AltaGas - Research

7/28/2019 AltaGas - Research

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Institutional Equity Research

Earnings Updat

May 5, 2013 Energy Infrastructure

AltaGas Ltd.Marketing Highlights

We provide highlights from our marketing trip with AltaGas management.AltaGas is pursuing $2B to $5B of West Coast energy export-related

projects. Most notable is the $1.5B, 600 mmcf/d near-term expansion of t

Western Transmission pipeline (WTP) and the $0.5B LPG export terminal.

The WTP expansion would bring additional natural gas to Kitimat and PrincRupert. Additional capacity will likely be used for LNG export, intra-BC CNG

and micro-LNG supply, power generation, and general utility demand

growth. The expansion would earn a 10.15% ROE on 45% equity thicknes

AltaGas' $1B of hydro projects are all ahead of schedule and on budget. Ththree northwest hydro projects are expected to generate $130M of EBITDA

The first and largest project, 195 MW Forrest Kerr facility, should start

operations in May 2014 and the remaining two should start in mid-2015.

AltaGas expects high-single digit dividend growth over the next severalyears based on currently secured growth projects. We see upside to this

target should AltaGas capture some or all of the West Coast energy export

opportunities. We maintain our SO rating w ith $2 higher $40 price target.

Stock Price Performance

Source: Reuters

All f igures in Canadian dollars, unless otherwise stated. 13-122836

CIBC World Markets does and seeks to do business with companies covered inits research reports. As a result, investors should be aware that the firm may

have a conflict o f interest that could affect the objectivity of this report.

Investors should consider this report as only a s ingle factor in making their

investment decision.

See "Important Disclosures" section at the end of this report for important

required disclosures, including potential conflicts of interest.

See "Price Target Calculation" and "Key Risks to Price Target" sections at th

end of this report, where applicable.

David Noseworthy, P.Eng,CFA1 (416) [email protected]

Stock Rating:

Sector OutperformerSector Weighting:

Market Weight12-18 mo. Price Target $40.00

ALA-TSX (5/3/13) $37.26

Key Indices: None

3-5-Yr. EPS Gr. Rate (E) NM

52-week Range $27.46-$37.94Shares Outstanding 120.4M

Float 120.4M Shrs

Avg. Daily Trading Vol. 236,000Market Capitaliza tion $4,486.1M

Dividend/Div Yield $1.50 / 4.0%

Fiscal Year Ends DecemberBook Value $18.83 per Shr

2013 ROE (E) 5.4%

Net Debt $2,737.0MPreferred $402.00M

Common Equity $1,991.3MConvertible Av ailable No

Earnings Per Share Prev Current

2012 $1.06A2013 $1.08E $0.99E

2014 $1.55E $1.51EP/E2012 35.2x2013 34.5x 37.6x2014 24.0x 24.7x

EBITDA ($ mlns.)2012 $335.5A2013 $488.5E $488.5E2014 $593.9E $614.8E

EV/EBITDA2012 22.8x2013 15.7x 15.7x

2014 12.9x 12.5x

Company DescriptionAltaGas Ltd. is a balanced energy infrastructurecompany. It has gas field gathering and processing,NGL infrastructure, gas utility, and power generationoperations throughout Canada.www.altagas.ca
http://www.altagas.ca/http://www.altagas.ca/http://www.altagas.ca/


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Marketing Highlights - May 05, 2013

2

AltaGas Ltd. Sector OutperformALA - TSX 5/3/13 $37.26 David Noseworthy CFA, MBA, P.E12- To 18- Month Price Target: $40.00 (416-956-61Energy Infrastructure David.Noseworthy@cibc

Sector Weighting: Market WeightAll figures in Canadian millions, except per share data.

Price Target Calculation 12 Month 18 Month Company Profile

CIBC 12 Month Expected Dividend $1.55 $2.39

Target Yield 4.25% 4.25%CIBC 2014E EBITDA 615 615

Target Multiple (EV/EBITDA) 13.50x 13.50x Investment Thesis

CIBC Price Target $40.00 $40.00 0.07353731

Implied Total Return 11.5% 13.8%

Market Data Volumes

Share Price $37.26 Net Debt (inc. convert. debt & NCI) 2,737 2010 2011 2012

Shares Outstanding 120 Preferred Shares 402 Extraction Volumes bbls/d 38,106 41,081 39,979

Market Capitalization 4,486 NCI 41 FG&P (Gross Throughput) Mmcf/d 423 390 373

NTM Dividend $1.55 Enterprise Value 7,666 Energy Services GJ/d 386,004 369,799 356,489

Current Dividend Annualized $1.50 Power Sold MW/h 2,854 3,001 3,317

Current Yield 4.0%

Trading Multiples 2011A 2012A 2013E 2014E EBITDA Breakdown by Cash Flow

EV/EBITDA 29.6x 22.8x 15.7x 12.5x

P/E 38.1x 35.2x 37.6x 24.7x

P/FFO 15.2x 15.0x 12.4x 10.1xP/Book Value 2.3x 1.8x 1.8x 1.8x

Energy Infrastructure Sector Average

EV/EBITDA 24.8x 17.6x 14.4x 13.1x

Per Share Data 2011A 2012A 2013E 2014E

Dividend Per Share $1.33 $1.40 $1.49 $1.69

Funds From Operation Per Share, fully diluted $2.45 $2.48 $3.01 $3.69

AFFO Per Share, fully diluted $2.30 $2.34 $2.84 $3.50

Payout Ratio, basic 57% 58% 52% 48%

Earnings Per Share, fully diluted $0.98 $1.06 $0.99 $1.51

Book Value Per Share, basic $16.22 $20.69 $20.94 $20.22

Shares Outstanding, Closing 89 105 119 121 2013E EBITDA By Segment Excluding Corporate

EBITDA 2011A 2012A 2013E 2014E

Gas EBITDA 162 154 213 239

Utilities EBITDA 39 102 187 241

Power EBITDA 102 91 116 167

Corporate EBITDA (45) (12) (35) (32)

Total EBITDA 259 336 488 615EBITDA Margin (Net Revenue) 48% 52% 52% 54%

Net Revenue 535 645 937 1,143

Net Income 84 102 112 182

Return On Equity 6.2% 7.9% 5.4% 9.0%

Debt Metrics 2011A 2012A 2013E 2014E

Net Debt / TTM EBITDA 5.1x 8.0x 6.3x 5.2x

Total Debt / Total Capital 49% 57% 56% 56%

EBITDA/ Interest Expense 4.9x 5.5x 4.3x 4.7x Major Sources, Uses of Cash

Capital Structure 2011A 2012A 2013E 2014E

Cash & Cash Equivalents 4 12 (6) (1)

Working Capital (202) 29 111 114

Total Assets 3,542 5,912 6,599 7,074

Total Debt (incl. Current) 1,324 2,702 3,050 3,189

Long Term Debt (ex. Convertibles) 1,201 2,626 3,050 3,189

Preferred Shares 200 400 407 397

Convertible Debentures 0 0 0 0

Shareholders Equity 1,163 1,565 1,977 2,033Total Capital 2,766 4,562 5,322 5,506

Commodity + FX Price Deck 2011A 2012A 2013E 2014E

WTI Oil (USD/bbl) $95.07 $92.37 $90.00 $90.00

Henry Hub Gas (US$/mmbtu) $4.38 $2.75 $3.31 $4.25

CAD NGL (CAD/bbl) $40.62 $28.89 $27.00 $28.25

Average Alberta Power (CAD/MWh) $76.17 $64.25 $57.92 $60.00

USD/CAD Exchange $0.99 $1.00 $1.03 $0.98

Note: AltaGas increased its dividend to $0.125/share (from $0.12/share) effective with its May dividend payment. The dividend is currently $1.44/share annualized.

2013E EBITDA does not include Q1 transaction costs and unrealized gains/losses. Segment EBITDA may not add up to 2013E EBITDA.

AltaGas Ltd. is an energy infrastructure company with gas field gathering and processing, NGL

infrastructure, gas utility and power generation operations throughout Canada.

We recommend AltaGas Ltd. as a unique investment opportunity among the energy infrastructure

players with an attractive mix of gas infrastructure, power infrastructure, and utility assets. We like

AltaGas for its positive leverage to Canadian West Coast energy exports, growing cash flows, and

improving corporate risk profile.

53% 48%

24%15% 11%

43%38%

33%

28%25%

4%

14%43%

56%65%

0%

10%

20%

30%

40%

50%

60%

70%

80%90%

100%

2011 2012 2013E 2014E 2015E

Cost-of-serviceEBITDA

EBITDA withvolume only risk

EBITDA withcommodity andvolume risk

Dividends Dividends Dividends Dividends

Capex

Capex

CapexCapex

Debt Amort

Debt Repay

Equity

EquityFFO

FFOFFO

FFO

Debt

Debt

Debt

Debt

Debt Amort.

Debt Amort.

Debt Repay

Equity

Equity

-$500M

$0M

$500M

$1,000M

$1,500M

$2,000M

2011 2012 2013E 2014E

$mln

s.

NGL

MarginExposed

5%

Power

22%

Gas (ex.NGL

MarginExposed)

37%

Utility36%

Source: Company reports and CIBC World Markets Inc.


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3

West Coast Energy Exports

We have revised our estimates to reflect a 50% risk-weighting for the

600 mmcf/d expansion of the Western Transmission project and a 25%

risk-weighting for the 25,000 bbls/d LPG export facility. The Western

Transmission project positively impacts our 2014 estimates as we assume the

regulator will allow AltaGas (ALA-SO) to earn on accumulated funds used durin

construction (AFUDC) and that construction begins in 2014. The LPG export

terminal begins operations in H2/15 and therefore its contribution is beyond ouforecast horizon. We have increased our target multiple to reflect the value of

both projects not captured in our 2014 estimates. We assumed a higher

probability for the Western Transmission pipeline than the LPG export terminal

as there is no one project upon which it is dependent and therefore more likely

to proceed in one form or another. We do not provide any value for an LNG

export terminal, LNG related power generation, or LNG-related FG&P in our

estimates.

Should AltaGas proceed with both the Western Transmission pipeline expansio

and the LPG export terminal, we would expect AltaGas to issue about $300 -

$400 million of equity by mid-2014.

Exhibit 1 provides a graphical summary of AltaGas West Coast Energy ExportOpportunities. We provide a full list of growth projects on pg 7 (Exhibit 5).

Exhibit 1. AltaGas' West Coast Energy Export Opportunities



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US Operations, US MLP, And US Listing

US operations will represent about 35% of 2016E EBITDA. AltaGas

intends to grow its utility and power business segments in the US. Based on

current operating and under-construction projects, US EBITDA is expected to

represent about 35% of 2016 EBITDA. AltaGas, at present, does not intend to

hedge its US free cash flows.

Master Limited Partnerships (US MLP) Parity Act could represent anopportunity for AltaGas. On April 24, 2013, US Senator Chris Coons along

with several Senate co-sponsors re-introduced legislation that would modify th

U.S. Internal Revenue Code to allow US MLPs to include income from clean and

renewable assets as qualifying income. This would allow those companies wit

renewable assets to establish a US MLP. This same legislation was also

introduced in the US House of Representatives on the same day by a bipartisan

group of legislators.

A US MLP is a tax-efficient structure that passes-through the income and tax

attributes of the income through distributions made to the holders (limited

partners) of its publicly traded units. The US MLP and investor thus avoid the

double taxation of corporate income tax and dividend tax. So instead of the US

MLP paying taxes on its profits like a corporation, each limited partner isresponsible on their own individual income tax for a proportional share of the U

MLP's income allowing a higher cash flow payout to unitholders.

Under the proposed legislation, income from the following assets woul

be regarded as qualifying income for inclusion within a U.S. MLP

structure: (i) solar energy and equipment; (ii) w ind energy and equipment; (

closed and open loop biomass; (iv) municipal solid waste; (v) hydropower; (vi)

marine and hydrokinetic renewable energy; (vii) fuel cells; (viii) combined hea

and power; (ix) certain biofuels; (x) energy-efficient buildings; (xi) electricity

storage; (xii) carbon capture and storage; (xiii) renewable chemicals; and (xiv

waste-heat-to-power technologies.

AltaGas has 4 operating facilities that could be restructured under a USMLP should the proposed legislation be passed. We summarize these

assets in Exhibit 2. In our view, a tax-efficient US MLP structure would likely

further enhance the growth of AltaGas US power operations.

Exhibit 2. AltaGas U.S. Operating Facilities

Asset Name Location Type Interest

Net

Capacity

(MW)

Annua

EBITD

($M)

Blythe Energy California Natural Gas 100% 507 $44

Busch Ranch Colorado Wind 50% 15 $1

Craven County Wood Energy North Carolina Bio-mass 50% 24 $3

Grayling Generating Station Michigan Bio-mass 30% 11 $1

Total 557 $50


A dual listing for AltaGas on the New York Stock Exchange is not

imminent. While clearly on the minds of management and US investors,

AltaGas intends to prudently manage its free cash flows by avoiding additional

issuance costs related to dual listing and applying these cash flows to its large

host of committed and prospective growth projects.


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5

AltaGas is actively improving its corporate risk profile. It has reduced its

commodity exposure with its hedging program. In addition, AltaGas has been

adding assets underpinned by regulated returns or long-term contracts. As a

result, it is forecasting ~80% of its earnings to come from stable sources in

2013. Its overall target is 85% to come from stable earnings.

Lower Risk and Higher Dividend

Exhibit 3. Targeting 85% Stable Earnings


As AltaGas improves the stability of its growing cash flows, expect

continued dividend increases (see Exhibit 3). Concurrent with their Q1/13

results, AltaGas increased their dividend 4.2% to $1.50/share annualized from

$1.44/share annualized. The new higher dividend is effective with the May 201

dividend, two months earlier than we had expected. We expect another 4%

increase by year-end. AltaGas targets an AFFOPS payout ratio between 40% -

50% and an EPS payout ratio less than 100%. Based on its current committedgrowth projects, AltaGas expects high-single digit dividend growth over the ne

several years. We forecast a 9% compounded annual dividend growth rate

between 2012 and 2016E (see Exhibit 4).


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Exhibit 4. Dividend Forecast

-

0.50

1.00

1.50

2.00

2.50

2010 2011 2012 2013E 2014E 2015E 2016E

DividendPer

Share

0%

10%

20%

30%

40%

50%

60%

70%

80%

PayoutRatio

Dividend Per Share (LHS) Payout Ratio (RHS)

We forecast 9% CAGR between 2012 and

2016E.

Source: CIBC World Markets Inc.


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7

Exhibit 5. AltaGas Committed And Prospective Growth Projects

Type Net Total Capacity Est. CO

Gas

Taiga Pipeline Committed 65,000 GJ/d July 20

JEEP Spur pipeline Committed 70 km Late 20

Farmington C3+ and C5+ Pipeline Committed 45 km N

West Coast LPG export terminal Prospective $300 - $500 $25 - $40 25,000 bbls/d 20

West Coast LNG export terminal Prospective $500 - $800 $50 - $72 285 Mmcf/d 20Alton natural gas storage and pipeline project Prospective

Initial: 4 - 6 Bcf

Expandable to 20+ BcfN

Michigan natural gas storage Prospective N/A N

Harmattan - deep cut / additional raw gas processing Prospective N/A N

Younger extraction plant - 70 Mmcf/d expansion Prospective N/A N

Committed Subtotal

Prospective Subtotal $800 - $1,300 $75.0 - $112

Power

Forrest Kerr Committed 195 MW May 2014

McLymont Creek Committed 66 MW Mid 20

Volcano Creek Committed 16 MW Mid 20

Narrow Inlet (Hydro) Prospective 22.5 MW N

Harmattan Cogen III Prospective N/A NGas-fired acquisitions and partnerships Prospective N/A N

Potential gas-fired generation projects serving FG&P andLNG demand Prospective N/A N

Committed Subtotal

Prospective Subtotal

UtilityCNG - Heritage Gas Committed N/A May 207 - 8 Bcf CINGSA storage expansion Prospective N/A N600 Mmcf/d PNG Western System expansion Prospective 755 Mmcf/d Q2/20

PNG Rate Base for CNG supply to Alaska Prospective $135 - $265 $19(5)

- $36 N/A N2013 Rate Base Addition Prospective N/A 202014 Rate Base Addition Prospective N/A 202015 Rate Base Addition Prospective N/A 20

Committed Subtotal

Prospective Subtotal $1,999 - $2,129 $213 - $230

TotalTotal Committed

Total Prospective

Note

1) EBITDA includes the Gilby to JEEP pipeline and JEEP deep-cut processing plant.

3) Based on the capital cost of Harmattan Cogen II plant.

4) Capex and EBITDA estimate based on 65% ownership.

5) Based on PNG's 2012 revenue requirements for the Western system.

$30 N/A

$1,025 $130

$214 $9

$7

$12

$30

$44(4)

$4.2 - $4.9 B$1.2 B

$3.0 - $3.7 B

$450 - $504$153

$297 - $351

$1,500

$105

$105

$110

N/A

$7

$152

$16

N/A

N/A

$100

$30

$6

$3

N/A

N/A

~$260

~$40

$190

$24(3)

N/A

$164 $23

$725

N/A

N/A

Est. Run-Rate

EBITDA ($M)

$5

$12.5(1)

$5

N/A

N/A

N/A

2) Will be mechanically completed by end of 2013. Electricity delivery will begin after the Northwest Transmission Line is complete.

Estimated Capex

($M)

$24

$100

$40

N/A

N/A


Estimate Revisions

Our 2013E AFFOPS decreases $0.12 to $2.84 due to modeling adjustments

regarding AltaGas capitalized interest expense (See Exhibit 6).

Our 2014E AFFOPS decreases $0.01 to $3.50 due to modeling adjustments to

capitalized interest expense, partially offset by the addition of a LPG export

terminal risk weighted 25% and increasing the capital expenditure for the

Western Transmission expansion project by $1 billion to a total of $1.5 billion,

which remains risk-weighted 50%.


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Exhibit 6. Cash Flow Estimate Revisions

2013E 2014E(C$ millions; unless otherwise stated) Current Previous Current Previou

Funds from Operation $363 $377 $462 $4

Add (Less):Maintenance Capital -$15 -$15 -$20 -$Mandatory Debt Repayment -$4 -$4 -$4 -Preferred Dividends -$19 -$19 -$19 -$

Other $0 $0 $0

Adjusted Cash Flow (B) $325 $339 $420 $4

FFOPS ($/share) $3.01 $3.13 $3.69 $3.7AFFOPS ($/share) $2.84 $2.96 $3.50 $3.5

Dividends paid (A) $169 $169 $203 $2

DPS ($/share) $1.49 $1.49 $1.69 $1.6

Payout Ratio (A/B) 52% 50% 48% 48

Earnings (C) $113 $124 $182 $1EPS ($/share) $0.99 $1.08 $1.51 $1.Earnings Payout Ratio (A/C) 150% 137% 112% 109

Avg Shares Outstanding F.D. (M shares) 115 115 120 1

Equity Funding

Free Cash Flow (B - A) $156 $170 $217 $2Add: DRIP and net proceeds from share issuance $460 $460 $77 $Total Equity Funding $616 $630 $295 $2

Growth Capital Expenditures 889 889 636 3


Price Target CalculationWe increase our 12- to 18-month price target by $2.00 to $40.00 based on a

combination of 13.5x EV/EBITDA (13.25x previously) using our 2014E EBITDAand an unchanged 4.25% target yield on our 2014E dividend estimate. We

increase our EV/EBITDA multiple 0.25x to reflect increased cash flows in 2015

and 2016 from the risk-weighted Western Transmission pipeline expansion and

LPG export terminal. We have assumed both are operational in H2/15. Our

target yield represents a 231 bps spread over Q2/14 10-year implied forward

swap government of Canada bond yield of 1.94%. This is slightly wider than th

current yield spread of 226 bps over spot 10-year government Canada bond

yield of 1.77%.

Key Risks To Price Target

Access To Capital And Financing RisksAltaGas is involved in capital-intensive businesses and, as such, AltaGas

operations rely on sufficient access to capital and affordable borrowing rates.

Insufficient access to a reasonable cost of capital would ultimately limit AltaGa

ability to grow. Additionally, when financing operations through debt, AltaGas

faces risks from increases in interest rates on new or variable-rate debt.

Customary covenants and financial tests associated with those debts may also

constrain AltaGas finances in any moment.


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AltaGas mitigates its capital and financial risks by careful management of its

financial leverage, targeting a debt to total capitalization of 50% to 55%. Also,

AltaGas aims to maintain 70%75% of liabilities in fixed-rate funds to limit the

impact of interest rate movement on its debt servicing costs.

Commodity Price Risk

Changes in commodity prices of AltaGas inputs and outputs can impact the

companys financial standing in a number of ways. AltaGas NGL Extraction

business is exposed to differentials between natural gas prices and NGL producprices. Narrowing of these differentials would squeeze NGL margins and

negatively impact cash flows. Despite this effect, higher natural gas prices may

also result in increased natural gas production and higher throughputs,

increasing cash flows in AltaGas Field Gathering and Processing (FG&P), NGL

Extraction, and Transmission businesses.

AltaGas Power Segment is exposed to spot Alberta power prices through its

Sundance B PPA. Alberta power prices are largely a function of natural gas

prices, except during capacity-constrained periods or periods of high wind pow

production. The Sundance B power plant, however, is coal-fired and pays only

the cost of extraction plus a small return to obtain coal from an adjacent mine

Therefore, higher natural gas prices that lead to higher Alberta power prices ar

generally beneficial to AltaGas cash flows in the Power Segment. To mitigaterisks from commodity price volatility, AltaGas manages its exposure through

power, NGL, and natural gas hedges. Furthermore, AltaGas benefits from the

naturally offsetting operational hedges described above.

Legislation And Regulatory Risk

Changes in applicable legislation or other regulations could restrict AltaGas

business activities or impose higher costs on AltaGas. For example, if

agreements cannot be reached with producers, pipelines and facilities are

subject to common carrier and common processor applications and possible ra

setting by regulatory authorities.

AltaGas may also face changes in environmental legislation at the local,

provincial, territorial, or federal levels. Though current legislation is not

burdensome, stricter environmental laws, regulations, or enforcement practice

and potential claims for damages against the company could impose significan

new costs going forward. In January 2010, Environment Canada listed a new

target of a 17% reduction in greenhouse gas (GHG) emissions from 2005 level

by 2020, but has not enacted any legislation. Recently, the federal governmen

has signaled that incoming regulations to reduce emissions from coal-fired

power plants would provide flexibility in how companies achieve reductions,

instead of imposing plant-by-plant requirements, and would leave considerable

authority with the provincial governments.

In 2007, Alberta passed the Climate and Emissions Management Amendment

Act, mandating emission reductions for large-emitter facilities. Only the

Harmattan Complex qualified as a large emitter; however, since it is currentlyoperating below the target intensity, it will face no penalties and will qualify for

credits. In 2006, Alberta passed its Environmental Protection and Enhancemen

Act, regulating mercury emissions from coal-fired power plants. TransAlta (TA-

SP), the owner of the Sundance generating station, has implemented

technologies to achieve the necessary reductions.


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10

Counterparties And Credit Risk

AltaGas also faces risks related to its reliance on other significant parties,

particularly the risk of counterparties failing to fulfill agreements. In this

eventuality, AltaGas revenues could be negatively impacted, and AltaGas abil

to fulfill other commitments could be limited.

To mitigate the risk of counterparties failing to honor contracts, AltaGas

performs continuous review of counterparty credit, adheres to credit thresholds

based on conservative credit metrics, and spreads risk across many diversecustomers and suppliers, most o f whom have investment -grade credit ratings.

Separately, AltaGas is partially liable for soil contamination damages caused by

past activities at the Harmattan Complex. Depending on the extent of these

damages, AltaGas may face significant new costs in the future. AltaGas has

already negotiated an agreement with the relevant counterparties at the

Harmattan Complex, largely reducing potential liability.

Execution Risks

Plans for future development, construction, and operation of AltaGas facilities

are vulnerable to changes in the cost of construction, construction delays, and

competition in the industry. These changes create uncertainties when planningfuture activities. AltaGas offsets these uncertainties with contractual tools, suc

as arrangements to recover cost overruns from customers or to establish fixed

price quotes from contractors where appropriate. AltaGas also follows a

structured project governance process to ensure smooth implementation.


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Our EPS estimates are shown below:

1 Qtr. 2 Qtr. 3 Qtr. 4 Qtr. Yearly

2012 Current $0.45A $0.28A $0.08A $0.25A $1.06A2013 Prior $0.45A ($0.02E) $0.06E $0.58E $1.08E

2013 Current $0.45A ($0.05E) $0.03E $0.55E $0.99E

2014 Prior -- -- -- -- $1.55E

2014 Current -- -- -- -- $1.51E

Our EBITDA ($mln) estimates are shown below:

1 Qtr. 2 Qtr. 3 Qtr. 4 Qtr. Yearly

2012 Current $93.6A $73.2A $59.4A $109.3A $335.5A2013 Prior $144.3A $79.7E $90.0E $174. 5E $488.5E

2013 Current $144.3A $79.7E $90.0E $174.5E $488.5E

2014 Prior -- -- -- -- $593.9E

2014 Current -- -- -- -- $614.8E


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IMPORTANT DISCLOSURES:

Analyst Certification: Each CIBC World Markets research analyst named on the front page of this research report, or

at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein

accurately reflect such research analyst's personal views about the company and securities that are the subject of this

report and all other companies and securities mentioned in this report that are covered by such research analyst and (i

no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific

recommendations or views expressed by such research analyst in this report.

Potential Conflicts of Interest: Equity research analysts employed by CIBC World Markets are compensated from

revenues generated by various CIBC World Markets businesses, including the CIBC World Markets Investment Banking

Department. Research analysts do not receive compensation based upon revenues from specific investment banking

transactions. CIBC World Markets generally prohibits any research analyst and any member of his or her household fro

executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets

generally prohibits any research analyst from serving as an officer, director or advisory board member of a company th

such analyst covers.

In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report,

CIBC World Markets may have a long position of less than 1% or a short position or deal as principal in the securities

discussed herein, related securities or in options, futures or other derivative instruments based thereon.

Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosuresset forth below, may at times give rise to potential conflicts of interest.

Important Disclosure Footnotes for AltaGas Ltd. (ALA)

2a AltaGas Ltd. is a client for which a CIBC World Markets company has performed investment banking services

in the past 12 months.

2c CIBC World Markets Inc. has managed or co-managed a public offering of securities for AltaGas Ltd. in the

past 12 months.

2e CIBC World Markets Inc. has received compensation for investment banking services from AltaGas Ltd. in the

past 12 months.

2g CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services

from AltaGas Ltd. in the next 3 months.

7 CIBC World Markets Corp., CIBC World Markets Inc., and their affiliates, in the aggregate, beneficially own 1%

or more of a class of equity securities issued by AltaGas Ltd.


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Important Disclosure Footnotes for Companies Mentioned in this Report that Are Coveredby CIBC World Markets Inc.:

Stock Prices as of 05/05/2013:

TransAlta Corporation (2a, 2c, 2e, 2g, 7, 9) (TA-TSX, $14.96, Sector Performer)

Important disclosure footnotes that correspond to the footnotes in this table may be found in the "Key to

Important Disclosure Footnotes" section of this report.


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14

Key to Important Disclosure Footnotes:

1 CIBC World Markets Corp. makes a market in the securities of this company.

2a This company is a client for which a CIBC World Markets company has performed investment banking services

in the past 12 months.

2b CIBC World Markets Corp. has managed or co-managed a public offering of securities for this company in the

past 12 months.

2c CIBC World Markets Inc. has managed or co-managed a public offering of securities for this company in the

past 12 months.

2d CIBC World Markets Corp. has received compensation for investment banking services from this company in

the past 12 months.

2e CIBC World Markets Inc. has received compensation for investment banking services from this company in the

past 12 months.

2f CIBC World Markets Corp. expects to receive or intends to seek compensation for investment banking services

from this company in the next 3 months.

2g CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services

from this company in the next 3 months.

3a This company is a client for which a CIBC World Markets company has performed non-investment banking,

securities-related services in the past 12 months.

3b CIBC World Markets Corp. has received compensation for non-investment banking, securities-related services

from this company in the past 12 months.

3c CIBC World Markets Inc. has received compensation for non-investment banking, securities-related services

from this company in the past 12 months.

4a This company is a client for which a CIBC World Markets company has performed non-investment banking,

non-securities-related services in the past 12 months.

4b CIBC World Markets Corp. has received compensation for non-investment banking, non-securities-related

services from this company in the past 12 months.

4c CIBC World Markets Inc. has received compensation for non-investment banking, non-securities-related

services from this company in the past 12 months.

5a The CIBC World Markets Corp. analyst(s) who covers this company also has a long position in its common

equity securities.

5b A member of the household of a CIBC World Markets Corp. research analyst who covers this company has a

long position in the common equity securities of this company.

6a The CIBC World Markets Inc. fundamental analyst(s) who covers this company also has a long position in itscommon equity securities.

6b A member of the household of a CIBC World Markets Inc. fundamental research analyst who covers this

company has a long position in the common equity securities of this company.

7 CIBC World Markets Corp., CIBC World Markets Inc., and their affiliates, in the aggregate, beneficially own 1%

or more of a class of equity securities issued by this company.

8 An executive of CIBC World Markets Inc. or any analyst involved in the preparation of this research report has

provided services to this company for remuneration in the past 12 months.

9 A senior executive member or director of Canadian Imperial Bank of Commerce ("CIBC"), the parent company

to CIBC World Markets Inc. and CIBC World Markets Corp., or a member of his/her household is an officer,

director or advisory board member of this company or one of its subsidiaries.

10 Canadian Imperial Bank of Commerce ("CIBC"), the parent company to CIBC World Markets Inc. and CIBC

World Markets Corp., has a significant credit relationship with this company.11 The equity securities of this company are restricted voting shares.

12 The equity securities of this company are subordinate voting shares.

13 The equity securities of this company are non-voting shares.

14 The equity securities of this company are limited voting shares.


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CIBC World Markets Inc. Price Chart

HISTORICAL PERFORMANCE OF CIBC WORLD MARKETS INC. RECOMMENDATIONS FOR ALTAGAS LTD. (ALA)

Date Change Type Closing Price Rating Price Target Coverage

03/11/2012 31.58 SO 36.00Dav id Noseworthy, P.EnCFA



03/25/2013 34.90 R -Dav id Noseworthy, P.EnCFA




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17

Legal Disclaimer

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which is regulated by the Financial Services Authority (FSA), (c) in Australia to wholesale clients only, CIBC Australia

Ltd, a company regulated by the ASIC with AFSL license number 240603 and ACN 000 067 256, and (d) in Japan, CIBC

World Markets (Japan) Inc., a registered Type 1 Financial product provider with the registration number Director Gener

of Kanto Finance Bureau #218 (collectively, CIBC World Markets) and (e) in the United States either by (i) CIBC WorlMarkets Inc. for distribution only to U.S. Major Institutional Investors (MII) (as such term is defined in SEC Rule 15a -

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this report from CIBC World Markets Inc. (the Canadian broker-dealer) are required to effect transactions (other than

negotiating their terms) in securities discussed in the report through CIBC World Markets Corp. (the U.S. broker-dealer

This report is provided, for informational purposes only, to institutional investor and retail clients of CIBC World

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This report has been prepared by the CIBC group and is issued in Hong Kong by Canadian Imperial Bank of

Commerce, Hong Kong Branch, a registered institution under the Securities and Futures Ordinance, Cap 571 (the SFO

This report is intended for professional investors only (within the meaning of the SFO) and has been prepared forgeneral circulation and does not take into account the objectives, financial situation or needs of any recipient. Any

recipient in Hong Kong who has any questions or requires further information on any matter arising from or relating to

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executed by Canadian Imperial Bank of Commerce, Hong Kong Branch. Canadian Imperial Bank of Commerce, Hong

Kong Branch has entered into an arrangement with its broker-dealer affiliates worldwide to execute orders for securitie

listed outside of Hong Kong for Hong Kong clients.

This report is intended for distribution in Singapore solely to accredited investors, expert investors and institution

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respect of any matter arising from or in connection w ith this report.

The securities mentioned in this report may not be suitable for all types of investors. This report does not take int

account the investment objectives, financial situation or specific needs of any particular client of CIBC World Markets.Recipients should consider this report as only a single factor in making an investment decision and should not rely so le

on investment recommendations contained herein, if any, as a substitution for the exercise of independent judgment of

the merits and risks of investments. The analyst writing the report is not a person or company w ith actual, implied or

apparent authority to act on behalf of any issuer mentioned in the report. Before making an investment decision with

respect to any security recommended in this report, the recipient should consider whether such recommendation is

appropriate given the recipient's particular investment needs, objectives and financial circumstances. CIBC World

Markets suggests that, prior to acting on any of the recommendations herein, Canadian retail clients of CIBC World

Markets contact one of our client advisers in your jurisdiction to discuss your particular circumstances. Non-client

recipients of this report who are not institutional investor clients of CIBC World Markets should consult with an

independent financial advisor prior to making any investment decision based on this report or for any necessary

explanation of its contents. CIBC World Markets will not treat non-client recipients as its clients solely by virtue of their

receiving this report.

Past performance is not a guarantee of future results, and no representation or warranty, express or implied, ismade regarding future performance of any security mentioned in this report. The price of the securities mentioned in th

report and the income they produce may fluctuate and/or be adversely affected by exchange rates, and investors may

realize losses on investments in such securities, including the loss of investment principal. CIBC World Markets accepts

no liability for any loss arising from the use of information contained in this report, except to the extent that liability ma

arise under specific statutes or regulations applicable to CIBC World Markets.

Information, opinions and statistical data contained in this report were obtained or derived from sources believed

be reliable, but CIBC World Markets does not represent that any such information, opinion or statistical data is accurate

or complete (with the exception of information contained in the Important Disclosures section of this report provided by

CIBC World Markets or individual research analysts), and they should not be relied upon as such. All estimates, opinion

and recommendations expressed herein constitute judgments as of the date of this report and are subject to change


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Legal Disclaimer (Continued)

without notice.

Nothing in this report constitutes legal, accounting or tax advice. Since the levels and bases of taxation can chang

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consequences of investments. As with any investment having potential tax implications, clients should consult with thei

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This report may provide addresses of, or contain hyperlinks to, Internet web sites. CIBC World Markets has not

reviewed the linked Internet web site of any third party and takes no responsibility for the contents thereof. Each suchaddress or hyperlink is provided solely for the recipient's convenience and information, and the content of linked third

party web sites is not in any way incorporated into this document. Recipients who choose to access such third-party we

sites or follow such hyperlinks do so at their own risk.

Although each company issuing this report is a wholly owned subsidiary of Canadian Imperial Bank of Commerce

(CIBC), each is solely responsible for its contractual obligations and commitments, and any securities products offered

or recommended to or purchased or sold in any client accounts (i) will not be insured by the Federal Deposit Insurance

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deposits or other obligations of CIBC, (iii) will not be endorsed or guaranteed by CIBC, and (iv) will be subject to

investment risks, including possible loss of the principal invested. The CIBC trademark is used under license.

2013 CIBC World Markets Inc. All rights reserved. Unauthorized use, distribution, duplication or disclosure

without the prior written permission of CIBC World Markets is prohibited by law and may result in prosecution.

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