approval of the PPA with SCE received by the California Public
Utilities Commission in January 2020, Blythe is contracted under a PPA until December 31, 2023. Under the tolling agreement,
SCE has exclusive rights to all capacity, energy, ancillary services, and resource adequacy benefits during the PPA term. In
addition, AltaGas is in the process of permitting a new 60 MW stand-alone energy storage development project in Goleta,
California. On February 9, 2022, AltaGas closed the sale of this energy storage project for proceeds of approximately US$15
million, subject to certain contingencies.
In the second quarter of 2021, AltaGas transferred ownership of the last remaining distributed generation project to the
purchaser as part of the sale of its portfolio of U.S. distributed generation assets, which closed in 2019. Refer to Note 4 and
Note 6 of the 2021 Annual Consolidated Financial Statements for additional details.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 20
Consolidated Financial Review
($ millions, except where noted)
Revenue
Normalized EBITDA (1)
Income (loss) before income taxes
Net income (loss) applicable to common shares
Normalized net income (1)
Total assets
Total long-term liabilities
Invested capital (1) (2)
Cash flows used by investing activities
Dividends declared (3)
Cash from (used by) operations
Normalized funds from operations (1)
Normalized effective income tax rate (%) (1)
Effective income tax rate (%)
($ per share, except shares outstanding)
Net income (loss) per common share - basic
Net income (loss) per common share - diluted
Normalized net income - basic (1)
Normalized net income - diluted (1)
Dividends declared (3)
Cash from (used by) operations
Normalized funds from operations (1)
Shares outstanding - basic (millions)
During the period (4)
End of period
Three Months Ended
December 31
2020
1,689
392
74
48
147
21,532
11,264
1,071
(980)
67
7
327
21.5
8.1
2021
3,140
341
(162)
(156)
107
21,593
11,335
253
(241)
71
(157)
287
23.6
17.9
Three Months Ended
December 31
2020
0.17
0.17
0.53
0.53
0.24
0.03
1.17
2021
(0.56)
(0.56)
0.38
0.38
0.25
(0.56)
1.03
280
280
279
279
Year Ended
December 31
2020
5,587
1,310
699
486
396
21,532
11,264
1,727
(1,211)
268
773
1,003
22.3
18.2
2021
10,573
1,490
446
230
497
21,593
11,335
798
(483)
281
738
1,198
22.1
23.8
Year Ended
December 31
2020
1.74
1.74
1.42
1.42
0.96
2.77
3.59
279
279
2021
0.82
0.82
1.78
1.76
1.00
2.64
4.28
280
280
(1) Non‑GAAP financial measure; see discussion in the Non-GAAP Financial Measures section of this MD&A.
(2)
In prior periods, invested capital did not include adjustments for the cost of removal of utility assets; however, beginning in the fourth quarter of 2021,
Management has adjusted for these costs to better align with the investing section of the Consolidated Statements of Cash Flows. Comparative periods have
been restated to reflect this change.
(3) Dividends declared per common share per month: $0.08 beginning December 2018, increased to $0.0833 per share beginning December 2020.
(4) Weighted average.
Three Months Ended December 31
Normalized EBITDA for the fourth quarter of 2021 was $341 million, compared to $392 million for the same quarter in 2020.
Factors negatively impacting AltaGas' normalized EBITDA in the fourth quarter of 2021 included lower gas and power margins
from WGL's retail marketing business, a hedge loss associated with revenue recognized for export cargos loaded at the end of
the third quarter at market spot prices, cessation of AFUDC related to MVP, the impact of the sale of the majority of WGL
Midstream's commodity business in the second quarter of 2021, amortization of a contract asset at Gordondale related to a
blend and extend contract that was entered into in 2018 with the impact of the lower processing fees being recognized for
accounting purposes starting in 2021, the impact of warmer weather in Michigan and the District of Columbia, and lower
realized frac spreads (inclusive of hedges). Factors positively impacting normalized EBITDA included the impact of
Washington Gas' 2020 Maryland and District of Columbia rate cases, impacts from the consolidation of Petrogas, higher
export volumes at RIPET, higher extracted NGL volumes, and higher revenue from accelerated pipe replacement program
AltaGas Ltd. – 2021 MD&A and Financial Statements - 21
spend. For the three months ended December 31, 2021, the average Canadian/U.S. dollar exchange rate decreased to 1.26
from an average of 1.30 in the same quarter of 2020, resulting in a decrease in normalized EBITDA of approximately $8
million.
Loss before income taxes for the fourth quarter of 2021 was $162 million, compared to income of $74 million for the same
quarter in 2020. The decrease was mainly due to the provision recorded on AltaGas' investment in MVP, the same previously
referenced factors impacting normalized EBITDA, and the absence of the gain recorded on the re-measurement of AltaGas'
previously held equity investment in AltaGas Idemitsu Joint Venture LP (AIJVLP) upon acquisition of Petrogas, partially offset
by the absence of the impairment of the Alton Natural Gas Storage Project (Alton) in the fourth quarter of 2020, the absence of
the dilution loss and other adjustments to equity income related to the acquisition of Petrogas, and lower unrealized losses on
risk management contracts. Net loss applicable to common shares for the fourth quarter of 2021 was $156 million ($0.56 per
share), compared to income of $48 million ($0.17 per share) for the same quarter in 2020. The change was due to the same
previously referenced factors impacting loss before income taxes and higher net income applicable to non-controlling interests,
partially offset by lower income tax expense.
Normalized funds from operations for the fourth quarter of 2021 was $287 million ($1.03 per share), compared to $327 million
($1.17 per share) for the same quarter in 2020. The decrease was mainly due to the same previously referenced factors
impacting normalized EBITDA.
Cash used by operations for the fourth quarter of 2021 was $157 million ($0.56 per share), compared to cash from operations
of $7 million ($0.03 per share) for the same quarter in 2020. The decrease was mainly due to lower net income after taxes
(after adjusting for non-cash items) and unfavourable variances in the net change in operating assets and liabilities, primarily
as a result of higher commodity prices. Please refer to the Liquidity section of this MD&A for further details on the variance in
cash from operations.
In the fourth quarter of 2021, AltaGas recorded pre-tax losses on dispositions of assets of approximately $1 million related to
minor Midstream asset sales. In addition, in the fourth quarter of 2021, AltaGas recorded pre-tax provisions on assets of
approximately $6 million ($2 million after-tax) primarily related to non-core development stage Midstream projects that are no
longer being developed and the Parks at Walter Reed thermal plant in Washington, D.C. which was impaired as the carrying
value exceeded future expected cash flows from the asset. In the fourth quarter of 2021, AltaGas recorded a pre-tax provision
on equity investments of approximately $271 million ($209 million after-tax) in the Consolidated Statements of Income under
the line item "income (loss) from equity investments" related to its investment in MVP. The provision is a result of continued
legal and regulatory challenges associated with the Mountain Valley Pipeline and MVP Southgate projects. In the fourth
quarter of 2020, upon the acquisition of Petrogas, AltaGas recorded a gain on re-measurement of the Company's previously
held equity investment in AIJVLP of approximately $22 million. In addition, in the fourth quarter of 2020, AltaGas recorded pre-
tax provisions on assets of approximately $104 million ($79 million after-tax), primarily related to Alton.
Operating and administrative expense for the fourth quarter of 2021 was $403 million, compared to $342 million for the same
quarter in 2020. The increase was mainly due to the inclusion of Petrogas' operating and administrative expenses upon
consolidation and higher costs from increased activity at RIPET. Depreciation and amortization expense for the fourth quarter
of 2021 was $105 million, compared to $108 million for the same quarter in 2020. The slight decrease was mainly due to the
impact of the sale of the majority of WGL Midstream's commodity business, partially offset by amortization expense on
Petrogas assets upon consolidation. Interest expense for the fourth quarter of 2021 was $67 million, compared to $68 million
for the same quarter in 2020. The slight decrease was predominantly due to lower average interest rates and lower average
foreign exchange rates in 2021, partially offset by higher average debt balances.
AltaGas recorded income tax recovery of $28 million for the fourth quarter of 2021 compared to expense of $5 million in the
same quarter in 2020. The decrease in income tax expense was mainly due to the tax impact of the provision recorded on
AltaGas' investment in MVP, which created a loss before taxes in the fourth quarter of 2021.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 22
Normalized net income was $107 million ($0.38 per share) for the fourth quarter of 2021, compared to $147 million ($0.53 per
share) reported for the same quarter in 2020. The decrease was mainly due to the same factors impacting normalized EBITDA
net of income taxes, and higher net income applicable to non-controlling interests, partially offset by lower interest expense
and lower depreciation and amortization expense. Normalizing items in the fourth quarter of 2021 increased normalized net
income by $262 million and included after‑tax amounts related to transaction costs and acquired contingencies related to
acquisitions and dispositions, provisions on assets, provisions on investments accounted for by the equity method, unrealized
losses on risk management contracts, losses on sale of assets, and non-controlling interest portion of non-GAAP adjustments.
Normalizing items in the fourth quarter of 2020 increased normalized net income by $99 million and included after‑tax amounts
related to transaction costs and acquired contingencies related to acquisitions and dispositions, restructuring costs, provisions
on assets, unrealized losses on risk management contracts, gains on sale of assets, dilution loss and other adjustments to
equity income related to the acquisition of Petrogas, and the gain recorded on the re-measurement of AltaGas' previously held
equity investment in AIJVLP upon acquisition of Petrogas. Please refer to the Non-GAAP Financial Measures section of this
MD&A for further details on normalization adjustments.
Year Ended December 31
Normalized EBITDA for the year ended December 31, 2021 was $1,490 million, compared to $1,310 million in 2020. Factors
positively impacting normalized EBITDA included impacts from the consolidation of Petrogas, favorable storage and
transportation margins and higher storage withdrawals at WGL Midstream in the first quarter of 2021, higher export volumes at
RIPET, the impact of Washington Gas' 2020 Maryland and District of Columbia rate cases, higher processed volumes at the
NEBC facilities due to NEBC growth projects placed into service, higher returns on pension assets, increased earnings from
the cogeneration plants at Harmattan due to higher Alberta power prices, higher revenue from accelerated pipe replacement
program spend, and higher gas margins from WGL's retail marketing business due to favourable pricing. These were partially
offset by the impact of asset sales, including AltaGas Canada Inc. (ACI), the majority of WGL Midstream's commodity
business, Pomona Energy Storage Inc. (Pomona) and AltaGas Ripon Energy Inc. (Ripon), as well as cessation of AFUDC
related to MVP, higher expenses related to employee incentive plans as a result of the increasing share price in 2021,
amortization of a contract asset at Gordondale related to a blend and extend contract that was entered into in 2018 with the
impact of the lower processing fees being recognized for accounting purposes starting in 2021, lower realized merchant
margins at RIPET (inclusive of hedges), and the absence of recoveries related to CEWS in 2020. For the year ended
December 31, 2021, the average Canadian/U.S. dollar exchange rate decreased to 1.25 from an average of 1.34 in 2020,
resulting in an decrease in normalized EBITDA of approximately $49 million.
Income before income taxes for the year ended December 31, 2021 was $446 million, compared to $699 million in 2020. The
decrease was mainly due the provision recorded on AltaGas' investment in MVP in the fourth quarter of 2021, the absence of
gains on certain 2020 asset sales, including ACI, distributed generation projects which were transferred to the purchaser in the
first quarter of 2020, Pomona, and Ripon, as well as the absence of the gain recorded on the re-measurement of AltaGas'
previously held equity investment in AIJVLP upon acquisition of Petrogas, provisions related to the sale of the majority of WGL
Midstream's commodity business, and higher depreciation expense, partially offset by to the same previously referenced
factors impacting normalized EBITDA, the absence of the provision on Alton, the absence of the dilution loss and other
adjustments to equity income related to the acquisition of Petrogas, higher unrealized gains on risk management contracts,
and the absence of provision on equity investments related to the Constitution pipeline project (Constitution) which was
cancelled in February 2020. Net income applicable to common shares for the year ended December 31, 2021 was $230
million ($0.82 per share), compared to $486 million ($1.74 per share) in 2020. The change was due to the same previously
referenced factors impacting income before income taxes and higher net income applicable to non-controlling interests as a
result of the Petrogas acquisition, partially offset by lower income tax expense.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 23
Normalized funds from operations for the year ended December 31, 2021 was $1,198 million ($4.28 per share), compared to
$1,003 million ($3.59 per share) in 2020. The increase was mainly due to the same previously referenced factors impacting
normalized EBITDA, partially offset by higher current income tax expense.
Cash from operations for the year ended December 31, 2021 was $738 million ($2.64 per share), compared to $773 million
($2.77 per share) in 2020. The decrease was mainly due to unfavourable variances in the net change in operating assets and
liabilities and higher current tax expense on asset sales, partially offset by higher net income after taxes (after adjusting for
non-cash items). Please refer to the Liquidity section of this MD&A for further details on the variance in cash from operations.
In 2021, AltaGas recorded pre-tax gains on dispositions of assets of approximately $6 million. This was primarily comprised of
a pre-tax loss of $1 million on the last remaining U.S. distributed generation project which was sold in 2019 but transferred to
the purchaser during the second quarter of 2021, a pre-tax gain of $3 million on the sale of the majority of WGL Midstream's
commodity business, a pre-tax gain of $1 million on minor Midstream asset sales, and $3 million of cash proceeds received
from an escrow account related to the 2019 disposition of AltaGas' investment in Meade, which held WGL Midstream's indirect,
non-operating interest in the Central Penn pipeline (Central Penn). Upon close of the sale, various escrow accounts were
established to provide the purchaser a form of recourse for the settlement of indemnification obligations. In addition, in 2021,
AltaGas recorded pre-tax provisions on assets of approximately $64 million ($48 million after-tax) primarily related to the sale
of the majority of WGL Midstream's commodity business and the previously mentioned provisions recorded in the fourth
quarter of 2021. In 2021, AltaGas also recorded the previously mentioned provision on equity investments of $271 million
($209 million after-tax) related to its investment in MVP. In 2020, AltaGas recorded a pre-tax gain of $206 million on the
disposition of its equity investment in ACI and a pre-tax gain on disposition of assets of $17 million. This was comprised of a
pre-tax gain of $9 million related to certain distributed generation projects which were transferred to the purchaser in 2020, a
pre-tax gain of $5 million on the disposition of Pomona, and a pre-tax gain of $3 million on the disposition of Ripon. In 2020,
upon the acquisition of Petrogas, AltaGas also recorded the previously mentioned gain on the re-measurement of its
previously held equity investment in AIJVLP of approximately $22 million. In 2020, AltaGas recorded pre-tax provisions on
assets of approximately $109 million ($81 million after-tax) primarily related to Alton, certain U.S. distributed generation
projects which had not yet transferred to the purchaser, and land parcels located near the Harmattan gas processing plant. In
addition, in 2020, AltaGas recorded a pre-tax provision on equity investments of approximately $7 million ($6 million after-tax)
for costs associated with Constitution which was canceled in February 2020.
Operating and administrative expense for the year ended December 31, 2021 was $1,476 million, compared to $1,267 million
in 2020. The increase was mainly due to the inclusion of Petrogas' operating and administrative expenses upon consolidation,
higher costs from increased activity at RIPET and the NEBC growth projects which were placed in service in the second and
third quarters of 2020, higher expenses related to employee incentive plans as a result of the increasing share price in 2021,
and the absence of recoveries related to CEWS recorded in 2020. Depreciation and amortization expense for the year ended
December 31, 2021 was $422 million, compared to $414 million in 2020. The increase was mainly due to amortization
expense on Petrogas assets upon consolidation and new assets placed in-service, partially offset by an amortization
adjustment related to the derecognition of an intangible liability in the second quarter of 2020. Interest expense for the year
ended December 31, 2021 was $275 million, compared to $274 million in 2020. The slight increase was due to lower
capitalized interest and higher average debt balances, partially offset by lower average interest rates and lower average
foreign exchange rates in 2021.
AltaGas recorded income tax expense of $106 million for the year ended December 31, 2021 compared to $127 million in
2020. The decrease in tax expense was mainly due to the tax impact of the provision recorded on AltaGas' investment in MVP
in the fourth quarter of 2021, partially offset by the absence of gains taxed at 50 percent of the normal Canadian rate (primarily
related to the gain on sale of ACI in the first quarter of 2020).
AltaGas Ltd. – 2021 MD&A and Financial Statements - 24
Normalized net income was $497 million ($1.78 per share) for the year ended December 31, 2021, compared to $396 million
($1.42 per share) in 2020. The increase was mainly due to the same previously referenced factors impacting normalized
EBITDA, partially offset by higher net income applicable to non-controlling interests, higher interest expense, higher
depreciation and amortization expense, and higher income tax expense. Normalizing items in the year ended December 31,
2021 increased normalized net income by $267 million and included after‑tax amounts related to gains on sale of assets,
transaction costs and acquired contingencies related to acquisitions and dispositions, restructuring costs, provisions on assets,
provisions on investments accounted for by the equity method, and unrealized gains on risk management contracts.
Normalizing items in the year ended December 31, 2020 reduced normalized net income by $90 million and included after‑tax
amounts related to gains on sale of assets, transaction costs related to acquisitions and dispositions, restructuring costs,
provisions on assets, provisions on investments accounted for by the equity method, dilution loss and other adjustments to
equity income related to the acquisition of Petrogas, COVID-19 related costs, gain recorded on the re-measurement of
AltaGas' previously held equity investment in AIJVLP upon acquisition of Petrogas, and unrealized gains on risk management
contracts. Please refer to the Non-GAAP Financial Measures section of this MD&A for further details on normalization
adjustments.
Non‑GAAP Financial Measures
This MD&A contains references to certain financial measures used by AltaGas that do not have a standardized meaning
prescribed by GAAP and may not be comparable to similar measures presented by other entities. Readers are cautioned that
these non-GAAP measures should not be construed as alternatives to other measures of financial performance calculated in
accordance with GAAP. The non‑GAAP measures and their reconciliation to GAAP financial measures are shown below.
These non-GAAP measures provide additional information that Management believes is meaningful in describing AltaGas'
operational performance, liquidity and capacity to fund dividends, capital expenditures, and other investing activities. The
specific rationale for, and incremental information associated with, each non‑GAAP measure is discussed below.
References to normalized EBITDA, normalized net income, normalized funds from operations, normalized income tax
expense, normalized effective income tax rate, net debt, net debt to total capitalization, invested capital, and net invested
capital throughout this MD&A have the meanings as set out in this section.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 25
Normalized EBITDA
($ millions)
Income (loss) before income taxes (GAAP financial measure)
Add:
Depreciation and amortization
Interest expense
EBITDA
Add (deduct):
Transaction costs and acquired contingencies related to acquisitions and
dispositions (1)
Unrealized losses (gains) on risk management contracts (2)
Losses (gains) on sale of assets (3)
Gain on re-measurement of previously held equity investment in AIJVLP (4)
Dilution loss and other adjustments to equity investments (4)
Restructuring costs (5)
COVID-19 related costs (6)
Provisions on assets
Provisions on investments accounted for by the equity method (7)
Accretion expenses
Foreign exchange gains
Normalized EBITDA
$
$
$
Three Months Ended
December 31
2020
2021
(162) $
74 $
Year Ended
December 31
2020
699
2021
446 $
105
67
10 $
108
68
414
422
274
275
250 $ 1,143 $ 1,387
16
33
1
—
—
—
—
6
271
4
—
341 $
5
24
—
(22)
26
4
—
104
—
2
(1)
22
(21)
(223)
(22)
42
6
2
109
7
5
(4)
392 $ 1,490 $ 1,310
33
(18)
(6)
—
—
1
—
64
271
6
(4)
(1) Comprised of transaction costs and acquired contingencies related to acquisitions and dispositions of assets and/or equity investments in the period. These
costs and contingencies are included in the "cost of sales", "operating and administrative", and "other income" line items on the Consolidated Statements of
Income. Transaction costs include expenses, such as legal fees, that are directly attributable to the acquisition or disposition. The acquired contingencies
relate to the acquisition of Petrogas and include amounts for additional contingent consideration for the purchase of Petrogas as well as certain acquired
indirect tax liabilities. Please refer to Note 3 and Note 4 of the 2021 Annual Consolidated Financial Statements for further details regarding AltaGas'
acquisitions and dispositions.
(2)
Included in the "revenue" and “cost of sales” line items on the Consolidated Statements of Income. Please refer to Note 23 of the 2021 Annual Consolidated
Financial Statements for further details regarding AltaGas' risk management activities.
(3)
Included in the "other income" line item on the Consolidated Statements of Income. Please refer to Note 4 of the 2021 Annual Consolidated Financial
Statements for further details regarding AltaGas' disposition of assets in the period.
(4) Relates to adjustments to equity income recognized in 2020 related to the investment in Petrogas. These amounts are included in the “income (loss) from
equity investments” line item on the Consolidated Statements of Income.
(5) Comprised of costs related to a workforce optimization program. These costs are included in the “operating and administrative” line item on the Consolidated
Statements of Income.
(6) COVID-19 related costs are primarily comprised of credit losses that were incremental and directly attributable to the COVID-19 pandemic and charges
incurred to support remote work arrangements. As these costs would not have otherwise been incurred, it has been included as a normalizing item. Credit
losses are included in the “revenue” line item as a reduction to revenue, and the additional charges incurred to support remote work arrangements are
included in the “operating and administrative” line item on the Consolidated Statements of Income.
(7) Relates to the provisions recorded on AltaGas' investment in MVP in the fourth quarter of 2021 and the Constitution pipeline project which was canceled in
February 2020. The provisions are included in the “income (loss) from equity investments” line item on the Consolidated Statements of Income.
EBITDA is a measure of AltaGas' operating profitability prior to how business activities are financed, assets are amortized, or
earnings are taxed. EBITDA is calculated from the Consolidated Statements of Income using income before income taxes
adjusted for pre‑tax depreciation and amortization and interest expense.
AltaGas presents normalized EBITDA as a supplemental measure. Normalized EBITDA is used by Management to enhance
the understanding of AltaGas' earnings over periods, as well as for budgeting and compensation related purposes. The metric
is frequently used by analysts and investors in the evaluation of entities within the industry as it excludes items that can vary
substantially between entities depending on the accounting policies chosen, the book value of assets, and the capital
structure.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 26
Normalized Net Income
($ millions)
Net income (loss) applicable to common shares (GAAP financial measure)
Add (deduct) after-tax:
Transaction costs and acquired contingencies related to acquisitions and
dispositions (1)
Unrealized losses (gains) on risk management contracts (2)
Losses (gains) on sale of assets (3)
Non-controlling interest portion of non-GAAP adjustments (4)
Gain on re-measurement of previously held equity investment in AIJVLP (5)
Dilution loss and other adjustments to equity investments (5)
Restructuring costs (6)
COVID-19 related costs (7)
Provisions on assets
Provisions on investments accounted for by the equity method (8)
Normalized net income
$
$
Three Months Ended
December 31
2020
2021
(156) $
Year Ended
December 31
2020
486
2021
230 $
28
(10)
—
(9)
—
—
1
—
48
209
497 $
18
(18)
(204)
—
(22)
42
5
2
81
6
396
48 $
3
17
(7)
—
(22)
26
3
—
79
—
147 $
13
21
15
3
—
—
—
—
2
209
107 $
(1) Comprised of transaction costs and acquired contingencies related to acquisitions and dispositions of assets and/or equity investments in the period. The
pre-tax costs and contingencies are included in the "cost of sales", "operating and administrative", and "other income" line items on the Consolidated
Statements of Income. Transaction costs include expenses, such as legal fees, that are directly attributable to the acquisition or disposition. The acquired
contingencies relate to the acquisition of Petrogas and include amounts for additional contingent consideration for the purchase of Petrogas as well as
certain acquired indirect tax liabilities. Please refer to Note 3 and Note 4 of the 2021 Annual Consolidated Financial Statements for further details regarding
AltaGas' acquisitions and dispositions.
(2)
The pre-tax amounts are included in the "revenue" and “cost of sales” line items on the Consolidated Statements of Income. Please refer to Note 23 of the
2021 Annual Consolidated Financial Statements for further details regarding AltaGas' risk management activities.
(3)
The pre-tax amounts are included in the "other income" line item on the Consolidated Statements of Income. Please refer to Note 4 of the 2021 Annual
Consolidated Financial Statements for further details regarding AltaGas' disposition of assets in the period. The after-tax amount also includes the impact of
the increase in accumulated state deferred income tax liabilities caused by the elimination of the WGL Midstream business from AltaGas' consolidated U.S.
tax group.
(4)
The portion of non-GAAP adjustments applicable to non-controlling interests are excluded in the computation of normalized net income to ensure
consistency of normalizations applied to controlling and non-controlling interests. These amounts are included in the “net income applicable to non-controlling
interests” line item on the Consolidated Statements of Income.
(5) Relates to adjustments to equity income recognized in 2020 related to the investment in Petrogas. The pre-tax amounts are included in the “income (loss)
from equity investments” line item on the Consolidated Statements of Income.
(6) Comprised of costs related to a workforce optimization program. The pre-tax costs are included in the “operating and administrative” line item on the
Consolidated Statements of Income.
(7) COVID-19 related costs are primarily comprised of credit losses that were incremental and directly attributable to the COVID-19 pandemic and charges
incurred to support remote work arrangements. As these costs would not have otherwise been incurred, it has been included as a normalizing item. Credit
losses are included in the “revenue” line item as a reduction to revenue, and the additional charges incurred to support remote work arrangements are
included in the “operating and administrative” line item on the Consolidated Statements of Income.
(8) Relates to the provisions recorded on AltaGas' investment in MVP in the fourth quarter of 2021 and the Constitution pipeline project which was canceled in
February 2020. The pre-tax provisions are included in the “income (loss) from equity investments” line item on the Consolidated Statements of Income.
Normalized net income and normalized net income per share are used by Management to enhance the comparability of
AltaGas’ earnings, as it reflects the underlying performance of AltaGas’ business activities.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 27
Normalized Funds From Operations
($ millions)
Cash from (used by) operations (GAAP financial measure)
Add (deduct):
Net change in operating assets and liabilities
Asset retirement obligations settled
Funds from operations
Add (deduct):
Transaction costs and acquired contingencies related to acquisitions
and dispositions (1)
Current tax expense (recovery) on asset sales (2)
Restructuring costs (3)
COVID-19 related costs (4)
Normalized funds from operations
$
$
$
Three Months Ended
December 31
2020
2021
(157) $
7 $
Year Ended
December 31
2020
773
2021
738 $
437
3
283 $
16
(12)
—
—
287 $
311
2
320 $
410
10
1,158 $
203
4
980
5
(2)
4
33
6
1
17
(2)
6
—
327 $
—
1,198 $
2
1,003
(1) Comprised of costs and acquired contingencies related to acquisitions and dispositions of assets and/or equity investments in the period. These costs and
contingencies exclude non-cash amounts and are included in the "cost of sales", "operating and administrative", and "other income" line items on the
Consolidated Statements of Income. Transaction costs include expenses, such as legal fees, that are directly attributable to the acquisition or disposition.
The acquired contingencies relate to the acquisition of Petrogas and include amounts for additional contingent consideration for the purchase of Petrogas as
well as certain acquired indirect tax liabilities. Please refer to Note 3 and Note 4 of the 2021 Annual Consolidated Financial Statements for further details
regarding AltaGas' acquisitions and dispositions.
(2)
Primarily related to the sale of WGL Midstream's commodity business. These expenses (recoveries) are included in the "current income tax expense" line
item on the Consolidated Statements of Income.
(3) Comprised of costs related to a workforce optimization program. These costs are included in the “operating and administrative” line item on the Consolidated
Statements of Income.
(4) COVID-19 related costs are primarily comprised of credit losses that were incremental and directly attributable to the COVID-19 pandemic and charges
incurred to support remote work arrangements. As these costs would not have otherwise been incurred, it has been included as a normalizing item. Credit
losses are included in the “revenue” line item as a reduction to revenue, and the additional charges incurred to support remote work arrangements are
included in the “operating and administrative” line item on the Consolidated Statements of Income.
Normalized funds from operations and funds from operations are used to assist Management and investors in analyzing the
liquidity of the Corporation. Management uses these measures to understand the ability to generate funds for capital
investments, debt repayment, dividend payments, and other investing activities.
Funds from operations and normalized funds from operations as presented should not be viewed as an alternative to cash
from (used in) operations or other cash flow measures calculated in accordance with GAAP.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 28
Normalized Income Tax Expense
($ millions)
Income tax expense (recovery) (GAAP financial measure)
Add (deduct) tax impact of:
Three Months Ended
December 31
2020
2021
$
(28) $
5 $
Year Ended
December 31
2020
127
2021
106 $
Transaction costs and acquired contingencies related to acquisitions and
dispositions
Unrealized losses (gains) on risk management contracts
Losses (gains) on sale of assets (1)
Restructuring costs
Provisions on assets
Provisions on investments accounted for by the equity method
Normalized income tax expense
$
3
12
(14)
—
4
62
39 $
2
6
7
1
25
—
46 $
6
(9)
(6)
—
16
62
175 $
4
(4)
(19)
1
28
1
138
(1)
Includes the impact of the increase in accumulated state deferred income tax liabilities caused by the elimination of the WGL Midstream business from
AltaGas' consolidated U.S. tax group.
The above table provides a reconciliation of normalized income tax expense from the GAAP financial measure, income tax
expense. The reconciling items are comprised of the income tax impacts of normalizing items present in the calculation of
normalized net income. For more information on the individual normalizing items, please refer to the normalized net income
reconciliation above.
Normalized income tax expense is used by Management to enhance the comparability of the impact of income tax on AltaGas’
earnings, as it reflects the underlying performance of AltaGas’ business activities, and is presented to provide this perspective
to analysts and investors.
Net Debt and Net Debt to Total Capitalization
Net debt and net debt to total capitalization are used by the Corporation to monitor its capital structure and financing
requirements. It is also used as a measure of the Corporation’s overall financial strength and is presented to provide this
perspective to analysts and investors. Net debt is defined as short-term debt (excluding third-party project financing obtained
for the construction of certain energy management services projects), plus current and long-term portions of long-term debt,
less cash and cash equivalents. Total capitalization is defined as net debt plus shareholders’ equity and non-controlling
interests. Additional information regarding these non-GAAP measures can be found under the Capital Resources section of
this MD&A.
Net Invested Capital
($ millions)
Cash used in investing activities (GAAP financial measure)
Add (deduct):
Net change in non-cash capital expenditures (1)
Cash acquired in business acquisitions (2)
Contributions from non-controlling interests (3)
Net invested capital
$
$
Three Months Ended
December 31
2020 (4)
2021
241 $
980 $
Year Ended
December 31
2020 (4)
1,211
2021
483 $
11
—
—
252 $
53
40
(2)
1,071 $
(33)
—
(1)
449 $
33
40
(7)
1,277
(1) Comprised of non-cash capital expenditures included in the "accounts payable and accrued liabilities" line item on the Consolidated Balance Sheets. Please
refer to Note 31 of the 2021 Annual Consolidated Financial Statements for further details.
(2) Related to the cash acquired as part of the Petrogas Acquisition. Business acquisitions are presented net of cash acquired on the Consolidated Statements
of Cash Flows. Please refer to Note 3 of the 2021 Annual Consolidated Financial Statements for further details regarding the acquisition.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 29
(3) Comprised of partner recoveries for capital expenditures incurred for the Ridley Island Propane Export Terminal. These recoveries are included in
"contributions from non-controlling interests" under financing activities in the Consolidated Statements of Cash Flows, however as Management views this as
a part of AltaGas' invested capital, it has been included in the calculation of net invested capital.
(4)
In prior periods, invested capital did not include adjustments for the cost of removal of utility assets; however, beginning in the fourth quarter of 2021,
Management has adjusted for these costs to better align with the investing section of the Consolidated Statements of Cash Flows. Comparative periods have
been restated to reflect this change. Additionally, 2020 invested capital has been revised to include the $7 million final payment related to the Constitution
pipeline project that was canceled in February 2020, also to better align with the investing section of the Consolidated Statements of Cash Flows.
Invested capital is a measure of AltaGas' use of funds for capital expenditure activities. It includes expenditures relating to
property, plant, and equipment and intangible assets, capital contributed to long term investments, and contributions from non-
controlling interests. Net invested capital is invested capital presented net of any proceeds from disposals of assets and equity
investments in the period. Net invested capital is calculated based on the investing activities section in the Consolidated
Statements of Cash Flows, adjusted for items such as non-cash capital expenditures, cash acquired in business acquisitions,
and contributions from non-controlling interests. Invested capital and net invested capital are used by Management, investors,
and analysts to enhance the understanding of AltaGas' capital expenditures from period to period and provide additional detail
on the Company's use of capital.
Supplemental Calculations
Reconciliation of Normalized EBITDA to Normalized Net Income
The below table provides a supplemental reconciliation of normalized EBITDA to normalized net income. Both of these non-
GAAP measures have been previously reconciled to the relevant GAAP financial measures in the section above. This
supplemental information is provided as additional information to assist analysts and investors in comparing normalized
EBITDA to normalized net income and is not intended as a substitute for the reconciliations to the nearest comparable GAAP
measures. Readers should not place undue reliance on this supplemental reconciliation.
($ millions)
Normalized EBITDA
Add (deduct):
Depreciation and amortization
Interest expense
Income tax expense
Normalizing items impacting income taxes (1)
Accretion expenses
Foreign exchange gains
Non-controlling interest portion of non-GAAP adjustments (2)
Net income applicable to non-controlling interests
Preferred share dividends
Three Months Ended
December 31
2020
392 $
2021
341 $
$
Year Ended
December 31
2020
1,310
2021
1,490 $
(105)
(67)
28
(67)
(4)
—
3
(9)
(13)
107 $
(108)
(68)
(5)
(42)
(2)
1
—
(5)
(16)
147 $
(422)
(275)
(106)
(69)
(6)
4
(9)
(57)
(53)
497 $
(414)
(274)
(127)
(12)
(5)
4
—
(20)
(66)
396
Normalized net income
$
(1) Represents the income tax expense related to the normalizing items included in the calculation of Normalized EBTIDA.
(2)
The portion of non-GAAP adjustments applicable to non-controlling interests are excluded in the computation of normalized net income to ensure
consistency of normalizations applied to controlling and non-controlling interests. These amounts are included in the “net income applicable to non-controlling
interests” line item on the Consolidated Statements of Income.
Calculation of Normalized Effective Income Tax Rate
The below table provides a calculation of normalized effective income tax rate from normalized net income and normalized
income tax expense. Both of these non-GAAP measures have been previously reconciled to the relevant GAAP measures in
the section above. This supplemental calculation is provided as additional information to assist analysts and investors in
AltaGas Ltd. – 2021 MD&A and Financial Statements - 30
comparing normalized income tax expense to normalized net income and is not intended as a substitute for the reconciliations
to the nearest comparable GAAP measures. Readers should not place undue reliance on this supplemental calculation.
($ millions, except where noted)
Normalized net income
Add (deduct):
Normalized income tax expense (1)
Net income applicable to non-controlling interests
Non-controlling interest portion of non-GAAP adjustments (2)
Preferred share dividends
Normalized net income before taxes
Normalized effective income tax rate (%) (3)
(1) Calculated in the section above.
Three Months Ended
December 31
2020
147 $
2021
107 $
Year Ended
December 31
2020
396
2021
497 $
39
9
(3)
13
165 $
46
5
—
16
214 $
175
57
9
53
791 $
138
20
—
66
620
23.6
21.5
22.1
22.3
$
$
(2)
The portion of non-GAAP adjustments applicable to non-controlling interests are excluded in the computation of normalized net income to ensure
consistency of normalizations applied to controlling and non-controlling interests. These amounts are included in the “net income applicable to non-controlling
interests” line item on the Consolidated Statements of Income.
(3) Calculated as normalized income tax expense divided by normalized net income before taxes.
Results of Operations by Reporting Segment
Normalized EBITDA (1)
($ millions)
Utilities
Midstream
Sub-total: Operating Segments
Corporate/Other
Three Months Ended
December 31
2020
259 $
128
387 $
5
392 $
2021
238 $
102
340 $
1
341 $
$
$
$
Year Ended
December 31
2020
788
473
1,261
49
1,310
2021
771 $
734
1,505 $
(15)
1,490 $
(1) Non‑GAAP financial measure; See discussion in the Non‑GAAP Financial Measures section of this MD&A.
Income (Loss) Before Income Taxes
($ millions)
Utilities
Midstream
Sub-total: Operating Segments
Corporate/Other
Revenue
($ millions)
Utilities
Midstream
Sub-total: Operating Segments
Corporate/Other
Intersegment eliminations
$
$
$
$
$
$
2021
64 $
Three Months Ended
December 31
2020
157 $
(36)
121 $
(47)
74 $
(87) $
(75)
(162) $
(151)
Year Ended
December 31
2020
687
235
922
(223)
699
2021
538 $
242
780 $
(334)
446 $
Three Months Ended
December 31
2020
1,092 $
572
1,664 $
34
(9)
2021
1,261 $
1,852
3,113 $
27
—
3,140 $
1,689 $
2021
3,936 $
6,535
10,471 $
104
(2)
Year Ended
December 31
2020
3,817
1,636
5,453
135
(1)
5,587
10,573 $
AltaGas Ltd. – 2021 MD&A and Financial Statements - 31
Utilities
Operating Statistics
Natural gas deliveries - end-use (Bcf) (1)
Natural gas deliveries - transportation (Bcf) (1)
Service sites (thousands) (2)
Degree day variance from normal - SEMCO Gas (%) (3)
Degree day variance from normal - ENSTAR (%) (3)
Degree day variance from normal - Washington Gas (%) (3) (4)
Retail energy marketing - gas sales volumes (Mmcf)
Retail energy marketing - electricity sales volumes (GWh)
Three Months Ended
December 31
2020
50.0
35.6
1,672
(4.4)
0.2
(10.6)
18,053
3,257
2021
44.0
31.2
1,689
(15.0)
11.9
(12.7)
16,299
3,167
Year Ended
December 31
2020
151.7
124.1
1,672
(4.6)
5.6
(11.2)
59,782
13,607
2021
155.9
124.5
1,689
(10.0)
11.0
(7.0)
58,589
13,355
(1)
(2)
(3)
(4)
Bcf is one billion cubic feet.
Service sites reflect all of the service sites of the utilities, including transportation and non‑regulated business lines.
A degree day is a measure of coldness determined daily as the number of degrees the average temperature during the day in question is below 65 degrees
Fahrenheit. Degree days for a particular period are determined by adding the degree days incurred during each day of the period. Normal degree days for a
particular period are the average of degree days during the prior 15 years for SEMCO Gas, during the prior 10 years for ENSTAR, and during the prior 30
years for Washington Gas.
In certain of Washington Gas’ jurisdictions (Virginia and Maryland) there are billing mechanisms in place that are designed to eliminate the effects of variance
in customer usage caused by weather and other factors such as conservation. In the District of Columbia, there is no weather normalization billing
mechanism nor does Washington Gas hedge to offset the effects of weather. As a result, colder or warmer weather will result in variances to financial results.
Regulatory Metrics
Approved ROE (%) (1)
Approved return on debt (%) (1)
Rate base ($ millions) (2) (3) (4)
Year Ended
December 31
2020
9.6
5.1
4,291
2021
9.6
4.7
4,655
(1) Weighted average of all the regulated utilities.
(2) Rate base is indicative of the earning potential of each utility over time. Approved revenue requirement for each utility is typically based on the rate base as
approved by the regulator for the respective rate application, but may differ from the rate base indicated above.
(3) Reflects AltaGas’ 65 percent interest in Cook Inlet Natural Gas Storage Alaska LLC.
(4)
In U.S. dollars.
During the fourth quarter of 2021, AltaGas’ Utilities segment experienced warmer weather at SEMCO, colder weather at
ENSTAR, and warmer at Washington Gas compared to the same quarter of 2020.
For the year ended December 31, 2021, AltaGas' Utilities segment experienced warmer weather at SEMCO, colder weather at
ENSTAR, and colder weather at Washington Gas compared to 2020.
Service sites at December 31, 2021 increased by approximately 17 thousand sites compared to December 31, 2020 due to
growth in customer base.
In the fourth quarter of 2021, U.S. retail gas sales volumes were 16,299 Mmcf, compared to 18,053 Mmcf in the same quarter
of 2020. The decrease was primarily due to warmer weather compared to the same quarter of 2020. In the fourth quarter of
2021, U.S. retail electricity sales volumes were 3,167 GWh compared to 3,257 GWh in the same quarter of 2020. The
decrease was primarily due to warmer weather.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 32
For the year ended December 31, 2021, U.S. retail gas sales volumes were 58,589 Mmcf, compared to 59,782 Mmcf in the
same period in 2020. The slight decrease was primarily due to fewer residential gas customers served in the year ended
December 31, 2021 compared to 2020. For the year ended December 31, 2021, U.S. retail electricity sales volumes were
13,355 GWh compared to 13,607 GWh in the same period in 2020. The decrease was primarily due to more moderate
weather and a decrease in customers served.
Three Months Ended December 31
The Utilities segment reported normalized EBITDA of $238 million in the fourth quarter of 2021, compared to $259 million in
the same quarter in 2020. The decrease in normalized EBITDA was mainly due to lower gas and power margins from WGL's
retail marketing business, an impact of approximately $7 million due to the weaker U.S. dollar, warmer weather in Michigan
and the District of Columbia, and higher general and administrative expenses mainly related to technology costs and
professional fees, partially offset by the impact of Washington Gas' 2020 Maryland and District of Columbia rate cases, higher
returns on pension assets, and higher revenue from accelerated pipe replacement program spend.
The Utilities segment income before income taxes was $64 million in the fourth quarter of 2021, compared to $157 million in
the same quarter in 2020. The decrease was mainly due to the same previously referenced factors impacting normalized
EBITDA and higher losses on unrealized risk management contracts mainly within the retail marketing business.
Year Ended December 31
The Utilities segment reported normalized EBITDA of $771 million in the year ended December 31, 2021, compared to $788
million in 2020. The decrease in normalized EBITDA was mainly due to an impact of approximately $40 million due to the
weaker U.S. dollar, higher general and administrative expenses mainly related to technology costs and professional fees, the
impact of the sale of ACI in 2020, lower power margins from WGL's retail marketing business due to lower volumes and unit
margins, Virginia rate refund adjustments in 2020, and warmer weather in Michigan, partially offset by the impact of
Washington Gas' 2020 Maryland and District of Columbia rate cases, higher returns on pension assets, higher revenue from
accelerated pipe replacement program spend, higher gas margins from WGL's retail marketing business due to favourable
pricing, colder weather in the District of Columbia and Alaska, and customer growth.
The Utilities segment income before income taxes was $538 million in the year ended December 31, 2021, compared to $687
million in 2020. The decrease was mainly due to the absence of the gain on the disposition of ACI and the same previously
referenced factors impacting normalized EBITDA, partially offset by higher gains on risk management contracts mainly within
the retail marketing business.
In 2020, the Utilities segment recognized a pre-tax gain of $206 million on the disposition of ACI.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 33
Expected
Timing of
Decision
Final order
issued April
2021
Rate Case Updates
Utility/
Jurisdiction Date Filed
Request
Status
Washington
Gas -
Maryland
August
2020
US$27 million increase in
base rates, including US$6
million currently collected
through the Strategic
Infrastructure Development
Enhancement Plan (STRIDE)
surcharges for system
upgrades. Therefore, the
incremental amount of the
base rate increase requested
was approximately US$21
million.
to
increase
Washington Gas filed this rate case on August 28,
2020. On February 12, 2021, the Public Utility
Law Judge (PULJ) issued a Proposed Order in
the Case and an ERRATA filing correcting of the
Proposed Order on February 19, 2021. The
Proposed Order, as corrected, authorizes
Washington Gas to increase its Maryland natural
gas distribution rates by approximately US$13
million (including US$5 million for the STRIDE
surcharge), reflecting a return of equity of 9.70
percent. On April 9, 2021, after considering the
appeals, the PSC of MD issued an order which
its
authorized Washington Gas
Maryland natural gas distribution
rates by
approximately US$13 million (including US$5
million currently collected through the STRIDE
surcharge), reflecting a return on equity of 9.70
percent. The revenue increase became effective
on March 26, 2021. On May 14, 2021, the
Maryland Office of People's Counsel (MD OPC)
filed a petition for re-hearing and on June 2,
2021, Washington Gas filed an opposition to the
re-hearing. On July 29, 2021, the PSC of MD
denied the petition for rehearing. On August 31,
2021, the MD OPC filed an appeal of the PSC of
MD's denial of their petition for a re-hearing with
the Circuit Court of Baltimore. Washington Gas
has filed a notice of intervention.
The MD OPC's Initial Memorandum was filed on
December 15, 2021, and the PSC of MD and
Washington Gas
their Answering
filed
Memoranda on January 14, 2022. The MD OPC's
following Reply Memorandum was
filed on
January 31, 2022, and the Circuit Court trial was
held on February 16, 2022. On February 25,
2022, the Circuit Court of Baltimore City reversed
the July 29, 2021 order from the PSC of MD and
remanded two issues back to the PSC of MD.
CINGSA
July 2021
US$1.9 million revenue
increase.
On July 1, 2021, CINGSA filed a rate case with
the RCA seeking approval for approximately
US$1.9 million revenue
increase based on
US$105.5 million rate base, 11.9 percent ROE
and 59.99 percent equity thickness. The filing
proposed an across-the-board 2 percent interim
rate increase to be effective August 1, 2021,
which the RCA approved on July 29, 2021.
Discovery on CINGSA's direct testimony closed
on December 30, 2021, CINGSA
filed
supplemental testimony on January 31, 2022,
and interveners' testimony was due February 11,
2022. Evidentiary hearing is scheduled for June
2022, and a decision is expected around the end
of the third quarter of 2022.
Around Q3
2022
AltaGas Ltd. – 2021 MD&A and Financial Statements - 34
COVID-19 Related Orders
Utility/
Jurisdiction
Moratoriums
Customer Programs
Washington
Gas - District
of Columbia
Washington
Gas -
Maryland
Washington
Gas -
Virginia
The moratorium on
evictions and utility
shutoffs triggered by the
pandemic ended on
October 12, 2021.
However, the September
15, 2021 Order
discussed below
regarding call response
time standards prevents
disconnection until
Washington Gas can
meet the PSC of DC's
requirements.
The shut-off moratorium
on Tier 1 and 2
customers ended in
November 2021. The
COVID related shut-off
moratorium for Tier 3
customers ended in
November 2020.
However, as a result of
customer service
matters, dunning
activities, including
service disconnections
were suspended for all
customers beginning in
September 2021.
The moratorium on
disconnections ended on
June 30, 2021.
Washington Gas must
wait 60 days before
making customer
disconnections and will
not commence charging
late fees during this
period.
On April 19, 2021, Washington Gas
filed an Arrearage
Management Plan (AMP) proposal designed to help customers:
1) lower or eliminate existing COVID-19 related arrearages, 2)
bring accounts current, 3) improve payment behavior on
customers’ new bills, and 4) avoid disconnection and allow
customers to remain current in their payment obligations. Under
the proposed AMP plan, each participating customer would be
enrolled in the plan for approximately 12 months. After an
eligible customer enrolls in the program and pays each new
monthly amount due on a timely basis, Washington Gas will
grant a pro-rated monthly arrearage reduction amount toward
the goal of full arrearage elimination at the end of the 12 month
period. On August 9, 2021,
the PSC of DC approved
Washington Gas' AMP. On October 8, 2021, Washington Gas
filed new tariff provisions regarding the AMP and implemented
the AMP starting November 1, 2021.
for
the Economy, Livelihoods,
On February 15, 2021, the Maryland General Assembly passed
the Recovery
Industries,
Entrepreneurs and Families Act (RELIEF Act). The RELIEF Act
includes approximately US$83 million in funds to help Maryland
residential customers who are in arrears. On June 15, 2021, the
PSC of MD issued an order allocating US$5.7 million to
Washington Gas to be reflected on customer bills. The funds
were received in July and Washington Gas has applied the
amounts in full to customer accounts.
Regulatory
Assets
Recorded as at
December 31,
2021 ($USD)
$3.5 million, and
an additional $5.6
million of
unrecorded late
payment fees.
$0.5 million, and
an additional $1.5
million of
unrecorded late
payment fees.
On December 8, 2020, Washington Gas was awarded US$7.7
million under the Virginia CARES Relief Funding Award, to use
for customer arrearages. Virginia customers must meet the
criteria established by the program to receive the funds. The
funds have been fully applied.
In August 2021, the Virginia General Assembly appropriated
US$120 million of American Rescue Plan Act Funds (ARPA
Funds) as direct financial assistance to residential utility
customers with arrearages over 60 days as of August 31, 2021.
On December 6, 2021, Washington Gas received US$6.9
million of ARPA Funds to be applied to residential customers
arrearages.
$0.7 million, and
an additional $3.3
million of
unrecorded late
payment fees.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 35
Utility/
Jurisdiction
Moratoriums
SEMCO -
Michigan
COVID-related
disconnection
moratorium ended June
2020.
the MPSC Staff
Customer Programs
The MPSC issued an order on February 18, 2021, following a
MPSC staff report on energy accessibility and affordability. The
to establish an Energy
order requires
Accessibility and Affordability Collaborative to coordinate efforts
and find efficiencies between the Energy Waste Reduction
the Monthly Energy
(EWR) Low-Income workgroup and
Assistance Program workgroup. The Collaborative’s
first
meeting occurred on April 8, 2021. MPSC Staff filed an interim
report on progress and recommendations on December 17,
recommended continuation of collaboration
2021, which
between energy waste
reduction services and energy
assistance to promote energy affordability and accessibility.
Regulatory
Assets
Recorded as at
December 31,
2021 ($USD)
None, as bad
debt expense is
not expected to
exceed the level
approved in the
last rate case
proceeding.
ENSTAR -
Alaska
COVID-related
disconnection
moratorium ended
November 2020.
ENSTAR received approximately US$1.2 million of CARES Act
funding from the Cities of Anchorage, Palmer, Wasilla and Mat-
Su Borough, all of which has been applied toward ENSTAR
customer accounts.
$0.5 million
Other Regulatory Updates
On July 1, 2021, SEMCO submitted its 2022-2023 EWR Plan, a form of energy efficiency program for its customers, for MPSC
approval. SEMCO proposes to spend approximately US$30 million on energy waste reduction over 2022 and 2023 to achieve
a combined first year energy savings goal of approximately 10.1 million therms. SEMCO filed its Brief and Reply Brief on
December 3, and December 22, 2021, respectively. A Commission order is expected around the second quarter of 2022.
On September 15, 2021, the PSC of DC issued an Order directing Washington Gas to submit a corrective action plan to bring
Washington Gas into compliance with the Natural Gas Quality of Service Standards (NGQSS) regarding call response time
standards. The Order also stated that Washington Gas shall not disconnect gas customers for non-payment until Washington
Gas complies with NGQSS or such time as the PSC of DC otherwise determines. The PSC of DC also found that costs
incurred by complying with this Order are not to be included in Washington Gas' COVID-19 regulatory asset. Finally, the Order
stated that the PSC of DC found that although it cannot stop Washington Gas from seeking a rate increase, any petition for a
rate increase may be held in abeyance either at the request of a party or by the PSC of DC until this performance issue is
satisfactorily addressed. Washington Gas filed a corrective action plan with the PSC of DC on September 27, 2021.
Washington Gas was in compliance with the call answering and call abandonment NGQSS service metrics in January 2022,
and expects to maintain NGQSS levels for these metrics going forward. Pursuant to an Order issued by the PSC of DC on
February 10, 2022, Washington Gas will not resume disconnection activities until authorized by the Commission.
On September 30, 2021, the MD OPC filed a motion to establish a corrective action plan and impose civil penalties or,
alternatively, to order Washington Gas to show cause why the Commission should not impose civil penalties. The MD OPC's
request asserts that Washington Gas has violated Condition 11 of the PSC of MD Order in the Washington Gas Merger
proceeding with AltaGas because it has not devoted the resources necessary to ensure continued compliance with all
Commission regulations. In particular, the MD OPC asserts that Washington Gas’ failure to devote enough resources to
customer service has made it impossible for customers to successfully and promptly communicate complaints and disputes.
Finally, MD OPC asserts that because Washington Gas cannot receive complaints and disputes, it is unable to satisfactorily
resolve them or report them pursuant to its obligations under the Code of Maryland regulations. On October 15, 2021, the PSC
of MD issued a show cause order directing Washington Gas to respond to the MD OPC motion and to show cause why the
PSC of MD should not impose civil penalties. Additionally, the PSC of MD ordered Washington Gas to include a proposed
corrective plan, which addresses the decline in customer service post-merger. On October 22, 2021, Washington Gas filed its
reply to the MD OPC's motion. On November 12, 2021, the MD OPC, Montgomery County and Staff filed responses to
AltaGas Ltd. – 2021 MD&A and Financial Statements - 36
Washington Gas' reply. On December 23, 2021, the PSC of MD found that, among other things: (1) Washington Gas violated
the Maryland Code of Regulations from 2016 through June 22, 2021; (2) Washington Gas violated Conditions 11 and 11F of
the AltaGas Merger Order from June 2018 through June 22, 2021; (3) the Commission will schedule a hearing to address
whether and to what extent civil penalties are appropriate; and (4) Washington Gas’ proposed Corrective Action Plan was
accepted with modifications. On January 24, 2022, Washington Gas filed for rehearing of two issues from the Order, including
the imposition of certain call center performance metrics and the creation of a regulatory liability to account for past costs.
Washington Gas has accrued US$350,000 in anticipation of civil penalties related to reporting violations. On February 2, 2022,
the Staff of the Maryland Public Service Commission (the MD Staff) filed comments regarding the penalty for Washington Gas'
violations of the Code of Maryland Regulations (COMAR) and merger conditions. The MD Staff recommended that the
Commission assess a civil penalty against Washington Gas in the range of US$750,000 to US$1.5 million. The Commission
held a hearing on February 9, 2022 to address civil penalties and to consider Washington Gas' rehearing request. A decision is
pending. The PSC of MD's decision may also address its current directive that Washington Gas shall continue the suspension
of dunning letters, disconnections, and late fees until Washington Gas meets required customer service standards for three
consecutive months.
On December 17, 2021, Washington Gas filed a proposed amendment for its natural gas conservation and ratemaking
efficiency plan (CARE Plan) for the period from May 2022 to April 2025, proposing to continue and expand its portfolio of
energy efficiency programs to Virginia customers with a total three-year budget of approximately US$12 million. The Staff
Report on findings and recommendation is due March 18, 2022, and Washington Gas comment on the Report is due April 1,
2022. A decision from the SCC of VA is expected in the second quarter of 2022.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 37
Midstream
Operating Statistics
RIPET export volumes (Bbls/d) (1)
Ferndale export volumes (Bbls/d) (1) (2)
Total inlet gas processed (Mmcf/d) (1)
Extraction ethane volumes (Bbls/d) (1)
Extraction NGL volumes (Bbls/d) (1) (3)
Fractionation volumes (Bbls/d) (1)
Frac spread - realized ($/Bbl) (1) (4)
Frac spread - average spot price ($/Bbl) (1) (5)
Propane Far East Index (FEI) to Mont Belvieu spread (US$/Bbl) (1) (6)
Butane FEI to Mont Belvieu spread (US$/Bbl) (1) (7)
Natural gas optimization inventory (Bcf)
(1)
Average for the period.
Three Months Ended
December 31
2020
37,782
33,979
1,409
30,766
34,199
27,026
13.95
9.33
15.01
12.84
39.3
2021
48,974
27,635
1,534
27,000
35,734
37,000
9.18
35.82
12.65
10.29
2.0
Year Ended
December 31
2020
39,285
33,979
1,357
28,018
32,206
23,559
14.37
5.42
11.72
12.84
39.3
2021
50,695
38,636
1,498
27,955
36,364
30,715
12.15
28.91
10.14
10.46
2.0
(2) Represents propane and butane volumes exported at Ferndale for the period after close of the Petrogas Acquisition on December 15, 2020.
(3) NGL volumes refer to propane, butane, and condensate.
(4) Realized frac spread or NGL margin, expressed in dollars per barrel of NGL, is derived from sales recorded by the segment during the period for frac spread
exposed volumes plus the settlement value of frac hedges settled in the period less extraction premiums, divided by the total frac exposed volumes produced
during the period.
(5)
Average spot frac spread or NGL margin, expressed in dollars per barrel of NGL, is indicative of the average sales price that AltaGas receives for propane,
butane and condensate less extraction premiums, before accounting for hedges, divided by the respective frac spread exposed volumes for the period.
(6)
(7)
Average propane price spread between FEI and Mont Belvieu TET commercial index.
Average butane price spread between FEI and Mont Belvieu TET commercial index for the period beginning December 15, 2020.
Propane volumes exported to Asia at RIPET for the three months ended December 31, 2021 averaged 48,974 Bbls/d
compared to 37,782 Bbls/d for the same period in 2020. There were 8 full shipments in the fourth quarter of 2021, compared to
6 shipments and one partially loaded shipment in the same period in 2020. Higher RIPET export volumes were the result of
improved logistics and supply volumes in the quarter. Propane and butane export volumes at Ferndale averaged 27,635 Bbls/
d, with 5 shipments and one partially loaded shipment to Asia during the three months ended December 31, 2021. Export
volumes at Ferndale in the fourth quarter of 2020 represent shipments from the period subsequent to the acquisition of
Petrogas, for the period from December 15, 2020 to December 31, 2020.
Propane volumes exported to Asia at RIPET for the year ended December 31, 2021 averaged 50,695 Bbls/d compared to
39,285 Bbls/d for the same period in 2020. There were 32 shipments during the year ended December 31, 2021 compared to
27 shipments in the same period of 2020. Higher RIPET export volumes and shipments were the result of improved logistics
and supply volumes compared to 2020. Propane and butane export volumes at Ferndale averaged 38,636 Bbls/d, with 28
shipments to Asia during the year ended December 31, 2021.
Inlet gas processing volumes for the fourth quarter of 2021 increased by 125 Mmcf/d compared to the same quarter in 2020.
Higher inlet gas processing volumes in the fourth quarter of 2021 were the result of additional volumes from the Townsend
Deep Cut facility, additional volumes from phase 1 of the Nig Creek expansion, which was placed in-service in July 2021, and
higher inlet volumes at certain extraction facilities.
Inlet gas processing volumes for the year ended December 31, 2021 increased by 141 Mmcf/d compared to the same period
in 2020. Higher inlet gas processing volumes in the year ended December 31, 2021 were a result of additional volumes from
the Townsend Deep Cut facility, additional volumes from phase 1 of the Nig Creek expansion, and higher inlet volumes at
Gordondale and certain extraction facilities.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 38
Average ethane volumes for the fourth quarter of 2021 decreased by 3,766 Bbls/d, while average NGL production volumes
increased by 1,535 Bbls/d compared to the same quarter in 2020. Lower ethane volumes were a result of reinjected ethane
volumes at the extraction facilities due to a major customer's scheduled turnaround, the force majeure declared by Nova
Chemicals in November 2021, resulting in the curtailment of ethane production for EEEP and JEEP, as well as EEEP's turbo
expander not being in commission for most of December. Higher NGL volumes were a result of additional extracted NGL
volumes from the Townsend Deep Cut facility and higher inlet volumes at the extraction facilities.
Average ethane volumes for the year ended December 31, 2021 were relatively consistent compared to 2020, while average
NGL production volumes increased by 4,158 Bbls/d compared to 2020. Lower ethane volumes were a result of reinjected
ethane volumes at the extraction facilities due to a major customer's scheduled turnaround. Higher extracted NGL volumes
were a result of additional extracted NGL volumes from the Townsend Deep Cut facility and higher inlet volumes at the
extraction facilities.
Fractionation volumes for the fourth quarter of 2021 increased by 9,974 Bbls/d compared to the same quarter in 2020. Higher
fractionation volumes were a result of the North Pine expansion, higher inlet and trucked-in volumes at Harmattan, additional
liquids volumes from the Townsend Deep Cut facility, and higher fractionation volumes at the Younger facility due to higher
inlet.
Fractionation volumes for the year ended December 31, 2021 increased by 7,156 Bbls/d compared to the same period in
2020. Higher fractionation volumes were a result of the North Pine expansion and additional liquids volumes from the
Townsend Deep Cut facility.
Natural gas optimization inventory as at December 31, 2021 was 2.0 Bcf (December 31, 2020 - 39.3 Bcf). The decrease was
primarily due to the sale of the majority of WGL Midstream's commodity business in April 2021.
Three Months Ended December 31
The Midstream segment reported normalized EBITDA of $102 million in the fourth quarter of 2021, compared to $128 million in
the same quarter in 2020. The decrease in normalized EBITDA in the fourth quarter of 2021 was mainly due to cessation of
AFUDC related to MVP, the impact of the sale of the majority of WGL Midstream's commodity business, a hedge loss
associated with revenue recognized for export cargos loaded at the end of the third quarter at market spot prices, amortization
of a contract asset at Gordondale related to a blend and extend contract that was entered into in 2018 with the impact of the
lower processing fees being recognized for accounting purposes starting in 2021, and lower realized frac spreads (inclusive of
hedges). Factors positively impacting normalized EBITDA in the fourth quarter of 2021 included impacts from the consolidation
of Petrogas, higher extracted NGL volumes, higher fractionation and liquids handling revenues and higher processed volumes
at the NEBC facilities due to NEBC growth projects placed into service, higher realized propane margins and export volumes
at RIPET, and increased earnings from the cogeneration plants at Harmattan due to higher Alberta power prices.
Loss before income taxes in the Midstream segment was $151 million in the fourth quarter of 2021, compared to $36 million in
the same quarter in 2020. The increased loss was mainly due to the provision recorded on AltaGas' investment in MVP, the
same previously referenced factors impacting normalized EBITDA, the absence of the gain on the re-measurement of AltaGas'
previously held equity investment in AIJVLP, and higher unrealized losses on risk management contracts, partially offset by the
absence of the provision on Alton recorded in the fourth quarter of 2020, the absence of the dilution loss and other adjustments
to equity investments related to the acquisition of Petrogas, and lower depreciation expense as a result of the sale of the
majority of WGL Midstream's commodity business.
In the fourth quarter of 2021, the Midstream segment recognized pre-tax provisions on assets of approximately $1 million ($1
million after-tax) primarily related to non-core development stage Midstream projects that are no longer being developed. In
AltaGas Ltd. – 2021 MD&A and Financial Statements - 39
addition, in the fourth quarter of 2021, the Midstream segment recognized a pre-tax provision on equity investments of
approximately $271 million ($209 million after-tax) related to it's investment in MVP. The provision is a result of continued legal
and regulatory challenges associated with the Mountain Valley Pipeline and MVP Southgate projects. In the fourth quarter of
2020, the Midstream segment recognized a gain on its previously held equity investment in AIJVLP of approximately $22
million, as well as a dilution loss and other adjustments to equity investments related to the acquisition of Petrogas of $26
million. In addition, in the fourth quarter of 2020, the Midstream segment recognized pre-tax provisions on assets of
approximately $104 million ($79 million after-tax) primarily related to the Alton Natural Gas Storage Project.
Year Ended December 31
The Midstream segment reported normalized EBITDA of $734 million in the year ended December 31, 2021, compared to
$473 million in 2020. The increase in normalized EBITDA in the year ended December 31, 2021 was mainly due to impacts
from the consolidation of Petrogas, favorable storage and transportation margins and higher storage withdrawals at WGL
Midstream in the first quarter of 2021, higher fractionation and liquids handling revenues and higher processed volumes at the
NEBC facilities due to NEBC growth projects placed into service, increased earnings from the cogeneration plants at
Harmattan due to higher Alberta power prices, and higher export volumes at RIPET. Factors negatively impacting normalized
EBITDA in the year ended December 31, 2021 included cessation of AFUDC related to MVP, lower realized merchant margins
at RIPET (inclusive of hedges and foreign exchange impacts), amortization of a contract asset at Gordondale related to a
blend and extend contract that was entered into in 2018 with the impact of the lower processing fees being recognized for
accounting purposes starting in 2021, the impact of the sale of the majority of WGL Midstream's commodity business, and
lower realized frac spreads (inclusive of hedges).
Income before income taxes in the Midstream segment was $242 million in the year ended December 31, 2021, compared to
$235 million in 2020. The increase was mainly due to the same previously referenced factors impacting normalized EBITDA,
the absence of the provision on Alton, higher unrealized gains on risk management contracts, the absence of the dilution loss
and other adjustments to equity investments related to the acquisition of Petrogas, the absence of provisions on equity
investments related to Constitution which was cancelled in February 2020, and higher gains on the disposition of assets,
partially offset by the provision recorded on AltaGas' investment in MVP, the provision on the sale of the majority of WGL
Midstream's commodity business, the absence of the gain on the re-measurement of AltaGas' previously held equity
investment in AIJVLP, and higher depreciation expense as a result of the consolidation of Petrogas and a full year of NEBC
projects in service.
In 2021, the Midstream segment recognized pre-tax gains on dispositions of assets of approximately $6 million related to the
sale of the majority of WGL Midstream's commodity business, certain Petrogas propane distribution assets, minor Midstream
asset sales, and cash proceeds received from an escrow account related to the 2019 disposition of AltaGas' investment in
Meade, which held WGL Midstream's indirect, non-operating interest in Central Penn. In addition, in 2021, the Midstream
segment recognized pre-tax provisions of approximately $59 million ($44 million after-tax) primarily related to the sale of the
majority of WGL Midstream's commodity business as well as the previously mentioned provisions recognized in the fourth
quarter of 2021. In 2021, the Midstream segment also recognized the previously mentioned provision on equity investments of
$271 million ($209 million after-tax) related to its investment in MVP. In 2020, the Midstream segment recognized a pre-tax
gain on the re-measurement of its previously held equity investment in AIJVLP of approximately $22 million and a dilution loss
and other adjustments to equity investments related to the acquisition of Petrogas of $42 million. In addition, in 2020, the
Midstream segment recognized a pre-tax provision on assets of approximately $106 million related to the previously
mentioned provisions recognized in the fourth quarter of 2020 and land parcels located near the Harmattan gas processing
plant, as well as a pre-tax provision on equity investments of approximately $7 million related to Constitution which was
cancelled in February 2020.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 40
Midstream Hedges
Frac exposed volumes (Bbls/d)
NGL volumes hedged (Bbls/d)
Average price of NGL volumes hedged ($/Bbl) (1)
Average export volumes hedged (Bbls/d)
Average FEI to North American NGL price spread for volumes
hedged (US$/Bbl)
(1)
Excludes basis differential
Corporate/Other
Three Months Ended December 31
Three Months Ended
December 31
2020
9,277
10,068
26
59,630
2021
9,081
8,982
26
44,984
Year Ended
December 31
2020
8,952
9,412
29
60,518
2021
9,887
9,253
26
47,714
10
11
10
11
In the Corporate/Other segment, normalized EBITDA for the fourth quarter of 2021 was $1 million, compared to $5 million in
the same quarter in 2020. The decrease was mainly due to lower revenues from design build contracts and the absence of
normalized EBITDA from the remaining distributed generation project which transferred to the purchaser in the second quarter
of 2021.
Loss before income taxes in the Corporate/Other segment was $75 million in the fourth quarter of 2021, compared to $47
million in the same quarter in 2020. The higher loss was mainly due to the impact of the weaker U.S. dollar, the same
previously referenced factors impacting normalized EBITDA, and higher provisions on assets.
In the fourth quarter of 2021, the Corporate/Other segment recognized a pre-tax provision on assets of $5 million related to the
Parks at Walter Reed thermal plant in Washington, D.C. which was impaired as the carrying value exceeded future expected
cash flows from the asset.
Year Ended December 31
In the Corporate/Other segment, normalized EBITDA for the year ended December 31, 2021 was a loss of $15 million,
compared to earnings of $49 million in 2020. The decrease was mainly due to higher expenses related to employee incentive
plans as a result of the increasing share price in 2021, the absence of recoveries related to CEWS in 2020, and the impact of
the disposition of Pomona in the third quarter of 2020.
Loss before income taxes in the Corporate/Other segment was $334 million in the year ended December 31, 2021, compared
to $223 million in 2020. The higher loss was mainly due to the impact of the weaker U.S. dollar, the same previously
referenced factors impacting normalized EBITDA, the absence of gains on asset sales, including certain distributed generation
projects which were transferred to the purchaser in the first quarter of 2020, and Pomona and Ripon, which were sold in the
third quarter of 2020, as well as higher provisions on assets.
In 2021, the Corporate/Other segment recognized a pre-tax loss of approximately $1 million on the last remaining U.S.
distributed generation project which was sold in 2019 but transferred to the purchaser during the second quarter of 2021. In
addition, in 2021, the Corporate/Other segment recognized the previously mentioned pre-tax provision related to the Parks at
Walter Reed thermal plant in Washington, D.C. In 2020, the Corporate/Other segment recognized a pre-tax gain of $9 million
on certain U.S. distributed generation projects which were sold in 2019 but transferred to the purchaser in 2020, a pre-tax gain
AltaGas Ltd. – 2021 MD&A and Financial Statements - 41
of $5 million on the disposition of Pomona, and a pre-tax gain of $3 million on the disposition of Ripon. In addition, in 2020, the
Corporate/Other segment recognized a pre-tax provision of approximately $3 million related to certain U.S. distributed
generation projects which had not yet transferred to the purchaser.
Net invested Capital
Net invested capital is a non-GAAP financial measure. Please refer to the Non-GAAP Financial Measures section of this
MD&A for further discussion.
($ millions)
Invested capital:
Property, plant and equipment (1)
Intangible assets
Long-term investments
Invested capital
Disposals:
Asset dispositions
Net invested capital
Three Months Ended
December 31, 2021
Utilities
Midstream
Corporate/
Other
$
$
$
234 $
1
—
235 $
—
235 $
11 $
1
3
15 $
(1)
14 $
2 $
1
—
3 $
—
3 $
Total
247
3
3
253
(1)
252
(1)
In prior periods, invested capital did not include adjustments for the cost of removal of utility assets; however, beginning in the fourth quarter of 2021,
Management has adjusted for these costs to better align with the investing section of the Consolidated Statements of Cash Flows. Comparative periods have
been restated to reflect this change.
Three Months Ended
December 31, 2020
($ millions)
Invested capital:
Utilities
Midstream
Corporate/
Other
Property, plant and equipment (1)
Intangible assets
Business acquisition
Long-term investments
Contributions from non-controlling interest
Invested capital and net invested capital
$
$
227 $
1
—
—
—
228 $
50 $
1
715
76
(2)
840 $
2 $
1
—
—
—
3 $
Total
279
3
715
76
(2)
1,071
(1)
In prior periods, invested capital did not include adjustments for the cost of removal of utility assets; however, beginning in the fourth quarter of 2021,
Management has adjusted for these costs to better align with the investing section of the Consolidated Statements of Cash Flows. Comparative periods have
been restated to reflect this change.
During the fourth quarter of 2021, AltaGas’ invested capital was $253 million, compared to $1,071 million in the same quarter
in 2020. The decrease in invested capital was primarily due to the absence of cash paid for the Petrogas Acquisition in 2020,
lower contributions to long-term investments due the absence of a loan made to an affiliate in the fourth quarter of 2020, and
lower additions to property, plant and equipment.
The decrease in additions to property, plant and equipment in the fourth quarter of 2021 was mainly due to lower spend on the
Nig Creek expansion and the absence of the Younger facility turnaround costs incurred in the fourth quarter of 2020.
The invested capital in the fourth quarter of 2021 included maintenance capital of $6 million (2020 ‑ $18 million) in the
Midstream segment and $1 million (2020 ‑ $nil) related to remaining power assets in the Corporate/Other segment.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 42
Maintenance capital incurred in the fourth quarter of 2021 primarily related to the Townsend, Harmattan, North Pine, EEEP,
and Ferndale facilities.
During the fourth quarter of 2021, AltaGas’ cash flow from investing activities was an outflow of $241 million, compared to $980
million in the same quarter in 2020. Please refer to the Non-GAAP Financial Measures and Liquidity sections of this MD&A for
further information on AltaGas' cash flow from investing activities.
Year Ended
December 31, 2021
($ millions)
Invested capital:
Property, plant and equipment (1)
Intangible assets
Long-term investments
Contributions from non-controlling interest
Other
Invested capital
Disposals:
Asset dispositions
Equity method investments
Net invested capital
$
$
$
Utilities
Midstream
Corporate/
Other
705 $
2
—
—
—
707 $
—
—
707 $
61 $
2
11
(1)
7
80 $
(345)
(3)
(268) $
9 $
2
—
—
—
11 $
(1)
—
10 $
Total
775
6
11
(1)
7
798
(346)
(3)
449
(1)
In prior periods, invested capital did not include adjustments for the cost of removal of utility assets; however, beginning in the fourth quarter of 2021,
Management has adjusted for these costs to better align with the investing section of the Consolidated Statements of Cash Flows. Comparative periods have
been restated to reflect this change.
($ millions)
Invested capital:
Property, plant and equipment (1)
Intangible assets
Long-term investments (2)
Business acquisition
Contributions from non-controlling interest
Invested capital
Disposals:
Asset dispositions
Equity method investments
Net invested capital
$
$
$
Year Ended
December 31, 2020
Utilities
Midstream
Corporate/
Other
703 $
3
—
—
—
706 $
—
(369)
337 $
139 $
3
147
715
(7)
997 $
(3)
(7)
987 $
20 $
4
—
—
—
24 $
(71)
—
(47) $
Total
862
10
147
715
(7)
1,727
(74)
(376)
1,277
(1)
In prior periods, invested capital did not include adjustments for the cost of removal of utility assets; however, beginning in the fourth quarter of 2021,
Management has adjusted for these costs to better align with the investing section of the Consolidated Statements of Cash Flows. Comparative periods have
been restated to reflect this change.
(2)
2020 invested capital has been revised to include the $7 million final payment related to the Constitution pipeline project that was canceled in February 2020,
also to better align with the investing section of the Consolidated Statements of Cash Flows.
During the year ended December 31, 2021, AltaGas’ invested capital was $798 million, compared to $1.7 billion in 2020. The
decrease in invested capital was primarily due to the absence of cash paid for the Petrogas Acquisition in 2020, lower
contributions to long-term investments, and lower additions to property, plant and equipment.
The decrease in contributions to long-term investments in the year ended December 31, 2021 was mainly due to the absence
of a capital contribution made to AIJVLP related to a cash call in the first quarter of 2020 and the previously mentioned loan
AltaGas Ltd. – 2021 MD&A and Financial Statements - 43
made to an affiliate in the fourth quarter of 2020. The decrease in additions to property, plant and equipment in the year ended
December 31, 2021 was mainly due to lower construction costs relating to the NEBC projects, most of which were completed
in the first half of 2020, and lower maintenance costs at the Blythe facility, partially offset by construction costs for the Nig
Creek expansion, capital invested at consolidated Petrogas facilities, and accelerated pipeline replacement and system
betterment program spend at Washington Gas and SEMCO. The dispositions in the year ended December 31, 2021 primarily
related to proceeds received from the sale of the majority of WGL Midstream's commodity business, certain Petrogas propane
distribution assets, and other minor Midstream asset sales. In the year ended December 31, 2020, dispositions primarily
related to the remaining proceeds received from the disposition of the U.S. distributed generation assets and the disposition of
Pomona and Ripon in the third quarter of 2020. The disposal of equity method investments in the year ended December 31,
2021 related to the cash proceeds received from an escrow account related to the 2019 disposition of AltaGas' investment in
Meade, which held WGL Midstream's indirect, non-operating interest in Central Penn, while in the year ended December 31,
2020 the disposals of equity method investments related to the disposition of ACI.
The invested capital for the year ended December 31, 2021 included maintenance capital of $13 million (2020 ‑ $22 million) in
the Midstream segment and $7 million (2020 ‑ $14 million) related to remaining power assets in the Corporate/Other segment.
The decrease in maintenance capital for the Midstream segment was primarily due to lower maintenance capital at the
Younger facility, partially offset by maintenance capital at the consolidated Petrogas facilities. The decrease in maintenance
capital for the Corporate/Other segment was primarily due to lower maintenance expenditures at the Blythe facility.
During the year ended December 31, 2021, AltaGas’ cash flow from investing activities was an outflow of $483 million,
compared to $1,211 million in 2020. Please refer to the Non-GAAP Financial Measures and Liquidity sections of this MD&A for
further information on AltaGas' cash flow from investing activities.
Risk Management
Risks Related to COVID-19
AltaGas, with its subsidiaries, activated its pandemic response team early in 2020 to monitor developments related to
COVID-19 and to ensure the Corporation was responding swiftly and appropriately. Continuity plans and preparedness
measures have been implemented at each of AltaGas’ businesses, with safeguarding the well-being of its personnel as the
primary concern. To date, AltaGas has been able to respond to the COVID-19 related challenges without materially disrupting
its operations and business. As the COVID-19 pandemic persists, AltaGas continues to take proactive steps to effectively
prepare for and address the evolving risks and regulatory mandates in the jurisdictions in which it operates, including changing
international travel restrictions, potential for higher incidents of colds and influenza in the winter season, vaccination rates and
mandates, vaccine effectiveness, and the evolution of COVID-19 variants. While the Company is moving toward reintegration
of its workplaces, AltaGas' approach has been, and will continue to be, risk-based and guided by its core values. The health
and safety of AltaGas' employees, customers, contractors, and the communities in which it operates is the top priority and is
integrated into each aspect of AltaGas' response efforts.
AltaGas has identified the following as potential direct or indirect impacts to its business and operations from the pandemic:
▪
COVID-19 variants: In response to the emergence of COVID-19 variants, certain COVID-19 restrictions have been
reimplemented in the jurisdictions in which AltaGas operates and restrictions may continue to loosen and tighten with
subsequent threat from COVID-19 variants. As a result, AltaGas was forced to delay its reintegration efforts.
Widespread inability of AltaGas’ workforce or contractors to perform their duties as a result of pervasive incidence of a
COVID-19 variant or inability to comply with applicable mandates on a timely basis would have an adverse impact on
AltaGas’ ability to continue normal operations; and
AltaGas Ltd. – 2021 MD&A and Financial Statements - 44
▪
Return to work: As AltaGas reintegrates its personnel to its workplace, it may incur additional costs to meet
applicable health and safety requirements, which may include adaptations to its workplaces, workforce testing and
compliance with applicable vaccine mandates. The occurrence of additional waves of the virus or its variants, or time
required to ensure compliance with applicable mandates may require AltaGas to revise or delay such integration
plans.
To the extent these risks materialize, the Corporation’s ability to carry out its business plans for 2022 may be adversely
impacted. For further discussion of risks related to COVID-19 please refer to AltaGas' Annual Information Form for the year
ended December 31, 2021, under the heading "Risk Factors".
Other
AltaGas is exposed to various market risks in the normal course of operations that could impact earnings and cash flows.
AltaGas enters into physical and financial derivative contracts to manage exposure to fluctuations in commodity prices and
foreign exchange rates, as well as to optimize certain owned and managed natural gas assets. The Board of Directors of
AltaGas has established a risk management policy for the Corporation establishing AltaGas’ risk management control
framework. Derivative instruments are governed under, and subject to, this policy. As at December 31, 2021 and
December 31, 2020, the fair values of the Corporation’s derivatives were as follows:
($ millions)
Natural gas
Energy exports
NGL frac spread
Power
Crude oil and NGLs
Foreign exchange
Net derivative liability
December 31,
2021
(91) $
15
(19)
(26)
(8)
—
(129) $
$
$
December 31,
2020
(69)
(31)
(6)
(29)
1
23
(111)
Summary of Risk Management Contracts
AltaGas strives to continuously and systematically de-risk the business in order to drive predictable and durable returns and
maximize long-term value for stakeholders. For Midstream, this includes striving to match financial hedges with physical
volumes, and for Utilities, this includes purchasing physical gas throughout the year to help shield customers from major cost
spikes during peak winter demand.
Commodity Price Contracts
The Corporation executes gas, power, LPG, crude oil, ocean freight, and other physical and financial commodity contracts to
serve its customers as well as manage and optimize its asset portfolio. A portion of these physical contracts are not recorded
at fair value because they are either: 1) designated as “normal purchases and normal sales”; 2) do not qualify as derivative
instruments due to the significance of their notional amount relative to the applicable liquid markets; or 3) are weather
derivatives, which are not exchanged or traded and the underlying variables relate to a climactic, geological, or other physical
variable. The fair value of commodity contracts that qualify as derivatives was calculated using estimated forward prices based
on published sources for the relevant period. AltaGas has not elected hedge accounting for any of its derivative contracts
currently in place. For AltaGas’ Midstream segment, changes in the fair value of these derivative contracts are recorded in the
Consolidated Statements of Income in the period in which the change occurs. For the Utilities segment, changes in the fair
value of derivative instruments recoverable or refundable to customers are recorded to regulatory assets or regulatory
liabilities on the Consolidated Balance Sheets, while changes in the fair value of derivative instruments not affected by rate
AltaGas Ltd. – 2021 MD&A and Financial Statements - 45
regulation are recorded in the Consolidated Statements of Income in the period in which the change occurs. The Midstream
segment also executes fixed-for-floating NGL frac spread swaps to manage exposure to frac spreads as the financial results of
several extraction plants are affected by fluctuations in NGL frac spreads.
▪
The average indicative spot NGL frac spread for the year ended December 31, 2021 was approximately $29/Bbl
(2020 – $5/Bbl), inclusive of basis differentials. The average NGL frac spread realized by AltaGas (based on average
spot price and realized hedge price inclusive of basis differentials) for the year ended December 31, 2021 was
approximately $12/Bbl inclusive of basis differentials (2020 - $14/Bbl).
▪
At RIPET and Ferndale, NGL price margins are protected through AltaGas' comprehensive hedging programs.
AltaGas is well hedged for 2022 with approximately 74 percent of its 2022 expected frac exposed volumes hedged at
approximately $33/Bbl, prior to transportation costs. In addition, approximately 44 percent of AltaGas' 2022 expected
export volumes are either tolled or financially hedged with an average FEI to North American financial hedge price of
approximately US$13/Bbl for non-tolled propane and butane volumes. AltaGas plans to manage the export facilities
such that a growing portion of annual capacity will be underpinned by tolling arrangements, and expects to reach this
objective over the next several years.
Additionally, AltaGas uses physical and financial derivatives for the purchase and sale of natural gas in order to optimize
owned storage and transportation capacity as well as manage transportation and storage assets on behalf of third parties.
The Utilities segment enters into hedging contracts and other contracts that may qualify as derivative instruments related to the
purchase of natural gas to manage price risk for its ratepayers. Additionally, Washington Gas executes commodity-related
physical and financial contracts in the form of forward, futures, and option contracts as part of an asset optimization program.
Under this program, Washington Gas realizes value from its long-term natural gas transportation and storage capacity
resources when they are not being fully used to serve utility customers. Additionally, to serve retail customers, AltaGas enters
into both physical and financial contracts for the purchase and sale of electricity and natural gas.
The Corporate/Other segment has various fixed-for-floating power purchase and sale contracts in the Alberta market, which
are expected to be settled over the next two years.
Foreign Exchange Contracts
AltaGas is exposed to foreign exchange risk as changes in foreign exchange rates may affect the fair value or future cash
flows of the Corporation’s financial instruments. AltaGas has foreign operations whereby the functional currency is the U.S.
dollar. As a result, the Corporation’s earnings, cash flows, and other comprehensive income are exposed to fluctuations
resulting from changes in foreign exchange rates. This risk is partially mitigated to the extent that AltaGas has U.S. dollar-
denominated debt and/or preferred shares outstanding. AltaGas may also enter into foreign exchange forward derivatives to
manage the risk of fluctuating cash flows due to variations in foreign exchange rates.
▪
▪
As at December 31, 2021, Management has designated US$122 million of outstanding loans to hedge against the
currency translation effect of its foreign investments (December 31, 2020 - $nil).
For the year ended December 31, 2021, no after-tax unrealized gains or losses were recorded related to the
translation of debt in other comprehensive income (2020 - after-tax unrealized loss of $9 million).
The following foreign exchange forward contracts are outstanding as at December 31, 2021:
Foreign exchange forward contract
Notional Amount
(US$ millions)
Duration
Weighted average
foreign exchange rate
Fair Value
Foreign exchange swaps (purchases)
US$10 Less than one year
1.2640 Less than $1 million
AltaGas Ltd. – 2021 MD&A and Financial Statements - 46
The following foreign exchange forward contracts were outstanding as at December 31, 2020:
Foreign exchange forward contract
Forward USD sales
Forward USD purchases
Foreign exchange swaps (sales)
Notional Amount
(US$ millions)
US$29
US$356
US$410
Duration
Less than one year
Less than one year
Less than one year
Weighted average
foreign exchange rate
1.3591 $
1.2824 $
1.3322 $
Fair Value
(millions)
3
(3)
23
For the year ended December 31, 2021, AltaGas recorded an after-tax realized gain of $19 million on all foreign exchange
forward contracts (2020 - after-tax realized gain of $1 million).
Interest Rate Contracts
AltaGas is exposed to interest rate risk as changes in interest rates may impact future cash flows and the fair value of its
financial instruments. The Corporation manages its interest rate risk by holding a mix of both fixed and floating interest rate
debt.
From time to time, AltaGas may concurrently draw on its credit facility in U.S. dollars and enter into cross currency basis swaps
whereby, on final settlement, AltaGas receives U.S. dollars from the counterparty and pays Canadian dollars to the
counterparty.
Weather Instruments
WGL Energy Services utilizes heating degree day (HDD) instruments from time to time to manage weather and price risks
related to its natural gas and electricity sales during the winter heating season. WGL Energy Services also utilizes cooling
degree day (CDD) instruments and other instruments to manage weather and price risks related to its electricity sales during
the summer cooling season. These instruments cover a portion of estimated revenue or energy-related cost exposure to
variations in HDDs or CDDs. For the year ended December 31, 2021, a pre-tax loss of less than $1 million (2020 - pre-tax loss
of $3 million) was recorded related to heating degree day (HDD) and cooling degree day (CDD) instruments.
The Effects of Derivative Instruments on the Consolidated Statements of Income (Loss)
The following table presents the unrealized gains (losses) on derivative instruments as recorded in the Corporation’s
Consolidated Statements of Income:
($ millions)
Natural gas
Energy exports
Crude oil and NGLs
NGL frac spread
Power
Foreign exchange
Three Months Ended
December 31
2020
2021
2021
$
$
(54) $
19
17
29
(42)
(2)
(33) $
30 $
(29)
4
(13)
(11)
(5)
(24) $
6 $
Year Ended
December 31
2020
32
10
4
(5)
(15)
(5)
21
38
1
(13)
9
(23)
18 $
Please refer to Note 23 of the 2021 Annual Consolidated Financial Statements for further details regarding AltaGas' risk
management activities.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 47
Corporation Risks
AltaGas manages its exposure to risks using the strategies outlined in the following table:
Risks
COVID-19
Operations
Health and Safety
Adequate natural
gas supply and
storage capacity to
meet customer
demand
Long-term natural
gas volume declines
Strategies and Organizational Capability to Mitigate Risks
• Activation of pandemic response team to monitor developments related to COVID-19 and its variants
• Implement continuity plans and preparedness measures to ensure safe and reliable operations
• Monitor and implement compliance with regulatory requirements in all jurisdictions
• Recovery mechanisms in place to track COVID related incremental costs in the Utilities segment
• A phased approach to return to work is being managed in keeping with requirements in
each jurisdiction with oversight by EHS and senior leadership
• Designed and delivered tools and information to support workforce resilience through pandemic
• Ensure appropriate policies, procedures, and systems are in place and internal controls are
operating efficiently
• Programs to manage pipeline system integrity including accelerated replacement of aging pipeline
and infrastructure based on risk mitigation
• Contractual provisions often provide for recovery of operating costs
• Centralized procurement strategy to reduce costs
• Maintain control over operational decisions, operating costs, and capital expenditures by operating
certain jointly-owned facilities
• Maintain standard operating practices, assess and document employee competency, and maintain
formal inspection, maintenance, environmental, health, and safety programs
• Carry property and business interruption insurance
• Fixed price operating and maintenance contracts with equipment manufacturers
• Hedging strategy used to balance price and operating risk
• Strong process safety management systems
• Pipeline and asset integrity programs in place
• Accelerated replacement of mature pipeline infrastructure
• Preventative and remedial measures to address leak rates within Washington Gas’
distribution system
• Continuous process improvement strategy employed
• Comprehensive Environmental, Health and Safety management system
• Purchase and maintain general liability and business interruption insurance
• Maintain diverse capacity portfolio of firm transportation, storage, and peaking services across
different transmission lines for supply flexibility
• Capacity reserve portfolio maintained for maximum forecasted load under extreme conditions plus
a reserve margin approved by regulators
• Long-term contracts such as take-or-pay, area of mutual interest, geographic franchise with
economic out
• Increase market share by expanding existing facilities or acquiring or constructing new facilities in
productive resource play regions
• Increase geographic and customer diversity to reduce exposure to any one individual customer or
area of the WCSB
• Strategically locate facilities to provide secure access to gas supply
• Capitalize on integrated aspects of AltaGas' business to increase volumes through its processing
facilities
AltaGas Ltd. – 2021 MD&A and Financial Statements - 48
Risks
Commodity price
Information security
Environment and
Climate-related
Regulatory and
Stakeholder
Legislative
Liquidity
Foreign exchange
Interest rates
Credit ratings
Strategies and Organizational Capability to Mitigate Risks
• Contracting terms and processing, storage, and transportation fees independent of commodity
prices through fee-for-service, take-or-pay, fixed-fee, or cost-of-service provisions
• Hedging strategy to reduce exposure to commodity prices and earnings volatility established by
senior management and monitored by the Risk Management Committee
• Regulatory recovery mechanisms for gas purchases to serve utility customers
• Matching natural gas and electricity purchase obligations with sales commitments in terms of
volume and pricing
• AltaGas' Commodity Risk Policy approved by the Board of Directors prohibits transactions for
speculative purposes
• Employ strong systems and processes for monitoring and reporting compliance with the
Commodity Risk Policy
• In-depth knowledge and experience of transportation systems, natural gas, NGL, LPG, and power
markets where AltaGas operates
• Direct marketing to end-use commercial and industrial customers
• Strong identity and access management controls
• Improved information management and control of electronic and physical information, in
accordance with data classification, data handling, privacy regulations, and data retention
requirements
• Ongoing cybersecurity communication and phishing tests, including targeted training to higher risk
teams and individuals
• Implementation of new information security standards and policies
• Procedures to ensure regulatory compliance
• Enhanced penetration and vulnerability testing
• Incident response protocols
• Measure and monitor emissions, and seek new technologies to reduce greenhouse gas (GHG)
emissions from operations
• Programs in place to reduce fugitive methane emissions
• Projects designed to limit impacts throughout operations, monitor land, air, and water quality,
where appropriate
• Strong working relationships with regulatory authorities
• Regulatory and commercial personnel monitor and manage regulatory issues
• Development of consistent framework for community consultation
• Safe Digging campaign, emergency preparedness and 24/7 Gas Control and dispatch to protect
utility customers and public
• Utilities seek rate recovery through rate cases with regulatory commissions and agencies
• Ongoing identification of public policy issues to determine risks to the Corporation
• Development of advocacy strategies to address risks
• Where appropriate, engagement in advocacy at the state/provincial and federal level including
participation with trade associations
• Forecast cash flow on a continuous basis to maintain adequate cash balances to fund financial
obligations as they come due and to support business operations
• Maintain financial flexibility and access to multiple credit facilities and continually monitor covenant
compliance
• Execute financing plans and strategies to maintain and improve credit ratings to minimize financing
costs and support ready access to capital markets
• Issue a portion of long-term debt in U.S. dollars which hedges the Corporation’s net investment in
U.S. subsidiaries
• Employ hedging practices when appropriate, such as entering foreign exchange forward contracts
• Optimize financing plans to maintain and improve credit ratings to minimize interest costs
• Monitor and proactively manage the Corporation’s debt maturity profile
• Employ hedging practices such as entering into interest rate swaps
• Monitor and manage the mix of fixed versus floating rate debt exposures
• Maintain open dialogue with credit rating agencies and request feedback to understand any
potential implications to the Corporation’s credit rating
AltaGas Ltd. – 2021 MD&A and Financial Statements - 49
Risks
Construction
Counterparty
Weather
Labor relations
Litigation
Strategies and Organizational Capability to Mitigate Risks
• Major projects group manages and monitors significant construction projects
• Strong in-house project control and management framework
• Appropriate internal management structure and processes
• Engage specialists in designing and building major projects
• Contractual arrangements to mitigate cost and schedule risks
• Strong credit policies and procedures
• Continuous review of counterparty creditworthiness
• Establish credit thresholds using appropriate credit metrics
• Closely monitor exposures and impact of price shocks on liquidity
• Build a diverse customer and supplier base
• Active accounts receivable monitoring and collections processes in place
• Credit terms, netting arrangements, and margining provisions included in contractual agreements
• Anticipated volumes for SEMCO Gas and ENSTAR are determined based on the 15-year and
10-year rolling average for weather, respectively
• In Maryland and Virginia, Washington Gas has in place regulatory mechanisms and rate designs
that eliminate deviations in customer usage caused by variations in weather from normal levels
• Use of weather derivative instruments by WGL Energy Services
• Initiatives focused on talent development, employee engagement, and diversity and inclusion
among workforce
• Positive employee relations to retain existing talent and maintain strong relations with labor unions
• Proactive management of lawsuits and other claims
• Continuous monitoring of defense and settlement costs of lawsuits and claims
• Experienced in-house legal department
• Use of expert third parties when needed
Natural disasters
and catastrophic
events
Government trade
policy
Non-controlling
interest in pipeline
investments
Volume of power
generated
Political uncertainty,
civil unrest, terrorist
attacks, military
activity
Inflationary
pressures on labor,
materials and
equipment
• Risks factored into capital investment, project design, logistics planning of supply chains, emergency
response planning, and optimizing the way products are handled and moved
• Maintain a comprehensive insurance program that covers losses from natural disasters and
catastrophic events such as fires, earthquakes, explosions, floods, tornados, and
other similar occurrences. This program provides a risk transfer mechanism that facilitates timely
recovery from losses and mitigates financial impact
• Supply chain personnel monitor potential impacts of government trade policy and tariffs on costs
for goods used in the normal course of business
• Invest in pipeline projects where the developer/builder/operator of the projects are experienced
companies with a history of successful project completion
• Engage specialists in reviewing project assumptions
• Structure investment agreements to provide mitigation for cost overruns
• Ensure the structure of the project governance requires timely information flow regarding project
status
• In-house regulatory affairs and public policy resources to validate the information from the
developer/builder/operator
• Appropriate internal management structure and processes
• PPA for the Blythe facility includes specified target availability levels and pay fixed capacity
payments upon achieving target availability, and as a result, volumes of power sold have a minimal
impact on the Corporation
• Monitor changes in law, political climate, other threats
• Operational procedures in place including physical security, emergency response
• Ongoing communication by management with employees in all operational areas
• Monitor potential impacts of inflation which may negatively impact levels of demand for AltaGas'
services and cost of inputs, and could, accordingly, have a material adverse effect on AltaGas'
business, financial condition, and results of operations
AltaGas Ltd. – 2021 MD&A and Financial Statements - 50
Liquidity
As a result of certain commitments made to the PSC of DC, the PSC of MD, and the SCC of VA in respect of the WGL
Acquisition, Washington Gas is subject to certain restrictions when paying dividends to AltaGas. However, AltaGas does not
expect that this will have an impact on AltaGas’ ability to meet its obligations.
In addition, Wrangler SPE LLC and Washington Gas made certain ring fencing commitments to the PSC of DC, the PSC of
MD, and the SCC of VA with the intention of removing Washington Gas from the bankruptcy estate of AltaGas and its affiliates,
other than Washington Gas and Wrangler SPE LLC (together, the “Ring Fenced Entities”). Because of these ring fencing
measures, none of the assets of the Ring Fenced Entities would be available to satisfy the debt or contractual obligations of
AltaGas or any non-Ring Fenced Entity Affiliate, including any indebtedness or other contractual obligations of AltaGas, and
the Ring Fenced Entities do not bear any liability for indebtedness or other contractual obligations of any non-Ring Fenced
Entity, and vice versa.
($ millions)
Cash from operations
Investing activities
Financing activities
Increase (decrease) in cash, cash equivalents, and restricted cash
Cash From Operations
Year Ended
December 31
2020
773
(1,211)
392
(46)
2021
738 $
(483)
(245)
10 $
$
$
Cash from operations decreased by $35 million for the year ended December 31, 2021 compared to 2020, primarily due to
unfavorable variances in the net change in operating assets and liabilities and decreased distributions from equity investments,
partly offset higher net income after taxes (after adjusting for non-cash items). The majority of the variance in net change in
operating assets and liabilities was due to lower cash flow from accounts receivable and inventory due to fluctuations in
commodity prices and sales volumes, partially offset by increased cash flows from accounts payable and accrued liabilities
driven by fluctuations in volumes and prices and increased cash flows from regulatory assets and liabilities.
Working Capital
($ millions, except working capital ratio)
Current assets
Current liabilities
Working deficiency
Working capital ratio (1)
(1) Calculated as current assets divided by current liabilities.
December 31,
2021
2,624 $
2,657
(33) $
0.99
December 31,
2020
2,497
2,607
(110)
0.96
$
$
The increase in the working capital ratio was primarily due to increases in cash and cash equivalents and inventory, and
decreases in short-term debt and accounts payable and accrued liabilities, partially offset by increases in the current portion of
long-term debt, and decreases in prepaid expenses and other assets and accounts receivable. AltaGas’ working capital will
fluctuate in the normal course of business. The working capital deficiency is expected to be funded using cash flow from
operations and available credit facilities as required.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 51
Investing Activities
Cash used in investing activities for the year ended December 31, 2021 was $483 million, compared to $1.2 billion in 2020.
Investing activities for the year ended December 31, 2021 primarily included expenditures of approximately $814 million for
property, plant, and equipment and intangible assets, approximately $11 million of contributions to equity investments, and
other changes in investing activities of $7 million, partially offset by proceeds of $3 million received from an escrow account
related to the 2019 disposition of AltaGas' investment in Meade and proceeds of $346 million from the disposition of assets
(net of transaction costs). Investing activities for the year ended December 31, 2020 included the cash payment, net cash
acquired, of $675 million for the Petrogas Acquisition, expenditures of approximately $843 million for property, plant, and
equipment and intangible assets, $75 million related to the change in loan to an affiliate, and approximately $72 million of
contributions of equity investments, which were partially offset by proceeds of $4 million from the sale of investments in
publicly-traded entities, $376 million from the disposition of equity investments (primarily for the disposition of ACI), and
proceeds of $74 million from the disposition of assets (net of transaction costs).
Financing Activities
Cash used in financing activities for the year ended December 31, 2021 was $245 million, compared to cash from financing
activities of $392 million in 2020. Financing activities for the year ended December 31, 2021 were primarily comprised of net
repayments of short-term debt and repayments of long-term debt of $89 million, net repayments under credit facilities of $229
million, dividends of $356 million, and distributions to non-controlling interests of $32 million, partially offset by debt issuances
of $446 million, net proceeds from shares issued on the exercise of share options of $14 million, and contributions from non-
controlling interests of $1 million. Financing activities for the year ended December 31, 2020 were primarily comprised of net
repayments of short-term debt and repayments of long-term debt of $1.2 billion, dividends of $334 million, $200 million for the
redemption of Series I Preferred Shares, and distributions to non-controlling interests of $28 million, partially offset by debt
issuances of $2.0 billion, net issuances under credit facilities of $191 million, contributions from non-controlling interests of $7
million, and net proceeds from shares issued on the exercise of share options of $1 million. Total dividends paid to common
and preferred shareholders of AltaGas for the year ended December 31, 2021 were $356 million (2020 - $334 million).
Capital Resources
AltaGas' objective for managing capital is to maintain its investment grade credit ratings, ensure adequate liquidity, optimize
the profitability of its existing assets, and grow its energy infrastructure to create long‑term value and enhance returns for its
investors. AltaGas' capital structure is comprised of shareholders' equity (including non‑controlling interests), short‑term and
long‑term debt (including the current portion) less cash and cash equivalents.
The use of debt or equity funding is based on AltaGas’ capital structure, which is determined by considering the norms and
risks associated with operations and cash flow stability and sustainability.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 52
($ millions)
Short-term debt (1)
Current portion of long-term debt (2)
Long-term debt (3)
Total debt
Less: cash and cash equivalents
Net debt
Shareholders' equity
Non-controlling interests
Total capitalization
Net debt-to-total capitalization (%)
December 31,
2021
161 $
511
7,684
8,356
(63)
8,293 $
6,949
652
15,894 $
December 31,
2020
236
360
7,626
8,222
(32)
8,190
7,041
620
15,851
$
$
$
52
52
(1)
For the purposes of the net debt calculation, short-term debt excludes third-party project financing obtained on behalf of the United States federal
government to provide funds for the construction of certain energy management services projects. As this debt was obtained on behalf of the U.S.
government, AltaGas would only need to repay in the event that the project is not completed or accepted by the government. See Note 15 of the 2021 Annual
Consolidated Financial Statements for additional details. At December 31, 2021, the project financing balance excluded from short-term debt in the above
table was $8 million (December 31, 2020 - $20 million).
(2) Net of debt issuance costs of $1 million as at December 31, 2021 (December 31, 2020 - Less than $1 million).
(3) Net of debt issuance costs of $43 million as at December 31, 2021 (December 31, 2020 - $43 million).
As at December 31, 2021, AltaGas’ total debt primarily consisted of outstanding medium-term notes (MTNs) of $4.3 billion
(December 31, 2020 - $4.0 billion), WGL and Washington Gas long-term debt of $2.4 billion (December 31, 2020 - $2.1
billion), reflecting fair value adjustments on acquisition, SEMCO long‑term debt of $633 million (December 31, 2020 - $641
million), $495 million drawn under the bank credit facilities (December 31, 2020 - $934 million) and short-term debt of $169
million (December 31, 2020 - $256 million). In addition, AltaGas had $245 million of letters of credit outstanding (December 31,
2020 - $230 million).
As at December 31, 2021, AltaGas’ total market capitalization was approximately $7.6 billion based on approximately 280
million common shares outstanding and a closing trading price on December 31, 2021 of $27.16 per common share.
AltaGas' earnings interest coverage for the rolling twelve months ended December 31, 2021 was 2.0 times (twelve months
ended December 31, 2020 – 2.8 times).
AltaGas Ltd. – 2021 MD&A and Financial Statements - 53
Credit Facilities
($ millions)
AltaGas demand credit facilities (1) (2)
AltaGas revolving credit facilities (1) (2) (3)
SEMCO Energy US$150 million credit facilities (1) (2)
WGL US$300 million revolving credit facility (1) (2) (4) (5)
Washington Gas US$450 million revolving credit facility (1) (2) (4)
Petrogas revolving credit facilities (6)
Petrogas demand credit facilities
Borrowing
capacity
Drawn at
December 31,
2021
$
$
70 $
2,300
190
380
571
200
25
3,736 $
34 $
375
120
342
288
—
—
1,159 $
Drawn at
December 31,
2020
—
802
80
132
363
51
6
1,434
(1)
Amount drawn at December 31, 2021 converted at the month‑end rate of 1 U.S. dollar = 1.2678 Canadian dollar (December 31, 2020 - 1 U.S. dollar = 1.2732
Canadian dollar).
(2)
All US$ borrowing capacity was converted at the December 31, 2021 U.S./Canadian dollar month-end exchange rate.
(3) During the second quarter of 2021, AltaGas closed an amendment that caused all committed credit facilities in Canada to be consolidated into a $2.3 billion
facility. The facility has a $2 billion five-year extendable committed revolving tranche and a $300 million two-year extendable side car liquidity revolving
facility.
(4)
Amounts drawn include commercial paper that is supported by the long term facilities. WGL and Washington Gas have the right to request additional
borrowings of up to US$100 million with the bank’s approval, for a total of US$400 million and US$550 million on their respective facilities.
(5) During the second quarter of 2021, WGL extended its credit facility by two years and increased the size of the facility to US$300 million. The amended facility
matures in July 2024.
(6) During the third quarter of 2021, AltaGas closed an amendment that caused all committed Petrogas credit facilities to be consolidated into a four-year $200
million facility.
In addition to the facilities listed above, AltaGas has demand Letter of Credit facilities of $467 million. At December 31, 2021,
there were letters of credit for $245 million (December 31, 2020 - $229 million) issued on these facilities and an additional less
than $1 million (December 31, 2020 - $1 million) issued on the Company's revolving credit facilities.
WGL and Washington Gas use short-term debt in the form of commercial paper or unsecured short-term bank loans to fund
seasonal cash requirements. Revolving committed credit facilities are maintained in an amount equal to or greater than the
expected maximum commercial paper position. As at December 31, 2021, commercial paper outstanding totaled $630 million
for WGL and Washington Gas (December 31, 2020 – $495 million).
All of the borrowing facilities have covenants customary for these types of facilities, which must be met at each quarter end.
AltaGas and its subsidiaries have been in compliance with all financial covenants each quarter since the establishment of the
facilities. AltaGas and its subsidiaries are also in compliance with trust indenture requirements for its MTNs as at
December 31, 2021 and December 31, 2020.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 54
The following table summarizes the Corporation's primary financial covenants as defined by the credit facility agreements:
Ratios
Bank debt-to-capitalization (1) (2)
Bank EBITDA-to-interest expense (1) (2)
Bank debt-to-capitalization (SEMCO) (2) (3)
Bank EBITDA-to-interest expense (SEMCO) (2) (3)
Bank debt-to-capitalization (WGL) (2) (4)
Bank debt-to-capitalization (Washington Gas) (2) (4)
Net debt-to-EBITDA (Petrogas) (2) (5)
Net Senior debt-to-EBITDA (Petrogas) (2) (5)
Interest Coverage (Petrogas) (2) (5)
Debt covenant
requirements
not greater than 65%
not less than 2.5x
not greater than 60%
not less than 2.25x
not greater than 65%
not greater than 65%
not greater than 4.00x
not greater than 3.00x
not less than 3.00x
As at December 31, 2021
less than 50%
greater than 4.5x
less than 45%
greater than 10.5x
less than 46%
less than 49%
less than 0.5x
less than 0.1x
greater than 21.0x
(1) Calculated in accordance with the Corporation’s $2.3 billion credit facility agreement, which is available on SEDAR at www.sedar.com. The covenants are
equivalent and applicable to all the Corporation’s committed credit facilities.
Estimated, subject to final adjustments.
Bank EBITDA-to-interest expense (SEMCO) and bank debt-to-capitalization (SEMCO) are calculated based on SEMCO’s consolidated financial statements
(2)
(3)
and are calculated similarly to bank debt-to-capitalization and bank EBITDA-to-interest expense.
(4) WGL’s bank debt-to-capitalization ratio is calculated based on WGL’s consolidated financial statements.
(5) Calculated in accordance with the amended Petrogas credit facility agreement.
On February 22, 2021, a $2.5 billion base shelf prospectus for the issuance of certain types of future public debt and/or equity
issuances was filed to replace the base shelf prospectus dated September 25, 2019. This enables AltaGas to access the
Canadian capital markets on a timely basis during the 25-month period that the base shelf prospectus remains effective. As at
December 31, 2021, approximately $2.0 billion was available under the base shelf prospectus.
On February 22, 2021, AltaGas filed a US$2.0 billion short form base shelf prospectus in both Alberta and the U.S to replace
the US$2.0 billion short form base prospectus filed on January 21, 2020. This will enable AltaGas to access the U.S. capital
markets during the 25-month period that the base shelf prospectus remains effective. As at December 31, 2021, US$2.0 billion
was available under the base shelf prospectus.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 55
Contractual Obligations
December 31, 2021
($ millions)
Short-term debt
Long-term debt (1)
Operating leases (2)
Purchase obligations
Capital project commitments
Pension plan and retiree benefits (3)
Merger commitments (4)
Environmental commitments
Post-acquisition contingent payments (5)
Other liabilities (6)
Total contractual obligations (7)
Total
Less than
1 year
1 - 3
years
4 - 5
years
$
169 $
8,145
385
13,284
3
12
9
18
16
43
$ 22,084 $
169 $
506
92
2,501
3
12
2
13
16
43
3,357 $
— $
— $
1,356
126
3,470
—
—
4
3
—
—
4,959 $
1,775
77
2,494
—
—
2
2
—
—
4,350 $
After 5
years
—
4,508
90
4,819
—
—
1
—
—
—
9,418
(1)
(2)
(3)
Excludes deferred financing costs, discounts, finance lease liabilities, and the fair value adjustment on the WGL Acquisition.
Payments are presented on an undiscounted cash basis.
Assumes only required payments will be made into the pension plans in 2022. Contributions are made in accordance with independent actuarial valuations.
(4) Relates to merger commitments arising from the WGL Acquisition. Represents the estimated future payments of merger commitments that have been
accrued but not paid. As at December 31, 2021, the cumulative amount of merger commitments that have been expensed but not yet paid is approximately
US$7 million. Additionally, there are a number of operational commitments, including the funding of leak mitigation and reducing leak backlogs, the funding of
damage prevention efforts, developing projects to extend natural gas service, maintaining pre-merger quality of service standards including odor call
response times, increasing supplier diversity, achieving synergy savings benefits, as well as reporting and tracking related to all the commitments, and
developing 15 megawatts of either electric grid energy storage or Tier 1 renewable resources within five years after the merger closed.
(5) Contingent payments of up to $16 million are expected to be paid related to the Petrogas Acquisition.
(6)
Excludes non-financial liabilities.
(7) U.S. dollar commitments have been converted to Canadian dollars using the December 31, 2021 exchange rate.
AltaGas expects to fund its obligations through internally-generated cash flow, asset sales, and normal course borrowings on
existing committed credit facilities.
Related Party Transactions
In the normal course of business, AltaGas transacts with its subsidiaries, affiliates and joint ventures. Refer to Note 30 of the
2021 Annual Consolidated Financial Statements for the amounts due to or from related parties on the Consolidated Balance
Sheets and the classification of revenue, income, and expenses in the Consolidated Statements of Income.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 56
Credit Ratings
The below table summarizes the most recent credit ratings for AltaGas and subsidiaries:
Entity
Rating Agency
Debt Rated
AltaGas
Washington
Gas
WGL
SEMCO
Standard &
Poor's (S&P)
Fitch Ratings
(Fitch)
S&P
Fitch
S&P
Fitch
Moody's
S&P
Issuer rating
Senior unsecured
Preferred shares and
Junior Subordinated
Issuer
Preferred shares and
Junior Subordinated
Issuer and unsecured
debt
Commercial paper
Issuer
Issuer
Senior unsecured
Commercial paper
Issuer
Long-term issuer
Senior secured notes
Long-term issuer
Senior secured notes
Most Recent
Rating
BBB-
BBB-
P-3 / BB
BBB
BB+
A-
A-2
A-
Comments
Last reviewed December 20, 2021.
Last reviewed December 20, 2021.
Last reviewed December 20, 2021, Junior
Subordinated added on January 5, 2022.
Affirmed on March 31, 2021.
Affirmed on March 31, 2021, Junior Subordinated
added on January 5, 2022.
Last reviewed December 20, 2021.
Last reviewed December 20, 2021.
Affirmed on April 3, 2020.
BBB-
Last reviewed December 20, 2021.
BB+
A-3
BBB
A3
A1
BBB
A-
Last reviewed December 20, 2021.
Last reviewed December 20, 2021.
Affirmed on April 3, 2020.
Raised from Baa1 to A3 on January 22, 2021 with
stable outlook.
Raised from A2 to A1 on January 22, 2021 with
stable outlook.
Last reviewed May 21, 2021.
Last reviewed May 21, 2021.
According to the S&P rating system, an obligor rated BBB has adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial
commitments. The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative
standing within the major rating categories. A P-3 rating by S&P is the third highest of eight categories granted by S&P under
its Canadian preferred share rating scale and a P-3 rating directly corresponds with a BB rating under its global preferred
rating scale. The Canadian preferred share rating scale is fully determined by the global preferred rating scale and there are
no additional analytical criteria associated with the determination of ratings on the Canadian preferred share rating scale.
According to the S&P rating system, while securities rated P-3 are regarded as having significant speculative characteristics,
they are less vulnerable to non-payment than other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet
its financial commitment on the obligation. The ratings from P-1 to P-5 may be modified by "high" and "low" grades which
indicate relative standing within the major rating categories.
According to the Fitch rating system, ‘BBB’ ratings indicate that expectations of default risk are currently low. The capacity for
payment of financial commitments is considered adequate, but adverse business or economic conditions are more likely to
impair this capacity. A ‘BB’ rating by Fitch indicates an elevated vulnerability to default risk, particularly in the event of adverse
changes in business or economic conditions over time; however, business or financial flexibility exists that support the
servicing of financial commitments.
According to the Moody’s rating system, A3 ratings indicate low credit risk. Obligations rated A3 are considered upper-medium
grade.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 57
The credit ratings accorded to the securities by the rating agencies are not recommendations to purchase, hold, or sell the
securities in as much as such ratings do not comment as to market price or suitability for a particular investor. There is no
assurance that any rating will remain in effect for any given period of time or that any rating will not be revised or withdrawn
entirely by a rating agency in the future if, in its judgment, circumstances so warrant.
Share Information
Issued and outstanding
Common shares
Preferred Shares
Series A
Series B
Series C
Series E
Series G
Series H
Series K
Issued
Share options
Share options exercisable
Dividends
As at February 25, 2022
280,443,077
6,746,679
1,253,321
8,000,000
8,000,000
6,885,823
1,114,177
12,000,000
8,495,435
5,648,827
On December 3, 2021, AltaGas announced that effective March 31, 2022, common share dividends will be declared and paid
on a quarterly basis, instead of monthly. Dividends on preferred shares are also paid quarterly. Dividends are at the discretion
of the Board of Directors and dividend levels are reviewed periodically, giving consideration to the ongoing sustainable cash
flow from operating activities, maintenance and growth capital expenditures, and debt repayment requirements of AltaGas.
The following table summarizes AltaGas’ dividend declaration history:
Common Share Dividends
Year Ended December 31
($ per common share)
First quarter
Second quarter
Third quarter
Fourth quarter
Total
2021
0.249900 $
0.249900
0.249900
0.249900
0.999600 $
2020
0.240000
0.240000
0.240000
0.243300
0.963300
$
$
AltaGas Ltd. – 2021 MD&A and Financial Statements - 58
Series A Preferred Share Dividends
Year Ended December 31
($ per preferred share)
First quarter
Second quarter
Third quarter
Fourth quarter
Total
Series B Preferred Share Dividends
Year Ended December 31
($ per preferred share)
First quarter
Second quarter
Third quarter
Fourth quarter
Total
Series C Preferred Share Dividends
Year Ended December 31
(US$ per preferred share)
First quarter
Second quarter
Third quarter
Fourth quarter
Total
Series E Preferred Share Dividends
Year Ended December 31
($ per preferred share)
First quarter
Second quarter
Third quarter
Fourth quarter
Total
2021
0.191250 $
0.191250
0.191250
0.191250
0.765000 $
2020
0.211250
0.211250
0.211250
0.191250
0.825000
2021
0.170690 $
0.170360
0.174480
0.178830
0.694360 $
2020
0.268030
0.267160
0.183180
0.176520
0.894890
2021
0.330625 $
0.330625
0.330625
0.330625
1.322500 $
2020
0.330625
0.330625
0.330625
0.330625
1.322500
2021
0.337063 $
0.337063
0.337063
0.337063
1.348252 $
2020
0.337063
0.337063
0.337063
0.337063
1.348252
$
$
$
$
$
$
$
$
AltaGas Ltd. – 2021 MD&A and Financial Statements - 59
Series G Preferred Share Dividends
Year Ended December 31
($ per preferred share)
First quarter
Second quarter
Third quarter
Fourth quarter
Total
Series H Preferred Share Dividends
Year ended December 31
($ per preferred share)
First quarter
Second quarter
Third quarter
Fourth quarter
Total
Series I Preferred Share Dividends (1)
Year Ended December 31
($ per preferred share)
First quarter
Second quarter
Third quarter
Fourth quarter
Total
(1) On December 31, 2020, AltaGas redeemed all of its outstanding Series I preferred shares.
Series K Preferred Share Dividends
Year Ended December 31
($ per preferred share)
First quarter
Second quarter
Third quarter
Fourth quarter
Total
Critical Accounting Estimates
2021
0.265125 $
0.265125
0.265125
0.265125
1.060500 $
2020
0.265125
0.265125
0.265125
0.265125
1.060500
2021
0.195349 $
0.195295
0.199690
0.204038
0.794372 $
2020
0.292890
0.292020
0.208320
0.201660
0.994890
2021
— $
—
—
—
— $
2020
0.328125
0.328125
0.328125
0.328125
1.312500
2021
0.312500 $
0.312500
0.312500
0.312500
1.250000 $
2020
0.312500
0.312500
0.312500
0.312500
1.250000
$
$
$
$
$
$
$
$
Since a determination of the value of many assets, liabilities, revenues and expenses is dependent upon future events, the
preparation of AltaGas' Consolidated Financial Statements requires the use of estimates and assumptions that have been
made using careful judgment. AltaGas’ significant accounting policies are contained in the notes to the 2021 Annual
Consolidated Financial Statements. Certain of these policies involve critical accounting estimates as a result of the
requirement to make particularly subjective or complex judgments about matters that are inherently uncertain, and because of
the likelihood that materially different amounts could be reported under different conditions or using different assumptions.
Significant estimates and judgments made by Management in the preparation of the Consolidated Financial Statements are
outlined below:
AltaGas Ltd. – 2021 MD&A and Financial Statements - 60
Regulatory Assets and Liabilities
SEMCO Gas, ENSTAR and Washington Gas engage in the delivery and sale of natural gas. SEMCO Gas and ENSTAR are
regulated by the MPSC and RCA, respectively. Washington Gas is regulated by the PSC of DC in the District of Columbia, the
PSC of MD in Maryland, and the SCC of VA in Virginia.
The regulatory agencies exercise statutory authority over matters such as tariffs, rates, construction, operations, financing,
returns and certain contracts with customers. In order to recognize the economic effects of the actions and decisions of the
regulators, the timing of recognition of certain assets, liabilities, revenues and expenses as a result of regulation may differ
from that otherwise expected using U.S. GAAP for entities not subject to rate regulation.
Regulatory assets represent future revenues associated with certain costs incurred in the current period or in prior periods that
are expected to be recovered from customers in future periods through the rate-setting process. Regulatory liabilities represent
future reductions or limitations of increases in revenue associated with amounts that are expected to be refunded to customers
through the rate-setting process.
Asset Impairment
AltaGas reviews long-lived assets, regulatory assets, and intangible assets with indefinite and finite lives whenever events or
changes in circumstances indicate that the carrying value of such assets may not be recoverable. Recoverability is determined
based on an estimate of undiscounted cash flows or other indicators of fair value, and measurement of an impairment loss is
determined based on the fair value of the assets. The determination of fair value requires Management to make assumptions
about future cash inflows and outflows over the life of an asset. Any changes to the assumptions used for the future cash flow
could result in revisions to the evaluation of the recoverability of the long-lived assets or intangible assets and the recognition
of an impairment loss in the Consolidated Financial Statements.
AltaGas also tests goodwill for impairment annually or more frequently if events or changes in circumstances indicate that it is
more likely than not that the fair value of a reporting unit is less than its carrying value. The Corporation has the option to first
assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. If the
quantitative goodwill impairment test is performed, the fair value of the Corporation’s reporting units is compared to the
carrying values. If the carrying value of a reporting unit, including allocated goodwill exceeds its fair value, goodwill impairment
is measured as the excess of the carrying value amount of the reporting unit’s allocated goodwill over the implied fair value of
the goodwill. The fair value used in the quantitative impairment test of goodwill requires estimating future cash flows as well as
appropriate discount rates. AltaGas has assessed goodwill for impairment as at December 31, 2021 and determined that no
write-down was required.
Asset Retirement Obligations
AltaGas records liabilities relating to asset retirement obligations when there is a legal obligation. In estimating the obligations,
Management is required to make assumptions regarding inflation and discount rates, ultimate amounts and timing of
settlements, and expected changes in environmental laws and regulation. A change in any of these estimates could have a
material impact on AltaGas' Consolidated Financial Statements.
Income Taxes
The Corporation is subject to the provisions of the Income Tax Act (Canada) for purposes of determining the amount of income
that will be subject to tax in Canada and the Internal Revenue Code (U.S.) for the purposes of determining the amount of
AltaGas Ltd. – 2021 MD&A and Financial Statements - 61
income that will be subject to tax in the United States. The determination of AltaGas’ and its subsidiaries’ provision for income
taxes requires the application of these complex rules.
Substantial deferred income tax assets and liabilities are recognized in the Consolidated Financial Statements. The recognition
of deferred tax assets depends on the assumption that future earnings will be sufficient to realize the deferred benefit. A
valuation allowance is recorded against deferred tax assets where all or a portion of that asset is not expected to be realized.
The amount of the deferred tax asset or liability recorded is based on Management’s best estimate of the timing of the
realization of the assets or liabilities.
If Management’s interpretation of tax legislation differs from that of tax authorities, or if timing of reversals is not as anticipated,
the provision for income taxes could increase or decrease in future periods. See Note 20 of the 2021 Annual Consolidated
Financial Statements.
Pension Plans and Post-Retirement Benefits
The determination of pension plan obligations and expense is based on a number of actuarial assumptions. Critical
assumptions include the expected long-term rate-of-return on plan assets, the discount rate applied to pension plan
obligations, the expected rate of compensation increase, and mortality rates. For post-retirement benefit plans, which provide
for certain health care premiums and life insurance benefits for qualifying retired employees and which are not funded, critical
assumptions in determining post-retirement obligations and expense are the discount rate and the assumed health care cost
trend rates.
Depreciation and Amortization
Depreciation and amortization of property, plant, and equipment and intangible assets are based on Management’s judgment
of the estimated useful life of the assets. When it is determined that assigned asset lives do not reflect the estimated remaining
period of benefit, prospective changes are made to the depreciable lives of those assets. For regulated entities, amortization
rates are generally prescribed by the applicable regulatory authority. There are a number of uncertainties inherent in estimating
the remaining useful life of certain assets and changes in assumptions could result in material adjustments to the amount of
amortization that AltaGas recognizes from period to period.
Loss Contingencies
AltaGas and its subsidiaries are subject to various legal claims and actions arising in the normal course of business. Liabilities
for loss contingencies are determined on a case-by-case basis and are accrued for when it is probable that a liability has been
incurred and the amount can be reasonably estimated. Significant judgment is required to determine the probability of having
incurred the liability and the estimated amount. Estimates are reviewed regularly and updated as new information is received.
As at December 31, 2021, no material provisions on loss contingencies have been recorded by the Corporation. However, due
to the inherent uncertainty of the litigation process, the resolution of any particular contingencies could have a material adverse
effect on the Corporation’s results of operations or financial position.
Fair Value of Financial Instruments
Fair value is defined as the amount of consideration that would be agreed upon in an arms-length transaction, other than a
forced sale or liquidation, between knowledgeable, willing parties who are under no compulsion to act. The best evidence of
fair value is a quoted bid or ask price, as appropriate, in an active market. Fair value based on unadjusted quoted prices in an
active market requires minimal judgment by Management. Where bid or ask prices in an active market are not available,
Management’s judgment on valuation inputs is necessary to determine fair value. AltaGas enters into physical and financial
derivative contracts to manage exposure to fluctuations in commodity prices and foreign exchange rates, as well as to optimize
AltaGas Ltd. – 2021 MD&A and Financial Statements - 62
certain owned and managed natural gas assets. AltaGas estimates forward prices based on published sources adjusted for
factors specific to the asset or liability, including basis and location differentials, discount rates, and currency exchange. The
forward curves used to mark these derivative instruments to market are vetted against public sources. Where observable
market data is not available, AltaGas uses valuation techniques which require significant judgment by Management. Changes
in estimates and assumptions about these inputs could affect the reported fair value.
Adoption of New Accounting Standards
Effective January 1, 2021, AltaGas adopted the following Financial Accounting Standards Board (FASB) issued Accounting
Standards Updates (ASU):
§
In December 2019, FASB issued ASU No. 2019-12 “Income Taxes: Simplifying the Accounting for Income Taxes".
The amendments in this ASU simplify the accounting for income taxes by clarifying certain aspects of current
guidance and removing some exceptions to the general principles in ASC 740. The adoption of this ASU did not have
a material impact on AltaGas’ consolidated financial statements;
§
In January 2020, FASB issued ASU No. 2020-01 “Derivatives and Hedging: Clarifying the Interactions between Topic
321, Topic 323, and Topic 815". The amendments in this ASU clarify the application of the measurement alternative
for equity instruments and the measurement of non-derivative forward contracts or purchased call options used to
acquire equity securities. The adoption of this ASU did not have a material impact on AltaGas’ consolidated financial
statements; and
§
In March 2020, FASB issued ASU No. 2020-04 "Reference Rate Reform: Facilitation of the Effects of Reference Rate
Reform on Financial Reporting". The amendments in this ASU provide optional expedients and exceptions for
applying GAAP to contract modifications and hedging relationships affected by reference rate reform if certain criteria
are met. These apply only to contracts, hedging relationships, and other transactions that reference the London
Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate
reform. Certain of AltaGas' credit facilities, lessee vehicle finance leases, and carrying charges in certain derivative
commodity sale arrangements reference LIBOR. The discontinuation of LIBOR will require these arrangements to be
modified to replace LIBOR with an alternative interest rate. As such, AltaGas has made a policy election to adopt the
contract modification optional expedients related to these arrangements on January 1, 2021 on a prospective basis.
As a result of electing these optional expedients, contract modifications due to LIBOR are not expected to have a
material effect on AltaGas' consolidated financial statements. AltaGas will continue to monitor the activities of
regulators and financial institutions to transition to an alternative reference rate and continue to review additional
arrangements for references to LIBOR. Accordingly, AltaGas may make additional optional elections in the future.
Future Changes in Accounting Principles
In August 2020, FASB issued ASU No. 2020-06 "Debt with Conversion and Other Options and Topic 815-40 - Derivatives and
Hedging - Contracts in Entity's Own Equity: Accounting for Convertible Instruments and Contract in an Entity's Own Equity".
The amendments in this ASU simplify the accounting for certain financial instruments with characteristics of liabilities and
equity, including convertible instruments and contracts in an entity's own equity. The amendments in this ASU are effective for
public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities
eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021,
including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning
AltaGas Ltd. – 2021 MD&A and Financial Statements - 63
after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The adoption of this
ASU is not expected to have a material impact on AltaGas’ consolidated financial statements.
In July 2021, FASB issued ASU No. 2021-05 "Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments."
The amendments in this ASU affect lessors with lease contracts that have variable lease payments that do not depend on a
reference index or a rate and would have resulted in the recognition of a selling loss at lease commencement if classified as
sales-type or direct financing. The amendments are effective for fiscal years beginning after December 15, 2021, including
interim periods within those fiscal years and could either be applied retrospectively to leases that commenced or were modified
upon the adoption of ASC 842 or prospectively to new or modified leases. The adoption of this ASU is not expected to have a
material impact on AltaGas' consolidated financial statements.
In October 2021, FASB issued ASU 2021-08 "Business Combinations (Topic 805): Accounting for Contract Assets and
Contract Liabilities from Contracts with Customers". The amendments in this ASU require an entity to recognize and measure
contract assets and liabilities acquired in a business combination in accordance with Topic 606. The amendments in this ASU
are effective for fiscal years beginning after December 15, 2022 and should be applied prospectively to business combinations
occurring on or after the effective date of the amendment. The adoption of this ASU is not expected to have a material impact
on AltaGas' consolidated financial statements.
In November 2021, FASB issued ASU No. 2021-10 "Government Assistance (Topic 832): Disclosures by Business Entities
about Government Assistance". The amendments in this ASU require annual disclosure about transactions with a government
entity, including the nature of the transactions, the method applied to account for the government assistance, impacted line
items on the financial statements, and significant terms and conditions of the agreement. The amendments in this ASU are
effective for fiscal years beginning after December 15, 2021 and could either be applied prospectively to all new transactions
with a government that are entered into after the date of initial application or retrospectively to those transactions. The
adoption of this ASU is not expected to have a material impact on AltaGas' consolidated financial statements.
Off-Balance Sheet Arrangements
AltaGas is not party to any contractual arrangements with unconsolidated entities that have, or are reasonably likely to have, a
current or future material effect on the Corporation’s financial performance or financial condition including liquidity and capital
resources.
Disclosure Controls and Procedures (DCP) and Internal Control Over Financial Reporting (ICFR)
Management, including the Chief Executive Officer and Chief Financial Officer, are responsible for establishing and
maintaining DCP and ICFR, as those terms are defined in National Instrument 52‑109 "Certification of Disclosure in Issuers'
Annual and Interim Filings". The objective of this instrument is to improve the quality, reliability, and transparency of information
that is filed or submitted under securities legislation.
Management, including the Chief Executive Officer and the Chief Financial Officer, have designed, or caused to be designed
under their supervision, DCP and ICFR to provide reasonable assurance that information required to be disclosed by AltaGas
in its annual filings, interim filings or other reports to be filed or submitted by it under securities legislation is made known to
them, is reported on a timely basis, financial reporting is reliable, and financial statements prepared for external purposes are
in accordance with U.S. GAAP.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 64
The ICFR have been designed based on the framework established in the 2013 Internal Control ‑ Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Management has designed the existing framework to result in both a complete and accurate consolidation of related
information. During the year ended December 31, 2021, there were no changes made to AltaGas' ICFR that materially
affected, or are reasonably likely to materially affect, its ICFR or DCP. AltaGas does not believe that process changes adopted
in connection with the COVID‑19 pandemic have materially affected ICFR.
The Chief Executive Officer and the Chief Financial Officer have evaluated, with the assistance of AltaGas' employees, the
effectiveness of AltaGas' DCP and ICFR as at December 31, 2021 and concluded that as at December 31, 2021 AltaGas' DCP
and ICFR were effective.
It should be noted that a control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all control issues, including instances of fraud, if any,
have been detected. The design of any system of controls is also based in part on certain assumptions about the likelihood of
future events, and there can be no assurances that any design will succeed in achieving its stated goals under all potential
conditions.
Summary of Consolidated Results for the Eight Most Recent Quarters (1)
($ millions)
Total revenue
Normalized EBITDA (2)
Net income (loss) applicable to common shares
($ per share)
Net income (loss) per common share
Basic
Diluted
Dividends declared
Q4-21 Q3-21 Q2-21 Q1-21 Q4-20 Q3-20 Q2-20 Q1-20
969 1,059 1,869
499
206
213
3,140 2,339 2,009 3,085 1,689
392
244
230
674
341
(156)
464
Q4-21 Q3-21 Q2-21 Q1-21 Q4-20 Q3-20 Q2-20 Q1-20
337
(47)
48
25
24
21
(0.56)
(0.56)
0.25
0.09
0.09
0.25
0.09
0.09
0.25
1.21
1.20
0.25
0.17
0.17
0.24
(0.17)
(0.17)
0.24
0.08
0.08
0.24
1.66
1.66
0.24
Amounts may not add due to rounding.
(1)
(2) Non‑GAAP financial measure. See discussion in the Non‑GAAP Financial Measures section of this MD&A.
AltaGas’ quarter-over-quarter financial results are impacted by seasonality, fluctuations in commodity prices, weather, the U.S./
Canadian dollar exchange rate, planned and unplanned plant outages, timing of in-service dates of new projects, and
acquisition and divestiture activities.
Revenue for the Utilities is generally the highest in the first and fourth quarters of any given year as the majority of natural gas
demand occurs during the winter heating season, which typically extends from November to March.
Other significant items that impacted quarter-over-quarter revenue during the periods noted include:
The impact of the sale of Pomona and Ripon in the third quarter of 2020;
§ The seasonally colder weather experienced at several of the utilities in the second and third quarters of 2020;
▪
▪
▪
The impact of the sale of the majority of WGL Midstream's commodity business in the second quarter of 2021.
The impact of the acquisition of additional equity interest in Petrogas in the fourth quarter of 2020; and
Net income (loss) applicable to common shares is also affected by non-cash items such as deferred income tax, depreciation
and amortization expense, accretion expense, provisions on assets, gains or losses on long-term investments, and gains or
AltaGas Ltd. – 2021 MD&A and Financial Statements - 65
losses on the sale of assets. In addition, net income (loss) applicable to common shares is also impacted by preferred share
dividends and gains or losses on the redemption of preferred shares. For these reasons, net income (loss) may not
necessarily reflect the same trends as revenue. Net income (loss) applicable to common shares during the periods noted was
impacted by:
§ After-tax transaction costs and acquired contingencies of approximately $28 million and $18 million incurred
throughout 2021 and 2020, respectively, due to the acquisition of Petrogas and asset sales;
§ The impact of the sale of ACI in the first quarter of 2020;
§ The impact of the sale of Pomona and Ripon in the third quarter of 2020;
§ The impact of the change in accounting principle relating to Washington Gas' net periodic pension and other post-
retirement benefit plan costs in the third quarter of 2020;
§ The impact of the acquisition of additional equity interest in Petrogas in the fourth quarter of 2020;
§ The after-tax provision of approximately $79 million recognized in the fourth quarter of 2020 related to the Alton
Natural Gas Storage Project;
▪
▪
▪
The impact of the sale of the majority of WGL Midstream's commodity business in the second quarter of 2021;
The after-tax provision of approximately $43 million recognized in 2021 related to the sale of the majority of WGL
Midstream's commodity business; and
The after-tax provision on equity investments of approximately $209 million recognized in the fourth quarter of 2021
related to AltaGas' investment in MVP, which includes the Mountain Valley Pipeline and MVP Southgate projects.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 66
SELECTED ANNUAL FINANCIAL INFORMATION
($ millions, except where noted)
Revenue
Net income applicable to common shares
Net income per common share - basic
Net income per common share - diluted
Total assets
Total long-term liabilities
Weighted average number of common shares outstanding (millions)
Dividends declared per common share ($ per share)
Preferred share dividends declared ($ per share)
2021
10,573
230
0.82
0.82
21,593
11,335
280
2020
5,587
486
1.74
1.74
21,532
11,264
279
0.999600
0.963300
2019
5,495
769
2.78
2.77
19,795
9,301
277
0.960000
Series A
Series B
Series C (US$)
Series E
Series G
Series H
Series I (1)
Series K
Washington Gas $4.80 series (US$) (2)
Washington Gas $4.25 series (US$) (2)
Washington Gas $5.00 series (US$) (2)
(1) Series I preferred shares were redeemed on December 31, 2020.
(2) Washington Gas preferred shares were redeemed on December 20, 2019.
0.765000
0.694360
1.322500
1.348252
1.060500
0.794372
0.825000
0.894890
1.322500
1.348252
1.060500
0.994890
— 1.312500
1.250000
1.250000
—
—
—
0.845000
1.084641
1.322500
1.348252
1.155750
0.296040
1.312500
1.250000
— 2.400000
— 2.125000
— 2.500000
AltaGas Ltd. – 2021 MD&A and Financial Statements - 67
MANAGEMENT'S REPORT
The Consolidated Financial Statements of AltaGas Ltd. (AltaGas or the Corporation) and other financial information included in
this report are the responsibility of Management. The Consolidated Financial Statements have been prepared by Management
in accordance with United States Generally Accepted Accounting Principles (U.S. GAAP) and include amounts that are based
on Management’s best estimates and judgments. It is Management's responsibility to ensure that judgments, estimates and
accounting principles and methods used in the preparation of financial information are reasonable, appropriate, and applied
consistently.
Management's Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal controls over financial reporting for the
Corporation (as defined in Rules 13a-15(f) of the Securities Exchange Act and under National Instrument 52-109).
Management has used the framework established in the 2013 Internal Control ‑ Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) to evaluate the effectiveness of the
Corporation's internal control over financial reporting. Based on this evaluation, Management, including the CEO and CFO,
has concluded that the Corporation's internal control over financial reporting is effective as at December 31, 2021.
Internal control over financial reporting may not prevent all misstatements due to its inherent limitations. In addition, the
evaluation of internal control was made as of a specific date and continued effectiveness in future periods is subject to the risk
that controls may become inadequate.
The Board of Directors is responsible for ensuring that Management fulfills its responsibilities for financial reporting and
internal controls. The Board is assisted in carrying out its responsibilities principally through its Audit Committee which is
composed of independent non-management directors. The Audit Committee meets with Management regularly and meets
independently with internal and external auditors and as a group to review any significant accounting, internal controls, and
auditing matters in accordance with the terms of the Charter of the Audit Committee, which is set out in the Annual Information
Form.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 68
The shareholders have appointed Ernst & Young LLP as independent external auditors to express an opinion as to whether
the Consolidated Financial Statements present fairly, in all material respects, the Corporation’s consolidated financial position,
results of operations, and cash flows in accordance with U.S. GAAP. Ernst & Young LLP is not required under securities law to
express an opinion as to the effectiveness of the Corporation's internal control over financial reporting. The report of Ernst &
Young LLP outlines the scope of its examination and its opinion on the Consolidated Financial Statements.
(signed) "Randall Crawford"
(signed) "James Harbilas"
RANDALL CRAWFORD
President and
Chief Executive Officer of
AltaGas Ltd.
March 3, 2022
JAMES HARBILAS
Executive Vice President and
Chief Financial Officer of
AltaGas Ltd.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 69
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of AltaGas Ltd.
Opinion on the Consolidated Financial Statements
We have audited the accompanying balance sheets of AltaGas Ltd. (the “Company”) as of December 31, 2021 and 2020, the
related consolidated statements of income, comprehensive income, equity and cash flows for each of the years then ended,
and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of AltaGas Ltd. as at December 31, 2021 and
2020, and the results of its operations and its cash flows for each of the years then ended, in conformity with United States
generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company‘s management. Our responsibility is to express
an opinion on the Company‘s consolidated financial statements based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved especially challenging, subjective or complex judgements. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit
matters or on the accounts or disclosures to which it relates.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 70
Description of the
Matter
Fair Value Measurement of Level 3 Derivatives
As described in Note 23 to the financial statements, AltaGas Ltd. enters into commodity contracts that
qualify as derivative instruments and are accounted for under ASC Topic 815, Derivatives and
Hedging. The fair value measurements of certain of these contracts are considered Level 3 under the
fair value hierarchy as they are determined using significant unobservable inputs. As of December 31,
2021, derivative assets of $69 million and derivative liabilities of $224 million were recorded based on
Level 3 fair value measurements.
Auditing the fair value measurement of Level 3 derivative instruments was complex given the
judgmental nature of the assumptions used as inputs into the valuation models. In particular, the
valuation of Level 3 derivative instruments is sensitive to significant unobservable inputs used by the
Company such as the assumed natural gas basis prices and implied volatilities of natural gas prices.
These unobservable assumptions could be affected by future economic and market conditions.
How We Addressed
the Matter in Our
Audit
To test the valuation of Level 3 derivative instruments, our audit procedures included, among others,
evaluating the valuation methodologies used by the Company and testing significant inputs,
assumptions and
the mathematical accuracy of
the calculations.
In certain
instances, we
independently determined the significant unobservable assumptions described above, calculated the
resulting fair values and compared them to the Company’s estimates. For a sample of instruments, we
obtained forward prices from independent sources, including broker quotes, evaluated the Company’s
assumptions related to their forward curves and obtained external confirmation of key contract terms
from counterparties. We also performed sensitivity analyses using independent sources of market
data to evaluate the change in fair value of Level 3 derivative instruments that would result from
changes in underlying assumptions.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 71
Valuation of Equity Method Investment in Mountain Valley Pipeline LLC
Description of the
Matter
At December 31, 2021, the Company has an investment in the Mountain Valley Pipeline (“MVP”) of
approximately $447 million. As discussed in Note 2 and 14 to the consolidated financial statements,
the Company accounts for its interests in MVP under the equity method because it has the ability to
exercise significant influence, but not control, over MVP’s operating and financial policies. The
Company reviews the carrying value of its investments in unconsolidated entities for impairment
whenever events or changes in circumstances indicate that the investment may not be recoverable.
When such condition is deemed other than temporary, the Company writes down the carrying value of
the investment to its fair value, and an impairment charge is recorded in the Consolidated Statements
of Income. As described in Note 14 to the consolidated financial statements, the Company recorded
an impairment charge of $271 million at December 31, 2021 on the MVP investment due to continued
legal and regulatory challenges. The fair value of the investment in MVP was calculated using a
discounted cash flow model, taking into account the cap on the Company's contractual capital
contributions, cost of capital, an assessment of the probability that MVP will overcome legal and
regulatory challenges, and the potential removal costs should the project not move forward.
Auditing management’s measurement of impairment of the equity investment in the MVP was complex
due to the significant judgment required to estimate the fair value of the investment. In particular, the
fair value estimate of the equity investment in MVP was sensitive to significant assumptions, including
the probability that MVP will overcome legal and regulatory challenges and the discount rate.
To test the Company’s impairment measurement related to its equity investment in MVP, our audit
procedures included, among others, testing the completeness and accuracy of the underlying data
used in the discounted cash flow model and testing the significant assumptions described above. We
involved our valuation specialists to assess the appropriateness of the valuation methodology,
including evaluating the discount rate by referencing current industry, economic, and comparable
company information. We evaluated the reasonableness of the probability that MVP will overcome
legal and regulatory challenges by reviewing information included in analyst and industry reports,
internal communications to management and the Board of Directors and other MVP Partners’ press
releases and regulatory filings.
How We Addressed
the Matter in Our
Audit
We have served as AltaGas Ltd. auditor since 1997.
Chartered Professional Accountants
Calgary, Canada
March 3, 2022
AltaGas Ltd. – 2021 MD&A and Financial Statements - 72
CONSOLIDATED BALANCE SHEETS
As at December 31
ASSETS
Current assets
Cash and cash equivalents (note 31)
Accounts receivable (net of credit losses of $39 million) (notes 10 and 23)
Inventory (note 7)
Restricted cash holdings from customers (note 31)
Regulatory assets (note 21)
Risk management assets (note 23)
Prepaid expenses and other current assets (notes 28 and 31)
Assets held for sale (note 5)
Property, plant and equipment (note 8)
Intangible assets (note 9)
Operating right-of-use assets (note 10)
Goodwill (note 11)
Regulatory assets (note 21)
Risk management assets (note 23)
Restricted cash holdings from customers (note 31)
Prepaid post-retirement benefits (note 28)
Long-term investments and other assets (net of credit losses of $1 million)
(notes 12, 28, and 31)
Investments accounted for by the equity method (note 14)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities (notes 17, 18, 23, and 28)
Dividends payable (note 23)
Short-term debt (notes 15 and 23)
Current portion of long-term debt (notes 16 and 23)
Customer deposits
Regulatory liabilities (note 21)
Risk management liabilities (note 23)
Operating lease liabilities (note 10)
Other current liabilities (note 23)
Liabilities associated with assets held for sale (note 5)
Long-term debt (notes 16 and 23)
Asset retirement obligations (note 17)
Unamortized investment tax credits (note 20)
Deferred income taxes (note 20)
Regulatory liabilities (note 21)
Risk management liabilities (note 23)
Operating lease liabilities (note 10)
Other long-term liabilities (notes 19 and 23)
Future employee obligations (note 28)
2021
2020
$
63 $
$
$
1,427
782
3
48
113
188
—
2,624
11,323
171
311
5,153
436
51
—
674
227
623
21,593 $
1,544 $
—
169
511
74
79
128
91
61
—
2,657
7,684
429
2
1,158
1,424
165
253
134
86
$
13,992 $
32
1,444
636
3
46
98
234
4
2,497
10,888
539
372
5,039
444
47
2
572
245
887
21,532
1,561
22
256
360
73
90
111
95
38
1
2,607
7,626
379
3
1,118
1,381
145
304
153
155
13,871
AltaGas Ltd. – 2021 MD&A and Financial Statements - 73
As at December 31
Shareholders' equity
Common shares, no par values, unlimited shares authorized;
2021 - 280.3 million and 2020 - 279.5 million issued and outstanding (note 25)
Preferred shares (note 25)
Contributed surplus
Accumulated deficit
Accumulated other comprehensive income (loss) (AOCI) (note 22)
Total shareholders' equity
Non-controlling interests
Total equity
2021
2020
$
$
$
6,735 $
1,076
388
(1,243)
(7)
6,949
652
7,601 $
21,593 $
6,723
1,077
383
(1,192)
50
7,041
620
7,661
21,532
Business acquisition (note 3)
Variable interest entities (note 13)
Commitments, guarantees and contingencies (note 29)
Related party transactions (note 30)
Segmented information (note 32)
Subsequent events (note 33)
See accompanying notes to the Consolidated Financial Statements.
Approved by the Board of Directors of AltaGas Ltd.
(signed) "Randall Crawford"
(signed) "Robert B. Hodgins"
RANDALL CRAWFORD
Director
ROBERT B. HODGINS
Director
AltaGas Ltd. – 2021 MD&A and Financial Statements - 74
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31
REVENUE (note 24)
EXPENSES
Cost of sales, exclusive of items shown separately
Operating and administrative
Accretion expenses (note 17)
Depreciation and amortization (notes 8 and 9)
Provisions on assets (note 6)
Income (loss) from equity investments (note 14)
Other income (note 27)
Foreign exchange gains
Interest expense
Income before income taxes
Income tax expense (note 20)
Current
Deferred
Net income after taxes
Net income applicable to non-controlling interests
Net income applicable to controlling interests
Preferred share dividends
Net income applicable to common shares
Net income per common share (note 26)
Basic
Diluted
Weighted average number of common shares
outstanding (millions) (note 26)
Basic
Diluted
See accompanying notes to the Consolidated Financial Statements.
2021
2020
$
10,573 $
5,587
7,708
1,476
6
422
64
9,676
(261)
81
4
(275)
446
59
47
340
57
283
(53)
230 $
0.82 $
0.82 $
3,178
1,267
5
414
109
4,973
49
306
4
(274)
699
1
126
572
20
552
(66)
486
1.74
1.74
279.9
281.7
279.4
279.7
$
$
$
AltaGas Ltd. – 2021 MD&A and Financial Statements - 75
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31
Net income after taxes
Other comprehensive income (loss), net of taxes
Loss on foreign currency translation
Unrealized loss on net investment hedge (note 23)
Actuarial gain (loss) on pension plans and post-retirement benefit (PRB) plans (note 28)
Reclassification of actuarial gains and prior service credits on defined benefit (DB) and
post-retirement benefit plans (PRB) to net income (note 28)
Other comprehensive loss from equity investees
Total other comprehensive loss (OCI), net of taxes (note 22)
Comprehensive income attributable to controlling interests and non-controlling
interests, net of taxes
Comprehensive income attributable to:
Non-controlling interests
Controlling interests
See accompanying notes to the Consolidated Financial Statements.
2021
2020
$
340 $
572
(61)
—
2
2
—
(57) $
(175)
(9)
(8)
2
(5)
(195)
283 $
377
56 $
227
283 $
21
356
377
$
$
$
$
AltaGas Ltd. – 2021 MD&A and Financial Statements - 76
CONSOLIDATED STATEMENTS OF EQUITY
Year Ended December 31
2021
2020
Common shares (note 25)
Balance, beginning of year
Shares issued for cash on exercise of options
Shares issued under DRIP (1)
Deferred taxes on share issuance costs
Balance, end of year
Preferred shares (note 25)
Balance, beginning of year
Redemption of preferred shares
Deferred taxes on share issuance costs
Balance, end of year
Contributed surplus
Balance, beginning of year
Share options expense
Exercise of share options
Balance, end of year
Accumulated deficit
Balance, beginning of year
Net income applicable to controlling interests
Common share dividends
Preferred share dividends
Adoption of ASU No. 2016-13 (note 23)
Balance, end of year
AOCI (note 22)
Balance, beginning of year
Other comprehensive loss
Balance, end of year
Total shareholders' equity
Non-controlling interests
Balance, beginning of year
Net income applicable to non-controlling interests
Foreign currency translation adjustments
Contributions from non-controlling interests to subsidiaries
Distributions by subsidiaries to non-controlling interests
Acquisition of non-controlling interests through Petrogas Acquisition (note 3)
Balance, end of year
Total equity
$
$
$
$
$
$
$
$
$
$
$
$
$
$
6,723 $
15
—
(3)
6,735 $
1,077 $
—
(1)
1,076 $
383 $
7
(2)
388 $
(1,192) $
283
(281)
(53)
—
(1,243) $
50 $
(57)
(7) $
6,949 $
620 $
57
6
1
(32)
—
652 $
7,601 $
6,719
1
6
(3)
6,723
1,277
(200)
—
1,077
377
6
—
383
(1,403)
552
(268)
(66)
(7)
(1,192)
245
(195)
50
7,041
154
20
—
7
(28)
467
620
7,661
(1)
Premium Dividend™, Dividend Reinvestment and Optional Cash Purchase Plan (DRIP). The plan was suspended in December 2019, with the December
dividend (paid January 2020) being the last dividend payment eligible for reinvestment by participating shareholders under the DRIP.
See accompanying notes to the Consolidated Financial Statements.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 77
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
Cash from (used by) operations
Net income after taxes
Items not involving cash:
Depreciation and amortization (notes 8 and 9)
Provisions on assets (note 6)
Accretion expenses (note 17)
Share-based compensation (note 25)
Deferred income tax expense (note 20)
Gains on sale of assets (notes 4 and 27)
Gain on remeasurement of previously held interest in AIJVLP (note 3)
Loss (income) from equity investments (note 14)
Unrealized gains on risk management contracts (note 23)
Amortization of deferred financing costs
Provision for doubtful accounts
Change in pension and other post-retirement benefits (note 28)
Other
Asset retirement obligations settled (note 17)
Distributions from equity investments
Changes in operating assets and liabilities (note 31)
Investing activities
Business acquisitions, net of cash acquired (note 3)
Capital expenditures - property, plant and equipment
Capital expenditures - intangible assets
Contributions to equity investments
Change in loan to affiliate
Proceeds from disposition of equity investments (note 14)
Proceeds from sale of investments in publicly-traded entities
Proceeds from disposition of assets, net of transaction costs (note 4)
Other changes in investing activities
Financing activities
Net repayment of short-term debt
Issuance of long-term debt, net of debt issuance costs
Repayment of long-term debt
Net borrowing (repayment) under credit facilities
Dividends - common shares
Dividends - preferred shares
Distributions to non-controlling interest
Contributions from non-controlling interests
Net proceeds from shares issued on exercise of options
Net proceeds from issuance of common shares
Redemption of preferred shares (note 25)
Change in cash, cash equivalents, and restricted cash
Effect of exchange rate changes on cash, cash equivalents, and
restricted cash
Cash, cash equivalents, and restricted cash beginning of year
Cash, cash equivalents, and restricted cash end of year (note 31)
See accompanying notes to the Consolidated Financial Statements.
2021
2020
$
340 $
572
422
64
6
7
47
(6)
—
261
(18)
5
14
(25)
28
(10)
13
(410)
738 $
—
(805)
(9)
(11)
—
3
—
346
(7)
(483) $
(78)
446
(11)
(229)
(303)
(53)
(32)
1
14
—
—
(245) $
10
—
74
84 $
414
109
5
6
126
(223)
(22)
(49)
(21)
8
25
(11)
15
(4)
26
(203)
773
(675)
(825)
(18)
(72)
(75)
376
4
74
—
(1,211)
(157)
1,962
(1,056)
191
(268)
(66)
(28)
7
1
6
(200)
392
(46)
(2)
122
74
$
$
$
$
AltaGas Ltd. – 2021 MD&A and Financial Statements - 78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts and amounts in footnotes to tables are in millions of Canadian dollars unless otherwise indicated.)
1. Organization and Overview of the Business
The businesses of AltaGas are operated by the Company and a number of its subsidiaries including, without limitation, AltaGas
Services (U.S.) Inc., AltaGas Utility Holdings (U.S.) Inc., WGL Holdings, Inc. (WGL), Wrangler 1 LLC, Wrangler SPE LLC,
Washington Gas Resources Corporation, WGL Energy Services, Inc. (WGL Energy Services), and SEMCO Holding
Corporation; in regard to the Utilities business, Washington Gas Light Company (Washington Gas), Hampshire Gas Company,
and SEMCO Energy, Inc. (SEMCO); and in regard to the Midstream business, AltaGas Extraction and Transmission Limited
Partnership, AltaGas Pipeline Partnership, AltaGas Processing Partnership, AltaGas Northwest Processing Limited
Partnership, Harmattan Gas Processing Limited Partnership, Ridley Island LPG Export Limited Partnership, AltaGas Pacific
Partnership, AltaGas LPG Limited Partnership, Petrogas Energy Corporation (Petrogas), Petrogas Holdings Partnership, and
Petrogas, Inc. In the Corporate/Other segment, subsidiaries include AltaGas Power Holdings (U.S.) Inc., WGL Energy
Systems, Inc. (WGL Energy Systems), and Blythe Energy Inc. (Blythe). SEMCO conducts its Michigan natural gas distribution
business under the name SEMCO Energy Gas Company (SEMCO Gas), its Alaska natural gas distribution business under the
name ENSTAR Natural Gas Company (ENSTAR) and its 65 percent interest in an Alaska regulated gas storage utility under
the name Cook Inlet Natural Gas Storage Alaska LLC (CINGSA).
AltaGas is a leading energy infrastructure company that connects natural gas and NGLs to domestic and global markets. The
Company operates a diversified, lower-risk, high-growth energy infrastructure business that is focused on delivering resilient
and durable value for its stakeholders.
AltaGas' operating segments include the following:
§
Utilities, which owns and operates franchised, cost-of-service, rate regulated natural gas distribution and storage utilities
that provide safe, reliable, affordable energy to approximately 1.7 million residential and commercial customers. This
includes operating four utilities that operate across five major U.S. jurisdictions with an average 2021 rate base of
approximately US$4.7 billion The Utilities business also includes storage facilities and contracts for interstate natural gas
transportation and storage services, as well as the affiliated retail energy marketing business, which sells natural gas and
electricity directly to approximately 0.5 million residential, commercial, and industrial customers located in Maryland,
Virginia, Delaware, Pennsylvania, Ohio, and the District of Columbia; and
§ Midstream, which is a leading North American platform that connects customers and markets from wellhead to tidewater
and beyond. The three pillars of the Midstream business include: 1) global exports, which includes AltaGas' two LPG
export terminals; 2) natural gas gathering and extraction; and 3) fractionation and liquids handling. AltaGas' Midstream
segment also includes its natural gas and NGL marketing business, domestic logistics, trucking and rail terminals, and
liquid storage capability. The addition of Petrogas resulted in revenue of approximately $4.7 billion for the year ended
December 31, 2021.
The Corporate/Other segment consists of AltaGas' corporate activities and a small portfolio of gas-fired power generation and
distribution assets capable of generating 578 MW of power in California and Colorado.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 79
2. Summary of Significant Accounting Policies
BASIS OF PRESENTATION
These Consolidated Financial Statements have been prepared by Management in accordance with United States Generally
Accepted Accounting Principles (U.S. GAAP).
Pursuant to National Instrument 52‑107, "Acceptable Accounting Principles and Auditing Standards" (NI 52‑107), financial
statements of an “SEC issuer” may be prepared in accordance with U.S. GAAP. On February 22, 2021, AltaGas filed a final
short form base shelf prospectus in Alberta and a corresponding registration statement on Form F-10 in the United States, by
virtue of which AltaGas is required to file reports under section 15(d) of the Securities Exchange Act of 1934 with the United
States Securities and Exchange Commission. As a result, AltaGas is an SEC issuer and is entitled to prepare its financial
statements in accordance with U.S. GAAP.
PRINCIPLES OF CONSOLIDATION
These Consolidated Financial Statements of AltaGas include the accounts of the Corporation, its subsidiaries, variable interest
entities (VIEs) for which the Corporation is the primary beneficiary, and its interest in various partnerships and joint ventures
where AltaGas has an undivided interest in the assets and liabilities. Investments in unconsolidated companies that AltaGas
has significant influence, but not control, over are accounted for using the equity method.
Hypothetical Liquidation at Book Value (HLBV) methodology is used for AltaGas' investment in Mountain Valley Pipeline (MVP)
This methodology is used when the governing structuring agreement over the equity investment results in different liquidation
rights and priorities than what is reflected by the underlying ownership interest percentage.
All intercompany balances and transactions are eliminated on consolidation. Where there is a party with a non‑controlling
interest in a subsidiary that AltaGas controls, that non‑controlling interest is reflected as “non‑controlling interests” in the
Consolidated Financial Statements. The non‑controlling interests in net income of consolidated subsidiaries are shown as an
allocation of the consolidated net income and are presented separately in "net income applicable to non-controlling interests".
USE OF ESTIMATES AND MEASUREMENT UNCERTAINTY
The preparation of Consolidated Financial Statements in accordance with U.S. GAAP requires Management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and
expenses during the period. Key areas where Management has made complex or subjective judgments, when matters are
inherently uncertain, include but are not limited to: determining the nature and timing of satisfaction of performance obligations
and determining the transaction price and amounts allocated to performance obligations for revenue recognition; depreciation
and amortization rates; determination as to whether a contract is or contains a lease; determination of the classification, term,
and discount rate for leases; fair value of asset retirement obligations; fair value of property, plant and equipment and goodwill
for impairment assessments; fair value of financial instruments; measurement of credit losses; provisions for income taxes;
assumptions used to measure employee future benefits; provisions for contingencies; purchase price allocations; and carrying
value of regulatory assets and liabilities. Certain estimates are necessary for the regulatory environment in which AltaGas'
subsidiaries or affiliates operate, which often require amounts to be recorded at estimated values until these amounts are
finalized pursuant to regulatory decisions or other regulatory proceedings. By their nature, these estimates are subject to
measurement uncertainty and may impact the Consolidated Financial Statements of future periods.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 80
SIGNIFICANT ACCOUNTING POLICIES
Rate-Regulated Operations
SEMCO Gas, ENSTAR, Washington Gas, and Hampshire Gas (collectively the Utilities) engage in the delivery, sale, and
storage of natural gas. SEMCO Gas and ENSTAR are regulated by the Michigan Public Service Commission (MPSC) and
Regulatory Commission of Alaska (RCA), respectively. Washington Gas operates in the District of Columbia, Maryland, and
Virginia, and is regulated in those jurisdictions by the Public Service Commission of the District of Columbia (PSC of DC), the
Maryland Public Service Commission (PSC of MD), and the Commonwealth of Virginia State Corporation Commission (SCC of
VA), respectively. Hampshire is regulated under a cost-of-service tariff by the Federal Energy Regulatory Commission (FERC).
The MPSC, RCA, PSC of DC, PSC of MD, and SCC of VA exercise statutory authority over matters such as tariffs, rates,
construction, operations, financing, returns, accounting, and certain contracts with customers. In order to recognize the
economic effects of the actions and decisions of the MPSC, RCA, PSC of DC, PSC of MD, and SCC of VA, the timing of
recognition of certain assets, liabilities, revenues, and expenses as a result of regulation may differ from that otherwise
expected using U.S. GAAP for entities not subject to rate regulation.
Regulatory assets represent future revenues associated with certain costs incurred in the current period or in prior periods that
are expected to be recovered from customers in future periods through the rate setting process. Regulatory liabilities represent
future reductions or limitations of increases in revenue associated with amounts that are expected to be refunded to customers
through the rate setting process.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, balances with banks, and investments in money market instruments with
original maturities of less than three months.
Restricted Cash Holdings from Customers
Cash deposited, which is restricted and is not available for general use by AltaGas, is separately presented as restricted cash
holdings in the Consolidated Balance Sheets. Pursuant to the acquisition of WGL Holdings, Inc. (the WGL Acquisition), rabbi
trust funds were funded to satisfy certain Washington Gas executive and outside director retirement benefit plan obligations.
The rabbi trust funds are invested in money market funds which are considered cash equivalents. These balances are
included in "prepaid expenses and other current assets" and "long-term investments and other assets" in the Consolidated
Balance Sheets.
Accounts Receivable
Receivables are recorded net of the allowance for doubtful accounts in the Consolidated Balance Sheets. AltaGas regularly
analyzes and evaluates the collectability of the accounts receivable based on a combination of factors. If circumstances
related to the collectability change, the allowance for doubtful accounts is further adjusted. Accounts are written off when
collection efforts are complete and future recovery is unlikely.
Inventory
Inventory consists of materials, supplies, natural gas, natural gas liquids, crude oil and condensates, processed finished
products, renewable energy credits, and emission compliance instruments which are valued at the lower of cost or net
realizable value. Cost of inventory is assigned using a weighted average cost formula. In general, commodity costs and
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variable transportation costs are capitalized as gas in underground storage. Fixed costs, primarily pipeline demand charges
and storage charges, are expensed as incurred through the cost of gas.
Property, Plant, and Equipment (PP&E), Depreciation and Amortization
Property, plant, and equipment are carried at cost. The Corporation depreciates the cost of capital assets, net of salvage value,
on a straight-line basis over the estimated useful life of the assets, with the exception of rate-regulated utilities assets, for
which depreciation is calculated on a straight-line basis or over the contract term of a specific agreement at rates as approved
by the regulatory authorities.
The Utilities charge maintenance and repairs directly to operating expense and capitalize betterments and renewal costs. In
accordance with regulatory requirements, depreciation expense includes an amount allowed for regulatory purposes to be
collected in current rates for future removal and site restoration costs.
Interest costs are capitalized on major additions to property, plant, and equipment until the asset is ready for its intended use.
The interest rate used for calculating the interest costs to be capitalized is based on AltaGas' prior quarter actual borrowing
long-term interest rate.
The Utilities capitalize an imputed carrying cost on assets during construction as authorized by regulatory authorities and the
amount so capitalized is an allowance for funds used during construction (AFUDC). AFUDC is the amount that a rate-regulated
enterprise is allowed to recover for its cost of financing assets under construction. Capitalized overhead, administrative
expenses, and AFUDC are included in the cost of the related assets and are recovered in rates charged to customers through
depreciation expense, as allowed by the regulators.
The range of useful lives for AltaGas’ PP&E is as follows:
Utilities assets
Midstream assets
Corporate/Other assets
4 to 69 years
1 to 43 years
3 to 46 years
As required by the regulatory authority, net additions to SEMCO's utility assets are amortized for one half-year in the year in
which they are brought into active service. Net additions to WGL’s assets are amortized in the month after they are brought
into active service.
Generally, when a regulated asset is retired or disposed of, there is no gain or loss recorded in the Consolidated Statements of
Income. Any difference between the cost and accumulated depreciation of the asset, net of salvage proceeds, is charged to
accumulated depreciation or another regulatory asset or liability account. It is expected that any gain or loss that is charged to
accumulated depreciation or another regulatory account will be reflected in future depreciation expense when it is refunded or
collected in rates. When a non-regulated asset is retired or disposed of from PP&E, the original cost and related accumulated
depreciation and amortization are derecognized and any gain or loss is recorded in the Consolidated Statements of Income.
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Intangible Assets
Intangible assets are recorded at cost. Intangible assets which have a finite useful life are amortized on a straight-line basis
over their term or estimated useful life. The range of useful lives for intangible assets with a finite life is as follows:
Energy services relationships
Software
5 years
3 to 20 years
Extraction and Transmission (E&T) Contracts
25 years
Commodity contracts
1 to 7 years
Assets Held for Sale
The Corporation classifies assets as held for sale when the carrying amount will be principally recovered through a sale
transaction rather than through continuing use. This condition is met when Management approves and commits to a formal
plan to sell the assets, the assets are available for immediate sale in their present condition, and Management expects the
sale to close within the next 12 months. Upon classifying an asset as held for sale, an asset is recorded at the lower of its
carrying value or the estimated fair value less cost to sell. Assets held for sale are not depreciated or amortized.
Business Acquisitions
Business acquisitions are accounted for using the acquisition method. Under the acquisition method, assets and liabilities of
the acquired entity are recorded at fair value at the date of acquisition. Acquisition-related costs are expensed as incurred.
Goodwill represents the excess of purchase price over the fair value of the net assets acquired. Management applies its best
estimates and assumptions to determine the fair value of net assets acquired; however, the estimates are subject to further
refinement of assumptions over a measurement period, which may be up to one year from the acquisition date. During the
measurement period, adjustments to assets acquired and liabilities assumed may be recorded, with a corresponding impact to
goodwill.
Provisions on Assets
If facts and circumstances suggest that a long-lived asset or an intangible asset may be impaired, the carrying value is
reviewed. If this review indicates that the value of the asset is not recoverable, as determined by the projected undiscounted
cash flows related to the asset over its remaining life, then the carrying value of the asset is reduced to its estimated fair value
and an impairment loss is recognized.
Goodwill is not subject to amortization, but assessed at least annually for impairment, or more often when events or changes
in circumstances indicate that goodwill may be impaired. The annual assessment of goodwill is performed at the reporting unit
level, which is an operating segment or one level below. The Corporation has the option to first assess qualitative factors to
determine whether events or changes in circumstances indicate that the goodwill may be impaired. If a quantitative impairment
test is performed, the fair value of the reporting unit will be compared to its carrying value (including goodwill). If the carrying
value of the reporting unit exceeds the fair value, goodwill is reduced to its fair value and an impairment loss would be
recorded in the Consolidated Statements of Income.
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Investments Accounted for by the Equity Method
The equity method of accounting is used for investments in which AltaGas has the ability to exercise significant influence, but
does not have a controlling interest. Equity investments are initially measured at cost and are adjusted for the Corporation’s
proportionate share of earnings or losses. Equity investments are increased for contributions made and decreased for
distributions received. To the extent an investee undertakes activities necessary to commence its planned principal operations,
the Corporation will capitalize interest costs associated with its investment during such period.
The HLBV methodology is used to allocate earnings or losses for certain WGL equity method investments when WGL’s
ownership interest percentage is different than distribution percentages. When applying HLBV accounting, the Corporation
determines the amount that it would receive if an equity investment entity were to liquidate all of its assets at book value (as
valued in accordance with U.S. GAAP) and distribute that cash to the investors based on the contractually defined liquidation
priorities. The change in the Corporation’s claim on the equity investment entity's book value at the beginning and end of the
reporting period (adjusted for contributions and distributions) is the Corporation’s share of the earnings or losses from the
equity investment for the period.
An equity method investment is reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of the investment may not be recoverable. When such condition is deemed other than temporary, the carrying
value of the investment is written down to its fair value, and an impairment charge is recorded in the Consolidated Statements
of Income.
Financial Instruments
Non-Utility Operations
All financial instruments are initially recorded at fair value unless they qualify for, and are designated under, a normal purchase
and normal sale (NPNS) exemption. Subsequent measurement of the financial instruments is based on their classification. The
financial assets are classified as "held-for-trading", "held-to-maturity", or "loans and receivables". Financial liabilities are
classified as "held-for-trading" or other financial liabilities. Subsequent measurement is determined by classification.
A physical contract generally qualifies for the NPNS exemption if the transaction is reasonable in relation to AltaGas’ business
needs and AltaGas has the ability, and intent, to deliver or take delivery of the underlying item. AltaGas continually assesses
the contracts designated under the NPNS exemption and will discontinue the treatment of these contracts under this
exemption where the criteria are no longer met.
Held-for-trading instruments include non-derivative financial assets and financial assets and liabilities that may consist of
swaps, options, forwards, and equity securities. These financial instruments are initially recorded at their fair value, with
subsequent changes in fair value recorded in net income. Held-to-maturity, loans and receivables, and other financial liabilities
are recognized at amortized cost using the effective interest method unless they are held-for-sale and recognized at the lower
of cost or fair value less transaction fees.
Investments in equity instruments not accounted for under the equity method that do not have a quoted market price in an
active market are measured at cost. Income earned from these investments is included in the Consolidated Statements of
Income under "other income".
Derivatives embedded in other financial instruments or contracts (the host instrument) are recorded separately and are
measured at fair value if the economic characteristics of the embedded derivative are not closely related to the host
instrument, the terms of the embedded derivative are the same as those of a standalone derivative, and the entire contract is
not held-for-trading or accounted for at fair value. Changes in fair value are included in earnings.
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The fair values recorded on the Consolidated Balance Sheets reflect netting of the asset and liability positions where
counterparty master netting arrangements contain provisions for net settlement.
Transaction costs related to the acquisition of held-for-trading financial assets and liabilities are expensed as incurred.
Transaction costs for obtaining debt financing other than line-of-credit arrangements are recognized as a direct deduction from
the related debt liability on the Consolidated Balance Sheets. Transaction costs related to line-of-credit arrangements are
capitalized and included under "long-term investments and other assets" on the Consolidated Balance Sheets. Premiums and
discounts are netted against long-term debt on the Consolidated Balance Sheets. The deferred charges are amortized over
the life of the related debt on an effective interest basis and included in “interest expense” on the Consolidated Statements of
Income.
Regulated Utility Operations
All physical and financial derivative contracts are initially recorded at fair value. Changes in the fair value of derivative
instruments that are recoverable or refunded to customers when they settle are recorded as regulatory assets or liabilities.
Changes in the fair value of derivatives not affected by rate regulation are reflected in net income.
Transaction costs for obtaining debt financing and reacquired debt costs are recorded as regulatory assets or liabilities, or as a
reduction of the debt liability on the Consolidated Balance Sheets.
Weather-Related Instruments
WGL purchases certain weather-related instruments, such as heating degree day (HDD) derivatives and cooling degree day
(CDD) derivatives to manage weather and price risks related to its natural gas and electricity sales. These derivatives are
accounted for in accordance with ASC 815-45, Derivatives and Hedging – Weather Derivatives. For HDD derivatives, gains or
losses are recognized when the actual HDD’s falls above or below the contractual HDD’s for each instrument. For CDD
derivatives, gains or losses are recognized when the average temperature exceeds or is below a contractually stated level
during the contract period. Refer to Note 23 for further discussion on weather-related instruments.
Hedges
As part of its risk management strategy, AltaGas may use derivatives to reduce its exposure to commodity price, interest rate,
and foreign exchange risk. AltaGas may designate certain outstanding loans to hedge against the currency translation effect of
its foreign investments. No other derivatives have been designated as hedges under ASC Topic 815.
Non-Utility Operations
The change in fair value of cash flow hedges is recognized in OCI. Gains or losses from cash flow hedges are reclassified to
net income when the hedged transaction affects earnings, such as when the hedged forecasted transaction occurs.
Regulated Utility Operations
During planned issuances of debt securities, Washington Gas may utilize derivative instruments to manage the risk of interest-
rate volatility. Gains and losses associated with these types of derivatives are recorded as regulatory liabilities or assets, and
amortized in accordance with regulatory requirements, typically over the life of the related debt.
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Credit Losses
AltaGas regularly analyzes and evaluates the collectability of the accounts receivable based on a combination of factors. If
circumstances related to the collectability change, the allowance for credit losses is adjusted. Accounts are written off when
collection efforts are complete and future recovery is unlikely. See below for a description of how expected credit loss
estimates are developed.
Utilities Customer Receivables and Contract Assets
AltaGas is exposed to risk through the non-payment of utility bills by customers. To manage this customer credit risk, AltaGas'
regulated utilities customers are offered budget billing options or high risk customers may be required to provide a cash
deposit until the requirement for deposit refunds are met. AltaGas can recover a portion of non-payments from customers in
future periods through the rate-setting process. For accounts receivable generated by the Utilities business, an allowance for
credit losses is recorded against revenue and is recognized using a historical loss-rate based on historical payment and
collection experience. This rate may be adjusted based on Management’s expectations of unusual macroeconomic conditions
and other factors. AltaGas regularly evaluates the reasonableness of the allowance based on a combination of factors, such
as: the length of time receivables are past due, historical expected payment, collection experience, financial condition of
customers, and other circumstances that could impact customers' ability or desire to make payments. For retail energy
marketing customer receivables where AltaGas has enrolled in a regulatory utility purchase of receivable program, the
associated utility discount rate is used to determine credit losses.
Midstream Customer Receivables and Contract Assets
AltaGas operates under an existing credit policy that is designed to mitigate credit risk. Credit limits are established for each
counterparty and credit enhancements such as letters of credit, parent guarantees, and cash collateral may be required. The
creditworthiness of all counterparties is continuously monitored. A credit loss reserve is recorded for receivables with
customers and trading counterparties AltaGas considers to be below investment grade by applying an estimated loss rate. The
estimated loss rate is based on the historical default rates published by external rating agencies. For accounts receivable, a
one-year rate is used. For contract assets, historical loss rates associated with the estimated time frame that the contract asset
will be billed to the customer is used. In the event a customer or trading counterparty no longer exhibits similar risk
characteristics, the associated receivable is evaluated individually.
Other
For other long-term receivables, associated counterparties are evaluated and assigned internal credit ratings based on
AltaGas' credit policy. An allowance for credit losses is recorded based on historical default rates published by external credit
rating agencies and a rate commensurate with the period in which the receivables are expected to be collected.
Debt
AltaGas uses short-term debt in the form of commercial paper and advances under its syndicated bank credit facilities to fund
seasonal cash requirements. Short-term obligations are excluded from current liabilities if AltaGas has the ability and the intent
to refinance these obligations on a long-term basis. The ability to refinance is primarily demonstrated through the availability of
long-term revolving committed credit facilities in an amount equal to or greater than the expected maximum short-term
obligation.
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Asset Retirement Obligations
AltaGas recognizes asset retirement obligations in the period in which the legal obligation is incurred and a reasonable
estimate of fair value can be determined. The associated asset retirement costs are capitalized as part of the carrying amount
of the asset and are depreciated over the estimated useful life of the asset. The liability is increased due to the passage of time
over the estimated period until the settlement of the obligation, with a corresponding charge to accretion expense for asset
retirement obligations.
There are timing differences between accretion and depreciation amounts being recorded pursuant to GAAP and the
recognition of depreciation expense for legal asset removal costs that are recovered in rates, as allowed by the regulators.
These timing differences are recorded as a reduction to “regulatory liabilities” in accordance with ASC 980.
Certain midstream and utility assets will have future legal obligations on retirement, but an asset retirement obligation has not
been recorded due to its indeterminate life and corresponding indeterminable timing and scope of these asset retirement
obligations. The Utilities recognize asset retirement obligations for some interim retirements, as expected by their regulators.
Revenue Recognition
AltaGas has revenue from various sources, including rate-regulated revenue, commodity sales, midstream service contracts,
gas sales and transportation services, and storage services. For a detailed description of the Corporation’s revenue
recognition policy by major source of revenue, please refer to Note 24.
Foreign Currency Translation
Monetary assets and liabilities denominated in a foreign currency are converted to the functional currency using the exchange
rate in effect at the balance sheet date. Adjustments resulting from the conversion are recorded in the Consolidated
Statements of Income. Non-monetary assets and liabilities are converted at the historical exchange rate in effect at the
transaction date. Revenues and expenses are converted at the exchange rate applicable at the transaction date.
For foreign entities with a functional currency other than Canadian dollars, AltaGas’ reporting currency, assets and liabilities
are translated into Canadian dollars at the rate in effect at the reporting date. Revenues and expenses are translated at
average exchange rates during the reporting period. All adjustments resulting from the translation of the foreign operations are
recorded in OCI.
AltaGas may designate certain outstanding loans to hedge against the currency translation effect of its foreign investments.
Accordingly, foreign exchange gains and losses, from the dates of designation, on the translation of these loans are included in
OCI.
Share Options and Other Compensation Plans
Share options granted are recorded using fair value. Compensation expense is measured at the date of the grant using the
Black-Scholes-Merton model and is recognized over the vesting period of the options. Consideration received by AltaGas on
exercise of the share options is credited to shareholders’ equity.
AltaGas has a phantom unit plan (Phantom Plan, formerly the medium-term incentive plan) for employees, executive officers,
and directors, which includes two types of awards: restricted units (RUs) and performance units (PUs). A portion of AltaGas’
RUs and PUs are valued based on the dividends declared during the vesting period and the weighted average share price of
AltaGas' common shares multiplied by the units outstanding at the end of the vesting period. Upon vesting, the RUs and PUs
are paid in cash. The other portion of RUs and PUs are valued at US$1 per unit. Upon vesting, the RUs and PUs are paid in
AltaGas Ltd. – 2021 MD&A and Financial Statements - 87
cash. All PUs are also subject to a performance multiplier ranging from 0 to 2 dependent on the Corporation's performance
relative to performance targets as approved by the Board of Directors. Compensation expense is recognized using the liability
method and is recorded as operating and administrative expense over the vesting period. A change in value of the RUs or PUs
is recognized in the period the change occurs. Forfeitures are recognized when they occur instead of estimating the number of
awards that are expected to vest.
In addition, AltaGas has a deferred share unit plan (DSUP) for directors, officers, and employees as an additional form of long-
term variable compensation incentive. Although the DSUP is available to directors, officers, and employees, AltaGas currently
only grants deferred share units (DSUs) under the DSUP as a form of director compensation. The DSUs granted are fully
vested upon being credited to a participant’s account, the participant is entitled to payment upon retirement, and payment is
not subject to satisfaction of any requirements as to any minimum period of membership or employment or other conditions.
DSUs are accounted for at fair value. Compensation expense is determined based on the fair value of the DSUs on the date of
the grant and fluctuations in fair value are recognized in the period the change occurs. Forfeitures are recognized when they
occur instead of estimating the number of awards that are expected to vest.
Pension Plans and Post-Retirement Benefits
AltaGas maintains defined benefit pension plans, defined contribution plans, and other post-retirement benefit plans for eligible
employees. Contributions made by the Corporation to the defined contribution plans are expensed in the period in which the
contribution occurs.
The cost of defined benefit pension plans and post-retirement benefits is actuarially determined using the projected benefit
method prorated based on service and Management’s best estimate of expected plan investment performance, salary
escalation, retirement ages of employees, expected health care costs, and other actuarial factors including discount rates and
mortality. Pension plan assets are measured at fair value. The expected return on plan assets is based on historical and
projected rates of return for each asset class in the plan portfolio. The projected benefit obligation is discounted using the
market interest rate on high-quality debt instruments with cash flows matching the timing and amount of benefit payments.
Unrecognized actuarial gains and losses in excess of 10 percent of the greater of the benefit obligation and the fair value of
plan assets or the market-related value of assets along with any unamortized past service costs and credits are amortized on a
straight-line basis over the expected average remaining service life of active employees.
AltaGas recognizes the overfunded or underfunded status of its pension and post-retirement benefit plans as either assets or
liabilities in the Consolidated Balance Sheets. Unrecognized actuarial gains and losses and past service costs and credits that
arise during the period are recognized in OCI or a regulatory asset or liability.
For certain regulated utilities, the Corporation expects to recover pension expense in future rates and therefore records
unrecognized balances as either regulatory assets or liabilities. The regulatory assets or liabilities are amortized on a straight-
line basis over the expected average remaining service life of active employees.
In 2020, AltaGas made a voluntary change in accounting principle for calculating the market-related value of assets (MRVA)
used in the determination of Washington Gas' net periodic pension and other post-retirement benefit plan costs. The change
uses the fair value approach for the fixed income investment asset class of the plan assets, compared to the prior method that
utilized a calculated value where gains and losses arising from changes in fair value were deferred and amortized into the
calculation of the MRVA over a period of five years. The MRVA is used in the calculation of the expected return on assets and
the recognized actuarial gain or loss components of net periodic benefit cost. The approach applied for all other classes of
assets remains unchanged. Management believes that using the fair value approach for the fixed income investments in plan
assets is preferable as it more closely aligns the recognition of related components within the net periodic benefit cost.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 88
Income Taxes
Income taxes for the Corporation and its subsidiaries are calculated using the liability method of accounting for income taxes.
Under this method, deferred income tax assets and liabilities are determined based on differences between the carrying value
and the tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are in effect in the
periods in which the differences are expected to be settled or realized. Deferred income tax assets are routinely reviewed, and
a valuation allowance is recorded to reduce the deferred tax assets if it is more likely than not that deferred tax assets will not
be realized.
The financial statement effects of an uncertain tax position are recognized when it is more likely than not, based on technical
merits, that the position will be sustained upon examination by a taxing authority. The current and deferred tax impact is equal
to the largest amount, considering possible settlement outcomes, that is greater than 50 percent likely of being realized upon
settlement with the taxing authorities.
Investment tax credits are recognized as reductions to income tax expense over the estimated service lives of the related
properties.
The rate-regulated natural gas distribution subsidiaries recognize a separate regulatory asset or liability for the amount of
deferred income taxes expected to be recovered from, or paid to, customers in the future. Any tax related interest and/or
penalty incurred is included in interest expense.
Net Income per Share
Basic net income per common share is computed using the weighted average number of common shares outstanding during
the period. Dilutive net income per common share is calculated using the weighted average number of common shares
outstanding adjusted for dilutive common shares related to the Corporation’s share-based compensation awards.
The potentially dilutive impact of the share-based compensation awards is determined using the treasury stock method. Under
the treasury stock method, awards are treated as if they had been exercised with any proceeds used to repurchase common
stock at the average market price during the period. Any incremental difference between the assumed number of shares
issued and purchased is included in the diluted share computation.
Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation and other sources are recorded when it is
probable that a liability has been incurred and the amount can be reasonably estimated. Any such accruals are adjusted
thereafter as additional information becomes available or circumstances change.
Leases
The following are the Corporation’s significant accounting policies:
Leases – Lessee
AltaGas determines if an arrangement is a lease at inception. Operating leases are included in right-of-use (ROU) assets,
current operating lease liabilities, and long-term operating lease liabilities in the Consolidated Balance Sheets. Finance leases
are included in property, plant and equipment and current and long-term debt in the Consolidated Balance Sheets.
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ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to
make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement
date based on the present value of lease payments over the lease term. AltaGas uses the rate implicit in the lease when
readily determinable. When the implicit lease rate is not readily determinable, AltaGas uses its incremental borrowing rate to
determine the present value of lease payments. AltaGas includes lessee options to renew or terminate the lease term in the
determination of the ROU asset and lease liability when exercise is reasonably certain. The operating lease ROU asset is
adjusted for lease payments made in advance of the commencement date, initial direct costs, and any lease incentives.
Operating lease expense is recognized on a straight-line basis over the lease term in "operating and administrative expense".
Depreciation and interest expense are recorded on finance leases.
Leases – Lessor
AltaGas determines if an arrangement is a lease at inception. Lease payments under an operating lease are recognized on a
straight-line basis over the term of the lease. Variable lease payments are recognized as revenue as the facts and
circumstances on which the variable lease payment is based occur.
AltaGas does not include taxes assessed by governmental authorities, such as sales and related taxes, in the lease payments
or variable lease payments.
ADOPTION OF NEW ACCOUNTING STANDARDS
Effective January 1, 2021, AltaGas adopted the following Financial Accounting Standards Board (FASB) issued Accounting
Standards Updates (ASU):
§
In December 2019, FASB issued ASU No. 2019-12 “Income Taxes: Simplifying the Accounting for Income Taxes". The
amendments in this ASU simplify the accounting for income taxes by clarifying certain aspects of current guidance and
removing some exceptions to the general principles in ASC 740. The adoption of this ASU did not have a material impact
on AltaGas’ consolidated financial statements;
§
In January 2020, FASB issued ASU No. 2020-01 “Derivatives and Hedging: Clarifying the Interactions between Topic 321,
Topic 323, and Topic 815". The amendments in this ASU clarify the application of the measurement alternative for equity
instruments and the measurement of non-derivative forward contracts or purchased call options used to acquire equity
securities. The adoption of this ASU did not have a material impact on AltaGas’ consolidated financial statements; and
§
In March 2020, FASB issued ASU No. 2020-04 "Reference Rate Reform: Facilitation of the Effects of Reference Rate
Reform on Financial Reporting". The amendments in this ASU provide optional expedients and exceptions for applying
GAAP to contract modifications and hedging relationships affected by reference rate reform if certain criteria are met.
These apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered
Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. Certain of AltaGas'
credit facilities, lessee vehicle finance leases, and carrying charges in certain derivative commodity sale arrangements
reference LIBOR. The discontinuation of LIBOR will require these arrangements to be modified to replace LIBOR with an
alternative interest rate. As such, AltaGas has made a policy election to adopt the contract modification optional
expedients related to these arrangements on January 1, 2021 on a prospective basis. As a result of electing these
optional expedients, contract modifications due to LIBOR are not expected to have a material effect on AltaGas'
consolidated financial statements. AltaGas will continue to monitor the activities of regulators and financial institutions to
transition to an alternative reference rate and continue to review additional arrangements for references to LIBOR.
Accordingly, AltaGas may make additional optional elections in the future.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 90
FUTURE CHANGES IN ACCOUNTING PRINCIPLES
In August 2020, FASB issued ASU No. 2020-06 "Debt with Conversion and Other Options and Topic 815-40 - Derivatives and
Hedging - Contracts in Entity's Own Equity: Accounting for Convertible Instruments and Contract in an Entity's Own Equity".
The amendments in this ASU simplify the accounting for certain financial instruments with characteristics of liabilities and
equity, including convertible instruments and contracts in an entity's own equity. The amendments in this ASU are effective for
public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities
eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021,
including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning
after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The adoption of this
ASU is not expected to have a material impact on AltaGas’ consolidated financial statements.
In July 2021, FASB issued ASU No. 2021-05 "Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments."
The amendments in this ASU affect lessors with lease contracts that have variable lease payments that do not depend on a
reference index or a rate and would have resulted in the recognition of a selling loss at lease commencement if classified as
sales-type or direct financing. The amendments are effective for fiscal years beginning after December 15, 2021, including
interim periods within those fiscal years and could either be applied retrospectively to leases that commenced or were modified
upon the adoption of ASC 842 or prospectively to new or modified leases. The adoption of this ASU is not expected to have a
material impact on AltaGas' consolidated financial statements.
In October 2021, FASB issued ASU 2021-08 "Business Combinations (Topic 805): Accounting for Contract Assets and
Contract Liabilities from Contracts with Customers". The amendments in this ASU require an entity to recognize and measure
contract assets and liabilities acquired in a business combination in accordance with Topic 606. The amendments in this ASU
are effective for fiscal years beginning after December 15, 2022 and should be applied prospectively to business combinations
occurring on or after the effective date of the amendment. The adoption of this ASU is not expected to have a material impact
on AltaGas' consolidated financial statements.
In November 2021, FASB issued ASU No. 2021-10 "Government Assistance (Topic 832): Disclosures by Business Entities
about Government Assistance". The amendments in this ASU require annual disclosure about transactions with a government
entity, including the nature of the transactions, the method applied to account for the government assistance, impacted line
items on the financial statements, and significant terms and conditions of the agreement. The amendments in this ASU are
effective for fiscal years beginning after December 15, 2021 and could either be applied prospectively to all new transactions
with a government that are entered into after the date of initial application or retrospectively to those transactions. The
adoption of this ASU is not expected to have a material impact on AltaGas' consolidated financial statements.
3. Acquisition of Petrogas Energy Corporation
On December 15, 2020, following the receipt of all required approvals, AltaGas acquired an additional 37 percent of Petrogas
Energy Corp. for total cash consideration upon close of approximately $715 million. Additional post-acquisition contingent
payments of up to $16 million may be paid no later than 2022 based on certain criteria, including earnings targets being met
(Note 29). AltaGas funded the transaction through draws on its existing credit facilities. As a result of the transaction, AltaGas'
ownership in Petrogas has increased to approximately 74 percent with Idemitsu Kosan Co., Ltd. (Idemitsu) owning the
remaining approximately 26 percent. Subsequent to the transaction, AltaGas controls Petrogas and as such, Petrogas results
have been consolidated for the period subsequent to close.
This acquisition is consistent with AltaGas' global export strategy, growing Midstream operations, and corporate focus on
building a diversified, low-risk, high-growth Utilities and Midstream business. The transaction provides AltaGas with operational
AltaGas Ltd. – 2021 MD&A and Financial Statements - 91
responsibility of strategic assets that, along with the Ridley Island Propane Export Terminal and existing Midstream assets,
position the Company to capture efficiencies that are expected to accrue to shareholders and customers.
AltaGas accounted for the acquisition as a business combination achieved in stages and re-measured its previously held 37
percent equity investment in Petrogas at an acquisition date fair value of $631 million. The fair value of assets and liabilities
acquired were determined using a combination of income and cost approach. The fair value of the previously held interest and
non-controlling interests were derived from the valuation of the assets and liabilities including considerations for expected
synergies. Prior to the acquisition, AltaGas' indirect non-controlling interest in Petrogas was accounted for as an investment
accounted for by the equity method (Note 14).
The following table summarizes the purchase price allocation representing the consideration paid and the estimated fair value
of the net assets acquired as at December 15, 2020. The purchase price allocation was completed prior to the end of the
measurement period and reflects Management's best estimate of the fair value of Petrogas' assets and liabilities. In 2021,
goodwill was increased by approximately $147 million (Note 11) based on new information obtained during the measurement
period.
Fair value of previously held interest in AltaGas Idemitsu Joint Venture LP (AIJVLP) on the
acquisition date
Less: Carrying value of previously held interest in AIJVLP
Gain on re-measurement of previously held interest
Purchase consideration for an additional 37 percent of Petrogas
Deemed settlement of intercompany debt
Fair value of previously held interest on the acquisition date
Less: Fair value assigned to net assets
Current assets
Property, plant and equipment
Intangible assets
Operating right-of-use assets
Investments accounted for by the equity method
Current liabilities
Long-term debt
Asset retirement obligations
Deferred income taxes
Operating lease liabilities
Other long-term liabilities
Fair value of net assets acquired
Fair value of AIJVLP's non-controlling interest in Petrogas on the acquisition date
Goodwill
$
$
$
$
$
631
(609)
22
715
120
631
542
499
8
196
125
(521)
(48)
(18)
7
(155)
(20)
615
467
1,318
AltaGas Ltd. – 2021 MD&A and Financial Statements - 92
4. Dispositions
WGL Midstream Assets
On April 23, 2021, AltaGas completed the sale of the majority of WGL Midstream's commodity business for cash proceeds of
approximately $341 million (US$275 million). The disposition included goodwill of $13 million (Note 11). For the year ended
December 31, 2021, AltaGas recognized a pre-tax gain on disposition of approximately $3 million in the Consolidated
Statements of Income under the line item "other income".
Distributed Generation Assets
In the second quarter of 2021, all consents and approvals were obtained and AltaGas transferred ownership of the last
remaining distributed generation project that was previously classified as held for sale. For the year ended December 31,
2021, AltaGas recognized a pre-tax loss on disposition of approximately $1 million in the Consolidated Statements of Income
under the line item "other income" related to projects transferred in 2021.
Other Midstream Asset Sales
In 2021, additional minor asset sales within the Midstream segment were completed for cash proceeds of approximately $5
million. As a result, AltaGas recognized a pre-tax gain on disposition of approximately $1 million in the Consolidated
Statements of Income under the line item "other income" for the year ended December 31, 2021.
Petrogas Propane Distribution Assets
In the third quarter of 2021, AltaGas completed the sale of certain Petrogas propane distribution assets for cash proceeds of
less than $1 million. As a result, AltaGas recognized a pre-tax loss on disposition of less than $1 million in the Consolidated
Statements of Income under the line item "other income" for the year ended December 31, 2021.
Meade Escrow Proceeds
In 2019, AltaGas completed the disposition of its investment in Meade Pipeline Co. LLC (Meade), which held WGL
Midstream's indirect, non-operating interest in the Central Penn pipeline. Upon close of the sale, various escrow accounts
were established to provide the purchaser a form of recourse for the settlement of indemnification obligations. In 2021, AltaGas
received approximately $3 million (US$2 million) cash proceeds from the indemnity escrow account. As a result, AltaGas
recognized a pre-tax gain on disposition of approximately $3 million in the Consolidated Statements of Income under the line
item "other income" for the year ended December 31, 2021.
5. Assets Held For Sale
As at
Assets held for sale
Property, plant and equipment
Liabilities associated with assets held for sale
Unamortized investment tax credits
December 31,
2021
December 31,
2020
$
$
$
$
— $
— $
— $
— $
4
4
1
1
AltaGas Ltd. – 2021 MD&A and Financial Statements - 93
Distributed Generation Assets
Assets held for sale and liabilities associated with assets held for sale at December 31, 2020 related to the last remaining
distributed generation project which had not yet transferred to the purchaser. This project transferred to the purchaser in the
second quarter of 2021 (Note 4) and as such, there are no longer any distributed generation assets held for sale at
December 31, 2021.
6. Provisions on Assets
Year Ended December 31
Midstream
Corporate/Other
Midstream
$
$
2021
59 $
5
64 $
2020
106
3
109
In 2021, AltaGas recorded pre-tax provisions of $59 million primarily related to the sale of the majority of WGL Midstream's
commodity business as well as certain non-core development stage Midstream projects that are no longer being developed.
The pre-tax provisions were primarily recorded against intangible assets. In 2020, AltaGas recorded pre-tax provisions of $106
million of which $104 million related to the Alton Natural Gas Storage Project and the remaining $2 million related to land
parcels located near the Harmattan gas processing plant which were sold in the second quarter of 2020.
Corporate/Other
In 2021, AltaGas recorded a pre-tax provision of $5 million related to the Parks at Walter Reed thermal plant in Washington,
D.C. which was impaired as the carrying value exceeded future expected cash flows from the asset. In 2020, AltaGas recorded
pre-tax provisions of $3 million related to the remaining U.S. distributed generation project which had not yet transferred to the
purchaser and was classified as held for sale as at December 31, 2020. The pre-tax provisions were recorded against
property, plant and equipment.
7. Inventory
As at December 31
Natural gas held in storage (a)
Natural gas liquids
Materials and supplies
Renewable energy credits and emission compliance instruments
Crude oil and condensate
Processed finished products
$
$
2021
341 $
175
70
82
109
5
782 $
2020
309
116
61
80
66
4
636
(a)
As at December 31, 2021, $304 million of the natural gas held in storage was held by rate-regulated utilities (2020 - $193 million).
AltaGas Ltd. – 2021 MD&A and Financial Statements - 94
8. Property, Plant and Equipment
As at
December 31, 2021
December 31, 2020
Utilities
Midstream
Corporate/Other
Reclassified to assets held for sale
Cost
Accumulated
amortization
Net book
value
Cost
Accumulated
amortization
Net book
value
$
8,432 $
(437) $
7,995 $
7,791 $
(286) $
3,898
840
—
(793)
(617)
—
3,105
3,832
223
—
842
(4)
(689)
(598)
—
7,505
3,143
244
(4)
$
13,170 $
(1,847) $
11,323 $
12,461 $
(1,573) $
10,888
Interest capitalized on long-term capital construction projects for the year ended December 31, 2021 was $1 million (2020 -
$6 million).
As at December 31, 2021, the Corporation had approximately $570 million (December 31, 2020 - $457 million) of capital
projects under construction that were not yet subject to amortization.
Depreciation expense related to property, plant and equipment (including assets under capital leases) for the year ended
December 31, 2021 was $365 million (2020 - $346 million).
9. Intangible Assets
As at
December 31, 2021
December 31, 2020
Cost
Accumulated
amortization
Net book
value
Accumulated
amortization
Cost
Net book
value
E&T contracts
$
26 $
(17) $
9 $
26 $
Energy services relationships
Software
Land rights
Commodity contracts (a)
90
331
1
7
(63)
(203)
—
(1)
27
128
1
6
90
304
1
332
(16) $
(45)
(133)
—
(20)
$
455 $
(284) $
171 $
753 $
(214) $
10
45
171
1
312
539
(a)
The majority of commodity contracts were disposed of in April 2021 through the disposition of the majority of WGL Midstream's commodity business (Note 4).
Amortization expense related to intangible assets for the year ended December 31, 2021 was $57 million (2020 - $68 million).
As at December 31, 2021, the Corporation excluded $7 million (December 31, 2020 - $176 million) from the asset base subject
to amortization. Items excluded relate to software assets under development and assets with an indefinite life.
The following table sets forth the estimated amortization expense of intangible assets, excluding any amortization of assets not
yet subject to amortization as well as assets with an indefinite life, for the years ended December 31:
2022
2023
2024
2025
2026
Thereafter
$
$
$
$
$
$
60
44
30
24
1
5
AltaGas Ltd. – 2021 MD&A and Financial Statements - 95
10. Leases
Lessee
AltaGas has operating and finance leases for office space, office equipment, field equipment, rail cars, aquatic use, vehicles,
power and gas facilities, transmission and distribution assets, and land.
The components of lease expense were as follows:
Operating lease cost (includes variable lease payments)
Finance lease cost
Amortization of right-of-use assets
Total finance lease cost
Total lease cost
Supplemental cash flow information related to leases was as follows:
Year Ended December 31
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used by operating leases
Financing cash flows used by finance leases (a)
Right-of-use assets obtained in exchange for new lease liabilities
Operating leases
Finance leases
(a)
Included within repayment of long-term debt on the Consolidated Statements of Cash Flows.
Supplemental balance sheet information related to leases was as follows:
As at December 31
Operating Leases
Operating lease right-of-use assets
Long-term
Total operating lease right-of-use assets
Operating lease liabilities
Current
Long-term
Total operating lease liabilities
Finance Leases
Property and equipment, gross
Accumulated depreciation
Property and equipment, net
Current portion of long-term debt
Long-term debt
Total finance lease liabilities
Year Ended
December 31, 2021
96 $
6
6 $
102 $
Year Ended
December 31, 2020
43
4
4
47
2021
2020
(96) $
(6) $
38 $
10 $
(36)
(4)
227
6
$
$
$
$
2021
2020
311 $
311 $
(91) $
(253)
(344) $
29 $
(12)
17 $
(6) $
(11)
(17) $
372
372
(95)
(304)
(399)
19
(7)
12
(4)
(8)
(12)
$
$
$
$
$
$
$
$
$
$
$
AltaGas Ltd. – 2021 MD&A and Financial Statements - 96
As at
Weighted average remaining lease term (years)
Operating leases
Finance leases
Weighted average discount rate (%)
Operating leases
Finance leases
Maturity analysis of lease liabilities was as follows:
2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less: imputed interest
Total
Lessor
December 31,
2021
December 31,
2020
6.9
4.3
2.45
2.23
Operating
Leases
92 $
70
56
42
35
90
385 $
(41)
344 $
$
$
$
7.4
4.8
2.42
2.89
Finance
Leases
6
5
4
2
—
2
19
(2)
17
Certain of AltaGas’ revenues are obtained through power purchase agreements or take-or-pay contracts whereby AltaGas is
the lessor in these operating lease arrangements. Minimum lease payments received are amortized over the term of the lease.
Contingent rentals are recorded when the condition that created the present obligation to make such payments occurs such as
when actual electricity is generated and delivered.
Maturity analysis of lease receivables was as follows:
2022
2023
2024
2025
2026
Thereafter
Total
Operating
Leases
70
68
2
2
2
72
216
$
$
The carrying value of property, plant, and equipment associated with these leases was approximately $202 million as at
December 31, 2021.
AltaGas manages its risk associated with the residual value of its leased assets through strategically constructing leased
facilities in key commercial regions and retaining the ability to sell commodities and ancillary services via the merchant market
or through commodity sales agreements.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 97
11. Goodwill
As at
Balance, beginning of year
Business acquisition (note 3)
Adjustment to goodwill on business acquisition (note 3)
Goodwill included in dispositions (note 4)
Foreign exchange translation
Balance, end of year
12. Long-Term Investments and Other Assets
As at
Deferred lease receivable
Debt issuance costs associated with credit facilities
Refundable deposits
Prepayment on long-term service agreements
Deferred information technology costs
Cash calls from joint venture partners (a)
Contract asset (net of credit losses of $1 million) (notes 23 and 24)
Rabbi trust (notes 28 and 31)
Other long-term receivables
Capitalized contract costs
Financial transmission rights
Other
$
December 31,
2021
5,039 $
—
147
(13)
(20)
5,153 $
December 31,
2020
3,942
1,171
—
—
(74)
5,039
$
December 31,
2021
December 31,
2020
12
3
9
70
4
26
50
19
18
5
12
17
245
15 $
8
9
72
6
23
41
10
—
5
17
21
227 $
$
$
(a) Represents a cash advance to a joint venture partner as part of a construction, ownership and operation (CO&O) agreement.
13. Variable Interest Entities
Consolidated VIEs
AltaGas consolidates a variable interest entity (VIE) where the Corporation is deemed the primary beneficiary. The primary
beneficiary of a VIE has the power to direct the activities of the entity that most significantly impact its economic performance
such as being the provider of construction, operating and marketing services to the entity. In addition, the primary beneficiary
of a VIE also has the obligation to absorb losses of the entity or the right to receive benefits that could potentially be significant
to the VIE. AltaGas determined that it is the primary beneficiary of the following VIEs:
Ridley Island LPG Export Limited Partnership
On May 5, 2017, AltaGas LPG Limited Partnership (AltaGas LPG), a wholly-owned subsidiary of AltaGas, and Vopak
Development Canada Inc. (Vopak), a wholly-owned subsidiary of Koninklijke Vopak N.V. (Royal Vopak), a public company
incorporated under the laws of the Netherlands, formed the Ridley Island LPG Export Limited Partnership (RILE LP) to
develop, own and operate the Ridley Island Propane Export Terminal (RIPET). AltaGas’ subsidiaries hold a 70 percent interest
while Vopak holds a 30 percent interest in RILE LP. The construction cost of RIPET was funded by AltaGas LPG and Vopak in
proportion to their respective interests in RILE LP. As part of the arrangements, AltaGas entered into a long-term agreement for
the capacity of RIPET with RILE LP, and AltaGas and certain of its subsidiaries provide operating services to RILE LP.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 98
AltaGas has determined that RILE LP is a VIE in which it holds variable interests and is the primary beneficiary. In the
determination that AltaGas is the primary beneficiary of the VIE, AltaGas noted that it has the power to direct the activities that
most significantly impact the VIE’s economic performance through the operating and marketing services provided to RILE LP.
In addition, AltaGas has the obligation to absorb the losses and the right to receive the benefits that could potentially be
significant to RILE LP through the long-term agreement for the capacity of RIPET. As such, AltaGas has consolidated RILE LP.
The assets of RILE LP are the property of RILE LP and are not available to AltaGas for any other purpose. RILE LP’s asset
balances can only be used to settle its own obligations. The liabilities of RILE LP do not represent additional claims against
AltaGas’ general assets. AltaGas’ exposure to loss as a result of its interest as a limited partner is its net investment. AltaGas
and Royal Vopak have provided limited guarantees for the obligations of their respective subsidiaries for the construction cost
of RIPET. With the commencement of commercial operations at RIPET, the terms of the long-term capacity agreement
between AltaGas LPG and RILE LP provide for a return on and of capital and reimbursement of RIPET's operating costs by
AltaGas LPG in accordance with the terms set out in the agreement.
The following table represents amounts included in the Consolidated Balance Sheets attributable to AltaGas’ consolidated VIE:
As at
Current assets
Property, plant and equipment
Long-term investments and other assets
Current liabilities
Asset retirement obligations
Net assets
Unconsolidated VIE
Strathcona Storage Limited Partnership (SSLP)
December 31,
2021
December 31,
2020
7
358
50
(2)
(2)
411
6 $
357
47
(8)
(3)
399 $
$
$
Upon the acquisition of Petrogas on December 15, 2020, AltaGas acquired an indirect interest in SSLP, a partnership formed
with ATCO Energy Solutions Ltd. to construct, operate, and maintain underground NGL storage caverns at Fort Saskatchewan,
Alberta. The facility currently has four underground NGL storage salt caverns in service, with a fifth cavern under development.
As at December 31, 2021, AltaGas held an indirect 30 percent equity investment in SSLP with a carrying value of $131 million
(2020 - $124 million), inclusive of fair value adjustments on acquisition date (Note 3). SSLP is not consolidated by Petrogas
and instead is accounted for by the equity method of accounting. Petrogas is not the primary beneficiary of SSLP and it does
not have the power to direct the activities most significant to the economic performance of SSLP. The maximum financial
exposure to loss as a result of the involvement with this VIE is equal to AltaGas' net investment in SSLP.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 99
14. Investments Accounted for by the Equity Method
Description
AltaGas Canada Inc. (ACI) (a)
AltaGas Idemitsu Joint Venture LP (AIJVLP) (b)
Constitution Pipeline, LLC (Constitution) (c)
Eaton Rapids Gas Storage System
Mountain Valley Pipeline, LLC (MVP) (d)
Sarnia Airport Storage Pool LP
Petrogas Preferred Shares (e)
Petrogas Terminals Penn LLC (f)
Strathcona Storage LP (f)
Location
Canada
Canada
United States
United States
United States
Canada
Canada
United States
Canada
Carrying value as
at December 31
Equity income (loss)
for the year ended
December 31
Ownership
Percentage
2021
2020
2021
2020
— $
— $
— $
— $
—
—
50
10
50
n/a
37
30
—
—
27
—
—
26
—
—
2
447
718
(271)
17
—
1
18
—
1
131
124
1
—
—
7
$
623 $
887 $
(261) $
3
(25)
(7)
2
62
1
13
—
—
49
(a) ACI was acquired by the Public Sector Pension Investment Board and the Alberta Teachers' Retirement Fund Board on March 31, 2020.
(b) Upon acquisition of Petrogas on December 15, 2020 (Note 3), AltaGas no longer has an equity investment in AIJVLP.
(c)
In February 2020, the partners of Constitution elected not to proceed with the pipeline project and Constitution was dissolved. The loss recorded in 2020
relates to a provision recorded against the equity investment.
(d) The equity method is considered appropriate because MVP is an LLC with specific ownership accounts and ownership between five and fifty percent,
resulting in WGL Midstream exercising a more than minor influence over the investee's operating and financing policies. In 2021, a provision was recorded
against the equity investment in MVP due to ongoing legal and regulatory issues.
(e) Petrogas' preferred shares ceased to be an investment accounted for by the equity method after AltaGas acquired a controlling interest in Petrogas on
December 15, 2020 (Note 3).
(f)
Acquired on December 15, 2020 as part of the Petrogas Acquisition (Note 3).
The carrying amount of certain equity investments differs from the amount of the underlying equity in net assets. These basis
differences include amounts related to purchase accounting adjustments, capitalized interest, and a contractual cap on
contributions to MVP.
Summarized combined financial information, assuming a 100 percent ownership interest in AltaGas’ equity investments listed
above, is as follows:
Year Ended December 31 (a)
Revenues
Expenses
As at December 31 (a)
Current assets
Property, plant and equipment
Long-term investments and other assets
Current liabilities
Other long-term liabilities
2021
97 $
(23)
74 $
2021
206 $
8,571 $
3 $
(214) $
(12) $
2020
828
(181)
647
2020
351
7,598
5
(281)
(2)
$
$
$
$
$
$
$
(a) For equity investments that were disposed of in the periods presented, revenues and expenses reflect the period prior to disposition and balance sheet
amounts are $nil. For equity investments that were acquired in the periods presented (Note 3), revenues and expenses reflect the period subsequent to
acquisition and balance sheet amounts are included as at December 31, 2020 and December 31, 2021.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 100
Provisions on investments accounted for by the equity method
In 2021, AltaGas recorded a pre-tax provision on equity investments of approximately $271 million in the Consolidated
Statements of Income under the line item "income (loss) from equity investments" related to its investment in MVP. The
provision is a result of continued legal and regulatory challenges associated with the Mountain Valley Pipeline and MVP
Southgate projects. The fair value of AltaGas' investment in MVP was calculated using a discounted cash flow model, taking
into account the cap on the Company's contractual capital contributions, cost of capital, an assessment of the probability that
MVP will overcome legal and regulatory challenges, and the potential removal costs should the project not move forward.
Significant assumptions included an after-tax discount rate of approximately 5 percent. The valuation is considered a Level 3
fair value estimate. In 2020, AltaGas recorded a pre-tax provision on equity investments of approximately $7 million in the
Consolidated Statements of Income under the line item "income (loss) from equity investments" for costs associated with
AltaGas' equity investment in the Constitution pipeline project which was canceled in February 2020.
15. Short-term Debt
As at
Commercial paper (a)
Project financing
December 31,
2021
December 31,
2020
$
$
161 $
8
169 $
236
20
256
(a) Washington Gas use short-term debt in the form of commercial paper or unsecured short-term bank loans to fund seasonal cash requirements. Revolving
committed credit facilities are maintained in an amount equal to or greater than the expected maximum commercial paper position.
Project Financing
WGL and certain of its subsidiaries previously obtained third-party project financing on behalf of the United States federal
government to provide funds for the construction of certain energy management services projects entered into under
Washington Gas' area-wide contract. When these projects are formally accepted by the government and deemed complete,
the ownership of the receivable is assigned to the third-party lender in satisfaction of the obligation, removing both the
receivable and the obligation related to the financing from the Consolidated Financial Statements. As at December 31, 2021,
draws related to project financing were $8 million (December 31, 2020 - $20 million).
Credit Facilities
As at December 31, 2021, AltaGas held a $70 million (December 31, 2020 - $70 million) unsecured demand revolving
operating credit facility with a Canadian chartered bank. Draws on the facility bear interest at the lender's prime rate or at the
bankers' acceptance rate plus a stamping fee. Letters of credit outstanding under this facility as at December 31, 2021 were
$34 million (December 31, 2020 - $nil).
As at December 31, 2021, AltaGas held a US$200 million (December 31, 2020 - US$200 million) unsecured bilateral letter of
credit demand facility with a Canadian chartered bank. Borrowings on the facility incur fees and interest at rates relevant to the
nature of the draws made. Letters of credit outstanding under this facility as at December 31, 2021 were $139 million
(December 31, 2020 - $190 million).
As at December 31, 2021, AltaGas held a US$125 million (December 31, 2020 - $nil) demand letter of credit facility. Letters of
credit outstanding under this facility as at December 31, 2021 were $99 million (December 31, 2020 - $nil).
AltaGas Ltd. – 2021 MD&A and Financial Statements - 101
WGL and Washington Gas use short-term debt in the form of commercial paper and advances under its syndicated bank credit
facilities to fund seasonal cash requirements. Revolving committed credit facilities are maintained in an amount equal to or
greater than the expected maximum commercial paper position. As at December 31, 2021, commercial paper outstanding
classified as short-term debt totaled $161 million (December 31, 2020 - $236 million).
As at December 31, 2021, Petrogas held a $30 million (December 31, 2020 - $30 million) unsecured bilateral letter of credit
demand facility. Letters of credit outstanding under this facility as at December 31, 2021 were $7 million (December 31, 2020 -
$22 million).
As at December 31, 2021, Petrogas held an unsecured bilateral letter of credit demand facility of $25 million (December 31,
2020 - $25 million). Letters of credit outstanding under this facility as at December 31, 2021 were $nil (December 31, 2020 -
$nil).
AltaGas Ltd. – 2021 MD&A and Financial Statements - 102
16. Long-Term Debt
As at
Credit facilities
$2 billion unsecured extendible revolving facility (a) (b)
US$150 million unsecured extendible revolving facility
Commercial paper (c)
$200 million secured extendible revolving facility (d)
AltaGas Ltd. medium-term notes (MTNs)
$350 million Senior unsecured - 3.72 percent
$500 million Senior unsecured - 2.61 percent
$300 million Senior unsecured - 3.57 percent
$200 million Senior unsecured - 4.40 percent
$350 million Senior unsecured - 1.23 percent
$300 million Senior unsecured - 3.84 percent
$500 million Senior unsecured - 2.16 percent
$350 million Senior unsecured - 4.12 percent
$200 million Senior unsecured - 2.17 percent
$200 million Senior unsecured - 3.98 percent
$500 million Senior unsecured - 2.08 percent
$200 million Senior unsecured - 2.48 percent
$100 million Senior unsecured - 5.16 percent
$300 million Senior unsecured - 4.50 percent
$250 million Senior unsecured - 4.99 percent
WGL and Washington Gas MTNs and private placement notes
US$20 million Senior unsecured - 6.65 percent
US$41 million Senior unsecured - 5.44 percent
US$53 million Senior unsecured - 6.62 to 6.82 percent
US$72 million Senior unsecured - 6.40 to 6.57 percent
US$52 million Senior unsecured - 6.57 to 6.85 percent
US$9 million Senior unsecured - 7.50 percent
US$50 million Senior unsecured - 5.70 to 5.78 percent
US$75 million Senior unsecured - 5.21 percent
US$75 million Senior unsecured - 5.00 percent
US$300 million Senior unsecured - 4.22 to 4.60 percent
US$450 million Senior unsecured - 3.80 percent
US$400 million Senior unsecured - 3.65 percent (e)
US$200 million Senior unsecured - 2.98 percent
SEMCO long-term debt
US$82 million CINGSA Senior Secured - 4.48 percent (f)
US$225 million First Mortgage Bonds - 3.15 percent
US$225 million First Mortgage Bonds - 2.45 percent
Fair value adjustment on WGL acquisition
Finance lease liabilities (note 10)
Less debt issuance costs
Less current portion
$
Maturity date
4-May-2026
20-Dec-2026
Various
28-Sep-2025
28-Sep-2021
16-Dec-2022
12-Jun-2023
15-Mar-2024
18-Mar-2024
15-Jan-2025
10-Jun-2025
7-Apr-2026
16-Mar-2027
4-Oct-2027
30-May-2028
30-Nov-2030
13-Jan-2044
15-Aug-2044
4-Oct-2047
20-Mar-2023
11-Aug-2025
Oct 2026
Feb - Sep 2027
Jan - Mar 2028
1-Apr-2030
Jan - Mar 2036
3-Dec-2040
15-Dec-2043
Sep - Nov 2044
15-Sep-2046
15-Sep-2049
15-Dec-2051
2-Mar-2032
21-Apr-2050
21-Apr-2030
$
$
$
December 31,
2021
December 31,
2020
375 $
120
469
—
—
500
300
200
350
300
500
350
200
200
500
200
100
300
250
25
51
67
91
66
11
63
95
95
380
572
528
254
63
285
285
77
17
8,239 $
(44)
8,195 $
(511)
7,684 $
802
81
260
51
350
500
300
200
—
300
500
350
—
200
500
200
100
300
250
25
52
67
92
66
11
64
95
95
382
573
530
—
69
286
286
80
12
8,029
(43)
7,986
(360)
7,626
(a) Borrowings on the facility can be by way of prime loans, U.S. base-rate loans, LIBOR loans, bankers' acceptances, or letters of credit. Borrowings on the
facility have fees and interest at rates relevant to the nature of the draw made.
(b) During the second quarter of 2021, AltaGas closed an amendment that caused all committed credit facilities in Canada to be consolidated into a $2.3 billion
facility. The facility has a $2 billion five-year extendable committed revolving tranche and a $300 million two-year extendable side car liquidity revolving
facility.
(c) Commercial paper is supported by the availability of long-term committed credit facilities with maturity dates ranging from 2022 to 2024. Commercial paper
intended to be repaid within the next year is recorded as short-term debt (Note 15).
AltaGas Ltd. – 2021 MD&A and Financial Statements - 103
(d) During the third quarter of 2021, Petrogas closed an amendment that caused all committed Petrogas credit facilities to be consolidated into a four-year
$200 million facility.
(e) On December 10, 2020, Washington Gas issued MTNs with an aggregate principal amount of US$100 million. This offering constituted the reopening of its
US$300 million MTNs originally issued in 2019. The total includes a US$17 million premium which will be amortized as a reduction to interest expense over
the term of the note.
(f) Collateral for the CINGSA Senior secured loan is certain CINGSA assets. Alaska Storage Holding Company, LLC, a subsidiary in which AltaGas has a
controlling interest, is the non-recourse guarantor of this loan.
Credit Facilities
As at December 31, 2021, AltaGas held a $2.3 billion (December 31, 2020 - $1.4 billion) unsecured revolving credit facility.
Draws on the facility can be by way of prime loans, U.S. base-rate loans, LIBOR loans, bankers' acceptances, or letters of
credit. Outstanding bank loans under this facility as at December 31, 2021 were $375 million (December 31, 2020 -
$802 million).
As at December 31, 2021, WGL held a US$300 million (December 31, 2020 - US$250 million) unsecured revolving credit
facility. Draws on the facility can be by way of prime loans, U.S. base-rate loans, LIBOR loans, bankers’ acceptances, or letters
of credit. There were no outstanding bank loans under this facility as at December 31, 2021 or December 31, 2020.
As at December 31, 2021, Washington Gas held a US$450 million (December 31, 2020 - US$450 million) unsecured revolving
credit facility. Draws on the facility can be by way of prime loans, U.S. base-rate loans, LIBOR loans, bankers’ acceptances, or
letters of credit. There were no outstanding bank loans under this facility as at December 31, 2021 or December 31, 2020.
WGL and Washington Gas use short-term debt in the form of commercial paper and advances under its syndicated bank credit
facilities to fund seasonal cash requirements. Revolving committed credit facilities are maintained in an amount equal to or
greater than the expected maximum commercial paper position. As at December 31, 2021, outstanding commercial paper
classified as long-term debt totaled $469 million (December 31, 2020 - $260 million).
As at December 31, 2021, SEMCO held a US$150 million (December 31, 2020 - US$150 million) unsecured extendible
revolving facility. Draws on the facility can be by way of letters of credit, Alternate Base Rate or Eurodollar loans. There were
US$95 million outstanding bank loans under this facility as at December 31, 2021 (December 31, 2020 - US$81 million).
As at December 31, 2021, Petrogas held a $200 million (December 31, 2020 - $175 million) unsecured extendible revolving
credit facility. Draws on the facility can be by way of prime loans, U.S. base-rate loans, LIBOR loans, bankers’ acceptances, or
letters of credit. Loans and letters of credit outstanding under this facility as at December 31, 2021 were $nil (December 31,
2020 - $51 million).
As at December 31, 2021, Petrogas held a $25 million (December 31, 2020 - $25 million) swingline facility. Draws on the
facility can be by way of prime loans or U.S. base-rate loans. There were no outstanding bank loans under this facility as at
December 31, 2021 (December 31, 2020 - $6 million).
During the year ended December 31, 2021, Petrogas cancelled a US$40 million seasonal bulge facility and a US$10 million
operating revolving letter of credit facility.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 104
17. Asset Retirement Obligations
As at December 31
Balance, beginning of year
Obligations acquired (note 3)
New obligations
Obligations settled (a)
Disposals
Revision in estimated cash flow
Accretion expense (b)
Foreign exchange translation
Total
Less: current portion (included in accounts payable and accrued liabilities)
Balance, end of year
$
$
$
2021
379 $
5
4
(10)
—
40
19
(1)
436 $
(7)
429 $
2020
362
13
14
(4)
(1)
(10)
17
(6)
385
(6)
379
(a) During the year ended December 31, 2021, approximately $7 million of asset retirement obligations included in accounts payable and accrued liabilities were
settled (December 31, 2020 - $6 million).
(b) Certain amounts relating to Utility asset retirement obligations are recorded through regulatory assets or liabilities on the Consolidated Balance Sheets due to
regulatory treatment. The remaining portion is recorded through the Consolidated Statements of Income.
The majority of the asset retirement obligations are associated with distribution and transmission systems in the Utilities
segment.
AltaGas estimates the undiscounted cash required to settle the asset retirement obligations, excluding growth for inflation, at
December 31, 2021 was $892 million (December 31, 2020 - $868 million).
The asset retirement obligations have been recorded in the Consolidated Financial Statements at estimated values discounted
at rates between 2.0 and 8.5 percent (December 31, 2020 - between 2.0 to 8.5 percent) and are expected to be incurred
between 2022 and 2139 (December 31, 2020 - between 2021 and 2138). No assets have been legally restricted for settlement
of the estimated liability.
18. Environmental Matters
AltaGas is subject to federal, provincial, state and local laws and regulations related to environmental matters. These laws and
regulations may require expenditures over a long time frame to control environmental effects. Almost all of the environmental
liabilities AltaGas has recorded are for costs expected to be incurred to remediate sites where AltaGas or a predecessor
affiliate operated manufactured gas plants (MGPs). Estimates of liabilities for environmental response costs are difficult to
determine with precision because of the various factors that can affect their ultimate level. These factors include, but are not
limited to, the following:
▪
▪
▪
▪
▪
▪
the complexity of the site;
changes in environmental laws and regulations at the federal, state, and local levels;
the number of regulatory agencies or other parties involved;
new technology that renders previous technology obsolete or experience with existing technology that proves
ineffective;
the level of remediation required; and
variations between the estimated and actual period of time that must be dedicated to respond to an environmentally-
contaminated site.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 105
AltaGas has identified up to twelve sites where it or its predecessors may have operated MGPs. In connection with these
operations, AltaGas is aware that coal tar and certain other by-products of the gas manufacturing process are present at or
near some former sites and may be present at others.
As at December 31, 2021, a liability of $18 million has been recorded on an undiscounted basis related to future environmental
response costs (December 31, 2020 - $13 million) in the Consolidated Balance Sheets under the line items “accounts payable
and accrued liabilities and other long-term liabilities”. These estimates principally include the minimum liabilities associated
with a range of environmental response costs expected to be incurred. As at December 31, 2021, AltaGas estimated the
maximum liability associated with all of its sites to be approximately $50 million (December 31, 2020 - $39 million). The
estimates were determined by AltaGas’ environmental experts, based on experience in remediating MGP sites and advice
from legal counsel and environmental consultants. The variation between the recorded and estimated maximum liability
primarily results from differences in the number of years that will be required to perform environmental response processes
and the extent of remediation that may be required.
As at December 31, 2021, AltaGas reported a regulatory asset of $16 million (December 31, 2020 - $15 million) for the portion
of environmental response costs that are expected to be recoverable in future rates (Note 21).
19. Other Long-term Liabilities
As at
Deferred revenue
Customer advances for construction
Merger commitments
Non-retirement employee benefits
Deferred payroll taxes (a)
Petrogas equalization reserve (b)
Uncertain tax positions (note 20)
Other
December 31,
2021
December 31,
2020
$
13 $
59
7
19
—
—
20
16
8
60
10
22
6
5
21
21
$
134 $
153
(a) Represented U.S. federal payroll tax deferrals from the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
(b) Reserve was held by a wholly owned subsidiary of Petrogas.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 106
20. Income Taxes
Year Ended December 31
Income before income taxes - consolidated
Statutory income tax rate (%)
Expected taxes at statutory rates
Add (deduct) the tax effect of:
Permanent differences
Statutory and other rate differences
Deferred income tax recovery on regulated assets
Tax differences on divestitures and transactions
Change in valuation allowance
Other
Income tax provision
Current
Deferred
Effective income tax rate (%)
Net deferred income tax liabilities were composed of the following:
As at
PP&E and intangible assets
Regulatory assets
Tax pools, deferred financing, and compensation
Other
Valuation allowance
$
$
$
$
$
$
2021
446 $
23.0
103 $
3 $
25
(18)
(4)
—
(3)
106 $
59 $
47
106 $
23.8
2020
699
24.0
168
2
9
(15)
(33)
(2)
(2)
127
1
126
127
18.2
December 31,
2021
December 31,
2020
$
1,709 $
1,645
(233)
(236)
(84)
2
(229)
(208)
(94)
4
$
1,158 $
1,118
The amount shown on the Consolidated Balance Sheets as deferred income tax liabilities represents the net differences
between the tax basis and book carrying values on the Corporation's balance sheets at enacted tax rates.
The Alberta government reduced Alberta's corporate tax rate from 11 percent to 8 percent on July 1, 2020.
As at December 31, 2021, the Corporation had tax-effected non-capital losses of approximately $331 million, which will be
available to offset future taxable income. If not used, these losses will expire between 2027 and 2041.
Uncertain Tax Positions
The Corporation recognizes the benefit of an uncertain tax position only when it is more likely than not that such a position will
be sustained by the taxing authorities based on the technical merits of the position. The current and deferred tax impact is
equal to the largest amount, considering possible settlement outcomes, that has greater than 50 percent likelihood of being
realized upon settlement with the taxing authorities.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 107
On an annual basis, the Corporation and its subsidiaries file tax returns in Canada and various foreign jurisdictions. In Canada,
AltaGas' federal and provincial tax returns for the years 2013 to 2020 remain subject to examination by taxation authorities. In
the United States, both the federal and state tax returns for the years 2017 to 2020 remain subject to examination by the
taxation authorities.
Management determined that the following provision was required for uncertainty on income taxes during the year:
Year ended December 31
Balance, beginning of year
Gross increases for tax positions of prior year
Lapses of statute of limitations
Settlement
Balance, end of year
21. Regulatory Assets and Liabilities
$
$
2021
21 $
—
—
(1)
20 $
2020
2
21
(2)
—
21
AltaGas accounts for certain transactions in accordance with ASC 980, Regulated Operations. AltaGas refers to this
accounting guidance for regulated entities as “regulatory accounting”. Under regulatory accounting, utilities are permitted to
defer expenses and income as regulatory assets and liabilities, respectively, in the Consolidated Balance Sheets when it is
probable that those expenses and income will be allowed in the rate-setting process in a period different from the period in
which they would have been reflected in the Consolidated Statements of Income by a non-rate-regulated entity. These
deferred regulatory assets and liabilities are included in the Consolidated Statements of Income in future periods when the
amounts are reflected in customer rates. If an application is filed to modify customer rates with certain regulatory commissions,
AltaGas is permitted to charge customers new rates, subject to refund, until the regulatory commission renders a final
decision. During this interim period, a provision is recorded for a rate refund regulatory liability based on the difference
between the amount collected in rates and the amount expected to be recovered from a final regulatory decision.
Management’s assessment of the probability of recovery or pass-through of regulatory assets and liabilities requires judgment
and interpretation of laws and regulatory agency orders, rules, and rate-making conventions. The relevant regulatory bodies
are the MPSC, RCA, PSC of DC, PSC of MD, and SCC of VA.
If, for any reason, the Corporation ceases to meet the criteria for application of regulatory accounting for all or part of its
operations, the regulatory assets and liabilities related to those portions ceasing to meet such criteria would be de-recognized
from the Consolidated Balance Sheets and included in the Consolidated Statements of Income for the period in which the
discontinuance of regulatory accounting occurs. Criteria that give rise to the discontinuance of regulatory accounting include:
(i) increasing competition that restricts the ability of the Corporation to charge prices sufficient to recover specific costs, and (ii)
a significant change in the manner in which rates are set by regulatory agencies from cost-based regulation to another form of
regulation. The Corporation’s review of these criteria currently supports the continued application of regulatory accounting for
all its utilities.
The following table summarizes the regulatory assets and liabilities recorded in the Consolidated Balance Sheets, as well as
the remaining period, as at December 31, 2021 and 2020, over which the Corporation expects to realize or settle the assets or
liabilities:
AltaGas Ltd. – 2021 MD&A and Financial Statements - 108
As at December 31
Regulatory assets - current
Deferred cost of gas (a)
Accelerated replacement recovery mechanisms (b)
Interruptible sharing (c)
Energy optimization costs
Virginia and Maryland revenue normalization (c)
Regulatory assets - non-current
Deferred regulatory costs (c) (d)
Future recovery of pension and other retirement benefits (c)
Future recovery of non-retirement employee benefits (c) (e)
Deferred environmental costs (c) (f)
Deferred loss on debt transactions and derivative instruments (c) (g)
Deferred future income taxes (c) (h)
Energy efficiency program - Maryland (i)
COVID-19 costs (j)
Other
Regulatory liabilities - current
Deferred cost of gas (a)
Refundable tax credit (k)
Federal income tax rate change (l)
Interruptible sharing (c)
Virginia Coronavirus Relief Fund (m)
Other
Regulatory liabilities - non-current
Refundable tax credit (k)
Future expense of pension and other retirement benefits (c)
Future removal and site restoration costs (n)
Deferred gain on debt transactions and derivative instruments (c) (g)
Federal income tax rate change (l)
Other
2021
2020
Recovery
Period
$
$
$
$
$
$
$
20 $
7
—
5
16
48 $
199 $
33
19
16
89
43
23
6
8
436 $
71 $
2
1
4
1
—
79 $
— $
425
453
1
543
2
$
1,424 $
18 Less than one year
6 Less than one year
2
n/a
1 Less than one year
19 Less than one year
46
158
68
22
15
93
46
18
10
14
444
1 - 54 years
10 - 20 years
Various
Various
Various
Various
Various
Various
Various
56 Less than one year
2 Less than one year
20 Less than one year
1 Less than one year
10 Less than one year
n/a
1
90
2
335
462
1
578
3
1,381
n/a
Various
Various
Various
Various
Various
(a) Washington Gas is not entitled to a rate of return on these assets. Washington Gas is allowed to recover and required to pay, using short-term interest rates,
the carrying costs related to billed gas costs due from and to its customers in the District of Columbia and Virginia jurisdictions.
(b) Represents amounts for deferred over or under collections of surcharges associated with Washington Gas' accelerated pipeline recovery programs in the
District of Columbia, Maryland, and Virginia.
(c) Washington Gas is not entitled to a rate of return on these assets.
(d)
Includes deferred gas costs and fair value of derivatives, which are not included in customer bills until settled.
(e) Represents the timing difference between the recognition of workers compensation and short-term disability costs in accordance with generally accepted
accounting principles and the way these costs are recovered through rates.
(f)
(g)
This balance represents allowed environmental remediation expenditures at SEMCO and Washington Gas sites to be recovered through rates.
The losses or gains on the issuance and extinguishment of debt and interest-rate derivative instruments include unamortized balances from transactions
executed in prior years. These transactions create gains and losses that are amortized over the remaining life of the debt as prescribed by regulatory
accounting requirements. As at December 31, 2021, this also includes a fair value adjustment of $72 million (December 31, 2020 - $76 million) recorded on
the WGL Acquisition in 2018.
(h)
This balance represents amounts due from customers for deferred tax assets and liabilities related to tax benefits/expenses on deductions flowed directly to
customers prior to the adoption of income tax normalizations for ratemaking purposes and to tax rate changes.
(i)
Represents amounts for deferred credits associated with Washington Gas' participation in the energy conservation and efficiency program EmPower in
Maryland.
(j)
Regulatory assets established to capture and track incremental COVID-19 related costs.
(k) On September 18, 2013, CINGSA received a US$15 million gas storage facility tax credit from the State of Alaska for the benefit of its firm storage service
customers. CINGSA acted as a custodian of the tax credit and any interest earned for the benefit of CINGSA's customers. On an annual basis from 2012 to
2021, CINGSA disbursed to the customers 1/10th of the amount of the tax credit not subject to refund to the State and interest earned.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 109
(l)
The Tax Cuts and Jobs Act (TCJA) was enacted on December 22, 2017, and required the Corporation to revalue its U.S. deferred tax assets and liabilities in
2018 to the lower federal corporate tax rate of 21 percent, resulting in excess accumulated deferred income taxes. The tax rate reduction created a reduction
in deferred tax liability, which SEMCO Gas and Washington Gas are required to refund to ratepayers.
(m) The Virginia Coronavirus Relief Fund was received by WGL to provide direct assistance to Virginia customers with balances over 60 days in arrears.
(n)
This amount and timing of draw down is dependent upon the cost of removal of the underlying utility property, plant and equipment and its useful life.
22. Accumulated Other Comprehensive Income (Loss)
Defined
benefit
pension and
PRB plans
Hedge net
investments
Translation
foreign
operations
Equity
investee
($ millions)
Opening balance, January 1, 2021
OCI before reclassification
Amounts reclassified from OCI
Current period OCI (pre-tax)
$
$
Income tax on amounts retained in AOCI
Income tax on amounts reclassified to earnings
Net current period OCI
Ending balance, December 31, 2021
Opening balance, January 1, 2020
OCI before reclassification
Amounts reclassified from OCI
Current period OCI (pre-tax)
$
$
$
$
Income tax on amounts retained in AOCI
Income tax on amounts reclassified to earnings
Net current period OCI
Ending balance, December 31, 2020
$
$
(12) $
3
3
6 $
(1)
(1)
4 $
(8) $
(6) $
(11)
3
(8) $
3
(1)
(6) $
(12) $
(158) $
—
—
— $
—
—
— $
(158) $
(149) $
(10)
—
(10) $
1
—
(9) $
(158) $
220 $
(61)
—
(61) $
—
—
(61) $
159 $
395 $
(175)
—
(175) $
—
—
(175) $
220 $
— $
—
—
— $
—
—
— $
— $
5 $
(5)
—
(5) $
—
—
(5) $
— $
Total
50
(58)
3
(55)
(1)
(1)
(57)
(7)
245
(201)
3
(198)
4
(1)
(195)
50
Reclassification From Accumulated Other Comprehensive Income
AOCI components reclassified
Defined benefit pension and PRB plans
Income statement line item
Other income
Deferred income taxes
Income tax expense – deferred
Year Ended
December 31, 2021
Year Ended
December 31, 2020
$
$
3 $
(1)
2 $
3
(1)
2
AltaGas Ltd. – 2021 MD&A and Financial Statements - 110
23. Financial Instruments and Financial Risk Management
The Corporation’s financial instruments consist of cash and cash equivalents, accounts receivable, risk management
contracts, certain long-term investments and other assets, accounts payable and accrued liabilities, dividends payable,
short-term and long-term debt, and certain other current and long-term liabilities.
Fair Value Hierarchy
AltaGas categorizes its financial assets and financial liabilities into one of three levels based on fair value measurements
and inputs used to determine the fair value.
Level 1 - fair values are based on unadjusted quoted prices in active markets for identical assets or liabilities. Fair values are
based on direct observations of transactions involving the same assets or liabilities and no assumptions are used. Included
in this category are publicly traded shares valued at the closing price as at the balance sheet date.
Level 2 - fair values are determined based on valuation models and techniques where inputs other than quoted prices
included within Level 1 are observable for the asset or liability either directly or indirectly. AltaGas enters into derivative
instruments in the futures, over-the-counter and retail markets to manage fluctuations in commodity prices and foreign
exchange rates. The fair values of power, natural gas, NGL, LPG, ocean freight, and oil derivative contracts were calculated
using forward prices based on published sources for the relevant period, adjusted for factors specific to the asset or liability,
including basis and location differentials, discount rates, and currency exchange. The fair value of foreign exchange
derivative contracts was calculated using quoted market rates.
Level 3 - fair values are based on inputs for the asset or liability that are not based on observable market data. AltaGas uses
valuation techniques when observable market data is not available. Level 3 derivatives include physical contracts at illiquid
market locations with no observable market data, long-dated positions where observable pricing is not available over the life
of the contract, contracts valued using historical spot price volatility assumptions, and valuations using indicative broker
quotes for inactive market locations. A significant change to any one of these inputs in isolation could result in a significant
upward or downward fluctuation in the fair value measurement.
The following methods and assumptions were used to estimate the fair value of each significant class of financial
instruments:
Other current liabilities - the carrying amounts approximate fair value because of the short maturity of these instruments.
Current portion of long-term debt, Long-term debt and Other long-term liabilities - the fair value of these liabilities was
estimated based on discounted future interest and principal payments using the current market interest rates of instruments
with similar terms.
Risk management assets and liabilities - the fair values of power, natural gas and NGL, LPG, ocean freight, and oil
derivative contracts were calculated using forward prices from published sources for the relevant period. The fair value of
foreign exchange derivative contracts was calculated using quoted market rates. The fair value of Level 3 derivative
contracts was calculated using internally developed valuation inputs and pricing models.
Loans and receivables – the fair value of these assets was estimated based on discounted future interest and principal
payments using the current market interest rates of instruments with similar terms.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 111
As at
Financial assets
Fair value through net income (a)
Risk management assets - current
Risk management assets - non-current
Fair value through regulatory assets (a)
Risk management assets - current
Risk management assets - non-current
Financial liabilities
Fair value through net income (a)
Risk management liabilities - current
Risk management liabilities - non-current
Fair value through regulatory liabilities (a)
Risk management liabilities - current
Risk management liabilities - non-current
Amortized cost
Current portion of long-term debt
Long-term debt
Other current liabilities (b)
December 31, 2021
Carrying
Amount
Level 1
Level 2
Level 3
Total Fair
Value
$
$
$
$
112 $
50
1
1
164 $
113 $
90
15
75
511
7,684
43
8,531 $
— $
—
—
—
— $
— $
—
—
—
—
—
—
— $
73 $
22
—
—
95 $
58 $
11
—
—
511
7,898
43
8,521 $
39 $
28
1
1
69 $
55 $
79
15
75
—
—
224 $
112
50
1
1
164
113
90
15
75
511
7,898
43
8,745
(a) To manage price risk associated with acquiring natural gas supply for Maryland, Virginia, and District of Columbia utility customers, Washington Gas, a
subsidiary of the Corporation, enters into physical and financial derivative transactions. Any gains and losses associated with these derivatives are
recorded as regulatory liabilities or assets, respectively, to reflect the rate treatment for these economic hedging activities. Additionally, as part of its asset
optimization program, Washington Gas enters into derivatives with the primary objective of securing operating margins that Washington Gas will ultimately
realize. Regulatory sharing mechanisms provide for the annual realized profit from these transactions to be shared between Washington Gas' shareholder
and customers; therefore, changes in fair value are recorded through earnings, or as regulatory assets or liabilities to the extent that it is probable that
realized gains and losses associated with these derivative transactions will be included in the rates charged to customers when they are realized.
(b) Excludes non-financial liabilities.
As at
Financial assets
Fair value through net income (a)
Risk management assets - current
Risk management assets - non-current
Fair value through regulatory assets (a)
Risk management assets - current
Risk management assets - non-current
Financial liabilities
Fair value through net income (a)
Risk management liabilities - current
Risk management liabilities - non-current
Fair value through regulatory liabilities (a)
Risk management liabilities - current
Risk management liabilities - non-current
Amortized cost
Current portion of long-term debt
Long-term debt
Other current liabilities (b)
December 31, 2020
Carrying
Amount
Level 1
Level 2
Level 3
Total
Fair Value
$
$
$
$
94 $
38
4
9
145 $
102 $
66
9
79
360
7,626
37
8,279 $
— $
—
—
—
— $
— $
—
—
—
—
—
—
— $
73 $
2
1
—
76 $
78 $
15
—
1
21 $
36
3
9
69 $
24 $
51
9
78
94
38
4
9
145
102
66
9
79
360
8,451
37
8,942 $
—
—
—
162 $
360
8,451
37
9,104
AltaGas Ltd. – 2021 MD&A and Financial Statements - 112
(a)
To manage price risk associated with acquiring natural gas supply for Maryland, Virginia, and District of Columbia utility customers, Washington Gas, a
subsidiary of the Corporation, enters into physical and financial derivative transactions. Any gains and losses associated with these derivatives are
recorded as regulatory liabilities or assets, respectively, to reflect the rate treatment for these economic hedging activities. Additionally, as part of its asset
optimization program, Washington Gas enters into derivatives with the primary objective of securing operating margins that Washington Gas will ultimately
realize. Regulatory sharing mechanisms provide for the annual realized profit from these transactions to be shared between Washington Gas' shareholder
and customers; therefore, changes in fair value are recorded through earnings, or as regulatory assets or liabilities to the extent that it is probable that
realized gains and losses associated with these derivative transactions will be included in the rates charged to customers when they are realized.
Excludes non‑financial liabilities.
(b)
Financial assets and liabilities not included in the fair value hierarchy table include money market funds, short term debt, and
commercial paper. The carrying value of these financial instruments approximate their fair value, which reflects the short-
term maturity and/or normal credit terms of these financial instruments.
The following table includes quantitative information about the significant unobservable inputs used in the fair value
measurement of Level 3 financial instruments as at December 31, 2021:
Net Fair
Value
Valuation
Technique
Discounted
Cash Flow
Unobservable Inputs
Range
Weighted
Average (a)
Natural Gas Basis Price (per Dth)
$ (1.79)
- $ 5.71
$
(0.51)
(106)
Option
Model
(1)
Discounted
Cash Flow
(48)
Natural Gas Basis Price (per Dth)
Annualized Volatility of Spot Market
Natural Gas
$ (1.61)
- $ 5.57
$
0.39
14 % -
399 %
60 %
Electricity Congestion Price (per MWh)
$ (8.13)
- $ 93.94
$
18.37
Natural gas
Natural gas
Electricity
$
$
$
(a) Unobservable inputs were weighted by transaction volume.
The following tables provide a reconciliation of changes in net fair value of derivative assets and liabilities classified as Level
3 in the fair value hierarchy:
For the year ended December 31
2021
Natural
Gas Electricity
Total
2020
Natural
Gas
Electricity
Balance, beginning of year
Realized and unrealized gains (losses):
Recorded in income
Recorded in regulatory assets
Transfers into Level 3
Transfers out of Level 3
Purchases
Settlements
Foreign exchange translation
Balance, end of year
$
(74) $
(19) $
(93) $
(85) $
— $
(15)
(28)
—
(1)
—
14
(3)
(107) $
(25)
—
—
—
4
(8)
—
(48) $
(40)
(28)
—
(1)
4
6
(3)
(155) $
8
(1)
(1)
1
—
4
—
(74) $
(55)
—
—
—
3
32
1
(19) $
$
Total
(85)
(47)
(1)
(1)
1
3
36
1
(93)
Transfers between different levels of the fair value hierarchy may occur based on fluctuations in the valuation and on the
level of observable inputs used to value the instruments from period to period. Transfers into and out of the different levels of
the fair value hierarchy are presented at the fair value as of the beginning of the period. Transfers out of Level 3 during the
year ended December 31, 2021 were due to an increase in valuations using observable market inputs.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 113
Realized and Unrealized Gains (Losses) Recorded to Income for Level 3 Measurements
Year Ended December 31
Recorded to revenue
Recorded to cost of sales
$
$
2021
(79) $
39
(40) $
Summary of Unrealized Gains (Losses) on Risk Management Contracts Recognized in Net Income
Year Ended December 31
Natural gas
Energy exports
Crude oil and NGLs
NGL frac spread
Power
Foreign exchange
$
$
2021
6 $
38
1
(13)
9
(23)
18 $
2020
(79)
32
(47)
2020
32
10
4
(5)
(15)
(5)
21
Offsetting of Derivative Assets and Derivative Liabilities
Certain of AltaGas’ risk management contracts are subject to master netting arrangements that create a legally enforceable
right for a counterparty to offset the related financial assets and financial liabilities. As part of these master netting
agreements, cash, letters of credit and parental guarantees may be required to be posted or obtained from counterparties in
order to mitigate credit risk related to both derivative and non-derivative positions. Collateral balances are also offset against
the related counterparties’ derivative positions to the extent the application would not result in the over-collateralization of
those derivative positions on the balance sheet.
As at
December 31, 2021
Gross amounts
of recognized
assets/liabilities
Gross amounts
offset in
balance sheet
Netting
of collateral
Net amounts
presented in
balance sheet
Risk management assets (a)
Natural gas
Energy exports
NGL frac spread
Power
Risk management liabilities (b)
Natural gas
Energy exports
Crude oil and condensates
NGL frac spread
Power
$
$
$
$
94 $
61
4
101
260 $
164 $
81
6
23
126
400 $
(22) $
(60)
—
(25)
(107) $
(22) $
(60)
—
—
(25)
(107) $
(25) $
37
—
(1)
11 $
(4) $
2
2
—
—
— $
47
38
4
75
164
138
23
8
23
101
293
(a) Net amount of risk management assets on the Balance Sheet is comprised of risk management assets (current) balance of $113 million and risk
management assets (non‑current) balance of $51 million.
(b) Net amount of risk management liabilities on the Balance Sheet is comprised of risk management liabilities (current) balance of $128 million and risk
management liabilities (non‑current) balance of $165 million.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 114
As at
December 31, 2020
Gross amounts of
recognized
assets/liabilities
Gross amounts
offset in
balance sheet
Netting
of collateral
Net amounts
presented in
balance sheet
Risk management assets (a)
Natural gas
Energy exports
Crude oil and NGLs
Power
Foreign exchange
Risk management liabilities (b)
Natural gas
Energy exports
NGL frac spread
Power
Foreign exchange
$
$
$
$
104 $
86
1
30
27
248 $
173 $
153
6
58
3
393 $
(38) $
(86)
—
(8)
(3)
(135) $
(38) $
(86)
—
(8)
(3)
(135) $
(3) $
36
—
—
(1)
32 $
(3) $
—
—
1
—
(2) $
63
36
1
22
23
145
132
67
6
51
—
256
(a) Net amount of risk management assets on the Balance Sheet is comprised of risk management assets (current) balance of $98 million and risk
management assets (non‑current) balance of $47 million.
(b) Net amount of risk management liabilities on the Balance Sheet is comprised of risk management liabilities (current) balance of $111 million and risk
management liabilities (non‑current) balance of $145 million.
Cash Collateral
The following table presents collateral not offset against risk management assets and liabilities:
As at
Collateral posted with counterparties
Cash collateral held representing an obligation
December 31,
2021
$
$
9 $
2 $
December 31,
2020
4
—
Any collateral posted that is not offset against risk management assets and liabilities is included in line item “prepaid
expenses and other current assets” in the Consolidated Balance Sheets. Collateral received and not offset against risk
management assets and liabilities is included in line item “customer deposits” in the Consolidated Balance Sheets.
Certain derivative instruments contain contract provisions that require collateral to be posted if the credit rating of AltaGas or
certain of its subsidiaries falls below certain levels. At December 31, 2021 and December 31, 2020, AltaGas has not posted
any collateral related to its derivative liabilities that contained credit-related contingent features. The following table shows
the aggregate fair value of all derivative instruments with credit-related contingent features that are in a liability position, as
well as the maximum amount of collateral that would be required if specific credit-risk-related contingent features underlying
these agreements were triggered:
As at
Risk management liabilities with credit-risk-contingent features
Maximum potential collateral requirements
Risks associated with financial instruments
December 31,
2021
$
$
42 $
21 $
December 31,
2020
32
26
AltaGas is exposed to various financial risks in the normal course of operations such as market risks resulting from
fluctuations in commodity prices, currency exchange rates and interest rates as well as credit risk and liquidity risk.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 115
Commodity Price Risk
AltaGas enters into financial derivative contracts to manage exposure to fluctuations in commodity prices. The use of
derivative instruments is governed under formal risk management policies and is subject to parameters set out by AltaGas’
Risk Management Committee and Board of Directors. AltaGas does not make use of derivative instruments for speculative
purposes.
Natural Gas
In the normal course of business, AltaGas purchases and sells natural gas to support its infrastructure business. The fixed
price and market price contracts for both the purchase and sale of natural gas extend to 2033. In addition, AltaGas may
enter into financial derivative contracts as part of WGL’s asset optimization program. WGL optimized the value of its long-
term natural gas transportation and storage capacity resources during periods when these resources are not being used to
physically serve utility customers.
AltaGas had the following forward contracts and commodity swaps outstanding related to the activities in the energy
services business as at December 31, 2021 and 2020:
December 31, 2021
Sales
Purchases
Swaps
December 31, 2020
Sales
Purchases
Swaps
Crude Oil and NGLs
Fixed price
(per GJ)
1.75 to 10.8
1.75 to 10.8
2.95 to 7.42
Fixed price
(per GJ)
1.58 to 7.86
1.58 to 6.47
2.29 to 7.86
Period
(months)
Notional volume
(GJ)
259,750,059 $
606,923,548 $
201,266,412 $
1-142
1-143
1-55
Period
(months) Notional volume (GJ)
1-157
1-240
1-60
590,054,996 $
1,522,958,497 $
288,613,586 $
Fair Value
(8)
(102)
19
Fair Value
32
(106)
5
In the normal course of business, AltaGas utilizes financial swaps to manage the impact of timing between when product is
purchased and solid in addition to differing indices on purchase and sales.
December 31, 2021
Swaps
December 31, 2020
Swaps
Energy Exports
Fixed price
(per Bbl)
41.18 to 97.12
Fixed price
(per Bbl)
19.92 to 62.59
Period
(months)
1-12
Notional volume
(Bbl)
864,000 $
Fair Value
(8)
Period
(months)
1-9
Notional volume
(Bbl)
901,000 $
Fair Value
1
AltaGas entered into a series of swaps to lock in a portion of the volumes exposed to the propane and butane price
differentials between North American Indices and the Far East Index for contracts not under tolling arrangements at RIPET
and Ferndale. AltaGas had the following contracts outstanding as at December 31, 2021:
AltaGas Ltd. – 2021 MD&A and Financial Statements - 116
December 31, 2021
Propane and butane swaps
December 31, 2020
Propane and butane swaps
NGL Frac Spread
Fixed price
(per Bbl)
5.2 to 115.54
Fixed price
(per Bbl)
3.57 to 61.46
Period
(months)
Notional volume
(Bbl)
1-15
38,860,780 $
Period
(months)
Notional volume
(Bbl)
1-36
37,425,488 $
Fair Value
15
Fair Value
(31)
AltaGas entered into a series of swaps to lock in a portion of the volumes exposed to NGL frac spread. AltaGas had the
following contracts outstanding as at December 31, 2021 and 2020:
December 31, 2021
Propane swaps
Butane swaps
Crude oil swaps
Natural gas swaps
December 31, 2020
Propane swaps
Butane swaps
Crude oil swaps
Natural gas swaps
Power
Fixed price
33.14 to 59.75/Bbl
36.19 to 36.20/Bbl
63.25 to 89.86/Bbl
2.54 to 3.89/GJ
Fixed price
28.83 to 35.36/Bbl
32.45 to 34.02/Bbl
60.08 to 61.95/Bbl
1.58 to 1.86/GJ
Period
(months)
1-12
1-3
1-12
1-12
Period
(months)
1-12
1-12
1-12
1-12
Notional volume
Fair Value
2,099,243 Bbl $
18,967 Bbl $
369,495 Bbl $
11,873,390 GJ $
(15)
(1)
(4)
1
Notional volume
Fair Value
1,270,350 Bbl $
307,784 Bbl $
123,120 Bbl $
7,281,570 GJ $
(5)
(1)
—
—
AltaGas sells power to the Alberta Electric System Operator at market prices. AltaGas also sells power through its WGL
Energy Services affiliate, to commercial, industrial and mass market users within the PJM Regional Transmission
Organization at fixed and market prices. AltaGas' strategy is to mitigate the cash flow risk to power prices to provide
predictable earnings. Therefore, AltaGas uses third-party swaps and purchase contracts to fix the prices over time on a
portion of the volumes to mitigate financial exposure associated with the sale contracts. These power purchase and sale
contracts extend to 2026. As at December 31, 2021, AltaGas had no intention to terminate any contracts prior to maturity.
AltaGas had the following power commodity forward contracts and commodity swaps outstanding as at December 31, 2021
and 2020:
December 31, 2021
Power sales
Power purchases
Swap purchases
December 31, 2020
Power sales
Power purchases
Swap purchases
Fixed price
(per MWh)
27.19 to 93.94
27.19 to 93.94
(8.13) to 86.84
Fixed price
(per MWh)
24.56 to 61.75
24.56 to 61.88
(6.26) to 74.26
Period
(months)
1-42
1-53
1-41
Notional volume
(MWh)
4,938,045 $
6,393,003 $
22,845,569 $
Period
(months)
1-33
1-63
1-44
Notional volume
(MWh)
5,482,242 $
8,848,007 $
24,081,519 $
Fair Value
(60)
69
(35)
Fair Value
13
(18)
(24)
AltaGas Ltd. – 2021 MD&A and Financial Statements - 117
The table below provides the potential impact on pre-tax income due to changes in the fair value of risk management
contracts in place as at December 31, 2021:
Factor
PJM power price
NYMEX natural gas price
Energy Exports:
Propane Far East Index to domestic supply
Baltic LPG Freight
NGL frac spread:
Natural gas
Foreign Exchange Risk
Increase or decrease to
forward prices
Increase or
decrease to income
before tax ($ millions)
US$1/MWh
US$0.50/GJ
$1/Bbl
$1/Bbl
$0.50/GJ
1
39
(9)
5
6
AltaGas is exposed to foreign exchange risk as changes in foreign exchange rates may affect the fair value or future cash
flows of the Corporation’s financial instruments. AltaGas has foreign operations whereby the functional currency is the U.S.
dollar. As a result, the Corporation’s earnings, cash flows, and OCI are exposed to fluctuations resulting from changes in
foreign exchange rates. This risk is partially mitigated to the extent that AltaGas has U.S. dollar-denominated debt and/or
preferred shares outstanding. AltaGas may also enter into foreign exchange forward derivatives to manage the risk of
fluctuating cash flows due to variations in foreign exchange rates.
AltaGas may designate its external U.S. dollar-denominated debt or certain U.S. dollar-denominated loans that may give rise
to a foreign currency transaction gain or loss as a net investment hedge of its U.S. subsidiaries. As at December 31, 2021,
AltaGas has designated US$122 million of outstanding loans as a net investment hedge (December 31, 2020 - $nil). For the
year ended December 31, 2021, no after-tax unrealized gains or losses were recorded related to the translation of debt in
OCI (2020 ‑ after-tax unrealized loss of $9 million).
The following foreign exchange forward contracts were outstanding as at December 31, 2021:
Foreign exchange forward contract
Notional Amount
(US$ millions)
Duration
Weighted average
foreign exchange rate
Foreign exchange swaps (purchases)
US$10
Less than one year
1.2640
Fair Value
Less than $1
million
The following foreign exchange forward contracts were outstanding as at December 31, 2020:
Foreign exchange forward contract
Forward USD sales
Forward USD purchases
Foreign exchange swaps (sales)
Notional Amount
(US$ millions)
US$29
US$356
US$410
Weighted average
Duration
Less than one year
Less than one year
Less than one year
foreign exchange rate Fair Value
3
(3)
23
1.3591 $
1.2824 $
1.3322 $
For the year ended December 31, 2021, AltaGas recorded an after-tax realized gain of $19 million on all foreign exchange
forward contracts (2020 - $1 million).
AltaGas Ltd. – 2021 MD&A and Financial Statements - 118
Interest Rate Risk
AltaGas is exposed to interest rate risk as changes in interest rates may impact future cash flows and the fair value of its
financial instruments. The Corporation manages its interest rate risk by holding a mix of both fixed and floating interest rate
debt. As at December 31, 2021, approximately 87 percent of AltaGas’ total outstanding short-term and long-term debt was at
fixed rates (December 31, 2020 - 83 percent). In addition, from time to time, AltaGas may enter into interest rate swap
agreements to fix the interest rate on a portion of its banker’s acceptances issued under its credit facilities. There were no
outstanding interest rate swaps as at December 31, 2021.
Credit Risk
Credit risk results from the possibility that a counterparty to a financial instrument fails to fulfill its obligations in accordance
with the terms of the contract.
AltaGas' credit policy details the parameters used to grant, measure, monitor and report on credit provided to counterparties.
AltaGas minimizes counterparty risk by conducting credit reviews on counterparties in order to establish specific credit limits,
both prior to providing products or services and on a recurring basis. In addition, most contracts include credit mitigation
clauses that allow AltaGas to obtain financial or performance assurances from counterparties under certain circumstances.
AltaGas maintains an allowance for doubtful accounts in the normal course of its business.
AltaGas' maximum credit exposure consists primarily of the carrying value of the non-derivative financial assets and the fair
value of derivative financial assets. As at December 31, 2021, AltaGas had no concentration of credit risk with a single
counterparty.
Weather Related Instruments
WGL Energy Services utilizes heating degree day (HDD) instruments from time to time to manage weather and price risks
related to its natural gas and electricity sales during the winter heating season. WGL Energy Services also utilizes cooling
degree day (CDD) instruments and other instruments to manage weather and price risks related to its electricity sales during
the summer cooling season. These instruments cover a portion of estimated revenue or energy-related cost exposure to
variations in HDDs or CDDs. For the year ended December 31, 2021, a pre-tax loss of less than $1 million was recorded
related to these instruments (2020 - pre-tax loss of $3 million).
Accounts Receivable Past Due or Impaired
With the exception of accounts receivable which are due in one year or less as summarized in the following table, AltaGas
does not have any past due or impaired accounts receivable (AR) as at December 31, 2021:
As at December 31, 2021
Trade receivable
Other
Allowance for credit losses
Total
1,431 $
35
(39)
1,427 $
$
$
AR
accruals
Receivables
impaired
Less than
30 days
31 to
60 days
61 to
90 days
560 $
—
—
560 $
39 $
—
(39)
— $
703 $
35
—
738 $
52 $
—
—
52 $
Over
90 days
53
—
—
53
24 $
—
—
24 $
AltaGas Ltd. – 2021 MD&A and Financial Statements - 119
As at December 31, 2020
Trade receivable
Other
Allowance for credit losses
Total
1,465 $
20
(41)
1,444 $
$
$
AR
accruals
Receivables
impaired
Less than
30 days
31 to
60 days
61 to
90 days
396 $
—
—
396 $
41 $
—
(41)
— $
906 $
20
—
926 $
52 $
—
—
52 $
17 $
—
—
17 $
Over
90 days
53
—
—
53
The following table provides a summary of changes to the allowance for credit losses by segment and major type:
Utilities
Balance, beginning of period
Adjustments to allowance (b)
Written off
Recoveries collected
Balance, end of period
Midstream
Balance, beginning of period
New allowance
Balance, end of period
Total
$
$
$
$
$
Accounts
Receivable
Year Ended December 31, 2021
Contract
Assets (a)
Other long-term
investments and
other assets
40 $
15
(22)
5
38 $
1 $
—
1 $
39 $
— $
—
—
—
— $
1 $
—
1 $
1 $
— $
—
—
—
— $
2 $
(2)
— $
— $
Total
40
15
(22)
5
38
4
(2)
2
40
(a)
An allowance for credit loss is assessed quarterly and is recorded based on historical default rates published by external credit rating agencies and a rate
associated with the estimated time frame that the contract asset will be billed to the customer.
(b)
Includes $5 million recorded to a regulatory asset relating to the impact of COVID-19 on uncollectible accounts.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 120
Utilities
Balance, beginning of period
Adjustment upon adoption of ASC 326 (c)
Foreign exchange translation
New allowance (d)
Written off
Recoveries collected
Balance, end of period
Midstream
Balance, beginning of period
Adjustment upon adoption of ASC 326
Recoveries collected
Balance, end of period
Corporate/Other
Balance, beginning of period
Adjustment upon adoption of ASC 326
Written off
Recoveries collected
Balance, end of period
Total
$
$
$
$
$
$
$
Accounts
Receivable
Year Ended December 31, 2020
Contract
Assets (a)
Other long-term
investments and
other assets (b)
31 $
2
(1)
32
(28)
4
40 $
1 $
—
—
1 $
2 $
—
(2)
—
— $
41 $
— $
—
—
—
—
—
— $
— $
1
—
1 $
— $
—
—
—
— $
1 $
— $
—
—
—
—
—
— $
— $
3
(1)
2 $
— $
1
—
(1)
— $
2 $
Total
31
2
(1)
32
(28)
4
40
1
4
(1)
4
2
1
(2)
(1)
—
44
(a)
An allowance for credit loss is assessed quarterly and is recorded based on historical default rates published by external credit rating agencies and a rate
associated with the estimated time frame that the contract asset will be billed to the customer.
(b)
Includes loan to affiliate, which is no longer outstanding at December 31, 2020, and other long-term receivables. An allowance for credit loss is assessed
quarterly and is recorded based on historical default rates published by external credit rating agencies and a rate commensurate with the period in which
the receivable is expected to be collected.
(c)
Based on previous collection experience, AltaGas did not record an allowance for credit losses for its contract assets associated with its energy
management services projects with the U.S. federal government.
(d)
Includes $8 million recorded to a regulatory asset relating to the impact of COVID-19 on uncollectible accounts.
Liquidity Risk
Liquidity risk is the risk that AltaGas will not be able to meet its financial obligations as they come due. AltaGas manages this
risk through its extensive budgeting and monitoring process to ensure it has sufficient cash and credit facilities to meet its
obligations. AltaGas' objective is to maintain its investment-grade ratings to ensure it has access to debt and equity funding
as required.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 121
AltaGas had the following contractual maturities with respect to financial liabilities:
As at December 31, 2021
Contractual maturities by period
Total
Less than
1 year
1-3 years
4-5 years
Accounts payable and accrued liabilities
$
1,544 $
1,544 $
— $
— $
Short-term debt
Other current liabilities (a)
Risk management contract liabilities
Current portion of long-term debt (b)
Long-term debt (b)
169
43
293
506
7,639
169
43
128
506
—
—
—
85
—
—
—
25
—
1,356
1,775
$
10,194 $
2,390 $
1,441 $
1,800 $
(a)
(b)
Excludes non-financial liabilities.
Excludes deferred financing costs, discounts, finance lease liabilities, and the fair value adjustment on the WGL Acquisition.
As at December 31, 2020
Contractual maturities by period
Total
Less than
1 year
1-3 years
4-5 years
Accounts payable and accrued liabilities
$
1,561 $
1,561 $
— $
— $
Dividends payable
Short-term debt
Other current liabilities (a)
Risk management contract liabilities
Current portion of long-term debt (b)
Long-term debt (b)
22
256
37
256
356
7,581
22
256
37
111
356
—
—
—
—
51
—
—
—
—
22
—
1,771
1,324
$
10,069 $
2,343 $
1,822 $
1,346 $
(a)
(b)
Excludes non-financial liabilities.
Excludes deferred financing costs, discounts, finance lease liabilities, and the fair value adjustment on the WGL Acquisition.
After
5 years
—
—
—
55
—
4,508
4,563
After
5 years
—
—
—
—
72
—
4,486
4,558
AltaGas Ltd. – 2021 MD&A and Financial Statements - 122
24. Revenue
The following tables disaggregate revenue by major sources for the year:
Revenue from contracts with customers
Commodity sales contracts
Midstream service contracts
Gas sales and transportation services
Storage services
Other
Total revenue from contracts with customers
Other sources of revenue
Revenue from alternative revenue programs (a)
Leasing revenue (b)
Risk management and trading activities (c) (d)
Other
Total revenue from other sources
Total revenue
$
$
$
$
$
Year Ended December 31, 2021
Corporate/
Other
Midstream
Utilities
1,316 $
—
2,582
24
8
3,930 $
92 $
—
(74)
(12)
6 $
3,936 $
4,667 $
1,664
—
—
—
6,331 $
— $
168
12
22
202 $
6,533 $
1 $
—
—
—
4
5 $
— $
102
(4)
1
99 $
104 $
Total
5,984
1,664
2,582
24
12
10,266
92
270
(66)
11
307
10,573
(a) A large portion of revenue generated from the Utilities segment is subject to rate regulation and accordingly there are circumstances where the revenue
recognized is mandated by the applicable regulators in accordance with ASC 980.
(b) Revenue generated from certain of AltaGas’ gas facilities is accounted for as operating leases. For the Corporate/Other segment, a significant amount of
revenue earned is through power purchase agreements which are accounted for as operating leases.
(c) Risk management activities involve the use of derivative instruments such as physical and financial swaps, forward contracts, and options. These derivatives
are accounted for under ASC 815 and ASC 825. A portion of revenue generated by the Utilities segment is from the physical sale and delivery of natural gas
and power to end users.
(d) WGL Midstream trading margins are reported in risk management and trading activities from the Midstream segment. Prior to the sale of the majority of WGL
Midstream's commodity business in the second quarter of 2021, WGL Midstream entered into derivative contracts for the purpose of optimizing its storage
and transportation capacity as well as managing the transportation and storage assets on behalf of third parties. The trading margins of WGL Midstream,
including unrealized gains and losses on derivative instruments, are netted within revenues. Gross revenues for the year ended December 31, 2021 of
$172 million associated with the GAIL Global (USA) LNG LLC (GAIL) contract and an Asset Management Agreement (AMA), which are in scope of ASC 606,
are reported within risk management and trading activities. While the GAIL contract and AMA are individually not accounted for as derivatives, they are
inseparable from the overall trading portfolio. Revenue from the GAIL contract is recognized at a point in time based on the actual volumes of the commodity
sold at the delivery point, which corresponds to the customer’s monthly invoice amount. The GAIL contract had a term of 20 years and began on March 31,
2018. Revenue from the AMA is recognized based on the amount WGL Midstream has the right to invoice the customer in accordance with ASC 606. WGL
executed the AMA in April 2020. AltaGas completed the sale of the majority of WGL Midstream's commodity business, including the GAIL contract and the
AMA, in April 2021.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 123
Revenue from contracts with customers
Commodity sales contracts
Midstream service contracts
Gas sales and transportation services
Storage services
Other
Total revenue from contracts with customers
Other sources of revenue
Revenue from alternative revenue programs (a)
Leasing revenue (b)
Risk management and trading activities (c) (d)
Other
Total revenue from other sources
Total revenue
$
$
$
$
$
Year Ended December 31, 2020
Corporate/
Other
Midstream
Utilities
1,338 $
—
2,394
25
9
3,766 $
96 $
1
(31)
(15)
51 $
3,817 $
1,097 $
277
—
—
—
1,374 $
— $
139
112
10
261 $
1,635 $
1 $
—
—
—
20
21 $
— $
100
—
14
114 $
135 $
Total
2,436
277
2,394
25
29
5,161
96
240
81
9
426
5,587
(a)
A large portion of revenue generated from the Utilities segment is subject to rate regulation and accordingly there are circumstances where the revenue
recognized is mandated by the applicable regulators in accordance with ASC 980.
(b) Revenue generated from certain of AltaGas’ gas facilities is accounted for as operating leases. For the Corporate/Other segment, a significant amount of
revenue earned is through power purchase agreements which are accounted for as operating leases.
(c) Risk management activities involve the use of derivative instruments such as physical and financial swaps, forward contracts, and options. These derivatives
are accounted for under ASC 815 and ASC 825. A portion of revenue generated by the Utilities segment is from the physical sale and delivery of natural gas
and power to end users.
(d) WGL Midstream trading margins are reported in risk management and trading activities from the Midstream segment. Prior to the sale of the majority of WGL
Midstream's commodity business in the second quarter of 2021, WGL Midstream entered into derivative contracts for the purpose of optimizing its storage
and transportation capacity as well as managing the transportation and storage assets on behalf of third parties. The trading margins of WGL Midstream,
including unrealized gains and losses on derivative instruments, are netted within revenues. Gross revenues for the year ended December 31, 2020 of
$437 million associated with the GAIL contract and an AMA, which are in scope of ASC 606, are reported within risk management and trading activities.
While the GAIL contract and AMA are individually not accounted for as derivatives, they are inseparable from the overall trading portfolio. Revenue from the
GAIL contract is recognized at a point in time based on the actual volumes of the commodity sold at the delivery point, which corresponds to the customer’s
monthly invoice amount. The GAIL contract had a term of 20 years and began on March 31, 2018. Revenue from the AMA is recognized based on the
amount WGL Midstream has the right to invoice the customer in accordance with ASC 606. WGL executed the AMA in April 2020. AltaGas completed the
sale of the majority of WGL Midstream's commodity business, including the GAIL contract and the AMA, in April 2021.
Revenue Recognition
The following is a description of the Corporation’s revenue recognition policy by segment and by major source of revenue from
contracts with customers.
Utilities Segment
Gas Sales and Transportation Services
Customers are billed monthly based on regular meter readings. Customer billings are based on two main components: (i) a
fixed service fee and (ii) a variable fee based on usage. Revenue is recognized over time when the gas has been delivered or
as the service has been performed. As meter readings are performed on a cycle basis, AltaGas recognizes accrued revenue
for any services rendered to its customers but not billed at month-end. The vast majority of these contracts are “at-will” as
customers may cancel their service at any time, however, there are certain contracts that have terms of one year or longer. For
these long-term contracts, there is generally a contract demand specified in the contract whereby the customer has to pay
regardless of whether or not gas has been delivered. These contracts generally do not contain any make up rights and
revenue is recognized on a monthly basis as service has been performed.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 124
Gas Storage Services
Gas storage customers are billed monthly for services provided. Customer billings are based on four components: (i)
reservation charges; (ii) capacity charges; (iii) injection/withdrawal charges; and (iv) excess charges. Reservation charges are
based on the customer’s contract withdrawal quantity, capacity charges are based on the customer’s total contract quantity,
and injection/withdrawal charges are based on the volume of gas delivered to or from the customer. Excess charges are
applied to each day that the storage quantity exceeds 100 percent of the customer’s maximum storage quantity. Revenue is
recognized as the service has been performed over time on a monthly basis, which corresponds to the invoice amount. The
majority of these contracts have terms extending beyond one year.
Commodity Sales
Commodity sales also include gas sales to residential, commercial, and industrial customers in certain states where WGL
Energy Services is authorized as a competitive service provider. These commodity sales contracts have varying terms that
generally range from one to five years. Customers are billed monthly based on the amount of gas delivered to the customer.
Revenue is recognized based on the amount the Corporation is entitled to invoice the customer.
Midstream Segment
Commodity Sales
A portion of the NGL production from AltaGas’ extraction facilities is subject to frac spread between NGLs extracted and the
natural gas purchased to make up the heating value of the NGLs extracted. For commodity sales contracts that do not meet
the definition of a derivative or for contracts whereby AltaGas has elected to apply the normal purchase normal sales scope
exception, the sales contract is accounted for under ASC 606. These commodity sales contracts have varying terms but the
majority of the contracts have a one-year term which coincides with the NGL year. AltaGas recognizes revenue for commodity
sales contracts at a point in time based on the actual volumes of the commodity sold at the delivery point, which corresponds
to the customer’s monthly invoice amount.
Commodity sales contracts at RIPET and Ferndale generate revenue from the sale and delivery of LPGs to customers in Asia
shipped from offshore export terminals. Revenue is recognized when LPGs are loaded onto transport vessels, which is the
delivery point. AltaGas has the right to consideration in an amount that directly corresponds to the volumes of LPGs loaded on
a vessel. Petrogas' commodity sales also include the sale of upgraded crude oil, processed finished products, and various
fuels. Delivery takes place when there is a sales contract in place, specifying delivery volumes and sales prices. The
consideration received under these contracts is variable based on commodity prices.
Midstream Service Contracts
AltaGas earns revenue from its field gathering and processing facilities, extraction facilities, storage facilities, truck hauling
services, rail and truck loading and unloading terminalling, and transmission systems through a variety of contractual
arrangements. For arrangements that do not contain a lease, the revenue is accounted for under ASC 606 as follows:
Fee-for-service – The customer is charged a fee for the service provided on a per unit volume basis. Contract terms generally
range from one month to up to the life of the reserves. Revenue under this type of arrangement is recognized over time as the
service is provided, which corresponds to the customer’s monthly invoice amount.
Take-or-pay – The customer has agreed to a minimum volume commitment whereby the customer must have AltaGas process
or deliver a specified volume at a rate per unit that is specified in the contract. Quantities that the customer is unable to deliver
are considered deficiency quantities. Certain of AltaGas’ take-or-pay contracts contain provisions whereby the customer can
AltaGas Ltd. – 2021 MD&A and Financial Statements - 125
make up deficiency quantities in subsequent periods. Under this type of arrangement, any consideration received relating to
the deficiency quantities that will be made up in a future period will be deferred until either: (i) the customer makes up the
volumes or (ii) the likelihood that the customer will make up the volumes before the make up period expires becomes remote.
If AltaGas does not expect the customer to make up the deficiency quantities (also referred to as breakage amount), AltaGas
may recognize the expected breakage amount as revenue before the make up period expires. Significant judgment is required
in estimating the breakage amount. For contracts where the customer has no make up rights, revenue is recognized on a
monthly basis based on the higher of (i) the actual quantity delivered times the per unit rate or (ii) the contracted minimum
amount.
Petrogas' storage fees are typically recognized in revenue ratably over the term of the contract and rail and truck loading and
unloading fees are recognized when the volumes are delivered or received.
Corporate/Other Segment
For the Corporate/Other segment, the majority of revenue relates to remaining power assets, from which revenue is primarily
earned through power purchase agreements which are accounted for as operating leases. In instances where power
generation is not sold under a power purchase agreement, the commodity is sold via a merchant market, or via commodity
sales agreements which are accounted for as financial instruments. For commodity sales contracts that do not meet the
definition of a lease, derivative or for contracts whereby AltaGas has elected to apply the normal purchase normal sales scope
exception, the sales contract is accounted for under ASC 606.
Contract Balances
As at December 31, 2021, a contract asset of $42 million ($41 million net of credit losses) has been recorded within long-term
investments and other assets on the Consolidated Balance Sheets (December 31, 2020 – $50 million net of credit losses).
This contract asset represents the difference in revenue recognized under a new rate in a blend-and-extend contract
modification with a customer. Revenue from this contract modification was recognized at the pre-modification rate until
December 31, 2020, with the excess revenue recorded as a contract asset. The contract asset will be drawn down over the
remaining term of the modified contract.
In addition, at December 31, 2021, there is a contract asset of $13 million (December 31, 2020 - $21 million) recorded within
prepaid expenses and other current assets on the Consolidated Balance Sheets for WGL Energy Systems’ unbilled revenue
relating to design-build construction contracts. The contract asset represents unbilled amounts typically resulting from sales
under contracts when the cost-to-cost method of revenue recognition is utilized, and revenue recognized exceeds the amount
billed to the customer. Right to payment is achieved when the projects are formally “accepted” by the federal government. At
December 31, 2021, contract liabilities of $1 million (December 31, 2020 - $nil) have been recorded within other current
liabilities on the Consolidated Balance Sheets. The contract liabilities consisted of advance payments and billings in excess of
revenue recognized and deferred revenue. Contract assets and liabilities are reported in a net position on a contract-by-
contract basis at the end of each reporting period.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 126
Contract Assets
As at
Balance, beginning of year
Additions
Amortization (a)
Transfers to accounts receivable (b)
Foreign exchange translation
Balance, end of year
December 31,
2021
71 $
—
(4)
(13)
—
54 $
$
$
December 31,
2020
89
30
—
(49)
1
71
(a) Represents the drawdown of a contract asset under a blend-and-extend contract modification.
(b)
Amounts included in contract assets are transferred to accounts receivable when AltaGas’ right to consideration becomes unconditional.
Contract Liabilities
As at
Balance, beginning of year
Additions
Revenue recognized from contract liabilities (a)
Balance, end of year
December 31,
2021
$
$
— $
1
—
1 $
December 31,
2020
2
2
(4)
—
(a) Recognition of revenue related to performance obligations satisfied in the current period for amounts that were previously included in contract liabilities.
Transaction price allocated to the remaining obligations
The following table includes estimated revenue expected to be recognized in the future related to performance obligations that
are unsatisfied as of December 31, 2021:
Midstream service contracts
Storage services
Other
2022
136 $
23
2
161 $
2023
133 $
23
2
158 $
2024
133 $
23
2
158 $
2025
130 $
23
2
155 $
$
$
2026
127 $
23
2
152 $
2027 &
beyond
954 $
121
7
1,082 $
Total
1,613
236
17
1,866
AltaGas applies the practical expedient available under ASC 606 and does not disclose information about the remaining
performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts for which revenue is
recognized at the amount to which AltaGas has the right to invoice for performance completed, and (iii) contracts with variable
consideration that is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to
transfer a distinct good or service that forms part of a single performance obligation. In addition, the table above does not
include any estimated amounts of variable consideration that are constrained. The majority of midstream service contracts,
gas sales and transportation service contracts, and storage service contracts contain variable consideration whereby
uncertainty related to the associated variable consideration will be resolved (usually on a daily basis) as volumes are
processed, gas is delivered or as service is provided.
25. Shareholders’ Equity
Authorization
AltaGas is authorized to issue an unlimited number of voting common shares. AltaGas is also authorized to issue such number
of Preferred Shares in series at any time as have aggregate voting rights either directly or on conversion or exchange that in
AltaGas Ltd. – 2021 MD&A and Financial Statements - 127
the aggregate represent less than 50 percent of the voting rights attaching to the then issued and outstanding Common
Shares.
Dividend Reinvestment and Optional Cash Purchase Plan (DRIP or the Plan)
The Plan consisted of two components: a Dividend Reinvestment component and an Optional Cash Purchase component. The
Premium Dividend™ component of the plan was suspended in December 2018. The Dividend Reinvestment and Optional
Cash Purchase component was suspended in December 2019, with the December dividend (paid January 2020) being the last
dividend payment eligible for reinvestment by participating shareholders under the DRIP. The Plan in its entirety will remain
suspended until further notice.
Common Shares Issued and Outstanding
January 1, 2020
Shares issued for cash on exercise of options
Deferred taxes on share issuance cost
Shares issued under DRIP
December 31, 2020
Shares issued for cash on exercise of options
Deferred taxes on share issuance cost
Issued and outstanding at December 31, 2021
Preferred Shares
As at
Issued and Outstanding
Series A
Series B
Series C
Series E
Series G
Series H
Series K
Share issuance costs, net of taxes
Number of
shares
279,074,685 $
88,082
—
331,532
279,494,299 $
774,739
—
280,269,038 $
Amount
6,719
1
(3)
6
6,723
15
(3)
6,735
December 31, 2021
December 31, 2020
Number of shares
6,746,679 $
1,253,321
8,000,000
8,000,000
6,885,823
1,114,177
12,000,000
44,000,000 $
Amount
169
31
206
200
172
28
300
(30)
1,076
Number of shares
6,746,679 $
1,253,321
8,000,000
8,000,000
6,885,823
1,114,177
12,000,000
44,000,000 $
Amount
169
31
206
200
172
28
300
(29)
1,077
On December 31, 2020, all outstanding Series I shares were redeemed. No gain or loss was recognized upon redemption.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 128
The following table outlines the characteristics of the cumulative redeemable preferred shares (a):
Series A (e)
Series B (f) (g)
Series C (h)
Series E (e)
Series G (e)
Series H (f) (g)
Series K
Current
yield
3.060 %
Floating
5.290 %
5.393 %
4.240 %
Floating
5.000 %
Annual dividend
per share(b)
$0.76500
Floating
US$1.32250
$1.34825
$1.06050
Floating
$1.25000
Redemption
price per
share (g)
$25
$25
US$25
$25
$25
$25
$25
Redemption and
conversion option date(c)(g)
September 30, 2025
September 30, 2025
September 30, 2022
December 31, 2023
September 30, 2024
September 30, 2024
March 31, 2022
Right to
convert
into(d)
Series B
Series A
Series D
Series F
Series H
Series G
n/a (c)
(a)
This table only includes those series of preferred shares that are currently issued and outstanding. The Corporation is authorized to issue up to 8,000,000 of
each of Series D Shares, Series F Shares, subject to certain conditions, upon conversion by the holders of the applicable currently issued and outstanding
series of preferred shares noted opposite such series in the table on the applicable conversion option date. If issued upon the conversion of the applicable
series of preferred shares, Series F Shares are also redeemable for $25.50 and Series D Shares are redeemable for US$25.50 on any date after the
applicable conversion option date, plus all accrued but unpaid dividends to, but excluding, the date fixed for redemption.
(b)
The holders of Series A Shares, Series C Shares, Series E Shares, Series G Shares, and Series K Shares are entitled to receive a cumulative quarterly fixed
dividend as and when declared by the Board of Directors. The holders of Series B Shares and Series H Shares are entitled to receive a quarterly floating
dividend as and when declared by the Board of Directors. If issued upon the conversion of the applicable series of Preferred Shares, the holders of Series D
Shares and Series F Shares will be entitled to receive a quarterly floating dividend as and when declared by the Board of Directors.
(c)
AltaGas may, at its option, redeem all or a portion of the outstanding shares for the redemption price per share, plus all accrued and unpaid dividends on the
applicable redemption option date and on every fifth anniversary thereafter. On February 16, 2022, Series K holders received formal notice that all
outstanding Series K preferred shares will be redeemed on March 31, 2022.
(d)
The holder will have the right, subject to certain conditions, to convert their preferred shares of a specified series into Preferred Shares of that other specified
series as noted in this column of the table on the applicable conversion option date and every fifth anniversary thereafter.
(e) Holders of Series A Shares, Series E Shares, and Series G Shares will be entitled to receive cumulative quarterly fixed dividends, which will reset on the
redemption and conversion option date and every fifth year thereafter, at a rate equal to the sum of the then five-year Government of Canada bond yield plus
2.66 percent (Series A Shares), 3.17 percent (Series E Shares), and 3.06 percent (Series G Shares).
(f)
Holders of Series B Shares and Series H Shares will be entitled to receive cumulative quarterly floating dividends, which will reset each quarter thereafter at
a rate equal to the sum of the then 90-day Government of Canada Treasury Bill rate plus 2.66 percent (Series B Shares) and 3.06 percent (Series H Shares).
Each quarterly dividend is calculated as the annualized amount multiplied by the number of days in the quarter, divided by the number of days in the year.
Commencing December 31, 2021, the floating quarterly dividend rate is $0.17192 per share for Series B Shares and $0.196582 per share for Series H
Shares for the period starting December 31, 2021 to, but excluding, March 31, 2022.
(g)
Series B Shares can be redeemed for $25.50 per share on any date after September 30, 2015 that is not a Series B conversion date, plus all accrued and
unpaid dividends to, but excluding, the date fixed for redemption. Series H Shares can be redeemed for $25.50 per share on any date after September 30,
2019 that is not a Series H conversion date, plus all accrued and unpaid dividends to, but excluding, the date fixed for redemption.
(h) Holders of Series C Shares will be entitled to receive cumulative quarterly fixed dividends, which will reset on the redeemable and conversion option date
and every fifth year thereafter, at a rate equal to the sum of the five-year U.S. Government bond yield plus 3.58 percent.
Share Option Plan
AltaGas has an employee share option plan under which officers, employees, and service providers (as defined by the TSX)
are eligible to receive grants. As at December 31, 2021, 12,976,162 shares were reserved for issuance under the plan.
As at December 31, 2021, share options granted under the plan have a term between six and ten years until expiry and vest
no longer than over a four‑year period.
As at December 31, 2021, the unexpensed fair value of share option compensation cost associated with future periods was $3
million (December 31, 2020 ‑ $4 million).
AltaGas Ltd. – 2021 MD&A and Financial Statements - 129
The following table summarizes information about the Corporation’s share options:
As at
Share options outstanding, beginning of year
Granted
Exercised
Forfeited
Expired
Share options outstanding, end of year
Share options exercisable, end of year
(a) Weighted average.
December 31, 2021
Options outstanding
Number of
options
8,362,211 $
1,878,670
(774,739)
(214,259)
(572,375)
8,679,508 $
4,435,287 $
Exercise
price (a)
21.06
18.77
17.44
25.24
33.26
19.98
20.72
December 31, 2020
Options outstanding
Number of
options
7,043,956 $
2,501,755
(88,082)
(631,549)
(463,869)
8,362,211 $
3,607,391 $
Exercise
price (a)
22.49
19.46
14.89
26.00
27.69
21.06
23.59
As at December 31, 2021, the aggregate intrinsic value of the total share options exercisable was $33 million (December 31,
2020 - $5 million), the total intrinsic value of share options outstanding was $68 million (December 31, 2020 - $9 million) and
the total intrinsic value of share options exercised was $5 million (December 31, 2020 - less than $1 million).
The following table summarizes the employee share option plan as at December 31, 2021:
Options outstanding
Options exercisable
Number
outstanding
Weighted
average
exercise price
Weighted average
remaining
contractual life
(years)
Number
exercisable
Weighted
average
exercise price
Weighted average
remaining
contractual life
(years)
$14.52 to $18.00
$18.01 to $25.08
$25.09 to $37.86
2,055,551 $
5,325,569
1,298,388
8,679,508 $
15.31
19.29
30.21
19.98
3.08
4.22
1.36
3.52
1,821,156 $
1,396,838
1,217,293
4,435,287 $
15.07
19.60
30.48
20.72
3.03
3.68
1.28
2.75
The fair value of each option granted is estimated on the date of grant using the Black-Scholes-Merton option pricing model.
The weighted average grant date fair value and assumptions are as follows:
Year ended December 31
Fair value per options ($)
Risk-free interest rate (%)
Expected life (years)
Expected volatility (%)
Annual dividend per share ($) (a)
Forfeiture rate (%)
2021
3.37
0.42
6
35.70
1.00
—
2020
2.61
1.54
6
25.40
0.96
—
(a)
Annual dividend per share is calculated based on a weighted average share price and forward dividend yields as the grant dates.
Phantom Unit Plan (Phantom Plan) and Deferred Share Unit Plan (DSUP)
AltaGas has a Phantom Plan for employees, executive officers, and directors, which includes restricted units (RUs) and
performance units (PUs) with vesting periods of 36 months from the grant date. In addition, AltaGas has a DSUP, pursuant to
which directors receive deferred share units (DSUs). DSUs granted under the DSUP vest immediately but settlement of the
DSUs occur when the individual ceases to be a director.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 130
PUs, RUs, and DSUs (number of units)
Balance, beginning of year
Granted
Vested and paid out
Forfeited
Units in lieu of dividends
Additional units added by performance factor
Outstanding, end of year
2021
5,732,134
1,405,190
(3,495,702)
(313,621)
126,250
28,889
3,483,140
2020
6,484,831
1,158,547
(681,841)
(1,342,832)
113,429
—
5,732,134
For the year ended December 31, 2021, the compensation expense recorded for the Phantom Plan and DSUP was $66 million
(2020 – $16 million). As at December 31, 2021, the unrecognized compensation expense relating to the remaining vesting
period for the Phantom Plan was $16 million (December 31, 2020 ‑ $23 million) and is expected to be recognized over the
vesting period.
26. Net Income Per Common Share
The following table summarizes the computation of net income per common share:
Numerator:
Net income applicable to controlling interests
Less: Preferred share dividends
Net income applicable to common shares
Denominator:
(millions of shares)
Weighted average number of common shares outstanding
Dilutive equity instruments (a)
Weighted average number of common shares outstanding - diluted
Basic net income per common share
Diluted net income per common share
(a) Determined using the treasury stock method.
Year Ended December 31
2021
2020
283 $
(53)
230 $
279.9
1.8
281.7
0.82 $
0.82 $
552
(66)
486
279.4
0.3
279.7
1.74
1.74
$
$
$
$
For the year ended December 31, 2021, 1.7 million share options (2020 – 7.0 million) were excluded from the diluted net
income per share calculation as their effects were anti‑dilutive.
27. Other Income
Year Ended December 31
Gains on asset sales (note 4)
Gain on remeasurement of previously held interest in AIJVLP (note 3)
Other components of net benefit cost (note 28)
Interest income and other revenue
Total
$
$
2021
6 $
—
64
11
81 $
2020
223
22
52
9
306
AltaGas Ltd. – 2021 MD&A and Financial Statements - 131
28. Pension Plans and Retiree Benefits
The costs of the defined benefit and post-retirement benefit plans are based on Management's estimate of the future rate of
return on the fair value of pension plan assets, salary escalations, mortality rates and other factors affecting the payment of
future benefits.
Defined Contribution Plan
AltaGas has a defined contribution (DC) pension plan for substantially all employees. The pension cost recorded for the DC
plan was $22 million for the year ended December 31, 2021 (2020 - $21 million).
Defined Benefit Plans
AltaGas has several defined benefit pension plans for unionized and non-unionized employees, including one in Canada
(which is comprised of five divisions) and five in the United States. The plans in the United States include a qualified, trusteed,
non-contributory defined benefit pension plan, and a non-funded defined benefit restoration plan maintained by Washington
Gas.
The defined benefit plans are partially funded except for three of the divisions in Canada and two plans in the United States
which are fully funded.
AltaGas’ most recent actuarial valuation of the Canadian defined benefit plan for funding purposes was completed for the year
ended December 31, 2019. AltaGas is required to file an actuarial valuation of its Canadian defined benefit plan with the
pension regulators at least every three years. The next actuarial valuation for funding purposes is required to be completed as
of a date no later than December 31, 2022, and will be filed with the pension regulators in 2023. Actuarial valuations for
funding purposes are required annually for AltaGas’ U.S. defined benefit plans.
AltaGas plans to wind-up the Canadian defined benefit plan in 2022. As the decision to wind-up the plan was made in 2021, a
curtailment of less than $1 million was recorded to AOCI for the year ended December 31, 2021.
Supplemental Executive Retirement Plans (SERP)
AltaGas has non-registered defined benefit plans that provide defined benefit pension benefits to eligible executives based on
average earnings, years of service and age at retirement. The SERP benefits will be paid from the general revenue of the
Corporation as payments come due or from the Rabbi Trusts funded as part of the WGL acquisition. Security will be provided
for the SERP benefits through a letter of credit within a retirement compensation arrangement trust account.
Several executive officers of Washington Gas participate in a separate non-funded defined benefit SERP (a non-qualified
pension plan). This defined benefit SERP was closed to new entrants beginning January 1, 2010.
Post-Retirement Benefit Plans
AltaGas has several post-retirement benefit plans for unionized and non-unionized employees, including one in Canada and
five in the United States. The post-retirement benefit plan in Canada is limited to the payment of life insurance and an annual
allocation to a Healthcare Spending Account (HSA). This benefit plan is not funded.
Post-retirement benefit plans in the United States provide certain medical, prescription drug, dental, and life insurance benefits
to eligible retired employees, their spouses and covered dependents. Benefits are based on a combination of the retiree's age
and years of service at retirement. For eligible Washington Gas retirees and dependents not yet receiving Medicare benefits,
AltaGas Ltd. – 2021 MD&A and Financial Statements - 132
Washington Gas provides medical, prescription drug, and dental benefits through Preferred Provider Organization (PPO) or
Health Maintenance Organization (HMO) plans, through the Washington Gas Light Company Retiree Medical Plan. For
Medicare-eligible retirees age 65 and older and their dependents, eligible retirees and dependents participate in a tax-free
Health Reimbursement Account (HRA) Plan. The HRA plan provides an annual subsidy to help purchase supplemental
medical, prescription drug and dental coverage in the marketplace. One of these benefit plans is partially funded, three are
fully funded, and one is not funded.
Rabbi Trusts
Rabbi trusts of $18 million as at December 31, 2021 have been funded to satisfy the employee benefit obligations associated
with WGL’s various pension plans (December 31, 2020 - $28 million). These balances are included in prepaid expenses and
other current assets and long-term investments and other assets in the Consolidated Balance Sheets.
The following table summarizes the details of the defined benefit plans, including the SERP and post-retirement plans in
Canada and the United States:
Year Ended December 31, 2021
Canada
United States
Total
Defined
Benefit
Post-
Retirement
Benefits
Defined
Benefit
Post-
Retirement
Benefits
Defined
Benefit
Post-
Retirement
Benefits
Projected benefit obligation (a)
Balance, beginning of year
$
37 $
2 $
1,800 $
452 $
1,837 $
Actuarial gain
Current service cost
Member contributions
Interest cost
Benefits paid
Expenses paid
Settlements
Plan amendments
Foreign exchange translation
Balance, end of year
Plan assets
Fair value, beginning of year
Actual return on plan assets
Employer contributions
Member contributions
Benefits paid
Expenses paid
Settlements
Other
Foreign exchange translation
Fair value, end of year
Funded status
(4)
4
—
1
(4)
—
—
—
—
—
—
—
—
—
—
—
—
—
(39)
23
—
49
(74)
(1)
(7)
—
(8)
(19)
10
2
12
(25)
—
—
(1)
(1)
(43)
27
—
50
(78)
(1)
(7)
—
(8)
454
(19)
10
2
12
(25)
—
—
(1)
(1)
$
$
34 $
2 $
1,743 $
430 $
1,777 $
432
16 $
— $
1,667 $
1,016 $
1,683 $
1,016
—
4
—
(4)
—
—
—
—
$
$
16 $
(18) $
—
—
—
—
—
—
—
—
— $
(2) $
125
11
—
(74)
(1)
(7)
—
(6)
67
—
2
(23)
—
—
—
(4)
125
15
—
(78)
(1)
(7)
—
(6)
67
—
2
(23)
—
—
—
(4)
1,715 $
1,058 $
1,731 $
(28) $
628 $
(46) $
1,058
626
(a) For post-retirement benefit plans, the projected benefit obligation represents the accumulated benefit obligation.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 133
Year Ended December 31, 2020
Canada
United States
Total
Defined
Benefit
Post-
Retirement
Benefits
Defined
Benefit
Post-
Retirement
Benefits
Defined
Benefit
Post-
Retirement
Benefits
Projected benefit obligation (a)
Balance, beginning of year
Actuarial loss (gain)
Current service cost
Member contributions
Interest cost
Benefits paid
Expenses paid
Settlements
Foreign exchange translation
Balance, end of year
Plan assets
Fair value, beginning of year
Actual return on plan assets
Employer contributions
Member contributions
Benefits paid
Expenses paid
Settlements
Foreign exchange translation
Fair value, end of year
Funded status
$
36 $
2 $
1,725 $
428 $
1,761 $
1
3
—
1
(4)
—
—
—
—
—
—
—
—
—
—
—
137
27
—
60
(82)
(1)
(25)
(41)
32
9
2
15
(24)
—
—
(10)
138
30
—
61
(86)
(1)
(25)
(41)
37 $
2 $
1,800 $
452 $
1,837 $
15 $
— $
1,504 $
$
$
1
4
—
(4)
—
—
—
$
$
16 $
(21) $
—
—
—
—
—
—
—
— $
(2) $
275
37
—
(82)
(1)
(25)
(41)
906 $
157
—
2
(24)
—
—
(25)
1,519 $
276
41
—
(86)
(1)
(25)
(41)
1,667 $
1,016 $
1,683 $
(133) $
564 $
(154) $
1,016
562
430
32
9
2
15
(24)
—
—
(10)
454
906
157
—
2
(24)
—
—
(25)
(a) For post-retirement benefit plans, the projected benefit obligation represents the accumulated benefit obligation.
For the year ended December 31, 2021, AltaGas' defined benefit and post-retirement benefit pension plans incurred actuarial
gains primarily due to the increase in discount rates, which were the result of an increase in high-quality corporate bond yield
curves in the Canadian and U.S. markets. For the year ended December 31, 2020, AltaGas' defined benefit plans incurred
actuarial losses due to the decrease in discount rates, which were the result of a decline in high-quality corporate bond yield
curves in the Canadian and U.S. markets. In 2020, AltaGas' post-retirement benefits plans also incurred actuarial losses
primarily due to the previously mentioned decrease in discount rates, as well as updated census data and assumptions related
to the HRA.
The following amounts were included in the Consolidated Balance Sheets:
December 31, 2021
Defined
Benefit
Post-
Retirement
Benefits
Total
Prepaid post-retirement benefits
Accounts payable and accrued liabilities (a)
Future employee obligations
$
37 $
637 $
674 $
(8)
(75)
—
(11)
(8)
(86)
December 31, 2020
Defined
Benefit
Post-
Retirement
Benefits
— $
(9)
(145)
572 $
—
(10)
(a) Account balances on the Consolidated Balance Sheets also include certain non-pension related amounts.
$
(46) $
626 $
580 $
(154) $
562 $
Total
572
(9)
(155)
408
AltaGas Ltd. – 2021 MD&A and Financial Statements - 134
The accumulated benefit obligation for all defined benefit plans were:
As at
December 31, 2021
December 31, 2020
Canada United States
Canada
United States
Accumulated benefit obligation (a)
$
33 $
1,659 $
36 $
1,704
(a)
Accumulated benefit obligation differs from projected benefit obligation in that it does not include an assumption with respect to future compensation levels.
For those pension plans where the projected benefit obligation exceeded the fair value of plan assets as at December 31,
2021, the cumulative obligation and asset balances were:
As at
Projected benefit obligation
Plan assets
December 31, 2021
December 31, 2020
Defined
Benefit
375 $
289 $
$
$
Post-
Retirement
Benefits
14 $
3 $
Defined
Benefit
1,824 $
1,670 $
Post-
Retirement
Benefits
14
3
For those pension plans where the accumulated benefit obligation exceeded the fair value of plan assets as at December 31,
2021, the cumulative obligation and asset balances were:
As at
Accumulated benefit obligation
Plan assets
December 31, 2021
December 31, 2020
Defined
Benefit
221 $
158 $
$
$
Post-
Retirement
Benefits
14 $
3 $
Defined
Benefit
427 $
329 $
Post-
Retirement
Benefits
14
3
The following amounts were recorded in other comprehensive income (loss) and have not yet been recognized in net periodic
benefit cost:
Year Ended December 31, 2021
Canada
United States
Total
Past service cost
Net actuarial gain (loss)
Recognized in AOCI pre-tax
Increase (decrease) by the amount
included in deferred tax liabilities
Net amount in AOCI after-tax
Year Ended December 31, 2020
Past service cost
Net actuarial gain (loss)
Recognized in AOCI pre-tax
Increase (decrease) by the amount
included in deferred tax liabilities
Net amount in AOCI after-tax
Defined
Benefit
Post-
Retirement
Benefits
Defined
Benefit
Post-
Retirement
Benefits
Defined
Benefit
Post-
Retirement
Benefits
— $
(5)
(5) $
1
(4) $
— $
(1)
(1) $
—
(1) $
— $
4
4 $
(1)
3 $
(2) $
(6)
(8) $
2
(6) $
Canada
United States
(2)
(7)
(9)
2
(7)
— $
(1)
(1) $
—
(1) $
Total
Defined
Benefit
Post-
Retirement
Benefits
Defined
Benefit
Post-
Retirement
Benefits
Defined
Benefit
Post-
Retirement
Benefits
— $
(9)
(9) $
2
(7) $
— $
(1)
(1) $
—
(1) $
— $
6
6 $
(2)
4 $
(3) $
(8)
(11) $
3
(8) $
— $
(3)
(3) $
—
(3) $
(3)
(9)
(12)
3
(9)
$
$
$
$
$
$
AltaGas Ltd. – 2021 MD&A and Financial Statements - 135
The following amounts were recorded in a regulatory asset (liability) and have not yet been recognized in net periodic benefit
cost:
Year Ended December 31, 2021
Canada
United States
Total
Past service credit
Net actuarial gain
Recognized in regulatory liability
Year Ended December 31, 2020
Past service credit
Net actuarial loss (gain)
$
$
$
Recognized in regulatory asset (liability)
$
Defined
Benefit
Post-
Retirement
Benefits
Defined
Benefit
Post-
Retirement
Benefits
Defined
Benefit
— $
—
— $
— $
—
— $
— $
(26)
(77) $
(289)
(26) $
(366) $
Canada
United States
Total
Defined
Benefit
Post-
Retirement
Benefits
Defined
Benefit
Post-
Retirement
Benefits
Defined
Benefit
— $
—
— $
— $
—
— $
— $
68
68 $
(94) $
(241)
(335) $
Post-
Retirement
Benefits
(77)
— $
(26)
(26) $
(289)
(366)
Post-
Retirement
Benefits
(94)
— $
68
68 $
(241)
(335)
The costs of the defined benefit and post-retirement benefit plans are based on Management's estimate of the future rate of
return on the fair value of pension plan assets, salary escalations, mortality rates and other factors affecting the payment of
future benefits.
The net pension expense by plan was as follows:
Year Ended December 31, 2021
Canada
United States
Total
Defined
Benefit
Post-
Retirement
Benefits
Defined
Benefit
Post-
Retirement
Benefits
Defined
Benefit
Post-
Retirement
Benefits
Current service cost (a)
Interest cost (b)
Expected return on plan assets (b)
Amortization of past service credit (b)
Amortization of net actuarial loss (gain) (b)
Plan settlements (b)
Net benefit cost (income) recognized
$
4 $
— $
23 $
10 $
27 $
1
(1)
—
1
—
—
—
—
—
—
$
5 $
— $
49
(76)
—
6
2
4 $
12
(34)
(18)
(6)
—
(36) $
50
(77)
—
7
2
9 $
10
12
(34)
(18)
(6)
—
(36)
(a) Recorded under the line item “operating and administrative” expenses on the Consolidated Statements of Income.
(b) Recorded under the line item “other income” on the Consolidated Statements of Income.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 136
Year Ended December 31, 2020
Canada
United States
Total
Defined
Benefit
Post-
Retirement
Benefits
Defined
Benefit
Post-
Retirement
Benefits
Defined
Benefit
Post-
Retirement
Benefits
Current service cost (a)
Interest cost (b)
Expected return on plan assets (b) (c)
Amortization of past service credit (b)
Amortization of net actuarial loss (gain) (b) (c)
Plan settlements (b)
Net benefit cost (income) recognized
$
3 $
— $
27 $
9 $
30 $
1
(1)
—
1
—
—
—
—
—
—
60
(81)
—
10
7
15
(40)
(19)
(5)
—
61
(82)
—
11
7
$
4 $
— $
23 $
(40) $
27 $
9
15
(40)
(19)
(5)
—
(40)
(a) Recorded under the line item “operating and administrative” expenses on the Consolidated Statements of Income.
(b) Recorded under the line item “other income” on the Consolidated Statements of Income.
(c)
Includes the impact of the voluntary change in accounting principle implemented in 2020. Refer to Note 2 for additional information.
The objective for fund returns for the Canadian defined benefit pension plan is a liability-matching fixed income portfolio that is
constructed to have similar characteristics as the liabilities of the pension plan. The liability-matching fixed income portfolio is
determined as the combination of fixed income indices that exhibit the same sensitivity to real and nominal interest rate
changes as the liabilities of the pension plan.
The objective for fund returns for the pension plans in the United States, over three to five-year periods, is the sum of two
components - a passive component, which is the benchmark index market returns for the asset mix in effect, plus the added
value expected from active management, if applicable to the fund. It is the Corporation’s belief that the potential additional
returns justify the additional risk associated with active management. The risk inherent in the investment strategy over a
market cycle (a three-to five-year period) is two-fold. There is a risk that the market returns, as measured by the benchmark
returns, will not be in line with expectations. The other risk is that the expected added value of active management over
passive management will not be realized over the time period prescribed in each fund manager's mandate. There is also the
risk of annual volatility in returns, which means that in any one year the actual return may be very different from the expected
return.
Cash and money market investments may be held from time to time as short-term investment decisions at the discretion of the
fund manager(s) within the constraints prescribed by their mandate(s).
The Corporation's target asset mix for the Canadian defined benefit plan is 100 percent fixed income assets. The target asset
mix for SEMCO plans is 33 percent fixed income assets, for WGL plans is 50 percent to 70 percent fixed income assets.
These objectives have taken into account the nature of the liabilities and the risk-reward tolerance of the Corporation.
The collective investment mixes for the plans are as follows as at December 31, 2021:
Canada
Cash and short-term equivalents
Fixed income
Fair value
Level 1
Level 2
$
$
2 $
14
16 $
2 $
14
16 $
—
—
—
Percentage of
Plan Assets
(%)
13
87
100
AltaGas Ltd. – 2021 MD&A and Financial Statements - 137
United States
Cash and short-term equivalents
Canadian equities
Foreign equities (a)
Fixed income
Derivatives
Other (b)
Total investments in the fair value hierarchy
Investments measured at net asset value
using the NAV practical expedient (c)
Commingled funds (d)
Private equity/limited partnership (e)
Pooled separate accounts (f)
Collective trust fund (g)
Total fair value of plan investments
Net receivable (h)
Fair value
Level 1
8 $
2
350
148
—
—
508 $
$
$
$
$
$
8 $
2
350
1,074
6
17
1,457 $
760
46
38
467
2,768
5
2,773
Level 2
—
—
—
926
6
17
949
Percentage of
Plan Assets
(%)
—
—
13
39
—
1
53
27
2
1
17
100
—
100
(a)
(b)
(c)
Investments in foreign equities include U.S. and international securities.
As at December 31, 2021, these investments consisted primarily of non-U.S. government bonds.
In accordance with ASC Topic 820, these investments are measured at fair value using net asset value (NAV) per share as a practical expedient and,
therefore, have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliations of the fair
value hierarchy to the statements of net assets available for plan benefits.
(d)
As at December 31, 2021, investments in commingled funds consisted of approximately 51 percent common stock of large-cap U.S. companies, 21 percent
U.S. Government fixed income securities, and 28 percent corporate bonds for WGL’s post-retirement benefit plans.
As at December 31, 2021, investments in a private equity/limited partnership consisted of common stock of international companies.
As at December 31, 2021, investments in pooled separate accounts consisted of 100 percent income producing properties located in the United States.
As at December 31, 2021, investments in collective trust funds consisted primarily of 91 percent common stock of U.S, companies, and 9 percent income
(e)
(f)
(g)
producing properties located in the United States.
(h)
As at December 31, 2021, this net receivable primarily represents pending trades for investments sold and interest receivable net of pending trades for
investments purchased.
Total
Cash and short-term equivalents
Canadian equities
Foreign equities (a)
Fixed income
Derivatives
Other (b)
Total investments in the fair value hierarchy
Investments measured at net asset value using
the NAV practical expedient (c)
Commingled funds(d)
Private equity/limited partnership (e)
Pooled separate accounts (f)
Collective trust fund (g)
Total fair value of plan investments
Net receivable (h)
Fair value
Level 1
10 $
2
350
162
—
—
524 $
$
$
$
$
$
10 $
2
350
1,088
6
17
1,473 $
760
46
38
467
2,784
5
2,789
Level 2
—
—
—
926
6
17
949
Percentage of
Plan Assets
(%)
—
—
13
39
—
1
53
27
2
1
17
100
—
100
(a)
(b)
(c)
Investments in foreign equities include U.S. and international securities.
As at December 31, 2021, these investments consisted primarily of non-U.S. government bonds.
In accordance with ASC Topic 820, these investments are measured at fair value using net asset value (NAV) per share as a practical expedient and,
therefore, have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliations of the fair
value hierarchy to the statements of net assets available for plan benefits.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 138
(d)
As at December 31, 2021, investments in commingled funds consisted of approximately 51 percent common stock of large-cap U.S. companies, 21 percent
U.S. Government fixed income securities, and 28 percent corporate bonds for WGL’s post-retirement benefit plans.
(e)
(f)
(g)
As at December 31, 2021, investments in a private equity/limited partnership consisted of common stock of international companies.
As at December 31, 2021, investments in pooled separate accounts consisted of 100 percent income producing properties located in the United States.
As at December 31, 2021, investments in collective trust funds consisted primarily of 91 percent common stock of U.S, companies, and 9 percent income
producing properties located in the United States.
(h)
As at December 31, 2021, this net receivable primarily represents pending trades for investments sold and interest receivable net of pending trades for
investments purchased.
Year Ended December 31
Significant actuarial assumptions used in measuring net
benefit plan costs
Discount rate (%)
Expected long-term rate of return on plan assets (%) (a)
Rate of compensation increase (%)
(a) Only applicable for funded plans
2021
2020
Defined
Benefit
Post-
Retirement
Benefits
Defined
Benefit
Post-
Retirement
Benefits
1.90 - 2.85
2.50 - 3.10
2.30 - 3.50
3.10 - 3.60
4.75 - 7.00
3.37 - 7.00
5.25 - 7.05
4.03 - 7.05
1.00 - 4.00
2.50 - 3.00
2.75 - 4.00
3.50
As at December 31
Significant actuarial assumptions used in measuring
benefit obligations
Discount rate (%)
Rate of compensation increase (%)
2021
2020
Defined
Benefit
2.50 - 3.10
2.50 - 4.00
Post-
Retirement
Benefits
Defined
Benefit
Post-
Retirement
Benefits
3.10
3.00
1.90 - 2.80
2.50 - 2.90
1.73 - 3.93
2.50 - 3.00
The expected rate of return on assets is based on the current level of expected returns on risk free investments, the historical
level of risk premium associated with other asset classes in which the portfolio is invested, and the expectations for future
returns of each asset class. The expected return for each asset class was then weighted based on the target asset allocation
to develop the expected rate of return on assets assumption for the portfolio.
The discount rate is based on yields available on high-quality long-term corporate bonds, with maturities matching the
estimated timing and amount of expected benefit payments.
The estimates for health care benefits take into consideration increased health care benefits due to aging and cost increases
in the future. The assumed health care cost trend rate used to measure the expected cost of benefits for the next year was
between 2.5 and 6.0 percent. The health care cost trend rates were assumed to decline to between 2.5 and 4.5 percent by
2028.
The following table shows the expected cash flows for defined benefit pension and other post-retirement plans:
Expected employer contributions:
2022
Expected benefit payments:
2022
2023
2024
2025
2026
2027 - 2031
Defined
Benefit
Post-Retirement
Benefits
$
$
$
$
$
$
$
12 $
91 $
88 $
89 $
90 $
91 $
468 $
—
22
21
21
21
21
110
AltaGas Ltd. – 2021 MD&A and Financial Statements - 139
29. Commitments, Guarantees, and Contingencies
Commitments
AltaGas has long-term natural gas purchase and transportation arrangements, LPG purchase agreements, crude oil and
condensate purchase agreements, electricity purchase arrangements, service agreements, pipeline and storage service
contracts, capital commitments, environmental commitments, merger commitments, and operating leases for office space,
office equipment, vehicles, rail cars, land, storage, aquatic surface use, and other equipment, all of which are transacted at
market prices and in the normal course of business.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 140
Future payments of these commitments as at December 31, 2021 are estimated as follows:
Gas purchase (a)
Pipeline and storage services (b)
LPG purchase (c)
Electricity purchase (d)
Operating leases (e)
Service agreements (f) (g) (h)
Environmental (i)
Post-acquisition contingent payments (j)
Crude oil and condensate purchase (k)
Merger commitments (l)
Capital projects (m)
2022
2023
2024
2025
2026
2027 &
beyond
Total
$ 1,128 $
900 $
799 $
760 $
719 $ 3,400 $ 7,706
450
436
425
92
49
13
16
13
2
3
400
342
243
73
42
2
—
1
2
—
339
252
121
83
31
1
—
—
2
—
310
199
271
139
893 2,663
267 1,635
39
69
27
1
—
—
1
—
4
62
26
1
—
—
1
—
—
196
259
—
—
—
1
—
832
575
434
18
16
14
9
3
$ 2,627 $ 2,005 $ 1,628 $ 1,406 $ 1,223 $ 5,016 $ 13,905
(a)
AltaGas enters into contracts to purchase natural gas from various suppliers for its utilities. These contracts are used to ensure that there is an adequate
supply of natural gas to meet the needs of customers and to minimize exposure to market price fluctuations. Gas purchase commitments are valued based
on fixed prices and forward prices, which may fluctuate significantly from period to period.
(b)
Pipeline and storage commitments include minimum payments for natural gas transportation, storage and peaking contracts that have expiration dates
through 2044.
(c)
AltaGas enters into contracts to purchase LPGs for its operations at RIPET and Ferndale. These contracts are used to ensure that there is an adequate
supply of LPGs to meet shipment commitments and to minimize exposure to market price fluctuations. LPG purchase commitments are valued based on
forward prices, which may fluctuate significantly from period to period.
(d)
AltaGas enters into contracts to purchase electricity from various suppliers for its non-utility business. Electricity purchase commitments are based on
existing fixed price and fixed volume contracts, and include US$48 million of commitments related to renewable energy credits.
(e) Operating leases include lease arrangements for office space, office equipment, field equipment, rail cars, aquatic use, vehicles, power and gas facilities,
transmission and distribution assets, and land. Operating leases also include US$150 million in future undiscounted cash flows associated with leasing
arrangements for the use of Very Large Gas Carriers (VLGCs) that are anticipated to commence between 2023 and 2024.
(f)
In 2014, AltaGas' Blythe facility entered into a Long-Term Service Agreement (LTSA) with a service pro to complete various upgrade and maintenance
services on the Combustion Turbines (CT) at the Blythe facility over 124,000 equivalent operating hours per CT, or 25 years, whichever comes first. The
LTSA has variable fees on a per equivalent operating hour basis. As at December 31, 2021, the total commitment was $147 million payable over the next 14
(g)
(h)
(i)
(j)
(k)
years, of which $48 million is expected to be paid over the next 5 years.
In 2017, AltaGas entered into a 12-year service agreement commencing in 2019 for tug services to support the marine operations of RIPET.
In 2015, AltaGas entered into a Project Agreement that contemplated the sublease of lands from Ridley Terminals Inc. (RTI), provision of certain terminal
services, and access to RTI's terminal facilities to support RIPET's operations for an initial term of 20 years ending in 2039. In 2019, RILE LP and RTI
executed a Terminal Services Agreement that formalized the concepts outlined in the Project Agreement.
Environmental commitments include committed payments related to certain environmental response costs.
Contingent payments of up to $16 million are expected to be paid related to the Petrogas Acquisition (Note 3).
AltaGas enters into contracts to purchase crude oil and condensates for marketing, sale, and distribution. These contracts are used to ensure that there is an
adequate supply of crude oil and condensates to meet the needs of customers and to minimize exposure to market price fluctuations. Crude oil and
condensate commitments are valued based on forward prices, which may fluctuate significantly from period to period.
(l)
Represents the estimated future payments of WGL merger commitments that have been accrued but not paid. As at December 31, 2021, the cumulative
amount of merger commitments that have been expensed but not yet paid is approximately US$7 million. Additionally, there are a number of operational
commitments, including the funding of leak mitigation and reducing leak backlogs, the funding of damage prevention efforts, developing projects to extend
natural gas service, maintaining pre-merger quality of service standards including odor call response times, increasing supplier diversity, achieving synergy
savings benefits, as well as reporting and tracking related to all the commitments, and developing 15 megawatts of either electric grid energy storage or Tier
1 renewable resources within five years after the merger closed.
(m) Commitments for capital projects. Estimated amounts are subject to variability depending on the actual construction costs.
Guarantees
AltaGas has guaranteed payments primarily for certain commitments on behalf of some of its subsidiaries. AltaGas has also
guaranteed payments for certain of its external partners. With the sale of WGL Midstream in the second quarter of 2021, as at
December 31, 2021, a US$25 million WGL performance guarantee to a former WGL Midstream wholesale counterparty
remained in effect until the purchaser can transfer the credit support. In return, the purchaser provided a US$25 million third-
AltaGas Ltd. – 2021 MD&A and Financial Statements - 141
party bank letter of credit in which WGL is the beneficiary. As at December 31, 2021, AltaGas has no other guarantees issued
on behalf of external parties.
Contingencies
AltaGas and its subsidiaries are subject to various legal claims and actions arising in the normal course of business. While the
final outcome of such legal claims and actions cannot be predicted with certainty, the Corporation does not believe that the
resolution of such claims and actions will have a material impact on the Corporation’s consolidated financial position or results
of operations.
30. Related Party Transactions
In the normal course of business, AltaGas transacts with its subsidiaries, affiliates and joint ventures. Amounts due to or from
related parties on the Consolidated Balance Sheets were measured at the exchange amount and were as follows:
As at
Due from related parties
Accounts receivable (a)
Due to related parties
Accounts payable (b)
(a) Receivables from joint ventures, affiliates and from a former affiliate of Petrogas.
(b)
Payables to a joint venture, affiliates and a former affiliate of Petrogas.
December 31,
2021
December 31,
2020
$
$
7 $
7 $
5
3
The following transactions with related parties have been recorded on the Consolidated Statements of Income for the years
ended December 31, 2021 and 2020:
Year Ended December 31
Revenue (a)
Cost of sales (b)
Operating and administrative expenses (c)
Other income (d)
2021
2020
— $
6 $
— $
— $
92
12
1
3
$
$
$
$
(a)
Prior to the disposition of AltaGas' equity interest in ACI (now named TriSummit Utilities Inc.) and the acquisition of Petrogas, in the ordinary course of
business, AltaGas sold commodities to TriSummit Utilities Inc. and Petrogas.
(b)
In the ordinary course of business, AltaGas obtained natural gas storage services from a joint venture as well as incurred costs related to the sale of natural
gas liquids to affiliates.
(c)
(d)
Subsequent to the close of the Petrogas Acquisition, certain operating and administrative expenses were paid on behalf of Petrogas by a former affiliate.
Interest income from loans to Petrogas (secured loan facility) prior to the acquisition of Petrogas.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 142
31. Supplemental Cash Flow Information
The following table details the changes in operating assets and liabilities from operating activities:
Source (use) of cash:
Accounts receivable
Inventory
Risk management assets - current
Other current assets
Regulatory assets - current
Accounts payable and accrued liabilities
Customer deposits
Regulatory liabilities - current
Risk management liabilities - current
Other current liabilities
Other operating assets and liabilities
Changes in operating assets and liabilities
The following table details the changes in non-cash investing and financing activities:
Decrease (increase) of balance:
Common shares issued under DRIP
Exercise of stock options
Common share dividends payable
Net right-of-use assets obtained in exchange for new operating lease liabilities
Net right-of-use assets obtained in exchange for new finance lease liabilities
Capital expenditures included in accounts payable and accrued liabilities
The following cash payments have been included in the determination of earnings:
Interest paid (net of capitalized interest)
Income taxes paid
Year Ended
December 31
2021
2020
(206) $
(232)
4
4
(3)
92
27
(12)
(1)
21
(104)
(410) $
21
32
(30)
31
(33)
(41)
(2)
(55)
(1)
4
(129)
(203)
Year Ended
December 31
2021
2020
— $
2 $
22 $
(38) $
(10) $
33 $
(6)
—
—
(227)
(6)
(33)
Year Ended
December 31
2021
279 $
69 $
2020
276
23
$
$
$
$
$
$
$
$
$
$
AltaGas Ltd. – 2021 MD&A and Financial Statements - 143
The following table is a reconciliation of cash and restricted cash balances:
As at December 31
Cash and cash equivalents
Restricted cash holdings from customers - current
Restricted cash holdings from customers - non-current
Restricted cash included in prepaid expenses and other current assets (a)
Restricted cash included in long-term investments and other assets (note 12) (a)
Restricted cash included in accounts receivable (note 29)
Cash, cash equivalents, and restricted cash per Consolidated Statements of Cash Flows
$
$
2021
63 $
3
—
8
10
—
84 $
2020
32
3
2
9
19
9
74
(a)
The restricted cash balances included in prepaid expenses and other current assets and long-term investments and other assets relate to Rabbi trusts
associated with WGL’s pension plans (see Note 28).
32. Segmented Information
AltaGas owns and operates a portfolio of assets and services used to move energy from the source to the end‑user. The
following describes the Corporation’s reporting segments:
Utilities
Midstream
n rate-regulated natural gas distribution assets in Michigan, Alaska, the District of Columbia,
Maryland, and Virginia;
n rate-regulated natural gas storage in the United States; and
n sale of energy to residential, commercial and industrial customers in Washington D.C.,
Maryland, Virginia, Delaware, Pennsylvania and Ohio.
n NGL processing and extraction plants;
n natural gas storage facilities;
n liquefied petroleum gas (LPG) export terminals;
n transmission pipelines to transport natural gas and NGLs;
n natural gas gathering lines and field processing facilities;
n purchase and sale of natural gas;
n natural gas and NGL marketing;
n marketing, storage and distribution of wellsite fluids and fuels, crude oil and condensate diluents; and
n interest in a regulated pipeline in the Marcellus/Utica gas formation.
Corporate/
Other
n the cost of providing corporate services, financing and general corporate overhead, corporate assets,
financing other segments, and the effects of changes in the fair value of certain risk management
contracts; and
n a small portfolio of remaining power assets.
The following table provides a reconciliation of segment revenue to the disaggregated revenue table disclosed in Note 24:
External revenue (note 24)
Intersegment revenue
Segment revenue
Year Ended December 31, 2021
Corporate/
Other
Midstream
Utilities
$
$
3,936 $
—
3,936 $
6,533 $
2
6,535 $
104 $
—
104 $
Total
10,573
2
10,575
AltaGas Ltd. – 2021 MD&A and Financial Statements - 144
External revenue (note 24)
Intersegment revenue
Segment revenue
Geographic Information
Year Ended December 31
Revenue (a)
Canada
United States
Total
Year Ended December 31, 2020
Corporate/
Other
Midstream
Utilities
$
$
3,817 $
—
3,817 $
1,635 $
1
1,636 $
135 $
—
135 $
Total
5,587
1
5,588
2021
2020
$
$
6,420 $
4,304
10,724 $
1,512
4,053
5,565
(a) Operating revenue from external customers, excluding unrealized gains or losses on risk management contracts.
As at December 31
Property, plant and equipment
Canada
United States
Total
Operating right-of-use assets
Canada
United States
Total
The following tables show the composition by segment:
2021
2020
3,109 $
8,214
11,323 $
3,149
7,739
10,888
239 $
72
311 $
293
79
372
$
$
$
$
Year Ended December 31, 2021
Corporate/
Other
Intersegment
Elimination (a)
Utilities Midstream
Segment revenue (note 24)
Cost of sales
Operating and administrative
Accretion expenses
Depreciation and amortization
Provisions on assets (note 6)
Income (loss) from equity investments
Other income
Foreign exchange gains (losses)
Interest expense
Income (loss) before income taxes
Net additions (reductions) to:
Property, plant and equipment (b)
Intangible assets
$
$
$
$
3,936 $
(2,273)
(906)
(1)
(285)
—
2
65
—
—
538 $
6,535 $
(5,412)
(475)
(6)
(104)
(59)
(263)
16
10
—
242 $
705 $
2 $
(284) $
2 $
104 $
(25)
(95)
1
(33)
(5)
—
—
(6)
(275)
(334) $
8 $
2 $
(2) $
2
—
—
—
—
—
—
—
—
— $
— $
— $
Total
10,573
(7,708)
(1,476)
(6)
(422)
(64)
(261)
81
4
(275)
446
429
6
(a)
Intersegment transactions are recorded at market value.
(b) Net additions to property, plant, and equipment, and intangible assets may not agree to changes reflected in the Consolidated Statements of Cash Flows due
to classification of business acquisition and foreign exchange changes on U.S. assets.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 145
Year Ended December 31, 2020
Corporate/
Other
Intersegment
Elimination (a)
Utilities Midstream
Segment revenue (note 24)
Cost of sales
Operating and administrative
Accretion expenses
Depreciation and amortization
Provision on assets (note 6)
Income from equity investments
Other income
Foreign exchange gains (losses)
Interest expense
Income (loss) before income taxes
Net additions (reductions) to:
Property, plant and equipment (b) (c)
Intangible assets
$
$
$
$
3,817 $
(2,156)
(942)
—
(295)
(1)
5
259
—
—
687 $
1,636 $
(994)
(254)
(4)
(86)
(105)
44
24
(26)
—
235 $
703 $
3 $
136 $
3 $
135 $
(29)
(71)
(1)
(33)
(3)
—
23
30
(274)
(223) $
(51) $
4 $
(1) $
1
—
—
—
—
—
—
—
—
— $
— $
— $
Total
5,587
(3,178)
(1,267)
(5)
(414)
(109)
49
306
4
(274)
699
788
10
(a)
Intersegment transactions are recorded at market value.
(b) Net additions to property, plant, and equipment, and intangible assets may not agree to changes reflected in the Consolidated Statements of Cash Flows due
to classification of business acquisition and foreign exchange changes on U.S. assets.
(c)
In 2021, Management determined that it would include adjustments for the cost of removal of utility assets in net additions to property, plant and equipment.
Comparative periods have been restated to reflect this change.
The following table shows goodwill and total assets by segment:
As at December 31, 2021
Goodwill
Segmented assets
As at December 31, 2020
Goodwill
Segmented assets
33. Subsequent Events
Utilities
Midstream
Corporate/
Other
$
$
$
$
3,691 $
14,603 $
1,462 $
6,415 $
3,706 $
13,675 $
1,333 $
7,320 $
— $
575 $
— $
537 $
Total
5,153
21,593
5,039
21,532
On January 11, 2022, AltaGas closed its offering of $300 million of 5.25 percent Fixed-to-Fixed Rate Subordinated Notes,
Series 1, due January 11, 2082. As a result of the offering, based on current rates, AltaGas expects cash savings of
approximately $66 million over the initial ten-year term of the offering due to lower taxes and financing charges. The
subordinated notes were offered under AltaGas' short form base shelf prospectus dated February 22, 2021, as supplemented
by a prospectus supplement dated January 5, 2022. On February 16, 2022, AltaGas provided notice to shareholders of its
intention to use the proceeds of this offering to redeem all of its issued and outstanding Series K Preferred Shares on March
31, 2022 for a redemption price equal to $25.00 per Series K Share.
In January 2022, AltaGas agreed to sell one of its customers an interest in certain Midstream processing facilities for total
consideration of approximately $234 million. The transaction is expected to close in the second quarter of 2022.
On February 9, 2022, pursuant to the terms of a Membership Interest Purchase Agreement entered into on January 14, 2022
with an undisclosed buyer, AltaGas closed the sale of a 60 MW stand-alone energy storage development project in Goleta,
California for total proceeds of approximately US$15 million, subject to certain contingencies.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 146
On February 11, 2022, AltaGas entered into a stock purchase agreement to sell a 70MW combined cycle power plant in Brush,
Colorado. The transaction is expected to close in the second quarter of 2022.
Subsequent events have been reviewed through March 3, 2022, the date on which these audited Consolidated Financial
Statements were issued.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 147
SUPPLEMENTAL QUARTERLY OPERATING INFORMATION
Q4-21
Q3-21
Q2-21
Q1-21
Q4-20
OPERATING HIGHLIGHTS
UTILITIES
Natural gas deliveries - end use (Bcf) (1)
Natural gas deliveries - transportation (Bcf) (1)
Service sites (thousands) (2)
Degree day variance from normal - SEMCO Gas (%) (3)
Degree day variance from normal - ENSTAR (%) (3)
Degree day variance from normal - Washington Gas (%) (3) (4)
WGL retail energy marketing - gas sales volumes (Mmcf)
WGL retail energy marketing - electricity sales volumes (GWh)
44.0
31.2
1,689
(15.0)
11.9
(12.7)
16,299
3,167
12.2
21.4
1,676
(41.8)
16.9
—
7,682
3,738
72.6
43.1
1,675
(6.2)
9.7
(7.1)
22.4
25.3
1,673
(5.6)
9.0
20.8
9,887 24,696
3,249
3,201
50.0
35.6
1,672
(4.4)
0.2
(10.6)
18,053
3,257
MIDSTREAM
RIPET export volumes (Bbls/d) (5)
Ferndale export volumes (Bbls/d) (5) (6)
Total inlet gas processed (Mmcf/d) (5)
Extraction ethane volumes (Bbls/d) (5)
Extraction NGL volumes (Bbls/d) (5) (7)
Fractionated volumes (Bbls/d) (5)
Frac spread - realized ($/Bbl) (5) (8)
Frac spread - average spot price ($/Bbl) (5) (9)
Propane Far East Index (FEI) to Mont Belvieu spread (US$/Bbl) (5) (10)
Butane FEI to Mont Belvieu spread (US$/Bbl) (5) (11)
Natural gas optimization inventory (Bcf)
48,974 58,056 44,973 50,714 37,782
33,979
27,635 47,014 45,133 34,750
1,409
1,526
30,766
33,138
34,199
38,026
27,026
28,591
13.95
14.69
9.33
24.35
15.01
10.14
12.84
12.74
39.3
23.9
1,534
27,000
35,734
37,000
9.18
35.82
12.65
10.29
2.0
1,460
28,867
37,070
27,900
11.59
20.54
8.98
10.03
1.3
1,471
22,938
34,671
29,130
12.63
36.32
9.00
8.79
2.6
(1)
(2)
(3)
Bcf is one billion cubic feet.
Service sites reflect all of the service sites of the utilities, including transportation and non‑regulated business lines.
A degree day is a measure of coldness determined daily as the number of degrees the average temperature during the day in question is below 65
degrees Fahrenheit. Degree days for a particular period are determined by adding the degree days incurred during each day of the period. Normal
degree days for a particular period are the average of degree days during the prior 15 years for SEMCO Gas, during the prior 10 years for ENSTAR, and
during the prior 30 years for Washington Gas.
(4)
In certain of Washington Gas’ jurisdictions (Virginia and Maryland) there are billing mechanisms in place that are designed to eliminate the effects of
variance in customer usage caused by weather and other factors such as conservation. In the District of Columbia, there is no weather normalization
billing mechanism nor does Washington Gas hedge to offset the effects of weather. As a result, colder or warmer weather will result in variances to
financial results.
(5)
Average for the period.
(6) Represents propane and butane volumes exported at Ferndale for the period after close of the Petrogas Acquisition on December 15, 2020.
(7) NGL volumes refer to propane, butane, and condensate.
(8) Realized frac spread or NGL margin, expressed in dollars per barrel of NGL, is derived from sales recorded by the segment during the period for frac
spread exposed volumes plus the settlement value of frac hedges settled in the period less extraction premiums, divided by the total frac exposed
volumes produced during the period.
(9)
Average spot frac spread or NGL margin, expressed in dollars per barrel of NGL, is indicative of the average sales price that AltaGas receives for
propane, butane and condensate less extraction premiums, before accounting for hedges, divided by the respective frac spread exposed volumes for the
period.
(10) Average propane price spread between FEI and Mont Belvieu TET commercial index.
(11) Average butane price spread between FEI and Mont Belvieu TET commercial index for the period beginning December 15, 2020.
AltaGas Ltd. – 2021 MD&A and Financial Statements - 148
OTHER INFORMATION
DEFINITIONS
Bbls/d
Bcf
Dth
GJ
GWh
Mcf
barrels per day
billion cubic feet
dekatherm
gigajoule
gigawatt‑hour
thousand cubic feet
Mmcf/d
million cubic feet per day
MW
MWh
US$
megawatt
megawatt‑hour
United States dollar
ABOUT ALTAGAS
AltaGas is a leading North American energy infrastructure Company that connects NGLs and natural gas to domestic and
global markets. The Company operates a diversified, lower-risk, high-growth Utilities and Midstream business that is focused
on delivering resilient and durable value for its stakeholders.
For more information visit www.altagas.ca or reach out to one of the following:
Jon Morrison
Senior Vice President, Investor Relations & Corporate Development
Jon.Morrison@altagas.ca
Adam McKnight
Director, Investor Relations
Adam.McKnight@altagas.ca
Investor Inquiries
1-877-691-7199
investor.relations@altagas.ca
Media Inquiries
1-403-206-2841
media.relations@altagas.ca
AltaGas Ltd. – 2021 MD&A and Financial Statements - 149
For investor relations inquiries contact:
investor.relations@altagas.ca | altagas.ca
Telephone: 403.691.7100 Toll-free: 1.877.691.7199
1700, 355 - 4th Avenue SW Calgary, Alberta T2P 0J1
The AltaGas Family of Companies