"EPCOR had a strong quarter operationally, with teams adapting their work to the COVID-19 pandemic, and continuing to support customers with safe, reliable utility services," said Stuart Lee, EPCOR President & CEO. "EPCOR achieved a second quarter net income of $70 million despite the headwinds created by the pandemic and operational impacts from wet weather in Edmonton and on the North Saskatchewan river basin."
"While we are expecting continued pandemic impacts for the remainder of 2020 the Company is in a strong position," Mr. Lee said. "We continue to invest in the infrastructure renewal and growth projects needed to deliver reliable utility services to customers while supporting our communities through various support programs. Over the balance of the year, we are also investing in growth, as we continue construction of natural gas utility infrastructure in the Southern Bruce region of Ontario, electrical sub-station infrastructure for the Trans Mountain pipeline expansion project and the extension of a major sewer main followed by expansion of the wastewater treatment plant in Phoenix."
Highlights of EPCOR's financial performance are as follows:
Net income was $70 million and $120 million for the three and six months ended June 30, 2020, respectively, compared with net income of $40 million and $96 million for the comparative periods in 2019. The $30 million increase for the three months ended June 30, 2020, was primarily due to favorable fair value adjustments related to financial electricity purchase contracts, higher transmission system access service charge net collections, lower income tax expense and higher Adjusted EBITDA, as described below, partially offset by higher depreciation and finance expenses. The $24 million increase for the six months ended June 30, 2020, was primarily due to higher transmission system access service charge net collections, lower income tax expense and higher Adjusted EBITDA, as described below, partially offset by unfavorable fair value adjustments related to financial electricity purchase contracts, higher depreciation and finance expenses.
Adjusted EBITDA was $185 million and $358 million for the three and six months ended June 30, 2020, respectively, compared with $178 million and $335 million for the comparative periods in 2019. The increase of $7 million and $23 million for the three and six months ended June 30, 2020, respectively, was primarily due to higher water and wastewater rates, customer growth, higher water revenues in Arizona due to a tax reform adjustment credit on customer bills in 2019 with no corresponding credit in 2020, and higher electricity distribution customer rates, partially offset by lower water consumption for operations in Edmonton, lower work volumes and lower margins for street lighting, traffic signals and light rail transit electrical services for the City of Edmonton, higher water treatment costs due to poor water quality conditions of the North Saskatchewan River, higher provisions for expected credit losses from customers resulting from the deferral of utility bill payments and lower other revenues resulting from the suspension of late payment and disconnections fees.
Investment in capital projects was $352 million for the six months ended June 30, 2020, compared with $290 million for the corresponding period in 2019, and included higher capital spending across most of our operating segments. The increase of $62 million was primarily due to higher spending in the Water Services segment on Parkallen Dry Pond project, several sanitary sewer main projects and various lifecycle projects; higher spending in the Distribution and Transmission segment including a 15kV and 25 kV circuit duct bank under the North Saskatchewan River, West Valley Light Rail Transit system relocation project and various lifecycle replacement projects, partially offset by lower spending on a new substation in southwest Edmonton which was substantially complete in 2019; higher spending in the U.S. Operations segment on the sewer main extension project west of metropolitan Phoenix to accommodate new industrial and commercial customers, the payment for Vista Ridge project; and higher spending on a new customer billing system. Capital spending increases were partially offset by the acquisition of Rio Verde Utilities Inc. in 2019, with no corresponding acquisition year-to-date in 2020.
Interim management's discussion and analysis and the unaudited condensed consolidated interim financial statements are available on our finanacial information page and SEDAR.
EPCOR, through its wholly owned subsidiaries, builds, owns and operates electrical, natural gas and water transmission and distribution networks, water and wastewater treatment facilities, sanitary and stormwater systems, and infrastructure 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 75 employer.
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Phone: (780) 412-3711
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