AltaGas Ltd. advanced data center deals at its Washington Gas Light Co. subsidiary and said it would exceed 2026 earnings guidance if the strength in its liquefied petroleum gas export business persists.
Washington Gas executed its second agreement for a behind-the-meter data center connection to provide backup power generation for an existing 15-megawatt data center in Virginia, Vern Yu, president and CEO of the parent company, announced on an April 30 earnings conference call. On a March 6 call, Yu disclosed Washington Gas' first data center deal, which will provide natural gas supply for on-site power generation at a 24-MW data center in Maryland.
"Both of our announced data center projects have the potential for larger follow-on phases, and we continue to advance various opportunities across all of our jurisdictions," AltaGas CFO Sean Brown said on the latest call.
AltaGas, a Calgary-based company, was among the first gas utility operators to promote the potential of behind-the-meter solutions at data centers. Developers of these centers have turned to on-site generation amid long waits to connect to electric grids, opening an opportunity for gas distributors.
AltaGas executives said Washington Gas has initially focused on small projects to provide energy to data centers, but it is in discussions to participate in other opportunities in Virginia and Maryland. "And those range anywhere from something that looks like 15 or 20 megawatts to up to 50 megawatts," Washington Gas President and CEO Donald Jenkins said. "But, they're in various stages of assessment on their side to move forward."
Surpassing guidance
Strong first-quarter results in the midstream and utility segments, along with a boom in the AltaGas export business in April, led executives to increase their expectations. AltaGas anticipates full-year 2026 earnings will at least reach the top end of guidance, with the potential to exceed the range if growth in the liquefied petroleum gas (LPG) export market continues.
The company's guidance for normalized EBITDA ranges from C$1.93 billion to C$2.03 billion for 2026, and normalized EPS guidance ranges from C$2.20 to C$2.45.
AltaGas also increased its 2026 capital budget from C$1.6 billion to C$1.7 billion, following the sanctioning of the Dimsdale natural gas storage facility and improved visibility into key vendor milestone payments for project work.
The company said the market disruption caused by the Strait of Hormuz closure reduced Middle East LPG supply in April from 1.5 million to 200,000 barrels per day. The instability has created a growing and diversified demand for AltaGas' Canadian LPG among its Asian customers.
"I think all of this turmoil in the Middle East really highlights the value of secure and stable supply," Yu said.
Earnings results
AltaGas on April 30 reported a first-quarter record of adjusted EBITDA totaling C$818 million, up 19% year over year from C$689 million. The company's first-quarter adjusted earnings per share of C$1.33, up from C$1.15 a year ago, surpassed analyst expectations of C$1.24.
Incremental value from a positive rate case outcome in DC for Washington Gas, along with new interim rates in Virginia and a $35 million gain from a partial settlement on pension liability, contributed to the higher EBITDA, Brown said. Executives said the results were partially offset by lower retail performance and increased general and administrative expenses related to employee incentive plans tied to AltaGas' share price.
AltaGas invested C$146 million in capital in the utility segment in the first quarter, including C$56 million for modernization programs and C$23 million for customer growth initiatives, supporting long-term earnings growth of 5-7%.
"These investments are focused on delivering long-term safety and reliability while extending our network to serve our expanding customer base," Brown said.
Yu said AltaGas has more than 5,000 miles of pre-1970s vintage pipe across its utility territories that need to be replaced "to enhance safety and reliability." He highlighted US$1.5 billion in modernization programs that regulators in DC, Michigan, Virginia and Maryland have approved.
On March 4, the Public Service Commission of the District of Columbia approved a successor to Washington Gas' long-running pipeline replacement program. The PSC set a three-year budget of US$150 million, down 30% from the company's request.
