Canadian Utilities Limited

Thank you for standing by. This is the conference operator. Welcome to the first quarter 2023 results conference call for Canadian Utilities Limited. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Mr. Colin Jackson, Senior Vice President, Finance, Treasury and Sustainability. Please go ahead, Mr. Jackson.

Thank you. Good morning, everyone. We're pleased you could join us for the Canadian Utilities first quarter 2023 conference call. With me today is Executive Vice President and Chief Financial Officer Brian Skrobot. Before we move into our formal agenda, I would like to take a moment to acknowledge the numerous traditional territories and homelands on which our global facilities are located. Today, we're speaking to you from ACCO Park head office in Calgary, which is located in the Treaty 7 region. This is the ancestral territory of the Blackfoot Confederacy, comprised of the Siksika, Kainai and Pagani Nations, the Tsitsinu Nation, and the Stony Nakota Nations that include the Tukniki, Bearspaw, and Good Stony First Nations. The City of Calgary is also home to the Métis Nation of Alberta, Region 3. We honor and respect the diverse history, languages, ceremonies, and culture of the indigenous peoples who call these areas home. Brian will begin today with some opening comments on recent company developments our financial results and key trends and expectations from our businesses in 2023. Following these prepared marks, we will take questions from the investment community. Please note that a replay of the conference call and transcript will be available on our website at canadianutilities.com and can be found in the investors section under the heading events and presentations. I'd like to remind you all that our remarks today will include forward-looking statements which are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reports filed by Canadian utilities with the Canadian securities regulators. And finally, I'd also like to point out that during this presentation, we may refer to certain non-GAAP and other financial measures, such as total of segment measures, adjusted earnings, adjusted earnings per share, and capital investment. These measurements do not have any standardized meaning under IFRS. And as a result, they may not be comparable to similar measures presented in other entities. And now, I'll turn the call over to Brian for his opening remarks.

Thanks, Colin. And good morning, everyone. Thank you all very much for joining us here today for our first quarter 2023 conference call. Canadian utilities achieved adjusted earnings of $217 million or $0.81 per share in the first quarter of 2023 compared to $219 million in the first quarter of last year. This was a considerable accomplishment given the expected impact of rebasing in our Alberta distribution utilities in 2023. This overall stability in first quarter earnings was primarily driven by strong contributions from our recently acquired wind generation assets and our Alberta storage assets, both of which served to offset the expected decline in first quarter earnings in our Alberta distribution utilities, which is, of course, associated with the end of PBR2 in 2022 and the transition to a 2023 cost of service. Also contributing to this great year-over-year result was a strong operating performance and timing of CPI indexing in our international natural gas distribution business in Australia, which I will go into more shortly. With our renewables portfolio acquisition closing at the start of this year, the first quarter included a full quarter of contributions from our 40 Mile Wind and Adelaide operating assets. Along with these assets performing in line with expectations operationally, our 40-mile wind asset also benefited from the exceptional merchant market pricing in Alberta during the period. As a reminder, our long-term power purchase agreement for the 40-mile wind asset does not come into effect until Q3 of this year, allowing us to capture these strong merchant market trends in the near term. Similarly, since acquisition, our Alberta Hub storage asset has contributed significantly to growing their earnings in our energy storage segment. Q1 in particular had benefited by strong commodity price spreads, growing injection activity, and higher facility capacity, all of which support strong earnings growth. Looking at our natural gas distribution business in Australia, not only did we see growth in key operating metrics such as tariffs and system volumes in the period, the business also continued to benefit from strong CPI indexing when compared to the first quarter of 2022. As we look back to 2022 for the Australian gas business, it's important to highlight the inflation trend we saw in that year. how this compares to our expectations for 2023, and of course, how this difference will impact our year-over-year results for the business. 2022 saw us enter the year with a full-year annual inflation expectation of just 3% in Australia. By the time the year had ended, however, full-year inflation had reached almost 8%. This surge in inflation resulted in strong earnings for 2022, but more importantly, an earnings profile that built beginning in Q2 of 2022 and rapidly progressed through the year. In 2023, our current in-country estimates for CPI suggest full-year forecast of 4% to 5% of CPI and a greater degree of stability. While first quarter results look favorable to last year, we will expect this trend to revert as the year goes on and expect earnings from this business to be lower when compared to 2022. As we previously discussed, the rate at which CPI may change in the year could potentially have a meaningful impact on the results and will be a key trend to monitor throughout the remainder of the year. Moving on to our Alberta distribution utilities, the work that we were able to advance into the latter part of 2022, combined with key regulatory decisions on the 2023 cost of service framework and the timing of cost, all helped soften the earnings impact of our rebasing in the first quarter of 2023. However, despite the strong showing from this business in the first quarter, I want to caution that the rebasing of Alberta distribution utilities will still result in lower achieved ROEs and earnings for 2023 when we compare that to the prior year. As we move further into 2023, the seasonality and other timing impacts that helped hold first quarter earnings stable will begin to ease. where we'll see the business deliver an earnings profile more in line with expectations for a revising year. Moving on to capital, I just want to briefly touch on the capital investments we made in the first quarter of this year. The first quarter saw us invest $996 million in our business, a significant increase compared to the prior year. The largest driver of this increase was our successful renewable energy portfolio acquisition, which closed in January of this year. Totaling $691 million, this acquisition dramatically increased the size of our renewable energy fleet and rapidly advanced our renewable energy ownership targets. In our core utilities, we invested an additional $262 million and a quarter. This ongoing utility investment ensures continued generation of stable earnings and reliable cash flows while also driving rate-based growth. Beyond the renewables acquisition I mentioned a moment ago, we also invested an additional $42 million within our energy infrastructure businesses in the quarter. These investments were tied to the ongoing energy transition initiatives that we launched last year, which continue to progress. Notably, Our three previously announced solar developments, Deerfoot, Barlow and Empress, continue to move forward with the expectation of commercial operation in 2023. We've also seen great progress advancing numerous projects within our acquired renewables development pipeline and expect the upgrading or upgrading of our 40 mile wind asset to be completed by year end. Similarly, our teams are hard at work on both our world-scale hydrogen production project with Suncor and our Atlas Storage Hub carbon capture and sequestration opportunity with Suncor and Shell. As outlined in our year-end 2022 conference call, we continue to see progress on both of these projects with a decision on feed for our hydrogen development coming in the first half of this year and FID for our sequestration opportunity in a later part of the year. Overall, it was a great quarter that saw our newly acquired assets contribute to earnings in a meaningful way, and our core businesses continue to deliver great performance during this key regulatory transition period. Look forward to providing further updates on the progress of the numerous growth initiatives as the year progresses. And that concludes my prepared remarks. I will now turn the call over back to Colin.