Atco Ltd. Class I · TSX:ACO.X
Atco Ltd. Class I — Investor Presentation (June 2018)
50 slides from Atco Ltd. Class I's investor presentation, June 2018
Slide 1: Investor Presentation June 2018
INVESTOR PRESENTATION JUNE 2018
Slide 2: Slide 2
Slide 3: Legal Disclaimer
LEGAL DISCLAIMER Statements made by representatives for ATCO Ltd. and Canadian Utilities Limited and information provided in this presentation JUNE be considered forward-looking statements. By their nature, such statements are subject to numerous known and unknown risks and uncertainties and therefo
Slide 4: Organizational Structure
ORGANIZATIONAL STRUCTURE 1 Retail Energy was launched in early 2016 to provide retail, commercial and industrial electricity and natural gas service in Alberta. 2 Regulated operations include ATCO Gas, ATCO Pipelines, ATCO Gas Australia, ATCO Electric Distribution, and ATCO Electric Transmission. 3
Slide 5: The ATCO Group of Companies
THE ATCO GROUP OF COMPANIES With approximately 7,000 Electricity employees and assets of • 87,000 kms of electric $22 billion, ATCO is a power lines diversified corporation • 19 power plants globally providing sustainable, • 2,517 MW power innovative and generating capacity comprehensive energy solu
Slide 6: Asset Growth
ASSET GROWTH We have more than doubled in size since 2009 ATCO Canadian Utilities $4.1B $21.8B $4.1B $20.8B $7.6B $7.6B $0.1B $10B $9.1B Electricity Pipelines 2009 2009 Structures & Logistics Electricity Pipelines & Liquids 2017 2016 2009 & Liquids 2017 INVESTOR PRESENTATION JUNE 2018 4
Slide 7: Regulated Utility Growth
REGULATED UTILITY GROWTH Regulated Adjusted Normalized Earnings Regulated Capital Mid-Year Rate Base Investment $1.2B $13.0B $318M $12.5B $291M $11.9B $1.1B $252M $10.3B $230M $1.5B $8.9B $190M $2.2B $2.3B 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 INVESTOR PRESENTATI
Slide 8: Utilities Achieve Top Tier Returns on Equity
UTILITIES ACHIEVE TOP TIER RETURNS ON EQUITY 14% 13% 12% CU Inc. ROE +2.33% on 11% average above AUC 10% approved ROE from 2007-2017 9% 8% 7% 6% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Alberta Utility Average (excluding CU) CU Inc. Average AUC Approved • Alberta Utility average is a s
Slide 9: Growing a High Quality Earnings Base
GROWING A HIGH QUALITY EARNINGS BASE REGULATED ADJUSTED EARNINGS AS A PERCENTAGE OF TOTAL ADJUSTED EARNINGS ATCO Canadian Utilities 93% 99% 65% 51% 2013 2017 2013 2017 INVESTOR PRESENTATION JUNE 2018 7
Slide 10: Continued Dividend Growth
CONTINUED DIVIDEND GROWTH ATCO $1.51 per share Canadian Utilities $1.57 per share Longest track record of 25 year track record of annual dividend increases increasing common of any Canadian publicly share dividends* traded company* 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Slide 11: Growth: $1.8B of Capital Investment in 2017
GROWTH: $1.8B OF CAPITAL INVESTMENT IN 2017 5% Regulated Utility Capital 29% Long-term Contracted Capital Other 66% INVESTOR PRESENTATION JUNE 2018 9
Slide 12: Continued Regulated Utility Capital Investment
CONTINUED REGULATED UTILITY CAPITAL INVESTMENT ELECTRIC TRANSMISSION ELECTRIC DISTRIBUTION $211M $227M NATURAL GAS DISTRIBUTION NATURAL GAS TRANSMISSION INTERNATIONAL NATURAL $372M $297M GAS DISTRIBUTION $92M INVESTOR PRESENTATION JUNE 2018 10
Slide 13: 2017 Adjusted Earnings
2017 ADJUSTED EARNINGS Canadian Utilities $590M $602M ATCO $360M $335M 2016 2017 2016 2017 INVESTOR PRESENTATION JUNE 2018 11
Slide 14: Regulated Earnings Growth in 2017
REGULATED EARNINGS GROWTH IN 2017 ATCO Canadian Utilities Adjusted Earnings Adjusted Earnings $593M $550M $313M $292M $68M $22M $40M $9M 2016 2017 2016 2017 2016 2017 2016 2017 Regulated Businesses Non-Regulated Segment Regulated Businesses Non-Regulated Segment Businesses & Corporate Businesses & C
Slide 15: First Quarter 2018 Adjusted Earnings
FIRST QUARTER 2018 ADJUSTED EARNINGS Lower earnings mainly due $116M to rate rebasing under Alberta’s regulated model $99M Q1 2017 Q1 2018 INVESTOR PRESENTATION JUNE 2018 13
Slide 16: First Quarter 2018 Adjusted Earnings: Operating Improvements Flow into Customer Rates
FIRST QUARTER 2018 ADJUSTED EARNINGS: OPERATING IMPROVEMENTS FLOW INTO CUSTOMER RATES ELECTRIC DISTRIBUTION DEEMED REVENUE FOR OPERATING COSTS INVESTOR PRESENTATION JUNE 2018 14
Slide 17: PBR 2.0 Highlights
PBR 2.0 HIGHLIGHTS PBR PBR 2.0 Productivity Adjuster 1.16% 0.30% (X Factor) Based on approved 2012 forecast O&M levels; Based on the lowest annual actual O&M level during 2013-2016, O&M inflated by I-X thereafter over the PBR term adjusted for inflation, growth and productivity to 2017 dollars; infl
Slide 18: Regulatory Update
REGULATORY UPDATE Getting back to prospective rate making 2017 2018 2019 2020 2018 to 2020 Generic Decision Decision Decision Expected Cost of Capital (GCOC) Expected Expected 2017 2018 2019 2020 Gas and Electric Distribution Decision Decision 2018 to 2020 Performance Decision Received Expected Expe
Slide 19: Strategic Priorities for 2018 and Beyond
STRATEGIC PRIORITIES FOR 2018 AND BEYOND INVESTOR PRESENTATION JUNE 2018 17
Slide 20: Structures & Logistics
STRUCTURES & LOGISTICS LOWER EARNINGS BUT CONTINUED STRONG CASH FLOW GENERATION Adjusted Earnings Funds Generated By Operations $110M $85M $43M $6M 2016 2017 2016 2017 INVESTOR PRESENTATION JUNE 2018 18
Slide 21: Growth Strategy: Structures & Logistics
GROWTH STRATEGY: STRUCTURES & LOGISTICS Right-sizing space rental fleet Improving space rental utilization to lower fixed operating costs 13,629 13,456 9,419 8,723 2016 2017 2016 2017 Total Space Rental Units Total Space Rental Units Utilized INVESTOR PRESENTATION JUNE 2018 19
Slide 22: Growth Strategy: Structures & Logistics
GROWTH STRATEGY: STRUCTURES & LOGISTICS Diversifying the global customer base into non-traditional modular markets such as public education facilities, high density urban residential housing and correctional facilities 130-student dormitory Langley, Canada Melbourne Girls Grammar Melbourne, Australi
Slide 23: Growth Strategy: Structures & Logistics
GROWTH STRATEGY: STRUCTURES & LOGISTICS EXPANDING GEOGRAPHICALLY IN SELECT GLOBAL MARKETS Current Operations INVESTOR PRESENTATION JUNE 2018 21
Slide 24: Growth: Continued Capital Investment
GROWTH: CONTINUED CAPITAL INVESTMENT $4.5B OF PLANNED CAPITAL INVESTMENT 2018 TO 2020 INVESTOR PRESENTATION JUNE 2018 22
Slide 25: Rate Base Growth
RATE BASE GROWTH Regulated Capital Investment Mid-Year Rate Base Expected to Grow 4% - 5% per year $1.1B $1.2B $1.2B $13.0B $12.5B $11.9B $1.2B $10.3B $1.1B $8.9B $1.5B $2.2B $2.3B 2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020 INVESTOR PRESENTATION JUNE 2018 23
Slide 26: Growth: Long-Term Contracted Capital Investment
GROWTH: LONG-TERM CONTRACTED CAPITAL INVESTMENT HYDROELECTRIC FORT MCMURRAY WEST HYDROCARBON STORAGE COGENERATION GENERATION 500 KV TRANSMISSION $1.0 BILLION (2018–2020) INVESTOR PRESENTATION JUNE 2018 24
Slide 27: Growth: Global Expansion
GROWTH: GLOBAL EXPANSION Mexico Hydro Acquisition and Cogeneration In December 2017, Canadian Utilities announced the $114 million acquisition of a long-term contracted, 35 MW hydroelectric power station based in Veracruz, Mexico. In March 2018, Canadian Utilities announced it will build Gomez a
Slide 28: Growth: Alberta PowerLine
GROWTH: ALBERTA POWERLINE Fort McMurray West 500 kV Transmission Project The design and planning phases were completed and construction commenced in August 2017. Land preparation and tower foundation installation and tower assembly is proceeding ahead of schedule. The target energization date of
Slide 29: Alberta Power Market Developments
ALBERTA POWER MARKET DEVELOPMENTS IMPROVING MINIMAL RISK WELL POSITIONED CLARITY EXPOSURE Capacity Market in Alberta Phase-in of Renewable Generation Carbon Tax Market design discussions under Clean Power Call First contracts Compliance costs recovered through way with the AESO; expect f
Slide 30: Financial Strength: Funding Sources
FINANCIAL STRENGTH: FUNDING SOURCES Canadian Utilities Funding Sources 2013 – 2017 26% 5% 63% 3% 3% Funds Generated Dividend Capital Debt Issues Preferred by Operations Reinvestment Redeployment (net of repayment) Shares (DRIP) INVESTOR PRESENTATION JUNE 2018 28
Slide 31: Financial Strength: Balance Sheet
FINANCIAL STRENGTH: BALANCE SHEET INVESTOR PRESENTATION JUNE 2018 29
Slide 32: Financial Strength: Capital Markets Access
FINANCIAL STRENGTH: CAPITAL MARKETS ACCESS $1,600 IN 2017, CANADIAN UTILITIES ISSUED DEBT AT THE LOWEST LONG-TERM 12% $1,400 INTEREST RATE IN COMPANY HISTORY 10% BOND AMOUNT ($M) $1,200 INTEREST RATE 8% $1,000 $800 6% 3.548% $600 4% $400 2% $200 $0 0% BOND AMOUNT INTEREST RATE INVESTOR PRESENTATION
Slide 33: Financial Strength: Capital Markets Access
FINANCIAL STRENGTH: CAPITAL MARKETS ACCESS $1,385M In 2017, Alberta PowerLine Completed The Largest Public-Private Partnership Debt Financing in Canadian History Other Public-Private Financings Alberta PowerLine INVESTOR PRESENTATION JUNE 2018 31
Slide 34: Financial Strength: Liquidity
FINANCIAL STRENGTH: LIQUIDITY EXCELLENT LIQUIDITY POSITION $3.3B of readily $600M of available accessible cash on the lines of credit balance sheet * Amounts as at the first quarter ended March 31, 2018 INVESTOR PRESENTATION JUNE 2018 32
Slide 35: Summary
SUMMARY FINANCIAL GROWTH COST EFFICIENCY STRENGTH INVESTOR PRESENTATION JUNE 2018 33
Slide 36: Appendix
ATCO APPENDIX
Slide 37: Structures & Logistics
STRUCTURES & LOGISTICS We offer workforce housing, innovative modular facilities, construction, site support services, and logistics and operations management 7 manufacturing plants globally Nearly 1,000,000 sq ft of manufacturing space Subsidiary: Sustainable Communities INVESTOR PRESENTATION
Slide 38: Electricity Distribution & Transmission
ELECTRICITY DISTRIBUTION & TRANSMISSION We build, own and operate electrical distribution and transmission facilities 256,000 farm, business and residential customers in 241 Alberta communities Approximately 11,000 km of transmission lines, and delivers power to and operates 4,000 km of lines ow
Slide 39: Financial Strength: Electric Distribution Return on Equity
FINANCIAL STRENGTH: ELECTRIC DISTRIBUTION RETURN ON EQUITY 14% 13% 12% ROE +2.88% on average above AUC approved 11% ROE from 2007-2017 10% and +3.03% on average in the last 5 years 9% 8% 7% 6% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Electric Distribution AUC Approved INVESTOR PRESENTA
Slide 40: Financial Strength: Electric Transmission Return on Equity
FINANCIAL STRENGTH: ELECTRIC TRANSMISSION RETURN ON EQUITY 14% 13% 12% 11% 10% ROE +0.83% on average above AUC 9% approved ROE from 2007-2017 8% 7% 6% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Electric Transmission AUC Approved INVESTOR PRESENTATION JUNE 2018 38
Slide 41: Electricity Generation
ELECTRICITY GENERATION We have an ownership position in 19 power generation plants in Alberta, British Columbia, Saskatchewan, Ontario and Mexico Electricity Market Exposure Portfolio: 1,610 MW Contract (69%) 731 MW Merchant (31%) INVESTOR PRESENTATION JUNE 2018 39
Slide 42: Electricity Generation
ELECTRICITY GENERATION We operate two power generation facilities with a combined capacity share of 176 MW Provides energy infrastructure for thousands of public sector, domestic and industrial clients across Australia Electricity Market Exposure Portfolio: 176 MW Contract (100%) INVESTOR PRES
Slide 43: Natural Gas Distribution
NATURAL GAS DISTRIBUTION We build, own and operate natural gas distribution facilities in Alberta Alberta’s largest natural gas distribution company Serves approximately 1.2 million customers in nearly 300 Alberta communities We build, maintain, and operate 41,000 km of natural gas distributio
Slide 44: Financial Strength: Natural Gas Distribution Return on Equity
FINANCIAL STRENGTH: NATURAL GAS DISTRIBUTION RETURN ON EQUITY 17% 16% 15% 14% 13% ROE +3.11% on average 12% above AUC approved 11% ROE from 2007-2017 10% and +4.23% on average 9% in the last 5 years 8% 7% 6% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Natural Gas Distribution AUC Approved
Slide 45: Natural Gas Transmission
NATURAL GAS TRANSMISSION We build, own and operate key high-pressure natural gas transmission facilities in Alberta Transports clean, efficient energy from producers and other pipelines to utilities, power generators and major industries Owns and operates 9,400 km of pipeline Delivers a peak o
Slide 46: Financial Strength: Natural Gas Transmission Return on Equity
FINANCIAL STRENGTH: NATURAL GAS TRANSMISSION RETURN ON EQUITY 14% 13% 12% 11% ROE +2.11% on average 10% above AUC approved ROE from 2007-2017 9% 8% 7% 6% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Natural Gas Transmission AUC Approved INVESTOR PRESENTATION JUNE 2018 44
Slide 47: Storage & Industrial Water
STORAGE & INDUSTRIAL WATER We build, own and operate non- regulated industrial water, natural gas storage, hydrocarbon storage, and NGL related infrastructure 85,200 m3/day water infrastructure capacity 400,000 m3 hydrocarbon storage capacity 52 PJ natural gas storage capacity ~ 116 km pipel
Slide 48: International Natural Gas Distribution
INTERNATIONAL NATURAL GAS DISTRIBUTION We provide safe and reliable natural gas service to the Perth metropolitan area and the wider Western Australian community Approximately 753,000 customers 14,000 km of natural gas distribution pipelines INVESTOR PRESENTATION JUNE 2018 46
Slide 49: Financial Strength: Balance Sheet as at Q1 2018
FINANCIAL STRENGTH: BALANCE SHEET AS AT Q1 2018 ATCO Canadian Utilities 10% 9% 33% 60% 57% 31% Debt (net of cash) Preferred Shares Equity Debt (net of cash) Preferred Shares Equity INVESTOR PRESENTATION JUNE 2018 47
Slide 50: www.ATCO.com www.canadianutilities.com Tel: 403.292.7500
www.ATCO.com www.canadianutilities.com Tel: 403.292.7500 Investor Relations 5302 Forand Street SW Calgary, Alberta T3E 8B4 Canada 48