Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the AltaGas 4th Quarter 2018 Financial Results Conference 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 of Investor Relations. Please go ahead, Mr. McKnight.
All right. Thanks, Chris, and good morning, everyone. Thank you for joining us this morning for the AltaGas Q4 2018 financial results conference call. Speaking on the call this morning will be Randy Crawford, President and Chief Executive Officer and Tim Watson, Executive Vice President and Chief Financial Officer. We're also joined here this morning by several other members of our executive team to help these guys out with the tough questions.
Because as always, today's prepared remarks will be followed by an analyst question and answer period. And I'll remind everyone that the Investor Relations team will be available after the call for any follow-up questions or any detailed modeling questions that you might have. This call is webcast, and I encourage those listening on the phone lines to view the supporting slides available on our website. A replay of the call will be available later today and a transcript will be posted to our website as well. Before we begin, I'll 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 this presentation and more fully within our public disclosure filings on both the SEDAR and EDGAR systems. And with that, I'll now turn the call over to Randy Crawford.
Thank you, Adam, and good morning. It is my pleasure to welcome you to our Q4 2018 results call. Before I dive into our 2018 operational highlights and near term priorities, I want to provide you with an update since the call we held in December on my 4th day in the CEO seat. During that call, I outlined a strategy that would bestow AltaGas financial strength and position us to capitalize on significant growth opportunities of our midstream and utility businesses. Now nearly 3 months in, my view of the strength and opportunities of AltaGas assets remains unchanged.
These assets provide a strong foundation to deliver growth at attractive returns and to deliver operational and financial performance that our shareholders expect. I continue to believe that our strategy is the right one and we will deliver strong organic growth. Later in this call, I will provide you some insight on how we will get there. I believe we will look back on 2018 as a transformational year, which saw AltaGas reposition itself through the WGL acquisition as a low risk, high growth utility and midstream company. In order to leverage the full growth potential of these assets, we must continue to strengthen our balance sheet and ultimately reset our financial position.
With our RIPET project coming online in early spring as the 1st propane export terminal in Western Canada, we are poised to execute on our strategy to leverage this unique capability to attract new producer commitments that will increase utilization of our existing assets and provide new organic investment opportunities. At the same time, I see ample opportunity in our U. S. Utilities to renew and extend our distribution pipelines and drive higher returns through operational efficiencies, superior customer service, accelerated rate recovery mechanisms and periodic rate cases. Given the magnitude of the transformation that took place in 2018, some significant accomplishments we had last year may have been overlooked.
In our midstream businesses, we continue to leverage and extend our footprint in Northeast British Columbia, attracting more volumes to our value chain. We've achieved a 25% increase in our gas processing volumes through our core Montney assets, primarily driven by our Townsend facility. The agreements we announced with Black Swan and Kelt will enhance our NGL capture area, triggering an expansion of our North Pine facility and provide propane supply through tolling arrangements to RIPET. At our utilities, we are increasing the level of capital that is recovered through the accelerated pipeline replacement programs in 2019 by over 40% compared to 2018. We also implemented new base rates at WGL in our Maryland and Virginia jurisdictions.
At SEMCO, we began the construction of our Marquette Connector pipeline, which is scheduled for completion by year end 2019. Timely recovery of this investment is expected to begin in the Q1 2020. On another note and something we are quite proud of, Washington Gas was recognized for the 2nd consecutive year as the most trusted brand among residential utility customers in a Cogent report study released by Market Strategies International. This type of performance is critical to our operational excellence strategy and part of our platform for growth. The growth potential of our asset base is significant.
In order to realize this growth, we need to remain focused on delivering on the balanced funding plan we outlined in our December call. The concrete measures we've identified will shore up our financial position so that we can capture the full value of our opportunity set going forward. This remains one of my top priorities. With this work well underway, we must also explore how we best optimize our assets and unlock their full potential. To do this, we must be relentless in driving operational excellence and delivering accelerated and superior returns in every corner of our business.
A critical component of this plan is driving a performance culture at AltaGas. In 2019, we are rolling out a new value driver model that sets clear expectations and drives enhanced performance. With the right values and leadership, I am confident that we will deliver on our plan to enhance operational excellence, grow the business profitably and achieve the appropriate returns. An important component in our balanced funding plan is our asset sales. Sales align our business to assets that complement our platform in midstream and utilities, further delever the balance sheet and provide an efficient source of capital to fund growth.
In 2018, we successfully monetized $3,800,000,000 in non core assets, which included the sale of our remaining 55 percent interest in Northwest Hydro that we closed in January. In 2019, we plan to sell an additional $1,500,000,000 to $2,000,000,000 in non core assets. First steps in the execution of these sales are well underway. We are pursuing a number of processes simultaneously and we are confident with our ability to get this done throughout 2019. The value of the portfolio of assets we have identified is significantly greater than our target and we have had strong interest and engagement from high quality counterparties to date.
Therefore, we have flexibility to choose the assets that maximize valuations. We expect that the total asset sale program will be accretive to FFO and other metrics. With that, I am now going to turn things over to Tim, who will provide a more detailed review of our financial results and 2019 outlook. Once Tim has concluded his remarks, we'll take a closer look at our core business segments and provide a little more color on the opportunities we have ahead of us.
Good morning, everyone. I will provide an overview of 2018 financial results before turning it back to Randy for the discussion on operations and strategy. As we move into 2019, we've taken significant steps to strengthen the financial position of AltaGas and have a clear line of sight on high quality growth opportunities, which reflect the underlying strength of our business. Randy will speak further to that shortly. Looking back at 2018, there have been many moving parts in our business given the closing of the WGL transaction in July and a significant asset sales completed.
I'll look to provide some clarity as I take you through the financial results in 2018. Let's start with the Q4 results. As you will now see, our Utilities and Midstream businesses make up the large majority of our earnings and will be the drivers of our growth going forward. Overall normalized EBITDA for the quarter came in at $394,000,000 up $181,000,000 from $213,000,000 or 85%. Utilities represented 58% of total Q4 EBITDA with midstream 23% and Power at 19%.
As you would expect, the WGL acquisition accounted for much of this increase. WGL contributed $223,000,000 in Canadian dollars that is comprised of $159,000,000 from utilities, dollars 31,000,000 from midstream and $33,000,000 from power. During the Q4, we clearly benefited from WGL seasonality as compared to the Q3, which I'll come back to later in my remarks. Setting aside the positive contributions of WGL, the results within our legacy Utility Midstream segment before asset sales were generally stable for the quarter. So beginning with Utilities, Q4 results were in line with our expectations.
Higher firm revenue due to higher rates, strong customer growth and higher usage contributed positively and a favorable FX rate versus Q4 2017 contributed $3,000,000 This was partially offset by slightly warmer weather overall in the quarter, in particular at NSTAR and at WGL, which had extremely cold weather in December of 2017. U. S. Tax reform had a $21,000,000 negative impact, that's Canadian dollars. However, this EBITDA impact does not flow through to our net income where there was in fact a positive $8,000,000 impact overall from the U.
S. Tax reform. WGL utilities also had higher O and M and leak remediation costs. In the Midstream segment, contributions from the new Aitken Creek facility in Northeast BC along with higher Townsend volumes and Hermaton fee for service revenues were partially offset by slightly lower realized frac margins of $16 a barrel versus $18 a barrel in the quarter, lower NGL marketing margins and a reduced ownership interest in the Younger facility. The WGL contribution to Midstream included the Q1 from the Central Penn Pipeline investment and higher transportation margins, while both storage spreads as well as retail gas marketing margins at WGL were lower than the previous year.
In the Power segment, the addition of the WGL distributed generation business, including new projects placed into service in Q4, along with the $2,000,000 positive impact from the favorable FX rate, were partially offset by the $9,000,000 impact of lower water flows at Northwest Hydro, dollars 2,000,000 from the RIP and PPA expiry in May 2018 and lower retail power marketing margins in the Northeast U. S. Asset sales reduced Q4 2018 EBITDA by CAD 36,000,000 This included the sale of the San Joaquin power facilities in California with an effective date of early September and the AltaGas Canada IPO, which closed on October 25. Overall in the quarter, the higher Canadian U. S.
Exchange rate, which is 1.32% versus 1.27%, increased EBITDA by $5,000,000 versus Q4 2017. Normalized funds from operations for the Q4 of 2018 were $255,000,000 compared to $175,000,000 in Q4 2017, reflecting the same drivers as EBITDA, but also partially offset by lower income tax recoveries and higher interest expense. Normalized net income was $120,000,000 for Q4 2018 compared to $63,000,000 for Q4 2017. Note that while 2018 benefited from less than half a year from WGL's contribution while having the full transaction costs including financing, 2019 will be more balanced with a full year of combined operations. During the Q4, AltaGas received $3,000,000 in preferred share dividends from Petrogas similar to the previous year and also $2,000,000 in common share dividends versus $1,000,000 in 20 17.
Now turning to total overall performance in 2018. Normalized EBITDA was just over $1,000,000,000 This is up $212,000,000 or 27 percent year over year from $797,000,000 in 2017, which is largely in line with our expectations. Clearly, the single biggest reason for the higher EBITDA in 2018 was the WGL acquisition that closed in the 3rd quarter as that contributed $255,000,000 Other key business factors in 2018 had a slightly positive combined impact on EBITDA. These included favorable contributions from new assets at Townsend 2A, Aitken Creek and North Pine about $18,000,000 gas commodity margins about $17,000,000 utility rates and growth about $10,000,000 favorable weather at utilities about 4 dollars and corporate income about $4,000,000 partially offset by lower Northwest Hydro Generation, that impact was $19,000,000 lower storage NGL marketing dollars 7,000,000 impact the RIP and PPA expiry, dollars 6,000,000 impact lower petrogas contribution for the year, dollars 5,000,000 and lower contribution from Blythe and Biomass, dollars 6,000,000 The slightly stronger average FX rate for 2018 versus 2017 lowered EBITDA by $2,000,000 for the year. U.
S. Tax reform impact on utilities, including WGL, was CAD35 million for full year, but that was only about 3% of our total EBITDA in the year. And asset sales lowered our 2018 overall performance by CAD36 1,000,000 similar to what it was in just Q4. Putting these all together, the 27% increase in EBITDA for 2018 relative to last year falls within the 25% to 30% guidance range for year over year growth in 2018 that we previously provided. Normalized funds from operations for the full year or FFO, as we call it, were $657,000,000 equal to $2.95 per share.
This is up $42,000,000 or 7% over last year, which was just below our 10% expected growth year over year. The slight disconnect between achieving our EBITDA versus our FFO guidance is primarily due to a timing issue associated with the receipt of the cash distributions from our equity investments in AltaGas Canada and the Central Penn Pipeline. For both investments, we did not physically receive or actually receive the cash distributions until 1st couple days of 2019. So although the proportion of net income for those two investments does appear in our earnings statements, cash does not show up in our cash flow statements for Q4 as represented by the FFO measure. Weaker results from Northwest Hydro due to lower water inflows also had a proportionally larger impact on the 2018 FFO.
Just a quick comment on total capital in 2018, it was about $1,200,000,000 which was within expectations. Turning to Slide 11, which summarizes our Q4 and full year segmented EBITDA results. Listed on the right hand side of this slide are the key drivers for EBITDA year over year within each segment. There's a lot of numbers on this chart, and I've reviewed most of the drivers already on the previous slide, so I'm not going to go through this in any great detail. However, I do want to highlight that the results are up year over year for all of our segments even after the impact of asset sales.
The improvement in the corporate segment was due to higher allocations to business segments as well as higher interest income earned and lower operating costs. You can start to see here the impact of the WGL acquisition on our business mix year over year. As we've mentioned, phases 12 of asset sales totaling $3,800,000,000 were announced in 2018 and all completed by early this current year. The primary impact of 2018 results was from the sale of the California Power assets and the AltaGas Canada IPO. Although we sold 35 percent of Northwest Hydro for $922,000,000 in 2018, we continue to consolidate that investment in the 2018 results.
But of course, going forward in 2019, it will no longer be included. Therefore, in 2019, the Power segment's contribution will be lower than what it shows here on the slide for 2018. Now shifting gears to our capital program and funding plan for 2019. As Randy noted, in December of last year, we announced our balanced funding plan for 2019. The plan was specifically designed to regain our financial strength, enhance our financial flexibility and optimize our cost of capital.
You'll recall that the plan consists of $1,300,000,000 of capital investment focused primarily on high quality organic growth projects in our Midstream and U. S. Utilities businesses. The plan outlined a series of steps that we are taking to delever and strengthen our balance sheet. This will allow us to efficiently fund our capital growth in the Midstream and U.
S. Utilities while maintaining our investment grade credit rating. Moving to Slide 13. We have a rich and diverse platform of organic growth opportunities available to us, so disciplined capital allocation will be vital to creating value for our shareholders as we strengthen our balance sheet. To that end, we've identified $1,300,000,000 of only the highest quality projects that we plan to allocate capital to in 2019.
While our initial opportunity set was much broader, the projects we have identified align with our focused strategy, provide us with ongoing organic growth potential, have favorable risk profiles and strong risk adjusted returns and provide immediate payback. Almost 90% of our 2019 project capital will be spent within the utility and midstream businesses where we see the greatest opportunities. This includes CAD112 1,000,000 allocated to the completion of the Mountain Valley Pipeline in 2019. And I'll remind you that we have certain protections in place to limit the capital that AltaGas is exposed to on that particular project. Moving to the next slide and our funding plan.
We've designed the 2019 plan to delever and stabilize the balance sheet through a combination of asset sales, disciplined capital allocation and a repositioning of our dividend. We have a total capital plan in 2019 of approximately $4,900,000,000 This includes the $1,300,000,000 in capital projects I just mentioned, along with over $800,000,000 in debt maturities across the enterprise, the total funding requirements before delevering of $2,100,000,000 balance of the uses that you see on the slide in the capital plan are for debt repayments. As you can see from the breakdown of the sources of capital in the right hand bar, after the dividend reset, we expect to retain approximately $680,000,000 in cash flow, net of preferred dividends and common dividends. This is also inclusive of the DRIP, although the DRIP amounts are expected to be immaterial in 2019. We expect WGL Utility to access the debt markets for the Canadian equivalent of approximately $300,000,000 to finance capital and debt maturities at that utility level.
The sale of the remaining 55 percent in Northwest Hydro raised $1,370,000,000 and closed already. And finally, the remaining Phase III asset sales are expected to generate the additional funding of $1,500,000,000 to $2,000,000,000 with an expectation at the high end of this range. That completes the sources of the funding. So when you add it all up, after funding our $1,300,000,000 capital program, we expect to pay down over $2,000,000,000 in debt this year. And this is before any hybrids or preferred share issuances or any new term debt MTN issuances by AltaGas, which we will consider on an opportunistic basis consistent with how we thought about those in the past.
So when you combine over $2,000,000,000 of debt repayments, as I just highlighted, along with the $560,000,000 of net debt maturities that are repaid, this would bring total capital bring total debt repayments for 2019 to approximately $3,000,000,000 potentially more. In summary, we are extremely confident in our ability to execute on the funding strategy, and we've already made substantial progress, which has resulted in a material decrease in debt since the 2018 year end. I should also note that the remaining $1,200,000,000 on the bridge facility that was used to fund a portion of the WGL transaction has been refinanced with a new revolving credit facility. This provides enhanced financial flexibility overall and lowers costs. This brings me to the investment grade credit rating, which is fundamental to our strategy.
It provides us with greater financial flexibility and stronger cost of capital, supporting growth going forward. We designed our 2019 capital and funding plan with a very clear goal of maintaining an investment grade credit rating. On December 19, 2018, S and P assessed AltaGas, a long term issuer credit rating of BBB- with a negative outlook, pending the execution of our remaining $1,500,000,000 to $2,000,000,000 of asset sales. This was consistent with our expectations. We were very engaged with S and P leading up to our December 13 guidance conference call as they were concurrently completing their annual review.
I should also note that AltaGas' long term issuer credit ratings at Fitch and DBRS are BBB- mid sorry, BBB- let me start one more time. Fitch, BBB Mid and DBRS BBB Low respectively. AltaGas' business risk profile has been strengthened over the past year with regulated utilities becoming the largest business, then followed by contract at midstream the business there and that being the 2nd largest and finally Power as the smallest other three business lines. Our credit profile is expected to improve significantly through 2023 as we continue to execute our growth capital program and new projects and our service. We expect our FFO to debt ratio to move comfortably into the 13% to 15% range, and we see debt to EBITDA in the 5 to 5.5 times range, starting at the higher end of 2019 and improving over that planning period.
The debt to capital ratio was forecast to be in the low 50% range starting this year, which is well below our 65% to 70% covenant levels. Given our significant successes over the course of 2018 and monetizing non core assets, including completing the sale of Northwest Hydro, we are confident that we can execute on our remaining asset sales in a timely fashion, which will help support our credit profile. The next couple of slides reaffirm the consolidated outlook for 2019 that we rolled out on December 13. I'm not going to run through these numbers again, but I would like to emphasize that we remain comfortable in our consolidated normalized EBITDA guidance range of $1,200,000,000 to 1,300,000,000 dollars This factors in the remaining Phase III asset sales in 2019, along with the recently completed sale of Northwest Hydro. For 2019 guidance, which includes the first full year with WGL, we expect our utilities business to be the largest at just over 50% of total EBITDA, followed by midstream.
On a combined basis, Utilities and Midstream will represent almost 90% of total corporate EBITDA. Our 2019 guidance assumes an average FX rate of 1 point $3.2 As a reminder, for every $0.05 change in that FX exchange rate, there is an approximate CAD36 million impact on our 2019 EBITDA, which is about which is less than 3% of our total. Other key sensitivities to keep in mind for 2019 EBITDA include for every $1 per barrel change in frac spreads, the impact is about $1,000,000 for every 10% change in gas processing and extraction inlet volumes, That's about $16,000,000 impact on EBITDA. And a new one for that we disclosed here pertains specifically to our new RIPET project for every US0.02 dollars change per gallon in the Asian North American propane spreads, EBITDA is impacted by about CAD 8,000,000 Slide 19 shows the breakdown of our EBITDA guidance, moving it to funds from operation and then adjusted funds from operations and finally, the U AFFO, which is just AFFO less our utility depreciation. Again, I'm not going to go through the numbers, but we're comfortable in our previously disclosed guidance for FFO as well as AFFO and UAFFO.
The last slide that I'll review just provides a summary of the seasonality that we expect to experience this year within our Utility and Midstream businesses. As you'd expect, our Utility business traditionally experiences some significant seasonality with the Q1 accounting for close to half of the annual EBITDA contribution for that segment. Seasonality within the Utilities business is driven by a couple of factors. On the revenue side of the equation, colder weather in the winter heating months drives higher net revenue or distribution charges. This revenue seasonality is further compounded by O and M expenses that vary somewhat throughout the year.
Maintenance and repair or leak remediation work tends to be higher during the summer months when weather is favorable. Seasonality within the midstream business is fairly stable. However, the segment will benefit throughout 2019 from contributions from new facilities that are placed into service during the year. This includes RIPET, the Townsend 2B expansion, North Pine Train 2, Aitken Creek, Gilead Capital and the Mountain Valley Pipeline. That concludes my remarks.
So I'll now turn the call back over to Randy.
Thank you, Tim. As Tim outlined, our Midstream and Utility segments are being allocated the lion's share of our 2019 capital budget, a trend that we will continue in the years ahead. As such, these businesses will be the driving force behind AltaGas' future earnings growth. To ensure that we capitalize on this investment, we must stay laser focused on executing our strategy. That is to leverage and enhance our expertise and asset footprint to maximize the value of our Midstream and Utility segments.
In our Canadian Midstream business, we have developed a unique asset footprint. The integrated platform and unique value proposition we have established firmly anchored by RIPET is attractive to our customers and provides a competitive advantage that is difficult for others to replicate. RIPET as the 1st propane export terminal off Canada's West Coast is uniquely positioned to access global markets from the West. Overall facility construction is nearing completion and commissioning activities are underway. Quality assurance testing has been completed on the propane storage tank and we are on track to introduce propane feedstock by the end of the Q1.
We have successfully hit all critical milestones and members of the operation team are now on-site to initiate a smooth transition with the first cargo expected in early Q2. In fact, just last week, the first ship was christened in Japan, aptly named Maple Gas. Once RIPET is operational, Maple Gas will become the 1st BLGC to transport Canadian liquid propane gas to Japan, delivering 20,000,000 to 30 cargoes or 1,200,000 tons of LPG per year. We have successfully secured the initial 40,000 barrels per day of supply for the terminal and agreements around offtake are progressing as planned. Our team has spent years laying the foundation, developing the individual midstream assets that link together to create our Northeast BC strategy and RIPET brings it all together.
Through these complementary assets, we are positioned to offer our customers a complete solution for propane. As we move our producers product to each step in our value chain, gas gathering and processing, liquids handling, fractionation to export, we see significantly better economics from an integrated value proposition when compared to being 1 dimensional, driving towards CapEx to EBITDA multiples of approximately 6x or better. Beyond that, we see significant growth potential through organic expansions that leverage and enhance our Montney footprint as well as our ability to expand RIPET for minimal capital investment. This will significantly enhance total cash flows and returns from these assets. To that end, I'm pleased to announce that AltaGas has recently entered into definitive agreements with Tourmaline Oil Corporation for the provision of certain liquids handling arrangements relating to Tourmaline's liquids rich Montney development at Gundy.
The liquids handling arrangements will be supported by AltaGas existing liquids infrastructure in Northeast BC as well as certain new infrastructure to be jointly constructed and owned by AltaGas. The marketing agreements associated with liquids infrastructure will see AltaGas secure incremental propane supply for RIPET under a tolling arrangement with Tourmaline. The transaction showcases our integrated value proposition and further diversifies the strengths the Northeast B. C. Strategy and customer base by partnering with Canada's 2nd largest natural gas producer and one of the largest producers in the Montney.
We can clearly see how we are going to achieve growth in this segment. New assets in service drive EBITDA growth by 30% to 40% in 2019. And this is only a partial year for RIPET in the 2nd Aiken Creek processing plant. We see even more growth in the coming years as assets like the 2nd train at North Pine and the expansion of Townsend comes into service. I am very excited about the growth of this business.
Now turning to our utilities. As I said before, our utility segment is an integral part of our business as it balances our portfolio and provides regulated low risk growing cash flows. With the acquisition of the Washington Gas assets, our U. S. Utility businesses have a rate base of US3.7 billion dollars and operate in 5 constructive regulatory jurisdictions: Virginia, Maryland, Michigan, Alaska and the District of Columbia.
We have accelerated programs in place, we accelerated replacement programs in place in 4 of these jurisdictions with capital investments of approximately US1.2 billion dollars spread over the next 5 years that will earn immediate returns through these surcharge mechanisms. We also have healthy customer growth and system reliability projects that provide investment opportunities to serve new customers and continue our steady rate base growth. Take for example our Marquette Connector pipeline, which is currently under construction in Michigan. With this project, we are putting approximately US142 million dollars of capital to work to improve the long term reliability of our pipeline system and connect new customers. This investment is aligned with the timing of our 2019 CIMCO rate case such that it will generate timely recovery at this important capital investment.
Overall, we have a solid utility business with some great fundamentals. Having said that, we have some work to do. I often reference operational excellence as an integral part of our strategy. As it relates to our utility business, I define operational excellence as operating a safe and reliable system, creating operational efficiencies, providing excellent customer service and earning our allowed rate of return. It is also critical that we maximize the utilization of accelerated rate recovery mechanisms.
This will allow us to maintain a record of success in safe and reliable operations and to obtain our return on invested capital in a timely manner. By increasing the percentage of capital that is deployed into accelerated replacement programs, we will benefit not only from the rate base growth, but also achieve more timely returns on investment and minimize the need for future rate cases. One of the benefits associated with this capital recovery mechanism is it incents the company to replace additional aging infrastructure above the traditional benchmark of depreciation levels, which improves the overall integrity of the system. It also allows the company to earn a more timely return on this higher level of investment. Importantly, the replacement of aging pipelines will eliminate leaks and drive our maintenance costs down over the long run, benefiting all stakeholders.
As such, our goal is to recover all pipeline replacement capital investment in excess of depreciation through this mechanism. We are making progress in managing our maintenance capital in this way and we'll continue to focus on reaching my stated goal. In addition, we need to improve our return on capital already in the ground by taking a closer look at our operating expenses and ensuring we optimize every dollar spent. Some of this work takes time. We can't change it overnight, but make no mistake, change we will.
In 2019, the focus of our utilities is to deliver on the plan and to position us to earn our allowed return. In closing, 2018 was a transformational year. The WGL acquisition repositions AltaGas as a low risk, high growth utility and midstream company. To unlock the full growth potential of these assets, we are committed to continuing to strengthen our balance sheet. The unique value proposition we have established within our integrated midstream platform firmly anchored by RIPET is attractive to our customers and provides a competitive advantage.
The marketplace continues to validate our strategic approach as evidenced by recent transactions with Kelp, Black Swan and Tourmaline. Our U. S. Utilities provide us a tremendous growth opportunity. Through accelerated pipeline replacement, we can drive rate based growth, achieve more timely returns and minimize future rate cases.
Lastly, the execution of $1,300,000,000 of high quality capital projects will leverage and enhance the strength of our asset footprint and provide strong EBITDA growth for 2019 beyond. I am confident that 2019 will be a successful and defining year. The steps we are taking position at AltaGas for significant success for years to come. I am excited about the possibilities that lie ahead. Thank you.
We'd now like to turn the call over to the operator to facilitate the question and answer session.
Thank you. Ladies and gentlemen, we will now conduct the analyst question and answer Your first question is from Robert Kwan with RBC Capital Markets. Please go ahead.
Good morning. Starting on asset sales here, Randy, you talked about having multiple processes and the ability to exceed the target based on the assets that you're considering. So I guess ultimately the ability to cherry pick the best valuations and create some tension in your processes. Just wondering though, what's the willingness to go above the target range? And what would be a key driver from your perspective?
Would it be further strengthening of the balance sheet and the funding plan with an eye of turning off the DRIP or would it be more about cleaning up the asset base to focus on the utilities in midstream?
Yes. Thank you, Robert, for the question. I think that at the end of the day, it's a combination of the 2. Obviously, we have some significant growth opportunities at AltaGas and we're redeploying these funds into higher returning investments. But at the same time, we are focused on deleveraging our balance sheet.
And so as we look toward exceeding that target, our process here is to under promise and over deliver and so we're focused on that. Obviously, a key driver will be ultimately the valuations, but I feel very confident in where we are headed.
Okay. That's great. And then I guess just turning to the business, you mentioned aspects such as improving performance of the utilities, which you mentioned at the outset of the call, overhead and OpEx reductions across your business and then commercial activities for Canadian Midstream, you see that with the Tourmaline deal. Just wondering as you kind of put all of that together and the types of activities that really carry minimal capital, what do you see as the EBITDA upside? And over what timeframe do you think you can realize that?
Well, we've currently we've given our guidance for 2019. You can see the growth that is in place relative to 2018, the 25% to 30% growth. And as I mentioned in my prepared remarks, that's with only a partial year of RIPET as well as Townsend. And so I see consistent growth from both of our businesses, both our core utilities and midstream. But at this point, as we work through the assets, I'm not prepared to sort of give the guidance as to post 2019.
But you can clearly see that the opportunities ahead of us are very strong in terms of our growth potential. And so been in the job for a couple of months and we're not at this point to give that specific guidance into 2020 we're not prepared to do. But obviously I'm bullish on the opportunity to continue strong growth at AltaGas.
Understood. And if I can just finish with a question on RIPET. There's a statement you want to contract a majority of the capacity with the timing statement being over the next several years. I'm just wondering how does that kind of objective play into your thinking around a potential expansion?
I think obviously, we see RIPET is providing the highest value propane market in Canada. And we believe that that will use that to expand all of our entire midstream business and really continue to leverage across all of our value chain. So I think what you'll see is we continue to prove out that value proposition and to capture the value associated with the Far East Index. I think that we've got strong demand from the producer community and from the offtake. So I think that as we move through the year and we prove out the value proposition, I think we're going to be well positioned in the near term to look at expanding that facility.
But we're going to get it online here early in Q2 and we will look toward expanding that later in the year or into next year.
Okay. So you don't need to be at that majority position before you go at the expansion?
Well, I think that we've got in terms of the majority we've got the 40,000 barrels a day firm and we've got the demand offtake. So we will continue to work with the producer community as well as the Asian market. And yes, I think what you'll see us is to continue to transition to more of a tolling structure as we go through the end of the year. But we'll be looking we'll be trying to think forward, but we don't need to have it fully contracted, but we want to be confident in the decision that we have the market going forward. So we don't need it fully contracted, but my philosophy is to ensure that we get our cost of capital in terms of any investments that we make and be able to be positioned to do well in excess of that.
So it doesn't have to be fully committed because the incremental expansion cost is quite minimal.
That's great. Thank you, Randy.
Thank you, Robert.
Your next question is from Patrick Kenny with National Bank Financial. Your line is open.
Yes, good morning guys. Just on the target leverage metrics here, the 5.5x to 5x debt to EBITDA through 2023. This is up from the original pro form a target ratio of 4.5x. And I believe that also didn't contemplate selling the hydro assets at that time. So just wondering if you could walk us through why the 5.5x to 5x is the optimal capital structure now, especially when some of your larger cap midstream utility peers are driving more towards the 4.5x to 5x range?
Well, I'll start off. I'll let Tim comment. Clearly, that's our target as we go through this year. But as we look at the asset sales and the valuations that we're receiving, ultimately over time, we'll continue to improve that metric Obviously, with the resetting of the dividend, the cash flows that we're generating and the asset sales, we should be in a stronger position in the years ahead. But go ahead, Tim.
I would just say, Patrick, on the December 13 guidance call, we were indicating 5 to 5.5. So we were not using 4.5 that might have been an earlier number, but certainly in the timeframe where we've cast our views out for the 2019 fiscal year, we've been indicating 5 times to 5.5 times. So I think it's actually fairly logical when you look at it. There's some pure utilities in the marketplace that could be 6 or even a little bit north of 6 times. You've got some pure midstream companies that are they might be 3 to 4 times.
We've got a healthy dose of utilities in our overall business mix as we described. So it's probably the right combination that results in that type of multiple target range.
Okay. Thanks for that. And then Randy, as you get to know your customers a bit better here and you think about counterparty risk, just given some of the commodity price headwinds facing E and Ps, not to mention their access or lack of access to the equity markets. Are there any take or pay agreements across your portfolio that might be giving you heartburn right now? And should we be expecting any contract renegotiations through 2019 to not only help your customer, but also mitigate that counterparty risk?
Yes. Well, obviously, we're always monitoring our counterparty risk in the credit profile of our customers and we work closely with those customers. I can't highlight anything that's on the horizon. We're beginning the growth strategy primarily in the BC market. So I think that we feel good about our counter price.
We'll continue to monitor that and work with our customers. But look, I feel very confident with our growth targets that we set out for 2019. And I think we'll be continue to be disciplined and work with our customers to ensure that our producers are successful because with them they need to be successful for us to be successful.
Great. Last question, if I could. The $1,500,000,000 to $2,000,000,000 of asset sales, you mentioned a number of processes underway. Just wondering if that $1,500,000,000 to $2,000,000,000 also contemplates the potential sale of your 37% interest in ACI once the lockup expires here in November?
Sure. As I said on the December call, we're looking at all of our non core assets and we have simultaneous processes underway. That's an excellent asset, great company. But as I said in the previous comments, that we've made a decision with the IPO and that asset is a non core asset as I would define that. And so that's certainly something that we'll evaluate going forward.
That's great. Thank you very much. You're welcome.
Your next question is from Robert Catellier with CIBC Capital Markets. Your line is open.
Hi, thank you. You've answered the majority of my questions, so just a couple of cleanups here. When looking at RIPET and the potential expansion, notwithstanding, you want to have reasonably confident you have access to the market. It doesn't sound like it's a lot of money to expand. What are the timelines like in terms of sanctioning the expansion?
If you so really what I'm after is the construction and permitting period?
No. Hey, Robert, fair question. This is Randy. I'm going to hand it to our President of Midstream, Randy Toon to address that.
Hi, Robert. Our focus is to get the facility online and then understand the operational capability of the facility. The design, it does warrant for fairly low capital expansion, but we really want to get operating, really understand its capabilities and line it up for say the next contract year is April of 2020 would be really where we're looking at any substantial increase. And so we'd have to go through the regulatory hurdles to meet that target.
So it's possible to get the regs done by and have it up and running by 2020?
Potentially, yes.
Okay. And then just a little bit more clarification on the asset sales and should you exceed the $1,500,000,000 to $2,000,000,000 target and it's not clear to me that what you would do if you got to that stage. You mentioned, Randy, that you could pick and choose which assets to sell, depending on valuations. But if in aggregate they exceed your expectations, what I'm still not clear on the primary motivation, would you be more inclined to make the additional sales to drive the leverage down so that you can address those additional growth opportunities in the future? Or would you just simply look at the valuation or some other metric and just decide $2,000,000,000 is enough?
Yes. I'll tell you, Rob, it's a dynamic process, but we would look at the ultimate valuations that we're receiving. But philosophically, I'll just share with you my viewpoint on this is that we really are selling assets, lower returning assets and redeploying those funds into higher returning investments. Obviously, as I said, we're also going to delever and provide financial flexibility to fund these higher growth opportunities we see in both our utility and our midstream business. So as we look toward exceeding that target, it would be a combination of both the continued investment in organic growth and maybe overall accelerating the delevering of the balance sheet.
So we'll look at what is the best opportunity with that currency going forward. What's the best value proposition for our shareholders?
Right. That makes sense. And then when you look at the long term per share growth rates, you kind of gave a I think it's a mid to high single digit rate base growth rate on the utilities. What do you think is possible in the longer term in the midstream in terms of growth potential?
Are you asking specifically for the midstream?
Yes.
Yes. Well, as I said, we've got significant growth this year. We've only got 3 quarters every year in the Townsend investment. And so I don't want to give a metric and put that out there for 2020 or beyond, but we see very significant potential for growth going forward. And so I mean we could run a variety of scenarios on the expansion of RIPET for limited cash flow, limited investment in those multiples could be quite significant.
But again, I think we're focused on executing this year and then those assets growing cash flows, earnings growth and returns into 2020. And you should look for us throughout the year. We'll be more prepared to give you a specific guidance number in the years out. But right now, we're not able to do that.
Yes. I appreciate your answer. It wasn't really try to nearly down for 2020, but like sort of give maybe boundaries through 2023 what the potential is like, but I understand your answer. Thank you.
Okay. You're welcome. Thank you.
Your next question is from Elias Foscolos with Industrial Alliance Securities. Your line is open. Good morning.
Good morning.
I have two questions I think I'd focus on. First of all is the Tourmaline announcement. Instead of focusing on EBITDA, I think that was asked earlier, question I have is, is the contribution from that deal included in your EBITDA estimates that we received today? And also maybe just following up on that, can you is it possible to give us a feel on capital if that is not included in the estimates also?
Yes. First answer, yes, it's included in the estimates. And with respect to capital, it is included in the capital forecast as well.
Okay. Thank you very much for that color. On the $1,500,000,000 to $2,000,000,000 again focusing a bit on the asset disposition. I'm trying to reconcile a number of things, but one question is kind of on the theme of over deliver and under promise. Timing on this, is there any possibility we could see something before the announcement of the Q1 results?
You can appreciate that I don't want to give specific timing. I just I refer back to my remarks in that there's numerous simultaneous processes going on and that we're confident in those processes. I don't want to commit to that we'll have this or announcements for our Q1 call. We may, but we're again, I'm not going to accelerate the process beyond where it is today. And so I'm confident in where we're headed, but I'm not going to be able to commit to that.
Yes. No, that's fine. I appreciate that. I'm just trying to put some color in between the EBITDA reconciliation where you do have some asset sales and there's obviously an assumption there on what sold their contribution and timing, but it's okay to leave it at that. And just one more clarification on the asset sales again, just sort of a metric one.
You mentioned it would be accretive. I'm assuming going to be accretive on a debt to FFO basis. That's maybe a clarification point of view. And then would that be a more near term 2019 or a more longer term type if you feel like providing something along that line?
First of all, yes, we do it would be accretive to the metric that you referenced. And in terms of I don't think you have any comments on the longer term aspect of that, but
Yes. I mean, I think we look at things both in terms of the current year because obviously we're past January 1. So anything we're doing here in terms of the $1,500,000,000 to $2,000,000,000 will be interspersed throughout the year. And keep in mind too, there'll be announcements. So as we progress things over the course of the year, there'll be an announcement here or there of transactions and then there'll be closings thereafter.
And so we'll usually be collecting the cash. We'll be holding those assets until closing. We'll usually be benefiting such from that. So asset sales will take place this year. We'll have sort of partial year impacts, but we most certainly look at it on a full year impact as well.
So what does it look like if we sell an asset this year and no longer have it next year? That goes into our thinking and our calculations for whether it makes sense both from a debt perspective as well as the impact on our EBITDA and FFO profile.
Great. That color is appreciated. And one final question on capital spending. We've got about $1,000,000,000 in CapEx this year. Again, I'm trying to reconcile one of the slides where we've got $1,300,000,000 in top quality projects.
A lot of that is allocated to the utility segment. And yet we're looking at high single digit type growth in that business. The question I've got is, the capital the accelerated pipeline replacement program over the next few years, is that going to be a little more front end loaded to the next few years or is it really ratable?
I think it's basically ratable over that. That's the guidance that we're giving is over annual, and that's going to be our primary recovery mechanism.
That's it for me. Thank you very much.
Welcome. This
concludes the Q and A portion of today's call. I will now turn
and for your interest in AltaGas. As a reminder, the Investor Relations team will be available after the call for any follow-up questions that you have. That concludes our call this morning. You may now disconnect your lines.
Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.