ATCO Reports Second Quarter 2022 Earnings
ATCO Ltd. (ATCO or the Company) today announced second quarter 2022 adjusted earnings of $92 million ($0.81 per share), $12 million ($0.11 per share) higher compared to $80 million ($0.70 per share) in the second quarter of 2021.
Second quarter earnings attributable to Class I and Class II Shares reported in accordance with International Financial Reporting Standards (IFRS earnings) were $90 million ($0.79 per share), $78 million ($0.69 per share) higher compared to $12 million ($0.10 per share) in the second 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 Second Quarter of 2022
- Awarded a contract from Seabridge Gold for the supply and installation of a 120-person camp for the Kerr-Sulphurets-Mitchell (KSM) Project in Northwest British Columbia.
- Commenced manufacturing on the construction of a 2,500-person accommodation village and supplemental parallel modular facility for the Bechtel Pluto Train II project in Western Australia. Demobilization and relocation of the client’s existing assets is underway. Delivery of these projects is expected to commence in the third and fourth quarters of 2022.
- Delivered a training camp for the US Defense Threat Reduction Agency (DTRA) as a sub-contractor to Bechtel Inc. and Black & Veatch. The field camp was provided for 130 personnel from DTRA and US Department of Energy in order to test their mobile facilities.
- Commenced the North Warning System contract on April 1, 2022 with transition work underway. Care, custody and control of the system is expected to commence in August 2022.
- Announced an agreement with Canadian Pacific (CP) to provide engineering, procurement and construction services for two hydrogen production and refueling facilities in Calgary and Edmonton. The construction of these facilities will advance CP’s innovative Hydrogen Locomotive Program, which has its sights set on building its first line-haul hydrogen-powered freight locomotive.
- On July 14, 2022, ATCO declared a third quarter dividend of 46.17 cents per share or $1.85 per share on an annualized basis per Class I Non-Voting and Class II Voting Share.
- Released ATCO’s 2021 Sustainability Report which highlights our progress and key achievements in energy transition, climate change and environmental stewardship, operational reliability and resilience, community and Indigenous relations, diversity, equity and inclusion, and safety.
Financial Summary and Reconciliation of Adjusted Earnings
A financial summary of the consolidated subsidiaries of ATCO and a reconciliation of adjusted earnings to earnings attributable to Class I and Class II Shares is provided below:
|Three Months Ended
|Six Months Ended
|($ millions except share data)||2022||2021||2022||2021|
|Impairments and other costs (1)||—||(33)||—||(33)|
|Unrealized losses on mark-to-market forward and
swap commodity contracts (2)
|Rate-regulated activities (3)||12||(15)||31||(43)|
|IT Common Matters decision (4)||(2)||(2)||(4)||(4)|
|Transition of managed IT services (5)||—||(11)||—||(17)|
|AUC enforcement proceeding (6)||—||—||(14)||—|
|Workplace COVID-19 vaccination standard (7)||—||—||(5)||—|
|Gain on sale (8)||—||—||3||—|
|Earnings attributable to Class I and Class II Shares||90||12||218||95|
|Weighted average shares outstanding (millions of shares)||114.1||114.2||114.1||114.2|
|(1)||In 2021, ATCO recorded impairments and other costs not in the normal course of business of $33 million (after-tax and non-controlling interests). Canadian Utilities incurred $28 million of these costs in Mexico, related mainly to its Veracruz hydro facility within its Energy Infrastructure segment. The charge reflected an adverse arbitration decision, changes in market regulations, ongoing political uncertainty, and a challenging operating environment, resulting in an impairment of the carrying value of the assets. Other costs recorded were individually immaterial.|
|(2)||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.|
|(3)||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 the current year, revenues to be billed in future years, regulatory decisions received, and settlement of regulatory decisions and other items.|
|(4)||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.|
|(5)||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.|
|(6)||In the fourth quarter of 2021 and first quarter of 2022, the Company recognized a $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 AUC enforcement proceeding. The settlement was filed with the AUC on April 14, 2022 and on June 29, 2022, the AUC issued its decision approving the settlement between the AUC Enforcement branch and ATCO Electric in its entirety.|
|(7)||In the six months ended June 30, 2022, the Company incurred $5 million (after-tax and non-controlling interests) in severance and related costs associated with its Workplace COVID-19 vaccination standard.|
|(8)||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 Denendeh Investments Incorporated (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 June 30, 2022 will be available on the ATCO website (www.ATCO.com), via SEDAR (www.sedar.com) or can be requested from the Company.
For the full press release, click here.
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.
Colin Jackson – Senior Vice President, Finance, Treasury, Risk & Sustainability – Colin.Jackson@atco.com – (403) 808 2636
Source: ATCO Ltd.