Thank you for standing by. This is the conference operator. Welcome to the fourth quarter 2025 results conference call and webcast for Canadian Utilities Limited. 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. To join the question queue, you may press Star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing Star, then zero. I would now like to turn the conference over to Mr. Colin Jackson, Senior Vice President, Financial Operations. Please go ahead, Mr. Jackson.
Thank you, and good morning, everyone. We are pleased you could join us for Canadian Utilities Q4 2025 conference call. On the line today, we have Bob Myles, Chief Executive Officer, Katie Patrick, Chief Financial and Investment Officer. Before we move into today's remarks, I would like to take a moment to acknowledge the numerous traditional territories and homelands on which our global facilities are located. Today, I am speaking to you from our ATCO Park head office in Calgary, which is located in the Treaty 7 region. This is the ancestral territory of the Blackfoot Confederacy, comprised of the Siksika, the Kainai, and the Piikani nations, the Tsuut'ina Nation, and the Stoney Nakoda Nations, which includes the Chiniki, Bearspaw, and Goodstoney First Nation. I also want to recognize that the City of Calgary is home to the Métis Nation of Alberta, Districts Five and Six.
We honor and respect the diverse history, languages, and ceremonies and cultures of the Indigenous people who call these areas home. Today's remarks will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please refer to our filings with the Canadian Securities Regulators. During today's presentation, we may refer to certain non-GAAP and other financial measures, including adjusted earnings, adjusted earnings per share, 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 by other entities. Please refer to our filings with the Canadian Securities Regulator for further information. Now I'll turn the call over to Bob for his opening remarks.
Thank you, Colin. Good morning, everyone. To begin, I'm really pleased to tell you about the strong results we achieved in 2025. Notably, we overcame CAD 57 million of headwinds last year. This is a major feat, highlighting our ability to deliver earnings growth in the phases of challenges. This is a testament to our strong work ethic, discipline, and resiliency. Katie will speak to this more in the financial update. I want to reiterate the key pillars driving our strategy and where we will focus our efforts in 2026. First, we have growth and prosperity. This is reflective of our project pipeline across all of our business segments. Next, we have operational excellence, which includes continuous modernization of our operating model with safety, reliability, and resiliency at the forefront. Lastly, we remain focused on financial leadership, which includes our funding strategy and financial performance.
Beginning with our first pillar, growth and prosperity. 2025 was a transformational year at Canadian Utilities. The team at ATCO Energy Systems saw significant growth with over 19,600 new gas connections. This is the largest number of gas connections we've had in a decade. We are projecting to continue this momentum into 2026. With our largest assets located in Alberta, we remain optimistic for the year ahead. Throughout 2025, Alberta experienced the strongest population growth, leading the country amongst all provinces. As shown on this slide, this population growth, along with industrial development, is also driving the increasing electricity load forecast for Alberta. We continue to believe that significant investment will be required in our service territory, reinforcing our view that Alberta is leading Canada's energy future.
Aligned with Alberta's growth forecast, we are spurring investment and capitalizing on growth opportunities in front of us. Today, we announced a 12 billion dollar, five year capital expenditure plan across all of our regulated utilities, which I'm proud to say is our most ambitious plan in the history of Canadian Utilities. As shown on this graph, you can see a significant increase in our natural gas transmission spending in 2026 and 2027. This is directly correlated with the Yellowhead Pipeline Project, which I will expand upon later in my remarks. Although 2028 will see a year-over-year decline in capital spend following the completion of the Yellowhead Project, I want to highlight on this slide that our 2028 to 2030 plan will still be significantly above historical levels as we focus on three key areas: customer growth, system reliability and safety, and climate and technology.
I will also note that the forecast does not account for any prospective major projects that may be approved to alleviate existing capacity constraint on the natural gas or electric transmission systems, nor does it reflect the possible approval of new interprovincial electric transmission lines. These potential projects would be additional growth, not currently recognized in the forecast. Our strategic capital plan is driving our five year compound annual growth rate, or CAGR, of 6.9%, an increase from our previously announced three year forecast of 5.4%. This CAGR includes our regulated utility businesses and the impact from the Yellowhead Pipeline Project. I would like to remind everyone that it does not include the growth ambitions from our non-regulated assets and only reflects regulated distribution and transmission, allowing for further growth for our organization.
We are pleased to confirm that our Central East Transfer Out project, or CETO, continues to progress on time and on budget, with our 85 km of the transmission line on track to be energized by June of this year. This CAD 255 million investment directly mitigates grid congestion challenges and remains a critical piece of energy infrastructure in the province, improving the efficiency of our grid. Beyond CETO, further opportunities exist to improve congestion of the electricity system as our transmission lines are located in key areas that will bring generation to consumers, including industrial development. Opportunities that we expect will drive long-term growth include the Northwest Area Transmission Development. This is one area where the ISO has initiated needs identification development work for transmission reinforcements in the Grande Prairie area of Alberta to support existing demand, future load growth, and reliability.
The size of this opportunity will be clear as we progress through 2026, with a preliminary cost estimate of CAD 500 million. The McNeil Converter Station is another opportunity we continue to progress. As shown on the map, the McNeil Converter Station is currently the only intertie point between Alberta and Saskatchewan. Currently, the ISO-led work is being undertaken for an end-of-life replacement of the McNeil Converter. Once complete, this will enable more generation to flow between Alberta and Saskatchewan, representing the next step in addressing regional congestion and supporting system reliability. Due to the scope involved with this opportunity, preliminary cost estimates are approximately CAD 1 billion, and we would expect the majority of the costs to fall outside of our five year capital plan. Finally, we believe there are a number of opportunities for us related to substations and interties.
On substations, I'm proud to announce we recently had two new substations approved by the AUC in Fort McMurray and in Northwest Alberta, which will be in service in late 2026 and the first half of 2027, respectively. Beyond these projects, we continue to work on other substation development opportunities throughout the province of Alberta. As it relates to interties, we are optimistic about the collaboration referenced in the Alberta, Canada MOU, which is expected to significantly increase the intertie transfer capability between the western provinces, which we expect will be an opportunity for our utilities. Moving to our largest infrastructure opportunity, the Yellowhead Pipeline Project. This project will be a key conduit to connecting supply to demand growth while debottlenecking Alberta's existing natural gas network.
Ultimately, the Yellowhead Pipeline will relieve pressure on the entire Alberta integrated system, making it a key infrastructure investment in the province. The Yellowhead Pipeline is fully situated in Alberta, running through Treaty 6 territory. We continue to pursue partnership arrangements with indigenous partners, First Nations, and Métis, as meaningful participation remains essential and closely linked to our company values. In 2025, the project reached several milestones, including the approval of the needs application from the AUC. In late 2025, we also filed a facility application with the AUC. This facility application includes a detailed technical and environmental plan, along with our consultation data, a requirement for construction approval. We expect to receive approval of the facility application by the Q3 of this year, which will enable us to commence construction.
Other Yellowhead milestones accomplished in the last quarter include the procurement of steel pipe, the securing of major equipment for compressor facilities, and the advancement in the selection of a number of service providers. We continue to work collaboratively with the AUC to progress this project. I'm proud to share that the Yellowhead Pipeline Project is now 100% contracted, reinforcing the need for this natural gas pipeline in Alberta. Moving to Australia, I'm also proud to say that ATCO Gas Australia continues to deliver strong results, particularly under the new access arrangement, AA6. For the five year AA6 period, the return on equity is 8.23%. Coupled with the arrangement, the Australia government forecasts significant population increases from which we will benefit and expect to grow by 80,000 new customers during the AA6 period.
Our five year capital plan has $500 million of investment in our Australian gas business, and we will continue to see growth in Australia in the years ahead. As I look at the non-reg side of the business, we have a strong base of assets that align with our strategic pillars of energy storage, generation, and cleaner fuels. Notwithstanding the challenges renewable generation is facing in Alberta, we remain committed to the long-term strategic potential of power generation. In the Q4 , we acquired a 100% ownership interest in Northstone Power Corporation, an independent 18.6 megawatt power producer located near Grande Prairie, Alberta. Northstone primarily operates as a gas peaking facility, supplying power during periods where there is low renewable generation.
This acquisition provides differentiated economics and follows a distinct operating strategy, complementing our existing assets and strengthening our generation profile. As you can see on the slide, we have a balanced portfolio of gas-fired, wind, solar, and hydro generation assets. As previously mentioned, and based on our inability to get Government of Canada support for rail infrastructure expansion, we've made the decision to pause further work on the Alberta Hydrogen Hub project. We did stage-gate this cleaner fuel project opportunity, and we will reevaluate the project at a later date, should investment in cleaner fuels like hydrogen, become more economically feasible and market conditions become more favorable. The project remains part of the portfolio and our long-term cleaner fuel strategy, but in the near term, we require appropriate policy frameworks to make the project investable.
As part of our cleaner fuel strategy, we continue to move ahead with the first phase of the Atlas Carbon Storage Hub in partnership with Shell Canada. This project serves as a centralized storage facility for carbon emissions in Alberta's industrial heartland region. Construction has begun, and once it reaches commercial operations in late 2028, Atlas will be another key non-regulated asset within our portfolio. Optionality allows us to choose growth opportunities we wish to pursue. Natural gas storage remains a valuable asset for our business, generating consistent and predictable cash flow based on long-term secure contracts. The growth in our storage business has allowed us the ability to offset the reduction in our generation earnings and still achieve our overall non-regulated financial targets.
We remain on track to expand the capacity of our Carbon and A-Hub assets from 117 PJ today to 130 PJ by the end of 2026. This expansion will support future natural gas storage financial performance. Outside of these accretive organic growth opportunities, we continue to review strategic opportunities for additional growth in both natural gas storage capacity and power generation, including M&A. We are well-positioned to capitalize on these market fundamentals. I look forward to sharing further updates as we progress through 2026. Our second pillar, operational excellence, is anchored on safety, reliability, and operational outperformance. Despite a challenging wildfire season with the number of fires in 2025, well above the five year average, we were able to maintain strong operational performance, reinforcing the strength and reliability of our infrastructure and systems.
As evident by the year-over-year performance on this slide, we saw a significant improvement in the overall reliability of our Alberta distribution utilities, despite headwinds caused by wildfires. These results can be directly attributed to the teams across our company, who seamlessly coordinated their efforts while responding with remarkable efficiency and unwavering dedication to the safety of our people. As we look at safety across Canadian Utilities, we were able to achieve zero recordable incidents across our non-regulated businesses in 2025, a wonderful accomplishment. Throughout 2025, our team members continued to show their commitment to continuous improvement. As we enter 2026, safety, reliability, and operational outperformance will continue to be at the forefront of our operations. Our third pillar is financial leadership. With that, I'll pass the call to Katie to discuss this in further detail.
Thank you, Bob, and good morning, everyone. Following the financing plan I have discussed for the Yellowhead Pipeline Project in previous quarters, I'm very pleased to share that our portion of the equity investment of the project is fully funded. This was completed via a combination of hybrids, preferred shares, and cash from operations, without the need to issue common equity. We continue to pursue partnership arrangements with indigenous partners for up to 30% of the remainder of the equity investment. Looking at the full year 2025 performance for Canadian Utilities, we are very proud to have delivered year-over-year earnings growth despite many challenges put in front of us. Canadian Utilities achieved adjusted earnings of $658 million, or $2.42 per share, up from $647 million in 2024.
As you can see on the graph, this was an exceptional accomplishment as we were able to overcome CAD 57 million of headwinds we faced. The first of these was a decrease in the 2025 return on equity and the completion of the efficiency carryover mechanism at the end of 2024. These factors immediately created a CAD 26 million gap to overcome. As Bob discussed, changing government policy also created significant earnings deficit from a renewables portfolio of CAD 12 million. Lastly, as you can see on the slide, a strategic decision to redeploy capital from the sale of ATCO Energy to our core regulated business did create an earnings obstacle relative to 2024. However, redeployment of this capital contributed to the CAD 36 million of Alberta utility rate base growth and other outperformance.
Our successful regulatory outcome and move into AA6 in Australia added CAD 21 million of growth to Canadian Utilities. Finally, we had CAD 11 million of growth within our storage and industrial water segment, an impressive 30% increase over 2024. Our continued adjusted earnings growth in the face of these headwinds highlights the strength and resiliency of the company's portfolio. I would particularly highlight the impact of targeted capital recycling out of ATCO Energy into our core utilities, which created an immediate positive impact to our shareowners. As we look ahead, we are well-positioned entering 2026, and we expect to deliver further adjusted earnings growth on a full year basis. Looking at the specific business units, ATCO Energy Systems delivered adjusted earnings of CAD 642 million in 2025, CAD 10 million higher year-over-year.
When factoring in the impact from the change in the ROE and completion of the efficiency carryover mechanism, ATCO Energy Systems drove an impressive $36 million of growth within its regulated utilities, driven primarily by growth in rate base and a prudent focus on delivering cost efficiencies. Within ATCO EnPower, we successfully delivered comparable results to the prior year. As shown in this graph, this was due to the strong performance of our storage and industrial water segment, which, as I mentioned, delivered adjusted earnings growth of 30% year-over-year. This segment continues to generate consistent earnings growth, and as Bob spoke to, we continue to progress our expansion of key facilities that will result in additional storage capacity for us by the end of this year.
ATCO Australia had an excellent year and was a key driver of growth at Canadian Utilities, delivering adjusted earnings of CAD 69 million, up CAD 21 million year-over-year. This is an almost 45% increase in year-over-year adjusted earnings. I want to congratulate the team's effort in transitioning seamlessly into the new access arrangement, AA6, and their focus on driving efficiencies and outperformance across all of our operations in Australia. From a cash flow perspective, our cash flow from operating activities increased by CAD 144 million. Our strong foundation of regulated utilities continues to drive cash flow, earnings, and our long and consistent history of dividend growth. In 2026, we will continue to execute our proven strategy and focus on finding efficiencies across the business to ensure we create shareowner value.
I will now turn the call back to Bob for his closing remarks.
Thanks, Katie. As we close out 2025, we have positive momentum heading into 2026. In the year ahead, we will continue to advance strategic initiatives that reinforce our stability, expand our capabilities, and position the business to capture long-term value. I hope you agree it was an outstanding year as our team worked very hard to overcome many headwinds to drive earnings growth. That concludes our prepared remarks. I'll turn the call back to Colin for questions from the investment community.
Thank you, Bob, and thank you, Katie. In the interest of time, we ask you to limit yourself to two questions. If you have additional questions, you are welcome to rejoin the queue. I'll now turn it over to the conference coordinator for questions.
Thank you. To join the question queue, you may press Star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press Star, then two. The first question comes from John Mould with TD Securities. Please go ahead.
Morning. Thanks very much for taking my questions. First of all, I'd just like to touch on the renewable impairments, but it a two-part question. One, how much of this is due to, you know, planned versus actual curtailment since you bought the assets, versus uncertainty around future congestion policy and where financial transmission rights are going? Sort of flowing from that, you know, N Power generated about CAD 60 million in EBITDA in 2025. How much lower could this go under the scenario that underpinned that impairment decision?
John, I'll start Bob here. On the curtailment, when we, I guess, got into the renewables business three, four years ago, there was a policy of zero congestion in the province. That has since changed. To give you a sense, probably 12 to 15 months ago, we were seeing zero congestion on our largest facility, our Forty Mile Wind project. You know, we're now seeing upwards of 40% curtailment, so it's pretty significant. You know, we're obviously working hard with the ISO and the government to actually address that. As of right now, that's a pretty significant impact on our ability to generate power in the area. Katie, why don't you comment on the financials?
Yeah, John. I mean, I think when you think about how we look forward for the renewables business, I mean, it's a very challenging market as we've highlighted before. I think you can see comparable year-over-year. We expect comparable earnings profile going forward. I can't exactly translate it to EBITDA, I'm sure we can give you some help with that offline as well.
Okay. No, that's helpful. Appreciate that. Just maybe on the gas, you know, side of things, you highlighted, looking at gas M&A and the peaker you bought. You know, how much of what you're potentially looking at is additional acquisitions of smaller gas in Alberta? Is there a potential for you to build a bit of a peaker portfolio there? Are you looking outside the province? Would you consider, you know, development opportunities, you know, in any circumstance, it's just being mindful of the merchant, nature of the market?
Yeah, John, I mean, as we've said in our capital forecast, that's the regulated side, and I'm sure you saw that as well. On the non-reg side, and specifically in generation, we have been looking at different gas peaker, gas generation opportunities. Would we look outside, you know, Alberta? Yes, we would. You know, we see some opportunities in Australia to basically develop as well as to acquire. We would look at both organic and inorganic opportunities. The thing that I would really stress is that it's got to be, it's got to be economic. We are not gonna do things just for the sake of doing a deal.
Okay, that's helpful. Yeah, my questions were on the unregulated side, so, that's perfect, and I'll get back in the queue. Thanks.
The next question comes from Mark Jarvi with CIBC Capital Markets. Please go ahead.
Thanks. That is, the equity for that is fully covered. How would you frame the overall funding as you look at, or the five year plan to 2030? Would there be a need for any external equity to fund the growth?
Thanks. Thanks, Mark. No, we're really happy that we have, you know, cleared away the headwinds that were in front of us. Not headwinds, in terms of trying to make sure we had a clear funding strategy for Yellowhead. I think that was an important step for us. As you know, we've released the new five year capital forecast. I think as we move forward, we should see higher cash flows obviously coming from the investment in Yellowhead and the renewed rate base. We will continue to look to maximize the funding plan for shareowner value. As we get closer to those investments, roll out, you know, a more specific funding strategy as we are with Yellowhead right now in the near term.
In the past, you've mentioned potentially some minority asset sales or even non-core asset sales. Is that something that's still on the table?
Yeah, absolutely.
Beyond Yellowhead. Yeah.
Yeah. Yeah, absolutely. We would consider any option that's gonna maximize returns to investors, and capital recycling is part of the mix in terms of how we would fund future growth.
Bob, just on Yellowhead, facility application, you're trying to get it by Q3? Can you just comment in terms of timelines, if it slips a little bit, any implications, what that could do for the project in itself?
Mark, we knock on wood here, we're optimistic that we will receive it. We have a hearing date set with the regulator right now, which is actually about three weeks ahead of what we had in our original plan, so that's encouraging. We, you know, obviously, we want to be in construction in late Q3, is kind of our timeline. The current plan is we're still on track to do that. If, if it slips, then of course it would, you know, the construction on-stream date, you know, would slip as well. We have some room to be able to move on that, but we're definitely taking a look at the schedule, you know, I'm not gonna say on a daily basis, but definitely on a weekly basis, we're evaluating the schedule and making sure that we have some ability to have some float in that schedule.
You know, typically, if something gets delayed a little bit, there's some cost increases. Is your view, though, that would be fully put back to the ratepayers, or would there be a view that maybe you'd have to reevaluate even the scope of the project somehow?
We have been working with the regulator, Mark, specifically on some, you know, plus or minus in our estimate. We've, you know, we filed an application of CAD 2.9 billion ±20% because we still don't have final design, and we don't have all of that schedule locked down yet, for the reasons you've mentioned. We are working with contractors quite closely to partner around how we can definitely execute this, you know, on time and on budget.
That's good to hear. Okay, thanks.
The next question comes from Maurice Choy with RBC. Please go ahead.
Thank you, good morning, everyone. Just want to come back to the rate base CAGR. Previously, I know that you've mentioned a long-term CAGR of 4% to 5%, obviously today you've further increased it from 5.4% to now 6.9%. Is there, you know, if I look at some of the commentaries that you made today, it sounds like there's even more to come as well. Just curious whether or not this 4% to 5% long-term CAGR is still valid or not?
Yeah, Maurice, I, you know, I am quite proud to say that we have increased our CAGR. You know, as I mentioned, there are opportunities that we're pursuing to allow us to increase that further. We just wanna make sure we're comfortable with the numbers that we put forward. You know, we do think there is potential. Again, we wanna make sure that whatever we put forward, that we can actually execute on that.
Maybe just a quick follow-on to that. When I think about your philosophy of what's baked into this CAD 12 billion of CapEx, you mentioned it doesn't include prospective projects such as those on slide 11. Is it fair to say that the projects in this CAD 12 billion pipeline are projects that either have been approved or, you know, have effectively been sanctioned, such as the Yellowhead Project?
Yeah, exactly, Maurice, is, you know, you might say that's a conservative way of looking at it, but we do wanna feel very confident in the projects that we put into our capital forecast. You know, we have been working with the ISO, we have been working, you know, with the regulator on those projects. You know, there is, as you know, the time delay from pursuing some of these projects to getting them into rate base, which we obviously are working on that issue as well. Yes, I would say that, you know, we're pretty comfortable with the numbers that we're putting forward.
Understood. If I could just finish off with a discussion about guidance and more specifically, EPS guidance. I know you guys don't put that out, and I suppose you have at least two moving parts here, one being the annual update to your Alberta ROEs, and secondly, any equity raises that you may do, seeing as it doesn't sound like you're ruling that out from an early response. Beyond these two items, can you just discuss some of the top things that could prevent you from delivering an EPS CAGR that's similar to your updated 6.9% rate base CAGR?
Yeah. Thanks, Maurice. It's Katie. I think, you know, you hit on the two big ones that are moving factors when we look at how we will deliver earnings per share growth in the future. The other one, obviously, would be the outperformance. We have a long history of strong outperformance. As we move through, as you know, we've moved through a number of different PBR cycles, as well as, you know, different characteristics associated with our transmission applications. Those can, this can create some upside or can create some headwinds in terms of how we would deliver precise sort of earnings related to that rate base growth. I think those are some of the biggest items that we would can have a bit of volatility in them.
Do you envision the non-reg business to provide, you know, I'm sure there's upside, but material upside beyond just the infrastructure, regulated infrastructure CAGR?
Yeah, sorry, apologies. That rate base growth, of course, would not include any growth that we would have from the non-regulated side. We are definitely looking for, you know, not insignificant growth, that we are looking for that to be a big driver of growth for us in the future.
That's great. Thank you very much.
Once again, if you have a question, please press Star, then one. The next question comes from Ben Pham with BMO. Please go ahead.
Thanks, good morning. I wanted to follow up on Mark Jarvi's question on funding. I just didn't totally get it or crystal clear from my standpoint. In your CapEx plan you have now, do you need equity to fund that, or can you self-fund the CAD 12 billion?
You know, to be clear, I think that as we get further out, there probably will be the need for some form of capital recycling or equity component to that CAD 12 billion capital plan. You know, we're very focused on the near term and delivering successfully on the project at Yellowhead, which we have now fully funded. For the next few years, I think we're in a good position, and we'll, you know, keep people posted on how it looks for the outer years of that capital plan.
Okay, got it. On the top of acquisitions, you now have the 10%, rounded rate base CAGR. You have maybe upside beyond that in acquisitions or, non-organic growth, opportunities. I'm just curious then, I mean, that's generally a pretty good growth rate in North America, as a leading, point. Why are you pursuing acquisitions then, when you're considering just the balance sheet right now, too, and where it's going forward? Is that some strategic angle you're looking at? Is it relative valuations for organic growth? Maybe enlighten us a bit on the acquisition strategy.
Ben, I would say one of the big things is obviously we wanna try to continue to increase our earnings per share, which is why I said earlier that not really interested in acquisitions if they're not going to be accretive and not gonna really make economic sense. The other benefit of looking at acquisitions for us is geographic diversification. You know, Australia is an area that I really believe is a great opportunity for us. An acquisition in Australia would be something that we would consider, just to give you an example of that. Also as we grow our portfolio, it's got to be the right acquisition. It's more around those items, I would say.
Okay, got it. Thank you very much.
The next question comes from Patrick Kenny with National Bank. Please go ahead. Patrick, you may go ahead.
Sorry, Patrick, we're having some trouble hearing you. Maybe we'll just continue on with the, with the call.
This concludes the question and answer session. I would like to turn the conference back over to Mr. Colin Jackson for any closing remarks. Please go ahead, Colin.
Thank you, and thank you all for joining us today. We appreciate your interest in Canadian Utilities, and look forward to speaking to you again in the future.
This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.