ATCO REPORTS THIRD QUARTER 2024 EARNINGS

Canada NewsWire

CALGARY, AB, Nov. 14, 2024

CALGARY, AB, Nov. 14, 2024 /CNW/ - ATCO Ltd. (TSX: ACO.X) (TSX: ACO.Y)

ATCO Ltd. (ATCO or the Company) today announced third quarter 2024 adjusted earnings of $91 million ($0.81 per share), $10 million ($0.10 per share) higher compared to $81 million ($0.71 per share) in the third quarter of 2023.

Third quarter earnings attributable to Class I and Class II Shares reported in accordance with International Financial Reporting Standards (IFRS earnings) were $93 million ($0.83 per share), $2 million ($0.03 per share) higher compared to $91 million ($0.80 per share) in the third quarter of 2023.

IFRS earnings include timing adjustments related to rate-regulated activities, 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.

RECENT DEVELOPMENTS

ATCO Structures

   -- Successfully closed the previously announced acquisition of NRB Limited, 
      a leading Canadian manufacturer of modular industrial, educational and 
      residential buildings. The transaction closed on August 30, 2024, for a 
      purchase price of $40 million, subject to normal closing adjustments. 
 
   -- Awarded a $14 million contract to design, supply, transport and install a 
      29-unit, two-storey mine dry facility in support of a mining operation in 
      Western Canada. Manufacturing is scheduled to commence in the fourth 
      quarter of 2024 with delivery and installation expected in the second 
      quarter of 2025. 

Canadian Utilities

   -- In September 2024, ATCO Energy Systems announced the filing of a 
      comprehensive regulatory application that establishes the need for the 
      Yellowhead Mainline natural gas project and represents the first of two 
      applications to the Alberta Utilities Commission. This is a significant 
      milestone for the advancement of the project. Subject to regulatory and 
      company approvals, construction is expected to commence in 2026 and the 
      pipeline is expected to be on-stream in the fourth quarter of 2027. 
 
   -- ATCO EnPower remains committed to hydrogen development within Alberta's 
      Industrial Heartland and has signed a Letter of Intent with Linde Canada 
      Inc. (Linde). ATCO EnPower and Linde are working alongside other parties 
      to further the development and commercial success of the AH3 project, 
      with the objective to commence Front End Engineering Design (FEED) in the 
      fourth quarter of 2024 and advance both domestic and export offtake 
      opportunities. The project has significant potential to supply hydrogen 
      to domestic and international markets, including the Alberta gas grid, 
      industrial, municipal, and commercial transport users. The parties 
      continue to work with supportive Federal and Provincial governments to 
      establish policy and frameworks that facilitate investment in the 
      Canadian hydrogen economy of both export and domestic opportunities, and 
      to work with First Nations for their participation in the development of 
      and ownership in the project. 
 
   -- In September 2024, ATCO EnPower successfully produced hydrogen through 
      two 1-MW electrolyzers that were constructed and commissioned in Edmonton 
      and Calgary. This is a significant milestone for ATCO EnPower's 
      partnership with Canadian Pacific Kansas City Limited that was announced 
      in the second quarter of 2022, to provide engineering, procurement and 
      construction services for two hydrogen production and refueling 
      facilities in Calgary and Edmonton. 
 
   -- Subsequent to quarter end, on November 8, 2024, ATCO Gas Australia 
      received the final AA6 decision from the Economic Regulation Authority 
      $(ERA.AU)$. This final decision is a result of a constructive and 
      collaborative regulatory process. The decision from the ERA approves the 
      prices for ATCO Gas Australia's gas distribution network for the next 
      five years. Their decision is underpinned by a five-year capital 
      expenditure program, a five-year operating cost forecast, the demand 
      forecast of throughput on the natural gas distribution network in Western 
      Australia, and included an evaluation of the capital expenditure program 
      completed during the AA5 period to confirm the capital expenditures met 
      the regulatory criteria. The decision also determines the rate of return 
      for the AA6 period, which adopts a ROE of 8.23 per cent, compared to 5.02 
      per cent in the previous Access Arrangement. 
 
   -- Incurred $414 million in capital expenditures in the third quarter of 
      2024, of which 94 per cent was invested in our regulated utilities 
      in ATCO Energy Systems and ATCO Australia, and 6 per cent mainly in ATCO 
      EnPower. 

Corporate

   -- On October 10, 2024, ATCO declared a fourth quarter dividend of 48.98 
      cents per share or $1.96 per share on an annualized basis per Class I 
      non-voting and Class II voting share. 

FINANCIAL SUMMARY AND RECONCILIATION OF ADJUSTED EARNINGS

A financial summary of the consolidated subsidiaries of ATCO and a reconciliation of adjusted earnings to earnings attributable to Class I non-voting shares and Class II voting shares is provided below:

 
                       Three Months                Nine Months EndedSeptember 
                       EndedSeptember 30           30 
($ millions except     2024        2023            2024         2023 
share data) 
 
Adjusted Earnings              91              81          335             305 
Restructuring (1)             (6)              --         (29)              -- 
ATCO Electric                  --              --          (4)              -- 
settlement 
application (2) 
Unrealized gains on 
 mark-to-market 
 forward and 
 swapcommodity 
 contracts (3)                 11              38            6              73 
Rate-regulated 
 activities (4)               (7)            (25)         (15)            (24) 
IT Common Matters 
 decision (5)                 (3)             (3)          (8)             (8) 
Impairment (6)                 --              --           --             (4) 
Transition of managed 
 IT services (7)               --              --           --             (5) 
Other (8)                       7              --            7              -- 
 
Earnings attributable 
 to Class I 
 non-voting and Class 
 II voting shares              93              91          292             337 
Weighted average 
 shares outstanding 
 (millions of shares)       112.2           113.4        112.2           113.4 
 
 
(1)  In the third quarter and first nine months of 2024, 
      the Company recorded restructuring costs of $6 million 
      and $29 million (after-tax and non-controlling interests) 
      mainly related to staff reductions and associated 
      severance costs. 
(2)  In the second quarter of 2024, the Company recognized 
      costs of $4 million (after-tax and non-controlling 
      interests) related to an AUC enforcement proceeding 
      on the settlement agreement of two matters the Electric 
      Transmission business had self-reported to AUC Enforcement 
      staff. 
(3)  The Company's electricity generation and retail electricity 
      and natural gas businesses in Alberta enter into fixed-price 
      swap commodity contracts to manage exposure to electricity 
      and natural gas prices and volumes. These contracts 
      are measured at fair value. Unrealized gains and losses 
      due to changes in the fair value of the fixed-price 
      swap commodity contracts in the electricity generation 
      and electricity and natural gas retail businesses 
      are recognized in the earnings of the ATCO EnPower 
      segment and Corporate & Other, respectively. Realized 
      gains or losses are recognized in adjusted earnings 
      when the commodity contracts are settled. 
(4)  The Company records significant timing adjustments 
      as a result of the differences between rate-regulated 
      accounting and IFRS with respect to additional revenues 
      billed in the current year, revenues to be billed 
      in future years, regulatory decisions received, and 
      settlement of regulatory decisions and other items. 
(5)  Consistent with the treatment of the gain on sale 
      in 2014 from the IT services business by the Company, 
      financial impacts associated with the IT Common Matters 
      decision are excluded from adjusted earnings. 
(6)  In the second quarter of 2023, the Company recognized 
      an impairment of $4 million (after-tax and non-controlling 
      interests) relating to certain electricity generation 
      assets in Electricity Transmission. These assets had 
      been removed from service and it was determined that 
      they no longer had any remaining value. 
(7)  In the first quarter of 2023, the Company recognized 
      legal and other costs of $5 million (after-tax and 
      non-controlling interests) related to the Wipro Ltd. 
      master services agreements matter that was concluded 
      on February 26, 2023. 
(8)  Transfer of ownership of ATCO Energy Ltd. from Canadian 
      Utilities Limited to ATCO. Canadian Utilities Limited 
      recorded a loss of $14 million ($7 million after non-controlling 
      interest) which is eliminated on consolidation with 
      ATCO. 
 

This news release should be read in concert with the full disclosure documents. ATCO's unaudited consolidated financial statements and management's discussion and analysis for the quarter ended September 30, 2024 will be available on the ATCO website (www.ATCO.com), via SEDAR+ (www.sedarplus.ca) or can be requested from the Company.

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