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.
TELECONFERENCE AND WEBCAST
(MORE TO FOLLOW) Dow Jones Newswires
November 14, 2024 06:51 ET (11:51 GMT)