EPCOR Utilities Inc. (EPCOR) has filed its annual and fourth quarter results for 2019.
“EPCOR had a strong year operationally, with safety, reliability and customer service results that consistently met or exceeded targets,” said Stuart Lee, EPCOR President and CEO. “Our annual net income was down to $231 million (S$321 million), compared to $295 million (S$410 million) in 2018, driven primarily by higher non-cash income tax expense, while adjusted EBITDA saw modest growth to $730 million (S$1.01 billion) in 2019 from $700 million (S$972.9 million) in 2018.”
“As we enter 2020, we look back on a decade of growth and transformation for the company,” Mr. Lee continued. “A decade of working to build a proactive, zero-injury safety culture has resulted in a rate of incidents that is now less than half what it was in 2009. Similarly, a diligent focus on operational excellence has resulted in improved reliability, with water main breaks and electricity interruptions in Edmonton cut nearly in half over the last ten years. Our people established and built a major utility business in the United States – first in Arizona and New Mexico, and now expanding further into Texas. In Canada, our footprint extends across four provinces, and our Energy Services team reached one million customer connections served in 2019.”
Highlights of EPCOR’s financial performance are as follows:
- Net income was $59 million (S$82 million) and $231 million (S$321 million) for the three and twelve months ended December 31, 2019, respectively, compared with net income of $107 million (S$148 million) and $295 million (S$410 million) for the comparative periods in 2018, respectively. The decrease of $48 million (S$66 million) for the three months ended December 31, 2019, was primarily due to higher income tax and depreciation expenses and lower transmission system access service charge net collections, partially offset by lower finance expenses, lower unfavourable fair value adjustments related to financial electricity purchase contracts and higher Adjusted EBITDA. The decrease of $64 million (S$89 million) for the twelve months ended December 31, 2019, was primarily due to higher income tax, depreciation and finance expenses, as well as, lower transmission system access service charge net collections, partially offset by favourable fair value adjustments related to financial electricity purchase contracts and higher Adjusted EBITDA.
- Adjusted EBITDA was $194 million (S$269 million) and $730 million (S$1.01 billion) for the three and twelve months ended December 31, 2019, respectively, compared with $182 million (S$252 million) and $700 million (S$972 million) for the comparative periods in 2018, respectively. Adjusted EBITDA increased by $12 million (S$16 million) for the three months ended December 31, 2019, primarily due to higher water and wastewater customer rates, customer growth and higher water consumption, higher electricity distribution and transmission rates, higher Energy Price Setting Plan (EPSP) margins and recognition of lower rent expense related to implementation of IFRS 16, which is now being recorded as depreciation on right-of-use assets and finance expense related to lease liabilities. These increases were partially offset by lower work volumes and margins for street lighting, traffic signals and light rail transit electrical services for The City of Edmonton (the City), higher maintenance costs on water storage tanks in U.S. Operations and lower water revenues in Arizona due to a tax reform adjustment credit on customer bills. Adjusted EBITDA increased by $30 million (S$41 million) for twelve months ended December 31, 2019, primarily due to higher water and wastewater customer rates and customer growth, higher electricity distribution and transmission rates, higher EPSP margins and recognition of lower rent expense related to implementation of IFRS 16. These increases were partially offset by lower work volumes and margins for street lighting, traffic signals and light rail transit electrical services for the City, lower water consumption resulting from lower temperatures and higher precipitation, higher maintenance costs on water storage tanks in U.S. Operations, lower water revenues in Arizona due to a tax reform adjustment credit on customer bills and higher water treatment costs due to poor water quality of the North Saskatchewan River.
- Investment in capital projects was $786 million (S$1.09 billion) for the twelve months ended December 31, 2019, compared with $653 million (S$907 million) for the corresponding period in the 2018 and included higher capital spending across most of our operating segments. The increase of $133 million (S$184 million) was primarily due to higher spending in the Water Services segment including on the Groat Road Sewer Trunk line rehabilitation, the Gold Bar Sludge Line Replacement projects, and private water transmission main development projects, higher spending in the Distribution and Transmission segment including on a new substation in southwest Edmonton, a transmission line in the Norwood community of Edmonton and on several other growth projects within Edmonton, as well as, spending on the Southern Bruce Design and Construction project and on our new customer billing system.
Management’s discussion and analysis and the audited consolidated financial statements are available on EPCOR’s website and SEDAR.
