INVESTOR PRESENTATION JUNE 2018
LEGAL DISCLAIMER Statements made by representatives for ATCO Ltd. and Canadian Utilities Limited and information provided in this presentation may be considered forward-looking statements. By their nature, such statements are subject to numerous known and unknown risks and uncertainties and therefore actual results may differ materially from those currently anticipated. ATCO Ltd. and Canadian Utilities Limited disclaim any intention or obligation to update or revise such statements. Due to the nature of the Corporation’s operations, quarterly revenues and earnings are not necessarily indicative of annual results. INVESTOR PRESENTATION JUNE 2018 1
ORGANIZATIONAL STRUCTURE 1 Retail Energy was launched in early 2016 to provide retail, commercial and industrial electricity and natural gas service in Alberta. 2 Regulated operations include ATCO Gas, ATCO Pipelines, ATCO Gas Australia, ATCO Electric Distribution, and ATCO Electric Transmission. 3 Alberta PowerLine General Partner Ltd. is the general partner of Alberta PowerLine Limited Partnership (Alberta PowerLine or APL), a partnership between Canadian Utilities Limited (80 per cent) and Quanta Services, Inc. (20 per cent). INVESTOR PRESENTATION JUNE 2018 2
CANADIAN UTILITIES LIMITED Electricity • 87,000 kms of electric power lines • 19 power plants globally • 2,517 MW power With approximately 5,400 generating capacity employees and assets of $21 billion, Canadian Utilities Limited is part of a diversified corporation providing Pipelines & Liquids sustainable, innovative and Current comprehensive energy solutions • 64,500 kms of pipelines Operations globally. • 85,200 m 3 /d water infrastructure capacity • 52 PJ natural gas storage capacity • 400,000 m 3 hydrocarbon storage capacity Canadian Utilities CU Inc. (TSX: CU / CU.X) ~$7.5 billion ~$9 billion common debt equity capitalization capitalization INVESTOR PRESENTATION JUNE 2018 3
ASSET GROWTH We have more than doubled in size since 2009 $4.1B $20.8B $7.6B $9.1B 2009 Electricity Pipelines 2017 & Liquids INVESTOR PRESENTATION JUNE 2018 4
REGULATED UTILITY GROWTH Regulated Normalized Adjusted Earnings Regulated Capital Mid-Year Rate Base Investment $1.2B $603M $11.9B $12.5B $13.0B $547M $1.1B $473M $10.3B $1.5B $430M $8.9B $358M $2.2B $2.3B 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 INVESTOR PRESENTATION JUNE 2018 5
UTILITIES ACHIEVE TOP TIER RETURNS ON EQUITY 14% 13% 12% CU Inc. ROE +2.33% on 11% average above AUC approved ROE from 10% 2007-2017 9% 8% 7% 6% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Alberta Utility Average (excluding CU) CU Inc. Average AUC Approved • Alberta Utility average is a simple average and includes: AltaGas, AltaLink, Enmax Distribution, Enmax Transmission, EPCOR Distribution, EPCOR Transmission, and Fortis Alberta. ** CU Inc. average is a simple average and includes: Electric Distribution, Electric Transmission, Natural Gas Distribution, and Natural Gas Transmission. Further details on the individual ROEs can be found in this Appendix. INVESTOR PRESENTATION JUNE 2018 6
GROWING A HIGH QUALITY EARNINGS BASE REGULATED ADJUSTED EARNINGS AS A PERCENTAGE OF TOTAL ADJUSTED EARNINGS 99% 65% 2013 2017 INVESTOR PRESENTATION JUNE 2018 7
CONTINUED DIVIDEND GROWTH Canadian Utilities $1.57 per share Longest track record of annual dividend increases of any Canadian publicly traded company* 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 *On April 04, 2018, Canadian Utilities declared a second quarter dividend of $0.3933 per share, or $1.57 per share annualized. INVESTOR PRESENTATION JUNE 2018 8
GROWTH: $1.7B OF CAPITAL INVESTMENT IN 2017 1% 29% Regulated Utility Capital Long-term Contracted Capital Other 70% INVESTOR PRESENTATION JUNE 2018 9
CONTINUED REGULATED UTILITY CAPITAL INVESTMENT ELECTRIC TRANSMISSION ELECTRIC DISTRIBUTION $211M $227M NATURAL GAS TRANSMISSION INTERNATIONAL NATURAL NATURAL GAS DISTRIBUTION $297M GAS DISTRIBUTION $92M $372M INVESTOR PRESENTATION JUNE 2018 10
2017 RECORD ADJUSTED EARNINGS RECORD EARNINGS DUE TO GROWTH IN REGULATED BUSINESSES $602M $593M $590M $550M $40M $9M 2016 2017 2016 2017 2016 2017 Consolidated Regulated Businesses Non-Regulated Segment Businesses & Corporate INVESTOR PRESENTATION JUNE 2018 11
FIRST QUARTER 2018 ADJUSTED EARNINGS Lower earnings mainly due $213M to rate rebasing under Alberta’s regulated model $181M Q1 2017 Q1 2018 INVESTOR PRESENTATION JUNE 2018 12
FIRST QUARTER 2018 ADJUSTED EARNINGS: OPERATING IMPROVEMENTS FLOW INTO CUSTOMER RATES ELECTRIC DISTRIBUTION DEEMED REVENUE FOR OPERATING COSTS INVESTOR PRESENTATION JUNE 2018 13
PBR 2.0 HIGHLIGHTS PBR PBR 2.0 Productivity Adjuster 1.16% 0.30% (X Factor) Based on the lowest annual actual O&M level during 2013-2016, Based on approved 2012 forecast O&M levels; O&M adjusted for inflation, growth and productivity to 2017 dollars; inflated by I-X thereafter over the PBR term inflated by I-X thereafter over the PBR term Recovered through going-in rates inflated by I-X and a K Bar that is based on inflation adjusted average historical capital Recovered through going-in rates inflated by I-X expenditures for the period 2013-2016. The K Bar is calculated Treatment of Capital annually and adjusted for the actual WACC Expenditures Significant capital expenditures not fully Significant capital costs that are extraordinary, not previously recovered by the I-X formula and meeting certain incurred and required by a third party recovered through a criteria recovered through a K Factor “Type I” K Factor Efficiency Carry-over ECM up to 0.5% additional ROE for the years 2023 and 2024 ECM up to 0.5% additional ROE for the years 2018 Mechanism (ECM) based on certain criteria and 2019 based on certain criteria INVESTOR PRESENTATION JUNE 2018 14
REGULATORY UPDATE Getting back to prospective rate making 2017 2018 2019 2020 2018 to 2020 Generic Decision Decision Decision Expected Cost of Capital (GCOC) Expected Expected 2017 2018 2019 2020 Gas and Electric Distribution Decision Decision Decision 2018 to 2020 Performance Expected Expected Received Based Regulation (PBR) 2.0 2017 2018 2019 2020 Electric Transmission Decision Decision 2018 to 2019 General Decision Expected Expected Expected Tariff Application (GTA) 2017 2018 2019 2020 Gas Transmission 2019 to 2020 Decision Decision 2017 to 2018 General Decision 2019 to 2020 GRA expected Expected Expected Received Decision Expected filing Rate Application (GRA) INVESTOR PRESENTATION JUNE 2018 15
STRATEGIC PRIORITIES FOR 2018 AND BEYOND INVESTOR PRESENTATION JUNE 2018 16
GROWTH: CONTINUED CAPITAL INVESTMENT $4.5B OF PLANNED CAPITAL INVESTMENT 2018 TO 2020 INVESTOR PRESENTATION JUNE 2018 17
RATE BASE GROWTH Mid-Year Rate Base Regulated Capital Investment Expected to Grow 4% - 5% per year $1.1B $1.2B $11.9B $12.5B $13.0B $1.2B $1.2B $10.3B $1.1B $8.9B $1.5B $2.2B $2.3B 2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020 INVESTOR PRESENTATION JUNE 2018 18
GROWTH: LONG-TERM CONTRACTED CAPITAL INVESTMENT HYDROELECTRIC FORT MCMURRAY WEST HYDROCARBON STORAGE COGENERATION GENERATION 500 KV TRANSMISSION $1.0 BILLION (2018 – 2020) INVESTOR PRESENTATION JUNE 2018 19
GROWTH: GLOBAL EXPANSION Mexico Hydro Acquisition and Cogeneration In December 2017, Canadian Utilities announced the ▪ $114 million acquisition of a long-term contracted, 35 MW hydroelectric power station based in Veracruz, Mexico. ▪ In March 2018, Canadian Utilities announced it will build Gomez Palacio a 26 MW electricity cogeneration facility under a long-term contract near Gomez Palacio, Mexico. San Luis Potosi Mexico City Veracruz Generating Facility Type Capacity Owned (MW) Distributed Generation 11 MW Hydroelectric Generation 35 MW Cogeneration 26 MW INVESTOR PRESENTATION JUNE 2018 20
GROWTH: ALBERTA POWERLINE Fort McMurray West 500 kV Transmission Project The design and planning phases were completed and ▪ construction commenced in August 2017. Land preparation and tower foundation installation and tower ▪ assembly is proceeding ahead of schedule. The target energization date of June 2019 remains on track. * More information is available at www.albertapowerline.com. INVESTOR PRESENTATION JUNE 2018 21
FINANCIAL STRENGTH: FUNDING SOURCES Canadian Utilities Funding Sources 2013 – 2017 5% 26% 3% 3% 63% Funds Generated Dividend Capital Debt Issues Preferred by Operations Reinvestment Redeployment (net of repayment) Shares (DRIP) INVESTOR PRESENTATION JUNE 2018 22
FINANCIAL STRENGTH: BALANCE SHEET INVESTOR PRESENTATION JUNE 2018 23
FINANCIAL STRENGTH: CAPITAL MARKETS ACCESS IN 2017, CANADIAN UTILITIES ISSUED DEBT AT THE LOWEST LONG-TERM $1,600 12% INTEREST RATE IN COMPANY HISTORY $1,400 10% BOND AMOUNT ($M) $1,200 INTEREST RATE 8% $1,000 $800 6% 3.548% $600 4% $400 2% $200 $0 0% BOND AMOUNT INTEREST RATE INVESTOR PRESENTATION JUNE 2018 24
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