Canadian Utilities Limited (TSX: CU, CU.X)
Canadian Utilities announced adjusted earnings in 2018 of $607
million, or $2.24 per share, compared to $602 million, or $2.23 per
share, in 2017. Canadian Utilities had fourth quarter 2018 adjusted
earnings of $187 million, or $0.69 per share, compared to $169
million, or $0.63 per share, in the fourth quarter of 2017.
Higher fourth quarter 2018 earnings compared to the same period
in 2017 were due to strong results in all business segments.
Strong 2018 earnings were driven by our non-regulated businesses
mainly due to improved results in electricity generation and
Alberta PowerLine. Continued capital investment and operational
cost improvements in our regulated businesses helped partially
offset the adverse earnings impact of rate re-basing in several of
our Alberta utilities.
Canadian Utilities invested $2 billion in capital growth
projects in 2018, of which $1.1 billion was invested in Regulated
Utilities and more than $800 million was invested in long-term
contracted assets, including Alberta PowerLine and a hydroelectric
power station acquisition in Mexico.
In the period 2019 to 2021, Canadian Utilities plans to invest
$3.6 billion in Regulated Utility and long-term contracted assets
in Canada, Australia, and Latin America, which will continue to
strengthen our high-quality earnings base.
RECENT DEVELOPMENTS
- On January 10, 2019, Canadian Utilities declared a first
quarter dividend for 2019 of 42.27 cents per Class A non-voting and
Class B common share. Canadian Utilities has increased its dividend
per share for 47 consecutive years, the longest track record of
annual dividend increases of any publicly traded Canadian
company.
- In the fourth quarter of 2018, construction continued on the
Alberta PowerLine Project. The project is ahead of schedule and the
expected energization date has been advanced to March 2019 from the
original target date of June 2019.
- In December, Canadian Utilities sold its 100 per cent ownership
interest in Barking Power assets in the U.K. The total proceeds
received on the sale of the Barking Power assets were $219 million.
This transaction is consistent with Canadian Utilities' strategy of
selling mature assets and recycling the proceeds into growing areas
of the Company.
- In November, Canadian Utilities subsidiary CU Inc. issued $385
million of 3.95 per cent 30-year debentures. Proceeds from this
issuance were used to fund capital investments, to repay existing
indebtedness, and for other general corporate
purposes.
FINANCIAL SUMMARY AND RECONCILIATION OF ADJUSTED
EARNINGS
A financial summary and reconciliation of adjusted earnings to
earnings attributable to equity owners of the company is provided
below:
|
|
For the Three Months Ended December 31 |
For the Year Ended December 31 |
| ($ millions except
share data) |
2018 |
2017 (10) |
2018 |
2017 (10) |
| Adjusted earnings (1) |
187 |
169 |
607 |
602 |
| Gain on sale of operation (2) (8) |
— |
— |
— |
30 |
| Proceeds from termination of PPA (3) (8) |
— |
— |
36 |
— |
| Restructuring and other costs (4) (8) |
— |
— |
(60) |
— |
| Derecognition of customer contributions (5)
(8) |
— |
31 |
— |
31 |
| Impairment (6) (8) |
— |
(7) |
— |
(7) |
| Sale of Barking Power assets (7) (8) |
87 |
— |
87 |
— |
| Unrealized gains (losses) on mark-to-market
forward commodity contracts (8) |
2 |
(53) |
31 |
(90) |
| Rate-regulated activities (8) |
(37) |
(52) |
(133) |
(119) |
| Dividends on equity preferred shares |
17 |
17 |
67 |
67 |
| Other (8) (9) |
— |
(3) |
(1) |
— |
| Earnings attributable to
equity owners of the Company |
256 |
102 |
634 |
514 |
| Weighted average shares outstanding (millions of
shares) |
272.2 |
270.3 |
271.5 |
269.4 |
| (1) |
Adjusted earnings are defined as
earnings attributable to equity owners of the Company after
adjusting for the timing of revenues and expenses associated with
rate-regulated activities, dividends on equity preferred shares of
the Company, 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 Canadian Utilities’
earnings with other Canadian rate-regulated companies. |
| (2) |
In January 2017, Canadian Utilities
sold its 100 per cent investment in ATCO Real Estate Holdings Ltd.
to ATCO Ltd. which resulted in a gain of $30 million. |
| (3) |
In the third quarter of 2018, the
Battle River unit 5 Power Purchase Arrangement was terminated by
the Balancing Pool and dispatch control was returned to Canadian
Utilities. Canadian Utilities received a payment from the Balancing
Pool and recorded additional coal-related costs and Asset
Retirement Obligations associated with the Battle River generating
facility. This one-time receipt and costs in the net amount of $36
million were excluded from adjusted earnings. |
| (4) |
In the second quarter of 2018,
restructuring and other costs not in the normal course of business
of $60 million were recorded. These costs mainly relate to staff
reductions and associated severance costs, as well as costs related
to decisions to discontinue certain projects that no longer
represent long-term strategic value to the Company. |
| (5) |
In December 2017, Canadian
Utilities signed a contract amendment that triggered a reassessment
of the accounting treatment of the Muskeg River generating plant.
Due to the nature of the contract amendment, the Company recorded
$31 million on derecognition of customer contributions related to a
sale of electricity generation assets on transition to finance
lease. |
| (6) |
In the fourth quarter of 2017,
Structures & Logistics recognized an impairment relating to
workforce housing assets in Canada and space rental assets in the
U.S. Canadian Utilities' 24.5 per cent share of the impairment
decreased earnings by $7 million in the Corporate & Other
segment. |
| (7) |
In the fourth quarter of 2018,
Canadian Utilities sold its 100 per cent ownership interest in the
Barking Power assets. A gain in the amount of $87 million was
excluded from adjusted earnings. |
| (8) |
Refer to Note 4 of the 2018
Consolidated Financial Statements for detailed descriptions of the
adjustments. |
| (9) |
The Company adjusted 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. |
| (10) |
These numbers have been restated to
account for the impact of IFRS 15. Additional detail on IFRS 15 is
discussed in Note 3 of the 2018 Consolidated Financial
Statements. |
TELECONFERENCE AND WEBCAST
Canadian Utilities will hold a live teleconference and webcast
to discuss our year-end financial results. Dennis DeChamplain,
Senior Vice President and Chief Financial Officer, will discuss
year-end financial results and recent developments at 8:00 am
Mountain Time (10:00 am Eastern Time) on Thursday, February 28,
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 and request to join the Canadian Utilities
teleconference.
Management invites interested parties to listen via live webcast
at:http://www.canadianutilities.com/Investors/Events-and-Presentations/
A replay of the teleconference will be available approximately
two hours after the conclusion of the call until March 28, 2019.
Please call 1-800-319-6413 and enter pass code 2938. An archive of
the webcast will be available on February 28, 2019 and a transcript
of the call will be posted on
http://www.canadianutilities.com/Investors/Events-and-Presentations/ within
a few business days.
This news release should be used as a preparation for reading
the full disclosure documents. Canadian Utilities’ consolidated
financial statements and management’s discussion and analysis for
the quarter ended December 31, 2018 will be available on the
Canadian Utilities website (www.canadianutilities.com), via SEDAR
(www.sedar.com) or can be requested from the Company.
With approximately 5,000 employees and assets of $22
billion, Canadian Utilities Limited is an ATCO company. Canadian
Utilities is a diversified global energy infrastructure corporation
delivering service excellence and innovative business solutions in
Electricity (electricity generation, transmission, and
distribution); Pipelines & Liquids (natural gas transmission,
distribution and infrastructure development, energy storage, and
industrial water solutions); and Retail Energy (electricity and
natural gas retail sales). More information can be found at
www.canadianutilities.com.
Investor Inquiries:
D.A. (Dennis) DeChamplainSenior Vice President &Chief
Financial Officer403-292-7502
Media Inquiries:
Donna PincottDirector, Corporate Communications587-224-7684
Forward-Looking Information:Certain statements
contained in this news release may constitute forward-looking
information. Forward-looking information is often, but not always,
identified by the use of words such as “anticipate”, “plan”,
“estimate”, “expect”, “may”, “will”, “intend”, “should”, and
similar expressions.
Forward-looking information involves known and unknown risks,
uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such
forward-looking information.
The Company’s actual results could differ materially from those
anticipated in this forward-looking information as a result of
regulatory decisions, competitive factors in the industries in
which the Company operates, prevailing economic conditions, and
other factors, many of which are beyond the control of the
Company.
The Company believes that the expectations reflected in the
forward-looking information are reasonable, but no assurance can be
given that these expectations will prove to be correct and such
forward-looking information should not be unduly relied upon.
Any forward-looking information contained in this news release
represents the Company’s expectations as of the date hereof and is
subject to change after such date. The Company disclaims any
intention or obligation to update or revise any forward-looking
information whether as a result of new information, future events
or otherwise, except as required by applicable securities
legislation.
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