News

AltaGas Reports 2006 Net Income of $114.5 Million, Up 27 Percent

February 28, 2007





CALGARY, ALBERTA--(CCNMatthews - Feb. 28, 2007) - AltaGas Income Trust (TSX:ALA.UN) (AltaGas or the Trust) today announced net income of $114.5 million ($2.06 per unit) for 2006, a 27 percent increase compared to $90.3 million ($1.67 per unit) in 2005. Net income for the quarter ended December 31, 2006 was $27.3 million ($0.49 per unit) up from $26.4 million ($0.48 per unit) for the same quarter in 2005.

The Trust also declared a distribution of $0.17 per trust unit and exchangeable unit payable on April 16, 2007 to holders of record on March 26, 2007 and declared total distributions of $0.51 per unit in fourth quarter 2006.

"AltaGas reported another year of record earnings in 2006. We are proud of having passed the $100 million milestone in net income this year," said David Cornhill, Chairman, President and CEO of the Trust. He added, "We also increased distributions to our unitholders twice in 2006 for an annual increase of 6 percent. Our net income growth surpassed our distribution growth in 2006 and our debt-to-total capitalization remains well below our target range. We are well positioned to continue to grow and deliver strong sustainable distributions to our unitholders."

"We remain committed to running our business in the same disciplined manner we always have. We did not change our financial strategy or our focus on traditional financial metrics when we converted to a trust in 2004 and we will continue to employ that same strategy going forward. Our businesses are sound and underpinned by strong long term demand for power and natural gas. We were pleased that both Standard and Poor's (S&P) and Dominion Bond Rating Service (DBRS) confirmed our ratings and that DBRS changed the trend on our medium-term notes (MTN) from Stable to Positive in the fourth quarter."

Net income in fourth quarter 2006 was higher than in fourth quarter 2005 due to higher power prices received and lower power transmission costs, higher natural gas liquids (NGL) fractionation spreads (frac spreads), higher extraction volumes processed and lower interest expense due to lower debt balances. These increases were partially offset by higher costs in the Corporate segment primarily as a result of higher salaries and benefits, the impact of the expiration of the Genesee contract in first quarter 2006, the spin-out of the Natural Gas Distribution (NGD) segment in fourth quarter 2005, a write-down of goodwill related to a non-core investment in the Field Gathering and Processing (FG&P) segment and revenue deferred in the transmission business related to shortfall volumes. Net income in fourth quarter 2006 was also impacted by higher future income taxes compared to the same quarter in 2005 as a result of higher net income before taxes and an adjustment of future tax balances that resulted in a tax recovery in fourth quarter 2005.

Net income in 2006 was impacted by the same factors as in the fourth quarter, as well as a $6.6 million non-cash future income tax benefit as a result of a reduction in the federal and Alberta corporate income tax rates reported in second quarter 2006, lower average interest rates compared to 2005 as well as higher costs related to certification requirements mandated by the Canadian Securities Administrators. Results in 2005 included one time after-tax gains of $7.5 million related to the Trust's ownership of Taylor NGL Limited Partnership (Taylor) units.

FINANCIAL HIGHLIGHTS (1)

- Earnings before interest, taxes, depreciation and amortization (EBITDA) were $44.5 million ($0.79 per unit) in fourth quarter 2006, compared to $39.8 million ($0.73 per unit) in the same quarter in 2005. EBITDA for 2006 was $173.1 million ($3.12 per unit), up from $155.5 million ($2.88 per unit) in 2005. EBITDA in 2005 included $9.2 million related to the Trust's investment in Taylor units and $2.0 million and $13.0 million in the fourth quarter and year ended December 31, 2005, respectively, related to the NGD business.

- Cash from operations in fourth quarter 2006 was $36.6 million ($0.65 per unit) compared to $29.5 million ($0.54 per unit) in fourth quarter 2005. Cash from operations in 2006 was $146.9 million ($2.65 per unit) compared to $112.3 million in 2005 ($2.08 per unit).

- Funds from operations in fourth quarter 2006 were $41.4 million ($0.74 per unit) compared to $36.4 million ($0.67 per unit) for the same period in 2005. Funds from operations in 2006 were $161.7 million ($2.92 per unit), up from $129.0 million ($2.39 per unit) in 2005.

- Total debt as at December 31, 2006 was $265.5 million, compared to $269.0 million at December 31, 2005. The Trust's debt-to-total capitalization ratio at December 31, 2006 was 33.4 percent, versus 36.0 percent at the end of 2005.

- The Trust expects approximately 73 percent of the cash distributions declared in 2006 to be taxed as income, with the remaining 27 percent classified as return of capital.

(1) Includes non-GAAP financial measures. See previous public disclosures available at www.altagas.ca or www.sedar.com for definitions.

IN THE FOURTH QUARTER:

- AltaGas announced the 18 Mmcf/d expansion of its Cold Lake natural gas transmission system located in northeastern Alberta. The Trust plans to install compression and construct 4 km of 8-inch diameter natural gas pipeline from its existing transmission system to BlackRock Ventures Inc.'s (BlackRock) Orion steam assisted gravity drainage (SAGD) plant. AltaGas will provide BlackRock, a subsidiary of Shell Canada Limited, with natural gas supply of up to 17,000 GJ/d, with delivery expected to commence by May 1, 2007.

- The Trust renewed its revolving three-year credit facility with a syndicate of Canadian chartered banks for a further 12 months. The facility now expires September 30, 2009.

- DBRS confirmed AltaGas' MTN and stability ratings at BBB (low) and STA-3 (middle) respectively. The trend on the MTN rating was changed to Positive from Stable.

- S&P Ratings Services confirmed AltaGas Income Trust's stability rating at SR-3 with a stable outlook.

SUBSEQUENT TO THE FOURTH QUARTER:

- AltaGas completed a $100 million issue of senior unsecured MTNs. The notes carry a coupon rate of 5.07 percent and mature on January 19, 2012.

- S&P Ratings Services affirmed its BBB- corporate credit and senior unsecured debt ratings on AltaGas Income Trust with a stable outlook.

This news release, including unaudited financial information, is being issued in lieu of a fourth quarter report to unitholders. AltaGas will hold a teleconference today at 2:00 p.m. Mountain time (4:00 p.m. Eastern) to discuss the 2006 fourth quarter and annual financial and operating results and other general issues and developments concerning the Trust. Members of the media, investment community and other interested parties may dial 416-695-6130 or call toll free at 1-877-888-7019. No passcode is required. Please note that the conference call will also be webcast. To listen, please connect here: http://events.online broadcasting.com/altagas/022807/index.php.

Shortly after the conclusion of the call, a replay will be available by dialing 416-695-5275 or 1-888-509-0081. The passcode is 638903. The replay will expire at midnight (Eastern) on March 7, 2007. The webcast will be archived for one year.

The audited consolidated annual financial statements and annual Management's Discussion and Analysis, which contains additional notes and disclosures, are expected to be filed with SEDAR on or about March 8, 2007, at which time a press release to that effect will be issued. The material will also be available on the AltaGas website on that same day (www.altagas.ca).

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements. When used in this news release the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "seek", "propose", "estimate", "expect", and similar expressions, as they relate to the Trust or an affiliate of the Trust, are intended to identify forward-looking statements. In particular, this press release contains forward-looking statements with respect to, among others things, business objectives, expected growth, results of operations, performance, business projects and opportunities and financial results. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Such statements reflect the Trust's current views with respect to future events based on certain material factors and assumptions and are subject to certain risks and uncertainties including without limitation, changes in market competition, governmental or regulatory developments, general economic conditions and other factors set out in the Trust's public disclosure documents. Many factors could cause the Trust's actual results, performance or achievements to vary from those described in this news release, including without limitation those listed above. 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 news release as intended, planned, anticipated, believed, sought, proposed, estimated or expected, and such forward-looking statements included in this news release herein should not be unduly relied upon. These statements speak only as of the date of this news release. The Trust does not intend, and does not assume any obligation, to update these forward-looking statements. The forward-looking statements contained in this news release are expressly qualified as cautionary statements.

Additional information relating to AltaGas can be found on its website at www.altagas.ca. The continuous disclosure materials of the Trust, filed as AltaGas Services Inc. prior to May 1, 2004, including its annual MD&A and audited financial statements, Annual Information Form, Information Circular and Proxy Statement, material change reports and press releases issued by the Trust, are also available through the Trust's website or directly through the SEDAR system at www.sedar.com.



CONSOLIDATED RESULTS

Three Months Ended Year Ended
December 31 December 31
($ millions) 2006 2005 2006 2005
--------------------------------------------------------------------------
Revenue 367.4 448.4 1,362.6 1,502.3
Net revenue(1) 84.6 78.7 318.9 296.9
Net income 27.3 26.4 114.5 90.3
EBITDA(1) 44.5 39.8 173.1 155.5
Operating income(1) 32.0 29.0 126.7 108.1
Total assets 1,109.6 1,068.3 1,109.6 1,068.3
Total long-term liabilities 340.5 335.5 340.5 335.5
Net additions to capital assets 16.5 (165.5) 70.5 (139.4)
Distributions declared(2)(3) 28.7 26.2 110.8 100.0
Cash flows
Cash from operations 36.6 29.5 146.9 112.3
Funds generated from
operations(1) 41.4 36.4 161.7 129.0
Distributable cash(1) 39.5 33.7 155.6 121.01
--------------------------------------------------------------------------
--------------------------------------------------------------------------
($ per unit)
--------------------------------------------------------------------------
Net income - Basic 0.49 0.48 2.06 1.67
EBITDA(1) 0.79 0.73 3.12 2.88
Distributions declared(2)(3) 0.51 0.48 1.995 1.85
Cash flows
Cash from operations 0.65 0.54 2.65 2.08
Funds generated from
operations(1) 0.74 0.67 2.92 2.39
Distributable cash(1) 0.70 0.63 2.81 2.25
Units outstanding (millions)
Weighted average number of units
outstanding for the period
(basic) 56.2 54.5 55.5 54.0
End of period 56.4 54.6 56.4 54.6
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Non-GAAP financial measure. See previous public disclosures available
at www.altagas.ca or www.sedar.com for definitions.
(2) Distributions declared of $0.17 per unit per month commencing in
August 2006. From March 2006 to July 2006 distributions of $0.165 per
unit per month were declared. From August 2005 to February 2006
distributions of $0.16 per unit per month were declared. From May
2004 to July 2005 distributions of $0.15 per unit per month were
declared.
(3) Excludes share distribution as a result of the spin-out of the NGD
segment in November 2005 which provided an additional non-cash
distribution of $0.54 per unit.

 


CONSOLIDATED FINANCIAL REVIEW

Fourth Quarter

Net income for the quarter ended December 31, 2006 was $27.3 million ($0.49 per unit) compared to $26.4 million ($0.48 per unit) for the same period in 2005. Net income increased as a result of higher power revenues on both hedged and unhedged power volumes, lower power transmission costs, higher NGL frac spreads and extraction volumes, and lower interest expense, partially offset by higher expenses in the Corporate segment, lower revenue in the transmission business and a write-down of goodwill related to a non-core investment in the FG&P segment. Fourth quarter 2005 included the contribution from the Genesee power contract and approximately six weeks of earnings from the NGD segment, as well as an income tax recovery related to the adjustment of future tax balances.

In the Power Generation, Energy Services and Extraction and Transmission segments, net revenue, which is revenue less the cost of commodities purchased for sale and shrinkage, is a better reflection of performance than revenue, as changes in the market price of power and natural gas affect both revenue and cost of sales.

On a consolidated basis, net revenue for the quarter ended December 31, 2006 was $84.6 million compared to $78.7 million for the same period in 2005. The increase was mainly due to higher revenue from both power hedges and spot sales and lower transmission costs in the Power Generation segment ($11.9 million), new plants in the FG&P segment ($3.0 million) and higher NGL frac spreads and higher volumes processed at the extraction plants ($1.0 million). The increases in net revenue were reduced as a result of the spin-out of the NGD business in November 2005 ($4.2 million), the expiration of the Genesee power contract in March 2006 ($2.1 million), lower throughput in the FG&P segment ($1.4 million), as well as $1.5 million in a capital payout in fourth quarter 2005 and $0.8 million of revenue deferred in the transmission business.

Operating and administrative expense for the quarter ended December 31, 2006 was $40.1 million compared to $38.9 million for the same period in 2005. The increase was primarily due to additional costs from new FG&P facilities, higher compensation costs and general cost escalations. The increases were partially offset by the spin-out of the NGD segment which reported operating and administrative costs of $2.2 million in the fourth quarter of 2005.

Amortization expense for the quarter ended December 31, 2006 was $12.5 million compared to $10.9 million for the same period in 2005. The increase was primarily due to higher amortization of energy services contracts and relationships of $0.9 million, higher depletion and depreciation rates in oil and gas production ($0.6 million), the write-off of $0.6 million in goodwill related to a non-core investment in the FG&P segment, and growth in the FG&P segment of $0.9 million. The increases were partially offset by lower amortization of $0.8 million due to the spin-out of the NGD segment in the fourth quarter of 2005.

Interest expense in the fourth quarter of 2006 was $3.3 million compared to $3.9 million for the same quarter in 2005. The decrease was due to higher funds from operations and lower average debt balances as a result of $85.4 million of debt repayment in late 2005 that was made using the proceeds of the spin-out of the NGD segment.

Income taxes for the quarter ended December 31, 2006 were $1.4 million compared to recoveries of $1.3 million for the same period in 2005. The increased income tax expense was due to higher net income before taxes in the fourth quarter of 2006, as well as an adjustment of the future tax balances which resulted in an income tax recovery of $1.6 million in fourth quarter 2005.

Full Year 2006

Net income in 2006 was $114.5 million ($2.06 per unit) compared to $90.3 million ($1.67 per unit) in 2005. The increase was due to higher power prices received on both hedged and unhedged power volumes, lower power transmission costs, higher NGL frac spreads, higher extraction volumes and lower interest expense, partially offset by higher operating and administrative expense and higher income taxes.

In addition, the Trust recorded a $6.6 million non-cash future income tax benefit in 2006 as a result of a reduction in federal and Alberta corporate income tax rates. Net income in 2005 included one-time after-tax gains of $7.5 million related to the Trust's ownership of Taylor units, a full-year contribution from the Genesee power contract and the contribution from the NGD segment which was spun out on November 17, 2005.

Net revenue for 2006 was $318.9 million compared to $296.9 million in 2005. The increases were mainly due to higher prices received on the sale of power and lower power transmission costs ($42.2 million), new facilities, higher processing fees and higher operating cost recoveries in the FG&P segment ($15.1 million), higher NGL frac spreads and higher volumes processed in the extraction business ($7.0 million), higher equity earnings in the Corporate segment ($3.0 million), the acquisition of the assets and liabilities of iQ2 Power Corporation (iQ2) in late 2005 ($2.2 million) and $2.1 million higher net revenue from the gas-fired peaking plants. The increases in net revenue were partially offset by the spin-out of the NGD business in November 2005 ($29.0 million), lower throughput in the FG&P segment ($5.2 million), the expiration of the Genesee power contract in March 2006 ($2.5 million) and $1.6 million lower contribution from the oil and gas properties. In 2005 net revenue included a gain of $9.2 million related to the Trust's ownership of Taylor units.

Operating and administrative expense for 2006 was $145.8 million, compared to $141.4 million in 2005. The increase was due to higher administrative and compensation costs, additional costs due to new FG&P facilities and the acquisition of iQ2. The increases were partially offset by the spin-out of the NGD segment which reported operating and administrative costs of $16.0 million in 2005. Increased costs of $1.0 million were incurred in 2006 compared to 2005 to meet new certification requirements for reporting issuers mandated by the Canadian Securities Administrators.

Amortization expense for 2006 was $46.4 million compared to $47.4 million last year. The decrease was due to the spin-out of the NGD segment which reported $6.8 million in amortization expense in 2005, partially offset by increases related to the growth in capital assets resulting from acquisitions and internal expansion projects, higher depletion expense related to the Trust's oil and gas properties and higher amortization related to energy services contracts and relationships. In fourth quarter 2006 AltaGas recorded a goodwill impairment of $0.6 million related to a non-core investment.

Interest expense in 2006 was $13.3 million compared to $19.1 million in 2005. The decrease was due to lower average debt balances as a result of $85.4 million in debt repayment in late 2005 using the proceeds from the spin-out of the NGD segment and due to higher cash from operations. Also contributing to the lower interest expense was a lower average borrowing rate of 4.9 percent in 2006, compared to 5.6 percent in 2005, driven primarily by the August 2005 refinancing of term debt at lower rates.

Income tax recoveries for 2006 were $1.1 million compared to recoveries of $1.3 million in 2005. Income tax recoveries decreased as a result of higher net income before tax in 2006, partially offset by a non-cash future tax benefit of $6.6 million that resulted from federal and Alberta income tax rate reductions in 2006. Income taxes reported in 2005 also included an expense of $1.1 million related to the NGD segment, an adjustment of future tax balances that resulted in a recovery of $1.6 million and a lower effective tax rate in respect of the Taylor capital gain reported in 2005.



RESULTS OF OPERATIONS BY SEGMENT

Operating Income Three Months Ended Year Ended
December 31 December 31
($ millions) 2006 2005 2006 2005
--------------------------------------------------------------------------
Field Gathering and Processing 7.0 7.6 25.4 24.1
Extraction and Transmission 7.1 7.0 35.2 30.4
Power Generation 25.5 15.9 90.9 48.7
Energy Services 0.2 1.8 2.8 5.6
Natural Gas Distribution - 1.2 - 6.2
Corporate (7.8) (4.5) (27.6) (6.9)
--------------------------------------------------------------------------
32.0 29.0 126.7 108.1
--------------------------------------------------------------------------
--------------------------------------------------------------------------

 


FIELD GATHERING AND PROCESSING

The FG&P segment includes the field gathering and processing facilities, as well as AltaGas' investments in businesses ancillary to the gathering and processing business.



Financial Results Three Months Ended Year Ended
December 31 December 31
($ millions) 2006 2005 2006 2005
--------------------------------------------------------------------------
Revenue 36.3 37.4 139.1 131.8
Net revenue 34.4 33.9 129.7 120.1
Operating and administrative
expense 20.6 21.0 80.1 75.3
Amortization expense 6.2 5.3 23.6 20.7
Goodwill impairment 0.6 - 0.6 -
Operating income 7.0 7.6 25.4 24.1
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Operating Statistics Three Months Ended Year Ended
December 31 December 31
2006 2005 2006 2005
--------------------------------------------------------------------------
Capacity (Mmcf/d)(1) 1,021 962 1,021 962
Throughput (gross Mmcf/d)(2) 549 573 555 563
Capacity utilization
(percent)(2) 54 60 54 60
Average working interest
(percent)(1) 92 90 92 90
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(1) As at December 31.
(2) For the period.

 


Fourth Quarter

Operating income in the FG&P segment for fourth quarter 2006 was $7.0 million compared to $7.6 million in the same quarter in 2005. Operating income increased by $1.4 million as a result of new facilities and $0.6 million due to higher rates. These increases were a direct result of AltaGas' strategy to manage the risk of volume declines by adding new facilities and implementing rate increases. The increases in operating income in fourth quarter 2006 were offset by lower throughput ($1.2 million), a write-down of goodwill ($0.6 million) related to a non-core investment and higher amortization due to expansions of $0.3 million. Results in fourth quarter 2005 included $1.5 million in take-or-pay revenue and $1.4 million in corporate costs charged to the segment.

Throughput in fourth quarter 2006 averaged 549 Mmcf/d, compared to 573 Mmcf/d in fourth quarter 2005 and increased from 537 Mmcf/d in third quarter 2006. In the South district, throughput decreased by 7 Mmcf/d or 2 percent in fourth quarter 2006. The addition of the new Princess facility increased processed volumes by 11 Mmcf/d which partially offset the impact of natural declines, lower producer activity and operational interruptions. Volumes processed in the North district decreased by 7 percent or 17 Mmcf/d in fourth quarter 2006 compared to the same period in 2005. The addition of new plants at Clear Prairie and Clear Hills increased throughput by 9 Mmcf/d which partially offset the impact of natural declines, severe winter weather in November freezing off producer wells and upstream operator issues. The Marten Creek winter only access drilling area experienced volume declines of 15 Mmcf/d as a result of a less successful drilling program last winter. AltaGas believes that despite the declines experienced in fourth quarter 2006, the North district continues to be an area with high producer activity and potential opportunities to increase throughput.

Utilization reported in fourth quarter 2006 was 54 percent compared to 60 percent reported in the same quarter in 2005, primarily due to lower throughput at existing facilities as a result of natural declines and the recent slowdown in producer drilling and well tie-ins. AltaGas' new Princess and Clear Hills plants operated at higher than the average utilization rates in the quarter, averaging 56 percent and 68 percent respectively, and finished the year operating at 65 percent and 80 percent of licensed capacity respectively and at close to 100 percent of throughput capability. Lower utilization in fourth quarter 2006 was also due to higher licensed capacity than throughput capability built. As demand for increased processing capacity grows, AltaGas expects to meet those demands in a more cost-effective and timely manner.

Revenue in the FG&P segment in fourth quarter 2006 was $36.3 million, compared to $37.4 million in the same period in 2005. Revenue increased by $3.0 million in the fourth quarter due to new facilities, $0.6 million due to higher processing fees and $0.6 million due to higher operating cost recoveries. The increases were offset by $3.1 million resulting from lower throughput, a $1.5 million capital payout recognized in fourth quarter 2005 and higher revenue sharing of $0.5 million in fourth quarter 2006 compared to the same quarter in 2005.

Operating and administrative expense in fourth quarter 2006 was $20.6 million, compared to $21.0 million for the same period in 2005. New facilities resulted in higher costs of $1.8 million. The increase was offset by $1.1 million lower overhaul costs in fourth quarter 2006 compared to the same quarter in 2005 and $1.4 million in corporate costs charged to the segment in fourth quarter 2005.

Amortization expense increased by $0.9 million in the quarter compared to the same quarter in 2005. The increase was due to new facilities ($0.6 million) and expansion of existing facilities ($0.3 million). AltaGas reported $0.6 million in goodwill impairment related to a non-core investment.

Operating income as a percentage of net revenue in the FG&P segment in fourth quarter 2006 was 20 percent compared to approximately 22 percent in the same period in 2005, primarily due to lower average throughput, higher amortization and goodwill write-down and a capital payout reported in fourth quarter 2005.

Full Year 2006

Operating income in the FG&P segment for 2006 was $25.4 million compared to $24.1 million in 2005. Operating income increased by $2.7 million as a result of new facilities, $2.6 million due to higher rates and $2.5 million from higher operating cost recovery. These increases were a direct result of AltaGas' strategy to manage the risk of volume declines by adding new facilities, increasing processing rates and moving to more contracts that allowed AltaGas to flow through operating costs. The increases in operating income in 2006 were partially offset by lower producer activity and operational and third-party interruptions at Bantry and Rainbow Lake ($5.3 million) which persisted throughout the year, volume declines ($2.0 million), higher amortization of $1.3 million due to expansions and the goodwill write-down of $0.6 million related to a non-core investment. In 2005 corporate costs of $3.3 million were charged to the segment and $0.9 million of positive equalizations of operating costs were reported.

Throughput in 2006 averaged 555 Mmcf/d, a decrease of 8 Mmcf/d from 2005. The 8 Mmcf/d decline was due to 26 Mmcf/d lower throughput from existing facilities, offset by an increase from new facilities of 18 Mmcf/d. Throughput in the South district decreased by 1 percent or 4 Mmcf/d in 2006. The addition of the new Princess plant increased volumes by 7 Mmcf/d which offset lower throughput due to natural declines and slightly lower producer activity. The South district continued to be an area of relatively stable volumes in 2006.

Volumes processed in the North district also decreased by 1 percent, or 4 Mmcf/d, in 2006. The addition of the new plants at Clear Prairie and Clear Hills and the full-year impact of the Blair Creek plant increased throughput by 11 Mmcf/d which offset the effects of natural declines, slightly lower producer activity and third-party operational issues. AltaGas expects the North district to continue to be an area of growth opportunity. While AltaGas experienced lower throughput in 2006 compared to 2005, results remained relatively stable as a result of the contracting and growth strategy employed to offset the financial impact of lower throughput.

Utilization in 2006 was 54 percent, compared to 60 percent reported in 2005. Approximately 3 percentage points of the decrease was due to planned and unplanned operational interruptions, mainly at Bantry, upstream producer disruptions at Rainbow Lake and the slowdown experienced in producer drilling and well tie-ins late in 2006, as well as natural declines in some of the operating areas. The remaining decrease in utilization was due to the timing of volumes associated with the completion of new facilities, as well as higher capacity licensed than processing capability built in order to meet the demand for processing capability in the future.

Revenue in the FG&P segment in 2006 was $139.1 million compared to $131.8 million last year. New facilities contributed $9.4 million to revenue in 2006. The increase was also due to higher flowthrough operating costs ($3.1 million) and higher fees ($2.6 million). The increases were partially offset by operational disruptions and upstream disruptions at the Bantry and Rainbow Lake facilities ($3.2 million), lower throughput volumes ($2.0 million) and lower product revenue ($3.2 million).

Operating and administrative expense in the FG&P segment in 2006 was $80.1 million compared to $75.3 million in 2005. The increase was due to additional costs of $5.1 million related to new facilities, general cost escalations of approximately $2.3 million and higher power costs of $0.7 million. A first quarter 2005 positive adjustment of $0.9 million associated with a co-owned facility also contributed to the year-over-year increase. In 2005 corporate costs of $3.3 million were charged to the segment. In 2006, 39 percent of operating expenses were recovered through cost flowthrough arrangements, as compared to 30 percent in 2005.

Amortization expense increased $2.9 million in 2006 over 2005 due to capital expenditures incurred in late 2005 and in 2006. In 2006 AltaGas recorded a write-down of goodwill of $0.6 million related to a non-core investment.

Operating income as a percentage of net revenue in the FG&P segment in 2006 was 20 percent in both 2006 and 2005.

Outlook

In 2006 North American natural gas markets experienced a softening of prices. As a result many producers announced reduced drilling programs resulting in a decline in well tie-in activity in the latter half of the year. AltaGas expects the impact on throughput volumes to continue during this period of lower drilling and lower well tie-in activity. AltaGas expects its strategy to increase the percentage of operating costs flowed through to customers, additional volumes from its new facilities and take-or-pay provisions, to mitigate the impact of lower well tie-ins and natural declines.

In 2007 AltaGas expects there to be continued opportunities to expand, construct, and acquire processing facilities as producers continue to focus capital investment on drilling opportunities. AltaGas expects to spend approximately $50 million of capital on the construction of new, and the expansion of existing, FG&P facilities over the year.

EXTRACTION AND TRANSMISSION

The Extraction and Transmission (E&T) segment includes ethane and natural gas liquids extraction plant interests and transmission pipelines.



Financial Results Three Months Ended Year Ended
December 31 December 31
($ millions) 2006 2005 2006 2005
---------------------------------------------------------------------------
Revenue 34.5 47.5 149.1 181.3
Net revenue 15.6 16.0 63.2 58.0
Operating and
administrative expense 6.5 7.2 20.3 20.1
Amortization expense 2.0 1.8 7.7 7.5
Operating income 7.1 7.0 35.2 30.4
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Operating Statistics Three Months Ended Year Ended
December 31 December 31
2006 2005 2006 2005
---------------------------------------------------------------------------
Extraction inlet
capacity (Mmcf/d)(1) 554 539 554 539
Extraction volumes
(Bbls/d)(2) 20,512 19,409 19,696 19,357
Transmission volumes
(Mmcf/d)(2)(3) 412 432 400 432
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) As at December 31.
(2) Average for the period.
(3) Excludes condensate pipeline volumes.

 


Fourth Quarter

Operating income in the E&T segment in fourth quarter 2006 was $7.1 million compared to $7.0 million in the same period in 2005. The increase was mainly due to higher NGL frac spreads and higher volumes processed in the extraction business and revenue deferral of $0.8 million in the transmission business. Commercial arrangements at AltaGas' extraction business are structured to manage exposure to commodity price movements such that the majority of extraction volumes have downside protection to volatility and the remaining volumes allow AltaGas to participate in upside opportunity. Approximately 93 percent of AltaGas' total extraction volumes in fourth quarter 2006 were processed under long-term, fixed-fee or cost-of-service arrangements compared to 95 percent in fourth quarter 2005. The remaining volumes were subject to NGL frac spreads, allowing AltaGas to benefit from high NGL frac spreads of approximately $13/Bbl in fourth quarter 2006 compared to approximately $6.50/Bbl in the same quarter in 2005. The percentage of total extraction volumes exposed to frac spreads increased slightly in the fourth quarter because of higher facility utilization which resulted in the incremental NGLs sold at market prices.

In the transmission business, pipeline throughput has minimal overall impact on the financial results due to cost of service and take or pay contractual arrangements in place. On the Suffield system, the major shipper pays AltaGas based on a daily contract quantity (DCQ). When annual volumes shipped are less than the annualized daily contract quantity (shortfall volumes), there is no refund paid to the shipper and AltaGas posts the shortfall quantity to a shortfall account as a credit. With respect to any year where shipper's quantities exceed the DCQ, and to the extent there is a shortfall account, the shipper may apply excess quantities up to an amount equal to 10 percent of the annualized DCQ to reduce any shortfall account balance. Short fall amounts expire five years following the year in which they are created and AltaGas incurs no additional cost on drawdown of the shortfall account. In the fourth quarter AltaGas deferred $0.8 million of revenue to account for the obligation outstanding under this arrangement. Based on current and expected volumes on the Suffield system AltaGas expects this deferral to be reversed by 2011.

Average ethane and NGL volumes increased to 20,512 Bbls/d in fourth quarter 2006, from 19,409 Bbls/d in the same quarter in 2005. Volumes were higher mainly due to higher natural gas volumes processed at the Empress facilities and increased NGL composition in the inlet gas stream processed at the Joffre facility. Although there was a two-week planned shutdown at one of the Empress facilities for maintenance in October 2006, AltaGas diverted volumes to another Empress facility which earned an extraction fee and offset the lost production. In addition, the natural gas processed at Empress for the balance of the fourth quarter was higher when compared to the same period in 2005 due to incremental natural gas volumes processed in collaboration with AltaGas' Energy Services segment.

Late in fourth quarter 2006 volumes increased at the Edmonton extraction facility due to increased inlet gas processing capability as a result of an enhanced ethane recovery project which was partially placed into service in December 2006. The project, which is expected to increase ethane production capability by 10 percent on an annual basis, was completed in January 2007 at a total cost to AltaGas of approximately $2.2 million. On December 15, 2006 AltaGas increased its ownership at one of its Empress facilities from 10 percent to 11.25 percent, resulting in 15 Mmcf/d of additional inlet capacity, increasing total extraction inlet processing capacity to 554 Mmcf/d.

In the transmission business, volumes declined in fourth quarter 2006, primarily on the Suffield and Cold Lake systems due to lower deliveries from shippers. While pipeline throughput has minimal overall impact on the financial results of the segment due to cost-of-service and take-or-pay contractual arrangements in place. AltaGas deferred $0.8 million in revenue to account for lower volumes shipped in 2006. This deferral is expected to reverse by 2011.

Revenue in the E&T segment in fourth quarter 2006 was $34.5 million compared to $47.5 million in the same period in 2005, mainly due to purchasing arrangements associated with the replacement of shrinkage gas in the extraction business in 2005.

Net revenue was $15.6 million in fourth quarter 2006 compared to $16.0 million in the same quarter in 2005. Higher NGL frac spreads contributed $0.5 million, and higher ethane and NGL volumes due to increased gas processed and higher NGL yields contributed $0.5 million. The increases were offset by the deferral of $0.8 million due to lower transmission volumes in 2006 and $0.6 million of lower net revenue resulting from a decrease in operating costs recovered in the transmission business when compared to fourth quarter 2005.

Operating and administrative expense in the E&T segment in fourth quarter 2006 was $6.5 million compared to $7.2 million in the same period in 2005. The decrease was primarily due to lower costs in the transmission business in 2006 as a result of expenses incurred in fourth quarter 2005 for repairs on the Porcupine Hills pipeline due to weather-related damage and to two years of National Energy Board costs incurred in 2005.

Amortization expense in the E&T segment in fourth quarter 2006 was similar to that in fourth quarter 2005.

Operating income as a percentage of net revenue in the E&T segment in fourth quarter 2006 was 46 percent compared to 44 percent in the same period in 2005. The increase was primarily due to higher NGL frac spreads, higher volumes processed in the extraction business and higher NGL yields at the Joffre extraction facility.

Full year 2006

Operating income in the E&T segment in 2006 was $35.2 million compared to $30.4 million in 2005. The increase was mainly due to higher NGL frac spreads and higher volumes processed in the extraction business. Approximately 93 percent of AltaGas' total extraction volumes in 2006 were processed under long-term, fixed-fee or cost-of-service arrangements, compared to 95 percent in 2005. The remaining volumes were subject to NGL frac spreads, allowing AltaGas to benefit from the historically high NGL frac spreads of approximately $18.50/Bbl in 2006 compared to approximately $9.50/Bbl in 2005. The percentage of total extraction volumes exposed to frac spreads increased slightly in 2006 as a result of higher utilization of the facilities compared to 2005 resulting in the incremental NGLs being sold at market prices. Over the past four years AltaGas realized average frac spreads of approximately $10/Bbl.

In 2006 transmission volumes declined to 400 Mmcf/d from 432 Mmcf/d due to lower deliveries from shippers, primarily on the Suffield and Cold Lake transmission systems. As a result, operating income in the transmission business decreased in 2006 due to the deferral of $0.8 million related to shortfall volumes credited to the a shipper's account in the year. Overall AltaGas volumes are transported through cost-of-service or take-or-pay arrangements which provide a stable source of income.

Average ethane and NGL volumes increased to 19,696 Bbls/d in 2006 from 19,357 Bbls/d in 2005. Volumes increased mainly due to the full-year impact of operating in higher ethane recovery mode at one of the Empress extraction facilities and due to higher natural gas volumes processed at the Empress facilities in collaboration with the Energy Services segment.

Revenue in the E&T segment in 2006 was $149.1 million compared to $181.3 million in 2005. The decrease was mainly due to purchasing arrangements associated with the replacement of shrinkage gas in the extraction business in 2005.

In 2006 net revenue was $63.2 million compared to $58.0 million in 2005, mainly due to higher NGL frac spreads throughout the year and higher extraction volumes in the last half of the year. Higher NGL frac spreads contributed $3.7 million, higher ethane and NGL volumes in the last half of the year contributed $3.3 million and higher recovery of operating costs contributed $0.7 million to the increase for 2006. The increases in net revenue associated with the extraction business were partially offset by lower revenues in the transmission business as a result of the volume shortfall on the Suffield system and lower cost recoveries.

Operating and administrative expense in the E&T segment in 2006 was $20.3 million compared to $20.1 million in 2005. The increase was primarily due to higher operating costs in extraction which were recovered, along with higher administrative expenses. The increases were partially offset by lower operating costs in the transmission business in 2006 compared to 2005, when operating expenses were higher due to weather-related damage on the Porcupine Hills pipeline which were recovered from the shipper, and due to higher National Energy Board costs incurred.

Amortization expense in the E&T segment in 2006 was relatively flat at $7.7 million compared to $7.5 million in 2005.

Operating income as a percentage of net revenue in the E&T segment in 2006 was 56 percent compared to 52 percent in 2005, due mainly to higher NGL frac spreads and higher volumes processed in the extraction business.

Outlook

The E&T segment is expected to continue to deliver strong performance and predictable and stable returns due to contractual arrangements in place. In the extraction business, the enhanced ethane recovery project at the Edmonton extraction facility was completed in January 2007 and increased ethane production capability by 800 Bbls/d. The full-year production impact of the enhanced ethane recovery project and increased ownership of one of the Empress facilities are expected to contribute to earnings starting in the first quarter of 2007. In 2007 NGL frac spreads are expected to decline to a level closer to the historical average, based on current natural gas and product price forecasts. However, any impact from lower frac spreads is anticipated to be mitigated by the increased utilization at the Empress facilities.

In the transmission business, results are expected to be slightly higher than in 2006 as AltaGas does not expect revenue to be deferred given current transmission volumes on the Suffield system. Should volumes be lower than the DCQ AltaGas will defer the revenue until such time as the shortfall account is drawn down or the time to draw down the shortfall expires. The Cold Lake pipeline expansion is expected to be completed by May 1, 2007 and is expected to positively impact earnings upon start-up.

POWER GENERATION

The Power Generation segment comprises the Sundance power purchase arrangements which expire December 31, 2020 and gas-fired peaking plants under capital lease until 2014 with options to renew or purchase.



Financial Results Three Months Ended Year Ended
December 31 December 31
($ millions) 2006 2005 2006 2005
---------------------------------------------------------------------------
Revenue 59.4 57.2 199.4 189.2
Net revenue 27.8 18.2 99.6 57.8
Operating and
administrative expense 0.4 0.5 1.3 1.8
Amortization expense 1.9 1.8 7.4 7.3
Operating income 25.5 15.9 90.9 48.7
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Operating Statistics Three Months Ended Year Ended
December 31 December 31
2006 2005 2006 2005
---------------------------------------------------------------------------
Volume of power sold
(GWh) 711 879 2,878 3,466
Average price received
on the sale of power
($/MWh)(1) 83.45 65.10 69.26 54.59
Alberta Power Pool
average spot price
($/MWh)(1) 116.81 116.59 80.48 70.19
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) Average for the period.

 


Fourth quarter

Operating income for the Power Generation segment in fourth quarter 2006 was $25.5 million compared to $15.9 million for the same quarter in 2005. The increase was due to higher effective hedge prices, higher unhedged volumes and lower transmission costs incurred.

Net revenue for the Power Generation segment in fourth quarter 2006 was $27.8 million compared to $18.2 million in the same quarter in 2005. The increase was due to higher revenue on the sale of power ($4.1 million) as a result of higher hedge prices and higher volumes exposed to spot prices in fourth quarter 2006. The increase was also due to lower transmission costs ($7.8 million) which was mainly the result of a shift in responsibility for interconnection and operating reserve charges from power generators to power purchasers effective January 1, 2006. The increase in net revenue was partially offset by the impact of the expiration of the Genesee power contract in March 2006, which contributed approximately $2.1 million to net revenue in fourth quarter 2005 and a lower contribution from the gas-fired peaking plants ($0.2 million).

Operating and administrative expenses in fourth quarter 2006 were relatively flat compared to fourth quarter 2005.

Amortization expense in the quarter ended December 31, 2006 was similar to fourth quarter 2005 as there were no changes to capital assets employed in the segment.

Operating income as a percentage of net revenue increased to 92 percent in fourth quarter 2006 from 87 percent in the same quarter in 2005 due to higher power sales revenues and lower transmission costs.

The volume of power sold in the quarter ended December 31, 2006 was lower than in the same quarter in 2005 as a result of the expiration of the Genesee power contract on March 31, 2006.

Full year 2006

In 2006 operating income for the Power Generation segment was $90.9 million, almost double 2005 operating income of $48.7 million. The increase was due to higher power prices, lower power transmission charges and higher earnings from the gas fired peaking plants, partially offset by the expiration of the Genesee power contract at the end of first quarter 2006.

Net revenue in 2006 was $99.6 million compared to $57.8 million in 2005, an increase of $41.8 million. The increase was due to higher average power prices received on hedged and unhedged power volumes related to the Sundance PPAs ($23.8 million) in 2006 compared to 2005. The increase in net revenue was also due to lower transmission costs ($18.4 million) related primarily to changes in interconnection charges and lower line losses due to lower system loss rates and lower generation.

The gas-fired peaking plants also benefited from the strong Alberta power market in 2006, contributing $2.1 million to the increase in net revenue in 2006 compared to 2005. The increases were partially offset by the expiration of the Genesee power contract on March 31, 2006 which contributed approximately $6.5 million to net revenue in 2005 versus $4.0 million in 2006.

Operating and administrative expenses in 2006 were slightly lower for the year compared to 2005 due to corporate costs of $0.4 million allocated to the segment in 2005.

Amortization expense in 2006 was similar to 2005 as capital assets employed in the segment were the same in 2006 as in 2005.

Operating income as a percentage of net revenue increased to 91 percent in 2006 compared to 84 percent in 2005. The increase was primarily due to higher power prices and lower transmission costs.

Volume of power sold in 2006 was lower than in 2005 as a result of the expiration of the Genesee power contract on March 31, 2006.

Outlook

Operating income from hedged power volumes in 2007 is expected to be higher than in 2006. Consistent with AltaGas' hedge program, approximately two-thirds of the power available from the Sundance B PPAs has been hedged, with the remaining one-third exposed to the spot market price of power in Alberta. The price at which volumes have been hedged is higher than in the prior year. The volumes from the Sundance PPAs exposed to spot prices in 2007 remain approximately the same as in 2006, but due to the expiration of the Genesee contract in March 2006 overall volumes exposed to spot prices will be lower.

In Alberta natural gas prices influence the price of power. While the Alberta economy has been strong and there has been strong power demand growth and marginal additions to supply, power prices could potentially be lower than those observed in 2006 if natural gas prices are lower in 2007.

During 2006 AltaGas announced it had entered into partnerships with two developers, Aeolis Wind Power Corporation (Aeolis) and GreenWing Energy Management Ltd. (GreenWing) to develop and own wind power projects as part of its strategy to expand ownership of power generation assets, particularly renewable generating capacity.

The Bear Mountain Wind project, which is being developed with Aeolis, has a 25-year electricity purchase agreement with BC Hydro, and a planned in-service date of late 2009. AltaGas and Aeolis are continuing to optimize the project configuration and finalize key supplier contracts and expect to commence construction in 2007. As the project is likely to include one or more additional investors, AltaGas has not yet finalized its ownership interest in the project.

AltaGas has invested approximately $4.3 million in the development of wind projects, and has issued a letter of credit for $7.2 million relating to the Bear Mountain Wind project. AltaGas continues to work with its partners to develop projects in a number of other jurisdictions. The projects currently under development are expected to generate earnings commencing in 2009 and beyond.

ENERGY SERVICES

The Energy Services segment includes the energy management, gas services and oil and gas production businesses. AltaGas is not in the business of exploration and development of natural gas reserves; however, associated with certain of its facility acquisitions, AltaGas has accumulated a portfolio of oil and natural gas reserves that it continues to hold and produce.



Financial Results Three Months Ended Year Ended
December 31 December 31
($ millions) 2006 2005 2006 2005
---------------------------------------------------------------------------
Revenue 255.0 339.0 948.9 1,080.2
Net revenue 6.1 6.3 24.7 23.5
Operating and
administrative expense 4.6 4.1 17.1 14.8
Amortization expense 1.3 0.4 4.8 3.1
Operating income 0.2 1.8 2.8 5.6
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Operating Statistics Three Months Ended Year Ended
December 31 December 31
2006 2005 2006 2005
---------------------------------------------------------------------------
Energy management
service contracts(1) 1,394 1,243 1,394 1,243
Average wholesale
volumes marketed
(GJ/d)(2) 349,218 306,649 327,057 312,272
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) Active energy management service contracts at the end of the reporting
period.
(2) Average for the period.

 


Fourth quarter

Operating income in the Energy Services segment in fourth quarter 2006 was $0.2 million compared to $1.8 million for the same quarter in 2005. The decrease was primarily due to higher amortization of energy services contracts and relationships primarily due to an adjustment reported in fourth quarter 2005, higher administrative costs and lower production volumes and higher depletion rates in oil and gas production.

Net revenue in fourth quarter 2006 was $6.1 million compared to $6.3 million in the same period in 2005. The decrease was due to lower transportation and exchange margins and lower oil and gas production partially offset by higher net revenue from back-to-back buy and sell gas contracts.

Operating and administrative expense for the Energy Services segment in fourth quarter 2006 was $4.6 million compared to $4.1 million in the same quarter in 2005. The increase was primarily due to the acquisition of iQ2 (the Alberta energy management business) in late 2005 and to general cost escalation.

Amortization expense in fourth quarter 2006 was $1.3 million compared to $0.4 million in the same period last year. The increase was primarily due to a year-to-date adjustment reported in fourth quarter 2005.

Operating income as a percentage of net revenue in fourth quarter 2006 was 3 percent compared to 29 percent in the same period in 2005. The decrease was primarily due to lower contributions from transportation and exchange margins as well as from the oil and gas production business, and to higher amortization on energy contracts and relationships.

Full year 2006

Operating income in the Energy Services segment in 2006 was $2.8 million compared to $5.6 million in 2005. The decrease was primarily due to lower production volumes and higher depletion rates in oil and gas production, higher amortization related to energy services contracts and relationships, and general cost escalations. The decreases were partially offset by growth in the fixed margins received from back-to-back buy and sell gas contracts and higher advisory services fees.

Net revenue for the Energy Services segment in 2006 was $24.7 million compared to $23.5 million in 2005. The increase was due to the acquisition of the iQ2 business in fourth quarter 2005 ($2.2 million), additional back-to-back buy and sell gas contracts ($1.0 million) and growth in advisory services fees through the addition of new energy management customers in Ontario ($0.7 million), partially offset by lower production volumes in oil and gas production ($1.6 million) and lower transportation and exchange margins in the gas services business. Net revenue in 2005 also included a settlement of $0.6 million related to a gas marketing contract.

Operating and administrative expense in 2006 was $17.1 million compared to $14.8 million in 2005. The increase was primarily due to the acquisition of the Alberta energy management business in November 2005 ($1.6 million) and higher general and administrative costs.

Amortization expense in 2006 was $4.8 million compared to $3.1 million last year. The increase was due to $1.1 million higher amortization related to energy services contracts and relationships and $0.6 million higher depletion and depreciation rates in the oil and gas production business.

Operating income as a percentage of net revenue in 2006 was 11 percent compared to 24 percent in 2005. The decrease was primarily due to a lower contribution from the oil and gas production business, higher operating and administrative costs and higher amortization.

Outlook

The core businesses within the Energy Services segment are the advisory fee-based business serving non-residential gas and electricity end-users (energy management), and the fixed-margin gas marketing business (gas services). In 2007 growth in energy management fees is expected from the addition of agency service customers due to the recent expansion into electricity supply management in Ontario and from a focused national account strategy. The gas services component is also expected to grow as a result of locking in back-to-back buy and sell gas contracts which are expected to produce fixed margins for terms of up to five years.

The Energy Services segment is also an important element in increasing the value of assets in AltaGas' other segments. Energy Services connects and interacts with the other segments and in this capacity is expected to contribute to earnings growth across AltaGas.

The oil and gas production business is not a core business, and is experiencing production declines as a result of minimal capital expenditures in 2006. The underlying reserves continue to have value. AltaGas is considering alternatives for maximizing the value of these assets.

NATURAL GAS DISTRIBUTION

The NGD segment included AltaGas Utilities Inc., AltaGas' one-third interest in Inuvik Gas Ltd. and its 24.9 percent interest in Heritage Gas Limited. On November 17, 2005 the Trust spun out its NGD business into a separate, publicly traded entity, AltaGas Utility Group Inc. (Utility Group).



Financial Results (1) Three Months Ended Year Ended
December 31 December 31
($ millions) 2006 2005 2006 2005
---------------------------------------------------------------------------
Revenue - 26.8 - 113.4
Net revenue - 4.2 - 29.0
Operating and
administrative expense - 2.2 - 16.0
Amortization expense - 0.8 - 6.8
Operating income - 1.2 - 6.2
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) Reported from January 1 to November 17, 2005.

 


Through a series of transactions, the Trust's ownership interest in Utility Group, the holding company of the former NGD segment, was reduced to 26.7 percent. Prior to these transactions, the operations and financial results of the NGD segment were consolidated by the Trust. Subsequent to November 17, 2005 the Trust accounts for its ownership interest in Utility Group as an equity investment, recognizing its share of net income or loss in the Corporate segment using the equity method of accounting.

CORPORATE

The Corporate segment includes the cost of providing corporate services and general corporate overhead and investments in public and private entities.



Financial Results Three Months Ended Year Ended
December 31 December 31
($ millions) 2006 2005 2006 2005
---------------------------------------------------------------------------
Revenue 1.6 0.9 4.4 10.9
Operating and
administrative expense 8.9 4.9 29.7 15.8
Amortization expense 0.5 0.5 2.3 2.0
Operating loss (7.8) (4.5) (27.6) (6.9)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

 


Fourth quarter

The operating loss from the Corporate segment for fourth quarter 2006 was $7.8 million compared to $4.5 million for the same quarter in 2005. The increased loss was due to higher compensation and administrative costs and $1.6 million corporate costs charged to the operating segments in fourth quarter 2005. The increased loss was partially offset by higher earnings from Utility Group and a write-down of an investment in a private company in fourth quarter 2005.

Revenue in fourth quarter 2006 was $1.6 million compared to $0.9 million for the same quarter in 2005 as a result of a write down of $0.6 million on an investment in the shares of a private company reported in fourth quarter 2005, the impact of a full quarter of earnings from AltaGas' investment in Utility Group compared to six weeks reported in fourth quarter 2005, higher earnings from the Taylor investment, partially offset by the gain of $0.9 million recorded on the spin-out of the NGD segment in fourth quarter 2005.

Operating and administrative expense for the quarter ended December 31, 2006 was $8.9 million compared to $4.9 million in the same quarter in 2005. The increase was primarily related to higher salaries and benefits and higher costs due to general cost escalations and growth of the Trust. In fourth quarter 2005, corporate costs of $1.6 million were charged to the operating segments instead of the Corporate segment.

Full year 2006

The operating loss for the segment increased to $27.6 million in 2006 from $6.9 million in 2005. The increase was primarily due to gains related to AltaGas' interest in Taylor reported in 2005, higher compensation and administrative costs, corporate costs charged to the operating segments in 2005 and increased costs incurred to meet new certification requirements for reporting issuers by the Canadian Securities Administrators. These increases were partially offset by higher equity earnings reported from AltaGas' investment in Utility Group for all of 2006 compared to six weeks in 2005, higher earnings from the investment in Taylor and a write-down of an investment in a private company in fourth quarter 2005.

Revenue for the year was $4.4 million compared to $10.9 million in 2005. The decrease was due to higher earnings from the Taylor and Utility Group investments ($3.0 million) which were more than offset by $9.2 million gain related to the Trust's ownership of Taylor units, the gain of $0.9 million reported on the spin-out of the NGD segment and a write-down of $0.6 million on an investment in the shares of a private company reported in 2005.

Operating and administrative expense for the year ended December 31, 2006 was $29.7 million, compared to $15.8 million in 2005. The increase was due to higher salaries and benefits ($7.0 million), overall general increases of $1.4 million, higher technology support costs of $0.6 million and $1.0 million higher costs incurred to meet new certification requirements for reporting issuers. In 2005 $3.9 million of corporate costs were allocated to the operating segments.

Amortization expense was $2.3 million in 2006 compared to $2.0 million in 2005 due to increased administrative capital costs, including computer hardware and software projects to support the growth of the Trust.

Outlook

In the Corporate segment, the operating loss is expected to be slightly lower than in 2006 as revenues from the investments in Taylor and Utility Group are expected to stay relatively flat compared to 2006 and AltaGas expects lower operating and administrative expense due to lower ongoing costs to meet the certification requirements mandated by the Canadian Securities Administrators.

INVESTED CAPITAL

In fourth quarter 2006 the Trust acquired $12.7 million in capital assets and long-term investments compared to $56.2 million in the same quarter of 2005. In fourth quarter 2006 growth capital accounted for $9.6 million, including $5.3 million in the FG&P segment and $2.8 million in the E&T segment.

During 2006 AltaGas acquired $71.5 million in capital assets and long-term investments, compared to $90.2 million in 2005. Growth capital of $62.0 million included the Blair Creek, Clear Prairie, Prairie River, Princess and Clear Hills gas plants, and an increased ownership interest in the Pouce Coupe facility in the FG&P segment. In the E&T segment growth capital included the ethane enhancement recovery project at the Edmonton extraction facility and the increased interest at one of the Empress facilities. In the Power Generation segment $4.3 million was spent on the GreenWing and Bear Mountain Wind Limited Partnership investments.

Maintenance capital projects totaling $6.1 million in 2006 (2005 - $8.0 million) were undertaken mainly in the FG&P segment. An additional $3.4 million (2005 - $4.1 million) was spent in 2006 on administrative capital, including computer hardware and software projects expected to increase the effectiveness of the operating and administrative functions of the Trust.



For the three
months ended Field Extraction
December 31, Gathering and Power
2006 and Trans- Gener- Energy
($ millions) Processing mission ation Services Corporate Total
---------------------------------------------------------------------------
Invested capital:
Capital assets 7.1 3.0 - 0.3 0.9 11.3
Long-term investments
and other assets - - 0.1 - 1.3 1.4
---------------------------------------------------------------------------
7.1 3.0 0.1 0.3 2.2 12.7
Disposals
Capital assets (0.3) - - - - (0.3)
---------------------------------------------------------------------------
Net invested capital 6.8 3.0 0.1 0.3 2.2 12.4
---------------------------------------------------------------------------
---------------------------------------------------------------------------


For the three
months ended Field Extraction
December 31, Gathering and Power
2006 and Trans- Gener- Energy
($ millions) Processing mission ation Services Corporate Total
---------------------------------------------------------------------------
Invested capital:
Maintenance 1.7 0.2 - 0.2 - 2.1
Growth 5.3 2.8 0.1 - 1.4 9.6
Administrative 0.1 - - 0.1 0.8 1.0
---------------------------------------------------------------------------
7.1 3.0 0.1 0.3 2.2 12.7
Disposals (0.3) - - - - (0.3)
---------------------------------------------------------------------------
Net invested capital 6.8 3.0 0.1 0.3 2.2 12.4
---------------------------------------------------------------------------
---------------------------------------------------------------------------


For the year Field Extraction
ended December Gathering and Power
31, 2006 and Trans- Gener- Energy
($ millions) Processing mission ation Services Corporate Total
---------------------------------------------------------------------------
Invested capital:
Capital assets 58.5 4.3 - 0.8 2.2 65.8
Long-term investments
and other assets - - 4.3 - 1.4 5.7
---------------------------------------------------------------------------
58.5 4.3 4.3 0.8 3.6 71.5
Disposals
Capital assets (0.8) - - - - (0.8)
---------------------------------------------------------------------------
Net invested capital 57.7 4.3 4.3 0.8 3.6 70.7
---------------------------------------------------------------------------
---------------------------------------------------------------------------

For the year Field Extraction
ended December Gathering and Power
31, 2006 and Trans- Gener- Energy
($ millions) Processing mission ation Services Corporate Total
---------------------------------------------------------------------------
Invested capital:
Maintenance 5.0 0.8 - 0.3 - 6.1
Growth 53.3 3.4 4.3 0.2 0.8 62.0
Administrative 0.2 0.1 - 0.3 2.8 3.4
---------------------------------------------------------------------------
58.5 4.3 4.3 0.8 3.6 71.5
Disposals (0.8) - - - - (0.8)
---------------------------------------------------------------------------
Net invested capital 57.7 4.3 4.3 0.8 3.6 70.7
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Field
For the three Gather- Ex-
months ended ing traction
December 31, and and Power
2005 Process- Trans- Gener- Energy Corp-
($ millions) ing mission ation Services orate NGD Total
---------------------------------------------------------------------------
Invested capital:
Capital assets 32.3 0.4 - 0.8 1.5 2.5 37.5
Energy
services
arrangements,
contracts and
relationships - - - 4.2 - - 4.2
Long-term
investments
and other
assets - - - - 14.5 - 14.5
---------------------------------------------------------------------------
32.3 0.4 - 5.0 16.0 2.5 56.2

Disposals
Capital assets - - - - - (203.0) (203.0)
Long-term
investments
and other
assets - - - - (1.2) (2.6) (3.8)
---------------------------------------------------------------------------
Net invested
capital 32.3 0.4 - 5.0 14.8 (203.1) (150.6)
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Field
For the three Gather- Ex-
months ended ing traction
December 31, and and Power
2005 Process- Trans- Gener- Energy Corp-
($ millions) ing mission ation Services orate NGD Total
---------------------------------------------------------------------------
Invested capital:
Maintenance 1.0 0.3 - 0.6 - 0.7 2.6
Growth 31.2 0.1 - 4.3 14.7 1.6 51.9
Administrative 0.1 - - 0.1 1.3 0.2 1.7
---------------------------------------------------------------------------
32.3 0.4 - 5.0 16.0 2.5 56.2
Disposals - - - - (1.2)(205.6) (206.8)
---------------------------------------------------------------------------
Net invested
capital 32.3 0.4 - 5.0 14.8 (203.1) (150.6)
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Field
Gather- Ex-
For the year ing traction
ended December and and Power
31, 2005 Process- Trans- Gener- Energy Corp-
($ millions) ing mission ation Services orate NGD Total
---------------------------------------------------------------------------
Invested capital:
Capital assets 53.4 1.6 - 1.4 3.5 10.8 70.7
Energy services
arrangements,
contracts
and relationships - - - 4.2 - - 4.2
Long-term
investments and
other assets - - - - 14.9 0.4 15.3
---------------------------------------------------------------------------
53.4 1.6 - 5.6 18.4 11.2 90.2

Disposals
Capital assets (7.1) - - - - (203.0) (210.1)
Long-term
investments and
other assets - - - - (6.6) (2.7) (9.3)
---------------------------------------------------------------------------
Net invested
capital 46.3 1.6 - 5.6 11.8 (194.5) (129.2)
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Field
Gather- Ex-
For the year ing traction
ended December and and Power
31, 2005 Process- Trans- Gener- Energy Corp-
($ millions) ing mission ation Services orate NGD Total
---------------------------------------------------------------------------
Invested capital:
Maintenance 2.0 1.4 - 1.1 - 3.5 8.0
Growth 50.8 0.2 - 4.4 15.6 7.1 78.1
Administrative 0.6 - - 0.1 2.8 0.6 4.1
---------------------------------------------------------------------------
53.4 1.6 - 5.6 18.4 11.2 90.2
Disposals (7.1) - - - (6.6)(205.7) (219.4)
---------------------------------------------------------------------------
Net invested
capital 46.3 1.6 - 5.6 11.8 (194.5)(129.2)
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Consolidated Balance Sheets

As at December 31
($ thousands) 2006 2005
---------------------------------------------------------------------------
ASSETS (unaudited)
Current assets
Cash and cash equivalents $ 13,226 $ 11,685
Accounts receivable 224,533 220,684
Inventory 61 95
Customer deposits 16,304 15,371
Other 9,277 4,421
---------------------------------------------------------------------------
263,401 252,256
Capital assets 677,941 645,442
Energy services arrangements, contracts and
relationships 103,330 110,850
Goodwill 18,260 18,860
Long-term investments and other assets 46,643 40,921
---------------------------------------------------------------------------
$ 1,109,575 $ 1,068,329
---------------------------------------------------------------------------
---------------------------------------------------------------------------

LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 200,882 $ 215,601
Distributions payable to unitholders 9,588 8,744
Short-term debt - 2,710
Current portion of long-term debt 1,147 1,071
Customer deposits 16,304 15,371
Other current liabilities 10,982 10,773
Deferred revenue 788 -
---------------------------------------------------------------------------
239,691 254,270
Long-term debt 264,340 265,245
Asset retirement obligations 23,350 16,982
Future income taxes 51,252 52,433
Other long-term liabilities 1,526 813
---------------------------------------------------------------------------
580,159 589,743
Unitholders' equity 529,416 478,586
---------------------------------------------------------------------------
$ 1,109,575 $ 1,068,329
---------------------------------------------------------------------------
---------------------------------------------------------------------------

See segmented information note to the Consolidated Financial Statements.



Consolidated Statements of Income and Accumulated Earnings

Three Months Ended Year Ended
($ thousands except December 31 December 31
per unit and unit 2006 2005 2006 2005
amounts) (unaudited) (unaudited) (unaudited)
---------------------------------------------------------------------------

Revenue
Operating $ 365,738 $ 447,609 $ 1,358,189 $ 1,491,621
Other 1,648 819 4,415 10,725
---------------------------------------------------------------------------
367,386 448,428 1,362,604 1,502,346
---------------------------------------------------------------------------

Expenses
Cost of sales 282,836 369,750 1,043,691 1,205,481
Operating and
administrative 40,065 38,875 145,788 141,382
Amortization 11,883 10,863 45,861 47,372
Goodwill impairment 600 - 600 -
---------------------------------------------------------------------------
335,384 419,488 1,235,940 1,394,235
---------------------------------------------------------------------------
Operating income 32,002 28,940 126,664 108,111
Interest expense
Short-term debt 52 130 270 576
Long-term debt 3,295 3,760 13,012 18,515
---------------------------------------------------------------------------
Income before income
taxes 28,655 25,050 113,382 89,020
Income tax expense 1,379 (1,349) (1,129) (1,268)
(recovery)
---------------------------------------------------------------------------
Net income 27,276 26,399 114,511 90,288
Accumulated earnings,
beginning of period 374,342 260,708 287,107 196,819
---------------------------------------------------------------------------
Accumulated earnings,
end of period $ 401,618 $ 287,107 $ 401,618 $ 287,107
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Net income per unit
Basic $ 0.49 $ 0.48 $ 2.06 $ 1.67
Diluted $ 0.49 $ 0.48 $ 2.06 $ 1.67

Weighted average
number of units
outstanding
(thousands)
Basic 56,181 54,529 55,469 54,011
Diluted 56,216 54,620 55,516 54,088

See segmented information note to the Consolidated Financial Statements.



Consolidated Statements of Cash Flows

Three Months Ended Year Ended
December 31 December 31
2006 2005 2006 2005
($ thousands) (unaudited) (unaudited) (unaudited)
---------------------------------------------------------------------------
Cash from operations
Net income $ 27,276 $ 26,399 $ 114,511 $ 90,288
Items not involving
cash:
Amortization 11,883 10,863 45,861 47,372
Accretion of asset
retirement
obligations 367 353 1,430 1,326
Unit option
compensation 286 7 482 16
Future income taxes 1,336 (2,183) (1,181) (3,364)
(recovery)
Gain on sale of
assets and
investment - (163) - (9,573)
transactions
Equity income (1,388) (592) (3,967) (1,141)
Distributions from
equity investments 755 705 2,950 2,874
Goodwill impairment 600 - 600 -
Other 252 970 994 1,240
---------------------------------------------------------------------------
Funds generated from
operations 41,367 36,359 161,680 129,038
Asset retirement
obligations settled (501) (37) (560) (183)
Net change in
non-cash working
capital (4,261) (6,833) (14,260) (16,545)
---------------------------------------------------------------------------
36,605 29,489 146,860 112,310
---------------------------------------------------------------------------

Investing activities
Decrease (increase)
in customer deposits 2,911 2,473 (933) 1,547
Acquisition of
capital assets (10,369) (27,632) (73,042) (53,965)
Disposition of
capital assets 188 - 509 5,030
Acquisition of energy
services arrangements
and contracts - (3,869) - (3,868)
Disposition of energy
services arrangements
and contracts - - 36 -
Acquisition of
long-term investments
and other assets (633) - (5,032) (855)
Disposition of
long-term investments
and other assets - 145 - 13,027
Proceed on spin-out
of Natural Gas
Distribution segment - 85,383 - 85,383
---------------------------------------------------------------------------
(7,903) 56,500 (78,462) 46,299
---------------------------------------------------------------------------

Financing activities
Decrease in
short-term debt - 2,715 (2,710) (4,235)
Increase (decrease)
in long-term debt (11,657) (140,018) (829) (86,217)
Distributions to
unitholders (28,593) (26,131) (109,954) (99,249)
Net proceeds from
issuance of units 12,709 7,733 46,636 30,476
---------------------------------------------------------------------------
(27,541) (155,701) (66,857) (159,225)
---------------------------------------------------------------------------
Change in cash and
cash equivalents 1,161 (69,712) 1,541 (616)
Cash and cash
equivalents,
beginning of period 12,065 81,397 11,685 12,301
---------------------------------------------------------------------------
Cash and cash
equivalents, end
of period $ 13,226 $ 11,685 $ 13,226 $ 11,685
---------------------------------------------------------------------------
---------------------------------------------------------------------------

See segmented information note to the Consolidated Financial Statements.

 


Selected Notes to the Consolidated Financial Statements

(Tabular amounts in thousands of dollars unless otherwise indicated.)

1. SEGMENTED INFORMATION

AltaGas is an integrated energy trust with a portfolio of assets and services used to move energy from the source to the end user. Transactions between the reporting segments are recorded at fair value. For the period from January 1, 2005 to November 16, 2005 the operating and financial results reflect the consolidated revenues and expenses of the entities that formed the Natural Gas Distribution segment, which was spun out on November 17, 2005. The following describes the segments reported in the following tables:

Field Gathering and Processing - natural gas gathering lines and processing facilities;

Extraction and Transmission - ethane and natural gas liquids extraction plants and transmission pipelines;

Power Generation - power purchase arrangements and contracts and gas-fired peaking plants;

Energy Services - gas services and energy management services for natural gas and power, and oil and natural gas reserves and production;

Natural Gas Distribution - natural gas distribution utility business; and
Corporate - the costs of providing corporate services, and investments in public and private entities, corporate assets and general corporate overhead.



The following tables show the breakdown by segment:

Field
Gathering Extraction
For the three months ended and and Power Energy
December 31, 2006 Processing Transmission Generation Services
---------------------------------------------------------------------------
Revenue $ 36,287 $ 34,531 $ 59,378 $ 254,977
Cost of sales (1,882) (18,975) (31,610) (248,888)
Operating and
administrative
expenses (20,583) (6,520) (414) (4,562)
Amortization (6,202) (1,950) (1,899) (1,271)
Goodwill impairment (600) - - -
---------------------------------------------------------------------------
Operating income $ 7,020 $ 7,086 $ 25,455 $ 256
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net additions (reductions)
to:
---------------------------------------------------------------------------
Capital assets $ 11,406 $ 2,926 - $ 1,198
Energy service
arrangements,
contracts and
relationships - - $ 36 $ (36)
Long-term investments and
other assets - - $ 132 -
---------------------------------------------------------------------------
Goodwill $ 215 $ 18,045 $ - -
Segment assets $ 591,784 $ 143,005 $ 124,079 $ 233,656
---------------------------------------------------------------------------
---------------------------------------------------------------------------

For the three months ended Intersegment
December 31, 2006 Corporate elimination Total
---------------------------------------------------------------------------
Revenue $ 1,648 $ (19,435) $ 367,386
Cost of sales - 18,519 (282,836)
Operating and administrative
expenses (8,902) 916 (40,065)
Amortization (561) - (11,883)
Goodwill impairment - - (600)
---------------------------------------------------------------------------
Operating income $ (7,815) - $ 32,002
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net additions (reductions)
to:
---------------------------------------------------------------------------
Capital assets $ 994 - $ 16,524
Energy service arrangements,
contracts and relationships - - -
Long-term investments and
other assets $ 1,215 - $ 1,347
---------------------------------------------------------------------------
Goodwill - - $ 18,260
Segment assets $ 17,051 - $1,109,575
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Field
Gathering Extraction
For the year ended and and Power Energy
December 31, 2006 Processing Transmission Generation Services
---------------------------------------------------------------------------
Revenue $ 139,016 $ 149,143 $ 199,344 $ 948,939
Cost of sales (9,381) (85,888) (99,761) (924,249)
Operating and
administrative
expenses (80,068) (20,305) (1,332) (17,060)
Amortization (23,579) (7,733) (7,382) (4,848)
Goodwill impairment (600) - - -
---------------------------------------------------------------------------
Operating income $ 25,388 $ 35,217 $ 90,869 $ 2,782
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net additions (reductions)
to:
---------------------------------------------------------------------------
Capital assets $ 62,295 $ 4,319 $ (28)$ 1,652
Energy service
arrangements,
contracts and
relationships - - - $ (36)
Long-term investments and
other assets - - $ 4,374 -
---------------------------------------------------------------------------
Goodwill $ 215 $ 18,045 - -
Segment assets $ 591,784 $ 143,005 $ 124,079 $ 233,656
---------------------------------------------------------------------------
---------------------------------------------------------------------------

For the year ended Intersegment
December 31, 2006 Corporate elimination Total
---------------------------------------------------------------------------
Revenue $ 4,415 $ (78,253) $1,362,604
Cost of sales - 75,588 (1,043,691)
Operating and administrative
expenses (29,688) 2,665 (145,788)
Amortization (2,319) - (45,861)
Goodwill impairment - - (600)
---------------------------------------------------------------------------
Operating income $ (27,592) - $ 126,664
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net additions (reductions)
to:
---------------------------------------------------------------------------
Capital assets $ 2,270 - $ 70,508
Energy service
arrangements,
contracts and
relationships - - $ (36)
Long-term investments and
other assets $ 1,348 - $ 5,722
---------------------------------------------------------------------------
Goodwill - - $ 18,260
Segment assets $ 17,051 - $1,109,575
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Field
Gathering Extraction
For the three months ended and and Power Energy
December 31, 2005 Processing Transmission Generation Services
---------------------------------------------------------------------------
Revenue $ 37,437 $ 47,545 $ 57,190 $ 339,034
Cost of sales (3,438) (31,554) (38,994) (332,775)
Operating and
administrative
expenses (21,008) (7,112) (517) (4,032)
Amortization (5,346) (1,920) (1,830) (423)
---------------------------------------------------------------------------
Operating income $ 7,645 $ 6,959 $ 15,849 $ 1,804
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net additions
(reductions) to:
---------------------------------------------------------------------------
Capital assets $ 32,338 $ 385 - $ 825
Energy service
arrangements,
contracts and
relationships - - - $ 4,233
Long-term
investments and
other assets - - - -
---------------------------------------------------------------------------
Goodwill $ 815 $ 18,045 - -
Segment assets $ 532,083 $ 211,150 $ 156,053 $ 120,140
---------------------------------------------------------------------------
---------------------------------------------------------------------------

For the three months Natural Gas Intersegment
ended December 31, 2005 Distribution Corporate elimination Total
---------------------------------------------------------------------------
Revenue $ 26,825 $ 860 $ (60,463)$ 448,428
Cost of sales (22,611) - 59,622 (369,750)
Operating and
administrative expenses (2,189) (4,858) 841 (38,875)
Amortization (828) (516) - (10,863)
---------------------------------------------------------------------------
Operating income $ 1,197 $ (4,514) - $ 28,940
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net additions (reductions)
to:
---------------------------------------------------------------------------
Capital assets $ (200,457) $ 1,418 - $ (165,491)
Energy service
arrangements, contracts
and relationships - - - $ 4,233
Long-term investments and
other assets $ (2,670) $ 13,450 - $ 10,780
---------------------------------------------------------------------------
Goodwill - - - $ 18,860
Segment assets $ - $ 48,903 - $1,068,329
---------------------------------------------------------------------------
---------------------------------------------------------------------------



Field
Gathering Extraction
For the year ended and and Power Energy
December 31, 2005 Processing Transmission Generation Services
---------------------------------------------------------------------------
Revenue $ 131,835 $ 181,314 $ 189,205 $1,080,225
Cost of sales (11,693) (123,319) (131,363)(1,056,764)
Operating and
administrative
expenses (75,390) (20,055) (1,834) (14,758)
Amortization (20,660) (7,558) (7,313) (3,151)
---------------------------------------------------------------------------
Operating income $ 24,092 $ 30,382 $ 48,695 $ 5,552
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net additions
(reductions) to:
---------------------------------------------------------------------------
Capital assets $ 46,320 $ 1,639 - $ 1,384
Energy service
arrangements,
contracts and
relationships - - - $ 4,233
Long-term
investments and
other assets - - - -
---------------------------------------------------------------------------
Goodwill $ 815 $ 18,045 - -
Segment assets $ 532,083 $ 211,150 $ 156,053 $ 120,140
---------------------------------------------------------------------------
---------------------------------------------------------------------------


For the year ended Natural Gas Intersegment
December 31, 2005 Distribution Corporate elimination Total
---------------------------------------------------------------------------
Revenue $ 113,429 $ 10,915 $ (204,577)$1,502,346
Cost of sales (84,444) - 202,102 (1,205,481)
Operating and
administrative
expenses (15,988) (15,832) 2,475 (141,382)
Amortization (6,755) (1,935) - (47,372)
---------------------------------------------------------------------------
Operating income $ 6,242 $ (6,852) - $ 108,111
---------------------------------------------------------------------------
Net additions (reductions)
to:
---------------------------------------------------------------------------
Capital assets $ (192,157)$ 3,453 - $ (139,361)
Energy service
arrangements,
contracts and
relationships - - - 4,233
Long-term investments
and other assets $ (2,327)$ 8,372 - $ 6,045
---------------------------------------------------------------------------
Goodwill - - - $ 18,860
Segment assets - $ 48,903 - $1,068,329
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Financial and Operating Information
($ millions except as indicated) Q4-06 Q3-06 Q2-06 Q1-06 2006
---------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS(1)

Net Revenue(2)
Field Gathering and Processing 34.4 32.4 31.0 31.9 129.7
Extraction and Transmission 15.6 17.9 15.3 14.4 63.2
Power Generation 27.8 26.2 20.7 24.9 99.6
Energy Services 6.1 6.1 6.4 6.1 24.7
Corporate 1.6 0.5 0.2 2.1 4.4
Intersegment Elimination (0.9) (0.7) (0.8) (0.3) (2.7)
---------------------------------------------------------------------------
84.6 82.4 72.8 79.1 318.9
---------------------------------------------------------------------------
EBITDA(2)
Field Gathering and Processing 13.8 13.3 9.9 12.6 49.6
Extraction and Transmission 9.1 12.3 11.3 10.2 42.9
Power Generation 27.4 26.0 20.3 24.6 98.3
Energy Services 1.5 2.7 1.7 1.7 7.6
Corporate (7.3) (9.2) (5.8) (3.0) (25.3)
---------------------------------------------------------------------------
44.5 45.1 37.4 46.1 173.1
---------------------------------------------------------------------------
Operating Income(2)
Field Gathering and Processing 7.0 7.5 4.0 6.9 25.4
Extraction and Transmission 7.1 10.4 9.4 8.3 35.2
Power Generation 25.5 24.1 18.5 22.8 90.9
Energy Services 0.2 1.6 0.4 0.6 2.8
Corporate (7.8) (9.9) (6.3) (3.6) (27.6)
---------------------------------------------------------------------------
32.0 33.7 26.0 35.0 126.7
---------------------------------------------------------------------------
OPERATING HIGHLIGHTS

Field Gathering and Processing
Capacity (gross Mmcf/d)(3) 1,021 1,021 1,002 1,002 1,021
Throughput (gross Mmcf/d)(4) 549 537 565 570 555
Capacity utilization (percent)(4) 54 53 56 57 55

Extraction and Transmission
Extraction inlet capacity
(Mmcf/d)(3) 554 539 539 539 554
Extraction volumes (Bbls/d)(4) 20,512 19,880 18,976 19,403 19,696
Transmission volumes (Mmcf/d)(4)(5) 412 388 399 400 400

Power Generation
Volume of power sold (thousands of
MWh)(4) 711 669 656 842 2,878
Average price received on sale of
power ($/MWh)(4) 83.45 72.88 60.26 61.41 69.26
Alberta Power Pool average spot
price ($/MWh)(4) 116.81 94.87 53.59 56.76 80.48

Energy Services
Energy management service
contracts(3) 1,394 1,342 1,289 1,274 1,394
Average gas volumes marketed
(GJ/d)(4) 349,218 325,419 322,420 310,767 327,057
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) Columns may not add due to rounding.
(2) Non-GAAP financial measure.
(3) As at period end.
(4) Average for the period.
(5) Excludes condensate pipeline volumes.

Other Information

DEFINITIONS

Bbls/d barrels per day
Bcf billion cubic feet
Mmcf/d million cubic feet per day
MW megawatt
MWh megawatt-hour

 


ABOUT ALTAGAS

AltaGas Income Trust is one of Canada's largest and fastest growing integrated energy infrastructure and services organizations. The Trust creates value by growing and optimizing assets and services across the energy value chain to serve North America's energy demand. Since 1994, AltaGas Income Trust has expanded its business to include natural gas gathering, processing and transmission, extraction of ethane and natural gas liquids, power generation, marketing of natural gas and natural gas liquids, as well as retail energy services to commercial, industrial and institutional end-users across Canada.

AltaGas Income Trust's units are listed on the Toronto Stock Exchange under the symbol ALA.UN. The Trust is included in the S&P/TSX Composite Index, the S&P/TSX Capped Income Trust Index and the S&P/TSX Capped Energy Trust Index.


FOR FURTHER INFORMATION PLEASE CONTACT:
Media:
AltaGas Income Trust
Dennis Dawson
(403) 691-7534
Email: dennis.dawson@altagas.ca

or

Investment Community:
AltaGas Income Trust
Stephanie Labowka-Poulin
(403) 691-7136
Email: stephanie.labowka-poulin@altagas.ca

or

AltaGas Income Trust
Investor Relations
1-877-691-7199
Email: investor.relations@altagas.ca
Website: www.altagas.ca