Canadian Utilities Q1 2025 slides: 3% earnings growth amid $5.8B capital plan

Introduction & Market Context

Canadian Utilities Limited (TSX:CU) presented its Q1 2025 earnings results on May 7, 2025, highlighting a 3% year-over-year growth in adjusted earnings alongside an ambitious three-year capital expenditure plan. The company is strategically positioning itself to capitalize on Alberta’s economic strength, which leads Canada in both GDP per capita and population growth.

The utility provider’s stock closed at $37.91 on May 6, 2025, showing a 0.96% increase, reflecting investor confidence in the company’s growth strategy. Canadian Utilities continues to focus on expanding its energy infrastructure capabilities while diversifying across the energy transition value chain.

As shown in the following slide highlighting Alberta’s economic strength:

Quarterly Performance Highlights

Canadian Utilities reported Q1 2025 adjusted earnings of $232 million, up from $225 million in Q1 2024, representing a 3% year-over-year increase. This growth was primarily driven by ATCO Energy Systems (+$11 million) and ATCO EnPower (+$3 million), with additional contributions from ATCO Australia (+$2 million), partially offset by a $9 million decrease in the Financing & Other segment.

The company’s cash flow from operating activities showed remarkable strength, increasing 27% to $637 million in Q1 2025 from $502 million in the same period last year. This robust cash generation supports the company’s increased capital expenditures, which rose to $401 million in Q1 2025 from $316 million in Q1 2024.

The following waterfall chart illustrates the Q1 2025 adjusted earnings breakdown by segment:

The strong cash flow performance relative to capital expenditures demonstrates the company’s ability to fund its growth initiatives:

Capital Investment Strategy

Canadian Utilities outlined an ambitious $5.8 billion capital expenditure plan over the next three years, with a projected 5.4% three-year mid-year rate base CAGR. The investment is strategically allocated across electricity distribution, electricity transmission, natural gas distribution, and natural gas transmission assets.

The capital plan shows a significant ramp-up in investment, particularly in electricity distribution, which is expected to increase from $0.2 billion in 2024 to $1.6 billion by 2027. This acceleration reflects the company’s focus on meeting growing demand in Alberta’s expanding economy.

The detailed breakdown of the three-year capital expenditure plan is illustrated in the following slide:

Strategic Growth Projects

The company highlighted several major infrastructure projects that will drive long-term growth, with the Yellowhead Pipeline Project being the most significant at an estimated investment of $2.8 billion. This 230-kilometer pipeline will have a capacity of 1.1 Bcf/d and is expected to be in service by Q4 2027, with construction starting in 2026.

The Yellowhead Pipeline project details are shown in the following slide:

Another key project is the Central East Transfer-Out Project (CETO), which involves building 85 kilometers of 240 kV double-circuit powerline and expanding the Tinchebray Substation. With an investment of approximately $280 million, this project will connect customers to renewable generation in Central East Alberta and is targeted for completion in Q2 2026.

The ATCO Heartland Hydrogen Hub (AH3) represents the company’s strategic move into the hydrogen economy, though the final investment decision is pending clarity on policy support, risk-sharing mechanisms, and funding.

In Australia, Canadian Utilities has secured favorable regulatory outcomes with the Sixth Access Arrangement (AA6), which will be implemented from January 2025 to December 2029. The arrangement includes a significant increase in nominal return on equity from 5.02% to 8.23% and a substantial boost in total tariff revenue from $839 million to $1,375 million.

The improved regulatory terms in Australia are illustrated in this slide:

Asset Diversification Strategy

Canadian Utilities is strategically diversifying its asset base across the energy transition value chain through its ATCO EnPower division. The company has established a robust portfolio that includes significant natural gas storage capacity (117 PJ), natural gas liquids storage (544,000 m³), water infrastructure, and renewable energy generation assets.

ATCO EnPower reported FY 2024 adjusted EBITDA of $146 million and adjusted earnings of $44 million, with total assets of $2.3 billion. The company emphasizes long-term contracts that provide cash flow stability and maintains strategic land holdings of 2,000 acres in Canada’s most significant energy hub.

The diversified asset portfolio is detailed in the following slide:

Forward-Looking Statements

Canadian Utilities’ presentation emphasizes Alberta as the center of Canada’s energy future, with the province leading in GDP per capita and population growth. The company is positioning itself to capitalize on the $149+ billion being invested in major projects across Alberta.

The capital expenditure plan and major projects like the Yellowhead Pipeline and CETO demonstrate Canadian Utilities’ commitment to expanding its infrastructure to meet growing demand. The company’s strong cash flow generation supports these investments without requiring external equity, according to previous statements from management.

While the presentation maintains an optimistic outlook, investors should note that the company faces challenges including regulatory changes and market uncertainties. Previous guidance mentioned a reduction in the return on equity for 2025 and the loss of an efficiency carryover mechanism, though these factors appear to be offset by the positive regulatory outcome in Australia and the ambitious capital program.

Canadian Utilities continues to balance traditional utility operations with strategic investments in emerging areas like hydrogen and renewable energy, positioning itself for sustainable long-term growth in an evolving energy landscape.

Full presentation:

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