ATCO Reports Higher Second Quarter 2019 Earnings
Press Release
CALGARY, Alberta, July 25, 2019 — ATCO Ltd. (TSX: ACO.X, ACO.Y)
ATCO today announced second quarter 2019 adjusted earnings of $78 million, or $0.68 per share, compared to $61 million, or $0.53 per share, in the second quarter of 2018. Higher second quarter earnings were recorded in Structures & Logistics, Neltume Ports, and Canadian Utilities.
Structures & Logistics achieved $1 million in higher earnings in the second quarter, mainly due to earnings from the LNG Canada workforce accommodation project, and higher rental activity.
Neltume Ports contributed $4 million in earnings in the second quarter, driven by continued strong movement of copper cargo volumes in Chile.
Canadian Utilities recorded $10 million in higher second quarter earnings, mainly due to favourable electricity and natural gas transmission regulatory decisions, ongoing growth in the regulated rate base, cost efficiencies, and lower income taxes.
RECENT DEVELOPMENTS
Structures & Logistics
In the second half of 2019, modular structures business activity will continue to ramp up due to the execution of secured contract work such as LNG Canada, ongoing rental earnings from Chico, California, PMC contracts in the US and Canada, and orders with major mining companies in Western Australia.
- Modular structures has successfully commenced both manufacturing and site construction work for the LNG Canada workforce accommodation project. Manufacturing commenced in the first quarter of 2019 and is planned to continue through 2020.
- Modular structures completed the first stage handover of 300 beds in June 2019, for a 600-person camp in Western Australia. Total contract value is $27 million with completion of all 600 beds expected in August 2019.
- Modular structures has secured multiple contracts for approximately $27 million with the Government of British Columbia’s supportive housing program in response to the growing issue of homelessness in communities.
- Modular structures was awarded a $7 million contract to supply modular product for a Marriott hotel near San Francisco, California with an expected completion in July 2019. A second $7 million contract to supply modular product for a Marriott hotel in Oakland, California is expected to be complete in November 2019.
Canadian Utilities
- In May 2019, Canadian Utilities entered into definitive agreements to sell its entire Canadian fossil fuel-based electricity generation portfolio for aggregate proceeds of approximately $835 million, subject to customary closing adjustments. The sale will occur as three separate transactions. The transaction for Canadian Utilities’ 50 per cent ownership interest in the 260 MW Cory Cogeneration Station closed in July 2019. The remaining two transactions, one for 10 partly- or fully-owned natural gas-fired and coal-fired electricity generation assets located in Alberta and British Columbia, and the other for Canadian Utilities’ 50 per cent ownership in the 580 MW Brighton Beach Power joint venture, are expected to close in the second half of 2019.
- In June 2019, Canadian Utilities, along with its partner Quanta Services Inc., entered into definitive agreements to sell Alberta PowerLine Limited Partnership (APL) through a competitive process for total proceeds of approximately $300 million, and the assumption of approximately $1.4 billion of APL debt. As part of these agreements, Canadian Utilities is offering an opportunity for Indigenous communities along the transmission line route to obtain up to a 40 per cent equity interest in APL. The final ownership mix will be determined upon close of the purchase opportunity for Indigenous communities. Canadian Utilities will remain the operator of APL over its 35-year contract with the Alberta Electric System Operator. The sale is expected to close in the fourth quarter of 2019, subject to receipt of regulatory approvals and satisfaction of other customary closing conditions.
- In June 2019, the Alberta Utilities Commission issued its decision regarding the IT Common Matters proceeding. The decision had no impact on adjusted earnings.
Corporate
- On July 11, 2019, ATCO declared a third quarter dividend for 2019 of 40.48 cents per Class I Non-Voting and Class II Voting Share.
- On July 17, 2019, Dominion Bond Rating Service affirmed its ‘A (high)’ long-term corporate credit rating and stable outlook on ATCO subsidiary CU Inc.
FINANCIAL SUMMARY AND RECONCILIATION OF ADJUSTED EARNINGS
A financial summary of the consolidated subsidiaries of ATCO and a reconciliation of adjusted earnings to earnings attributable to Class I and Class II Shares is provided below:
| For the Three Months Ended June 30 |
For the Six Months Ended June 30 |
|||
| ($ millions except share data) | 2019 | 2018 | 2019 | 2018 |
| Consolidated adjusted earnings (1) | 78 | 61 | 190 | 160 |
| Transaction costs (2) | (5) | — | (5) | — |
| Restructuring and other costs (2) | — | (39) | — | (39) |
| Unrealized (losses) gains on mark-to-market forward commodity contracts (2) | (3) | 6 | — | (3) |
| Rate-regulated activities (2) (3) | 96 | (38) | 93 | (39) |
| IT Common Matters decision (2) | (8) | — | (8) | — |
| Other (2) (4) | — | (2) | — | (1) |
| Earnings attributable to Class I and Class II Shares | 158 | (12) | 270 | 78 |
| Weighted average shares outstanding (millions of shares) | 114.4 | 114.4 | 114.3 | 114.4 |
| (1) | Adjusted earnings are earnings attributable to Class I and Class II Shares after adjusting for the timing of revenues and expenses associated with rate-regulated activities and unrealized gains or losses on mark-to-market forward commodity contracts. Adjusted earnings also exclude one-time gains and losses, significant impairments, and items that are not in the normal course of business or a result of day-to-day operations. Adjusted earnings present earnings on the same basis as was used prior to adopting International Financial Reporting Standards (IFRS) – that basis being the U.S. accounting principles for rate-regulated entities – and they are a key measure used to assess segment performance, to reflect the economics of rate regulation and to facilitate comparability of ATCO’s earnings with other Canadian rate-regulated companies. |
| (2) | Refer to Note 4 of the Unaudited Interim Consolidated Financial Statements for the six months ended June 30, 2019 for detailed descriptions of this adjustment and others. |
| (3) | In the second quarter of 2019, the Government of Alberta enacted a phased decrease in the provincial corporate income tax rate from 12 per cent to 8 per cent. This decrease is being phased in increments from July 1, 2019 to January 1, 2022. As a result of this change, the Alberta Utilities decreased deferred income taxes and increased earnings for the three and six months ended June 30, 2019 by $106 million. |
| (4) | Each quarter, the Company adjusts the deferred tax asset which was recognized as a result of the Tula Pipeline Project impairment. The adjustment is due to a difference between the tax base currency, which is the Mexican peso, and the U.S. dollar functional currency. |
TELECONFERENCE AND WEBCAST
ATCO will hold a live teleconference and webcast to discuss our second quarter 2019 financial results. Dennis DeChamplain, Executive Vice President & Chief Financial Officer, will discuss second quarter 2019 financial results and recent developments at 9:30 am Mountain Time (11:30 am Eastern Time) on Thursday, July 25, 2019 at 1-800-319-4610. No pass code is required. 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 of the call 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 August 25, 2019. Please call 1-800-319-6413 and enter pass code 3381. An archive of the webcast will be available on July 25, 2019 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.
This news release should be used as preparation for reading the full disclosure documents. ATCO’s unaudited interim consolidated financial statements and management’s discussion and analysis for the six months ended June 30, 2019 will be available on the ATCO website (www.ATCO.com), via SEDAR (www.sedar.com) or can be requested from the Company.
With approximately 6,000 employees and assets of $23 billion, ATCO is a diversified global holding corporation with investments in Structures & Logistics (workforce housing, innovative modular facilities, construction, site support services, and logistics and operations management); Energy Infrastructure (electricity generation, transmission, and distribution; natural gas transmission, distribution and infrastructure development; energy storage and industrial water solutions; and electricity and natural gas retail sales); Transportation (ports and transportation logistics); and Commercial Real Estate. More information can be found atwww.ATCO.com.
Investor Inquiries:
D.A. (Dennis) DeChamplain
Executive Vice President &
Chief Financial Officer
403-292-7502
Media Inquiries:
Spencer Forgo
Manager, Corporate Communications &
Public Affairs
403-333-3239
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