News

Strong Operational Performance Leads to Record Results for AltaGas Income Trust

August 10, 2004


CALGARY--(CCNMatthews - Aug. 10) - AltaGas Income Trust (AltaGas or the 
Trust) (TSX: ALA.UN) today released its financial results for the second 
quarter and six months ended June 30, 2004. AltaGas declared a distribution 
of $0.15 per Trust unit and limited partnership unit (Exchangeable unit) 
(collectively Units) payable on September 15, 2004 to holders of record on 
August 25, 2004.

"Our operational performance was exceptional during the second quarter of 
2004, our first quarter as an income trust, and we have posted the strongest 
second quarter and six month financial results in our history," said David 
Cornhill, AltaGas' Chairman and Chief Executive Officer. "That operational 
performance was so strong that we achieved record operating income, even 
after absorbing in the second quarter $3.5 million in costs associated with 
our conversion to an income trust and $1.7 million in one time turnaround 
costs at our Bantry field processing facility." Mr. Cornhill added, "The 
outlook for the remainder of the year looks very positive. With the 
successful completion of our $88.5 million June equity offering our balance 
sheet is strong. We are working on several internal growth opportunities and 
expect to close our previously announced acquisitions of the Edmonton ethane 
extraction plant and PremStar Energy Canada Ltd."

/T/

    HIGHLIGHTS

    -   Generated record funds from operations for the second quarter and the
        first six months of 2004. Funds from operations were $23.9 million
        for the second quarter of 2004 compared to $20.8 million for the
        second quarter of 2003 and $45.5 million for the first six months of
        2004 compared to $42.7 million for the first six months of 2003.

    -   Increased second quarter net income to $11.9 million from
        $6.8 million for the same period of 2003. On a per Unit basis net
        income was $0.25 compared to $0.15 for the second quarter of 2003.

    -   Converted from a corporate structure to AltaGas Income Trust on
        May 1, 2004. The income trust structure will allow the Trust to
        reduce the cash tax liability of its corporate subsidiaries thereby
        increasing the amount of cash available for distribution to
        unitholders.

    -   Commenced monthly distributions of $0.15 per Unit on June 15, 2004 to
        holders of Units.

    -   Successfully closed on June 10, 2004, a public offering of 4,730,000
        Trust units, raising gross proceeds of $88.5 million. Net proceeds of
        $83.8 million were applied to debt, reducing debt to total
        capitalization at June 30, 2004 to 39.9 percent from 52.2 percent at
        December 31, 2003.

    -   Implemented Premium Distribution(TM), Distribution Reinvestment, and
        Optional Unit Purchase Plans (DRIP) for eligible holders of Units.
        DRIP provides unitholders with the option to reinvest their
        distribution towards the purchase of new Trust units at a 5 percent
        discount to the average market price of AltaGas Trust units trading
        on the Toronto Stock Exchange or for eligible investors to elect to
        exchange such Trust units for a cash payment equal to 102 percent of
        such distribution. Complete details are available from investor
        relations or the Trust's website at www.altagas.ca.


    -   Finalized commercial arrangements regarding several strategic growth
        initiatives:

           On May 26, 2004 AltaGas announced it had entered into an agreement
           to acquire PremStar Energy Canada Ltd. and its subsidiaries ECNG
           Inc. and Energistics Group Inc. for approximately $22.0 million
           payable by way of 993,789 AltaGas Trust Units plus approximately
           $1.2 million cash. The PremStar group is one of Canada's leading
           energy agency businesses, specialized in the procurement and
           supply of energy to end use customers.

           Continued to grow through internal expansion projects in the field
           gathering and processing component. AltaGas has spent
           approximately $6.0 million on various projects including the
           purchase of the remaining 25 percent of the Namaka field
           processing facility, the installation of booster compression at
           Marten Creek and construction of a pipeline at the Doris facility.

    -   On July 21, 2004 Enbridge Inc. sold 11,650,000 Trust units of AltaGas
        to a group of Canadian underwriters at a price of $19.75. This sale
        reduced Enbridge's interest in AltaGas from approximately 36 percent
        to 13 percent. Commenting on the transaction Mr.Cornhill said "We are
        very pleased with the strong market response and successful sale of
        our Units by Enbridge. Since Enbridge made its initial investment in
        AltaGas five years ago we have tripled our asset base and grown our
        market capitalization by six times to over one billion dollars.
        Enbridge has been a good investor and received very good returns on
        their investment. We are supportive of their disposition and are
        pleased with the opportunity to realize our full growth potential and
        deliver substantial unitholder value to an expanded unitholder base."

/T/

MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis dated August 10, 2004 is a review 
of the results of operations and the liquidity and capital resources the 
AltaGas Income Trust (AltaGas or the Trust). It should be read in conjunction 
with the accompanying unaudited consolidated financial statements of the 
Trust, formerly AltaGas Services Inc. (ASI), for the three and six month 
periods ended June 30, 2004 and the notes thereto and with the financial 
statements and Management's Discussion and Analysis contained in ASI's annual 
report for the year ended December 31, 2003. The discussion and analysis of 
operations and unaudited interim consolidated financial statements presented 
herein report on a continuity-of-interest accounting basis which recognizes 
AltaGas Income Trust as the successor to AltaGas Services Inc.

Prospective data, comments and analysis are also provided wherever 
appropriate to assist investors to see the business from a management 
viewpoint. Such disclosure is subject to the reasonable constraints of 
maintaining the confidentiality of certain information which, if published 
could have an adverse impact on the competitive position of the Trust.

Additional information relating to AltaGas Income Trust 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 
Management's Discussion and Analysis and audited financial statements, 2003 
Annual Report, 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. voted in 
favour of a plan of arrangement to reorganize the business of AltaGas 
Services Inc. into an open-ended investment trust effective May 1, 2004. For 
each common share of AltaGas Services Inc., shareholders received either one 
AltaGas Income Trust unit or one Exchangeable unit of AltaGas Income Trust. 
As a result of implementing the reorganization, AltaGas Income Trust now 
indirectly holds through its partnerships and subsidiaries all of the assets, 
liabilities and businesses formerly owned by AltaGas Services Inc. The 
material businesses are operated by AltaGas Holding Limited Partnership No.1, 
AltaGas Ltd., AltaGas Operating Partnership, AltaGas Power Holdings 
Partnership, AltaGas Pipelines Partnership and AltaGas Utilities Inc. 
(collectively the operating subsidiaries). The cash flow of AltaGas Income 
Trust is solely dependent on the results of the operating subsidiaries and is 
derived from dividends or returns of capital from common shares held and from 
interest earned on loans made by AltaGas Income Trust to the operating 
subsidiaries.

The Trust has incurred costs and charges to implement the conversion, which 
are anticipated to total approximately $14.4 million. In the second quarter 
of 2004 approximately $7.0 million has been charged to unitholders' capital, 
and $3.5 million has been charged to earnings. The balance is expected to be 
charged to earnings in the future. 

DISTRIBUTIONS

AltaGas targets to pay out substantially all of its ongoing sustainable 
distributable cash flow through regular monthly distributions made to 
unitholders. The distributions are determined giving consideration to the 
consolidated net income, maintenance and growth capital requirements and the 
debt repayment requirements of AltaGas.

On April 29, 2004, AltaGas announced that AltaGas Income Trust would commence 
monthly distributions of $0.15 for each Trust unit and Exchangeable unit on 
June 15, 2004 to holders of Trust units and holders of Exchangeable units. 
AltaGas pays cash distributions on the 15th day of each month to unitholders 
of record on the 25th day of the previous month, or the following business 
day if it falls on a weekend or holiday. AltaGas paid its first distribution 
of $0.15 per unit on June 15, 2004 to unitholders of record on May 25, 2004 
and paid $0.15 per unit on July 15, 2004 to unitholders of record on June 25, 
2004. During the second quarter and first six months of 2004 the Trust paid 
distributions to unitholders of $6.9 million. At June 30, 2004, the Trust has 
accrued $7.7 million of distributions payable to unitholders related to the 
July 15, 2004 distribution. Distribution levels will be reviewed periodically 
giving consideration to AltaGas' growth-related initiatives, financial 
position, financing requirements, cash flow and other relevant factors. The 
following table summarizes AltaGas' dividend and distribution history.(1)

/T/

    (dollars)                 2004         2003         2002         2001
    -------------------------------------------------------------------------
    First quarter          $     0.11   $     0.08   $     0.06   $     0.03
    Second quarter               0.30         0.08         0.06         0.03
    Third quarter      not applicable(1)      0.11         0.08         0.06
    Fourth quarter     not applicable         0.11         0.08         0.06
    -------------------------------------------------------------------------
                           $     0.41   $     0.38   $     0.28   $     0.18

    (1) Dividends were paid from first quarter 2001 through first quarter
        2004. Prior to December 2000 no dividends were paid. Monthly
        distributions began in second quarter of 2004.
    (2) Monthly distributions of $0.15 per Unit have been declared for
        payment on both August 16, 2004 and September 15, 2004.
    -------------------------------------------------------------------------

/T/

For income tax purposes the Trust expects that approximately 70 percent of 
the distributions declared in 2004 will be taxed as interest with the 
remaining 30 percent to be classified as a combination of dividends and 
return of capital. For most unitholders, the return of capital amount will 
reduce the cost base of their Trust units for purposes of calculating the 
capital gains amount upon disposition of their Units. Unitholders should seek 
independent tax advice in respect of the consequences to them of acquiring, 
holding and disposing of Units.

/T/

    CONSOLIDATED RESULTS

    Consolidated Financial Results

                              Three months ended        Six months ended
                                   June 30                   June 30
    ($ millions)              2004        2003(1)       2004        2003(1)
    -------------------------------------------------------------------------
    Revenue                     175.4        168.4        368.9        372.7
    Net revenue(2)               59.5         51.2        116.7        105.6
    EBITDA(2)                    27.8         27.4         59.0         58.1
    Net income                   11.9          6.8         22.9         17.0
    Cash flows
      Funds generated from
       operations(2)             23.9         20.8         45.5         42.7
      Net additions to
       capital assets             6.2          4.9         20.5         12.5
      Distributable cash(2)      22.4         19.6         42.2         39.7
      Distributions (3)          14.6          n/a         19.7          n/a
    -------------------------------------------------------------------------
    ($ per unit)(4)
    -------------------------------------------------------------------------
    EBITDA(4)                    0.59         0.60         1.27         1.28
    Net income(4)                0.25         0.15         0.49         0.38
    Cash flows
      Funds generated
       from operations           0.51         0.45         0.98         0.94
      Distributable cash         0.48          n/a         0.91          n/a
      Distribution(3)            0.30          n/a         0.41          n/a
    Units outstanding
     (millions)
      Basic                      46.9         45.4         46.4         45.3
      End of period              51.2         45.4         51.2         45.4
    -------------------------------------------------------------------------

    (1) Prior periods have been restated for the impacts of the adoption of
        CICA Handbook requirement for accounting for asset retirement
        obligations
    (2) Non-GAAP financial measure. See discussion on page 5 and 6
    (3) Dividends of $0.11 per share for Q1 2004, and distributions of $0.15
        per unit paid in May, 2004 and accrued for in June, 2004
    (4) Per Unit amounts are based on the Units outstanding during the period

/T/

AltaGas' net income for the second quarter and first half of 2004 is the 
highest net income AltaGas has generated in comparable periods since its 
formation and continues the growth trend achieved throughout its 10 year 
history. The driver for this performance is the exceptional operating 
performance from AltaGas' business components. The strong operational 
performance and the favorable impact of two months operation as a Trust and 
the associated reduced income tax expense more than offset one time costs 
related to AltaGas' Bantry facility turnaround in May, 2004 and the 
conversion to an income trust.

Revenue of $368.9 million for the first six months of 2004 is one percent 
lower than the same period last year due mainly to the lower average prices 
received for natural gas in the Natural Gas Distribution and Energy Services 
segments. For the three months ended June 30, 2004 revenue is up four percent 
to $175.4 million compared to the same period in 2003 on the strength of 
volume increases in all segments, and higher power prices in the power 
services component only partially offset by lower prices in the Natural Gas 
Distribution segment.

Net revenue (gross revenue less cost of sales) increased eleven percent for 
the first six months and sixteen percent for the second quarter 2004 compared 
to the same periods in 2003 due to volume increases. 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 purchased for resale affect both 
revenue and the cost of sales.

Volume increases in the Gathering and Processing segment were driven by well 
tie-ins, expansions, modifications at existing facilities and the Rainbow 
Lake and Mica Pouce Coupe field gathering and processing acquisitions in late 
2003. In the Energy Services segment, power volumes sold were higher in the 
first half of 2004 over the same period of 2003, due to the addition on April 
1, 2003 of volumes associated with the Genesee energy contract. Natural Gas 
Distribution sales volumes at AltaGas Utilities Inc. were up in 2004, for 
both the second quarter and six months, when compared to the same periods in 
2003 based on an increased customer base.

Operating costs and general and administrative expense were both higher in 
the second quarter and first six months of 2004 compared to 2003. Operating 
costs increased due to the late 2003 field gathering and processing 
facilities acquisitions and due to a major turnaround required at the Bantry 
facility for $1.7 million. General and administrative expense increased due 
to $1.1 million cash costs related to the conversion to an income trust, an 
additional $2.4 million in non-cash compensation expense recorded as a result 
of all outstanding unvested employee trust unit options vesting effective May 
1, 2004, and due to increased staffing required to support the Trust's 
growth. Amortization expense was up four percent for the six months of 2004 
compared to the same period in the prior year and four percent for the second 
quarter of 2004 compared to 2003. The increases are due mainly to Gathering 
and Processing segment acquisitions and expansions during 2003 and the first 
half of 2004.

Interest expense was lower in the first six months of 2004 compared to the 
first six months of 2003 due to lower average debt outstanding combined with 
lower interest rates. Average debt outstanding is lower due to the strong 
cash generation experienced by AltaGas and due to the net proceeds of the 
June 2004 Trust unit offering being applied to debt.

AltaGas' income is subject to a variety of tax rates and rate reductions 
currently and in the future. Consequently there are several items which 
impact income tax expense and the effective tax rate from period to period. 
Income tax expense for the first half of 2004 was $5.3 million less than 
reported for the same period of 2003 even though income before tax was 
higher. As a result of AltaGas' conversion into an income trust, amortization 
expense exceeds capital cost allowance claimed, resulting in a reversal over 
time of the future income tax liability. AltaGas' first two months as a Trust 
resulted in a credit to income tax expense of $4.2 million. Also contributing 
to the variance from 2003 to 2004 in the effective income tax rate was a $0.7 
million charge in the second quarter 2003 to future income tax liability to 
record the impact of federal rate and resource allowance adjustments. Income 
tax expense for the six months of 2004 was reduced by $0.7 million as a 
result of the application of a provincial rate reduction arising out of the 
March 19, 2004 Alberta Government's budget. The impact of recording a charge 
to income for compensation expense related to stock options, which has no 
current or future income tax implication, partially offset these rate 
reductions by $0.8 million. 

NON-GAAP FINANCIAL MEASURES

AltaGas provides certain financial measures in this Management's Discussion 
and Analysis 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. All amounts are in millions 
of Canadian dollars unless otherwise noted.

/T/

    Funds generated from operations

                              Three months ended        Six months ended
                                   June 30                   June 30
    ($ millions)              2004        2003          2004        2003
    -------------------------------------------------------------------------
    Non-GAAP financial
     measure                     23.9         20.8         45.5         42.7
    Add (deduct): Net
     change in non-cash
     working capital              1.0         (2.2)         3.6          6.7
    -------------------------------------------------------------------------
    Cash from operations
     (GAAP financial
     measure)                    24.9         18.6         49.1         49.4
    -------------------------------------------------------------------------

    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 working capital in the period.


    EBITDA
                              Three months ended        Six months ended
                                   June 30                   June 30
    ($ millions)              2004         2003         2004         2003
    -------------------------------------------------------------------------
    Non-GAAP financial
     measure                     27.8         27.4         59.0         58.1
    Deduct:
     Amortization               (10.2)        (9.8)       (20.3)       (19.6)
    -------------------------------------------------------------------------
    Operating Income (GAAP
     financial measure)          17.6         17.6         38.7         38.5
    -------------------------------------------------------------------------

    Earnings before interest, taxes, depreciation and amortization (EBITDA)
is provided to assist in understanding the ability of the organization to
generate cash and its ability to cover interest payments.


    Distributable cash flow
                              Three months ended        Six months ended
                                   June 30                   June 30
    ($ millions)              2004         2003         2004         2003
    -------------------------------------------------------------------------
    Funds generated from
     operations                  23.9         20.8         45.5         42.7
    Deduct: Maintenance
     capital expenditures        (1.5)        (1.2)        (3.3)        (3.0)
    -------------------------------------------------------------------------
    Distributable cash flow      22.4         19.6         42.2         39.7
    -------------------------------------------------------------------------
    Distributable cash flow
     per unit, basic             0.48          n/a         0.91          n/a
    -------------------------------------------------------------------------

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

    Net revenue
                              Three months ended        Six months ended
                                   June 30                   June 30
    ($ millions)              2004         2003         2004         2003
    -------------------------------------------------------------------------
    Non-GAAP financial
     measure                     59.5         51.2        116.7        105.6
    Add: Cost of sales          115.9        117.2        252.2        267.1
    -------------------------------------------------------------------------
    Revenue (GAAP financial
     measure)                   175.4        168.4        368.9        372.7
    -------------------------------------------------------------------------

/T/

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 purchased for resale 
affect both revenue and the cost of sales, net revenue better reflects 
organic growth in the business than does revenue. This table reconciles the 
revenue and net revenue amounts in the table for Financial and Operating 
Results for the Gathering and Processing segment to illustrate the 
relationship between these non-GAAP and GAAP measures where used throughout 
this Management's Discussion and Analysis.

/T/

    RESULTS OF OPERATIONS BY SEGMENT

    Operating income(1)
                              Three months ended        Six months ended
                                   June 30                   June 30
    ($ millions)              2004         2003         2004         2003
    -------------------------------------------------------------------------
    Gathering and Processing      7.2          9.0         19.1         18.7
    Energy Services              10.0          8.3         15.3         14.3
    Natural Gas Distribution      0.4          0.3          4.3          5.5
    -------------------------------------------------------------------------
                                 17.6         17.6         38.7         38.5
    -------------------------------------------------------------------------
    (1) Prior periods have been restated for the impacts of the adoption of
        CICA Handbook requirement for accounting for asset retirement
        obligations

/T/

GATHERING AND PROCESSING

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

/T/

    Financial results
                              Three months ended        Six months ended
                                   June 30                   June 30
    ($ millions)              2004        2003(1)       2004        2003(1)
    -------------------------------------------------------------------------
    Revenue                      45.9         39.3         90.6         82.7
    Net revenue                  38.8         33.0         76.6         67.2
    Operating and
     administrative              25.1         17.8         44.6         36.2
    Amortization expense          6.5          6.2         12.9         12.3
    Operating income              7.2          9.0         19.1         18.7
    -------------------------------------------------------------------------

    (1) Prior periods have been restated for the impacts of the adoption of
        CICA Handbook requirements for accounting for asset retirement
        obligations

    Operating statistics

                              Three months ended        Six months ended
                                   June 30                   June 30
                              2004         2003         2004         2003
    -------------------------------------------------------------------------
    Field gathering
     and processing
      Capacity (Mmcf/d)           906          838          906          838
      Throughput (gross
       Mmcf/d)(1)                 563          510          562          522
      Capacity utilization
       (percent)(1)                62           61
      Average working
       interest (percent)(2)       89           88           89           88
    Extraction
      Inlet capacity
       (Mmcf/d)                   349          349          349          349
      Production (Bbls/d)       9,337        7,140        9,678        7,352
    Transmission volumes
     (Mmcf/d)(1)(3)               415          321          405          320
    -------------------------------------------------------------------------
    (1) Average for the period
    (2) As at June 30
    (3) Excludes condensate pipeline volumes

/T/

AltaGas natural gas processing capacity ranks the Trust in the top ten 
Canadian processors of natural gas and one of the top four largest Canadian 
midstream processors. The Gathering and Processing segment includes more than 
6,000 kilometers of gathering lines, 69 natural gas processing plants, 
interests in four ethane and natural gas liquids (NGLs) extraction facilities 
and six transmission pipelines. These long-life assets provide service to a 
diverse customer base under arrangements which include a significant portion 
of cost of service, fixed fee and recovery of operating cost contracts. 
Commodity price exposure is minimal and revenues are generally volume driven. 
Future opportunities derive from the requirement that all natural gas must be 
processed to meet downstream pipeline specifications prior to delivery to the 
end user. With its extensive gathering infrastructure and the mobile nature 
of its field gathering and processing plants, AltaGas can quickly redeploy 
assets in response to producer drilling activity, size facilities to meet 
demand while reducing operating costs and minimize the time required to bring 
new production on line, accelerating producer and AltaGas' cash flow.

Net revenue for AltaGas' Gathering and Processing segment was $76.6 million 
for the six months ended June 30, 2004, compared to $67.2 million for 2003 
and $38.8 million for the second quarter of 2004 compared to $33.0 million 
for same period in 2003. Net revenue growth in this segment was the result of 
increased volumes processed in the field gathering and processing, extraction 
and transmission components.

In the field gathering and processing component volumes processed rose due to 
the December, 2003 acquisition of the Rainbow Lake facilities in northwestern 
Alberta and due to the record 253 well tie-ins experienced in AltaGas' 
operating areas during the first half of 2004. Gas drilling activity in the 
Western Canadian Sedimentary Basin continued to strengthen during the second 
quarter of 2004, resulting in 98 wells tied-in to AltaGas' field gathering 
and processing facilities in the second quarter compared with 62 well tie-ins 
during the same period in 2003. The strong tie-in activity, along with new 
volumes from the Rainbow Lake acquisition more than offset normal natural gas 
production declines and increased AltaGas' gross average throughput to 563 
Mmcf/d during the second quarter of 2004 compared to 510 Mmcf/d during the 
second quarter of 2003. These volume increases resulted in field gathering 
and processing net revenue of $28.4 million in the second quarter of 2004 
compared to $24.0 million during the same period in 2003 and $55.0 million 
and $48.3 million for the first six months of 2004 and 2003 respectively.

AltaGas continues to grow through its program of internal expansion. In the 
field gathering and processing component, the remaining 25 percent of the 
Namaka facility was purchased, booster compression was installed at the 
Marten Creek facility and at the Doris facility construction of a pipeline 
was completed that will open up access to new processing areas with the 
potential to double throughput by year-end. Both development projects are 
supported by producer commitments designed to minimize AltaGas' financial 
exposure to throughput declines. During the first half of 2004, AltaGas 
invested approximately $6.0 million in these projects for throughput 
increases of approximately 11 Mmcf/d, and an additional $1.0 million in 
maintenance capital.

In the extraction component, processed volumes for the second quarter of 2004 
increased substantially reaching 9,337 Bbls/d of NGLs compared to an average 
of 7,140 Bbls/d for the same period in 2003. Contributing to the increase 
were modifications made to the Empress EnCana extraction facility that 
increased ethane production effective the fourth quarter of 2003 as well as 
increased production at the Joffre ethane extraction plant compared to last 
year due to NGLs that were reinjected in the second quarter of 2003 as a 
result of lower gas to liquids price differential. As a result of the higher 
volumes processed and a favourable NGL pricing environment, net revenue for 
the extraction component grew 59 percent during the second quarter of 2004 
compared to the second quarter of 2003, reaching $3.6 million.

Late in the first quarter of 2004, AltaGas entered into a purchase and sale 
agreement with BP Canada Energy Resources Company (BP) for BP's 48 2/3 
percent interest in the Edmonton ethane extraction plant (EEEP) located at 
Edmonton, Alberta. AltaGas has invested $7.1 million as a deposit on this 
plant in the first half of 2004. The plant has a licensed inlet capacity of 
390 Mmcf/d of natural gas and gross natural gas liquids production of 
approximately 15,000 Bbls/d of specification ethane and 6,000 Bbls/d of 
propane-plus product. The acquisition will increase AltaGas' total net inlet 
extraction capacity to 539 Mmcf/d. AltaGas' share of plant products will be 
sold under long-term contracts and a long-term gas supply contract provides 
secure feedstock supply to EEEP. AltaGas will operate the facility and 
expects to close the acquisition in the third quarter of 2004 after the 
provincial government approval of the transfer of operator licenses to 
AltaGas. The $46.0 million purchase price was effective January 1, 2004 and 
will be reduced by EEEP's operating margin to that date to closing.

Net revenue in AltaGas' transmission component was flat for the second 
quarter of 2004 when compared to the same quarter of 2003 but up six percent 
on a year over year basis due to increased EnCana volume commitments on the 
Suffield transmission system. 

ENERGY SERVICES

The Energy Services segment is comprised of the power services, gas services 
and oil and gas production components. The financial results of the power 
services component account for a significant portion of overall segment 
financial results and as such the commentary in this section will be 
restricted to the power services component.

/T/
   
 Financial results

                              Three months ended        Six months ended
                                   June 30                   June 30
    ($ millions)              2004         2003         2004         2003
    -------------------------------------------------------------------------
    Revenue                     124.1        120.9        257.5        270.5
    Net revenue(1)               14.6         12.5         24.4         22.2
    Operating income(2)          10.0          8.3         15.3         14.3
    -------------------------------------------------------------------------
    (1) Gross revenue less cost of sales
    (2) Gross revenue less costs of sales less operating and general and
        administration expense and amortization

    Operating statistics

                              Three months ended        Six months ended
                                   June 30                   June 30
                              2004         2003         2004         2003
    -------------------------------------------------------------------------
    Volume of power sold
     (thousands of MWh)           862          861        1,725        1,521
    Average price received
     on the sale of power
     ($/MWh)(1)                 49.88        45.78        47.83        46.76
    Alberta Power Pool
     average spot price
     ($/MWh)(1)                 60.07        50.88        54.43        67.37
    -------------------------------------------------------------------------
     (1) Average for the period

/T/

In the second quarter of 2004 AltaGas had 453 megawatts of power capacity 
which represents approximately six percent of Alberta's total power capacity. 
AltaGas entered into the Genesee energy contract on April 1, 2003 and as a 
result volumes sold in the six month period ended June 30, 2004 are higher 
than volumes sold in the prior year's six month period. The power services 
component generated net revenue of $20.7 million for the first half of 2004 
compared to $18.1 million for the same period in 2003 and $13.0 million for 
second quarter 2004 compared to $10.8 million in 2003. The result of the 
higher volumes sold and higher realized prices ($47.83 per MWh in 2004 
compared to $46.76 per MWh in 2003) drove the increase in net revenues. The 
Alberta Electric System Operator (AESO) is entitled to recover or refund 
variances between revenues collected through transmission charges and 
expenses incurred by AESO through true up adjustments calculated quarterly. 
For 2004, the cumulative adjustment has resulted in a net charge to AltaGas' 
income of $0.6 million while for 2003 the amount was a credit to income of 
$1.6 million.

AltaGas does not engage in speculative trading of power but reduces its 
exposure to power price volatility by using a balanced portfolio of contracts 
to lock in power margins. The average price AltaGas received from power sales 
in the second quarter of 2004 was $49.88 per MWh compared to $45.78 per MWh 
in the second quarter of 2003. Average Alberta Power Pool spot prices were 
$60.07 per MWh and $50.88 per MWh in the second quarters of 2004 and 2003 
respectively.

During the quarter AltaGas advanced an opportunity to build its low risk, fee 
for service, gas services component. On May 26, 2004, AltaGas announced that 
a subsidiary of the Trust executed a letter of intent to purchase the 
business of PremStar Energy Canada Ltd. for approximately $22.0 million 
payable by way of 993,789 Trust units issued from the Trust's treasury plus 
approximately $1.2 million cash. The PremStar group is one of Canada's 
leading energy agency businesses, specializing in the procurement and supply 
of energy to end use customers located primarily in Ontario. On a fee for 
service basis, the PremStar group provides energy supply, arranges for 
transportation services, and supports customers with valuable market 
information. The transaction is expected to close in the third quarter of 
2004.

In this segment, the Trust also reports the results of the oil and gas 
production component and the gas services 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. 

NATURAL GAS DISTRIBUTION

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

/T/

    Financial Results

                              Three months ended        Six months ended
                                   June 30                   June 30
    ($ millions)              2004         2003         2004         2003
    -------------------------------------------------------------------------
    Revenue                      20.6         23.5         68.7         81.8
    Net revenue(1)                6.2          5.8         15.9         16.4
    Operating income(2)           0.4          0.3          4.3          5.5
    -------------------------------------------------------------------------
    (1) Gross revenue less cost of sales
    (2) Gross revenue less costs of sales less operating and general and
        administration expense and amortization

    Operating Statistics(1)

                              Three months ended        Six months ended
                                   June 30                   June 30
                              2004         2003         2004         2003
    -------------------------------------------------------------------------
    Volume of natural
     gas distributed
      Sales (Bcf)                 2.2          2.1          7.8          8.0
      Transportation (Bcf)        2.6          2.2          5.6          4.1
    Degree day variance
     (percent)(2)                11.5         15.4          4.3         10.7
    Number of customers(3)     59,266       58,671       59,266       58,671
    -------------------------------------------------------------------------
    (1) AUI only
    (2) Variance from 20 year average. Positive variances are favorable
    (3) At June 30

/T/

In the first half of 2004, net revenue in AltaGas' Natural Gas Distribution 
segment was $15.9 million compared to $16.4 million for the same period in 
2003. This decrease is due partially to warmer weather in 2004 compared to 
the first half of 2003 and to the impact of completion of negotiations on 
AUI's general rate application filed with the Alberta Energy and Utilities 
Board (AEUB). Heritage Gas, 24.9 percent owned by AltaGas, activated its 
natural gas distribution system in late December 2003. Heritage Gas is in the 
initial stages of its planned growth and consequently has not had a material 
impact on AltaGas' consolidated results in the first half of 2004.

In the second quarter of 2004, net revenue in AltaGas' Natural Gas 
Distribution segment was $6.2 million compared to $5.8 million for the same 
period in 2003. This increase is due to higher sales and transportation 
volumes in 2004 compared to the second quarter of 2003. AUI and Heritage Gas 
are provincially regulated as to natural gas rates and terms and conditions 
of service. Customer rates are based on anticipated sales as well as the 
revenue required to recover estimated cost of service and an allowed return 
on rate base. Rate base generally consists of the aggregate of the utility's 
approved investment in plant, property and equipment in service, less 
accumulated depreciation plus an allowance for working capital. Return on 
rate base is comprised of regulatory allowed financing costs and return on 
common equity. Lower than anticipated cost rates for debt and common equity 
as negotiated and approved for 2003 resulted in a charge to net income of 
$0.5 million in the first quarter of 2004 related to previously recorded 2003 
results. On July 2, 2004 the AEUB issued its Generic Cost of Capital 
decision. The decision established for AUI the 2004 rate of return on common 
equity at 9.6 percent and 2004 capital structure at 41 percent equity and 59 
percent debt resulting in final allowable rates for interest expense and 
return on common equity.

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 
distribution net revenue, resulting in strong first and fourth quarter 
results and second and third quarters that show either small profits or 
losses.

/T/

    Summary of Eight Most Recently Completed Consolidated Quarterly
    Results(1)

    ($
     millions)  Q2 04   Q1 04   Q4 03   Q3 03   Q2 03   Q1 03 Q4 02(2)  Q3 02
    ----------  -----   -----   -----   -----   -----   ----- --------  -----
    Net revenue  59.5    57.2    61.0    53.3    51.2    54.4    48.8    41.4
    -------------------------------------------------------------------------
    Net income   11.9    11.0    12.0     9.3     6.8    10.2    11.2     5.7
    -------------------------------------------------------------------------

    ($ per unit)
    -------------------------------------------------------------------------
    Earnings
      Basic      0.25    0.24    0.26    0.20    0.15    0.23    0.25    0.13
      Diluted    0.25    0.24    0.26    0.20    0.15    0.22    0.25    0.13
    Dividends/
     distri-
     butions(3)  0.30    0.11    0.11    0.11    0.08    0.08    0.08    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) Includes a pre-tax loss of $1.4 million
    (3) The Trust pays a stable 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

/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 first and last quarters each year are 
AltaGas' most profitable on the basis of the contribution from the Natural 
Gas Distribution segment which, as a distributor of natural gas for heating 
purposes, reports higher earnings in colder periods than in warmer periods.

Excellent consolidated results for the third quarter of 2002 of $5.7 million 
in net income were the combined result of strong performance in the power 
services component with higher power prices, seasonally higher results in the 
Natural Gas Distribution segment and solid performance from all components in 
the Gathering and Processing segment. AltaGas' approach to managing 
fluctuations in the price of power by locking in margins through forward 
sales contributed to the gains in the power services component. Increased 
extraction production driven by stronger business fundamentals allowing 
AltaGas to utilize more of its available extraction capacity also had a 
positive impact on results. The Gathering and Processing segment continued to 
maintain throughput essentially at levels processed in prior periods even 
though producer activity slowed generally due to continued uncertainty over 
the strength of near term gas prices. The Board of Directors increased 
AltaGas' quarterly dividend to $0.08 per share from the $0.06 paid for the 
previous four quarters based on the strength of the business' ability to 
generate cash flows.

The fourth quarter of 2002 was the strongest quarter to that date for the 
Corporation at $11.2 million in net income on the basis of an increased 
customer base in the Natural Gas Distribution segment and from power sales 
which AltaGas commenced at the beginning of 2002. Fourth quarter 2002 net 
income was also higher than in the previous quarter of the year due to the 
higher seasonal contribution from the Natural Gas Distribution segment. The 
Suffield pipeline and Wabasca field gathering and processing facilities were 
acquired and construction of the Joffre ethane extraction plant was 
commissioned late in the quarter.

Net income of $10.2 million in the first quarter of 2003 set a new high for 
ASI for that period in a year. The projects and acquisitions undertaken in 
the fourth quarter of 2002 were the main drivers of this performance, along 
with an improved business environment in all business segments. The Wabasca 
facilities acquisition increased throughput in the field gathering and 
processing component as did sharply increased tie-in activity with a record 
85 wells tied-in during the first quarter. Final commissioning of the Joffre 
ethane extraction plant provided volume increases in the extraction component 
and volumes in the transmission component were higher due to the Suffield 
pipelines acquisition. Unplanned outages in the power services component, 
combined with higher than expected transmission costs due to changes in 
process at the Transmission Authority, partially offset the gains made in the 
other segments. AltaGas commenced selling power on April 1, 2003 from the 
Genesee energy contract it entered into which arrangement provides for 100 
megawatts of power capacity from the Genesee power plant.

Second quarter 2003 net income was $6.8 million, 39 percent higher than the 
same quarter 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 and by the increased volumes sold resulting from the 
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 again 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, the 
business drivers for which are those same ones responsible for the increases 
in each of the previous two quarters of 2003 when compared to the appropriate 
prior periods.

Operating results were very strong on the basis of contributions from the 
transmission, power services and extraction components. Late in the quarter 
modifications were completed to the EnCana-operated Empress extraction 
facility, increasing AltaGas' net production capability by an estimated 1,400 
Bbls/d. 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 announced changes in 
federal large corporations tax legislation, was still 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 and incremental power volumes sold from the Genesee 
energy contract and to the completion of modifications to increase ethane 
production at the EnCana-operated Empress extraction plant late in the third 
quarter of 2003.

First quarter 2004 produced another record net income of $11.0 million for 
that period in a year based on 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.

Second quarter 2004 results are discussed in detail in an earlier section of 
this Management's Discussion and Analysis. 

CHANGES IN ACCOUNTING POLICIES

Effective January 1, 2004, AltaGas prospectively adopted the provisions of 
the CICA's new Accounting Guideline "Hedging Relationships" that specifies 
the circumstances in which hedge accounting is appropriate, including the 
identification, documentation, designation and effectiveness of hedges, and 
the discontinuance of hedge accounting. AltaGas has determined that its 
hedging documentation meets the requirements of the Guideline and therefore 
there has been no impact on the consolidated financial statements.

Effective the first quarter of 2004, AltaGas' changed its accounting policy 
for stock-based compensation, now recognizing the compensation expense 
related to stock options in the financial statements according to the fair- 
value method. Prior to the change in policy, the Trust disclosed the impact 
of the accounting for stock options under the fair-value method on a pro-
forma basis. Under the provisions set out by the CICA, AltaGas has adopted 
the change retroactively. The impact was to reduce retained earnings at 
January 1, 2004 by $332 thousand, and to reduce first quarter 2004 earnings 
by $136 thousand which amounts were based on the vesting status and exercise 
assumptions in existence at the end of the first quarter 2004. Subsequent to 
the conversion of AltaGas Services Inc. to an income trust all unvested 
options became fully vested. The charge to income in second quarter 2004 to 
reflect this early vesting was $2.4 million. 

CRITICAL ACCOUNTING ESTIMATES

Since a determination of many assets, liabilities, revenues and expenses is 
dependent upon future events, the preparation of the Trust's consolidated 
financial statements requires the use of estimates and assumptions which have 
been made using careful judgment. AltaGas' critical accounting estimates 
continue to be amortization expense, asset retirement obligations and asset 
impairment assessment. For further information on these critical accounting 
estimates, refer to Management's Discussion and Analysis in ASI's 2003 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 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 2004 business has been to 
provide revenue stability in the power services component. Alberta Power Pool 
daily average spot prices ranged from $38.86 per MWh to $70.43 per MWh in the 
second quarter of 2004. Through the use of financial hedges on a portion of 
its power portfolio deemed optimal by management, AltaGas moderated the 
impact of this volatility.

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 
June 30, 2004 AltaGas had interest rates fixed through swap transactions with 
varying terms to maturity on $200.0 million of its $241.0 million drawn bank 
debt. Including AltaGas' medium term notes, the rate has been fixed on 88 
percent of AltaGas' total debt. The amount of fixed rate debt was higher than 
AltaGas' target of 70 to 75 percent of total debt due to the proceeds of the 
equity offering being applied to debt. 

CAPITAL EXPENDITURES

Capital expenditures by the Trust for the second quarter and first half of 
2004 were $6.2 million and $20.5 million compared to $4.9 million and $12.5 
million for the same respective periods of 2003 and are summarized as 
follows:

/T/

                           Gathering
    For the three months      and         Energy    Natural Gas
     ended June 30, 2004   Processing    Services   Distribution     Total
    -------------------------------------------------------------------------
    Capital
      Maintenance          $      0.7   $        -   $      0.8   $      1.5
      Growth                      2.8            -          1.1          3.9
      Administration              0.8            -            -          0.8
    -------------------------------------------------------------------------
                           $      4.3   $        -   $      1.9   $      6.2
    -------------------------------------------------------------------------

                           Gathering
    For the three months      and         Energy    Natural Gas
     ended June 30, 2003   Processing    Services   Distribution     Total
    -------------------------------------------------------------------------
    Capital
      Maintenance          $      0.2   $        -   $      1.0   $      1.2
      Growth                      2.5            -          0.4          2.9
      Administration              0.8            -            -          0.8
    -------------------------------------------------------------------------
                           $      3.5   $        -   $      1.4   $      4.9
    -------------------------------------------------------------------------


                           Gathering
    For the six months        and         Energy    Natural Gas
     ended June 30, 2004   Processing    Services   Distribution     Total
    -------------------------------------------------------------------------
    Capital
      Maintenance          $      1.2   $        -   $      2.1   $      3.3
      Growth                     14.1            -          1.6         15.7
      Administration              1.2          0.3            -          1.5
    -------------------------------------------------------------------------
                           $     16.5   $      0.3   $      3.7   $     20.5
    -------------------------------------------------------------------------


                           Gathering
    For the six months        and         Energy    Natural Gas
     ended June 30, 2003   Processing    Services   Distribution     Total
    -------------------------------------------------------------------------
    Capital
      Maintenance          $      0.6   $      0.5   $      1.9   $      3.0
      Growth                      6.6            -          0.9          7.5
      Administration              1.6          0.3            -          1.9
    -------------------------------------------------------------------------
                           $      8.8   $      0.8   $      2.8   $     12.4
    -------------------------------------------------------------------------

/T/

LIQUIDITY AND CAPITAL RESOURCES

Funds generated from operations were $45.5 million in the first six months of 
2004 compared to $42.7 million for the same period in 2003.

AltaGas 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 2004. A description of the AltaGas' credit 
facilities can be found in Notes 6 and 7 to the consolidated financial 
statements included in ASI's 2003 Annual Report further updated in the Trust 
unit offering Final Short-Form Prospectus dated July 29, 2004.

The use of debt or equity funding is determined on the basis of AltaGas' 
capital structure determined by considering the norms and risks associated 
with each of its business components and segments. AltaGas Operating 
Partnership has $100 million in medium term notes outstanding and AltaGas 
Ltd. has access to prime loans, banker's acceptances and letters of credit 
though bank lines of approximately $425 million. These two entities fund all 
operating subsidiaries. At June 30, 2004 AltaGas Ltd had drawn debt of $241.0 
million and letters of credit outstanding of $29.7 million. Consolidated cash 
and short term investments at June 30, 2004 of $40.3 million arising largely 
from proceeds of the June 10, 2004 equity offering were held to repay debt 
instruments at their due dates. If the cash and short term investments had 
been applied to the debt balance at June 30, 2004, net debt for the Trust 
would have been $300.7 million on which basis AltaGas' net debt to total 
capitalization ratio decreased to 39.9 percent at June 30, 2004 from 53.3 
percent at June 30, 2003 and 52.2 percent at December 31, 2003. As an income 
trust, AltaGas targets a debt to total capitalization ratio between 45 
percent and 50 percent.

On June 10, 2004 AltaGas Income Trust closed a public offering of 4,730,000 
Trust units, at a price of $18.70 per Trust unit for gross proceeds of $88.5 
million. The offering included the concurrent exercise by the Underwriters of 
an over-allotment option granted by AltaGas to purchase an additional 10 
percent of the issue or 430,000 Trust units on the same terms. The net 
proceeds of the offering to the Trust, after payment of fees and expenses of 
$4.7 million was approximately $83.8 million. The net proceeds were used to 
reduce bank indebtedness, which may be redrawn and used for general corporate 
purposes including AltaGas' ongoing capital program, funding the acquisition 
of the Edmonton ethane extraction plant and funding future acquisitions.

On May 20, 2004 AltaGas adopted Premium Distribution(TM), Distribution 
Reinvestment and Optional Unit Purchase Plans (DRIP) for eligible holders of 
Trust units and Exchangeable units of AltaGas Income Trust, AltaGas Holding 
Limited Partnership No. 1 and AltaGas Holding Limited Partnership No. 2. DRIP 
participation in the second quarter of 2004 averaged approximately 10 percent 
and generated $0.4 million in new equity through the issuance of 20,344 Trust 
units. Complete details on DRIP are available on the AltaGas website at 
www.altagas.ca.

Following AltaGas' announcement in March of its then proposed conversion to a 
trust Standard & Poor's (S&P) confirmed the rating on AltaGas' long term 
corporate credit at BBB- with a negative outlook and the rating on the senior 
unsecured debt at BBB-. The Dominion Bond Rating Service (DBRS) confirmed the 
rating of AltaGas Income Trust at BBB (low) with a stable trend and applied 
the same rating to AltaGas Operating Partnership and the medium term notes 
held by AltaGas Operating Partnership. AltaGas is currently seeking a trust 
stability rating from S&P and DBRS. 

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 do not trade on the TSX.

As of July 31, 2004 the Trust has 39.1 million Trust units and 12.2 million 
Exchangeable units outstanding and a market capitalization of $1.0 billion 
based on a closing trading price on July 31, 2004 of $19.70 per Trust unit. 
There are 0.8 million Options exercisable under the terms of the Unit option 
agreement brought forward in the reorganization. All options under this plan 
have vested effective May 1, 2004. 

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, 
including payments due for each of the next five years and thereafter, since 
December 31, 2003. For further information on these contractual obligations, 
refer to Management's Discussion and Analysis in ASI's 2003 Annual Report. 

RELATED PARTIES

On March 19, 2004 AltaGas purchased 320,000 units of Taylor NGL Limited 
Partnership (Taylor) at a cost of $2.2 million. AltaGas' interest in Taylor 
after this purchase is 18.5 percent. Taylor's business is the ownership and 
operatorship of facilities in the midstream sector of the Western Canadian 
natural gas industry including the Joffre ethane extraction plant in which 
AltaGas has a 50 percent ownership interest.

On July 21, 2004 AltaGas announced that Enbridge Inc. sold 11,650,000 Trust 
units of AltaGas to a group of Canadian underwriters at a price of $19.75. 
This sale reduced Enbridge's interest in AltaGas from approximately 36 
percent to 13 percent. In addition, the underwriters have been granted an 
over-allotment option to purchase an additional 1,747,500 Trust units at the 
issue price of $19.75 per unit at any time up to 30 days after closing of the 
offering anticipated on or about August 10, 2004. Should the over-allotment 
option be taken up Enbridge's interest in AltaGas would be reduced to under 
10 percent. 

OUTLOOK

The outlook for the balance of 2004 is expected to be very positive 
particularly due to the increased drilling activity in the Gathering and 
Processing segment. Drilling activity in the majority of AltaGas' operating 
areas is expected to remain strong given the favorable commodity pricing 
environment. In addition, exploitation of opportunities in existing 
businesses and processes are expected to increase processed volumes. In the 
Energy Services segment, power prices are expected to be higher providing 
improved earnings on the unhedged portion of the AltaGas' power portfolio. 

UNITHOLDER LIMITED LIABILITY LEGISLATION

Legislation came into effect in Alberta on July 1, 2004 to provide limited 
liability for holders of trust units, similar to protection afforded to 
investors of corporations. The legislation covers events that occur on or 
after July 1, 2004 and extends to all unitholders of AltaGas Income Trust, 
which is registered in Alberta, including non-residents. The legislation does 
not remove the issue of unlimited liability for any acts or omissions that 
occurred prior to July 1, 2004.

Prior to the July 1 amendments, the legislation governing the creation of 
trusts did not contain explicit language which limited the liability of 
unitholders of the Trust to their equity investment in the Trust. As a 
result, there has existed a possibility that unitholders of the Trust may not 
be protected from liabilities of the Trust to the same extent as a 
shareholder of a publicly traded corporation and that potentially, 
unitholders could be liable for tort claims such as environmental claims. 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, 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
                      (Formerly AltaGas Services Inc.)
                         CONSOLIDATED BALANCE SHEETS

    ($ thousands)
    -------------------------------------------------------------------------
                                                  June 30, 2004   December 31
                                                     (unaudited)         2003
    -------------------------------------------------------------------------
    ASSETS
    Current assets
      Cash and short term investments               $    40,261  $         -
      Accounts receivable                                86,652       88,463
      Inventory                                             387        1,879
      Other                                               2,430        5,806
    -------------------------------------------------------------------------
                                                        129,730       96,148
    Capital assets                                      681,468      677,911
    Energy services arrangements and contracts           98,029      101,035
    Goodwill                                             18,860       18,860
    Future income taxes                                     207          208
    Investments and other assets                         24,350       25,098
    -------------------------------------------------------------------------
                                                    $   952,644  $   919,260
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND UNITHOLDERS' EQUITY
    Current liabilities
      Accounts payable and accrued liabilities      $    67,711  $    74,726
      Distributions payable to unitholders                7,672            -
      Short-term debt                                         2        4,493
      Other                                               6,451        7,857
    -------------------------------------------------------------------------
                                                         81,836       87,076
    -------------------------------------------------------------------------
    Long-term debt                                      341,006      392,358
    Asset retirement obligations                         14,489       13,962
    Future income taxes                                  62,622       62,537
    -------------------------------------------------------------------------
                                                        418,117      468,857
    -------------------------------------------------------------------------
    Unitholders' equity (note 3)                        452,691      363,327
    -------------------------------------------------------------------------
                                                    $   952,644  $   919,260
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to the consolidated financial statements


                            ALTAGAS INCOME TRUST
                      (Formerly AltaGas Services Inc.)
          CONSOLIDATED STATEMENTS OF INCOME AND UNITHOLDERS' EQUITY
                                 (unaudited)

    ($ thousands except per unit amounts)
    -------------------------------------------------------------------------
                                   Three months ended       Six months ended
                                         June 30                 June 30
                                    2004        2003        2004        2003
    -------------------------------------------------------------------------
    REVENUE
      Operating               $  175,069  $  168,076  $  368,198  $  372,359
      Other                          332         296         722         318
    -------------------------------------------------------------------------
                                 175,401     168,372     368,920     372,677
    -------------------------------------------------------------------------
    EXPENSES
      Cost of sales              115,924     117,161     252,253     267,100
      Operating and
       administrative             31,668      23,790      57,716      47,517
      Amortization                10,219       9,835      20,209      19,597
    -------------------------------------------------------------------------
                                 157,811     150,786     330,178     334,214
    -------------------------------------------------------------------------
    Operating income              17,590      17,586      38,742      38,463
    Interest expense
      Short-term debt                140         679         247       1,376
      Long-term debt               5,195       4,970      10,623       9,823
    -------------------------------------------------------------------------
    Income before income taxes    12,255      11,937      27,872      27,264
    Income taxes                     366       5,129       4,944      10,216
    -------------------------------------------------------------------------
    Net income                    11,889       6,808      22,928      17,048
    Unitholders' equity,
     beginning of period         371,237     345,833     363,327     338,546
      Change in accounting
       policy (note 2)                 -           -        (332)          -
      Dividends                        -      (3,626)     (5,051)     (7,253)
      Distributions              (14,604)          -     (14,604)          -
      Net issuance of
       trust units                81,814         483      83,600       1,157
      Addition to
       contributed surplus         2,355           -       2,823           -
    -------------------------------------------------------------------------
      Unitholders' equity,
       end of period          $  452,691  $  349,498  $  452,691  $  349,498
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income per Unit
     (note 3)
      Basic                   $     0.25  $     0.15  $     0.49  $     0.38
      Diluted                 $     0.25  $     0.15  $     0.48  $     0.38

    See accompanying notes to the consolidated financial statements


                            ALTAGAS INCOME TRUST
                      (Formerly AltaGas Services Inc.)
                    CONSOLIDATED STATEMENTS OF CASH FLOW
                                 (unaudited)

    (Canadian $ thousands)
    -------------------------------------------------------------------------
                                   Three months ended       Six months ended
                                         June 30                 June 30
                                    2004        2003        2004        2003
    -------------------------------------------------------------------------
    Cash from operations
      Net income              $   11,889  $    6,808  $  220,928  $   17,048
      Items not involving
       cash:
        Amortization              10,219       9,835      20,209      19,597
        Accretion of asset
         retirement
         obligations                 378         364         561         583
        Stock option
         compensation (note 2)     2,355           -       2,491           -
        Future income taxes         (438)      3,708          84       5,311
        (Gain) loss on sale of
         assets and investments      (37)        (48)         40         (46)
        Equity income               (502)       (268)       (955)       (292)
      Other                          110         335         174         471
    -------------------------------------------------------------------------
    Funds generated from
     operations                   23,974      20,734      45,532      42,672
    Decrease in deferred
     revenue and other                 -         (44)          -         (37)
    Net change in non-cash
     working capital                 972      (2,074)      3,587       6,718
    -------------------------------------------------------------------------
                                  24,946      18,616      49,119      49,353
    -------------------------------------------------------------------------
    Investing activities
      Acquisition of capital
       assets                     (9,341)     (5,642)    (25,824)    (14,716)
      Disposition of capital
       assets                          -          83           -         279
      Acquisition of investments
       and other assets              (64)     (9,886)     (2,249)    (10,325)
      Disposition of investments
       and other assets            3,140           -       3,440       1,480
    -------------------------------------------------------------------------
                                  (6,265)    (15,445)    (24,633)    (23,282)
    -------------------------------------------------------------------------
    Financing activities
      Decrease in operating loans (53,303)       (28)    (55,843)    (19,973)
      Dividends                         -     (3,626)     (5,051)     (7,253)
      Distributions to unitholders (6,931)         -      (6,931)          -
      Net proceeds from issuance
       of shares and
       units (note 3)              81,814        483      83,600       1,155
    -------------------------------------------------------------------------
                                  (21,580)    (3,171)    (15,775)    (26,071)
    -------------------------------------------------------------------------
    Change in cash and
     short-term investments        40,261          -      40,261           -
    Cash and short-term
     investments, beginning
     of period                          -          -           -           -
    -------------------------------------------------------------------------
    Cash and short-term
     investments, end of period $  40,261  $       -  $   40,261  $        -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements


                            ALTAGAS INCOME TRUST
                      (Formerly AltaGas Services Inc.)

    SELECTED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)
    ($ thousands except per share amounts or where otherwise noted)

    1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        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. As a result, these unaudited interim consolidated
    financial statements follow the continuity of interest basis of
    accounting as if the Trust had always existed. As a result, the
    comparative figures are those of ASI while the results of operations
    include ASI's results for the period up to and including April 30, 2004
    and the Trust's results of operations from May 1, 2004 to June 30, 2004.

        The Trust makes monthly cash distributions to unitholders of Trust
    units and Exchangeable units (Unitholders) based on the Trust's
    distribution policy.

        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 ASI's annual consolidated financial statements for
    the fiscal year ended December 31, 2003, except as noted below in note 2.
    These interim consolidated financial statements for the quarter ending
    June 30, 2004 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 ASI's 2003 Annual
    Report.


    2.  CHANGE IN ACCOUNTING POLICY

        Effective January 1, 2004, the Trust adopted the new Canadian
    Institute of Chartered Accountants standard for accounting for stock-
    based compensation (Section 3870), which requires the use of the fair
    value method to account for stock options. Based on the Black-Scholes
    option valuation model, stock options are valued at the date of the grant
    and recognized as compensation expense over their expected life.

        This change in accounting policy has been adopted retroactively
    without restatement of individual prior periods. In accordance with
    Section 3870, only stock options issued on, or after, the initial
    adoption date of the section are recognized in the financial statements.
    No compensation expense is recorded for stock options issued and
    outstanding prior to January 1, 2002. This change in accounting policy
    resulted in a reduction of opening retained earnings for 2004 of
    $332 thousand with an offset to contributed surplus within unitholders'
    equity. Stock option compensation expense for the three months ended
    June 30, 2004 was $2.4 million (six months ended June 30, 2004 -
    $2.5 million) with corresponding offsets to contributed surplus.


    3.  Unitholders' Equity

    Authorized:

    -   an unlimited number of Trust units
    -   12,260,225 Exchangeable units

                                                      June 30    December 31
    Unitholders' equity                                  2004           2003
    -------------------------------------------------------------------------
    Unitholders', shareholders' capital               351,640        268,040
    Contributed surplus (note 2)                        2,823              -
    Accumulated earnings                              112,832         95,287
    Accumulated unitholders' distributions            (14,604)             -
    -------------------------------------------------------------------------
    Unitholders' equity                               452,691        363,327
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    Number of
    Trust units issued:                          Units/Shares         Amount
    -------------------------------------------------------------------------
    Common shares December 31, 2003                36,716,844  $     179,076
    Common shares issued for cash on
     exercise of options                              209,449          1,752
    Common shares issued
     for compensation                                   2,000             39
    Common shares issued on conversion
     of preferred shares                            9,000,000         88,964
    Common shares repurchased and
     cancelled on trust conversion                (45,928,293)      (269,831)
    Units issued on conversion
     (net of conversion costs)                     33,668,068        192,690
    Units issued on public unit
     offering (net of issuance costs)               4,730,000         83,760
    Units issued for cash on exercise
     of options                                       504,727          4,652
    Units issued under distribution
     reinvestment program                              20,344            370
    Units issued for exchangeable units                14,480             83
    -------------------------------------------------------------------------
    June 30, 2004                                  38,937,619  $     281,555
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Exchangeable units issued:                Number of Units         Amount
    -------------------------------------------------------------------------
    December 31, 2003                                       -              -
    Issued (net of conversion costs)               12,260,225         70,168
    Exchanged for Trust units                         (14,480)           (83)
    -------------------------------------------------------------------------
    June 30, 2004                                  12,245,745  $      70,085
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Preferred shares issued:                 Number of Shares         Amount
    -------------------------------------------------------------------------
    December 31, 2003                               9,000,000  $      88,964
    Converted to common shares                     (9,000,000)       (88,964)
    -------------------------------------------------------------------------
    June 30, 2004                                           -              -
    -------------------------------------------------------------------------

    Issued and outstanding, June 30, 2004          51,183,364  $     351,640
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                      June 30        June 30
    Accumulated unitholders' distributions:              2004           2003
    -------------------------------------------------------------------------
    Accumulated unitholders' distributions
     December 31, 2003                                      -              -
    Unitholders' distributions                        (14,604)             -
    -------------------------------------------------------------------------
    June 30, 2004                                     (14,604)             -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


        The Trust has an employee unit option plan under which both employees
    and directors are eligible to receive grants. At June 30, 2004 3,800,000
    units were reserved for issuance under the plan. To June 30, 2004 options
    granted under the plan generally had a term of ten years to expiry and
    vested no longer than over a four year period. Options outstanding under
    the plan have a weighted average exercise price of $9.61 and a weighted
    average remaining contractual life of 7.73 years.

        As at May 1, 2004 all unvested options of ASI vested and all options
    were converted to options of the Trust. This accelerated vesting resulted
    in a stock option compensation expense of $2.4 million in the three month
    period ended June 30, 2004.

                                                                    Weighted
                                                                     Average
                                                        Number      Exercise
                                                    of Options         Price
    -------------------------------------------------------------------------
    Stock options outstanding, December 31, 2003     1,506,362  $       8.74
    Granted                                            107,000         15.07
    Exercised                                         (714,176)         8.97
    Cancelled                                          (32,375)         7.24
    -------------------------------------------------------------------------
    Unit options outstanding, June 30, 2004            866,811  $       9.61
    -------------------------------------------------------------------------
    Exercisable at June 30, 2004                       866,811  $       9.61
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        The basic number of Units outstanding for the six months ended
    June 30, 2004 was 46.6 million (June 30, 2003 - 45.3 million ASI shares)
    and the diluted number of Units outstanding for the six months ended
    June 30, 2004 was 47.4 million (June 30, 2003 - 45.7 million ASI shares).


    4.  RELATED PARTY TRANSACTIONS

        On March 18, 2004, the Trust purchased an additional 320,000 limited
    partnership units of Taylor NGL Limited Partnership (Taylor) for
    $2.2 million. The purchase resulted in a dilution of the Trust's
    ownership in Taylor from 19.2 to 18.5 percent and an unrealized dilution
    gain of $192 thousand.


    5.  SEGMENTED INFORMATION

        AltaGas is a midstream energy trust with a portfolio of assets and
    services used to move energy from the source to the end-user. 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
    June 30,      and        Energy        Gas       Intersegment
    2004      Processing    Services   Distribution   Elimination     Total
    -------------------------------------------------------------------------
    Revenue  $    45,952  $   124,092  $    20,519  $   (15,162) $   175,401
    Cost of
     sales        (7,185)    (109,432)     (14,339)      15,032     (115,924)
    Operating
     and
     adminis-
     trative
     expenses    (25,063)      (2,581)      (4,154)         130      (31,668)
    Amorti-
     zation       (6,506)      (2,105)      (1,608)           -      (10,219)
    -------------------------------------------------------------------------
    Operating
     income  $     7,198  $     9,974  $       418  $         -  $    17,590
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net
     additions
     to
     capital
     assets  $     4,347  $       (40) $     1,904               $     6,211
    Segment
     assets  $   655,842  $   166,801  $   130,001               $   952,644
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    For the
    three
    months
    ended       Gathering                 Natural
    June 30,       and        Energy        Gas       Intersegment
    2003       Processing    Services   Distribution   Elimination     Total
    -------------------------------------------------------------------------
    Revenue  $    39,298  $   120,867  $    23,557  $   (15,350)  $  168,372
    Cost of
     sales        (6,340)    (108,372)     (17,688)      15,239     (117,161)
    Operating
     and
     adminis-
     trative
     expenses    (17,718)      (2,072)      (4,111)         111      (23,790)
    Amorti-
     zation       (6,197)      (2,097)      (1,541)           -       (9,835)
    -------------------------------------------------------------------------
    Operating
     income  $     9,043  $     8,326  $       217  $         -  $    17,586
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net
     additions
     to
     capital
     assets  $     3,588  $       (42) $     1,421               $     4,967
    Segment
     assets  $   584,748  $   171,664  $   125,189               $   881,601
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the
    six
    months
    ended      Gathering                 Natural
    June 30,      and        Energy        Gas       Intersegment
    2004      Processing    Services   Distribution   Elimination     Total
    -------------------------------------------------------------------------
    Revenue  $    90,644  $   257,501  $    68,648  $   (47,873) $   368,920
    Cost of
     sales       (14,085)    (233,081)     (52,726)      47,639     (252,253)
    Operating
     and
    adminis-
     trative
     expenses    (44,608)      (4,913)      (8,429)         234      (57,716)
    Amorti-
     zation      (12,782)      (4,237)      (3,190)           -      (20,209)
    -------------------------------------------------------------------------
    Operating
     income  $    19,169  $    15,270  $     4,303  $         -  $    38,742
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net
     additions
     to
     capital
     assets  $    16,453  $       262  $     3,749               $    20,464
    Segment
     assets  $   655,842  $   166,801  $   130,001               $   952,644
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    For the
    six
    months
    ended      Gathering                 Natural
    June 30,      and        Energy        Gas       Intersegment
    2003      Processing    Services   Distribution   Elimination     Total
    -------------------------------------------------------------------------
    Revenue  $    82,665  $   270,497  $    81,831  $   (62,316) $   372,677
    Cost of
     sales       (15,473)    (248,320)     (65,398)      62,091     (267,100)
    Operating
     and
     adminis-
     trative
     expenses    (36,233)      (3,623)      (7,886)         225      (47,517)
    Amorti-
     zation      (12,249)      (4,265)      (3,083)           -      (19,597)
    -------------------------------------------------------------------------
    Operating
     income  $    18,710  $    14,289  $     5,464  $         -  $    38,463
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net
     additions
     to
     capital
     assets  $     8,858  $       817  $     2,816               $    12,491
    Segment
     assets  $   584,788  $   171,664  $   125,189               $   881,601
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    6.  EMPLOYEE FUTURE BENEFITS

        Substantially all full-time employees of the Company'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 benefit cost expensed for the three and six months ended
    June 30, 2004 is $0.3 million (2003 - $0.2 million) and $0.6 million
    (2003 - $0.5 million).


    7.  COMPARATIVE FIGURES

        Certain comparative figures have been reclassified to conform to the
    current financial statement presentation. Prior periods have been
    restated for the impacts of the December 31, 2003 adoption of CICA
    Handbook Section on accounting for asset retirement obligations.


    8.  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.


    9.  SUBSEQUENT EVENTS

        Consolidated cash and short term investments at June 30, 2004 of
    $40.3 million arising largely from proceeds of the June 10, 2004 equity
    offering were held to repay debt instruments at their due dates. The debt
    of $341.0 million at June 30, 2004 would have been $300.7 million had the
    cash and short term investments been used to pay down debt on June 30,
    2004. However, the application of the short term investments to debt
    balances occurred as debt instruments matured during July 2004, with the
    amount fully applied to debt by July 27, 2004.

        On March 18, 2004, the Trust announced that it entered into a
    purchase and sale agreement with BP Canada Energy Resources Company (BP)
    to acquire BP's 48 2/3 percent interest in the Edmonton ethane extraction
    plant located at Edmonton, Alberta for approximately $46 million. The
    transaction is expected to close in third quarter 2004 after receipt of
    the provincial government approval of the transfer of operator licenses
    to AltaGas.

        On May 26, 2004, the Trust announced that it executed a letter of
    intent to purchase the business of PremStar Energy Canada Ltd. and its
    subsidiaries ECNG Inc. and Energistics Group Inc. for approximately
    $22.0 million payable by way of 993,789 Trust units issued from the
    Trust's treasury plus $1.2 million cash. The transaction is conditional
    on the execution of a purchase and sale agreement, which is expected to
    occur in the third quarter of 2004.


        On August 4, 2004 AltaGas Income Trust committed to purchase
    20 percent of a public offering of 8,025,000 Taylor NGL Limited
    Partnership units at a price of $6.60 per unit or $10.6 million. As a
    result, AltaGas' ownership in Taylor will increase from 18.5 percent to
    approximately 18.9 percent of the outstanding limited partnership units
    of Taylor on closing of the offering anticipated to occur on or about
    August 19, 2004. This purchase is for investment purposes only and not
    for the purpose of influencing the control or direction of Taylor.

    OTHER INFORMATION

    FINANCIAL SUMMARY BY BUSINESS SEGMENT
    ($ millions)               Q2/04     Q1/04     Q4/03     Q3/03     Q2/03
    -------------------------------------------------------------------------
    Revenue
      Gathering and
       Processing
        Field gathering
         and processing         29.2      27.8      29.0      26.5      24.8
        Extraction              10.8      10.4      10.3       8.8       8.6
        Transmission             6.4       7.0       6.7       6.7       6.4
        Intercomponent
         elimination            (0.5)     (0.5)     (0.5)     (0.9)     (0.5)
      Energy Services          124.1     133.4     125.2     115.1     120.9
      Natural Gas
       Distribution(1)          20.6      48.1      34.7      12.9      23.5
      Intersegment
       elimination             (15.2)    (32.7)    (26.3)    (10.2)    (15.3)
    -------------------------------------------------------------------------
                               175.4     193.5     179.1     158.9     168.4
    -------------------------------------------------------------------------
    Net revenue
      Gathering and
       Processing
        Field gathering
         and processing         29.3      27.8      29.0      26.5      24.8
        Extraction               3.6       3.5       3.6       2.2       2.3
        Transmission             6.4       7.0       6.7       6.7       6.4
        Intercomponent
         elimination            (0.5)     (0.5)     (0.5)     (0.9)     (0.5)
      Energy Services           14.6       9.8      13.1      14.0      12.5
      Natural Gas
       Distribution(1)           6.2       9.7       9.2       4.9       5.8
      Intersegment
       elimination              (0.1)     (0.1)     (0.1)     (0.1)     (0.1)
    -------------------------------------------------------------------------
                                59.5      57.2      61.0      53.3      51.2
    -------------------------------------------------------------------------
    Operating income
      Gathering and
       Processing                7.2      12.0      13.5      10.2       9.0
      Energy Services           10.0       5.3       8.7       9.5       8.3
      Natural Gas
       Distribution(1)           0.4       3.9       3.7      (0.5)      0.3
    -------------------------------------------------------------------------
                                17.6      21.2      25.9      19.2      17.6
    -------------------------------------------------------------------------

    (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
                               Q2/04     Q1/04     Q4/03     Q3/03     Q2/03
    -------------------------------------------------------------------------
    Revenue
    Gathering and
     Processing
      Field gathering
       and processing
        Processing capacity
         (gross Mmcf/d)(1)       906       901       861       835       838
        Processed throughput
         (gross Mmcf/d)(2)       563       560       523       514       510
        Capacity utilization
         (percent)(1)             62        62        61        62        61
        Average working
         interest
         (percent)(1)             89        87        90        88        88
      Extraction
        Inlet capacity
         (Mmcf/d)(1)             349       349       349       349       349
        Production
         (Bbls/d)(2)           9,337    10,020     9,159     6,428     7,140
      Transmission volumes
       (Mmcf/d)(2)(4)            415       396       403       347       321
    Energy Services
      Volume of power sold
       (thousands of MWh)        862       863       873       872       861
      Price received on the
       sale of power
       ($/MWh)(2)              49.88     45.78     47.10     49.41     46.33
      Average Alberta Power
       Pool prices
       ($/MWh)(2)              60.07     48.78     54.78     62.39     50.88
    Natural Gas
     Distribution(5)
      Customers               59,266    59,528    59,543    58,941    58,671
      Volume of natural gas
       distributed
        Sales (Bcf)(6)           2.2       5.5       4.5       1.3       2.1
        Transportation (Bcf)     2.6       3.0       3.0       2.6       2.2
      Degree day variance
       (percent)(3)             11.5       2.0       3.4      (5.9)     15.4
    -------------------------------------------------------------------------

    (1) At period end                      (5) Excludes Inuvik Gas Ltd. and
    (2) Quarter average                        Heritage Gas Limited operating
    (3) Variance from 20-year average.         statistics
        Positive variances are favourable  (6) Q2 and Q3 natural gas
    (4) Excludes condensate transmission       distributed (Bcf) reflect the
        volumes                                normal lower seasonal demand
                                               for natural gas in the Natural
                                               Gas Distribution segment


    CONFERENCE CALL

    AltaGas will hold a conference call on August 10, 2004 at 3:30 p.m. (ET)
to comment on its 2004 second quarter results. The discussion will be 
followed
by a question and answer period.
    To participate in the conference call, you may dial 416-640-4127 or      
1-800-814-4853 toll-free. Shortly after the conclusion of the live call, the
replay will be available by dialing 416-640-1917 or 1-877-289-8525. The pass
code is 21057238 followed by the pound key. The replay will expire at 
midnight
(ET) on August 17, 2004.

    ABOUT ALTAGAS

    AltaGas moves energy from its source to the end user, adding value
through the process. The Trust has consolidated assets totalling over
$900 million and a market capitalization of approximately $1 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 and sale of power from its power purchase based arrangements.
    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.

  When used in this press release, the words "anticipate," "estimate," and
similar expressions are intended to identify forward looking statements. Such
statements are subject to certain risks, uncertainties and assumptions that
could cause actual results to differ materially from those contemplated in 
the
forward looking statements. These risks and uncertainties include operating
performance, regulatory and environmental issues, weather and economic
conditions, competition and financing availability. For additional 
information
on these and other factors see the reports filed by AltaGas with Canadian
securities regulators. AltaGas disclaims any intention or obligation to 
update
or revise any forward looking information whether as a result of new
information or future event.

/T/

 


Media:
Dennis Dawson,
(403) 691-7534
Email: dennis_dawson@altagas.ca


or


Investment Community:
Marilyn Pfaefflin
(403) 691-7540
Email: marilyn_pfaefflin@altagas.ca
Website: www.altagas.ca