DBRS Confirms ATCO at A (low), R-1 (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, Canadian Utilities Limited (CU, rated “A”; 52.7% owned by ATCO; see separate press release), and very low leverage at the parent level. The one-notch differential in the ratings of ATCO and CU reflects structural subordination of debt at ATCO. CU’s contributions account for approximately 80% of ATCO’s total earnings. Earnings contributed from a higher-risk business, ATCO Structures & Logistics, remain reasonable at approximately 20% of total earnings.

ASL 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 has no bonds/debentures issued at the parent level and is not expected to have any debt at the parent level. ATCO utilizes a small portion of its $200 million committed credit facilities from time to time for general corporate purposes.

ATCO’s operating cash flow is primarily made up of dividends from its 52.7% ownership of CU. Cash flows from CU to ATCO (consisting of distributions) have been sufficient to cover ATCO’s dividends to its shareholders.

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.