ATCO Ltd. Annual Report 2021

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FY2021 Annual Report · ATCO Ltd.

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ATCO LTD.

ANNUAL REPORT

FOR THE YEAR ENDED DECEMBER 31, 2021

Message from the Chair & CEO

Management’s Discussion and Analysis

Financial Statements

Consolidated Annual Results

Consolidated Operating Summary

General Information

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MESSAGE FROM
THE CHAIR & CEO

Dear ATCO Share Owners,

In 1947, when my grandfather and father started
Alberta Trailer Hire, providing remote
accommodations to Alberta’s early oilfield pioneers,
S.D. and R.D. Southern knew they were onto a good
thing. What they could not have foreseen at the time
is how our small family business would one day
become so much more—how 15 utility trailers, put
out on rent at service stations across Calgary, would
be the genesis of a global enterprise, and a
testament to commerce as an instrument for good.

This year, as ATCO commemorates 75 years of
operations, I find myself reflecting upon their vision,
and upon the thousands of people of ATCO who
have stewarded the ATCO Heart & Mind over the
years.

People often focus now on the products our
founders first offered, and for good reason. Today,
ATCO’s ubiquitous yellow-striped trailers can be
found around the world. But I choose to reflect on
the entrepreneurship, determination, and shared
belief that “a dream is never just a dream—it’s the
wish to change the world around you.”

It was this philosophy that my father R.D. Southern
instilled in the subsequent generations of our family
and the people of ATCO around the world. The idea
that there was always a next page, next chapter and
next volume—where what we did now would make a
difference in the future—created a sense of agency
and resolve that ATCO could meet the maxim of
“doing well by doing good.”

And so, from the wheels and steel of those first
Alberta trailers 75 years ago, ATCO has continued to
grow, not only around the world and into different
essential industries, but in anticipating and defining
what the future might look like.

Today, our family of nearly 6,400 people collaborate
on a global scale to bring an expansive vision—and

i ATCO ANNUAL REPORT 2021

offering—to life: delivering inspired solutions for a
better world. Always there. Anywhere.

Over the course of 2021, ATCO delivered against our
strategy to target investments and provide
sustainable solutions in six essential service sectors
that are fundamental to global prosperity: energy,
shelter, real estate, water, agriculture, and logistics
and transportation. In this report—and in our 2022
ATCO Business Profile—you’ll learn about our
progress, made possible by the collaboration and
engagement among our customers, communities,
Indigenous partners and the terrific people of ATCO.

We have been able to seize on prospects while
increasing dividends (29 years in a row) because of
our enviable balance sheet, the result of high-quality
earnings, relentless cost-management and prudent
capital allocation. Our superbly diversified portfolio
of businesses has provided shelter from volatility
and afforded growth from new projects.

I’d like to touch briefly on a few of our recent
achievements. Notably, our businesses collectively
delivered year-over-year earnings growth, despite
lingering market pressure related to the COVID-19
pandemic.

ATCO Structures continued to successfully diversify
and achieved marked success in the replacement of
business and associated earnings from major
projects, such as the Cedar Valley Lodge LNG Canada
project, which was completed in 2021. With
entrepreneurial panache that would make our
founders proud, the Structures team grew the rental
fleet, drove higher fleet utilization and rental rates,
and won new projects across the globe.

In 2021, ATCO Frontec bid on a number of highly
competitive opportunities, including the North
Warning System Contract with the Government of
Canada. Nasittuq, our partnership with Pan Arctic
Inuit Logistics Corporation, was successful,
repatriating the contract Nasittuq held from 1987-
2014 and demonstrating our expertise in the
national defence market and the importance of
Indigenous partnerships.

We launched Rümi, the newest member of the ATCO
group of companies. Rümi provides solutions for
homeowners by connecting them with reliable repair

and maintenance services professionals. Rümi joins
trusted ATCO consumer brands such as Blue Flame
Kitchen, a longstanding culinary institution in Alberta,
and energy retailer ATCOenergy.

LUMA Energy, our joint venture in Puerto Rico, is yet
another striking example of how we are applying our
utility expertise to benefit our communities while
also accelerating the energy transition. The process
of transforming Puerto Rico’s transmission and
distribution system into a reliable and modern
system is no small undertaking. There have certainly
been some bumps along the road, but we remain
fiercely committed to delivering on our promises for
the good of the customers we’ve been entrusted to
serve.

In addition to LUMA Energy commencing operations
in Puerto Rico, Neltume Ports continued to expand
its North American footprint. We celebrated the
official opening of our first U.S. terminal in Mobile,
Alabama in June, and we acquired a 70% interest in
Tidal Transport & Trading USA, which provides full-
scale marine operations services in California,
Oregon and Washington.

Canadian Utilities continues to play a key role in
energy transformation. In May, we announced our
collaboration with Suncor Energy on the design of a
potential clean hydrogen project near Fort
Saskatchewan, Alberta that would produce more
than 300,000 tonnes per year of hydrogen and
reduce Alberta's CO₂ emissions by more than two
million tonnes per year. We also announced three
new Alberta solar projects, the receipt of
government funding to establish Australia’s first
commercial scale renewable hydrogen supply chain,
our acquisition of the Alberta Hub natural gas
storage facility, and the development of a renewable
natural gas facility in Alberta.

These are concrete examples of the significant steps
our company is taking on our journey to a cleaner,
more sustainable future.

At the start of 2022, we announced a comprehensive
set of 2030 environmental, social and governance
targets and a commitment to net-zero emissions by
2050. The 2030 targets include reducing our
operational and customer emissions, growing our
renewable energy footprint, increasing economic

benefits for Indigenous partners, continuing our
focus on safety, and further promoting diversity,
equity, and inclusion in the workplace.

From the genesis of our business, the people of
ATCO have pioneered innovative solutions at the
forefront of global trends, generating value for our
share owners and creating the conditions for our
communities and customers to thrive. Our ambitious
ESG targets reflect the same holistic perspective that
has underpinned our growth for decades—one that
considers not just near-term economic pressures but
also creates truly intergenerational, sustainable
prosperity.

Transforming our energy systems to achieve net-
zero by 2050 is a societal challenge that no
individual, business, or government can solve on its
own. It will require unprecedented collaboration
among all constituents, as well as an informed,
pragmatic, and affordable roadmap from
policymakers to unlock the necessary scale and pace
of private sector investment and expertise.

Looking to the future, we will continue to build a
resilient business that is diverse in its operations but
integrated in its focus—a series of investments
united by a common strategy of delivering the
essentials of life. We invest strategically in meeting
people’s needs, and we bring industry-leading
expertise with a focus on innovative and long-term
results, not short-term trends.

I thank each and every member of team ATCO for
the passion and expertise they display in advancing
our business and vision, especially in such trying
times. I am particularly proud of the coalition of
employee-led committees that plan, implement and
administer the workplace fundraising campaigns we
call ATCO EPIC. In 2021, our people raised $2.97
million for hundreds of charities—bringing the total
program contributions since 2006 to $50 million,
alongside 250,000 volunteer hours over that same
time period.

I would like to pay special tribute to two leaders
whose contributions and character will be forever
remembered at ATCO and Canadian Utilities.

ATCO ANNUAL REPORT 2021 ii

Siegfried Kiefer retired as President & Chief
Executive Officer of Canadian Utilities last July.
Siegfried’s accomplishments during his 38 years with
ATCO and Canadian Utilities are impressive and his
sincerity, quiet optimism, mentorship and strength
of character were obvious to all of us who worked
with him.

Dennis DeChamplain, who held the role of Executive
Vice President & Chief Financial Officer of both ATCO
and Canadian Utilities Limited, passed away
suddenly last August. Over the course of his almost
30 years with us, Dennis was known for his
principled leadership, keen insight and unmatched
attention to detail. His expertise and resourcefulness
in finance, accounting, sustainability and
environment have left an indelible mark on our
organization and helped position us for success in a
rapidly evolving world.

I would like to thank the members of our Executive
Team—including Katie Patrick, who was appointed as
Executive Vice President and Chief Financial &
Investment Officer of ATCO last October. I also
express my gratitude to our Board of Directors for
their guidance and expertise over the course of 2021.

And I thank you for your continued interest in ATCO
and the confidence you have placed in us.

This year, we look back to 1947 with fondness, and
we reflect on all that’s happened since then with
gratitude. I’m excited and optimistic about the future
of ATCO and how we will continue to support and
enable a better world for all.

Sincerely yours,

Nancy C. Southern
Chair & Chief Executive

Officer, ATCO Ltd.

iii ATCO ANNUAL REPORT 2021

ATCO LTD.

MANAGEMENT’S DISCUSSION AND
ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2021

This Management's Discussion and Analysis (MD&A) is meant to help readers understand key operational and financial events
that influenced the results of ATCO Ltd. (ATCO, our, we, us, or the Company) during the year ended December 31, 2021.

This MD&A was prepared as of February 23, 2022, and should be read with the Company's audited consolidated financial
statements (2021 Consolidated Financial Statements) for the year ended December 31, 2021. Additional information, including
the Company's Annual Information Form (2021 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) (53.0 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 Core Vision and Values ..................................................................................................................................................

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

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

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

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

Strategic Priorities for 2022 .....................................................................................................................................................

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

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

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

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

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

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

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

Utilities Regulatory Information ..............................................................................................................................

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 ..................................................................................................................................

Other Financial and Non-GAAP Measures ............................................................................................................................

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

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

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

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

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

Page

ATCO LTD. 2021 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

Developing Integrated Solutions Our Customers Can Rely On

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

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.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

CORPORATE PILLARS

Innovation

We seek to create an inclusive 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 value-creating greenfield projects; fostering continuous
improvement; and delivering reliable, safe, 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.

ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

SUSTAINABILITY PILLARS

ATCO conducts business in a manner that reflects our values. Integrity, agility, collaboration and caring—these
foundational principles help us deliver on our commitment to sustainability. We report on five focus areas: Energy
Transition, Climate Change & Environmental Stewardship, Operational Reliability & Resilience, People and
Community & Indigenous Relations.

Strategic Environmental, Social and Governance (ESG) Targets For 2030

In January 2022, ATCO announced an initial set of 2030 environmental, social and governance targets, and a
commitment to achieve net-zero greenhouse gas (GHG) emissions by 2050.

ATCO's 2030 ESG targets include reducing its operational and customer emissions, growing its renewable energy
footprint, increasing economic benefits for Indigenous partners, continuing its focus on safety, and further
promoting diversity, equity, and inclusion in the workplace.

The 2050 net-zero commitment builds upon the Company's significant progress in recent years in decarbonizing its
portfolio, including a 90 per cent reduction in operational GHG emissions from 2019 to 2020 realized primarily
through the sale of Canadian Utilities' fossil fuel-based electricity generation portfolio as well as reductions in its
retained assets.

Our Company is actively pursuing several pathways to further reduce its operational emissions, as well as its
customers' emissions, by accelerating the deployment and use of cleaner fuels (hydrogen and renewable natural
gas), renewable energy, energy infrastructure and storage (including carbon capture technologies), energy efficiency
and carbon offsets. In support of its net-zero commitment, ATCO is also working with all levels of government to
advocate for enabling policy and regulation, and to identify barriers that impede cost-effective, economy-wide
decarbonization. It will require unprecedented collaboration among all constituents, as well as an informed,
pragmatic, and affordable roadmap from policymakers to unlock the necessary scale and pace of private sector
investment and expertise.

ATCO continues to evaluate further ESG targets and conduct additional analysis with respect to the Company's 2050
net-zero commitment. Additional information and progress towards ATCO's ESG targets will be included in the
Company's annual Sustainability Report, which will be available in May 2022.

FURTHER COMMENTARY REGARDING STRATEGIES AND COMMITMENTS

Our financial and operational achievements in 2021 relative to the strategies outlined above are included in this
MD&A, the 2021 Consolidated Financial Statements and 2021 AIF. Further commentary regarding strategies and
commitments to innovation, growth, financial strength, operational excellence, and community involvement will be
provided in the forthcoming 2021 Management Proxy Circular, Year in Review, and Sustainability Report. The 2021
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. 2021 MANAGEMENT DISCUSSION & ANALYSIS

COMPANY OVERVIEW AND OPERATING
ENVIRONMENT

With approximately 6,400 employees and assets of $23 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. 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. 2021 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 engaged in the processing and marketing of live ash and ash reclaimed from landfills.

(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 consists of 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.

(5) Canadian Utilities owns and operates 348-MW of non-regulated electricity generation assets in Australia, Mexico, Canada and Chile, and 103-MW of

assets under development in Canada.

(6) Clean Fuels includes large-scale hydrogen production opportunities, renewable natural gas opportunities, and technical expertise support.

(7) ATCOenergy includes Rümi, Blue Flame Kitchen, and Retail Energy and provides home products, home maintenance services, professional advice, and

retail electricity and natural gas services in Alberta.

The 2021 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 53.0 per cent (38.8 per cent of the Class
A non-voting shares and 91.6 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 2021 Consolidated Financial Statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) and the reporting currency is the Canadian dollar.

ATCO LTD. 2021 MANAGEMENT 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, and healthcare
facilities continue to offer development
opportunities. Our operations in parts of the US and
Latin America have provided strategic value and
opportunities for the business. We will continue to
evaluate organic and acquisition growth
opportunities.

MARKET CHALLENGES

ATCO Structures Kynetone Kindergarten, Australia

The modular construction industry is significantly influenced by capital spending cycles in the natural resource and
construction sectors. 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. We are
facing additional challenges with the increased impact of COVID-19 variants that are causing considerable
disruption and uncertainty in operations globally. Many active projects are presented with varying levels of
disruption, which is generating labor shortages of critical trades, and global supply chain disruptions affecting
project productivity and delivery.

ATCO LTD. 2021 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, expansion into new geographies including the servicing of
remote communities, and continuous refinement of 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. Changes in government policy and social
license have resulted in a decrease of large-scale
projects in Canada that historically provided potential
contracts for ATCO Frontec. There is a high level of
competition in the defence sector of the US that
could present difficulty surrounding market entry.

Resolute Bay, Nunavut

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

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, Brazil, and the US. Neltume Ports employs approximately 7,100 people and operates 17 port
facilities and 6 port operation services businesses. In 2021, Neltume Ports handled 46 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.

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, supply chain constraints, labour shortages, commodity prices
and foreign exchange; therefore prolonged economic recovery could impact Neltume Ports. There is exposure to
certain countries with a higher possibility of political unrest.

Neltume, Puerto Mejillones

ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

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 Operations); Energy Infrastructure (Energy Storage, Energy Generation, Industrial Water Solutions, and
Clean Fuels); and Retail Energy (Electricity and Natural Gas Retail Sales, and Whole-Home Solutions).

Utilities

BUSINESS DESCRIPTION

The Utilities business unit operates in Canada, Australia and Puerto Rico. The four regulated utilities (Electricity
Transmission and Distribution, and Natural Gas Transmission and Distribution) in Alberta, Saskatchewan and the
northern regions of Canada have delivered reliable electricity and clean-burning natural gas to customers for many
decades. International Operations consists of the regulated natural gas distribution business in Western Australia,
and the 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 transmission and distribution assets, capitalize on
opportunities to provide long-term contracted electricity and natural gas transmission and distribution services, and
consistently deliver safe, reliable, affordable and clean energy for our customers.

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 clean energy solutions for our
customers, and continuing to invest in our core business while maintaining safety, reliability and affordability.

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 Transmission Lines

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

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, industrial water solutions, and renewable natural gas (RNG)
production in Alberta. Energy Infrastructure is also developing its clean fuels business including hydrogen, RNG,
carbon capture and underground storage projects.

BUSINESS STRATEGY

Energy transition is a key component of our growth strategy, focused on the three pillars of renewable generation,
clean fuels, and energy storage. We are actively seeking out opportunities that capitalize on the key trends shaping
global energy markets, from smaller and rapidly executable projects such as solar and renewable natural gas, to
larger and longer lead-time initiatives, including commercial scale hydrogen production, transportation and storage.
Additionally, we continue to optimize and drive growth in our energy storage business. Storage is critical to energy
stability and to support the reliability of the grid as the world transitions to clean, but more intermittent sources of
energy. It is a critical supporting factor to energy transition and to the diversification of industry within Alberta.

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
clean energy, mainly supplied through renewables
and clean fuels. 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 fossil fuel-based energy producers
become increasingly interested in renewables and
clean fuels as part of the global energy transition.
Government policy and regulatory constraints
present challenges to renewables and clean fuel
projects aligned with energy transition strategies.
Macroeconomic conditions such as global economic
activity, inflation, and political uncertainty pose
challenges for investment.

El Resplandor Solar Project, Cabrero, Chile

11 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

PERFORMANCE OVERVIEW

FINANCIAL METRICS

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

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

2021

2020

2019

Year Ended
December 31

Key Financial Metrics

Revenues
Adjusted earnings (1)

Structures & Logistics

Neltume Ports

ATCO Corporate & Other

Canadian Utilities Limited
Utilities (1)
Energy Infrastructure

Canadian Utilities Corporate & Other

Adjusted earnings ($ per share)

Earnings attributable to Class I and Class II Shares

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

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

Total assets

Long-term debt

Class I and Class II Share owners' equity

Cash dividends declared per Class I and Class II Share ($ per share)

Cash flows from operating activities
Capital investment (2)
Capital expenditures

Other Financial Metrics

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

Basic

Diluted

4,289

3,944

4,706

382

352

365

336

(41)

3.35

246

2.16

2.15

—

305

(40)

3.08

252

2.21

2.20

(6)

301

(39)

3.19

513

4.49

4.47

23,004 22,200

21,703

9,852

9,619

4,111

4,052

1.79

1.74

1,864

1,843

1,463

1,069

1,352

1,041

9,436

4,000

1.62

1,542

1,324

1,218

114,172 114,396 114,370

114,450 114,713 114,746

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

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

REVENUES

Revenues in 2021 were $4,289 million, $345 million higher than the same period in 2020. Higher revenues were
mainly due to improved performance at ATCOenergy resulting from higher electricity and natural gas commodity
prices associated with floating rate energy contracts, higher flow-through revenues in the Electricity Distribution and
Natural Gas Distribution businesses and the timing of prior period costs recovered in Natural Gas Distribution,
ATCO Structures' increased workforce housing revenue with the addition of the new China Lake Military Rebuild
project, and increased revenue from operations in Chile due to acquisition of the remaining 50 per cent ownership
interest in ATCO Sabinco at the end of 2020. Higher revenues were partially offset by the completion of
manufacturing work on ATCO Structures' LNG Canada Cedar Valley Lodge contract in Q2 2020.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

ADJUSTED EARNINGS

Our adjusted earnings in 2021 were $382 million or 3.35 per share, compared to $352 million or 3.08 per share for
the same period in 2020.

Higher adjusted earnings in 2021 were mainly due to a full 12 months of earnings from Canadian Utilities'
International Electricity Operations comprised of ongoing transition work in the first half of 2021 and the June 2021
commencement of a Supplemental Agreement to LUMA Energy's 15-year Operations and Maintenance Agreement.
Higher adjusted earnings were also due to inflation indexing in Australia, which positively impacted earnings in
Canadian Utilities' International Natural Gas Distribution business, cost efficiencies within the Electricity Distribution
business, and certain tax benefits recognized by ATCO Corporate in 2021.

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 $246 million in 2021, $6 million lower compared to 2020.
Earnings attributable to Class I and Class II Shares include timing adjustments related to rate-regulated activities,
unrealized gains or losses on mark-to-market forward and swap commodity contracts, one-time gains and losses,
impairments, and items that are not in the normal course of business or a result of day-to-day operations. These
items are not included in adjusted earnings.

More information on these and other items is included in the Reconciliation of Adjusted Earnings to Earnings
Attributable to Class I and Class II Shares section of this MD&A.

CASH FLOWS FROM OPERATING ACTIVITIES

Cash flows from operating activities were $1,864 million in 2021, $21 million higher than the same period in 2020.
The increase was mainly due to higher customer contributions received for Alberta Utilities' capital expenditures,
and higher cash flows generated in ATCO Structures' from the sale of used fleet. These amounts were partially
offset by the Company's decision to provide rate relief to customers through the deferral of rate increases for
Canadian Utilities' Electricity Distribution and Natural Gas Distribution businesses, which will be collected from
customers starting in 2022.

COMMON SHARE DIVIDENDS

We have increased our common share dividend every year for the past 29 years, a track record of which we are very
proud. Dividends paid to Class I and Class II share owners totaled $205 million in 2021. On January 13, 2022, the
Board of Directors declared a first quarter dividend of 46.17 cents per share or $1.85 on an annualized basis. ATCO
continues to grow its dividends consistent with the sustainable growth of its investments.

13 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

Quarterly Dividend Rate 1993 - 2022(dollars per share)$0.4617939495969798990001020304050607080910111213141516171819202122CAPITAL INVESTMENT (1) AND CAPITAL EXPENDITURES

Total capital investment of $1,463 million in 2021 was
$394 million higher compared to the same period in
2020, mainly due to the acquisition of the Pioneer
Pipeline in Canadian Utilities' Natural Gas Transmission
business; the acquisition of the Alberta Hub natural gas
storage facility, the acquisition of three solar
development projects, and the construction of a long-
term contracted hydrocarbon storage cavern in
Canadian Utilities' Energy Infrastructure segment; and a
strategic land purchase.

Total capital expenditures of $1,352 in 2021 were $311
million higher compared to the same period in 2020,
mainly due to the acquisition of the Pioneer Pipeline in
Canadian Utilities' Natural Gas Transmission business;
the acquisition of three solar development projects in
the Energy Infrastructure segment; and a strategic land
purchase.

Capital spending in Canadian Utilities' Regulated Utilities accounted for 75 per cent of total capital invested in the
full year of 2021. The remaining 25 per cent invested mainly included the acquisition of the Alberta Hub natural gas
storage facility, the acquisition of three solar development projects, the construction of a long-term contracted
hydrocarbon storage cavern in Canadian Utilities' Energy Infrastructure segment, and a strategic land purchase.

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

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

Capital Investment in 202175%25%Regulated UtilitiesOtherATCO SCORECARD

The following scorecard outlines our performance in 2021.

STRATEGIC
PRIORITIES

INNOVATION

New and
existing
products and
services

2021 TARGET

2021 PERFORMANCE

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

ATCO Structures secured its sixth affordable housing project
with the Government of British Columbia supportive housing
program. The four-story, 61-unit apartment complex was
awarded during the second quarter of 2021.

ATCO Structures completed a contract to provide two
healthcare complexes in Guatemala with 7,400 m2 of clinical
space for the treatment of patients with COVID-19.

ATCO Structures was awarded a contract to supply 15 double
classrooms and 7 two-story classrooms to the Victoria
Department of Education in Australia.

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

ATCO Land and Development completed the master planning
work on the "North Yard" redevelopment site. A land use
redesignation application process has been initiated with the
City of Edmonton and is awaiting approval.

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

On May 28, 2021, the CSA released a notable amendment to
the CSA A3001 specification, "Cementitious Materials for Use in
Concrete." The revised standard allows for the inclusion of
harvested and processed bottom ash with fly ash for use in
concrete, provided the physical and chemical requirements of
the standard are met.

Following the successful amendment, Ashcor has experienced
improved production rates, and strong customer adoption of
its reclaimed ash product.

15 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

STRATEGIC
PRIORITIES
New and
existing
products and
services

GROWTH

Regulated and
long-term
contracted
capital
investment

2021 TARGET
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.

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.

2021 PERFORMANCE

The Vuntut Gwitchin First Nation and Canadian Utilities
announced the completion of Canada's most northerly off-grid
solar project, reducing diesel use by 189,000 litres annually in
Old Crow, Yukon and providing a clean energy source for
decades to come.

Utilities and Energy Infrastructure 2021 strategies focused on
energy transition with a specific emphasis on renewable
generation, hydrogen blending, clean fuels and energy storage.
Through the calendar year we announced the following
projects (further details can be found in the Business Unit
Performance section of this MD&A):

•
•
•
•
•
•
•
•

Alberta Hub Natural Gas Storage Acquisition
Two Hills RNG Facility
Empress Solar Development Project
Calgary Solar Development Projects
Canadian Utilities - Suncor Clean Hydrogen Project
Clean Energy Innovation Park, Australia
Central West Pumped Storage Hydro Project, Australia
Fort Saskatchewan Hydrogen Blending

Continued progression on the digitization of the grid:

•

Continued deployment of Advanced Metering
Infrastructure (AMI) across our service territory. The
communities of Grande Prairie and Chipewyan Lake
are now complete.
Progressing on the Advanced Distribution
Management System (ADMS) that will orchestrate the
delivery of electricity across a multi-directional flowing
grid.

Canadian Utilities announced the acquisition of the Pioneer
Pipeline in 2020 and closed this transaction on June 30, 2021.
The 131-km natural gas pipeline has been incorporated into
NOVA Gas Transmission's (NGTL) and ATCO's Alberta 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. Consistent with the geographic
areas defined in the Integration Agreement, Canadian Utilities'
Natural Gas Transmission will transfer to NGTL the 30-km
segment of pipeline in 2022 that is located in the NGTL
footprint. The pipeline transfer was approved by the Canada
Energy Regulator on December 22, 2021.

LUMA Energy began implementation of the System
Remediation Plan and engaged with the Federal Emergency
Management Agency (FEMA) and US Department of Housing
and Urban Development (HUD) on capital rebuilding programs
designed to lift electricity transmission and distribution
operations to the standards of a world-class utility.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

STRATEGIC
PRIORITIES
Regulated and
long-term
contracted
capital
investment

Global
expansion

2021 TARGET
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.

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

2021 PERFORMANCE
The ongoing Urban Pipeline Replacement (UPR) Program in
Alberta consists of the removal of the remaining high-pressure
service pipe, installation of remaining stations, and clean-up
efforts.

The project is expected to be completed in 2022 and will have
removed a total of 310-km upon completion.

Canadian Utilities, along with its partner, Quanta
Services, Inc., announced their joint ownership interest in LUMA
Energy in 2020 and commenced a one-year transition period.
In June 2021, one month in advance of its anticipated timeline,
LUMA Energy commenced operations under a Supplemental
Agreement to its 15-year contract to modernize and operate
Puerto Rico's electricity transmission and distribution system.

Canadian Utilities and its joint venture partner, Australian Gas
Infrastructure Group, received notification of conditional grant
funding from Australian Renewable Energy Agency (ARENA) of
$29 million AUD to contribute financing for the production of
hydrogen through a large scale project at Canadian Utilities’
proposed Clean Energy Innovation Park (CEIP) in Western
Australia.

ATCO acquired the rights to develop the 325-MW Central West
Pumped Storage Hydro project, located approximately 175-km
west of Sydney, Australia. The acquisition marks ATCO's first
renewable energy investment on Australia’s east coast. A final
investment decision on project construction is expected in
2023.

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

ATCO Structures' space rental fleet increased by 1,403 units in
2021 as part of strategic expansion in North America, Chile and
Australia.

ATCO Structures completed the sale of its 42-unit Alaskan space
rentals fleet in the US which enables the business to continue
its focus on mainland US space rentals fleet expansion.

17 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

STRATEGIC
PRIORITIES
Global
expansion

2021 TARGET
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.

2021 PERFORMANCE
ATCO Structures continued to secure affordable housing
projects with the Government of British Columbia's supportive
housing program. A four-story, 61-unit apartment complex was
awarded in the second quarter of 2021.

The Victoria Department of Education awarded ATCO
Structures a contract to supply 15 double classrooms and 7
two-story classrooms in the third quarter of 2021.

Throughout 2021, space rental demand increased across all
geographies due to an increase in activity in the construction
and mining sectors. This growth in demand produced an
increase in utilization and average rental rates across all
geographies.

ATCO Structures decreased the size of its idle workforce
housing fleet and increased the average utilization rate year-
over-year by selling used and under-utilized fleet assets in
Canada, Australia, and the US. Through optimization of the US
workforce housing fleet, Structures has capitalized on used
fleet sale opportunities resulting in the sale of 240 idle
workforce housing units.

Invest in Australia's
workforce housing fleet.

ATCO Structures was awarded a contract for the supply of a
120-unit camp at the Angelo River mine site in Western
Australia.

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

ATCO Frontec was awarded a contract from the State of
California Department of General Services to operate a 100-bed
facility near Quincy, California.

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

Defense Construction Canada awarded Frontec North America
two Facility Maintenance and Site Services contracts with a
combined revenue of $25 million to maintain 15 different sites
of Department of National Defence buildings and associated
infrastructure across Alberta.

UQSUQ was awarded a 10-year contract in 2021 to manage and
operate Iqaluit's bulk fuel storage facility, pipeline distribution
system and municipal fuel delivery system. This contract
continues a successful 14-year relationship.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

STRATEGIC
PRIORITIES
Global
expansion

2021 TARGET
Seek opportunities with
Neltume Ports' available
cash in brownfield,
greenfield and acquisition
opportunities.

2021 PERFORMANCE
Neltume Ports acquired a 70 per cent interest in Tidal Transport
& Trading USA (Tidal). Tidal provides full-scale marine operation
services, focused primarily on stevedoring, hold cleaning, and
port captaincy on the US West Coast, with operations in
California, Oregon, and Washington.

AutoMobile International Terminal (AIT), a 50/50 joint venture
partnership with Terminal Zarate in Mobile, Alabama had their
grand opening and is now in service. The port will primarily
serve the import and export requirements of the automotive
market in the US.

Neltume Ports increased ownership ranging from 4 per cent to
8 per cent in three existing operations; Terminal Ontur, Sagres,
and Puerto Coronel.

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

Acquired the rights to the Empress Solar project, a 39-MW solar
facility under development near Empress, Alberta with
commercial operations expected in 2022. The project will
provide enough renewable electricity to power more than
11,000 homes.

Acquired the development rights to build two solar projects
with a combined capacity of 64-MW in Calgary, Alberta with
commercial operations expected in 2022. The Deerfoot and
Barlow projects will provide enough renewable electricity to
power more than 18,000 homes.

FINANCIAL STRENGTH

Credit rating

Maintain investment grade
credit rating.

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

Access to capital
markets

Access capital at attractive
rates.

Maintained 'A-' long-term issuer credit rating with a negative
outlook on ATCO and Canadian Utilities with Standard & Poors.

In 2021, CU Inc. raised $460 million in 30-year debentures at a
rate of 3.174 per cent. The issue was oversold and completed at
an attractive spread of 138 basis points above Government of
Canada 30-year bond rates.

Canadian Utilities issued $201 million of 4.75 per cent
Cumulative Redeemable Second Preferred Shares Series HH by
means of a short-form prospectus. The proceeds of the
issuance were used for capital expenditures, to repay
indebtedness and for other general corporate purposes.

19 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

STRATEGIC
PRIORITIES

2021 TARGET

2021 PERFORMANCE

OPERATIONAL EXCELLENCE

Lost-time
incident
frequency:
employees

Total recordable
incident
frequency:
employees

Customer
satisfaction

Compare favourably to
safety benchmarks.

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 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 while
maintaining a low fixed
cost structure through
peak cycles of activity.

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 2021 was 0.14/200,000 hours
worked.

Our total recordable incident frequency in 2021 compares
favourably to benchmarks such as US private industry and
industry best practice rates. Our total recordable incident
frequency in 2021 was 1.44 incidents/200,000 hours worked.

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

ATCO Gas Australia’s Customer Satisfaction (CSAT) was 8.9 out
of a possible 10, above a national industry benchmark of 8.5.
ATCO Gas Australia consistently outperforms the broader
energy industry in terms of both customer satisfaction and also
a second measurement, the ‘ease of implementation’ of its
services. ATCO Gas Australia has improved its CSAT score from
8.7 in 2020 to 8.9 in 2021.

LUMA Energy had a six per cent increase in overall customer
satisfaction, and a 13 per cent increase in both in-person
customer service and power quality and reliability as measured
by J.D. Power CSAT score.

A permanent modular construction project and a workforce
housing trade sale project was awarded to ATCO Structures US
and was manufactured in the ATCO Structures Canadian
manufacturing facility. This strategic utilization of global
manufacturing capacity filled excess manufacturing capacity in
the Canadian facility while enabling the US facility to direct local
manufacturing capacity on securing additional trade sale
opportunities. ATCO Structures was able to balance capacity
with production of fleet units in line with the space rentals
strategic expansion targets.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

STRATEGIC
PRIORITIES

2021 TARGET
• 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.

21 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

2021 PERFORMANCE
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 Gas Australia commenced an upgrade of its billing and
metering system to comply with Australian Energy Market
Operator (AEMO) regulations. This project will provide
stakeholders with added functionality and upgrade the
software to the latest version. The upgrade is being run in two
phases, with Phase 1 complete and Phase 2 due for completion
in 2022.

The Alberta Utilities implemented a Customer Information
System (CIS) replacement program. CIS holds our metering
asset information, collects meter reads, calculates billing, and
applies rates and production tariff bills for retailers. The
replacement for both Natural Gas and Electricity is well
underway, and the projects are on-track to go-live in 2022.

Across our operations, we awarded contracts of approximately
$100 million for Indigenous and Indigenous-affiliated
contractors in 2021.

$64,500 was awarded to 52 students across Canada, including
the territories, through the ATCO Indigenous Education Awards
Program.

A total of 5,280 employees participated in one of the many
Indigenous training courses offered in 2021 through virtual
classroom and training platforms.

ATCO Australia implemented its 'Innovate Reconciliation Action
Plan (RAP)'. This plan strengthens our approach to driving
reconciliation through business activities and community
programs, and develops mutually beneficial relationships with
Aboriginal and Torres Strait Islander stakeholders and
organizations. Recognizing the continuing connection to land,
sea and culture, ATCO Australia have invited Elders to welcome
our employees to their country through Cultural Smoking
Ceremonies for events and projects.

Canadian Utilities announced the completion of Canada's most
northerly off-grid solar project in Old Crow, Yukon. The facility
will provide the Vuntut Gwitchin First Nations with a clean
energy source for decades to come and fosters community
ownership and self-sustaining economic development through
job creation, investment in infrastructure, and revenue from
the sale of renewable energy.

STRATEGIC
PRIORITIES
ATCO EPIC
(Employees
Participating
in Communities)

2021 TARGET
Continue to administer the
employee-led campaign to
give employees the
opportunity to 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
lineworkers college in
Puerto Rico.

2021 PERFORMANCE
With the combined efforts of our employees around the world,
ATCO pledged more than $2.97 million to support hundreds of
community charities through our annual ATCO EPIC campaign,
taking the program’s cumulative fundraising total to over
$50 million since its inception in 2006.

The ATCO Giving Gardens at Spruce Meadows was created in
spring 2021 as a way to weave sustainability, volunteerism and
generosity into one great initiative by providing fresh produce
to Calgary's vulnerable seniors and veterans.

ATCO provided 4,720 meals to seniors and veterans through
our partnerships with the Calgary Seniors' Resource Society
and the Homes For Heroes Foundation in Calgary. ATCO's
Giving Gardens supplied the beets, potatoes, and squash
towards these meals.

In 2021, LUMA Energy obtained all permits and began
construction on the LUMA College for Technical Training – a
state-of-the-art lineworkers’ college within Puerto Rico aimed at
training LUMA Energy’s current and future employees. The
College's 24-acre site in Canóvanas will include an outdoor skills
training field, indoor learning laboratory, administrative and
classroom operations building, and covered equipment and
personnel parking structures. Collectively, this will create
approximately 22,000 square feet of usable building space for
the purpose of training, education and administration.

During construction activities in 2021, the College innovated by
using off-site locations in Puerto Rico to commence its training
programs and graduated the first pre-apprentice class of 14
students in October.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

STRATEGIC PRIORITIES FOR 2022

The following table outlines our strategic priorities for 2022.

INNOVATION
New and existing
products and
services

GROWTH
Regulated and
long-term
contracted capital
investment

Demonstrate continued product and service expansion within ATCO Structures to diversify
revenue, expand customer base, achieve market penetration, and improve manufacturing and
installation.

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

Continue to progress Canadian Utilities’ energy transition strategies across the regulated and
non-regulated energy businesses to increase ownership, develop or manage renewable
generation, energy storage and/or clean fuel facilities, and/or modernize natural gas and/or
electricity delivery.

Continue to prioritize Canadian Utilities’ strategic role in working with remote communities to
reduce their reliance on diesel fuels in a way that continues to support economic growth, energy
independence, reconciliation and community building with Indigenous peoples.

expansion into new geographies including the servicing of remote communities

Continue to strategically invest in Canadian Utilities' technology and the modernization of both the
natural gas and electricity networks to enhance sustainability and flexibility.

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.

Continue to implement the System Remediation Plan in LUMA Energy; designed to lift the
Transmission & Distribution System to the standards of a world-class utility.

Increase the average contracted life of the in-service renewable generation portfolio by securing
new power purchase agreements.

Global expansion

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

•

Continue to build sustainable growth within ATCO Structures through the expansion of the
rental fleet, space rental business and permanent modular construction business in select
markets.

Continue to optimize idle workforce housing fleet capitalizing on opportunities as they
arise.

Expand ATCO Frontec's North American camp business and enter the Australian market.

ATCO Frontec will expand into new geographies with the focus of servicing remote
communities.

Grow ATCO Frontec's Facilities Operations & Maintenance Business with further
commercial and government clients, including large scale defence contracts.

Ashcor to secure additional commercial agreements and ash rights in North America.

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

Continue to build upon Canadian Utilities' existing renewables generation and energy
storage, and invest in Clean Fuels innovation in the Energy Infrastructure business.

FINANCIAL STRENGTH
Credit rating

Maintain investment grade credit rating.

Access to capital
markets

Continue to manage liquidity and access to capital in a prudent manner that facilitates strong
access to capital at appropriate rates.

23 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

Compare favourably to safety benchmarks.

OPERATIONAL EXCELLENCE
Lost-time and
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.

Continue to prioritize improvements in LUMA Energy based on customer input and measure
effectiveness via overall Customer Satisfaction scores.

Organizational
transformation

Streamline and gain operational efficiencies:

•

Continue to demonstrate progress in leadership development, succession planning, and
diversity, equity and inclusion initiatives across the organization.

Pivot the Structures' manufacturing business to a more flexible and agile operating model
across all geographies that creates cost efficiencies in its global manufacturing operations.

ATCO Land and Development will work with all ATCO businesses to optimize the
group’s real estate portfolio for operational use and long-term value and
optionality.

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

LUMA Energy will advance its integrated safety culture and programs that will
allow prioritization of safety risks and mitigations across business functions and
enable employee safety, compliance and continual improvement.

LUMA has developed baseline performance metrics and will monitor progress in,
among other areas, customer service, safety, reliability and the delivery of
budgeted results.

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)

Community
investment

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

LUMA Energy will establish the LUma Committed with EmployeeS (“LUCES”) program.

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. The formal college is
expected to open in the second quarter of 2022.

LUMA Energy will continue its grassroots community investment program across Puerto Rican
municipalities through partnership with the American Red Cross of Puerto Rico and the Boys &
Girls Club of Puerto Rico.

As a community partner in the Homes for Heroes Foundation, ATCO Structures' will continue to
provide expertise in design, manufacturing, transportation and placement to provide housing
along with the resources, services and training that will enable them to successfully transition.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

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 2021 Management Proxy Circular, which will be available in April 2022.

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 the 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.
Dr. Robert J. Routs is the current Lead Director for ATCO, and was appointed to this position on July 22, 2021. 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.

25 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

BUSINESS UNIT PERFORMANCE

ATCO Structures & Logistics' 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 they 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.

REVENUES

Structures & Logistics revenues of $243 million in the fourth quarter of 2021 were $72 million higher than the same
period in 2020. Higher revenues were mainly due to increased workforce housing activity on numerous projects, the
addition of the China Lake Military Rebuild project in the US, higher space rental activity across all geographies, and
permanent modular construction activity in Canada and Australia. Higher revenues were partially offset by the
completion of manufacturing work on ATCO Structures' LNG Canada Cedar Valley Lodge project in 2020.

Structures & Logistics revenues of $777 million in the full year of 2021 were $63 million higher than the same period
in 2020. This was largely due to the addition of the China Lake Military Rebuild project, higher space rental activity
across all geographies, the acquisition of the remaining 50 per cent ownership interest in ATCO Sabinco at the end
of 2020, ATCO Frontec's disaster and emergency management response projects, and workforce housing service
contracts. Higher revenues were partially offset by the completion of the manufacturing work on ATCO Structures'
LNG Canada Cedar Valley Lodge project in 2020.

ADJUSTED EARNINGS

($ millions)

ATCO Structures (1)
ATCO Frontec (1)

Total Structures & Logistics

Three Months Ended
December 31

Year Ended
December 31

2021

2020

Change

2021

2020

Change

(1)

(7)

(5)

(12)

(4)

—

(4)

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

Structures & Logistics adjusted earnings of $5 million in the fourth quarter of 2021 were $12 million lower than the
same period in 2020. Lower earnings were mainly due to lower contributions from ATCO Structures' LNG Canada
Cedar Valley Lodge project which reached substantial completion in the third quarter of 2021, lower earnings from
workforce housing trade sales in Mexico, and lower client work requests at the BC Hydro Site C and Alaska Radar
System sites serviced by ATCO Frontec. Lower earnings were partially offset from continued focus on the build-out
of space rentals in ATCO Structures.

Structures & Logistics adjusted earnings of $53 million in the full year of 2021 were $4 million lower than the same
period in 2020. Lower earnings were mainly due to lower contributions from ATCO Structures' LNG Canada Cedar
Valley Lodge project which reached substantial completion in the third quarter of 2021, and lower earnings from

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

workforce housing trade sales in Mexico. Lower earnings were partially offset by ATCO Structures' higher space
rentals activity.

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 housing, residential housing, and space
rental products. Space rentals sells and leases mobile office trailers in various sizes and floor plans to suit our
customers’ needs. Workforce housing delivers modular workforce housing worldwide, including short-term and
permanent modular construction, pre-fabricated and relocatable modular buildings.

ATCO Structures adjusted earnings of $6 million and $48 million in the fourth quarter and full year of 2021 were
$7 million and $4 million lower than the same periods in 2020. Lower earnings were mainly due to lower
contributions from the LNG Canada Cedar Valley Lodge project which reached substantial completion in the third
quarter of 2021, and lower earnings from workforce housing trade sales in Mexico, partially offset by higher
earnings from space rentals activity.

The following table compares ATCO Structures' manufacturing hours and rental fleet for the fourth quarter and full
year of 2021 and 2020.

North America

Manufacturing hours (thousands)

109

20%

488

718

(32%)

Three Months Ended
December 31

Year Ended
December 31

2021

2020

Change

2021

2020

Change

Global Space Rentals
Number of units
Average utilization (%)

Average rental rate ($ per month)

Global Workforce Housing

Number of units

Average utilization (%)

20,230 18,827

7% 20,230 18,827

615

617

—%

603

615

(2%)

2,333

2,679

(13%)

2,333

2,679

(13%)

11%

15%

37%

Average rental rate ($ per month)

2,452

1,672

47%

2,130

1,554

Manufacturing Hours

The increase in manufacturing hours in the fourth quarter of 2021 was mainly due to execution of manufacturing
work on the Brucejack contract, a 450-person camp for Pretium Exploration Inc. in Northwest British Columbia (BC).

The decrease in manufacturing hours for 2021 was mainly due to the completion of manufacturing on the LNG
Canada Cedar Valley Lodge project in 2020.

Rental Fleet

Global Space Rentals

ATCO Structures increased its global space rental fleet by 1,493 units year-over-year. The increase was part of the
continued strategic expansion of the space rental fleet in targeted regions of Canada, mainland US, and Chile.
Throughout 2021, space rental demand increased mainly due to an increase in activity in the construction and
mining sectors. This growth in demand produced an increase in utilization. During the fourth quarter of 2021, ATCO
Structures completed the sale of its 42-unit Alaskan space rentals fleet in the US which enables the business to
continue to focus on mainland US space rentals fleet expansion.

27 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

Global Workforce Housing

ATCO Structures continuously evaluates the size of its global workforce housing fleet in relation to economic
conditions and seeks to balance unit counts, utilization rates and average rental rates. ATCO Structures decreased
the size of its idle workforce housing fleet and increased the average utilization rate year-over-year by selling used
and under-utilized fleet assets in Canada, Australia, and the US. The increase in the utilization rate was also due to
the workforce housing fleet on rent for the Trans Mountain Expansion project in BC. Increased utilization in the US
was a result of disaster relief camps on rent to house workers and people displaced by Hurricane Ida. Increases in
workforce housing average rental rates correspond with the shift in customer demand towards higher priced, lower
density workforce housing options in Canada, and short-term rental contracts in the US.

ATCO STRUCTURES RECENT DEVELOPMENTS THROUGHOUT 2021

Canada

Trans Mountain Expansion Project

In the fourth quarter of 2021, ATCO Structures was awarded a rental contract to supply a 550-person camp for the
Trans Mountain Expansion Project in Blue River, BC. This is the third camp for the project with the previous camps
located in Valemount and Clearwater, BC. Crews were mobilized in the fourth quarter of 2021 with the first 100 beds
planned to be turned over for occupancy in the first quarter of 2022, and the remainder by the second quarter of
2022.

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 through the first three quarters of 2021. The facility was 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 was substantially completed in the
third quarter of 2021.

LNG Canada Cedar Valley Lodge, Kitimat, BC

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

BC Housing - Government of British Columbia

ATCO Structures secured several projects with the Government of British Columbia's supportive housing program in
2019 and 2020. The housing projects will provide affordable housing to individuals and families across the province.
In the second quarter of 2021, ATCO Structures was awarded an additional $13 million supportive housing contract
in Vernon, BC for a four-story, 61-unit building which is expected to be completed in Q2 2022. This is our sixth
affordable housing project.

Brucejack - Pretium Exploration Inc.

In the first quarter of 2021, ATCO Structures was awarded a contract for the supply of a 450-person camp for
Pretium Exploration Inc.’s Brucejack operations in Northwest BC. The $44 million contract includes the supply of
accommodation dorms with complete kitchen and recreation amenities. Installation work is expected to conclude in
the first quarter of 2022.

United States

Plumas Basecamp Greenville - California Department of General Services Forest Fire Recovery

In the third quarter of 2021, ATCO Structures was awarded a $25 million supply contract for a 102-person modular
accommodation facility with common areas and ongoing support services for the California Department of General
Services Forest Fire Recovery in Quincy, California. The delivery and installation was completed in the fourth quarter
of 2021.

China Lake Military Base Rebuild - Environmental Chemical Corporation

In the first quarter of 2021, ATCO Structures completed installation of a $19 million contract to 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. During the third quarter of 2021, ATCO Structures was awarded a 150-person expansion
camp which was completed in the fourth quarter of 2021. In the fourth quarter of 2021, we were awarded a second
150-person expansion camp to be completed in the first quarter of 2022. The combined value of the expansion
camps is $22 million.

Australia

Bechtel Pluto Train II

In February 2020, ATCO Structures was awarded two Limited Notice to Proceed contracts for the construction of a
2,500-person accommodation village to support the construction of a second LNG train. In the second quarter of
2020 the project was suspended. In the fourth quarter of 2021, ATCO Structures received a Full Notice to Proceed.
The project will resume in the first quarter of 2022.

Angelo River Mine Site - Robe River Mining Company

In the third quarter of 2021, ATCO Structures was
awarded an $18 million contract for the supply of a
480-person camp at the Angelo River mine site in
Western Australia. The camp was completed in the
fourth quarter of 2021.

Victoria Department of Education

In the third quarter of 2021, ATCO Structures was
awarded a $10 million contract to supply 15 double
classrooms and 7 two-story classrooms to the
Victoria Department of Education. Manufacturing for
this contract commenced in the fourth quarter of
2021 and is expected to be complete by the second
quarter of 2022.

29 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

Hallam Primary School, Victoria Australia

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 in the fourth quarter of 2021 were $5 million lower than the same period in 2020.
Lower adjusted earnings were mainly due to lower client work requests at the BC Hydro Site C Camp and Alaska
Radar System sites.

ATCO Frontec adjusted earnings of $5 million in the full year of 2021 were comparable to the same period in 2020.

ATCO FRONTEC RECENT DEVELOPMENTS THROUGHOUT 2021

BC Hydro Site C Camp

In December 2021, ATCO Frontec received notification from BC Hydro that it had exercised its right to extend the
agreement term for the Site C camp from December 31, 2022 to December 31, 2024.

Defence Construction Canada (DCC)

ATCO Frontec secured two Facility Maintenance and Site Services contracts with DCC to maintain 15 different
Department of National Defence sites and the associated infrastructure across Alberta for a 5-year base period for a
combined contracted revenue of $25 million. Both contracts contain options for an additional 6-year period, with a
maximum contract term up to 11 years. Mobilization activities are underway and are on track for operations to
commence in the second quarter of 2022.

Blue River Facility

In August 2021, ATCO Frontec commenced mobilization of a 550-bed facility near Blue River, BC for the Trans
Mountain Expansion Project with the first occupants in the camp in November 2021. Full operations are expected to
begin by the first quarter of 2022. This will be our third lodging contract related to the Trans Mountain project.

UQSUQ Contract

The Government of Nunavut originally awarded UQSUQ, a joint venture between ATCO Frontec and Nunavut
Petroleum Corporation, a contract for bulk fuel delivery services in Iqaluit, Nunavut in June 2007. The contract
involves operating and maintaining the Iqaluit bulk fuel storage facility and pipeline distribution system and the
delivery of petroleum products. In the second quarter of 2021, ATCO Frontec received confirmation that UQSUQ
had successfully secured the critical 10-year infrastructure contract with a 5-year extension option; reinforcing
ATCO's commitment to Northern Canada and its Indigenous partners.

China Lake Military Base - Naval Berthing Camp

In the first quarter of 2021, ATCO Frontec was formally awarded a 44-month workforce lodging services contract
(Naval Berthing Camp) for a 400-person camp to support additional construction work at the China Lake Military
base. This contract includes three expansion options. In September 2021, ATCO Frontec was awarded the Phase 1
expansion, bringing camp capacity to 550-people, and operations began in January, 2022. In December 2021, ATCO
Frontec was awarded the Phase 2 expansion bringing camp capacity to 700-people, and operations of this
expansion will begin in the second quarter of 2022.

ATCO FRONTEC RECENT DEVELOPMENTS 2022

North Warning System (NWS) Contract

In February 2022, the Government of Canada awarded Nasittuq Corporation (Nasittuq), a partnership between
ATCO Frontec and the Pan Arctic Inuit Logistics Corporation (PAIL), a seven-year contract to operate and maintain
the North Warning System, beginning April 1, 2022. Under the contract, Nasittuq will operate and maintain 47
remote NWS sites in the Canadian Arctic and three facilities in Ontario. The remote sites include helipads, gravel
runways, more than 100 buildings and over 300 bulk fuel storage tanks, and involves maintenance, logistics,
environmental systems management, systems engineering and project management.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

Neltume Ports is a port operator and developer with a diversified portfolio of 17 multi-purpose, bulk cargo and
container port facilities and 6 port operation services. The business is located primarily in Chile with additional
operations in Uruguay, Argentina, Brazil and the US.

ADJUSTED EARNINGS

($ millions)

Neltume Ports

Three Months Ended
December 31

Year Ended
December 31

2021

2020

Change

2021

2020

Change

(4)

(2)

Neltume Ports adjusted earnings of $3 million and $13 million in the fourth quarter and full year of 2021 were
$4 million and $2 million lower than the same periods in 2020. Lower earnings were mainly due to a gain on sale of
equipment in the fourth quarter of 2020 and timing of certain revenue and expenses.

RECENT DEVELOPMENTS THROUGHOUT 2021

In 2021, Neltume Ports increased its ownership interest in Sagres from 86 per cent to 90 per cent, in Terminal Ontur
from 20 per cent to 28 per cent, and in Puerto Coronel from 17 per cent to 25 per cent.

Tidal Transport & Trading USA Acquisition

On September 3, 2021, Neltume Ports acquired a 70 per cent interest in Tidal Transport & Trading USA (Tidal). Tidal
provides full-scale marine operation services focused primarily on stevedoring, hold cleaning, and port captaincy on
the US West Coast, with operations in California, Oregon, and Washington. Tidal is Neltume Ports' first marine
operation services on the west coast, further expanding its presence in the US.

AutoMobile International Terminal

On June 2, 2021, AutoMobile International Terminal, a 50/50 joint venture partnership with Terminal Zarate in
Mobile, Alabama, had their grand opening and is now in service. The terminal is operating under a 10-year
concession agreement with two consecutive 10-year extensions at the JV's election for a total of up to 30 years. The
port will primarily serve the import and export requirements of the automotive market in the US.

31 ATCO LTD. 2021 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, a company engaged in the processing and
marketing of live ash and ash reclaimed from landfills. 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)

2021

2020

Change

2021

2020

Change

ATCO Corporate & Other

—

Three Months Ended
December 31

Year Ended
December 31

ATCO Corporate & Other adjusted earnings in the fourth quarter and full year of 2021 were $5 million and
$6 million higher than the same period in 2020 mainly due to tax benefits recognized in 2021.

Executive Appointments

On October 6, 2021, the ATCO and CU Boards of Directors announced the appointments of Katie Patrick to the
position of Executive Vice President, Chief Financial & Investment Officer of ATCO Ltd. and Brian Shkrobot to the
position of Executive Vice President & Chief Financial Officer of Canadian Utilities Limited.

New Board of Directors Appointee

Effective September 1, 2021, Norman M. Steinberg was appointed to the Board of Directors of ATCO Ltd.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

Canadian Utilities is a diversified global energy infrastructure corporation delivering operating and service
excellence and innovative business solutions in Utilities (Electricity and Natural Gas Transmission and Distribution,
and International Operations); Energy Infrastructure (Energy Storage, Energy Generation, Industrial Water Solutions,
and Clean Fuels); and Retail Energy (Electricity and Natural Gas Retail Sales, and Whole-Home Solutions).

UTILITIES

REVENUES

Utilities revenues of $884 million and $3,041 million in the fourth quarter and full year of 2021 were $100 million
and $109 million higher compared to the same periods in 2020 mainly due to higher flow-through revenues in the
Electricity Distribution and Natural Gas Distribution businesses, and the timing of prior period costs recovered in
Natural Gas Distribution.

Revenue growth for Electricity and Natural Gas Distribution in the fourth quarter and full year of 2021 has been
deferred as a result of our decision to provide rate relief to customers in light of the current COVID-19 global
pandemic and the economic situation in Alberta. The AUC issued a decision directing ATCO to collect the 2021
deferred amounts commencing January 1, 2022.

ADJUSTED EARNINGS

($ millions)

2021

2020

Change

2021

2020

Change

Three Months Ended
December 31

Year Ended
December 31

Electricity
Electricity Distribution (1)
Electricity Transmission (1)
International Electricity Operations (1)
Total Electricity

Natural Gas
Natural Gas Distribution (1)
Natural Gas Transmission (1)
International Natural Gas Distribution (1)

Total Natural Gas
Total Utilities (2)

109

102

—

(3)

(1)

184

166

152

336

139

305

(10)

(1)

(4)

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

(2) Additional information regarding this total of segments measure is provided in the Other Financial and Non-GAAP Measures section of this MD&A.

33 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

Utilities adjusted earnings of $109 million in the fourth quarter of 2021 were $7 million higher than the same period
in 2020 mainly due to higher earnings from International Electricity Operations as a result of the June 2021
commencement of a Supplemental Agreement to LUMA Energy's 15-year Operations and Maintenance Agreement,
and inflation indexing in International Natural Gas Distribution. Higher earnings were partially offset by timing of
operating costs.

Utilities adjusted earnings of $336 million in the full year of 2021 were $31 million higher than the same period in
2020 mainly due to higher earnings from International Electricity Operations as a result of ongoing transition work
in the first half of 2021 and the June 2021 commencement of a Supplemental Agreement to LUMA Energy's 15-year
Operations and Maintenance Agreement. Higher earnings were also due to inflation indexing in International
Natural Gas Distribution, and cost efficiencies within the Electricity Distribution business. Higher earnings were
partially offset by the impact of the Electricity Transmission 2018-2019 GTA Compliance Filing decision and the
2020-2022 GTA Compliance Filing decision received in 2021. Combined, these decisions included a $6 million
reduction of earnings related to prior periods.

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

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 in the fourth quarter of 2021 were comparable to the same
period in 2020.

Electricity Distribution adjusted earnings of $80 million in the full year of 2021 were $11 million higher compared to
the same period in 2020 mainly due to cost efficiencies.

Electricity Transmission

Electricity Transmission provides regulated electricity transmission mainly in Northern and Central East Alberta, and
in the Lloydminster area of Saskatchewan. Electricity Transmission has a 35-year contract to be the operator of
Alberta PowerLine, a 500-km electricity transmission line between Wabamun, near Edmonton and Fort McMurray,
Alberta.

Electricity Transmission adjusted earnings of $19 million in the fourth quarter of 2021 were $3 million lower than
the same period in 2020 mainly due to timing of operating costs.

Electricity Transmission adjusted earnings of $81 million in the full year of 2021 were $10 million lower than the
same period in 2020. Lower earnings were mainly due to the impact of the Electricity Transmission 2018-2019 GTA
Compliance Filing decision received in the second quarter of 2021, and the 2020-2022 GTA Compliance Filing
decision received in the third quarter of 2021. Combined, these decisions included a $6 million reduction of
earnings related to prior periods.

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
(T&D) system under an Operations and Maintenance Agreement with the Puerto Rico Public-Private Partnerships
Authority (P3A) and the Puerto Rico Electric Power Authority (PREPA).

LUMA Energy has assumed operations under terms of a Supplemental Agreement as PREPA remains in bankruptcy.
This Agreement can span up to 18 months and allows LUMA Energy to collect an annualized fixed fee equivalent of
$115 million USD. Should PREPA emerge from bankruptcy during this period, LUMA Energy will transition to year
one of the previously outlined Operations and Maintenance Agreement.

International Electricity Operations adjusted earnings of $8 million and $23 million in the fourth quarter and full
year of 2021 were $5 million and $17 million higher than the same periods in 2020. Higher earnings were mainly
due to ongoing transition work in the first half of 2021 and the June 1, 2021 commencement of operations under a
Supplemental Agreement to LUMA Energy's 15-year contract to modernize and operate Puerto Rico's electricity T&D
system.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

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 $38 million in the fourth quarter of 2021 were $3 million lower than
the same period in 2020 mainly due to timing of operating costs.

Natural Gas Distribution adjusted earnings of $75 million in the full year of 2021 were $1 million lower than the
same period in 2020 mainly due to higher operating costs, partially offset by growth in rate base.

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 $11 million and $43 million in the fourth quarter and full year of
2021 were $1 million and $4 million lower than the same periods in 2020. Lower earnings were mainly due to the
impact of the 2021-2023 General Rate Application which included operating cost efficiencies implemented in prior
periods that are being passed on to customers, partially offset by growth in rate base.

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 $13 million and $34 million in the fourth quarter and full
year of 2021 were $9 million and $18 million higher compared to the same periods in 2020. Higher earnings were
mainly due to the impact of inflation indexing and increased customer volumes.

UTILITIES RECENT DEVELOPMENTS THROUGHOUT 2021

Old Crow Solar Development Project

In August 2021, the Vuntut Gwitchin First Nation and ATCO subsidiary, Canadian Utilities announced the completion
of Canada's most northerly off-grid solar project, reducing diesel use by 189,000 litres annually in Old Crow, Yukon
and providing a clean energy source for decades to come.

This project showcases a first-of-its-kind Electricity
Purchase Agreement. Vuntut Gwitchin will serve as
the Independent Power Producer, owner and
operator of the solar facility and ATCO Electric Yukon
will purchase the solar electricity generated for the
next 25 years and feed it into the grid for
redistribution to the community.

This facility, similar to the Fort Chipewyan Solar Farm
in Northern Alberta, fosters community ownership
and self-sustaining economic development through
job creation, investment in infrastructure, and
revenue from the sale of renewable energy.

Energy projects like this are models of effective
collaboration to enable and accelerate the clean
energy transition. The Company intends to replicate
its success with many of the other Northern
Communities reliant on diesel power.

35 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

Old Crow Solar Project - Old Crow, Yukon

UTILITIES REGULATORY INFORMATION

UTILITIES REGULATORY FRAMEWORKS

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. On October 13, 2020 and March 4,
2021, the AUC issued the decisions for 2021 and 2022, respectively, approving the extension of the current ROE of
8.5 per cent and capital structure of 37 per cent equity on a final basis. The AUC commenced a new GCOC process in
January 2022 to address the ROE and equity thickness for 2023 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.

ATCO LTD. 2021 MANAGEMENT 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 weighted average cost of
capital (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 - 2022: 8.5%

Access Arrangement - International Natural Gas Distribution

On November 15, 2019, the ERA published its final rate of return guidelines which outlined the parameters for the
WACC applicable to International Natural Gas Distribution's Access Arrangement period (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.

Under the existing Access Arrangement, ATCO Gas Australia is using the Post-Tax Revenue Model method to
determine revenue requirement and customer rates. Under this method, the impact of inflation is added to the rate
base annually. The inflation impact is reflected in customer rates in future periods through the recovery of
depreciation. Customer rates are adjusted annually through a mechanism, which adjusts the approved rates in real
dollars for actual inflation.

ALBERTA REGULATORY UPDATES

Common Matters

2021 Rate Relief Application

On March 1, 2021, ATCO filed a 2021 Rate Relief Application for Electricity Distribution and Natural Gas Distribution
to postpone rate increases for the full year 2021 and collect the deferred amounts commencing in 2023 for no more
than a 5-year period. On June 18, 2021, the AUC issued a decision approving the requested rate relief, but directed
ATCO to collect the 2021 deferred amounts commencing January 1, 2022, over a short duration, without exceeding a
prescribed maximum increase in any year during the collection process. ATCO filed its 2022 PBR Rates applications
on September 10, 2021, requesting recovery over the years 2022 and 2023 for Electricity Distribution and full
recovery in 2022 for Natural Gas Distribution. The AUC issued its decisions in December 2021, approving the 2022
PBR rates for Electricity Distribution and Natural Gas Distribution as filed.

37 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

Distribution Regulatory Framework - Post 2022

On June 18, 2021, the AUC issued a decision providing direction regarding the 2023 COS application process. Each
distribution utility is to present its application using an AUC-developed template with a prescribed minimum level of
detail. On November 15, 2021, Electricity Distribution filed a 2023 COS application requesting, among other things,
approval of a new grid modernization capital program to ensure that the grid can safely and reliably accommodate
changing customer behaviours associated with decarbonization. On December 15, 2021, Natural Gas Distribution
filed a 2023 COS application which includes a request for approval of a new capital program for the introduction of
hydrogen into its distribution system in order to meet government-mandated net-zero emissions targets. Decisions
from the AUC are expected in the third quarter of 2022.

On June 30, 2021, the AUC issued a decision relating to the Evaluation of Performance-Based Regulation in Alberta.
The Commission determined that PBR has achieved many of the set principle objectives and that a third PBR term
(PBR3) will commence in 2024 after a one year COS rebasing in 2023. A future generic proceeding will be initiated in
the third quarter of 2022 to determine the parameters of the third generation PBR plan, including a review of
incremental capital funding provisions, the inflation (I) and productivity (X) factors, and consideration of an earnings
sharing mechanism.

Electricity Transmission

2020-2022 General Tariff Application (GTA)

In October 2019, Electricity Transmission filed a GTA for its operations for 2020, 2021, and 2022. The decision was
received in March 2021 approving the vast majority of requested capital expenditures and operating costs, as filed.
Electricity Transmission filed its compliance filing on April 19, 2021 and on September 1, 2021, the AUC issued a
decision which determined Electricity Transmission’s final revenue requirement for 2020 and 2021. The impact to
2021 adjusted earnings as a result of this decision included a decrease of $2 million, all of which relates to prior
periods.

2018-2019 General Tariff Application

On June 29, 2021, the AUC issued a decision on the 2018-2019 GTA Compliance Filing which determined Electricity
Transmission’s final revenue requirement for 2018 and 2019. The impact of this decision is a decrease to 2021
adjusted earnings of $4 million, all of which relates to prior periods.

Application of AUC Enforcement Staff for the Commencement of Proceeding Pursuant to Sections 8 and 63 of the

Alberta Utilities Commission Act

On November 29, 2021, the AUC enforcement branch filed an application with the AUC recommending an
enforcement proceeding be initiated. This proceeding is to determine whether ATCO Electric failed to comply with
AUC decisions and enactments under the AUC's jurisdiction with respect to the sole source contract for the Jasper
interconnection project and the actions leading up to and including the filing of the 2018-2020 Deferral Account
Application. This proceeding will also determine any future remedies that may be required.

AUC Enforcement and Electricity Transmission are pursuing settlement discussions prior to the AUC determining
the next process steps. In 2021, the Company recognized expenses of $7 million (after-tax and NCI) due to the
potential outcome of the proceeding. As this proceeding is not in the normal course of business, these costs have
been excluded from adjusted earnings.

Natural Gas Transmission

Pioneer Pipeline Acquisition

In the third quarter of 2020, Natural Gas Transmission entered into an agreement to acquire the Pioneer Pipeline
from Tidewater Midstream & Infrastructure Ltd. and its partner TransAlta Corporation, subject to customary
conditions including regulatory approvals by the AUC and Alberta Energy Regulator.

The 131-km natural gas pipeline runs from the Drayton Valley area to the Wabamun area west of Edmonton. On
June 15, 2021, the AUC issued a decision approving the acquisition of the pipeline and associated integration costs,
totaling $265 million, and the corresponding revenue requirement for 2021 to be included in Natural Gas
Transmission's rates.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

Consistent with the geographic areas defined in the Integration Agreement, Natural Gas Transmission will transfer
to Nova Gas Transmission Ltd. (NGTL) the 30-km segment of pipeline that is located in the NGTL footprint for
approximately $65 million.

The transaction to acquire the Pioneer Pipeline closed in 2021. The transfer to NGTL received approval from the
Canada Energy Regulator on December 22, 2021, and is expected to close in the first quarter of 2022. The Pioneer
Pipeline has been incorporated into NGTL's and ATCO's Alberta regulated natural gas transmission systems to
provide reliable natural gas supply to TransAlta's power generating units at Sundance and Keephills, facilitating the
conversion of these coal plants to cleaner-burning natural gas.

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

In June 2020, Natural Gas Transmission filed a GRA for the period 2021-2023. An AUC decision was received in
March 2021, approving the vast majority of requested capital expenditures and operating costs as filed, which
included operating cost efficiencies implemented in prior periods that are being passed on to customers. On June
15, 2021, the AUC approved the acquisition of the Pioneer Pipeline including the associated integrated costs. On
January 12, 2022, the AUC approved Natural Gas Transmission’s application reflecting the acquisition of Pioneer
Pipeline in its 2021-2023 revenue requirement.

39 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

ENERGY INFRASTRUCTURE

REVENUES

Energy Infrastructure revenues of $74 million and $209 million in the fourth quarter and full year of 2021 were
$15 million and $14 million higher than the same periods in 2020 mainly due to higher natural gas prices at the
Carbon, Alberta natural gas storage facility.

ADJUSTED EARNINGS

($ millions)

Electricity Generation (1)
Storage & Industrial Water (1)
Total Energy Infrastructure

Three Months Ended
December 31

Year Ended

December 31

2021

2020

Change

2021

2020

Change

—

(2)

(3)

(5)

—

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

Energy Infrastructure adjusted earnings of $2 million in the fourth quarter of 2021 were $5 million lower than the
same period in 2020 mainly due to the costs associated with the purchase of the Alberta Hub natural gas storage
facility, Central West Pumped Hydro development costs, non-recurring recoveries in 2020, and lower demand for
natural gas storage services.

Energy Infrastructure adjusted earnings of $15 million in the full year of 2021 were comparable to the same period
in 2020.

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 include the supply of electricity from solar, hydroelectric, and natural gas
generating plants in Western Canada, Australia, Mexico, and Chile and non-regulated electricity transmission in
Alberta.

Electricity Generation adjusted earnings in the fourth quarter of 2021 were $2 million lower compared to the same
period in 2020. Lower earnings were mainly due to Central West Pumped Hydro development costs, and non-
recurring recoveries in 2020.

Electricity Generation adjusted earnings of $7 million in the full year of 2021 were comparable to the same period in
2020.

Storage & Industrial Water

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

Storage & Industrial Water adjusted earnings of $2 million in the fourth quarter of 2021 were $3 million lower
compared to the same period in 2020 mainly due to costs associated with the purchase of the Alberta Hub natural
gas storage facility and lower demand for natural gas storage services.

Storage & Industrial Water adjusted earnings of $8 million in the full year of 2021 were comparable to the same
period in 2020.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

ENERGY INFRASTRUCTURE RECENT DEVELOPMENTS THROUGHOUT 2021

Alberta Hub Natural Gas Storage Acquisition

In December 2021, Canadian Utilities announced the acquisition of the Alberta Hub natural gas storage facility near
Edson, Alberta. The Alberta Hub underground natural gas storage facility has a capacity of approximately 49
petajoules and is connected to the NOVA Gas Transmission (NGTL) system. Complementing our existing natural gas
storage facility at Carbon, Alberta, the Alberta Hub facility will provide customized storage solutions tailored to our
customers’ needs.

Calgary Solar Development Projects

In September 2021, Canadian Utilities announced
that it had acquired the development rights to build
two solar projects, the Deerfoot and Barlow projects
in Calgary Alberta, with a combined capacity of
64-MW. Electricity from these solar projects may be
sold through a contracted Power Purchase
Agreement with any uncontracted electricity sold into
the Alberta power market. The projects will be the
largest urban solar developments in Western Canada
and will provide enough renewable electricity to
power more than 18,000 homes. The Barlow and
Deerfoot projects have received all major permits.
Detailed design and procurement for both projects
has begun and commercial operations are expected
to commence in the fourth quarter of 2022.

Empress Solar Development Project

Rendering of Deerfoot Solar Development Project - Calgary, AB

In September 2021, Canadian Utilities announced that it had acquired the rights to the Empress Solar project, a 39-
MW solar facility under development near Empress, Alberta. Electricity from this solar project may be sold through a
contracted Power Purchase Agreement with any uncontracted electricity sold into the Alberta power market. The
project will provide enough renewable electricity to power more than 11,000 homes. Project execution is underway
with all major permits received. Commercial operations are expected to commence in the fourth quarter of 2022.

Two Hills Renewable Natural Gas (RNG) Facility

In July 2021, Canadian Utilities announced its
partnership with Future Fuel Ltd. to build and
operate the Two Hills RNG facility north of Vegreville,
Alberta. The RNG facility will combine organic waste
from nearby municipalities with agricultural
byproducts to produce approximately 230,000
gigajoules per year of renewable natural gas (enough
to fuel 2,500 homes). Detailed design is currently
underway and the facility is targeting to commence
commercial operations in the fourth quarter of 2022.

The RNG produced will be delivered into the local gas
distribution network and sold under a 15-year sales
contract between Pacific Northern Gas Ltd. (PNG) and
ATCO Future Fuel RNG Limited Partnership (ATCO
Future Fuel).

41 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

Two Hills Renewable Natural Gas (RNG) Facility - Vegreville, AB

Canadian Utilities - Suncor Clean Hydrogen Project

In May 2021, Canadian Utilities and Suncor Energy announced the decision to collaborate on early stage design and
engineering of a potential clean hydrogen project. The project will produce more than 300,000 tonnes per year of
clean hydrogen, while capturing greater than 90 per cent of the carbon emissions, reducing Alberta's carbon dioxide
emissions by more than two million tonnes per year. The hydrogen production facility will be located at ATCO's
Heartland Energy Centre near Fort Saskatchewan, Alberta, and is expected to be operational as early as 2028.
Although several provincial and federal policies, fiscal programs and regulations have already been put in place to
support significant decarbonization and the development of a leading low-carbon fuels industry, further regulatory
certainty and fiscal support is required for the project to progress to a sanctioning decision (which is expected in
2024). In addition to supplying clean hydrogen to Suncor and the Alberta gas grid, the project will make hydrogen
volumes available for Alberta's other industrial, municipal and commercial transport users.

Clean Energy Innovation Park

In May 2021, Canadian Utilities and its joint venture partner, Australian Gas Infrastructure Group, received
notification of $29 million AUD in conditional funding from the Australian Renewable Energy Agency (ARENA) to kick
start the production of hydrogen through a large scale project at Canadian Utilities' proposed Clean Energy
Innovation Park (CEIP) in Western Australia. The proposed project will leverage Canadian Utilities' learnings from its
Clean Energy Innovation Hub, a pilot project which saw the company become the first in Australia to generate and
use green hydrogen. The CEIP will include a 10-MW electrolyser and plant capable of producing up to four tonnes of
hydrogen per day, along with storage and delivery to gas network injection points. The facility is planned to be co-
located with a 180-MW wind farm in Western Australia, which will provide the renewable energy to power the
electrolyser. A final investment decision for this project is expected in the first half of 2022.

Chile Solar Generation Facility

In 2019, Canadian Utilities entered into a partnership with Impulso Capital, a Chilean developer, to build and
operate the El Resplandor solar project. This project, located in Cabrero, Chile, provides solar energy to the Chilean
electricity grid. The 3-MW of solar generation capacity was completed at the end of the second quarter of 2020 for a
total investment of $4 million. In the second quarter of 2021, Canadian Utilities made the decision to cancel the
remaining planned 6-MW of the project due to land zoning concerns.

Central West Pumped Storage Hydro Project

In February 2021, ATCO announced an agreement to acquire the rights to develop the 325-MW Central West
Pumped Storage Hydro project, located approximately 175-km west of Sydney, Australia. The acquisition marks
ATCO's first renewable energy investment on Australia’s east coast. The project is in close proximity to significant
renewable energy resources and will be integral in supporting the development of new renewable generation
capacity in the state of New South Wales. A final investment decision on project construction is expected in 2023.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

CANADIAN UTILITIES CORPORATE & OTHER

Canadian Utilities' Corporate & Other segment includes Rümi, Blue Flame Kitchen and Retail Energy through
ATCOenergy which provides home products, home maintenance services, professional advice, and retail electricity
and natural gas services in Alberta. Corporate & Other also includes the global corporate head office in Calgary,
Canada, the Australia corporate head office in Perth, Australia and the Mexico corporate head office in Mexico City,
Mexico. Canadian Utilities' Corporate & Other includes CU Inc. and Canadian Utilities preferred share dividend and
debt expenses.

ADJUSTED EARNINGS

($ millions)

2021

2020

Change

2021

2020

Change

Canadian Utilities Corporate & Other

(10)

(11)

(41)

(40)

(1)

Three Months Ended
December 31

Year Ended
December 31

Canadian Utilities' Corporate & Other adjusted earnings in the fourth quarter of 2021 were $1 million higher
compared to the same period in 2020 mainly due to the timing of certain expenses and improved earnings from
ATCOenergy resulting from increased commodity margins.

Canadian Utilities' Corporate & Other adjusted earnings in the full year of 2021 were $1 million lower compared to
the same period in 2020 mainly due to lower bank interest income from lower rates and lower cash balances,
partially offset by improved earnings from ATCOenergy resulting from increased commodity margins.

CANADIAN UTILITIES CORPORATE & OTHER RECENT DEVELOPMENTS THROUGHOUT 2021

Rümi Launch

On June 3, 2021, Canadian Utilities launched Rümi, a solutions provider for home and business owners, offering
lifestyle products, home maintenance services and professional advice for homeowners. Rümi currently offers
approximately 60 services in Edmonton and Calgary, and more than 750 products for purchase online.

Executive Appointment

On October 6, 2021, the Canadian Utilities Board of Directors announced the appointment of Brian Shkrobot to the
position of Executive Vice President & Chief Financial Officer of Canadian Utilities Limited.

New Board of Directors Appointee

Effective September 1, 2021, Robert Hanf, Q.C. was appointed to the Board of Directors for Canadian Utilities
Limited.

43 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

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 while consistently delivering
safe, reliable and affordable services.

Sustainability Reporting and ESG Targets

Our 2021 Sustainability Report, which will be published in May 2022, will focus on the following material topics:

•

Energy Transition - energy transition and innovation, and energy access and affordability;

Climate Change and Environmental Stewardship - climate change and GHG emissions, and environmental
stewardship;

Operational Reliability and Resilience - system reliability and availability, emergency preparedness and
response, and supply chain resilience and responsibility;

People - diversity, equity and inclusion, occupational health and safety, public health and safety; and

Community and Indigenous Relations - Indigenous engagement, economic opportunity and reconciliation,
and community engagement and investment.

In January 2022, we released our net zero by 2050 commitment as well as an initial set of 2030 ESG Targets. Our
Board of Directors recognizes and fully supports our net-zero commitment and 2030 targets, and agrees that these
commitments and targets align with our strategic direction. More detailed information and progress towards these
targets will be found in the 2021 Sustainability Report. Achieving net zero by 2050 is a societal challenge that no
individual, business, or government can solve on its own. It will require unprecedented collaboration among all
constituents, as well as an informed, pragmatic, and affordable roadmap from policymakers to unlock the necessary
scale and pace of private sector investment and expertise.

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 2021 Sustainability Report, Sustainability Framework Reference Document, Corporate Governance, materiality
assessment, and additional details and other disclosures will be available on our website at www.atco.com.

Climate Change and Energy Transition

To contribute to a net-zero future, we continue to pursue initiatives to integrate cleaner fuels, renewable energy and
energy storage. This includes looking at ways to modernize our energy infrastructure to accommodate new and
innovative sources of energy as well as ways to further use energy more efficiently. We are decarbonizing our
operations and enabling our customers to transition to lower emitting sources of energy, while maintaining safety,
reliability and affordability.

POLICY/REGULATORY UPDATE

We actively and constructively work with all levels of government to advocate for enabling policy and regulation, and
to identify barriers that impede cost-effective, economy-wide decarbonization. We participate in a wide number of
discussions, and the following are examples of where we are focusing our efforts.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

Carbon Pricing/Output-Based Pricing Systems

In April 2021, the carbon price in Canada increased from $30 to $40 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.

In December 2021, the Government of Alberta, confirmed that the Technology, Innovation and Emissions Reduction
(TIER) regulation will increase from $40 per tonne in 2021 to $50 per tonne in 2022, meeting the federal
government's stringency requirements for the emission sources they cover. Accordingly, the federal fuel charge
continues to apply in Alberta, but not the federal Output-Based Pricing System. In the future, as carbon price
increases and new updated initiatives are put in place by the federal government, TIER will also need to be updated
to meet the federal government's stringency requirements.

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 and
affects our natural gas-fired power generation facilities. 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.

Net-Zero Emissions Accountability Act

On June 29, 2021, the Net-Zero Emissions Accountability Act came into effect outlining the Government of Canada’s
commitment to achieve net-zero GHG emissions by 2050, as well as a 2030 target under the Paris Agreement to
reduce GHG emissions by 40 to 45 per cent from 2005 levels. The Act establishes a legally binding process to set
five-year national emissions-reduction targets, with the 2030 plan due by the end of March 2022. The Act also
requires national emissions reduction targets for 2035, 2040, and 2045, ten years in advance, with credible, science-
based emissions reduction plans to achieve it.

The Government of Canada is currently consulting on initiatives in early 2022 as part of their commitments to the
emission-reduction targets. If these initiatives move forward, it may create both opportunities and challenges
directly and indirectly for ATCO. Some of these initiatives include: transitioning to a net-zero emitting electricity grid
by 2035; developing emission standards for different categories of vehicles and mandating a percentage of zero
emission vehicles by specific dates; capping emissions from the oil and gas sector at current levels and declining at
the pace to get to net zero by 2050; and developing a plan to reduce methane emissions across the broader
Canadian economy in support of the Global Methane Pledge and Canada’s climate plan goals to reduce oil and gas
methane emissions by at least 75 percent below 2012 levels by 2030.

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. Canadian Utilities continues to implement programs to reduce or
eliminate fugitive and venting emissions in our Natural Gas Transmission and Distribution businesses.

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 July 2021, the Government of Canada announced that the scope of the Clean Fuel Standards (CFS) was further
refined to cover only gasoline and diesel liquid fossil fuels used predominately in transportation (with an exemption
for diesel used in space heating). The regulations are expected to come into effect in late 2022.

45 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

Hydrogen Roadmap

In December 2020, the Government of Canada released their Hydrogen Strategy for Canada. In November 2021, the
Government of Alberta released the Alberta Hydrogen Roadmap outlining the Government's approach to
developing hydrogen use and production in Alberta. The Hydrogen Roadmap is an action plan that integrates
hydrogen with the province's existing energy infrastructure. It is a key part of Alberta's Recovery Plan and will be
implemented in a phased approach. In the first phase, Alberta will establish policy foundations, close technology
gaps with research and innovation, reduce the carbon intensity of existing hydrogen production, and deploy clean
hydrogen into end-use markets. The second phase will focus on growth and commercialization. These actions will
be implemented by working closely with partner agencies, federal, provincial and municipal governments, industries
and other key partners and stakeholders.

ENERGY TRANSITION HIGHLIGHTS

To support the energy transition, we continue to explore and implement opportunities in cleaner fuels, renewable
energy, energy infrastructure and storage, and energy efficiency. We intend to expand our ownership, management
and development of clean energy solutions, as well as enable our customers to transition to lower-emitting sources
of energy.

Renewable Energy

ATCO continues to build its renewable energy portfolio and enable customers to integrate renewable energy
options. Renewable energy initiatives are discussed in the "Business Unit Performance" section, under the "Utilities"
and "Energy Infrastructure" sections in this MD&A, and include the examples highlighted below.

In February 2021, ATCO subsidiary, Canadian Utilities acquired the rights to develop the 325-MW Central West
Pumped Storage Hydro project, located approximately 175-km west of Sydney, Australia. The project is in close
proximity to significant renewable energy resources and will be integral in supporting the development of new
renewable generation capacity in the state of New South Wales.

In August 2021, the Vuntut Gwitchin First Nation and ATCO subsidiary, Canadian Utilities completed Canada's most
northerly off-grid solar project, reducing diesel use by 189,000 litres annually in Old Crow, Yukon and providing the
community with clean energy for decades to come.

In September 2021, ATCO subsidiary, Canadian Utilities acquired the rights to the Empress Solar Project, a 39-MW
photovoltaic solar facility under development near the village of Empress, Alberta. Canadian Utilities also acquired
the rights to build two solar installations in Calgary. Once complete, the Barlow and Deerfoot solar projects will be
the largest solar installation in a major urban centre in Western Canada, with a combined capacity of 64-MW.

Cleaner Fuels

ATCO continues to pursue opportunities in cleaner fuels including RNG and hydrogen, and below are examples that
are included in the "Business Unit Performance - Energy Infrastructure" section in this MD&A.

Building on our hydrogen blending project in Fort Saskatchewan, in May 2021 Canadian Utilities and Suncor Energy
announced the decision to collaborate on early stage design and engineering of a potential clean hydrogen project.
The project will produce more than 300,000 tons per year of clean hydrogen, while capturing greater than 90 per
cent of the carbon emissions, reducing Alberta's carbon dioxide emissions by more than two million tons per year.

In May 2021, Canadian Utilities and its joint venture partner, Australian Gas Infrastructure Group, received
notification of conditional grant funding from Australian Renewable Energy Agency of $29 million AUD to contribute
financing for the production of hydrogen through a large scale project at Canadian Utilities' proposed Clean Energy
Innovation Park in Western Australia. The proposed project will leverage Canadian Utilities' learnings from its Clean
Energy Innovation Hub, a pilot project which saw the company become the first in Australia to generate and use
green hydrogen.

In July 2021, ATCO subsidiary Canadian Utilities partnered with Future Fuel Ltd. to build and operate a RNG facility in
Alberta with Emissions Reduction Alberta committing $8 million to the project through its Natural Gas Challenge.
Located north of Vegreville, Alberta, the Two Hills RNG Facility is Canadian Utilities' first commercial RNG production
facility and a strategic investment in ATCO's clean fuels strategy. Detailed design is currently underway and full
commercial operation is expected to be achieved in late 2022.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

Our Performance

As our portfolio of assets and businesses evolves, so too does our environmental footprint. Since 2005, we have
significantly decarbonized our portfolio through a combination of asset sales, implementation of fuel-switching,
GHG reduction initiatives and other efficiency programs.

*This graph represents historical portfolio direct GHG emissions, and therefore includes data from assets that were later sold/divested.

Our 2021 estimated direct (Scope 1) GHG emissions are 0.74 million tonnes CO2e. Final 2021 direct GHG emissions
data will be available in our Sustainability Report, which will be released in May 2022.

CLIMATE CHANGE RESILIENCY

We carefully manage climate-related risks, including preparing for, and responding to, extreme weather events
through activities such as proactive route and site 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.

47 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

ATCO Historical Portfolio Direct (Scope 1) GHG Emissions(million tonnes CO2e)20052006200720082009201020112012201320142015201620172018201920202021E05101520CLIMATE 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
following table 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

l
a
n
o
i
t
i
s
n
a
r
T

l
a
c
i
s
y
h
P

Market

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

Increasing demand for
lower-emitting
technologies

Changing customer
behaviour

Hydrogen market
development

Technology

Replacement of current
products/services with
lower-emitting options

Prosumer movement
may affect energy load
profiles in the future

Reputational

Public perception of
carbon risk

Physical

Extreme weather events

Long-term changes in
temperature and
weather patterns

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

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

Climate change
mitigation and
adaptation

Rapidly deployable
structures and logistics
services

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 and
development

Participation in carbon
markets

Business diversification

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

Providing a suite of
lower-emitting
technology solutions so
our customers can pick
the right solutions for
their unique situation

Transparent reporting

Authentic engagement
and collaboration

Climate change resiliency
efforts

Emergency Response &
Preparedness plans and
training

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

OTHER EXPENSES AND INCOME

A financial summary of other consolidated expenses and income items for the fourth quarter and full year of 2021
and 2020 is given below. These amounts are presented in accordance with IFRS accounting standards. They have
not been adjusted for the timing of revenues and expenses associated with rate-regulated activities and other items
that are not in the normal course of business.

($ millions)

Operating costs

Depreciation, amortization and impairment

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

2021

2020

Change

2021

2020

Change

765

156

118

631

174

104

134

2,607

2,254

353

(18)

717

669

(4)

423

148

407

166

(2)

(18)

Operating costs, which are total costs and expenses less depreciation, amortization and impairment, increased by
$134 million in the fourth quarter of 2021 compared to the same period in 2020. Higher operating costs were
mainly due to higher flow-through electricity costs in ATCOenergy, higher flow-through natural gas transmission
costs, higher materials costs in ATCO Structures from increased activity on workforce housing projects, and the
inclusion of ATCO Sabinco costs due to acquisition of the remaining 50 per cent ownership interest at the end of
2020. Higher operating costs were partially offset by lower materials costs from the completion of manufacturing
activities for the LNG Canada Cedar Valley Lodge project in 2020.

Operating costs increased by $353 million for the full year of 2021 compared to the same period in 2020. Higher
operating costs were mainly due to higher flow-through electricity costs in ATCOenergy, higher flow-through natural
gas transmission costs, higher materials costs in ATCO Structures from increased activity on workforce housing
projects, the inclusion of ATCO Sabinco costs due to acquisition of the remaining 50 per cent ownership interest at
the end of 2020, and higher unrealized and realized losses on derivative financial instruments. Higher operating
costs were partially offset by lower materials costs from the completion of manufacturing activities for the LNG
Canada Cedar Valley Lodge project in 2020.

DEPRECIATION, AMORTIZATION AND IMPAIRMENT

Depreciation, amortization and impairment decreased by $18 million in the fourth quarter of 2021 compared to the
same period in 2020 mainly due to project cost recoveries related to the conclusion of an international project,
partially offset by higher depreciation in Electricity Transmission as a result of a project cancellation.

Depreciation, amortization and impairment increased by $48 million in the the full year of 2021 compared to the
same period in 2020 mainly due to the second quarter 2021 impairment of assets in Canadian Utilities' Energy
Infrastructure segment as part of the continued assessment of our assets, and ATCO Structures' acquisition of the
remaining 50 per cent ownership interest of ATCO Sabinco in December 2020, which was previously accounted for
as an equity investment.

49 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

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 based in South America with operations in 17 port facilities and 6 port
operation services businesses located in Chile, Uruguay, Argentina, Brazil, and the US.

Earnings from investment in associate company in the fourth quarter and the full year of 2021 were $4 million and
$2 million lower compared to the same periods in 2020. Lower earnings were mainly due to a gain on sale of
equipment in the fourth quarter of 2020 and timing of certain revenue and expenses.

EARNINGS FROM INVESTMENT IN JOINT VENTURES

Earnings from investment in joint ventures is mainly comprised of Canadian Utilities' ownership positions in
electricity generation plants, LUMA Energy electricity operations and maintenance in Puerto Rico, and the
Strathcona Storage Limited Partnership, which operates hydrocarbon storage facilities at the ATCO Heartland
Energy Centre near Fort Saskatchewan, Alberta.

Earnings from investment in joint ventures increased by $10 million in the fourth quarter of 2021 compared to the
same period in 2020 mainly due to earnings from LUMA Energy related to the commencement on June 1, 2021 of
the Supplemental Agreement to LUMA Energy's 15-year Operations and Maintenance Agreement.

Earnings from investment in joint ventures increased by $28 million in the full year of 2021 compared to the same
period in 2020 mainly due to earnings from LUMA Energy related to ongoing transition work in the first half of 2021,
and the commencement on June 1, 2021 of the Supplemental Agreement to LUMA Energy's 15-year Operations and
Maintenance Agreement, partially offset by an impairment of an investment in Canadian Utilities' Energy
Infrastructure segment as part of the continued assessment of our assets.

NET FINANCE COSTS

Net finance costs increased by $14 million and $16 million in the fourth quarter and full year of 2021 compared to
the same periods in 2020 mainly due to recognition of accretion expense on asset retirement obligations related to
an international project and lower interest income resulting from lower interest rates received on cash balances.

INCOME TAX EXPENSE

Income taxes were higher by $30 million in the fourth quarter of 2021 compared to the same period in 2020 mainly
due to higher IFRS earnings before income taxes and a write down of deferred tax assets in ATCO Mexico.

Income taxes were lower by $18 million in the full year of 2021 compared to the same period in 2020 mainly due to
lower IFRS earnings before income taxes, partially offset by a write down of deferred tax assets in ATCO Mexico.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

LIQUIDITY AND CAPITAL RESOURCES

Our financial position is supported by our Regulated Utilities and our portfolio of energy infrastructure businesses,
which are structured to be highly regulated and long-term contracted. 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 capital
markets.

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 August 31, 2021, S&P Global Ratings affirmed its 'A-' long-term issuer credit ratings and negative outlook on
ATCO Ltd. and Canadian Utilities. On July 30, 2021, S&P Global Ratings affirmed ATCO subsidiary CU Inc.'s 'A-' long
term issuer credit rating and stable outlook, reflecting S&P's view that CU Inc. is an insulated entity to ATCO Ltd. and
Canadian Utilities.

On September 1, 2021, DBRS Limited affirmed its 'A (low)' long-term corporate credit rating and stable outlook on
ATCO. On August 13, 2021, DBRS Limited affirmed its 'A' long-term corporate credit rating and stable outlook on
ATCO subsidiary Canadian Utilities. On July 22, 2021, DBRS Limited affirmed its 'A (high)' long-term corporate credit
rating and stable outlook on Canadian Utilities' subsidiary CU Inc.

51 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

LINES OF CREDIT

At December 31, 2021, ATCO and its subsidiaries had the following lines of credit.

($ millions)

Long-term committed

Uncommitted
Total

Total

3,128

584
3,712

Used

Available

1,208

186
1,394

1,920

398
2,318

Of the $3,712 million in total lines of credit,
$584 million was in the form of uncommitted credit
facilities with no set maturity date. The other
$3,128 million in credit lines was committed, with
maturities between 2023 and 2026, and may be
extended at the option of the lenders.

Of the $1,394 million in lines of credit used,
$626 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.

Cash Flows from Operating Activities

Cash flows from operating activities were $542 million in the fourth quarter of 2021, $64 million higher compared to
the same period in 2020 mainly due to higher cash flows in the Natural Gas Distribution business as a result of
higher revenues.

Cash flows from operating activities were $1,864 million in the full year of 2021, $21 million higher compared to the
same period in 2020 mainly due to higher customer contributions received for Alberta Utilities' capital expenditures,
and higher cash flows generated in ATCO Structures' from the sale of used fleet. These amounts were partially
offset by the Company's decision to provide rate relief to customers through the deferral of rate increases for
Canadian Utilities' Electricity Distribution and Natural Gas Distribution businesses, which will be collected from
customers starting in 2022.

Cash flows from operating activities in 2021 are adversely impacted as a result of ATCO's decision to provide rate
relief to customers through the deferral of rate increases for Electricity Distribution and Natural Gas Distribution
which will be collected from customers starting in 2022.

Cash Used for Capital Investment (1) and Capital Expenditures

Cash used for capital investment was $419 million in the fourth quarter of 2021, $121 million higher compared to
the same period in 2020 mainly due to the acquisition of the Alberta Hub natural gas storage facility in Canadian
Utilities' Energy Infrastructure segment and a strategic land purchase.

Cash used for capital expenditures was $327 million in the fourth quarter of 2021, $50 million higher compared to
the same period in 2020 mainly due to a strategic land purchase.

Cash used for capital investment was $1,463 million in the full year of 2021, $394 million higher compared to the
same period in 2020 mainly due to the acquisition of the Pioneer Pipeline in Canadian Utilities' Natural Gas
Transmission business; the acquisition of the Alberta Hub natural gas storage facility, the acquisition of three solar
development projects, and the construction of a long-term contracted hydrocarbon storage cavern in Canadian
Utilities' Energy Infrastructure segment; and a strategic land purchase.

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

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

Lines of Credit($ millions)$3,712$(1,394)$2,318TotalUsedAvailable

Cash used for capital expenditures was $1,352 million in the full year of 2021, $311 million higher compared to the
same period in 2020 mainly due to the acquisition of the Pioneer Pipeline in Canadian Utilities' Natural Gas
Transmission business; the acquisition of three solar development projects in Canadian Utilities' Energy
Infrastructure segment; and a strategic land purchase.

Capital investment and capital expenditures for the fourth quarter and full year of 2021 and 2020 is shown in the
following table.

($ millions)
Structures & Logistics
ATCO Corporate & Other (1)

Canadian Utilities
Utilities

Electricity
Natural Gas

Energy Infrastructure
CU Corporate & Other
Canadian Utilities Total Capital Expenditures (2) (3)

ATCO Total Capital Expenditures

Capital Expenditures in Joint Ventures

Utilities

Electricity

Energy Infrastructure

Business Combinations

Energy Infrastructure

Structures & Logistics

Canadian Utilities Total Capital Investment (4)
ATCO Total Capital Investment (4)

Three Months Ended
December 31

Year Ended
December 31

2020
24
2
26

95
148
243
5
3

251

277

—

253

298

Change
9
(42)
(33)

(3)
11
8
75
—

(19)

173

121

2021
114
11
125

350
747
1,097
120
10

1,227

2020
125
13
138

366
510
876
19
8

903

1,352

1,041

—

1,338

912

1,463

1,069

Change
(11)
(2)
(13)

(16)
237
221
101
2

324

311

(19)

426

394

2021
33
(40)
(7)

92
159
251
80
3

334

327

—

426

419

(1)

(2)

In the fourth quarter of 2021, ATCO Land and Development sold land that was purchased in the second quarter of 2021 to an ATCO affiliate for project
development.

Includes additions to property, plant and equipment, intangibles and $(3) million and $6 million (2020 - $3 million and $13 million) of capitalized interest
during construction for the fourth quarter and full year of 2021. The $(3) million of capitalized interest during construction recognized in the fourth
quarter relates to a project cancellation.

(3)

Includes $38 million and $169 million for the fourth quarter and full year of 2021 (2020 - $37 million and $82 million) of capital expenditures, mainly in
the Utilities, that were funded with the assistance of customer contributions.

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

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 22, 2022, aggregate issuances of

debentures were $610 million.

Debt Issuances and Repayments

On September 3, 2021, CU Inc. issued $460 million of 3.174 per cent 30-year debentures. Proceeds from this
issuance were used to finance capital investments, to repay existing indebtedness, and for other general corporate
purposes of the Alberta Utilities.

Preferred Shares - CU Inc.

Effective June 1, 2021, the annual dividend rate on CU Inc.'s Cumulative Redeemable Preferred Shares Series 4 was
reset from 2.243 per cent to 2.292 per cent for a five-year period.

53 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

Redemption of Canadian Utilities' Equity Preferred Shares

On August 27, 2021, Canadian Utilities redeemed all of the issued 4.60 per cent Series V preferred shares for
$110 million plus accrued dividends. $79 million of Series V was allocated to the Alberta Utilities under CU Inc. and
this portion was subsequently replaced with long-term debt as part of CU Inc.’s September 2021 debenture issue.

Preferred Shares Issuances - Canadian Utilities

On December 9, 2021, Canadian Utilities issued $175 million of 4.75 per cent Cumulative Redeemable Second
Preferred Shares Series HH by means of a short-form prospectus and granted an underwriter option to purchase an
additional $26 million. This option was exercised in December 2021 increasing the total gross proceeds to $201
million. Canadian Utilities intends to use the proceeds for capital expenditures, to repay indebtedness and for other
general corporate purposes.

Dividends and Common Shares

We have increased our common share dividend each year since 1993, a 29-year track record. Dividends paid to
Class I and Class II Share owners totaled $51 million in the fourth quarter of 2021, and $205 million in the full year of
2021.

On January 13, 2022, the Board of Directors declared a first quarter dividend of 46.17 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.

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, 2021, we commenced a normal course issuer bid to purchase up to 1,013,478 outstanding Class I
Shares. The bid will expire on March 8, 2022. From March 9, 2021 to February 22, 2022, 220,000 shares were
purchased for $9.3 million.

CONSOLIDATED CASH FLOW

At December 31, 2021, the Company's cash position was $1,088 million, a decrease of $12 million compared to
December 31, 2020. Major movements are outlined in the following table:

($ millions)

Cash flow from operating activities

Net issue of long-term debt

Issue of short-term debt
Cash used for capital investment (1)
Issue of equity preferred shares

Redemption of equity preferred shares by subsidiary company

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

2021

2020

Change

1,864 1,843

273

206

129

—

144

206

(1,463) (1,069)

(394)

201

(110)

—

201

(110)

(205)

(200)

(297)

(301)

(401)

(413)

(80)

(12)

(29)

(40)

(5)

(51)

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

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

SHARE CAPITAL

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

At February 22, 2022, we had outstanding 101,190,749 Class I Shares, 13,196,129 Class II Shares, and options to
purchase 1,427,950 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, 107,150 Class I Shares
were available for issuance at December 31, 2021. Options may be granted to officers and key employees of the
Company and its subsidiaries 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.

55 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

QUARTERLY INFORMATION

The following table shows financial information for the eight quarters ended March 31, 2020 through
December 31, 2021.

($ millions, except for per share data)

Q1 2021

Q2 2021

Q3 2021

Q4 2021

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 (1)
Energy Infrastructure
Canadian Utilities Corporate & Other

Total adjusted earnings (1)

($ millions, except for per share data)

Total adjusted earnings (1)

1,072
83
0.73
0.72
1.04

970
12
0.10
0.10
0.70

977
52
0.46
0.46
0.60

1,270
99
0.87
0.87
1.01

14
3
1

106
5
(10)

119

18
3
(1)

65
4
(9)

16
4
1

56
4
(12)

5
3
5

109
2
(10)

114

Q1 2020

Q2 2020

Q3 2020

Q4 2020

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)

897
54
0.48
0.47
0.47

12
3
—

47
3
(11)

1,053
66
0.58
0.58
1.07

17
7
—

102
7
(11)

122

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

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 volumes 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.

ADJUSTED EARNINGS

STRUCTURES & LOGISTICS

In the first quarter of 2020, earnings were positively impacted by 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 were positively impacted by 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.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

In the third quarter of 2020, earnings were adversely impacted by 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 were positively impacted by additional ATCO Frontec client work requests at
existing contract sites for COVID-19 proactive and preventative safety measures.

In the first quarter of 2021, earnings increased compared to the same period in 2020 mainly due to ATCO
Structures' workforce housing trade sale activity in Canada and the US, workforce housing rental activity in Canada,
higher space rental activity in Canada and Australia, and additional ATCO Frontec client work requests at the BC
Hydro Site C Camp due to COVID-19 proactive and preventative safety measures.

In the second quarter of 2021, earnings decreased compared to the same period in 2020 mainly due to ATCO
Structures' lower workforce housing trade sale activity in Canada, Australia and the US. Lower adjusted earnings
were partially offset by ATCO Structures' higher space rental activity in Canada, Australia, and the US, and ATCO
Frontec's recently awarded workforce housing service contract for the Trans Mountain Expansion project.

In the third quarter of 2021, earnings increased compared to the same period in 2020 mainly due to ATCO
Structures' higher space rental activity, and higher occupancy and additional work requests at all workforce housing
camps serviced by ATCO Frontec. Higher earnings were partially offset by the completion of manufacturing work on
ATCO Structures' LNG Canada Cedar Valley Lodge project in 2020.

In the fourth quarter of 2021, earnings decreased compared to the same period in 2020 mainly due to lower
contributions from ATCO Structures' LNG Canada Cedar Valley Lodge project which reached substantial completion
in the third quarter of 2021, lower earnings from workforce housing trade sales in Mexico, and lower client work
requests at the BC Hydro Site C and Alaska Radar System sites serviced by ATCO Frontec. Lower earnings were
partially offset from continued focus on the build-out of space rentals in ATCO Structures.

NELTUME PORTS

In the first quarter of 2020, Neltume Ports' adjusted earnings were adversely impacted mainly by lower cargo
volumes and margin.

In the second quarter of 2020, Neltume Ports' adjusted earnings were adversely impacted mainly by 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.

In the fourth quarter of 2020, Neltume ports' adjusted earnings were positively impacted mainly by a gain on sale of
equipment, the timing of certain revenues and expenses, and higher cargo volumes and margins at select ports.

In the first quarter of 2021, Neltume Ports recorded adjusted earnings that were comparable to the same period in
2020.

In the second quarter of 2021, Neltume Ports recorded adjusted earnings that were $1 million higher than the same
period in 2020. Higher earnings were mainly due to unplanned equipment maintenance activity at the Puerto
Mejillones port in 2020, and higher volumes in 2021 across the portfolio of ports.

In the third quarter of 2021, Neltume Ports recorded adjusted earnings that were $1 million higher than the same
period in 2020. Higher earnings were mainly due to a return to normal operations following unplanned equipment
maintenance activity at the Puerto Mejillones port in 2020, and higher volumes in 2021 across the portfolio of ports.

57 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

$7M$21M$12M$17M$14M$18M$16M$5MQ1 2020Q2 2020Q3 2020Q4 2020Q1 2021Q2 2021Q3 2021Q4 2021In the fourth quarter of 2021, Neltume ports recorded adjusted earnings that were $4 million lower than the same
period in 2020. Lower earnings were mainly due to a gain on sale of equipment in the fourth quarter of 2020 and
timing of certain revenue and expenses.

CANADIAN UTILITIES

Utilities (1)

In the first quarter of 2020, Utilities adjusted earnings were positively impacted by 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 adversely impacted by 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 adversely impacted by 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.

In the fourth quarter of 2020, adjusted earnings in the Utilities were positively impacted by cost efficiencies, rate
base growth, and contributions in International Electricity Operations from Canadian Utilities' 50 per cent joint
venture ownership in LUMA Energy.

In the first quarter of 2021, adjusted earnings in the Utilities were higher than the same period in 2020. Higher
earnings were mainly due to cost efficiencies and continued growth in the regulated rate base, earnings from
International Electricity Operations, and inflation indexing and foreign exchange adjustments in International
Natural Gas Distribution.

In the second quarter of 2021, adjusted earnings in the Utilities were higher than the same period in 2020. Higher
earnings were mainly due to contributions from International Electricity Operations, a higher inflation rate in
International Natural Gas Distribution, and cost efficiencies, partially offset by the impact of the Electricity
Transmission 2018-2019 General Tariff Application (GTA) Compliance Filing decision received in the second quarter
of 2021.

In the third quarter of 2021, adjusted earnings in the Utilities were higher than the same period in 2020. Higher
earnings were mainly due to higher earnings from International Electricity Operations, inflation indexing in
International Natural Gas Distribution, and cost efficiencies within the Electricity Distribution business.

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

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

$3M$2M$3M$7M$3M$3M$4M$3MQ1 2020Q2 2020Q3 2020Q4 2020Q1 2021Q2 2021Q3 2021Q4 2021In the fourth quarter of 2021, adjusted earnings in the Utilities were higher than the same period in 2020 mainly
due to higher earnings from International Electricity Operations, and inflation indexing in International Natural Gas
Distribution. Higher earnings were partially offset by timing of operating costs.

Energy Infrastructure

In all quarters of 2020, Energy Infrastructure earnings were adversely impacted 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.

In the first quarter of 2021, Energy Infrastructure earnings were higher than the same period in 2020 mainly due to
increased demand for natural gas storage services and recovered business development costs.

In the second quarter of 2021, Energy Infrastructure earnings were higher than the same period in 2020 mainly due
to recovered business development costs, partially offset by lower demand for natural gas storage services.

In the third quarter of 2021, Energy Infrastructure earnings were higher than the same period in 2020 mainly due to
increased demand for natural gas storage services and recovered business development costs.

In the fourth quarter of 2021, Energy Infrastructure earnings were lower than the same period in 2020 mainly due
to the costs associated with the purchase of the Alberta Hub natural gas storage facility, Central West Pumped
Hydro development costs, non-recurring recoveries in 2020, and lower demand for natural gas storage services.

59 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

$99M$57M$47M$102M$106M$65M$56M$109MQ1 2020Q2 2020Q3 2020Q4 2020Q1 2021Q2 2021Q3 2021Q4 2021$3M$2M$3M$7M$5M$4M$4M$2MQ1 2020Q2 2020Q3 2020Q4 2020Q1 2021Q2 2021Q3 2021Q4 2021EARNINGS 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, impairments, 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:

•

In the second quarter of 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 related to certain
assets that no longer represent strategic value for the Company.

Early Termination of the Master Service Agreements (MSA) for Managed IT Services

◦

In the fourth quarter of 2020 and first quarter of 2021, Canadian Utilities signed MSAs with IBM
Canada Ltd. (subsequently novated to Kyndryl Canada Ltd.) and IBM Australia Limited (IBM),
respectively, to provide managed IT services. These services were previously provided by Wipro
under a ten-year MSA expiring in December 2024. ATCO recognized termination costs of $32
million and $2 million (after-tax and non-controlling interests) in the fourth quarter of 2020 and
first quarter of 2021, respectively, which represents managements' best estimate of the costs to
exit the Wipro MSAs.

The transition of the managed IT services from Wipro to IBM commenced on February 1, 2021
and is now complete. In the fourth quarter and full year of 2021, ATCO recognized transition
costs of $1 million and $24 million (after-tax and non-controlling interests), respectively.

In the second quarter of 2021, impairments and other costs not in the normal course of business of
$33 million (after-tax and non-controlling interests) were recorded. Canadian Utilities incurred $28 million
of these costs in Mexico, related mainly to its Veracruz hydro facility within its Energy Infrastructure
segment. The charge reflects an adverse arbitration decision, changes in market regulations, ongoing
political uncertainty, and a challenging operating environment, resulting in an impairment of the carrying
value of the assets. Other costs recorded were individually immaterial.

•

AUC Enforcement Proceeding

◦

In the fourth quarter of 2021, the AUC enforcement branch filed an application with the AUC
recommending an enforcement proceeding be initiated. This proceeding is to determine
whether ATCO Electric failed to comply with AUC decisions and enactments under the AUC's
jurisdiction with respect to the sole source contract for the Jasper interconnection project and
the actions leading up to and including the filing of the 2018-2020 Deferral Account Application.
This proceeding will also determine any future remedies that may be required.

AUC Enforcement and Electricity Transmission are pursuing settlement discussions prior to the
AUC determining the next process steps. In 2021, the Company recognized expenses of
$7 million (after-tax and non-controlling interests) due to the potential outcome of the
proceeding.

•

During the fourth quarter and full year of 2021, the Company recorded earnings of $9 million (after-tax
and non-controlling interests) following the conclusion of the Company's involvement in an international
project.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

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. As it relates to the Company’s energy transition investments, the Company faces additional risks
including policy certainty, pace of energy transition, commodity and environmental attribute price risk and climate
risk.

Risk Management Approach

The Company attempts to reduce the risks of project delays and cost increases by careful project feasibility,
development and management processes, 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 reduces risks associated with policy certainty, pace of energy transition, commodity and
environmental attribute price risk and climate-related risk by leveraging our competitive advantages and assigning
clear accountability and leadership for executing and realizing capital investment. Planned capital investments for
Energy Infrastructure are based on the following significant assumptions: a diversified approach to business
development focused on multiple pillars (energy storage, clean fuels, renewables) and development in areas closest
to economic feasibility; ensuring long-term assets are matched with appropriate customer offtake agreements with
investment grade counterparties; pursuing projects in markets where fundamentals and competitive advantage
enable us to be successful; and self-performing or working with Engineering, Procurement and Construction firms
and partners to ensure construction activities are completed by parties with the competencies to ensure successful
project delivery.

The Company believes these assumptions are reasonable.

61 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

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 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.

Energy Infrastructure has pivoted its growth strategy to largely focus on energy transition assets. A lack of clarity on
proposed regulations creates revenue uncertainty for these projects.

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.

Energy Infrastructure is targeting investments that benefit from climate change. In addition, we are actively and
constructively working with all levels of government as well as Indigenous communities to ensure ongoing
communication and that the impacts and costs of proposed policy changes are identified and understood. Where
appropriate, the Company is also working with its peers and industry associations to develop common positions
and strategies.

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. Assets across all of ATCO and Canadian Utilities' businesses 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 and site 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.

These are the material climate related risks. For more detailed information on additional climate-related risks please
refer to the Sustainability, Climate Change and Energy Transition section of this MD&A.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

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.

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.

63 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

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, and the Alberta Hub natural gas storage
facility near Edson, Alberta are 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.

To manage its exposure to natural gas storage spreads the Company uses a combination of storage service
contracts to lease space and to capture future storage spreads.

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.

Risk Management Approach

To address this risk, the Company manages its capital structure to maintain strong investment grade 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.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

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 known
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, 2021, the Company had fixed interest rates, either directly or through interest rate swap agreements,
on 97 per cent (2020 - 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.

65 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

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 & Logistics' 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
& Logistics 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 & Logistics' risk exposure to any one particular industry sector or geography.

Neltume Ports has a diversified operational portfolio that is linked to a mix of cargos, economies, economic cycles,
and political environments in Chile, Uruguay, Argentina, Brazil and the US.

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, inflation risk, 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.

Risk Management Approach

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. In response to the COVID-19
pandemic, ATCO's Pandemic Plan was activated in February 2020. The plan includes 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). Additionally, 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.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

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.

67 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

Business Risk: Regulated Operations

Businesses Impacted:

• Utilities

Description & Context

Associated Strategies:

• Growth

• Operational Excellence

• Financial Strength

The Regulated Utilities are subject to the risks associated with 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. They are
also subject to risk of the regulator's potential disallowance of costs incurred. Electricity Distribution and Natural
Gas Distribution operate under 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 ensure 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.

ATCO LTD. 2021 MANAGEMENT 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. At December 31, 2021, the Company’s cash position was approximately $1 billion and there
were available committed and uncommitted lines of credit of approximately $2.3 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)

2022

2023

2024

2025

2026

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

Principal
Interest expense (1)

Derivatives (2)

Commitments
Purchase obligations:

Operating and maintenance agreements
Capital expenditures

Other

Total

852
206

351
371
32
1,812

350
359
6
715
2,527

—
—

233
371
9
613

326
—
—
326
939

—
—

451
363
4
818

286
—
—
286
1,104

—
—

62
358
1
421

51
—
—
51
472

—
—

432
365
—
797

40
—
—
40
837

2027 and
thereafter

—
—

8,373
7,006
—
15,379

96
—
—
96
15,475

(1) Interest payments on floating rate debt have been estimated using rates in effect at December 31, 2021. 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, 2021.

69 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

OTHER FINANCIAL AND NON-GAAP
MEASURES

Other financial measures presented in this MD&A consist of:

1. Adjusted earnings which are a key measure of segment earnings that are used to assess segment

performance and allocate resources; and

Total of segments measures, which are defined as financial measures disclosed by an issuer that are a
subtotal or total of two or more reportable segments.

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, 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. Adjusted earnings are presented in
Note 3 of the 2021 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.

Adjusted earnings are most directly comparable to earnings attributable to Class I and Class II shares but is not a
standardized financial measure under the reporting framework used to prepare our financial statements. Adjusted
earnings may not be comparable to similar financial measures disclosed by other issuers. Management’s view is
that adjusted earnings allow for a more effective analysis of operating performance and trends. For investors,
adjusted earnings may provide value as they exclude items that are not in the normal course of business and, as
such, provide insight as to earnings resulting from the issuer's usual course of business. A reconciliation of adjusted
earnings to earnings attributable to Class I and Class II Shares is presented in this MD&A.

Total of segments measures are most directly comparable to total earnings attributable to Class I and Class II
shares. Comparable total of segments measures from 2020 have been calculated using the same composition and
are disclosed alongside the current total of segments measures in this MD&A. A reconciliation of the total of
segments measures with total earnings attributable to Class I and Class II shares is presented in this MD&A.

Non-GAAP financial measures presented in this MD&A are defined as financial measures disclosed by an issuer that
are not disclosed in the financial statements.

Capital investment is a non-GAAP measure defined as cash used for capital expenditures, business combinations,
and cash used in the Company's proportional share of capital expenditures in joint ventures. Capital expenditures
includes additions to property, plant and equipment and intangibles as well as interest capitalized during
construction. Capital investment is most directly comparable to capital expenditures. Capital investment is not a
standardized financial measure under the reporting framework used to prepare our financial statements. Capital
investment may not be comparable to similar financial measures disclosed by other issuers. Management views
capital investment as the Company's total cash investment in assets. For investors, capital investment is useful
because it identifies how much cash is being used to acquire, invest in and finance assets. A reconciliation of capital
investments to capital expenditures is presented in this MD&A.

ATCO LTD. 2021 MANAGEMENT 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, 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. Additional information regarding this measure is
provided in the Other Financial and Non-GAAP Measures section of this MD&A.

($ millions)
2021
2020

Revenues

Adjusted earnings
(loss)

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

Rate-regulated
activities

IT Common Matters
decision

Transition of
managed IT services

AUC enforcement
proceeding

Project cost recovery

Other

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

ATCO Ltd.

Canadian Utilities Limited

Structures
& Logistics

Neltume
Ports

ATCO
Corporate
& Other

Utilities

Energy
Infrastructure

CUL
Corporate
& Other

Consolidated

ATCO
Consolidated

Three Months Ended
December 31

243

171

—

(1)

—

884

784

109

102

—

(1)

(3)

—

(1)

—

(15)

(16)

(2)

(5)

(3)

(26)

(7)

—

(1)

—

(1)

—

(1)

(10)

(11)

1,028

881

101

1,270

1,053

114

122

(4)

—

(2)

—

(7)

(16)

(4)

(15)

(2)

(5)

(3)

(4)

(15)

(2)

(5)

(1)

(29)

(32)

(7)

—

(1)

(7)

—

(1)

—

71 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

($ millions)

2021

2020

Revenues

Adjusted earnings
(loss)

Impairment and
other costs

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

Rate-regulated
activities

IT Common Matters
decision

Transition of managed
IT services

AUC enforcement
proceeding

Project cost recovery

Other

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

ATCO Ltd.

Canadian Utilities

Structures
& Logistics

Neltume
Ports

ATCO
Corporate &
Other

Utilities

Energy
Infrastructure

CUL
Corporate
& Other

Consolidated

Year Ended
December 31

ATCO
Consolidated

777

714

—

(5)

—

(3) 3,041

(3)

2,932

—

336

305

—

(4)

209

195

(34)

(2)

265

106

(41)

(40)

—

(9)

3,515

3,233

4,289

3,944

310

280

(34)

(15)

382

352

(33)

(20)

—

(1)

(9)

(10)

—

(2)

(3)

—
—

—

—
—

—

—
—

(1)

—

(64)

(34)

(7)

(10)

(20)

(26)

(7)
—

—
—

—

(2)

—

(1)

—
—

9
—

(2)

(1)

(2)

—

(1)

(2)

—
—

—

238

(1)

231

(14)

(51)

(4)

(64)

(32)

(7)

(10)

(22)

(29)

(7)
—

9
—

(2)

(1)

173

189

(4)

(64)

(32)

(7)

(10)

(24)

(32)

(7)
—

9
—

—

(2)

246

252

IMPAIRMENT AND OTHER COSTS

In 2021, impairments and other costs not in the normal course of business of $33 million (after-tax and non-
controlling interests) were recorded. Canadian Utilities incurred $28 million of these costs in Mexico, related mainly

to its Veracruz hydro facility within its Energy Infrastructure segment. The charge reflects an adverse arbitration

decision, changes in market regulations, ongoing political uncertainty, and a challenging operating environment,

resulting in an impairment of the carrying value of the assets. Other costs recorded were individually immaterial.

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 related to certain assets that no longer represented
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 oil price volatility and the COVID-19 pandemic continuing to
cause economic uncertainty, an impairment of $9 million was recorded in 2020 reflecting the reduced likelihood of
future recovery of these costs. The remaining costs relate to the continued transformation and realignment of
certain functions in the Company.

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
2020.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

The remaining costs related 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 GAINS AND LOSSES 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. These contracts are measured at
fair value. Unrealized gains and losses due to changes in the fair value of the fixed-price swap commodity contracts
are recognized in the earnings of the Corporate & Other segment.

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.

73 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

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

Timing Adjustment

Items

RRA Treatment

IFRS Treatment

Additional
revenues billed in
current year

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
years

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 years 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.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

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:

($ millions)

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)
Distribution rate relief (4)
Impact of warmer temperatures (2)
Impact of inflation on rate base (5)

Settlement of regulatory decisions and other items (6)

Three Months Ended
December 31

Year Ended
December 31

2021

2020

Change

2021

2020

Change

—

(17)

(13)

(10)

(15)

—

(17)

—

(3)

(1)

(5)

(15)

—

(13)

(9)

—

(56)

(63)

(1)

(17)

(64)

(55)

—

(3)

(16)

(32)

(1)

(63)

(1)

(14)

(32)

(1)

(2)

(3)

(4)

(5)

(6)

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 years.

Natural Gas Distribution's 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 normal temperatures 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.

During the fourth quarter and year ended December 31, 2021, Electricity Distribution and Natural Gas Distribution recorded a decrease in earnings of
$13 million and $63 million related to interim rate relief for customers as applied for by the Company and approved by the AUC to hold current
distribution base rates in place. These amounts will be recovered from customers in 2022.

The inflation-indexed portion of International Natural Gas Distribution's rate base is billed to customers through the recovery of depreciation in
subsequent years based on the actual or forecasted annual rate of inflation. Under rate-regulated accounting, revenue is recognized in the current year
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.

In 2021, Natural Gas Distribution collected $28 million related to depreciation and transmission rate riders which was partially offset by a decrease in
earnings of $15 million related to payments of transmission costs. In 2020, Electric Distribution recorded a decrease in earnings of $14 million related to
payments to customers for transmission costs and capital related items.

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 in 2021 was $2 million and $7 million (after-tax and non-controlling interests)
(2020 - $5 million and $10 million).

TRANSITION OF MANAGED IT SERVICES

In the fourth quarter of 2020 and first quarter of 2021, Canadian Utilities signed MSAs with IBM Canada Ltd.
(subsequently novated to Kyndryl Canada Ltd.) and IBM Australia Limited (IBM), respectively, to provide managed IT
services. These services were previously provided by Wipro under a ten-year MSA expiring in December 2024. The
transition of the managed IT services from Wipro to IBM commenced on February 1, 2021 and is complete.

In the fourth quarter and full year of 2021, ATCO recognized termination and transition costs of $1 million and
$24 million (after-tax and non-controlling interests) (2020 - $32 million and $32 million).

AUC ENFORCEMENT PROCEEDING

AUC Enforcement and Electricity Transmission are pursuing settlement discussions prior to the AUC determining
the next process steps. In the fourth quarter and full year of 2021, the Company recognized expenses of $7 million
(after-tax and non-controlling interests) due to the potential outcome of the proceeding.

75 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

PROJECT COST RECOVERY

During the fourth quarter and full year of 2021, the Company recorded earnings of $9 million (after-tax and non-
controlling interests) following the conclusion of the Company's involvement in an international project.

OTHER

The Company adjusts the deferred tax asset which was recognized as a result of the 2015 Tula Pipeline Project
impairment. In the full year of 2021, the Company recorded a foreign exchange impact of $2 million (after-tax and
non-controlling interests) (2020 - a foreign exchange loss of $1 million) due to a difference between the tax base
currency, which is the Mexican peso, and the US dollar functional currency.

STRUCTURES & LOGISTICS

The following tables reconcile adjusted earnings for the Structures & Logistics business unit to the directly
comparable financial measure, earnings attributable to Class I and Class II shares.

($ millions)

2021

2020

Adjusted earnings (loss)

Transition of managed IT services

Earnings (loss) attributable to Class I and Class II shares

Three Months Ended
December 31

ATCO Ltd.

Structures

Frontec

Structures
& Logistics

—

(3)

(1)

—

(2)

(1)

(3)

($ millions)

2021

2020

Adjusted earnings

Impairments and other costs

Transition of managed IT services

Earnings attributable to Class I and Class II shares

Year Ended

December 31

ATCO Ltd.

Structures

Frontec

Structures
& Logistics

—

(5)

(1)

(3)

—

(1)

—

(5)

(2)

(3)

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

7
7

UTILITIES

A
T
C
O
L
T
D

2
0
2
1
M
A
N
A
G
E
M
E
N
T
S
D
I
S
C
U
S
S
I
O
N
&
A
N
A
L
Y
S
I
S

The following tables reconcile adjusted earnings for the Utilities business unit to the directly comparable financial measure, earnings attributable to Class I and
Class II shares.

($ millions)

2021

2020

Adjusted earnings

Rate-regulated activities

IT Common Matters decision

Transition of managed IT services

AUC enforcement proceeding

Earnings attributable to

Class I and Class II shares

Electricity

Natural Gas

Canadian Utilities Ltd.

Three Months Ended
December 31

Utilities

Electric
Distribution

Electric
Transmission

International
Electricity

Consolidated
Electricity

Natural Gas
Distribution

Natural Gas
Transmission

International
Natural Gas

Consolidated
Natural Gas

(13)

(6)

(1)

(2)

(1)

(8)

—

(1)

(4)

(7)

—

(9)

(3)

(1)

(3)

(2)

(12)

(7)

—

(6)

(1)

(10)

—

(3)

(5)

—

(1)

—

(2)

—

(11)

(2)

—

(2)

—

(6)

(13)

(1)

(2)

(1)

(14)

—

109

102

(15)

(16)

(2)

(5)

(3)

(26)

(7)

—

($ millions)

2021

2020

Adjusted earnings

Impairments and other costs

Rate-regulated activities

IT Common Matters decision

Transition of managed IT services

AUC enforcement proceeding

Other

Earnings attributable to

Class I and Class II shares

Electricity

Natural Gas

Canadian Utilities Ltd.

Electric
Distribution

Electric
Transmission

International
Electricity

Consolidated
Electricity

Natural Gas
Distribution

Natural Gas
Transmission

International
Natural Gas

Consolidated
Natural Gas

—

(1)

(40)

(28)

(2)

(3)

(5)

(8)

—

(1)

(2)

(3)

(2)

(4)

(7)

—

184

166

—

(2)

(30)

(24)

(4)

(6)

(7)

(12)

(7)

—

136

122

—

(2)

(5)

(2)

(3)

(8)

(12)

—

(2)

—

(11)

(14)

(1)

(2)

—

(18)

(1)

—

(4)

—

152

139

—

(2)

(34)

(10)

(3)

(4)

(13)

(14)

—

102

109

Year Ended

December 31

Utilities

336

305

—

(4)

(64)

(34)

(7)

(10)

(20)

(26)

(7)

—

238

231

A
T
C
O
L
T
D

2
0
2
1
M
A
N
A
G
E
M
E
N
T
D
I
S
C
U
S
S
I
O
N
&
A
N
A
L
Y
S
I
S

7
8

ENERGY INFRASTRUCTURE

The following tables reconcile adjusted earnings for the Energy Infrastructure business unit to the directly
comparable financial measure, earnings attributable to Class I and Class II shares.

($ millions)

2021

2020

Adjusted earnings

Unrealized losses on mark-to-market forward
and swap commodity contract

Transition of managed IT services

Project cost recovery

Other

Earnings attributable to Class I and Class II shares

($ millions)

2021

2020

Adjusted earnings

Impairments and other costs

Unrealized losses on mark-to-market forward
and swap commodity contract

Transition of managed IT services

Project cost recovery

Other

Loss (earnings) attributable to Class I and Class II shares

Three Months Ended
December 31

Canadian Utilities Ltd.

Electricity
Generation

Storage &
Industrial Water

Energy
Infrastructure

—

(1)

—

(1)

—

(1)

—

(1)

—

(1)

Canadian Utilities Limited

Year Ended

December 31

Electricity
Generation

Storage &
Industrial Water

Energy
Infrastructure

(34)

(1)

—

(27)

—

(1)

(2)

(1)

—

(2)

(1)

(34)

(2)

(1)

(2)

(1)

—

(2)

(1)

(14)

79 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

RECONCILIATION OF CAPITAL INVESTMENT
TO CAPITAL EXPENDITURES

Capital investment is a non-GAAP measure defined as cash used for capital expenditures, business combinations,
and cash used in the Company's proportional share of capital expenditures in joint ventures. 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.
Additional information regarding this non-GAAP measure is provided in the Other Financial and Non-GAAP
Measures section of this MD&A.

($ millions)

2021

2020

Capital Investment

Capital Expenditure
in joint ventures (1)

Business
combination (2)

Capital Expenditures

Three Months Ended
December 31

ATCO Ltd.

Canadian Utilities Limited

Structures
& Logistics

Neltume
Ports

ATCO
Corporate
& Other

Utilities

Energy
Infrastructure

CUL
Corporate
& Other

Consolidated

ATCO
Consolidated

—

(19)

—

(40)

—

(40)

253

243

(2)

—

251

243

170

(6)

(2)

(84)

—

426

253

(8)

(2)

(84)

—

334

251

419

298

(8)

(2)

(84)

(19)

327

277

(1) Capital expenditures in joint ventures relates mainly to the construction of a long-term contracted hydrocarbon storage cavern in Canadian Utilities' Energy

Infrastructure segment.

(2) Business combination in 2021 is due to an acquisition of the Alberta Hub natural gas storage facility in Canadian Utilities' Energy Infrastructure segment.

($ millions)

2021

2020

Capital Investment

Capital Expenditure
in joint ventures (1)

Business
combination (2)

Capital Expenditures

ATCO Ltd.

Canadian Utilities Limited

Structures
& Logistics

Neltume
Ports

ATCO
Corporate
& Other

Utilities

Energy
Infrastructure

CUL
Corporate
& Other

Consolidated

Year Ended
December 31

ATCO
Consolidated

114

144

—

(19)

114

125

—

1,102

876

(5)

—

1,097

876

226

(22)

(9)

(84)

—

120

—

1,338

912

(27)

(9)

(84)

—

1,463

1,069

(27)

(9)

(84)

(19)

1,227

903

1,352

1,041

(1) Capital expenditures in joint ventures relates mainly to the construction of a long-term contracted hydrocarbon storage cavern in Canadian Utilities' Energy

Infrastructure segment.

(2) Business combination in 2021 is due to an acquisition of the Alberta Hub natural gas storage facility in Canadian Utilities' Energy Infrastructure segment.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

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 2021 Consolidated
Financial Statements.

SIGNIFICANT ACCOUNTING ESTIMATES

The Company’s significant accounting estimates are described in Note 23 of the 2021 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, 2021, 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 2022 Consolidated Financial Statements once adopted.

DISCLOSURE CONTROLS AND PROCEDURES

As of December 31, 2021, 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, 2021.

INTERNAL CONTROL OVER FINANCIAL REPORTING

There was no change in the Company’s internal control over financial reporting that occurred during the period
beginning on January 1, 2021, and ended on December 31, 2021, that materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.

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.

81 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

As of December 31, 2021, 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.

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, 2021.

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", "goals", "targets", "strategy", "future", and similar expressions. In particular, forward-looking
information in this MD&A includes, but is not limited to, references to general strategic plans and targets, including
with respect to reducing GHG emissions; the timing for construction, completion or the commencement of
operations in relation to the projects and programs highlighted under “Recent Developments in the Fourth Quarter
of 2021” and elsewhere and the expected revenues or contract values associated with such projects and programs;
projected expenses in connection with the described Alberta Utilities Commission proceedings; and forecast cost
recoveries.

Although the Company believes that the expectations reflected in the forward-looking information are reasonable
based on the information available on the date such statements are made and processes used to prepare the
information, such statements are not guarantees of future performance and no assurance can be given that these
expectations will prove to be correct. Forward-looking information should not be unduly relied upon. By their
nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties, and other
factors, which may cause actual results, levels of activity, and achievements to differ materially from those
anticipated in such forward-looking information. The forward-looking information reflects the Company's beliefs
and assumptions with respect to, among other things, the Company's ability to successfully achieve its net-zero
GHG target by 2050; the development and performance of technology and technological innovations and the ability
to otherwise access and implement all technology necessary to achieve GHG and other environmental, social and
governance targets; continuing collaboration with certain regulatory and environmental groups; the performance of
assets and equipment; demand levels for oil, natural gas, gasoline, diesel and other energy sources; certain levels of
future energy use; future production rates; future revenue and earnings; the ability to meet current project
schedules, and other assumptions inherent in management's expectations in respect of the forward-looking
information identified herein.

The Company's actual results could differ materially from those anticipated in this forward-looking information as a
result of, among other things, risks inherent in the performance of assets; capital efficiencies and cost savings;
applicable laws and government policies; 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); credit
risk; interest rate fluctuations; the availability and cost of labour, materials, services, and infrastructure; the
development and execution of projects; prices of electricity, natural gas, natural gas liquids, and renewable energy;
the development and performance of technology and new energy efficient products, services, and programs
including but not limited to the use of zero-emission and renewable fuels, carbon capture, and storage,
electrification of equipment powered by zero-emission energy sources and utilization and availability of carbon
offsets; the occurrence of unexpected events such as fires, severe weather conditions, explosions, blow-outs,
equipment failures, transportation incidents, and other accidents or similar events; and other risk factors, many of
which are beyond the control of the Company. Due to the interdependencies and correlation of these factors, the
impact of any one material assumption or risk on a forward-looking statement cannot be determined with certainty.
Readers are cautioned that the foregoing lists are not exhaustive. For additional information about the principal
risks that the Company faces, see “Business Risks and Risk Management” in this MD&A.

This MD&A may contain information that constitutes future-oriented financial information or financial outlook
information, all of which are subject to the same assumptions, risk factors, limitations and qualifications set forth
above. Readers are cautioned that the assumptions used in the preparation of such information, although
considered reasonable at the time of preparation, may prove to be imprecise or inaccurate and, as such, undue
reliance should not be placed on such future-oriented financial information or financial outlook information. The
Company's actual results, performance and achievements could differ materially from those expressed in, or
implied by, such future-oriented financial information or financial outlook information. The Company has included

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

such information in order to provide readers with a more complete perspective on its future operations and its
current expectations relating to its future performance. Such information may not be appropriate for other
purposes and readers are cautioned that such information should not be used for purposes other than those for
which it has been disclosed herein. Future-oriented financial information or financial outlook information contained
herein was made as of the date of this MD&A.

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 2021 Consolidated Financial Statements and MD&A for the year ended December 31, 2021.
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.

83 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

GLOSSARY

AESO means Alberta Electric System Operator.

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

I-X means the Inflation adjuster (I Factor) and
Productivity Adjuster (X Factor).

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

AUC means the Alberta Utilities Commission.

LNG means liquefied natural gas.

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

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

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

NCI means non-controlling interest.

PBR means Performance Based Regulation.

RNG means renewable natural gas. It is a renewable
fuel produced by capturing methane emissions which
would otherwise be released to the atmosphere.

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

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.

CO2e means Carbon dioxide equivalent.

Customer Contributions are non-refundable cash
contributions made by customers for certain additions
to property, plant and equipment, mainly in the
Utilities. These contributions are made when the
estimated revenue is less than the cost of providing
service.

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

GAAP means Canadian generally accepted accounting
principles.

GHG means greenhouse gas.

IFRS means International Financial Reporting
Standards.

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

APPENDIX 1
FOURTH QUARTER FINANCIAL
INFORMATION

Financial information for the three months ended December 31, 2021 and 2020 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

Materials and consumables

Depreciation and amortization

Franchise fees

Property and other taxes

Other

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

85 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

Three Months Ended
December 31

2021

2020

1,270

1,053

(151)

(122)

(69)

(46)

(78)

(158)

(156)

(76)

(18)

(100)

(921)

375

(122)

(118)

257

(68)

189

$0.87

(57)

(44)

(22)

(55)

(93)

(174)

(64)

(17)

(157)

(805)

268

(109)

(104)

164

(38)

126

$0.58

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
Cash flows from operating activities

Investing activities

Additions to property, plant and equipment

Additions to intangibles

Acquisition, net of cash acquired

Changes in non-cash working capital

Investment in joint ventures

Other
Cash flows used in investing activities

Financing activities
Issue of short-term debt
Issue of long-term debt
Repayment of long-term debt
Net issue (purchase) of shares by subsidiary companies
Repayment of lease liabilities
Issue of equity preferred shares by subsidiary company
Net issue (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 from (used in) financing activities

Increase (decrease) in cash position
Foreign currency translation
Beginning of period
End of period

Three Months Ended
December 31

2021

2020

189
365
(12)
542

(301)

(29)

(84)

(6)

99
(320)

206
57
(203)
2
(5)
201
2
(51)
(74)
(117)
(6)
12

234
(4)
858
1,088

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

ATCO LTD. 2021 MANAGEMENT DISCUSSION & ANALYSIS

87 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

ATCO LTD.

CONSOLIDATED
FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2021

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

3.
Segmented Information ................................................................................................................................................................
4.
Revenues ..........................................................................................................................................................................................
5. Other Costs and Expenses............................................................................................................................................................
6.
Interest Expense .............................................................................................................................................................................
7.
Income Taxes ...................................................................................................................................................................................
8.
Earnings per Share .........................................................................................................................................................................

Information on Financial Position

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

Information on Cash Flow

19. Cash Flow Information ..................................................................................................................................................................

Risk

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

Group Structure
6
24. Business Combinations .................................................................................................................................................................
.
25.
Investment in Equity Interest in Associate Company .............................................................................................................
26. Subsidiaries ......................................................................................................................................................................................
27.
Joint Arrangements ........................................................................................................................................................................
28. Non-Controlling Interests .............................................................................................................................................................

Other Information

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

Page
90
91
96
97
98
99
100

101
101

102
109
110
110
111
113

113
114
116
117
117
118
119
124
125
127

128

130
133
137
138

141
142
143
143
145

147
149
150
150
151

89 ATCO LTD. 2021 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 K. Patrick]

Executive Vice President, Chief Financial &
Investment Officer

February 23, 2022

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 90

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, 2021 and
2020, 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, 2021 and 2020;

the consolidated statements of comprehensive income for the years ended December 31, 2021 and 2020;

the consolidated balance sheets as at December 31, 2021 and 2020;

the consolidated statements of changes in equity for the years ended December 31, 2021 and 2020;

the consolidated statements of cash flows for the years ended December 31, 2021 and 2020; and

the notes to the 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.

91 ATCO LTD. 2021 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, 2021. 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 15 – Retirement Benefits and note 23 –
Significant Judgments, Estimates and Assumptions to
the consolidated financial statements.

The Company maintains registered defined benefit or
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, 2021, total accrued benefit obligations
were $3,283 million and the market value of plan assets
was $3,084 million. These balances are presented net
on the consolidated balance sheet, resulting in
retirement benefit asset of $93 million and retirement
benefit obligations of $292 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 included the following:

–

Utilized professionals with specialized skill 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 rate, future compensation rates, health
care costs trend rates and life expectancy rates;

Tested certain underlying data used in the
determination of retirement benefit obligations;
and

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, the competence, capabilities
and objectivity of management’s independent
actuaries were evaluated, the work performed
was understood and the appropriateness of the
work as audit evidence was evaluated. The
procedures performed also included evaluation
of the methods and assumptions used by
management's independent actuaries, tests of
the data used by management's independent
actuaries and an evaluation of their findings.

• Tested disclosures related to the sensitivity

assumptions used in estimating retirement benefit
obligations.

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 92

Key audit matter

How our audit addressed the key audit matter

Assessment of unbilled revenue related to the
Utilities segment

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

• 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 included the following:

–

Tested a sample of billings made after
December 31, 2021 and compared the
relevant amounts of these billings to the
corresponding estimate of unbilled revenue
recorded.

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

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

Refer to note 4 – Revenues and note 23 – Significant
Judgments, Estimates and Assumptions to the
consolidated financial statements.

The Company had $156 million of unbilled revenue
related to the Utilities segment as at December 31,
2021.

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 measurement
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.

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.

93 ATCO LTD. 2021 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. 2021 CONSOLIDATED FINANCIAL STATEMENTS 94

•

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 23, 2022

95 ATCO LTD. 2021 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
Materials and consumables
Depreciation, amortization and impairment
Franchise fees
Property and other taxes
Other

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

2021

2020

4,289

3,944

Note

(573)
(267)
(211)
(116)
(296)
(420)
(717)
(263)
(74)
(387)
(3,324)

13
62

(531)
(225)
(200)
(86)
(211)
(388)
(669)
(243)
(72)
(298)
(2,923)

15
34

1,040

1,070

14
(437)
(423)

617
(148)

469

246
223
469

$2.16

$2.15

18
(425)
(407)

663
(166)

497

252
245
497

$2.21

$2.20

10,11,17

25
27

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 96

CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME

(millions of Canadian Dollars)

Earnings for the year

Other comprehensive income, net of income taxes

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

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

Other comprehensive income

Comprehensive income for the year

Comprehensive income attributable to:

Class I and Class II Shares

Non-controlling interests

(1)

(2)

(3)

Net of income taxes of $(56) million for the year ended December 31, 2021 (2020 - nil).

Net of income taxes of $(21) million for the year ended December 31, 2021 (2020 - $6 million).

Net of income taxes of nil.

See accompanying Notes to Consolidated Financial Statements.

Note

Year Ended
December 31

2021

469

2020

497

189

(76)

(7)

(23)

166

635

324

311

635

(13)

(2)

509

257

252

509

97 ATCO LTD. 2021 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

Retirement benefit asset

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

Short-term debt

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

2021

2020

December 31

11
15

27
25

3
13

7
15

3
14

1,091

844

213

2,221

18,791

752

228

445

149

111

1,103

727

124

2,039

18,327

685

—

186

460

166

23,004

22,200

852

161

206

350

695

164

—

196

1,586

1,074

1,624

292

1,870

105

9,502

15,055

180

3,962

(39)

4,111

3,838

7,949

1,443

439

1,756

132

9,423

14,351

178

3,880

(12)

4,052

3,797

7,849

23,004

22,200

See accompanying Notes to Consolidated Financial Statements.

[Original signed by N.C. Southern]

[Original signed by R.J. Routs]

DIRECTOR

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 98

9
9

A
T
C
O
L
T
D

2
0
2
1
C
O
N
S
O
L
I
D
A
T
E
D
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(millions of Canadian Dollars)

December 31, 2019

Earnings for the year

Other comprehensive income
Gains on retirement benefits transferred to

retained earnings

Shares issued

Shares purchased and cancelled

Dividends

Share-based compensation
Changes in ownership interest in subsidiary company (1)
Other

December 31, 2020

Earnings for the year

Other comprehensive income

Gains on retirement benefits transferred to

retained earnings

Net issuance of equity preferred shares issued by

subsidiary company

Shares issued

Shares purchased and cancelled

Dividends

Share-based compensation
Changes in ownership interest in subsidiary company (1)
Other

December 31, 2021

Class I and
Class II
Shares

Note

Contributed
Surplus

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

173

18,28

—

178

—

180

—

(6)

—

3,832

252

—

(6)

(200)

(3)

—

3,880

246

—

104

—

(9)

(205)

(56)

3,962

(17)

—

(2)

—

(12)

—

(104)

—

(1)

(39)

Non-
Controlling
Interests

3,858

245

—

(13)

(301)

—

(1)

Total

4,000

252

—

(6)

(200)

(2)

Total Equity

7,858

497

—

(19)

(501)

—

4,052

3,797

7,849

246

—

(9)

(205)

(56)

—

223

469

166

—

(119)

(297)

(1)

(128)

(502)

—

4,111

3,838

7,949

(1)

The changes in ownership interest in subsidiary company are due to Canadian Utilities Limited's purchases of Class A shares under the normal course issuer bid program.

See accompanying Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(millions of Canadian Dollars)

Note

2021

2020

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

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
Investment in joint ventures
Changes in non-cash working capital
Other
Cash flows used in investing activities

Financing activities
Issue of short-term debt
Issue of long-term debt
Repayment of long-term debt
Issue of equity preferred shares by subsidiary company
Redemption of equity preferred shares by subsidiary company
Repayment of lease liabilities
Net purchase of shares by subsidiary company
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 in cash position (1)
Foreign currency translation
Beginning of year
End of year

19
19

24
27
19
3,10

13
14,19
14,19
28
28
17

18
18
28

469
1,391
4

1,864

(1,200)
30
(146)
(84)
(27)
8
36
(1,383)

206
534
(261)
201
(110)
(19)
(117)
(7)
(205)
(297)
(401)
(10)
(486)

(5)
(7)
1,100
1,088

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)

Cash position includes $18 million which is not available for general use by the Company (2020 - $39 million).

See accompanying Notes to Consolidated Financial Statements.

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 100

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

DECEMBER 31, 2021

(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 and whole-home solutions) (included in the
Corporate & Other segment); and

•

Neltume Ports (ports and transportation logistics) (see Note 25).

The consolidated financial statements include the accounts of ATCO Ltd. and its subsidiaries (see Note 26). 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 27) and its equity-accounted investment in associate
company (see Note 25). 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 23, 2022.

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 33.

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.

101 ATCO LTD. 2021 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 23.

ADOPTION OF NEW ACCOUNTING INTERPRETATION

In April 2021, the IFRS Interpretations Committee published a final agenda decision with respect to recognition of
certain configuration and customization expenditures related to cloud computing with retrospective application.
Costs that do not meet the capitalization criteria should be expensed as incurred. Any changes resulting from the
decision were required to be implemented by December 31, 2021.

The analysis of the impacts of the decision did not result in a material change to the consolidated financial
statements for the year ended December 31, 2021.

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.

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 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), 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, and a whole-
home solution provider.

Neltume Ports

Corporate & Other

The Neltume Ports segment includes the equity interest in Neltume Ports S.A., a
leading port operator and developer based in South America. Neltume Ports
operates seventeen port facilities and six port operation services businesses
located in Chile, Uruguay, Argentina, Brazil and the United States.
ATCO Corporate & Other includes commercial real estate owned by the
Company, intersegment eliminations and Ashcor, a business engaged in the
processing and marketing of live ash and ash reclaimed from landfill .

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 102

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

2021

Structures

Neltume Corporate

Canadian Utilities Limited

Corporate

& Other Consolidated
3,515
3,233

Utilities (1)
3,030
2,907
11
25
3,041
2,932
(1,513)
(1,408)

Energy
Infrastructure
162
149
47
46
209
195
(180)
(159)

(42)

(20)

(10)

(22)

2020
Revenues - external

Revenues -

intersegment

Revenues

Operating expenses (2)

Depreciation,

amortization and
impairment
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)

Total assets

Capital expenditures (3)

& Logistics

Ports

& Other

777
714

—

777
714
(653)
(595)

(59)

(52)

—

3
(7)
(7)
61
63
(14)
(14)
47
49
53

—

13
15

—

13
15
13

1,032
1,069

114
125

448
460

—

(3)
(3)

—

(3)
(3)
28
23

(7)

—

(14)
(14)
5
(1)
4

—

9
(1)
6

—

449
375

11
13

(599)

(568)

—

14
(381)
(373)
595
597
(136)
(145)
459
452
336

305

—

17
(18)
(10)
(20)
23
(6)
(7)
(26)
16
15

18,984
18,310

1,097
876

1,194
993

120
19

ATCO

Consolidated

4,289
3,944

—

4,289
3,944
(2,607)
(2,254)

(717)

(669)

34
(423)
(407)
617
663
(148)
(166)
469
497
382

352

—

3,515
3,233
(1,982)
(1,682)

(651)

(610)

—

31
(402)
(386)
538
586
(138)
(152)
400
434
310

280

21,075
20,296

1,227
903

23,004
22,200

1,352
1,041

323
177
(58)
(71)
265
106
(289)
(115)

—

(3)
(3)
(37)
(34)
4

—

(33)
(34)
(41)

(40)

897
993

10
8

(1)

Includes the collective results of the Electricity and the Natural Gas operating segments. 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, intangibles and $6 million of interest capitalized during construction for the year ended December
31, 2021 (2020 - $13 million).

103 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

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

2021

2020
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

Earnings for the year

Adjusted earnings

Total assets

Capital expenditures (2)

Utilities

Electricity
1,402
1,368
12
19
1,414
1,387
(575)
(545)
(322)
(309)
47
14
(232)
(229)
332
318
(71)
(77)
261
241
184
166

10,405

10,326

350
366

Natural Gas
1,628
1,539
4
9
1,632
1,548
(943)
(866)
(277)
(259)

—

(149)
(144)
263
279
(65)
(68)
198
211
152
139

8,581

7,985

747
510

Intersegment
eliminations

—

(5)
(3)
(5)
(3)
5
3

—

(2)

(1)

—

Consolidated
3,030
2,907
11
25
3,041
2,932
(1,513)
(1,408)
(599)
(568)
47
14
(381)
(373)
595
597
(136)
(145)
459
452
336
305

18,984

18,310

1,097
876

(1)

(2)

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

Includes additions to property, plant and equipment, intangibles and $6 million of interest capitalized during construction for the year ended December
31, 2021 (2020 - $12 million).

GEOGRAPHIC SEGMENTS

Financial information by geographic area is summarized below.

Revenues - external

Canada
Australia
Other
Total

Non-current assets

Canada
Australia
South America
Other
Total

2021
3,678
374
237
4,289

Property, Plant
and Equipment

Intangible Assets

2021
17,177
1,370
43
201
18,791

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

2021
732
11
1
8
752

2020
660
13
1
11
685

Other Assets (1)
2020
277
53
461
4
795

2021
337
40
435
5
817

2021
18,246
1,421
479
214
20,360

2020
3,428
385
131
3,944

Total

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

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

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 104

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;

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.

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

Structures

Neltume Corporate

Canadian Utilities Limited

& Logistics

Ports

& Other

53
57

(2)

(3)

—

(5)

—

13
15

—

Utilities
336
305

(20)

(26)

(7)

—

(4)

—

(64)
(34)

—

(7)
(10)

—

238

231

—

2
(1)

(1)

Energy
Infrastructure
15

(1)

—

(34)

(2)

(1)

(2)

—

(2)
(1)

(14)

Corporate

& Other Consolidated
310
280

(41)
(40)

(1)

(2)

—

(9)

(2)

—

(51)

(22)

(29)

(7)

—

(34)
(15)

(10)

(4)

(64)
(32)

—

(7)
(10)

(2)
(1)

173

189

2021

2020

Adjusted earnings

(loss)

Transition of managed

IT services

AUC enforcement
proceeding

Impairment and other

costs

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

Rate-regulated

activities

Project cost recovery

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

ATCO

Consolidated

382
352

(24)

(32)

(7)

—

(33)
(20)

(10)

(4)

(64)
(32)

—

(7)
(10)

—

(2)

246

252

223

245
469
497

Transition of managed IT services

In 2020, and in the first quarter of 2021, the Company signed Master Services Agreements (MSA) with IBM Canada
Ltd. (subsequently novated to Kyndryl Canada Ltd.) and IBM Australia Limited (IBM), respectively, to provide
managed information technology (IT) services. These services were previously provided by Wipro Ltd. (Wipro) under

105 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

a ten-year MSA expiring in December 2024. The transition of the managed IT services from Wipro to IBM
commenced on February 1, 2021 and was complete at December 31, 2021.

In 2020, and during the first quarter of 2021, the Company recognized onerous contract provisions of $75 million
($32 million after-tax and non-controlling interests (NCI)) and $6 million ($2 million after-tax and NCI), respectively,
which represents management’s best estimate of the costs to exit the Wipro MSAs. The provisions are included in
provisions and other current liabilities in the consolidated balance sheets. The provision of $6 million was recorded
in the first quarter of 2021 and is included in other expenses in the consolidated statements of earnings for the year
ended December 31, 2021. The onerous contract provision is not in the normal course of business and has been
excluded from adjusted earnings.

In addition, the Company recognized transition costs of $52 million ($22 million after-tax and NCI) in 2021. The
transition costs related to activities to transfer the managed IT services from Wipro to IBM. As these costs are not in
the normal course of business, they have been excluded from adjusted earnings.

Alberta Utilities Commission (AUC) enforcement proceeding

On November 29, 2021, the AUC enforcement branch filed an application with the AUC recommending an
enforcement proceeding be initiated. This proceeding is to determine whether ATCO Electric Transmission failed to
comply with AUC decisions and enactments under the AUC's jurisdiction with respect to the sole source contract for
the Jasper interconnection project and the actions leading up to and including the filing of the 2018-2020 Deferral
Account Application. This proceeding will also determine any future remedies that may be required.

AUC Enforcement and Electricity Transmission are pursuing settlement discussions prior to the AUC determining
the next process steps. In 2021, the Company recognized expenses of $16 million ($7 million after-tax and NCI)
related to the potential outcome of the proceeding. As this proceeding is not in the normal course of business,
these costs have been excluded from adjusted earnings.

Impairment and other costs recorded in 2021

In 2021, impairments and other costs not in the normal course of business of $33 million after tax and NCI were
recorded, mainly in Mexico, related to Energy Infrastructure’s Veracruz hydro facility in the amount of $28 million
after tax and NCI. Other costs recorded were individually immaterial.

The charge reflects an adverse arbitration decision, changes in market regulations, ongoing political uncertainty,
and a challenging operating environment, resulting in an impairment of the carrying value of the assets.

The recoverable amount of Energy Infrastructure’s Veracruz hydro facility was determined based on fair value less
costs of disposal. The expected future cash flows were estimated under an assumption of 43 years of operations,
representing the useful life of the Veracruz hydro facility, and were discounted at an after-tax rate of approximately
10 per cent. The fair value measurement is categorized as level 3 on the fair value hierarchy. The recoverable
amount of Energy Infrastructure’s Veracruz hydro facility was estimated to be $22 million.

As the charges relate to impairments, they have been excluded from adjusted earnings.

Impairment and other costs recorded in 2020

In 2020, impairment and other costs not in the normal course of business of $20 million, after tax and NCI, were
recorded. These costs mainly related 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 oil price volatility and the COVID-19 pandemic continuing to cause economic uncertainty, an
impairment of $9 million was recorded in 2020, reflecting the reduced likelihood of future recovery of these costs.
The fair value measurement was categorized as level 3 on the fair value hierarchy. The recoverable amount of the
oil and gas assets was estimated to be nil.

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.

The remaining costs mainly related 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.

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 106

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

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
Regulated Utilities.

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

Timing Adjustment

Items

RRA Treatment

IFRS Treatment

1. Additional revenues
billed in current
year

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
years

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.

3. Regulatory

decisions received

Regulatory decisions received
which relate to current and
prior years.

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

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

4. Settlement of
regulatory
decisions and other
items

Settlement of amounts
receivable or payable to
customers and other items.

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.

107 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

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)
Distribution rate relief (4)
Impact of warmer temperatures (2)
Impact of inflation on rate base (5)

Settlement of regulatory decisions and other items (6)

2021

2020

—

(56)
(63)
(1)
(17)
17
(64)

41
1

(55)

—

(3)
(16)
(32)

(1)

(2)

(3)

(4)

(5)

(6)

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 years.

ATCO Gas Distribution's 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 year are refunded to or recovered from
customers in future years.

Income taxes are billed to customers when paid by the Company.

In 2021, in response to the ongoing COVID-19 Pandemic, ATCO Electric Distribution and ATCO Gas Distribution applied for interim rate relief for
customers to hold current distribution base rates in place. Following approval by the AUC, ATCO Electric Distribution and ATCO Gas Distribution
recorded a decrease in earnings $63 million. This will be recovered from customers in 2022 and 2023.

The inflation-indexed portion of ATCO Gas Australia's (part of Natural Gas Distribution) rate base is billed to customers through the recovery of
depreciation in subsequent years based on the actual or forecasted annual rate of inflation. Under rate-regulated accounting, revenue is recognized in
the current year 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.

In 2021, ATCO Gas Distribution collected $28 million related to depreciation and transmission rate riders which was partly offset by a decrease in
earnings of $15 million related to payments of transmission costs. 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.

Project cost recovery

During the fourth quarter of 2021, the Company recorded earnings of $9 million ($110 million in project costs
recovered net of abandonment costs, accretion, income taxes and NCI of $101 million) following the conclusion of
the Company's involvement in an international project. As these are not a result of day-to-day operations they have
been excluded from adjusted earnings.

IT Common Matters decision

Other

The Company adjusts the deferred tax asset which was recognized as a result of the 2015 Tula Pipeline Project
impairment. In 2021, the Company recorded a foreign exchange loss of $2 million after tax and NCI (2020 - a foreign
exchange loss of $1 million) due to a difference between the tax base currency, which is the Mexican peso, and the
U.S. dollar functional currency.

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 108

4. REVENUES

The Company disaggregates revenues based on the nature of revenue streams. The disaggregation of revenues by
each operating segment for the year ended December 31 is shown below:

2021

2020

Revenue Streams

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

Total rendering of services

Sale of Goods

Electricity generation and

delivery

Commodity sales

Modular structures - goods

Total sale of goods

Lease income

Finance lease

Operating lease

Total lease income

Other

Total

Structures
& Logistics

Utilities

Electricity (1) Natural Gas (1)

Total

Energy
Infrastructure

Corporate
& Other (2)

Consolidated

—

183
276

104

97
92
90

—

548
531
712
716

—

33
34
34
31

—

1,036
969
308
296

1,584
1,500
1,020
1,012

—

22
22
229
212

—

55
56
263
243

—

379
463

1,327
1,312

1,595
1,499

2,922
2,811

—

241
124
241
124

—

1
157
126
157
127

—

777
714

—

75
56

1,402
1,368

33
40

108
96

1,628
1,539

3,030
2,907

—

28
27
28
27

38
31
52
28

—

90
59

16
17

—

16
17

28
46

—

304
162

—

304
162

—

11
8

—

11
8

—

5
4

1,584
1,500
1,020
1,012
183
276

104

97
92
90
55
56
263
243
304
162
28
27
3,633
3,463

38
31
63
36
241
124
342
191

16
18
157
126
173
144

141
146

162
149

320
174

4,289
3,944

(1) For the year ended December 31, 2021, Electricity and Natural Gas segments include $156 million of unbilled revenue (2020 - $132 million). At
December 31, 2021, $156 million of the unbilled revenue is included in trade accounts receivable and contract assets (2020 - $132 million).

(2)

Includes revenues from the Corporate & Other in Canadian Utilities Limited and ATCO Ltd.

109 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

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, 2021, 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, 2022, 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, 2022; and

(iii) manufacturing of transportable workforce housing and space rental products under the terms of fixed

price contracts that in aggregate approximates $0.2 billion. The Company expects that approximately 75
per cent will be recognized as revenue during the year ending December 31, 2022.

5. OTHER COSTS AND EXPENSES

In addition to rent, utilities, and goods and services such as professional fees, contractor costs, technology related
expenses, advertising and other general and administrative expenses, in 2021, other costs and expenses included
costs related to the transition of managed information technology services of $58 million (2020 - $75 million) (see
Note 3).

6. INTEREST EXPENSE

Interest expense primarily arises from interest on long-term debentures. The components of interest expense are
summarized below.

Long-term debt

Retirement benefits interest expense

Accretion expense on asset retirement obligation

Amortization of deferred financing charges

Short-term debt

Interest expense on lease liabilities (Note 17)

Other

Less: interest capitalized (Notes 10, 11)

2021

409

443

(6)

437

2020

413

438

(13)

425

Borrowing costs capitalized to property, plant and equipment and intangibles during 2021 were calculated by
applying a weighted average interest rate of 4.31 per cent (2020 - 4.45 per cent) to expenditures on qualifying
assets.

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 110

7. INCOME TAXES

INCOME TAX EXPENSE

The income tax rate for 2021 is 23.0 per cent (2020 - 24.0 per cent).

The components of income tax expense for the year ended December 31 are summarized below.

2021

2020

Current income tax expense
Canada
Australia
United States
Other
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

Equity earnings

Unrecognized deferred income tax assets

Tax cost on equity preferred shares financing

International financing
Change in income taxes resulting from decrease in

provincial corporate tax rate

Other

617

142

(12)

(5)

148

2021

23.0

(1.9)

2.3

0.8

(0.8)

0.2

0.4

24.0

48
(18)
(2)
(2)
6
32

122
1
(7)
116
148

663

159

(8)

—

(7)

166

40
(10)
10
3
(4)
39

119
5
3
127
166

2020

24.0

(1.2)

1.8

0.8

—

0.8

(1.2)

25.0

INCOME TAX ASSETS AND LIABILITIES

Income tax assets and liabilities in the consolidated balance sheets at December 31 are summarized below.

Balance Sheet Presentation

2021

2020

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

1,624

1,636

132

1,443

1,480

111 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

DEFERRED INCOME TAXES

The changes in deferred income tax assets are as follows:

Movements
December 31, 2019
Credit (charge) to earnings
Charge to other comprehensive income
Business combinations
Foreign exchange adjustment
Other
December 31, 2020
(Charge) credit to earnings
Charge to other comprehensive income
Other
December 31, 2021

Property,
Plant and
Equipment
(9)
20

Intangibles Reserves
4
(2)
(4)
1
(1)

—

Tax Loss Carry
Forwards and
Tax Credits
69
(13)

Retirement
Benefit

Obligations Other
3
18
2
(6)

—

57
(10)

—

12
(1)
(1)

—

1
1
7
2

—

(4)
5

Total
83

—

(1)
1
1
1
85
(14)
(13)
(4)
54

—

(1)
1

—

(1)
7
(12)

—

(6)

The Company does not expect any deferred income tax assets to reverse within the next twelve months.

The changes in deferred income tax liabilities are as follows:

Property,
Plant and
Equipment
1,430
190

Intangibles Reserves
(14)
(12)

97
9

Tax Loss Carry
Forwards and
Tax Credits
(83)
(20)

Retirement
Benefit

Obligations Other
(127)
(10)

Total
16 1,319
(35) 122

Movements
December 31, 2019
Charge (credit) to earnings
Credit to other

comprehensive income

Change in income taxes resulting from

decrease in provincial corporate tax rate

Foreign exchange adjustment
Other
December 31, 2020
Charge (credit) to earnings
Charge to other

comprehensive income

Change in income taxes resulting from

decrease in provincial corporate tax rate

Acquisition (Note 24)
Foreign exchange adjustment
Other
December 31, 2021

—

106
(1)

—

(7)

—

(33)
(1)

—

5
1

—

(97)
8

—

(137)
2

—

(7)

—

(2)
1

5
3
1
(20) 1,443
(28) 103

—

(1)
24
(5)
(4)
(49) 1,624

1
(2)

105

(25)

(89)

(80)

—

11
(13)

—

(2)

—

1,624
123

—

(1)
24
(6)
(2)
1,762

The Company does not expect any of its deferred income tax liabilities to reverse within the next twelve months.

At December 31, 2021, the Company had $614 million of non-capital tax losses and credits which expire between
2025 and 2041 and $31 million of tax losses which do not expire. The Company recognized deferred income tax
assets of $136 million for these losses and credits.

The Company had $110 million of aggregate temporary differences for investments in subsidiaries, branches and
joint ventures for which deferred income tax liabilities were not recognized (2020 - $125 million). The Company had
$95 million of aggregate temporary differences for which no deferred tax assets were recognized (2020 - $87
million).

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 112

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

2021

2020

114,171,978 114,396,312

35,451

50,697

242,222

265,547

114,449,651 114,712,556

469

(223)

246

497

(245)

252

$2.16

$2.15

$2.21

$2.20

2021

2020

For the year ended December 31, 2021, inventories of $285 million were used in operations and expensed (2020 -
$256 million).

Inventories with a carrying value of $12 million were pledged as security for liabilities at December 31, 2021 (2020 -
$11 million).

113 ATCO LTD. 2021 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:

Utility
Transmission
& Distribution

Energy
Infrastructure

Land and
Buildings

Construction
Work-in-
Progress

Rental
Assets

Other

Total

Cost

December 31, 2019

20,082

389

Additions

Transfers

Retirements and disposals

Acquisition of ATCO Sabinco

(Note 27)

Changes to asset retirement

costs

Foreign exchange rate

adjustment

December 31, 2020

Additions

Transfers

Retirements and disposals

Acquisition (Note 24)

Foreign exchange rate

adjustment

Changes to asset retirement

costs

December 31, 2021

Accumulated depreciation and

855

(75)

—

21,004

895

(110)

—

(83)

—

21,771

(1)

—

(2)

(6)

393

—

104

(4)

(1)

500

996

(18)

—

998

(3)

(7)

751

823

(922)

—

(2)

651

1,025

(1,052)

(175)

589

(65)

—

657

(66)

859

(30)

—

890

(5)

(44)

—

23,666

974

—

(188)

(1)

24,593

1,219

—

(398)

106

(4)

(18)

(4)

(120)

—

1,062

—

445

—

718

—

903

(1)

25,399

impairment

December 31, 2019

Depreciation and
impairment

Retirements and disposals

Foreign exchange rate

adjustment

December 31, 2020

Depreciation and
impairment

Retirements and disposals

Foreign exchange rate

adjustment

December 31, 2021

Net book value

December 31, 2020

December 31, 2021

4,720

145

211

254

401

5,809

455

(75)

5,119

486

(110)

(17)

5,478

15,885

16,293

—

(1)

153

—

(1)

184

240

316

(18)

216

(3)

(2)

238

782

824

—

(1)

(148)

—

(2)

574

447

(45)

255

(34)

(6)

256

402

462

(30)

446

(44)

(3)

454

444

449

602

(168)

6,266

710

(339)

(29)

6,608

18,327

18,791

In 2021, the Company reorganized the groups of property, plant and equipment to align presentation with the
reportable segments. This resulted in reclassification of comparative figures to conform to the current presentation.

The additions to property, plant and equipment included $2 million of interest capitalized during construction for
the year ended December 31, 2021 (2020 - $10 million).

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 114

PIONEER NATURAL GAS PIPELINE ACQUISITION

In 2020, ATCO Gas and Pipelines Ltd., a wholly owned subsidiary of CU Inc., entered into an agreement to acquire
the Pioneer Pipeline from Tidewater Midstream & Infrastructure Ltd. and its partner TransAlta Corporation, subject
to customary conditions including regulatory approvals by the Alberta Utilities Commission (AUC) and Canada
Energy Regulator.
The 131 km natural gas pipeline runs from the Drayton Valley area to the Wabamum area west of Edmonton. On
June 15, 2021, the AUC issued a decision approving the acquisition of the Pioneer Pipeline and associated costs,
totaling $265 million.

Consistent with the geographic areas defined in the Integration Agreement, ATCO Gas and Pipelines Ltd. will
transfer to Nova Gas Transmission Ltd. (NGTL) the 30 km segment of pipeline that is located in the NGTL footprint
for approximately $65 million.

The transaction to acquire the Pioneer Pipeline closed in 2021. The transfer to NGTL received approval from the
Canada Energy Regulator on December 22, 2021, and is expected to close in the first quarter of 2022. As a result,
$197 million was recorded in additions to property, plant and equipment in the consolidated balance sheets and the
consolidated statements of cash flows. The costs incurred for the segment of the pipeline that will be sold to NGTL,
amounting to $64 million, were recorded as assets held-for-sale in prepaid expenses and other current assets in the
consolidated balance sheets, and were included in other investing activities in the consolidated statements of cash
flows. Pipeline integration costs of $1 million are expected to be incurred in the first half of 2022, which would result
in total costs of $262 million, $3 million less than the approved amount of $265 million.

ATCO Gas and Pipelines Ltd. applied the optional IFRS 3 Business combinations concentration test to the acquisition
of the Pioneer Pipeline, which has resulted in the acquired asset being accounted for as an asset acquisition.

IMPAIRMENTS

Impairment recorded in 2021 - Energy Infrastructure Segment

In 2021, impairment of $21 million was recorded in respect of Energy Infrastructure’s Veracruz hydro facility. The
charge reflects an adverse arbitration decision, changes in market regulations, ongoing political uncertainty, and a
challenging operating environment, resulting in an impairment of the carrying value of the assets. The recoverable
amount of Energy Infrastructure’s Veracruz hydro facility was determined based on fair value less costs of disposal.
The expected future cash flows were estimated under an assumption of 43 years of operations, representing the
useful life of the Veracruz hydro facility, and were discounted at an after-tax rate of approximately 10 per cent. The
fair value measurement is categorized as level 3 on the fair value hierarchy. The recoverable amount of Energy
Infrastructure’s Veracruz hydro facility was estimated to be $22 million.

Impairment recorded in 2020 - 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 oil price volatility and the COVID-19 pandemic continuing to cause economic
uncertainty (see Note 21), 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 $18 million in 2020. The impairment was included in depreciation, amortization
and impairment expense. After recognizing the impairment, the recoverable amount of these assets was nil.

115 ATCO LTD. 2021 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, 2019

Additions

Transfers

Retirements

Foreign exchange rate adjustment

December 31, 2020

Additions

Transfers

Acquisition (Note 24)

Retirements

Foreign exchange rate adjustment

December 31, 2021

Accumulated amortization and

impairment

December 31, 2019

Amortization

Retirements

Foreign exchange rate adjustment

December 31, 2020

Amortization and impairment

Retirements

Foreign exchange rate adjustment

December 31, 2021

Net book value

December 31, 2020

December 31, 2021

560

(177)

443

—

(33)

(3)

459

360

(176)

238

(31)

(1)

255

205

204

383

—

407

—

(82)

—

141

(72)

—

437

156

—

347

372

—

156

—

(2)

—

(2)

—

(2)

—

(2)

—

1,087

—

(179)

999

146

—

(35)

(3)

1,112

425

(176)

314

(33)

(1)

360

685

752

The additions to intangibles include interest capitalized during construction of $4 million for the year ended
December 31, 2021 (2020 - $3 million).

IMPAIRMENT

Energy Infrastructure Segment

In 2021, impairment of $24 million was recorded in respect of Energy Infrastructure’s Veracruz hydro facility. The
charge reflects an adverse arbitration decision, changes in market regulations, ongoing political uncertainty, and a
challenging operating environment, resulting in an impairment of the carrying value of the assets. The recoverable
amount of Energy Infrastructure’s Veracruz hydro facility was determined based on fair value less costs of disposal.
The expected future cash flows were estimated under an assumption of 43 years of operations, representing the
useful life of the Veracruz hydro facility, and were discounted at an after-tax rate of approximately 10 per cent. The
fair value measurement is categorized as level 3 on the fair value hierarchy. The recoverable amount of Energy
Infrastructure’s Veracruz hydro facility was estimated to be $22 million.

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 116

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

2021
38
33
2
73

2020
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.

The Company used an average enterprise value-to-earnings before interest, taxes, depreciation, and amortization of
12.9 and 12.7 (2020 - 11.5 and 9.8) and price-to-earnings value of 26.2 and 24.9 (2020 - 17.0 and 13.3) for the
Electricity and Natural gas 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. SHORT-TERM DEBT

At December 31, 2021, the Company had $206 million of commercial paper outstanding at an effective interest rate
of 0.32 per cent, maturing in January 2022, issued under a long-term committed credit line (Note 21) (2020 - nil). The
outstanding balance was fully repaid in January 2022.

The commercial paper is supported by the Company's long-term committed credit facilities.

117 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

14. 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 2023 - unsecured (2)

4.410% (2020 - 4.487%)

2.45% (2020 - 2.45%)

Effective
Interest
Rate

2021

8,440

2020

8,140

Canadian Utilities Limited debentures - unsecured,

3.122%, due November 2022

3.187%

200

ATCO Power Australia credit facility, payable in Australian dollars,

at BBSY Rates, due June 2025, secured by a pledge of project assets and
contracts, $58 million AUD (2020 - $58 million AUD) (3)

Floating (4)

ATCO Gas Australia revolving credit facility, payable in Australian dollars, at

BBSY rates, due August 2024, $350 million AUD (2020 - $275 million AUD)(3) Floating (4)

ATCO Gas Australia revolving credit facility, payable in Australian dollars, at

BBSY rates, due August 2026, $330 million AUD (2020 - $405 million AUD)(3) Floating (4)

Electricidad del Golfo credit facility, payable in Mexican pesos, at Mexican
Interbank rates, due March 2023, $570 million MXP (2020 - $570 million
MXP)

ATCO Investments Ltd. mortgage, at BA rates, payable in Canadian dollars,

due March 2028

ATCO Ltd. extendible revolving credit facility, at BA rates, due November

2024 (3)

ATCO Ltd. fixed-to-floating rate subordinated notes, due November 2078

ATCO Structures & Logistics credit facility, at BA and Libor rates, due August

2023 (3)

ATCO Structures & Logistics credit facility, at BBSY rates, due July 2025, $31.5

million AUD (2020 - $20 million AUD) (3)

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)

ATCO Sabinco credit facility, payable in Chilean pesos, at Libor rates, due

September 2023, $13 billion CLP (2020 - nil) (7)

Floating (4)

Floating

5.50% (5)

Floating

3.221%

Floating

Less: deferred financing charges

Less: amounts due within one year

BBSY - Bank Bill Swap Benchmark Rate

BA - Bankers’ Acceptance

Libor - London Inter-Bank Offered Rate

322

304

129

200

—

(50)
9,852
(350)
9,502

268

394

138

200

106

—

(49)
9,619
(196)
9,423

(1)

Interest rate is the average effective interest rate weighted by principal amounts outstanding.

(2)

(3)

(4)

(5)

(6)

(7)

During 2021, the expiry date of the CU Inc. other long-term obligation was extended from June 2022 to June 2023.

During 2021, the above interest rates had additional margin fees at a weighted average rate of 0.92 per cent (2020 - 1.22 per cent). The margin fees are
subject to escalation.

Floating interest rates have been partially or completely hedged with interest rate swaps (see Note 20).

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.

ATCO Sabinco credit facilities were acquired as part of the increase in ownership interest in ATCO Sabinco S.A. (see Note 27).

During 2021, the above interest rate had an additional margin fee of 2.60 per cent.

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 118

DEBENTURE ISSUANCES AND REPAYMENTS

On September 3, 2021, CU Inc., a wholly owned subsidiary of Canadian Utilities Limited, issued $460 million of 3.174
per cent debentures maturing on September 5, 2051. CU Inc. also repaid repaid $160 million of 4.801 per cent
debentures on November 22, 2021.

On September 28, 2020, CU Inc. issued $150 million of 2.609 per cent debentures maturing on September 28, 2050.
CU Inc. also repaid $100 million of 11.77 per cent debentures on November 30, 2020.

OTHER LONG-TERM DEBT ISSUANCES AND REPAYMENTS

ATCO Power Australia re-financing

In 2020, ATCO Power Australia, a subsidiary of Canadian Utilities Limited, refinanced its 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, 2021, the book value of assets pledged to maintain the Company's long-term credit facilities was
$825 million (2020 - $860 million).

15. RETIREMENT BENEFITS

The Company maintains registered defined benefit or 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.

119 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

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

Actuarial (gains) losses

Past service cost
End of year (1)

Funded status

Pension
Benefit Plans

OPEB Plans

Pension
Benefit Plans

OPEB Plans

2021

2020

3,105

—

(138)

3,084

—

2,903

(139)

240

3,105

—

3,405

139

3,207

125

—

(138)

(9)

(201)

—

3,156

—

(4)

(15)

—

127

(139)

(7)

226

3,405

—

(4)

—

139

Net retirement benefit obligations

127

300

139

Included in net retirement benefit obligations are:

Registered funded defined benefit pension plan (asset)

liability (1)

Non-registered, non-funded defined benefit pension

plans benefit obligation (2)

OPEB Plans

(93)

165

—

127

120

180

—

300

—

139

(1) The registered funded defined benefit pension plan was in the asset position of $93 million at December 31, 2021 due to the impacts of returns on plan

assets, increase in the liability discount rate, experience adjustments, and the restriction of the net retirement benefit asset by the asset ceiling
adjustment.

(2)

In the Company's non-registered, non-funded defined benefit pension plans, accrued benefit obligations decreased to $165 million at December 31, 2021
due to an increase in the liability discount rate and experience adjustments (2020 - increased to $180 million due to a decrease in the liability discount
rate and experience adjustments).

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 120

BENEFIT PLAN COST

The components of benefit plan cost are as follows:

Current service cost

Interest cost

Interest income

Past service cost

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

2021

2020

(76)

—

(87)

—

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

Gains (losses) 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

2021

2020

201

230

—

240

(226)

—

(12)

(1) Gains net of income taxes were $189 million for the year ended December 31, 2021 (2020 - gains net of income taxes of $2 million).

121 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

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

2021

Quoted

Un-quoted

Total

2020

3
161
90

—

254

1,457

839
50
5
2,351

—

9
102
2,707

—

2
2

—

149
149

14
212
226

—

377

3
161
90
2
256

1,457

839
50
154
2,500

14
212
226

17
379
288

—

684

1,141

764
131
4
2,040

—

9
102
3,084

4
100

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

15
51
3,105

2
100

(1) The land and building are leased by the Company.

FUNDING

In 2021, an actuarial valuation for funding purposes as of December 31, 2020 was completed for the registered
defined benefit pension plans. The estimated contribution for 2022 is $11 million. The next actuarial valuation for
funding purposes must be completed as of December 31, 2023.

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

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 (1)
Other medical costs

Dental costs

Pension
Benefit Plans

OPEB Plans

Pension
Benefit Plans

OPEB Plans

2021

2020

2.58 %

2.25 %

3.16 %

2.00 %

n/a

2.58 %

n/a

3.16 %

n/a

5.05 %

4.00 %

3.10 %

2.50 %

2.58 %

2.00 %

n/a

3.10 %

n/a

2.58 %

n/a

5.11 %

4.00 %

(1)

The Company uses a graded drug cost trend rate, which assumes 5.05 per cent rate per annum, grading down to 4.00 per cent in and after 2040.

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 122

The weighted average duration of the defined benefit obligation is 13.4 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.

Life expectancy

Should pensioners live longer than assumed, benefit obligations and liabilities will be larger than expected.

SENSITIVITIES

The 2021 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 %

(403)

467

(95)

499

(6)

(385)

(9)

107

—

(1)

(11)

—

(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.

123 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

16. 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

2021
811
33
844
3
847

2020
712
15
727
2
729

A reconciliation of the changes in trade accounts receivable and contract assets during the year ended December 31
are as follows:

Beginning of year

Revenue from satisfied performance obligations

Customer billings and other items not included in revenue

Acquisitions (Notes 24, 27)

Credit loss allowance, net

Payments received

Foreign exchange rate adjustment and other

End of year

CUSTOMER CONTRIBUTIONS

2021

714

3,989

582

(5)

2020

711

3,644

411

(2)

(4,465)

(4,070)

(2)

814

714

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 during the year ended December 31 are summarized below.

Beginning of year

Receipt of customer contributions

Amortization

Transfers from other liabilities and foreign exchange rate adjustment

End of year

2021

1,756

169

(55)

—

1,870

2020

1,720

(56)

1,756

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 124

17. 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. A reconciliation of the changes in
the carrying amount of right-of-use assets for the year ended December 31 is as follows:

2021

2020

Cost

Beginning of year

Additions

Disposals

Foreign exchange rate adjustment

End of year

Accumulated depreciation

Beginning of year

Depreciation

Disposals

End of year

Net book value

Lease liabilities

129

(1)

(2)

134

(1)

The Company has recognized lease liabilities in relation to the arrangements to lease the right-of-use assets. A
reconciliation of movements in lease liabilities during the year ended December 31 is as follows:

Beginning of year

Additions

Interest expense

Lease payments

Foreign exchange rate adjustment

End of year

Less: amounts due within one year

End of year

Note

2021

100

(19)

(2)

(14)

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

114

(2)

129

(2)

2020

(18)

100

(16)

118

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

2021

2020

During the years ended December 31, 2021 and 2020, no expenses were incurred in relation to leases with variable
payments.

125 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

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, 2021 and 2020, the Company's operating leases include rentals of modular structures.

Finance leases

The total net investment in finance leases at December 31 is shown below. Finance lease income is recognized in
revenues.

2021

2020

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

277

(116)

161

149

161

102

147

277

161

315

(140)

175

166

175

109

179

315

117

175

During the year ended December 31, 2021, $2 million of contingent rent was recognized as income from these
finance leases (2020 - $1 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

2021

2020

—

152

During the years ended December 31, 2021 and 2020, no contingent rent was recognized as income from these
operating leases.

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 126

18. 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, 2019
Purchased and cancelled
Stock options exercised
Converted: Class II to Class I
December 31, 2020
Purchased and cancelled
Stock options exercised
December 31, 2021

Class I Non-Voting

Shares
300,000,000

Amount

Shares
50,000,000

Class II Voting

Amount

Shares
350,000,000

Total

Amount

101,463,781
(150,000)
27,300
6,818
101,347,899
(220,000)
59,750
101,187,649

185

13,202,947

—

186

—

2
188

—

(6,818)
13,196,129

—

13,196,129

—

114,666,728
(150,000)
27,300

—

114,544,028
(220,000)
59,750
114,383,778

187

—

188

—

2
190

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

114,383,778

190

114,544,028

Shares held in trust for the mid-term incentive plan

(243,638)

(10)

(244,209)

Shares outstanding, net of shares held in trust

114,140,140

180

114,299,819

188

(10)

178

2021

2020

Amount

DIVIDENDS

The Company declared and paid cash dividends of $1.7932 per Class I and Class II Share during 2021 (2020 -
$1.7408). 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 13, 2022, the Company declared a first quarter dividend of $0.4617 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, 2021, ATCO Ltd. began a normal course issuer bid (NCIB) to purchase up to 1,013,478 outstanding Class
I Shares. The bid expires on March 8, 2022. The prior year NCIB to purchase up to 1,014,684 outstanding Class I
Shares began on March 9, 2020 and expired on March 8, 2021.

During the year ended December 31, 2021, 220,000 Class I shares were purchased for $9 million, resulting in a
decrease to share capital of less than $1 million and a decrease to retained earnings of $9 million (2020 - 150,000

127 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

shares were purchased for $6 million, resulting in a decrease to share capital of less than $1 million and a decrease
to retained earnings of $6 million).

19. 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

Earnings from investment in associate company

Dividends received from associate company

Earnings from investment in joint ventures

Dividends and distributions received from investment in joint ventures

Income tax expense

Unrealized losses 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

2021

717

(13)

(62)

148

169

(55)

423

(51)

2020

669

(15)

(34)

166

(56)

407

(31)

(3)

1,391

1,307

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

Accounts payable and accrued liabilities

2021

2020

(110)

(4)

115

(9)

(12)

(2)

(4)

—

(4)

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 128

DEBT RECONCILIATION

The reconciliation of the changes in debt for the year ended December 31 is shown below.

Liabilities from financing activities

December 31, 2019

Net issue of debt

Acquisition (Note 27)

Foreign currency translation

Debt issue costs

Amortization of deferred financing charges

December 31, 2020

Net issue of debt

Foreign currency translation

Debt issue costs

Amortization of deferred financing charges

December 31, 2021

Short-term
debt

Long-term
debt

—

206

—

9,436

129

(3)

9,619

273

(39)

(5)

206

9,852

See Note 17 for the reconciliation of the changes in lease liability for the years ended December 31, 2021 and 2020.

CASH POSITION

Cash position at December 31 is comprised of:

Cash
Short-term investments
Restricted cash (1)
Cash and cash equivalents
Bank indebtedness

2021
1,072
1

18
1,091
(3)
1,088

2020
1,059
5

39
1,103
(3)
1,100

(1) Cash balances which are restricted under the terms of joint arrangement agreements are considered not available for general use by the Company.

129 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

20. 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,
accounts payable and accrued liabilities and
short-term debt

Finance lease receivables

Long-term debt

Measured at Fair Value

Interest rate swaps

Foreign currency contracts

Commodity contracts

Assumed to approximate carrying value due to their
short-term nature.

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

The fair values of the Company’s financial instruments measured at amortized cost at December 31 are as follows:

Recurring
Measurements

Financial Assets

Finance lease receivables

Financial Liabilities

Long-term debt

Carrying
Value

2021

Fair
Value

Carrying
Value

2020

Fair
Value

161

217

175

254

9,852

11,395

9,619

11,987

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 130

FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

The Company's derivative instruments are measured at fair value. At December 31, 2021 and 2020, 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; 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, 2021

Financial Assets
Prepaid expenses and other current assets (1)
Other assets (1)
Financial Liabilities
Provisions and other current liabilities (1)
Other liabilities (1)

December 31, 2020

Financial Assets
Prepaid expenses and other current assets (1)
Other assets (1)
Financial Liabilities

Provisions and other current liabilities
Other liabilities (1)

Subject to Hedge
Accounting

Not Subject
to Hedge
Accounting

Interest

Rate Swaps Commodities Commodities

Total Fair
Value of
Derivatives

—

(1)

At December 31, 2021, financial liabilities and financial assets include $26 million and $8 million, respectively, of Level 3 derivative financial instruments
(2020 - financial liabilities and financial assets include $9 million and $8 million, respectively, of Level 3 derivative financial instruments).

During the year ended December 31, 2021, gains before income taxes of $111 million were recognized in other
comprehensive income (OCI) (2020 - losses of $22 million), and $30 were reclassified to the statement of earnings
(2020 - $3 million).

Hedge ineffectiveness of $14 million was recognized in the consolidated statements of earnings during 2021 (2020 -
$3 million). Over the next 12 months, the Company estimates that net gains before income taxes of $33 million will
be reclassified from accumulated other comprehensive income (AOCI) to earnings.

131 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

Notional and maturity summary

The notional value and maturity dates of the Company's derivative instruments outstanding are as follows:

Notional value and maturity

Interest Rate
Swaps

Natural
Gas (1)

Power (2)

Foreign
Currency
Forward
Contracts

Natural
Gas (1)

Power (2)

Foreign
Currency
Forward
Contracts

Subject to Hedge Accounting

Not Subject to Hedge Accounting

December 31, 2021
Purchases (3)
Sales (3)
Currency

Canadian dollars
Australian dollars
Mexican pesos
U.S. dollars

Maturity

December 31, 2020
Purchases (3)
Sales (3)
Currency

Canadian dollars
Australian dollars
Mexican pesos

Maturity

—

732

570

—

23,062,900

3,240,005

2,313,227

526,314

—

11,015,969 1,232,616

—

2023-2028

2022-2026

2022 2022-2024 2022-2024

2022

—

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

2021-2024

—

100

2021

(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:

2021

Financial Assets
Derivative assets (1) (2)
Accounts receivable and contract assets

Financial Liabilities
Derivative liabilities (1) (3)

2020

Financial Assets
Derivative assets (1) (2)
Accounts receivable and contract assets

Financial Liabilities
Derivative liabilities (1) (3)

Effects of Offsetting on the Balance Sheet

Gross Amount

Gross Amount
Offset

Net Amount
Recognized

—

(39)

—

(39)

—

(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.

(2) At December 31, 2021, $54 million is included in prepaid expenses and other assets, and $41 million is included in other assets in the consolidated

balance sheets (2020 - $29 million and $16 million).

(3) At December 31, 2021, $32 million is included in provisions and other current liabilities, and $14 million is included in other liabilities in the consolidated

balance sheets (2020 - $13 million and $7 million).

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 132

21. RISK MANAGEMENT

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 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 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 (2020 - 97 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, 2021.

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

133 ATCO LTD. 2021 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, 2021.

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 $11 million, and would increase or decrease OCI by $21 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. 2021 CONSOLIDATED FINANCIAL STATEMENTS 134

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, 2021

December 31, 2020

High
(AA to AAA)

Medium
(BBB to A)

Low
(BB and
below)

0%-0.02% 0.05%-0.15% 0.48%-3.13%

0%-0.02% 0.05%-0.16% 0.51%-3.20%

At December 31, 2021, the Company had approximately $57 million of accounts receivable and contract assets
classified as Low (BB and below) (2020 - approximately $90 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 for the year ended December 31 is as follows:

Beginning of year
Credit loss allowance
Utilization of credit loss allowance
End of year

2021
8
6
(1)
13

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

2021
734
21
7
24
786

2020
6
12
(10)
8

2020
652
18
6
16
692

At December 31, 2021, the Company held $285 million in letters of credit for certain counterparty receivables (2020
- $237 million). The Company did not take possession of any collateral it holds as security in 2021 or 2020. The
Company has also entered into guarantee arrangements with the parent company of Direct Energy Partnership
(NRG Energy) relating to the retail energy supply functions performed by Direct Energy (see Note 30).

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.

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
3,128

—

584
3,712

Used
1,208

—

186
1,394

2021

Available
1,920

—

398
2,318

Total
2,914
150
571
3,635

Used
814
138
154
1,106

2020

Available
2,100
12
417
2,529

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.

135 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

Lines of credit utilized at December 31 are comprised of:

Short-term debt
Long-term debt
Letters of credit

Commercial paper

2021
206
941
247
1,394

2020

—

906
200
1,106

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, 2021 of the Company's financial
liabilities based on the contractual undiscounted cash flows.

Accounts payable and accrued liabilities
Short-term debt
Long-term debt:

Principal
Interest expense (1)

Derivatives (2)

2022
852
206

351
371
32
1,812

2023

2024

2025

2026

—

233
371
9
613

—

451
363
4
818

—

62
358
1
421

—

432
365

—

797

2027 and
thereafter

—

8,373
7,006

—

15,379

(1)

Interest payments on floating rate debt have been estimated using rates in effect at December 31, 2021. 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, 2021.

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, as reported in the consolidated financial statements for
the year ended December 31, 2020.

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

—

377

7,979
6,986

—

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.

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. This includes 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.

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 136

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, 2021.

CLIMATE CHANGE RISK

The Company manages climate risks related to assets, including preparing for, and responding to, extreme weather
events through activities such as proactive route and site 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 expenditures or acquiring assets, the Company considers
site specific climate and weather factors, such as flood plain mapping and extreme weather history.

The Company also continues to explore and implement opportunities in clean fuels, renewable energy, and energy
efficiency. This includes looking at ways to modernize the Company's energy infrastructure to accommodate new
and innovative sources of energy as well as ways to further use energy more efficiently. This process is associated
with risks and uncertainties, and is highly dependent on changes in legislation, market price volatility, local and
global demand on energy, as well as the timing of when the local and global markets transition to a more energy
efficient and cleaner fuels-based economy. The extent and significance of the future impact of such risks and
uncertainties remain unknown.

22. 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 and long-
term debt (including its respective current portion). 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.

137 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

The Company’s capitalization at December 31 is as follows:

Bank indebtedness

Short-term debt

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

2021

206

9,852

10,061

180

3,962

(39)

3,838

7,949

2020

—

9,619

9,622

178

3,880

(12)

3,797

7,849

18,010

17,471

56 %

55 %

For the year ended December 31, 2021, the Company complied with externally imposed requirements on its capital,
including covenants related to debentures and credit facilities.

23. 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.

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

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 138

operates. Judgments and assessments about conditions and events are made in 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
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 21.

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

139 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

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.

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 15.

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.

Use of judgments and estimates around the COVID-19 pandemic

For the year ended December 31, 2021, the Company performed an assessment of the impacts of uncertainties
around the COVID-19 pandemic on its consolidated financial position, financial performance and cash flows. The
assessment required use of judgments and estimates and resulted in no material impacts to the consolidated
financial statements.

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 140

24. BUSINESS COMBINATIONS

Acquisition of the natural gas storage business in Canada

On December 2, 2021, ATCO Energy Solutions Ltd., a subsidiary of Canadian Utilities Limited, acquired a 100 per
cent ownership interest in Alberta Hub, an underground natural gas storage business in Alberta, Canada. The
acquisition is reported in the Energy Infrastructure segment.

The aggregate consideration paid for Alberta Hub was $135 million, which is comprised of $84 million cash paid, net
of cash acquired of $51 million. There is no contingent consideration with this acquisition.

The fair values of the identifiable assets acquired and liabilities assumed were as follows:

Accounts receivable and contract assets
Property, plant & equipment
Intangible assets
Deferred income tax liabilities
Other liabilities
Total identifiable net assets acquired

1
106
5
(24)
(4)
84

The fair value of the acquired accounts receivable approximated the carrying value due to their short-term nature.
None of the accounts receivable acquired were impaired.

From the date of acquisition, revenues of $1 million and earnings attributable to earnings attributable to Class I and
Class II shares of less than $1 million were included in the consolidated statements of earnings for the year ended
December 31, 2021, as a result of the acquisition. Transaction costs of $1 million for incremental legal and advisory
services fees were expensed during the year ended December 31, 2021 and included in other costs and expenses in
the consolidated statements of earnings.

The Company's pro-forma consolidated revenues and earnings attributable to Class I and Class II shares for the year
ended December 31, 2021, would have been $4,314 million and $252 million, respectively, if the acquisition had
occurred on January 1, 2021. These pro-forma adjustments reflect the Company’s historic natural gas storage
margin and adjustments for depreciation and amortization assuming the fair values attributed in the purchase price
allocation occurred on January 1, 2021. These pro-forma results may not necessarily be indicative of actual results
had the acquisition occurred on January 1, 2021.

141 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

25. INVESTMENT IN EQUITY INTEREST IN ASSOCIATE COMPANY

The summarized financial information for the Company's 40 per cent interest in Neltume Ports S.A., over which the
Company has significant influence, is provided below. This includes the balance sheets and selected information
from the statements of earnings and comprehensive income.

December 31
2021

December 31
2020

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.

265
70
335

1,172
1,507

(48)
(65)
(113)

(169)
(112)
(281)

(394)

1,113

445

Selected information from the statement of earnings and comprehensive income for the year ended
December 31 is as follows:

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

2021

346

(60)
1
(11)
(7)

33
(17)

(7)

307
63
370

1,180
1,550

(53)
(45)
(98)

(197)
(104)
(301)

(399)

1,151

460

2020

326

(65)
2
(13)
(4)

40
(5)

(2)

A reconciliation of the carrying amount of the investment in associate company for the year ended December 31 is
as follows:

Beginning of year
ATCO's share of net earnings
ATCO's share of other comprehensive loss
Dividends received
Foreign exchange
Other
End of year

2021
460
13
(7)
(15)
(6)

—

445

2020
468
15
(2)
(17)
(3)
(1)
460

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 142

26. SUBSIDIARIES

Principal operating subsidiaries are listed below. Subsidiaries are wholly owned, unless otherwise indicated.

Principal Operating Subsidiaries

Principal Place
of Business

Principal Activity

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)
CU Inc.

ATCO Electric

ATCO Gas (2)
ATCO Pipelines (2)

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 and a solution provider for

home and business

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

(1) At December 31, 2021, ATCO Ltd. has an ownership interest of 53.0 per cent (2020 - 52.3 per cent).

(2) ATCO Gas and ATCO Pipelines are divisions of ATCO Gas and Pipelines Ltd.

27. JOINT ARRANGEMENTS

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

Operating
Jurisdiction

Ownership % Principal Activity

LUMA Energy LLC

Utilities, Electricity

Puerto Rico

Osborne Cogeneration Plant

Energy Infrastructure Australia

Strathcona Storage Limited

Partnership

Energy Infrastructure Canada

Joint venture during the period ended December 31, 2020
Sabinco Soluciones Modulares S.A. (1)

Structures & Logistics Chile

(1) A joint venture during the period ended December 31, 2020.

Operations and

management services

Electricity generation

Hydrocarbon storage

Modular structures

ATCO Sabinco

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.

143 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

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.

Joint Ventures financial information

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

2021

228

Contributions in the Company's joint ventures during the year ended December 31 were as follows:

LUMA Energy LLC

Strathcona Storage Limited Partnership

Commitments

2021

2020

186

2020

—

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, 2021 (2020 - $25 million).

Dividends and Distributions

The Company requires approval from its joint venture partners before any dividends or distributions can be paid.

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 144

28. 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 (Class B Common shares of Canadian Utilities Limited)

Proportion of non-voting rights held (Class A Non-voting shares of Canadian Utilities

Limited)

2021

3,834

3,838

2021

47.0

8.4

61.2

2020

3,794

3,797

2020

47.7

9.7

61.7

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 in cash position

Dividends paid to NCI

Class A and Class B share owners

Equity preferred shares

145 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

2021

2020

3,515

400

589

223

311

3,233

434

451

245

252

1,731

19,344

(1,418)

1,559

18,737

(856)

(12,835)

(12,632)

6,822

3,834

1,718

(1,262)

(478)

(22)

225

297

6,808

3,794

1,631

(905)

(924)

(198)

227

301

EQUITY PREFERRED SHARES

Equity preferred shares held by non-controlling interests at December 31 are shown below.

CU Inc. Equity Preferred Shares

Cumulative Redeemable Preferred Shares, at 2.292% to 4.60% (1)

Canadian Utilities Limited Equity Preferred Shares

2021

2020

190

Cumulative Redeemable Second Preferred Shares, at 3.403% to 5.25%

1,601

1,400

Perpetual Cumulative Second Preferred Shares, at 4.60%

Issuance costs

—

(30)

110

(30)

1,761

1,670

(1)

Effective June 1, 2021, the annual dividend rate for the Series 4 Preferred Shares was reset at 2.292 per cent for the five-year period from June 1, 2021 to
May 31, 2026. Prior to the reset on June 1, 2021, the annual dividend rate was 2.24 per cent.

On August 27, 2021, Canadian Utilities Limited redeemed all of the issued 4.60 per cent Perpetual Cumulative

Second Preferred Shares for $110 million plus accrued dividends.

In December 2021, the Company issued 8,050,000 Series HH Preferred Shares yielding 4.75 per cent per annum for
gross proceeds of $201 million.

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
0.14325

Cumulative Redeemable Second Preferred Shares

Does not reset Currently redeemable Not convertible
Series 5 (5)

June 1, 2026 (4)

1.36 %

Series Y
Series AA
Series BB
Series CC
Series DD
Series EE
Series FF
Series HH

25.00
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
0.296875

2.40 %
Does not reset
Does not reset
Does not reset
Does not reset
Does not reset
3.69 %
Does not reset

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)
March 1, 2027 (6) 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.

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 146

29. 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
Stock options (1) (2)

Eligibility

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 from 2020 onwards vest over 4 years with a term of 8 years. Stock Options that were granted prior to 2020 vest over 5 years with
a term of 10 years.

Based on achieving certain performance criteria.

Issued from Treasury.

Purchased on the secondary market.

STOCK OPTION PLAN

Information about the options outstanding and exercisable at December 31 is summarized below.

Options authorized for grant

Options available for issuance

2021

Weighted
Average
Exercise Price

Options

10,200,000

107,150

Outstanding options, beginning of year

1,115,200

$42.33

Granted

Exercised

Forfeited

Outstanding options, end of year

Options exercisable, end of year

515,000

(59,750)

(139,400)

1,431,050

572,300

45.30

34.12

42.76

$43.70

$44.53

2020

Weighted
Average
Exercise Price

$44.40

38.40

29.96

42.08

$42.33

$44.44

Options

10,200,000

482,750

693,000

450,000

(27,300)

(500)

1,115,200

461,950

Options

Range of
Exercise Prices

$35.12 - $38.93

$40.38 - $44.97

$45.38 - $49.51

$50.33 - $51.97

$35.12 - $51.97

Outstanding

Exercisable

Weighted
Average
Remaining
Contractual Life

Weighted
Average
Exercise Price

Number
Exercisable

Weighted
Average
Exercise Price

6.4

4.3

6.8

2.4

6.2

$38.43

43.20

46.55

51.89

$43.70

181,550

134,250

184,900

71,600

572,300

$38.49

43.64

48.27

51.90

$44.53

Number
Outstanding

474,050

182,550

702,750

71,700

1,431,050

Compensation expense related to stock options was $2 million in 2021 (less than $1 million in 2020), with a
corresponding increase to contributed surplus.

147 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

SHARE APPRECIATION RIGHTS

Information about the share appreciation rights (SARs) outstanding and exercisable at December 31 is summarized
below.

Outstanding SARs, beginning of year

Granted

Exercised

Forfeited

Outstanding SARs, end of year

SARs exercisable, end of year

SARs

Range of
Exercise Prices

$35.12 - $38.93

$40.38 - $44.97

$45.38 - $49.51

$50.33 - $51.97

$35.12 - $51.97

SARs

736,200

8,000

(72,100)

(32,400)

639,700

472,450

2021

Weighted
Average
Exercise Price

2020

Weighted
Average
Exercise Price

SARs

$44.99

775,000

$44.56

45.38

35.28

46.65

$46.01

$45.81

7,000

(27,300)

(18,500)

736,200

461,950

38.40

29.96

46.79

$44.99

$44.44

Outstanding

Exercisable

Number
Outstanding

Weighted
Average
Remaining
Contractual Life

Weighted
Average
Exercise Price

Number
Exercisable

Weighted
Average
Exercise Price

87,700

187,550

290,750

73,700

639,700

4.1

4.3

5.8

2.5

4.8

$38.58

43.19

48.58

51.86

$46.01

83,700

132,250

184,900

71,600

472,450

$38.59

43.66

48.27

51.90

$45.81

In 2021, compensation expense related to SARs was an expense of $2 million (2020 - credit of $1 million). The total
carrying value of liabilities arising from SARs at December 31, 2021 was $3 million (2020 - $2 million). The total
intrinsic value of all vested SARs at December 31, 2021 was less than $1 million (2020 - less than $1 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

$45.30

1.11 %

26.19 %

4.89 %

2021

SARs

$45.38

0.67 %

24.87 %

3.93 %

Options

$38.40

0.52 %

21.76 %

4.62 %

2020

SARs

$38.40

0.37 %

24.67 %

4.62 %

Expected holding period prior to exercise

7.1 years

4.0 years

7.1 years

4.0 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.

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 148

MID-TERM INCENTIVE PLAN

Information about the MTIPs outstanding at December 31 is summarized below.

2021

Weighted
Average
Grant Date
Fair Value

MTIPs

Outstanding MTIPs, beginning of year

244,209

$42.16

321,948

Vested
Forfeited (1)
Change in unallocated shares (2)
Outstanding MTIPs, end of year

(8,400)

(1,400)

9,229

243,638

41.34

42.36

—

$44.38

(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.

2020

Weighted
Average
Grant Date
Fair Value

$45.00

49.21

43.49

—

$42.16

MTIPs

Range of Prices
$44.38
Unallocated shares

Weighted
Average
Remaining
Contractual Life
0.6

Outstanding

Weighted
Average
Grant Date
Fair Value
$44.38

—

0.6

—

$44.38

Number
Outstanding
3,150
240,488
243,638

Compensation expense related to MTIP grants was less than $1 million for 2021 with a corresponding increase to
contributed surplus (2020 - credit of $3 million with a corresponding decrease to contributed surplus).

The Company, through a trustee, did not purchase any shares during 2021 to be distributed to employees on
vesting of the awards (2020 - nil).

30. CONTINGENCIES

AUC enforcement proceeding

On November 29, 2021, the AUC enforcement branch filed an application with the AUC recommending an
enforcement proceeding be initiated. This proceeding is to determine whether ATCO Electric Transmission failed to
comply with AUC decisions and enactments under the AUC's jurisdiction with respect to the sole source contract for
the Jasper interconnection project and the actions leading up to and including the filing of the 2018-2020 Deferral
Account Application. This proceeding will also determine any future remedies that may be required.

AUC Enforcement and Electricity Transmission are pursuing settlement discussions prior to the AUC determining
the next process steps. In 2021, the Company recognized expenses of $16 million ($7 million after-tax and NCI)
related to the proceeding, however, the ultimate outcome of the enforcement proceeding is uncertain and could
differ materially from the amount recognized.

Measurement inaccuracies

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.

Direct Energy Partnership retail obligation

In 2004, ATCO Gas and ATCO Electric Distribution transferred their retail energy supply businesses to Direct Energy
Partnership (Direct Energy). The legal obligations of ATCO Gas and ATCO Electric Distribution 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 Distribution, with no refund of the transfer proceeds to Direct Energy.

149 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

NRG Energy Inc. (NRG), Direct Energy’s parent company, provided a $300 million guarantee, supported by a $300
million letter of credit for Direct Energy’s obligations to ATCO Gas and ATCO Electric Distribution 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.

Other

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.

31. 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

32. RELATED PARTY TRANSACTIONS

2022

2023

2024

2025

2026

2027 and
thereafter

350

359

715

326

286

—

326

286

—

In transactions with the Company’s joint ventures, the Company recognized revenues of $38 million relating to
management fees and other charges (2020 - $21 million).

In transactions with the Company’s group pension plans, the Company paid occupancy costs of $5 million relating to
property owned by the pension plans (2020 - $7 million).

The Company received less than $1 million (2020 - less than $1 million) in retail electricity and natural gas services
revenue and incurred $1 million in advertising, promotion and other expenses from entities related through
common control (2020 - $1 million).

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)

2021

2020

(3)

(1)

In 2020, related to certain forfeitures of mid-term incentive plan grants.

Key management personnel comprise members of executive management and the Board, a total of 23 individuals
(2020 - 18 individuals).

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 150

33. 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.

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.

151 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

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.

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

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 152

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.

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
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.

153 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

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
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.

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 154

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

Energy infrastructure plant and equipment:

Gas-fired generation
Hydroelectric generation
Solar power generation
Other energy infrastructure

Buildings
Other:

Rental assets
Other plant, equipment and machinery

Useful Life

Average
Useful Life

Average
Depreciation Rate

10 to 67 years
10 to 103 years
3 to 57 years
3 to 120 years

15 years
43 to 50 years
10 to 30 years
3 to 100 years
10 to 73 years

2 to 17 years
2 to 50 years

51 years
43 years
42 years
40 years

14 years
50 years
22 years
36 years
30 years

16 years
18 years

2.0 %
2.3 %
2.4 %
2.5 %

7.4 %
1.8 %
4.6 %
2.8 %
3.3 %

6.1 %
5.7 %

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.

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.

155 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 156

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 principal 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.

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 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

157 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

(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.

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

ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS 158

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.

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

159 ATCO LTD. 2021 CONSOLIDATED FINANCIAL STATEMENTS

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 on 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.

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

2021

1.2656

0.9200

2020

1.2838

0.9726

2021

1.2793

0.9164

2020

1.3415

0.9247

ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

At December 31, 2021, 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. 2021 CONSOLIDATED FINANCIAL STATEMENTS 160

CONSOLIDATED ANNUAL RESULTS (1)

YEAR ENDED DECEMBER 31, 2021

(Millions of Canadian dollars, except as indicated)

2021

2020

2019

2018

2017

EARNINGS STATEMENT
Revenues
Earnings attributable to Class I and Class II shares
Adjusted earnings (2)

Structures & Logistics
Neltume Ports
Corporate & Other
Canadian Utilities Limited

- Utilities
- 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
Cash flows from operating activities
Capital expenditures

Structures & Logistics
Corporate & Other and Eliminations
Canadian Utilities Limited
- Utilities (Electricity)
- Utilities (Natural Gas)
- Energy Infrastructure
- Corporate & Other

Capital expenditures

PER SHARE DATA
Earnings per share ($)
Adjusted earnings per share ($) (2)
Dividends paid per share ($)
Equity per share ($)
Class I non-voting closing share price ($)
Class II Voting closing share price ($)

4,289
246

3,944
252

4,706
513

4,888
328

4,600
219

53
13
6

336

(41)

382

57
15

—

305

(40)

352

37
15
(6)

301

(39)

365

15
4
17

275

(39)

355

1,088
23,004

1,100
22,200

1,140
21,703

691
23,344

3
206
9,852

—

9,619

9,436

—

3,838
4,111
18,010

3,797
4,052
17,471

3,858
4,000
17,294

—

175
9,397
1,401
3,687
3,755
18,415

—

313

(35)

335

494
21,786

7
10
8,557
1,416
3,576
3,527
17,093

1,864

1,843

1,542

999

1,331

114
11

350
747
120
10
1,352

2.16
3.35
1.79
35.94
42.70
43.00

125
13

366
510
19
8
1,041

2.21
3.08
1.74
35.37
36.49
37.81

105
(16)

389
646
88
6
1,218

4.49
3.19
1.62
34.88
49.77
49.55

88
10

467
622
51
16
1,254

2.87
3.10
1.51
32.75
38.61
38.55

33
81

438
761
32
3
1,348

1.92
2.93
1.31
30.76
45.00
44.90

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).

(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,
impairments and items that are not in the normal course of business or a result of day-to-day operations. The
most directly comparable measure to “adjusted earnings” that is reported in accordance with IFRS is
“earnings attributable to Class I and Class II shares”. For additional information regarding these total of
segment measures, see “Other Financial and Non-GAAP Measures” and “Reconciliation of Adjusted Earnings
to Earnings Attributable to Class I and Class II Shares” in Management’s Discussion and Analysis for the year-
ended December 31, 2021, which is available at www.atco.com, and incorporated by reference herein.

(3) Cash is defined as cash and cash equivalents less current bank indebtedness.

161 ATCO LTD. 2021 CONSOLIDATED ANNUAL RESULTS

CONSOLIDATED OPERATING SUMMARY

YEAR ENDED DECEMBER 31, 2021

(Millions of Canadian dollars, except as indicated)

2021

2020

2019

2018

2017

Structures & Logistics
Capital expenditures
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 (1)

114
2
67
20
82

125
3
52
19
73

105
3
48
16
72

Port products handling (millions of tonnes)

Utilities

88
3
40
15
75

33
4
37
13
70

—

Electricity distribution and transmission

operations

Capital expenditures
Power lines (thousands of kilometres)
Power lines owned (thousands of kilometres)
Electricity distributed (millions of kilowatt hours)
Average annual use per residential customer (kWh)
Average customers during the year (thousands)
Natural gas distribution operations
Capital expenditures
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

Average customers during the year (thousands)
Natural gas transmission operations
Capital expenditures
Pipelines (thousands of kilometres)

Energy Infrastructure

Electricity generation operations (2)
Capital expenditures
Non-regulated generating capacity (megawatts)
Non-regulated generating capacity owned (megawatts)
Energy storage & industrial water operations
Capital expenditures
Seasonal natural gas storage capacity (petajoules)
Salt cavern storage capacity (thousands of m3)
Industrial water infrastructure intake capacity

(thousands of m3/day)

350
105
71
12,491
7,535
261

385
55
2,476
299

366
75
71
12,012
7,528
261

307
55
2,535
300

389
75
71
12,664
7,227
260

353
55
2,304
311

467
75
71
12,928
7,398
258

383
55
2,292
304

438
75
71
11,961
7,325
256

464
55
2,381
287

111

113

112

111

116

14
2,036

13
2,014

13
1,989

14
1,964

14
1,936

362
9

28
348
248

92
101
400

203
9

2
347
247

17
52
400

293
9

59
344
244

29
52
400

239
9

297
9

30
3,922
2,517

16
3,887
2,482

21
52
400

16
52
200

(1) On September 12, 2018, ATCO invested in a 40 per cent interest in Neltume Ports. Neltume Ports is a port
operator and developer with a diversified portfolio of 17 multi-purpose bulk cargo and container port
facilities and 6 port operation services. The business is located primarily in Chile, with additional operations in
Uruguay, Argentina, Brazil and the US.

(2)

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.

ATCO LTD. 2021 CONSOLIDATED OPERATING SUMMARY 162

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
TSX Trust Company
Calgary/Montreal/Toronto/Vancouver

Telephone:
8:00 a.m. to 6:30 p.m. ET
Monday–Friday

Toll-Free in North America:
1 800 360 4519

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:
shareholderinquiries@tmx.com

www.tsxtrust.com

Mailing Address:
TSX Trust Company
P.O. Box 700
Station B
Montreal, QC
Canada H3B 3K3

Printed in Canada

ATCO ANNUAL REPORT 2021 163

5302 FORAND ST SW, CALGARY, ALBERTA T3E 8B4 CANADA
403 292 7500 | ATCO.COM

Printed in Canada