# Altagas Ltd (ALA.TO)



## 1sImage (Jan 2, 2013)

Altagas Ltd sold off 10.1 million shares to buy Blythe Energy.

Stock down over $1.14 today, and sits at $34.90





"CALGARY - AltaGas Ltd. (TSX:ALA) has agreed to pay US$515 million to buy Blythe Energy LLC, which owns a 507-megawatt power plant in Southern California.

In addition to the natural gas-fired generator, the purchase from affiliates of LS Power Equity Advisory LLC includes major spare parts and a 108-kilometre transmission line in the state."


http://www.edmontonjournal.com/busi...rgy+partially+funded+stock/8147530/story.html


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## doctrine (Sep 30, 2011)

It dropped to the issue price of the 10 million new shares, which was also $34.90. Equity issues are commonly priced 2-3% below close in order to give the purchasers a bit of a deal. You'll have to be a little patient with this as they are not predicting increased revenues/earnings per share from this purchase until 2014. It's a big purchase - that issue is almost 10% of their market cap.


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## Synergy (Mar 18, 2013)

Any thoughts on the future of Altagas? Seems a little on the expensive side (P/E) but the future growth looks promosing. I like the fact that it's not really tied to Nat Gas prices but if interest rates shoot up, it could hurt the stock price - similar to other utilities.


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## Nemo2 (Mar 1, 2012)

Down about 2.59% right now today ($1.37).....because they released a new issue @ $51.........boy, that's annoying.


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## Synergy (Mar 18, 2013)

I've got them on my watch list but I'm going to stay on the sidelines until I see how things play out with interest rates. I'm leaning towards TOU for my Nat gas exposure, but they're still a little expensive and the cool summer hasn't helped all that much for nat-gas pricing.


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## Nemo2 (Mar 1, 2012)

At an average cost of $18.49 I guess we're still doing OK.......irks me that they issue more units 'substantially' (relatively) below the previous close though.


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## HaroldCrump (Jun 10, 2009)

Nemo2 said:


> irks me that they issue more units 'substantially' (relatively) below the previous close though.


This is a bought deal, right?
The secondary issue price would have been set a couple of weeks ago, and since then the price seems to have run up quite a bit (just looking at the price charts).
Say, the deal with the investment banks was done in July - at that time stock price was in the $47 - $49 range.
So, it is not too bad.

Also, secondary IPOs are always priced slightly below recent closing prices.

Overall, I don't think a 2.60% discount from recent closing price is bad at all.
If anything, that is a good deal for the company and indicates a demand for its yield.

However, what you should look at is the consistent and sustained issue of new debt and equity by the company.
It seems just in the last couple of years, outstanding shares have grown from about 80M to 123M, and debt has grown from $900M to over $3B.

I don't follow this company, so can't speak to the reasons, but something like this should be looked into.


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## gibor365 (Apr 1, 2011)

ALA with P/E = 40 looking too expensive, also yield is low for utility.,,,, EMA or CPX looks better


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## daddybigbucks (Jan 30, 2011)

Nemo2 said:


> Down about 2.59% right now today ($1.37).....because they released a new issue @ $51.........boy, that's annoying.


ALA is up 10.5% in the last month.
ALA is rising so fast that the new issue purchase price was probably set when the price was at $48.

ALA is not running high on earnings, its running high on future expectations. They will be selling nat gas to the orient in the near future.
My shares are on long term and these little blips mean nothing to me.

relax and enjoy the ride.


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## Holland (Apr 24, 2016)

Nice quarterly report and dividend increase today. Anyone own these guys?


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## kelaa (Apr 5, 2016)

I like it at this level. It rose and fell hard with the price of oil since summer 2014. Then the dividend was just above 3 %. Now at more than 6 % it is pretty good for income purposes. Unless there is a major collapse of the producers, its midstream business won't be very sensitive to the commodity prices (it's just 1/3 of the business in any case). It's LNG consortium project seems dead, but it's LPG export terminal probably will proceed. It's power generation business and gas utilities business seem to be doing fine.


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## AltaRed (Jun 8, 2009)

They have been deathly silent on taking equity in mostly gas producers as partial payment for midstream processing contracts. I have not read their latest quarterly financials in detail but the only thing they mention in the summary release is a $150 million investment in Petrogas preferred shares. What the hell are they doing investing in customer equity? It seems a sneaky way to say they have contracts in place for plant processing capacity but if they are using shareholder money to invest in someone like Petrogas just so presumably Petrogas can pay their processing bills, is that not taking money out of the left pocket to put in the right pocket?

I am a shareholder of ALA but I am beginning to be alarmed at these incestuous? relationships. Gotta dig further.


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## doctrine (Sep 30, 2011)

I've acquired a position in ALA this year. They actually own 1/3rd equity of Petrogas, which is part of their Gas segment. They also now own these preferred shares, and also provide a $100M line of credit to them. Petrogas is pretty heavy into NGL, especially propane, and it is a part of their strategy to export propane gas from the Ridley terminal in Prince Rupert. They have been publicly disclosing all equity that they have been getting from Petrogas as they increase their stake by a little bit ever year. The whole investment dates back to 2013, see here, when they increased their stake to 33% from 25%. The good news is that Petrogas is making money (by my estimates, $40-50M a year), so it's definitely not throwing good money after bad. 

ALA management have extremely high credibility which is one of the key reasons I am onboard. They also maintain investment grade ratings and are constantly under scrutiny, and having their status reiterated, by the investment agencies. If the Ridley terminal works out, it is going to make a lot of money and they'll need Petrogas to supply it (they already have a MOU for 50% of the capacity). Investment decision is expected this year, and no pipelines nor new land development is required (already on an existing export facility). Of course, they also have numerous other growth activities. Definitely a long term hold for me - few quality utilities with a 6%+ yield.


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## TomB19 (Sep 24, 2015)

I've owned this stock for quite a while. How worried should I be about the 135:1 P/E?


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## gardner (Feb 13, 2014)

That and the 840% dividend payout ratio.


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## doctrine (Sep 30, 2011)

I wouldn't be worried. They have 20% underlying growth this year with some big projects coming online and are covering the dividend out of funds from operations with about an 80% payout ratio, which will continue to drop as capital is deployed. Now trading at a year high with a 6 year steady history of dividend increases. Very well run company.


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## kelaa (Apr 5, 2016)

Gardner and TomB19:

Free cash flow is what makes the wheels go around for utilities, not "earnings". Depreciation is on your side to lower earnings and taxation.


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## gibor365 (Apr 1, 2011)

TD Direct Investing would like to inform you that the following New Issue has just been announced.

AltaGas Ltd. - Subscription Receipts

Short Description: Treasury Offering of Subscription Receipts via Bought Deal 
Price: $31.00 CDN
Settlement: On or about February 3, 2017.


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## doctrine (Sep 30, 2011)

This is a big acquisition. It's also very positive. An excellent price to get in at compared to most utilities, especially pipelines like TRP which are approaching nosebleed level. $31 offering is a 6.7% yield with 8-10% growth out five years in primarily regulated industries. Extremely attractive.


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## gibor365 (Apr 1, 2011)

doctrine said:


> This is a big acquisition. It's also very positive. An excellent price to get in at compared to most utilities, especially pipelines like TRP which are approaching nosebleed level. $31 offering is a 6.7% yield with 8-10% growth out five years in primarily regulated industries. Extremely attractive.


I have similar opinion... however, CIBC IE still didn't published this mew offer  . (I got alert email from TDW that was set when I was TD client). Curious what will be the minimum lot, as I plan to buy it into TFSA using new contribution. Was debating to buy or not new issue of SMU.UN for $6.20, but anyways it got sold out).


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## gardner (Feb 13, 2014)

gibor365 said:


> Treasury Offering of Subscription Receipts via Bought Deal
> Price: $31.00 CDN


What's the difference between subscription receipts and just a plain old share offering?
Does the SR approach allow them to back out if the deal doesn't go through for WGL or something?
Is there a downside to buying ALA in the market at $31.17 (this morning's price)?
Any word on if the offering is fully subscribed?


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## OptsyEagle (Nov 29, 2009)

A share offering is a share offering. This is a maybe share offering. With this subscription receipt method, if the deal does not go through they take their shares back and give the buyers back their money. The buyer would get to keep all the dividends they received up until they receive back their cash.

There is always a downside in everything you do.

Not sure if it is fully subscribed. The 10 million share overallotment is a way for the offering brokers to sell short the shares before the open and either stand back if the Altagas share price is strong or buy the shares like crazy, to support the price, if the market price is declining in the market, at the open. In other words, the current price tells you nothing about what the proper price should be because most likely the brokers are supporting it for the time being, to allow them to unload the bought deal.


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## gardner (Feb 13, 2014)

OptsyEagle said:


> Not sure if it is fully subscribed.


Well, TD is sold out.

It's a reasonable, but not spectacular price to get into ALA. I will have to consider whether to just buy on the market.


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## gibor365 (Apr 1, 2011)

gardner said:


> Well, TD is sold out.
> 
> It's a reasonable, but not spectacular price to get into ALA. I will have to consider whether to just buy on the market.


Sold out at CIBC IE in 1 hour . Thinking just to buy at market


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## OptsyEagle (Nov 29, 2009)

gibor365 said:


> Sold out at CIBC IE in 1 hour . Thinking just to buy at market


They are slightly better shares. The subscription shares will resist rising in 2017 because if this deal gets cancelled, the subscription shares only get back the original subscription price. The common shares not only get any appreciation of the shares, regardless of the WGL deal but may get a bump from such a cancelation.

I am not saying the deal will get cancelled but you will see the subscription shares will trade at a discount to the common shares since they carry that extra cancelation risk.


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## gibor365 (Apr 1, 2011)

> They are slightly better shares....the subscription shares will trade at a discount to the common shares


 Sorry, don't really understand your point . If , for example, I buy subscription shares, couldn't I sell it after settlement date (Feb 3)? Isn't price for subscription and common are the same?


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## doctrine (Sep 30, 2011)

Subscription receipts can be sold on the market but under a different ticker and may or may not be as liquid as the common shares. At $31.xx, I would buy the common shares just for flexibility. 

It sounds like it is selling well. Other companies that have gone down into the states, such as Emera, Fortis, and Algonquin Power, have all issued shares (plus various debt/preferred equity) and all of those stocks are trading above all of their issue prices. Altagas has credible management and there is no reason to expect they will blow this up. 

That being said, it won't close for over a year. That is a long time to hold subscription receipts, and a long time to potentially add to a position. I hold shares. if they stay below $32 for long, I might pick up a few more. This is as close as you get to a screaming buy on the TSX these days, imo. Large cap, investment grade, great management, great value, great dividend, plus growth.


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## gibor365 (Apr 1, 2011)

> Subscription receipts can be sold on the market but under a different ticker


 Is ALA was sold under different ticker?

I bought via shares offering SRT.UN, and as per my account the ticker is the same...


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## doctrine (Sep 30, 2011)

SRT.UN was an offering of common shares, not subscription receipts like this ALA offering. The ALA receipts will be converted to common shares upon closing of the acquisition but will receive the same dividends. It's effectively the same thing as common shares, but if the acquisition doesn't close, you get your money back plus any unpaid dividends. And, not sure if they'll be listed on the exchange yet for general trading.


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## gibor365 (Apr 1, 2011)

> The ALA receipts will be converted to common shares upon closing of the acquisition


 I see  and when acquisition to be closed?

and yes, there is some uncertainly


> Regulatory obstacles in Washington can prove difficult to surmount: Just ask Exelon, whose $6.8B purchase of Pepco was rejected twice before finally being cleared by D.C. regulators last year.
> 
> “There is probably additional uncertainty due to the Pepco-Exelon transaction which had a lot of turmoil and controversy surrounding it and is in the same regulatory jurisdiction," says Edward Jones utilities analyst Andrew Smith.


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## OptsyEagle (Nov 29, 2009)

gibor365 said:


> Sorry, don't really understand your point . If , for example, I buy subscription shares, couldn't I sell it after settlement date (Feb 3)? Isn't price for subscription and common are the same?


You can sell the subscription shares anytime you want but to someone else who wants the subscription shares, and at the price they are willing to give you for them. Until they are converted they are not exactly the same shares. The sub shares carry with them the risk that the deal may not go through and the value they would retain at that moment will be the original subscription price...not the price they trade at in the market. 

Obviously you and others come to these boards to pick up on these things but if I can add a suggestion. Never assume anything. If you are going to participate in an IPO or secondary offerings, you really need to read those offering documents and understand what they mean now and in the future. It will save you money and it will make you money from the investors that do not do this. There are a lot of them, but Goldman Sachs will usually take their money before you and I can get at it...but not always.

Good luck.


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## gardner (Feb 13, 2014)

You might value in the expected dividends the SRs might earn, in addition to the original subscription price. Dividends paid before they either convert or buy-back the SRs should be paid on the SRs. Messing up their dividends would be a bad move for these guys, so I expect they would keep to the usual schedule.


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## blin10 (Jun 27, 2011)

good name, keep adding to my position, I expect this thing to be in the high 30's in the mid of 2018


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## yyz (Aug 11, 2013)

Just picked up some ALA.R this morning.One thing to think about ,the "dividends" that the receipts generate are part interest and will not be taxed as favorably as regular shares.Keep that in mind in an unregistered account.


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## CanuckBull (Jan 24, 2017)

yyz said:


> Just picked up some ALA.R this morning.One thing to think about ,the "dividends" that the receipts generate are part interest and will not be taxed as favorably as regular shares.Keep that in mind in an unregistered account.


Hello guys, I have AQN shares and while checking out, I came upon ALTAGAS and found this thread. I can't find the "subscription shares" in Google finance. is it the ALA-U?
I see ALA.R.TO in Questrade trading at $29.88 on 09March. Is that it?

I was going to add a bit to my utility dividend paying holdings, how do you compare AQN and ALA for long term holdings? (sorry, didn't mean to steal the thread)
If the subscription is at this discount price, and will adjust to common shares if successful, I'm willing to take the bet ...


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## al42 (Mar 5, 2011)

I see ALA.R.TO

Yup that's it


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## GreedIsGood (Dec 4, 2013)

I ran into this stock today. Anyone have any insight? Was thinking about buying some. Trading at $30.98 now.


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## doctrine (Sep 30, 2011)

I own the common shares and like it. The subscription receipts (ALA.R) are a good option as well, especially in registered accounts. It might take 12-18 months for their WGL acquisition to close, so you need a long term time horizon. I would expect the shares to start to pick up 6-9 months out from close as it becomes more certain.


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## TomB16 (Jun 8, 2014)

Can someone help me understand the WGL acquisition? Why did they offer double the market cap for WGL? How much synergy can they possibly find?

It seems like they are buying random utilities, all around the continent, when they aren't building new projects... also, all around the continent.

Do they have a focus?


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## AltaRed (Jun 8, 2009)

It was only a 12 percent premiuum to WGL's closing price (not double). Still, I think the deal stinks and is a major distraction to ALA's focus/strategies in the west. Other shareholders don't like it either given where ALA shares have traded since the announcement. I'll probably hold on to my ALA shares and collect the dividend until (and if) there is a bump in ALA's stock price when the deal closes. I have no interest in owning an Atlantic seaboard utility.


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## ludetuner (Dec 28, 2016)

*Odd Lot Offer*

I just got an odd lot offer letter. Can someone please shed some light on benefits/drawbacks on this and potential reasoning why Altagas would make this offer?

Thanks


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## AltaRed (Jun 8, 2009)

Ypu have provided no real information on the content of that letter.


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## doctrine (Sep 30, 2011)

I believe it is related to this:

http://altagas.mwnewsroom.com/press...ified-sale-program-tsx-ala-201704031090733001

I'm not sure the reasons why. It's a way to offer liquidity to small investors while reducing share count.


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## ludetuner (Dec 28, 2016)

Unfortunately the letter is pretty vague and that's doctrine, that's the one. I'm thinking their management seems to be pretty confident with the health of the company and don't want to be burdened with the administrative tasks for investors with small holdings. Just wanted to see if anyone else had any insight


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