“EPCOR’s financial performance was in line with expectations for the quarter,” said
Stuart Lee, EPCOR President & CEO. “It was a productive quarter for EPCOR, as we completed the acquisition of Hughes Gas Resources, Inc., a natural gas distribution utility operating northwest of Houston, Texas, which marks our entrance into the natural gas distribution business and further builds out our footprint in Texas.”
“We also made excellent progress in preparing for the transfer of the City of Edmonton’s Drainage Services utility to EPCOR,” said Mr. Lee. “We look forward to welcoming Drainage employees and customers on September 1.” The City of Edmonton approved the transfer of its Drainage Services utility to EPCOR on April 12. With the transfer, EPCOR will oversee the City’s entire water utility cycle.
Results were lower than the same periods in 2016 owing to events in 2016 that were not present in 2017. Highlights of EPCOR’s financial performance are as follows:
- Net income was $56 million and $94 million for the three and six months ended June 30, 2017, respectively, compared with $67 million and $145 million for the corresponding periods in the previous year. Net income was lower primarily due to lower income from core operations, as described below, and no dividend income due to the final sale of Capital Power shares. Partially offsetting these decreases were greater favorable fair value adjustments related to financial electricity purchase contracts in 2017 and unfavorable fair value adjustments related to interest swaps in the corresponding periods in 2016. In addition, the six months ended June 30, 2017 include the recognition of the fair value gain resulting from the final sale of Capital Power shares.
- Income from core operations was $52 million and $90 million for the three and six months ended June 30, 2017, respectively, compared with $68 million and $143 million for the corresponding periods in the previous year. Income from core operations was lower primarily due to lower income from industrial services contracts resulting from the termination of the Suncor financing and operating agreements in 2016, lower Energy Price Setting Plan margins, lower water and wastewater volumes due to higher precipitation in the city of Edmonton, higher water treatment costs and a loss on sale of surplus land, partially offset by higher electricity transmission and water customer rates. In addition, the decrease for the six months ended June 30, 2017 was also due to lower net system access service collections and lower gains as a result of sales of surplus land in the first quarter of 2016.
- Net cash flows from operating activities was $132 million for the six months ended June 30, 2017, compared with $223 million for the corresponding period in the previous year. The decrease reflects reduced income from operations and lower funds from changes in non-cash operating working capital.
- Investment in capital projects and acquisitions was $154 million and $252 million for the three and six months ended June 30, 2017, respectively, compared with $122 million and $210 million for the corresponding periods in the previous year. The year-to-date increase of $42 million was primarily due to the acquisition of Hughes Gas Resources, Inc., partially offset by decreased spending in Distribution and Transmission on growth and lifecycle projects.
Management’s discussion and analysis (MD&A) of the quarterly results are shown below. The MD&A and the unaudited condensed consolidated interim financial statements are available on
EPCOR’s website and
EPCOR, through its subsidiaries, builds, owns and operates electrical and natural gas transmission and distribution networks, water and wastewater treatment, collection and distribution facilities and networks 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 an Alberta Top 70 employer.
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