Canadian Utilities: $471M impairments and a $12B regulated capex pivot
Context and chronology
Canadian Utilities reported divergent accounting outcomes for 2025: resilient segment results versus a material non‑cash write-down that produced a statutory loss. Management will discuss results on a February webcast with Mr. Myles and Ms. Patrick, underscoring that operational cash flows and regulated returns remain the company’s focal point. The company flagged transmission and grid constraints as drivers of the impairment, while preserving a progressive dividend policy declared for Q1 2026. This release reframes 2025 as a transition year: short-term write-offs versus longer-term rate base expansion.
Projects, funding and pipeline timing
Two large infrastructure projects anchor the forward plan. Yellowhead is scoped at about $2.9B (Class III, ±20%) and is fully contracted for capacity, with construction targeted to begin in 2026 pending regulator clearances. The Central East Transfer‑Out transmission link is on schedule to energize in mid‑2026 with a project spend near $255M, delivering roughly 1,500 MW of transfer capability into Alberta’s system. To pre‑fund the equity portion the company issued $500M subordinate notes and $200M of preferred shares in 2025 and expects regulated debenture issuance through 2026–2027 to satisfy the capital stack.
Earnings drivers and the impairment signal
On a non‑GAAP basis Canadian Utilities posted $658M adjusted earnings for 2025, up modestly year‑over‑year, while the reported IFRS outcome fell to $119M after a $471M impairment. The impairment mainly hit renewables and select hydrogen and LPG positions because of curtailment risks and regulatory uncertainty, illustrating asset‑specific value erosion where grid access is inadequate. CapEx outlays were heavy in 2025—about $1.6B for the year, with fourth quarter spend at $415M—and management signals a sustained investment cadence to grow regulated rate base through 2030.
Regulatory mechanics and strategic consequences
The five‑year regulated spending plan near $12B implies a consolidated mid‑year rate base rising from $16.6B in 2025 to about $23.2B by 2030, a compound annual growth rate of 6.9%. That trajectory underpins future allowed returns tied to regulatory ROE and equity ratios; however, the company noted a temporary reduction to allowed ROE in 2025 that trimmed near‑term regulated earnings. Financing will lean on regulated debt issuance consistent with a 63/37 debt/equity capital structure for project funding, concentrating rate‑based earnings resilience but increasing near‑term leverage to fund large buildouts.
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