News

AltaGas Reports Third Quarter Earnings

November 05, 2009

CALGARY, ALBERTA--(Marketwire - Nov. 5, 2009) - AltaGas Income Trust (AltaGas or the Trust) (TSX:ALA.UN) today announced net income of $34.7 million ($0.44 per unit - basic) for the three months ended September 30, 2009, compared to $53.5 million ($0.75 per unit - basic) for the same period of 2008, which included a one-time tax recovery of $13.8 million as a result of legal entity ownership changes within the trust structure. Excluding the one-time tax recovery, net income was $39.7 million in third quarter 2008 ($0.56 per unit - basic). Net income for the nine months ended September 30, 2009 was $109.1 million ($1.40 per unit - basic), compared to $124.0 million ($1.83 per unit - basic) for the same period in 2008. "Our third quarter earnings reflect AltaGas' stable operations, diversified gas and power assets and disciplined risk management. While parts of our business faced current market challenges, overall our energy infrastructure business reported solid results," said David Cornhill, Chairman and CEO of the Trust. "We continue to expect 2009 to be a year of strong earnings as current growth projects come online and contribute to earnings." The $200 million, 102-MW Bear Mountain Wind Park was fully in-service on October 24, beating its November in-service target and was delivered on budget. As British Columbia's first operational wind park, the facility features 34 turbines and will produce enough energy to power most of B.C.'s South Peace region. The power from the project is being sold to BC Hydro under a 25-year agreement. The success of the Bear Mountain Wind Park demonstrates AltaGas' strategy of investing in and building long-term, stable assets with solid returns. AltaGas has again proven its ability to meet complex project development and construction targets on time and on budget. "We remain committed to delivering strong returns to investors and to growing our gas and power business. We are pursuing approximately $2 billion in real growth projects over the next five to seven years, including renewable energy developments and a number of gas business opportunities currently under development," added Cornhill. Subsequent to third quarter, the successful acquisition of AltaGas Utility Group Inc. (Utility Group) adds regulated assets and strong, stable cash flows to the Trust. AltaGas expects to benefit as the Utility Group investments, people and growth opportunities expand and further diversify the Trust' gas business. AltaGas declared a distribution of $0.18 per trust unit and exchangeable unit payable on December 15, 2009 to unitholders of record on November 25, 2009. The Trust declared total cash distributions of $0.54 per unit in third quarter 2009. The unaudited interim Consolidated Financial Statements and Management's Discussion and Analysis, which contains additional notes and disclosures, are available on the AltaGas website (www.altagas.ca). FINANCIAL HIGHLIGHTS(1): - Earnings before interest, taxes, depreciation and amortization (EBITDA) were $63.6 million ($0.80 per unit) for third quarter 2009, compared to $68.0 million ($0.96 per unit) for the same quarter in 2008. - Funds from operations were $50.5 million ($0.64 per unit) for third quarter 2009, compared to $56.2 million ($0.79 per unit) for the same period in 2008. - Total net debt on September 30, 2009 was $668.9 million, compared to $592.8 million at June 30, 2009 and $582.0 million at December 31, 2008. The Trust's debt-to-total capitalization ratio as at September 30, 2009 was 38.7 percent, versus 36.1 percent at June 30, 2009 and 37.8 percent at the end of 2008. (1) Includes Non-GAAP financial measures. See previous public disclosures available at www.altagas.ca or www.sedar.com for definitions IN THE THIRD QUARTER: - AltaGas acquired common shares of Magma Energy Corp. (Magma) through an additional investment of $6.2 million. Magma completed its initial public offering and began trading on the TSX July 7, 2009. The incremental share purchase maintained AltaGas' ownership in Magma of approximately 5 percent. - AltaGas announced that it has entered into a MOU with NOVA Chemicals related to liquids extraction at the Trust's Harmattan Complex, as part of the proposed Harmattan Co-stream Project. The MOU provides that the definitive agreements between AltaGas and NOVA Chemicals would be for an initial term of 20 years, AltaGas would deliver all liquids or co-stream gas products on a full cost-of-service basis to NOVA Chemicals and would provide that all capital expenditures and operating costs related to the proposed project will be fully recovered through fees under normal operations. The MOU is subject to normal conditions precedent, including execution and delivery of mutually satisfactory definitive agreements between AltaGas and NOVA Chemicals and a favourable decision on the Harmattan Co-Stream application currently before the ERCB. - AltaGas offered to acquire all of the outstanding common shares of Utility Group not previously held by AltaGas for $10.50 cash per common share. - Taylor NGL Limited Partnership (Taylor), an indirect, wholly-owned subsidiary of AltaGas, redeemed the $16,570,000 of outstanding 5.85 percent convertible subordinated unsecured debentures (Debentures) as of September 16, 2009 for a redemption amount of $1,000.96 for each $1,000.00 principal amount of Debentures. SUBSEQUENT TO THE THIRD QUARTER: - AltaGas successfully acquired Utility Group on October 8, 2009. - On October 16, Dominion Bond Rating Services (DBRS) upgraded the Trust's credit rating from BBB (low) with a Positive trend to BBB with a Stable trend. - The Trust's 102-MW Bear Mountain Wind Park was fully connected to the B.C. power grid and met the conditions of Commercial Operation Date (COD) in order to receive the firm price under the 25-year energy purchase agreement (EPA) with BC Hydro. Owned and operated by AltaGas, the $200 million project is B.C.'s first fully operational wind park. - AltaGas entered into a purchase and sale agreement with SaskEnergy Incorporated and Scotia Investments, pursuant to which Utility Group will purchase the 75.1 percent of Heritage Gas Limited that it does not already own for $109.8 million. The acquisition is subject to customary conditions and expected to close in mid-November. AltaGas will hold a conference call today at 9 a.m. MT (11 a.m. ET) to discuss the third quarter 2009 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/110509/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 5774737. The replay expires at midnight (ET) on November 12, 2009. The webcast will be archived for one year. FORWARD LOOKING INFOMRATION 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: "Consolidated Outlook"; "Capital Projects"; "Gas Business Outlook"; "Power Business Outlook"; and "Corporate Outlook". 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 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 and Taylor NGL Limited Partnership (Taylor), 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 holders of the units, 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 Nine Months Ended (unaudited) September 30 September 30 ($ millions) 2009 2008 2009 2008 ---------------------------------------------------------------------------- Revenue 291.4 460.7 931.8 1,392.2 Unrealized gain on risk management 4.4 3.7 10.9 1.4 Net revenue(1) 114.7 122.7 341.1 350.7 EBITDA(1) 63.6 68.0 189.2 185.3 EBITDA before unrealized gain on risk management(1) 59.2 64.3 178.3 183.9 Operating income(1) 45.4 50.6 135.4 135.1 Operating income before unrealized gain on risk management(1) 41.0 46.9 124.5 133.7 Net income 34.7 53.5 109.1 124.0 Net income before tax-adjusted unrealized gain on risk management(1) 31.3 52.7 100.5 124.4 Net income before tax(1) 36.5 44.7 113.2 116.0 Total assets 2,243.4 2,113.5 2,243.4 2,113.5 Total long-term liabilities 846.2 828.1 846.2 828.1 Net additions to capital assets 79.5 95.1 164.1 760.5 Distributions declared(2) 43.0 38.0 126.9 108.3 Cash flows Cash from operations 43.7 50.3 141.1 167.5 Funds from operations(1) 50.5 56.2 153.6 163.0 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three Months Ended Nine Months Ended September 30 September 30 ($ per unit) 2009 2008 2009 2008 ---------------------------------------------------------------------------- EBITDA(1) 0.80 0.96 2.43 2.73 EBITDA before unrealized gain on risk management(1) 0.74 0.90 2.29 2.71 Net income - basic 0.44 0.75 1.40 1.83 Net income - diluted 0.43 0.75 1.39 1.81 Net income before tax-adjusted unrealized gain on risk management(1) 0.39 0.74 1.29 1.83 Net income before tax(1) 0.46 0.63 1.45 1.71 Distributions declared(2) 0.54 0.535 1.62 1.585 Cash flows Cash from operations 0.55 0.71 1.81 2.47 Funds from operations(1) 0.64 0.79 1.97 2.40 Units outstanding - basic (millions) During the period(3) 79.5 71.1 78.0 67.9 End of period 79.8 71.3 79.8 71.3 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (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. January 2008 to July 2008 distributions of $0.175 per unit per month were declared. (3) Weighted average. /T/ CONSOLIDATED FINANCIAL REVIEW Three Months Ended September 30 Net income for the three months ended September 30, 2009 was $34.7 million compared to the $53.5 million reported for the same period in 2008, which included a one-time tax recovery of $13.8 million as a result of legal entity ownership changes within the trust structure. Net income was $0.44 per basic unit in the current quarter compared to $0.75 per basic unit for the third quarter of 2008. Excluding the one-time income tax recovery, net income was $39.7 million in third quarter 2008 (0.56 per unit - basic). The gas business was affected in third quarter by the Extraction & Transmission (E&T) segment's higher volumes due to fewer turnarounds in 2009, the benefits of the 2008 Harmattan Complex capital program and lower operating costs. In addition, the transmission business reported increased revenues from the Ethylene Delivery System (EDS) pipeline upgrade and an adjustment for revenues previously deferred. In the Energy Services segment an adjustment of liabilities related to natural gas transactions also increased earnings. These increases were more than offset by a reduction in Field Gathering and Processing (FG&P) volumes due to producers shutting-in gas production and volume declines. The power business reported lower results primarily due to lower spot power prices and higher power purchase agreement (PPA) costs, but benefited from strong hedge prices and lower transmission and environmental compliance costs. Unrealized gains on investments and risk management contracts recorded in the Corporate segment contributed to earnings compared to an operating loss reported in the comparable quarter. The Trust reported higher interest expense because of a higher average debt balance and a higher average interest rate. Income tax expense was higher in third quarter 2009 compared to the same quarter in 2008 due largely to the one-time tax recovery in the prior year as a result of changes within the trust structure, which resulted in the use of lower tax rates for future tax liabilities. Operating income from the gas business was $25.3 million in third quarter 2009 compared to $26.0 million in same quarter 2008. Results were relatively flat despite the challenging economic environment faced by the gas business. The E&T segment reported higher operating income due to prior year's impact of turnarounds and unplanned outages. The increase to operating income was also the result of a positive adjustment to transmission revenues previously deferred, higher extraction volumes processed and higher contracted transmission volumes. Energy Services also reported an increase due to an adjustment to liabilities related to natural gas transactions and the contribution from the Sarnia storage asset. These increases were offset by lower throughput in most FG&P areas due to reduced producer activity and shut-ins, lower NGL frac spreads and a turnaround at a FG&P facility. In the power business, operating income was $21.4 million in third quarter 2009 compared to $30.1 million in third quarter 2008. Operating income decreased due to higher PPA costs, lower spot prices compared to third quarter 2008 when power prices were at near historic highs and higher power volumes sold at spot prices. The power business benefited from higher than spot hedge prices, as well as lower transmission and environmental compliance costs. On a consolidated basis, net revenue for the quarter ended September 30, 2009 was $114.7 million compared to $122.7 million in same quarter 2008. In the gas business, net revenue decreased due to lower spot commodity prices, lower throughput in most FG&P areas and lower operating cost recoveries. These decreases were partially offset by the higher extraction volumes, no planned outages at extraction facilities, higher contracted transmission volumes and a positive adjustment to revenues related to previously deferred revenue in transmission, as well as Energy Services liabilities. In the power business, net revenue decreased due to lower revenue from the sale of more power at spot power prices and prior year's sale of a wind development project, which were partially offset by strong hedge prices. The Corporate segment reported higher net revenue due to unrealized gains and investment income. Operating and administrative expense for third quarter 2009 was $51.0 million, down from $54.6 million in same quarter 2008. The decrease was a result of lower prices for fuel gas and electricity, lower power transmission fees, reduced environmental compliance costs and costs for a single turnaround of $0.8 million compared to $1.4 million in third quarter 2008. The decreases were partially offset by higher costs incurred to support the Trust's growth initiatives in both the gas and power businesses. Amortization expense for third quarter 2009 was $18.2 million compared to $17.4 million in the same quarter last year. The increase was due to the growth in AltaGas' asset base from construction activities. Interest expense for third quarter 2009 was $8.8 million compared to $6.0 million in same quarter 2008. The increase was due to a higher average debt balance of $657.8 million compared to $548.3 million for the same period in 2008. Borrowing rates were also higher because of the $200 million medium-term note (MTN) issuance in April at a 7.42 percent coupon rate. The average borrowing rate was 6.9 percent in third quarter 2009 compared to 4.9 percent for third quarter 2008. Income tax expense in third quarter 2009 was $1.8 million compared to an income tax recovery of $8.8 million in the same period 2008. The increase was largely due to a one-time $13.8 million recovery of future income taxes in third quarter 2008 as a result of legal entity ownership changes within the trust structure, partially offset by lower income subject to tax and implied taxes on financial instruments. Nine Months Ended September 30 Net income for the nine months ended September 30, 2009 was $109.1 million compared to $124.0 million in the same period in 2008, which included a one-time recovery of $13.8 million. Excluding this recovery, net income for the nine months ended September 30, 2008 was $110.2 million or $1.1 million higher than the current period. Net income was $1.40 per basic unit for the first nine months of 2009 compared to $1.83 per basic unit for the same period 2008. During the first nine months of 2009, the gas business performed well despite lower commodity prices and lower volumes processed in FG&P. The power business reported lower results primarily due to lower revenue from sales at spot power prices and higher PPA costs compared to the same period last year, but benefited from strong hedge prices, more favourable 30-day rolling average power price (RAPP) and lower transmission and environmental compliance costs. Investment income and unrealized gains recorded in the first nine months of 2009 in the Corporate segment contributed to a lower operating loss in this segment compared to the same period last year. The Trust reported slightly higher interest expense in the first nine months of 2009 compared to the same period in 2008 due to higher average debt balances and a higher average interest rate. Income tax expense was higher in the nine months ended September 30, 2009 due to a one-time tax recovery of $13.8 million in 2008, partially offset by lower income subject to tax. Operating income from the gas business was $78.3 million in the first nine months of 2009 compared to $78.6 million in same period 2008. Results were flat in spite of the challenging economic environment faced by the gas business. Operating income decreased due to lower throughput in most FG&P areas, lower NGL frac spreads received on unhedged volumes and one turnaround in the FG&P segment. These decreases were partially offset by no major turnarounds in the E&T segment in the first nine months of 2009, a positive adjustment to previously deferred transmission revenues and Energy Services liabilities, higher extraction volumes processed, higher contracted volumes in the transmission business and income generated from the Sarnia storage asset. In the power business, operating income was $65.1 million in the first nine months of 2009 compared to $85.4 million in same period 2008. Operating income decreased due to lower revenue from sales at spot power prices, higher PPA costs, a gain on sale of assets recorded in 2008 and lower contributions from the gas-fired peaking plants. These decreases were partially offset by stronger hedge prices, more favourable RAPP and lower transmission and environmental compliance costs. The operating loss incurred by the Corporate segment decreased primarily due to higher unrealized gains and investment income, no one-time charges unlike the $2.6 million for project development costs in second quarter 2008 and lower administrative expenses primarily due to cost control measures initiated in late 2008. On a consolidated basis, net revenue for the nine months ended September 30, 2009 was $341.1 million compared to $350.7 million in same period 2008. In the gas business, net revenue decreased due to lower throughput in most FG&P areas, lower spot commodity prices and lower operating cost recoveries, partially offset by adjustments to Energy Services liabilities and previously deferred transmission revenues, higher extraction volumes and higher contracted transmission volumes and contributions from the Sarnia storage asset. In the power business, net revenue decreased due to lower revenue from the sale of power at spot power prices, the gain on assets sold in 2008 and lower contribution from gas-fired peaking plants, partially offset by strong hedge prices and lower PPA costs. The Corporate segment reported higher net revenue due to investment income and unrealized gains. Operating and administrative expense for the nine months ended September 30, 2009 was $151.9 million, down from $165.2 million in same period last year. The decrease was largely due to fewer turnarounds unlike the same period last year, when approximately $7.4 million of turnaround costs were recorded. The decrease is further explained by a $2.6 million charge for project development costs in the same period last year. Cost control measures have also resulted in a decline in administrative costs. These decreases were partially offset by incremental costs associated with the addition of new assets and businesses acquired by the Trust during the second half of 2008. Amortization expense for the nine months ended September 30, 2009 was $53.8 million compared to $50.2 million in the same period last year. The increase was due to the growth in AltaGas' asset base from construction activities. Interest expense for the nine months ended September 30, 2009 was $22.5 million compared to $19.3 million in the same period last year. The increase was due to higher average debt balances of $606.0 million compared to $580.8 million for the same period in 2008. The average borrowing rate was 6.0 percent in the first nine months of 2009 compared to 4.9 percent in the same period in 2008. Income tax expense in the first nine months of 2009 was $4.1 million compared to a recovery of $8.0 million in the same period 2008. The increase was largely due to a one-time $13.8 million recovery of future income taxes in third quarter 2008 as a result of legal entity ownership changes within the trust structure, partially offset by lower income subject to tax. Consolidated Outlook AltaGas is well positioned to deliver another year of strong results in 2009, despite a challenging economic environment. The commencement of operations at the Bear Mountain Wind Park and Sarnia storage asset, along with the acquisition of the remaining interests in AltaGas Utility Group Inc. (Utility Group) and Heritage Gas Limited (collectively "natural gas distribution assets") augments the Trust's portfolio of low-risk, long-life assets and is expected to increase earnings and cash flow. 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 a disciplined hedging strategy which mitigates the impact of NGL frac spread and power price volatility. For the remainder of 2009, two-thirds of NGL and power volumes exposed to spot prices have been hedged at prices similar to hedged prices in 2008. For 2010, approximately 30 percent of volumes exposed to NGL frac spreads have been hedged at approximately $21/Bbl and approximately 50 percent of Alberta power volumes have been hedged at $77/MWh. Gas business results are expected to be relatively unchanged in 2009 compared to 2008 since revenue contributions from completed capital projects, the natural gas distribution assets, revenue adjustments and fewer turnarounds are expected to offset the impact of lower FG&P volumes and commodity prices. Management expects current producer drilling rates to remain relatively unchanged over the coming months; however, management believes natural gas prices may modestly strengthen when the lack of drilling adjusts the balance between North American natural gas supply and demand. Although this presents a short-term challenge for the FG&P segment, AltaGas believes it is well positioned when the economic environment improves. As an indicator of market improvements, several producers have recently begun flowing production that was previously shut-in and renewed their activity in deep gas drilling. AltaGas is working closely with its customers to find ways to optimize gas processing capacity in an effort to reduce costs for its customers and rationalize processing capacity in its operating areas. The Trust is also working with producers on engineering estimates and feasibility studies for plant expansions and consolidations in areas experiencing higher drilling activity. Despite continued low gas prices, the Trust is expediting plans to take advantage of these opportunities as the long-term outlook for the natural gas sector supports continued investment in processing assets to meet the needs of producers. The Energy Services segment is expected to benefit from the expiry of natural gas purchase and sales contracts. These contracts, which expired October 31, 2009, resulted in depressed Energy Services results in recent years. The expiry of these contracts is expected to increase income by $1.0 million in 2009 or $5.6 million on an annualized basis. The gas business is also expected to continue to benefit from the capital projects undertaken in 2008 to increase plant efficiencies and throughput at the Harmattan Complex, the operation of the Sarnia storage asset and the expansion of the Ethylene Delivery System (EDS), as well as measures to improve efficiencies at other facilities. On October 8, 2009, the Trust closed the acquisition of the outstanding common shares of Utility Group not previously held by the Trust. Utility Group distributes natural gas to more than 71,000 customers in Alberta, Nova Scotia and the Northwest Territories. On November 3, 2009, AltaGas announced the acquisition of the remaining 75.1 percent of Heritage Gas Limited that it did not already own, thereby increasing the Trust's natural gas distribution assets. This business is highly seasonal, with the majority of natural gas deliveries occurring during the winter heating season. Gas sales during the winter typically account for approximately two-thirds of annual revenue, resulting in strong first and fourth quarter results and losses in the second and third quarters. The new assets are expected to be accretive to earnings and cash flow. The power business results are expected to be lower based on the current forward spot price for Alberta power. Lower power prices are expected to be partially offset by the addition of the Bear Mountain Wind Park, which went into commercial service on October 24, 2009. The power segment is also expected to benefit from measures taken to reduce environmental costs. /T/ RESULTS OF OPERATIONS BY BUSINESS Operating Income Three Months Ended Nine Months Ended September 30 September 30 ($ millions) 2009 2008 2009 2008 ---------------------------------------------------------------------------- Gas 25.3 26.0 78.3 78.6 Power 21.4 30.1 65.1 85.4 Corporate (1.2) (5.5) (8.0) (28.9) ---------------------------------------------------------------------------- 45.5 50.6 135.4 135.1 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Consolidated Balance Sheets (unaudited) September 30 December 31 ($ thousands) 2009 2008 ---------------------------------------------------------------------------- ASSETS Current assets Cash and cash equivalents $ 18,460 $ 18,304 Short-term investment 45,625 - Accounts receivable 153,185 220,280 Inventory 558 775 Restricted cash holdings from customers 28,324 24,017 Risk management 84,510 92,842 Other current assets 12,142 7,705 ---------------------------------------------------------------------------- 342,804 363,923 Capital assets 1,556,408 1,436,686 Energy arrangements, contracts and relationships 131,440 138,913 Goodwill 143,840 143,840 Risk management 27,217 31,147 Long-term investments and other assets 41,663 17,744 ---------------------------------------------------------------------------- $ 2,243,372 $ 2,132,253 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- LIABILITIES AND UNITHOLDERS' EQUITY Current liabilities Accounts payable and accrued liabilities $ 136,547 $ 198,232 Distributions payable to unitholders 14,363 12,943 Short-term debt 604 4,493 Current portion of long-term debt 101,411 1,363 Customer deposits 28,324 24,017 Deferred revenue 40 2,777 Risk management 45,368 57,423 Other current liabilities 12,439 21,927 ---------------------------------------------------------------------------- 339,096 323,175 Long-term debt 566,854 559,412 Asset retirement obligations 45,887 41,708 Future income taxes 211,652 211,256 Risk management 15,306 16,745 Convertible debentures - 16,682 Other long-term liabilities 6,475 5,833 ---------------------------------------------------------------------------- 1,185,270 1,174,811 Unitholders' equity 1,058,102 957,442 ---------------------------------------------------------------------------- $ 2,243,372 $ 2,132,253 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See notes to the Consolidated Financial Statements. Consolidated Statements of Income and Accumulated Earnings (unaudited) Three Months Ended Nine Months Ended ($ thousands except September 30 September 30 per unit amounts) 2009 2008 2009 2008 ---------------------------------------------------------------------------- REVENUE Operating $ 281,843 $ 457,168 $ 909,765 $ 1,389,462 Unrealized gain on risk management 4,364 3,654 10,903 1,386 Other 5,170 (120) 11,163 1,390 ---------------------------------------------------------------------------- 291,377 460,702 931,831 1,392,238 ---------------------------------------------------------------------------- EXPENSES Cost of sales 176,676 338,042 590,695 1,041,545 Operating and administrative 51,018 54,729 151,864 165,436 Amortization: Capital assets 15,756 14,835 46,339 42,800 Energy arrangements, contracts and relationships 2,491 2,552 7,473 7,412 ---------------------------------------------------------------------------- 245,941 410,158 796,371 1,257,193 ---------------------------------------------------------------------------- Foreign exchange gain (loss) (78) 136 259 249 Interest expense Short-term debt 401 105 1,038 311 Long-term debt 8,422 5,921 21,441 19,032 ---------------------------------------------------------------------------- Income before income taxes 36,535 44,654 113,240 115,951 Income tax expense (recovery) Current income tax (99) 2,177 167 2,393 Future income tax 1,868 (10,977) 3,910 (10,386) ---------------------------------------------------------------------------- Net income 34,766 53,454 109,163 123,944 Accumulated earnings, beginning of period 748,133 580,902 673,736 510,412 ---------------------------------------------------------------------------- Accumulated earnings, end of period $ 782,899 $ 634,356 $ 782,899 $ 634,356 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Net income per unit Basic $ 0.44 $ 0.75 $ 1.40 $ 1.83 Diluted $ 0.43 $ 0.75 $ 1.39 $ 1.81 Weighted average number of units outstanding (thousands) Basic 79,501 71,138 78,034 67,873 Diluted 80,449 72,042 78,993 68,794 See notes to the Consolidated Financial Statements. Consolidated Statements of Comprehensive Income and Accumulated Other Comprehensive Income (unaudited) Three Months Ended Nine Months Ended September 30 September 30 ($ thousands) 2009 2008 2009 2008 ---------------------------------------------------------------------------- Net income $ 34,766 $ 53,454 $ 109,163 $ 123,944 Other comprehensive income (loss), net of tax Unrealized net gain on available-for-sale financial assets 4,578 - 4,578 - Unrealized net gain on derivatives designated as cash flow hedges 7,664 15,689 12,060 823 Reclassification of available-for-sale financial assets as a result of business acquisition - - - (17,873) Reclassification to net income of net gain (loss) on derivatives designated as cash flow hedges pertaining to prior periods (5,631) 4,810 (20,686) 2,387 ---------------------------------------------------------------------------- 6,611 20,499 (4,048) (14,663) ---------------------------------------------------------------------------- Comprehensive income $ 41,377 $ 73,953 $ 105,115 $ 109,281 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Accumulated other comprehensive income (loss), beginning of period $ 20,910 $ (7,993) $ 31,569 $ 27,169 Other comprehensive income, net of tax 6,611 20,499 (4,048) (14,663) ---------------------------------------------------------------------------- Accumulated other comprehensive income, end of period $ 27,521 $ 12,506 $ 27,521 $ 12,506 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See notes to the Consolidated Financial Statements. Consolidated Statements of Cash Flows (unaudited) Three Months Ended Nine Months Ended September 30 September 30 ($ thousands) 2009 2008 2009 2008 ---------------------------------------------------------------------------- Cash from operations Net income $ 34,766 $ 53,454 $ 109,163 $ 123,944 Items not involving cash: Amortization 18,247 17,387 53,812 50,212 Accretion of asset retirement obligations 794 838 2,331 1,793 Unit-based compensation 1,548 105 1,484 300 Future income tax expense (recovery) 1,958 (10,977) 4,000 (10,386) Gain on sale of assets - (1,407) (28) (1,725) Equity income 171 165 (899) (416) Unrealized gain (7,831) (3,654) (18,932) (1,386) Other 886 300 2,677 694 Asset retirement obligations settled - (182) (145) (399) Net change in non-cash working capital (6,830) (5,722) (12,388) 4,875 ---------------------------------------------------------------------------- 43,709 50,307 141,075 167,506 ---------------------------------------------------------------------------- Investing activities Increase (decrease) in customer deposits 5,208 (517) (4,307) (163) Decrease in note receivable - 1,000 - 6,500 Capital expenditures (69,748) (26,642) (158,292) (110,875) Disposition of capital assets - 6,589 - 15,432 Distributions from equity investments 81 72 380 209 Acquisition of short-term investments (11,403) - (39,323) - Acquisition of long-term investments and other assets (6,223) (45,911) (16,223) (306,916) ---------------------------------------------------------------------------- (82,085) (65,409) (217,765) (395,813) ---------------------------------------------------------------------------- Financing activities Repayment of short-term debt (47) (2,154) (3,889) (3,406) Net issuance (repayment) of revolving long-term debt (7,090) 59,226 (191,391) 212,892 Issuance of long-term debt (330) (207) 295,146 (207) Repayment of long-term debt (16,968) (4,636) (17,652) (5,369) Distributions to unitholders (42,876) (37,666) (125,493) (105,732) Net proceeds from issuance of units 7,519 9,091 120,125 134,515 Net proceeds from issuance of warrants - - - 4,500 ---------------------------------------------------------------------------- (59,792) 23,654 76,846 237,193 ---------------------------------------------------------------------------- Change in cash and cash equivalents (98,168) 8,552 156 8,886 Cash and cash equivalents, beginning of period 116,628 12,785 18,304 12,451 ---------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 18,460 $ 21,337 $ 18,460 $ 21,337 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See notes to the Consolidated Financial Statements. Supplementary Quarterly Financial Information (unaudited) ($ millions unless otherwise indicated) Q3-09 Q2-09 Q1-09 Q4-08 Q3-08 ---------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS(1) Net Revenue(2) Gas business Extraction and Transmission 45.4 42.4 44.6 42.7 43.8 Field Gathering and Processing 30.8 32.6 33.4 33.6 38.1 Energy Services 5.2 6.1 6.1 3.3 4.4 ---------------------------------------------------------------------------- 81.4 81.1 84.1 79.6 86.3 Power Generation 24.8 23.4 27.5 35.9 32.8 Corporate 9.5 11.3 1.2 10.1 3.6 Intersegment Elimination (1.0) (1.5) (0.7) 0.2 - ---------------------------------------------------------------------------- 114.7 114.3 112.1 125.8 122.7 ---------------------------------------------------------------------------- EBITDA(2) Gas Business Extraction and Transmission 31.4 28.1 29.9 29.0 25.4 Field Gathering and Processing 7.3 8.7 10.5 10.3 14.2 Energy Services 2.1 3.0 3.0 0.1 1.4 ---------------------------------------------------------------------------- 40.8 39.8 43.4 39.4 41.0 Power Generation 23.4 21.9 26.0 34.4 31.8 Corporate (0.6) 1.8 (7.1) (2.9) (4.7) ---------------------------------------------------------------------------- 63.6 63.5 62.3 70.9 68.1 ---------------------------------------------------------------------------- Operating Income (Loss)(2) Gas Business Extraction and Transmission 23.7 20.6 22.7 22.2 18.0 Field Gathering and Processing 0.1 1.4 3.2 3.1 7.2 Energy Services 1.5 2.6 2.5 (0.3) 0.8 ---------------------------------------------------------------------------- 25.3 24.6 28.4 25.0 26.0 Power Generation 21.4 19.6 24.1 32.5 30.1 Corporate (1.3) 1.3 (7.8) (3.4) (5.4) ---------------------------------------------------------------------------- 45.4 45.5 44.7 54.1 50.7 ---------------------------------------------------------------------------- (1) Columns may not add due to rounding. (2) Non-GAAP financial measure. Supplementary Quarterly Operating Information (unaudited) Q3-09 Q2-09 Q1-09 Q4-08 Q3-08 ---------------------------------------------------------------------------- OPERATING HIGHLIGHTS Extraction and Transmission Extraction inlet gas processed (Mmcf/d)(1) 839 798 882 790 781 Extraction volumes (Bbls/d)(1) 38,222 39,334 42,898 35,426 35,591 Transmission volumes (Mmcf/d)(1)(3) 332 345 348 367 381 NGL frac spread - realized ($/Bbl)(1)(4) 20.55 22.05 25.29 28.41 26.02 NGL frac spread - average spot price ($/Bbl)(1)(4) 19.74 16.34 15.20 18.58 36.92 Field Gathering and Processing Capacity (gross Mmcf/d)(2) 1,172 1,172 1,172 1,172 1,178 Throughput (gross Mmcf/d)(1) 433 475 480 521 545 Capacity utilization (%)(1) 37 41 41 44 46 Energy Services Energy management service contracts(2) 1,727 1,727 1,707 1,711 1,572 Average volumes transacted (GJ/d)(1) 329,192 287,315 374,113 291,353 298,608 Power Generation Volume of power sold (GWh)(1) 683 672 664 664 651 Average price realized on sale of power ($/MWh)(1) 70.22 63.84 74.33 87.30 83.10 Alberta Power Pool average spot price ($/MWh)(1) 49.75 32.31 63.01 95.18 80.36 ---------------------------------------------------------------------------- (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. 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 /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 Sheena McKellar (403) 691-9855 sheena.mckellar@altagas.ca or AltaGas Income Trust Investor Relations 1-877-691-7199 investor.relations@altagas.ca www.altagas.ca