ATCO Reports First Quarter 2022 Earnings
Press Release
CALGARY, AB, April 27, 2022 – ATCO Ltd. (TSX: ACO.X) (TSX: ACO.Y)
ATCO Ltd. (ATCO or the Company) today announced first quarter 2022 adjusted earnings of $134 million ($1.17 per share), $15 million ($0.13 per share) higher compared to $119 million ($1.04 per share) in the first quarter of 2021.
First quarter earnings attributable to Class I and Class II Shares reported in accordance with International Financial Reporting Standards (IFRS earnings) were $128 million ($1.12 per share), $45 million ($0.39 per share) higher compared to $83 million ($0.73 per share) in the first quarter of 2021.
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 IN THE FIRST QUARTER OF 2022
ATCO Structures
- Awarded an additional $37 million contract to manufacture and install a parallel camp facility for the Bechtel Pluto Train II project in Western Australia. ATCO Structures also commenced the construction of a 2,500-person accommodation village with installation scope and site setup. Manufacturing scope is expected to commence in the second quarter of 2022 with delivery in the third quarter of 2022 through the second quarter of 2023.
- Fully completed a 550-person camp for the Trans Mountain Expansion Project in Blue River, BC. The camp will remain rented for a minimum of 10 months.
ATCO Frontec
- On February 1, 2022, Nasittuq Corporation (Nasittuq), a partnership between ATCO Frontec and the Pan Arctic Inuit Logistics Corporation (PAIL), was awarded by the Government of Canada a seven-year contract to operate and maintain the North Warning System (NWS), beginning April 1, 2022. Under the contract, Nasittuq will operate and maintain 47 remote NWS sites in the Canadian Arctic and three facilities in Ontario.
- Commenced operations on April 1, 2022 to maintain 15 different Department of National Defence sites and the associated infrastructure across Alberta for two Facility Maintenance and Site Services contracts with Defence Construction Canada.
Canadian Utilities
- 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.
- 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 our 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.
Corporate
- On April 14, 2022, ATCO declared a second quarter dividend of 46.17 cents per share or $1.85 per share on an annualized basis per Class I Non-Voting and Class II Voting Share.
FINANCIAL SUMMARY AND RECONCILIATION OF ADJUSTED EARNINGS
A financial summary of the consolidated subsidiaries of ATCO and a reconciliation of adjusted earnings to earnings attributable to Class I and Class II Shares is provided below:
|
Three Months Ended March 31 |
||
|
($ millions except share data) |
2022 |
2021 |
|
Adjusted Earnings |
134 |
119 |
|
Unrealized losses on mark-to-market forward and swap commodity contracts (1) |
(6) |
— |
|
Rate-regulated activities (2) |
19 |
(28) |
|
IT Common Matters decision (3) |
(2) |
(2) |
|
Transition of managed IT services (4) |
— |
(6) |
|
AUC enforcement proceeding (5) |
(14) |
— |
|
Workplace COVID-19 vaccination standard (6) |
(5) |
— |
|
Gain on sale (7) |
3 |
— |
|
Other |
(1) |
— |
|
Earnings attributable to Class I and Class II Shares |
128 |
83 |
|
Weighted average shares outstanding (millions of shares) |
114.1 |
114.3 |
The Company’s retail electricity and natural gas business in Alberta enters 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 are recognized in the earnings of the Corporate & Other segment. Realized gains or losses are recognized in adjusted earnings when the commodity contracts are settled.
|
(1) |
|
|
(2) |
The Company records significant timing adjustments as a result of the differences between rate-regulated accounting and International Financial Reporting Standards with respect to additional revenues billed in current year, revenues to be billed in future years, regulatory decisions received, and settlement of regulatory decisions and other items. |
|
(3) |
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. |
|
(4) |
In the fourth quarter of 2020 and first quarter of 2021, the Company signed Master Services Agreements (MSA) with IBM Canada Ltd. (subsequently novated to Kyndryl Canada Ltd.) and IBM Australia Limited, respectively, to provide managed IT services. These services were previously provided by Wipro under a ten-year MSA expiring in December 2024. The transition of the managed IT services from Wipro to IBM commenced on February 1, 2021 and is complete. |
|
(5) |
In the fourth quarter of 2021 and first quarter of 2022, the Company recognized the $31 million penalty, $11 million of project costs and other costs of $2 million ($7 million in Q4 2021 and $14 million in Q1 2022 (after tax and non-controlling interests)) related to the potential outcome of the AUC enforcement proceeding. The settlement was filed with the AUC on April 14, 2022 and the AUC is currently determining the next process steps. |
|
(6) |
In the three months ended March 31, 2022, the Company incurred $5 million (after-tax and non-controlling interests) in severance and related costs associated with the Workplace COVID-19 vaccination standard. |
|
(7) |
On March 31, 2022, the Company sold 36 per cent of its ownership interest in a subsidiary, Northland Utilities Enterprises Ltd., for $8 million, net of cash disposed. The transaction resulted in a gain on sale of $3 million (after-tax and non-controlling interests). With this transaction, ATCO Electric Ltd. and DII each have a 50 per cent ownership interest. |
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 March 31, 2022 will be available on the ATCO website (www.ATCO.com), via SEDAR (www.sedar.com) or can be requested from the Company.
TELECONFERENCE AND WEBCAST
ATCO will hold a live teleconference and webcast at 10:00 am Mountain Time (12:00 pm Eastern Time) on Thursday, April 28, 2022 at 1-800-319-4610. No pass code is required.
Katie Patrick, Executive Vice President, Chief Financial & Investment Officer, will discuss first quarter 2022 financial results and recent developments. Opening remarks will be followed by a question and answer period with investment analysts. Participants are asked to please dial-in 10 minutes prior to the start and request to join the ATCO teleconference.
Management invites interested parties to listen via live webcast at: https://www.atco.com/en-ca/about-us/investors/events-presentations.html
A replay of the teleconference will be available approximately two hours after the conclusion of the call until May 28, 2022. Please call 1-800-319-6413 and enter pass code 8784. An archive of the webcast will be available on April 28, 2022 and a transcript of the call will be posted on https://www.atco.com/en-ca/about-us/investors/events-presentations.html within a few business days.
With approximately 6,400 employees and assets of $23 billion, ATCO is a diversified global corporation with investments in the essential services of Structures & Logistics (workforce and residential housing, innovative modular facilities, construction, site support services, workforce lodging services, facility operations and maintenance, defence operations services, and disaster and emergency management services); Utilities (electricity and natural gas transmission and distribution, and international operations); Energy Infrastructure (energy storage, energy generation, industrial water solutions, and clean fuels); Retail Energy (electricity and natural gas retail sales, and whole-home solutions); Transportation (ports and transportation logistics); and Commercial Real Estate. More information can be found at www.ATCO.com.
Investor & Analyst Inquiries:
Colin Jackson
Senior Vice President, Finance, Treasury, Risk & Sustainability
[email protected]
(403) 808 2636
Media Inquiries:
Kurt Kadatz
Director, Corporate Communications
[email protected]
(587) 228 4571
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