DBRS Confirms Ratings of ATCO Ltd. at R-1 (low), A (low), Stable Trends

DBRS has today confirmed the Short-Term Issuer Rating and Issuer Rating of ATCO Ltd. (ATCO or the Company) at R-1 (low) and A (low), respectively, with Stable trends. The confirmations reflect the strong credit quality of ATCO’s principal subsidiary (52.7% owned by ATCO), Canadian Utilities Limited (CU), which accounts for approximately 80% of the Company’s earnings, and no debt at the parent level, offset by moderate exposure to higher-risk business in the ATCO Structures & Logistics segment. (See CU’s rating report dated March 29, 2012.)

ATCO Structures and Logistics (approximately 20% of earnings) continues to provide stable earnings and cash flows to ATCO as it benefits from increased business activity in its rental fleet segment. This segment is expected to remain a source of earnings growth in the medium term as a result of an increased level of activity in the resource extraction industries. DBRS expects ATCO to continue to manage these operations selectively in such a way that they will not represent a significant portion of consolidated earnings but will rather provide incremental benefits.

ATCO’s non-consolidated operating cash flow is made up primarily from dividends from its 52.7% ownership of CU and remains sufficient to cover the company’s dividend payments. DBRS does not expect the company to issue any debt or preferred shares at this level. ATCO’s non-consolidated debt-to-capital of 1.5% is well below DBRS’s 20% threshold and is not expect to increase materially in the foreseeable future.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Companies in the North American Energy Utilities (Electric and Natural Gas) Industry, which can be found on our website under Methodologies.