Q1 2024 Canadian Utilities Ltd Earnings Call

Operator: Thank you for standing by. This is the conference operator. Welcome to the first quarter 2024 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 1 on your telephone keypad. If you do 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, Finance, Treasury, and Sustainability. Please go ahead, Mr. Jackson.

Thank you for standing by this is the conference operator, welcome to the first quarter 'twenty 'twenty four results conference call for Canadian Utilities limited.

Operator: Thank you for participating and have a pleasant day...

Operator: As a reminder, all participants are in listen only mode and the conference is being recorded.

Operator: 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 then zero I would now like to turn the conference over to Mr. Colin Jackson, Senior Vice President Finance Treasury and sustain.

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Colin R. Jackson: Ability. Please go ahead Mr. Jackson.

Colin R. Jackson: Thank you and good morning, everyone.

Colin R. Jackson: Thank you and good morning, everyone. We are pleased you could join us for Canadian Utilities' first quarter 2024 conference call. With me today, we have Katie Patrick, Executive Vice President and Chief Financial Officer of Canadian Utilities, and Wayne Stensby, Chief Operating Officer of ACCO Energy Systems. Clint Workington, Executive Vice President and Chief Financial and Investment Officer of ACO Energy Systems, Bob Myles, Chief Operating Officer of ACO Empower, and Greg Stephenson, Chief Financial Officer of ACO Empower.

Colin R. Jackson: We are pleased you could join us for Canadian utilities first quarter 2020 for conference calls.

Colin R. Jackson: With me today, we have Katie Patrick Executive Vice President and Chief Financial Officer of Canadian Utilities Wayne.

Colin R. Jackson: Wayne Stansby, Chief operating officer of Atco Energy systems.

Colin R. Jackson: Two our content executive Vice President and Chief financial and investment Officer Tobacco energy systems.

Colin R. Jackson: Bob miles Chief operating officer tobacco empower.

Colin R. Jackson: And Greg Stevenson Chief Financial Officer.

Colin R. Jackson: Arco empower.

Colin R. Jackson: 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.

Colin R. Jackson: Before we move into our formal agenda, we'd like to take a moment to acknowledge the numerous traditional territories and homelands on which our global facilities are located. Today we are speaking to you from our Aco 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 Pagani Nations, the Tsutsinu Nation, and the Skoda Nakoda Nations, which include the Techniki, Bears Paw, and Good Stony First Nations.

Colin R. Jackson: Today, we are speaking to you from our ankle Park head office in Calgary.

Colin R. Jackson: Which is located in the treaty seven region.

Colin R. Jackson: This is the ancestral territory the Blackfoot Confederacy comprised of it Scott.

Colin R. Jackson: So the <unk> nations to see new nation, and Scouting Dakota Nations that include the Nicky Bears Pas and good Stony first nations.

Colin R. Jackson: The City of Calgary is also home to the Métis Nation of Alberta, Districts 5 and 6. We honor and respect the diverse histories, language, ceremonies, and culture of the Indigenous peoples who call these areas home. Katie will begin today with some opening comments on our financial results and recent company developments, followed by an update from Bob and Wayne on their respective business segments. Following our prepared remarks, the Canadian Utilities team will take questions from the investment community.

Colin R. Jackson: City of Calgary is also home to the <unk> nation of Alberta districts, five and six.

Colin R. Jackson: We honor and respect the diverse histories language ceremonies culture of the indigenous peoples call. These areas home.

Colin R. Jackson: Kt will.

Colin R. Jackson: Again today with some opening comments on our financial results and recent company developments, followed by an update from board and Wayne on their respective business segments.

Colin R. Jackson: Following our prepared remarks, the Canadian utilities team, we'll take questions from the investment community. We ask that questions be limited to two per analyst and if you have additional questions. Please re enter the queue.

Colin R. Jackson: We ask that questions be limited to two per analyst, and if you have additional questions, please re-enter the queue. Please follow up with the investor relations team for any detailed modeling questions. A replay of the conference call, a transcript, and a short supplementary presentation will be available following this call on our website at CanadianUtilities.com. Our remarks today 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 Securities Regulators.

Colin R. Jackson: Yes.

Colin R. Jackson: Please follow up with the Investor relations team for any detailed modeling questions a bit.

Colin R. Jackson: Play of the conference call, a transcript and a short supplementary presentation will be available. Following this call on our website at Canadian utilities Dot com.

Colin R. Jackson: Our remarks today 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 Securities regulators.

Colin R. Jackson: During today's 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 measures do not have any standardized meaning under IFRF, and as a result, they may not be comparable to similar measures presented by other entities.

Colin R. Jackson: During today's presentation, we may refer to certain non-GAAP and other financial measures such as total segment measures adjusted earnings adjusted earnings per share and capital investment. These measures do not have any standardized meaning under ifr Ias.

Colin R. Jackson: And as a result, they may not be comparable to similar measures presented by other entities.

Colin R. Jackson: And now, I'll turn the call over to Katie for her opening remarks.

Colin R. Jackson: And now I'll turn the call over to Katie for her opening remarks.

Katie Patrick: Thanks, Colin, and good morning, everyone. Thank you all for joining us today.

Katie: Thanks, Colin and good morning, everyone. Thank you all for joining us today.

Katie Patrick: Canadian Utilities had a strong start to the year, delivering adjusted earnings of $225 million in the first quarter. This is up 4% from the same period last year. This translates to adjusted earnings per share of $83.70. Additionally, Atco Energy Systems delivered adjusted earnings of $221 million, an increase of 7% from Q1 last year. Results were driven by rate-based growth and an increase to our allowed ROEs from 8.5% to 9.28% across our Alberta-based utilities.

Katie Patrick: Canadian utilities had a strong start to the year delivering adjusted earnings of $225 million in the first quarter.

Katie Patrick: This is up 4% from the same period in 2023.

Katie Patrick: This translates to adjusted earnings per share of <unk> 83 cents.

Katie Patrick: Actual energy systems delivered adjusted earnings of $221 million, an increase of 7% from Q1 last year.

Katie Patrick: Results were driven by rate base growth and an increase to our allowed ROE from eight 5% to nine point to 8% across Alberta based utilities.

Katie Patrick: Atco Empower delivered adjusted earnings of $8 million in the quarter, down $7 million from the same period last year. The energy storage business continues to show strong performance. However, renewable generation experienced lower earnings year over year. Drought in southern Alberta, wind conditions below historical averages, as well as lower merchant prices contributed to the lower earnings profile.

Katie Patrick: And to empower delivered adjusted earnings of $8 million in the quarter down $7 million from the same period last year.

Katie Patrick: The energy storage business continues to show strong performance, however, renewable generation experienced lower earnings year over year.

Katie Patrick: Drought in southern Alberta, when conditions below historical averages as well as lower mentioned prices contributed to the lower earnings profile.

Katie Patrick: Yeah.

Katie Patrick: Beginning this quarter, ATSA Australia is reported as a distinct segment. Previously, AQA Australia was reported in both the energy systems and end power segments. This change enhances our disclosure and aligns our reporting to how we think about the Australian business internally. This will allow us to provide more meaningful information on this segment as we move forward. Aqua Australia delivered a just earnings of $11 million in Q1 2024, down from $60 million last year. Year-over-year results were impacted mostly by lower CPI. As a rule of thumb, every 10 basis points change in CPI results in approximately $1 million annual impact on the Australian business.

Katie Patrick: Beginning this quarter as Australia is reported as a distinct segments previously at Australia was reported in both the energy systems and power segments.

Katie Patrick: This change enhances our disclosure and aligns our reporting to how we think about the Australian business internally.

Katie Patrick: This will allow us to provide more meaningful information on this segment as we move forward.

Katie Patrick: At the Australia delivered adjusted earnings of $11 million in Q1, 2024 down from $60 million last year.

Katie Patrick: Year over year results were impacted mostly by lower CPI expectations.

Katie Patrick: As a rule of thumb every 10 basis points changes CPI resulted in approximately $1 million.

Katie Patrick: Annual impact on the Australian business.

Katie Patrick: And we are currently tracking approximately 1% lower than 2023. Operational execution remains a key priority for Australia, and the business is performing very well. We developed over 3,500 new gas connections during the quarter, an increase of 18% year-over-year, allowing us to grow haulage revenues during the quarter. We also received the draft AA6 response following our submission in late 2023. We are happy to see the draft includes provisions for 82,000 new customer connections through 2029. Post ROE was also increased to 8.47%, reflecting a higher-for-longer interest rate environment.

Katie Patrick: And we are currently tracking approximately.

Katie Patrick: 1% lower than 2023.

Katie Patrick: Operational execution remains a key priority for Australia, and the business is performing very well.

Katie Patrick: We developed over 3500, new gas connections during the quarter, an increase of 18% year over year, allowing us to grow haulage revenues during the quarter.

Katie Patrick: We also received the draft a six response.

Katie Patrick: Mission in late 'twenty, two 'twenty three.

Katie Patrick: We are happy to see the drafts includes provisions for 80 82000, new customer connections through 2029.

Katie Patrick: Post <unk> was also increased to 8.47%, reflecting a higher for longer interest rate environment.

Katie Patrick: There is work to be done on aligning our views around operating efficiencies, capital levels, and accelerated depreciation. We look forward to collaborating with the regulator on how we can confidently invest in Australia, reduce uncertainty for consumers, and support Australia's rapidly evolving energy future. We will respond to this draft by June and expect the final AA6 framework to be finalized by November. Meanwhile, we continue to evaluate numerous growth opportunities in Australia. Our engineering teams are developing energy storage projects that will complement our existing Osborne JV and other renewable power generation assets in the region.

Katie Patrick: There is work to be done on aligning our views around operating efficiencies capital levels and accelerated depreciation.

Katie Patrick: We look forward to collaborating with the regulator on how we can confidently invest in Australia reduce uncertainty for consumers and support Australia's rapidly evolving energy future.

Katie Patrick: We will respond to this draft by June and expect the final Asics framework to be finalized by November.

Katie Patrick: We continue to evaluate numerous growth opportunities in Australia our.

Katie Patrick: Our engineering teams are developing energy storage projects that will complement our existing Osborne JV and other renewable power generation assets in the region.

Katie Patrick: We look forward to providing additional updates later in the year as we make headway on these projects. Stepping back and looking at Canadian Utilities as a whole, cash flow from operations was $502 million in the quarter, which supported our operations, capital program, and normal course financial commitments. We also repaid a $120 million Suyu Ink Dependiture upon maturity with cash on hand. With that, let's dive into each segment in more detail. I will now turn the call over to Wayne to discuss the Actual Energy Systems results.

Katie Patrick: We look forward to providing additional updates later in the year as we make headway on these projects.

Wayne: Stepping back and looking at Canadian utilities as a whole.

Wayne: Cash flow from operations was $502 million in the quarter.

Wayne: Which supported our operations capital program and normal course financial commitments.

Wayne: We also repaid the $120 million do you Ain't debenture upon maturity with cash on hand.

Wayne: With that let's dive into each segment in more detail.

Katie Patrick: I will now turn the call over to Wayne to discuss the actual energy systems results.

Wayne: Thank you Keith.

Wayne K. Stensby: Atco Energy Systems continues to perform well, and we are seeing positive momentum in this quarter's results. Adjusted earnings were $221 million in the first quarter of 2024, which is a $14 million increase over the same period from last year.

Wayne: Atco energy systems continues to perform well and we are seeing positive momentum in this quarter's results.

Wayne: Adjusted earnings were $221 million in the first quarter of 2024, which is a $14 million increase over the same period from last year.

Wayne: And as Katie mentioned and as we have previously discussed in the Q4 2000 Twenty's recall over regulators have approved an increase in the allowable Roy from eight 5% in 2023% to 9.28% in 2024.

Wayne K. Stensby: And as Katie mentioned, and as we had previously discussed in the Q4 2023 call, Alberta regulators approved an increase in the allowable ROE from 8.5% in 2023 to 9.28% in 2024. This has benefited adjusted earnings in both our electricity and natural gas businesses in Alberta. This decision provides us with certainty on our returns from our utility investments and sets out, importantly, a path forward. Atco Energy Systems invested over a billion dollars in our four Alberta-based utilities through 2023. And we invested an additional $282 million in the first quarter of 2024.

Wayne K. Stensby: This has benefited adjusted earnings in both our electricity and natural gas businesses Brito.

Wayne K. Stensby: Decision provides us with certainty on our returns from our utility investments and said so.

Wayne K. Stensby: Importantly, our path forward.

Wayne K. Stensby: Atco energy systems invested over $1 billion in our four Alberta based utilities through 2023, and we have invested an additional $282 million in the first quarter of 2024, our investments are focused really in five areas, which would be customer growth our customer connections system reliability.

Wayne K. Stensby: Our investments are really focused on five areas, which would be customer growth or customer connections, system reliability and safety, climate adaptation and resiliency, decarbonization, and new technology. Our growth outlook remains strong, supported by customer growth and projects like the Central East Transfer Out Transmission project, which is scheduled to begin construction later this year. We are on track to deliver the investment levels in line with our three-year plan, and we will provide additional detail on our capital priorities and our programs at our annual general meeting next week. On the regulatory side, we received a decision in late March from the AUC that approved the previously announced ATCO Pipelines Negotiated Settlement for the 24 and 25 GRA.

Wayne K. Stensby: <unk> and safety climate adaptation, and resiliency decarbonization and new technology.

Wayne K. Stensby: Our growth outlook remains strong supported by customer growth and projects like the central lease transfer road transmission project, which is scheduled to begin construction later this year.

Wayne K. Stensby: We are on track to deliver the investment levels in line with our three year plan and we will provide additional detail on our capital priorities and our programs at our annual General meeting next week.

Wayne K. Stensby: On the regulatory side, we received a decision in late March from the AUC that had approved the previously announced agco pipelines negotiated settlement for the 'twenty four and 'twenty five.

Wayne K. Stensby: G R E.

Wayne K. Stensby: And, as previously mentioned, we are happy to have certainty and a stable outcome regarding these matters. We'll continue to work closely with our regulator as we advance growth across our Alberta utilities. Finally, I want to thank our energy systems team for their tremendous work across the past quarter. I'm proud to say that despite the many challenges the team faced during the unprecedented cold spell in January, we were able to keep Albertans warm with reliable gas and electricity.

Wayne K. Stensby: And as previously mentioned, we are happy to have certainty and a stable outcome regarding these matters will continue to work closely with our regulator as we advance growth across our Alberta utilities.

Wayne K. Stensby: And <unk>.

Wayne K. Stensby: Finally, I want to thank our energy systems team for their tremendous work across the past quarter I'm proud to say that despite the many challenges the team faced during the unprecedented cold spell in January we were able to keep albertsons warm with reliable gas and electricity.

Wayne K. Stensby: Our system was tested during this period and we're evaluating future upgrades and investments in order to provide the reliability that our customers expect during these ever challenging times.

Wayne K. Stensby: Our system was tested during this period, and we're evaluating future upgrades and investments in order to provide the reliability that our customers expect during these ever challenging times. We are also anticipating and, in fact, have begun an active wildfire season. And our teams have been, you know, busy preparing through the winter months. They have identified the high-risk areas of our system, and we have invested in hardware upgrades and improvements across our service territory.

Wayne K. Stensby: Yeah.

Wayne K. Stensby: We are also anticipating and in fact have begun enacted wildfire season, and our teams have been have.

Wayne K. Stensby: I have been busy preparing through the winter months.

Wayne K. Stensby: They have identified the high risk areas of our system and we have invested in hardware upgrades and improvements across our service territory.

Wayne K. Stensby: As well, we've increased our inventory to mitigate supply chain timelines, and we've been working with our contractor teams to ensure there are sufficient resources available across the season. As in previous years, we are also working closely and fully engaged with Alberta Forestry and Parks and our municipal partners in order to provide a coordinated response. As I look ahead, I see a lot to be excited about in 2024 and beyond. Alberta had the highest population growth in Canada in 2023, and industrial activity continues to show very strong momentum and growth.

Wayne K. Stensby: As well, we've increased our inventory to mitigate supply chain timelines and we've been working with.

Wayne K. Stensby: Our contractor teams to ensure there is sufficient resources available across the season as in previous years. We are also working closely and fully engaged with Alberta, forestry and parks and our municipal partners in order to provide a coordinated response.

Wayne K. Stensby: As I look ahead I see a lot to be excited about in 2024 and beyond Alberta has experienced the highest population growth in Canada in 2023, and industrial activity continues to show very strong momentum and growth, Alberta energy needs are expanding and energy systems is well positioned.

Wayne K. Stensby: Alberta's energy needs are expanding, and Energy Systems is well positioned to move that energy and deliver that energy to where our customers need it. We look forward to growing with Albertans and playing our part in the energy transition. And with that, I'll pass the call over to Bob.

Bob: Move that energy deliver that energy to where our customers need as we look forward to growing with El burdens and playing our part in the energy transition.

Wayne K. Stensby: And with that I'll pass the call over to Bob.

Bob: Speak about empower.

Robert J. Myles: Thanks, Wayne. Within our storage and industrial water business, we saw stronger spreads on our natural gas storage during the quarter. This led to a 25% increase in adjusted earnings for the quarter in that business. The NPower team has secured several fixed long-term contracts for storage, and this has provided better visibility on earnings and higher overall margin. As Katie indicated, on the generation side of Penn Power, our Old Man River hydro asset was curtailed in the quarter due to exceptionally dry conditions in southern Alberta. However, following significant recent precipitation, this facility is now once again operating.

Bob: Thanks, Wayne within our storage and industrial water business, we saw a stronger spreads on our natural gas storage during the quarter. This led to a 25% increase in adjusted earnings for the quarter in that business.

Robert J. Myles: The empower team has secured several fixed long term contracts for storage and this would provide better visibility on earnings and higher overall margins is.

Robert J. Myles: As Kathy indicated on the generation side of empower our old Man River Hydro asset was curtailed in the quarter due to exceptionally dry conditions in southern Alberta. Following significant recent precipitation. This facility is now once again operating.

Robert J. Myles: Wind generation was down compared to Q1 2023, as we saw wind generation across the province below five-year average levels, and we lost generation when temperatures were below the safe operating temperatures for our turbines. These negative impacts were partially offset by contributions from our Barlow, Deerfoot, and Empress solar assets, which achieved commercial operations in the second half of 2023. We are prepared to take advantage of more favorable summer water flow, solar hours, and wind conditions as we move forward through the remainder of this year. Comparing Q1 2023 to Q1 2024, our average sale price for power generation declined from $106 to $84 per megawatt hour as a result of a rapidly declining merchant pricing environment in Alberta.

Robert J. Myles: Wind generation was down compared to Q1 2023, as we saw wind generation across the province below five year average levels and we lost generation when temperatures were below the safe operating temperatures for our turbines. These.

Robert J. Myles: These negative impacts were partially offset by contributions from our Barlow Dear foot and Empress solar assets, which achieved commercial operations in the second half of 2023.

Robert J. Myles: We are prepared to take advantage of more favorable summer waterflood, <unk> solar hours and wind conditions as we move forward through the remainder of this year.

Robert J. Myles: Comparing Q1, 'twenty twenty-three to Q1 2024 hour average sale price for power generation declined from $106 to $84 per megawatt hour as a result of a rapidly declining merchant pricing environment in Alberta.

Robert J. Myles: Over the past 12 months, we increased the proportion of our generation assets contracted under power purchase arrangements from 18% in Q1 2023 to 79% in Q1 2024. This aligns with our strategy to have approximately 75% of our generation portfolio under long-term contracts, which for us reduces risk, lowers volatility, and increases access to the capital necessary to develop our pipeline of renewable energy projects. Looking over the long term, Canadians are demanding more and cleaner forms of energy. In April, the federal government confirmed its intent to have Bill C-59 approved by June 1, 2024. This is the legislation containing provisions for carbon capture, utilization, and storage, as well as for clean technology investment tax credits.

Robert J. Myles: Over the past 12 months, we increased the proportion of our generation assets contracted under power purchase arrangements from 18% in Q1, 'twenty 'twenty, 3% to 79% in Q1 2024.

Robert J. Myles: This aligns with our strategy to have approximately 75% of our generation portfolio under long term contracts, which for us reduces risk lowers volatility and increases access to the capital necessary to develop our pipeline of renewable energy projects.

Robert J. Myles: Looking over the long term Canadians are demanding more and cleaner forms of energy in April the federal government confirmed their intent to have Bill C. 59 approved by June 1st 2024.

Robert J. Myles: This is the legislation containing provisions for carbon capture utilization and storage as well as clean technology investment tax credits. These investment tax credits will allow us and our partners to invest with more certainty our development portfolio will allow us to capitalize on opportunities in the energy transition.

Robert J. Myles: These investment tax credits will allow us and our partners to invest with more certainty. Our development portfolio will allow us to capitalize on opportunities in the energy transition, and the team is working hard to ensure our path forward is commercially viable and will generate sustainable long-term shareholder value. As it relates to our project pipeline, we continue to advance several initiatives. Our 40-mile solar project is shovel-ready, and our focus remains on contracting a significant portion of the generation prior to commencing construction.

Robert J. Myles: <unk> and the team is working hard to ensure our path forward is commercially viable and will generate sustainable long term shareholder value as it relates to our project pipeline. We continue to advance several initiatives are 40 miles solar project is shovel ready and our focus remains on contracting of signet.

Robert J. Myles: <unk> portion of the generation prior to commencing construction. We also continue to make progress on the Atlas carbon sequestration project with our partner Shell, Canada and together, we are advancing towards F. D. In Q2 of this year once the carbon capture and storage at T. C has been passed.

Robert J. Myles: We also continue to make progress on the Atlas Carbon Sequestration Project with our partner Shell Canada, and together we are advancing towards FID in Q2 of this year once the Carbon Capture and Storage ITC has been passed into legislation. Our 40 mile operating project has completed construction, and we are now in the commissioning phase of this project. This will add 23 megawatts of additional capacity, and we are on track to begin commercial operations in the back half of 2024.

Robert J. Myles: Into legislation.

Robert J. Myles: Our 40 mile operating project has completed construction and we are now in the commissioning phase of this project. This will add 23 megawatts of additional capacity.

Robert J. Myles: And we are on track to begin commercial operations in the back half of 2024.

Robert J. Myles: On our large hydrogen project, we are in the final stages of a process to select a partner. We are progressing commercial discussions with potential offtakers, and we have been moving forward with the technology selection and other technical work associated with this project. We remain excited about the potential growth of NPower and the business, and we will continue to provide updates on these projects throughout 2024. With that, I'll now pass the call back to Katie. Thanks, Bob.

Robert J. Myles: On our large hydrogen project, we are in the final stages of our process to select a partner we are progressing commercial discussions with potential off takers and we have been moving forward with technology selection and other technical work associated with this project.

Katie Patrick: We remain excited for the potential growth of empower and the business and we will continue to provide updates on these projects throughout 2024.

Robert J. Myles: With that I'll now pass the call back to Katie.

Katie Patrick: Thanks, Bob.

Katie Patrick: Thanks, Bob. Canadian Utilities is off to a good start in 2024. We are executing well on our operating plans and continue to make progress on our growth opportunities. As most on this call are aware, we released updated rate-based growth and capital guidance for our utilities at year-end and are advancing on this work. In addition, we have provided substantially more detail on our NPower projects and milestones in our investor presentation. And finally, Colin and I would like to thank the many investors we recently met with as we were proactively increasing our engagement and transparency with the investment community.

Katie Patrick: Many utilities is off to a good start in 2024.

Katie Patrick: Executing well on our operating plans and continue to make progress on our growth opportunities.

Katie Patrick: As most on this call are aware, we released updated rate base growth and capital guidance for utilities at year end and are advancing on this work. In addition, we have provided substantially more detail on our empower projects and milestones in our investor presentations.

Katie Patrick: And finally, Colin and I would like to thank the many investors. We recently met with as we were proactively increasing our engagement and transparency with the investment community.

Katie Patrick: I would also like to thank the internal team for their hard work over the past quarter and demonstrating our core values of safety, integrity, agility, caring, and collaboration every day. With that, we will now open the line for questions.

Katie Patrick: I would also like to thank the internal team for their hard work over the past quarter and demonstrating our core values of safety integrity agility carrying and collaboration everyday.

Katie Patrick: With that we will now open the line for questions.

Speaker Change: Thank you.

Operator: To join the question queue, you may press star, then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then 2. The first question comes from Maurice Choy with RBC Capital Markets. Please go ahead.

Katie Patrick: To join the question queue you May Press Star then one on your telephone keypad.

Operator: You'll hear a tone acknowledging your request if you are using.

Maurice Choy: Speakerphone, please pick up your handset before pressing any key cause there.

Operator: Your question. Please press Star then two.

Operator: The first question comes from Maurice Choy with RBC capital markets. Please go ahead.

Maurice Choy: Thank you and good morning, everyone just wanted to pick up on the discussion on the large scale hydrogen project.

Maurice Choy: Thank you and good morning everyone. I just want to pick up on the discussion on the large-scale hydrogen project, and I appreciate that you're in the final stages of selecting a partner, and discussions for commercial offtakers are ongoing. Can you just provide a little more color and be more specific as to what tends to be the gating factors that prevent some of these selections, and more specifically, you know, if you look out to the next seven months or so, how should we figure out, how should we think about the progression of these updates? We'll hear everything all at once or progressively every quarter; there'll be more and more to share.

Maurice Choy: And I appreciate that you're in final stages of selecting a partner in discussions with commercial secrets are ongoing can.

Maurice Choy: Can you just provide a little more color and be more specific as to what tends to be gating factors that prevent some selections and more specifically.

Maurice Choy: If you look out to the next seven months or so.

Maurice Choy: How should we figure out how should we.

Maurice Choy: Think about the progression of these updates isn't a well here everything all at once or progressively in the corner there'll be more and more to share.

Bob: Thanks, Maurice Bob here.

Robert J. Myles: Thanks, Maurice. Bob here. To me, there's going to be a number of different announcements as we go forward, but the first thing we really are focused on is ensuring that we have the appropriate partner for us. And that partner is really, we're looking in the area of a strategic partner and someone that can help us develop the project. But at the same time, we're also looking for partners in the area of offtake.

Maurice Choy: To me, there's going to be a number of different announcements as we go forward, but the first thing. We really are focused on is ensuring that we have the appropriate partner for us and that partner is really where we're looking in the area of a strategic partner.

Robert J. Myles: And someone that can help us develop the project, but at the same time. We're also looking at partners in the area of offtake.

Robert J. Myles: And you know, I don't mind sharing with you that we're looking both domestically and exportally, and there's a lot of momentum in both of those areas. There's significant interest in Southeast Asia right now for hydrogen or hydrogen derivative projects from Western Canada. So we're having very lengthy discussions in both of those areas as we speak. So hopefully, as I said, we'll be able to make an announcement on our partner later this quarter, and then we still want to get to, you know, our feed in 2024 with a financial investment decision in 2025. That's still our plan.

Bob: And you know I don't mind sharing with you that where we're looking both domestically and export and there's a lot of momentum in both of those areas and there's significant interest in southeast Asia right now for our hydrogen or hydrogen derivative project from Western Canada. So we're having very lengthy does.

Robert J. Myles: <unk> and both of those areas as we speak.

Maurice Choy: Thanks. And just to be clear, this is the partner and the offtaker, likely to be the same as it was with the prior ex partner or two separate entities.

Robert J. Myles: So hopefully as I said, we'll be able to make an announcement on a partner later this quarter and then we still want to get to you know our feed in 2024 with a financial investment decision in 2025, that's still our plan.

Maurice Choy: Yeah.

Speaker Change: Thanks, and just to be clear.

Maurice Choy: <unk> is the.

Maurice Choy: Partner and the off taker like E B C. As it was.

Maurice Choy: Yep.

Maurice Choy: Ex partner.

Maurice Choy: Two separate entities.

Robert J. Myles: Maurice, it could be, or it could be separate. We're looking at a scenario where they're separate and a partner that will come in as a strategic but, for example, as when you talk about Southeast Asia, more than likely that will just be an offtaker from Southeast Asia.

Speaker Change: Maurice it could be or it could be separate we're looking at a scenario, where they're separate and my partner that'll come in as a strategic but for example, as if we when you talk about southeast Asia more than likely that will just be an off taker from southeast Asia.

Maurice Choy: Thank you for that. And, yep, it does. And second question, I want to come back to a comment about Australia that Katie mentioned. You mentioned that the reset notation of information allows you to provide more meaningful information moving forward. In the past, you've always broken down the earnings from the Australian gas LBC, just not the power business. However, the power business isn't that big from a contribution perspective. So what meaningful information are you hoping to provide that we don't already have? Or is it that you expect this to be bigger moving forward, thereby justifying its own line?

Speaker Change: Understood. Thank you I hope that in.

Maurice Choy: It does.

Maurice Choy: Second question I wanted to come back to a comment about Australia that Gideon mentioned.

Maurice Choy: You mentioned that the recent mutation that information.

Maurice Choy: To provide more meaningful information moving forward.

Maurice Choy: In the past you've always broken down the earnings from the Australian gas LDC team just knocked the power business. However, the power business isn't that big from a contribution perspective, so what meaningful commission that you're hoping for but that we don't really do you have or is it that you expected the bigger moving forward, thereby just.

Maurice Choy: Its own line item.

Speaker Change: Yeah. Thanks for that <unk> I think the big thing is right now you're right. We've always provided both the power and Australian gas separately. They just render different segments as I mentioned, it's partly about the fact that internally we are viewing Australia now more holistically.

Katie Patrick: Yeah, thanks for that, Maurice. I think the big thing is, right now, I know you're right; we've always provided both power and Australian gas separately; they just were under different segments. As I mentioned, it's partly about the fact that internally, we are viewing Australia now more holistically, especially with the appointment of John Ivelitch as the country CEO down there. But it is about sort of moving forward where we will continue to have growth on both, well, predominantly on the energy transition side of the business down there. So we're hoping that with the segmented disclosure, that will always provide more meaningful disclosure in that regard.

Katie Patrick: Especially with the appointment of John I village as the country's CEO down there.

Katie Patrick: But it is about sort of the moving forward, where we will continue to have a growth on both.

Katie Patrick: But predominantly on the energy transition side of the business down there. So we're hoping that with the segmented disclosure that that will allow us to provide more meaningful disclosure in that regard.

Katie Patrick: Okay.

Maurice Choy: Got it. And just so I am a little more pointed in my follow-up question here, as you think about funding your energy transition, I'd recognize that, you know, separating end power is one of the potential options here, but how should we view Australia as a business? Is it still core to you? holistically, where does it fit into your overall funding?

Katie Patrick: Got it and then just.

Speaker Change: I am a liberal pointed in my follow up question here as you think about funding your energy transition.

Maurice Choy: Recognize that.

Maurice Choy: Separating empower it's one of the potential options here, but.

Maurice Choy: How do how should we view, Australia as a business that still core to you.

Maurice Choy: Holistically, where does it fit into your overall funding plan.

Maurice Choy: Yeah in Australia is definitely still a core business for us where we're at.

Katie Patrick: Yeah, Australia is definitely still a core business for us, and we're really excited about the prospects that we see down there. I think in some ways, the government in Australia, as you can see, as evidenced by the South Australian hydrogen project that we mentioned on previous calls, is moving quicker than even in Canada. So from a market perspective, we're still really excited about the opportunities to participate in the energy transition down there.

Katie Patrick: We're really excited about the prospects that we see down there I think in some ways. The government in Australia. As you can you know as evidenced by the.

Katie Patrick: Seth Australian hydrogen project that we've mentioned on previous calls is living quicker than even in Canada. So from a market perspective, we're still really excited about the opportunities to participate in the energy transition down there.

Katie Patrick: And Australia definitely remains a core holding for us. I think as a follow-up, you asked about the funding down there. The gas utility remains, you know, a self-funding entity in Australia. And as we look to growth projects, a couple things. Obviously, we do have access to parent equity if needed, but as well, the Australian business has the ability, they are relatively under leveraged at the Australian level and have the ability, probably, to access some funds for growth in that regard.

Katie Patrick: And Australia definitely remains a core holding for us.

Speaker Change: I think it is a follow up you said you asked about the funding down there.

Katie Patrick: You know the gas utility remains.

Katie Patrick: A self funding entity.

Katie Patrick: In Australia, and as we look to growth projects.

Katie Patrick: Things I mean, obviously, we do have access to.

Katie Patrick: Parents equity if needed, but as well the Australian business has the ability they are relatively.

Katie Patrick: Under leveraged at the Australian level and have the ability probably to access some funds for growth in that in that regard.

Speaker Change: Perfect that makes sense. Thank you very much.

Maurice Choy: Perfect. That makes sense. Thank you very much.

Maurice Choy: The next question comes from Mark Jarvi CIBC capital markets. Please go ahead.

Operator: The next question comes from Mark Jarvi with CIBC Capital Markets. Please go ahead.

Mark Thomas Jarvi: Good morning, everyone. So maybe on the access arrangement, or at least the draft that's come out, when you think about the ROE equity thicknesses maintained, how do you think that kind of translates to expected earnings relative to what the ROE was now? And I guess how much capital, for lack of a better word, was disallowed relative to what you would have expected and that you're sort of arguing for as we get to the final decision?

Mark Thomas Jarvi: Yes, good morning, everyone. So maybe on the access arrangement for the at least to the draft. That's come out when you think about the ROE equity thickness isn't maintain how do you think that kind of translate.

Mark Thomas Jarvi: Translate to an expected earnings.

Mark Thomas Jarvi: Relative to what the ROE was now and I guess, how much capital.

Mark Thomas Jarvi: Hum for lack of better word was disallowed relative to what you would've expected and that you were sort of arguing for as we get to the final decision.

Katie Patrick: Yeah, I would just say, I think it's a little early for us to jump towards the earnings impact of that we're obviously, the ROE is obviously a positive upside for us. But that yet also has to be determined on a final basis as we approach nearer to the November timeframe. But in terms of some of the things that we mentioned, we want to work with them on the operating capital, the total amount of operating expenses, and the capital. But it is a little early before we can sort of put those things together, because, as with our previous access arrangements, there was pretty substantial movement between the draft that we received and the final decision. So, I think it's too early to sort of make any calls on the impact of earnings.

Speaker Change: Yeah, I would just say I think it's a little early for us to to jump towards the earnings impact of that were obviously you know the the iron ore.

Katie Patrick: We are positive.

Katie Patrick: Upside for us.

Katie Patrick: But that yet also has to be determined on a final basis as we approach in Europe to the to the November timeframe, but in terms of some of the things as we mentioned we want to work with them on the operating capital on the.

Katie Patrick: Okay.

Katie Patrick: The amount of operating expenses the capital.

Katie Patrick: But it is a little early before we can sort of put those things together because as.

Katie Patrick: As with our previous access arrangements you know there was it was pretty substantial movement between the draft that we received and the final decision. So I think it's too early to sort of make any calls on the impact to earnings.

Katie Patrick: Okay, and then coming back to the G. R. A in a gas pipeline is it asked for some like some working capital recovery or construction work in progress on this yellow had mainline pipeline, which is quite substantial.

Mark Thomas Jarvi: Okay, and then coming back to the GRA and the gas pipeline, because it asked for some working capital recovery or construction work in progress on this Yellowhead mainline pipeline, which is quite substantial, they didn't grant that, but yet in the, you know, filings that kind of show that that project could be coming, you know, sooner than later, can you just kind of outline that project, status of it, how you think about it, how do you think we'll get in regulatory approval when capital starts to need to be sort of deployed on that project?

Mark Thomas Jarvi: They didn't grant that but yet and it didn't.

Mark Thomas Jarvi: The.

Mark Thomas Jarvi: Violent to kind of show that that project could be coming.

Mark Thomas Jarvi: Sooner than later can you just outline that project status of it how you think about it how do you think we're getting regulatory approval one capital starts to need to be sort of deploy it on that project.

Wayne K. Stensby: Absolutely. Thanks, Mark.

Mark Thomas Jarvi: Absolutely.

Speaker Change: Thanks Mark.

Wayne K. Stensby: The sort of connection into the GRA was really around whether we were gonna get it, call it a two-year period or a three-year period. And, given the state of some of those pipeline expansion projects, we were quite satisfied with the two-year period and the working capital. Of course, we do, you know, as you'd be aware, we do get AFUDC nonetheless on all of the capital projects that are underway.

Wayne K. Stensby: The sort of connection into the G. R. A was really around whether we were going to get.

Wayne K. Stensby: Get a call it a two year period over a three year period.

Wayne K. Stensby: And.

Wayne K. Stensby: Given the state of some of those pipeline expansion projects.

Wayne K. Stensby: We're quite satisfied with the two year period and the.

Wayne K. Stensby: The working capital of course, we do you know as you'd be aware, we do get a a few D. C. Nonetheless song.

Wayne K. Stensby: All of the capital projects that are underway, we see.

Wayne K. Stensby: We see, you know, back to system expansion, I think not only the project you mentioned, but there are a significant amount of kind of growth demands that we see coming out of the pipelines business, and we look forward to making, you know, subsequent announcements in that regard over the next quarter, I would say, and, you know, firming some of that up, but we are seeing very, very strong underpin by customer contracts, which I think is, is a fundamental part of how we see the next three, and even five years growth in our business.

Wayne K. Stensby: Back to system expansion I think not only the project you mentioned, but there are a significant amount of kind.

Wayne K. Stensby: Kind of growth demands that we see coming out of the pipelines business and and we look forward to making subsequent.

Wayne K. Stensby: Announcements in that regard over the next quarter I would say in.

Wayne K. Stensby: Firming some of it up but we are seeing very very strong.

Wayne K. Stensby: Underpinned by customer contracts, which I think is is a fundamental.

Wayne K. Stensby: Part of how we see the next three and even five years growth in our business.

Wayne K. Stensby: Yeah.

Mark Thomas Jarvi: So in those filings, it said that CapEx for that one pipeline could be north of $1.5, up to $2.5 billion. Would that be sort of shared with someone else? Like, is that—are you assuming that this goes down a rate-regulated path? Are there other options you're thinking about?

Wayne K. Stensby: So in those filings it said the capex for that one pipeline could be north of 1.5 up to $2 5 billion would that'd be sort of.

Mark Thomas Jarvi: Shared with someone else like is that are you assuming it just goes down our rate regulated path is there other options you're thinking about and so when you say some clarity in the next quarters as that specific around this project or smaller pipelines you're looking at.

Wayne K. Stensby: And so when you say—

Wayne K. Stensby: No, I would say specific around this precise opportunity, and that range of CAPEX is still correct as far as we see it. And in terms of, and it would be, and it would.

Speaker Change: No I would say specific around this.

Wayne K. Stensby: Precise opportunity in that range of Capex is.

Wayne K. Stensby: Still <unk>.

Wayne K. Stensby: Correct as far as we see it.

Wayne K. Stensby: And in terms of and it would sorry and it would be within.

Wayne K. Stensby: The atco pipelines regulated.

Wayne K. Stensby: Rate base.

Wayne K. Stensby: So the update would just be a new filing, essentially, and the kick-off of a new case.

Wayne K. Stensby: So the update would just be a new filing essentially and kick off of a new case.

Wayne K. Stensby: The any any sort of subsequent.

Wayne K. Stensby: any sort of subsequent development projects within Atco Pipelines. Um, the, you know, as the projects progress, the next big regulatory piece would be a needs application with the AUC.

Wayne K. Stensby: Development projects with inadequate pipelines.

Wayne K. Stensby:

Wayne K. Stensby: The as the projects progress the next big Regs.

Wayne K. Stensby: Regulatory piece would be a needs application with the AUC.

Mark Thomas Jarvi: Okay. Okay, thanks everyone, and see you next week.

Speaker Change: Understood. Okay. Thanks for everyone and see you next week.

Colin R. Jackson: This concludes the question and answer session. I would like to turn the conference back over to Mr. Colin Jackson for any closing remarks. Please go ahead.

Mark Thomas Jarvi: This concludes the question and answer session I would like to turn the conference back over to Mr. Colin Jackson for any closing remarks. Please go ahead.

Colin R. Jackson: Thank you Sir.

Colin R. Jackson: Thank you all for participating today. We appreciate your interest in Canadian Utilities, and we look forward to speaking to you soon again.

Colin R. Jackson: And thank you all for participating today, we appreciate your interest in Canadian utilities, and we look forward to speaking to you soon again.

Operator: This concludes today's conference call. You may disconnect your lines.

Speaker Change: This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

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Operator: Yeah.