# EDGAR Filing Document

**Accession Number:** 0001695519
**File Stem:** 0001695519-23-000008
**Filing Date:** 2023-3
**Character Count:** 852065
**Document Hash:** ff7d66452085bf2f1bfac2d4f98b977e
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001695519-23-000008.hdr.sgml**: 20230302

**ACCESSION NUMBER**: 0001695519-23-000008

**CONFORMED SUBMISSION TYPE**: 40-F

**PUBLIC DOCUMENT COUNT**: 194

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230302

**DATE AS OF CHANGE**: 20230302

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** AltaGas Ltd.
- **CENTRAL INDEX KEY:** 0001695519
- **STANDARD INDUSTRIAL CLASSIFICATION:** CRUDE PETROLEUM & NATURAL GAS [1311]
- **IRS NUMBER:** 000000000
- **STATE OF INCORPORATION:** Z4
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 40-F
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 333-225606
- **FILM NUMBER:** 23696650

**BUSINESS ADDRESS:**
- **STREET 1:** 1700, 355-4 AVENUE SW
- **CITY:** CALGARY
- **STATE:** A0
- **ZIP:** T2P0J1
- **BUSINESS PHONE:** 1 (403) 691-7575

**MAIL ADDRESS:**
- **STREET 1:** 1700, 355-4 AVENUE SW
- **CITY:** CALGARY
- **STATE:** A0
- **ZIP:** T2P0J1

?xml version="1.0" ? atgff-20221231

**U.S. SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

**FORM 40-F**

&nbsp;&nbsp;&nbsp;&nbsp;☐ **REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934.**

&nbsp;&nbsp;&nbsp;&nbsp;☒ **ANNUAL REPORT PURSUANT TO SECTION 13(a) or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

---

| | | | |
|:---|:---|:---|:---|
| **For the fiscal year ended:**  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**December 31, 2022** | **Commission File Number:**  | **333-225606** |

---

**ALTAGAS LTD.**

(Exact name of Registrant as specified in its charter)

**Canada**

(Province or other jurisdiction of incorporation or organization)

---

| | |
|:---|:---|
| **1311** | **Not Applicable** |
| <br>(Primary Standard Industrial<br>Classification Code Number) | <br>(I.R.S. Employer<br>Identification Number) |

---

**1700, 355-4**<sup>th</sup> **Avenue S.W.**

**Calgary, Alberta T2P 0J1, Canada**

**(403) 691-7575**

(Address and telephone number of Registrant's principal executive offices)

**AltaGas Services (U.S.) Inc.**

**1000 Maine Ave.**

**Washington DC 20024**

**(703) 750-4400**

(Name, address (including zip code) and telephone number (including area code)

of agent for service in the United States)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

**None**

(Title of Class)

Securities registered or to be registered pursuant to Section 12(g) of the Act.

**None**

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

**None**

(Title of Class)

For Annual Reports indicate by check mark the information filed with this Form:

☒ &nbsp;&nbsp;&nbsp;&nbsp; Annual information form ☒ Audited annual financial statements

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:

There were 281,531,833 Common Shares, of no par value, outstanding as of December 31, 2022.

Indicate by check mark whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to filing requirements for the past 90 days.

Yes ☒ No □

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

Yes ☒ No □

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.

Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

This Annual Report on Form 40-F shall be incorporated by reference into or as an exhibit to, as applicable, the Registrant's Registration Statement on Form F-10 (File No. 333-253122) and under the Securities Act of 1933, as amended ("Securities Act").

------

**PRINCIPAL DOCUMENTS**

The following documents have been filed as part of this Annual Report on Form 40-F as Exhibits hereto and are incorporated by reference herein:

A.**Annual Information Form**

The Annual Information Form of AltaGas Ltd. (the "Registrant") for the fiscal year ended December 31, 2022 is included as Exhibit 13.1 of this Annual Report on Form 40-F.

B.**Management's Discussion and Analysis and Audited Annual Financial Statements**

The Registrant's Management's Discussion and Analysis for the year ended December 31, 2022 and audited consolidated financial statements for the fiscal year ended December 31, 2022, including the auditor's report with respect thereto, are included as Exhibit 13.2 of this Annual Report on Form 40-F.

**CERTIFICATIONS AND DISCLOSURE REGARDING CONTROLS AND PROCEDURES**

<u>Certifications</u>. See Exhibits 31.1, 31.2, 32.1, and 32.2 to this Annual Report on Form 40-F.

<u>Disclosure Controls and Procedures</u>. The Registrant maintains disclosure controls and procedures and internal control over financial reporting designed to ensure that information required to be disclosed in the Registrant's filings under the Securities Exchange Act of 1934, as amended ("Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the "Commission"). The Registrant's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), after having evaluated the effectiveness of the Registrant's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Report on Form 40-F, have concluded that, as of such date, the Registrant's disclosure controls and procedures were effective to ensure that information required to be disclosed by the Registrant in reports that the Registrant files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms, and (ii) accumulated and communicated to management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. However, as recommended by the Commission in its adopting release for the rules governing the disclosure and control procedures discussed above, the Registrant will continue to periodically evaluate its disclosure controls and procedures and will make modifications from time to time as deemed necessary to ensure that information is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms.

The Registrant's disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and, as indicated in the preceding paragraph, the CEO and CFO believe that the Registrant's disclosure controls and procedures are effective at that reasonable assurance level, although the CEO and CFO do not expect that the disclosure controls and procedures or internal control over financial reporting will prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

<u>Management Report on Internal Control over Financial Reporting:</u> The Registrant's management is responsible for establishing and maintaining adequate internal control over financial reporting. The Registrant's internal control framework is based on the criteria published in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. The Registrant's management, including the CEO and CFO, evaluated the effectiveness of the Registrant's internal control over financial reporting as at December 31, 2022 and concluded that the Registrant's internal control over financial reporting is effective as at December 31, 2022.

<u>Auditor's Attestation Report:</u> This annual report does not include an attestation report of the Registrant's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Registrant's registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "**Dodd-Frank Act**"). The Dodd-Frank Act permits a "non-accelerated filer" to provide only management's report on internal control over financial reporting in an annual report and omit an attestation report of the issuer's registered public accounting firm regarding management's report on internal control over financial reporting.

<u>Changes in Internal Control Over Financial Reporting:</u> During the fiscal year ended December 31, 2022, there were no changes in the Registrant's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.

**NOTICES PURSUANT TO REGULATION BTR**

None.

**IDENTIFICATION OF THE AUDIT COMMITTEE**

The Registrant has a separately-designated standing audit committee (the "Audit Committee") established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of the Audit Committee are: Linda G. Sullivan, Robert B. Hodgins, Cynthia Johnston, and Nancy G. Tower.

**AUDIT COMMITTEE FINANCIAL EXPERTS**

The board of directors of the Registrant has determined that Linda G. Sullivan, the chair of the Audit Committee, qualifies as an audit committee financial expert for purposes of paragraph (8) of General Instruction B to Form 40-F. Details of her relevant experience is included under the heading "Audit Committee - Relevant Education and Experience" at page 49 of the Registrant's Annual Information Form for the fiscal year ended December 31, 2022, filed as part of this Annual Report on Form 40-F in Exhibit 13.1. The Commission has indicated that the designation of Linda G. Sullivan as an audit committee financial expert does not (i) make her an "expert" for any purpose, including without limitation for purposes of Section 11 of the Securities Act, (ii) impose on her any duties, obligations or liabilities that are greater than those imposed on members of the Audit Committee and the board of directors who do not carry this designation or identification or (iii) affect the duties, obligations or liabilities of any other member of the Audit Committee or the board of directors. The board of directors has

------

further determined that each of Linda G. Sullivan, Robert B. Hodgins, Cynthia Johnston, and Nancy G. Tower is independent, as that term is defined in the Corporate Governance Listing Standards of the New York Stock Exchange.

**ADDITIONAL DISCLOSURE**

**Code of Ethics**

The Registrant has adopted a "code of ethics" (as that term is defined in paragraph (9) of General Instruction B to Form 40-F), entitled the "Code of Business Ethics", that applies to directors, officers, employees, contractors, consultants, representatives and agents of the Registrant including its principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. During the fiscal year ended December 31, 2022, there were no waivers, including implicit waivers, or amendments granted from any provision of the Code of Business Ethics.

The Code of Business Ethics is available for viewing on the Registrant's website at www.altagas.ca.

**Principal Accountant Fees and Services**

The Registrant's auditor is Ernst & Young LLP (Calgary, AB, Canada, PCAOB ID: 01263).

The required disclosure is included under the heading "Audit Committee - External Auditor Service Fees by Category" at page 50 of the Registrant's Annual Information Form for the fiscal year ended December 31, 2022, filed as part of this Annual Report on Form 40-F in Exhibit 13.1.

**Pre-Approval Policies and Procedures**

The Audit Committee pre-approves all audit services to be provided to the Registrant by its independent auditors. The Audit Committee's policy regarding the pre-approval of non-audit services to be provided to the Registrant by its independent auditors is that all such services shall be pre-approved by the Audit Committee. All non-audit services performed by the Registrant's independent auditors for the fiscal year ended December 31, 2022 have been pre-approved by the Audit Committee.

**Off-Balance Sheet Arrangements**

The Registrant has no off-balance sheet arrangements as described in paragraph (11) of General Instruction B to Form 40-F.

**Tabular Disclosure of Contractual Obligations**

The required disclosure is included under the heading "Contractual Obligations" in the Registrant's Management's Discussion and Analysis for the year ended December 31, 2022, filed as part of this Annual Report on Form 40-F in Exhibit 13.2.

**Mine Safety Disclosure.**

Not applicable.

**UNDERTAKING**

The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.

**CONSENT TO SERVICE OF PROCESS**

The Registrant has previously filed with the Commission a Form F-X in connection with the class of securities in relation to which the obligation to file this report arises.

Any changes to the name or address of the agent for service of process of the Registrant shall be communicated promptly to the Commission by an amendment to the Form F-X referencing the file number of the Registrant.

**SIGNATURES**

Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 2, 2023

---

| | |
|:---|:---|
| **AltaGas Ltd.** | **AltaGas Ltd.** |
| By: | /s/ Randall L. Crawford |
| Name: | Randall L. Crawford |
| Title: | President and Chief Executive Officer |

---

------

**EXHIBIT INDEX** 

---

| | |
|:---|:---|
| 13.1 | <u>[2022 Annual Information Form dated March](altagasaif-2022.htm)[1](altagasaif-2022.htm)[, 2023 for the fiscal year ended December 31, 2022](altagasaif-2022.htm)</u> |
| 13.2 | <u>[Management's Discussion and Analysis for the year ended December 31, 2022 and audited consolidated financial statements for the fiscal year ended December 31, 2022](atgff-20221231_d2.htm)</u> |
| 23.1 | <u>[Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm](ex231-eyconsentq422.htm)</u> |
| 31.1 | <u>[Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act](ex311-302certxceoq422.htm)</u> |
| 31.2 | <u>[Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act](ex312-302certxcfoq422.htm)</u> |
| 32.1 | <u>[Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](ex321-906certxceoq422.htm)</u> |
| 32.2 | <u>[Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](ex322-906certxcfoq422.htm)</u> |
| 101 | Interactive Data File |

---

## Exhibit 13.1

**ALTAGAS LTD.**

**Annual Information Form**

For the year ended December 31, 2022

Dated: March 1, 2023

------

&nbsp;&nbsp;&nbsp;&nbsp;

**TABLE OF CONTENTS**

---

| | |
|:---|:---|
| <u>[GENERAL INFORMATION](#ia769ecfd9438474abf53da6a203cd373_10)</u> | <u>[2](#ia769ecfd9438474abf53da6a203cd373_10)</u> |
| <u>[FORWARD-LOOKING INFORMATION AND STATEMENTS](#ia769ecfd9438474abf53da6a203cd373_13)</u> | <u>[2](#ia769ecfd9438474abf53da6a203cd373_13)</u> |
| <u>[CORPORATE STRUCTURE](#ia769ecfd9438474abf53da6a203cd373_16)</u>  | <u>[3](#ia769ecfd9438474abf53da6a203cd373_16)</u> |
| <u>[OVERVIEW OF THE BUSINESS](#ia769ecfd9438474abf53da6a203cd373_19)</u> | <u>[5](#ia769ecfd9438474abf53da6a203cd373_19)</u> |
| <u>[ALTAGAS' GEOGRAPHIC FOOTPRINT](#ia769ecfd9438474abf53da6a203cd373_22)</u> | <u>[6](#ia769ecfd9438474abf53da6a203cd373_22)</u> |
| <u>[GENERAL DEVELOPMENT OF ALTAGAS' BUSINESS](#ia769ecfd9438474abf53da6a203cd373_25)</u> | <u>[8](#ia769ecfd9438474abf53da6a203cd373_25)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[DEVELOPMENT OF THE UTILITIES BUSINESS OF ALTAGAS](#ia769ecfd9438474abf53da6a203cd373_28)</u> | <u>[8](#ia769ecfd9438474abf53da6a203cd373_28)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[DEVELOPMENT OF THE MIDSTREAM BUSINESS OF ALTAGAS](#ia769ecfd9438474abf53da6a203cd373_31)</u> | <u>[10](#ia769ecfd9438474abf53da6a203cd373_31)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[DEVELOPMENT OF THE CORPORATE/OTHER BUSINESS OF ALTAGAS](#ia769ecfd9438474abf53da6a203cd373_34)</u> | <u>[11](#ia769ecfd9438474abf53da6a203cd373_34)</u> |
| <u>[BUSINESS OF THE CORPORATION](#ia769ecfd9438474abf53da6a203cd373_37)</u> | <u>[12](#ia769ecfd9438474abf53da6a203cd373_37)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[UTILITIES BUSINESS](#ia769ecfd9438474abf53da6a203cd373_43)</u> | <u>[12](#ia769ecfd9438474abf53da6a203cd373_43)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[MIDSTREAM BUSINESS](#ia769ecfd9438474abf53da6a203cd373_79)</u> | <u>[24](#ia769ecfd9438474abf53da6a203cd373_79)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[CORPORATE/OTHER SEGMENT](#ia769ecfd9438474abf53da6a203cd373_112)</u> | <u>[40](#ia769ecfd9438474abf53da6a203cd373_112)</u> |
| <u>[CAPITAL STRUCTURE](#ia769ecfd9438474abf53da6a203cd373_124)</u> | <u>[42](#ia769ecfd9438474abf53da6a203cd373_124)</u> |
| <u>[GENERAL](#ia769ecfd9438474abf53da6a203cd373_127)</u> | <u>[44](#ia769ecfd9438474abf53da6a203cd373_127)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>EMPLOYEES</u>  | <u>[44](#ia769ecfd9438474abf53da6a203cd373_127)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[DIRECTORS AND OFFICERS](#ia769ecfd9438474abf53da6a203cd373_130)</u> | <u>[45](#ia769ecfd9438474abf53da6a203cd373_130)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[EXECUTIVE OFFICERS](#ia769ecfd9438474abf53da6a203cd373_133)</u> | <u>[47](#ia769ecfd9438474abf53da6a203cd373_133)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[AUDIT COMMITTEE](#ia769ecfd9438474abf53da6a203cd373_136)</u> | <u>[48](#ia769ecfd9438474abf53da6a203cd373_136)</u> |
| <u>[RISK FACTORS](#ia769ecfd9438474abf53da6a203cd373_139)</u> | <u>[50](#ia769ecfd9438474abf53da6a203cd373_139)</u> |
| <u>[ENVIRONMENTAL, SOCIAL, AND GOVERNANCE](#ia769ecfd9438474abf53da6a203cd373_142)</u> | <u>[67](#ia769ecfd9438474abf53da6a203cd373_142)</u> |
| <u>[DIVIDENDS](#ia769ecfd9438474abf53da6a203cd373_151)</u> | <u>[70](#ia769ecfd9438474abf53da6a203cd373_151)</u> |
| <u>[MARKET FOR SECURITIES](#ia769ecfd9438474abf53da6a203cd373_154)</u> | <u>[72](#ia769ecfd9438474abf53da6a203cd373_154)</u> |
| <u>[CREDIT RATINGS](#ia769ecfd9438474abf53da6a203cd373_157)</u> | <u>[74](#ia769ecfd9438474abf53da6a203cd373_157)</u> |
| <u>[MATERIAL CONTRACTS](#ia769ecfd9438474abf53da6a203cd373_160)</u> | <u>[76](#ia769ecfd9438474abf53da6a203cd373_160)</u> |
| <u>[INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS](#ia769ecfd9438474abf53da6a203cd373_163)</u> | <u>[77](#ia769ecfd9438474abf53da6a203cd373_163)</u> |
| <u>[LEGAL PROCEEDINGS](#ia769ecfd9438474abf53da6a203cd373_166)</u> | <u>[77](#ia769ecfd9438474abf53da6a203cd373_166)</u> |
| <u>[REGULATORY ACTIONS](#ia769ecfd9438474abf53da6a203cd373_169)</u> | <u>[77](#ia769ecfd9438474abf53da6a203cd373_169)</u> |
| <u>[INTERESTS OF EXPERTS](#ia769ecfd9438474abf53da6a203cd373_172)</u> | <u>[78](#ia769ecfd9438474abf53da6a203cd373_172)</u> |
| <u>[ADDITIONAL INFORMATION](#ia769ecfd9438474abf53da6a203cd373_175)</u> | <u>[78](#ia769ecfd9438474abf53da6a203cd373_175)</u> |
| <u>[TRANSFER AGENTS AND REGISTRARS](#ia769ecfd9438474abf53da6a203cd373_178)</u> | <u>[78](#ia769ecfd9438474abf53da6a203cd373_178)</u> |
| <u>[METRIC CONVERSION](#ia769ecfd9438474abf53da6a203cd373_181)</u> | <u>[78](#ia769ecfd9438474abf53da6a203cd373_181)</u> |
| <u>[GLOSSARY](#ia769ecfd9438474abf53da6a203cd373_184)</u> | <u>[79](#ia769ecfd9438474abf53da6a203cd373_184)</u> |
| <u>[SCHEDULE A: AUDIT COMMITTEE MANDATE](#ia769ecfd9438474abf53da6a203cd373_187)</u> | <u>[88](#ia769ecfd9438474abf53da6a203cd373_187)</u> |

---

&nbsp;&nbsp;&nbsp;&nbsp;

  

AltaGas Ltd. – 2022 Annual Information Form – 1

------

&nbsp;&nbsp;&nbsp;&nbsp;

**GENERAL INFORMATION**

Unless otherwise noted, the information contained in this AIF is stated as at December 31, 2022 and all dollar amounts in this AIF are in Canadian dollars. Financial information is presented in accordance with United States generally accepted accounting principles. For an explanation of certain terms and abbreviations used in this AIF, see the "Glossary" of this AIF.

**FORWARD-LOOKING INFORMATION AND STATEMENTS**

This AIF contains forward-looking information (forward-looking statements). Words such as "may", "can", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "aim", "seek", "propose", "contemplate", "estimate", "focus", "strive", "forecast", "expect", "project", "target", "potential", "objective", "continue", "outlook", "vision", "opportunity", and similar expressions suggesting future events or future performance, as they relate to the Corporation or any affiliate of the Corporation, are intended to identify forward-looking statements. In particular, this AIF contains forward-looking statements with respect to, among other things, business objectives, expected growth, results of operations, performance, business projects and opportunities and financial results.

Specifically, such forward-looking statements included in this document include, but are not limited to, statements with respect to the following: AltaGas' strategy, priorities and focus with regard to its Utilities and Midstream segments; expected use of proceeds from the Alaska Utilities Disposition; expected timing, process and outcomes of AltaGas' CEO succession plan; timing of material regulatory filings, proceedings and decisions in the Utilities business; Washington Gas' ability to maintain NGQSS levels; Washington Gas' potential remediation obligations related to real property; AltaGas' belief in the role and importance of global resource exports; expected in-service and completion dates for current projects and transactions in the Midstream business, including the carbon capture opportunity at Harmattan, the Mountain Valley pipeline and the MVP Southgate Project; AltaGas' 2023 strategic priorities, including its competitive advantage, export capabilities and logistics optimization; AltaGas' expectations for continued North American natural gas development, LPG supply/demand imbalance in North America, strong Asian demand and a robust pricing differential; the percentage of contracted volumes expected to be shipped from the Ferndale terminal and RIPET in 2023; anticipated timing and impact of material environmental legislation on AltaGas' businesses; expected impacts of the Eastern European conflict on AltaGas' business and operations; anticipated timing and impact of court and regulatory proceedings on AltaGas' businesses, including with respect to Indigenous and treaty rights; AltaGas' ability to respond to the COVID-19 pandemic and the expected impact on AltaGas' business and operations; expectation that existing credit facilities are sufficient for operations and AltaGas' ability to refinance on commercially reasonable terms; and AltaGas' ESG commitments, strategies, policies, priorities and goals, AltaGas' ability to achieve and implement them into its businesses and operations, and any expected outcomes therefrom.

These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events, and achievements to differ materially from those expressed or implied by such statements. Such statements reflect AltaGas' current expectations, estimates, and projections based on certain material factors and assumptions at the time the statement was made. Material assumptions include: effective tax rate of approximately 22 percent, U.S./Canadian dollar exchange rates; inflation; interest rates, credit ratings, regulatory approvals and policies; expected commodity supply, demand and pricing; volumes and rates; propane price differentials; degree day variance from normal; pension discount rate; financing initiatives; the performance of the businesses underlying each sector; impacts of the hedging program; weather; frac spread; access to capital; future operating and capital costs; timing and receipt of regulatory approvals; seasonality; planned and unplanned plant outages; timing of in-service dates of new projects and acquisition and divestiture activities; taxes; operational expenses; returns on investments; dividend levels; and transaction costs.

  

AltaGas Ltd. – 2022 Annual Information Form – 2

------

&nbsp;&nbsp;&nbsp;&nbsp;

AltaGas' forward-looking statements are subject to certain risks and uncertainties which could cause results or events to differ from current expectations, including, without limitation: risks related to conflict in Eastern Europe; health and safety risks; operating risks; infrastructure; natural gas supply risks; volume throughput; service interruptions; transportation of petroleum products; market risk; inflation; general economic conditions; cyber security, information, and control systems; climate-related risks; environmental regulation risks; regulatory risks; litigation; changes in law; Indigenous and treaty rights; dependence on certain partners; political uncertainty and civil unrest; decommissioning, abandonment and reclamation costs; reputation risk; weather data; capital market and liquidity risks; interest rates; internal credit risk; foreign exchange risk; debt financing, refinancing, and debt service risk; counterparty and supplier risk; technical systems and processes incidents; growth strategy risk; construction and development; underinsured and uninsured losses; impact of competition in AltaGas' businesses; counterparty credit risk; composition risk; collateral; rep agreements; market value of common shares and other securities; variability of dividends; potential sales of additional shares; labor relations; key personnel; risk management costs and limitations; commitments associated with regulatory approvals for the acquisition of WGL; cost of providing retirement plan benefits; failure of service providers; risks related to pandemics, epidemics or disease outbreaks, including COVID-19; and the other factors discussed under the heading "Risk Factors" in this AIF.

Many factors could cause AltaGas' or any particular business segment's actual results, performance, or achievements to vary from those described in this AIF, including, without limitation, those listed above and the assumptions upon which they are based proving incorrect. These factors should not be construed as exhaustive. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this AIF as intended, planned, anticipated, believed, sought, proposed, estimated, forecasted, expected, projected, or targeted and such forward-looking statements included in this AIF should not be unduly relied upon. The impact of any one assumption, risk, uncertainty, or other factor on a particular forward-looking statement cannot be determined with certainty because they are interdependent and AltaGas' future decisions and actions will depend on management's assessment of all information at the relevant time. Such statements speak only as of the date of this AIF. AltaGas does not intend, and does not assume any obligation, to update these forward-looking statements except as required by law. The forward-looking statements contained in this AIF are expressly qualified by these cautionary statements.

Financial outlook information contained in this AIF about prospective results of operations, financial position, or cash flow is based on assumptions about future events, including economic conditions and proposed courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this AIF should not be used for purposes other than for which it is disclosed herein.

Additional information relating to AltaGas, including its quarterly and annual MD&A and Consolidated Financial Statements and press releases are available through AltaGas' website at www.altagas.ca or through SEDAR at www.sedar.com.

  

AltaGas Ltd. – 2022 Annual Information Form – 3

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**CORPORATE STRUCTURE**

**Incorporation**

AltaGas is a Canadian corporation amalgamated pursuant to the CBCA on January 1, 2020. AltaGas and/or its predecessors began operations in Calgary, Alberta on April 1, 1994 and AltaGas continues to maintain its head, principal, and registered office in Calgary, Alberta currently located at 1700, 355 – 4th Avenue SW, Calgary, Alberta T2P 0J1. AltaGas is a public company, the Common Shares of which trade on the TSX under the symbol "ALA".

**Amended Articles**

On July 1, 2010, AltaGas filed articles of arrangement under the CBCA to effect a corporate arrangement and the amalgamation of AltaGas Ltd., AltaGas Conversion Inc., and AltaGas Conversion #2 Inc. to form AltaGas. Subsequent to the filing of the articles of arrangement, AltaGas filed articles of amendment on the following dates in connection with the creation of each series of Preferred Shares: (i) August 13, 2010 to create the first series of Preferred Shares, Series A Shares and the second series of Preferred Shares, Series B Shares; (ii) June 1, 2012 to create the third series of Preferred Shares, Series C Shares and the fourth series of Preferred Shares, Series D Shares; (iii) December 9, 2013 to create the fifth series of Preferred Shares, Series E Shares and the sixth series of Preferred Shares, Series F Shares; (iv) June 27, 2014 to create the seventh series of Preferred Shares, Series G Shares and the eighth series of Preferred Shares, Series H Shares; (v) November 17, 2015 to create the ninth series of Preferred Shares, Series I Shares and the tenth series of Preferred Shares, Series J Shares; and (vi) February 15, 2017 to create the eleventh series of Preferred Shares, Series K Shares and the twelfth series of Preferred Shares, Series L Shares. On January 1, 2020, AltaGas filed articles of amalgamation to effect the amalgamation of AltaGas with its non-operating subsidiaries AltaGas Investment Ltd., 11801376 Canada Ltd., and Northwest Triumph Contracting Ltd. On January 7, 2022, AltaGas filed articles of amendment to create the thirteenth series of Preferred Shares, Series 2022-A Shares and on August 15, 2022, AltaGas filed articles of amendment to create the fourteenth series of Preferred Shares, Series 2022-B Shares.

**Subsidiary Entities**

The businesses of AltaGas are operated by the Company and a number of its subsidiaries including, without limitation, AltaGas Services (U.S.) Inc., AltaGas Utility Holdings (U.S.) Inc., WGL Holdings, Inc. (WGL), Wrangler 1 LLC, Wrangler SPE LLC, Washington Gas Resources Corp., WGL Energy Services, Inc. (WGL Energy Services), and SEMCO Holding Corporation; in regard to the Utilities business, Washington Gas Light Company (Washington Gas), Hampshire Gas Company, and SEMCO Energy, Inc. (SEMCO); and in regard to the Midstream business, AltaGas Extraction and Transmission Limited Partnership, AltaGas Pipeline Partnership, AltaGas Processing Partnership, AltaGas Northwest Processing Limited Partnership, Harmattan Gas Processing Limited Partnership, Ridley Island LPG Export Limited Partnership, AltaGas Pacific Partnership, AltaGas LPG Limited Partnership, Petrogas Energy Corporation (Petrogas), Petrogas Holdings Partnership, and Petrogas, Inc. In the Corporate/Other segment, subsidiaries include AltaGas Power Holdings (U.S.) Inc., WGL Energy Systems, Inc. (WGL Energy Systems), and Blythe Energy Inc. (Blythe). SEMCO conducts its Michigan natural gas distribution business under the name SEMCO Energy Gas Company (SEMCO Gas). Prior to the close of the Alaska Utilities Disposition, it operated its Alaska natural gas distribution business under the name ENSTAR Natural Gas Company (ENSTAR) and its 65 percent interest in an Alaska regulated gas storage utility under the name Cook Inlet Natural Gas Storage Alaska LLC (CINGSA).

  

AltaGas Ltd. – 2022 Annual Information Form – 4

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**Intercorporate Relationships**

The following organization diagram presents the name and the jurisdiction of incorporation of certain of AltaGas' subsidiaries as at the date of this AIF. The diagram does not include all of the subsidiaries of AltaGas. The assets and revenues of those subsidiaries omitted from the diagram individually did not exceed 10 percent, and in the aggregate did not exceed 20 percent, of the total consolidated assets or total consolidated revenues of AltaGas as at and for the year ended December 31, 2022.

![orgchart5.gif](orgchart5.gif)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp;&nbsp;Updated as of the date of this Annual Information Form.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise stated, ownership is 100%.

  

AltaGas Ltd. – 2022 Annual Information Form – 5

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**OVERVIEW OF THE BUSINESS**

AltaGas is a leading energy infrastructure company that connects natural gas and NGLs to domestic and global markets. The Company operates a diversified, lower-risk, high-growth energy infrastructure business that is focused on delivering resilient and durable value for its stakeholders.

AltaGas' operating segments include the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Utilities, which owns and operates franchised, cost-of-service, rate-regulated natural gas distribution and storage utilities that provide safe, reliable, and affordable energy to its customers. Prior to the close of the Alaska Utilities Disposition, AltaGas' Utilities provided energy to approximately 1.7 million residential and commercial customers in 2022 with an average 2022 rate base of approximately US$5.2 billion. The Utilities business also includes other storage facilities and contracts for interstate natural gas transportation and storage services, as well as WGL Energy Services, an affiliated retail energy marketing business, which sells natural gas and electricity directly to residential, commercial, and industrial customers located in Maryland, Virginia, Delaware, Pennsylvania, Ohio, and the District of Columbia; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Midstream, which is a leading North American platform that connects customers and markets from wellhead to tidewater and beyond. The three pillars of the Midstream business include: 1) global exports, which includes AltaGas' two LPG export terminals; 2) natural gas gathering and extraction; and 3) fractionation and liquids handling. AltaGas' Midstream segment also includes its natural gas and NGL marketing business, domestic logistics, trucking and rail terminals, and liquid storage capability.

AltaGas' Corporate/Other segment consists of the Company's corporate activities and a small portfolio of gas-fired power generation and distribution assets capable of generating 508 MW of power primarily in the state of California.

  

AltaGas Ltd. – 2022 Annual Information Form – 6

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**ALTAGAS' GEOGRAPHIC FOOTPRINT**

![a2023_02x14xutilitiesxmapx.jpg](a2023_02x14xutilitiesxmapx.jpg)

![a2022_11x16xmidstreamxmapx.jpg](a2022_11x16xmidstreamxmapx.jpg)

  

AltaGas Ltd. – 2022 Annual Information Form – 7

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**GENERAL DEVELOPMENT OF ALTAGAS' BUSINESS**

Below is a summary of key developments, acquisitions and dispositions, construction projects and other commercial arrangements broken down by business segment, which have influenced the development of the business segments of the Corporation over the last three completed fiscal years.

**Utilities** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On March 16, 2020, the Council of the District of Columbia passed legislation prohibiting the disconnection of electric and gas services for non-payment of fees during the COVID-19 public health emergency. The moratorium expired in October 2021, however Washington Gas continues to suspend disconnection activities until authorized by the PSC of DC. On April 19, 2021, Washington Gas filed an AMP proposal designed to help customers lower COVID-19 related arrearages, bring accounts current, improve payment behavior, and avoid disconnections. The PSC of DC approved the AMP on August 9, 2021 and began implementing the AMP on November 1, 2021. See "Business of the Corporation - Utilities Business - Washington Gas - Recent Material Regulatory Developments and Approvals".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On March 16, 2020, the Governor of Maryland issued an Executive Order which ordered regulated utilities to cease disconnections and billing of late fees for residential customers. Although the moratorium ended in November 2021, Washington Gas continues to suspend dunning and disconnection activities until certain customer service thresholds have been met for three consecutive months. On February 15, 2021, the Maryland General Assembly passed the RELIEF Act to help Maryland residential customers who are in arrears. On June 15, 2021, the PSC of MD issued an order allocating US$5.7 million to Washington Gas to be reflected on customer bills. Those funds have all been applied to customer accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On March 16, 2020, the SCC of VA issued an order which prohibited disconnections of electricity, gas, water, and sewer utility services during the COVID-19 public health emergency. The moratoriums ended on June 30, 2021. On December 8, 2020, Washington Gas was awarded US$7.7 million under the Virginia CARES Relief Funding Award, to use for customer arrearages. In August 2021, the Virginia General Assembly appropriated US$120 million of ARPA Funds as direct financial assistance to residential utility customers with arrearages over 60 days as of August 31, 2021. On December 6, 2021, Washington Gas received US$6.9 million ARPA Funds which was applied to customer arrearages.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On March 31, 2020, the Public Sector Pension Investment Board and the Alberta Teachers' Retirement Fund Board acquired all the issued and outstanding common shares of ACI for $33.50 per share. AltaGas owned 11,025,000 (approximately 37 percent) of ACI's common shares and received cash proceeds of approximately $369 million upon close.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On April 15, 2020, the MPSC issued an order for all utilities which allows for regulatory asset accounting to capture bad debts in excess of what is in approved rates. On February 18, 2021, the MPSC issued an order that requires the MPSC staff to establish an Energy Accessibility and Affordability Collaborative to coordinate efforts

  

AltaGas Ltd. – 2022 Annual Information Form – 8

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and find efficiencies between the EWRP Low-Income workgroup and the Monthly Energy Assistance Program workgroup.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On February 24, 2021, the PSC of DC approved Washington Gas' settlement agreement in its recent rate case, reflecting a base rate increase of approximately US$20 million effective April 1, 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On April 9, 2021, the PSC of MD issued a Final Order affirming the PULJ in Washington Gas' recent rate case, reflecting a base rate increase of approximately US$13 million effective on March 26, 2021. See "Business of the Corporation - Utilities Business - Washington Gas - Recent Material Regulatory Developments and Approvals".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On July 1, 2021, SEMCO submitted its 2022-2023 EWRP plan, a form of energy efficiency program for its customers, for approval by the MPSC. SEMCO proposes to spend approximately US$30 million on energy waste reduction over 2022 and 2023 to achieve a combined first year energy savings goal of approximately 10.1 million therms. On April 25, 2022, the MPSC approved the EWRP plan. See "Business of the Corporation - Utilities Business - SEMCO Energy - Recent Material Regulatory Developments and Approvals".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On September 15, 2021, the PSC of DC issued an Order directing Washington Gas to submit a corrective action plan to bring Washington Gas into compliance with the NGQSS regarding call response time standards. Washington Gas was in compliance with the call answering and call abandonment NGQSS service metrics in January 2022, and expects to maintain NGQSS levels for these metrics going forward. Pursuant to a further Order issued by the PSC of DC on February 10, 2022, Washington Gas will not resume disconnections until authorized by the PSC of DC. On April 22, 2022, the PSC of DC approved Washington Gas' petition to resume disconnections. See "Business of the Corporation - Utilities Business - Washington Gas - Recent Material Regulatory Developments and Approvals".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On September 30, 2021, the MD OPC filed a motion to establish a corrective action plan and impose civil penalties or, alternatively, to order Washington Gas to show cause why the Commission should not impose civil penalties in regards to violation of Condition 11, relating to customer service requirements, of the PSC of MD Order in the Washington Gas Merger proceeding with AltaGas. On October 15, 2021, the PSC of MD issued a show cause order directing Washington Gas to respond to the MD OPC motion. Washington Gas filed its reply to the MD OPC motion on October 22, 2021. On December 23, 2021, the PSC of MD accepted Washington Gas' proposed corrective action plan with modifications. On March 17, 2022, the PSC of MD issued an Order imposing a civil penalty of approximately US$1.1 million on Washington Gas, which was paid in full on March 31, 2022. On September 2, 2022, Washington Gas filed a request with the PSC of MD seeking permission to resume collections, late fees and terminations. See "Business of the Corporation - Utilities Business - Washington Gas - Recent Material Regulatory Developments and Approvals".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On December 1, 2021, Washington Gas filed its proposed amendment for the 2023 to 2027 SAVE program, proposing to invest approximately US$889 million from 2023 to 2027 to replace higher risk pipeline and facilities in Virginia. On May 26, 2022, the SCC of VA approved the proposed amendment with a total five-year spending cap of approximately US$878 million, which may be exceeded by up to 5 percent. See "Business of the Corporation - Utilities Business - Washington Gas - Recent Material Regulatory Developments and Approvals".

  

AltaGas Ltd. – 2022 Annual Information Form – 9

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On December 17, 2021, Washington Gas filed a proposed amendment for its CARE Plan for the period from May 2022 to April 2025, proposing to continue and expand its portfolio of energy efficiency programs to Virginia customers with a total three-year budget of approximately US$12 million. On April 13, 2022, the SCC of VA approved the proposed US$12 million CARE Plan for residential and commercial customers for the three year period beginning May 1, 2022. See "Business of the Corporation - Utilities Business - Washington Gas - Recent Material Regulatory Developments and Approvals".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On April 4, 2022, Washington Gas filed an application for authority to increase charges for gas service in the District of Columbia. The requested rates are designed to collect an incremental US$48 million in revenues, net of approximately US$5 million of costs collected through the PROJECT*pipes* surcharge. See "Business of the Corporation - Utilities Business - Washington Gas - Recent Material Regulatory Developments and Approvals".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On May 26, 2022, AltaGas announced the Alaska Utilities Disposition for consideration of US$800 million (approximately CAD$1.1 billion) prior to closing adjustments. The transaction closed on March 1, 2023. See "Business of the Corporation - Utilities Business - ENSTAR and CINGSA".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On June 29, 2022, Washington Gas filed an application for authority to increase rates in the Commonwealth of Virginia. The request is to collect an incremental US$48 million in base rates as well as to transfer an additional US$39 million currently collected in SAVE surcharge into base rates. See "Business of the Corporation - Utilities Business - Washington Gas - Recent Material Regulatory Developments and Approvals".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On December 22, 2022, Washington Gas filed an application with the PSC of DC for the third phase of PROJECT*pipes* (PROJECT*pipes* 3), seeking approval of approximately US$672 million for the five-year period from January 1, 2024 to December 31, 2028. See "Business of the Corporation - Utilities Business - Washington Gas - Recent Material Regulatory Developments and Approvals".

**Midstream**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On December 15, 2020, AltaGas completed the acquisition of 37 percent of Petrogas for total consideration of $715 million, increasing its indirectly held ownership interest in Petrogas to approximately 74 percent with Idemitsu owning the remaining interest of approximately 26 percent. On July 5, 2022, AltaGas announced the purchase of the remaining equity ownership of Petrogas from Idemitsu for total cash consideration of approximately $285 million. The closing and effective date of the transaction was July 5, 2022, with AltaGas now owning 100 percent of Petrogas.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ In February 2020, following evaluations of the diminished underlying economics for the proposed Constitution pipeline project, the partners of Constitution elected not to proceed with the project. AltaGas held a 10 percent equity interest in Constitution.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ In the first half of 2020, the Company expanded its integrated northeast B.C. strategy with the completion of the North Pine facility and Townsend 2B expansions. The 10,000 Bbls/d North Pine facility expansion was completed

  

AltaGas Ltd. – 2022 Annual Information Form – 10

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and placed into service in the first quarter of 2020 with additional capacity for the rail terminal to handle the additional volume. The Townsend 2B expansion was commissioned in the second quarter of 2020 and began flowing gas in early May 2020. In March 2020, Townsend Complex licensed capacity was increased to 550 Mmcf/d.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On April 23, 2021, AltaGas completed the sale of the U.S. transportation and storage business for cash proceeds of approximately $341 million (US$275 million), resulting in a pre-tax gain on disposition of approximately $3 million.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On April 12, 2022, AltaGas closed the sale of its interest in the Aitken Creek processing facilities for cash consideration of approximately $224 million, net of closing adjustments, resulting in a pre-tax gain of $1 million.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On June 23, 2022, the Canada Energy Regulator issued AltaGas a 25-year export license for an additional 46,000 Bbls/d of butane.

**Corporate/Other**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ In the third quarter of 2020, AltaGas closed the dispositions of AltaGas Pomona Energy Storage Inc. and land related to a gas fired power generation facility in the U.S., as well as AltaGas Ripon Energy Inc. Aggregate gross proceeds for these dispositions, before working capital and other adjustments, were approximately $67 million, resulting in a pre-tax gain of $8 million.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On January 11, 2022, AltaGas closed an offering of $300 million aggregate principal amount of Subordinated Notes, Series 1. The Subordinated Notes, Series 1 were offered under the Corporation's base shelf prospectus dated February 22, 2021, as supplemented by a prospectus supplement dated January 5, 2022. In connection with the offering, 300,000 Series 2022-A Shares were issued to Computershare Trust Company of Canada to satisfy AltaGas' obligations under the Series 1 Indenture. The proceeds from the offering were used to redeem the Corporation's outstanding Series K Shares on March 31, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**▪** On February 9, 2022, AltaGas closed the sale of a 60 MW stand-alone energy storage development project in Goleta, California for total proceeds of approximately $20 million (US$15 million), subject to certain contingencies, resulting in a pre-tax gain of $7 million. In February 2023, the parties reached an agreement on outstanding contingencies and as a result, the buyer paid AltaGas an additional US$8 million.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On May 27, 2022, AltaGas closed the stock sale of its 70 MW combined cycle power plant in Brush, Colorado for total proceeds of approximately $1 million, net of closing adjustments, resulting in a pre-tax loss of $2 million.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On August 17, 2022, AltaGas closed its offering of $250 million aggregate principal amount of Subordinated Notes, Series 2. The Subordinated Notes, Series 2 were offered under the Corporation's base shelf prospectus dated February 22, 2021, as supplemented by a prospectus supplement dated August 4, 2022. In connection with the offering, 250,000 Series 2022-B Shares were issued to Computershare Trust Company of Canada to

  

AltaGas Ltd. – 2022 Annual Information Form – 11

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satisfy AltaGas' obligations under the Series 2 Indenture. The proceeds from the offering were used to redeem the Corporation's outstanding Series C Shares on September 30, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On November 21, 2022, AltaGas announced that Randy Crawford, President and Chief Executive Officer, will retire from AltaGas in the first half of 2023 as part of a planned leadership succession process. During this period, the Board of Directors will complete its work with external advisors to evaluate internal and external candidates. Mr. Crawford will remain in his role until a successor is named.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ In February 2023, AltaGas reached an agreement with SCE for the purchase of resource adequacy attributes from the Blythe facility for the period from January 1, 2024 through December 31, 2027.

**BUSINESS OF THE CORPORATION**

AltaGas' revenue for the year ended December 31, 2022 was approximately $14.1 billion compared to $10.6 billion for the year ended December 31, 2021. In 2022, 64 percent of revenue from AltaGas' operating segments (excluding Corporate/Other and intercompany eliminations) was from the Midstream segment and 36 percent was from the Utilities segment, compared to 62 percent and 38 percent, respectively, in 2021.

**UTILITIES BUSINESS**

The Utilities business contributed revenue of approximately $5.0 billion for the year ended December 31, 2022 (2021 - $3.9 billion), representing approximately 36 percent (2021 – 38 percent) of AltaGas' total revenue before Corporate/Other segment and intersegment eliminations.

**Utilities Business**

The Utilities segment owns utility assets that deliver natural gas to end-users in the United States and operates a retail energy marketing business. The Utilities business is comprised of Washington Gas (in the District of Columbia, Maryland, and Virginia); Hampshire Gas, a regulated natural gas storage utility in West Virginia; SEMCO Gas in Michigan; and WGL Energy Services, which sells natural gas and electricity to retail customers on an unregulated basis. Prior to the close of the Alaska Utilities Disposition, which closed on March 1, 2023, the Utilities segment also included ENSTAR in Alaska and a 65 percent interest in CINGSA, a regulated natural gas storage utility in Alaska.

**Regulatory Process** 

The Utilities business predominantly operates in regulated marketplaces where, as franchise or certificate holders, regulated utilities are allowed by the regulator to charge regulated rates that provide the utilities the opportunity to recover costs and earn a return on capital. The return on capital is to reflect a fair rate of return on approved utility investments (i.e. rate base) based on a regulatory deemed or targeted capital structure. The ability of a regulated utility to recover prudently incurred costs of providing service and earn the regulator-approved rate of return on equity depends on the utility achieving the cost levels established in the rate-setting processes.

SEMCO Gas and Washington Gas have accelerated pipe and infrastructure replacement programs in place in Michigan and in the District of Columbia, Maryland, and Virginia, respectively. These are long-term programs subject to both

  

AltaGas Ltd. – 2022 Annual Information Form – 12

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changing conditions and regulatory review and approval in multi-year increments. These programs enable SEMCO Gas and Washington Gas to accelerate pipe and infrastructure replacement to further enhance the safety and reliability of the natural gas delivery system. SEMCO Gas and Washington Gas are allowed to begin recovering the cost, including a return, for these investments immediately through approved surcharges for each accelerated pipe or infrastructure replacement program outside of a normal rate case process, mitigating regulatory lag. Once new base rates are put into effect in a given jurisdiction following approval of an application to increase rates, expenditures previously being recovered through the surcharge will be collected through the new base rates.

The Utilities business is subject to regulation over, among other things, rates, accounting procedures, and standards of service. The MPSC has jurisdiction over the regulatory matters related, directly or indirectly, to the services that SEMCO Gas provides to its Michigan customers. Washington Gas is regulated by the PSC of DC, the PSC of MD, and the SCC of VA, which approve its terms of service and the billing rates that it charges to its customers, regulate interactions with affiliates, and regulate retail competition for natural gas supply service. In all jurisdictions, the regulators approve distribution rates based on a cost-of-service regulatory model. In Alaska, the District of Columbia, and Maryland, rates are set using the results from a historical test year plus known and measurable changes. In Michigan and Virginia, rates are set using a projected test year. In all jurisdictions, the rates charged to utility customers are designed to provide the distribution utility with an opportunity to recover all prudently incurred operating, depreciation, income tax, and financing costs and to earn a reasonable return on its investment in the net assets used in its firm gas sales and delivery service.

**Utilities Business Key Utility Metrics** 

The following table summarizes the average rate base for the Utilities business for the years ended December 31, 2022 and 2021:

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| | | |
|:---|:---|:---|
| *(US$ millions)* | **2022** | 2021 |
| Rate base <sup>(1) (2)</sup> | **5211** | 4655 |

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(1)Rate base is indicative of the earning potential of each utility over time. Approved revenue requirement for each utility is typically based on the rate base as approved by the regulator for the respective rate application, but may differ from the rate base indicated above.

(2)Includes ENSTAR and SEMCO Energy's 65 percent interest in CINGSA, which were sold on March 1, 2023 pursuant to the Alaska Utilities Disposition.

  

AltaGas Ltd. – 2022 Annual Information Form – 13

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The following table summarizes the nature of regulation applicable to each utility:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| Regulated Utility | Regulated Authority | % of AltaGas' Consolidated Rate Base as at December 31, 2022 | Allowed Common Equity (%) | Allowed ROE<br>(%)<br>2021 | Allowed ROE<br>(%)<br>2022 | Significant Features/ <br>Material Regulatory Developments |
| **Washington Gas** | PSC of MD<br>SCC of VA<br>PSC of DC | 78% | 52.0 - 53.5 | 9.2 - 9.7 | 9.2 - 9.7 | ■ Distribution rates approved under cost of service model.<br>■ Rate case filed in January 2020 with the PSC of DC for an increase in rates. Settlement agreement filed December 2020 and was approved in February 2021.<br>■ Rate case filed in August 2020 with the PSC of MD for an increase in rates. Evidentiary hearing took place January 2021 and the final order was issued in April 2021.<br>■ Rate case filed in April 2022 with the PSC of DC for an increase in rates. Evidentiary hearing scheduled for late March 2023. <br>■ Application for authority to increase rates filed in June 2022 with the SCC of VA. Evidentiary hearing scheduled to begin in May 2023. |
| **SEMCO Gas** | MPSC | 16% | 45.86 | 9.87 | 9.87 | ■ Distribution rates approved under cost of service model.<br>■ Use of projected test year for rate cases with 10-month limit to issue a rate order. <br>■ Rate rider provides recovery relating to the Main Replacement Program which allows SEMCO Gas to accelerate the replacement of older portions of its system. New IRIP was approved in the 2019 rate case for the years 2020 - 2025. Customers were billed a surcharge beginning in 2021 for the IRIP.  |
| **Hampshire Gas** | FERC | n/a | n/a | n/a | n/a | ■ Pass through cost of service tariff approved by FERC. |

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**Washington Gas**

Washington Gas has been engaged in the natural gas distribution business since 1848 and provides regulated gas distribution services to end users in the District of Columbia, Maryland and Virginia. The utility has approximately 1.2 million customers across these three jurisdictions: District of Columbia (~165,000; 13 percent), Maryland (~512,000; 42 percent), and Virginia (~550,000; 45 percent). Washington Gas operations are such that the loss of any one customer or group of customers would not have a significant adverse effect on its business.

The average number of customers at Washington Gas has increased by approximately 1 percent annually during the past three years, with an increase of 1 percent in 2022. While there may occasionally be variations in this pattern, average per customer annual gas consumption at Washington Gas over the longer-term has been gradually decreasing because of, among other things, the availability of utility programs and resources for customers to reduce consumption through: (1) investing in high-efficiency equipment and appliances; (2) optimizing home and building energy use; and (3) becoming more conscious of high energy usage and making changes to habits and routines.

  

AltaGas Ltd. – 2022 Annual Information Form – 14

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***Operations***

Washington Gas obtains natural gas supplies that originate from multiple regions throughout the U.S. At December 31, 2022, it had service agreements with four pipeline companies that provided firm transportation and storage services, with contract expiration dates ranging from 2023 to 2044. Washington Gas has also contracted with various interstate pipeline and storage companies to add to its storage and transportation capacity.

The following table sets out, by customer category, Washington Gas' deliveries:

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| | | |
|:---|:---|:---|
| | **2022** | 2021 |
| **Deliveries: (MDth)** |  |  |
| Residential | **70121** | 65779 |
| Commercial | **21675** | 20099 |
| Transport | **82615** | 80062 |
| Total deliveries | **174411** | 165940 |
|  | **2022** | 2021 |
| **Customers at Year End:** |  |  |
| Residential | **1007600** | 988296 |
| Commercial | **50503** | 49369 |
| Transport | **168707** | 179514 |
| Total customers | **1226810** | 1217179 |

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***Seasonality***

The natural gas distribution business in the District of Columbia, Maryland and Virginia is seasonal, as the majority of natural gas demand occurs during the winter heating season that extends from November to March. Accordingly, annualized individual quarterly revenues and earnings are not indicative of annual results.

Forecasted volumes in the District of Columbia are set based on the 30-year average Degree Days expected for the period. In Maryland and Virginia, there are billing mechanisms in place which are designed to eliminate the effects of variance in customer usage caused by weather and other factors such as conservation. In the District of Columbia, there is no weather normalization billing mechanism, nor does Washington Gas hedge to offset the effects of weather. As a result, colder or warmer weather will result in variances to financial results.

  

AltaGas Ltd. – 2022 Annual Information Form – 15

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**Recent Material Regulatory Developments and Approvals** 

***District of Columbia Jurisdiction***

Washington Gas has an Accelerated Pipe Replacement Plan (PROJECT*pipes*) for the replacement of higher-risk pipe associated with an aging infrastructure in its distribution system in the District of Columbia. On December 11, 2020, the PSC of DC approved a 3-year, US$150 million plan covering the period from January 1, 2021 to December 31, 2023. On December 22, 2022, Washington Gas filed an application with the PSC of DC for PROJECT*pipes* 3, seeking approval of approximately US$672 million for the five-year period from January 1, 2024 to December 31, 2028.

In August 2021, the PSC of DC approved Washington Gas' AMP proposal designed to help customers: 1) lower or eliminate existing COVID-19 related arrearages, 2) bring accounts current, 3) improve payment behavior on customers' new bills, and 4) avoid disconnection and allow customers to remain current in their payment obligations. On October 8, 2021, Washington Gas filed new tariff provisions regarding the AMP and implemented the AMP starting November 1, 2021. On October 6, 2022, the PSC of DC approved Washington Gas' request to automatically enroll its District of Columbia energy assistance customers in the AMP and extended the AMP for two years to October 2024.

On September 15, 2021, the PSC of DC issued an Order directing Washington Gas to submit a corrective action plan to bring Washington Gas into compliance with the NGQSS regarding call response time standards. The Order also stated that Washington Gas shall not disconnect gas customers for non-payment until Washington Gas complies with NGQSS or such time as the PSC of DC otherwise determines. The PSC of DC also found that costs incurred by complying with this Order are not to be included in Washington Gas' COVID-19 regulatory asset. Washington Gas filed a corrective action plan with the PSC of DC on September 27, 2021 and has complied with the additional filing requirements directed by the September 15, 2021 Order. In March 2022, the PSC of DC issued an Order stating that Washington Gas may resume collection activities, but not disconnections, and shall not assess late fees for the 2020 or 2021 calendar years for all classes of customers. On April 1, 2022, Washington Gas filed a Motion requesting permission to resume non-payment disconnections, demonstrating it met the threshold for compliance with the NGQSS. On April 22, 2022, the PSC of DC granted Washington Gas' motion to resume disconnections.

On April 4, 2022, Washington Gas filed an application for authority to increase charges for gas service in the District of Columbia. The requested rates are designed to collect approximately US$53 million in total annual revenues requesting a 10.4 percent rate of return on equity. Of the requested revenue increase, approximately US$5 million represents costs currently collected through the PROJECT*pipes* surcharge; therefore, the incremental amount of the base rate increase is approximately US$48 million. Washington Gas requested that new rates be implemented in January 2023. The PSC of DC adopted a procedural schedule on August 12, 2022 and supplemental testimony was filed on September 2, 2022. The direct testimony of the District of Columbia's Office of People's Counsel and other intervenors was filed on November 4, 2022. Rebuttal testimony was filed on January 6, 2023 and evidentiary hearings are scheduled for late March 2023.

***Maryland Jurisdiction***

In August 2020, Washington Gas filed an application with the PSC of MD to increase its base rates by approximately US$28 million, including approximately US$6 million collected through the STRIDE surcharges for system upgrades. In December 2020, Washington Gas filed rebuttal testimony with a revised revenue requirement of approximately US$27 million. On April 9, 2021, a final order was received from the PSC of MD related to this rate increase application, authorizing Washington Gas to increase its Maryland natural gas distribution rates by approximately US$13 million (including US$6 million currently collected through the STRIDE surcharge), reflecting a return on equity of 9.70 percent. The revenue increase became effective on March 26, 2021. On May 14, 2021, the MD OPC filed a petition for re-hearing of the PSC of MD's finding on merger synergy savings and certain rate base additions. The request was denied and on August 31, 2021, the MD OPC filed an appeal of the PSC of MD's denial of their petition for a re-hearing with the Circuit Court of Baltimore City (Circuit Court). On February 25, 2022, the Circuit Court reversed the July 29, 2021 order from the

  

AltaGas Ltd. – 2022 Annual Information Form – 16

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PSC of MD and remanded two issues back to the PSC of MD. On March 10, 2022, the PSC of MD filed a Motion to Alter or Amend Judgement to the Circuit Court's ruling on the merger synergy savings issue and the MD OPC filed a response. On May 31, 2022, the Circuit Court granted the PSC of MD and Washington Gas' joint motion, determining that the PSC of MD properly permitted Washington Gas' recovery of corporate costs and relieving the PSC of MD of the obligation to rule on merger synergy savings on remand. The Circuit Court did not disturb its ruling on certain rate base additions, and the PSC of MD stated in a subsequent filing that it will address future challenges to rate base in accordance with the Circuit Court's original ruling. On June 30, 2022, the MD OPC appealed the Circuit Court's new order on merger synergy savings to the Appellate Court of Maryland (formerly the Maryland Court of Special Appeals). Washington Gas anticipates a final decision from the Appellate Court as soon as the first half of 2023.

On September 30, 2021, the MD OPC filed a motion to establish a corrective action plan and impose civil penalties or, alternatively, to order Washington Gas to show cause why the Commission should not impose civil penalties relating to customer service issues. On October 22, 2021, Washington Gas filed its reply to the MD OPC's motion. On December 23, 2021, the PSC of MD found that, among other things: (1) Washington Gas violated the Maryland Code of Regulations from 2016 through June 22, 2021; (2) Washington Gas violated Conditions 11 and 11F of the AltaGas Merger Order from June 2018 through June 22, 2021; (3) the Commission scheduled a hearing to address whether and to what extent civil penalties are appropriate; and (4) Washington Gas' proposed Corrective Action Plan was accepted with modifications. The PSC of MD held a hearing on February 9, 2022 to address civil penalties and to consider Washington Gas' rehearing request. On March 17, 2022, the PSC of MD issued an Order imposing a civil penalty of approximately US$1.1 million on Washington Gas. The Order also addressed required customer service standards as well as the requirement to track certain costs related to Washington Gas' call center. The civil penalty was paid in full in March 2022.

On September 2, 2022, Washington Gas filed a request with the PSC of MD seeking permission to resume collections, late fees, and terminations. Washington Gas is currently conversing with PSC of MD Staff and the MD OPC on a joint recommendation for regularizing call center metrics and resuming regular customer care, including collections, late fees and terminations.

***Virginia Jurisdiction***

On December 1, 2021, Washington Gas filed its proposed amendment for the 2023 to 2027 SAVE program, proposing to invest approximately US$889 million from 2023 to 2027 to replace higher risk pipeline and facilities in Virginia. On May 26, 2022, the SCC of VA approved the proposed amendment with a total five-year spending cap of approximately US$878 million, which may be exceeded by up to 5 percent.

On December 17, 2021, Washington Gas filed a proposed amendment for its CARE Plan for the period from May 2022 to April 2025, proposing to continue and expand its portfolio of energy efficiency programs to Virginia customers with a total three-year budget of approximately US$12 million. On March 18, 2022, the staff of the SCC of VA issued its report on this proceeding, agreeing that Washington Gas' programs are generally cost effective but recommending that the SCC of VA reject the proposed programs targeting commercial and industrial customers. Washington Gas filed its response to the Staff report on April 1, 2022. On April 13, 2022, the SCC of VA approved the proposed US$12 million CARE Plan for residential and commercial customers for the three-year period beginning May 1, 2022.

On June 29, 2022, Washington Gas filed an application for authority to increase rates in the Commonwealth of Virginia. The requested rates are designed to collect an incremental US$48 million in total annual revenues requesting a 10.75 percent return on equity. In addition to the incremental revenues requested, the base rate increase also includes the transfer of US$39 million in revenues currently collected in the form of a surcharge relating to Washington Gas' SAVE program. Washington Gas implemented the proposed rates (on an interim basis subject to refund) on the first billing cycle date for December 2022, which was 150 days after its application was filed, as permitted by Virginia law. Intervenors provided their direct testimony on February 10, 2023. The SCC of VA staff testimony is due on March 10, 2023, Washington Gas' rebuttal testimony is due on April 7, 2023, and the hearings are scheduled for May 2023.

  

AltaGas Ltd. – 2022 Annual Information Form – 17

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In connection with the WGL Acquisition, AltaGas and WGL have made commitments related to the terms of the PSC of DC settlement agreement and the conditions of approval from the PSC of MD and the SCC of VA. Among other things, these commitments include rate credits distributable to both residential and non-residential customers to partially offset rate increases resulting from gas expansion, extension of natural gas service over a 10-year period and other programs, various public interest commitments, and safety programs. As at December 31, 2022, approximately US$8 million of these merger commitments have been charged to expense but not paid. Additionally, there are a number of operational commitments with various timeframes, including the funding of leak mitigation and reducing leak backlogs, the funding of damage prevention efforts, developing projects to extend natural gas service, maintaining pre-merger quality of service standards including odor call response times, increasing supplier diversity, achieving synergy savings benefits, as well as reporting and tracking related to certain commitments, and causing the development of 15 MW of either electric grid energy storage or tier one renewable resources.

**Hampshire Gas**

Hampshire owns underground natural gas storage facilities, including pipeline delivery facilities located in and around Hampshire County, West Virginia, and operates these facilities to serve Washington Gas. Hampshire is regulated by the FERC. Washington Gas purchases all of the storage services of Hampshire, and includes the cost of the services in the commodity cost of its regulated energy bills to customers. Hampshire operates under a "pass-through" cost-of-service based tariff approved by FERC.

**SEMCO Energy** 

SEMCO Energy's head office is located in Port Huron, Michigan. SEMCO Energy's primary business is a gas utility business. It operates regulated natural gas transmission and distribution divisions in Michigan, doing business as SEMCO Gas. Prior to the close of the Alaska Utilities Disposition on March 1, 2023, SEMCO Energy also included ENSTAR in Alaska and a 65 percent ownership interest in CINGSA, a regulated natural gas storage utility in Alaska. The gas utility business accounts for approximately 99 percent of SEMCO Energy's 2022 consolidated revenues. The gas utility business purchases, transports, distributes, stores and sells natural gas and related gas distribution services to residential and C&I customers and is SEMCO Energy's largest business segment.

**SEMCO Gas** 

In Michigan, SEMCO Gas distributes natural gas to approximately 320,000 regulated customers located in both southern Michigan and Michigan's Upper Peninsula, approximately 92 percent of which are residential. The remaining customers include power plants, food production facilities, furniture manufacturers, and other industrial customers.

The average number of customers at SEMCO Gas has increased by an average of approximately 1 percent annually during the past three years, with an increase of approximately 1 percent in 2022. While there may occasionally be variations in this pattern, average per customer annual gas consumption in Michigan over the longer-term has been gradually decreasing because of, among other things, the availability of utility programs and resources for customers to reduce consumption through: (1) investing in high-efficiency equipment and appliances; (2) optimizing home and building energy use; and (3) becoming more conscious of high energy usage and making changes to habits and routines.

SEMCO Gas pursues opportunities to develop service areas that are not currently served with natural gas. Expansion opportunities that currently exist represent relatively minor asset growth, but SEMCO Gas remains committed to its strategy of pursuing expansion projects that meet management's target return on investment.

  

AltaGas Ltd. – 2022 Annual Information Form – 18

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***Operations***

The SEMCO Gas natural gas transmission and delivery system in Michigan includes approximately 197 miles of gas transmission pipelines and 6,551 miles of gas distribution mains. The pipelines and mains are located throughout the southern half of Michigan's Lower Peninsula (including in and around the cities of Albion, Battle Creek, Holland, Niles, Port Huron, and Three Rivers) and also in the central, eastern, and western areas of Michigan's Upper Peninsula.

SEMCO Gas has access to natural gas supplies throughout the U.S. and Canada via interstate and intrastate pipelines in and near Michigan. To provide gas to SEMCO Gas sales customers, SEMCO Gas has negotiated standard terms and conditions for the purchase of natural gas under the NAESB form of agreement with a variety of suppliers.

The following table sets out, by customer category, SEMCO Gas' deliveries:

---

| | | |
|:---|:---|:---|
| | **2022** | 2021 |
| **Deliveries: (MDth)** |  |  |
| Residential | **27030** | 24245 |
| Commercial | **16462** | 14027 |
| Transport | **20460** | 20920 |
| Gas Customer Choice <sup>(1)</sup> | **2937** | 3049 |
| Total deliveries | **66889** | 62241 |
|  | **2022** | 2021 |
| **Customers at Year End** <sup>(2)</sup>**:** |  |  |
| Residential | **274989** | 270312 |
| Commercial | **25302** | 24500 |
| Transport | **265** | 268 |
| Gas Customer Choice <sup>(1)</sup> | **19397** | 21490 |
| Total customers | **319953** | 316570 |

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(1)In Michigan, the MPSC has a program known as the Gas Customer Choice Program, under which gas sales customers may choose to purchase natural gas from third-party suppliers, while SEMCO Gas continues to charge these customers applicable distribution charges and customer fees, plus a balancing fee.

(2)Excludes customers from SEMCO Gas' non-regulated business.

***Seasonality***

The natural gas distribution business in Michigan is seasonal, as the majority of natural gas demand occurs during the winter heating season that extends from November to March. Accordingly, annualized individual quarterly revenues and earnings are not indicative of annual results.

Forecasted volumes for SEMCO Gas are set based on the 15-year rolling average Degree Days expected for the period. Temperature fluctuations impact the operating results of SEMCO Gas.

***Recent Material Regulatory Developments and Approvals***

As required by the order issued by the MPSC during SEMCO Gas' last depreciation study in 2018, SEMCO Gas filed a new depreciation study with the MPSC on September 30, 2022, using 2021 data. Based on the depreciation study, the new proposed rates will result in an upward adjustment of less than US$1 million to depreciation expense when compared to the current rates. The MPSC is expected to issue its decision in 2023.

SEMCO Gas is required by Michigan law (Public Acts of 2008 Act No. 295, amended by Public Acts of 2016 Act No. 342) to establish and maintain an EWRP for its customers and to implement and fund various energy efficiency and conservation matters. The costs of the EWRP are recovered through surcharges imposed on all customers of SEMCO Gas. EWRP plans and reconciliations are subject to review and approval by the MPSC. SEMCO Gas also has the ability

  

AltaGas Ltd. – 2022 Annual Information Form – 19

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to earn a performance incentive if certain EWRP goals and objectives are met annually. On July 1, 2021, SEMCO submitted its 2022 — 2023 EWRP plan for MPSC approval. SEMCO Gas proposes to spend approximately US$30 million on energy waste reduction over 2022 and 2023 to achieve a combined first year energy savings goal of approximately 10.1 million therms. On April 25, 2022, the MPSC approved the EWRP plan as filed. On April 29, 2022, SEMCO Gas submitted its 2021 EWRP reconciliation filing which demonstrated it achieved the goals and parameters established in its 2021 Commission-approved EWRP plan, and requested that it receive a performance incentive of approximately US$3 million. Settlement was reached and the MPSC approved the settlement on July 27, 2022, allowing SEMCO Gas to collect the performance incentive as applied for.

**ENSTAR and CINGSA**

On May 26, 2022, AltaGas announced the Alaska Utilities Disposition for consideration of US$800 million (approximately CAD$1.1 billion) prior to closing adjustments. The transaction closed on March 1, 2023 and included AltaGas' 100 percent interest in ENSTAR, the 65 percent indirect interest in CINGSA and the CINGSA Storage facility, and other ancillary operations. AltaGas plans to use the proceeds of this sale to reduce debt and provide financial flexibility to advance its growth opportunities over the coming years.

The following table sets out, by customer category, ENSTAR's deliveries:

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| | | |
|:---|:---|:---|
| | **2022** | 2021 |
| **Deliveries: (MDth)** |  |  |
| Residential | **19840** | 21230 |
| Commercial | **13469** | 14203 |
| Transport | **22804** | 22385 |
| Total deliveries | **56113** | 57818 |
|  | **2022** | 2021 |
| **Customers at Year End:** |  |  |
| Residential | **138644** | 137229 |
| Commercial | **13170** | 13114 |
| Transport | **12** | 13 |
| Total customers | **151826** | 150356 |

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**Retail Energy Marketing**

AltaGas' retail energy marketing business consists of the operations of WGL Energy Services, which sells natural gas and electricity directly to residential, commercial, and industrial customers located in Maryland, Virginia, Delaware, Pennsylvania, Ohio, and the District of Columbia.

WGL Energy Services has a secured supply arrangement with Shell Energy North America (US), L.P (Shell Energy). Under this arrangement, WGL Energy Services has the ability to purchase the majority of its power, natural gas, and related products from Shell Energy in a structure that reduces WGL Energy Services' cash flow risk from collateral posting requirements. While Shell Energy is intended to be the majority provider of natural gas and electricity, WGL Energy Services retains the right to purchase supply from other providers. The supply arrangement with Shell Energy expires in March 2024.

  

AltaGas Ltd. – 2022 Annual Information Form – 20

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<u>Natural Gas</u>

As of December 31, 2022, WGL Energy Services served approximately 84,000 residential, commercial and industrial natural gas customers located in Maryland, Virginia, Delaware, Pennsylvania, and the District of Columbia. WGL Energy Services is subject to regulation by the public service regulatory commission of the jurisdictions in which it is authorized as a competitive service provider. WGL Energy Services contracts for storage and pipeline capacity to meet its customers' needs primarily through transportation releases and storage services allocated from the utility companies in the various service territories through several interstate natural gas pipelines. To supplement WGL Energy Services' natural gas supplies during periods of high customer demand, WGL Energy Services maintains gas storage inventory in storage facilities that are assigned by natural gas utilities such as Washington Gas. This storage inventory enables WGL Energy Services to meet daily and monthly fluctuations in demand and to minimize the effect of market price volatility.

<u>Electricity</u>

As of December 31, 2022, WGL Energy Services served approximately 84,000 residential, commercial, and industrial electricity customer accounts located in Maryland, Delaware, Pennsylvania, Ohio, and the District of Columbia. WGL Energy Services does not own or operate any electric generation, transmission, or distribution assets.

**Competition**

WGL Energy Services competes with wholesale energy suppliers, regulated electric utilities, and other third-party marketers to sell natural gas and electricity to customers. Marketers of natural gas and electric supply compete largely on price; therefore, gross margins are relatively small.

Operations can be positively or negatively affected by significant volatility in the wholesale price of natural gas. Accordingly, risk management policies and procedures are designed to minimize the risk that purchase commitments and the related sale commitments do not closely match. In general, profit opportunities for trading activities are increased with increased volatility in natural gas prices. These opportunities are primarily in short-term transportation and storage spreads, seasonal storage spreads, and long-term supply or basis transactions.

To provide competitive pricing to its retail customers and in adherence to its risk management policies and procedures, WGL Energy Services manages its contract portfolios by attempting to closely match the commitments for deliveries from suppliers with requirements to serve sales customers. WGL Energy Services' residential and small commercial electric customer growth opportunities are significantly affected by the price for SOS offered by electric utilities. These rates are periodically reset for each customer class based on the regulatory requirements in each jurisdiction. Customer growth opportunities either expand or contract due to the relationship of these SOS rates to current market prices.

**Environmental Considerations Impacting the Utilities Business** 

<u>Washington Gas</u> 

Washington Gas is subject to federal, state, and local laws and regulations related to environmental matters. These laws and regulations may require sustained expenditures over time to control environmental effects. The cost of compliance associated with environmental laws and regulation can be significant and is subject to change. Almost all environmental liabilities associated with Washington Gas operations are costs expected to be incurred to remediate sites where Washington Gas or a predecessor affiliate operated MGPs or gas holder sites. Estimates of liabilities for environmental response costs are difficult to determine with precision because of the various and variable factors that can affect eventual remediation costs for a given site. These factors include, but are not limited to, the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the complexity of the site;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in environmental laws and regulations at the federal, state, and local levels;

  

AltaGas Ltd. – 2022 Annual Information Form – 21

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the number of regulatory agencies or other parties involved;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• new technology that renders previous technology obsolete or experience with existing technology that proves ineffective;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the level of remediation required; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• variations between the estimated and actual time required to remediate an environmentally contaminated site.

Washington Gas has identified up to ten sites where it or its predecessors may have operated MGPs. Washington Gas last used any such plant in 1984. In connection with these operations, Washington Gas is aware that coal tar and certain other by-products of the gas manufacturing process are present at or near some former sites and may be present at others.

Washington Gas is currently remediating its East Station property located in Washington, D.C., which is adjacent to the Anacostia River, under a 2012 Consent Decree with the District of Columbia and federal government. Remedial measures include ground water pump and treat, tar recovery, soil encapsulation, and other treatment. In addition, at another adjoining property located to the east of the property owned by the District of Columbia, Washington Gas agreed to perform a site investigation and report the findings pursuant to oversight by the DOEE. Additional remediation may be required at this property.

At another adjoining property known as the "Eastern Power Boat Club Property", located to the east of the property owned by the District of Columbia, Washington Gas agreed to perform a site investigation and report the findings pursuant to oversight by the DOEE. The property was subject to a July 12, 2019 Administrative Order from the DOEE. That Administrative Order was withdrawn, and Washington Gas entered into a negotiated Administrative Order on Consent with the DOEE that was effective on March 11, 2020. Under the terms of the Administrative Order on Consent, Washington Gas submitted a Remedial Investigative Report on February 26, 2021. On March 11, 2021, Washington Gas received an Administrative Order related to the alleged presence of sheens in the Anacostia River. Washington Gas filed an appeal of the Administrative Order with the District of Columbia Office of Administrative Hearings on March 26, 2021. The appeal is pending.

Washington Gas may be responsible for environmental cleanup and government costs associated with the ARSP. In February 2016, Washington Gas received a letter from the DOEE and NPS regarding the ARSP, indicating that the District of Columbia is conducting a separate remedial investigation and feasibility study of the river to determine if and what cleanup measures may be required and to prepare a natural resource damage assessment. Subsequently, the DOEE issued an Interim ROD for remediation of "Early Action Areas" in the Anacostia River. Although the Interim ROD identifies East Station as one of fifteen potential environmental cleanup sites, the DOEE is proposing to continue the remediation of East Station under Washington Gas' existing Consent Decree rather than as part of the ARSP. On June 14, 2021, Washington Gas received letters from the DOEE and NPS notifying the Company that it may be responsible for environmental cleanup and government costs associated with the ARSP. On November 12, 2021, Washington Gas was notified by DOEE, the U.S. Department of Interior, and the National Oceanic and Atmospheric Administration that those agencies, as trustees, will perform a Natural Resource Damage Assessment of the Anacostia River and that Washington Gas was identified as a potentially responsible party. Washington Gas is not able to estimate the total amount of potential damages or timing associated with the District of Columbia's environmental investigation on the Anacostia River at this time. While an allocation method has not been established, Washington Gas has accrued an amount based on a potential range of estimates for its share of the feasibility study costs.

On May 27, 2021, Washington Gas submitted an application to the VCP for a former gas holder site located in Chillum, Maryland. Based upon the VCP application, Washington Gas has accrued an amount for the Chillum site based on the potential costs of a range of remedial options. Regulatory orders issued by the PSC of MD allow Washington Gas to recover the costs associated with the sites applicable to Maryland over the period ending in 2035. Rate orders issued by the PSC of DC allow Washington Gas a three-year recovery of prudently incurred environmental response costs and allow Washington Gas to defer additional costs incurred between rate cases. Regulatory orders from the SCC of VA have

  

AltaGas Ltd. – 2022 Annual Information Form – 22

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generally allowed the recovery of prudent environmental remediation costs to the extent they were included in the underlying financial data supporting an application for rate change.

If revisions to applicable environmental laws or regulations require further investigation and remediation to be performed at the sites in the future, Washington Gas could incur a material liability. This liability would be offset by a corresponding regulatory asset. To the extent that any costs are not fully recoverable from customers through regulatory proceedings or from insurance or other potentially responsible persons in any of Washington Gas' jurisdictions, these costs would reduce its earnings and results of operations.

In certain jurisdictions where Washington Gas operates, legislation and other forms of regulation driven by climate goals or other policies intended to reduce carbon or decarbonize — including policy-driven electrification, renewable fuel requirements, building code revisions that reduce or eliminate natural gas in residential or commercial buildings, building performance standards that eliminate natural gas, efficiency standards or other measures — may be, or have been, enacted at the federal, state or local level. For example, D.C. Act 24-528 requires the Mayor to issue final regulations by December 31, 2026 that require all new construction or substantial improvements of commercial buildings (with limited exceptions) to be constructed to a net-zero-energy standard, which is defined to prohibit on-site fuel combustion. In Montgomery County, Maryland, Bill 13-22 will require regulations that establish all-electric building standards for all new construction (with limited exceptions) by December 31, 2026.

This current or future legislation or regulation may impose additional requirements, restrictions, or costs on Washington Gas' operations or may adversely impact customer growth or usage or may impact Washington Gas' ability to recover costs and maintain reasonable rates. Additionally, current or pending environmental laws and regulations could restrict or impact AltaGas' business operations, financial conditions, and operating expenses (which may or may not be recoverable in customer rates) by providing a cost or other competitive advantage to energy sources other than natural gas, reducing demand for natural gas service and/or the amount of potential new customers, passing on additional costs or restrictions to end users of natural gas, negatively impacting the price of natural gas, increasing the likelihood of litigation, requiring new infrastructure and technology development and implementation, and negatively impacting the overall public perception of AltaGas' services or products that negatively diminishes the value of its brand.

<u>SEMCO Gas</u>

SEMCO Gas had completed its investigation and remediation at the two MGP sites it was responsible for and has received NFA letters from the Michigan Department of Environment, Great Lakes, and Energy for both sites. SEMCO Gas will continue to monitor these sites in the future as required by the NFA letters.

In accordance with an MPSC accounting order, SEMCO Gas' environmental investigation and remediation costs associated with these MGP sites are deferred and amortized over ten years. Rate recognition of the related amortization expense does not begin until the costs are subject to review by the MPSC in a base rate case. To the extent that any costs are not fully recoverable from customers through regulatory proceedings or from insurance or other potentially responsible persons, these costs would reduce SEMCO Gas' earnings and results of operations.

As a result of the NFA letters received to date, SEMCO Gas believes that the likelihood of any further liability at either of these sites is remote. However, if applicable environmental laws change that require further investigation and remediation to be performed at the sites in the future, SEMCO Gas could incur a material liability. This liability would be offset by a corresponding regulatory asset.

Environmental, health, and safety regulations may also require SEMCO Gas to install pollution control equipment, modify its operations, or perform other corrective actions at its facilities.

  

AltaGas Ltd. – 2022 Annual Information Form – 23

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**U.S. Federal Air and GHG Regulations**

<u>Greenhouse Gas Reporting Program</u>

The U.S. GHGRP requires reporting of GHG data and other relevant information from large GHG emission sources, fuel, and industrial gas suppliers, and CO2 injection sites in the United States. A total of 41 categories of reporters are covered by the GHGRP. Facilities determine whether they are required to report based on the types of industrial operations located at the facility, their emission levels, or other factors. Facilities are generally required to submit annual reports under Part 98 of the GHGRP if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ GHG emissions from covered sources exceed 25,000 metric tons CO2e per year;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Supply of certain products would result in over 25,000 metric tons CO2e of GHG emissions if those products were released, combusted, or oxidized; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The facility receives 25,000 metric tons or more of CO2 for underground injection.

All of AltaGas' operating facilities and utilities located in the U.S. operate under and comply with the requirements set forth by the GHGRP.

For further discussion of the U.S. federal and state air emission regulations, please see "Business of the Corporation – Corporate/Other Segment – Environmental Considerations Impacting the Corporate/Other Segment".

**MIDSTREAM BUSINESS**

AltaGas' Midstream business contributed revenue of $9.0 billion for the year ended December 31, 2022 (2021 - $6.5 billion), representing approximately 64 percent (2021 – 62 percent) of AltaGas' total revenue before the Corporate/Other segment and intersegment eliminations.

**Midstream Business**

AltaGas' Midstream segment is a leading North American platform that connects customers and markets. From wellhead to tidewater and beyond, the Company is focused on providing its customers with safe and reliable service and connectivity that facilitates the best outcomes for their businesses. This includes global market access for North American LPGs, which provides North American producers and aggregators with attractive netbacks for propane and butane while delivering diversity of supply and supporting stronger energy security in Asia.

AltaGas' Midstream platform is heavily focused on the Montney resource play in Northeastern B.C. and centers around global exports, which is where the Company believes the market is headed for resource development over the long-term. AltaGas also operates a broader set of midstream infrastructure assets across the WCSB and select regions in the U.S., which are all focused on connecting customers and markets in the most efficient manner possible.

There are three core pillars to AltaGas' Midstream platform that are integral to each other and facilitate the Company's wellhead to tidewater and beyond value chain. These include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Global Exports, which includes AltaGas' two LPG export terminals where the Company has capacity to export up to 150,000 Bbl/d of propane and butane to key markets in Asia;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Natural Gas Gathering, Processing and Extraction, which includes 1.2 Bcf/d of extraction processing capacity and approximately 1.1 Bcf/d of raw field gas processing capacity, which is heavily focused on the Montney; and

  

AltaGas Ltd. – 2022 Annual Information Form – 24

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Fractionation and Liquids Handling platform, which includes 65 MBbl/d of fractionation capacity and a sizable liquids handling footprint.

The Midstream segment also consists of natural gas, crude oil, and NGL marketing business, domestic logistics, trucking and rail terminals, and approximately 3.2 million barrels of liquid storage capability though a network of underground salt caverns through the Company's Strathcona Storage Joint Venture with ATCO Energy Solutions Ltd, as well as AltaGas' 10 percent interest in the MVP.

**Global Exports**

AltaGas' global export assets are focused on providing North American producers global market access and incremental value for NGLs. Global export assets extend AltaGas' integrated value chain and attract additional volumes to the AltaGas system, supporting future growth of the overall Midstream infrastructure platform with current export capacity of up to 150,000 Bbls/d to Asian markets.

On June 23, 2022, the Canada Energy Regulator approved AltaGas' application for a 25-year export license for an additional 46,000 (40,000 Bbls/d plus 15 percent tolerance) Bbls/d of butane. The license will allow AltaGas to export additional Canadian butane volumes through non-seaborne exports into the U.S. via rail, including deliveries to the Company's Ferndale export terminal in Washington State, and potentially the seaborne exports from Ridley Island in British Columbia over the long-term.

<u>RIPET</u> 

On October 16, 2015, AltaGas entered into a project agreement with RTI (now Trigon) for RIPET, with construction commencing in April 2017. In May 2017, AltaGas entered into a joint venture agreement with Vopak pursuant to which Vopak acquired a 30 percent interest in RIPET. The commercial operations of RIPET commenced in May 2019, with the first propane shipment departing from the terminal to Asia.

Based on production at AltaGas' Midstream facilities and commercial contracts executed or under negotiation, RIPET ended the year with physical throughput of approximately 63,765 Bbls/d in December of 2022, with the ability to increase throughput to upwards of 80,000 Bbls/d.

The terminal leverages CN's existing railway network and the deepest harbor in North America to offer Canada's natural gas producers direct access to international markets and a 15-day shipping advantage versus the U.S. Gulf Coast. With RIPET being the closest North American LPG terminal to Asia, it allows Canadian natural gas and propane producers and aggregators to diversify their market access to Asia, a premium market for propane. RIPET is capable of storing 600,000 Bbls of propane. AltaGas expects to increase throughput from RIPET as it builds on the operational capabilities and global counterparty networks for RIPET. On August 21, 2020, the Canada Energy Regulator granted AltaGas an additional 25 year license to export up to 46,000 Bbls/d of propane to North American and global markets from RIPET, bringing the aggregate propane export capacity under 25 year export licenses to 92,000 Bbls/d. In December 2020, the Minister of Natural Resources approved the additional license.

<u>Ferndale LPG Export Facility</u>

Located approximately 100 miles north of Seattle, the Ferndale terminal represents a strategic outlet point for North American LPG volumes. Like RIPET, it is competitively situated to serve the high-demand Far East market with shorter average shipping times and has a similar competitive arbitrage as RIPET compared to the U.S. Gulf Coast.

Terminal demand is supported through various long-term purchase agreements with Canadian and U.S. suppliers, primarily from key producing regions, processing facilities and refineries in parts of Western Canada and the Northern

  

AltaGas Ltd. – 2022 Annual Information Form – 25

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U.S., including the Bakken in North Dakota. AltaGas also maintains service agreements with numerous Tier 1 rail providers in order to leverage existing railway networks to take advantage of competitively priced product across North America. The terminal is also pipeline connected to two regional refineries, providing additional supply, sales and fee-for-service opportunities for the terminal. The terminal is capable of handling upwards of 75,000 Bbls/d of throughput capacity, with 800,000 Bbls of on-site storage capacity and rail siding capacity for up to 40 railcars.

**Natural Gas Gathering, Processing and Extraction**

Midstream processing activities are comprised of gathering systems that move natural gas on behalf of producers from the wellhead to AltaGas plants where impurities and certain hydrocarbon components are removed, and the gas is compressed to meet the operating specifications of downstream pipeline systems. AltaGas' Midstream processing facilities serve customers primarily in the WCSB that deliver natural gas into downstream pipeline systems and can connect producers to the global export markets for LPG. AltaGas has a total net licensed processing capacity of approximately 2.3 Bcf/d, of which approximately 15 percent is capable of processing sour gas. All of AltaGas' processing facilities are capable of extracting NGLs. The main drivers of AltaGas' processing activities are throughput, inlet composition, gathering and processing fees, frac spreads, and operating costs, with several facilities having the benefit of take-or-pay contracts. Throughput is impacted by new well tie-ins, re-activations, re-completions, well optimizations performed by producers, natural production declines in areas served by AltaGas' processing facilities, and gas available on the main lines.

On April 12, 2022, AltaGas closed the sale of its interest in the Aitken Creek processing facilities. The disposition was triggered as a result of the operator of the facilities exercising a purchase option.

AltaGas' significant processing facilities are as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
| **2022 Licensed Capacity (Net)** | **2022 Licensed Capacity (Net)** | **2022 Licensed Capacity (Net)** | **2022 Licensed Capacity (Net)** | **2022 Licensed Capacity (Net)** |
| Facility | Location | Interest <br>(%) | Operated / Non-Operated | Licensed Capacity Gas Processing - Net (Mmcf/d) |
| Townsend | North of Fort St. John, BC | 100% | Operated | 550 |
| Gordondale | Bonanza, AB | 100% | Operated | 150 |
| Blair Creek | North of Fort St. John, BC | 100% | Operated | 120 |
| JEEP | Joffre, AB | 100% | Operated | 250 |
| EEEP | Edmonton, AB | 100% | Operated | 390 |
| Empress Pembina (PEEP) | Empress, AB | 11% | Non-Operated | 135 |
| Harmattan | Sundre, AB | 100% | Operated | 490 |
| Younger | Taylor, BC | 28% | Non-Operated | 213 |
| Total |  |  |  | 2298 |

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<u>Townsend Complex</u>

The Townsend complex, which is wholly owned by AltaGas, is a 550 Mmcf/d gas processing facility located approximately 100 km north of Fort St. John and 20 km southeast of AltaGas' Blair Creek facility. The majority of the processing capacity is contracted with Montney producers in the area under long-term take-or-pay agreements. In addition, the Townsend complex is able to provide NGL handling, treatment, and storage services to producers. Refer to the "Fractionation and Liquids Handling" section below.

A 25 km gas gathering line connects the Blair Creek field gathering area to the Townsend complex.

In August 2018, AltaGas entered into definitive agreements with Kelt to provide an energy infrastructure solution for the liquids-rich Inga Montney development located in British Columbia. In the second quarter of 2020, Townsend 2B and a

  

AltaGas Ltd. – 2022 Annual Information Form – 26

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gas gathering pipeline that connects upstream fields to AltaGas facilities were commissioned, which added 198 Mmcf/d C3+ deep cut gas processing capacity at the Townsend Complex. The expanded facility provided Kelt with firm processing of 75 Mmcf/d of raw gas under an initial 10 year take-or-pay agreement. In the third quarter of 2020, ConocoPhillips acquired oil and gas assets in the Inga/Fireweed/Stoddart division in the Montney area from Kelt. All operating agreements of AltaGas remain in effect with ConocoPhillips since the acquisition.

<u>Gordondale</u>

AltaGas owns 100 percent of the Gordondale facility which has licensed capacity of 150 Mmcf/d for processing sour natural gas. AltaGas operates the facility which is located in the Gordondale area of the Montney reserve area approximately 100 km northwest of Grande Prairie, Alberta. The Gordondale facility processes gas gathered from Birchcliff's Gordondale Montney development under a long-term take-or-pay contract. The plant is equipped with liquids extraction facilities to capture the NGL value for the producer. The plant also has peaking power plant generators which serve as emergency back-up generation for the plant as well as power supply to the grid when demand is high or supply is low.

<u>Blair Creek</u>

AltaGas owns 100 percent of the Blair Creek facility which has licensed capacity of 120 Mmcf/d of natural gas. AltaGas operates the facility which is located approximately 140 km northwest of Fort St. John, British Columbia. The facility processes gas gathered from Montney producers in the area. The plant is equipped with liquids extraction facilities to capture the NGL value for the producer.

<u>JEEP</u>

AltaGas owns 100 percent of JEEP which has processing capacity of 250 Mmcf/d of natural gas and is capable of producing up to 10,400 Bbls/d of ethane and other NGLs.

The plant is adjacent to Nova Chemicals' Joffre petrochemical complex and recovers ethane and other NGLs from the fuel gas used at the complex. All ethane production from JEEP is sold under a long-term, cost-of-service type contract with Nova Chemicals. AltaGas delivers its NGL production to the Harmattan fractionation plant for further processing. The resulting spec products are sold into markets throughout North America to maximize plant gate netbacks.

<u>EEEP</u>

AltaGas owns 100 percent of EEEP. EEEP is directly connected to the Alberta Ethane Gathering System and to Plains Midstream Canada's Co-Ed NGL pipeline. The plant has a licensed gross inlet capacity of 390 Mmcf/d of natural gas and gross production capacity of 30,500 Bbls/d of ethane and other NGLs.

The processed gas from the facility supplies end-use markets in the city of Edmonton, Alberta. Almost all of EEEP ethane production capacity is currently sold to ethane buyers under long-term fee-for-service contracts. The NGL production is delivered to a Fort Saskatchewan fractionator for further processing. AltaGas takes the resulting spec products in-kind and sells to North American and global markets, through RIPET, to maximize plant gate netbacks.

Gas is supplied to EEEP under a gas supply agreement with NGTL which includes the right for AltaGas to extract liquids from all gas processed at EEEP.

  

AltaGas Ltd. – 2022 Annual Information Form – 27

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<u>Harmattan</u>

AltaGas owns a 100 percent interest in Harmattan located 100 km north of Calgary, Alberta. Harmattan has natural gas processing capacity of 490 Mmcf/d consisting of sour gas treating, co-stream processing, and NGL extraction. In addition, Harmattan has fractionation and terminalling facilities (see the "Fractionation and Liquids Handling" section below). Harmattan's raw natural gas supply is based on producer activity in the west-central region of Alberta. Harmattan is well-positioned as the high-volume, low-cost processing facility in its service area.

At Harmattan, natural gas processing services are provided to approximately 70 producers under contracts with a variety of commercial arrangements and terms. Approximately 17 percent of the natural gas volume processed at Harmattan is done under the terms of the Rep Agreements which have life-of-reserves dedications. The balance of the raw natural gas processed at Harmattan is processed under contracts with terms varying from one month to life-of-reserves. The majority of the contracts provide for fee escalation based on CPI.

The co-stream processing allows the extraction of NGLs from gas in the west leg of the NGTL system using unused capacity in the NGL recovery units at Harmattan. The co-stream processing has resulted in increased utilization at the plant, with the added benefit that the equipment installed for the co-stream process increases reliability and efficiency for both gas processing and co-streaming customers. AltaGas entered into a 250 Mmcf/d cost-of-service co-stream processing agreement with Nova Chemicals related to ethane and other NGL extraction at Harmattan in 2012 for an initial term of 20 years. AltaGas will deliver all NGLs or co-stream gas products on a full cost-of-service basis to Nova Chemicals.

AltaGas has 45 MW of co-generation capacity in Alberta through three co-generation facilities, each of which can generate 15 MW of power. The co-generation facilities are located at AltaGas' Harmattan facility and have a heat recovery steam generator that is capable of producing all of the steam required to process gas at Harmattan from the waste heat in the exhaust gases from the turbine. Excess electricity from the co-generation units is delivered to the Alberta power market.

AltaGas is currently advancing an opportunity to capture up to 60,000 tonnes/year of carbon emissions at Harmattan. The project involves decommissioning Harmattan's existing sulfur plant, which significantly reduces the facility's operational complexity and extends the facility's turnaround cycle from 4 years to 5 years, which is expected to result in cost savings. Phase 1 of this project, which involves drilling an acid gas injection well, is currently underway.

Management identified environmental issues associated with the prior activities of Harmattan. An environmental allocation agreement is in place with the former operator that allocates the liability. This agreement significantly reduces soil and groundwater contamination liability to AltaGas. See "Risk Factors - Decommissioning, Abandonment, and Reclamation Costs" in this AIF.

<u>Younger</u>

AltaGas owns a 28.33 percent interest in Younger processing and extraction assets and a 50 percent interest in Younger's fractionation and terminalling assets (see the "Fractionation and Liquids handling" section below). Younger has licensed capacity to process up to 750 Mmcf/d of natural gas and AltaGas' share of such capacity is 213 Mmcf/d. The remaining interest is held by Pembina, which has assumed plant operatorship. Younger processes natural gas transported on the West Coast transmission system and other regional transmission systems to recover NGLs. Natural gas supply to Younger is dependent on the amount of raw gas processed at the McMahon gas plant, which is based on the robust natural gas producing region of northeastern British Columbia.

  

AltaGas Ltd. – 2022 Annual Information Form – 28

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**Fractionation and Liquids Handling** 

Fractionation production is a function of NGL mix volumes processed, liquids composition, recovery efficiency of the plants, and plant on-line time. Due to the integration and inter-connectivity of AltaGas' Midstream assets, the fractionation and liquids handling activities provide integral services to the other Midstream segments and customers by providing NGL products with access to North American and global markets through rail networks, pipelines, RIPET, and the Ferndale terminal.

AltaGas' liquids handling infrastructure consists of NGL pipelines, treating, storage, and truck and rail terminal infrastructure centered around AltaGas' key Midstream operating assets at RIPET, the Ferndale terminal, Harmattan, and in NEBC, the Townsend complex and the North Pine facility. In the NEBC area, a network of NGL pipelines connects upstream gas plant producers to the AltaGas North Pine facility. The NEBC NGL pipelines consist of three liquids egress lines, with the third line commissioned in the third quarter of 2020, connecting the Townsend complex to the truck terminal on the Alaska Highway (30 km) and AltaGas' North Pine facility (70 km). In addition, NGL and spec propane lines that connect the Townsend complex in the North to the Aitken Creek facilities through the 60 km Aitken Connector NGL pipeline, Canadian Natural Resources Limited's Nig plant through a lateral, and the Tourmaline Gundy facility in the West through a 15 km spec propane line were all commissioned in the first half of 2020. AltaGas' liquids handling infrastructure also consists of a 15,000 Bbls/d NGL treatment facility at the Townsend complex designed to process mercaptan rich NGL volumes delivered from the Townsend complex deep-cut plant and Aitken Connector pipeline.

AltaGas' significant fractionation facilities are as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
| **2022 Licensed Capacity (Net)** | **2022 Licensed Capacity (Net)** | **2022 Licensed Capacity (Net)** | **2022 Licensed Capacity (Net)** | **2022 Licensed Capacity (Net)** |
| Facility | Location | Interest (%) | Operated / Non-Operated | Licensed Capacity NGL Fractionation - Net (Bbls/d) |
| Harmattan | Sundre, AB | 100% | Operated | 35000 |
| Younger | Taylor, BC | 50% | Non-Operated | 9750 |
| North Pine | Fort St. John, BC | 100% | Operated | 20000 |
| Total |  |  |  | 64750 |

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<u>Harmattan</u>

Harmattan has NGL fractionation capacity of 35,000 Bbls/d, a 450 Bbls/d capacity frac oil processing facility, and a 200 tonnes/d capacity industrial grade CO2 facility. Harmattan is the only deep-cut and full fractionation plant in its operating area. Fractionation services at Harmattan are provided under contracts with a variety of commercial arrangements and terms, typically fee-for-service revenues. Harmattan fractionation services include a truck terminal for NGL mix delivered from adjacent plants in the area, as well as a rail terminal at Didsbury with a loading capacity of approximately 10,000 Bbls/d.

<u>Younger</u>

AltaGas owns a 50 percent interest in Younger's fractionation, storage, loading, treating and terminalling of NGL facility, with the remaining interest held by Pembina, which operates the plant. While Younger is the only straddle plant in its operating area, the Alliance pipeline competes for local natural gas supply. Pembina is responsible for sourcing AltaGas' gas supply and AltaGas markets its share of NGLs produced.

<u>North Pine Facility</u>

The North Pine facility is the only custom fractionation plant in B.C., providing area producers with a lower cost, higher

  

AltaGas Ltd. – 2022 Annual Information Form – 29

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netback alternative for their NGLs than transporting and fractionating in Edmonton. Commissioning of the first train of the North Pine facility was completed in 2017. The first train of the North Pine facility is capable of processing up to 10,000 Bbls/d of NGL mix. The second train, commissioned in the first quarter of 2020, provides an additional 10,000 Bbls/d of NGL mix.

The North Pine facility is connected via the North Pine pipelines to the Townsend truck terminal which has a capacity of 10,000 Bbls/d and is contracted through long-term supply agreements with the producers at the Townsend complex. The North Pine facility is also connected to the Tourmaline Gundy facility, and has access to the CN rail network, allowing for the transportation of propane, butane, and condensate to North American markets and propane to global markets via RIPET.

**Terminals and Storage Business**

AltaGas' Midstream segment also includes a terminals business, which supports its marketing and distribution business by providing the ability to source, transport, process, store, and deliver products through strategically located fixed assets throughout North America. In addition, the terminals business provides various terminalling services to third party customers through take-or-pay or fee-for-service agreements which provide earnings stability through volatile commodity price environments.

The terminals business consists of strategically located crude oil and NGL assets which provide storage, blending, rail and truck logistical support and waterborne LPG export capabilities.

AltaGas' significant terminals are as follows:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **2022 Licensed Capacity** | **2022 Licensed Capacity** | **2022 Licensed Capacity** | **2022 Licensed Capacity** | **2022 Licensed Capacity** | **2022 Licensed Capacity** |
| Facility | Location | Interest (%) | Operated / Non-Operated | Operational Capacity LPG/NGL/Crude - Gross <br>(Bbls/d) | Storage Capacity - Gross (Bbls) |
| Griffith LPG Terminal <sup>(1)</sup> | Griffith, IN | 100% | Operated | 12000 | 700000 |
| Fort Sask. NGL Terminal <sup>(1)</sup> | Fort Saskatchewan, AB | 100% | Operated | 25000 | 180000 |
| Strathcona Storage JV <sup>(1)</sup> | Fort Saskatchewan, AB | 40% | Non-Operated |  | 3215500 |
| Crude Blending Terminals <sup>(1)</sup> | Various | 100% | Operated | 25700 | 20000 |
| Total |  |  |  | 62700 | 4115500 |

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(1)Ownership interest percentages have been updated to reflect the Petrogas Acquisition.

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| | | | | |
|:---|:---|:---|:---|:---|
| **2022 Licensed Capacity** | **2022 Licensed Capacity** | **2022 Licensed Capacity** | **2022 Licensed Capacity** | **2022 Licensed Capacity** |
| Facility | Location | Interest (%) | Operated / Non-Operated | Storage Capacity - Gross (GJ) |
| Sarnia Gas Storage | Sarnia, ON | 50% | Non-Operated | 6.4 |

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<u>Griffith LPG Terminal</u>

Owned and operated by AltaGas, the Griffith LPG terminal directly supports domestic propane and butane marketing efforts. Equipped with inbound and outbound truck and rail infrastructure, the terminal is capable of handling approximately 12,000 Bbls/d, and can be easily expandable to 30,000 Bbls/d. Underground caverns provide 700,000 barrels of storage and rail siding capacity exists for up to 220 railcars. Storage services are provided on a fee for service basis including to pipeline connected refiners.

  

AltaGas Ltd. – 2022 Annual Information Form – 30

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<u>Fort Saskatchewan NGL Terminal</u>

Owned and operated by AltaGas, this facility was built by Petrogas and provides multiproduct storage and handling support to the marketing business while also generating fee-for-service revenues through third party agreements.

Connected to a regional fractionation facility and to the Strathcona Storage Caverns through a 10 km AltaGas constructed and owned pipeline, the Fort Saskatchewan facility is equipped with truck and rail loading and offloading infrastructure, providing 25,000 Bbls/d of throughput capacity. The terminal has rail siding capacity for up to 265 railcars and on-site tank storage for 180,000 Bbls. The terminal is an important staging area for RIPET and Ferndale terminal destined product, providing key export exposure optionality to regional producers.

<u>Sarnia Storage and Crude Oil Terminal JV Agreement</u>

The Sarnia storage and crude oil terminal is a joint venture agreement with Nova Chemicals, providing AltaGas with crude oil storage and crude-to-rail infrastructure accessibility. Situated in southern Ontario, this terminal provides the ability to service crude oil demand needs to eastern refiners and end users through regional rail networks and Enbridge pipeline infrastructure. The joint venture partner supplies and manages the terminal assets, while AltaGas manages the marketing and commercial agreements for the terminal. The right to access the terminal assets under the joint venture arrangement have been recorded as a lease by AltaGas. This terminal provides up to 2.1 million Bbls of crude oil and refined product storage capacity with outbound throughput supported by 10,000 Bbls/d of rail loading capacity. The terminal generates revenue through storage contracts and storage tank leases, rail loading, and term commitments for crude oil supply. The joint venture agreement expires in 2028 and can be renewed at the discretion of the parties.

<u>Strathcona Storage JV</u>

The Strathcona Storage Joint Venture facility is a joint venture with ATCO Energy Solutions Ltd. which is located near Fort Saskatchewan, Alberta. AltaGas holds a 40 percent ownership interest in the facility. The facility is strategically positioned to help satisfy storage needs from increased liquids rich production from the Duvernay and Montney shale basins, while also supporting petrochemical requirements in the Edmonton area. The facility consists of five underground storage salt caverns in service, which have a combined storage capacity of 3,215,500 Bbls. Construction of the fifth cavern was completed in the third quarter of 2022 and is currently storing customer product.

<u>Crude Blending Terminals</u>

Owned and operated by AltaGas, the crude blending terminals consist of five blending terminals located throughout Alberta and Southern Saskatchewan. These terminals blend heavier grade crude oil to meet pipeline specification requirements and are designed to operate at an average capacity of 25,700 Bbls/d. Feedstock is sourced through trucking infrastructure and pipeline connected batteries, with offloading capability through connections to regional pipelines.

<u>Other</u>

AltaGas maintains an assortment of ancillary owned and leased storage assets across North America to support marketing and distribution and terminal efforts. Locations include the Yahk B.C. propane truck terminal, Scranton propane terminal, Guernsey and Edmonton leased crude tanks and various other strategic leased NGL storage at key hubs.

In addition, AltaGas' natural gas storage assets include a 50 percent ownership of the 6.4 GJ Sarnia natural gas storage facility connected to the Dawn Hub in Eastern Canada.

  

AltaGas Ltd. – 2022 Annual Information Form – 31

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***Trucking and Wellsite Fluids***

<u>Trucking Business</u>

AltaGas' Midstream business includes three primary trucking entities, which provide transportation related services within the WCSB and the United States Pacific Northwest by hauling frac fluid, produced water, crude oil and NGLs between producers, terminals, customers and end users. Trucking operations are instrumental in connecting suppliers and customers to either the AltaGas infrastructure assets, third party terminals, or long-haul transportation to domestic wholesale markets.

In addition to first party volumes, the trucking business maintains various agreements with regional oil and gas production companies for hauling services from remote drilling locations. Agreements could include master service agreements, evergreen term contracts or spot loadings. Third party hauling rates are determined by receipt location, delivery point and length of haul.

<u>Wellsite Fluids and Fuels</u>

Enerchem International Inc. is a Canadian corporation which focuses on the production of drilling and wellsite fluids, and consumer fuels. Through the fractionation of crude oil feedstock, Enerchem produces and distributes proprietary hydrocarbon fluids for drilling oil and gas wells to improve productivity and to resolve oilfield production challenges for downstream producers.

Enerchem operates two primary facilities located in Sundre and Slave Lake, Alberta, which are capable of processing over 1.5 million Bbls of finished products per year. These plants are supported by various ancillary storage and distribution facilities located across the WCSB providing over 150,000 Bbls of storage capacity, strategically placed within the vicinity of active drilling regions.

**Other Liquids Handling Services**

To support LPG and NGL handling, AltaGas manages a rail logistics network consisting of approximately 4,600 rail cars. AltaGas is active in identifying opportunities to buy and resell NGLs for producers and exchange, reallocate, or resell pipeline capacity and storage to earn a profit. Net revenues from these activities are derived from low risk opportunities based on transportation cost differentials between pipeline systems and differences in commodity prices from one period to another. Margins are earned by locking in buy and sell transactions in compliance with AltaGas' credit and commodity risk policies. AltaGas also provides energy procurement services for utility gas users and manages the third-party pipeline transportation requirements for many of its gas marketing customers.

AltaGas' marketing business is focused on the purchase, sale, exchange, and distribution of NGLs and crude oil, primarily in proximity to its strategically owned and leased asset base. By leveraging AltaGas' fully integrated infrastructure base and extensive logistical capabilities, the marketing team is able to source competitively priced supply at the key hubs and across various hydrocarbon basins in order to capture arbitrage opportunities derived through regional pricing differentials. Marketing efforts are driven by two primary focuses: 1) domestic NGL and crude oil wholesale, and 2) LPG waterborne exports. AltaGas supports its distribution efforts by maintaining an extensive leased rail fleet. Leases are on a full-service basis and are established on a staggered maturity schedule with multiple lessors to ensure railcar integrity and up-to-date DOT classification.

  

AltaGas Ltd. – 2022 Annual Information Form – 32

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**Mountain Valley**

AltaGas owns a 10 percent equity interest in Mountain Valley. The proposed FERC regulated interstate natural gas pipeline, which is being developed, constructed, and owned by Mountain Valley (a venture of EQT and other entities), is planned to transport approximately 2.0 Bcf/d of natural gas and to extend 300 miles from Equitrans LP's system in Wetzel County, West Virginia to Transco's Station 165 in Pittsylvania County, Virginia.

In the first quarter of 2022, the U.S. Fourth Circuit Court of Appeals (Fourth Circuit Court) issued separate decisions vacating and remanding, on specific issues, the U.S. Forest Service and Bureau of Land Management permits that allow the pipeline to pass through the Jefferson National Forest and the U.S. Fish and Wildlife Service Endangered Species Act Biological Opinion (Biological Opinion). Until the pipeline has a valid Biological Opinion, the Army Corps has stated they will not approve the necessary permits. On February 28, 2023, the U.S. Fish and Wildlife Service issued a revised Biological Opinion. Mountain Valley remains engaged in the permitting process with the relevant federal agencies to obtain the permits necessary to complete the project. The total project costs are expected to be US$6.6 billion with a targeted in-service date during the second half of 2023. As of December 31, 2022, approximately 94 percent of the project is complete, which includes construction of all original interconnects and compressor stations. AltaGas' exposure is contractually capped to the original estimated contributions of approximately US$352 million, which was met as of December 31, 2021. In the fourth quarter of 2021, AltaGas impaired its equity investment in MVP to a carrying value of US$352 million as a result of these ongoing legal and regulatory challenges.

In April 2018, AltaGas entered into a separate agreement with EQM to acquire a 5 percent equity interest in a lateral project to build an interstate natural gas pipeline (MVP Southgate project). The proposed pipeline would receive gas from the Mountain Valley mainline in Pittsylvania County, Virginia and extend approximately 73 miles south to new delivery points in Rockingham and Alamance counties, North Carolina. MVP continues to evaluate the MVP Southgate project, including engaging in discussions with the shipper regarding options for the project and potential changes to the project design and timing in lieu of pursuing the project as originally contemplated. As originally designed, AltaGas' total capital contributions were expected to be approximately US$20 million for the project. In the fourth quarter of 2021, AltaGas impaired its investment in the MVP Southgate project to a carrying value of $nil as a result of these ongoing legal and regulatory challenges.

**Competition**

As a leading provider of LPG services connecting producers to domestic and global markets, AltaGas has refined its strategy and realigned its assets to increase the utilization of its existing assets and attract future growth while facilitating the delivery of affordable and reliable sources of energy for today and tomorrow. AltaGas' unique integrated value chain from wellhead to tidewater and beyond offers customers egress solutions and higher netbacks as a result of access to higher value global energy markets, including Asia.

Through its integrated infrastructure value chain, AltaGas is able to connect North American producers from the wellhead to the global LPG markets via RIPET and the Ferndale terminal. With the addition of two VLGCs in 2021 to its value chain that are currently under construction, AltaGas' integrated value proposition is a unique offering that is challenging to replicate. Regardless, ensuring consistent cost competitiveness and the highest netbacks is critical as AltaGas is competing for LPG supply from the WCSB. Currently, RIPET and the Ferndale terminal, at upwards of 150,000 Bbls/d of throughput capacity, account for approximately one third of the LPG demand in the WCSB. The expectation of continued North American natural gas development and the resulting LPG supply/demand imbalance in North America, combined with strong Asian demand, is expected to maintain a robust pricing differential between North America and Asia. AltaGas' structural and locational advantage through RIPET and the Ferndale terminal will enhance producers' netbacks and be highly competitive with other North American LPG exports for LPG supply as AltaGas' global export operations continue to be optimized. To protect and enhance our competitive advantage, logistics optimization is one of AltaGas' top priorities.

  

AltaGas Ltd. – 2022 Annual Information Form – 33

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On the upstream side of the value chain, AltaGas competes with large, sophisticated integrated upstream natural gas exploration and production entities, as well as other midstream entities operating in the WCSB for natural gas processing services. AltaGas' core gas processing facilities are strategically located in liquids rich basins and offer additional services such as LPG fractionation, liquids handling and rail loading. These facilities provide AltaGas' producers and other customers with access to lower cost and higher netback alternatives for their NGLs, the opportunity to market their LPGs regionally and most importantly, attracts supply to AltaGas' export terminals. In 2022, AltaGas processed an average of 1.5 Bcf/d, which is approximately 14 percent of volumes produced in the WCSB. The majority of WCSB processing capacity generally continues to be provided by the upstream natural gas exploration and production companies. With the ability to provide Western Canadian producers a fully integrated value chain, supported by liquids processing and handling and global export capabilities, AltaGas is well positioned to compete for incremental throughput for its existing processing facilities and attract future growth.

**Midstream Utilization**

AltaGas strives for continued improvement, operational excellence, and maximum utilization of all facilities over which it has operational control and to consistently exceed WCSB average utilization rates. Volume additions at plants, which come from new well tie-ins and from re-activations, re-completions, and well optimizations performed by producers, are offset by natural production declines. Global export volumes are driven by production at AltaGas' Midstream facilities, LPG supply from the WCSB, and various long-term purchase agreements with Canadian and American suppliers.

<u>Global Exports</u>

Average global exports utilization increased to 85 percent in 2022 from 69 percent in 2021, and throughput volumes increased to 101,654 Bbls/d during the year ended December 31, 2022, compared to 89,331 Bbls/d in 2021. There were 68 shipments to Asia during the year ended December 31, 2022, compared to 60 shipments in the same period of 2021. Higher export volumes were primarily the result of increased offtake demand, higher available supply, and improved logistics.

<u>Gas Processing</u>

Average processing facility utilization of core assets decreased to 61 percent in 2022 from 62 percent in 2021 primarily due to the sale of AltaGas' interest in the Aitken Creek processing facilities.

<u>Fractionation</u>

Average fractionation utilization of 65 percent in 2022 is higher than 47 percent utilization in 2021 due to the additional liquids volumes from the NEBC facilities, higher volumes at Younger, and higher trucked-in volumes at Harmattan.

***Significant Operating Areas and Customers***

<u>Global Exports</u>

As two of the only three LPG terminals operating on the west coast of North America and the only two able to ship with VLGCs and Large Gas Carriers, RIPET and the Ferndale terminal offer significantly reduced shipping times to the Asian LPG markets compared to the other North American LPG terminals that are not located on the west coast. Both terminals are connected to the key North American hubs with rail networks.

  

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<u>Processing and Fractionation</u>

Approximately 48 percent of AltaGas' processing volumes are processed through the Townsend complex, Blair Creek facility, Gordondale facility, and the Younger facility located in the liquids-rich Montney resource play in NEBC.

AltaGas has also fractionation capacity in NEBC through the North Pine facility and Younger facility. The North Pine facility is interconnected to the Townsend complex and is the only custom fractionation plant in British Columbia, providing area producers with a lower cost, higher netback alternative for their NGLs than fractionating in Edmonton.

The JEEP and EEEP facilities are strategically located and take advantage of the gas consumption by the petrochemical industry and the City of Edmonton. Harmattan is a significant service provider with a large capture area in west central Alberta. Many other facilities in the Harmattan area are currently underutilized, providing AltaGas with opportunities to consolidate and increase asset utilization and profitability.

<u>Terminals and Storage</u>

The Fort Saskatchewan NGL terminal is strategically located in the Fort Saskatchewan petrochemical hub, near Edmonton. It is pipeline connected to a regional fractionator with long-term agreements to ship LPGs. The terminal is also pipeline connected to the Strathcona Storage Joint Venture which is located in the same area. The LPG caverns are supporting the supply and logistics capabilities required for the global export business.

***Midstream Contractual Arrangements***

<u>Global Exports</u>

RIPET and Ferndale terminal annual capacity is currently managed through a combination of merchant supply agreements and tolling arrangements for both propane and butane. AltaGas' plans are to have an increasing amount of RIPET and Ferndale terminal's capacity underpinned by tolling arrangements with focus on creating an integrated value chain for AltaGas' customers and suppliers in the WCSB from the wellhead to the global export markets.

In 2023, AltaGas has in place agreements for the purchase of approximately 60 percent of the propane expected to be shipped from RIPET. Approximately 60 percent of RIPET propane volumes are exported under term and semi-term contracts, while 40 percent are under current year strip or spot contracts.

In 2023, AltaGas also has in place agreements for propane and butane offtake volumes for the purchase of approximately 60 percent of the product expected to be shipped from the Ferndale terminal. Approximately 58 percent of Ferndale terminal propane and butane volumes are exported under term and semi-term contracts, while 42 percent are under current year strip or spot contracts.

<u>Processing and Fractionation</u>

AltaGas gathers, processes, and fractionates natural gas and NGL under contracts with natural gas producers. There are approximately 190 active processing contracts with approximately 103 counterparties. These contracts, in general:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Establish fees for the gathering and processing services offered by AltaGas;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Establish operating costs flow through to the producers for a significant portion of the contracts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Define the producers' access rights to gathering and processing services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Establish minimum throughput commitments with producers and use appropriate fee structures to recover invested capital early in the life of the contract where capital investment is required by AltaGas;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Define the terms and conditions under which future production is processed at an AltaGas facility; and

  

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Establish processing fees at several facilities on a take-or-pay basis.

The majority of contracts in place at December 31, 2022 were subject to annual price escalation related to changes in CPI.

Where natural gas reserves have been dedicated under a contract, the contract normally extends beyond one year and up to the life of the reserves, depending on the amount of capital AltaGas has invested in the facility. Where reserves have not been dedicated under a contract or AltaGas has not made a significant capital investment, the contracts are normally subject to termination by either party upon one to three months' notice. Producing wells typically remain connected to a processing system for their entire productive lives.

Natural gas processing facility owners have the right to extract liquids from the natural gas stream, either directly as the owner of the natural gas, or through NGL extraction agreements. The typical commercial arrangement involves the ethane and NGL extraction plant owner contracting with the gas shipper on a natural gas transmission system for the right to extract NGL from the transporter's natural gas. Ethane and NGL are extracted from the energy content of the shipper's natural gas.

The value of ethane and NGL extraction is a function of the difference between the value of the ethane, propane, butane and condensate as separate marketable commodities and their heating value as constituents of the natural gas stream. If the components are not extracted and sold at prices that reflect the value for each of the individual commodities, they are sold as part of natural gas and generate revenue for their heating value at the prevailing natural gas price.

Fractionation facilities charge a fee to separate NGL mix into specification propane, butane, and condensate.

<u>Terminals and Storage</u>

The Fort Saskatchewan terminal offloads NGLs from the nearby fractionator and loads propane and butane onto tank trucks and railcars. A portion of the terminal's capacity is dedicated under a long-term agreement to the fractionation facility and provides egress capability for its customers. AltaGas enters into annual and long-term loading agreements with customers in the Fort Saskatchewan hub at the current competitive market based rates.

The Strathcona Storage Joint Venture currently handles propane, butane, and ethylene for customers/owners of the Fort Saskatchewan petrochemical hub. The two ethylene caverns store products under long-term lease agreements underpinned by cost of service models with creditworthy counterparties. The NGL caverns are leased under long-term agreements at market rate storage fees plus reimbursement of operating and maintenance costs.

**Environmental Considerations Impacting the Midstream Business**

The Midstream business is subject to the following environmental regulations:

***Canadian Jurisdictions***

<u>Multi-Sector Air Pollutants Regulations</u>

The Multi-Sector Air Pollutants Regulation promulgated under the Canadian EPA, was passed on June 17, 2016. The regulation requires owners and operators of specific industrial facilities and equipment types to meet consistent performance standards across the country. The objectives of the regulations are to limit the amount of NOx emitted from modern (new) and pre-existing (existing), gaseous-fuel-fired non-utility boilers and heaters used in many industrial facilities.

  

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AltaGas is currently focused on evaluating and implementing air emissions reductions opportunities to reduce NOx emission associated with its engine, heater, and boiler fleet.

<u>Federal Carbon Pricing</u>

On December 9, 2016, the Government of Canada formally announced the "Pan-Canadian Framework on Clean Growth and Climate Change". As a result, on June 21, 2018, the federal government enacted the GGPPA to implement a carbon pollution pricing system that took effect beginning in 2019, to be applied in provinces and territories that do not have a carbon pricing system that aligns with the federal benchmark.

On October 11, 2022, the Government of Canada amended the GGPPA to establish the federal benchmark carbon price post-2022. These amendments formally set the national minimum price on carbon pollution to 2030. The Government of Canada has also over time strengthened the criteria that all provincial pricing systems across Canada must meet.

The federal carbon pollution pricing scheme is composed of two elements, both of which may impact AltaGas' business: (1) a carbon levy applied to the distribution of fossil fuels, priced at $65 per tonne in 2023, and then increasing by $15 per year, reaching $170 per tonne of carbon emitted in 2030; and (2) an output-based pricing system for industrial facilities that emit 50,000 tonnes of CO2e per year or more, with an opt-in capability for smaller facilities with emissions below the threshold.

The output-based pricing system will apply to emissions from fuel combustion as well as emissions of synthetically produced GHG's from industrial processes and products. As of December 31, 2022, AltaGas has three processing facilities that would exceed the 50,000 tonnes of CO2e per year threshold, including two facilities in Alberta and one facility in British Columbia. These facilities will continue to be regulated by the carbon pricing and reporting systems within those provinces. The federal government currently considers the carbon pricing schemes in both Alberta and British Columbia as equivalent to the federal output-based pricing system. The B.C. scheme is also deemed equivalent to the federal carbon levy. In contrast, the federal carbon levy applies in Alberta, which does not have an equivalent regime applicable to the distribution of fossil fuels.

Provincial and territorial carbon pollution pricing systems will continue to be required to meet the strengthened 2023 to 2030 benchmark criteria to be a federally recognized carbon pollution pricing system. The federal government will continue to assess, on an annual basis, whether provinces and territories meet these criteria and whether they can continue to implement their own carbon pollution pricing regimes in lieu of the GGPPA.

<u>Federal Greenhouse Gas Reporting Program</u>

The GHGRP collects information on GHG emissions annually from facilities across Canada. It is a mandatory program for those who meet the requirements. Facilities that emit 10,000 tonnes or more of GHGs, in CO2e per year, must report their emissions to Environment and Climate Change Canada. As of June 1, 2022, ten facilities within the Midstream segment reported to the GHGRP.

<u>Methane Reduction Regulation</u>

ECCC methane reduction regulations that detail requirements to reduce methane emissions through operational and equipment modifications came into effect in January 2020. ECCC's methane reduction regulations aim to reduce the oil and gas sector emissions by 40 to 45 percent below 2012 levels by 2025. Alberta and British Columbia have drafted their own methane regulations that supersede the federal regulation for provincially regulated assets.

The Alberta methane regulations (AER Directives 060 and 017) set out requirements for flaring, incinerating, and venting in Alberta at all upstream petroleum industry wells and facilities, with specific operational requirements to address fugitive

  

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emissions and venting. These operational requirements could result in equipment retrofit, equipment replacement, advanced planning, and investment to ensure compliance. In addition, companies are required to have a fugitive emissions management program that must be designed to reduce fugitive emissions over time and conduct leak detection surveys at their facilities at a prescribed frequency (annually or tri-annually) based on equipment or facility type.

In British Columbia, oil and gas facilities under the *Oil and Gas Activities Act -* Drilling and Production Regulation are required to conduct leak detection surveys at their facilities at a prescribed frequency (annually or tri-annually) based on equipment or facility type. In addition to the leak detection surveys, natural gas vent limits have been established for various types of oil and gas equipment, which could result in equipment retrofit, equipment replacement, advanced planning, and investment to ensure compliance.

<u>TIER</u>

The TIER regulation in Alberta requires established industrial facilities with GHG emissions above a certain threshold to reduce their emissions. Emission reduction obligations under TIER are determined according to a facility specific benchmark approach, which initially required facilities to reduce emissions intensity by 10 percent relative to the facility's historical production weighted average emissions intensity and increased the stringency of the facility specific benchmark by 1 percent annually. Effective January 1, 2023, the benchmarks for most sectors will increase by 2 percent annually until the benchmark meets a designated high-performance benchmark, which is calculated as the average emissions intensity of the most emissions-efficient facilities in the sector. These benchmark tightening rates were included in an Order in Council, released by the Alberta Minister of Energy on December 14, 2022, which made certain other changes to the TIER regulation that were designed to ensure continued equivalency to the output-based pricing system under the GGPPA. At the same time, the Government of Alberta announced it would be increasing the price of fund credits under the TIER regulation to match the national minimum price on GHG emissions between 2023 and 2030.

Both AltaGas' Harmattan and Gordondale facilities are mandatory participants in the TIER program.

<u>Greenhouse Gas Industrial Reporting and Control Act</u>

On January 1, 2016, the B.C. *Greenhouse Gas Industrial Reporting and Control Act* came into force to, among other things, ensure LNG facilities in B.C. have an emissions cap. The legislation replaced the previous *Greenhouse Gas Reduction (Cap and Trade) Act.*

AltaGas' Blair Creek facility, Townsend complex, North Pine facility, RIPET, and other assets in B.C. are subject to the reporting obligations and as of December 31, 2022, are in compliance with the Greenhouse Gas Emission Reporting Regulation.

<u>Carbon Tax Act</u>

AltaGas' operating facilities in B.C. operate under and comply with requirements set forth by the *Carbon Tax Act* of B.C. While AltaGas is subject to this tax, some of the compliance costs are recovered through contract recovery mechanisms with its customers. British Columbia established the CleanBC program which provides incentive payments or tax rebates for industrial operations that meet an established emission intensity benchmark. AltaGas participates in these programs and receives carbon tax rebates at its facilities that meet or exceed the emission intensity benchmarks.

***Anticipated Policies***

<u>Methane Emissions Reduction Plan</u>

On October 11, 2021, the ECCC committed to developing a plan to reduce oil and gas sector methane emissions by at least 75 percent below 2012 levels by 2030. On November 10, 2022, Canada released its proposed framework on how it

  

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intends to reach this goal. The proposed amendments expand the scope of existing methane regulations to apply to a wider set of sources, eliminate exclusions, and drive as many individual sources toward zero emissions. ECCC aims to update the regulations by early 2023. AltaGas will continue to monitor and assess the impacts of the amendments on its businesses and operations, as more information becomes available.

<u>GHG Emissions Reduction Plan</u>

On June 29, 2021, the federal government enacted the Net-Zero Act, which legislated a federal commitment to achieve net-zero GHG emissions by 2050 and a nearer-term target of the federal government's Nationally Determined Contribution under the Paris Climate Agreement, which currently is a 40 - 45 percent GHG emissions reduction by 2030. The upstream crude oil and natural gas industry is expected to contribute a significant amount of the reduction needed to achieve these goals. On March 29, 2022, the federal government released the first plan under the Net-Zero Act, the "2030 Emissions Reduction Plan".

In the 2030 Emissions Reduction Plan and a discussion paper which followed, the federal government has proposed to cap and reduce oil and gas sector GHG emissions in order to achieve an overall reduction of GHG emissions from the sector of 32 percent below 2005 levels by 2030. The details of this cap and reduction strategy are still in development and AltaGas continues to actively monitor such developments.

***United States Jurisdictions***

**Washington State** 

<u>Department of Ecology Reporting of Emissions of Greenhouse Gases</u>

The Department of Ecology has established Greenhouse Gas Reporting requirements for any facility that exceeds the threshold of 10,000 metrics tonnes of CO2e or more per calendar year in total GHG emissions from applicable source categories. If the reporting threshold is exceeded, an annual GHG report must be filed with the Department of Ecology.

As of December 31, 2022, the Ferndale terminal was in material compliance with its GHG emissions reporting requirements.

<u>Cap-and-Invest Program</u>

In 2021, the Washington State Legislature passed the *Climate Commitment Act* which establishes a comprehensive, market-based cap-and-invest program to reduce carbon pollution and achieve the GHG limits set in state law. Generally, businesses are subject to the program if they generate covered emissions that exceed 25,000 metric tons of CO2e per year. Covered business types include, but are not limited to, fuel suppliers, natural gas and electric utilities, waste-to-energy facilities (starting in 2027), and railroads (starting in 2031).

The cap-and-invest program commences January 2023, and the first emissions allowance auction will take place in the second half of February 2023. AltaGas will continue to monitor and assess the impacts of the program on its businesses and operations, as more information becomes available.

***U.S. Federal Air and GHG Regulations***

The U.S. GHGRP requires reporting of GHG data and other relevant information from large GHG emission sources, fuel, and industrial gas suppliers, and CO2 injection sites in the United States. A total of 41 categories of reporters are covered by the U.S. GHGRP. Facilities determine whether they are required to report based on the types of industrial operations

  

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located at the facility, their emission levels, or other factors. Facilities are generally required to submit annual reports under Part 98 if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ GHG emissions from covered sources exceed 25,000 metric tons CO2e per year;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Supply of certain products would result in over 25,000 metric tons CO2e of GHG emissions if those products were released, combusted, or oxidized; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The facility receives 25,000 metric tons or more of CO2 for underground injection.

All of AltaGas' operating facilities located in the U.S. operate under and comply with requirements set forth by the U.S. GHGRP.

**CORPORATE/OTHER SEGMENT**

The Corporate/Other business consists of power assets and AltaGas' corporate activities, including general corporate investments and other revenue and expense items, such as general corporate overhead and interest expense, which are not directly attributable to AltaGas' operating business segments. For the year ended December 31, 2022, the revenue for the Corporate/Other business was $100 million excluding intersegment eliminations and risk management and trading activities (2021 – $108 million).

**Power Assets**

AltaGas' power assets are engaged in the generation and sale of capacity, electricity, ancillary services, and related products, primarily in California. After the sale of Brush II in the second quarter of 2022, AltaGas has 508 MW of installed power capacity from a combination of gas-fired and remaining distributed generation assets, as more particularly set forth in the below table:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| Facility | Interest <br>(%) | Capacity <br>(MW) | Type | Geographic Region | Contracted <br>Expiry Date |
| Blythe | 100% | 507 | Gas-fired | California, U.S. | 2027 |
| Distributed Generation | 100% | 1 | Various | Various regions in the U.S. | Various |
| Total |  | 508 |  |  |  |

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<u>Gas-Fired Generation</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ In southern California, the Blythe Energy Center utilizes gas-fired generation to produce power and serves the transmission grid operated by the CAISO to cover periods of high demand primarily driven by the Los Angeles area. Due to the structure of the long-term PPA with SCE, the majority of the revenue from the facility is derived from being available to produce and not from actual production, therefore providing stable cash flow. The facility is directly connected to an El Paso Gas Company natural gas pipeline for its primary supply and a Southern California Gas Company pipeline as a secondary supply source, and interconnects to SCE and CAISO via a 67-mile transmission line also owned by Blythe and part of the Blythe Energy Center. In 2019, AltaGas announced the successful recontracting of the Blythe Energy Center to SCE. Under the tolling agreement, SCE has exclusive rights to all capacity, energy, ancillary services, and resource adequacy benefits. The agreement became effective on August 1, 2020 and runs through December 31, 2023. In February 2023, AltaGas reached an agreement with SCE for the purchase of resource adequacy attributes from the Blythe facility for the period from January 1, 2024 through December 31, 2027.

  

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**Competition**

The Blythe Energy Center is contracted under a PPA until December 31, 2023. Under the tolling agreement(s), SCE has exclusive rights to all capacity, energy, ancillary services, and resource adequacy benefits during the PPA term.

**Environmental Considerations Impacting the Corporate/Other Segment**

AltaGas' power assets included in the Corporate/Other segment are subject to the following environmental regulations:

**U.S. Federal Air and GHG Regulations**

<u>Clean Air Act</u>

Under the *Clean Air Act*, the USEPA has the authority to set federal ambient air quality standards for certain air pollutants which apply throughout the U.S. The *Clean Air Act* could increase regulatory burdens for AltaGas' natural gas-fired power plants, which emit volatile organic compounds and NO2, by leading to additional control requirements, obligations to obtain emission offsets, or permitting delays.

Individual states must ensure that, at a minimum, their air quality meets the ambient federal standards set by the USEPA. In general, states may choose to impose stricter performance requirements than does the USEPA.

In addition, the *Clean Air Act* requires certain facilities to obtain construction and operating permits for their air emissions.

As of December 31, 2022, AltaGas' operating natural gas-fired power generation facility in California was in compliance with its air permit requirements, which are issued in accordance with federal and state emissions standards.

**California GHG Regulations**

<u>Clean Energy Targets</u>

In late 2022, California passed SB 1020. SB 1020 updates the clean electricity goals and targets previously set by SB 100 in 2018. SB 1020 has added interim targets to SB 100's policy framework to require renewable and zero-carbon resources to supply 90 percent of all retail electricity sales by 2035 and 95 percent of all electricity retail sales by 2040. SB 1020 also requires that all state agencies must source their energy from 100 percent renewable sources by 2035, ten years sooner than the current law requires. AltaGas will continue to monitor and assess the impacts of SB 1020 on its operations as more information becomes available.

<u>Cap-and-Trade Program</u>

In late 2022, the California Air Resources Board adopted its SP, California's roadmap for reducing GHG emissions and achieving carbon neutrality. The SP contemplates the continuation, and revisions, to the Cap-and-Trade Program. As of December 31, 2022, AltaGas' Blythe Energy Center in California was in compliance with the Cap-and-Trade Program requirements. Costs associated with meeting AB 32 and California's cap-and-trade program have been passed through to the utilities pursuant to the applicable PPA. The SP does not provide specifics as to amendments to the Cap-and-Trade Program, but does suggest the possibility of revisions to allowance supply and other potential changes. Regulated entities should expect revisions to the Cap-and-Trade Program which may impact their operations, although the extent of the revisions and any resulting impacts remains unknown at this time.

  

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<u>California Groundwater Regulation</u>

In California, water supply availability can be volatile, particularly as implementation moves forward on the SGMA. SGMA will require adoption of new mandatory requirements with the aim of managing groundwater "sustainably" over the long term. SGMA gives primary responsibility for regulating groundwater to local agencies referred to as GSAs. GSAs must develop plans that allow the maximum quantity of groundwater to be withdrawn without causing the lowering of groundwater levels, reduction of storage, seawater intrusion, degraded water quality, land subsidence, or depletion of interconnected surface water. Although SGMA focuses on groundwater supplies, reduced availability of groundwater might increase surface water demands, whether originating from local or imported surface water supply sources. It is uncertain whether or how SGMA may impact water supplies for Blythe Energy Center. Blythe Energy Center was designed to operate with wastewater capture and other water recycling techniques. Water is reused at Blythe Energy Center in steam generation, reducing the amount of water used by the facility.

**CAPITAL STRUCTURE**

**Description of Capital Structure**

The authorized share capital of AltaGas consists of an unlimited number of Common Shares and such number of Preferred Shares issuable in series at any time as have aggregate voting rights either directly or on conversion or exchange that in the aggregate represent less than 50 percent of the voting rights attaching to the then issued and outstanding Common Shares. At December 31, 2022, AltaGas had 281,531,833 outstanding Common Shares, 6,746,679 outstanding Series A Shares, 1,253,321 outstanding Series B Shares, 8,000,000 outstanding Series E Shares, 6,885,823 outstanding Series G Shares, 1,114,177 Series H Shares, 300,000 outstanding Series 2022-A Shares, and 250,000 outstanding Series 2022-B Shares.

On March 31, 2022, AltaGas redeemed all of its 12,000,000 issued and outstanding Series K Preferred Shares for a redemption price equal to $25.00 per Series K Share, together with all accrued and unpaid dividends to, but excluding, the redemption date.

On September 30, 2022, AltaGas redeemed all of its 8,000,000 issued and outstanding Series C Preferred Shares for a redemption price equal to US$25.00 per Series C Share, together with all accrued and unpaid dividends to, but excluding, the redemption date.

The summary below of the rights, privileges, restrictions and conditions attaching to the Common Shares and the Preferred Shares is subject to, and qualified by reference to, AltaGas' articles and by-laws.

**Common Shares**

Holders of Common Shares are entitled to one vote per share at meetings of Shareholders, to receive dividends if, as and when declared by the Board of Directors and to receive the remaining property and assets of AltaGas upon its dissolution or winding-up, subject to the rights of shares having priority over the Common Shares.

**Preferred Shares** <sup>(1) (8) (9)</sup>

The following table summarizes AltaGas' Preferred Shares outstanding as at December 31, 2022:

  

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | Current Yield | Annual dividend <br>per share <sup>(2)</sup> | Redemption price <br>per share <sup>(7)</sup> | Redemption and conversion <br>option date <sup>(3) (7)</sup> | Right to <br>convert into <sup>(4)</sup> |
| Series A Shares <sup>(5)</sup> | 3.060% | $0.76500 | $25 | September 30, 2025 | Series B |
| Series B Shares <sup>(6) (7)</sup> | Floating | Floating | $25 | September 30, 2025 | Series A |
| Series E Shares <sup>(5)</sup> | 5.393% | $1.34825 | $25 | December 31, 2023 | Series F |
| Series G Shares <sup>(5)</sup> | 4.242% | $1.06050 | $25 | September 30, 2024 | Series H |
| Series H Shares <sup>(6) (7)</sup> | Floating | Floating | $25 | September 30, 2024 | Series G |

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(1)The Corporation is authorized to issue up to 8,000,000 of Series F Shares, subject to certain conditions, upon conversion by the holders of the applicable currently issued and outstanding series of Preferred Shares noted opposite such series in the table on the applicable conversion option date. If issued upon the conversion of the applicable series of Preferred Shares, Series F Shares are also redeemable for $25.50 on any date after the applicable conversion option date, plus all accrued but unpaid dividends to, but excluding, the date fixed for redemption.

(2)The holders of Series A Shares, Series E Shares, and Series G Shares are entitled to receive a cumulative quarterly fixed dividend as and when declared by the Board of Directors. The holders of Series B Shares and Series H Shares are entitled to receive a quarterly floating dividend as and when declared by the Board of Directors. If issued upon the conversion of the applicable series of Preferred Shares, the holders of Series F Shares will be entitled to receive a quarterly floating dividend as and when declared by the Board of Directors.

(3)AltaGas may, at its option, redeem all or a portion of the outstanding shares for the redemption price per share, plus all accrued and unpaid dividends on the applicable redemption option date and on every fifth anniversary thereafter.

(4)The holder will have the right, subject to certain conditions, to convert their preferred shares of a specified series into preferred shares of that other specified series as noted in this column of the table on the applicable conversion option date and every fifth anniversary thereafter.

(5)Holders of Series A Shares, Series E Shares, and Series G Shares will be entitled to receive cumulative quarterly fixed dividends, which will reset on the redemption and conversion option date and every fifth year thereafter, at a rate equal to the sum of the then five-year Government of Canada bond yield plus 2.66 percent (Series A Shares), 3.17 percent (Series E Shares), and 3.06 percent (Series G Shares).

(6)Holders of Series B Shares and Series H Shares will be entitled to receive cumulative quarterly floating dividends, which will reset each quarter thereafter at a rate equal to the sum of the then 90-day Government of Canada Treasury Bill rate plus 2.66 percent (Series B Shares) and 3.06 percent (Series H Shares). Each quarterly dividend is calculated as the annualized amount multiplied by the number of days in the quarter, divided by the number of days in the year. Commencing December 31, 2022, the floating quarterly dividend rate is $0.41875 per share for Series B Shares and $0.44340 per share for Series H Shares for the period starting December 31, 2022 to, but excluding, March 31, 2023.

(7)Series B Shares can be redeemed for $25.50 per share on any date after September 30, 2015 that is not a Series B conversion date, plus all accrued and unpaid dividends to, but excluding, the date fixed for redemption. Series H Shares can be redeemed for $25.50 per share on any date after September 30, 2019 that is not a Series H conversion date, plus all accrued and unpaid dividends to, but excluding, the date fixed for redemption.

(8)The Series 2022-A Shares were issued to Computershare Trust Company of Canada to be held in trust to satisfy AltaGas' obligations under the Series 1 Indenture, in connection with the issuance of the Subordinated Notes, Series 1. Holders of the Series 2022-A Shares shall not be entitled to receive any dividends, nor shall any dividends accumulate or accrue, on the Series 2022-A Shares prior to delivery to the holders of the Subordinated Notes, Series 1 following the occurrence of certain bankruptcy or insolvency events in respect of AltaGas. If at any time, AltaGas redeems, purchases for cancellation or repays the Subordinated Notes, Series 1 such number of Series 2022-A Shares with an aggregate issue price equal to the principal amount of Subordinated Notes, Series 1 redeemed, purchased for cancellation or repaid by AltaGas will be redeemed in accordance with the terms of the Series 2022-A Shares.

(9)The Series 2022-B Shares were issued to Computershare Trust Company of Canada to be held in trust to satisfy AltaGas' obligations under the Series 2 Indenture, in connection with the issuance of the Subordinated Notes, Series 2. Holders of the Series 2022-B Shares shall not be entitled to receive any dividends, nor shall any dividends accumulate or accrue, on the Series 2022-B Shares prior to delivery to the holders of the Subordinated Notes, Series 2 following the occurrence of certain bankruptcy or insolvency events in respect of AltaGas. If at any time, AltaGas redeems, purchases for cancellation or repays the Subordinated Notes, Series 2 such number of Series 2022-B Shares with an aggregate issue price equal to the principal amount of Subordinated Notes, Series 2 redeemed, purchased for cancellation or repaid by AltaGas will be redeemed in accordance with the terms of the Series 2022-B Shares.

  

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Preferred Shares may be used by AltaGas for any appropriate corporate purposes, including, without limitation, public or private financing transactions or issuance as a means of obtaining additional capital for use in AltaGas' business and operations or in connection with acquisitions of other businesses and properties. AltaGas does not intend to use Preferred Shares as a defensive tactic to block take-over bids.

The Board of Directors may divide any unissued Preferred Shares into series and fix the number of shares in each series and the designation, rights, privileges, restrictions, and conditions thereof. The Preferred Shares of each series will rank on parity with Preferred Shares of every other series with respect to accumulated dividends and return of capital and the holders of Preferred Shares will rank prior to the holders of Common Shares and any other shares of AltaGas ranking junior to the Preferred Shares with respect to the payment of dividends and the distribution of assets in the event of liquidation, dissolution or winding-up of AltaGas, whether voluntary or involuntary.

The rights, privileges, restrictions and conditions attaching to the Preferred Shares as a class may be repealed, altered, modified, amended or amplified or otherwise varied only with the sanction of the holders of the Preferred Shares given in such manner as may then be required by law, subject to a minimum requirement that such approval be given by resolution in writing executed by all holders of Preferred Shares entitled to vote on that resolution or passed by the affirmative vote of at least 66⅔ percent of the votes cast at a meeting of holders of Preferred Shares duly called for such purpose.

For the specific rights, privileges, restrictions, and conditions attaching to the currently issued and, as applicable, outstanding: (i) Series A Shares and the Series B Shares, reference should be made to the prospectus supplement of AltaGas dated August 11, 2010; (ii) Series E Shares and Series F Shares, reference should be made to the prospectus supplement of AltaGas dated December 6, 2013; (iii) Series G Shares and Series H Shares, reference should be made to the prospectus supplement of AltaGas dated June 25, 2014; (iv) Series 2022-A Shares, reference should be made to the prospectus supplement of AltaGas dated January 5, 2022; and (v) Series 2022-B Shares, reference should be made to the prospectus supplement of AltaGas dated August 4, 2022. The articles of the corporation and each of the prospectus supplements described herein have been filed with, and may be retrieved from, SEDAR at www.sedar.com.

**Debt**

AltaGas' total debt is primarily comprised of senior unsecured notes in the form of MTNs, WGL and Washington Gas long-term notes, SEMCO long-term notes, subordinated hybrid notes, draws under bank credit facilities, and short-term debt in the form of commercial paper. For a complete list of such notes and draws currently outstanding, please refer to Notes 15, 16, and 17 of AltaGas' audited Consolidated Financial Statements as at and for the year ended December 31, 2022 (which has been filed with, and may be retrieved from, SEDAR at www.sedar.com).

**GENERAL**

**Employees**

At December 31, 2022, there were 3,045 individuals employed by AltaGas.

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| | |
|:---|:---|
| | December 31, 2022 |
| Utilities | 2203 |
| Midstream | 610 |
| Corporate/Other | 232 |
| Total | 3045 |

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AltaGas Ltd. – 2022 Annual Information Form – 44

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&nbsp;&nbsp;&nbsp;&nbsp;

**Directors and Officers** 

As at February 24, 2023, the directors and executive officers of AltaGas, as a group, owned beneficially, directly or indirectly, or exercised control or direction over 2,208,019 of the outstanding Common Shares, or approximately 0.78 percent of the 281,591,363 Common Shares issued and outstanding.

**Directors** 

The number of directors of AltaGas is to be determined from time to time by resolution of the Board of Directors. The number of directors is currently 10, of which 9 are independent directors.

The term of office of any director continues until the next annual meeting of Shareholders following the director's election or appointment, unless the term ends earlier in the event of death, resignation, removal, disqualification or other reason in accordance with the constating documents of AltaGas. The Shareholders are annually entitled to elect the Board of Directors.

The following table sets forth the names of the directors of AltaGas on February 24, 2023, their municipalities of residence, and their principal occupations within the last five years.

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;Name of Director, <br>Municipality of <br>Residence, and Position | &nbsp;&nbsp;Principal Occupation During the Past Five Years | &nbsp;&nbsp;Director Since |
| &nbsp;&nbsp;**Victoria A. Calvert** <sup>(1)</sup><br>Calgary, Alberta, Canada<br>Director | &nbsp;&nbsp;Ms. Calvert is a Corporate Director and a private consultant specializing in executive coaching. She is also Professor Emerita of Business at Mount Royal University in Calgary, where she taught from 1988 to 2018. Ms. Calvert was a Director of the Canadian Alliance of Community Service Learning from 2009 to 2017. Prior to this, she held corporate positions at Hudson's Bay Oil and Gas, the Bank of Nova Scotia and British Petroleum. | &nbsp;&nbsp;November 1, 2015 |
| &nbsp;&nbsp;**David W. Cornhill** <sup>(1)</sup><br>Calgary, Alberta, Canada<br>Director | &nbsp;&nbsp;Mr. Cornhill is a founding shareholder of AltaGas and its predecessors. Mr. Cornhill was Chief Executive Officer from 1994 to 2016 and served as interim Co-CEO from July to December 2018. He was Chairman of the Board from 1994 to April 2019. Prior to forming AltaGas, Mr. Cornhill served in various capacities with Alberta and Southern Gas Co. Ltd., including Vice President, Finance and Administration, Treasurer and President and Chief Executive Officer. | &nbsp;&nbsp;Director of AltaGas <br>(and its predecessors) <br>since April 1, 1994 |
| &nbsp;&nbsp;**Randall L. Crawford** <sup>(2)</sup><br>Naples, Florida, USA<br>Director | &nbsp;&nbsp;Mr. Crawford has been the President and Chief Executive Officer since December 2018. Refer to the disclosure under "Executive Officers" for further information. | &nbsp;&nbsp;December 10, 2018 |
| &nbsp;&nbsp;**Jon-Al Duplantier** <sup>(1) (3)</sup><br>Houston, Texas, USA<br>Director | &nbsp;&nbsp;&nbsp;Mr. Duplantier retired from Parker Drilling Company in July 2020, where he held a number of executive roles since joining in 2009, most recently as President, Rental Tools and Well Services from April 2018. Prior thereto, he served as Senior Vice President, Chief Administrative Officer and General Counsel from April 2014 to March 2018. | &nbsp;&nbsp;&nbsp;February 2, 2021 |
| &nbsp;&nbsp;**Robert B. Hodgins** <sup>(1)</sup><br>Calgary, Alberta, Canada<br>Director | &nbsp;&nbsp;Mr. Hodgins is a CA, CPA and has been an independent businessman since November 2004. Mr. Hodgins served as a non-executive part-time Senior Advisor, Investment Banking for Canaccord Genuity Corp. from September 2018 to May 2022. Mr. Hodgins also held the positions of Chief Financial Officer of Pengrowth Energy Trust, Vice President and Treasurer of Canadian Pacific Limited and Chief Financial Officer of TransCanada PipeLines Limited. | &nbsp;&nbsp;Director of AltaGas <br>(and its predecessors) <br>since March 2, 2005 |

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AltaGas Ltd. – 2022 Annual Information Form – 45

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;Name of Director, <br>Municipality of <br>Residence, and Position | &nbsp;&nbsp;Principal Occupation During the Past Five Years | &nbsp;&nbsp;Director Since |
| &nbsp;&nbsp;**Cynthia Johnston** <sup>(1)</sup><br>Victoria, B.C., Canada<br>Director | &nbsp;&nbsp;Ms. Johnston is a Corporate Director. She was Executive Vice President, Gas, Renewables and Operations Services at TransAlta Corporation from 2015 to 2017. From 2011 to 2015, she held various positions, including Executive Vice President, Enterprise Risk and Corporate Services and Executive Vice President Corporate Services. Prior thereto, Ms. Johnston held various executive leadership positions with TransAlta and FortisAlberta Inc. | &nbsp;&nbsp;July 25, 2018 |
| &nbsp;&nbsp;**Pentti O. Karkkainen** <sup>(1)</sup><br>West Vancouver, B.C., Canada<br>Chair of the Board | &nbsp;&nbsp;Mr. Karkkainen is the Chair of the Board. He was a co-founder and General Partner of KERN Partners from 2000 to 2014, and was the firm's Senior Strategy Advisor from 2014 until his retirement in 2015. Prior thereto, Mr. Karkkainen was the Managing Director and Head of Oil and Gas Equity Research at RBC Capital Markets. | &nbsp;&nbsp;July 25, 2018 |
| &nbsp;&nbsp;**Phillip R. Knoll** <sup>(1)</sup><br>Kelowna, B.C., Canada<br>Director | &nbsp;&nbsp;Mr. Knoll is a Corporate Director. He is a Professional Engineer and served as President of Knoll Energy Inc., a private consulting company from 2006 until 2021. Mr. Knoll served as interim Co-CEO of AltaGas from July to December 2018. He was CEO of Corridor Resources Inc. from October 2010 to September 2014. Prior thereto, Mr. Knoll held senior roles with a number of companies, including Duke Energy Gas Transmission, Maritimes & Northeast Pipeline, Westcoast Energy Inc., TransCanada Pipelines Limited and Alberta Natural Gas Company Ltd. | &nbsp;&nbsp;November 1, 2015 |
| &nbsp;&nbsp;**Linda G. Sullivan** <sup>(1)</sup><br>Moneta, Virginia, USA<br>Director | &nbsp;&nbsp;Ms. Sullivan is a Corporate Director. She was Executive Vice President and Chief Financial Officer at American Water Works Company, Inc. from 2016 until her retirement in August 2019, and prior thereto was Senior Vice President and Chief Financial Officer from 2014. Prior to joining American Water Works, she held various roles with the Edison International companies during her 22 years there, including Senior Vice President and Chief Financial Officer at Southern California Edison Company. | &nbsp;&nbsp;January 9, 2020 |
| &nbsp;&nbsp;**Nancy G. Tower** <sup>(1)</sup><br>Halifax, N.S., Canada<br>Director | &nbsp;&nbsp;Ms. Tower served as President and Chief Executive Officer of Tampa Electric Company, a regulated electric utility and a subsidiary of Emera Incorporated, from December 2017 until 2021. From 2014 to 2017, she was the Chief Corporate Development Officer of Emera. Since joining Emera in 1997, Ms. Tower has held several senior positions in corporate finance and in operations at Emera and with its subsidiaries, including Controller and Vice President, Customer Operations of Nova Scotia Power Inc., Chief Financial Officer of Emera, and Chief Executive Officer of Emera Newfoundland and Labrador. | &nbsp;&nbsp;January 9, 2020 |

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(1)Independent director. The Board has determined that all directors other than Mr. Crawford are independent under National Instrument 52-110.

(2)Mr. Crawford, as current CEO of the Corporation, is not considered independent.

(3)Mr. Duplantier was an officer of Parker Drilling Company (Parker) from 2009 until July 2020. Parker and certain of its U.S. subsidiaries (collectively, the Debtors) commenced voluntary Chapter 11 proceedings and filed a prearranged Joint Chapter 11 Plan of Reorganization under Chapter 11 of the United States *Bankruptcy Code* in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. The Plan was subsequently amended and was confirmed by the Bankruptcy Court on March 7, 2019. The Plan became effective on March 26, 2019 and the Debtors emerged from the Chapter 11 Cases.

  

AltaGas Ltd. – 2022 Annual Information Form – 46

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AltaGas has four standing committees of the Board of Directors: (1) Audit, (2) Governance, (3) Human Resources and Compensation (HRC), and (4) Environment, Health and Safety (EH&S). The members of each of these committees as of February 24, 2023 are identified below:

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| | | | | |
|:---|:---|:---|:---|:---|
| Director | Audit Committee | Governance Committee | HRC Committee | EH&S Committee |
| Victoria A. Calvert | | ■ | ■ | |
| David W. Cornhill | | | | ■ |
| Jon-Al Duplantier | | ■ | ■ | |
| Cynthia Johnston | ■ | | | Chair |
| Pentti O. Karkkainen | | | | |
| Robert B. Hodgins | ■ | ■ | | |
| Phillip R. Knoll | | Chair | | ■ |
| Linda G. Sullivan | Chair | | ■ | |
| Nancy G. Tower | ■ | | Chair | |

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AltaGas Ltd. – 2022 Annual Information Form – 47

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&nbsp;&nbsp;&nbsp;&nbsp;

**Executive Officers** 

The names, municipality of residence and position of each of the current executive officers of AltaGas are as follows:

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| | |
|:---|:---|
| &nbsp;&nbsp;Name of Officer, Municipality of Residence, and <br>Position with AltaGas Ltd. | &nbsp;&nbsp;Principal Occupation During the Past Five Years |
| &nbsp;&nbsp;**Randall L. Crawford**<br>Naples, Florida, USA<br>President and Chief Executive Officer<br>Director | &nbsp;&nbsp;President and Chief Executive Officer of AltaGas since December 2018. Prior to joining AltaGas, Mr. Crawford was with EQT Midstream Partners, LP from 2012 to 2017, most recently as Executive Vice President and Chief Operating Officer, and with EQT Corporation as Senior Vice President and President Midstream, Commercial and Distribution from 2007 to 2017.  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D. James Harbilas**<br>Calgary, Alberta, Canada<br>Executive Vice President and Chief Financial Officer | &nbsp;&nbsp;Executive Vice President and Chief Financial Officer of AltaGas from June 2019. Prior to joining AltaGas, Mr. Harbilas was the Executive Vice President and Chief Financial Officer of Enerflex Ltd. from 2007.  |
| &nbsp;&nbsp;**Corine R.K. Bushfield**<br>Airdrie, Alberta, Canada<br>Executive Vice President, Chief Administrative Officer | &nbsp;&nbsp;Executive Vice President, Chief Administrative Officer of AltaGas from December 2016. Senior Vice President and Chief Financial Officer of Long Run Exploration Ltd. from March 2013 to September 2016. Vice President and Assistant Controller of Encana Corporation from 2010 to March 2013. |
| &nbsp;&nbsp;**Donald M. Jenkins**<br>McLean, Virginia, USA<br>Executive Vice President and President Utilities, President of Washington Gas Light Company | &nbsp;&nbsp;Executive Vice President and President, Utilities of AltaGas from December 2019. President of WGL and Washington Gas from December 2019. Prior thereto, Mr. Jenkins was with EQT Corporation from 2012, most recently as Chief Commercial Officer. |
| &nbsp;&nbsp;**Randy W. Toone**<br>Calgary, Alberta, Canada<br>Executive Vice President and President, Midstream | &nbsp;&nbsp;Executive Vice President and President, Midstream from January 2019. Executive Vice President and Acting President from July to December 2018. Executive Vice President Gas from June 2017. Executive Vice President, Commercial and Business Development from December 2016 to June 2017. Chief Operating Officer of CSV Midstream Solutions from July 2014 to November 2016. Country Manager of TAG Oil Ltd. from May 2013 to June 2014. Other roles with AltaGas prior to 2014 include President Utilities, President Gas, and Co-President Gas. |
| &nbsp;&nbsp;**Bradley B. Grant**<br>Calgary, Alberta, Canada<br>Executive Vice President, Chief Legal Officer and Corporate Secretary | &nbsp;&nbsp;Executive Vice President and Chief Legal Officer of AltaGas since July 2018. Also appointed Corporate Secretary of AltaGas in April 2022. Prior thereto, Vice President and General Counsel of AltaGas from May 2015. Partner with the law firm of Stikeman Elliott LLP from January 2004 to May 2015. |
| &nbsp;&nbsp;**Shaheen Amirali**<br>Calgary, Alberta, Canada<br>Executive Vice President, Chief External Affairs and Sustainability Officer  | &nbsp;&nbsp;&nbsp;Executive Vice President, Chief External Affairs and Sustainability Officer from October 2020. Also served as Corporate Secretary until May 2021. Prior thereto, Senior Vice President and Corporate Secretary from May 2019, Vice President and Corporate Secretary from October 2017, Associate General Counsel from January 2017 and Senior Corporate Counsel from 2007 to 2016. |

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**Audit Committee** 

**Composition of the Audit Committee** 

The Committee is currently comprised of four members, Linda Sullivan, Robert Hodgins, Cynthia Johnston and Nancy Tower. Ms. Sullivan assumed the role of chair of the Committee on March 5, 2022. All of the members of the Committee are independent and financially literate as defined under Canadian securities law.

  

AltaGas Ltd. – 2022 Annual Information Form – 48

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**Relevant Education and Experience** 

Ms. Sullivan was Executive Vice President and Chief Financial Officer at American Water Works Company, Inc. from 2016 until 2019, and prior thereto was Senior Vice President and Chief Financial Officer from 2014. Prior to joining American Water Works, she held various roles with the Edison International companies, last serving as Senior Vice President and Chief Financial Officer at Southern California Edison Company from 2009 to 2014. Ms. Sullivan began her career in public accounting as an auditor with Arthur Andersen. Ms. Sullivan has over 30 years of utility finance and regulatory experience. She received her Certified Public Accountant designation (inactive) and Certified Management Accountant designation in 1991 and 1996, respectively. Ms. Sullivan holds a Bachelor of Science in Business Administration and Accounting from Portland State University. Ms. Sullivan is the chair of the audit committee at NorthWestern Energy, a U.S. public company.

Mr. Hodgins was the Chief Financial Officer at Pengrowth Energy Trust from 2002 to 2004. Mr. Hodgins was Vice President and Treasurer at Canadian Pacific Limited from 1998 to 2002 and Chief Financial Officer of TransCanada PipeLines Limited from 1993 to 1998. Mr. Hodgins has an Honours Degree in Business from the Richard Ivey School of Business at the University of Western Ontario, and is a CA, CPA in Ontario and Alberta. He has served on a number of public company audit committees, and is currently chair of the audit committee of MEG Energy Corp. and serves on the audit committee of Gran Tierra Energy Inc.

Ms. Johnston was Executive Vice President, Gas, Renewables and Operations Services at TransAlta Corporation from 2015 to 2017. From 2011 to 2015, she held a number of other executive positions with TransAlta, including Chief Operating Officer of TransAlta Renewables Inc., President, TAMA Transmission, and Executive Vice President, Enterprise Risk and Corporate Services. Prior thereto, Ms. Johnston held various executive leadership positions with TransAlta and FortisAlberta. In these roles, she had financial oversight responsibilities and actively supervised financial officers and public accountants. She also had executive accountability for the enterprise risk management function of a large publicly traded company. She is on the audit committee of Russel Metals Inc., a public company, and has served on the audit committees of other private entities, including as chair. She holds a Bachelor of Arts in Economics from the University of Calgary and a Masters in Applied Economics from the University of Victoria.

Ms. Tower served as President and Chief Executive Officer of Tampa Electric Company, a regulated electric utility and a subsidiary of Emera Incorporated in Tampa, Florida from 2017 until her retirement in 2021. Prior thereto, she was the Chief Corporate Development Officer of Emera from 2014 to 2017. From 1997 until 2014, Ms. Tower held several senior positions in corporate finance and in operations at Emera and with its subsidiaries, including Controller and Vice President, Customer Operations of Nova Scotia Power Inc., Chief Financial Officer of Emera, and Chief Executive Officer of Emera Newfoundland and Labrador. Ms. Tower holds a Bachelor of Commerce from Dalhousie University and received her Fellow Chartered Accountant designation in 1985. She serves on the audit committees of Finning International Inc. and the Toronto-Dominion Bank.

**Pre-Approval Policies and Procedures**

As set forth in the Committee's charter, the Committee must pre-approve services provided by the external auditor and has direct responsibility for overseeing the work of the external auditor.

  

AltaGas Ltd. – 2022 Annual Information Form – 49

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&nbsp;&nbsp;&nbsp;&nbsp;

**External Auditor Service Fees by Category** 

The fees billed by Ernst & Young LLP (E&Y), AltaGas' external auditor, during 2022 and 2021 were as follows:

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| | | |
|:---|:---|:---|
| Category of External Auditor Service Fee <sup>(1)</sup> *($ millions)* | **2022** | 2021 |
| Audit fees | $**3.5** | $4.2 |
| Audit-related fees <sup>(2)</sup> | **0.4** | 0.3 |
| Tax compliance fees <sup>(3)</sup> | **0.4** | 0.3 |
| All other fees <sup>(4)</sup> | **0.3** | 0.4 |
| Total  | $**4.6** | $5.2 |

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(1)Due to the timing of invoices received, $1.8 million of fees relating to 2021 were paid in 2022.

(2)Represents the aggregate fees billed by E&Y for assurance and related services that were reasonably related to the performance of the audit or review of AltaGas' financial statements and were not reported under "Audit fees". During 2022 and 2021, the nature of the services provided included: review of prospectuses and security filings; research of accounting and audit-related issues; specified audit procedures; review of the change in accounting principle related to pensions; internal controls assessment; cost allocation manual audits; environmental, social, and governance services; and registration costs for the Canadian Public Accountability Board.

(3)During 2022 and 2021, the nature of the services provided was for tax consultations, tax compliance, and transfer pricing.

(4)Represents the aggregate fees billed by E&Y for products and services, other than those reported with respect to the other categories of service fees, as well as any out-of-pocket costs incurred. During 2022 and 2021, the nature of the services provided was for translation services and an assessment of IT risk management and cyber security.

**RISK FACTORS**

Set forth below is a summary of certain risk factors relating to AltaGas and the business of AltaGas. The risks described below are not an exhaustive list of all risks, nor should they be taken as a complete summary of all the risks associated with the applicable business being conducted. Security holders and prospective security holders of AltaGas should carefully review and consider the risk factors set out below as well as all other information contained and incorporated by reference in this AIF before making a decision on investment and should consult their own experts where necessary. Information regarding AltaGas' risk management activities can be found in AltaGas' management information circular dated March 10, 2022 and will also be included in AltaGas' management information circular for its 2023 annual meeting of Shareholders.

**Conflict in Eastern Europe**

While AltaGas' operations have not been, and are unlikely to be, directly impacted by it, the current conflict between Ukraine and Russia and the international response has, and may continue to have, potential wide-ranging consequences for global market volatility and economic conditions, including energy and commodity prices, which may, in turn, increase inflationary pressures and interest rates. Certain countries, including Canada and the United States, have imposed strict financial and trade sanctions against Russia, which have, and may continue to have, far-reaching effects on the global economy and energy and commodity prices. The short-, medium- and long-term implications of the conflict in Ukraine are difficult to predict with any certainty at this time and there remains uncertainty relating to the potential direct and indirect impact of the conflict on AltaGas, and it could have a material and adverse effect on AltaGas' business, financial condition and results of operations. Depending on the extent, duration, and severity of the conflict, it may have the effect of heightening many of the other risks described in this AIF.

  

AltaGas Ltd. – 2022 Annual Information Form – 50

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**Health and Safety**

The ownership and operation of AltaGas' business is subject to hazards of gathering, processing, transporting, fractionating, storing, and marketing hydrocarbon products, including, without limitation, blowouts, fires, explosions, gaseous leaks, releases and migration of harmful substances, hydrocarbon spills, corrosion, and acts of vandalism and terrorism. Any of these hazards can interrupt operations, impact AltaGas' reputation, cause loss of life or personal injury, result in loss of or damage to equipment, property, information technology systems, related data and control systems, and cause environmental damage that may include polluting water, land or air.

Further, such ownership and operations carry the potential for liability related to worker health and safety, including, without limitation, the risk of any or all of government imposed orders to remedy unsafe conditions, potential penalties for contravention of health and safety laws, licenses, permits and other approvals, and potential civil liability.

**Operating Risk**

AltaGas' businesses are subject to the risks normally associated with the operation and development, and storage and transportation of natural gas, NGL, LNG, LPG, and power systems and facilities, including, without limitation, mechanical failure, transportation problems, physical degradation, operator error, manufacturer defects, constraints on natural resource development, delay of or restrictions for projects due to climate change policies and initiatives, protests, activist activity, sabotage, terrorism, failure of supply, weather, wind or water resource deviation, catastrophic events and natural disasters, fires, floods, explosions, earthquakes, and other similar events. These types of events could result in injuries to personnel, third parties, including the public, damage to property and the environment, as well as unplanned outages or prolonged downtime for maintenance and repair. Among other things, these events typically increase operation and maintenance expenses and reduce revenues. The occurrence or continuation of any of these events could increase AltaGas' costs and reduce its ability to process, store, transport, deliver, or distribute natural gas, NGLs, LNG, and LPG, and result in significant losses for which insurance may not be sufficient or available. Environmental damage could also result in increased costs to operate and insure AltaGas' assets and have a negative impact on AltaGas' reputation and its ability to work collaboratively with stakeholders.

As AltaGas continues to grow and diversify its energy infrastructure businesses, the risk profile of AltaGas may change. Operating entities may enter into or expand business segments where there is greater economic exposure and more "at-risk" capital.

**Infrastructure** 

As utilities infrastructure matures, several of AltaGas' utilities have implemented replacement programs to replace aging infrastructure. If certain pipelines and related infrastructure were to become unexpectedly unavailable for delivery of current or future volumes of natural gas because of repairs, damage, spills or leaks, or any other reason, it could have a material adverse impact on financial conditions and results of operation of the utilities business. Although the costs of infrastructure replacement programs are typically recovered in rates, ongoing capital is required to fund such programs. In addition, operating issues resulting from maturing infrastructure such as leaks, equipment problems and incidents, including, without limitation, explosions and fire, could result in injuries to personnel, third parties, including the public, damage to property and the environment, as well as unplanned outages or prolonged downtime for maintenance and repair, legal liability, repair and remediation costs, increased operating costs, increased capital expenditures, regulatory

  

AltaGas Ltd. – 2022 Annual Information Form – 51

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&nbsp;&nbsp;&nbsp;&nbsp;

fines and penalties, and other costs and a loss of customer confidence. Any liabilities resulting from the occurrence of these events may not be fully covered by insurance or rates.

**Natural Gas Supply Risk**

Adequate supplies of natural gas and pipeline and storage capacity may not be available to satisfy committed obligations as a result of economic events, natural occurrences, and/or failure of a counterparty to perform under gas purchase, capacity, or storage contracts and, accordingly, could have a material adverse effect on AltaGas' business, financial conditions and cash flow.

In addition, Washington Gas and SEMCO Gas must acquire additional interstate pipeline transportation or storage capacity and construct transmission and distribution pipe to deliver additional capacity into growth areas on its system. The specific timing of any larger customer additions to its market may not be forecasted with sufficiently long lead time and the availability of these supply options to serve any of its customer additions may be limited by market supply and demand, the timing of participation in new interstate pipeline construction projects, local permitting requirements, and the ability to acquire necessary rights of way. These limitations could result in an interruption in Washington Gas or SEMCO Gas' ability to satisfy the needs of some of its customers.

**Volume Throughput**

AltaGas' businesses process, transport, and store natural gas, ethane, NGLs, and other commodities. Throughput within the business is dependent on a number of factors, including the level of exploration and development activity within the WCSB, the long-term supply and demand dynamics for the applicable commodities, and the regulatory and stakeholder environment for market participants. Notably, as a result of the development of non-conventional shale gas supplies in North America, the price of natural gas in North America has declined and there has been a shift towards richer, wet gas with higher NGL content. Areas with dryer gas have seen depressed activity. Countering this impact has been the increase in LNG exports from the U.S. Gulf Coast which has produced a more international gas market where prices in North America are influenced by global trends more directly than before. These factors and industry trends may result in AltaGas being unable to maintain throughput in certain areas. Consequently, AltaGas may be exposed to declining cash flow and profitability arising from reduced natural gas, ethane, and NGL throughput and from rising operating costs.

**Service Interruptions**

Service interruption incidents that may arise through unexpected major power disruptions to facilities or pipeline systems, third-party negligence or unavailability of critical replacement parts could cause AltaGas to be unable to safely and effectively operate its assets. This could adversely affect AltaGas' business operations and financial results.

**Transportation of Petroleum Products**

AltaGas' operations include transportation by truck and rail of petroleum products, including NGLs, crude oil, and other refined products. NGLs are transported from natural gas producers to RIPET and the Ferndale terminal by rail and truck and are delivered to customers by marine transport. Shipments may be impacted by service delays, inclement weather, rail car availability, rail car derailment, other transport incidents, protests, activist activities, or strikes, and could adversely impact volumes or the price received for product or impact its reputation or result in legal liability, loss of life or personal injury, loss of equipment or property, or environmental damage. Costs for environmental damage, damage to property, and/or personal injury in the event of a transportation incident involving petroleum products have the potential to be significant. Major Canadian railways have adopted standard contract provisions designed to shift liability for third-party claims to shippers. In the event that AltaGas is ultimately held liable for any damages resulting from its activities relating to rail or marine transport of petroleum products, and for which insurance is not available, or increased costs or obligations

  

AltaGas Ltd. – 2022 Annual Information Form – 52

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&nbsp;&nbsp;&nbsp;&nbsp;

are imposed on AltaGas as a result of new regulations, AltaGas' business, operations, and financial condition may be adversely impacted. In addition, in instances where transport is not available, AltaGas may not be able to procure substitute transportation and, as a result, may experience an adverse impact on its operations at RIPET, the Ferndale terminal or other assets.

**Market Risk**

AltaGas is exposed to market risks resulting from fluctuations in commodity prices and interest rates, in both North American markets and, with respect to the export business, offshore markets. In these markets, commodity supply and demand is affected by a number of factors including, without limitation: the significant cost of inflation; the amount of the commodity available to specific market areas either from the wellhead or from storage facilities; demand for product; changing customer preferences and behaviours; prevailing weather patterns; the U.S., Canadian and Asian economies; the occurrence of natural disasters; and pipeline restrictions. In addition, the retail energy marketing business is exposed to pricing of certain ancillary services provided by the power pool in which it operates. The fluctuations in commodity prices are beyond AltaGas' control and, accordingly, could have a material adverse effect on AltaGas' business, financial condition, and cash flow.

**Inflation**

An inflationary economy over an extended period of time could increase certain operating and capital costs across AltaGas' operating businesses and throughout its supply chains. High inflation rates could also negatively impact AltaGas' key input costs, including labour and materials. Inflationary pressures could also increase the amount of capital that needs to be raised by the Company and the costs of such capital. Governmental action, such as the imposition of higher interest rates or wage controls, may also negatively impact AltaGas' costs and magnify the impacts of other risks identified in this AIF, including those relating to the Company's indebtedness, other financial risks and interest rate risks. Continued inflation, any governmental response thereto, and any corresponding significant increase in costs could adversely affect AltaGas' business, operations or financial results. Economic conditions can affect customers' demand and ability to pay for service, which could adversely affect the Company.

**General Economic Conditions**

AltaGas' operations are affected by the condition and overall strength of the global economy and, in particular, the economies of Canada and the U.S. During economic downturns, the demand for the products and services that AltaGas provides and the supply of or demand for power, natural gas, and NGLs may be adversely affected. The occurrence of periods of poor economic conditions or low or negative economic growth could have an adverse impact on AltaGas' results and restrict AltaGas' ability to make dividends to Shareholders.

**Cyber Security, Information, and Control Systems**

AltaGas' business processes are increasingly reliant upon information systems and automation provided by infrastructure, technologies, and data. A failure of these information systems could lead to the impairment of business processes, and there is a risk of cascading failure of information systems leading to the impairment of multiple business processes. The risk of cyber-attacks is increasing, with strong evidence of the energy industry being specifically targeted. In addition, AltaGas collects and stores sensitive information in the ordinary course of business, including personal information in respect of its employees and proprietary information in respect of its stakeholders, including customers, suppliers, and investors.

Increased volume and sophistication of targeted cyber-attacks have been seen since the declaration of the global COVID-19 pandemic and ongoing conflict between Russia and Ukraine. Work from home arrangements and remote

  

AltaGas Ltd. – 2022 Annual Information Form – 53

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access to the Corporation's systems pose heightened risk of cyber security and privacy breaches and may put additional stress on the Corporation's IT infrastructure. A failure of such infrastructure could severely limit AltaGas' ability to conduct ordinary operations. Similarly, the conflict between Russia and Ukraine poses a heightened risk of cyber security breach from more sophisticated, state sponsored attackers. To date, AltaGas' systems have functioned capably, and it has not experienced a material impact to its operations as a result of an IT infrastructure issue.

Security breaches of AltaGas' information technology or operational technology infrastructure, including, without limitation, cyber-attacks and cyber-terrorism, or other failures of AltaGas' information technology and operational technology infrastructure could result in disruptions of natural gas distribution operations and other operational outages, ability to operate safely, delays, damage to assets, the environment or to AltaGas' reputation, diminished customer confidence, lost profits, lost data including, without limitation, the unauthorized release of customer, employee, financial, or company data that is crucial to AltaGas' operational security or could adversely affect the ability to deliver and collect on customer bills, increased regulation and other adverse outcomes, including, without limitation, material legal claims and liability or fines or penalties under applicable laws which adversely affect its business operations and financial results. If any of AltaGas' systems are damaged, fail to function properly, or otherwise become unavailable, AltaGas may incur substantial costs to repair or replace them.

AltaGas relies on third parties and managed service providers for various services. If these third parties undergo cyber-attacks, the services they provide AltaGas could be disrupted. The disruption could interfere with AltaGas' ability to conduct its business, which in turn could negatively affect AltaGas' financial condition and reputation. Additionally, the theft, damage, or improper disclosure of sensitive data held by these third parties may subject AltaGas to adverse consequences.

**Climate-Related Risks**

AltaGas may be subject to both physical and transition risks related to climate change.

<u>Physical Risks</u>

Acute physical risk exposure is associated with the frequency and severity of climate-related physical hazards such as wildfires, floods, and storms which may negatively impact AltaGas' assets, operations or supply chain by causing damages or interruptions that may require AltaGas to perform emergency repairs or incur material unplanned expenses. Extreme weather events may also impact AltaGas' ability to access its assets, cause operational difficulties or increase the risk of injury to employees or contractors as a result of dangerous weather conditions. Chronic climate-related physical risks arise from progressive shifts in climate patterns over the longer-term, such as increasing temperatures, sea level rise and changes in precipitation that may adversely impact AltaGas' assets, operations or supply chain or lower aggregate customer demand from affected markets. Any long-term physical climate-related impacts may have a material adverse effect on the business of the Company, its reputation, financial condition, results of operations and cash flows.

<u>Transition Risks</u> 

Climate-related transition risks arise as the global economy shifts to reduce GHG emissions and lower its impact on the environment. The pace and magnitude of climate change and associated impact on AltaGas' businesses varies in each operating jurisdiction. AltaGas is exposed to climate-related policy, market, technology, reputational and legal risks associated with the global transition to a lower carbon economy.

  

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i.Climate-Related Legislation, Regulation and Policy

AltaGas' facilities and operations are, and may become subject to, current and emerging local, provincial, state, federal and international climate change legislation, regulation and policies designed to manage or limit GHG emissions or restrict natural gas usage. Carbon taxes, levies and various carbon abatement programs, among other legislation, regulation and policies, are active or may become active across some or all of AltaGas' operating areas and the scope, pricing and compliance requirements under these programs may continue to increase. The direct or indirect costs and obligations imposed on AltaGas and its customers to comply with these regulations, including carbon pricing regimes, may have a material adverse effect on AltaGas' business, financial condition or results of operations.

Additionally, AltaGas may become subject to emerging climate-related reporting requirements, including GHG emissions reporting, that could introduce mandatory disclosure for reporting issuers, and/or other entities if implemented. Emerging voluntary reporting requirements such as those published by international climate-related standard setting bodies could also impact AltaGas' disclosure requirements if broadly adopted by peer companies or required by stakeholders such as investors, credit agencies and lenders. These disclosure requirements, whether mandatory or voluntary, may also require significant investments in data collection, monitoring, reporting and verification, including in respect of data generated by third parties, and high quality data may not always be available. The direct or indirect cost of compliance with these climate-related reporting requirements, the inability to meet future regulatory reporting requirements, unexpected changes in reporting requirements and methodologies, the inability to collect comprehensive and high quality data or the current and future expectations of stakeholders, including investors, may adversely affect the Company's reputation, financial condition, ability to obtain regulatory permits or approvals and raise capital.

ii.Climate-Related Market Risk

AltaGas is exposed to market risks, including as a result of fluctuations in commodity prices, consumer preferences, foreign exchange rates and interest rates. Increased commodity prices or other market factors such as inflation could have a negative impact on customer affordability which, in turn, may reduce demand for AltaGas' natural gas products. Higher natural gas prices result in increased direct costs for AltaGas' utility businesses which, in turn, impacts the price customers pay. The increased costs may impact customer decisions in the short-term and reduce the amount of natural gas used. Over the longer-term, increased commodity prices may result in customers switching from natural gas to alternative energy sources, negatively impacting the long-term demand for AltaGas' services. Sustained long-term increases in commodity prices could shift customer behavior and encourage the transition away from natural gas to alternative energy sources. Such increases could also materially increase the costs of materials required for AltaGas to operate its business.

Changing customer preferences towards lower-carbon energy sources may reduce the demand for AltaGas' product and services over the longer-term. Government incentives and regulatory requirements to transition energy usage towards lower-carbon or alternative energy sources, such as electrification or renewable or low carbon fuels, may also impact the long-term purchasing behaviors of AltaGas' customers and adversely impact the demand for the Company's services.

iii.Climate-Related Technology Risk

Technology advancements and improvements may impact the pace of GHG emission reduction strategies that could affect AltaGas and its customers. Changes in energy consumption by customers as a result of the availability of and incentive to invest in energy efficient technologies have the potential to reduce customer demand and adversely impact AltaGas' business.

Emerging technologies that may be deployed in connection with GHG emission reduction strategies include the use of co-generation facilities, acid gas injection, carbon capture and storage, advanced leak detection and methane capture technologies. The cost to acquire and implement technology required to reduce the carbon intensity of AltaGas' assets

  

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and operations, and the availability of that technology in the future, is difficult to predict given the uncertainty and pace of change with respect to advancements in emerging technologies. Increasing costs to acquire or implement technologies, or an inability to procure and deploy such technologies, could negatively impact AltaGas' capital spending, operating costs or impact the rate of return on new projects.

iv.Climate-Related Reputational Risk

With increased public scrutiny related to climate change and reducing environmental impact, increasing public opposition to the energy industry may impact AltaGas' business and its reputation could become unfavorable. As governments and regulatory bodies increasingly focus on mitigating the risks associated with global climate change, there is reputational risk associated with AltaGas' ability to meet potential increasingly stringent regulatory requirements, achieve its emissions reduction targets and meet the expectation of its stakeholders. Climate-related reputational risk cannot be managed in isolation from other forms of climate-related risks.

Additionally, with the increased public focus on climate change and support for the energy transition, the energy industry is exposed to the risk of increased activism related to the continued processing, transportation and distribution of oil and natural gas products, even where such activities are conducted in compliance with applicable laws. Activism in the form of protests, demonstrations or blockades could result in temporary disruptions to AltaGas' operations. AltaGas may also be subject to opposition from special interest groups resulting in regulatory process delays, which can impact schedules and increase costs. Furthermore, activism may impact AltaGas' ability to obtain or maintain permits and regulatory approvals or negatively impact the anticipated timing and costs associated with capital projects.

Damage to AltaGas' reputation could result in negative investor sentiment towards the Company and could limit its ability to access capital or decrease the price and liquidity of AltaGas' shares.

v.Climate-Related Legal Risk

In the course of its business, AltaGas may be subject to lawsuits and other claims related to its alleged role and impact on climate change, GHG emissions, or alleged misleading information with respect to the climate-related impacts of AltaGas' products and services or the Company's climate-related commitments. In addition, AltaGas may be required to obtain legal or regulatory approval on projects from regulators or stakeholders in order to conduct its business, which may become the subject of legal proceedings seeking to overturn such approvals. Costs associated with the resolution of any climate-related legal proceedings, even with respect to claims that have no merit, or failure to obtain required approvals could result in delays or cancellation of projects, adversely impacting the financial position or operating results of the Company.

**Environmental Regulation**

AltaGas is also subject to and may become subject to current and emerging environmental regulations beyond climate-related regulations. These regulations may apply to AltaGas' water usage, waste handling and disposal, air emissions, land use and other potential environmental-related impacts. AltaGas faces uncertainties related to future environmental laws and regulations affecting its business and operations. Existing environmental laws and regulations may be revised or interpreted more strictly, and new laws or regulations may be adopted or become applicable to AltaGas, which may result in increased compliance costs or additional operating restrictions, each of which could reduce AltaGas' earnings and adversely affect AltaGas' business. Compliance with these regulations could significantly increase capital spending, operating expenses, facility downtime or impact the affordability of rates charged to customers.

The Midstream and Utilities segments are subject to environmental regulation pursuant to local, provincial, state, territorial, and federal legislation. Environmental legislation places restrictions and prohibitions on land and water use as well as on various substances discharged to the air, land, and water in association with certain Utilities and Midstream

  

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operations. AltaGas' operations are required to obtain and comply with a variety of environmental licenses, permits, approvals, and registrations. In addition to the license and permit requirements, provincial, state, territorial, and federal legislation may require that end of life assets be abandoned, remediated, and reclaimed to the satisfaction of provincial, state, federal, or territorial authorities. Failure to comply with applicable environmental legislation can result in civil or criminal penalties, environmental contamination clean-up requirements, and government orders affecting future operations. It is possible that increasingly strict environmental laws, regulations, and enforcement policies, and potential claims for damages and injuries to property, employees, other persons, and the environment resulting from current or discontinued operations, could result in substantial costs and liabilities in the future. Environmental risks from AltaGas' operations can typically include, but are not limited to: air emissions, such as sulphur dioxide, nitrogen oxides, particulate matter and greenhouse gases; potential impacts on land; the use, storage, or release of chemicals or hydrocarbons; the generation, handling, and disposal of wastes and hazardous wastes; and water impacts.

See sections "Environmental Regulation", "Business of the Corporation – Utilities Business – Environmental Regulations Impacting the Utilities Business", "Business of the Corporation – Midstream Business – Environmental Regulations Impacting the Midstream Business", "Business of the Corporation – Corporate/Other Segment - Environmental Regulations Impacting the Corporate/Other Segment" of this AIF.

**Regulatory** 

AltaGas' businesses are subject to extensive and complex laws and regulations in the jurisdictions in which they carry on business. Regulations and laws are subject to ongoing policy initiatives, and AltaGas cannot definitively predict the future course of regulations. Changes in the regulatory environment may be beyond AltaGas' control and may significantly affect AltaGas' businesses, results of operations, and financial conditions. Pipelines and facilities can be subject to common carrier and common processor applications and to rate setting by the regulatory authorities in the event an agreement on fees or tariffs cannot be reached with producers. The export and import of energy is also subject to regulatory approvals. Power facilities are subject to regulatory approvals and regulatory changes in tariffs, market structure, and penalties. Washington Gas and SEMCO Gas operate in regulated marketplaces where regulatory approval is required to afford the utilities the opportunity to earn their regulated returns that provide for recovery of costs and a return on capital and may limit the ability to make and implement independent management decisions, including, without limitation, setting rates charged to customers, determining methods of cost recovery, and issuing debt. Earnings of AltaGas' regulated utilities may be impacted by a number of factors, including, without limitation, (i) changes in the regulator-approved allowed return on equity and common equity component of capital structure; (ii) changes in rate base; (iii) changes in gas delivery volumes; (iv) changes in the number and composition of customers; (v) variances between actual expenses incurred and forecast expenses used to determine revenue requirements and set customer rates; and (vi) recovery of unplanned costs through rate cases. Changes to regulatory and environmental laws could increase AltaGas' operating costs and require enhanced disclosures. Increased expenditures could include capital expenditures, operating expenditures, and decommissioning, abandonment, and reclamation costs, which may not be recoverable in the marketplace or through rate cases. These changes could adversely affect AltaGas, resulting in current operations and projects becoming less profitable or uneconomic and could require significant investment to develop new technologies.

**Litigation**

In the course of its business, AltaGas is subject to lawsuits and other claims. Defense and settlement costs associated with such lawsuits and claims can be substantial, even with respect to lawsuits and claims that have no merit. Due to the inherent uncertainty of the litigation process, the resolution of any particular legal proceeding could have a material adverse effect on the financial position or operating results of AltaGas.

  

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**Changes in Laws**

Applicable laws, including, without limitation, international trade laws and tariffs, environmental laws, policies, or government incentive programs may be changed in a manner that adversely affects AltaGas through the imposition of restrictions on its business activities or by the introduction of regulations that increase AltaGas' operating costs. There can be no assurance that applicable laws, policies, or government incentive programs relating to energy infrastructure will not be changed in a manner which adversely affects AltaGas.

Income tax laws relating to AltaGas may be changed in a manner that adversely affects its shareholders. This includes, without limitation, taxation and tax policy changes, tax rate changes, new tax laws, and revised tax law interpretations that may individually or collectively cause an increase in AltaGas' effective tax rate.

AltaGas may face regulatory and financial risks related to pipeline safety legislation seeking to require increased oversight over pipeline operations and increased investment in and inspections of pipeline. Additional operating expenses and capital expenditures may be necessary to remain in compliance with the increased federal oversight resulting from such proposals. While AltaGas cannot predict with certainty the extent of these expenses and expenditures or when they will become effective, the adoption of such proposals could result in significant additional costs to AltaGas' businesses. AltaGas' utilities may be unable to recover from customers through the regulatory process all or some of these costs which could impact the ability to earn its authorized rate of return on these costs.

**Indigenous and Treaty Rights**

Indigenous peoples assert and claim, or have established, Aboriginal and/or Treaty rights and/or Aboriginal title in relation to a substantial portion of the lands and waters in Canada and the United States. Governments in Canada have a duty to consult with and, where appropriate, accommodate Indigenous peoples where the rights of Indigenous peoples may be affected by a government action or decision. AltaGas operates in territories in which Indigenous groups have claimed Aboriginal and/or Treaty rights. Such claims, if advanced, could conflict with development activity and, if successful, could have a significant adverse effect on matters, including, without limitation, natural gas production, the development of natural gas and NGL extraction projects in Alberta and British Columbia, and the operations of RIPET in British Columbia and Ferndale in Washington State. The potential impacts on such matters could have a materially adverse effect on AltaGas' business and operations, including, without limitation, the volume of natural gas processed at AltaGas' facilities, or on the operation or development of facilities for gathering and processing, energy exports, natural gas distribution, storage, power generation, or extraction and transmission.

AltaGas cannot predict whether Aboriginal and/or Treaty rights and/or Aboriginal title claims will affect its ability to conduct its business and operations as currently undertaken or as may be undertaken in the future in such regions. Furthermore, any failure to reach an agreement, or resolve any conflict or disagreement that may arise, with an Indigenous group could have a material adverse effect on AltaGas' business, financial condition, and results of operations.

In June 2021, the British Columbia Supreme Court ruled in the case of *Yahey vs. British Columbia* that the rights of the BRFN under Treaty 8 had been breached by the cumulative impacts of industrial developments within BRFN's traditional territory over many years. The Court determined that B.C.'s regulatory mechanisms for assessing and taking into account the cumulative effects of development on rights conveyed to Indigenous peoples under Treaty 8 were lacking, and that B.C. may not continue to authorize activities that breach the promises included in Treaty 8. AltaGas operates natural gas processing facilities in the Treaty 8 area located in B.C., and requires continued volumes of natural gas production in this region in order to grow and sustain these developments. The Court has required B.C. to consult with Treaty 8 Nations for the purpose of establishing timely enforceable mechanisms to assess and manage the cumulative impact of industrial development on Treaty rights. As a result of the Court's decision, B.C. paused development in the Treaty 8 area pending reaching agreement with BRFN in respect of development within Treaty 8. On October 7, 2021, B.C. reached an initial agreement with BRFN which allowed the projects which were permitted or authorized prior to the Court decision to proceed. On January 18, 2023, B.C. and BRFN reached agreement on development within Treaty 8, which includes

  

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measures to protect wildlife, forest and land resources and share revenue from oil and gas development. The agreement further limits new petroleum and natural gas development and contemplates a new planning regime for future oil and gas activities. The Court decision could have potentially significant impacts on continued and future natural gas development in Treaty 8 and could extend to other areas in Canada where similar claims may be made. The final agreement between BRFN and B.C. may potentially impact AltaGas' operations within the Treaty 8 area, however, the specific impact on AltaGas' operations is unknown at this time.

On September 7, 2022, Duncan's First Nation initiated a claim with the Court of Queen's Bench of Alberta alleging that the cumulative effects of development activity have breached Alberta's obligations to Duncan's First Nation under Treaty 8. A ruling has not been made regarding the claim. AltaGas operates natural gas processing facilities in the Treaty 8 area located in Alberta. AltaGas cannot predict the outcomes of any ruling in this claim or the potential impacts of any ruling on AltaGas' operations.

**Dependence on Certain Partners**

AltaGas co-owns certain facilities with joint venture partners. Failure by the operators of these facilities to operate at the cost or in the manner projected by AltaGas could negatively affect AltaGas' results. In addition, for non-wholly owned subsidiaries, AltaGas relies on other investors to fulfill their commitments and obligations in respect of the project or facility. AltaGas has entered into various types of arrangements with joint venture partners for any or all of the construction, operation or ownership of certain facilities. Certain of these partners may have or develop interests or objectives which are different from or even in conflict with the objectives of AltaGas. AltaGas does not have the sole power to direct the business and operations of such facilities and AltaGas faces the risk of being impacted by partners' decisions and by potential disagreements regarding operations and other business decisions. Any such differences could have a negative impact on the success of such facilities.

**Political Uncertainty, Civil Unrest, Terrorist Attacks and Threats, Escalation of Military Activity in Response to these Attacks or Acts of War, and other Civil Unrest or Activism** 

Uncertainty exists with regard to the political climate in the jurisdictions where AltaGas operates. Changes in social, political, regulatory, or economic conditions, or in laws and policies governing environment, development, tax, foreign trade, investment or energy could materially adversely affect AltaGas' business and operations.

There have been significant incidents of civil unrest in areas where AltaGas operates. To the extent that civil unrest is accompanied by disruption to transportation routes, damage to infrastructure, violence or destruction, AltaGas' personnel, physical facilities, and operations may be placed at risk and financial and operational results may be adversely impacted.

Terrorist attacks and threats, escalation of military activity or acts of war, or other civil unrest or activism may have significant effects on general economic conditions and may cause fluctuations in consumer confidence and spending and market liquidity, each of which could adversely affect AltaGas' business. Future terrorist attacks, rumors or threats of war, actual conflicts involving the US or Canada, or military or trade disruptions may significantly affect AltaGas' operations and those of its customers. Strategic targets, such as energy related assets, may be at greater risk of future attacks than other targets in the US and Canada. In addition, increased environmental activism against pipeline construction and operation could potentially result in work delays, reduced demand for AltaGas' products and services, increased legislation or denial or delay of permits and rights-of-way. Finally, the disruption or a significant increase in energy prices could result in government-imposed price controls. It is possible that any of these occurrences, or a combination of them, could adversely affect AltaGas' business, operations or financial results.

  

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**Decommissioning, Abandonment, and Reclamation Costs** 

AltaGas is responsible for compliance with all applicable laws and regulations regarding the decommissioning, abandonment and reclamation of its facilities at the end of their economic life, the costs of which may be substantial. It is not possible to predict these costs with certainty since they are a function of regulatory requirements at the time of decommissioning, abandonment and reclamation and the actual costs may exceed current estimates which are the basis of the asset retirement obligation shown in AltaGas' financial statements. In particular, management has identified environmental issues associated with the prior activities of Harmattan and the Utilities. There are indications of significant groundwater and soil contamination resulting from Harmattan's prior activities. There is a risk that the costs of addressing these environmental issues could be significant.

As well, Washington Gas has recorded environmental liabilities for costs expected to be incurred to remediate sites where Washington Gas or a predecessor affiliate operated manufactured gas plants. Estimates of liabilities for environmental response costs are difficult to determine with precision because of the various factors, including the likely effects of inflation, that can affect their ultimate level. See the section "Business of the Corporation – Utilities Business – Environmental Considerations Impacting the Utilities Business".

**Reputation**

AltaGas places great importance on establishing and maintaining positive relationships with its stakeholders, including, without limitation, within the communities in which AltaGas operates, regulators, and local Indigenous peoples. There is an increasing level of public concern and scrutiny relating to the perceived effect of natural resources activities, including, without limitation: exploration, development, production, processing, and transportation; on certain environmental and social aspects such as overall environmental performance, emissions, air and water quality, noise, dust, land, and ecological disturbance; and employment and economic development opportunities. Opposition to natural resources activities by communities, special interest groups (including non-governmental organizations), or Indigenous peoples may ultimately impact AltaGas, including its ability to obtain or maintain permits, the anticipated timing and costs associated with capital projects, its operations, shareholder confidence, and its reputation. Recent and proposed regulatory changes could increase the ability of special interest groups to object to and/or delay certain capital projects. See "Changes in Laws" above. Publicity adverse to AltaGas' operations, AltaGas' partners, or others operating in the energy industry generally, could have an adverse effect on AltaGas and its operations. While AltaGas is committed to operating in a socially responsible manner, there can be no assurance that its efforts in this respect will mitigate this potential risk.

**Weather Data**

The utilities and natural gas distribution business is highly seasonal, with the majority of natural gas demand occurring during the winter heating season, the length of which varies in each jurisdiction in which AltaGas' utilities operate. Natural gas distribution revenue during the winter typically accounts for the largest share of annual revenue in the Utilities business. There can be no assurance that the long-term historical weather patterns will remain unchanged. Annual and seasonal deviations from the long-term average can be significant. In Maryland and Virginia, Washington Gas has in place regulatory mechanisms and rate designs intended to stabilize the level of net revenues that it collects from customers by eliminating the effect of deviations in customer usage caused by variations in weather from normal levels and other factors such as conservation. If Washington Gas' rates and tariffs are modified to eliminate these provisions, then Washington Gas would be exposed to significant risk associated with weather.

The operations of AltaGas' retail energy-marketing business are weather sensitive and seasonal, with a significant portion of revenues derived from the sale of natural gas to retail customers for space heating during the winter months, and from the sale of electricity to retail customers for cooling during the summer months. Weather conditions directly influence the volume of natural gas and electricity delivered to customers. Weather conditions can also affect the short-term pricing of

  

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energy supplies that the retail energy-marketing business may need to procure to meet the needs of its customers. Similarly, AltaGas' Midstream business is seasonal due to the tendency of storage and transportation spreads to increase during the winter. Deviations from normal weather conditions and the seasonal nature of these businesses can create large fluctuations in short-term cash requirements and earnings for these businesses.

**Capital Market and Liquidity Risks**

AltaGas may have restricted access to capital and increased borrowing costs. As AltaGas' future capital expenditures will be financed out of cash generated from operations, borrowings, and possible future equity sales, AltaGas' ability to finance such expenditures is dependent on, among other factors, the overall state of capital markets and investor demand for investments in the energy industry generally and AltaGas' securities in particular.

To the extent that external sources of capital become unavailable or available on onerous terms or otherwise limited, AltaGas' ability to make capital investments and maintain existing assets may be impaired, and its assets, liabilities, business, financial condition, results of operations, and dividends may be materially and adversely affected as a result.

If cash flow from operations is lower than expected or capital costs for these projects exceed current estimates, or if AltaGas incurs major unanticipated expenses related to construction, development, or maintenance of its existing assets, AltaGas may be required to seek additional capital to maintain its capital expenditures at planned levels. Failure to obtain financing necessary for AltaGas' capital expenditure plans may result in a delay in AltaGas' capital program or a decrease in dividends.

Washington Gas and the SPE made certain ring-fencing commitments, such that the assets of the Ring-Fenced Entities will not be available to satisfy the debt or contractual obligations of any Non-Ring-Fenced Entity.

**Interest Rates**

AltaGas is exposed to interest rate fluctuations on variable rate debt. Interest rates are influenced by Canadian, U.S., and global economic conditions beyond AltaGas' control and, accordingly, could have a material adverse effect on AltaGas' business, financial condition and cash flow.

**Internal Credit Risk** 

Credit ratings affect AltaGas' ability to obtain short-term and long-term financing and the cost of such financing. Additionally, the ability of AltaGas to engage in ordinary course derivative or hedging transactions and maintain ordinary course contracts with customers and suppliers on acceptable terms depends on AltaGas' credit ratings.

A reduction in the current rating on AltaGas' debt by one or more of its rating agencies below an investment grade rating would adversely affect AltaGas' cost of financing and its access to sources of liquidity and capital.

In addition, a downgrade in AltaGas' credit ratings may affect AltaGas' ability to, and the associated costs to, (i) enter into ordinary course derivative or hedging transactions and may require AltaGas to post additional collateral under certain of its contracts, and (ii) enter into and maintain ordinary course contracts with customers and suppliers on acceptable terms.

Additionally, with respect to WGL, a reduction in credit rating could lead to higher borrowing costs. Merger-related commitments placed limitations on Washington Gas' ability to recover increased costs of financing from customers if caused by the ongoing affiliation of AltaGas and its affiliates. Therefore, a downgrade in AltaGas' or WGL's credit ratings could adversely affect earnings or cash flows by limiting Washington Gas' ability to earn its allowed rate of return. Credit ratings are intended to provide investors with an independent measure of credit quality of any issuer of securities. The credit ratings assigned to AltaGas' securities by the rating agencies are not recommendations to purchase, hold, or sell

  

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the securities in as much as such ratings do not comment as to market price or suitability for a particular investor. Any rating may not remain in effect for any given period of time or may be revised or withdrawn entirely by a rating agency in the future if in its judgment circumstances so warrant.

**Foreign Exchange Risk** 

AltaGas' functional currency is the Canadian dollar. AltaGas is exposed to foreign exchange risk through its investments in the U.S. and is exposed to foreign exchange risk through its export business. Changes in the Canadian dollar/U.S. dollar exchange rate could impact the earnings of AltaGas, the value of the U.S. investments, and the cash generated from the U.S. businesses. AltaGas operates internationally, with an increasing amount of the Corporation's net income earned outside of Canada. As a result, AltaGas may experience a discrepancy between the currencies in which liabilities are incurred and the currency in which revenues are generated. This could adversely affect AltaGas' results due to the imposition of additional taxes and cost of currency exchange.

**Debt Financing, Refinancing, and Debt Service**

AltaGas relies on debt financing for some of its business activities, including capital and operating expenditures. The credit facilities and long-term senior unsecured notes have defined terms and there are no assurances that AltaGas will be able to refinance any or all of the borrowings at their maturity. In addition, there are no assurances that AltaGas will be able to comply at all times with the covenants applicable under its current borrowings, nor are there assurances that AltaGas will be able to secure new financing that may be necessary to finance its operations and capital growth program. Any failure of AltaGas to secure refinancing, to obtain new financing, or to comply with applicable covenants under its borrowings could have a material adverse effect on AltaGas' financial results, including its ability to maintain dividends to Shareholders. Further, any inability of AltaGas to obtain new financing may limit its ability to support future growth.

Borrowings or additional borrowings made by or on behalf of AltaGas will affect the leverage of the business. Interest and principal payments on such borrowings will take precedence over cash dividends and may increase the level of financial risk in the operations of AltaGas. AltaGas' debt prohibits the payment of dividends at any time at which a default or event of default would exist under such debt, or if a default or event of default would exist as a result of paying a dividend.

If AltaGas is unable to refinance debt obligations at the time of maturity or is unable to refinance on equally favourable terms, the level of cash dividends to Shareholders may be affected. Details regarding the maturity dates of debt facilities can be found in Note 16 to AltaGas' audited Consolidated Financial Statements as at and for the year ended December 31, 2022.

AltaGas believes that the existing credit facilities will be sufficient for its immediate requirements and has no reason to believe that it will not be able to renew its existing credit facilities or refinance its long-term senior unsecured notes on commercially reasonable terms. However, continued uncertainty in the global economic situation means AltaGas, along with other energy companies, may have restricted access to capital and increased borrowing costs. AltaGas' ability to raise debt is dependent upon, among other factors, the overall state of the capital markets, the quality of AltaGas' credit ratings, and investor appetite for investments in the energy industry and AltaGas' securities in particular. The ability to make scheduled payments on or to refinance debt obligations depends on the financial condition and operating performance of AltaGas, which is subject to prevailing economic and competitive conditions and to certain financial, business, and other factors beyond its control. As a result, AltaGas may be unable to maintain a level of cash flow from operations sufficient to permit it to pay the principal, premium, if any, and interest on its indebtedness. These conditions could have an adverse effect on the industry in which AltaGas operates and its business, including future operating and financial results. There can be no assurance that AltaGas' cash flow will be adequate for future financial obligations or that additional funds will be able to be obtained.

  

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**Counterparty and supplier risk** 

Significant delays and disruption in global supply chains may lead to a shortage of available products and higher prices. To the extent AltaGas is unable to secure products required for its operations at acceptable pricing or at all, it may result in delays in planned operational activities and higher costs of doing business. AltaGas could also face increased exposure that contract counterparties could fail to meet their obligations to AltaGas. Such non-performance by a significant counterparty could adversely affect AltaGas' operations and financial results.

**Technical Systems and Processes Incidents**

Failure of key technical systems and processes to effectively support information requirements and business processes may lead to AltaGas' inability to effectively and efficiently measure, record, access, analyze, and accurately report key data. This could result in increased costs and missed business opportunities.

**Growth Strategy Risk**

It is possible that the strategy AltaGas has implemented and plans to continue implementing in 2023 and onwards will not be as successful as projected. A failure to fully realize the anticipated benefits of AltaGas' strategy could have a negative impact on AltaGas' results, including causing the failure to achieve all or any targets provided in its financial guidance.

**Construction and Development** 

The construction and development of AltaGas' projects and their future operations are subject to changes in the policies and laws of both Canadian and U.S. federal, provincial, state, and local governments, including, without limitation, regulatory approvals and regulations relating to the environment, land use, health, culture, conflicts of interest with other parties, and other matters beyond the direct control of AltaGas.

The construction of AltaGas' pipeline assets have experienced and may continue to experience legislative and regulatory obstacles, and the construction and operation of these assets are subject to hazards, equipment failures, supply chain disruptions, personnel issues, and related risks, which could result in decreased values of these investments, including impairments, and/or delays to their in-service dates, which would negatively affect results of operations. For instance, AltaGas is required to test certain assets for impairment on either an annual basis or when events or circumstances occur which indicate that the carrying value of such assets might be impaired. That testing might result in the impairment of assets, including goodwill, property, plant and equipment, intangible assets, or certain investments.

Because these assets are interconnected with facilities of third parties, the operation of these facilities could also be adversely affected by unexpected or uncontrollable events occurring on the systems of such third parties. These events could further delay the in-service date of AltaGas' projects or disrupt operations on these projects, which could have an adverse effect on AltaGas' financial results.

**Underinsured and Uninsured Losses**

There can be no assurance that AltaGas will be able to obtain or maintain adequate insurance coverage at all or at rates it considers reasonable. Further, there can be no assurance that available insurance will cover all losses or liabilities that might arise in the conduct of AltaGas' business. The occurrence of a significant uninsured claim, a claim in excess of the insurance coverage limits maintained by AltaGas, or a claim that falls within a significant self-insured retention could have a material adverse effect on AltaGas' business or its results. Further, significant insured claims could lead to an increased cost of operating and insuring AltaGas' assets in the future.

  

AltaGas Ltd. – 2022 Annual Information Form – 63

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**Impact of Competition in AltaGas' Businesses**

AltaGas faces strong competition in its Retail Energy Marketing business. It competes with other non-regulated retail suppliers of natural gas and electricity, as well as with the commodity rate offerings of electric and gas utilities. Increases in competition, including utility commodity rate offers that are below prevailing market rates, may result in a loss of sales volumes or a reduction in growth opportunities. AltaGas' Midstream business competes with other midstream infrastructure and energy services companies, wholesale energy suppliers, and other non-utility affiliates of regulated utilities to acquire natural gas storage and transportation assets. AltaGas' Corporate/Other segment faces many competitors in the commercial energy systems business, including, for government customers, companies that contract with customers under Energy Savings Performance Contracting and other utilities providing services under UESC and, in the renewable energy market, other developers, tax equity investors, distributed generation asset owner firms and lending institutions. These competitors may have diversified energy platforms with multiple marketing approaches, broader geographic coverage, greater access to credit and other financial resources, or lower cost structures, and may make strategic acquisitions or establish alliances among themselves. There can be no assurances that AltaGas can compete successfully, and its failure to do so could have an adverse impact on AltaGas' results of operations and cash flow.

**Counterparty Credit Risk**

AltaGas is exposed to credit-related losses in the event that counterparties to contracts fail to fulfill their present or future obligations to AltaGas. AltaGas has credit risk relating to, among others, counterparties to the sale, purchase, and delivery of commodity, transportation capacity, energy system design and construction, investment terms, as well as long-term contracts including PPAs, EPAs, and take-or-pay agreements. While the majority of AltaGas' counterparties are of investment grade quality, AltaGas can provide no assurance as to whether the credit quality of its counterparties will remain at current levels or decline. In addition, for non-wholly owned subsidiaries, AltaGas relies on other investors to fulfill their commitments and obligations in respect of the project or facility. In the event such entities fail to meet their contractual obligations to AltaGas, such failures may have a material adverse effect on AltaGas' business, financial condition, results of operations, and prospects.

**Composition Risk**

The extraction business is influenced by the composition of natural gas produced in the WCSB and processed at AltaGas' facilities. The composition of the gas stream has the potential to vary over time due to factors such as the level of processing done at plants upstream of AltaGas' facilities and the composition of the natural gas produced from reservoirs upstream of AltaGas' facilities.

**Collateral**

AltaGas is able to obtain unsecured credit limits from its counterparties in order to procure natural gas and NGL supply and services for its energy services business. If counterparties' credit exposure to AltaGas exceeds the unsecured credit limits granted, AltaGas may have to provide collateral such as letters of credit.

**Rep Agreements**

If AltaGas becomes insolvent or is in material default under the terms of the Rep Agreements for an extended period, effective ownership of the natural gas processing plant within Harmattan can be claimed by the original Harmattan owners for a nominal fee. Accordingly, under these circumstances, AltaGas could lose its investment in the natural gas processing plant, excluding the facilities that are owned 100 percent by AltaGas.

  

AltaGas Ltd. – 2022 Annual Information Form – 64

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**Market Value of Common Shares and Other Securities** 

AltaGas cannot predict at what price the Common Shares, Preferred Shares, or other securities issued by AltaGas will trade in the future. Common Shares, Preferred Shares, and other securities of AltaGas will not necessarily trade at values determined solely by reference to the underlying value of the Corporation's assets. One of the factors that may influence the market price of such securities is the annual yield on such securities. An increase in market interest rates may lead purchasers of securities of AltaGas to demand a higher annual yield and this could adversely affect the market price of such securities. In addition, the market price for securities of AltaGas may be affected by announcements of new developments, changes in AltaGas' operating results, differences between results and analysts' expectations, changes in credit ratings, changes in general market conditions, fluctuations in the market for securities, and numerous other factors beyond the control of AltaGas.

**Variability of Dividends**

The declaration and payment of dividends on Common Shares by AltaGas are at the discretion of the Board of Directors. The cash available for dividends to Shareholders is a function of numerous factors, including, without limitation, AltaGas' financial performance, the impact of interest rates, electricity prices, natural gas, NGL, LNG and LPG prices, debt covenants and obligations, working capital requirements, liquidity, and future capital requirements. Dividends may be reduced or suspended entirely depending on the operations of AltaGas and the performance of its assets. The market value of AltaGas' shares may deteriorate if AltaGas is unable to meet or otherwise chooses to modify its dividend targets, and that deterioration may be material.

**Potential Sales of Additional Shares**

AltaGas may issue additional shares in the future to directly or indirectly fund, among other things, capital expenditure requirements of entities now or hereafter owned directly or indirectly by AltaGas, including financing acquisitions by those entities. Such additional shares may be issued without the approval of Shareholders. Shareholders will have no pre-emptive rights in connection with such additional issuances. The Board of Directors has discretion in connection with the price and the other terms of the issue of such additional shares. Any issuance of Common Shares or securities convertible into Common Shares may have a dilutive effect on existing Shareholders.

**Labor Relations**

The operations and maintenance staff at the Blythe Energy Center and Younger, as well as some employees of Washington Gas and SEMCO Energy, are members of a labor union. Aspects of RIPET's operations are also performed by employees that are members of a labor union. Also, other employee groups may organize to form labor unions within AltaGas' operating entities in the future. Labor disruptions could restrict AltaGas' operations including the ability of the Blythe Energy Center to generate power, the ability of Younger to process natural gas and produce NGLs, operations at RIPET, or could affect Washington Gas and SEMCO Energy's operations and therefore could affect AltaGas' cash flow and net income.

**Key Personnel**

AltaGas' success has been largely dependent on the skills and expertise of its key personnel. The continued success of AltaGas will be dependent on its ability to retain such personnel and to attract additional talented personnel to the organization. Access to a sustained labor market from which to attract the required expertise, knowledge, and experience is a critical factor to AltaGas' success. Costs associated with attracting and retaining key personnel could adversely affect AltaGas' business operations and financial results.

  

AltaGas Ltd. – 2022 Annual Information Form – 65

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**Risk Management Costs and Limitations** 

AltaGas uses derivative financial instruments to hedge risks associated with exchange rates, interest rates, and commodity price fluctuations. AltaGas does not enter into derivatives transactions for speculative purposes. AltaGas' derivative transactions cannot mitigate all risk associated with AltaGas' business nor the risk of unauthorized activities notwithstanding appropriate oversight through AltaGas' risk management function. Any such unauthorized activities could materially adversely affect AltaGas' business, operations, and financial condition.

**Commitments Associated with Regulatory Approvals for the Acquisition of WGL**

As a result of the process to obtain any consents required of each of the PSC of DC, the PSC of MD, the SCC of VA, and FERC, as well as to obtain CFIUS approval for the acquisition of WGL, AltaGas is committed to various programs, contributions, and investments in several agreements and regulatory approval orders. It is possible that AltaGas may encounter delays, unexpected difficulties, or additional costs in meeting these commitments in compliance with the terms of the relevant agreements and orders. Failure to fulfill the commitments in accordance with their terms could result in increased costs or result in penalties or fines that could materially adversely affect AltaGas' business, financial condition, operating results, and prospects.

**Cost of Providing Retirement Plan Benefits** 

The cost of providing retirement plan benefits to eligible current and former employees is subject to changes in the market value of AltaGas' retirement plan assets, changing bond yields, changing demographics and changing assumptions. Any sustained declines in equity markets, reductions in bond yields, increases in health care cost trends, or increases in life expectancy of beneficiaries may have an adverse effect on AltaGas' retirement plan liabilities, assets and benefit costs. Additionally, AltaGas may be required to increase its contributions in future periods in order to preserve the current level of benefits under the plans and/or due to U.S. federal funding requirements.

**Failure of Service Providers** 

Certain of AltaGas' information technology, customer service, supply chain, pipeline and infrastructure installation and maintenance, engineering, payroll, and human resources functions that AltaGas relies on are provided by third party vendors. Some of these services may be provided by vendors from centers located outside of Canada or the U.S. Services provided pursuant to these agreements could be disrupted due to events and circumstances beyond AltaGas' control. AltaGas' reliance on these service providers could have an adverse effect on AltaGas' business, results of operations and financial condition.

**Pandemics, epidemics or disease outbreaks, such as the COVID-19 pandemic, may adversely affect local and global economies and our business, operations or financial results**

To date, AltaGas has been able to respond to the COVID-19 related challenges without materially disrupting its operations and business. Although many governments have recently relaxed the restrictive measures previously put in place in response to COVID-19, given the dynamic nature of the COVID-19 pandemic, any further impacts will depend on future developments and factors outside of AltaGas' control, which are uncertain, evolving, and cannot be predicted. This includes new information which may emerge concerning the severity or duration of the pandemic, including new COVID-19 variants and the efficacy of vaccines, as well as further actions taken by governments and others to contain or mitigate the impacts of COVID-19. Such developments could include disruptions which may have an adverse effect on our customers, suppliers, regulators, business, operations, or financial results.

AltaGas has identified the following as potential direct or indirect impacts to its business and operations from the pandemic:

  

AltaGas Ltd. – 2022 Annual Information Form – 66

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ <u>Resurgence of COVID-19 variants</u>: widespread inability of AltaGas' workforce or contractors to perform their duties as a result of pervasive incidence of a COVID-19 variant or inability to comply with any applicable mandates on a timely basis would have an adverse impact on AltaGas' ability to continue normal operations; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ <u>Return to work</u>: while AltaGas has managed the return to work for personnel at all of its workplaces, the occurrence of additional waves of the virus or its variants may require AltaGas to reassess current work models. To the extent these risks materialize, AltaGas' ability to carry out its business plans may be adversely impacted.

**ENVIRONMENTAL, SOCIAL AND GOVERNANCE**

AltaGas' commitment to ESG means upholding its Core Values and operating with purpose towards a shared mission of providing safe and reliable access to affordable energy. Through a commitment to reducing GHG emissions; investing in its people and communities; building long-term relationships with Indigenous peoples, local communities, governments and regulatory bodies; ensuring sound leadership and oversight; adhering to risk management practices; and being disciplined in capital deployment, AltaGas is focused on integrating ESG practices into its business. Ongoing communication with stakeholders is a key input to inform AltaGas' community consultation, strategy development and risk management activities, ensuring the Company approaches work in a responsible way and creates social value for the communities it serves. AltaGas' commitment to providing safe, affordable and reliable access to energy, together with its Core Values, enables an inclusive, performance-based culture.

AltaGas has identified seven ESG topics that reflect its ESG priorities. The topics were identified through consideration of both the perspectives of internal and external stakeholders as well as an internal assessment of risks. These seven topics are assessed regularly against a broad range of perspectives to confirm that the topics are still relevant and accurate.

AltaGas' seven key ESG topics are:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Safety and Reliability;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Energy Affordability;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Energy Evolution;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Cybersecurity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Diversity and Inclusion;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Culture; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Community Partnerships.

In December 2022, AltaGas released its 2022 ESG Update, Reporting 2021 Performance, highlighting 2021 data for key topics and outlining progress towards the Company's sustainability goals within the areas of climate, diversity and inclusion and safety. This update covers AltaGas' consolidated enterprise-wide ESG performance prepared with reference to the TCFD framework, the SASB standards for the Oil & Gas sector – Midstream and the Infrastructure sector – Gas Utilities & Distributors, and supplemented with Global Reporting Initiative (GRI) standards. The 2022 ESG Update builds upon AltaGas' detailed ESG Report released in 2021 and the two should be read together. The 2022 ESG Update and the 2021 ESG Report can be accessed at www.altagas.ca.

**Environment**

Environmental stewardship is integrated into how AltaGas conducts its business. The Board established the Environment, Health and Safety Committee to review, monitor, and make recommendations to the Board regarding Environment, Health and Safety strategy, policy, compliance, and risk, including climate-related risks and opportunities.

  

AltaGas Ltd. – 2022 Annual Information Form – 67

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AltaGas is focused on operational excellence to minimize environmental impacts throughout the lifecycle of its operations while meeting the energy needs of its customers. AltaGas' EHS Policy guides its commitment to managing and minimizing environmental impacts and enabling a strong environmentally conscious culture. This includes implementing programs to safeguard the environment by proactively identifying and managing risks, using innovative technology, applying lessons learned and following leading practices to continually improve performance.

<u>Climate Change and the Energy Evolution</u>

AltaGas' climate strategy is focused on reducing GHG emissions within its areas of operation while positioning the Utilities and Midstream businesses to participate in future global emissions reduction and decarbonization initiatives. AltaGas has taken many purposeful steps over the years to diversify its business, its energy offerings and to open the door to new markets for its customers. AltaGas' network of hard-to-replicate assets in strategic locations, its North American West Coast export footprint and core strengths in energy delivery are key to its competitive advantage.

AltaGas' climate strategy is influenced by the climate-related risks and opportunities to the businesses over the short term (less than three years), medium term (three - 10 years) and long term (+10 years) horizon and the management of climate-related risks is incorporated into the business through AltaGas' enterprise-risk management processes. Integrating these considerations throughout the decision-making process ensures AltaGas is well-positioned to capitalize on the swiftly changing landscape.

**Social**

<u>Safety and Reliability</u>

AltaGas' EHS Policy and guidelines outline the Company's commitment to safety as a core value and set expectations and parameters that apply consistently across the organization and provide a framework to reinforce a culture of safety. AltaGas' commitment to safety means putting the health and safety of its employees, customers and communities above all else; believing no job is so urgent that it cannot be done safely; taking action to protect against health and safety issues; pursuing operational excellence to ensure AltaGas delivers energy solutions safely and reliably; and proactively identifying and managing risks, reviewing leading practices, and integrating lessons learned into our health and safety planning.

To further emphasize the importance of safety, each employee and contractor must commit to upholding AltaGas' EHS Policy and Core Values every day. In addition, AltaGas' EHS management system provides a transparent framework that can be consistently applied across its operations to drive accountability, operational excellence and manage risk.

Building resiliency in the Company's infrastructure is essential for providing safe, reliable service to customers and keeping communities safe. AltaGas' Midstream and Utility businesses have process safety management systems that ensure asset integrity, regulatory compliance, and resiliency in respect of both human factors and engineering design and operation. AltaGas proactively engineers to ensure it can safely operate complex systems. AltaGas' systems are designed with multiple layers of protection against human, manufacturer and environmental factors that could result in a loss of integrity. AltaGas makes capital investments to enhance the resiliency of its assets, which includes investments to modernize facility and pipeline networks through enhancement and replacement activities.

<u>Cybersecurity</u>

Protecting the Company's infrastructure, system availability, the security of digital assets and confidential information is essential to the safe and reliable operation of AltaGas' business. AltaGas works closely with regulators and governments

  

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in each of its jurisdictions to assess and protect its systems and to ensure the Company's cybersecurity and data privacy measures are aligned and compliant with local rules and regulations.

<u>Diversity and Inclusion</u>

Spanning North America, AltaGas' diverse workforce of approximately 3,000 employees at December 31, 2022, is guided by one set of Core Values and a common mission. This connection to a common set of principles provides the basis for how AltaGas does business and executes on its strategic priorities. AltaGas' Human Rights Policy, guided by the International Bill of Human Rights, outlines the Company's commitment to maintaining a corporate culture that respects the principles aimed at promoting, protecting and supporting internationally recognized human rights.

AltaGas' diversity and inclusion objectives stem from its Core Values, with a focus on employee, community, and third-party engagement, supported by effective programming. AltaGas invests in its people through talent development, diversity and inclusion initiatives and engagement strategies. The Company's Employee Resource Groups support employees and provide professional development opportunities for diverse employees. AltaGas' diversity and inclusion efforts also extend beyond the workforce into local communities and supply chains through community investment and engagement, including with Indigenous communities and supplier diversity initiatives.

<u>Community Partnerships and Indigenous Relations</u>

AltaGas operates in many diverse jurisdictions and recognizes that each community has unique needs. The stakeholders within its communities, including Indigenous partners, local governments, regulators, and customers have varied perspectives that AltaGas is continuously learning from. To meet each community's individual needs, the Company strives to build long-term collaborative relationships and ensure mutually beneficial solutions to generate long-term value for all stakeholders. AltaGas' commitment is visible through several of its programs, including community investment, customer affordability and energy assistance programs, public awareness and safety programs, supplier diversity programs, and employee engagement through volunteerism and giving.

AltaGas recognizes the value of building enduring, trusting, and mutually beneficial relationships with Indigenous peoples and the Company's Indigenous Engagement Guideline ensures that a consistent approach is applied to engagement practices, areas of focus for economic and social benefit and record keeping. As part of AltaGas' engagement, the Company may enter into agreements with Indigenous peoples. These agreements range from short-term arrangements enabling Indigenous peoples to learn more about the Company's proposed developments and participate in regulatory processes, to agreements that define how AltaGas and Indigenous communities can collaborate over the long-term. AltaGas' longer-term initiatives include training, employment, contracting, supplier procurement, environmental protection and community investment.

<u>Energy Affordability</u>

Through energy affordability and assistance programs which support its low-income utility customers, AltaGas strives to meet the needs of local communities and ensure safe and affordable access to energy for community members. These programs include asset optimization, revenue adjustments, budget plans and helping qualifying customers access federal and state funding.

  

AltaGas Ltd. – 2022 Annual Information Form – 69

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**Governance**

AltaGas' Board oversees strategy development and evaluates and measures progress towards execution, including ESG initiatives, and short-and long-term risks to meet strategic objectives. ESG oversight is ultimately a Board responsibility. Each of the Board's four standing committees assist in providing oversight of environment, social and governance areas, with different aspects of ESG performance falling under each committee mandate. AltaGas' Governance Committee has accountability for ESG reporting. For more details on the role of each standing committee, see the 2021 ESG Report available at www.altagas.ca.

The CEO is ultimately responsible for the development and execution of strategic plans, with each president responsible for execution within their business. In addition, AltaGas has established an Environment, Social and Governance Steering Committee made up of a cross functional enterprise-wide team led by the EVP, Chief External Affairs and Sustainability Officer. The Committee is charged with assisting the business to identify significant ESG priorities, raise awareness of internal initiatives, and report on the outcomes.

<u>Policies</u>

AltaGas' governance, policies, and procedures are the framework and foundation that support sound decision making. AltaGas has a number of policies in place with respect to environmental stewardship, health and safety, and social responsibility. Notably, AltaGas' COBE ensures AltaGas upholds its Core Values and conducts business in a safe, respectful and ethical manner. The COBE and its related policies are approved by the Board. Directors, officers and employees of AltaGas, and other representatives are required to certify that they have read, understand and will comply with the COBE and its key policies when joining AltaGas and on an annual basis thereafter. The Board monitors compliance with the COBE and its key policies and related procedures and oversees training initiatives implemented to support compliance. AltaGas' COBE related policies include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Acceptable Use of Technology;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Alcohol and Drug;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Anti-Bribery and Anti-Corruption;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Conflicts of Interest;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Cybersecurity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Disclosure;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Environment, Health and Safety;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Human Rights;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Privacy;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Reporting Concerns and Anti-Retaliation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Respectful Workplace; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Securities Trading and Reporting.

Details of AltaGas' COBE and related policies are available at www.altagas.ca.

  

AltaGas Ltd. – 2022 Annual Information Form – 70

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**DIVIDENDS**

Dividends are declared at the discretion of the Board of Directors and dividend levels are reviewed periodically by the Board of Directors, giving consideration to the ongoing sustainable cash flow as impacted by the consolidated net income, maintenance and growth capital and debt repayment requirements of AltaGas. The Corporation targets to pay a portion of its ongoing cash flow through regular quarterly dividends made to Shareholders.

Effective March 31, 2022, common share dividends were declared and paid on a quarterly basis, instead of monthly. Dividends on the Preferred Series A Shares, Series B Shares, Series E Shares, Series G Shares, and Series H Shares are paid quarterly.

AltaGas' payment of dividends may be limited by covenants under its credit agreements, including, without limitation, in circumstances when a default or event of default exists or would be reasonably expected to exist upon or as a result of making such dividend payment. In the event of liquidation, dissolution, or winding-up of AltaGas, the preferred shareholders have priority in the payment of dividends over the common shareholders.

The table below shows the cash dividends paid by AltaGas on Common Shares and Preferred Shares for the three most recently completed fiscal years.

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| | | | |
|:---|:---|:---|:---|
| $ per share | **2022** | 2021 | 2020 |
| Common Shares | **1.060000** | 1.082900 | 0.963300 |
| Series A Shares | **0.765000** | 0.765000 | 0.825000 |
| Series B Shares | **1.007330** | 0.694360 | 0.894890 |
| Series C Shares <sup>(1)</sup> | **0.991875** | 1.322500 | 1.322500 |
| Series E Shares | **1.348252** | 1.348252 | 1.348252 |
| Series G Shares | **1.060500** | 1.060500 | 1.060500 |
| Series H Shares | **1.107322** | 0.794372 | 0.994890 |
| Series I Shares <sup>(2)</sup> | **—** |  | 1.312500 |
| Series K Shares <sup>(3)</sup> | **0.312500** | 1.250000 | 1.250000 |

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(1)Amounts disclosed are in U.S. dollars. Series C shares were redeemed on September 30, 2022.

(2)Series I shares were redeemed on December 31, 2020.

(3)Series K shares were redeemed on March 31, 2022.

  

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**MARKET FOR SECURITIES**

The following chart provides the reported high and low trading prices and volume of Common Shares, traded on the TSX under the symbol ALA, traded by month from January to December 2022 as reported by the TSX:

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| | | | |
|:---|:---|:---|:---|
| Month | High | Low | Volume Traded |
| January | 27.54 | 25.59 | 28179159 |
| February | 28.05 | 26.41 | 25796687 |
| March | 28.94 | 27.68 | 28865510 |
| April | 30.98 | 28.33 | 26937267 |
| May | 30.54 | 28.11 | 24461452 |
| June | 30.29 | 25.18 | 47420280 |
| July | 28.53 | 26.50 | 21922211 |
| August | 30.19 | 28.18 | 21961994 |
| September | 29.57 | 26.45 | 20618674 |
| October | 27.64 | 24.24 | 29930625 |
| November | 23.80 | 22.31 | 46537751 |
| December | 24.68 | 22.67 | 35469695 |

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Series A Shares are traded on the TSX under the symbol ALA.PR.A. The following table sets forth the monthly price range and volume traded for Series A Shares from January to December 2022 as reported by the TSX:&nbsp;&nbsp;&nbsp;&nbsp;

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| | | | |
|:---|:---|:---|:---|
| Month | High | Low | Volume Traded |
| January | 20.70 | 20.15 | 66051 |
| February | 20.59 | 19.75 | 59463 |
| March | 20.02 | 19.23 | 94570 |
| April | 19.45 | 16.32 | 136739 |
| May | 18.27 | 16.81 | 67462 |
| June | 18.40 | 16.33 | 73409 |
| July | 16.60 | 15.58 | 54141 |
| August | 17.41 | 16.25 | 62050 |
| September | 17.03 | 14.60 | 98803 |
| October | 15.60 | 14.20 | 143002 |
| November | 15.95 | 15.00 | 84081 |
| December | 15.35 | 14.38 | 136942 |

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Series B Shares are traded on the TSX under the symbol ALA.PR.B. The following table sets forth the monthly price range and volume traded for Series B Shares for the period from January to December 2022 as reported by the TSX:

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| | | | |
|:---|:---|:---|:---|
| Month | High | Low | Volume Traded |
| January | 20.40 | 19.00 | 8804 |
| February | 20.46 | 20.20 | 6810 |
| March | 20.20 | 20.01 | 3808 |
| April | 20.18 | 17.53 | 11380 |
| May | 18.04 | 17.90 | 14813 |
| June | 19.44 | 17.70 | 15094 |
| July | 17.80 | 16.70 | 17720 |
| August | 18.08 | 17.02 | 9802 |
| September | 18.31 | 17.45 | 25876 |
| October | 18.20 | 16.25 | 21685 |
| November | 18.45 | 17.40 | 8379 |
| December | 17.95 | 16.61 | 9133 |

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Series C Shares were traded on the TSX under the symbol ALA.PR.U. The following table sets forth the monthly price range (in US dollars) and volume traded for Series C Shares from January to September 2022 as reported by the TSX:

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| | | | |
|:---|:---|:---|:---|
| Month | High | Low | Volume Traded |
| January | 25.20 | 24.64 | 69181 |
| February | 25.20 | 24.98 | 63034 |
| March | 25.10 | 24.74 | 71689 |
| April | 25.20 | 24.20 | 377597 |
| May | 24.85 | 24.32 | 84457 |
| June | 24.95 | 24.26 | 199429 |
| July | 24.45 | 23.95 | 223055 |
| August | 25.25 | 24.00 | 1548973 |
| September | 25.26 | 24.96 | 155302 |

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On September 30, 2022, AltaGas redeemed all of its outstanding Series C Preferred Shares. A loss of $74 million was recognized upon redemption, which was comprised of a $69 million foreign exchange loss and a $5 million loss related to share issuance costs for the Preferred Shares.

Series E Shares are traded on the TSX under the symbol ALA.PR.E. The following table sets forth the monthly price range and volume traded for Series E Shares from January to December 2022 as reported by the TSX:

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| | | | |
|:---|:---|:---|:---|
| Month | High | Low | Volume Traded |
| January | 25.84 | 25.11 | 85855 |
| February | 25.80 | 25.00 | 66153 |
| March | 25.93 | 24.76 | 111208 |
| April | 25.20 | 22.10 | 94126 |
| May | 24.70 | 22.25 | 135571 |
| June | 24.99 | 22.56 | 252219 |
| July | 22.61 | 21.00 | 141291 |
| August | 22.81 | 22.17 | 116088 |
| September | 22.77 | 19.63 | 123093 |
| October | 21.32 | 19.63 | 91481 |
| November | 21.06 | 20.10 | 81292 |
| December | 21.18 | 20.31 | 175641 |

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Series G Shares are traded on the TSX under the symbol ALA.PR.G. The following table sets forth the monthly price range and volume traded for Series G Shares from January to December 2022 as reported by the TSX:

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| | | | |
|:---|:---|:---|:---|
| Month | High | Low | Volume Traded |
| January | 24.60 | 23.78 | 76904 |
| February | 24.28 | 23.77 | 44355 |
| March | 24.24 | 23.59 | 123184 |
| April | 24.05 | 19.98 | 78590 |
| May | 22.39 | 20.31 | 115546 |
| June | 22.82 | 19.01 | 79103 |
| July | 19.64 | 18.35 | 57204 |
| August | 20.15 | 19.33 | 76659 |
| September | 19.80 | 16.70 | 60091 |
| October | 18.10 | 16.40 | 409104 |
| November | 18.10 | 17.23 | 119609 |
| December | 17.74 | 17.16 | 89014 |

---

  

AltaGas Ltd. – 2022 Annual Information Form – 73

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&nbsp;&nbsp;&nbsp;&nbsp;

Series H Shares are traded on the TSX under the symbol ALA.PR.H. The following table sets forth the monthly price range and volume traded for Series H Shares for the period of January to December 2022 as reported by the TSX:

---

| | | | |
|:---|:---|:---|:---|
| Month | High | Low | Volume Traded |
| January | 23.00 | 22.40 | 400 |
| February | 22.76 | 22.76 | 1 |
| March | 22.76 | 22.76 | 5 |
| April | 23.00 | 21.00 | 5651 |
| May | 21.49 | 20.00 | 2866 |
| June | 21.75 | 20.00 | 5815 |
| July | 20.49 | 19.08 | 6470 |
| August | 20.50 | 19.08 | 1220 |
| September | 21.21 | 20.50 | 300 |
| October | 20.65 | 19.50 | 5486 |
| November | 20.50 | 19.55 | 2300 |
| December | 20.05 | 19.55 | 4407 |

---

Series K Shares were traded on the TSX under the symbol ALA.PR.K. The following table sets forth the monthly price range and volume traded for Series K Shares for the period of January to March 2022 as reported by the TSX:

---

| | | | |
|:---|:---|:---|:---|
| Month | High | Low | Volume Traded |
| January | 25.40 | 25.20 | 845,598 |
| February | 25.29 | 25.22 | 472,958 |
| March | 25.30 | 24.98 | 202,035 |

---

On March 31, 2022, AltaGas redeemed all of its outstanding Series K Preferred Shares. A loss of $10 million was recognized upon redemption related to share issuance costs for the Preferred Shares.

**CREDIT RATINGS** 

Credit ratings are intended to provide investors with an independent measure of credit quality of an issue of securities and are indicators of the likelihood of payment and of the capacity and willingness of a company to meet its financial commitment on an obligation in accordance with the terms of an obligation. This information concerning AltaGas' credit ratings relates to AltaGas' financing costs, liquidity, and operations. The availability of AltaGas' funding options may be affected by certain factors, including the global capital markets environment and outlook as well as AltaGas' financial performance. AltaGas' access to capital markets at competitive rates is influenced by credit ratings and rating outlook, as determined by credit rating agencies such as S&P, Fitch, and Moody's, and if AltaGas' ratings were downgraded, AltaGas' financing costs and future debt issuances could be unfavorably impacted.

S&P, Fitch, and Moody's are rating agencies that provide credit ratings. Ratings for debt instruments from S&P, and Fitch range from a high of AAA to a low of D. Moody's ratings for debt instruments range from a high of AAA to a low of C. S&P, and Fitch also provide credit ratings for Preferred Shares and subordinated debt. S&P ratings for Preferred Shares and subordinated debt range from a high of P-1 to a low of D. Fitch ratings for Preferred Shares and subordinated debt range from a high of AAA to a low of D.

  

AltaGas Ltd. – 2022 Annual Information Form – 74

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&nbsp;&nbsp;&nbsp;&nbsp;

The below table summarizes the most recent credit ratings for AltaGas and subsidiaries:

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| | | | | |
|:---|:---|:---|:---|:---|
| **Entity** | **Rating Agency** | **Debt Rated** | **Most Recent Rating** | **Comments** |
| **AltaGas** | Standard & Poor's (S&P) | Issuer rating | BBB- | Last reviewed June 8, 2022 |
| **AltaGas** | Standard & Poor's (S&P) | Senior unsecured | BBB- | Last reviewed June 8, 2022 |
| **AltaGas** | Standard & Poor's (S&P) | Preferred shares and Junior Subordinated | P-3 / BB | Last reviewed August 3, 2022. Junior Subordinated added on January 5 and August 3, 2022. |
| **AltaGas** | Fitch Ratings (Fitch) | Issuer | BBB | Last reviewed on August 17, 2022. |
| **AltaGas** | Fitch Ratings (Fitch) | Preferred shares and Junior Subordinated | BB+ | Last reviewed on August 17, 2022. Junior Subordinated added on January 5, 2022. |
| **Washington Gas** | S&P | Unsecured debt | A- | Last reviewed June 8, 2022. |
| **Washington Gas** | S&P | Commercial paper | A-2 | Last reviewed June 8, 2022. |
| **Washington Gas** | Fitch | Unsecured debt | A | Last reviewed August 17, 2022. |
| **WGL** | S&P | Issuer | BBB- | Last reviewed June 8, 2022. |
| **WGL** | S&P | Senior unsecured | BB+ | Last reviewed June 8, 2022. |
| **WGL** | S&P | Commercial paper | A-3 | Last reviewed June 8, 2022. |
| **WGL** | Fitch | Issuer | BBB | Last reviewed August 17, 2022. |
| **SEMCO** | Moody's | Long-term issuer | A3 | Raised from Baa1 to A3 on January 22, 2021 with stable outlook. |
| **SEMCO** | Moody's | Senior secured notes | A1 | Raised from A2 to A1 on January 22, 2021 with stable outlook. |
| **SEMCO** | S&P | Long-term issuer | BBB | Last reviewed June 8, 2022. |
| **SEMCO** | S&P | Senior secured notes | A- | Last reviewed June 8, 2022. |

---

According to the S&P rating system, an obligor rated BBB has adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments. An obligor rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitments on the obligation is still strong. The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

A P-3 rating by S&P is the third highest of eight categories granted by S&P under its Canadian preferred share rating scale and a P-3 rating directly corresponds with a BB rating under its global preferred rating scale. The Canadian preferred share rating scale is fully determined by the global preferred rating scale and there are no additional analytical criteria associated with the determination of ratings on the Canadian preferred share rating scale. According to the S&P rating system, while securities rated P-3 are regarded as having significant speculative characteristics, they are less vulnerable to non-payment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. The ratings from P-1 to P-5 may be modified by "high" and "low" grades which indicate relative standing within the major rating categories.

According to the Fitch rating system, 'BBB' ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate, but adverse business or economic conditions are more likely to impair this capacity. 'A' ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings. The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign indicating relative differences of probability of default or recovery for issues.

  

AltaGas Ltd. – 2022 Annual Information Form – 75

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&nbsp;&nbsp;&nbsp;&nbsp;

A 'BB' rating by Fitch indicates an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists that support the servicing of financial commitments.

A short-term obligation rated 'A-2' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitments on the obligation is satisfactory. A short-term obligation rated 'A-3' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken an obligor's capacity to meet its financial commitments on the obligation.

Moody's obligations rated A are judged to be upper-medium grade and are subject to low credit risk. Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.

The credit ratings accorded to the securities by the rating agencies are not recommendations to purchase, hold, or sell the securities in as much as such ratings do not comment as to market price or suitability for a particular investor. There is no assurance that any rating will remain in effect for any given period of time or that any rating will not be revised or withdrawn entirely by a rating agency in the future if, in its judgment, circumstances so warrant.

Except as set forth above, none of S&P, Fitch, nor Moody's has announced that it is reviewing or intends to revise or withdraw the ratings on AltaGas.

AltaGas provides an annual fee to S&P, Fitch, and Moody's for credit rating services. AltaGas has paid each of S&P, Fitch, and Moody's its respective fees in connection with the provision of the above ratings. Over the past two years, in addition to the aforementioned fees, AltaGas has made payments in respect of certain other services provided to the Corporation by S&P, Fitch, and Moody's.

  

AltaGas Ltd. – 2022 Annual Information Form – 76

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&nbsp;&nbsp;&nbsp;&nbsp;

**MATERIAL CONTRACTS**

Except for contracts entered into in the ordinary course of business, the only material contracts entered into by AltaGas within the most recently completed fiscal year, or before the most recently completed fiscal year but which are still material and are still in effect, are the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The trust indenture between AltaGas and Computershare Trust Company of Canada dated July 1, 2010, as supplemented, related to the issuance and sale of MTNs pursuant to AltaGas' medium term note program;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The trust indenture between AltaGas and Computershare Trust Company of Canada dated September 26, 2017, as supplemented, related to the issuance and sale of MTNs pursuant to AltaGas' medium term note program;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The Amended and Restated Credit Agreement dated May 4, 2021 among AltaGas Ltd., AltaGas Services (U.S.) Inc., Royal Bank of Canada as agent and certain financial institutions as lenders; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The Purchase and Sale Agreement dated May 25, 2022 among SEMCO Energy, Inc., as vendor, Alaska Utility Holdings Inc., as buyer, and TriSummit Cycle Holding Inc. (as buyer parent), related to the Alaska Utilities Disposition.

Copies of each of these documents have been filed on SEDAR at www.sedar.com.

**INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS**

AltaGas is not aware of any material interest, direct or indirect, of any director or officer of AltaGas, any director or officer of a corporation that is an insider or subsidiary of AltaGas, or any other insider of AltaGas, or any associate or affiliate of any such person, in any transaction since the commencement of AltaGas' last three completed fiscal years, or in any proposed transaction, that has materially affected or would materially affect AltaGas or any of its subsidiaries.

**LEGAL PROCEEDINGS**

AltaGas is not aware of any material legal proceedings to which the Corporation or its affiliates are party or to which their property is subject during AltaGas' most recently completed fiscal year and AltaGas is not aware of any such material legal proceedings being contemplated. See "Risk Factors – Litigation".

**REGULATORY ACTIONS**

AltaGas is not aware of any (i) penalties or sanctions imposed against it by a court relating to securities legislation or by a securities regulatory authority during its most recently completed fiscal year, or (ii) other penalties or sanctions imposed by a court or regulatory body against it that would likely be considered important to a reasonable investor in making an investment decision. There were no settlement agreements entered into by AltaGas before a court relating to securities legislation or with a securities regulatory authority during AltaGas' most recently completed fiscal year.

  

AltaGas Ltd. – 2022 Annual Information Form – 77

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&nbsp;&nbsp;&nbsp;&nbsp;

**INTERESTS OF EXPERTS**

The auditors of the Corporation are Ernst & Young LLP, Chartered Accountants, 2200 – 215 2nd Street SW, Calgary, Alberta T2P 1M4. Ernst & Young LLP is independent in accordance with the Rules of Professional Conduct as outlined by the Chartered Professional Accountants of Alberta.

**ADDITIONAL INFORMATION**

Additional information, including, without limitation, directors' and officers' remuneration and indebtedness, principal holders of AltaGas' securities and Share Options is contained in AltaGas' management information circular for AltaGas' most recent annual meeting of Shareholders that involved the election of directors.

Additional financial information is contained in AltaGas' audited Consolidated Financial Statements as at and for the year ended December 31, 2022 and MD&A for the year ended December 31, 2022.

The Corporation routinely files all required documents through the SEDAR system and on its own website. Internet users may retrieve such material through the SEDAR website www.sedar.com. AltaGas' website is located at www.altagas.ca, but AltaGas' website is not incorporated by reference into this AIF.

**TRANSFER AGENTS AND REGISTRARS**

The registrar and transfer agent for the Common Shares and the Preferred Shares is Computershare Investor Services Inc., Home Oil Tower 800, 324-8th Avenue SW, Calgary, Alberta T2P 2Z2, Tel: 1-800-564-6253.

The registrar and trustee for AltaGas' MTNs is Computershare Trust Company of Canada, Home Oil Tower 800, 324-8th Avenue SW, Calgary, Alberta T2P 2Z2, Tel: 1-800-564-6253.

**METRIC CONVERSION**

The following table sets forth certain standard conversions between Standard Imperial Units and the International System of Units (or metric units). &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| To Convert From | To | Multiply by | To Convert From | To | Multiply by |
| Mcf | cubic meters | 28.174 | feet | meters | 0.305 |
| cubic meters | cubic feet | 35.494 | meters | feet | 3.281 |
| Bbls | cubic meters | 0.159 | miles | km | 1.609 |
| cubic meters | Bbls | 6.29 | km | miles | 0.621 |
| tonnes | long tons | 0.98 | gigajoule | Mcf | 0.9482 |
| metric tonnes | Bbls (propane) | 12.40 | metric tonnes | Bbls (butane) | 10.90 |

---

  

AltaGas Ltd. – 2022 Annual Information Form – 78

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&nbsp;&nbsp;&nbsp;&nbsp;

**GLOSSARY**

Unless the context otherwise requires, terms used in this AIF have the following meanings and references to agreements include any amendments, restatements, modifications, or supplements in effect as of the date hereof:

**"AB 32"** means the Global Warming Solutions Act of 2006, or Assembly Bill 32, a California State Law designed to reduce greenhouse gas emissions from all sources throughout the state;

**"ACI"** means AltaGas Canada Inc., which has since been renamed TriSummit Utilities Inc.;

**"AER"** means the Alberta Energy Regulator;

**"AESO"** means the Alberta Electric System Operator;

**"AIF"** means this Annual Information Form;

**"Aitken Connector"** means an eight-inch diameter NGL pipeline, approximately 60 km in length, which runs from Aitken Creek to the Townsend complex;

"**Alaska Utilities Disposition**" means the agreement dated May 25, 2022 to sell AltaGas' 100 percent ownership interest in ENSTAR, 65 percent interest in CINGSA and CINGSA Storage facility and other ancillary operations, to TriSummit Utilities, for consideration of US$800 million (approximately CAD$1.1 billion) prior to closing adjustments. The transaction closed on March 1, 2023;

**"AltaGas",** the **"Company",** or the **"Corporation"** means AltaGas Ltd., including, where the context requires, the affiliates of AltaGas Ltd.;

**"ARB"** means the California Air Resources Board;

**"AMP"** means Arrearage Management Plan;

**"ARPA Funds"** means American Rescue Plan Act Funds;

**"ARSP"** means the Anacostia River Sediment Project;

**"ASC"** means the Alberta Securities Commission;

**"B.C."** or **"BC"** means the province of British Columbia in Canada;

**"Bbls"** means stock tank barrels of ethane and other NGLs, expressed in standard 42 U.S. gallon barrels or 34.972 imperial gallon barrels;

**"Bbls/d"** means Bbls per day;

**"Bcf"** means billion cubic feet or 1,000,000 Mcf of natural gas;

**"Bcf/d"** means Bcf per day;

**"Birchcliff"** means Birchcliff Energy Ltd.;

  

AltaGas Ltd. – 2022 Annual Information Form – 79

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&nbsp;&nbsp;&nbsp;&nbsp;

**"Blair Creek facility"** means the Blair Creek processing facility located approximately 140 km northwest of Fort St. John, British Columbia, owned by AltaGas' indirect wholly-owned subsidiary AltaGas Northwest Processing Limited Partnership;

**"Blythe"** means Blythe Energy Inc.;

**"Blythe Energy Center"** means the 507 MW gas-fired generation facility located near Blythe, California, together with the related 67 miles transmission lines, owned by AltaGas' indirect wholly-owned subsidiary Blythe;

**"Board of Directors" or "the Board"** means the board of directors of AltaGas, as from time to time constituted;

"**BRFN**" means Blueberry River First Nations;

**"Brush II"** means the 70 MW gas-fired generation facility in Colorado, which was sold during 2022;

**"C&I"** means commercial and industrial;

**"CAISO"** means the California Independent System Operator;

**"Canadian EPA"** means the Canadian Environmental Protection Act;

**"CARE Plan"** means Washington Gas' natural gas conservation and ratemaking efficiency plan;

**"CARES Act"** means Coronavirus Aid, Relief, and Economic Security Act;

**"CBCA"** means the *Canada Business Corporations Act*, R.S.C. 1985, c. C 44, as amended from time to time, including the regulations from time to time promulgated thereunder;

**"CCAA"** means the *Companies' Creditors Arrangement Act*, R.S.C. 1985, c. C 36, as amended from time to time, including the regulations from time to time promulgated thereunder;

**"CCEMA"** means the *Climate Change and Emissions Management Act*, S.A. 2003, C-16.7, as amended from time to time, including the regulations from time to time promulgated thereunder;

"**CEO**" means Chief Executive Officer;

**"CFIUS"** means the Committee on Foreign Investment in the United States;

**"CINGSA"** means Cook Inlet Natural Gas Storage Alaska, LLC, which was sold on March 1, 2023 pursuant to the Alaska Utilities Disposition;

**"CINGSA Storage facility"** means the in-field storage facility in the Cook Inlet area of Alaska owned and operated by CINGSA, which was sold on March 1, 2023 pursuant to the Alaska Utilities Disposition;

**"CN"** means Canadian National Railway Company;

**"CO2"** means carbon dioxide;

**"CO2e"** means carbon dioxide equivalent;

**"COBE"** means AltaGas' Code of Business Ethics

**"Common Shares"** means common shares of AltaGas Ltd.;

  

AltaGas Ltd. – 2022 Annual Information Form – 80

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&nbsp;&nbsp;&nbsp;&nbsp;

**"Constitution"** means Constitution Pipeline Company, LLC, an entity formed to create a pipeline to transport natural gas from the Marcellus region in northern Pennsylvania to northeastern markets;

**"Core Values"** means AltaGas' stated mission to (1) work safely, act responsibly; (2) act with integrity; (3) make informed decisions; (4) achieve results; and (5) invest in our people and foster diversity;

**"COVID-19"** means the 2019 novel coronavirus;

**"CPI"** means the Consumer Price Index;

**"Degree Day"** means the amount that the daily mean temperature deviates below 65 degrees Fahrenheit at SEMCO Gas and Washington Gas, such that a one degree difference equates to one Degree Day;

**"Dekatherm (Dth)"** means 10 Therms;

**"DOEE"** means the Department of Energy and Environment;

**"ECCC"** means Environment and Climate Change Canada;

**"EEEP"** means the Edmonton ethane extraction plant and related facilities, AltaGas' interest being owned by its indirect wholly-owned subsidiary AltaGas Extraction and Transmission Limited Partnership;

**"EH&S Committee"** means the Environment, Health and Safety Committee of the Board of Directors;

**"EHS Management System"** means AltaGas' Environmental, Health & Safety Management System;

**"EHS Policy"** means AltaGas' Environment, Health and Safety policy;

**"Enerchem"** means Enerchem International Inc., a wholly owned subsidiary of AltaGas;

**"ENSTAR"** means the natural gas distribution business conducted by SEMCO Energy in Alaska under the name ENSTAR Natural Gas Company, which was sold on March 1, 2023 pursuant to the Alaska Utilities Disposition;

**"EPA"** means electricity purchase agreement;

**"EQM"** means EQM Gathering Opco, LLC;

**"EQT"** means EQT Midstream Partners, LP;

**"ERM"** means Enterprise Risk Management;

**"ESG"** means Environment, Social & Governance;

**"EWRP"** means Energy Waste Reduction Program;

**"FERC"** means the United States Federal Energy Regulatory Commission;

**"EVP"** means Executive Vice President;

**"Ferndale terminal"** means the storage, distribution, and export facility for bulk shipments of propane, and butane located on the west coast near Ferndale, Washington, and owned by a subsidiary of AltaGas;

**"Fitch"** means Fitch Ratings Inc.;

  

AltaGas Ltd. – 2022 Annual Information Form – 81

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&nbsp;&nbsp;&nbsp;&nbsp;

**"g"** means grams;

"**GGPPA**" means the *Greenhouse Gas Pollution Pricing Act;*

**"GJ"** means gigajoule;

**"GHG"** means greenhouse gas;

**"GHGRP"** means the Federal Greenhouse Gas Reporting Program;

**"Gordondale facility"** means the Gordondale gas processing facility in the Gordondale area of the Montney reserve area approximately 100 km northwest of Grande Prairie, Alberta, owned by AltaGas' indirect wholly-owned subsidiary AltaGas Northwest Processing Limited Partnership;

**"GRI"** means the Global Reporting Initiative;

**"GSAs"** means Groundwater Sustainability Agencies;

**"Hampshire"** or **"Hampshire Gas"** means Hampshire Gas Company, a subsidiary of WGL that provides regulated interstate natural gas storage services to Washington Gas under a FERC approved interstate storage service tariff;

**"Harmattan"** means the combined Harmattan gas processing facility and extraction plant and associated facilities, owned by AltaGas' indirect wholly-owned subsidiary Harmattan Gas Processing Limited Partnership;

**"HRC"** means the Human Resources and Compensation committee of the Board of Directors;

**"Idemitsu"** means Idemitsu Kosan Co., Ltd.;

"**IT**" means information technology;

**"IRIP"** means the Infrastructure Reliability Improvement Program;

**"JEEP"** means the Joffre ethane extraction plant and related facilities;

**"Kelt"** means Kelt Exploration (LNG) Ltd;

**"km"** means kilometer;

**"kWh"** means kilowatt hour;

**"LNG"** means liquefied natural gas;

**"LPG"** means liquefied petroleum gas;

**"MBbl/d"** means thousands of barrels per day;

**"Mcf"** means a thousand cubic feet of natural gas at standard imperial conditions of measurement;

**"Mcf/d"** means Mcf per day;

**"MD&A"** means management discussion and analysis;

**"MDth"** means thousands of Dekatherms;

  

AltaGas Ltd. – 2022 Annual Information Form – 82

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&nbsp;&nbsp;&nbsp;&nbsp;

**"MD OPC"** means Maryland Office of People's Counsel;

**"Merger Agreement"** means the agreement and plan of merger dated as of January 25, 2017, among AltaGas, Merger Sub and WGL;

**"Merger Sub"** means Wrangler Inc., a Virginia corporation and an indirect wholly-owned subsidiary of AltaGas;

**"MGP"** means manufactured gas plant;

**"Mmcf"** means a million cubic feet of natural gas at standard conditions of measurement;

**"Mmcf/d"** means Mmcf per day;

**"Moody's"** means Moody's Investor Service;

**"Mountain Valley"** or **"MVP"** means Mountain Valley pipeline, an equity investment of Washington Gas Resources;

**"MPSC"** means the Michigan Public Service Commission;

**"MRP"** means Main Replacement Program;

**"MTN"** means medium term notes issued from time to time under either the amended and restated trust indenture dated July 1, 2010 between AltaGas and Computershare Trust Company of Canada, as further amended, restated, supplemented or otherwise modified from time to time or the trust indenture dated September 26, 2017 between AltaGas and Computershare Trust Company of Canada, as amended, restated, supplemented or otherwise modified from time to time, as the case may be;

**"MW"** means megawatt; one MW is 1,000,000 watts; the watt is the basic electrical unit of power;

**"M3"** means cubic meter;

**"NAESB"** means North American Energy Standards Board;

**"NEBC"** means Northeast British Columbia;

"**Net-Zero Act**" means the *Canadian Net-Zero Emissions Accountability Act.*

**"NFA"** means No Further Action;

**"NGL"** or **"NGLs"** means natural gas liquids, which includes primarily propane, butane, and condensate;

**"NGTL"** means NOVA Gas Transmission Ltd.;

**"Non-Ring-Fenced Entities"** means AltaGas and its affiliates other than Washington Gas and the SPE;

**"NGQSS"** means Natural Gas Quality of Service Standards;

**"NPS"** means the National Park Service;

**"North Pine facility"** means the NGL separation facility, located approximately 40 km northwest of Fort St. John, British Columbia;

  

AltaGas Ltd. – 2022 Annual Information Form – 83

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&nbsp;&nbsp;&nbsp;&nbsp;

**"North Pine pipelines"** means two eight-inch diameter NGL supply pipelines, each approximately 40 km in length, which run from the existing Alaska Highway truck terminal to the North Pine facility;

**"Nova Chemicals"** means NOVA Chemicals Corporation;

**"NOx"** means nitrogen oxides;

**"O2"** means oxygen;

**"PEEP"** means the Pembina Empress extraction plant and related facilities;

**"Pembina"** means Pembina Infrastructure and Logistics LP;

**"Petrogas"** means Petrogas Energy Corp., a North American integrated midstream company, wholly-owned by AltaGas pursuant to the Petrogas Acquisition;

**"Petrogas Acquisition"** means AltaGas' acquisition of a controlling interest in Petrogas on December 15, 2020. On July 5, 2022, AltaGas closed the purchase of the remaining 25.97 percent equity ownership, with AltaGas now owning 100 percent of Petrogas;

**"Pomona"** means the 44.5 MW gas-fired generation facility located in Pomona, California, which was sold during 2020;

**"Pool"** means the scheme operated by the AESO for (i) exchanges of electric energy, and (ii) financial settlement for the exchange of electric energy;

**"PPA"** means power purchase agreement;

**"Preferred Shares"** means the preferred shares of AltaGas Ltd. as a class, including, without limitation, the Series A Shares, Series B Shares, Series C Shares, Series E Shares, Series G Shares, Series H Shares, Series I Shares, Series K Shares;

**"PROJECT*pipes*"** means Washington Gas' 40-year accelerated pipeline replacement program, that was launched in 2014 in the District of Columbia and is designed to enhance the safety and reliability of its system;

**"PSC of DC"** means the Public Service Commission of the District of Columbia;

**"PSC of MD"** means the Maryland Public Service Commission;

**"PULJ"** means the Public Utility Law Judge;

**"RCA"** means the Regulatory Commission of Alaska;

**"Rep Agreements"** mean the Representation, Management and Processing Agreements at Harmattan;

**"RELIEF Act"** means the Recovery for the Economy, Livelihoods, Industries, Entrepreneurs and Families Act;

**"Ring-Fenced Entities"** means Washington Gas and the SPE;

**"RIPET"** means the Ridley Island Propane Export Terminal, the propane export terminal located on Ridley Island, near Prince Rupert, British Columbia;

**"Ripon"** means the 49.5 MW gas-fired generation facility in Ripon, California, which was sold during 2020;

  

AltaGas Ltd. – 2022 Annual Information Form – 84

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&nbsp;&nbsp;&nbsp;&nbsp;

**"ROD"** means Record of Decision;

**"ROE"** means return on equity;

**"Royal Vopak"** means Koninklijke Vopak N.V., a public company incorporated under the laws of the Netherlands;

**"RTI"** means Ridley Terminals Inc.;

**"S&P"** means Standard & Poor's Ratings Services and its successors;

**"Sarbanes-Oxley"** means the *Sarbanes-Oxley Act of 2002*;

**"SASB"** means the Sustainability Accounting Standards Board;

**"SAVE"** means Steps to Advance Virginia's Energy Plan;

**"SB 1020"** means Senate Bill 1020, a bill signed in California in September 2022 which aims to reduce the state's dependency on fossil fuels in three stages;

**"SCC of VA"** means the Commonwealth of Virginia State Corporation Commission;

**"SCE"** means Southern California Edison Company;

**"SEDAR"** means System for Electronic Document Analysis and Retrieval, at www.sedar.com;

**"SEMCO Energy"** means SEMCO Energy, Inc.;

**"SEMCO Gas"** means the Michigan natural gas distribution business conducted by SEMCO Energy in Michigan under the name SEMCO Energy Gas Company;

**"Series 1 Indenture"** means the trust indenture dated September 26, 2017 between AltaGas and Computershare Trust Company of Canada, as supplemented and amended by a ninth supplemental indenture dated January 11, 2022;

**"Series 2 Indenture"** means the trust indenture dated September 26, 2017 between AltaGas and Computershare Trust Company of Canada, as supplemented and amended by a tenth supplemental indenture dated August 17, 2022;

**"Series 2022-A Shares"** means the Cumulative Redeemable Fixed-to-Fixed Rate Preferred Shares, Series 2022-A, of AltaGas;

**"Series 2022-B Share"** means the Cumulative Redeemable Fixed-to-Fixed Rate Preferred Shares, Series 2022-B, of AltaGas;

**"Series A Shares"** means the cumulative redeemable 5-year fixed rate reset preferred shares, Series A, of AltaGas;

**"Series B Shares"** means the cumulative redeemable floating rate preferred shares, Series B, of AltaGas;

**"Series C Shares"** means the cumulative redeemable 5-year fixed rate reset preferred shares, Series C, of AltaGas (US dollar), which were redeemed by AltaGas on September 30, 2022;

**"Series E Shares"** means the cumulative redeemable 5-year fixed rate reset preferred shares, Series E, of AltaGas;

**"Series G Shares"** means the cumulative redeemable 5-year fixed rate reset preferred shares, Series G, of AltaGas;

  

AltaGas Ltd. – 2022 Annual Information Form – 85

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**"Series H Shares"** means the cumulative redeemable floating rate preferred shares, Series H, of AltaGas;

**"Series I Shares"** means the cumulative redeemable 5-year minimum fixed rate reset preferred shares, Series I, of AltaGas, which were redeemed by AltaGas on December 31, 2020;

**"Series K Shares"** means the cumulative redeemable 5-year minimum fixed rate reset preferred shares, Series K, of AltaGas, which were redeemed by AltaGas on March 31, 2022;

**"SGMA"** means the *Sustainable Groundwater Management Act*;

**"Share Options"** means options to acquire Common Shares granted pursuant to AltaGas' share option plan;

**"Shareholders"** mean the holders of Common Shares;

**"Shell Energy"** means Shell Energy North America (US), LP;

**"SOS"** means Standard offer Service;

**"SP"** means California Air Resources Board's 2022 Scoping Plan;

**"SPE"** means Wrangler SPE LLC, a wholly-owned special purpose entity subsidiary of WGL incorporated as a bankruptcy remote entity;

**"STRIDE"** means Strategic Infrastructure Development Enhancement Plan;

**"Subordinated hybrid notes"** means the Subordinated Notes, Series 1 and the Subordinated Notes, Series 2;

**"Subordinated Notes, Series 1"** means the 5.25 percent Fixed-to-Fixed Rate Subordinated Notes, Series 1 of AltaGas;

**"Subordinated Notes, Series 2"** means the 7.35 percent Fixed-to-Fixed Rate Subordinated Notes, Series 2 of AltaGas;

**"TCFD"** means the Task Force on Climate-related Financial Disclosures;

**"TIER"** means Technology Innovation and Emissions Reduction;

**"Tourmaline"** means Tourmaline Oil Corp.;

**"Townsend 2B"** means the 198 Mmcf/d C3+ deep cut gas processing facility located on the existing Townsend complex;

**"Townsend complex"** means the 550 Mmcf/d gas processing facility, including shallow cut and deep cut processing;

**"Transco"** means Transcontinental Gas Pipeline Company LLC;

"**Trigon**" means Trigon Pacific Terminals Ltd.;

**"TSX"** means the Toronto Stock Exchange;

**"UESC"** means Utility Energy Savings Contracts;

**"United States", "US",** or **"U.S."** means the United States of America;

**"US dollar"** or **"US$"** means currency in the form of United States dollars;

  

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&nbsp;&nbsp;&nbsp;&nbsp;

**"USEPA"** means United States Environmental Protection Agency;

**"VCP"** means the Maryland Department of Environment's Voluntary Cleanup Program;

**"VLGCs"** means Very Large Gas Carriers, the largest sub-class of fully refrigerated LPG carriers with capacity's typically above 70,000 M3;

**"Vopak"** means Vopak Development Canada Inc., a wholly-owned subsidiary of Royal Vopak;

**"Washington Gas"** means Washington Gas Light Company, a subsidiary of WGL that sells and delivers natural gas primarily to retail customers in the District of Columbia, Maryland and Virginia in accordance with tariffs approved by the PSC of DC, the PSC of MD and the SCC of VA;

**"Washington Gas Resources"** means Washington Gas Resources Corporation, a subsidiary of WGL that owns the majority of the non-utility subsidiaries;

**"WCSB"** means Western Canada Sedimentary Basin;

**"WGL"** means WGL Holdings, Inc., an indirect subsidiary of AltaGas;

**"WGL Acquisition"** means the acquisition by AltaGas, indirectly through Merger Sub, of WGL through a merger of Merger Sub with and into WGL pursuant to the Merger Agreement, which closed on July 6, 2018;

**"WGL Energy Services"** means WGL Energy Services, Inc. (formerly Washington Gas Energy Services, Inc.), a subsidiary of Washington Gas Resources that sells natural gas and electricity to retail customers on an unregulated basis;

**"WGL Energy Systems"** means WGL Energy Systems, Inc. (formerly Washington Gas Energy Systems, Inc.), a subsidiary of Washington Gas Resources, which provides commercial energy efficient and sustainable solutions to government and commercial clients;

**"WGL Midstream"** means WGL Midstream, Inc., a former subsidiary of Washington Gas Resources that, prior to the divisive merger and sale of the majority of its assets on April 23, 2021, engaged in acquiring and optimizing natural gas storage and transportation assets; and

**"Younger"** means the Younger extraction plant and related facilities, AltaGas' interest being owned by its indirect wholly-owned subsidiary AltaGas Extraction and Transmission Limited Partnership.

  

AltaGas Ltd. – 2022 Annual Information Form – 87

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**SCHEDULE A: AUDIT COMMITTEE MANDATE** 

**I. PURPOSE**

The Board of Directors (the "Board") of AltaGas Ltd. ("AltaGas" or the "Corporation") has established an Audit Committee (the "Committee") to serve as the Audit Committee of the Board. The Committee is responsible for performing such duties as delegated by the Board to assist the Board in fulfilling its oversight role in relation to financial reporting and enterprise risk. This oversight role includes reviewing the quality and integrity of the Corporation's financial statements, financial disclosure and internal controls over financial reporting, including compliance with legal and regulatory requirements; reviewing the qualifications, independence and performance of the external and internal auditors and reviewing the Corporation's enterprise risk management program and management's identification and mitigation of significant risks.

**II. MEMBERSHIP**

The Board shall elect from its members not less than three (3) Directors to serve on the Committee (the "Members") and shall appoint one such Member as Chair of the Committee.

Every Member must be:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• independent (in accordance with National Instrument 52-110 – *Audit Committees* of the Canadian Securities Administrators ("NI 52-110") and, if AltaGas is at such time an SEC Issuer, the rules of the SEC); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• financially literate (in accordance with NI 52-110).

For so long as the Corporation has a class of securities registered under section 12 of the United States *Securities Exchange Act of 1934* (the "1934 Act") or is required to file reports under section 15(d) of the 1934 Act (at such time, an "SEC Issuer"), at least one Member shall be an "audit committee financial expert" as such term is defined under applicable SEC rules.

No Member shall be an officer or employee of AltaGas or any subsidiary or affiliate of AltaGas.

Each Member shall hold office until the Member resigns or is replaced, whichever first occurs. Any Member may be removed or replaced at any time by the Board and shall cease to be a Member upon ceasing to be a Director of the Corporation. Where a vacancy occurs at any time in the membership of the Audit Committee, it may be filled by the Board on the recommendation of the Governance Committee, provided that the proposed Member meets the above criteria (and, if applicable in the circumstances where the vacancy was in relation to the sole "audit committee financial expert", the proposed Member is also an "audit committee financial expert"). Provided the Committee includes three Members, including an "audit committee financial expert" if required, it may continue to act in the event of a vacancy. When appointing a Member to the Committee, the Board shall take into consideration the number of other audit committees upon which the proposed Member sits.

The Corporate Secretary of AltaGas shall be secretary to the Committee unless the Committee directs otherwise.

**III. MEETINGS**

The Committee shall convene no less than four times per year at such times and places as designated by its Chair or whenever a meeting is requested by a Member, the Board, the Chair of the Board or an officer of the Corporation. A minimum of twenty-four (24) hours' notice of each meeting shall be given to each Member. Members may waive notice of the meeting in any manner, including through their attendance at the meeting. Members of management of the Corporation or any subsidiary or affiliate of the Corporation shall attend whenever requested to do so by a Member. The Committee shall have the right to determine who shall be present at any time during a meeting of the Committee.

  

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A meeting of the Committee shall be duly convened if a majority of Members are present. Members may participate in a meeting of the Committee by means of such telephonic, electronic or other communication facilities as permits all persons participating in the meeting to communicate adequately with each other, and a Member participating in such a meeting by any such means is deemed to be present at that meeting.

In the absence of the Chair of the Committee, the Chair may delegate a member to chair the meeting. If a delegate is not selected by the Chair, members may choose one of the Members to be the chair of the meeting.

The external auditor will be given notice of all Committee meetings and be provided the opportunity to attend every meeting relating to quarterly and annual financial reporting.

The Committee will hold *in camera* sessions without management present, including with internal and external auditors, as may be deemed appropriate by the Members.

Minutes shall be kept of all meetings of the Committee by the Corporate Secretary of the Corporation or a designate of the Corporate Secretary, as approved by the Chair.

**IV. DUTIES AND RESPONSIBILITIES OF THE CHAIR**

The Chair of the Committee is responsible for:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.providing leadership to the Committee and assisting the Committee in reviewing and monitoring its responsibilities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.working with management on the development of agendas;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.ensuring, to the extent possible, the Committee has sufficient information to properly discharge its duties and responsibilities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.presiding over meetings and ensuring such meetings are conducted in an efficient, effective and focused manner;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.together with the Board Chair, reviewing director expenses on a quarterly basis, and approving any exceptions to the Director Expense Policy in respect of the Chair of the Board;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.advising the Committee of any finance, accounting or misappropriation matters brought to the Chair's attention;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.facilitating information sharing with other Board committees as required to address matters of mutual interest or concern; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.reporting to the Board on the activities, decisions and recommendations of the Committee after each meeting.

**V. DUTIES AND RESPONSIBILITIES OF THE COMMITTEE**

The Committee is hereby delegated by the Board, as permitted and in accordance with the requirements of the *Canada Business Corporations Act*, the Articles and By-Laws of the Corporation and any legal or regulatory authority having jurisdiction, the authority to perform the following functions:

*Financial Reporting and Public Disclosure*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.Approve and recommend to the Board for approval, the annual consolidated financial statements, including management's discussion and analysis and press release containing annual financial results.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.Approve or recommend to the Board for approval, the interim consolidated financial statements, including management's discussion and analysis and press release containing interim financial results (provided that any declaration of dividends incorporated in the press release has been approved by the Board).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.Review the analysis by management and the external auditor regarding financial reporting made in connection with the preparation of the consolidated financial statements.

  

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&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.Approve the financial information and financial related matters contained in public disclosure documents including information on audited or unaudited financial statements and external auditor appointment, services or fees, including such information contained in, prospectuses, annual information forms, and management information circulars.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.Ensure adequate procedures are in place for review of public disclosure of financial information and periodically assess the adequacy of such procedures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.Approve any significant changes to the Corporation's accounting principles and procedures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.Review reports from auditors, and the audit committee or board of directors of subsidiaries that produce audited financial statements, relating to financial reporting of such subsidiaries.

*External Auditors*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.On an annual basis, approve and recommend to the Board for approval, the appointment of the external auditor subject to shareholder approval.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.Approve and recommend to the Board for approval any termination of the external auditor of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.Approve the terms of the external auditor's annual engagement letter, including the proposed audit fee for the Corporation and its subsidiaries.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.Review and pre-approve all non-audit services to be provided to the Corporation and its' subsidiaries by the external auditor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.Approve the Corporation's policies with respect to the hiring of current and former partners and employees of the external auditors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.Review the experience and qualifications of the audit team and assess the performance and effectiveness of the external auditor in its provision of services.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.Review the report pertaining to auditor independence prepared by the external auditor on an annual basis, which report shall delineate all relationships between the external auditor and the Corporation and its subsidiaries, and determine the auditor's independence.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.Review and pre-approve the audit plans (and any changes) of the external auditor and determine the degree of coordination with the internal audit plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.Oversee the work of the external auditor in the preparation of the auditor's report, including the resolution of any disagreements between management and the auditors regarding financial reporting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.Review other reports from the external auditor, as necessary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.Regularly meet independently with external auditor in the absence of management on matters of interest, including matters that the external auditor recommends bringing to the attention of the Committee or the Board.

*Internal Auditor*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.Review the responsibilities, budget and staffing of the Corporation's internal audit function.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.Approve the Internal Audit Charter and the internal audit plan and any changes thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.Assess the performance and effectiveness of the internal audit function and participate in succession planning for the head of internal audit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22.Review the reports prepared periodically by the head of internal audit regarding the activities of the internal audit function, including any significant disagreements between internal auditor and management.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.Receive summaries of significant reports to management prepared by the internal auditors and managements' responses (or the full report if requested).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24.Regularly meet independently with internal auditor in the absence of management on matters of interest, including matters that the internal auditor recommends bringing to the attention of the Board.

*Internal Control over Financial Reporting and Disclosure Controls*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.Review the adequacy and effectiveness of the accounting and internal control policies and procedures, including internal controls over financial reporting, through inquiry and discussions with the external auditor, management and the internal auditor, including about the extent to which the scope of the internal and external audit plans can be relied upon to detect weakness in internal control policies, fraud or other illegal acts.

  

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&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;26.Review the effectiveness of procedures for the receipt, retention and resolution of complaints regarding accounting, internal accounting controls or auditing matters, and review any complaints raised by employees or others regarding accounting, internal accounting controls, financial reporting, auditing matters or otherwise relating to matters within the Committee's mandate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;27.Review management's periodic reports on the adequacy and effectiveness of the disclosure control policies and procedures of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;28.Review with management and the external auditor the certification and reports of management and the external auditor required in the Corporation's periodic SEC reports concerning the Corporation's internal controls over financial reporting and disclosure controls and procedures, the adequacy of such controls and any remedial steps being undertaken to address any material weaknesses or significant deficiencies in internal control over financial reporting.

*Risk Oversight*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;29.On a quarterly basis, review the Corporation's enterprise risk management (ERM) processes, including processes relating to management's identification of material risks, methods of risk analysis, and mitigation strategies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30.On a quarterly basis, review the Corporation's top enterprise risks, changes in risk rankings, emerging risks and an update on related mitigation activities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;31.On a quarterly basis, review management's reporting on financial risk exposures, including commodity risk, credit risk of counterparties, and management's processes and practices for risk mitigation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32.Review management's periodic reports on the status of material litigation, claims and contingencies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;33.Review the financial aspects of any transactions of the Corporation that involve related parties (other than wholly-owned subsidiaries).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;34.On a quarterly basis, review management's reporting on information security matters, including processes for identifying and managing data, cyber and other information technology related risk and processes for the development of data security, training and compliance programs and practices.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;35.Review the Corporation's insurance programs, at least annually.

*Policies and Mandate* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;36.Approve key policies under the Code of Business Ethics relating to the Committee's mandate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;37.On an annual basis, review the Committee mandate and recommend any changes.

*Pension and Benefits* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;38.Oversee financial aspects of pension and benefit plans that are delegated to the management Retirement and Savings Committee (the "RSC") to manage and administer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;39.Review, at least annually, the financial management activities of the RSC, including funding levels, investment decisions and changes to valuation assumptions performed by the RSC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;40.Review any proposed changes to pension or benefit plans that may significantly impact financial matters relating to such plans and make recommendations to the Human Resources and Compensation Committee in relation thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;41.Approve the financial information that supports the calculation of financial metrics used to evaluate performance under incentive compensation plans and funding pools under compensation plans and report to the Human Resources and Compensation Committee.

*Other*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;42.Annually review and approve the election of the end-user exemption from mandatory clearing, as defined in the Dodd-Frank Wall Street Reform and Consumer Protection Act, by the Corporation and its subsidiaries, and the provision of swap guarantees by the Corporation to one of its subsidiaries from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;43.Review the solvency and liquidity tests used to support dividend declarations by the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;44.Review asset retirement obligations in relation to decommissioning, reclamation and remediation.

  

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&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;45.Receive updates on material tax policies, tax planning initiatives and tax audits or assessments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;46.Review management's process for certification under the *Extractive Sector Transparency Measures Act* (Canada), if applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;47.Review, approve or make recommendations in respect of any other matters considered necessary or appropriate in the context of the mandate of this Committee, or otherwise delegated to it by the Board from time to time.

**VI. COMMITTEE TIMETABLE**

The major activities of the Committee will be outlined in an annual schedule.

**VII. OUTSIDE EXPERTS AND ADVISORS**

The Committee is authorized, when deemed necessary or desirable, to engage independent counsel, outside experts and other advisors, at the Corporation's expense, to advise the Committee on any matter.

**VIII. RELIANCE**

Absent actual knowledge to the contrary (which shall be promptly reported to the Board), each member of the Committee shall be entitled to rely on (i) the integrity of those persons or organizations within and outside the Corporation from which it receives information, (ii) the accuracy of the financial and other information provided to the Committee by such persons or organizations, and (iii) representations made by management and the external auditor, as to any information technology, risk management, internal audit and other non-audit services provided by the external auditor to the Corporation and its subsidiaries.

*Approved by the Board on July 27, 2022.*

  

AltaGas Ltd. – 2022 Annual Information Form – 92

## Exhibit 13.2

?xml version="1.0" ? atgff-20221231_d2

**MANAGEMENT'S DISCUSSION AND ANALYSIS**

*This Management's Discussion and Analysis (MD&A) dated March 1, 2023 is provided to enable readers to assess the results of operations, liquidity, and capital resources of AltaGas Ltd. ("AltaGas", the "Company" or the "Corporation") as at and for the year ended December 31, 2022. This MD&A should be read in conjunction with the accompanying audited Consolidated Financial Statements and notes thereto of AltaGas as at and for the year ended December 31, 2022.* 

*The Consolidated Financial Statements and comparative information have been prepared in accordance with United States (U.S.) generally accepted accounting principles (U.S. GAAP) and in Canadian dollars, unless otherwise indicated. Throughout this MD&A, references to GAAP refer to U.S. GAAP and dollars refer to Canadian dollars, unless otherwise indicated.*

*Abbreviations, acronyms and capitalized terms used in this MD&A without express definition shall have the same meanings given to those terms in the MD&A as at and for the year ended December 31, 2022 or the Annual Information Form for the year ended December 31, 2022.*

*This MD&A contains forward-looking information (forward-looking statements). Words such as "may", "can", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "aim", "seek", "propose", "contemplate", "estimate", "focus", "strive", "forecast", "expect", "project", "target", "potential", "objective", "continue", "outlook", "vision", "opportunity" and similar expressions suggesting future events or future performance, as they relate to the Corporation or any affiliate of the Corporation, are intended to identify forward-looking statements. In particular, this MD&A contains forward-looking statements with respect to, among other things, business objectives, expected growth, results of operations, performance, business projects and opportunities and financial results. Specifically, such forward-looking statements included in this document include, but are not limited to, statements with respect to the following: AltaGas' belief in the role and importance of global resource exports; expected timing, process and outcomes of AltaGas' CEO succession plan; 2023 strategic priorities; AltaGas' belief in the role and importance of the Blythe Energy Center in meeting California's power needs and reliability on the power grid; expectation of 2023 annual consolidated normalized EBITDA of approximately $1.5 to $1.6 billion; anticipated 2023 normalized earnings per share of approximately $1.85 to $2.05; assumed effective tax rate of approximately 22 percent in 2023; expectation that the Utilities segment will contribute approximately 57 to 61 percent of normalized EBITDA for 2023; expected growth drivers of normalized EBITDA in the Utilities segment; expectation that the Midstream segment will contribute approximately 39 to 43 percent of normalized EBITDA for 2023; drivers of expected growth in the Midstream segment; expected higher normalized EBITDA from the Corporate/Other segment in 2023; expected growth drivers of 2023 normalized earnings per share; AltaGas' expectation of an active 2023 hedging program and anticipated outcomes therefrom; the percentage of AltaGas' expected 2023 frac exposed volumes that are hedged; the percentage of AltaGas' expected 2023 global export volumes that are tolled or financially hedged; AltaGas' 2023 Midstream Hedge Program quarterly estimates; estimated impact of changes in commodity prices, exchange rates, and weather on normalized annual EBITDA; expected invested capital expenditures of approximately $1.0 billion in 2023, including approximately $90 million of discretionary Midstream capital which was deferred from 2022 to 2023; anticipated segment allocation and focus of capital expenditures in 2023; expectation for 2023 committed capital program to be funded through internally-generated cash flow, asset sales including the Alaska Utilities Disposition, and normal course borrowings on existing committed credit facilities; the estimated cost, status and expected in-service dates for growth capital projects in the Midstream and Utilities businesses; anticipated annual average capital spending at SEMCO Gas from 2021 to 2025; AltaGas' pursuit of opportunities and its long-term objectives in the Utilities segment, including among other things, RNG and lower carbon investments, anticipated rate base growth of 8 to 10 percent annually through 2027, and ensuring energy affordability for its customers; the percentage of contracted volumes expected to be shipped from Ferndale and RIPET in 2023; anticipated in-service date for the Mountain Valley pipeline and completion date of MVP Southgate; expected timing and outcomes of the Harmattan carbon capture opportunity; AltaGas' pursuit of opportunities and its long-term objectives in the Midstream segment, including among other things, increase export volumes and throughput, advance ESG initiatives, goals and opportunities, and mitigate commodity, volume and counterparty risk; expected filing, procedure and decision dates for rate cases in the Utilities business; timing of material regulatory filings, proceedings and decisions in the Utilities business; objectives and expected results from AltaGas'* 

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 1

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*commodity price contract strategies by segment; future changes in accounting policies and adoption of new accounting standards; and expected in-service date of the VLGCs currently under construction.*

*These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events and achievements to differ materially from those expressed or implied by such statements. Such statements reflect AltaGas' current expectations, estimates, and projections based on certain material factors and assumptions at the time the statement was made. Material assumptions include: effective tax rate of approximately 22 percent, U.S./Canadian dollar exchange rates; inflation; interest rates, credit ratings, regulatory approvals and policies; expected commodity supply, demand and pricing; volumes and rates; propane price differentials; degree day variance from normal; pension discount rate; financing initiatives; the performance of the businesses underlying each sector; impacts of the hedging program; weather; frac spread; access to capital; future operating and capital costs; timing and receipt of regulatory approvals; seasonality; planned and unplanned plant outages; timing of in-service dates of new projects and acquisition and divestiture activities; taxes; operational expenses; returns on investments; dividend levels; and transaction costs.*

*AltaGas' forward-looking statements are subject to certain risks and uncertainties which could cause results or events to differ from current expectations, including, without limitation: risks related to conflict in Eastern Europe; health and safety risks; operating risks; infrastructure; natural gas supply risks; volume throughput; service interruptions; transportation of petroleum products; market risk; inflation; general economic conditions; cyber security, information, and control systems; climate-related risks; environmental regulation risks; regulatory risks; litigation; changes in law; Indigenous and treaty rights; dependence on certain partners; political uncertainty and civil unrest; decommissioning, abandonment and reclamation costs; reputation risk; weather data; capital market and liquidity risks; interest rates; internal credit risk; foreign exchange risk; debt financing, refinancing, and debt service risk; counterparty and supplier risk; technical systems and processes incidents; growth strategy risk; construction and development; underinsured and uninsured losses; impact of competition in AltaGas' businesses; counterparty credit risk; composition risk; collateral; rep agreements; market value of common shares and other securities; variability of dividends; potential sales of additional shares; labor relations; key personnel; risk management costs and limitations; commitments associated with regulatory approvals for the acquisition of WGL; cost of providing retirement plan benefits; failure of service providers; risks related to pandemics, epidemics or disease outbreaks, including COVID-19; and the other factors discussed under the heading "Risk Factors" in the Corporation's Annual Information Form for the year ended December 31, 2022 (AIF) and set out in AltaGas' other continuous disclosure documents.* 

*Many factors could cause AltaGas' or any particular business segment's actual results, performance or achievements to vary from those described in this MD&A, including, without limitation, those listed above and the assumptions upon which they are based proving incorrect. These factors should not be construed as exhaustive. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this MD&A as intended, planned, anticipated, believed, sought, proposed, estimated, forecasted, expected, projected or targeted and such forward-looking statements included in this MD&A, should not be unduly relied upon. The impact of any one assumption, risk, uncertainty, or other factor on a particular forward-looking statement cannot be determined with certainty because they are interdependent and AltaGas' future decisions and actions will depend on Management's assessment of all information at the relevant time. Such statements speak only as of the date of this MD&A. AltaGas does not intend, and does not assume any obligation, to update these forward-looking statements except as required by law. The forward-looking statements contained in this MD&A are expressly qualified by these cautionary statements.*

*Financial outlook information contained in this MD&A about prospective financial performance, financial position, or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on AltaGas Management's assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this MD&A should not be used for purposes other than for which it is disclosed herein.*

*Additional information relating to AltaGas, including its quarterly and annual MD&A and Consolidated Financial Statements, Annual Information Form, and press releases are available through AltaGas' website at www.altagas.ca or through SEDAR at www.sedar.com.*

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 2

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**AltaGas Business Overview and Organization**

AltaGas is a leading energy infrastructure company that connects customers and markets to affordable and reliable sources of energy. The Company operates a diversified, lower-risk, high-growth energy infrastructure business that is focused on delivering resilient and durable value for its stakeholders. AltaGas has three reporting segments - Utilities, Midstream, and Corporate/Other.

**Utilities Segment**

AltaGas' Utilities segment owns and operates franchised, cost-of-service, rate-regulated natural gas distribution and storage utilities that are focused on providing safe, reliable, and affordable energy to its customers. Prior to the close of the sale of the Alaska Utilities Disposition, AltaGas' Utilities provided energy to approximately 1.7 million residential and commercial customers in 2022 with an average rate base of approximately US$5.2 billion.

Subsequent to the Alaska Utilities Disposition, the Utilities segment includes two utilities that operate across four major U.S. jurisdictions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Washington Gas, which is the Company's largest operating utility that serves approximately 1.2 million customers across Maryland, Virginia and the District of Columbia; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ SEMCO Energy, which delivers essential energy to approximately 325,000 customers in Southern Michigan and Michigan's Upper Peninsula.

The Utilities business also includes other storage facilities and contracts for interstate natural gas transportation and storage services, as well as WGL Energy Services, an affiliated retail energy marketing business, which sells natural gas and electricity directly to residential, commercial, and industrial customers located in Maryland, Virginia, Delaware, Pennsylvania, Ohio, and the District of Columbia.

**Midstream Segment**

AltaGas' Midstream segment is a leading North American platform that connects customers and markets. From wellhead to tidewater, the Company is focused on providing its customers with safe and reliable service and connectivity that facilitates the best outcomes for their businesses. This includes global market access for North American Liquified Petroleum Gases (LPGs), which provides North American producers and aggregators with attractive netbacks for propane and butane while delivering diversity of supply and supporting stronger energy security in Asia.

Throughout AltaGas' Midstream operations, the Company believes it is playing a vital role within the larger energy ecosystem that keeps the global economy moving forward and is powering the possible within our society, and doing so in a safe, reliable and affordable manner.

AltaGas' Midstream platform is heavily focused on the Montney resource play in Northeastern B.C. and centers around global exports, which is where the Company believes the market is headed for resource development over the long-term. AltaGas also operates a broader set of midstream infrastructure assets across the Western Canadian Sedimentary Basin (WCSB) and select regions in the U.S., which are all focused on connecting customers and markets in the most efficient manner possible.

There are three core pillars to AltaGas' Midstream platform that are integral to each other and facilitate the Company's wellhead to tidewater and beyond value chain. These include:

  

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Global Exports, which includes AltaGas' two LPG export terminals where the Company has capacity to export up to 150,000 Bbl/d of propane and butane to key markets in Asia;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Natural Gas Gathering, Processing and Extraction, which includes 1.2 Bcf/d of extraction processing capacity and approximately 1.1 Bcf/d of raw field gas processing capacity, which is heavily focused on the Montney; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Fractionation and Liquids Handling platform, which includes 65 MBbl/d of fractionation capacity and a sizable liquids handling footprint that operates under the AltaGas and Petrogas banners.

The Midstream segment also consists of natural gas and NGL marketing business, domestic logistics, trucking and rail terminals, and approximately 3.2 million barrels of liquid storage capability through a network of underground salt caverns through the Company's Strathcona Storage JV with ATCO Energy Solutions Ltd, as well as AltaGas' 10 percent interest in the Mountain Valley Pipeline (MVP).

**Corporate/Other Segment**

AltaGas' Corporate/Other segment consists of the Company's corporate activities and a small portfolio of gas-fired power generation and distribution assets capable of generating 508 MW of power primarily in the state of California.

**Subsidiary Entities**

The businesses of AltaGas are operated by the Company and a number of its subsidiaries including, without limitation, AltaGas Services (U.S.) Inc., AltaGas Utility Holdings (U.S.) Inc., WGL Holdings, Inc. (WGL), Wrangler 1 LLC, Wrangler SPE LLC, Washington Gas Resources Corp., WGL Energy Services, Inc. (WGL Energy Services), and SEMCO Holding Corporation; in regard to the Utilities business, Washington Gas Light Company (Washington Gas), Hampshire Gas Company, and SEMCO Energy, Inc. (SEMCO); and in regard to the Midstream business, AltaGas Extraction and Transmission Limited Partnership, AltaGas Pipeline Partnership, AltaGas Processing Partnership, AltaGas Northwest Processing Limited Partnership, Harmattan Gas Processing Limited Partnership, Ridley Island LPG Export Limited Partnership, AltaGas Pacific Partnership, AltaGas LPG Limited Partnership, Petrogas Energy Corporation (Petrogas), Petrogas Holdings Partnership, and Petrogas, Inc. In the Corporate/Other segment, subsidiaries include AltaGas Power Holdings (U.S.) Inc., WGL Energy Systems, Inc. (WGL Energy Systems), and Blythe Energy Inc. (Blythe). SEMCO conducts its Michigan natural gas distribution business under the name SEMCO Energy Gas Company (SEMCO Gas). Prior to the close of the Alaska Utilities Disposition, it operated its Alaska natural gas distribution business under the name ENSTAR Natural Gas Company (ENSTAR) and its 65 percent interest in an Alaska regulated gas storage utility under the name Cook Inlet Natural Gas Storage Alaska LLC (CINGSA).

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 4

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**Fourth Quarter Highlights**

*(Normalized EBITDA, normalized funds from operations, normalized net income, and net debt are non-GAAP financial measures. Please see Non-GAAP Financial Measures section of this MD&A.)*

**Growth and Operational Highlights**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On December 22, 2022, Washington Gas filed an application with the Public Service Commission of the District of Columbia (PSC of DC) for the third phase of PROJECT*pipes* (PROJECT*pipes* 3), seeking approval of approximately US$672 million for the five-year period from January 1, 2024 to December 31, 2028;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On December 5, 2022, AltaGas announced that its Board of Directors approved a 6 percent increase to its annual common share dividends. As a result, quarterly common share dividends for the 2023 calendar year will be at the rate of $0.28 per common share ($1.12 per common share annually). This change will be effective for the dividend that will be paid on March 31, 2023;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Global export volumes in the Midstream segment increased by approximately 14 percent in 2022, with export volumes averaging 101,654 Bbls/d during the year ended December 31, 2022;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Average utilities rate base, before considering the impact of the Alaska Utilities Disposition, increased by approximately 12 percent to approximately US$5.2 billion in 2022, compared to approximately US$4.7 billion in 2021; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On December 5, 2022, AltaGas released its 2022 ESG Update, which highlights AltaGas' ongoing efforts to advance sustainability goals in the core areas of emission reductions, safety, and diversity. The update continues to show the progress made towards GHG emission reduction goals and builds upon AltaGas' aspirations with the addition of two new goals designed to broaden the diversity of perspectives within its senior leadership team beyond gender to be reflective of the breadth of diversity that exists within AltaGas' workforce and demonstrates its commitment to safety and strive towards incident-free operations.

**Other Highlights** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On November 21, 2022, AltaGas announced that Randy Crawford, President and Chief Executive Officer, will retire from AltaGas in the first half of 2023 as part of a planned leadership succession process. During this period, the Board of Directors will complete its work with external advisors to evaluate internal and external candidates. Mr. Crawford will remain in his role until a successor is named.

**2022 Financial Highlights**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Normalized EBITDA was $1,537 million in 2022 compared to expected normalized EBITDA of $1.50 to $1.55 billion;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Normalized EBITDA for the Utilities segment was $933 million in 2022 compared to expected normalized EBITDA of approximately $900 million to $930 million;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Normalized EBITDA for the Midstream segment was $607 million in 2022, compared to expected normalized EBITDA of approximately $600 to $620 million;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Income before income taxes was $716 million in 2022 compared to $446 million in 2021;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Cash from operations was $539 million ($1.92 per share) in 2022 compared to $738 million ($2.64 per share) in 2021;

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 5

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Normalized funds from operations was $1,204 million ($4.28 per share) in 2022 compared to $1,180 million ($4.21 per share) in 2021;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Net income applicable to common shares was $399 million ($1.42 per share) in 2022 compared to $230 million ($0.82 per share) in 2021; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Normalized net income was $530 million ($1.89 per share) in 2022 compared to $481 million ($1.72 per share) in 2021.

**Highlights Subsequent to Year End**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ On March 1, 2023, AltaGas closed the sale of its 100 percent interest in ENSTAR and 65 percent indirect interest in CINGSA and other ancillary operations to TriSummit Utilities for consideration of approximately US$800 million (approximately CAD$1.1 billion) prior to closing adjustments (the Alaska Utilities Disposition);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ In February 2023, AltaGas reached an agreement with Southern California Edison for the purchase of resource adequacy attributes from the Blythe facility for the period from January 1, 2024 through December 31, 2027. AltaGas believes this facility is important in meeting California's power needs and improving reliability on the power grid during peak demand; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ In February 2023, AltaGas reached an agreement with an investment grade counterparty to extend the existing throughput and marketing agreement at the Ferndale LPG Export terminal by five years through 2033.

**2023 Outlook**

In 2023, AltaGas expects to achieve annual consolidated normalized EBITDA of approximately $1.5 to $1.6 billion, compared to actual normalized EBITDA of $1.54 billion in 2022, and normalized earnings per share of approximately $1.85 to $2.05 per share compared to actual normalized earnings per share and net income per share of $1.89 per share and $1.42 per share, respectively in 2022, assuming an effective tax rate of approximately 22 percent. For the year ended December 31, 2022, income before income taxes and net income applicable to common shares were $716 million and $399 million, respectively.

The Utilities segment is expected to contribute approximately 57 to 61 percent of normalized EBITDA, with modest growth driven primarily by revenue growth from Virginia and District of Columbia rate cases, continued rate base growth through ongoing capital investments in accelerated replacement programs, ongoing operational cost optimization activities, and modest customer growth, partially offset by the impact of the Alaska Utilities Disposition and higher expected pension and operating costs as a result of the inflationary environment. The Midstream segment is expected to contribute approximately 39 to 43 percent of normalized EBITDA, with expected modest growth driven by higher expected global export margins, higher volumes and asset utilization at AltaGas' Northeastern B.C. (NEBC) facilities, and higher crude and NGL marketing margins and revenues. These positive factors are expected to be partially offset by the full year impact of the sale of the Aitken Creek processing facilities, lower fractionation spreads, and the absence of turnaround costs which were recovered from customers and recognized in income in 2022. Normalized EBITDA from the Corporate/Other segment, which includes AltaGas' remaining power assets, is expected to be slightly higher in 2023 mainly due to lower expected expenses related to employee incentive plans.

The expected variance in normalized earnings per share from $1.89 per share in 2022 to approximately $1.85 to $2.05 per share in 2023 is expected to be primarily due to the same factors impacting normalized EBITDA, lower expected income

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 6

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applicable to non-controlling interests, and lower expected preferred share dividends, partially offset by higher expected interest and income taxes in 2023 compared to 2022.

The forecasted normalized EBITDA and earnings per share include assumptions around the U.S./Canadian dollar exchange rate. Within each segment, the performance of the underlying businesses has the potential to vary. Any variance from AltaGas' current assumptions could impact the forecasted normalized EBITDA and normalized earnings per share. For further discussion of the risks impacting AltaGas please refer to the *Risk Factors* section of AltaGas' 2022 Annual Information Form, which is available on SEDAR at www.sedar.com.

AltaGas continues to focus on de-risking its business and managing direct commodity price exposure to drive predictable and durable returns. While the Company does have exposure, it plans to maintain an active hedging program that proactively hedges commodity price and spread risk to mitigate the impact of fluctuations in margins and cash flows. For 2023, AltaGas has hedged approximately 77 percent of its 2023 expected frac exposed volumes hedged at approximately US$27/Bbl, prior to transportation costs. In addition, approximately 62 percent of AltaGas' 2023 expected global export volumes are either tolled or financially hedged with an average FEI to North American financial hedge price of approximately US$12/Bbl for non-tolled propane and butane volumes. AltaGas is targeting to be highly hedged for the global export business through a combination of tolling agreements and financial hedges.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **2023 Midstream Hedge Program** | **Q1 2023** | **Q2 2023** | **Q3 2023** | **Q4 2023** | **Full Year 2023** |
| Global Exports volumes hedged (%) <sup>(1)</sup> | 77 | 71 | 76 | 25 | 62 |
| Average propane/butane FEI to North America average hedge (US$/Bbl) <sup>(2)</sup> | 13.80 | 11.06 | 10.81 | 21.76 | 12.17 |
| Fractionation volume hedged (%) <sup>(3)</sup> | 59 | 82 | 96 | 72 | 77 |
| Frac spread hedge rate (US$/Bbl) <sup>(3)</sup> | 26.80 | 26.83 | 26.83 | 26.83 | 26.83 |

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(1)Approximate expected volume hedged. Includes contracted tolling volumes and financial hedges. Based on AltaGas' internally assumed export volumes. AltaGas is hedged at a higher percentage for firmly committed volumes.

(2)Approximate average for the period. Does not include physical differential to FSK for C3 volumes. Butane is hedged as a percentage of WTI.

(3)Approximate average for the period.

**Sensitivity Analysis**

AltaGas' financial performance is affected by factors such as changes in commodity prices, exchange rates, and weather. The following table illustrates the approximate effect of these key variables on AltaGas' expected normalized EBITDA for 2023:

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| | | |
|:---|:---|:---|
| **Factor** | **Increase or <br>decrease** | **Approximate impact on normalized annual EBITDA**<br>***($ millions)*** |
| Degree day variance from normal - Utilities <sup>(1)</sup> | 5 percent | 8 |
| Change in Canadian dollar per U.S. dollar exchange rate | 0.05 | 41 |
| Propane and butane Far East Index to Mont Belvieu spread <sup>(2)</sup> | US$1/Bbl | 22 |
| Pension discount rate | 1 percent | 18 |

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(1)Degree days – Utilities relate to SEMCO Gas, ENSTAR, and District of Columbia service areas. Degree days are a measure of coldness determined daily as the numbers of degrees the average temperature during the day in question is below 65 degrees Fahrenheit. Degree days for a particular period are the average of degree days during the prior 15 years for SEMCO Gas, during the prior 10 years for ENSTAR, and during the prior 30 years for Washington Gas.

(2)The sensitivity is net of hedges currently in place. The impact on EBITDA due to changes in the spread will vary and is being managed through an active hedging program.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 7

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**Growth Capital**

Based on projects currently under review, development, or construction, AltaGas expects invested capital of approximately $1.0 billion in 2023, including approximately $90 million of discretionary Midstream capital which was deferred from 2022 to 2023, compared to invested capital of $1.2 billion in 2022. The decrease in expected invested capital in 2023 compared to 2022 is primarily due to the absence of cash paid to purchase the remaining equity ownership of Petrogas in the third quarter of 2022, the absence of capital expenditures related to the Alaskan Utilities due to its divestiture in the first quarter of 2023, and lower spend on system betterment at Washington Gas, partially offset by the previously mentioned deferral of certain discretionary Midstream capital to 2023, higher spend on accelerated pipe replacement programs, and higher spend on Environment, Social & Governance (ESG) initiatives. In 2022, actual 2022 invested capital of approximately $1.2 billion was higher than previous guidance of $995 million, primarily due to cash paid for the purchase of the remaining equity ownership of Petrogas and the impact of changes in foreign exchange rates, partially offset by the previously mentioned deferral of certain discretionary Midstream capital to 2023. The majority of 2023 capital expenditures are expected to focus on projects within the Utilities platform that are anticipated to deliver strong organic rate base growth, positive risk-adjusted returns, and safe, reliable service for customers. The Utilities segment is expected to account for approximately 73 percent of total capital expenditures, while the Midstream segment is expected to account for approximately 25 percent and the Corporate/Other segment is expected to account for any remainder. In 2023, AltaGas' capital expenditures for the Utilities segment will focus primarily on maintenance, safety, and reliability programs including system betterment, accelerated pipe replacement programs and new customer additions. In the Midstream segment, capital expenditures are anticipated to primarily relate to facility turnarounds, maintenance and administrative capital, optimization of existing assets, investment in environmental initiatives, and new business development. The Corporation continues to focus on capital efficient organic growth and disciplined capital allocation while improving balance sheet strength and flexibility.

AltaGas' 2023 committed capital program is expected to be funded through internally-generated cash flow, asset sales including the Alaska Utilities Disposition, and normal course borrowings on existing committed credit facilities.

Please refer to the *Invested Capital* and *Non-GAAP Financial Measures* sections of this MD&A for additional information on the components of AltaGas' invested capital.

**Growth Capital Project Updates**

The following table summarizes the status of AltaGas' significant growth projects:

  

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Project** | **AltaGas' Ownership Interest** | **AltaGas' Ownership Interest** | **AltaGas' Ownership Interest** | **Estimated Cost** <sup>(1)</sup> | **Expenditures to Date** <sup>(2)</sup> | **Expenditures to Date** <sup>(2)</sup> | **Status** | **Expected In-Service Date** |
| **Midstream Projects** | **Midstream Projects** | **Midstream Projects** | **Midstream Projects** | **Midstream Projects** | **Midstream Projects** | **Midstream Projects** | **Midstream Projects** | **Midstream Projects** |
| Harmattan Carbon Capture and Acid Gas Injection Well | Harmattan Carbon Capture and Acid Gas Injection Well | 100% | $43 million | $43 million | $15 million | AltaGas is currently advancing an opportunity to capture up to 60,000 tonnes/year of carbon emissions at Harmattan. The project involves decommissioning Harmattan's existing sulfur plant, which significantly reduces the facility's operational complexity and extends the facility's turnaround cycle from 4 years to 5 years, which is expected to result in cost savings. Phase 1 of this project, which involves drilling an acid gas injection well, is currently underway. | AltaGas is currently advancing an opportunity to capture up to 60,000 tonnes/year of carbon emissions at Harmattan. The project involves decommissioning Harmattan's existing sulfur plant, which significantly reduces the facility's operational complexity and extends the facility's turnaround cycle from 4 years to 5 years, which is expected to result in cost savings. Phase 1 of this project, which involves drilling an acid gas injection well, is currently underway. | Fourth quarter of 2023 |
| Mountain Valley Pipeline (MVP) | Mountain Valley Pipeline (MVP) | 10% | US$352 million | US$352 million | US$352 million | In the first quarter of 2022, the U.S. Fourth Circuit Court of Appeals (Fourth Circuit Court) issued separate decisions vacating and remanding, on specific issues, the U.S. Forest Service and Bureau of Land Management permits that allow the pipeline to pass through the Jefferson National Forest and the U.S. Fish and Wildlife Service Endangered Species Act Biological Opinion (Biological Opinion). Until the pipeline has a valid Biological Opinion, the Army Corps has stated they will not approve the necessary permits. On February 28, 2023, the U.S. Fish and Wildlife Service issued a revised Biological Opinion. Mountain Valley remains engaged in the permitting process with the relevant federal agencies to obtain the permits necessary to complete the project. The total project costs are expected to be US$6.6 billion with a targeted in-service date during the second half of 2023. As of December 31, 2022, approximately 94 percent of the project is complete, which includes construction of all original interconnects and compressor stations. AltaGas' exposure is contractually capped to the original estimated contributions of approximately US$352 million. In the fourth quarter of 2021, AltaGas impaired its equity investment in MVP to a carrying value of US$352 million as a result of these ongoing legal and regulatory challenges. See Note 14 of the 2022 Annual Consolidated Financial Statements for additional details.  | In the first quarter of 2022, the U.S. Fourth Circuit Court of Appeals (Fourth Circuit Court) issued separate decisions vacating and remanding, on specific issues, the U.S. Forest Service and Bureau of Land Management permits that allow the pipeline to pass through the Jefferson National Forest and the U.S. Fish and Wildlife Service Endangered Species Act Biological Opinion (Biological Opinion). Until the pipeline has a valid Biological Opinion, the Army Corps has stated they will not approve the necessary permits. On February 28, 2023, the U.S. Fish and Wildlife Service issued a revised Biological Opinion. Mountain Valley remains engaged in the permitting process with the relevant federal agencies to obtain the permits necessary to complete the project. The total project costs are expected to be US$6.6 billion with a targeted in-service date during the second half of 2023. As of December 31, 2022, approximately 94 percent of the project is complete, which includes construction of all original interconnects and compressor stations. AltaGas' exposure is contractually capped to the original estimated contributions of approximately US$352 million. In the fourth quarter of 2021, AltaGas impaired its equity investment in MVP to a carrying value of US$352 million as a result of these ongoing legal and regulatory challenges. See Note 14 of the 2022 Annual Consolidated Financial Statements for additional details.  | Second half of 2023 |
| MVP Southgate Project | MVP Southgate Project | 5% | US$20 million | US$20 million | US$4 million | MVP continues to evaluate the MVP Southgate project, including engaging in discussions with the shipper regarding options for the project and potential changes to the project design and timing in lieu of pursuing the project as originally contemplated. In the fourth quarter of 2021, AltaGas impaired its investment in the MVP Southgate project to a carrying value of $nil as a result of these ongoing legal and regulatory challenges. See Note 14 of the 2022 Annual Consolidated Financial Statements for additional details.  | MVP continues to evaluate the MVP Southgate project, including engaging in discussions with the shipper regarding options for the project and potential changes to the project design and timing in lieu of pursuing the project as originally contemplated. In the fourth quarter of 2021, AltaGas impaired its investment in the MVP Southgate project to a carrying value of $nil as a result of these ongoing legal and regulatory challenges. See Note 14 of the 2022 Annual Consolidated Financial Statements for additional details.  | Completion date under review |

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Project** | **AltaGas' Ownership Interest** | **AltaGas' Ownership Interest** | **AltaGas' Ownership Interest** | **Estimated** <br>**Cost** <sup>(1)</sup> | **Expenditures to Date** <sup>(2)</sup> | **Expenditures to Date** <sup>(2)</sup> | **Expenditures to Date** <sup>(2)</sup> | **Status** | **Expected In-Service Date** |
| **Utilities Projects** | **Utilities Projects** | **Utilities Projects** | **Utilities Projects** | **Utilities Projects** | **Utilities Projects** | **Utilities Projects** | **Utilities Projects** | **Utilities Projects** | **Utilities Projects** |
| Accelerated Utility Pipe Replacement Programs – ***District of Columbia*** | Accelerated Utility Pipe Replacement Programs – ***District of Columbia*** | 100% | Estimated US$150 million over the three year period from January 2021 to December 2023, plus additional expenditures for subsequent phases upon approval. | Estimated US$150 million over the three year period from January 2021 to December 2023, plus additional expenditures for subsequent phases upon approval. | Estimated US$150 million over the three year period from January 2021 to December 2023, plus additional expenditures for subsequent phases upon approval. | US$85 million <sup>(3)</sup> | The second phase of the accelerated utility pipe replacement programs in the District of Columbia (PROJECTpipes 2) ends in December 2023. On December 22, 2022, Washington Gas filed an application with the PSC of DC for PROJECTpipes 3, seeking approval of approximately US$672 million for the five-year period from January 1, 2024 to December 31, 2028. | The second phase of the accelerated utility pipe replacement programs in the District of Columbia (PROJECTpipes 2) ends in December 2023. On December 22, 2022, Washington Gas filed an application with the PSC of DC for PROJECTpipes 3, seeking approval of approximately US$672 million for the five-year period from January 1, 2024 to December 31, 2028. | Individual assets are placed into service throughout the program. |
| Accelerated Utility Pipe Replacement Programs – ***Maryland*** | Accelerated Utility Pipe Replacement Programs – ***Maryland*** | 100% | Estimated US$350 million over the five year period from January 2019 to December 2023, plus additional expenditures for subsequent phases upon approval. | Estimated US$350 million over the five year period from January 2019 to December 2023, plus additional expenditures for subsequent phases upon approval. | Estimated US$350 million over the five year period from January 2019 to December 2023, plus additional expenditures for subsequent phases upon approval. | US$282 million <sup>(3)</sup> | The second phase of the accelerated utility pipe replacement programs in Maryland (STRIDE 2.0) ends in December 2023. On December 21, 2022, the Maryland Public Service Commission (PSC of MD) issued an Order reducing the calendar year 2023 STRIDE surcharge by 14.7 percent, consistent with the reduction in 2022. Recovery of STRIDE expenditures not included in this surcharge will be requested through the normal rate-making process.  | The second phase of the accelerated utility pipe replacement programs in Maryland (STRIDE 2.0) ends in December 2023. On December 21, 2022, the Maryland Public Service Commission (PSC of MD) issued an Order reducing the calendar year 2023 STRIDE surcharge by 14.7 percent, consistent with the reduction in 2022. Recovery of STRIDE expenditures not included in this surcharge will be requested through the normal rate-making process.  | Individual assets are placed into service throughout the program. |
| Accelerated Utility Pipe Replacement Programs – ***Virginia*** | Accelerated Utility Pipe Replacement Programs – ***Virginia*** | 100% | Estimated US$525 million over the five year period from January 2018 to December 2022, and estimated US$878 million over the five year period from January 2023 to December 2027, plus additional expenditures for subsequent phases upon approval. | Estimated US$525 million over the five year period from January 2018 to December 2022, and estimated US$878 million over the five year period from January 2023 to December 2027, plus additional expenditures for subsequent phases upon approval. | Estimated US$525 million over the five year period from January 2018 to December 2022, and estimated US$878 million over the five year period from January 2023 to December 2027, plus additional expenditures for subsequent phases upon approval. | US$525 million <sup>(3)</sup> | The second phase of the accelerated pipe replacement programs in Virginia (SAVE 2.0) began in January 2018. On December 1, 2021, Washington Gas filed its proposed amendment for the 2023 to 2027 SAVE Plan, proposing to invest approximately US$889 million from 2023 to 2027 to replace higher risk pipeline and facilities in Virginia. On May 26, 2022, the Commonwealth of Virginia State Corporation Commission (SCC of VA) approved the proposed amendment with a total five-year spending cap of approximately US$878 million, which may be exceeded by up to 5 percent. | The second phase of the accelerated pipe replacement programs in Virginia (SAVE 2.0) began in January 2018. On December 1, 2021, Washington Gas filed its proposed amendment for the 2023 to 2027 SAVE Plan, proposing to invest approximately US$889 million from 2023 to 2027 to replace higher risk pipeline and facilities in Virginia. On May 26, 2022, the Commonwealth of Virginia State Corporation Commission (SCC of VA) approved the proposed amendment with a total five-year spending cap of approximately US$878 million, which may be exceeded by up to 5 percent. | Individual assets are placed into service throughout the program. |
| Accelerated Mains Replacement and Infrastructure Reliability Improvement Programs – ***Michigan*** | Accelerated Mains Replacement and Infrastructure Reliability Improvement Programs – ***Michigan*** | 100% | Estimated US$115 million over five year period from 2021 to 2025, plus additional expenditures for subsequent phases upon approval. | Estimated US$115 million over five year period from 2021 to 2025, plus additional expenditures for subsequent phases upon approval. | Estimated US$115 million over five year period from 2021 to 2025, plus additional expenditures for subsequent phases upon approval. | US$40 million <sup>(3)</sup> | A new Main Replacement Program (MRP) was agreed to in SEMCO's last rate case settled in December 2019. The new five-year MRP program began in 2021 with a total spend of approximately US$60 million. In addition to the new MRP program, SEMCO was also granted a new Infrastructure Reliability Improvement Program (IRIP), which is also a five-year program with a total spend of approximately US$55 million beginning in 2021. | A new Main Replacement Program (MRP) was agreed to in SEMCO's last rate case settled in December 2019. The new five-year MRP program began in 2021 with a total spend of approximately US$60 million. In addition to the new MRP program, SEMCO was also granted a new Infrastructure Reliability Improvement Program (IRIP), which is also a five-year program with a total spend of approximately US$55 million beginning in 2021. | Individual assets are placed into service throughout the program. |

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(1)These amounts are estimates and are subject to change based on various factors. Where appropriate, the amounts reflect AltaGas' share of the various projects.

(2)Expenditures to date reflect total cumulative capital expenditures incurred from inception of the projects to December 31, 2022.

(3)The utility accelerated replacement programs are long-term projects with multiple phases for which expenditures are approved by the regulators and managed in multi-year increments. Expenditures to date only include amounts for the current programs described above, and exclude any expenditures made under prior increments of the programs. Actual regulatory filings may differ from reported amounts.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 10

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**Utilities**

**Description of Assets** 

AltaGas owns and operates utility assets that store and deliver natural gas to end-users in Virginia, Maryland, Michigan, and the District of Columbia. Prior to the close of the Alaska Utilities Disposition, AltaGas' Utilities served approximately 1.7 million customers in 2022 with a combined average 2022 rate base of approximately US$5.2 billion.

The Utilities are underpinned by regulated returns and regulatory regimes that generally provide stable earnings and cash flows. The Utilities segment enhances the diversification of AltaGas' portfolio of energy infrastructure assets and strengthens the Corporation's business profile, thus allowing the Corporation to meet its objective of operating a diversified low-risk, high-growth energy infrastructure business that is focused on delivering resilient and durable value for its stakeholders with long-life assets.

Subsequent to the Alaska Utilities Disposition, the Utilities segment includes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Washington Gas in Virginia, Maryland, and the District of Columbia;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Hampshire, providing regulated interstate natural gas storage to Washington Gas;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ SEMCO Gas in Michigan; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ WGL's Retail Marketing business, which sells power and natural gas directly to residential, commercial, and industrial customers in Maryland, Virginia, Delaware, Pennsylvania, Ohio, and the District of Columbia.

![atgff-20221231_g1.jpg](atgff-20221231_g1.jpg)

All of AltaGas' regulated Utilities are allowed the opportunity to earn regulated returns. This return on rate base is composed of regulator-allowed financing costs and return on equity (ROE). If actual costs are different from those recoverable through approved rates, the utility bears the risk of this difference other than for certain costs that are subject to deferral treatment.

Earnings in the Utilities segment are seasonal, as revenues are primarily based on the demand for space heating in the winter months, mainly from November to March. Costs, on the other hand, are generally incurred more uniformly over the year. This typically results in stronger first and fourth quarters and weaker second and third quarters. In Michigan and the District of Columbia, earnings can be impacted by variations from normal weather resulting in delivered gas volumes being different than

  

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anticipated. Increases in the number of customers or changes in customer usage are other factors that might typically affect delivered volumes, and hence actual earned returns for the Utilities segment. In Virginia and Maryland, Washington Gas has billing mechanisms in place which are designed to eliminate or mitigate the effects of variance in customer usage caused by weather and other factors such as conservation.

***Washington Gas***

Washington Gas is a regulated public utility that has been engaged in the natural gas distribution business since 1848 and provides regulated gas distribution services to end users in Virginia, Maryland, and the District of Columbia. At the end of 2022, Washington Gas had approximately 1.2 million customers, of which approximately 94 percent were residential. The number of customers at Washington Gas increased approximately 1 percent in 2022. The average rate base for the year ended December 31, 2022 was approximately US$4.0 billion. At the end of 2022, the approved regulated ROE for Washington Gas in its various jurisdictions ranged from 9.2 - 9.7 percent based on an equity ratio ranging from 52.0 - 53.5 percent.

Washington Gas is regulated by the PSC of DC, the PSC of MD, and the SCC of VA, which approve its terms of service and the billing rates that it charges to customers. The rates charged to Utilities customers are designed to recover Washington Gas' operating expenses and natural gas commodity costs and to provide a return on its investment in the net assets used in its firm gas sales and delivery service.

Washington Gas has accelerated pipe replacement programs in place in each of its three jurisdictions. Washington Gas accelerates pipe replacement in order to reduce risk and further enhance the safety and reliability of the pipeline system. Each regulatory commission having jurisdiction over Washington Gas' retail rates has approved accelerated replacement programs with an associated surcharge mechanism to recover the cost, including a return, on those capital investments. In contrast to the traditional rate-making approach to capital investments, for the accelerated pipe replacement programs, Washington Gas is receiving recovery for these investments through the approved surcharges for each program and is authorized to invest in each of these programs over a three- to five-year period.

Washington Gas' customers are eligible to purchase their natural gas from unregulated third-party marketers through natural gas unbundling. As at December 31, 2022, approximately 14 percent of its customers have chosen to purchase gas from marketers. This does not negatively impact Washington Gas' net income as the Corporation does not earn a margin on the sale of natural gas to firm customers, but only from the delivery and distribution of the gas.

Washington Gas obtains natural gas supplies that originate from multiple regions throughout the United States. At December 31, 2022, it had service agreements with four pipeline companies that provided firm transportation and storage services with contract expiration dates ranging from 2023 to 2044. Washington Gas has also contracted with various interstate pipeline and storage companies to add to its storage and transportation capacity. Washington Gas, under its asset optimization program, makes use of storage and transportation capacity resources when those assets are not required to serve utility customers. The objective of this program is to derive a profit to be shared with its utility customers. These profits are earned by entering into commodity-related physical and financial contracts with third parties.

***Hampshire***

Hampshire owns underground natural gas storage facilities, including pipeline delivery facilities located in and around Hampshire County, West Virginia, and operates these facilities to serve Washington Gas. Hampshire is regulated by the FERC. Washington Gas purchases all of the storage services of Hampshire, and includes the cost of the services in the commodity cost of its regulated energy bills to customers. Hampshire operates under a "pass-through" cost-of-service based tariff approved by FERC.

  

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***SEMCO Gas***

SEMCO owns and operates a regulated natural gas distribution utility in Michigan operating under the name SEMCO Gas and has an interest in a regulated natural gas storage facility in Michigan. At the end of 2022, SEMCO Gas had approximately 320,000 regulated customers. Of these customers, approximately 92 percent were residential. In 2022, SEMCO Gas experienced customer growth of approximately 1 percent reflecting growth in the franchise areas and customer conversions with the favourable price of natural gas compared to other heating sources. The average 2022 rate base was approximately US$846 million. In 2022, the approved regulated ROE for SEMCO Gas was 9.87 percent with an approved capital structure based on 45.86 percent equity, inclusive of the impact of deferred income tax.

SEMCO Gas is regulated by the Michigan Public Service Commission (MPSC). It operates under cost-of-service regulation and utilizes actual results from the most recently completed fiscal year along with known and measurable changes in its application for new rates.

SEMCO Gas has an Accelerated MRP surcharge to recover a stated amount of accelerated main replacement capital expenditures in excess of what is authorized in its current base rates. For the years 2021 to 2025, the anticipated annual average capital spending is approximately US$12 million. Any MRP revenue associated with unspent capital will be placed into a regulatory liability account to be addressed in the next general rate base case. Additionally, a new IRIP was approved in the 2019 rate case, pursuant to which SEMCO Gas will complete certain projects totaling US$55 million to improve the reliability of infrastructure. Customers were billed a surcharge beginning in 2021 for the IRIP.

***ENSTAR and CINGSA***

In the second quarter of 2022, AltaGas entered into an agreement to sell its Alaskan Utilities pursuant to the Alaska Utilities Disposition. The transaction closed on March 1, 2023 and included AltaGas' 100 percent interest in ENSTAR, the 65 percent indirect interest in CINGSA, and other ancillary operations.

***Retail Energy Marketing*** 

The U.S. retail gas marketing business sells natural gas directly to residential, commercial, and industrial customers in Maryland, Virginia, Delaware, Pennsylvania, and the District of Columbia.

The U.S. retail power marketing business sells power to end users in Maryland, Delaware, Pennsylvania, Ohio, and the District of Columbia. This area is served by the PJM Interconnection (PJM), a regional transmission organization that regulates and coordinates generation supply and the wholesale delivery of electricity in these states and jurisdictions.

Natural gas and electricity are purchased with the objective of earning a profit through competitively priced sales contracts with end users. Requirements to serve retail customers is closely matched with commitments for deliveries, and thus, a secured supply arrangement expiring in March 2024 has been entered into with Shell Energy North America (US), L.P, which reduces credit requirements.

**Capitalize on Opportunities**

While providing safe and reliable service, AltaGas pursues opportunities in the Utilities segment to deliver value to its customers while enhancing long-term shareholder returns. The Corporation's objectives are to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Ensure safe, reliable operations and infrastructure, providing effective and cost-efficient service for customers;

  

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Upgrade the Utilities platform to enhance the customer value proposition, drive better stakeholder outcomes and deliver improved environmental benefits;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Enhance returns, capital efficiency, and more timely recovery of expenditures through rate cases and increased utilization of accelerated rate recovery programs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Enhance and grow the business through asset optimization, cost reduction initiatives, and operational efficiencies to reduce costs and deliver an improved customer experience;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Improve business processes and drive down leak remediation costs, reinvesting savings into improving the customer experience;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Provide better stakeholder outcomes and environmental benefits by focusing on accelerated pipelines replacement and network upgrades which provides optionality for blending of additional cleaner burning fuels;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Invest in opportunities that reflect the emerging lower carbon ecosystem and shifts in the market;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Pursue Renewable Natural Gas (RNG) investments through local interconnection opportunities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Attract and retain customers through exceptional customer service;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Continue to grow the consolidated Utilities rate base, with anticipated rate base growth of up to eight to ten percent annually through 2027, excluding the impact of the Alaska Utilities Disposition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Focus on ensuring energy affordability and acting in the best interests of customers during periods of higher commodity prices and inflation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Maintain strong relationships with local communities, Indigenous peoples, governments, and regulatory bodies while ensuring appropriate returns to shareholders.

AltaGas expects to grow its existing utility infrastructure through continued investment and capital improvements in franchise areas, which will result in rate base growth and continued customer growth including the conversion of users of alternative energy sources to natural gas. AltaGas' utilities have had annual rate base growth averaging approximately 10 percent over the past three years after adjusting for the impact of foreign exchange translation and before considering the impact of asset sales. The growth in rate base is a result of prudent investments in current areas of operations, and the addition of new customers. Customer growth rates for AltaGas' utilities are moderate, as is typical with mature utilities, with growth rates generally tied closely to the economic growth of the respective franchise regions.

  

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**Midstream** 

**Description of Assets**

AltaGas' Midstream segment is a leading North American platform that connects customers and markets. From wellhead to tidewater and beyond, the Company is focused on providing its customers with safe and reliable service and connectivity that facilitates the best outcomes for their businesses. This includes global market access for North American LPGs, which provides North American producers and aggregators with attractive netbacks for propane and butane while delivering diversity of supply and supporting stronger energy security in Asia.

AltaGas' Midstream platform is heavily focused on the Montney resource play in Northeastern B.C. and centers around global exports, which is where the Company believes the market is headed for resource development over the long-term. AltaGas also operates a broader set of midstream infrastructure assets across the WCSB and select regions in the U.S., which are all focused on connecting customers and markets in the most efficient manner possible.

There are three core pillars to AltaGas' Midstream platform that are integral to each other and facilitate the Company's wellhead to tidewater and beyond value chain. These include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Global Exports, which includes AltaGas' two LPG export terminals where the Company has capacity to export up to 150,000 Bbl/d of propane and butane to key markets in Asia;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Natural Gas Gathering, Processing and Extraction, which includes 1.2 Bcf/d of extraction processing capacity and approximately 1.1 Bcf/d of raw field gas processing capacity, which is heavily focused on the Montney; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Fractionation and Liquids Handling platform, which includes 65 MBbl/d of fractionation capacity and a sizable liquids handling footprint.

The Midstream segment also consists of natural gas, crude oil, and NGL marketing business, domestic logistics, trucking and rail terminals, and approximately 3.2 million barrels of liquid storage capability though a network of underground salt caverns through the Company's Strathcona Storage Joint Venture with ATCO Energy Solutions Ltd, as well as AltaGas' 10 percent interest in the MVP.

The Midstream segment includes expansion projects under development or construction, as discussed under the *Growth Capital* section of this MD&A.

  

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![atgff-20221231_g2.jpg](atgff-20221231_g2.jpg)

<u>Global Exports</u>

AltaGas' global export assets include the Company's RIPET and Ferndale export terminals, which are located in Northern B.C. and Washington State, respectively. These terminals facilitate North American producers and aggregators to access global markets and provides incremental opportunities for improved price realization for propane and butane production. Between the two facilities, AltaGas has the ability to ship in excess of 150,000 Bbl/d.

RIPET commenced commercial operations on May 23, 2019, with the first propane shipment departing from the terminal to Asia. RIPET has storage of 600,000 Bbls and throughput capacity of up to 80,000 Bbls/d at the terminal. As AltaGas builds on the Company's operational capabilities and continues to align with leading North American producers and global customers in Asia through long-term tolling agreements, it expects to continue to increase throughput from RIPET. On August 21, 2020, AltaGas was granted an additional 25-year license to export an additional 46,000 bbl/d of propane to North American and global markets, bringing its aggregate propane export capacity under 25-year export licenses to 92,000 Bbls/d. For 2023, AltaGas has in place agreements for the purchase of approximately 60 percent of the propane expected to be shipped from RIPET. The RIPET dock offers deep draft, sufficient to accommodate loading VLGCs.

AltaGas also operates the Ferndale LPG terminal, which is capable of loading VLGCs, has 800,000 Bbls of on-site storage, and can flow approximately 75,000 Bbls/d. Located approximately 100 miles north of Seattle, the terminal is also pipeline connected to two regional refineries, providing additional supply, sales, and fee-for-service opportunities for the facility. For 2023, AltaGas has in place agreements for propane and butane offtake volumes for the purchase of approximately 60 percent of the product expected to be shipped from the Ferndale terminal.

  

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On June 23, 2022, the Canada Energy Regulator approved AltaGas' application for a 25-year export license for an additional 46,000 (40,000 Bbls/d plus 15 percent tolerance) Bbls/d of butane. The license will allow AltaGas to export additional Canadian butane volumes through non-seaborne exports into the U.S. via rail, including deliveries to the Company's Ferndale export terminal in Washington State, and potentially the seaborne exports from Ridley Island in British Columbia over the long-term.

On July 5, 2022, AltaGas closed the purchase of the remaining 25.97 percent equity ownership of Petrogas from Idemitsu Canada Corporation, with AltaGas now owning 100 percent of Petrogas. Refer to Note 3 of the 2022 Annual Consolidated Financial Statements for additional details.

<u>Natural Gas Gathering, Processing and Extraction</u>

Gas processing activities are comprised of gathering systems that move raw natural gas and NGLs from producing wells to processing facilities, where impurities and certain hydrocarbon components are removed, and the product moves down the energy value chain. The gas is then compressed to meet downstream pipelines' operating specifications for transportation to North American natural gas markets. All of AltaGas' processing facilities are capable of extracting NGLs and converting the throughput into usable products. The facilities provide revenues based on take-or-pay contracts and fee-for-service arrangements with its customers, with the latter based on volumes processed. A significant portion of AltaGas' Midstream contracts flow the Company's operating costs through to the producers. AltaGas' processing infrastructure includes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The Townsend facility, a 550 Mmcf/d gas processing facility, along with the related egress pipelines, truck terminal, and NGL treatment infrastructure (the Townsend complex), which is wholly owned and operated by AltaGas. The majority of the processing capacity is contracted with Montney producers in the area under long-term take-or-pay agreements. In the second quarter of 2020, Townsend 2B and a gas gathering pipeline that connects upstream fields to AltaGas facilities were commissioned, which added 198 Mmcf/d C3+ deep cut gas processing capacity at the Townsend Complex;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The Gordondale facility, which has licensed capacity of 150 Mmcf/d of natural gas and is wholly owned and operated by AltaGas. The Gordondale facility processes gas gathered from Birchcliff Energy Ltd.'s Gordondale Montney development under a long-term take-or-pay contract. The plant is equipped with liquids extraction facilities to capture the NGL value for the producer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The Blair Creek facility, which has licensed capacity of 120 Mmcf/d of natural gas and is wholly owned and operated by AltaGas. The facility processes gas gathered from producers in the area. The plant is equipped with liquids extraction facilities to capture the NGL value for the producer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The Harmattan facility, which has a natural gas processing capacity of 490 Mmcf/d and is wholly owned and operated by AltaGas. Harmattan's natural gas processing consists of sour gas treating, co-stream straddle processing, and NGL extraction. In addition, Harmattan has fractionation and terminalling facilities (see *Fractionation and Liquids Handling* section below); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Interests in four NGL extraction plants with net licensed inlet capacity of 1.0 Bcf/d. The extraction plants consist of Edmonton Ethane Extraction Plant (EEEP), Joffre Ethane Extraction Plant (JEEP), Pembina Empress Extraction Plant (PEEP), and the Younger Extraction Plant (Younger). The extraction assets provide stable fixed-fee or cost-of-service type revenues and margin based revenues. The natural gas supply to EEEP, JEEP, and PEEP depends on natural gas demand pull from residential, commercial and industrial usage inside and outside of Western Canada, and gas liquids demand pull from the Alberta petrochemical market and propane heating. Natural gas supply to Younger is dependent on the amount of raw natural gas processed at the McMahon gas plant, which is based on the robust natural gas producing region of NEBC.

  

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On April 12, 2022, AltaGas closed the sale of its interest in the Aitken Creek processing facilities. The disposition was triggered as a result of the operator of the facilities exercising a purchase option. Refer to Note 4 of the 2022 Annual Consolidated Financial Statements for additional details.

<u>Fractionation and Liquids Handling</u>

Fractionation production is a function of NGL mix volumes processed, liquids composition, recovery efficiency of the plants, and plant on-line time. Due to the integration and inter-connectivity of AltaGas' Midstream assets, the fractionation and liquids handling activities provide integral services to the other Midstream businesses and customers by providing access to high value NGL products with access to North American and global markets through rail networks, pipelines, RIPET, and Ferndale.

AltaGas' liquids handling infrastructure consists of NGL pipelines, treating, storage, truck, and rail terminal infrastructure centered around AltaGas' key Midstream operating assets at RIPET, Ferndale, Harmattan and, in NEBC, Townsend and North Pine. AltaGas' fractionation and liquids handling business also includes terminals, wellsite fluids and fuels, and trucking.

AltaGas' fractionation and liquids handling infrastructure includes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The North Pine facility, which is the only custom fractionation plant in British Columbia, providing area producers with a lower cost, higher netback alternative for their NGLs than transporting and fractionating in Edmonton, Alberta. The first train of the North Pine facility is capable of processing up to 10,000 Bbls/d of NGL mix. The second train, commissioned in the first quarter of 2020, provides an additional 10,000 Bbls/d of NGL mix. The North Pine facility is connected to the Townsend truck terminal via the North Pine pipelines, to the Tourmaline Gundy facility, and also has access to the Canadian National (CN) rail network, allowing the transportation of propane, butane, and condensate to North American markets and propane to global markets via RIPET and butane via Ferndale;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The Harmattan gas processing complex, which has NGL fractionation capacity of 35,000 Bbls/d, a 450 Bbls/d capacity frac oil processing facility, and a 200 tonnes/d capacity industrial grade carbon dioxide (CO2) facility. Harmattan is the only deep-cut and full fractionation plant in its operating area;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Younger, which has fractionation capacity of 19,500 Bbls/d (9,750 Bbls/d net) and is operated by Pembina. AltaGas has a 50 percent interest in Younger's fractionation, storage, loading, treating, and terminalling of NGL. The remaining interest is held by Pembina;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ A network of NGL pipelines in the NEBC area that connects upstream gas plant producers to the AltaGas North Pine facility. The NEBC NGL pipelines consist of three liquids egress lines. The third line, which connects the Townsend facility to the Townsend truck terminal on the Alaska Highway (30 km) and AltaGas' North Pine facility (70 km), was commissioned in the third quarter of 2020;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ NGL and spec propane lines that connect the Townsend complex in the North, to the Aitken Creek facilities through the 60 km Aitken Connector NGL pipeline, Canadian Natural Resources Limited's Nig plant through a lateral, and to the Tourmaline Gundy facility in the West, through a 15 km spec propane line were all commissioned in the first half of 2020;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ A rail logistics network consisting of approximately 4,600 rail cars that AltaGas manages to support LPG and NGL handling;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ AltaGas' terminals and storage business, which provides support to the LPG exports and distribution business by providing the ability to source, transport, process, store, and deliver products through strategically located fixed assets throughout North America. In addition, the terminals business provides various storage and handling services to third-party customers through take-or-pay and fee-for-service agreements, which provide earnings stability through volatile commodity price environments. The terminals business consists of strategically located crude and NGL assets which provide storage, blending, rail, and truck logistical support and waterborne LPG export capabilities. AltaGas'

  

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terminal business includes Griffith LPG Terminal, which is capable of handling approximately 12,000 Bbls/d of NGLs, 700,000 barrels of underground cavern storage, and up to 220 railcars rail siding capacity; the Strathcona Storage JV, which consists of five underground storage salt caverns that have a combined storage capacity of approximately 3,215,500 Bbls; the Fort Saskatchewan facility, which is equipped with truck and rail loading and offloading infrastructure, providing 25,000 Bbls/d of throughput capacity, rail siding capacity for up to 265 railcars, and on-site tank storage for 180,000 Bbls; and Sarnia Storage and Crude Oil Terminal JV agreement, which provides up to 2.1 million barrels of crude oil and refined product storage capacity with outbound throughput supported by 10,000 Bbls/d of rail loading capacity. The right to access the terminal assets under the joint venture arrangement have been recorded as a lease by AltaGas;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Terminal demand is supported through various long-term purchase agreements with Canadian and U.S. suppliers, primarily from key Northern British Columbia and Alberta gathering facilities and select U.S. producing regions, including the Bakken in North Dakota. AltaGas also maintains service agreements with numerous Tier 1 rail providers in order to leverage existing rail networks and secure competitively priced LPGs across North America;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ 50 percent ownership of the 6.4 GJ Sarnia natural gas storage facility, which is connected to the Dawn Hub in Eastern Canada;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Three primary trucking entities which AltaGas operates, providing transportation related services within the WCSB and the Pacific Northwest in the U.S. by hauling frac fluid, produced water, crude oil, and NGLs between producers, terminals, customers and end users; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Enerchem International Inc., a wholly owned subsidiary of AltaGas, is a Canadian corporation which focuses on the production of drilling and wellsite fluids and consumer fuels. Through the fractionation of crude oil feedstock, Enerchem produces and distributes proprietary hydrocarbon fluids for fracturing and drilling of oil and gas wells to improve productivity and to resolve oilfield production challenges for downstream producers. Enerchem operates two primary facilities located in Sundre and Slave Lake, Alberta, which are capable of processing over 1.5 million barrels of finished products per year. These plants are supported by various ancillary storage and distribution facilities located across the WCSB, providing over 150,000 barrels of storage capacity, strategically placed within the vicinity of active drilling regions.

<u>Energy Services</u>

In addition to supporting the other Midstream activities within AltaGas, the logistics business identifies opportunities to buy and resell NGLs for producers, and exchange, reallocate or resell pipeline and storage capacity to earn a profit. Net revenues from these activities are derived from low risk opportunities based on transportation cost differentials between pipeline systems and differences in commodity prices from one period to another. Margins are earned by locking in buy and sell transactions in compliance with AltaGas' credit and commodity risk policies. AltaGas also provides energy procurement services for utilities gas users and manages the third-party pipeline transportation requirements for many of its gas marketing customers.

AltaGas' marketing business is focused on the purchase, sale, exchange, and distribution of NGLs and crude oil, primarily in proximity to its strategically owned and leased asset base. By leveraging AltaGas' fully integrated infrastructure base and extensive logistical capabilities, the marketing team is able to source competitively priced supply at the key hubs and across various hydrocarbon basins in order to capture arbitrage opportunities derived through regional pricing differentials. Marketing efforts are driven by two primary focuses: 1) domestic NGL and crude oil wholesale, and 2) LPG waterborne exports. AltaGas supports its distribution efforts by maintaining an extensive leased rail fleet. Leases are on a full-service basis and are established on a staggered maturity schedule with multiple lessors to ensure railcar integrity and up-to-date DOT classification.

  

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<u>Pipeline Investments</u>

AltaGas has a 10 percent equity interest in the MVP. The proposed pipeline is planned to transport approximately 2.0 Bcf/d of natural gas. In April 2018, AltaGas entered into a separate agreement to acquire a 5 percent equity interest in a lateral project to build an interstate natural gas pipeline (MVP Southgate) which would receive natural gas from MVP. Due to ongoing legal and regulatory challenges, the targeted in-service date for MVP is the second half of 2023 while the completion date for MVP Southgate is currently being reassessed.

<u>Harmattan Carbon Capture and Acid Gas Injection Well</u>

AltaGas is currently advancing an opportunity to capture up to 60,000 tonnes/year of carbon emissions at Harmattan. The project involves decommissioning Harmattan's existing sulfur plant, which significantly reduces the facility's operational complexity and extends the facility's turnaround cycle from 4 years to 5 years, which is expected to result in cost savings. Phase 1 of this project, which involves drilling an acid gas injection well, is currently underway.

**Capitalize on Opportunities** 

To take advantage of opportunities, including the continued Montney LPG growth and the increasing Asian demand for LPG, AltaGas plans to grow its Midstream business by expanding and optimizing strategically-located assets as well as its global export platform. New infrastructure consists of larger scale facilities supporting the vast reserves in North America and growing the footprint and integration of AltaGas' existing assets. While providing safe and reliable service, AltaGas pursues opportunities in the Midstream segment to deliver value to its customers while enhancing long-term shareholder value. The Corporation's objectives are to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Maximize and grow the unique structural advantage within AltaGas' integrated platform in the Montney region, leveraging RIPET/Ferndale and the integrated value chain to attract volumes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Increase utilization and export volumes, optimize commercial and operational capability at RIPET and Ferndale, and continue to build on export competency while positioning the platform to export additional lower carbon fuels;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Provide a fully-integrated Midstream service offering including natural gas gathering, processing and NGL extraction, fractionation, liquids handling, and transportation and marketing services to customers across the energy value chain, with higher producer netbacks resulting from global export access to higher value global markets, including Asia;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Advance emissions intensity reduction plans and targets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Advance alternative fuels opportunities and new growth initiatives that are within AltaGas' core markets and competencies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Maintain strong relationships with Indigenous peoples, regulators, customers, partners, and service providers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Optimize existing rail infrastructure to gain scale and efficiencies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Increase utilization and throughput at existing facilities while maintaining top tier operating costs, high reliability and NGL recovery, highly efficient business administration, and effective safety and environmental programs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Mitigate commodity risk through tolling agreements and effective hedging and risk management programs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Mitigate volume risk through contractual structures, redeployment of equipment, and expansion of geographic reach; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Mitigate counterparty risk through customer base growth and diversification.

  

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**Corporate/Other**

**Description of Assets**

In addition to Corporate activities and assets, AltaGas' Corporate/Other segment includes 508 MW of operational gross capacity from remaining natural gas-fired and distributed generation power assets. Specifically, the most significant remaining power asset in the Corporate/Other segment is the Blythe Energy Center (Blythe), a natural gas-fired plant in California with 507 MW of generating capacity.

The Blythe Energy Center utilizes gas-fired generation to produce power and serves the transmission grid operated by the California Independent System Operator (CAISO) to cover periods of high demand primarily driven by the Los Angeles area. Due to the structure of the long-term Power Purchase Arrangement (PPA) with Southern California Edison (SCE), the majority of the revenue from the facility is derived from being available to produce and not from actual production, which reduces risk and provides stable cash flow. The facility is directly connected to an El Paso Gas Company natural gas pipeline for its primary supply and a Southern California Gas Company pipeline as a secondary supply source, and interconnects to SCE and CAISO via a 67-mile transmission line also owned by Blythe and is part of the Blythe Energy Center. In 2019, AltaGas announced the successful recontracting of the Blythe facility to SCE. With the approval of the PPA with SCE received by the California Public Utilities Commission in January 2020, Blythe is contracted under a PPA until December 31, 2023. Under the tolling agreement, SCE has exclusive rights to all capacity, energy, ancillary services, and resource adequacy benefits during the PPA term. In February 2023, AltaGas reached an agreement with Southern California Edison for the purchase of resource adequacy attributes from the Blythe facility for the period from January 1, 2024 through December 31, 2027. AltaGas believes this facility is important in meeting California's power needs and improving reliability on the power grid during peak demand.

In the first quarter of 2022, AltaGas closed the sale of a 60 MW stand-alone energy storage development project in Goleta, California. Refer to Note 4 of the 2022 Annual Consolidated Financial Statements for additional details.

  

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**Consolidated Financial Review**

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| | | | | |
|:---|:---|:---|:---|:---|
| | Three Months Ended<br>December 31 | Three Months Ended<br>December 31 | Year Ended<br>December 31 | Year Ended<br>December 31 |
| *($ millions, except where noted)* | **2022** | 2021 | **2022** | 2021 |
| Revenue | **3898** | 3140 | **14087** | 10573 |
| Normalized EBITDA <sup>(1) (2)</sup> | **454** | 334 | **1537** | 1472 |
| Income (loss) before income taxes | **78** | (162) | **716** | 446 |
| Net income (loss) applicable to common shares | **54** | (156) | **399** | 230 |
| Normalized net income <sup>(1) (2)</sup> | **178** | 99 | **530** | 481 |
| Total assets | **23965** | 21593 | **23965** | 21593 |
| Total long-term liabilities | **12940** | 11335 | **12940** | 11335 |
| Invested capital <sup>(1)</sup> | **326** | 253 | **1233** | 798 |
| Cash flows used in investing activities | **(336)** | (241) | **(997)** | (483) |
| Dividends declared <sup>(3)</sup> | **75** | 71 | **298** | 281 |
| Cash from (used by) operations | **(289)** | (157) | **539** | 738 |
| Normalized funds from operations <sup>(1) (2)</sup> | **371** | 280 | **1204** | 1180 |
| Normalized effective income tax rate (%) <sup>(1) (2)</sup> | **21.5** | 25.3 | **20.2** | 22.4 |
| Effective income tax rate (%) | **15.4** | 17.9 | **20.0** | 23.8 |

---

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| | | | | |
|:---|:---|:---|:---|:---|
| | Three Months Ended<br>December 31 | Three Months Ended<br>December 31 | Year Ended<br>December 31 | Year Ended<br>December 31 |
| *($ per share, except shares outstanding)*  | **2022** | 2021 | **2022** | 2021 |
| Net income (loss) per common share - basic | **0.19** | (0.56) | **1.42** | 0.82 |
| Net income (loss) per common share - diluted | **0.19** | (0.56) | **1.41** | 0.82 |
| Normalized net income - basic <sup>(1) (2)</sup> | **0.63** | 0.35 | **1.89** | 1.72 |
| Normalized net income - diluted <sup>(1) (2)</sup> | **0.63** | 0.35 | **1.87** | 1.71 |
| Dividends declared <sup>(3)</sup> | **0.27** | 0.25 | **1.06** | 1.00 |
| Cash from (used by) operations | **(1.02)** | (0.56) | **1.92** | 2.64 |
| Normalized funds from operations <sup>(1) (2)</sup> | **1.32** | 1.00 | **4.28** | 4.21 |
| Shares outstanding - basic (millions) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;During the period <sup>(4)</sup> | **282** | 280 | **281** | 280 |
| &nbsp;&nbsp;&nbsp;&nbsp;End of period | **282** | 280 | **282** | 280 |

---

(1)Non-GAAP financial measure; see discussion in the *Non-GAAP Financial Measures* section of this MD&A.

(2)In the third quarter of 2022, Management changed AltaGas' non-GAAP policy to remove normalization adjustments relating to acquired contingencies. Prior periods have been restated to reflect this change. Please refer to the *Non-GAAP Financial Measures* section of this MD&A for additional details.

(3)Effective March 31, 2022, common share dividends are declared and paid on a quarterly basis. The dividend declared each quarter is $0.265 per share beginning March 31, 2022, which represents a 6 percent increase on an annual basis from the previous monthly dividends declared of $0.0833 per share beginning December 2020. On December 5, 2022, AltaGas announced that its Board of Directors approved a 6 percent increase to its annual common share dividends for 2023, which equates to a quarterly dividend rate of $0.28 per common shares, effective March 31, 2023.

(4)Weighted average*.*

**Three Months Ended December 31**

Normalized EBITDA for the fourth quarter of 2022 was $454 million, compared to $334 million for the same quarter in 2021. Factors positively impacting normalized EBITDA included higher earnings at the extraction facilities driven by higher frac spreads, higher earnings from the export facilities driven by strong volumes and higher propane margins (inclusive of hedges), which were partially offset by lower Asian-to-Canadian butane spreads and elevated rail and freight logistics costs. Utility results were also positively impacted by an increase in asset optimization activities at Washington Gas, the impact of Washington Gas' Virginia rate case, and colder weather in Michigan and the District of Columbia. Factors negatively impacting AltaGas' normalized EBITDA in the fourth quarter of 2022 included higher operating and administrative expenses at the utilities, lower margins from the crude marketing business, and the impact of the sale of AltaGas' interest in the Aitken Creek

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 22

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processing facilities in the second quarter of 2022. For the three months ended December 31, 2022, the average Canadian/U.S. dollar exchange rate increased to 1.36 from an average of 1.26 in the same quarter of 2021, resulting in an increase in normalized EBITDA of approximately $20 million.

Income before income taxes for the fourth quarter of 2022 was $78 million, compared to loss of $162 million for the same quarter in 2021. The increase was mainly due to the same previously referenced factors impacting normalized EBITDA and the absence of the impairment on MVP recorded in the fourth quarter of 2021, partially offset by higher unrealized losses on risk management contracts and higher interest expense. Net income applicable to common shares for the fourth quarter of 2022 was $54 million ($0.19 per share), compared to a loss of $156 million ($0.56 per share) for the same quarter in 2021. The increase was primarily due to the same previously referenced factors impacting income before income taxes, partially offset by higher income tax expense.

Normalized funds from operations for the fourth quarter of 2022 was $371 million ($1.32 per share), compared to $280 million ($1.00 per share) for the same quarter in 2021. The increase was mainly due to the same previously referenced factors impacting normalized EBITDA, partially offset by higher interest expense and higher current tax expense.

Cash used by operations for the fourth quarter of 2022 was $289 million ($1.02 per share), compared to $157 million ($0.56 per share) for the same quarter in 2021. The increase was mainly due to unfavourable variances in the net change in operating assets and liabilities, primarily as a result of higher commodity prices, partially offset by higher net income after taxes (after adjusting for non-cash items). Please refer to the *Liquidity* section of this MD&A for further details on the variance in cash from operations.

In the fourth quarter of 2022, AltaGas recorded pre-tax provisions on assets of approximately $6 million ($5 million after-tax) primarily related to the abandoned Alton natural gas storage project as a result of updated reclamation cost estimates. In the fourth quarter of 2021, AltaGas recorded pre-tax losses on dispositions of assets of approximately $1 million related to minor Midstream asset sales. In addition, in the fourth quarter of 2021, AltaGas recorded pre-tax provisions on assets of approximately $6 million ($2 million after-tax), primarily related to non-core development stage Midstream projects that were no longer being developed and the Parks at Walter Reed thermal plant in Washington, D.C. In the fourth quarter of 2021, AltaGas also recorded pre-tax provisions on equity investments of approximately $271 million ($209 million after-tax), related to its investment in MVP.

Operating and administrative expense for the fourth quarter of 2022 was $396 million, compared to $403 million for the same quarter in 2021. The decrease was mainly due to the favourable resolution of certain acquisition related commercial disputes and contingencies and lower crude and NGL marketing expenses, partially offset by higher power and fuel costs at the extraction facilities, higher expenses at the utilities, and the impact of the higher average Canadian/U.S. dollar exchange rate. Depreciation and amortization expense for the fourth quarter of 2022 was $112 million, compared to $105 million for the same quarter in 2021. The increase was due to the impact of new assets placed in-service, partially offset by the impact of the Alaska Utilities Disposition. Interest expense for the fourth quarter of 2022 was $99 million, compared to $67 million for the same quarter in 2021. The increase was due to $8 million of interest related to the subordinated hybrid notes, higher average interest rates, higher average debt balances, and a higher average Canadian/U.S. dollar exchange rate.

AltaGas recorded income tax expense of $12 million for the fourth quarter of 2022 compared to income tax recovery of $28 million in the same quarter in 2021. The increase in income tax expense was mainly due to an increase in income before income taxes in the fourth quarter of 2022 compared to a loss before income taxes in the same quarter in 2021.

Normalized net income was $178 million ($0.63 per share) for the fourth quarter of 2022, compared to $99 million ($0.35 per share) reported for the same quarter in 2021. The increase was mainly due to the same factors impacting normalized EBITDA, lower preferred share dividends, and lower net income applicable to non-controlling interests, partially offset by higher interest expense, higher normalized income tax expense, and higher depreciation and amortization expense. Normalizing items in the

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 23

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fourth quarter of 2022 increased normalized net income by $124 million and included after-tax amounts related to transaction costs related to acquisitions and dispositions, provisions on assets, and unrealized losses on risk management contracts. Normalizing items in the fourth quarter of 2021 increased normalized net income by $255 million and included after-tax amounts related to transaction costs related to acquisitions and dispositions, provisions on assets, provisions on investments accounted for by the equity method, unrealized losses on risk management contracts, losses on sale of assets, and non-controlling interest portion of non-GAAP adjustments. Please refer to the *Non-GAAP Financial Measures* section of this MD&A for further details on normalization adjustments.

**Year Ended December 31**

Normalized EBITDA for the year ended December 31, 2022 was $1,537 million, compared to $1,472 million in 2021. Factors positively impacting normalized EBITDA included an increase in asset optimization activities at Washington Gas, higher earnings at the processing and extraction facilities driven by higher frac spreads and the recovery of turnaround costs from customers, favourable resolution of certain acquisition related commercial disputes and contingencies, impacts from Washington Gas' 2020 Maryland and District of Columbia rate cases and 2022 Virginia rate case, higher gas margins from WGL's retail marketing business, higher revenue from accelerated pipe replacement program spend, colder weather in Michigan and the District of Columbia, higher drilling and fuel margins at other ancillary businesses, and lower expenses relating to employee incentive plans as a result of the absence of the increase in share price in 2021. Factors negatively impacting normalized EBITDA included the impact of the sale of the U.S. transportation and storage business in April 2021 and the sale of AltaGas' interest in the Aitken Creek processing facilities in the second quarter of 2022, higher operating and administrative expenses at the utilities, lower earnings from the export facilities as strong volumes were more than offset by lower Asian-to-Canadian butane spreads, as well as elevated rail and freight logistics costs, the absence of gains on foreign exchange swaps in the fourth quarter of 2021, lower NGL marketing margins mainly due to the sale of NGL volumes in storage to the market at a premium in 2021, lower crude marketing margins, a write down of natural gas storage inventory to its net realizable value, an accrual for penalties related to certain alleged air-related violations at the Ferndale terminal, and the absence of a one-time contract termination payout related to a railcar sublease agreement in the third quarter of 2021. For the year ended December 31, 2022, the average Canadian/U.S. dollar exchange rate increased to 1.30 from an average of 1.25 in 2021, resulting in an increase in normalized EBITDA of approximately $29 million.

Income before income taxes for the year ended December 31, 2022 was $716 million, compared to $446 million in 2021. The increase was mainly due to the same previously referenced factors impacting normalized EBITDA, the absence of the pre-tax provision on equity investments recorded in 2021 related to MVP, and the absence of the pre-tax provision related to the sale of the U.S. transportation and storage business in the first quarter of 2021, partially offset by higher unrealized losses on risk management contracts, higher interest expense, and higher depreciation and amortization expense. Net income applicable to common shares for the year ended December 31, 2022 was $399 million ($1.42 per share), compared to $230 million ($0.82 per share) in 2021. The increase was mainly due to the same previously referenced factors impacting income before income taxes and lower preferred share dividends due to the redemption of preferred shares, partially offset by the loss on preferred shares redeemed in 2022 and higher income tax expense.

Normalized funds from operations for the year ended December 31, 2022 was $1,204 million ($4.28 per share), compared to $1,180 million ($4.21 per share) in 2021. The increase was mainly due to the same factors impacting normalized EBITDA and lower current income tax expense, partially offset by higher interest expense.

Cash from operations for the year ended December 31, 2022 was $539 million ($1.92 per share), compared to $738 million ($2.64 per share) in 2021. The decrease was mainly due to unfavourable variances in the net change in operating assets and liabilities, primarily as a result of fluctuations in commodity prices and sales volumes, partially offset by higher net income after taxes after adjusting for non-cash items. Please refer to the *Liquidity* section of this MD&A for further details on the variance in cash from operations.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 24

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In 2022, AltaGas recorded pre-tax gains on dispositions of assets of approximately $3 million. This was primarily comprised of a pre-tax loss of $3 million for expenses incurred related to asset sales which closed in prior periods, a pre-tax gain of $1 million on the sale of AltaGas' interest in the Aitken Creek processing facilities, a pre-tax loss of $2 million on the sale of a power plant in Brush, Colorado, and a pre-tax gain of $7 million on the sale of an energy storage development project in Goleta, California. In addition, in 2022, AltaGas recorded pre-tax provisions on assets of approximately $6 million ($5 million after-tax) primarily related to the previously mentioned abandoned Alton natural gas storage project. In 2021, AltaGas recorded a pre-tax gain on disposition of assets of approximately $6 million. This was primarily comprised of a pre-tax loss of $1 million on the last remaining U.S. distributed generation project which was sold in 2019 but transferred to the purchaser during the second quarter of 2021, a pre-tax gain of $3 million on the sale of the U.S. transportation and storage business, a pre-tax gain of $1 million on minor Midstream asset sales, and $3 million of cash proceeds received from an escrow account related to the 2019 disposition of AltaGas' investment in Meade, which held WGL Midstream's indirect, non-operating interest in the Central Penn pipeline (Central Penn). Upon close of the sale, various escrow accounts were established to provide the purchaser a form of recourse for the settlement of indemnification obligations. In addition, in 2021, AltaGas recorded pre-tax provisions on assets of approximately $64 million ($48 million after-tax) primarily related to the sale of the U.S. transportation and storage business and the previously mentioned provisions recorded in the fourth quarter of 2021. In 2021, AltaGas also recorded the previously mentioned provision on equity investments of $271 million ($209 million after-tax) related to its investment in MVP.

Operating and administrative expense for the year ended December 31, 2022 was $1,568 million, compared to $1,476 million in 2021. The increase was mainly due to higher expenses at the utilities, higher power and fuel costs at the extraction facilities, elevated rail and freight logistics related costs at the export facilities, and the impact of the higher average Canadian/U.S. dollar exchange rate, partially offset by the favourable resolution of certain acquisition related commercial disputes and contingencies, lower crude and NGL marketing expenses, and lower expenses relating to employee incentive plans as a result of the absence of an increase in share price in 2021. Depreciation and amortization expense for the year ended December 31, 2022 was $439 million, compared to $422 million in 2021. The increase was mainly due to the absence of depreciation and amortization adjustments made in the first quarter of 2021 related to the Petrogas purchase price allocation and WGL Midstream, and the impact of new assets placed in-service, partially offset by the impact of the Alaska Utilities Disposition and the impact of the sale of AltaGas' interest in the Aitken Creek processing facilities. Interest expense for the year ended December 31, 2022 was $330 million, compared to $275 million in 2021. The increase was due to $22 million of interest relating to the subordinated hybrid notes, higher average interest rates, higher average debt balances, and a higher average Canadian/U.S. dollar exchange rate.

AltaGas recorded income tax expense of $143 million for the year ended December 31, 2022 compared to $106 million in 2021. The increase in tax expense was mainly due to higher income before income taxes in 2022, partially offset by the recognition of research and development tax credits. Current tax expense of $23 million was recorded for the year ended December 31, 2022, which included $1 million of tax recovery related to asset sales, compared to current tax expense of $59 million in 2021, which included $12 million of tax expense on asset sales.

Normalized net income was $530 million ($1.89 per share) for the year ended December 31, 2022, compared to $481 million ($1.72 per share) in 2021. The increase was mainly due to the same previously referenced factors impacting normalized EBITDA, lower preferred share dividends, and lower normalized income tax expense, partially offset by higher depreciation and amortization expense and higher interest expense. Normalizing items in the year ended December 31, 2022 increased normalized net income by $131 million and included after-tax amounts related to gains on sale of assets, transaction costs related to acquisitions and dispositions, loss on redemption of preferred shares, provisions on assets, reversal of provisions on investments accounted for by the equity method, non-controlling interest portion of non-GAAP adjustments, and unrealized losses on risk management contracts. Normalizing items in the year ended December 31, 2021 increased normalized net income by $251 million and included after-tax amounts related to provisions on assets, transaction costs related to acquisitions and dispositions, restructuring costs, provisions on investments accounted for by the equity method, non-controlling interest

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 25

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portion of non-GAAP adjustments, and unrealized gains on risk management contracts. Please refer to the *Non-GAAP Financial Measures* section of this MD&A for further details on normalization adjustments.

**Non-GAAP Financial Measures**

This MD&A contains references to certain financial measures used by AltaGas that do not have a standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other entities. Readers are cautioned that these non-GAAP measures should not be construed as alternatives to other measures of financial performance calculated in accordance with GAAP. The non-GAAP measures and their reconciliation to GAAP financial measures are shown below. These non-GAAP measures provide additional information that Management believes is meaningful in describing AltaGas' operational performance, liquidity and capacity to fund dividends, capital expenditures, and other investing activities. The specific rationale for, and incremental information associated with, each non-GAAP measure is discussed below.

References to normalized EBITDA, normalized net income, normalized funds from operations, normalized income tax expense, normalized effective income tax rate, net debt, net debt to total capitalization, invested capital, and net invested capital throughout this MD&A have the meanings as set out in this section.

**Change in Composition of Non-GAAP Measures**

In the third quarter of 2022, Management changed the composition of certain of AltaGas' non-GAAP measures such that adjustments for acquired contingencies are no longer included as normalization adjustments. This change was made as a result of Management's assessment that these contingencies are of a recurring and ongoing nature, and as such, the more appropriate methodology is to align the non-GAAP treatment of these costs and recoveries with the GAAP accounting treatment. Prior period calculations of the relevant non-GAAP measures have been restated to reflect this change. The following table summarizes the impact of this change on the periods presented in this MD&A:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Increase (decrease) as result of change** | Three Months Ended<br>December 31 | Three Months Ended<br>December 31 | Year Ended<br>December 31 | Year Ended<br>December 31 |
| *($ millions, except where noted)* | **2022** | 2021 | **2022** | 2021 |
| Normalized EBITDA | $**—** | $(7) | $**30** | $(18) |
| Normalized net income <sup>(1)</sup> | $**—** | $(8) | $**17** | $(16) |
| Normalized funds from operations <sup>(1)</sup> | $**—** | $(7) | $**30** | $(18) |
| Normalized income tax expense | $**—** | $1 | $**6** | $(2) |
| Normalized effective tax rate (%) | **— %** | 1.7% | **0.1%** | 0.3% |

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(1) Corresponding per share amounts have also been adjusted.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 26

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**Normalized EBITDA**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | Three Months Ended<br>December 31 | Three Months Ended<br>December 31 | Year Ended<br>December 31 | Year Ended<br>December 31 |
| *($ millions)* | **2022** | 2021 | **2022** | 2021 |
| Income (loss) before income taxes (GAAP financial measure) | $**78** | $(162) | $**716** | $446 |
| Add: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | **112** | 105 | **439** | 422 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest expense | **99** | 67 | **330** | 275 |
| EBITDA | $**289** | $10 | $**1485** | $1143 |
| Add (deduct): |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Transaction costs related to acquisitions and dispositions <sup>(1)</sup> | **2** | 9 | **6** | 15 |
| &nbsp;&nbsp;&nbsp;&nbsp;Unrealized losses (gains) on risk management contracts <sup>(2)</sup> | **156** | 33 | **49** | (18) |
| &nbsp;&nbsp;&nbsp;&nbsp;Losses (gains) on sale of assets <sup>(3)</sup> | **—** | 1 | **(3)** | (6) |
| &nbsp;&nbsp;&nbsp;&nbsp;Restructuring costs <sup>(4)</sup> | **—** |  | **—** | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provisions on assets | **6** | 6 | **6** | 64 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provisions (reversal of provisions) on investments accounted for by the equity method <sup>(5)</sup> | **—** | 271 | **(3)** | 271 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accretion expenses | **2** | 4 | **7** | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Foreign exchange gains | **(1)** |  | **(10)** | (4) |
| Normalized EBITDA | $**454** | $334 | $**1537** | $1472 |

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(1)Comprised of transaction costs related to acquisitions and dispositions of assets and/or equity investments in the period. These costs are included in the "cost of sales" and "operating and administrative" line items on the Consolidated Statements of Income. Transaction costs include expenses, such as legal fees, which are directly attributable to the acquisition or disposition. As noted on page [26](#i187a92d8023a418bb1e40a3152f13c50_43) of this MD&A, in the third quarter of 2022 AltaGas changed its non-GAAP policy to remove the normalization of acquisition related contingencies. The amounts presented in this table reflect the restated figures to align with the revised policy. Please refer to Note 4 of the 2022 Annual Consolidated Financial Statements for further details regarding AltaGas' disposition of assets in the period.

(2)Included in the "revenue" and "cost of sales" line items on the Consolidated Statements of Income. Please refer to Note 24 of the 2022 Annual Consolidated Financial Statements for further details regarding AltaGas' risk management activities.

(3)Included in the "other income" line item on the Consolidated Statements of Income. Please refer to Note 4 of the 2022 Annual Consolidated Financial Statements for further details regarding AltaGas' disposition of assets in the period.

(4)Comprised of costs related to a workforce optimization program. These costs are included in the "operating and administrative" line item on the Consolidated Statements of Income.

(5)Relates to the return of certain costs associated with the Constitution pipeline project as a result of its cancellation in February 2020 and provisions recorded on AltaGas' investment in MVP in the fourth quarter of 2021. The provisions are included in the "income (loss) from equity investments" line item on the Consolidated Statements of Income.

EBITDA is a measure of AltaGas' operating profitability prior to how business activities are financed, assets are amortized, or earnings are taxed. EBITDA is calculated from the Consolidated Statements of Income using income before income taxes adjusted for pre-tax depreciation and amortization and interest expense.

AltaGas presents normalized EBITDA as a supplemental measure. Normalized EBITDA is used by Management to enhance the understanding of AltaGas' earnings over periods, as well as for budgeting and compensation related purposes. The metric is frequently used by analysts and investors in the evaluation of entities within the industry as it excludes items that can vary substantially between entities depending on the accounting policies chosen, the book value of assets, and the capital structure.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 27

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**Normalized Net Income** 

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| | | | | |
|:---|:---|:---|:---|:---|
| | Three Months Ended<br>December 31 | Three Months Ended<br>December 31 | Year Ended<br>December 31 | Year Ended<br>December 31 |
| *($ millions)* | **2022** | 2021 | **2022** | 2021 |
| Net income (loss) applicable to common shares (GAAP financial measure) | $**54** | $(156) | $**399** | $230 |
| Add (deduct) after-tax: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Transaction costs related to acquisitions and dispositions <sup>(1)</sup> | **1** | 5 | **4** | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;Unrealized losses (gains) on risk management contracts <sup>(2)</sup> | **118** | 21 | **39** | (10) |
| &nbsp;&nbsp;&nbsp;&nbsp;Losses (gains) on sale of assets <sup>(3)</sup> | **—** | 15 | **(4)** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-controlling interest portion of non-GAAP adjustments <sup>(4)</sup> | **—** | 3 | **5** | (9) |
| &nbsp;&nbsp;&nbsp;&nbsp;Restructuring costs <sup>(5)</sup> | **—** |  | **—** | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on redemption of preferred shares, including foreign exchange impact <sup>(6)</sup> | **—** |  | **84** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Provisions on assets | **5** | 2 | **5** | 48 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provisions (reversal of provisions) on investments accounted for by the equity method <sup>(7)</sup> | **—** | 209 | **(2)** | 209 |
| Normalized net income | $**178** | $99 | $**530** | $481 |

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(1)Comprised of transaction costs related to acquisitions and dispositions of assets and/or equity investments in the period. The pre-tax costs are included in the "cost of sales" and "operating and administrative" line items on the Consolidated Statements of Income. Transaction costs include expenses, such as legal fees, which are directly attributable to the acquisition or disposition. As noted on page [26](#i187a92d8023a418bb1e40a3152f13c50_43) of this MD&A, in the third quarter of 2022 AltaGas changed its non-GAAP policy to remove the normalization of acquisition related contingencies. The amounts presented in this table reflect the restated figures to align with the revised policy. Please refer to Note 4 of the 2022 Annual Consolidated Financial Statements for further details regarding AltaGas' disposition of assets in the period.

(2)The pre-tax amounts are included in the "revenue" and "cost of sales" line items on the Consolidated Statements of Income. Please refer to Note 24 of the 2022 Annual Consolidated Financial Statements for further details regarding AltaGas' risk management activities.

(3)The pre-tax amounts are included in the "other income" line item on the Consolidated Statements of Income. Please refer to Note 4 of the 2022 Annual Consolidated Financial Statements for further details regarding AltaGas' disposition of assets in the period. The after-tax amount in 2021 also includes the impact of the increase in accumulated state deferred income tax liabilities caused by the elimination of the WGL Midstream (now WGL Sustainable Energy LLC) business from AltaGas' consolidated U.S. tax group.

(4)The portion of non-GAAP adjustments applicable to non-controlling interests are excluded in the computation of normalized net income to ensure consistency of normalizations applied to controlling and non-controlling interests. These amounts are included in the "net income applicable to non-controlling interests" line item on the Consolidated Statements of Income. As noted on page [26](#i187a92d8023a418bb1e40a3152f13c50_43) of this MD&A, in the third quarter of 2022 AltaGas changed its non-GAAP policy to remove the normalization of acquisition related contingencies. This includes the associated impact to the portion applicable to non-controlling interests. The amounts presented in this table reflect the restated figures to align with the revised policy.

(5)Comprised of costs related to a workforce optimization program. The pre-tax costs are included in the "operating and administrative" line item on the Consolidated Statements of Income.

(6)Comprised of losses on the redemption of Series K Preferred Shares on March 31, 2022 and the redemption of U.S. dollar denominated Series C Preferred Shares on September 30, 2022 including an associated foreign exchange loss of approximately $69 million. The loss on redemption of preferred shares is recorded on the "loss of redemption of preferred shares" line on the Consolidated Statements of Income.

(7)Relates to the return of certain costs associated with the Constitution pipeline project as a result of its cancellation in February 2020 and provisions recorded on AltaGas' investment in MVP in the fourth quarter of 2021. The pre-tax provisions are included in the "income (loss) from equity investments" line item on the Consolidated Statements of Income.

Normalized net income and normalized net income per share are used by Management to enhance the comparability of AltaGas' earnings, as it reflects the underlying performance of AltaGas' business activities.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 28

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**Normalized Funds From Operations** 

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| | | | | |
|:---|:---|:---|:---|:---|
| | Three Months Ended<br>December 31 | Three Months Ended<br>December 31 | Year Ended<br>December 31 | Year Ended<br>December 31 |
| *($ millions)* | **2022** | 2021 | **2022** | 2021 |
| Cash from (used by) operations (GAAP financial measure) | $**(289)** | $(157) | $**539** | $738 |
| Add (deduct): |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net change in operating assets and liabilities | **653** | 437 | **650** | 410 |
| &nbsp;&nbsp;&nbsp;&nbsp;Asset retirement obligations settled | **5** | 3 | **10** | 10 |
| Funds from operations | $**369** | $283 | $**1199** | $1158 |
| Add (deduct): |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Transaction costs related to acquisitions and dispositions <sup>(1)</sup> | **2** | 9 | **6** | 15 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current tax expense (recovery) on asset sales <sup>(2)</sup> | **—** | (12) | **(1)** | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Restructuring costs <sup>(3)</sup> | **—** |  | **—** | 1 |
| Normalized funds from operations | $**371** | $280 | $**1204** | $1180 |

---

(1)Comprised of transaction costs related to acquisitions and dispositions of assets and/or equity investments in the period. These costs exclude non-cash amounts and are included in the "cost of sales" and "operating and administrative" line items on the Consolidated Statements of Income. Transaction costs include expenses, such as legal fees, which are directly attributable to the acquisition or disposition. As noted on page [26](#i187a92d8023a418bb1e40a3152f13c50_43) of this MD&A, in the third quarter of 2022 AltaGas changed its non-GAAP policy to remove the normalization of acquisition related contingencies. The amounts presented in this table reflect the restated figures to align with the revised policy. Please refer to Note 4 of the 2022 Annual Consolidated Financial Statements for further details regarding AltaGas' disposition of assets in the period.

(2)Included in the "current income tax expense" line item on the Consolidated Statements of Income.

(3)Comprised of costs related to a workforce optimization program. These costs are included in the "operating and administrative" line item on the Consolidated Statements of Income.

Normalized funds from operations and funds from operations are used to assist Management and investors in analyzing the liquidity of the Corporation. Management uses these measures to understand the ability to generate funds for capital investments, debt repayment, dividend payments, and other investing activities.

Funds from operations and normalized funds from operations as presented should not be viewed as an alternative to cash from (used in) operations or other cash flow measures calculated in accordance with GAAP.

**Normalized Income Tax Expense**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | Three Months Ended<br>December 31 | Three Months Ended<br>December 31 | Year Ended<br>December 31 | Year Ended<br>December 31 |
| *($ millions)* | **2022** | 2021 | **2022** | 2021 |
| Income tax expense (recovery) (GAAP financial measure) | $**12** | $(28) | $**143** | $106 |
| Add (deduct) tax impact of: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Transaction costs related to acquisitions and dispositions <sup>(1)</sup> | **1** | 4 | **2** | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;Unrealized losses (gains) on risk management contracts | **38** | 12 | **10** | (9) |
| &nbsp;&nbsp;&nbsp;&nbsp;Losses (gains) on sale of assets | **—** | (14) | **1** | (6) |
| &nbsp;&nbsp;&nbsp;&nbsp;Provisions on assets | **1** | 4 | **1** | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provisions (reversal of provisions) on investments accounted for by the equity method | **—** | 62 | **(1)** | 62 |
| Normalized income tax expense | $**52** | $40 | $**156** | $173 |

---

(1)As noted on page [26](#i187a92d8023a418bb1e40a3152f13c50_43) of this MD&A, in the third quarter of 2022 AltaGas changed its non-GAAP policy to remove the normalization of acquisition related contingencies. The amounts presented in this table reflect the restated figures to align with the revised policy.

The above table provides a reconciliation of normalized income tax expense from the GAAP financial measure, income tax expense. The reconciling items are comprised of the income tax impacts of normalizing items present in the calculation of normalized net income. For more information on the individual normalizing items, please refer to the normalized net income reconciliation above.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 29

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Normalized income tax expense is used by Management to enhance the comparability of the impact of income tax on AltaGas' earnings, as it reflects the underlying performance of AltaGas' business activities, and is presented to provide this perspective to analysts and investors.

**Net Debt and Net Debt to Total Capitalization**

Net debt and net debt to total capitalization are used by the Corporation to monitor its capital structure and financing requirements. It is also used as a measure of the Corporation's overall financial strength and is presented to provide this perspective to analysts and investors. Net debt is defined as short-term debt (excluding third-party project financing obtained for the construction of certain energy management services projects), plus current and long-term portions of long-term debt (including debt classified as held for sale), and subordinated hybrid notes, less cash and cash equivalents. Total capitalization is defined as net debt plus shareholders' equity and non-controlling interests. Additional information regarding these non-GAAP measures can be found under the *Capital Resources* section of this MD&A.

**Net Invested Capital**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | Three Months Ended<br>December 31 | Three Months Ended<br>December 31 | Year Ended<br>December 31 | Year Ended<br>December 31 |
| *($ millions)* | **2022** | 2021 | **2022** | 2021 |
| Cash used in investing activities (GAAP financial measure) | $**336** | $241 | $**997** | $483 |
| Add (deduct): |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net change in non-cash capital expenditures <sup>(1)</sup> | **(7)** | 11 | **(6)** | (33) |
| &nbsp;&nbsp;&nbsp;&nbsp;Allowance for Funds Used During Construction (AFUDC) <sup>(2)</sup> | **(3)** |  | **(3)** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Contributions from non-controlling interests <sup>(3)</sup> | **—** |  | **—** | (1) |
| Net invested capital | $**326** | $252 | $**988** | $449 |

---

(1)Comprised of non-cash capital expenditures included in the "accounts payable and accrued liabilities" line item on the Consolidated Balance Sheets. Please refer to Note 32 of the 2022 Annual Consolidated Financial Statements for further details.

(2)AFUDC is the amount that a rate-regulated enterprise is allowed to recover for its cost of financing assets under construction and is included in the "property, plant and equipment" line item on the Consolidated Balance Sheets.

(3)Comprised of partner recoveries for capital expenditures incurred for the Ridley Island Propane Export Terminal. These recoveries are included in "contributions from non-controlling interests" under financing activities in the Consolidated Statements of Cash Flows, however as Management views this as a part of AltaGas' invested capital, it has been included in the calculation of net invested capital.

Invested capital is a measure of AltaGas' use of funds for capital expenditure activities. It includes expenditures relating to property, plant, and equipment and intangible assets, capital contributed to long term investments, and contributions from non-controlling interests. Net invested capital is invested capital presented net of any proceeds from disposals of assets and equity investments in the period. Net invested capital is calculated based on the investing activities section in the Consolidated Statements of Cash Flows, adjusted for items such as non-cash capital expenditures, AFUDC, and contributions from non-controlling interests. Invested capital and net invested capital are used by Management, investors, and analysts to enhance the understanding of AltaGas' capital expenditures from period to period and provide additional detail on the Company's use of capital.

**Supplemental Calculations**

**Reconciliation of Normalized EBITDA to Normalized Net Income**

The below table provides a supplemental reconciliation of normalized EBITDA to normalized net income. Both of these non-GAAP measures have been previously reconciled to the relevant GAAP financial measures in the section above. This supplemental information is provided as additional information to assist analysts and investors in comparing normalized EBITDA to normalized net income and is not intended as a substitute for the reconciliations to the nearest comparable GAAP measures. Readers should not place undue reliance on this supplemental reconciliation.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 30

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---

| | | | | |
|:---|:---|:---|:---|:---|
| | Three Months Ended<br>December 31 | Three Months Ended<br>December 31 | Year Ended<br>December 31 | Year Ended<br>December 31 |
| *($ millions)* | **2022** | 2021 | **2022** | 2021 |
| Normalized EBITDA <sup>(1)</sup> | $**454** | $334 | $**1537** | $1472 |
| Add (deduct): |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | **(112)** | (105) | **(439)** | (422) |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest expense | **(99)** | (67) | **(330)** | (275) |
| &nbsp;&nbsp;&nbsp;&nbsp;Income tax expense (recovery) | **(12)** | 28 | **(143)** | (106) |
| &nbsp;&nbsp;&nbsp;&nbsp;Normalizing items impacting income taxes <sup>(1)(2)</sup> | **(40)** | (68) | **(13)** | (67) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accretion expenses | **(2)** | (4) | **(7)** | (6) |
| &nbsp;&nbsp;&nbsp;&nbsp;Foreign exchange gains | **1** |  | **10** | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-controlling interest portion of non-GAAP adjustments <sup>(3)</sup> | **—** | 3 | **5** | (9) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income applicable to non-controlling interests | **(5)** | (9) | **(50)** | (57) |
| &nbsp;&nbsp;&nbsp;&nbsp;Preferred share dividends | **(7)** | (13) | **(40)** | (53) |
| Normalized net income <sup>(1)</sup> | $**178** | $99 | $**530** | $481 |

---

(1)As noted on page [26](#i187a92d8023a418bb1e40a3152f13c50_43) of this MD&A, in the third quarter of 2022 AltaGas changed its non-GAAP policy to remove the normalization of acquisition related contingencies. The amounts presented in this table reflect the restated figures to align with the revised policy.

(2)Represents the income tax expense related to the normalizing items included in the calculation of normalized EBTIDA.

(3)The portion of non-GAAP adjustments applicable to non-controlling interests are excluded in the computation of normalized net income to ensure consistency of normalizations applied to controlling and non-controlling interests. These amounts are included in the "net income applicable to non-controlling interests" line item on the Consolidated Statements of Income. As noted on page [26](#i187a92d8023a418bb1e40a3152f13c50_43) of this MD&A, in the third quarter of 2022 AltaGas changed its non-GAAP policy to remove the normalization of acquisition related contingencies. This includes the associated impact of the portion applicable to non-controlling interests. The amounts presented in this table reflect the restated figures to align with the revised policy.

**Calculation of Normalized Effective Income Tax Rate** 

The below table provides a calculation of normalized effective income tax rate from normalized net income and normalized income tax expense. Both of these non-GAAP measures have been previously reconciled to the relevant GAAP measures in the section above. This supplemental calculation is provided as additional information to assist analysts and investors in comparing normalized income tax expense to normalized net income and is not intended as a substitute for the reconciliations to the nearest comparable GAAP measures. Readers should not place undue reliance on this supplemental calculation.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | Three Months Ended<br>December 31 | Three Months Ended<br>December 31 | Year Ended<br>December 31 | Year Ended<br>December 31 |
| *($ millions, except where noted)* | **2022** | 2021 | **2022** | 2021 |
| Normalized net income <sup>(1)</sup> | $**178** | $99 | $**530** | $481 |
| Add (deduct): |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Normalized income tax expense <sup>(1)</sup> | **52** | 40 | **156** | 173 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income applicable to non-controlling interests | **5** | 9 | **50** | 57 |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-controlling interest portion of non-GAAP adjustments <sup>(2)</sup> | **—** | (3) | **(5)** | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;Preferred share dividends | **7** | 13 | **40** | 53 |
| Normalized net income before taxes <sup>(1)</sup> | $**242** | $158 | $**771** | $773 |
| Normalized effective income tax rate (%) <sup>(1)(3)</sup> | **21.5** | 25.3 | **20.2** | 22.4 |

---

(1)Calculated in the section above. As noted on page [26](#i187a92d8023a418bb1e40a3152f13c50_43) of this MD&A, in the third quarter of 2022 AltaGas changed its non-GAAP policy to remove the normalization of acquisition related contingencies. The amounts presented in this table reflect the restated figures to align with the revised policy.

(2)The portion of non-GAAP adjustments applicable to non-controlling interests are excluded in the computation of normalized net income to ensure consistency of normalizations applied to controlling and non-controlling interests. These amounts are included in the "net income applicable to non-controlling interests" line item on the Consolidated Statements of Income. As noted on page 26 of this MD&A, in the third quarter of 2022 AltaGas changed its non-GAAP policy to remove the normalization of acquisition related contingencies. This includes the associated impact to the portion applicable to non-controlling interests. The amounts presented in this table reflect the restated figures to align with the revised policy.

(3)Calculated as normalized income tax expense divided by normalized net income before taxes.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 31

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**Results of Operations by Reporting Segment**

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Normalized EBITDA** <sup>(1) (2)</sup>  | Three Months Ended<br>December 31 | Three Months Ended<br>December 31 | Year Ended<br>December 31 | Year Ended<br>December 31 |
| *($ millions)* | **2022** | 2021 | **2022** | 2021 |
| Utilities | $**294** | $238 | $**933** | $771 |
| Midstream | **163** | 95 | **607** | 717 |
| Sub-total: Operating Segments | $**457** | $333 | $**1540** | $1488 |
| Corporate/Other | **(3)** | 1 | **(3)** | (16) |
|  | $**454** | $334 | $**1537** | $1472 |

---

(1)Non-GAAP financial measure; See discussion in the *Non-GAAP Financial Measures* section of this MD&A.

(2)In the third quarter of 2022, Management changed AltaGas' non-GAAP policy to remove normalization adjustments relating to acquired contingencies. Prior periods have been restated to reflect this change. Please refer to the *Non-GAAP Financial Measures* section of this MD&A for additional details.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Income (Loss) Before Income Taxes** | Three Months Ended<br>December 31 | Three Months Ended<br>December 31 | Year Ended<br>December 31 | Year Ended<br>December 31 |
| *($ millions)* | **2022** | 2021 | **2022** | 2021 |
| Utilities | $**80** | $64 | $**548** | $538 |
| Midstream | **113** | (151) | **526** | 242 |
| Sub-total: Operating Segments | $**193** | $(87) | $**1074** | $780 |
| Corporate/Other | **(115)** | (75) | **(358)** | (334) |
|  | $**78** | $(162) | $**716** | $446 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Revenue** | Three Months Ended<br>December 31 | Three Months Ended<br>December 31 | Year Ended<br>December 31 | Year Ended<br>December 31 |
| *($ millions)* | **2022** | 2021 | **2022** | 2021 |
| Utilities | $**1725** | $1261 | $**4980** | $3936 |
| Midstream | **2145** | 1852 | **9010** | 6535 |
| Sub-total: Operating Segments | $**3870** | $3113 | $**13990** | $10471 |
| Corporate/Other | **28** | 27 | **97** | 104 |
| Intersegment eliminations | **—** |  | **—** | (2) |
|  | $**3898** | $3140 | $**14087** | $10573 |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 32

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**Utilities**

**Operating Statistics**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | Three Months Ended<br>December 31 | Three Months Ended<br>December 31 | Year Ended<br>December 31 | Year Ended<br>December 31 |
| | **2022** | 2021 | **2022** | 2021 |
| Natural gas deliveries - end-use (Bcf) <sup>(1)</sup> | **54.3** | 44.0 | **164.6** | 155.9 |
| Natural gas deliveries - transportation (Bcf) <sup>(1)</sup> | **34.0** | 31.2 | **126.9** | 124.5 |
| Service sites (thousands) <sup>(2)</sup> | **1704** | 1689 | **1704** | 1689 |
| Degree day variance from normal - SEMCO Gas (%) <sup>(3)</sup> | **(1.7)** | (15.0) | **1.2** | (10.0) |
| Degree day variance from normal - ENSTAR (%) <sup>(3)</sup> | **8.7** | 11.9 | **(2.2)** | 11.0 |
| Degree day variance from normal - Washington Gas (%) <sup>(3) (4)</sup> | **9.2** | (12.7) | **4.5** | (7.0) |
| Retail energy marketing - gas sales volumes (Mmcf) | **18064** | 16299 | **59302** | 58589 |
| Retail energy marketing - electricity sales volumes (GWh) | **3328** | 3167 | **13217** | 13355 |

---

(1)Bcf is one billion cubic feet.

(2)Service sites reflect all of the service sites of the utilities, including transportation and non-regulated business lines.

(3)A degree day is a measure of coldness determined daily as the number of degrees the average temperature during the day in question is below 65 degrees Fahrenheit. Degree days for a particular period are determined by adding the degree days incurred during each day of the period. Normal degree days for a particular period are the average of degree days during the prior 15 years for SEMCO Gas, during the prior 10 years for ENSTAR, and during the prior 30 years for Washington Gas.

(4)In certain of Washington Gas' jurisdictions (Virginia and Maryland) there are billing mechanisms in place that are designed to eliminate the effects of variance in customer usage caused by weather and other factors such as conservation. In the District of Columbia, there is no weather normalization billing mechanism nor does Washington Gas hedge to offset the effects of weather. As a result, colder or warmer weather will result in variances to financial results.

**Regulatory Metrics** 

---

| | | |
|:---|:---|:---|
| | Year Ended<br>December 31 | Year Ended<br>December 31 |
| | **2022** | 2021 |
| Approved ROE (%) <sup>(1)</sup> | **9.6** | 9.6 |
| Approved return on debt (%) <sup>(1)</sup> | **4.7** | 4.7 |
| Rate base *($ millions)* <sup>(2) (3) (4)</sup> | **5211** | 4655 |

---

(1)Weighted average of all the regulated utilities.

(2)Rate base is indicative of the earning potential of each utility over time. Approved revenue requirement for each utility is typically based on the rate base as approved by the regulator for the respective rate application, but may differ from the rate base indicated above.

(3)Reflects AltaGas' 65 percent interest in Cook Inlet Natural Gas Storage Alaska LLC, which was sold on March 1, 2023 pursuant to the Alaska Utilities Disposition.

(4)In U.S. dollars.

During the fourth quarter of 2022, AltaGas' Utilities segment experienced colder weather at SEMCO, warmer weather at ENSTAR, and colder weather at Washington Gas compared to the same quarter of 2021.

For the year ended December 31, 2022, AltaGas' Utilities segment experienced colder weather at SEMCO, warmer weather at ENSTAR, and colder weather at Washington Gas compared to 2021.

Service sites at December 31, 2022 increased by approximately 14 thousand sites compared to December 31, 2021 due to growth in customer base.

In the fourth quarter of 2022, U.S. retail gas sales volumes were 18,064 Mmcf, compared to 16,299 Mmcf in the same quarter of 2021. The increase was primarily due to colder than average weather in the fourth quarter of 2022 compared to the same quarter of 2021. In the fourth quarter of 2022, U.S. retail electricity sales volumes were 3,328 GWh compared to 3,167 GWh in the same quarter of 2021. The increase was primarily due to colder than average weather in the fourth quarter of 2022 compared to the same quarter of 2021.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 33

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For the year ended December 31, 2022, U.S. retail gas sales volumes were 59,302 Mmcf, compared to 58,589 Mmcf in the same period in 2021. The increase was primarily due to an increase in the number of customers served and variations in the weather in the year ended December 31, 2022 compared to 2021. For the year ended December 31, 2022, U.S. retail electricity sales volumes were 13,217 GWh compared to 13,355 GWh in the same period in 2021. The slight decrease was primarily due to a decrease in customers served by the business and variations in the weather.

**Three Months Ended December 31** 

The Utilities segment reported normalized EBITDA of $294 million in the fourth quarter of 2022, compared to $238 million in the same quarter in 2021. The increase in normalized EBITDA was mainly due to an increase in asset optimization activities at Washington Gas, an impact of approximately $20 million due to the change in foreign exchange rates, the impact of Washington Gas' Virginia rate case, colder weather in Michigan and the District of Columbia, higher late fees, higher power margins from WGL's retail marketing business, higher revenue associated with carrying charges for natural gas held in storage, customer growth, and higher revenue from accelerated pipe replacement program spend, partially offset by higher operating and administrative expenses and lower gas margins from WGL's retail marketing business.

The Utilities segment income before income taxes was $80 million in the fourth quarter of 2022, compared to $64 million in the same quarter in 2021. The increase was mainly due to the same previously referenced factors impacting normalized EBITDA, partially offset by higher unrealized losses on risk management contracts mainly within the retail marketing business.

**Year Ended December 31** 

The Utilities segment reported normalized EBITDA of $933 million in the year ended December 31, 2022, compared to $771 million in 2021. The increase in normalized EBITDA was mainly due to an increase in asset optimization activities at Washington Gas, the impact of Washington Gas' 2020 Maryland and District of Columbia rate cases and the implementation of interim rates for the Virginia rate case filed in 2022, higher gas margins from WGL's retail marketing business, an impact of approximately $27 million due to the change in foreign exchange rates, colder weather in Michigan and the District of Columbia, higher revenue from accelerated pipe replacement program spend, customer growth, higher revenue associated with carrying charges for natural gas held in storage, higher late fees, and favourable usage in certain jurisdictions, partially offset by higher operating and administrative expenses, warmer weather in Alaska, and lower power margins from WGL's retail marketing business.

The Utilities segment income before income taxes was $548 million in the year ended December 31, 2022, compared to $538 million in 2021. The increase was mainly due to the same previously referenced factors impacting normalized EBITDA, partially offset by higher unrealized losses on risk management contracts, primarily within the retail marketing business.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 34

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**Rate Case Updates** 

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| | | | | |
|:---|:---|:---|:---|:---|
| **Utility/Jurisdiction** | **Date Filed** | **Request** | **Status** | **Expected Timing of Decision** |
| Washington Gas - District of Columbia | April 2022 | US$53 million increase in base rates, including US$5 million currently collected through the PROJECT*pipes* surcharge. Therefore, the incremental amount of the base rate increase requested was approximately US$48 million.  | On April 4, 2022, Washington Gas filed an application for authority to increase charges for gas service in the District of Columbia. The requested rates are designed to collect approximately US$53 million in total annual revenues requesting a 10.4 percent rate of return on equity. Of the requested revenue increase, approximately US$5 million represents costs currently collected through the PROJECT*pipes* surcharge; therefore, the incremental amount of the base rate increase is approximately US$48 million. Washington Gas requested that new rates be implemented in January 2023. The PSC of DC adopted a procedural schedule on August 12, 2022 and supplemental testimony was filed on September 2, 2022. The direct testimony of the District of Columbia's Office of People's Counsel and other intervenors was filed on November 4, 2022. Rebuttal testimony was filed on January 6, 2023 and evidentiary hearings are scheduled for late March 2023.  | Timing of decision not yet known, however based on procedural schedule, decision could be around Q3 2023. |
| Washington Gas - Virginia | June 2022 | US$48 million increase in base rates, plus the request to transfer an additional US$39 million currently collected in SAVE surcharge into base rates, for a total increase of approximately US$87 million. | On June 29, 2022, Washington Gas filed an application for authority to increase rates in the Commonwealth of Virginia. The requested rates are designed to collect an incremental US$48 million in total annual revenues requesting a 10.75 percent return on equity. In addition to the incremental revenues requested, the base rate increase also includes the transfer of US$39 million in revenues currently collected in the form of a surcharge relating to Washington Gas' SAVE program. Washington Gas implemented the proposed rates (on an interim basis subject to refund) on the first billing cycle date for December 2022, which was 150 days after its application was filed, as permitted by Virginia law. Intervenors provided their direct testimony on February 10, 2023. The SCC of VA staff testimony is due on March 10, 2023, Washington Gas' rebuttal testimony is due on April 7, 2023, and the hearings are scheduled for May 2023. | Timing of decision not yet known. Interim rates went into effect on the first billing cycle for December 2022, subject to refund. |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 35

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---

| | | | | |
|:---|:---|:---|:---|:---|
| **Utility/Jurisdiction** | **Date Filed** | **Request** | **Status** | **Expected Timing of Decision** |
| Washington Gas - Maryland | August 2020 | US$27 million increase in base rates, including US$6 million currently collected through the Strategic Infrastructure Development Enhancement Plan (STRIDE) surcharges for system upgrades. Therefore, the incremental amount of the base rate increase requested was approximately US$21 million. | On April 9, 2021, a final order was received from the PSC of MD related to this rate increase application, authorizing Washington Gas to increase its Maryland natural gas distribution rates by approximately US$13 million (including US$6 million currently collected through the STRIDE surcharge), reflecting a return on equity of 9.70 percent. The revenue increase became effective on March 26, 2021. On May 14, 2021, the Maryland Office of People's Counsel (MD OPC) filed a petition for re-hearing of the PSC of MD's finding on merger synergy savings and certain rate base additions. The request was denied and on August 31, 2021, the MD OPC filed an appeal of the PSC of MD's denial of their petition for a re-hearing with the Circuit Court of Baltimore City (Circuit Court). On February 25, 2022, the Circuit Court reversed the July 29, 2021 order from the PSC of MD and remanded two issues back to the PSC of MD. On March 10, 2022, the PSC of MD filed a Motion to Alter or Amend Judgement to the Circuit Court's ruling on the merger synergy savings issue and the MD OPC filed a response. On May 31, 2022, the Circuit Court granted the PSC of MD and Washington Gas' joint motion, determining that the PSC of MD properly permitted Washington Gas' recovery of corporate costs and relieving the PSC of MD of the obligation to rule on merger synergy savings on remand. The Circuit Court did not disturb its ruling on certain rate base additions, and the PSC of MD stated in a subsequent filing that it will address future challenges to rate base in accordance with the Circuit Court's original ruling. On June 30, 2022, the MD OPC appealed the Circuit Court's new order on merger synergy savings to the Appellate Court of Maryland (formerly the Maryland Court of Special Appeals). Washington Gas anticipates a final decision from the Appellate Court as soon as the first half of 2023.  | Final order issued April 2021. Decision by Court of Special Appeals expected in the first half of 2023. |

---

**Other Regulatory Updates**

On September 2, 2022, Washington Gas filed a request with the PSC of MD seeking permission to resume collections, late fees, and terminations. Washington Gas is currently conversing with PSC of MD Staff and the MD OPC on a joint recommendation for regularizing call center metrics and resuming regular customer care, including collections, late fees and terminations.

On October 6, 2022, the PSC of DC approved Washington Gas request to automatically enroll District of Columbia energy assistance customers to its Arrearage Management Plan (AMP). The PSC of DC also extended the AMP for two years until October 31, 2024.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 36

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**Midstream** 

**Operating Statistics** 

---

| | | | | |
|:---|:---|:---|:---|:---|
| | Three Months Ended<br>December 31 | Three Months Ended<br>December 31 | Year Ended<br>December 31 | Year Ended<br>December 31 |
| | **2022** | 2021 | **2022** | 2021 |
| LPG export volumes (Bbls/d) <sup>(1)</sup> | **97152** | 76609 | **101654** | 89331 |
| Total inlet gas processed (Mmcf/d) <sup>(1)</sup>  | **1274** | 1534 | **1268** | 1498 |
| Extraction ethane volumes (Bbls/d) <sup>(1)</sup>  | **21947** | 27000 | **23816** | 27955 |
| Extraction NGL volumes (Bbls/d) <sup>(1) (2)</sup> | **34782** | 35734 | **32853** | 36364 |
| Fractionation volumes (Bbls/d) <sup>(1)</sup> | **36658** | 37000 | **33602** | 30715 |
| Frac spread - realized ($/Bbl) <sup>(1) (3)</sup> | **25.14** | 9.18 | **26.07** | 12.15 |
| Frac spread - average spot price ($/Bbl) <sup>(1) (4)</sup> | **23.14** | 35.82 | **32.02** | 28.91 |
| Propane Far East Index (FEI) to Mont Belvieu spread (US$/Bbl) <sup>(1) (5)</sup> | **18.95** | 12.65 | **13.81** | 10.14 |
| Butane FEI to Mont Belvieu spread (US$/Bbl) <sup>(1) (6)</sup> | **18.59** | 10.29 | **13.31** | 10.46 |

---

(1)Average for the period.

(2)NGL volumes refer to propane, butane, and condensate.

(3)Realized frac spread or NGL margin, expressed in dollars per barrel of NGL, is derived from sales recorded by the segment during the period for frac spread exposed volumes plus the settlement value of frac hedges settled in the period less extraction premiums, divided by the total frac exposed volumes produced during the period.

(4)Average spot frac spread or NGL margin, expressed in dollars per barrel of NGL, is indicative of the average sales price that AltaGas receives for propane, butane and condensate less extraction premiums, before accounting for hedges, divided by the respective frac spread exposed volumes for the period.

(5)Average propane price spread between FEI and Mont Belvieu TET commercial index.

(6)Average butane price spread between FEI and Mont Belvieu TET commercial index.

LPG volumes exported to Asia from RIPET and Ferndale for the three months ended December 31, 2022 averaged 97,152 Bbls/d compared to 76,609 Bbls/d for the same period in 2021. There were 16 full shipments in the fourth quarter of 2022, compared to 13 full shipments and one partial shipment in the same period in 2021. Higher export volumes were primarily the result of increased offtake demand, higher available supply, and improved logistics.

LPG volumes exported to Asia from RIPET and Ferndale for the year ended December 31, 2022 averaged 101,654 Bbls/d compared to 89,331 Bbls/d for the same period in 2021. There were 68 shipments during the year ended December 31, 2022 compared to 60 shipments in the same period of 2021. Higher export volumes and shipments were primarily the result of increased offtake demand, higher available supply, and improved logistics.

Inlet gas processing volumes for the fourth quarter of 2022 decreased by 260 Mmcf/d compared to the same quarter in 2021. Lower inlet gas processing volumes in the fourth quarter of 2022 were primarily the result of the impact of the Aitken Creek sale and lower producer volumes at the Townsend complex.

Inlet gas processing volumes for the year ended December 31, 2022 decreased by 230 Mmcf/d compared to the same period in 2021. Lower inlet gas processing volumes in the year ended December 31, 2022 were primarily the result of the Aitken Creek sale, scheduled turnarounds at the Harmattan, Townsend, and Gordondale facilities in the second quarter of 2022, and lower producer volumes at the Townsend complex.

Average ethane volumes for the fourth quarter of 2022 decreased by 5,053 Bbls/d, while average NGL production volumes decreased by 952 Bbls/d compared to the same quarter in 2021. Lower ethane volumes were primarily a result of lower co-stream production at Harmattan due to a customer re-injecting its share of ethane production. Lower extracted NGL volumes were due to lower raw gas inlet volumes at the Townsend facility, partially offset by higher raw gas inlet volumes at Gordondale.

Average ethane volumes for the year ended December 31, 2022 decreased by 4,139 Bbls/d compared to 2021, while average NGL production volumes decreased by 3,511 Bbls/d compared to the same period in 2021. Lower ethane volumes were a

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 37

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result of the scheduled turnaround at Harmattan, lower contracted ethane volumes at the extraction facilities, and lower co-stream production at Harmattan due to a customer re-injecting its share of ethane production. Lower extracted NGL volumes were a result of scheduled turnarounds at the Townsend and Gordondale facilities and lower inlet volumes at the extraction facilities due to scheduled maintenance.

Fractionation volumes for the fourth quarter of 2022 were relatively flat compared to the same quarter in 2021. The slight decrease was a result of lower Harmattan trucked-in NGL mix and raw gas volumes, partially offset by higher fractionation volumes at the Younger facility due to higher inlet and higher North Pine volumes and utilization.

Fractionation volumes for the year ended December 31, 2022 increased by 2,887 Bbls/d compared to the same period in 2021. Higher fractionation volumes were a result of more available volumes due to upstream facility expansions, higher North Pine volumes and utilization, and higher Harmattan trucked-in NGL mix and raw gas volumes, partially offset by scheduled turnarounds at the Harmattan and North Pine facilities.

**Three Months Ended December 31** 

The Midstream segment reported normalized EBITDA of $163 million in the fourth quarter of 2022, compared to $95 million in the same quarter in 2021. The increase in normalized EBITDA in the fourth quarter of 2022 was mainly due to higher earnings at the export facilities due to higher export volumes, with lower butane margins and elevated rail and freight logistics costs offset by higher propane margins (inclusive of hedges), higher earnings at the extraction facilities driven by higher frac spreads, higher power revenue at Harmattan primarily driven by higher power prices, and lower operating and administrative expenses at the processing facilities, partially offset by the impact of the lost contribution from the Aitken Creek facility sale. Other factors impacting normalized EBITDA in the Midstream segment during the fourth quarter of 2022 relative to the fourth quarter of 2021 included the favourable resolution of certain commercial disputes and contingencies, and stronger contribution from a number of AltaGas' ancillary businesses, partially offset by lower margins from the marketing business, a write down of natural gas storage inventory to its net realizable value, and an accrual for penalties related to certain alleged air-related violations at the Ferndale terminal.

Income before income taxes in the Midstream segment was $113 million in the fourth quarter of 2022, compared to a loss of $151 million in the same quarter in 2021. The increase was mainly due to the absence of the impairment on MVP recorded in the fourth quarter of 2021, the same previously referenced factors impacting normalized EBITDA, and lower transaction costs, partially offset by higher unrealized losses on risk management contracts, higher provisions on assets, and higher depreciation expense.

In the fourth quarter of 2022, the Midstream segment recognized pre-tax provisions on assets of approximately $6 million ($5 million after-tax) primarily related to the abandoned Alton natural gas storage project. In the fourth quarter of 2021, the Midstream segment recognized a pre-tax provision on assets of approximately $1 million ($1 million after-tax) primarily related to non-core development stage Midstream projects that were no longer being developed. In addition, in the fourth quarter of 2021, the Midstream segment recognized a pre-tax provision on equity investments of approximately $271 million ($209 million after-tax) related to its investment in MVP.

**Year Ended December 31** 

The Midstream segment reported normalized EBITDA of $607 million in the year ended December 31, 2022, compared to $717 million in 2021. The decrease in normalized EBITDA in the year ended December 31, 2022 reflected the absence of strong contributions from WGL Midstream in the first quarter of 2021 as a result of the sale of the U.S. transportation and storage business in April 2021, and lower earnings from the export facilities as strong export volumes were more than offset by lower Asian-to-Canadian butane spreads, and elevated rail and freight logistics related costs including fuel surcharges. The processing facilities were positively impacted by higher earnings at the extraction facilities driven by higher frac spreads and

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 38

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the recovery of turnaround costs from customers at the Townsend and Gordondale facilities, partially offset by the impact of the lost contribution from the Aitken Creek facility sale. Normalized EBITDA in the Midstream segment for 2022 was also impacted by the favourable resolution of certain acquisition related commercial disputes and contingencies and higher drilling and fuel margins at other ancillary businesses, partially offset by lower marketing margins, the absence of gains on foreign exchange swaps, the absence of a one-time contract termination payout related to a railcar sublease agreement in the third quarter of 2021, lower NGL marketing margins due to the sale of NGL volumes in storage to the market at a premium in 2021, and a write down of natural gas storage inventory to its net realizable value.

Income before income taxes in the Midstream segment was $526 million in the year ended December 31, 2022, compared to $242 million in 2021. The increase was mainly due to the absence of the impairment of MVP recorded in the fourth quarter of 2021, higher unrealized gains on risk management contracts, the absence of the pre-tax provision related to the sale of the U.S. transportation and storage business in the first quarter of 2021, and lower transaction costs, partially offset by the same previously referenced factors impacting normalized EBITDA, higher depreciation expense, and higher losses on disposition of assets.

In 2022, the Midstream segment recognized a pre-tax loss on disposition of assets of approximately $3 million primarily due to expenses incurred in the third quarter of 2022 related to asset sales which closed in previous periods and the sale of AltaGas' interest in the Aitken Creek processing facilities in the second quarter of 2022. In addition, in 2022, the Midstream segment recognized the previously mentioned pre-tax provision of approximately $6 million ($5 million after-tax) primarily related to the abandoned Alton natural gas storage project. In 2021, the Midstream segment recognized pre-tax gains on dispositions of assets of approximately $6 million related to the sale of the U.S. transportation and storage business, certain propane distribution assets, minor Midstream asset sales, and cash proceeds received from an escrow account related to the 2019 disposition of AltaGas' investment in Meade, which held WGL Midstream's (now WGL Sustainable Energy LLC) indirect, non-operating interest in Central Penn. In addition, in 2021, the Midstream segment recognized pre-tax provisions of approximately $59 million ($44 million after-tax) primarily related to the sale of the U.S. transportation and storage business as well as the previously mentioned provisions recognized in the fourth quarter of 2021. In 2021, the Midstream segment also recognized the previously mentioned provision on equity investments of $271 million ($209 million after-tax) related to its investment in MVP.

**Midstream Hedges**

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| | | | | |
|:---|:---|:---|:---|:---|
| | Three Months Ended<br>December 31 | Three Months Ended<br>December 31 | Year Ended<br>December 31 | Year Ended<br>December 31 |
| | **2022** | 2021 | **2022** | 2021 |
| Frac exposed volumes (Bbls/d) | **10927** | 9081 | **10440** | 9887 |
| NGL volumes hedged (Bbls/d) | **8000** | 8982 | **8204** | 9253 |
| Average price of NGL volumes hedged ($/Bbl) <sup>(1)</sup>  | **34** | 26 | **34** | 26 |
| Average export volumes hedged (Bbls/d) | **55953** | 44984 | **54721** | 47714 |
| Average FEI to North American NGL price spread for volumes hedged (US$/Bbl) | **11** | 10 | **16** | 10 |

---

(1)Excludes basis differential.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 39

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**Corporate/Other** 

**Three Months Ended December 31** 

In the Corporate/Other segment, normalized EBITDA for the fourth quarter of 2022 was a loss of $3 million, compared to normalized EBITDA of $1 million in the same quarter in 2021. The decrease in normalized EBITDA was mainly due to higher operating and administrative expenses.

Loss before income taxes in the Corporate/Other segment was $115 million in the fourth quarter of 2022, compared to $75 million in the same quarter in 2021. The higher loss was mainly due to higher interest expense, the same previously referenced factors impacting normalized EBITDA, and higher unrealized losses on risk management contracts, partially offset by the absence of provisions on assets recorded in 2021.

In the fourth quarter of 2021, the Corporate/Other segment recognized a pre-tax provision on assets of $5 million relating to the Parks at Walter Reed thermal plant in Washington, D.C.

**Year Ended December 31**

In the Corporate/Other segment, normalized EBITDA for the year ended December 31, 2022 was a loss of $3 million, compared to $16 million in 2021. The increase in normalized EBITDA was mainly due to lower expenses related to employee incentive plans as a result of a lower share price in 2022 compared to 2021, partially offset by higher operating and administrative expenses.

Loss before income taxes in the Corporate/Other segment was $358 million in the year ended December 31, 2022, compared to $334 million in 2021. The higher loss was mainly due to higher interest expense and higher unrealized losses on risk management contracts, partially offset by the same factors impacting normalized EBITDA, higher gains on disposition of assets, and the absence of provisions on assets recorded in 2021.

In 2022, the Corporate/Other segment recognized a pre-tax gain on disposition of assets of approximately $5 million which was comprised of a pre-tax gain of $7 million on the sale of an energy storage development project in Goleta, California, partially offset by a pre-tax loss of $2 million on the sale of a power plant in Brush, Colorado. In 2021, the Corporate/Other segment recognized a pre-tax loss of approximately $1 million on the last remaining U.S. distributed generation project which was sold in 2019 but transferred to the purchaser during the second quarter of 2021. In addition, in 2021, the Corporate/Other segment recognized the previously mentioned pre-tax provision related to the Parks at Walter Reed thermal plant in Washington, D.C.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 40

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**Net Invested Capital**

Net invested capital is a non-GAAP financial measure. Please refer to the *Non-GAAP Financial Measures* section of this MD&A for further discussion.

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended<br>December 31, 2022** | **Three Months Ended<br>December 31, 2022** | **Three Months Ended<br>December 31, 2022** | **Three Months Ended<br>December 31, 2022** |
| *($ millions)* | **Utilities** | **Midstream** | **Corporate/Other** | **Total** |
| Invested capital: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Property, plant and equipment | $**271** | $**49** | $**1** | $**321** |
| &nbsp;&nbsp;&nbsp;&nbsp;Intangible assets | **1** | **3** | **—** | **4** |
| &nbsp;&nbsp;&nbsp;&nbsp;Long-term investments | **—** | **1** | **—** | **1** |
| Invested capital and net invested capital | $**272** | $**53** | $**1** | $**326** |

---

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| | | | | |
|:---|:---|:---|:---|:---|
| | Three Months Ended<br>December 31, 2021 | Three Months Ended<br>December 31, 2021 | Three Months Ended<br>December 31, 2021 | Three Months Ended<br>December 31, 2021 |
| *($ millions)* | Utilities | Midstream | Corporate/<br>Other | Total |
| Invested capital: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Property, plant and equipment | $234 | $11 | $2 | $247 |
| &nbsp;&nbsp;&nbsp;&nbsp;Intangible assets | 1 | 1 | 1 | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;Long-term investments |  | 3 |  | 3 |
| Invested capital | $235 | $15 | $3 | $253 |
| Disposals: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Asset dispositions |  | (1) |  | (1) |
| Net invested capital | $235 | $14 | $3 | $252 |

---

During the fourth quarter of 2022, AltaGas' invested capital was $326 million, compared to $253 million in the same quarter in 2021. The increase in invested capital was primarily due to higher additions to property, plant, and equipment as a result of higher spend on system betterment programs at Washington Gas, construction costs for the Harmattan Carbon Capture and Acid Gas Injection Well project, and higher maintenance capital in the Midstream segment.

The invested capital in the fourth quarter of 2022 included maintenance capital of $18 million (2021 - $6 million) in the Midstream segment and less than $1 million (2021 - $1 million) related to remaining power assets in the Corporate/Other segment. The increase in Midstream maintenance capital in the fourth quarter of 2022 primarily related to routine maintenance expenditures at the Harmattan, RIPET, Gordondale, and Ferndale facilities.

During the fourth quarter of 2022, AltaGas' cash flow from investing activities was an outflow of $336 million, compared to $241 million in the same quarter in 2021. Please refer to the *Non-GAAP Financial Measures* and *Liquidity* sections of this MD&A for further information on AltaGas' cash flow from investing activities.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 41

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Year Ended<br>December 31, 2022** | **Year Ended<br>December 31, 2022** | **Year Ended<br>December 31, 2022** | **Year Ended<br>December 31, 2022** |
| *($ millions)* | **Utilities** | **Midstream** | **Corporate/Other** | **Total** |
| Invested capital: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Property, plant and equipment | $**822** | $**108** | $**10** | $**940** |
| &nbsp;&nbsp;&nbsp;&nbsp;Intangible assets | **2** | **6** | **1** | **9** |
| &nbsp;&nbsp;&nbsp;&nbsp;Long-term investments | **—** | **(1)** | **—** | **(1)** |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchase of remaining non-controlling interest<br>in a subsidiary | **—** | **285** | **—** | **285** |
| Invested capital | $**824** | $**398** | $**11** | $**1233** |
| Disposals: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Asset dispositions | **—** | **(225)** | **(20)** | **(245)** |
| Net invested capital | $**824** | $**173** | $**(9)** | $**988** |

---

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| | | | | |
|:---|:---|:---|:---|:---|
| | Year Ended<br>December 31, 2021 | Year Ended<br>December 31, 2021 | Year Ended<br>December 31, 2021 | Year Ended<br>December 31, 2021 |
| *($ millions)* | Utilities | Midstream | Corporate/<br>Other | Total |
| Invested capital: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Property, plant and equipment | $705 | $61 | $9 | $775 |
| &nbsp;&nbsp;&nbsp;&nbsp;Intangible assets | 2 | 2 | 2 | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Long-term investments |  | 11 |  | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;Contributions from non-controlling interest |  | (1) |  | (1) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other |  | 7 |  | 7 |
| Invested capital | $707 | $80 | $11 | $798 |
| Disposals: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Asset dispositions |  | (345) | (1) | (346) |
| &nbsp;&nbsp;&nbsp;&nbsp;Equity method investments |  | (3) |  | (3) |
| Net invested capital | $707 | $(268) | $10 | $449 |

---

During the year ended December 31, 2022, AltaGas' invested capital was $1.2 billion, compared to $798 million in 2021. The increase in invested capital was primarily due to cash paid to purchase the remaining equity ownership of Petrogas, higher additions to property, plant, and equipment as a result of higher spend on system betterment, accelerated pipe replacement, and new business programs at Washington Gas, construction costs for the Harmattan Carbon Capture and Acid Gas Injection Well project, and higher turnaround maintenance capital in the Midstream segment. These were partially offset by the absence of spend on the Nig Creek expansion in the first half of 2021 and lower capital invested in the terminals and storage business and at the Ferndale facility.

The asset dispositions in the year ended December 31, 2022 primarily related to proceeds received from the sale of AltaGas' interest in the Aitken Creek processing facilities, a power plant in Brush, Colorado, and an energy storage development project in Goleta, California. In the year ended December 31, 2021, dispositions primarily related to proceeds received from the sale of the U.S. transportation and storage business, certain propane distribution assets, and other minor Midstream asset sales. The disposal of equity method investments in the year ended December 31, 2021 related to the cash proceeds received from an escrow account related to the 2019 disposition of AltaGas' investment in Meade, which held WGL Midstream's indirect, non-operating interest in Central Penn.

The invested capital for the year ended December 31, 2022 included maintenance capital of $66 million (2021 - $13 million) in the Midstream segment and $8 million (2021 - $7 million) related to remaining power assets in the Corporate/Other segment. The increase in maintenance capital for the Midstream segment was primarily due to costs relating to planned turnaround maintenance capital at the Harmattan, Townsend, and Gordondale facilities, as well as routine maintenance expenditures

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 42

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incurred at the Harmattan, Ferndale and RIPET facilities. The increase in maintenance capital for the Corporate/Other segment was primarily due to the planned spring outage at Blythe.

During the year ended December 31, 2022, AltaGas' cash flow from investing activities was an outflow of $997 million, compared to $483 million in 2021. Please refer to the *Non-GAAP Financial Measures* and *Liquidity* sections of this MD&A for further information on AltaGas' cash flow from investing activities.

**Risk Management** 

AltaGas is subject to a variety of risks which could have a material impact on the financial results and operations of the Company. Shareholders and prospective investors should carefully evaluate risk factors noted by the Company before investing in the Company's securities, as each of these risks may negatively affect the trading price of the Company's securities, the amount of dividends paid to shareholders and the ability of the Company to fund its debt obligations, including debt obligations under its outstanding notes and any other debt securities that the Company may issue from time to time. For discussion of the risks and trends that could materially affect the Company's performance please refer to AltaGas' 2022 Annual Information Form, which is available on SEDAR at www.sedar.com.

**Risk Management Contracts**

AltaGas is exposed to various market risks in the normal course of operations that could impact earnings and cash flows. AltaGas enters into physical and financial derivative contracts to manage exposure to fluctuations in commodity prices and foreign exchange rates, as well as to optimize certain owned and managed natural gas assets. These contracts do not eliminate AltaGas' exposure to risk associated with fluctuations in commodity prices or foreign exchange rates. The Board of Directors of AltaGas has established a risk management policy for the Corporation establishing AltaGas' risk management control framework. Derivative instruments are governed under, and subject to, this policy. As at December 31, 2022 and December 31, 2021, the fair values of the Corporation's derivatives were as follows:

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| | | |
|:---|:---|:---|
| *($ millions)* | **December 31,<br>2022** | December 31,<br>2021 |
| Natural gas | $**(203)** | $(91) |
| Energy exports | **27** | 15 |
| NGL frac spread | **(3)** | (19) |
| Power | **(78)** | (26) |
| Crude oil and NGLs | **4** | (8) |
| Net derivative liability | $**(253)** | $(129) |

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AltaGas strives to continuously and systematically de-risk the business in order to drive predictable and durable returns and maximize long-term value for stakeholders. For Midstream, this includes striving to match financial hedges with physical volumes, and for Utilities, this includes purchasing physical gas throughout the year to help shield customers from major cost spikes during peak winter demand.

<u>Commodity Price Contracts</u> 

The Corporation executes natural gas, power, LPG, crude oil, ocean freight, and other physical and financial commodity contracts to serve its customers as well as manage and optimize its asset portfolio. A portion of these physical contracts are not recorded at fair value because they are either: 1) designated as "normal purchases and normal sales"; 2) do not qualify as derivative instruments due to the significance of their notional amount relative to the applicable liquid markets; or 3) are weather derivatives, which are not exchanged or traded and the underlying variables relate to a climactic, geological, or other

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 43

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physical variable. The fair value of commodity contracts that qualify as derivatives was calculated using estimated forward prices based on published sources for the relevant period. AltaGas has not elected hedge accounting for any of its derivative contracts currently in place. For AltaGas' Midstream segment, changes in the fair value of these derivative contracts are recorded in the Consolidated Statements of Income in the period in which the change occurs. For the Utilities segment, changes in the fair value of derivative instruments recoverable or refundable to customers are recorded to regulatory assets or regulatory liabilities on the Consolidated Balance Sheets, while changes in the fair value of derivative instruments not affected by rate regulation are recorded in the Consolidated Statements of Income in the period in which the change occurs. The Midstream segment also executes fixed-for-floating NGL frac spread swaps to manage exposure to frac spreads as the financial results of several extraction plants are affected by fluctuations in NGL frac spreads.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**▪** The average indicative spot NGL frac spread for the year ended December 31, 2022 was approximately $32/Bbl (2021 – $29/Bbl), inclusive of basis differentials. The average NGL frac spread realized by AltaGas (based on average spot price and realized hedge price inclusive of basis differentials) for the year ended December 31, 2022 was approximately $26/Bbl inclusive of basis differentials (2021 - $12/Bbl).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**▪** AltaGas continues to focus on de-risking its business and managing direct commodity price exposure to drive predictable and durable returns. While the Company does have exposure, it plans to maintain an active hedging program that proactively hedges commodity price and spread risk to mitigate the impact of fluctuations in margins and cash flows. For 2023, AltaGas has hedged approximately 77 percent of its 2023 expected frac exposed volumes hedged at approximately US$27/Bbl, prior to transportation costs. In addition, approximately 62 percent of AltaGas' 2023 expected global export volumes are either tolled or financially hedged with an average FEI to North American financial hedge price of approximately US$12/Bbl for non-tolled propane and butane volumes. AltaGas plans to manage the export facilities such that a growing portion of annual capacity will be underpinned by tolling arrangements, and expects to reach this objective over the next several years.

Additionally, AltaGas uses physical and financial derivatives for the purchase and sale of natural gas in order to optimize owned storage and transportation capacity as well as manage transportation and storage assets on behalf of third parties.

The Utilities segment enters into hedging contracts and other contracts that may qualify as derivative instruments related to the purchase of natural gas to manage price risk for its ratepayers. Additionally, Washington Gas executes commodity-related physical and financial contracts in the form of forward, futures, and option contracts as part of an asset optimization program. Under this program, Washington Gas realizes value from its long-term natural gas transportation and storage capacity resources when they are not being fully used to serve utility customers. Additionally, to serve retail customers, AltaGas enters into both physical and financial contracts for the purchase and sale of electricity and natural gas.

The Corporate/Other segment has various fixed-for-floating power purchase and sale contracts in the Alberta market, which are expected to be settled over the next year.

<u>Foreign Exchange Contracts</u>

AltaGas is exposed to foreign exchange risk as changes in foreign exchange rates may affect the fair value or future cash flows of the Corporation's financial instruments. AltaGas has foreign operations whereby the functional currency is the U.S. dollar. As a result, the Corporation's earnings, cash flows, and other comprehensive income are exposed to fluctuations resulting from changes in foreign exchange rates. This risk is partially mitigated to the extent that AltaGas has U.S. dollar-denominated debt and/or preferred shares outstanding. AltaGas may also enter into foreign exchange forward derivatives to manage the risk of fluctuating cash flows due to variations in foreign exchange rates.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 44

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**▪** As at December 31, 2022, Management has designated US$281 million of outstanding loans as a net investment hedge to hedge against the currency translation effect of its foreign investments (December 31, 2021 - US$122 million).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**▪** For the year ended December 31, 2022, a $15 million after-tax unrealized loss on the net investment hedge was recorded in other comprehensive income (2021 - $nil).

As at December 31, 2022, AltaGas did not have any outstanding foreign exchange forward contracts. The following foreign exchange forward contracts were outstanding as at December 31, 2021:

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| | | | | |
|:---|:---|:---|:---|:---|
| **Foreign exchange forward contract** | **Notional Amount *(US$ millions)*** | **Duration** | **Weighted average foreign exchange rate** | **Fair Value** <br>***($ millions)*** |
| Foreign exchange swaps (purchases) | US$10 | Less than one year | 1.2640 | Less than $1 million |

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For the year ended December 31, 2022, AltaGas recorded an after-tax realized gain of less than $1 million on foreign exchange forward contracts (2021 - after-tax realized gain of $19 million).

<u>Interest Rate Contracts</u>

AltaGas is exposed to interest rate risk as changes in interest rates may impact future cash flows and the fair value of its financial instruments. The Corporation manages its interest rate risk by holding a mix of both fixed and floating interest rate debt.

From time to time, AltaGas may concurrently draw on its credit facility in U.S. dollars and enter into cross currency basis swaps whereby, on final settlement, AltaGas receives U.S. dollars from the counterparty and pays Canadian dollars to the counterparty.

<u>Weather Instruments</u>

WGL Energy Services utilizes heating degree day (HDD) instruments from time to time to manage weather and price risks related to its natural gas and electricity sales during the winter heating season. WGL Energy Services also utilizes cooling degree day (CDD) instruments and other instruments to manage weather and price risks related to its electricity sales during the summer cooling season. These instruments cover a portion of estimated revenue or energy-related cost exposure to variations in HDDs or CDDs. For the year ended December 31, 2022, a pre-tax loss of less than $1 million (2021 - pre-tax loss of less than $1 million) was recorded related to heating degree day (HDD) and cooling degree day (CDD) instruments.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 45

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**The Effects of Derivative Instruments on the Consolidated Statements of Income** 

The following table presents the unrealized gains (losses) on derivative instruments as recorded in the Corporation's Consolidated Statements of Income:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended<br>December 31** | **Three Months Ended<br>December 31** | **Year Ended<br>December 31** | **Year Ended<br>December 31** |
| *($ millions)* | **2022** | 2021 | **2022** | 2021 |
| Natural gas | $**(98)** | $(54) | $**(57)** | $6 |
| Energy exports | **(12)** | 19 | **21** | 38 |
| Crude oil and NGLs | **(4)** | 17 | **2** | 1 |
| NGL frac spread | **(5)** | 29 | **16** | (13) |
| Power | **(37)** | (42) | **(31)** | 9 |
| Foreign exchange | **—** | (2) | **—** | (23) |
|  | $**(156)** | $(33) | $**(49)** | $18 |

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Please refer to Note 24 of the 2022 Annual Consolidated Financial Statements for further details regarding AltaGas' risk management activities.

**Liquidity**

As a result of certain commitments made to the PSC of DC, the PSC of MD, and the SCC of VA in respect of the WGL Acquisition, Washington Gas is subject to certain restrictions when paying dividends to AltaGas. However, AltaGas does not expect that this will have an impact on AltaGas' ability to meet its obligations.

In addition, Wrangler SPE LLC and Washington Gas made certain ring fencing commitments to the PSC of DC, the PSC of MD, and the SCC of VA with the intention of removing Washington Gas from the bankruptcy estate of AltaGas and its affiliates, other than Washington Gas and Wrangler SPE LLC (together, the "Ring Fenced Entities"). Because of these ring fencing measures, none of the assets of the Ring Fenced Entities would be available to satisfy the debt or contractual obligations of AltaGas or any non-Ring Fenced Entity Affiliate, including any indebtedness or other contractual obligations of AltaGas, and the Ring Fenced Entities do not bear any liability for indebtedness or other contractual obligations of any non-Ring Fenced Entity, and vice versa.

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| | | |
|:---|:---|:---|
| | Year Ended<br>December 31 | Year Ended<br>December 31 |
| *($ millions)* | **2022** | 2021 |
| Cash from operations | $**539** | $738 |
| Investing activities | **(997)** | (483) |
| Financing activities | **435** | (245) |
| Increase (decrease) in cash, cash equivalents, and restricted cash | $**(23)** | $10 |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 46

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**Cash From Operations**

Cash from operations decreased by $199 million for the year ended December 31, 2022 compared to 2021, primarily due to unfavourable variances in the net change in operating assets and liabilities, partly offset by higher distributions from equity investments and higher net income after taxes (after adjusting for non-cash items). The majority of the variance in net change in operating assets and liabilities was due to lower cash flow from accounts receivable and inventory due to fluctuations in commodity prices and sales volumes as well as the impact of the sale of the U.S. transportation and storage business in 2021, partially offset by increased cash flows from accounts payable and accrued liabilities driven by fluctuations in commodity prices and the impact of the sale of the U.S. transportation and storage business and increased cash flows from regulatory liabilities.

**Working Capital**

---

| | | |
|:---|:---|:---|
| *($ millions, except working capital ratio)* | **December 31,<br>2022** | December 31,<br>2021 |
| Current assets | $**4638** | $2624 |
| Current liabilities | **3407** | 2657 |
| Working capital (deficiency) | $**1231** | $(33) |
| Working capital ratio <sup>(1)</sup> | **1.36** | 0.99 |

---

(1)Calculated as current assets divided by current liabilities.

The increase in the working capital ratio was primarily due to the reclassification of assets held for sale related to the Alaska Utilities Disposition, and increases in accounts receivable and inventory, partially offset by increases in accounts payable and accrued liabilities, short-term debt, regulatory liabilities, and liabilities associated with assets held for sale. AltaGas' working capital will fluctuate in the normal course of business.

**Investing Activities**

Cash used in investing activities for the year ended December 31, 2022 was $997 million, compared to $483 million in 2021. Investing activities for the year ended December 31, 2022 primarily included expenditures of approximately $958 million for property, plant, and equipment and intangible assets and a cash payment of approximately $285 million for the purchase of the remaining non-controlling interest of Petrogas, partially offset by proceeds of $245 million from the disposition of assets primarily related to the disposition of the interest in the Aitken Creek processing facilities, a 60 MW stand-alone energy development project in Goleta, California, and a power plant in Brush, Colorado, and approximately $1 million of net distributions from equity investments. Investing activities for the year ended December 31, 2021 included expenditures of approximately $814 million for property, plant, and equipment and intangible assets, approximately $11 million of contributions to equity investments, and other changes in investing activities of $7 million, partially offset by proceeds of $3 million received from an escrow account related to the 2019 disposition of AltaGas' investment in Meade and proceeds of $346 million from the disposition of assets (net of transaction costs).

**Financing Activities** 

Cash from financing activities for the year ended December 31, 2022 was $435 million, compared to cash used in financing activities of $245 million in 2021. Financing activities for the year ended December 31, 2022 were primarily comprised of long-term debt issuances of $718 million, net issuances under credit facilities of $466 million, issuance of subordinated hybrid notes, net of debt issuance costs of $544 million, issuances of short-term debt of $128 million and net proceeds from shares issued on the exercise of share options of $25 million, partially offset by repayments of long-term debt of $513 million, dividends of $338 million, redemption of preferred shares of $574 million, and distributions to non-controlling interests of $21 million. Financing activities for the year ended December 31, 2021 were primarily comprised of net repayments of short-term debt and repayments of long-term debt of $89 million, net repayments under credit facilities of $229 million, dividends of $356

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 47

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million, and distributions to non-controlling interests of $32 million, partially offset by long-term debt issuances of $446 million, net proceeds from shares issued on the exercise of share options of $14 million, and contributions from non-controlling interests of $1 million.

**Capital Resources** 

AltaGas' objective for managing capital is to maintain its investment grade credit ratings, ensure adequate liquidity, optimize the profitability of its existing assets, and grow its energy infrastructure to create long-term value and enhance returns for its investors. AltaGas' capital structure is comprised of shareholders' equity (including non-controlling interests), short-term and long-term debt (including the current portion and debt classified as held for sale), and subordinated hybrid notes, less cash and cash equivalents.

The use of debt or equity funding is based on AltaGas' capital structure, which is determined by considering the norms and risks associated with operations and cash flow stability and sustainability.

---

| | | |
|:---|:---|:---|
| *($ millions)* | **December 31,<br>2022** | December 31,<br>2021 |
| &nbsp;&nbsp;Short-term debt <sup>(1)</sup> | $**293** | $161 |
| &nbsp;&nbsp;Current portion of long-term debt <sup>(2)</sup> | **334** | 511 |
| &nbsp;&nbsp;Long-term debt <sup>(3)</sup> | **8694** | 7684 |
| &nbsp;&nbsp;Subordinated hybrid notes <sup>(4) (5)</sup> | **544** |  |
| &nbsp;&nbsp;Debt classified as held for sale <sup>(6)</sup> | **63** |  |
| Total debt  | **9928** | 8356 |
| &nbsp;&nbsp;Less: cash and cash equivalents | **(53)** | (63) |
| Net debt | $**9875** | $8293 |
| Shareholders' equity | **7456** | 6949 |
| Non-controlling interests | **162** | 652 |
| Total capitalization | $**17493** | $15894 |
| Net debt-to-total capitalization (%) | **56** | 52 |

---

(1)For the purposes of the net debt calculation, short-term debt excludes third-party project financing obtained on behalf of the United States federal government to provide funds for the construction of certain energy management services projects. As this debt was obtained on behalf of the U.S. government, AltaGas would only need to repay in the event that the project is not completed or accepted by the government. At December 31, 2022, the project financing balance excluded from short-term debt in the above table was $nil (December 31, 2021 - $8 million).

(2)Net of debt issuance costs of less than $1 million as at December 31, 2022 (December 31, 2021 - $1 million).

(3)Net of debt issuance costs of $41 million as at December 31, 2022 (December 31, 2021 - $43 million).

(4)The $300 million subordinated hybrid notes, Series 1 have a coupon rate of 5.25 percent, and are due on January 11, 2082. They were offered under AltaGas' short form base shelf prospectus dated February 22, 2021, as supplemented by a prospectus supplement dated January 5, 2022. The $250 million subordinated hybrid notes, Series 2 have a coupon rate of 7.35 percent and are due on August 17, 2082. They were offered under AltaGas' short form base shelf prospectus dated February 22, 2021, as supplemented by a prospectus supplement dated August 4, 2022.

(5)Net of debt issuance costs of $6 million as at December 31, 2022 (December 31, 2021 - $nil).

(6)Pursuant to the May 26, 2022 announcement of the Alaska Utilities Disposition, $63 million of related debt was reclassified to "liabilities associated with assets held for sale" on the Consolidated Balance Sheets at December 31, 2022. The transaction closed on March 1, 2023. Refer to Notes 5 and 34 of the 2022 Annual Consolidated Financial Statements for additional details.

As at December 31, 2022, AltaGas' total debt primarily consisted of outstanding medium-term notes (MTNs) of $3.8 billion (December 31, 2021 - $4.3 billion), WGL and Washington Gas long-term debt of $2.8 billion (December 31, 2021 - $2.4 billion), reflecting fair value adjustments on acquisition, SEMCO long-term debt of $670 million (December 31, 2021 - $633 million) of which $63 million is classified as held for sale (December 31, 2021 - $nil), $1.5 billion drawn under the bank credit facilities (December 31, 2021 - $495 million), $550 million of subordinated hybrid notes (December 31, 2021 - $nil), and short-term debt of $293 million (December 31, 2021 - $169 million). In addition, AltaGas had $198 million of letters of credit outstanding (December 31, 2021 - $245 million).

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 48

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As at December 31, 2022, AltaGas' total market capitalization was approximately $6.6 billion based on approximately 282 million common shares outstanding and a closing trading price on December 31, 2022 of $23.38 per common share.

AltaGas' earnings interest coverage for the rolling twelve months ended December 31, 2022 was 2.4 times (twelve months ended December 31, 2021 – 2.0 times).

---

| | | | |
|:---|:---|:---|:---|
| **Credit Facilities**<br>*($ millions)* | Borrowing capacity | **Drawn at December 31, 2022** | Drawn at December 31,<br>2021 |
| AltaGas demand credit facilities <sup>(1) (2)</sup> | $70 | $**—** | $34 |
| AltaGas revolving credit facilities <sup>(1) (2) (3)</sup> | 2500 | **861** | 375 |
| AltaGas term credit facility <sup>(1)</sup>  | 450 | **450** |  |
| SEMCO Energy US$150 million credit facilities <sup>(1) (2)</sup>  | 203 | **189** | 120 |
| WGL US$300 million revolving credit facility <sup>(1) (2) (4)</sup> | 406 | **250** | 342 |
| Washington Gas US$450 million revolving credit facility <sup>(1) (2) (4)</sup> | 609 | **429** | 288 |
|  | $4238 | $**2179** | $1159 |

---

(1)Amount drawn at December 31, 2022 converted at the month-end rate of 1 U.S. dollar = 1.3544 Canadian dollar (December 31, 2021 - 1 U.S. dollar = 1.2678 Canadian dollar).

(2)All US$ borrowing capacity was converted at the December 31, 2022 U.S./Canadian dollar month-end exchange rate.

(3)During the fourth quarter of 2022, AltaGas closed an amendment of the Petrogas $200 million revolving credit facility in which AltaGas replaced Petrogas as the borrower, which is in addition to the AltaGas $2 billion five-year extendible committed revolving tranche, and the $300 million two-year extendable side car liquidity revolving facility.

(4)Amounts drawn include commercial paper that is supported by the long term facilities. WGL and Washington Gas have the right to request additional borrowings of up to US$100 million with the bank's approval, for a total of US$400 million and US$550 million on their respective facilities.

In addition to the facilities listed above, AltaGas has demand Letter of Credit facilities of $461 million (December 31, 2021 - $467 million). At December 31, 2022, there were letters of credit for $198 million (December 31, 2021 - $245 million) issued on these facilities and an additional less than $1 million (December 31, 2021 - less than $1 million) issued on the Company's revolving credit facilities.

WGL and Washington Gas use short-term debt in the form of commercial paper or unsecured short-term bank loans to fund seasonal cash requirements. Revolving committed credit facilities are maintained in an amount equal to or greater than the expected maximum commercial paper position. As at December 31, 2022, commercial paper outstanding totaled $679 million for WGL and Washington Gas (December 31, 2021 – $630 million).

All of the borrowing facilities have covenants customary for these types of facilities, which must be met at each quarter end. AltaGas and its subsidiaries have been in compliance with all financial covenants each quarter since the establishment of the facilities. AltaGas and its subsidiaries are also in compliance with trust indenture requirements for its MTNs as at December 31, 2022 and December 31, 2021.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 49

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The following table summarizes the Corporation's primary financial covenants as defined by the credit facility agreements:

---

| | | |
|:---|:---|:---|
| Ratios | Debt covenant <br>requirements | **As at December 31, 2022** |
| Bank debt-to-capitalization <sup>(1)</sup> <sup>(2)</sup> | not greater than 65% | less than 55% |
| Bank EBITDA-to-interest expense <sup>(1) (2)</sup>  | not less than 2.5x | greater than 4.3x |
| Bank debt-to-capitalization (SEMCO) <sup>(2) (3)</sup> | not greater than 60% | less than 48% |
| Bank EBITDA-to-interest expense (SEMCO) <sup>(2) (3)</sup> | not less than 2.25x | greater than 8.0x |
| Bank debt-to-capitalization (WGL) <sup>(2) (4)</sup> | not greater than 65% | less than 50% |
| Bank debt-to-capitalization (Washington Gas) <sup>(2) (4)</sup> | not greater than 65% | less than 52% |

---

(1)Calculated in accordance with the Corporation's $2.3 billion credit facility agreement, which is available on SEDAR at www.sedar.com. The covenants are equivalent and applicable to all the Corporation's committed credit facilities.

(2)Estimated, subject to final adjustments.

(3)Bank EBITDA-to-interest expense (SEMCO) and bank debt-to-capitalization (SEMCO) are calculated based on SEMCO's consolidated financial statements and are calculated similarly to bank debt-to-capitalization and bank EBITDA-to-interest expense.

(4)WGL's bank debt-to-capitalization ratio is calculated based on WGL's consolidated financial statements.

On February 22, 2021, a $2.5 billion base shelf prospectus for the issuance of certain types of future public debt and/or equity issuances was filed to replace the base shelf prospectus dated September 25, 2019. This enables AltaGas to access the Canadian capital markets on a timely basis during the 25-month period that the base shelf prospectus remains effective. As at December 31, 2022, approximately $1.4 billion was available under the base shelf prospectus.

On February 22, 2021, AltaGas filed a US$2.0 billion short form base shelf prospectus in both Alberta and the U.S to replace the US$2.0 billion short form base prospectus filed on January 21, 2020. This will enable AltaGas to access the U.S. capital markets during the 25-month period that the base shelf prospectus remains effective. As at December 31, 2022, US$2.0 billion was available under the base shelf prospectus.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 50

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**Contractual Obligations**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **December 31, 2022** | | | | | |
| *($ millions)* | **Total** | Less than 1 year | 1 - 3<br>years | 4 - 5<br>years | After 5<br>years |
| Short-term debt  | $**293** | $293 | $— | $— | $— |
| Long-term debt <sup>(1)</sup> | **8968** | 327 | 2241 | 1968 | 4432 |
| Debt classified as held for sale <sup>(2)</sup> | **60** | 7 | 12 | 12 | 29 |
| Subordinated hybrid notes <sup>(2)</sup> | **550** |  |  |  | 550 |
| Operating leases <sup>(3)</sup> | **562** | 101 | 177 | 128 | 156 |
| Purchase obligations <sup>(4)</sup> | **15680** | 3297 | 4651 | 3130 | 4602 |
| Capital project commitments | **32** | 32 |  |  |  |
| Pension plan and retiree benefits <sup>(5)</sup> | **8** | 8 |  |  |  |
| Merger commitments <sup>(6)</sup> | **10** | 5 | 3 | 2 |  |
| Environmental commitments | **13** | 10 | 2 | 1 |  |
| Post-acquisition contingent payments <sup>(7)</sup> | **5** | 5 |  |  |  |
| Other liabilities <sup>(8)</sup> | **52** | 52 |  |  |  |
| Total contractual obligations <sup>(9)</sup> | $**26233** | $4137 | $7086 | $5241 | $9769 |

---

(1)Excludes deferred financing costs, discounts, finance lease liabilities, the fair value adjustment on the WGL Acquisition, and debt classified as held for sale.

(2)Excludes deferred financing costs and certain finance lease liabilities.

(3)Payments are presented on an undiscounted cash basis.

(4)Excludes an estimated US$7.6 billion of natural gas purchases through 2033 and US$1 billion of pipeline contracts through 2043 that are contingent on the in-service date of the Mountain Valley Pipeline.

(5)Assumes only required payments will be made into the pension plans in 2023. Contributions are made in accordance with independent actuarial valuations.

(6)Relates to merger commitments arising from the WGL Acquisition. Represents the estimated future payments of merger commitments that have been accrued but not paid. Among other things, these commitments include rate credits distributable to both residential and non-residential customers to partially offset rate increases resulting from gas expansion, extension of natural gas service over a 10-year period and other programs, various public interest commitments, and safety programs. As at December 31, 2022, the cumulative amount of merger commitments that have been expensed but not yet paid is approximately US$8 million. Additionally, there are a number of operational commitments with various timeframes, including the funding of leak mitigation and reducing leak backlogs, the funding of damage prevention efforts, developing projects to extend natural gas service, maintaining pre-merger quality of service standards including odor call response times, increasing supplier diversity, achieving synergy savings benefits, as well as reporting and tracking related to certain commitments, and causing the development of 15 MW of either electric grid energy storage or tier one renewable resources.

(7)Relating to certain alleged air-related violations at the Ferndale terminal. The penalty was paid in full in February 2023.

(8)Excludes non-financial liabilities.

(9)U.S. dollar commitments have been converted to Canadian dollars using the December 31, 2022 exchange rate.

AltaGas expects to fund its obligations through internally-generated cash flow, asset sales, and normal course borrowings on existing committed credit facilities.

**Related Party Transactions**

In the normal course of business, AltaGas transacts with its subsidiaries, affiliates and joint ventures. Refer to Note 31 of the 2022 Annual Consolidated Financial Statements for the amounts due to or from related parties on the Consolidated Balance Sheets and the classification of revenue, income, and expenses in the Consolidated Statements of Income.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 51

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**Credit Ratings**

The below table summarizes the most recent credit ratings for AltaGas and subsidiaries:

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| | | | | |
|:---|:---|:---|:---|:---|
| **Entity** | **Rating Agency** | **Debt Rated** | **Most Recent Rating** | **Comments** |
| **AltaGas** | Standard & Poor's (S&P) | Issuer rating | BBB- | Last reviewed June 8, 2022 |
| **AltaGas** | Standard & Poor's (S&P) | Senior unsecured | BBB- | Last reviewed June 8, 2022 |
| **AltaGas** | Standard & Poor's (S&P) | Preferred shares and Junior Subordinated | P-3 / BB | Last reviewed August 3, 2022. Junior Subordinated added on January 5 and August 3, 2022. |
| **AltaGas** | Fitch Ratings (Fitch) | Issuer | BBB | Last reviewed on August 17, 2022. |
| **AltaGas** | Fitch Ratings (Fitch) | Preferred shares and Junior Subordinated | BB+ | Last reviewed on August 17, 2022. Junior Subordinated added on January 5, 2022. |
| **Washington Gas** | S&P | Unsecured debt | A- | Last reviewed June 8, 2022. |
| **Washington Gas** | S&P | Commercial paper | A-2 | Last reviewed June 8, 2022. |
| **Washington Gas** | Fitch | Unsecured debt | A | Last reviewed August 17, 2022. |
| **WGL** | S&P | Issuer | BBB- | Last reviewed June 8, 2022. |
| **WGL** | S&P | Senior unsecured | BB+ | Last reviewed June 8, 2022. |
| **WGL** | S&P | Commercial paper | A-3 | Last reviewed June 8, 2022. |
| **WGL** | Fitch | Issuer | BBB | Last reviewed August 17, 2022. |
| **SEMCO** | Moody's | Long-term issuer | A3 | Raised from Baa1 to A3 on January 22, 2021 with stable outlook. |
| **SEMCO** | Moody's | Senior secured notes | A1 | Raised from A2 to A1 on January 22, 2021 with stable outlook. |
| **SEMCO** | S&P | Long-term issuer | BBB | Last reviewed June 8, 2022. |
| **SEMCO** | S&P | Senior secured notes | A- | Last reviewed June 8, 2022. |

---

According to the S&P rating system, an obligor rated BBB has adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments. An obligor rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitments on the obligation is still strong. The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. A P-3 rating by S&P is the third highest of eight categories granted by S&P under its Canadian preferred share rating scale and a P-3 rating directly corresponds with a BB rating under its global preferred rating scale. The Canadian preferred share rating scale is fully determined by the global preferred rating scale and there are no additional analytical criteria associated with the determination of ratings on the Canadian preferred share rating scale. According to the S&P rating system, while securities rated P-3 are regarded as having significant speculative characteristics, they are less vulnerable to non-payment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. The ratings from P-1 to P-5 may be modified by "high" and "low" grades which indicate relative standing within the major rating categories.

According to the Fitch rating system, 'BBB' ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate, but adverse business or economic conditions are more likely to impair this capacity. 'A' ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings. The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign indicating relative differences of probability of default or recovery for issues. A 'BB' rating by Fitch indicates an elevated

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 52

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vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists that support the servicing of financial commitments.

A short-term obligation rated 'A-2' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitments on the obligation is satisfactory. A short-term obligation rated 'A-3' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken an obligor's capacity to meet its financial commitments on the obligation.

Moody's obligations rated A are judged to be upper-medium grade and are subject to low credit risk. Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.

The credit ratings accorded to the securities by the rating agencies are not recommendations to purchase, hold, or sell the securities in as much as such ratings do not comment as to market price or suitability for a particular investor. There is no assurance that any rating will remain in effect for any given period of time or that any rating will not be revised or withdrawn entirely by a rating agency in the future if, in its judgment, circumstances so warrant.

**Share Information**

---

| | |
|:---|:---|
| | As at February 24, 2023 |
| **Issued and outstanding** |  |
| Common shares | 281591363 |
| Preferred Shares |  |
| &nbsp;&nbsp;Series A | 6746679 |
| &nbsp;&nbsp;Series B | 1253321 |
| &nbsp;&nbsp;Series E | 8000000 |
| &nbsp;&nbsp;Series G | 6885823 |
| &nbsp;&nbsp;Series H | 1114177 |
| **Issued** |  |
| Share options | 6898609 |
| Share options exercisable | 6263664 |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 53

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**Dividends**

Effective March 31, 2022, common share dividends are declared and paid on a quarterly basis. Dividends on preferred shares are also paid quarterly. Dividends are at the discretion of the Board of Directors and dividend levels are reviewed periodically, giving consideration to the ongoing sustainable cash flow from operating activities, maintenance and growth capital expenditures, and debt repayment requirements of AltaGas.

The following table summarizes AltaGas' dividend declaration history:

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| | | |
|:---|:---|:---|
| **Common Share Dividends** | | |
| Year Ended December 31 |  |  |
| *($ per common share)* | **2022** | 2021 |
| First quarter | $**0.265000** | $0.249900 |
| Second quarter | **0.265000** | 0.249900 |
| Third quarter | **0.265000** | 0.249900 |
| Fourth quarter | **0.265000** | 0.249900 |
| **Total** | $**1.060000** | $0.999600 |

---

---

| | | |
|:---|:---|:---|
| **Series A Preferred Share Dividends** | | |
| Year Ended December 31 |  |  |
| *($ per preferred share)* | **2022** | 2021 |
| First quarter | $**0.191250** | $0.191250 |
| Second quarter | **0.191250** | 0.191250 |
| Third quarter | **0.191250** | 0.191250 |
| Fourth quarter | **0.191250** | 0.191250 |
| **Total** | $**0.765000** | $0.765000 |

---

---

| | | |
|:---|:---|:---|
| **Series B Preferred Share Dividends** | | |
| Year Ended December 31 |  |  |
| *($ per preferred share)* | **2022** | 2021 |
| First quarter | $**0.171920** | $0.170690 |
| Second quarter | **0.198020** | 0.170360 |
| Third quarter | **0.260690** | 0.174480 |
| Fourth quarter | **0.376700** | 0.178830 |
| **Total** | $**1.007330** | $0.694360 |

---

---

| | | |
|:---|:---|:---|
| **Series C Preferred Share Dividends** <sup>(1)</sup> | | |
| Year Ended December 31 |  |  |
| *(US$ per preferred share)* | **2022** | 2021 |
| First quarter | $**0.330625** | $0.330625 |
| Second quarter | **0.330625** | 0.330625 |
| Third quarter | **0.330625** | 0.330625 |
| Fourth quarter | **—** | 0.330625 |
| **Total** | $**0.991875** | $1.322500 |

---

(1)On September 30, 2022, AltaGas redeemed all of its outstanding Series C Preferred Shares.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 54

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---

| | | |
|:---|:---|:---|
| **Series E Preferred Share Dividends** | | |
| Year Ended December 31 |  |  |
| *($ per preferred share)* | **2022** | 2021 |
| First quarter | $**0.337063** | $0.337063 |
| Second quarter | **0.337063** | 0.337063 |
| Third quarter | **0.337063** | 0.337063 |
| Fourth quarter | **0.337063** | 0.337063 |
| **Total** | $**1.348252** | $1.348252 |

---

---

| | | |
|:---|:---|:---|
| **Series G Preferred Share Dividends** | | |
| Year Ended December 31 |  |  |
| *($ per preferred share)* | **2022** | 2021 |
| First quarter | $**0.265125** | $0.265125 |
| Second quarter | **0.265125** | 0.265125 |
| Third quarter | **0.265125** | 0.265125 |
| Fourth quarter | **0.265125** | 0.265125 |
| **Total** | $**1.060500** | $1.060500 |

---

---

| | | |
|:---|:---|:---|
| **Series H Preferred Share Dividends** | | |
| Year ended December 31 |  |  |
| *($ per preferred share)* | **2022** | 2021 |
| First quarter | $**0.196582** | $0.195349 |
| Second quarter | **0.222950** | 0.195295 |
| Third quarter | **0.285890** | 0.199690 |
| Fourth quarter | **0.401900** | 0.204038 |
| **Total** | $**1.107322** | $0.794372 |

---

---

| | | |
|:---|:---|:---|
| **Series K Preferred Share Dividends** <sup>(1)</sup> | | |
| Year Ended December 31 |  |  |
| *($ per preferred share)* | **2022** | 2021 |
| First quarter | $**0.312500** | $0.312500 |
| Second quarter | **—** | 0.312500 |
| Third quarter | **—** | 0.312500 |
| Fourth quarter | **—** | 0.312500 |
| **Total** | $**0.312500** | $1.250000 |

---

(1)On March 31, 2022, AltaGas redeemed all of its outstanding Series K Preferred Shares.

**Critical Accounting Estimates** 

Since a determination of the value of many assets, liabilities, revenues and expenses is dependent upon future events, the preparation of AltaGas' Consolidated Financial Statements requires the use of estimates and assumptions that have been made using careful judgment. AltaGas' significant accounting policies are contained in the notes to the 2022 Annual Consolidated Financial Statements. Certain of these policies involve critical accounting estimates as a result of the requirement to make particularly subjective or complex judgments about matters that are inherently uncertain, and because of the likelihood that materially different amounts could be reported under different conditions or using different assumptions.

Significant estimates and judgments made by Management in the preparation of the Consolidated Financial Statements are outlined below:

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 55

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**Regulatory Assets and Liabilities**

SEMCO Gas, ENSTAR and Washington Gas engage in the delivery and sale of natural gas. SEMCO Gas and ENSTAR are regulated by the MPSC and RCA, respectively. Washington Gas is regulated by the PSC of DC in the District of Columbia, the PSC of MD in Maryland, and the SCC of VA in Virginia.

The regulatory agencies exercise statutory authority over matters such as tariffs, rates, construction, operations, financing, returns and certain contracts with customers. In order to recognize the economic effects of the actions and decisions of the regulators, the timing of recognition of certain assets, liabilities, revenues and expenses as a result of regulation may differ from that otherwise expected using U.S. GAAP for entities not subject to rate regulation.

Regulatory assets represent future revenues associated with certain costs incurred in the current period or in prior periods that are expected to be recovered from customers in future periods through the rate-setting process. Regulatory liabilities represent future reductions or limitations of increases in revenue associated with amounts that are expected to be refunded to customers through the rate-setting process.

**Asset Impairment**

AltaGas reviews long-lived assets, regulatory assets, and intangible assets with indefinite and finite lives whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Recoverability is determined based on an estimate of undiscounted cash flows or other indicators of fair value, and measurement of an impairment loss is determined based on the fair value of the assets. The determination of fair value requires Management to make assumptions about future cash inflows and outflows over the life of an asset. Any changes to the assumptions used for the future cash flow could result in revisions to the evaluation of the recoverability of the long-lived assets or intangible assets and the recognition of an impairment loss in the Consolidated Financial Statements.

AltaGas also tests goodwill for impairment annually or more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value. The Corporation has the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. If the quantitative goodwill impairment test is performed, the fair value of the Corporation's reporting units is compared to the carrying values. If the carrying value of a reporting unit, including allocated goodwill exceeds its fair value, goodwill impairment is measured as the excess of the carrying value amount of the reporting unit's allocated goodwill over the implied fair value of the goodwill. Based on the valuation approach, the fair value used in the quantitative impairment test of goodwill requires determining appropriate market multiples of earnings or estimating future cash flows as well as appropriate discount rates. AltaGas has assessed goodwill for impairment as at December 31, 2022 and determined that no write-down was required.

**Asset Retirement Obligations** 

AltaGas records liabilities relating to asset retirement obligations when there is a legal obligation. In estimating the obligations, Management is required to make assumptions regarding inflation and discount rates, ultimate amounts and timing of settlements, and expected changes in environmental laws and regulation. A change in any of these estimates could have a material impact on AltaGas' Consolidated Financial Statements.

**Income Taxes**

The Corporation is subject to the provisions of the *Income Tax Act* (Canada) for purposes of determining the amount of income that will be subject to tax in Canada and the *Internal Revenue Code* (U.S.) for the purposes of determining the amount of

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 56

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income that will be subject to tax in the United States. The determination of AltaGas' and its subsidiaries' provision for income taxes requires the application of these complex rules.

Substantial deferred income tax assets and liabilities are recognized in the Consolidated Financial Statements. The recognition of deferred tax assets depends on the assumption that future earnings will be sufficient to realize the deferred benefit. A valuation allowance is recorded against deferred tax assets where all or a portion of that asset is not expected to be realized. The amount of the deferred tax asset or liability recorded is based on Management's best estimate of the timing of the realization of the assets or liabilities.

If Management's interpretation of tax legislation differs from that of tax authorities, or if timing of reversals is not as anticipated, the provision for income taxes could increase or decrease in future periods. See Note 21 of the 2022 Annual Consolidated Financial Statements.

**Pension Plans and Post-Retirement Benefits**

The determination of pension plan obligations and expense is based on a number of actuarial assumptions. Critical assumptions include the expected long-term rate-of-return on plan assets, the discount rate applied to pension plan obligations, the expected rate of compensation increase, and mortality rates. For post-retirement benefit plans, which provide for certain health care premiums and life insurance benefits for qualifying retired employees and which are not funded, critical assumptions in determining post-retirement obligations and expense are the discount rate and the assumed health care cost trend rates.

**Depreciation and Amortization** 

Depreciation and amortization of property, plant, and equipment and intangible assets are based on Management's judgment of the estimated useful life of the assets. When it is determined that assigned asset lives do not reflect the estimated remaining period of benefit, prospective changes are made to the depreciable lives of those assets. For regulated entities, amortization rates are generally prescribed by the applicable regulatory authority. There are a number of uncertainties inherent in estimating the remaining useful life of certain assets and changes in assumptions could result in material adjustments to the amount of amortization that AltaGas recognizes from period to period.

**Loss Contingencies**

AltaGas and its subsidiaries are subject to various legal claims and actions arising in the normal course of business. Liabilities for loss contingencies are determined on a case-by-case basis and are accrued for when it is probable that a liability has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine the probability of having incurred the liability and the estimated amount. Estimates are reviewed regularly and updated as new information is received. As at December 31, 2022, a liability of US$4 million (approximately CAD $5 million) has been recorded for penalties related to certain alleged air-related violations at the Ferndale terminal. On January 13, 2023, Petrogas West, LLC signed a Settlement Agreement with the Northwest Clean Air Agency (NWCAA) in order to resolve these alleged violations. The penalty was paid in February 2023 and represents a full and final resolution of all claims brought, or that could have been brought by the NWCAA related to the alleged violations. No additional material provisions on loss contingencies have been recorded by the Corporation. However, due to the inherent uncertainty of the litigation process, the resolution of any particular contingencies could have a material adverse effect on the Corporation's results of operations or financial position.

**Fair Value of Financial Instruments**

Fair value is defined as the amount of consideration that would be agreed upon in an arms-length transaction, other than a forced sale or liquidation, between knowledgeable, willing parties who are under no compulsion to act. The best evidence of

  

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fair value is a quoted bid or ask price, as appropriate, in an active market. Fair value based on unadjusted quoted prices in an active market requires minimal judgment by Management. Where bid or ask prices in an active market are not available, Management's judgment on valuation inputs is necessary to determine fair value. AltaGas enters into physical and financial derivative contracts to manage exposure to fluctuations in commodity prices and foreign exchange rates, as well as to optimize certain owned and managed natural gas assets. AltaGas estimates forward prices based on published sources adjusted for factors specific to the asset or liability, including basis and location differentials, discount rates, and currency exchange. The forward curves used to mark these derivative instruments to market are vetted against public sources. Where observable market data is not available, AltaGas uses valuation techniques which require significant judgment by Management. Changes in estimates and assumptions about these inputs could affect the reported fair value.

**Adoption of New Accounting Standards** 

Effective January 1, 2022, AltaGas adopted the following Financial Accounting Standards Board (FASB) issued Accounting Standards Updates (ASU):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪&nbsp;&nbsp;&nbsp;&nbsp;In August 2020, FASB issued ASU No. 2020-06 "Debt with Conversion and Other Options and Topic 815-40 - Derivatives and Hedging - Contracts in Entity's Own Equity: Accounting for Convertible Instruments and Contract in an Entity's Own Equity". The amendments in this ASU simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity's own equity. The adoption of this ASU did not have a material impact on AltaGas' consolidated financial statements; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪&nbsp;&nbsp;&nbsp;&nbsp;In July 2021, FASB issued ASU No. 2021-05 "Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments". The amendments in this ASU affect lessors with lease contracts that have variable lease payments that do not depend on a reference index or a rate as an operating lease that and would have resulted in the recognition of a selling loss at lease commencement if classified as sales-type or direct financing. The adoption of this ASU did not have a material impact on AltaGas' consolidated financial statements.

Effective December 31, 2022, AltaGas adopted the following FASB issued ASU:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪&nbsp;&nbsp;&nbsp;&nbsp;In November 2021, FASB issued ASU No. 2021-10 "Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance". The amendments in this ASU require annual disclosure about transactions with a government entity, including the nature of the transactions, the method applied to account for the government assistance, impacted line items on the financial statements, and significant terms and conditions of the agreement. The adoption of this ASU did not have a material impact on AltaGas' consolidated financial statements; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪&nbsp;&nbsp;&nbsp;&nbsp;In December 2022, FASB issued ASU 2022-06 "Topic 848 - Reference Rate Reform: Deferral of the Sunset Date of Topic 848". The amendments in this ASU defer the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The adoption of this ASU did not have a material impact on AltaGas' consolidated financial statements.

**Future Changes in Accounting Principles**

In October 2021, FASB issued ASU 2021-08 "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers". The amendments in this ASU require an entity to recognize and measure contract assets and liabilities acquired in a business combination in accordance with Topic 606. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022 and should be applied prospectively to business combinations

  

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occurring on or after the effective date of the amendment. The adoption of this ASU is not expected to have a material impact on AltaGas' consolidated financial statements.

In March 2022, FASB issued ASU No. 2022-01 "Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method". The amendments in this ASU will allow non-prepayable financial assets to be included in a closed portfolio hedged using the portfolio layer method and promote consistency in single and multiple hedged layers. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022 and should be applied on a modified retrospective basis. Early adoption is permitted. The adoption of this ASU is not expected to have a material impact on AltaGas' consolidated financial statements.

In March 2022, FASB issued ASU No. 2022-02 "Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures". The amendments in this ASU will eliminate the accounting guidance for troubled debt restructurings (TDRs) by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty, as well as require disclosure of current-period write offs by year of origination for financing receivables and net investments in leases. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022 and should be applied prospectively with an option to apply on a modified retrospective basis for the transition method related to the recognition and measurement of TDRs. The adoption of this ASU is not expected to have a material impact on AltaGas' consolidated financial statements.

In June 2022, FASB issued ASU No. 2022-03 "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions". The amendments in this ASU clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security, and therefore, is not considered in measuring fair value. In addition, an entity cannot, as a separate unit of account, recognize a contractual sale restriction. Equity securities subject to contractual sale restrictions also require certain additional disclosures. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023 and should be applied prospectively with adjustments as a result of adopting this ASU being recognized in earnings. The adoption of this ASU is not expected to have a material impact on AltaGas' consolidated financial statements.

In September 2022, FASB issued ASU No. 2022-04 "Liabilities (Subtopic 405-50) - Supplier Finance Programs". The amendments in this ASU will require a buyer in a supplier finance program to disclose the key terms of the program, the amount outstanding at the end of the period, a roll forward of that obligation during the period, and where the obligation is presented on the balance sheet. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, except for the amendment on the roll forward information, which is effective for fiscal years beginning after December 15, 2023. The amendments in this ASU should be applied retrospectively, except for the amendment on the roll forward information, which is applied prospectively. The adoption of this ASU is not expected to have a material impact on AltaGas' consolidated financial statements.

**Off-Balance Sheet Arrangements**

AltaGas is not party to any contractual arrangements with unconsolidated entities that have, or are reasonably likely to have, a current or future material effect on the Corporation's financial performance or financial condition including liquidity and capital resources.

  

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**Disclosure Controls and Procedures (DCP) and Internal Control Over Financial Reporting (ICFR)** 

Management, including the Chief Executive Officer and Chief Financial Officer, are responsible for establishing and maintaining DCP and ICFR, as those terms are defined in National Instrument 52-109 "Certification of Disclosure in Issuers' Annual and Interim Filings". The objective of this instrument is to improve the quality, reliability, and transparency of information that is filed or submitted under securities legislation.

Management, including the Chief Executive Officer and the Chief Financial Officer, have designed, or caused to be designed under their supervision, DCP and ICFR to provide reasonable assurance that information required to be disclosed by AltaGas in its annual filings, interim filings or other reports to be filed or submitted by it under securities legislation is made known to them, is reported on a timely basis, financial reporting is reliable, and financial statements prepared for external purposes are in accordance with U.S. GAAP.

The ICFR have been designed based on the framework established in the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Management has designed the existing framework to result in both a complete and accurate consolidation of related information. During the year ended December 31, 2022, there were no changes made to AltaGas' ICFR that materially affected, or are reasonably likely to materially affect, its ICFR or DCP.

The Chief Executive Officer and the Chief Financial Officer have evaluated, with the assistance of AltaGas' employees, the effectiveness of AltaGas' DCP and ICFR as at December 31, 2022 and concluded that as at December 31, 2022 AltaGas' DCP and ICFR were effective.

It should be noted that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, including instances of fraud, if any, have been detected. The design of any system of controls is also based in part on certain assumptions about the likelihood of future events, and there can be no assurances that any design will succeed in achieving its stated goals under all potential conditions.

**Summary of Consolidated Results for the Eight Most Recent Quarters** <sup>(1)</sup>

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| *($ millions)* | **Q4-22** | Q3-22 | Q2-22 | Q1-22 | Q4-21 | Q3-21 | Q2-21 | Q1-21 |
| Total revenue | **3898** | 3056 | 3241 | 3892 | 3140 | 2339 | 2009 | 3085 |
| Normalized EBITDA <sup>(2)</sup>  | **454** | 233 | 276 | 574 | 334 | 239 | 227 | 671 |
| Net income (loss) applicable to common shares | **54** | (48) | 35 | 357 | (156) | 25 | 24 | 337 |
| *($ per share)* | **Q4-22** | Q3-22 | Q2-22 | Q1-22 | Q4-21 | Q3-21 | Q2-21 | Q1-21 |
| Net income (loss) per common share |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | **0.19** | (0.17) | 0.12 | 1.27 | (0.56) | 0.09 | 0.09 | 1.21 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | **0.19** | (0.17) | 0.12 | 1.26 | (0.56) | 0.09 | 0.09 | 1.20 |
| Dividends declared | **0.27** | 0.27 | 0.27 | 0.27 | 0.25 | 0.25 | 0.25 | 0.25 |

---

(1)Amounts may not add due to rounding.

(2)Non-GAAP financial measure. Prior periods have been revised to reflect a change in the composition of normalized EBITDA made in the third quarter of 2022. See discussion in the *Non-GAAP Financial Measures* section of this MD&A.

AltaGas' quarter-over-quarter financial results are impacted by seasonality, fluctuations in commodity prices, weather, the U.S./Canadian dollar exchange rate, planned and unplanned plant outages, timing of in-service dates of new projects, and acquisition and divestiture activities.

  

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Revenue for the Utilities is generally the highest in the first and fourth quarters of any given year as the majority of natural gas demand occurs during the winter heating season, which typically extends from November to March.

Other significant items that impacted quarter-over-quarter revenue during the periods noted include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The impact of the sale of the U.S. transportation and storage business in the second quarter of 2021; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The impact of the sale of AltaGas' interest in the Aitken Creek processing facilities in the second quarter of 2022.

Net income (loss) applicable to common shares is also affected by non-cash items such as deferred income tax, depreciation and amortization expense, accretion expense, provisions on assets, gains or losses on long-term investments, and gains or losses on the sale of assets. In addition, net income (loss) applicable to common shares is also impacted by preferred share dividends and gains or losses on the redemption of preferred shares. For these reasons, net income (loss) may not necessarily reflect the same trends as revenue. Net income (loss) applicable to common shares during the periods noted was impacted by:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪&nbsp;&nbsp;&nbsp;&nbsp;After-tax transaction costs of approximately $4 million and $12 million incurred throughout 2022 and 2021, respectively, due to the acquisition of Petrogas and asset sales;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The impact of the sale of the U.S. transportation and storage business in the second quarter of 2021;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The after-tax provision of approximately $43 million recognized in 2021 related to the sale of the U.S. transportation and storage business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The after-tax provision on equity investments of approximately $209 million recognized in the fourth quarter of 2021 related to AltaGas' investment in MVP, which includes the Mountain Valley Pipeline and MVP Southgate projects;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The gain on the sale of the energy storage development project in Goleta, California in the first quarter of 2022;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The loss on the Series K Preferred Shares that were redeemed on March 31, 2022;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Favourable resolution of certain acquisition related commercial disputes and contingencies in 2022; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The loss on the redemption of the U.S. dollar denominated Series C Preferred Shares in September 2022, including the associated foreign exchange impact.

  

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**SELECTED ANNUAL FINANCIAL INFORMATION**

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| | | | |
|:---|:---|:---|:---|
| *($ millions, except where noted)* | **2022** | 2021 | 2020 |
| Revenue | **14087** | 10573 | 5587 |
| Net income applicable to common shares | **399** | 230 | 486 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income per common share - basic | **1.42** | 0.82 | 1.74 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income per common share - diluted | **1.41** | 0.82 | 1.74 |
| Total assets | **23965** | 21593 | 21532 |
| Total long-term liabilities | **12940** | 11335 | 11264 |
| Weighted average number of common shares outstanding *(millions)* | **281** | 280 | 279 |
| Dividends declared per common share *($ per share)* | **1.060000** | 0.999600 | 0.963300 |
| Preferred share dividends declared *($ per share)* |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Series A | **0.765000** | 0.765000 | 0.825000 |
| &nbsp;&nbsp;&nbsp;&nbsp;Series B | **1.007330** | 0.694360 | 0.894890 |
| &nbsp;&nbsp;&nbsp;&nbsp;Series C *(US$)* <sup>(1)</sup> | **0.991875** | 1.322500 | 1.322500 |
| &nbsp;&nbsp;&nbsp;&nbsp;Series E | **1.348252** | 1.348252 | 1.348252 |
| &nbsp;&nbsp;&nbsp;&nbsp;Series G | **1.060500** | 1.060500 | 1.060500 |
| &nbsp;&nbsp;&nbsp;&nbsp;Series H | **1.107322** | 0.794372 | 0.994890 |
| &nbsp;&nbsp;&nbsp;&nbsp;Series I <sup>(2)</sup> | **—** |  | 1.312500 |
| &nbsp;&nbsp;&nbsp;&nbsp;Series K <sup>(3)</sup> | **0.312500** | 1.250000 | 1.250000 |

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(1)Series C Preferred Shares were redeemed on September 30, 2022.

(2)Series I Preferred Shares were redeemed on December 31, 2020.

(3)Series K Preferred Shares were redeemed on March 31, 2022.

  

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**MANAGEMENT'S REPORT** 

The Consolidated Financial Statements of AltaGas Ltd. (AltaGas or the Corporation) and other financial information included in this report are the responsibility of Management. The Consolidated Financial Statements have been prepared by Management in accordance with United States Generally Accepted Accounting Principles (U.S. GAAP) and include amounts that are based on Management's best estimates and judgments. It is Management's responsibility to ensure that judgments, estimates and accounting principles and methods used in the preparation of financial information are reasonable, appropriate, and applied consistently.

<u>Management's Report on Internal Control Over Financial Reporting</u>

Management is responsible for establishing and maintaining adequate internal controls over financial reporting for the Corporation (as defined in Rules 13a-15(f) of the Securities Exchange Act and under National Instrument 52-109).

Management has used the framework established in the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to evaluate the effectiveness of the Corporation's internal control over financial reporting. Based on this evaluation, Management, including the CEO and CFO, has concluded that the Corporation's internal control over financial reporting is effective as at December 31, 2022.

Internal control over financial reporting may not prevent all misstatements due to its inherent limitations. In addition, the evaluation of internal control was made as of a specific date and continued effectiveness in future periods is subject to the risk that controls may become inadequate.

The Board of Directors is responsible for ensuring that Management fulfills its responsibilities for financial reporting and internal controls. The Board is assisted in carrying out its responsibilities principally through its Audit Committee which is composed of independent non-management directors. The Audit Committee meets with Management regularly and meets independently with internal and external auditors and as a group to review any significant accounting, internal controls, and auditing matters in accordance with the terms of the Charter of the Audit Committee, which is set out in the Annual Information Form.

  

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The shareholders have appointed Ernst & Young LLP as independent external auditors to express an opinion as to whether the Consolidated Financial Statements present fairly, in all material respects, the Corporation's consolidated financial position, results of operations, and cash flows in accordance with U.S. GAAP. Ernst & Young LLP is not required under securities law to express an opinion as to the effectiveness of the Corporation's internal control over financial reporting. The report of Ernst & Young LLP outlines the scope of its examination and its opinion on the Consolidated Financial Statements.

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| | |
|:---|:---|
| (signed) "Randall Crawford" | (signed) "James Harbilas" |
| **RANDALL CRAWFORD** | **JAMES HARBILAS** |
| President and | Executive Vice President and |
| Chief Executive Officer of | Chief Financial Officer of |
| AltaGas Ltd. | AltaGas Ltd. |

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March 1, 2023

  

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**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** 

**To the Shareholders and Directors of AltaGas Ltd.** 

**Opinion on the Consolidated Financial Statements** 

We have audited the accompanying consolidated balance sheets of AltaGas Ltd. (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the years then ended, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of AltaGas Ltd. as at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years then ended, in conformity with United States generally accepted accounting principles.

**Basis for Opinion**

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

**Critical Audit Matter**

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved especially challenging, subjective or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

  

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| | |
|:---|:---|
| | ***Fair Value Measurement of Level 3 Derivatives*** |
| *Description of the Matter* | As described in Note 24 to the consolidated financial statements, AltaGas Ltd. enters into commodity contracts that qualify as derivative instruments and are accounted for under ASC Topic 815, Derivatives and Hedging. The fair value measurements of certain of these contracts are considered Level 3 under the fair value hierarchy as they are determined using significant unobservable inputs. As of December 31, 2022, derivative assets of $63 million and derivative liabilities of $455 million were recorded based on Level 3 fair value measurements. <br>Auditing the fair value measurement of Level 3 derivative instruments was complex given the judgmental nature of the assumptions used as inputs into the valuation models. In particular, the valuation of Level 3 derivative instruments is sensitive to significant unobservable inputs used by the Company such as the assumed natural gas basis prices and implied volatilities of natural gas prices. These unobservable inputs can be affected by future economic and market conditions. |
| *How We Addressed the Matter in Our Audit* | To test the valuation of Level 3 derivative instruments, our audit procedures included, among others, evaluating the valuation methodologies used by the Company and testing significant inputs, assumptions and the mathematical accuracy of the calculations. For a sample of instruments, we independently tested the significant unobservable assumptions described above, calculated the resulting fair values and compared them to the Company's estimates. For a sample of instruments, we obtained forward prices from independent sources, including broker quotes, evaluated the Company's assumptions related to their forward curves and obtained external confirmation of key contract terms from counterparties. We also performed sensitivity analyses using independent sources of market data to evaluate the change in fair value of Level 3 derivative instruments that would result from changes in underlying assumptions. We also evaluated the adequacy of the Level 3 fair value measurement note disclosure in the consolidated financial statements related to the matter. |

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/s/ Ernst & Young LLP

Chartered Professional Accountants

We have served as AltaGas Ltd. auditor since 1997.

Calgary, Canada

March 1, 2023

  

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**CONSOLIDATED BALANCE SHEETS**

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| | | |
|:---|:---|:---|
| As at December 31 | **2022** | 2021 |
| **ASSETS** |  |  |
| **Current assets** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents *(note 32)* | $**53** | $63 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable *(net of credit losses of $41 million) (notes 10 and 24)* | **2091** | 1427 |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventory *(note 7)* | **1060** | 782 |
| &nbsp;&nbsp;&nbsp;&nbsp;Restricted cash holdings from customers *(note 32)* | **—** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;Regulatory assets *(note 22)* | **38** | 48 |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk management assets *(note 24)* | **140** | 113 |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets *(notes 29 and 32)* | **169** | 188 |
| &nbsp;&nbsp;&nbsp;&nbsp;Assets held for sale *(note 5)* | **1087** |  |
|  | **4638** | 2624 |
| **Property, plant and equipment** *(note 8)* | **11686** | 11323 |
| **Intangible assets** *(note 9)* | **120** | 171 |
| **Operating right-of-use assets** *(note 10)* | **281** | 311 |
| **Goodwill** *(note 11)* | **5250** | 5153 |
| **Regulatory assets** *(note 22)* | **448** | 436 |
| **Risk management assets** *(note 24)* | **77** | 51 |
| **Prepaid post-retirement benefits** *(note 29)* | **538** | 674 |
| **Long-term investments and other assets** *(net of credit losses of $1 million)* <br>&nbsp;&nbsp;&nbsp;&nbsp;*(notes 12, 29, and 32)* | **273** | 227 |
| **Investments accounted for by the equity method** *(note 14)* | **654** | 623 |
|  | $**23965** | $21593 |
| **LIABILITIES AND SHAREHOLDERS' EQUITY** |  |  |
| **Current liabilities** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued liabilities *(notes 18, 19, 24, and 29)* | $**1902** | $1544 |
| &nbsp;&nbsp;&nbsp;&nbsp;Short-term debt *(notes 15 and 24)* | **293** | 169 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current portion of long-term debt *(notes 16 and 24)* | **334** | 511 |
| &nbsp;&nbsp;&nbsp;&nbsp;Customer deposits | **79** | 74 |
| &nbsp;&nbsp;&nbsp;&nbsp;Regulatory liabilities *(note 22)* | **183** | 79 |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk management liabilities *(note 24)* | **172** | 128 |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities *(note 10)* | **92** | 91 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other current liabilities *(note 24)* | **57** | 61 |
| &nbsp;&nbsp;&nbsp;&nbsp;Liabilities associated with assets held for sale *(note 5)* | **295** |  |
|  | **3407** | 2657 |
| **Long-term debt** *(notes 16 and 24)* | **8694** | 7684 |
| **Asset retirement obligations** *(note 18)* | **451** | 429 |
| **Unamortized investment tax credits** *(note 21)* | **2** | 2 |
| **Deferred income taxes** *(note 21)* | **1369** | 1158 |
| **Subordinated hybrid notes** *(notes 17 and 24)* | **544** |  |
| **Regulatory liabilities** *(note 22)* | **1201** | 1424 |
| **Risk management liabilities** *(note 24)* | **298** | 165 |
| **Operating lease liabilities** *(note 10)* | **215** | 253 |
| **Other long-term liabilities** *(notes 20 and 24)* | **122** | 134 |
| **Future employee obligations** *(note 29)* | **44** | 86 |
|  | $**16347** | $13992 |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 67

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---

| | | |
|:---|:---|:---|
| As at December 31 | **2022** | 2021 |
| **Shareholders' equity** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Common shares, no par values, unlimited shares authorized; <br>&nbsp;&nbsp;&nbsp;&nbsp;2022 - 281.5 million and 2021 - 280.3 million issued and outstanding *(note 26)* | $**6761** | $6735 |
| &nbsp;&nbsp;&nbsp;&nbsp;Preferred shares *(note 26)*  | **586** | 1076 |
| &nbsp;&nbsp;&nbsp;&nbsp;Contributed surplus | **625** | 388 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit | **(1142)** | (1243) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive income (loss) (AOCI) *(note 23)* | **626** | (7) |
| **Total shareholders' equity** | **7456** | 6949 |
| **Non-controlling interests** | **162** | 652 |
| **Total equity** | $**7618** | $7601 |
|  | $**23965** | $21593 |

---

*Acquisitions (note 3)*

*Variable interest entities (note 13)*

*Commitments, guarantees and contingencies (note 30)*

*Related party transactions (note 31)*

*Segmented information (note 33)*

*Subsequent events (note 34)*

*See accompanying notes to the Consolidated Financial Statements.*

Approved by the Board of Directors of AltaGas Ltd.

---

| | |
|:---|:---|
| (signed) "Randall Crawford" | (signed) "Linda G. Sullivan" |
| **RANDALL CRAWFORD** | **LINDA G. SULLIVAN** |
| Director | Director |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 68

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**CONSOLIDATED STATEMENTS OF INCOME** 

---

| | | |
|:---|:---|:---|
| Year Ended December 31 | **2022** | 2021 |
| **REVENUE** *(note 25)* | $**14087** | $10573 |
| **EXPENSES** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cost of sales, exclusive of items shown separately | **11138** | 7708 |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating and administrative | **1568** | 1476 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accretion expenses *(note 18)* | **7** | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization *(notes 8 and 9)* | **439** | 422 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provisions on assets *(note 6)* | **6** | 64 |
|  | **13158** | 9676 |
| **Income (loss) from equity investments** *(note 14)* | **13** | (261) |
| **Other income** *(note 28)* | **94** | 81 |
| **Foreign exchange gains** | **10** | 4 |
| **Interest expense** | **(330)** | (275) |
| **Income before income taxes** | **716** | 446 |
| **Income tax expense** *(note 21)* |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Current | **23** | 59 |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred | **120** | 47 |
| **Net income after taxes** | **573** | 340 |
| **Net income applicable to non-controlling interests** | **50** | 57 |
| **Net income applicable to controlling interests** | **523** | 283 |
| **Preferred share dividends** | **(40)** | (53) |
| **Loss on redemption of preferred shares** *(note 26)* | **(84)** |  |
| **Net income applicable to common shares** | $**399** | $230 |
| **Net income per common share** *(note 27)* |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | $**1.42** | $0.82 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | $**1.41** | $0.82 |
| **Weighted average number of common shares <br> outstanding** (millions) *(note 27)* |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | **281.0** | 279.9 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | **283.3** | 281.7 |

---

*See accompanying notes to the Consolidated Financial Statements.*

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 69

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**CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME** 

---

| | | |
|:---|:---|:---|
| Year Ended December 31 | **2022** | 2021 |
| **Net income after taxes** | $**573** | $340 |
| Other comprehensive income (loss), net of taxes |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain (loss) on foreign currency translation | **643** | (61) |
| &nbsp;&nbsp;&nbsp;&nbsp;Unrealized loss on net investment hedge *(note 24)* | **(15)** | **—** |
| &nbsp;&nbsp;&nbsp;&nbsp;Actuarial gain on pension plans and post-retirement benefit (PRB) plans *(note 29)* | **3** | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;Reclassification of actuarial gains and prior service credits on defined benefit (DB) and post-retirement benefit plans (PRB) to net income *(note 29)* | **—** | 2 |
| **Total other comprehensive income (loss) (OCI), net of taxes**  | $**631** | $(57) |
| **Comprehensive income attributable to controlling interests and non-controlling interests, net of taxes** | $**1204** | $283 |
| **Comprehensive income attributable to:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-controlling interests | $**53** | $56 |
| &nbsp;&nbsp;&nbsp;&nbsp;Controlling interests | **1151** | 227 |
|  | $**1204** | $283 |

---

 *See accompanying notes to the Consolidated Financial Statements.*

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 70

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**CONSOLIDATED STATEMENTS OF EQUITY**

---

| | | |
|:---|:---|:---|
| Year Ended December 31 | **2022** | 2021 |
| **Common shares** *(note 26)* |  |  |
| Balance, beginning of year | $**6735** | $6723 |
| Shares issued for cash on exercise of options | **28** | 15 |
| Deferred taxes on share issuance costs | **(2)** | (3) |
| Balance, end of year | $**6761** | $6735 |
| **Preferred shares** *(note 26)* |  |  |
| Balance, beginning of year | **1076** | 1077 |
| Redemption of preferred shares *(note 26)* | **(490)** |  |
| Deferred taxes on share issuance costs | **—** | (1) |
| Balance, end of year | $**586** | $1076 |
| **Contributed surplus** |  |  |
| Balance, beginning of year | **388** | 383 |
| Share options expense | **3** | 7 |
| Exercise of share options | **(3)** | (2) |
| Purchase of remaining non-controlling interest in subsidiaries *(note 3)* | **237** |  |
| Balance, end of year | $**625** | $388 |
| **Accumulated deficit** |  |  |
| Balance, beginning of year | **(1243)** | (1192) |
| Net income applicable to controlling interests | **523** | 283 |
| Common share dividends | **(298)** | (281) |
| Preferred share dividends | **(40)** | (53) |
| Loss on redemption of preferred shares *(note 26)* | **(84)** |  |
| Balance, end of year | $**(1142)** | $(1243) |
| **AOCI** *(note 23)* |  |  |
| Balance, beginning of year | **(7)** | 50 |
| Other comprehensive income (loss) | **628** | (57) |
| Purchase of remaining non-controlling interest in a subsidiary *(note 3)* | **5** |  |
| Balance, end of year | $**626** | $(7) |
| **Total shareholders' equity** | $**7456** | $6949 |
| **Non-controlling interests** |  |  |
| Balance, beginning of year | **652** | 620 |
| Net income applicable to non-controlling interests | **50** | 57 |
| Foreign currency translation adjustments | **3** | 6 |
| Contributions from non-controlling interests to subsidiaries | **—** | 1 |
| Distributions by subsidiaries to non-controlling interests | **(21)** | (32) |
| Acquisition of non-controlling interests through Petrogas Acquisition *(note 3)* | **(522)** |  |
| Balance, end of year | $**162** | $652 |
| **Total equity** | $**7618** | $7601 |

---

*See accompanying notes to the Consolidated Financial Statements.*

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 71

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**CONSOLIDATED STATEMENTS OF CASH FLOWS** 

---

| | | |
|:---|:---|:---|
| Year Ended December 31 | **2022** | 2021 |
| **Cash from operations** |  |  |
| Net income after taxes | $**573** | $340 |
| Items not involving cash: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization *(notes 8 and 9)* | **439** | 422 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provisions on assets *(note 6)* | **6** | 64 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accretion expenses *(note 18)* | **7** | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Share-based compensation *(note 26)* | **3** | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred income tax expense *(note 21)* | **120** | 47 |
| &nbsp;&nbsp;&nbsp;&nbsp;Gains on sale of assets *(notes 4 and 28)* | **(3)** | (6) |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss (income) from equity investments *(note 14)* | **(13)** | 261 |
| &nbsp;&nbsp;&nbsp;&nbsp;Unrealized losses (gains) on risk management contracts *(note 24)* | **49** | (18) |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of deferred financing costs | **6** | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;Allowance for credit losses | **26** | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in pension and other post-retirement benefits *(note 29)* | **(46)** | (25) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other | **18** | 28 |
| Asset retirement obligations settled *(note 18)* | **(10)** | (10) |
| Distributions from equity investments | **14** | 13 |
| Changes in operating assets and liabilities *(note 32)* | **(650)** | (410) |
|  | $**539** | $738 |
| **Investing activities** |  |  |
| Capital expenditures - property, plant and equipment | **(945)** | (805) |
| Capital expenditures - intangible assets | **(13)** | (9) |
| Distributions from (contributions to) equity investments | **1** | (11) |
| Proceeds from disposition of equity investments *(note 14)* | **—** | 3 |
| Proceeds from disposition of assets, net of transaction costs *(note 4)* | **245** | 346 |
| Purchase of remaining non-controlling interest in a subsidiary *(note 3)* | **(285)** |  |
| Other changes in investing activities | **—** | (7) |
|  | $**(997)** | $(483) |
| **Financing activities** |  |  |
| Net issuance (repayment) of short-term debt | **128** | (78) |
| Issuance of long-term debt, net of debt issuance costs | **718** | 446 |
| Repayment of long-term debt | **(513)** | (11) |
| Net borrowing (repayment) under credit facilities | **466** | (229) |
| Issuance of subordinated hybrid notes *(note 17)* | **544** |  |
| Dividends - common shares | **(298)** | (303) |
| Dividends - preferred shares | **(40)** | (53) |
| Distributions to non-controlling interest | **(21)** | (32) |
| Contributions from non-controlling interests | **—** | 1 |
| Net proceeds from shares issued on exercise of options | **25** | 14 |
| Redemption of preferred shares *(note 26)* | **(574)** |  |
|  | $**435** | $(245) |
| **Change in cash, cash equivalents, and restricted cash** | **(23)** | 10 |
| **Effect of exchange rate changes on cash, cash equivalents, and <br> restricted cash** | **4** |  |
| **Net change in cash classified within assets held for sale** | **(1)** |  |
| **Cash, cash equivalents, and restricted cash beginning of year** | **84** | 74 |
| **Cash, cash equivalents, and restricted cash end of year** *(note 32)* | $**64** | $84 |

---

*See accompanying notes to the Consolidated Financial Statements.* 

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 72

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**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS** 

*(Tabular amounts and amounts in footnotes to tables are in millions of Canadian dollars unless otherwise indicated.)*

**1. Organization and Overview of the Business** 

The businesses of AltaGas are operated by the Company and a number of its subsidiaries including, without limitation, AltaGas Services (U.S.) Inc., AltaGas Utility Holdings (U.S.) Inc., WGL Holdings, Inc. (WGL), Wrangler 1 LLC, Wrangler SPE LLC, Washington Gas Resources Corp., WGL Energy Services, Inc. (WGL Energy Services), and SEMCO Holding Corporation; in regard to the Utilities business, Washington Gas Light Company (Washington Gas), Hampshire Gas Company, and SEMCO Energy, Inc. (SEMCO); and in regard to the Midstream business, AltaGas Extraction and Transmission Limited Partnership, AltaGas Pipeline Partnership, AltaGas Processing Partnership, AltaGas Northwest Processing Limited Partnership, Harmattan Gas Processing Limited Partnership, Ridley Island LPG Export Limited Partnership, AltaGas Pacific Partnership, AltaGas LPG Limited Partnership, Petrogas Energy Corporation (Petrogas), Petrogas Holdings Partnership, and Petrogas, Inc. In the Corporate/Other segment, subsidiaries include AltaGas Power Holdings (U.S.) Inc., WGL Energy Systems, Inc. (WGL Energy Systems), and Blythe Energy Inc. (Blythe). SEMCO conducts its Michigan natural gas distribution business under the name SEMCO Energy Gas Company (SEMCO Gas). Prior to the close of the Alaska Utilities Disposition, it operated its Alaska natural gas distribution business under the name ENSTAR Natural Gas Company (ENSTAR) and its 65 percent interest in an Alaska regulated gas storage utility under the name Cook Inlet Natural Gas Storage Alaska LLC (CINGSA).

AltaGas is a leading energy infrastructure company that connects natural gas and NGLs to domestic and global markets. The Company operates a diversified, lower-risk, high-growth energy infrastructure business that is focused on delivering resilient and durable value for its stakeholders.

AltaGas' operating segments include the following:

▪&nbsp;&nbsp;&nbsp;&nbsp;Utilities, which owns and operates franchised, cost-of-service, rate regulated natural gas distribution and storage utilities focused on providing safe, reliable, and affordable energy to its customers. Prior to the sale of ENSTAR and AltaGas' interest in Cook Inlet Natural Gas Storage Alaska (CINGSA) on March 1, 2023 (the Alaska Utilities Disposition), AltaGas' Utilities provided energy to approximately 1.7 million residential and commercial customers in 2022 and had an average 2022 rate base of approximately US$5.2 billion. The Utilities business also includes storage facilities and contracts for interstate natural gas transportation and storage services, as well as the affiliated retail energy marketing business, which sells natural gas and electricity directly to residential, commercial, and industrial customers located in Maryland, Virginia, Delaware, Pennsylvania, Ohio, and the District of Columbia; and

▪&nbsp;&nbsp;&nbsp;&nbsp;Midstream, which is a leading North American platform that connects customers and markets from wellhead to tidewater and beyond. The three pillars of the Midstream business include: 1) global exports, which includes AltaGas' two LPG export terminals; 2) natural gas gathering and extraction; and 3) fractionation and liquids handling. AltaGas' Midstream segment also includes its natural gas and NGL marketing business, domestic logistics, trucking and rail terminals, and liquid storage capability.

The Corporate/Other segment consists of AltaGas' corporate activities and a small portfolio of gas-fired power generation and distribution assets capable of generating 508 MW of power primarily in the state of California.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 73

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**2. Summary of Significant Accounting Policies**

***BASIS OF PRESENTATION***

These Consolidated Financial Statements have been prepared by Management in accordance with United States Generally Accepted Accounting Principles (U.S. GAAP).

Pursuant to National Instrument 52-107, "Acceptable Accounting Principles and Auditing Standards" (NI 52-107), financial statements of an "SEC issuer" may be prepared in accordance with U.S. GAAP. On February 22, 2021, AltaGas filed a final short form base shelf prospectus in Alberta and a corresponding registration statement on Form F-10 in the United States, by virtue of which AltaGas is required to file reports under section 15(d) of the Securities Exchange Act of 1934 with the United States Securities and Exchange Commission. In addition, AltaGas sought and obtained exemptive relief by the securities regulators in Alberta and Ontario to permit it to prepare its financial statements in accordance with U.S. GAAP. The Alberta Securities Commission exemption will terminate on or after the earlier of January 1, 2024, the date to which AltaGas ceases to have activities subject to rate regulation, or the effective date prescribed by the International Accounting Standards Board for the mandatory application of a standard within the International Financial Reporting Standard for entities with activities subject to rate-regulated accounting. This exemptive relieve would apply should AltaGas cease to become an SEC issuer.

***PRINCIPLES OF CONSOLIDATION***

These Consolidated Financial Statements of AltaGas include the accounts of the Corporation, its subsidiaries, variable interest entities (VIEs) for which the Corporation is the primary beneficiary, and its interest in various partnerships and joint ventures where AltaGas has an undivided interest in the assets and liabilities. Investments in unconsolidated companies that AltaGas has significant influence, but not control, over are accounted for using the equity method.

Hypothetical Liquidation at Book Value (HLBV) methodology is used for AltaGas' investment in Mountain Valley Pipeline (MVP) This methodology is used when the governing structuring agreement over the equity investment results in different liquidation rights and priorities than what is reflected by the underlying ownership interest percentage.

All intercompany balances and transactions are eliminated on consolidation. Where there is a party with a non-controlling interest in a subsidiary that AltaGas controls, that non-controlling interest is reflected as "non-controlling interests" in the Consolidated Financial Statements. The non-controlling interests in net income of consolidated subsidiaries are shown as an allocation of the consolidated net income and are presented separately in "net income applicable to non-controlling interests".

***USE OF ESTIMATES AND MEASUREMENT UNCERTAINTY***

The preparation of Consolidated Financial Statements in accordance with U.S. GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses during the period. Key areas where Management has made complex or subjective judgments, when matters are inherently uncertain, include but are not limited to: determining the nature and timing of satisfaction of performance obligations and determining the transaction price and amounts allocated to performance obligations for revenue recognition; depreciation and amortization rates; determination as to whether a contract is or contains a lease; determination of the classification, term, and discount rate for leases; fair value of asset retirement obligations; fair value of property, plant and equipment and goodwill for impairment assessments; fair value of financial instruments; measurement of credit losses; provisions for income taxes; assumptions used to measure employee future benefits; provisions for contingencies; purchase price allocations; and carrying value of regulatory assets and liabilities. Certain estimates are necessary for the regulatory environment in which AltaGas' subsidiaries or affiliates operate, which often require amounts to be recorded at estimated values until these amounts are

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 74

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finalized pursuant to regulatory decisions or other regulatory proceedings. By their nature, these estimates are subject to measurement uncertainty and may impact the Consolidated Financial Statements of future periods.

***SIGNIFICANT ACCOUNTING POLICIES***

***Rate-Regulated Operations***

SEMCO Gas, Washington Gas, Hampshire Gas, and, prior to the Alaska Utilities Disposition, ENSTAR (collectively the Utilities) engage in the delivery, sale, and storage of natural gas. SEMCO Gas is regulated by the Michigan Public Service Commission (MPSC). Washington Gas operates in the District of Columbia, Maryland, and Virginia, and is regulated in those jurisdictions by the Public Service Commission of the District of Columbia (PSC of DC), the Maryland Public Service Commission (PSC of MD), and the Commonwealth of Virginia State Corporation Commission (SCC of VA), respectively. Hampshire is regulated under a cost-of-service tariff by the Federal Energy Regulatory Commission (FERC).

The MPSC, PSC of DC, PSC of MD, and SCC of VA exercise statutory authority over matters such as tariffs, rates, construction, operations, financing, returns, accounting, and certain contracts with customers. In order to recognize the economic effects of the actions and decisions of the MPSC, PSC of DC, PSC of MD, and SCC of VA, the timing of recognition of certain assets, liabilities, revenues, and expenses as a result of regulation may differ from that otherwise expected using U.S. GAAP for entities not subject to rate regulation.

Regulatory assets represent future revenues associated with certain costs incurred in the current period or in prior periods that are expected to be recovered from customers in future periods through the rate setting process. Regulatory liabilities represent future reductions or limitations of increases in revenue associated with amounts that are expected to be refunded to customers through the rate setting process.

***Cash and Cash Equivalents***

Cash and cash equivalents consist of cash on hand, balances with banks, and investments in money market instruments with original maturities of less than three months.

***Restricted Cash Holdings from Customers***

Cash deposited, which is restricted and is not available for general use by AltaGas, is separately presented as restricted cash holdings in the Consolidated Balance Sheets. Pursuant to the acquisition of WGL Holdings, Inc. (the WGL Acquisition), rabbi trust funds were funded to satisfy certain Washington Gas executive and outside director retirement benefit plan obligations. The rabbi trust funds are invested in money market funds which are considered cash equivalents. These balances are included in "prepaid expenses and other current assets" and "long-term investments and other assets" in the Consolidated Balance Sheets.

***Accounts Receivable***

Receivables are recorded net of the allowance for credit losses in the Consolidated Balance Sheets. AltaGas regularly analyzes and evaluates the collectability of the accounts receivable based on a combination of factors. If circumstances related to the collectability change, the allowance for credit losses is further adjusted. Accounts are written off when collection efforts are complete and future recovery is unlikely.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 75

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***Inventory*** 

Inventory consists of materials, supplies, natural gas, natural gas liquids, crude oil and condensates, processed finished products, renewable energy credits, and emission compliance instruments which are valued at the lower of cost or net realizable value. Cost of inventory is assigned using a weighted average cost formula. In general, commodity costs and variable transportation costs are capitalized as gas in underground storage. Fixed costs, primarily pipeline demand charges and storage charges, are expensed as incurred through the cost of gas.

***Property, Plant, and Equipment (PP&E), Depreciation and Amortization***

Property, plant, and equipment are carried at cost. The Corporation depreciates the cost of capital assets, net of salvage value, on a straight-line basis over the estimated useful life of the assets, with the exception of rate-regulated utilities assets, for which depreciation is calculated on a straight-line basis or over the contract term of a specific agreement at rates as approved by the regulatory authorities.

The Utilities charge maintenance and repairs directly to operating expense and capitalize betterments and renewal costs. In accordance with regulatory requirements, depreciation expense includes an amount allowed for regulatory purposes to be collected in current rates for future removal and site restoration costs.

Interest costs are capitalized on major additions to property, plant, and equipment until the asset is ready for its intended use. The interest rate used for calculating the interest costs to be capitalized is based on AltaGas' prior quarter actual borrowing long-term interest rate.

The Utilities capitalize an imputed carrying cost on assets during construction as authorized by regulatory authorities and the amount so capitalized is an allowance for funds used during construction (AFUDC). AFUDC is the amount that a rate-regulated enterprise is allowed to recover for its cost of financing assets under construction. Capitalized overhead, administrative expenses, and AFUDC are included in the cost of the related assets and are recovered in rates charged to customers through depreciation expense, as allowed by the regulators.

The range of useful lives for AltaGas' PP&E is as follows:

&nbsp;&nbsp;&nbsp;&nbsp;

---

| | |
|:---|:---|
| Utilities assets | 4 to 69 years |
| Midstream assets | 1 to 43 years |
| Corporate/Other assets | 3 to 46 years |

---

As required by the regulatory authority, net additions to SEMCO's utility assets are amortized for one half-year in the year in which they are brought into active service. Net additions to WGL's assets are amortized in the month after they are brought into active service.

Generally, when a regulated asset is retired or disposed of, there is no gain or loss recorded in the Consolidated Statements of Income. Any difference between the cost and accumulated depreciation of the asset, net of salvage proceeds, is charged to accumulated depreciation or another regulatory asset or liability account. It is expected that any gain or loss that is charged to accumulated depreciation or another regulatory account will be reflected in future depreciation expense when it is refunded or collected in rates. When a non-regulated asset is retired or disposed of from PP&E, the original cost and related accumulated depreciation and amortization are derecognized and any gain or loss is recorded in the Consolidated Statements of Income.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 76

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***Intangible Assets***

Intangible assets are recorded at cost. Intangible assets which have a finite useful life are amortized on a straight-line basis over their term or estimated useful life. The range of useful lives for intangible assets with a finite life is as follows:

&nbsp;&nbsp;&nbsp;&nbsp;

---

| | |
|:---|:---|
| Energy services relationships | 5 years |
| Software | 3 to 20 years |
| Extraction and Transmission (E&T) Contracts | 25 years |
| Commodity contracts | 7 years |

---

***Assets Held for Sale***

The Corporation classifies assets as held for sale when the carrying amount will be principally recovered through a sale transaction rather than through continuing use. This condition is met when Management approves and commits to a formal plan to sell the assets, the assets are available for immediate sale in their present condition, and Management expects the sale to close within the next 12 months. Upon classifying an asset as held for sale, an asset is recorded at the lower of its carrying value or the estimated fair value less cost to sell. Assets held for sale are not depreciated or amortized.

***Business Acquisitions***

Business acquisitions are accounted for using the acquisition method. Under the acquisition method, assets and liabilities of the acquired entity are recorded at fair value at the date of acquisition. Acquisition-related costs are expensed as incurred. Goodwill represents the excess of purchase price over the fair value of the net assets acquired. Management applies its best estimates and assumptions to determine the fair value of net assets acquired; however, the estimates are subject to further refinement of assumptions over a measurement period, which may be up to one year from the acquisition date. During the measurement period, adjustments to assets acquired and liabilities assumed may be recorded, with a corresponding impact to goodwill.

***Provisions on Assets*** 

If facts and circumstances suggest that a long-lived asset or an intangible asset may be impaired, the carrying value is reviewed. If this review indicates that the value of the asset is not recoverable, as determined by the projected undiscounted cash flows related to the asset over its remaining life, then the carrying value of the asset is reduced to its estimated fair value and an impairment loss is recognized.

Goodwill is not subject to amortization, but assessed at least annually for impairment, or more often when events or changes in circumstances indicate that goodwill may be impaired. The annual assessment of goodwill is performed at the reporting unit level, which is an operating segment or one level below. The Corporation has the option to first assess qualitative factors to determine whether events or changes in circumstances indicate that the goodwill may be impaired. If a quantitative impairment test is performed, the fair value of the reporting unit will be compared to its carrying value (including goodwill). If the carrying value of the reporting unit exceeds the fair value, goodwill is reduced to its fair value and an impairment loss would be recorded in the Consolidated Statements of Income.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 77

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***Investments Accounted for by the Equity Method***

The equity method of accounting is used for investments in which AltaGas has the ability to exercise significant influence, but does not have a controlling interest. Equity investments are initially measured at cost and are adjusted for the Corporation's proportionate share of earnings or losses. Equity investments are increased for contributions made and decreased for distributions received. To the extent an investee undertakes activities necessary to commence its planned principal operations, the Corporation will capitalize interest costs associated with its investment during such period.

The HLBV methodology is used to allocate earnings or losses for certain WGL equity method investments when WGL's ownership interest percentage is different than distribution percentages. When applying HLBV accounting, the Corporation determines the amount that it would receive if an equity investment entity were to liquidate all of its assets at book value (as valued in accordance with U.S. GAAP) and distribute that cash to the investors based on the contractually defined liquidation priorities. The change in the Corporation's claim on the equity investment entity's book value at the beginning and end of the reporting period (adjusted for contributions and distributions) is the Corporation's share of the earnings or losses from the equity investment for the period.

An equity method investment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable. When such condition is deemed other than temporary, the carrying value of the investment is written down to its fair value, and an impairment charge is recorded in the Consolidated Statements of Income.

***Financial Instruments***

<u>Non-Utility Operations</u>

All financial instruments are initially recorded at fair value unless they qualify for, and are designated under, a normal purchase and normal sale (NPNS) exemption. Subsequent measurement of the financial instruments is based on their classification. The financial assets are classified as "held-for-trading", "held-to-maturity", or "loans and receivables". Financial liabilities are classified as "held-for-trading" or other financial liabilities. Subsequent measurement is determined by classification.

A physical contract generally qualifies for the NPNS exemption if the transaction is reasonable in relation to AltaGas' business needs and AltaGas has the ability, and intent, to deliver or take delivery of the underlying item. AltaGas continually assesses the contracts designated under the NPNS exemption and will discontinue the treatment of these contracts under this exemption where the criteria are no longer met.

Held-for-trading instruments include non-derivative financial assets and financial assets and liabilities that may consist of swaps, options, forwards, and equity securities. These financial instruments are initially recorded at their fair value, with subsequent changes in fair value recorded in net income. Held-to-maturity, loans and receivables, and other financial liabilities are recognized at amortized cost using the effective interest method unless they are held-for-sale and recognized at the lower of cost or fair value less transaction fees.

Investments in equity instruments not accounted for under the equity method that do not have a quoted market price in an active market are measured at cost. Income earned from these investments is included in the Consolidated Statements of Income under "other income".

Derivatives embedded in other financial instruments or contracts (the host instrument) are recorded separately and are measured at fair value if the economic characteristics of the embedded derivative are not closely related to the host instrument, the terms of the embedded derivative are the same as those of a standalone derivative, and the entire contract is not held-for-trading or accounted for at fair value. Changes in fair value are included in earnings.

  

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The fair values recorded on the Consolidated Balance Sheets reflect netting of the asset and liability positions where counterparty master netting arrangements contain provisions for net settlement.

Transaction costs related to the acquisition of held-for-trading financial assets and liabilities are expensed as incurred.

Transaction costs for obtaining debt financing other than line-of-credit arrangements are recognized as a direct deduction from the related debt liability on the Consolidated Balance Sheets. Transaction costs related to line-of-credit arrangements are capitalized and included under "long-term investments and other assets" on the Consolidated Balance Sheets. Premiums and discounts are netted against long-term debt on the Consolidated Balance Sheets. The deferred charges are amortized over the life of the related debt on an effective interest basis and included in "interest expense" on the Consolidated Statements of Income.

<u>Regulated Utility Operations</u> 

All physical and financial derivative contracts are initially recorded at fair value. Changes in the fair value of derivative instruments that are recoverable or refunded to customers when they settle are recorded as regulatory assets or liabilities. Changes in the fair value of derivatives not affected by rate regulation are reflected in net income.

Transaction costs for obtaining debt financing and reacquired debt costs are recorded as regulatory assets or liabilities, or as a reduction of the debt liability on the Consolidated Balance Sheets.

***Weather-Related Instruments*** 

WGL purchases certain weather-related instruments, such as heating degree day (HDD) derivatives and cooling degree day (CDD) derivatives to manage weather and price risks related to its natural gas and electricity sales. These derivatives are accounted for in accordance with ASC 815-45, Derivatives and Hedging – Weather Derivatives. For HDD derivatives, gains or losses are recognized when the actual HDDs falls above or below the contractual HDDs for each instrument. For CDD derivatives, gains or losses are recognized when the average temperature exceeds or is below a contractually stated level during the contract period. Refer to Note 24 for further discussion on weather-related instruments.

***Hedges***

As part of its risk management strategy, AltaGas may use derivatives to reduce its exposure to commodity price, interest rate, and foreign exchange risk. AltaGas may designate certain outstanding loans to hedge against the currency translation effect of its foreign investments. No other derivatives have been designated as hedges under ASC Topic 815.

<u>Non-Utility Operations</u>

The change in fair value of cash flow hedges is recognized in OCI. Gains or losses from cash flow hedges are reclassified to net income when the hedged transaction affects earnings, such as when the hedged forecasted transaction occurs.

<u>Regulated Utility Operations</u>

During planned issuances of debt securities, Washington Gas may utilize derivative instruments to manage the risk of interest-rate volatility. Gains and losses associated with these types of derivatives are recorded as regulatory liabilities or assets, and amortized in accordance with regulatory requirements, typically over the life of the related debt.

  

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***Credit Losses***

AltaGas regularly analyzes and evaluates the collectability of the accounts receivable based on a combination of factors. If circumstances related to the collectability change, the allowance for credit losses is adjusted. Accounts are written off when collection efforts are complete and future recovery is unlikely. See below for a description of how expected credit loss estimates are developed.

<u>Utilities Customer Receivables and Contract Assets</u>

AltaGas is exposed to risk through the non-payment of utility bills by customers. To manage this customer credit risk, AltaGas' regulated utilities customers are offered budget billing options or high risk customers may be required to provide a cash deposit until the requirement for deposit refunds are met. AltaGas can recover a portion of non-payments from customers in future periods through the rate-setting process. For accounts receivable generated by the Utilities business, an allowance for credit losses is recognized using a loss-rate based on historical payment and collection experience. This rate may be adjusted based on Management's expectations of unusual macroeconomic conditions and other factors. AltaGas regularly evaluates the reasonableness of the allowance based on a combination of factors, such as: the length of time receivables are past due, historical expected payment, collection experience, financial condition of customers, and other circumstances that could impact customers' ability or desire to make payments. For retail energy marketing customer receivables where AltaGas has enrolled in a regulatory utility purchase of receivable program, the associated utility discount rate is used to determine credit losses.

<u>Midstream Customer Receivables and Contract Assets</u>

AltaGas operates under an existing credit policy that is designed to mitigate credit risk. Credit limits are established for each counterparty and credit enhancements such as letters of credit, parent guarantees, and cash collateral may be required. The creditworthiness of all counterparties is continuously monitored. A credit loss reserve is recorded for receivables with customers and trading counterparties AltaGas considers to be below investment grade by applying an estimated loss rate. The estimated loss rate is based on the historical default rates published by external rating agencies. For accounts receivable, a one-year rate is used. For contract assets, historical loss rates associated with the estimated time frame that the contract asset will be billed to the customer is used. In the event a customer or trading counterparty no longer exhibits similar risk characteristics, the associated receivable is evaluated individually.

<u>Other</u>

For other long-term receivables, associated counterparties are evaluated and assigned internal credit ratings based on AltaGas' credit policy. An allowance for credit losses is recorded based on historical default rates published by external credit rating agencies and a rate commensurate with the period in which the receivables are expected to be collected.

***Debt***

AltaGas uses short-term debt in the form of commercial paper and advances under its syndicated bank credit facilities to fund seasonal cash requirements. Short-term obligations are excluded from current liabilities if AltaGas has the ability and the intent to refinance these obligations on a long-term basis. The ability to refinance is primarily demonstrated through the availability of long-term revolving committed credit facilities in an amount equal to or greater than the expected maximum short-term obligation.

  

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***Asset Retirement Obligations***

AltaGas recognizes asset retirement obligations in the period in which the legal obligation is incurred and a reasonable estimate of fair value can be determined. The associated asset retirement costs are capitalized as part of the carrying amount of the asset and are depreciated over the estimated useful life of the asset. The liability is increased due to the passage of time over the estimated period until the settlement of the obligation, with a corresponding charge to accretion expense for asset retirement obligations.

There are timing differences between accretion and depreciation amounts being recorded pursuant to GAAP and the recognition of depreciation expense for legal asset removal costs that are recovered in rates, as allowed by the regulators. These timing differences are recorded as a reduction to "regulatory liabilities" in accordance with ASC 980.

Certain midstream and utility assets will have future legal obligations on retirement, but an asset retirement obligation has not been recorded due to its indeterminate life and corresponding indeterminable timing and scope of these asset retirement obligations. The Utilities recognize asset retirement obligations for some interim retirements, as expected by their regulators.

***Revenue Recognition*** 

AltaGas has revenue from various sources, including rate-regulated revenue, commodity sales, midstream service contracts, gas sales and transportation services, and storage services. For a detailed description of the Corporation's revenue recognition policy by major source of revenue, please refer to Note 25.

***Foreign Currency Translation***

Monetary assets and liabilities denominated in a foreign currency are converted to the functional currency using the exchange rate in effect at the balance sheet date. Adjustments resulting from the conversion are recorded in the Consolidated Statements of Income. Non-monetary assets and liabilities are converted at the historical exchange rate in effect at the transaction date. Revenues and expenses are converted at the exchange rate applicable at the transaction date.

For foreign entities with a functional currency other than Canadian dollars, AltaGas' reporting currency, assets and liabilities are translated into Canadian dollars at the rate in effect at the reporting date. Revenues and expenses are translated at average exchange rates during the reporting period. All adjustments resulting from the translation of the foreign operations are recorded in OCI.

AltaGas may designate certain outstanding loans to hedge against the currency translation effect of its foreign investments. Accordingly, foreign exchange gains and losses, from the dates of designation, on the translation of these loans are included in OCI.

***Share Options and Other Compensation Plans***

Share options granted are recorded using fair value. Compensation expense is measured at the date of the grant using the Black-Scholes-Merton model and is recognized over the vesting period of the options. Consideration received by AltaGas on exercise of the share options is credited to shareholders' equity.

AltaGas has a phantom unit plan (Phantom Plan) for eligible employees, officers, and directors, which includes two types of awards: restricted units (RUs) and performance units (PUs). AltaGas' RUs and PUs are valued based on the dividends declared during the vesting period and the weighted average share price of AltaGas' common shares multiplied by the units outstanding at the end of the vesting period. Upon vesting, the RUs and PUs are paid in cash. All PUs are also subject to a performance multiplier ranging from 0 to 2 dependent on the Corporation's performance relative to performance targets as

  

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approved by the Board of Directors. Compensation expense is recognized using the liability method and is recorded as operating and administrative expense over the vesting period. A change in value of the RUs or PUs is recognized in the period the change occurs. Forfeitures are recognized when they occur instead of estimating the number of awards that are expected to vest.

In addition, AltaGas has a deferred share unit plan (DSUP) for directors, officers, and eligible employees as an additional form of long-term variable compensation incentive. Although the DSUP is available to directors, officers, and eligible employees, AltaGas currently only grants deferred share units (DSUs) under the DSUP as a form of director compensation. The DSUs granted are fully vested upon being credited to a participant's account, the participant is entitled to payment upon retirement, and payment is not subject to satisfaction of any requirements as to any minimum period of membership or employment or other conditions. DSUs are accounted for at fair value. Compensation expense is determined based on the fair value of the DSUs on the date of the grant and fluctuations in fair value are recognized in the period the change occurs. Forfeitures are recognized when they occur instead of estimating the number of awards that are expected to vest.

***Pension Plans and Post-Retirement Benefits***

AltaGas maintains defined benefit pension plans, defined contribution plans, and other post-retirement benefit plans for eligible employees. Contributions made by the Corporation to the defined contribution plans are expensed in the period in which the contribution occurs.

The cost of defined benefit pension plans and post-retirement benefits is actuarially determined using the projected benefit method prorated based on service and Management's best estimate of expected plan investment performance, salary escalation, retirement ages of employees, expected health care costs, and other actuarial factors including discount rates and mortality. Pension plan assets are measured at fair value. The expected return on plan assets is based on historical and projected rates of return for each asset class in the plan portfolio. The projected benefit obligation is discounted using the market interest rate on high-quality debt instruments with cash flows matching the timing and amount of benefit payments.

Unrecognized actuarial gains and losses in excess of 10 percent of the greater of the benefit obligation and the fair value of plan assets or the market-related value of assets along with any unamortized past service costs and credits are amortized on a straight-line basis over the expected average remaining service life of active employees.

AltaGas recognizes the overfunded or underfunded status of its pension and post-retirement benefit plans as either assets or liabilities in the Consolidated Balance Sheets. Unrecognized actuarial gains and losses and past service costs and credits that arise during the period are recognized in OCI or a regulatory asset or liability.

For certain regulated utilities, the Corporation expects to recover pension expense in future rates and therefore records unrecognized balances as either regulatory assets or liabilities. The regulatory assets or liabilities are amortized on a straight-line basis over the expected average remaining service life of active employees.

In 2020, AltaGas made a voluntary change in accounting principle for calculating the market-related value of assets (MRVA) used in the determination of Washington Gas' net periodic pension and other post-retirement benefit plan costs. The change uses the fair value approach for the fixed income investment asset class of the plan assets, compared to the prior method that utilized a calculated value where gains and losses arising from changes in fair value were deferred and amortized into the calculation of the MRVA over a period of five years. The MRVA is used in the calculation of the expected return on assets and the recognized actuarial gain or loss components of net periodic benefit cost. The approach applied for all other classes of assets remains unchanged. Management believes that using the fair value approach for the fixed income investments in plan assets is preferable as it more closely aligns the recognition of related components within the net periodic benefit cost.

  

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***Income Taxes***

Income taxes for the Corporation and its subsidiaries are calculated using the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are determined based on differences between the carrying value and the tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are in effect in the periods in which the differences are expected to be settled or realized. Deferred income tax assets are routinely reviewed, and a valuation allowance is recorded to reduce the deferred tax assets if it is more likely than not that deferred tax assets will not be realized.

The financial statement effects of an uncertain tax position are recognized when it is more likely than not, based on technical merits, that the position will be sustained upon examination by a taxing authority. The current and deferred tax impact is equal to the largest amount, considering possible settlement outcomes, that is greater than 50 percent likely of being realized upon settlement with the taxing authorities.

Investment tax credits are recognized as reductions to income tax expense over the estimated service lives of the related properties.

The rate-regulated natural gas distribution subsidiaries recognize a separate regulatory asset or liability for the amount of deferred income taxes expected to be recovered from, or paid to, customers in the future. Any tax related interest and/or penalty incurred is included in interest expense.

***Net Income per Share***

Basic net income per common share is computed using the weighted average number of common shares outstanding during the period. Dilutive net income per common share is calculated using the weighted average number of common shares outstanding adjusted for dilutive common shares related to the Corporation's share-based compensation awards.

The potentially dilutive impact of the share-based compensation awards is determined using the treasury stock method. Under the treasury stock method, awards are treated as if they had been exercised with any proceeds used to repurchase common stock at the average market price during the period. Any incremental difference between the assumed number of shares issued and purchased is included in the diluted share computation.

***Contingencies*** 

Liabilities for loss contingencies arising from claims, assessments, litigation and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Any such accruals are adjusted thereafter as additional information becomes available or circumstances change.

***Leases***

The following are the Corporation's significant accounting policies:

*<u>Leases – Lessee</u>*

AltaGas determines if an arrangement is a lease at inception. Operating leases are included in right-of-use (ROU) assets, current operating lease liabilities, and long-term operating lease liabilities in the Consolidated Balance Sheets. Finance leases are included in property, plant and equipment and current and long-term debt in the Consolidated Balance Sheets.

  

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ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. AltaGas uses the rate implicit in the lease when readily determinable. When the implicit lease rate is not readily determinable, AltaGas uses its incremental borrowing rate to determine the present value of lease payments. AltaGas includes lessee options to renew or terminate the lease term in the determination of the ROU asset and lease liability when exercise is reasonably certain. The operating lease ROU asset is adjusted for lease payments made in advance of the commencement date, initial direct costs, and any lease incentives. Variable lease payments are based on a rate.

Operating lease expense is recognized on a straight-line basis over the lease term in "operating and administrative expense". Depreciation and interest expense are recorded on finance leases.

*<u>Leases – Lessor</u>*

AltaGas determines if an arrangement is a lease at inception. Lease payments under an operating lease are recognized on a straight-line basis over the term of the lease. Variable lease payments are recognized as revenue as the facts and circumstances on which the variable lease payment is based occur.

AltaGas does not include taxes assessed by governmental authorities, such as sales and related taxes, in the lease payments or variable lease payments.

***ADOPTION OF NEW ACCOUNTING STANDARDS*** 

Effective January 1, 2022, AltaGas adopted the following Financial Accounting Standards Board (FASB) issued Accounting Standards Updates (ASU):

▪&nbsp;&nbsp;&nbsp;&nbsp;In August 2020, FASB issued ASU No. 2020-06 "Debt with Conversion and Other Options and Topic 815-40 - Derivatives and Hedging - Contracts in Entity's Own Equity: Accounting for Convertible Instruments and Contract in an Entity's Own Equity". The amendments in this ASU simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity's own equity. The adoption of this ASU did not have a material impact on AltaGas' consolidated financial statements; and

▪&nbsp;&nbsp;&nbsp;&nbsp;In July 2021, FASB issued ASU No. 2021-05 "Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments". The amendments in this ASU affect lessors with lease contracts that have variable lease payments that do not depend on a reference index or a rate as an operating lease that and would have resulted in the recognition of a selling loss at lease commencement if classified as sales-type or direct financing. The adoption of this ASU did not have a material impact on AltaGas' consolidated financial statements.

Effective December 31, 2022, AltaGas adopted the following FASB issued ASU:

▪&nbsp;&nbsp;&nbsp;&nbsp;In November 2021, FASB issued ASU No. 2021-10 "Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance". The amendments in this ASU require annual disclosure about transactions with a government entity, including the nature of the transactions, the method applied to account for the government assistance, impacted line items on the financial statements, and significant terms and conditions of the agreement. The adoption of this ASU did not have a material impact on AltaGas' consolidated financial statements; and

▪&nbsp;&nbsp;&nbsp;&nbsp;In December 2022, FASB issued ASU 2022-06 "Topic 848 - Reference Rate Reform: Deferral of the Sunset Date of Topic 848". The amendments in this ASU defer the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The adoption of this ASU did not have a material impact on AltaGas' consolidated financial statements.

  

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***FUTURE CHANGES IN ACCOUNTING PRINCIPLES*** 

In October 2021, FASB issued ASU 2021-08 "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers". The amendments in this ASU require an entity to recognize and measure contract assets and liabilities acquired in a business combination in accordance with Topic 606. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022 and should be applied prospectively to business combinations occurring on or after the effective date of the amendment. The adoption of this ASU is not expected to have a material impact on AltaGas' consolidated financial statements.

In March 2022, FASB issued ASU No. 2022-01 "Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method". The amendments in this ASU will allow non-prepayable financial assets to be included in a closed portfolio hedged using the portfolio layer method and promote consistency in single and multiple hedged layers. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022 and should be applied on a modified retrospective basis. Early adoption is permitted. The adoption of this ASU is not expected to have a material impact on AltaGas' consolidated financial statements.

In March 2022, FASB issued ASU No. 2022-02 "Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures". The amendments in this ASU will eliminate the accounting guidance for troubled debt restructurings (TDRs) by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty, as well as require disclosure of current-period write offs by year of origination for financing receivables and net investments in leases. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022 and should be applied prospectively with an option to apply on a modified retrospective basis for the transition method related to the recognition and measurement of TDRs. The adoption of this ASU is not expected to have a material impact on AltaGas' consolidated financial statements.

In June 2022, FASB issued ASU No. 2022-03 "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions". The amendments in this ASU clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security, and therefore, is not considered in measuring fair value. In addition, an entity cannot, as a separate unit of account, recognize a contractual sale restriction. Equity securities subject to contractual sale restrictions also require certain additional disclosures. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023 and should be applied prospectively with adjustments as a result of adopting this ASU being recognized in earnings. The adoption of this ASU is not expected to have a material impact on AltaGas' consolidated financial statements.

In September 2022, FASB issued ASU No. 2022-04 "Liabilities (Subtopic 405-50) - Supplier Finance Programs". The amendments in this ASU will require a buyer in a supplier finance program to disclose the key terms of the program, the amount outstanding at the end of the period, a roll forward of that obligation during the period, and where the obligation is presented on the balance sheet. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, except for the amendment on the roll forward information, which is effective for fiscal years beginning after December 15, 2023. The amendments in this ASU should be applied retrospectively, except for the amendment on the roll forward information, which is applied prospectively. The adoption of this ASU is not expected to have a material impact on AltaGas' consolidated financial statements.

  

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**3. Acquisitions** 

On July 5, 2022, AltaGas acquired the remaining 25.97 percent equity ownership of Petrogas from Idemitsu Canada Corporation, a wholly owned subsidiary of Idemitsu Kosan Co., Ltd. (Idemitsu) for total cash consideration of approximately $285 million. Subsequent to this transaction, AltaGas now owns 100 percent of Petrogas. Due to the acquisition of the remaining equity ownership, AltaGas' accumulated other comprehensive income increased by $5 million and contributed surplus increased by $237 million.

**4. Dispositions**

**Energy Storage Development Project** 

In the first quarter of 2022, AltaGas completed the sale of a 60 MW stand-alone energy storage development project in Goleta, California for total proceeds of approximately $20 million (US$15 million), subject to certain contingencies. As a result, AltaGas recognized a pre-tax gain on disposition of approximately $7 million in the Consolidated Statements of Income under the line item "other income" for the year ended December 31, 2022. In February 2023, the parties reached an agreement on outstanding contingencies and as a result, the buyer paid AltaGas an additional US$8 million.

**Midstream Processing Facilities**

On April 12, 2022, AltaGas completed the sale of its interest in the Aitken Creek processing facilities for total proceeds of approximately $224 million, net of closing adjustments. As a result, AltaGas recognized a pre-tax gain on disposition of approximately $1 million in the Consolidated Statements of Income under the line item "other income" for the year ended December 31, 2022.

**Brush II** 

On May 27, 2022, AltaGas closed the stock sale of its 70 MW combined cycle power plant in Brush, Colorado for total proceeds of approximately $1 million, net of closing adjustments. As a result, AltaGas recognized a pre-tax loss on disposition of approximately $2 million in the Consolidated Statements of Income under the line item "other income" for the year ended December 31, 2022.

  

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**5. Assets Held For Sale**

---

| | | |
|:---|:---|:---|
| As at | **December 31, 2022** | December 31, 2021 |
| **Assets held for sale** |  |  |
| Accounts receivable *(net of credit losses of $1 million) (note 24)* | $**93** | $— |
| Inventory | **86** |  |
| Restricted cash holdings from customers | **1** |  |
| Prepaid expenses and other current assets | **6** |  |
| Property, plant and equipment | **646** |  |
| Intangible assets | **5** |  |
| Operating right-of-use assets | **1** |  |
| Goodwill | **226** |  |
| Regulatory assets - non-current | **14** |  |
| Post retirement benefits | **8** |  |
| Long-term investments and other assets | **1** |  |
|  | $**1087** | $— |
| **Liabilities associated with assets held for sale** |  |  |
| Accounts payable and accrued liabilities | $**59** | $— |
| Current portion of long-term debt | **7** |  |
| Customer deposits | **13** |  |
| Long-term debt | **56** |  |
| Asset retirement obligations | **4** |  |
| Regulatory liabilities - non-current | **96** |  |
| Operating lease liabilities - non-current | **1** |  |
| Other long-term liabilities | **53** |  |
| Future employee obligations | **6** |  |
|  | $**295** | $— |

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**Alaskan Utilities** 

On May 26, 2022, AltaGas entered into an agreement for the Alaska Utilities Disposition for consideration of approximately US$800 million (approximately CAD $1.1 billion) prior to closing adjustments. As such, the carrying value of the assets and liabilities related to this business were classified as held for sale at December 31, 2022, which resulted in the reclassification of $1,087 million of assets to assets held for sale and $295 million of liabilities to liabilities associated with assets held for sale on the Consolidated Balance Sheets. The transaction closed on March 1, 2023. Refer to Note 34 for additional details.

  

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**6. Provisions on Assets**

---

| | | |
|:---|:---|:---|
| Year Ended December 31 | **2022** | 2021 |
| Midstream | $**6** | $59 |
| Corporate/Other | **—** | 5 |
|  | $**6** | $64 |

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**Midstream** 

In 2022, AltaGas recorded a pre-tax provision of $6 million related to the Alton Natural Gas Storage Project as a result of updated reclamation cost estimates. Since AltaGas has abandoned this project, the resulting property, plant and equipment associated with the estimated reclamation costs was impaired. The pre-tax provisions were primarily recorded against property, plant and equipment. In 2021, AltaGas recorded pre-tax provisions of $59 million primarily related to the sale of the U.S. transportation and storage business as well as certain non-core development stage Midstream projects that are no longer being developed. The pre-tax provisions were primarily recorded against intangible assets.

**Corporate/Other** 

There were no provisions recorded in the Corporate/Other segment in 2022. In 2021, AltaGas recorded pre-tax provisions of $5 million related to the Parks at Walter Reed thermal plant in Washington, D.C. which was impaired as the carrying value exceeded future expected cash flows from the asset. The pre-tax provisions were recorded against property, plant and equipment.

**7. Inventory**

---

| | | |
|:---|:---|:---|
| As at December 31 | **2022** | 2021 |
| Natural gas held in storage <sup>(a) (b)</sup> | $**588** | $341 |
| Natural gas liquids | **197** | 175 |
| Materials and supplies | **76** | 70 |
| Renewable energy credits and emission compliance instruments | **127** | 82 |
| Crude oil and condensate | **152** | 109 |
| Processed finished products | **6** | 5 |
|  | $**1146** | $782 |
| Less: inventory reclassified to assets held for sale *(note 5)* <sup>(c)</sup> | **(86)** |  |
|  | $**1060** | $782 |

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(a)As at December 31, 2022, $520 million of the natural gas held in storage was held by rate-regulated utilities (2021 - $304 million).

(b)In 2022, a write-down of $5 million was recorded relating to the revaluation of the Company's natural gas storage inventory in the Midstream business to its net realizable value.

(c)Pursuant to the May 26, 2022 announcement of the sale of the Alaska Utilities Disposition, $72 million of the natural gas held in storage that was held by rate-regulated utilities was reclassified to "assets held for sale" on the Consolidated Balance Sheets at December 31, 2022. The transaction closed on March 1, 2023. Refer to Notes 5 and 34 for more details.

  

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**8. Property, Plant and Equipment** 

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| As at | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | December 31, 2021 | December 31, 2021 | December 31, 2021 |
|  | **Cost** | **Accumulated amortization** | **Net book value** | Cost | Accumulated amortization | Net book value |
| Utilities | $**9806** | $**(614)** | $**9192** | $8432 | $(437) | $7995 |
| Midstream | **3810** | **(884)** | **2926** | 3898 | (793) | 3105 |
| Corporate/Other | **879** | **(665)** | **214** | 840 | (617) | 223 |
| Reclassified to assets held for sale (*note 5)* | **(1124)** | **478** | **(646)** |  |  |  |
|  | $**13371** | $**(1685)** | $**11686** | $13170 | $(1847) | $11323 |

---

Interest capitalized on long-term capital construction projects for the year ended December 31, 2022 was less than $1 million (2021 - $1 million).

As at December 31, 2022, the Corporation had approximately $571 million (December 31, 2021 - $570 million) of capital projects under construction that were not yet subject to amortization.

Depreciation expense related to property, plant and equipment (including assets under capital leases) for the year ended December 31, 2022 was $375 million (2021 - $365 million).

**9. Intangible Assets**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| As at | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | December 31, 2021 | December 31, 2021 | December 31, 2021 |
|  | **Cost** | **Accumulated<br>amortization** | **Net book<br>value** | Cost | Accumulated<br>amortization | Net book<br>value |
| E&T contracts | $**26** | $**(18)** | $**8** | $26 | $(17) | $9 |
| Energy services relationships | **96** | **(86)** | **10** | 90 | (63) | 27 |
| Software | **359** | **(255)** | **104** | 331 | (203) | 128 |
| Land rights | **1** | **—** | **1** | 1 |  | 1 |
| Commodity contracts | **8** | **(6)** | **2** | 7 | (1) | 6 |
| Reclassified to assets held for sale *(note 5)* | **(30)** | **25** | **(5)** |  |  | $— |
|  | $**460** | $**(340)** | $**120** | $455 | $(284) | $171 |

---

Amortization expense related to intangible assets for the year ended December 31, 2022 was $64 million (2021 - $57 million).

As at December 31, 2022, the Corporation excluded $6 million (December 31, 2021 - $7 million) from the asset base subject to amortization. Items excluded relate to software assets under development and assets with an indefinite life.

The following table sets forth the estimated amortization expense of intangible assets, excluding any amortization of assets not yet subject to amortization as well as assets with an indefinite life, for the years ended December 31:

---

| | |
|:---|:---|
| 2023 | $**46** |
| 2024 | $**33** |
| 2025 | $**29** |
| 2026 | $**1** |
| 2027 | $**1** |
| Thereafter | $**4** |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 89

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**10. Leases** 

**Lessee**

AltaGas has operating and finance leases for office space, office equipment, field equipment, rail cars, aquatic use, vehicles, power and gas facilities, transmission and distribution assets, and land.

The components of lease expense were as follows:

---

| | | |
|:---|:---|:---|
| | **Year Ended<br>December 31, 2022** | Year Ended<br>December 31, 2021 |
| Operating lease cost (includes variable lease payments) | $**100** | $96 |
| Finance lease cost |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of right-of-use assets | **7** | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest on lease liabilities | **1** |  |
| Total finance lease cost | $**8** | $6 |
| Total lease cost | $**108** | $102 |

---

Supplemental cash flow information related to leases was as follows:

---

| | | |
|:---|:---|:---|
| Year Ended December 31 | **2022** | 2021 |
| Cash paid for amounts included in the measurement of lease liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating cash flows used by operating leases | $**(111)** | $(96) |
| &nbsp;&nbsp;&nbsp;&nbsp;Financing cash flows used by finance leases <sup>(a)</sup> | $**(8)** | $(6) |
| Right-of-use assets obtained in exchange for new lease liabilities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating leases | $**56** | $38 |
| &nbsp;&nbsp;&nbsp;&nbsp;Finance leases | $**14** | $10 |

---

(a)Included within repayment of long-term debt on the Consolidated Statements of Cash Flows.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 90

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Supplemental balance sheet information related to leases was as follows:

---

| | | |
|:---|:---|:---|
| As at December 31 | **2022** | 2021 |
| **Operating Leases** |  |  |
| Operating lease right-of-use assets |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Long-term | $**281** | $311 |
| &nbsp;&nbsp;&nbsp;&nbsp;Included in assets held for sale *(note 5)* | **1** |  |
| Total operating lease right-of-use assets | $**282** | $311 |
| Operating lease liabilities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Current | $**(92)** | $(91) |
| &nbsp;&nbsp;&nbsp;&nbsp;Long-term | **(215)** | (253) |
| &nbsp;&nbsp;&nbsp;&nbsp;Included in liabilities associated with assets held for sale *(note 5)* | **(1)** |  |
| Total operating lease liabilities | $**(308)** | $(344) |
| **Finance Leases** |  |  |
| Property and equipment, gross | $**46** | $29 |
| Accumulated depreciation | **(21)** | (12) |
| Total property and equipment, net | $**25** | $17 |
| Less: finance lease property and equipment reclassified to assets held for sale *(note 5)* | **(3)** |  |
| Property and equipment, net | $**22** | $17 |
| Current portion of long-term debt | $**(8)** | $(6) |
| Long-term debt | **(17)** | (11) |
| Total finance lease liabilities | $**(25)** | $(17) |
| Less: finance lease liabilities reclassified to liabilities associated with assets held for sale *(note 5)* | **3** |  |
| Finance lease liabilities | $**(22)** | $(17) |

---

---

| | | |
|:---|:---|:---|
| As at | **December 31,<br>2022** | December 31,<br>2021 |
| **Weighted average remaining lease term (years)** |  |  |
| Operating leases | **6.4** | 6.9 |
| Finance leases | **4.5** | 4.3 |
| **Weighted average discount rate (%)** |  |  |
| Operating leases | **2.91** | 2.45 |
| Finance leases | **3.29** | 2.23 |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 91

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Maturity analysis of lease liabilities was as follows:

---

| | | |
|:---|:---|:---|
| | **Operating Leases** | **Finance <br>Leases** |
| 2023 | $95 | $8 |
| 2024 | 65 | 7 |
| 2025 | 50 | 5 |
| 2026 | 41 | 4 |
| 2027 | 25 | 2 |
| Thereafter | 73 | 2 |
| Total lease payments | $349 | $28 |
| Less: imputed interest | (41) | (3) |
| Total | $308 | $25 |

---

**Lessor**

Certain of AltaGas' revenues are obtained through power purchase agreements or take-or-pay contracts whereby AltaGas is the lessor in these operating lease arrangements. Minimum lease payments received are amortized over the term of the lease. Contingent rentals are recorded when the condition that created the present obligation to make such payments occurs such as when actual electricity is generated and delivered.

Maturity analysis of lease receivables was as follows:

---

| | |
|:---|:---|
| | **Operating <br>Leases** |
| 2023 | $73 |
| 2024 | 2 |
| 2025 | 2 |
| 2026 | 2 |
| 2027 | 1 |
| Thereafter | 76 |
| Total | $156 |

---

The carrying value of property, plant, and equipment associated with these leases was approximately $203 million as at December 31, 2022.

AltaGas manages its risk associated with the residual value of its leased assets through strategically constructing leased facilities in key commercial regions and retaining the ability to sell commodities and ancillary services via the merchant market or through commodity sales agreements.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 92

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**11. Goodwill** 

---

| | | |
|:---|:---|:---|
| As at | **December 31,<br>2022** | December 31,<br>2021 |
| Balance, beginning of year | $**5153** | $5039 |
| Adjustment to goodwill on business acquisition | **—** | 147 |
| Goodwill included in dispositions | **—** | (13) |
| Reclassified to assets held for sale *(note 5)* | **(226)** |  |
| Foreign exchange translation | **323** | (20) |
| Balance, end of year | $**5250** | $5153 |

---

**12. Long-Term Investments and Other Assets**

---

| | | |
|:---|:---|:---|
| As at | **December 31,<br>2022** | December 31,<br>2021 |
| Deferred lease receivable | $**17** | $15 |
| Debt issuance costs associated with credit facilities | **7** | 8 |
| Refundable deposits | **10** | 9 |
| Prepayment on long-term service agreements | **79** | 72 |
| Deferred information technology costs | **24** | 6 |
| Cash calls from joint venture partners | **21** | 23 |
| Contract asset *(net of credit losses of $1 million) (notes 24 and 25)* | **37** | 41 |
| Rabbi trust *(notes 29 and 32)* | **8** | 10 |
| Capitalized contract costs | **5** | 5 |
| Financial transmission rights | **39** | 17 |
| Other | **27** | 21 |
|  | $**274** | $227 |
| Less: long-term investments and other assets reclassified to assets held for sale *(note 5)* | **(1)** |  |
|  | $**273** | $227 |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 93

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**13. Variable Interest Entities** 

**Consolidated VIEs**

AltaGas consolidates a variable interest entity (VIE) where the Corporation is deemed the primary beneficiary. The primary beneficiary of a VIE has the power to direct the activities of the entity that most significantly impact its economic performance such as being the provider of construction, operating and marketing services to the entity. In addition, the primary beneficiary of a VIE also has the obligation to absorb losses of the entity or the right to receive benefits that could potentially be significant to the VIE. AltaGas determined that it is the primary beneficiary of the following VIEs:

*<u>Ridley Island LPG Export Limited Partnership</u>* 

On May 5, 2017, AltaGas LPG Limited Partnership (AltaGas LPG), a wholly-owned subsidiary of AltaGas, and Vopak Development Canada Inc. (Vopak), a wholly-owned subsidiary of Koninklijke Vopak N.V. (Royal Vopak), a public company incorporated under the laws of the Netherlands, formed the Ridley Island LPG Export Limited Partnership (RILE LP) to develop, own and operate the Ridley Island Propane Export Terminal (RIPET). AltaGas' subsidiaries hold a 70 percent interest while Vopak holds a 30 percent interest in RILE LP. The construction cost of RIPET was funded by AltaGas LPG and Vopak in proportion to their respective interests in RILE LP. As part of the arrangements, AltaGas entered into a long-term agreement for the capacity of RIPET with RILE LP, and AltaGas and certain of its subsidiaries provide operating services to RILE LP.

AltaGas has determined that RILE LP is a VIE in which it holds variable interests and is the primary beneficiary. In the determination that AltaGas is the primary beneficiary of the VIE, AltaGas noted that it has the power to direct the activities that most significantly impact the VIE's economic performance through the operating and marketing services provided to RILE LP. In addition, AltaGas has the obligation to absorb the losses and the right to receive the benefits that could potentially be significant to RILE LP through the long-term agreement for the capacity of RIPET. As such, AltaGas has consolidated RILE LP.

The assets of RILE LP are the property of RILE LP and are not available to AltaGas for any other purpose. RILE LP's asset balances can only be used to settle its own obligations. The liabilities of RILE LP do not represent additional claims against AltaGas' general assets. AltaGas' exposure to loss as a result of its interest as a limited partner is its net investment. AltaGas and Royal Vopak have provided limited guarantees for the obligations of their respective subsidiaries for the construction cost of RIPET. With the commencement of commercial operations at RIPET, the terms of the long-term capacity agreement between AltaGas LPG and RILE LP provide for a return on and of capital and reimbursement of RIPET's operating costs by AltaGas LPG in accordance with the terms set out in the agreement.

The following table represents amounts included in the Consolidated Balance Sheets attributable to AltaGas' consolidated VIE:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| As at | **December 31, 2022** | December 31, 2021 |  |  |  |
| As at | **December 31, 2022** | December 31, 2021 | Current assets | $**12** | $6.0 |
| Property, plant and equipment | **353** | 357 |  |  |  |
| Long-term investments and other assets | **45** | 47 |  |  |  |
| Current liabilities | **(16)** | (8) |  |  |  |
| Asset retirement obligations | **(4)** | (3) |  |  |  |
| Net assets | $**390** | $399 |  |  |  |

---

*<u>AltaGas Hybrid Trust</u>*

On January 11, 2022, AltaGas closed its offering of $300 million of 5.25 percent Fixed-to-Fixed Rate Subordinated Notes, Series 1 (Note 17). In conjunction with the debt offering, AltaGas issued $300 million in Preferred Shares, Series 2022-A, to be held in the AltaGas Hybrid Trust with Computershare Trust Company of Canada acting as trustee. The Preferred Shares were

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 94

------

issued to satisfy the obligations under the indenture governing the associated Series 1 Subordinated Notes. Following the occurrence of certain bankruptcy or insolvency events in respect of AltaGas, subject to certain exceptions, the Series 2022-A Preferred Shares would be delivered to the holders of the Series 1 Subordinated Notes. Upon delivery of the Series 2022-A Preferred Shares, the Series 1 Subordinated Notes would be immediately and automatically surrendered and cancelled and all rights of any Series 1 Subordinated Notes will automatically cease.

On August 17, 2022, AltaGas closed its offering of $250 million of 7.35 percent Fixed-to-Fixed Subordinated Notes, Series 2 (Note 17). In conjunction with the debt offering, AltaGas issued $250 million in Preferred Shares, Series 2022-B, to be held in the AltaGas Hybrid Trust with Computershare Trust Company of Canada acting as trustee. The Preferred Shares were issued to satisfy the obligations under the indenture governing the associated Series 2 Subordinated Notes. Following the occurrence of certain bankruptcy or insolvency events in respect of AltaGas, subject to certain exceptions, the Series 2022-B Preferred Shares would be delivered to the holders of the Series 2 Subordinated Notes. Upon delivery of the Series 2022-B Preferred Shares, the Series 2 Subordinated Notes would be immediately and automatically surrendered and cancelled and all rights of any Series 2 Subordinated Notes will automatically cease. The only assets held by the holding trust are the Series 2022-A and Series 2022-B Preferred Shares.

AltaGas has determined that AltaGas Hybrid Trust is a VIE in which it holds variable interests and is the primary beneficiary. In the determination that AltaGas is the primary beneficiary of the VIE, AltaGas noted that it has the power to direct the activities that most significantly impact the VIE's economic performance through its role as the sole administrative agent. In addition, AltaGas has the obligation to absorb the administrative expenses that are significant to the trust through the associated administrative agreement. As such, AltaGas has consolidated the AltaGas Hybrid Trust.

**Unconsolidated VIE** 

*<u>Strathcona Storage Limited Partnership (SSLP)</u>* 

Upon the acquisition of Petrogas on December 15, 2020, AltaGas acquired an indirect interest in SSLP, a partnership formed with ATCO Energy Solutions Ltd. to construct, operate, and maintain underground NGL storage caverns at Fort Saskatchewan, Alberta. The facility currently has five underground NGL storage salt caverns. Construction of the fifth cavern was completed in the third quarter of 2022 and is currently storing customer product.

On July 5, 2022, AltaGas acquired the remaining 25.97 percent equity ownership in Petrogas which resulted in an increase in AltaGas' ownership in SSLP from 30 percent to 40 percent. As at December 31, 2022, AltaGas' carrying value in SSLP was $130 million (2021 - $131 million). SSLP is not consolidated by AltaGas and instead is accounted for by the equity method of accounting. AltaGas is not the primary beneficiary of SSLP and it does not have the power to direct the activities most significant to the economic performance of SSLP. The maximum financial exposure to loss as a result of the involvement with this VIE is equal to AltaGas' net investment in SSLP.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 95

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**14. Investments Accounted for by the Equity Method**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | **Carrying value as at December 31** | **Carrying value as at December 31** | **Equity income (loss) for the year ended December 31** | **Equity income (loss) for the year ended December 31** |
| **Description** | **Location** | **Ownership Percentage** | **2022** | 2021 | **2022** | 2021 |
| Constitution Pipeline, LLC (Constitution) <sup>(a)</sup> | United States | **10** | $**—** | $— | $**3** | $— |
| Eaton Rapids Gas Storage System | United States | **50** | **28** | 27 | **3** | 2 |
| Mountain Valley Pipeline, LLC (MVP) <sup>(b)</sup> | United States | **10** | **478** | 447 | **—** | (271) |
| Sarnia Airport Storage Pool LP | Canada | **50** | **17** | 17 | **1** | 1 |
| Petrogas Terminals Penn LLC <sup>(c)</sup> | United States | **50** | **1** | 1 | **—** |  |
| Strathcona Storage LP <sup>(c)</sup> | Canada | **40** | **130** | 131 | **6** | 7 |
|  |  |  | $**654** | $623 | $**13** | $(261) |

---

(a)In the third quarter of 2022, AltaGas received a payment for the return of certain costs associated with the Constitution pipeline project as a result of its cancellation in February 2020.

(b)The equity method is considered appropriate because MVP is an LLC with specific ownership accounts and ownership between five and fifty percent, resulting in WGL Midstream (now WGL Sustainable Energy LLC) exercising a more than minor influence over the investee's operating and financing policies. In 2021, a provision was recorded against the equity investment in MVP due to ongoing legal and regulatory issues. Management has continued to assess the equity investment in MVP for further impairment and determined that no further provisions were required in 2022.

(c)On July 5, 2022, AltaGas acquired the remaining 25.97 percent equity ownership of Petrogas which resulted in an increase in AltaGas' ownership in Petrogas Terminals Penn LLC from 37 percent to 50 percent and in Strathcona Storage LP from 30 percent to 40 percent. Refer to Note 3 for more details.

The carrying amount of certain equity investments differs from the amount of the underlying equity in net assets. These basis differences include amounts related to purchase accounting adjustments, capitalized interest, and a contractual cap on contributions to MVP.

Summarized combined financial information, assuming a 100 percent ownership interest in AltaGas' equity investments listed above, is as follows:

---

| | | |
|:---|:---|:---|
| Year Ended December 31 | **2022** | 2021 |
| Revenues | $**50** | $97 |
| Expenses | **(26)** | (23) |
|  | $**24** | $74 |
| As at December 31 | **2022** | 2021 |
| Current assets | $**136** | $206 |
| Property, plant and equipment | $**9544** | $8571 |
| Long-term investments and other assets | $**12** | $3 |
| Current liabilities | $**(166)** | $(214) |
| Other long-term liabilities | $**(14)** | $(12) |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 96

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**15. Short-term Debt** 

---

| | | |
|:---|:---|:---|
| As at <sup>(a)</sup> | **December 31,<br>2022** | December 31,<br>2021 |
| Commercial paper  | $**293** | $161 |
| Project financing | **—** | 8 |
|  | $**293** | $169 |

---

(a)As at December 31, 2022, AltaGas' weighted average interest rate on short-term borrowings outstanding was 4.8 percent (December 31, 2021 - 0.3 percent).

**Credit Facilities**

As at December 31, 2022, AltaGas held a $70 million (December 31, 2021 - $70 million) unsecured demand revolving operating credit facility with a Canadian chartered bank. Draws on the facility bear interest at the lender's prime rate or at the bankers' acceptance rate plus a stamping fee. As at December 31, 2022, there were no letters of credit outstanding under this facility (December 31, 2021 - $34 million).

As at December 31, 2022, AltaGas held a US$300 million (December 31, 2021 - US$200 million) unsecured bilateral letter of credit demand facility, amended in July 2022, with a Canadian chartered bank. Borrowings on the facility incur fees and interest at rates relevant to the nature of the draws made. Letters of credit outstanding under this facility as at December 31, 2022 were $181 million (December 31, 2021 - $139 million).

As at December 31, 2021, AltaGas held a US$125 million demand letter of credit facility. Letters of credit outstanding under this facility as at December 31, 2021 were $99 million. The facility was terminated in November 2022.

WGL and Washington Gas use short-term debt in the form of commercial paper and advances under its syndicated bank credit facilities to fund seasonal cash requirements. Revolving committed credit facilities are maintained in an amount equal to or greater than the expected maximum commercial paper position. As at December 31, 2022, commercial paper outstanding classified as short-term debt totaled $293 million (December 31, 2021 - $161 million).

As at December 31, 2022, Petrogas held a $30 million (December 31, 2021 - $30 million) unsecured bilateral letter of credit demand facility. Letters of credit outstanding under this facility as at December 31, 2022 were $16 million (December 31, 2021 - $7 million).

As at December 31, 2022, Petrogas held an unsecured bilateral letter of credit demand facility of $25 million (December 31, 2021 - $25 million). As at December 31, 2022, there were no letters of credit outstanding under this facility (December 31, 2021 - $nil).

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 97

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**16. Long-Term Debt** 

---

| | | | |
|:---|:---|:---|:---|
| As at | Maturity date | **December 31,<br>2022** | December 31,<br>2021 |
| Credit facilities |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$2 billion unsecured extendible revolving facility <sup>(a)</sup> | 20-May-2027 | $**860** | $375 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US$150 million unsecured extendible revolving facility | 20-Dec-2026 | **188** | 120 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial paper <sup>(b)</sup> | Various | **386** | 469 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$450 million term loan | 25-Aug-2024 | **450** |  |
| AltaGas Ltd. medium-term notes (MTNs) |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$500 million Senior unsecured - 2.61 percent | 16-Dec-2022 | **—** | 500 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$300 million Senior unsecured - 3.57 percent | 12-Jun-2023 | **300** | 300 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$200 million Senior unsecured - 4.40 percent | 15-Mar-2024 | **200** | 200 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$350 million Senior unsecured - 1.23 percent | 18-Mar-2024 | **350** | 350 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$300 million Senior unsecured - 3.84 percent | 15-Jan-2025 | **300** | 300 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$500 million Senior unsecured - 2.16 percent | 10-Jun-2025 | **500** | 500 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$350 million Senior unsecured - 4.12 percent | 7-Apr-2026 | **350** | 350 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$200 million Senior unsecured - 2.17 percent | 16-Mar-2027 | **200** | 200 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$200 million Senior unsecured - 3.98 percent | 4-Oct-2027 | **200** | 200 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$500 million Senior unsecured - 2.08 percent | 30-May-2028 | **500** | 500 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$200 million Senior unsecured - 2.48 percent | 30-Nov-2030 | **200** | 200 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$100 million Senior unsecured - 5.16 percent | 13-Jan-2044 | **100** | 100 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$300 million Senior unsecured - 4.50 percent | 15-Aug-2044 | **300** | 300 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$250 million Senior unsecured - 4.99 percent | 4-Oct-2047 | **250** | 250 |
| WGL and Washington Gas MTNs and private placement notes |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US$20 million Senior unsecured - 6.65 percent | 20-Mar-2023 | **27** | 25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US$41 million Senior unsecured - 5.44 percent | 11-Aug-2025 | **55** | 51 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US$53 million Senior unsecured - 6.62 to 6.82 percent | Oct 2026 | **72** | 67 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US$72 million Senior unsecured - 6.40 to 6.57 percent | Feb - Sep 2027 | **98** | 91 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US$52 million Senior unsecured - 6.57 to 6.85 percent | Jan - Mar 2028 | **70** | 66 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US$9 million Senior unsecured - 7.50 percent | 1-Apr-2030 | **12** | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US$50 million Senior unsecured - 5.70 to 5.78 percent | Jan - Mar 2036 | **68** | 63 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US$75 million Senior unsecured - 5.21 percent | 3-Dec-2040 | **102** | 95 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US$75 million Senior unsecured - 5.00 percent | 15-Dec-2043 | **102** | 95 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US$300 million Senior unsecured - 4.22 to 4.60 percent | Sep - Nov 2044 | **405** | 380 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US$450 million Senior unsecured - 3.80 percent | 15-Sep-2046 | **608** | 572 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US$400 million Senior unsecured - 3.65 percent <sup>(c)</sup> | 15-Sep-2049 | **563** | 528 |
| &nbsp;&nbsp;&nbsp;&nbsp; US$200 million Senior unsecured - 2.98 percent | 15-Dec-2051 | **271** | 254 |
| &nbsp;&nbsp;&nbsp;&nbsp; US$25 million Senior unsecured - 5.25 percent | 29-Dec-2042 | **34** |  |
| &nbsp;&nbsp;&nbsp;&nbsp; US$175 million Senior unsecured - 5.33 percent | 29-Dec-2052 | **237** |  |
| SEMCO long-term debt |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US$82 million CINGSA Senior secured - 4.48 percent <sup>(d)</sup> | 2-Mar-2032 | **60** | 63 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US$225 million First Mortgage Bonds - 2.45 percent | 21-Apr-2030 | **305** | 285 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US$225 million First Mortgage Bonds - 3.15 percent | 21-Apr-2050 | **305** | 285 |
| Fair value adjustment on WGL acquisition |  | **79** | 77 |
| Finance lease liabilities *(note 10)* |  | **25** | 17 |
|  |  | $**9132** | $8239 |
| Less: debt issuance costs |  | **(41)** | (44) |
|  |  | $**9091** | $8195 |
| Less: current portion |  | **(334)** | (511) |
| Less: liabilities associated with assets held for sale *(note 5)* <sup>(e)</sup> |  | **(63)** |  |
|  |  | $**8694** | $7684 |

---

(a)Borrowings on the facility can be by way of prime loans, U.S. base-rate loans, SOFR loans, bankers' acceptances, or letters of credit. Borrowings on the facility have fees and interest at rates relevant to the nature of the draw made. During the fourth quarter of 2022, AltaGas completed an amendment of the Petrogas $200 million Revolving Credit Facility in which AltaGas has replaced Petrogas as the borrower, which is in addition to the AltaGas $2 billion five-year extendable committed revolving tranche, and the $300 million two-year extendable side car liquidity revolving facility.

(b)Commercial paper is supported by the availability of long-term committed credit facilities maturing in 2024. Commercial paper intended to be repaid within the next year is recorded as short-term debt (Note 15).

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 98

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(c)The outstanding balance includes a US$15 million premium which will be amortized as a reduction to interest expense over the term of the note.

(d)Collateral for the CINGSA Senior secured loan is certain CINGSA assets. Alaska Storage Holding Company, LLC, a subsidiary in which AltaGas has a controlling interest, is the non-recourse guarantor of this loan.

(e)Pursuant to the May 26, 2022 announcement of the Alaska Utilities Disposition, related long-term debt balances totaling $63 million, including the CINGSA Senior secured loan net of issuance costs as well as certain finance lease liabilities, were reclassified to "liabilities associated with assets held for sale" on the Consolidated Balance Sheets at December 31, 2022. The transaction closed on March 1, 2023. Refer to Notes 5 and 34 for more details.

**Credit Facilities** 

During the fourth quarter of 2022, AltaGas closed an amendment on the Petrogas $200 million unsecured extendible revolving credit facility in which AltaGas has replaced Petrogas as the borrower. As at December 31, 2022, AltaGas held $2.5 billion (December 31, 2021 - $2.3 billion) of unsecured revolving credit facilities. These facilities include a $2 billion five-year extendable committed revolving tranche, a $300 million two-year extendable side car revolving tranche, and a $200 million three-year revolving credit facility (previously at Petrogas). Draws on the facilities can be by way of prime loans, U.S. base-rate loans, SOFR loans, bankers' acceptances, or letters of credit. Outstanding bank loans under this facility as at December 31, 2022 were $860 million (December 31, 2021 - $375 million).

As at December 31, 2022, AltaGas held a $450 million unsecured two-year term credit facility which was initiated on August 25, 2022. Draws on the facility can be by way of prime loans, U.S. base-rate loans, SOFR loans, bankers' acceptances, or letters of credit. Outstanding bank loans under this facility as at December 31, 2022 were $450 million.

As at December 31, 2022, WGL held a US$300 million (December 31, 2021 - US$300 million) unsecured revolving credit facility. Draws on the facility can be by way of prime loans, U.S. base-rate loans, LIBOR loans, bankers' acceptances, or letters of credit. There were no outstanding bank loans under this facility as at December 31, 2022 or December 31, 2021.

As at December 31, 2022, Washington Gas held a US$450 million (December 31, 2021 - US$450 million) unsecured revolving credit facility. Draws on the facility can be by way of prime loans, U.S. base-rate loans, LIBOR loans, bankers' acceptances, or letters of credit. There were no outstanding bank loans under this facility as at December 31, 2022 or December 31, 2021.

WGL and Washington Gas use short-term debt in the form of commercial paper and advances under its syndicated bank credit facilities to fund seasonal cash requirements. Revolving committed credit facilities are maintained in an amount equal to or greater than the expected maximum commercial paper position. As at December 31, 2022, outstanding commercial paper classified as long-term debt totaled $386 million (December 31, 2021 - $469 million).

As at December 31, 2022, SEMCO held a US$150 million (December 31, 2021 - US$150 million) unsecured extendible revolving facility. Draws on the facility can be by way of letters of credit, Alternate Base Rate or Eurodollar loans. There were US$140 million outstanding bank loans under this facility as at December 31, 2022 (December 31, 2021 - US$95 million).

As at December 31, 2021, Petrogas held a $25 million swingline facility. There were no outstanding bank loans under this facility as at December 31, 2021. The facility was terminated in December 2022.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 99

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**17. Subordinated Hybrid Notes**

---

| | | | |
|:---|:---|:---|:---|
| As at | Maturity date | **December 31,<br>2022** | December 31,<br>2021 |
| $300 million subordinated notes, Series 1  | 11-Jan-2082 | $**300** | $— |
| $250 million subordinated notes, Series 2 | 17-Aug-2082 | **250** |  |
|  |  | $**550** | $— |
| Less: debt issuance costs |  | **(6)** |  |
|  |  | $**544** | $— |

---

On January 11, 2022, AltaGas closed its offering of $300 million of 5.25 percent Fixed-to-Fixed Rate Subordinated Notes, Series 1, due January 11, 2082. The subordinated notes were offered under AltaGas' short form base shelf prospectus dated February 22, 2021, as supplemented by a prospectus supplement dated January 5, 2022.

On August 17, 2022, AltaGas closed its offering of $250 million of 7.35 percent Fixed-to-Fixed Rate Subordinated Notes, Series 2, due August 17, 2082. The subordinated notes were offered under AltaGas' short form base shelf prospectus dated February 22, 2021, as supplemented by a prospectus supplement dated August 4, 2022.

For the year ended December 31, 2022, AltaGas recorded interest expense of $22 million on the subordinated hybrid notes (2021 - $nil).

**18. Asset Retirement Obligations** 

---

| | | |
|:---|:---|:---|
| As at December 31 | **2022** | 2021 |
| Balance, beginning of year | $**429** | $379 |
| Obligations acquired | **—** | 5 |
| New obligations | **3** | 4 |
| Obligations settled <sup>(a)</sup> | **(10)** | (10) |
| Disposals | **(1)** |  |
| Revision in estimated cash flow | **(2)** | 40 |
| Accretion expense <sup>(b)</sup> | **20** | 19 |
| Foreign exchange translation | **23** | (1) |
| Reclassified to liabilities associated with assets held for sale *(note 5)* | **(4)** |  |
| Total | $**458** | $436 |
| Less: current portion (included in accounts payable and accrued liabilities) | **(7)** | (7) |
| Balance, end of year | $**451** | $429 |

---

(a)During the year ended December 31, 2022, approximately $7 million of asset retirement obligations included in accounts payable and accrued liabilities were settled (December 31, 2021 - $7 million).

(b)Certain amounts relating to Utility asset retirement obligations are recorded through regulatory assets or liabilities on the Consolidated Balance Sheets due to regulatory treatment. The remaining portion is recorded through the Consolidated Statements of Income.

The majority of the asset retirement obligations are associated with distribution and transmission systems in the Utilities segment.

AltaGas estimates the undiscounted cash required to settle the asset retirement obligations, excluding growth for inflation, at December 31, 2022 was $877 million (December 31, 2021 - $892 million).

The asset retirement obligations have been recorded in the Consolidated Financial Statements at estimated values discounted at rates between 2.0 and 8.4 percent (December 31, 2021 - between 2.0 to 8.5 percent) and are expected to be incurred

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 100

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between 2023 and 2140 (December 31, 2021 - between 2022 and 2139). No assets have been legally restricted for settlement of the estimated liability.

**19. Environmental Matters** 

AltaGas is subject to federal, provincial, state and local laws and regulations related to environmental matters. These laws and regulations may require expenditures over a long time frame to control environmental effects. Almost all of the environmental liabilities AltaGas has recorded are for costs expected to be incurred to remediate sites where AltaGas or a predecessor affiliate operated manufactured gas plants (MGPs). Estimates of liabilities for environmental response costs are difficult to determine with precision because of the various factors that can affect their ultimate level. These factors include, but are not limited to, the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ the complexity of the site;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ changes in environmental laws and regulations at the federal, state, and local levels;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ the number of regulatory agencies or other parties involved;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ new technology that renders previous technology obsolete or experience with existing technology that proves ineffective;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ the level of remediation required; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ variations between the estimated and actual period of time that must be dedicated to respond to an environmentally-contaminated site.

AltaGas has identified up to twelve sites where it or its predecessors may have operated MGPs. In connection with these operations, AltaGas is aware that coal tar and certain other by-products of the gas manufacturing process are present at or near some former sites and may be present at others.

As at December 31, 2022, a liability of $13 million has been recorded on an undiscounted basis related to future environmental response costs (December 31, 2021 - $18 million) in the Consolidated Balance Sheets under the line items "accounts payable and accrued liabilities and other long-term liabilities". These estimates principally include the minimum liabilities associated with a range of environmental response costs expected to be incurred. As at December 31, 2022, AltaGas estimated the maximum liability associated with all of its sites to be approximately $50 million (December 31, 2021 - $50 million). The estimates were determined by AltaGas' environmental experts, based on experience in remediating MGP sites and advice from legal counsel and environmental consultants. The variation between the recorded and estimated maximum liability primarily results from differences in the number of years that will be required to perform environmental response processes and the extent of remediation that may be required.

As at December 31, 2022, AltaGas reported a regulatory asset of $15 million (December 31, 2021 - $16 million) for the portion of environmental response costs that are expected to be recoverable in future rates (Note 22).

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 101

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**20. Other Long-term Liabilities** 

---

| | | |
|:---|:---|:---|
| As at | **December 31,<br>2022** | December 31,<br>2021 |
| Deferred revenue | $**11** | $13 |
| Customer advances for construction | **69** | 59 |
| Merger commitments | **5** | 7 |
| Non-retirement employee benefits <sup>(a)</sup> | **51** | 19 |
| Uncertain tax positions *(note 21)* | **20** | 20 |
| Other | **19** | 16 |
|  | $**175** | $134 |
| Less: liabilities associated with assets held for sale *(note 5)* | **(53)** |  |
|  | $**122** | $134 |

---

(a)Consists of long-term portion of liabilities relating to employee incentive plans and other non-retirement related employee benefits.

**21. Income Taxes**

---

| | | |
|:---|:---|:---|
| Year Ended December 31 | **2022** | 2021 |
| Income before income taxes - consolidated | $**716** | $446 |
| Statutory income tax rate (%) | **23.0** | 23.0 |
| Expected taxes at statutory rates | $**165** | $103 |
| Add (deduct) the tax effect of: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Permanent differences | $**2** | $3 |
| &nbsp;&nbsp;&nbsp;&nbsp;Statutory and other rate differences | **1** | 25 |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred income tax recovery on regulated assets | **(21)** | (18) |
| &nbsp;&nbsp;&nbsp;&nbsp;Tax differences on divestitures and transactions | **(3)** | (4) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other | **(1)** | (3) |
|  | $**143** | $106 |
| **Income tax provision** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Current | $**23** | $59 |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred | **120** | 47 |
|  | $**143** | $106 |
| Effective income tax rate (%) | **20.0** | 23.8 |

---

Net deferred income tax liabilities were composed of the following:

---

| | | |
|:---|:---|:---|
| As at | **December 31,<br>2022** | December 31,<br>2021 |
| PP&E and intangible assets | $**1862** | $1709 |
| Regulatory assets | **(187)** | (233) |
| Tax pools, deferred financing, and compensation | **(238)** | (236) |
| Other | **(69)** | (84) |
| Valuation allowance | **1** | 2 |
|  | $**1369** | $1158 |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 102

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The amount shown on the Consolidated Balance Sheets as deferred income tax liabilities represents the net differences between the tax basis and book carrying values on the Corporation's balance sheets at enacted tax rates.

As at December 31, 2022, the Corporation had tax-effected non-capital losses of approximately $338 million, which will be available to offset future taxable income. If not used, these losses will expire between 2027 and 2042.

**Uncertain Tax Positions**

The Corporation recognizes the benefit of an uncertain tax position only when it is more likely than not that such a position will be sustained by the taxing authorities based on the technical merits of the position. The current and deferred tax impact is equal to the largest amount, considering possible settlement outcomes, that has greater than 50 percent likelihood of being realized upon settlement with the taxing authorities.

On an annual basis, the Corporation and its subsidiaries file tax returns in Canada and various foreign jurisdictions. In Canada, AltaGas' federal and provincial tax returns for the years 2013 to 2021 remain subject to examination by taxation authorities. In the United States, both the federal and state tax returns for the years 2018 to 2021 remain subject to examination by the taxation authorities.

Management determined that the following provision was required for uncertainty on income taxes during the year:

---

| | | |
|:---|:---|:---|
| Year ended December 31 | **2022** | 2021 |
| Balance, beginning of year | $**20** | $21 |
| Settlement | **—** | (1) |
| Balance, end of year | $**20** | $20 |

---

**22. Regulatory Assets and Liabilities**

AltaGas accounts for certain transactions in accordance with ASC 980, Regulated Operations. AltaGas refers to this accounting guidance for regulated entities as "regulatory accounting". Under regulatory accounting, utilities are permitted to defer expenses and income as regulatory assets and liabilities, respectively, in the Consolidated Balance Sheets when it is probable that those expenses and income will be allowed in the rate-setting process in a period different from the period in which they would have been reflected in the Consolidated Statements of Income by a non-rate-regulated entity. These deferred regulatory assets and liabilities are included in the Consolidated Statements of Income in future periods when the amounts are reflected in customer rates. If an application is filed to modify customer rates with certain regulatory commissions, AltaGas is permitted to charge customers new rates, subject to refund, until the regulatory commission renders a final decision. During this interim period, a provision is recorded for a rate refund regulatory liability based on the difference between the amount collected in rates and the amount expected to be recovered from a final regulatory decision.

Management's assessment of the probability of recovery or pass-through of regulatory assets and liabilities requires judgment and interpretation of laws and regulatory agency orders, rules, and rate-making conventions. The relevant regulatory bodies are the MPSC, RCA, PSC of DC, PSC of MD, and SCC of VA.

If, for any reason, the Corporation ceases to meet the criteria for application of regulatory accounting for all or part of its operations, the regulatory assets and liabilities related to those portions ceasing to meet such criteria would be de-recognized from the Consolidated Balance Sheets and included in the Consolidated Statements of Income for the period in which the discontinuance of regulatory accounting occurs. Criteria that give rise to the discontinuance of regulatory accounting include: (i) increasing competition that restricts the ability of the Corporation to charge prices sufficient to recover specific costs, and (ii)

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 103

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a significant change in the manner in which rates are set by regulatory agencies from cost-based regulation to another form of regulation. The Corporation's review of these criteria currently supports the continued application of regulatory accounting for all its utilities.

The following table summarizes the regulatory assets and liabilities recorded in the Consolidated Balance Sheets, as well as the remaining period, as at December 31, 2022 and 2021, over which the Corporation expects to realize or settle the assets or liabilities:

---

| | | | |
|:---|:---|:---|:---|
| As at December 31 | **2022** | 2021 | Recovery<br>Period |
| **Regulatory assets - current** |  |  |  |
| &nbsp;&nbsp;Deferred cost of gas <sup>(a)</sup> | $**15** | $20 | Less than one year |
| &nbsp;&nbsp;Accelerated replacement recovery mechanisms <sup>(b)</sup> | **11** | 7 | Less than one year |
| &nbsp;&nbsp;Energy optimization costs | **4** | 5 | Less than one year |
| &nbsp;&nbsp;Virginia and Maryland revenue normalization <sup>(c)</sup> | **8** | 16 | Less than one year |
|  | $**38** | $48 |  |
| **Regulatory assets - non-current** |  |  |  |
| &nbsp;&nbsp;Deferred regulatory costs <sup>(c) (d)</sup> | $**254** | $199 | 1 - 53 years |
| &nbsp;&nbsp;Future recovery of pension and other retirement benefits <sup>(c)</sup> | **1** | 33 | 2 - 20 years |
| &nbsp;&nbsp;Future recovery of non-retirement employee benefits <sup>(c) (e)</sup> | **16** | 19 | Various |
| &nbsp;&nbsp;Deferred environmental costs <sup>(c) (f)</sup> | **15** | 16 | Various |
| &nbsp;&nbsp;Deferred loss on debt transactions and derivative instruments <sup>(c) (g)</sup> | **91** | 89 | Various |
| &nbsp;&nbsp;Deferred future income taxes <sup>(c) (h)</sup>  | **42** | 43 | Various |
| &nbsp;&nbsp;Energy efficiency program - Maryland <sup>(i)</sup> | **31** | 23 | Various |
| &nbsp;&nbsp;COVID-19 costs <sup>(j)</sup> | **4** | 6 | Various |
| &nbsp;&nbsp;Other | **8** | 8 | Various |
|  | $**462** | $436 |  |
| &nbsp;&nbsp;Less: non-current regulatory assets reclassified to assets held for sale *(note 5)* | **(14)** |  |  |
|  | $**448** | $436 |  |
| **Regulatory liabilities - current** |  |  |  |
| &nbsp;&nbsp;Deferred cost of gas <sup>(a)</sup> | $**164** | $71 | Less than one year |
| &nbsp;&nbsp;Refundable tax credit | **—** | 2 | n/a |
| &nbsp;&nbsp;Federal income tax rate change <sup>(k)</sup>  | **1** | 1 | Less than one year |
| &nbsp;&nbsp;Virginia rate refund <sup>(m)</sup> | **5** |  | Less than one year |
| &nbsp;&nbsp;Interruptible sharing <sup>(c)</sup> | **3** | 4 | Less than one year |
| &nbsp;&nbsp;Virginia and Maryland revenue normalization <sup>(a)</sup> | **2** |  | Less than one year |
| &nbsp;&nbsp;Virginia Coronavirus Relief Fund <sup>(n)</sup> | **—** | 1 | n/a |
| &nbsp;&nbsp;&nbsp;&nbsp;Other | **8** |  | Less than one year |
|  | $**183** | $79 |  |
| **Regulatory liabilities - non-current** |  |  |  |
| &nbsp;&nbsp;Future expense of pension and other retirement benefits <sup>(c)</sup> | $**235** | $425 | Various |
| &nbsp;&nbsp;Future removal and site restoration costs <sup>(l)</sup> | **490** | 453 | Various |
| &nbsp;&nbsp;Deferred gain on debt transactions and derivative instruments <sup>(c) (g)</sup> | **1** | 1 | Various |
| &nbsp;&nbsp;Federal income tax rate change <sup>(k)</sup> | **568** | 543 | Various |
| &nbsp;&nbsp;Other | **3** | 2 | Various |
|  | $**1297** | $1424 |  |
| &nbsp;&nbsp;Less: non-current regulatory liabilities associated with assets held for sale *(note 5)* | **(96)** |  |  |
|  | $**1201** | $1424 |  |

---

(a)Washington Gas is not entitled to a rate of return on these assets. Washington Gas is allowed to recover and required to pay, using short-term interest rates, the carrying costs related to billed gas costs due from and to its customers in the District of Columbia and Virginia jurisdictions.

(b)Represents amounts for deferred over or under collections of surcharges associated with Washington Gas' accelerated pipeline recovery programs in the District of Columbia, Maryland, and Virginia.

(c)Washington Gas is not entitled to a rate of return on these assets.

(d)Includes deferred gas costs and fair value of derivatives, which are not included in customer bills until settled.

(e)Represents the timing difference between the recognition of workers compensation and short-term disability costs in accordance with generally accepted accounting principles and the way these costs are recovered through rates.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 104

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(f)This balance represents allowed environmental remediation expenditures at SEMCO and Washington Gas sites to be recovered through rates.

(g)The losses or gains on the issuance and extinguishment of debt and interest-rate derivative instruments include unamortized balances from transactions executed in prior years. These transactions create gains and losses that are amortized over the remaining life of the debt as prescribed by regulatory accounting requirements. As at December 31, 2022, this also includes a fair value adjustment of $74 million (December 31, 2021 - $72 million) recorded on the WGL Acquisition in 2018.

(h)This balance represents amounts due from customers for deferred tax assets and liabilities related to tax benefits/expenses on deductions flowed directly to customers prior to the adoption of income tax normalizations for ratemaking purposes and to tax rate changes.

(i)Represents amounts for deferred credits associated with Washington Gas' participation in the energy conservation and efficiency program EmPower in Maryland.

(j)Regulatory assets established to capture and track incremental COVID-19 related costs.

(k)The *Tax Cuts and Jobs Act* (TCJA) was enacted on December 22, 2017, and required the Corporation to revalue its U.S. deferred tax assets and liabilities in 2018 to the lower federal corporate tax rate of 21 percent, resulting in excess accumulated deferred income taxes. The tax rate reduction created a reduction in deferred tax liability, which SEMCO Gas and Washington Gas are required to refund to ratepayers.

(l)This amount and timing of draw down is dependent upon the cost of removal of the underlying utility property, plant and equipment and its useful life.

(m)This amount represents estimated refunds related to customers billed at a higher rate during the interim period as part of the 2022 Virginia rate case.

(n)The Virginia Coronavirus Relief Fund was received by WGL to provide direct assistance to Virginia customers with balances over 60 days in arrears.

**23. Accumulated Other Comprehensive Income (Loss)**

---

| | | | | |
|:---|:---|:---|:---|:---|
| *($ millions)* | **Defined benefit pension and PRB plans** | **Hedge net investments** | **Translation foreign operations** | **Total** |
| **Opening balance, January 1, 2022** | $**(8)** | $**(158)** | $**159** | $**(7)** |
| &nbsp;&nbsp;OCI before reclassification | **4** | **(17)** | **640** | **627** |
| Current period OCI (pre-tax) | $**4** | $**(17)** | $**640** | $**627** |
| &nbsp;&nbsp;Income tax on amounts retained in AOCI | **(1)** | **2** | **—** | **1** |
| Net current period OCI | $**3** | $**(15)** | $**640** | $**628** |
| Purchase of remaining non-controlling interest in subsidiaries *(note 3)* | **—** | **—** | **5** | **5** |
| **Ending balance, December 31, 2022** | $**(5)** | $**(173)** | $**804** | $**626** |
| Opening balance, January 1, 2021 | $(12) | $(158) | $220 | $50 |
| &nbsp;&nbsp;OCI before reclassification | 3 |  | (61) | (58) |
| &nbsp;&nbsp;&nbsp;Amounts reclassified from OCI | 3 |  |  | 3 |
| Current period OCI (pre-tax) | $6 | $— | $(61) | $(55) |
| &nbsp;&nbsp;Income tax on amounts retained in AOCI | (1) | **—** | **—** | (1) |
| &nbsp;&nbsp;Income tax on amounts reclassified to earnings | (1) | **—** | **—** | (1) |
| Net current period OCI | $4 | $— | $(61) | $(57) |
| Ending balance, December 31, 2021 | $(8) | $(158) | $159 | $(7) |

---

**Reclassification From Accumulated Other Comprehensive Income** 

---

| | | | |
|:---|:---|:---|:---|
| AOCI components reclassified | Income statement line item | **Year Ended December 31, 2022** | Year Ended<br>December 31, 2021 |
| Defined benefit pension and PRB plans | Other income | $**—** | $3 |
| Deferred income taxes | Income tax expense – deferred | **—** | (1) |
|  |  | $**—** | $2 |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 105

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**24. Financial Instruments and Financial Risk Management**

The Corporation's financial instruments consist of cash and cash equivalents, accounts receivable, risk management contracts, certain long-term investments and other assets, accounts payable and accrued liabilities, dividends payable, short-term and long-term debt, and certain other current and long-term liabilities.

**Fair Value Hierarchy**

AltaGas categorizes its financial assets and financial liabilities into one of three levels based on fair value measurements and inputs used to determine the fair value.

*Level 1* - fair values are based on unadjusted quoted prices in active markets for identical assets or liabilities. Fair values are based on direct observations of transactions involving the same assets or liabilities and no assumptions are used. Included in this category are publicly traded shares valued at the closing price as at the balance sheet date.

*Level 2* - fair values are determined based on valuation models and techniques where inputs other than quoted prices included within Level 1 are observable for the asset or liability either directly or indirectly. AltaGas enters into derivative instruments in the futures, over-the-counter and retail markets to manage fluctuations in commodity prices and foreign exchange rates. The fair values of power, natural gas, NGL, LPG, ocean freight, and crude oil derivative contracts were calculated using forward prices based on published sources for the relevant period, adjusted for factors specific to the asset or liability, including basis and location differentials, discount rates, and currency exchange. The fair value of foreign exchange derivative contracts was calculated using quoted market rates.

*Level 3* - fair values are based on inputs for the asset or liability that are not based on observable market data. AltaGas uses valuation techniques when observable market data is not available. Level 3 derivatives include physical contracts at illiquid market locations with no observable market data, long-dated positions where observable pricing is not available over the life of the contract, contracts valued using historical spot price volatility assumptions, and valuations using indicative broker quotes for inactive market locations. A significant change to any one of these inputs in isolation could result in a significant upward or downward fluctuation in the fair value measurement.

The following methods and assumptions were used to estimate the fair value of each significant class of financial instruments:

*Other current liabilities* - the carrying amounts approximate fair value because of the short maturity of these instruments.

*Current portion of long-term debt, Long-term debt (including debt classified as held for sale), Subordinated hybrid notes, and Other long-term liabilities* - the fair value of these liabilities was estimated based on discounted future interest and principal payments using the current market interest rates of instruments with similar terms.

*Risk management assets and liabilities* - the fair values of power, natural gas, NGL, and crude oil derivative contracts were calculated using forward prices from published sources for the relevant period. The fair value of foreign exchange derivative contracts was calculated using quoted market rates. The fair value of Level 3 derivative contracts was calculated using internally developed valuation inputs and pricing models.

*Loans and receivables* – the fair value of these assets was estimated based on discounted future interest and principal payments using the current market interest rates of instruments with similar terms.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 106

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **As at** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| | **Carrying Amount** | **Level 1** | **Level 2** | **Level 3** | **Total Fair Value** |
| Financial assets |  |  |  |  |  |
| &nbsp;&nbsp;Fair value through net income <sup>(a)</sup> |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk management assets - current | $**132** | $**—** | $**96** | $**36** | $**132** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk management assets - non-current | **77** | **—** | **52** | **25** | **77** |
| &nbsp;&nbsp;Fair value through regulatory assets <sup>(a)</sup> |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk management assets - current | **8** | **—** | **6** | **2** | **8** |
|  | **217** | $**—** | $**154** | $**63** | $**217** |
| Financial liabilities |  |  |  |  |  |
| &nbsp;&nbsp;Fair value through net income <sup>(a)</sup> |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk management liabilities - current | $**133** | $**—** | $**11** | $**122** | $**133** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk management liabilities - non-current | **170** | **—** | **4** | **166** | **170** |
| &nbsp;&nbsp;Fair value through regulatory liabilities <sup>(a)</sup> |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk management liabilities - current | **39** | **—** | **—** | **39** | **39** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk management liabilities - non-current | **128** | **—** | **—** | **128** | **128** |
| &nbsp;&nbsp;Amortized cost |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current portion of long-term debt | **334** | **—** | **334** | **—** | **334** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-term debt  | **8694** | **—** | **7721** | **—** | **7721** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subordinated hybrid notes | **544** | **—** | **480** | **—** | **480** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debt classified as held for sale *(note 5)* | **63** | **—** | **60** | **—** | **60** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other current liabilities <sup>(b)</sup> | **52** | **—** | **52** | **—** | **52** |
|  | $**10157** | $**—** | $**8662** | $**455** | $**9117** |

---

(a)To manage price risk associated with acquiring natural gas supply for Maryland, Virginia, and District of Columbia utility customers, Washington Gas, a subsidiary of the Corporation, enters into physical and financial derivative transactions. Any gains and losses associated with these derivatives are recorded as regulatory liabilities or assets, respectively, to reflect the rate treatment for these economic hedging activities. Additionally, as part of its asset optimization program, Washington Gas enters into derivatives with the primary objective of securing operating margins that Washington Gas will ultimately realize. Regulatory sharing mechanisms provide for the annual realized profit from these transactions to be shared between Washington Gas' shareholder and customers; therefore, changes in fair value are recorded through earnings, or as regulatory assets or liabilities to the extent that it is probable that realized gains and losses associated with these derivative transactions will be included in the rates charged to customers when they are realized.

(b)Excludes non-financial liabilities.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| As at | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 |
|  | Carrying <br>Amount | Level 1 | Level 2 | Level 3 | Total <br>Fair Value |
| Financial assets |  |  |  |  |  |
| &nbsp;&nbsp;Fair value through net income <sup>(a)</sup> |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk management assets - current | $112 | $— | $73 | $39 | $112 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk management assets - non-current | 50 |  | 22 | 28 | 50 |
| &nbsp;&nbsp;Fair value through regulatory assets <sup>(a)</sup> |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk management assets - current | 1 |  |  | 1 | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk management assets - non-current | 1 |  |  | 1 | 1 |
|  | $164 | $— | $95 | $69 | $164 |
| Financial liabilities |  |  |  |  |  |
| &nbsp;&nbsp;Fair value through net income <sup>(a)</sup> |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk management liabilities - current | $113 | $— | $58 | $55 | $113 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk management liabilities - non-current | 90 |  | 11 | 79 | 90 |
| &nbsp;&nbsp;Fair value through regulatory liabilities <sup>(a)</sup> |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk management liabilities - current | 15 |  |  | 15 | 15 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk management liabilities - non-current | 75 |  |  | 75 | 75 |
| &nbsp;&nbsp;Amortized cost |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current portion of long-term debt | 511 |  | 511 |  | 511 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-term debt | 7684 |  | 7898 |  | 7898 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other current liabilities <sup>(b)</sup> | 43 |  | 43 |  | 43 |
|  | $8531 | $— | $8521 | $224 | $8745 |

---

(a)To manage price risk associated with acquiring natural gas supply for Maryland, Virginia, and District of Columbia utility customers, Washington Gas, a subsidiary of the Corporation, enters into physical and financial derivative transactions. Any gains and losses associated with these derivatives are

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 107

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recorded as regulatory liabilities or assets, respectively, to reflect the rate treatment for these economic hedging activities. Additionally, as part of its asset optimization program, Washington Gas enters into derivatives with the primary objective of securing operating margins that Washington Gas will ultimately realize. Regulatory sharing mechanisms provide for the annual realized profit from these transactions to be shared between Washington Gas' shareholder and customers; therefore, changes in fair value are recorded through earnings, or as regulatory assets or liabilities to the extent that it is probable that realized gains and losses associated with these derivative transactions will be included in the rates charged to customers when they are realized.

(b)Excludes non-financial liabilities.

Financial assets and liabilities not included in the fair value hierarchy table include money market funds, short term debt, and commercial paper. The carrying value of these financial instruments approximate their fair value, which reflects the short-term maturity and/or normal credit terms of these financial instruments.

The following table includes quantitative information about the significant unobservable inputs used in the fair value measurement of Level 3 financial instruments as at December 31, 2022:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Net Fair Value** | **Valuation Technique** | **Unobservable Inputs** | **Range** | **Range** | **Weighted Average** <sup>(a)</sup> |
| Natural gas | $(222) | Discounted Cash Flow | Natural Gas Basis Price (per Dth) | $(2.59) | $14.00 | $(0.50) |
| Natural gas | $(4) | Option Model | Natural Gas Basis Price (per Dth) | $(2.06) | $7.30 | $0.73 |
|  |  |  | Annualized Volatility of Spot Market Natural Gas | 22% | 292% | 91% |
| Electricity | $(166) | Discounted Cash Flow | Electricity Congestion Price (per MWh) | $(10.86) | $185.54 | $23.20 |

---

(a)Unobservable inputs were weighted by transaction volume.

The following tables provide a reconciliation of changes in net fair value of derivative assets and liabilities classified as Level 3 in the fair value hierarchy:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| For the year ended December 31 | **2022** | **2022** | **2022** | 2021 | 2021 | 2021 |
|  | **Natural<br> Gas** | **Electricity** | **Total** | Natural<br> Gas | Electricity | Total |
| Balance, beginning of year | $**(107)** | $**(48)** | $**(155)** | $(74) | $(19) | $(93) |
| Net realized and unrealized losses: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Recorded in income | **(43)** | **(213)** | **(256)** | (15) | (25) | (40) |
| &nbsp;&nbsp;&nbsp;&nbsp;Recorded in regulatory assets | **(100)** | **—** | **(100)** | (28) |  | (28) |
| Transfers out of Level 3 | **2** | **(30)** | **(28)** | (1) |  | (1) |
| Purchases | **—** | **16** | **16** |  | 4 | 4 |
| Settlements | **35** | **118** | **153** | 14 | (8) | 6 |
| Foreign exchange translation | **(13)** | **(9)** | **(22)** | (3) |  | (3) |
| Balance, end of year | $**(226)** | $**(166)** | $**(392)** | $(107) | $(48) | $(155) |

---

Transfers between different levels of the fair value hierarchy may occur based on fluctuations in the valuation and on the level of observable inputs used to value the instruments from period to period. Transfers into and out of the different levels of the fair value hierarchy are presented at the fair value as of the beginning of the period. Transfers out of Level 3 during the year ended December 31, 2022 were due to an increase in valuations using observable market inputs.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 108

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**Realized and Unrealized Gains (Losses) Recorded to Income for Level 3 Measurements**

---

| | | |
|:---|:---|:---|
| Year Ended December 31 | **2022** | 2021 |
| Recorded to revenue | $**(258)** | $(79) |
| Recorded to cost of sales | **2** | 39 |
|  | $**(256)** | $(40) |

---

**Summary of Unrealized Gains (Losses) on Risk Management Contracts Recognized in Net Income** 

---

| | | |
|:---|:---|:---|
| Year Ended December 31 | **2022** | 2021 |
| Natural gas | $**(57)** | $6 |
| Energy exports | **21** | 38 |
| Crude oil and NGLs | **2** | &nbsp;&nbsp;&nbsp;1 |
| NGL frac spread | **16** | (13) |
| Power | **(31)** | 9 |
| Foreign exchange | **—** | (23) |
|  | $**(49)** | $18 |

---

**Offsetting of Derivative Assets and Derivative Liabilities** 

Certain of AltaGas' risk management contracts are subject to master netting arrangements that create a legally enforceable right for a counterparty to offset the related financial assets and financial liabilities. As part of these master netting agreements, cash, letters of credit and parental guarantees may be required to be posted or obtained from counterparties in order to mitigate credit risk related to both derivative and non-derivative positions. Collateral balances are also offset against the related counterparties' derivative positions to the extent the application would not result in the over-collateralization of those derivative positions on the balance sheet.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **As at** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| | **Gross amounts of recognized <br>assets/liabilities** | **Gross amounts <br> offset in <br>balance sheet** | **Netting <br>of collateral** | **Net amounts <br>presented in <br>balance sheet** |
| Risk management assets <sup>(a)</sup> |  |  |  |  |
| Natural gas | $**174** | $**(80)** | $**(17)** | $**77** |
| Energy exports | **105** | **(112)** | **34** | **27** |
| Crude oil and NGLs | **6** | **(4)** | **2** | **4** |
| NGL frac spread | **6** | **(6)** | **—** | **—** |
| Power | **153** | **(44)** | **—** | **109** |
|  | $**444** | $**(246)** | $**19** | $**217** |
| Risk management liabilities <sup>(b)</sup> |  |  |  |  |
| Natural gas | $**360** | $**(80)** | $**—** | $**280** |
| Energy exports | **112** | **(112)** | **—** | **—** |
| Crude oil and NGLs | **4** | **(4)** | **—** | **—** |
| NGL frac spread | **9** | **(6)** | **—** | **3** |
| Power | **231** | **(44)** | **—** | **187** |
|  | $**716** | $**(246)** | $**—** | $**470** |

---

(a)Net amount of risk management assets on the Balance Sheet is comprised of risk management assets (current) balance of $140 million and risk management assets (non-current) balance of $77 million.

(b)Net amount of risk management liabilities on the Balance Sheet is comprised of risk management liabilities (current) balance of $172 million and risk management liabilities (non-current) balance of $298 million.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 109

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---

| | | | | |
|:---|:---|:---|:---|:---|
| As at | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 |
|  | Gross amounts of <br>recognized <br>assets/liabilities | Gross amounts <br> offset in <br>balance sheet | Netting <br>of collateral | Net amounts <br>presented in <br>balance sheet |
| Risk management assets <sup>(a)</sup> |  |  |  |  |
| Natural gas | $94 | $(22) | $(25) | $47 |
| Energy exports | 61 | (60) | 37 | 38 |
| NGL frac spread | 4 |  |  | 4 |
| Power | 101 | (25) | (1) | 75 |
|  | $260 | $(107) | $11 | $164 |
| Risk management liabilities <sup>(b)</sup> |  |  |  |  |
| Natural gas | $164 | $(22) | $(4) | $138 |
| Energy exports | 81 | (60) | 2 | 23 |
| Crude oil and NGLs | 6 |  | 2 | 8 |
| NGL frac spread | 23 |  |  | 23 |
| Power | 126 | (25) |  | 101 |
|  | $400 | $(107) | $— | $293 |

---

(a)Net amount of risk management assets on the Balance Sheet is comprised of risk management assets (current) balance of $113 million and risk management assets (non-current) balance of $51 million.

(b)Net amount of risk management liabilities on the Balance Sheet is comprised of risk management liabilities (current) balance of $128 million and risk management liabilities (non-current) balance of $165 million.

**Cash Collateral** 

The following table presents collateral not offset against risk management assets and liabilities:

---

| | | |
|:---|:---|:---|
| As at | **December 31,<br>2022** | December 31,<br>2021 |
| Collateral posted with counterparties | $**2** | $9 |
| Cash collateral held representing an obligation | $**4** | $2 |

---

Any collateral posted that is not offset against risk management assets and liabilities is included in line item "prepaid expenses and other current assets" in the Consolidated Balance Sheets. Collateral received and not offset against risk management assets and liabilities is included in line item "customer deposits" in the Consolidated Balance Sheets.

Certain derivative instruments contain contract provisions that require collateral to be posted if the credit rating of AltaGas or certain of its subsidiaries falls below certain levels. At December 31, 2022 and December 31, 2021, AltaGas has not posted any collateral related to its derivative liabilities that contained credit-related contingent features. The following table shows the aggregate fair value of all derivative instruments with credit-related contingent features that are in a liability position, as well as the maximum amount of collateral that would be required if specific credit-risk-related contingent features underlying these agreements were triggered:

---

| | | |
|:---|:---|:---|
| As at | **December 31,<br>2022** | December 31,<br>2021 |
| Risk management liabilities with credit-risk-contingent features | $**145** | $42 |
| Maximum potential collateral requirements | $**68** | $21 |

---

**Risks Associated with Financial Instruments**

AltaGas is exposed to various financial risks in the normal course of operations such as market risks resulting from fluctuations in commodity prices, currency exchange rates and interest rates as well as credit risk and liquidity risk.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 110

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***Commodity Price Risk***

AltaGas enters into financial derivative contracts to manage exposure to fluctuations in commodity prices. The use of derivative instruments is governed under formal risk management policies and is subject to parameters set out by AltaGas' Risk Management Committee and Board of Directors. AltaGas does not make use of derivative instruments for speculative purposes.

<u>Natural Gas</u>

In the normal course of business, AltaGas purchases and sells natural gas to support its infrastructure business. The fixed price and market price contracts for both the purchase and sale of natural gas extend to 2033. In addition, AltaGas may enter into financial derivative contracts as part of WGL's asset optimization program. WGL optimized the value of its long-term natural gas transportation and storage capacity resources during periods when these resources are not being used to physically serve utility customers.

AltaGas had the following forward contracts and commodity swaps outstanding related to the activities in the energy services business as at December 31, 2022 and 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2022** | **Fixed price<br>(per GJ)** | **Period <br>(months)** | **Notional volume (GJ)** | **Fair Value**<br>***($ millions)*** |
| Sales | **1.75 to 20.38** | **1-130** | **244060786** | $**(54)** |
| Purchases <sup>(a)</sup> | **1.75 to 20.38** | **1-98** | **521045852** | $**(169)** |
| Swaps | **3.28 to 17.02** | **1-57** | **147565012** | $**20** |
| December 31, 2021 | Fixed price <br>(per GJ) | Period <br>(months) | Notional volume (GJ) | Fair Value<br>*($ millions)* |
| Sales | 1.75 to 10.8 | 1-142 | 259750059 | $(8) |
| Purchases | 1.75 to 10.8 | 1-143 | 606923548 | $(102) |
| Swaps | 2.95 to 7.42 | 1-55 | 201266412 | $19 |

---

(a)Excludes approximately 191,071,366 GJ of natural gas purchases through 2033 that are contingent on the in-service date of the Mountain Valley Pipeline.

<u>Crude Oil and NGLs</u>

In the normal course of business, AltaGas utilizes financial swaps to manage the impact of timing between when product is purchased and sold in addition to differing indices on purchase and sales.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2022** | **Fixed price<br>(per Bbl)** | **Period <br>(months)** | **Notional volume (Bbl)** | **Fair Value**<br>***($ millions)*** |
| Swaps | **44.19 to 120.45** | **1-12** | **1597173** | $**4** |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| December 31, 2021 | Fixed price<br>(per Bbl) | Period <br>(months) | Notional volume (Bbl) | Fair Value<br>*($ millions)* |
| Swaps | 41.18 to 97.12 | 1-12 | 864000 | $(8) |

---

<u>Energy Exports</u> 

AltaGas entered into a series of swaps to lock in a portion of the volumes exposed to the propane and butane price differentials between North American Indices and the Far East Index for contracts not under tolling arrangements at RIPET and Ferndale. AltaGas had the following contracts outstanding as at December 31, 2022:

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 111

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---

| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2022** | **Fixed price <br>(per Bbl)** | **Period <br>(months)** | **Notional volume <br>(Bbl)** | **Fair Value**<br>***($ millions)*** |
| Purchases | **9.45** | **1-3** | **90646** | **Less than $1 million** |
| Propane and butane swaps | **4.8 to 118.69** | **1-12** | **89433941** | $**27** |
| December 31, 2021 | Fixed price <br>(per Bbl) | Period <br>(months) | Notional volume <br>(Bbl) | Fair Value<br>*($ millions)* |
| Propane and butane swaps | 5.2 to 115.54 | 1-15 | 38860780 | $15 |

---

<u>NGL Frac Spread</u> 

AltaGas entered into a series of swaps to lock in a portion of the volumes exposed to NGL frac spread. AltaGas had the following contracts outstanding as at December 31, 2022 and 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2022** | **Fixed price** | **Period<br>(months)** | **Notional volume** | **Fair Value**<br>***($ millions)*** |
| Propane swaps | **48.94 to 50.79/Bbl** | **1-12** | **1075194** **Bbl** | $**5** |
| Crude oil swaps | **108.65 to 113.88/Bbl** | **1-12** | **214255** **Bbl** | $**1** |
| Natural gas swaps | **4.5 to 4.98/GJ** | **1-12** | **6139191** **GJ** | $**(9)** |
| December 31, 2021 | Fixed price | Period<br>(months) | Notional volume | Fair Value<br>*($ millions)* |
| Propane swaps | 33.14 to 59.75/Bbl | 1-12 | 2099243 Bbl | $(15) |
| Butane swaps | 36.19 to 36.20/Bbl | 1-3 | 18967 Bbl | $(1) |
| Crude oil swaps | 63.25 to 89.86/Bbl | 1-12 | 369495 Bbl | $(4) |
| Natural gas swaps | 2.54 to 3.89/GJ | 1-12 | 11873390 GJ | $1 |

---

<u>Power</u> 

AltaGas sells power to the Alberta Electric System Operator at market prices. AltaGas also sells power through its WGL Energy Services affiliate, to commercial, industrial and mass market users within the PJM Regional Transmission Organization at fixed and market prices. AltaGas' strategy is to mitigate the cash flow risk to power prices to provide predictable earnings. Therefore, AltaGas uses third-party swaps and purchase contracts to fix the prices over time on a portion of the volumes to mitigate financial exposure associated with the sale contracts. These power purchase and sale contracts extend to 2026. As at December 31, 2022, AltaGas had no intention to terminate any contracts prior to maturity. AltaGas had the following power commodity forward contracts and commodity swaps outstanding as at December 31, 2022 and 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2022** | **Fixed price<br>(per MWh)** | **Period<br>(months)** | **Notional volume<br>(MWh)** | **Fair Value**<br>***($ millions)*** |
| Power sales | **37.18 to 167.07** | **1-42** | **5276832** | $**(96)** |
| Power purchases | **37.18 to 167.07** | **1-42** | **6341582** | $**99** |
| Swap purchases | **(10.86) to 185.54** | **1-41** | **23888348** | $**(81)** |
| December 31, 2021 | Fixed price<br>(per MWh) | Period<br>(months) | Notional volume<br>(MWh) | Fair Value<br>*($ millions)* |
| Power sales | 27.19 to 93.94 | 1-42 | 4938045 | $(60) |
| Power purchases | 27.19 to 93.94 | 1-53 | 6393003 | $69 |
| Swap purchases | (8.13) to 86.84 | 1-41 | 22845569 | $(35) |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 112

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The table below provides the potential impact on pre-tax income due to changes in the fair value of risk management contracts in place as at December 31, 2022:

---

| | | |
|:---|:---|:---|
| **Factor** | **Increase or decrease to forward prices** | **Increase or decrease to income before tax *($ millions)*** |
| PJM power price | US$1/MWh | 43 |
| NYMEX natural gas price | US$0.50/GJ | 30 |
| Energy Exports: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Propane Far East Index to domestic supply | $1/Bbl | (3) |
| &nbsp;&nbsp;&nbsp;&nbsp;Baltic LPG Freight | $1/Bbl | 12 |
| NGL frac spread: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Propane | $1/Bbl | (1) |
| &nbsp;&nbsp;&nbsp;&nbsp;Natural gas | $0.50/GJ | 3 |

---

**Foreign Exchange Risk** 

AltaGas is exposed to foreign exchange risk as changes in foreign exchange rates may affect the fair value or future cash flows of the Corporation's financial instruments. AltaGas has foreign operations whereby the functional currency is the U.S. dollar. As a result, the Corporation's earnings, cash flows, and OCI are exposed to fluctuations resulting from changes in foreign exchange rates. This risk is partially mitigated to the extent that AltaGas has U.S. dollar-denominated debt and/or preferred shares outstanding. AltaGas may also enter into foreign exchange forward derivatives to manage the risk of fluctuating cash flows due to variations in foreign exchange rates.

AltaGas may designate its external U.S. dollar-denominated debt or certain U.S. dollar-denominated loans that may give rise to a foreign currency transaction gain or loss as a net investment hedge of its U.S. subsidiaries. As at December 31, 2022, AltaGas has designated US$281 million of outstanding loans as a net investment hedge (December 31, 2021 - US$122 million). For the year ended December 31, 2022, a $15 million after-tax unrealized loss on the net investment hedge was recorded in OCI (2021 - $nil).

As at December 31, 2022, AltaGas did not have any outstanding foreign exchange forward contracts. The following foreign exchange forward contracts were outstanding as at December 31, 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Foreign exchange forward contract** | **Notional Amount *(US$ millions)*** | **Duration** | **Weighted average foreign exchange rate** | **Fair Value** |
| Foreign exchange swaps (purchases) | US$10 | Less than one year | 1.2640 | Less than $1 million |

---

For the year ended December 31, 2022, AltaGas recorded an after-tax realized gain of less than $1 million on all foreign exchange forward contracts (2021 - after-tax realized gain of $19 million).

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 113

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***Interest Rate Risk***

AltaGas is exposed to interest rate risk as changes in interest rates may impact future cash flows and the fair value of its financial instruments. The Corporation manages its interest rate risk by holding a mix of both fixed and floating interest rate debt. As at December 31, 2022, approximately 78 percent of AltaGas' total outstanding short-term and long-term debt was at fixed rates (December 31, 2021 - 87 percent). In addition, from time to time, AltaGas may enter into interest rate swap agreements to fix the interest rate on a portion of its banker's acceptances issued under its credit facilities. There were no outstanding interest rate swaps as at December 31, 2022.

***Credit Risk***

Credit risk results from the possibility that a counterparty to a financial instrument fails to fulfill its obligations in accordance with the terms of the contract.

AltaGas' credit policy details the parameters used to grant, measure, monitor and report on credit provided to counterparties. AltaGas minimizes counterparty risk by conducting credit reviews on counterparties in order to establish specific credit limits, both prior to providing products or services and on a recurring basis. In addition, most contracts include credit mitigation clauses that allow AltaGas to obtain financial or performance assurances from counterparties under certain circumstances. AltaGas maintains an allowance for doubtful accounts in the normal course of its business.

AltaGas' maximum credit exposure consists primarily of the carrying value of the non-derivative financial assets and the fair value of derivative financial assets. As at December 31, 2022, AltaGas had no concentration of credit risk with a single counterparty.

**Weather Related Instruments**

WGL Energy Services utilizes heating degree day (HDD) instruments from time to time to manage weather and price risks related to its natural gas and electricity sales during the winter heating season. WGL Energy Services also utilizes cooling degree day (CDD) instruments and other instruments to manage weather and price risks related to its electricity sales during the summer cooling season. These instruments cover a portion of estimated revenue or energy-related cost exposure to variations in HDDs or CDDs. For the year ended December 31, 2022, a pre-tax loss of less than $1 million was recorded related to these instruments (2021 - pre-tax loss of less than $1 million).

**Accounts Receivable Past Due or Impaired**

With the exception of accounts receivable which are due in one year or less as summarized in the following table, AltaGas does not have any past due or impaired accounts receivable (AR) as at December 31, 2022:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **As at December 31, 2022** | **Total** | **AR<br>accruals** | **Receivables<br>impaired** | **Less than<br>30 days** | **31 to<br>60 days** | **61 to <br>90 days** | **Over<br>90 days** |
| Trade receivable | $**2067** | $**1078** | $**41** | $**751** | $**87** | $**26** | $**84** |
| Other | **65** | **—** | **—** | **65** | **—** | **—** | **—** |
| Allowance for credit losses | **(41)** | **—** | **(41)** | **—** | **—** | **—** |  |
|  | $**2091** | $**1078** | $**—** | $**816** | $**87** | $**26** | $**84** |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 114

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---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| As at December 31, 2021 | Total | AR<br>accruals | Receivables<br>impaired | Less than<br>30 days | 31 to<br>60 days | 61 to <br>90 days | Over<br>90 days |
| Trade receivable | $1431 | $560 | $39 | $703 | $52 | $24 | $53 |
| Other | 35 |  |  | 35 |  |  |  |
| Allowance for credit losses | (39) |  | (39) |  |  |  |  |
|  | $1427 | $560 | $— | $738 | $52 | $24 | $53 |

---

The following table provides a summary of changes to the allowance for credit losses by segment and major type:

---

| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** |
| | **Accounts Receivable** | **Contract**<br>**Assets** <sup>(a)</sup> | **Total** |
| **Utilities** | | | |
| Balance, beginning of period | $**38** | $**—** | $**38** |
| Foreign exchange translation | **2** | **—** | $**2** |
| Adjustments to allowance <sup>(b)</sup> | **26** | **—** | **26** |
| Written off | **(29)** | **—** | **(29)** |
| Recoveries collected | **4** | **—** | **4** |
| Reclassified to assets held for sale *(note 5)* | **(1)** | **—** | **(1)** |
| Balance, end of period | $**40** | $**—** | $**40** |
| **Midstream** |  |  |  |
| Balance, beginning of period | $**1** | $**1** | $**2** |
| Adjustments to allowance | **—** | **—** | **—** |
| Balance, end of period | $**1** | $**1** | $**2** |
| **Total** | $**41** | $**1** | $**42** |

---

(a)An allowance for credit loss is assessed quarterly and is recorded based on historical default rates published by external credit rating agencies and a rate associated with the estimated time frame that the contract asset will be billed to the customer.

(b)Includes $2 million recorded to a regulatory asset relating to the impact of COVID-19 on uncollectible accounts.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | Year Ended December 31, 2021 | Year Ended December 31, 2021 | Year Ended December 31, 2021 | Year Ended December 31, 2021 |
| | Accounts Receivable | Contract<br>Assets <sup>(a)</sup> | Other long-term investments and other assets <sup>(b)</sup> | Total |
| **Utilities** |  |  |  |  |
| Balance, beginning of period | $40 | $— | $— | $40 |
| Adjustments to allowance <sup>(b)</sup> | 15 |  |  | 15 |
| Written off | (22) |  |  | (22) |
| Recoveries collected | 5 |  |  | 5 |
| Balance, end of period | $38 | $— | $— | $38 |
| **Midstream** |  |  |  |  |
| Balance, beginning of period | $1 | $1 | $2 | $4 |
| New allowance |  |  | (2) | (2) |
| Balance, end of period | $1 | $1 | $— | $2 |
| **Total** | $39 | $1 | $— | $40 |

---

(a)An allowance for credit loss is assessed quarterly and is recorded based on historical default rates published by external credit rating agencies and a rate associated with the estimated time frame that the contract asset will be billed to the customer.

(b)Includes $5 million recorded to a regulatory asset relating to the impact of COVID-19 on uncollectible accounts.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 115

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**Liquidity Risk** 

Liquidity risk is the risk that AltaGas will not be able to meet its financial obligations as they come due. AltaGas manages this risk through its extensive budgeting and monitoring process to ensure it has sufficient cash and credit facilities to meet its obligations. AltaGas' objective is to maintain its investment-grade ratings to ensure it has access to debt and equity funding as required.

AltaGas had the following contractual maturities with respect to financial liabilities:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Contractual maturities by period** | **Contractual maturities by period** | **Contractual maturities by period** | **Contractual maturities by period** | **Contractual maturities by period** |
| **As at December 31, 2022** | **Total** | **Less than<br>1 year** | **1-3 years** | **4-5 years** | **After<br>5 years** |
| Accounts payable and accrued liabilities | $**1902** | $**1902** | $**—** | $**—** | $**—** |
| Short-term debt | **293** | **293** | **—** | **—** | **—** |
| Other current liabilities <sup>(a)</sup> | **52** | **52** | **—** | **—** | **—** |
| Risk management contract liabilities | **470** | **172** | **183** | **57** | **58** |
| Current portion of long-term debt <sup>(b)</sup> | **327** | **327** | **—** | **—** | **—** |
| Long-term debt <sup>(b)</sup> | **8641** | **—** | **2241** | **1968** | **4432** |
| Debt classified as held for sale | **(60)** | **(7)** | **(12)** | **(12)** | **(29)** |
| Subordinated hybrid notes | **550** | **—** | **—** | **—** | **550** |
|  | $**12175** | $**2739** | $**2412** | $**2013** | $**5011** |

---

(a)Excludes non-financial liabilities.

(b)Excludes deferred financing costs, discounts, finance lease liabilities, the fair value adjustment on the WGL Acquisition, and debt classified as held for sale.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | Contractual maturities by period | Contractual maturities by period | Contractual maturities by period | Contractual maturities by period | Contractual maturities by period |
| As at December 31, 2021 | Total | Less than<br>1 year | 1-3 years | 4-5 years | After<br>5 years |
| Accounts payable and accrued liabilities | $1544 | $1544 | $— | $— | $— |
| Short-term debt | 169 | 169 |  |  |  |
| Other current liabilities <sup>(a)</sup> | 43 | 43 |  |  |  |
| Risk management contract liabilities | 293 | 128 | 85 | 25 | 55 |
| Current portion of long-term debt <sup>(b)</sup> | 506 | 506 |  |  |  |
| Long-term debt <sup>(b)</sup> | 7639 |  | 1356 | 1775 | 4508 |
|  | $10194 | $2390 | $1441 | $1800 | $4563 |

---

(a)Excludes non-financial liabilities.

(b)Excludes deferred financing costs, discounts, finance lease liabilities, and the fair value adjustment on the WGL Acquisition.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 116

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**25. Revenue**

The following tables disaggregate revenue by major sources for the year:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** |
| | **Utilities** | **Midstream** | **Corporate/Other** | **Total** |
| **Revenue from contracts with customers** | | | | |
| &nbsp;&nbsp;Commodity sales contracts | $**1715** | $**6260** | $**—** | $**7975** |
| &nbsp;&nbsp;Midstream service contracts | **—** | **2411** | **—** | **2411** |
| &nbsp;&nbsp;Gas sales and transportation services | **3179** | **—** | **—** | **3179** |
| &nbsp;&nbsp;Storage services | **24** | **—** | **—** | **24** |
| &nbsp;&nbsp;Other | **9** | **—** | **1** | **10** |
| **Total revenue from contracts with customers** | $**4927** | $**8671** | $**1** | $**13599** |
| **Other sources of revenue** |  |  |  |  |
| &nbsp;&nbsp;Revenue from alternative revenue programs <sup>(a)</sup> | $**94** | $**—** | $**—** | $**94** |
| &nbsp;&nbsp;Leasing revenue <sup>(b)</sup> | **—** | **232** | **99** | **331** |
| &nbsp;&nbsp;Risk management and trading activities <sup>(c)</sup> | **(28)** | **76** | **(3)** | **45** |
| &nbsp;&nbsp;Other | **(13)** | **31** | **—** | **18** |
| **Total revenue from other sources** | $**53** | $**339** | $**96** | $**488** |
| **Total revenue** | $**4980** | $**9010** | $**97** | $**14087** |

---

(a)A large portion of revenue generated from the Utilities segment is subject to rate regulation and accordingly there are circumstances where the revenue recognized is mandated by the applicable regulators in accordance with ASC 980.

(b)Revenue generated from certain of AltaGas' gas facilities is accounted for as operating leases. For the Corporate/Other segment, a significant amount of revenue earned is through power purchase agreements which are accounted for as operating leases.

(c)Risk management activities involve the use of derivative instruments such as physical and financial swaps, forward contracts, and options. These derivatives are accounted for under ASC 815 and ASC 825. A portion of revenue generated by the Utilities segment is from the physical sale and delivery of natural gas and power to end users.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 117

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---

| | | | | |
|:---|:---|:---|:---|:---|
| | Year Ended December 31, 2021 | Year Ended December 31, 2021 | Year Ended December 31, 2021 | Year Ended December 31, 2021 |
| | **Utilities** | **Midstream** | **Corporate/Other** | **Total** |
| **Revenue from contracts with customers** |  |  |  |  |
| &nbsp;&nbsp;Commodity sales contracts | $1316 | $4667 | $1 | $5984 |
| &nbsp;&nbsp;Midstream service contracts |  | 1664 |  | 1664 |
| &nbsp;&nbsp;Gas sales and transportation services | 2582 |  |  | 2582 |
| &nbsp;&nbsp;Storage services | 24 |  |  | 24 |
| &nbsp;&nbsp;Other | 8 |  | 4 | 12 |
| **Total revenue from contracts with customers** | $3930 | $6331 | $5 | $10266 |
| **Other sources of revenue** |  |  |  |  |
| &nbsp;&nbsp;Revenue from alternative revenue programs <sup>(a)</sup> | $92 | $— | $— | $92 |
| &nbsp;&nbsp;Leasing revenue <sup>(b)</sup> |  | 168 | 102 | 270 |
| &nbsp;&nbsp;Risk management and trading activities <sup>(c) (d)</sup> | (74) | 12 | (4) | (66) |
| &nbsp;&nbsp;Other | (12) | 22 | 1 | 11 |
| **Total revenue from other sources** | $6 | $202 | $99 | $307 |
| **Total revenue** | $3936 | $6533 | $104 | $10573 |

---

(a)A large portion of revenue generated from the Utilities segment is subject to rate regulation and accordingly there are circumstances where the revenue recognized is mandated by the applicable regulators in accordance with ASC 980.

(b)Revenue generated from certain of AltaGas' gas facilities is accounted for as operating leases. For the Corporate/Other segment, a significant amount of revenue earned is through power purchase agreements which are accounted for as operating leases.

(c)Risk management activities involve the use of derivative instruments such as physical and financial swaps, forward contracts, and options. These derivatives are accounted for under ASC 815 and ASC 825. A portion of revenue generated by the Utilities segment is from the physical sale and delivery of natural gas and power to end users.

(d)WGL Midstream trading margins are reported in risk management and trading activities from the Midstream segment. Prior to the sale of the U.S. transportation and storage business in the second quarter of 2021, WGL Midstream entered into derivative contracts for the purpose of optimizing its storage and transportation capacity as well as managing the transportation and storage assets on behalf of third parties. The trading margins of WGL Midstream, including unrealized gains and losses on derivative instruments, are netted within revenues. Gross revenues for the year ended December 31, 2021 of $172 million associated with the GAIL Global (USA) LNG LLC (GAIL) contract and an Asset Management Agreement (AMA), which are in scope of ASC 606, are reported within risk management and trading activities. While the GAIL contract and AMA are individually not accounted for as derivatives, they are inseparable from the overall trading portfolio. Revenue from the GAIL contract is recognized at a point in time based on the actual volumes of the commodity sold at the delivery point, which corresponds to the customer's monthly invoice amount. The GAIL contract had a term of 20 years and began on March 31, 2018. Revenue from the AMA is recognized based on the amount WGL Midstream has the right to invoice the customer in accordance with ASC 606. WGL executed the AMA in April 2020. AltaGas completed the sale of the U.S. transportation and storage business, including the GAIL contract and the AMA, in April 2021.

**Revenue Recognition**

The following is a description of the Corporation's revenue recognition policy by segment and by major source of revenue from contracts with customers.

**Utilities Segment**

*<u>Gas Sales and Transportation Services</u>*

Customers are billed monthly based on regular meter readings. Customer billings are based on two main components: (i) a fixed service fee and (ii) a variable fee based on usage. Revenue is recognized over time when the gas has been delivered or as the service has been performed. As meter readings are performed on a cycle basis, AltaGas recognizes accrued revenue for any services rendered to its customers but not billed at month-end. The vast majority of these contracts are "at-will" as customers may cancel their service at any time, however, there are certain contracts that have terms of one year or longer. For these long-term contracts, there is generally a contract demand specified in the contract whereby the customer has to pay regardless of whether or not gas has been delivered. These contracts generally do not contain any make up rights and revenue is recognized on a monthly basis as service has been performed.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 118

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*<u>Gas Storage Services</u>*

Gas storage customers are billed monthly for services provided. Customer billings are based on four components: (i) reservation charges; (ii) capacity charges; (iii) injection/withdrawal charges; and (iv) excess charges. Reservation charges are based on the customer's contract withdrawal quantity, capacity charges are based on the customer's total contract quantity, and injection/withdrawal charges are based on the volume of gas delivered to or from the customer. Excess charges are applied to each day that the storage quantity exceeds 100 percent of the customer's maximum storage quantity. Revenue is recognized as the service has been performed over time on a monthly basis, which corresponds to the invoice amount. The majority of these contracts have terms extending beyond one year.

*<u>Commodity Sales</u>*

Commodity sales also include gas sales to residential, commercial, and industrial customers in certain states where WGL Energy Services is authorized as a competitive service provider. These commodity sales contracts have varying terms that generally range from one to five years. Customers are billed monthly based on the amount of gas delivered to the customer. Revenue is recognized based on the amount the Corporation is entitled to invoice the customer.

**Midstream Segment**

*<u>Commodity Sales</u>*

A portion of the NGL production from AltaGas' extraction facilities is subject to frac spread between NGLs extracted and the natural gas purchased to make up the heating value of the NGLs extracted. For commodity sales contracts that do not meet the definition of a derivative or for contracts whereby AltaGas has elected to apply the normal purchase normal sales scope exception, the sales contract is accounted for under ASC 606. These commodity sales contracts have varying terms but the majority of the contracts have a one-year term which coincides with the NGL year. AltaGas recognizes revenue for commodity sales contracts at a point in time based on the actual volumes of the commodity sold at the delivery point, which corresponds to the customer's monthly invoice amount.

Commodity sales contracts at RIPET and Ferndale generate revenue from the sale and delivery of LPGs to customers in Asia shipped from offshore export terminals. Revenue is recognized when LPGs are loaded onto transport vessels, which is the delivery point. AltaGas has the right to consideration in an amount that directly corresponds to the volumes of LPGs loaded on a vessel. AltaGas' commodity sales also include the sale of upgraded crude oil, processed finished products, and various fuels. Delivery takes place when there is a sales contract in place, specifying delivery volumes and sales prices. The consideration received under these contracts is variable based on commodity prices.

*<u>Midstream Service Contracts</u>*

AltaGas earns revenue from its field gathering and processing facilities, extraction facilities, storage facilities, truck hauling services, rail and truck loading and unloading terminalling, and transmission systems through a variety of contractual arrangements. For arrangements that do not contain a lease, the revenue is accounted for under ASC 606 as follows:

Fee-for-service – The customer is charged a fee for the service provided on a per unit volume basis. Contract terms generally range from one month to up to the life of the reserves. Revenue under this type of arrangement is recognized over time as the service is provided, which corresponds to the customer's monthly invoice amount.

Take-or-pay – The customer has agreed to a minimum volume commitment whereby the customer must have AltaGas process or deliver a specified volume at a rate per unit that is specified in the contract. Quantities that the customer is unable to deliver

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 119

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are considered deficiency quantities. Certain of AltaGas' take-or-pay contracts contain provisions whereby the customer can make up deficiency quantities in subsequent periods. Under this type of arrangement, any consideration received relating to the deficiency quantities that will be made up in a future period will be deferred until either: (i) the customer makes up the volumes or (ii) the likelihood that the customer will make up the volumes before the make up period expires becomes remote. If AltaGas does not expect the customer to make up the deficiency quantities (also referred to as breakage amount), AltaGas may recognize the expected breakage amount as revenue before the make up period expires. Significant judgment is required in estimating the breakage amount. For contracts where the customer has no make up rights, revenue is recognized on a monthly basis based on the higher of (i) the actual quantity delivered times the per unit rate or (ii) the contracted minimum amount.

Storage fees are typically recognized in revenue ratably over the term of the contract and rail and truck loading and unloading fees are recognized when the volumes are delivered or received.

**Corporate/Other Segment**

For the Corporate/Other segment, the majority of revenue relates to remaining power assets, from which revenue is primarily earned through power purchase agreements which are accounted for as operating leases. In instances where power generation is not sold under a power purchase agreement, the commodity is sold via a merchant market, or via commodity sales agreements which are accounted for as financial instruments. For commodity sales contracts that do not meet the definition of a lease, derivative or for contracts whereby AltaGas has elected to apply the normal purchase normal sales scope exception, the sales contract is accounted for under ASC 606.

**Contract Balances**

As at December 31, 2022, a contract asset of $41 million (December 31, 2021 - $54 million) has been recorded on the Consolidated balance Sheets, of which $38 million ($37 million net of credit losses) is included within long-term investments and other assets (December 31, 2021 – $41 million net of credit losses) and $4 million within prepaid expenses and other current assets (December 31, 2021 - $13 million). This contract asset represents the difference in revenue recognized under a new rate in a blend-and-extend modification with a customer. Revenue from this contract modification was recognized at a pre-modification rate until December 31, 2020, with the excess revenue recorded as a contract asset. The contract asset is now being drawn down over the remaining term of the modified contract.

At December 31, 2022, contract liabilities of $nil (December 31, 2021 - $1 million) have been recorded within other current liabilities on the Consolidated Balance Sheets. Contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period.

*<u>Contract Assets</u>*

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| As at | **December 31,<br>2022** | December 31,<br>2021 |  |  |  |
| As at | **December 31,<br>2022** | December 31,<br>2021 | Balance, beginning of year | $**54** | $71.0 |
| Additions | **1** |  |  |  |  |
| Amortization <sup>(a)</sup> | **(4)** | (4) |  |  |  |
| Transfers to accounts receivable <sup>(b)</sup> | **(10)** | (13) |  |  |  |
| Balance, end of year | $**41** | $54 |  |  |  |

---

(a)Represents the drawdown of a contract asset under a blend-and-extend contract modification.

(b)Amounts included in contract assets are transferred to accounts receivable when AltaGas' right to consideration becomes unconditional.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 120

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*<u>Contract Liabilities</u>*

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| As at | **December 31,<br>2022** | December 31,<br>2021 |  |  |  |
| As at | **December 31,<br>2022** | December 31,<br>2021 | Balance, beginning of year | $**1** | $|
| Additions | **—** | 1 |  |  |  |
| Revenue recognized from contract liabilities <sup>(a)</sup> | **(1)** |  |  |  |  |
| Balance, end of year | $**—** | $1 |  |  |  |

---

(a)Recognition of revenue related to performance obligations satisfied in the current period for amounts that were previously included in contract liabilities.

**Transaction Price Allocated to the Remaining Obligations**

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied as of December 31, 2022:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 & beyond | &nbsp;&nbsp;&nbsp;&nbsp;**Total** |
| Midstream service contracts | $120 | $120 | $116 | $113 | $112 | $784 | $**1365** |
| Storage services | 25 | 25 | 25 | 25 | 25 | 106 | **231** |
| Other | 2 | 2 | 2 | 2 | 2 | 5 | **15** |
|  | $147 | $147 | $143 | $140 | $139 | $895 | $**1611** |

---

AltaGas applies the practical expedient available under ASC 606 and does not disclose information about the remaining performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts for which revenue is recognized at the amount to which AltaGas has the right to invoice for performance completed, and (iii) contracts with variable consideration that is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation. In addition, the table above does not include any estimated amounts of variable consideration that are constrained. The majority of midstream service contracts, gas sales and transportation service contracts, and storage service contracts contain variable consideration whereby uncertainty related to the associated variable consideration will be resolved (usually on a daily basis) as volumes are processed, gas is delivered or as service is provided.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 121

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**26. Shareholders' Equity**

**Authorization**

AltaGas is authorized to issue an unlimited number of voting common shares. AltaGas is also authorized to issue such number of preferred shares in series at any time as have aggregate voting rights either directly or on conversion or exchange that in the aggregate represent less than 50 percent of the voting rights attaching to the then issued and outstanding Common Shares.

---

| | | |
|:---|:---|:---|
| **Common Shares Issued and Outstanding** <sup>(a)</sup> | Number of <br> shares | Amount |
| January 1, 2021 | 279494299 | $6723 |
| Shares issued for cash on exercise of options | 774739 | 15 |
| Deferred taxes on share issuance cost |  | (3) |
| December 31, 2021 | 280269038 | $6735 |
| Shares issued for cash on exercise of options | 1262795 | 28 |
| Deferred taxes on share issuance cost |  | (2) |
| **Issued and outstanding at December 31, 2022** | **281531833** | $**6761** |

---

(a)Dividends declared per share for the year ended December 31, 2022 was $1.06 (December 31, 2021 - $1.00).

**Preferred Shares**

---

| | | | | |
|:---|:---|:---|:---|:---|
| As at | **December 31, 2022** | **December 31, 2022** | December 31, 2021 | December 31, 2021 |
| **Issued and Outstanding** <sup>(a) (b)</sup> | **Number of shares** | **Amount** | Number of shares | Amount |
| Series A | **6746679** | $**169** | 6746679 | $169 |
| Series B | **1253321** | **31** | 1253321 | 31 |
| Series C <sup>(c)</sup> | **—** | **—** | 8000000 | 206 |
| Series E | **8000000** | **200** | 8000000 | 200 |
| Series G | **6885823** | **172** | 6885823 | 172 |
| Series H | **1114177** | **28** | 1114177 | 28 |
| Series K <sup>(d)</sup> | **—** | **—** | 12000000 | 300 |
| Share issuance costs, net of taxes |  | **(14)** |  | (30) |
|  | **24000000** | $**586** | 44000000 | $1076 |

---

(a)On January 11, 2022, in connection with the offering of the Subordinated Notes, Series 1, AltaGas issued $300 million in Preferred Shares, Series 2022-A, to be held in the AltaGas Hybrid Trust with Computershare Trust Company of Canada acting as a trustee. Refer to Notes 13 and 17 for more details.

(b)On August 17, 2022, in connection with the offering of the Subordinated Notes, Series 2, AltaGas issued $250 million in Preferred Shares, Series 2022-B, to be held in the AltaGas Hybrid Trust with Computershare Trust Company of Canada acting as a trustee. Refer to Notes 13 and 17 for more details.

(c)On September 30, 2022, AltaGas redeemed all of its outstanding U.S. dollar denominated Series C Preferred Shares. A loss of $74 million was recognized upon redemption, which was comprised of a $69 million foreign exchange loss and a $5 million loss related to share issuance costs for the preferred shares.

(d)On March 31, 2022, AltaGas redeemed all of its outstanding Series K Preferred Shares. A loss of $10 million was recognized upon redemption related to share issuance costs for the preferred shares.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 122

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The following table outlines the characteristics of the cumulative redeemable preferred shares <sup>(a) (h) (i)</sup>:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | Current yield | Annual dividend per share<sup>(b)</sup> | Redemption price per share <sup>(g)</sup> | Redemption and conversion option date<sup>(c)(g)</sup> | Right to convert into<sup>(d)</sup> |
| Series A <sup>(e)</sup> | 3.060% | $0.76500 | $25 | September 30, 2025 | Series B |
| Series B <sup>(f) (g)</sup> | Floating | Floating | $25 | September 30, 2025 | Series A |
| Series E <sup>(e)</sup> | 5.393% | $1.34825 | $25 | December 31, 2023 | Series F |
| Series G <sup>(e)</sup> | 4.242% | $1.06050 | $25 | September 30, 2024 | Series H |
| Series H <sup>(f) (g)</sup> | Floating | Floating | $25 | September 30, 2024 | Series G |

---

(a)The Corporation is authorized to issue up to 8,000,000 of Series F Shares, subject to certain conditions, upon conversion by the holders of the applicable currently issued and outstanding series of preferred shares noted opposite such series in the table on the applicable conversion option date. If issued upon the conversion of the applicable series of preferred shares, Series F Shares are also redeemable for $25.50 on any date after the applicable conversion option date, plus all accrued but unpaid dividends to, but excluding, the date fixed for redemption.

(b)The holders of Series A Shares, Series E Shares, and Series G Shares are entitled to receive a cumulative quarterly fixed dividend as and when declared by the Board of Directors. The holders of Series B Shares and Series H Shares are entitled to receive a quarterly floating dividend as and when declared by the Board of Directors. If issued upon the conversion of the applicable series of preferred shares, the holders of Series F Shares will be entitled to receive a quarterly floating dividend as and when declared by the Board of Directors.

(c)AltaGas may, at its option, redeem all or a portion of the outstanding shares for the redemption price per share, plus all accrued and unpaid dividends on the applicable redemption option date and on every fifth anniversary thereafter.

(d)The holder will have the right, subject to certain conditions, to convert their preferred shares of a specified series into preferred shares of that other specified series as noted in this column of the table on the applicable conversion option date and every fifth anniversary thereafter.

(e)Holders of Series A Shares, Series E Shares, and Series G Shares will be entitled to receive cumulative quarterly fixed dividends, which will reset on the redemption and conversion option date and every fifth year thereafter, at a rate equal to the sum of the then five-year Government of Canada bond yield plus 2.66 percent (Series A Shares), 3.17 percent (Series E Shares), and 3.06 percent (Series G Shares).

(f)Holders of Series B Shares and Series H Shares will be entitled to receive cumulative quarterly floating dividends, which will reset each quarter thereafter at a rate equal to the sum of the then 90-day Government of Canada Treasury Bill rate plus 2.66 percent (Series B Shares) and 3.06 percent (Series H Shares). Each quarterly dividend is calculated as the annualized amount multiplied by the number of days in the quarter, divided by the number of days in the year. Commencing December 31, 2022, the floating quarterly dividend rate is $0.41875 per share for Series B Shares and $0.44340 per share for Series H Shares for the period starting December 31, 2022 to, but excluding, March 31, 2023.

(g)Series B Shares can be redeemed for $25.50 per share on any date after September 30, 2015 that is not a Series B conversion date, plus all accrued and unpaid dividends to, but excluding, the date fixed for redemption. Series H Shares can be redeemed for $25.50 per share on any date after September 30, 2019 that is not a Series H conversion date, plus all accrued and unpaid dividends to, but excluding, the date fixed for redemption.

(h)The Series 2022-A Shares were issued to Computershare Trust Company of Canada to be held in trust to satisfy AltaGas' obligations under the Series 1 Indenture, in connection with the issuance of the Subordinated Notes, Series 1. Holders of the Series 2022-A Shares shall not be entitled to receive any dividends, nor shall any dividends accumulate or accrue, on the Series 2022-A Shares prior to delivery to the holders of the Subordinated Notes, Series 1 following the occurrence of certain bankruptcy or insolvency events in respect of AltaGas. If at any time, AltaGas redeems, purchases for cancellation or repays the Subordinated Notes, Series 1 such number of Series 2022-A Shares with an aggregate issue price equal to the principal amount of Subordinated Notes, Series 1 redeemed, purchased for cancellation or repaid by AltaGas will be redeemed in accordance with the terms of the Series 2022-A Shares.

(i)The Series 2022-B Shares were issued to Computershare Trust Company of Canada to be held in trust to satisfy AltaGas' obligations under the Series 2 Indenture, in connection with the issuance of the Subordinated Notes, Series 2. Holders of the Series 2022-B Shares shall not be entitled to receive any dividends, nor shall any dividends accumulate or accrue, on the Series 2022-B Shares prior to delivery to the holders of the Subordinated Notes, Series 2 following the occurrence of certain bankruptcy or insolvency events in respect of AltaGas. If at any time, AltaGas redeems, purchases for cancellation or repays the Subordinated Notes, Series 2 such number of Series 2022-B Shares with an aggregate issue price equal to the principal amount of Subordinated Notes, Series 2 redeemed, purchased for cancellation or repaid by AltaGas will be redeemed in accordance with the terms of the Series 2022-B Shares.

**Share Option Plan**

AltaGas has an employee share option plan under which officers, employees, and service providers (as defined by the TSX) are eligible to receive grants. As at December 31, 2022, 11,713,367 shares were reserved for issuance under the plan.

As at December 31, 2022, share options granted under the plan have a term between six and ten years until expiry and vest no longer than over a four-year period.

As at December 31, 2022, the unexpensed fair value of share option compensation cost associated with future periods was $1 million (December 31, 2021 - $3 million).

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 123

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The following table summarizes information about the Corporation's share options:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | December 31, 2021 | December 31, 2021 |
| As at | **Options outstanding** | **Options outstanding** | Options outstanding | Options outstanding |
|  | **Number of <br>options** | **Exercise price** <sup>(a)</sup> | Number of <br>options | Exercise price <sup>(a)</sup> |
| Share options outstanding, beginning of year | **8679508** | $**19.98** | 8362211 | $21.06 |
| Granted | **—** | **—** | 1878670 | 18.77 |
| Exercised | **(1262795)** | **19.94** | (774739) | 17.44 |
| Forfeited | **(107799)** | **26.24** | (214259) | 25.24 |
| Expired | **(350775)** | **32.19** | (572375) | 33.26 |
| **Share options outstanding, end of year** | **6958139** | $**19.28** | 8679508 | $19.98 |
| **Share options exercisable, end of year** | **4960341** | $**19.38** | 4435287 | $20.72 |

---

(a)Weighted average.

As at December 31, 2022, the aggregate intrinsic value of the total share options exercisable was $24 million (December 31, 2021 - $33 million), the total intrinsic value of share options outstanding was $33 million (December 31, 2021 - $68 million) and the total intrinsic value of share options exercised was $11 million (December 31, 2021 - $5 million).

The following table summarizes the employee share option plan as at December 31, 2022:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Options outstanding** | **Options outstanding** | **Options outstanding** | **Options exercisable** | **Options exercisable** | **Options exercisable** |
| | Number outstanding | Weighted average exercise price | Weighted average remaining contractual life (years) | Number exercisable | Weighted average exercise price | Weighted average remaining contractual life (years) |
| $14.52 to $18.00 | 1739186 | $15.41 | 2.07 | 1712333 | $15.40 | 2.04 |
| $18.01 to $25.08 | 4570158 | 19.27 | 3.25 | 2601089 | 19.43 | 2.96 |
| $25.09 to $37.86 | 648795 | 29.70 | 0.72 | 646919 | 29.71 | 0.71 |
|  | **6958139** | $**19.28** | **2.72** | **4960341** | $**19.38** | **2.35** |

---

The fair value of each option granted is estimated on the date of grant using the Black-Scholes-Merton option pricing model. The weighted average grant date fair value and assumptions are as follows:

---

| | | |
|:---|:---|:---|
| Year ended December 31 <sup>(a)</sup> | **2022** | 2021 |
| Fair value per options ($) | **—** | 3.37 |
| Risk-free interest rate (%) | **—** | 0.42 |
| Expected life (years) | **—** | 6 |
| Expected volatility (%) <sup>(b)</sup> | **—** | 35.70 |
| Annual dividend per share ($) <sup>(c)</sup> | **—** | 1.00 |
| Forfeiture rate (%) | **—** |  |

---

(a)No options were granted in 2022.

(b)Expected volatility assumptions are based on the historic daily share price volatility.

(c)Annual dividend per share is calculated based on a weighted average share price and forward dividend yields as the grant dates.

**Phantom Unit Plan (Phantom Plan) and Deferred Share Unit Plan (DSUP)**

AltaGas has a Phantom Plan for employees, executive officers, and directors, which includes restricted units (RUs) and performance units (PUs) with vesting periods of 36 months from the grant date. In addition, AltaGas has a DSUP, pursuant to which directors receive deferred share units (DSUs). DSUs granted under the DSUP vest immediately but settlement of the DSUs occur when the individual ceases to be a director.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 124

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---

| | | |
|:---|:---|:---|
| **PUs, RUs, and DSUs** *(number of units)* | **2022** | 2021 |
| Balance, beginning of year | **3877843** | 5920300 |
| Granted | **1413790** | 1611727 |
| Vested and paid out | **(1784293)** | (3495702) |
| Forfeited | **(140150)** | (313621) |
| Units in lieu of dividends | **172563** | 126250 |
| Additional units added by performance factor | **792309** | 28889 |
| **Outstanding, end of year** | **4332062** | 3877843 |

---

For the year ended December 31, 2022, the compensation expense recorded for the Phantom Plan and DSUP was $50 million (2021 – $66 million). As at December 31, 2022, the unrecognized compensation expense relating to the remaining vesting period for the Phantom Plan was $14 million (December 31, 2021 - $16 million) and is expected to be recognized over the vesting period.

**27. Net Income Per Common Share**

The following table summarizes the computation of net income per common share:

---

| | | |
|:---|:---|:---|
| | Year Ended December 31 | Year Ended December 31 |
| | **2022** | 2021 |
| Numerator: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income applicable to controlling interests | $**523** | $283 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Preferred share dividends | **(40)** | (53) |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on redemption of preferred shares *(note 26)* | **(84)** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income applicable to common shares | $**399** | $230 |
| Denominator: |  |  |
| *(millions of shares)* |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Weighted average number of common shares outstanding | **281.0** | 279.9 |
| &nbsp;&nbsp;&nbsp;&nbsp;Dilutive equity instruments <sup>(a)</sup> | **2.3** | 1.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;Weighted average number of common shares outstanding - diluted | **283.3** | 281.7 |
| Basic net income per common share | $**1.42** | $0.82 |
| Diluted net income per common share | $**1.41** | $0.82 |

---

(a)Determined using the treasury stock method.

For the year ended December 31, 2022, less than a million share options (2021 – 1.7 million) were excluded from the diluted net income per share calculation as their effects were anti-dilutive.

**28. Other Income**

---

| | | |
|:---|:---|:---|
| Year Ended December 31 | **2022** | 2021 |
| Gains on asset sales *(note 4)* | $**3** | $6 |
| Other components of net benefit cost *(note 29)* | **74** | 64 |
| Interest income and other revenue | **17** | 11 |
| Total | $**94** | $81 |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 125

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**29. Pension Plans and Retiree Benefits** 

The costs of the defined benefit and post-retirement benefit plans are based on Management's estimate of the future rate of return on the fair value of pension plan assets, salary escalations, mortality rates and other factors affecting the payment of future benefits.

**Defined Contribution Plan**

AltaGas has a defined contribution (DC) pension plan for substantially all employees. The pension cost recorded for the DC plan was $25 million for the year ended December 31, 2022 (2021 - $22 million).

**Defined Benefit Plans** 

AltaGas has several defined benefit pension plans for unionized and non-unionized employees, including one in Canada (which is comprised of five divisions) and five in the United States. The plans in the United States include a qualified, trusteed, non-contributory defined benefit pension plan, and a non-funded defined benefit restoration plan maintained by Washington Gas.

The defined benefit plans are fully funded except for two of the divisions in Canada, which are partially funded.

In 2021, AltaGas made the decision to wind-up the Canadian defined benefit pension plan effective March 31, 2022. As the decision to wind-up the plan was made in 2021, a curtailment of less than $1 million was recorded to AOCI for the year ended December 31, 2021. In October 2022, approval of the wind-up was received from the Alberta Superintendent of Pensions.

AltaGas' most recent actuarial valuation of the Canadian defined benefit plan for funding purposes was completed for the year ended December 31, 2019. As the Canadian defined benefit plan is in the process of being wound up, no further actuarial valuations for this plan are required. Actuarial valuations for funding purposes are required annually for AltaGas' U.S. defined benefit plans.

**Supplemental Executive Retirement Plans (SERP)**

AltaGas has non-registered defined benefit plans that provide defined benefit pension benefits to eligible executives based on average earnings, years of service and age at retirement. The SERP benefits will be paid from the general revenue of the Corporation as payments come due or from the Rabbi Trusts funded as part of the WGL acquisition. Security will be provided for the SERP benefits through a letter of credit within a retirement compensation arrangement trust account.

Several executive officers of Washington Gas participate in a separate non-funded defined benefit SERP (a non-qualified pension plan). This defined benefit SERP was closed to new entrants beginning January 1, 2010.

**Post-Retirement Benefit Plans**

AltaGas has several post-retirement benefit plans for unionized and non-unionized employees, including one in Canada and five in the United States. The post-retirement benefit plan in Canada is limited to the payment of life insurance and an annual allocation to a Healthcare Spending Account (HSA). This benefit plan is not funded.

Post-retirement benefit plans in the United States provide certain medical, prescription drug, dental, and life insurance benefits to eligible retired employees, their spouses and covered dependents. Benefits are based on a combination of the retiree's age and years of service at retirement. For eligible Washington Gas retirees and dependents not yet receiving Medicare benefits, Washington Gas provides medical, prescription drug, and dental benefits through Preferred Provider Organization (PPO) or

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 126

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Health Maintenance Organization (HMO) plans, through the Washington Gas Light Company Retiree Medical Plan. For Medicare-eligible retirees age 65 and older and their dependents, eligible retirees and dependents participate in a tax-free Health Reimbursement Account (HRA) Plan. The HRA plan provides an annual subsidy to help purchase supplemental medical, prescription drug and dental coverage in the marketplace. One of these benefit plans is partially funded, three are fully funded, and one is not funded.

**Rabbi Trusts**

Rabbi trusts of $11 million as at December 31, 2022 have been funded to satisfy the employee benefit obligations associated with WGL's various pension plans (December 31, 2021 - $18 million). These balances are included in the "prepaid expenses and other current assets" and "long-term investments and other assets" line items on the Consolidated Balance Sheets.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 127

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The following table summarizes the details of the defined benefit plans, including the SERP and post-retirement plans in Canada and the United States:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Year Ended December 31, 2022** | **Canada** | **Canada** | **United States** | **United States** | **Total** | **Total** |
| | **Defined Benefit** | **Post-Retirement Benefits** | **Defined Benefit** | **Post-Retirement Benefits** | **Defined Benefit** | **Post-Retirement Benefits** |
| **Projected benefit obligation** <sup>(a)</sup> | | | | | | |
| Balance, beginning of year | $**34** | $**2** | $**1743** | $**430** | $**1777** | $**432** |
| Actuarial gain | **(6)** | **—** | **(473)** | **(118)** | **(479)** | **(118)** |
| Current service cost | **3** | **—** | **22** | **10** | **25** | **10** |
| Member contributions | **—** | **—** | **—** | **3** | **—** | **3** |
| Interest cost | **1** | **—** | **52** | **13** | **53** | **13** |
| Benefits paid | **(4)** | **—** | **(83)** | **(23)** | **(87)** | **(23)** |
| Expenses paid | **—** | **—** | **(1)** | **—** | **(1)** | **—** |
| Settlements | **—** | **—** | **(5)** | **—** | **(5)** | **—** |
| Other | **—** | **—** | **—** | **1** | **—** | **1** |
| Foreign exchange translation | **—** | **—** | **98** | **25** | **98** | **25** |
|  | $**28** | $**2** | $**1353** | $**341** | $**1381** | $**343** |
| Less: projected benefit obligation reclassified to liabilities associated with assets held for sale (*note 5)* <sup>(b)</sup> | **—** | **—** | **(85)** | **(9)** | **(85)** | **(9)** |
| Balance, end of year | $**28** | $**2** | $**1268** | $**332** | $**1296** | $**334** |
| **Plan assets** |  |  |  |  |  |  |
| Fair value, beginning of year | $**16** | $**—** | $**1715** | $**1058** | $**1731** | $**1058** |
| Actual return on plan assets | **(3)** | **—** | **(374)** | **(254)** | **(377)** | **(254)** |
| Employer contributions | **4** | **—** | **8** | **—** | **12** | **—** |
| Member contributions | **—** | **—** | **—** | **3** | **—** | **3** |
| Benefits paid | **(4)** | **—** | **(83)** | **(23)** | **(87)** | **(23)** |
| Expenses paid | **—** | **—** | **(1)** | **—** | **(1)** | **—** |
| Settlements | **—** | **—** | **(5)** | **—** | **(5)** | **—** |
| Other | **—** | **—** | **—** | **1** | **—** | **1** |
| Foreign exchange translation | **—** | **—** | **99** | **60** | **99** | **60** |
|  | $**13** | $**—** | $**1359** | $**845** | $**1372** | $**845** |
| Less: plan assets reclassified to assets held for sale (*note 5)* <sup>(b)</sup> | **—** | **—** | **(93)** | **(3)** | **(93)** | **(3)** |
| Fair value, end of year | $**13** | $**—** | $**1266** | $**842** | $**1279** | $**842** |
| Funded status <sup>(c)</sup> | $**(15)** | $**(2)** | $**6** | $**504** | $**(9)** | $**502** |

---

(a)For post-retirement benefit plans, the projected benefit obligation represents the accumulated benefit obligation.

(b)Presented on a net basis in Note 5. See below for specific amounts included in the Consolidated Balance Sheets.

(c)Calculation includes plan assets and liabilities classified as held for sale.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 128

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---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| Year Ended December 31, 2021 | Canada | Canada | United States | United States | Total | Total |
|  | Defined Benefit | Post-Retirement Benefits | Defined Benefit | Post-Retirement Benefits | Defined Benefit | Post-Retirement Benefits |
| **Projected benefit obligation** <sup>(a)</sup> |  |  |  |  |  |  |
| Balance, beginning of year | $37 | $2 | $1800 | $452 | $1837 | $454 |
| Actuarial gain | (4) |  | (39) | (19) | (43) | (19) |
| Current service cost | 4 |  | 23 | 10 | 27 | 10 |
| Member contributions |  |  |  | 2 |  | 2 |
| Interest cost | 1 |  | 49 | 12 | 50 | 12 |
| Benefits paid | (4) |  | (74) | (25) | (78) | (25) |
| Expenses paid |  |  | (1) |  | (1) |  |
| Settlements |  |  | (7) |  | (7) |  |
| Plan amendments |  |  |  | (1) |  | (1) |
| Foreign exchange translation |  |  | (8) | (1) | (8) | (1) |
| Balance, end of year | $34 | $2 | $1743 | $430 | $1777 | $432 |
| **Plan assets** |  |  |  |  |  |  |
| Fair value, beginning of year | $16 | $— | $1667 | $1016 | $1683 | $1016 |
| Actual return on plan assets |  |  | 125 | 67 | 125 | 67 |
| Employer contributions | 4 |  | 11 |  | 15 |  |
| Member contributions |  |  |  | 2 |  | 2 |
| Benefits paid | (4) |  | (74) | (23) | (78) | (23) |
| Expenses paid |  |  | (1) |  | (1) |  |
| Settlements |  |  | (7) |  | (7) |  |
| Foreign exchange translation |  |  | (6) | (4) | (6) | (4) |
| Fair value, end of year | $16 | $— | $1715 | $1058 | $1731 | $1058 |
| Funded status | $(18) | $(2) | $(28) | $628 | $(46) | $626 |

---

(a)For post-retirement benefit plans, the projected benefit obligation represents the accumulated benefit obligation.

For the year ended December 31, 2022 and year ended December 31, 2021, AltaGas' defined benefit and post-retirement benefit pension plans incurred actuarial gains primarily due to the increase in discount rates, which were the result of an increase in high-quality corporate bond yield curves in the Canadian and U.S. markets.

The following amounts were included in the Consolidated Balance Sheets:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | December 31, 2021 | December 31, 2021 | December 31, 2021 |
| | **Defined Benefit** | **Post- Retirement Benefits** | **Total** | Defined Benefit | Post-Retirement Benefits | Total |
| Prepaid post-retirement benefits | $**28** | $**510** | $**538** | $37 | $637 | $674 |
| Assets held for sale (*note 5)* | **8** | **—** | **8** |  |  |  |
| Accounts payable and accrued liabilities <sup>(a)</sup> | **(3)** | **—** | **(3)** | (8) |  | (8) |
| Future employee obligations | **(42)** | **(2)** | **(44)** | (75) | (11) | (86) |
| Liabilities associated with assets held for sale (*note 5)* | **—** | **(6)** | **(6)** |  |  |  |
|  | $**(9)** | $**502** | $**493** | $(46) | $626 | $580 |

---

(a)Account balances on the Consolidated Balance Sheets also include certain non-pension related amounts.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 129

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The accumulated benefit obligation for all defined benefit plans were:

---

| | | | | |
|:---|:---|:---|:---|:---|
| As at | **December 31, 2022** | **December 31, 2022** | December 31, 2021 | December 31, 2021 |
|  | **Canada** | **United States** | Canada | United States |
| Accumulated benefit obligation <sup>(a)</sup> | $**27** | $**1307** | $33 | $1659 |

---

(a)Accumulated benefit obligation differs from projected benefit obligation in that it does not include an assumption with respect to future compensation levels.

For those pension plans where the projected benefit obligation exceeded the fair value of plan assets as at December 31, 2022, the cumulative obligation and asset balances were:

---

| | | | | |
|:---|:---|:---|:---|:---|
| As at | **December 31, 2022** | **December 31, 2022** | December 31, 2021 | December 31, 2021 |
|  | **Defined Benefit** | **Post-Retirement Benefits** | Defined<br>Benefit | Post-Retirement Benefits |
| Projected benefit obligation | $**49** | $**11** | $375 | $14 |
| Plan assets | $**3** | $**3** | $289 | $3 |

---

For those pension plans where the accumulated benefit obligation exceeded the fair value of plan assets as at December 31, 2022, the cumulative obligation and asset balances were:

---

| | | | | |
|:---|:---|:---|:---|:---|
| As at | **December 31, 2022** | **December 31, 2022** | December 31, 2021 | December 31, 2021 |
|  | **Defined Benefit** | **Post-Retirement Benefits** | Defined<br>Benefit | Post-Retirement Benefits |
| Accumulated benefit obligation | $**48** | $**11** | $221 | $14 |
| Plan assets | $**3** | $**3** | $158 | $3 |

---

The following amounts were recorded in other comprehensive income (loss) and have not yet been recognized in net periodic benefit cost:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Year Ended December 31, 2022** | **Canada** | **Canada** | **United States** | **United States** | **Total** | **Total** |
| | **Defined Benefit** | **Post- Retirement Benefits** | **Defined Benefit** | **Post-Retirement Benefits** | **Defined Benefit** | **Post-Retirement Benefits** |
| Past service cost | $**—** | $**—** | $**—** | $**(1)** | $**—** | $**(1)** |
| Net actuarial loss | **(2)** | **—** | **—** | **(3)** | **(2)** | **(3)** |
| Recognized in AOCI pre-tax | $**(2)** | $**—** | $**—** | $**(4)** | $**(2)** | $**(4)** |
| Increase by the amount<br> included in deferred tax liabilities | **—** | **—** | **—** | **1** | **—** | **1** |
| Net amount in AOCI after-tax | $**(2)** | $**—** | $**—** | $**(3)** | $**(2)** | $**(3)** |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| Year Ended December 31, 2021 | Canada | Canada | United States | United States | Total | Total |
|  | Defined Benefit | Post- Retirement Benefits | Defined Benefit | Post- Retirement Benefits | Defined Benefit | Post- Retirement Benefits |
| Past service cost | $— | $— | $— | $(2) | $— | $(2) |
| Net actuarial gain (loss) | (5) | (1) | 4 | (6) | (1) | (7) |
| Recognized in AOCI pre-tax | $(5) | $(1) | $4 | $(8) | $(1) | $(9) |
| Increase (decrease) by the amount<br> included in deferred tax liabilities | 1 |  | (1) | 2 |  | 2 |
| Net amount in AOCI after-tax | $(4) | $(1) | $3 | $(6) | $(1) | $(7) |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 130

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The following amounts were recorded in a regulatory asset (liability) and have not yet been recognized in net periodic benefit cost:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Year Ended December 31, 2022** | **Canada** | **Canada** | **United States** | **United States** | **Total** | **Total** |
| | **Defined Benefit** | **Post- Retirement Benefits** | **Defined Benefit** | **Post- Retirement Benefits** | **Defined Benefit** | **Post- Retirement Benefits** |
| Past service credit | $**—** | $**—** | $**—** | $**(64)** | $**—** | $**(64)** |
| Net actuarial gain | **—** | **—** | **(47)** | **(123)** | **(47)** | **(123)** |
|  | $**—** | $**—** | $**(47)** | $**(187)** | $**(47)** | $**(187)** |
| Less: regulatory asset (liability) reclassified to assets (liabilities associated with assets) held for sale | **—** | **—** | **(3)** | **3** | **(3)** | **3** |
| Recognized in regulatory liability | $**—** | $**—** | $**(50)** | $**(184)** | $**(50)** | $**(184)** |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| Year Ended December 31, 2021 | Canada | Canada | United States | United States | Total | Total |
|  | Defined Benefit | Post- Retirement Benefits | Defined Benefit | Post- Retirement Benefits | Defined Benefit | Post- Retirement Benefits |
| Past service credit | $— | $— | $— | $(77) | $— | $(77) |
| Net actuarial gain |  |  | (26) | (289) | (26) | (289) |
| Recognized in regulatory liability | $— | $— | $(26) | $(366) | $(26) | $(366) |

---

The costs of the defined benefit and post-retirement benefit plans are based on Management's estimate of the future rate of return on the fair value of pension plan assets, salary escalations, mortality rates and other factors affecting the payment of future benefits.

The net pension expense by plan was as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** |
| | **Canada** | **Canada** | **United States** | **United States** | **Total** | **Total** |
| | **Defined Benefit** | **Post-Retirement Benefits** | **Defined Benefit** | **Post-Retirement Benefits** | **Defined Benefit** | **Post-Retirement Benefits** |
| Current service cost <sup>(a)</sup> | $**3** | $**—** | $**22** | $**10** | $**25** | $**10** |
| Interest cost <sup>(b)</sup> | **1** | **—** | **52** | **13** | **53** | **13** |
| Expected return on plan assets <sup>(b)</sup>  | **—** | **—** | **(79)** | **(38)** | **(79)** | **(38)** |
| Amortization of past service credit <sup>(b)</sup> | **—** | **—** | **—** | **(18)** | **—** | **(18)** |
| Amortization of net actuarial loss (gain) <sup>(b)</sup>  | **—** | **—** | **2** | **(7)** | **2** | **(7)** |
| Net benefit cost (income) recognized | $**4** | $**—** | $**(3)** | $**(40)** | $**1** | $**(40)** |

---

(a)Recorded under the line item "operating and administrative" expenses on the Consolidated Statements of Income.

(b)Recorded under the line item "other income" on the Consolidated Statements of Income.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 131

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---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | Year Ended December 31, 2021 | Year Ended December 31, 2021 | Year Ended December 31, 2021 | Year Ended December 31, 2021 | Year Ended December 31, 2021 | Year Ended December 31, 2021 |
| | Canada | Canada | United States | United States | Total | Total |
| | Defined Benefit | Post-Retirement Benefits | Defined Benefit | Post-Retirement Benefits | Defined Benefit | Post-Retirement Benefits |
| Current service cost <sup>(a)</sup> | $4 | $— | $23 | $10 | $27 | $10 |
| Interest cost <sup>(b)</sup> | 1 |  | 49 | 12 | 50 | 12 |
| Expected return on plan assets <sup>(b)</sup>  | (1) |  | (76) | (34) | (77) | (34) |
| Amortization of past service credit <sup>(b)</sup> |  |  |  | (18) |  | (18) |
| Amortization of net actuarial loss (gain) <sup>(b)</sup>  | 1 |  | 6 | (6) | 7 | (6) |
| Plan settlements <sup>(b)</sup> |  |  | 2 |  | 2 |  |
| Net benefit cost (income) recognized | $5 | $— | $4 | $(36) | $9 | $(36) |

---

(a)Recorded under the line item "operating and administrative" expenses on the Consolidated Statements of Income.

(b)Recorded under the line item "other income" on the Consolidated Statements of Income.

The objective for fund returns for the Canadian defined benefit pension plan is a liability-matching fixed income portfolio that is constructed to have similar characteristics as the liabilities of the pension plan. The liability-matching fixed income portfolio is determined as the combination of fixed income indices that exhibit the same sensitivity to real and nominal interest rate changes as the liabilities of the pension plan.

The objective for fund returns for the pension plans in the United States, over three to five-year periods, is the sum of two components - a passive component, which is the benchmark index market returns for the asset mix in effect, plus the added value expected from active management, if applicable to the fund. It is the Corporation's belief that the potential additional returns justify the additional risk associated with active management. The risk inherent in the investment strategy over a market cycle (a three-to five-year period) is two-fold. There is a risk that the market returns, as measured by the benchmark returns, will not be in line with expectations. The other risk is that the expected added value of active management over passive management will not be realized over the time period prescribed in each fund manager's mandate. There is also the risk of annual volatility in returns, which means that in any one year the actual return may be very different from the expected return.

Cash and money market investments may be held from time to time as short-term investment decisions at the discretion of the fund manager(s) within the constraints prescribed by their mandate(s).

The Corporation's target asset mix for the Canadian defined benefit plan is 100 percent fixed income assets. The target asset mix for SEMCO plans is 33 percent fixed income assets, for WGL plans is 50 percent to 70 percent fixed income assets. These objectives have taken into account the nature of the liabilities and the risk-reward tolerance of the Corporation.

The collective investment mixes for the defined benefit plans are as follows as at December 31, 2022 and December 31, 2021:

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 132

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---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** |
| **Canada** | **Fair value** | Level 1 | Level 2 | Percentage of Plan Assets (%) |
| **December 31, 2022** |  |  |  |  |
| Cash and short-term equivalents | $**2** | $2 | $— | 15 |
| Fixed income |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Canadian bonds | **11** | $11 | $— | 85 |
|  | $**13** | $13 | $— | 100 |
| **December 31, 2021** |  |  |  |  |
| Cash and short-term equivalents | $2 | $2 | $— | 13 |
| Fixed income |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Canadian bonds | 14 | 14 |  | 87 |
|  | $16 | $16 | $— | 100 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** |
| **United States** | **Fair value** | Level 1 | Level 2 | Percentage of Plan Assets (%) |
| **December 31, 2022** |  |  |  |  |
| Cash and short-term equivalents | $**2** | $2 | $— |  |
| Canadian equities | **2** | 2 |  |  |
| Foreign equities <sup>(a)</sup> | **247** | 247 |  | 20 |
| Fixed income |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Government debt | **413** | 80 | 333 | 33 |
| &nbsp;&nbsp;&nbsp;&nbsp;Corporate debt | **355** | 30 | 325 | 28 |
| Derivatives | **2** |  | 2 |  |
| Other <sup>(b)</sup> | **11** |  | 11 | 1 |
| Total investments in the fair value hierarchy | $**1032** | $361 | $671 | 82 |
| *Investments measured at net asset value*<br>*using the NAV practical expedient* <sup>(c)</sup> |  |  |  |  |
| &nbsp;&nbsp;Pooled separate accounts <sup>(d)</sup> | $**43** |  |  | 3 |
| &nbsp;&nbsp;Collective trust funds <sup>(e)</sup> | **279** |  |  | 22 |
| Total fair value of plan investments | $**1354** |  |  | 107 |
| Net receivable <sup>(f)</sup> | **5** |  |  |  |
|  | $**1359** |  |  | 107 |
| Less: investments reclassified to assets held for sale | **(93)** |  |  | (7) |
|  | $**1266** |  |  | 100 |
| **December 31, 2021** |  |  |  |  |
| Cash and short-term equivalents | $2 | $2 | $— |  |
| Canadian equities | 2 | 2 |  |  |
| Foreign equities <sup>(a)</sup> | 290 | 290 |  | 17 |
| Fixed income |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Government debt | 346 | 39 | 307 | 20 |
| &nbsp;&nbsp;&nbsp;&nbsp;Corporate debt | 502 | 79 | 423 | 30 |
| Derivatives | 6 |  | 6 |  |
| Other <sup>(b)</sup> | 11 |  | 11 | 1 |
| Total investments in the fair value hierarchy | $1159 | $412 | $747 | 68 |
| *Investments measured at net asset value*<br>*using the NAV practical expedient* <sup>(c)</sup> |  |  |  |  |
| &nbsp;&nbsp;Private equity/limited partnership <sup>(g)</sup> | $46 |  |  | 3 |
| &nbsp;&nbsp;Pooled separate accounts <sup>(d)</sup> | 38 |  |  | 2 |
| &nbsp;&nbsp;Collective trust funds <sup>(e)</sup> | 467 |  |  | 27 |
| Total fair value of plan investments | $1710 |  |  | 100 |
| Net receivable <sup>(f)</sup> | 5 |  |  |  |
|  | $1715 |  |  | 100 |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 133

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(a)Consists of investments in foreign equities include U.S. and international securities.

(b)As at December 31, 2022 and December 31, 2021, these investments consisted primarily of non-U.S. government bonds and asset-backed securities.

(c)In accordance with ASC Topic 820, these investments are measured at fair value using net asset value (NAV) per share as a practical expedient and, therefore, have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliations of the fair value hierarchy to the statements of net assets available for plan benefits.

(d)As at December 31, 2022, investments in pooled separate accounts consisted of 100 percent income producing properties located in the United States (December 31, 2021 - 100 percent).

(e)As at December 31, 2022, investments in collective trust funds consisted primarily of 79 percent common stock of U.S. companies (December 31, 2021 - 91 percent), 16 percent income producing properties located in the United States (December 31, 2021 - 9 percent), and 5 percent of short-term money market investments (December 31, 2021 - nil).

(f)As at December 31, 2022 and December 31, 2021, this net receivable primarily represents pending trades for investments sold and interest receivable net of pending trades for investments purchased.

(g)As at December 31, 2021, investments in a private equity/limited partnership consisted of common stock of international companies.

The collective investment mixes for the post-retirement benefit plans are as follows as at December 31, 2022 and December 31, 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **United States** | **Fair value** | Level 1 | Level 2 | Percentage of Plan Assets (%) |
| **December 31, 2022** |  |  |  |  |
| Cash and short-term equivalents | $**8** | $8 | $— | 1 |
| Foreign equities <sup>(a)</sup> | **50** | 50 |  | 6 |
| Fixed income |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Government debt | **101** | 21 | 80 | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;Corporate debt | **85** | 8 | 77 | 10 |
| Other <sup>(b)</sup> | **5** |  | 5 | 1 |
| Total investments in the fair value hierarchy | $**249** | $87 | $162 | 30 |
| *Investments measured at net asset value*<br>*using the NAV practical expedient* <sup>(c)</sup> |  |  |  |  |
| &nbsp;&nbsp;Commingled funds <sup>(d)</sup> | $**596** |  |  | 71 |
| Total fair value of plan investments | $**845** |  |  | 101 |
| Less: investments reclassified to assets held for sale | **(3)** |  |  | (1) |
|  | $**842** |  |  | 100 |
| **December 31, 2021** |  |  |  |  |
| Cash and short-term equivalents | $6 | $6 | $— | 1 |
| Foreign equities <sup>(a)</sup> | 60 | 60 |  | 6 |
| Fixed income |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Government debt | 104 | 10 | 94 | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;Corporate debt | 122 | 20 | 102 | 11 |
| Other <sup>(b)</sup> | 6 |  | 6 | 1 |
| Total investments in the fair value hierarchy | $298 | $96 | $202 | 29 |
| *Investments measured at net asset value*<br>*using the NAV practical expedient* <sup>(c)</sup> |  |  |  |  |
| &nbsp;&nbsp;Commingled funds <sup>(d)</sup> | $760 |  |  | 71 |
|  | $1058 |  |  | 100 |

---

(a)Consists of investments in foreign equities include U.S. and international securities.

(b)As at December 31, 2022 and December 31, 2021, these investments consisted primarily of non-U.S. government bonds.

(c)In accordance with ASC Topic 820, these investments are measured at fair value using net asset value (NAV) per share as a practical expedient and, therefore, have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliations of the fair value hierarchy to the statements of net assets available for plan benefits.

(d)As at December 31, 2022, investments in commingled funds consisted of approximately 49 percent common stock of large-cap U.S. companies (December 31, 2021 - 51 percent), 23 percent U.S. Government fixed income securities (December 31, 2021 - 21 percent), and 28 percent corporate bonds for WGL's post-retirement benefit plans (December 31, 2021 - 28 percent).

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 134

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---

| | | | | |
|:---|:---|:---|:---|:---|
| Year Ended December 31 | **2022** | **2022** | 2021 | 2021 |
| Significant actuarial assumptions used in measuring net benefit plan costs | **Defined Benefit** | **Post-Retirement Benefits** | Defined Benefit | Post-Retirement Benefits |
| Discount rate (%) | **2.50 - 5.05** | **3.10** | 1.90 - 2.85 | 2.50 - 3.10 |
| Expected long-term rate of return on plan assets (%) <sup>(a)</sup> | **2.83 - 6.50** | **3.00 - 6.50** | 4.75 - 7.00 | 3.37 - 7.00 |
| Rate of compensation increase (%) | **2.50 - 4.00** | **3.00** | 1.00 - 4.00 | 2.50 - 3.00 |

---

(a)Only applicable for funded plans

---

| | | | | |
|:---|:---|:---|:---|:---|
| As at December 31 | **2022** | **2022** | 2021 | 2021 |
| Significant actuarial assumptions used in measuring benefit obligations | **Defined Benefit** | **Post-Retirement Benefits** | Defined Benefit | Post-Retirement Benefits |
| Discount rate (%) | **5.05 - 5.60** | **5.30 - 5.70** | 2.50 - 3.10 | 3.10 |
| Rate of compensation increase (%) | **2.50 - 4.00** | **3.00** | 2.50 - 4.00 | 3.00 |

---

The expected rate of return on assets is based on the current level of expected returns on risk free investments, the historical level of risk premium associated with other asset classes in which the portfolio is invested, and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected rate of return on assets assumption for the portfolio.

The discount rate is based on yields available on high-quality long-term corporate bonds, with maturities matching the estimated timing and amount of expected benefit payments.

The estimates for health care benefits take into consideration increased health care benefits due to aging and cost increases in the future. The assumed health care cost trend rate used to measure the expected cost of benefits for the next year was between 2.8 and 6.5 percent. The health care cost trend rates were assumed to decline to between 2.6 and 5.0 percent by 2030.

The following table shows the expected cash flows for defined benefit pension and other post-retirement plans:

---

| | | |
|:---|:---|:---|
| | Defined<br>Benefit | Post-Retirement<br>Benefits |
| **Expected employer contributions:** |  |  |
| &nbsp;&nbsp;&nbsp;2023 | $8 | $— |
| **Expected benefit payments:** |  |  |
| &nbsp;&nbsp;&nbsp;2023 | $95 | $23 |
| &nbsp;&nbsp;&nbsp;2024 | $94 | $22 |
| &nbsp;&nbsp;&nbsp;2025 | $96 | $22 |
| &nbsp;&nbsp;&nbsp;2026 | $97 | $23 |
| &nbsp;&nbsp;&nbsp;2027 | $98 | $23 |
| &nbsp;&nbsp;&nbsp;2028 - 2032 | $501 | $119 |

---

**30. Commitments, Guarantees, and Contingencies** 

**Commitments** 

AltaGas has long-term natural gas purchase and transportation arrangements, LPG purchase agreements, crude oil and condensate purchase agreements, electricity purchase arrangements, service agreements, pipeline and storage service contracts, capital commitments, environmental commitments, merger commitments, and operating leases for office space,

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 135

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office equipment, vehicles, rail cars, land, storage, aquatic surface use, and other equipment, all of which are transacted at market prices and in the normal course of business.

Future payments of these commitments as at December 31, 2022 are estimated as follows:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 & beyond | **Total** |
| Gas purchase <sup>(a) (b)</sup> | $1433 | $1209 | $1088 | $1014 | $1004 | $3406 | $**9154** |
| Pipeline and storage services <sup>(b) (c)</sup> | 474 | 428 | 392 | 347 | 303 | 749 | **2693** |
| LPG purchase <sup>(d)</sup> | 431 | 336 | 251 | 173 | 150 | 194 | **1535** |
| Electricity purchase <sup>(e)</sup>  | 869 | 616 | 231 | 56 | 16 | 2 | **1790** |
| Operating leases <sup>(f)</sup> | 101 | 96 | 81 | 72 | 56 | 156 | **562** |
| Service agreements <sup>(g) (h) (i)</sup> | 76 | 53 | 47 | 38 | 29 | 251 | **494** |
| Environmental <sup>(j)</sup> | 10 | 1 | 1 | 1 |  |  | **13** |
| Post-acquisition contingent payments <sup>(k)</sup>  | 5 |  |  |  |  |  | **5** |
| Crude oil and condensate purchase <sup>(l)</sup> | 14 |  |  |  |  |  | **14** |
| Merger commitments <sup>(m)</sup> | 5 | 2 | 1 | 1 | 1 |  | **10** |
| Capital projects <sup>(n)</sup> | 32 |  |  |  |  |  | **32** |
|  | $3450 | $2741 | $2092 | $1702 | $1559 | $4758 | $**16302** |

---

(a)AltaGas enters into contracts to purchase natural gas from various suppliers for its utilities. These contracts are used to ensure that there is an adequate supply of natural gas to meet the needs of customers and to minimize exposure to market price fluctuations. Gas purchase commitments are valued based on fixed prices and forward prices, which may fluctuate significantly from period to period. Pursuant to the May 26, 2022 announcement of the Alaska Utilities Disposition, $2.6 billion of the gas purchase commitments are associated with the assets held for sale at December 31, 2022. The transaction closed on March 1, 2023. Refer to Notes 5 and 34 for more details.

(b)Excludes an estimated US$7.6 billion of natural gas purchases through 2033 and US$1 billion of pipeline contracts through 2043 that are contingent on the in-service date of the Mountain Valley Pipeline.

(c)Pipeline and storage commitments include minimum payments for natural gas transportation, storage and peaking contracts that have expiration dates through 2044.

(d)AltaGas enters into contracts to purchase LPGs for its operations at RIPET and Ferndale. These contracts are used to ensure that there is an adequate supply of LPGs to meet shipment commitments and to minimize exposure to market price fluctuations. LPG purchase commitments are valued based on forward prices, which may fluctuate significantly from period to period.

(e)AltaGas enters into contracts to purchase electricity from various suppliers for its non-utility business. Electricity purchase commitments are based on existing fixed price and fixed volume contracts, and include US$78 million of commitments related to renewable energy credits.

(f)Operating leases include lease arrangements for office space, office equipment, field equipment, rail cars, aquatic use, vehicles, power and gas facilities, transmission and distribution assets, and land. Operating leases also include $203 million in future undiscounted cash flows associated with leasing arrangements for the use of Very Large Gas Carriers (VLGCs) that are anticipated to commence between 2023 and 2024 and $11 million in future discounted cash flows associated with leasing arrangements for rail cars commencing in 2023.

(g)In 2014, AltaGas' Blythe facility entered into a Long-Term Service Agreement (LTSA) with a service pro to complete various upgrade and maintenance services on the Combustion Turbines (CT) at the Blythe facility over 124,000 equivalent operating hours per CT, or 25 years, whichever comes first. The LTSA has variable fees on a per equivalent operating hour basis. As at December 31, 2022, the total commitment was $148 million payable over the next 13 years, of which $53 million is expected to be paid over the next 5 years.

(h)In 2017, AltaGas entered into a 12-year service agreement commencing in 2019 for tug services to support the marine operations of RIPET.

(i)In 2015, AltaGas entered into a Project Agreement that contemplated the sublease of lands from Ridley Terminals Inc. (RTI, now Trigon Pacific Terminals Ltd. (Trigon)), provision of certain terminal services, and access to Trigon's terminal facilities to support RIPET's operations for an initial term of 20 years ending in 2039. In 2019, RILE LP and Trigon executed a Terminal Services Agreement that formalized the concepts outlined in the Project Agreement.

(j)Environmental commitments include committed payments related to certain environmental response costs.

(k)Relating to certain air-related violations at the Ferndale terminal. The penalty was paid in full in February 2023.

(l)AltaGas enters into contracts to purchase crude oil and condensates for marketing, sale, and distribution. These contracts are used to ensure that there is an adequate supply of crude oil and condensates to meet the needs of customers and to minimize exposure to market price fluctuations. Crude oil and condensate commitments are valued based on forward prices, which may fluctuate significantly from period to period.

(m)Represents the estimated future payments of WGL merger commitments that have been accrued but not paid. Among other things, these commitments include rate credits distributable to both residential and non-residential customers to partially offset rate increases resulting from gas expansion, extension of natural gas service over a 10-year period and other programs, various public interest commitments, and safety programs. As at December 31, 2022, the cumulative amount of merger commitments that have been expensed but not yet paid is approximately US$8 million. Additionally, there are a number of operational commitments with various timeframes, including the funding of leak mitigation and reducing leak backlogs, the funding of damage prevention efforts, developing projects to extend natural gas service, maintaining pre-merger quality of service standards including odor call response times, increasing supplier diversity, achieving synergy savings benefits, as well as reporting and tracking related to certain commitments, and causing the development of 15 MW of either electric grid energy storage or tier one renewable resources.

(n)Commitments for capital projects. Estimated amounts are subject to variability depending on the actual construction costs.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 136

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**Guarantees**

AltaGas has guaranteed payments primarily for certain commitments on behalf of some of its subsidiaries. As at December 31, 2022, AltaGas has no guarantees issued on behalf of external parties.

**Contingencies**

AltaGas and its subsidiaries are subject to various legal claims and actions arising in the normal course of business. While the final outcome of such legal claims and actions cannot be predicted with certainty, the Corporation does not believe that the resolution of such claims and actions will have a material impact on the Corporation's consolidated financial position or results of operations. As at December 31, 2022, a liability of US$4 million (approximately CAD $5 million) has been recorded for penalties related to certain alleged air-related violations at the Ferndale terminal. On January 13, 2023, Petrogas West, LLC signed a Settlement Agreement with the Northwest Clean Air Agency (NWCAA) in order to resolve these alleged violations. The penalty was paid in February 2023 and represents a full and final resolution of all claims brought, or that could have been brought by the NWCAA related to the alleged violations.

**31. Related Party Transactions**

In the normal course of business, AltaGas transacts with its subsidiaries, affiliates and joint ventures. Amounts due to or from related parties on the Consolidated Balance Sheets were measured at the exchange amount and were as follows:

---

| | | |
|:---|:---|:---|
| As at | **December 31, 2022** | December 31, 2021 |
| **Due from related parties** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable <sup>(a)</sup> | $**1** | $7 |
| **Due to related parties** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable <sup>(b)</sup> | $**1** | $7 |

---

(a)Receivables from affiliates.

(b)Payables to affiliates.

The following transactions with related parties have been recorded on the Consolidated Statements of Income for the years ended December 31, 2022 and 2021:

---

| | | |
|:---|:---|:---|
| Year Ended December 31 | **2022** | 2021 |
| Cost of sales <sup>(a)</sup> | $**7** | $6 |

---

(a)In the ordinary course of business, AltaGas obtained natural gas storage services from a joint venture.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 137

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**32. Supplemental Cash Flow Information**

The following table details the changes in operating assets and liabilities from operating activities:

---

| | | |
|:---|:---|:---|
| | Year Ended<br>December 31 | Year Ended<br>December 31 |
| | **2022** | 2021 |
| Source (use) of cash: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | $**(691)** | $(206) |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventory | **(324)** | (232) |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk management assets - current | **4** | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other current assets | **(1)** | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;Regulatory assets - current | **13** | (3) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued liabilities | **377** | 92 |
| &nbsp;&nbsp;&nbsp;&nbsp;Customer deposits | **14** | 27 |
| &nbsp;&nbsp;&nbsp;&nbsp;Regulatory liabilities - current | **98** | (12) |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk management liabilities - current | **(6)** | (1) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other current liabilities | **(12)** | 21 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other operating assets and liabilities | **(122)** | (104) |
| Changes in operating assets and liabilities | $**(650)** | $(410) |

---

The following table details the changes in non-cash investing and financing activities:

---

| | | |
|:---|:---|:---|
| | Year Ended<br>December 31 | Year Ended<br>December 31 |
| | **2022** | 2021 |
| Decrease (increase) of balance: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exercise of stock options | $**3** | $2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common share dividends payable | $**—** | $22 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net right-of-use assets obtained in exchange for new operating lease liabilities | $**(56)** | $(38) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net right-of-use assets obtained in exchange for new finance lease liabilities | $**(14)** | $(10) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital expenditures included in accounts payable and accrued liabilities | $**6** | $33 |

---

The following cash payments have been included in the determination of earnings:

---

| | | |
|:---|:---|:---|
| | Year Ended<br>December 31 | Year Ended<br>December 31 |
| | **2022** | 2021 |
| Interest paid (net of capitalized interest) | $**304** | $279 |
| Income taxes paid | $**17** | $69 |

---

The following table is a reconciliation of cash and restricted cash balances:

---

| | | |
|:---|:---|:---|
| As at December 31 | **2022** | 2021 |
| Cash and cash equivalents | $**53** | $63 |
| Restricted cash holdings from customers - current | **—** | 3 |
| Restricted cash included in prepaid expenses and other current assets <sup>(a)</sup> | **3** | 8 |
| Restricted cash included in long-term investments and other assets *(note 12)* <sup>(a)</sup> | **8** | 10 |
| Cash, cash equivalents, and restricted cash per Consolidated Statements of Cash Flows | $**64** | $84 |

---

(a)The restricted cash balances included in prepaid expenses and other current assets and long-term investments and other assets relate to Rabbi trusts associated with WGL's pension plans (see Note 29).

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 138

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**33. Segmented Information**

AltaGas owns and operates a portfolio of assets and services used to move energy from the source to the end-user. The following describes the Corporation's reporting segments:

---

| | |
|:---|:---|
| **Utilities** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;■rate-regulated natural gas distribution assets in Michigan, Alaska, the District of Columbia, <br>&nbsp;&nbsp;&nbsp;&nbsp;Maryland, and Virginia. The sale of the Alaskan Utilities closed on March 1, 2023;<br>■rate-regulated natural gas storage in the United States, of which certain storage facilities in Alaska<br>&nbsp;&nbsp;&nbsp;&nbsp;were sold on March 1, 2023, pursuant to the Alaska Utilities Disposition; and<br>■sale of energy to residential, commercial and industrial customers in Washington D.C., <br>&nbsp;&nbsp;&nbsp;&nbsp;Maryland, Virginia, Delaware, Pennsylvania and Ohio. |
| **Midstream** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;■NGL processing and extraction plants;<br>■natural gas storage facilities;<br>■liquefied petroleum gas (LPG) export terminals;<br>■transmission pipelines to transport natural gas and NGLs;<br>■natural gas gathering lines and field processing facilities;<br>■purchase and sale of natural gas;<br>■natural gas and NGL marketing;<br>■marketing, storage and distribution of wellsite fluids and fuels, crude oil and condensate diluents; and<br>■interest in a regulated pipeline in the Marcellus/Utica gas formation.  |
| **Corporate/Other** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;■the cost of providing corporate services, financing and general corporate overhead, corporate assets,<br>&nbsp;&nbsp;&nbsp;&nbsp;financing other segments, and the effects of changes in the fair value of certain risk management<br>&nbsp;&nbsp;&nbsp;&nbsp;contracts; and<br>■a small portfolio of remaining power assets. |

---

The following table provides a reconciliation of segment revenue to the disaggregated revenue table disclosed in Note 25:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** |
| | **Utilities** | **Midstream** | **Corporate/Other** | **Total** |
|<br>External revenue *(note 25)* | $**4980** | $**9010** | $**97** | $**14087** |
| Segment revenue | $**4980** | $**9010** | $**97** | $**14087** |

---

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| | | | | |
|:---|:---|:---|:---|:---|
| | Year Ended December 31, 2021 | Year Ended December 31, 2021 | Year Ended December 31, 2021 | Year Ended December 31, 2021 |
| | Utilities | Midstream | Corporate/Other | Total |
| External revenue *(note 25)* | $3936 | $6533 | $104 | $10573 |
| Intersegment revenue |  | 2 |  | 2 |
| Segment revenue | $3936 | $6535 | $104 | $10575 |

---

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 139

------

**Geographic Information**

---

| | | |
|:---|:---|:---|
| Year Ended December 31 | **2022** | 2021 |
| Revenue <sup>(a)</sup> |  |  |
| Canada | $**8915** | $6420 |
| &nbsp;&nbsp;&nbsp;&nbsp;United States | **5155** | 4304 |
| **Total** | $**14070** | $10724 |

---

(a)Operating revenue from external customers, excluding unrealized gains or losses on risk management contracts.

---

| | | |
|:---|:---|:---|
| As at December 31 | **2022** | 2021 |
| **Property, plant and equipment** |  |  |
| Canada | $**2930** | $3109 |
| &nbsp;&nbsp;&nbsp;&nbsp;United States | **8756** | 8214 |
| **Total** | $**11686** | $11323 |
| **Operating right-of-use assets** |  |  |
| Canada | $**212** | $239 |
| &nbsp;&nbsp;&nbsp;&nbsp;United States | **69** | 72 |
| **Total** | $**281** | $311 |

---

The following tables show the composition by segment:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** |
| | Utilities | Midstream | Corporate/Other | Intersegment Elimination | Total |
| Segment revenue *(note 25)* | $**4980** | $**9010** | $**97** | $**—** | $**14087** |
| Cost of sales | **(3197)** | **(7915)** | **(26)** | **—** | **(11138)** |
| Operating and administrative | **(1023)** | **(461)** | **(84)** | **—** | **(1568)** |
| Accretion expenses | **(1)** | **(6)** | **—** | **—** | **(7)** |
| Depreciation and amortization | **(290)** | **(116)** | **(33)** | **—** | **(439)** |
| Provisions on assets *(note 6)* | **—** | **(6)** | **—** | **—** | **(6)** |
| Income from equity investments | **2** | **11** | **—** | **—** | **13** |
| Other income | **77** | **9** | **8** | **—** | **94** |
| Foreign exchange gains | **—** | **—** | **10** | **—** | **10** |
| Interest expense | **—** | **—** | **(330)** | **—** | **(330)** |
| Income (loss) before income taxes | $**548** | $**526** | $**(358)** | $**—** | $**716** |
| Net additions (reductions) to: |  |  |  |  |  |
| Property, plant and equipment <sup>(a)</sup>  | $**822** | $**(117)** | $**(10)** | $**—** | $**695** |
| Intangible assets | $**2** | $**6** | $**1** | $**—** | $**9** |

---

(a)Net additions to property, plant, and equipment, and intangible assets may not agree to changes reflected in the Consolidated Statements of Cash Flows due to classification of business acquisition and foreign exchange changes on U.S. assets.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 140

------

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | Year Ended December 31, 2021 | Year Ended December 31, 2021 | Year Ended December 31, 2021 | Year Ended December 31, 2021 | Year Ended December 31, 2021 |
| | Utilities | Midstream | Corporate/Other | Intersegment Elimination | Total |
| Segment revenue *(note 25)* | $3936 | $6535 | $104 | $(2) | $10573 |
| Cost of sales | (2273) | (5412) | (25) | 2 | (7708) |
| Operating and administrative | (906) | (475) | (95) |  | (1476) |
| Accretion expenses | (1) | (6) | 1 |  | (6) |
| Depreciation and amortization | (285) | (104) | (33) |  | (422) |
| Provision on assets *(note 6)* |  | (59) | (5) |  | (64) |
| Income (loss) from equity investments | 2 | (263) |  |  | (261) |
| Other income | 65 | 16 |  |  | 81 |
| Foreign exchange gains (losses) |  | 10 | (6) |  | 4 |
| Interest expense |  |  | (275) |  | (275) |
| Income (loss) before income taxes | $538 | $242 | $(334) | $— | $446 |
| Net additions (reductions) to: |  |  |  |  |  |
| Property, plant and equipment <sup>(a)</sup> | $705 | $(284) | $8 | $— | $429 |
| Intangible assets | $2 | $2 | $2 | $— | $6 |

---

(a)Net additions to property, plant, and equipment, and intangible assets may not agree to changes reflected in the Consolidated Statements of Cash Flows due to classification of business acquisition and foreign exchange changes on U.S. assets.

The following table shows goodwill and total assets by segment:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Utilities** | **Midstream** | **Corporate/Other** | **Total** |
| **As at December 31, 2022** | | | | |
| &nbsp;&nbsp;&nbsp;&nbsp;Goodwill | $**3718** | $**1532** | $**—** | $**5250** |
| &nbsp;&nbsp;&nbsp;&nbsp;Segmented assets | $**16782** | $**6728** | $**455** | $**23965** |
| As at December 31, 2021 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Goodwill | $3691 | $1462 | $— | $5153 |
| &nbsp;&nbsp;&nbsp;&nbsp;Segmented assets | $14603 | $6415 | $575 | $21593 |

---

**34. Subsequent Events**

On March 1, 2023, AltaGas closed the sale of its 100 percent interest in ENSTAR and 65 percent indirect interest in CINGSA and other ancillary operations to TriSummit Utilities for consideration of approximately US$800 million (approximately CAD$1.1 billion) prior to closing adjustments.

Subsequent events have been reviewed through March 1, 2023, the date on which these audited Consolidated Financial Statements were issued.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 141

------

**SUPPLEMENTAL QUARTERLY OPERATING INFORMATION**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Q4-22** | Q3-22 | Q2-22 | Q1-22 | Q4-21 |
| **OPERATING HIGHLIGHTS** |  |  |  |  |  |
| **UTILITIES** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Natural gas deliveries - end use (Bcf) <sup>(1)</sup> | **54.3** | 12.6 | 23.0 | 74.7 | 44.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Natural gas deliveries - transportation (Bcf) <sup>(1)</sup> | **34.0** | 21.5 | 26.1 | 43.7 | 31.2 |
| &nbsp;&nbsp;&nbsp;&nbsp;Service sites (thousands) <sup>(2)</sup> | **1704** | 1695 | 1693 | 1694 | 1689 |
| &nbsp;&nbsp;&nbsp;&nbsp;Degree day variance from normal - SEMCO Gas (%) <sup>(3)</sup> | **(1.7)** | (3.7) | 1.8 | 3.2 | (15.0) |
| &nbsp;&nbsp;&nbsp;&nbsp;Degree day variance from normal - ENSTAR (%) <sup>(3)</sup>  | **8.7** | 12.6 | (9.6) | (11.7) | 11.9 |
| &nbsp;&nbsp;&nbsp;&nbsp;Degree day variance from normal - Washington Gas (%) <sup>(3) (4)</sup>  | **9.2** | 750.0 | 20.7 | (1.3) | (12.7) |
| &nbsp;&nbsp;&nbsp;&nbsp;WGL retail energy marketing - gas sales volumes (Mmcf) | **18064** | 7133 | 10469 | 23637 | 16299 |
| &nbsp;&nbsp;&nbsp;&nbsp;WGL retail energy marketing - electricity sales volumes (GWh) | **3328** | 3670 | 3123 | 3096 | 3167 |
| **MIDSTREAM** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;LPG export volumes (Bbls/d) <sup>(5)</sup> | **97152** | 110453 | 110845 | 87967 | 76609 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total inlet gas processed (Mmcf/d) <sup>(5)</sup>  | **1274** | 1228 | 1205 | 1472 | 1534 |
| &nbsp;&nbsp;&nbsp;&nbsp;Extraction ethane volumes (Bbls/d) <sup>(5)</sup> | **21947** | 21178 | 21706 | 29654 | 27000 |
| &nbsp;&nbsp;&nbsp;&nbsp;Extraction NGL volumes (Bbls/d) <sup>(5) (6)</sup> | **34782** | 31483 | 29402 | 35770 | 35734 |
| &nbsp;&nbsp;&nbsp;&nbsp;Fractionated volumes (Bbls/d) <sup>(5)</sup> | **36658** | 35578 | 28944 | 33090 | 37000 |
| &nbsp;&nbsp;&nbsp;&nbsp;Frac spread - realized ($/Bbl) <sup>(5) (7)</sup> | **25.14** | 27.78 | 28.70 | 23.92 | 9.18 |
| &nbsp;&nbsp;&nbsp;&nbsp;Frac spread - average spot price ($/Bbl) <sup>(5) (8)</sup> | **23.14** | 36.25 | 32.97 | 36.98 | 35.82 |
| &nbsp;&nbsp;&nbsp;&nbsp;Propane Far East Index (FEI) to Mont Belvieu spread (US$/Bbl) <sup>(5) (9)</sup> | **18.95** | 10.48 | 12.94 | 12.91 | 12.65 |
| &nbsp;&nbsp;&nbsp;&nbsp;Butane FEI to Mont Belvieu spread (US$/Bbl) <sup>(5) (10)</sup> | **18.59** | 11.87 | 11.84 | 10.95 | 10.29 |

---

(1)Bcf is one billion cubic feet.

(2)Service sites reflect all of the service sites of the utilities, including transportation and non-regulated business lines.

(3)A degree day is a measure of coldness determined daily as the number of degrees the average temperature during the day in question is below 65 degrees Fahrenheit. Degree days for a particular period are determined by adding the degree days incurred during each day of the period. Normal degree days for a particular period are the average of degree days during the prior 15 years for SEMCO Gas, during the prior 10 years for ENSTAR, and during the prior 30 years for Washington Gas.

(4)In certain of Washington Gas' jurisdictions (Virginia and Maryland) there are billing mechanisms in place that are designed to eliminate the effects of variance in customer usage caused by weather and other factors such as conservation. In the District of Columbia, there is no weather normalization billing mechanism nor does Washington Gas hedge to offset the effects of weather. As a result, colder or warmer weather will result in variances to financial results.

(5)Average for the period.

(6)NGL volumes refer to propane, butane, and condensate.

(7)Realized frac spread or NGL margin, expressed in dollars per barrel of NGL, is derived from sales recorded by the segment during the period for frac spread exposed volumes plus the settlement value of frac hedges settled in the period less extraction premiums, divided by the total frac exposed volumes produced during the period.

(8)Average spot frac spread or NGL margin, expressed in dollars per barrel of NGL, is indicative of the average sales price that AltaGas receives for propane, butane and condensate less extraction premiums, before accounting for hedges, divided by the respective frac spread exposed volumes for the period.

(9)Average propane price spread between FEI and Mont Belvieu TET commercial index.

(10)Average butane price spread between FEI and Mont Belvieu TET commercial index.

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 142

------

**OTHER INFORMATION** 

**DEFINITIONS**

Bbls/d&nbsp;&nbsp;&nbsp;&nbsp;barrels per day

Bcf&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;billion cubic feet

Dth&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;dekatherm

GJ&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;gigajoule

GWh&nbsp;&nbsp;&nbsp;&nbsp;gigawatt-hour

Mmcf&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million cubic feet

Mmcf/d&nbsp;&nbsp;&nbsp;&nbsp;million cubic feet per day

MW&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;megawatt

MWh&nbsp;&nbsp;&nbsp;&nbsp;megawatt-hour

US$&nbsp;&nbsp;&nbsp;&nbsp;United States dollar

**ABOUT ALTAGAS**

AltaGas is a leading North American energy infrastructure Company that connects NGLs and natural gas to domestic and global markets. The Company operates a diversified, lower-risk, high-growth Utilities and Midstream business that is focused on delivering resilient and durable value for its stakeholders.

For more information visit www.altagas.ca or reach out to one of the following:

**Jon Morrison**

Senior Vice President, Investor Relations & Corporate Development

Jon.Morrison@altagas.ca

**Adam McKnight**

Director, Investor Relations

Adam.McKnight@altagas.ca

**Investor Inquiries**

1-877-691-7199

investor.relations@altagas.ca

**Media Inquiries**

1-403-206-2841

media.relations@altagas.ca

  

AltaGas Ltd. – 2022 MD&A and Financial Statements - 143

## Exhibit 23.1

**Consent of Independent Registered Public Accounting Firm** 

We consent to the reference to our Firm under the caption "Interests of Experts", and to the incorporation by reference in the Registration Statement (Form F-10 No. 333-253122) of AltaGas Ltd. (the "Company") and the use herein of our report dated March 1, 2023, with respect to the consolidated balance sheets as at December 31, 2022 and 2021 and the consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of equity and consolidated statements of cash flows for each of the years in the two-year period ended December 31, 2022, included in this Annual Report on Form 40-F.

/s/ Ernst & Young LLP

Chartered Professional Accountants

Calgary, Alberta

March 1, 2023

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14 OF THE**

**SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO**

**SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Randall L. Crawford, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this annual report on Form 40-F of AltaGas Ltd.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.Evaluated the effectiveness of the issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.Disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.The issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer's auditors and the audit committee of the issuer's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal control over financial reporting.

Date: March 2, 2023

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>/s/ Randall L. Crawford</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Name: Randall L. Crawford

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title: President and Chief Executive Officer

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14 OF THE**

**SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO**

**SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, James Harbilas, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this annual report on Form 40-F of AltaGas Ltd.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.Evaluated the effectiveness of the issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.Disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.The issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer's auditors and the audit committee of the issuer's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal control over financial reporting.

Date: March 2, 2023

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>/s/ James Harbilas</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Name: James Harbilas

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title: Executive Vice President and Chief Financial Officer

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED**

**PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Annual Report of AltaGas Ltd. (the "Company") on Form 40-F for the fiscal year ended December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Randall L. Crawford, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 2, 2023

<u>/s/ Randall L. Crawford</u> 

Name: Randall L. Crawford

Title: President and Chief Executive Officer

## Exhibit 32.2

**Exhibit 32.2**

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED**

**PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Annual Report of AltaGas Ltd. (the "Company") on Form 40-F for the fiscal year ended December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James Harbilas, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 2, 2023

<u>/s/ James Harbilas</u> 

Name: James Harbilas

Title: Executive Vice President and Chief Financial Officer

<br>