Canadian Utilities Limited Class A · TSX:CU
Canadian Utilities Limited Class A — Investor Presentation (February 2019)
56 slides from Canadian Utilities Limited Class A's investor presentation, February 2019
Slide 1: Investor Presentation February 2019
INVESTOR PRESENTATION FEBRUARY 2019
Slide 2: Legal Disclaimer
LEGAL DISCLAIMER Statements made by representatives for ATCO Ltd. and Canadian Utilities Limited and information provided in this presentation may be considered forward-looking statements. By their nature, such statements are subject to numerous known and unknown risks and uncertainties and therefor
Slide 3: Table of Contents
TABLE OF CONTENTS 1 ATCO Group Overview Page 5 2 Canadian Utilities Limited Page11 Regulated Utility Businesses Page 13 Non-Regulated Businesses Page 23 3 Other ATCO Investments Page 30 Structures & Logistics Page 31 Neltume Ports Page 36 Commercial Real Estate Page 46 4 Appendix Page 48 INVESTOR PR
Slide 4: Slide 4
Slide 5: ATCO Group Overview
ATCO GROUP OVERVIEW
Slide 6: Organizational Structure
ORGANIZATIONAL STRUCTURE With approximately 7,000 employees ATCO and assets of $23 billion, ATCO is a (TSX: ACO.X / ACO.Y ) diversified corporation providing ~$4 billion common sustainable, innovative and equity capitalization comprehensive energy solutions globally. Canadian Utilities (TSX: CU / CU
Slide 7: ATCO Focus: Global Essential Services
ATCO FOCUS: GLOBAL ESSENTIAL SERVICES Energy Real Estate Housing Logistics & Water Transportation Agriculture INVESTOR PRESENTATION FEBRUARY 2019 7
Slide 8: Continued Dividend Growth
CONTINUED DIVIDEND GROWTH ATCO $1.62 Canadian Utilities $1.69 26 year track record of Longest track record of per share per share increasing common annual dividend increases share dividends* of any Canadian publicly 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 9: ATCO Credit Ratings
ATCO CREDIT RATINGS INVESTOR PRESENTATION FEBRUARY 2019 9
Slide 10: Slide 10
Slide 11: Canadian Utilities
CANADIAN UTILITIES ENERGY INFRASTRUCTURE 11
Slide 12: Organizational Structure
ORGANIZATIONAL STRUCTURE 1. Regulated businesses include Natural Gas Distribution, Natural Gas Transmission, International Natural Gas Distribution, Electric Distribution, and Electric Transmission. 2. CU Inc. includes Natural Gas Distribution, Natural Gas Transmission, Electric Distribution, and El
Slide 13: Regulated Utilities
REGULATED UTILITIES ELECTRIC TRANSMISSION ELECTRIC DISTRIBUTION $5,227M Rate Base $2,476M Rate Base NATURAL GAS DISTRIBUTION NATURAL GAS TRANSMISSION INTERNATIONAL NATURAL GAS $2,537M Rate Base $1,633M Rate Base DISTRIBUTION $1,177M Rate Base INVESTOR PRESENTATION FEBRUARY 2019 13
Slide 14: 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 15: Utilities Achieve Top Tier Returns on Equity
UTILITIES ACHIEVE TOP TIER RETURNS ON EQUITY 14% 13% CU Inc. ROE +2.33% on average above AUC 12% approved ROE from 11% 2007-2017 10% 9% 8% • Alberta Utility average is a simple average and includes: AltaGas, AltaLink, Enmax 7% Distribution, Enmax Transmission, EPCOR Distribution, EPCOR Transmission,
Slide 16: Australia Utility
AUSTRALIA UTILITY ATCO Gas Australia ROE +3.34% on average above ERA approved ROE from 2015-2017 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2015 2016 2017 Financial ROE Approved ROE INVESTOR PRESENTATION FEBRUARY 2019 16
Slide 17: Growing a High Quality Earnings Base
GROWING A HIGH QUALITY EARNINGS BASE REGULATED ADJUSTED EARNINGS AS A PERCENTAGE OF TOTAL ADJUSTED EARNINGS Canadian Utilities 99% 65% 2013 2017 INVESTOR PRESENTATION FEBRUARY 2019 17
Slide 18: Regulated Utility Earnings in 2018
REGULATED UTILITY EARNINGS IN 2018 Canadian Utilities Adjusted Earnings Electric Transmission Lower earnings mainly earnings delayed due to $230M due to rate rebasing Alberta regulatory backlog; under Alberta’s on lower 2018 interim rates $195M $187M regulated model until rates decision which $175M
Slide 19: Alberta Distribution Utilities Performance Based Ratemaking
ALBERTA DISTRIBUTION UTILITIES PERFORMANCE BASED RATEMAKING PBR (2013-2017) PBR 2.0 (2018-2022) Efficiency Carry-over ECM up to 0.5% additional ROE for the years ECM up to 0.5% additional ROE for the years 2023 and 2024 Mechanism (ECM) 2018 and 2019 based on certain criteria based on certain criteri
Slide 20: Operating Improvements from PBR 1.0 Flow into Customer Rates in PBR 2.0
OPERATING IMPROVEMENTS FROM PBR 1.0 FLOW INTO CUSTOMER RATES IN PBR 2.0 ELECTRIC DISTRIBUTION DEEMED REVENUE FOR OPERATING COSTS INVESTOR PRESENTATION FEBRUARY 2019 20
Slide 21: Regulatory Update
REGULATORY UPDATE 2017 2018 2019 2020 Gas and Electric Decision Decision Decision Distribution 2018 to 2022 Received Expected Expected Performance Based Regulation (PBR) 2.0 2017 2018 2019 2020 2018 to 2020 Generic Decision Decision Decision Cost of Capital (GCOC) Received Expected Expected 2017 201
Slide 22: Rate Base Growth
RATE BASE GROWTH Regulated Capital Investment Mid-Year Rate Base Expected to Grow ~4% 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 FEBRUARY 2019 22
Slide 23: Non-Regulated Businesses
NON-REGULATED BUSINESSES ELECTRICITY GENERATION ELECTRICITY GENERATION ELECTRICITY GENERATION CANADA AUSTRALIA MEXICO 2,300 MW 176 MW 46 MW INDUSTRIAL WATER SERVICES HYDROCARBON STORAGE NATURAL GAS STORAGE CANADA CANADA CANADA 85,200 m3/day 400,000 m3 52 PJ INVESTOR PRESENTATION FEBRUARY 2019 23
Slide 24: Long-Term Contracted Capital Investment
LONG-TERM CONTRACTED CAPITAL INVESTMENT HYDROCARBON NATURAL GAS HYDROELECTRIC FORT MCMURRAY WEST STORAGE COGENERATION GENERATION 500 KV TRANSMISSION $1.0 BILLION (2018–2020) INVESTOR PRESENTATION FEBRUARY 2019 24
Slide 25: Alberta PowerLine
ALBERTA POWERLINE Fort McMurray West 500 kV Transmission Project • The design and planning phases were completed and construction commenced in August 2017. • Tower assembly is proceeding ahead of schedule and line stringing is proceeding on schedule. • The target energization date of June 2019 remai
Slide 26: Mexico Expansion
MEXICO EXPANSION Mexico Attractiveness • Energy Reform offers opportunities for energy infrastructure investment • Attractive GDP growth forecast Gomez • Acquired and built a total of 46 MW of electricity Palacio generation, including hydroelectric generation; contracted to build 26 MW of natural ga
Slide 27: Storage & Industrial Water Growth
STORAGE & INDUSTRIAL WATER GROWTH 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
Slide 28: Coal to Gas Conversion Strategy
COAL TO GAS CONVERSION STRATEGY Battle River • Partial conversion (50%) completed on BR4 Mar 2018 • Proceeding with “Dual Fuel” conversion of BR5 with commercial operation date (COD) of Dec 2019 • Proceeding with increasing natural gas interconnection to the site to support the conversion work with
Slide 29: Other ATCO Investments
ATCO OTHER ATCO.INVESTMENTS
Slide 30: Structures & Logistics
STRUCTURES & LOGISTICS Modular Structures Workforce Housing & Space Rentals - Permanent modular camps - Mobile office trailers - Relocatable modular buildings Logistics and Facility O&M Services Lodging & Support Services - Facility operations - Lodging, catering - Maintenance services - Maintenance
Slide 31: Structures & Logistics
STRUCTURES & LOGISTICS Global Rental Utilization 2016 YE 57% Current 68% Total Increase 11% W Cda. E Cda. Utilization Utilization rate: 54% rate: 77% E Australia Chile W Australia Utilization Utilization Utilization rate: 75% rate: 77% rate: 47% INVESTOR PRESENTATION FEBRUARY 2019 31
Slide 32: Structures & Logistics
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 $65M $44M $44M Melbourne Girls Grammar Melbourne, Australia $16M YTD Q1 2018 YTD Q2 2018 YTD Q3 20
Slide 33: ATCO Sabinco (Ultramar Partnership)
ATCO SABINCO (ULTRAMAR PARTNERSHIP) New 100,000 sq. ft. Chilean Manufacturing Facility further cements the business foundation we are re-establishing in South America. Arica Iquique Antofagasta 2% 7% Copiapó Mining Energy 12% Curauma Infrastructure Santiago Ranked #3 in Overall Modular Construction
Slide 34: Structures & Logistics Key Highlights
STRUCTURES & LOGISTICS KEY HIGHLIGHTS Diversifying our customer Lowering operating Expanding geographically in base into new market costs and increasing new global markets with segments and rebuilding our rental utilization long-term growth potential customer lead list 11,613 10,613 2016 Q3 2018 Tot
Slide 35: Neltume Ports Overview
NELTUME PORTS OVERVIEW • Neltume Ports is a leading port operator and developer with a diversified range of terminals across South America and is headquartered in Santiago, Chile o 16 port terminals in 4 countries: Chile, Uruguay, Argentina and Brazil o 2 stevedoring companies in Chile, 1 in Uruguay
Slide 36: Neltume Ports Operations
NELTUME PORTS OPERATIONS BY CARGO TYPE BY GEOGRAPHY 5% 11% 33% Brazil Container Approx. Approx. 20% 48% Uruguay Break Bulk 51 M 51 M Tonnes Tonnes Chile Bulk 64% Argentina 19% *Based on 100% of volumes of ports where Neltume Ports has an ownership stake INVESTOR PRESENTATION FEBRUARY 2019 36
Slide 37: Port Overview
PORT OVERVIEW PERCENT TERMINAL Puerto Angamos (PANG) Montecon (MON) PORT COUNTRY KEY CARGO OWNERSHIP TYPE Terminal Puerto Arica 35% CHL Container Mixed Terminal Puerto Angamos 40% CHL Multi Copper Terminal Graneles del Norte 40% CHL Dry Bulk Coal Puerto Mejillones 50% CHL Dry Bulk Coal/Copper Termin
Slide 38: Strong Volume Growth
STRONG VOLUME GROWTH Consistent and growing volumes support stability of cash flows 55 2010 - 2017 50.8 4000 50 12% Cargo CAGR 3500 45 7% Container CAGR 3000 40 35.7 35.8 35.5 35 33.8 2500 30 29 2476 26.7 2320 2147 2228 2000 25 22.5 2047 1767 1814 1500 20 1546 15 1000 10 500 5 0 0 2010 2011 2012 201
Slide 39: Growth Driven by Macroeconomic Tailwinds
GROWTH DRIVEN BY MACROECONOMIC TAILWINDS Strong macro economic growth indicators: FORECASTED AGGREGATE GROWTH • Latin American GDP to outpace Canadian GDP growth 16% • Chile has been one of Latin America’s fastest‐growing economies 14% averaging 3.5% GDP growth over the last 8 years. 12% • Global t
Slide 40: Growth Due to Rising Copper Global Demand
GROWTH DUE TO RISING COPPER GLOBAL DEMAND GLOBAL FORECASTED COPPER CONSUMPTION Exposure to Growing Copper Global Demand: 26 • Chile represents approximately 28% of global copper production and owns the largest copper reserves in the world. 25 • Copper supply deficit starting in 2020 is expected to M
Slide 41: Brownfield Growth Potential
BROWNFIELD GROWTH POTENTIAL • A portion of ATCO’s investment may be used for berth expansions or additions of multi- purpose berths. • Berth expansions create increased draft that allows terminals to receive bigger ships & larger volumes. • Berth extensions or adding berths create additional growth
Slide 42: Growth by Acquisition and Construction
GROWTH BY ACQUISITION AND CONSTRUCTION Acquisition of Rio Estiba and Increased Awarded port Construction of participation in Tender of TPS TGN Montecon, Sagres and Ontur via the Construction of Awarded port Partnership takeover of Puerto Mejillones tender of TPA TPS/MSC Schandy 1995 1996 2000 2003 2
Slide 43: Neltume Ports Investment Strategic Rationale
NELTUME PORTS INVESTMENT STRATEGIC RATIONALE Investment with a Exposure to Strong macro Portfolio, industry, trusted long-term growing global factors and and geographic partner with trade and economic diversification shared values transportation tailwinds INVESTOR PRESENTATION FEBRUARY 2019 43
Slide 44: Neltume Ports Investment Financial Highlights
NELTUME PORTS INVESTMENT FINANCIAL HIGHLIGHTS • The Neltume Ports investment is expected to be accretive to earnings per share in the first full year of ownership and thereafter. • Neltume Ports generated approximately $120M CAD of EBITDA in 2017. • ATCO funded its investment in Neltume Ports with a
Slide 45: ATCO Corporate: Commercial Real Estate
ATCO CORPORATE: COMMERCIAL REAL ESTATE Calgary office space Edmonton industrial space • ATCO Investments Ltd. (AIL), a subsidiary of ATCO Ltd., currently owns 15 commercial real estate properties throughout Alberta • 417,000 Square footage of saleable or leasable office space • 90,000 square footage
Slide 46: Key Highlights
KEY HIGHLIGHTS Geographic EPS Accretion Global Essential Services Diversification Energy Real Estate Housing Logistics & Water Transportation Agriculture INVESTOR PRESENTATION FEBRUARY 2019 46
Slide 47: Appendix
ATCO APPENDIX
Slide 48: 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 49: 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 50: 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 FEBRUARY 2019 50
Slide 51: 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 1.2M customers in nearly 300 Alberta communities ▪ We build, maintain, and operate 41,000 km of natural gas distribution pipel
Slide 52: 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 in the last 5 years 9% 8% 7% 6% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Natural Gas Distribution AUC Approved
Slide 53: 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 54: 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 9% ROE from 2007-2017 8% 7% 6% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Natural Gas Transmission AUC Approved INVESTOR PRESENTATION FEBRUARY 2019 54
Slide 55: Financial Strength: Balance Sheet as at Q3 2018
FINANCIAL STRENGTH: BALANCE SHEET AS AT Q3 2018 ATCO Canadian Utilities 9% 10% 32% 62% 28% 59% Debt (net of cash) Preferred Shares Equity Debt (net of cash) Preferred Shares Equity INVESTOR PRESENTATION FEBRUARY 2019 55
Slide 56: Investor Relations Contact
www.ATCO.com www.canadianutilities.com Tel: 403.292.7500 Investor Relations 5302 Forand Street SW Calgary, Alberta T3E 8B4 Canada 56
Canadian Utilities — Investor Presentation (February 2019) on 6ix