Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the AltaGas Second Quarter 2021 Financial Results Conference Call. My name is Annis, and I will be your operator for today's call. All lines have been placed on mute to prevent any background noise.
After the speakers' remarks, there will be a question and answer session. As a reminder, this conference call is being broadcast live on the Internet and recorded. I would now like to turn the conference call over to Adam McKnight, Director, Investor Relations, please go ahead, Mr. McKnight.
Thanks, Hannes. Good morning, everyone. Thank you for joining us today for the AltaGas' 2nd quarter 2021 financial results conference call. Speaking on the call this morning will be Randy Crawford, President and Chief Executive Officer James Harbilas, Executive Vice President and Chief Financial Officer. We're also joined here this morning by Randy Toon, Executive Vice President President of our Midstream Business Lou Jenkins, Executive Vice President, President of our Utilities Business and John Morrison, Senior Vice President, Investor Relations and Corporate Development.
Consistent with prior quarters, in addition to the 2nd quarter press release, Financial statements and MD and A that were released earlier today, we've also published a Q1 earnings summary presentation. This presentation walks through the quarter and highlights some of the variances and non recurring items that we would assume would be helpful for the market to understand, and it's available on our website under our Events and Presentations tab. As always, today's prepared remarks will be followed by an analyst question and answer period. I'll remind everyone that we will be available after the call for any follow-up or detailed modeling questions. We'll proceed in the basis that everyone is Taking the opportunity to review the press release and our Q1 results.
And for the structure of the call, we'll start with Randy Crawford to provide some comments on our Q2 performance and the progress on our strategic priorities, followed by James Harbilis providing more detailed walk through of our financial results, near term outlook and guidance, and then we'll leave plenty of time at the end for Q and A. Before we begin, we will also remind everyone that we will refer to forward looking information on today's call. This information is subject to certain risks and uncertainties as outlined in the forward looking information disclosure on Slide 2 of our investor presentation, which can be found on our website and more fully within our public disclosure filings on both the EDGAR and the CER systems. And with that, I'll now turn the call over to Randy. Thank you, Adam, and good morning, everyone.
We are pleased to announce that AltaGas delivered strong second quarter results, continued to execute on our strategic plan and positioned ourselves to meet the company's 2021 And longer term growth plans. Our operating results were in line with our expectations for the quarter and reflect the benefit of operating a diversified set Long life infrastructure assets in a position to provide resilient and durable value for our shareholders. Despite ongoing headwinds associated with the U. S. Dollar exchange rate, we delivered normalized earnings per share growth of 33% normalized, EBITDA growth of 12% and FFO growth of 10% year over year.
Our U. S. Utility business Underpinned by our continued investment to update our pipeline network to reduce emissions, along with updated rates from our DC and Maryland jurisdictions, delivered 35% year over year EBITDA growth in local currency. These actions will result in better customer outcomes and provide reduced operating costs. Providing safe and reliable and affordable service to our customers across all five jurisdictions in which we operate is paramount.
The sustainable operational efficiencies that we achieve are driving improved results and better outcomes for our customers. New customer growth continues to track ahead of our expectation and is in line with the robust population growth we've seen in the DMD area over the past decade, which has been higher than the national average by nearly 25% since 2010. On July 1, we filed a new rate case At one of our Alaska utilities, Cinza, requesting a US1 $900,000 rate increase and is a continuation of our ongoing plan to remain active and keeping our rates up to date. We are also pleased to make headway in promoting combined heat and power to larger commercial and industrial customers during the quarter, which is advancing our lower carbon focus that is part of our climate business plan. In the years ahead, we will continue to operate with the high degree of regulatory, Capital and cost discipline that we believe is synonymous with delivering the best customer and stakeholder outcomes, which should also deliver steady normalized EPS and FFO We believe this disciplined approach provides the foundation to support AltaGas' long term strategic plan And we'll continue to reward all of our stakeholders.
We continue to build a world class midstream and global export business that delivered another quarter of record volumes across the platform. Our utilities continue to achieve sustainable operational efficiencies and improved financial performance as we prioritize the health and safety of our employees, our customers And our stakeholders. Our midstream business is performing incredibly well with record volumes in our global export businesses And solid volume growth across our entire platform. Our global export business shipped a record 90,106 barrels a day of North American propane and butane to Asia during the Q2. Gas processing and fractionation volumes through our facilities We're up 12% 35% year over year respectively and continues to demonstrate that our platform is well positioned for future at the Montney.
The outlook for Western Canadian supply growth looks increasingly positive and we are witnessing strong well capitalized producer activity around our Montney focused platform in Northeastern B. C. During the quarter, we exported 15 very large gas carriers to Asia with Ferndale exceeding 50,000 barrels a day in June, a new record for that terminal. Also during the quarter, We closed the purchase of approximately 1600 acres of land adjacent to Ferndale LPG Exelis facility. Incremental land will provide Petro Gas with enhanced flexibility and optionality to advance our promising future energy development initiatives that are aligned with the larger energy transition.
From a strategic standpoint, AltaGas entered into a 7 year time charter with a 3 year optional extension for 2 new dual fuel The LGCs that will go into service in late 2023 and early 2024. The contract extends AltaGas' reach into the Asian market for its products and further derisk AltaGas' long term export strategy. The procurement of the dedicated vessels We'll reduce shipping costs by approximately 25% compared to prevailing market rates and reduce pricing volatility. The vessels can carry 15% larger cargoes than the standard DLGC. As such, the vessels deployment will drive reduced cost and provide better environmental outcomes.
At the end of the second half of the year, We remain confident we will achieve our increased guidance ranges and we remain on target to reduce our net debt to normalized EBITDA ratio by up to 5.5x over the course of 2021 and we'll continue to remain focused on further de risking of the platform. Longer term, we will continue to operate long life infrastructure assets that deliver durable and growing EPS and FFO per share for today and tomorrow and provide the foundation for steady dividend growth and provide the opportunity for ongoing capital appreciation. As we have said in the past, We continue to believe that natural gas will play a critical role in the energy transition as the fuel of the future. Our assets are long life and provide a great deal of future optionality. These assets provide the critical infrastructure needed to deliver low carbon natural gas today while providing a foundation for delivery of carbon free solutions in the years ahead, including renewable gas and hydrogen.
And through this transition, we will tirelessly advocate for the best outcomes for the consumer and ensure that we are focused on delivering long term sustainability in all forms, including economic, safety and environmental. And with that, I will turn the call over to James to dig into the operational and financial results of
Thank you, Randy, and good morning, everyone. Overall, the Q2 was a relatively clean quarter for us and results were right in line with our expectations. Strong performance across all of our core businesses and the significant year over year EPS and FFO per share growth clearly demonstrates the visibility and growth within our utilities and midstream businesses and the continued execution of our strategic priorities. PetroGas continues to be a strong contributor for our integrated midstream business as it provides increased scale and optionality along our midstream value chain We realized continued volume growth across the entire platform. Our utilities results were driven by our continued investment across our network, Acute cost discipline and fewer COVID-nineteen headwinds.
During the Q2 of 2021, we delivered normalized EPS of $0.08 compared to $0.06 in the Q2 of 2020, representing a 33% year over year increase. Normalized FFO per share of $0.56 compared to $0.51 in the Q2 of 2020, representing a 10% year over year increase And normalized EBITDA of $230,000,000 compared to $206,000,000 in the Q2 of 2020, representing a 12% year over year increase. Our utility results reflected the normal seasonal slowdown in energy demand that is associated with the spring summer months And reported normalized EBITDA of $99,000,000 compared to $80,000,000 in Q2 2020, representing a 24% increase year over year. Strong operating performance across the segment was somewhat offset by $9,000,000 unfavorable move in the U. S.
To Canadian dollar exchange rate. In local currency, EBITDA was up $28,000,000 or 35% year over year. Utility segment growth continues to be underpinned by our disciplined investment in our distribution systems through our previously approved ARP programs. These programs are focused on driving better customer and environmental outcomes through improved safety and reliability, reduced leak rates and lower operating costs. WGL had another solid quarter with normalized EBITDA of $56,000,000 compared to $44,000,000 in Q2 2020.
Excluding the $5,000,000 negative impact of foreign exchange, WGL's EBITDA increased approximately $17,000,000 or 39% year over year in local currency. Notable drivers include the rate cases at DC and Maryland, which became effective Q2 and late Q1 respectively, The ongoing capital investment across the network and lower COVID-nineteen related impacts on usage and late fees. This was partially offset by lower asset optimization revenue. As Randy mentioned, we continue to make solid progress towards earning our allowed returns at through a combination of capital, rates and cost discipline, which you continue to see reflected in our quarterly results. SEMCO and Enstar's combined normalized EBITDA was $33,000,000 in the 2nd quarter, down $5,000,000 from the same period last year, entirely as a result of the negative impact of foreign exchange.
Stronger customer growth and usage was offset by higher G and A costs associated with higher property taxes and employee benefits. And finally, normalized EBITDA from retail energy marketing business was $10,000,000 in the quarter, An increase of $11,000,000 year over year driven by favorable gas and power margins and increased demand from C and I customers. Within our Midstream segment, we reported $142,000,000 of normalized EBITDA in the Q2 compared to 111 1,000,000 in the Q2 of 2020, which represented a 28% year over year increase. EBITDA from global exports was approximately $70,000,000 during the Q2 reflecting the record shipments of LPGs to Asia across 15 The LGCs from the RIPET and Ferndale Terminals. Record export volumes were underpinned by strong operational efficiencies across the two terminals Demonstrating the value of our expanded midstream operations and the integration of the Petro Gas assets as we continue to optimize our operations and the logistics networks and embrace best practices across the AltaGas and Petro Gas teams.
Our processing and fractionation business also realized strong volume growth across the midstream platform with gas processing up 12% year over year Infractionation volumes up 35% year over year driven by increasing producer activity on the back of improving fundamentals in commodity prices And a number of customers growing into their contractual commitments. We continue to benefit from our strong in the heart of Montney, which we believe will continue to outpace development in other parts of the basin. Processing and fractionation volumes At our non Montney facilities were also up year over year driven by increasing drilling activity and the strengthening in commodity prices. We remain focused on actively derisking the Midstream platform and reducing commodity price exposure and volatility. We had approximately 84% of our frac exposed volumes for the quarter hedged at $25 a barrel.
AltaGas remains well hedged through the balance of 2021 with approximately 79% of 2021 total expected global export volumes tolled or collectively hedged. This includes an average FEI to North American financial hedge price Approximately US10.79 dollars per barrel for both propane and butane. We also have 98% of our expected frac exposed volumes hedged at 2,570. In the corporate segment, strong contributions from higher generation of life was more than offset by higher G and A costs largely associated with higher long term incentive plan costs due to the significant increase in our share price during the quarter year to date. Depreciation and amortization expense for the Q2 of 2021 was $108,000,000 compared to $93,000,000 for the same period in 2020.
The increase was mainly due to new assets placed in service and the consolidation of the petrogas assets. Interest expense of $69,000,000 was down slightly over last year's at $71,000,000 as a result of lower average interest rates and a lower U. S. Dollar to Canadian dollar exchange rate, which were partially offset by higher average debt balances. We continue to make significant progress towards strengthening our financial position and improving our leverage ratios through 2021, which include reducing net debt by more than $630,000,000 year to date, which was supported by the sale of the non core U.
S. Transportation and storage business on April 23. This was an important milestone as it reflected the continuation of our strategy and ongoing efforts to de risk the platform And deleverage the balance sheet. We are reiterating the increased guidance that we made concurrent with Q1 results, which includes $1.65 to $1.80 for normalized EPS and $1,475,000,000 to 1,525,000,000 for 2021 normalized EBITDA. Our 2021 CapEx outlook remains unchanged at approximately $910,000,000 As Randy mentioned, our corporate strategy remains unchanged as we are focused on operating long life infrastructure assets that provide resilient and durable value for our stakeholders.
Our focus continues to be steady returns at compound value over time. That concludes our prepared remarks. We would be happy to turn it over to the operator for Q and A.
Thank you. Ladies and gentlemen, we will now conduct the analyst question and answer session. Your first question comes from Darius Losni with Bank of America. Darius, please go ahead.
Hi, good morning and thank you for taking my questions. My first one is I wanted to follow-up on You mentioned chartering a couple of vessels for your export strategy. I was just curious how you're thinking about that on a go forward basis. Are you going to be looking to potentially acquire more capacity to vertically integrate the logistics side of things a little bit? And also, How could you possibly or how might you do that in terms of transportation of NGL To the Ferndale and RIPET facilities, I know you've mentioned in the past that logistics had been an issue.
So just curious how you're thinking about that on a prospective basis?
Well, good morning. Thank you for the question. When we looked at the value proposition of the 2 ships, Our first driver was the commitment that it's going to reduce our shipping costs by 25%. So that's key to improving our Being a low cost shipper for our customers and continuing to improve our gross margin. So But overall, we feel that this is a strategic to control more of the value chain to the markets and essentially reaching further into the market on behalf of our customers Going forward.
So the 2 shifts are a small part of that and it's the beginning of us creating optionality for ourselves and our customers going forward.
Thanks very much for that detail. And one more if I could. I'm just curious about your Power assets, I know you've clearly said in the past that those are considered non core. We've been seeing a lot of news in California specifically about resource adequacy and things along those lines. So just curious how those how you're thinking about Plans for those power assets, either now or in the intermediate term?
Yes, it's James here, Darius. I mean, obviously, we our thinking hasn't changed around Blythe. I mean, the Power segment has been identified as something that's on core. That being said, though, The asset is performing extremely well. It's being 2nd year in a row here where it's being dispatched significantly higher than where it has been historically and it's obviously We need some of the power shortages in California.
We think that the asset has a bright Future in terms of it being able to meet California's power needs. So we're not in a rush But we said that if the right value comes along and it fully reflects the intrinsic value of that asset and it's accretive to our debt metrics, we would consider it, but nothing in the plans right
Okay. Thanks very much. I'll turn it back.
Thank you. Your next question comes from Jeremy Tonet with JPMorgan. Please go ahead.
Hi, good morning.
Good morning, Jeremy.
On the land acquisition that you announced today, the 1600 Acre Land, can you speak on the potential energy transition opportunities?
Sure. I'll give you a little color on that. I mean besides the sizable breadth of the land, It has access to hydropower. It's in close proximity to carbon capture opportunities. So In the short run, we plan to use the land to expand our rail system, handle unit trains, which will increase efficiency, lower our logistics costs.
In the longer term, we're exploring all the low emissions opportunities, including construction of hydrogen facilities that We'll enhance our product mix and further position AltaGas as really become an energy export leader off the West Coast of North America. I'm confident that the culture of innovation at AltaGas and our track record of building challenging and complicated projects will position us to succeed. But this is going to take several years, right? And it's going to require some governmental policy support, but there's no debate. We're heading into a lower carbon world.
And Overall, our asset base is well positioned to be at the forefront in my judgment on this energy transition.
Got it. Thank you so much. And then one more just on the export side. Seems like you've been able to capitalize on that pretty well. Just wondering how the synergies for the Petrobras integration And the optimization across RIPET and Ferndale have been tracking against your initial expectations.
Yes. I'm going to let Randy Can you comment on that because his team has done just an excellent job and it's exceeding our expectations quite frankly and you can see it in the results Yes. The overall efficiency and flexibility and synergies have been tremendous and the team is hitting on all cylinders. So Randy, can I add?
Hi, Jeremy. Yes, we were initially we're targeting $30,000,000 worth of synergies for the year, and we are expected to Do more than that. The 2 businesses come together, we've really identified a lot of great things to do and you can see it with our export capability through both Ferndale and RIPET and we think that we're going to do even more
in the second half of this year.
All right, got it. Thank you. I'll leave it there. Thank you.
Thank you. Your next question comes from Rob Hope with Scotiabank. Please go ahead.
Hey, good morning everyone. First question continues on the export theme. With the increasing volumes and activity that we're seeing in Northeast BC, Has that driven any incremental conversations on additional contracting or tolling of RIPET that could support an expansion?
Rob, good morning and thank you for the question. Conversations with producers are constructive, right? And we speak to them regularly. And we are focused on securing additional tolling volumes at RIPET and Ferndale. So we're currently at 35% at RIPET and we're targeting higher percentages.
But Really, the recent strengthening of fundamentals, improving commodity prices are starting to support the conversation and we are seeing increased interest From aggregators who want to participate on the upside of having direct access to the Asian market. So, in summary, Rob, I'll The industry consolidation is resolving in stronger counterparties, larger balance sheets, capable of taking long term commitments. With our greater scale and the tools in our toolbox around logistics and supply chain, we're optimistic that we'll continue To provide that access and increase tolling volumes into the future.
All right. Appreciate that. And then just kind of A question on the similar vein. When we take a look at the synergies of having 2 export terminals on the West Coast, are you able to move barrels in between the two facilities, like for instance, if we're seeing kind of fires impacting DC rail, could you ship them down to Ferndale? And the fact that you do have Ferndale, does that push off the need to expand RIPET as you could further optimize your existing capital first?
Yes. I mean, I think that you're spot on. And look, the fact is, is even we will move ships between the two ports from the rail logistics. We have some challenges and we've had with some of the CNN and some of the fire, but overall our ability To reroute those into our facilities and that optionality has created significant benefits and opportunities and we're just scratching the surface. So, Lindy, do you want to add anything more to that?
Yes. As we've talked about before, RIPET can do more We're currently doing the 50,000 barrels a day. We think we can get that above closer to say 70,000 barrels a day and it's all about logistics And the petrogas and AltaGas assets combined have made us more efficient on the logistics front. And so we are going to continue to optimize both terminals To increase export volumes.
And I'll add that just the 2 products also provides us another layer of Optimization of our assets, right, depending on the availability and the logistics associated with that. So Really a lot of value to the scale and optionality. So thank you for the question.
I appreciate the color. Thank you.
Thank you. Your next question comes from Robert Catellier with CIBC. Please go ahead.
Hi, Rod Catellier from CIBC. I wondered if you could provide your initial thoughts on how the Blueberry River First Nation case Can impact both current operations and future development in the Montney, not just for the industry, but also Or your specific strategy?
Yes. Well, AltaGas has had just Excellent stakeholder relationships with all the First Nations and particularly the Blueberry. And so clearly our Asset position having existing capacity and to be able to take the growing volumes is certainly something of value to us And it makes us distinct. So we think it's somewhat of a competitive advantage. Clearly, as we work with all of our stakeholders Going forward, we think that our constructive relationships are not going to impact a lot of our future growth.
But I think it's important to understand that It's from our perspective, when you have access to land and someone's land that it's important To have an excellent relationship with them and to manage the environmental impacts along the way. So we have I think they'll be an excellent relationship and I think that that's how we are going to progress going forward. Do you have any color, Randy?
No, Randy said, I think our Relations Group has done a great job in Northeast BC and even around RIPET. And we know that we have to work With the First Nations to do any kind of development and we've always done that. So we don't think that this ruling is going to
have a major impact to our business.
And we think we can help our producers and those in the North Montney to continue to develop and we can leverage those strong relationships
Okay. For the sake of further clarity, the timing of the purchase of the 1600 Acres at Ferndale and the timing of the Blueberry River case, that's just coincidental and it doesn't reflect the pivot Having focused perhaps putting more emphasis on Ferndale?
No, no. Those are just Coincidentally, the timing of no, we've been focused on optimizing Ferndale and our core competency around exporting. And we're very bullish On North Montney and the development there too. So no change in the fact of our integrated strategy overall.
Yes, that's what I thought. And just last question for me then is on the retail, that's quite a notable improvement, The results there year over year, can you speak a little bit more to the drivers there and whether you foresee that as being sustainable over the next 12 months?
Blu, I'll let you comment on that.
Yes, of course. Yes, good question, Rob. Notably, the challenge We had in Q2 of last year was related to that was the 1st full quarter where we were facing the COVID impacts. And so of course our usage expectations and profiles didn't match our transportation and Purchase profile. So as we've gotten more confident in those usage profiles, etcetera, what you see this year is a better management And more reflective of our expectations as we work our way through COVID.
So really the change was just coming into the year with the expectations of COVID and being able to manage around that usage profile. So yes, we do think we're slightly above budget for the year and we expect that to look the same As we go throughout the year. So will it continue? Yes, we think so. We just we weren't surprised by a full quarter of COVID this year.
Right. So it's more to do with COVID effects coming off that it has to do with the winter storm effect that may be incentivizing More demand for your retail products?
Correct. So demand has been good. Yes, I would characterize there was Minimal, if any, impacts on the winter storm activity.
Okay. That's it for me. Thank you. You
bet. Thank you. Your next question comes from Ben Pham with BMO. Please go ahead.
Hi, thanks. Good morning. I wanted to go back on some of your comments on the new acreage with hydrogen. It's a thought process I wanted to clarify that you would not be getting in the production of hydrogen. It seems more The benefit from that market expanding and it's more the expectation or exportation of hydrogen that you would be looking at?
Yes. This is a longer term vision. And then in terms of all of the attributes And our additional land purchase. And so the fact that, as I mentioned in my previous answers in the comments, some of the attributes associated with Our access to ports, hydropower, green power, as well as pipeline access there that we have a vision in the long run. Again, this is a long Term transition, right?
And we're looking at that into the future, keeping our eye on the fact that we have a strong track Building and challenging another project. So again, long term, nothing immediate, no significant dollars to invest, but just Wanted to make sure that investors understood the attributes of this and how we're looking at the future energy transitions and serving our customer needs in Asia to help them transition to cleaner burning fuels and reduce carbon emissions. Okay.
There was a Thanks, Randy. And there's also mention of Alberta Power prices benefiting as your results have been hearing That price impacted for some time. Is that just simply your cogen plants output into the market? Are you And just moving some of the volumes internally to the external market?
Yes. I think the answer is yes, but Randy, I'll let you comment about that Specifically?
Yes, that's just with our cogen facilities at Harmatt and Complex. We've been able to take advantage of the high power price In Alberta.
And do you usually sell that to the spot market or are you using that Do you typically that internally?
Those cogens are largely to provide power to Harmattan. And then the excess volume we sell into the grid on a spot base.
Okay. And then maybe my last question is on the spread. Like what's been impacting some of the softness in the spread? Do you think it's The supply driven, the van driven combination?
Look, we continue to see robust demand Information, so the local domestic prices, but the spreads continue to come in a bit here, but you can see it in the forward Outlook that they continue to be stronger on what we expect and have seen increasing demand going forward. So Ben, as you know, I mean, our structural advantage around being off the West Coast of North America provides a significant transportation advantage. And so we're we continue to optimize that going forward.
Okay, that's great. Thank you.
Thank you. Your next question comes from Robert Kwan with RBC Capital Markets. Please go ahead.
Hey, good morning. I'm just wondering, you've talked a bunch about things, especially the export side exceeding expectations, some of the integration and the synergies. So I'm just kind of wondering as you were thinking about your guidance, what are some of the headwinds That you're seeing for the second half of the year, I think that you're cautious about just in terms of maintaining guidance versus Either changing it or even just a directional guide.
Well, Robert, thanks for the question. As you know, we increased our guidance Into the Q1 and we're coming into the Q2 and I think the team has done an excellent job continuing to execute as I said in my prepared remarks. And while we have some Currency headwinds and such, I would be disappointed if we're not in the high end of our guidance range going forward. So So clearly, we're just in the second half. The team is executing quite clearly and doing a great job.
So again, We can revisit that, but overall, as each quarter goes by, overall, we're well positioned to get into the high end of our guidance range. James, did you want to give any of the other headwinds?
Yes. I just wanted to add, like, obviously, Randy touched on one of the headwinds that's been creating volatility for us and everyone else that has U. S. Dollar Denominated revenues and EBITDA, so that's something that we keep our eye on for the back half of the year. But right now, propane spreads Have been tracking below where they were when we rolled out our guidance.
So obviously as Q3 unfolds and we get into another winter season, We'll see if those rebound and if they create a bit of a tailwind for us. But right now, those are headwinds that we need to take into account with respect to the current guidance range.
Got it. But I thought when you redid your guidance range, didn't you remark your FX assumption? Yes, we did. We did. So that's a tailwind actually, isn't it at this point?
Slight.
Yes. So Robert, I mean, obviously, when we remarked In the Q1, we saw it go from what we had in our budget at 132 down to 126. We've seen A further decline in the 5 bank forecast, 123 and I think the spot right now is about 124, 125. So if it stays there In the back half of the year, then I agree with you, it would become a tailwind. But when we set when we reforecasted the business in the quarter, The exchange rate between Q1 and Q2 has gone down.
Got it. Okay. So is this maybe just a little bit with respect to Randy's Disappointed if you're not at the high end, just trying to stay conservative given you just increased guidance a quarter ago?
Randy, yes.
I think we want to be clear and we will visit these each quarter, but I stand by my comment and the team is doing John, hitting on all cylinders.
Got it.
If I can just quickly come back to the question around Vertical integration and chartering the vessels, how far down the value chain would you be willing to go? Would you be willing to get into Receiving terminals on the other side?
No, I'm not just I think what we want to be able to do is we're building relationships with our customers, Global customers across the world and into Asia. And so our ability to be have direct access, think about it as extending the pipeline right into the market areas. I think Well, we would be focusing on our value chain. I think it adds value to our customers as well and de risk the platform. So not a lot further than that, I don't believe.
Got it. If I can just finish one last question here. We've seen strong asset valuations in private markets. Is that enticing enough for you to look to transact on assets maybe that you wouldn't have considered or is your focus pretty squarely at this point On the sale of MVP as it relates to more material dispositions?
Sure. I think We've demonstrated as a management team that we are focused on creating shareholder value and that we will recycle capital and we will grow our core assets As we have stated, so we have our non core assets and to the extent that other assets that Don't meet necessarily our growth profile or that are better to be monetized and recycled to these tremendous organic growth opportunities we have both in the midstream and utility. We'll look at that, right? But we're not going to we're in a position where we continue to improve the strength of our balance sheet, focus on driving organic growth Going forward and a long durable resilient model increasing our dividends over time. So I guess the short answer is, Robert, we'll look at all of that, Right.
And but overall, our focus is continuing to invest in these core businesses and demonstrate the growth that we have.
National Bank, please go ahead.
Yes, good morning guys. Just maybe back to your G and P business here and the continued trend of consolidation Across the E and P sector, specifically in the Montney region. And given where commodity prices are at these days, I'm just curious How far out we might be in terms of needing to expand capacity at either North Pine, Townsend Or potentially needing to add infrastructure across other assets in your portfolio?
Sure. No, great question, Will. The fortunate part as we've said in the past that we've made significant investments in our midstream infrastructure over $2,000,000,000 investing in our Obviously, our export capabilities as well as our fractionation and processing assets. So our focus has been and we're in an enviable position, right, because we can move additional products at the That we have already invested in. So that puts us in a really strong position overall.
And while we work with our customers and to stay out in front of this as they Developed a world class resource. We have the opportunity to do module other expansion opportunities with the facilities that we have. So we'll continue to work with our customers. But right now, I think given the fact that we have available opportunities and we can connect our producers to these value global and domestic markets, Bodes well for our growth and our profitability into the future. So there will be a time, there will be need for additional assets and We stand ready to be there.
Okay, great.
Thanks for that. And then, within the utilities, just curious If you might be working on any emerging opportunities on the RNG front just with respect to connecting into new supplies there and Whether or not this might represent a little bit of upside to that 8% rate base CAGR outlook?
Yes. Excellent point. Blu, I'll let you comment. But yes, the team is doing looking at all of those and we've talked a lot about that and We're bringing some of our first RNG into the system. So Blu, I'll let you comment on the activities.
Yes. You bet. Thanks, Randy. Yes, Patrick, good question. So We signed a recent small deal with a local RNG facility building the facilities and pipeline connections to deliver gas So they and of course take RNG from the facility.
We are scrubbing several others and are working actively across the region for those opportunities. So yes, we're optimistic that we'll have more to come and more announcements as we go. Some of those are in fairly early stages, but yes, we think there's some upside around ROG over time.
Okay. That's great. I'll leave it there. Thank you.
Thank you, Patrick.
Thank you. The last question comes from Linda Ezebel with TD Judy, please go ahead.
Thank you. Just wanted to follow-up again on your intriguing extending into Vessels opportunity and the optionality around that. You mentioned that it is The beginning of you creating optionality, I'm wondering if there might be the potential to rent additional vessels and If you can expand on that comment. And then as a second part to that question, Should we extend a little bit upstream as well or into other marketing type opportunities?
Thank you, Lana. Thank you for the question. The first part of your question about the ships and additional opportunities and the optionality is Starting here and we think this makes good sense for the company. It's a small aspect of our overall volumes that we're moving. But If you think about what I mentioned on our structural advantage, a 10 day transportation to the open waters of the Pacific to the growing markets of Asia, China and EMEA as well.
I mean, this really does and you highlight create tremendous optionality for ourselves and for our customers and to be able to get them access Into these growing markets. So I think it will ultimately allow us, as you said, even further upstream. So as we optimize our footprint and focus on our leading export footprint that's extremely valuable to the robust Asian market, I believe it will also provide opportunities further upstream, right, to bring on more product, more investments in the basin as well. So Yes. It's all calculated and coordinated strategy and steps that we're taking and we're excited about those.
And Randy and Ken Wentworth and the team Are doing an excellent job and looking forward as well to creating more value with maximizing the latent capacity that we have Tremendous support assets. So thank you for the question.
Thank you. And just as a Follow on with respect to creating optionality and accessing end markets. You've done a great job of expanding Access to North American markets to global markets, but what about getting a little bit into upgrading as some of your peers have And accessing new markets through that, whether it be propane or butane or other products being partially upgraded?
Yes. I think that we certainly when we are shipping to the global markets, we're getting Some of that into upgrading into the PDH facilities. But our overall focus right now is to maximize the flow of the propane and butane To our customers and such. And so, while we look upstream at different types of investments right now, I think when I look at our ability to provide Almost 100 well, we have capacity up in excess of 130,000 barrels to global access markets across the world, Right. As opposed to domestic markets alone, I think it's really valuable now.
And I think that's where our focus is more on connecting the growth that's going on in Asia With the basin. But again, we'll look at those things, Linda. We're early on and as we go through refining that product and if we can do upgrades, the Team is extremely nimble and entrepreneurial and we'll look at that. Right now, our focus is just maximizing the capacity and getting our customers
This concludes the Q and A portion of today's call. I will now turn the call back to Mr. McKnight.
Thanks, Annis, and thank you everyone once again for joining our call today and for your interest in AltaGas. Just as a reminder, the IR team will be available after the call