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1. Company Snapshot

1.a. Company Description

Canadian Utilities Limited and its subsidiaries engage in the electricity, natural gas, and retail energy businesses worldwide.It operates through Utilities, Energy Infrastructure, and Corporate & Other segments.The Utilities segment provides regulated electricity transmission and distribution services in northern and central east Alberta, the Yukon, and the Northwest Territories; and integrated natural gas transmission and distribution services in Alberta, the Lloydminster area of Saskatchewan, and Western Australia.


It owns and operates approximately 9,000 kilometers of natural gas pipelines, 16 compressor sites, approximately 3,700 receipt and delivery points, and a salt cavern storage peaking facility located near Fort Saskatchewan, Alberta in Canada.The Energy Infrastructure segment provides electricity generation, natural gas storage, industrial water, and related infrastructure development solutions in Alberta, the Yukon, the Northwest Territories, Australia, Mexico, and Chile.The Corporate & Other segment retails electricity and natural gas business in Alberta.


The company was incorporated in 1927 and is headquartered in Calgary, Canada.Canadian Utilities Limited is a subsidiary of ATCO Ltd.

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1.b. Last Insights on CU

Canadian Utilities Limited's recent performance was positively driven by its Q3 earnings rise, despite lower revenue, with growth fueled by energy systems and Australian rates. The company secured key regulatory approval for the Yellowhead Pipeline Project, a 230-kilometre natural gas pipeline in Alberta. Additionally, its subsidiary ATCO Structures won a $130 million contract for worker housing at Idaho's Stibnite Gold Project. The company's focus on capital structure management, including redeeming Series FF Preferred Shares, also contributed to its positive momentum. A dividend payment of CA$0.4577 per share was also announced.

1.c. Company Highlights

2. Canadian Utilities' Q3 2025 Earnings: A Strong Performance

Canadian Utilities Limited reported adjusted earnings of $108 million or $0.40 per share for the third quarter of 2025, up from $102 million for the same period in 2024. The strong performance was driven by growth across all core businesses, including ATCO Energy Systems, ATCO EnPower, Storage and Industrial Water, and electricity generation. However, the actual EPS came in lower than expected at $0.40 relative to estimates at $0.696. Revenue growth is expected to be around 3.2% next year according to analysts' estimates.

Publication Date: Nov -15

📋 Highlights
  • Yellowhead Pipeline Capex:: $2.9 billion with 90% contracted, targeting $261 million remaining funding via hybrid preferreds.
  • Hybrid Notes & Debentures:: $750 million hybrid notes and $370 million debentures, 3x oversubscribed, to fund projects like Yellowhead.
  • Adjusted Earnings Growth:: Q3 2025 adjusted earnings rose to $108 million ($0.40/share) from $102 million in Q3 2024.
  • Australia Earnings Surge:: ATCO Australia delivered $27 million adjusted earnings, 80% higher year-over-year.
  • CETO Project Investment:: $280 million allocated to enhance Central East Alberta’s electric grid efficiency.

Segmental Performance

The company's Australian business delivered strong earnings growth, driven by higher rates and outperformance, with adjusted earnings of $27 million during the quarter, up 80% year-over-year. Katie Patrick mentioned that the strong growth in the Australian business is expected to continue, driven by inflation indexing and potential efficiencies across operations.

Growth Initiatives

Canadian Utilities is making significant investments in its growth initiatives, including the Central East Transfer-Out (CETO) project, a $280 million investment that will enhance the efficiency of the electric grid in Central East Alberta, and the Yellowhead pipeline project, which will create a new direct corridor from the Northwest Alberta supply region to the Greater Edmonton area. The Yellowhead pipeline project is 90% contracted and is expected to deliver long-term economic benefits while strengthening the province's natural gas network.

Valuation and Outlook

With a P/E Ratio of 22.04 and an EV/EBITDA of 10.94, Canadian Utilities' valuation appears reasonable. The company's dividend yield of 4.32% is also attractive. The company's ROIC of 3.95% and ROE of 7.53% indicate a decent return on investment. The Net Debt / EBITDA ratio of 6.15 may raise some concerns about the company's debt levels. As the company continues to invest in its growth initiatives, investors will be watching to see if Canadian Utilities can deliver on its long-term strategy and create value for shareholders.

Funding and Capital Structure

The company has demonstrated its ability to secure funding for its growth initiatives, with a $750 million transaction of hybrid notes and a $370 million transaction of debentures, both of which were 3x oversubscribed. This suggests that there is sufficient investor demand to satisfy the funding requirements for the Yellowhead project. Katie Patrick confirmed that the company anticipates fulfilling the remaining $261 million funding through other capital sources, such as hybrid preferreds.

3. NewsRoom

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Canadian Utilities Ltd (CDUAF) Q3 2025 Earnings Call Highlights: Strong Earnings Growth and ...

Nov -13

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Canadian Utilities Q3 Earnings Rise Despite Lower Revenue; Growth Driven by Energy Systems and Australia Rates

Nov -07

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ATCO Q3 Earnings Rise to $103 Million; Secures U.S. Navy Contract, Boosts Investment in Regulated Utilities

Nov -07

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ATCO Structures Wins US$130 Million Contract for Worker Housing at Idaho's Stibnite Gold Project

Oct -27

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Canadian Utilities (TSE:CU) Is Due To Pay A Dividend Of CA$0.4577

Oct -18

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Does Canadian Utilities' (TSX:CU) Preferred Share Redemption Reflect a Shift in Capital Allocation Priorities?

Oct -16

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Should AUC's Approval of the Yellowhead Pipeline Drive Action From Canadian Utilities (TSX:CU) Investors?

Sep -02

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Emera Announces New CFO

Aug -25

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.22%)

6. Segments

ATCO Energy Systems - Natural Gas

Expected Growth: 4.83%

ATCO Energy Systems' 4.83% growth in Natural Gas is driven by increasing demand for clean energy, Alberta's economic growth, and strategic acquisitions. Additionally, Canadian Utilities Limited's diversified customer base, strong operational efficiency, and investments in infrastructure expansion contribute to the segment's growth.

ATCO Energy Systems - Electricity

Expected Growth: 4.83%

ATCO Energy Systems' 4.83% growth is driven by increasing demand for reliable and efficient electricity distribution, strategic acquisitions, and investments in grid modernization. Additionally, favorable regulatory environments and growing industrial activities in Alberta support the growth. Furthermore, the company's focus on renewable energy sources and energy storage solutions contributes to its expansion.

Canadian Utilities Limited Corporate & Other

Expected Growth: 4.73%

Canadian Utilities Limited's Corporate & Other segment growth of 4.73% is driven by increasing demand for utility services, strategic acquisitions, and cost savings initiatives. Additionally, the company's focus on renewable energy and infrastructure development has contributed to its growth. Furthermore, a favorable regulatory environment and strong operational performance have also supported the segment's expansion.

ATCO EnPower

Expected Growth: 10.27%

ATCO EnPower's 10.27% growth is driven by increasing demand for sustainable energy solutions, strategic acquisitions, and investments in renewable energy infrastructure. Additionally, the company's focus on energy efficiency and electrification of transportation contributes to its growth momentum.

7. Detailed Products

Electricity Distribution

Canadian Utilities Limited provides electricity distribution services to residential, commercial, and industrial customers across Alberta.

Natural Gas Distribution

The company distributes natural gas to customers in Alberta, providing a clean and efficient source of energy for heating, cooking, and powering appliances.

Transmission and Distribution Infrastructure

Canadian Utilities Limited owns and operates transmission and distribution infrastructure, including power lines, substations, and natural gas pipelines.

Renewable Energy

The company invests in renewable energy sources, such as wind and solar power, to reduce its carbon footprint and provide clean energy to customers.

Energy Storage

Canadian Utilities Limited provides energy storage solutions, including battery storage systems, to optimize energy efficiency and reduce peak demand.

8. Canadian Utilities Limited's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Canadian Utilities Limited is low due to the lack of alternative energy sources that can replace the company's services.

Bargaining Power Of Customers

The bargaining power of customers for Canadian Utilities Limited is medium due to the presence of some large industrial customers who can negotiate prices, but the company's diversified customer base mitigates this risk.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Canadian Utilities Limited is low due to the company's ability to negotiate prices with its suppliers and the availability of alternative suppliers.

Threat Of New Entrants

The threat of new entrants for Canadian Utilities Limited is low due to the high barriers to entry in the utility industry, including regulatory hurdles and significant capital requirements.

Intensity Of Rivalry

The intensity of rivalry for Canadian Utilities Limited is medium due to the presence of some competitors in the industry, but the company's strong market position and diversified services mitigate this risk.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 60.29%
Debt Cost 5.85%
Equity Weight 39.71%
Equity Cost 6.92%
WACC 6.28%
Leverage 151.83%

11. Quality Control: Canadian Utilities Limited passed 0 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Otter Tail

A-Score: 6.6/10

Value: 5.3

Growth: 7.0

Quality: 6.5

Yield: 6.0

Momentum: 6.0

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
NorthWestern

A-Score: 6.5/10

Value: 6.1

Growth: 3.4

Quality: 5.1

Yield: 8.0

Momentum: 6.0

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
ALLETE

A-Score: 6.4/10

Value: 5.9

Growth: 4.0

Quality: 4.3

Yield: 8.0

Momentum: 6.0

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
Canadian Utilities

A-Score: 6.3/10

Value: 4.7

Growth: 3.4

Quality: 4.4

Yield: 9.0

Momentum: 6.5

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
Avista

A-Score: 6.3/10

Value: 6.5

Growth: 4.2

Quality: 4.3

Yield: 8.0

Momentum: 4.5

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
Black Hills

A-Score: 6.2/10

Value: 5.2

Growth: 4.4

Quality: 4.4

Yield: 8.0

Momentum: 5.0

Volatility: 10.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

41.77$

Current Price

41.77$

Potential

-0.00%

Expected Cash-Flows