Summary

  • Canadian Utilities Limited, an ATCO company, is a $20 billon company operating globally
  • The company has diverse energy services portfolio in Utilities, Energy Infrastructure and Retail Energy.
  • The company delivers natural gas and electricity to communities throughout Alberta and Northern Canada, in Mexico with clean hydroelectricity, gas-fired power plants in Australia

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Company Overview

Canadian Utilities Limited (NYSE:CU, TSX:CU) an ATCO company, is a $20 billon company operating globally, with a diverse portfolio that positions it to deliver premier energy services to its customers in Utilities, Energy Infrastructure and Retail Energy. At the heart of its business are approximately 5,000 employees, carrying forward almost 50 years of innovation and service excellence in solving its clients’ challenges, big and small- from major infrastructure projects to home energy delivery.1

Electricity Global Business Unit - unites electricity generation, transmission and distribution expertise from across its business to provide sustainable, innovative and comprehensive customer solutions globally.

Pipelines & Liquids Global Business Unit - leverages the strength of its businesses to offer fully integrated, cost-effective solutions in natural gas transmission and distribution, natural gas liquids storage and processing and industrial water solutions.

Retail Energy business - allows it to provide its customers with competitive rates for both natural gas and electricity services to homes and businesses in the markets where the company operate.

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Operations

Whether delivering natural gas and electricity to communities throughout Alberta and Northern Canada, keeping the lights on in Mexico with clean hydroelectricity, transforming the electricity system in Puerto Rico, or developing highly efficient natural gas-fired power plants in Australia, the scope and scale of its operations are truly global. Over the course of its more than 70-year history, we’ve developed integrated solutions you can rely on.2

Alberta

In Alberta, its roots have grown deep over its 70-year history. Today, the company deliver reliable electricity, clean-burning natural gas, and affordable energy plans to residential and business customers across the province.

Canada's North

Canadian Utilities has been a proud part of the North since 1901, serving communities across the Yukon and Northwest Territories. Here, we’re always looking to better serve its customers – who rely on it to heat their homes, power their businesses and help move the economy forward.

Mexico

Through ATCO Mexico and ATCO Energia, the company continue to participate in the transformational change that is continuing in Mexico’s energy market – as an owner of hydroelectric and distributed generation facilities, a qualified supplier of electricity, and a designer and builder of energy infrastructure.

Australia

Canadian Utilities has been faithfully serving customers in Australia since 1961. From power generation to natural gas infrastructure and modular manufacturing and rentals, ATCO Australia represents a full range of energy infrastructure and other services.

Puerto Rico

Through its 50 per cent ownership in LUMA, its newly-formed company in Puerto Rico, Canadian Utilities is eager to serve nearly 1.5 million customers across the island by transforming and operating their electric transmission and distribution system over a term of 15 years.

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Business Segments

Revenues in 2021 were $3,515 million, $282 million higher than the same period in 2020. Higher revenues were mainly due to improved performance at ATCOenergy resulting from higher electricity and natural gas commodity prices associated with floating rate energy contracts, and higher flow-through revenues in the Electricity Distribution and Natural Gas Distribution businesses and the timing of prior period costs recovered in Natural Gas Distribution.3

The company's adjusted earnings in 2021 were $586 million or $2.17 per share, compared to $535 million or $1.96 per share for the same period in 2020.

Higher adjusted earnings in 2021 were mainly due to a full 12 months of earnings from International Electricity Operations comprised of ongoing transition work in the first half of 2021 and the June 2021 commencement of a Supplemental Agreement to LUMA Energy's 15-year Operations and Maintenance Agreement. Higher adjusted earnings were also due to inflation in Australia, which positively impacted earnings in the International Natural Gas Distribution business and cost efficiencies within the Electricity Distribution business.

Total capital investment of $1,338 million in 2021 was $426 million higher compared to the same period in 2020, mainly due to the acquisition of the Pioneer Pipeline in the Natural Gas Transmission business; and the acquisition of the Alberta Hub natural gas storage facility, the acquisition of three solar development projects, and the construction of a long-term contracted hydrocarbon storage cavern in the Energy Infrastructure segment.

Total capital expenditures of $1,227 million in 2021 were $324 million higher compared to the same period in 2020, mainly due to the acquisition of the Pioneer Pipeline in the Natural Gas Transmission business, and the acquisition of three solar development projects in the Energy Infrastructure segment.

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Utilities

Utilities revenues of $884 million and $3,041 million in the fourth quarter and full year of 2021 were $100 million and $109 million higher compared to the same periods in 2020 mainly due to higher flow-through revenues in the Electricity Distribution and Natural Gas Distribution businesses, and the timing of prior period costs recovered in Natural Gas Distribution.

Utilities adjusted earnings of $206 million in the fourth quarter of 2021 were $11 million higher than the same period in 2020 mainly due to higher earnings from International Electricity Operations as a result of the June 2021 commencement of a Supplemental Agreement to LUMA Energy's 15-year Operations and Maintenance Agreement, and inflation indexing in International Natural Gas Distribution. Higher earnings were partially offset by timing of operating costs.

Utilities adjusted earnings of $635 million in the full year of 2021 were $51 million higher than the same period in 2020 mainly due to higher earnings from International Electricity Operations as a result of ongoing transition work in the first half of 2021 and the June 2021 commencement of a Supplemental Agreement to LUMA Energy's 15-year Operations and Maintenance Agreement. Higher earnings were also due to inflation indexing in International Natural Gas Distribution, and cost efficiencies within the Electricity Distribution business. Higher earnings were partially offset by the impact of the Electricity Transmission 2018-2019 GTA Compliance Filing decision and the 2020-2022 GTA Compliance Filing decision received in 2021. Combined, these decisions included a $12 million reduction of earnings related to prior periods.

Electricity Distribution

Electricity Distribution provides regulated electricity distribution and distributed generation mainly in Northern and Central East Alberta, the Yukon, the Northwest Territories and in the Lloydminster area of Saskatchewan.

Electricity Distribution adjusted earnings of $37 million in the fourth quarter of 2021 were $1 million lower than the same period in 2020 mainly due timing of operating costs.

Electricity Distribution adjusted earnings of $151 million in the full year of 2021 were $19 million higher compared to the same period in 2020 mainly due to cost efficiencies.

Electricity Transmission

Electricity Transmission provides regulated electricity transmission mainly in Northern and Central East Alberta, and in the Lloydminster area of Saskatchewan. Electricity Transmission has a 35-year contract to be the operator of Alberta PowerLine, a 500-km electricity transmission line between Wabamun, near Edmonton and Fort McMurray, Alberta.

Electricity Transmission adjusted earnings of $35 million in the fourth quarter of 2021 were $7 million lower than the same period in 2020 mainly due to timing of operating costs.

Electricity Transmission adjusted earnings of $152 million in the full year of 2021 were $22 million lower than the same period in 2020. Lower earnings were mainly due to the impact of the Electricity Transmission 2018-2019 GTA Compliance Filing decision received in the second quarter of 2021, and the 2020-2022 GTA Compliance Filing decision received in the third quarter of 2021. Combined, these decisions included a $12 million reduction of earnings related to prior periods.

International Electricity Operations

International Electricity Operations includes a 50 per cent ownership in LUMA Energy, a company formed to transform, modernize and operate Puerto Rico's 30,000-km electricity transmission and distribution (T&D) system under an Operations and Maintenance Agreement with the Puerto Rico Public-Private Partnerships Authority (P3A) and the Puerto Rico Electric Power Authority (PREPA).

LUMA Energy has assumed operations under terms of a Supplemental Agreement as PREPA remains in bankruptcy. This Agreement can span up to 18 months and allows LUMA Energy to collect an annualized fixed fee equivalent of $115 million USD. Should PREPA emerge from bankruptcy during this period, LUMA Energy will transition to year one of the previously outlined Operations and Maintenance Agreement.

International Electricity Operations adjusted earnings of $16 million and $44 million in the fourth quarter and full year of 2021 were $10 million and $32 million higher than the same periods in 2020. Higher earnings were mainly due to ongoing transition work in the first half of 2021 and the June 1, 2021 commencement of operations under a Supplemental Agreement to LUMA Energy's 15-year contract to modernize and operate Puerto Rico's electricity T&D system.

Natural Gas Distribution

Natural Gas Distribution serves municipal, residential, commercial and industrial customers throughout Alberta and in the Lloydminster area of Saskatchewan.

Natural Gas Distribution adjusted earnings of $72 million in the fourth quarter of 2021 were $7 million lower than the same period in 2020 mainly due to timing of operating costs.

Natural Gas Distribution adjusted earnings of $142 million in the full year of 2021 were $4 million lower than the same period in 2020 mainly due to higher operating costs, partially offset by growth in rate base.

Natural Gas Transmission

Natural Gas Transmission receives natural gas on its pipeline system from various gas processing plants as well as from other natural gas transmission systems and transports it to end users within the province of Alberta or to other pipeline systems.

Natural Gas Transmission adjusted earnings of $20 million and $81 million in the fourth quarter and full year of 2021 were $2 million and $8 million lower than the same periods in 2020. Lower earnings were mainly due to the impact of the 2021-2023 General Rate Application which included operating cost efficiencies implemented in prior periods that are being passed on to customers, partially offset by growth in rate base.

International Natural Gas Distribution

International Natural Gas Distribution is a regulated provider of natural gas distribution services in Western Australia, serving metropolitan Perth and surrounding regions.

International Natural Gas Distribution adjusted earnings of $26 million and $65 million in the fourth quarter and full year of 2021 were $18 million and $34 million higher compared to the same periods in 2020. Higher earnings were mainly due to the impact of inflation indexing and increased customer volumes.

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Energy Infrastructure

Energy Infrastructure revenues of $74 million and $209 million in the fourth quarter and full year of 2021 were $15 million and $14 million higher than the same periods in 2020 mainly due to higher natural gas prices at the Carbon, Alberta natural gas storage facility.

Energy Infrastructure adjusted earnings of $4 million in the fourth quarter of 2021 were $8 million lower than the same period in 2020 mainly due to the costs associated with the purchase of the Alberta Hub natural gas storage facility, Central West Pumped Hydro development costs, non-recurring recoveries in 2020, and lower demand for natural gas storage services.

Electricity Generation

Non-regulated electricity activities include the supply of electricity from solar, hydroelectric, and natural gas generating plants in Western Canada, Australia, Mexico, and Chile and non-regulated electricity transmission in Alberta.

Electricity Generation adjusted earnings in the fourth quarter of 2021 were $4 million lower compared to the same period in 2020. Lower earnings were mainly due to Central West Pumped Hydro development costs, and nonrecurring recoveries in 2020.

Electricity Generation adjusted earnings of $13 million in the full year of 2021 were comparable to the same period in 2020.

Storage & Industrial Water

Storage & Industrial Water provides non-regulated natural gas storage and transmission activities, natural gas liquids storage, and industrial water services in Alberta and the Northwest Territories.

Storage & Industrial Water adjusted earnings of $4 million in the fourth quarter of 2021 were $4 million lower compared to the same period in 2020 mainly due to costs associated with the purchase of the Alberta Hub natural gas storage facility and lower demand for natural gas storage services.

Storage & Industrial Water adjusted earnings of $15 million in the full year of 2021 were comparable to the same period in 2020.

Financial Highlights

First Quarter 2022 Result

April 27, 2022; Canadian Utilities Reports First Quarter 2022 Earnings4

Canadian Utilities Limited (Canadian Utilities or the Company) today announced first quarter 2022 adjusted earnings of $219 million ($0.81 per share), $28 million ($0.11 per share) higher compared to $191 million ($0.70 per share) in the first quarter of 2021.

First quarter earnings attributable to equity owners of the Company reported in accordance with International Financial Reporting Standards (IFRS earnings) were $227 million ($0.78 per Class A and Class B share), $86 million ($0.32 per Class A and Class B share) higher compared to $141 million ($0.46 per Class A and Class B share) in the first quarter of 2021.

IFRS earnings include timing adjustments related to rate-regulated activities, dividends on equity preferred shares of the Company, unrealized gains or losses on mark-to-market forward and swap commodity contracts, one-time gains and losses, impairments, and items that are not in the normal course of business or a result of day-to-day operations. These items are not included in adjusted earnings.

Three Months Ended  March 31  
($ millions except share data)20222021
   
Adjusted Earnings 219191
Unrealized (losses) gains on mark-to-market forward and swap commodity contracts (1)-121
Rate-regulated activities (2)36-52
IT Common Matters decision (3)-4-4
Transition of managed IT services (4)-11
Dividends on equity preferred shares of Canadian Utilities Limited1817
AUC enforcement proceeding (5)-27
Workplace COVID-19 vaccination standard (6)-8
Gain on sale (7)5
Other-1
Earnings attributable to equity owners of the Company227141
Weighted average shares outstanding (millions of shares)268.9272
  • On April 14, 2022, a joint settlement agreement was filed with the AUC with respect to the AUC enforcement proceeding with an agreed administrative penalty of $31 million. Customers were never impacted as these costs were not included in customer rates and the administrative penalty and excluded project costs will not be recovered from customers.
  • Invested $263 million in capital projects of which 83 per cent was invested in regulated utilities and 17 per cent mainly in Energy Infrastructure.
  • Entered into a share purchase agreement with Denendeh Investments Incorporated (DII) to increase DII's ownership interest from 14 per cent to 50 per cent in Northland Utilities Enterprises Ltd. (NUE). NUE is an electric utility company operating in the Northwest Territories, Canada and a subsidiary of ATCO Electric Ltd. The transaction results in ATCO Electric Ltd. and DII each having a 50 per cent ownership interest in NUE and highlights its continued commitment to foster community ownership and self-sustaining economic development.
  • Closed the transaction to transfer a 30-km segment of the Pioneer Natural Gas Pipeline to Nova Gas Transmission Ltd. for $63 million in the Natural Gas Transmission business on February 25, 2022.
  • Announced a 15-year power purchase agreement with Microsoft Corporation to purchase all renewable energy generated by ATCO's Deerfoot solar project in Calgary, Alberta. Once operational, the Deerfoot solar project will be one of the largest solar installations in a major urban centre in Western Canada, at 37-MW.
  • On April 14, 2022, Canadian Utilities declared a second quarter dividend of 44.42 cents per share or $1.78 per Class A non-voting and Class B common share on an annualized basis.

References

  1. ^ https://www.canadianutilities.com/en-ca/about-us/corporate-structure.html
  2. ^ https://www.canadianutilities.com/en-ca/about-us/global-operations.html
  3. ^ https://www.canadianutilities.com/content/dam/web/canadian-utilities/investors/cu-yearly/cu-2021-ye-annual-report.pdf
  4. ^ https://www.canadianutilities.com/en-ca/about-us/news/2022/122658-canadian-utilities-reports-first-quarter-2022-earnings.html
Tags: US:CU CA:CU
Created by Asif Farooqui on 2022/05/05 08:00
     

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