ATCO Ltd. Annual Report 2020

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FY2020 Annual Report · ATCO Ltd.

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ATCO LTD. | 2020
ANNUAL REPORT

FOR THE YEAR ENDED DECEMBER 31, 2020

Message from the Chair & CEO

Management’s Discussion and Analysis

Financial Statements

Consolidated Annual Results

Consolidated Operating Summary

General Information

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ATCO ANNUAL REPORT 2020 i

MESSAGE FROM THE CHAIR & CEO
RISING TO UNPRECEDENTED CHALLENGE

Dear ATCO Share Owners,

Throughout 2020, we braved political,
social and economic waves that
changed how we think about the
fundamentals that we used to take
for granted.

After an extended phase of opening
global markets that promised new
opportunities, we felt the effect
of a surge of protectionism from
Europe to North America and Asia
that has hindered possibilities for
collaboration and innovation. Global
trade and human progress are not a
zero-sum game where countries must
defend their own, above all others.
I believe there is such a thing as the
global common good, and that we can
build a better reality emerging from
the economic uncertainty and social
disconnect we now face.

So many things about 2020 were
unprecedented. As the pandemic
encompassed every aspect of
our lives, that idea pervaded our
collective consciousness. Never
before had we faced this intensity—
and intersection—of personal
strife, societal shift and economic

devastation. I often reflect on the
changing landscape in which we live
and work, and this last year we found
ourselves adapting on the spot, in
a completely foreign milieu. 2020
quickly became a story about agility.
About pivoting our position, so we
could continue to meet the essential
needs of our communities, safely.
But first and foremost, for ATCO, 2020
was about people and leadership.

Leadership wasn’t just how our
executive took the helm to steer your
company through the storm, but the
leadership of each and every one of
our employees, who were constantly
assessing the dynamics around
them and charting a course for what
needed to be done. I am so proud of
the contribution of each one of our
6,200-member team, who worked so
hard and so smart, often during times
of immense personal stress.

Through this leadership, and over
time, we no longer saw the pandemic
as unprecedented. We saw it as the
next challenge. The evolving reality.
Another step in our journey. It’s the
same attitude that has driven us for
seven decades to strive for a future

where we provide critical products
and services in a way that is better
than how we did before. Better for
the environment, better for our
customers and communities, better
for our employees—now and for
generations to come.

To always do better, we must be
unrelenting. Unrelenting is a culture.
It seeps into every aspect of our
business, from making safety our
first consideration to reducing our
own environmental impact, from
increasing operational reliability
to focusing on our communities.

Transitioning to lower-emitting
energy is a critical priority, where
we are working fiercely to make
a difference. Hydrogen is one
cleaner energy option that I am
particularly committed to. We are
building Alberta’s first hydrogen
blending project, after successful
outcomes at our Clean Energy
Innovation Hub in Western Australia.
Emissions Reduction Alberta shares
our confidence and has awarded
ATCO $2.8 million in funding. Once
completed, it will be Canada’s largest
hydrogen blending project. Research,

ii ATCO ANNUAL REPORT 2020

innovation and calculated risks—with
a long-term goal in mind. That’s how
we change the world.

But, the reality is we can’t change
the world in a context that doesn’t
support it. Cumbersome government
policy remains a concern, and as
citizens become disenchanted with
the politics of the day, it is time
for another kind of change. It is an
ongoing exercise to peel away the
layers that build up over time caused
by unnecessary policy or regulation,
or just habit. Responsive government
that supports businesses in their
desire to do better is critical for our
ambitions of sustainability.

We’ve shown what’s possible
by rethinking and refining our
approach to projects. This last year,
we were bestowed the prestigious
International Edison Award for
our work on the Fort McMurray
West 500-kilovolt Transmission
Project, completed by Alberta
PowerLine, our partnership with
Quanta Services. The award
recognizes distinguished leadership,
innovation and contribution to the
advancement of the electric power

industry. Specifically, we led the
way in developing state-of-the-art
energy infrastructure and creating
new models for consultation and
engagement, long-term economic
benefit, and reconciliation with
Indigenous Peoples. This project
was a success because we did
what we do best: extraordinary
project execution, forward-thinking
collaboration, and a focus on how
things should be done, not how
they’ve always been done.

Our vision is inextricably intertwined
with the goals and needs of our
customers, as we offer the essentials.
Amidst the most adverse conditions,
including a global pandemic, a
significant flood in Fort McMurray,
Alberta and a cyclone in Australia,
we provided unwavering support to
our customers through a range of
products and services. We built and
managed workforce accommodation
for ambitious projects in Canada
and built medical facilities in Mexico.
We made inviting schools and hotels.
We planned rapid response after
earthquakes damaged a U.S.
military base.

ATCO ANNUAL REPORT 2020 iii

As the pandemic strained Canada’s
medical infrastructure, collaboration
between businesses and government
became key to supporting public
health. I am immensely proud that
we are able to do our part to increase
Canada’s healthcare capacity by
working with Weatherhaven Global
Resources to provide a nimble fleet
of specially designed medical facilities.

And, of course, there is the crucial
essential of energy: electricity,
natural gas and renewables.
We provide these essentials to
over two million customers with
a laser focus on sustainability and
an eye on the future. The projects
that often stand out for me are the
ones where we work together with
our Indigenous partners. In 2020,
we completed Canada’s largest
off-grid solar project, providing the
remote Northern Alberta hamlet of
Fort Chipewyan with clean energy
and reducing local diesel use by
about 800,000 litres annually. In
partnership with Three Nations
Energy, we showcased how we can
collaborate to develop sustainable
energy solutions that benefit today’s
and future generations.

Benefiting generations is also at the
heart of our work in Puerto Rico with
an exciting addition to our portfolio
of global energy infrastructure in
Latin America. After the devastation
of Hurricane Maria, we were chosen
with our partner Quanta Services
to rebuild and operate the electric
grid to one that is safe, reliable,
sustainable and affordable. LUMA
Energy, as our new company on the
island is called, will advance this
historic transformation over 15 years,
producing enduring benefits to the
people and communities of Puerto
Rico. This endeavour exemplifies our
disciplined approach, as we pursue
opportunities for growth.

Beyond the business of ATCO, I am
immensely proud of the community
spirit of our people. ATCO EPIC,
or Employees Participating in
Communities, is a long-standing
employee-led program that rallies
the spirit of our people all over the
world, combining volunteerism,
fundraising events and individual
donations. With our employees
working safely from home, the
contribution that EPIC provides
was in danger of faltering. I am so
proud of our team, who re-assessed
how the program could work and
leveraged technology to ensure our

people could contribute to their
communities without leaving their
desks. This new approach actually
increased the number of our
employees who participated, pushing
us to exceed our goal from last year.
This unexpected and impressive
outcome is the result of ingenuity,
plain and simple.

2021 is a year of hope and renewed
optimism. We’ve walked together
through some dark times in 2020.
I would like to express my deepest
appreciation to our Board of Directors,
whose stewardship drives our
success. I would also like to personally
acknowledge the strength, support
and commitment of our customers,
communities and employees as we
collaborated in extremely difficult
circumstances to provide the most
essential products and services to
those who needed them most. The
world will never be quite the same.
I believe, it will be better.

Sincerely yours,

Nancy C. Southern
Chair & Chief Executive Officer,
ATCO Ltd.

iv ATCO ANNUAL REPORT 2020

ATCO LTD.

MANAGEMENT’S DISCUSSION AND
ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2020

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 year ended December 31, 2020.

This MD&A was prepared as of February 24, 2021, and should be read with the Company's audited consolidated financial
statements (2020 Consolidated Financial Statements) for the year ended December 31, 2020. Additional information, including
the Company's Annual Information Form (2020 AIF), is available on SEDAR at www.sedar.com.

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) (52.3 per cent ownership), ATCO Structures &
Logistics Ltd. (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.

TABLE OF CONTENTS

ATCO: What Sets Us Apart...............................................................................................................................................

ATCO Core Vision and Values.........................................................................................................................................

ATCO Strategies................................................................................................................................................................

Organizational Structure.................................................................................................................................................

Company Overview and Operating Environment........................................................................................................

Performance Overview....................................................................................................................................................

ATCO Scorecard................................................................................................................................................................

Strategic Priorities for 2021.............................................................................................................................................

Corporate Governance....................................................................................................................................................

Business Unit Performance.............................................................................................................................................

Structures & Logistics....................................................................................................................................................

Neltume Ports................................................................................................................................................................

ATCO Corporate & Other..............................................................................................................................................

Canadian Utilities...........................................................................................................................................................

Utilities .....................................................................................................................................................................

Utilities Regulatory Developments...................................................................................................................

Energy Infrastructure.............................................................................................................................................

Canadian Utilities Corporate & Other..................................................................................................................

Sustainability, Climate Change and Energy Transition................................................................................................

Other Expenses and Income...........................................................................................................................................

Liquidity and Capital Resources.....................................................................................................................................

Share Capital.....................................................................................................................................................................

Quarterly Information......................................................................................................................................................

Business Risks and Risk Management...........................................................................................................................

Non-GAAP and Additional GAAP Measures..................................................................................................................

Reconciliation of Adjusted Earnings to Earnings Attributable to Class I and Class II Shares..................................

Reconciliation of Funds Generated by Operations to Cash Flows from Operating Activities.................................

Reconciliation of Capital Investment to Capital Expenditures....................................................................................

Other Financial Information ...........................................................................................................................................

Glossary.............................................................................................................................................................................

Appendix 1 Fourth Quarter Financial Information.......................................................................................................

Page

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

ATCO: WHAT SETS US APART

TRACK RECORD OF DIVIDEND GROWTH

We have increased our common share dividend every year for the past 28 years, a track record of which we are very
proud. On January 14, 2021, we declared a first quarter dividend of 44.83 cents per share or $1.79 per share on an
annualized basis. ATCO continues to grow its dividends consistent with the sustainable growth of its investments.

Quarterly 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

DIVERSIFIED ESSENTIAL SERVICES

ATCO's investments put us at the forefront of global trends. We strive to deliver growth within our portfolio with a
focus on select opportunities in the essential global services of: shelter, logistics and transportation, agriculture,
water, real estate, energy, and energy infrastructure.

GLOBAL GROWTH PLANS

In the years ahead, ATCO will continue to grow and expand our business in a disciplined and proactive manner.

COMMITMENT TO FINANCIAL STRENGTH

Financial strength is fundamental to our current and future success. It ensures we have the financial capacity to
grow our existing business and seek future opportunities that will ensure sustainable long term intergenerational
prosperity. We remain committed to maintaining our strong, investment grade credit ratings.

Dividend Growth

Diversified Essential
Services

Global Growth

Range Credit Rating

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

ATCO CORE VISION AND VALUES

EXCELLENCE: THE HEART & MIND OF ATCO

"Going far beyond the call of duty. Doing more than others expect.

This is what excellence is all about. It comes from striving, maintaining the highest

standards, looking after the smallest detail and going the extra mile. Excellence means

caring. It means making a special effort to do more."

R.D. Southern, Founder, ATCO

CORE VISION

Delivering inspired solutions for a better world. Always there. Anywhere.

CORE VALUES

It is ATCO’s Heart and Mind that drives the Company’s approach to service reliability and product quality. Our
pursuit of excellence governs the way we act and make decisions.

ATCO STRATEGIES

"Making life easier for our customers by offering integrated

solutions around the world."

ATCO's investments put us at the forefront of global trends. We deliver the enduring essentials required for a
healthy global economy: shelter, logistics and transportation, agriculture, water, real estate, energy, and energy
infrastructure.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

Innovation, growth and financial strength provide the foundation from which we have built our Company. Our
long-term success depends on our ability to continue offering our customers premier, comprehensive and
integrated solutions to meet their needs and expand into new markets.

These strategic imperatives are supported by our unwavering commitment to operational excellence, our
customers, our people and the communities we are privileged to serve around the world.

INNOVATION
We seek to create a work environment where employees are encouraged to take a creative and innovative approach
to meeting our customers' needs. By committing to applied research and development, we are able to offer our
customers unique and imaginative solutions that differentiate us from our competitors.

GROWTH
Our long-term strategy is focused on sustainable growth. We approach this strategy by: expanding geographically to
meet the global needs of our customers; developing significant, value-creating greenfield projects; fostering
continuous improvement; and delivering reliable, cleaner, and affordable energy for our customers.

We pursue the acquisition and development of complementary assets and businesses that have future growth
potential and provide long-term value for share owners.

FINANCIAL STRENGTH
Financial strength is the bedrock of our current and future success. It ensures that we have the financial capacity to
fund existing and future capital investments through a combination of predictable cash flows from operations, cash
balances on hand, credit facilities and access to capital markets. It enables us to sustain our operations and to grow
through economic cycles, thereby providing long-term financial benefits.

We continuously review our holdings to evaluate opportunities to sell mature assets and recycle the proceeds into
growing areas of the Company. The viability of such opportunities depends on the outlook of each business as well
as general market conditions. This ongoing focus supports the optimal allocation of capital across the Company.

OPERATIONAL EXCELLENCE
We achieve operational excellence through high service, reliability, and product quality for our customers and the
communities we serve. We are uncompromising about maintaining a safe work environment for employees and
contractors, promoting public safety and striving to minimize our environmental impact. We ensure the timely
supply of goods and services that are critical to our customers' ability to meet their core business objectives.

COMMUNITY INVOLVEMENT
We are committed to a respectful and collaborative community approach, where meaningful partnerships and
positive relationships are built with community leaders and groups that will enhance economic and social
development. Community involvement creates the opportunity to develop partnerships with Indigenous and
community groups and build ongoing, positive Indigenous relationships that contribute to economic and social
development in their communities. We also engage with governing authorities, regulatory bodies, and landowners.
We encourage partnerships throughout the organization. We encourage our employees to participate in community
initiatives that will serve to benefit non-profit organizations through volunteer efforts, and the provision of products
and services in-kind.

FURTHER COMMENTARY REGARDING STRATEGIES AND COMMITMENTS
Our financial and operational achievements in 2020 relative to the strategies outlined above are included in this
MD&A, the 2020 Consolidated Financial Statements and 2020 AIF. Further commentary regarding strategies and
commitments to growth, financial strength, innovation, operational excellence, and community involvement will be
provided in the forthcoming 2020 Management Proxy Circular, Year in Review, and Sustainability Report. The 2020
Management Proxy Circular will also contain a discussion of the Company's corporate governance practices.

ATCO’s website, www.atco.com, is a valuable source for the latest news of the Company’s activities. Prior years’
reports are also available on this website.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

ORGANIZATIONAL STRUCTURE

(1) ATCO Land and Development Ltd. includes commercial real estate investments held for sale, lease or development.

(2) ASHCOR Technologies Ltd. (ASHCOR) is an Alberta-based company engaged in the processing and marketing of ash, a waste byproduct of electricity

generation.

(3) Canadian Utilities' 100 per cent owned subsidiary CU Inc. includes Electricity Distribution, Electricity Transmission, Natural Gas Distribution and Natural

Gas Transmission.

(4)

International Electricity Operations includes Canadian Utilities' 50 per cent ownership in LUMA Energy, LLC (LUMA Energy), a company formed to
transform, modernize and operate Puerto Rico's 30,000 km electricity transmission and distribution system under an Operations and Maintenance
Agreement with a 15-year term after a one-year transition period which began on June 22, 2020.

(5) Canadian Utilities owns 248-MW of non-regulated electricity generation assets in Australia, Mexico, Canada and Chile.

(6) Retail Energy, through ATCO Energy Ltd. (ATCOenergy), provides retail electricity and natural gas service in Alberta.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

In the first quarter of 2020, the Company reorganized its reporting segments. These segments are reported in a
manner consistent with the internal reporting provided to the Chair & Chief Executive Officer and other members of
the Executive Committee of the Company. Comparative amounts for prior periods have been restated to reflect the
realigned segments.

The 2020 Consolidated Financial Statements include the accounts of ATCO Ltd., including a proportionate share of
joint venture (JV) investments and its equity-accounted investment in associate company (40 per cent of Neltume
Ports). Principal subsidiaries are Canadian Utilities, of which ATCO Ltd. owns 52.3 per cent (38.3 per cent of the Class
A non-voting shares and 90.3 per cent of the Class B common shares), and ATCO Structures & Logistics Ltd., of
which ATCO Ltd. owns 100 per cent of the common shares. ATCO Ltd. also owns 100 per cent of the common shares
of ATCO Land and Development Ltd. and ASHCOR Technologies Ltd.

The 2020 Consolidated Financial Statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) and the reporting currency is the Canadian dollar. Certain comparative figures
throughout this MD&A have been reclassified to conform to the current presentation.

ATCO’s website, www.atco.com, is a valuable source for the latest news of the Company’s activities. Prior years’
reports are also available on this website.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

COMPANY OVERVIEW AND OPERATING
ENVIRONMENT

With approximately 6,200 employees and assets of $22 billion, ATCO is privileged to serve more than two million
customers around the world, providing innovative, sustainable solutions in the sectors that are essential to global
growth and prosperity: shelter, logistics and transportation, agriculture, water, real estate, energy, and energy
infrastructure. From the delivery of efficient and reliable energy for homes, businesses and communities, to
affordable temporary and permanent buildings, and transportation of products and services, we build communities,
energize industries and deliver customer-focused infrastructure solutions.

At the heart of ATCO’s strategy is the desire to be a unified provider of essential services for our customers, allowing
them to avoid the challenges of utilizing a fragmented network of providers. Our unique market position, integrated
capabilities, and exceptional customer care combine to create a competitive advantage that is difficult to replicate,
and one that continues to deliver value to share owners through earnings and dividend growth.

Our growth strategy to diversify our mix of portfolio investments into new markets and business lines and
prudently deploy capital underpins our ability to generate long-term growth and financial prosperity. Our steadfast
commitment to our five strategic priorities of innovation, growth, financial strength, operational excellence, and
community involvement has allowed ATCO to endure periods of macroeconomic instability while continuing to
grow.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

STRUCTURES & LOGISTICS

BUSINESS DESCRIPTION

ATCO Structures & Logistics business unit's activities are conducted through two complementary businesses: ATCO
Structures and ATCO Frontec. Diversified by geography, product and service offerings, these businesses meet the
needs of customers and communities globally. Together these businesses offer 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.

ATCO Structures

BUSINESS STRATEGY

Our strategy generates sustainable earnings growth by creating a culture of continuous improvement and providing
our customers with exceptional customer service. Our growth strategy in each geography is delivered through the
expansion of our space rentals business line, which provides the infrastructure and skilled personnel to leverage
our strategic offering of workforce housing and permanent modular construction capabilities, and manufacturing
solutions. We aim to continue to grow our business strategically across the globe to meet the needs of our
customers anywhere.

MARKET OPPORTUNITIES

We are expanding fleet in our existing space rental
geographies and targeting new geographies while
streamlining our manufacturing platform to scale quickly
and profitably when needed to capture workforce housing
contracts. We continue to pursue customer diversification
opportunities outside of the natural resource sector. Public
infrastructure spending will continue to be a source of
opportunity for ATCO Structures. Non-traditional modular
markets such as public education facilities, high density
urban residential housing, hotels, hospitals and
correctional facilities continue to offer development
opportunities. We have recently expanded our operations
in parts of the US and Latin America, particularly Chile and
Mexico, where we see strategic value and opportunity for
the future. We will continue to evaluate organic and
acquisition growth opportunities.

MARKET CHALLENGES

The modular construction industry is significantly
influenced by capital spending cycles in the natural
resource and construction sectors. Slower global economic
activity has resulted in delayed or redeployed funding by
our existing and potential customers which may not
change until current macroeconomic conditions stabilize.
There is also a high level of competition in the markets in
which we operate both from traditional competitors and
new product developers looking to enter the market or
diversify their business.

ATCO Sabinco, Manufacturing Facility, Santiago, Chile

BC Housing, Powell River, British Columbia

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

ATCO Frontec

BUSINESS STRATEGY

Our strategy is to enhance our competitive position through diversification of our existing workforce lodging and
facility operations and maintenance service client base, expand into new geographies, and continuously refine our
business practices.

MARKET OPPORTUNITIES

We see opportunity to expand our operations and
maintenance services and workforce housing businesses in
Canada and the US through our own business relationships
and partnering with ATCO Structures. Opportunities for
growth in our disaster and emergency management and
defence operations services business will be pursued as we
continue to build from our existing base of contracts.

MARKET CHALLENGES

Continued uncertainty in the natural resource sector in
Canada may limit the demand for workforce housing and
associated camp services. We are pursuing contracts with
customers whose projects remain subject to
comprehensive approval processes.

ATCO Frontec, facility operations and maintenance, NATO Flying Training,
Moose Jaw, Saskatchewan

NELTUME PORTS

BUSINESS DESCRIPTION

ATCO has a 40 per cent interest in Neltume Ports. Neltume Ports is a port operator and developer with a diversified
portfolio of multipurpose, bulk cargo and container terminals located primarily in Chile with additional operations in
Uruguay, Argentina, and Brazil. Neltume Ports employs approximately 7,200 people and operates 16 port facilities
and three port operation services businesses. A seventeenth port is under construction and is expected to be in
service in 2021. In 2020, Neltume Ports handled 45 million tonnes of product, including copper, forestry products,
consumer goods and agricultural products.

BUSINESS STRATEGY

Neltume Ports' strategy is focused on continuous improvement initiatives to refine operational practices throughout
all facets of its business. Sustained growth will continue to be achieved by improving margins, increasing volumes
and ownership at existing ports, and investing in brownfield, greenfield and acquisition opportunities throughout
the Americas. Most of Neltume's existing ports are underpinned by long-term contracts or concessions and are
strategically located near major resource or agriculture hubs, as well as high density areas of economic importance.
The business environment is also supported by key partnerships with shipping lines and cargo owners.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

MARKET OPPORTUNITIES

Through Neltume Ports' exposure to global trade and
transportation, the business is able to capitalize on
increasing demand for resources, particularly copper,
agriculture and forestry products, as well as on other
macroeconomic factors. Neltume Ports continuously
reviews opportunities to increase its ownership position in
ports that are jointly owned. Brownfield expansion
opportunities at ports also exist. Greenfield and acquisition
expansion potential will continue to be evaluated.

MARKET CHALLENGES

The Latin American economy may experience a slow
recovery from the COVID-19 pandemic. The ports industry
by nature is sensitive to changes in international trade,
commodity prices and foreign exchange and therefore
prolonged economic recovery could impact Neltume Ports.
There is exposure to certain countries with a higher
possibility of political unrest.

Terminal Pacifico Sur, Valparaíso, Chile

CANADIAN UTILITIES

Canadian 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

BUSINESS DESCRIPTION

The Utilities' business unit's activities consist of four regulated utilities (Electricity Transmission and Distribution, and
Natural Gas Transmission and Distribution) in Alberta, Saskatchewan and northern regions of Canada, that have
delivered reliable electricity and cleaner-burning natural gas to customers for many decades, a regulated natural
gas distribution business in Western Australia, and the newly formed International Electricity Operations business in
Puerto Rico, which includes Canadian Utilities' 50 per cent ownership in LUMA Energy.

BUSINESS STRATEGY

Our strategy is to invest in regulated electricity and natural gas distribution and transmission assets, capitalize on
opportunities to provide long-term contracted electricity and natural gas transmission and distribution services, and
consistently deliver reliable, affordable and cleaner energy for our customers.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 10

MARKET OPPORTUNITIES

The utilities industry is changing with an increased focus on
decarbonization, digitalization, decentralization, and
evolving customer demand. Continuing climate change
concerns, evolving regulations to encourage the
advancement of new technologies, emission reduction
targets, and government incentives present opportunities
for utility companies. Our natural gas and electric utilities
are well positioned to capitalize on these trends. Our
strategic priorities remain focused on investments that
provide lower emissions and cleaner energy solutions for
our customers, while continuing to invest in our core
business.

MARKET CHALLENGES

Traditional utility industry challenges include the
regulator's approval of customer rates that permit a
reasonable opportunity to recover service costs on a timely
basis, including a fair return on invested capital. The
increasing move towards decarbonization, arrival of new
smart-grid technologies, renewable energy generation,
decentralized generation, energy storage and digital
transformation has forced the traditional utility sector to
reinvent itself and adapt to remain competitive. These new
challenges present new policy and technology risks that
could lead to disruption of the Company's existing business
models and create new competitive market dynamics.

Electricity Distribution, Maintenance Work, Alberta

Jasper Interconnection Project, Alberta

Energy Infrastructure

BUSINESS DESCRIPTION

The Energy Infrastructure non-regulated businesses include: hydro, solar and natural gas electricity generation in
western Canada, Australia, Mexico, and Chile, as well as non-regulated electricity transmission, natural gas storage
and transmission, Natural Gas Liquids (NGL) storage, and industrial water services in Alberta.

BUSINESS STRATEGY

Renewable energy, particularly hydro and solar electricity generation, is the key growth platform of our energy
infrastructure business. Cleaner fuels, such as hydrogen, represent another key platform for development that
provides both defensive and offensive opportunities. Additionally, we continue to optimize and drive growth in our
natural gas and liquids storage business.

Greenfield projects will be our preferred driver of value creation as it allows more opportunity to create value by
taking managed risk and leveraging our extensive experience in developing energy infrastructure projects. We will
continue to evaluate smaller scale acquisition opportunities to accelerate growth.

11 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

MARKET OPPORTUNITIES

In developed markets, the political and societal push to
address climate change with decarbonization goals and the
energy transition are driving the demand for cleaner
energy, mainly supplied through renewables. Energy
markets will be focused on providing firm, reliable and
affordable energy supply as the share of renewables
grows; this is likely to drive further investment into storage
and grid balancing solutions to improve system reliability.

MARKET CHALLENGES

There is significant competition as financial, strategic and
traditional fuel-based energy producers become
increasingly interested in the renewables space.
Macroeconomic conditions such as government policy,
slowing global economic activity, and political uncertainty
pose challenges for investment.

Natural gas storage facility, Carbon, Alberta

Hydroelectric power station, Veracruz, Mexico

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 12

PERFORMANCE OVERVIEW

FINANCIAL METRICS

The following chart summarizes key financial metrics associated with our financial performance.

($ millions, except per share data and outstanding shares)

2020

2019

2018

Year Ended
December 31

Key Financial Metrics

Revenues
Adjusted earnings (1)

Structures & Logistics

Neltume Ports

ATCO Corporate & Other

Canadian Utilities Limited

Utilities

Energy Infrastructure

Canadian Utilities Corporate & Other

Adjusted earnings ($ per share) (1)
Earnings attributable to Class I and Class II Shares

Earnings attributable to Class I and Class II Shares ($ per share)

Long-term debt and non-recourse long-term debt

Class I and Class II Share owners' equity

Cash dividends declared per Class I and Class II Share (cents per share)
Funds generated by operations (1)
Capital investment (1)

Other Financial Metrics

Weighted average Class I and Class II Shares outstanding (thousands):

3,944

4,706

4,888

352

—

305

(40)

3.08

252

2.21

365

355

(6)

301

(39)

3.19

513

4.49

275

(39)

3.10

328

2.87

9,619

9,436

10,798

4,052

1.74

1,804

1,069

4,000

3,755

1.62

1,927

1,324

1.51

1,897

2,518

Basic

Diluted

114,396 114,370 114,394

114,713 114,746 114,788

(1) Additional information regarding these measures is provided in the Non-GAAP and Additional GAAP Measures section of this MD&A.

REVENUES

Revenues in 2020 were $3,944 million, $762 million lower than the same period in 2019. Lower revenues were
mainly due to forgone revenue following Canadian Utilities' sale of the Canadian fossil fuel-based electricity
generation business and Alberta PowerLine (APL) in 2019, and the completion of manufacturing work on ATCO
Structures' LNG Canada Cedar Valley Lodge in the second quarter of 2020. Lower revenues were partially offset by
higher global space rental activity in ATCO Structures.

13 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

ADJUSTED EARNINGS

Our adjusted earnings in 2020 were $352 million or $3.08 per share, compared to $365 million or $3.19 per share
for the same period in 2019.

Lower adjusted earnings in 2020 were mainly due to Canadian Utilities' sale of the Canadian fossil fuel-based
electricity generation business and 80 per cent ownership interest in APL in 2019, which together contributed
$45 million in adjusted earnings in 2019.

Excluding the forgone earnings impact from the sale of these businesses in 2019, adjusted earnings in 2020 were
$32 million higher compared to the same period in 2019. Higher earnings were mainly due to ATCO Structures'
higher workforce housing trade sale activity, and higher global space rental activity from growth in the rental fleet
and higher rental rates and utilization across Canada, the US and Australia.

Adjusted Earnings
($ millions)

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 $252 million in 2020, $261 million lower compared to 2019.
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,
significant 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.

In the fourth quarter of 2020, Canadian Utilities signed a Master Services Agreement (MSA) with IBM Canada Ltd.
(IBM) to provide managed information technology services. These services are currently provided by Wipro
Solutions Canada Limited (Wipro) under a ten-year MSA maturing in December 2024. ATCO has recognized costs of
$32 million (after-tax and non-controlling interests), which represents management’s best estimate of the costs to
exit the Wipro MSA. The actual costs are expected to be finalized later in 2021. As these costs are one-time in
nature, they are excluded from 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.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 14

COMMON SHARE DIVIDENDS

Dividends paid to Class I and Class II share owners totaled $200 million in 2020. On January 14, 2021, the Board of
Directors declared a first quarter dividend of 44.83 cents per share.

ATCO SCORECARD

FUNDS GENERATED BY OPERATIONS

Funds generated by operations were $1,804 million in 2020, $123 million lower than in 2019. The decrease was
mainly due to lower funds generated in Canadian Utilities' Energy Infrastructure business as a result of the sale of
APL and the Canadian fossil fuel-based electricity generation business in 2019, and in the Alberta Utilities as a result
of the timing of certain revenues and expenses from regulatory decisions. These amounts were partially offset by
higher funds generated in ATCO Structures due to higher workforce housing trade sale activity and higher space
rental activity in Canada, the US, and Australia.

CAPITAL INVESTMENT

Total capital investment of $1,069 million in 2020 was
$255 million lower than the previous year mainly due to
lower capital investment in the Regulated Utilities in
2020, the completion of construction on Alberta
PowerLine in 2019, and lower capital investment in
Electricity Generation due to the sale of the Canadian
fossil fuel-based electricity generation business in 2019.

Capital spending in Canadian Utilities' Regulated Utilities
accounted for 82 per cent of total capital invested in
2020. The remaining 18 per cent invested in 2020
included capital for ATCO Structures' acquisition of an
additional 50 per cent in ATCO Sabinco S.V. and
expansion of its global rental fleet.

82%

Capital Investment In
2020

Continue to expand

permanent modular

In 2020, ATCO Structures secured several projects with the

Government of British Columbia’s supportive housing program.

products and

construction into hotels,

ATCO Structures completed a $9 Million, 44-unit apartment

services

schools, affordable

complex in Powell River, British Columbia (BC) in the first

housing and seniors' living

quarter. ATCO Structures completed a $9 million, 44-unit

18%

centres.

Regulated Utilities
ATCO Structures & Other

Explore and test new

products and methods of

energy delivery to meet

customers' future needs.

The following scorecard outlines our performance in 2020.

2020 TARGET

2020 PERFORMANCE

STRATEGIC

PRIORITIES

INNOVATION

New and

existing

apartment complex in New Westminster, BC in the third

quarter. ATCO Structures has commenced work on a

$14 million, 61-unit apartment complex in Surrey, BC which is

expected to be completed in June 2021.

ATCO Structures was awarded multiple contracts with the

Victoria Department of Education to design, manufacture and

install 50 permanent modular classrooms in Melbourne,

Australia.

ATCO Espaciomovil delivered two modular health care facilities

in Tijuana and Mexico City in the third quarter to support the

fight against COVID-19.

Canadian Utilities is advancing a first-of-its kind hydrogen

blending project in Fort Saskatchewan, Alberta. Once complete,

the project will be Canada's largest hydrogen blending project.

Canadian Utilities and Fortescue Metals Group Ltd. commenced

research on an opportunity in Australia to refuel vehicles

capable of utilizing hydrogen as the primary fuel source.

Canadian Utilities completed the first 3-MW of solar generation

capacity in Chile on the 9-MW El Resplandor (Cabrero Solar

Project) in the second quarter of 2020.

• Continue to expand the

Canadian Utilities installed a total of 10 electric vehicle (EV)

number of electric vehicle

charging stations in Alberta in 2020. Since 2019, Canadian

charging stations in

Utilities has installed 25 electric vehicle fast charging stations in

Alberta.

15 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 16

ATCO SCORECARD

The following scorecard outlines our performance in 2020.

STRATEGIC
PRIORITIES

2020 TARGET

INNOVATION
INNOVATION
New and
New and
existing
existing
products and
products and
services
services

Continue to expand
Continue to expand
permanent modular
permanent modular
construction into hotels,
construction into hotels,
schools, affordable
schools, affordable
housing and seniors' living
housing and seniors' living
centres.
centres.

Explore and test new
products and methods of
energy delivery to meet
customers' future needs.

2020 PERFORMANCE

In 2020, ATCO Structures secured several projects with the
Government of British Columbia’s supportive housing program.
ATCO Structures completed a $9 Million, 44-unit apartment
complex in Powell River, British Columbia (BC) in the first
quarter. ATCO Structures completed a $9 million, 44-unit
apartment complex in New Westminster, BC in the third
quarter. ATCO Structures has commenced work on a
$14 million, 61-unit apartment complex in Surrey, BC which is
expected to be completed in June 2021.

ATCO Structures was awarded multiple contracts with the
Victoria Department of Education to design, manufacture and
install 50 permanent modular classrooms in Melbourne,
Australia.

ATCO Espaciomovil delivered two modular health care facilities
in Tijuana and Mexico City in the third quarter to support the
fight against COVID-19.

Canadian Utilities is advancing a first-of-its kind hydrogen
Canadian Utilities is advancing a first-of-its kind hydrogen
blending project in Fort Saskatchewan, Alberta. Once complete,
blending project in Fort Saskatchewan, Alberta. Once complete,
the project will be Canada's largest hydrogen blending project.
the project will be Canada's largest hydrogen blending project.

Canadian Utilities and Fortescue Metals Group Ltd. commenced
Canadian Utilities and Fortescue Metals Group Ltd. commenced
research on an opportunity in Australia to refuel vehicles
research on an opportunity in Australia to refuel vehicles
capable of utilizing hydrogen as the primary fuel source.
capable of utilizing hydrogen as the primary fuel source.

Canadian Utilities completed the first 3-MW of solar generation
capacity in Chile on the 9-MW El Resplandor (Cabrero Solar
Project) in the second quarter of 2020.

• Continue to expand the
• Continue to expand the
number of electric vehicle
number of electric vehicle
charging stations in
charging stations in
Alberta.
Alberta.

Canadian Utilities installed a total of 10 electric vehicle (EV)
Canadian Utilities installed a total of 10 electric vehicle (EV)
charging stations in Alberta in 2020. Since 2019, Canadian
charging stations in Alberta in 2020. Since 2019, Canadian
Utilities has installed 25 electric vehicle fast charging stations in
Utilities has installed 25 electric vehicle fast charging stations in
Alberta.
Alberta.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 16

STRATEGIC
STRATEGIC
PRIORITIES
PRIORITIES
New and
New and
existing
existing
products and
products and
services
services

2020 TARGET
2020 TARGET
• Continue to reduce or
• Continue to reduce or
replace diesel
replace diesel
consumption with more
consumption with more
energy efficient solutions
energy efficient solutions
for customers in remote
for customers in remote
communities.
communities.

Demonstrate continuous
improvement of existing
products and services.

2020 PERFORMANCE
Canadian Utilities installed Canada’s largest off-grid 2,800-kW
solar project in partnership with three Alberta Indigenous
Nations in the remote northern Alberta community of Fort
Chipewyan. Diesel consumption in this community has been
reduced by 25 per cent as a result.

Canadian Utilities completed and placed in-service the
Canadian Utilities completed and placed in-service the
$230 million Pembina-Keephills transmission pipeline. The new
$230 million Pembina-Keephills transmission pipeline. The new
line is a critical piece in Alberta's transition away from coal-fired
line is a critical piece in Alberta's transition away from coal-fired
power plants. Connecting into Capital Power's generating
power plants. Connecting into Capital Power's generating
stations at Genesee, this pipeline will be a part of the phase-out
stations at Genesee, this pipeline will be a part of the phase-out
of coal and will help reduce emissions with cleaner-burning
of coal and will help reduce emissions with cleaner-burning
natural gas.
natural gas.

Complete ATCO Park real
Complete ATCO Park real
estate land use
estate land use
amendments to improve
amendments to improve
value and future
value and future
optionality.
optionality.

Significant progress has been made with predevelopment work
for ATCO Park. Calgary City Council approved a land use bylaw
amendment which will allow ATCO to develop a variety of
products including residential, hotel, industrial, retail, research
and development, and office real estate.

GROWTH
GROWTH
Regulated and
Regulated and
long-term
long-term
contracted
contracted
capital
capital
investment
investment

Continue to invest across
our Regulated Utilities and
in long-term contracted
assets.

Global
expansion

Continue expansion into
Continue expansion into
select global markets
select global markets
including: Canada,
including: Canada,
Australia, and Latin
Australia, and Latin
America.
America.

Canadian Utilities invested $876 million in its Regulated Utilities
in 2020.

Canadian Utilities announced the acquisition of the Pioneer
Canadian Utilities announced the acquisition of the Pioneer
Pipeline for $255 million. The 131-km natural gas pipeline
Pipeline for $255 million. The 131-km natural gas pipeline
located west of Edmonton, Alberta, facilitates the conversion of
located west of Edmonton, Alberta, facilitates the conversion of
the Sundance and Keephills coal-fired electricity generating
the Sundance and Keephills coal-fired electricity generating
plants to cleaner-burning natural gas. The transaction is
plants to cleaner-burning natural gas. The transaction is
expected to close in 2021.
expected to close in 2021.

ATCO Structures acquired the remaining 50 per cent interest in
the ATCO Sabinco S.A. joint venture partnership in Chile. The
transaction closed on December 30, 2020.

In June, Canadian Utilities along with its partner, Quanta
Services, Inc., announced their joint ownership interest in newly
formed LUMA Energy. The company was selected by the Puerto
Rico Public-Private Partnerships Authority (P3A) to transform,
modernize and operate Puerto Rico's electricity transmission
and distribution system over a term of 15 years after a
one-year transition period.

Reposition ATCO
Reposition ATCO
Structures' rental fleet into
Structures' rental fleet into
growing regions and
growing regions and
further expand space
further expand space
rental business in selected
rental business in selected
regions.
regions.

ATCO Structures' space rental fleet increased by 2,474 units in
2020 due to strategic expansion in the United States, central
Canada, British Columbia, Mexico and Chile.

ATCO Structures commenced and completed manufacturing
ATCO Structures commenced and completed manufacturing
and construction of two workforce camps to house
and construction of two workforce camps to house
approximately 1,150 persons in total to support the Trans
approximately 1,150 persons in total to support the Trans
Mountain Expansion project.
Mountain Expansion project.

17 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

STRATEGIC
STRATEGIC
PRIORITIES
PRIORITIES
Global
Global
expansion
expansion

2020 TARGET
2020 TARGET
Expand ATCO Frontec's
Expand ATCO Frontec's
North American business
North American business
and diversify the customer
and diversify the customer
base.
base.

2020 PERFORMANCE
ATCO Frontec was awarded two workforce lodging services
contracts for approximately 1,150 persons in total to support
the Trans Mountain Expansion project.

Seek opportunities with
Seek opportunities with
Neltume Ports' available
Neltume Ports' available
cash in brownfield,
cash in brownfield,
greenfield and M&A
greenfield and M&A
opportunities.
opportunities.

Neltume Ports entered into a 50/50 joint venture partnership
Neltume Ports entered into a 50/50 joint venture partnership
with Terminal Zarate in January 2020 to build and operate a
with Terminal Zarate in January 2020 to build and operate a
roll-on roll-off terminal in Mobile, Alabama. Construction of this
roll-on roll-off terminal in Mobile, Alabama. Construction of this
terminal is expected to be complete by the end of the first
terminal is expected to be complete by the end of the first
quarter and in service in the second quarter of 2021.
quarter and in service in the second quarter of 2021.

Increase number of
Increase number of
customers for
customers for
International Natural Gas
International Natural Gas
Distribution in Australia.
Distribution in Australia.

International Natural Gas Distribution added 10,443 new
residential connections in 2020.

FINANCIAL STRENGTH
FINANCIAL STRENGTH
Credit rating
Credit rating

Maintain investment grade
credit rating.

Access to capital
markets

Access capital at attractive
rates.

OPERATIONAL EXCELLENCE
Lost-time
incident
frequency:
employees

Compare favourably to
safety benchmarks.

Total recordable
incident
frequency:
employees

Maintained 'A (low)' long-term credit rating with a stable trend
with DBRS Limited.

Maintained 'A-' long-term issuer credit rating on ATCO and
Maintained 'A-' long-term issuer credit rating on ATCO and
Canadian Utilities with outlooks revised from stable to negative
Canadian Utilities with outlooks revised from stable to negative
in the third quarter of 2020 with Standard & Poors.
in the third quarter of 2020 with Standard & Poors.

In 2020, CU Inc. raised $150 million in 30-year debentures at a
rate of 2.609 per cent, the lowest long-term coupon achieved in
the company’s history.

Our lost-time incident frequency compares favourably to
benchmarks such as Alberta Occupational Health and Safety,
US private industry, and industry best practice rates. Our lost-
time incident frequency in 2020 was 0.22/200,000 hours
worked.

Our total recordable incident frequency in 2020 compares
favourably to benchmarks such as US private industry and
industry best practice rates. Our total recordable incident
frequency in 2020 was 1.58 incidents/200,000 hours worked.

Customer
satisfaction

Achieve high service for
Achieve high service for
the customers and
the customers and
communities we serve.
communities we serve.
Results from customer
Results from customer
satisfaction surveys should
satisfaction surveys should
be consistent with or
be consistent with or
better than prior years.
better than prior years.

Within Electricity and Natural Gas Distribution, more than
Within Electricity and Natural Gas Distribution, more than
96 per cent of customers agreed that Canadian Utilities
96 per cent of customers agreed that Canadian Utilities
provides good service. Within our energy retail operations,
provides good service. Within our energy retail operations,
75 per cent of customers who interact with call centres are
75 per cent of customers who interact with call centres are
"very satisfied". These results compare favourably to industry
"very satisfied". These results compare favourably to industry
averages and are consistent with previous years.
averages and are consistent with previous years.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 18

STRATEGIC
PRIORITIES
Organizational
transformation

2020 TARGET
Streamline and gain
operational efficiencies.

• Improve processes and
increase production
automation for ATCO
Structures' North
American manufacturing
facilities.

• Continue to improve
• Continue to improve
global manufacturing and
global manufacturing and
sourcing strategies to
sourcing strategies to
increase ATCO Structures'
increase ATCO Structures'
manufacturing
manufacturing
competitive advantage.
competitive advantage.

• Continue to optimize
enterprise resource
planning, workforce and
asset management, and
computerized
maintenance
management systems.

COMMUNITY INVOLVEMENT
Indigenous
relations

Continue to work together
Continue to work together
with Indigenous
with Indigenous
communities to contribute
communities to contribute
to economic and social
to economic and social
development in their
development in their
communities.
communities.

STRATEGIC

PRIORITIES

Indigenous

relations

2020 TARGET

2020 PERFORMANCE

Canadian Utilities was awarded a contract in July 2020 with a

Montana First Nation to build a substation to support the

Nation’s 5-MW solar facility currently under construction. In

addition, they have been awarded a contract with the Nation to

provide infrastructure mapping services for their existing

natural gas system.

ATCO was awarded the 2020 International Edison Award for

Alberta PowerLine’s Fort McMurray West 500-kilovolt (kV)

Transmission Project which created a new business model that

exemplified how the electric power industry and Indigenous

Peoples can work together to develop innovative energy

infrastructure that benefits both customers and communities.

ATCO EPIC

(Employees

Continue to administer the

employee-led campaign to

Participating

give employees the

With the combined efforts of our employees around the world,

ATCO pledged more than $2.9 million to support hundreds of

community charities through our annual ATCO EPIC campaign,

in Communities)

opportunity to contribute

taking the program’s cumulative fundraising total to nearly

to charitable organizations

$47 million since its inception in 2006.

in the communities in

which they work.

During the devastating bushfires of Australia, ATCO and its

people donated over $1.1 million to help residents and to

support the rebuilding of the communities impacted by the

fires.

ATCO provided 11,700 meals to seniors who were isolated

during the pandemic.

2020 PERFORMANCE
2020 PERFORMANCE
ATCO Structures completed manufacturing for the LNG Canada
ATCO Structures completed manufacturing for the LNG Canada
Cedar Valley Lodge project in the second quarter of 2020,
Cedar Valley Lodge project in the second quarter of 2020,
ahead of schedule and on budget. Improved production
ahead of schedule and on budget. Improved production
processes and an optimized workforce and asset management
processes and an optimized workforce and asset management
system in the facility provided the tools necessary for
system in the facility provided the tools necessary for
successful project execution. The LNG project is the largest
successful project execution. The LNG project is the largest
workforce camp to be built in ATCO Structures' Canadian
workforce camp to be built in ATCO Structures' Canadian
history.
history.

ATCO Structures streamlined its North American manufacturing
by closing a facility located in Pocatello, Idaho in the second
quarter and relocating materials and equipment to
manufacturing facilities in Calgary, Alberta and Diboll, Texas.

ATCO Structures developed and implemented a manufacturing
planning, process management, and workforce visualization
tool.

Canadian Utilities continued implementation of a Workforce
and Asset Management program for its electricity and natural
gas businesses to advance digitalization and data analytics. This
technology will help to optimize resources, and digitize
information and processes thereby providing a means to track,
manage, and dispatch work to field-based employees more
efficiently. The natural gas business is expected to complete
implementation by 2022, followed by the electricity business in
2023.

ATCO Frontec implemented a computerized maintenance
ATCO Frontec implemented a computerized maintenance
management platform as part of an internal process
management platform as part of an internal process
improvement initiative which has enhanced reporting for
improvement initiative which has enhanced reporting for
management and clients, provided near-real-time analytics and
management and clients, provided near-real-time analytics and
improved overall decision making.
improved overall decision making.

More than 5,000 students from 41 communities in Alberta
More than 5,000 students from 41 communities in Alberta
participated in the Spirit North program. This program is
participated in the Spirit North program. This program is
designed to help Indigenous youth develop skills that improve
designed to help Indigenous youth develop skills that improve
their performance in the classroom and deepen their
their performance in the classroom and deepen their
connection to their communities.
connection to their communities.

$66,000 was awarded to 49 students across Canada, including
the territories, through the ATCO Indigenous Education Awards
Program.

A total of 617 employees participated in one of the many
Indigenous training courses offered in 2020 through virtual
classroom and online training platforms.

19 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 20

STRATEGIC
PRIORITIES
Indigenous
relations

2020 TARGET

ATCO EPIC
(Employees
Participating
in Communities)

Continue to administer the
Continue to administer the
employee-led campaign to
employee-led campaign to
give employees the
give employees the
opportunity to contribute
opportunity to contribute
to charitable organizations
to charitable organizations
in the communities in
in the communities in
which they work.
which they work.

2020 PERFORMANCE
2020 PERFORMANCE
Canadian Utilities was awarded a contract in July 2020 with a
Canadian Utilities was awarded a contract in July 2020 with a
Montana First Nation to build a substation to support the
Montana First Nation to build a substation to support the
Nation’s 5-MW solar facility currently under construction. In
Nation’s 5-MW solar facility currently under construction. In
addition, they have been awarded a contract with the Nation to
addition, they have been awarded a contract with the Nation to
provide infrastructure mapping services for their existing
provide infrastructure mapping services for their existing
natural gas system.
natural gas system.

ATCO was awarded the 2020 International Edison Award for
ATCO was awarded the 2020 International Edison Award for
Alberta PowerLine’s Fort McMurray West 500-kilovolt (kV)
Alberta PowerLine’s Fort McMurray West 500-kilovolt (kV)
Transmission Project which created a new business model that
Transmission Project which created a new business model that
exemplified how the electric power industry and Indigenous
exemplified how the electric power industry and Indigenous
Peoples can work together to develop innovative energy
Peoples can work together to develop innovative energy
infrastructure that benefits both customers and communities.
infrastructure that benefits both customers and communities.

With the combined efforts of our employees around the world,
ATCO pledged more than $2.9 million to support hundreds of
community charities through our annual ATCO EPIC campaign,
taking the program’s cumulative fundraising total to nearly
$47 million since its inception in 2006.

During the devastating bushfires of Australia, ATCO and its
people donated over $1.1 million to help residents and to
support the rebuilding of the communities impacted by the
fires.

ATCO provided 11,700 meals to seniors who were isolated
during the pandemic.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 20

STRATEGIC PRIORITIES FOR 2021

The following table outlines our strategic priorities for 2021.

INNOVATION
INNOVATION
New and existing
New and existing
products and
products and
services
services

Continue to expand ATCO Structures' permanent modular construction into hotels, schools,
hospitals, affordable housing, and senior's living centres.

Complete master planning and land use work on the Edmonton "North Yard" redevelopment site
in ATCO Land and Development Ltd.

Continue to build and enhance ASHCOR's business model for the production and marketing of ash
within the North American market.

Explore and test new products and methods of energy delivery to meet customers' future needs.

•

Continue to support communities and customers through the deployment of cleaner
energy solutions.

•

Explore further opportunities to invest in clean fuel initiatives such as hydrogen and
renewable natural gas within the Utilities and Energy Infrastructure businesses.

GROWTH
GROWTH
Regulated and
Regulated and
long-term
long-term
contracted capital
contracted capital
investment
investment

Continue to strategically invest in Canadian Utilities' technology and the modernization of both the
natural gas and electricity networks to enhance sustainability and flexibility while reducing the long
term need for additional utility infrastructure, resulting in lower costs and an improved experience
for customers.

Continue to advance replacement and improvement projects in Canadian Utilities to ensure that
the safety and reliability of our gas and electricity systems are properly maintained and managed.

Global expansion

Continue expansion into select global markets including North America, Australia and Chile:

•

Reposition ATCO Structures' rental fleet into growing regions and further expand the
space rental business in the US and other select regions.

•

Continue to build sustainable growth in permanent modular construction and space
rentals at ATCO Structures.

•

Continue retrofitting idle workforce housing fleet in Canada and the US and capitalize on
opportunities as they arise. Invest in Australia's workforce housing fleet.

Continue to expand upon ATCO Frontec's North American camp business.

•

Continue to pursue ATCO Frontec facilities and maintenance contracts with commercial
and government clients, including large scale defence contracts.

•

Seek opportunities with Neltume Ports' available cash in brownfield, greenfield and
acquisition opportunities.

•

Continue to build upon Canadian Utilities' existing renewables generation platform in the
Energy Infrastructure business.

21 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

FINANCIAL STRENGTH
FINANCIAL STRENGTH
Credit rating
Credit rating

Maintain investment grade credit rating.

Access to capital
markets

Access capital at attractive rates.

OPERATIONAL EXCELLENCE
OPERATIONAL EXCELLENCE
Lost-time incident
Lost-time incident
frequency:
frequency:
employees
employees

Compare favourably to safety benchmarks.

Total recordable
incident
frequency:
employees

Customer
satisfaction

Achieve high service for the customers and communities we serve. Results from customer
satisfaction surveys should be consistent with or better than prior years.

Organizational
transformation

Streamline and gain operational efficiencies:

•

Continue to develop a strategy for ATCO Structures' manufacturing facilities and
Continue to develop a strategy for ATCO Structures' manufacturing facilities and
capabilities in Canada and the US, to provide better competitive value for the business.
capabilities in Canada and the US, to provide better competitive value for the business.
Reduce costs in production and provide scalable capacity and improved performance
Reduce costs in production and provide scalable capacity and improved performance
while maintaining a low fixed cost structure through peak cycles of activity.
while maintaining a low fixed cost structure through peak cycles of activity.

•

Continue to optimize enterprise resource planning, workforce and asset management,
customer information systems and computerized maintenance management systems
within Canadian Utilities.

COMMUNITY INVOLVEMENT
Indigenous
relations

Continue to work together with Indigenous communities to contribute to economic and social
development in their communities.

ATCO EPIC
(Employees
Participating in
Communities)

Continue to administer the employee-led campaign to give employees the opportunity to
Continue to administer the employee-led campaign to give employees the opportunity to
contribute to charitable organizations in the communities in which they work.
contribute to charitable organizations in the communities in which they work.

Community
investment

Invest in the health and safety of LUMA Energy's people and communities by opening a state-of-
the-art electricity and distribution lineworkers college in Puerto Rico.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 22

CORPORATE GOVERNANCE

Ensuring that our business operates in a transparent, ethical and accountable manner is at the core of creating
strong and sustainable value for our share owners and in promoting the Company's well-being over the long term.

We do not believe in a one-size fits all approach to governance. Our Board of Directors has designed and
implemented a unique and effective system of checks and balances that recognize the need to provide autonomy to
our various business units, while prudently managing our financial resources.

This fit-for-purpose approach to governance has worked exceedingly well over the years, providing our Board of
Directors and senior management team with the foundation to create long-term intergenerational value for our
share owners.

Following are some of the highlights of our model for corporate governance. For a more complete picture, please
see the Governance section of the 2020 Management Proxy Circular, which will be available in April 2021.

From left to right: Michael Rayfield, Denis Ellard, Robert Booth, Charles Wilson, Nancy Southern, Linda Southern-Heathcott, Roger Urwin,
Susan Werth, Robert Routs

Our Board of Directors
The role of our Board of Directors has evolved alongside our business, providing oversight to an organization with a
growing global footprint and a diverse, yet complementary suite of premier products and services. The Board strives
to ensure that its corporate governance practices provide for the effective stewardship of the Company, and it
regularly evaluates these practices to ensure they are in keeping with the highest standards.

Key elements of our corporate governance system include the oversight and diligence provided by the Board, the
Lead Director, the Audit & Risk Committee and our Corporate Governance - Nomination, Compensation and
Succession Committee (GOCOM). Although not required by securities laws, some of our governance tools, such as
the use of Designated Audit Directors (DADs), also reinforce the effectiveness and rigor of our governance model.

Much like our business operations, the strength of our Board of Directors is due in no small part to the diverse
nature of skills, talent and experience each member brings to Board deliberations.

In 1995, ATCO was among the first public companies in Canada to introduce the concept of a Lead Director.
Mr. Charles W. Wilson is the current Lead Director for ATCO, and was appointed to this position on April 1, 2003. The
Lead Director provides the Board with the leadership necessary to ensure independent oversight of management.
The Lead Director is an independent director and must be a member of GOCOM.

Designated Audit Directors

Distinctly unique to ATCO are Designated Audit Directors who are directors of either ATCO or Canadian Utilities.
Each DAD is assigned to one of our business units to provide oversight based on their strengths and experience in
various industry sectors.

Each DAD meets quarterly with the senior leadership of their business unit, and holds annual meetings with internal
and external auditors. In addition, they review their respective businesses' financial statements and operating
results, discuss risks with management, and report on both operating results and risks to our Audit & Risk
Committee.

23 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

BUSINESS UNIT PERFORMANCE

REVENUES

Structures & Logistics revenues of $171 million in the fourth quarter of 2020 were $74 million lower than the same
period in 2019 mainly due to the completion of manufacturing work on ATCO Structures' LNG Canada Cedar Valley
Lodge project in the second quarter of 2020.

Structures & Logistics revenues of $714 million in 2020 were $89 million lower than the same period in 2019 mainly
due to the completion of the manufacturing work on ATCO Structures' LNG Canada Cedar Valley Lodge project in
the second quarter of 2020, and the completion of ATCO Frontec contracts in late 2019 and early 2020. Lower
revenues were partially offset by higher space rental activity in Canada, the US, and Australia.

ADJUSTED EARNINGS

($ millions)

ATCO Structures

ATCO Frontec

Total Structures & Logistics

Three Months Ended
December 31

Year Ended
December 31

2020

2019

Change

2020

2019

Change

—

Structures & Logistics adjusted earnings of $17 million in the fourth quarter of 2020 were $3 million higher
compared to the same period in 2019. Higher earnings were mainly due to additional ATCO Frontec client work
requests at existing contract sites for COVID-19 proactive and preventative safety measures.

Structures & Logistics adjusted earnings of $57 million in the full year of 2020 were $20 million higher than the same
period in 2019. Higher earnings were mainly due to higher workforce housing trade sale activity and higher space
rental activity in Canada, the US and Australia. Higher earnings were partially offset by lower contributions from
ATCO Structures' LNG Canada Cedar Valley Lodge project with the transition from manufacturing to installation
work in the second quarter of 2020.

Detailed information about the activities and financial results of the Structures & Logistics businesses is provided in
the following sections.

ATCO STRUCTURES

ATCO Structures manufactures, sells and leases transportable workforce, 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 adjusted earnings of $13 million in the fourth quarter of 2020 were comparable to the same period
in 2019.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 24

ATCO Structures recorded adjusted earnings of $52 million in 2020, $20 million higher than the same period in
2019. Higher earnings were mainly due to higher workforce housing trade sale activity and higher space rental
activity in Canada, the US, and Australia. Higher earnings were partially offset by lower contributions from the LNG
Canada Cedar Valley Lodge project with the transition from manufacturing to installation work in the second
quarter of 2020.

The following table compares ATCO Structures' manufacturing hours and rental fleet for the fourth quarter and full
year of 2020 and 2019.

Three Months Ended
December 31

Year Ended
December 31

2020

2019

Change

2020

2019

Change

North America

Manufacturing hours (thousands)

252

(64%)

718

988

(27%)

Global Space Rentals
Number of units (1)
Average utilization (%)

Average rental rate ($ per month)

Global Workforce Housing
Number of units (1)
Average utilization (%)

18,827 16,353

15% 18,827 16,353

617

605

615

568

2,679

2,866

(7%)

2,679

2,866

15%

(7%)

Average rental rate ($ per month)

1,672

1,882

(11%)

1,554

1,872

(17%)

(1) Includes the acquisition of the remaining 50 per cent interest in ATCO Structures' joint venture partnership of ATCO Sabinco S.A., completed on
December 30, 2020, which resulted in an increase of 1,776 global space rental units and 18 workforce housing units.

The decrease in manufacturing hours in the fourth quarter and full year of 2020 was mainly due to the completion
of manufacturing on the LNG Canada Cedar Valley Lodge project in the second quarter.

ATCO Structures increased its global space rental fleet size by 2,474 units year-over-year. The increase in the
number of space rental units was mainly due to the continued strategic expansion of the space rental fleet in
targeted geographies including the acquisition of the remaining 50 per cent interest in ATCO Structures' joint
venture partnership of ATCO Sabinco S.A., completed on December 30, 2020. In addition, ATCO Structures has
experienced an increase in demand for space rentals on construction sites as a result of physical distancing
protocols in response to the COVID-19 pandemic. The increase in the average rental rate was mainly due to
improved rates in North America and Australia, driven by increased activity in the construction sector and an
enhanced product mix.

The decrease in the size of the workforce housing fleet and increase in the annual utilization was mainly due to the
sale of used and non-utilized fleet assets in the US and Australia. The increase in the utilization rate was also due to
workforce housing fleet on rent for the Trans Mountain Expansion project in BC. The decrease in the average rental
rate in 2020 was mainly due to the demobilization of a large workforce housing rental project in Chico, California in
the first quarter of 2020.

ATCO STRUCTURES RECENT DEVELOPMENTS

Canada

Cedar Valley Lodge - LNG Canada

ATCO Structures, through its joint venture with Bird Construction and the Haisla Nation, continued work on the LNG
Canada Cedar Valley Lodge project in 2020. The facility is being built to house workers involved in the construction
of LNG Canada’s natural gas liquefaction and export facility in Kitimat, BC and is one of the largest accommodation
facilities ever built in Canada. Manufacturing of the modules for the accommodation facility was completed in the
second quarter of 2020 and installation activity will continue into 2021.

25 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

Trans Mountain Expansion Project

ATCO Structures commenced manufacturing and construction in the second quarter of 2020 on the first of two
workforce housing camp rental contracts awarded in 2020. The camps will accommodate approximately
1,150 persons in total to support the construction of the Trans Mountain Expansion project. In the third quarter,
ATCO Structures completed and handed over the first camp and repurposed existing fleet to supply the second
camp, which was completed and handed over to the client in the fourth quarter of 2020. Rental contracts for both
camps will continue through 2023.

Trans Mountain Expansion Project Camp, Valemount, British Columbia

BC Hydro Site C Two Rivers Lodge – Phase 2 Expansion

In 2016, ATCO Structures commenced a supply and installation contract at the BC Hydro Site C Two Rivers Lodge for
up to 1,750 workers.

In the second quarter of 2020, ATCO Structures achieved substantial completion and project handover of the phase
2 expansion and increased the total lodge capacity to 2,194 workers.

BC Housing - Government of British Columbia

During 2019 and 2020, ATCO Structures secured several projects with the Government of British Columbia’s
supportive housing program. The housing projects provide affordable housing to low income individuals and
families across the province. In the first quarter of 2020, ATCO Structures completed a $9 million, 44-unit apartment
complex in Powell River, BC. In the third quarter of 2020, ATCO Structures completed a $9 million, 44-unit apartment
complex in New Westminster, BC. Site work and manufacturing commenced on an additional 61-unit apartment
complex in Surrey, BC in the third quarter of 2020. The $14 million contract is expected to be handed over to BC
Housing in the second quarter of 2021.

Canada Emergency Wage Subsidy (CEWS)

The Government of Canada introduced the Canada Emergency Wage Subsidy (CEWS) program in April 2020 to
provide financial support to businesses that experienced revenue loss in 2020 attributed to the COVID-19 pandemic.

ATCO Structures & Logistics qualified for this program and recognized $5 million in adjusted earnings in the fourth
quarter related to costs incurred in 2020. These funds were used to retain contract employees for a longer duration
due to project delays resulting from the evolving pandemic, to offset additional costs incurred to implement
appropriate safety protocols, and to continue to compensate employees that could not report to work due to
COVID-19 or government mandated quarantine restrictions.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 26

United States

China Lake Military Rebuild - Environmental Chemical Corporation

In the fourth quarter of 2020, ATCO Structures was awarded a $12 million contract for phase I of the China Lake
Military Rebuild project. The project will support the rebuild and expansion of the China Lake Military Base in
southern California. The military base was damaged by two major earthquakes in July 2019. The 450-person camp
for phase I will remain on rent for 31 months and is expected to commence in the first quarter of 2021.

Disaster and Emergency Response

In 2020, ATCO Structures responded to inquiries from customers who were looking for potential solutions to the
COVID-19 pandemic to assist in the prevention of the spread of the virus. In March and April 2020, ATCO Structures
signed three short-term rental contracts to supply 630 beds in Nevada, Louisiana and Texas to support the fight
against COVID-19.

In the third quarter of 2020, ATCO Structures deployed and mobilized modular housing units with a total of
2,000 beds across Louisiana and Alabama within six days of Hurricanes Laura and Sally. In response to Hurricane
Laura, ATCO Structures mobilized a 1,200-person rental camp and completed the sale of a 300-person camp.
Additionally, in September, two 250-person rental camps were deployed in response to Hurricane Sally.

Pocatello Idaho Manufacturing Facility

In the second quarter of 2020, ATCO Structures closed its manufacturing facility located in Pocatello, Idaho,
relocated materials and equipment to its manufacturing facilities in Calgary, Alberta, and Diboll, Texas, and
recorded $3 million in one-time closure costs.

Australia

Permanent Classrooms - Victoria Department of Education
In the first half of 2020, ATCO Structures was awarded multiple contracts with the Victoria Department of Education
to design, manufacture and install 50 permanent modular classrooms in Melbourne, Australia. Installation work for
30 classrooms was completed in 2020 and the remaining classrooms are expected to be complete in early 2021.

Permanent Classrooms - Islamic College of Melbourne

During the fourth quarter of 2020, installation activity commenced for an eight-year contract with the Islamic
College of Melbourne. Manufacturing at ATCO Structures' Brisbane facility in Queensland commenced in the third
quarter of 2020 and installation is expected to be complete in the first quarter of 2021.

Islamic College of Melbourne, Melbourne, Victoria, Australia

27 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

Bay Village - Multiplex

In the third quarter of 2020, ATCO Structures completed construction on the 604-person accommodation "Bay
Village" for Multiplex in Karratha, Western Australia.

Mexico & Central America

Health Care Complexes - United Nations Office for Project Services (UNOPS)

In the fourth quarter of 2020, ATCO Structures commenced work on the previously awarded $12 million contract
with the United Nations Office for Project Services (UNOPS) to supply two healthcare complexes in Guatemala with
7,400 m2 of clinic space for the treatment of patients with COVID-19. The facility will be complete in 2021.

Peñasquito Mine Camp - Newmont Corporation

In the fourth quarter of 2020, ATCO Structures was awarded a $13 million contract with Newmont Corporation to
supply a 600-person camp to house workers at the Peñasquito Mine in the state of Zacatecas, Mexico. The camp is
expected to be complete in the fourth quarter of 2021.

Instituto Mexicano del Seguro Social (IMSS) - Grupo Modelo

In the second quarter of 2020, ATCO Structures was awarded a design, supply and installation contract for two
modular hospital facilities in Mexico City and Tijuana to support the fight against COVID-19. These two facilities were
installed in the third quarter of 2020.

Chile

ATCO Sabinco S.A. Acquisition

In the fourth quarter of 2020, ATCO Structures acquired the remaining 50 per cent interest in its ATCO Sabinco S.A.
joint venture partnership. With this strategic investment, ATCO Structures gained full ownership and control of its
Chilean business. This acquisition included a large-scale modular manufacturing facility in Santiago, Chile,
1,776 additional space rental units at 81 per cent utilization, and capabilities to deliver workforce housing projects
throughout South America. The transaction closed on December 30, 2020.

ATCO 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 adjusted earnings of $4 million in the fourth quarter of 2020 were $3 million higher than the same
period in 2019 mainly due to additional client work requests at existing contract sites for COVID-19 proactive and
preventative safety measures.

ATCO Frontec adjusted earnings of $5 million in the full year of 2020 were comparable to the same period in 2019.

ATCO FRONTEC RECENT DEVELOPMENTS

Canada

Trans Mountain Expansion Project

In the second and third quarters of 2020, ATCO Frontec was awarded two workforce lodging services contracts for
approximately 1,150 persons in total to support the construction of the Trans Mountain Expansion project. Work
commenced for both contracts in the third and fourth quarters of 2020 and will continue through 2023.

United States

China Lake Military Rebuild

In the fourth quarter of 2020, ATCO Frontec was awarded a 31-month workforce lodging services contract for
approximately 450 persons to support the phase I rebuild of the China Lake Military Base. The contract is expected
to commence in the first quarter of 2021.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 28

Neltume Ports is a port operator and developer with a diversified portfolio of 16 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, and Brazil.

ADJUSTED EARNINGS

($ millions)

Neltume Ports

Three Months Ended
December 31

Year Ended
December 31

2020

2019

Change

2020

2019

Change

—

Neltume Ports adjusted earnings of $7 million in the fourth quarter were $3 million higher than the same period in
2019. Higher earnings were mainly due to the timing of certain revenues and expenses, and higher cargo volumes
and margins at select ports.

Neltume Ports adjusted earnings of $15 million in the full year of 2020 were comparable to the same period in 2019.

While all of Neltume Ports' terminals remained operational in 2020, Neltume experienced lower volume throughput
at some terminals due to the effects of the COVID‑19 pandemic on global trade activity. These impacts were largely
offset by stronger operational performance at unaffected terminals elsewhere in the portfolio.

Recent Developments

In January 2020, Neltume Ports entered into a 50/50 joint venture partnership with Terminal Zarate
to build and operate a roll-on roll-off (RoRo) terminal in Mobile, Alabama. The JV will invest 30 per cent of
construction costs. Neltume Ports' portion of the investment will be approximately US $9 million and will be funded
with existing cash reserves. The Alabama State Port Authority will provide the remaining capital funding. The JV will
operate the terminal beginning in 2021 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 support the import and export
needs of the growing local automotive sector in the region. Construction of this terminal is expected to be
substantially complete by the end of the first quarter and in service in the second quarter of 2021.

Construction Site of RoRo terminal, Mobile, Alabama

29 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

ATCO 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, an Alberta-based 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

($ millions)

2020

2019

Change

2020

2019

Change

ATCO Corporate & Other

—

(9)

—

(6)

Three Months Ended
December 31

Year Ended
December 31

ATCO Corporate & Other adjusted earnings in the fourth quarter and full year of 2020 were $9 million and
$6 million higher compared to the same periods in 2019. Higher earnings were mainly due to the timing of certain
expenses, lower share-based compensation expenses, and earnings contributions from ASHCOR.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 30

UTILITIES

REVENUES

Utilities revenues of $784 million and $2,932 million in the fourth quarter and full year of 2020 were $33 million and
$24 million lower than the same periods in 2019. Lower revenues were mainly due to the timing of settlements
related to regulatory decisions, and the transition to APL operating activities by Electricity Transmission with the
completion of project management construction activities in 2019, partially offset by increased revenue from
Canadian Utilities' 50 per cent joint venture ownership in LUMA Energy and growth in the regulated rate base.

ADJUSTED EARNINGS

($ millions)

Electricity

Electricity Distribution

Electricity Transmission

International Electricity Operations

Total Electricity

Natural Gas

Natural Gas Distribution

Natural Gas Transmission

International Natural Gas Distribution

Total Natural Gas

Total Utilities Adjusted Earnings

Three Months Ended
December 31

Year Ended
December 31

2020

2019

Change

2020

2019

Change

102

—

(5)

(4)

106

—

166

172

139

305

129

301

(15)

(6)

(12)

Utilities adjusted earnings of $102 million and $305 million in the fourth quarter and full year of 2020 were
$10 million and $4 million higher than the same periods in 2019. Higher earnings were mainly due to cost
efficiencies, rate base growth, and contributions in International Electricity Operations from Canadian Utilities'
50 per cent joint venture ownership in LUMA Energy. Higher earnings were partially offset by the adverse earnings
impact of the five-year Access Arrangement and adjustment for the impact of forecasted inflation rates in
International Natural Gas Distribution, and Electricity Transmission's transition to APL operating activities in 2019.

Detailed information about the activities and financial results of the Utilities business segments is provided in the
following sections.

31 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

Electricity Distribution
Electricity Distribution provides regulated electricity distribution and distributed generation mainly in northern and
central east Alberta, the Yukon, the Northwest Territories and in the Lloydminster area of Saskatchewan.

Electricity Distribution adjusted earnings of $20 million and $69 million in the fourth quarter and full year of 2020
were $4 million and $3 million higher compared to the same periods in 2019. Higher earnings were mainly due to
cost efficiencies and continued growth in rate base. Higher earnings were partially offset by the completion of the
Efficiency Carry-over Mechanism (ECM) funding in 2019.

Electricity Transmission

Electricity Transmission provides regulated electricity transmission mainly in northern and central east Alberta, and
in the Lloydminster area of Saskatchewan. Electricity Transmission was the construction project manager for APL
and is the operator under a 35-year contract.

Electricity Transmission adjusted earnings of $22 million in the fourth quarter of 2020 were $5 million lower than
the same period in 2019. Lower earnings were mainly due to the transition to APL operating activities by Electricity
Transmission with the completion of project management construction activities in 2019, and the timing of certain
costs.

Electricity Transmission adjusted earnings of $91 million in the full year of 2020 were $15 million lower than the
same period in 2019. Lower earnings were mainly due to the transition to APL operating activities by Electricity
Transmission with the completion of project management construction activities in 2019, and the positive earnings
impact of the Electricity Transmission 2018-2019 General Tariff Application (GTA) decision received in 2019.

International Electricity Operations

International Electricity Operations includes Canadian Utilities' 50 per cent ownership in LUMA Energy, a company
formed to transform, modernize and operate Puerto Rico's 30,000-km electricity transmission and distribution
system under an Operations and Maintenance Agreement with the Puerto Rico Public-Private Partnerships
Authority for a 15-year term after a one-year transition period which commenced on June 22, 2020.

International Electricity Operations adjusted earnings in the fourth quarter and full year of 2020 were $3 million and
$6 million due to operations and maintenance transition work.

Natural Gas Distribution

Natural Gas Distribution serves municipal, residential, commercial and industrial customers throughout Alberta and
in the Lloydminster area of Saskatchewan.

Natural Gas Distribution adjusted earnings of $41 million and $76 million in the fourth quarter and full year of 2020
were $9 million and $14 million higher than the same periods in 2019. Higher earnings were mainly due to ongoing
cost efficiencies, the timing of certain operating costs, and growth in the regulated rate base. Higher earnings were
partially offset by the completion of ECM funding in 2019.

Natural Gas Transmission

Natural Gas Transmission receives natural gas on its pipeline system from various gas processing plants as well as
from other natural gas transmission systems and transports it to end users within the province of Alberta or to
other pipeline systems.

Natural Gas Transmission adjusted earnings of $12 million and $47 million in the fourth quarter and full year of
2020 were $3 million and $8 million higher than the same periods in 2019. Higher adjusted earnings were mainly
due to growth in the regulated rate base, and ongoing cost efficiencies.

International Natural Gas Distribution

International Natural Gas Distribution is a regulated provider of natural gas distribution services in Western
Australia, serving metropolitan Perth and surrounding regions.

International Natural Gas Distribution adjusted earnings of $4 million and $16 million in the fourth quarter and full
year of 2020 were $4 million and $12 million lower compared to the same periods in 2019. Lower earnings were
mainly due to the five-year Access Arrangement which resulted in new rates commencing on January 1, 2020, with a

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 32

lower rate of return and rebasing of the demand forecast, financing, and operating allowances. Lower earnings
were also due to an adjustment for the impact of forecasted inflation rates, partially offset by higher earnings from
cost efficiencies and interest savings which became effective in January 2020.

UTILITIES RECENT DEVELOPMENTS

International Electricity Operations

LUMA Energy

On June 22, 2020, LUMA Energy, a newly-formed company owned 50 per cent by Canadian Utilities and 50 per cent
by Quanta Services, Inc., was selected by the P3A to transform, modernize and operate Puerto Rico’s 30,000-km
electricity transmission and distribution system over a term of 15 years after a one-year transition period. The
transition period commenced in the second quarter of 2020.

This innovative arrangement allows the Puerto Rico Electric Power Authority to retain ownership of all utility assets
while benefiting from the expertise of a qualified operator. LUMA Energy combines Canadian Utilities' world-class
utility operations and customer service expertise with Quanta’s superior utility services and project execution
capabilities.

LUMA Energy, Canóvanas, Puerto Rico

Key financial terms associated with the LUMA Energy contract are highlighted in the table below.

USD (millions)

Transition Period

Contract Year 1

Contract Year 2

Contract Year 3

Contract Year 4+

Front-End Service Fee (1)

Fixed Fee (1) (2)
(paid monthly)

Potential
Incentive Fee (1) (2)

100

105

(1) All compensation figures above are at the LUMA Energy level. Canadian Utilities Limited holds a 50 per cent interest in LUMA Energy.
(2) Fixed Fee and Incentive Fee are escalated annually at US CPI.

33 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

Natural Gas Transmission

Pembina Keephills

In the second quarter of 2020, Natural Gas Transmission completed and placed in-service the $230 million
Pembina-Keephills transmission pipeline. The 59-km high-pressure natural gas pipeline supports coal-to-gas
conversion of power producers in the Genesee and surrounding areas of Alberta with the capacity to deliver up to
550-TJ per day.

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. (Tidewater) and its partner TransAlta Corporation (TransAlta) for a
purchase price of $255 million. The 131-km natural gas pipeline runs from the Drayton Valley area to the Wabamun
area west of Edmonton, Alberta.

This agreement replaces the previously announced Tidewater and TransAlta purchase and sale agreement to sell
the Pioneer Pipeline to NOVA Gas Transmission Ltd. (NGTL) and is under substantially similar terms.

NGTL and Natural Gas Transmission agreed that, consistent with the geographic areas defined in their Integration
Agreement, Natural Gas Transmission would transfer to NGTL the 30-km segment of the Pioneer Pipeline located in
the NGTL footprint for approximately $63 million. Natural Gas Transmission will retain ownership and continue to
operate the portion of the Pioneer Pipeline located in the Natural Gas Transmission footprint. Upon completion of
this transfer, and some additional investment to connect the pipeline to the existing system, the Pioneer Pipeline
acquisition will add a net $200 million to the Natural Gas Transmission asset base.

The transactions are subject to customary conditions including regulatory approvals by the AUC and the Alberta
Energy Regulator, which are expected in the second quarter of 2021.

Following the close of the transaction, the Pioneer Pipeline will be integrated into NGTL's and ATCO's Alberta
integrated regulated natural gas transmission systems to provide reliable natural gas supply to TransAlta's power
generating units at Sundance and Keephills, facilitating the conversion of these coal plants to cleaner-burning
natural gas.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 34

UTILITIES REGULATORY DEVELOPMENTS

Regulated Business Models

The business operations of Electricity Distribution, Electricity Transmission, Natural Gas Distribution and Natural
Gas Transmission are regulated mainly by the Alberta Utilities Commission (AUC). The AUC administers acts and
regulations covering such matters as rates, financing and service area.

Natural Gas Transmission and Electricity Transmission operate under cost of service (COS) regulation. Under this
model, the regulator establishes the revenues to provide for a fair return on utility investment using mid-year
calculations of the total investment less depreciation, otherwise known as mid-year rate base. Growth in mid-year
rate base is a leading indicator of the business' earnings trend, depending on changes in the approved equity
component of the mid-year rate base and the rate of return on common equity.

Natural Gas Distribution and Electricity Distribution operate under performance based regulation (PBR). Under PBR,
revenue is determined by a formula that adjusts customer rates for inflation less an estimated amount for
productivity improvements. The AUC reviews the utilities' results annually to ensure the rate of return on common
equity is within certain upper and lower boundaries. To do these calculations, the AUC uses mid-year rate base. For
this reason, growth in mid-year rate base can be a leading indicator of the business' earnings trend, depending on
the ability of the business to maintain costs based on approved going-in rates and on the formula that adjusts rates
for inflation and productivity improvements.

International Natural Gas Distribution is regulated mainly by the Economic Regulation Authority (ERA) of Western
Australia. International Natural Gas Distribution operates under incentive based regulation (IBR) under which the
ERA establishes the prices for a five-year period to recover a return on forecasted rate base, including income taxes,
depreciation on the forecasted rate base, and forecasted operating costs based on forecasted throughput. For this
reason, growth in mid-year rate base can be a leading indicator of the business' earnings trend, depending on the
ability of the business to maintain costs within approved forecasts.

Generic Cost of Capital Proceeding (GCOC)

In August 2018, the AUC issued a decision approving a Return on Equity (ROE) of 8.5 per cent and capital structure
of 37 per cent equity for the 2018, 2019 and 2020 periods for all Alberta utilities. In December 2019, the AUC
initiated the 2021 GCOC proceeding. The main focus of the proceeding was to determine the rate of return for the
years 2021 and 2022, and provide consideration for returning to a formula-based approach. Initial evidence was
filed in January 2020 focusing on comparability to other investments, capital attraction and financial integrity. On
October 13, 2020, the AUC issued a decision approving the extension of the current ROE of 8.5 per cent and capital
structure of 37 per cent equity on a final basis for 2021. The AUC commenced a new GCOC process in December
2020 to address ROE and equity thickness for 2022 and beyond.

Performance Based Regulation

Under the 2018 to 2022 second generation PBR framework, electricity and natural gas distribution utility rates are
adjusted by a formula that estimates annual inflation and assumes productivity improvements.

In February 2018, the AUC released a regulatory decision that provided determinations for the going-in rates and
incremental capital funding for the second generation of PBR. While subsequent proceedings have occurred to
review the setting of going-in rates, none of these proceedings have resulted in any changes for our Electricity
Distribution and Natural Gas Distribution rates.

35 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

Timeframe

2018 to 2022

PBR Second Generation

Inflation Adjuster (I Factor)

Inflation indices (AWE and CPI) adjusted annually

Productivity Adjuster (X Factor) 0.30%

O&M

Treatment of Capital Costs

ROE Used for Going-in Rates

Efficiency Carry-over
Mechanism (ECM)

Reopener

ROE Used for Reopener
Calculation

Based on the lowest annual actual O&M level during 2013-2016, adjusted for
inflation, growth and productivity to 2017 dollars; inflated by I-X thereafter over the
PBR term
• Recovered through going-in rates inflated by I-X and a K Bar that is based on

inflation adjusted average historical capital costs for the period 2013-2016. The
K Bar is calculated annually and adjusted for the actual WACC

• Significant capital costs that are extraordinary, not previously incurred and

required by a third party recovered through a “Type I” K Factor

• 8.5%
• + 0.5% ROE ECM achieved from PBR First Generation added to 2018 and 2019

ECM up to 0.5% additional ROE for the years 2023 and 2024 based on certain criteria

+/- 300 bps of the approved ROE for two consecutive years or +/- 500 bps of the
approved ROE for any single year

• 2018: 8.5% excluding impact of ECM
• 2019: 8.5% excluding impact of ECM
• 2020: 8.5%
• 2021: 8.5%
• 2022: ROE pending future GCOC proceeding decisions

Access Arrangement - International Natural Gas Distribution

International Natural Gas Distribution's Access Arrangement period (AA4) was in place from July 2014 to December
2019. On November 15, 2019 the ERA published its final rate of return guidelines which outlined the parameters for
the weighted average cost of capital (WACC) applicable to AA5.

The AA5 ROE is 5.02 per cent compared to 7.21 per cent in the previous Access Arrangement. The final decision also
includes rebasing of revenues for the recovery of operating costs, the approved capital expenditure program, and
the forecast of demand and throughput. The common equity ratio for AA5 is 45 per cent compared to 40 per cent in
the previous Access Arrangement.

The tariffs included in the AA5 final decision are applicable for the period January 1, 2020 to December 31, 2024.

ALBERTA REGULATORY UPDATES

COMMON MATTERS

2021 Interim Rate Relief Request

In December 2020, the AUC approved the Electricity Distribution and Natural Gas Distribution requests to defer the
compulsory distribution rate increases which would normally come into effect on January 1, 2021 for both
businesses. The rate relief was requested to defer significant distribution rate increases which would be passed
onto end use customers due to the formulaic approach of rate calculations under the AUC PBR mechanism.
Electricity Distribution and Natural Gas Distribution cited the current economic situation in Alberta, including the
hardships faced by some end use customers due to the COVID-19 pandemic, as rationale to proceed with these
interim rates. Electricity Distribution and Natural Gas Distribution are to file an application by March 1, 2021,
outlining the duration of the rate freeze and collection timelines, expected deferral values including carrying costs
and anticipated impacts to customers.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 36

ELECTRICITY TRANSMISSION

2020-2022 GENERAL TARIFF APPLICATION (GTA)

In October 2019, Electricity Transmission filed a GTA for the period 2020-2022. The application also requests the

ability to advance an application to establish 2023 and 2024 revenue requirements by escalating the 2022 approved

revenue requirement. This proceeding has concluded, and a decision is expected in the first quarter of 2021.

2015-2017 Direct Assigned Projects Deferral Application

In November 2020, Electricity Transmission received a decision regarding its 2019 application for the disposal of its
2015-2017 transmission deferral accounts and annual filing adjustment balances. Electricity Transmission's
application included capital additions for 27 projects, most notably the Eastern Alberta Transmission Line (EATL),
which represented $1.8 billion of the $2.2 billion of capital additions in this proceeding. The AUC approved the
$2.2 billion in capital additions to be added to rate base with minimal disallowance.

NATURAL GAS TRANSMISSION

Natural Gas Transmission 2021-2023 General Rate Application (GRA)

In June 2020, Natural Gas Transmission filed a GRA for the period 2021-2023. The application requests, among other
things, additional revenues due to rate base growth driven by capital expenditures, such as the Pembina-Keephills
Pipeline project and operations and maintenance costs. A decision from the AUC is expected in the first quarter of
2021.

37 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

ENERGY INFRASTRUCTURE

REVENUES

Energy Infrastructure revenues of $59 million in the fourth quarter were $34 million lower than the same period in
2019 mainly due to the sale of Alberta PowerLine in the fourth quarter of 2019.

Energy Infrastructure revenues of $195 million in the full year of 2020 were $661 million lower than the same period
in 2019 mainly due to the sale of the Canadian fossil fuel-based electricity generation business and Alberta
PowerLine in 2019.

ADJUSTED EARNINGS

Three Months Ended
December 31

Year Ended
December 31

($ millions)

2020

2019

Change

2020

2019

Change

Electricity Generation

Storage & Industrial Water

Adjusted Earnings from Businesses Sold in 2019

Canadian Fossil Fuel-Based Electricity Generation

Alberta PowerLine (APL)

Total Energy Infrastructure Adjusted Earnings

—

(1)

—

(32)

(13)

(45)

(42)

Energy Infrastructure adjusted earnings of $7 million and $15 million in the fourth quarter and full year of 2020
were $1 million and $42 million lower than the same periods in 2019 mainly due to the sale of the Canadian fossil
fuel-based electricity generation business in the third quarter of 2019 and sale of APL in the fourth quarter of 2019.

Excluding the earnings impact for the sale of these businesses in 2019, adjusted earnings in the fourth quarter
were comparable to the same period in 2019.

Excluding the earnings impact from the sale of these businesses in 2019, adjusted earnings for the full year of 2020
were $3 million higher than the same period in 2019 mainly due to cost efficiencies and recovered business
development costs.

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 hydroelectric, solar and natural gas generating plants in
western Canada, Australia, Mexico and Chile and non-regulated electricity transmission in Alberta.

Electricity Generation adjusted earnings of $2 million in the fourth quarter of 2020 were comparable to the same
period in 2019.

Electricity Generation adjusted earnings of $7 million in the full year of 2020 were $3 million higher than the same
period in 2019. Higher earnings were mainly due to cost efficiencies and recovered business development costs.

Storage & Industrial Water

Storage & Industrial Water provides non-regulated natural gas storage and transmission activities, NGL storage, and
industrial water services in Alberta and the North West Territories.

Storage & Industrial Water adjusted earnings of $5 million and $8 million in the fourth quarter and full year of 2020
were comparable to the same periods in 2019.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 38

ENERGY INFRASTRUCTURE RECENT DEVELOPMENTS

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, will provide
solar energy to the Chilean electricity grid. Construction on the first 3-MW of solar generation capacity was
completed at the end of the second quarter of 2020 with the next 6-MW expected to be complete in 2021. The total
investment for the 9-MW project is approximately $13 million.

El Resplandor Solar Project, Cabrero, Chile

La Laguna Cogeneration Facility

In March 2018, Canadian Utilities entered into a commercial agreement with Chemours to build a 26-MW
cogeneration facility, known as La Laguna Cogeneration, on the site of the Chemours Company Mexicana S. de R.L.
de C.V.'s chemical facility near Gómez Palacio, Mexico.

Developed in partnership with RANMAN Energy, the La Laguna Cogeneration facility was expected to provide
low-carbon and cost-effective heat and electricity under a long-term agreement. The total investment associated
with the project was expected to be $70 million. In February 2021, due to ongoing construction permitting delays,
Canadian Utilities and Chemours mutually agreed to terminate the La Laguna Cogeneration facility contract. The
contract provides for the recovery of Canadian Utilities' incurred costs on the project.

Industrial Water

In the fourth quarter of 2017, Canadian Utilities entered into a long-term commercial agreement with Inter Pipeline
Ltd. to provide water services to Inter Pipeline's integrated propane dehydrogenation and polypropylene plant
known as the Heartland Petrochemical Complex. Construction activities commenced in 2019 and construction of the
pipeline is now complete. The pipeline is expected to be in service by the second quarter of 2021 in coordination
with Inter Pipeline’s facility needs.

Natural Gas Liquids Storage

In the fourth quarter of 2019, Canadian Utilities secured a long-term contract for the construction and operation of
a fifth storage cavern at the ATCO Heartland Energy Centre, near Fort Saskatchewan, Alberta. This cavern will store
hydrocarbon products for customers in the Alberta Industrial Heartland. Canadian Utilities also secured a long-term
transportation contract for the construction and operation of a regional pipeline to connect the new cavern to
existing facilities in the area, further strengthening the ATCO Heartland Energy Centre as a key storage hub in the
largest hydrocarbon processing region in Canada. Construction began in the fourth quarter of 2019, with
construction on track to be completed by the end of 2021.

39 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

CANADIAN UTILITIES CORPORATE & OTHER

Canadian Utilities' Corporate & Other segment includes 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. In addition, Canadian Utilities Corporate & Other includes CU Inc. and Canadian Utilities
preferred share dividend and debt expenses.

ADJUSTED EARNINGS

($ millions)

2020

2019

Change

2020

2019

Change

Canadian Utilities Corporate & Other

(11)

(8)

(3)

(40)

(39)

(1)

Three Months Ended
December 31

Year Ended
December 31

Including intersegment eliminations, Canadian Utilities' Corporate & Other adjusted earnings in the fourth quarter
of 2020 were $3 million lower than the same period in 2019 mainly due to the timing of certain expenses, partially
offset by improved earnings from ATCOenergy.

Including intersegment eliminations, Canadian Utilities' Corporate & Other adjusted earnings in the full year of 2020
were $1 million lower than the same period in 2019 mainly due to interest expenses that are no longer recoverable
as a result of Canadian Utilities' sale of the Canadian fossil fuel-based electricity generation business in 2019.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 40

SUSTAINABILITY, 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 2020, we completed a refresh of the material topics for our Sustainability Report, incorporating feedback from
internal and external groups. Our 2020 Sustainability Report, which will be published in May 2021, focuses on the
material topics listed below:

•

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 2019 Sustainability Report, Sustainability Framework Reference Document, 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 looking at integrating cleaner fuels and
renewable energy. We look to expand our ownership and development of clean energy solutions, as well as enable
our customers to transition to lower emitting sources of energy.

We actively and constructively work with federal and provincial governments with the goal of finding the best long-
term solutions. We participate in a wide number of discussions, and the following are examples of where we are
focusing our efforts.

Carbon Pricing / Output-Based Pricing Systems

In Alberta, the Technology Innovation and Emissions Reduction (TIER) regulations came into effect on January 1,
2020. These regulations meet the Government of Canada’s stringency requirements for carbon emitting pricing
systems for Large Industrial Emitters.

In April 2020, the carbon price in Canada increased from $20 to $30 per tonne, and by 2022 it is expected to reach
$50 per tonne. In December 2020, the Government of Canada announced their plan on climate change, proposing
to increase the carbon price by $15 per tonne each year starting in 2023, rising to $170 per tonne by 2030. The
Company's exposure is mitigated for the Alberta Utilities as carbon charges are generally recovered in rates.

41 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

In Australia, under the National Greenhouse and Energy Reporting scheme, a safeguard mechanism applies to
facilities with direct covered emissions of more than 100,000 tonnes of carbon dioxide equivalent per year. These
facilities are required to keep their net emissions at or below emissions baselines set by the Clean Energy Regulator
or surrender Australia Carbon Credit Units to offset their emissions and stay below their baseline. Canadian Utilities
applied for an adjusted baseline which was approved in December 2020 by the Clean Energy Regulator.

Methane Reductions

In December 2020, Alberta reached equivalency with federal methane regulations to reduce methane emissions by
40 to 45 per cent from 2012 levels by 2025.

The methane regulations affect a portion of Canadian Utilities' fugitive and venting emissions from the Canadian
natural gas pipeline-related operations. Canadian Utilities continues to implement programs to reduce or eliminate
fugitive and venting emissions in our Natural Gas Distribution and Transmission businesses. Canadian Utilities'
exposure is mitigated because requirements to upgrade equipment to further reduce methane emissions are
expected to be included in rate base on a go-forward basis.

In January 2020, a new estimation method to report Unaccounted for Gas (UAFG) emissions resulting from natural
gas distribution activities was introduced in Australia. This approach enables site/network specific UAFG values to be
used, allowing Canadian Utilities to translate network maintenance and replacement activities into reportable
reductions in UAFG emissions.

Clean Fuel Standards

In December 2020, the Government of Canada announced that the scope of the Clean Fuel Standards (CFS) had
been narrowed to cover only liquid fossil fuels and will no longer include gaseous and solid fuels. The regulations
for the liquid class include gasoline, diesel, and oil, which are mainly used in the transportation sector, and will come
into effect in 2022.

CLEANER FUELS AND RENEWABLE ENERGY INITIATIVES

We continue to explore and implement opportunities for fuel switching to lower-emitting options for both ourselves
and our customers.

Solar Electricity Generation

In the fourth quarter of 2020, Canadian Utilities completed Canada’s largest off-grid solar and storage installation in
the remote northern Alberta community of Fort Chipewyan. In partnership with Three Nations Energy (3NE), which
is jointly owned by the Athabasca Chipewyan First Nation, Mikisew Cree First Nation and Fort Chipewyan Métis
Association, Canadian Utilities designed and built the two-phased project that includes a 600-kW solar farm owned
and operated by Canadian Utilities, and a 2,200-kW solar farm owned by 3NE and operated by Canadian Utilities.
The project will provide about 25 per cent of Fort Chipewyan's electricity needs, reducing local diesel use by
approximately 800,000 litres annually – equivalent to a decrease in greenhouse gas emissions of 2,145 tons
annually.

Fort Chipewyan Solar Project, Fort Chipewyan, Alberta

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 42

Electric Vehicle Fast Charging Stations

In 2020, Canadian Utilities continued to expand its number of EV fast charging stations providing end-users an
opportunity to replace liquid fuel with a low-carbon emitting energy. To date, Canadian Utilities has installed a total
of 25 public EV fast charging stations in Alberta.

Hydrogen

In July 2020, Canadian Utilities was awarded funding from Emission Reduction Alberta’s Natural Gas Challenge to
advance a first-of-its-kind hydrogen blending project in Fort Saskatchewan, Alberta. Once complete, the project will
be Canada’s largest hydrogen blending project, injecting an initial five per cent hydrogen by volume into a section of
Fort Saskatchewan’s residential natural gas distribution network.

In Australia, Canadian Utilities continues to build on its work at the Clean Energy Innovation Hub, a test bed for
hybrid energy solutions integrating natural gas, solar photovoltaic, battery storage, and hydrogen production. In
2020, Canadian Utilities was able to successfully test a 10 per cent hydrogen blend injected into the natural gas
supply at its major depot at Jandakot in Perth, Western Australia.

In August 2020, Canadian Utilities and Fortescue Metals Group Ltd. (FMG) were awarded $1 million in funding from
the Government of Western Australia's Renewable Hydrogen Fund to initiate an H2 Refueller project. This project
will provide Canadian Utilities with an opportunity to refuel vehicles capable of utilizing hydrogen as a primary fuel
source.

Our Performance

As our portfolio of assets evolves, so too does our environmental footprint. Our direct greenhouse gas (GHG)
emissions are estimated to have been reduced by almost 90 per cent from 2019 to 2020, primarily as a result of
Canadian Utilities' sale of the Canadian fossil fuel-based electricity generation business in the third quarter of 2019,
eliminating coal-fired generation from the portfolio. Since 2008, we have also reduced direct GHG emissions
through the implementation of fuel-switching and other efficiency programs.

Direct GHG Emissions
(million tonnes CO2e)

2008

.....

2015

2016

2017

2018

2019

2020E

GHG Emissions

GHG Emissions Related to Assets Divested in Q3-2019

Our 2020 estimated direct GHG emissions are 0.87 million tonnes CO2e. Final 2020 direct GHG emissions data will
be available in our Sustainability Report, which will be released in May 2021.

43 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

CLIMATE CHANGE RESILIENCY

We carefully manage climate-related risks, including preparing for, and responding to, extreme weather events
through activities such as proactive route selection, asset hardening, regular maintenance, and insurance. The
Company follows regulated engineering codes and continues to evaluate ways to create greater system reliability
and resiliency. When planning for capital investment or acquiring assets we consider site specific climate and
weather factors, such as flood plain mapping and extreme weather history.

In Canadian Utilities' Electricity Transmission and Distribution operations, grid resiliency initiatives focus on
prevention, protection, and reaction. Prevention includes minimizing operational risks and ensuring system
adequacy through system planning and coordination. Protection is focused on improving grid resiliency through
activities such as retrofitting and vegetation management to reduce incidents that result in outages. Wildfire
Management Plans include requirements to conduct annual patrols of all transmission power lines in forest
protection areas. Finally, we look to restore services in the shortest possible timeframe through grid modernization,
adequate contingency planning and dispatch.

In Canadian Utilities' Natural Gas Transmission and Distribution businesses, the majority of the pipeline network is
underground, making it less susceptible to extreme weather events. We work with regulators to increase resiliency
where appropriate through asset improvement projects. We have also mapped and continue to regularly inspect
pipeline water crossings.

In our Structures and Logistics activities, we look to leverage our expertise to produce high-efficiency structures in
response to evolving building codes. Our modular housing units are built in factories, which reduces our emissions
and environmental impact. In addition, the availability of deployable modular housing and logistical services can be
an important asset when extreme weather events occur around the world.

We have streamlined our Crisis Response and Emergency Preparedness systems, and we continuously improve our
ability to rapidly mobilize and effectively respond to crises globally. We incorporate learnings from responding to
extreme weather events which enables us to continue to strengthen our emergency response capabilities.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 44

CLIMATE CHANGE CHALLENGES AND OPPORTUNITIES

While climate-related challenges and opportunities are integrated throughout our strategy and risk management
processes, we understand that specifically disclosing climate-related information aligned with the TCFD
recommendations is also useful for the investment community.

In addition to the material risks described in the Business Risks and Risk Management section of this MD&A, the
table below provides further information on how we address specific climate-related challenges and opportunities.

Category/Driver

Challenges

Opportunities

Policy/Regulatory Operations in several

jurisdictions subject to
emissions limiting regulations

Aggressive shifts in policy
which do not allow for
transition in an effective,
affordable manner

Continued fuel switching to
lower-emitting options

Coal-to-gas electricity
generation conversions by
other companies present
opportunities for increased
demand for natural gas
transmission infrastructure
investment in the near to
medium term

Electricity grid modernization

Hydrogen economy
development

Mitigation Options/
Measures

Active participation in
policy development,
industry groups, and
regulatory discussions

Business diversification

Removal of coal-fired
electricity generation from
our portfolio in 2019

Hydrogen research projects

Market

Changes in carbon policy, costs
of operations, and commodity
prices

Changing customer behaviour

Increasing demand for lower-
emitting technologies

Participation in carbon
markets

Hydrogen market development

Business diversification

Technology

Replacement of current
products/services with lower-
emitting options

Prosumer movement may
affect energy load profiles in
the future

Removal of coal-fired
electricity generation from
our portfolio in 2019

Internal innovation teams
to evaluate new
technologies

Distributed energy solutions

A transition to lower-emitting
energy systems provides
opportunities to utilize
expertise in: generation,
integration and delivery of new
energy sources including
hydrogen, renewable natural
gas, EV networks; and
transmission and distribution
infrastructure to ensure energy
network reliability and security

Reputational

Public perception of carbon
risk

Physical

Extreme weather events

Long-term changes in
temperature and weather
patterns

Increase in demand for trusted
long-term partners to deliver
lower-emitting solutions

Transparent reporting

Authentic engagement and
collaboration

Climate change mitigation and
adaptation

Climate change resiliency
efforts

Rapidly deployable structures
and logistics services

Emergency Responses &
Preparedness plans and
training

45 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

OTHER EXPENSES AND INCOME

A financial summary of other consolidated expenses and income items for the fourth quarter and full year of 2020
and 2019 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.

($ millions)

Operating costs

Service concession arrangement costs

Depreciation, amortization and impairment

Gain on sale of operations

Earnings from investment in associate company

Earnings from investment in joint ventures

Net finance costs

Income tax expense

OPERATING COSTS

Three Months Ended
December 31

Year Ended
December 31

2020

2019

Change

2020

2019

Change

631

—

174

—

104

663

(32)

2,254

2,598

172

115

(9)

(21)

(11)

(52)

—

669

—

407

166

127

637

174

484

(344)

(127)

(174)

—

(77)

100

Operating costs, which are total costs and expenses less service concession arrangement costs and depreciation,
amortization and impairment, were $32 million lower in the fourth quarter of 2020 compared to the same period in
2019. Lower operating costs were mainly due to lower material costs in ATCO Structures resulting from the
completion of manufacturing activities for ATCO Structures' LNG Canada Cedar Valley Lodge project in the second
quarter and lower plant and equipment maintenance and contractor services expenses in the Alberta Utilities.
These lower operating costs were partially offset by higher costs in 2020 due to the early termination of the Master
Services Agreement with Wipro for managed IT services.

Operating costs of $2,254 million for the full year of 2020 were $344 million lower than the same period in 2019
mainly due to the sale of the Canadian fossil-fuel based electricity generation business in the third quarter of 2019,
and the completion of manufacturing activities for ATCO Structures' LNG Canada Cedar Valley Lodge project.

SERVICE CONCESSION ARRANGEMENT COSTS

Service concession arrangement costs were recorded for third party construction and operation activities for
Canadian Utilities' Alberta PowerLine Fort McMurray West-500-kV project. Service concession arrangement costs in
the fourth quarter and full year of 2020 were $9 million and $127 million lower compared to the same periods in
2019 due to the transition to APL operating activities by Electricity Transmission with the completion of project
management construction activities at the end of the first quarter of 2019, and subsequent sale in the fourth
quarter of 2019.

DEPRECIATION, AMORTIZATION AND IMPAIRMENT

Depreciation, amortization and impairment increased by $2 million in the fourth quarter of 2020 compared to the
same period in 2019 mainly due to an impairment of assets that no longer represent strategic value to the
Company, and continued capital investment in the Regulated Utilities.

Depreciation, amortization and impairment increased by $32 million in the full year of 2020 compared to the same
period in 2019 mainly due to an impairment of assets that no longer represent strategic value to the Company, a
rate change regulatory decision received in the third quarter of 2019 in Electricity Distribution which resulted in a
one-time depreciation adjustment, continued capital investment in the Regulated Utilities, and higher depreciation
at ATCO Structures due to the expansion of the global space rentals fleet.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 46

GAIN ON SALE OF OPERATIONS

In the second, third and fourth quarters of 2019, the Company closed a series of transitions related to the sale of its
Canadian fossil fuel-based electricity generation business and Alberta PowerLine. These sales resulted in an
aggregate gain of $174 million in 2019.

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 16 port facilities and three port operation
services businesses located in Chile, Uruguay, Argentina, and Brazil.

Earnings from investment in associate company in the fourth quarter of 2020 were $3 million higher than the same
period in 2019 mainly due to the timing of certain revenue and expenses, and higher cargo volumes and margins at
select ports.

Earnings from investment in associate company in the full year of 2020 were comparable to the same period in
2019.

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. It also includes ATCO Sabinco S.A. which operates an ATCO Structures
business in Chile and certain ATCO Frontec facility operations and maintenance contracts.

Earnings from investment in joint ventures increased by $6 million in the fourth quarter of 2020 compared to the
same period in 2019 mainly due to earnings at LUMA Energy with the commencement of transition work under the
Operations and Maintenance Agreement.

Earnings from investment in joint ventures increased by $10 million in the full year of 2020 compared to the same
period in 2019 mainly due to earnings at LUMA Energy with the commencement of transition work under the
Operations and Maintenance Agreement. Higher earnings were partially offset by the 2019 sale of joint venture
ownership positions included within the sale of the Canadian fossil fuel-based electricity generation business.

NET FINANCE COSTS

Net finance costs decreased by $11 million in the fourth quarter of 2020 when compared to the same period in
2019 mainly due to lower interest expense under service concession arrangement accounting for APL.

Net finance costs decreased by $77 million in the full year of 2020 when compared to the same period in 2019
mainly due to lower interest expense under service concession arrangement accounting for APL and lower interest
expense on non-recourse long-term debt related to Canadian Utilities' 2019 sale of its the Canadian fossil fuel-based
electricity generation business. Decreased net finance costs were also due to the positive impact of interest savings
in Canadian Utilities' International Natural Gas Distribution business, which became effective in January, 2020.

INCOME TAX

Income taxes were lower by $52 million in the fourth quarter of 2020 compared to the same period in 2019 mainly
due to lower earnings before taxes in the fourth quarter of 2020 as a result of the 2019 sale of APL.

Income taxes were higher by $100 million in the full year of 2020 compared to the same period in 2019 mainly due
to the realization of the deferred tax benefit from the Alberta tax rate reduction in 2019, partially offset by lower
earnings before taxes resulting from the sale of the Canadian fossil fuel-based electricity generation business and
Alberta PowerLine in 2019.

In June 2019, the Government of Alberta enacted a phased decrease in the provincial corporate income tax rate
from 12 per cent to 8 per cent over four years, commencing with a one per cent decrease on July 1, 2019 followed
by a one per cent reduction on January 1 of each of the next three years. On October 20, 2020, the Government of
Alberta accelerated the date of the decrease in the provincial corporate income tax rate to 8 per cent effective July 1,
2020.

47 ATCO LTD. 2020 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.

CREDIT RATINGS

Credit ratings are important to the Company's financing costs and ability to raise funds. The Company intends to
maintain strong investment grade credit ratings in order to provide efficient and cost-effective access to funds
required for operations and growth.

The following table shows the current credit ratings assigned to ATCO Ltd., Canadian Utilities Limited, CU Inc., and
ATCO Gas Australia Pty Ltd.

ATCO Ltd.

Issuer

Canadian Utilities Limited

Issuer

Senior unsecured debt

Commercial paper

Preferred shares

CU Inc.

Issuer and senior unsecured debt

Commercial paper

Preferred shares

ATCO Gas Australia Pty Ltd. (1)

Issuer and senior unsecured debt

DBRS

S&P

A (low)

R-1 (low)

PFD-2 (high)

A (high)

R-1 (low)

A-

BBB+

A-1 (low)

P-2

A-

A-1 (low)

PFD-2 (high)

P-2

N/A

BBB+

(1) ATCO Gas Australia Pty Ltd. is a regulated provider of natural gas distribution services in Western Australia, serving metropolitan Perth and surrounding

regions.

On July 20, 2020, Dominion Bond Rating Service affirmed its 'A (high)' long-term corporate credit rating and stable
trend on ATCO subsidiary CU Inc.

On August 10, 2020, Dominion Bond Rating Service affirmed its 'A' long-term corporate credit rating and stable
trend on ATCO subsidiary Canadian Utilities.

On August 28, 2020, Dominion Bond Rating Service affirmed its 'A (low)' long-term corporate credit rating and stable
trend on ATCO Ltd.

On September 17, 2020, S&P Global Ratings affirmed its 'A-' long-term issuer credit ratings on ATCO Ltd. and
Canadian Utilities with the outlooks revised from stable to negative.

On September 17, 2020, S&P Global Ratings affirmed ATCO subsidiary CU Inc.'s 'A-' long-term issuer credit rating
and maintained a stable outlook, reflecting S&P's decision to insulate CU Inc.'s rating from ATCO's issuer credit
rating.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 48

LINES OF CREDIT

At December 31, 2020, ATCO and its subsidiaries had the following lines of credit.

($ millions)

Long-term committed
Short-term committed

Uncommitted
Total

Of the $3,635 million in total lines of credit,
$571 million was in the form of uncommitted credit
facilities with no set maturity date. The other
$3,064 million in credit lines was committed, with
maturities between 2021 and 2023, and may be
extended at the option of the lenders.

Of the $1,106 million in lines of credit used,
$661 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
expand its global rental fleet and working capital
needs on workforce housing projects.

Total

2,914
150

571
3,635

Used

814
138

154
1,106

Available

2,100
12

417
2,529

Lines of Credit
($ millions)

$3,635

$2,529

$(1,106)

Total

Used

Available

49 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

CONSOLIDATED CASH FLOW

At December 31, 2020, the Company's cash position was $1,100 million, a decrease of $40 million compared to
December 31, 2019. Major movements are outlined in the following table:

($ millions)

Funds generated by operations (1)

Release of restricted project funds

Proceeds on sales of assets and operations

Net issue of long-term debt

Net repayment of short-term debt

Cash used for capital investment

Dividends paid to Class I and Class II Share owners

Dividends paid to non-controlling interests

Interest paid

Other
(Decrease) increase in cash position

Year Ended
December 31

2020

2019

Change

1,804 1,927

(123)

—

329

(329)

903

(903)

129

—

(175)

(1,069)

(1,324)

(200)

(186)

(301)

(294)

(413)

(498)

175

255

(14)

(7)

10
(40)

(311)
449

321
(489)

(1) Additional information regarding this measure is provided in the Non-GAAP and Additional GAAP Measures section of this MD&A.

Changes in Consolidated Cash Balances in 2020
($ Millions)

$1,804

$129

$(1,069)

$1,140

$(501)

$10

$1,100

$(413)

Cash
Dec 31,
2019

Funds
generated
by
operations

Net
Issue
of
long-term
debt

Cash
used
for
capital
investment

Dividends
paid

Interest
paid

Other

Cash
Dec 31,
2020

Funds Generated by Operations

Funds generated by operations were $516 million in the fourth quarter of 2020, $47 million higher compared to the
same period in 2019. The increase was mainly due to higher funds generated in the Regulated Utilities as a result of
the timing of certain revenues and expenses from regulatory decisions in Canadian Utilities, and in ATCO Structures
due to higher workforce housing trade sale activity and higher space rental activity in Canada, US and Australia.

Funds generated by operations were $1,804 million in the full year of 2020, $123 million lower compared to the
same period in 2019. The decrease was mainly due to lower funds generated in Canadian Utilities' Energy
Infrastructure business as a result of the sale of APL and the Canadian fossil fuel-based electricity generation

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 50

business in 2019, and in the Alberta Utilities as a result of the timing of certain revenues and expenses from
regulatory decisions. These amounts were partially offset by higher funds generated in ATCO Structures due to
higher workforce housing trade sale activity and higher space rental activity in Canada, the US, and Australia.

Cash Used for Capital Investment

Cash used for capital investment was $298 million in the fourth quarter of 2020, $84 million lower compared to the
same period in 2019 mainly due to higher capital investment in 2019 on the Pembina-Keephills transmission
pipeline in Natural Gas Transmission. Lower spending was partially offset by ATCO Structures' additional 50 per cent
acquisition of the ATCO Sabinco S.A. joint venture in December of 2020.

Cash used for capital investment was $1,069 million in the full year of 2020, $255 million lower than the same
period in 2019 mainly due to lower overall capital investment in the Regulated Utilities in 2020, the completion of
construction on APL in 2019, and lower capital investment in Electricity Generation due to the sale of the Canadian
fossil fuel-based electricity generation business and APL in 2019. Lower spending was partially offset by ATCO
Structures' additional 50 per cent acquisition of its ATCO Sabinco S.A. joint venture in December 2020 and
expansion of its global rental fleet.

Capital investment for the fourth quarter and full year of 2020 and 2019 is shown in the table below.

($ millions)

Structures & Logistics
Neltume Ports
ATCO Corporate & Other
Intersegment Eliminations

Canadian Utilities
Utilities

Electricity Distribution
Electricity Transmission
Natural Gas Distribution
Natural Gas Transmission
International Natural Gas Distribution

Energy Infrastructure
Electricity Generation
Storage & Industrial Water

Capital Investment from Businesses Sold in 2019 (1)
Canadian Fossil Fuel-Based Electricity Generation
Alberta PowerLine

CU Corporate & Other

2020

43
—
2
—
45

56
39
71
49
28
243

3
4
7

—
—
—
3

Three Months Ended
December 31
Change

2019

Year Ended
December 31

2020

2019

Change

25
—
3
(20)
8

73
26
92
130
19
340

2
19
21

10
—
10
3

18
—
(1)
20
37

(17)
13
(21)
(81)
9
(97)

1
(15)
(14)

(10)
—
(10)
—

144
—
13
—
157

0.00000

105
9
4

(20)
98

221
145
237
203
70

224
165
284
293
69
876 1,035

7
21
28

—
—
—
8

6
31
37

53
95

148
6

39
(9)
9

20
59

(3)
(20)
(47)
(90)

1
(159)

1
(10)
(9)

(53)
(95)

(148)
2

Canadian Utilities Total Capital Investment
ATCO Total Capital Investment (2) (3)

253

374

(121)

912 1,226

(314)

298

382

(84) 1,069 1,324

(255)

(1) Capital investment specific to the Canadian fossil fuel-based electricity generation business sold in September 2019 and Alberta PowerLine sold in

December 2019.

(2)

(3)

Includes capital expenditures in joint ventures of $2 million and $9 million (2019 - nil and $2 million) for the fourth quarter and full year of 2020.

Includes additions to property, plant and equipment, intangibles of $3 million and $13 million (2019 - $2 million and $16 million) of interest capitalized
during construction for the fourth quarter and full year of 2020.

51 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

Debt Issuances and Repayments

On September 28, 2020, CU Inc. issued $150 million of 2.609 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 of the Alberta Utilities.

Base Shelf Prospectus - CU Inc. Debentures

On September 16, 2020, CU Inc. filed a base shelf prospectus that permits it to issue up to an aggregate of

$1.2 billion of debentures over the 25-month life of the prospectus. As of February 24, 2021, aggregate issuances of

debentures were $150 million.

Dividends and Common Shares

We have increased our common share dividend each
year since 1993, a 28-year track record. Dividends paid
to Class I and Class II Share owners totaled $50 million
in the fourth quarter and $200 million in the full year of
2020.

On January 14, 2021, the Board of Directors declared a
first quarter dividend of 44.83 cents per share. The
payment of any dividend is at the discretion of the
Board of Directors and depends on our financial
condition and other factors.

28 year
track record of
increasing
common
share dividends

Normal Course Issuer Bid

We believe that, from time to time, the market price of our Class I Shares may not fully reflect the value of our
business, and that purchasing Class I Shares represents a desirable use of available funds. The purchase of Class I
Shares, at appropriate prices, will also minimize any dilution resulting from the exercise of stock options.

On March 9, 2020, we commenced a normal course issuer bid to purchase up to 1,014,684 outstanding Class I
Shares. This bid will expire on March 8, 2021. From March 9, 2020 to February 24, 2021, 150,000 shares were
purchased for $6 million.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 52

SHARE CAPITAL

ATCO's equity securities consist of Class I Shares and Class II Shares.

At February 23, 2021, we had outstanding 101,347,899 Class I Shares, 13,196,129 Class II Shares, and options to
purchase 1,115,200 Class I Shares.

CLASS I NON-VOTING SHARES AND CLASS II VOTING SHARES

Each Class II Share may be converted into one Class I Share at any time at the share owner’s option. If an offer to
purchase all Class II Shares is made, and such offer is accepted and taken up by the owners of a majority of the
Class II Shares, and, if at the same time, an offer is not made to the Class I Share owners on the same terms and
conditions, then the Class I Shares will be entitled to the same voting rights as the Class II Shares. The two share
classes rank equally in all other respects, except for voting rights.

Of the 10,200,000 Class I Shares authorized for grant of options under our stock option plan, 1,994,950 Class I
Shares were available for issuance at December 31, 2020. Options may be granted to our officers and key
employees at an exercise price equal to the weighted average of the trading price of the shares on the Toronto
Stock Exchange for the five trading days immediately preceding the grant date. The vesting provisions and exercise
period (which cannot exceed 10 years) are determined at the time of grant.

53 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

QUARTERLY INFORMATION

The following table shows financial information for the eight quarters ended March 31, 2019 through
December 31, 2020.

($ millions, except for per share data)

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Revenues
Earnings attributable to Class I and Class II Shares
Earnings per Class I and Class II Share ($)
Diluted earnings per Class I and Class II Share ($)
Adjusted earnings per Class I and Class II Share ($)
Adjusted earnings (loss)
Structures & Logistics
Neltume Ports
ATCO Corporate & Other
Canadian Utilities
Utilities
Energy Infrastructure
Canadian Utilities Corporate & Other

Total adjusted earnings

($ millions, except for per share data)

Total adjusted earnings

ADJUSTED EARNINGS

1,056
87
0.76
0.76
0.93

7
3
1

99
3
(7)
106

938
45
0.39
0.39
0.61

21
2
(1)

57
2
(11)
70

897
54
0.48
0.47
0.47

12
3
—

47
3
(11)
54

1,053
66
0.58
0.58
1.07

17
7
—

102
7
(11)
122

Q1 2019

Q2 2019

Q3 2019

Q4 2019

1,324
112
0.98
0.98
0.98

1,103
158
1.38
1.37
0.68

1,097
160
1.40
1.40
0.65

1,182
83
0.73
0.72
0.88

3
4
—

93
19
(7)
112

7
4
—

68
10
(11)
78

13
3
3

48
20
(13)
74

14
4
(9)

92
8
(8)
101

Our financial results for the previous eight quarters reflect the cyclical demand for workforce housing and space
rental products and services in ATCO Structures and ATCO Frontec, cargo volume and margins at Neltume Ports,
and in Canadian Utilities, the timing of utility regulatory decisions, and the seasonal nature of demand for natural
gas and electricity.

$112M

$101M

$106M

$78M

$74M

$122M

$70M

$54M

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Q3 2020

Q4 2020

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 54

STRUCTURES & LOGISTICS

In the first quarter of 2019, earnings were adversely impacted by low demand globally for workforce housing camps
in the natural resource sector, partially offset by asset expansions in Mexico and Chile, improving space rentals
activity, higher trade sale activity particularly in permanent modular construction in Canada and Australia, and
commencement of work on the LNG Canada Cedar Valley Lodge project.

In the second quarter of 2019, earnings were positively impacted by the continued progress of ATCO Structures'
LNG Canada Cedar Valley Lodge project and higher space rental activity.

In the third and fourth quarters of 2019, earnings were positively impacted by continued progress on ATCO
Structures' LNG Canada Cedar Valley Lodge project and incremental ATCO Frontec earnings from North American
camp services and maintenance contracts.

In the first quarter of 2020, earnings increased compared to the same period in 2019, mainly due to incremental
earnings from ATCO Structures' LNG Canada Cedar Valley Lodge project, higher space rental activity in Canada, and
higher workforce housing trade sale and rental activity in Australia. Higher earnings were partially offset by higher
operating and administrative costs.

In the second quarter of 2020, earnings increased compared to the same period in 2019, mainly due to higher
workforce housing trade sale activity in Canada, the US and Australia, continued progress with the LNG Canada
Cedar Valley Lodge project and higher space rental activity in Canada, the US and Australia.

In the third quarter of 2020, earnings decreased compared to the same period in 2019, mainly due to the scheduled
completion of ATCO Frontec North American contracts in late 2019 and early 2020, partially offset by additional
client work requests at existing contract sites for COVID-19 proactive and preventative safety measures.

In the fourth quarter of 2020, earnings increased compared to the same period in 2019, mainly due to additional
ATCO Frontec client work requests at existing contract sites for COVID-19 proactive and preventative safety
measures.

$13M

$14M

$7M

$3M

$21M

$17M

$12M

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Q3 2020

Q4 2020

NELTUME PORTS

In the third quarter of 2018, ATCO invested in a 40 per cent interest in Neltume Ports. In 2019, Neltume Ports
recorded consistent quarterly earnings of $4 million, $4 million, $3 million and $4 million, respectively.

In the first quarter of 2020, Neltume Ports recorded adjusted earnings that were $1 million lower than the same
period in 2019. Lower earnings were mainly due to lower cargo volumes and margins in the first quarter of 2020.

In the second quarter of 2020, Neltume Ports recorded adjusted earnings that were $2 million lower than the same
period in 2019. Lower earnings were mainly due to unplanned equipment maintenance activity at Puerto Mejillones
in northern Chile and overall lower cargo volumes related to the COVID-19 pandemic.

In the third quarter of 2020, Neltume Ports recorded adjusted earnings that were comparable to the same period in
2019.

55 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

In the fourth quarter of 2020, Neltume ports recorded adjusted earnings that were $3 million higher than the same
period in 2019. Higher earnings were mainly due to the timing of certain revenues and expenses, and higher cargo
volumes and margins at select ports.

$4M

$3M

$2M

$7M

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Q3 2020

Q4 2020

CANADIAN UTILITIES

Utilities

Utilities adjusted earnings are impacted by the timing of certain major regulatory decisions and seasonality.

In the first quarter of 2019, earnings were positively impacted mainly by growth in the regulated rate base and cost
efficiencies in Natural Gas and Electricity Distribution, partially offset by inflation adjustments applied to the rate of
return calculations in International Natural Gas Distribution.

In the second quarter of 2019, earnings were positively impacted mainly by the Electricity Transmission 2018-2019
GTA decision, the Natural Gas Transmission 2019-2020 GRA decision, continued growth in the regulated rate base,
cost efficiencies, and lower income taxes.

In the third and fourth quarters of 2019, Utilities earnings were positively impacted by the Electricity Transmission
2018-2019 GTA decision received in the second quarter of 2019, overall cost efficiencies and lower income taxes.

In the first quarter of 2020, Utilities adjusted earnings increased compared to the same period in 2019 mainly due to
cost efficiencies, rate base growth, and lower income taxes. Higher earnings were partially offset by the completion
of ECM funding in 2019 for Electricity Distribution and Natural Gas Distribution.

In the second quarter of 2020, adjusted earnings in the Utilities were lower compared to the same period in 2019
mainly due to the prior period impact of the Electricity Transmission 2018-2019 GTA decision received in the second
quarter of 2019, the adverse earnings impact of the new five-year Access Arrangement regulatory decision in
International Natural Gas Distribution, the transition to APL operating activities by Electricity Transmission with
completion of project management construction activities at the end of the first quarter of 2019, and the completion
of the incremental ECM funding in 2019 for Electricity Distribution and Natural Gas Distribution.

In the third quarter of 2020, adjusted earnings in the Utilities were lower than the same period in 2019 mainly due
to the adverse earnings impact of the five-year Access Arrangement regulatory decision, an adjustment for the
impact of forecasted inflation rates in International Natural Gas Distribution and the transition to APL operating
activities by Electricity Transmission. Lower earnings were partially offset by ongoing cost efficiencies and rate base
growth across the Utilities, and contributions in International Electricity Operations from Canadian Utilities' 50 per
cent joint venture ownership in LUMA Energy which commenced work in Puerto Rico at the end of the second
quarter of 2020.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 56

In the fourth quarter of 2020, adjusted earnings in the Utilities were higher than the same period in 2019. Higher
earnings were mainly due to cost efficiencies, rate base growth, and contributions in International Electricity
Operations from Canadian Utilities' 50 per cent joint venture ownership in LUMA Energy.

$93M

$92M

$99M

$102M

$68M

$48M

$57M

$47M

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Energy Infrastructure

Up until the third quarter of 2019 when the Canadian fossil fuel-based electricity generation business was sold,
Energy Infrastructure's adjusted earnings could be materially impacted by Alberta Power Pool pricing and spark
spreads. Demand for hydrocarbon and natural gas storage and water services continues to have a potential impact
on Energy Infrastructure adjusted earnings.

In the first quarter of 2019, earnings were positively impacted by increased Alberta power market prices.

In the second quarter of 2019, the adverse earnings impact of planned outages in Electricity Generation was offset
by incremental earnings from two additional hydrocarbon storage caverns.

In the third quarter of 2019, Energy Infrastructure earnings were positively impacted by cost efficiencies and
realized forward sales in Electricity Generation.

In the fourth quarter of 2019, Energy Infrastructure earnings were adversely impacted by forgone earnings from the
sale of the Canadian fossil fuel-based electricity generation business.

In all quarters of 2020, Energy Infrastructure earnings were lower compared to the same periods in 2019 mainly due
to the sale of the Canadian fossil fuel-based electricity generation business in the third quarter of 2019 and the sale
of APL in the fourth quarter of 2019.

$19M

$20M

$10M

$8M

$3M

$2M

$3M

$7M

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Q3 2020

Q4 2020

EARNINGS ATTRIBUTABLE TO CLASS I AND CLASS II SHARES

Earnings attributable to Class I and Class II Shares include timing adjustments related to rate-regulated activities
and unrealized gains or losses on mark-to-market forward and swap commodity contracts. They also include
one-time gains and losses, significant impairments, restructuring charges and other items that are not in the normal
course of business or a result of day-to-day operations recorded at various times over the past eight quarters.
These items are excluded from adjusted earnings and are highlighted below:

57 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

•

In the second, third and fourth quarters of 2019, Canadian Utilities closed a series of transactions related
to the sale of its Canadian fossil fuel-based electricity generation business and Alberta PowerLine
resulting in a gain on sale of operations of $65 million (after-tax and non-controlling interests). As these
transactions are one-time in nature, they are excluded from adjusted earnings.

In 2020, impairment and other costs not in the normal course of business of $20 million (after-tax and
non-controlling interests) were recorded. These costs mainly relate to certain assets that no longer
represent strategic value for the Company. As these costs are one-time in nature, they are excluded from
adjusted earnings.

In the fourth quarter of 2020, Canadian Utilities signed a Master Services Agreement with IBM to provide
managed information technology services. These services are currently provided by Wipro under a
ten-year MSA maturing in December 2024. ATCO has recognized costs of $32 million (after-tax and non-
controlling interests) which represents management’s best estimate of the costs to exit the Wipro MSA.
As these costs are one-time in nature, they are excluded from adjusted earnings.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 58

BUSINESS RISKS AND RISK MANAGEMENT

The Board of Directors is responsible for understanding the principal risks of the businesses in which the Company
is engaged. The Board also must achieve a prudent balance between risks incurred and the potential return to
share owners. It must confirm controls are in place that effectively monitor and manage those risks for the
Company's long-term viability.

The Board has an Audit & Risk Committee, which reviews significant risks associated with future performance and
growth. This committee is responsible for confirming that management has procedures in place to mitigate
identified risks.

We have an established enterprise risk management process that allows us to identify and evaluate our risks by
both severity of impact and probability of occurrence. Materiality thresholds are reviewed annually by the Audit &
Risk Committee. Non-financial risks that may have an impact on the safety of our employees, customers or the
general public and reputation risks are also evaluated. The following table outlines our current significant risks and
associated mitigations.

Business Risk: Capital Investment

Businesses Impacted:

• All businesses

Description & Context

Associated Strategies:

• Growth

• Financial Strength

The Company is subject to the normal risks associated with major capital projects, including cancellations, delays
and cost increases.

Risk Management Approach

The Company attempts to reduce the risks of project delays and cost increases by careful planning, diligent
procurement practices and entering into fixed price contracts when possible.

International Natural Gas Distribution's planned capital investment is approved by the regulator. Planned capital
investments for the Alberta Utilities are based on the following significant assumptions: projects identified by the
AESO will proceed as currently scheduled; the remaining planned capital investments are required to maintain safe
and reliable service and meet planned growth in the Alberta Utilities’ service areas; regulatory approval for capital
projects can be obtained in a timely manner; and access to capital market financings can be maintained. The
Company believes these assumptions are reasonable.

Business Risk: Climate Change

Businesses Impacted:

• All businesses

Description & Context - Policy Risks

Associated Strategies:

• Operational Excellence

• Innovation

ATCO has operations in several jurisdictions subject to emission regulations, including carbon pricing, output-based
performance standards, and other emission management policies. For example, in Alberta the output-based
Technology Innovation and Emissions Reduction (TIER) Regulations replaced the federal output-based pricing
system as of January 1, 2020.

ATCO Structures' rental fleet has historically played an important role in servicing large industries such as the oil
and gas industry. Provincial and federal climate policies that adversely impact the economic viability of these
operations present an under-utilized asset risk to rental fleet assets in the short to medium term.

59 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

Risk Management Approach - Policy Risks

The Company's exposure is mitigated for the Regulated Utilities because GHG emission charges are generally
recovered in rates. In addition, future requirements, such as upgrading equipment to further reduce methane
emissions in the natural gas utilities, are expected to be included in rate base on a go-forward basis.

ATCO Structures is further mitigating risk through the diversification of customers, geography, and end use of
products, including the pursuit of three main business lines: space rentals, workforce housing, and permanent
modular construction.

Description & Context - Physical Risks

Physical risks associated with climate change may include an increase in extreme weather events such as heavy
rainfall, floods, wildfires, extreme winds and ice storms, or changing weather patterns that cause ongoing impacts
to seasonal temperatures. Electricity transmission, distribution and pipeline assets above ground or on water
crossings are exposed to extreme weather events.

Risk Management Approach - Physical Risks

The Company continues to carefully manage physical risks, including preparing for, and responding to, extreme
weather events through activities such as proactive route selection, asset hardening, regular maintenance, and
insurance. The Company follows regulated engineering codes, continues to evaluate ways to create greater system
reliability and resiliency and, where appropriate, submits regulatory applications for capital expenditures aimed at
creating greater system reliability and resiliency within the code.

Prevention activities include Wildfire Management Plans and vegetation management at Electricity Transmission
and Distribution operations. The majority of the Company's natural gas pipeline network is in the ground, making it
less susceptible to extreme weather events.

The Company maintains in-depth emergency response measures for extreme weather events. When planning for
capital investment or acquiring assets, we consider site specific climate and weather factors, such as flood plain
mapping and extreme weather history.

Business Risk: Credit Risk

Businesses Impacted:

• All businesses

Description & Context

Associated Strategies:

• Financial Strength

For cash and cash equivalents and accounts receivable and contract assets, credit risk represents the carrying
amount on the consolidated balance sheet. Derivative and finance lease receivable credit risk arises from the
possibility that a counterparty to a contract fails to perform according to the terms and conditions of that contract.
The maximum exposure to credit risk is the carrying value of loans and receivables and derivative financial
instruments.

Risk Management Approach

Cash and cash equivalents credit risk is reduced by investing in instruments issued by credit-worthy financial
institutions and in federal government issued short-term instruments.

The Company minimizes other credit risks by dealing with credit-worthy counterparties, following established credit-
approval policies, and requiring credit security, such as letters of credit.

Geographically, a significant portion of loans and receivables are from the Company’s operations in Alberta,
followed by operations in Australia and Mexico. The largest credit risk concentration is from the Alberta Utilities,
which are able to recover an estimate for doubtful accounts through approved customer rates and to request
recovery through customer rates for any material losses from the retailers beyond the retailer security mandated by
provincial regulations. The second largest concentration of credit risk is within the Structures & Logistics business.
The counterparties' financial quality is monitored regularly to ensure appropriate mitigation of credit risk.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 60

Business Risk: Cybersecurity

Businesses Impacted:

• All businesses

Description & Context

Associated Strategies:

• Operational Excellence

• Innovation

The Company’s reliance on technology, which supports its information and industrial control systems, is subject to
potential cyber-attacks including unauthorized access of confidential information and outage of critical
infrastructure.

Risk Management Approach

The Company has an enterprise wide cybersecurity program covering all technology assets. The cybersecurity
program includes employee awareness, layered access controls, continuous monitoring, network threat detection,
and coordinated incident response through a centralized Security Operations Centre. The Company’s cybersecurity
management is consolidated under a common, centralized organization structure to increase effectiveness and
compliance across the entire enterprise.

Business Risk: Energy Commodity Price

Businesses Impacted:

Associated Strategies:

• Retail Energy

• Energy

• Financial Strength

Infrastructure

Description & Context

Retail Energy's earnings are affected by short-term price volatility.

Storage & Industrial Water's natural gas storage facility in Carbon, Alberta, is also exposed to storage price
differentials.

Risk Management Approach

In conducting its business, the Company may use various instruments, including forward physical contracts,
financial swaps, and storage service contracts to manage the risks arising from fluctuations in commodity prices.
The Company enters into natural gas physical contracts and forward power swap contracts as the hedging
instrument to manage the exposure to electricity and natural gas market price movements.

Under IFRS accounting, entering into hedging instruments may result in mark-to-market adjustments that are
recorded as unrealized gains or losses on the income statement. Realized gains or losses are recognized in adjusted
earnings and IFRS earnings when the commodity contracts are settled.

In addition, Retail Energy monitors forward curves in order to ensure it is not promoting product offerings that are
unfavourable to the Company.

Business Risk: Financing

Businesses Impacted:

• All businesses

Description & Context

Associated Strategies:

• Financial Strength

The Company’s financing risk relates to the price volatility and availability of external financing to fund the capital
expenditure program and refinance existing debt maturities. Financing risk is directly influenced by market factors.
As financial market conditions change, these risk factors can affect the availability of capital and also the relevant
financing costs.

61 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

Risk Management Approach

To address this risk, the Company manages its capital structure to maintain strong credit ratings which allow
continued ease of access to the capital markets. The Company also considers it prudent to maintain sufficient
liquidity to fund approximately one full year of cash requirements to preserve strong financial flexibility. This
liquidity is generated by cash flows from operations and supported by appropriate levels of cash and available
committed credit facilities.

Business Risk: Foreign Currency Exchange Rate Risk

Businesses Impacted:

• All businesses

Description & Context

Associated Strategies:

• Financial Strength

The Company’s earnings from, and carrying values of, its foreign operations are exposed to fluctuations in exchange
rates. The Company is also exposed to transactional foreign exchange risk through transactions denominated in a
foreign currency.

Risk Management Approach

In conducting its business, the Company may use forward contracts to manage the risks arising from fluctuations in
exchange rates. Such instruments are used only to manage risk and not for trading purposes. This foreign exchange
impact is partially offset by foreign denominated financing and by hedging activities. The Company manages this
risk through its policy of matching revenues and expenses in the same currency. When matching is not possible, the
Company may utilize foreign currency forward contracts to manage the risk.

Business Risk: Interest Rate

Businesses Impacted:

• All businesses

Description & Context

Associated Strategies:

• Financial Strength

The interest rate risk faced by the Company is largely a result of its long-term debt at variable rates as well as cash
and cash equivalents. The Company also has exposure to interest rate movements that occur beyond the term of
maturity of the fixed-rate investments.

Risk Management Approach

In conducting its business, the Company may use swap agreements to manage the risks arising from fluctuations in
interest rates. All such instruments are used only to manage risk and not for trading purposes. The Company has
converted certain variable rate long-term debt to fixed rate debt through interest rate swap agreements. At
December 31, 2020, the Company had fixed interest rates, either directly or through interest rate swap agreements,
on 98 per cent (2019 - 98 per cent) of total long-term debt. Consequently, the exposure to fluctuations in future cash
flows, with respect to debt, from changes in market interest rates was limited. The Company’s cash and cash
equivalents include fixed rate instruments with maturities of generally 90 days or less that are reinvested as they
mature.

Business Risk: Natural Gas Supply

Businesses Impacted:

• Energy Infrastructure

Description & Context

Associated Strategies:

• Financial Strength

All commercial natural gas storage in Alberta is subject to interruptible transport constraints. An Alberta natural gas
transportation provider's curtailment protocol in 2017 related to maintenance and expansion work on their system
contributed to ongoing low natural gas prices in Alberta and volatility in the market. Further natural gas

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 62

transportation maintenance is scheduled for the summer of 2021, which may result in transportation constraints.
There are on going discussions at the Canadian Energy Regulator (CER) on the appropriate solution to enhance
access to natural gas storage in Alberta during the summer of 2021.

Risk Management Approach

To reduce the impact to natural gas storage operations, Canadian Utilities structures its natural gas storage
portfolio around the natural gas transportation provider’s planned maintenance schedules to minimize the impact
of natural gas supply curtailments. Further, Energy Infrastructure is an intervenor in the CER process providing input
to help CER make the appropriate decisions. The Energy Infrastructure business is also an active participant in
consultations with natural gas transportation and other natural gas service providers to further enhance access to
storage.

Business Risk: Natural Resource Sector Business Cycles

Businesses Impacted:

• Structures & Logistics

• Neltume Ports

Description & Context

Associated Strategies:

• Growth

• Operational Excellence

• Financial Strength

Demand for Structures & Logistics’ workforce housing products and services, and the services provided by Neltume
Ports are directly related to capital spending cycles and levels of development activity in various industries, primarily
in the natural resources sector. Several key external factors influence customers’ decision-making on whether or not
to purchase products and services offered by the Company and/or to utilize the services provided by Neltume Ports.
These factors include expected commodity prices, global economic and political conditions, and access to debt
financing and equity capital. Any adverse impact on these influential key decision factors for a prolonged period
could affect demand for the Company’s products and services.

Risk Management Approach

ATCO Structures' cost structure has a high variable cost component which provides flexibility in the Company's
ability to reduce costs when the resource sector experiences a decline. In recent years, ATCO Structures has
managed fluctuations in the natural resource sector through its diversification into permanent modular
construction and facility operations and maintenance services, while expanding its global space rentals business.
These businesses provide stable earnings and cash flows and greater geographic diversity thereby reducing ATCO
Structures' risk exposure to any one particular industry sector or geography.

Neltume Ports has a diversified operational portfolio linked to a mix of economic activity in Chile, Uruguay,
Argentina, and Brazil.

Business Risk: Pandemic Risk

Businesses Impacted:

• All businesses

Description & Context

Associated Strategies:

• Growth

• Operational Excellence

• Financial Strength

• Community Involvement

An outbreak of infectious disease, a pandemic or a similar public health threat, such as the COVID-19 pandemic, or a
fear of any of the foregoing, could adversely impact the Company by causing operating, supply chain and project
development delays and disruptions, labour shortages and shutdowns as a result of government regulation and
prevention measures, increased strain on employees and compromised levels of customer service, any of which
could have a negative impact on the Company’s operations.

Any deterioration in general economic and market conditions resulting from a public health threat could negatively
affect demand for electricity and natural gas, revenue, operating costs, timing and extent of capital expenditures,
results of financing efforts, or credit risk and counterparty risk; any of which could have a negative impact on the
Company’s business.

63 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

Risk Management Approach

While ATCO's investments in essential services are largely focused on regulated utilities and long-term contracted
businesses with strong counterparties, creating a resilient investment portfolio, the extent of the COVID-19
pandemic and its future impact on the Company remains uncertain. In response to the evolving situation, ATCO's
Pandemic Plan was activated in February 2020. The plan included travel restrictions, limited access to facilities, a
direction to work from home whenever possible, physical distancing measures and other protocols (including the
use of personal protective equipment while at a work premise). Since then, the Company has been following
recommendations by local and national public health authorities across the globe to adjust operational
requirements as needed to ensure a coordinated approach across ATCO. As a result of these efforts and the
Company’s experience in crisis response, ATCO has been able to minimize the impact of the current COVID-19
pandemic on the Company’s businesses and the essential services it provides to customers.

Business Risk: Pipeline Integrity

Businesses Impacted:

• Utilities

Description & Context

Associated Strategies:

• Operational Excellence

• Community Involvement

Natural Gas Transmission, Natural Gas Distribution and International Gas Distribution have significant pipeline
infrastructure. Although the probability of a pipeline rupture is very low, the consequences of a failure can be
severe.

Risk Management Approach

Programs are in place to monitor the integrity of the pipeline infrastructure and replace pipelines or pipeline
infrastructure as required to address safety, reliability, and future growth. These programs include Natural Gas
Distribution and Natural Gas Transmission's Urban Pipeline Replacement and Integrity programs, and Natural Gas
Distribution and International Natural Gas Distribution's Mains Replacement programs. The Company also carries
property and liability insurance. The Company actively engages in damage prevention initiatives including proactive
direct engagement with the building and excavation communities. The Company also promotes ground
disturbance and excavation safety to homeowners and the excavation community.

Business Risk: Political

Businesses Impacted:

• All businesses

Description & Context

Associated Strategies:

• Growth

• Financial Strength

• Operational Excellence

Operations are exposed to a risk of change in the business environment due to political change. Legislative or policy
changes may impact the financial performance of operations. This could negatively impact earnings, return on
equity and assets, and credit metrics.

Risk Management Approach

Participation in policy consultations with governments and engagement of stakeholder groups ensure ongoing
communication and that the impacts and costs of proposed policy changes are identified and understood. Where
appropriate, the Company works with its peers and industry associations to develop common positions and
strategies. Geographic diversification of assets by region and by country reduces the impact of political and
legislative changes.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 64

Business Risk: Regulated Operations

Businesses Impacted:

• Utilities

Description & Context

Associated Strategies:

• Growth

• Operational Excellence

• Financial Strength

The Regulated Utilities are subject to the normal risks faced by regulated companies. These risks include the
regulator's approval of customer rates that permit a reasonable opportunity to recover service costs on a timely
basis, including a fair return on rate base. These risks also include the regulator's potential disallowance of costs
incurred. Electricity Distribution and Natural Gas Distribution operate under performance based regulation (PBR).
Under PBR, utility revenues are formula driven, which raises the uncertainty of cost recovery. In Australia, the ERA
assesses appropriate returns, prudent levels of operating costs, capital expenditures and expected throughput on
the network through an Access Arrangement proceeding.

Risk Management Approach

The Regulated Utilities file forecasts in the rate-setting process to recover the costs of providing services and earn a
fair rate of return. The determination of a fair rate of return on the common equity component of rate base is
determined in a generic cost of capital proceeding in Alberta and an Access Arrangement proceeding in Australia.
The Regulated Utilities continuously monitor various regulatory decisions and cases to assess how they might
impact the Company's regulatory applications for the recovery of costs. The Regulated Utilities are proactive in
demonstrating prudence and continuously look for ways to lower operating costs while maintaining service levels.

Business Risk: Technological Transformation and Disruption

Businesses Impacted:

• All businesses

Description & Context

Associated Strategies:

• Growth

• Operational Excellence

• Financial Strength

• Innovation

The introduction and rapid, widespread adoption of transformative technology could lead to disruption of the
Company's existing business models and introduce new competitive market dynamics. Failure to effectively identify
and manage disruptive technology and / or changing consumer attitudes and preferences may result in disruptions
to the business and an inability to achieve strategic and financial objectives.

Risk Management Approach

The strategic plans of each business unit incorporate transformative technology into the evolution of their business
and ensures that the best available technology is deployed to support current state operational efficiency and
reliability. The business seeks opportunities to minimize costs by monitoring trends occurring in other jurisdictions
that may be ahead of the technological curve.

65 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

Business Risk: Liquidity

Businesses Impacted:

• All businesses

Description & Context

Associated Strategies:

• Financial Strength

Liquidity risk is the risk that the Company will not be able to meet its financial obligations.

Risk Management Approach

Cash flow from operations provides a substantial portion of the Company’s cash requirements. Additional cash
requirements are met with the use of existing cash balances and externally through bank borrowings and the
issuance of long-term debt, non-recourse long-term debt and preferred shares. Commercial paper borrowings and
short-term bank loans under available credit lines are used to provide flexibility in the timing and amounts of long-
term financing. The Company does not invest any of its cash balances in asset-backed securities. At December 31,
2020, the Company’s cash position was approximately $1 billion and there were available committed and
uncommitted lines of credit of approximately 2.5 billion which can be utilized for general corporate purposes.

Liquidity risk includes contractual financial obligations which the Company will meet with cash flow from operations,
existing cash balances and external financing, if necessary. These contractual financial obligations for the next five
years and thereafter are shown below.

($ millions)

2021

2022

2023

2024

2025

2026 and
thereafter

Financial Liabilities
Accounts payable and accrued liabilities
Long-term debt:

Principal
Interest expense (1)

Derivatives (2)

Commitments
Purchase obligations:

Operating and maintenance agreements
Capital expenditures

Other

Total

695

—

329
398
13
1,435

407
231
14
652
2,087

379
384
5
768

817
364
2
1,183

319
—
—
319
1,087

329
—
—
329
1,512

129
343
—
472

299
—
—
299
771

35
342
—
377

7,979
6,986
—
14,965

47
—
—
47
424

151
—
—
151
15,116

(1) Interest payments on floating rate debt have been estimated using rates in effect at December 31, 2020. Interest payments on debt that has been hedged

have been estimated using hedged rates.

(2) Payments on outstanding derivatives have been estimated using exchange rates and commodity prices in effect at December 31, 2020.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 66

NON-GAAP AND ADDITIONAL GAAP
MEASURES

Adjusted earnings are defined as 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 or losses on mark-to-market
forward and swap 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 from rate-regulated activities on the same basis as was used prior to adopting
IFRS - that basis being the US accounting principles for rate-regulated activities. Management’s view is that adjusted
earnings allow for a more effective analysis of operating performance and trends. A reconciliation of adjusted
earnings to earnings attributable to Class I and Class II Shares is presented in this MD&A. Adjusted earnings is an
additional GAAP measure presented in Note 3 of the 2020 Consolidated Financial Statements.

Adjusted earnings per Class I and Class II Share is calculated by dividing adjusted earnings by the weighted average
number of shares outstanding for the period.

Funds generated by operations is defined as cash flow from operations before changes in non-cash working capital
and change in receivable under service concession arrangement. In management’s opinion, funds generated by
operations is a significant performance indicator of the Company’s ability to generate cash during a period to fund
capital expenditures. Funds generated by operations does not have any standardized meaning under IFRS and
might not be comparable to similar measures presented by other companies. A reconciliation of funds generated by
operations to cash flows from operating activities is presented in this MD&A.

Capital investment is defined as cash used for capital expenditures, business combinations, service concession
arrangements, and cash used in the Company's proportional share of capital expenditures in joint ventures, and
cash used for equity investment in associate companies. In management's opinion, capital investment reflects the
Company's total cash investment in assets. Capital expenditures includes additions to property, plant and
equipment and intangibles as well as interest capitalized during construction. A reconciliation of capital investments
to capital expenditures is presented in this MD&A.

67 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

RECONCILIATION OF ADJUSTED EARNINGS
TO EARNINGS ATTRIBUTABLE TO CLASS I
AND CLASS II SHARES

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 or losses on mark-to-market forward
and swap 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 are a key measure of segment earnings that management uses to assess segment performance
and allocate resources. It is management’s view that adjusted earnings allow a better assessment of the economics
of rate regulation in Canada and Australia than IFRS earnings.

($ millions)

2020

2019

Revenues

Adjusted earnings

(loss)

Loss on sale of
operations

Unrealized (losses)
gains on mark-to-
market forward and
swap commodity
contracts

Rate-regulated

activities

IT Common Matters

decision

Early termination of
the master service
agreement for
managed IT services

Other

Earnings (loss)

attributable to Class
I and Class II Shares

Structures
& Logistics

Neltume
Ports

ATCO
Corporate
& Other

Canadian Utilities Limited

Three Months Ended
December 31

ATCO
Consolidated

Utilities

Energy
Infrastructure

CUL
Corporate
& Other

Consolidated

171

245

—

(9)

—

784

817

102

—

(3)

—

(1)

(6)

—

(16)

(5)

(3)

(26)

—

(7)

—

(1)

—

(6)

(2)

(11)

(8)

—

(4)

(1)

—

(2)

—

(1)

(16)

(11)

881

929

—

(7)

(4)

1,053

1,182

122

101

—

(7)

(4)

(15)

(6)

(5)

(3)

(4)

(5)

(3)

(29)

(32)

—

(7)

—

(6)

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 68

($ millions)

2020

2019

Revenues

Adjusted earnings
(loss)

Gain on sale of
operations

Impairment and
other costs

Unrealized (losses)
gains on mark-to-
market forward and
swap commodity
contracts
Rate-regulated
activities

IT Common Matters
decision

Early termination of
the master service
agreement for
managed IT services

Other

E Earnings (loss)
attributable to Class
I and Class II Shares

Structures
& Logistics

Neltume
Ports

ATCO
Corporate
& Other

Canadian Utilities Limited

Utilities

Energy
Infrastructure

CUL
Corporate
& Other

Consolidated

Year Ended
December 31

ATCO
Consolidated

106

3,233

714

803

—

(5)

—

(3)

—

(3)

(2)

—

(6)

—

(1)

(3)

2,932

2,956

305

301

—

(4)

—

(34)

(10)

(12)

(26)

—

231

386

195

856

—

(2)

—

(2)

(4)

—

(1)

—

(1)

(6)

112

3,905

280

319

—

(15)

—

(4)

(32)

(10)

(12)

3,944

4,706

352

365

—

(20)

—

(4)

(32)

(10)

(12)

(29)

(32)

—

(1)

(7)

189

464

—

(2)

(6)

252

513

(40)

(39)

—

(9)

—

(2)

(1)

—

(2)

—

(1)

(51)

(34)

GAIN ON SALE OF OPERATIONS

In 2019, the Company closed a series of transactions related to the sale of its Canadian fossil fuel-based electricity
generation business and Alberta PowerLine. These sales resulted in an aggregate gain of $65 million (after-tax and
non-controlling interests). As the gain was related to a series of one-time transactions, it was excluded from
adjusted earnings.

IMPAIRMENT AND OTHER COSTS

In 2020, impairment and other costs not in the normal course of business of $20 million (after-tax and non-
controlling interests) were recorded. These costs mainly relate to certain assets that no longer represent strategic
value to the Company.

Canadian Utilities' subsidiary ATCO Oil & Gas Ltd. holds a five per cent working interest in oil and gas assets in
Northern Canada. With continued low oil prices and the COVID-19 pandemic continuing to cause economic
uncertainty, an impairment of $9 million was recorded in the second quarter of 2020 reflecting the reduced
likelihood of future recovery of these costs.

ATCO Structures closed its manufacturing facility located in Pocatello, Idaho, relocated materials and equipment to
its manufacturing facilities in Calgary, Alberta and Diboll, Texas and recorded $3 million in one-time closure costs in
the second quarter of 2020.

69 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

The remaining costs mainly relate to the continued transformation and realignment of certain functions in the
Company, as well as an adjustment to certain real estate assets in small markets within the Company's real estate
portfolio due to continued low prices and economic uncertainty.

UNREALIZED (LOSSES) GAINS ON MARK-TO-MARKET FORWARD AND SWAP COMMODITY CONTRACTS

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. Prior to the sale of the Canadian
fossil fuel-based electricity generation business in the third quarter of 2019, these contracts were accounted for as
normal purchase agreements as they were with an affiliate company and the own use exemption was applied.
Starting September 30, 2019, these contracts are measured at fair value because the contracts are with a third party
and the own use exemption no longer applies.

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 of Canadian Utilities Limited.

Additionally, prior to the sale of the Canadian fossil fuel-based electricity generation business in the third quarter of
2019, the Company entered into forward contracts in order to optimize available merchant capacity and manage
exposure to electricity market price movements for its Independent Power and Thermal Plants not governed by a
Power Purchase Arrangement. The forward contracts were measured at fair value. Unrealized gains and losses due
to changes in the fair value of the forward contracts were recognized in the earnings of the Energy Infrastructure
operating segment where hedge accounting was not applied.

The CODM believes that removal of the unrealized gains or losses on mark-to-market forward and swap commodity
contracts provides a better representation of operating results for the Company's operations.

Realized gains or losses are recognized in adjusted earnings when the commodity contracts are settled.

RATE-REGULATED ACTIVITIES

Electricity Distribution and Transmission and their subsidiaries, ATCO Electric Yukon, Northland Utilities (NWT) and
Northland Utilities (Yellowknife), as well as Natural Gas Distribution, Natural Gas Transmission and International
Natural Gas Distribution are collectively referred to as the Regulated Utilities.

There is currently no specific guidance under IFRS for rate-regulated entities that the Company is eligible to adopt.
In the absence of this guidance, the Regulated Utilities do not recognize assets and liabilities from rate-regulated
activities as may be directed by regulatory decisions. Instead, the Regulated Utilities recognize revenues in earnings
when amounts are billed to customers, consistent with the regulator-approved rate design. Operating costs and
expenses are recorded when incurred. Costs incurred in constructing an asset that meet the asset recognition
criteria are included in the related property, plant and equipment or intangible asset.

The Company uses standards issued by the Financial Accounting Standards Board (FASB) in the United States as
another source of generally accepted accounting principles to account for rate-regulated activities in its internal
reporting provided to the CODM. The CODM believes that earnings presented in accordance with the FASB
standards are a better representation of the operating results of the Company’s rate-regulated activities. Therefore,
the Company presents adjusted earnings as part of its segmented disclosures on this basis. Rate-regulated
accounting (RRA) standards impact the timing of how certain revenues and expenses are recognized when
compared to non-rate regulated activities, to appropriately reflect the economic impact of a regulator's decisions on
revenues.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 70

Rate-regulated accounting differs from IFRS in the following ways:

Timing Adjustment

Items

RRA Treatment

IFRS Treatment

Additional
revenues billed in
current period

Future removal and site
restoration costs, and impact of
colder temperatures

The Company defers the
recognition of cash
received in advance of
future expenditures.

The Company recognizes
revenues when amounts are
billed to customers and costs
when they are incurred.

Revenues to be
billed in future
periods

Deferred income taxes, impact of
warmer temperatures, and
impact of inflation on rate base

Regulatory
decisions received

Regulatory decisions received
which relate to current and prior
periods

Settlement of
regulatory
decisions and
other items

Settlement of amounts
receivable or payable to
customers and other items

The Company recognizes
revenues associated with
recoverable costs in
advance of future billings
to customers.

The Company recognizes
costs when they are
incurred, but does not
recognize their recovery until
customer rates are changed
and amounts are collected
through future billings.

The Company recognizes
the earnings from a
regulatory decision
pertaining to current and
prior periods when the
decision is received.

The Company does not
recognize earnings from a
regulatory decision when it is
received as regulatory assets
and liabilities are not
recorded under IFRS.

The Company recognizes
the amount receivable or
payable to customers as a
reduction in its regulatory
assets and liabilities when
collected or refunded
through future billings.

The Company recognizes
earnings when customer
rates are changed and
amounts are recovered or
refunded to customers
through future billings.

The significant timing adjustments as a result of the differences between rate-regulated accounting and IFRS are as
follows:

($ millions)

Additional revenues billed in current period
Future removal and site restoration costs (1)
Impact of (warmer) colder temperatures (2)

Revenues to be billed in future periods

Deferred income taxes (3)
Deferred income taxes due to decrease in provincial

corporate income tax (4)

Impact of inflation on rate base (5)

Regulatory decisions received (see below)
Settlement of regulatory decisions and other items (6)

Three Months Ended
December 31

Year Ended
December 31

2020

2019

Change

2020

2019

Change

(3)

(1)

(2)

(6)

(17)

(13)

(4)

(55)

(54)

(1)

—

(1)

—

(5)
(15)

—

(2)

5
(4)

—

(2)

(10)
(11)

—

(3)

—

(16)
(32)

106

(106)

(7)

9
98

(3)

(25)
(130)

(1)

(2)

(3)
(4)

(5)

Removal and site restoration costs are billed to customers over the estimated useful life of the related assets based on forecast costs to be incurred in
future periods.

Natural Gas Distribution customer rates are based on a forecast of normal temperatures. Fluctuations in temperatures may result in more or less
revenue being recovered from customers than forecast. Revenues above or below the normal in the current period are refunded to or recovered from
customers in future periods.

Income taxes are billed to customers when paid by the Company.
In the second quarter of 2019, the Government of Alberta enacted a phased decrease in the provincial corporate income tax rate from 12 per cent to
8 per cent. This decrease is being phased in increments starting July 1, 2019. As a result of this change, the Alberta Utilities decreased deferred income
taxes and increased earnings in 2019 by $106 million.

The inflation-indexed portion of International Natural Gas Distribution's rate base is billed to customers through the recovery of depreciation in
subsequent periods based on the actual or forecasted annual rate of inflation. Under rate-regulated accounting, revenue is recognized in the current
period for the inflation component of rate base when it is earned. Differences between the amounts earned and the amounts billed to customers are
deferred and recognized in revenues over the service life of the related assets.

71 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

(6)

In 2020, Electricity Distribution recorded a decrease in earnings of $14 million related to payments to customers for transmission costs and capital
related items.

REGULATORY DECISIONS RECEIVED

Under rate-regulated accounting, the Company recognizes earnings from a regulatory decision pertaining to current

and prior periods when the decision is received. A description of the significant regulatory decisions recognized in

adjusted earnings in 2019 is provided below.

Decision

Amount

Description

Information
Technology (IT)
Common Matters

In August 2014, the Company sold its IT services business to Wipro Ltd.
(Wipro) and signed a ten-year IT MSA effective January 1, 2015.

In 2015, the Alberta Utilities Commission (AUC) commenced an Information
Technology Common Matters proceeding to review the recovery of IT costs by
the Alberta Utilities from January 1, 2015 going forward. On June 5, 2019, the
AUC issued its decision regarding the IT Common Matters proceeding and
directed the Alberta Utilities to reduce the first-year of the Wipro MSA by
13 per cent and to apply a glide path that reduces pricing by 4.61 per cent in
each of years 2 through 10. The reduction in adjusted earnings resulting from
the decision for the period January 1, 2015 to December 31, 2019 was
$12 million.

2. Electricity

Transmission
General Tariff
Application (GTA)

(9)

In June 2017, Electricity Transmission filed a GTA for its operations for 2018
and 2019. The decision was received in July 2019 approving the majority of
capital expenditures and operating costs requested. The increase in adjusted
earnings resulting from the decision of $9 million was recorded in 2019.

IT COMMON MATTERS DECISION
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. The amount
excluded from adjusted earnings for the fourth quarter and year ended December 31, 2020 was $5 million and
$10 million (2019 - $3 million and $12 million).

EARLY TERMINATION OF THE MASTER SERVICE AGREEMENT FOR MANAGED IT SERVICES

In the fourth quarter of 2020, Canadian Utilities signed a Master Services Agreement with IBM Canada Ltd. to
provide managed information technology services. These services are currently provided by Wipro Ltd. (Wipro)
under a ten-year MSA maturing in December 2024. The transition of the managed IT services from Wipro to IBM will
be completed over a six-month period, which commenced February 1, 2021.

ATCO has recognized costs of $32 million (after-tax and non-controlling interests), which represents management’s
best estimate of the costs to exit the Wipro MSA. The actual costs will be finalized later in 2021. As these costs are
one-time in nature, they are excluded from adjusted earnings.

OTHER

Each quarter, the Company adjusts the deferred tax asset which was recognized as a result of the 2015 Tula Pipeline
Project impairment. During the year ended December 31, 2020, the Company recorded a foreign exchange loss of
$2 million (after tax and non-controlling interests) (2019 - nil) due to a difference between the tax base currency,
which is the Mexican peso, and the US dollar functional currency.

In 2019, the Company recognized costs of $6 million (after tax and non controlling interests) with regard to a
number of disputes related to the Tula Pipeline project. The Company continues to work with the involved parties to
achieve a resolution of these disputes. As these costs related to a significant non-recurring event, they were
excluded from adjusted earnings.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 72

RECONCILIATION OF FUNDS GENERATED
BY OPERATIONS TO CASH FLOWS FROM
OPERATING ACTIVITIES

($ millions)

2020

2019
Funds generated by operations

Changes in non-cash working capital

Change in receivable under service concession arrangement

Cash flows from operating activities

Three Months Ended
December 31

Year Ended
December 31

516
469

(38)
2

—
(28)
478
443

1,804
1,927

39
(205)

—
(180)
1,843
1,542

73 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

RECONCILIATION OF CAPITAL INVESTMENT
TO CAPITAL EXPENDITURES

($ millions)

2020

2019

Capital Investment

Capital expenditure
in joint ventures

Business
combinations

Capital Expenditures

($ millions)

2020

2019

Capital Investment

Equity investment in
associate company

Capital expenditure
in joint ventures

Business
combinations

Service concession
arrangement

Capital Expenditures

Structures
& Logistics

Neltume
Ports

ATCO
Corporate
& Other

Canadian Utilities Limited

Three Months Ended
December 31

ATCO
Consolidated

Utilities

Energy
Infrastructure

CUL
Corporate
& Other

Consolidated

—

(19)

—

(17)

—

(17)

243

340

—

243

340

(2)

—

Structures
& Logistics

Neltume
Ports

ATCO
Corporate
& Other

Canadian Utilities Limited

253

374

(2)

—

251

374

298

382

(2)

—

(19)

—

277

382

Year Ended
December 31

ATCO
Consolidated

Utilities

Energy
Infrastructure

CUL
Corporate
& Other

Consolidated

144

105

—

(19)

—

125

105

—

(9)

—

876

(16)

1,035

—

—
—

—

876

(16)

1,035

185

—

(9)

(2)

—

(95)

—

—
—

912

1,226

1,069

1,324

—

(9)

(2)

—

(95)

903

1,129

—

(9)

(2)

(19)

—

(95)

1,041

1,218

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 74

OTHER FINANCIAL INFORMATION

OFF BALANCE SHEET ARRANGEMENTS

ATCO does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or
future effect on the results of operations or financial condition, including, without limitation, the Company's liquidity
and capital resources.

CONTINGENCIES

The Company is party to a number of disputes and lawsuits in the normal course of business. The Company
believes the ultimate liability arising from these matters will have no material impact on its 2020 Consolidated
Financial Statements.

SIGNIFICANT ACCOUNTING ESTIMATES

The Company’s significant accounting estimates are described in Note 22 of the 2020 Consolidated Financial
Statements, which are prepared in accordance with IFRS. Management makes judgments and estimates that could
significantly affect how policies are applied, amounts in the consolidated financial statements are reported, and
contingent assets and liabilities are disclosed. Most often these judgments and estimates concern matters that are
inherently complex and uncertain. Judgments and estimates are reviewed on an ongoing basis; changes to
accounting estimates are recognized prospectively.

ACCOUNTING CHANGES

At December 31, 2020, there are no new or amended standards issued, or interpretations that need to be adopted
in future periods, which will have a material effect on the 2021 Consolidated Financial Statements once adopted.

DISCLOSURE CONTROLS AND PROCEDURES

As of December 31, 2020, management evaluated the effectiveness of the Company’s disclosure controls and
procedures as required by the Canadian Securities Administrators. This evaluation was performed under the
supervision of, and with the participation of, the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO).

Disclosure controls and procedures are designed to provide reasonable assurance that information required to be
disclosed in documents filed with securities regulatory authorities is recorded, processed, summarized and
reported on a timely basis. The controls also seek to assure this information is accumulated and communicated to
management, including the CEO and the CFO, as appropriate, to allow timely decisions on required disclosure.

Management, including the CEO and the CFO, does not expect the Company's disclosure controls and procedures
will prevent or detect all errors. The inherent limitations in all control systems are that they can provide only
reasonable, not absolute, assurance that all control issues and instances of error, if any, within the Company have
been detected.

Based on this evaluation, the CEO and the CFO have concluded that the Company’s disclosure controls and
procedures were effective at December 31, 2020.

INTERNAL CONTROL OVER FINANCIAL REPORTING

As of December 31, 2020, management evaluated the effectiveness of the Company’s internal control over financial
reporting as required by the Canadian Securities Administrators. This evaluation was performed under the
supervision of, and with the participation of, the CEO and the CFO.

The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
IFRS. Internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore,
internal control over financial reporting can provide only reasonable assurance regarding the reliability of financial
statement preparation and may not prevent or detect all misstatements.

75 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

Based on this evaluation, the CEO and the CFO have concluded that the Company’s internal control over financial
reporting was effective at December 31, 2020.

There was no change in the Company’s internal control over financial reporting that occurred during the period
beginning on January 1, 2020, and ended on December 31, 2020, that materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.

FORWARD-LOOKING INFORMATION

Certain statements contained in this MD&A 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 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.

The Company’s actual results could differ materially from those anticipated in any forward-looking information
contained in this MD&A as a result of regulatory decisions, competitive factors in the industries in which the
Company operates, prevailing economic conditions (including as may be affected by the COVID-19 pandemic) and
other factors, many of which are beyond the control of the Company.

Any forward-looking information contained in this MD&A 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.

ADDITIONAL INFORMATION

ATCO has published its 2020 Consolidated Financial Statements and MD&A for the year ended December 31, 2020.
Copies of these documents may be obtained upon request from Investor Relations at 3rd Floor, West Building, 5302
Forand Street S.W., Calgary, Alberta, T3E 8B4, telephone 403-292-7500, fax 403-292-7532 or email
investorrelations@atco.com.

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 76

K Bar means the AUC allowance for capital additions
under performance based regulation.

Kilowatt (kW) is a measure of electric power equal to
1,000 watts.

LNG means liquefied natural gas.

Megawatt (MW) is a measure of electric power equal
to 1,000,000 watts.

NCI means non controlling interest.

PBR means Performance Based Regulation.

Regulated Utilities means Electricity Distribution,
Electricity Transmission, Natural Gas Distribution,
Natural Gas Transmission and International Natural
Gas Distribution.

Thermal Plant is a coal-fired power station in which
heat energy is converted to electric power.

GLOSSARY

AESO means the Alberta Electric System Operator.

Alberta Power Pool means the market for electricity in
Alberta operated by AESO.

Alberta Utilities means Electricity Distribution,
Electricity Transmission, Natural Gas Distribution and
Natural Gas Transmission.

AUC means the Alberta Utilities Commission.

Average weekly earnings (AWE) is an indicator of
short-term employee earnings growth.

Class I Shares means Class I Non-Voting Shares of the
Company.

Class II Shares means Class II Voting Shares of the
Company.

CODM means Chief Operating Decision Maker, and is
comprised of the Chair & Chief Executive Officer, and
the other members of the Executive Committee.

Company means ATCO Ltd. and, unless the context
otherwise requires, includes its subsidiaries and joint
arrangements.

Consumer price index (CPI) measures the average
change in prices over time that consumers pay for a
basket of goods and services.

Earnings means Adjusted Earnings as defined in the
Non-GAAP and Additional GAAP Measures section of
this MD&A.

GAAP means Canadian generally accepted accounting
principles.

GHG means greenhouse gas.

IFRS means International Financial Reporting
Standards.

77 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

APPENDIX 1
FOURTH QUARTER FINANCIAL
INFORMATION

Financial information for the three months ended December 31, 2020 and 2019 is shown below.

CONSOLIDATED STATEMENT OF EARNINGS

(millions of Canadian Dollars except per share data)

Revenues

Costs and expenses

Salaries, wages and benefits

Energy transmission and transportation

Plant and equipment maintenance

Fuel costs

Purchased power

Service concession arrangement costs

Materials and consumables

Depreciation and amortization

Franchise fees

Property and other taxes

Other

Gain on Sale of Operations

Earnings from investment in associate company

Earnings from investment in joint ventures

Operating profit

Interest income

Interest expense

Net finance costs

Earnings before income taxes

Income taxes

Earnings for the period

Earnings attributable to:

Class I and Class II Shares

Non-controlling interests

Earnings per Class I and Class II Share

Diluted earnings per Class I and Class II Share

Three Months Ended
December 31

2020

1,053

2019

1,182

(122)

(139)

(57)

(44)

(22)

(55)

—

(93)

(174)

(64)

(17)

(157)

(805)

—

7
13

268

(109)

(104)

164

(38)

126

$0.58

(49)

(66)

(28)

(51)

(9)

(151)

(172)

(68)

(17)

(94)

(844)

4
7

370

(124)

(115)

255

(90)

165

$0.73

$0.72

ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS 78

CONSOLIDATED STATEMENT OF CASH FLOWS

(millions of Canadian Dollars)

Operating activities
Earnings for the period
Adjustments to reconcile earnings to cash flows from operating activities
Changes in non-cash working capital
Change in receivable under service concession arrangement
Cash flows from operating activities

Investing activities

Additions to property, plant and equipment
Proceeds on disposal of property, plant and equipment

Additions to intangibles

Acquisition, net of cash acquired

Proceeds on sales of operations, net of cash disposed

Changes in non-cash working capital

Other
Cash flows used in investing activities

Financing activities
Issue of long-term debt
Repayment of long-term debt

Release of projected restricted funds
Purchase of shares by subsidiary companies
Repayment of non-recourse long-term debt
Repayment of lease liabilities
Net purchase of Class I Shares
Dividends paid to Class I and Class II Share owners
Dividends paid to non-controlling interests
Interest paid
Other
Cash flows used in financing activities

(Decrease) increase in cash position
Foreign currency translation
Beginning of period
End of period

Three Months Ended
December 31

2020

2019

126
390
(38)
—
478

(238)
—

(36)

—

(3)

(14)
(291)

19
(128)

—
(12)
—
(4)
(5)
(50)
(75)
(126)
(2)
(383)

(196)
(2)
1,298
1,100

165
304
2
(28)
443

(353)
3

(27)

(5)

222

3
(127)

13
(10)

146
—
(7)
(5)
(5)
(47)
(73)
(143)
(1)
(132)

184
(35)
991
1,140

79 ATCO LTD. 2020 MANAGEMENT'S DISCUSSION & ANALYSIS

ATCO LTD.

CONSOLIDATED
FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2020

TABLE OF CONTENTS

Management's Responsibility for Financial Reporting......................................................................................................

Independent Auditor’s Report..............................................................................................................................................

Consolidated Statements of Earnings..................................................................................................................................

Consolidated Statements of Comprehensive Income........................................................................................................

Consolidated Balance Sheets................................................................................................................................................

Consolidated Statements of Changes in Equity..................................................................................................................

Consolidated Statements of Cash Flows..............................................................................................................................

Notes to Consolidated Financial Statements

General Information

1.
2.

The Company and its Operations.......................................................................................................................................

Basis of Presentation............................................................................................................................................................

Information on Financial Performance

Segmented Information.......................................................................................................................................................

3.
4.
Revenues................................................................................................................................................................................
5. Other Costs and Expenses...................................................................................................................................................
6.
7.
8.

Interest Expense...................................................................................................................................................................

Income Taxes.........................................................................................................................................................................

Earnings per Share...............................................................................................................................................................

Information on Financial Position

9.
Inventories.............................................................................................................................................................................
10. Property, Plant and Equipment...........................................................................................................................................
11.
Intangibles.............................................................................................................................................................................
12. Goodwill.................................................................................................................................................................................
13. Long-Term Debt....................................................................................................................................................................
14. Retirement Benefits..............................................................................................................................................................
15. Balances from Contracts with Customers.........................................................................................................................
16. Leases.....................................................................................................................................................................................
17. Class I Non-Voting and Class II Voting Shares...................................................................................................................

Page
82
83
88
89
90
91
92

93
93

94
102
103
103
104
107

107
108
110
110
111
112
117
118
121

Information on Cash Flow

18. Cash Flow Information.........................................................................................................................................................

122

Risk

19. Financial Instruments...........................................................................................................................................................
20. Risk Management.................................................................................................................................................................
21. Capital Disclosures...............................................................................................................................................................
22. Significant Judgments, Estimates and Assumptions........................................................................................................

Group Structure
6
.

23. Business Combinations........................................................................................................................................................
24.
Investment in Equity Interest in Associate Company.......................................................................................................
25. Subsidiaries...........................................................................................................................................................................
26.
Joint Arrangements...............................................................................................................................................................
27. Non-Controlling Interests....................................................................................................................................................

Other Information

28. Share-Based Compensation Plans.....................................................................................................................................
29. Contingencies........................................................................................................................................................................
30. Commitments........................................................................................................................................................................
31. Related Party Transactions..................................................................................................................................................
32. Accounting Policies...............................................................................................................................................................

124
127
131
133

135
139
140
140
142

144
147
147
147
148

81 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

MANAGEMENT'S RESPONSIBILITY FOR
FINANCIAL REPORTING

Management is responsible for preparing the consolidated financial statements of ATCO Ltd. (the Company) in
accordance with International Financial Reporting Standards, which include amounts based on estimates and
judgments. Management is also responsible for the preparation of the Management's Discussion and Analysis and
other financial information contained in the Company's Annual Report, and ensures that it is consistent with the
consolidated financial statements.

Management has established internal accounting and financial reporting control systems, which are subject to
periodic review by the Company’s internal auditors, to meet its responsibility for reliable and accurate reporting.
Integral to these control systems are a code of ethics and management policies that provide guidance and direction
to employees, as well as a system of corporate governance that provides oversight to the Company’s operating,
reporting and risk management activities.

The consolidated financial statements are approved by the Board of Directors on the recommendation of the Audit
& Risk Committee. The Audit & Risk Committee is comprised entirely of independent Directors. The Audit & Risk
Committee meets regularly with management and the independent auditors to review significant accounting and
financial reporting matters, to assure that management is carrying out its responsibilities and to review and
approve the consolidated financial statements.

PricewaterhouseCoopers LLP, our independent auditors, are engaged to perform an audit of the consolidated
financial statements and expresses a professional opinion on the results. The Independent Auditor's Report to the
Share Owners appears on the following page. PricewaterhouseCoopers LLP have full and independent access to the
Audit & Risk Committee and management to discuss their audit and related matters.

[Original signed by N.C. Southern]
Chair & Chief Executive Officer

[Original signed by D.A. DeChamplain]
Executive Vice President & Chief Financial Officer

February 24, 2021

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 82

Independent auditor’s report

To the Share Owners of ATCO Ltd.

Our opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
financial position of ATCO Ltd. and its subsidiaries (together, the Company) as at December 31, 2020 and
2019, and its financial performance and its cash flows for the years then ended in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board
(IFRS).

What we have audited
The Company’s consolidated financial statements comprise:

•

the consolidated statements of earnings for the years ended December 31, 2020 and 2019;

the consolidated statements of comprehensive income for the years ended December 31, 2020 and 2019;

the consolidated balance sheets as at December 31, 2020 and 2019;

the consolidated statements of changes in equity for the years ended December 31, 2020 and 2019;

the consolidated statements of cash flows for the years ended December 31, 2020 and 2019; and

the notes to consolidated financial statements, which include significant accounting policies and other
explanatory information.

Basis for opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the
consolidated financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.

Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit
of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in
accordance with these requirements.

PricewaterhouseCoopers LLP

111-5th Avenue SW, Suite 3100, Calgary, Alberta, Canada T2P 5L3
T: +1 403 509 7500, F: +1 403 781 1825

“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

83 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the consolidated financial statements for the year ended December 31, 2020. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter

Assessment of retirement benefit obligations

Refer to note 14 – Retirement Benefits and note 22 –
Significant Judgments, Estimates and Assumptions to
the consolidated financial statements.

The Company maintains registered defined benefit and
defined contribution pension plans for most of its
employees. It also provides other post-employment
benefits for retirees and their dependents. The
Company accrues for its obligations under defined
benefit pension and other post-employment benefits
plans (the retirement benefit obligations). As at
December 31, 2020, total accrued benefit obligations
were $3,544 million and the market value of plan assets
was $3,105 million. These balances are presented net
on the consolidated balance sheet, resulting in net
retirement benefit obligations of $439 million.

In determining the retirement benefit obligations,
management consults with independent actuaries when
setting the assumptions used to estimate retirement
benefit obligations and the cost of providing retirement
benefits during the period. The significant assumptions
used by management in determining the Company’s
retirement benefit obligations include discount rate,
long-term inflation rate, future compensation rates,
health care cost trend rates and life expectancy rates.

We determined that this is a key audit matter due to the
significance of the retirement benefit obligations and the
significant judgment made by management in
estimating the Company’s retirement benefit obligations.
In addition, our audit effort involved the use of
professionals with specialized skill and knowledge in the
field of actuarial services.

How our audit addressed the key audit matter

Our approach to addressing the matter involved the
following procedures, among others:

• Tested how management determined the retirement

benefit obligations, which includes:

–

Utilized a professional with specialized skills
and knowledge in the field of actuarial services,
who assisted in testing management’s process
for estimating the total accrued benefit
obligations, appropriateness of the
methodology, and assessed the reasonableness
of management's assumptions such as discount
rate, long-term inflation rates, future
compensation rates, healthcare costs trend
rates and life expectancy rates.

Tested the underlying data used in the
determination of retirement benefit obligations.

The work of management’s independent
actuaries was used in performing the
procedures to evaluate the reasonableness of
the retirement benefit obligations. As a basis for
using this work, management’s independent
actuaries’ competence, capability and objectivity
were evaluated, their work performed was
understood and the appropriateness of their
work as audit evidence was evaluated by
considering the relevance and reasonableness
of the assumptions, methods and findings.

• Tested disclosures related to the sensitivity

assumptions used in estimating retirement benefit
obligations.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 84

Key audit matter

How our audit addressed the key audit matter

Assessment of unbilled revenue related to Utilities
segment

Our approach to addressing the matter included the
following procedures, among others:

Refer to note 4 – Revenues and note 22 – Significant
Judgments, Estimates and Assumptions to the
consolidated financial statements.

The Company had $132 million of unbilled revenue
related to Utilities segment as at December 31, 2020.

The revenue recognized by the Company includes an
estimate of consumption by customers of natural gas
and electricity that has not yet been billed (unbilled
revenue).

The estimate is derived from unbilled gas and
electricity distribution services supplied to customers
and is based on historical consumption patterns.
Management applies judgment to the measure and
value of the estimated consumption.

We determined that this is a key audit matter due to (i)
the significance of the unbilled revenue; (ii) the
judgment applied by management to estimate the
consumption; and (iii) the significant auditor effort in
performing procedures to test the estimated amount of
unbilled revenue.

• Tested the reasonableness of the estimate of

unbilled revenue through evidence obtained from
events occurring up to the date of the auditor's
report, which includes the following:

–

Tested a sample of billings made after
December 31, 2020 and compared the
relevant amounts of these billings to the
corresponding estimate of unbilled revenue
recorded.

Agreed the pricing applied to the sample of
billings to the externally published rates.

• Tested the operating effectiveness of internal

controls relating to billed and unbilled revenue,
including information technology (IT) general
controls of the relevant IT systems that
management uses for meter readings and billings.

Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis, which we obtained prior to the date of this auditor’s report and the information, other
than the consolidated financial statements and our auditor’s report thereon, included in the annual report,
which is expected to be made available to us after that date.

Our opinion on the consolidated financial statements does not cover the other information and we do not and
will not express an opinion or any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.

85 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard. When we read the information, other than the
consolidated financial statements and our auditor’s report thereon, included in the annual report, if we
conclude that there is a material misstatement therein, we are required to communicate the matter to those
charged with governance.

Responsibilities of management and those charged with governance for the
consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements
in accordance with IFRS, and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to
fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless management either intends to liquidate the Company or to
cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with Canadian generally accepted auditing standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:

•

Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that

are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 86

•

Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the
related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Company to cease to continue as a
going concern.

Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Company to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were
of most significance in the audit of the consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Shannon Ryhorchuk.

[Original signed by “PricewaterhouseCoopers LLP”]

Chartered Professional Accountants

Calgary, Alberta
February 24, 2021

87 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS
OF EARNINGS

(millions of Canadian Dollars except per share data)

Revenues

Costs and expenses
Salaries, wages and benefits
Energy transmission and transportation
Plant and equipment maintenance
Fuel costs
Purchased power
Service concession arrangement costs
Materials and consumables
Depreciation, amortization and impairment
Franchise fees
Property and other taxes
Other

Gain on sale of operations
Earnings from investment in associate company
Earnings from investment in joint ventures

Operating profit

Interest income
Interest expense
Net finance costs

Earnings before income taxes
Income tax expense

Earnings for the year

Earnings attributable to:

Class I and Class II Shares
Non-controlling interests

Earnings per Class I and Class II Share

Diluted earnings per Class I and Class II Share

See accompanying Notes to Consolidated Financial Statements.

Year Ended
December 31

Note

2020

2019

3,944

4,706

(531)
(225)
(200)
(86)
(211)

—

(388)
(669)
(243)
(72)
(298)
(2,923)

—

15
34

(538)
(203)
(272)
(199)
(207)
(127)
(480)
(637)
(239)
(154)
(306)
(3,362)

174
15
24

1,070

1,557

18
(425)
(407)

663
(166)

497

252
245
497

$2.21

$2.20

27
(511)
(484)

1,073
(66)

1,007

513
494
1,007

$4.49

$4.47

10, 11, 16

23
24
26

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 88

CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME

(millions of Canadian Dollars)

Earnings for the year

Other comprehensive income (loss), net of income taxes

Items that will not be reclassified to earnings:
Re-measurement of retirement benefits (1)

Year Ended
December 31

Note

2020

2019

497

1,007

(44)

Items that are or may be reclassified subsequently to earnings:
Cash flow hedges (2)
Cash flow hedges reclassified to earnings (3)
Cash flow hedges reclassified to earnings as a result of sale of operations (4)
Foreign currency translation adjustment (5)
Share of other comprehensive loss in associate company (5)

Other comprehensive income (loss)
Comprehensive income for the year

Comprehensive income attributable to:

Class I and Class II Shares
Non-controlling interests

(1)

(2)

(3)

(4)

(5)

Net of income taxes of nil for the year ended December 31, 2020 (2019 - $14 million).

Net of income taxes of $6 million for the year ended December 31, 2020 (2019 - $1 million).

Net of income taxes of nil for the year ended December 31, 2020 (2019 - $(3) million).

Net of income taxes of nil for the year ended December 31, 2020 (2019 - $(2) million).

Net of income taxes of nil.

See accompanying Notes to Consolidated Financial Statements.

(13)

—

25
(2)

10
12
509

257

252

509

(2)
8
9
(83)
(2)

(70)
(114)
893

431

462

893

89 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(millions of Canadian Dollars)

ASSETS
Current assets
Cash and cash equivalents
Accounts receivable and contract assets
Finance lease receivables
Inventories
Prepaid expenses and other current assets

Non-current assets
Property, plant and equipment
Intangibles
Right-of-use assets
Goodwill
Investment in joint ventures
Investment in associate company
Finance lease receivables
Deferred income tax assets
Other assets
Total assets

LIABILITIES
Current liabilities
Bank indebtedness
Accounts payable and accrued liabilities
Lease liabilities
Provisions and other current liabilities
Long-term debt

Non-current liabilities
Deferred income tax liabilities
Retirement benefit obligations
Customer contributions
Lease liabilities
Other liabilities
Long-term debt
Total liabilities

EQUITY
Class I and Class II Share owners' equity
Class I and Class II shares
Contributed surplus
Retained earnings
Accumulated other comprehensive loss

Non-controlling interests
Total equity
Total liabilities and equity

Note

2020

2019

December 31

18
15
16
9

10
11
16
12
26
24
16
7

16
3
13

7
14
15
16
3
13

1,103
727
9
76
124
2,039

18,327
685
97
82
186
460
166
85
73
22,200

3
695
16
164
196
1,074

1,443
439
1,756
84
132
9,423
14,351

178
6
3,880
(12)
4,052
3,797
7,849
22,200

1,140
731
9
64
93
2,037

17,857
662
96
82
187
468
170
83
61
21,703

—

675
15
47
173
910

1,319
429
1,720
84
120
9,263
13,845

173
12
3,832
(17)
4,000
3,858
7,858
21,703

See accompanying Notes to Consolidated Financial Statements.

[Original signed by N.C. Southern]

[Original signed by R.J. Routs]

DIRECTOR

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 90

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Class I and
Class II
Shares

Contributed
Surplus

Retained
Earnings

D
e
c
e
m
b
e
r
3
1

2
0
2
0

S
e
e
a
c
c
o
m
p
a
n
y
i
n
g
N
o
t
e
s

t
o
C
o
n
s
o

l
i

O
t
h
e
r

C
h
a
n
g
e
s

n
o
w
n
e
r
s
h
p

n
t
e
r
e
s
t

S
h
a
r
e
s

i
s
s
u
e
d

D
i
v
i
d
e
n
d
s

S
h
a
r
e
-
b
a
s
e
d
c
o
m
p
e
n
s
a
t
i
o
n

S
h
a
r
e
s
p
u
r
c
h
a
s
e
d
a
n
d
c
a
n
c
e

l
l

e
d

r
e
t
a
n
e
d
e
a
r
n
n
g
s

D
e
c
e
m
b
e
r
3
1

2
0
1
8

E
a
r
n
n
g
s

f
o
r

t
h
e
y
e
a
r

O
t
h
e
r

c
o
m
p
r
e
h
e
n
s
i
v
e

o
s
s

L
o
s
s
e
s
o
n
r
e
t
i
r
e
m
e
n
t
b
e
n
e
f
i
t
s

(

i
l
l
i

o
n
s
o
f
C
a
n
a
d
a
n
D
o

l
l

a
r
s
)

D
i
v
i
d
e
n
d
s

D
e
c
e
m
b
e
r
3
1

2
0
1
9

E
a
r
n
n
g
s

f
o
r

t
h
e
y
e
a
r

S
h
a
r
e
-
b
a
s
e
d
c
o
m
p
e
n
s
a
t
i
o
n

O
t
h
e
r

c
o
m
p
r
e
h
e
n
s
i
v
e

n
c
o
m
e

S
h
a
r
e
s

i
s
s
u
e
d

p
u
r
c
h
a
s
e
d
a
n
d
c
a
n
c
e

l
l

e
d

r
e
t
a
n
e
d
e
a
r
n
n
g
s

G
a
n
s
o
n
r
e
t
i
r
e
m
e
n
t
b
e
n
e
f
i
t
s

t
r
a
n
s
f
e
r
r
e
d
t
o

n
s
u
b
s
i
d
a
r
y

c
o
m
p
a
n
y

d
a
t
e
d
F
i
n
a
n
c
i
a

S
t
a
t
e
m
e
n
t
s
.

(millions of Canadian Dollars)

December 31, 2018

Earnings for the year

1
7

2
7

1
7

2
7

2
8

1
7

1
4

Other comprehensive loss

1
7
8

Losses on retirement benefits transferred to
retained earnings

Shares issued, purchased and cancelled
1

—

Dividends

Share-based compensation

December 31, 2019
6

—

Earnings for the year

(
6
)

Other comprehensive income

—

1
7
3

1
2

Note

1
7

2
7

1
7

2
7

1
4

2
8

—

17, 27
1

—

17, 27

—

173
1
1

Gains on retirement benefits transferred to
retained earnings

—

(
3
)

(
6
)

—

(
2
0
0
)

3
,
8
8
0

Shares issued

Shares purchased and cancelled

Dividends

2
5
2

—

3
8
3
2

—

(
1
8
6
)

5
1
3

—

(
5
)

14
(
2
5
)
17

17, 27

Share-based compensation

Changes in ownership interest in subsidiary company

—

(
2
)

(
1
2
)

28
2
5

(
8
2
)

—

(
1
7
)

Other

December 31, 2020
4
,
0
5
2

(
2
0
0
)
See accompanying Notes to Consolidated Financial Statements.

2
5
2

(
6
)

(
2
)

—

(
1
8
6
)

4
0
0
0

178
3
7
5
5

5
1
3

(
4
)

—

(
8
2
)

3
,
7
9
7

7
,
8
4
9

(
1
)

—

(
3
0
1
)

(
1
3
)

—

3
8
5
8

2
4
5

(
2
9
4
)

—

3
6
8
7

4
9
4

(
3
2
)

—

(
5
0
1
)

(
1
9
)

—

4
9
7

1
2

7
8
5
8

(
4
8
0
)

(
4
)

—

1
0
0
7

7
4
4
2

(
1
1
4
)

91 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

169

—

1
—
6
1
9

—

3
5
3
—
5
1

—

4
4
0
—

—

N
o
t
e

S
h
a
r
e
s

C
l
a
s
s

I
I

C
o
n
t
r
i
b
u
t
e
d

S
u
r
p
u
s

E
a
r
n
n
g
s

R
e
t
a
i
n
e
d

C
o
m
p
r
e
h
e
n
s
i
v
e

(
L
o
s
s
)

I
n
c
o
m
e

C
l
a
s
s

I
a
n
d

—

A
c
c
u
m
(6)
u
l
a
t
e
d

—

O
t
h
e
r

—

C
o
n
t
r
o

l
l
i

n
g

N
o
n

T
o
t
a
l

I
n
t
e
r
e
s
t
s

T
o
t
a
l
E
q
u
i
t
y

C
O
N
S
O
L
I
D
A
T
E
D
S
T
A
T
E
M
E
N
T
S
O
F
C
H
A
N
G
E
S

N
E
Q
U
I
T
Y

3,535

513

—

(25)

(5)

(186)

—

3,832

252

—

(6)

(200)

(3)

—

3,880

Accumulated
Other
Comprehensive
(Loss) Income

Non-

Controlling

Total

Interests

Total Equity

3,755

3,687

—

(82)

—

513

(82)

494

(32)

—

(4)

(186)

(294)

(480)

(17)

4,000

3,858

7,858

—

(2)

—

252

245

497

(200)

—

(6)

(2)

(12)

4,052

3,797

7,849

7,442

1,007

(114)

—

(4)

—

(1)

(13)

(301)

(19)

(501)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(millions of Canadian Dollars)

Note

2020

2019

Year Ended
December 31

Operating activities
Earnings for the year
Adjustments to reconcile earnings to cash flows from operating activities
Changes in non-cash working capital
Change in receivable under service concession arrangement

Cash flows from operating activities

Investing activities
Additions to property, plant and equipment
Proceeds on disposal of property, plant and equipment
Additions to intangibles
Investment in equity interest in associate company
Proceeds on sale of operations, net of cash disposed
Investment in joint ventures
Changes in non-cash working capital
Other
Cash flows used in investing activities

Financing activities
Net repayment of short-term debt
Issue of long-term debt
Repayment of long-term debt
Release of restricted project funds
Repayment of non-recourse long-term debt
Repayment of lease liabilities
(Net purchase) issue of shares by subsidiary companies
Net purchase of Class I Shares
Dividends paid to Class I and Class II Share owners
Dividends paid to non-controlling interests
Interest paid
Other
Cash flows used in financing activities

(Decrease) increase in cash position (1)
Foreign currency translation
Beginning of year
End of year

18
18

24
23
26
18

18
13, 18
13, 18

18
16

17
27

497
1,307
39

—

1,843

(940)
7
(88)

—

(9)
(4)
(27)
(1,061)

—

348
(219)

—

(18)
(12)
(5)
(200)
(301)
(413)
(3)
(823)

(41)
1
1,140
1,100

1,007
920
(205)
(180)

1,542

(1,128)
4
(74)
(9)
903

—

7
8
(289)

(175)
632
(554)
329
(32)
(19)
3
(2)
(186)
(294)
(498)
14
(782)

471
(22)
691
1,140

(1)

Cash position includes $39 million which is not available for general use by the Company (2019 - $79 million).

See accompanying Notes to Consolidated Financial Statements.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 92

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

DECEMBER 31, 2020

(Tabular amounts in millions of Canadian Dollars, except as otherwise noted)

1. THE COMPANY AND ITS OPERATIONS

ATCO Ltd. was incorporated under the laws of the province of Alberta and is listed on the Toronto Stock Exchange.
Its head office and registered office is at 4th Floor, West Building, 5302 Forand Street SW, Calgary, Alberta T3E 8B4.
ATCO Ltd. is controlled by Sentgraf Enterprises Ltd. and its controlling share owner, the Southern family.

ATCO Ltd. is engaged in the following business activities:

•

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);

Canadian Utilities Limited, including:

•

Utilities (electricity and natural gas transmission and distribution and international electricity
operations);

Energy Infrastructure (electricity generation, energy storage and industrial water solutions);

Retail Energy (electricity and natural gas retail sales) (included in the Corporate & Other segment);
and

•

Neltume Ports (ports and transportation logistics) (see Note 24).

The consolidated financial statements include the accounts of ATCO Ltd. and its subsidiaries (see Note 25). The
statements also include the accounts of a proportionate share of the Company's investments in joint operations, its
equity-accounted investments in joint ventures (see Note 26) and its equity-accounted investment in associate
company (see Note 24). In these financial statements, "the Company" means ATCO Ltd., its subsidiaries, joint
arrangements and the associate company.

2. BASIS OF PRESENTATION

STATEMENT OF COMPLIANCE

The consolidated financial statements are prepared according to International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB) and interpretations of the IFRS Interpretations
Committee (IFRIC).

The Board of Directors (Board) authorized these consolidated financial statements for issue on February 24, 2021.

BASIS OF MEASUREMENT

The consolidated financial statements are prepared on a historic cost basis, except for derivative financial
instruments, retirement benefit obligations and cash-settled share-based compensation liabilities which are carried
at remeasured amounts or fair value. The Company's significant accounting policies are described in Note 32.

Certain comparative figures have been reclassified to conform to the current presentation.

FUNCTIONAL AND PRESENTATION CURRENCY

The consolidated financial statements are presented in Canadian dollars. Each entity within the Company
determines its own functional currency based on the primary economic environment in which it operates.

93 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

USE OF JUDGMENTS AND ESTIMATES

Management makes judgments and estimates that could significantly affect how policies are applied, amounts in
the consolidated financial statements are reported, and contingent assets and liabilities are disclosed. Most often
these judgments and estimates concern matters that are inherently complex and uncertain. Judgments and
estimates are reviewed on an on-going basis; changes to accounting estimates are recognized prospectively. The
significant judgments, estimates and assumptions are described in Note 22.

3. SEGMENTED INFORMATION
The Company's operating segments are reported in a manner consistent with the internal reporting provided to the
Chief Operating Decision Maker (CODM). The CODM is comprised of the Chair and Chief Executive Officer, and the
other members of the Executive Committee.

The Accounting policies applied by the segments are the same as those applied by the Company, except for those
used in the calculation of adjusted earnings. Intersegment transactions are measured at the exchange amount, as
agreed to by the related parties.

In 2020, the Company reorganized its operating subsidiaries into the following segments:

•

Structures & Logistics;

Utilities (Electricity and Natural Gas);

Energy Infrastructure;

Neltume Ports; and

Corporate & Other.

Comparative amounts for prior periods have been restated to reflect the realigned segments. Management has
determined that the operating subsidiaries in the reportable segments below share similar economic
characteristics, as such, they have been aggregated.

The descriptions and principal operating activities of the realigned reportable segments are as follows:

Structures & Logistics

Utilities

Electricity

Natural
Gas

Energy
Infrastructure

Canadian
Utilities
Limited

The Structures & Logistics segment includes ATCO Structures & Logistics. This
company offers 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.

The Utilities (Electricity) segment includes ATCO Electric, which provides
regulated electricity transmission and distribution services in northern and
central east Alberta, the Yukon and the Northwest Territories and the
Company's 50 per cent ownership interest in LUMA Energy LLC which provides
international electricity operations (see Note 26).

The Utilities (Natural Gas) segment includes ATCO Gas, ATCO Pipelines and
ATCO Gas Australia. These businesses provide integrated natural gas
transmission and distribution services throughout Alberta, in the Lloydminster
area of Saskatchewan and in Western Australia.
The Energy Infrastructure segment includes ATCO Power (2010) (in 2019, the
Company sold its Canadian fossil fuel-based electricity generation business),
Alberta PowerLine (before sale in 2019), ATCO Energy Solutions and ATCO Power
Australia. Together these businesses provide electricity generation, natural gas
storage, industrial water solutions and related infrastructure development
throughout Alberta, the Yukon, the Northwest Territories, Australia, Mexico and
Chile.

Corporate & Other

Canadian Utilities Limited Corporate & Other includes intersegment eliminations
and ATCO Energy, a retail electricity and natural gas business in Alberta.

Neltume Ports

Corporate & Other

The Neltume Ports segment includes the equity interest in Neltume Ports S.A., a
leading port operator and developer in South America. Neltume Ports operates
sixteen port facilities and three port operation services businesses located in
Chile, Uruguay, Argentina and Brazil.
ATCO Corporate & Other includes commercial real estate owned by the
Company and intersegment eliminations.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 94

Results by operating segment for the year ended December 31 are shown below.

2020

Structures

Neltume

Corporate

Canadian Utilities Limited

& Logistics

Ports

& Other

Utilities (1)

Energy
Infrastructure

Corporate

& Other Consolidated

ATCO

Consolidated

2019
Revenues - external

Revenues -
intersegment
Revenues

Operating expenses (2)

Depreciation,

amortization and
impairment

Gain on sale of

operations (Note 23)

Earnings from
investment in
associate company

Earnings from
investment in joint
ventures

Net finance costs

Earnings (loss) before

income taxes

Income tax (expense)

recovery

Earnings (loss) for the

year

Adjusted earnings
(loss) for the year

Total assets

Capital expenditures (3)

714
801

—

2
714
803

(595)
(702)

(52)

(45)

—

(7)
(7)
63
52

(14)
(15)
49
37
57

1,069
987

125
105

—

15
15

—

15
15
15

460
466

—

(3)

—

(2)
(3)
(2)

2,907
2,910

25
46
2,932
2,956

149
824

46
32
195
856

177
171

(71)
(78)
106
93

3,233
3,905

3,944
4,706

—

3,233
3,905

3,944
4,706

23
22

(1,408)
(1,315)

(159)
(647)

(115)
(83)

(1,682)
(2,045)

(2,254)
(2,725)

(7)

(568)

(20)

(22)

(610)

(7)

(582)

(10)

(542)

—

(14)
(15)
(1)
(5)

—

2
(1)
(3)

—

(6)

—

(373)
(379)
597
720

(145)
27
452
747
305

301

(33)

—

174

—

(10)
(87)
23
284

(7)
(69)
16
215
15

375 18,310
206 17,852

13
(16)

876
1,035

993
1,754

19
88

—

(3)
4
(34)
7

—

(11)
(34)
(4)
(40)

(39)

993
438

8
6

(669)

(637)

—

174

(407)
(484)
663
1,073

(166)
(66)
497
1,007
352

365

—

174

—

(386)
(462)
586
1,011

(152)
(53)
434
958
280

319

20,296
20,044

903
1,129

22,200
21,703

1,041
1,218

(1)

Includes the collective results of the Electricity and the Natural Gas operating segments, and related intersegment eliminations. Details of the results by
operating segments included in the Utilities are disclosed below.

(2)

Includes total costs and expenses, excluding depreciation, amortization and impairment expense.

(3)

Includes additions to property, plant and equipment and intangibles and $13 million of interest capitalized during construction for the year ended
December 31, 2020 (2019 - $16 million).

95 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

Results of the operating segments included in the Utilities for the year ended December 31 are shown below.

2020

2019
Revenues - external

Revenues - intersegment

Revenues

Operating expenses (1)

Depreciation and amortization

Earnings from investment in joint ventures

Net finance costs

Earnings before income taxes

Income tax (expense) recovery

Earnings for the year

Adjusted earnings for the year

Total assets

Capital expenditures (2)

Utilities

Electricity

Natural Gas

Intersegment
eliminations

1,368
1,390

19
44
1,387
1,434

(545)
(500)

(309)
(296)

—

(229)
(231)
318
407

(77)
37
241
444
166
172

10,326

10,211

366
389

1,539
1,520

9
4
1,548
1,524

(866)
(820)

(259)
(246)

—

(144)
(148)
279
310

(68)
(9)
211
301
139
130

7,985

7,641

510
646

—

(3)
(2)
(3)
(2)

3
5

—

(1)

—

(1)

—

Consolidated
2,907
2,910

25
46
2,932
2,956

(1,408)
(1,315)

(568)
(542)

—

(373)
(379)
597
720

(145)
27
452
747
305
301

18,310

17,852

876
1,035

(1)
(2)

Includes total costs and expenses, excluding depreciation and amortization expense.
Includes additions to property, plant and equipment and intangibles and $12 million of interest capitalized during construction for the year ended
December 31, 2020 (2019 - $16 million).

GEOGRAPHIC SEGMENTS

Financial information by geographic area is summarized below.

Revenues - external

Canada
Australia
Other
Total

2020
3,428
385
131
3,944

2019
4,180
364
162
4,706

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 96

Non-current assets

Canada
Australia
South America
Other
Total

Property, Plant
and Equipment

2020
16,567
1,402
44
314
18,327

2019
16,247
1,288

—

322
17,857

Intangible Assets

2020
660
13
1
11
685

2019
635
14

—

13
662

Other Assets (1)
2019
229
54
492
6
781

2020
277
53
461
4
795

2020
17,504
1,468
506
329
19,807

Total

2019
17,111
1,356
492
341
19,300

(1) Other assets exclude financial instruments, deferred income tax assets and goodwill.

ADJUSTED EARNINGS

Adjusted earnings are earnings attributable to Class I and II Shares after adjusting for:

•

the timing of revenues and expenses for rate-regulated activities;

one-time gains and losses;

unrealized gains and losses on mark-to-market forward and swap commodity contracts;

significant impairments; and

items that are not in the normal course of business or a result of day-to-day operations.

Adjusted earnings are a key measure of segment earnings used by the CODM to assess segment performance and
allocate resources. Other accounts in the consolidated financial statements have not been adjusted as they are not
used by the CODM for those purposes.

97 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

The reconciliation of adjusted earnings and earnings for the year ended December 31 is shown below.

2020

2019

Structures Neltume

Corporate

Canadian Utilities Limited

& Logistics

Ports

& Other

Utilities

Energy
Infrastructure

Corporate

& Other Consolidated

ATCO

Consolidated

15
15

—

(6)

305
301

15
57

(40)
(39)

280
319

352
365

57
37

(3)

—

(5)

—

Adjusted earnings
(loss)

Early termination of
the master service
agreement for
managed IT services

Gain on sale of
operations

Impairment and other

costs

Unrealized (losses)
gains on mark-to-
market forward and
swap commodity
contracts

Rate-regulated
activities

IT Common Matters
decision

Other

Earnings (loss)

attributable to Class I
and Class II Shares

Earnings attributable
to non-controlling
interests

Earnings for the year

(26)

(1)

(2)

(29)

(32)

—

(4)

—

(2)

—

(9)

—

(15)

—

(20)

—

(1)
1

(1)

(3)

—

(34)
97

(10)
(12)

—

231

386

(2)

(4)

—

(1)
(6)

112

2
(1)

—

(1)

(51)

(34)

(32)
96

(10)

(12)

(1)
(7)

189

464

(32)
98

(10)

(12)

(2)
(6)

252

513

245

494
497
1,007

Early termination of the master service agreement for managed IT services

On December 31, 2020, the Company signed a Master Services Agreement (MSA) with IBM Canada Ltd. (IBM) to
provide managed information technology (IT) services. These services are currently provided by Wipro Ltd. (Wipro)
under a ten-year MSA expiring December 2024. The transition of the managed IT services from Wipro to IBM will be
completed over a six-month period, which commenced February 1, 2021.

On December 31, 2020, the Company recognized an onerous contract provision of $75 million ($32 million after-tax
and non-controlling interests (NCI), which represents management’s best estimate of the costs to exit the Wipro
MSA. The provision is included in provisions and other current liabilities in the consolidated balance sheets and
other expenses in the consolidated statements of earnings. The actual costs will be finalized later in 2021. The
onerous contract provision is not in the normal course of business and has been excluded from adjusted earnings.

Gain on sale of operations

In 2019, the Company closed a series of transactions related to the sale of its Canadian fossil fuel-based electricity
generation business and Alberta PowerLine (see Note 23). These sales resulted in an aggregate gain of $174 million
($65 million after-tax and NCI). As the gain was related to a series of one-time transactions, it was excluded from
adjusted earnings.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 98

Impairment and other costs

In 2020, impairment (see Note 10) and other costs not in the normal course of business of $20 million, after tax and
NCI, were recorded. These costs mainly relate to certain assets that no longer represent strategic value to the
Company.

ATCO Structures & Logistics Ltd. closed its manufacturing facility located in Pocatello, Idaho, relocated materials and
equipment to its manufacturing facilities in Calgary, Alberta and Diboll, Texas and recorded $3 million in one-time
closure costs in the second quarter of 2020.

Unrealized gains and losses on mark-to-market forward and swap commodity contracts

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 of Canadian Utilities Limited.

Realized gains or losses are recognized in adjusted earnings when the commodity contracts are settled.

Rate-regulated activities

ATCO Electric and its subsidiaries, ATCO Electric Yukon, Northland Utilities (NWT) and Northland Utilities
(Yellowknife), as well as ATCO Gas, ATCO Pipelines and ATCO Gas Australia are collectively referred to as the Utilities.

There is currently no specific guidance under IFRS for rate-regulated entities that the Company is eligible to adopt.
In the absence of this guidance, the Utilities do not recognize assets and liabilities from rate-regulated activities as
may be directed by regulatory decisions. Instead, the Utilities recognize revenues in earnings when amounts are
billed to customers, consistent with the regulator-approved rate design. Operating costs and expenses are recorded
when incurred. Costs incurred in constructing an asset that meet the asset recognition criteria are included in the
related property, plant and equipment or intangible asset.

99 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

Rate-regulated accounting differs from IFRS in the following ways:

Timing Adjustment

Items

RRA Treatment

IFRS Treatment

1. Additional revenues
billed in current
period

Future removal and site
restoration costs, and impact
of colder temperatures.

The Company defers the
recognition of cash received
in advance of future
expenditures.

The Company recognizes
revenues when amounts are
billed to customers and costs
when they are incurred.

2. Revenues to be
billed in future
periods

Deferred income taxes,
impact of warmer
temperatures, and impact of
inflation on rate base.

The Company recognizes
revenues associated with
recoverable costs in advance
of future billings to
customers.

The Company recognizes
costs when they are incurred,
but does not recognize their
recovery until customer rates
are changed and amounts
are collected through future
billings.

3. Regulatory

decisions received

Regulatory decisions received
which relate to current and
prior periods.

4. Settlement of
regulatory
decisions and other
items

Settlement of amounts
receivable or payable to
customers and other items.

The Company recognizes the
earnings from a regulatory
decision pertaining to
current and prior periods
when the decision is
received.

The Company does not
recognize earnings from a
regulatory decision when it is
received as regulatory assets
and liabilities are not
recorded under IFRS.

The Company recognizes the
amount receivable or
payable to customers as a
reduction in its regulatory
assets and liabilities when
collected or refunded
through future billings.

The Company recognizes
earnings when customer
rates are changed and
amounts are recovered or
refunded to customers
through future billings.

For the year ended December 31, the significant timing adjustments as a result of the differences between rate-
regulated accounting and IFRS are as follows:

Additional revenues billed in current period

Future removal and site restoration costs (1)
Impact of colder temperatures (2)
Revenues to be billed in future periods

Deferred income taxes (3)
Deferred income taxes due to decrease in provincial corporate income tax (4)
Impact of inflation on rate base (5)
Regulatory decisions received (see below)
Settlement of regulatory decisions and other items (6)

2020

2019

41
1

(55)

—

(3)

—

(16)
(32)

34
7

(54)
106
(7)
3
9
98

(1)

(2)

(3)

(4)

(5)

Removal and site restoration costs are billed to customers over the estimated useful life of the related assets based on forecast costs to be incurred in
future periods.

ATCO Gas' customer rates are based on a forecast of normal temperatures. Fluctuations in temperatures may result in more or less revenue being
recovered from customers than forecast. Revenues above or below the normal in the current period are refunded to or recovered from customers in
future periods.

Income taxes are billed to customers when paid by the Company.

In 2019, the Government of Alberta enacted a phased decrease in the provincial corporate income tax rate from 12 per cent to 8 per cent. This decrease
was phased in increments from July 1, 2019 (see Note 7). As a result of this change, the Alberta Utilities decreased deferred income taxes and increased
earnings in 2019 by $106 million.

The inflation-indexed portion of ATCO Gas Australia's rate base is billed to customers through the recovery of depreciation in subsequent periods based
on the actual or forecasted annual rate of inflation. Under rate-regulated accounting, revenue is recognized in the current period for the inflation
component of rate base when it is earned. Differences between the amounts earned and the amounts billed to customers are deferred and recognized
in revenues over the service life of the related assets.

(6)

In 2020, ATCO Electric Distribution recorded a decrease in earnings of $14 million related to payments to customers for transmission costs and capital
related items.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 100

Regulatory decisions received

Under rate-regulated accounting, the Company recognizes earnings from a regulatory decision pertaining to current
and prior periods when the decision is received. A description of the significant regulatory decisions recognized in
adjusted earnings in 2019 is provided below.

Decision

Amount

Description

Information
Technology (IT)
Common Matters

In August 2014, the Company sold its IT services business to Wipro Ltd.
(Wipro) and signed a ten-year IT Master Services Agreement (MSA) effective
January 1, 2015.

In 2015, the Alberta Utilities Commission (AUC) commenced an Information
Technology Common Matters proceeding to review the recovery of IT costs by
the Alberta Utilities from January 1, 2015 going forward. On June 5, 2019, the
AUC issued its decision regarding the IT Common Matters proceeding and
directed the Alberta Utilities to reduce the first-year of the Wipro MSA by 13
per cent and to apply a glide path that reduces pricing by 4.61 per cent in each
of years 2 through 10. The reduction in adjusted earnings resulting from the
decision for the period January 1, 2015 to December 31, 2019 was $12 million.

2. ATCO Electric
Transmission
General Tariff
Application (GTA)

(9)

In June 2017, ATCO Electric Transmission filed a GTA for its operations for
2018 and 2019. The decision was received in July 2019 approving the majority
of capital expenditures and operating costs requested. The increase in
adjusted earnings resulting from the decision of $9 million was recorded in
2019.

IT Common Matters decision

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. The amount
excluded from adjusted earnings for the year ended December 31, 2020 was $10 million (2019 - $12 million).

Other

The Company adjusts the deferred tax asset which was recognized as a result of the 2015 Tula Pipeline Project
impairment. During the year ended December 31, 2020, the Company recorded a foreign exchange loss of $2
million after tax and NCI (2019 - $nil) due to a difference between the tax base currency, which is the Mexican peso,
and the US dollar functional currency.

For the year ended December 31, 2019, the Company recognized costs of $6 million after tax and NCI with regard to
a number of disputes related to the Tula Pipeline project. The Company continues to work with the involved parties
to achieve a resolution of these disputes. As these costs related to a significant non-recurring event, they were
excluded from adjusted earnings.

101 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

4. REVENUES

The Company disaggregates revenues based on the nature of revenue streams. The disaggregation of revenues by
each operating segment for year ended December 31 is shown below:

2020

2019

Structures
& Logistics

Utilities

Electricity (1) Natural Gas (1)

Total

Energy
Infrastructure

Corporate
& Other (2)

Consolidated

Revenue Streams
Sale of Goods

Electricity generation and

delivery

Commodity sales

Modular structures - goods

Total sale of goods

Rendering of Services

Distribution services

Transmission services

Modular structures -

services

Logistics and facility
operations and

maintenance services

Lodging and support

Customer contributions

Franchise fees

Retail electricity and natural

gas services

Storage and industrial water

—

124
188
124
188

—

276
310

105
90
89

—

531
589
716
674

—

34
47
31
32

—

969 1,500
988 1,577
296 1,012
952
278

—

22
19
212
207

56
66
243
239

—

Total rendering of services

463
504

1,312
1,342

1,499 2,811
1,492 2,834

Lease income

Finance lease

Operating lease

Total lease income

Service concession
arrangement

Other

Total

1
1
126
108
127
109

—

56
48

40
28

96
76

714
801

1,368
1,390

1,539 2,907
1,520 2,910

31
412
28
36

—

59
448

—

27
23
27
23

17
21

—

65
17
86

—

232
46
35

149
824

—

162
162

—

162
162

—

4
9

174
171

31
412
36
36
124
188
191
636

1,500
1,577
1,012
952
276
310

105
90
89
56
66
243
239
162
162
27
23
3,463
3,523

18
22
126
173
144
195

—

232
146
120

3,944
4,706

(1) For the year ended December 31, 2020, Electricity and Natural Gas segments include $132 million of unbilled revenue (2019 - $130 million). At December
31, 2020, $132 million of the unbilled trade accounts receivables are included in trade accounts receivable and contract assets (2019 - $130 million).

(2)

Includes revenues from the Corporate & Other in Canadian Utilities Limited and ATCO Ltd.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 102

Remaining performance obligations

The Company is party to performance obligations, which have a duration of more than one year, are not subject to
the Right-to-Invoice practical expedient, and do not include variable consideration which is constrained (remaining
performance obligations). At December 31, 2020, the most significant remaining performance obligations are as
follows:

(i)

the Company's 35-year service agreement to operate Fort McMurray 500 kV Transmission project that
amounts to $0.8 billion. The Company expects that approximately 2 per cent of the amount will be
recognized as revenue during the year ending December 31, 2021, subject to satisfaction of related
performance obligations;

(ii) provision of storage and industrial water services over the life of a contract that in aggregate approximates
$0.3 billion. The Company expects that approximately 7 per cent of the amount will be recognized as
revenue during the year ending December 31, 2021; and

(iii) manufacturing of transportable workforce housing and space rental products under the terms of fixed

price contracts that in aggregate approximates $0.3 billion. The Company expects that approximately 95
per cent will be recognized as revenue during the year ending December 31, 2021.

5. OTHER COSTS AND EXPENSES

Other costs and expenses include costs related to early termination of the master service agreement for managed
information technology services (see Note 3), rent, gains and losses on derivative financial instruments, goods and
services such as professional fees, contractor costs, technology related expenses, advertising, and other general and
administrative expenses.

6. INTEREST EXPENSE

Interest expense primarily arises from interest on long-term debentures. The components of interest expense are
summarized below.

Long-term debt

Non-recourse long-term debt

Retirement benefits net interest expense

Amortization of deferred financing charges

Short-term debt

Interest expense on lease liabilities (Note 16)

Other

Less: interest capitalized (Notes 10, 11)

2020

413

—

438

(13)

425

2019

427

527

(16)

511

Borrowing costs capitalized to property, plant and equipment during 2020 were calculated by applying a weighted
average interest rate of 4.45 per cent (2019 - 4.54 per cent) to expenditures on qualifying assets.

103 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

7. INCOME TAXES

IMPACT OF CHANGE IN INCOME TAX RATE

On May 28, 2019, the Alberta government passed Bill 3, the Job Creation Tax Cut (Bill 3), which reduces the Alberta
provincial corporate tax rate from 12.0 per cent to 8.0 per cent in a phased approach between July 1, 2019 and
January 1, 2022. As a result of this change, in 2019, the Company recorded an adjustment to current and deferred
income taxes of $1 million and $210 million, respectively.

On October 20, 2020, Bill 35, Tax Statutes (Creating Jobs and Driving Innovation) (Bill 35) received first reading in the
legislative assembly of Alberta and became substantively enacted for financial reporting purposes. The Bill received
Royal Assent on December 9, 2020. Bill 35 accelerated the reduction of the Alberta provincial corporate tax rate,
which was previously announced in Bill 3, to 8.0 per cent on July 1, 2020. The financial impact of this change is not
significant.

The income tax rate for 2020 is 24.0 per cent (2019 - 26.5 per cent).

INCOME TAX EXPENSE

The components of income tax expense for the year ended December 31 are summarized below.

Current income tax expense
Canada
Australia
United States
Mexico
Change in income taxes resulting from decrease in provincial corporate tax rate
Adjustment in respect of prior years

Deferred income tax expense
Reversal of temporary differences
Change in income taxes resulting from decrease in provincial corporate tax rate
Adjustment in respect of prior years

The reconciliation of statutory and effective income tax expense is as follows:

Earnings before income taxes

Income taxes, at statutory rates
Change in income taxes resulting from decrease in

provincial corporate tax rate

Statutory and deferred tax rate variance

Equity earnings

Unrecognized deferred income tax assets

Non-taxable gains

Tax cost of preferred share financings

Other

663

159

(4)

(8)

—

(3)

166

2020

24.0

0.8

(0.6)

(1.2)

1.8

—

0.8

(0.6)

25.0

2020

2019

40
(10)
10
3

—

(4)
39

119
5
3
127
166

1,073

284

80
(5)
(2)
2
(1)
3
77

203
(210)
(4)
(11)
66

2019

26.5

(211)

(19.7)

(8)

(7)

(2)

(0.8)

(0.7)

0.6

(0.2)

0.2

6.1

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 104

INCOME TAX ASSETS AND LIABILITIES

Income tax assets and liabilities in the consolidated balance sheet at December 31 are summarized below.

Balance Sheet Presentation

2020

2019

Income tax assets

Current

Deferred

Income tax liabilities

Current

Deferred

Prepaid expenses and other current assets

Deferred income tax assets

Provisions and other current liabilities

Deferred income tax liabilities

DEFERRED INCOME TAXES

The changes in deferred income tax assets are as follows:

132

1,443

1,480

116

1,319

1,331

Property,
Plant and
Equipment

Tax Loss Carry
Forwards and
Tax Credits

Retirement
Benefit

Obligations Other

Movements
December 31, 2018
(Charge) credit to earnings
Credit to other comprehensive income
Change in income taxes resulting from

decrease in provincial corporate tax rate

Business combinations (Note 23)
Foreign exchange adjustment
Other
December 31, 2019
Credit (charge) to earnings
Charge to other comprehensive income
Business combinations
Foreign exchange adjustment
Other
December 31, 2020

Intangibles Reserves
(7)
3

38
1

(6)
(10)

50
23

—

1
7
(1)

—

(9)
20

—

1
1

—

(2)
1

—

(2)
(33)

—

4
(4)
(1)

—

(4)

—

69
(13)

—

8
2
15

—

(7)

—

18
(6)

—

Total
85
22
15

(5)
(32)
(1)
(1)
83

—

(1)
1
1
1
85

2
3

—

(1)

—

(1)
3
2

—

1
1
7

(1)

The Company does not expect any deferred income tax assets to reverse within the next twelve months (2019 - $7
million).

105 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

Property,
Plant and
Equipment

Tax Loss Carry
Forwards and
Tax Credits

The changes in deferred income tax liabilities are as follows:

Movements
December 31, 2018
Charge (credit) to earnings
Charge (credit) to other
comprehensive income
Change in income taxes resulting from

decrease in provincial corporate tax rate

Business combinations (Note 23)
Foreign exchange adjustment
Other
December 31, 2019
Charge (credit) to earnings
Charge (credit) to other
comprehensive income
Change in income taxes resulting from

decrease in provincial corporate tax rate

Foreign exchange adjustment
Other
December 31, 2020

Intangibles Reserves
121
(4)

(48)
(22)

1,540
223

—

(220)
(109)
(4)

—

1,430
190

—

(18)
(2)

—

97
9

—

6
46

—

(14)
(12)

(7)

—

Retirement
Benefit

Obligations Other
(137)
8

Total
31 1,399
1 221

—

(108)
15

—

6
4

—

15
(14)

—

(83)
(20)

(127)
(10)

—

5
1

—

(4)
(14)

(215)
(89)
(4)
2
16 1,319
(35) 122

—

(7)

—

5
3
1
(20) 1,443

(2)
1

1,624

106

(33)

(97)

(137)

The Company does not expect any of its deferred income tax liabilities to reverse within the next twelve months.

At December 31, 2020, the Company had $628 million of non-capital tax losses and credits which expire between
2024 and 2040 and $85 million of tax losses which do not expire. The Company recognized deferred income tax
assets of $154 million for these losses and credits.

The Company had $125 million of aggregate temporary differences for investments in subsidiaries, branches and
joint ventures for which deferred income tax liabilities were not recognized (2019 - $122 million). The Company had
$87 million of aggregate temporary differences for which no deferred tax assets were recognized (2019 - $45
million).

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 106

8. EARNINGS PER SHARE

Earnings per Class I Non-Voting (Class I) and Class II Voting (Class II) Share are calculated by dividing the earnings
attributable to Class I and Class II Shares by the weighted average shares outstanding. Diluted earnings per share
are calculated using the treasury stock method, which reflects the potential exercise of stock options and vesting of
shares under the Company's mid-term incentive plan (MTIP) on the weighted average Class I and Class II Shares
outstanding.

The earnings and average number of shares used to calculate earnings per share for the year ended December 31
are as follows:

Average shares

Weighted average shares outstanding

Effect of dilutive stock options

Effect of dilutive MTIP

Weighted average dilutive shares outstanding

Earnings for earnings per share calculation

Earnings for the year

Non-controlling interests

Earnings attributable to Class I and Class II Shares

Earnings and diluted earnings per Class I and
Class II Share

Earnings per Class I and Class II Share

Diluted earnings per Class I and Class II Share

9. INVENTORIES

Inventories at December 31 are comprised of:

Natural gas and fuel in storage

Raw materials and consumables

Work-in-progress

Finished goods

2020

2019

114,396,312 114,369,909

50,697

47,937

265,547

327,978

114,712,556 114,745,824

497

(245)

252

1,007

(494)

513

$2.21

$2.20

$4.49

$4.47

2020

2019

For the year ended December 31, 2020, inventories of $256 million were used in operations and expensed (2019 -
$341 million).

Inventories with a carrying value of $11 million were pledged as security for liabilities at December 31, 2020 (2019 -
$10 million).

107 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

10. PROPERTY, PLANT AND EQUIPMENT

A reconciliation of the changes in the carrying amount of property, plant and equipment is as follows:

Cost

December 31, 2018

Additions

Transfers

Retirements and disposals

Sale of operations (Note 23)

Foreign exchange rate adjustment

December 31, 2019

Additions

Transfers

Retirements and disposals

Acquisition of ATCO Sabinco (Note 26)

Changes to asset retirement costs

Foreign exchange rate adjustment

December 31, 2020

Accumulated depreciation

December 31, 2018

Depreciation

Retirements and disposals

Sale of operations (Note 23)

Foreign exchange rate adjustment

December 31, 2019

Depreciation and impairment

Retirements and disposals

Foreign exchange rate adjustment

December 31, 2020

Net book value

December 31, 2019

December 31, 2020

Utility
Transmission
& Distribution

Electricity
Generation

Land and
Buildings

Construction
Work-in-
Progress

Other

Total

19,315

1,950

1,007

670

1,683

24,625

874

(87)

—

(72)

20,083

855

(75)

—

21,004

(27)

(1,801)

(1)

142

—

(1)

—

(6)

140

4,384

1,338

434

(86)

—

(12)

4,720

455

(75)

5,119

(18)

(1,335)

—

(1)

15,363

15,885

125

122

(15)

(13)

—

996

(18)

—

1,095

(971)

(15)

(21)

(10)

(55)

(21)

(24)

1,203

—

(199)

(1,856)

(107)

748

1,697

23,666

823

(922)

—

(2)

(95)

(2)

974

—

(189)

(1)

100

998

647

1,804

24,593

201

(15)

—

212

(18)

216

784

782

754

6,760

—

(4)

—

(1)

(41)

(13)

(11)

781

124

(75)

583

(160)

(1,348)

(26)

5,809

602

(168)

835

6,266

669

569

916

969

17,857

18,327

The additions to property, plant and equipment included $13 million of interest capitalized during construction for
the year ended December 31, 2020 (2019 - $15 million).

Property, plant and equipment with a carrying value of $343 million were pledged as security for liabilities at
December 31, 2020 (2019 - $274 million).

IMPAIRMENT

Canadian Utilities Limited - Corporate & Other Segment

ATCO Oil & Gas Ltd., a subsidiary of Canadian Utilities Limited, holds a five per cent working interest in oil and gas
assets in Northern Canada. With the continued lower oil prices and the COVID-19 pandemic continuing to cause
economic uncertainty (see Note 20), the Company determined that the total net book value of these assets was not
recoverable due to reduced likelihood of future development of the assets, and, therefore, impaired these assets in
full, recognizing an impairment of $9 million, after tax and NCI. The impairment was included in depreciation,
amortization and impairment expense. After recognizing the impairment, the recoverable amount of these assets
was nil.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 108

PIONEER NATURAL GAS PIPELINE ACQUISITION

Utilities Segment

On September 30, 2020, ATCO Gas and Pipelines Ltd., a wholly owned subsidiary of CU Inc., entered into an
agreement to acquire the 130 km Pioneer Pipeline from Tidewater Midstream & Infrastructure Ltd. and its partner
TransAlta Corporation for a purchase price of $255 million.

NOVA Gas Transmission Ltd. (NGTL) and ATCO Gas and Pipelines Ltd. subsequently agreed that, consistent with the
geographic footprints defined in their Integration Agreement, ATCO Gas and Pipelines Ltd. would subsequently
transfer to NGTL the approximately 30 km segment of the Pioneer Pipeline located in the NGTL footprint for
approximately $63 million. ATCO Gas and Pipelines Ltd. will retain ownership and continue to operate the portion of
the Pioneer Pipeline located in the its footprint.

The transaction is subject to satisfaction of customary conditions, including regulatory approvals by the Alberta
Utilities Commission and the Alberta Energy Regulator, which are expected in the second quarter of 2021.

109 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

11. INTANGIBLES

Intangible assets consist mainly of computer software not directly attributable to the operation of property, plant
and equipment and land rights. Goodwill is also an intangible asset. A reconciliation of the changes in the carrying
amount of intangible assets is as follows:

Computer
Software

Land
Rights

Work-in-
Progress

Other

Total

Cost

December 31, 2018

Additions

Transfers

Sale of operations (Note 23)

Retirements

Foreign exchange rate adjustment

December 31, 2019

Additions

Transfers

Retirements

Foreign exchange rate adjustment

December 31, 2020

Accumulated amortization

December 31, 2018

Amortization

Sale of operations (Note 23)

Retirements

Foreign exchange rate adjustment

December 31, 2019

Amortization

Retirements

Foreign exchange rate adjustment

December 31, 2020

Net book value

December 31, 2019

December 31, 2020

656

(25)

(117)

(1)

560

(177)

443

442

(15)

(117)

(1)

360

(176)

238

200

205

364

—

383

—

407

—

(59)

—

(82)

—

330

347

—

(10)

(2)

—

(2)

—

(2)

—

1,174

—

(35)

(119)

(1)

1,087

—

(179)

999

502

(17)

(117)

(1)

425

(176)

314

662

685

The additions to intangibles include interest capitalized during construction of nil for the year ended December 31,
2020 (2019 - $1 million).

12. GOODWILL

The carrying value of goodwill for the Utilities and Structures & Logistics segments is shown below.

Utilities, Electricity
Utilities, Natural gas
Structures & Logistics
Carrying value

2020
47
33
2
82

2019
47
33
2
82

The recoverable amount of goodwill is measured based on each segment’s fair value less costs of disposal, which is
calculated using publicly available enterprise values and price-to-earnings multiples of comparable, actively traded
companies. Each segment’s fair value less costs of disposal is compared to its carrying value and is sufficient to
support the carrying value of allocated goodwill.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 110

The Company used an average enterprise value-to-earnings before interest, taxes, depreciation, and amortization of
11.5 and 9.8 (2019 - 11.8 and 13.6) and price-to-earnings value of 17.0 and 13.3 (2019 - 19.6 and 16.3) for the
Electricity and Pipelines & Liquids segments, respectively, to calculate fair value less costs of disposal.

The fair value measurements are categorized in Level 3 of the fair value hierarchy.

13. LONG-TERM DEBT

Long-term debt outstanding at December 31 is as follows:

CU Inc. debentures - unsecured (1)
CU Inc. other long-term obligation, due June 2022 - unsecured (2)
Canadian Utilities Limited debentures - unsecured,

3.122%, due November 2022

ATCO Power Australia credit facility, payable in Australian dollars,

Effective
Interest
Rate

2020

2019

4.487% (2019 - 4.616%)

8,140

8,090

2.45% (2019 - 3.95%)

3.187%

200

at BBSY Rates, due June 2025, secured by a pledge of project assets and
contracts, $58 million AUD (2019 - $63 million AUD) (3)

Floating (4)

ATCO Gas Australia revolving credit facility, payable in Australian dollars, at

BBSY rates, due October 2023, $275 million AUD
Floating (4)
(2019 - $275 million AUD) (3)

268

250

ATCO Gas Australia revolving credit facility, payable in Australian dollars, at
BBSY rates, due July 2023, $405 million AUD (2019 - $405 million AUD) (3)

Floating (4)

394

369

Electricidad del Golfo credit facility, payable in Mexican pesos, at Mexican
Interbank rates, due March 2023, $570 million MXP (2019 - $570 million
MXP)

ATCO Investments Ltd. mortgage, at BA rates, payable in Canadian dollars,

due March 2028

Floating (4)

ATCO Ltd. extendible revolving credit facility, at BA rates, due August 2021 (3)

Floating

ATCO Ltd. fixed-to-floating rate subordinated notes, due November 2078
ATCO Structures & Logistics credit facility, at BA rates, due January 2021 (3)
ATCO Structures & Logistics credit facility, at BA rates, due September 2023 (3)

5.50% (5)

Floating

ATCO Sabinco credit facilities, payable in Chilean pesos, 2.86%, due April

2021, $4 billion CLP (2019 - nil) (6)

ATCO Sabinco credit facility, payable in Chilean pesos, 2.88%, due February

2021, $2 billion CLP (2019 - nil) (6)

Less: deferred financing charges

Less: amounts due within one year

BBSY - Bank Bill Swap Benchmark Rate

BA - Bankers’ Acceptance

3.221%

138

200

106

(49)
9,619
(196)
9,423

138

200

—

(49)
9,436
(173)
9,263

(1) Interest rate is the average effective interest rate weighted by principal amounts outstanding.

(2)

(3)

(4)

(5)

During 2020, the expiry date of the CU Inc. other long-term obligation was extended from June 2021 to June 2022.

During 2020, the above interest rates had additional margin fees at a weighted average rate of 1.22 per cent (2019 - 0.99 per cent). The margin fees are
subject to escalation.

Floating interest rates have been partially or completely hedged with interest rate swaps (see Note 19).

The rate of 5.50 per cent is fixed for the period from November 1, 2018 to October 31, 2028. Starting November 1, 2028, on every interest reset date
(February 1, May 1, August 1, November 1) of each year until November 1, 2048, the interest rate will be reset to the three month BA plus 2.92 per cent.
Starting November 1, 2048, on every interest reset date of each year until November 1, 2078, the interest rate will be reset to BA rate plus 3.67 per cent.

(6)

ATCO Sabinco credit facilities were acquired as part of the increase in ownership interest in ATCO Sabinco S.A. (see Note 26).

111 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

DEBENTURE ISSUANCES

On September 28, 2020, CU Inc., a wholly owned subsidiary of Canadian Utilities Limited, issued $150 million of
2.609 per cent debentures maturing on September 28, 2050. The Company also repaid $100 million of 11.77 per
cent debentures on November 30, 2020.

On September 5, 2019, CU Inc. issued $580 million of 2.963 per cent debentures maturing on September 7, 2049.
CU Inc. also repaid $180 million of 5.432 per cent debentures on January 23, 2019 and $300 million of 6.8 per cent
debentures on August 13, 2019.

OTHER LONG TERM DEBT ISSUANCES AND REPAYMENTS

ATCO Power Australia re-financing

In the first quarter of 2020, ATCO Power Australia, a subsidiary of Canadian Utilities Limited, refinanced its $63
million Australian dollars credit facility with a new lender at Bank Bill Swap Benchmark Rate (BBSY) plus margin fee,
extending the credit facility's maturity from February 2020 to June 2025. The floating BBSY interest rate is hedged to
June 23, 2025 with an interest rate swap agreement which fixes the interest rate at 1.68 per cent.

PLEDGED ASSETS

The ATCO Power Australia credit facility is guaranteed by Canadian Utilities Limited and is secured by a mortgage on
certain assets of the Karratha Power Plant and an assignment of certain contracts and agreements. The Karratha
Power Plant is accounted for as a finance lease receivable.

The ATCO Investments Limited mortgage is secured by certain of the Company's real estate holdings.

The ATCO Structures & Logistics credit facilities are secured by a general assignment of ATCO Structures & Logistics’
present and future property, assets, undertakings and equity interests in certain of its restricted subsidiaries and
joint ventures.

At December 31, 2020, the book value of assets pledged to maintain the Company's long-term credit facilities was
$860 million at (2019 - $709 million).

14. RETIREMENT BENEFITS

The Company maintains registered defined benefit and defined contribution pension plans for most of its
employees. It also provides other post-employment benefits (OPEB), principally health, dental and life insurance, for
retirees and their dependents. The defined benefit pension plans provide for pensions based on employees’ length
of service and final average earnings. As of 1997, new employees of Canadian Utilities Limited and its subsidiaries,
and, as of 2005, new employees of ATCO Structures & Logistics, automatically participate in the defined contribution
pension plans.

The Company also maintains non-registered, non-funded defined benefit pension plans for certain officers and key
employees.

The majority of benefit payments are made from trustee-administered funds; however, there are a number of
unfunded plans where the Company makes the benefit payments. Plan assets held in trusts are governed by
provincial and federal legislation and regulations, as is the relationship between the Company and the trustee. The
Pension Committees of the Boards of Directors of Canadian Utilities Limited and ATCO Structures & Logistics are
responsible for governance of the funded plans and policy decisions related to benefit design, liability management,
and funding and investment, including selection of investment managers and investment options for the plans.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 112

BENEFIT PLAN ASSETS, OBLIGATIONS AND FUNDED STATUS

The changes in Company's pension and OPEB plan assets and obligations are as follows:

Market value of plan assets

Beginning of year

Interest income

Employee contributions

Employer contributions

Benefit payments

Return on plan assets, excluding amounts included

in interest income

End of year

Accrued benefit obligations

Beginning of year

Current service cost

Interest cost

Employee contributions

Benefit payments from plan assets

Benefit payments by employer
Curtailment gain (1)
Actuarial losses

Past service cost (credit)
End of year (2)

Funded status

Pension
Benefit Plans

OPEB Plans

Pension
Benefit Plans

OPEB Plans

2020

2019

2,903

(139)

240

3,105

—

2,667

(127)

246

2,903

—

3,207

125

2,933

118

(139)

(7)

—

226

3,405

—

(4)

—

139

108

(127)

(8)

(10)

297

(6)

—

(5)

(2)

—

3,207

125

Net retirement benefit obligations

300

139

304

125

(1)

In 2019, as a result of a reduction of plan members due to the sale of the Canadian fossil fuel-based electricity generation business (see Note 23), the
Company recorded a curtailment gain of $12 million. This gain was included in salaries, wages and benefits expense in the consolidated statements of
earnings.

(2) The non-registered, non-funded defined benefit pension plans accrued benefit obligations increased to $180 million at December 31, 2020 due to a

decrease in the liability discount rate and experience adjustments (2019 - increased to $166 million due to a decrease in the liability discount rate and
experience adjustments).

113 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

BENEFIT PLAN COST

The components of benefit plan cost are as follows:

Current service cost

Interest cost

Interest income

Curtailment gain

Past service cost (credit)

Defined benefit plans cost

Defined contribution plans cost

Total cost

Less: capitalized

Net cost recognized

Pension
Benefit Plans

OPEB Plans

Pension
Benefit Plans

OPEB Plans

2020

2019

(87)

—

108

(95)

(10)

(6)

—

(2)

—

RE-MEASUREMENT OF RETIREMENT BENEFITS

Re-measurements of the pension and OPEB plans are as follows:

Gains on plan assets from:

Return on plan assets, excluding amounts included
in net interest expense

Losses gains on plan obligations from:

Changes in financial assumptions

Gains (losses) recognized in other

comprehensive income (1)

Pension
Benefit Plans

OPEB Plans

Pension
Benefit Plans

OPEB Plans

2020

2019

240

—

246

(226)

(12)

(297)

(12)

(51)

—

(7)

(1) Gains net of income taxes were $2 million for the year ended December 31, 2020 (2019 - Losses net of income taxes of $44 million).

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 114

PLAN ASSETS

The market values of the Company’s defined benefit pension plan assets at December 31 are as follows:

Plan asset mix
Equity securities

Public

Canada
United States
International

Private

Fixed income securities
Government bonds

Corporate bonds

and debentures

Securitizations
Mortgages

Real estate

Land and building (1)
Real estate funds

Cash and other assets

Cash

Short-term notes and

money market funds

Accrued interest and

dividends receivable

Quoted

Un-quoted

Total

2020

Quoted

Un-quoted

Total

2019

17
379
288

—

684

1,141

764
131
4
2,040

—

15
51
2,775

—

3
3

—

106
106

23
198
221

—

330

17
379
288
3
687

1,141

764
131
110
2,146

23
198
221

6
329
228

—

563

1,141

672
118
4
1,935

—

15
51
3,105

2
100

3
44
2,542

—

10
10

—

118
118

30
203
233

—

361

6
329
228
10
573

1,141

672
118
122
2,053

30
203
233

3
44
2,903

1
100

(1) The land and building are leased by the Company.

FUNDING

In 2020, an actuarial valuation for funding purposes as of December 31, 2019 was completed for the registered
defined benefit pension plans. The estimated contribution for 2021 is $13 million. The next actuarial valuation for
funding purposes must be completed as of December 31, 2022.

115 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

WEIGHTED AVERAGE ASSUMPTIONS

The significant assumptions used to determine the benefit plan cost and accrued benefit obligation are as follows:

Benefit plan cost
Discount rate for the year (1)
Average compensation increase for the year

Accrued benefit obligations

Discount rate at December 31

Long-term inflation rate

Health care cost trend rate:

Drug costs (2)
Other medical costs

Dental costs

Pension
Benefit Plans

OPEB Plans

Pension
Benefit Plans

OPEB Plans

2020

2019

3.10 %

2.50 %

2.58 %

2.00 %

n/a

3.10 %

n/a

2.58 %

n/a

5.11 %

4.00 %

3.80 %

2.50 %

3.10 %

2.00 %

n/a

3.80 %

n/a

3.10 %

n/a

5.17 %

4.00 %

(1)

The discount rate assumption for 2019 was 3.80 per cent up to September 30, 2019, at which time there was a plan curtailment due to the sale of the
Canadian fossil fuel-based electricity generation portfolio (see Note 23). The discount rate assumption for the period from October 1, 2019 to December
31, 2019, was 3.00 per cent.

(2)

The Company uses a graded drug cost trend rate, which assumes 5.11 per cent rate per annum, grading down to 4.00 per cent in and after 2040.

The weighted average duration of the defined benefit obligation is 13.5 years.

RISKS

The Company is exposed to a number of risks related to its defined benefit pension plans and OPEB plans. The most
significant risks are described below.

Investment risk

The Company makes investment decisions for its funded plans using an asset-liability matching framework. Within
this framework, the Company’s objective over time is to increase the proportion of plan assets in fixed income
securities with maturities that match the expected benefit payments as they fall due. However, due to the long-term
nature of the benefit obligations, the strength of the Company, and the belief that a diversified portfolio offers an
appropriate risk-return profile, the Company continues to invest in equity securities, global fixed income and
Canadian real estate in addition to Canadian fixed income. The Company has not changed the processes used to
manage its risks from previous periods.

Interest rate risk

A decrease in long-term interest rates will increase accrued benefit obligations, which will be partially offset by an
increase in the value of the plans’ bond holdings. Other things remaining the same, a further decrease in long-term
interest rates will cause the funded status to deteriorate, while increases in interest rates will result in gains.

Compensation risk

The present value of the accrued benefit obligations is calculated using the estimated future compensation of plan
participants. Should future compensation be higher than estimated, benefit obligations will increase.

Inflation risk

Accrued benefit obligations are linked to inflation, and higher inflation will lead to increased obligations. For the
defined benefit pension plans, inflation risk is mitigated because the indexing of benefit payments is capped at an
annual increase of 3.0 per cent.

The majority of plan assets are also affected by inflation. As inflation rises, long-term interest rates will likely rise,
pushing up bond yields and reducing the value of existing fixed rate bonds. The relationship between equities and
inflation is not as clear, but generally speaking, high inflation has a negative impact on equity valuations. Overall,
rising inflation will likely reduce a plan surplus or increase a deficit.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 116

Life expectancy

Should pensioners live longer than assumed, benefit obligations and liabilities will be larger than expected.

SENSITIVITIES

The 2020 sensitivities of significant assumptions used in measuring the Company's pension and OPEB plans are as
follows:

Assumption

Discount rate

Future compensation rate
Long-term inflation rate (1)
Health care cost trend rate

Life expectancy

Per cent
Change

Accrued Benefit Obligation
Decrease in
Assumption

Increase in
Assumption

Net Benefit Plan Cost
Decrease in
Assumption

Increase in
Assumption

1 %

10 %

(435)

459

(88)

541

(8)

(378)

(9)

101

—

(1)

(9)

—

(7)

—

(1)

The long-term inflation rate for pension plans reflects the fact that pension plan benefit payments have historically been indexed annually to increases
in the Canadian Consumer Price Index to a maximum increase of 3.0 per cent per annum.

The above sensitivities have been calculated independently of each other. Actual experience may result in changes
in a number of assumptions simultaneously.

15. BALANCES FROM CONTRACTS WITH CUSTOMERS

Balances from contracts with customers are comprised of accounts receivable and contract assets and customer
contributions.

ACCOUNTS RECEIVABLE AND CONTRACT ASSETS

At December 31, accounts receivable and contract assets are as follows:

Trade accounts receivable and contract assets
Other accounts receivable

Contract assets included in other assets

The significant changes in trade accounts receivable and contract assets are as follows:

December 31, 2018

Revenue from satisfied performance obligations

Customer billings and other items not included in revenue

Sale of operations (Note 23)

Payments received

Foreign exchange rate adjustment

December 31, 2019

Revenue from satisfied performance obligations

Customer billings and other items not included in revenue

Acquisition of ATCO Sabinco (Note 26)

Credit loss allowance

Payments received

Foreign exchange rate adjustment and other

December 31, 2020

117 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

2020
712
15
727
2
729

2019
711
20
731

—

731

719

4,132

556

(72)

(4,621)

(3)

711

3,644

411

(2)

(4,055)

(11)

714

CUSTOMER CONTRIBUTIONS

Certain additions to property, plant and equipment, mainly in the utilities, are made with the assistance of non-
refundable cash contributions from customers. These contributions are made when the estimated revenue is less
than the cost of providing service or where the customer needs special equipment. Since these contributions will
provide customers with on-going access to the supply of natural gas or electricity, they represent deferred revenues
and are recognized in revenues over the life of the related asset.

Changes in customer contributions balance are summarized below.

December 31, 2018

Receipt of customer contributions

Sale of operations (Note 23)

Amortization

December 31, 2019

Receipt of customer contributions

Amortization

Transfers from other liabilities and foreign exchange rate adjustment

December 31, 2020

16. LEASES

THE COMPANY AS LESSEE

Right-of-use assets

The Company's right-of-use assets mainly relate to the lease of land and buildings.

Cost

January 1, 2019

Additions

Foreign exchange rate adjustment

December 31, 2019

Additions

Disposals

Foreign exchange rate adjustment

December 31, 2020

Accumulated depreciation

January 1, 2019

Depreciation

December 31, 2019

Depreciation

Disposals

December 31, 2020

Net book value

December 31, 2019

December 31, 2020

1,798

(97)

(66)

1,720

(56)

1,756

Land and
Buildings

107

(2)

114

(2)

129

—

(2)

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 118

Lease liabilities

The Company has recognized lease liabilities in relation to the arrangements to lease land and buildings. The
reconciliation of movements in lease liabilities is as follows:

January 1, 2019

Additions

Interest expense

Lease payments

Foreign exchange rate adjustment

December 31, 2019

Additions

Interest expense

Lease payments

Foreign exchange rate adjustment

December 31, 2020

Less: amounts due within one year

December 31, 2020

Note

The maturity analysis of the undiscounted contractual balances of the lease liabilities is as follows:

In one year or less

In more than one year, but not more than five years

In more than five years

107

(19)

(1)

(18)

100

(16)

126

The amounts expensed in the consolidated statements of earnings for the year ended December 31, in relation to
short-term leases and low-value leases are as follows:

Short-term leases

Low-value leases

2020

2019

During the years ended December 31, 2020 and 2019, less than a million of expenses were incurred in relation to
low-value leases, and no expenses were incurred in relation to leases with variable payments.

THE COMPANY AS LESSOR

The Company is party to certain arrangements that convey the right to use electricity generation and non-regulated
electricity transmission assets. These arrangements are classified as finance leases, with the Company as the lessor.

As at December 31, 2020 and 2019, the Company's operating leases include rentals of modular structures.

119 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

Finance leases

The total net investment in finance leases is shown below. Finance lease income is recognized in revenues.

Net investment in finance leases

Finance lease - gross investment

Unearned finance income

Current portion

Non-current portion

Gross receivables from finance leases

In one year or less

In more than one year, but not more than five years

In more than five years

Net investment in finance leases

In one year or less

In more than one year, but not more than five years

In more than five years

2020

2019

315

(140)

175

166

175

109

179

315

117

175

331

(152)

179

170

179

105

200

331

126

179

During the year ended December 31, 2020, $1 million of contingent rent was recognized as income from these
finance leases (2019 - $2 million).

Operating leases

The aggregate future minimum lease payments receivable under non-cancellable operating leases are:

Minimum lease payments receivable

In one year or less

In more than one year, but not more than five years

In more than five years

2020

2019

152

—

During the year ended December 31, 2020 and 2019, no contingent rent was recognized as income from these
operating leases.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 120

17. CLASS I NON-VOTING AND CLASS II VOTING SHARES

A reconciliation of the number and dollar amount of outstanding Class I and Class II Shares at December 31 is
shown below.

AUTHORIZED AND ISSUED

Authorized:

Issued and outstanding:

December 31, 2018
Purchased and cancelled
Stock options exercised
Converted: Class II to Class I
December 31, 2019
Purchased and cancelled
Stock options exercised
Converted: Class II to Class I
December 31, 2020

Class I Non-Voting

Shares
300,000,000

Amount

Shares
50,000,000

Class II Voting

Amount

Shares
350,000,000

Total

Amount

101,428,881
(101,350)
107,950
28,300
101,463,781
(150,000)
27,300
6,818
101,347,899

182

13,231,247

—

185

—

(28,300)
13,202,947

—

(6,818)
186 13,196,129

2 114,660,128
(101,350)
107,950

—

2 114,666,728
(150,000)
27,300

—

184

—

187

—

2 114,544,028

188

Class I and Class II Shares have no par value.

MID-TERM INCENTIVE PLAN

The Company's MTIP trust is considered a special purpose entity which is consolidated in these financial statements.
The Class I Shares, while held in trust, are accounted for as a reduction of share capital. The consolidated Class I and
Class II Shares outstanding at December 31 is shown below.

Shares issued and outstanding

114,544,028

188 114,666,728

Shares held in trust for the mid-term incentive plan

(244,209)

(10)

(321,948)

Shares outstanding, net of shares held in trust

114,299,819

178 114,344,780

187

(14)

173

2020

2019

Amount

DIVIDENDS

The Company declared and paid cash dividends of $1.7408 per Class I and Class II Share during 2020 (2019 -
$1.6192). The Company’s policy is to pay dividends quarterly on its Class I and Class II Shares. The payment and
amount of any quarterly dividend is at the discretion of the Board and depends on the financial condition of the
Company and other factors.

On January 14, 2021, the Company declared a first quarter dividend of $0.4483 per Class I and Class II Share.

SHARE OWNER RIGHTS

Each Class II Share may be converted into one Class I Share at any time at the share owner’s option. If an offer to
purchase all Class II Shares is made, and such offer is accepted and taken up by the owners of a majority of the
Class II Shares, and if, at the same time, an offer is not made to the Class I Share owners on the same terms and
conditions, then the Class I Shares will be entitled to the same voting rights as the Class II Shares. The two share
classes rank equally in all other respects, except for voting rights.

NORMAL COURSE ISSUER BID

On March 9, 2020, ATCO Ltd. began a normal course issuer bid to purchase up to 1,014,684 outstanding Class I
Shares. The bid expires on March 8, 2021. The prior year normal course issuer bid to purchase up to 1,014,294
outstanding Class I Shares began on March 8, 2019 and expired on March 7, 2020.

121 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, 2020, 150,000 shares were purchased for $6 million, resulting in no impact to
share capital and a decrease to retained earnings of $6 million (2019 - 101,350 shares were purchased for $5
million, resulting in no impact to share capital and a decrease to retained earnings of $5 million).

18. CASH FLOW INFORMATION

ADJUSTMENTS TO RECONCILE EARNINGS TO CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile earnings to cash flows from operating activities for the year ended December 31 are
summarized below.

Depreciation, amortization and impairment

Gain on sale of operations (Note 23)

Earnings from investment in associate company

Dividends received from associate company

Earnings from investment in joint ventures, net of dividends and distributions

received

Dividends and distributions received from investment in joint ventures, net of

earnings

Income tax expense

Unearned availability incentives

Unrealized losses (gains) on derivative financial instruments

Contributions by customers for extensions to plant

Amortization of customer contributions

Net finance costs

Income taxes paid

Provision on early termination of the master service agreement for managed

IT services (Note 3)

Other

2020

669

—

(15)

(14)

—

166

—

(56)

407

(31)

(3)

1,307

2019

637

(174)

(15)

—

(7)

(66)

484

(94)

—

(16)

920

CHANGES IN NON-CASH WORKING CAPITAL

The changes in non-cash working capital for the year ended December 31 are summarized below.

Operating activities

Accounts receivable and contract assets

Inventories

Prepaid expenses and other current assets

Accounts payable and accrued liabilities

Provisions and other current liabilities

Investing activities

Accounts receivable and contract assets

Inventories

Prepaid expenses and other current assets

Accounts payable and accrued liabilities

2020

2019

(2)

(4)

—

(4)

(5)

(37)

(202)

(25)

(205)

(6)

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 122

DEBT RECONCILIATION

The reconciliation of the changes in debt for the year ended December 31 is shown below.

Liabilities from financing activities

December 31, 2018

Net (repayment) issue of debt

Foreign currency translation

Sale of operations (Note 23)

Debt issue costs

Amortization of deferred financing charges

December 31, 2019

Net issue of debt

Acquisition of ATCO Sabinco (Note 26)

Foreign currency translation

Debt issue costs

Amortization of deferred financing charges

December 31, 2020

Short-term
debt

Long-term
debt

Non-recourse
debt

Total

175

(175)

—

9,397

1,401

10,973

(38)

—

(4)

9,436

129

(3)

9,619

(32)

—

(129)

(38)

(1,371)

—

(4)

9,436

129

(3)

9,619

See Note 16 for the reconciliation of the changes in lease liability for the years ended December 31, 2020 and 2019.

CASH POSITION

Cash position in the consolidated statements of cash flows at December 31 is comprised of:

Cash
Short-term investments
Restricted cash (1)
Cash and cash equivalents
Bank indebtedness

2020
1,059
5

39
1,103
(3)
1,100

2019
1,061

—

79
1,140

—

1,140

(1) Cash balances which are restricted under the terms of joint arrangement agreements are considered not available for general use by the Company.

123 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

19. FINANCIAL INSTRUMENTS

FAIR VALUE MEASUREMENT

Financial instruments are measured at amortized cost or fair value. Fair value represents the estimated amounts at
which financial instruments could be exchanged between knowledgeable and willing parties in an arm’s length
transaction. Determining fair value requires management judgment. The valuation methods used to determine the
fair value of each financial instrument and its associated level in the fair value hierarchy is described below.

Financial Instruments

Fair Value Method

Measured at Amortized Cost

Cash and cash equivalents, accounts receivable
and contract assets, bank indebtedness, and
accounts payable and accrued liabilities

Assumed to approximate carrying value due to their
short-term nature.

Finance lease receivables

Long-term debt

Measured at Fair Value

Interest rate swaps

Foreign currency contracts

Commodity contracts

Determined using a risk-adjusted interest rate to discount
future cash receipts (Level 2).

Determined using quoted market prices for the same or similar
issues. Where the market prices are not available, fair values
are estimated using discounted cash flow analysis based on
the Company’s current borrowing rate for similar borrowing
arrangements (Level 2).

Determined using interest rate yield curves at period-end
(Level 2).

Determined using quoted forward exchange rates at
period-end (Level 2).

Determined using observable period-end forward curves and
quoted spot market prices with inputs validated by publicly
available market providers (Level 2).

Determined using statistical techniques to derive period-end
forward curves using unobservable inputs or extrapolation
from spot prices in certain commodity contracts (Level 3).

FINANCIAL INSTRUMENTS MEASURED AT AMORTIZED COST

At December 31, the fair values of the Company’s financial instruments measured at amortized cost are as follows:

Recurring
Measurements

Financial Assets

Finance lease receivables

Financial Liabilities

Long-term debt

Carrying
Value

2020

Fair
Value

Carrying
Value

2019

Fair
Value

175

254

179

227

9,619

11,987

9,436

11,098

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 124

FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

The Company's derivative instruments are measured at fair value. At December 31, 2020 and 2019, the following
derivative instruments were outstanding:

•

interest rate swaps for the purpose of limiting interest rate risk on the variable future cash flows of long-
term debt;

foreign currency forward contracts for the purpose of limiting exposure to exchange rate fluctuations
relating to expenditures denominated in Mexican pesos and U.S. dollars; and

natural gas and forward power sale and purchase contracts for the purpose of limiting exposure to
electricity and natural gas market price movements.

The balance sheet classification and fair values of the Company’s derivative financial instruments are as follows:

Recurring Measurements

December 31, 2020

Financial Assets

Prepaid expenses and other current assets

Other assets

Financial Liabilities

Provisions and other current liabilities
Other liabilities (1)

December 31, 2019

Financial Assets

Prepaid expenses and other current assets

Other assets

Financial Liabilities
Provisions and other current liabilities (1)
Other liabilities (1)

Subject to Hedge
Accounting

Not Subject to Hedge
Accounting

Interest

Rate Swaps Commodities Commodities

Foreign
Currency
Forward
Contracts

Total Fair
Value of
Derivatives

—

(1)

At December 31, 2020, financial liabilities include $1 million of Level 3 derivative financial instruments (December 31, 2019 - $7 million).

During the year ended December 31, 2020, losses before income taxes of $19 million were recognized in other
comprehensive income (OCI) (2019 - losses of $3 million), none of which were reclassified to the statement of
earnings (2019 - losses of $22 million were reclassified to the statement of earnings, of which $11 million were
reclassified on sale of the Canadian fossil fuel-based electricity generation business (see Note 23)).

Hedge ineffectiveness of $3 million was recognized in the statement of earnings during 2020 (2019 - $19 million).
Over the next 12 months, the Company estimates that gains before income taxes of $6 million will be reclassified
from accumulated other comprehensive income (AOCI) to earnings.

125 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

Notional and maturity summary
The notional value and maturity dates of the Company's derivative instruments outstanding are as follows:

Subject to Hedge Accounting

Not Subject to Hedge Accounting

Notional value and maturity

Interest Rate
Swaps

Natural
Gas (1)

Power (2)

Natural
Gas (1)

Power (2)

December 31, 2020
Purchases (3)
Sales (3)
Currency

Canadian dollars
Australian dollars
Mexican pesos

Maturity

December 31, 2019
Purchases (3)
Sales (3)
Currency

Canadian dollars
Australian dollars
Mexican pesos
U.S. dollars

Maturity

—

738

570

10,593,800

2,203,836

—

3,238,242

759,246

7,867,560

1,089,495

—

2023-2028

2021-2025

2021-2024

—

743

570

—

19,680,771

2,627,765

—

20,456,673

2,215,145

7,000,000

—

2020-2028

2020-2024

2020-2021

—

Foreign
Currency
Forward
Contracts

—

100

2021

—

100

2020

(1)

(2)

(3)

Notional amounts for the natural gas purchase contracts are the maximum volumes that can be purchased over the terms of the contracts.

Notional amounts for the forward power sale and purchase contracts are the commodity volumes committed in the contracts.

Volumes for natural gas and power derivatives are in GJ and MWh, respectively.

OFFSETTING FINANCIAL ASSETS AND LIABILITIES

Netting arrangements and similar agreements provide counterparties the legal right to set-off liabilities against
assets received. The following financial assets and financial liabilities are subject to offsetting at December 31:

2020

Financial Assets
Derivative assets (1)
Accounts receivable and contract assets

Financial Liabilities
Derivative liabilities (1)

2019

Financial Assets

Effects of Offsetting on the Balance Sheet

Gross Amount

Gross Amount
Offset

Net Amount
Recognized

—

(39)

—

Accounts receivable and contract assets

(37)

(1) The Company enters into derivative transactions based on master agreements in which there is a set-off provision under certain circumstances, such as
default. The agreements do not meet the criteria for offsetting in the consolidated balance sheet since the Company does not presently have a legally
enforceable right to set-off. This right is enforceable only if certain credit events occur in the future.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 126

20. RISK MANAGEMENT

FINANCIAL RISKS

The Company is exposed to a variety of risks associated with the use of financial instruments: market risk, credit risk
and liquidity risk. The Company may use various derivative financial instruments to manage its exposure in these
areas. All such instruments are used to manage risk and are not for trading purposes.

The Company’s Board is responsible for understanding the principal risks of the Company’s business, achieving a
proper balance between risks incurred and the potential return to share owners, and confirming there are controls
in place to effectively monitor and manage those risks with a view to the long-term viability of the Company. The
Board established the Audit & Risk Committee to review significant risks associated with future performance,
growth and lost opportunities identified by management that could materially affect the Company’s ability to
achieve its strategic or operational targets. This committee is responsible for confirming that management has
procedures in place to mitigate identified risks.

The source of risk exposure and how each is managed is outlined below.

MARKET RISK

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to
changes in interest rates. The Company’s interest-bearing assets and liabilities include cash and cash equivalents,
bank indebtedness and long-term debt. The interest rate risk faced by the Company is primarily due to its cash and
cash equivalents and floating rate long-term debt.

Cash and cash equivalents include fixed rate instruments with maturities of generally 90 days or less that are
reinvested as they mature. The Company is exposed to interest rate movements after these investments mature.

The Company's risk management policy is to hedge all material interest rate risk exposures related to long-term
financings when the risk is incurred, unless commercial arrangements or mechanisms are in place to offset such
interest rate risk. The Company has fixed interest rates, either directly or through interest rate swap agreements, on
97 per cent (2019 - 98 per cent) of total long-term debt. Consequently, the exposure to fluctuations in market
interest rates is limited.

A 25 basis point increase or decrease in interest rates would increase or decrease earnings by less than $1 million.
This analysis has been determined based on the exposure to interest rates for financial instruments outstanding at
December 31, 2020.

Foreign exchange risk

Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to
changes in foreign exchange rates. The Company operates internationally and is exposed to foreign exchange risk
from financial instruments denominated in currencies other than the functional currency of an operation and on its
net investments in foreign subsidiaries. The majority of this currency risk arises from exposure to the U.S. dollar and
Australian dollar. The Company offsets foreign exchange volatility in part by entering into foreign currency
derivative contracts and by financing with foreign-denominated debt. The Company's risk management policy is to
hedge all material transactions with foreign exchange risks arising from the sale or purchase of goods and services
where revenue or the costs to be incurred are denominated in a currency other than the functional currency of the
transacting company.

A 10 per cent increase or decrease in foreign exchange rates would each increase or decrease OCI by the following:

U.S. dollar

Australian dollar

OCI

127 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

The sensitivity analysis is based on management’s assessment that an average 10 per cent increase or decrease in
these currencies relative to the Canadian dollar is a reasonable potential change over the next year. This analysis
has been determined based on the exposure to foreign exchange for financial instruments outstanding at
December 31, 2020.

The sensitivity analysis excludes translation risk associated with the translation of subsidiaries that have a different
functional currency than the functional currency of the Company.

Energy commodity price risk

Energy commodity price risk is the risk that the fair value or future cash flows of natural gas and electricity sales and
purchases will fluctuate due to changes in market prices. Fluctuations in market prices result from changes in
supply and customer demand, fuel costs, market conditions, weather, regulatory policies, and other factors. The
Company’s retail energy and natural gas storage businesses are exposed to commodity price movements,
particularly to the market price of natural gas and electricity.

Anticipated price risks are calculated based on the Company’s customer demand requirements and supply
requirements to natural gas and electricity. These are consistently observed and analyzed to ensure that
operational and commercial strategic policies to mitigate pricing risk are met.

The Company manages its price risk as part of its strategy by entering into hedging contracts, including short-term
and long-term fixed price sale and purchase contracts. Management actively monitors its derivative transactions in
accordance with its risk management policy. This policy sets out pre-defined risks and financial parameters so that
price fluctuations do not materially affect the margins the Company ultimately receives.

The Company is also exposed to seasonal natural gas price spreads in its natural gas storage operations.
Management mitigates this risk by entering into short-term and long-term firm capacity arrangements, where
appropriate.

The Company’s natural gas and electricity contracts associated with financial derivatives are significantly influenced
by the variability of forward spot prices.

A 10 per cent increase or decrease in the forward price of natural gas or electricity would increase or decrease
earnings by $6 million, and would increase or decrease OCI by $8 million. This analysis assumes that changes in the
forward price of natural gas and electricity affects the mark-to-market adjustment of the purchase and sale
contracts.

CREDIT RISK

Credit risk is the risk of financial loss due to a counterparty's inability to discharge their contractual obligations to
the Company. The Company is exposed to credit risk on its cash and cash equivalents, accounts receivable and
contract assets, finance lease receivable and derivative instrument assets. The exposure to credit risk represents the
total carrying amount of these financial instruments in the consolidated balance sheet.

The Company manages its credit risk on cash and cash equivalents by investing in instruments issued by credit-
worthy financial institutions and in short-term instruments issued by the federal government.

Accounts receivable and contract assets and finance lease receivable credit risk is reduced by transacting with
credit-worthy customers in accordance with the established credit approval policies, diversified customer base and
through collateral arrangements such as letters of credit, corporate guarantees and cash deposits. The utilities are
also able to recover an estimate for their credit loss allowances through approved customer rates and to request
recovery through customer rates for any losses from retailers beyond the retailer security mandated by provincial
regulations.

Derivative credit risk arises from the possibility that a counterparty to a contract fails to perform according to its
terms and conditions. This risk is mitigated by dealing with large, credit-worthy counterparties and continuous
monitoring of the counterparty risk exposure. The Company has in certain instances entered into master netting
agreements with its derivative counterparties, which provides a right to offset for certain exposures between the
parties.

The Company does not have a concentration of credit risk with any counterparty, except for finance lease
receivables, which by its nature is with a single counterparty.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 128

Depending on the nature of accounts receivable and contract assets, the Company estimates credit losses based on
the expected credit loss rates for respective credit ratings. At December 31, the summary of the expected credit loss
rates for respective credit ratings is as follows:

December 31, 2020

December 31, 2019

High
(AA to AAA)

Medium
(BBB to A)

Low
(BB and
below)

0%-0.02% 0.05%-0.16% 0.51%-3.20%

0%-0.02% 0.06%-0.16% 0.53%-3.41%

At December 31, 2020, the Company had approximately $90 million of accounts receivable and contract assets
classified as Low (BB and below) (2019 - approximately $150 million).

Where the Company believes there is a high probability of a customer default, additional credit allowances are
recorded.

The reconciliation of changes in the Company's credit loss allowance is as follows:

Beginning of year
Credit loss allowance
Utilization of credit loss allowance
End of year

2020

6
12
(10)
8

The aging analysis of the trade receivables that are past due but not impaired at December 31 is as follows:

Up to 30 days
31 to 60 days
61 to 90 days
Over 90 days

2020
652
18
6
16
692

2019
6
4
(4)
6

2019
640
25
10
25
700

At December 31, 2020, the Company held $237 million in letters of credit for certain counterparty receivables (2019
- $246 million). The Company did not take possession of any collateral it holds as security in 2020 or 2019. The
Company has also entered into guarantee arrangements with the parent company of Direct Energy Partnership
(Direct Energy) relating to the retail energy supply functions performed by Direct Energy (see Note 29).

LIQUIDITY RISK

Liquidity risk is the risk that the Company will not be able to meet its financial obligations associated with its
financial liabilities that are settled in cash or another financial asset. Liquidity risk arises from the Company's
general funding needs and in the management of its assets, liabilities and capital structure. The Company considers
it prudent to maintain sufficient liquidity to fund approximately one full year of cash requirements to preserve
strong financial flexibility. Cash flow from operations provides a substantial portion of the Company’s cash
requirements. Additional cash requirements are met with the use of existing cash balances, bank borrowings and
issuance of long-term debt and preferred shares. Commercial paper borrowings and short-term bank loans are also
used under available credit lines to provide flexibility in the timing and amounts of long-term financing.

129 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

Lines of credit

At December 31, the Company has the following lines of credit that enable it to obtain financing for general
business purposes:

Long-term committed
Short-term committed
Uncommitted

Total
2,914
150
571
3,635

Used
814
138
154
1,106

2020

Available

2,100
12
417
2,529

Total
2,985
18
571
3,574

Used
839
13
174
1,026

2019

Available
2,146
5
397
2,548

Long-term committed credit facilities have maturities greater than one year. Uncommitted credit facilities have no
set maturity and the lender can demand repayment at any time.

Lines of credit utilized at December 31 are comprised of:

Long-term debt
Letters of credit

Commercial paper

2020
906
200
1,106

2019
797
229
1,026

The Company is authorized to issue $1.2 billion of commercial paper against its long-term committed credit
facilities.

Maturity analysis of financial obligations

The table below analyzes the remaining contractual maturities at December 31, 2020 of the Company's financial
liabilities based on the contractual undiscounted cash flows.

Accounts payable and accrued liabilities
Long-term debt:

Principal
Interest expense (1)

Derivatives (2)

2021
695

329
398
13
1,435

2022

2023

2024

2025

2026 and
thereafter

—

379
384
5
768

817
364
2
1,183

129
343

—

472

35
342

7,979
6,986

—

377

14,965

(1)

Interest payments on floating rate debt have been estimated using rates in effect at December 31, 2020. Interest payments on debt that has been
hedged have been estimated using hedged rates.

(2)

Payments on outstanding derivatives have been estimated using exchange rates and commodity prices in effect at December 31, 2020.

The table below analyzes the remaining contractual maturities at December 31, 2019 of the Company's financial
liabilities based on the contractual undiscounted cash flows, as reported in the consolidated financial statements for
the year ended December 31, 2019.

Accounts payable and accrued liabilities
Long-term debt:

Principal
Interest expense (1)

Derivatives (2)

2020
675

200
412
11
1,298

2021

2022

2023

2024

2025 and
thereafter

—

557
394
8
959

327
370
1
698

511
352
1
864

123
337

7,767
6,687

—

460

14,454

(1)

Interest payments on floating rate debt have been estimated using rates in effect at December 31, 2019. Interest payments on debt that has been
hedged have been estimated using hedged rates.

(2)

Payments on outstanding derivatives have been estimated using exchange rates and commodity prices in effect at December 31, 2019.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 130

PANDEMIC RISK

An outbreak of infectious disease, a pandemic or a similar public health threat, such as the COVID-19 pandemic,
could adversely impact the Company by causing operating, supply chain and project development delays and
disruptions, labor shortages and shutdowns as a result of government regulation and prevention measures,
increased strain on employees and compromised levels of customer service, any of which could have a negative
impact on the Company’s operations.

While the Company’s investments are largely focused on regulated utilities and long-term contracted businesses
with strong counterparties creating a resilient investment portfolio, the extent of the COVID-19 pandemic and its
future impact on the Company remains uncertain. In response to the evolving situation, the Company's Pandemic
Plan was activated in February 2020. The plan included travel restrictions, limited access to facilities, a direction to
work from home whenever possible, physical distancing measures and other protocols (including the use of
personal protective equipment while at a work premise). Since then, the Company has been following
recommendations by local and national public health authorities across the globe to adjust operational
requirements as needed to ensure a coordinated approach across the Company. As a result of these efforts and the
Company’s experience in crisis response, the Company’s operations, financial position and performance have not
been significantly impacted for the year ended December 31, 2020.

21. CAPITAL DISCLOSURES

The Company’s objectives when managing capital are to:

Safeguard the Company’s ability to continue as a going concern so it can continue to provide returns to share
owners and benefits for other stakeholders.

2. Maintain strong investment-grade credit ratings in order to provide efficient and cost-effective access to funds

required for operations and growth.

The Company considers both its regulated and non-regulated operations, as well as changes in economic conditions
and risks impacting its operations, in managing its capital structure. The Company may adjust the dividends paid to
share owners, issue or purchase Class I and Class II Shares, issue or redeem preferred shares, and issue or repay
short-term debt, long-term debt and non-recourse long-term debt. Financing decisions are based on assessments
by management in line with the Company’s objectives, with a goal of managing the financial risk to the Company as
a whole.

While the Alberta based Utilities have as their objective to be capitalized according to the AUC-approved capital
structure, the Company as a whole is not restricted in the same manner. The Company sets its capital structure
relative to risk and to meet financial and operational objectives, while factoring in the decisions of the regulator.

The Company also manages capital to comply with the customary covenants on its debt. A common financial
covenant for the Company’s debentures and credit facilities is that total debt divided by total capitalization must be
less than 75 per cent. The Company defines total debt as the sum of bank indebtedness, short-term debt, long-term
debt and non-recourse long-term debt (including their respective current portions). It defines total capitalization as
the sum of Class I and Class II Shares, contributed surplus, retained earnings, AOCI, NCI and total debt. Management
maintains the debt capitalization ratio well below 75 per cent to sustain access to cost-effective financing.

Debt capitalization does not have standardized meaning under IFRS and might not be comparable to similar
measures presented by other companies. Also, the definitions of total debt and total capitalization vary slightly in
the Company’s debt-related agreements.

131 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

The Company’s capitalization at December 31 is as follows:

Bank indebtedness

Long-term debt

Total debt

Class I and Class II Shares

Contributed surplus

Retained earnings

Accumulated other comprehensive loss

Non-controlling interests

Total equity

Total capitalization

Debt capitalization

2020

9,619

9,622

178

3,880

(12)

3,797

7,849

2019

—

9,436

173

3,832

(17)

3,858

7,858

17,471

17,294

55 %

For the year ended December 31, 2020, the Company complied with externally imposed requirements on its capital,
including covenants related to debentures and credit facilities.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 132

22. SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS

Significant judgments, estimates and assumptions made by the Company are outlined below.

SIGNIFICANT ACCOUNTING JUDGMENTS

Revenue related items

The Company makes judgments with respect to: determining whether the promised goods and services are
considered distinct performance obligations by considering the relationship of such promised goods and services;
allocating the transaction price for each distinct performance obligation identified through stand-alone selling price;
evaluating when a customer obtains control of the goods or services promised; and evaluating whether the
Company acts as principal or agent on certain flow-through charges to customers.

Impairment of financial assets

The impairment loss allowance for financial assets is based on assumptions about risk of default and expected loss
rates. The Company makes judgments in making these assumptions and selecting the inputs to the impairment
calculation, based on the Company's past history, existing market conditions as well as forward looking estimates at
the end of each reporting period.

Associates

Judgment is required when assessing the classification of an investment as an associate. When making this
assessment, the Company considers the structure of the investment, the legal form of any separate vehicles, the
contractual terms of the investment, and other facts and circumstances.

Joint arrangements

Judgment is required when assessing the classification of a joint arrangement as a joint operation or a joint venture.
When making this assessment, the Company considers the structure of the arrangements, the legal form of any
separate vehicles, the contractual terms of the arrangements, and other facts and circumstances.

Service concession arrangements

Judgment is required when assessing whether contracts with government entities fall within the scope of IFRIC 12
Service Concession Arrangements. Judgment also needs to be exercised when determining the classification to be
applied to the service concession asset, allocation of consideration between revenue generating activities,
classification of costs incurred and the effective interest rate to be applied to the service concession asset.

Impairment of long-lived assets
Indicators of impairment are considered when evaluating whether or not an asset is impaired. Factors which could
indicate an impairment exists include: significant underperformance relative to historical or projected operating
results, significant changes in the way in which an asset is used or in the Company’s overall business strategy,
significant negative industry or economic trends, or adverse decisions by regulators. Events indicating an
impairment may be clearly identifiable or based on an accumulation of individually insignificant events over a
period of time. Measurement uncertainty is increased where the Company is not the operator of a facility. The
Company continually monitors its operating facilities and the markets and business environment in which it
operates. Judgments and assessments about conditions and events are made order to conclude whether a possible
impairment exists.

Property, plant and equipment and intangibles

The Company makes judgments to: assess the nature of the costs to be capitalized and the time period over which
they are capitalized in the purchase or construction of an asset; evaluate the appropriate level of componentization
where an asset is made up of individual components for which different depreciation and amortization methods
and useful lives are appropriate; distinguish major overhauls to be capitalized from repair and maintenance
activities to be expensed; and determine the useful lives over which assets are depreciated and amortized.

Leases

The Company evaluates contract terms and conditions to determine whether they contain or are leases. Where a
lease exists, the Company determines whether substantially all of the significant risks and rewards of ownership are

133 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

transferred to the customer, in which case it is accounted for as a finance lease, or remain with the Company, in
which case it is accounted for as an operating lease.

In the situation where the implicit interest rate in the lease is not readily determined, the Company uses judgment
to estimate the incremental borrowing rate for discounting the lease payments. The Company's incremental
borrowing rate generally reflects the interest rate that the Company would have to pay to borrow a similar amount
at a similar term and with a similar security. The Company estimates the lease term by considering the facts and
circumstances that create an economic incentive to exercise an extension or termination option. Certain qualitative
and quantitative assumptions are used when evaluating these incentives.

Income taxes

The Company makes judgments with respect to changes in tax legislation, regulations and interpretations thereof.
Judgment is also applied to estimating probable outcomes, when temporary differences will reverse, and whether
tax assets are realizable.

When tax legislation is subject to interpretation, management periodically evaluates positions taken in tax filings
and records provisions where appropriate. The provisions are management’s best estimates of the expenditures
required to settle the present obligations at the balance sheet date, using a probability weighting of possible
outcomes.

SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS

Revenue recognition

An estimate of usage not yet billed is included in revenues from the regulated distribution of natural gas and
electricity. The estimate is derived from unbilled gas and electricity distribution services supplied to customers and
is based on historical consumption patterns. Management applies judgment to the measure and value of the
estimated consumption.

Impairment of financial assets

The impairment loss allowance for financial assets are based on assumptions about risk of default and expected
loss rates. For details regarding significant assumptions and key inputs used to calculate impairment loss allowance,
see Note 20.

Service concession arrangements

Contracts falling under IFRIC 12 Service Concession Arrangements require the use of estimates over the term of the
arrangement, including estimates of the services performed to date as a proportion of the total services to be
performed. Any change in the long-term estimates could result in significant variation in the amounts recognized
under service concession arrangements.

Useful lives of property, plant and equipment and intangibles

Useful lives are estimated based on current facts and past experience taking into account the anticipated physical
life of the asset, existing long-term sales agreements and contracts, current and forecast demand, and the potential
for technological obsolescence.

Impairment of long-lived assets

The Company continually monitors its long-lived assets and the markets and business environment in which it
operates for indications of asset impairment. Where necessary, the Company estimates the recoverable amount for
the cash generating unit (CGU) to determine if an impairment loss is to be recognized. These estimates are based on
assumptions, such as the price for which the assets in the CGU could be obtained or future cash flows that will be
produced by the CGU, discounted at an appropriate rate. Subsequent changes to these estimates or assumptions
could significantly impact the carrying value of the assets in the CGU.

Leases

Useful lives of right-of-use assets are based on current facts and past experience taking into account the anticipated
physical life of the asset, existing long-term sales agreements and contracts, current and forecast demand, and the
potential for technological obsolescence.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 134

Onerous contracts

In assessing the unavoidable costs of meeting obligations under an onerous contract at the reporting date, the
Company identifies and quantifies any compensation or penalties, other costs arising from the need to terminate a
contract or inability to fulfil it. This process involves judgment about the future events, interpretation of legal terms
of a contract, as well as estimates on the timing and amount of future cash flows. The change in used estimates and
underlying assumptions can significantly impact the amount of recognized provision in relation to onerous
contracts.

Retirement benefits

The Company consults with qualified actuaries when setting the assumptions used to estimate retirement benefit
obligations and the cost of providing retirement benefits during the period. These assumptions reflect
management’s best estimates of the long-term inflation rate, projected salary increases, retirement age, discount
rate, health care costs trend rates, life expectancy and termination rates. The discount rate is determined by
reference to market yields on high quality corporate bonds. Since the discount rate is based on current yields, it is
only a proxy for future yields. Significant assumptions used to determine the retirement benefit cost and obligation
are shown in Note 14.

Asset retirement obligations

The Company's estimates regarding asset retirement costs and related obligations change as a result of changes in
cost estimates, legal and constructive requirements, market rates and technological advancement. The significant
assumptions used to record asset retirement obligations include, but are not limited to, expected timing of
retirement of an asset, scope and costs of retirement and reclamation activities, rates of inflation and a pre-tax risk-
free discount rate. The estimates and assumptions for asset retirement obligations are reviewed at each reporting
period. Changes to the estimates or assumptions could significantly impact the carrying values of the asset
retirement obligations.

Income taxes

Management periodically evaluates positions taken in tax filings where tax legislation is subject to interpretation,
and records provisions where appropriate. The provisions are management’s best estimates of the expenditures
required to settle the present obligations at the balance sheet date measured using a probability weighting of
possible outcomes.

23. BUSINESS COMBINATIONS

SALE OF OPERATIONS IN 2019

In 2019, proceeds on sale of operations, net of cash disposed, and gain on sale of operations are summarized as
follows:

(millions of Canadian Dollars)

Proceeds on sale of operations:

Cash consideration received in 2019

Cash and cash equivalents disposed

Proceeds on sale of operations received in 2019, net of cash and

cash equivalents disposed

Cash consideration received in 2020 on final closing adjustments

Total proceeds on sale of operations, received and receivable, net of

cash and cash equivalents disposed

Gain (loss) on sale of operations before income taxes

Gain (loss) on sale of operations after income taxes and NCI

Sale of the Canadian
fossil fuel-based
electricity generation
business

Sale of Alberta
PowerLine
operations

770
(89)

681

694

175
78

222

—

222

—

222

(1)
(13)

Total

992
(89)

903

916

174
65

135 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

Sale of the Canadian fossil fuel-based electricity generation business

In 2019, the Company closed a series of transactions related to the sale of its Canadian fossil fuel-based electricity
generation business. A transaction with Heartland Generation Ltd., an affiliate of Energy Capital Partners included
the sale of 10 partly or fully owned natural gas-fired and coal-fired electricity generation assets located in Alberta
and British Columbia. In two other separate transactions, the Company sold its 50 per cent ownership interest in the
Cory Cogeneration Station to SaskPower International and its 50 per cent ownership interest in Brighton Beach
Power to Ontario Power Generation.

The sale resulted in gross proceeds of $821 million. An additional $13 million was received in January 2020 for
settlement of customary post-closing purchase price adjustments.

Prior to the sale, the assets and liabilities of the Canadian fossil fuel-based electricity generation business were
reported in the Energy Infrastructure operating segment.

The below summary illustrates major classes of assets and liabilities included in the sale of the Canadian fossil fuel-
based electricity generation business.

(millions of Canadian Dollars)

ASSETS
Current assets
Cash and cash equivalents
Accounts receivable and contract assets
Finance lease receivables
Prepaid expenses and other current assets

Non-current assets
Property, plant and equipment
Intangibles
Investment in joint ventures
Finance lease receivables
Deferred income tax assets
Other assets
Total assets

LIABILITIES
Current liabilities
Accounts payable, accrued liabilities and other current liabilities
Non-recourse long-term debt

Non-current liabilities
Deferred income tax liabilities
Customer contributions
Other liabilities
Non-recourse long-term debt
Total liabilities
Carrying value of net assets sold

Assets and

liabilities sold

89
77
12
18
196

535
17
35
202
32
49
1,066

159
10
169

33
96
187
32
517
549

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 136

The gain on sale of the Canadian fossil fuel-based electricity generation portfolio is shown below.

(millions of Canadian Dollars)
Aggregate consideration as per share purchase agreement

Debt adjustments (1)
Working capital and other purchase price adjustments made in 2019
Cash consideration received in 2019
Cash consideration received in 2020 on final closing adjustments

Cash consideration received and receivable
Carrying value of net assets sold and other items

Carrying value of net assets sold
Transaction costs (2)
Write-down of natural gas inventory
Other directly attributable costs

Gain on sale before income taxes
Income tax expense
Gain on sale after income taxes
Non-controlling interests
Gain on sale after income taxes and non-controlling interests

821
(109)
58
770
13
783

(549)
(29)
(19)
(11)
(608)
175
(25)
150
(72)
78

(1)

Debt adjustments include $37 million of non-recourse long-term debt of Cory Cogeneration Station assumed by SaskPower International, $67 million of
non-recourse long-term debt of Brighton Beach Power assumed by Ontario Power Generation and $5 million of non-recourse debt assumed by
Heartland Generation Ltd.

(2)

Transaction costs relate to success fees, legal costs and other advisory costs directly attributable to the sale of operations.

137 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

Sale of Alberta PowerLine operations

In 2019, the Company sold its entire 80 per cent ownership interest in Alberta PowerLine, a partnership between the
Company and Quanta Services Inc. The sale resulted in gross proceeds of $222 million and the assumption of $1.4
billion of debt, excluding deferred financing charges.

Prior to the sale, the assets and liabilities of Alberta PowerLine were reported in the Energy Infrastructure operating
segment.

The below summary illustrates major classes of assets and liabilities included in the sale of Alberta PowerLine.

(millions of Canadian Dollars)

ASSETS
Current assets
Accounts receivable and contract assets
Restricted project funds
Receivable under service concession arrangement

Non-current assets
Receivable under service concession arrangement
Other assets
Total assets

LIABILITIES
Current liabilities
Accounts payable, accrued liabilities and other current liabilities
Non-recourse long-term debt

Non-current liabilities
Deferred income tax liabilities
Other liabilities (1)
Non-recourse long-term debt
Total liabilities
Carrying value of net assets sold

(1)

Represents the Canadian Utilities Limited 20 per cent non-controlling ownership interest classified as other liabilities.

The loss on sale of Alberta PowerLine is shown below.

(millions of Canadian Dollars)

Aggregate consideration as per share purchase agreement

Carrying value of net assets sold and other items

Carrying value of net assets sold
Transaction costs (1)

Loss on sale before income taxes

Income tax expense

Loss on sale after income taxes

Non-controlling interests

Loss on sale after income taxes and non-controlling interests

(1)

Transaction costs relate to success fees, legal costs and other advisory costs directly attributable to the sale of operations.

Assets and
liabilities sold

7
83
106
196

1,470
18
1,684

25
20
45

56
62
1,309
1,472
212

222

(212)

(11)

(223)

(1)

(24)

(25)

(13)

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 138

24. INVESTMENT IN EQUITY INTEREST IN ASSOCIATE COMPANY

In 2018, the Company invested in a 40 per cent interest in Neltume Ports S.A. (Neltume Ports), a leading port
operator and developer in South America, for aggregate consideration of $471 million (equivalent of $357 million
U.S. dollars). Neltume Ports, a subsidiary of Ultramar, operates sixteen port facilities and three port operation
services businesses located in Chile, Uruguay, Argentina and Brazil.

The Company has significant influence over Neltume Ports due to its 40 per cent interest and other provisions in the
shareholders agreement. As such, the Company accounts for its investment using the equity method of accounting,
whereby the initial investment of $471 million shall be adjusted for the Company's share of Neltume Ports' earnings,
other comprehensive income, dividends received from Neltume Ports, and foreign exchange.

The equity interest in Neltume Ports is reported as a separate operating segment (see Note 3).

The summarized financial information for Neltume Ports is provided below. This includes the balance sheets and
selected information from the statements of earnings and comprehensive income.

December 31
2020

December 31
2019

Balance sheet

Cash and cash equivalents
Other current assets
Current assets

Non-current assets
Total assets

Financial liabilities (1)
Other current liabilities
Current liabilities

Financial liabilities (1)
Other non-current liabilities
Non-current liabilities

Total liabilities

Net assets
ATCO's share of net assets

(1)

Financial liabilities are comprised mainly of long-term debt.

Selected information from the statement of earnings and comprehensive

income

Revenues

Depreciation and amortization
Interest income
Interest expense
Income taxes

Earnings
Other comprehensive loss

ATCO's share of earnings
ATCO's share of other comprehensive loss

139 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

307
63
370

1,180
1,550

(53)
(45)
(98)

(197)
(104)
(301)

(399)

322
78
400

1,186
1,586

(48)
(57)
(105)

(215)
(95)
(310)

(415)

1,151
460

1,171
468

2020

2019

326

(65)
2
(13)
(4)

40
(5)

15
(2)

328

(62)
8
(14)
(2)

37
(6)

15
(2)

A reconciliation of the carrying amount of the investment in associate company is as follows:

Balance at the beginning of the year
ATCO's share of net earnings
ATCO's share of other comprehensive loss
Dividends received
Foreign exchange
Other
Balance at the end of the year

25. SUBSIDIARIES

2020
468
15
(2)
(17)
(3)
(1)
460

2019
491
15
(2)
(12)
(24)

—

468

Principal operating subsidiaries are listed below. Subsidiaries are wholly owned, unless otherwise indicated.

Principal Operating Subsidiaries

Principal Place
of Business

Principal Activity

Subsidiaries at December 31, 2020 and December 31, 2019

ATCO Structures & Logistics

Canada

Inversiones ATCO Chile Limitada Chile
Canadian Utilities Limited (1)
ATCO Energy Solutions

Canada

Electricidad del Golfo
ATCO Gas Australia
ATCO Power Australia
ATCO Energy
ATCO Power (2010) (2)
CU Inc.

ATCO Electric

ATCO Gas

ATCO Pipelines

Mexico
Australia
Australia
Canada
Canada
Canada

Canada

Workforce housing, modular facilities, construction, site support
services and logistics and operations management.
Holds 40% investment in associate, Neltume Ports S.A.

Holding company

Develops, owns and operates non-regulated energy and water-
related infrastructure
Electricity generation and related infrastructure services
Natural gas distribution
Electricity generation
Electricity and natural gas retailer
Electricity generation and related infrastructure services
Holding company

Electricity transmission, distribution and related infrastructure
development
Natural gas distribution and related infrastructure development

Natural gas transmission and related infrastructure development

Subsidiaries sold during the year ended December 31, 2019 (see Note 23)
ATCO Power Canada (3)
Alberta PowerLine (4)

Canada

Electricity generation and related infrastructure services
Design, build, own, and operate transmission infrastructure

(1) At December 31, 2020, ATCO Ltd. has an ownership interest of 52.3 per cent (2019 - 52.2 per cent).

(2) Following the sale of the Canadian fossil fuel-based electricity generation business (see Note 23), ATCO Power (2010) holds the remaining Canadian

electricity generation and related infrastructure assets.

(3)

Included the Canadian fossil fuel-based electricity generation business sold in 2019 (see Note 23).

(4) Prior to the sale of operations in 2019, Canadian Utilities Limited had an ownership interest of 80 per cent.

26. JOINT ARRANGEMENTS

JOINT OPERATIONS

In 2019, the Company disposed of its significant joint operations as part of the sale of the Canadian fossil fuel-based
electricity generation business (see Note 23). Prior to the sale, the significant joint operations, all of which were
included in the Energy Infrastructure segment, were as follows.

Significant Joint Operations
Sheerness Generating Plant
Joffre Cogeneration Plant
Cory Cogeneration Plant
Muskeg River Cogeneration Plant

Operating
Jurisdiction
Canada
Canada
Canada
Canada

Ownership %

50
40
50
70

Principal Activity
Electricity generation
Electricity generation
Electricity generation
Electricity generation

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 140

JOINT VENTURES

The following joint ventures are considered the most significant; however, they are not individually material to the

operations of the Company.

Significant Joint Ventures

Segment

Joint ventures at December 31, 2020 and December 31, 2019

Operating
Jurisdiction

Ownership % Principal Activity

LUMA Energy LLC

Utilities, Electricity

Puerto Rico

Osborne Cogeneration Plant

Electricity

Australia

Strathcona Storage Limited
Partnership

Pipelines & Liquids

Canada

Joint venture at December 31, 2019, and during the period ended December 30, 2020

Operations and

management services

Electricity generation

Hydrocarbon storage

Sabinco Soluciones Modulares S.A.

Structures & Logistics Chile

Modular structures

Aggregate information for the Company’s interest in joint ventures is shown below.

Earnings and comprehensive income for the year

Dividends received

Aggregate carrying amount of interests in joint ventures

ATCO Sabinco

2020

186

2019

187

On December 30, 2020, the Company increased its ownership in Sabinco Soluciones Modulares S.A. (ATCO Sabinco)
from 50 per cent to 100 per cent. The increase in ownership was accounted for using the acquisition method. The
aggregate consideration paid was $20 million and is included in other investing activities in the consolidated
statements of cash flows. ATCO Sabinco was previously accounted for as a joint venture, and, effective December
30, 2020, is consolidated. Significant assets and liabilities acquired and, as a result included in the consolidated
balance sheets at December 31, 2020, include $43 million of property, plant and equipment, $16 million of trade
accounts receivable and contract assets, and $11 million of long-term debt.

ATCO Sabinco is reported in the Structures & Logistics segment.

LUMA Energy LLC

On June 22, 2020, LUMA Energy LLC (LUMA), a Commonwealth of Puerto Rico based joint venture between the
Company and Quanta Services, Inc., where each party holds a 50 per cent ownership interest, was selected by the
Puerto Rico Public-Private Partnerships Authority to modernize and operate Puerto Rico's electric transmission and
distribution system over a term of 15 years after a one year transition period which commenced in June 2020.

LUMA contractual arrangements do not assume ownership of any electric transmission and distribution assets. The
functional currency of LUMA is US dollars.

The Company has accounted for its 50 per cent ownership interest as a joint venture, whereby the initial investment
shall be adjusted for the Company's share of LUMA's earnings, other comprehensive income, dividends received
from LUMA, and foreign exchange. When making the assessment on whether LUMA represents a joint venture, the
Company considered the structure, legal form and contractual terms of the arrangement with Quanta Services, Inc.,
as well as other facts and circumstances.

LUMA is reported in the Utilities, Electricity segment.

At December 31, 2020, the investment in LUMA was $14 million. Earnings from investment in LUMA during the year
ended December 31, 2020, were $14 million. No dividends or distributions were received from LUMA during the
year ended December 31, 2020.

Joint venture disposed of as part of the sale of operations

In 2019, Canadian Utilities Limited disposed of its 50 per cent ownership in Brighton Beach Plant joint venture as
part of the sale of the Canadian fossil fuel-based electricity generation business (see Note 23). Prior to the sale,
Brighton Beach Plant was included in the Energy Infrastructure segment.

141 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

Investment in joint ventures

In 2020, contributions of $9 million were made to the Strathcona Storage Limited Partnership (2019 - nil).

Commitments

The joint ventures have contractual obligations in the normal course of business. The Company’s total share of
these unrecognized commitments, based on the contractual undiscounted cash flows, was $25 million at
December 31, 2020 (2019 - $45 million).

Restrictions

The Company requires approval from its joint venture partners before any dividends or distributions can be paid.

27. NON-CONTROLLING INTERESTS

Non-controlling interests at December 31 are as follows:

NCI in Canadian Utilities Limited
NCI in ATCO Espaciomovil S.A.P.I. de C.V., 70 per cent owned subsidiary of
ATCO Structures & Logistics

NCI in CANADIAN UTILITIES LIMITED

Non-controlling interests in Canadian Utilities Limited at December 31 are as follows:

Class A non-voting shares and Class B common shares

Total ownership interest held

Proportion of voting rights held

Proportion of non-voting rights held

2020

3,794

2019

3,853

3,797

3,858

2020

47.7

9.7

61.7

2019

47.8

9.8

61.8

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 142

The summarized consolidated financial information for Canadian Utilities Limited, before inter-company
eliminations, is provided below.

Consolidated Statements of Comprehensive Income

Revenues

Earnings for the year

Total comprehensive income

Attributable to NCI:

Earnings for the year

Total comprehensive income

Consolidated Balance Sheets

Current assets

Non-current assets

Current liabilities

Non-current liabilities

Net assets

Attributable to NCI

Consolidated Statements of Cash Flows

Cash flows from operating activities

Cash flows used in investing activities

Cash flows used in financing activities

(Decrease) Increase in cash position

Dividends paid to NCI

Class A and Class B share owners

Equity preferred shares

EQUITY PREFERRED SHARES

Equity preferred shares held by non-controlling interests at December 31 are shown below.

2020

2019

3,233

3,905

434

451

245

252

958

892

494

462

1,559

1,714

18,737

18,330

(856)

(739)

(12,632)

(12,384)

6,808

3,794

6,921

3,853

1,631

1,358

(905)

(924)

(198)

227

301

(172)

(788)

398

220

294

2020

2019

CU Inc. Equity Preferred Shares

Cumulative Redeemable Preferred Shares, at 2.243% to 4.60%

190

Canadian Utilities Limited Equity Preferred Shares

Cumulative Redeemable Second Preferred Shares, at 3.403% to 5.25%

Perpetual Cumulative Second Preferred Shares, at 4.60%

Issuance costs

1,400

110

(30)

110

(30)

1,670

143 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

Rights and privileges

Preferred shares
Cumulative Redeemable Preferred Shares

Quarterly Dividend (2)

Redemption
Amount (1)

Reset Premium (3)

Date Redeemable/
Convertible

Convertible To

Series 1
Series 4

25.00
25.00

0.2875
0.1401875

Cumulative Redeemable Second Preferred Shares

Does not reset Currently redeemable Not convertible
Series 5 (5)

June 1, 2021 (4)

1.36 %

Series Y
Series AA
Series BB
Series CC
Series DD
Series EE
Series FF

25.00
25.00
25.00
25.00
25.00
25.00
25.00

0.2126875
0.30625
0.30625
0.28125
0.28125
0.328125
0.28125

2.40 %
Does not reset
Does not reset
Does not reset
Does not reset
Does not reset
3.69 %

June 1, 2022 (4)

Series Z (5)
September 1, 2017 (6) Not convertible
September 1, 2017 (6) Not convertible
June 1, 2018 (6) Not convertible
September 1, 2018 (6) Not convertible
September 1, 2020 (6) Not convertible
Series GG (5)
December 1, 2025 (4)

Perpetual Cumulative Second Preferred Shares

Series V

25.00

0.2875

No premium Currently redeemable Not convertible

(1)

(2)

(3)

(4)

(5)

(6)

Plus accrued and unpaid dividends.

Cumulative, payable quarterly as and when declared by the Board.

Dividend rate will reset on the date redeemable/convertible and every five years thereafter at a rate equal to the Government of Canada yield plus the
reset premium noted.

Redeemable by the Company or convertible by the holder on the date noted and every five years thereafter.

If converted, holders will be entitled to receive quarterly floating rate dividends equal to the Government of Canada Treasury Bill yield plus the reset
premium noted. Holders have the option to convert back to the original preferred shares series on subsequent redemption dates.

Subject to a redemption premium of 4 per cent per share. The redemption premium declines by 1 per cent in each succeeding twelve month period from
the redeemable date.

28. SHARE-BASED COMPENSATION PLANS

PLAN FEATURES

Share based forms of compensation are granted at the discretion of the Corporate Governance – Nomination,
Compensation and Succession Committee. Plan features are described below.

Form of compensation

Eligibility

Stock options (1) (2)

Officers and key employees

Share appreciation rights

(1) Directors, officers and key

employees

Mid-term incentive plan

Officers and key employees

Vesting Period

20% per year
over 5 years

25% per year
over 4 years

20% per year
over 5 years
2-3 years (3)

Term

Settlement
10 years Class I Non-Voting Shares (4)

8 years Class I Non-Voting Shares (4)

10 years

Cash

2-3 years Class I Non-Voting Shares (5)

(1)

(2)

(3)

(4)

(5)

Exercise price is equal to the weighted average of the trading price of the shares on the Toronto Stock Exchange for the five trading days immediately
preceding the date of grant.

Stock Options granted in 2020 vest over 4 years with a term of 8 years. Stock Options that were granted in 2019 and prior vest over 5 years with a term
of 10 years.

Based on achieving certain performance criteria.

Issued from Treasury.

Purchased on the secondary market.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 144

STOCK OPTION PLAN

Information about the options outstanding and exercisable at December 31 is summarized below.

Options authorized for grant

Options available for issuance

2020

Weighted
Average
Exercise Price

Options

10,200,000

2,444,540

2019

Weighted
Average
Exercise Price

Options

10,200,000

1,994,950

Outstanding options, beginning of year

693,000

$44.40

705,500

$41.31

Granted

Exercised

Forfeited

Outstanding options, end of year

Options exercisable, end of year

Options

Range of
Exercise Prices

$28.32

$35.12 - $38.93

$40.38 - $44.97

$45.40 - $49.51

$50.33 - $51.97

$28.32 - $51.97

450,000

(27,300)

38.40

106,000

29.96

(107,950)

(500)

42.08

(10,550)

1,115,200

$42.33

693,000

461,950

$44.44

397,850

49.51

29.04

45.92

$44.40

$43.21

Number
Outstanding

Weighted
Average
Remaining
Contractual Life

9,000

584,900

176,050

269,750

75,500

1,115,200

0.2

7.0

5.1

6.8

3.4

6.3

Outstanding

Exercisable

Weighted
Average
Exercise Price

Number
Exercisable

Weighted
Average
Exercise Price

$28.32

9,000

$28.32

38.15

43.26

48.60

51.89

119,100

113,500

146,650

73,700

37.08

43.93

48.03

51.91

$42.33

461,950

$44.44

Compensation expense related to stock options was less than $1 million in each of 2020 and 2019, with a
corresponding increase to contributed surplus.

SHARE APPRECIATION RIGHTS

Information about the share appreciation rights (SARs) outstanding and exercisable at December 31 is summarized
below.

Outstanding SARs, beginning of year

775,000

$44.56

787,500

$41.76

2020

Weighted
Average
Exercise Price

SARs

2019

Weighted
Average
Exercise Price

SARs

Granted

Exercised

Forfeited

Outstanding SARs, end of year

SARs exercisable, end of year

SARs

Range of
Exercise Prices

$28.32

$35.12 - $38.93

$40.38 - $44.97

$45.40 - $49.51

$50.33 - $51.97

$28.32 - $51.97

7,000

38.40

127,000

(27,300)

(18,500)

736,200

461,950

29.96

(107,950)

46.79

(31,550)

$44.99

775,000

$44.44

397,850

49.51

29.04

47.51

$44.56

$43.21

Outstanding

Exercisable

Number
Outstanding

Weighted
Average
Remaining
Contractual Life

9,000

148,900

199,050

301,750

77,500

736,200

0.2

3.9

5.4

6.9

3.5

5.4

Weighted
Average
Exercise Price

Number
Exercisable

Weighted
Average
Exercise Price

$28.32

9,000

$28.32

37.43

43.15

48.67

51.86

119,100

113,500

146,650

73,700

37.08

43.93

48.03

51.91

$44.99

461,950

$44.44

145 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

In 2020, compensation credit related to SARs was a credit of $1 million (2019 - expense of $3 million). The total
carrying value of liabilities arising from SARs at December 31, 2020 was $2 million (2019 - $3 million). The total
intrinsic value of all vested SARs at December 31, 2020 was less than $1 million (2019 - $3 million).

STOCK OPTION AND SARS WEIGHTED AVERAGE ASSUMPTIONS

The Company uses the Black-Scholes option pricing model to estimate the weighted average fair value of the stock
options and SARs granted. The following weighted average assumptions were used:

Class I share price

Risk-free interest rate
Share price volatility (1)
Estimated annual Class I share dividend

Options

$38.40

0.52 %

21.76 %

4.62 %

2020

SARs

$38.40

0.37 %

24.67 %

4.62 %

Options

$49.51

1.47 %

18.88 %

3.25 %

2019

SARs

$49.51

1.47 %

18.85 %

3.25 %

Expected holding period prior to exercise

7.1 years

4.0 years

7.1 years

5.9 years

(1)

The share price volatility is based on historical data and reflects the assumption that historical volatility over a period similar to the life of the option or
SAR is indicative of future trends, which may not necessarily be indicative of exercise patterns that may occur.

MID-TERM INCENTIVE PLAN

Information about the MTIPs outstanding at December 31 is summarized below.

Outstanding MTIPs, beginning of year

321,948

$45.00

342,212

$44.34

2020

Weighted
Average
Grant Date
Fair Value

MTIPs

2019

Weighted
Average
Grant Date
Fair Value

MTIPs

Granted

Vested
Forfeited (1)
Change in unallocated shares (2)
Outstanding MTIPs, end of year

—

49.21

43.49

—

108,650

(28,770)

(48,558)

(51,586)

$42.16

321,948

(78,401)

(224,799)

225,461

244,209

(1) Forfeitures occur when certain performance criteria are not met.

(2) Unallocated shares are Class I Shares held by the trustee which have not been awarded to officers or key employees.

44.46

42.62

41.77

—

$45.00

Outstanding

Weighted
Average
Grant Date
Fair Value
$42.16

Weighted
Average
Remaining
Contractual Life
0.6

Number
Outstanding

12,950
231,259
244,209

—

0.6

—

$42.16

MTIPs

Range of Prices
$40.92 - $44.38
Unallocated shares
$40.92 - $44.38

Compensation expense related to MTIP grants was a credit of $3 million for 2020 with a corresponding decrease to
contributed surplus (2019 - expense of $2 million with a corresponding increase to contributed surplus).

The Company, through a trustee, did not purchase any shares during 2020 to be distributed to employees on
vesting of the awards (2019 - 10,000 shares).

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 146

29. CONTINGENCIES

Measurement inaccuracies occur from time to time on electricity and gas metering facilities. The measurement
adjustments relating to the Canadian utilities are settled between the parties according to the Electricity and Gas
Inspections Act (Canada) and related regulations. The AUC may disallow recovery of a measurement adjustment if it
finds that controls and timely follow-up are inadequate. The measurement adjustments relating to ATCO Gas
Australia are reconciled by the market operator and settled between the parties. Recovery of the costs is via a
predetermined allowance contained in the current Access Arrangement.

The Company is party to a number of other disputes and lawsuits in the normal course of business. The Company
believes that the ultimate liability arising from these matters will have no material impact on the consolidated
financial statements.

In 2004, ATCO Gas and ATCO Electric transferred their retail energy supply businesses to Direct Energy. The legal
obligations of ATCO Gas and ATCO Electric for the retail functions transferred to Direct Energy, which include the
supply of natural gas and electricity to customers as well as billing and customer care, remain if Direct Energy fails
to perform. In certain circumstances, the functions will revert to ATCO Gas and/or ATCO Electric, with no refund of
the transfer proceeds to Direct Energy.

Prior to and as at December 31, 2020, Centrica plc., Direct Energy’s parent company, provided a $300 million
guarantee, supported by a $235 million letter of credit for Direct Energy’s obligations to ATCO Gas and ATCO Electric
under the transaction agreements. However, there can be no assurance that the coverage under these agreements
will be adequate to defray all costs that could arise if the obligations are not met.

On January 5, 2021, Centrica plc. closed a transaction to sell its entire ownership interest in Direct Energy to NRG
Energy Inc. (NRG). Effective January 5, 2021, NRG provided a $300 million guarantee, supported by a $300 million
letter of credit for Direct Energy’s obligations to ATCO Gas and ATCO Electric under the transaction agreements.

30. COMMITMENTS

In addition to commitments disclosed elsewhere in these financial statements, the Company has entered into a
number of operating and maintenance agreements and agreements to purchase capital assets. Approximate future
undiscounted payments under these agreements are as follows:

Purchase obligations:

Operating and maintenance agreements

Capital expenditures

Other

31. RELATED PARTY TRANSACTIONS

2021

2022

2023

2024

2025

2026 and
thereafter

407

231

652

319

329

299

151

—

319

329

299

151

In transactions with the Company’s joint ventures, the Company recognized revenues of $21 million relating to
management fees and other charges (2019 - $6 million).

In transactions with the Company’s group pension plans, the Company paid occupancy costs of $7 million relating to
property owned by the pension plans (2019 - $8 million).

The Company received less than $1 million (2019 - less than $1 million) in electricity and gas sales revenue and
incurred $1 million in advertising, promotion and other expenses from entities related through common control
(2019 - $3 million).

147 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

KEY MANAGEMENT COMPENSATION

Information on management compensation for the year ended December 31 is shown below.

Salaries and short-term employee benefits

Retirement benefits
Share-based compensation (1)

2020

(3)

2019

(1)

In 2020, relates to certain forfeitures of mid-term incentive plan grants.

Key management personnel comprise members of executive management and the Board, a total of 18 individuals
(2019 - 19 individuals).

32. ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

Subsidiaries are consolidated from the date control is obtained until the date control ends. Control exists where the
Company has power over the investee, exposure or rights to variable returns from the investee and the ability to
use its power over the investee to affect returns.

All intra-group balances and transactions are eliminated on consolidation.

Interests in subsidiaries owned by other parties are included in NCI. NCI in subsidiaries are identified separately
from equity attributable to Class I and Class II owners of the Company. Earnings and each component of OCI are
attributed to the Class I and Class II owners of the Company and to NCI, even if this results in the NCI having a deficit
balance. Earnings attributable to the Class I and Class II owners are determined after adjusting for dividends on
equity preferred shares held by NCI.

Changes in the Company’s ownership interests that do not result in a loss of control are accounted for as equity
transactions. The carrying amounts of the Company’s interest and the NCI are adjusted to reflect the changes in
their relative interests in the subsidiaries. Any difference between the amount by which the NCI are adjusted and
the fair value of the consideration paid or received is recognized directly in equity and attributed to the Class I and
Class II owners of the Company.

ASSOCIATES

Associates are those entities over which the Company has significant influence, but not control or joint control, over
the financial and operating policies. This is generally the case where the group holds between 20% and 50% of the
voting rights.

Associates are equity accounted. Under this method, the Company’s interests in associates are initially recognized at
cost. The interests are subsequently adjusted to recognize the Company’s share of post-acquisition profits or losses,
movements in OCI and dividends or distributions received.

The Company’s interests in associates are tested for recoverability when events or circumstances indicate a possible
impairment. An impairment loss is recognized in earnings when the carrying value of the Company’s interest in an
individual associate is higher than its recoverable amount. The recoverable amount is the higher of fair value less
disposal costs and value in use. An impairment loss may be reversed if there is objective evidence that a change in
the estimated recoverable amount of the investment is warranted.

JOINT ARRANGEMENTS

A joint arrangement can be classified as either a joint operation or joint venture and represents the contractually
agreed sharing of control by two or more parties. A joint operation is an arrangement in which the Company has the
rights and obligations to the corresponding assets and liabilities of the arrangement, whereas a joint venture is an
arrangement in which the Company has the rights to the net assets of the arrangement.

Joint operations are proportionately consolidated by including the Company’s share of assets, liabilities, revenues,
expenses and OCI in the respective consolidated accounts.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 148

Joint ventures are equity accounted. Under this method, the Company’s interests in joint ventures are initially
recognized at cost. The interests are subsequently adjusted to recognize the Company’s share of post-acquisition
profits or losses, movements in OCI and dividends or distributions received.

The Company’s interests in joint ventures are tested for recoverability when events or circumstances indicate a
possible impairment. An impairment loss is recognized in earnings when the carrying value of the Company’s
interest in an individual joint venture is higher than its recoverable amount. The recoverable amount is the higher of
fair value less disposal costs and value in use. An impairment loss may be reversed if there is objective evidence that
a change in the estimated recoverable amount of the investment is warranted.

BUSINESS COMBINATIONS

Business combinations are accounted for using the acquisition method. Assets acquired and liabilities assumed are
measured at their fair value at the acquisition date. Acquisition costs are expensed in the period incurred.

SERVICE CONCESSION ARRANGEMENTS

Service concession arrangements are contracts between the Company and government entities and can involve the
design, build, finance, operation and maintenance of public infrastructure in which the government entity controls:

(i)

the services provided by the Company; and

(ii) a significant residual interest in the infrastructure.

Service concession arrangements are classified as either a financial asset or an intangible asset, or both. A financial
asset is recognized when the Company has an unconditional right to receive a specified amount of cash or other
financial asset over the life of the arrangement. The financial asset is measured at the fair value of consideration
received or receivable upon initial recognition. When the Company delivers more than one category of activity in a
service concession arrangement, the consideration received or receivable is allocated by reference to the relative
fair value of the activity, when amounts are separately identifiable. The Company recognizes an intangible asset
when it has a right to charge for usage of the public infrastructure. The intangible asset is measured at fair value
upon initial recognition. Subsequent to initial recognition, both the financial and intangible assets are measured at
cost less accumulated amortization and impairment losses, if any.

REVENUE RECOGNITION

Revenue is allocated to the respective performance obligations based on relative transaction prices, and is
recognized as goods and services are delivered to the customer. Revenue is measured as the amount of
consideration expected to be received in exchange for the goods transferred or services delivered. The amount of
revenue recognized reflects the time value of money where a significant financing component has been identified.

Contract modifications are accounted for prospectively or as a cumulative catch-up adjustment depending on the
nature of the change.

Where the amount of goods and services delivered to the customer corresponds directly to the amount invoiced,
the Company recognizes revenue equal to what it has the right to invoice.

Where the Company arranges for another party to provide a specified good or service (that is, it does not control
the specified good or service provided by another party before that good or service is transferred to the customer),
only revenues net of payments to the other party for the goods or services provided are recognized.

Non-cash considerations received from the Company’s customers are included in the amount of revenue
recognized and measured at fair value.

Costs incurred directly to obtain or fulfill a contract are capitalized and amortized to expense over the life of the
contract.

Electricity generation and delivery

Revenue from independent power plant (IPP) contracts providing generation capacity to customers is recognized
over the contract term and is measured based on fixed or variable capacity payments. Revenue from operating and
maintaining the plant is recognized as the Company incurs costs to service the plant.

149 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

Electricity and natural gas transmission

Revenue from electricity and natural gas transmission services is recognized when service is provided to customers
and is measured in proportion to the amount it has the right to invoice under the contract.

Customer contributions for extensions to plant are recognized as revenue over the life of the related asset.

Electricity and natural gas distribution

Revenue from distribution of electricity and natural gas is recognized when the services are provided to the
customer based on metered consumption, which is adjusted periodically to reflect differences between estimated
and actual consumption. Distribution of regulated and non-regulated electricity and natural gas is based on tariff-
approved rates established by the Alberta Electric System Operator and Natural Gas Exchange and rates stipulated
in the contracts, respectively. The Company recognizes revenue in an amount that corresponds directly with the
services delivered and the amount invoiced.

Customer contributions for extensions to plant are recognized as revenue over the life of the related asset.

Gas storage and transportation

Revenue from hydrocarbon storage and transportation is recognized as the service is rendered to customers based
on the length of the required service and contracted schedule of injections and withdrawals from the storage
facilities.

Modular structures and related services

Revenue on manufactured modular structures is recognized upon delivery to or acceptance by the customer.
Revenue from certain long-term contracts that relate to highly customized modular structures is recognized over
time based on the costs incurred.

Lease revenue

Power purchase arrangements (PPA) for the generation of electricity are accounted for as operating leases, finance
leases or executory contracts, depending on the terms of the PPAs.

Operating lease PPAs are subject to incentives and penalties relating to the generating unit’s availability. Incentives
are paid to the Company by the PPA counterparties for availability in excess of predetermined targets, whereas
penalties are paid by the Company to the PPA counterparties when the availability targets are not achieved. The
Company recognizes operating lease income on a declining rate base method, in accordance with the lease
contract. Accumulated incentives in excess of accumulated penalties are deferred and operating lease income is
recognized over the remaining term of the PPA. Conversely, any shortfall is expensed in the year the shortfall
occurs.

Certain PPAs are classified as finance leases. Finance lease income is included in revenues. Non-lease components
of the PPAs are accounted for based on the applicable performance obligations.

Service concession arrangement

Revenue on design and construction of the Fort McMurray 500 kV Transmission project (Project) was recognized
based on the stage of completion of the related services. Revenue on operating and maintenance of the Project are
recognized as related costs are incurred using the applicable markup.

Franchise fees

Municipal governments charge franchise fees to the utilities in Canada for the exclusive right to provide service in
their community. These costs are charged to customers through rates approved by the regulator. Franchise fees do
not represent a separate performance obligation to a customer and are recovered through utility transmission and
distribution prices. The recovery is part of the provision of continuous electricity and natural gas transmission and
distribution service performance obligation. Franchise fees invoiced to customers are recognized as revenues.

SHORT-TERM EMPLOYEE BENEFITS

Short-term employee benefits are recognized as an expense in salaries, wages and benefits as employees render
service. These benefits include wages, salaries, social security contributions, short-term compensated absences,
incentives and non-monetary benefits, such as medical care. Costs for employee services incurred in constructing

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 150

an asset that meet the asset recognition criteria are included in the related property, plant and equipment or
intangible asset.

Termination benefits are recognized as an expense in salaries, wages and benefits at the earlier of when the
Company can no longer withdraw the offer of those benefits and when the Company recognizes costs for a
restructuring that includes the payment of termination benefits. In the case of an offer made to encourage
voluntary redundancy, the termination benefits are measured based on the number of employees expected to
accept the offer.

INCOME TAXES

Income taxes are the sum of current and deferred taxes. Income tax is recognized in earnings, except to the extent
it relates to items recorded in OCI or in equity.

Current tax is calculated on taxable earnings using rates enacted or substantively enacted at the balance sheet date
in the jurisdictions in which the Company operates.

The liability method is used to determine deferred income tax on temporary differences between the financial
statement carrying amounts of assets and liabilities and their respective tax bases. Deferred income tax is
calculated using the enacted or substantively enacted tax rates that are expected to apply in the period when the
liability is settled or the asset is realized. If expected tax rates change, deferred income taxes are adjusted to the
new rates.

Deferred income tax assets and liabilities are not recognized if the temporary differences arise from the initial
recognition of goodwill or of other assets and liabilities in a transaction, other than a business combination, that
does not affect accounting or taxable earnings. The tax effect of temporary differences from investments in
subsidiaries and joint arrangements are not accounted for where the Company is able to control the reversal of the
temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognized only when it is probable that future taxable earnings will be available
against which the temporary differences can be applied.

Current income tax assets and liabilities are offset where the Company has the legally enforceable right to offset
and the Company intends to either settle on a net basis or realize the asset and settle the liability simultaneously.

Deferred income tax assets and liabilities are offset where the Company has a legally enforceable right to set off tax
assets and liabilities, and when the deferred income tax assets and liabilities relate to income taxes levied by the
same tax authority.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash at bank, bankers’ acceptances, certificates of deposit issued or
guaranteed by credit worthy financial institutions and federal government issued short-term investments with
maturities generally of 90 days or less at purchase.

INVENTORIES

Inventories are valued at the lower of cost or net realizable value. The cost of inventories that are interchangeable is
assigned using the weighted average cost method. For inventories that are not interchangeable, cost is assigned
using specific identification of their individual costs. Net realizable value is the estimated selling price in the ordinary
course of business, less variable selling expenses.

The cost of inventories is comprised of all purchase, conversion and other costs to bring inventories to their present
condition and location. Purchase costs consist of the purchase price, import duties, non-recoverable taxes,
transport, handling and other costs directly attributable to the purchase of finished goods, materials or services.
Conversion costs include direct material and labour costs and a systematic allocation of fixed and variable
overheads incurred in converting materials into finished goods. The standard cost method is used to approximate
cost in the Company’s Structures & Logistics manufacturing operations.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at cost less accumulated depreciation and any recognized impairment
losses. Cost includes expenditures that are directly attributable to the purchase or construction of the asset, such as

151 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

materials, labour, borrowing costs incurred during construction, contracted services and asset retirement costs.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset only when it is
probable that future economic benefits will flow to the Company and the cost can be measured reliably.

Major overhaul costs are capitalized and depreciated on a straight-line basis over the period to the next major
overhaul, which varies from three to eight years. The cost of repair and maintenance activities performed every two
years or less which do not enhance or extend the useful life of the asset are expensed when incurred.

Borrowing costs attributable to a construction period of substantial duration are added to the cost of the asset. The
effective interest method is used to calculate capitalized interest using specified rates for specific borrowings and a
weighted average rate for general borrowings. Interest capitalization starts when borrowing costs and expenditures
are incurred at the onset of construction and ends when construction is substantially complete.

The Company allocates the amount initially recognized in property, plant and equipment to its significant
components and depreciates each component separately. Assets are depreciated mainly on a straight-line basis
over their estimated useful lives. No depreciation is provided on land and construction work-in-progress.

The carrying amount of a replaced asset is derecognized when the cost of replacing the asset is capitalized. When
an asset is derecognized, any resulting gain or loss is recorded in earnings.

Depreciation periods for the principal categories of property, plant and equipment are shown in the table below.

Utility transmission and distribution:
Electricity transmission equipment
Electricity distribution equipment
Gas transmission equipment
Gas distribution plant and equipment
Power generation plant and equipment:

Gas-fired
Hydroelectric

Buildings
Other:

Rental assets
Other plant, equipment and machinery

Useful Life

Average
Useful Life

Average
Depreciation Rate

2 to 65 years
10 to 103 years
4 to 57 years
3 to 120 years

15 years
43 to 50 years
10 to 73 years

12 to 17 years
1 to 74 years

51 years
44 years
42 years
41 years

15 years
50 years
34 years

17 years
17 years

1.9 %
2.3 %
2.4 %
2.4 %

6.4 %
1.9 %
2.9 %

6.0 %
6.0 %

Depreciation methods and the estimated residual values and useful lives of assets are reviewed on an annual basis.
Any changes in these accounting estimates are recorded prospectively.

INTANGIBLES

Intangible assets are recorded at cost less accumulated amortization and any recognized impairment losses. The
Company amortizes intangible assets on a straight-line basis over their useful lives. Useful life is not longer than
10 years for computer software and between 74 and 80 years for land rights based on the contractual life of the
underlying agreements. Software work-in-progress is not amortized as the software is not available for use.

Amortization methods and useful lives of assets are reviewed annually. Any changes in these accounting estimates
are recorded prospectively.

IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLES

Property, plant and equipment and intangible assets with finite lives are tested for recoverability when events or
circumstances indicate a possible impairment. Impairment is assessed at the CGU level, which is the smallest
identifiable group of assets that generates independent cash inflows. An impairment loss is recognized in earnings
when the CGU’s carrying value is higher than its recoverable amount. The recoverable amount is the greater of the
CGU’s fair value less disposal costs and its value in use. An impairment loss may be reversed in whole or in part if
there is objective evidence that a change in the estimated recoverable amount is warranted. A reversal of an
impairment loss shall not exceed the carrying amount that would have been determined (net of depreciation) had
no impairment loss been recognized for the asset in prior years.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 152

GOODWILL

Goodwill is not amortized. The carrying value of goodwill is tested for impairment annually or more frequently if
there is an indicator of impairment. Impairment is tested at the operating segment level. If the carrying value of the
segment to which goodwill has been assigned exceeds its recoverable amount, then any excess of the carrying value
of a segment's goodwill over its recoverable amount is expensed and is not subsequently reversed.

LEASES

The Company as a lessee

At the inception of a contract, the Company assesses whether the contract is, or contains, a lease based on whether
the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration.

A right-of-use asset representing the right to use the underlying asset with a corresponding lease liability is
recognized when the leased asset becomes available for use by the Company.

The right-of-use asset is recognized at cost and is depreciated on a straight-line basis over the shorter of the
estimated useful life of the asset and the lease term on a straight-line basis. The cost of the right-of-use asset is
based on the following:

•

the amount of initial recognition of related lease liability;

adjusted by any lease payments made on or before inception of the lease;

increased by any initial direct costs incurred; and

decreased by lease incentives received and any costs to dismantle the leased asset.

The lease term includes consideration of an option to extend or to terminate if the Company is reasonably certain
to exercise that option. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain re-measurements of the lease liability.

Lease liabilities are initially recognized at the present value of the lease payments. The lease payments are
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s
incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.
Subsequent to recognition, lease liabilities are measured at amortized cost using the effective interest rate method.
Lease liabilities are remeasured when there is a change in future lease payments arising mainly from a change in an
index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual
value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, renewal or
termination option.

The payments related to short-term leases and low-value leases are recognized as other expenses over the lease
term in the consolidated statements of earnings.

The Company as a lessor

A finance lease exists when the terms of the lease transfer substantially all the risks and rewards incidental to
ownership of the leased asset to the lessee. Amounts due from lessees under finance leases are recorded as
finance lease receivables. They are initially recognized at amounts equal to the present value of the minimum lease
payments receivable. Payments that are part of the leasing arrangement are divided between a reduction in the
finance lease receivable and finance lease income. Finance lease income is recognized so as to produce a constant
rate of return on the Company’s investment in the lease and is included in revenues.

ASSETS AND LIABILITIES OF DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE

Assets and liabilities of disposal groups are classified as held for sale if their carrying amount will be recovered
principally through a sale transaction. They are measured at the lower of their carrying value and fair value less
costs to sell, except for deferred tax assets, assets arising from employee benefits and financial assets and liabilities
that are carried at fair value.

Assets held for sale are not depreciated or amortized while they are classified as held for sale. Interest and other
expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognized.

153 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

PROVISIONS

The Company recognizes provisions when:

(i)

there is a current legal or constructive obligation as a result of a past event;

(ii) a probable outflow of economic benefits will be required to settle the obligation; and

(iii) a reliable estimate of the obligation can be made.

Current legal or constructive obligations arising from onerous contracts are recognized as provisions when the
unavoidable cost of meeting the obligation under the contract exceeds the economic benefits expected to be
received.

If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate
that reflects current market assessments of the time value of money and the risks specific to the liability. If
discounting is used, the increase in the provision due to the passage of time is recognized in interest expense.

CONTINGENCIES

A contingent liability is a possible obligation, and a contingent asset is a possible asset, that arises from past events
and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the Company. A contingent liability may also be a present obligation that
arises from past events that is not recognized because it is not probable that an outflow of economic resources will
be required to settle the obligation or the amount of the obligation cannot be measured reliably.

Neither contingent liabilities nor assets are recognized in the consolidated financial statements. However, a
contingent liability is disclosed, unless the possibility of an outflow of resources is remote. A contingent asset is only
disclosed where an inflow of economic benefits is probable.

Management evaluates the likelihood of contingent events based on the probability of exposure to potential loss.
Actual results could differ from these estimates.

ASSET RETIREMENT OBLIGATIONS

Asset retirement obligations (AROs) are legal and constructive obligations connected with the retirement of tangible
long-lived assets. These obligations are measured at management’s best estimate of the expenditure required to
settle the obligation and are discounted to present value when the effect is material. Cash flows for AROs are
adjusted to take risks and uncertainties into account and are discounted using a pre-tax, risk-free discount rate.

Initially, an ARO is recorded in provisions, included in other liabilities, with a corresponding increase to property,
plant and equipment. Subsequently, the carrying amount of the provision is accreted over the estimated time
period until the obligation is to be settled; the accretion expense is recognized as interest expense. The asset is
depreciated over its estimated useful life. Revaluations of the ARO at each reporting period take into account
changes in estimated future cash flows and the discount rate.

FINANCIAL INSTRUMENTS

The Company classifies financial assets when they are first recognized as amortized cost or fair value through profit
or loss. Classification is determined based on the Company’s business model for managing financial assets and the
contractual cash flow characteristics of the financial assets. Financial assets are measured at amortized cost if the
financial asset is:

(i) held for the purpose of collecting contractual cash flows, and

(ii)

the contractual cash flows of the financial asset solely represent payments of principle and interest.

All other financial assets are classified as fair value through profit or loss.

Financial liabilities are classified as amortized cost or fair value through profit or loss.

Amortized cost

Financial instruments classified as amortized cost are initially measured at fair value and subsequently measured at
their amortized cost using the effective interest method.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 154

Fair value through profit or loss

Financial instruments classified as fair value through profit or loss are initially measured at fair value with
subsequent changes in fair value recognized in earnings.

Transaction costs

Transaction costs directly attributable to the purchase or issue of financial assets or financial liabilities that are not
classified as fair value through profit or loss are added to the fair value of such assets or liabilities when initially
recognized. Transaction costs for long-term debt are amortized over the life of the respective financial liability using
the effective interest method. The Company’s long-term debt, non-recourse long-term debt and equity preferred
shares are presented net of their respective transaction costs.

Offsetting financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated balance sheet:

(i)

if there is a legally enforceable right to offset the recognized amounts, and

(ii)

if the Company intends either to settle on a net basis or to realize the assets and settle the liabilities
simultaneously.

Derecognition of financial instruments

Financial assets are derecognized:

(i) when the right to receive cash flows from the financial assets has expired or been transferred, and

(ii)

the Company has transferred substantially all the risks and rewards of ownership.

Financial liabilities are derecognized when the obligation is discharged, cancelled, or expired.

Fair value hierarchy

The Company uses quoted market prices when available to estimate fair value. Models incorporating observable
market data, along with transaction specific factors, are also used to estimate fair value. Financial assets and
liabilities are classified in the fair value hierarchy according to the lowest level of input that is significant to the fair
value measurement. Management’s judgment as to the significance of a particular input may affect placement
within the fair value hierarchy levels.

The hierarchy is as follows:

•

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (i.e., as prices) or indirectly (i.e., derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Company applies settlement date accounting to the purchases and sales of financial assets. Settlement date
accounting means recognizing an asset on the day it is received by the Company and recognizing the disposal of an
asset on the day it is delivered by the Company. Any gain or loss on disposal is also recognized on that day.

IMPAIRMENT OF FINANCIAL INSTRUMENTS

At each reporting date, the Company assesses whether there is evidence that a financial asset or group of financial
assets is impaired. If such evidence exists, an impairment loss is recognized in earnings.

Impairment losses on financial assets carried at amortized cost are calculated as the difference between the
amortized cost and the present value of estimated future cash flows discounted at the financial asset’s original
effective interest rate. Impairment losses on financial assets carried at amortized cost may be reversed in whole or
in part if there is evidence that a change in the estimated recoverable amount is warranted. The revised recoverable
amount cannot exceed the carrying amount that would have been determined had no impairment charge been
recognized in previous periods.

The Company applies the expected credit loss allowance matrix based on historical credit loss experience, aging of
financial assets, default probabilities, forward-looking information specific to the counterparty, and industry-specific
economic outlooks.

155 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

For accounts receivable and contract assets and finance lease receivables, the Company estimates credit loss
allowances at initial recognition and throughout the life of the receivable. For receivable under service concession
arrangement, the Company estimates credit loss allowances from possible default events within the twelve months
after the balance sheet date.

DERIVATIVE FINANCIAL INSTRUMENTS

Contracts settled net in cash or in another financial asset are classified as derivatives, unless they meet the
Company’s own use requirements.

All derivative financial instruments are measured at fair value. The gain or loss that results from changes in fair
value of the derivative is recognized in earnings immediately, unless the derivative is designated and effective as a
hedging instrument, in which case the timing of recognition in earnings depends on the hedging relationship.

Where the Company elects to apply hedge accounting, the Company documents the relationship between the
derivative and the hedged item at inception of the hedge, based on the Company’s risk management policies. A
qualitative assessment of the effectiveness of the hedging relationship is performed at each reporting period if both
the critical terms of the hedging relationship and the economic relationship between the hedged item and hedging
instrument continue to remain the same or similar. If the mismatch in terms is significant, a quantitative
assessment may be required. Ineffectiveness, if any, is measured at the end of each reporting period.

If the risk management hedge ratio used to form the economic relationship of the hedged item and hedging
instrument changes, rebalancing of the hedging relationship is required. Under this circumstance, an adjustment to
the quantities of the hedged item or hedging instrument would be allowed to realign the hedging relationship in
accordance with the appropriate risk management hedge ratio. The Company can only discontinue hedge
accounting prospectively if there is no longer an economic relationship between the hedged item and hedging
instrument, the risk management objective changes, the derivative no longer is designated as a hedging instrument,
or the underlying hedged item is derecognized.

Cash flow hedges

The Company enters into interest rate swaps, foreign currency forward contracts and natural gas and forward
power purchase and sale contracts to offset the risk of volatility in the variable cash flows arising from a recognized
asset or liability, a highly probable forecast transaction or a firm commitment in a foreign currency transaction. The
effective portion of changes in fair value of the derivative is recognized in OCI, whereas the ineffective portion is
recognized in earnings immediately. Sources of hedge ineffectiveness can occur as a result of credit risk, change in
hedge ratio, changes in the timing of payment, and forecast adjustments leading to over-hedging. The cumulative
gain or loss in AOCI is transferred to earnings when the hedged item affects earnings. If a forecast transaction
results in the recognition of a non-financial asset or liability, the amount in AOCI is added to the initial cost of the
non-financial asset or liability.

If the Company discontinues hedge accounting, the cumulative gain or loss in AOCI is transferred to earnings at the
same time as the hedged item affects earnings.

The amount in AOCI is immediately transferred to earnings if the hedged item is derecognized or it is probable that
a forecast transaction will not occur in the originally specified time frame.

RETIREMENT BENEFITS

The Company accrues for its obligations under defined benefit pension and OPEB plans.

Pension plan assets at the balance sheet date are reported at fair value. Accrued benefit obligations at the balance
sheet date are determined using a discount rate that reflects market interest rates. The rates are equivalent to
those on high quality corporate bonds that match the timing and amount of expected benefit payments.

The cost for defined benefit plans includes net interest expense. This expense is calculated by applying the discount
rate to the net defined benefit asset or liability at the beginning of the year plus projected contributions and benefit
payments during the year.

Gains and losses resulting from experience adjustments and changes in assumptions used to measure the accrued
benefit obligations are recognized in OCI in the period in which they occur. Those gains and losses are then
transferred directly to retained earnings.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 156

Employer contributions to the defined contribution pension plans are expensed as employees render service.

For defined benefit pension plans and OPEB plans, service cost is recognized as an expense in salaries, wages and
benefits, and net interest expense is recognized in interest expense. The cost of defined contribution pension plans
is recognized as an expense in salaries, wages and benefits. Past service costs are recognized immediately in
earnings in the period of a plan amendment or curtailment. The change in the present value of the defined benefit
pension plans resulting from a curtailment is accounted for as a past service cost. When retirement benefit costs for
employee services are incurred in constructing an asset and meet asset recognition criteria, they are included in the
related property, plant and equipment or intangible asset.

SHARE-BASED COMPENSATION PLANS

The Company expenses stock options granted by ATCO Ltd. and its subsidiary, Canadian Utilities Limited. The
Company determines the fair value of the options on the date of grant. The fair value is recognized over the vesting
period of the options granted by applying graded vesting, adjusted for estimated forfeitures. The fair value of the
ATCO Ltd. options is recorded in salaries, wages and benefits expense and contributed surplus. Contributed surplus
is reduced as the ATCO Ltd. options are exercised, and the amount initially recorded in contributed surplus is
credited to Class I and Class II Share capital. The fair value of the Canadian Utilities Limited options is recorded in
salaries, wages and benefits expense and non-controlling interests.

SARs are cash-settled and are measured at fair value. The fair value is recognized over the vesting period of the
SARs granted by applying graded vesting, adjusted for estimated forfeitures. The fair value of SARs is recorded in
salaries, wages and benefits expense and accounts payable and accrued liabilities and other non-current liabilities.
The liabilities are re-measured at each reporting period.

The MTIP awards are equity-settled with shares purchased on the secondary market. They are measured at fair
value based on the purchase price of the Company’s Class I Shares at the date of grant. The awards are held by a
trust until the shares are vested, at which time they are transferred to the employee. The fair value of the MTIP
awards is recognized in salaries, wages and benefits expense over the vesting period, with a corresponding charge
to contributed surplus.

RELATED PARTY TRANSACTIONS

Transactions with related parties in the normal course of business are measured at the exchange amount. Transfers
of assets or business combinations between entities under common control are measured at the carrying amount.

FOREIGN CURRENCY TRANSLATION

Foreign currency transactions

Transactions denominated in foreign currencies are translated at the exchange rate at the date of the transaction.
Monetary assets and liabilities and non-monetary assets and liabilities measured at fair value denominated in a
foreign currency are adjusted to reflect the exchange rate at the balance sheet date. Gains or losses on translation
of these monetary and non-monetary items are recognized in earnings. Non-monetary items not measured at fair
value are not retranslated after they are first recognized.

Foreign operations

The assets and liabilities of subsidiaries whose functional currencies are other than Canadian dollars are translated
into Canadian dollars at the exchange rate at the balance sheet date. Revenues and expenses are translated at the
average monthly exchange rates during the period, which approximates the foreign exchange rates on the dates of
the transactions. Gains or losses on translation are included in OCI.

If the Company disposes of its entire interest in a foreign operation, or loses control, joint control, or significant
influence over a foreign operation, the accumulated foreign currency translation gains or losses related to the
foreign operation are recognized in earnings.

157 ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS

The exchange rates for the major currencies used in the preparation of the consolidated financial statements were
as follows:

U.S. dollar

Australian dollar

Exchange Rates as
at December 31

Average Exchange Rates for
Year Ended December 31

2020

2019

2020

1.2838

0.9726

1.2963

0.9112

1.3415

0.9247

2019

1.3281

0.9227

ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

At December 31, 2020, there are no new or amended standards and interpretations that need to be adopted in
future periods and will have a significant impact on the Company.

ATCO LTD. 2020 CONSOLIDATED FINANCIAL STATEMENTS 158

CONSOLIDATED ANNUAL RESULTS (1)

YEAR ENDED DECEMBER 31, 2020

(Millions of Canadian dollars, except as indicated)

2020

2019

2018

2017

2016

EARNINGS STATEMENT
Revenues
Earnings attributable to Class I and Class II shares
Adjusted earnings (2) (6)
Structures & Logistics
Neltume Ports
Corporate & Other
Canadian Utilities Limited

- Utilities (Electricity)
- Utilities (Natural Gas)
- Energy Infrastructure

- Corporate & Other Eliminations

Adjusted earnings

BALANCE SHEET
Cash (3)
Total assets
Capitalization

Bank indebtedness
Short-term debt
Long-term debt
Non-recourse long-term debt
Non-controlling interests
Share owners' equity

Capitalization

CASH FLOW STATEMENT
Funds generated by operations (4)
Capital investments (5) (6)
Structures & Logistics
Neltume Ports
Corporate & Other and Eliminations
Canadian Utilities Limited
- Utilities (Electricity)
- Utilities (Natural Gas)
- Energy Infrastructure
- Corporate & Other

Capital investments

PER SHARE DATA
Earnings per share ($)
Adjusted earnings per share ($)
Dividends paid per share ($)
Equity per share ($)
Class I non-voting closing share price ($)
Class II Voting closing share price ($)

3,944
252

4,706
513

4,888
328

4,600
219

4,045
340

57
15

—

166
139
15
(40)

352

37
15
(6)

172
129
57
(39)

365

15
4
17

151
124
83
(39)

355

—

175
138
41
(35)

335

—

169
123
57
(35)

360

1,100
22,200

1,140
21,703

691
23,344

494
21,786

601
19,724

—

9,619

9,436

—

3,797
4,052
17,471

3,858
4,000
17,294

—

175
9,397
1,401
3,687
3,755
18,415

7
10
8,557
1,416
3,576
3,527
17,093

5
55
8,220
98
3,653
3,546
15,577

1,804

1,927

1,897

1,813

1,912

144

—

366
510
28
8
1,069

2.21
3.08
1.74
35.37
36.49
37.81

105
9
(16)

389
646
185
6
1,324

4.49
3.19
1.62
34.88
49.77
49.55

113
444
10

467
622
846
16
2,518

2.87
3.10
1.51
32.75
38.61
38.55

—

438
761
501
3
1,821

1.92
2.93
1.31
30.76
45.00
44.90

—

470
678
289
5
1,609

2.97
3.15
1.14
30.93
44.66
44.78

Full disclosure of all financial information is available on the SEDAR website - www.sedar.com.

(1) Financial results have been prepared in accordance with International Financial Reporting Standards (IFRS).

159 ATCO LTD. 2020 CONSOLIDATED ANNUAL RESULTS

(2) Adjusted earnings are earnings attributable to Class I & Class II shares after adjusting for the timing of

revenues and expenses associated with rate-regulated activities and unrealized gains or losses on mark-to-
market forward and swap 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. Descriptions of the adjustments are provided in Note 3 of the 2020 Consolidated Financial
Statements.

(3) Cash is defined as cash and cash equivalents less current bank indebtedness.

(4) Funds generated by operations is defined as cash flow from operations before changes in non-cash

working capital and change in receivable under service concession arrangement. This measure is not
defined by IFRS and GAAP and may not be comparable to similar measures used by other companies.

(5) Capital investment is defined as cash used for capital expenditures, business combinations, service

concession arrangements, and cash used in the Company's proportional share of capital expenditures in
joint ventures.

(6)

In 2020, the Company reorganized its operating segments into Structures & Logistics, Utilities (Electricity
and Natural Gas), Energy Infrastructure, and Corporate & Other. Comparative amounts for 2016 through
2019 have been restated to reflect the realigned segments.

ATCO LTD. 2020 CONSOLIDATED ANNUAL RESULTS 160

CONSOLIDATED OPERATING SUMMARY

YEAR ENDED DECEMBER 31, 2020

(Millions of Canadian dollars, except as indicated)

2020

2019

2018

2017

2016

Structures & Logistics
Capital investments (1)
Workforce housing lease fleet (units in thousands)
Workforce housing lease fleet utilization (%)
Space rental lease fleet (units in thousands)
Space rental lease fleet utilization (%)

Neltume (2)
Port products handling (millions of tonnes)

Utilities

Electricity distribution and transmission
operations
Capital investments (1)
Power lines (thousands of kilometres)
Electricity distributed (millions of kilowatt hours)
Average annual use per residential customer (kWh)
Customers at year-end (thousands)
Natural gas distribution operations
Capital investments (1)
Pipelines (thousands of kilometres)
Maximum daily demand (terajoules)
Natural gas distributed (petajoules)

Average annual use per residential customer
(gigajoules) for ATCO Gas

Average annual use per residential customer
(gigajoules) for ATCO Gas Australia
Customers at year-end (thousands)
Natural gas transmission operations
Capital investments (1) (4)
Pipelines (thousands of kilometres)

Energy Infrastructure

Electricity generation operations (3)
Capital investments (1)
Non-regulated generating capacity (megawatts)
Non-regulated generating capacity owned (megawatts)
Energy storage & industrial water operations
Capital investments (1)
Seasonal natural gas storage capacity (petajoules)
Salt cavern storage capacity (thousands of m3)
Industrial water infrastructure intake capacity
(thousands of m3/day)

144
3
52
19
73

105
3
48
16
72

113
3
40
15
75

37
4
37
13
70

97
5
38
14
64

—

366
75
12,012
7,528
261

389
75
12,664
7,227
260

467
75
12,928
7,398
258

438
75
11,961
7,325
256

470
76
11,659
7,198
256

307
55
2,535
300

353
55
2,304
311

383
55
2,292
304

464
55
2,381
287

426
55
2,097
263

113

112

111

116

13
2,023

13
2,003

14
1,978

14
1,952

15
1,924

203
9

293
9

239
9

297
9

252
9

7
348
248

21
52
400

59
344
244

31
52
400

156
3,922
2,517

24
3,887
2,482

108
3,870
2,473

12
52
400

10
52
200

26
52
200

(1) Capital investment is defined as cash used for capital expenditures, business combinations, service

concession arrangements, and cash used in the Company's proportional share of capital expenditures in
joint ventures.

(2) On September 12, 2018, ATCO invested in a 40 per cent interest in Neltume Ports, a leading port operator

and developer in South America. Neltume Ports, a subsidiary of Ultramar, is a port operator and developer
with a diversified portfolio of 16 multipurpose bulk cargo and container port facilities and three port
operation services. The business is located primarily in Chile, with smaller operations in Uruguay,
Argentina, and Brazil. The port product handling volume for 2018 represents an annual amount. The
volume of products handled includes copper, forestry products, consumer goods and agricultural products.

161 ATCO LTD. 2020 CONSOLIDATED ANNUAL RESULTS

(3)

In 2019, the Company closed a series of transactions related to the sale of its Canadian fossil fuel-based
electricity generation business. A transaction with Heartland Generation Ltd., an affiliate of Energy Capital
Partners, included the sale of 10 partly or fully owned natural gas-fired and coal-fired electricity generation
assets located in Alberta and British Columbia. In two other separate transactions, the Company sold its 50
per cent ownership interest in the Cory Cogeneration Station to SaskPower International and its 50 per cent
ownership interest in Brighton Beach Power to Ontario Power Generation.

(4)

ATCO LTD. 2020 CONSOLIDATED ANNUAL RESULTS 162

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163 ATCO ANNUAL REPORT 2020

GENERAL INFORMATION

INCORPORATION
ATCO Ltd. was incorporated under the laws of the
province of Alberta on August 31, 1962.

AUDITORS
PricewaterhouseCoopers LLP
Calgary, AB

LEGAL COUNSEL
Bennett Jones LLP
Calgary, AB

STOCK EXCHANGE LISTINGS
Class I Non-Voting Shares
Symbol ACO.X
Class II Voting Shares
Symbol ACO.Y
Listing: The Toronto Stock Exchange

INVESTOR RELATIONS
Email: investorrelations@ATCO.com
Telephone: 403 292 7500
Fax: 403 292 7532

Mailing Address:
Investor Relations c/o ATCO
3rd floor, West Building
5302 Forand St SW
Calgary, AB
Canada T3E 8B4

REGISTRAR & TRANSFER AGENT
Class I Non-Voting and
Class II Voting Shares
AST Trust Company (Canada)
Calgary/Montreal/Toronto/Vancouver

Telephone:
8:00 a.m. to 6:30 p.m. ET
Monday–Friday

Toll-Free in North America:
1 800 387 0825

Outside of North America:
1 416 682 3860

Fax in North America:
1 888 249 6189

Fax Outside of North America:
1 514 985 8843

Email: inquiries@astfinancial.com

www.astfinancial.com

Mailing Address:
AST Trust Company (Canada)
P.O. Box 700
Station B
Montreal, QC
Canada H3B 3K3

On the cover:
Black bear cubs peer out from behind a tree in the Rocky Mountains of western Alberta, while mama bear keeps a close eye on them as she forages in a grassy meadow nearby.
Photo by Liron Gertsman — lirongertsman.com

Printed in Canada

ATCO ANNUAL REPORT 2020 164

5302 FORAND ST SW, CALGARY, ALBERTA T3E 8B4 CANADA
403 292 7500 | ATCO.COM

Printed in Canada

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