Investor Overview

Canadian Utilities has achieved significant growth over the past decade, driven by a buoyant natural resource sector in both North America and Australia. However, since late 2014, the world has been faced with declining mineral and oil prices in addition to a continuing low natural gas price environment in Western Canada. The challenges that are impacting many of our customers also had an impact on Canadian Utilities in 2015. Canadian Utilities earnings attributable to equity owners of the Company were lower in 2015 compared to 2014.

In late 2015, Canadian Utilities undertook a transformational change that shifted our global business strategy to address these challenges. The Company has restructured into two Global Business Units - Electricity, and Pipelines & Liquids - that are vertically integrated and better able to efficiently and effectively respond to our customers' needs. However, this transformative restructuring came with some costs. The net impact was a reduction of $131 million to earnings attributable to equity owners of the Company in 2015, largely due to staff reductions and the associated severance costs and impairments of certain underperforming assets across our organization. Earnings in 2015 also included $27 million of gains on the sales of some operations and the positive revaluation of a joint venture investment. The cash proceeds from these sales were redeployed to finance the Company's growth initiatives.

The long-term success of Canadian Utilities is dependent upon our ability to grow the business by expanding into new markets and into new business lines. To achieve this, we are expanding our sales and customer focus in all our activities. At the same time, we are pursuing cost savings and efficiencies in every part of our organization to ensure that we deliver the most competitive solutions to our customers. But I want to make it clear that while we have restructured our business to become more customer focused, our financial tenets remain the same: we are focused on making prudent decisions, maintaining our strong financial position and creating long-term investor value.

Canadian Utilities’ adjusted earnings, which exclude the one-time gains from the sales of operations, impairment charges and the other items that were not in the normal course of business were $483 million in 2015, compared to $575 million in 2014.

Decreased adjusted earnings in 2015 were mainly due to lower Alberta Power Pool prices and the adverse earnings impact of several regulatory decisions received from the Alberta Utilities Commission and the Australian Economic Regulation Authority in 2015.

In March 2015, the Alberta Utilities Commission released decisions on the Generic Cost of Capital and Performance Based Regulation Capital Tracker proceedings that covered the period from the beginning of 2013 to the end of 2015. In July 2015, ATCO Gas Australia received the Access Arrangement decision, covering the period from July 2014 to December 2019. The 2013 to 2015 earnings impact that resulted from these decisions was recorded in 2015. If the prior period impact of these retroactive decisions had been recorded in 2013 and 2014, adjusted earnings in 2015 would have been $53 million higher than the same period last year due to the ongoing investment to meet the needs of Alberta’s and Australia’s utility customers.

Capital Investment Plans

Canadian Utilities invested $1,819 million in 2015 in long term growth initiatives. Investment in the regulated utilities and on long-term contracted capital assets accounted for $1,754 million or 96 per cent of capital spending. These investments either earn a return under a regulatory business model or are commercially secured under long-term contracts. The remaining 4 per cent of expenditures were mainly maintenance capital spread across the Company.

In the 2016 to 2018 period, Canadian Utilities expects to invest an additional $5.3 billion in regulated utility and commercially secured capital growth projects. This capital investment is expected to contribute significant earnings and cash flow and create long-term value for share owners.

This three year plan includes $4.1 billion of planned capital investment in the regulated utilities. The Company also intends to invest a further $1.2 billion in long-term contracted capital from 2016 to 2018. Of this $1.2 billion, $1.1 billion is planned capital investment in the Alberta Powerline’s Fort McMurray 500 kV Project and approximately $100 million is planned capital investment in contracted hydrocarbon storage and distributed generation in Alberta and a natural gas pipeline in Mexico.

Canadian Utilities also continues to pursue various business development opportunities with long-term potential, such as the Tula cogeneration power plant in Mexico, which are not included in these capital growth investment estimates.

Dividends

The Board of Directors increased the quarterly dividends paid per Class A and Class B Share for the four quarters of 2015 from 26.75 cents per share to 29.50 cents per share, an increase of 10 per cent over 2014.

And on January 7, 2016, the Board of Directors declared a first-quarter dividend of 32.50 cents per share. That amount represents a 10 per cent increase over the quarterly dividends per share paid in 2015.

The Board of Directors has approved an increase in Canadian Utilities’ common share dividends each year since 1972; a track record we are very proud of.

Financial Strength

Financial strength is fundamental to Canadian Utilities’ current and future success. It ensures we have the financial capacity to fund our existing and future capital investments through a combination of predictable cash flow from operations, cash balances on hand, committed credit facilities and access to the capital markets. Financial strength enables Canadian Utilities to sustain our operations and to grow through economic cycles, thereby providing long-term financial benefits and value creation to you, our investors. Canadian Utilities is committed to maintaining strong investment grade credit ratings which allow us access to capital markets at competitive rates.

We financed our asset expansion through a number of sources in 2015. Our most significant source of capital was funds generated by operations which totaled $1.5 billion in 2015. We also issued $650 million in debt and $375 million in preferred shares, all at very competitive rates

The Company has a long track record of generating reliable and growing earnings and dividends over time. There is no doubt we face some challenging conditions with low commodity prices and reduced activity levels in some of our markets. However, we will overcome these challenges, as we always have, with fiscal prudence and a long term focus on creating shareowner value.



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