ATCO LTD. FINANCIAL INFORMATION - FOR THE SIX MONTHS ENDED June 30, 2021
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ATCO LTD.
FINANCIAL INFORMATION
FOR THE SIX MONTHS ENDED June 30, 2021
CORPORATE OFFICE: 5302 FORAND ST SW, CALGARY, ALBERTA, CANADA T3E 8B4
TEL: 403-292-7500 WWW.ATCO.COM
atco.com
Q2 2021 INVESTOR FACT SHEET STRUCTURES & LOGISTICS | NELTUME PORTS | CANADIAN UTILITIES
With approximately 6,200 employees and assets of $22 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, international electricity operations, and
international natural gas distribution); Energy Infrastructure (electricity generation, energy storage and industrial water solutions);
Retail Energy (electricity and natural gas retail sales); Transportation (ports and transportation logistics); and Commercial Real Estate.
TRACK RECORD OF DIVIDEND GROWTH DIVERSIFIED ESSENTIAL SERVICES
ATCO’s investments put us at the forefront of global trends. We deliver the
enduring essentials required for a healthy global economy.
$0.4483
28-year track record of increasing
common share dividends*
93 97 01 05 09 13 17 21
* On July 22, 2021, ATCO declared a third quarter dividend of 44.83 cents per share, or
$1.79 per share annualized.
ATCO AT A GLANCE GLOBAL GROWTH
74-year history in more than 100 countries
“A-” rating by Standard & Poor’s; “A” (low) rating by DBRS Limited
Total Assets $22 Billion
Modular Building Manufacturing 6 Globally (1 Canada, 1 United States,
Locations 2 Australia, 1 Chile, 1 Mexico)
Electric Powerlines 75,000 kms
Pipelines 64,000 kms
Power Generation Operated 398 MW *
Power Generation Owned 294 MW *
Water Infrastructure Capacity 85,200 m3/d **
Natural Gas Storage Capacity 52 PJ ***
Natural Gas Liquids Capacity 400,000 m3 ****
Ports and Port Operations 17 Ports, 3 Port Operation Services
Canadian Utilities, Structures Neltume Ports, Structures &
*megawatts, name plate capacity, includes ownership of subsidiaries **cubic metres per day
***petajoules ****cubic metres
& Logistics, Commercial Real Logistics, and Canadian Utilities
Estate and ASHCOR
Structures & Logistics and
ATCO SHARE INFORMATION Neltume Ports Neltume Ports
Canadian Utilities and
Common Shares (TSX): ACO.X, ACO.Y Canadian Utilities Structures & Logistics
Market Capitalization $5 billion *
We continue to grow and expand our
Weighted Average Common Shares international business
114.2 million *
Outstanding
*As of June 30, 2021 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
It is important for prospective owners of ATCO shares to understand that ATCO is a diversified or losses on mark-to-market forward and swap commodity contracts. Adjusted earnings also
group of companies principally controlled by Sentgraf, a Southern family holding company. It is exclude one-time gains and losses, impairments, and items that are not in the normal course
also important for present and prospective share owners to understand that the ATCO share of business or a result of day-to-day operations. Certain statements in this document contain
registry has both Class I Non-Voting (ACO.X) and Class II Voting (ACO.Y) common shares. forward-looking information. Please refer to our forward-looking information disclaimer in
ATCO’s management’s discussion and analysis for more information.
Q2 2021 RESULTS
CONSOLIDATED REVENUES CONSOLIDATED ADJUSTED EARNINGS
$938 M $970 M
$80 M
$70 M
Q2 2020 Q2 2021 Q2 2020 Q2 2021
STRUCTURES & LOGISTICS ADJUSTED EARNINGS
• Lower earnings were mainly due to ATCO Structures' lower workforce housing trade sale
$21 M
activity in Canada, Australia and the United States (US). Lower adjusted earnings were
partially offset by ATCO Structures' higher space rental activity in Canada, Australia and the
US, and ATCO Frontec's recently awarded workforce housing service contract for the Trans $18 M
Mountain Expansion project.
• Awarded a $13 million supportive housing contract in Vernon, BC for a
four-VWRU\-unit building. This is our sixth affordable housing project. Site work and
manufacturing for this project is expected to commence in the third quarter of 2021.
• Awarded a supply contract with a mining client in Nunavut for a 276-bed accommodation
complex. The project involved the deployment of fleet product which was repurposed to
withstand the environment in the region and was fully delivered in July 2021.
Q2 2020 Q2 2021
NELTUME PORTS ADJUSTED EARNINGS
• Higher adjusted earnings were mainly due to unplanned equipment maintenance activity at
the Puerto Mejillones port in 2020, and higher volumes in 2021 across our portfolio of $3 M
ports. $2 M
• Held a grand opening on June 2, 2021 for the AutoMobile International Terminal, a 50/50
joint venture (JV) partnership with Terminal Zarate in Mobile, Alabama. The terminal is now
in service and primarily supports the import and export requirements of the automotive
market in the US. Q2 2020 Q2 2021
CANADIAN UTILITIES ADJUSTED EARNINGS
• Higher earnings were mainly due to contributions from International Electricity Operations,
a higher inflation rate in International Natural Gas Distribution, and cost efficiencies,
$60 M
partially offset by the impact of the Electricity Transmission 2018-2019 General Tariff
Application Compliance Filing decision received in the second quarter of 2021, which relates
to prior periods.
$48 M
• Received a decision from the Alberta Utilities Commission approving the acquisition of
the 131-km Pioneer Pipeline for the purchase price and associated integration costs of
$265 million.
• LUMA Energy commenced operations on June 1, 2021 under the Supplemental Agreement
to its 15-year contract to modernize and operate Puerto Rico’s electricity transmission and
distribution system after successful completion of the one-year transition period.
• Announced a partnership with Suncor Energy in May 2021 to collaborate on early-stage
design and engineering of a clean hydrogen project near Fort Saskatchewan, Alberta. A
sanctioning decision for the project is expected in 2024. Q2 2020 Q2 2021
Investor Relations, c/o ATCO Ltd. InvestorRelations@atco.com
3rd Floor, West Building
T: (403) 292-7500 | F: (403) 292-7532
5302 Forand Street SW, Calgary, Alberta, Canada T3E 8B4
2021 SECOND QUARTER FINANCIAL INFORMATION INVESTOR FACT SHEET MANAGEMENT'S DISCUSSION AND ANALYSIS UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2021 TABLE OF CONTENTS Management’s Discussion and Analysis 4 Consolidated Financial Statements 40
ATCO LTD.
MANAGEMENT’S DISCUSSION AND
ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 2021
This Management's Discussion and Analysis (MD&A) is meant to help readers understand key operational and financial events
that influenced the results of ATCO Ltd. (ATCO, our, we, us, or the Company) during the six months ended June 30, 2021.
This MD&A was prepared as of July 28, 2021, and should be read with the Company's unaudited interim consolidated financial
statements for the six months ended June 30, 2021. Additional information, including the Company's previous MD&As, Annual
Information Form (2020 AIF), and audited consolidated financial statements for the year ended December 31, 2020, is available
on SEDAR at www.sedar.com. Information contained in the 2020 MD&A is not discussed in this MD&A if it remains substantially
unchanged.
The Company is controlled by Sentgraf Enterprises Ltd. and its controlling share owner, the Southern family. The Company
includes controlling positions in Canadian Utilities Limited (Canadian Utilities or CU) (53.0 per cent ownership), ATCO Structures &
Logistics Ltd. (ATCO Structures & ATCO Frontec) (100 per cent ownership), ATCO Land and Development Ltd. (100 per cent
ownership), and ASHCOR Technologies Ltd. (100 per cent ownership). The Company also has a non-controlling equity investment
in Neltume Ports S.A. (Neltume Ports) (40 per cent ownership). Throughout this MD&A, the Company's earnings attributable to
Class I and Class II Shares and adjusted earnings are presented after non-controlling interests.
Terms used throughout this MD&A are defined in the Glossary at the end of this document.
ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 4
TABLE OF CONTENTS
Page
Performance Overview............................................................................................................................................................. 6
Business Unit Performance..................................................................................................................................................... 9
Structures & Logistics............................................................................................................................................................. 9
Neltume Ports.......................................................................................................................................................................... 13
ATCO Corporate & Other....................................................................................................................................................... 14
Canadian Utilities.................................................................................................................................................................... 15
Utilities ............................................................................................................................................................................... 15
Utilities Regulatory Developments........................................................................................................................... 17
Energy Infrastructure...................................................................................................................................................... 18
Canadian Utilities Corporate & Other.......................................................................................................................... 20
Sustainability, Climate Change and Energy Transition...................................................................................................... 21
Other Expenses and Income................................................................................................................................................... 22
Liquidity and Capital Resources.............................................................................................................................................. 24
Share Capital............................................................................................................................................................................... 27
Quarterly Information............................................................................................................................................................... 28
Non-GAAP and Additional GAAP Measures......................................................................................................................... 30
Reconciliation of Adjusted Earnings to Earnings Attributable to Class I and Class II Shares.................................... 31
Reconciliation of Funds Generated by Operations to Cash Flows from Operating Activities................................... 35
Reconciliation of Capital Investment to Capital Expenditures......................................................................................... 36
Other Financial Information ................................................................................................................................................... 37
Glossary........................................................................................................................................................................................ 38
5 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS
PERFORMANCE OVERVIEW
FINANCIAL METRICS
The following chart summarizes key financial metrics associated with our financial performance.
Three Months Ended Six Months Ended
June 30 June 30
($ millions, except per share data and outstanding shares) 2021 2020 Change 2021 2020 Change
Key Financial Metrics
Revenues 970 938 32 2,042 1,994 48
(1)
Adjusted earnings (loss) 80 70 10 199 176 23
Structures & Logistics 18 21 (3) 32 28 4
Neltume Ports 3 2 1 6 5 1
ATCO Corporate & Other (1) (1) — — — —
Canadian Utilities Limited
Utilities 65 57 8 171 156 15
Energy Infrastructure 4 2 2 9 5 4
Canadian Utilities Corporate & Other (9) (11) 2 (19) (18) (1)
(1)
Adjusted earnings ($ per share) 0.70 0.61 0.09 1.74 1.54 0.20
Earnings attributable to Class I and Class II
Shares 12 45 (33) 95 132 (37)
Earnings attributable to Class I and Class II
Shares ($ per share) 0.10 0.39 (0.29) 0.83 1.15 (0.32)
Cash dividends declared per Class I and Class II
Share (cents per share) 44.83 43.52 1.31 89.66 87.04 2.62
(1)
Funds generated by operations 414 378 36 905 894 11
(1)
Capital investment 507 226 281 760 529 231
Other Financial Metrics
Weighted average Class I and Class II Shares
outstanding (thousands):
Basic 114,184 114,411 (227) 114,243 114,382 (139)
Diluted 114,500 114,682 (182) 114,526 114,700 (174)
(1) Additional information regarding these measures is provided in the Non-GAAP and Additional GAAP Measures section of this MD&A.
REVENUES
Revenues for the second quarter of 2021 were $970 million, $32 million higher than the same period in 2020. Higher
revenues were mainly due to improved performance at ATCOenergy resulting from higher electricity and natural
gas commodity prices associated with floating rate energy contracts.
ADJUSTED EARNINGS
Our adjusted earnings in the second quarter of 2021 were $80 million or $0.70 per share, compared to $70 million
or $0.61 per share for the same period in 2020.
Higher adjusted earnings in the second quarter of 2021 were mainly due to earnings from International Electricity
Operations related to ongoing transition work and the commencement on June 1, 2021 under the Supplemental
Agreement to LUMA Energy's 15-year contract to modernize and operate Puerto Rico's electricity transmission and
distribution (T&D) system. Higher earnings were also due to a return to more stable levels of inflation in Australia,
which positively impacted earnings in International Natural Gas Distribution.
ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 6
Adjusted Earnings ($ Millions)
$12 $80
$70 $1 $—
$(3)
Q2 2020 Structures & Neltume ATCO Canadian Q2 2021
Logistics Ports Corporate & Utilities
Other
Additional detail on the financial performance of our business units is discussed in the Business Unit Performance
section of this MD&A.
EARNINGS ATTRIBUTABLE TO CLASS I AND CLASS II SHARES
Earnings attributable to Class I and Class II Shares were $12 million in the second quarter of 2021, $33 million lower
compared to 2020. Earnings attributable to Class I and Class II Shares 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.
More information on these and other items is included in the Reconciliation of Adjusted Earnings to Earnings
Attributable to Class I and Class II Shares section of this MD&A.
FUNDS GENERATED BY OPERATIONS
Funds generated by operations were $414 million in the second quarter of 2021, $36 million higher compared to
the same period in 2020. The increase was mainly due to higher customer contributions for Canadian Utilities'
Electricity Transmission and International Natural Gas Distribution capital investments, partially offset by the timing
of certain revenues and expenses.
COMMON SHARE DIVIDENDS
Dividends paid to Class I and Class II share owners totaled $52 million in the second quarter of 2021. On
July 22, 2021, the Board of Directors declared a third quarter dividend of 44.83 cents per share.
7 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSISQuarterly Dividend Rate 1993 - 2021
(dollars per share)
$0.4483
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
CAPITAL INVESTMENT
Total capital investment of $507 million and $760 million
in the second quarter and first six months of 2021 was Capital Investment for the
$281 million and $231 million higher compared to the Six Months Ended June 30, 2021
same periods in 2020 mainly due to Canadian Utilities'
acquisition of the Pioneer Pipeline in Natural Gas
Transmission, and the strategic purchase of 17%
development lands by ATCO Land & Development.
Capital spending in Canadian Utilities' Regulated Utilities
accounted for 83 per cent of total capital invested in the
first six months of 2021. The remaining 17 per cent
invested largely included the strategic purchase of
development lands by ATCO Land & Development.
83%
Regulated Utilities
ATCO Structures & Other
ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 8BUSINESS UNIT PERFORMANCE
REVENUES
Structures & Logistics revenues of $181 million and $348 million in the second quarter and first six months of 2021
were $20 million and $24 million lower than the same periods in 2020 mainly due to ATCO Structures' lower
workforce housing trade sale activity in 2021 in Canada and Australia, and the completion of manufacturing work on
ATCO Structures' LNG Canada Cedar Valley Lodge project in the second quarter of 2020. Lower revenues were
partially offset by ATCO Structures' space rental performance, recently awarded ATCO Frontec workforce housing
service contracts for the Trans Mountain and China Lake Military Rebuild projects, and ongoing Disaster &
Emergency Management response projects.
ADJUSTED EARNINGS
Three Months Ended Six Months Ended
June 30 June 30
($ millions) 2021 2020 Change 2021 2020 Change
ATCO Structures 16 21 (5) 29 28 1
ATCO Frontec 2 — 2 3 — 3
Total Structures & Logistics 18 21 (3) 32 28 4
Structures & Logistics recorded adjusted earnings of $18 million in the second quarter of 2021, $3 million lower
than the same period in 2020. Lower earnings were mainly due to ATCO Structures' lower workforce housing trade
sale activity in Canada, Australia and the United States (US). Lower adjusted earnings were partially offset by ATCO
Structures' higher space rental activity in Canada, Australia, and the US, and ATCO Frontec's recently awarded
workforce housing service contract for the Trans Mountain Expansion project.
Structures & Logistics recorded adjusted earnings of $32 million in the first six months of 2021, $4 million higher
than the same period in 2020. Higher earnings were mainly due to ATCO Structures' higher space rental activity and
higher occupancy at ATCO Frontec's Site C camp. Higher earnings were partially offset by lower ATCO Structures
workforce housing trade sale activity in Canada, Australia and the US.
ATCO STRUCTURES
ATCO Structures manufactures, sells and leases transportable workforce housing, residential housing, and space
rental products. Space rentals sells and leases mobile office trailers in various sizes and floor plans to suit our
customers’ needs. Workforce housing delivers modular workforce housing worldwide, including short-term and
permanent modular construction, pre-fabricated and relocatable modular buildings.
ATCO Structures recorded adjusted earnings of $16 million in the second quarter of 2021, $5 million lower than the
same period in 2020 mainly due to lower workforce housing trade sale activity in Canada, Australia and the US,
partially offset by higher space rental activity in Canada, Australia and the US.
ATCO Structures recorded adjusted earnings of $29 million in the first six months of 2021, $1 million higher than the
same period in 2020 mainly due to higher space rental activity, partially offset by lower workforce housing trade
9 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSISsale activity in Canada, Australia and the US, and the completion of manufacturing work on the LNG Canada Cedar
Valley Lodge project in the second quarter of 2020.
The following table compares ATCO Structures' manufacturing hours and rental fleet for the second quarter and
first six months of 2021 and 2020.
Three Months Ended Six Months Ended
June 30 June 30
2021 2020 Change 2021 2020 Change
North America
Manufacturing hours (thousands) 130 157 (17%) 250 507 (51%)
Global Space Rentals
Number of units 19,475 16,767 16% 19,475 16,767 16%
Average utilization (%) 82 71 11% 81 71 10%
Average rental rate ($ per month) 675 656 3% 629 583 8%
Global Workforce Housing
Number of units 2,452 2,772 (12%) 2,452 2,772 (12%)
Average utilization (%) 66 46 20% 63 46 17%
Average rental rate ($ per month) 1,487 1,359 9% 1,674 1,502 11%
Manufacturing Hours
The decrease in manufacturing hours in the second quarter of 2021 was mainly due to the completion of
manufacturing on the LNG Canada Cedar Valley Lodge project in the second quarter of 2020.
Rental Fleet
Global Space Rentals
ATCO Structures increased its global space rental fleet size by 2,708 units year-over-year. The increase in the
number of space rental units was mainly due to the acquisition of the remaining 50 per cent interest in the ATCO
Sabinco S.A. joint venture partnership on December 30, 2020 and the continued strategic expansion of the space
rental fleet in targeted regions in Canada and the US.
In the second quarter of 2021, space rental demand increased in Canada, Australia, the US and Chile mainly due to
an increase in activity in the construction and mining sectors, as well as a result of physical distancing protocols in
response to the COVID-19 pandemic. This increase in demand produced an increase in utilization and average
rental rates.
Global Workforce Housing
ATCO Structures continuously evaluates the size of its global workforce housing fleet in relation to economic
conditions and seeks to balance unit counts, utilization rates and average rental rates. ATCO Structures decreased
the size of its unused workforce housing fleet and increased the average utilization rate year-over-year by selling
used and non-utilized fleet assets in Canada, Australia and the US. The increase in the utilization rate was also due
to the workforce housing fleet on rent for the Trans Mountain Expansion project in British Columbia (BC). Workforce
housing average rental rates have increased from the prior year as a result of higher overall economic activity and a
shift in customer demand towards the higher priced lower density workforce housing options in Canada.
ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 10ATCO STRUCTURES RECENT DEVELOPMENTS
Canada
Brucejack - Pretium Exploration Inc.
ATCO Structures has commenced manufacturing and installation work on its previously awarded contract to supply
a 450-person camp for Pretium Exploration Inc.’s Brucejack operations in Northwest BC. The contract includes the
supply of accommodation dorms with complete kitchen and recreation amenities. Installation work is expected to
be complete by the end of 2021.
BC Housing - Government of British Columbia
In 2020, ATCO Structures secured several projects
with the Government of British Columbia's
supportive housing program. The housing projects
will provide affordable housing to low income
individuals and families across the province.
In the second quarter of 2021, ATCO Structures
continued work on its previously awarded Surrey, BC
affordable housing project and was awarded an
additional $13 million supportive housing contract in
Vernon, BC for a four-story, 61-unit building. This is
our sixth affordable housing project. Site work and
manufacturing is expected to commence in the third
quarter of 2021.
61-unit supportive housing complex - Surrey, BC
Sabina Gold
In the second quarter of 2021, ATCO Structures was awarded a supply contract for a 276-bed accommodation
complex for a mining client in Nunavut. The project consists of deployment of fleet product which has been
repurposed to withstand the environment in the region. The product was fully delivered in July 2021.
11 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSISATCO FRONTEC
ATCO Frontec provides facility operations and maintenance services, workforce lodging and support services,
defense operations services, and disaster and emergency management services.
ATCO Frontec's adjusted earnings of $2 million in the second quarter of 2021 were $2 million higher than the same
period in 2020 mainly due to recently awarded workforce housing service contracts for the Trans Mountain
Expansion project, and ongoing Disaster & Emergency Management response projects.
ATCO Frontec's adjusted earnings of $3 million in the first six months of 2021 were $3 million higher than the same
period in 2020 mainly due to higher occupancy at the Site C workforce housing camp in BC, recently awarded
workforce housing service contracts for the Trans Mountain Expansion project, and ongoing Disaster & Emergency
Management response projects.
UQSUQ Operations Airside Crew - Iqaluit, Nunavut
ATCO FRONTEC RECENT DEVELOPMENTS
In June 2007, the Government of Nunavut awarded UQSUQ, a joint venture between ATCO Frontec and Nunavut
Petroleum Corporation, a contract for bulk fuel delivery services in Iqaluit, Nunavut. The contract involves operating
and maintaining the Iqaluit bulk fuel storage facility and pipeline distribution system and the delivery of petroleum
products.
The current contract is in place until the fourth quarter of 2021. In late 2020, UQSUQ engaged in a competitive bid
process for a new 10-year contract with a 5-year extension option. In the second quarter of 2021, ATCO Frontec
received confirmation that UQSUQ has successfully secured this critical infrastructure contract; reinforcing ATCO's
commitment to Northern Canada and its Indigenous partners.
ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 12Neltume Ports is a port operator and developer with a diversified portfolio of 17 multi-purpose, bulk cargo and
container port facilities and three port operation services. The business is located primarily in Chile with additional
operations in Uruguay, Argentina, Brazil and the US.
ADJUSTED EARNINGS
Three Months Ended Six Months Ended
June 30 June 30
($ millions) 2021 2020 Change 2021 2020 Change
Neltume Ports 3 2 1 6 5 1
Neltume Ports' adjusted earnings of $3 million and $6 million in the second quarter and first six months of 2021
were $1 million higher than the same periods in 2020 mainly due to unplanned equipment maintenance activity at
the Puerto Mejillones port in 2020, and higher volumes in 2021 across the portfolio of ports.
RECENT DEVELOPMENTS
On June 2, 2021, AutoMobile International Terminal (AIT), a 50/50 joint venture (JV) partnership with Terminal Zarate
in Mobile, Alabama had their grand opening and is now in service. The terminal is operating under a 10-year
concession agreement with two consecutive 10-year extensions at the JV's election for a total of up to 30 years.
The port will primarily serve the import and export requirements of the automotive market in the US.
13 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSISATCO Corporate & Other contains ATCO Land and Development Ltd. which is a commercial real estate business that
holds investments for sale, lease or development, as well as ASHCOR, a company engaged in the processing and
marketing of ash, a waste byproduct of electricity generation. ATCO Corporate & Other also includes the global
corporate head office in Calgary, Canada, ATCO licensing fees received, and financing expenses associated with the
Neltume Ports investment.
ADJUSTED EARNINGS
Three Months Ended Six Months Ended
June 30 June 30
($ millions) 2021 2020 Change 2021 2020 Change
ATCO Corporate & Other (1) (1) — — — —
ATCO Corporate & Other adjusted earnings in the second quarter and first six months of 2021 were comparable to
the same periods in 2020.
ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 14Canadian Utilities is a diversified global energy infrastructure corporation delivering service excellence and
innovative business solutions in Utilities (Electricity and Natural Gas Transmission and Distribution, and
International Electricity Operations); Energy Infrastructure (Electricity Generation, Energy Storage, and Industrial
Water Solutions); and Retail Energy (Electricity and Natural Gas Retail Sales).
UTILITIES
REVENUES
Utilities revenues of $688 million and $1,478 million in the second quarter and first six months of 2021 were
comparable to the same periods in 2020.
Revenue growth for Electricity and Natural Gas Distribution in the second quarter and first six months of 2021 has
been deferred to be recognized and collected in a future period as a result of our decision to provide rate relief to
customers in light of the current COVID-19 global pandemic and the economic situation in Alberta.
ADJUSTED EARNINGS
Three Months Ended Six Months Ended
June 30 June 30
($ millions) 2021 2020 Change 2021 2020 Change
Electricity
Electricity Distribution 19 17 2 41 35 6
Electricity Transmission 19 23 (4) 42 46 (4)
International Electricity Operations 4 — 4 7 — 7
Total Electricity 42 40 2 90 81 9
Natural Gas
Natural Gas Distribution 5 1 4 47 44 3
Natural Gas Transmission 11 13 (2) 21 24 (3)
International Natural Gas Distribution 7 3 4 13 7 6
Total Natural Gas 23 17 6 81 75 6
Total Utilities Adjusted Earnings 65 57 8 171 156 15
Utilities adjusted earnings of $65 million and $171 million in the second quarter and first six months of 2021 were
$8 million and $15 million higher than the same periods in 2020. Higher earnings were mainly due to contributions
from International Electricity Operations, a higher inflation rate in International Natural Gas Distribution, and cost
efficiencies, partially offset by the impact of the Electricity Transmission 2018-2019 General Tariff Application (GTA)
Compliance Filing decision received in the second quarter of 2021.
Detailed information about the activities and financial results of the Utilities business segments is provided in the
following sections.
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ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 16International Natural Gas Distribution adjusted earnings of $7 million and $13 million in the second quarter and first six months of 2021 were $4 million and $6 million higher compared to the same periods in 2020. Higher earnings were mainly due to the impact of a higher forecasted inflation rate and a settlement relating to the 2011 acquisition of ATCO Gas Australia. UTILITIES REGULATORY DEVELOPMENTS COMMON MATTERS 2021 Rate Relief Application On March 1, 2021, ATCO filed a 2021 Rate Relief Application for Electricity Distribution and Natural Gas Distribution to postpone rate increases for the full year 2021 and collect the deferred amounts commencing in 2023 for no more than a 5-year period. On June 18, 2021, the AUC issued a decision directing ATCO to collect the 2021 deferred amounts commencing January 1, 2022, over a short duration, without exceeding a prescribed maximum increase in any year during the collection process. The majority of the deferred amounts are expected to be collected in 2022, with the remainder to be collected in 2023. Distribution Regulatory Framework - Post 2022 On June 18, 2021, the AUC issued a decision providing direction regarding the 2023 cost of service application process. Each distribution utility is to present its application using an AUC-developed template with a prescribed minimum level of detail. Electricity Distribution is required to file its application by November 15, 2021, and Natural Gas Distribution is required to file its application by December 15, 2021. On June 30, 2021, the AUC issued a decision relating to the Evaluation of Performance-Based Regulation in Alberta. The Commission determined that PBR has achieved many of the set principle objectives and that a third PBR term (PBR3) will commence in 2024 after a one year cost of service rebasing in 2023. A future generic proceeding will be initiated in the third quarter of 2022 to determine the parameters of PBR3, including a review of incremental capital funding provisions, the inflation (I) and productivity (X) factors, and consideration of an earnings sharing mechanism. ELECTRICITY TRANSMISSION 2018-2019 General Tariff Application On June 29, 2021, the AUC issued a decision on the 2018-2019 GTA Compliance Filing which determined Electricity Transmission’s final revenue requirement for 2018 and 2019. The impact of this decision is a decrease to second quarter 2021 adjusted earnings of $4 million, all of which relates to prior periods. NATURAL GAS TRANSMISSION Pioneer Pipeline Acquisition In the third quarter of 2020, Natural Gas Transmission entered into an agreement to acquire the Pioneer Pipeline from Tidewater Midstream & Infrastructure Ltd. and its partner TransAlta Corporation, subject to customary conditions including regulatory approvals by the AUC and Alberta Energy Regulator. The 131-km natural gas pipeline runs from the Drayton Valley area to the Wabamum area west of Edmonton. On June 15, 2021, the AUC issued a decision approving the acquisition of the pipeline and associated integration costs, totaling $265 million, and the corresponding revenue requirement for 2021 to be included in Natural Gas Transmission's rates. Consistent with the geographic areas defined in the Integration Agreement, Natural Gas Transmission will transfer to Nova Gas Transmission Ltd. (NGTL) the 30-km segment of pipeline that is located in the NGTL footprint for approximately $65 million. The pipeline has been integrated but is subject to approval from the Canada Energy Regulator and is expected to close in the fourth quarter of 2021. With the close of the transaction on June 30, 2021, the Pioneer Pipeline has been incorporated into NGTL's and ATCO's Alberta regulated natural gas transmission systems to provide reliable natural gas supply to TransAlta's 17 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS
power generating units at Sundance and Keephills, facilitating the conversion of these coal plants to cleaner-burning
natural gas.
ENERGY INFRASTRUCTURE
REVENUES
Energy Infrastructure revenues of $39 million in the second quarter of 2021 were $5 million lower than the same
period in 2020 mainly due to demand for natural gas storage services.
Energy Infrastructure revenues of $91 million in the first six months of 2021 were $1 million higher than the same
period in 2020 mainly due to demand for natural gas storage services.
ADJUSTED EARNINGS
Three Months Ended Six Months Ended
June 30 June 30
($ millions) 2021 2020 Change 2021 2020 Change
Electricity Generation 1 1 — 4 3 1
Storage & Industrial Water 3 1 2 5 2 3
Total Energy Infrastructure Adjusted Earnings 4 2 2 9 5 4
Energy Infrastructure adjusted earnings of $4 million in the second quarter of 2021 were $2 million higher than the
same period in 2020 mainly due to recovered business development costs, partially offset by lower demand for
natural gas storage services.
Energy Infrastructure adjusted earnings of $9 million in the first six months of 2021 were $4 million higher than the
same period in 2020 mainly due to recovered business development costs and demand for natural gas storage
services.
Detailed information about the activities and financial results of Energy Infrastructure's businesses is provided in
the following sections.
Electricity Generation
Non-regulated electricity activities supply electricity from natural gas and hydroelectric generating plants in Western
Canada, Australia, Chile, Mexico, and non-regulated electricity transmission in Alberta.
Electricity Generation adjusted earnings of $1 million in the second quarter of 2021 were comparable to the same
period in 2020.
Electricity Generation adjusted earnings of $4 million in the first six months of 2021 were $1 million higher than the
same period in 2020. Higher earnings were mainly due to recovered business development costs.
Storage & Industrial Water
Storage & Industrial Water provides non-regulated natural gas storage and transmission activities, natural gas
liquids storage, and industrial water services in Alberta and the Northwest Territories.
Storage & Industrial Water adjusted earnings of $3 million and $5 million in the second quarter and first six months
of 2021 were $2 million and $3 million higher than the same periods in 2020 mainly due to demand for natural gas
storage services and recovered business development costs.
ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 18ENERGY INFRASTRUCTURE RECENT DEVELOPMENTS CANADIAN UTILITIES - SUNCOR Clean Hydrogen Project In May 2021, Canadian Utilities and Suncor Energy announced the decision to collaborate on early stage design and engineering of a potential clean hydrogen project. The project will produce more than 300,000 tons per year of clean hydrogen, while capturing greater than 90 per cent of the carbon emissions, reducing Alberta's carbon dioxide emissions by more than two million tons per year. The hydrogen production facility will be located at ATCO's Heartland Energy Centre near Fort Saskatchewan, Alberta, and is expected to be operational as early as 2028. Although several provincial and federal policies, fiscal programs and regulations have already been put in place to support significant decarbonization and the development of a leading low-carbon fuels industry, further regulatory certainty and fiscal support is required for the project to progress to a sanctioning decision. In addition to supplying clean hydrogen to Suncor and the Alberta gas grid, the project will make hydrogen volumes available for Alberta's other industrial, municipal and commercial transport users. Clean Energy Innovation Park In May 2021, Canadian Utilities and its joint venture partner, Australian Gas Infrastructure Group, received notification of $29 million AUD in conditional funding from the Australian Renewable Energy Agency (ARENA) to kick start the production of hydrogen through a large scale project at Canadian Utilities' proposed Clean Energy Innovation Park (CEIP) in Western Australia. The proposed project will leverage Canadian Utilities' learnings from its Clean Energy Innovation Hub, a pilot project which saw the company become the first in Australia to generate and use green hydrogen. The CEIP will include a 10-MW electrolyser and plant capable of producing up to four tonnes of hydrogen per day, along with storage and delivery to gas network injection points. The facility is planned to be co-located with a 180-MW wind farm in Western Australia, which will provide the renewable energy to power the electrolyser. A final investment decision for this project is expected in the first quarter of 2022. Chile Solar Generation Facility In the fourth quarter of 2019, Canadian Utilities entered into a partnership with Impulso Capital, a Chilean developer, to build and operate the El Resplandor solar project. This project, located in Cabrero, Chile, provides solar energy to the Chilean electricity grid. The 3-MW of solar generation capacity was completed at the end of the second quarter of 2020 for a total investment of $4 million. Despite plans to expand the facility, Canadian Utilities has cancelled the remaining planned 6-MW of the project due to land zoning concerns. 19 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS
CANADIAN UTILITIES CORPORATE & OTHER
Canadian Utilities' Corporate & Other segment includes Rümi and Retail Energy through ATCOenergy which
provides retail electricity and natural gas services in Alberta. Corporate & Other also includes the global corporate
head office in Calgary, Canada, the Australia corporate head office in Perth, Australia and the Mexico corporate
head office in Mexico City, Mexico. Canadian Utilities' Corporate & Other includes CU Inc. and Canadian Utilities
preferred share dividend and debt expenses.
ADJUSTED EARNINGS
Three Months Ended Six Months Ended
June 30 June 30
($ millions) 2021 2020 Change 2021 2020 Change
Canadian Utilities Corporate & Other (9) (11) 2 (19) (18) (1)
Including intersegment eliminations, Canadian Utilities' Corporate & Other adjusted earnings in the second quarter
of 2021 were $2 million higher than the same period in 2020 mainly due to improved earnings in ATCOenergy and
the timing of certain expenses.
Including intersegment eliminations, Canadian Utilities' Corporate & Other adjusted earnings in the first six months
of 2021 were $1 million lower than the same period in 2020 mainly due to the timing of certain expenses, partially
offset by improved earnings at ATCOenergy.
CANADIAN UTILITIES CORPORATE & OTHER RECENT DEVELOPMENTS
Rümi Launch
On June 3, 2021, Canadian Utilities launched Rümi, a solutions provider for home and business owners, offering
lifestyle products, home maintenance services and professional advice for homeowners.
Rümi is expected to create more than 200 jobs in Alberta over the next 3 years, while simultaneously supporting
Alberta businesses. Rümi currently offers approximately 60 services in Edmonton and Calgary, and more than 750
products for purchase online.
ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 20SUSTAINABILITY, CLIMATE CHANGE AND
ENERGY TRANSITION
Within our group of companies, we balance the short and long-term economic, environmental and social
considerations of our businesses while creating value for our customers, employees, share owners, and Indigenous
and community partners. As a provider of essential services in diverse communities around the world, we operate
in an inclusive manner to meet the needs of society today and for generations to come.
Sustainability Reporting
In 2021, we completed a refresh of the material topics for our Sustainability Report, incorporating feedback from
internal and external groups. Our 2020 Sustainability Report, published in May 2021, focused on the following
material topics:
• Energy Transition - energy transition and innovation, and energy access and affordability;
• Climate Change and Environmental Stewardship - climate change and GHG emissions, and environmental
stewardship;
• Operational Reliability and Resilience - system reliability and availability, and emergency preparedness and
response;
• People - occupational health and safety, public safety, and diversity, inclusion and equity; and
• Community and Indigenous Relations - Indigenous engagement, economic opportunity and reconciliation,
and community engagement and investment.
The Sustainability Report is based upon the internationally recognized Global Reporting Initiative (GRI) Standards.
Our reporting is also guided by the Sustainability Accounting Standards Board (SASB) and the Financial Stability
Board’s Task Force on Climate-related Financial Disclosures' (TCFD) recommendations.
The 2020 Sustainability Report, Sustainability Framework Reference Document, and more details of our materiality
assessment, and other disclosures are available on our website at www.atco.com.
Climate Change and Energy Transition
To contribute to a low carbon future, we continue to pursue initiatives to integrate cleaner fuels and renewable
energy. We intend to expand our ownership and development of clean energy solutions, as well as enable our
customers to transition to lower emitting sources of energy.
In May 2021, Canadian Utilities was able to advance two large scale hydrogen projects. In Australia, Canadian
Utilities and its joint venture partner, Australian Gas Infrastructure Group, received notification of $29 million AUD
in conditional funding from ARENA to kick start the production of hydrogen through a large-scale project at
Canadian Utilities' proposed Clean Energy Innovation Park. This project builds on Canadian Utilities' pilot project, the
Clean Energy Innovation Hub, and will produce hydrogen along with storage and delivery to gas network injection
points. In Canada, Canadian Utilities and Suncor Energy announced the decision to collaborate on early-stage
design and engineering for a potential hydrogen project near Fort Saskatchewan, Alberta.
As our portfolio of assets evolves, so too does our environmental footprint. Our direct (Scope 1) GHG emissions
were reduced by 90 per cent from 2019 to 2020, primarily as a result of Canadian Utilities' sale of its Canadian fossil
fuel-based electricity generation, eliminating coal-fired generation from our portfolio. Our direct GHG emissions
from retained assets have been reduced by 17 per cent since 2019.
21 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSISOTHER EXPENSES AND INCOME
A financial summary of other consolidated expenses and income items for the second quarter and first six months
of 2021 and 2020 is given below. These amounts are presented in accordance with IFRS accounting standards. They
have not been adjusted for the timing of revenues and expenses associated with rate-regulated activities and other
items that are not in the normal course of business.
Three Months Ended Six Months Ended
June 30 June 30
($ millions) 2021 2020 Change 2021 2020 Change
Operating costs 618 540 78 1,229 1,114 115
Depreciation, amortization and impairment 224 177 47 394 333 61
Earnings from investment in associate company 3 2 1 6 5 1
Earnings from investment in joint ventures 6 3 3 20 10 10
Net finance costs 101 102 (1) 203 201 2
Income tax expense 10 35 (25) 55 98 (43)
OPERATING COSTS
Operating costs, which are total costs and expenses less depreciation, amortization and impairment, increased by
$78 million and $115 million in the second quarter and first six months of 2021 compared to the same periods in
2020. Higher operating costs were mainly due to higher flow-through electricity costs in ATCOenergy, higher
flow-through Alberta-system natural gas transmission costs, higher unrealized and realized losses on derivative
financial instruments in 2021, and the recognition of termination and transition costs related to the early
termination of the Master Services Agreements (MSA) with Wipro Ltd. (Wipro) for managed information technology
(IT) services.
DEPRECIATION, AMORTIZATION AND IMPAIRMENT
Depreciation, amortization and impairment increased by $47 million and $61 million in the second quarter and first
six months of 2021 compared to the same periods in 2020 mainly due to the impairment of assets in Canadian
Utilities' Energy Infrastructure segment as part of the continued assessment of our investment portfolio.
EARNINGS FROM INVESTMENT IN ASSOCIATE COMPANY
Earnings from investment in associate company relate to our 40 per cent ownership interest in Neltume Ports, a
leading port operator and developer in South America with operations in 17 port facilities and three port operation
services businesses located in Chile, Uruguay, Argentina, Brazil, and the US.
Earnings from investment in associate company in the second quarter and first six months of 2021 were $1 million
higher compared to the same periods in 2020. Higher earnings were mainly due to unplanned equipment
maintenance activity at the Puerto Mejillones port in 2020, and higher volumes in 2021 across the portfolio of ports.
EARNINGS FROM INVESTMENT IN JOINT VENTURES
Earnings from investment in joint ventures is mainly comprised of Canadian Utilities' ownership positions in
electricity generation plants, LUMA Energy electricity operations and maintenance in Puerto Rico, and the
Strathcona Storage Limited Partnership, which operates hydrocarbon storage facilities at the ATCO Heartland
Energy Centre near Fort Saskatchewan, Alberta.
Earnings from investment in joint ventures increased by $3 million and $10 million in the second quarter and first
six months of 2021 compared to the same periods in 2020 mainly due to earnings from LUMA Energy due to the
ongoing transition work during the period, and commencement on June 1, 2021 of the Supplemental Agreement,
partially offset by an impairment of an investment in Canadian Utilities' Energy Infrastructure segment as part of the
continued assessment of our investment portfolio.
ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 22NET FINANCE COSTS Net finance costs decreased by $1 million in the second quarter of 2021 when compared to the same period in 2020 mainly due to lower interest expense as a result of increased capitalization of interest during construction on capital projects in 2021. Net finance costs increased by $2 million in the first six months of 2021 when compared to the same period in 2020 mainly due to lower interest income resulting from lower interest rates received on bank balances. INCOME TAX EXPENSE Income taxes were lower by $25 million and $43 million in the second quarter and first six months of 2021 compared to the same periods in 2020 mainly due to lower earnings before income taxes and a reduction in deferred income tax assets in 2020. 23 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Our financial position is supported by Regulated Utilities and long-term contracted operations. Our business
strategies, funding of operations, and planned future growth are supported by maintaining strong investment grade
credit ratings and access to capital markets at competitive rates. Primary sources of capital are cash flow from
operations, and the debt and capital markets.
Under normal market conditions, we consider it prudent to maintain enough liquidity to fund approximately one full
year of cash requirements to preserve strong financial flexibility. Liquidity is generated by cash flow from operations
and is supported by appropriate levels of cash and available committed credit facilities.
LINES OF CREDIT
At June 30, 2021, ATCO and its subsidiaries had the following lines of credit.
($ millions) Total Used Available
Long-term committed 3,071 902 2,169
Uncommitted 571 143 428
Total 3,642 1,045 2,597
Lines of Credit
Of the $3,642 million in total lines of credit,
($ millions)
$571 million was in the form of uncommitted credit
facilities with no set maturity date. The other $3,642
$3,071 million in credit lines was committed, with
maturities between 2022 and 2024, and may be
$2,597
extended at the option of the lenders.
Of the $1,045 million in lines of credit used, $(1,045)
$633 million was related to ATCO Gas Australia Pty
Ltd. Long-term committed credit lines are used to
satisfy all of ATCO Gas Australia Pty Ltd.'s term debt
financing needs. The majority of the remaining usage
is for the issuance of Canadian Utilities' letters of
credit and ATCO Structures & Logistics' funding to Total Used Available
expand its global rental fleet and working capital
needs on workforce housing projects.
CONSOLIDATED CASH FLOW
At June 30, 2021, the Company's cash position was $643 million, a decrease of $457 million compared to December
31, 2020. Funds generated by operations achieved during the quarter were partially offset by cash used to fund the
capital investment program, dividends paid, financing costs and share repurchases.
Funds Generated by Operations
Funds generated by operations were $414 million in the second quarter of 2021, $36 million higher compared to the
same period in 2020. The increase was mainly due to higher customer contributions for Canadian Utilities' Electricity
Transmission and International Natural Gas Distribution capital investments.
Funds generated by operations were $905 million in the first six months of 2021, $11 million higher compared to
the same period in 2020. The increase was mainly due to higher customer contributions for Canadian Utilities'
Electricity Transmission and International Natural Gas Distribution capital investments, partially offset by the timing
of certain revenues and expenses.
Funds generated by operations in 2021 are adversely impacted as a result of ATCO's decision to provide rate relief
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