News

AltaGas Reports First Quarter Results and Announces Plans for Corporate Conversion

April 29, 2010

CALGARY, ALBERTA--(Marketwire - April 29, 2010) - AltaGas Income Trust (AltaGas or the Trust) (TSX:ALA.UN) today reported net income for the three months ended March 31, 2010 of $36.4 million ($0.45 per unit - basic), compared to $37.5 million ($0.50 per unit - basic) for the same period of 2009. Excluding the effect of unrealized gain on risk management contracts, first quarter 2010 net income was $32.4 million compared to $37.0 million for the same period in 2009.  "The operating segments reported operating income of $49.5 million compared to $52.5 million for the same period last year," said David Cornhill, Chairman and CEO of AltaGas. "Although power prices in Alberta were the lowest we have seen in many years and we are just now starting to see renewed producer activity in the basin, our overall results reflect the benefits of the Trust's diversified portfolio of assets and disciplined risk management. Our field gathering and processing business reported its third quarter of improved results and we are seeing increased volumes generally across all our gas businesses this year."  AltaGas declared a distribution of $0.18 per trust unit and exchangeable unit payable on June 15, 2010 to securityholders of record on May 25, 2010. The ex distribution date is May 21, 2010. The Trust declared total cash distributions of $0.54 per unit in first quarter 2010.  Board Proposes Reorganization to a Corporate Structure  AltaGas is pleased to announce its proposed reorganization into a corporate structure, subject to securityholder, court and regulatory approval. The Board expects to declare an annual dividend of $1.32 per share to be paid on a monthly basis with the final determination to be made subsequent to securityholder approval. This dividend level will provide a significant increase in internally generated funds, as well as provide investors with a stable, sustainable dividend over the long term. Should the Plan of Arrangement be approved at the Annual and Special Meeting of Securityholders on June 3, 2010, AltaGas expects that the Board would declare the first monthly dividend on the effective date of the reorganization for securityholders of record on or about July 25 to be paid mid August.  "We are excited about our future as we continue to deliver on our commitment to create value in a financially disciplined manner," said Mr. Cornhill. "With $2 billion of projects in advanced stages of development, AltaGas is poised to enter a new phase in its history. The significant growth opportunities will be supported by a dividend policy which balances income and growth to provide long term, sustainable returns to AltaGas' investors. The reorganization into a corporate structure will enhance AltaGas' access to capital and provide a strong financial platform to support its growth strategy. AltaGas' business is being built for the long term."  The Reorganization Plan  AltaGas has scheduled an Annual and Special Meeting of the holders (Unitholders) of trust units (Trust Units) and the holders of exchangeable limited partnership units (Exchangeable Units) of AltaGas Holding Limited Partnership No.1 (Exchangeable Unitholders and together with the Unitholders, collectively, the Securityholders) at 3 p.m. MDT on June 3, 2010 at the Petroleum Club, 319 5 Ave SW, Calgary, Alberta (the Meeting) to consider, among other things, a proposed arrangement (the Arrangement) pursuant to the Canada Business Corporations Act involving AltaGas and a number of its subsidiaries and newly formed corporate entities pursuant to which AltaGas will be reorganized into a dividend paying corporation that will be named "AltaGas Ltd" (New AltaGas) The Arrangement is expected to be completed on or about July 1, 2010 and is subject to, among other things, the approval of at least two thirds of the Securityholders, voting together as a single class, the approval of the Court of Queen's Bench of Alberta and certain regulatory approvals (including the approval of the Toronto Stock Exchange to the substitutional listing of the New AltaGas common shares). Pursuant to the Arrangement, Securityholders will receive one common share of New AltaGas for each Trust Unit or Exchangeable Unit on a tax deferred basis.   All current members of the Board of Directors and senior management are expected to continue serving as directors and officers of the new corporation.   A management information circular and proxy statement outlining the details of the matters to be dealt with at the Meeting, including the Arrangement, is expected to be mailed to Securityholders in early May and will be available on SEDAR (www.sedar.com) and the AltaGas Website (www.altagas.ca).  If the effective date of the Arrangement is July 1, 2010, as currently anticipated, AltaGas expects that its final monthly distribution will be paid on July 1, 2010. To the extent the effective date of the Arrangement is delayed beyond July 1, 2010, regular monthly distributions will be paid in the usual manner until such effective date, at which time any outstanding distributions declared but not yet paid will be paid on the effective date to Unitholders of record on the applicable distribution record date.   Following the Arrangement, dividends will be paid monthly starting on or about August 15, 2010 subject to Board approval. The dividend is initially expected to be set at $0.11 per share on a monthly basis or $1.32 per share on an annual basis. This dividend level will provide a significant increase in internally generated funds, as well as provide investors with a stable, sustainable dividend over the long term. The Board of Directors will continue to conduct its annual review of the dividend amount and frequency after its review of the strategic plan and second quarter results as it has done in the past.  "We are excited about our future as we continue to deliver on our commitment to create shareholder value in a financially disciplined manner," said Mr. Cornhill.  Rationale and Benefits of the Arrangement  AltaGas' management and the Board of Directors have determined that enhanced Securityholder and asset value could be realized and delivered more effectively through a corporate structure than through the existing trust structure. Management and the Board of Directors believe that the proposed corporate structure will simplify the business structure of the Trust, thereby improving the company's access to capital.   Management and the Board of Directors believe the Arrangement provides a number of strategic benefits to AltaGas and its Securityholders including:  - a more simplified and efficient corporate structure which is easier for market participants to understand and value;  - greater flexibility to deliver long term capital growth and a reliable cash yield;  - enhanced access to capital and removal of the restriction on non resident ownership applicable to income trusts, resulting in greater access to capital markets and increased liquidity; and  - the reorganization into a corporate structure along with the growth projects and dividend policy provide a compelling value proposition for securityholders as stable earnings and cash flow are expected to grow.  GROWTH HIGHLIGHTS  The Trust continued to progress in realizing a planned $2 billion of organic growth in the next five years. In 2010, AltaGas expects to invest more than $56 million in the natural gas distribution business to grow its average mid year rate base by roughly $47 million or more than 18 percent. Approval was received to construct a gas fired co generation facility at the Harmattan Complex and expansions are underway at the Pouce Coupe, Ante Creek and Acme gas processing facilities, which combined will add 34 Mmcf/d of capacity. Additionally, AltaGas is in the final stages of regulatory approval on its Harmattan Co stream project, which is expected to increase extraction production by 25 percent. The acquisition of Landis Energy Corporation has now increased the Trust's ability to expand its storage business in key market areas.  Yesterday AltaGas announced the $28 million acquisition of a 28 Mmcf/d sour gas plant located in the Groundbirch area of northeast B.C. and targeting the Montney formation. This supports the Trust's continuing efforts to proceed with opportunities to meet strong producer demand in northeast British Columbia and northwest Alberta by expanding existing facilities and building new infrastructure in the area.  Discussions are also continuing regarding the three northwest British Columbia run of river projects with the Government of British Columbia, BC Hydro, BC Transmission Corporation and First Nations. Underpinned by long term contracts with solid counterparties, these renewable energy projects are expected to provide AltaGas with long term stable cash flows and strong returns. The three power generation projects total 277 MW of capacity and are estimated to cost approximately $1 billion. Subject to final government approvals, these projects are expected to begin generating cash flow and earnings between 2014 and 2016.  FINANCIAL HIGHLIGHTS(1):  - Earnings before interest, taxes, depreciation and amortization (EBITDA) were $65.5 million ($0.81 per unit) for first quarter 2010, compared to $62.3 million ($0.82 per unit) for the same quarter in 2009.  - Funds from operations were $51.3 million ($0.63 per unit) for first quarter 2010, compared to $57.0 million ($0.75 per unit) for the same period in 2009.  - Total net debt on March 31, 2010 was $1,043.0 million, compared to $1,014.7 million at December 31, 2009. The Trust's debt-to-total capitalization ratio as at March 31, 2010 was 50.0 percent, versus 49.2 percent at December 31, 2009 and 33.6 percent at March 31, 2009.  (1) Includes Non GAAP financial measures. See previous public disclosures available at www.altagas.ca or www.sedar.com for definitions  IN THE FIRST QUARTER:  - AltaGas acquired all of the outstanding common shares of Landis Energy Corporation for $0.80 per common share. Landis is a developer of underground natural gas storage facilities, focused on opportunities in Atlantic Canada. Landis adds good opportunities for AltaGas to grow its storage capacity, including the Alton natural gas storage facility, which is in the advanced development phase. The acquisition was valued at $25.6 million including estimated transaction costs and has been funded through AltaGas' existing credit facilities.  - AltaGas completed a $200 million issue of senior unsecured medium term notes. The notes carry a coupon rate of 5.49 percent and mature on March 27, 2017.  CONFERENCE CALL AND WEBCAST DETAILS:  AltaGas will hold a conference call today at 7:30 a.m. MT (9:30 a.m. ET) to discuss first quarter 2010 financial and operating results and other general issues and developments concerning the Trust.  Members of the media, investment community and other interested parties may dial (416) 695-6616 or call toll free at 1-800-952-4972. No pass code is required. Please note that the conference call will also be webcast. To listen, please connect here: http://events.digitalmedia.telus.com/altagas/042910/index.php.  Shortly after the conclusion of the call, a replay will be available by dialing (416) 695-5800 or 1-800-408-3053. The passcode is 1756544. The replay expires at midnight (ET) on May 6, 2010. The webcast will be archived for one year.  Forward Looking Information  This Release contains forward looking statements. When used in this Release the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "seek", "propose", "estimate", "expect", and similar expressions, as they relate to the Trust or an affiliate of the Trust, are intended to identify forward looking statements. In particular, this Release contains forward looking statements with respect to, among others things, business objectives, expected growth, results of operations, performance, business projects and opportunities and financial results. Specifically, such forward looking statements are set forth under: "Reorganization to a Corporate Structure"; "Consolidated Outlook"; "Growth Capital"; "Gas Segment Outlook"; "Power Segment Outlook"; "Corporate Outlook" and "Corporate Reorganization".  These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Such statements reflect the Trust's current views with respect to future events based on certain material factors and assumptions and are subject to certain risks and uncertainties including without limitation, changes in market competition, governmental or regulatory developments, changes in tax legislation, general economic conditions and other factors set out in the Trust's public disclosure documents.  Many factors could cause the Trust's or any of its business segment's actual results, performance or achievements to vary from those described in this Release, including without limitation those listed above as well as the assumptions upon which they are based proving incorrect. These factors should not be construed as exhaustive. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this Release as intended, planned, anticipated, believed, sought, proposed, estimated or expected, and such forward-looking statements included in this Release herein should not be unduly relied upon. These statements speak only as of the date of this Release. The Trust does not intend, and does not assume any obligation, to update these forward-looking statements except as required by law. The forward-looking statements contained in this Release are expressly qualified as cautionary statements.  Financial outlook information contained in this Release about prospective results of operations, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this Release should not be used for the purposes other than for which it is disclosed herein.  Additional information relating to AltaGas can be found on its website at www.altagas.ca. The continuous disclosure materials of the Trust, including its annual MD&A and Consolidated Financial Statements, Annual Information Form, Information Circular, and Proxy Statement, material change reports and press releases issued by the Trust, are also available through the Trust's website or directly through the SEDAR system at www.sedar.com.  ALTAGAS INCOME TRUST  The material businesses of the Trust are operated by AltaGas Ltd., AltaGas Operating Partnership, AltaGas Limited Partnership, AltaGas Pipeline Partnership, Taylor NGL Limited Partnership (Taylor), AltaGas Utility Group Inc. (Utility Group), as well as AltaGas Energy Limited Partnership and ECNG Energy L.P. (collectively the operating subsidiaries). The cash flow of the Trust is solely dependent on the results of the operating subsidiaries and is predominantly derived from interest earned on loans to the operating subsidiaries and from dividends or returns of capital from equity interests held within the Trust structure.  AltaGas General Partner Inc., through its Board of Directors, the members of which are elected by the Trust at the direction of the unitholders, has been delegated by the trustee of the Trust to manage or supervise the business and affairs of the Trust. AltaGas Ltd. provides all management, administrative and operating services to the Trust and its subsidiaries.  /T/  CONSOLIDATED FINANCIAL RESULTS                           Three Months Ended (unaudited)                                                        March 31 ($ millions)                                            2010           2009 ----------------------------------------------------------------------------  Revenue                                                360.5          354.6 Unrealized gain on risk management                       5.3            0.6 Net revenue(1)                                         127.2          112.1 EBITDA(1)                                               65.5           62.3 EBITDA before unrealized gain on risk management(1)     60.4           61.7 Operating income(1)                                     42.7           44.5 Operating income before unrealized gain on risk  management(1)                                          37.4           43.9 Net income                                              36.4           37.5 Net income before tax-adjusted unrealized gain on  risk management(1)                                     32.4           37.0 Net income before tax(1)                                31.0           39.0 Total assets                                         2,652.8        2,157.1 Total long-term liabilities                            923.8          824.3 Net additions to capital assets                         48.2           25.8 Distributions declared(2)                               43.7           41.3 Cash flows  Cash from operations                                   37.0           30.7  Funds from operations(1)                               51.3           57.0                                                            Three Months Ended                                                                    March 31 ($ per unit)                                            2010           2009 ----------------------------------------------------------------------------  EBITDA(1)                                               0.81           0.82 EBITDA before unrealized gain on risk management(1)     0.75           0.82 Net income - basic                                      0.45           0.50 Net income - diluted                                    0.45           0.49 Net income before tax-adjusted unrealized gain on  risk management(1)                                     0.40           0.49 Net income before tax(1)                                0.38           0.52 Distributions declared(2)                               0.54           0.54 Cash flows  Cash from operations                                   0.46           0.41  Funds from operations(1)                               0.63           0.75 Units outstanding - basic (millions)  During the period(3)                                   80.8           75.6  End of period                                          81.0           78.7 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) Non-GAAP financial measure; see discussion in Non-GAAP Financial     Measures section of this MD&A. (2) Distributions declared of $0.18 per unit per month commenced in August     2008. (3) Weighted-average.  /T/  REORGANIZATION TO A CORPORATE STRUCTURE  AltaGas has scheduled an Annual and Special Meeting of the holders (Unitholders) of trust units (Trust Units) and the holders of exchangeable limited partnership units (Exchangeable Units) of AltaGas Holding Limited Partnership No.1 (Exchangeable Unitholders and together with the Unitholders, collectively, the Securityholders) at 3 p.m. MDT on June 3, 2010 at the Petroleum Club, 319 5 Ave SW, Calgary, Alberta (the Meeting) to consider, among other things, a proposed arrangement (the Arrangement) pursuant to the Canada Business Corporations Act involving AltaGas and a number of its subsidiaries and newly formed corporate entities pursuant to which AltaGas will be reorganized into a dividend paying corporation that will be named "AltaGas Ltd" (New AltaGas). The Arrangement is expected to be completed on or about July 1, 2010 and is subject to, among other things, the approval of at least two thirds of the Securityholders, voting together as a single class, the approval of the Court of Queen's Bench of Alberta and certain regulatory approvals (including the approval of the Toronto Stock Exchange to the substitutional listing of the New AltaGas common shares). Pursuant to the Arrangement, Securityholders will receive one common share of New AltaGas for each Trust Unit or Exchangeable Unit on a tax deferred basis.  All current members of the Board of Directors and senior management are expected to continue serving as directors and officers of the new corporation.  A management information circular and proxy statement outlining the details of the matters to be dealt with at the Meeting, including the Arrangement, is expected to be mailed to Securityholders in early May and will be available on SEDAR (www.sedar.com) and the AltaGas Website (www.altagas.ca).  If the effective date of the Arrangement is July 1, 2010, as currently anticipated, AltaGas expects that its final monthly distribution will be paid on June 30, 2010. To the extent the effective date of the Arrangement is delayed beyond July 1, 2010, regular monthly distributions will be paid in the usual manner until such effective date, at which time any outstanding distributions declared but not yet paid will be paid on the effective date to Unitholders of record on the applicable distribution record date.   Following the Arrangement, the Board of Directors will approve the dividend policy subject to economic and financial conditions at that time. Dividends will be paid monthly starting on or about August 15, 2010 subject to Board approval. The dividend is expected to be set at $0.11 per share on a monthly basis or $1.32 per share on an annual basis. This dividend level will provide a significant increase in internally generated funds, as well as provide investors with a stable, sustainable dividend over the long term. The Board of Directors will continue to conduct its annual review of the frequency and amount of the dividend after its review of the annual strategic plan and second quarter results.   The Trust and the Board believe that there are many benefits to the arrangement. With approximately $2 billion in growth projects over the next five years, the reorganization into a corporate structure along with a dividend policy that increases free cash flow to grow the company is expected to create long term securityholder value. There are several near term growth projects such as expansions at three field gathering facilities, a cogeneration plant and co-streaming expansion at the Harmattan Complex as well as the acquisition of a new plant in the Montney area. The Trust continues to further its plans to meet producers' needs in northeast British Columbia and northwest Alberta and grow the natural gas storage and distribution businesses.  The Trust's strategy is to reduce its carbon footprint while creating securityholder value. The Trust will have a full year of operations from the Bear Mountain Wind Park in 2010 and will continue to find ways to reduce emissions in the gas business. The Trust is moving forward on securing contracts to underpin its wind projects and run-of-river projects in northwest BC. The 277 MWs of run-of-river projects will provide long term stable cash flows with a solid counterparty. The projects are estimated to cost approximately $1 billion and subject to final government approvals, these projects are expected to begin generating cash flow and earnings between 2014 and 2016.   The Trust's strategy is to grow the gas and power business to increase long-term earnings and cash flow to provide growing and stable returns for shareholders.  CONSOLIDATED FINANCIAL REVIEW  Net income for first quarter 2010 was $36.4 million compared to $37.5 million in the same period in 2009. Net income was $0.45 per basic unit for first quarter 2010 compared to $0.50 per basic unit for 2009.  During first quarter 2010, the Gas Segment performed well due the addition of the Natural Gas Distribution (NGD) assets in fourth quarter 2009, the Sarnia Storage asset which began contributing to operating income in second quarter 2009, the expiration of a legacy gas marketing contract and higher frac spreads. These increases were partially offset by the reduction in liabilities related to natural gas transactions as reported in first quarter 2009, lower processing volumes at some Field Gathering and Processing (FG&P) locations and lower NGLs extracted. The gas business benefited from the third consecutive quarter of increased contribution from the FG&P business based on improved processing volumes and well tie-ins. The increased producer activity in horizontal drilling has resulted in higher volumes at some of the field facilities. Lower extraction volumes were primarily driven by lower throughput at the Younger and Empress plants, offset by higher production yields and higher frac spreads.  The Power Segment reported lower results primarily due to declines in realized power prices and higher environmental costs. These decreases were partially offset by contributions from the Bear Mountain Wind Park which commenced commercial operations in fourth quarter 2009 and lower power purchase arrangement (PPA) costs.  The Corporate Segment reported higher unrealized gains on risk management contracts partially offset by lower investment income and higher compensation and administrative costs. The Trust reported higher interest expense in first quarter 2010 compared to first quarter 2009 primarily due to higher average debt balances. The Trust reported an income tax recovery in first quarter 2010 compared to an expense in first quarter 2009 due to lower income subject to tax and a current income tax recovery reported by the NGD business, partially offset by the tax effect of risk management contracts.  On a consolidated basis, net revenue for the quarter ended March 31, 2010 was $127.2 million compared to $112.1 million in same quarter 2009. In the Gas Segment, net revenue increased due to the addition of the NGD assets and Sarnia Storage, the expiration of a legacy gas marketing contract and higher frac spreads. These increases were partially offset by the reduction in liabilities reported in first quarter 2009, lower throughput in most FG&P areas and lower volumes exposed to frac spreads. In the Power Segment, net revenue decreased due to lower realized power prices in Alberta partially offset by the Bear Mountain Park and lower PPA costs. The Corporate Segment reported higher net revenue due to higher gains on risk management contracts, partially offset by lower investment income.  Operating and administrative expense for first quarter 2010 was $61.5 million, up from $50.0 million in same quarter 2009. The increase was due to incremental costs associated with the growth of the Trust including the addition of NGD assets, higher environmental costs and higher compensation expenses. These increases were partially offset by lower operating costs related to the FG&P and Extraction and Transmission (E&T) businesses due to lower volumes processed as well as cost control measures.  Amortization expense for first quarter 2010 was $23.0 million compared to $17.6 million in the same quarter last year. The increase was due to the growth in AltaGas' asset base from acquisitions and construction activities.  Interest expense in first quarter 2010 was $11.5 million compared to $5.7 million in first quarter 2009. The increase was due to higher average debt balances of $1,030.2 million compared to $568.6 million in for the same period in 2009. The average borrowing rate was 4.6 percent in first quarter 2010 compared to 4.7 percent in first quarter 2009.  Income tax recovery in first quarter 2010 was $5.4 million compared to income tax expense of $1.5 million in the same period 2009. The decrease in expense was a result of $5.1 million due to lower income subject to tax and a $2.0 million current tax recovery in the NGD business. These decreases were partially offset by $1.2 million due to the tax impact on gains reported on risk management contracts.  Consolidated Outlook  The Trust announced plans to reorganize to a corporate structure on or about July 1, 2010. As a result of the Arrangement, the company will increase its capital cost allowance claims (CCA) for tax purposes. The increased CCA claims will result in higher deferred taxes reported in the second half of 2010. The new dividend policy expected to be adopted by the Board upon completion of the Arrangement will result in increased free cash flow to finance growth projects or reduce debt.  AltaGas' operations are well positioned to deliver another year of strong results in 2010, despite a challenging economic environment. The addition of new assets in the second half of 2009 as well as plant expansions and addition of new assets in 2010, higher frac spreads and growing throughput at processing facilities are expected to increase earnings and cash flow. These increases are expected to be impacted by weak power prices in Alberta, higher general and administrative costs, higher interest and higher deferred (non-cash) taxes.  The majority of the Trust's earnings are underpinned by long-term, fee-for-service, cost-of-service or minimum volume commitment contracts. To the extent that the Trust is exposed to NGL frac spreads and Alberta power prices, the Trust has mitigated the impact of NGL frac spread and power price volatility through its hedging activity. For 2010, approximately two thirds of volumes exposed to NGL frac spreads have been hedged at approximately $21/Bbl and approximately two thirds of Alberta power volumes have been hedged at approximately $72/MWh.  The Gas Segment is expected to deliver increased earnings and cash flow in the second half of 2010 from expansions and plant efficiencies and throughput at the Acme, Ante Creek and Pouce Couple facilities. The NGD business expects to increase its rate base by more than 18 percent. The gas business is also expected to benefit from higher frac spreads and higher volumes at the Younger facility as a result of increased producer activity in the area. In addition, the gas business expects to benefit from the expiry of a legacy gas marketing contract which expired October 31, 2009, and historically resulted in depressed operating income in the Energy Services business. The expiry is expected to increase income by $5.6 million in 2010. Offsetting these benefits, management expects that the ongoing low natural gas price will result in lower demand for AltaGas' energy services.  GROWTH CAPITAL  Based on projects currently under review, development or construction, AltaGas expects capital expenditures for 2010 to be approximately $250 million, 75 percent for gas and 25 percent for power. As at March 31, 2010, approximately $130 million of capital has been committed for 2010. Growth capital is funded through AltaGas' cash from operations, DRIP proceeds and credit facilities. The following section has been updated from previous disclosure for material changes to projects with an expected in-service date post 2010.  Alton Gas Storage Project  AltaGas has completed the acquisition of Landis Energy Corporation (Landis) which is a developer of underground natural gas storage facilities. The most advanced project under development is the Alton natural gas storage project, located near Truro, Nova Scotia which is expected to serve customers seeking to manage natural gas supply requirements in eastern Canada and the northeast United States. The timing of commercial operations and capital cost estimates are currently under review.  INVESTED CAPITAL  During first quarter 2010, AltaGas acquired capital assets, long-term investments and other assets for $43.1 million compared to $36.0 million in first quarter 2009.  /T/  Net Invested Capital - Investment Type                                                          Three Months Ended                                                              March 31, 2010                                            Gas     Power   Corporate ($ millions)                           Segment   Segment     Segment  Total ---------------------------------------------------------------------------- Invested capital:  Capital assets                           42.5       3.7         2.0   48.2  Long-term investments and other assets      -      (0.1)       (4.7)  (4.8) ---------------------------------------------------------------------------- Net invested capital                      42.5       3.6        (2.7)  43.4 Disposals:  Long-term investments and other assets   (0.3)        -           -   (0.3) ---------------------------------------------------------------------------- Net invested capital                      42.2       3.6        (2.7)  43.1 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------   Net Invested Capital - Investment Type                   Three Months Ended                                                              March 31, 2009 ($ millions)                               Gas     Power   Corporate                                        Segment   Segment     Segment  Total ---------------------------------------------------------------------------- Invested capital:  Capital assets                           12.7      11.9         1.2   25.8  Long-term investments and other assets      -       9.6         0.6   10.2 ---------------------------------------------------------------------------- Net invested capital                      12.7      21.5         1.8   36.0 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------  /T/  The Trust categorizes its invested capital into maintenance, growth and administration.  Growth capital of $39.7 million was expended in first quarter 2010 (first quarter 2009 - $33.5 million). In the Gas Segment, growth capital comprised $26.0 million for assets from the Landis acquisition, $9.0 million for FG&P projects, $5.6 million for NGD projects and $1.1 million for the Harmattan fractionation project. Within the Power Segment, growth capital projects included $1.8 million for renewable power development projects and $1.2 million related to the Harmattan Cogeneration project. The Corporate Segment growth capital of $(4.7) million was related to unrealized loss on mark-to-market for Magma Energy Corporation. Administrative and maintenance capital expenditures in first quarter 2010 were $2.0 million and $1.4 million, respectively (first quarter 2009 - $1.9 million and $0.6 million, respectively).  /T/  Invested Capital - Use                                   Three Months Ended                                                              March 31, 2010                                            Gas     Power   Corporate ($ millions)                           Segment   Segment     Segment  Total ---------------------------------------------------------------------------- Invested capital:  Maintenance                               0.8       0.6           -    1.4  Growth                                   41.7       3.0        (4.7)  40.0  Administrative                              -         -         2.0    2.0 ---------------------------------------------------------------------------- Invested capital                          42.5       3.6        (2.7)  43.4 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------   Invested Capital - Use                                   Three Months Ended                                                              March 31, 2009                                            Gas     Power   Corporate ($ millions)                           Segment   Segment     Segment  Total ---------------------------------------------------------------------------- Invested capital:  Maintenance                               0.6         -           -    0.6  Growth                                   12.0      21.5           -   33.5  Administrative                            0.1         -         1.8    1.9 ---------------------------------------------------------------------------- Invested capital                          12.7      21.5         1.8   36.0 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------                               Consolidated Balance Sheets                                     (unaudited)                                                      March 31    December 31 ($ thousands)                                           2010           2009 ---------------------------------------------------------------------------- ASSETS Current assets  Cash and cash equivalents                        $    6,317   $      3,739  Short-term investment                                16,191         19,436  Accounts receivable                                 184,747        203,673  Inventory                                             1,106          1,401  Restricted cash holdings from customers              25,458         27,228  Regulatory assets                                        45          2,567  Risk management                                      79,398         66,271  Prepaid expense and other current assets             12,046          7,505 ----------------------------------------------------------------------------                                                      325,308        331,820 Capital assets                                     1,884,970      1,857,095 Energy arrangements, contracts and relationships     126,458        128,949 Goodwill                                             201,764        201,728 Regulatory assets                                     62,642         60,885 Risk management                                       26,380         18,132 Long-term investments and other assets                25,295         30,487 ----------------------------------------------------------------------------                                                   $2,652,817   $  2,629,096 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------  LIABILITIES AND UNITHOLDERS' EQUITY Current liabilities  Accounts payable and accrued liabilities         $  145,748   $    158,319  Distributions payable to unitholders                 14,589         15,110  Short-term debt                                      18,959         14,626  Current portion of long-term debt                   416,574        591,944  Customer deposits                                    28,901         30,678  Regulatory liabilities                                1,727          1,403  Risk management                                      51,734         34,200  Other current liabilities                             9,617         14,830 ----------------------------------------------------------------------------                                                      687,849        861,110 Long-term debt                                       607,425        408,170 Asset retirement obligations                          42,424         41,771 Future income taxes                                  222,068        228,596 Regulatory liabilities                                17,117         16,610 Risk management                                       24,911         14,491 Future employee obligations                            9,865          9,491 ----------------------------------------------------------------------------                                                    1,611,659      1,580,239 Unitholders' equity                                1,041,158      1,048,857 ----------------------------------------------------------------------------                                                   $2,652,817   $  2,629,096 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------  See accompanying notes to the unaudited Consolidated Financial Statements.               Consolidated Statements of Income and Accumulated Earnings                                      (unaudited)  For the Three Months Ended                          March 31       March 31 ($ thousands except per unit amounts)                   2010           2009 ---------------------------------------------------------------------------- REVENUE  Operating                                       $   354,958     $  353,453  Unrealized gain on risk management                    5,282            635  Other                                                   256            469 ----------------------------------------------------------------------------                                                      360,496        354,557 ----------------------------------------------------------------------------  EXPENSES  Cost of sales                                       233,290        242,410  Operating and administrative                         61,511         49,999  Amortization:   Capital assets                                      20,476         15,059   Energy arrangements, contracts and relationships     2,491          2,491 ----------------------------------------------------------------------------                                                      317,768        309,959 ----------------------------------------------------------------------------  Foreign exchange gain (loss)                            (248)           152 Interest expense  Short-term debt                                         406            193  Long-term debt                                       11,095          5,511 ---------------------------------------------------------------------------- Income before income taxes                            30,979         39,046 Income tax expense (recovery)  Current income tax                                   (1,217)            87  Future income tax                                    (4,200)         1,424 ---------------------------------------------------------------------------- Net income                                            36,396         37,535 Accumulated earnings, beginning of year              814,869        673,736 ---------------------------------------------------------------------------- Accumulated earnings, end of year                $   851,265     $  711,271 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------  Net income per unit  Basic                                           $      0.45     $     0.50  Diluted                                         $      0.45     $     0.49  Weighted average number of units outstanding  (thousands)  Basic                                                80,780         75,602  Diluted                                              81,110         76,517  See accompanying notes to the unaudited Consolidated Financial Statements.                 Consolidated Statements of Comprehensive Income                 and Accumulated Other Comprehensive Income                              (unaudited)  For the Three Months Ended                          March 31       March 31 ($ thousands)                                           2010           2009 ---------------------------------------------------------------------------- Net income                                        $   36,396     $   37,535   Other comprehensive income (loss), net of tax  Unrealized net loss on available-for-sale   financial assets                                    (2,307)             -  Unrealized net loss on derivatives designated as   cash flow hedges                                    (2,190)         9,696  Reclassification to net income of net gain on   derivatives designated as cash flow hedges   pertaining to prior periods                         (6,273)        (4,459) ----------------------------------------------------------------------------                                                      (10,770)         5,237 ---------------------------------------------------------------------------- Comprehensive income                              $   25,626     $   42,772 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------  Accumulated other comprehensive income, beginning  of period                                        $   21,225     $   31,569  Other comprehensive income (loss), net of tax        (10,770)         5,237 ---------------------------------------------------------------------------- Accumulated other comprehensive income, end of  period                                           $   10,455     $   36,806 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------  See accompanying notes to the unaudited Consolidated Financial Statements.                           Consolidated Statements of Cash Flows                                     (unaudited)  For the three months ended                          March 31       March 31 ($ thousands)                                           2010           2009 ---------------------------------------------------------------------------- Cash from operations  Net income                                      $    36,396     $   37,535  Items not involving cash:   Amortization                                        22,967         17,550   Accretion of asset retirement obligations              720            766   Unit-based compensation                                (39)            49   Future income tax expense (recovery)                (4,200)         1,424   Gain on sale of investments                         (1,396)             -   Equity income                                            -           (606)   Unrealized gain on risk management                  (5,282)          (635)   Unrealized loss on held-for-trading investments      1,384              -   Other                                                1,127            906  Non-operating investment income                        (345)             -  Asset retirement obligations settled                    (66)          (149)  Net change in non-cash working capital              (14,224)       (26,175) ----------------------------------------------------------------------------                                                       37,042         30,665 ---------------------------------------------------------------------------- Investing activities  Increase (decrease) in restricted cash holdings   from customers                                       1,770         (3,923)  Capital expenditures                                (14,238)       (34,362)  Investment in regulatory assets                          86              -  Distributions from equity investments                     -            218  Distributions from short-term investment                345              -  Disposition of short-term investments                 4,716              -  Business acquisition                                (21,917)             -  Acquisition of long-term investments and other   assets                                                   -        (10,000)  Disposition of long-term investments                    850              - ----------------------------------------------------------------------------                                                      (28,388)       (48,067) ---------------------------------------------------------------------------- Financing activities  Drawings (repayment) of short-term debt               4,333         (3,413)  Net repayment of revolving long-term debt          (175,336)       (38,584)  Issuance of long-term debt                          199,096              -  Repayment of long-term debt                            (361)          (337)  Distributions to unitholders                        (43,539)       (40,034)  Net proceeds from issuance of units                   9,731        105,475 ----------------------------------------------------------------------------                                                       (6,076)        23,107 ---------------------------------------------------------------------------- Change in cash and cash equivalents                    2,578          5,705 Cash and cash equivalents, beginning of period         3,739         18,304 ---------------------------------------------------------------------------- Cash and cash equivalents, end of period         $     6,317     $   24,009 ----------------------------------------------------------------------------  See accompanying notes to the unaudited Consolidated Financial Statements.                    Supplementary Quarterly Financial Information                                    (unaudited)  ($ millions unless otherwise  indicated)                   Q1-10     Q4-09     Q3-09     Q2-09     Q1-09 ---------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS(1) Net Revenue(2)  Gas                           99.0      93.6      81.4      81.1      84.1  Power                         23.5      26.5      24.8      23.4      27.5  Corporate                      5.5      (3.5)      9.5      11.3       1.2  Intersegment Elimination      (0.8)     (1.2)     (1.0)     (1.5)     (0.7) ----------------------------------------------------------------------------                               127.2     115.4     114.7     114.3     112.1 ----------------------------------------------------------------------------  EBITDA(2)  Gas                           51.0      49.6      40.8      39.9      43.4  Power                         20.8      24.9      23.4      21.9      26.0  Corporate                     (6.3)    (15.7)     (0.6)      1.8      (7.1) ----------------------------------------------------------------------------                                65.5      58.8      63.6      63.6      62.3 ----------------------------------------------------------------------------  Operating Income (Loss)(2)  Gas                           32.6      32.0      25.3      24.6      28.4  Power                         16.9      22.9      21.4      19.6      24.1  Corporate                     (6.8)    (16.1)     (1.3)      1.3      (8.0) ----------------------------------------------------------------------------                                42.7      38.8      45.4      45.5      44.5 ----------------------------------------------------------------------------  (1) Columns may not add due to rounding. (2) Non-GAAP financial measure.                       Supplementary Quarterly Operating Information                                     (unaudited)                                Q1-10     Q4-09     Q3-09     Q2-09     Q1-09 ---------------------------------------------------------------------------- OPERATING HIGHLIGHTS GAS  E&T  Extraction inlet gas   processed (Mmcf/d)(1)         787       844       839       798       882  Extraction volumes   (Bbls/d)(1)                38,429    39,812    38,222    39,334    42,898  Frac spread - realized   ($/Bbl)(1)(4)               30.42     25.96     20.55     22.05     25.29  Frac spread - average spot   price ($/Bbl)(1)(4)         35.38     26.87     19.74     16.34     15.20  Transmission volumes   (Mmcf/d)(1)(3)                310       320       332       345       348  FG&P  Processing Capacity (gross   Mmcf/d)(2)                  1,172     1,172     1,172     1,172     1,172  Processing Throughput   (gross Mmcf/d)(1)             432       423       433       475       480  Capacity utilization (%)(1)     37        39        37        41        41  NGD  Natural gas deliveries   - end-use (PJ)(5)(6)         7.20      6.62         -         -         -  Natural gas deliveries -   transportation (PJ) (5)(6)   1.30      0.55         -         -         -  Service sites at period-end   (7)                        73,198    72,717         -         -         -  Degree day variance (%)   - AUI(8)                    (10.3)      9.9         -         -         -  Degree day variance (%)   - Heritage Gas (9)          (10.5)        -         -         -         -  Energy Services  Energy management service   contracts(2)                  416       412       425       424       429  Average volumes transacted   (GJ/d)(1)                 405,048   377,580   329,192   287,315   374,113 POWER  Volume of power sold   (GWh)(1)                      685       707       683       672       664  Average price realized on   sale of power ($/MWh)(1)    62.16     67.54     70.22     63.84     74.33  Alberta Power Pool average   spot price ($/MWh)(1)       40.88     46.32     49.75     32.31     63.01 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------  (1) Average for the period. (2) As at period end. (3) Excludes natural gas liquids pipeline volumes. (4) AltaGas reports an indicative frac spread or NGL margin, expressed in     dollars per barrel of NGL, which is derived from Edmonton postings for     propane, butane and condensate and the daily AECO natural gas price. (5) Petajoule (PJ) is one million gigajoules (GJ) (6) Deliveries reflect AltaGas' 100 percent share in AUGI and Heritage Gas     as at October 8 and November 18, 2009 respectively. (7) Service sites reflect all the service sites of AUI, Heritage Gas and     Inuvik Gas. (8) Degree days relate to AUI's service area. A degree day is the     cumulative extent to which the daily mean temperature falls below 15     degrees Celsius. Normal degree days are based on a 20-year rolling     average. Positive variances from normal lead to increased delivery     volumes from normal expectations. (9) Degree days relate to Heritage Gas' service area. A degree day is the     cumulative extent to which the daily mean temperature falls below 18     degrees Celsius. Normal degree days are based on a 20-year rolling     average. Positive variances from normal lead to increased delivery     volumes from normal expectations.   Other Information  DEFINITIONS  Bbls/d      barrels per day Bcf         billion cubic feet GJ          gigajoule GWh         gigawatt-hour Mcf         thousand cubic feet Mmcf/d      million cubic feet per day MW          megawatt MWh         megawatt-hour PJ          petajoule  /T/  ABOUT ALTAGAS  AltaGas Income Trust is one of Canada's largest and fastest growing integrated energy infrastructure organizations. The Trust creates value by growing and optimizing gas and power infrastructure, including a focus on renewable energy sources.  AltaGas Income Trust's units are listed on the Toronto Stock Exchange under the symbol ALA.UN. The Trust is included in the S&P/TSX Composite Index, the S&P/TSX Income Trust Index and the S&P/TSX Capped Energy Trust Index.\

Media AltaGas Income Trust Adrianne Lovric (403) 691-9873 adrianne.lovric@altagas.ca or Investment Community AltaGas Income Trust Greg Aarssen (403) 691-7141 greg.aarssen@altagas.ca or AltaGas Income Trust Investor Relations 1-877-691-7199 investor.relations@altagas.ca www.altagas.ca