ATCO Ltd. Annual Report 2022

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FY2022 Annual Report · ATCO Ltd.

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ATCO LTD.

ANNUAL REPORT

FOR THE YEAR ENDED DECEMBER 31, 2022

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Message from the Chair & CEO

Management Discussion & Analysis

Financial Statements

Consolidated Annual Results

Consolidated Operating Summary

General Information

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With these tenets clear in our minds, the talents
and passion of our ATCO people at the ready,
and our values at our back, we will continue to
do great things in shaping the future for
generations to come.

While mounting macroeconomic and
geopolitical uncertainty reminds us that stability
is the exception, we are resolute in our vision
and our focus to deliver the enduring essentials
required for global economic growth. In 2022,
each of our businesses continued to cement
their position at the forefront of their respective
industries. I’m pleased to share with you a few
of our notable achievements and some
perspective on the future.

ATCO Structures continued to grow its base
business by increasing fleet size and average
rental rates and by positioning new fleets across
our markets and geographies. On the global
workforce housing side of operations,
Structures continued to progress their project
work, particularly with Bechtel in Australia
related to the Pluto II LNG expansion. You will
see additional updates about Structures’
achievements in this report, but I do want to
note the successful acquisition of Triple M
Housing, a leading North American
manufacturer of modular housing. This
acquisition is key to solving urban housing
shortages and affordability concerns.

ATCO Frontec has delivered exciting and
enhanced business results, many with
Indigenous partners. We deeply believe that this
kind of equity partnership business represents
the future of development. Of note, the
Government of Canada awarded Nasittuq, the
partnership between Frontec and the Pan Arctic
Inuit Logistics Corporation, a seven-year
contract to operate and maintain the North
Warning System, a chain of radar sites and
support facilities that form part of Canada's
North American Aerospace Defense Command
(NORAD) agreement with the United States.
Nasittuq was also awarded a support services
contract at the Canadian Forces Station Alert on
Ellesmere Island. With the Canadian federal
government announcing its commitment to

SHAPING OUR FUTURE

Dear ATCO Share Owners,

Two hours south of your company’s
headquarters in Calgary lies the town of
Longview, Alberta. This quaint and picturesque
ranching community is just one of many
communities in Alberta and Western Australia
served by ATCO Gas.

As you drive the aptly named Cowboy Trail
Highway overlooking the Longview area, wide
open views stretch from the high prairies to the
majestic Rockies. This spot provides perspective
on business and what’s important to ATCO. I am
reminded how important the “long view” is—
both when conducting our current business and
considering our future opportunities to build
shared prosperity. This special place also
provides opportunity to reflect on what lies at
the heart of ATCO and what we hold to be true
after 75 years in business. The essence of ATCO
is captured in the following strategic
imperatives:

• We create global opportunities to innovate,
advise and lead in the energy transition.

• We believe in building truly equitable

partnerships with Indigenous communities.

• We build accessible and innovative solutions

for housing and community spaces.

• We collaborate with community partners to
enhance economic and social development.

• We value a long-range outlook to build

future prosperity.

• We champion a diverse and inclusive

environment where inspired people can
make a meaningful difference.

ATCO LTD. 2022 ANNUAL REPORT

spend $4.9 billion over six years to modernize
NORAD's capabilities, ATCO and our partners
are well positioned to support defence of the
North.

Through our investment in Canadian Utilities,
we continue to energize homes, businesses, and
industries—delivering reliable and increasingly
sustainable solutions like no other company in
the world.

In the past year, we completed the acquisition
of a high-quality portfolio of renewable energy
assets that includes 232 MW of operational
wind facilities and a development pipeline of
more than 1,500 MW of wind and solar projects
in Alberta and Ontario. This acquisition
complements the previously announced Barlow,
Deerfoot and Empress solar projects that we
are actively pursuing in Alberta. Our growing
renewable energy footprint further positions us
as a leader in decarbonization and allows our
company to play a prominent role in enabling
the energy transition for our customers.

Building upon our significant expertise in the
production and utilization of clean fuels,
Canadian Utilities is actively developing several
hydrogen projects in Canada and Australia,
including production, blending and refuelling
facilities to drive down emissions and help
progress the energy transition. In Western
Australia we commissioned two significant
hydrogen projects—a facility to allow for
hydrogen blending to decarbonize our natural
gas network and a hydrogen refuelling station
for passenger transport. In Alberta, we made
significant progress on the Suncor-ATCO
Heartland Hydrogen Hub, a world-scale,
vertically integrated, first-of-its-kind, clean
hydrogen development in the Alberta Industrial
Heartland. We are also pursuing a pilot project
to blend hydrogen into our natural gas network
in the same region, providing
2,100 customers with hydrogen-blended natural
gas to fuel their homes and businesses safely
and reliably.

Alberta and Australia can produce ultra-low
emissions hydrogen at a lower cost than almost
any other jurisdiction in the world, and the

utilization of this domestically produced clean
fuel offers the most cost-effective pathway to
decarbonize building heat and appliances. This
strategic advantage will take on even greater
importance in the years ahead, as governments
seek to advance simultaneous policies targeting
various pillars of the economy, such as clean
electricity regulations and green building
strategies.

Energy storage is another key part of our
business and will be crucial to managing energy
supply in a changing energy system. We
continue to advance the Central West Pumped
storage hydro facility in Australia, and we have
submitted the project to the New South Wales
Government, with the aim of the project starting
construction in 2024. In both Canada and
Australia, we continue to explore options for
hydrogen storage, as well as hydrogen
refuelling initiatives.

Neltume Ports, which positions us in the
expanding global trade sector, continues to be a
strong investment for ATCO. In 2022, Neltume
invested in a number of operational
improvements at existing ports, and we believe
the pipeline of opportunities in the Neltume
business remains strong.

Across our global operations, we know that
affordability and reliability are vital
considerations for our customers and
communities. We must continue to provide
prosperity in the communities where we have
the opportunity and privilege to work. That’s
why we strive to provide value to our customers
and communities through efficient, cost-
effective and high-quality service.

For example, we continue to deliver significant
efficiencies in the transmission and distribution
of electricity and natural gas. In Alberta, ATCO
Electric has reduced 2023 rates across both its
distribution and transmission businesses
compared to 2022 levels despite significant
inflationary pressures. Our ATCO Gas business
has also achieved a similar result in reducing
distribution charges.

ATCO LTD. 2022 ANNUAL REPORT

I invite you to read this report and our
Sustainability Report for more details on our
progress and achievements. You can also stay
abreast of our news and results via our
quarterly reports, website and social media
channels.

Each member of the ATCO team has a role to
play in delivering our strategic imperatives,
balancing the deliverables of affordability,
reliability and innovation. I thank each one of
more than 10,000 direct and indirect members
of the ATCO family who display courage and
excellence and live by our values of safety,
integrity, agility, caring and collaboration in
delivering our essential services.

My deep appreciation also goes out to the
members of our Board of Directors for their
ongoing direction, guidance and wisdom over
the course of the past year.

And I thank you – our share owners – for your
continued investment and trust that you place
in the ATCO group of companies.

Sincerely yours,

Nancy C. Southern

Chair & Chief Executive Officer,

ATCO Ltd.

ATCO LTD. 2022 ANNUAL REPORT

ATCO LTD.

MANAGEMENT’S DISCUSSION AND
ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2022

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, 2022.

This MD&A was prepared as of March 1, 2023, and should be read with the Company's audited consolidated financial statements
(2022 Consolidated Financial Statements) for the year ended December 31, 2022. Additional information, including the
Company's Annual Information Form (2022 AIF) is available on SEDAR at www.sedar.com.

The Company is controlled by Sentgraf Enterprises Ltd. and its controlling share owner, the Southern family. The Company
includes controlling positions in Canadian Utilities Limited (Canadian Utilities or CU) (52.9 per cent ownership), ATCO Structures &
Logistics Ltd. (100 per cent ownership), ATCO Land and Development Ltd. (100 per cent ownership), and ASCHOR Technologies
Ltd. (Ashcor) (100 per cent ownership). The Company also has an equity investment in Neltume Ports S.A. (Neltume Ports) (40 per
cent ownership). Throughout this MD&A, the Company's earnings attributable to Class I and Class II Shares and adjusted
earnings are presented after non-controlling interests.

Terms used throughout this MD&A are defined in the Glossary at the end of this document.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

TABLE OF CONTENTS

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

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

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

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

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

Strategic Priorities for 2023 .....................................................................................................................................................

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

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

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

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

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

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

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

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. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

ATCO VISION AND VALUES

EXCELLENCE: THE ATCO HEART & MIND

"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

OUR VISION

To create prosperity and opportunity for generations to come.

ATCO STRATEGIES

ATCO is a diversified holding company with a
foundation of low volatility assets complimented with
higher growth opportunities. Our essential services
investments offer customers around the world tailored
solutions to meet their individual needs and offer
investors a stable and growing earnings profile, with
exposure to favourable macroeconomic trends and a
long-term investment horizon.

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

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.

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. We strive to live by the following values:

Safety

Safety is the first consideration in everything we do. We hold a shared belief that safety must direct all our day-to-
day priorities and decisions, and we are accountable for understanding and following the health and safety
requirements for any work we undertake.

Integrity

We are honest, ethical and treat others with fairness, dignity and respect. We make good decisions, take personal
ownership of tasks, are responsible for our actions and deliver on our commitments.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Agility

We are creative, innovative and take a measured
approach to opportunities and risk, balanced with a
long term perspective. We stay relevant, reward action
and learn from failure.

Caring

We care about our customers, our employees and
their families, our communities and the environment.
We seek to understand and care enough to challenge
each other.

Collaboration

We work together, share ideas, recognize the contribution of others and learn from our failures and successes. We
are clear about our intentions and communicate openly especially when problems or issues arise. We value and
encourage diversity and different perspectives. We work together to build strong networks.

SUSTAINABILITY

ATCO's sustainability strategy has always been driven by a holistic, long-term perspective, one that prioritizes our
sustainability objectives and environmental, social and governance (ESG) performance while reliably delivering
essential products and services to our customers, each and every day.

Energy Transition

We are actively transitioning our portfolio of
investments to meet the needs of a new energy future
while maintaining energy safety, reliability and
affordability. We are investing in innovative technology
and developing a suite of solutions from which our
customers can choose. Our strategic focus is on cleaner
fuels, renewable energy, energy infrastructure and
storage, and energy efficiency.

Climate Change & Environmental Stewardship

Our Climate Change Strategy not only minimizes our
environmental footprint, it accelerates the clean energy
transition. Critical to this approach is our focus on
decarbonization and exploring new and more efficient
ways to generate, transport and conserve energy.

People

Health and safety are the first considerations in everything we do. And, while we protect the people in our
workforce and communities, we know we must also reflect the people in our communities by promoting diversity,
equity and inclusion.

Operational Reliability & Resilience

We prepare for the future so that even in times of crisis our system continues to provide the essential services our
customers need. We are committed to providing reliable energy, working around the clock to minimize service
outages, and ensuring our assets are resilient for decades to come.

Community & Indigenous Relations

Building respectful and mutually beneficial relationships with communities, with Indigenous Peoples and with
businesses has long defined how we do business. Together with our Indigenous and community partners, we are
continually exploring new ways to collaborate.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

STRATEGIC ENVIRONMENTAL, SOCIAL AND GOVERNANCE 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. These 2030 targets include reducing our
operational GHG intensity and customer emissions, growing our renewable energy footprint and transitional
products, increasing economic benefits for Indigenous partners, continuing our 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.

ATCO continues to evaluate further ESG targets and conduct additional analyses with respect to the Company's
2050 net-zero commitment. Additional information and progress towards ATCO's ESG targets is included in this
MD&A and will be included in the Company's annual Sustainability Report, which will be available in May 2023.

FURTHER COMMENTARY REGARDING STRATEGIES AND COMMITMENTS

Our financial and operational achievements in 2022 relative to the strategies outlined are included in this MD&A,
the 2022 Consolidated Financial Statements and 2022 AIF. Further commentary will be provided in the forthcoming
2022 Management Proxy Circular, Business Profile, and Sustainability Report. The 2022 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. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

COMPANY OVERVIEW AND OPERATING
ENVIRONMENT

With approximately 7,600 employees, 11,400 employees in non-controlled interests, and assets of $24 billion, ATCO
is privileged to serve more than four 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.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

ORGANIZATIONAL STRUCTURE

(1) ATCO Land and Development Ltd. is a commercial real estate business that holds investments for sale, lease or development.

(2) ASHCOR Technologies Ltd. (Ashcor) is engaged in the processing and marketing of fly ash predominantly 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)

(5)

International Electricity Operations consists of Canadian Utilities' 50 per cent ownership in LUMA Energy, LLC (LUMA Energy), a company which is
transforming, modernizing and operating Puerto Rico's 30,000-km electricity transmission and distribution system.

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

(6) 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 as of December 31, 2022. Subsequent to year-end, 242-MW of operational non-regulated electricity generation was added
when the acquisition of Suncor Energy Inc.'s renewable energy portfolio closed on January 3, 2023.

(7) Storage & Industrial Water builds, owns and operates non-regulated natural gas storage, natural gas liquids storage, natural gas related infrastructure,

and industrial water.

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

(9) ATCO Energy Ltd. (ATCO Energy) includes Rümi, Blue Flame Kitchen, and Retail Energy and offers home products, home maintenance services, professional

homeowners advice, and retail electricity and natural gas services in Alberta.

The 2022 Consolidated Financial Statements includes our share of joint venture (JV) investments and its equity-
accounted investment in an associate company (40 per cent of Neltume Ports). Principal subsidiaries are Canadian
Utilities, of which ATCO owns 52.9 per cent (37.9 per cent of the Class A non-voting shares and 96.7 per cent of the
Class B common shares), and ATCO Structures & Logistics Ltd., of which ATCO owns 100 per cent of the common
shares. ATCO also owns 100 per cent of the common shares of ATCO Land and Development Ltd. and ASHCOR
Technologies Ltd.

The 2022 Consolidated Financial Statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) and the reporting currency is the Canadian dollar.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

STRUCTURES & LOGISTICS

BUSINESS DESCRIPTION

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 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 is to generate sustainable earnings growth by increasing our market presence in the regions we
operate, identifying opportunities in new markets, and delivering 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 deliver our strategic offerings in workforce housing, permanent modular
construction, 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 regions within
geographies in which we operate, while continuing to
utilize our manufacturing platform to scale quickly
when needed to meet the demand of workforce
housing opportunities. We continue to pursue
customer diversification opportunities and the
expansion of our product offerings. Non-traditional
modular markets, particularly residential housing,
public education facilities, and healthcare facilities,
continue to offer development opportunities. We will
continue to pursue organic and acquisition growth
opportunities. Globally, our operations continue to
provide strategic value and opportunities for growth.

MARKET CHALLENGES

ATCO Structures, Calgary, Alberta, Canada

The modular construction industry is influenced by the capital spending cycles of our clients and their respective
industries. There is also a high level of competition in the markets in which we operate. We face additional
challenges with ongoing worldwide health and geopolitical events, and unprecedented inflationary and interest rate
pressures. Many active projects are presented with varying levels of disruption, which is generating labor shortages
of critical trades, and persistent global supply chain delays affecting project productivity and delivery.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

ATCO Frontec

BUSINESS STRATEGY

Our strategy is to grow our business as an international provider of integrated operational support services to
government, defence and commercial clients. With our expertise in workforce housing camp services, facility
operations and maintenance services, defense operations services, and disaster and emergency management, we
are able to apply our competitive advantages of being a bundled services provider with proven long-term,
collaborative partnerships.

MARKET OPPORTUNITIES

We see opportunity to expand our operations within Canada and the US, particularly as defence spending in these
countries increases. Frontec specializes in supporting public and private sector clients operating in remote and
austere locations. Our strategic Indigenous partnerships, presence and ongoing operations in northern
communities, and extensive knowledge of the unique operating requirements make Frontec a favourable choice.
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 for large scale projects within
Canada may limit the demand for workforce housing
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. Inflationary pressures could impact our
operating costs, though we look to mitigate this risk
with carefully constructed contracts. There is a high
level of competition in the defence sector of the US
that could present difficulty securing contracts.

ATCO Employee, Resolute Bay, Nunavut, Canada

ATCO LTD. 2022 MANAGEMENT'S 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 7,400 people and operates 17 port
facilities and 6 port operation services businesses. In 2022, Neltume Ports handled 43 million tonnes of product,
including copper, forestry products, consumer goods and agricultural products.

BUSINESS STRATEGY

Neltume Ports' sustained growth will continue to be achieved by improving operational efficiency, increasing
volumes and ownership at existing ports, and investing in brownfield, greenfield and acquisition opportunities
throughout the Americas. Neltume's strategy is focused on continuous improvement initiatives to refine operational
practices throughout all facets of its business. 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 other
global trends. Neltume Ports continuously reviews
opportunities to increase its ownership position in
ports that are jointly owned and continues to actively
explore brownfield and greenfield opportunities, as
well as acquisition expansion potential.

MARKET CHALLENGES

The ports industry by nature is sensitive to changes in
international trade, supply chain constraints, labour
shortages, commodity prices and foreign exchange,
all of which could impact Neltume Ports. In recent
years, Neltume Ports has seen challenges caused by
the global pandemic, social unrest, political instability,
and economic issues in the region.

Terminal Puerto Coquimbo, Coquimbo, Chile

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

CANADIAN UTILITIES

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

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; 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
to enable renewable energy generation, delivery, and storage. Our strategic priorities are focused on investments
that provide lower emissions and clean energy solutions for our customers, and continuing to invest in our core
business while maintaining energy reliability, safety, and affordability.

MARKET OPPORTUNITIES

The utilities industry is changing with an increased focus on decarbonization, digitalization, decentralization, and
evolving customer demand. The worldwide push towards reaching net-zero, 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 this movement.

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. Provincial and federal governments have
expressed concerns about existing levels of customer
rates and affordability, which may impact the pace of
growth. The ongoing energy transition is driving
policy uncertainty and risks delaying investment
decisions that would align with our decarbonization
targets. Technology risks associated with
decarbonization, digitalization, and decentralization
could lead to disruption of the Company's existing
business models and create competitive market
dynamics.

ATCO Employee, Alberta, Canada

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Energy Infrastructure

BUSINESS DESCRIPTION

The Energy Infrastructure non-regulated businesses include: hydro, solar, wind, and natural gas electricity
generation in Western Canada, Australia, Mexico, and Chile, as well as non-regulated electricity transmission,
natural gas storage and transmission, Natural Gas Liquids (NGL) storage, and industrial water solutions in Alberta.
Energy Infrastructure is also developing its clean fuels business including hydrogen, renewable natural gas, carbon
capture and underground storage projects.

BUSINESS STRATEGY

Energy transition is a key component of our growth strategy, focused on the three pillars of clean fuels, renewable
generation, and energy storage. Energy Infrastructure is striving to be a leader in clean energy development while
focusing on delivering reliable, affordable and clean energy infrastructure that supports our customers’
decarbonization objectives and leverages our core competencies and assets in the Americas and Australia. Energy
Infrastructure continues to actively explore potential opportunities that will complement our growing renewable
portfolio. 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.

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 will 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, interest rates, inflation, and political
uncertainty pose challenges for investment.

Forty Mile Wind, Alberta, Canada

ATCO LTD. 2022 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)

2022

2021

2020

Year Ended
December 31

Key Financial Metrics

Revenues
Adjusted earnings (loss) (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

4,978

4,289

3,944

423

382

352

—

379

(50)

3.71

370

3.25

3.24

336

(41)

3.35

246

2.16

2.15

—

305

(40)

3.08

252

2.21

2.20

24,139

23,004

22,200

10,087

9,852

4,376

4,111

1.85

1.79

2,396

1,864

1,650

1,463

1,597

1,352

9,619

4,052

1.74

1,843

1,069

1,041

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

Basic

Diluted

113,958 114,172 114,396

114,269 114,450 114,713

(1) Additional information regarding these total of segments measures is provided under the headings “Other Financial and Non-GAAP Measures” and

“Reconciliation of Adjusted Earnings to Earnings Attributable to Class I and Class II Shares” in this MD&A.

(2) Additional information regarding this non-GAAP measure is provided under the headings “Other Financial and Non-GAAP Measures” and “Reconciliation

of Capital Investment to Capital Expenditures” in this MD&A.

REVENUES

Revenues in 2022 were $4,978 million, $689 million higher than the same period in 2021. Higher revenues, largely in
Electricity Distribution and Natural Gas Distribution, are a result of rate relief provided to customers in 2021 in light
of the COVID-19 global pandemic and subsequently the AUC decision to maximize the collection of 2021 deferred
revenues in 2022. Higher revenues were also due to work on ATCO Structures' Bechtel Pluto Train II project, higher
electricity and natural gas commodity prices at ATCO Energy, higher flow-through revenues in Natural Gas
Distribution, growth in rate base in the Alberta Utilities, and additional revenue from the Alberta Hub natural gas
storage facility acquired in December 2021 in the Energy Infrastructure segment.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

ADJUSTED EARNINGS (1)

Our adjusted earnings in 2022 were $423 million or $3.71 per share, compared to $382 million or $3.35 per share
for the same period in 2021.

Higher adjusted earnings in 2022 were mainly due to inflation indexing on rate base in Australia which positively
impacted earnings in Canadian Utilities' International Natural Gas Distribution business, ATCO Structures' strong
business performance driven by space rentals activity globally and earnings from the Bechtel Pluto Train II project,
cost efficiencies throughout our Alberta Utilities, and earnings from the Alberta Hub natural gas storage facility
acquired in December 2021 in the Energy Infrastructure's business.

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 $370 million in 2022, $124 million higher compared to 2021.
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 $2,396 million in 2022, $532 million higher than the same period in 2021.
The increase was mainly due to higher cash flows from Canadian Utilities' Electricity Distribution and Gas
Distribution businesses resulting from revenue attributable to the recovery of the 2021 deferral of customer rate
increases, and higher cash flows at ATCO Structures' due to the Bechtel Pluto II Project in Australia.

COMMON SHARE DIVIDENDS

We have increased our common share dividend every year for the past 30 years, a track record of which we are very
proud. Dividends paid to Class I and Class II Share owners totaled $211 million in 2022. On January 12, 2023, the
Board of Directors declared a first quarter dividend of 47.56 cents per share or $1.90 on an annualized basis. ATCO
continues to grow its dividends consistent with the sustainable growth of its investments.

(1)

Additional information is provided under the headings “Other Financial and Non-GAAP Measures” and “Reconciliation of Adjusted Earnings to Earnings
Attributable to Class I and Class II Shares” in this MD&A.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Quarterly Dividend Rate 1993 - 2023(dollars per share)$0.475693949596979899000102030405060708091011121314151617181920212223CAPITAL INVESTMENT (1) AND CAPITAL EXPENDITURES

Total capital investment of $1,650 million in 2022 was
$187 million higher compared to the same period in
2021 mainly due to ongoing capital investment in the
Regulated Utilities, increased construction activities
within Canadian Utilities' Energy Infrastructure segment,
and continued expansion of ATCO Structures' space
rental fleet globally and the fourth quarter acquisition of
Triple M Housing Ltd. (Triple M). The increase in 2022
was partially offset by Canadian Utilities' 2021
acquisition of the Pioneer Pipeline and the completed
construction of the Calgary Northwest Connector in 2021
in the Natural Gas Transmission business, and the
acquisition of the Alberta Hub natural gas storage facility
in the Energy Infrastructure business in December 2021.

Total capital expenditures of $1,597 million in 2022 were
$245 million higher compared to the same period in
2021 mainly due to the factors outlined above with the
exception of the 2022 Triple M and the 2021 Alberta Hub
acquisitions as these business combinations were
excluded from capital expenditures.

Capital spending in Canadian Utilities' Regulated Utilities accounted for 71 per cent of total capital expenditures in
2022. The remaining 29 per cent was mainly related to ATCO Structures' continued expansion of its space rental
fleet globally and increased capital spending within Canadian Utilities' Energy Infrastructure segment, including the
Barlow, Deerfoot and Empress Solar Projects, the expansion of the Carbon natural gas storage facility, and the
Suncor ATCO Heartland Hydrogen Hub (SAH3).

(1)

Additional information regarding this non-GAAP measure is provided under the headings “Other Financial and Non-GAAP Measures” and “Reconciliation

of Capital Investment to Capital Expenditures” in this MD&A.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Capital Expenditures in 202271%29%Regulated UtilitiesOtherATCO SCORECARD

The following scorecard outlines our performance in 2022.

INNOVATION
New and existing products and services

STRUCTURES

2022 Target

Performance

ASHCOR

2022 Target

Performance

CANADIAN UTILITIES

2022 Target

Performance

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

ATCO Structures expanded its product and service offering with the Bechtel Pluto
Train II project, a major project that supplements the base trade and rental
activity of the Western Australia business. The project scope includes a significant
component of relocating and refurbishing existing client assets, augmenting
Structures’ typical service offerings of manufacturing and installation elements.

In December 2022, Structures acquired Triple M Housing Ltd., a leading
manufacturer of factory-built, modular housing. This acquisition establishes
Structures’ presence in the North American residential housing market, and
provides new capabilities in the construction and sale of single family modular
homes.

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

In 2022, Ashcor developed key strategic partnerships with leading civil
construction and engineering firms, positioning us to offer a turnkey solution to
utilities desiring closure-by-removal and beneficiation solutions.

Through the collection of critical operating information and the extensive
knowledge gained from the operation of our flagship Alberta facility, we will
shorten the time to establish and ramp up production, facilitating the swift
establishment of Reclaimed Ash Management (RAM) operations in potential new
locations.

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.

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

•
•
•
•
•
•
•

•

Suncor Energy Inc. Renewable Energy Portfolio Acquisition;
Suncor ATCO Heartland Hydrogen Hub (SAH3);
Atlas Carbon Sequestration Hub (Atlas Hub);
Empress and Calgary Solar Development Projects;
Central West Pumped Storage Hydro project, Australia;
Canadian Pacific (CP) Hydrogen Locomotive Project;
Beaver Creek Solar Facility and Burwash Landing Wind Facility Electricity
Purchase Agreements; and
Clean Energy Innovation Hub & Hydrogen Refuelling Station, Australia.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

2022 Target

Performance

Continue to prioritize Canadian Utilities’ 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.

The Yukon Electrical Company Limited (ATCO Electric Yukon) finalized two
landmark Electricity Purchase Agreements with the Copper Niisüü Limited
Partnership as well as the Kluane First Nation for the upcoming Beaver Creek
solar and the Burwash Landing wind facilities. Once complete, these projects will
support the White River and Kluane First Nations to reduce reliance on diesel
power, achieve greater energy autonomy, and generate economic benefits for
the next 30 years.

In 2022, Canadian Utilities was selected as the partner and commenced
construction on the Métis Crossing Solar Project (MCSP), a community generation
solar project located in Smoky Lake County at Métis Crossing, a signature cultural
destination of the Métis Nation of Alberta (MNA). The MCSP is a collaboration
between the MNA, the Town of Smoky Lake, and Smoky Lake County. The
development of the solar facility will provide economic and community benefits
to all community partners.

In 2022, ATCO formed a partnership with Indigenous Clean Energy (ICE), which is
a pan-Canadian, not-for-profit platform focused on promoting Indigenous
inclusion in Canada’s energy future by advancing Indigenous leadership and
collaboration. This partnership provides opportunities for us to support
Indigenous projects, engage and mentor the community clean energy
champions, build capacity, and ensure project success.

With participation from energy experts across our company, ATCO hosted a free
four-part webinar series, "The Project Lifecycle Of Remote Community Clean Energy
Projects". These webinars provided the opportunity for communities to learn
about the critical stages and key considerations in the development of
community clean energy projects. The webinars are hosted on our website and
YouTube channel, extending their reach to any interested parties.

GROWTH
Regulated and long-term contracted capital investment

CANADIAN UTILITIES

2022 Target

Performance

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

Electricity developed a comprehensive Grid Modernization roadmap and
strategy, and the Alberta Utilities Commission (AUC) approved, as filed, the
scope, timing, and 2023 forecast of this Grid Modernization program in the 2023
Cost of Service Application.

Digitization of the grid continued with further progression on implementing the
technology to support the Advanced Distribution Management Systems (ADMS).
As of year end, our control center has a dedicated SCADA (supervisory control
and data acquisition) system serving our distribution grid. Additionally the
deployment of Advanced Metering Infrastructure (AMI) continued to advance
with a total of 8,606 installations completed in 2022.

LUMA Energy installed 149 new automation devices in 2022 at strategic locations
across Puerto Rico. These innovative devices detect outages within milliseconds,
shorten outage duration and reduce the number of customers that experience
an outage.

In 2022, LUMA Energy activated distributed energy resources for 30,700
customers, representing 179-MW of distributed solar. In addition, LUMA Energy
performed interconnection studies for clean energy projects representing more
than 800-MW of renewable generation and 500-MW of energy storage.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

2022 Target

Performance

2022 Target

Performance

2022 Target

Performance

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.

In 2022, all major components were completed for the Urban Pipeline
Replacement (UPR) Program, a program to replace and relocate aging, high-
pressure natural gas pipelines in the densely populated areas of Calgary and
Edmonton to address safety, reliability and support future growth. Final clean up
and project close outs remain to be completed in 2023.

As part of Electricity’s ongoing improvement and replacement programs, in 2022
Electricity advanced its wildfire mitigation program to address the ongoing risk of
a powerline-related wildfire ignition in light of the increasing frequency of severe
weather events. The program includes a focus on vegetation management in
conjunction with ongoing life extension programs.

In 2022, Electricity completed the second phase of its three phase replacement of
a 97-km transmission line in central Alberta. The line will facilitate increased
reliability in the region and enable the addition of renewable generation onto
Alberta’s electricity grid.

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.

While Hurricane Fiona caused significant damage across Puerto Rico, the LUMA
Energy team restored service to over 90 per cent of customers impacted by the
devastation of the hurricane within 12 days – a historic pace that has never been
seen before in Puerto Rico. By October 10, 2022 (three weeks after the
hurricane), LUMA had restored service to 99 per cent of customers.

LUMA Energy has continued to improve the Transmission and Distribution
System by implementing the System Remediation Plan and to date has advanced
critical improvements to Puerto Rico’s electric system including:

•
•

•

Replaced more than 3,800 broken and failing poles;
Connected over 42,000 customers to rooftop solar - adding 200-MW of
clean energy to the grid;
Replaced over 21,100 streetlights as part of our US $1 billion Federal
Emergency Management Agency funded Community Streetlight
Initiative;
Replaced dozens of critical distribution breakers to reduce the likelihood
of future outages;
Restored equipment, including one substation that had not been in
operation since 2010;
Inspected and completed engineering on the 37 worst performing
feeders, of which the first six feeders’ work has begun; and
Performed high-level assessments on 168 feeders, 118 transmission
lines, and 10 substation sites to support project scoping and identifying
focus areas for upcoming repairs and reconstruction.

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

In line with our overall generation strategy, we continue to seek opportunities to
enter into long-term offtake agreements with high quality counterparties that
underpin new developments and provide greater stability of cash flow and
earnings for share owners.

In 2022, Canadian Utilities entered into a 15-year power purchase agreement
(PPA) with Microsoft Corporation. Under the terms of the agreement, Microsoft
will purchase all renewable energy generated by Canadian Utilities’ 37-MW
Deerfoot solar project in Calgary, Alberta.

Continuing into 2023, Canadian Utilities entered into a new 15-year renewable
energy purchase agreement (REPA) with Microsoft Corporation. Under the terms
of the agreement, Microsoft will purchase 150-MW of renewable energy
generated by Canadian Utilities' newly acquired Forty Mile Wind Phase 1 Project
in Alberta.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Global expansion - continue expansion into select global markets including: North America, South
America and Australia

STRUCTURES

2022 Target

Performance

2022 Target

Performance

FRONTEC

2022 Target

Performance

2022 Target

Performance

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.

In 2022, Structures’ global space rentals fleet grew by 14 per cent from 19,684
units to 22,433 units. Targeted expansion of the US space rentals fleet is a
significant component of this growth with the fleet nearly doubling from 853
units to 1,703 during the year. The additional fleet is key in growing market
presence in the US, and will be deployed through existing branches, and new
branch locations. This includes the Denver branch, which commenced operations
in 2022, and the Houston branch, which was opened during the year.

During 2022, Structures expanded its space rentals customer base in the US, with
160 distinct customers during the year compared to only 4 distinct customers in
2021.

In November 2022, ATCO Structures executed its sixth affordable housing project
with the completion of a supportive housing permanent modular construction
building located in Vernon, BC for the Government of British Columbia’s BC
Housing organization.

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

2022 saw Structures tailor their fleet size and unit type, primarily through the
strategic sale of used and under-utilized fleet assets in the US, Canada and
Australia. This strategy ensured that Structures retained sufficient capacity to
support the rapidly evolving needs of customers while generating strong
cashflows to refresh the workforce housing fleet and support other business
objectives.

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

Based on exploratory research and a visit to Australia in 2022, a decision was
made to redirect our attention from Australia to the United States. Frontec has
already seen great success in the US market - six project wins over the last three
years - and the opportunity to expand our offerings to include our Facilities
Operations and Maintenance and Disaster and Emergency Management
offerings, while expanding our market share in the camp services space. Our
most recent win in 2022 of the Pogo camp, discussed below, further expands our
operations in the US.

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

ATCO Frontec announced a new contract to provide camp support services to
Northern Star Resources' Pogo mine, located approximately 220-km southeast of
Fairbanks, Alaska.

The Nasittuq contracts discussed below highlight why Frontec is the preferred
choice for remote community opportunities, with our strategic Indigenous
partnerships, extensive knowledge of the unique operating environment, and
ongoing operations in the North.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

2022 Target

Performance

ASHCOR

2022 Target

Performance

NELTUME PORTS

2022 Target

Performance

CANADIAN UTILITIES

2022 Target

Performance

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

The North Warning System (NWS) Operations and Maintenance contract
awarded by Public Services and Procurement Canada, on behalf of the
Department of National Defence, to Nasittuq Corporation (Nasittuq), an Inuit
majority-owned corporation and a partnership between ATCO Frontec and
Nunasi Corporation and Pan Arctic Inuit Logistics Corporation, commenced
contract year one on October 1, 2022.

Nasittuq was also successful in rebidding the contract to continue providing
support services at the Canadian Forces Station (CFS) Alert on Ellesmere Island,
by Public Services and Procurement Canada, on behalf of the Department of
National Defence. Nasittuq has been the incumbent provider since 2012 for this
contract, and the new contract is set to commence June 1, 2023.

ATCO Frontec successfully delivered the United Kingdom (UK) training camp for
the US Defense Threat Reduction Agency (DTRA). ATCO Frontec provided a field
camp for 130 personnel from DTRA and US Department of Energy in order to test
their mobile facilities. The camp was mobilized in April, operated in May and
demobilized in early June 2022 in accordance with schedule.

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

Although additional commercial agreements have not yet been secured, Ashcor
has further advanced its RAM technology through continued process
improvements. Additional research and development efforts have been invested
in the development of mobile RAM technology, expanding the existing
technologies' flexibility and potential applications, with its rapid deployment
capabilities improving our business' competitiveness.

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

Growth and the deployment of capital continues to be a key priority for Neltume.
In 2022, capital deployment was centered around operational improvements at
existing ports. Our pipeline of opportunities in the Neltume business remains
strong and we’re confident that this will create meaningful opportunities for new
investment.

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

Building on our solar and clean fuel developments, Energy Infrastructure
announced in October that Canadian Utilities entered into a definitive agreement
with Suncor Energy Inc. to acquire a portfolio of assets which includes a suite of
operational wind facilities and a development pipeline of wind and solar projects
in Alberta and Ontario. The transaction closed on January 3, 2023.

Throughout 2022, Energy Infrastructure focused on optimizing our storage
facilities, the integration of the Alberta Hub natural gas storage facility, and the
completion and operation of the fifth cavern at the ATCO Heartland Energy
Centre that is now storing customer products. 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.

SAH3 continues to make considerable progress. 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, subject to a 2024
sanctioning decision.

Canadian Utilities announced in September a $9 million AUD recoverable grant
had been awarded from the New South Wales Government to help fund pre-
investment activities in the development of the 325-MW Central West Pumped
Storage Hydro project in Australia.

Further details can be found in Energy Infrastructures' Recent Developments
section in this MD&A.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

FINANCIAL STRENGTH

Credit Rating
2022 Target

Performance

Access To Capital Markets
2022 Target

Performance

Maintain investment grade credit rating.

Maintained 'A (low)' long-term credit rating with stable outlook on ATCO Ltd. and
'A' long-term credit rating with stable outlook on Canadian Utilities Limited with
DBRS Limited.

Standard & Poors revised its issuer rating for ATCO Ltd. and Canadian Utilities
Limited from 'A-' with a negative outlook to 'BBB+' with a stable outlook.

Fitch Ratings assigned a first-time issuer rating of 'BBB+' with stable outlook to
ATCO Ltd. and 'A-' with stable outlook to Canadian Utilities Limited.

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

Despite heightened volatility and market turmoil globally, our businesses
retained strong liquidity and market access in the year, with the market
recognizing our financial strength and stability.

On June 3, 2022, Canadian Utilities Limited issued $250 million of 4.851 per cent
30-year debentures. Proceeds from this issuance were used to repay existing
indebtedness, and for other general corporate purposes. The issue was oversold
and completed at an attractive spread of 198 basis points above Government of
Canada 30-year bond rates.

On September 14, 2022, CU Inc. issued $210 million of 4.773 per cent 30-year
debentures. Proceeds from this issuance were used for financing capital
expenditures, and for other general corporate purposes. The issue was oversold
and completed at an attractive spread of 163 basis points above Government of
Canada 30-year bond rates.

OPERATIONAL EXCELLENCE

In 2022, Safety was included as a fifth core value alongside Integrity, Collaboration, Caring, and Agility. This
value reiterates that safety is the first consideration in everything we do. We hold a shared belief that safety must
direct all our day-to-day priorities and decisions, and we are accountable for understanding and following the
health and safety requirements for any work we undertake.

Employees Lost-Time Incident Frequency (LTIF)

ATCO

2022 Target

Performance

Compare favourably to safety benchmarks.

Our lost time incident frequency in 2022 was 0.26/200,000 hours worked. Our
lost-time incident frequency compares favourably to many benchmarks including
Alberta Occupational Health and Safety, US private industry, and industry best
practice rates. While our results are favourable to benchmarks, we continue to
strive to have best-in-class safety programs that prioritize the safety of our
people.

Employees Total Recordable Incident Frequency (TRIF)

ATCO

2022 Target

Performance

Compare favourably to safety benchmarks.

Our total recordable incident frequency in 2022 was 0.99 incidents/200,000
hours worked. Our total recordable incident frequency in 2022 compares
favourably to many benchmarks including US private industry and industry best
practice rates. While we have made great progress and continue to improve, we
continue to strive to have best-in-class safety programs that prioritize the safety
of our people.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Customer Satisfaction

CANADIAN UTILITIES

2022 Target

Performance

2022 Target

Performance

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

Electricity and Natural Gas Distribution achieved high service satisfaction levels,
with approximately 95 per cent of customers agreeing that Canadian Utilities
provides good service. These results compare favourably to industry averages
and are consistent with previous years.

ATCO Gas Australia’s Customer Satisfaction (CSAT) was 8.8 out of a possible 10,
above the national industry benchmark of 8.4. 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. The
ease of implementation scored 8.9 out of a possible 10, above the national
industry benchmark of 8.6.

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

LUMA Energy had a year-over-year increase of 3 per cent in overall customer
satisfaction, a 13 per cent increase in the area of billing and payment, and a 9 per
cent increase in contact centre customer service as measured by J.D. Power CSAT
scoring.

Organizational Transformation - Streamline and gain operational efficiencies

ATCO

2022 Target

Performance

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

In 2022, ATCO was selected as a Top Employer in Alberta and a Top Employer for
Young People in Canada.

ATCO continues to evolve the succession management program platform and
reporting to incorporate key metrics in the areas of growth, critical roles, top
talent and diversity groups. Critical roles have successors identified and
incumbents have development plans for retention.

The Company continues to progress the development of our leaders with
psychological safety and additional leadership training programs offered through
the Leadership Development Academy.

In July 2022, ATCO's Diversity, Equity and Inclusion (DE&I) Committee hosted
guests from 38 companies across Canada, to join our inaugural DE&I event,
facilitating conversations and knowledge-sharing around the power of
representation. The key-note speaker was Hon. Scott Brison, P.C., Vice-Chair,
Investment & Corporate Banking, BMO.

2022 was the inaugural year of the Women’s Speed Networking events, one of our
cross-organization mentoring programs. Almost 60 participants were given the
opportunity to connect with company leaders, including the Chair and CEO of
ATCO and Canadian Utilities, Nancy Southern. The events kicked off in Calgary
during Gender Equality Week and not only provided professional development,
but also encouraged women to find their voice, advocate for themselves, and
build networks across the Company.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

STRUCTURES

2022 Target

Performance

LAND & DEVELOPMENT

2022 Target

Performance

CANADIAN UTILITIES

2022 Target

Performance

2022 Target

Performance

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

During the year, Structures reduced the size of its manufacturing facility in
Mexico to better align with the business needs. It provides adequate capacity to
enter projects that are within the execution scope of the organization while
reducing overhead burden.

Structures continues to leverage key relationships and strategically utilize global
manufacturing capacity. The US currently uses two third-party sourcing
arrangements for space rentals product, reducing the logistics costs and
providing flexibility to be selective and opportunistic with manufacturing
projects. Utilization of excess capacity in the Canadian facility allows additional
flexibility for the US facility to balance trade sales opportunities with the space
rentals strategic expansion targets.

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.

ATCO Land and Development is undertaking renovations to the two downtown
office buildings in Calgary, with significant updates that modernize the buildings
and improve the amenities. This will increase the competitiveness of these
properties in the Calgary real estate market, while attracting new tenants and
providing a better experience for everyone working at the locations. Additionally,
ATCO Land and Development sold three vacant properties in 2022, further
optimizing our real estate portfolio.

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

Canadian Utilities continued to progress the implementation of its Workforce and
Asset Management program for the Electricity and Natural Gas businesses,
aimed at advancing 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 and is expected to be fully complete in 2023.

In 2021, 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 upgrades the
software to the latest version. The upgrade is expected to be complete in 2023.

The Alberta Utilities Customer Information System (CIS) replacement program for
both Natural Gas and Electricity is well underway. CIS holds our metering asset
information, collects meter reads, calculates billing, and applies rates and
production tariff bills for retailers. Both programs have experienced delays in
in-service dates but are expected to be completed in 2023.

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.

In the first year of operations, over 140,000 hours of mentorship, safety and
technical training have been completed by employees and contractors at LUMA
Energy.

Since the commencement of operations, LUMA Energy has driven significant
improvements in all safety measures across the business. In 2022, LUMA Energy
achieved a TRIF of 2.66, a 65 per cent improvement from the prior operator and
had a severity rate of 15.5, a 75 per cent improvement from the prior operator.

During Hurricane Fiona, LUMA Energy achieved a TRIF of 2.42. This is a result of
significant emphasis placed upon safety during emergency response efforts,
including onboarding contractor safety specialists and setting expectations for
adequate hazard assessment and worksite observations during restoration
efforts.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

2022 Target

Performance

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

LUMA Energy is currently operating under an extended fixed fee arrangement
during the Supplemental Agreement period. The extension of the Agreement was
approved November 30, 2022; support for the work done to date was a
consideration in the extension. While the agreement does not contain specific
performance metrics, LUMA Energy created and progressed baseline
performance metrics that are being reported quarterly to the regulatory body
and the public.

Once Puerto Rico Electric Power Authority (PREPA) exits from bankruptcy,
incentive compensation will be measured through achieving performance
metrics. Performance metrics have been submitted to the Puerto Rico Energy
Bureau (PREB), the energy regulatory agency. The key performance metric
categories currently being proposed are as follows:

•

Customer Satisfaction - Achieve a high-level of customer satisfaction
across all customer classes.
Technical, Safety & Regulatory - Operate a safe and reliable electrical
grid while remaining compliant with applicable safety regulations.
Financial Performance - Meet the approved Federally Funded
Operating & Capital Budget and Non-Federally Funded Capital Budget.

COMMUNITY INVOLVEMENT
Indigenous Relations

ATCO

2022 Target

Performance

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

Across ATCO, $81,000 was awarded to 68 students across Canada, including the
territories, through the ATCO Indigenous Education Awards Program.

Across ATCO, 4,528 employees participated in one of the many Indigenous
training courses offered in 2022 through in-person and virtual classroom training
platforms.

ATCO Frontec was awarded Silver-level certification from the Canadian Council
for Aboriginal Business’s (CCAB) Progressive Aboriginal Relations (PAR) program.
The program evaluates a company's commitment to Indigenous communities
and recognizes sustained leadership in Indigenous relations.

We continue to innovate new, collaborative models for our partnerships with
Indigenous Peoples. Highlights in 2022 include a share purchase agreement
between Denendeh Investments Incorporated (DII) and ATCO Electric Ltd. to
increase DII’s ownership stake in Northland Utilities Enterprises Ltd. from 14 per
cent to 50 per cent. In addition, AEY finalized two landmark Electricity Purchase
Agreements for the upcoming Beaver Creek solar and the Burwash Landing wind
facilities, and Canadian Utilities was selected as the partner and commenced
construction on the MCSP, a community generation solar project located in
Smoky Lake County.

Employee-led Charitable Campaigns
ATCO

2022 Target

Performance

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

With the combined efforts of our employees around the world and the company
donation match program, ATCO pledged more than $3.6 million to support
hundreds of community charities in 2022. The annual ATCO Employees
Participating In Communities (EPIC) campaign has a cumulative fundraising total
of nearly $54 million since its inception in 2006.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

CANADIAN UTILITIES

2022 Target

Performance

Community Investment

STRUCTURES

2022 Target

Performance

CANADIAN UTILITIES

2022 Target

Performance

2022 Target

Performance

LUMA Energy will establish the Somos LUCES (LUMA Committed with Employees)
program.

In 2022, the Somos LUCES program was launched. The program offers a 1:1
company match for donations and this year LUMA employees saw their
donations matched at twenty different non-profit organizations. LUMA pledged
more than $75,000 during the 2022 program.

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 support a successful transition.

During the year, ATCO Structures provided ongoing support to the ATCO Villages
in Calgary and Edmonton through training initiatives, and operational
consultation. Technical expertise was also provided to the Homes for Heroes
Foundation for construction projects Structures was unable to directly participate
in.

Building on the momentum of the ATCO Villages in Calgary and Edmonton, the
Homes for Heroes Foundation continues to expand into other Canadian cities.

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.

Construction of the LUMA College for Technical Training is scheduled to be
completed at the end of the second quarter of 2023 with a grand opening
scheduled for later in 2023. The college’s primary purpose is to develop a local
pipeline of future lineworkers and to enhance the skills of the initial LUMA craft
employees. While the initial opening was delayed, partially due to Hurricane
Fiona, our programs continued at our Palo Seco facility, and over 750
certification, training and development programs were completed.

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.

LUMA Energy and the Puerto Rico Chapter of the American Red Cross announced
in July 2022 the continuation of their partnership. This partnership provides
communities across Puerto Rico with educational resources and programs for
students and families focused on preparing for emergencies and improving
electrical safety in the home.

LUMA Energy also renewed the collaborative agreement with Boys & Girls Clubs
of Puerto Rico. Through this agreement, LUMA Energy impacted more than 800
students through different programs that Boys & Girls Clubs of Puerto Rico
offers. With the renewal of this agreement, we continue to reaffirm our social
responsibility in Puerto Rico, and we will continue to support the education of
children through various educational projects.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

STRATEGIC PRIORITIES FOR 2023

Our 2022 performance highlights that our corporate strategy, which includes leadership in environmental, social
and governance matters, continues to drive success. ATCO's 2023 strategy will build on these achievements and
look to create additional value through the execution of the priorities identified below.

GROWTH

Support energy transition with strategic regulated and
non-regulated capital investments.

Canadian Utilities will invest in its core utility assets to ensure continued safe and reliable
operations and continue to invest in renewable generation, clean fuels and energy storage within
Energy Infrastructure.

Additionally, Canadian Utilities will target investments that support system growth and the
modernization needed to support the energy transition and the decarbonization needs of our
customers.

Continue expansion into select global markets including
Australia and the Americas.

ATCO businesses will leverage our reputation to drive growth in markets where we are a known,
trusted brand. We will also seek opportunities to collaborate where an alignment of key values
and complementary expertise exists; prioritizing Indigenous partnerships. We continue to explore
acquisition opportunities that will complement our growth strategies for each business,
specifically those that increase diversification, advance energy transition, and provide access to
higher-growth sectors.

Explore diversification opportunities that complement our
current products, services and assets.

Each business within the ATCO group of companies continues to evaluate opportunities to
expand offerings and better serve customers. These efforts aim to specifically target new
business areas and services that build upon their core competencies and leverage existing assets.

Additionally, in 2023 we will focus on promoting cross-organizational opportunities to find
efficiencies and change the way we do business, by fully utilizing the strengths of our diverse and
high-performing workforce.

INNOVATION

Execute initiatives and projects to drive meaningful progress
towards our 2030 ESG targets.

With the January 2022 announcement of ATCO's 2030 ESG goals, our businesses have committed
to the achievement of their own supporting initiatives and have embedded these goals within
their respective strategies. Across the Company, businesses are pursuing opportunities and
developing programs that create operational efficiency and effectiveness, while increasing
Indigenous benefits and supporting leadership development and career opportunities for all
employees.

Canadian Utilities is also continuing to advance its energy transition strategies across regulated
and non-regulated businesses, while simultaneously modernizing our existing electricity and
natural gas systems to support the energy transition and ensure continued reliability.

Cultivate the continued financial strength needed to create prosperity
and opportunity for generations to come.

FINANCIAL
STRENGTH

Our business strategies, funding of operations, and planned future growth are supported by
maintaining our strong investment grade credit ratings and continued access to capital markets
at competitive rates.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Compare favourably to safety benchmarks.

ATCO companies are committed to a culture of health and safety excellence and our positive
performance will continue to be reflected in the favourable rankings against industry safety
benchmarks, such as lost-time incidents and incident frequency.

Achieve high service satisfaction levels for the
customers and communities we serve.

OPERATIONAL
EXCELLENCE

Results from customer satisfaction surveys should be consistent with or better than prior years
and we will leverage customer input and effectiveness measures in the prioritization of process
improvements.

Be an employer of choice while building
and strengthening the capacity of our people.

We continue to focus on employee engagement and programs that enhance diversity, equity and
inclusion across our organization. Leadership development that lends to effective succession
planning and opportunities for employee growth will continue to be a priority; supporting both
employee satisfaction and retention.

Committed to reconciliation with Indigenous communities
and the maximizing of benefits.

COMMUNITY
INVOLVEMENT

We believe that our Indigenous partners should be provided with opportunities to share in the
economic and social benefits of developments that happen within their communities. We look to
increase net economic benefits to our Indigenous partners each year.

Be a leader in supporting initiatives and charitable organizations within
the communities we live and work.

ATCO will continue to administer the incredibly successful employee-led charitable campaigns of
ATCO EPIC and Somos LUCES. Within the communities that ATCO does business, we will continue
to seek out and support programs that deliver meaningful benefits to community members.

ATCO EPIC Days of Caring

ATCO LTD. 2022 MANAGEMENT'S 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 prosperity and opportunity for generations to
come.

Following are some of the highlights of our model for corporate governance. For a more complete picture, please
see the Governance section of the 2022 Management Proxy Circular, which will be available in March 2023.

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 must be an independent director and is a member of GOCOM.

Designated Audit Directors

Distinctly unique to ATCO are Designated Audit Directors (DAD). 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.

ATCO LTD. 2022 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 $241 million in the fourth quarter of 2022 were $2 million lower than the same
period in 2021 mainly due to lower workforce housing trade sale activity in most geographies as installed projects
moved to rental contracts, and lower permanent modular construction activity in Canada. Lower revenues were
partially offset by revenues from ATCO Structures' Bechtel Pluto Train II project, performance improvement for
space rentals across most geographies, and new projects and increased occupancy for ATCO Frontec-operated
camps.

Structures & Logistics revenues of $929 million in the full year of 2022 were $152 million higher than the same
period in 2021 mainly due to revenues from ATCO Structures' Bechtel Pluto Train II project, performance
improvement for space rentals, higher trade sale activity for workforce housing in Chile and Mexico, and new
projects and increased occupancy for ATCO Frontec-operated camps. Higher revenues were partially offset by lower
workforce housing trade sales activity as installed projects shifted to rentals, and lower revenues from ATCO
Structures' LNG Canada Cedar Valley Lodge project, which was substantially completed in 2021.

ADJUSTED EARNINGS

($ millions)

ATCO Structures (1) (2)
ATCO Frontec (1) (2)

Total Structures & Logistics (2)

(1) Considered to be non-GAAP financial measures.

Three Months Ended
December 31

Year Ended
December 31

2022

2021

Change

2022

2021

Change

(3)

(1)

(2)

(1)

(2) Additional information is provided under the headings “Other Financial and Non-GAAP Measures” and “Reconciliation of Adjusted Earnings to Earnings

Attributable to Class I and Class II Shares” in this MD&A.

Structures & Logistics adjusted earnings of $4 million in the fourth quarter of 2022 were $1 million lower than the
same period in 2021. Lower adjusted earnings are mainly due to ATCO Structures' lower workforce housing trade
sales activity in the US, and lower earnings in ATCO Frontec's disaster and emergency management response
projects.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Structures & Logistics adjusted earnings of $61 million in the full year of 2022 were $8 million higher than the same
period in 2021. Higher earnings were mainly due to ATCO Structures' strong business performance driven by higher
space rentals activity globally and earnings from the Bechtel Pluto Train II project, and ATCO Frontec's UK Training
Camp Exercise project and higher occupancy at Trans Mountain camps. Higher earnings were partially offset by
ATCO Structures' performance on a workforce housing trade sale project in Mexico and lower workforce housing
trade sales activity across most geographies.

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. Residential housing
manufactures and sells pre-fabricated, modular residential homes.

ATCO Structures adjusted earnings of $7 million and $54 million in the fourth quarter and full year of 2022 were
$1 million and $6 million higher than the same periods in 2021 mainly due to strong business performance driven
by space rentals activity globally, and earnings from the Bechtel Pluto Train II project. Higher earnings were partially
offset by performance on a workforce housing trade sale project in Mexico, and lower workforce housing trade
sales activity as installed projects shifted to rentals across most geographies.

The following table compares ATCO Structures' rental fleet for the fourth quarter and full year of 2022 and 2021.

Three Months Ended
December 31

Year Ended
December 31

2022

2021 (1)

Change

2022

2021(1)

Change

Global Space Rentals
Number of units
Average utilization (%)

Average rental rate ($ per month)

Global Workforce Housing

Number of units

Average utilization (%)

22,433 19,684

14% 22,433 19,684

660

579

(6%)

14%

627

571

2,652

2,879

(8%)

2,652

2,879

Average rental rate ($ per month)

1,931

2,064

(6%)

1,908

1,801

14%

(3) %

10%

(8%)

(1)

In 2022, management has reclassified space rental fleet units to workforce housing fleet units. 2021 number of units, average utilization and average
rental rate have been restated for comparability.

Rental Fleet

Space Rentals

The year-over-year growth of the space rentals fleet is the result of continued strategic expansion in targeted
regions of Canada, Australia, the US and Chile. ATCO Structures has increased the number of units on rent and
realized higher average rental rates due to sustained higher demand for space rentals fleet in these regions. This is
driven by activity across multiple sectors including mining, construction, education, and healthcare, although
utilization has decreased due to the timing of placing fleet additions on rent.

Workforce Housing

ATCO Structures decreased the size of the workforce housing fleet and increased the average utilization rate by
selling used and under-utilized fleet assets in Canada, Australia, and the US. In the fourth quarter and full year of
2022 the utilization increase was also due to the workforce housing fleet on rent for the third phase of the Trans
Mountain Expansion project in BC.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

ATCO STRUCTURES RECENT DEVELOPMENTS

Canada

Triple M Housing Ltd. Acquisition

In December 2022, ATCO Structures acquired a 100 per cent ownership interest in Triple M Housing Ltd. a leading
North American manufacturer of pre-fabricated, modular residential homes. Triple M is headquartered in
Lethbridge, Alberta, and primarily serves Western Canada and segments of the US. Triple M will operate as a
specialized housing division for ATCO Structures within Canada. Triple M has contributed earnings accretion to
ATCO Structures post-acquisition.

Triple M's 230,000 square foot manufacturing facility, Lethbridge, Alberta, Canada

British Columbia (BC) Housing - Government of British Columbia

ATCO Structures was previously awarded a supportive housing contract in Vernon, BC for a four-story, 61-unit
building. The contract reached substantial completion in October 2022, making this Structures’ sixth completed
affordable housing project.

Seabridge Gold

ATCO Structures was awarded a contract from Seabridge Gold for the supply and installation of a 120-person camp
for the Kerr-Sulphurets-Mitchell (KSM) Project in Northwest BC. Work commenced in July 2022 and concluded in
October 2022.

Sabina Gold

ATCO Structures was awarded a supply contract for a 276-bed accommodation complex for a mining client in
Nunavut. Manufacturing for phase 2 of the project, a 216-person complex, was completed during the second
quarter of 2022.

Trans Mountain Expansion Project

ATCO Structures was previously 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. Site personnel were mobilized in the fourth quarter of 2021 and the camp was
completed during the first quarter of 2022. The rental contract is expected to be complete in the third quarter of
2023.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

United States

Integrated Modular Solutions (IMS)

ATCO Structures was awarded a $12 million rental contract for 63 units; the accommodations are for National
Guard supporting the staffing of state penitentiaries in Florida. The contract commenced in November 2022 for an
initial term of nine months with option for extension in 2023.

TIC (Kiewit)

In December 2022, ATCO Structures was awarded an $8 million rental contract for 116 units to support a new
chemical plant construction project in Orange, Texas. The units will be installed in multiple phases starting in the
first quarter of 2023 through the third quarter of 2023. The rental terms range from 33 to 39 months.

Hensel Phelps Contract

In the third quarter of 2022, ATCO Structures was awarded a rental contract with Hensel Phelps for 40 space rental
units for a data centre in the Northwestern United States. The contract commenced in August 2022 for an initial
term of 14 months.

Plaquemines LNG Export Facility – KBR & Zachry Group Joint Venture (KZJV)

ATCO Structures was awarded a rental contract for 50 space rentals units to support the LNG export facility
construction project in Plaquemines Parish, Louisiana. The contract term is 36 months and commenced in
September 2022.

Australia

Bechtel Pluto Train II

ATCO Structures commenced construction of the previously awarded 2,200-person accommodation village in the
first quarter of 2022 with installation scope and site setup. The stage one milestone was completed in the third
quarter of 2022, and included the handover of the manufactured units. The stage two milestone was completed in
the fourth quarter of 2022, and included relocated and refurbished accommodations and central facilities. Site
preparation, relocation, and refurbishment of buildings for stage three and four milestones are underway with
handovers expected through the second quarter of 2023. The project continues to track ahead of planned progress.

In the first quarter of 2022, ATCO Structures was awarded a space rentals contract to manufacture and install a
parallel modular facility. Manufacturing commenced in the second quarter of 2022, which continued through the
fourth quarter of 2022. Delivery and handover began in the fourth quarter of 2022 and is expected to continue
through the second quarter of 2023.

Bechtel Pluto Train II, near Karratha, Western Australia

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Central America

Collahuasi Project

In the fourth quarter of 2022, ATCO-Sabinco S.A. was awarded a $6 million contract to refurbish 8 existing buildings
at the Collahuasi mine site in Northern Chile. The contract commenced in the first quarter of 2023 and is expected
to conclude in the third quarter of 2023.

ATCO FRONTEC

ATCO Frontec provides facility operations and maintenance services, workforce lodging and support services,
defence operations services, and disaster and emergency management services.

ATCO Frontec adjusted earnings in the fourth quarter of 2022 were $2 million lower than the same period in 2021
mainly due to lower earnings in ATCO Frontec's disaster and emergency management response projects.

ATCO Frontec adjusted earnings of $7 million in the full year of 2022 were $2 million higher than the same period in
2021 mainly due to increased occupancy at the Trans Mountain camps, the UK Training Camp Exercise conducted in
the second quarter, and the North Warning System contract which commenced October 1, 2022. Higher earnings
were partially offset by lower earnings for disaster and emergency management response projects.

ATCO FRONTEC RECENT DEVELOPMENTS

NATO Headquarters (HQ) Support Contract

In the fourth quarter of 2022, ATCO Frontec received confirmation of a one-year contract extension for the NATO
HQ communication and information systems (CIS) support contract until December 31, 2023. For over 19 years,
ATCO Frontec has held the contract to provide NATO Support and Procurement Agency CIS support to the NATO
headquarters at the 820-person Camp Butmir near Sarajevo, Bosnia.

North Warning System (NWS) Contract

In February 2022, Nasittuq, an Inuit majority-owned corporation and a partnership between ATCO Frontec and
Nunasi Corporation and Pan Arctic Inuit Logistics Corporation, was awarded the seven-year contract for the
Operation and Maintenance of the NWS by Public Services and Procurement Canada, on behalf of the Department
of National Defence. The NWS contract commenced April 1, 2022 and the transition was completed September 30,
2022, with the contract year one beginning on October 1, 2022.

Pogo Mine Contract

In September 2022, Frontec was awarded a three year contract for the provision of camp services to Pogo Gold
Operations at Pogo Mine near Fairbanks, Alaska. All mobilization activities were completed on time for a
commencement date of November 1, 2022.

Canadian Forces Station Alert Contract

On October 2022, Nasittuq was awarded a $122 million eight-and-a-half-year contract to provide support services at
the Canadian Forces Station Alert on Ellesmere Island, by Public Services and Procurement Canada, on behalf of the
Department of National Defence. Nasittuq has been the incumbent provider since 2012 for this contract, and the
new contract is set to commence June 1, 2023.

UK Training Camp Exercise

In the second quarter of 2022, ATCO Frontec successfully delivered the UK training camp for the US Defense Threat

Reduction Agency (DTRA). As a sub-contractor to Bechtel Inc. and Black & Veatch, ATCO Frontec's role was to provide

a field camp for 130 personnel from DTRA and US Department of Energy in order to test their mobile facilities. The

camp was mobilized in April, operated in May and demobilized in early June 2022 in accordance with schedule and

budget, with no recordable incidents.

Defence Construction Canada (DCC)

In October 2021, ATCO Frontec secured two facility maintenance and site services contracts with DCC to maintain

15 Department of National Defence sites and the associated infrastructure across Alberta for a five-year period.

Mobilization was successfully completed and operations commenced on April 1, 2022.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Trans Mountain Expansion Project

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. Mobilization was completed
and the camp was fully operational in February 2022.

SUBSEQUENT EVENT

BHP Jansen Discovery Lodge

In February 2023, Wicehtowak Frontec Services (WFS), ATCO Frontec’s joint venture partnership with George Gordon
Developments Ltd., was awarded a three-and-a-half-year base contract to provide camp support services for the
BHP Jansen Discovery Lodge in Saskatchewan. The lodge, which was originally designed and built in 2012 by ATCO
Structures, features diverse, high-end amenities, and accommodates up to 2,500 workers. WFS will provide
management and administration, food services, retail, housekeeping and janitorial, and maintenance work for the
facility. The contract is expected to commence in the second quarter of 2023.

ATCO’s collaboration with George Gordon First Nation began in 2011 as a 50-50 joint venture. Evolving over the
years and recently restructured, Wicehtowak Frontec Services was created as a majority Indigenous-owned
company. It will provide opportunities for employment, skills development and procurement for surrounding
Indigenous communities.

BHP Jansen Lodge, Saskatchewan, Canada

ATCO LTD. 2022 MANAGEMENT'S 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 (1)

Three Months Ended
December 31

Year Ended
December 31

2022

2021

Change

2022

2021

Change

(1)

(1) Additional information is provided under the headings “Other Financial and Non-GAAP Measures” and “Reconciliation of Adjusted Earnings to Earnings

Attributable to Class I and Class II Shares” in this MD&A.

Neltume Ports adjusted earnings of $2 million in the fourth quarter of 2022 were $1 million lower than the same
period in 2021 mainly due to lower volumes during the quarter.

Neltume Ports adjusted earnings of $14 million in the full year of 2022 were $1 million higher than the same period
in 2021. Higher adjusted earnings were mainly due to increased activity and revenues across the portfolio of ports
in 2022 and favourable exchange rates.

ATCO LTD. 2022 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 fly ash, predominantly 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
credit facilities.

ADJUSTED EARNINGS

($ millions)

2022

2021

Change

2022

2021

Change

ATCO Corporate & Other (1)

—

(6)

(1) Additional information is provided under the headings “Other Financial and Non-GAAP Measures” and “Reconciliation of Adjusted Earnings to Earnings

Attributable to Class I and Class II Shares” in this MD&A.

Three Months Ended
December 31

Year Ended
December 31

ATCO Corporate & Other adjusted earnings of $8 million in the fourth quarter of 2022 were $3 million higher
compared to the same period in 2021 mainly due to higher interest income earned and timing of certain expenses,
partially offset by one-time tax benefits that were recognized in 2021.

ATCO Corporate & Other adjusted earnings in the full year of 2022 were $6 million lower compared to the same
period in 2021 mainly due to one-time tax benefits that were recognized in 2021 and increased costs at Ashcor,
partially offset by higher interest income earned.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

UTILITIES

REVENUES

Utilities revenues of $902 million and $3,384 million in the fourth quarter and full year of 2022 were
$18 million and $343 million higher than the same periods in 2021. Higher revenues, largely in Electricity
Distribution and Natural Gas Distribution, are a result of rate relief provided to customers in 2021 in light of the
COVID-19 global pandemic and subsequently the AUC decision to maximize the collection of 2021 deferred
revenues in 2022. Higher revenues are also due to growth in rate base, and higher flow-through revenues in the
Natural Gas Distribution business.

ADJUSTED EARNINGS

($ millions)

2022

2021

Change

2022

2021

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)

100

109

(3)

—

(2)

(5)

(4)

—

(4)

(9)

199

184

180

379

152

336

(1) Additional information regarding these non-GAAP measures is provided under the headings “Other Financial and Non-GAAP Measures” and

“Reconciliation of Adjusted Earnings to Earnings Attributable to Class I and Class II Shares” in this MD&A.

(2) Additional information regarding this total of segments measure is provided under the headings “Other Financial and Non-GAAP Measures” and

“Reconciliation of Adjusted Earnings to Earnings Attributable to Class I and Class II Shares” in this MD&A.

Utilities adjusted earnings of $100 million in the fourth quarter of 2022 were $9 million lower than the same period
in 2021 mainly due to timing of cost recoveries in International Electricity Operations and the timing of operating
costs in Electricity Distribution, Natural Gas Distribution and International Electricity Operations.

Utilities adjusted earnings of $379 million in the full year of 2022 were $43 million higher than the same period in
2021. Higher adjusted earnings were mainly due to the impact of inflation indexing on rate base in the International

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Natural Gas Distribution business, cost efficiencies, and growth in rate base. Higher adjusted earnings were also due
the impact of the Electricity Transmission 2018-2019 General Tariff Application (GTA) Compliance Filing and the
2020-2022 GTA Compliance Filing decisions received from the AUC in the second and third quarters of 2021.

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 $17 million in the fourth quarter of 2022 were $3 million lower than the
same period in 2021 mainly due to the timing of operating costs.

Electricity Distribution adjusted earnings of $85 million in the full year of 2022 were $5 million higher than the same
period in 2021 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 2022 were comparable to the same
period in 2021.

Electricity Transmission adjusted earnings of $87 million in the full year of 2022 were $6 million higher than the
same period in 2021. Adjusted earnings in 2021 were lower as a result of the Electricity Transmission 2018-2019
GTA Compliance Filing and the 2020-2022 GTA Compliance Filing decisions received from the AUC in the second and
third quarters of 2021. Combined, these decisions included a $6 million (after-tax and non-controlling interests)
reduction of earnings in 2021 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
system under an Operations and Maintenance Agreement with the Puerto Rico Public-Private Partnerships
Authority (P3A) and the Puerto Rico Electric Power Authority.

LUMA Energy continues to operate under the terms of a Supplemental Agreement, which was extended on
November 30, 2022 and will continue until such time that PREPA's bankruptcy is resolved. The agreement allows
LUMA Energy to collect an annualized fixed fee equivalent of $115 million USD. Following the resolution of PREPA's
bankruptcy proceeding, LUMA Energy will transition to year one of the Operations and Maintenance agreement.

International Electricity Operations adjusted earnings of $6 million in the fourth quarter of 2022 were $2 million
lower than the same period in 2021 mainly due to timing of operating costs and timing of cost recoveries.

International Electricity Operations adjusted earnings of $27 million in the full year of 2022 were $4 million higher
than the same period in 2021. Higher adjusted earnings were mainly due to ongoing operations, as compared to the
ongoing transition work in the first half of 2021 and the impact of foreign exchange rates.

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 $34 million in the fourth quarter of 2022 were $4 million lower than
the same period in 2021 mainly due to timing of operating costs.

Natural Gas Distribution adjusted earnings of $84 million in the full year of 2022 were $9 million higher than the
same period in 2021 mainly due to cost efficiencies.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

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 in the fourth quarter of 2022 were comparable to the
same period in 2021.

Natural Gas Transmission adjusted earnings of $47 million in the full year of 2022 were $4 million higher than the
same period in 2021 mainly due to growth in rate base, including the acquisition of the Pioneer Pipeline which
occurred in June 2021.

International Natural Gas Distribution

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

International Natural Gas Distribution adjusted earnings of $13 million in the fourth quarter of 2022 were
comparable to the same period in 2021.

International Natural Gas Distribution adjusted earnings of $49 million in the full year of 2022 were $15 million
higher than the same period in 2021 mainly due to the impact of inflation indexing on rate base. The impact of
inflation on rate base is added to the rate base annually and 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. Higher earnings were partially offset by the impact of foreign
exchange rates.

UTILITIES RECENT DEVELOPMENTS

Electricity Distribution

White River First Nation Saa Sè Energy Project

ATCO Electric Yukon, a subsidiary of Canadian Utilities, and Copper Niisüü Limited Partnership, have finalized a
landmark Electricity Purchase Agreement that will help the White River First Nation reduce their reliance on diesel
power, achieve greater energy autonomy, and generate economic benefits for the next 30 years.

Under the agreement, CNLP will build, own and operate the Beaver Creek solar facility, designed to be the largest
penetration solar project in the Yukon Territory – a measure of how much power generated by current means is
being replaced by solar electricity. Canadian Utilities will provide technical expertise throughout the duration of the
project and will manage the installation of equipment that helps connect solar equipment to Canadian Utilities'
existing systems. Once construction is completed, CNLP will serve as the Independent Power Producer, owning and
operating the solar facility. Canadian Utilities will purchase the solar electricity generated, connect it to the grid and
redistribute it back to the community. The facility is expected to be fully operational by 2024.

The Government of the Northwest Territories (GNWT) Electric Vehicle (EV) Investment

In August 2022, GNWT announced it is providing Northland Utilities Enterprises Ltd. (NUE), a 50/50 joint-venture
partnership between a subsidiary of the Company and Denendeh Investments Incorporated (DII), with up to
$300,000 to support the installation of two public EV fast-charger stations in Yellowknife.

The charger stations are part of the planned EV charging corridor between Yellowknife and the Alberta border
committed to by the GNWT as part of their 2030 Energy Strategy. It will also support the purchasing of EVs for
Northern Canadian residents by increasing public access to the charging infrastructure. This partnership highlights
our Company's continued focus on collaboration to enable and accelerate the clean energy transition.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Northland Utilities Enterprises Ltd. Ownership Structure

On March 31, 2022, the Company and Denendeh Investments Incorporated entered into a share purchase
agreement to increase DII's ownership interest in NUE from 14 per cent to 50 per cent. NUE is an electric utility
company operating in the Northwest Territories and a subsidiary of ATCO Electric Ltd. The change in ownership
interest was accomplished through DII's purchase of 36 per cent of the outstanding shares of NUE for a purchase
price, net of cash disposed, of $8 million. The transaction results in each party having a 50 per cent ownership
interest in NUE and highlights our continued commitment to foster Indigenous community ownership and self-
sustaining economic development.

International Natural Gas Distribution

Clean Energy Innovation Hub Hydrogen Projects

In December 2022, Canadian Utilities announced the commissioning of two hydrogen projects at the Clean Energy
Innovation Hub in Australia, the blending of hydrogen into the Western Australia natural gas network and the first
hydrogen fuelling station.

A small percentage of hydrogen has been blended into a portion of the natural gas distribution network for around
2,700 homes within the City of Cockburn.

Canadian Utilities, in partnership with Fortescue Future Industries, has constructed WA's first Hydrogen Refuelling
Station that will enable Fortescue, Canadian Utilities and third parties such as the WA Police to support their fleets
of hydrogen fuel cell vehicles for emissions-free travel.

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. 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 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.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Performance Based Regulation (PBR)

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

In 2022, the Natural Gas Distribution and Electricity Distribution businesses concluded their second PBR term
resulting in earnings achieved through cost efficiencies implemented in 2022 and prior periods. These efficiencies
will be passed on to customers upon rebasing. Following a one-year cost-of-service rebasing in 2023, these
businesses will move to a third generation of performance-based regulation (PBR3). More information on PBR3 is
outlined below in the Regulatory Updates section.

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

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, are recovered through a “Type I” K Factor

Return On Equity (ROE) Used for
Going-in Rates

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

and 2019

Efficiency Carry-over
Mechanism (ECM)

Reopener

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

ROE Used for Reopener
Calculation

• 2018: 8.5% excluding impact of ECM
• 2019: 8.5% excluding impact of ECM
• 2020 - 2022: 8.5%

Access Arrangement - International Natural Gas Distribution

Under the existing Access Arrangement (AA5), ATCO Gas Australia is using the Post-Tax Revenue Model method to
determine revenue requirement and customer rates. This approach incorporates an annual addition of the impact
of inflation to the rate base, which is reflected in future customer rates through the recovery of depreciation.
Customer rates are annually adjusted through a mechanism that aligns approved rates in real dollars with actual
inflation.

The Economic Regulation Authority is required to publish a Rate of Return Instrument that details the methodology
and parameters to determine the WACC relevant to the Access Arrangement period. The current AA5 applicable
period is January 1, 2020 to December 31, 2024. The ERA reviews and updates the Instrument every four years, with
the most recent Instrument published in December 2022. This updated Instrument will not be applied until the next
Access Arrangement period (AA6) and has no impact on the current AA5 ROE of 5.02 per cent. More information on
AA6 is outlined below in the Regulatory Updates section.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

REGULATORY UPDATES

Common Matters

Generic Cost of Capital Proceeding (GCOC)

On March 31, 2022, the AUC approved the extension of the current ROE of 8.5 per cent and equity thickness ratio of
37 per cent on a final basis for the 2023 period. On June 29, 2022, the AUC initiated a process schedule to determine
the cost-of-capital parameters and explore a formula-based approach to determine the ROE for 2024 and future
test years. As part of this proceeding, the AUC has also highlighted the need to establish the deemed equity ratios
for the 2024 test period and in future years if a formula is implemented. A decision is expected in the third quarter
of 2023.

2023 Cost of Service (COS) for Distribution Utilities

On July 28, 2022 and September 1, 2022, the AUC issued decisions on Electricity Distribution's and Natural Gas
Distribution’s 2023 COS applications which resulted in the majority of the requested revenue requirement being
approved. The AUC accepted the forecasting methodology and confirmed that it reflects achieved efficiencies, which
are being passed onto customers. Electricity and Natural Gas Distribution received AUC approval in December 2022,
approving 2023 distribution rates on an interim basis effective January 1, 2023.

Third Generation Performance Based Regulation

On May 26, 2022, the AUC initiated a proceeding to establish parameters for a third generation of performance-
based regulation. Following a one-year cost of service rebasing in 2023, this proceeding will set rates for the
Distribution utilities for the subsequent PBR term which commences in 2024. A decision on third generation
parameters is expected in the fourth quarter of 2023.

Bill 18 – Utility Commodity Rebate Act

On April 25, 2022, the provincial government passed Bill 18: Utility Commodity Rebate Act which includes legislation to
allow the government to provide upcoming electricity and gas rebates to Albertans. Bill 18 enables the Government
of Alberta (GOA) to provide monthly electricity rebates from July 2022 to April 2023 for a total rebate of $500, to
almost all homes and businesses, as well as a natural gas rebate (administrated through retailers) if regulated
natural gas rates exceed $6.50 per gigajoule over winter (October 1, 2022 to March 31, 2023). Since the rebate is
government funded there is no financial impact to Canadian Utilities.

Electricity Transmission

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. A proceeding was commenced to determine whether ATCO Electric
Transmission failed to comply with AUC decisions and enactments under the AUC's jurisdiction with respect to a
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.

The AUC enforcement branch and ATCO Electric Transmission commenced settlement discussions in January 2022.
On March 18, 2022, the AUC enforcement branch and ATCO Electric Transmission concluded discussions and
notified the AUC that the parties had reached a settlement on all matters. On April 14, 2022, the AUC Enforcement
branch and ATCO Electric Transmission filed the settlement with the AUC, which reflected an agreed administrative
penalty of $31 million, a commitment to amend the ongoing Deferral Account Application to ensure the estimated
$11 million of additional rate base remains excluded from customer rates, and the implementation of revised
practices and policies. On June 29, 2022, the AUC issued its decision approving the settlement in its entirety. In the
fourth quarter of 2021 and first quarter of 2022, the Company recognized costs of $7 million and $14 million (after-
tax and non-controlling interests), respectively, related to the proceeding.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

ATCO Electric Transmission 2018-2021 Deferral Account

The proceeding was re-opened on June 29, 2022 to address the costs associated with the Jasper interconnection
project and include the 2021 deferral balances. ATCO Electric Transmission filed a comprehensive update to all
information originally filed in support of the Jasper Interconnection Project and a Decision is expected in the second
quarter of 2023.

ATCO Electric Transmission 2023-2025 GTA Application

On May 19, 2022, ATCO Electric Transmission filed a GTA requesting approval of revenue requirements related to
operational and maintenance costs as well as capital expenditures needed over the 2023-2025 period. The
application also requested new deferral accounts and changes to a number of existing deferral accounts. A
comprehensive negotiated settlement was reached with all the participating interveners, and a negotiated
settlement application was filed with the AUC in January 2023. A decision from the AUC is expected in the second
quarter of 2023.

Natural Gas Transmission

Pioneer Pipeline Acquisition

In 2020, Natural Gas Transmission entered into an agreement to acquire the 131-km Pioneer Pipeline from
Tidewater Midstream & Infrastructure Ltd. and its partner TransAlta Corporation. Consistent with the geographic
areas defined in the Integration Agreement, Natural Gas Transmission transferred to Nova Gas Transmission Ltd.
(NGTL) the 30-km segment of pipeline that is located in the NGTL footprint.

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 on February 25, 2022, Natural Gas Transmission completed
the transfer to NGTL of the 30-km segment of pipeline located in the NGTL footprint for $63 million.

International Natural Gas Distribution

Access Arrangement 6 (AA6)

ATCO Gas Australia is advancing its AA6 submission to the Economic Regulation Authority for the period January 1,
2025 to December 31, 2029. ATCO Gas Australia will formally submit its Access Arrangement proposal to the ERA by
September 1, 2023.

The ERA published the 2022 Rate of Return Instrument on December 16, 2022. On the return on equity, compared
to the 2018 Instrument, the 2022 Instrument is favourable as it adopts a 10-year term for the risk free rate (in the
2018 Instrument a 5-year term was adopted) and a 6.1 per cent market risk premium (in the 2018 Instrument a 6.0
per cent market risk premium was adopted). On the cost of debt, the 2022 Instrument retains the hybrid trailing
average approach and incorporates a small increase (0.074 per cent) in debt hedging and raising costs. This new
rate of return instrument will not apply to ATCO Gas Australia until AA6 commences on January 1, 2025.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

ENERGY INFRASTRUCTURE

REVENUES

Energy Infrastructure revenues of $94 million and $312 million in the fourth quarter and full year of 2022 were
$20 million and $103 million higher than the same periods in 2021. Higher revenues were mainly due to revenue
from the Alberta Hub natural gas storage facility acquired in December 2021 and higher natural gas prices at the
Carbon and Alberta Hub natural gas storage facilities.

ADJUSTED EARNINGS

($ millions)

2022

2021

Change

2022

2021

Change

Three Months Ended
December 31

Year Ended

December 31

Electricity Generation (1) (2)
Storage & Industrial Water (1) (2)
Total Energy Infrastructure (2)

(1) Considered to be non-GAAP financial measures.

(2)

—

(2)

(5)

(2) Additional information is provided under the headings “Other Financial and Non-GAAP Measures” and “Reconciliation of Adjusted Earnings to Earnings

Attributable to Class I and Class II Shares” in this MD&A.

Energy Infrastructure adjusted earnings of $3 million and $19 million in the fourth quarter and full year of 2022
were $1 million and $4 million higher than the same periods in 2021 mainly due to earnings from the Alberta Hub
natural gas storage facility acquired in December 2021, partially offset by higher project development costs incurred
in 2022, largely in Australia.

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 and full year of 2022 were $2 million and $5 million
lower compared to the same periods in 2021 mainly due to higher project development costs incurred in 2022,
largely in Australia.

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 $5 million and $17 million in the fourth quarter and full year of 2022
were $3 million and $9 million higher compared to the same periods in 2021 mainly due to earnings from the
Alberta Hub natural gas storage facility acquired in December 2021.

ENERGY INFRASTRUCTURE RECENT DEVELOPMENTS

Renewable Energy Portfolio Acquisition

In October 2022, Canadian Utilities announced it had entered into a definitive agreement with Suncor Energy Inc. to
acquire a portfolio of wind and solar assets and development projects located in Alberta and Ontario. Subsequent
to year-end, on January 3, 2023, the transaction closed for a purchase price of $713 million, net of cash acquired,
and subject to working capital adjustments.

The acquisition includes a majority interest in the Adelaide wind facility in Ontario, the new 202-MW Forty Mile wind
project in Alberta, and a development pipeline with more than 1,500-MW of wind and solar projects at various
stages of development, including several late-stage projects.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Through a formal preemptive rights process, existing
partners on the Chin Chute and Magrath Wind
projects opted to acquire the additional interest in
these facilities. As a result, the corresponding 20-MW
of net nameplate capacity of the previously
announced 252-MW operational portfolio was not
acquired by Canadian Utilities as part of this
transaction and the purchase price was adjusted
accordingly from $730 million to $713 million.

Concurrent with the close of this acquisition,
Canadian Utilities entered into a new 15-year
renewable energy purchase agreement with
Microsoft Corporation. Under the terms of the
agreement, Microsoft will purchase 150-MW of
renewable energy generated by Canadian Utilities'
newly acquired Forty Mile Wind Phase 1 Project in
Alberta. The offtake from the Adelaide wind facility is
also contracted under a long-term power purchase
agreement.

Adelaide wind facility, Ontario, Canada

This investment drives meaningful progress towards meeting our previously announced goal of owning, developing
or managing more than 1,000-MW of renewable energy by 2030.

Central West Pumped Storage Hydro Project

In February 2021, Canadian Utilities 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 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 (NSW). In September 2022, a $9 million AUD
recoverable grant was awarded by the NSW Government to help fund pre-investment activities. A final investment
decision on project construction is expected in 2023.

Canadian Pacific Hydrogen Locomotive Project

In May 2022, Canadian Utilities announced an agreement with Canadian Pacific (CP) to provide engineering,
procurement and construction services for two hydrogen production and refueling facilities in Calgary and
Edmonton. The fuelling stations will be essential in bringing zero-emissions hydrogen locomotive propulsion into
reality as part of CP's commitment to sustainable and responsible operations. The construction of these facilities
will advance CP's innovative Hydrogen Locomotive Program, which has its sights set on building its first line-haul
hydrogen-powered freight locomotive. Early stages of siting and construction has commenced, with production and
supply of hydrogen expected to be provided to locomotives in 2023.

Suncor ATCO Heartland Hydrogen Hub (SAH3)

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 is currently progressing through early design and
engineering phases, which will continue throughout 2023 ahead of the sanctioning decision currently expected as
early as 2024.

Atlas Carbon Sequestration Hub (Atlas Hub)

To support Canadian Utilities' hydrogen strategy and the development of SAH3, as well as the Province of Alberta’s
carbon sequestration ambitions, Canadian Utilities and its partners are developing the Atlas Carbon Sequestration
Hub. The Atlas Hub development has been proposed east of Edmonton by a partnership led by Shell Canada
Limited, ATCO Energy Solutions Ltd., and Suncor Energy Inc.

On March 31, 2022, Atlas Hub was shortlisted for further evaluation by the Government of Alberta. Proponents have
been invited to work with the government to further evaluate the suitability of each location for safely storing

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

carbon from industrial emissions. If the evaluation demonstrates that the proposed projects can provide permanent
storage, companies can work with the government on an agreement that provides them with the right to inject
captured carbon dioxide. This agreement will also ensure proponents will provide open access to all emitters and
affordable use of the hub. Canadian Utilities and its partners continue to progress development of Atlas Hub, which
is expected to advance throughout 2023.

Calgary Solar Development Projects

In September 2021, Canadian Utilities announced 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. In March 2022, Canadian
Utilities entered into a 15-year power purchase agreement with Microsoft Corporation. Under the terms of the
agreement, Microsoft will purchase all renewable energy generated by Canadian Utilities’ 37-MW Deerfoot solar
project in Calgary, Alberta. Once operational, the Deerfoot solar project will be one of the largest solar installations
in a major urban centre in Western Canada.

Both the Barlow and the Deerfoot projects have
received all major permits. Construction started on
Barlow in June 2022 and Deerfoot in September
2022. The Barlow Solar Project achieved its in-service
date with the Alberta Electric System Operator along
with exporting power to the grid with the
energization of the first array of solar panels in
December 2022, with full commercial operations
expected in the second quarter of 2023. Deerfoot is
expected to commence energization in the third
quarter of 2023, with full commercial operations
expected in the fourth quarter of 2023.

Barlow solar site, Calgary, Alberta, Canada

Empress Solar Development Project

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. Construction
began late in the third quarter of 2022. Commercial operation is expected to commence in the fourth quarter of
2023.

Natural Gas Liquids Storage

In the fourth quarter of 2019, Canadian Utilities secured a long-term contract for the construction and operation of
a fifth storage cavern and associated pipeline at the ATCO Heartland Energy Centre, near Fort Saskatchewan,
Alberta. Construction of the facilities were completed in the third quarter of 2022 and commenced commercial
operations in the fourth quarter of 2022.

Subsequent Event

Osborne Power Purchase Agreement Extension

Subsequent to year-end, on February 3, 2023, Canadian Utilities executed an extension to the current PPA with
Origin Energy Electricity Limited for the Osborne electricity cogeneration facility in South Australia. The extension is
for a period of three years, commencing on January 1, 2024, with a further one year option. The terms of the
extension are similar to the current tolling arrangement with increased flexibility and dispatch capability for the
customer.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

CANADIAN UTILITIES CORPORATE & OTHER

Canadian Utilities' Corporate & Other segment includes Rümi, Blue Flame Kitchen and Retail Energy through ATCO
Energy 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

Three Months Ended
December 31

Year Ended
December 31

($ millions)

2022

2021

Change

2022

2021

Change

Canadian Utilities Corporate & Other (1)

(7)

(10)

(50)

(41)

(9)

(1) Additional information is provided under the headings “Other Financial and Non-GAAP Measures” and “Reconciliation of Adjusted Earnings to Earnings

Attributable to Class I and Class II Shares” in this MD&A.

Including intersegment eliminations, Canadian Utilities' Corporate & Other adjusted earnings in the fourth quarter
of 2022 were $3 million higher compared to the same period in 2021 mainly due to the timing of certain expenses
and higher interest income earned, partially offset by increased financing costs from a new preferred dividend
issuance in December 2021.

Canadian Utilities' Corporate & Other adjusted earnings in the full year of 2022 were $9 million lower compared to
the same period in 2021 mainly due to increased financing costs from a new preferred share issuance in December
2021.

ATCO LTD. 2022 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 2022 Sustainability Report, which will be published in May 2023, focuses 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 2022 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 2022 Sustainability Report, ESG Datasheet, Corporate Governance, materiality assessment, and additional
details and other disclosures will be available in May 2023 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.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

ENERGY TRANSITION HIGHLIGHTS AND PERFORMANCE

As our portfolio of assets and businesses evolve, so too does our environmental footprint. Since 2005, we have
significantly decarbonized our portfolio.

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. Below are examples of 2022 energy transition
developments, with further details included in the Business Unit Performance section in this MD&A:

•

Suncor ATCO Heartland Hydrogen Hub;

Canadian Pacific Hydrogen Locomotive Project;

Clean Energy Innovation Hub & Hydrogen Refuelling Station, Australia;

Empress and Calgary Solar Development Projects;

Central West Pumped Storage Hydro project, Australia;

Suncor Energy Inc. Renewable Energy Portfolio Acquisition; and

Atlas Carbon Sequestration Hub.

Historical Portfolio Direct (Scope 1) GHG Emissions

Our 2022 estimated direct (Scope 1) GHG emissions are 0.79 million tonnes CO2e, which is a slight increase over
2021. The reason for this increase can be attributed to an increase in energy demand from our natural gas power
plants in Australia. Final 2022 direct GHG emissions data will be available in our Sustainability Report, which will be
released in May 2023.

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

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 focus our efforts on policies or regulations most relevant
to our existing or planned projects.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

ATCO Historical Portfolio Direct (Scope 1) GHG Emissions (million tonnes CO2e)200520062007200820092010201120122013201420152016201720182019202020212022E05101520Canadian Net-Zero Emissions Accountability Act

As required under its Canadian Net-Zero Emissions Accountability Act enacted in March 2022, the Government of
Canada released its 2030 Emissions Reduction Plan: Canada’s Next Steps for Clean Air and a Strong Economy. The
plan outlines a sector-by-sector approach for Canada to reduce emissions by 40 per cent below 2005 levels by 2030.
The plan includes specific sector reduction intentions such as:

•

Clean Electricity Regulation – intention to have a net-zero electricity grid by 2035.

Green Building Strategy – reducing direct residential, commercial and institutional building emissions by
37 per cent from 2005 levels by 2030.

• Methane Reductions – reducing oil and gas methane emissions by at least 75 per cent below 2012 levels

by 2030.

•

Oil and Gas Cap – reducing oil and gas sector emissions by 31per cent from 2005 levels by 2030.

Zero Emissions Vehicle Mandate – setting Zero Emission Vehicle sales targets for manufacturers and
importers of new passenger cars, SUVs, and pickup trucks requiring that at least 20 per cent of new vehicles
sold in Canada to be zero emission by 2026, at least 60 per cent by 2030, and 100 per cent by 2035.

Consultations have been ongoing on most of the above mentioned reduction intentions, with plans to introduce
regulations for some of the initiatives in 2023.

Government of Canada Clean Fuel Regulations (CFR)

The CFR were published in the Canada Gazette Part II on July 6, 2022, with reduction requirements coming into force
on July 1, 2023. The CFR will require gasoline and diesel suppliers to reduce carbon intensity by approximately 13
per cent by 2030 and will create opportunities to generate credits through clean fuels production and fuel switching.

Government of Canada Carbon Capture, Utilization and Storage (CCUS) Investment Tax Credit (ITC)

The Canadian Federal Budget 2022 established a refundable ITC for CCUS. For 2022-2030, the CCUS ITC is 60 per
cent for investments in equipment for capturing carbon from air, 50 per cent for investments that capture and store
carbon, and 37.5 per cent for investments in equipment for storage, transportation, and use. In August 2022, the
Government of Canada released for public comments draft legislative proposals to the Income Tax Act and the
Income Tax Regulations related to the ITC for CCUS.

Government of Canada 2022 Fall Economic Statement (FES)

In November 2022, the FES was announced, introducing a series of measures designed to grow the Canadian
economy — both in the short and medium term. Key energy policies include:

•

An Investment Tax Credit for Clean Technologies – a refundable tax credit equal to 30 per cent of the capital
cost of investments in clean technologies.

An Investment Tax Credit for Clean Hydrogen – an investment tax credit to support investments in clean
hydrogen production.

Canada Growth Fund – a fund that will help to attract private capital to invest in building a thriving,
sustainable Canadian economy with thousands of new, good-paying jobs.

In August 2022, the US passed an energy bill called the Inflation Reduction Act (IRA). It offers extensive financial
supports to firms that locate their production in the United States—from electric vehicle battery production, to
hydrogen, to biofuels, and beyond. The Canadian government has stated its commitment to respond to the IRA and
ensure that Canada remains a first-choice destination for businesses to invest and create jobs. It has launched
consultations to seek input on how best to design and implement the initiatives mentioned above.

Alberta Utilities Commission Hydrogen Inquiry Report

Following the release of its Hydrogen Roadmap, the Government of Alberta directed the AUC to inquire into and
report to the Minister of Energy on matters relating to hydrogen blending into natural gas distribution systems. On
September 6, 2022, the AUC publicly released the Hydrogen Inquiry Report, which provides further information on
hydrogen blending into natural gas distribution systems. It discusses the role of regulated natural gas distribution
systems and unregulated competitive markets for up to 20 per cent blending by volume, impacts of blending
hydrogen into low-pressure natural gas distribution systems, the safe and reliable delivery of blended hydrogen,

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

and regulatory ambiguity. While the AUC report represents a positive step forward, it is a consultative inquiry and
changes to legislation must be passed through legislature.

Government of Alberta Bill 22 Electricity Statutes (Modernizing Alberta’s Electricity Grid) Amendment Act, 2022

Bill 22, which received royal assent on May 31, 2022, enables the integration of energy storage (batteries) into
Alberta’s interconnected electric system and will include the development of new transmission regulations.

Carbon Pricing/Output-Based Pricing Systems

In January 2022, the carbon price in Canada increased from $40 to $50 per tonne. The Government of Canada’s plan
on climate change proposes to increase the carbon price by $15 per tonne each year starting in 2023, rising to $170
per tonne by 2030. As a result, beginning April 2023, the minimum national carbon price in Canada is expected to be
$65 per tonne.

In December 2022, the Government of Alberta introduced amendments to Technology Innovation and Emissions
Reduction (TIER) Regulation to help bring the regulation in line with the minimum federal standards, ensuring the
continuation of the provincial emissions trading and carbon pricing system in Alberta. These changes come after a
stakeholder consultation process which was introduced in June 2022. A significant change includes the creation of
sequestration credits and the recognition of captured tonnes under the federal Clean Fuel Regulation. Other
changes include alignment with the federal carbon pricing, increases to benchmark tightening, reduced periods to
use created credits, increases to credit limit use and the inclusion of flaring for aggregated oil and gas facilities.

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.

Government of Australia Climate Change Bill 2022

In July 2022, the Australian Government introduced the Climate Change Bill 2022 legislating the nation’s
commitment to reduce greenhouse gases by 43 per cent below 2005 levels by 2030, and net zero by 2050. The
legislation strengthens accountability through an annual statement and tasks the independent Climate Change
Authority to provide advice on Australia's progress towards these targets, and on what Australia's future targets
should be.

Government of Australia National Gas Rules

In October 2022, it was agreed to amend the National Gas Law and Regulations to bring hydrogen blends,
biomethane and other renewable gases under the national gas regulatory framework. This work supports the
development of the domestic hydrogen and biomethane industries by removing barriers for producers to access
infrastructure and markets. It also ensures consumers are protected as Australia’s energy system transitions in line
with net zero goals.

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

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

where appropriate through asset improvement projects. We have also mapped and continue to regularly inspect
pipeline water crossings.

In our Structures & Logistics business, 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.

In addition, our global property insurance provider conducted an assessment of our global locations (excluding
electricity and natural gas transmission and distribution) and determined that ATCO is in the top quartile for climate
change resiliency. This means that, when compared to other global customers, our score is in the lowest climate risk
quartile. We continue to evaluate priority investments and actions in 2023 and beyond to further reduce climate
change physical risks to assets.

CLIMATE CHANGE CHALLENGES AND OPPORTUNITIES

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

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

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Category/Driver

Challenges

Opportunities

Policy/Regulatory Operations in several

jurisdictions subject to
emissions limiting
regulations

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

Continued fuel switching
to lower-emitting options

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

Electricity grid
modernization

Hydrogen economy
development

Mitigation Options/
Measures

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

Business diversification

Hydrogen research and
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

Participation in carbon
markets

Business diversification

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, energy
storage, 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

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. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

OTHER EXPENSES AND INCOME

A financial summary of other consolidated expenses and income items for the fourth quarter and full year of 2022
and 2021 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

2022

2021

Change

2022

2021

Change

884

195

765

156

118

119

3,044

2,607

437

(1)

(21)

(30)

717

391

214

423

148

—

(32)

Operating costs, which are total costs and expenses less depreciation, amortization and impairment, increased by
$119 million and $437 million in the fourth quarter and full year of 2022 compared to the same periods in 2021.
Higher operating costs were mainly due to net increased material costs associated with ATCO Structures' projects
and other trade sales, higher energy costs and higher unrealized and realized losses on derivative financial
instruments in ATCO Energy, higher flow-through costs in the Alberta Utilities, and increased fuel costs at Energy
Infrastructure's Carbon and Alberta Hub natural gas storage facilities. Higher operating costs compared to the same
periods in 2021 were partially offset by the Information Technology (IT) transition costs incurred in 2021 for the
early termination of the master services agreements with Wipro Ltd. (Wipro).

DEPRECIATION, AMORTIZATION AND IMPAIRMENT

Depreciation, amortization and impairment increased by $39 million in the fourth quarter of 2022 compared to the
same period in 2021 mainly due to the recognition of project cost recoveries in 2021 related to the conclusion of an
international project that had previously been impaired, and ATCO Structures' increase in rental fleet assets.

Depreciation, amortization and impairment in the full year of 2022 was comparable to the same period in 2021.

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 of 2022 were $1 million lower than the same
period in 2021 mainly due to lower volumes during the quarter.

Earnings from investment in associate company in the full year of 2022 were $1 million higher compared to the
same period in 2021. Higher earnings were mainly due to increased activity and revenues across the portfolio of
ports in 2022 and favourable exchange rates.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

EARNINGS FROM INVESTMENT IN JOINT VENTURES

Earnings from investment in joint ventures is mainly comprised of Canadian Utilities' ownership positions in
electricity generation plants, Northland Utilities Enterprises electricity operations in the Northwest Territories, 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 in the fourth quarter of 2022 were comparable to the same period in
2021.

Earnings from investment in joint ventures increased by $19 million in the full year of 2022 compared to the same
period in 2021. Higher earnings were generated as a result of LUMA Energy's ongoing operations as compared to
continued transition work in the first half of 2021, and the impact of foreign exchange rates. Earnings in 2022 were
also higher due to the 2022 reversal of an impairment of an investment previously recognized in 2021 in the Energy
Infrastructure segment.

NET FINANCE COSTS

Net finance costs decreased by $21 million and $32 million in the fourth quarter and full year of 2022 compared to
the same periods in 2021 mainly due to higher interest income from cash investments.

INCOME TAX EXPENSE

Income taxes were lower by $30 million in the fourth quarter of 2022 compared to the same period in 2021 mainly
due to lower IFRS earnings before income taxes and a 2021 write down of deferred tax assets in ATCO Mexico.

Income taxes were higher by $66 million in the full year of 2022 compared to the same period in 2021 mainly due to
increased IFRS earnings before income taxes.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

LIQUIDITY AND CAPITAL RESOURCES

Our financial position is supported by our diversified portfolio with a structured foundation of regulated and long-
term contracted businesses. 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

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

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

A (high)

R-1 (low)

BBB+

BBB

A-1 (low)

P-2 (low)

A-

A-1 (low)

PFD-2 (high)

P-2

Fitch

BBB+

A-

BBB

A-

BBB+

N/A

BBB+

N/A

(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 March 2, 2022, S&P Global Ratings revised its issuer rating on ATCO Ltd. and Canadian Utilities Limited from 'A-'
with a negative outlook to 'BBB+' with a stable outlook. S&P Global Ratings affirmed ATCO subsidiary CU Inc.'s 'A-'
issuer credit rating and stable outlook, reflecting S&P's view that CU Inc. is an insulated entity to ATCO Ltd. and
Canadian Utilities Limited.

On March 17, 2022, Fitch Ratings assigned a first-time issuer rating of 'A-' with a stable outlook to both Canadian
Utilities Limited and CU Inc., as well as a first-time issuer rating of 'BBB+' with a stable outlook to ATCO Ltd.

On March 24, 2022, S&P Global Ratings affirmed ATCO subsidiary ATCO Gas Australia Pty Ltd's 'BBB+' issuer credit
rating and stable outlook.

On August 2, 2022, DBRS Limited affirmed its 'A (high)' long-term corporate credit rating and stable outlook on
Canadian Utilities subsidiary CU Inc.

On August 4, 2022, S&P Global Ratings affirmed Canadian Utilities subsidiary CU Inc.'s 'A-' long-term issuer credit
rating and stable outlook. On August 11, 2022, S&P Global Ratings affirmed its 'BBB+' long-term issuer credit rating
and stable outlook on Canadian Utilities Limited.

On September 12, 2022, DBRS Limited affirmed its 'A (low)' long-term corporate credit rating and stable outlook on
ATCO Ltd. and its 'A' long-term corporate credit rating and stable outlook on Canadian Utilities Limited.

On September 21, 2022, S&P Global Ratings affirmed its 'BBB+' long-term issuer credit rating and stable outlook on
ATCO Ltd.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

LINES OF CREDIT

At December 31, 2022, ATCO and its subsidiaries had the following lines of credit.

($ millions)

Long-term committed

Uncommitted
Total

Total

Used

Available

3,396

669
4,065

1,080

258
1,338

2,316

411
2,727

Of the $4,065 million in total lines of credit, $669
million was in the form of uncommitted credit
facilities with no set maturity date. The other $3,396
million in credit lines was committed, with maturities
between 2024 and 2026, and may be extended at the
option of the lenders.

Of the $1,338 million in lines of credit used, $656
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.

CONSOLIDATED CASH FLOW

At December 31, 2022, the Company's cash position was $1,033 million, a decrease of $55 million compared to
December 31, 2021. Major movements are outlined in the following table:

($ millions)

Cash flows from operating activities

Net issue (repayment) of long-term debt

(Repayment) issue of short-term debt
Cash used for capital investment (1)
Issue of equity preferred shares by subsidiary company

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 in cash position

Year Ended
December 31

2022

2021

Change

2,396 1,864

532

222

273

(51)

(206)

206

(412)

(1,650) (1,463)

(187)

—

201

(201)

(110)

110

(211)

(205)

(288)

(297)

(6)

(426)

(401)

(25)

108

(55)

(80)

(12)

188

(43)

(1)

Additional information regarding this non-GAAP measure is provided under the headings “Other Financial and Non-GAAP Measures” and “Reconciliation
of Capital Investment to Capital Expenditures” in this MD&A.

Cash Flows from Operating Activities

Cash flows from operating activities were $696 million and $2,396 million in the fourth quarter and full year of 2022,
$154 million and $532 million higher than the same periods in 2021. The increase in the fourth quarter was mainly
due to higher cash flows from ATCO Structures' Bechtel Pluto II Project in Australia, and the timing of payables. Cash
flows from operating activities for the full year 2022 were higher due to ATCO Structures' Bechtel Pluto II Project,
and higher cash flows from Canadian Utilities' Electricity Distribution and Gas Distribution businesses resulting from
revenue attributable to the recovery of the 2021 deferral of customer rate increases.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Lines of Credit($ millions)$4,065$(1,338)$2,727TotalUsedAvailable

Cash Used for Capital Investment (1) and Capital Expenditures

Total capital investment of $560 million and $1,650 million in the fourth quarter and full year of 2022 was
$141 million and $187 million higher compared to the same periods in 2021 mainly due to ongoing capital
investment in the Regulated Utilities, and ATCO Structures' continued expansion of its space rental fleet globally and
fourth quarter acquisition of Triple M. In addition to the fourth quarter variances, full year 2022 capital investment
was higher due to increased construction activities within Canadian Utilities' Energy Infrastructure segment, partially
offset by Canadian Utilities' 2021 acquisition of the Pioneer Pipeline and the completed construction of the Calgary
Northwest Connector in 2021 in the Natural Gas Transmission business. The fourth quarter and full year 2022
capital investment increases were partially offset by the acquisition of the Alberta Hub natural gas storage facility in
the Energy Infrastructure business in December 2021.

Total capital expenditures of $517 million and $1,597 million in the fourth quarter and full year of 2022 were
$190 million and $245 million higher compared to the same periods in 2021 mainly due to the factors outlined
above with the exception of the 2022 Triple M and the 2021 Alberta Hub acquisitions as these business
combinations were excluded from capital expenditures.

Capital investment and capital expenditures for the fourth quarter and full year of 2022 and 2021 are shown in the
following table.

Three Months Ended
December 31

Year Ended
December 31

2021
114
11
125

Change
90
(1)
89

($ 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

Structures & Logistics

Energy Infrastructure

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

2022
60
5
65

199
185
384
64
4

452

517

—

453

560

2021
33
(40)
(7)

92
159
251
80
3

334

327

—

426

419

Change
27
45
72

107
26
133
(16)
1

118

190

(1)

(6)

(84)

2022
204
10
214

566
571
1,137
234
12

350
747
1,097
120
10

1,383

1,227

1,597

1,352

—

1,394

1,338

141

1,650

1,463

216
(176)
40
114
2

156

245

—

(16)

(84)

187

(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 $4 million and $14 million (2021 - $(3) million and $6 million) of capitalized interest
during construction for the fourth quarter and full year of 2022. The $(3) million of capitalized interest during construction recognized in the fourth
quarter of 2021 relates to a project cancellation.

(3)

Includes $26 million and $178 million for the fourth quarter and full year of 2022 (2021 - $38 million and $169 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 under the headings “Other Financial and Non-GAAP Measures” and

“Reconciliation of Capital Investment to Capital Expenditures” in this MD&A.

(1) Additional information regarding this non-GAAP measure is provided under the headings “Other Financial and Non-GAAP Measures” and “Reconciliation of

Capital Investment to Capital Expenditures” in this MD&A.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Base Shelf Prospectus - CU Inc. Debentures

On September 16, 2020, CU Inc. filed a base shelf prospectus that permitted it to issue up to an aggregate of
$1.2 billion of debentures over the 25-month life. The prospectus expired on October 17, 2022 and the aggregate
issuances of the debentures were $820 million.

Debenture Issuances

On September 14, 2022, CU Inc. issued $210 million of 4.773 per cent 30-year debentures. Proceeds from the issue
were used to finance capital expenditures, and for other general corporate purposes.

On June 3, 2022, Canadian Utilities issued $250 million of 4.851 per cent 30-year debentures. Proceeds from this
issuance were used to repay existing indebtedness, and for other general corporate purposes.

Other Debt Issuance

On December 8, 2022, ATCO Energy Solutions Ltd. and ATCO Power (2010) Ltd., wholly owned subsidiaries of

Canadian Utilities Limited, entered into a $250 million extendible credit agreement maturing in December 2025 with

a syndicate of lenders, as well as an aggregate $100 million of uncommitted credit facilities with no set maturity

date.

Debenture Repayments

On April 1, 2022, CU Inc. repaid $125 million of 9.92 per cent debentures.

On November 9, 2022, Canadian Utilities repaid $200 million of 3.122 per cent debentures.

Preferred Shares

On May 24, 2022, Canadian Utilities reset the quarterly dividend rate on its Series Y Preferred Shares for the five
year period from and including June 1, 2022 to May 31, 2027. The fixed dividend will be paid as and when declared
by the Board of Directors of Canadian Utilities based on an annual dividend rate of 5.196 per cent.

Dividends and Common Shares

We have increased our common share dividend each year since 1993, a 30-year track record. Dividends paid to
Class I and Class II Share owners totaled $53 million in the fourth quarter of 2022 and $211 million in the full year of
2022.

On January 12, 2023, the Board of Directors declared a first quarter dividend of 47.56 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, 2022, we commenced a normal course issuer bid to purchase up to 1,011,907 outstanding Class I
Shares. The bid will expire on March 8, 2023. Between March 9, 2022 and February 28, 2023, 486,400 shares have
been purchased for $23 million.

SHARE CAPITAL

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

At February 28, 2023, we had outstanding 101,488,182 Class I Shares, 12,424,996 Class II Shares, and options to
purchase 1,878,600 Class I Shares.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

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, 8,305,300 Class I
Shares were available for issuance at December 31, 2022. 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.

QUARTERLY INFORMATION

The following table shows financial information for the eight quarters ended March 31, 2021 through
December 31, 2022.

($ millions, except for per share data)

Q1 2022

Q2 2022

Q3 2022

Q4 2022

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)

1,311
128
1.12
1.12
1.17

1,161
90
0.79
0.79
0.81

1,158
71
0.62
0.62
0.76

1,348
81
0.72
0.71
0.97

20
4
(6)

124
4
(12)

134

19
4
(3)

82
6
(16)

18
4
1

73
6
(15)

4
2
8

100
3
(7)

110

Q1 2021

Q2 2021

Q3 2021

Q4 2021

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

(1)

Additional information regarding these total of segments measures is provided under the headings "Other Financial and Non-GAAP Measures" and
"Reconciliation of Adjusted Earnings to Earnings Attributable to Class I and Class II Shares" in this MD&A.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Our financial results for the previous eight quarters reflect the cyclical demand for workforce housing and
seasonality with our 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.

STRUCTURES & LOGISTICS

In the first quarter of 2021, adjusted earnings were higher than 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, adjusted earnings were lower than 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, adjusted earnings were higher than 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, adjusted earnings were lower than 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.

In the first quarter of 2022, adjusted earnings were higher than the same period in 2021 mainly due to higher space
rental activity across all geographies, and higher occupancy and client work requests at BC Hydro Site C, and Trans
Mountain camps located in Clearwater and Valemount, BC.

In the second quarter of 2022, adjusted earnings were comparable to the same period in 2021.

In the third quarter of 2022, adjusted earnings were higher than the same period in 2021 mainly due to ATCO
Structures' strong business performance driven by higher space rentals activity globally and earnings from the
Bechtel Pluto Train II project, and ATCO Frontec's UK Training Camp Exercise project and higher occupancy at Site C
and Trans Mountain camps. Higher earnings were partially offset by ATCO Structures' project performance on
workforce housing trade sales in Mexico and lower workforce housing trade sales activity in Canada.

In the fourth quarter of 2022, adjusted earnings were lower compared to the same period in 2021 mainly due to
ATCO Structures' lower workforce housing trade sales activity in the US, and lower earnings in ATCO Frontec's
disaster and emergency management response projects.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

$14M$18M$16M$5M$20M$19M$18M$4MQ1 2021Q2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 2022NELTUME PORTS

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

In the second quarter of 2021, Neltume Ports' adjusted earnings were 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' adjusted earnings were higher compared to 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.

In the fourth quarter of 2021, Neltume Ports' adjusted earnings were lower compared to 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.

In the first quarter of 2022, Neltume Ports' adjusted earnings were higher compared to the same period in 2021.
Higher earnings were mainly due to higher volumes across the portfolio of ports largely resulting from improved
weather conditions over the same time frame in 2021.

In the second quarter of 2022, Neltume Ports' adjusted earnings were higher compared to the same period in 2021.
Higher earnings were mainly due to increased activity and revenues across the portfolio in 2022 and favourable
exchange rates.

In the third quarter of 2022, Neltume Ports' adjusted earnings were comparable to the same period in 2021.

In the fourth quarter of 2022, Neltume Ports' adjusted earnings were lower than the same period in 2021 mainly
due to lower volumes during the quarter.

CANADIAN UTILITIES

Utilities (1)

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.

In 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.

(1)

Additional information regarding this total of segments measure is provided under the headings “Other Financial and Non-GAAP Measures” and
“Reconciliation of Adjusted Earnings to Earnings Attributable to Class I and Class II Shares” in this MD&A.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

$3M$3M$4M$3M$4M$4M$4M$2MQ1 2021Q2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 2022In the first quarter of 2022, adjusted earnings in the Utilities were higher than the same period in 2021. Higher
earnings were mainly due to timing of operating costs, cost efficiencies, growth in rate base, and earnings from
International Electricity Operations.

In the second quarter of 2022, adjusted earnings in the Utilities were higher than the same period in 2021. Higher
earnings were mainly due to the impact of inflation indexing on rate base in the International Natural Gas
Distribution business, timing of operating costs, cost efficiencies, and growth in rate base. Higher adjusted earnings
were also due to the impact of the Electricity Transmission 2018-2019 GTA Compliance Filing decision received from
the AUC in the second quarter of 2021.

In the third quarter of 2022, adjusted earnings in the Utilities were higher than the same period in 2021. Higher
earnings were mainly due to the impact of inflation indexing on rate base in the International Natural Gas
Distribution business, timing of operating costs, cost efficiencies, and growth in rate base. Higher earnings were also
due to the impact of the Electricity Transmission 2020-2022 GTA Compliance Filing decision received from the AUC
in the third quarter of 2021.

In the fourth quarter of 2022, adjusted earnings in the Utilities were lower than the same period in 2021 mainly due
to timing of cost recoveries in International Electricity Operations and the timing of operating costs in Electricity
Distribution, Natural Gas Distribution and International Electricity Operations.

Energy Infrastructure

In the first quarter of 2021, Energy Infrastructure adjusted 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 adjusted 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 adjusted 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 adjusted 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.

In the first quarter of 2022, Energy Infrastructure adjusted earnings were lower than the same period in 2021 mainly
due to recovered business development costs in 2021, project development costs incurred in 2022, and
unfavourable movements in the Australian foreign exchange rate, partially offset by earnings from the Alberta Hub
natural gas storage facility acquired in December 2021.

In the second quarter of 2022, Energy Infrastructure adjusted earnings were higher than the same period in 2021
mainly due to earnings from the Alberta Hub natural gas storage facility acquired in December 2021 and an
insurance recovery related to the Karratha facility in Australia.

In the third quarter of 2022, Energy Infrastructure adjusted earnings were higher than the same period in 2021
mainly due to earnings from the Alberta Hub natural gas storage facility acquired in December 2021, and higher
power pricing at the Old Man River hydro facility, partially offset by higher project development costs incurred in
2022, largely in Australia.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

$106M$65M$56M$109M$124M$82M$73M$100MQ1 2021Q2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 2022In the fourth quarter of 2022, Energy Infrastructure adjusted earnings were higher than the same period in 2021
mainly due to earnings from the Alberta Hub natural gas storage facility acquired in December 2021, partially offset
by higher project development costs incurred in 2022, largely in Australia.

EARNINGS ATTRIBUTABLE TO CLASS I AND CLASS II SHARES

Earnings attributable to Class I and Class II Shares include timing adjustments related to rate-regulated activities
and unrealized gains or losses on mark-to-market forward and swap commodity contracts. They also include
one-time gains and losses, 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:

•

Early Termination of the Master Services 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 ten-year MSAs expiring in December 2024. ATCO recognized onerous contract provisions

relating to the Wipro MSAs of $32 million and $2 million (after-tax and non-controlling interests)

in the fourth quarter of 2020 and first quarter of 2021, respectively.

The transition of the managed IT services from Wipro to IBM commenced on February 1, 2021
and was completed by December 31, 2021. In 2021, ATCO recognized transition costs of
$22 million (after-tax and non-controlling interests).

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 reflected an adverse arbitration decision, changes in market regulations, ongoing
political uncertainty, and a challenging operating environment, resulting in an impairment of the carrying
value of the assets. Other costs recorded were individually immaterial.

During the fourth quarter 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.

AUC Enforcement Proceeding

•

◦

On April 14, 2022, the AUC Enforcement branch and ATCO Electric Transmission filed a
settlement with the AUC regarding a sole source contract for the Jasper interconnection project.
On June 29, 2022, the AUC issued its decision approving the settlement in its entirety. In the
fourth quarter of 2021 and first quarter of 2022, the Company recognized costs of $7 million and
$14 million (after-tax and non-controlling interests), respectively, related to the proceeding.

• Workplace COVID-19 Vaccination Standard

◦

To safeguard the health and safety of employees, business partners, customers and
communities, the Company required its employees, subject to certain exemptions, to be
vaccinated against COVID-19 effective January 1, 2022. Employees who did not demonstrate they
were vaccinated or did not have an approved exemption were provided severance. In 2022, the
Company incurred $5 million (after-tax and non-controlling interests) in severance and related
costs associated with the Workplace COVID-19 vaccination standard.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

$5M$4M$4M$2M$4M$6M$6M$3MQ1 2021Q2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 2022•

Gain on sale of ownership interest in a subsidiary company

◦

On March 31, 2022, the Company and Denendeh Investments Incorporated entered into a share
purchase agreement to increase DII's ownership interest in Northland Utilities Enterprises Ltd.
from 14 per cent to 50 per cent. The transaction resulted in a gain on sale of $3 million (after-tax
and non-controlling interests). Effective March 31, 2022, the Company no longer consolidates
NUE as a controlled subsidiary, and instead, accounts for its interest in NUE as an investment in
joint venture using the equity method.

•

In the fourth quarter of 2022, a reversal of impairment of $2 million (after-tax and non-controlling
interests) was recorded mainly related to Energy Infrastructure's joint venture investment in the Osborne
electricity cogeneration facility located in South Australia. The reversal resulted from an improvement in
the future outlook of power market prices.

ATCO LTD. 2022 MANAGEMENT'S 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 advantages
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.

ATCO LTD. 2022 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. The Government of Alberta recently completed
its review of the Technology Innovation and Emissions Reduction (TIER) Regulations and in December 2022, released
the TIER Regulation Amendments which met equivalency with the federal Output-Based Pricing System.

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 four main business lines: space rentals, workforce housing, permanent modular
construction and residential housing.

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's 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.

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. While we are also exposed to extreme weather events in Puerto Rico the risk
is limited to operating activities as the Company does not own the transmission and distribution assets.

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. 2022 MANAGEMENT'S 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 accounts receivable and contract assets are from the Company’s operations
in Alberta, followed by operations in Australia. 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.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Business Risk: Energy Commodity Price

Businesses Impacted:

• Retail Energy

• Energy Infrastructure

Description & Context

Associated Strategies:

• Financial Strength

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

Energy Infrastructures' natural gas storage facility in Carbon, Alberta, and the Alberta Hub natural gas storage
facility near Edson, Alberta are exposed to storage price differentials. The growth of Energy Infrastructure's
renewable electricity business has increased exposure to merchant power markets.

Risk Management Approach

In conducting its business, the Company may use various instruments, including forward physical contracts,
financial swaps, energy or power purchase agreements, 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. 2022 MANAGEMENT'S 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, 2022, the Company had fixed interest rates, either directly or through interest rate swap agreements,
on 97 per cent (2021 - 97 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 is 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.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Business Risk: Inflation Risk

Businesses Impacted:

• All businesses

Description & Context

Associated Strategies:

• Financial Strength

Inflation has the potential to impact the economies and business environments that the Company operates in.
Increased inflation and any economic conditions resulting from governmental monetary policy intended to reduce
inflation may negatively impact demand for products and services and/or adversely affect profitability.

Risk Management Approach

The Company monitors the impacts of inflation on the procurement of goods and services and seeks to minimize its
effects in future periods through pricing strategies, productivity improvements, and cost reductions. The majority of
the impact on costs resulting from inflation is mitigated through the regulatory construct, long-term contractual
terms, and pricing of short-term contractual sales. The Company maintains strong investment grade ratings, which
helps mitigate the risk of higher interest costs, and the vast majority of the Company’s outstanding debt carries
fixed rate interest, which helps to alleviate the impact of increasing short-term interest rates.

Business Risk: Industry 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 resource sector through expansion of its global space rentals business
while diversifying into the residential housing sector via the acquisition of Triple M, and development of permanent
modular construction and facility operations and maintenance services. 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.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

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. These impacts would increase strain on employees and compromise levels of
customer service, either 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. ATCO has a comprehensive
Pandemic Plan that is activated when a pandemic is declared. 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 follows
recommendations by local and national public health authorities across the globe to adjust operational
requirements as needed to ensure a coordinated approach across ATCO.

Business Risk: Workforce Retention

Businesses Impacted:

• All businesses

Description and Context:

Associated Strategies:

• Growth

• Financial Strength

• Operational Excellence

A low level of retention in a workforce, especially within critical roles, could result in a shortage of people that could
hamper Company operations and may negatively impact meeting business objectives.

Risk Management Approach

ATCO’s investment in our people provides an attractive environment that fosters retention. ATCO continuously
reviews and enhances its people resourcing and management strategy. This includes enhancing ATCO branding and
highlighting our Company values, building strong partnerships with educational institutions to attract new
graduates and co-operative education students, aligning total rewards of compensation, benefits, pension and
employee share purchase programs with market, and delivering orientation and onboarding for cultural and
strategy awareness. We promote and support the development of our people, complete succession and
development planning annually with a significant focus on critical roles and skills, and provide leadership and
individual development programs that are available for all leaders and employees. The annual performance
management program facilitates discussions on annual goals, development plans and career planning.

To promote a culture of inclusiveness, actions taken include supporting a flexible work environment, and through a
focus on Diversity, Equity and Inclusion (DE&I) with our DE&I Council and many committees along with our Well-
being@ATCO programs, we continue to build an environment where people feel safe (physically and
psychologically), have equal opportunity, and feel included. To understand more deeply the risks to retention, exit
interviews are conducted and an annual employee engagement survey is conducted, of which 84 per cent of
employees participated in 2022. Results are reviewed to inform areas of risk and engagement action plans are
developed by leaders to address risks. As a result, ATCO’s retention rates continue to be at or higher than global
benchmarks in the industries we operate.

ATCO LTD. 2022 MANAGEMENT'S 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's and Natural Gas Transmission's Urban Pipeline Replacement and integrity programs, and Natural Gas
Distribution's 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

• Operational Excellence

• Financial Strength

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

Risk Management Approach

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

ATCO LTD. 2022 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. The
Company is also subject to the potential risk of the regulator disallowing 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 a rate of return instrument review process, which
is then adopted in subsequent Access Arrangement proceedings, 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. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

Business Risk: Liquidity

Businesses Impacted:

• All businesses

Description & Context

Associated Strategies:

• Financial Strength

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

Risk Management Approach

Cash flow from operations provides a substantial portion of the Company’s cash requirements. Additional cash
requirements are met with the use of existing cash balances and externally through bank borrowings and the
issuance of long-term debt, non-recourse long-term debt and preferred shares. Commercial paper borrowings and
short-term bank loans under available credit lines are used to provide flexibility in the timing and amounts of long-
term financing. At December 31, 2022, the Company’s cash position was approximately $1 billion and there were
available committed and uncommitted lines of credit of approximately $2.7 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)

2023

2024

2025

2026

2027

2028 and
thereafter

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

Principal
Interest expense (1)

Derivatives (2)

Commitments
Purchase obligations:

Operating and maintenance agreements
Capital expenditures
Business Acquisition (3)

Other

Total

1,161

—

109
412
160
1,842

526
409
713
24
1,672
3,514

458
426
52
936

439
—
—
9
448
1,384

346
422
21
789

131
—
—
23
154
943

395
414
10
819

83
—
—
6
89
908

3
376
10
389

8,828
7,196
—
16,024

66
—
—
6
72
461

120
—
—
6
126
16,150

(1)

Interest payments on floating rate debt have been estimated using rates in effect at December 31, 2022. 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, 2022.

(3) On January 3, 2023, ATCO Power (2010) Ltd., a wholly owned subsidiary of Canadian Utilities, acquired a portfolio of wind and solar assets and projects

in Alberta and Ontario, Canada. The transaction was financed by a non-revolving credit facility issued by a syndicate of lenders.

ATCO LTD. 2022 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 2022 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 for the same period in 2021 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 financial measure defined as cash used for capital expenditures, business
combinations, and cash used in the Company's 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 and invest in assets. A reconciliation of capital
investments to capital expenditures is presented in this MD&A.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

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

Adjusted earnings are earnings attributable to Class I and Class II Shares after adjusting for the timing of revenues
and expenses associated with rate-regulated activities and unrealized gains or losses on mark-to-market forward
and swap commodity contracts. Adjusted earnings also exclude one-time gains and losses, 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.

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

($ millions)
2022
2021

Revenues

Adjusted earnings
(loss)

Impairment reversal

Unrealized (losses)
gains 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

241

243

—

(1)

—

902

884

100

109

—

111

(7)

(10)

—

1,107

1,028

101

—

1,348

1,270

110

114

—

(11)

—

(1)

—

—
—

—

—
—

—

—
—

—

(18)

(15)

(2)

—

(3)

—

(7)

—

—
—

(1)

—

—
(1)

—

—
—

(18)

(7)

(18)

(15)

(2)

—

(3)

—

(7)

—

—
(1)

(18)

(15)

(2)

—

(1)

—

(7)

—

—
(1)

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

($ millions)

2022

2021

Revenues

Adjusted earnings
(loss)

Impairment reversal
(charge) 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

Workplace COVID-19
vaccination standard

Gain on sale of
ownership interest
in a subsidiary
company

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

929

777

—

1 3,384

(3)

3,041

—

379

336

—

312

209

(34)

352

265

(50)

(41)

—

4,048

3,515

348

310

(34)

4,978

4,289

423

382

(33)

—

(36)

—

(2)

—
—

—

—
—

—

—
—

—

(1)

—

(64)

(8)

(7)

—

(20)

(14)
(7)

—
—

(5)

—

(1)

—

(1)

—
—

—
9

—

(2)

(9)

—

(1)

—
—

—

(10)

(64)

(8)

(7)

—

(22)

(14)
(7)

—
9

(5)

—

(2)

(10)

(64)

(8)

(7)

—

(24)

(14)
(7)

—
9

(5)

—

(1)

—

(1)

361

238

(14)

(86)

(51)

296

173

370

246

IMPAIRMENT REVERSAL (CHARGE) AND OTHER COSTS

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 reflected
an adverse arbitration decision, changes in market regulations, ongoing political uncertainty, and a challenging
operating environment, resulting in an impairment of the carrying value of the assets. Other costs recorded were
individually immaterial.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

facility located in South Australia. The reversal resulted from an improvement in the future outlook of power market
prices.

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 fixed-price swap commodity contracts are
recognized in the earnings of the Corporate & Other segment.

The CODM believes that removal of the unrealized gains and 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

ATCO Electric Transmission, ATCO Electric Distribution, ATCO Electric Yukon, Northland Utilities (NWT), Northland
Utilities (Yellowknife), ATCO Gas, ATCO Pipelines and ATCO Gas Australia are collectively referred to as the Regulated
Utilities.

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

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

ATCO LTD. 2022 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 period

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

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

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

Revenues to be
billed in future
periods

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

Regulatory
decisions received

Regulatory decisions received
which relate to current and prior
periods.

Settlement of
regulatory
decisions and
other items

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

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

The Company recognizes
the earnings from a
regulatory decision
pertaining to current and
prior periods when the
decision is received.
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
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.
The Company recognizes
earnings when customer
rates are changed and
amounts are recovered or
refunded to customers
through future billings.

For the year ended December 31, the significant timing adjustments as a result of the differences between rate-
regulated accounting and IFRS are as follows:

($ 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

Distribution rate relief (4)
Other (6)

Three Months Ended
December 31

Year Ended
December 31

2022

2021

Change

2022

2021

Change

(22)

—

(17)

(13)

(12)

(10)

(13)

(18)

—

(15)

(5)

(2)

(25)

(3)

(56)

—

(34)

(22)

—

(56)

(63)

(1)

(17)

—

(64)

—

(17)

(39)

(1) Removal and site restoration costs are billed to customers over the estimated useful life of the related assets based on forecast costs to be incurred in

future periods.

(2) 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.

(3)

(4)

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

In 2021, in response to the COVID-19 pandemic, Electricity Distribution and Natural Gas Distribution applied for interim rate relief for customers to hold
current distribution base rates in place. Following approval by the AUC, Electricity Distribution and Natural Gas Distribution recorded a decrease in
earnings for the fourth quarter and year ended December 31, 2021 of $13 million and $63 million (after-tax and non-controlling interests). Based on
direction from the AUC, collection of 2021 deferred rates commenced in 2022 and for the fourth quarter and year ended December 31, 2022, $10 million
and $55 million (after-tax and non-controlling interests) was billed to customers.

(5) 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

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

for the inflation component of rate base when it is earned. Differences between the amounts earned and the amounts billed to customers are deferred
and recognized in revenues over the service life of the related assets.

(6)

In 2022, Electricity Distribution recorded a decrease in earnings of $10 million (after-tax and non-controlling interests) related to payments of electricity
transmission costs and Natural Gas Distribution recorded a decrease in earnings of $8 million (after-tax and non-controlling interests) related to
payments of gas pipeline system load balancing costs. In 2021, Natural Gas Distribution collected $28 million (after-tax and non-controlling interests)
related to depreciation and transmission rate riders, which was partly offset by a decrease in earnings of $15 million (after-tax and non-controlling
interests) related to payments of transmission costs.

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 during the fourth quarter and year ended December 31, 2022 was $2 million and
$8 million (after-tax and non-controlling interests) (2021 - $2 million and $7 million (after-tax and non-controlling
interests)).

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, respectively, to provide managed IT
services. These services were previously provided by Wipro under ten-year MSAs expiring in December 2024. The
transition of the managed IT services from Wipro to IBM commenced on February 1, 2021 and was completed by
December 31, 2021. The amount excluded from adjusted earnings during the fourth quarter and year ended
December 31, 2022 was $nil (2021 - $1 million and $24 million (after-tax and non-controlling interests)).

AUC ENFORCEMENT PROCEEDING

On April 14, 2022, the AUC Enforcement branch and ATCO Electric Transmission filed a settlement with the AUC
regarding a sole source contract for the Jasper interconnection project. On June 29, 2022, the AUC issued its
decision approving the settlement in its entirety. In the fourth quarter of 2021 and first quarter of 2022, the
Company recognized costs of $7 million and $14 million (after-tax and non-controlling interests), respectively,
related to the proceeding.

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.

WORKPLACE COVID-19 VACCINATION STANDARD

To safeguard the health and safety of employees, business partners, customers and communities, the Company
required its employees, subject to certain exemptions, to be vaccinated against COVID-19 effective January 1, 2022.
Employees who did not demonstrate they were vaccinated or did not have an approved exemption were provided
severance. In 2022, the Company incurred $5 million (after-tax and non-controlling interests) in severance and
related costs associated with the Workplace COVID-19 vaccination standard.

GAIN ON SALE OF OWNERSHIP INTEREST IN A SUBSIDIARY COMPANY

On March 31, 2022, the Company and Denendeh Investments Incorporated (DII) entered into a share purchase
agreement to increase DII's ownership interest in NUE from 14 per cent to 50 per cent. The transaction resulted in a
gain on sale of $3 million (after-tax and non-controlling interests). Effective March 31, 2022, the Company no longer
consolidates NUE as a controlled subsidiary, and instead, accounts for its interest in NUE as an investment in joint
venture using the equity method.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

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)

2022

2021

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)

—

(1)

(3)

(2)

—

(1)

($ millions)

2022

2021

Adjusted earnings

Transition of managed IT services

Earnings attributable to Class I and Class II shares

Year Ended

December 31

ATCO Ltd.

Structures

Frontec

Structures
& Logistics

—

(1)

—

(1)

—

(2)

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

UTILITIES

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)

2022

2021

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 Limited

Three Months Ended
December 31

Utilities

Electricity
Distribution

Electricity
Transmission

International
Electricity

Consolidated
Electricity

Natural Gas
Distribution

Natural Gas
Transmission

International
Natural Gas

Consolidated
Natural Gas

(11)

(13)

(1)

—

(1)

—

(4)

—

(1)

—

(7)

—

(15)

(9)

(1)

—

(2)

—

(7)

(1)

—

(1)

—

(4)

(3)

—

(13)

(11)

—

(3)

(6)

(1)

—

(1)

—

100

109

(18)

(15)

(2)

—

(3)

—

(7)

A
T
C
O
L
T
D

2
0
2
2
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

8
6

8
7

A
T
C
O
L
T
D

2
0
2
2
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

($ millions)

2022

2021

Adjusted earnings

Rate-regulated activities

IT Common Matters decision

Transition of managed IT services

AUC enforcement proceeding

Workplace COVID-19 vaccination

standard

Gain on sale of ownership interest

in a subsidiary company

Earnings attributable to

Class I and Class II shares

Electricity

Natural Gas

Canadian Utilities Limited

Electricity
Distribution

Electricity
Transmission

International
Electricity

Consolidated
Electricity

Natural Gas
Distribution

Natural Gas
Transmission

International
Natural Gas

Consolidated
Natural Gas

(15)

(40)

(3)

(2)

—

(5)

—

(1)

—

(2)

—

(2)

(14)

(7)

(1)

—

199

184

(6)

(30)

(5)

(4)

—

(7)

(14)

(7)

(2)

—

175

136

(5)

(2)

—

(8)

—

(2)

—

132

(6)

(11)

(1)

—

(1)

—

(1)

—

(34)

(18)

—

(4)

—

180

152

(34)

(3)

—

(13)

—

(3)

—

186

102

Year Ended

December 31

Utilities

379

336

(64)

(8)

(7)

—

(20)

(14)

(7)

(5)

—

361

238

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)

2022

2021

Adjusted earnings (loss)

Impairment reversal

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

Project cost recovery

Other

Earnings attributable to Class I and Class II shares

($ millions)

2022

2021

Adjusted earnings

Impairment reversal (charge) and other costs

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

Transition of managed IT services

Project cost recovery

Other

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

Three Months Ended
December 31

Canadian Utilities Limited

Electricity
Generation

Storage &
Industrial Water

Energy
Infrastructure

(2)

—

(1)

—

(1)

—

(1)

—

(1)

Canadian Utilities Limited

Year Ended

December 31

Electricity
Generation

Storage &
Industrial Water

Energy
Infrastructure

(34)

—

(27)

—

(1)

—

(1)

—

(2)

(34)

—

(1)

—

(1)

—

(2)

(14)

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

RECONCILIATION OF CAPITAL INVESTMENT
TO CAPITAL EXPENDITURES

Capital investment is a non-GAAP financial measure defined as cash used for capital expenditures, business
combinations, and cash used in the Company's 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)

2022

2021

Capital Investment

Capital Expenditure
in joint ventures

Business
combination (1)

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

102

—

(42)

—

(40)

—

(40)

385

253

(1)

(2)

—

384

251

170

—

(6)

—

(84)

—

453

426

(1)

(8)

—

(84)

452

334

560

419

(1)

(8)

(42)

(84)

517

327

(1) Business combination refers to the acquisition of Triple M in the ATCO Structures & Logistics segment in 2022 and the acquisition of the Alberta Hub

natural gas storage facility in Canadian Utilities' Energy Infrastructure segment in 2021.

($ millions)

2022

2021

Capital Investment

Capital Expenditure
in joint ventures

Business
combination (1)

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

246

114

—

(42)

—

204

114

—

1,142

1,102

(5)

—

1,137

1,097

240

226

(6)

(22)

—

(84)

234

120

—

1,394

1,338

1,650

1,463

(11)

(27)

—

(84)

(11)

(27)

(42)

(84)

1,383

1,227

1,597

1,352

(1) Business combination refers to the acquisition of Triple M in the ATCO Structures & Logistics segment in 2022 and the acquisition of the Alberta Hub

natural gas storage facility in Canadian Utilities' Energy Infrastructure segment in 2021.

ATCO LTD. 2022 MANAGEMENT'S 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 2022 Consolidated
Financial Statements.

SIGNIFICANT ACCOUNTING ESTIMATES

The Company’s significant accounting estimates are described in Note 23 of the 2022 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.

FINANCIAL INSTRUMENTS

Financial instruments are measured at amortized cost or fair value. The valuation methods used to measure
financial instruments are described in Note 20 of the 2022 Consolidated Financial Statements, which are prepared
in accordance with IFRS.

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.
For further information, please refer to Note 32 of the 2022 Consolidated Financial Statements.

ACCOUNTING CHANGES

At December 31, 2022, 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 2023 Consolidated Financial Statements once adopted.

DISCLOSURE CONTROLS AND PROCEDURES

As of December 31, 2022, 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, 2022.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

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, 2022, and ended on December 31, 2022, 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.

As of December 31, 2022, 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, 2022.

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: strategic plans, goals and targets, including
ESG targets and the commitment to achieve net zero GHG emissions by 2050; expected emissions reductions;
expected electricity generation capacity and/or productive capacity of assets and projects, including assets and
projects that have been acquired or that are expected to be developed in the future; the expected timing of
regulatory decisions, or the commencement or completion of activities and/or contracts; the impact or benefits of
contracts, including contract value or fees to be paid or received; growth expectations; the expected purchase and
sale of electricity; the timing for commencement, construction or commercial operations of facilities, assets or
projects; other information pertaining to planned but not yet fully developed projects, including development
projects acquired as part of the Renewable Energy Portfolio Acquisition from Suncor, also the Central West Pumped
Storage Hydro Project, also the Canadian Pacific Hydrogen Locomotive Project, also the Suncor ATCO Heartland
Hydrogen Hub Project, also the ATLAS Carbon Sequestration Hub Project, also the Calgary Solar Development
Projects, also the Empress Solar Development Project; and future minimum national carbon pricing per tonne in
Canada.

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; credit risk; interest rate fluctuations; the availability and cost of
labour, materials, services, and infrastructure; the development and execution of projects; prices of electricity,

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

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; potential termination or breach of contract by contract
counterparties; 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
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 2022 Consolidated Financial Statements and MD&A for the year ended December 31, 2022.
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, or email investorrelations@atco.com.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

GLOSSARY

AESO means Alberta Electric System Operator.

EV means electric vehicle.

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

AUC means the Alberta Utilities Commission.

AUD means Australian dollars.

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

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

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

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

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

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

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.

ECM means efficiency carry-over mechanism.

ESG means Environmental, Social and Governance.

GAAP means Canadian generally accepted accounting
principles.

GHG means greenhouse gas.

GTA means general tariff application.

IFRS means International Financial Reporting
Standards.

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.

LNG means liquefied natural gas.

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

NCI means non-controlling interest.

O&M means operating and maintenance.

PBR means Performance Based Regulation.

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

REPA means Renewable Energy Purchase Agreement.

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

ROE means return on equity.

USD means United States dollars.

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

APPENDIX 1
FOURTH QUARTER FINANCIAL
INFORMATION

Financial information for the three months ended December 31, 2022 and 2021 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, 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 taxes

Earnings for the period

Earnings attributable to:

Class I and Class II Shares

Non-controlling interests

Earnings per Class I and Class II Share

Diluted earnings per Class I and Class II Share

Three Months Ended
December 31

2022

2021

1,348

1,270

(158)

(69)

(86)

(55)

(87)

(145)

(195)

(84)

(18)

(182)

(1,079)

295

(115)

(97)

198

(38)

160

$0.72

$0.71

(151)

(69)

(46)

(78)

(158)

(156)

(76)

(18)

(100)

(921)

375

(122)

(118)

257

(68)

189

$0.87

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

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

Three Months Ended
December 31

2022

2021

160
361
175
696

189
365
(12)
542

Investing activities

Additions to property, plant and equipment

(469)

(301)

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

(44)

(41)

—

(4)

—

(29)

(84)

(6)

Cash Flows used in investing activities

(550)

(320)

Financing activities
(Repayment) issue of short-term debt
Issue of long-term debt

Repayment of long-term debt

Repayment of lease liabilities

Issue of equity preferred shares by subsidiary company

Net issue of shares by subsidiary company

Net issue 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) from financing activities

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

(19)
151

(258)

(5)

—

(1)

(53)

(71)

(123)
1
(378)

(232)
(4)
1,269
1,033

206
57

(203)

(5)

201

(51)

(74)

(117)
(6)
12

234
(4)
858
1,088

ATCO LTD. 2022 MANAGEMENT'S DISCUSSION & ANALYSIS

ATCO LTD.

CONSOLIDATED
FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2022

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 96

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 and Class II Shares .............................................................................................................................................................

Information on Cash Flow

Page
98
99
105
106
107
108
109

110
110

111
120
121
121
122
124

124
125
127
128
128
129
130
135
136
138

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

139

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 Associate Company .............................................................................................................................................
26. Subsidiaries ......................................................................................................................................................................................
27.
Investment in Joint Ventures ........................................................................................................................................................
28. Non-Controlling Interests .............................................................................................................................................................

Other Information

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

141
145
149
150

153
154
156
156
158

161
163
164
164
164
175

ATCO LTD. 2022 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 material 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

March 1, 2023

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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, 2022
and 2021, 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, 2022 and 2021;

the consolidated statements of comprehensive income for the years ended December 31, 2022 and
2021;

the consolidated balance sheets as at December 31, 2022 and 2021;

the consolidated statements of changes in equity for the years ended December 31, 2022 and 2021;

the consolidated statements of cash flows for the years ended December 31, 2022 and 2021; 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.

ATCO LTD. 2022 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, 2022. 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, 2022, total accrued benefit obligations were
$2,636 million and the market value of plan assets
was $2,437 million. These balances are presented
net on the consolidated balance sheet, resulting in
a retirement benefit asset of $24 million and
retirement benefit obligations of $223 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

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.

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

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 100

Key audit matter

How our audit addressed the key audit matter

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.

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.

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, 2022 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 billings.

Refer to note 4 – Revenues and note 23 –
Significant judgments, estimates and assumptions
to the consolidated financial statements.

The Company had $180 million of unbilled
revenue related to the Utilities segment as at
December 31, 2022.

The revenue recognized by the Company includes
an estimate of consumption by customers of
natural gas and electricity distribution services
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.

101 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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 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.

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

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 102

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.

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

103 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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 Courtney Kolla.

[Original signed by “PricewaterhouseCoopers LLP”]

Chartered Professional Accountants

Calgary, Alberta
March 1, 2023

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 104

CONSOLIDATED STATEMENTS
OF EARNINGS

(millions of Canadian Dollars except per share data)

Note

2022

2021

Year Ended
December 31

4,978

4,289

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

10, 11, 17

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.

105 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

(599)

(271)

(245)

(176)

(308)

(535)

(717)

(328)

(74)

(508)

(573)

(267)

(211)

(116)

(296)

(420)

(717)

(263)

(74)

(387)

(3,761)

(3,324)

1,312

1,040

(436)

(391)

921

(214)

707

370

337

707

$3.25

$3.24

(437)

(423)

617

(148)

469

246

223

469

$2.16

$2.15

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)

Note

2022

707

Year Ended
December 31

2021

469

(2)

189

Items that are or may be reclassified subsequently to earnings:
Cash flow hedges (2)
Foreign currency translation adjustment (3)
Share of other comprehensive income (loss) in associate company (3)
Share of other comprehensive income of joint ventures (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 nil for the year ended December 31, 2022 (2021 - $(56) million).

Net of income taxes of $(47) million for the year ended December 31, 2022 (2021 - $(21) million).

Net of income taxes of nil.

See accompanying Notes to Consolidated Financial Statements.

146

207

205

912

506

406

912

(76)

(7)

—

(23)

166

635

324

311

635

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 106

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 income (loss)

Non-controlling interests
Total equity
Total liabilities and equity

Note

2022

2021

December 31

19
16
17
9
10, 20

10
11
15
17
12
27
25
17
7
20

17
20, 30
13
14

7
15
16
17
20
14

1,033
956
11
80
281
2,361

19,504
870
24
109
89
264
473
138
64
243
24,139

—

1,161
16
240

—
109
1,526

1,843
223
1,989
99
137
9,978
15,795

179
10
4,090
97
4,376
3,968
8,344
24,139

1,091
844
12
61
213
2,221

18,791
752
93
87
73
228
445
149
54
111
23,004

3
852
14
161
206
350
1,586

1,624
292
1,870
76
105
9,502
15,055

180
8
3,962
(39)
4,111
3,838
7,949
23,004

See accompanying Notes to Consolidated Financial Statements.

[Original signed by N.C. Southern]

[Original signed by M.R.P. Rayfield]

DIRECTOR

107 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(millions of Canadian Dollars)

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

Earnings for the year

Other comprehensive income
Shares issued

Shares purchased and cancelled
Dividends (1)
Share-based compensation
Changes in ownership interest in subsidiary company (2)
Other

Note

Class I and
Class II
Shares

178

18, 28

—

180

—

(1)

—

Contributed
Surplus

Retained
Earnings

Accumulated
Other
Comprehensive
(Loss) Income

—

3,880

246

—

104

—

(9)

(205)

(56)

3,962

370

—

(22)

(211)

—

(9)

—

(12)

—

(104)

—

(1)

(39)

—

136

—

Non-
Controlling
Interests

Total Equity

3,797

7,849

223

469

166

Total

4,052

246

—

(9)

(205)

(56)

—

4,111

370

136

—

(23)

(211)

(9)

—

(119)

(297)

(1)

3,838

337

69
21

—

(308)

(128)

(502)

—

7,949

707

205
21

(23)

(519)

—

December 31, 2022

179

4,090

4,376

3,968

8,344

(1)

Dividends paid to non-controlling interests of $308 million include $20 million of dividends paid by Canadian Utilities Limited through the issuance of Class A shares under its dividend reinvestment program (see
note 28).

(2)

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.

A
T
C
O
L
T
D

2
0
2
2
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

1
0
8

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended
December 31

Note

2022

2021

707

1,542
147

2,396

(1,435)
5

(148)
(41)

(8)
52
71
(1,496)

(206)
724
(502)

—

(18)
1
(23)
(211)
(288)
(426)
(4)
(953)

(53)
(2)
1,088
1,033

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

(millions of Canadian Dollars)

Operating activities
Earnings for the year

Adjustments to reconcile earnings to cash flows from operating activities
Changes in non-cash working capital

19
19

Cash flows from operating activities

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

Additions to intangibles
Acquisition, net of cash acquired

Proceeds on sale of ownership interest in a subsidiary company, net of cash

disposed

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

Financing activities
Net (repayment) 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 issue (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

27
19
3, 10

13
14, 19
14, 19
28
28
17

18
18
28

(1)

Cash position includes $18 million which is not available for general use by the Company (2021 - $18 million).

See accompanying Notes to Consolidated Financial Statements.

109 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

DECEMBER 31, 2022

(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 (energy storage, electricity generation, industrial water solutions, and clean
fuels)

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 ventures (see
Note 27) and its investment in associate company (see Note 25). In these financial statements, "the Company"
means ATCO Ltd., its subsidiaries, joint ventures 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 March 1, 2023.

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 material 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.

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 110

USE OF JUDGMENTS AND ESTIMATES

Management makes judgments and estimates that could significantly affect how policies are applied, how amounts
in the consolidated financial statements are reported, and how 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.

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 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
segment 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, the Northwest Territories and in the
Lloydminster area of Saskatchewan, and the Company's 50 per cent ownership
interest in LUMA Energy, LLC, which provides international electricity operations
(see Note 27).

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 landfills.

111 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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

2022

Structures

Neltume Corporate

Canadian Utilities Limited

& Logistics

Ports

& Other

Utilities (1)

Energy
Infrastructure

Corporate

& Other Consolidated

ATCO

Consolidated

2021
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)

929
777

—

929
777
(789)
(653)

(66)

(59)

—

3
(8)
(7)
71
61
(16)
(14)
55
47
61
53

1,147

1,032

204

114

—

14
13

—

14
13
14
13

473

448

—

1
(3)

—

1
(3)
18
28

(9)

(7)

—

1
(12)
(14)
(2)
5
1
4
(1)
9

—

3,362
3,030
22
11
3,384
3,041
(1,546)
(1,513)

(610)

(599)

—

47
(368)
(381)
913
595
(227)
(136)
686
459
379
336

234
162
78
47
312
209
(257)
(180)

452
323
(100)
(58)
352
265
(470)
(289)

4,048
3,515

4,978
4,289

—

4,048
3,515
(2,273)
(1,982)

—

4,978
4,289
(3,044)
(2,607)

(20)

(12)

(642)

(717)

(42)

(10)

(651)

(717)

—

11
(9)
(18)
49
(20)
(10)
(6)
39
(26)
19
15

—

6
(3)
(124)
(37)
38
4
(86)
(33)
(50)
(41)

—

58
(371)
(402)
838
538
(199)
(138)
639
400
348
310

62
(391)
(423)
921
617
(214)
(148)
707
469
423
382

545 19,507

1,342 1,125

21,974

24,139

449 18,984

1,194

897

21,075

23,004

1,137

1,097

234

120

1,383

1,227

1,597

1,352

(1)

(2)

(3)

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

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

Includes additions to property, plant and equipment, intangibles and $14 million of interest capitalized during construction for the year ended
December 31, 2022 (2021 - $6 million).

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 112

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

Utilities

Electricity

Natural Gas

Intersegment
Eliminations

2022

2021
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)

1,493
1,402
21
12
1,514
1,414
(591)
(575)
(321)
(322)
53
47
(222)
(232)

433
332
(100)
(71)
333
261
199
184

10,644

10,405

566
350

1,869
1,628
7
4
1,876
1,632
(961)
(943)
(289)
(277)

—

(146)
(149)

480
263
(127)
(65)
353
198
180
152

8,865

8,581

571
747

Consolidated
3,362
3,030
22
11
3,384
3,041
(1,546)
(1,513)
(610)
(599)
53
47
(368)
(381)

913
595
(227)
(136)
686
459
379
336

—

(6)
(5)
(6)
(5)
6
5

—

(2)

—

19,507

18,984

1,137
1,097

(1)

(2)

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

Includes additions to property, plant and equipment, intangibles and $12 million of interest capitalized during construction for the year ended
December 31, 2022 (2021 - $6 million).

GEOGRAPHIC SEGMENTS

Financial information by geographic area for the year ended and as at December 31 is summarized below.

Revenues - external

Canada
Australia
Other
Total

2022
4,187
526
265
4,978

2021
3,678
374
237
4,289

113 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

Non-current assets

Canada
Australia
South America
Other
Total

Property, Plant
and Equipment

2022
17,759
1,431
53
261
19,504

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

Intangible Assets

2022
845
16
1
8
870

2021
732
11
1
8
752

Other Assets (1)
2021
337
40
435
5
817

2022
413
45
470
12
940

2022
19,017
1,492
524
281
21,314

Total

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

(1)

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

ADJUSTED EARNINGS

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

•

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

one-time gains and losses;

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

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.

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 114

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

2022

2021

Structures

Neltume Corporate

Canadian Utilities Limited

& Logistics

Ports

& Other

Utilities

Energy
Infrastructure

Corporate

& Other Consolidated

ATCO

Consolidated

61
53

14
13

—

(2)

—

(1)
2

(1)

379
336
(14)
(7)
(5)

—

(20)

—

6
(64)

—

(8)

(7)

—

361

238

19
15

(50)
(41)

—

(1)

(34)

—

(1)

—

(2)

(14)

—

(1)

—

(36)

(9)

—

(86)

(51)

348
310
(14)
(7)
(5)

—

(22)

(34)

(36)

(10)
6
(64)

—

9
(8)

(7)

—

(2)

296

173

Adjusted earnings
(loss)

AUC enforcement

proceeding

Workplace COVID-19

vaccination standard

Gain on sale of

ownership interest in
a subsidiary
company

Transition of managed

IT services

Impairment reversal
(charge) 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

423
382
(14)
(7)
(5)

—

(24)

(33)

(36)

(10)
6
(64)

—

9
(8)

(7)
(1)

—

370

246

337

223
707
469

115 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

The reconciliation of adjusted earnings and earnings for the operating segments included in the Utilities for the year
ended December 31 are shown below.

2022

2021

Adjusted earnings

AUC enforcement proceeding

Workplace COVID-19 vaccination standard

Gain on sale of ownership interest in a subsidiary company

Transition of managed IT services

Rate-regulated activities

IT Common Matters decision

Earnings attributable to Class I and Class II Shares

Utilities

Electricity

Natural Gas

199
184
(14)
(7)
(2)

—

(7)
(6)
(30)
(5)
(4)

175

136

180
152

—

(3)

—

(13)
12
(34)
(3)
(3)

186

102

Total
379
336
(14)
(7)
(5)

—

(20)
6
(64)
(8)
(7)

361

238

Alberta Utilities Commission (AUC) enforcement proceeding

The AUC enforcement branch and ATCO Electric Transmission commenced settlement discussions in January 2022.
On March 18, 2022, the AUC enforcement branch and ATCO Electric Transmission concluded discussions and
notified the AUC that the parties had reached a settlement on all matters. On April 14, 2022, the AUC enforcement
branch and ATCO Electric Transmission filed the settlement with the AUC, which reflected an agreed administrative
penalty of $31 million, a commitment to amend the ongoing Deferral Account application to ensure the estimated
$11 million of additional rate base remains excluded from customer rates, and the implementation of revised
practices and policies. On June 29, 2022, the AUC issued its decision approving the settlement in its entirety.

In 2021 and 2022, the Company recognized costs of $7 million and $14 million (after-tax and non-controlling
interests (NCI)), respectively, related to the proceeding. As this proceeding is not in the normal course of business,
these costs have been excluded from adjusted earnings.

Workplace COVID-19 vaccination standard

To safeguard the health and safety of employees, business partners, customers and communities, the Company
required its employees, subject to certain exemptions, to be vaccinated against COVID-19 effective January 1, 2022.
Employees who did not demonstrate they were vaccinated or did not have an approved exemption were placed on
unpaid leave. These employees were subsequently offered severance and in 2022, the Company incurred $5 million
after-tax and NCI related to amounts paid and accrued. As these costs are not in the normal course of business and
are a one-time item, they have been excluded from adjusted earnings.

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 116

Gain on sale of ownership interest in a subsidiary company

On March 31, 2022, the Company and Denendeh Investments Incorporated (DII) entered into a share purchase
agreement to increase DII's ownership interest in Northland Utilities Enterprises Ltd. (NUE) from 14 per cent to 50
per cent. NUE is an electric utility company operating in the Northwest Territories, Canada and was a subsidiary of
ATCO Electric Ltd. The change in ownership interest was accomplished through the Company's sale to DII of a 36 per
cent ownership interest in NUE for proceeds, net of cash disposed, of $8 million. The transaction results in the
Company and DII each having a 50 per cent ownership interest in NUE.

The share purchase agreement includes a put option whereby the Company may be required to purchase the 36
per cent ownership interest that was sold to DII for fair market value, if certain conditions occur.

Commencing March 31, 2022, the Company no longer consolidates NUE as a controlled subsidiary, and instead,
accounts for NUE as an investment in joint venture using the equity method of accounting. The transaction resulted
in a gain on sale of $3 million after-tax and NCI. As the gain on sale is not in the normal course of business, it has
been excluded from adjusted earnings.

Transition of managed IT services

In 2020, the ATCO Technology Management Ltd. (a wholly owned subsidiary of Canadian Utilities Limited) signed
Master Services Agreements (MSAs) with IBM Canada Ltd. (subsequently novated to Kyndryl Canada Ltd. (Kyndryl))
to provide managed information technology services. In 2021, ATCO Gas Australia Pty Ltd and ATCO Australia Pty
Ltd (both wholly owned subsidiaries of Canadian Utilities Limited) signed MSAs with IBM Australia Limited (IBM) to
provide managed information technology services. These services were previously provided by Wipro Ltd. (Wipro)
under ten-year MSAs expiring in December 2024. The transition of the managed IT services from Wipro to Kyndryl
and 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 NCI), and $6 million ($2 million after-tax and NCI), respectively, relating to the Wipro MSAs
(see Note 30). The provisions are included in provisions and other current liabilities in the consolidated balance
sheets. The onerous contract provisions are not in the normal course of business and have been excluded from
adjusted earnings.

In addition, in 2021 the Company recognized transition costs of $52 million ($22 million after-tax and NCI). 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.

2022 Reversal of impairment

In 2022, a reversal of impairment of $2 million after-tax and NCI was recorded relating to Energy Infrastructure's
joint venture investment in the Osborne electricity cogeneration facility located in Southern Australia. The reversal
resulted from an improvement in the future outlook for power market prices.

As the reversal relates to a previous impairment, it has been excluded from adjusted earnings.

2021 Impairment and other costs

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 (see notes 10 and 11). Other costs recorded were individually immaterial.

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

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.

117 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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

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.

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 118

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

Distribution rate relief (4)
Other (6)

2022

2021

61
2

(56)

—

(34)

55
(22)
6

—

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

—

17
(64)

(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 temperatures 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 in 2021 of $63 million (after-tax and NCI). Based on direction from the AUC, collection of 2021 deferred rate amounts
commenced in 2022 and for the year ended December 31, 2022, $55 million (after-tax and NCI) was billed to customers.

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 2022, ATCO Electric Distribution recorded a decrease in earnings of $10 million (after-tax and NCI) related to payments of electricity transmission
costs and ATCO Gas Distribution recorded a decrease in earnings of $8 million (after-tax and NCI) related to payments of gas pipeline system load
balancing costs. In 2021, ATCO Gas Distribution collected $28 million (after-tax and NCI) related to depreciation and transmission rate riders, which was
partly offset by a decrease in earnings of $15 million (after-tax and NCI) related to payments of transmission costs.

Project cost recovery

In 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 this project recovery is not a result of day-to-day operations, it has been excluded from
adjusted earnings.

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 2022 was $8 million after-tax and NCI (2021 - $7 million after-tax and NCI).

119 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

4. REVENUES

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

2022

2021

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), (3)

Consolidated

—

339
183

123

104
97
92

—

609
548
724
712

—

33
33
36
34

—

1,187 1,796
1,036 1,584
337 1,061
308 1,020

—

22
22
292
229

55
55
328
263

—

559
379

1,402
1,327

1,838 3,240
1,595 2,922

—

193
241
193
241

—

176
157
176
157

—

91
75

31
33

122
108

929
777

1,493
1,402

1,869 3,362
1,628 3,030

—

66
28
66
28

46
38
80
52

—

126
90

14
16

—

14
16

28
28

234
162

—

431
304

—

431
304

—

17
11

—

17
11

—

5
5

453
320

1,796
1,584
1,061
1,020
339
183

123

104
97
92
55
55
328
263
431
304
66
28
4,296
3,633

46
38
97
63
193
241
336
342

14
16
176
157
190
173

156
141

4,978
4,289

(1)

(2)

For the year ended December 31, 2022, Electricity and Natural Gas segments include $180 million of unbilled revenue (2021 - $156 million). At
December 31, 2022, $180 million of the unbilled revenue is included in accounts receivable and contract assets (December 31, 2021 - $156 million).

For the year ended December 31, 2022, Corporate & Other segment includes $63 million of unbilled revenue (2021 - $58 million) from retail electricity
and natural gas energy services. At December 31, 2022, $63 million of the unbilled revenue is included in accounts receivable and contract assets
(December 31, 2021 - $58 million).

(3)

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

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 120

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, 2022, the most significant remaining performance obligations are as
follows:

(i)

the Company's 35-year service agreement to operate the Fort McMurray 500 kV Transmission line that
amounts to $0.8 billion (2021 - $0.8 billion). The remaining duration of the agreement is 32 years. The
Company expects that approximately 2 per cent of the amount will be recognized as revenue during the
year ending December 31, 2023, subject to satisfaction of related performance obligations;

(ii) provision of storage and industrial water services over the life of the contracts that in aggregate

approximates $0.3 billion (2021 - $0.3 billion). The remaining duration of the contracts ranges between 6 to
25 years. The Company expects that approximately 12 per cent of the amount will be recognized as
revenue during the year ending December 31, 2023; and

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

price contracts that in aggregate approximates $0.1 billion (2021 - $0.2 billion). The remaining duration of
the contracts ranges between 1 to 2 years. The Company expects that approximately 97 per cent will be
recognized as revenue during the year ending December 31, 2023.

5. OTHER COSTS AND EXPENSES

Other costs and expenses include rent, utilities, goods and services such as professional fees, contractor costs,
technology-related expenses, advertising, and other general and administrative expenses. For the year ended
December 31, 2022, other costs and expenses also included unrealized and realized losses on commodity contracts
of $165 million (2021 - $39 million), costs related to the AUC Enforcement proceeding of $28 million (2021 - $16
million), gain on sale of ownership interest in a subsidiary company of $7 million (2021 - nil) and transition of
managed information technology services of nil (2021 - $58 million).

6. INTEREST EXPENSE

Interest expense primarily arises from interest on long-term debentures. The components of interest expense for
the year ended December 31 are summarized below.

Long-term debt

Retirement benefits net interest expense (Note 15)

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)

2022

417

450

(14)

436

2021

409

443

(6)

437

Borrowing costs capitalized to property, plant and equipment and intangibles during 2022 were calculated by
applying a weighted average interest rate of 3.93 per cent (2021 - 4.31 per cent) to expenditures on qualifying
assets.

121 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

7. INCOME TAXES

INCOME TAX EXPENSE

The income tax rate for 2022 is 23.0 per cent (2021 - 23.0 per cent).

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

2022

2021

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

39
15
2

—

(3)
53

158

—

3
161
214

The reconciliation of statutory and effective income tax expense for the year ended December 31 is as follows:

Earnings before income taxes

Income taxes, at statutory rates

Equity earnings

Foreign tax rate variance

Non-deductible items

Tax cost on equity preferred share financing

Unrecognized deferred income tax assets

International financing

Other

921

212

(20)

—

(1)

214

2022

23.0

(2.3)

0.9

0.7

0.1

—

(0.1)

23.2

617

142

(12)

(5)

—

148

26
(1)
2
(1)
6
32

122
1
(7)
116
148

2021

23.0

(1.9)

0.2

0.4

0.8

2.3

(0.8)

—

24.0

INCOME TAX ASSETS AND LIABILITIES

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

Balance Sheet Presentation

2022

2021

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

1,843

1,856

1,624

1,636

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 122

DEFERRED INCOME TAXES

The changes in deferred income tax assets are as follows:

Movements
December 31, 2020
(Charge) credit to earnings
Charge to other comprehensive income
Other
December 31, 2021
Credit (charge) to earnings
Credit (charge) to other comprehensive

income

Other
December 31, 2022

Property,
Plant and
Equipment

Intangibles Reserves
(1)
1

11
(13)

Tax Loss Carry
Forwards and
Tax Credits

(1)
7
(12)

—

(6)
9

—

(2)

—

(2)

—

Retirement
Benefit

Obligations Other
12
(1)
(1)

—

7
2

—

10
1

(1)

—

(4)
5

—

6
11

Total
85
(14)
(13)
(4)
54
2

2
6
64

57
(10)

—

47
(8)

—

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:

Movements
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
Charge (credit) to earnings
Charge (credit) to other
comprehensive income
Acquisition (Note 24)
Foreign exchange adjustment
Other
December 31, 2022

—

(1)
24
(6)
(2)
1,762
158

—

2
(13)
1,909

Property,
Plant and
Equipment

Intangibles Reserves
106
(1)

(33)
(1)

1,624
123

Tax Loss Carry
Forwards and
Tax Credits

Retirement
Benefit

Obligations Other
(137)
2

Total
(20) 1,443
(28) 103

—

(97)
8

—

(80)
1

(2)

—

(1)
24
(5)
(4)
(49) 1,624
15 163

1
(2)

—

49
6
2
(1)
13
(20) 1,843

—

105
18

(25)
(10)

(89)
(19)

51
(1)

—

(1)
128

(108)

(81)

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

At December 31, 2022, the Company had $633 million of non-capital tax losses and credits which expire between
2024 and 2042 and $88 million of tax losses which do not expire. The Company recognized deferred income tax
assets of $147 million for these losses and credits.

The Company had $109 million of aggregate temporary differences for investments in subsidiaries, branches and
joint ventures for which deferred income tax liabilities were not recognized (2021 - $110 million). The Company had
$123 million of aggregate temporary differences for which no deferred tax assets were recognized (2021 - $95
million).

123 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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 (1)
Work-in-progress (1)
Finished goods (1)

2022

2021

113,957,680 114,171,978

60,868

35,451

250,772

242,222

114,269,320 114,449,651

707

(337)

370

469

(223)

246

$3.25

$3.24

$2.16

$2.15

2022

2021

(1) On December 7, 2022, ATCO Structures & Logistics Ltd., a subsidiary of the Company, acquired a 100 per cent ownership interest in Triple M Housing Ltd.
Inventories acquired amounted to $6 million in raw materials and consumables, $1 million in work-in-progress and $2 million in finished goods (see
Note 24).

For the year ended December 31, 2022, inventories of $256 million were used in operations and expensed (2021 -
$285 million).

Inventories with a carrying value of $15 million were pledged as security for liabilities at December 31, 2022 (2021 -
$12 million).

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 124

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, 2020

21,004

393

998

651

657

890

24,593

Additions

Transfers

Retirements and disposals

Acquisition (Note 24)

Foreign exchange rate

adjustment

Changes to asset retirement

costs

895

(110)

—

(83)

—

104

(4)

(1)

(3)

(7)

1,025

(1,052)

(175)

(66)

(5)

(44)

—

1,219

—

(398)

106

(4)

(18)

(4)

(120)

—

(1)

December 31, 2021

21,771

500

1,062

903

25,399

Additions

Transfers

Retirements and disposals

Sale of ownership interest
in a subsidiary company
(Note 3)

Acquisition (Note 24)

Foreign exchange rate

adjustment

Changes to asset retirement

costs

693

(123)

(111)

—

102

(5)

445

1,195

(861)

(10)

718

190

(75)

—

(8)

(2)

—

(30)

(5)

1,459

—

(248)

(126)

—

December 31, 2022

22,292

613

1,075

770

854

929

26,533

Accumulated depreciation and

impairment

December 31, 2020

Depreciation and
impairment

Retirements and disposals

Foreign exchange rate

adjustment

December 31, 2021

Depreciation

Retirements and disposals

Sale of ownership interest
in subsidiary company
(Note 3)

Foreign exchange rate

adjustment

December 31, 2022

Net book value

December 31, 2021

December 31, 2022

5,119

153

216

255

446

6,266

486

(110)

(17)

5,478

500

(111)

(52)

—

(1)

184

(5)

—

5,816

197

16,293

16,476

316

416

(3)

(2)

238

(2)

(3)

—

257

824

818

(146)

—

(34)

(6)

256

(32)

—

(46)

(3)

452

(29)

(2)

710

(339)

(29)

6,608

645

(179)

(57)

273

486

7,029

445

770

462

581

451

443

18,791

19,504

The additions to property, plant and equipment included $9 million of interest capitalized during construction for
the year ended December 31, 2022 (2021 - $2 million).

125 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

PIONEER NATURAL GAS PIPELINE

In 2021, ATCO Gas and Pipelines Ltd., a wholly owned subsidiary of CU Inc., completed the acquisition of a 131 km
natural gas pipeline that runs from the Drayton Valley area to the Wabamum area west of Edmonton (Pioneer
Pipeline) from Tidewater Midstream & Infrastructure Ltd. and its partner TransAlta Corporation for approximately
$265 million. The optional IFRS 3 Business Combinations concentration test was applied to the acquisition, which
resulted in the acquired asset being accounted for as an asset acquisition.

In 2022, consistent with the geographic areas defined in the Integration Agreement, ATCO Gas and Pipelines Ltd.
completed the sale to Nova Gas Transmission Ltd. (NGTL) of the 30 km segment of the Pioneer Pipeline that is
located in NGTL's footprint for $63 million. At December 31, 2021, the costs incurred for the segment of the pipeline
sold to NGTL were recorded as assets held-for-sale in prepaid expenses and other current assets in the
consolidated balance sheets. The 2021 purchase and 2022 sale were included in other investing activities in the
consolidated statements of cash flows for the years ended December 31, 2021 and 2022.

IMPAIRMENT

Energy Infrastructure Segment

In 2021, impairment of property, plant and equipment of $21 million ($8 million after-tax and NCI) 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. 2022 CONSOLIDATED FINANCIAL STATEMENTS 126

11. INTANGIBLES

Intangible assets consist mainly of computer software not directly attributable to the operation of property, plant
and equipment and land rights. 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, 2020

Additions

Transfers

Acquisition (Note 24)

Retirements

Foreign exchange rate adjustment

December 31, 2021

Additions

Transfers

Acquisition (Note 24)

Retirements

Sale of ownership interest in subsidiary

company (Note 3)

Foreign exchange rate adjustment

December 31, 2022

Accumulated amortization and

impairment

December 31, 2020

Amortization and impairment

Retirements

Foreign exchange rate adjustment

December 31, 2021

Amortization

Retirements

Foreign exchange rate adjustment

December 31, 2022

Net book value

December 31, 2021

December 31, 2022

443

—

(33)

(3)

459

—

(40)

(1)

501

238

(31)

(1)

255

(40)

(1)

266

204

235

407

—

437

—

(1)

—

457

—

141

(72)

—

156

139

(93)

—

(2)

—

200

—

372

387

156

200

(2)

—

(2)

—

(1)

—

999

146

—

(35)

(3)

1,112

154

—

(41)

(4)

(1)

1,248

(2)

—

(1)

—

314

(33)

(1)

360

(41)

(1)

378

752

870

The additions to intangibles include interest capitalized during construction of $5 million for the year ended
December 31, 2022 (2021 - $4 million).

IMPAIRMENT

Energy Infrastructure Segment

In 2021, impairment of intangibles of $24 million ($10 million after-tax and NCI) 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.

127 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

12. GOODWILL

The carrying value of goodwill for the Utilities and Structures & Logistics segments at December 31 is shown below.

Utilities, Electricity
Utilities, Natural gas
Structures & Logistics (1)
Carrying value

2022

38
33
18
89

2021
38
33
2
73

(1) On December 7, 2022, ATCO Structures & Logistics Ltd., a subsidiary of the Company, acquired a 100 per cent ownership interest in Triple M Housing Ltd.

(see Note 24).

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
multiple of 11.3 and 11.7 (2021 - 12.9 and 12.7) and price-to-earnings value of 21.3 and 19.7 (2021 - 26.2 and 24.9)
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, 2022, the Company had no commercial paper outstanding (2021 - $206 million of commercial
paper outstanding at an effective interest rate of 0.32 per cent, matured in January 2022).

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

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 128

14. LONG-TERM DEBT

Long-term debt outstanding at December 31 is as follows:

Effective
Interest Rate

2022

2021

CU Inc. debentures - unsecured (1)

4.397% (2021 - 4.410%)

8,525

8,440

CU Inc. other long-term obligation, due June 2024 - unsecured (2)

6.45% (2021 - 2.45%)

Canadian Utilities Limited debentures - unsecured, 3.122%, due November 2022

3.187%

—

200

Canadian Utilities Limited debentures - unsecured, 4.851%, due June 2052

4.899%

250

—

ATCO Power Australia credit facility, payable in Australian dollars,

at BBSY rates, due June 2025, secured by a pledge of project assets and
contracts, $45 million AUD (2021 - $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 (2021 - $350 million AUD)(3)

Floating (4)

322

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

BBSY rates, due August 2026, $362 million AUD (2021 - $330 million AUD)(3)

Floating (4)

334

304

Electricidad del Golfo credit facility, payable in Mexican pesos, at
Mexican Interbank rates, due November 2025, $335 million
MXP (2021 - $570 million MXP)

11.31%

(2021 - Floating)

ATCO Energy Solutions Ltd. and ATCO Power (2010) Ltd. extendible revolving
credit facility, at CDOR or Canadian prime rates, due December 2025 (3)

Floating

—

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

March 2028

Floating (4)

ATCO Ltd. extendible revolving credit facility, at BA rates, due November 2025 (3)

Floating

129

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

5.50% (5)

200

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

2024 (3)

Floating

114

ATCO Structures & Logistics credit facility, at BBSY rates, due July 2025, $38

million AUD (2021 - $32 million AUD) (3)

Floating

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

2024, $17 billion CLP (2021 - $13 billion CLP) (6)

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

CDOR - Canadian Dollar Overnight Rate

(52)
10,087
(109)
9,978

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

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

(2)

(3)

(4)

(5)

In 2022, the expiry date of the CU Inc. other long-term obligation was extended from June 2023 to June 2024.

During 2022, the above interest rates had additional margin fees at a weighted average rate of 1.43 per cent (2021 - 0.92 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.

(6)

During 2022, the above interest rate had an additional margin fee of 2.60 per cent (2021 - 2.60 per cent).

129 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

LONG-TERM DEBT ISSUANCES AND REPAYMENTS

On June 3, 2022, Canadian Utilities Limited issued $250 million of 4.851 per cent debentures maturing on June 3,
2052. Canadian Utilities Limited also repaid $200 million of 3.122 per cent debentures on November 9, 2022.

On September 14, 2022, CU Inc., a wholly owned subsidiary of Canadian Utilities Limited, issued $210 million of
4.773 per cent debentures maturing on September 14, 2052. CU Inc. also repaid $125 million of 9.92 per cent
debentures on April 1, 2022.

On September 3, 2021, CU Inc. issued $460 million of 3.174 per cent debentures maturing on September 5, 2051.
CU Inc. also repaid $160 million of 4.801 per cent debentures on November 22, 2021.

On December 8, 2022, ATCO Energy Solutions Ltd. and ATCO Power (2010) Ltd., wholly owned subsidiaries of

Canadian Utilities Limited, entered into a $250 million extendible credit agreement maturing in December 2025 with

a syndicate of lenders, as well as an aggregate $100 million of uncommitted credit facilities with no set maturity

date.

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.

The ATCO Energy Solutions Ltd. and ATCO Power (2010) Ltd. credit agreement is secured by their present and future

properties, assets, and equity interests in certain subsidiaries and joint ventures.

At December 31, 2022, the book value of assets pledged to maintain the Company's long-term credit facilities was
$1,691 million (2021 - $825 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 Ltd., 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 Ltd.
are responsible for governance of the funded plans and policy decisions related to benefit design, liability
management, and funding and investment, including selection of investment managers and investment options for
the plans.

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 130

BENEFIT PLAN ASSETS, OBLIGATIONS AND FUNDED STATUS

The changes in Company's pension and OPEB plan assets and obligations for the year ended December 31 are as
follows:

Market value of plan assets

Beginning of year

Interest income

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

Benefit payments from plan assets

Benefit payments by employer

Actuarial gains

Past service cost
End of year (1)

Funded status

Pension
Benefit Plans

OPEB Plans

Pension
Benefit Plans

OPEB Plans

2022

2021

3,084

(144)

(603)

2,437

—

3,105

(138)

3,084

—

3,156

127

3,405

139

(144)

(9)

(564)

2,544

—

(5)

(37)

—

(138)

(9)

(201)

—

3,156

—

(4)

(15)

—

127

Net retirement benefit obligations

107

127

Included in net retirement benefit obligations are:
Registered funded defined benefit pension plan asset (1)
Non-registered, non-funded defined benefit pension

plans benefit obligation (2)

OPEB Plans

(24)

131

—

107

—

(93)

165

—

127

(1)

(2)

The registered funded defined benefit pension plan was in an asset position of $24 million at December 31, 2022 (2021- $93 million) due to the impacts
of returns on plan assets, increase in the liability discount rate, and the restriction of the net retirement benefit asset by the asset ceiling adjustment.

In the Company's non-registered, non-funded defined benefit pension plans, accrued benefit obligations decreased to $131 million at December 31,
2022 due to an increase in the liability discount rate and experience adjustments (2021 - decreased to $165 million due to an increase in the liability
discount rate and experience adjustments).

131 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

BENEFIT PLAN COST

The components of benefit plan cost for the year ended December 31 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 in earnings

Pension
Benefit Plans

OPEB Plans

Pension
Benefit Plans

OPEB Plans

2022

2021

(92)

—

(76)

—

RE-MEASUREMENT OF RETIREMENT BENEFITS

Re-measurements of the pension and OPEB plans for the year ended December 31 are as follows:

(Losses) gains on plan assets from:

Return on plan assets, excluding amounts included
in net interest income

Gains on plan obligations from:

Changes in financial assumptions

(Losses) gains recognized in other

comprehensive income (1)

Pension
Benefit Plans

OPEB Plans

Pension
Benefit Plans

OPEB Plans

2022

2021

(603)

564

(39)

—

201

230

—

(1)

Losses net of income taxes were $2 million for the year ended December 31, 2022 (2021 - gains net of income taxes of $189 million).

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 132

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

2022

Quoted

Un-quoted

Total

2021

2
111
62

—

175

1,061

735
46

—

1,842

—

3
57
2,074

—

2
2

—

124
124

14
223
237

—

363

2
111
62
2
177

1,061

735
46
124
1,966

14
223
237

3
161
90

—

254

1,457

839
50
5
2,351

—

3
57
2,437

2
100

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

9
102
3,084

4
100

(1)

The land and building are leased by the Company.

FUNDING

In 2022, an actuarial valuation for funding purposes as of December 31, 2021 was completed for the registered
defined benefit pension plans. The estimated contribution for 2023 is $8 million. The next actuarial valuation for
funding purposes must be completed as of December 31, 2024.

133 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

WEIGHTED AVERAGE ASSUMPTIONS

The significant assumptions used to determine the benefit plan cost and accrued benefit obligation are as follows:

Benefit plan cost

Discount rate for the year

Average compensation increase for the year

Accrued benefit obligations

Discount rate at December 31
Long-term inflation rate (1)
Health care cost trend rate:

Drug costs (2)
Other medical costs

Dental costs

Pension
Benefit Plans

OPEB Plans

Pension
Benefit Plans

OPEB Plans

2022

2021

3.16 %

2.25 %

5.28 %

2.00 %

n/a

3.16 %

n/a

5.28 %

n/a

5.00 %

4.00 %

2.58 %

2.25 %

3.16 %

2.00 %

n/a

2.58 %

n/a

3.16 %

n/a

5.05 %

4.00 %

(1)

(2)

The long-term inflation rate used to calculate the accrued benefit obligation at December 31, 2022 was 7.00 per cent for 2022, 3.50 per cent for 2023,
2.30 per cent for 2024 and 2.00 per cent thereafter.

The Company uses a graded drug cost trend rate, which assumes a 5.00 per cent rate per annum (2021 - 5.05 per cent rate per annum), grading down
to 4.00 per cent in and after 2040.

The weighted average duration of the defined benefit obligation is 12.7 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

The Company mitigates interest rate risk by holding a large proportion of pension assets in fixed income securities.
A decrease in long-term interest rates will result in an increase in the accrued benefit obligations, which will be
partially offset by an increase in the value of the plan's fixed income securities. Other things remaining the same,
the opposite is also true.

Compensation risk

The present value of the accrued benefit obligations is calculated using the estimated future compensation of plan
participants. Should future compensation be higher than estimated, benefit obligations will increase.

Inflation risk

Accrued benefit obligations are linked to inflation, and higher inflation will lead to increased obligations. For the
defined benefit pension plans, inflation risk is mitigated because the indexing of benefit payments is capped at an
annual increase of 3.0 per cent.

The majority of plan assets are also affected by inflation. As inflation rises, long-term interest rates will likely rise,
pushing up bond yields and reducing the value of existing fixed rate bonds. The relationship between equities and
inflation is not as clear, but generally speaking, high inflation has a negative impact on equity valuations. Overall,
rising inflation will likely reduce a plan surplus or increase a deficit.

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 134

Life expectancy

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

SENSITIVITIES

The 2022 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 %

(267)

310

(61)

318

(2)

(263)

(6)

—

(2)

(6)

—

(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.

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

2022
917
39
956
3
959

2021
811
33
844
3
847

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

Credit loss allowance

Acquisitions (Note 24)

Payments received

Sale of ownership interest in a subsidiary company (Note 3)

Foreign exchange rate adjustment and other

End of year

CUSTOMER CONTRIBUTIONS

2022

814

4,621

619

(1)

2021

714

3,989

582

(5)

(5,129)

(4,465)

(6)

(1)

920

—

(2)

814

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

135 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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

Sale of ownership interest in a subsidiary company (Note 3)

End of year

17. LEASES

THE COMPANY AS LESSEE

Right-of-use assets

2022

1,870

178

(55)

(9)

2021

1,756

169

(55)

—

1,989

1,870

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:

Note

2022

2021

Cost

Beginning of year

Additions

Acquisition

Disposals

Foreign exchange rate adjustment

End of year

Accumulated depreciation

Beginning of year

Depreciation

Disposals

End of year

Net book value

Lease liabilities

134

(6)

—

167

(6)

109

129

—

(1)

(2)

134

(1)

The Company has recognized lease liabilities mainly in relation to the arrangements to lease land and buildings. A
reconciliation of movements in lease liabilities during the year ended December 31 is as follows:

Beginning of year

Additions

Acquisition

Interest expense

Lease payments

Foreign exchange rate adjustment

End of year

Less: amounts due within one year

End of year

Note

2022

(18)

115

(16)

2021

100

—

(19)

(2)

(14)

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 136

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

181

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

2022

—

2021

During the years ended December 31, 2022 and 2021, leases with variable payments were less than $1 million.

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, 2022 and 2021, 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.

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

2022

2021

271

(122)

149

138

149

101

145

271

149

277

(116)

161

149

161

102

147

277

161

During the year ended December 31, 2022, $2 million of contingent rent was recognized as income from these
finance leases (2021 - $2 million).

137 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

Operating leases

The aggregate future minimum lease payments receivable under non-cancellable operating leases at December 31
are:

Minimum lease payments receivable

In one year or less

In more than one year, but not more than five years

2022

2021

111

During the years ended December 31, 2022 and 2021, no contingent rent was recognized as income from these
operating leases.

18. CLASS I AND CLASS II SHARES

A reconciliation of the number and dollar amount of outstanding Class I non-voting and Class II voting shares at
December 31 is shown below.

AUTHORIZED AND ISSUED

Authorized:

Issued and outstanding:

December 31, 2020
Purchased and cancelled
Stock options exercised
December 31, 2021
Purchased and cancelled
Stock options exercised
Converted: Class II to Class I
December 31, 2022

Class I Non-Voting

Shares
300,000,000

Amount

Shares
50,000,000

Class II Voting

Amount

Shares
350,000,000

Total

Amount

101,347,899
(220,000)
59,750
101,187,649
(486,400)
15,200
652,695
101,369,144

186

13,196,129

—

2
188
(1)

—

13,196,129

—

(652,695)
187 12,543,434

—

2 114,544,028
(220,000)
59,750
2 114,383,778
(486,400)
15,200

—

188

—

2
190
(1)

—

2 113,912,578

189

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

113,912,578

189 114,383,778

Shares held in trust for the mid-term incentive plan

(254,021)

(10)

(243,638)

Shares outstanding, net of shares held in trust

113,658,557

179 114,140,140

190

(10)

180

2022

2021

Amount

DIVIDENDS

The Company declared and paid cash dividends of $1.8468 per Class I and Class II Share during 2022 (2021 -
$1.7932). 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 12, 2023, the Company declared a first quarter dividend of $0.4756 per Class I and Class II Share,
payable on March 31, 2023 to share owners of record as of March 2, 2023.

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 138

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, 2022, ATCO Ltd. began a normal course issuer bid (NCIB) to purchase up to 1,011,907 outstanding Class
I Shares. The bid expires on March 8, 2023. The prior year NCIB to purchase up to 1,013,478 outstanding Class I
Shares began on March 9, 2021 and expired on March 8, 2022.

During the year ended December 31, 2022, 486,400 Class I shares were purchased for $23 million, resulting in a
decrease to share capital of $1 million and a decrease to retained earnings of $22 million (2021 - 220,000 Class l
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).

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

Interest received
Other

2022

717

(14)

(81)

214

178

(55)

391

(42)
39

2021

717

(13)

(62)

148

169

(55)

423

(51)
13

1,542

1,391

139 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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

DEBT RECONCILIATION

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

Liabilities from financing activities

December 31, 2020

Net issue of debt

Foreign currency translation

Debt issue costs

Amortization of deferred financing charges

December 31, 2021

Net (repayment) issue of debt

Foreign currency translation

Debt issue costs

Amortization of deferred financing charges

December 31, 2022

2022

2021

(120)

(9)

281

(11)

147

(110)

(4)

115

(9)

(12)

Short-term
debt

Long-term
debt

—

206

—

206

(206)

—

9,619

273

(39)

(5)

9,852

222

(6)

10,087

See Note 17 for the reconciliation of the changes in lease liability for the years ended December 31, 2022 and 2021.

CASH POSITION

Cash position at December 31 is comprised of:

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

2022
1,012
3

18
1,033

—

1,033

2021
1,072
1

18
1,091
(3)
1,088

(1)

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

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 140

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 and long-term advances due from
joint venture

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 forward 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 or forward 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
Long-term advances due from joint venture (1)
Financial Liabilities

Carrying
Value

2022

Fair
Value

Carrying
Value

2021

Fair
Value

149

185

161

217

—

Long-term debt

10,087

9,099

9,852

11,395

(1)

Long-term advances due from joint venture are recorded in other assets on the consolidated balance sheets.

141 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

The Company's derivative instruments are measured at fair value. At December 31 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, 2022

Financial Assets
Prepaid expenses and other current assets (1)
Other assets (1)
Financial Liabilities
Provisions and other current liabilities (1)
Other liabilities (1) (2)

December 31, 2021

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 (2) Commodities (3)

Total Fair
Value of
Derivatives

—

184

195

151

135

(1)

(2)

(3)

At December 31, 2022, financial assets and financial liabilities include $18 million and $137 million, respectively, of Level 3 derivative financial
instruments (December 31, 2021 - financial assets and financial liabilities included $8 million and $26 million, respectively, of Level 3 derivative financial
instruments).

In 2022, the Company executed two 15-year renewable power purchase agreements with Microsoft Corporation on certain renewable generation
facilities. Under the agreements, the Company will receive a fixed price per megawatt per hour (MWh) and pay the settled price per MWh from the
Alberta Electric System Operator as well as deliver the related renewable energy credits. The Company designated the energy component within the
agreements as cash flow hedges. At December 31, 2022, other liabilities include $18 million of derivative financial liabilities, calculated using an internal
forecasting model. Inputs to the model (Level 3) to calculate fair value include electricity generation forecast volumes and extrapolated forward power
prices. The sensitivity of a 10 per cent increase or decrease in electricity generation forecast volumes and extrapolated forward power prices would
increase or decrease fair value of derivatives by $2 million and $44 million, respectively.

Derivative financial instruments related to customer contracts in the Company's retail electricity and natural gas business are calculated using an
internal forecasting model. Inputs to the model (Level 3) to calculate fair value of derivatives include electricity and natural gas forecast consumption
volumes. The sensitivity of a 10 per cent increase or decrease in electricity and natural gas forecast consumption volumes would increase or decrease
the fair value of derivatives by $11 million and $1 million, respectively (2021 - $1 million and $2 million, respectively).

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 142

A reconciliation of the Company's derivative financial instruments classified as Level 3 is summarized as follows:

December 31, 2020 (1)

Settlement of derivative contracts

Losses recognized in earnings
December 31, 2021 (1)

Settlement of derivative contracts

Losses recognized in earnings

Losses recognized in other comprehensive income
December 31, 2022 (1)

(1) Net financial (liabilities) assets classified as Level 3 at end of year.

Subject to Hedge
Accounting

Not Subject to
Hedge Accounting

—

(18)

(1)

(52)

(18)

(178)

—

(101)

Total

(1)

(52)

(18)

(178)

(18)

(119)

For the year ended December 31, the following realized and unrealized gains and losses on derivative financial
instruments were recognized in the consolidated statements of earnings:

Realized gains (losses)

Revenues

Fuel costs

Purchase power

Other costs and expenses

Unrealized gains (losses)

Other costs and expenses

Total

2022

2021

Level 2

Level 3

Total

Level 2

Level 3

Total

(28)

113

120

—

(95)

(28)

113

(76)

(6)

(83)

114

(178)

(89)

(64)

(19)

(9)

—

(35)

(17)

(52)

(19)

(13)

(26)

Hedge ineffectiveness of $14 million was recognized in the consolidated statements of earnings during 2022 (2021 -
$14 million).

During the year ended December 31, 2022, unrealized gains before income taxes of $281 million were recognized in
other comprehensive income (OCI) (2021 - unrealized gains of $111 million), and $88 million of realized gains were
reclassified to the consolidated statements of earnings (2021 - $30 million).

Over the next 12 months, the Company estimates that net gains before income taxes of $129 million will be
reclassified from accumulated other comprehensive income (AOCI) to earnings.

143 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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

Subject to Hedge Accounting

Not Subject to Hedge Accounting

Interest Rate
Swaps)

Natural
Gas (1)

Power (2)

Foreign
Currency
Forward
Contracts

Natural
Gas (1)

Power (2)

Foreign
Currency
Forward
Contracts

Notional value and
maturity

December 31, 2022
Purchases (3)
Sales (3)
Currency

Canadian dollars
Australian dollars
Mexican pesos
U.S. dollars

Maturity

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

Canadian dollars
Australian dollars
Mexican pesos
U.S. dollars

Maturity

2023-2045

2023-2026

2023-2038

2023 2023-2027 2023-2027

2023

—

443

725

—

35,272,100

4,234,062

1,227,947

10,451,215

—

732

570

—

23,062,900

3,240,005

2,313,227

526,314

—

24,050,972 2,181,310

—

11,015,969 1,232,616

—

23
7

—

2023-2028

2022-2026

2022 2022-2024

2022-2024

2022

(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.

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 144

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:

2022

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

Financial Liabilities
Derivative liabilities (1) (3)

2021

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

303

—

(56)

191

—

(39)

—

303

191

(1)

(2)

(3)

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.

At December 31, 2022, $194 million is included in prepaid expenses and other assets, and $109 million is included in other assets in the consolidated
balance sheets (2021 - $54 million and $41 million).

At December 31, 2022, $135 million is included in provisions and other current liabilities, and $56 million is included in other liabilities in the
consolidated balance sheets (2021 - $32 million and $14 million).

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, short-term debt 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

145 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

interest rate risk. The Company has fixed interest rates, either directly or through interest rate swap agreements, on
97 per cent (2021 - 97 per cent) of total long-term debt. Consequently, the exposure to fluctuations in market
interest rates is limited.

A 100 basis point increase or decrease in interest rates would increase or decrease earnings by $1 million (2021 - nil)
and increase or decrease OCI by $12 million (2021 - $12 million). This analysis has been determined based on the
exposure to interest rates for financial instruments outstanding at December 31, 2022.

Interest rate benchmark reform risk

A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of
some interbank offered rates (IBORs) with alternative reference rates (IBOR reform). IBOR reform could impact
interest rates with respect to the Company's credit facilities, debt agreements and interest rate swap agreements
that are referenced to IBORs. The Company is currently managing the transition so that the existing credit facilities
and agreements that refer to IBORs shall be modified to ensure continuity of financing arrangements and address
differences between IBORs and alternative reference rates.

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 the U.S. dollar and Australia dollar would each increase or decrease earnings
and OCI by less than $1 million (2021 - less than $1 million). 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, 2022.

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 natural gas storage, retail energy and electricity generation 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 prices.

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 146

A 10 per cent increase or decrease in the forward prices of natural gas or electricity at December 31 would increase
or decrease earnings or OCI as follows:

Forward prices of natural gas

Forward prices of electricity

Earnings

2022

OCI
10

Earnings

2021

OCI
5

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 receivables and derivative instrument assets. The exposure to credit risk represents
the total carrying amount of these financial instruments in the consolidated balance sheets.

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 receivables credit risk is reduced by transacting with
credit-worthy customers in accordance with the established credit approval policies, and a large and diversified
customer base and through collateral arrangements such as letters of credit, corporate guarantees and cash
deposits. The Alberta 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.

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, 2022

December 31, 2021

High
(AA to AAA)

Medium
(BBB to A)

Low
(BB and
below)

0%-0.02% 0.05%-0.14% 0.46%-2.99%

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

At December 31, 2022, the Company had $51 million of accounts receivable and contract assets classified as Low
(BB and below) (2021 - $57 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

2022

13
4
(6)
11

2021
8
6
(1)
13

147 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

The aging analysis of trade receivables at December 31 is as follows:

Up to 30 days
31 to 60 days
61 to 90 days
Over 90 days

2022
885
13
2
10
910

2021
734
21
7
24
786

At December 31, 2022, the Company held $606 million in letters of credit for certain counterparty receivables (2021
- $285 million). The Company did not take possession of any collateral it holds as security in 2022 or 2021. 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 flows from operations provide 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
Uncommitted

Total
3,396
669
4,065

Used
1,080
258
1,338

2022

Available

2,316
411
2,727

Total
3,128
584
3,712

Used
1,208
186
1,394

2021

Available
1,920
398
2,318

Long-term committed credit facilities have maturities greater than one year. Uncommitted credit facilities have no
set maturity and the lender can demand repayment at any time.

Lines of credit utilized at December 31 are comprised of:

Short-term debt
Long-term debt
Letters of credit

Commercial paper

2022

—

1,001
337
1,338

2021
206
941
247
1,394

The Company is authorized to issue $1.2 billion of commercial paper against its long-term committed credit
facilities.

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 148

Maturity analysis of financial obligations

The table below analyzes the remaining contractual maturities at December 31, 2022 of the Company's financial
liabilities based on the contractual undiscounted cash flows.

Accounts payable and accrued liabilities
Long-term debt:

Principal
Interest expense (1)

Derivatives (2)

2023
1,161

109
412
160
1,842

2024

2025

2026

2027

2028 and
thereafter

—

458
426
52
936

346
422
21
789

395
414
10
819

3
376
10
389

8,828
7,196

—

16,024

(1)

Interest payments on floating rate debt have been estimated using rates in effect at December 31, 2022. 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, 2022.

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, as reported in the consolidated financial statements for
the year ended December 31, 2021.

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

2027 and
thereafter

—

233
371
9
613

—

451
363
4
818

—

62
358
1
421

—

307
365

8,498
7,015

—

672

15,513

(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.

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

149 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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.

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 income (loss)

Non-controlling interests

Total equity

Total capitalization

Debt capitalization

2022

—

10,087

179

4,090

3,968

8,344

2021

206

9,852

10,061

180

3,962

(39)

3,838

7,949

18,431

18,010

55 %

56 %

For the year ended December 31, 2022, 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.

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 150

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 including the potential impact of climate change and
energy transition risks, significant negative industry or economic trends, or adverse decisions by regulators. Events
indicating an impairment may be clearly identifiable or based on an accumulation of individually insignificant events
over a period of time. Measurement uncertainty is increased where the Company is not the operator of a facility.
The Company continually monitors its operating facilities and the markets and business environment in which it
operates. Judgments and assessments about conditions and events are made 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.

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 as well as retail electricity and natural gas services. 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.

Impairment of financial assets

The impairment loss allowance for financial assets is 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 including the potential impact of climate change and energy transition risks.

151 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

Impairment of long-lived assets

The Company continually monitors its long-lived assets and the markets and business environment in which it
operates for indications of asset impairment. Where necessary, the Company estimates the recoverable amount for
the cash generating unit (CGU) to determine if an impairment loss is to be recognized. These estimates are based on
assumptions, such as the price for which the assets in the CGU could be obtained or future cash flows that will be
produced by the CGU, discounted at an appropriate rate. Subsequent changes to these estimates or assumptions
could significantly impact the carrying value of the assets in the CGU.

Leases

Useful lives of right-of-use assets are based on current facts and past experience taking into account the anticipated
physical life of the asset, existing long-term sales agreements and contracts, current and forecast demand, and the
potential for technological obsolescence.

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 estimates used 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 either the most likely amount
method or the expected value method based on the sum of the probability-weighted amounts in a range of possible
outcomes, depending on which method the Company expects to better estimate the amount of the provision.

Fair Value Measurements

The Company has material accounting policies and disclosures that require the measurement of fair values, for both
financial and non-financial assets and liabilities. When measuring the fair value of an asset or a liability, The
Company uses market observable data, where available. Significant unobservable inputs and valuation adjustments
are periodically reviewed. If third party information, such as broker quotes or pricing services, is used to measure
fair values, then the Company uses the evidence obtained from third parties to support measurement valuations.

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 152

24. BUSINESS COMBINATIONS

Acquisition of Triple M Housing Ltd. (Triple M)

On December 7, 2022, ATCO Structures & Logistics Ltd., a subsidiary of the Company, acquired a 100 per cent
ownership interest in Triple M, a manufacturer of factory-built, modular housing in Alberta, Canada. The acquisition
is reported in the Structures & Logistics segment.

The aggregate consideration paid for Triple M was $44 million, which included cash acquired of $3 million and
identifiable assets acquired and liabilities assumed of $41 million. There is no contingent consideration with this
acquisition.

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

Assets

Accounts receivable and contract assets

Inventory

Property, plant and equipment
Intangible assets (1)

Rights-of-use asset

Goodwill

Other assets

Total Assets

Liabilities

Deferred income tax liabilities

Other liabilities

Lease liabilities

Total Liabilities

Total identifiable net assets acquired

(6)

(12)

(25)

(43)

(1) Other intangible assets comprise brand name, $11 million, dealer relationships, $16 million, and non-compete agreements, $1 million.

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 $5 million and 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, 2022, 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, 2022 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, 2022, would have been $5,067 million and $375 million, respectively, if the acquisition had
occurred on January 1, 2022. These pro-forma adjustments reflect the Company’s adjustments for depreciation and
amortization if the purchase price allocation occurred on January 1, 2022 and differences in accounting policies.
These pro-forma results may not necessarily be indicative of actual results had the acquisition occurred on January
1, 2022.

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 included cash acquired of $51 million and
identifiable assets acquired and liabilities assumed of $84 million. There was no contingent consideration with this
acquisition.

153 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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

Accounts receivable and contract assets
Property, plant and 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 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.

25. INVESTMENT IN ASSOCIATE COMPANY

The Company has a 40 per cent interest in Neltume Ports S.A. (Neltume Ports), a port operator and developer with a
diversified portfolio of 17 multi-purpose, bulk cargo, and container port facilities and six port operation services. The
business is primarily located in Chile with additional operations in Uruguay, Argentina, Brazil and the United States.

The equity interest in Neltume Ports is reported as a separate operating segment (see Note 3).

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

Statement of earnings and other comprehensive income (loss)

Revenues

Depreciation and amortization
Interest income
Interest expense
Income taxes

Earnings

Other comprehensive income (loss)

ATCO's share of earnings

ATCO's share of other comprehensive income (loss)

2022

2021

413

346

(64)
4
(10)
(7)

(60)
1
(11)
(7)

(17)

(7)

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 154

The summarized financial information at December 31 of Neltume Ports, over which the Company has significant
influence, is provided below.

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.

2022

2021

232
101
333

1,263
1,596

(49)
(68)
(117)

(149)
(147)
(296)

(413)

265
70
335

1,172
1,507

(48)
(65)
(113)

(169)
(112)
(281)

(394)

1,183

1,113

473

445

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 earnings
ATCO's share of other comprehensive income (loss)
Dividends received
Foreign exchange
Other
End of year

2022
445
14
3
(15)
31
(5)
473

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

—

445

155 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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 Ltd.

Canada

Inversiones ATCO Chile Limitada
Canadian Utilities Limited (1)

ATCO Energy Solutions Ltd.

Chile
Canada

Canada

Workforce housing, modular facilities, construction, site support
services and logistics and operations management.

Holds 40 per cent investment in associate, Neltume Ports S.A.
Holding company

Develops, owns and operates non-regulated energy and water-
related infrastructure

Electricidad del Golfo, S. de R.L.
de C.V.

ATCO Gas Australia Pty Ltd

ATCO Australia Pty Ltd

ATCO Energy Ltd.

ATCO Power (2010) Ltd.

CU Inc.

ATCO Electric Ltd. (2)

Mexico

Electricity generation and related infrastructure services

Australia

Canada

Natural gas distribution services

Electricity generation services

Electricity and natural gas retailer and a provider of whole-home

solutions

Electricity generation and related infrastructure services

Holding company

Electricity transmission, distribution, and related infrastructure

services

ATCO Gas and Pipelines Ltd. (3) Canada

Natural gas transmission, distribution, and related infrastructure

services

(1)

(2)

(3)

At December 31, 2022, ATCO Ltd. has an ownership interest of 52.9 per cent (2021 - 53.0 per cent).

ATCO Electric Ltd. comprises two divisions, ATCO Electric Transmission and ATCO Electric Distribution.

ATCO Gas and Pipelines Ltd. comprises two divisions, ATCO Pipelines and ATCO Gas.

27. INVESTMENT IN JOINT VENTURES

The carrying amount of the investment in joint ventures for the year ended December 31 is as follows:

Strathcona Storage LP

Other joint ventures

Total

Beginning of year

The Company's share of net earnings

The Company's share of other comprehensive

income

Dividends received
Change in ownership of NUE (Note 3)
Contributions
Foreign exchange

End of year

Strathcona Storage LP

2022

2021

2022
147

—

(14)

—

2021
137

—

(14)

—

1
(59)
17
5
2

146

147

118

—

(32)

—

14
(1)

2022
228

1
(73)
17
8
2

2021
186

—

(46)

—

27
(1)

264

228

Strathcona Storage Limited Partnership (Strathcona Storage LP) is a partnership that operates hydrocarbon storage
facilities at the Alberta Industrial Heartland near Fort Saskatchewan, Alberta. The facility consists of five
underground storage salt caverns, which have a combined storage capacity of 544,000 cubic metres (m3).

The Company holds a 60 per cent ownership in Strathcona Storage LP and its equity interest is included in the
Energy Infrastructure segment.

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 156

Selected information from the statement of earnings for the year ended December 31 of Strathcona Storage LP is as
follows:

Statement of earnings
Revenues

Depreciation and amortization
Operating expenses

Earnings

The Company's share of earnings

Strathcona Storage LP

2022

2021

(7)
(12)

(6)
(10)

Strathcona Storage LP had no other comprehensive income for the years ended December 31, 2022 and 2021.

Summarized financial information from the balance sheet at December 31 of Strathcona Storage LP is provided
below.

Balance sheet

Cash and cash equivalents
Other current assets
Current assets

Non-current assets
Total assets

Current liabilities

Non-current liabilities

Total liabilities

Net assets

The Company's share of net assets

Other joint ventures

Strathcona Storage LP

2022

2021

2
5
7

253
260

(4)

(13)

(17)

243

146

6
5
11

252
263

(9)

(10)

(19)

244

147

Other joint ventures of the Company comprise 15 joint ventures, which include LUMA Energy and Osborne
Cogeneration Facility described below.

LUMA Energy

LUMA Energy, LLC (LUMA Energy) is a limited liability company formed to transform, modernize and operate Puerto
Rico's 30,000 km electricity transmission and distribution system under an Operations and Maintenance Agreement
with the Puerto Rico Public-Private Partnerships Authority and the Puerto Rico Electric Power Authority (PREPA) over
a term of 15 years. Under the terms of the agreement, LUMA Energy will not assume ownership of the electricity
transmission and distribution system. The Company provided a guarantee of up to $105 million USD to PREPA in
connection with the services to be performed by LUMA Energy under the Operations and Maintenance Agreement.

LUMA Energy currently operates under the terms of a Supplemental Agreement, which was extended on November
30, 2022 and will continue until such time that PREPA's bankruptcy is resolved. The agreement allows LUMA Energy
to collect an annualized fixed fee equivalent of $115 million USD (Company's proportionate share is $58 million
USD). Following the resolution of PREPA's bankruptcy proceeding, LUMA Energy will transition to year one of the
Operations and Maintenance Agreement.

The Company holds a 50 per cent ownership in LUMA Energy and its interest is reported in the Utilities, Electricity
segment.

157 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2022, the Company's share in LUMA Energy's net earnings and dividends received
amounted to $53 million (2021 - $47 million) and $51 million (2021 - $22 million), respectively.

Osborne Cogeneration Facility

The Osborne Cogeneration Facility is a 180 megawatt natural gas-fired combined cycle facility located in South
Australia. The facility has a power purchase agreement (PPA) with Origin Energy Electricity Limited (Origin Energy). In
2018, the Company negotiated a five-year extension to the PPA with Origin Energy to December 31, 2023. On
February 3, 2023, the Company executed an extension to the current PPA. The extension is for a period of three
years with a further one year option. The terms of the extension are similar to the current tolling arrangement with
increased flexibility and dispatch capability for the customer.

The Company holds a 50 per cent ownership in the Osborne Cogeneration Facility and its interest is reported in the
Energy Infrastructure segment.

For the year ended December 31, 2022, the Company's share in Osborne Cogeneration Facility's net earnings and
dividends amounted to $12 million (2021 - less than $1 million) and $5 million (2021 - $8 million), respectively.

Commitments

The joint ventures have contractual obligations in the normal course of business. The Company’s total share of
these unrecognized commitments, based on contractual undiscounted cash flows, was $7 million at December 31,
2022 (2021 - $25 million).

Dividends and Distributions

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

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 Voting Common shares of Canadian Utilities

Limited)

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

Limited)

2022

3,975

2021

3,834

(7)

3,968

3,838

2022

47.1

3.2

2021

47.0

8.4

62.1

61.2

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 158

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

2022

2021

4,048

3,515

639

784

337

406

400

589

223

311

1,867

1,731

20,107

19,344

(1,317)

(1,418)

(13,591)

(12,835)

7,066

3,975

6,822

3,834

2,140

(1,256)

(932)

(48)

226

308

1,718

(1,262)

(478)

(22)

225

297

CANADIAN UTILITIES LIMITED DIVIDEND REINVESTMENT PROGRAM

On January 13, 2022, Canadian Utilities Limited reinstated its dividend reinvestment program (DRIP) for eligible Class
A non-voting (Class A) and Class B voting common (Class B) share owners who are enrolled in the program. The
DRIP was previously suspended effective January 10, 2019.

The DRIP allows eligible Class A and Class B share owners of Canadian Utilities Limited to reinvest all or a specified
portion of their dividends in additional Class A shares.

The Class A shares are issued from treasury at a two per cent discount to the volume weighted average price of the
Class A shares traded on the Toronto Stock Exchange during the last five qualifying trading days preceding the
dividend payment date.

During the year ended December 31, 2022, non-controlling interests acquired 527,471 Class A shares of Canadian
Utilities Limited, using re-invested dividends of $20 million. The shares were priced at an average of $37.26 per
share.

159 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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

Cumulative Redeemable Second Preferred Shares, at 4.50% to 5.25%

Issuance costs

2022

2021

190

1,601

(30)

1,761

1,601

(30)

1,761

(1)

(2)

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.
Effective June 1, 2022, the annual dividend rate for the Series Y Preferred Shares was reset at 5.196 per cent for the five-year period from June 1, 2022 to
May 31, 2027. Prior to the reset on June 1, 2022, the annual dividend rate was 3.403 per cent.

In August 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, Canadian Utilities Limited 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

0.32475
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, 2027 (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. 2022 CONSOLIDATED FINANCIAL STATEMENTS 160

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

Vesting Period

Term

Officers and key employees

10 years

Settlement
Class I shares (4)

20% per year
over 5 years

25% per year
over 4 years

20% per year
over 5 years

8 years

Class I shares (4)

10 years

Cash

4 or 5 years

Cash

Share appreciation rights

(1) Directors, officers and key

employees

International executives and key
employees

Mid-term incentive plan

Officers and key employees

2-3 years (3)

2-3 years

Class I 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 (1)
Outstanding options, beginning of year

Granted

Exercised

Forfeited

Outstanding options, end of year

Options exercisable, end of year

2022

Weighted
Average
Exercise Price

Options

10,200,000

107,150

2021

Weighted
Average
Exercise Price

Options

10,200,000

8,305,300

1,431,050

$43.70 1,115,200

$42.33

482,000

47.54

515,000

(15,200)

(15,250)

38.60

(59,750)

46.32

(139,400)

1,882,600

$44.71 1,431,050

817,100

$44.15

572,300

45.30

34.12

42.76

$43.70

$44.53

(1)

The share owners voted to approve the replenishment of the stock option plan by 8,664,900 Class I shares on May 11, 2022.

Options

Range of
Exercise Prices

$38.40 - $38.93

$40.38 - $44.97

$45.38 - $49.51

$50.33 - $51.97

$38.40 - $51.97

Outstanding

Exercisable

Number
Outstanding

Weighted
Average
Remaining
Contractual Life

Weighted
Average
Exercise Price

Number
Exercisable

Weighted
Average
Exercise Price

463,950

172,550

1,174,400

71,700

1,882,600

5.5

3.2

6.6

1.4

5.8

$38.49

269,450

$38.55

43.23

46.94

51.89

148,050

327,900

71,700

43.45

47.38

51.89

$44.71

817,100

$44.15

Compensation expense related to stock options was $2 million in 2022 (2021 - $2 million), with a corresponding
increase to contributed surplus.

161 ATCO LTD. 2022 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

639,700

$46.01

736,200

$44.99

2022

Weighted
Average
Exercise Price

SARs

2021

Weighted
Average
Exercise Price

SARs

Granted

Exercised

Forfeited

Expired

Outstanding SARs, end of year

SARs exercisable, end of year

SARs

Range of
Exercise Prices

$38.40 - $38.93

$40.38 - $44.97

$45.38 - $49.51

$50.33 - $51.97

$38.40 - $51.97

21,000

(11,100)

(6,000)

(13,000)

630,600

510,350

47.54

37.83

47.51

49.12

8,000

(72,100)

(32,400)

45.38

35.28

46.65

—

$46.06

639,700

$46.08

472,450

$46.01

$45.81

Outstanding

Exercisable

Number
Outstanding

Weighted
Average
Remaining
Contractual Life

Weighted
Average
Exercise Price

Number
Exercisable

Weighted
Average
Exercise Price

83,200

181,550

294,150

71,700

630,600

3.1

2.7

3.1

1.4

2.8

$38.89

76,200

$38.93

43.18

48.44

51.89

145,300

217,150

71,700

43.48

48.40

51.89

$46.06

510,350

$46.08

In 2022, compensation expense related to SARs was an expense of $1 million (2021- $2 million). The total carrying
value of liabilities arising from SARs at December 31, 2022 was $3 million (2021 - $3 million). The total intrinsic value
of all vested SARs at December 31, 2022 was less than $1 million (2021 - 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

Expected holding period prior to exercise

Options

$47.54

3.17 %

25.98 %

3.98 %

7.1 years

2022

SARs

$47.54

3.56 %

29.62 %

3.98 %

4 years

Options

$45.30

1.11 %

26.19 %

3.94 %

7.1 years

2021

SARs

$45.38

0.67 %

24.87 %

3.93 %

4 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. 2022 CONSOLIDATED FINANCIAL STATEMENTS 162

MID-TERM INCENTIVE PLAN

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

Outstanding MTIPs, beginning of year

Exercised
Forfeited (1)
Outstanding MTIPs, end of year
Unallocated shares held by trustees (2)

Total number of shares held by trustees, end of year

2022

Weighted
Average
Grant Date
Fair Value

MTIPs

$44.38

15,558

MTIPs

3,150

(3,150)

44.38

(11,008)

—

254,021

—

(1,400)

3,150

240,488

243,638

2021

Weighted
Average
Grant Date
Fair Value

$42.29

43.43

42.36

$44.38

(1)

(2)

Forfeitures occur when certain performance criteria are not met.

Unallocated shares are Class I shares held by the trustee which have not been awarded to officers or key employees.

Compensation expense related to MTIP awards was less than $1 million for 2022 (2021 - less than $1 million) with a
corresponding increase to contributed surplus. The Company, through a trustee, did not purchase any shares
during 2022 to be distributed to employees on vesting of the awards (2021 - nil).

30. CONTINGENCIES

IT Master Services Agreements

In 2020, ATCO Technology Management Ltd. (a wholly owned subsidiary of Canadian Utilities Limited) signed Master
Services Agreements (MSAs) with IBM Canada Ltd. (subsequently novated to Kyndryl Canada Ltd.) to provide
managed information technology services. In 2021, ATCO Gas Australia Pty Ltd and ATCO Australia Pty Ltd (both
wholly owned subsidiaries of Canadian Utilities Limited) signed MSAs with IBM Australia Limited, to provide
managed information technology services. These services were previously provided by Wipro Ltd. (Wipro) under
ten-year MSAs expiring in December 2024. The Company recognized onerous contract provisions in 2020 and 2021
of $75 million and $6 million relating to the Wipro MSAs, which were included in provisions and other current
liabilities in the consolidated balance sheets. On February 26, 2023, the matters relating to the Wipro MSAs were
concluded resulting in no significant changes to the onerous contract provisions.

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.

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.

163 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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

Acquisition (Note 34)

Other

32. RELATED PARTY TRANSACTIONS

2023

2024

2025

2026

2027

2028 and
thereafter

526

409

713

1,672

439

131

120

—

448

—

154

—

126

In transactions with the Company’s joint ventures, the Company recognized revenues of $33 million relating to
management fees and other charges (2021 - $38 million).

In transactions with the Company’s group pension plans, the Company paid occupancy costs of $3 million relating to
property owned by the pension plans (2021 - $5 million).

The Company received $1 million (2021 - less than $1 million) in retail electricity and natural gas services revenue
and incurred $3 million in advertising, promotion and other expenses from entities related through common
control (2021 - $1 million).

At December 31, 2022, the Company had $33 million of unsecured interest-bearing long-term advances due from
NUE, a joint venture. These advances are included in other assets on the consolidated balance sheets.

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

2022

2021

Key management personnel comprise members of executive management and the Board, a total of 23 individuals
(2021 - 23 individuals).

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

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 164

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 per cent and 50
per cent 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.

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.

165 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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 electricity generation, capacity and related products under power purchase arrangements (PPAs) or
in the merchant market is recognized based on output delivered and capacity provided over the contract term and
is measured at rates agreed in the PPAs or rates prevailing in the spot market. Revenue from operating and
maintaining the generation 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

Operating lease revenue from the rental of modular structures and other equipment is recognized over the term of
the rental contract.

Certain Power Purchase Arrangements (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.

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 166

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.

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.

MARKETABLE SECURITIES INVESTMENTS

Marketable securities investments include highly-liquid short term debt and equity investments with a maturity of
more than 90 days but not exceeding one year at the time of 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,

167 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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.

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
Wind power generation
Other energy infrastructure

Buildings
Other:

Rental assets
Other plant, equipment and machinery

Useful Life

Average
Useful Life

Average
Depreciation Rate

25 to 67 years
15 to 103 years
3 to 57 years
3 to 120 years

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

2 to 17 years
2 to 50 years

52 years
42 years
42 years
41 years

13 years
56 years
21 years
30 years
32 years
39 years

18 years
18 years

1.9 %
2.4 %
2.4 %
2.5 %

7.5 %
1.8 %
4.8 %
3.3 %
3.1 %
2.6 %

5.7 %
5.4 %

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.

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 168

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. Assets that cannot be tested individually for impairment are
assessed at the CGU level to which the assets belong, 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.

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

169 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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.

CONTINGENCIES

Contingent liabilities are potential obligations and contingent assets are potential assets, that arise from past events
and whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events
and whose existence is not wholly within the control of the Company.

Contingent liabilities, when identified, are assessed as either probable, possible or remote. Contingent liabilities are
recognized in the consolidated financial statements when it is probable that future events will confirm them and
when they can be reasonably estimated. Contingent liabilities assessed as possible are disclosed, together with a
possible loss range, when determinable, in the notes to the consolidated financial statements. Contingent liabilities
assessed as remote are neither recognized nor disclosed in the consolidated financial statements.

Contingent assets are not recognized in the consolidated financial statements.

Determining contingencies inherently involves the exercise of judgment and the calculation of the estimated
outcomes of future events. Actual results could differ from the 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.

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 170

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

(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).

171 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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
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.

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS 172

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
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

173 ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

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

2022

2021

2022

1.3546

0.9212

1.2656

0.9200

1.3013

0.9034

2021

1.2793

0.9164

ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

At December 31, 2022, 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. 2022 CONSOLIDATED FINANCIAL STATEMENTS 174

34. SUBSEQUENT EVENT

ACQUISITION OF RENEWABLE ENERGY BUSINESS

On January 3, 2023, ATCO Power (2010) Ltd., a wholly owned subsidiary of the Company, acquired from Suncor
Energy Inc. a portfolio of wind and solar assets and projects in Alberta and Ontario, Canada. The aggregate
consideration paid was $713 million, which included cash acquired of $38 million and identifiable assets acquired
and liabilities assumed of $675 million. The aggregate consideration paid is subject to working capital adjustments.
The transaction was financed by a non-revolving credit facility issued by a syndicate of lenders. The acquisition will
be accounted for as a business acquisition and its results will be reported in the Energy Infrastructure operating
segment starting in the first quarter of 2023.

The preliminary fair value calculation of the major classes of assets acquired and liabilities assumed is shown below
which will be finalized within one year.

Assets
Accounts receivable and contract assets
Property, plant and equipment
Construction work-in-progress
Intangible assets
Other assets
Goodwill
Total assets
Liabilities and non-controlling interest
Accounts payable and accrued liabilities
Deferred income tax liabilities
Other liabilities
Non-controlling interest
Total liabilities and non-controlling interest
Total identifiable net assets acquired

6
641
46
61
9
150
913

(46)
(150)
(8)
(34)
(238)
675

Transaction costs of $2 million for incremental legal and advisory services fees were expensed during the year
ended December 31, 2022 and included in other costs and expenses in the consolidated statements of earnings.

In December 2022, the Company entered into a 15-year renewable power purchase agreement with Microsoft
Corporation relating to the 202 megawatt (MW) Forty Mile Wind Phase 1 project. The agreement was contingent
upon the successful acquisition of the project included in the transaction. Under the agreement, Microsoft
Corporation will purchase 150 MW of the generation capacity and related renewable energy credits generated by
the project for a fixed price once fully energized. The Company will receive a fixed price per MW hour (MWh) and
pay the settled price per MWh from the Alberta Electric System Operator.

175

ATCO LTD. 2022 CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED ANNUAL RESULTS (1)

YEAR ENDED DECEMBER 31, 2022

(Millions of Canadian dollars, except as indicated)
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 ($)
Class II Voting closing share price ($)

2022

2021

2020

2019

2018

4,978
370

4,289
246

3,944
252

4,706
513

4,888
328

61
14
–

379
19
(50)
423

53
13
6

336
15
(41)
382

57
15
–

305
15
(40)
352

37
15
(6)

301
57
(39)
365

15
4
17

275
83
(39)
355

1,033

691
24,139 23,004 22,200 21,703 23,344

1,100

1,140

1,088

–
–
10,087
–
3,968
4,376

–
175
9,397
1,401
3,687
3,755
18,431 18,010 17,471 17,294 18,415

–
–
9,436
–
3,858
4,000

3
206
9,852
–
3,838
4,111

3
–
9,619
–
3,797
4,052

2,396

1,864

1,843

1,542

999

204
10

114
11

125
13

105
(16)

88
10

566
571
234
12
1,597

3.25
3.71
1.85
38.42
42.38
40.45

350
747
120
10
1,352

2.16
3.35
1.79
35.94
42.70
43.00

366
510
19
8
1,041

2.21
3.08
1.74
35.37
36.49
37.81

389
646
88
6
1,218

4.49
3.19
1.62
34.88
49.77
49.55

467
622
51
16
1,254

2.87
3.10
1.51
32.75
38.61
38.55

Full disclosure of all financial information is available on the SEDAR website - www.sedar.com.

(1)

(2)

Financial results have been prepared in accordance with International Financial Reporting Standards (IFRS).

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 year-ended December 31, 2022, 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.

ATCO LTD. 2022 CONSOLIDATED OPERATING SUMMARY 176

CONSOLIDATED OPERATING SUMMARY

YEAR ENDED DECEMBER 31, 2022

(Millions of Canadian dollars, except as indicated)

2022

2021

2020

2019

2018

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

204

114

125

105

Port products handling (millions of tonnes)

Utilities

Electricity distribution and transmission
operations

Capital expenditures

Power lines (thousands of kilometres)

Power lines owned (thousands of kilometres)

566

105

350

105

366

389

467

Electricity distributed (millions of kilowatt hours)

12,489 12,491 12,012 12,664 12,928

Average annual use per residential customer (kWh)

7,334

7,535

7,528

7,227

7,398

Average customers during the year (thousands)

263

261

260

258

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

428

385

307

353

383

2,509

2,476

2,535

2,304

2,292

304

299

300

311

304

108

111

113

112

111

Average customers during the year (thousands)

2,063

2,036

2,014

1,989

1,964

Natural gas transmission operations

Capital expenditures

143

362

203

293

239

Pipelines (thousands of kilometres)

Energy Infrastructure

Electricity generation operations (1)

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)

123

348

248

111

117

550

348

248

101

400

347

247

344

3,922

244

2,517

400

(1)

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.

177 ATCO LTD. 2022 CONSOLIDATED ANNUAL RESULTS

GENERAL INFORMATION

INCORPORATION

REGISTRAR & TRANSFER AGENT

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

Mailing Address:

Investor Relations c/o ATCO

3rd Floor, West Building

5302 Forand St SW

Calgary, AB

Canada T3E 8B4

Class I Non-Voting and

Class II Voting Shares

TSX Trust Company

Calgary/Montreal/Toronto/Vancouver

Telephone:

8:30 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:

1 416 595 9593

Email:

shareholderinquiries@tmx.com

www.tsxtrust.com

Mailing Address:

TSX Trust Company

301 - 100 Adelaide Street West

Toronto, ON

Canada M5H 4H1

Printed in Canada

ATCO LTD. 2022 ANNUAL REPORT 2022 178