News

AltaGas reports strong first quarter 2005 results

May 11, 2005


AltaGas reports strong first quarter 2005 results

CALGARY--(CCNMatthews - May 11) - (TSX: ALA.UN) AltaGas Income Trust 
(AltaGas) today announced first quarter net income of $27.6 million, up from 
$11.0 million for the same quarter of 2004.

AltaGas declared a distribution of $0.15 per trust unit and exchangeable unit 
payable on June 15, 2005 to holders of record on May 25, 2005. AltaGas' total 
distributions for the first quarter 2005 were $0.45 per unit.

"Our financial and operational performance was solid for the first quarter of 
2005," said David Cornhill, Chairman and Chief Executive Officer. "We are now 
benefiting from the successful integration of acquisitions made in the latter 
half of 2004 as well as strong performance from our existing asset base."

/T/

    HIGHLIGHTS

    -   Net income - Net income for the three months ended March 31, 2005 was
        $27.6 million or $0.52 per unit, up from $11.0 million or $0.24 per
        share for the three months ended March 31, 2004. Net income for the
        first quarter 2005 includes a pre-tax gain of $4.8 million due to the
        sale of 1.4 million units of Taylor NGL Limited Partnership (Taylor)
        as well as a dilution gain of $4.4 million. The dilution gain was
        recorded as a result of a common unit issuance by Taylor in which
        AltaGas did not participate.

    -   Net revenue - Net revenue for the three months ended March 31, 2005
        was $78.0 million, an increase of 36 percent from $57.2 for the three
        months ended March 31, 2004. The increase was largely due to
        acquisitions in the latter half of 2004, higher prices received on
        hedged power volumes and one-time gains resulting from AltaGas'
        reduced ownership interest in Taylor.

    -   Funds generated from operations - Record funds generated from
        operations of $31.1 million for the three months ended March 31, 2005
        compared to $22.1 million for the three months ended March 31, 2004.

    AltaGas will hold a teleconference today at 2:30 p.m. (Mountain)/
4:30 p.m. (Eastern) to discuss the first quarter 2005 financial and
operational results and other general issues and developments concerning the
Trust. Members of the media, investment community and other interested 
parties
may dial 416-640-4127 or toll free at 800-814-4861. No passcode is required.
    Shortly after the conclusion of the call, a replay will be available by
dialing 416-640-1917 or 877-289-8525. The pass code is 21121981. The replay
will expire at midnight (Eastern) on May 18, 2005.

/T/

ABOUT ALTAGAS

AltaGas moves energy from its source to the end user, adding value through 
the process. The Trust has consolidated assets totaling over $1 billion and a 
market capitalization of $1.3 billion. Its steadily expanding asset base 
today includes natural gas gathering and processing facilities, interests in 
ethane and natural gas liquids extraction plants, and transmission pipelines. 
AltaGas distributes natural gas to Alberta customers through AltaGas 
Utilities Inc., to customers in the Northwest Territories through the Ikhil 
Gas Project and distributes gas in Nova Scotia through its interest in 
Heritage Gas Limited. The Trust provides energy services to customers, 
including marketing of natural gas and natural gas liquids, sale of power 
from its power purchase based arrangements and as a leading energy agency 
business, specializes in the procurement and supply of energy to end users.

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



MANAGEMENT'S DISCUSSION AND ANALYSIS

The Management's Discussion and Analysis (MD&A) of operations and unaudited 
interim consolidated financial statements presented herein report on a 
continuity-of-interest accounting basis which recognizes AltaGas Income Trust 
(AltaGas or the Trust) as the successor to AltaGas Services Inc. (ASI). This 
MD&A dated May 11, 2005 is a review of the results of operations and the 
liquidity and capital resources of the Trust. It should be read in 
conjunction with the accompanying unaudited consolidated financial statements 
of the Trust for the three month period ended March 31, 2005 and the notes 
thereto and with the audited consolidated financial statements and MD&A 
contained in the Trust's annual report for the year ended December 31, 2004.

This MD&A contains forward-looking statements. When used in this MD&A 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. 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 and are subject to certain risks, uncertainties and 
assumptions. Many factors could cause the Trust's actual results, performance 
or achievements to vary from those described in this MD&A. Should one or more 
of these risks or uncertainties materialize, or should assumptions underlying 
forward-looking statements prove incorrect, actual results may vary 
materially from those described in this MD&A as intended, planned, 
anticipated, believed, estimated or expected, and such forward looking 
statements included in this MD&A herein should not be unduly relied upon. 
These statements speak only as of the date of this short MD&A. The Trust does 
not intend, and does not assume any obligation, to update these forward-
looking statements.

Additional information relating to AltaGas Income Trust can be found on its 
website at www.altagas.ca. The continuous disclosure materials of the Trust, 
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.

ALTAGAS INCOME TRUST

On April 29, 2004 the securityholders of AltaGas Services Inc. (ASI) voted in 
favor of a plan of arrangement to reorganize the business into an open-ended 
investment trust effective May 1, 2004. For each common share of ASI, 
shareholders received either one unit of the Trust (trust unit) or one 
exchangeable unit of AltaGas Holding Limited Partnership No.1 or AltaGas 
Holding Limited Partnership No.2. (trust units and exchangeable units being 
collectively units). As a result of implementing the reorganization, the 
Trust now indirectly holds through its subsidiaries and partnerships all of 
the assets, liabilities and businesses formerly owned by AltaGas Services 
Inc. The material businesses are operated by AltaGas Ltd., AltaGas Operating 
Partnership, AltaGas Limited Partnership, AltaGas Power Holdings Partnership, 
AltaGas Pipelines Partnership and AltaGas Utilities Inc. (collectively the 
operating subsidiaries). The cash flows of the Trust are solely dependent on 
the results of the operating subsidiaries and are derived from interest 
earned on loans to the operating subsidiaries and from dividends or returns 
of capital from equity interests held within the trust structure.

AltaGas General Partner Inc., through its Board of Directors who are elected 
by the Trust at the direction of the holders of the units, manages or 
supervises the management of the business and affairs of the Trust. AltaGas 
Ltd. provides all the management, administrative and operating services to 
the Trust and its subsidiaries.

DISTRIBUTIONS

AltaGas' distributions are determined giving consideration to the ongoing 
sustainable distributable cash flow as impacted by the consolidated net 
income, maintenance and growth capital requirements and the debt repayment 
requirements of the Trust.

The Trust pays cash distributions on the 15th day of each month, to 
unitholders of record on the 25th day of the previous month or in each case 
the following business day if the payment date or record date falls on a 
weekend or holiday.

First quarter 2005 distributions declared were $0.15 monthly, or $0.45 per 
unit amounting to $24.1 million. During the first quarter of 2004, ASI paid 
dividends of $0.11 per common share. The following table summarizes AltaGas' 
dividend and distribution declaration history.(1)

/T/

    (dollars per
     unit)              2005        2004        2003        2002        2001
    -------------------------------------------------------------------------
    First quarter $     0.45  $     0.11  $     0.08  $     0.06  $     0.03
    Second quarter                  0.30        0.08        0.06        0.03
    Third quarter                   0.45        0.11        0.08        0.06
    Fourth quarter                  0.45        0.11        0.08        0.06
    -------------------------------------------------------------------------
                  $     0.45  $     1.31  $     0.38  $     0.28  $     0.18
    -------------------------------------------------------------------------
    (1) Dividends were paid to shareholders from first quarter 2001 through
        first quarter 2004. Monthly distributions to unitholders began in May
        2004.

    AltaGas has Premium Distribution(TM), Distribution Reinvestment and
Optional Unit Purchase plans (DRIP) for eligible holders of trust units and
exchangeable units of AltaGas Income Trust and AltaGas Holding Limited
Partnership No. 1. DRIP participation generated $6.1 million in new equity
through the issuance of 266,376 trust units in the first quarter of 2005.
Since the DRIP was introduced in May 2004 it has contributed a total of
$16.4 million of new equity. Complete details on DRIP are available on the
AltaGas website at www.altagas.ca.

    CONSOLIDATED RESULTS

    Consolidated Financial Results                        Three months ended
    ($ millions)                                                    March 31
                                                            2005        2004
    -------------------------------------------------------------------------
    Revenue                                                349.0       193.5
    Net revenue(1)                                          78.0        57.2
    EBITDA(1)                                               46.3        31.2
    Net income                                              27.6        11.0
    Net additions (disposals) to capital assets             (1.1)       14.3
    Total assets                                         1,089.3       917.3
    Long-term liabilities                                  309.0       461.0
    Cash flows
      Funds generated from operations(1)(3)                 31.1        22.1
      Distributable cash(1)(3)                              29.7        20.8
      Distributions/dividends(2)                            24.0         5.1

    -------------------------------------------------------------------------
    ($ per unit)
    -------------------------------------------------------------------------
    EBITDA                                                  0.87        0.68
    Net income                                              0.52        0.24
    Cash flows
      Funds generated from operations                       0.58        0.48
      Distributable cash(1)(3)                              0.56        0.45
      Distributions/dividends(2)                            0.45        0.11
    Units outstanding (millions)
      Basic                                                 53.4        45.9
      End of period                                         53.7        45.9

    (1) Non-GAAP financial measure. See discussion in the following section
        of this MD&A
    (2) Distributions of $0.15 per unit per month paid commencing June 2004
        (declared in May) and dividends of $0.11 per share paid in Q1 2004
    (3) Based on cash from operations and is not impacted by investing and
        financing activities, consequently the first quarter of 2005 does not
        include proceeds of $12.8 million from sale of units in Taylor NGL
        Limited Partnership

/T/

Net income for the three months ended March 31, 2005 was $27.6 million 
compared to $11.0 million for the three months ended March 31, 2004. The 
increase of $16.6 million includes a one-time after-tax gain of $7.9 million 
recorded as a result of AltaGas' percentage ownership reduction in Taylor.

On February 7, 2005, AltaGas sold 1.4 million units of Taylor resulting in a 
pre-tax gain of $4.8 million reducing its ownership interest to 4.0 million 
units or 14 percent. On March 22, 2005, Taylor offered partnership units for 
sale in a public offering, in which AltaGas did not participate, resulting in 
a reduction in AltaGas' ownership interest in Taylor to approximately 10 
percent. The reduction resulted in a pre-tax dilution gain of $4.4 million.

Excluding the after-tax gain on Taylor, net income increased primarily as a 
result of contributions from PremStar and the Edmonton ethane extraction 
plant (EEEP), both of which were acquired in the latter half of 2004, higher 
prices received on hedged power volumes and lower income taxes. These net 
income increases were partially offset by higher operating and administrative 
costs as well as lower prices received for unhedged power volumes.

Funds generated from operations for the three months ended March 31, 2005 was 
$31.1 million or $9.0 million higher than the same period last year due to 
improved business performance and lower income tax payments. Funds generated 
from operations are calculated prior to the inclusion of $12.8 million in 
proceeds from the sale of units in Taylor.

For the three months ended March 31, 2005, revenue increased 80 percent to 
$349.0 million compared to $193.5 million for the same period last year. Net 
revenue in the first quarter 2005 was $78 million or $20.8 million higher 
than the first quarter of 2004. In the extraction component and the Natural 
Gas Distribution and Energy Services segments, net revenue better reflects 
performance than does revenue, as changes in the market price of natural gas 
and power affect both revenue and cost of sales.

The increase in net revenue in the first quarter of 2005 compared to the same 
period last year was mainly due to the acquisition of EEEP and PremStar, 
overall higher power prices received on hedged volumes sold and the gains 
resulting from AltaGas' reduced ownership interest in Taylor.

Operating and administrative expenses were $31.7 million for the three months 
ended March 31, 2005 compared to $26.0 million for the same period of 2004. 
The increase was primarily due to 2004 acquisitions.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for 
the three months ended March 31, 2005 rose 48 percent to $46.3 million 
compared to $31.2 million for the same three month period in 2004.

Amortization expense increased 21 percent to $12.1 million for the first 
quarter of 2005 compared to $10.0 million for the same period in 2004. The 
higher expense was due mainly to increases in the Trust's capital asset base 
due to acquisitions and internal expansion projects.

Interest expense of $5.1 million for the first quarter of 2005 was nine 
percent lower than the $5.6 million for the first quarter of 2004. The 
decrease in interest expense was primarily due to lower 2005 average debt 
balances driven by the Trust's equity issue in June 2004 and higher funds 
generated from operations partially offset by capital lease interest expense.

Income tax expense for the first three months of 2005, including the Taylor 
transactions, was $3.1 million less than that reported for the same period in 
the prior year even though income before taxes was higher. AltaGas' 
consolidated income from corporations was taxable for the period January 1 
through March 31, 2004. Once restructured as an income trust, corporate 
subsidiaries' taxable income is generally reduced to zero by interest 
payments to the Trust. Payments received by the Trust in the form of interest 
distributions or other income from its subsidiaries are taxable income to the 
Trust. As the Trust is entitled to deduct its administrative costs and 
distributions to unitholders and since in accordance with its Trust indenture 
it distributes all of its income to unitholders, the Trust is not expected to 
be liable for income taxes either currently or in the foreseeable future. 
Incorporated subsidiaries in AltaGas' Natural Gas Distribution segment which 
operate as a regulated business under Utility Board regulation will continue 
to pay income tax.

NON-GAAP FINANCIAL MEASURES

AltaGas provides certain financial measures in this MD&A that do not have a 
standardized meaning prescribed by Canadian generally accepted accounting 
principles (GAAP). These non-GAAP financial measures may not be comparable to 
similar measures presented by other trusts.

The purpose of these financial measures and their reconciliation to GAAP 
financial measures is shown below. All of the measures have been calculated 
consistent with previous disclosures by AltaGas.

/T/

                                                          Three months ended
    Net Revenue                                                     March 31
    ($ millions)                                            2005        2004
    -------------------------------------------------------------------------
    Net revenue                                             78.0        57.2
    Add: Cost of sales                                     271.0       136.3
    -------------------------------------------------------------------------
    Revenue (GAAP financial measure)                       349.0       193.5
    -------------------------------------------------------------------------

/T/

In the Natural Gas Distribution and Energy Services segments as well as the 
extraction component, net revenue better reflects performance than revenue. 
As changes in the market price of natural gas and power purchased for resale 
affect both revenue and the cost of sales, net revenue better reflects growth 
in the business.

/T/

                                                          Three months ended
    Operating Income                                                March 31
    ($ millions)                                            2005        2004
    -------------------------------------------------------------------------
    Operating income                                        34.2        21.2
    Add (deduct): Interest                                  (5.1)       (5.6)
                  Income taxes                              (1.5)       (4.6)
    -------------------------------------------------------------------------
    Net income (GAAP financial measure)                     27.6        11.0
    -------------------------------------------------------------------------

/T/

AltaGas reports segmented operating income in the Notes to the Consolidated 
Financial Statements since interest and income taxes are not allocated to 
business segments. Operating income is used to measure operating performance 
without reference to financing decisions and income tax impacts which are not 
controlled at the operating management level.

/T/

                                                          Three months ended
    EBITDA                                                          March 31
    ($ millions)                                            2005        2004
    -------------------------------------------------------------------------
    EBITDA                                                  46.3        31.2
    Add (deduct): Amortization                             (12.1)      (10.0)
                  Interest                                  (5.1)       (5.6)
                  Income taxes                              (1.5)       (4.6)
    -------------------------------------------------------------------------
    Net income (GAAP financial measure)                     27.6        11.0
    -------------------------------------------------------------------------

/T/

Earnings before interest, taxes, depreciation and amortization (EBITDA) is 
provided to assist in evaluating AltaGas' ability to generate cash and its 
ability to cover interest payments.

/T/

    Net Income Before Gains on Reduction in Ownership     Three months ended
     Interest in Long-term Investments                              March 31
    ($ millions)                                            2005        2004
    -------------------------------------------------------------------------
    Net income before gains on reduction in ownership
     interest in long-term investments                      19.7        10.9
    Gains on long-term investments(1)                        7.9         0.1
    -------------------------------------------------------------------------
    Net income (GAAP financial measure)                     27.6        11.0
    -------------------------------------------------------------------------
    (1) After tax gain resulting from sale of Taylor units and dilution gain.

                                                          Three months ended
    Funds Generated from Operations                                 March 31
    ($ millions)                                            2005        2004
    -------------------------------------------------------------------------
    Funds generated from operations                         31.1        22.1
    Add (deduct): Net change in non-cash working
                   capital and other                       (15.0)        2.1
    -------------------------------------------------------------------------
    Cash from operations (GAAP financial measure)           16.1        24.2
    -------------------------------------------------------------------------

/T/

Funds generated from operations is provided to assist in determining the 
ability of AltaGas to generate cash from operations, after interest and 
taxes, without regard to changes in the Trust's non-cash working capital in 
the period.

/T/

                                                          Three months ended
    Distributable Cash                                              March 31
    ($ millions)                                            2005        2004
    -------------------------------------------------------------------------
    Distributable cash flow                                 29.7        20.8
    Add (deduct): Maintenance capital expenditures           1.4         1.3
    Net change in non-cash working capital and other       (15.0)        2.1
    -------------------------------------------------------------------------
    Cash from operations (GAAP financial measure)           16.1        24.2
    -------------------------------------------------------------------------

/T/

The Trust's distributable cash is equal to consolidated funds generated from 
operations before changes in non-cash working capital, after providing for 
maintenance capital expenditures. Distributable cash is not a defined 
performance measure under GAAP and distributable cash cannot be assured. The 
Trust's calculation of distributable cash flow may differ from similar 
calculations used by comparable entities. Distributable cash is a main 
performance measure used by management and investors to evaluate the 
performance of the Trust and its operating subsidiaries.

In the first quarter of 2005, AltaGas sold 1.4 million units of Taylor NGL 
Limited Partnership for proceeds of $12.8. As the Trust's distributable cash 
is based on cash from operations net of the change in non-cash working 
capital and maintenance capital expenditures, it is not impacted by any 
changes to cash resulting from investing or financing activities and hence 
does not include the $12.8 million in proceeds from sale of Taylor units.

RESULTS OF OPERATIONS BY SEGMENT

AltaGas reports consolidated financial and operating results to the operating 
income level on the basis of three business segments: Gathering and 
Processing, Energy Services and Natural Gas Distribution.

/T/

                                                          Three months ended
    Operating Income                                                March 31
    ($ millions)                                            2005        2004
    -------------------------------------------------------------------------
    Gathering and Processing                                20.0        12.0
    Energy Services                                          9.0         5.3
    Natural Gas Distribution                                 5.2         3.9
    -------------------------------------------------------------------------
                                                            34.2        21.2
    -------------------------------------------------------------------------

    GATHERING AND PROCESSING

    The Gathering and Processing segment includes the field gathering and
processing, extraction, and transmission components, as well as AltaGas'
investments in businesses ancillary to the gathering and processing business.

                                                          Three months ended
    Financial Results                                               March 31
    ($ millions)                                            2005        2004
    -------------------------------------------------------------------------
    Revenue                                                 82.9        44.7
    Net revenue                                             53.8        37.8
    Operating and administrative expense                    26.5        19.5
    Amortization expense                                     7.3         6.3
    Operating income                                        20.0        12.0
    -------------------------------------------------------------------------


                                                          Three months ended
                                                                    March 31
    Operating Statistics                                    2005        2004
    -------------------------------------------------------------------------
    Field gathering and processing
      Capacity (Mmcf/d)(1)                                   901         901
      Throughput (gross Mmcf/d)(2)                           558         560
      Capacity utilization (percent)(1)                       62          62
      Average working interest (percent)(1)                   90          87
    Extraction
      Inlet capacity (Mmcf/d)(1)                             539         349
      Production (Bbls/d)(2)                              21,103      10,020
    Transmission volumes (Mmcf/d)(2)(3)                      429         396
    -------------------------------------------------------------------------
    (1) As at March 31
    (2) Average for the period
    (3) Excludes condensate pipeline volumes

/T/

The Gathering and Processing segment generated revenue of $82.9 million for 
the three months ended March 31, 2005, an increase of 85 percent when 
compared to $44.7 million reported in the same period in 2004. Net revenue 
increased to $53.8 million, up $16.0 million for the first quarter of 2005 
compared to $37.8 million reported in the same period in 2004.

Operating income for the three months ended March 31, 2005 increased to $20.0 
million compared to $12.0 in the same period in 2004. Growth in operating 
income was due to gains recorded on transactions related to AltaGas' 
investment in Taylor, higher volumes processed at extraction facilities and 
higher field gathering and processing fees, partially offset by higher 
compressor repair and maintenance costs in the field gathering and processing 
component.

In the field gathering and processing component, net revenue for the three 
months ended March 31, 2005 was $29.9 million compared to $26.5 million for 
the same period last year. Volumes increased with the continuing strong gas 
drilling activity in the Western Canadian Sedimentary Basin during the first 
quarter of 2005 with 139 wells tied in to AltaGas' facilities compared with 
155 during the same period in 2004. In addition, the Shaunavon, Saskatchewan 
solution gas recovery plant was commissioned in the first quarter of 2005. 
Over the last half of 2004 and into the first quarter of 2005, AltaGas 
continued its program of internal expansion installing additional facilities 
to increase capacity at Kirkpatrick Lake, Windfall, Thunder Lake and Mundare. 
These development projects are supported by producer commitments designed to 
mitigate AltaGas' financial exposure to potential throughput declines. Much 
of the installed equipment at these facilities was redeployed from other 
AltaGas locations as was the majority of the equipment used in the 
construction of the Shaunavon plant. These increases in active processing 
assets were offset by the sale of the bulk of AltaGas' Winefred assets where 
production had been reduced as a result of the Alberta Energy and Utilities 
Board (EUB) decision on the gas over bitumen issue.

AltaGas also participated with a producer, in the construction of a large 
gathering line near the Rainbow Lake plant. This line is expected to result 
in an increase in the gas processed through the Rainbow Lake facility.

These increases in volumes processed in the first quarter 2005 were offset by 
temporary volume restrictions imposed by a third party during February 2005 
reducing throughput at AltaGas' Rainbow Lake facility.

In the extraction component higher volumes processed resulted in net revenue 
of $7.2 million for the three months ended March 31, 2005 compared to $3.5 
million for the same period in 2004. Average ethane and NGL volumes extracted 
for the first quarter of 2005 more than doubled reaching 21,103 Bbls/d 
compared to 10,020 Bbls/d for the same period in 2004. Volume increases for 
the first quarter were mainly due to the late August 2004 acquisition of its 
48 2/3 interest in EEEP, the addition of PremStar volumes at the Empress ATCO 
facility and the Joffre ethane extraction plant.

Invested capital in the Gathering and Processing segment was $3.6 million, 
which is offset by the disposition of non-core assets and the Taylor units 
during the quarter ended March 31, 2005, compared to $14.1 million for the 
same period in 2004.

For the remainder of 2005 gas prices are expected to remain strong and 
continue to drive drilling activity. AltaGas has a series of expansion 
projects it expects to undertake at existing facilities during the balance of 
2005. The projects are expected to positively impact volumes processed. In 
addition, processing fee and operating cost recovery negotiations will 
continue to have a positive impact on the financial results of the gathering 
and processing component.

The full year impact of the EEEP acquisition and the realization of value 
chain synergies with other components of the Trust's businesses are expected 
to provide stronger financial results in the extraction component in 2005. In 
the transmission component results are expected to be above 2004 levels based 
on higher volume commitments.

Additionally AltaGas will continue to explore investment or acquisition 
opportunities providing long term value to unitholders.

ENERGY SERVICES

The Energy Services segment is comprised of the power services and gas 
services components. This segment also includes the results of the oil and 
gas production component. 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.

/T/

                                                          Three months ended
    Financial Results                                               March 31
    ($ millions)                                            2005        2004
    -------------------------------------------------------------------------
    Revenue                                                283.6       133.4
    Net revenue                                             16.5         9.8
    Operating and administrative expense                     4.7         2.4
    Amortization expense                                     2.8         2.1
    Operating income                                         9.0         5.3
    -------------------------------------------------------------------------


                                                          Three months ended
                                                                    March 31
    Operating Statistics                                    2005        2004
    -------------------------------------------------------------------------
    Power services
      Volume of power sold (thousands of MWh)                851         863
      Average price received on the sale of
       power ($/MWh)(1)                                    47.24       45.78
      Alberta Power Pool average spot price ($/MWh)(1)     45.90       48.78
    -------------------------------------------------------------------------
    (1) Average for the period

/T/

Revenue in the Energy Services segment for the three months ended March 31, 
2005 was $283.6 million compared to $133.4 million for the same period last 
year, mainly due to the acquisition of the PremStar businesses in October 
2004.

Net revenue in the first quarter 2005 from the power services component was 
$10.4 million, an increase of 35 percent compared to $7.7 million for the 
first quarter of 2004. The increase was primarily due to higher prices 
received on hedged volumes and fewer outage days this quarter compared to the 
first quarter last year, partially offset by lower power pool prices received 
on the sale of unhedged power volumes.

The average price received for power sales in the first quarter of 2005 was 
$47.24 per MWh compared to $45.78 per MWh in the first quarter of 2004. 
Average Alberta Power Pool spot prices were $45.90 per MWh and $48.78 per MWh 
in the first quarters of 2005 and 2004 respectively.

The gas services component contributed net revenue of $4.1 million for the 
first quarter of 2005 compared to $0.4 million in 2004. The increase was 
driven by service fees generated by PremStar which were acquired by AltaGas 
in the fourth quarter of 2004.

The outlook for the Energy Services segment for 2005 is positive with 
favourable pricing on hedged power volumes in the power business and reduced 
power costs experienced in the early part of the year are projected to 
continue throughout the year. The Gas Services component, including PremStar, 
continues to be on track with the outlook at the beginning of the year. 
PremStar continues to experience high rates of customer contract renewals.

NATURAL GAS DISTRIBUTION

The Natural Gas Distribution segment includes AltaGas Utilities Inc., 
AltaGas' one-third interest in Inuvik Gas Ltd. and its 24.9 percent interest 
in Heritage Gas Limited.

/T/

                                                          Three months ended
    Financial Results                                               March 31
    ($ millions)                                            2005        2004
    -------------------------------------------------------------------------
    Revenue                                                 46.4        48.1
    Net revenue                                             11.8         9.7
    Operating income(1)                                      5.2         3.9
    -------------------------------------------------------------------------
    (1) Gross revenue less costs of sales less operating administrative
        expense and amortization


                                                          Three months ended
                                                                    March 31
    Operating Statistics(1)                                 2005        2004
    -------------------------------------------------------------------------
    Volume of natural gas distributed
      Sales (Bcf)                                            5.4         5.5
      Transportation (Bcf)                                   2.6         3.0
    Degree day variance (percent)(2)                        (1.8)        2.0
    Number of customers(3)                                60,638      59,528
    -------------------------------------------------------------------------
    (1) AUI only
    (2) Variance from 20 year average. Positive variances are favorable
    (3) At March 31

/T/

The natural gas distribution business is highly seasonal with the majority of 
natural gas deliveries occurring during the winter heating season. Gas sales 
during the winter typically account for approximately two-thirds of annual 
net revenue, resulting in strong first and fourth quarter results and second 
and third quarters results that show either small profits or losses.

In the first quarter 2005, net revenue in AltaGas' Natural Gas Distribution 
segment was $11.8 million compared to $9.7 million for the same period in 
2004. The increase was due to anticipated rate increases to recover higher 
operating costs and amortization, partially offset by warmer weather in the 
first quarter this year compared to the first quarter last year as well as a 
negative regulatory adjustment in the first quarter of 2004.

On April 12, 2005 the EUB issued Decision 2005-029, which approved a request 
by AltaGas Utilities Inc. (AUI) to increase its rates to cover costs in 
providing gas to its residential and irrigation customers, effective May 1, 
2005. Based on an average residential customer using 135 GJ/year, the EUB 
approved an increase on the distribution portion of a customer's bill of 4.4 
per cent. The EUB also approved an increase in distribution rates for 
approximately 285 irrigation customers by 10 percent.

In December 2004 AUI filed a Phase 1 General Rate Application for 2005 and 
2006. A hearing on the application is scheduled to begin on July 18, 2005 
with a decision on this phase expected in the fourth quarter of 2005.

At the end of the first quarter of 2005 Heritage Gas Limited (Heritage) had 
commitments from 244 customers in Dartmouth, with 184 activated, 31 services 
installed expecting activation early in the second quarter of 2005 and 29 
services remaining to be installed.

For the balance of 2005, Natural Gas Distribution segment financial results 
are expected to be slightly improved compared to 2004. This segment provides 
limited growth opportunities in the base business, so year over year the 
change is not expected to be significant. Heritage Gas Limited franchise area 
continues to expand with the impacts on financial results more likely to be 
evidenced in years beyond 2005.

/T/

    SUMMARY OF EIGHT MOST RECENTLY COMPLETED CONSOLIDATED QUARTERLY RESULTS

    -------------------------------------------------------------------------
                                                           Q4     Q3     Q2
    ($ millions)      Q1 05  Q4 04  Q3 04  Q2 04  Q1 04   03(1)  03(1)  03(1)
    -------------------------------------------------------------------------
    Net revenue        78.0   71.6   61.5   59.5   57.2   61.0   53.3   51.2
    Net income         27.6   25.8   17.1   11.9   11.0   12.0    9.3    6.8

    ($ per unit)
    -------------------------------------------------------------------------
    Earnings
      Basic            0.52   0.49   0.33   0.25   0.24   0.26   0.20   0.15
      Diluted          0.52   0.48   0.33   0.25   0.24   0.26   0.20   0.15
    Dividends/
     distributions(2)  0.45   0.45   0.45   0.30   0.11   0.11   0.11   0.08
    -------------------------------------------------------------------------
    (1) Prior periods have been restated for the impacts of the adoption of
        CICA Handbook guidance on accounting for asset retirement obligations
    (2) The Trust pays a monthly distribution of $0.15 per unit. The
        distributions for Q2 2004 are for the period starting May 1, 2004,
        the effective date of the Trust. Prior to May 1, 2004 ASI paid
        quarterly dividends from the Q1 2001 through Q1 2004

/T/

Identifiable trends in AltaGas' business across the past eight quarters 
reflect the organization's growth, a favorable business environment and 
seasonality in the business. The Natural Gas Distribution segment reports 
higher earnings in colder periods than in warmer periods resulting in the 
first and last quarters of each year being the most profitable for the 
consolidated entity.

Net income in the second quarter 2003 was $6.8 million, 39 percent higher 
than the same quarter in 2002, a result of stronger contributions from the 
transmission, power services and extraction components. Increases in the 
transmission component related to the Suffield pipeline acquisition at the 
end of 2002. In the power services component, increases in net revenue were 
driven by higher average prices received for power and by the increased 
volumes sold under the newly acquired Genesee energy contract. Extraction 
component performance was better than the same quarter in the prior year as a 
result of the commissioning of the Joffre ethane extraction plant at the end 
of 2002. Improved operating income was offset by higher interest expense due 
to higher debt levels in the second quarter of 2003 when compared to the same 
quarter of the prior year, and as a result of a charge to income for 
legislative changes to the taxation of resource income.

Power services, extraction and transmission components were the key 
contributors in the third quarter of 2003 to a 63 percent increase in net 
income to $9.3 million when compared to the third quarter of 2002. AltaGas 
paid a quarterly dividend of $0.11 per share, up from $0.08 per share in the 
second quarter of 2003 on the basis of the increased strength and 
sustainability of AltaGas' earnings.

Fourth quarter 2003 net income of $12.0 million, including an unfavorable 
income tax expense charge of $1.2 million related to changes announced in the 
federal large corporations tax legislation, was the highest quarterly net 
income reported by AltaGas since it was formed. The increase from the prior 
year's quarter was a result of the late 2002 gathering and processing segment 
acquisitions, incremental power volumes sold from the Genesee energy contract 
and the completion of modifications to increase AltaGas' share of ethane 
production by 1,400 Bbls/d at the EnCana-operated Empress extraction plant 
late in the third quarter of 2003.

Reported net income in the first quarter 2004 was $11.0 million due to 
increased volumes in the Gathering and Processing and Energy Services 
segments which were partially offset by lower margins in the Energy Services 
segment and warmer weather and regulatory adjustments in the Natural Gas 
Distribution segment.

In the second quarter of 2004 AltaGas converted from a corporate structure to 
an income trust. Strong operational performance in the second quarter of 2004 
was driven by volume increases in the Gathering and Processing segment from 
acquisitions and expansions and from higher power volumes sold. Net income of 
$11.9 million improved substantially compared to the same quarter of the 
prior year, the combined impact of higher operational earnings and reduced 
income taxes, the latter driven by the conversion to an income trust. During 
the quarter the Trust made its first public offering of units as an income 
trust and raised $88.5 million with net proceeds which was used to reduce the 
Trust's debt. In the second quarter 2004 AltaGas commenced monthly 
distributions to unitholders of $0.15 per unit.

The third quarter of 2004 was the first full quarter as an income trust. The 
Trust generated record funds from operations of $28.6 million and increased 
net income to $17.1 million or $0.33 per unit. Highlights for the quarter 
included the closing of the EEEP acquisition and the acquisition of 25 
megawatts of power peaking capacity in southern Alberta and a full quarter of 
reduced income tax expense resulting from the conversion to an income trust.

The highest quarterly net income in AltaGas' history highlighted the fourth 
quarter of 2004 as the Trust recorded $25.8 million or $0.49 per unit in net 
income. The increase was driven by the Energy Services segment, which 
benefited from higher power volumes sold and higher power prices on hedged 
volumes and the acquisition of the PremStar businesses. The Gathering and 
Processing segment, also provided improved results based on contributions 
from the acquisition of the Edmonton extraction ethane plant and improved 
operating performance in the field gathering and processing component.

First quarter 2005 results are discussed in detail in an earlier section of 
this MD&A.

CHANGES IN ACCOUNTING POLICY

The Canadian Institute of Chartered Accountants (CICA) issued Accounting 
guideline 15 (AcG-15) "Consolidation of Variable Interest Entities" which is 
effective for annual and interim reporting periods commencing after November 
1, 2004. This guideline requires organizations to assess any entity in which 
it may have a variable interest to determine whether or not the assets, 
liabilities and results of the entities' activities should be reported on 
other than a consolidated basis. AltaGas' has determined there is no 
requirement for change to its reporting with regard to its interests in those 
entities reported in its consolidated financial statements.

On March 18, 2005 the CICA issued revised Emerging Issues Committee Abstract 
(EIC) 151 "Exchangeable Securities issued by Subsidiaries of Income Trusts". 
The EIC states that exchangeable securities issued by a subsidiary of an 
income trust should be reflected as either non-controlling interest or debt 
in the consolidated balance sheet unless they meet certain criteria. A 
initial draft of the EIC was released January 19, 2005 under which guidance 
AltaGas determined that the exchangeable securities issued and outstanding by 
AltaGas Limited Partnership No. 1 at December 31, 2004 and March 31, 2005 met 
the criteria for consolidation accounting at those dates.

The revised EIC becomes effective for annual and interim reporting periods 
ending on or after June 30, 2005. AltaGas expects that the exchangeable 
securities issued and outstanding by AltaGas Limited Partnership No. 1 will 
meet the criteria at June 30, 2005.

CRITICAL ACCOUNTING ESTIMATES

AltaGas' financial statements have been prepared in accordance with generally 
accepted accounting principles. Certain accounting policies require that 
management make appropriate decisions with respect to the formulation of 
estimates and assumptions that affect the reported amounts of assets, 
liabilities, revenues and expenses. AltaGas' critical accounting estimates 
continue to be amortization expense, asset retirement obligations and asset 
impairment assessment. For a full discussion of these critical accounting 
estimates, refer to MD&A in AltaGas' 2004 Annual Report.

FINANCIAL INSTRUMENTS

AltaGas enters into financial derivative contracts such as swaps and collars 
to manage exposure to fluctuations in commodity prices and interest rates, 
particularly in the power services component and with respect to interest 
rates on debt. These contracts are designed as hedges and gains and losses 
relating to such contracts are deferred and recognized in the same period and 
financial statement category as the corresponding hedged transaction.

The most significant impact of these contracts on 2005 business has been to 
provide revenue stability in the power services component. Alberta Power Pool 
prices ranged from $7.74 per MWh to $997.00 per MWh in the first quarter of 
2005. Through the use of financial hedges on the portion of its 2005 power 
portfolio deemed optimal by management, AltaGas moderated the impact of this 
volatility on its business.

AltaGas reduces financing costs and minimizes the effect of future interest 
rate movements on its cash flows through the use of interest rate swaps. At 
March 31, 2005 the Trust had interest rates fixed through swap transactions 
with varying terms to maturity on $200.0 million of its $232.7 million total 
drawn bank debt. Including AltaGas' medium term notes, the rate has been 
fixed on 90 percent of AltaGas' total debt, including capital leases. The 
amount of fixed rate debt was higher than the Trust's target of 70 to 75 
percent of total debt due to the proceeds of the June 2004 equity offering 
being applied to floating rate debt.

INVESTED CAPITAL

During the first quarter of 2005, AltaGas invested $6.0 million in capital 
assets, energy services arrangements, contracts and relationships and long 
term investments compared to $16.3 million in the same period in 2004. 
AltaGas disposed of non-core assets in the gathering and processing segment 
totaling $7.1 million in original cost and reduced its investment interest in 
the Taylor NGL Limited Partnership through a sale of units and non-
participation in a public equity offering by Taylor.

/T/

    Invested capital by segment
                                                         Natural
    For the three months      Gathering                      Gas
     ended March 31,                and       Energy     Distrib-
     2005                    Processing     Services       ution       Total
    -------------------------------------------------------------------------
    Additions, net of
     disposals:
      Capital assets          $    (3.5)  $      0.5  $      1.9  $     (1.1)
      Energy service
       arrangements,
       contracts and
       relationships                  -            -           -           -
      Long-term investments
       and other assets            (8.1)           -           -        (8.1)
    -------------------------------------------------------------------------
                              $   (11.6)  $      0.5  $      1.9  $     (9.2)
    -------------------------------------------------------------------------


                                                         Natural
    For the three months      Gathering                      Gas
     ended March 31,                and       Energy     Distrib-
     2004                    Processing     Services       ution       Total
    -------------------------------------------------------------------------
    Additions, net of
     disposals:
      Capital assets          $    12.1   $      0.3  $      1.8  $     14.2
      Energy service
       arrangements,
       contracts and
       relationships                  -            -           -           -
      Long-term investments
       and other assets             2.0            -         0.1         2.1
    -------------------------------------------------------------------------
                              $    14.1   $      0.3  $      1.9  $     16.3
    -------------------------------------------------------------------------

/T/

AltaGas' categorizes its invested capital into maintenance, growth and 
administrative. Growth capital accounted for $3.9 million, which included 
Gathering and Processing facility acquisitions and expansions as well as 
expansions in the Natural Gas Distribution segment. Maintenance capital 
projects amounting to $1.4 million in the first three months of 2005 and $1.3 
million for the same period of 2004 were undertaken mainly in the Gathering 
and Processing and Natural Gas Distribution segments to maintain the 
productive capability of the facilities and gathering and distribution 
systems. Administrative capital expenditures, including computer hardware and 
software projects, totaled $0.7 million in the first quarter of 2005 compared 
to $0.9 million in the same period in 2004.

/T/

    Invested capital by activity
                                                         Natural
    For the three months      Gathering                      Gas
     ended March 31,                and       Energy     Distrib-
     2005                    Processing     Services       ution       Total
    -------------------------------------------------------------------------
    Capital
      Maintenance             $      0.6  $      0.2  $      0.6  $      1.4
      Growth                       (12.8)        0.2         1.3       (11.3)
      Administrative                 0.6         0.1           -         0.7
    -------------------------------------------------------------------------
                              $    (11.6) $      0.5  $      1.9  $     (9.2)
    -------------------------------------------------------------------------


                                                         Natural
    For the three months      Gathering                      Gas
     ended March 31,                and       Energy     Distrib-
     2004                    Processing     Services       ution       Total
    -------------------------------------------------------------------------
    Capital
      Maintenance             $      0.5  $        -  $      0.8  $      1.3
      Growth                        13.2           -         0.9        14.1
      Administrative                 0.4         0.3         0.2         0.9
    -------------------------------------------------------------------------
                              $     14.1  $      0.3  $      1.9  $     16.3
    -------------------------------------------------------------------------

/T/

LIQUIDITY AND CAPITAL RESOURCES

Funds generated from operations for the quarter ended March 31, 2005 
increased to $31.1 million from $22.1 million for the quarter ended March 31, 
2004.

AltaGas had a working capital deficit of $94.8 million at March 31, 2005 
compared to a working capital deficit of $106.5 million at December 31, 2004 
and a working capital surplus of $2.9 million at March 31, 2004. The primary 
driver for this change in working capital is related to the reclassification 
of AltaGas' $100.0 million medium-term notes (MTNs) due October 4, 2005 to 
current portion of long term debt.

The Trust believes that its access to debt and equity markets, unutilized 
bank credit facilities, funds generated from operations and funds generated 
from the Trust's Distribution Reinvestment and Premium Distribution(TM) 
programs will provide it with sufficient capital resources and liquidity to 
fund existing operations, future distributions, and certain acquisition and 
expansion opportunities in 2005. A description of the Trust's credit 
facilities can be found in Notes 9 and 10 to the consolidated financial 
statements included in the Trust's 2004 Annual Report.

The use of debt or equity funding is based on AltaGas' capital structure 
determined by considering the norms and risks associated with each of its 
business components and segments. At March 31, 2005 AltaGas had total debt 
outstanding of $345.7 million down from $359.5 million at December 31, 2004. 
AltaGas Operating Partnership had $100.0 million in MTNs outstanding and 
AltaGas Holding Limited Partnership No.1 had access to prime loans, banker's 
acceptances and letters of credit through bank lines totaling $425.0 million. 
As at March 31, 2005 AltaGas Holding Limited Partnership No.1 had drawn bank 
debt of $232.7 million and letters of credit outstanding of $36.6 million. 
These two entities fund all operating subsidiaries. As an income trust, the 
Trust targets a debt to total capitalization ratio between 45 percent and 50 
percent. The Trust's debt to total capitalization ratio as at March 31, 2005 
decreased to 41.1 percent from 42.6 percent at December 31, 2004.

TRUST UNIT INFORMATION

Under the terms of the restructuring of AltaGas into an income trust 
effective May 1, 2004, ASI securityholders exchanged their shares in the 
company for trust units and eligible securityholders also received 
exchangeable units that are exchangeable into trust units on a one for one 
basis. The exchangeable units are not listed for trading on an exchange.

As of April 30, 2005 the Trust had 51.6 million trust units and 2.2 million 
exchangeable units outstanding and a market capitalization of $1.3 billion 
based on a closing trading price on April 29, 2005 of $24.17 per trust unit. 
There are $0.3 million options exercisable under the terms of the unit option 
plan brought forward in the reorganization.

OFF BALANCE SHEET ARRANGEMENTS

The Trust is not party to any contractual arrangement under which an 
unconsolidated entity may have any obligation under certain guarantee 
contracts, a retained or contingent interest in assets transferred to an 
unconsolidated entity or similar arrangement that serves as credit, liquidity 
or market risk support to that entity for such assets. The Trust has no 
obligation under derivative instruments, nor under a material variable 
interest in an unconsolidated entity that provides financing, liquidity, 
market risk or credit risk support to the registrant, or engages in leasing, 
hedging or research and development services with the registrant.

CONTRACTUAL OBLIGATIONS

There have been no material changes to AltaGas' contractual obligations, 
since December 31, 2004. For further information on these contractual 
obligations, refer to the MD&A in AltaGas' 2004 Annual Report.

RELATED PARTIES

The Trust pays rent under a lease for office space to a company which is 
owned by a member of management. Payments of $20.0 thousand were made in the 
first quarter 2005. The five year lease expires in 2007 and is renewable at 
the option of AltaGas for another five years.

SUBSEQUENT EVENTS

On April 29, 2005 AltaGas filed a Universal Shelf Prospectus with Canadian 
Securities Commissions pursuant to which AltaGas Income Trust may issue up to 
an aggregate of $500 million of trust units and debt securities over a 25 
month period. This filing will provide AltaGas with the flexibility to raise 
funds from the offering of trust units or debt securities through one or more 
methods of distribution when market conditions are appropriate. AltaGas plans 
to use the proceeds raised from any offerings to reduce outstanding 
indebtedness under the Trust's existing credit facilities and for general 
corporate purposes including the financing of acquisitions, other capital 
expenditures and investments.

UNITHOLDER LIMITED LIABILITY LEGISLATION

On July 1, 2004, the Income Trusts Liability Act (Alberta) came into force 
which provides that a unitholder will not be, as a beneficiary, liable for 
any act, defaults, obligation or liability of the Trustee that arises after 
the particular provision of such legislation comes into force.

The AltaGas Income Trust indenture itself provides that no unitholder will be 
subject to any liability in connection with the Trust or its obligations and 
affairs or for any act or omission of the trustee of the Trust, provided that 
in the event that a court determines that unitholders are subject to such 
liabilities, the liabilities will be enforceable only against and will be 
satisfied out of the Trust's assets. The trust indenture also provides that 
contracts to which the Trust is a party should contain language restricting 
the liability of unitholders.

/T/

                            ALTAGAS INCOME TRUST
                         CONSOLIDATED BALANCE SHEETS

    ($ thousands)
    -------------------------------------------------------------------------
                                                        March 31,
                                                            2005    December
                                                      (unaudited)   31, 2004
    -------------------------------------------------------------------------
    ASSETS
    Current assets
      Cash and cash equivalents                       $    2,862  $    2,669
      Customer deposits                                   24,821      26,550
      Accounts receivable                                156,394     160,507
      Inventory                                              319         250
      Other                                                6,071       4,845
    -------------------------------------------------------------------------
                                                         190,467     194,821
    Capital assets                                       737,588     746,729
    Energy services arrangements, contracts and
     relationships                                       111,309     113,102
    Goodwill                                              18,860      18,860
    Future income taxes                                        -         208
    Long-term investments and other assets (Note 3)       31,041      34,876
    -------------------------------------------------------------------------
                                                      $1,089,265  $1,108,596
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND UNITHOLDERS' EQUITY
    Current liabilities
      Accounts payable and accrued liabilities        $  134,572  $  144,594
      Distributions payable to unitholders                 8,051       7,979
      Short-term debt                                      7,212       7,016
      Current portion of long-term debt                  101,018     101,001
      Customer deposits                                   24,821      26,550
      Other                                                9,554      14,193
    -------------------------------------------------------------------------
                                                         285,228     301,333
    -------------------------------------------------------------------------
    Long-term debt                                       237,439     251,462
    Asset retirement obligations                          15,648      16,122
    Future income taxes                                   55,951      56,164
    -------------------------------------------------------------------------
                                                         309,038     323,748
    -------------------------------------------------------------------------
    Unitholders' equity (notes 4 and 5)                  494,999     483,515
    -------------------------------------------------------------------------
                                                      $1,089,265  $1,108,596
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements





                            ALTAGAS INCOME TRUST
         CONSOLIDATED STATEMENTS OF INCOME AND ACCUMULATED EARNINGS
                                 (unaudited)

    ($ thousands except per unit amounts)
    -------------------------------------------------------------------------
                                                          Three months ended
                                                                    March 31
                                                            2005        2004
    -------------------------------------------------------------------------
    REVENUE
      Operating                                       $  339,097  $  193,129
      Gain on investments (note 3)                         9,188          99
      Other                                                  699         291
    -------------------------------------------------------------------------
                                                         348,984     193,519
    -------------------------------------------------------------------------
    EXPENSES
      Cost of sales                                      271,004     136,329
      Operating and administrative                        31,717      26,048
      Amortization                                        12,055       9,990
    -------------------------------------------------------------------------
                                                         314,776     172,367
    -------------------------------------------------------------------------
    Operating income                                      34,208      21,152
    Interest expense
      Short-term debt                                         80         107
      Long-term debt                                       4,977       5,428
    -------------------------------------------------------------------------
    Income before income taxes                            29,151      15,617
    Income taxes                                           1,531       4,578
    -------------------------------------------------------------------------
    Net income                                            27,620      11,039
    Accumulated earnings, beginning of period            196,819      89,904
    -------------------------------------------------------------------------
    Accumulated earnings, end of period               $  224,439  $  100,943
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income per unit (note 5)
      Basic                                           $     0.52  $     0.24
      Diluted                                         $     0.52  $     0.24

    See accompanying notes to the consolidated financial statements



                            ALTAGAS INCOME TRUST
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (unaudited)

    ($ thousands)
    -------------------------------------------------------------------------
                                                          Three months ended
                                                                    March 31
                                                            2005        2004
    -------------------------------------------------------------------------
    Cash from operations
      Net income                                      $   27,620  $   11,039
      Items not involving cash:
        Amortization                                      12,055       9,990
        Accretion of asset retirement obligations            320         183
        Stock option compensation                              -         136
        Future income taxes                                  147         521
        Loss (gain) on sale of assets and investments     (9,206)         77
        Equity income                                       (681)       (453)
        Distributions from equity investments                740         554
        Other                                                124          65
    -------------------------------------------------------------------------
    Funds generated from operations                       31,119      22,112
    ARO costs incurred and other                            (145)          -
    Net change in non-cash working capital               (14,832)      2,059
    -------------------------------------------------------------------------
                                                          16,142      24,171
    -------------------------------------------------------------------------
    Investing activities
      Decrease in customer deposits                        1,729           -
      Acquisition of capital assets                       (5,305)    (16,483)
      Disposition of capital assets                        4,831           -
      Acquisition of energy services arrangements and
       contracts                                               -         (12)
      Acquisition of long-term investments and other
       assets                                               (136)     (2,173)
      Disposition of long-term investments and other
       assets                                             12,807         300
    -------------------------------------------------------------------------
                                                          13,926     (18,368)
    -------------------------------------------------------------------------
    Financing activities
      Decrease in operating loans and long-term debt     (13,810)     (2,538)
      Dividends                                                -      (5,051)
      Distributions to unitholders                       (24,011)          -
      Net proceeds from issuance of units and common
       shares (note 5)                                     7,946       1,786
    -------------------------------------------------------------------------
                                                         (29,875)     (5,803)
    -------------------------------------------------------------------------
    Change in cash and cash equivalents                      193           -
    Cash and cash equivalents, beginning of period         2,669           -
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period         $     2,862  $        -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements



                            ALTAGAS INCOME TRUST

    SELECTED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)
    (tabular amounts in $ thousands)

    1.  STRUCTURE OF ALTAGAS INCOME TRUST

    AltaGas Income Trust (the Trust) is an unincorporated open-ended trust
    established under the laws of Canada, pursuant to a Declaration of Trust
    dated March 26, 2004. The Trust commenced operations on May 1, 2004 as
    successor to AltaGas Services Inc. (ASI) when it acquired all of the
    shares of ASI for consideration of trust units or exchangeable units on a
    one for one basis. These unaudited interim consolidated financial
    statements follow the continuity of interest basis of accounting whereby
    the Trust is considered a continuation of ASI. As a result, the
    comparative period figures prior to May 1, 2004 are those of ASI.

    2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    The interim consolidated financial statements of the Trust have been
    prepared by management in accordance with Canadian generally accepted
    accounting principles. The accounting policies applied are consistent
    with those outlined in the Trust's annual consolidated financial
    statements for the fiscal year ended December 31, 2004. These interim
    consolidated financial statements for the three months ended March 31,
    2005 do not include all of the disclosures required in the annual
    financial statements, and should be read in conjunction with the audited
    consolidated financial statements included in the Trust's Annual Report.

    3.  GAIN ON INVESTMENTS

    On February 7, 2005 the Trust sold 1.4 million partnership units of
    Taylor NGL Limited Partnership (Taylor) for proceeds of $12.8 million
    realizing a pre-tax gain of $4.8 million. The sale reduced the Trust's
    ownership in Taylor to 4.0 million units or 14.0 percent.


    On March 22, 2005 Taylor issued 13.0 million limited partnership units.
    AltaGas did not participate in this issue which reduced the Trust's
    ownership in Taylor to 9.6 percent and resulted in a pre-tax dilution
    gain of $4.4 million.

    4.  UNITHOLDERS' EQUITY
                                                        March 31,   December
                                                            2005    31, 2004
    -------------------------------------------------------------------------
    Unitholders' capital (note 6)                     $  394,584  $  386,638
    Contributed surplus                                    2,823       2,823
    Accumulated earnings                                 224,439     196,819
    Accumulated dividends                                (41,114)    (41,114)
    Accumulated unitholders' distributions               (85,733)    (61,651)
    -------------------------------------------------------------------------
                                                      $  494,999  $  483,515
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the quarter ended March 31, 2005 $nil (2004 - $5.1 million) of
    dividends and $24.0 million (2004 - $nil) of distributions were paid by
    the Trust.

    5.  UNITHOLDERS' CAPITAL

    Authorized
    -   an unlimited number of trust units redeemable for cash at the option
        of the holder
    -   an unlimited number of AltaGas Holding Limited Partnership No. 1
        (LP1) class B limited partnership units which are exchangeable into
        trust units on a one for one basis no later than May 1, 2014. Prior
        to May 1, 2014 the exchange is at the option of the unitholder at any
        time, and at the option of the Trust should the number of LP1 units
        outstanding fall below 750,000. After May 1, 2014 the exchange is at
        the option of the Trust.
    -   an unlimited number of AltaGas Holding Limited Partnership No. 2
        (LP2) class B limited partnership units which are exchangeable into
        trust units on a one for one basis no later than May 1, 2009. Prior
        to May 1, 2009 the exchange is at the option of the unitholder at
        anytime, and at the option of the Trust should the number of LP2
        units outstanding fall below 1,000,000. After May 1, 2009 the
        exchange is at the option of the Trust.



                                                       Number of
    Trust units issued and outstanding:                    units      Amount
    -------------------------------------------------------------------------
    December 31, 2004                                 49,825,241  $  367,349
    Units issued for cash on exercise of options         214,978       1,861
    Units issued under distribution reinvestment
     program                                             266,376       6,085
    Units issued for exchangeable units                1,187,958       6,799
    -------------------------------------------------------------------------
    March 31, 2005                                    51,494,553     382,094
    -------------------------------------------------------------------------

    Exchangeable units issued and outstanding:
    -------------------------------------------------------------------------
    December 31, 2004                                  3,370,294      19,289
    LP1 units redeemed for trust units                (1,187,958)     (6,799)
    -------------------------------------------------------------------------
    March 31, 2005                                     2,182,336      12,490
    -------------------------------------------------------------------------
    Issued and outstanding March 31, 2005             53,676,889  $  394,584
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

/T/

The Trust has an employee unit option plan under which both employees and 
directors are eligible to receive grants. At March 31, 2005 3,800,000 units 
were reserved for issuance under the plan. To March 31, 2005 options granted 
under the plan, including those granted in the first quarter of 2005, 
generally had a term of ten years to expiry and vested no longer than over a 
four year period. On May 1, 2004 subsequent to the establishment of the Trust 
all options granted were vested.

At March 31, 2005 outstanding options are exercisable at various dates to the 
year 2015 (2003 - 2014). Options outstanding under the plan have a weighted 
average exercise price of $13.09 (2004 - $9.31) and a weighted average 
remaining term of 8.13 years (2004 - 8.29 years). As at March 31, 2005 the 
unexpensed fair value of unit option compensation cost associated with future 
periods was $nil (December 31, 2004 - $nil).

/T/

                                                                    Weighted
                                                                     Average
                                                       Number of    Exercise
                                                         Options       Price
    -------------------------------------------------------------------------
    Unit options outstanding, December 31, 2004          349,411  $     9.02
    Granted                                               40,000       24.62
    Exercised                                           (214,978)       8.62
    -------------------------------------------------------------------------
    Unit options outstanding, March 31, 2005             174,433  $    13.09
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Exercisable at March 31, 2005                        134,433  $     9.66
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The basic number of units outstanding for the three months ended
    March 31, 2005 was 53.4 million (March 31, 2004 - 45.9 million ASI
    shares) and the diluted number of units outstanding for the three months
    ended March 31, 2005 was 53.6 million (March 31, 2004 - 46.6 million ASI
    shares).

    6.  RELATED PARTY TRANSACTIONS

    The Trust pays rent under a lease for office space to a company which is
    owned by a member of management. Payments of $20 thousand were made
    during the quarter ended March 31, 2005 (March 31, 2004 - nil). The five
    year lease expires in 2007 and is renewable at the option of AltaGas for
    another five years. These transactions have been recorded at their
    exchange amounts.

    7.  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.
    The Trust has three reportable segments:

        Gathering and Processing - natural gas gathering and processing,
        natural gas transmission, and ethane and natural gas liquids
        extraction.

        Energy Services - power services, gas services and oil and natural
        gas production.

        Natural Gas Distribution - natural gas distribution to end users and
        related services.



    For the three
     months ended  Gathering             Natural Gas      Inter-
     March 31,           and      Energy     Distrib-    segment
     2005         Processing    Services       ution  elimination      Total
    -------------------------------------------------------------------------
    Revenue       $   82,948  $  283,556  $   46,374  $  (63,894) $  348,984
    Cost of sales    (29,149)   (267,115)    (34,558)     59,818    (271,004)
    Operating and
     administrative
     expenses        (26,553)     (4,619)     (4,621)      4,076     (31,717)
    Amortization      (7,257)     (2,817)     (1,981)          -     (12,055)
    -------------------------------------------------------------------------
    Operating
     income       $   19,989  $    9,005  $    5,214  $        -  $   34,208
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net additions
     to:
      Capital
       assets     $   (3,542) $      515  $    1,903  $        -  $   (1,124)
      Energy
       Services
       arrangements,
       contracts
       and
       relation-
       ships      $        -  $        -  $        -  $        -  $        -
      Long-term
       investments
       and other
       assets     $   (8,085) $        -  $       34  $        -  $   (8,051)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill      $   18,860  $        -  $        -  $        -  $   18,860
    Segment
     assets       $  769,993  $  175,134  $  144,138  $        -  $1,089,265
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------




    For the three
     months ended  Gathering             Natural Gas      Inter-
     March 31,           and      Energy     Distrib-    segment
     2004         Processing    Services       ution  elimination      Total
    -------------------------------------------------------------------------
    Revenue       $   44,692  $  133,409  $   48,129  $  (32,711) $  193,519
    Cost of sales     (6,900)   (123,649)    (38,387)     32,607    (136,329)
    Operating and
     administrative
     expenses        (19,545)     (2,332)     (4,275)        104     (26,048)
    Amortization      (6,276)     (2,132)     (1,582)          -      (9,990)
    -------------------------------------------------------------------------
    Operating
     income       $   11,971  $    5,296  $    3,885  $        -  $   21,152
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net additions
     to:
      Capital
       assets     $   12,107  $      302  $    1,845  $        -  $   14,254
      Energy
       Services
       arrangements,
       contracts
       and
       relation-
       ships      $        -  $       12  $        -  $        -  $       12
    Long-term
     investments
     and other
      assets      $    1,972   $       -  $      105  $        -  $    2,077
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill      $   18,860   $       -  $        -  $        -  $   18,860
    Segment
     assets       $  784,837   $ 165,998  $  157,761  $        -  $1,108,596
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    8.  PENSION PLANS AND RETIREMENT BENEFITS

    Substantially all full-time employees of the Trust's natural gas
    distribution subsidiary, AltaGas Utilities Inc., are members of one of
    two defined benefit non-contributory pension plans. AltaGas Utilities
    Inc. also has plans that provide other post-retirement benefits such as
    life insurance and health care.

    The total post retirement benefit cost recorded in the statement of
    income for the three months ended March 31, 2005 is $0.3 million
    (March 31, 2004 - $0.3 million).

    9.  COMPARATIVE FIGURES

    Certain comparative figures have been reclassified to conform to the
    current financial statement presentation.

    10. SEASONALITY

    The natural gas distribution business is highly seasonal with the
    majority of natural gas deliveries occurring during the winter heating
    season. Gas sales during the winter typically account for approximately
    two-thirds of annual gas distribution revenue, resulting in strong first
    and fourth quarter results and second and third quarters that show either
    small profits or losses.



    OTHER INFORMATION

    FINANCIAL SUMMARY
     BY BUSINESS
     SEGMENT
    ($ millions)       Q1/05       Q4/04       Q3/04       Q2/04       Q1/04
    -------------------------------------------------------------------------
    Revenue
      Gathering and
       Processing
        Field
         gathering and
         processing     29.9        32.1        28.5        28.4        26.5
        Extraction      36.3        36.8        16.9        10.8        10.4
        Transmission     6.6         6.6         6.5         6.4         7.0
        Other           10.5         1.2         0.8         0.8         1.3
        Intercomponent
         elimination    (0.4)       (0.5)       (0.6)       (0.5)       (0.5)
      Energy Services  283.6       248.3       124.6       124.1       133.4
      Natural Gas
       Distribution(1)  46.4        41.9        14.0        20.6        48.1
      Intersegment
       elimination     (63.9)      (54.6)      (12.2)      (15.2)      (32.7)
    -------------------------------------------------------------------------
                       349.0       311.8       178.5       175.4       193.5
    -------------------------------------------------------------------------
    Net revenue
      Gathering and
       Processing
        Field
         gathering and
         processing     29.9        32.1        28.5        28.4        26.5
        Extraction       7.2         8.2         5.5         3.6         3.5
        Transmission     6.6         6.6         6.5         6.4         7.0
        Other           10.5         1.2         0.8         0.9         1.3
        Intercomponent
         elimination    (0.4)       (0.5)       (0.6)       (0.5)       (0.5)
      Energy Services   16.5        18.9        16.6        14.6         9.8
      Natural Gas
       Distribution(1)  11.8         9.7         5.1         6.2         9.7
      Intersegment
       elimination      (4.1)       (4.6)       (0.9)       (0.1)       (0.1)
    -------------------------------------------------------------------------
                        78.0        71.6        61.5        59.5        57.2
    -------------------------------------------------------------------------
    Operating income
      Gathering and
       Processing       20.0        14.1        12.1         7.2        12.0
      Energy Services    9.0        11.4        11.6        10.0         5.3
      Natural Gas
       Distribution(1)   5.2         3.9        (0.3)        0.4         3.9
    -------------------------------------------------------------------------
                        34.2        29.4        23.4        17.6        21.2
    -------------------------------------------------------------------------
    (1) Q2 and Q3 financial results reflect the normal lower seasonal demand
        for natural gas in the Natural Gas Distribution segment.
    Notes:
        Certain comparative figures have been reclassified to conform to the
        current financial statement presentation.
        AltaGas adopted CICA Handbook guidelines on asset retirement
        obligations in 2003. Prior year information has been restated for the
        effect of this adoption.



    OPERATING SUMMARY BY BUSINESS SEGMENT

                       Q1/05       Q4/04       Q3/04       Q2/04       Q1/04
    -------------------------------------------------------------------------
    Gathering and
     Processing
      Field gathering
       and processing
        Processing
         capacity
         (gross
         Mmcf/d)(1)      901         913         906         906         901
        Processed
         throughput
         (gross
         Mmcf/d)(2)      558         558         552         563         560
        Capacity
         utilization
         (percent)(1)     62          61          61          62          62
        Average
         working
         interest
         (percent)(1)     90          90          89          89          87
      Extraction
        Licensed inlet
         capacity
         (Mmcf/d) (1)    539         539         539         349         349
        Production
         (Bbls/d)(2)  21,103      21,244      13,054       9,337      10,020
      Transmission
       volumes
       (Mmcf/d)(2)(4)    429         432         417         415         396
    Energy Services
      Volume of power
       sold (thousands
       of MWh)           851         879         877         862         863
      Price received
       on the sale of
       power
       ($/MWh)(2)      47.24       50.17       49.22       49.88       45.78
      Average Alberta
       Power Pool
       prices
       ($/MWh)(2)      45.90       54.95       54.35       60.07       48.78
    Natural Gas
     Distribution(5)
      Customers       60,638      60,430      60,048      59,266      59,528
      Volume of
       natural gas
       distributed
        Sales (Bcf)(6)   5.4         4.4         1.5         2.2         5.5
        Transportation
         (Bcf)           2.5         2.8         2.6         2.6         3.0
      Degree day
       variance
       (percent)(3)     (1.8)       (4.4)       24.8        11.5         2.0
    -------------------------------------------------------------------------
    (1) At period end
    (2) Quarter average
    (3) Variance from 20-year average. Positive variances are favourable
        demand for natural gas in the Natural Gas Distribution segment
    (4) Excludes condensate transmission volumes
    (5) Excludes Inuvik Gas and Heritage Gas operating statistics
    (6) Q2 and Q3 natural gas distributed (Bcf) reflect the normal lower
        seasonal


    DEFINITIONS

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

/T/
Media
Dennis Dawson
(403) 691-7534
Email: dennis.dawson@altagas.ca


or


Investment Community
Debbie Stein
(403) 269-5683
Email: debbie.stein@altagas.ca


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