EPCOR Announces 2022 Financial Results

EDMONTON, AB, Feb. 16, 2023 /CNW/ - EPCOR Utilities Inc. (EPCOR) today filed its annual and fourth quarter results for 2022.

EPCOR MDA (CNW Group/Epcor Utilities Inc.)

"In 2022, EPCOR's people achieved strong results against our financial and non-financial targets, including exceptional safety performance, superior operating and financial results across our footprint, and the placement of more than $900 million in capital projects for our existing operations," said Stuart Lee, EPCOR President & CEO. "EPCOR's capital program helped sustain reliable utility service, support community growth, improve environmental performance, and included substantial investments that will advance water reclamation in the U.S. Southwest."

"EPCOR's growth in the United States accelerated in 2022, led by the ongoing construction of a new groundwater supply system and an industrial water reclamation facility in central Texas," continued Mr. Lee. "More than $450 million of construction work on these projects was completed in 2022, with construction expenditures and margins reflected in EPCOR's revenues and expenses.

"The strong performance of EPCOR's businesses, and prospects for continued growth, led the EPCOR dividend to be increased from $177 million in 2022 to $185 million in 2023. We continue to pursue a balanced approach to long-term value creation, investing in reliable utility services while protecting ratepayers, and re-investing in the business to deliver sustained income and dividend growth."

Highlights of EPCOR's financial performance are as follows:

• Net income was $93 million and $379 million for the three and twelve months ended December 31, 2022, respectively, compared with net income of $101 million and $388 million for the comparative periods in 2021. The decrease of $8 million and $9 million for the three and twelve months ended December 31, 2022, respectively was primarily due to the gain on the expropriation of the Bullhead City (BHC) water utility systems in 2021, combined with a gain on the settlement of contingent consideration related to EPCOR Gas Texas in 2021 and higher depreciation and finance expense in 2022, partially offset by favorable fair value adjustments related to financial electricity purchase contracts and higher Adjusted EBITDA, as described below. In addition net income for the three months ended December 31, 2022 was lower due to recovery of U.S. natural gas procurement costs in 2021.
• Adjusted EBITDA¹ was $223 million and $930 million for the three and twelve months ended December 31, 2022, respectively, compared with $203 million and $843 million for the comparative periods in 2021. The increase of $20 million for the three months ended December 31, 2022 was primarily due to higher rates and customer growth, higher recognition of deferred revenue in the U.S., higher average foreign exchange rates on higher Adjusted EBITDA from U.S Operations, and higher construction margins due to a new project in central Texas, partially offset by higher administrative and staff costs. The increase of $87 million for the twelve months ended December 31, 2022 was primarily due to higher rates and customer growth, higher Energy Price Setting Plan margins, higher construction margins due to a new project in central Texas, higher recognition of deferred revenue in the U.S., and higher average foreign exchange rates on higher Adjusted EBITDA from U.S. Operations, partially offset by higher operating and staff costs, lower commercial margins and lower Adjusted EBITDA from the expropriation of BHC in 2021.
• Investment in capital projects was $920 million for the twelve months ended December 31, 2022, compared with $1,036 million for the corresponding period in 2021, lower primarily due to the acquisition of San Tan operations in 2021 with no corresponding acquisition in 2022 and lower spending in the Company's Water Services segment, partially offset by higher capital spending in the Company's Distribution and Transmission and U.S. Operations segments.

1.    Adjusted EBITDA is a non-GAAP financial measure.  See the Non-GAAP Financial Measures section in Appendix 1 to this media release.

Management's discussion and analysis and the audited consolidated financial statements are available on EPCOR's website (www.epcor.com) and SEDAR (www.sedar.com).

EPCOR, through its wholly owned subsidiaries, builds, owns and operates electrical, natural gas and water transmission and distribution networks, water and wastewater treatment facilities, sanitary and stormwater systems in Canada and the United States. The Company also provides electricity, natural gas and water products and services to residential and commercial customers. EPCOR, headquartered in Edmonton, is committed to conducting its business and operations safely and responsibly. Environmental stewardship, public health and community well-being are at the heart of EPCOR's mission to provide clean water and safe, reliable energy. EPCOR is an Alberta Top 75 employer and is ranked among Corporate Knights' 2022 Best 50 Corporate Citizens in Canada.

Appendix 1 Non-GAAP Financial Measures

The Company uses earnings before finance expenses, income tax recovery (expense), depreciation and amortization, changes in the fair value of derivative financial instruments, transmission system access service charge net collections, net collections of U.S. natural gas procurement costs and other unusual items (collectively, Adjusted EBITDA) to discuss operating results for the Company's lines of business. Adjusted EBITDA is a non-GAAP financial measure and is not a standardized financial measure under IFRS and might not be comparable to similar financial measures disclosed by other issuers.

The reconciliation between Adjusted EBITDA to Net income as reported under IFRS is shown below:

($ millions)	Three months ended December 31,			Twelve months ended December 31,
	2022	2021		2022	2021
Adjusted EBITDA by Segment
Water Services segment	$            92	$            84		$          400	$           373
Distribution and Transmission segment	59	60		249	245
Energy Services segment	19	17		61	37
U.S. Operations segment	44	36		181	153
Other	9	6		39	35
Adjusted EBITDA	223	203		930	843
Other income	2	7		2	7
Finance expenses	(46)	(35)		(160)	(148)
Income tax expense	(14)	(15)		(37)	(39)
Depreciation and amortization	(116)	(100)		(409)	(377)
Change in fair value of financial electricity purchase contracts ^(1)	46	-		64	10
Transmission system access service charge net collections ^(2)	(2)	7		(11)	3
Net collections of U.S. natural gas procurement costs ^(3)	-	14		-	-
Gain on expropriation of the Bullhead City water utility systems ^(4)	-	20		-	89
Net income	$            93	$          101		$          379	$           388

1.	The change in fair value of derivative financial instruments represents the change in fair value of financial electricity purchase contracts between the electricity market forward prices and the contracted prices at the end of the reporting period, for the contracted volumes of electricity.
2.	Transmission system access service charge net collections is the difference between the transmission system access service charges paid to the provincial system operators and the transmission system access service charges collected from electricity retailers. Transmission system access service charge net collections are timing differences, which are collected from or returned to electricity retailers as the transmission system access service charges and customer billing determinants are finalized.
3.	Net collections of U.S. natural gas procurement costs represents the difference between collection of flow through natural gas procurement costs from customers and natural gas procurement costs paid to suppliers or producers. Net collections of U.S. natural gas procurement costs are timing differences, which are collected from or returned to customers on finalization of the regulatory process.
4.	Represents the unusual gain from expropriation of the Bullhead City water utility system in Q3 2021.

SOURCE Epcor Utilities Inc.

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