ATCO LTD.
ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 2023
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Message from the Chair & CEO
Management's Discussion & Analysis
Financial Statements
Consolidated Annual Results
Consolidated Operating Summary
General Information
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Valuing A Long-Term Outlook
We continue to develop the ATCO group of
companies as a portfolio of investments and
businesses that have the wherewithal to deliver our
purpose for generations to come. To that end we
invested substantial effort across all our businesses
in setting a long-term, unified vision.
First, we have enhanced our growth plans to deliver
significantly improved market capitalization and
provide share owners with consistent and growing
Total Shareholder Return along with increased
economic and societal impact in the communities
that we serve.
Second, we continued investing in our diverse
jurisdictions and business lines tied to the essentials
of life, our businesses are a meaningful part of our
ESG trajectory and ATCO plays an important role in
shelter, transportation, security and energy.
Finally, we have supplemented our global
management team to reflect our entrepreneurial,
imaginative and courageous culture with results-
driven and high-performing people. As a globally
trusted brand, we will continue to be a locally
minded, global company and a leader in improving
quality of life.
Our long-term outlook means ATCO seeks to build a
tailored portfolio of investments and businesses that
balances risk, provides the right mix of yield and
growth and delivers upon our 2030 ambitions.
A great example of this is our investment in Neltume
Ports. In 2023 Neltume signed a significant contract
with the Port Authority of Vancouver in Washington
State. This will see Neltume, with its partner Nautilus,
operate Terminal 2 in this port for a 30-year period
with two 10-year extension options. This opportunity,
underpinned by a significant contract for bulk
loading, demonstrates our ongoing expansion in
North America.
Providing Affordable Solutions for Housing and
Community Spaces
With our decades of experience in providing
workforce housing and a client list that is global in
nature we have the capability to meet the needs of
customers and communities around the world.
Our Structures business achieved stellar financial
and commercial results in 2023 thanks to continued
growth in our space rental business, as well as the
first full year of operations in the residential housing
sector following the acquisition and integration of
Triple M Housing.
DELIVERING CERTAINTY IN
UNCERTAIN TIMES
Dear ATCO Share Owners,
As I reflect on the past year, I celebrate the collective
accomplishments of our ATCO team in advancing our
business and shaping the future of ATCO. Together
we worked with customers, partners and
communities to deliver our essential products and
services and progress our purpose of creating
prosperity and opportunity for generations to come.
I also acknowledge that it continues to be an
unsettling time to be a citizen or business given the
volatility and uncertainty around the globe. The
ongoing Russian invasion of Ukraine, the conflict in
Israel and Palestine and China relationships
contribute to additional strife around the globe.
Across all our operating areas, there are questions
about how society will feed, house and provide the
energy people need in an affordable and sustainable
manner.
Businesses are seeking to navigate these unstable
geo-political forces and the shifting economies
around the globe. Governments of all levels are
grappling with how to respond to the societal, energy
and economic challenges set before them, including
Indigenous reconciliation, energy transition and
inflation.
In the Our Operating Environment section of this
report, you can learn more about the broad trends
impacting commerce, customers and communities
and ATCO’s ability to continue to deliver results and
capitalize on emerging opportunities.
At ATCO we endeavor to be a stabilizing force with
customers and partners, in our communities and for
our employees. We do that by having a firm grasp of
knowing how and where we can make a difference.
We express this imperative for doing the right thing
through six strategic tenets that articulate and
enshrine our commitment to share owners,
customers, partners, communities and employees. I
am pleased to share with you some of the
achievements from 2023 that demonstrate this
commitment.
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ATCO LTD. 2023 ANNUAL REPORT
The shortage of attainable housing in Canada and
elsewhere in the world has resulted in a significant
housing crisis. We continue to believe that factory
built homes will be a necessary part of the short- and
long-term solution to the supply and demand
imbalance.
I’m also very pleased with the role our teams were
able to play in housing evacuees during the 2023
wildfire response. The Structures team remobilized
an existing workforce housing camp from Clearwater,
BC to High Level, Alberta and hundreds of evacuees
from the Dene Tha’ First Nations were welcomed by
the ATCO Frontec employees who operated the
camp.
Taking A Leadership Role in the Energy Transition
Through our investment in Canadian Utilities, ATCO is
providing reliable and resilient energy operations,
taking strategic decisions that will contribute to a net-
zero future, and pursuing initiatives to integrate
cleaner fuels, renewable energy and energy storage.
Moving to lower emitting sources of energy, while
maintaining safety, reliability and affordability is the
easy-to-articulate, but difficult-to-execute challenge
of the energy transition, and we are making excellent
progress on this front.
In 2023, we achieved commercial operations of our
39-MW Empress solar facility in Alberta, the entire
output of which is being sold under a long-term
virtual power purchase agreement with Lafarge
Canada’s Exshaw cement plant.
We continued to advance our hydrogen initiatives,
with ongoing demonstration projects in Alberta and
Western Australia blending hydrogen into our
existing gas networks. The long-term goal of blending
volumes of hydrogen into the network is to lower
emissions and utilize natural gas infrastructure as an
energy delivery and storage system.
In addition to progressing the development of the
Heartland Hydrogen Hub, a proposed 300,00 tonne
per year hydrogen production facility in the Fort
Saskatchewan area, we also signed a memorandum
of understanding (MOU) with the Kansai Electric
Power Corporation. Under the MOU we are
collaborating with Kansai to develop an integrated
clean fuels supply chain between Canada and Japan.
Building Equitable Partnerships with Indigenous
Communities
With decades of meaningful Indigenous partnership
under our collective belts, our company has been a
force for positive change with Indigenous partners
and communities.
Last year, Wicehtowak Frontec Services (WFS), a
partnership between ATCO Frontec and George
Gordon First Nation was awarded a multi-year
contract to provide camp support services at BHP’s
Jansen Discovery Lodge in Saskatchewan, a lodge
which was designed and built in 2012 by ATCO
Structures. WFS began in 2011 as a 50-50 joint
venture, today it’s a majority Indigenous-owned
company and another example of our commitment
to economic reconciliation.
In 2023, we negotiated an agreement for the Chiniki
and Goodstoney First Nations to take a majority
equity position in our Deerfoot and Barlow solar
developments, making them
51 per cent owners in the Calgary facilities.
Not only does this partnership support energy
transition and our overall strategy related to
renewable generation and Indigenous engagement, it
also creates meaningful and long-lasting economic
returns for the Chiniki and Goodstoney communities.
Collaborating for the Betterment of Communities
ATCO has always been focused on being an
instrument of good. This extends right into the
communities we are so proud to serve.
We have deepened our involvement with the Invictus
Games, a global program that uses the power of
sport to enhance the lives of wounded or unwell
members of armed forces (veteran or active
member) from around the world. Participants find
new meaning, challenge themselves, and reconnect
with their team spirit.
In 2023 we were the Presenting Sponsor of Team
Canada for the Invictus Games in Düsseldorf,
Germany and announced our expanded participation
as the Presenting Partner of the 2025 Games in
Vancouver and Whistler, Canada. Our support of the
military is important to the people of ATCO and gives
us a deep sense of satisfaction and purpose knowing
we are providing an avenue for veterans and active
members to heal, connect, and be celebrated.
To support communities and organizations in their
energy transition, we created a new program last
year called the Community Energy Fund. This grant
making program awarded funds to 12 Alberta
schools, community groups and municipalities to
help them achieve their energy and sustainability
goals, with projects that include energy audits,
community charging stations, solar panel
installations and LED light conversions.
ATCO LTD. 2023 ANNUAL REPORT
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Supporting the Talent and Diversity of the ATCO
Team
Our first priority is keeping our people and our
communities safe. In 2023, we dealt with
unprecedented wildfires in Alberta and the
Northwest Territories. In concert with emergency
services and communities, ATCO teams delivered a
steadfast and coordinated response, with
collaboration across our businesses. Their joint effort
helped keep our systems available and our people
safe.
I encourage you to read the ATCO 2023 Sustainability
Report for more information about our commitment
to Safety, Diversity, Equity and Inclusion as well as
other information about our ESG goals and
performance.
I extend my appreciation to our Executive Leadership
team for their business success over the past year
and their commitment to a unified and inspiring
vision for our future.
I also wish to acknowledge and thank the ATCO
Board of Directors for their guidance, support and
commitment.
On behalf of our Board of Directors, our Executive
team, and the people of ATCO, I wish to thank you –
our share owners – for your ongoing support and
belief in our enterprise and our purpose.
Sincerely yours,
Nancy C. Southern
Chair & Chief Executive Officer,
ATCO Ltd.
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ATCO LTD. 2023 ANNUAL REPORT
ATCO LTD.
MANAGEMENT’S DISCUSSION AND
ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2023
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, 2023.
This MD&A was prepared as of February 28, 2024, and should be read with the Company's audited consolidated financial
statements (2023 Consolidated Financial Statements) for the year ended December 31, 2023. Additional information, including
the Company's Annual Information Form (2023 AIF) is available on SEDAR+ at www.sedarplus.ca.
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) (52.7 per cent ownership), ATCO Structures &
Logistics Ltd. (ATCO Structures & Logistics) (100 per cent ownership), ATCO Land and Development Ltd. (ATCO Land and
Development) (100 per cent ownership), and ASHCOR 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. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
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TABLE OF CONTENTS
ATCO's Path to 2030 ..................................................................................................................................................................
ATCO's Strategies .......................................................................................................................................................................
Our Company ..............................................................................................................................................................................
Our Business Units ..................................................................................................................................................................
Our Operating Environment .................................................................................................................................................
Our Corporate Governance...................................................................................................................................................
Performance Overview .............................................................................................................................................................
Business Unit Performance .....................................................................................................................................................
Structures & Logistics .............................................................................................................................................................
Neltume Ports ..........................................................................................................................................................................
ATCO Corporate & Other .......................................................................................................................................................
Canadian Utilities ....................................................................................................................................................................
ATCO Energy Systems .......................................................................................................................................................
ATCO EnPower .....................................................................................................................................................................
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 .............................................................................................................
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ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
ATCO'S PATH TO 2030
CREATING PROSPERITY AND OPPORTUNITY FOR GENERATIONS TO COME
ATCO is committed to a bold and extraordinary future for our companies and our share owners. ATCO is charting a
course towards 2030 with an ambitious set of objectives and targets that will build upon the long corporate history
of bringing prosperity and opportunity to the communities we serve.
Incorporating our Core Values
Our actions reflect our core values of safety, integrity, agility, caring, and collaboration. These foundational
principles guide us as we balance the short- and long-term economic, environmental and social considerations of
our businesses.
As a globally diversified holding company, ATCO focuses on investments in the essential services of Energy, Logistics
and Transportation, Water, Food and Agriculture, Real Estate and Shelter. We will continue to explore new
investments that align with our core capabilities and provide a pathway to the returns and growth profiles that we
require for our portfolio.
Committed to the sustainable future
ATCO's sustainability strategy has always been driven by a pragmatic, long-term perspective, one that prioritizes our
sustainability objectives and environmental, social and governance (ESG) performance while safely and reliably
delivering affordable products and services to our customers, each and every day.
We continue to make strong progress towards our 2030 ESG targets announced in 2022. These 2030 targets include
reducing our operational Greenhouse Gas Emissions (GHG) intensity and customer emissions, growing our low
carbon energy portfolio 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
aspiration builds upon the Company's significant progress in recent years in decarbonizing its portfolio.
Details about our progress towards these targets is discussed in this MD&A's "Sustainability, Climate Change and
Energy Transition" section and in the Company's annual Sustainability Report, which will be available in May 2024.
ATCO'S STRATEGIES
At the heart of ATCO’s strategy is the desire to be a unified provider of essential services for our customers. The
essentials for life are an integral part of global growth and prosperity and are key to our strategy. They are by
nature resilient to macroeconomic headwinds, geopolitical conflict and natural disasters. 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 is a globally-trusted brand, built on our foundation of excellence, which gives us an advantage as we look
towards purpose-driven expansion or acquisition opportunities through each of our business units. We know that
to continue to enable long-term prosperity, we need to evaluate different avenues for growth that allow us to
remain competitive on a global stage.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
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At the base of our portfolio we look for a stream of stable and reliable earnings and cash flow for ATCO. This
supports new investment and provides surety to our dividends.
Value investments provide a balance between yield and growth and while they likely have some cyclicality, they also
generally have the ability to outpace overall economic growth and drive better returns. Recent acquisitions such as
the 2022 acquisition of Triple M Housing Ltd. (Triple M Housing) by ATCO Structures, and the increase by Neltume
Ports in its ownership position in ports, showcase value investments.
We also look for contributions that are more growth focused. They may have less ability to contribute to the current
dividend due to the need for growth capital, but will create meaningful growth for our portfolio in the coming years.
Examples of this approach are ATCO EnPower's advancements on renewables and clean fuels investments, and
Ashcor's reclaimed ash management (RAM) technology.
Our businesses also continue to pursue diversification opportunities and/or expansion of product offerings through
the evaluation of new technologies, non-traditional markets, and integrated services.
STRATEGIC TENETS
Valuing a long-term outlook.
Providing affordable solutions for housing and community spaces.
Taking a leadership role in the energy transition.
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ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
Building equitable partnerships with Indigenous communities.
Collaborating for the betterment of communities.
Supporting the talent and diversity of the ATCO team.
OUR COMPANY
GLOBAL PROFILE
ATCO encompasses two publicly traded companies – ATCO Ltd. (TSX: ACO.X) (TSX: ACO.Y) and Canadian Utilities
Limited (TSX: CU).
Principal subsidiaries are Canadian Utilities, of which ATCO owns 52.7 per cent (37.4 per cent of the Class A non-
voting shares and 99.6 per cent of the Class B common shares), and ATCO Structures & Logistics, 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 and Ashcor, and 40 per cent of Neltume Ports (the 2023 Consolidated Financial Statements includes
our equity-accounted investment in this associate company and also our share of joint venture (JV) investments).
Partnering and investing in life's essentials for a changing world.
From reliable, sustainable energy for homes and businesses to innovative temporary and permanent structures and
everything in between, we build communities, energize industries and deliver customer-focused infrastructure
solutions. ATCO is privileged to be providing these innovative, sustainable solutions in sectors that are essential to
global growth and prosperity with the dedication and support of our approximately 8,000 ATCO employees and the
additional 12,100 employees in our non-controlled interests around the world.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
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As a diversified global corporation, ATCO has investments in the essential services of Structures & Logistics
(workforce and residential housing, innovative modular facilities, construction, site support services, workforce
lodging services, facility operations and maintenance, defence operations services, and disaster and emergency
management services); ATCO Energy Systems (electricity and natural gas transmission and distribution, and
international operations); ATCO EnPower (energy storage, energy generation, industrial water solutions, and clean
fuels); Retail Energy (electricity and natural gas retail sales, and whole-home solutions); Transportation (ports and
transportation logistics); and Commercial Real Estate.
4M+
$25B
31
100+
Countries
Total Customers
Total Assets
Years of Annual
Dividend Increases
Long History of Global
Operations
OUR BUSINESS UNITS
ATCO reports on the four business units of Structures & Logistics, Neltume Ports, ATCO Corporate & Other, and
Canadian Utilities. Each of the operating subsidiaries in these business units share similar economic characteristics
and have been aggregated for reporting purposes. Structures & Logistics includes performance details on ATCO
Structures and ATCO Frontec, and Canadian Utilities reports on ATCO Energy Systems (rebranded in 2023 from
Utilities), ATCO EnPower (rebranded in 2023 from Energy Infrastructure), and Canadian Utilities Corporate & Other.
Learn more details about each business unit, including their strategies, below.
Structures & Logistics
ATCO Structures & Logistics' activities are conducted through two complementary businesses: ATCO Structures and
ATCO Frontec.
ATCO STRUCTURES
FAST FACTS
38
Operating Locations
Worldwide
~27,000
Number of Units
in Lease Fleet
7
Manufacturing
Locations
ATCO Structures manufactures, sells and leases transportable workforce housing, residential housing, and space
rental products.
ATCO Structures aims to generate sustainable earnings growth by increasing our market presence and performance
in the regions in which we operate, identifying opportunities to expand into new markets, and delivering exceptional
customer service. Our growth strategy in each geography is delivered through continued expansion of our space
rentals business line, which provides the infrastructure and skilled personnel to deliver complementary products
and services, including workforce housing, residential housing, permanent modular construction, logistics, and site
construction services. Our manufacturing capability is a key differentiator in servicing the markets we operate in,
affording us the flexibility to build our fleet, offer customized product sales, and provide products and services
beyond our core offerings. We continue to grow our business strategically across the globe organically, while
supplementing with targeted merger and acquisition opportunities to meet the needs of our growing customer
base.
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ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
ATCO FRONTEC
FAST FACTS
30
Operating Locations
Worldwide
1.9 million
Guest Stays
at Our Camps
10
Current
Indigenous Partnerships
ATCO Frontec provides facility operations and maintenance services, workforce lodging and support services,
defence operations services, and disaster and emergency management services.
ATCO Frontec continues to grow its 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. We enable our customers to focus on their core business.
Neltume Ports
FAST FACTS
18
Ports
Facilities
5
Port
Operations
7,600
Approximate Employees
in 5 Countries
46 million
Tonnes
of Product Handled
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. In 2023, Neltume Ports handled 46 million tonnes of product, including
copper, forestry products, consumer goods and agricultural products.
Neltume Ports' growth will 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 Ports 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.
ATCO Corporate & Other
FAST FACTS
11
Commercial Real Estate
Properties
160,000 tonnes
RAM Facility Potential CO2
Reduction per annum
500+
Events hosted by
Blue Flame Kitchen
ATCO Corporate & Other contains ATCO Land and Development, a commercial real estate business, Ashcor, a
company engaged in the processing and marketing of fly ash, and Fresh Bites Inc., a food service company,
including the retail food services brand Blue Flame Kitchen (BFK). ATCO Corporate & Other also includes the global
corporate head office in Calgary, Canada, ATCO licensing fees received, and financing expenses associated with
credit facilities.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
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ATCO Land and Development's current portfolio includes 11 commercial real estate properties, including 380,000
square feet of office property, 20,000 square feet of industrial property and 315 acres of land.
Ashcor is at the forefront of the industry, advancing the way we source fly ash by developing an innovative
technology to beneficiate ponded and landfill ash. Over the past two decades, Ashcor has expanded its marketing
territory to encompass Western Canada, as well as the Northwestern United States and is actively seeking
beneficiation opportunities across North America.
Fresh Bites is a food service company that incorporates our legacy retail food services brand BFK. Established in
1997 and acquired by ATCO in 2023, Fresh Bites provides meaningful scale in the wholesale pre-packaged fresh and
frozen food industry and compliments BFK's 2022 launch of a branded quick serve and grocer program.
Canadian Utilities
Canadian Utilities is a diversified global energy infrastructure corporation delivering operating and service
excellence and innovative business solutions through ATCO Energy Systems (electricity and natural gas transmission
and distribution, and international operations); ATCO EnPower (energy storage, energy generation, industrial water
solutions, and clean fuels); and Retail Energy (electricity and natural gas retail sales, and whole-home solutions).
ATCO ENERGY SYSTEMS
FAST FACTS
105,000 KM
Powerlines
(Owns and Operates)
65,600 KM
Pipelines
(Owns and Operates)
84,000+
New Solar Connections
by LUMA Energy
ATCO Energy Systems is our regulated utilities business unit that operates in Canada, Australia, and Puerto Rico. The
four regulated utilities (Electricity Transmission, Electricity Distribution, and Natural Gas Transmission and Natural
Gas 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 through
Canadian Utilities' 50 per cent ownership in LUMA Energy, LLC (LUMA Energy).
Our value proposition is delivering essential energy for an evolving world. We do this through safely delivering
reliable and affordable energy, responsibly leading an equitable energy transition, investing to serve the growing
and changing needs of our customers, and being a trusted partner committed to long-term mutual prosperity.
ATCO ENPOWER
FAST FACTS
544,000 m3
Natural Gas Liquids
Storage Capacity
415 MW
Renewable Generation
(Owns and Operates)
117 PJ
Natural Gas Storage
Capacity
ATCO EnPower's energy transition businesses include: hydro, solar, wind, and natural gas electricity generation in
Canada, Australia, Mexico, and Chile, as well as natural gas storage, Natural Gas Liquids (NGL) storage, and
industrial water solutions in Alberta. ATCO EnPower is also developing its clean fuels business including hydrogen,
carbon capture and underground storage projects.
ATCO EnPower has a multifaceted approach to energy transition solutions that involves both innovative
technologies and lower carbon energy sources. We focus on delivering reliable, affordable, and clean energy
infrastructure that supports our customers’ decarbonization objectives and leverages our core competencies and
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ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
assets in the Americas and Australia. ATCO EnPower continues to actively explore potential opportunities that will
complement our growing portfolio and advocate for public policy that will enable a sustainable transition.
Additionally, we continue to optimize and drive growth in our energy storage business. Storage is critical to energy
stability and to supporting the reliability of the grid as the world transitions to clean, but more intermittent, sources
of energy.
CANADIAN UTILITIES CORPORATE & OTHER
FAST FACTS
~308,000
Residential Sites
at ATCOenergy
43%
Rümi's 2023
Customer Growth
4,690
Number of Rümi Home
Services Sold in 2023
Canadian Utilities Corporate & Other contains ATCOenergy which provides retail electricity and natural gas services,
and Rümi, which provides home products, home maintenance services and professional home advice in Alberta.
Canadian Utilities Corporate & Other 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 also includes preferred share dividend and debt expenses.
Rümi currently offers approximately 80 services in the Albertan communities of Edmonton and Calgary, and
approximately 35 services in the Lethbridge, Red Deer, and Grande Prairie communities.
ATCOenergy is the fourth largest competitive energy retailer in the province of Alberta, offering electricity and
natural gas plans to residential and business customers. By the end of 2023, ATCOenergy services a total of 308,000
sites in the residential competitive market which is comprised of 170,000 electricity sites and 138,000 gas sites.
ATCO AUSTRALIA
FAST FACTS
14,700 KM
Pipelines
(Owns and Operates)
268 MW
Operating
Assets
803,000
Average monthly
customers in 2023
Integrated within our other business units for reporting, our ATCO Australia business includes ATCO Gas Australia
(reported under ATCO Energy Systems as International Natural Gas Distribution) and the Power business (reported
under ATCO EnPower's Electricity Generation segment).
ATCO's growth strategy in Australia is aligned with the country's evolving energy landscape characterized by
progressive policies and publicly stated emissions targets. With a focus on renewable energy adoption and the
development of firming technologies, such as energy storage solutions and hydrogen production, we aim to
substantially increase our capacity to meet the rising demand for clean energy.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
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OUR OPERATING ENVIRONMENT
We operate in a complex and ever-changing world, so striving to anticipate and understand the broad trends
impacting our customers and communities is paramount. This appreciation and understanding of our operating
environment allows us to better identify possible challenges while capitalizing on emerging opportunities and
continuing to deliver high-performing results.
Key market trends
Global and societal changes can create opportunities or present challenges, and they play an important role in
shaping the way we collaborate with our customers, team members, share owners and the communities in which
we operate. The following is an examination of the key market trends we are seeing and how we are positioning our
businesses to respond.
ENERGY TRANSITION & ENERGY SECURITY
The global energy transition is a complex ongoing process requiring long-term energy strategies, which utilize
appropriate technologies and fuels to produce energy that satisfies evolving demand. The energy transition must
balance reliability and resilience with affordability while achieving higher energy security and lower emissions
toward a net-zero future. With this, the utilities industry is changing to 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, emissions reduction targets, and government
incentives present opportunities for utility companies. ATCO Energy Systems is well positioned to capitalize on these
trends. We also believe that new technologies will create opportunities for efficiencies within our utilities businesses
to drive down customers' costs.
Additionally, the political and societal push to address climate change is driving further investment into storage and
grid balancing solutions to improve system reliability. However, this ongoing transition also brings policy uncertainty
and risks, delaying investment decisions that would align with our 2050 net-zero targets.
Extreme weather events such as heat waves, wildfires, ice and frost events, and large storms are becoming more
frequent and more intense through the impact of climate change. ATCO is uniquely positioned to provide support to
communities and areas effected by these catastrophic events, while working diligently to minimize our impact with
our net-zero by 2050 aspiration as well as our initial set of 2030 ESG Targets. We also maintain in-depth emergency
response measures for these extreme weather events, including our robust Wildfire Management Plans. When
planning for capital investment or acquiring assets, site specific climate and weather factors, such as flood plain
mapping and reliability during extreme weather history are considered.
GLOBAL SECURITY AND DEFENSE
Over the last few years we have seen an increase in geopolitical tensions and conflicts. Such geopolitical events can
cause varying levels of disruption, which can generate labour shortages in critical trades, persistent global supply
chain delays that can affect project productivity and delivery, and directed cybersecurity threats and technology
leaks. As part of its corporate strategy, ATCO is vigilant about the increased risks and threats that may impact us.
Beyond the business impact, the human toll can be staggering, whether due to hostilities, food insecurity or loss of
homes.
We unfortunately only see this global polarization and resulting tension increasing over the years to come.
Governments and business will both need to bring all their resources to bear to protect our democracies and
civilians. These global security risk further amplify the need for protection of the critical infrastructure in the areas
we operate, and to provide support to those impacted by geopolitical events.
ATCO Frontec has a longstanding history of supporting Canada's Department of National Defence, the Canadian
Armed Forces, and NATO, largely by providing site support services with an expertise in remote, harsh
environments. They can also supply a rapidly deployable camp system to provide humanitarian relief and resolve
immediate shelter needs. Employees throughout the ATCO Group of companies are trained in using the Incident
13
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
Command Systems (ICS) and have a broad range of skills and expertise that can support the recovery of
communities in need or damaged infrastructure.
HOUSING ATTAINABILITY
Housing attainability is an issue impacting many of the communities in which we operate. Canada, notably, faces
a critical shortage of housing supply, compounded by large household debts, increasing population, investor
speculation, and high inflation and interest rates. The prohibitive cost of housing is impacting low-income
households and vulnerable peoples in particular.
We believe innovative solutions to the housing crisis are the path forward. From our partnership with the Homes for
Heroes Foundation creating tiny homes across Canada to ATCO Structures' affordable housing projects with the
Government of British Columbia from 2019 to 2022, ATCO has a proven record in providing those solutions. The
permanent modular construction offered by ATCO Structures is a way to relieve pressure on the housing market
with modular construction being up 40 per cent faster than traditional site-built construction. ATCO is also working
with governments and not-for-profit agencies to overcome challenges that often stall affordable housing projects.
INDIGENOUS RECONCILIATION
Share owners are increasingly favouring companies that align with their social values, including those that show a
commitment towards Indigenous reconciliation. Additionally, principles from the United Nations Declaration on the
Rights of Indigenous People Act (UNDRIP) are being incorporated into certain legislative acts, and companies that
genuinely pursue equitable partnerships, provide employment opportunities, and have robust Indigenous
procurement standards set themselves apart when bidding on government contracts or applying for government
projects or grants.
The progress ATCO has made in creating equitable partnerships with Indigenous Communities is a hallmark of our
approach to business. This is highlighted by ATCO Frontec's achievements in securing numerous contracts with our
Indigenous joint-venture partnerships, ATCO Energy Systems' landmark electricity purchase agreements with
remote communities that support reduction of diesel reliance, and ATCO EnPower's equity partnership with the
Chiniki and Goodstoney First Nations for the Deerfoot and Barlow solar projects. We believe that creating equitable
partnerships for Indigenous communities should be the standard for governments and businesses alike in support
of reconciliation and inclusiveness.
We pride ourselves on being a leader in the communities we serve through our various initiatives with Indigenous
groups, and local charities. ATCO has incorporated an Indigenous Advisory Board led by senior Indigenous directors
from across Canada and they have been instrumental with the advice provided to our businesses.
CHANGING WORKFORCE
ATCO's businesses serve a broad range of people and communities which requires that we attract a broad range of
backgrounds and dynamic experience in our workforce. Additionally, in the jurisdictions in which we operate there
is a multigenerational workforce with a high number of employees between 55 and 64 years of age. There is a risk
of labour shortages as many of our colleagues work towards retirement.
We strive to demonstrate our values to attract potential employees while providing the development, training and
leadership for them to thrive. We have an ongoing commitment to inclusion practices, fostering a safe working
environment, developing mentors, removing barriers, and providing development and succession planning. This is
critical to creating an equitable playing field of opportunity and supporting the internal pipeline of talent on which
our future relies. ATCO works to build a community where everyone can bring their whole selves to work and reach
their full potential. This strategy holds us accountable, enhances a sense of belonging and drives superior business
performance.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
14
THE GLOBAL ECONOMY AND MARKET VOLATILITY
The global impacts of large-scale world events can create challenges for any business. The recent examples of the
worldwide pandemic, increasingly destructive weather events, supply chain interruptions, and geopolitical tensions
and wars show that a business needs to be ready for anything. By being a forward-looking company, ATCO can, and
has, mitigated the impacts such changes bring.
We view total share owner return through a long-term lens, and our corporate actions are consistent with that.
Many of our core financial pillars – minimum cash balance, strong focus on access to capital, and adequate leverage
– reflect learnings from history. Whether it be capital recycling through asset sales, expanding through new
acquisitions or purposeful capital allocation to our existing companies, proactive decisions made across our
businesses have allowed us to deliver strong results through various geopolitical events and economic cycles.
PUBLIC DEBT, INFLATION AND INTEREST RATES
Recent years have seen inflation and interest rates increase globally and create challenges for investment and risk
to managing operating costs. Additionally, the increased expenditures of governments around the world in
response to the COVID-19 pandemic and the accumulated public debt will have lingering impacts on the global
economy for years to come. ATCO has operated for over 76 years through other times of high interest rates and
rising inflation and our record shows our ability to manage and thrive despite these conditions. We do not view
these macroeconomic impacts as transitory, and are actively managing our portfolio with this in mind.
ATCO Structures and ATCO Frontec look to mitigate such risk with carefully constructed contracts by working closely
with our partners and vendors in ways that are fair to all parties. ATCO Energy Systems' utility businesses in Alberta,
Australia, and Puerto Rico have regulatory mechanisms that take inflation into consideration, providing resiliency for
a large portion of our earnings, and ATCO EnPower limits its exposure to the fluctuating commodities market by
signing Power Purchase Agreements (PPA). The key to ATCO's success in weathering these conditions is our
consistent approach to being proactive when it comes to planning and operations, allowing us to take advantage of
opportune times for project purchasing, managing staffing requirements, and taking into account relevant
exchange rates.
DIGITIZATION AND ARTIFICIAL INTELLIGENCE (AI)
Artificial Intelligence is a critical topic as companies navigate how and when to apply these fast emerging
technologies. AI can range from the personal assistants in phones, generative AI incorporated into different
software, to technology providing real-time information to a company. Additionally, many companies are already in
the process of digitization to increase operational efficiencies, reliability of information, and managing large
amounts of data.
Within ATCO Energy Systems, leveraging data and digitizing our utilities technology remains a key priority and one
that will drive continued efficiencies as our system becomes more capable of predicting and responding to
customer needs. As part of this process, the last few years have seen us complete a number of digitization and
modernization objectives, including the deployment of Advanced Metering Infrastructure (AMI), the latest in
metering technology; working towards deploying an Advanced Distribution Management System, a platform for a
variety of smart grid functions; as well as implementation of a workforce and asset management program that
provides an efficient way to track, manage, and dispatch work to field-based employees based on urgency.
AI has the potential to enhance the capabilities of our digital systems. While our AMI technology is already allowing
for faster detection of outages, applied AI could predict infrastructure maintenance. Like all new technologies,
proper governance and risk management need to be part of the plan, but the successful integration of AI and digital
technologies could provide long-term operational and financial value to our businesses.
15
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
OUR 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.
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.
Following are some of the highlights of our model for corporate governance. For more information, please see the
Governance section of our 2023 Management Proxy Circular, which will be available in April 2024.
Our Board of Directors
The role of our Board 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 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 DADs. Each DAD is assigned to one of our business units based on their strengths and
experience in various industry sectors. The role of the DADs is to supplement the oversight role of the Audit & Risk
Committee.
DADs meet quarterly with senior management of their respective business unit, and annually with internal and
external auditors. In addition, they review their respective businesses' financial performance and operating results,
discuss risks with management, and report to the Audit & Risk Committee.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
16
PERFORMANCE OVERVIEW
FINANCIAL METRICS
The following chart summarizes key financial metrics associated with our financial performance.
($ millions, except per share data and outstanding shares)
2023
2022
2021
Year Ended
December 31
Key Financial Metrics
Revenues
Adjusted earnings (loss) (1)
Structures & Logistics (1)
Neltume Ports
ATCO Corporate & Other (1)
Canadian Utilities Limited (1)
ATCO Energy Systems (1)
ATCO EnPower (1)
Canadian Utilities Corporate & Other (1)
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 (cents per share)
Cash flows from operating activities
Capital investment (2)
Capital expenditures
Other Financial Metrics
Weighted average Class I and Class II Shares outstanding (thousands):
Basic
Diluted
4,741
4,978
4,289
432
423
382
90
22
5
61
14
—
340
379
26
(51)
19
(50)
3.82
3.71
432
3.82
3.82
370
3.25
3.24
53
13
6
336
15
(41)
3.35
246
2.16
2.15
25,358 24,139
23,004
11,048 10,087
4,423
4,376
1.90
1.85
1,965
2,396
2,301
1,650
1,586
1,597
9,852
4,111
1.79
1,864
1,463
1,352
113,216 113,958 114,172
113,378 114,269 114,450
(1) Total of segments measures (as defined in NI 52-112). The most directly comparable measure reported in accordance with International Financial
Reporting Standards is Earnings Attributable to Class I non-voting and Class II voting shares. See “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) Non-GAAP financial measure (as defined in NI 52-112). The most directly comparable measure reported in accordance with International Financial
Reporting Standards is capital expenditures. See “Other Financial and Non-GAAP Measures” and “Reconciliation of Capital Investment to Capital
Expenditures” in this MD&A.
REVENUES
Revenues in 2023 were $4,741 million, $237 million lower than the same period in 2022. Lower revenues were
mainly due to cost efficiencies generated by Electricity Distribution and Natural Gas Distribution over the second
generation Performance Base Regulation (PBR) term now being passed onto customers under the 2023 Cost of
Service (COS) rebasing framework, and the Alberta Utilities Commission (AUC) decision to maximize the collection of
2021 deferred revenues in 2022 as a result of rate relief provided to customers in 2021. Lower revenues were also
due to lower prices for retail electricity and natural gas in ATCOenergy, ATCO Structures' Bechtel Pluto Train II
project reaching substantial completion and lower workforce housing trade activity in the US and Mexico. Lower
17
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
revenues were partially offset by higher space rentals activity in ATCO Structures, additional revenue from the
acquisition of Triple M Housing in December 2022, and revenues from ATCO EnPower's Forty Mile and Adelaide
wind assets acquired in January 2023.
ADJUSTED EARNINGS (1)
Our adjusted earnings in 2023 were $432 million or $3.82 per share, compared to $423 million or $3.71 per share
for the same period in 2022.
Higher adjusted earnings in 2023 were mainly due to increased space rentals activity in most geographies for ATCO
Structures, earnings from Triple M Housing acquired in December 2022, additional earnings from ATCO EnPower's
Forty Mile and Adelaide wind assets acquired in January 2023, and Neltume Ports' increased ownership at Puerto
Angamos and Terminal Graneles del Norte. Higher adjusted earnings were partially offset by cost efficiencies
generated by Electricity Distribution and Natural Gas Distribution over the second generation PBR term now being
passed onto customers under the 2023 COS rebasing framework, the impact of inflation indexing on rate base in
2022 in International Natural Gas Distribution, ATCO Structures' Bechtel Pluto Train II project reaching substantial
completion, and lower workforce housing trade activity in the US and Mexico.
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 $432 million in 2023, $62 million higher compared to 2022.
Earnings attributable to Class I and Class II Shares include timing adjustments related to rate-regulated activities,
unrealized gains or losses on mark-to-market forward and swap commodity contracts, one-time gains and losses,
impairments, and items that are not in the normal course of business or a result of day-to-day operations. These
items are not included in adjusted earnings.
More information on these and other items is included in the "Reconciliation of Adjusted Earnings to Earnings
Attributable to Class I and Class II Shares" section of this MD&A.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows from operating activities were $1,965 million in 2023, $431 million lower than the same period in 2022.
This decrease was mainly due to lower prices for retail electricity and natural gas in ATCOenergy and lower cash
flows in 2023 resulting from the recovery of the 2021 deferral of rate increases in 2022 in the Electricity Distribution
and Natural Gas Distribution businesses, partly offset by the impact of the acquisitions of Triple M Housing and the
Forty Mile and Adelaide wind assets.
COMMON SHARE DIVIDENDS
We have increased our common share dividend every year for the past 31 years, a track record of which we are very
proud. Dividends paid to Class I and Class II Share owners totaled $215 million in 2023. On January 11, 2024, the
Board of Directors declared a first quarter dividend of 48.98 cents per share or $1.96 on an annualized basis. ATCO
expects to continue to grow its dividends consistent with the sustainable growth of its investments.
(1)
Total of segments measure. See “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. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
18
CAPITAL INVESTMENT (1) AND CAPITAL EXPENDITURES
Total capital investment of $2,301 million in 2023 was $651 million higher compared to the same period in 2022
mainly due to the first quarter 2023 acquisition of the renewable energy portfolio in Canadian Utilities' ATCO
EnPower segment, and ongoing capital investment in the Regulated Utilities.
Total capital expenditures of $1,586 million in 2023 were $11 million lower compared to the same period in 2022
mainly due to decreased capital spending within ATCO EnPower as the Carbon natural gas storage facility expansion
project was completed and the Barlow, Deerfoot, and Empress Solar projects reached commercial operations
throughout 2023, partially offset by ongoing capital investment in the Regulated Utilities.
Capital expenditures in Canadian Utilities' Regulated Utilities accounted for 76 per cent of the total in the full year of
2023. The remaining 24 per cent was primarily related to ATCO Structures' continued expansion of its space rentals
fleet globally, capital spending within Canadian Utilities' ATCO EnPower segment mainly related to the Barlow,
Deerfoot and Empress solar projects, and capital spending at Ashcor related to the Reclaimed Ash Management
(RAM) mobile project.
(1)
Non-GAAP financial measure. See “Other Financial and Non-GAAP Measures” and “Reconciliation of Capital Investment to Capital Expenditures” in this
MD&A.
19
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
Quarterly Dividend Rate 1993 - 2024(dollars per share)$0.48989394959697989900010203040506070809101112131415161718192021222324Capital Expenditures in 202376%24%Regulated UtilitiesOther 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 $239 million and $926 million in the fourth quarter and full year of 2023 were
$2 million and $3 million lower than the same periods in 2022 mainly due to ATCO Structures' Bechtel Pluto Train II
project reaching substantial completion in the second quarter of 2023, lower workforce housing trade activity in the
US, Mexico and Chile, and the closure of ATCO Frontec-operated camps including the Trans Mountain Expansion
Project (TMEP) camps. This was partially offset by increased space rentals activity, additional revenue from Triple M
Housing acquired in December 2022, increased workforce housing trade sale activity in Canada, and additional
revenue at ATCO Frontec-operated camps from new projects including the BHP Jansen Discovery Lodge.
ADJUSTED EARNINGS
($ millions)
ATCO Structures (1)
ATCO Frontec (1)
Total Structures & Logistics (2)
Three Months Ended
December 31
Year Ended
December 31
2023
2022
Change
2023
2022
Change
16
(2)
14
7
(3)
4
9
1
10
89
1
90
54
7
61
35
(6)
29
(1) Non-GAAP financial measures. See “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) Total of segments measure. See “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 $14 million in the fourth quarter of 2023 were $10 million higher than
the same period in 2022. Higher adjusted earnings were mainly due to strong business performance driven by
increased space rentals and workforce housing performance in most geographies for ATCO Structures, earnings
from Triple M Housing acquired in December 2022. Earnings were partially offset by ATCO Structures' lower
workforce housing trade sale activity in the US, and lower workforce housing rental activity in Canada.
Structures & Logistics adjusted earnings of $90 million in the full year of 2023 were $29 million higher than the same
period in 2022. Higher adjusted earnings were mainly due to strong business performance driven by increased
space rentals and workforce housing performance in most geographies for ATCO Structures, earnings from Triple M
Housing acquired in December 2022. Earnings were partially offset by ATCO Structures' lower workforce housing
trade sale activity in the US, lower workforce housing rental activity in Canada, and higher operating costs on ATCO
Frontec's Pogo Mine project.
Detailed information about the activities and financial results of the Structures & Logistics businesses is provided in
the following sections.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
20
ATCO STRUCTURES
ATCO Structures manufactures, sells and leases space rental products, transportable workforce housing, and
residential housing. 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 $16 million and $89 million in the fourth quarter and full year of 2023 were
$9 million and $35 million higher than the same periods in 2022 mainly due to strong business performance driven
by increased space rentals performance globally, additional earnings from Triple M Housing acquired in December
2022, and improved workforce housing rental performance in the US, Australia, and Chile. Earnings were partially
offset by lower workforce housing trade sale activity in the US and lower workforce housing rental activity in
Canada.
The following table compares ATCO Structures' rental fleet for the fourth quarter and full year of 2023 and 2022.
Three Months Ended
December 31
Year Ended
December 31
2023
2022
Change
2023
2022
Change
Global Space Rentals
Number of units
Average utilization (%)
Average rental rate ($ per month)
Global Workforce Housing
Number of units
Average utilization (%)
24,074 22,433
7% 24,074 22,433
74
738
77
660
(3%)
12%
75
721
79
627
2,747
2,652
4%
2,747
2,652
63
78
(15%)
69
75
Average rental rate ($ per month)
1,944
1,931
1%
2,027
1,908
7%
(4%)
15%
4%
(6%)
6%
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.
Following the easing of distancing requirements related to COVID-19, utilization has returned to the typical seasonal
profile with peak activity in the second and third quarters. Utilization has also been impacted by the strategic fleet
expansion due to the timing of placing fleet additions on rent.
Workforce Housing
In the prior year, ATCO Structures decreased the size of its workforce housing fleet by selling used and under-
utilized fleet assets in Canada, Australia, and the US. Year-over-year fleet growth is in targeted regions with
increased demand for workforce housing product, particularly Australia and Chile. The disposal of under-utilized
product in the prior year combined with fleet growth in the current year has resulted in decreased utilization.
Additionally, the successive conclusion of camp rental terms in each of the first three quarters for the TMEP
contributed to progressively lower utilization through 2023. The utilization impact was partially mitigated in the third
quarter through redeployment of assets previously on rent for TMEP to other projects, particularly wildfire relief
camps in Alberta. With the conclusion of those relief efforts, utilization decreased through the fourth quarter.
Residential Housing
ATCO Structures is a premier manufacturer of modular residential housing through Triple M Housing. ATCO
Structures produces single-family modular homes in a variety of configurations with available customizations.
Homes are sold through an established dealer network predominantly in Western Canada. During the year, ATCO
Structures supplied over 600 new homes produced at Triple M Housing’s manufacturing facility in Lethbridge,
Alberta.
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ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
ATCO STRUCTURES RECENT DEVELOPMENTS
Canada
Western Canada Mine Camp
In the fourth quarter of 2023, ATCO Structures was awarded a $13 million contract to supply a 296-person
accommodation complex to be deployed to a gold and silver mine in Western Canada. Delivery of the units is
expected in the second quarter of 2024.
Arctic Mining Camp Expansion
In the fourth quarter of 2023, ATCO Structures was awarded a $3 million contract to supply units for a 162-person
camp expansion, comprising 4 dorms and connecting corridors, to be deployed to a gold mine in the Canadian
Arctic. Delivery of the units is expected in the second quarter of 2024.
United States
Integrated Modular Solutions (IMS)
ATCO Structures was previously awarded a rental contract for units to accommodate personnel for Florida state
prisons. Following the conclusion of the rental term in the fourth quarter of 2023, an agreement was executed for
the sale of units previously rented to IMS for $5 million.
HROC LLC
In the fourth quarter of 2023, ATCO Structures was awarded a $12 million contract to manufacture, deliver and
install 45 workforce housing units to BPX Energy operating sites in West Texas. Manufacturing is scheduled to
commence in the first quarter of 2024 with installation expected to be complete by the second quarter of 2024.
Australia
Western Coalfield Project
ATCO Structures was awarded a $12 million contract for the manufacture, transport, and installation of a
102-person accommodation camp for a mine in New South Wales. Manufacturing commenced during the fourth
quarter of 2023 and full handover and completion is anticipated in the second quarter of 2024. The contract scope
includes supply and installation of generators to power the camp, and water and wastewater treatment plants.
Latin America
Grupo Financiero Banorte (Banorte) Mobile Banking Terminals
During the first quarter of 2023, ATCO Espaciomovil (AEM) manufactured and installed mobile banking terminals for
Banorte throughout Mexico. AEM was subsequently contracted in the second quarter to supply a branch office and
additional mobile banking terminals to Banorte. Manufacturing and installation works are expected to be completed
in the first quarter of 2024. The total value of works awarded to AEM is $4 million.
Chilean Education Sector Projects
ATCO Sabinco was awarded its first significant education sector contract to manufacture, install and rent units to
Universidad de Santiago de Chile during the second quarter of 2023. The contract includes 58 space rental units in a
classroom and restroom configuration. The initial rental term is one-year with the possibility of extension. Following
this initial success, in the fourth quarter of 2023, ATCO Sabinco was awarded a $2 million contract to manufacture,
transport and install units for Universidad San Sebastián. The contract includes 29 space rental units configured for
use as a healthcare facility by doctors and students in the university-run hospital.
ATCO STRUCTURES 2023 OVERVIEW
Canada
Quebec Hospital Complex
ATCO Structures executed a contract for the sale and installation of a 42-unit modular hospital complex in Quebec.
The complex was previously on a long-term rental contract, which concluded earlier in the year. The complex was
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
22
dismantled in the third quarter of 2023. Site preparation commenced during the fourth quarter of 2023, and
installation in the new location is scheduled for the second quarter of 2024.
Fire Relief Camps
ATCO Structures was previously awarded a rental contract for the rapid-response deployment of a 375-person
camp to support the recovery of a Northern Alberta First Nation community that was impacted by wildfires.
Installation and the rental term commenced in the second quarter of 2023. Installation concluded in the third
quarter, and the rental term concluded in the fourth quarter of 2023.
Additionally, following the conclusion of TMEP’s rental term in the second quarter of 2023, the workforce housing
camp in Valemount, British Columbia (BC), was re-mobilized to support people displaced by wildfires. The rental
term commenced and concluded during the third quarter of 2023.
United States
KBR & Zachry Group Joint Venture (KZJV) - Plaquemines LNG Export Facility
Through the first three quarters of 2023, ATCO Structures was awarded rental contracts for 95 space rental units,
supplementing the previously awarded rental contract for 50 units to support the LNG export facility construction in
Plaquemines Parish, Louisiana. Rental terms for the 145 units across all contracts range from 30 to 36 months.
TIC (Kiewit)
ATCO Structures was previously awarded a rental contract for 116 units to support a new chemical plant
construction project in Orange, Texas. During the second quarter of 2023, ATCO Structures was awarded a rental
contract for an additional 31 units for a 36-month rental term. The units were installed during the third quarter of
2023.
Australia
Bechtel Pluto Train II
ATCO Structures reached substantial completion on the 2,200-person accommodation village and the supplemental
parallel modular facility during the second quarter of 2023. The final handover of the accommodation village was
completed approximately four months ahead of the original project schedule while the supplemental parallel
modular facility was completed in line with the original project schedule.
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 2023 were $1 million higher than the same period in 2022
mainly due to new projects including the fire relief camp, partially offset by higher operating costs on ATCO
Frontec's Pogo Mine project.
ATCO Frontec adjusted earnings in the full year of 2023 were $6 million lower than the same period in 2022 mainly
due to the closure of the three TMEP camps throughout the year, prior year earnings from the UK Training Camp
Exercise project conducted over the second and third quarters of 2022, and higher operating costs on ATCO
Frontec's Pogo Mine project. Lower earnings were partially offset by earnings from new projects, including the fire
relief camps.
ATCO FRONTEC RECENT DEVELOPMENTS
Victoria Gold Project
On October 24, 2023, Frontec was awarded a contract to provide camp services to Victoria Gold for a 350-bed camp
in the Yukon, Canada. The contract was mobilized as of January 1, 2024 for a 3-year term.
Fire Prevention Services 2016 Ltd. (FPS) Acquisition
In December 2023, ATCO Frontec acquired Fire Prevention Services 2016 Ltd., a full-service fire inspection, testing
and maintenance company with operations in Northwest Territories, Nunavut and Alberta. The acquisition extends
23
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
Frontec's offering as an operational support services provider for government, defence and commercial clients and
will operate as a new business line for ATCO Frontec within Canada.
ATCO FRONTEC 2023 OVERVIEW
Trans Mountain Expansion Project Camps
ATCO Frontec operated three camps for the Trans Mountain Expansion Project as a joint venture operation with
Simpcw First Nation. In 2023, the expansion project's move towards completion resulted in the closure of these
camps throughout 2023.
Starting in January 2023, the 540-bed camp located in Clearwater, BC, was closed. The second camp, a 600-person
camp located in Valemount, BC, closed in May 2023 and in August 2023, the third and final camp, the 550-person
Blue River, BC, camp, was closed.
Fire Relief Camps
ATCO Frontec, in partnership with ATCO Structures, launched two fire relief camps in British Columbia and Alberta.
In June 2023, ATCO Frontec re-mobilized the above noted TMEP camp, Valemount Lodge in BC, and made it
available for people displaced by wildfires. Also in June 2023, ATCO Frontec entered into a contract with Dene Tha'
First Nation to provide camp services in High Level, Alberta, until December 2023. The Phase 1 construction camp of
100 rooms opened in June 2023, and the Phase 2 350-room camp opened in July 2023 and closed on schedule in
December 2023.
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. As of April 1, 2023, WFS successfully transitioned to operating the lodge.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
24
Neltume Ports is a port operator and developer with a diversified portfolio of 18 multi-purpose, bulk cargo and
container port facilities and 5 port operation services. The business is located primarily in Chile with additional
operations in Uruguay, Argentina, Brazil and the US.
ADJUSTED EARNINGS
($ millions)
Neltume Ports
Three Months Ended
December 31
Year Ended
December 31
2023
2022
Change
2023
2022
Change
5
2
3
22
14
8
Neltume Ports adjusted earnings of $5 million in the fourth quarter of 2023 were $3 million higher than the same
period in 2022 mainly due to improved margins across operations within the portfolio of ports.
Neltume Ports adjusted earnings of $22 million in the full year of 2023 were $8 million higher than the same period
in 2022 mainly due to increased ownership at Puerto Angamos and Terminal Graneles del Norte, improved margins
across operations within the portfolio of ports, and favourable exchange rates.
NELTUME PORTS RECENT DEVELOPMENTS
Terminal Graneleras Uruguayas
Subsequent to year-end, on January 23, 2024, Terminal Graneleras Uruguayas received notification of the extension
of its concession to 2042 from the Ministry of Livestock, Agriculture and Fisheries of Uruguay. Neltume Ports has an
equity ownership of 54 per cent in Terminal Graneleras Uruguayas.
NELTUME PORTS 2023 OVERVIEW
Vancouver Bulk Terminal Joint Venture
Neltume Ports and its partner, Nautilus International Holding Corporation (Nautilus), entered into a contract during
the second quarter of 2023 with the Port Authority of Vancouver in Washington State to operate Terminal 2. The
contract is for a 30-year term and allows for the opportunity to renew the contract for two additional terms of 10-
years each. The Port of Vancouver is strategically located on the US Pacific coast for export of mineral and other
bulk material.
On October 11, 2023, Vancouver Bulk Terminal, a joint venture between Neltume Ports and Nautilus, announced it
is working with Solvay, a global leader in the soda ash market, on the development of Terminal 2, Berth 7 at the Port
of Vancouver, in Washington State. The newly designed terminal will have the capability to annually export more
than 2.5 million tonnes of soda ash, supporting soda ash volumes from Solvay’s Green River, Wyoming operations
while providing additional export capacity to the North American soda ash industry. Construction to allow for the
transfer of soda ash is set to begin in 2024 and is expected to be completed by early 2026.
25
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
Puerto Angamos and Terminal Graneles del Norte Ownership Increase
On May 30, 2023, Neltume Ports acquired an additional ten per cent ownership in Puerto Angamos and Terminal
Graneles del Norte, raising Neltume Ports' equity ownership in each port from 40 per cent to 50 per cent.
Sagres Ownership Increase
On March 31, 2023, Neltume Ports acquired an additional five per cent ownership in Sagres, raising Neltume Ports'
equity ownership from 90 per cent to 95 per cent.
ATCO Corporate & Other contains ATCO Land and Development, Ashcor, and Fresh Bites, a food service company,
including retail food services brand Blue Flame Kitchen. ATCO Land and Development is a commercial real estate
business that holds investments for sale, lease or development. Ashcor is 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.
REVENUES
ATCO Corporate & Other revenues of $8 million and $19 million in the fourth quarter and full year of 2023 were
$8 million and $18 million higher compared to the same periods in 2022 mainly due to increased fly ash sales in
Ashcor and higher food services revenues in Fresh Bites, which was acquired by ATCO in 2023.
ADJUSTED EARNINGS
($ millions)
2023
2022
Change
2023
2022
Change
ATCO Corporate & Other (1)
6
8
(2)
5
—
5
(1) Total of segments measure. See “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 $6 million in the fourth quarter of 2023 were $2 million lower than
the same period in 2022 mainly due to the timing of certain expenses.
ATCO Corporate & Other adjusted earnings of $5 million in the full year of 2023 were $5 million higher compared to
the same period in 2022 mainly due to increased earnings from the Ashcor and Fresh Bites businesses.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
26
Canadian Utilities is a diversified global energy infrastructure corporation delivering operating and service
excellence and innovative business solutions through ATCO Energy Systems (Electricity and Natural Gas
transmission and distribution, and International Operations); ATCO EnPower (Energy Storage, Energy Generation,
Industrial Water Solutions, and Clean Fuels); and Retail Energy (Electricity and Natural Gas Retail Sales, and Whole-
Home Solutions).
ATCO ENERGY SYSTEMS
REVENUES
ATCO Energy Systems revenues of $852 million and $3,174 million in the fourth quarter and full year of 2023 were
$50 million and $210 million lower compared to the same periods in 2022 mainly due to cost efficiencies generated
by Electricity Distribution and Natural Gas Distribution over the second generation PBR term now being passed onto
customers under the 2023 COS rebasing framework, and the AUC decision to maximize the collection of 2021
deferred revenues in 2022 as a result of rate relief provided to customers in 2021. In addition, Electricity
Transmission revenues were lower due to the settlement of the 2018-2021 Deferral Application as well as the
settlement of the 2023-2025 General Tariff Application which reflects ceased collection and a refund of previously
collected federal deferred income taxes. These actions do not significantly impact adjusted earnings, however, they
will reduce revenues and cash flows from 2023 to 2025, providing rate relief to customers. Lower revenues were
partially offset by higher flow-through revenues in Electricity Distribution, growth in rate base in Natural Gas
Distribution and Natural Gas Transmission, and higher rates and increased system volumes in International Natural
Gas Distribution.
ADJUSTED EARNINGS
($ millions)
2023
2022
Change
2023
2022
Change
Three Months Ended
December 31
Year Ended
December 31
Electricity
Electricity Distribution (1)
Electricity Transmission (1)
International Electricity Operations (1)
Total Electricity (1)
Natural Gas
Natural Gas Distribution (1)
Natural Gas Transmission (1)
International Natural Gas Distribution (1)
Total Natural Gas (1)
Total ATCO Energy Systems (2)
23
19
7
49
32
12
7
51
17
19
6
42
34
11
13
58
100
100
6
—
1
7
(2)
1
(6)
(7)
—
79
86
25
85
87
27
190
199
63
48
39
150
340
84
47
49
180
379
(6)
(1)
(2)
(9)
(21)
1
(10)
(30)
(39)
(1) Non-GAAP financial measures. See “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) Total of segments measure. See “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.
27
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
ATCO Energy Systems adjusted earnings of $100 million in the fourth quarter of 2023 were comparable to the same
period in 2022.
ATCO Energy Systems adjusted earnings of $340 million in the full year of 2023 were $39 million lower than the
same period in 2022 mainly due to cost efficiencies generated by Electricity Distribution and Natural Gas
Distribution over the second generation PBR term now being passed onto customers under the 2023 COS rebasing
framework. Earnings were also lower due to the impact of inflation indexing on rate base in 2022 in International
Natural Gas Distribution. Lower earnings were partially offset by growth in rate base and new cost efficiencies and
lower operating costs realized in 2023 in Electricity Distribution and Natural Gas Distribution, and by increased
system volumes in International Natural Gas Distribution.
Detailed information about the activities and financial results of the ATCO Energy Systems 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 $23 million in the fourth quarter of 2023 were $6 million higher than the
same period in 2022 mainly due to new cost efficiencies realized in 2023.
Electricity Distribution adjusted earnings of $79 million in the full year of 2023 were $6 million lower than the same
period in 2022 mainly due to cost efficiencies generated over the second generation PBR term now being passed
onto customers under the 2023 COS rebasing framework, partially offset by new cost efficiencies realized in 2023
and growth in rate base.
Electricity Transmission
Electricity Transmission provides 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 2023 were comparable to the same
period in 2022.
Electricity Transmission adjusted earnings of $86 million in the full year of 2023 were $1 million lower compared to
the same period in 2022 mainly due to the second quarter decision received from the AUC on the 2018-2021
Deferral Application, which denied recovery of forgone return related to certain cancelled projects.
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 and the Puerto Rico Electric Power Authority (PREPA).
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. 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 $7 million in the fourth quarter of 2023 were $1 million
higher compared to the same period in 2022 mainly due to lower operating costs in 2023.
International Electricity Operations adjusted earnings of $25 million in the full year of 2023 were $2 million lower
compared to the same period in 2022 mainly due to increased operating costs, partially offset by favourable foreign
exchange rates.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
28
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 $32 million and $63 million in the fourth quarter and full year of 2023
were $2 million and $21 million lower than the same periods in 2022 mainly due to cost efficiencies generated over
the second generation PBR term now being passed onto customers under the 2023 COS rebasing framework. Lower
earnings were partially offset by growth in rate base and lower operating costs in the fourth quarter.
Natural Gas Transmission
Natural Gas Transmission receives natural gas on its pipeline system from various gas processing plants as well as
from other natural gas transmission systems and transports it to end users within the province of Alberta or to
other pipeline systems.
Natural Gas Transmission adjusted earnings of $12 million and $48 million in the fourth quarter and full year of
2023 were $1 million higher than the same periods in 2022 mainly due to growth in rate base.
International Natural Gas Distribution
International Natural Gas Distribution is a regulated provider of natural gas distribution services in Western
Australia, serving metropolitan Perth and surrounding regions.
International Natural Gas Distribution adjusted earnings of $7 million and $39 million in the fourth quarter and full
year of 2023 were $6 million and $10 million lower than the same periods in 2022 mainly due to the impact of
inflation indexing on rate base in 2022, partially offset by increased system volumes.
Australia inflation indexing reflected a full year inflation assumption of 7 per cent which increased to 8 per cent by
the end of 2022. Australia inflation indexing in 2023 reflects an inflation assumption of 4 per cent.
ATCO ENERGY SYSTEMS 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 AUC. The AUC administers acts and regulations covering such matters
as rates, financing and service area.
Natural Gas Transmission and Electricity Transmission operate under 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 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 complete 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 by the Economic Regulation Authority (ERA) of Western Australia.
International Natural Gas Distribution operates under incentive based regulation 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.
29
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
Performance Based Regulation
After the conclusion of the second generation PBR term (PBR2) in 2022, and following a one-year COS rebasing in
2023, the Natural Gas Distribution and Electricity Distribution businesses moved to a third generation of
performance-based regulation (PBR3) for the years 2024 to 2028.
On October 4, 2023, the AUC issued its decision on the parameters of the PBR3 plans that will set rates for the
distribution utilities for the years 2024 to 2028. AUC has approved continuation of the incremental capital funding
mechanism based on historical five years of actual capital spend as well as the ability to seek additional funding for
capital that meets certain eligibility criteria. The AUC also introduced a new productivity factor premium and an
asymmetric, two-tiered Earnings Sharing Mechanism.
Timeframe
PBR Third Generation
2024 to 2028
Inflation Adjuster (I Factor)
Inflation indices (FWI and CPI) adjusted annually with a true up applied
Productivity Adjuster (X Factor) 0.40% (includes 0.3% for productivity factor premium)
O&M
Based on 2023 approved COS Applications; inflated by I-X through the PBR
term
Return on Operating Cost
Investment
Ability to apply for return on operating solutions
Treatment of Capital Costs
a. Recovered through going-in rates inflated for I-X and a K Bar (the AUC
allowance for capital additions under PBR) that is based on inflation
adjusted average historical capital costs for the period 2018-2022. The
K Bar is calculated annually and adjusted for the actual weighted average
cost of capital (WACC)
b.
Significant extraordinary capital costs not previously incurred, required by
a third party or directly caused by applicable law related to net-zero
objectives recovered through a “Type I” K Factor
Return On Equity (ROE)
a. Based on the established Generic Cost of Capital (GCOC) formula (results
released November of each year)
b. + 0.5% ROE efficiency carry-over mechanism (ECM) achieved from PBR
Second Generation added to 2023 and 2024
Earnings Sharing Mechanism
(ESM)
Two-tiered, asymmetric ESM;
• the utilities retain 100% of the first 200 bps of earnings above the authorized
ROE
• a 60/40 utility/customer split for the next 200 bps of earnings, and
• a 20/80 utility/customer split for any earnings over 400 bps
Reopener
- 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
• 2024: Based on the GCOC formula excluding impact of ECM
• 2025-2028: Based on the GCOC formula
Quantification and Tracking of
Efficiencies
Utility must report a select set of operational metrics annually to the AUC
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 ERA 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
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
30
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.
REGULATORY UPDATES
Common Matters
Generic Cost of Capital (GCOC) Proceeding
On October 9, 2023, the AUC issued its decision with respect to the GCOC parameters for 2024 and beyond. The
AUC has approved the use of a formula for setting ROE rates and set the equity thickness at 37 per cent for Alberta
Utilities.
The established starting point ROE, which will serve as the base in the annual formula, is set at 9 per cent and the
formula will take into account two variables; changes in 30-year Government of Canada Bond Yields and changes in
utility spreads. The AUC will update the ROE annually and issue the following year's ROE in November of the current
year. On November 20, 2023, the AUC issued its decision with respect to the 2024 ROE with the rate being set at
9.28 per cent.
Second Generation Performance Based Regulation Reopeners
On June 30, 2023, the AUC initiated a proceeding for Electricity Distribution and Natural Gas Distribution as the
reopener clause was triggered by both utilities in 2022, the final year of the PBR2. The PBR2 reopener thresholds
were triggered if a utility's earnings are +/- 500 basis points from the approved ROE in one year or +/- 300 basis
points from the approved ROE in two consecutive years. In this proceeding, the AUC will determine whether a
reopener and any adjustment of Electricity Distribution and Natural Gas Distribution's 2018 to 2022 plans are
required. ATCO Gas and ATCO Electric were the only utilities in Alberta to lower rates in 2023 due to efficiencies
being passed onto to customers.
Similar to the first generation of PBR, the increase in earnings in the second generation of PBR was a direct result of
management’s response to the incentive to implement efficiency improvements and not due to a flaw in the PBR
framework.
Electricity Distribution
Alberta Court of Appeal ATCO Electric Distribution Fort McMurray Wildfire Decision
The Alberta Court of Appeal issued a favourable decision in the second quarter of 2023 in connection with the Fort
McMurray (Wood Buffalo) wildfire, which resulted in the AUC issuing its decision in December 2023 permitting ATCO
Electric to include the net book value of its electric distribution assets destroyed in the Wood Buffalo fire within rate
base.
The AUC accepted that, in the circumstances of the Wood Buffalo fire, isolating and directing the removal of the
entirety of the net book value of the destroyed assets had the effect of rescinding the reasonable opportunity
previously afforded to ATCO Electric to recover these costs, and did so for reasons beyond ATCO Electric’s control.
As a result, permitting recovery of the costs results in a just and reasonable tariff.
In addition to the reversal of the original disallowance of $3 million recognized in the second quarter of 2019, ATCO
Electric will be recovering the lost return and associated carrying costs from 2018-2023 of $2 million in 2024.
Electricity Transmission
ATCO Electric Transmission 2018-2021 Deferral Application
On April 26, 2023, the AUC issued a decision regarding ATCO Electric’s 2018–2021 Deferral Application for the
disposal of its 2018–2021 transmission deferral accounts and annual filing adjustment balances. While the decision
received from the AUC denied recovery of forgone return related to certain cancelled projects and some capital
additions, it approved the majority of additions to rate base.
31
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
ATCO Electric Transmission 2023-2025 General Tariff Application (GTA)
On May 19, 2022, ATCO Electric Transmission filed a GTA for its operations for the 2023-2025 period. A
comprehensive negotiated settlement was reached in December 2022 with all of the participating interveners and
an application was filed with the AUC in January 2023. On May 5, 2023, the AUC approved the negotiated settlement
agreement in its entirety.
Natural Gas Transmission
2024 - 2026 General Rate Application (GRA)
On July 31, 2023 ATCO Pipelines filed a GRA requesting approval of revenue requirements related to operational
and maintenance costs as well as capital expenditures needed over the 2024-2026 period. A comprehensive
negotiated settlement was reached with all participating interveners in December 2023 and was filed with the AUC
on January 5, 2024. The GRA also requested new deferral accounts which will be reviewed and litigated through a
separate process. A decision from the AUC is expected in the second quarter of 2024.
International Natural Gas Distribution
Access Arrangement 6 (AA6)
ATCO Gas Australia lodged its initial AA6 submission with the ERA on September 1, 2023. The submission detailed
expenditure plans for the period January 1, 2025 to December 31, 2029. The ERA are in the process of preparing
their draft decision, which is expected in late April or early May 2024. It is anticipated that the AA6 process will
conclude with the ERA’s Final Decision published in the fourth quarter of 2024.
ATCO ENPOWER
REVENUES
ATCO EnPower revenues of $89 million in the fourth quarter of 2023 were $5 million lower compared to the same
period in 2022 mainly due to lower demand for natural gas storage services resulting from warmer weather,
partially offset by revenues from the Forty Mile and Adelaide wind assets acquired in January 2023 and solar assets
energized in 2023.
ATCO EnPower revenues of $362 million in the full year of 2023 were $50 million higher compared to the same
period in 2022 mainly due to revenues from the Forty Mile and Adelaide wind assets acquired in January 2023 and
solar assets energized in 2023. Higher revenues were partially offset by loss of revenues attributable to non-
regulated electricity and natural gas transmission activities, which were recorded under ATCO Energy Systems in
2023.
ADJUSTED EARNINGS
($ millions)
Electricity Generation (1)
Storage & Industrial Water (1)
Total ATCO EnPower (2)
Three Months Ended
December 31
Year Ended
December 31
2023
2022
Change
2023
2022
Change
3
6
9
(2)
5
3
5
1
6
10
16
26
2
17
19
8
(1)
7
(1) Non-GAAP financial measures. See “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) Total of segments measure. See “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 EnPower adjusted earnings of $9 million and $26 million in the fourth quarter and full year of 2023 were
$6 million and $7 million higher than the same periods in 2022 mainly due to additional earnings from the Forty
Mile and Adelaide wind assets acquired in 2023, earnings from the solar assets energized in 2023, a non-recurring
recovery in the fourth quarter of 2023, and higher project development costs incurred in 2022, largely in Australia.
Higher earnings were partially offset by the loss of earnings attributable to non-regulated electricity and natural gas
transmission activities which were recorded under ATCO Energy Systems in 2023. Full year 2023 earnings were also
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
32
partially offset by engine repairs at the Karratha facility in Australia and an insurance recovery received in the
second quarter of 2022.
Detailed information about the activities and financial results of ATCO EnPower's businesses is provided in the
following sections.
Electricity Generation
Non-regulated electricity activities include the supply of electricity from solar, wind, hydroelectric, and natural gas
generating plants in Canada, Australia, Mexico, and Chile.
Electricity Generation adjusted earnings of $3 million and $10 million in the fourth quarter and full year of 2023
were $5 million and $8 million higher compared to the same periods in 2022 mainly due to additional earnings from
the Forty Mile and Adelaide wind assets acquired in January 2023, earnings from solar assets energized in 2023 and
project development costs incurred in Australia in the fourth quarter of 2022. Full year 2023 earnings were partially
offset by engine repairs at the Karratha facility in Australia and an insurance recovery received in the second
quarter of 2022.
The following table compares ATCO EnPower’s renewable portfolio performance in Canada over the four quarters
ended December 31, 2023.
Capacity Share (1) (MW)
Average Availability (%)
Generation (MWh)
Average Realized Price ($)
Q1 2023
Q2 2023
Q3 2023
Q4 2023
283
91
283
94
320
92
359
92
207,520
205,754
190,442
235,352
106
100
99
79
(1) Capacity share represents the percentage of the nameplate capacity owned by ATCO EnPower.
The quarter-over-quarter growth of the renewable portfolio in Canada is the result of continued strategic expansion
starting with the acquisition in January 2023 and achievement of commercial operations on our Barlow, Deerfoot,
and Empress solar assets during the year. Since acquiring the renewable energy portfolio in January 2023, the Forty
Mile and Adelaide wind assets have contributed revenues of $65 million for the year ended December 31, 2023.
Uprating work continues for the Forty Mile wind assets with expected completion in the first quarter of 2024. Upon
reaching commercial operations during the year, the solar assets have also contributed revenues of $8 million for
the year ended December 31, 2023.
The average realized price related to the renewable portfolio has decreased from an average of $106 per MWh in
the first quarter to an average of $79 per MWh in the fourth quarter due to lower capture prices on merchant
generation. Merchant generation decreased throughout the year as we increased the percentage of contracted
generation in response to expected lower merchant pricing and as we advanced project financings with contracted
offtakers on certain assets. Despite achieving average availability of 92 per cent during the year, generation from
the renewable portfolio was also impacted in the second and third quarters of 2023 from lower wind generation
than expected. However, overall generation increased during the year as the Barlow, Deerfoot and Empress solar
assets achieved commercial operations.
Storage & Industrial Water
Storage & Industrial Water provides non-regulated natural gas storage, natural gas liquids storage, and industrial
water services in Alberta and energy services in the Northwest Territories.
Storage & Industrial Water adjusted earnings of $6 million in the fourth quarter of 2023 were $1 million higher
compared to the same period in 2022 mainly due to a non-recurring recovery in the fourth quarter of 2023. Higher
earnings were partially offset by loss of earnings attributable to non-regulated natural gas transmission activities
which were recorded under ATCO Energy Systems in 2023.
Storage & Industrial Water adjusted earnings of $16 million in the full year of 2023 were $1 million lower compared
to the same period in 2022 mainly due to increased operating costs, and the loss of earnings attributable to non-
regulated natural gas transmission activities which were recorded under ATCO Energy Systems in 2023, partially
offset by a non-recurring recovery in the fourth quarter of 2023.
33
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
ATCO ENPOWER 2023 OVERVIEW
Canada
Chiniki and Goodstoney First Nations Equity Partnership
In September 2023, the Chiniki and Goodstoney First Nations and ATCO, through its investment in Canadian
Utilities, announced a partnership agreement for the Deerfoot and Barlow solar projects, the largest solar
installation in an urban centre in Western Canada. Under the terms of the agreement, the Chiniki and Goodstoney
First Nations have become the majority owners with a 51 per cent ownership stake in the facilities. The 27-MW
Barlow project and 37-MW Deerfoot project reached commercial operations in the second and third quarters,
respectively, of 2023.
Lafarge Canada Inc. (Lafarge) Power Purchase Agreement
In September 2023, ATCO, through its investment in Canadian Utilities entered into a 12.5-year virtual power
purchase agreement with Lafarge. Under the terms of the agreement, Lafarge's Exshaw cement plant will notionally
purchase 100 per cent of the solar power generated from the 39-MW Empress solar project. The Empress solar
project achieved commercial operations in the fourth quarter of 2023.
Heartland Hydrogen Hub Project
In the second quarter of 2023, Suncor Energy Inc. (Suncor) provided notice of its intention to withdraw from the
hydrogen production facility project. This has not changed our commitment to the project. The project has
significant potential to supply hydrogen to domestic and international markets, including the Alberta gas grid,
industrial, municipal, and commercial transport users.
We continue to work with supportive Federal and Provincial governments to establish policy and frameworks that
facilitate investment in the Canadian hydrogen economy, along with other parties to further the development and
commercial success of this project.
The Design Basis Memorandum is complete and we are targeting to bring in a strategic operating partner by the
third quarter of 2024 with the goal to sanction Front-End Engineering Design in 2024 to begin working towards a
final investment decision in 2025.
Renewable Energy Portfolio Acquisition
On January 3, 2023, Canadian Utilities closed the acquisition of renewable assets from Suncor. The acquisition
includes a majority interest in the 40-MW Adelaide wind facility in Ontario, the 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.
Concurrent with the close of this acquisition, Canadian Utilities entered into a 15-year renewable power purchase
agreement with Microsoft Corporation (Microsoft) beginning July 1, 2023. Under the terms of the agreement,
Microsoft will purchase 150-MW of renewable energy generated by Canadian Utilities' 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 until January 2035.
Australia
In October 2023, the South Australian Government announced an Early Contractor Involvement (ECI) agreement
with ATCO Australia and our joint venture partner BOC Linde for the South Australian Hydrogen Jobs Plan project, a
250-MW hydrogen production facility, a 200-MW hydrogen-fuelled electricity generation facility and a hydrogen
storage facility. Activities under this agreement include developing a contract offer price, and negotiation of
engineering, procurement, construction and operations and maintenance contracts for delivery and operations of
the project. The ECI phase of the project is due for completion in the second quarter of 2024.
Osborne Power Purchase Agreement (PPA) Extension
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. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
34
CANADIAN UTILITIES CORPORATE & OTHER
Canadian Utilities Corporate & Other segment includes Retail Energy and Rümi through ATCOenergy which provides
retail electricity and natural gas services, home products, home maintenance services and professional home advice
in Alberta. Corporate & Other 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 also includes CU Inc. and Canadian Utilities preferred share dividend and debt expenses.
REVENUES
Canadian Utilities Corporate & Other revenues of $33 million and $260 million in the fourth quarter and full year of
2023 were $78 million and $92 million lower compared to the same periods in 2022 mainly due to lower prices for
retail electricity and natural gas in ATCOenergy.
ADJUSTED EARNINGS
($ millions)
2023
2022
Change
2023
2022
Change
Canadian Utilities Corporate & Other (1)
(7)
(7)
—
(51)
(50)
(1)
(1) Total of segments measure. See “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
Including intersegment eliminations, Canadian Utilities Corporate & Other adjusted earnings in the fourth quarter of
2023 were comparable to the same period in 2022.
Including intersegment eliminations, Canadian Utilities Corporate & Other adjusted earnings in the full year of 2023
were $1 million lower compared to the same period in 2022 mainly due to the impact of the Preferred Dividend
Rate reset in June 2022, partially offset by improved earnings at ATCOenergy resulting from customer growth.
2023 OVERVIEW
Branding Initiative
In 2023 we launched two new brands; ATCO Energy Systems is our new global brand for our gas and electrical utility
services business, which also oversees our interest in LUMA Energy, and ATCO EnPower is our new global brand for
our non-regulated energy business, including renewables, clean fuels, and energy storage.
The branding initiative does not impact our reporting segments within our external documents.
Executive Appointments
Effective July 1, 2023, Wayne Stensby was appointed to Chief Operating Officer of ATCO Energy Systems and Bob
Myles was appointed to Chief Operating Officer of ATCO EnPower.
Effective October 1, 2023, John Ivulich was appointed to Chief Executive Officer & Country Chair of ATCO Australia,
our regulated gas utility and non-regulated renewables, power, and clean fuels businesses in Australia.
On January 19, 2024, the Company announced the retirement of Executive Vice President and Chief Financial
Officer, Brian P. Shkrobot, effective March 1, 2024. Concurrently, it was announced that with the support of the
Canadian Utilities' Board of Directors, Katie Patrick, Executive Vice President, Chief Financial & Investment Officer,
ATCO, will broaden her portfolio to include Chief Financial Officer for Canadian Utilities effective March 1, 2024.
35
ATCO LTD. 2023 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 2023 Sustainability Report, to be published in May 2024, focuses on the following material topics:
•
•
•
•
Energy Transition and Environment - energy transition and climate change, GHG emissions, and land use
and biodiversity;
Resilience and Safety - system reliability and availability, emergency preparedness and response, employee
safety and well-being, public health and safety, and cybersecurity;
People and Partners - Indigenous relations, economic opportunities and reconciliation, community
engagement and investment, customer experience and satisfaction, human capital development, retention,
and attraction, and diversity, equity and inclusion; and
Governance and Responsible Business – corporate governance, business ethics, government relations and
political advocacy, and responsible supply chain.
In January 2022, we released our net zero by 2050 aspiration as well as an initial set of 2030 ESG Targets. Our Board
of Directors recognizes and fully supports our net-zero aspiration and 2030 targets, and agrees that these
aspirations and targets align with our strategic direction. 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 Standards, the
Sustainability Accounting Standards Board, the Financial Stability Board’s Task Force on Climate-related Financial
Disclosures' (TCFD) recommendations, and the new IFRS International Sustainability Standards Board (ISSB)
Standards.
The 2022 Sustainability Report, ESG Datasheet, materiality assessment, and additional details and other disclosures
are available on our website at www.atco.com.
CLIMATE CHANGE AND ENERGY TRANSITION
To support the energy transition and 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.
Details on 2023 energy transition developments are included in the "Business Unit Performance" section in this
MD&A.
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.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
36
In addition to the material risks described in the "Business Risks and Risk Management" section of this MD&A, the
following table provides further information on how we address specific climate-related challenges and
opportunities.
Category/Driver
Transitional
Policy/
Regulatory
Challenges
Opportunities
Mitigation Options/Measures
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
Electricity generation
conversions present
opportunities for
transmission and
distribution
infrastructure investment
Electricity grid
modernization
Hydrogen economy
development
Active participation in
policy development,
industry groups, and
regulatory discussions
Business diversification
Removal of coal-fired
electricity generation
from our portfolio in 2019
Hydrogen research and
development
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
Providing a suite of lower-
emitting technology
solutions so our
customers can pick the
right solutions for their
unique situation
Distributed energy
solutions
A transition to lower-
emitting energy systems
provides opportunities to
utilize expertise in:
generation, integration
and delivery of new
energy sources including
hydrogen, renewable
natural gas, EV networks;
and transmission and
distribution
infrastructure to ensure
energy network reliability
and security
Reputational
Public perception of
carbon risk
Physical
Physical
Extreme weather events
Long-term changes in
temperature and
weather patterns
Increase in demand for
trusted long-term
partners to deliver lower-
emitting solutions
Transparent reporting
Authentic engagement
and collaboration
Climate change
mitigation and
adaptation
Rapidly deployable
structures and logistics
services
Climate change resiliency
efforts
Emergency Response &
Preparedness plans and
training
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.
Government of Canada Zero-Emission Vehicle Mandate/Regulations
On December 19, 2023, the Government of Canada finalized the new Electric Vehicle Availability Standard to
increase the supply of clean, zero-emission vehicles available to Canadians. The Standard will require that Canada
achieve a national target of 100 per cent zero-emission vehicle sales by 2035, with interim targets of at least 20 per
37
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
cent of all sales by 2026, and at least 60 per cent by 2030, with increases each year. In addition, companies can earn
one credit — which can be banked or traded — for every $20,000 invested in fast-charging station infrastructure
projects.
Government of Canada Methane Regulations
On December 4, 2023, the Government of Canada announced proposed amendments to federal methane
regulations. The proposal is designed to build on existing commitments and now aims to achieve a 75 per cent
reduction in oil and gas sector methane emissions by 2030. The existing methane regulation aimed to achieve a
40-45 per cent reduction in methane emissions by 2025. This regulation would apply to onshore upstream,
midstream, and transmission oil and gas facilities. The proposed amendments expand the current coverage and
stringency levels of the regulations as well as expanding fugitive emissions management and other requirements to
manage emissions from equipment. The proposal introduces a performance-based compliance option designed to
focus on emissions outcomes, rather than prescribing a specific action for compliance.
Government of Canada Clean Electricity Regulations
On August 19, 2023, the Government of Canada released draft Clean Electricity Regulations (CER) aimed at achieving
net-zero emissions from Canada’s electricity grid by 2035. If implemented, the draft regulations would take effect on
January 1, 2025, and apply to grid-connected fossil fuel generation units of 25 MW or greater. Some of the key terms
of the draft regulations include (i) a carbon intensity cap (prohibition) of 30 tonnes CO2/GWh, that applies if any net
electricity is delivered to the grid; (ii) the intensity cap would apply to generating units at their end of prescribed life,
defined as 20 years after commission date; and (iii) generating units may emit up to 150 kilotonnes of CO2 in a
calendar year if operating for 450 hours or less during that calendar year. The minister may also issue exemptions
for emergency situations.
Government of Canada Federal Budget 2023
Building on 2022 clean energy and investment tax credit (ITC) announcements, the 2023 Canadian Federal Budget
(Budget 2023) released on March 28, 2023 and updated November 28, 2023, provided further details including:
•
•
•
•
•
Clean Technology ITC – a 30 per cent refundable tax credit in clean technologies and expanded to include
certain property and additional geothermal equipment.
Clean Hydrogen ITC – a 15 to 40 per cent refundable tax credit available on eligible equipment for projects
that produce hydrogen from electrolysis or natural gas with emissions that are abated using Carbon
Capture Utilization and Storage (CCUS).
Clean Electricity ITC – a 15 per cent refundable tax credit for investments in non-emitting electricity
generation systems (i.e., solar, wind, hydro, nuclear), abated natural gas-fired electricity generation,
electricity storage systems, and equipment used for transmission of electricity between provinces and
territories.
Clean Technology Manufacturing ITC – a 30 per cent refundable tax credit for the capital costs of machinery
and equipment used in manufacturing of renewable energy equipment (i.e., solar, wind, geothermal),
nuclear energy equipment, grid-scale electrical storage equipment, zero-emission vehicles, batteries, fuel
cells, recharging systems for vehicles, and hydrogen production equipment.
Carbon Capture, Utilization and Storage ITC – a 37.5 to 60 per cent refundable tax credit for assets used to
capture, store, and reuse CO2.
For expenditures that qualify under more than one ITC program, only one credit may be claimed in respect of the
relevant piece of property or equipment. There are many details still pending for the different programs
announced.
Carbon Pricing/Output-Based Pricing Systems
Announced in January 2023, the carbon price in Canada increased from $50 to $65 per tonne, beginning April 2023.
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.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
38
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 GHGs 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.
Alberta Minister of Affordability and Utilities Renewable Electricity Generation Projects Approval Pause
On August 3, 2023, the Alberta Minister of Affordability and Utilities issued an announcement that the AUC was
directed to pause approvals on new renewable electricity generation projects greater than one megawatt until
February 29, 2024. Over this pause period, the AUC will conduct an inquiry to gather input on policy issues which is
intended to support the ongoing economic, orderly and efficient development of electricity generation in Alberta.
The AUC cannot issue approvals but will continue to process applications (new and existing) up to the approval
stage while the pause period is in effect. Projects currently approved are not impacted. At this time, there is no
impact to the post-permitted renewable power generation projects currently underway at ATCO.
CLIMATE CHANGE RESILIENCY
We carefully manage climate-related risks, including preparing for, and responding to, extreme weather events
through activities such as proactive route and site selection, asset hardening, regular maintenance, and insurance.
The Company follows regulated engineering codes and continues to evaluate ways to create greater system
reliability and resiliency. When planning for capital investment or acquiring assets we consider site specific climate
and weather factors, such as flood plain mapping and extreme weather history.
In Canadian Utilities' Electricity Transmission and Distribution operations, grid resiliency initiatives focus on
prevention, protection, and reaction. Prevention includes minimizing operational risks and ensuring system
adequacy through system planning and coordination. Protection is focused on improving grid resiliency through
activities such as retrofitting and vegetation management to reduce incidents that result in outages. Wildfire
Management Plans include requirements to conduct annual patrols of all transmission power lines in forest
protection areas. Finally, we look to restore services in the shortest possible timeframe through grid modernization,
adequate contingency planning and dispatch.
In Canadian Utilities' Natural Gas Transmission and Distribution businesses, the majority of the pipeline network is
underground, making it less susceptible to extreme weather events. We work with regulators to increase resiliency
where appropriate through asset improvement projects. We have also mapped and continue to regularly inspect
pipeline water crossings.
In our Structures & 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.
39
ATCO LTD. 2023 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 2023
and 2022 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
2023
2022
Change
2023
2022
Change
635
234
5
21
113
67
884
195
2
24
97
38
(249)
2,529
3,044
(515)
39
3
(3)
16
29
811
717
22
72
434
242
14
81
391
214
94
8
(9)
43
28
Operating costs, which are total costs and expenses less depreciation, amortization and impairment, decreased by
$249 million in the fourth quarter of 2023 compared to the same period in 2022. Lower operating costs were mainly
due to higher unrealized and realized gains on derivative financial instruments, lower energy costs in ATCOenergy,
decreased material costs at ATCO Structures due to the Bechtel Pluto Train II project reaching substantial
completion and other projects completed in 2022, and lower franchise fees within the Natural Gas Distribution
business. Lower operating costs were partially offset by ongoing operational expenses, technology costs, and
increased flow-through costs.
Operating costs decreased by $515 million in the full year of 2023 compared to the same period in 2022 mainly due
to the factors outlined above. Lower operating costs were partially offset by legal and other costs related to the
Wipro Ltd. (Wipro) Master Services Agreements (MSAs) matter that was concluded on February 26, 2023.
DEPRECIATION, AMORTIZATION AND IMPAIRMENT
Depreciation, amortization and impairment increased by $39 million and $94 million in the fourth quarter and full
year of 2023 compared to the same periods in 2022 mainly due to the Forty Mile and Adelaide wind assets acquired
in January 2023 in Canadian Utilities' ATCO EnPower business, ATCO Structures' increase in global rental fleet assets,
and ongoing investment in Canadian Utilities' Regulated Utilities. Additionally, an impairment of certain computer
software assets not expected to be used in the business was recognized in the fourth quarter of 2023, and an
impairment of certain electricity generation assets that had been removed from service as they were determined to
have no remaining value was recognized in the second quarter of 2023.
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 18 port facilities and 5 port
operation services businesses located in Chile, Uruguay, Argentina, Brazil, and the US.
Earnings from investment in associate company in the fourth quarter of 2023 were $3 million higher than the same
period in 2022 mainly due to improved margins across operations within the portfolio of ports.
Earnings from investment in associate company in the full year of 2023 were $8 million higher than the same period
in 2022 mainly due to increased ownership at Puerto Angamos and Terminal Graneles del Norte, improved margins
across operations within the portfolio of ports, and favourable exchange rates.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
40
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 Ltd. (NUE) 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 decreased by $3 million and $9 million in the fourth quarter and full year
of 2023 compared to the same periods in 2022 mainly due to a reversal of an impairment of an investment in the
fourth quarter of 2022 in ATCO EnPower.
NET FINANCE COSTS
Net finance costs increased by $16 million and $43 million in the fourth quarter and full year of 2023 compared to
the same periods in 2022 mainly due to higher interest expense as a result of external financing related to the
acquisition of the renewable energy portfolio, partially offset by higher interest income from cash investments.
INCOME TAX EXPENSE
Income taxes were higher by $29 million and $28 million in the fourth quarter and full year of 2023 compared to the
same periods in 2022 due to higher IFRS earnings before income taxes primarily driven by higher unrealized and
realized gains on derivative financial instruments, and the accrual of income taxes relating to the 2009 to 2016
reassessment notices received from the Portuguese Tax Authority.
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. 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 credit ratings assigned to ATCO, Canadian Utilities, CU Inc. and ATCO Gas Australia at
December 31, 2023.
ATCO
Issuer
Canadian Utilities
Issuer
Senior unsecured debt
Commercial paper
Preferred shares
DBRS
A (low)
A
A
R-1 (low)
PFD-2
Fitch
BBB+
A-
A-
F2
BBB
CU Inc.
Issuer
Senior unsecured debt
Commercial paper
Preferred shares
S&P Global Ratings has assigned Canadian Utilities' subsidiary ATCO Gas Australia (1) a BBB+ issuer and senior
unsecured debt credit rating with a stable outlook.
A (high)
A (high)
R-1 (low)
PFD-2 (high)
A-
A-
F2
BBB+
(1) ATCO Gas Australia is a regulated provider of natural gas distribution services in Western Australia, serving metropolitan Perth and surrounding regions.
41
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
On March 17, 2023, Fitch Ratings affirmed its 'BBB+' issuer rating and stable outlook on ATCO and its 'A-' issuer
rating with a stable outlook on both Canadian Utilities and CU Inc.
On March 27, 2023, S&P Global Ratings affirmed Canadian Utilities' subsidiary ATCO Gas Australia's 'BBB+' issuer
credit rating and stable outlook.
At our request, on July 12, 2023, S&P Global Ratings withdrew its 'BBB+' long-term issuer credit ratings and all
related debt issue ratings on ATCO and Canadian Utilities, and its ‘A-‘ issuer credit rating and all related debt issue
ratings on CU Inc. S&P will continue to rate ATCO Gas Australia on a standalone basis as an insulated subsidiary.
Going forward, Fitch and DBRS will continue to rate ATCO, Canadian Utilities and CU Inc.
On July 25, 2023, DBRS Limited affirmed its 'A (high)' long-term corporate credit rating and stable outlook on
Canadian Utilities' subsidiary CU Inc.
On August 29, 2023, DBRS Limited affirmed its 'A (low)' long-term corporate credit rating and stable outlook on
ATCO and its 'A' long-term corporate credit rating and stable outlook on Canadian Utilities.
LINES OF CREDIT
At December 31, 2023, ATCO and its subsidiaries had the following lines of credit.
($ millions)
Long-term committed
Short-term committed
Uncommitted
Total
Total
Used
Available
3,063
316
692
4,071
973
316
275
1,564
2,090
—
417
2,507
Of the $4,071 million in total lines of credit, $692 million was in the form of uncommitted credit facilities with no set
maturity date. The other $3,379 million in credit lines was committed with maturities between 2024 and 2027, and
may be extended at the option of the lenders.
Of the $1,564 million in lines of credit used, $643 million was related to ATCO Gas Australia. Long-term committed
credit lines are used to satisfy all of ATCO Gas Australia's term debt financing needs. The majority of the remaining
usage is related to the funding of the renewable energy portfolio acquisition in ATCO EnPower, 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, 2023, the Company's cash position was $288 million, a decrease of $745 million compared to
December 31, 2022. Major movements are outlined in the following table:
($ millions)
Three Months Ended
December 31
Year Ended
December 31
2023
2022
Change
2023
2022
Change
Cash position, beginning of period
579 1,269
(690) 1,033 1,088
(55)
Cash from (used in):
Operating activities
Investing activities
Financing activities
Foreign currency translation
Cash position, end of the period
Operating Activities
545
696
(151) 1,965 2,396
(431)
(424)
(550)
126 (2,585) (1,496) (1,089)
(410)
(378)
(32)
(123)
(953)
830
(2)
(4)
2
(2)
(2)
—
288 1,033
(745)
288 1,033
(745)
Cash flows from operating activities were $545 million in the fourth quarter of 2023, $151 million lower than the
same period in 2022 mainly due to lower cash flows from ATCOenergy caused by timing of payables in 2022, the
timing of certain revenue and expenses, partly offset by the impact of the acquisitions of Triple M and the Forty Mile
and Adelaide wind assets.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
42
Cash flows from operating activities were $1,965 million in the full year of 2023, $431 million lower than the same
period in 2022 mainly due to lower prices for retail electricity and natural gas in ATCOenergy and lower cash flows in
2023 resulting from the recovery of the 2021 deferral of rate increases in 2022 in the Electricity Distribution and
Natural Gas Distribution businesses, partly offset by the impact of the acquisitions of Triple M and the Forty Mile
and Adelaide wind assets.
Investing Activities
Cash flows used in investing activities was $424 million in the fourth quarter of 2023, $126 million lower than the
same period in 2022 mainly due to decreased capital spending in ATCO EnPower as the Carbon natural gas storage
expansion project was completed and the Barlow, Deerfoot and Empress solar projects reached commercial
operations throughout 2023, partially offset by timing of capital expenditures in ATCO Energy Systems.
Cash used in investing activities were $2,585 million in the full year of 2023, $1,089 million higher than the same
period in 2022 mainly due to the 2023 acquisition of the Forty Mile and Adelaide wind assets, and the 2023
investments in marketable securities.
A reconciliation of capital investment to capital expenditures and information pertaining to marketable securities is
summarized below.
Cash Used for Capital Investment and Capital Expenditures
Capital investment and capital expenditures for the fourth quarter and full year of 2023 and 2022 are shown in the
following table.
Year Ended
December 31
2022
204
10
214
Change
(6)
18
12
Three Months Ended
December 31
($ millions)
Structures & Logistics
ATCO Corporate & Other
Canadian Utilities
ATCO Energy Systems
Electricity
Natural Gas
ATCO EnPower
CU Corporate & Other
Canadian Utilities Total Capital Expenditures (1) (2)
ATCO Total Capital Expenditures
Capital Expenditures in joint ventures
ATCO Energy Systems
Electricity
ATCO EnPower
Business Combinations
Structures & Logistics
ATCO Corporate & Other
ATCO EnPower
Canadian Utilities Total Capital Investment (3)
ATCO Total Capital Investment (3)
2023
43
11
54
180
179
359
34
1
394
448
4
3
5
—
—
401
460
2022
60
5
65
199
185
384
64
4
452
517
1
—
42
—
—
453
560
Change
(17)
6
(11)
(19)
(6)
(25)
(30)
(3)
(58)
(69)
3
3
(37)
—
—
2023
198
28
226
630
583
1,213
139
8
566
571
1,137
234
12
1,360
1,383
1,586
1,597
6
7
5
6
691
5
6
42
—
—
(52)
2,064
1,394
(100)
2,301
1,650
64
12
76
(95)
(4)
(23)
(11)
1
1
(37)
6
691
670
651
(1)
(2)
Includes additions to property, plant and equipment, intangibles and $6 million and $21 million (2022 - $4 million and $14 million) of capitalized interest
during construction for the fourth quarter and full year of 2023.
Includes $22 million and $127 million for the fourth quarter and full year of 2023 (2022 - $26 million and $178 million) of capital expenditures, mainly in
ATCO Energy Systems, that were funded with the assistance of customer contributions and government grants.
(3) Non-GAAP financial measure. See “Other Financial and Non-GAAP Measures” and “Reconciliation of Capital Investment to Capital Expenditures” in this
MD&A.
43
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
Total capital investment of $460 million in the fourth quarter of 2023 was $100 million lower compared to the same
period in 2022 mainly due to decreased capital spending within Canadian Utilities' ATCO EnPower segment as the
Carbon natural gas storage facility expansion project was completed and the Barlow, Deerfoot and Empress Solar
projects reached commercial operations throughout 2023, and ATCO Structures' acquisition of Triple M Housing in
the fourth quarter of 2022.
Total capital investment of $2,301 million in the full year of 2023 was $651 million higher compared to the same
period in 2022 mainly due to the first quarter 2023 acquisition of the renewable energy portfolio in Canadian
Utilities' ATCO EnPower segment, and ongoing capital investment in the Regulated Utilities, partially offset by
decreased capital spending within ATCO EnPower as the Carbon natural gas storage facility expansion project was
completed and the Barlow, Deerfoot and Empress Solar projects reached commercial operations throughout 2023,
and ATCO Structures' acquisition of Triple M Housing in the fourth quarter of 2022.
Total capital expenditures of $448 million and $1,586 million in the fourth quarter and full year of 2023 were
$69 million and $11 million lower compared to the same periods in 2022 mainly due to the factors outlined above
with the exception of the first quarter 2023 renewable energy portfolio acquisition within ATCO EnPower, and ATCO
Structures' acquisition of Triple M Housing in the fourth quarter of 2022. These business combinations are excluded
from capital expenditures.
Marketable Securities
In February 2023, the Company invested excess cash of $290 million in a diversified portfolio of marketable
securities, with the objective of delivering competitive returns and maintaining a high degree of liquidity. The
Company's marketable securities are actively managed by an external investment manager with the majority of the
investments being highly liquid and redeemable within seven business days.
The marketable securities investments are measured at fair value. Realized gains, primarily representing interest
income received of $4 million and $10 million, were recorded in the fourth quarter and full year of 2023. Unrealized
gains, representing periodic temporary fluctuations in fair value measurement of $7 million and $4 million, were
recognized in other costs and expenses in the fourth quarter and full year of 2023.
Financing Activities
Cash flows used in financing activities were $410 million in the fourth quarter of 2023, $32 million higher than the
same period in 2022 mainly due to purchase of Class I Shares in the fourth quarter of 2023, partly offset by
increased net proceeds from long-term debt issuances.
Cash flows used in financing activities were $123 million in the full year of 2023, $830 million lower than the same
period in 2022 mainly due to an increase in net proceeds from long-term debt issuance, most of which was used to
finance the 2023 acquisition of renewable energy portfolio of assets in ATCO EnPower, and lower repayments of
short-term debt, partly offset by higher purchases of Class I Shares.
Information pertaining to financing activities is summarized below.
Dividends and Common Shares
We have increased our common share dividend each year since 1993, a 31-year track record. Dividends paid to
Class I and Class II Share owners totaled $53 million in the fourth quarter of 2023 and $215 million in the full year of
2023.
On January 11, 2024, the Board of Directors declared a first quarter dividend of 48.98 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.
Debenture Issuance
On September 20, 2023, Canadian Utilities' subsidiary CU Inc. issued $340 million of 5.088 per cent 30-year
debentures. Proceeds from the issue are being used to finance capital expenditures and for other general corporate
purposes.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
44
Other Debt Issuances
On January 3, 2023, Canadian Utilities entered into an unsecured non-revolving credit facility, consisting of two $355
million tranches to finance the acquisition of a portfolio of wind and solar assets and projects. The first $355 million
tranche matured on June 30, 2023. The second tranche matures on July 3, 2024 and with a payment made in
December 2023 there is now $68 million remaining. Both tranches bear an interest rate of Canadian Dollar
Overnight Rate (CDOR) plus an applicable margin.
On May 25, 2023, ATCO Adelaide Wind Holdings Limited Partnership, an indirect wholly-owned subsidiary of
Canadian Utilities, entered into a limited recourse term loan of $90 million with a bank lender. The loan is secured
by the assets of the borrower. The loan amortizes quarterly until final maturity on December 31, 2034, and bears
interest at CDOR plus an applicable margin. To mitigate the variable interest rate risk, the borrower entered into an
interest rate swap agreement to fix the interest rate at 4.88 per cent, including the applicable margin.
On June 30, 2023, Canadian Utilities issued $268 million additional long-term debt from an existing unsecured
extendible revolving credit facility with a syndicate of lenders. The facility matures on November 30, 2025, and bears
an interest rate at Canadian Overnight Repo Rate Average (CORRA) plus an applicable margin.
In July 2023, the Deerfoot Barlow Solar Limited Partnership, an indirect subsidiary of Canadian Utilities, completed a
credit agreement for limited recourse project-level debt of up to $78 million with an interest rate of 3.0 per cent. As
well, a funding agreement was reached for up to $13 million non-repayable grant funding.
In the fourth quarter of 2023, $56 million of debt and $9 million of grant funding was received. Subsequent to
year-end, in January 2024, an additional $13 million of debt and $2 million of grant funding was received, with
additional funds expected in the second quarter of 2024.
On December 4, 2023, Forty Mile Granlea Wind Limited Partnership (Forty Mile), an indirect wholly-owned subsidiary
of Canadian Utilities, issued multiple series of senior secured project bonds for aggregate gross proceeds of
$292 million. The project bonds are secured by the assets of the borrower. The series of bonds mature on
September 30, 2033 and June 30, 2046 carrying a weighted average fixed interest rate of 5.963 per cent.
Debenture Repayments
On May 1, 2023, Canadian Utilities' subsidiary, CU Inc., repaid $100 million of 9.4 per cent debentures upon
maturity.
Future Financing Alternatives
Significant opportunities for growth continue to be expected in connection with the energy transition, including
existing and new opportunities within both ATCO Energy Systems and ATCO EnPower. To support this potential
growth, Canadian Utilities intends to explore various financing alternatives. In the short-term we are considering
partnership options. In the long-term we will continue to evaluate both private and public sources of funding. We
are also considering the possibility of creating ATCO EnPower as a separate entity.
Normal Course Issuer Bid (NCIB)
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 13, 2023, ATCO Ltd. commenced a NCIB to purchase up to 1,014,881 outstanding Class I Shares. The bid
will expire on March 12, 2024. On September 26, 2023, we amended the NCIB to increase the maximum number of
Class I Shares that may be repurchased under the bid to 2,214,881 outstanding Class I Shares. No other terms of the
bid changed. Between March 13, 2023 and February 27, 2024, 1,758,600 Class I Shares were purchased for
$67 million.
Mid-Term Incentive Plan (MTIP)
In May 2023, the Company sold all of the 259,590 Class I shares that were held in trust for the MTIP for proceeds of
$11 million.
45
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
Base Shelf Prospectus - Canadian Utilities
On September 14, 2023, Canadian Utilities filed a short-form base shelf prospectus that permits it to issue Class A
non-voting shares, preferred shares and debt securities, over the 25-month life of the prospectus.
Cash Requirements
Contractual financial obligations and other commitments for the next five years and thereafter are shown below:
($ millions)
2024
2025
2026
2027
2028
2029 and
thereafter
Financial Liabilities
Accounts payable and accrued liabilities
Long-term debt:
Principal
Interest expense (1)
Derivatives (2)
Commitments
Purchase obligations:
Operating and maintenance agreements
Capital expenditures
Other
Other commitments
Total
961
531
491
49
2,032
545
354
81
10
990
3,022
—
—
—
—
—
679
475
20
1,174
351
426
9
786
25
414
5
444
220
407
1
628
9,301
7,542
24
16,867
480
464
429
399
390
—
—
—
—
—
22
11
513
1,687
6
8
478
1,264
6
1
436
880
6
1
406
1,034
6
3
399
17,266
(1)
Interest payments on floating rate debt have been estimated using rates in effect at December 31, 2023. 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, 2023.
SHARE CAPITAL
ATCO's equity securities consist of Class I Shares and Class II Shares.
At February 27, 2024 we had outstanding 99,733,891 Class I Shares, 12,424,987 Class II Shares, and options to
purchase 2,353,600 Class I Shares.
CLASS I NON-VOTING SHARES AND CLASS II VOTING SHARES
Each Class II Share may be converted into one Class I Share at any time at the share owner’s option. If an offer to
purchase all Class II Shares is made, and such offer is accepted and taken up by the owners of a majority of the
Class II Shares, and, if at the same time, an offer is not made to the Class I Share owners on the same terms and
conditions, then the Class I Shares will be entitled to the same voting rights as the Class II Shares. The two share
classes rank equally in all other respects, except for voting rights.
Of the 10,200,000 Class I Shares authorized for grant of options under our stock option plan 7,829,400 Class I
Shares were available for issuance at December 31, 2023. 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.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
46
QUARTERLY INFORMATION
The following table shows financial information for the eight quarters ended March 31, 2022 through December 31,
2023.
($ millions, except for per share data)
Q1 2023
Q2 2023
Q3 2023
Q4 2023
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 ($)
Adjusted earnings (loss) (1)
Structures & Logistics (1)
Neltume Ports
ATCO Corporate & Other (1)
Canadian Utilities (1)
ATCO Energy Systems (1)
ATCO EnPower (1)
Canadian Utilities Corporate & Other (1)
Total adjusted earnings (1)
($ millions, except for per share data)
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) (1)
Structures & Logistics (1)
Neltume Ports
ATCO Corporate & Other (1)
Canadian Utilities (1)
ATCO Energy Systems (1)
ATCO EnPower (1)
Canadian Utilities Corporate & Other (1)
Total adjusted earnings (1)
1,358
167
1.47
1.47
1.21
1,104
79
0.70
0.70
0.77
1,058
91
0.80
0.80
0.71
1,221
95
0.85
0.85
1.13
22
5
(5)
120
8
(13)
137
26
5
3
62
5
(14)
87
28
7
1
58
4
(17)
81
14
5
6
100
9
(7)
127
Q1 2022
Q2 2022
Q3 2022
Q4 2022
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)
92
18
4
1
73
6
(15)
87
4
2
8
100
3
(7)
110
(1) Total of segments measure. See “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.
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 (1)
In the first quarter of 2023, adjusted earnings were higher compared to the same period in 2022 mainly due to
earnings from Triple M Housing acquired in December 2022, increased space rentals performance in most
geographies for ATCO Structures, and earnings from ATCO Frontec's North Warning System contract. Earnings were
partially offset by ATCO Structures' lower workforce housing rental activity in Canada and the US and lower
workforce housing trade activity due to substantial used fleet sales and installation activity in 2022 in Australia and
Canada, and start-up costs on ATCO Frontec's Pogo Mine project and the closure of the Trans Mountain Clearwater
camp.
47
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
In the second quarter of 2023, adjusted earnings were higher than the same period in 2022. Higher adjusted
earnings were mainly due to strong business performance driven by increased space rentals activity in most
geographies for ATCO Structures, earnings from Triple M Housing acquired in December 2022, and earnings from
ATCO Frontec's North Warning System contract. Earnings were partially offset by ATCO Structures' lower workforce
housing trade sale activity in the US, ATCO Frontec's prior year earnings from the UK Training Camp Exercise project
conducted in the second quarter of 2022, and higher operating costs on ATCO Frontec's Pogo Mine project.
In the third quarter of 2023, adjusted earnings were higher than the same period in 2022. Higher adjusted earnings
were mainly due to strong business performance driven by increased space rentals performance in most
geographies for ATCO Structures, and earnings from Triple M Housing acquired in December 2022. Earnings were
partially offset by ATCO Structures' lower workforce housing trade sale activity in the US, and higher operating costs
on ATCO Frontec's Pogo Mine project.
In the fourth quarter of 2023, adjusted earnings were higher compared to the same period in 2022 mainly due to
strong business performance driven by increased space rentals and workforce housing performance in most
geographies for ATCO Structures, earnings from Triple M Housing acquired in December 2022. Earnings were
partially offset by ATCO Structures' lower workforce housing trade sale activity in the US, and lower workforce
housing rental activity in Canada.
(1) Adjusted earnings for Structures & Logistics is a total of segments measure. See “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
In the first quarter of 2023, adjusted earnings were higher than the same period in 2022 due to favourable foreign
exchange rates during the quarter.
In the second quarter of 2023, adjusted earnings were higher compared to the same period in 2022 mainly due to
favourable foreign exchange rates, and increased ownership at Puerto Angamos and Terminal Graneles del Norte.
In the third quarter of 2023, adjusted earnings were higher compared to the same period in 2022 mainly due to
favourable foreign exchange rates, increased ownership at Puerto Angamos and Terminal Graneles del Norte, and
timing of certain revenues and expenses.
In the fourth quarter of 2023, adjusted earnings were higher compared to the same period in 2022 mainly due to
improved margins across operations within the portfolio of ports.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
48
$20M$19M$18M$4M$22M$26M$28M$14MQ1 2022Q2 2022Q3 2022Q4 2022Q1 2023Q2 2023Q3 2023Q4 2023$4M$4M$4M$2M$5M$5M$7M$5MQ1 2022Q2 2022Q3 2022Q4 2022Q1 2023Q2 2023Q3 2023Q4 2023 CANADIAN UTILITIES
ATCO Energy Systems (1)
In the first quarter of 2023, adjusted earnings were lower than the same period in 2022 mainly due to cost
efficiencies generated by Electricity Distribution and Natural Gas Distribution over the second generation PBR term
now being passed onto customers under the 2023 COS rebasing framework. Lower earnings were partially offset by
new cost efficiencies realized in 2023 in Electricity Distribution and Natural Gas Distribution, and the impact of
inflation indexing on rate base in 2022 and higher rates and increased system volumes in International Natural Gas
Distribution.
In the second and third quarters of 2023, adjusted earnings were lower than the same period in 2022 mainly due to
cost efficiencies generated by Electricity Distribution and Natural Gas Distribution over the second generation PBR
term now being passed onto customers under the 2023 COS rebasing framework. Earnings were also lower due to
the impact of inflation indexing on rate base in 2022 in International Natural Gas Distribution, partially offset by
increased system volumes.
In the fourth quarter of 2023, adjusted earnings were comparable to the same period in 2022.
(1) Adjusted earnings for ATCO Energy Systems is a total of segments measure. See “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 EnPower (1)
In the first quarter of 2023, adjusted earnings were higher than the same period in 2022 mainly due to earnings
from the Forty Mile and Adelaide wind assets acquired in January 2023, and higher earnings from the Alberta Hub
and Carbon natural gas storage facilities, partially offset by higher project development costs in Australia.
In the second quarter of 2023, adjusted earnings were lower than the same period in 2022 mainly due to the
insurance recovery received in the second quarter of 2022 related to the Karratha facility in Australia, the timing of
project development costs, and the loss of earnings attributable to non-regulated electricity and natural gas
transmission activities which were recorded in ATCO Energy Systems in 2023, partially offset by earnings from the
Forty Mile and Adelaide wind assets acquired in January 2023.
In the third quarter of 2023, adjusted earnings were lower than the same period in 2022 mainly due to lower
demand for natural gas storage services, partially offset by the timing of project development costs.
In the fourth quarter of 2023, adjusted earnings were higher than the same period in 2022 mainly due to additional
earnings from the Forty Mile and Adelaide wind assets acquired in 2023, earnings from the solar assets energized in
2023, a non-recurring recovery in the fourth quarter of 2023, and higher project development costs incurred in
2022, largely in Australia. Higher earnings were partially offset by the loss of earnings attributable to non-regulated
electricity and natural gas transmission activities which were recorded in ATCO Energy Systems in 2023.
(1) Adjusted earnings for ATCO EnPower is a total of segments measure. See “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.
49
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
$124M$82M$73M$100M$120M$62M$58M$100MQ1 2022Q2 2022Q3 2022Q4 2022Q1 2023Q2 2023Q3 2023Q4 2023$4M$6M$6M$3M$8M$5M$4M$9MQ1 2022Q2 2022Q3 2022Q4 2022Q1 2023Q2 2023Q3 2023Q4 2023 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:
•
•
•
•
•
•
•
•
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.
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 the first quarter of 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.
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.
In the fourth quarter of 2022, a reversal of impairment of $2 million (after-tax and non-controlling interests)
was recorded mainly related to ATCO EnPower'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.
In the first quarter of 2023, the Company recognized legal and other costs of $5 million (after-tax and non-
controlling interests) related to the early termination of the Wipro MSAs for managed IT services. This
matter was concluded on February 26, 2023.
In the second quarter of 2023, the Company recognized an impairment of $4 million (after-tax and non-
controlling interests) relating to certain electricity generation assets in Electricity Transmission. These assets
had been removed from service as it was determined that they no longer had any remaining value.
In the fourth quarter of 2023, the Company recognized an impairment of $19 million (after-tax and non-
controlling interests) of certain computer software assets which are not expected to be used in the
Company.
In the fourth quarter of 2023, the Company accrued income taxes and interest of $15 million relating to the
2009-2016 reassessment notices received from the Portuguese Tax Authority.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
50
BUSINESS RISKS AND RISK MANAGEMENT
The Board 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. Details regarding business risks, both financial and
operational, and our risk management approach are discussed below.
FINANCIAL RISKS
Project Execution / Capital Investment
DESCRIPTION AND CONTEXT
Having multiple growth projects and an aggressive growth strategy could strain the Company’s ability to deliver
projects on time and on budget. This could lead to financial impacts and missed opportunities. Poorly managed
projects could result in project deliverables not being achieved or delivered as expected, which could lead to a loss
of market confidence and future partners.
The Company is subject to 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 uncertainty, the pace of energy transition, commodity and environmental attribute price risk, and
climate-related risks.
RISK MANAGEMENT APPROACH
The Company attempts to reduce the risks of project delays and cost increases through careful project feasibility,
development and management processes, reliable 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
Alberta Electric System Operator 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 uncertainty, the pace of energy transition, commodity and
environmental attribute price risk, and climate-related risks by leveraging our competitive advantages and assigning
clear accountability and leadership for executing and realizing capital investment. Planned capital investments for
ATCO EnPower are based on the following significant assumptions: a diversified approach to business development
focused on multiple pillars (energy storage, clean fuels, and 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.
51
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
Commodity Price
DESCRIPTION AND CONTEXT
Retail Energy's earnings are affected by short-term price volatility.
ATCO EnPower's natural gas storage facility in Carbon, Alberta, and the Alberta Hub natural gas storage facility near
Edson, Alberta, are exposed to storage price differentials. The growth of ATCO EnPower'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 PPAs, 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.
Financing
DESCRIPTION AND CONTEXT
The Company’s financing risk relates to price volatility and availability of external financing to fund the Company’s
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 the relevant
financing costs.
RISK MANAGEMENT APPROACH
To address this risk, the Company manages its capital structure to maintain strong investment grade credit ratings
that 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.
Liquidity
DESCRIPTION AND CONTEXT
Liquidity risk is the risk that the Company will not be able to meet its financial obligations.
RISK MANAGEMENT APPROACH
Cash flow from operations satisfies 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, preferred shares, and common equity. 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, 2023, the Company’s cash position was approximately $0.3 billion and there were
available committed and uncommitted lines of credit of approximately $2.5 billion, which can be utilized for general
corporate purposes.
Liquidity risk includes contractual financial obligations, which the Company plans to meet with cash flow from
operations, existing cash balances and external financing, if necessary. See the “Liquidity and Capital Resources”
section of this MD&A for the Company’s contractual financial obligations for the next five years and thereafter.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
52
Credit
DESCRIPTION AND CONTEXT
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
The Company reduces cash and cash equivalents credit risk 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 ATCO Structures & Logistics
business segment. The counterparties' financial quality is monitored regularly to ensure appropriate mitigation of
credit risk.
Foreign Exchange
DESCRIPTION AND CONTEXT
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 unknown
fluctuations in exchange rates. Such instruments are used only to manage risk and not for trading purposes. The
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.
Interest Rate
DESCRIPTION AND CONTEXT
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, 2023, the Company had fixed interest rates, either directly or through interest rate swap agreements,
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ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
on 94 per cent (2022 - 97 per cent) of total long-term debt. Consequently, the Company’s 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.
Inflation Risk
DESCRIPTION AND CONTEXT
Inflation has the potential to impact the economies and business environments in which the Company operates.
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.
OPERATIONAL RISKS
Health and Safety
DESCRIPTION AND CONTEXT
The operation of the Company’s businesses inherently involves risk to the health and safety of both employees and
the public. Such hazards include but are not limited to: the uncontrolled release of substances from our natural gas
transmission and distribution systems resulting in blowouts, fires, explosions, or gaseous leaks; and exposure to an
unintended release of electrical energy from our transmission and distribution wires system, including contact with
an energized circuit, electrical component, or equipment.
The failure to identify or inadequately identify worksite and/or work environment hazards or implement adequate
controls may cause loss of life or personal injury.
RISK MANAGEMENT APPROACH
Safety is one of the Company’s core values and is the first consideration in everything we do. The Company has
controls in place to mitigate these risks through pipeline and facility integrity programs, inspection programs,
operator training, emergency response full mobilization and tabletop exercises, mutual aid agreements (with others
in industry and municipalities), external awareness and education training through its damage prevention
department.
The Company has a number of safety programs, specialized training, detailed work methods and processes to
ensure the safety of our employees and contractors as they perform their work duties to help mitigate these risks.
From a public safety perspective, the Company participates in a number of public communication campaigns and
joint utility working groups and various other public safety activities and campaigns at the regional level.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
54
Cybersecurity
DESCRIPTION AND CONTEXT
The Company’s reliance on technology, which supports its information and industrial control systems, is subject to
potential cyber-attacks, which may include but are not limited to: unauthorized access of confidential information,
outage of critical infrastructure and/or ransomware attacks.
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.
Regulatory
DESCRIPTION AND CONTEXT
The Regulated Utilities are subject to 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 Regulated
Utilities are also subject to the potential risk of the regulator disallowing costs incurred. Electricity Distribution and
Natural Gas Distribution operate under PBR. Under PBR, the Regulated Utilities’ 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 GCOC 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.
Climate Change
DESCRIPTION AND CONTEXT - POLICY RISKS
The Company has operations in several jurisdictions that are subject to emissions regulations, including carbon
pricing, output-based performance standards, and other emissions management policies.
The potential of aggressive shifts in government decarbonization policies with limited transitional periods could
create risk as well as concerns over the energy transition being completed in an effective, reliable and affordable
manner. Future reliability of energy systems has also become a concern for system regulators and operators.
Part of the Company's growth strategy is taking a leadership role in the energy transition and associated projects. A
lack of clarity on proposed regulations and funding creates revenue uncertainty for these projects.
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.
55
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
RISK MANAGEMENT APPROACH - POLICY RISKS
The Company's exposure to climate change policy risks is mitigated to some extent 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.
The Company is actively and constructively working with all levels of government to ensure the impacts and costs of
proposed policy changes and pace of energy transition are identified and understood. Where appropriate, the
Company is also working with its peers and industry associations to develop common positions and strategies.
The Company is targeting climate change resilient investments and is working with different levels of government
and Indigenous communities on the opportunities, policy needs, market access, and funding requirements for
projects that help support climate action.
ATCO Structures' businesses are further mitigating risk through the diversification of customers, industry,
geography, and end use of products, including the pursuit of four main business lines: space rentals, workforce
housing, permanent modular construction and residential housing.
DESCRIPTION AND 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 vegetation management for electricity transmission and distribution operations, as well
as burying power lines in select areas. 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, including robust
Wildfire Management Plans. When planning for capital investment or acquiring assets, site specific climate and
weather factors, such as flood plain mapping and extreme weather history, are considered. The Company is also
exposed to extreme weather events in Puerto Rico, but the risk is limited to operating activities as the Company
does not own the transmission and distribution assets located there.
These are the material climate-related risks facing the Company. For more detailed information on additional
climate-related risks please refer to the "Sustainability, Climate Change and Energy Transition" section of this MD&A.
Pipeline Integrity
DESCRIPTION AND CONTEXT
Natural Gas Transmission, Natural Gas Distribution and International Gas Distribution have significant pipeline
infrastructure. Although the probability of a pipeline failure is very low, the consequences of a failure could 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
Transmission's integrity programs, and Natural Gas Distribution's and International Natural Gas Distribution's Mains
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
56
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.
Political
DESCRIPTION AND CONTEXT
The Company’s operations are exposed to a risk of change in the business environments in which we operate due
to political and legislative changes. 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.
Reputation
DESCRIPTION AND CONTEXT
The Company’s operations and growth prospects require strong relationships with key stakeholders, including
regulators, governments and agencies, Indigenous communities, landowners, and environmental organizations.
Inadequately managing expectations and issues important to stakeholders, including those arising during
construction of major capital projects and operation of critical energy infrastructure, could affect the Company's
reputation as well as have a significant impact on its operations and infrastructure development.
There is risk of non-compliance with the Company's internal policies, including its Code of Conduct, or anti-bribery
and anti-corruption laws by the Company’s employees, affiliates, independent contractors and/or agents, which may
potentially lead to reputational damage, in addition to fines, penalties, or litigation.
Any accusation of poor operational, leadership, or governance actions and/or practices that may be levelled against
the Company could create reputational risk for the Company, even in respect of issues or events that are largely
outside of our control, including but not limited to: protests, activist activity, sabotage, terrorism, failure of supply,
weather, catastrophic events and natural disasters, fires, floods, explosions, earthquakes and other similar events,
government policy, economic and/or social circumstances, and/or actions of third parties, which may affect safety or
quality of life of citizens.
Customers' monthly utility bills are made up of several components and it can be difficult to isolate the portions
between the various rate drivers. This can lead to customer confusion and lack of understanding of the components
of the bill and the various drivers of bill increases. Any such confusion may have reputational and/or financial
impacts on the Company.
RISK MANAGEMENT APPROACH
To address these risks, the Company has robust frameworks, practices, and training programs for employees in
place with respect to operations and maintenance, safety, whistleblower complaints, governance, and community
engagement. The Company will continue to ensure a rapid and effective operational response is in place when
responding to fires, line strikes, extreme weather events or similar events that may affect our services. The
Company prepares communication plans and key messages for customers and media as rate changes are approved
by the regulator and ready to be applied to the customers' bills. These plans address the specific reasons and
drivers for changes in rates.
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ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
The Company’s Marketing & Communications team is engaged at the outset on all customer-facing initiatives and
issues ensuring information is accurate, clear and concise to minimize negative perception by customers. The
Company also allocates resources and personnel to support public consultation around capital work, educational
safety campaigns and business development efforts.
The Company has a strong focus on community investment and communications efforts ensuring the Company’s
commitment to being a positive contributor to our community is demonstrable to the public and our customers.
Other Operational Risks
DESCRIPTION AND CONTEXT
The Company’s operations are subject to the risks normally associated with the operating and development of
power systems and facilities, the storage and transportation of natural gas, and manufacturing. These can include,
without limitation; mechanical failure, transportation problems, physical degradation, operator error, manufacturer
defects, constraints on natural resource development, delay of or restrictions on projects due to climate change
policies and initiatives, protests, activist activity, sabotage, terrorism, failure of supply, weather, catastrophic events
and natural disasters, fires, floods, explosions, earthquakes, and other similar events. These types of events could
result in injuries to personnel, third parties, including the public, damage to property and the environment, as well
as unplanned outages or prolonged downtime for maintenance and repair. Among other things, these events
typically increase operational and maintenance expenses and reduce revenues. The occurrence or continuation of
any of these events could result in significant losses for which insurance may not be sufficient or available.
Environmental damage could also result in increased costs to operate and insure the Company’s assets and have a
negative impact on the Company’s reputation and its ability to work collaboratively with stakeholders.
RISK MANAGEMENT APPROACH
To mitigate these risks, the Company has policies and an associated system of standards, processes and procedures
to identify, assess and mitigate safety, operational and environmental risks across our operations. In addition, the
Company maintains a comprehensive insurance program in respect of our assets and operations. The occurrence
of an event that is not fully covered by our insurance program could have a material adverse effect on our business,
financial condition, results of operations and cash flows.
Third Party Risk
DESCRIPTION AND CONTEXT
Certain of the Company’s assets are jointly owned and are governed by partnership, joint venture, or shareholder
agreements entered into with third parties. As a result, certain decisions relating to these assets require the
approval of a simple or special majority of the partners or owners, while others require unanimous approval of the
owners. In addition, certain of these assets are constructed, maintained, and operated by unrelated third-party
entities. The success of these assets is, to some extent, dependent on the effectiveness of the business relationship
and decision-making among the Company and the other partner(s) or owner(s) and the expertise and ability of any
third-party constructors, material suppliers, consultants and operators to operate and maintain the assets. There
can be no assurance that the Company will not encounter disputes with partners or owners or that assets operated
by third parties may not perform as expected. Such events could impact operations or cash flows of these assets or
cause them to not operate as the Company expects, which could, in turn, have a negative impact on the Company’s
business operations and financial performance.
RISK MANAGEMENT APPROACH
The Company believes that it has prudent governance and other contractual rights in place, along with robust third-
party selection due diligence to help mitigate third party risk, reduce the likelihood of disputes and ensure assets
operated by third parties perform as expected.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
58
Technological Transformation and Disruption
DESCRIPTION AND CONTEXT
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.
Indigenous Land Claims and Consultation
DESCRIPTION AND CONTEXT
Indigenous peoples assert and claim, or have established, Aboriginal and/or Treaty rights and/or Aboriginal title in
relation to a substantial portion of the lands and waters in Canada and the United States where the Company
operates.
There is a risk of project delays and relationship challenges caused by changes to consultation and engagement
policies and expectations at the community, provincial and federal levels. In addition, on June 21, 2021, Canada’s
United Nations Declaration on the Rights of Indigenous Peoples Act (the UNDRIP Act) received Royal Assent and
came into force. The UNDRIP Act provides a roadmap for the Government of Canada and Indigenous peoples to
work together to implement the United Nations Declaration on the Right of Indigenous Peoples (the UN Declaration)
based on lasting reconciliation, healing, and cooperative relations. On June 21, 2023, the United Nations Declaration
Act Action Plan (the Action Plan), developed in consultation with Indigenous peoples from across Canada, was
released. The implementation of the UNDRIP Act and the Action Plan will contribute to the Government of Canada’s
continued efforts to break down barriers, combat systemic racism and discrimination, close socio-economic gaps,
and promote greater equality and prosperity for Indigenous peoples. The impact of the UNDRIP Act and the Action
Plan and how they will be implemented and interpreted as part of Canadian law is still unknown, and therefore the
Company is unable to assess the effect, if any, that any land claims, consultation requirements with Indigenous
peoples or the implementation of the UNDRIP Act and the Action Plan may have on the Company’s business;
however, the impact could have a material adverse effect on the Company’s operations.
The Company has a long history of successful partnerships with Indigenous communities with over 40 current
partnerships, however, more effort needs to be undertaken to truly engage and include Indigenous communities
into the economy. Indigenous communities throughout the areas of Canada where the Company operates have
indicated their desire for this inclusion and participation in energy infrastructure ownership.
RISK MANAGEMENT APPROACH
As this is an emerging issue, the Company continues to evaluate the risks and opportunities. It is evident to the
Company that the desire for Indigenous energy autonomy and ownership is increasing, so it is imperative that the
Company evaluates options, educates key parties on the regulatory, financial and operational risks, and determines
our stance and goals for these engagements. The Company views a proactive approach as our best strategy to
continue to be front runners in the Indigenous equity space and to outpace Government of Canada expectations.
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ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
Workforce Retention
DESCRIPTION AND CONTEXT
Should the Company face a low level of retention in its workforce, especially within critical roles, this could result in
a shortage of personnel that may hamper Company operations and negatively impact the ability of the Company to
meet its business objectives.
RISK MANAGEMENT APPROACH
The Company’s investment in our people provides an attractive environment that fosters retention. The Company
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, including compensation, benefits,
pension and employee share purchase programs, with market practice, 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
training for leaders and individual development programs for all employees. The annual performance management
program facilitates discussions on annual goals, development plans and career planning.
To promote a culture of inclusiveness we have established an active Diversity, Equity and Inclusion (DE&I) Council
and a Well-being@ATCO program, and 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, in which 90 per cent of our
employees participated in 2023. Results are reviewed to inform areas of risk and engagement action plans are
developed by leaders to address risks. As a result, the Company’s retention rates continue to be at or higher than
global benchmarks in a majority of the industries in which we operate.
Labour Relations
DESCRIPTION AND CONTEXT
Most of the Company’s business units employ members of associations or labour unions under collective
bargaining agreements. Should any developments result in a strained relationship with any of our associations and/
or labour unions and/or work interruptions involving the Company’s workforce, this could create risk for our
businesses, which may result in increased grievances, arbitrations, and/or collective bargaining, which may impede
our ability to make progress on our business agenda.
RISK MANAGEMENT APPROACH
The Company has dedicated labour relations resources which focus on resolving issues, grievances and
arbitrations. The Company ensures all Human Resources Business Partners and business leaders who manage large
in-scope employee populations attend labour relations training to provide practical day-to-day knowledge of our
collective agreements and to develop capability in the areas of performance management and investigations. The
Company is committed to early and open dialogue with our associations and labour unions regarding business
changes and employee impacts in order to maintain a mutually beneficial relationship. Two of our larger
associations, Canadian Energy Workers Association (CEWA) and Natural Gas Employees' Association (NGEA), have
collective bargaining agreements that do not provide bargaining unit employees with the right to strike and that
prohibit lock-outs by management.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
60
Litigation and Claims
DESCRIPTION AND CONTEXT
In the ordinary course of business, the Company or entities in which it has an interest may be subject to demands,
disputes, proceedings, arbitrations and/or litigation (Claims) arising out of or related to our operations and other
contractual relationships, and any such Claims may be material. Due to the nature of our operations, various types
of Claims may be raised, including, but not limited to, failure to comply with applicable laws and regulations
including health and safety, environmental damage, climate change and the impacts thereof, breach of contract,
negligence, product liability, antitrust, bribery and other forms of corruption, tax, disclosure, securities class actions,
derivative actions, patent infringement, privacy, employment matters or labour relations, personal injury, and in
relation to a cyber attack, breach or unauthorized access to the Company’s information technology and
infrastructure. Litigation is subject to uncertainty, and it is possible that Claims could result in unfavourable
judgments, decisions, fines, sanctions, monetary damages, temporary or permanent suspensions of operations, or
the inability to engage in certain transactions. In addition, unfavourable outcomes or settlements of Claims could
encourage further Claims. The Company may also be subject to adverse publicity and reputational impacts
associated with such matters, regardless of whether the Company is ultimately found liable. There is a risk that the
outcome of any such Claims may be materially adverse to the Company and/or that the Company may be required
to incur significant expenses or devote significant resources in defence of such Claims, the success of which cannot
be guaranteed.
RISK MANAGEMENT APPROACH
The Company reviews all Claims it receives, including the nature of each Claim, the amount in dispute or claimed
and the availability of insurance coverage, and allocates internal or external resources in defence of such Claims, as
it deems appropriate.
Pandemic Risk
DESCRIPTION AND CONTEXT
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/or disruptions, inflation risk, labour shortages and/or shutdowns as a result of government
regulation and prevention measures. These impacts could 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
The Company's investments in essential services are largely focused on our 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, provincial and national public health authorities in Canada and in
other jurisdictions around the world in which we operate to adjust operational requirements as needed to ensure a
coordinated approach across the Company.
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ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
OTHER FINANCIAL AND NON-GAAP
MEASURES
This MD&A contains various “total of segments measures” (as such term is defined in NI 52-112), and “non-GAAP
financial measures” (as such term is defined in NI 52-112), which are described in further detail below.
Total of Segments Measures
NI 52-112 defines a “total of segments measure” as a financial measure disclosed by an issuer that is a subtotal or
total of two or more reportable segments of an entity, is not a component of a line item disclosed in the primary
financial statements of the entity, is disclosed in the notes to the financial statements of the entity, and is not
disclosed in the primary financial statements of the entity.
Consolidated adjusted earnings (loss) and adjusted earnings (loss) for each of Structures & Logistics, ATCO
Corporate & Other, Canadian Utilities Limited, ATCO Energy Systems, ATCO EnPower and Canadian Utilities
Corporate & Other are total of segments measures, as defined in NI 52-112.
Non-GAAP Financial Measures
NI 52-112 defines a “non-GAAP financial measure” as a financial measure disclosed by an issuer that (a) depicts the
historical or expected future financial performance, financial position or cash flow of an entity, (b) with respect to its
composition, excludes an amount that is included in, or includes an amount that is excluded from, the composition
of the most directly comparable financial measure disclosed in the primary financial statements of the entity, (c) is
not disclosed in the financial statements of the entity, and (d) is not a ratio, fraction, percentage or similar
representation.
All references to capital investment, and references to adjusted earnings (loss) for each of ATCO Structures, ATCO
Frontec, Electricity Distribution, Electricity Transmission, International Electricity Operations, Total Electricity, Natural
Gas Distribution, Natural Gas Transmission, International Natural Gas Distribution, Total Natural Gas, Electricity
Generation and Storage & Industrial Water, are non-GAAP financial measures, as defined in NI 52-112.
Adjusted earnings (loss) are defined as earnings (loss) 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 (loss) 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 (loss) present earnings (loss) 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 (loss)
are presented in Note 3 of the 2023 Consolidated Financial Statements. Adjusted earnings (loss) per Class I and
Class II Share are calculated by dividing adjusted earnings (loss) by the weighted average number of shares
outstanding for the period.
Adjusted earnings (loss) are most directly comparable to earnings (loss) 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 (loss) may not be comparable to similar financial measures disclosed by other
issuers. Management’s view is that adjusted earnings (loss) are a key measure of segment earnings (loss) that are
used to assess segment performance and allocate resources and allow for a more effective analysis of operating
performance and trends. For investors, adjusted earnings (loss) may provide value as they exclude items that are
not in the normal course of business and, as such, provide insight as to earnings (loss) resulting from the issuer's
usual course of business. A reconciliation of adjusted earnings (loss) to earnings (loss) 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 (loss) attributable to Class I and Class II
Shares. Comparable total of segments measures for the same period in 2022 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 (loss) attributable to Class I and Class II Shares is presented in
this MD&A.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
62
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
include 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.
63
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
RECONCILIATION OF ADJUSTED EARNINGS
TO EARNINGS ATTRIBUTABLE TO CLASS I
AND CLASS II SHARES
Adjusted earnings (loss) are earnings (loss) 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 (loss) 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 (loss) are a key measure of segment earnings (loss) that management uses to assess segment
performance and allocate resources. It is management’s view that adjusted earnings (loss) allow a better
assessment of the economics of rate regulation in Canada and Australia than IFRS earnings (loss). Additional
information regarding this measure is provided in the Other Financial and Non-GAAP Measures section of this
MD&A.
($ millions)
2023
2022
Revenues
Adjusted earnings
(loss)
Impairment (charge)
reversal
Unrealized gains
(losses) on mark-to-
market forward and
swap commodity
contracts
Rate-regulated
activities
IT Common Matters
decision
Madeira additional
income taxes
Earnings (loss)
attributable to Class
I and Class II Shares
Three Months Ended
December 31
ATCO Ltd.
Canadian Utilities Limited
Structures
& Logistics
Neltume
Ports
ATCO
Corporate
& Other
ATCO
Energy
Systems
ATCO
EnPower
CU
Corporate
& Other
Consolidated
ATCO
Consolidated
239
241
14
4
—
—
—
—
5
2
—
—
8
—
6
8
—
—
852
902
100
100
(18)
—
89
94
9
3
—
2
33
111
974
1,107
(7)
(7)
(1)
—
102
96
(19)
2
1,221
1,348
127
110
(19)
2
—
—
—
—
1
23
24
24
—
—
—
—
—
(15)
—
(1)
4
—
—
—
—
—
—
—
5
2
—
—
—
—
—
—
—
6
8
—
(19)
(18)
(3)
(2)
—
—
60
80
—
—
—
—
—
—
—
10
5
(11)
—
—
—
—
—
—
15
(18)
(11)
(19)
(18)
(3)
(2)
—
—
85
67
(11)
(19)
(18)
(3)
(2)
(15)
—
95
81
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
64
ATCO Ltd.
Canadian Utilities Limited
Structures
& Logistics
Neltume
Ports
ATCO
Corporate
& Other
ATCO
Energy
Systems
ATCO
EnPower
CU
Corporate
& Other
Consolidated
Year Ended
December 31
ATCO
Consolidated
926
929
90
61
—
—
—
—
22
14
—
—
19
3,174
1
5
—
—
—
3,384
340
379
(22)
—
362
312
26
19
—
2
260
352
(51)
(50)
(1)
—
3,796
4,048
315
348
(23)
2
4,741
4,978
432
423
(23)
2
—
—
—
—
1
96
97
97
—
—
—
—
—
(15)
—
—
—
—
—
—
—
—
—
—
—
75
61
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
22
14
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1)
5
(1)
—
(43)
6
(11)
(8)
—
—
(5)
—
—
(14)
—
(5)
—
3
—
—
259
361
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
27
21
(36)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(36)
(43)
6
(11)
(8)
—
—
(5)
—
—
(14)
—
(5)
—
3
—
—
(36)
(43)
6
(11)
(8)
(15)
—
(5)
—
—
(14)
—
(5)
—
3
—
(1)
44
(86)
330
296
432
370
($ millions)
2023
2022
Revenues
Adjusted earnings
(loss)
Impairment (charge)
reversal
Unrealized gains
(losses) on mark-to-
market forward and
swap commodity
contracts
Rate-regulated
activities
IT Common Matters
decision
Madeira additional
income taxes
Transition of managed
IT services
AUC enforcement
proceeding
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
IMPAIRMENTS
In the fourth quarter of 2023, the Company recognized an impairment of $19 million (after-tax and non-controlling
interests) of certain computer software assets which are not expected to be used in the Company.
In the second quarter of 2023, the Company recognized an impairment of $4 million (after-tax and non-controlling
interests) relating to certain electricity generation assets in Electricity Transmission. These assets had been removed
from service as it was determined that they no longer had any remaining value.
In the fourth quarter of 2022, a reversal of impairment of $2 million (after-tax and non-controlling interests) was
recorded mainly related to a 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.
65
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
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 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 Accounting Standards 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. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
66
Rate-regulated accounting differs from IFRS Accounting Standards 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
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
Accounting Standards.
The Company recognizes
the amount receivable or
payable to customers as a
reduction in its regulatory
assets and liabilities when
collected or refunded
through future billings.
The Company recognizes
earnings when customer
rates are changed and
amounts are recovered or
refunded to customers
through future billings.
For the year ended December 31, 2023, the significant timing adjustments as a result of the differences between
rate-regulated accounting and IFRS Accounting Standards 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)
Impact of warmer temperatures (2)
Impact of inflation on rate base (4)
Settlement of regulatory decisions and other items
Distribution rate relief (5)
Other (6)
Three Months Ended
December 31
Year Ended
December 31
2023
2022
Change
2023
2022
Change
15
—
(21)
(12)
(4)
2
1
(19)
13
6
(22)
—
(12)
10
(13)
(18)
2
(6)
62
—
1
(12)
8
(8)
14
(1)
(80)
(17)
(21)
9
4
(43)
61
2
(56)
—
(34)
55
(22)
6
1
(2)
(24)
(17)
13
(46)
26
(49)
(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)
Income taxes are billed to customers when paid by the Company.
(4) The inflation-indexed portion of International Natural Gas Distribution's rate base is billed to customers through the recovery of depreciation in
subsequent years based on the actual or forecasted annual rate of inflation. Under rate-regulated accounting, revenue is recognized in the current year
for the inflation component of rate base when it is earned. Differences between the amounts earned and the amounts billed to customers are deferred
and recognized in revenues over the service life of the related asset.
(5)
(6)
67
In 2021, in response to the COVID-19 pandemic, Electricity Distribution and Natural Gas Distribution had interim rate relief for customers approved by
the AUC to hold current distribution base rates in place. Based on direction from the AUC, collection of 2021 deferred rates commenced in 2022 and for
the fourth quarter and year ended December 31, 2023, $2 million and $9 million (after-tax and non-controlling interests) (2022 - $10 million and $55
million (after-tax and non-controlling interests)) was billed to customers.
In 2022, ATCO Electric Distribution recorded a decrease in earnings of $10 million (after-tax and non-controlling interests) related to payments of
electricity transmission costs, and ATCO 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.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
IT COMMON MATTERS DECISION
Consistent with the treatment of the gain on sale in 2014 from the IT services business by the Company, financial
impacts associated with the IT Common Matters decision are excluded from adjusted earnings. The amount
excluded from adjusted earnings for the fourth quarter and year ended December 31, 2023 was $3 million and
$11 million (after-tax and non-controlling interests) (2022 - $2 million and $8 million (after-tax and non-controlling
interests)).
MADEIRA ADDITIONAL INCOME TAXES
For the years 2009 to 2016, ATCO Frontec Europa Kft, a wholly owned subsidiary of ATCO Structures & Logistics Ltd.,
had income that was attributable to Madeira, Portugal and qualified for a special tax program promoted and
administered by the Portuguese Tax Authority (PTA). In December 2023, the PTA issued income tax reassessment
notices following the European Commission's determination that the Madeira Free Trade Zone Regime III
constituted state aid that does not comply with European Union guidelines and mandated the PTA to collect taxes at
normal Portuguese tax rates for the aforementioned years. In the fourth quarter of 2023, the Company accrued
income taxes and interest of $15 million relating to the 2009-2016 reassessment notices received from the PTA.
TRANSITION OF MANAGED IT SERVICES
In the first quarter of 2023, the Company recognized additional legal and other costs of $5 million (after-tax and
non-controlling interests) related to the Wipro MSAs matter that was concluded on February 26, 2023.
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 first quarter of 2022, the Company recognized costs of
$14 million (after-tax and non-controlling interests) 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 the first quarter of 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 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 $3 million (after-tax and
non-controlling interests). Effective March 31, 2022, the Company no longer consolidates NUE as a controlled
subsidiary, and instead, accounts for its interest in NUE as an investment in joint venture using the equity method.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
68
STRUCTURES & LOGISTICS
The following tables reconcile adjusted earnings (loss) for the Structures & Logistics business unit to the directly
comparable financial measure, earnings attributable (loss) to Class I and Class II shares.
($ millions)
2023
2022
Adjusted earnings (loss)
Madeira additional
income taxes
Earnings (loss) attributable to Class I and Class II Shares
Three Months Ended
December 31
ATCO Ltd.
Structures
Frontec
Structures
& Logistics
16
7
—
—
16
7
(2)
(3)
(15)
—
(17)
(3)
14
4
(15)
—
(1)
4
($ millions)
2023
2022
Adjusted earnings
Madeira additional
income taxes
Earnings (loss) attributable to Class I and Class II Shares
Year Ended
December 31
ATCO Ltd.
Structures
Frontec
Structures
& Logistics
89
54
—
—
89
54
1
7
(15)
—
(14)
7
90
61
(15)
—
75
61
69
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
ATCO Energy Systems
The following tables reconcile adjusted earnings for the ATCO Energy Systems business unit to the directly
comparable financial measure, earnings attributable to Class I and Class II Shares.
($ millions)
2023
2022
Adjusted
earnings
Impairment
Rate-regulated
activities
IT Common
Matters decision
Earnings
attributable to
Class I and
Class II Shares
($ millions)
2023
2022
Adjusted earnings
Impairment
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
Three Months Ended
December 31
Canadian Utilities Limited
Electricity
Natural Gas
Electricity
Distribution
Electricity
Transmission
International
Electricity
Consolidated
Electricity
Natural Gas
Distribution
Natural Gas
Transmission
International
Natural Gas
Consolidated
Natural Gas
ATCO
Energy
Systems
23
17
(6)
—
(4)
(11)
—
(1)
13
5
19
19
—
—
(3)
(4)
(1)
—
15
15
7
6
—
—
—
—
—
—
7
6
49
42
(6)
—
(7)
(15)
(1)
(1)
32
34
(12)
—
(3)
14
(2)
(1)
35
15
26
47
12
11
—
—
(4)
(4)
—
—
8
7
7
13
—
—
(5)
(13)
—
—
2
—
51
58
100
100
(12)
(18)
—
(12)
(3)
(2)
(1)
25
54
—
(19)
(18)
(3)
(2)
60
80
Year Ended
December 31
Canadian Utilities Limited
Electricity
Natural Gas
Electricity
Distribution
Electricity
Transmission
International
Electricity
Consolidated
Electricity
Natural Gas
Distribution
Natural Gas
Transmission
International
Natural Gas
Consolidated
Natural Gas
ATCO
Energy
Systems
79
85
(6)
—
(2)
(15)
(3)
(3)
(1)
—
—
—
—
(1)
—
3
67
69
86
87
(4)
—
(22)
9
(3)
(2)
—
—
—
(14)
—
(1)
—
—
57
79
25
27
—
—
—
—
—
—
—
—
—
—
—
—
—
—
190
199
(10)
—
(24)
(6)
(6)
(5)
(1)
—
—
(14)
—
(2)
—
3
63
84
(12)
—
11
52
(5)
(2)
(1)
—
—
—
—
(2)
—
—
25
149
56
27
175
132
48
47
—
—
(7)
(6)
—
(1)
—
—
—
—
—
(1)
—
—
41
39
39
49
—
—
(23)
(34)
—
—
(3)
—
—
—
—
—
—
—
150
180
340
379
(12)
(22)
—
—
(19)
(43)
12
6
(5)
(3)
(4)
—
—
—
(11)
(8)
(5)
—
—
(14)
—
—
(3)
(5)
—
—
—
3
13
110
259
15
186
361
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
70
ATCO EnPower
The following tables reconcile adjusted earnings for the ATCO EnPower business unit to the directly comparable
financial measure, earnings attributable to Class I and Class II shares.
($ millions)
2023
2022
Adjusted earnings (loss)
Impairment reversal
Unrealized gains on mark-to-market forward
and swap commodity contracts
Earnings attributable to Class I and Class II Shares
($ millions)
2023
2022
Adjusted earnings
Impairment reversal
Unrealized gains on mark-to-market forward
and swap commodity contracts
Earnings attributable to Class I and Class II Shares
Three Months Ended
December 31
Canadian Utilities Limited
Electricity
Generation
Storage &
Industrial Water
ATCO
EnPower
3
(2)
—
2
1
—
4
—
6
5
—
—
—
—
6
5
9
3
—
2
1
—
10
5
Canadian Utilities Limited
Year Ended
December 31
Electricity
Generation
Storage &
Industrial Water
ATCO
EnPower
10
2
—
2
1
—
11
4
16
17
—
—
—
—
16
17
26
19
—
2
1
—
27
21
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 include
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.
71
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
($ millions)
2023
2022
Capital Investment
Capital Expenditures
in joint ventures
Business
combinations (1)
Capital Expenditures
Three Months Ended
December 31
ATCO Ltd.
Canadian Utilities Limited
Structures
& Logistics
Neltume
Ports
ATCO
Corporate
& Other
ATCO
Energy
Systems
ATCO
EnPower
CU
Corporate
& Other
Consolidated
ATCO
Consolidated
48
102
—
—
(5)
(42)
43
60
—
—
—
—
—
—
—
—
11
5
—
—
—
—
11
5
363
385
(4)
(1)
—
—
359
384
37
64
(3)
—
—
—
34
64
1
4
—
—
—
—
1
4
401
453
(7)
(1)
—
—
394
452
460
560
(7)
(1)
(5)
(42)
448
517
(1) Business combinations refer to the Structures & Logistics acquisitions of Fire Prevention Services 2016 Ltd. in 2023 and Triple M Housing in 2022.
($ millions)
2023
2022
ATCO Ltd.
Canadian Utilities Limited
Structures
& Logistics
Neltume
Ports
ATCO
Corporate
& Other
ATCO
Energy
Systems
ATCO
EnPower
CU
Corporate
& Other
Consolidated
Year Ended
December 31
ATCO
Consolidated
Capital Investment
Capital Expenditures
in joint ventures
Business
combinations (1)
Capital Expenditures
203
246
—
—
(5)
(42)
198
204
—
—
—
—
—
—
—
—
34
10
—
—
(6)
—
28
10
1,219
1,142
(6)
(5)
—
—
1,213
1,137
837
240
(7)
(6)
(691)
—
139
234
8
12
—
—
—
—
8
12
2,064
1,394
(13)
(11)
(691)
—
1,360
1,383
2,301
1,650
(13)
(11)
(702)
(42)
1,586
1,597
(1) Business combinations refer to the 2023 acquisition of Fire Prevention Services 2016 Ltd. in the Structures & Logistics segment, the 2023 Fresh Bites Inc.
acquisition in the ATCO Corporate & Other segment, and the 2022 Triple M Housing acquisition in the Structures & Logistics segment.
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 financial performance or financial condition of the Company, 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 2023 Consolidated
Financial Statements.
MATERIAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The Company’s material accounting estimates are described in Note 23 of the 2023 Consolidated Financial
Statements, which are prepared in accordance with IFRS. Management makes judgments and estimates that could
materially affect how policies are applied, amounts in the consolidated financial statements are reported, and
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
72
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 2023 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 2023 Consolidated Financial Statements.
ACCOUNTING CHANGES
At December 31, 2023, 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, 2023, 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 by the Company in documents filed by it under securities legislation is recorded, processed, summarized
and reported within the time periods specified in the securities legislation. The disclosure controls and procedures
also seek to assure that information required to be disclosed by the Company 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, 2023.
INTERNAL CONTROL OVER FINANCIAL REPORTING
The certification of annual filings for the year ended December 31, 2023, requires that the Company disclose in the
annual MD&A any changes in the Company’s internal controls over financial reporting (ICFR) that occurred during
the period that have materially affected, or are reasonably likely to materially affect, the Company’s ICFR. The
Company confirms that no such changes were identified in the Company’s ICFR during the period beginning on
January 1, 2023 and ending on December 31, 2023.
The Company’s ICFR 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, ICFR can provide only reasonable
assurance regarding the reliability of financial statement preparation and may not prevent or detect all
misstatements.
As of December 31, 2023, management evaluated the effectiveness of the Company’s ICFR 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 ICFR was effective at
December 31, 2023.
73
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
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 and targets, including ESG
targets and the aspiration to achieve net zero GHG emissions by 2050; expected emissions reductions, and
decarbonization to enable customers to transition to lower emitting sources of energy while maintaining safety,
reliability and affordability; anticipated timing for the ROE rates annually; the expected timing of commencement,
completion or commercial operations of activities, contracts and projects; the expected term of contracts; the
impact or benefits of contracts, including economic and other benefits for the Company and its partners and
counterparties; expected inflation; the payment of dividends; expected growth and diversification and expansion
opportunities; the expected timing for the construction of the development of Terminal 2, Berth 7 at the Port of
Vancouver and the export capacity expected when construction is complete; the expected timing and impact of
regulatory decisions and new regulatory announcements; the expected electricity generation capacity of the
Deerfoot, Barlow and Empress solar projects; the Company’s Heartland Hydrogen Hub Project, including the
project’s potential, the Company’s continuing commitment to the project, planned design activities, anticipated
timing for a final investment decision and the Company’s plan to bring in a strategic operating partner; the expected
hydrogen production, electricity generation and hydrogen storage capacity of the facilities planned in connection
with the South Australian Hydrogen Jobs Plan project and the expected timing of the project; the expected purchase
and sale of electricity; expected carbon pricing in Canada; the Company’s liquidity, capital resources and contractual
financial obligations and other commitments; and potential financing alternatives, including the possibility of
creating ATCO EnPower as a separate entity.
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 meet its initial set of 2030 ESG
targets and 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 ESG targets; continuing collaboration with certain business partners and engagement with
new business partners, and 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, regulations and government policies; regulatory decisions; competitive factors in the industries in
which the Company operates; prevailing market and economic conditions; credit risk; interest rate fluctuations; the
availability and cost of labour, materials, services, infrastructure, and future demand for resources; the
development and execution of projects; prices of electricity, natural gas, natural gas liquids, and renewable energy;
the development and performance of technology and new energy efficient products, services, and programs
including but not limited to the use of zero-emission and renewable fuels, carbon capture, and storage,
electrification of equipment powered by zero-emission energy sources and utilization and availability of carbon
offsets; potential termination or breach of contract by contract counterparties; the occurrence of unexpected events
such as fires, extreme weather conditions, explosions, blow-outs, equipment failures, transportation incidents, and
other accidents or similar events, global pandemics; and geopolitical tensions and wars; 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 the “Business Risks and Risk Management” section in this MD&A.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
74
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
Additional information relating to the Company, including the Company’s 2023 Consolidated Financial Statements
and most recent Annual Information Form dated February 28, 2024, can be found on SEDAR+ at www.sedarplus.ca.
Copies of these documents may also 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.
Corporate information is also available on the Company's website at www.atco.com.
75
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
GLOSSARY
Alberta Utilities means Electricity Distribution,
Electricity Transmission, Natural Gas Distribution and
Natural Gas Transmission.
AUC means the Alberta Utilities Commission.
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.
COS means Cost of Service.
Customer contributions are non-refundable cash
contributions made by customers for certain additions
to property, plant and equipment, mainly in ATCO
Energy Systems. 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.
GRA means general rate application.
GTA means general tariff application.
IFRS means International Financial Reporting
Standards.
I-X means the Inflation Adjuster (I Factor) minus
Productivity Adjuster (X Factor).
K Bar means the AUC allowance for capital additions
under PBR.
LNG means liquefied natural gas.
Megawatt (MW) is a measure of electric power equal
to 1,000,000 watts.
Megawatt Hour (MWh) is a measure of electricity
consumption equal to the use of 1,000,000 watts of
electricity over one-hour period.
O&M means operating and maintenance.
PBR means Performance Based Regulation.
PPA means Power Purchase Agreement.
Regulated Utilities means Electricity Distribution,
Electricity Transmission, Natural Gas Distribution,
Natural Gas Transmission and International Natural
Gas Distribution.
FWI means Fixed Weighted Index of average hourly
earnings for all employees, by industry, monthly.
ROE means return on equity.
USD means United States dollars.
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
76
APPENDIX 1
FOURTH QUARTER FINANCIAL
INFORMATION
Financial information for the three months ended December 31, 2023 and 2022 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
Derivative financial instruments gains (losses)
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
77
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
Three Months Ended
December 31
2023
2022
1,221
1,348
(170)
(74)
(73)
(31)
(56)
(128)
(234)
(70)
(20)
74
(87)
(869)
5
21
378
17
(130)
(113)
265
(67)
198
95
103
198
$0.85
$0.85
(158)
(69)
(86)
(55)
(87)
(145)
(195)
(84)
(18)
(65)
(117)
(1,079)
2
24
295
18
(115)
(97)
198
(38)
160
81
79
160
$0.72
$0.71
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
2023
2022
198
366
(19)
545
160
361
175
696
Investing activities
Additions to property, plant and equipment
(399)
(469)
Proceeds on disposal of property, plant and equipment
Additions to intangibles
Acquisition, net of cash acquired
Investment in marketable securities
Changes in non-cash working capital
Other
2
(43)
—
(4)
(8)
28
3
(44)
(41)
—
5
(4)
Cash Flows used in investing activities
(424)
(550)
Financing activities
Net repayment of short-term debt
Issue of long-term debt
Repayment of long-term debt
Repayment of lease liabilities
Net purchase of Class I Shares
Dividends paid to Class I and Class II Share owners
Dividends paid to non-controlling interests
Interest paid
Other
Cash flows used in financing activities
Decrease in cash position
Foreign currency translation
Beginning of period
End of period
—
376
(435)
(8)
(44)
(53)
(74)
(134)
(38)
(410)
(289)
(2)
579
288
(19)
151
(258)
(5)
(1)
(53)
(71)
(123)
1
(378)
(232)
(4)
1,269
1,033
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
78
79
ATCO LTD. 2023 MANAGEMENT'S DISCUSSION & ANALYSIS
ATCO LTD.
CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2023
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 80
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. Marketable Securities ....................................................................................................................................................................
10.
Inventories .......................................................................................................................................................................................
11. Property, Plant and Equipment ...................................................................................................................................................
12.
Intangibles ........................................................................................................................................................................................
13. Goodwill ............................................................................................................................................................................................
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
82
83
89
90
91
92
93
94
94
95
105
106
106
107
108
109
109
110
111
112
113
116
121
122
124
19. Cash Flow Information ..................................................................................................................................................................
1
125
Risk
20. Financial Instruments ....................................................................................................................................................................
21. Risk Management ...........................................................................................................................................................................
22. Capital Disclosures .........................................................................................................................................................................
23. Material Judgments, Estimates and Assumptions ...................................................................................................................
Group Structure
6
24. Business Combinations and Other Transactions ....................................................................................................................
.
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 .........................................................................................................................................................................
127
132
136
137
140
141
143
144
146
149
151
152
152
153
81
ATCO LTD. 2023 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
February 28, 2024
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
82
Independent auditor’s report
To the Share Owners of ATCO Ltd.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of ATCO Ltd. and its subsidiaries (together, the Company) as at December 31, 2023
and 2022, 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 Accounting Standards).
What we have audited
The Company’s consolidated financial statements comprise:
•
•
•
•
•
•
the consolidated statements of earnings for the years ended December 31, 2023 and 2022;
the consolidated statements of comprehensive income for the years ended December 31, 2023 and
2022;
the consolidated balance sheets as at December 31, 2023 and 2022;
the consolidated statements of changes in equity for the years ended December 31, 2023 and 2022;
the consolidated statements of cash flows for the years ended December 31, 2023 and 2022; and
the notes to the consolidated financial statements, comprising material accounting policy information
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
Suncor Energy Centre, 111 5th Avenue South West, Suite 3100, Calgary, Alberta, Canada, T2P 5L3
T: +1 403 509 7500, F: +1 403 781 1825, ca_calgary_main_fax@pwc.com
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
83
ATCO LTD. 2023 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, 2023. 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.
How our audit addressed the key audit matter
Our approach to addressing the matter included the
following procedures, among others:
•
•
Tested how management estimated the fair value
of the Forty Mile property, plant and equipment,
which included the following:
– Read the purchase and sale agreement.
–
Involved professionals with specialized skill
and knowledge in the field of valuation to
assist in (i) evaluating the appropriateness of
management’s valuation method, (ii) testing
the underlying data used in the fair value
calculations, and (iii) assessing the
reasonableness of the RCN assumptions
used by management.
Professionals with specialized skill and
knowledge in the field of valuation were also
used to develop an independent estimate of the
fair value of the Forty Mile property, plant and
equipment to further corroborate the
reasonableness of management’s estimate, and
to compare the independent estimate to
management’s estimate.
Key audit matter
Valuation of property, plant and equipment
related to the Forty Mile wind project (Forty Mile
property, plant and equipment) acquired in a
business combination
Refer to note 11 – Property, plant and equipment,
note 23 – Material judgments, estimates and
assumptions, note 24 – Business combinations and
other transactions and note 33 – Accounting policies
to the consolidated financial statements.
On January 3, 2023, the Company acquired a
renewable energy business, which consisted of a
portfolio of wind and solar assets and projects,
including the Forty Mile wind project.
Management accounted for this transaction as a
business combination using the acquisition method.
Under this method, identifiable assets acquired and
liabilities assumed are recorded at their respective
fair values at the date of acquisition. The fair value of
the Forty Mile property, plant and equipment
makes up a significant portion of the Company’s
total acquired property, plant and equipment of $640
million.
Management applied judgment in estimating the
fair value of the Forty Mile property, plant and
equipment. To estimate the fair value, management
used the cost approach (valuation method), which
involved the use of replacement cost new (RCN)
assumptions for the property, plant and equipment
acquired.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
84
Key audit matter
How our audit addressed the key audit matter
We considered this a key audit matter due to the
judgment by management in estimating the fair
value of the Forty Mile property, plant and
equipment, including the use of RCN assumptions.
This, in turn, led to a high degree of auditor
judgment, subjectivity and effort in performing
procedures and evaluating audit evidence relating
to the RCN assumptions used by management. The
audit effort involved the use of professionals with
specialized skill and knowledge in the field of
valuation.
Assessment of unbilled revenue related to the
ATCO Energy Systems 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, 2023 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 – Material
judgments, estimates and assumptions to the
consolidated financial statements.
•
The Company had $132 million of unbilled revenue
related to the ATCO Energy Systems segment as at
December 31, 2023.
The revenue recognized by the Company from the
regulated distribution of natural gas and electricity
includes an estimate of consumption by customers
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 considered this 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.
85
ATCO LTD. 2023 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 Accounting Standards, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless management either intends to liquidate the Company or to
cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with Canadian generally accepted auditing standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these consolidated financial statements.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
86
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
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
87
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
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
February 28, 2024
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
88
CONSOLIDATED STATEMENTS
OF EARNINGS
(millions of Canadian Dollars except per share data)
Note
2023
2022
Year Ended
December 31
4
4,741
4,978
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
11, 12, 17
Franchise fees
Property and other taxes
Derivative financial instruments gains (losses)
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.
89
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
20
5
25
27
6
7
28
8
8
(644)
(295)
(264)
(126)
(261)
(471)
(811)
(290)
(79)
220
(319)
(599)
(271)
(245)
(176)
(308)
(535)
(717)
(328)
(74)
(165)
(343)
(3,340)
(3,761)
22
72
14
81
1,495
1,312
66
(500)
(434)
1,061
(242)
819
432
387
819
$3.82
$3.82
45
(436)
(391)
921
(214)
707
370
337
707
$3.25
$3.24
CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
(millions of Canadian Dollars)
Earnings for the year
Other comprehensive (loss) income, net of income taxes
Items that will not be reclassified to earnings:
Re-measurement of retirement benefits (1)
Items that are or may be reclassified subsequently to earnings:
Cash flow hedges (2)
Foreign currency translation adjustment (3)
Share of other comprehensive (loss) income in associate company (3)
Share of other comprehensive income of joint ventures (3)
Other comprehensive (loss) 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, 2023 (2022 - nil).
Net of income taxes of $38 million for the year ended December 31, 2023 (2022 - $(47) million).
Net of income taxes of nil (2022 - nil).
See accompanying Notes to Consolidated Financial Statements.
Note
2023
819
Year Ended
December 31
2022
707
15
1
(2)
20
25
27
(123)
(27)
(5)
3
(152)
(151)
668
340
328
668
146
57
3
1
207
205
912
506
406
912
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
90
CONSOLIDATED BALANCE SHEETS
(millions of Canadian Dollars)
ASSETS
Current assets
Cash and cash equivalents
Marketable securities
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
Accounts payable and accrued liabilities
Lease liabilities
Provisions and other current liabilities
Long-term debt
Non-current liabilities
Deferred income tax liabilities
Retirement benefit obligations
Customer contributions
Lease liabilities
Other liabilities
Long-term debt
Total liabilities
EQUITY
Class I and Class II Share owners' equity
Class I and Class II shares
Contributed surplus
Retained earnings
Accumulated other comprehensive income
Non-controlling interests
Total equity
Total liabilities and equity
Note
2023
2022
December 31
19
9
16
17
10
20
11
12
15
17
13
27
25
17
7
20
17
20
14
7
15
16
17
20
14
18
28
288
304
890
12
114
228
1,836
20,857
1,028
49
114
242
260
464
126
75
307
25,358
961
17
107
531
1,616
2,152
244
2,041
104
186
10,517
16,860
187
14
4,216
6
4,423
4,075
8,498
25,358
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
See accompanying Notes to Consolidated Financial Statements.
[Original signed by N.C. Southern]
[Original signed by N.M. Steinberg]
DIRECTOR
DIRECTOR
91
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Class I and
Class II
Shares
Note
Contributed
Surplus
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
Non-
Controlling
Interests
Total
(39)
4,111
(millions of Canadian Dollars)
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
December 31, 2022
Earnings for the year
Other comprehensive loss
Shares issued (3)
Sale of shares from MTIP Trust (4)
Shares purchased and cancelled
Acquisition
Dividends (1)
Share-based compensation
Changes in ownership interest in subsidiary company (2)
Other
180
8
28
28
28
18
18, 28
28
28
28
18, 28
18
24
18, 28
29
—
—
—
(1)
—
—
—
—
179
—
—
—
10
(3)
—
—
1
—
—
—
—
—
—
—
2
—
—
10
—
—
—
1
—
—
—
3
—
—
3,962
370
—
—
(22)
(211)
—
(9)
—
4,090
432
—
—
—
(64)
—
(215)
(1)
(29)
3
(211)
(308)
97
4,376
Total Equity
7,949
707
205
21
(23)
(519)
3
—
1
8,344
819
(151)
27
27
(67)
27
3,838
337
69
21
—
1
9
1
3,968
387
(59)
27
16
—
27
(318)
(533)
1
29
(3)
4
—
1
370
136
—
(23)
2
(9)
—
432
(92)
—
11
(67)
—
(215)
3
(29)
4
—
136
—
—
—
—
—
—
—
(92)
—
—
—
—
—
—
—
1
6
December 31, 2023
187
14
4,216
4,423
4,075
8,498
(1)
(2)
(3)
(4)
For the year ended December 31, 2023, dividends attributable to non-controlling interests of $318 million (2022 - $308 million) include $27 million (2022 - $20 million) of dividends paid by Canadian Utilities
Limited through the issuance of Class A shares under its dividend reinvestment program.
For the year ended December 31, 2023, changes in ownership interest in subsidiary company is related to Canadian Utilities Limited's dividend reinvestment program.
For the year ended December 31, 2023, shares issued attributable to non-controlling interests include $3 million (2022 - nil) in legal and other fees related to Canadian Utilities Limited's plan of arrangement to
exchange Class B shares with Class A shares that was completed on December 15, 2023.
For the year ended December 31, 2023, sale of shares from MTIP Trust included in non-controlling interests of $16 million (2022 - nil) is related to Canadian Utilities Limited's sale of Class A shares held in its MTIP
Trust.
See accompanying Notes to Consolidated Financial Statements.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
92
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions of Canadian Dollars)
Note
2023
2022
Year Ended
December 31
Operating activities
Earnings for the year
Adjustments to reconcile earnings to cash flows from operating activities
Changes in non-cash working capital
Cash flows from operating activities
Investing activities
Additions to property, plant and equipment
Proceeds on disposal of property, plant and equipment
Additions to intangibles
Acquisition, net of cash acquired
Proceeds on sale of ownership interest in a subsidiary company, net of cash
disposed
Investment in joint ventures
Investment in marketable securities
Changes in non-cash working capital
Other
Cash flows used in investing activities
Financing activities
Net repayment of short-term debt
Issue of long-term debt
Repayment of long-term debt
Repayment of lease liabilities
Issue of shares by subsidiary company
Net purchase of Class I Shares
Proceeds from sale of Class I shares from MTIP Trust
Proceeds from sale of shares from subsidiary's MTIP Trust
Dividends paid to Class I and Class II Share owners
Dividends paid to non-controlling interests
Interest paid
Other
Cash flows used in financing activities
Decrease in cash position (1)
Foreign currency translation
Beginning of year
End of year
19
19
24
3
27
9
19
3, 11
19
14, 19
14, 19
17
18
18
28
18
28
19
819
1,339
(193)
1,965
(1,423)
4
(142)
(691)
—
(7)
(300)
(60)
34
(2,585)
—
2,021
(1,051)
(21)
1
(67)
11
17
(215)
(291)
(485)
(43)
(123)
(743)
(2)
1,033
288
707
1,542
147
2,396
(1,435)
5
(148)
(41)
8
(8)
—
52
71
(1,496)
(206)
724
(502)
(18)
1
(23)
—
—
(211)
(288)
(426)
(4)
(953)
(53)
(2)
1,088
1,033
(1)
Cash position includes $16 million which is not available for general use by the Company (2022 - $18 million).
See accompanying Notes to Consolidated Financial Statements.
93
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2023
(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.
Effective July 1, 2023, ATCO Ltd. launched a branding initiative resulting in a change of its Utilities operating segment
to ATCO Energy Systems and its Energy Infrastructure operating segment to ATCO EnPower. ATCO Energy Systems
is the new global brand for gas and electrical utility services and ATCO EnPower is the new global brand for non-
regulated energy businesses, including renewables, clean fuels, and energy storage (see Note 3). As this is a change
in name of operating segments, there is no impact on the comparative amounts presented in the consolidated
financial statements.
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:
•
•
•
ATCO Energy Systems (previously Utilities) (electricity and natural gas transmission and distribution,
and international electricity operations);
ATCO EnPower (previously 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).
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 (IFRS Accounting Standards).
The Board of Directors (Board) authorized these consolidated financial statements for issue on February 28, 2024.
BASIS OF MEASUREMENT
The consolidated financial statements are prepared on a historic cost basis, except for marketable securities,
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.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
94
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.
USE OF JUDGMENTS AND ESTIMATES
Management makes judgments and estimates that could materially 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
material judgments, estimates and assumptions are described in Note 23.
ADOPTION OF NEW ACCOUNTING STANDARDS
In May 2023, the International Accounting Standards Board issued International Tax Reform - Pillar Two Model Rules
(Amendments to IAS 12), which amended IAS 12, Income Taxes. The amendments provide temporary relief for the
mandatory exemption in the recognition of deferred income taxes arising from the implementation of Organisation
for Economic Co-operation and Development's (OECD) Pillar Two model rules (such rules ensuring that large
multinational corporations would be subject to a minimum 15 per cent income tax rate in every jurisdiction in which
they operate). As different jurisdictions are expected to implement the OECD rules at different times, the
amendments are intended to help ensure consistency within, and comparability across, financial statements. The
amendments immediately became effective upon their issue and retrospectively in accordance with IAS 8,
Accounting Policies in Accounting Estimates and Errors.
Pillar Two model rules have not been substantively enacted in the main jurisdictions where the Company operates
(Canada, Australia, United States, Chile and Mexico). As such, the Company has adopted the temporary relief in the
amendments beginning January 1, 2023 and the adoption did not have an impact to the Company for the year
ended December 31, 2023.
The Company is actively monitoring the developments of the rules and will provide an additional update once
relevant information is known, including eligibility to qualify with the safe harbor rules, as applicable, and the
related impacts to income taxes can be reasonably estimated following their substantive enactments.
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.
95
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
The descriptions and principal operating activities of the segments are as follows:
Structures & Logistics
Canadian
Utilities
Limited
ATCO
Energy
Systems (1)
Electricity
Natural
Gas
ATCO EnPower (2)
Corporate & Other
Neltume Ports
Corporate & Other
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 ATCO Energy Systems (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 ATCO Energy Systems (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 ATCO EnPower segment includes ATCO Renewables (previously, ATCO
Power (2010)), ATCO Next Energy (previously, 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, Ontario, Australia, Mexico and Chile.
Canadian Utilities Limited Corporate & Other includes intersegment
eliminations and ATCO Energy, a retail electricity and natural gas business,
and a whole-home solution provider.
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 eighteen port facilities and five 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, Ashcor, a business engaged in the
processing and marketing of live ash and ash reclaimed from landfills, and
Fresh Bites, a business engaged in food services.
(1)
ATCO Energy Systems operating segment was previously reported as Utilities. It includes the collective results of the Electricity and the Natural Gas
operating segments. Details of the results by operating segment included in ATCO Energy Systems are disclosed below.
(2)
ATCO EnPower operating segment was previously reported as Energy Infrastructure.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
96
Results by operating segment for the year ended December 31 are shown below:
2023
Structures
Neltume Corporate
Canadian Utilities Limited
& Logistics
Ports
& Other
ATCO
Energy
Systems (1)
ATCO
EnPower
Corporate
& Other Consolidated
ATCO
Consolidated
2022
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)
926
929
—
—
926
929
(720)
(789)
(77)
(66)
—
—
6
5
(16)
(8)
119
71
(44)
(16)
75
55
90
61
1,283
1,147
198
204
—
—
—
—
—
—
—
—
—
—
22
14
—
—
—
—
22
14
—
—
22
14
22
14
454
473
—
—
19
1
3,174
3,362
—
—
19
1
7
18
(9)
(9)
—
—
—
—
(12)
(12)
5
(2)
—
1
5
(1)
5
—
—
22
3,174
3,384
(1,558)
(1,546)
(662)
(610)
—
—
50
53
(371)
(368)
633
913
(132)
(227)
501
686
340
379
279
234
83
78
362
312
(235)
(257)
(48)
(20)
—
—
16
23
(26)
(9)
69
49
(14)
(10)
55
39
26
19
343
452
(83)
(100)
260
352
(23)
(470)
(15)
(12)
—
—
—
—
(9)
6
213
(124)
(52)
38
161
(86)
(51)
(50)
3,796
4,048
4,741
4,978
—
—
3,796
4,048
(1,816)
(2,273)
—
—
4,741
4,978
(2,529)
(3,044)
(725)
(811)
(642)
(717)
—
—
66
76
(406)
(371)
915
838
(198)
(199)
717
639
315
348
22
14
72
81
(434)
(391)
1,061
921
(242)
(214)
819
707
432
423
463 20,033
2,550
575
23,158
25,358
545 19,507
1,342
1,125
21,974
24,139
28
10
1,213
1,137
139
234
8
12
1,360
1,383
1,586
1,597
(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 ATCO
Energy Systems are disclosed below.
Includes total costs and expenses, excluding depreciation, amortization and impairment expense.
Includes additions to property, plant and equipment, intangibles and $21 million of interest capitalized during construction for the year ended
December 31, 2023 (2022 - $14 million).
97
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
Results of the operating segments included in ATCO Energy Systems for the year ended December 31 are shown
below:
2023
2022
Revenues - external
Revenues - intersegment
Revenues
Operating expenses (1)
Depreciation, amortization and impairment
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)
ATCO Energy Systems
Electricity
Natural Gas
Intersegment
Eliminations
1,429
1,493
7
21
1,436
1,514
(570)
(591)
(339)
(321)
50
53
(225)
(222)
352
433
(65)
(100)
287
333
190
199
10,990
10,644
630
566
1,745
1,869
4
7
1,749
1,876
(999)
(961)
(323)
(289)
—
—
(146)
(146)
281
480
(67)
(127)
214
353
150
180
9,045
8,865
583
571
—
—
(11)
(6)
(11)
(6)
11
6
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(2)
(2)
—
—
Consolidated
3,174
3,362
—
22
3,174
3,384
(1,558)
(1,546)
(662)
(610)
50
53
(371)
(368)
633
913
(132)
(227)
501
686
340
379
20,033
19,507
1,213
1,137
(1)
(2)
Includes total costs and expenses, excluding depreciation, amortization and impairment expense.
Includes additions to property, plant and equipment, intangibles and $15 million of interest capitalized during construction for the year ended
December 31, 2023 (2022 - $12 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
2023
4,008
472
261
4,741
2022
4,187
526
265
4,978
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
98
Non-current assets
Canada
Australia
South America
Other
Total
Property, Plant
and Equipment
2023
19,006
1,460
52
339
20,857
2022
17,759
1,431
53
261
19,504
Intangible Assets
2023
1,002
17
1
8
1,028
2022
845
16
1
8
870
Other Assets (1)
2022
413
45
470
12
940
2023
430
41
453
18
942
2023
20,438
1,518
506
365
22,827
Total
2022
19,017
1,492
524
281
21,314
(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.
99
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
The reconciliation of adjusted earnings and earnings for the year ended December 31 is shown below:
Structures
Neltume
Corporate
Canadian Utilities Limited
ATCO
EnPower
Corporate
& Other Consolidated
& Logistics
Ports
& Other
90
61
22
14
—
—
—
—
—
—
—
—
(15)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
75
61
22
14
5
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1)
5
(1)
ATCO
Energy
Systems
340
379
(5)
—
—
—
(43)
6
(11)
(8)
—
—
(22)
—
—
(14)
—
(5)
—
3
—
—
26
19
—
—
(51)
(50)
—
—
1
96
—
—
—
—
—
—
—
—
2
—
—
—
—
—
—
—
—
(36)
—
—
—
—
—
—
(1)
—
—
—
—
—
—
—
—
—
259
361
27
21
44
(86)
2023
2022
Adjusted earnings
(loss)
Transition of managed IT
services
Unrealized gains (losses)
on mark-to-market
forward and swap
commodity contracts
Rate-regulated
activities
IT Common Matters
decision
Madeira additional
income taxes
Impairment (charge)
reversal
AUC enforcement
proceeding
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
Earnings attributable
to non-controlling
interests
Earnings for the year
ATCO
Consolidated
315
348
(5)
—
97
(36)
(43)
6
(11)
(8)
—
—
(23)
2
—
(14)
—
(5)
—
3
—
—
330
296
432
423
(5)
—
97
(36)
(43)
6
(11)
(8)
(15)
—
(23)
2
—
(14)
—
(5)
—
3
—
(1)
432
370
387
337
819
707
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 100
The reconciliation of adjusted earnings and earnings for the operating segments included in ATCO Energy Systems
for the year ended December 31 are shown below:
2023
2022
Adjusted earnings
Transition of managed IT services
Rate-regulated activities
IT Common Matters decision
Impairment
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
ATCO Energy Systems
Electricity
Natural Gas
190
199
(1)
—
(24)
(6)
(6)
(5)
(10)
—
—
(14)
—
(2)
—
3
149
175
150
180
(4)
—
(19)
12
(5)
(3)
(12)
—
—
—
—
(3)
—
—
110
186
Total
340
379
(5)
—
(43)
6
(11)
(8)
(22)
—
—
(14)
—
(5)
—
3
259
361
Transition of managed IT services
For the year ended December 31, 2023, the Company recognized additional legal and other costs of $5 million
(after-tax and non-controlling interests (NCI)) related to the Wipro Ltd. master service agreements matter that was
concluded on February 26, 2023. The impact was recorded in other expenses in the consolidated statements of
earnings, provisions and other current liabilities in the consolidated balance sheets, and in changes in non-cash
working capital (operating activities) in the consolidated statements of cash flows. As these costs are not in the
normal course of business, they have been excluded from adjusted earnings.
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 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 Accounting Standards 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
101 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
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.
Rate-regulated accounting differs from IFRS Accounting Standards in the following ways:
Timing Adjustment
Items
RRA Treatment
IFRS Accounting Standards
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
Accounting Standards.
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.
For the year ended December 31, the significant timing adjustments as a result of the differences between rate-
regulated accounting and IFRS Accounting Standards are as follows:
Additional revenues billed in current year
Future removal and site restoration costs (1)
Impact of colder temperatures (2)
Revenues to be billed in future years
Deferred income taxes (3)
Impact of warmer temperatures (2)
Impact of inflation on rate base (4)
Settlement of regulatory decisions and other items
Distribution rate relief (5)
Other (6)
2023
2022
62
—
(80)
(17)
(21)
9
4
(43)
61
2
(56)
—
(34)
55
(22)
6
(1)
(2)
(3)
(4)
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.
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
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 102
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 asset.
(5)
(6)
In 2021, in response to the ongoing COVID-19 Pandemic, ATCO Electric Distribution and ATCO Gas Distribution applied and received approval from the
AUC for interim rate relief for customers to hold current distribution base rates in place. Based on direction from the AUC, collection of 2021 deferred
rate amounts commenced in 2022 and for the year ended December 31, 2023, $9 million (after-tax and NCI) (2022 - $55 million (after-tax and NCI)) was
billed to customers.
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.
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 the year ended December 31, 2023 was $11 million (after-tax and NCI) (2022 -
$8 million (after-tax and NCI)).
Madeira additional income taxes
For the years 2009 to 2016, ATCO Frontec Europa Kft, a wholly owned subsidiary of ATCO Structures & Logistics Ltd.,
had income that was attributable to Madeira, Portugal and qualified for a special tax program, promoted and
administered by the Portuguese Tax Authority (PTA). Income tax rates between 4 per cent to 5 per cent were paid
and applied in those years. These rates were confirmed with binding tax rulings from both the Hungarian and
Portuguese authorities. In December 2023, the PTA issued reassessment notices following the European
Commission's (EU) determination that the Madeira Free Trade Zone Regime III constituted state aid that does not
comply with EU guidelines and mandated the PTA to collect taxes at normal Portuguese tax rates for the
aforementioned years. The reassessment notices resulted in a reduction of earnings of $15 million and was
comprised of an increase in current income taxes of $13 million (see Note 7) and additional interest expense of $2
million. As the additional taxes and interest were not in the normal course of business and were a one-time item,
they have been excluded from adjusted earnings.
Impairments
2023 Impairment charges
For the year ended December 31, 2023, impairments of $23 million (after-tax and NCI) were recognized, relating to
assets that no longer represent value to the Company.
Of these impairments, $17 million (after-tax and NCI) relates to impairments of certain computer software assets
which are not expected to be used in the business (see Note 12), and $4 million (after-tax and NCI) relates to certain
electricity generation assets in ATCO Electric Transmission which had been removed from service (see Note 11). As
the impairments are not in the normal course of business, the charges were 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 ATCO EnPower'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 leading to the extension of the
facility's power purchase agreement.
As the reversal relates to a previous impairment, it has been excluded from adjusted earnings.
Alberta Utilities Commission (AUC) enforcement proceeding
In 2022, the Company recognized costs of $14 million (after-tax and NCI) related to an AUC enforcement
proceeding. As this proceeding was 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
103 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
(after-tax and NCI) related to amounts paid and accrued. As these costs were not in the normal course of business
and were a one-time item, they have been excluded from adjusted earnings.
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 resulted in the
Company and DII each having a 50 per cent ownership interest in NUE. The sale of ownership interest resulted in a
gain on sale of $3 million (after-tax and NCI). As the gain on sale was not in the normal course of business, it was
excluded from adjusted earnings.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 104
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:
Structures
& Logistics
ATCO Energy Systems (1)
Electricity (3) Natural Gas (3)
Total
ATCO
EnPower (2)
Corporate
& Other (4), (5)
Consolidated
2023
2022
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
—
—
—
—
229
339
83
123
156
97
—
—
—
—
—
—
—
—
622
609
637
724
—
—
—
—
—
—
34
33
37
36
—
—
—
—
1,076 1,698
1,187 1,796
984
347
337 1,061
—
—
—
—
—
—
—
—
—
—
—
—
26
22
253
292
60
55
290
328
—
—
—
—
—
—
—
—
468
559
1,330
1,402
1,702 3,032
1,838 3,240
—
—
—
—
251
193
251
193
—
—
207
176
207
176
—
1
926
929
—
—
—
—
—
—
—
—
6
—
—
—
6
—
93
91
1,429
1,493
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6
—
—
—
6
—
43
31
136
122
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
80
66
80
66
114
46
53
80
—
—
167
126
8
14
—
—
8
14
24
28
—
—
—
—
—
—
—
—
—
—
—
—
—
—
329
431
—
—
329
431
—
—
26
17
—
—
26
17
—
—
—
—
—
—
7
5
362
453
1,698
1,796
984
1,061
229
339
83
123
156
97
60
55
290
328
329
431
80
66
3,909
4,296
114
46
79
97
251
193
444
336
14
14
207
176
221
190
167
156
4,741
4,978
1,745 3,174
1,869 3,362
279
234
(1)
(2)
(3)
(4)
ATCO Energy Systems operating segment was previously reported as Utilities.
ATCO EnPower operating segment was previously reported as Energy Infrastructure.
For the year ended December 31, 2023, ATCO Energy Systems segment includes $132 million of unbilled revenue (2022 - $180 million). At December 31,
2023, $132 million of the unbilled revenue is included in accounts receivable and contract assets (2022 - $180 million).
For the year ended December 31, 2023, Corporate & Other segment includes $40 million of unbilled revenue (2022 - $63 million) from retail electricity
and natural gas energy services. At December 31, 2023, $40 million of the unbilled revenue is included in accounts receivable and contract assets (2022 -
$63 million).
(5)
Includes revenues from the Corporate & Other segment in Canadian Utilities and ATCO Ltd.
105 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
Remaining performance obligations
The Company is party to performance obligations, which have a duration of more than one year, are not subject to
the Right-to-Invoice practical expedient, and do not include variable consideration which is constrained (remaining
performance obligations). At December 31, 2023, 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 (2022 - $0.8 billion). The remaining duration of the agreement is 31 years. The
Company expects that approximately 2 per cent of the amount will be recognized as revenue during the
year ending December 31, 2024, 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 $0.4 billion (2022 - $0.3 billion). The remaining duration of the contracts range between 5 to
24 years. The Company expects that approximately 20 per cent of the amount will be recognized as
revenue during the year ending December 31, 2024; 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 (2022 - $0.1 billion). The remaining duration of
the contracts range between 1 to 2 years. The Company expects that approximately 77 per cent will be
recognized as revenue during the year ending December 31, 2024.
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, 2023, other costs and expenses also included income from emission credits and allowances of $17
million (2022 - nil). For the year ended December 31, 2022, other costs and expenses included expenses related to
the AUC Enforcement proceeding of $28 million and gain on sale of ownership interest in a subsidiary company of
$7 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
Short-term debt
Retirement benefits net interest expense (Note 15)
Amortization of deferred financing charges
Interest expense on lease liabilities (Note 17)
Other
Less: interest capitalized (Notes 11, 12)
2023
474
23
7
7
4
6
521
(21)
500
2022
417
11
7
4
3
8
450
(14)
436
Borrowing costs capitalized to property, plant and equipment and intangibles during 2023 were calculated by
applying a weighted average interest rate of 4.71 per cent (2022 - 3.93 per cent) to expenditures on qualifying
assets.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 106
7. INCOME TAXES
INCOME TAX EXPENSE
The income tax rate for 2023 is 23.0 per cent (2022 - 23.0 per cent).
The components of income tax expense for the year ended December 31 are summarized below.
2023
2022
Current income tax expense
Canada
Australia
United States
Portugal
Chile
Puerto Rico
Other
Adjustment in respect of prior years
Deferred income tax expense
Reversal of temporary differences
Adjustment in respect of prior years
19
17
—
13
(2)
5
1
(7)
46
200
(4)
196
242
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
Previously unrecognized deferred income taxes
Investment tax credit
Retroactive foreign tax rate change
Other
1,061
244
(20)
9
2
7
(6)
(2)
13
(5)
242
2023
%
23.0
(1.9)
0.9
0.2
0.7
(0.6)
(0.2)
1.2
(0.5)
22.8
921
212
(20)
8
8
6
1
—
—
(1)
214
39
15
2
—
(1)
1
—
(3)
53
158
3
161
214
2022
%
23.0
(2.3)
0.9
0.9
0.7
0.1
—
—
(0.1)
23.2
INCOME TAX ASSETS AND LIABILITIES
Income tax assets and liabilities in the consolidated balance sheets at December 31 are summarized below.
Balance Sheet Presentation
2023
2022
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
55
75
130
23
2,152
2,175
35
64
99
13
1,843
1,856
107 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
DEFERRED INCOME TAXES
The changes in deferred income tax assets are as follows:
Movements
December 31, 2021
Credit (charge) to earnings
Credit (charge) to other comprehensive
income
Other
December 31, 2022
(Charge) credit to earnings
Credit to other comprehensive income
Foreign exchange adjustment
Other
December 31, 2023
Property,
Plant and
Equipment
Intangibles Reserves
Tax Loss Carry
Forwards and
Tax Credits
(2)
—
—
—
(2)
—
—
—
—
—
—
—
—
—
(1)
—
—
—
(6)
9
3
—
6
(4)
—
—
—
(2)
(1)
2
47
(8)
—
—
39
14
—
1
—
54
Retirement
Benefit
Obligations Other
10
1
—
5
(1)
—
10
(3)
1
—
—
8
—
6
11
8
—
1
(6)
14
Total
54
2
2
6
64
14
1
2
(6)
75
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, 2021
Charge (credit) to earnings
Charge (credit) to other
comprehensive income
Acquisition (Note 24)
Foreign exchange adjustment
Other
December 31, 2022
Charge (credit) to earnings
Charge (credit) to other
comprehensive income
Acquisition (Note 24)
Foreign exchange adjustment
Other
December 31, 2023
Property,
Plant and
Equipment
Tax Loss Carry
Forwards and
Tax Credits
Intangibles Reserves
105
18
(25)
(10)
1,762
158
—
—
2
(13)
1,909
194
—
135
(3)
—
—
6
—
(1)
128
4
—
13
—
—
2,235
145
51
(1)
—
—
15
53
(60)
(4)
—
—
4
Retirement
Benefit
Obligations Other
(80)
1
Total
(49) 1,624
15 163
(2)
—
—
—
(81)
(3)
1
—
—
—
(83)
—
—
1
49
6
2
(1)
13
(20) 1,843
5 210
22
(37)
1 145
(2)
1
(7)
(5)
4 2,152
(89)
(19)
—
—
—
—
(108)
(43)
—
—
—
(2)
(153)
The Company does not expect any of its deferred income tax liabilities to reverse within the next twelve months.
At December 31, 2023, the Company had $786 million of non-capital tax losses and credits which expire between
2024 and 2042 and $162 million of tax losses which do not expire. The Company recognized deferred income tax
assets of $207 million for these losses and credits.
The Company had $119 million of aggregate temporary differences for investments in subsidiaries, branches and
joint ventures for which deferred income tax liabilities were not recognized (2022 - $109 million). The Company had
$141 million of aggregate temporary differences for which no deferred tax assets were recognized (2022 - $123
million).
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 held in the mid-term incentive plan (MTIP) Trust on the weighted average Class I and Class II Shares
outstanding. In May 2023, all of the shares held in the MTIP Trust were sold (see Note 18).
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 108
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 shares held in MTIP Trust
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. MARKETABLE SECURITIES
2023
2022
113,216,263 113,957,680
65,188
96,590
60,868
250,772
113,378,041 114,269,320
819
(387)
432
$3.82
$3.82
707
(337)
370
$3.25
$3.24
In February 2023, the Company commenced investing in marketable securities with the objective of delivering
competitive returns and maintaining a high degree of liquidity. Marketable securities at December 31, 2023 are
comprised of:
Corporate bonds and debentures
Private fixed income funds
Bank loans and commercial mortgage funds
2023
125
102
77
304
The marketable securities are initially measured at cost and are subsequently measured at fair value through profit
or loss (FVTPL). For the year ended December 31, 2023, realized gains of $10 million were recognized in interest
income and unrealized gains of $4 million, resulting from fair value changes, were recognized in other costs and
expenses in the consolidated statements of earnings.
10. 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)
Emission credits and allowances (Note 5)
2023
2022
37
32
20
8
17
114
16
29
24
11
—
80
(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, 2023, inventories (excluding emission credits and allowances) of $239 million
were used in operations and recognized in costs and expenses in the consolidated statements of earnings (2022 -
$256 million).
Inventories with a carrying value of $33 million were pledged as security for liabilities at December 31, 2023 (2022 -
$15 million).
109 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
11. 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
Generation &
Storage (1)
Land and
Buildings
Construction
Work-in-
Progress
Rental
Assets
Other
Total
Cost
December 31, 2021
21,771
500
1,062
445
718
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
58
693
(123)
(111)
—
4
—
—
102
(5)
—
—
11
5
9
16
(5)
(8)
—
1
—
1,195
190
7 1,459
(861)
(10)
4
46
—
(75)
(30)
(248)
(2)
—
3
—
—
17
(5)
(126)
2
6
2
42
5
—
—
—
December 31, 2022
22,292
613
1,075
770
854
929 26,533
Additions
Transfers
Retirements and disposals
Acquisition (Note 24)
Foreign exchange rate adjustment
Changes to asset retirement costs
55
1,110
(104)
—
(32)
—
47
211
—
640
12
25
4
18
(7)
—
(1)
1,158
176
18 1,458
(1,401)
8
54
—
(2)
(48)
(39)
(200)
—
—
—
(1)
(11)
(3)
—
—
—
—
640
(36)
25
December 31, 2023
23,321
1,548
1,089
524
979
959 28,420
Accumulated depreciation
December 31, 2021
Depreciation
Retirements and disposals
Sale of ownership interest in
subsidiary company (Note 3)
Foreign exchange rate adjustment
5,478
184
238
500
(111)
(52)
1
15
(5)
—
3
24
(2)
(3)
—
December 31, 2022
5,816
197
257
Depreciation and impairment
Retirements and disposals
Foreign exchange rate adjustment
December 31, 2023
Net book value
December 31, 2022
December 31, 2023
526
(99)
(6)
40
—
3
24
(7)
—
6,237
240
274
—
—
—
—
—
—
—
—
—
—
256
452 6,608
46
60
645
(32)
(29)
(179)
—
3
(2)
5
(57)
12
273
486 7,029
54
62
706
(25)
(37)
(168)
(4)
3
(4)
298
514 7,563
16,476
17,084
416
1,308
818
815
770
524
581
443 19,504
681
445 20,857
(1)
Energy Generation & Storage property, plant and equipment was previously reported as Energy Infrastructure property, plant and equipment.
The additions to property, plant and equipment included $15 million of interest capitalized during construction for
the year ended December 31, 2023 (2022 - $9 million).
PIONEER NATURAL GAS PIPELINE
On February 25, 2022, ATCO Gas and Pipelines Ltd., a wholly owned subsidiary of CU Inc., closed a transaction to
transfer a 30 kilometer segment of the Pioneer Natural Gas Pipeline to Nova Gas Transmission Ltd. for $63 million.
The proceeds from sale are included in other investing activities in the consolidated statements of cash flows.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 110
IMPAIRMENT
In 2023, the Company recognized an impairment of $8 million related to certain electricity generation assets in
ATCO Electric Transmission. These assets had been removed from service and it was determined that they no
longer had any remaining value. The assets were derecognized from property, plant and equipment on the
consolidated balance sheet and the impairment was charged to depreciation, amortization and impairment
expense in the consolidated statement of earnings.
12. 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, 2021
Additions
Transfers
Acquisition (Note 24)
Retirements
Sale of ownership interest in subsidiary
company (Note 3)
Foreign exchange rate adjustment
December 31, 2022
Additions
Acquisition (Note 24)
Transfers
Retirements
Related party transfer
Foreign exchange rate adjustment
December 31, 2023
Accumulated amortization
December 31, 2021
Amortization
Retirements
Foreign exchange rate adjustment
December 31, 2022
Amortization and impairment
Retirements
December 31, 2023
Net book value
December 31, 2022
December 31, 2023
459
15
69
—
(40)
(1)
(1)
501
10
—
44
(45)
(1)
—
509
255
52
(40)
(1)
266
53
(45)
274
235
235
437
—
21
—
—
(1)
—
457
—
—
18
—
—
—
156
139
(93)
—
—
(2)
—
200
138
46
(74)
(33)
—
—
60
—
3
28
(1)
—
—
90
2
61
12
(1)
1
1
1,112
154
—
28
(41)
(4)
(1)
1,248
150
107
—
(79)
—
1
475
277
166
1,427
65
5
—
—
70
6
—
76
387
399
—
—
—
—
—
33
(33)
—
200
277
40
3
(1)
—
42
8
(1)
49
360
60
(41)
(1)
378
100
(79)
399
48
117
870
1,028
The additions to intangibles include interest capitalized during construction of $6 million for the year ended
December 31, 2023 (2022 - $5 million).
IMPAIRMENTS
For the year ended December 31, 2023, impairments of $33 million were recorded in respect of certain computer
software projects in construction work-in-progress. The charge represents computer software project costs,
primarily in ATCO Energy Systems which no longer have any value to the Company. The assets were derecognized
111 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
from intangible assets on the consolidated balance sheet and the impairment was charged to depreciation,
amortization and impairment expense in the consolidated statement of earnings.
13. GOODWILL
The carrying value of goodwill for the ATCO Energy Systems, ATCO EnPower, and Structures & Logistics segments at
December 31 is shown below.
ATCO Energy Systems, Electricity (1)
ATCO Energy Systems, Natural Gas (1)
ATCO EnPower (2)
Structures & Logistics (3)
Corporate & Other
Carrying value
2023
38
33
141
26
4
242
2022
38
33
—
18
—
89
(1)
(2)
(3)
ATCO Energy Systems operating segment was previously reported as Utilities.
ATCO EnPower operating segment was previously reported as Energy Infrastructure. On January 3, 2023, ATCO Renewables Ltd. (previously, ATCO Power
(2010) Ltd.), a wholly subsidiary of Canadian Utilities Limited, recorded goodwill of $141 million on the acquisition of a portfolio of wind and solar assets
and projects from Suncor Energy Inc. (see Note 24).
On December 7, 2022, ATCO Structures & Logistics Ltd., a subsidiary of the Company, recorded goodwill of $16 million on the acquisition of a 100 per
cent ownership interest in Triple M Housing Ltd. (see Note 24).
ATCO Energy Systems, Electricity and Natural Gas segments
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.
The Company used average enterprise value-to-earnings before interest, taxes, depreciation, and amortization
(EBITDA) multiples of 9.0 and 10.5 (2022 - 11.3 and 11.7) and price-to-earnings values of 14.0 and 17.9 (2022 - 21.3
and 19.7) for the Electricity and Natural gas segments, respectively, to calculate fair value less costs of disposal. The
fair value measurement inputs are categorized in Level 3 of the fair value hierarchy.
At December 31, 2023 and 2022, each segment’s fair value less costs of disposal was compared to its carrying value
and was sufficient to support the carrying value of allocated goodwill.
ATCO EnPower, ATCO Renewables Ltd. CGU
The recoverable amount of goodwill is measured based on the cash generating unit's (CGU) fair value less costs of
disposal, which is calculated using the CGU's EBITDA, enterprise value multiples specific to the CGU's asset base on
the purchase price, and estimated costs of disposal.
The Company used an enterprise value-to-EBITDA multiple of 12.6 to calculate fair value less costs of disposal. The
fair value measurement inputs are categorized in Level 3 of the fair value hierarchy.
At December 31, 2023, the CGU's fair value was sufficient to support the carrying value of its goodwill.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 112
14. LONG-TERM DEBT
Long-term debt outstanding at December 31 is as follows:
Corporate long-term debt
CU Inc. debentures - unsecured
CU Inc. other long-term obligation, due June 2025 - unsecured (2)
Canadian Utilities Limited debentures, 4.851%, due June 2052 -
unsecured
Canadian Utilities Limited non-revolving credit facility, at CDOR
rates, due July 2024 - unsecured
Canadian Utilities Limited extendible revolving credit facility, at
CORRA rates, due November 2025 - unsecured
ATCO Ltd. extendible revolving credit facility, at CORRA rates, due November
2025 - unsecured
ATCO Ltd. fixed-to-floating rate subordinated notes, due November 2078 -
unsecured
Subsidiaries and project finance long-term debt
ATCO Power Australia (Karratha) Pty Ltd non-revolving credit facility, payable in
Australian dollars, at BBSY rates, due June 2025, $39 million AUD (2022 - $45
million AUD)
ATCO Gas Australia Pty Ltd revolving credit facility, payable in Australian dollars,
at BBSY rates, due August 2026, $350 million AUD (2022 - $350 million AUD) -
unsecured
ATCO Gas Australia Pty Ltd revolving credit facility, payable in Australian dollars,
at BBSY rates, due August 2024, $362 million AUD (2022 - $362 million AUD) -
unsecured
Electricidad del Golfo, S. de R.L. de C.V. non-revolving credit facility, payable in
Mexican pesos due November 2025, $335 million MXP (2022 - $335 million
MXP)
ATCO Next Energy Ltd. and ATCO Renewables Ltd. extendible revolving credit
facility, at Canadian prime rates or CORRA, due December 2025 (6)
ATCO Adelaide Wind Holdings Limited Partnership amortizing non-revolving
credit facility, at CDOR, due December 2034
Deerfoot Barlow Solar Limited Partnership amortizing non-revolving credit
facility, due June 2049
Forty Mile Granlea Wind Limited Partnership amortizing debentures, due
September 2033 to June 2046
ATCO Investments Ltd. mortgage, at BA rates, due March 2028
Effective
Interest Rate
2023
2022
4.369% (2022 - 4.397%) (1)
8,765 8,525
6.95% (2022 - 6.45%)
7
7
4.899% (2022 - 4.899%)
250
250
Floating (3)
68
Floating (3)
268
—
—
Floating (7)
84
84
5.50% (4)
200
200
9,642 9,066
Floating (3), (5)
35
42
Floating (3), (5)
327
322
Floating (3), (5)
316
334
11.31%
Floating (3)
Floating (3), (5)
3.00%
5.963% (1)
Floating (5)
27
94
88
56
292
85
23
88
—
—
—
88
ATCO Structures & Logistics Ltd. revolving credit facility, at Canadian prime rates
or SOFR rates, due August 2025
Floating (7)
86
114
ATCO Structures & Logistics Pty credit facility, payable in Australian dollars, at
BBSY rates, due July 2025, $37 million AUD (2022 - $38 million AUD)
Floating (7)
33
35
ATCO Sabinco S.A. credit facility, payable in Chilean pesos, at SOFR rates, due
August 2025, $17 billion CLP (2022 - $17 billion CLP)
Floating (7)
26
27
Total Corporate, Subsidiaries and Project Finance long-term debt
Less: deferred financing charges
Less: amounts due within one year
113 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
1,465 1,073
11,107 10,139
(59)
(52)
11,048 10,087
(531)
(109)
10,517 9,978
CORRA - Canadian Overnight Repo Rate Average BBSY - Bank Bill Swap Benchmark Rate CDOR - Canadian Dollar Overnight Rate
BA - Bankers’ Acceptance SOFR - Secured Overnight Financing Rate
(1) Interest rate is the average effective interest rate weighted by principal amounts outstanding.
(2)
(3)
(4)
(5)
(6)
(7)
In 2023, the expiry date of the CU Inc. other long-term obligation was extended from June 2024 to June 2025.
During 2023, the above interest rates had additional margin fees at a weighted average rate of 0.94 per cent (2022 - 1.43 per cent). The margin fees are
subject to escalation.
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.
Floating interest rates have been partially or completely hedged with interest rate swaps (see Note 20).
In December 2023, ATCO Energy Solutions Ltd. and ATCO Power (2010) Ltd. were renamed to ATCO Next Energy Ltd. and ATCO Renewables Ltd.,
respectively.
During 2023, the above interest rate had an additional margin fees at a weighed average of 1.19 per cent (2022 - 2.60 per cent). The margin fees are
subject to escalation.
CORPORATE LONG-TERM DEBT ISSUANCES AND REPAYMENTS
CU Inc.
On September 20, 2023, CU Inc., a wholly owned subsidiary of Canadian Utilities Limited, issued $340 million of
5.088 per cent debentures maturing on September 20, 2053 (2022 - On September 14, 2022, CU Inc. issued $210
million of 4.773 per cent debentures maturing on September 14, 2052).
On May 1, 2023, CU Inc., repaid $100 million of 9.4 per cent debentures (2022 - On April 1, 2022, CU Inc. repaid $125
million of 9.92 per cent debentures).
Canadian Utilities Limited
On January 3, 2023, Canadian Utilities Limited entered into a non-revolving credit facility with a syndicate of lenders
consisting of two $355 million tranches to initially finance the acquisition of a portfolio of wind and solar assets and
projects (see Note 24). In June 2023, the first tranche was fully repaid. In December 2023, the second tranche was
partially repaid. The remaining balance on the second tranche of $68 million at December 31, 2023 will mature on
July 3, 2024 and bears interest at CDOR plus an applicable margin.
On June 30, 2023, Canadian Utilities Limited issued $268 million of long-term debt from an existing extendible
revolving credit facility with a syndicate of lenders. The facility matures on November 30, 2025 and bears interest at
CORRA plus an applicable margin.
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.
SUBSIDIARIES AND PROJECT FINANCE LONG-TERM DEBT ISSUANCES AND REPAYMENTS
Subsidiaries
On December 8, 2022, ATCO Next Energy Ltd. and ATCO Renewables Ltd., both wholly owned subsidiaries of
Canadian Utilities Limited, entered into a $250 million extendible revolving credit facility maturing in December 2025
and a $50 million uncommitted revolving credit facility for letters of credit issuances with no set maturity date, with
a syndicate of lenders. The facility bears interest at Canadian prime rates or CORRA plus an applicable margin.
Project finance
The Company generally maintains ownership and active management of contracted assets, such as electricity
generation and energy storage assets. Project finance debt, is commonly used to finance contracted assets using
the assets and underlying long-term contracts as support for repayment of the financing.
On May 25, 2023, ATCO Adelaide Wind Holdings Limited Partnership, an indirect wholly owned subsidiary of
Canadian Utilities Limited, entered into a limited recourse non-revolving amortizing credit facility of $90 million with
a bank lender (Adelaide Wind Project Finance Debt). The Adelaide Wind Project Finance Debt amortizes quarterly
until December 2034 and bears interest at CDOR plus an applicable margin.
On July 7, 2023, Deerfoot Barlow Solar Limited Partnership, an indirect 49 per cent subsidiary of Canadian Utilities
Limited, entered into a $78 million limited recourse non-revolving amortizing credit facility with a bank lender
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 114
(Deerfoot Barlow Solar Project Finance Debt). The amortizing credit facility bears a fixed interest rate of 3.00 per
cent with quarterly repayments and matures on September 30, 2048.
On December 4, 2023, Forty Mile Granlea Wind Limited Partnership, an indirect wholly owned subsidiary of
Canadian Utilities Limited, issued limited recourse amortizing debentures through a private placement consisting of
$108 million of 5.555 per cent Series A debentures maturing on September 30, 2033, $159 million of 6.223 per cent
Series B debentures and $25 million of 6.072 per cent of Series C debentures each of which mature on June 30, 2046
(collectively, Forty Mile Wind Project Finance Debt). Series A and Series C debentures require quarterly principal and
interest repayments. Series B debentures only require quarterly interest payments until Series A's principal amount
is fully paid.
The proceeds received from the Adelaide Wind Project Finance and Forty Mile Wind Project Finance Debt issuances
were used to pay a portion of Canadian Utilities Limited's non-revolving credit facility that was used to finance the
acquisition of wind and solar assets and projects.
PLEDGED ASSETS
Subsidiaries
The ATCO Next Energy Ltd. and ATCO Renewables Ltd. credit agreement is secured by their present and future
properties, assets, and equity interests in certain subsidiaries and joint ventures.
The ATCO Investments Ltd. mortgage is secured by certain real estate assets it holds.
The ATCO Structures & Logistics Ltd. credit facility is secured by a general assignment of its present and future
properties, assets, undertakings, and equity interests in certain subsidiaries and joint ventures.
At December 31, 2023, the book value of assets pledged to maintain the subsidiaries' credit facilities was
$1,857 million (2022 - $1,574 million).
Project finance
The ATCO Power Australia (Karratha) Project Finance Debt is secured by certain assets of the Karratha power
generation facility and an assignment of certain contracts and agreements. A guarantee has also been provided by
Canadian Utilities Limited to the lender. The Karratha power generation facility is accounted for as a finance lease
(see note 17).
The Adelaide Wind Project Finance Debt is secured by a pledge of Canadian Utilities Limited's partnership interest in
ATCO Adelaide Wind Holdings Limited Partnership.
The Deerfoot Barlow Solar Project Finance Debt is secured by the assets of the Deerfoot and Barlow solar
generation facilities and a pledge of Canadian Utilities Limited's partnership interest in Deerfoot Barlow Solar
Limited Partnership.
The Forty Mile Wind Project Finance Debt is secured by the assets of the Forty Mile wind generation facility and a
pledge of Canadian Utilities Limited's indirect partnership interest in Forty Mile Granlea Wind Limited Partnership.
At December 31, 2023, the book value of assets pledged to maintain the project finance debts was $914 million
(2022 - $252 million).
INTEREST RATE AMENDMENTS
In 2023, agreements relating to certain Corporate long-term debt and Project Finance long-term debt that were
previously referenced to CDOR and LIBOR have been been amended to reference them to CORRA and SOFR,
respectively. The amendments were prospective, and did not have a material impact to the Company's interest
expense for the year ended December 31, 2023 as the changes to the reference rates were economically equivalent
to the previous basis.
115 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
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. 2023 CONSOLIDATED FINANCIAL STATEMENTS 116
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:
Pension
Benefit Plans
OPEB Plans
Pension
Benefit Plans
OPEB Plans
2023
2022
3,084
92
8
(144)
(603)
2,437
—
—
—
—
—
—
3,156
127
9
95
(144)
(9)
1
(564)
2,544
3
4
—
(5)
—
(37)
92
92
—
—
92
92
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
Past service cost
Actuarial losses (gains)
End of year (1)
Funded status
2,437
122
4
(148)
57
2,472
2,544
5
124
(148)
(8)
—
49
—
—
—
—
—
—
92
2
5
—
(5)
—
7
2,566
101
Net retirement benefit obligations
94
101
107
Included in net retirement benefit obligations are:
Registered funded defined benefit pension plan asset (1)
Non-registered, non-funded defined benefit pension
plans obligation (2)
OPEB Plans
(49)
143
—
94
—
—
101
101
(24)
131
—
107
(1)
(2)
The registered funded defined benefit pension plan was in an asset position of $49 million at December 31, 2023 due to the impacts of returns on plan
assets, partly offset by a decrease in liability discount rate (2022 - $24 million due to the impacts of returns on plan assets, an 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 increased to $143 million at December 31, 2023
due to a decrease in the liability discount rate and experience adjustments (2022 - decreased to $131 million due to an increase in the liability discount
rate and experience adjustments).
117 ATCO LTD. 2023 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
2023
2022
5
124
(122)
—
7
37
44
(17)
27
2
5
—
—
7
—
7
(3)
4
9
95
(92)
1
13
30
43
(16)
27
3
4
—
—
7
—
7
(3)
4
RE-MEASUREMENT OF RETIREMENT BENEFITS
Re-measurements of the pension and OPEB plans for the year ended December 31 are as follows:
Gains (losses) on plan assets from:
Return on plan assets, excluding amounts included
in net interest income
(Losses) gains on plan obligations from:
Changes in financial assumptions
Gains (losses) recognized in other
comprehensive income (1)
Pension
Benefit Plans
OPEB Plans
Pension
Benefit Plans
OPEB Plans
2023
2022
57
(49)
8
—
(7)
(7)
(603)
564
(39)
—
37
37
(1)
Gains net of income taxes were $1 million for the year ended December 31, 2023 (2022 - losses net of income taxes of $2 million).
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 118
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
2023
%
Quoted
Un-quoted
Total
2022
%
3
126
66
—
195
1,156
615
92
—
1,863
—
—
—
31
41
5
77
2,135
—
—
—
2
2
—
—
—
94
94
25
216
241
—
—
—
—
337
3
126
66
2
197
1,156
615
92
94
1,957
25
216
241
31
41
8
2
111
62
—
175
1,061
735
46
—
79
1,842
10
—
—
—
47
7
5
77
2,472
3
100
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
47
7
7
81
10
3
57
2,437
2
100
(1)
The land and building are leased by the Company.
FUNDING
In 2023, an actuarial valuation for funding purposes as of December 31, 2022 was completed for the registered
defined benefit pension plans. The estimated contribution for 2024 is $4 million. The next actuarial valuation for
funding purposes must be completed as of December 31, 2025.
119 ATCO LTD. 2023 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
2023
2022
5.28 %
2.25 %
4.65 %
2.00 %
n/a
n/a
n/a
5.28 %
n/a
4.65 %
n/a
4.95 %
4.00 %
4.00 %
3.16 %
2.25 %
5.28 %
2.00 %
n/a
n/a
n/a
3.16 %
n/a
5.28 %
n/a
5.00 %
4.00 %
4.00 %
(1)
(2)
The long-term inflation rate used to calculate the accrued benefit obligation at December 31, 2023 was 4.00 per cent for 2023, 2.20 per cent for 2024,
and 2.00 per cent thereafter (2022 - 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 4.95 per cent rate per annum (2022 - 5.00 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 10.8 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. Additionally, 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 global 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
within a portfolio that has been designed to match the interest rate risk profile of the accrued benefit obligations. As
such, 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. Conversely, a rising interest rate
environment would result in the opposite impact on the relationship between the plan's obligations and fixed
income investments.
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 plan, inflation risk is mitigated due to the indexing of benefit payments being limited under
the plans' terms and conditions.
In addition, the deferred benefit plan achieves further inflation risk mitigation by investing in Government of
Canada Real Return Bonds, and high-quality Canada real estate assets.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 120
Life expectancy
Should pensioners live longer than assumed, benefit obligations and liabilities will be larger than expected.
SENSITIVITIES
The 2023 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 %
1 %
1 %
1 %
10 %
(258)
2
309
7
64
319
(3)
(261)
(6)
(70)
5
—
9
—
2
(7)
—
(8)
—
(2)
(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
2023
855
35
890
5
895
2022
917
39
956
3
959
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
2023
920
4,580
600
—
11
2022
814
4,621
619
(1)
3
(5,251)
(5,129)
—
—
860
(6)
(1)
920
Certain additions to property, plant and equipment, mainly in ATCO Energy Systems, are made with the assistance
of non-refundable cash contributions from customers. These contributions are made when the estimated revenue
is less than the cost of providing service or where the customer needs special equipment. Since these contributions
will provide customers with on-going access to the supply of natural gas or electricity, they represent deferred
revenues and are recognized in revenues over the life of the related asset.
121 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
Changes in customer contributions balance during the year ended December 31 are summarized below.
Beginning of year
Receipt of customer contributions
Amortization
Foreign exchange rate adjustment and other
Sale of ownership interest in a subsidiary company (Note 3)
End of year
17. LEASES
THE COMPANY AS LESSEE
Right-of-use assets
2023
1,989
127
(60)
(15)
—
2022
1,870
178
(55)
5
(9)
2,041
1,989
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
2023
2022
Cost
Beginning of year
Additions
Acquisitions
Disposals
Foreign exchange rate adjustment
End of year
Accumulated depreciation
Beginning of year
Depreciation
Disposals
End of year
Net book value
Lease liabilities
24
167
20
5
(6)
(1)
185
58
19
(6)
71
134
14
25
(6)
—
167
47
17
(6)
58
114
109
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
Acquisitions
Interest expense
Lease payments
Foreign exchange rate adjustment
End of year
Less: amounts due within one year
End of year
Note
24
6
2023
115
20
5
4
(21)
(2)
121
(17)
104
2022
90
14
25
3
(18)
1
115
(16)
99
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 122
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
21
70
71
162
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
2023
15
2022
15
During the years ended December 31, 2023 and 2022, 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, 2023 and 2022, 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
2023
2022
221
(83)
138
12
126
138
25
98
98
221
12
60
66
138
271
(122)
149
11
138
149
25
101
145
271
11
55
83
149
During the year ended December 31, 2023, $2 million of contingent rent was recognized as income from these
finance leases (2022 - $2 million).
123 ATCO LTD. 2023 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
In more than five years
2023
2022
67
32
1
100
78
33
—
111
During the years ended December 31, 2023 and 2022, 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, 2021
Purchased and cancelled
Stock options exercised
Converted: Class II to Class I
December 31, 2022
Purchased and cancelled
Stock options exercised
Converted: Class II to Class I
December 31, 2023
Class I Non-Voting
Shares
300,000,000
Amount
Shares
50,000,000
Class II Voting
Amount
Shares
350,000,000
Total
Amount
101,187,649
(486,400)
15,200
652,695
101,369,144
(1,758,600)
4,900
118,447
99,733,891
188
(1)
—
—
187
(3)
1
13,196,129
—
—
(652,695)
12,543,434
—
—
2 114,383,778
(486,400)
15,200
—
—
—
—
2 113,912,578
(1,758,600)
4,900
—
—
—
(118,447)
185 12,424,987
—
—
2 112,158,878
190
(1)
—
—
189
(3)
1
—
187
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.
2023
2022
Shares
Amount
Shares
Amount
Shares issued and outstanding
112,158,878
187 113,912,578
Shares held in trust for the mid-term incentive plan
—
—
(254,021)
Shares outstanding, net of shares held in trust
112,158,878
187 113,658,557
189
(10)
179
In May 2023, the MTIP Plan was terminated. Following its termination, the Company sold all of the 259,590 Class I
Shares that were held in trust for the MTIP for proceeds of $11 million, resulting in an increase in share capital of
$10 million, and contributed surplus of $1 million, representing the after tax gain on sale. In July 2023, the MTIP
trust was closed.
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
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 124
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.
DIVIDENDS
The Company declared and paid cash dividends of $1.9024 per Class I and Class II Share during 2023 (2022 -
$1.8468). 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 11, 2024, the Company declared a first quarter dividend of $0.4898 per Class I and Class II Share,
payable on March 31, 2024 to share owners of record as of February 29, 2024.
NORMAL COURSE ISSUER BID
On March 13, 2023, ATCO Ltd. began a normal course issuer bid (NCIB) to purchase up to 1,014,881 outstanding
Class I shares. On September 26, 2023, the NCIB was amended to increase the maximum outstanding number of
Class I shares that may be purchased from 1,014,881 to 2,214,881. The bid will expire on March 12, 2024. The prior
year NCIB to purchase up to 1,011,907 outstanding Class I shares began on March 9, 2022 and expired on March 8,
2023.
During the year ended December 31, 2023, 1,758,600 Class I shares were purchased for $67 million, resulting in a
decrease to share capital of $3 million and a decrease to retained earnings of $64 million (2022 - 486,400 Class l
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).
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 (gains) 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
2023
811
(22)
16
(72)
82
242
(240)
127
(60)
434
(52)
64
9
2022
717
(14)
15
(81)
73
214
89
178
(55)
391
(42)
39
18
1,339
1,542
125 ATCO LTD. 2023 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
Prepaid expenses and other current 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, 2021
Net (repayment) issue of debt
Foreign currency translation
Debt issue costs
Amortization of deferred financing charges
December 31, 2022
Net issue of debt
Foreign currency translation
Debt issue costs
Amortization of deferred financing charges
December 31, 2023
2023
2022
44
(34)
(8)
(138)
(57)
(193)
(1)
(1)
(58)
(60)
(120)
(9)
6
281
(11)
147
7
—
45
52
Short-term
debt (1)
Long-term
debt
206
(206)
—
—
—
—
—
—
—
—
—
9,852
222
15
(6)
4
10,087
970
(2)
(14)
7
11,048
(1)
In January 2022, the Company paid the commercial paper notes that were outstanding at December 31, 2021. Commercial paper notes are supported
by the Company's long-term committed credit lines (see Note 21).
See Note 17 for the reconciliation of the changes in lease liability for the years ended December 31, 2023 and 2022.
CASH POSITION
Cash position at December 31 is comprised of:
Cash
Short-term investments
Restricted cash (1)
Cash position
2023
250
22
16
288
2022
1,012
3
18
1,033
(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. 2023 CONSOLIDATED FINANCIAL STATEMENTS 126
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, and accounts payable and
accrued liabilities.
Finance lease receivables
Long-term debt and long-term advances due from
joint venture
Measured at Fair Value
Marketable securities
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 quoted market prices for the same or similar
securities or alternative pricing sources and models with inputs
validated by publicly available market providers (Level 2).
Determined using interest rate forward rate yield curves at
year end (Level 2).
Determined using quoted forward exchange rates at
year end (Level 2).
Determined using observable year end forward curves and
quoted spot market prices with inputs validated by publicly
available market providers (Level 2).
Determined using statistical techniques to derive year end
forward curves using unobservable inputs or extrapolation
from spot or forward prices in certain commodity contracts
(Level 3).
127 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
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
2023
Fair
Value
Carrying
Value
138
33
156
32
149
33
2022
Fair
Value
185
30
Long-term debt
11,048
10,744
10,087
9,099
(1)
Long-term advances due from joint venture are recorded in prepaid expenses and other current assets, $3 million (2022 - nil), and other assets,
$30 million (2022 - $33 million), on the consolidated balance sheets.
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
Marketable securities
At December 31, 2023, the Company's marketable securities measured at fair value include investment grade
corporate bonds and debentures, private fixed income funds, and bank loans and commercial mortgage funds (see
Note 9).
Derivative financial instruments
The Company's derivative instruments are measured at fair value. At December 31, 2023 and 2022 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 power forward sale and purchase contracts for the purpose of limiting exposure to
electricity and natural gas market price movements.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 128
The balance sheet classification and fair values of the Company’s derivative financial instruments are as follows:
Recurring Measurements
December 31, 2023
Financial Assets
Prepaid expenses and other current assets
Other assets
Financial Liabilities
Provisions and other current liabilities
Other liabilities
December 31, 2022
Financial Assets
Prepaid expenses and other current assets
Other assets
Financial Liabilities
Provisions and other current liabilities
Other liabilities
Level 2
Level 3
Subject to Hedge Accounting
Subject to
Hedge
Accounting (1)
Not Subject
to Hedge
Accounting (2)
Interest
Rate Swaps
Commodities (1)
Commodities
Total Fair Value
of Derivatives
22
3
—
1
7
46
1
2
36
16
43
35
184
91
36
15
—
90
—
—
—
—
—
18
51
94
6
—
4
14
98
21
109
203
49
36
195
151
135
56
(1)
Derivative financial instruments that are subject to hedge accounting are related to Canadian Utilities Limited's renewable power purchase agreements
in its generation business (reported in ATCO EnPower operating segment, previously reported as Energy Infrastructure), and supply contracts in its retail
electricity and natural gas business (reported in Canadian Utilities Limited's Corporate & Other operating segment). In September 2023, Canadian
Utilities Limited executed a 38.5 megawatt (MW) renewable power purchase agreement with Lafarge Canada Inc. (Lafarge) on its Empress Solar project
for 12.5 years. In March 2022 and December 2022, Canadian Utilities Limited executed 37 MW and 150 MW renewable power purchase agreements,
respectively, for 15 years on its Deerfoot Solar project and Forty Mile Wind project, with Microsoft Corporation (Microsoft). Under the agreements,
Canadian Utilities Limited 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 to Lafarge and Microsoft. The energy components within these agreements were
designated as cash flow hedges for accounting purposes.
(2)
Derivative financial instruments that are not subject to hedge accounting are related to customer contracts in Canadian Utilities Limited's retail
electricity and natural gas business (reported in Canadian Utilities Limited's Corporate & Other operating segment).
The table below presents the ranges of the most significant unobservable valuation inputs that are used to value
level 3 derivative financial instruments and the increase or decrease to the fair value amount based on a 10%
increase or decrease in the inputs.
Valuation
Technique
Unobservable Input
Range (1)
Forecast pricing
model
Forward power prices - Solar
Forward power prices - Wind
Forecast
generation
volume model
Internal
forecasting
model
Electricity generation forecast
volumes - Solar
Electricity generation forecast
volumes - Wind
Retail electricity forecast
consumption
Retail natural gas forecast
consumption
2023
2022
$28.89 to $180.55 /
MWh
$31.11 - $229.76 /
MWh
$24.08 to $129.62 /
MWh
$6.10 - $161.03 /
MWh
12,967 MWhs
6,312 MWhs
46,430 MWhs
50,221 MWhs
51,604 MWhs
39,991 Mwhs
444,129 GJs
440,934 GJs
Sensitivity of Input to
Fair Value
2023
2022
11
6
35
38
2
7
8
6
1
1
11
1
(1)
Numbers are calculated based on the monthly average of the unobservable inputs.
129 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the changes in the Company's derivative financial instruments classified as Level 3 is as follows:
December 31, 2021 (1)
Settlement of derivative contracts
Losses recognized in earnings
Losses recognized in other comprehensive income
December 31, 2022 (1)
Settlement of derivative contracts
Gains recognized in earnings
Gains recognized in other comprehensive income
December 31, 2023 (1)
(1) Net financial (liabilities) assets classified as Level 3 at end of year.
Subject to Hedge
Accounting
Not Subject to
Hedge Accounting
—
—
—
(18)
(18)
(1)
3
106
90
(18)
95
(178)
—
(101)
29
211
—
139
Total
(18)
95
(178)
(18)
(119)
28
214
106
229
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
Purchased power
Derivative financial instruments (1)
Interest expense
Unrealized gains (losses)
Derivative financial instruments (1)
Total
2023
2022
Level 2
Level 3
Total
Level 2
Level 3
Total
(13)
(15)
83
9
1
—
—
—
(29)
—
65
(29)
(13)
(15)
83
(20)
1
36
(28)
16
113
—
—
—
(28)
16
113
19
(95)
(76)
—
—
120
(95)
—
25
—
65
240
211
240
276
(6)
(83)
114
(178)
(89)
(64)
(1) Realized derivative financial instruments gains (losses) and unrealized gains (losses) are included in the derivative financial instruments gains (losses) in
the consolidated statements of earnings .
Hedge ineffectiveness
Hedge ineffectiveness of an $11 million derivative financial instruments gain was recognized in the consolidated
statements of earnings during 2023 (2022 - gain of $14 million).
Changes to other comprehensive income
During the year ended December 31, 2023, unrealized losses before income taxes of $33 million were recognized in
other comprehensive income (OCI) (2022 - unrealized gains before income taxes of $281 million), and $128 million
of realized gains before income taxes were reclassified to the consolidated statements of earnings (2022 - realized
gains before income taxes of $88 million).
Over the next 12 months, the Company estimates that earnings before income taxes of $3 million will be reclassified
from accumulated other comprehensive income (AOCI) to earnings.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 130
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, 2023
Purchases (3)
Sales (3)
Currency
Canadian dollars
Australian dollars
Mexican pesos
U.S. dollars
Maturity
December 31, 2022
Purchases (3)
Sales (3)
Currency
Canadian dollars
Australian dollars
Mexican pesos
U.S. dollars
2024-2045
2024-2028
2024-2038
2024
2024-2028 2024-2028
2024
49,744,800 4,633,262
422,595 10,288,344
—
—
173
719
—
—
—
—
—
—
—
—
—
—
35,272,100 4,234,062
1,227,947 10,451,215
—
—
443
725
—
—
—
—
—
—
—
—
—
—
5
—
—
—
—
—
—
—
—
—
—
3
—
—
26,647,764 3,096,245
—
—
24,050,972 2,181,310
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
23
1
—
—
—
—
23
7
2023
Maturity
2023-2045
2023-2026
2023-2038
2023
2023-2027
2023-2027
(1)
(2)
(3)
Notional amounts for the natural gas purchase contracts are the maximum volumes that can be purchased over the terms of the contracts.
Notional amounts for the forward power sale and purchase contracts are the commodity volumes committed in the contracts.
Volumes for natural gas and power derivatives are in GJ and MWh, respectively.
OFFSETTING FINANCIAL ASSETS AND LIABILITIES
Netting arrangements and similar agreements provide counterparties the legal right to set-off liabilities against
assets received. The following financial assets and financial liabilities are subject to offsetting at December 31:
2023
Financial Assets
Derivative assets (1), (2)
Accounts receivable and contract assets
Financial Liabilities
Derivative liabilities (1), (3)
2022
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
312
55
—
(33)
85
—
346
61
—
(56)
191
—
312
22
85
346
5
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, 2023, $109 million is included in prepaid expenses and other assets, and $203 million is included in other assets in the consolidated
balance sheets (2022 - $195 million and $151 million).
At December 31, 2023, $49 million is included in provisions and other current liabilities, and $36 million is included in other liabilities in the
consolidated balance sheets (2022 - $135 million and $56 million).
131 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
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 or future cash flows of a financial instrument will fluctuate due to
changes in interest rates. Interest-bearing assets and liabilities exposed to fair value interest rate risk include
marketable securities, short-term term debt and long-term debt with fixed interest rates. Interest-bearing assets
and liabilities exposed to cash flow interest rate risk include cash and cash equivalents, bank indebtedness and
long-term debt with variable interest rates.
The Company's interest-bearing assets that are subject to fair value or cash flow interest rate risk are mitigated by
maintaining investments that deliver satisfactory returns while maintaining liquidity.
In respect of interest-bearing liabilities that are subject to fair value or cash flows interest rate risk, the Company's
risk management policy is to hedge all material interest rate risk exposures related to long-term financings when
the risk is incurred, unless commercial arrangements or mechanisms are in place to offset such interest rate risk.
The Company closely monitors market interest rates and maintains a balance between variable rate and fixed rate
borrowings in order to reduce its exposure. The Company has fixed interest rates, either directly or through interest
rate swap agreements, on 94 per cent (2022 - 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 over the next year would increase or decrease earnings by
$5 million (2022 - $1 million) and would increase or decrease OCI by $11 million (2022 - $12 million). The sensitivity
analysis is based on management’s assessment that a 100 basis point increase or decrease in interest rates is a
reasonable potential change over the next year. This analysis has been determined based on the exposure to
interest rates for financial instruments outstanding at December 31, 2023.
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 agreements
that refer to IBORs shall be modified to ensure continuity of financing arrangements and address differences
between IBORs and alternative reference rates. At December 31, 2023, the Company has transitioned certain of its
credit facilities, debt agreements, and interest rate swap agreements (see Note 14) and continues to have
discussions with its counterparties to address the remaining agreements that are exposed to the IBOR reform.
For the remaining agreements that are still to be transitioned, the Company does not expect material effects on its
consolidated financial statements.
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
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 132
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 $2 million (2022 - 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, 2023.
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 that are considered financial derivatives are significantly
influenced by the variability of forward prices.
A 10 per cent increase or decrease in the forward prices of natural gas or electricity, based on management's
assessment that an average 10 per cent increase or decrease in forward prices is a reasonable change over the next
year, would increase or decrease earnings or OCI at December 31 as follows:
Forward prices of natural gas
Forward prices of electricity
Earnings
6
22
2023
OCI
12
7
Earnings
8
23
2022
OCI
10
3
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, marketable securities,
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. Credit risk in marketable securities is mitigated by investing in investment grade
companies, instruments issued by national and local governments, and bank loans and commercial mortgages with
low default risks.
133 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
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, 2023
December 31, 2022
High
(AA to AAA)
Medium
(BBB to A)
Low
(BB and below)
0%-0.02% 0.05%-0.14%
0.45%-2.85%
0%-0.02% 0.05%-0.14%
0.46%-2.99%
At December 31, 2023, the Company had $95 million of accounts receivable and contract assets classified as Low
(BB and below) (2022 - $51 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
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
2023
11
2
(2)
11
2023
814
26
5
10
855
2022
13
4
(6)
11
2022
892
13
2
10
917
At December 31, 2023, the Company held $368 million in letters of credit for certain counterparty receivables (2022
- $606 million). The Company did not take possession of any collateral it holds as security in 2023 or 2022. 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).
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 134
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, marketable securities,
bank borrowings and issuance of long-term debt and preferred shares. Commercial paper borrowings and short-
term bank loans are also used under available credit lines to provide flexibility in the timing and amounts of long-
term financing.
Lines of credit
At December 31, the Company has the following lines of credit that enable it to obtain financing for general
business purposes:
Long-term committed
Short-term committed
Uncommitted
Total
3,063
316
692
4,071
Used
973
316
275
1,564
2023
Available
2,090
Total
3,396
Used
1,080
—
—
—
417
2,507
669
4,065
258
1,338
2022
Available
2,316
—
411
2,727
Long-term committed revolving credit facilities have maturities greater than one year. Uncommitted credit facilities
have no set maturity and the lender can demand repayment at any time.
Lines of credit utilized at December 31 are comprised of:
Long-term debt due within one year
Long-term debt
Letters of credit
Commercial paper
2023
316
899
349
1,564
2022
—
1,001
337
1,338
The Company is authorized to issue $1.2 billion of commercial paper against its long-term committed credit
facilities. At December 31, 2023 and 2022, the Company had a nil outstanding balance of commercial paper notes.
Maturity analysis of financial obligations
The table below analyzes the remaining contractual maturities at December 31, 2023 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)
2024
961
531
491
49
2,032
2025
2026
2027
2028
2029 and
thereafter
—
—
—
—
—
679
475
20
1,174
351
426
9
786
25
414
5
444
220
407
1
628
9,301
7,542
24
16,867
(1)
Interest payments on floating rate debt have been estimated using rates in effect at December 31, 2023. 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, 2023.
135 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
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, as reported in the consolidated financial statements for
the year ended December 31, 2022.
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.
22. CAPITAL DISCLOSURES
The Company’s objectives when managing capital are to:
1.
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 and 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 corporate long-term debts and credit facilities is that total debt divided by total
capitalization must be less than 75 per cent calculated at the end of each quarter. The Company defines total debt
as the sum of bank indebtedness, short-term debt and long-term debt (including its respective current portion). It
defines total capitalization as the sum of Class I and Class II shares, contributed surplus, retained earnings, AOCI,
NCI and total debt. Management maintains the debt capitalization ratio well below 75 per cent to sustain access to
cost-effective financing.
Debt capitalization does not have standardized meaning under IFRS Accounting Standards 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.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 136
The Company’s capitalization at December 31 is as follows:
Long-term debt
Class I and Class II shares
Contributed surplus
Retained earnings
Accumulated other comprehensive income
Non-controlling interests
Total equity
Total capitalization
Debt capitalization
2023
2022
11,048
10,087
187
14
4,216
6
4,075
8,498
179
10
4,090
97
3,968
8,344
19,546
18,431
57 %
55 %
Certain subsidiaries and project finance debts, included in long-term debt, are required to maintain minimum
trailing twelve month debt service and interest coverage ratios between 1.15x to 3x, calculated at the end of each
quarter. Debt service and interest coverage ratios are calculated based on earnings before interest, taxes,
depreciation and amortization (EBITDA) over interest expense, as defined in the agreements.
For the year ended December 31, 2023, the Company complied with externally imposed requirements on its capital,
including financial covenants related to long term debt, credit facilities and project financings.
23. MATERIAL JUDGMENTS, ESTIMATES AND ASSUMPTIONS
Material judgments, estimates and assumptions made by the Company are outlined below.
ACCOUNTING JUDGMENTS
Revenue related items
The Company makes judgments with respect to: determining whether the promised goods and services are
considered distinct performance obligations by considering the relationship of such promised goods and services;
allocating the transaction price for each distinct performance obligation identified through stand-alone selling price;
evaluating when a customer obtains control of the goods or services promised; and evaluating whether the
Company acts as principal or agent on certain flow-through charges to customers.
Impairment of financial assets
The impairment loss allowance for financial assets is based on assumptions about risk of default and expected loss
rates. The Company makes judgments in making these assumptions and selecting the inputs to the impairment
calculation, based on the Company's past history, existing market conditions as well as forward looking estimates at
the end of each reporting period.
Associates
Judgment is required when assessing the classification of an investment as an associate. When making this
assessment, the Company considers the structure of the investment, the legal form of any separate vehicles, the
contractual terms of the investment, and other facts and circumstances.
Joint arrangements
Judgment is required when assessing the classification of a joint arrangement as a joint operation or a joint venture.
When making this assessment, the Company considers the structure of the arrangements, the legal form of any
separate vehicles, the contractual terms of the arrangements, and other facts and circumstances.
Impairment of long-lived assets
Long-lived assets consist primarily of property, plant and equipment, intangibles, rights-of-use assets, goodwill and
equity-accounted investments. Indicators of impairment are considered when evaluating whether or not a long-
lived 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,
137 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
decline in strategic value, 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.
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. 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.
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.
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 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,
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 138
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.
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 observable market 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.
In respect to business combinations that are accounted under the acquisition method, the Company estimates the
fair value of assets acquired, liabilities assumed, and non-controlling interest in the acquiree based on assumptions
a marketplace participant would consider. Estimates made in valuing assets acquired include, among other things,
future expected cash flows and discount rates. These estimates are based on historical information from the
acquired business and relevant market and industry data. The Company generally engages external valuation
advisors to assist in the valuation of certain assets acquired and liabilities assumed. Such valuations require
management to make estimates and assumptions, especially with respect to property plant and equipment and
intangible assets acquired.
In connection with the acquisition of the renewable energy business (see Note 24), the fair value of the property,
plant and equipment, comprising of the Forty Mile and Adelaide wind assets, was determined using the cost
approach. This approach uses the assets' replacement cost with adjustments for loss of value resulting from
physical deterioration and functional and economic obsolescence (replacement cost new method (RCN)).
139 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
24. BUSINESS COMBINATIONS AND OTHER TRANSACTIONS
ACQUISITION OF RENEWABLE ENERGY BUSINESS
On January 3, 2023, ATCO Renewables Ltd. (previously, ATCO Power (2010) Ltd.), a wholly owned subsidiary of
Canadian Utilities Limited, acquired from Suncor Energy Inc. (Suncor) a portfolio of wind and solar assets and
projects in Alberta and Ontario, Canada. The aggregate consideration paid on January 3, 2023 was $713 million,
which included cash acquired of $38 million. The finalized working capital adjustment, which resulted in an
additional payment of $16 million to Suncor, was recorded during the second quarter ended June 30, 2023.
Identifiable assets acquired and liabilities assumed are $691 million.
The transaction was primarily financed by an unsecured non-revolving credit facility issued by a syndicate of lenders
(see Note 14). The acquisition was accounted for as a business acquisition and its results are included in the ATCO
EnPower (previously reported as Energy Infrastructure) operating segment.
The fair values of the identifiable assets acquired and liabilities assumed were as follows:
Assets
Accounts receivable and contract assets
Property, plant and equipment
Construction work-in-progress
Intangible assets
Other assets
Right-of-use assets
Goodwill
Total assets
Liabilities and non-controlling interest
Accounts payable and accrued liabilities
Deferred income tax liabilities
Lease liabilities
Other liabilities
Non-controlling interest
Total liabilities and non-controlling interest
Total identifiable net assets acquired
Preliminary
Values Adjustments (1)
Final
Values
10
641
46
61
9
3
145
915
(37)
(150)
(3)
(7)
(27)
(224)
691
1
(1)
(46)
46
—
2
(4)
(2)
—
5
(2)
(1)
—
2
—
11
640
—
107
9
5
141
913
(37)
(145)
(5)
(8)
(27)
(222)
691
(1) The Company recorded certain adjustments to the purchase price allocation during the year ended December 31, 2023 following the finalization of the
fair values of the identifiable assets acquired and liabilities assumed.
From the date of acquisition, revenues and other income of $77 million, and earnings attributable to Class I and
Class II share owners of the Company of $6 million were included in the consolidated statements of earnings for the
year ended December 31, 2023. Acquisition costs of $2 million for incremental legal and advisory services fees
incurred were recognized as expenses during the fourth quarter ended December 31, 2022.
Given the January 3, 2023 date of the acquisition, actual revenues and other income, and earnings attributable to
Class I and Class II share owners of the Company are indicative of pro-forma results for the year ended December
31, 2023, if the acquisition had occurred on January 1, 2023.
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.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 140
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
3
9
2
28
25
16
1
84
(6)
(12)
(25)
(43)
41
(1) Other intangible assets comprise brand name, $11 million, dealer relationships, $16 million, and non-compete agreements, $1 million.
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.
Acquisition 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.
PARTNERSHIP WITH CHINIKI AND GOODSTONEY FIRST NATIONS
In September 2023, Canadian Utilities Limited announced the formation of a partnership for the Deerfoot and
Barlow Solar power projects with the Chiniki and Goodstoney First Nations (the First Nations) through its wholly
owned subsidiary, ATCO Renewables Ltd. As a result of the partnership's formation, the First Nations and ATCO
Renewables Ltd. have become 51 per cent and 49 per cent, owners of the solar projects, respectively. The solar
projects are included in the ATCO EnPower operating segment.
For accounting purposes, the Company has applied judgement in determining that it continues to retain material
financial risks in the projects, and therefore has accounted for the partnership as a controlled subsidiary using the
consolidation method of accounting.
25. INVESTMENT IN ASSOCIATE COMPANY
Inversiones ATCO Chile Limitada, a wholly owned subsidiary of 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 18 multi-purpose, bulk
cargo, and container port facilities and five 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).
141 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
Selected information from the statement of earnings and comprehensive income for the year ended December 31
is as follows:
Statement of earnings and other comprehensive (loss) income
Revenues
Depreciation and amortization
Interest income
Interest expense
Income taxes
Earnings attributable to:
Neltume Ports' share owners
Non-controlling interests
Other comprehensive (loss) income attributable to:
Neltume Ports' share owners
Non-controlling interests
ATCO's share of earnings
ATCO's share of other comprehensive (loss) income
2023
2022
460
413
(69)
10
(6)
(14)
55
6
61
(12)
1
(11)
22
(5)
(64)
4
(10)
(7)
36
6
42
8
(6)
2
14
3
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 attributable to:
Neltume Ports' share owners
Non-controlling interests
ATCO's share of net assets
(1)
Financial liabilities are comprised mainly of long-term debt.
2023
2022
229
94
323
1,262
1,585
(49)
(63)
(112)
(122)
(150)
(272)
(384)
232
106
338
1,261
1,599
(49)
(55)
(104)
(144)
(124)
(268)
(372)
1,160
1,183
41
44
1,201
1,227
464
473
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 142
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 (loss) income
Dividends received
Foreign exchange
Other
End of year
26. SUBSIDIARIES
2023
473
22
(5)
(16)
(10)
—
464
2022
445
14
3
(15)
31
(5)
473
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 Next Energy Ltd. (2)
ATCO Renewables Ltd. (2)
2240385 Alberta Ltd.
Electricidad del Golfo, S. de R.L.
de C.V.
ATCO Gas Australia Pty Ltd
ATCO Australia Pty Ltd
ATCO Energy Ltd.
CU Inc.
ATCO Electric Ltd. (3)
Chile
Canada
Canada
Canada
Canada
Mexico
Australia
Australia
Canada
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
Electricity generation and related infrastructure services
Holds 50 per cent investment in joint venture, LUMA Energy, LLC
Electricity generation and related infrastructure services
Natural gas distribution services
Electricity generation services
Electricity and natural gas retailer and a provider of whole-home
solutions
Holding company
Electricity transmission, distribution, and related infrastructure
services
ATCO Gas and Pipelines Ltd. (4) Canada
Natural gas transmission, distribution, and related infrastructure
services
(1)
(2)
(3)
(4)
At December 31, 2023, ATCO Ltd. has an ownership interest of 52.7 per cent (2022 - 52.9 per cent).
In December 2023, ATCO Energy Solutions Ltd. and ATCO Power (2010) Ltd. were renamed to ATCO Next Energy Ltd. and ATCO Renewables Ltd.,
respectively.
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.
143 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
27. INVESTMENT IN JOINT VENTURES
The carrying amount of the investment in joint ventures for the year ended December 31 is as follows:
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
Strathcona Storage LP
Other joint ventures
Total
2023
146
10
2022
147
10
—
(14)
—
(14)
—
5
—
—
3
—
2023
118
62
3
(68)
—
2
(4)
2022
81
71
1
(59)
17
5
2
2023
264
72
3
(82)
—
7
(4)
2022
228
81
1
(73)
17
8
2
147
146
113
118
260
264
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).
ATCO Next Energy Ltd. (previously, ATCO Energy Solutions Ltd.), a wholly owned subsidiary of Canadian Utilities
Limited, holds a 60 per cent ownership in Strathcona Storage LP and its equity interest is included in the ATCO
EnPower (previously reported as Energy Infrastructure) operating segment.
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
2023
2022
37
(8)
(12)
17
10
35
(7)
(12)
16
10
Strathcona Storage LP had no other comprehensive income for the years ended December 31, 2023 and 2022.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 144
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
2023
2022
6
3
9
256
265
(5)
(15)
(20)
245
147
2
5
7
253
260
(4)
(13)
(17)
243
146
Other joint ventures of the Company comprise 11 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 (indexed to inflation) 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.
2240385 Alberta Ltd., a wholly owned subsidiary of Canadian Utilities Limited, holds a 50 per cent ownership in
LUMA Energy and its interest is reported in the ATCO Energy Systems, Electricity (previously reported as Utilities,
Electricity) operating segment.
For the year ended December 31, 2023, the Company's share in LUMA Energy's net earnings and dividends received
amounted to $52 million (2022 - $53 million) and $55 million (2022 - $51 million), respectively.
For the year ended December 31, 2023, the Company recognized revenues of $26 million (2022 - $29 million)
primarily for services provided to LUMA Energy at cost.
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 with Origin Energy Electricity Limited (Origin Energy) with an
expiry date of December 31, 2026 with an option to extend for one year.
ATCO Australia Pty Ltd, a wholly owned subsidiary of Canadian Utilities Limited, holds a 50 per cent ownership in the
Osborne Cogeneration Facility and its interest is reported in the ATCO EnPower operating segment.
For the year ended December 31, 2023, the Company's share in Osborne Cogeneration Facility's net earnings and
dividends amounted to $6 million (2022 - $12 million) and $7 million (2022 - $5 million), respectively.
145 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
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 $31 million at December 31,
2023 (2022 - $37 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 Ltd.
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) (1)
Proportion of non-voting rights held (Class A Non-voting shares of Canadian Utilities
Limited)
2023
4,082
2022
3,975
(7)
(7)
4,075
3,968
2023
%
47.3
0.4
2022
%
47.1
3.2
62.6
62.1
(1) On December 15, 2023, Canadian Utilities Limited completed a transaction by way of a plan of arrangement to exchange the Class B Voting shares held by
non-controlling Class B Share Owners to Class A Non-voting shares. Under the terms of the arrangement, each Class B Voting share was exchanged for 1.1
Class A Non-voting shares. The Company did not participate in the arrangement.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 146
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
Attributable to NCI:
Earnings for the year
Other comprehensive (loss) income
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
Adelaide Limited Partnership
2023
2022
3,796
717
4,048
639
387
(59)
328
337
69
406
1,437
1,867
21,721
(1,422)
20,107
(1,317)
(14,580)
(13,591)
7,156
4,082
7,066
3,975
1,780
(2,253)
(19)
(492)
229
84
5
318
2,140
(1,256)
(932)
(48)
226
82
—
308
CANADIAN UTILITIES LIMITED MID-TERM INCENTIVE PLAN
In May 2023, Canadian Utilities Limited terminated its MTIP Plan. Following its termination, all of the 440,554 Class A
shares that were held in trust for the MTIP were sold for proceeds of $17 million. The cost of the Class A shares sold
of $14 million was recorded as an increase to Class A and Class B shares and the after tax gain of $2 million was
recorded as an increase to contributed surplus.
CANADIAN UTILITIES LIMITED DIVIDEND REINVESTMENT PROGRAM
Canadian Utilities Limited has a 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 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, 2023, non-controlling interests acquired 828,033 (2022 - 527,471) Class A
shares of Canadian Utilities Limited, using re-invested dividends of $27 million (2022 - $20 million). The shares were
priced at an average of $32.28 per share (2022- $37.26 per share).
147 ATCO LTD. 2023 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%
190
190
2023
2022
Canadian Utilities Limited Equity Preferred Shares
Cumulative Redeemable Second Preferred Shares, at 4.50% to 5.25%
Issuance costs
Rights and privileges
1,601
(30)
1,761
1,601
(30)
1,761
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 (7)
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)
(7)
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.
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.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 148
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 (GOCOM). Plan features are described below.
Form of compensation
Stock options (1), (2)
Eligibility
Vesting Period
Term
Officers and key employees
20% per year over
5 years
10 years
Settlement
Class I shares (3)
Share appreciation rights
(1) Directors, officers and key
employees
International executives and key
employees
25% per year over
4 years
20% per year over
5 years
8 years
Class I shares (3)
10 years
Cash
4 or 5 years
4 or 5 years
Cash
Restricted share units
Officers and key employees
25% in years 1 and
2 and 50% in year 3
3 years
Cash
Mid-term incentive plan (4) Officers and key employees
2-3 years
2-3 years
Class I shares
(1)
(2)
(3)
(4)
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.
Issued from Treasury.
In 2023, the mid-term incentive plan was terminated and all Class I shares held with the trustee were sold (see Note 18).
STOCK OPTION PLAN
Information about the options outstanding and exercisable at December 31 is summarized below.
Options authorized for grant
Options available for issuance
2023
Weighted
Average
Exercise Price
Options
10,200,000
8,305,300
2022
Weighted
Average
Exercise Price
Options
10,200,000
7,829,400
Outstanding options, beginning of year
1,882,600
$44.71 1,431,050
$43.70
Granted
Exercised
Forfeited
Expired
577,000
36.46
482,000
(4,900)
(29,100)
(72,000)
41.45
48.16
44.98
(15,200)
(15,250)
47.54
38.60
46.32
—
—
Outstanding options, end of year
Options exercisable, end of year
2,353,600
$42.64 1,882,600
1,076,850
$44.03
817,100
$44.71
$44.15
Options
Range of
Exercise Prices
$36.41 - $38.93
$40.38 - $42.77
$45.09 - $49.51
$50.33 - $51.97
$36.41 - $51.97
Outstanding
Exercisable
Number
Outstanding
Weighted
Average
Remaining
Contractual Life
Weighted
Average
Exercise Price
Number
Exercisable
Weighted
Average
Exercise Price
1,033,550
98,250
1,158,300
63,500
2,353,600
6.3
4.4
5.6
0.2
5.7
$37.34
364,300
$38.51
42.00
46.92
51.95
90,750
558,300
63,500
42.04
47.06
51.95
$42.64
1,076,850
$44.03
Compensation expense related to stock options was $3 million in 2023 (2022 - $2 million), with a corresponding
increase to contributed surplus.
149 ATCO LTD. 2023 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
630,600
$46.06
639,700
$46.01
2023
Weighted
Average
Exercise Price
SARs
2022
Weighted
Average
Exercise Price
SARs
Granted
Exercised
Forfeited
Expired
Outstanding SARs, end of year
SARs exercisable, end of year
SARs
Range of
Exercise Prices
$36.41 - $38.93
$40.38 - $42.08
$45.38 - $49.51
$50.33 - $51.97
$36.41 - $51.97
18,000
(6,400)
(28,850)
(92,000)
521,350
440,350
36.41
41.88
49.24
44.31
21,000
(11,100)
(6,000)
(13,000)
$45.91
630,600
$46.12
510,350
47.54
37.83
47.51
49.12
$46.06
$46.08
Outstanding
Exercisable
Number
Outstanding
Weighted
Average
Remaining
Contractual Life
Weighted
Average
Exercise Price
Number
Exercisable
Weighted
Average
Exercise Price
100,800
83,250
273,800
63,500
521,350
2.4
4.2
2.1
0.2
2.2
$38.44
75,800
$38.93
42.06
48.42
51.95
83,250
217,800
63,500
42.06
48.48
51.95
$45.91
440,350
$46.12
In 2023, compensation expense related to SARs was a credit of $1 million due to a decrease in the share price of
Class I shares (2022- expense of $1 million). The total carrying value of liabilities arising from SARs at December 31,
2023 was $2 million (2022 - $3 million). The total intrinsic value of all vested SARs at December 31, 2023 was nil
(2022 - 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
$36.46
3.78 %
2023
SARs
$36.41
3.56 %
Options
$47.54
3.17 %
2022
SARs
$47.54
3.56 %
24.45 %
29.62 %
25.98 %
29.62 %
5.13 %
7 years
3.98 %
4 years
3.98 %
7 years
3.98 %
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.
RESTRICTED SHARE UNIT PLAN
Effective September 12, 2023, the GOCOM adopted a service period-based Restricted Share Unit (RSU) Plan to grant
RSUs to its officers and key employees. RSUs will be settled in cash at an amount based on the Class I share price at
vesting date. The vesting period is three years. In 2023, the Company did not grant any RSUs.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 150
MID-TERM INCENTIVE PLAN
Information about the MTIPs outstanding at December 31 is summarized below.
Outstanding MTIPs, beginning of year
Exercised
Outstanding MTIPs, end of year
Unallocated shares held by trustee (1)
Total number of shares held by trustee, end of year
2023
Weighted
Average
Grant Date
Fair Value
—
—
—
2022
Weighted
Average
Grant Date
Fair Value
$44.38
44.38
MTIPs
3,150
(3,150)
—
—
254,021
254,021
MTIPs
—
—
—
—
—
(1)
Unallocated shares are Class I shares held by the trustee which have not been awarded to officers or key employees.
In May 2023, the Company terminated the MTIP plan and all shares held with the trustee have been sold (see Note
18).
Compensation expense related to MTIP awards was nil for 2023 with no affect to contributed surplus (2022 - less
than $1 million with a corresponding increase to contributed surplus).
30. CONTINGENCIES
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 $360 million guarantee, supported by a $360
million letter of credit for Direct Energy’s obligations to ATCO Gas and ATCO Electric Distribution under the
transaction agreements. However, there can be no assurance that the coverage under these agreements will be
adequate to defray all costs that could arise if the obligations are not met.
Other
The Company is party to a number of claims, disputes, lawsuits and other matters arising in the normal course of its
business. The Company believes that the ultimate liability arising from these matters will have no material impact
on the consolidated financial statements.
151 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
31. COMMITMENTS
Purchase obligations and other
In addition to commitments disclosed elsewhere in these financial statements, the Company has entered into a
number of operating and maintenance agreements and agreements to purchase capital assets. Approximate future
undiscounted payments under these agreements are as follows:
Purchase obligations:
Operating and maintenance agreements
Capital expenditures
Other
Other commitments
Performance guarantee obligations
2024
2025
2026
2027
2028
2029 and
thereafter
545
354
81
10
480
464
429
399
390
—
22
11
—
6
8
—
6
1
—
6
1
—
6
3
990
513
478
436
406
399
The Company guarantees a certain specified minimum renewable energy availability factor determined every two
years on its renewable PPA agreements (see Note 20). The renewable energy generation facilities are monitored to
ensure the availability factor is achieved. The Company evaluates if any amounts are due to counterparties based
on not meeting the guaranteed renewable energy availability factor at the end of each reporting period. As of
December 31, 2023 and 2022, the guaranteed minimum renewable energy availability factor has been met and the
Company has recorded no performance guarantee obligations.
32. RELATED PARTY TRANSACTIONS
In transactions with the Company’s joint ventures, the Company recognized revenues of $32 million relating to
management fees and other charges (2022 - $33 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 (2022 - $3 million).
The Company received $1 million (2022 - $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
(2022 - $3 million).
At December 31, 2023 and 2022, CU Inc. had unsecured interest-bearing long-term advances due from NUE, a joint
venture. Long term advances due from joint venture are recorded in prepaid expenses and other current assets, $3
million (2022 - nil), and other assets, $30 million (2022 - $33 million), 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
Other
2023
20
2
2
1
25
2022
17
2
4
—
23
Key management personnel comprise members of executive management and the Board, a total of 21 individuals
(2022 - 23 individuals).
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 152
33. ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
Subsidiaries are consolidated from the date control is obtained until the date control ends. Control exists where the
Company has power over the investee, exposure or rights to variable returns from the investee and the ability to
use its power over the investee to affect returns.
All intra-group balances and transactions are eliminated on consolidation.
Interests in subsidiaries owned by other parties are included in NCI. NCI in subsidiaries are identified separately
from equity attributable to Class I and Class II owners of the Company. Earnings and each component of OCI are
attributed to the Class I and Class II owners of the Company and to NCI, even if this results in the NCI having a deficit
balance. Earnings attributable to the Class I and Class II owners are determined after adjusting for dividends on
equity preferred shares held by NCI.
Changes in the Company’s ownership interests that do not result in a loss of control are accounted for as equity
transactions. The carrying amounts of the Company’s interest and the NCI are adjusted to reflect the changes in
their relative interests in the subsidiaries. Any difference between the amount by which the NCI are adjusted and
the fair value of the consideration paid or received is recognized directly in equity and attributed to the Class I and
Class II owners of the Company.
ASSOCIATES
Associates are those entities over which the Company has significant influence, but not control or joint control, over
the financial and operating policies. This is generally the case where the group holds between 20 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.
153 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
REVENUE RECOGNITION
Revenue is allocated to the respective performance obligations based on relative transaction prices, and is
recognized as goods and services are delivered to the customer. Revenue is measured as the amount of
consideration expected to be received in exchange for the goods transferred or services delivered. The amount of
revenue recognized reflects the time value of money where a significant financing component has been identified.
Contract modifications are accounted for prospectively or as a cumulative catch-up adjustment depending on the
nature of the change.
Where the amount of goods and services delivered to the customer corresponds directly to the amount invoiced,
the Company recognizes revenue equal to what it has the right to invoice.
Where the Company arranges for another party to provide a specified good or service (that is, it does not control
the specified good or service provided by another party before that good or service is transferred to the customer),
only revenues net of payments to the other party for the goods or services provided are recognized.
Non-cash considerations received from the Company’s customers are included in the amount of revenue
recognized and measured at fair value.
Costs incurred directly to obtain or fulfill a contract are capitalized and amortized to expense over the life of the
contract.
Electricity generation and delivery
Revenue from 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.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 154
Franchise fees
Municipal governments charge franchise fees to the utilities in Canada for the exclusive right to provide service in
their community. These costs are charged to customers through rates approved by the regulator. Franchise fees do
not represent a separate performance obligation to a customer and are recovered through utility transmission and
distribution prices. The recovery is part of the provision of continuous electricity and natural gas transmission and
distribution service performance obligation. Franchise fees invoiced to customers are recognized as revenues.
SHORT-TERM EMPLOYEE BENEFITS
Short-term employee benefits are recognized as an expense in salaries, wages and benefits as employees render
service. These benefits include wages, salaries, social security contributions, short-term compensated absences,
incentives and non-monetary benefits, such as medical care. Costs for employee services incurred in constructing
an asset that meet the asset recognition criteria are included in the related property, plant and equipment or
intangible asset.
Termination benefits are recognized as an expense in salaries, wages and benefits at the earlier of when the
Company can no longer withdraw the offer of those benefits and when the Company recognizes costs for a
restructuring that includes the payment of termination benefits. In the case of an offer made to encourage
voluntary redundancy, the termination benefits are measured based on the number of employees expected to
accept the offer.
INCOME TAXES
Income taxes are the sum of current and deferred taxes. Income tax is recognized in earnings, except to the extent
it relates to items recorded in OCI or in equity.
Current tax is calculated on taxable earnings using rates enacted or substantively enacted at the balance sheet date
in the jurisdictions in which the Company operates.
The liability method is used to determine deferred income tax on temporary differences between the financial
statement carrying amounts of assets and liabilities and their respective tax bases. Deferred income tax is
calculated using the enacted or substantively enacted tax rates that are expected to apply in the period when the
liability is settled or the asset is realized. If expected tax rates change, deferred income taxes are adjusted to the
new rates.
Deferred income tax assets and liabilities are not recognized if the temporary differences arise from the initial
recognition of goodwill or of other assets and liabilities in a transaction, other than a business combination, that
does not affect accounting or taxable earnings. The tax effect of temporary differences from investments in
subsidiaries and joint arrangements are not accounted for where the Company is able to control the reversal of the
temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognized only when it is probable that future taxable earnings will be available
against which the temporary differences can be applied.
Current income tax assets and liabilities are offset where the Company has the legally enforceable right to offset
and the Company intends to either settle on a net basis or realize the asset and settle the liability simultaneously.
Deferred income tax assets and liabilities are offset where the Company has a legally enforceable right to set off tax
assets and liabilities, and when the deferred income tax assets and liabilities relate to income taxes levied by the
same tax authority.
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
Marketable securities primarily consist of highly-liquid investment grade corporate bonds and debentures, private
fixed income funds, and bank loans and commercial mortgage funds. Any distributions received, including interest
155 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
income from the securities, are reinvested immediately. Generally, the securities are redeemable within seven
business days.
INVENTORIES
Natural gas and fuel, raw materials, work-in-progress and finished goods
Inventories are valued at the lower of cost or net realizable value. The cost of inventories that are interchangeable is
assigned using the weighted average cost method. For inventories that are not interchangeable, cost is assigned
using specific identification of their individual costs. Net realizable value is the estimated selling price in the ordinary
course of business, less variable selling expenses.
The cost of inventories is comprised of all purchase, conversion and other costs to bring inventories to their present
condition and location. Purchase costs consist of the purchase price, import duties, non-recoverable taxes,
transport, handling and other costs directly attributable to the purchase of finished goods, materials or services.
Conversion costs include direct material and labour costs and a systematic allocation of fixed and variable
overheads incurred in converting materials into finished goods. The standard cost method is used to approximate
cost in the Company’s Structures & Logistics manufacturing operations.
Emission credits and allowances
Emission performance and offset credits that are internally generated are initially recognized at fair market value,
which is measured using emission compliance rates in effect at the time of initial recognition. The credits are
subsequently measured at the lower of fair market value at the time of initial recognition or net realizable value. Net
realizable value is the estimated selling price in the ordinary course of business, less variable selling expenses.
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 an asset is derecognized when it is replaced or disposed of from its use. When an asset is
derecognized, any resulting gain or loss is recorded in earnings.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 156
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 generation and storage:
Gas-fired generation
Hydroelectric generation
Solar power generation
Wind power generation
Storage and other 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
10 to 15 years
43 to 50 years
10 to 35 years
30 years
2 to 100 years
5 to 73 years
2 to 17 years
2 to 50 years
50 years
43 years
42 years
40 years
14 years
50 years
34 years
30 years
36 years
40 years
17 years
18 years
2.0 %
2.3 %
2.4 %
2.5 %
7.1 %
2.0 %
2.9 %
3.3 %
2.8 %
2.5 %
5.9 %
5.5 %
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 35 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.
Intangible assets are derecognized when they are disposed of or when there is no future economic benefit to the
Company. Gains and losses between the carrying amount and the disposal proceeds, if any, are recognized in
earnings.
Amortization methods and useful lives of assets are reviewed annually. Any changes in these accounting estimates
are recorded prospectively.
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLES
Property, plant and equipment and intangible assets with finite lives are tested for recoverability when events or
circumstances indicate a possible impairment. 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.
GOVERNMENT GRANTS
The Company receives subsidies and incentives from government entities (collectively, government grants) to
subsidize capital project costs and operating and financing expenses.
Government grants are recognized when the grant conditions are met. If a government grant is a monetary asset, it
will be measured at the amount received or receivable. If a government grant is a non-monetary asset, it will be
measured at its fair value.
Government grants related to assets are recognized as deferred income and amortized over the useful lives of the
assets in earnings.
157 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
Government grants related to income that compensate operating costs are recorded as deferred income, and
deducted against the related costs when incurred.
The economic benefit of a loan received from a government-controlled financial institution at a below-market rate
of interest is treated as a government grant related to income measured as the difference between the proceeds
received and the fair value of the loan based on prevailing market interest rates. The difference is amortized using
the effective interest method over the life of the loan.
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 in earnings over the lease term and
are included in other expenses.
The Company as a lessor
A finance lease exists when the terms of the lease transfer substantially all the risks and rewards incidental to
ownership of the leased asset to the lessee. Amounts due from lessees under finance leases are recorded as
finance lease receivables. They are initially recognized at amounts equal to the present value of the minimum lease
payments receivable. Payments that are part of the leasing arrangement are divided between a reduction in the
finance lease receivable and finance lease income. Finance lease income is recognized so as to produce a constant
rate of return on the Company’s investment in the lease and is included in revenues.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 158
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.
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.
159 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
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 Class I and II shares are presented net of their
respective transaction costs.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated balance sheet:
(i)
if there is a legally enforceable right to offset the recognized amounts, and
(ii)
if the Company intends either to settle on a net basis or to realize the assets and settle the liabilities
simultaneously.
Derecognition of financial instruments
Financial assets are derecognized:
(i) when the right to receive cash flows from the financial assets has expired or been transferred, and
(ii)
the Company has transferred substantially all the risks and rewards of ownership.
Financial liabilities are derecognized when the obligation is discharged, cancelled, or expired.
Fair value hierarchy
The Company uses quoted market prices when available to estimate fair value. Models incorporating observable
market data, along with transaction specific factors, are also used to estimate fair value. Financial assets and
liabilities are classified in the fair value hierarchy according to the lowest level of input that is significant to the fair
value measurement. Management’s judgment as to the significance of a particular input may affect placement
within the fair value hierarchy levels.
The hierarchy is as follows:
•
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (i.e., as prices) or indirectly (i.e., derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Company applies settlement date accounting to the purchases and sales of financial assets. Settlement date
accounting means recognizing an asset on the day it is received by the Company and recognizing the disposal of an
asset on the day it is delivered by the Company. Any gain or loss on disposal is also recognized on that day.
IMPAIRMENT OF FINANCIAL INSTRUMENTS
At each reporting date, the Company assesses whether there is evidence that a financial asset or group of financial
assets is impaired. If such evidence exists, an impairment loss is recognized in earnings.
Impairment losses on financial assets carried at amortized cost are calculated as the difference between the
amortized cost and the present value of estimated future cash flows discounted at the financial asset’s original
effective interest rate. Impairment losses on financial assets carried at amortized cost may be reversed in whole or
in part if there is evidence that a change in the estimated recoverable amount is warranted. The revised recoverable
amount cannot exceed the carrying amount that would have been determined had no impairment charge been
recognized in previous periods.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 160
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.
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.
161 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
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 and RSUs are cash-settled and are measured at fair value. The fair value is recognized over the vesting period
of the SARs and RSUs granted by applying graded vesting, adjusted for estimated forfeitures. The fair value of SARs
and RSUs is recorded in salaries, wages and benefits expense and accounts payable and accrued liabilities and
other non-current liabilities. The liabilities are re-measured at each reporting period.
The MTIP awards are equity-settled with shares purchased on the secondary market. They are measured at fair
value based on the purchase price of the Company’s Class I Shares at the date of grant. The awards are held by a
trust until the shares are vested, at which time they are transferred to the employee. The fair value of the MTIP
awards is recognized in salaries, wages and benefits expense over the vesting period, with a corresponding charge
to contributed surplus.
RELATED PARTY TRANSACTIONS
Transactions with related parties in the normal course of business are measured at the exchange amount. Transfers
of assets or business combinations between entities under common control are measured at the carrying amount.
FOREIGN CURRENCY TRANSLATION
Foreign currency transactions
Transactions denominated in foreign currencies are translated at the exchange rate on the date of the transaction.
Monetary assets and liabilities and non-monetary assets and liabilities measured at fair value denominated in a
foreign currency are adjusted to reflect the exchange rate at the balance sheet date. Gains or losses on translation
of these monetary and non-monetary items are recognized in earnings. Non-monetary items not measured at fair
value are not retranslated after they are first recognized.
Foreign operations
The assets and liabilities of subsidiaries whose functional currencies are other than Canadian dollars are translated
into Canadian dollars at the exchange rate at the balance sheet date. Revenues and expenses are translated at the
average monthly exchange rates during the period, which approximates the foreign exchange rates on the dates of
the transactions. Gains or losses on translation are included in OCI.
If the Company disposes of its entire interest in a foreign operation, or loses control, joint control, or significant
influence over a foreign operation, the accumulated foreign currency translation gains or losses related to the
foreign operation are recognized in earnings.
ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS 162
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
2023
2022
2023
1.3223
0.9025
1.3546
0.9212
1.3497
0.8967
2022
1.3013
0.9034
ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
At December 31, 2023, certain new or amended standards that need to be adopted in future periods have not been
early adopted. These standards are not expected to have a material impact to the Company.
163 ATCO LTD. 2023 CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED ANNUAL RESULTS (1)
YEAR ENDED DECEMBER 31, 2023
(Millions of Canadian dollars, except as indicated)
EARNINGS STATEMENT
Revenues
Earnings attributable to Class I and Class II shares
Adjusted earnings (2)
Structures & Logistics (2)
Neltume Ports
Corporate & Other (2)
Canadian Utilities Limited (2)
ATCO Energy Systems (2) (4)
ATCO EnPower (2) (5)
Corporate & Other Eliminations (2)
Adjusted earnings
BALANCE SHEET
Cash (3)
Total assets
Capitalization
Bank indebtedness
Short-term debt
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
ATCO Energy Systems (4)
Electricity
Natural Gas
ATCO EnPower (5)
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 ($)
2023
2022
2021
2020
2019
4,741
432
4,978
370
4,289
246
3,944
252
4,706
513
90
22
5
340
26
(51)
432
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
288
25,358
1,033
24,139
1,088
23,004
1,100
22,200
1,140
21,703
–
–
11,048
4,075
4,423
19,546
–
–
10,087
3,968
4,376
18,431
3
206
9,852
3,838
4,111
18,010
3
–
9,619
3,797
4,052
17,471
–
–
9,436
3,858
4,000
17,294
1,965
2,396
1,864
1,843
1,542
198
28
630
583
139
8
1,586
3.82
3.82
1.90
39.44
38.67
40.27
204
10
566
571
234
12
1,597
3.25
3.71
1.85
38.42
42.38
40.45
114
11
350
747
120
10
1,352
2.16
3.35
1.79
35.94
42.70
43.00
125
13
366
510
19
8
1,041
2.21
3.08
1.74
35.37
36.49
37.81
105
(16)
389
646
88
6
1,218
4.49
3.19
1.62
34.88
49.77
49.55
Full disclosure of all financial information is available on the SEDAR+ website - www.sedarplus.ca.
(1)
(2)
(3)
(4)
Financial results have been prepared in accordance with International Financial Reporting Standards (IFRS).
Total of segments measures (as defined in NI 52-112). The most directly comparable measure reported in accordance with International Financial
Reporting Standards is Earnings Attributable to Class I non-voting and Class II voting shares. See “Other Financial and Non-GAAP Measures” and
“Reconciliation of Adjusted Earnings to Earnings Attributable to Class I and Class II Shares” on pages 59 and 61, respectively, of this Annual Report.
Cash is defined as cash and cash equivalents less current bank indebtedness.
ATCO Energy Systems operating segment was previously reported as Utilities. It includes the collective results of the Electricity and Natural Gas operating
segments.
(5)
ATCO EnPower operating segment was previously reported as Energy Infrastructure.
ATCO LTD. 2023 CONSOLIDATED ANNUAL RESULTS 164
CONSOLIDATED OPERATING SUMMARY
YEAR ENDED DECEMBER 31, 2023
(Millions of Canadian dollars, except as indicated)
2023
2022
2021
2020
2019
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
Port products handling (millions of tonnes)
ATCO Energy Systems
Electricity distribution and transmission
Capital expenditures
Power lines (thousands of kilometres)
Power lines owned (thousands of kilometres)
198
204
114
125
105
3
69
24
75
46
630
105
71
3
75
22
79
43
566
105
71
3
71
20
82
46
350
105
71
3
52
19
73
45
366
75
71
3
48
16
72
46
389
75
71
Electricity distributed (millions of kilowatt hours)
11,951
12,489
12,491
12,012
12,664
Average annual use per residential customer (kWh)
7,062
7,334
7,535
7,528
7,227
Average customers during the year (thousands)
264
263
261
261
260
Natural gas distribution
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
438
56
428
55
385
55
307
55
353
55
2,309
2,509
2,476
2,535
2,304
278
105
13
304
108
14
299
111
14
300
113
13
311
112
13
Average customers during the year (thousands)
2,093
2,063
2,036
2,014
1,989
Natural gas transmission
Capital expenditures
Pipelines (thousands of kilometres)
ATCO EnPower
Electricity generation
Capital expenditures
Non-regulated generating capacity operated (megawatts)
Non-regulated generating capacity owned (megawatts)
Energy storage & industrial water
Capital expenditures
Seasonal natural gas storage capacity (petajoules)
Salt cavern storage capacity (thousands of m3)
Industrial water infrastructure intake capacity
(thousands of m3/day)
145
9
86
694
551
53
117
544
85
143
9
123
348
248
111
117
550
85
362
9
28
348
248
92
101
400
85
203
9
2
347
247
17
52
400
85
293
9
59
344
244
29
52
400
85
165 ATCO LTD. 2023 CONSOLIDATED OPERATING SUMMARY
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. 2023 ANNUAL REPORT 166