Canadian Utilities A ((TSE:CU)) has held its Q4 earnings call. Read on for the main highlights of the call.
Canadian Utilities A’s recent earnings call painted a picture of both achievement and challenge. The company reported significant growth in adjusted earnings, driven by strategic investments and expansion plans, particularly in Australia. However, it also faces headwinds from decreased return on equity (ROE), uncertainties in the renewable energy market, and regulatory challenges. Despite these obstacles, the overall sentiment remains positive, with a focus on growth and strategic investments.
Strong Adjusted Earnings Growth
Canadian Utilities A reported adjusted earnings of $647 million in 2024, up from $596 million in 2023. This growth translates to an adjusted earnings per share of $2.38, showcasing the company’s robust financial performance over the past year.
ATCO Energy Systems Performance
ATCO Energy Systems delivered impressive results with adjusted earnings of $632 million in 2024, marking an 11% increase from the previous year. This performance was primarily driven by rate base growth and an increase in the allowable ROE.
Expansion Plans and Capital Investment
The company has ambitious expansion plans, having invested $1.4 billion in utilities within ATCO Energy Systems. It plans to invest a further $5.8 billion in Canadian regulated utilities over the next three years, aiming for an average annual rate base growth of 5.4%.
Positive Developments in Australia
In Australia, ATCO Gas achieved adjusted earnings of $48 million. The introduction of the new AA6 plan increased the regulated ROE to 8.23%, which is expected to boost adjusted earnings by 8% to 10% in 2025.
Decrease in Allowable ROE
The allowable ROE for ATCO Energy Systems in Alberta is set to decrease from 9.28% to 8.97% in 2025, which is anticipated to negatively impact earnings by approximately $15 million.
Renewable Energy Market Uncertainties
The renewable energy sector in Alberta is facing challenges, with a significant decrease in merchant power prices leading to a lower average realized price of $75 per megawatt in 2024 compared to $95 in 2023. Regulatory uncertainty is also causing delays in renewable projects.
Challenges in Australian Operations
ATCO Australia’s adjusted earnings fell by $12 million compared to 2023, largely due to the impact of lower inflation indexing on the rate base.
Regulatory and Political Uncertainty
The company is navigating through political and regulatory uncertainties affecting hydrogen and carbon projects at both federal and provincial levels.
Forward-Looking Guidance
Looking ahead, Canadian Utilities anticipates continued rate base growth and efficiency improvements despite the challenges. The company plans to invest $5.8 billion in its Canadian regulated utilities over the next three years, targeting an average annual rate base growth of 5.4%. Additionally, while the allowable ROE is expected to decrease, the company remains optimistic about its strategic investments and operational efficiencies.
In conclusion, Canadian Utilities A’s earnings call reflected a balanced view of achievements and challenges. While the company faces certain headwinds, its strategic focus on growth and investments provides a positive outlook for the future. Investors and stakeholders can take confidence in the company’s robust performance and forward-looking strategies.