DBRS Confirms AltaGas Ltd. at BBB with a Stable Trend

DBRS Limited (DBRS) has today confirmed the ratings on both the Issuer Rating and the Medium-Term Notes of AltaGas Ltd. (AltaGas or the Company) at BBB and on the Preferred Shares – Cumulative at Pfd-3. All with Stable trends. The confirmation reflects the Company’s business risk profile largely resulting from the addition of regulated utilities assets, including Pacific Northern Gas Ltd. in 2011 and SEMCO Energy Inc. in 2012, and power generation assets supported by medium- to long-term contracts, including 507 megawatt (MW) Blythe Energy Inc. in 2013 and the 195 MW Forrest Kerr Hydro Electric project (Forrest Kerr), commercially operational in October 2014.

The Company’s business risk profile continues to improve, as almost 85% (increasing from 80% in 2013) of the Company’s earnings are generated from low-risk, stable, regulated utility returns and fee-based long-term contacts, in the power and gas segments, with strong counterparties. The Company’s utility rate base has grown to nearly $1.5 billion ($255 million in 2009), operating under a supportive regulatory regime and contributes approximately 40% of the Company’s EBITDA (4% in 2009). Earnings from stable sources of business are expected to increase further once Forrest Kerr generation ramps up. The new run-of-the-river power assets, including Forrest Kerr, are primarily underpinned by 60-year, fully indexed power purchase agreements with British Columbia Hydro & Power Authority (rated AA (high), Stable by DBRS).

DBRS expects the recent improving trend in the Company’s credit metrics to continue as the full-year benefits from assets placed in service are realized. Cash flow-to-adjusted debt has improved to 11.8% in Q3 2014 (9.6% in 2012) and adjusted debt in capital structure has improved to 51.9% (60.2% in 2012). DBRS expects the Company to finance its capital expenditure program with a prudent mix of equity and debt and maintain credit metrics consistent with its current rating.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodologies are Rating Pipeline and Diversified Energy Companies (January 2014), Rating Companies in the Regulated Electric, Natural Gas and Water Utilities Industry (October 2014), Rating Companies in the Independent Power Producer Industry (August 2014) and DBRS Criteria: Preferred Share and Hybrid Criteria for Corporate Issuers (Excluding Financial Institutions) (December 2013), which can be found on our website under Methodologies.