Thank you for standing by. This is the conference operator. Welcome to the ATCO Limited's 3rd Quarter 2019 Results Conference Call and Webcast. 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.
I would now like to turn the conference over to Mr. Myles Dougan, Director, Investor Relations. Please go ahead, Mr. Dougan.
Thank you, Savvis, and good morning, everyone. We're pleased you could join us for our Q3 2019 conference call. With me today are Executive Vice President and Chief Financial Officer, Dennis DeChamplain Senior Vice President and Controller, Derek Cook and Vice President, Finance, Treasury and Risk, Colin Jackson. Dennis will begin today with some opening comments on our financial results and recent company developments. Following his prepared remarks, we will take questions from the investment community.
Please note that a replay of the conference call and a transcript will be available on our website atascode.com and can be found in the Investors section under the heading Events and Presentations. I'd like to remind you all that 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 see the reports filed by ATCO with Canadian Securities Regulators. And finally, I'd also like to point out that during this presentation, we may refer to certain non GAAP measures such as adjusted earnings, adjusted earnings per share, funds generated by operations and capital investment. These measures do not have any standardized meaning under IFRS, and as a result, they may not be comparable to similar measures presented in other entities.
And now, I'll turn the call over to Dennis for his opening remarks.
Thanks, Myles, and good morning, everyone. Thank you very much for joining us today on our Q3 2019 conference call. ATCO announced adjusted earnings in the Q3 of 2019 of $74,000,000 compared to $87,000,000 in the Q3 of 2018. Lower third quarter earnings recorded in Canadian Utilities and ATCO Investments were partially offset by higher earnings in Structures and Logistics and Neltume Ports. Structures and Logistics achieved $10,000,000 in higher earnings
in the
Q3 of 2019 compared to last Q3. Higher adjusted earnings were mainly due to the continued work on the LNG Canada Cedar Valley Lodge project, higher space rental activity in Canada and higher workforce housing trade sale activity in the United States and Australia. In Canada, manufacturing and site construction work for the LNG Canada project is well in hand and our Calgary manufacturing facility is operating at near full capacity. The project is going well and is progressing on schedule. In the United States, we completed a $7,000,000 contract to supply modular product for a Marriott hotel situated near San Francisco, California in the Q3.
The second $7,000,000 contract to supply modular product for a Marriott Hotel in Oakland, California is expected to be complete in early 2020. In Australia, manufacturing commenced on a 400 room, 2 storey accommodation village in Karratha, Western Australia. The total contract value is $22,000,000 with the final handover expected in April 2020. Our modular structures team also completed the final handover of a 600 person camp in Western Australia this quarter. The total contract value is $27,000,000 with ongoing rental earnings from the initial date of occupation in August of 2019 through to early 2021.
Neltume Ports also contributed $2,000,000 in higher earnings in the 3rd quarter and was awarded a 25 year copper concentrate loading contract at one of its Chilean ports. The contract extends the concession agreement at the fort for another 15 years to 2,041. These higher third quarter 2019 earnings in Structures and Logistics and Neltume Ports were more than offset by lower earnings in Canadian Utilities. Lower earnings were mainly due to favorable earnings realized in the Q3 of 2018 associated with ATCO Corporate and Other also recorded $12,000,000 in lower Q3 2019 earnings, mainly due to lower income from ATCO Investments, as ATCO Investments completed 2 commercial real estate transactions in the Q3 of 2018. Our objective is to unlock the hidden value of these investments over time, and we will continue to explore how to maximize value for our share owners from this business.
This quarter, Canadian Utilities finalized the sale of its entire 2,100 Megawatt Canadian fossil fuel based electricity generation portfolio in a series of transactions and received $821,000,000 of aggregate proceeds on the sale. This resulted in ATCO recognizing a gain on sale of $73,000,000 which is after tax and non controlling interests, which is excluded from adjusted earnings. Financial strength was confirmed in the Q3 as Dominion Bond Rating Service affirmed their A range corporate credit rating and stable outlook for ATCO, Canadian Utilities and SeaLink. And S and P Global ratings affirmed their A- credit rating and stable outlook for our companies as well. Overall, it was an active quarter at ATCO throughout North America, Latin America and Australia.
We made progress on a diverse range of modular project structures, extended the contract length on one of the concessions at Neltume Ports, and we completed the sale of Canadian Utilities' Canadian fossil fuel based electricity generation portfolio. That concludes my prepared remarks. And I'll now turn the call back over to Miles.
Thank you, Dennis. And we'll turn the call over to our conference coordinator for questions.
Thank you, sir. We will now begin the question and answer session. Webcast participants are welcome to click on the Submit Question tab near the top of the webcast frame and type their question. Our first question comes from Maurice Choi with RBC Capital Markets. Please go ahead.
Thank you and good morning. My first question is on structures and logistics. The margins on, I guess, this quarter seem to be higher than some of the previous periods. I wonder if you could just discuss what is the impact sorry, what is the origins of that? What is the contracts, the types of contracts that you record revenues this quarter?
Or is it an indication of the whole contract and periods moving forward? And alongside that, if you could just provide your activity levels over the next few periods?
Good morning, Maurice. In our in the MD and A, we show the average rental rates from our space rentals business and our workforce housing business. And there you can see the rental rates from our space rentals, up 14% year over year and our workforce housing, up 20% year over year. A lot of that the space rentals increase due to increased activity in Central Canada and British Columbia. In terms of workforce housing, we have higher rental rates coming out of Australia with some of the large mining projects and recently installed workforce housing in British Columbia.
So we've definitely seen the uptick on the revenue side. We're having, I'll say, good cost containment. So that will result in increased margins through the business. As we trend back a few years when the business made $6,000,000 in the full year, then we were able to double that and again have a healthy increase year over year from those levels. You just take a look at the base run of the business, we've said we've increased that base business through increased diversification in our markets and with our customers, trying to diversify away from the commodity based oil and gas resource sector.
So you're seeing the benefits of that strategy result in kind of that increased base business. Not going to give you our forecasts over the next number of quarters, But we are proceeding nicely with that emphasis on our strategy of diversification, both in markets and in products. So we're continuing on that trend. We would year over year, our base business in the 3rd quarter is very healthy, and we hope to continue that in the future.
And any insight on your order book or potential contracts to come?
We've got a very healthy lead list. It's a little bit lower at the same time last year only because LNG Canada was on our lead list and we're able to put the puck in the net on that project. But I'll go back to the lead list being well diversified by region. If you take a look at Mexico, Australia, United States, British Columbia, Alberta. So we're well diversified by geography and by contract type.
Natural Resources are still, say, the majority, but we do have kind of government contract leads, housing and other such new customers from our historic past.
Great. And just moving on to Neltume Ports. I gather that Neltume Ports continue to have a high level of cash in the underlying business following your investment. But I suppose with you already invested in that we continue to be at this date of activity? Or did you wish that there is more investments from the investee?
Well, that cash is still sitting on Neltume's balance sheet, even with the extension of our copper concentrate contract and new capital loading facilities required, that will be self funded by that port and will not draw on that circa $200,000,000 sitting on Neltume's balance sheet. So we do want that cash to be put to work. We expect that cash to be put to work through greenfield, brownfield M and A activities. That hasn't happened yet. But I know they have a lot of irons in the fire, and we're looking to deploy that capital and grow that business.
And I guess if you sit this time next year, would you be disappointed if all $200,000,000 is not already invested?
All $200,000,000 I would expect some to be deployed. Right now that the results we're seeing from Neltume are achieving our base case that we based our purchase on. So we're still happy with the investment. Going back to what I had said earlier, we still expect to deploy that cash and are actively seeking projects. Take a look at what's happening with world trade and the geopolitical environment.
It's kind of understandable. There's a little bit more uncertainty right now. So there may be a little bit of cautious optimism as we proceed to expand our ports business.
Our next question comes from Mark Jarvi with CIBC Capital Markets. Please go ahead.
Thanks. Just maybe continuing along some questions on the Ultimi. Do you anticipate the civil unrest in Chile to have any impact on the near term results?
Good morning, Mark. Thanks for the question. No, we do not expect any major impacts from those civil unrest. I mean, that's a very sad and unfortunate situation. We at Neltume have kind of prided ourselves on our labor relations.
There were general strikes called. We were able to stay open, the vast majority of our ports. Our workers were safe. We didn't lose any cargo, incoming cargo or outgoing cargo as a result of the unrest. There were curfews, so we did scale back on some overnight ships.
But because we were open and other ports weren't, we were actually able to pick up small incremental number of ships for unloading, which will help the business. But no material impact in the short term.
Okay. That's good to hear. And then you did put a NCIB in place for this year and obviously you've got a long track record of growing the dividend. Any updated views on capital allocation, if you struggle to find new investments? How do you think about maybe just again excess capital towards either the buyback or dividend increases over the next couple of years?
Yes. We haven't executed on the NCIB in any material shape whatsoever. Our dividend views are unchanged. We look to grow them in the based on our 2020 dividend recommendation to the Board. In terms of ATCO, we want to limit the leverage on ATCO's balance sheet.
We still have some credit facilities and debt outstanding from the Neltume purchase. We're continuing to look for acquisitions. But as we fully digest the Neltume purchase, we be heading out looking for more. We are looking for more, but executing on future growth projects down the road.
Okay. Thanks. I'll leave it there.
Thank you.
This concludes the question and answer session. I would like to turn the conference back over to Mr. Myles Dougan for any closing remarks.
Thank you, Savvis, and thank you all for participating this morning. We appreciate your interest in ATCO, and we look forward to speaking with you again soon. Bye for now.
This concludes today's conference call. You may disconnect your lines.