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Introduction & Market Context
AltaGas Ltd (TSX:ALA) presented its second quarter 2025 financial results on August 1, highlighting substantial year-over-year growth across key metrics despite a challenging market environment. The diversified energy infrastructure company saw its stock close at $42.62, down slightly by 0.56% following the presentation, even as the company reported significant operational improvements.
With operations spanning midstream and utilities segments, AltaGas continues to position itself at the intersection of North American natural gas production and global energy demand, particularly focusing on expanding its export capabilities and modernizing its utilities infrastructure.
Quarterly Performance Highlights
AltaGas reported a normalized EBITDA of $342 million for Q2 2025, representing a 16% increase compared to $295 million in the same period last year. Normalized earnings per share nearly doubled to $0.27 from $0.14 in Q2 2024, demonstrating substantial bottom-line improvement.
As shown in the following quarterly highlights slide, the company achieved strong operational metrics across its business segments:
The midstream segment was a particular standout performer, with normalized EBITDA increasing by 23% year-over-year. This growth was driven by higher global exports, which increased 4% compared to Q2 2024, along with improvements in fractionation and extraction (up 3%) and gathering and processing (up 8%).
The utilities segment also demonstrated solid performance with normalized EBITDA growing by 10% year-over-year, supported by ongoing capital investments and regulatory activities. Natural gas deliveries increased by 6% compared to the same period last year.
Strategic Initiatives & Project Updates
AltaGas provided detailed updates on two major growth projects that are critical to its future performance. The Ridley Export Expansion Facility (REEF) project has reached several key milestones, with approximately 70% of project costs now committed or incurred and about 60% under fixed-price EPC contracts. The project is progressing on schedule with in-water piling approximately 60% complete and commercial tolling targets achieved.
The REEF project is strategically designed to enable phased growth, with the initial phase providing approximately 55,000 Bbl/d of export capacity while utilizing only 10% of the dock capacity. This design allows for cost-effective expansion in the future to meet growing global demand.
Similarly, the Pipestone II project is advancing well, with facility construction now 85% complete. The project is fully contracted under long-term take-or-pay agreements, providing revenue certainty once operational.
Market Positioning & Industry Outlook
AltaGas emphasized the strong fundamentals supporting its growth strategy, particularly in the global LPG market. Asian LPG demand is projected to increase by 30% from 2025 to 2030, driven largely by PDH (propane dehydrogenation) capacity expansions in China. This growing demand aligns with AltaGas’s investment in export infrastructure.
The company highlighted the Montney region as having among the strongest economics in North America, with shorter payout periods compared to many U.S. gas plays. Representing approximately 55% of Canada’s gas production, Montney volume growth has outpaced total Western Canadian Sedimentary Basin (WCSB) growth by 2x, positioning AltaGas’s midstream assets in a high-growth area.
On the utilities side, AltaGas identified strong demand for natural gas infrastructure investments, particularly for modernization capital that drives rate base growth. The company noted a large backlog of pipe replacement opportunities and a spike in natural gas interconnection projects in the PJM region, supporting its utilities investment strategy.
Forward-Looking Statements
Looking ahead, AltaGas provided financial guidance for 2025, projecting normalized EBITDA between $1,775 million and $1,875 million, compared to $1,769 million in 2024. Normalized EPS is expected to range from $2.10 to $2.30, representing a 14% compound annual growth rate from 2018 to 2025.
The company outlined its 2025 capital expenditure budget of $1.4 billion, with 51% allocated to utilities and 45% to midstream projects. This allocation reflects AltaGas’s balanced approach to investing across its business segments.
AltaGas also reaffirmed its commitment to strengthening its balance sheet, targeting a medium to long-term leverage ratio of 4.65x. The company reported reducing its adjusted net debt by approximately $215 million in Q2 2025 compared to Q1 2025.
The company’s long-term value creation strategy has delivered impressive results, with normalized EPS growing at a 14% CAGR from 2018 to 2025E and normalized EBITDA increasing at a 9% CAGR over the same period. Additionally, AltaGas has reduced its adjusted net debt by more than 5.5x during this timeframe.
Executive Commentary
During the earnings call, CEO Vern Yu emphasized the company’s robust performance, stating, "We delivered normalized EBITDA of $342 million in the second quarter, 16% higher than Q2." He also highlighted the increasing demand for natural gas in the U.S. and its critical role in meeting long-term energy needs.
CFO James Harbilas reaffirmed the company’s commitment to dividend growth, stating, "We’re still committed to the 5–7% dividend growth," providing clarity on shareholder returns alongside the company’s growth investments.
While AltaGas’s presentation painted a positive picture of its operational performance and strategic positioning, investors appeared cautious, as reflected in the slight decline in share price following the results. Analysts have raised questions about regulatory policies limiting natural gas use, market volatility, and project completion risks, particularly for the REEF and Pipestone II projects, which could affect timelines and costs.
Nevertheless, AltaGas’s diversified business model, strategic growth projects, and exposure to growing global LPG demand position the company to potentially deliver on its projected growth trajectory, assuming successful execution of its business plan.
Full presentation:
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