Canadian Utilities Limited

Thank you for standing by. This is the conference operator. Welcome to the fourth quarter 2024 results conference call and webcast 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 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Mr. Colin Jackson, Senior Vice President, Financial Operations. Please go ahead, Mr. Jackson.

Thank you, and good morning, everyone. We are pleased you could join us for the Canadian Utilities fourth quarter 2024 conference call. On the line today, we have Katie Patrick, Executive Vice President, Chief Financial and Investment Officer, and Bob Miles, President and Chief Operating Officer. Before we move into today's remarks, I would like to take a moment to acknowledge the numerous traditional territories and homelands on which our global facilities are located. Today, I am speaking to you from our Akko 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, the Kainai, the Pekani, and the Tsutina Nation, and the Stony Nakota Nations, which include the Chikniki, Bears Paw, and Good Stony First Nations. I also want to recognize that the City of Calgary is home to the Métis Nation of Alberta, Districts 5 and 6. We honor and respect the diverse history, languages, ceremonies, and culture of the Indigenous people who call these areas home. Today, you'll hear from Katie, who will deliver opening comments on our financial results, along with an update for our Australian businesses, and from Bob, who will discuss key recent developments within our ACCO energy systems and ACCO Empower businesses. Following today's remarks, the Canadian Utilities team will take questions from the investment community Please note that a replay of the conference call, copy of the presentation, and today's transcript will be available on our website at canadianutilities.com following the call. The materials can be found in the Investors section under Events and Presentations. Today's remarks will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please refer to our filings with the Canadian security regulators. During today's presentation, we may refer to certain non-GAAP and other financial measures, including adjusted earnings, adjusted earnings per share, and adjusted EBITDA. These measures do not have any standardized meaning under IFRS, and as a result, they may not be comparable to similar measures presented by other entities. Please refer to our filings with the Canadian securities regulators for more information. And now, I'll turn the call over to Katie for her opening remarks.

Thanks, Colin, and good morning, everyone. Thank you all for joining us today. 2024 was a great year for Canadian utilities and demonstrated our continued focus on operational execution. We achieved adjusted earnings of $647 million up from $596 million in 2023. This translated to adjusted earnings per share of $2.38 for 2024. Acto Energy Systems delivered adjusted earnings of $632 million in 2024, an increase of 11% or $61 million compared to last year. This year-over-year growth was primarily driven by a few factors, including rate-based growth across our utilities, an increase in the allowable ROE from 8.5% in 2023 to 9.8% in 2024, and the benefit of the efficiency carryover mechanism, which provided an additional 50 basis points of ROE in our distribution utilities. As we look to 2025, there are some trends I would like to highlight that we expect will moderate earnings growth for Atkal Energy Systems. First, our allowable ROE of 9.28% for 2024 has been reset to 8.97% for 2025 across Alberta utilities. We expect this decision to have a year-over-year impact to earnings of approximately $15 million. Also, our incremental 50 basis points of ROE that our gas and electric distribution utilities benefited from due to strong efficiency gains under PBR2 concluded at the end of 2024. We expect this decision to have a year-over-year impact earnings of approximately $11 million. Despite these headwinds, we expect to have rate-based growth across our utilities and remain committed to pursuing efficiencies throughout our business, which will continue to translate to high-quality earnings for 2025 and beyond. Moving to Acto Empower, we delivered adjusted EBITDA in 2024 of $146 million, up $14 million from last year. and adjusted earnings of $44 million. Within our electricity generation business, we reported adjusted EBITDA of $75 million, an increase of $2 million over last year, and adjusted earnings of $6 million. The year-over-year increase in adjusted EBITDA was a result of increased generation of approximately 12% or 104,000 megawatt hours, and a received settlement related to lost generation in 2023 covered under warranties on our generation assets. Growth was partially offset as Alberta saw a significant decrease in merchant power prices and capture prices for both solar and wind assets, resulting in our lower average realized price of $75 per megawatt in 2024, compared to $95 per megawatt in 2023. Given our overall contracting strategy, our contracted sales volumes increased from 41% in 2023 to 73% in 2024 to reduce volatilities and stabilize future earnings and cash flow. Within our storage and industrial water business, we delivered a strong year with adjusted EBITDA of $71 million and adjusted earnings of $38 million, up $7 million from last year. Earnings growth in this segment was driven by strong seasonal spreads and the high demand for natural gas and liquid storage. As we look to 2025, we expect storage and industrial water to have a similar earnings profile compared to 2024. This is driven by our success in securing several fixed and long term contracts that provide line of sight to earnings next year. ATCO Australia delivered adjusted earnings of $48 million in 2024. This fell by 12 million compared to 2023. As we discussed throughout 2024, Lower adjusted earnings are due to the impact of inflation indexing on rate base in Aquagas Australia. In 2023, Australian inflation indexing reflected a full year inflation assumption of 4%, while inflation moderated to 2.6% for 2024. As a rule of thumb, a 10 basis points change to inflation has an impact to earnings of approximately $1.2 million. Our positive year-over-year result in our corporate line reflects a strong focus on finding efficiencies within our business and strong returns on our short-term investments, which reduced overall financing costs. Looking at Canadian utilities as a whole, cash flow from operations was $1.9 billion in 2024, up 8% from the prior year. This growth supported our operations capital program and normal course financial commitments. With that, I will now turn the call over to Bob, who will discuss key recent developments within our Apto Energy systems and Apto Empower businesses.