Thank you. Good morning, everyone. We are pleased you could join us for our 2018 Investor Day. Please note that a slide presentation will accompany our remarks. A copy of the presentation is available on our website at atco.com. It can be found in the Investors section under the heading Events and Presentations. I would 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. Finally, I would also like to point out that during this presentation, we will refer to certain non-GAAP measures such as adjusted earnings and earnings before interest, taxes, depreciation, and amortization, or EBITDA.
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. With that, I would like to introduce this morning our three speakers. With me today are Nancy Southern, Chair and Chief Executive Officer of ATCO, Siegfried Kiefer, President and Chief Strategy Officer, and Dennis DeChamplain, Senior Vice President and Chief Financial Officer. Now I will turn the podium over to our Chair and CEO, Nancy Southern, for her opening remarks.
Myles. Thanks very much. Good morning, everyone. As some of you, my longtime friends, have mentioned, it is 10 years since we have been together in an Investor Day. That seems to be a little bit of the modus operandi of ATCO. We thought that it was time to share some of our most recent news, talk about our operations today, and field any questions that you may have. Feel free to ask any questions you want at the end of our presentations. We thought we would go through everything, and then you can take some notes and feel free to ask. We will do our very best to answer. I guess what really spurred our rationale and desire to have an Investor Day is the announcement of our new acquisition in the Neltume Ports, a 40% stake for CAD 450 million.
It has been a very long time since ATCO has made a major acquisition. We are very proud and very pleased with this acquisition. It is a terrific opportunity for us. It involves 16 different ports throughout Latin America in Chile, Uruguay, Argentina, and Brazil. Perhaps most importantly is the nature of the company. Neltume is owned by Ultramar, which is controlled by the Von Appen family in Chile. We have had a long-standing relationship with the Von Appens, and Ultramar has now gone through three generations of succession, operating ports and a separate business in the shipping industry. They are a very trusted partner, and we feel very much aligned in terms of values and objectives of Ultramar being aligned with ATCO. With the acquisition, it really does enhance our long-term strategy in ATCO to be a holding company of long-term, sustainable, profitable investments.
We've spent the better part of the last decade supporting and making sure that our primary investment, Canadian Utilities, was healthy and robust during a very fast growth period, particularly in Alberta. Tremendous amount of infrastructure and a tremendous amount of growth in the rate base. For a very long time, since my father and my grandfather started ATCO, our objective and the strategy was to be a principal owner of robust, healthy, long-term enterprise. Neltume allows us to expand. In this slide, you'll see that we also have our traditional founding business ATCO Structures & Logistics. The Neltume Ports added to our wonderful Canadian Utilities business. I think that maybe some of you have not perhaps picked up on our real estate company that we have 100% ownership in, ATCO Investments.
We have actually spent some time, and I'll talk about that a little bit later, in trying to take a page out of some of the retailers, Books, Macy's, Westons, Shoppers Drug Mart, in looking at the real estate portfolio that was within our group of companies. We'll talk a little bit about that later. Going forward, when you look at ATCO, the most important aspect of what it is that we want to focus on are the main global sectors that will be in demand for as long as we can predict. Energy and energy infrastructure. Housing is in demand for mankind.
Water, real estate, and transportation, which we now enter into that space, into that sector, with the acquisition of Neltume, which also gives us a bridge into the agriculture sector, as the ports are used for shipping many agricultural goods in Uruguay and Chile and in Brazil. This is an investment that will serve to provide us accretive earnings in its first full year of operations and a healthy cash flow well into the future. As we look at global demand, pushing demand in the Latin American countries, Siegfried will talk a little bit more about the specifics of what we see in terms of GDP growth and the correlation between GDP growth and transportation or port growth. I think that you'll find that it's a very interesting complementary business to the ATCO suite of investments. By nature, it is very similar to the utilities.
There are long-term contracts associated with the ports, as well as concessions, franchise-like concessions, where the ports are located. All in all, it's a terrific business for predicting certainty as well as having growth opportunities. With that, I would like to now ask Siegfried to come to the stage and give you a few more details on Neltume itself. Sig? Oh, and the video.
We have a short video to introduce Neltume to you. Well, good morning, everyone. Thank you for joining us this morning. I love those accelerated videos. I wish I could do that in real life and just push a button and have a plant just speed up to 2 or 3 times its normal speed. I'd like to talk to you a bit about Neltume Ports, the business, and give you a bit of an overview of the company that we've invested in. Neltume has a 20-year history, and it's grown to now operate 16 ports in Chile, Argentina, Brazil, and Uruguay. The company has had a strong track record of growing its volumes through a number of methods, organic expansion, as well as from acquiring new ports or interest in new ports, and expanding their ownership in their existing ports.
Along with Neltume's geographic positions in Latin America, as Nancy mentioned, its volumes and cargo types improve its revenue risk profile, and I'd like to spend a bit of time on that profile with you. If you look at the business activity of Neltume by cargo type, about half of the activity is container. Now, container terminals handle the movement of mixed consumer goods in either 20 or 40-foot containers. The container ports typically also provide then storage facilities for allowing that container volume to be transported to and from the surrounding area. About one-third of the tonnage in the ports is bulk, meaning raw material that's transported, such as minerals and grains. A bulk terminal quite often is dedicated to a specific commodity cargo type because of the special handling nature of that cargo.
19% of the cargo is break bulk or general cargo, which is cargo that has to be loaded individually. Examples of that would be bagged cargo such as coffee, fruit, wine, or vehicles. If you look at the activity by geography, you can see that the Chilean ports move just under two-thirds of the volume by weight. The activity level is well diversified amongst the four countries, with Argentina being just a small piece of the volume at this time. Neltume's earnings are also well diversified, about a third of the earnings come from varied minerals and resources. Another third come from the container terminals, the remaining third comes from the multipurpose terminals, largely serving the forestry and agricultural sectors.
I thought it'd be worth spending some time on the ports, this next slide sort of shows you an overview of the 16 ports. It sort of breaks out each port by its ownership, its location, the terminal type, and the key cargo that's shipped through that port. You'll notice that many of these ports are our joint venture arrangements, that's a key risk mitigation for the business, where equity stakes in the ports are used to secure committed volumes wherever it's economically feasible. Each port operates under a concession agreement, as Nancy mentioned. A concession gives Neltume the right to develop, maintain, and operate within a defined region or area, the port. There are 2 types of port concessions, private and public.
Neltume has nine private ports that provided 50% of the cargo throughput in 2017, and seven public ports that provided the remaining 50% of throughput. Under each of these concession types, there are several factors that provide consistent and stable growth opportunities. I'd like to just highlight a few of the features for you. Firstly, as Nancy mentioned, there are long-term contracts and concession terms. The private ports typically involve long-term contracts for the import and export of commodities. While the public ports offer generally a 15-year average concession term with options to extend to an average of 25 years. Second thing I'd highlight to you, the locations of the ports that Neltume operates are quite strategic. The private ports are located near the mining and agribusiness hubs in Latin America, while the public ports are all near high-density areas of economic prosperity.
Strategic key partnerships with shipping lines and cargo owners is the third aspect that I would highlight to you. Where we are joint ventured, we are joint ventured with critical users of the infrastructure, having them as partners is a great way to secure their business for the long term. The diversity of revenues coming from multiple countries, sectors and clients and cargo types, allow us to have a diversity of customers so we're not overly dependent on any one customer group. In fact, no one customer represents more than 15% of the total business of the company. This next slide highlights the volume growth that Neltume has achieved since 2010.
You can see that there's been a strong track record of growth over that period, with 12% compound annual growth rate in cargo volume and a 7% compound annual growth rate on container volumes. The jump up in 2017 that you can see there really resulted from an expansion of the number of terminals that Neltume operates from 10 to 16, which they acquired in 2016. If you look just at 2010 to 2016, the cargo and container volumes had a healthy growth rate of 8% and 6%, respectively. That growth tends to be driven by or tied to GDP growth in the region. If we look forward to GDP growth in Latin America, you can see that it's forecasted to continue to grow at a more rapid pace than Canada.
That Latin American growth will be driven by agricultural exports and by the global trend in electrification and energy demand that are expected to drive the continued demand for copper and other energy products from the region. Neltume's port operations in Chile, Argentina, Uruguay, and Brazil are well positioned for export to both the Middle East and the Far East. China represents Chile's largest export destination at the moment. Chile has been one of Latin America's fastest-growing economies, averaging 3.5% GDP growth over the last eight years. The OECD expects Chilean growth to continue at around that rate in the coming years. In fact, the Chilean government has set a target of 4% annual GDP growth each year and is on track to a 5.3% GDP growth rate in 2018.
Container ports primarily handle the import and export of consumer goods, which is closely linked to the level of domestic consumption in each region. There is a strong correlation between GDP growth and cargo throughput growth. Independent studies have shown that South American container port throughput grows by a multiple of 1.6 times to three times that of GDP growth. Neltume's container ports are well positioned to capture this rising import and export activity. We expect continued strong GDP growth in Latin America. As I mentioned, as the world continues to grow its electrification, there is a rising demand for copper. Chile represents 28% of the global copper supply, and it does sit at the low end of the cost curve for that supply.
As expected growth in copper prices come to fruition and as expected global copper supply deficits come into play starting in 2020, we are expecting to see a new spur or expanded activity around copper mine investment in Chile and increasing copper exports from that region. Two of Neltume's ports are focused on Chilean copper, and other ports also have copper as one of their main cargos. These ports are well positioned to capture this expected future copper export growth activity. Expanded activity in Neltume's existing bulk ports, driven by increased export demand, is always another attractive feature that we see in the business. Another example of how this business can expand and grow is through brownfield development. Berth expansions create increased draft that allows terminals to receive bigger ships and larger volumes.
Neltume has successfully implemented these kinds of projects in the past and has identified berth expansion opportunities that would create market share growth at certain ports going into the future. Berth extension opportunities also arise out of these growth opportunities. Finally, in terms of growth, Neltume has a track record of growing its business through these organic methods, but also through acquisition and increasing ownership in its existing ports. We expect a continued strong track record of growth activity, and funds from ATCO's investment in Neltume Ports will be used to help finance these growth opportunities. Summary. Neltume's ports represent an excellent investment opportunity for ATCO, with strong growth prospects driven by continued GDP growth, ongoing growth in export demand, and Neltume's proven record of growth by acquisition and organic expansion.
I'd like to just let Dennis touch on some of the important investment financial highlights, if we could next.
Thank you, Siegfried. One. Thanks. There's four things I just want to touch on. Thing one is accretive to earnings per share and cash flows in the first year. As is our practice, we will not be giving you guidance, but I can tell you in 2017 that Neltume achieved EBITDA of $90 million U.S., or CAD 120 million, and that was for 100% of Neltume. We do expect that to grow. Siegfried just went through some of those drivers that we expect will result in increased EBITDA in the future. At 2% of our balance sheet, this CAD 450 million investment is a very manageable size for us. It has a positive impact to our credit metrics as the cash flows grow over time. We're paying for it with approximately CAD 110 million worth of cash and the remaining CAD 350 million through committed credit facilities.
Approximately 40% of which will be short-term in nature. The remaining 60% will be refinanced in the near term. Right now, we're looking at a hybrid debt instrument and market-dependent. We're looking at the fourth quarter of 2018 to do that refinancing. That's the source of the funds. In terms of uses, approximately CAD 100 million was used to retire some debt. Just over half of the sources will be held in Neltume to fund the future growth initiatives that Siegfried alluded to and other opportunities within its markets.
Back over to Nancy.
That's a lot about the acquisition, and of course, it's a very exciting acquisition for us. We're very pleased. We feel it is a very good fit, relatively low risk, and as Dennis mentioned, positive to our credit metrics. In thinking about ATCO, when you look at our company, I know that most of you put us in the utility realm. The majority of our earnings come from Canadian Utilities. I think it's very important to remember where this company started. When we look at ATCO today, we have a very high concentration of earnings coming from Alberta. We are looking within Canadian Utilities to continue to diversify geographies so that we are not completely dependent on a localized economy and region. We've certainly felt the impact of the low commodity cycle in Alberta in these last couple of years.
From ATCO's perspective as the holding company, it is very important for us to continue to diversify as well. As CU looks to diversify geographies in its core businesses, ATCO too is looking to diversify its geographies, but also its business lines that are complementary to its existing businesses. Those businesses that will lie within the ongoing global sectors necessary for our planet's prosperity. Infrastructure. We've talked a lot about Neltume so far. I want to tell you a little bit about ATCO Structures and what's happening there. You've obviously seen we're not getting the robust earnings that we were five years ago out of the Structures business. We had tremendous growth and a lot of opportunity from the resource sector for our industrial workforce housing, which is our founding business, which began in 1947.
In ATCO itself, ATCO Structures itself, we've always gone through the commodity cycles, which was the real driver for acquiring Canadian Utilities, was to give ATCO itself a base stability of earnings and growth. After this last commodity cycle decline, I won't say a bust because it's not actually a bust, is it? Since the decline, we've seen the earnings come off. In 2015, we started to see what was happening. It's our leading indicator, it's our leading economic indicator, the Structures business, and said, "Okay, what can we do to start having that business be cycle proof?" We now have a three-pronged approach for ATCO Structures, which I believe you will start to see the benefits of this three-pronged approach in the future.
Now, I know all of you feel that it's a darling to have in the high commodity cycle, but it's very important for us to have sustainable earnings and a growth in demand for the product. Our three-pronged approach, and not to forget that a couple of years ago, we acquired the 25% of Frontec, the old logistics business, out of CU so that we'd have a wholly owned subsidiary in Frontec as well. We've been calling it Structures and Logistics. They're very complementary to each other, and Frontec has a number of contracts such as Site C, the workforce housing at Site C in British Columbia, providing the catering and the camp services at that large workforce camp.
They've actually just secured a new contract for Canadian Forces in 2018, we start to see them taking a much more international approach like they did in the past when we had the NATO contracts in Kandahar and Bosnia. Structures itself now, in our assessment of where we need to be for the future, first thing that we did was lower the cost. We have been going through an extraordinary exercise to improve our manufacturing costs, our people costs, and our plant and equipment costs. That's number one. We're not all the way there yet, but our belief and my belief is that we need to get to the advanced manufacturing 4.0 for this business to be long-term sustainable and profitable. The second thing that we did was to find a new product line.
You probably watch the tiny home shows, or you've seen the tiny homes and the fad of really small, conservation conscious living styles. Well, modular is actually, when you think about the 5,000 person beds, actual towns that we construct in 6 months and actually have a working town for mining operations, and you think about migration and immigration throughout the world today, and you think about rapid deployment and expansion in urban centers, modular is the answer. As a result, we have started this second approach, to really develop our permanent modular business. We've seen tremendous growth in the last 2 years in terms of revenue. You'll start to see the bottom line demonstrating that. There's a couple of pictures here on the slide.
One is of the Grammar School in Melbourne, Australia, the bottom one is a dormitory at a university in British Columbia at Trinity College. I'm giving Myles a lot of heart attacks because I'm not following my script. Sorry. I continue to just talk. I love this business. I love all of our businesses, they really get me pumped. Diversification in geographies. We're really expanding geographically with ATCO Structures. We made a joint venture investment with the Ultramar Group, the Von Appen family in Chile 2 years ago. 2016, we formed a new company called ATCO-Sabinco. This also has given us a lot of confidence in the management style and the operating method of Ultramar itself.
ATCO-Sabinco, we just actually christened a brand new manufacturing plant that is lean manufacturing, poised to capture the growth coming out of the mining industry, particularly on the industrial mining side, but also for rental fleet and permanent modular structures. It's early days for this little company, but we think we've gotten in at just at the right time. If you'll remember, 5 years ago, we actually sold our joint venture company in Chile just before the commodity cycle decline. Monetized that business, did very well, had a 2-year non-compete. We feel that we've gone back into the region just at the right time as the activity for industrial workforce housing starts to pick up.
We've also acquired 350 units to satisfy a new contract that we have for schools in Mexico. We are looking to have manufacturing capabilities in Mexico by the end of the year as well. In Australia, our fleet utilization is very strong. We do see the mining sector in the Pilbara region of Western Australia start to pick up as well. Australia has been key to our permanent modular solutions. We're building jails, we're building schools, we're building hospitals and clinics for rural communities, seniors accommodation, dormitories, and residential housing. You will maybe have seen that we secured several economically accessible 3 and 4-story housing apartment buildings in British Columbia called My Home Place for low-income families. We're very excited about the prospects of ATCO Structures.
We're looking into a number of areas that were part of our history in the past, the Middle East and Africa. As those geographies continue to emerge as developing nations and we see the decline in growth in North America, that's where we'll have to go. I think you should all remember that expertise, the knowledge of going into new countries is not a foreign thing for ATCO. It's how we grew the business. It's part of the fabric of our structures and our logistics Frontec business. Also, that experience gives us great comfort in branching out on a much larger scale with Neltume in Chile. I'll just touch on commercial real estate for a moment. As I mentioned, and for those of you that have followed Canadian Utilities for many years, I see some of you in the room that have done that.
You'll recall that we went through a very long, protracted exercise of getting approval to remove real estate and other assets out of the utilities that were no longer in use. This exercise took us all the way to the Supreme Court, where we won. That has allowed us, for those assets no longer required for utility use, to extract those assets and find better purpose for them. That has created tremendous value for Canadian Utilities. It's also creating tremendous value for ATCO. We've taken many of the properties that were existing, and not used for the utilities, but just sitting in the utilities on the books, and we've taken them out of the utilities. We've done a market transaction with independent committees from both the CU and ATCO boards and moved a significant portion of real estate into ATCO under ATCO Investments.
We get earnings out of this ATCO Investments for the future three ways. First is managing our leases and rent to ourselves in a better fashion, and also leasing to third parties. Second is, the ability to sell properties, for a profitable return over time. In fact, this year in the third quarter, we made a sale on a property in Calgary that was owned previously by the utility, and we'll see a CAD 10 million profit from that. The third aspect of ATCO Investments is that it's a comfort like a bank. It's a significant enough portfolio that in a storm, in a perfect storm, for mitigation purposes, it's something that we can monetize, and we can do it in parts, or we can wait and do it in whole. I think that that's a valuable asset for us to have within the portfolio.
Finally, what we're seeing also with the modular space business is that we can combine some of these properties ourselves and actually commercially develop them and set up permanent modular apartment buildings, seniors housing, and hotels. That's an interesting new line of business for structures and our existing real estate. All in all, the new face of ATCO Structures is quite exciting. It provides us with a whole new customer base, a diversified lead list, and it's filling the factories. For owners of ATCO shares, I believe that it's a gem that is often underestimated. For sure, it's cyclical. It is the foundation, it is the DNA of all of the enterprises within the ATCO Group. I'm going to turn the podium now back over to Siegfried to talk to you a little bit more in depth about our Canadian utility operations. Thanks.
Thank you, Nancy. I'd like to spend a bit of time on Canadian Utilities Limited with you. As you know, our regulated utilities, predominantly in Alberta, but also in the North, have seen a tremendous amount of growth over the last period of time. That has somewhat tapered off lately in Alberta particularly. But in the last 5 years, we have grown our rate base by nearly 50% to just over CAD 13 billion of rate base as of 2017. During that time period, we've also had a tremendous focus on operational excellence and operating efficiencies. This next chart demonstrates how we've been able to outperform the approved rate of return by the Alberta Utilities Commission, but also outperform our peers, the peer utilities in Alberta. Based on our annual regulatory filings, we've achieved an average of about 2.3% above the regulated return that's approved by the AUC.
We've done this by really focusing on our operating costs and remaining focused on innovating our businesses to find new efficiencies as we go through time. We think that our track record here is perhaps a little bit underappreciated by investors, but the truth is, no one in our space has done this better. Our utilities have been the best in Canada at creating returns on equity for our investors, and the facts show it. You can't talk about regulated utilities without talking about regulation. So spend a bit of time just quickly on PBR 2.0, as we like to call it. We're now in our second iteration of performance-based regulation in Alberta. That regulation, while slightly changed from the first version of PBR, still incents us to strive to achieve strong returns in both our natural gas and our electricity distribution businesses.
We were able to achieve an efficiency carryover mechanism hurdle from the PBR 1, which automatically gave you a 50 basis point adder to the 2018 and 2019 regulated return on equity. That was really an incentive put in the first version of PBR to incent you to continue to strive for efficiencies as you approached the second PBR term. PBR 2.0 also includes the rate base growth that we invested in during the first term, and it also has pegged our revenues and earnings and growth-based capital for the second term. So that's a slight change from the capital tracker approach that was used in PBR 1. It's also true that to set the going-in rates for PBR 2, the regulator selected the lowest actual O&M year from the first term of PBR, 2013-2016.
That O&M cost recovery or reset is the main reason that we have had lower comparable earnings in 2018 versus 2017. But we'll continue to stay focused on our costs. In the early years of PBR 2, our ROEs will probably not be as high as what we achieved at the tail end of PBR 1 when we generated some exceptional ROEs, particularly in 2017 from our distribution utilities. On August 2nd of this year, the AUC issued a decision approving the return on equity of 8.5% and capital structure of 37% for the 2018, 2019, and 2020 periods for Alberta Utilities. You should note, though, that the AUC indicated that it intends to explore the possibility of returning to a formula-based approach to the cost of capital matters via setting a separate proceeding that will notify the parties of that process in due course.
While we thought we sort of had it settled for a period of time, it looks as though we're going to be back into another return on equity sort of proceeding very shortly. In our electric transmission business, and this is one of the problems we'd like to highlight to you in the regulatory world at the moment in Alberta, we were hoping to have a hearing in the fourth quarter of 2017 to deal with our tariffs for 2018 and 2019. However, due to the volume and complexity of intervener requests, the hearing will now hopefully occur in Q4 of 2018, a full year later than originally intended. As a result, we're unlikely to get a decision in this calendar year to determine our 2018 results.
We're again in a situation where in a subsequent year, we'll get a decision on a prior year's actuals and probably some adjustments as a result thereof. That lag is becoming more and more of an issue for utilities because we essentially create volatility in our earnings, at least calendar year to calendar year. On a second file, the utility asset disposition file, many of you would have been familiar with the Bill 13 that was introduced by the Alberta government, we were successful in getting some of the egregious parts of that bill removed. We're still awaiting a legislative solution to asset disposition in Alberta, we still live under some uncertainty around the treatment of assets, particularly if they're removed as a result of an extraordinary event.
In all of these cases, what we are seeing from a regulatory perspective is an increasing regulatory burden. Our hearings are taking longer, the proceedings are more complex, it sort of leads to erosion of our confidence in the process. We're also seeing that play out in other parts of regulation, not just rate regulation. This next chart just sort of tries to highlight for you the cumulative effects that all this mounting regulation that's going on in Canada, both provincially and federally, is taking its toll on business confidence. It is layering considerable cost into both our businesses and individuals over time. It's undermining the confidence of investors in new projects because there's uncertainty introduced by every one of these new acts. As a result, we're seeing really a delay or a removal of capital investment in the country.
It goes without saying that capital will flow to where it can find certainty. Having all of this uncertainty in Canada at the moment is not being helpful for the long-term investment plans required to continue to grow our economy. The layering in of costs is certainly having an impact on the competitiveness of our businesses. I think it's a challenge for our politicians to deal with. Enough on my whining. I'd like to talk a bit about our non-regulated investments in Canadian Utilities. We continue to look to provide safe and reliable service, and we look for capital investments will continue in our Alberta utilities as such. As you heard earlier with our investment in Neltume Ports, ATCO is turning its attention to investing in global essential services in select markets.
On the energy and energy infrastructure side, that's really what Canadian Utilities is looking to invest in in other regions of the world. We currently have earmarked about CAD 1 billion in global long-term contracted capital in the next few years. Included in that plan are investments in hydrocarbon storage in Alberta, electric generation in Mexico, and, in addition to that, our development teams are exploring energy infrastructure opportunities elsewhere in the world. I'll maybe just touch on a few of those key projects for you. Alberta PowerLine is where most of our current CAD 1 billion of investment is targeted. That's the 500 kV Fort McMurray West Transmission Project. It's a 500-kilometer transmission line running from just west of Edmonton up to the oil sands area near Fort McMurray.
The project is currently ahead of schedule for construction and commissioning. We remain on target to commission this line in the second quarter of 2019. Picture there is just a recent photo of the progress that we've made at our Thickwood substation, at the north end of the line. Interesting thing about this project is we are pursuing a new equity model around the equity invested in this project. It is, in my mind, quite progressive in terms of providing the indigenous communities along the route of the line with an opportunity to invest in the equity portion of the line for a stake in the project once it gets into service in 2019. As you may have seen, we did announce yesterday that we're exploring strategic alternatives for our Canadian electricity-generating businesses.
This process is consistent with our practice of continually evaluating and optimizing our portfolio of assets. While there can be no assurance that this process will lead to a transaction, we will continue to look to create value through the assets in the interim. We really have a three-point plan around that. One is maximize the value of our natural gas-fired generating fleet in the Alberta marketplace. We are proceeding with coal-to-gas conversion planning, and we will participate in the government of Alberta's clean power calls if they permit sort of a solar approach into those calls. With respect to that maximization plan, the new capacity market design in Alberta will have a capacity commitment period of one year with a three-year forward auction approach. Generally, we see the current capacity market design as favoring incumbent generators like us.
We're well-positioned going forward on our existing gas fleet. As I mentioned, we're actively exploring the coal-to-gas conversion on our coal units. On the solar file, the government of Alberta released initial details on an updated 75 MW solar request for proposals. In fact, an optional request for our information is due today. We haven't been provided any further details beyond that request for information. We'll continue to monitor that and the government's disclosure on that RFP to see if there's a good opportunity for our 75 MW Three Hills Solar Project to participate in that process. Four years ago, we made an expansion into Mexico. In Mexico, we continue to expand our investment portfolio there. In December 2017, we acquired a long-term contracted 35 MW hydroelectric power station in Veracruz.
In March, we announced that we're building a cogeneration facility near Gómez Palacio for Chemours under a long-term electricity and steam contract. This CAD 114 million acquisition and the CAD 70 million construction project increases our presence in Mexico's energy market. It expands our renewable power generating base. We continue to look for other attractive ventures in Mexico. We see it as a country that, despite its recent elections, is going to continue to require infrastructure investment to meet its economic growth. I should touch on Australia. A few minutes ago, I was sort of summarizing our historical top-tier performance in Alberta. In Australia, our natural gas distribution utility has also done very well over the last few years. The Australian regulatory filing requirements do not entail the same level of detailed filings that we have in Alberta.
If we look at the financial returns on equity, our Australian utility has generated very strong double-digit ROEs that are more than 300 basis points above the approved regulatory returns in Australia. We are just in the process of filing our next access arrangement. We look forward to seeing what that process yields in terms of outcomes, but it will essentially establish our rates for the next five-year period in Australia. Finally, I'll just touch on our industrial water business, where we've been adding water services under long-term contracts and have just recently added one with Pembina for their PDH facility starting in 2020. In hydrocarbon storage, we have four salt caverns up and running and contracted, and the lands surrounding those would permit us to potentially develop, if the customers arrive for that, upwards of another 40 caverns.
Great potential in that business as well. Both of the storage and water businesses are admittedly a small piece of our asset portfolio today, but they do have great potential. In the future, we will continue to develop those as we secure long-term contracts to backstop them. That's a quick run-through of what's happening at Canadian Utilities, and I'll now turn it over to Dennis.
I always have to pull down the mic when I follow Siegfried. Keep bragging that I'm tall for a Frenchman, but that doesn't help me very much. Looking at our financial strength, which is of primary importance to us, no change in our strategy to maintain our A-range rating. To that end, DBRS recently completed its annual review and confirmed its A low rating with a stable outlook for ATCO. For S&P, we had expected a report in July, but this has been delayed on their part. We expect that report soon. Right now, rating A- with a stable outlook. The credit ratings, as you're aware, help us to ensure that we have the financial capacity to fund existing and future capital investments at the most competitive rates. If we look at ATCO on a deconsolidated basis, we had a capital structure that was 100% equity.
As Neltume is a manageable size, as I referred to earlier, and after the permanent financing, Myles, can you flip the slide, please? Awesome. Thanks. We expect the equity ratio to be firmly above 90%. This further demonstrates our financial strength and funding options for all of our current and growth investments. It supports all of our portfolio investments and more should the right opportunities arise. In terms of liquidity, we continue to have excellent liquidity. At the end of Q2, we had CAD 280 million of readily accessible lines of credit and CAD 100 million of cash on hand. With the Neltume purchase, the cash that we used in the third quarter actions, we expect that cash on hand to come down to about CAD 50 million at the end of Q3. Lastly, a comment on our dividends.
ATCO's increased its dividends each year for the last 25 years, a track record that we're extremely proud of. As a holding company, ATCO currently receives a majority of its income from Canadian Utilities and now has Neltume and the commercial real estate, adding two diverse streams of earnings and cash flows to the mix. This affords ATCO greater flexibility and opportunity for future dividend increases that are consistent with our sustainable growth. As I said, we're very proud of our track record, one that we have all intentions to continuing on into the future. With that, I'd like to pass the podium back to Nancy for some closing remarks.
Thanks, Dennis. It's a very diverse group of companies that you invest in or represent investors in. I think in closing, what I'd like to say, first of all, about Neltume, one thing we didn't touch on is when we talk about the complementary nature of our businesses, if you think about ports and you think about refrigerated cargo and the increase in demand for agricultural products or storage for, what is it called? The hyaluronic acid that What's it called? Sulfuric acid that's required for copper processing. Storage, electricity demand for refrigerated units, the infrastructure of systems around the ports, modular space units and containers. You can start to see that it really does all knit together and makes a lot of sense in our minds anyway, in terms of creating within our own investments, real opportunity for the businesses.
I hope that you'll see that Structures and Frontec are repositioning and have a healthy future. No debt. We remain focused on a very strong balance sheet, and it is a fundamental tenet in how we operate. Finally, our growth comes without dilution, and principal control remains a fundamental tenet as well in the ATCO group. I believe that's worth considering. A 70-year track record of sustainable growth. You saw Dennis's slide on our dividend growth. There are not many home-based companies that can boast that performance. Our commitment to you is to continue a prosperous ATCO into the future. Now, I'd like to open up the floor for questions or any comments you might have. Sure.
Canadian.
Sorry.
The question was on the hybrid issue associated with the refinancing for the Neltume purchase. Would it be in Canadian or US dollars?
Myles and Brady have a mic in case you're not able to hear.
For the Neltume acquisition, could you maybe just talk a little bit about the growth and, I guess, the opportunity for organic growth versus acquiring additional ports over time?
I would have to say I think it's 50/50. Go ahead, Sig.
I think we tried to highlight in our slide that for absent acquisitions, we sort of see a 6%-8% growth in the volumes, depending if it's contained bulk year-over-year. That's what they've averaged over the past, since 2010, absent any. There are, as we mentioned, the ability to grow as well in the existing locations by expanding the facilities or deepening the berth at those facilities to handle bigger ships.
The expectation is to use brownfield growth, organic growth, along with acquisition targets that may materialize or not. In the meantime, we've got quite a hopper of brownfields growth available. Robert?
Nancy, I'm just wondering if you can talk a little bit about how you see the corporate structure going forward and tying in with funding. The role of CU and holding CU at the economic interest that you've got for Dennis. You've got the A-minus rating, what credit rating do you want to be long term? What amount of incremental debt capacity do you see to be able to raise at the ATCO level to fund new acquisitions? Are there other assets you think you can sell if you want to get bigger here?
You want to take that, Dennis?
Which part of it? I'll leave the buying and selling to you and Sig. You are well aware that ATCO has not had debt on its balance sheet. We have taken on some debt for this acquisition. We thought about it. Great investment. We decided to pursue it. We are looking at kind of capping that amount of the debt at the ATCO Holdco level to upwards in that 20% range, I will say. That
Would likely be dependent upon future acquisitions. In terms of capacity, we have room in the group right now of about an additional CAD 1 billion in preferred shares that we could issue that would be subject to the 50/50 equity treatment afforded by the rating agencies. As Nancy mentioned, a fundamental tenet is principal controlled. We would take that into consideration with respect to our future investments and potential cycling of capital.
Just are you committed to the A-minus rating? Historically, you have not issued common equity. Is that something that you would consider at the ATCO level?
No. No. The larger your company gets, and particularly it is evident in Canadian Utilities, new acquisition opportunities have to be of some substantial size to actually make a difference if you want to see growth. While we have a little bit of room in the A, everything we are doing now is to firm up the A to give us the ability to continue to build cash and be very focused on premier opportunities that will continue to allow us to grow. David Fry and I were having a little bit of a conversation. It feels like low interest rates are in our perpetuity. After the GFC, we saw a little bit of bandwidth grow between riskier investments and the non-risky ones.
That's not a permanent state that we're in today, and we feel that we're providing our ratepayers and our shareowners with very good value by being absolutely disciplined about the balance sheet. It's very important to us, Robert, and I take great pride that we have been able to grow without issuing equity. As long as I'm in the job, we don't intend on issuing equity.
Great. If I can just finish the one other line of questioning, just on the power asset sale. What was the greatest driver from your point of view to explore this asset sale? Was it your view on the Alberta power market? Was it that you think that generally power valuations are very high? Is it raising funds or is it something different?
It's probably all of the above. I think another thing that we've learned is we need to be a little quicker, like we have been in ATCO with structures, a little quicker at recycling and recognizing where the opportunity should lie. We've got a wonderful fleet of generating plants, great reliability. They're profitable. There's hardly any debt on them. As we talked about, we've got high concentration in Alberta. We do see that policymakers like to tamper with electricity a lot, as evidenced here. We want to shore up the balance sheet, and we want to provide ourselves with future opportunities. Having said that, my goodness, I'm so impressed with the skill set and the ingenuity that our generation team has brought to this coal to gas conversion. Very low cost and very profitable. It's a great business.
We just feel that there is perhaps opportunities in other places for more greenfields or brownfields, and we can recycle the capital and shore up and make sure that we keep that A.
Nancy,
One other aspect I would just add to that is just if you look at our philosophy around investing in long-term contracted assets. Our fleet, as great as it is getting into the latter stages of its expected life as well. I think it's an opportune time to recycle that capital into longer life assets going forward.
Just to get a question in from the webcast. One was, are the financials of Neltume private or public? I'll answer that one for you. It's a private company, although some of the ports do have public financials. The second question on the same email is, why aren't we acquiring a majority stake in Neltume? Why the 40%?
Well, that was all that was offered. In terms of governance, I believe we've struck a deal that looks very much like a 50/50. For any major business decision, dividends, business plan, debt, acquisitions, super majority is required. We have, in effect, negative control on the entity. We don't like to talk about that because we're working with a partner, and there are existing partners, and we believe that we are aligned, and we'll find ways to continue to move forward in a positive fashion. We're very, very comfortable with the shareholders agreement, and so the 40% is not bothersome to us. In my father's day, I know that many of you will have heard that he really wanted control of the entity over 50%, but via contract or shareholders agreements, we feel very comfortable with our ability to majority control. Yep. Oh, sorry.
Oh, yeah. Sorry about that. Folks can hear me in the internet world. I guess, a simple question in terms of financing. Some of your peers in Canada that have pursued this path have shares at the subsidiary, just like you do at CU. Is that something that you would contemplate, modifying the capital structure a little bit to create publicly traded subs? My second question is maybe just a more general one. You've got some big ambitions here. What gives ATCO an advantage over so many other deep-pocketed capital pools globally, whether it's a CPPIB, whether it's a Brookfield Asset Management? What are you going to bring to the table that those folks don't?
Well-
Other than a larger check, perhaps.
Well, we can't afford a larger check. It's a really good question, and I believe what we bring to the table, particularly on the utility side, is exactly what Siegfried demonstrated. I don't believe we get credit for it, for whatever reason, but it doesn't matter. Our over-performance in the regulated utility sector has driven tremendous value in Canadian Utilities, and we're able to demonstrate that in Australia. We can't compete with the CPPIB and the sovereign funds. Our cost of capital is higher. We have to find the right opportunities that really fit our criteria, and culture, value alignment, as apple pie and as qualitative as that sounds, is important. I believe when we find those right opportunities, that's why we have an advantage.
On a purely economic, financial scale, we can't beat them, but I think that we can become a little more agile in offering our operating services and develop some future partnerships with the low-cost capital investors.
Yeah. I think there's many funds that have lower cost of capital, if you look at developing projects and de-risking projects and commissioning projects, we bring a wealth of expertise in terms of doing that in a way that provides certainty around things like the West Fort McMurray transmission line, where we will bring that into service well within the timeframe stipulated. The financial players don't really have that expertise in-house.
I just want to go back and correct on the end of the comment about not having 50% investment in Neltume. At the end, I said we feel like we have majority control. Not majority control. We feel like we have a true partnership, and we have a very solid dispute mechanism, and major decisions have to be agreed to by both partners. I just want to clarify that. Sometimes I over-embellish. Yes, Mark.
Yeah.
Do you want to just wait for the mic?
Just wanted to get your take in terms of the dividend at ATCO in relation to this new investment and just your comment again about not wanting to issue common equity and being self-financing from an equity perspective at ATCO. Maybe commentary on how we should reconcile where you guys are now on a payout ratio in your growth and expectations for the dividend.
As everyone's likely aware, the ATCO dividend's been growing at a great rate. The payout ratio now is approximately 50%. We take a look at no change in how we come about recommending our dividends to the board, taking a look at our financial strength, and the consistent growth profile of the companies, Canadian Utilities being the lion's share. We'll take a look at where CU is expected to grow on a long-term, sustainable basis. Also now adding to the mix for ATCO would be Neltume and the real estate. To the extent that that would afford additional cover for the dividends, then that would go into the mix with respect to looking at where we recommend. We do recognize, though, that the payout ratio is still lower.
Is there an actual cap you guys would consider or?
Well, I think that's always dependent upon the situation and the environment. That's not to say that we might not. We likely will In certain occasions, slow the pace of growth down. We feel very comfortable with the growth. I think it really depends on what we're facing. The Europeans are talking about a global recession right now, right? When you get into an even more restricted or constricted environment like we have in Canada for capital investment and growth, which impacts the utilities, then we're going to see some contraction. I think you'll see it in a lot of companies, and ours won't be an exception. However, the way that we've planned and managed our company is that we've got lots of cushion. We will be agile with whatever the economic conditions and our businesses bring.
Then I want to go back to the structures business, and you made a comment about making it a bit more resilient to the business cycle and the commodity cycle. You did exit Chile, now you're going back into it. If you had to position the business the way you have it now or thinking about it forward in terms of resiliency, would you have still made that move out of the country and then back in?
Yeah.
You're still of the view that recycling of capital and being pretty active on, in terms of those businesses, is the way forward?
Yes. Especially in that business. It's a very easy entry business. When times are great and there's a resource boom on, every mom-and-pop shop can build a trailer. It's a very easy business to get into. It's not an easy business to sustain. That's why I'm really positive about the permanent modular side that should give us bread and butter to ride out the more extreme cycles. The other thing that we're starting to see is greater activity on the base business. The rental fleet. Certainly Eastern Canada and the eastern seaboard in Australia. We've seen an 11% utilization growth this year over the end of 2016. That's a really good signal that we've got some areas of the geographies that we're in that are strengthening. More activity.
I think it's very important for us to be on our toes about listening to the signals we get from that business and addressing them as soon as possible. We're never going to be perfect on the timing. There's going to be a little bit of a lag. Maybe the China-U.S. war slows down copper demand. We've seen copper prices come off just recently, there's a tremendous amount of expansion close to FID in the area right now with some of our Canadian miners and the Codelco of the world. I feel good about it.
Just on the sale of your power business, if you were successful in doing that, are there any areas in the business that you are specifically looking that you'd like to restructure those funds into? Secondly, does it kind of soured your opinion on Alberta and the power market, or is it more just the matureness of your assets? Would you still look at pursuing Slave Lake if there was ever an opportunity that came back there or anything like that?
Yeah. I would not-
I'm going to tell you that Dennis and Sig have different ideas about if we sold it and got cash.
I would not look at this strategic review as ATCO exiting the generation business. I would view or characterize the transaction more as an appropriate time to recycle the capital in that business. We talked earlier about people with significantly lower cost to capital or access to lower cost capital than we have. In some of these long-term contracted-type assets, there is, in my mind, emerging an appropriate strategy around once we have de-risked, commissioned, put a facility in place that has a long-term contract. At some point in that contract, it's appropriate for us to perhaps extract that capital and repeat that cycle of development investment. So I would call it a recycling of capital. We remain keenly interested in long-term assets like hydro.
As I've shown you that pancaking chart of regulations, any project with environmental impacts, which probably is all projects, are facing a higher and higher hurdle in Canada to proceed.
Just one question before I go to the back here. This one's for Dennis. How much debt does Neltume Ports have? I think you talked about sources and uses and net after the transaction, how much debt would Neltume Ports have?
After the transaction, Neltume at the holding company level would have no debt. There is debt at the individual ports. That debt is typically project financed, but consistent with the conservative nature of ATCO and the alignment of values with Ultramar. That is a relatively low-leverage business.
A couple of questions from me. On the power side, Canadian, are you also looking to sell the development portfolio, the hydro, maybe some of the wind stuff in there?
When you think about value creation, are you thinking about the post-contract cash flows that could be generated, perhaps in a more of a declining cash flow profile? Or are you just simply looking at this year's contracted cash flows?
In terms of the mix of assets, it is generally the Canadian generating assets, which are predominantly Alberta-based. It is generally our thermal fleet. So, we will not be looking to get out of our renewable assets like Oldman Hydro and those types of assets. We look at it as a business that, in that fleet, a good portion of it is today still contracted. So it has a stable income stream associated with it that frankly makes it quite attractive in the marketplace. Over time, it will come up for renewal or expiry of those contracts. As I said, the Alberta marketplace is changing to a capacity market design. We are a few years away from seeing what that capacity design yields in terms of actual contract value.
For the most part, the existing fleet will be in a very competitive position, particularly for the short-term capacity auctions for the next period of time. There will be ability to take the uncontracted portions of the fleet and bid it into that market, I think, quite competitively.
My second question, you had a couple of slides on strategic focus, infrastructure at that wheel of different asset classes, I am more curious, perhaps if you can talk with me what other infrastructure assets that you could be looking at right now outside what you own today.
Also geographically, is there any other geographies that you are looking at that you are not in today?
The global sectors that I spoke about. We have a good team, a really good team that is always keeping a lookout. They've become really very professional and experienced in assessing the targets and criteria. I think it's very important for us in ATCO and Canadian Utilities to make sure that we fully digest and integrate a new investment. We're a pretty lean team, and if we add too much at one time, that'd be a real stretch for us. As we talk about these very exciting investments and reviews that we're doing to look at the power generation or Alberta PowerLine, we're also in the midst of retooling all of our businesses. As you all know, technology is changing the way we do business, and our utilities have to stay up to date.
That's requiring a lot of brainpower, and it will require more ongoing capital investment to keep the utilities timely and meaningful to our customers. Otherwise, we'll see a demand shift, just like big block retail stores and people going to Amazon. Utilities, there's a lot of options out there. Internally, we are spending a lot of time and money on making very dynamic and relevant our services to our customers, which I believe will hold us in good stead. Hopefully, in the future, that will be a competitive advantage when we're looking at other targets as well. That we can bring real-time management, trigen and hydrogen and the entire Internet of Things sensors that will have a complete industrial-like system in a home.
Those are off in the future, those are things that are going on as we speak within the companies, both on the housing side and the utility side. It's not just about going out and finding a new opportunity, it's about making sure that you keep your existing businesses relevant, profitable, and growing themselves. Of course, the greatest value comes from greenfields growth.
Can I ask about telecommunications? Is that something that fits in that infrastructure realm? Have you looked at that or interested in that?
Yeah. Telecommunications is actually an operation that we do within our own utilities, and we've actually taken those skill sets. We have, I think, the longest-standing non-military NATO contract in Bosnia providing telecommunications. Did you want to talk about the-
Yeah, no. Certainly-
infrastructure?
as regions, and particularly regions that we operate in today, move to the new, whether it's the 5G and those types of standards, we have assets that are complementary to many of those new installations, existing poles and infrastructure. We have looked at times to the telecommunication industry, whether it presents an opportunity for us. At the moment, the market is quite integrated with content providers kind of owning networks. In some parts of the world, that is changing, where they are separating out into a utility-like structure, the telecommunications, the carrier, if you will, from the content providers to level the playing field and to get to less costly infrastructure associated with the pure transport of the data. We'll continue to look at it. We operate a large, and I think we've got the third largest telecommunications network in Alberta, just to operate our facilities.
There are some regulatory complications. The CRTC is not the easiest body to deal with in terms of carrying other people's data on our fiber, if you will. It's an area that we stay close to.
Sorry, can I ask one more just in case the next Investor Day is 10 years from now? I want to make sure I get all my questions I want to ask. Robert's question about structure, maybe for my own interests, can you talk about maybe the benefits of having two publicly traded securities and how it's set? Maybe some of the impediments you see in terms of consolidating those two vehicles.
Well, first of all, there's no intent to consolidate. Secondly, the benefit is flexibility. That's the primary benefit. While you don't see it today, and for sure Canadian Utilities is the predominant business in ATCO, and rightly so, and we're very proud of Canadian Utilities. Both companies have a purpose, and they're very different purposes. The strategy for ATCO is to be a holding company of sterling investments, and the strategy for Canadian Utilities is to grow energy infrastructure. That's my answer.
Another question from the webcast on ATCO Investments and the commercial real estate business. Is there a timeline for development of that real estate? What types of development? Would it be sales or the leasing that you referred to, Nancy?
Well, I think we're really looking at the real estate business as complementary to the existing businesses. When I talked about permanent modular space, we have some very key locations in our properties that could support apartment buildings, seniors housing, hotels, here and in the U.S. and in Australia. It's really a matter of sustainability. What we want to see is that we develop enough of the properties to make sure that we've got stable lease income from those properties and then have some nice properties on the shelf that on occasion, when the price is right, we may take the opportunity to sell. If we looked at the whole real estate portfolio, we could extract tremendous value out of it today, but quite frankly, we think we'll get a lot more value in the future out of it. Mark, Sorry, go ahead.
Sorry. I think it's interesting and positive that ATCO's shown the ability to both buy and sell assets at different parts of the cycle. Obviously, the structure sale, I think it was quite sensible. I'm just curious to understand how you think about it at a very sort of big picture level with every asset you have. I'm just going to cite two small examples. We've seen two interesting family-controlled companies in Canada. You have Thomson Reuters selling off one of their largest divisions to a private equity firm. You've seen some interesting things coming from the Weston family, repurposing their. Not to speak specifically about real estate, but they're adding a leg of stability in there. I'm just sort of thinking, my question to the team is how far are you willing to go with recycling capital?
Is it conceivable to say that every asset is potentially on the table for reviewing if a very deep pocketed investor, I'm thinking of AltaLink, when that AltaLink transaction happened with Berkshire Hathaway, I think we all said, "Holy smokes." I'm just trying to explore that notion a bit more.
AltaLink. No. When you think about long-term sustainable growth, where I'm not talking, Dennis isn't talking, Siegfried isn't talking five years or 10 years. We're talking generations. We have a commitment to our companies for generations. That's not to say that one business might not be relevant or we're not good at it, or somebody else would be better at it. Our businesses are here for the long term, and they're not for sale. Pieces may be for sale. Opportunities may arise that allow us to sell portions because of a strategic partnership, much like we've acquired in the Neltume Ports. ATCO and CU are not for sale.
One more question from the webcast. It's a shameless plug, really. It says, "It's nice to hear from management. Are you planning on doing Investor Days annually from this point on?" Is that your question? The name wasn't Myles Dougan on that webcast question.
Poor Myles. He's always pulling teeth with us. Do you want to see us more often or do you care? You do want to see us more often. You do. Why? Tell me why. There's that here. Well.
Just with Neltume, you talked about CAD 300 million for future growth projects. Could you give a sense of when that's going to be deployed or kind of the cadence of maybe that spend?
The Neltume, like any business, has a lead list of opportunities that they're in pursuit of currently. These are long lead time type opportunities, and as you can appreciate, ports aren't built every day, and they don't come for sale very often either. That timeline's not predetermined in terms of, it'll be spent in a couple of years. I think, certainly if all of their opportunities were to come to fruition, we would probably well within kind of a four- or five-year time period have invested that money. It'd be subject to the opportunities closing.
If a big opportunity came up, you guys would have a say sort of in terms of a call for capital or anything going forward, I imagine?
Absolutely.
Just one question on the real estate portfolio. Just generally, what sort of vacancy rates would you guys have within your office and industrial portfolio?
Well, luckily, we don't have many offices, especially in Calgary. The vacancy rate's still very high. We've just finished the development of a new park that's fully occupied, and we're starting to see some of the older buildings starting to come back. I think we're seeing about 35%, 30%, much like the other offices. The good news is we have no debt attached to those. They're fully paid down. That's kind of a common theme in our business, right?
Maybe just going back to the previous questions. Would you like to see more of us? Why communications? In the year and a half that I've been CFO, Myles has dragged me out or Myles and I have gone out on numerous occasions. The feedback that we've gotten from people that it is appreciated. More information is better, particularly with the kind of the strategic long-term view items that Nancy and Sig are much better equipped than myself at communicating and relaying. I haven't heard anything different from what I've messaged in the past number of quarters, so I think that's a good thing. Everyone's time is extremely valuable and limited. We are doing our best to get out to you guys as much as we can.
It's Dom over here, Dominique Barker, CIBC Asset Management. Actually, I'd be remiss just not to comment on you coming out annually. I don't think annually is required at all, but I think every three to four years, I think is appropriate.
God willing.
I did.
Fair enough. It's not a comment in any way on coming out and talking about our companies. I love our companies. Siegfried does. Dennis does, and I think you can tell that we love what we do. We enjoy talking about it. I'm encouraged to hear that you do think it's worthwhile. We will undertake to do more.
One more from the webcast. Is the Canadian economy in such a poor state that companies are getting out of Canada? What do you see in the future that can bring investment back to Canada?
That's a hot potato, isn't it? I think tax reform. We're not competitive, especially compared to our neighbors next door in the U.S. in terms of the tax environment, so fiscal policy. NAFTA is very important and access to markets. Tidewater. We can build all the roads and infrastructure within our country, but we have to be able to take our products to market. We're a small country, if we want to grow to any scale, we need to access global markets, whether it's a manufacturing business here in Ontario or in Quebec or the eastern provinces or in western provinces. The other thing I think that we need to do is bring what Siegfried talked about, far greater certainty to our regulatory framework. Right now, a lot of companies feel that the goalposts continue to be moved and there is a regulatory fatigue.
It doesn't matter whether it's with who you're consulting or how you're consulting, it costs extraordinary amounts of money, not to have certainty at the end of the day. I think those things I would encourage all of our governments, provincially, municipally, and federally, to come up with certainty for future investments and an improved fiscal regime in terms of tax policy and access to global markets through Tidewater. Thank you. Can we go off camera now and just have a talk here? No, I'm just teasing.
Are there any further questions in the room?
Hi, thanks. Can you talk a bit about the interaction between regulators at the provincial level and government, particularly with respect to the utilities? Would there be the potential for, if there were a change, for example, in Alberta, would there be potential for a different tone coming out of the regulators that may be more able to provide more certainty for aspects of your business regarding regulation and how the regulator might act? Maybe just talk a bit about that. We're at the lowest equity thickness in the continent and the lowest ROE. These types of things build on one another, then you get the certainty aspects of what you're touching on there. To what degree is there a potential for a positive rate of change if certain aspects were to reform?
Sieg is best to answer that, but I will say, I feel just as bad for the regulators because they're not making the policy changes. They're not making the legislative changes, they're having to cope just as much as we are with constant change.
I think regulators tend to move in a pack, I would agree with your point that in Alberta, we've been probably seeing the most aggressive, if you will, movements with respect to low equity thickness and returns generally, or at least in my tenure. Dennis can talk eloquently about the generic cost of capital proceedings and a move to a formula, I think, would be just that. It removes the discretion, if you will, from the regulator. They're looking for an easier way to look at these things because they don't like the uncertainty. They themselves, I think, are uncomfortable with the arguments around what is the right returns and thickness to provide regulated companies in a monopoly situation. Very conflicting signals in the marketplace when you look at the premiums being paid for regulated assets around the world.
The imputed returns are significantly lower than the approved return rates, that's what keeps them wanting to try to chase the numbers down. When it comes to, I'm going to call it all the other regulations and legislation that's going on in the country, Bill C-68 and Bill C-69 and the clean fuel standards and the huge environmental and Aboriginal push that has come with a stack of new regulations in Canada. For the first time in my working career, we're driving a direction that is dramatically different than what we're seeing with our major trading partner, the U.S. Be it tax policy, be it environmental. In the U.S., you're seeing a streamlining of regulation. You're seeing a reduction in the red tape to do business there, their economic growth is, I think, reflecting that.
I think Canada needs to be cognizant that capital will flow to where it's most certain and most attractive to be. We've seen dramatic declines in foreign direct investment in our country. We've seen dramatic declines in Canadian domestic investment in property, plant, and equipment, that's a direct reflection of the uncertainty associated with getting approvals and getting your assets installed. I agree wholeheartedly with Nancy's comments around what we need to do about that is we need to provide that certainty. We need to get through this desired change, we need to get through it in a balanced way. We've introduced Bill C-68, which is the Fisheries Act, that has no mention of the economics of what you're undertaking. By default, you read it to you're going to protect fish habitat at all costs.
Clearly, that's not the kind of balance that we need. It's not the kind of balance that regulators can bring to things, and that's why you have regulators. They need to take into account a number of factors when they make a ruling, and some of the legislation is removing that discretion.
Just to pile on. What we've seen in Alberta is some of the interveners, their mantra was lowest possible costs, just kind of at odds with the just and reasonable rates. I can give it for you cheaper today, but it may cost more long-term. We're seeing that in some of these, I'll call them proposed proceedings that the Alberta Utilities Commission has, such as the electric transmission utilization. Why do we need to build it today when I don't need it until tomorrow? It's overall long-term lowest costs. That seemingly has caught a little bit of traction with the Alberta Utilities Commission in signaling that they're going to launch some of these proceedings. We're very concerned about that. With respect to generic cost of capital, a formula, if it's bang on, is fantastic.
With the last formula that we had, it didn't track spreads. It may have tracked the bond rates, but it didn't track the spreads. We saw a disconnect. If you get it right, it's fantastic. There always seem to be some extenuating circumstances or something comes up where we would like to preserve that right to argue our case in light of the current regime. We'll need to see where it goes, but just referring back to that lowest possible cost mantra that seems to have found its way into Alberta's lexicon.
I don't think any of us are saying that we shouldn't have very prudent and stringent environmental policy. I agree with that. I also highly respect the constitutional rights of the Indigenous people of Canada. That Alberta PowerLine, it was a linear project. We had 26 nations including Métis, that we wanted to consult with, and those nations directly in line with the right of way, we didn't have any problems. We had a few differences, but that line and that right of way was agreed to. It's moved on. Our commitment to them was to have ownership in it after commissioning. They believe in us. We have trust. I'm not saying that that's the case in every project. I feel very proud of how we've managed and run our projects.
I feel very proud that I was given an honorary chieftainship because we do have trust, and I believe in our company. We have a very good understanding of the hardships. Those are all important things, and they are all part of Canada, but we have to be competitive as well. When you layer tax after tax and change in procedure after change in procedure onto our obligations and responsibilities to be good Canadian citizens, corporate citizens, then we are losing ground.
I have another question from the webcast. I think it is fair to say we have nearly 7,000 employees worldwide, and several of them, I am not sure the numbers, some of them are watching now, and I think this is an employee question. We have lowered our O&M costs considerably, and some of that has been from employee downsizing. What are we doing to ensure that the safety and reliability of our assets is being continued as we go through this process on our O&M restructuring?
Yeah. Our tenets around safe and reliable operations have not changed in our drive for efficiency. In fact, our attention has heightened, and in fact, I think our safety performance has improved over the same period of time. Efficiency does not mean a downgrade in the safety of your work environment. In fact, in many cases, it is an improvement because you are more aware of what is going on, your work is more orderly and scheduled more effectively, so you are not rushing around haphazardly. Our attention and our safety programs remain intact. We have not downsized or reduced our efforts with respect to running a safe operation that is safe for our customers, for our communities, and for our employees.
Now, when you have to reposition the company and you are looking at efficiencies, letting people go is the hardest aspect of my job or your job or Dennis's job. It is the hardest thing to do in business, and it breaks my heart. I just finished talking a lot about competition, and we do have to be competitive. We have changing expectations from our customers, the ratepayers, and the regulators. Actually, fortunately, there is technology that is allowing us to perform many of the same functions with less people and more accurately. If we do not stay current, if we do not continuously strive to improve, just like the country, we will end up losing ground. It is important for all of us, and I firmly believe that, as hard as it is, it does break my heart to lay people off.
Many of them are terrific people that have been with our company for years, decades, and have done an extraordinary job. Our shareowners and our customers expect us to be the very best that we can be. Part of that is being competitive and efficient and continually striving to improve that.
We're nearing the end of our designated time, I want to make sure if there's a question in the room while we're here that you have an opportunity to ask it. Otherwise, I've got one more from the webcast as our last question. Any more questions in the room? Okay, last question. What are the succession plans for Nancy and Siegfried?
We're going to live forever. No, in all seriousness, we have a very active, we call it GOCOM, so Governance Nomination and Succession Committee for both ATCO and Canadian Utilities. We're constantly reviewing expertise, skill sets, high potentials. Have well-developed career development plans for succession within the companies. I really like this question because I still feel very young. Right, Sig?
That's right.
Yes. Siegfried's taking on a much bigger role this year as president of both of the companies. Dennis is brand new in his job, almost. Well, a year and a half.
I'm young.
You're young, and you're young. If the question is about my succession and where principal control lies, we have a very well-developed plan to maintain principal control. We have a terrific roster of future leaders within the company now. We have, within the family, begun more than a decade ago, a very strong governance education program. I feel very comfortable that we've got good succession plans at all levels of the organization. Good. Thank you all very much. I really do appreciate you taking the time. I recognize it was short notice. I'll commit to you that we will undertake far more communication so that you have more access to myself and Sig and Dennis and the managers in our businesses.
I think it would be nice for you to meet the managing directors of the businesses next time, George Lidgett and Wayne Stensby and Adam Beattie. I think they can give you a real sense and flavor of how their actual operations are going. That's probably where we'll go in the not too distant future, okay? Thanks very much