ATCO LTD.

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ATCO LTD. FINANCIAL INFORMATION

FOR THE THREE MONTHS ENDED MARCH 31, 2021

CORPORATE OFFICE: 5302 FORAND ST SW, CALGARY, ALBERTA, CANADA T3E 8B4 TEL: 403-292-7500 WWW.ATCO.COM

atco.com

STRUCTURES &LOGISTICS | NELTUMEPORTS |CANADIAN UTILITIES

Q1 2021 INVESTOR FACT SHEET

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With approximately 6,200 employees and assets of $22 billion, ATCO is a diversified global corporation with investments in the essential services of: Structures & Logistics (workforce and residential housing, innovative modular facilities, construction, site support services, workforce lodging services, facility operations and maintenance, defence operations services, and disaster and emergency management services); Utilities (electricity and natural gas transmission and distribution, and international electricity operations); Energy Infrastructure (electricity generation, energy storage and industrial water solutions); Retail Energy (electricity and natural gas retail sales); Transportation (ports and transportation logistics); and Commercial Real Estate.

TRACK RECORD OF DIVIDEND GROWTH

DIVERSIFIED ESSENTIAL SERVICES

ATCO’s investments put us at the forefront of global trends. We deliver the enduring essentials required for a healthy global economy.

$0.4483

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28-year track record of increasing common share dividends*

93 97 01 05 09 13 17 21

On April 14, 2021, ATCO declared a second quarter dividend of $0.4483 per share, or $1.79 per share annualized.

GLOBAL GROWTH

ATCO AT A GLANCE

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74-year historyin more than 100 countries	74-year historyin more than 100 countries
“A-” ratingbyStandard & Poor’s; “A” (low) ratingbyDBRS Limited
Total Assets	$22 Billion
Modular Building Manufacturing Locations	6 Globally (1 Canada, 1 United States, 2 Australia, 1 Chile, 1 Mexico)
Electric Powerlines	75,000 kms
Pipelines	64,000 kms
Power Generation Operated Power Generation Owned	398 MW * 293 MW *
Water Infrastructure Capacity	85,200 m3/d **
Natural Gas Storage Capacity	52 PJ ***
Hydrocarbon Storage Capacity	400,000 m3 ****
Ports and Port Operations	16 Ports, 3 Port Operation Services

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Canadian Utilities, Structures Neltume Ports, Structures &
& Logistics, Commercial Real Estate Logistics, and Canadian Utilities
and ASHCOR
Canadian Utilities and Canadian Utilities
Structures & Logistics
Structures & Logistics Neltume Ports
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megawatts cubic metres per day petajoules **cubic metres

ATCO SHARE INFORMATION

ATCO SHARE INFORMATION	ATCO SHARE INFORMATION
Common Shares (TSX): ACO.X, ACO.Y
Market Capitalization	$5 billion
Weighted Average Common Shares Outstanding	114.3 million

ATCO SHARE INFORMATION	ATCO SHARE INFORMATION
Common Shares (TSX): ACO.X, ACO.Y
Market Capitalization	$5 billion
Weighted Average Common Shares Outstanding	114.3 million

We continue to grow and expand our international business

Adjusted earnings are earnings attributable to Class I and Class II Shares after adjusting for the timing of revenues and expenses associated with rate-regulated activities and unrealized gains or losses on mark-to-market forward and swap commodity contracts. Adjusted earnings also exclude one-time gains and losses, significant impairments, and items that are not in the normal course of business or a result of day-to-day operations. Certain statements in this document contain forward-looking information. Please refer to our forward-looking information disclaimer in ATCO’s management’s discussion and analysis for more information.

It is important for prospective owners of ATCO shares to understand that ATCO is a diversified group of companies principally controlled by Sentgraf, a Southern family holding company. It is also important for present and prospective share owners to understand that the ATCO share registry has both Class I Non-Voting (ACO.X) and Class II Voting (ACO.Y) common shares.

Q1 2021 RESULTS

CONSOLIDATED REVENUES

CONSOLIDATED ADJUSTED EARNINGS

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$119 M
$1,056 M $1,072 M $106 M
Q1 2020 Q1 2021 Q1 2020 Q1 2021
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STRUCTURES & LOGISTICS

ADJUSTED EARNINGS

Higher adjusted earnings were mainly due to ATCO Structures' workforce housing trade sale and rental activity, higher space rental activity, and additional ATCO Frontec client work requests at the BC Hydro Site C Camp due to COVID-19 proactive and preventative safety measures.
Awarded a $44 million contract for the supply of a 450-person camp for Pretium Exploration Inc.’s Brucejack operations in Northwest British Columbia. Detailed engineering work has commenced with manufacturing and site work expected to begin in the second quarter of 2021. Installation work is expected to be complete by the end of 2021.
Completed installation on a 450-person camp that had been previously awarded on a $12 million rental contract for 31 months. The project will support the rebuild and expansion of the China Lake Military Base in Southern California. The military base was damaged by two major earthquakes in July 2019.

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$14 M
$7 M
Q1 2020 Q1 2021
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NELTUME PORTS

ADJUSTED EARNINGS

Adjusted earnings were comparable to the same period in 2020.

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$3 M $3M
Q1 2020 Q1 2021
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CANADIAN UTILITIES

Higher earnings were mainly due to cost efficiencies and continued growth in the Utilities’ asset base, earnings from International Electricity Operations, as well as demand for natural gas storage services and recovered business development costs in Energy Infrastructure.
Acquired the rights to develop the 325-MW Central West Pumped Storage Hydro project, located approximately 175 km west of Sydney, Australia. A final investment decision on project construction is expected in 2023.
Filed an application with the Alberta Utilities Commission on March 1, 2021 to postpone Electricity and Natural Gas Distribution utility rate increases for 2021 and collect the deferred amounts commencing in 2023. The current economic situation in Alberta, including hardships faced by customers due to the COVID-19 pandemic, is the rationale for the rate freeze.
Received several regulatory decisions in the first quarter of 2021 which provide regulatory certainty into the future.

ADJUSTED EARNINGS

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$106 M
$99 M
Q1 2020 Q1 2021
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Investor Relations, c/o ATCO Ltd. 3rd Floor, West Building 5302 Forand Street SW, Calgary, Alberta, Canada T3E 8B4

[email protected] T: (403) 292-7500 | F: (403) 292-7532

2021 FIRST QUARTER FINANCIAL INFORMATION

INVESTOR FACT SHEET

MANAGEMENT'S DISCUSSION AND ANALYSIS

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021

Management’s Discussion and Analysis Consolidated Financial Statements

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MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2021

This Management's Discussion and Analysis (MD&A) is meant to help readers understand key operational and financial events that influenced the results of ATCO Ltd. (ATCO, our, we, us, or the Company) during the three months ended March 31, 2021.

This MD&A was prepared as of April 28, 2021, and should be read with the Company's unaudited interim consolidated financial statements for the three months ended March 31, 2021. Additional information, including the Company's previous MD&A (2020 MD&A), Annual Information Form (2020 AIF), and audited consolidated financial statements for the year ended December 31, 2020, is available on SEDAR at www.sedar.com. Information contained in the 2020 MD&A is not discussed in this MD&A if it remains substantially unchanged.

The Company is controlled by Sentgraf Enterprises Ltd. and its controlling share owner, the Southern family. The Company includes controlling positions in Canadian Utilities Limited (Canadian Utilities or CU) (52.7 per cent ownership), ATCO Structures & Logistics Ltd. (100 per cent ownership), ATCO Land and Development Ltd. (100 per cent ownership), and ASHCOR Technologies Ltd. (100 per cent ownership). The Company also has a non-controlling equity investment in Neltume Ports S.A. (Neltume Ports) (40 per cent ownership). Throughout this MD&A, the Company's earnings attributable to Class I and Class II Shares and adjusted earnings are presented after non-controlling interests.

Terms used throughout this MD&A are defined in the Glossary at the end of this document.

ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

TABLE OF CONTENTS
	Page
Performance Overview....................................................................................................................................................	6
Business Unit Performance.............................................................................................................................................	9
Structures & Logistics....................................................................................................................................................	9
Neltume Ports................................................................................................................................................................	12
ATCO Corporate & Other..............................................................................................................................................	13
Canadian Utilities...........................................................................................................................................................	14
Utilities.....................................................................................................................................................................	14
Utilities Regulatory Developments...................................................................................................................	15
Energy Infrastructure.............................................................................................................................................	16
Canadian Utilities Corporate & Other..................................................................................................................	17
Other Expenses and Income...........................................................................................................................................	18
Liquidity and Capital Resources.....................................................................................................................................	20
Share Capital.....................................................................................................................................................................	22
Quarterly Information......................................................................................................................................................	23
Non-GAAP and Additional GAAP Measures..................................................................................................................	25
Reconciliation of Adjusted Earnings to Earnings Attributable to Class I and Class II Shares..................................	26
Reconciliation of Funds Generated by Operations to Cash Flows from Operating Activities.................................	29
Reconciliation of Capital Investment to Capital Expenditures....................................................................................	30
Other Financial Information...........................................................................................................................................	31
Glossary.............................................................................................................................................................................	32

5 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

PERFORMANCE OVERVIEW

FINANCIAL METRICS

The following chart summarizes key financial metrics associated with our financial performance.

			Three Months Ended	Three Months Ended
				March 31
($ millions, except per share data and outstanding shares)		2021	2020	Change
Key Financial Metrics
Revenues		1,072	1,056	16
Adjusted earnings (1)		119	106	13
Structures & Logistics		14	7	7
Neltume Ports		3	3	—
ATCO Corporate & Other		1	1	—
Canadian Utilities Limited
Utilities		106	99	7
Energy Infrastructure		5	3	2
Canadian Utilities Corporate & Other		(10)	(7)	(3)
Adjusted earnings ($ per share)	(1)	1.04	0.93	0.11
Earnings attributable to Class I and Class II Shares		83	87	(4)
Earnings attributable to Class I and Class II Shares ($ per share)		0.73	0.76	(0.03)
Cash dividends declared per Class I and Class II Share (cents per share)		44.83	43.52	1.31
Funds generated by operations	(1)	491	516	(25)
Capital investment (1)		253	303	(50)
Other Financial Metrics
Weighted average Class I and Class II Shares outstanding_(thousands):_
Basic		114,302	114,352	(50)
Diluted		114,551	114,732	(181)

(1) Additional information regarding these measures is provided in the Non-GAAP and Additional GAAP Measures section of this MD&A.

REVENUES

Revenues for the first quarter of 2021 were $1,072 million, $16 million higher than the same period in 2020. Higher revenues were mainly due to improved performance at ATCOenergy resulting from higher electricity and natural gas commodity prices and customer growth.

ADJUSTED EARNINGS

Our adjusted earnings in the first quarter of 2021 were $119 million or $1.04 per share, compared to $106 million or $0.93 per share for the same period in 2020.

The primary drivers of adjusted earnings results were as follows:

Structures and Logistics adjusted earnings in the first quarter of 2021 were $7 million higher than the same period in 2020. Higher earnings were mainly due to ATCO Structures' workforce housing trade sale and rental activity, higher space rental activity, and additional ATCO Frontec client work requests at the BC Hydro Site C Camp due to COVID-19 proactive and preventative safety measures.
Canadian Utilities adjusted earnings in the first quarter of 2021 were $6 million higher than the same period in 2020. Higher earnings were mainly due to cost efficiencies and growth in the Utilities' rate base, earnings from International Electricity Operations, as well as demand for natural gas storage services and recovered business development costs in Energy Infrastructure.

ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

Adjusted Earnings ($ Millions)

$106	$7	$—	$6
Q1 2020 Structures & Neltume		ATCO	Canadian Q1 2021
	Logistics Ports	Corporate &	Utilities
		Other

Additional detail on the financial performance of our business units is discussed in the Business Unit Performance section of this MD&A.

EARNINGS ATTRIBUTABLE TO CLASS I AND CLASS II SHARES

Earnings attributable to Class I and Class II Shares were $83 million in 2021, $4 million lower compared to 2020. Earnings attributable to Class I and Class II Shares include timing adjustments related to rate-regulated activities, unrealized gains or losses on mark-to-market forward and swap commodity contracts, one-time gains and losses, significant impairments, and items that are not in the normal course of business or a result of day-to-day operations. These items are not included in adjusted earnings.

In the fourth quarter of 2020 and first quarter of 2021, Canadian Utilities signed Master Services Agreements (MSA) with IBM Canada Ltd. and IBM Australia Limited (IBM), respectively, to provide managed information technology (IT) services. These services are currently provided by Wipro Ltd. (Wipro) under a ten-year MSA expiring in December 2024. For the three months ended March 31, 2021, ATCO recognized $6 million (after-tax and non-controlling interests) in termination and transition costs. As these costs are not in the normal course of business, they have been excluded from Adjusted Earnings.

More information on these and other items is included in the Reconciliation of Adjusted Earnings to Earnings Attributable to Class I and Class II Shares section of this MD&A.

FUNDS GENERATED BY OPERATIONS

Funds generated by operations were $491 million in the first quarter of 2021, $25 million lower than the same period in 2020. The decrease was mainly due to the timing of certain revenues and expenses. Lower funds generated by operations were partially offset by higher customer contributions for Canadian Utilities' Electricity Transmission capital expenditures.

7 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

COMMON SHARE DIVIDENDS

Dividends paid to Class I and Class II share owners totaled $51 million in the first quarter of 2021. On April 14, 2021, the Board of Directors declared a second quarter dividend of 44.83 cents per share.

We have increased our common share dividend each year since 1993.

Quarterly Dividend Rate 1993 - 2021 (dollars per share)

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$0.4483
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93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

CAPITAL INVESTMENT

Total capital investment of $253 million in the first quarter of 2021 was $50 million lower compared to the same period in 2020 mainly due to lower investment in ATCO Structures' rental fleet and the timing of capital investment in the Utilities.

Capital spending in Canadian Utilities' Regulated Utilities accounted for 87 per cent of total capital invested in the first quarter of 2021. The remaining 13 per cent invested in the first quarter of 2021 included continued expansion of ATCO Structures' space rental fleet and construction of Storage & Industrial Water's long-term contracted hydrocarbon storage cavern in Fort Saskatchewan, Alberta.

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87%
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Capital Investment for the Three Months Ended March 31, 2021

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13%
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Regulated Utilities ATCO Structures & Other

ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 8

BUSINESS UNIT PERFORMANCE

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REVENUES

Structures & Logistics revenues of $167 million in the first quarter of 2021 were $4 million lower than the same period in 2020 mainly due to the completion of manufacturing work on ATCO Structures' LNG Canada Cedar Valley Lodge project in the second quarter of 2020, partially offset by ATCO Structures' workforce housing trade sale activity in the US and higher space rental activity in Australia and Canada.

ADJUSTED EARNINGS

ADJUSTED EARNINGS
		Three Months Ended
			March 31
($ millions)	2021	2020	Change
ATCO Structures	13	7	6
ATCO Frontec	1	—	1
Total Structures & Logistics	14	7	7

Structures & Logistics recorded adjusted earnings of $14 million in the first quarter of 2021, $7 million higher compared to the same period in 2020. Higher earnings were mainly due to ATCO Structures' workforce housing trade sale activity in Canada and the US, workforce housing rental activity in Canada, higher space rental activity in Canada and Australia, and additional ATCO Frontec client work requests at the BC Hydro Site C Camp due to COVID-19 proactive and preventative safety measures.

Detailed information about the activities and financial results of the Structures & Logistics businesses is provided in the following sections.

ATCO STRUCTURES

ATCO Structures manufactures, sells and leases transportable workforce housing, residential housing and space rental products. Space rentals sells and leases mobile office trailers in various sizes and floor plans to suit our customers’ needs. Workforce housing delivers modular workforce housing worldwide, including short-term and permanent modular construction, pre-fabricated and relocatable modular buildings.

ATCO Structures recorded adjusted earnings of $13 million in the first quarter of 2021, $6 million higher than the same period in 2020 mainly due to workforce housing trade sale activity in Canada and the US, workforce housing rental activity in Canada, and higher space rental activity in Canada and Australia. Higher earnings were partially offset by lower activity on the LNG Canada Cedar Valley Lodge project with the transition from manufacturing to installation work in the second quarter of 2020.

9 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

The following table compares ATCO Structures' manufacturing hours and rental fleet for the first quarter of 2021 and 2020.

and 2020.
		Three Months Ended
			March 31
	2021	2020	Change
North America
Manufacturing hours_(thousands)_	120	350	(66%)
Global Space Rentals
Number of units	18,927	16,669	14%
Average utilization_(%)_	79	71	8%
Average rental rate_($ per month)_	582	551	6%
Global Workforce Housing
Number of units	2,552	2,894	(12%)
Average utilization_(%)_	60	45	15%
Average rental rate_($ per month)_	1,862	1,646	13%

Manufacturing Hours

The decrease in manufacturing hours in the first quarter of 2021 was mainly due to the completion of manufacturing on the LNG Canada Cedar Valley Lodge project in the second quarter of 2020.

Rental Fleet

Global Space Rentals

ATCO Structures increased its global space rental fleet size by 2,258 units year-over-year. The increase in the number of space rental units was mainly due to the acquisition of the remaining 50 per cent interest in the ATCO Sabinco S.A. joint venture partnership on December 30, 2020, and the continued strategic expansion of the space rental fleet in targeted regions of Canada and the US. In the first quarter of 2021, space rental demand increased in Canada, Australia, the US and Chile mainly due to increased activity in the construction and mining sectors, as well as physical distancing protocols implemented in response to the COVID-19 pandemic. This increase in demand also produced an increase in the utilization and average rental rates.

Global Workforce Housing

ATCO Structures decreased the size of its workforce housing fleet and increased the average utilization rate yearover-year by selling used and non-utilized fleet assets in the US, Canada and Australia. The increase in the utilization rate was also due to workforce housing fleet on rent for the Trans Mountain Expansion project in British Columbia (BC). Workforce housing average rental rates have reflected higher demand compared to the prior year as a result of the conversion of 44-person dorms with shared ensuites to 36-person dorms with private ensuites in Canada.

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ATCO Sabinco S.A., Chile

ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 10

ATCO STRUCTURES RECENT DEVELOPMENTS

Canada

Brucejack - Pretium Exploration Inc.

ATCO Structures was awarded a contract for the supply of a 450-person camp for Pretium Exploration Inc.’s Brucejack operations in Northwest BC. The $44 million contract includes the supply of accommodation dorms with complete kitchen and recreation amenities. Detailed engineering work has commenced with manufacturing and site work expected to begin in the second quarter of 2021. Installation work is expected to be complete by the end of 2021.

United States

China Lake Military Rebuild - Environmental Chemical Corporation

During the first quarter of 2021, ATCO Structures completed installation on a 450-person camp that had been previously awarded on a $12 million rental contract for 31 months. The project will support the rebuild and expansion of the China Lake Military Base in Southern California. The military base was damaged by two major earthquakes in July 2019.

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China Lake Military Rebuild, Southern California, US

ATCO FRONTEC

Frontec provides facility operations and maintenance services, workforce lodging and support services, defense operations services, and disaster and emergency management services.

ATCO Frontec's adjusted earnings of $1 million in the first quarter of 2021 were $1 million higher than the same period in 2020 mainly due to additional client work requests at the BC Hydro Site C camp resulting from COVID-19 proactive and preventative safety measures.

ATCO FRONTEC RECENT DEVELOPMENTS

In the fourth quarter of 2020, ATCO Frontec was awarded a 31-month workforce lodging services contract for approximately 450 persons to support the phase I rebuild of the China Lake Military Base. On March 1, 2021, operations work commenced.

11 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

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Neltume Ports is a port operator and developer with a diversified portfolio of 16 multi-purpose, bulk cargo and container port facilities and three port operation services. The business is located primarily in Chile with additional operations in Uruguay, Argentina, and Brazil.

ADJUSTED EARNINGS

		Three Months Ended	Three Months Ended
			March 31
($ millions)	2021	2020	Change
Neltume Ports	3	3	—

Neltume Ports adjusted earnings of $3 million in the first quarter of 2021 were comparable to the the same period in 2020.

ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 12

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ATCO Corporate & Other contains ATCO Land and Development Ltd. which is a commercial real estate business that holds investments for sale, lease or development, as well as ASHCOR, a company engaged in the processing and marketing of ash, a waste byproduct of electricity generation. ATCO Corporate & Other also includes the global corporate head office in Calgary, Canada, ATCO licensing fees received, and financing expenses associated with the Neltume Ports investment.

ADJUSTED EARNINGS

		Three Months Ended	Three Months Ended
			March 31
($ millions)	2021	2020	Change
ATCO Corporate & Other	1	1	—

ATCO Corporate & Other adjusted earnings in 2021 were comparable to the same period in 2020.

13 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

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Canadian Utilities is a diversified global energy infrastructure corporation delivering service excellence and innovative business solutions in Utilities (Electricity and Natural Gas Transmission and Distribution, and International Electricity Operations); Energy Infrastructure (Electricity Generation, Energy Storage, and Industrial Water Solutions); and Retail Energy (Electricity and Natural Gas Retail Sales).

UTILITIES

REVENUES

Utilities revenues of $790 million in the first quarter of 2021 were comparable to the same period in 2020.

Revenue growth for Electricity and Natural Gas Distribution in the first quarter of 2021 has been deferred to be collected in a future period as a result of our decision to provide rate relief to customers in light of the current COVID-19 global pandemic and economic situation in Alberta.

ADJUSTED EARNINGS

		Three Months Ended	Three Months Ended
			March 31
($ millions)	2021	2020	Change
Electricity
Electricity Distribution	22	18	4
Electricity Transmission	23	23	—
International ElectricityOperations	3	—	3
Total Electricity	48	41	7
Natural Gas
Natural Gas Distribution	42	43	(1)
Natural Gas Transmission	10	11	(1)
International Natural Gas Distribution	6	4	2
Total Natural Gas	58	58	—
Total Utilities Adjusted Earnings	106	99	7

Utilities adjusted earnings of $106 million in the first quarter of 2021 were $7 million higher than the same period in 2020. Higher earnings were mainly due to cost efficiencies and continued growth in the regulated rate base, earnings from International Electricity Operations, and favourable inflation rate and foreign exchange adjustments in International Natural Gas Distribution.

Detailed information about the activities and financial results of the Utilities business segments is provided in the following sections.

Electricity Distribution

Electricity Distribution provides regulated electricity distribution and distributed generation mainly in northern and central east Alberta, the Yukon, the Northwest Territories and in the Lloydminster area of Saskatchewan.

ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 14

Electricity Distribution adjusted earnings of $22 million in the first quarter of 2021 were $4 million higher compared to the same period in 2020. Higher earnings were mainly due to cost efficiencies and continued growth in rate base.

Electricity Transmission

Electricity Transmission provides regulated electricity transmission mainly in Northern and Central East Alberta, and in the Lloydminster area of Saskatchewan. Electricity Transmission has a 35-year contract to be the operator of Alberta PowerLine, a 500-km electricity transmission line between Wabamun, near Edmonton and Fort McMurray, Alberta.

Electricity Transmission adjusted earnings of $23 million in the first quarter of 2021 were comparable to the same period in 2020.

International Electricity Operations

International Electricity Operations includes Canadian Utilities' 50 per cent ownership in LUMA Energy, a company formed to transform, modernize and operate Puerto Rico's 30,000-km electricity transmission and distribution system under an Operations and Maintenance Agreement with the Puerto Rico Public-Private Partnerships Authority for a 15-year term after a one-year transition period which commenced on June 22, 2020.

International Electricity Operations adjusted earnings in the first quarter of 2021 were $3 million due to continued operations and maintenance transition work.

Natural Gas Distribution

Natural Gas Distribution serves municipal, residential, commercial and industrial customers throughout Alberta and in the Lloydminster area of Saskatchewan.

Natural Gas Distribution adjusted earnings of$42 million in the first quarter of 2021 were $1 million lower than the same period in 2020. Lower earnings were mainly due to the timing of operating costs, partially offset by growth in rate base.

Natural Gas Transmission

Natural Gas Transmission receives natural gas on its pipeline system from various gas processing plants as well as from other natural gas transmission systems and transports it to end users within the province of Alberta or to other pipeline systems.

Natural Gas Transmission adjusted earnings of $10 million in the first quarter of 2021 were $1 million lower than the same period in 2020. Lower adjusted earnings were mainly due to the impact of the 2021-2023 General Rate Application decision which included operating cost efficiencies implemented in prior periods that are being passed on to customers.

International Natural Gas Distribution

International Natural Gas Distribution is a regulated provider of natural gas distribution services in Western Australia, serving metropolitan Perth and surrounding regions.

International Natural Gas Distribution adjusted earnings of $6 million in the first quarter of 2021 were $2 million higher compared to the same period in 2020. Higher earnings were mainly due to an adjustment for the impact of the forecasted inflation rate and favourable foreign exchange movements.

UTILITIES REGULATORY DEVELOPMENTS

COMMON MATTERS

2021 Rate Relief Application

In December 2020, the AUC approved Electric Distribution and Natural Gas Distribution requests to defer rate increases which would normally have come into effect on January 1, 2021. The AUC directed Electricity Distribution and Natural Gas Distribution to file an application outlining the duration of the rate freeze and collection timeline.

15 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

On March 1, 2021, ATCO filed a 2021 Rate Relief Application for Electricity Distribution and Natural Gas Distribution to postpone rate increases for the full year 2021 and collect the deferred amounts commencing in 2023 for no more than a 5-year period. This application aligns with our long-standing practice of supporting the communities we have the privilege to serve. The current economic situation in Alberta, including hardships faced by customers due to the COVID-19 pandemic, is the rationale for the rate freeze.

Distribution Regulatory Framework - Post 2022

On March 1, 2021, the AUC initiated a process to set revenues and rates for Electricity Distribution and Natural Gas Distribution for 2023 as well as a process to evaluate the merits of PBR to date. These processes will address how a one-year cost-of-service study for 2023 will be undertaken as well as a proceeding to determine the regulatory framework for Alberta distribution utilities going forward.

Generic Cost of Capital (GCOC)

On March 4, 2021, the AUC issued a decision on the 2022 GCOC proceeding. The Commission approved the extension of the current return on equity of 8.5 per cent and equity thickness ratio of 37 per cent on a final basis for the 2022 period.

ELECTRICITY TRANSMISSION

2020-2022 General Tariff Application (GTA)

In October 2019, Electricity Transmission filed a GTA for its operations for 2020, 2021, and 2022. The decision was received in March 2021 approving the vast majority of requested capital expenditures and operating costs as filed.

NATURAL GAS TRANSMISSION

Natural Gas Transmission 2021-2023 General Rate Application (GRA)

In June 2020, Natural Gas Transmission filed a GRA for the period 2021-2023. The decision was received in March 2021, approving the vast majority of requested capital expenditures and operating costs as filed, which included operating cost efficiencies implemented in prior periods that are being passed on to customers. The decision also approved a placeholder treatment for the Pioneer Pipeline acquisition pending a decision from the AUC on the acquisition proceeding. A decision is expected in the second quarter of 2021.

ENERGY INFRASTRUCTURE

REVENUES

Energy Infrastructure revenues of $52 million in the first quarter of 2021 were $2 million higher than the same period in 2020 mainly due to demand for natural gas storage services.

ADJUSTED EARNINGS

		Three Months Ended	Three Months Ended
			March 31
($ millions)	2021	2020	Change
Electricity Generation	3	2	1
Storage & Industrial Water	2	1	1
Total Energy Infrastructure Adjusted Earnings	5	3	2

Energy Infrastructure adjusted earnings of $5 million in the first quarter of 2021 were $2 million higher than the same period in 2020 mainly due to demand for natural gas storage services and recovered business development costs.

Detailed information about the activities and financial results of Energy Infrastructure's businesses is provided in the following sections.

ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 16

Electricity Generation

Non-regulated electricity activities supply electricity from hydroelectric, solar and natural gas generating plants in Western Canada, Australia, Mexico and Chile and non-regulated electricity transmission in Alberta.

Electricity Generation adjusted earnings of $3 million in the first quarter of 2021 were $1 million higher than the same period in 2020. Higher earnings were mainly due to recovered business development costs, lower costs of repairs and maintenance at the Karratha Power Station compared to the prior year, and favourable movements in the Australian foreign exchange rate.

Storage & Industrial Water

Storage & Industrial Water provides non-regulated natural gas storage and transmission activities, NGL storage, and industrial water services in Alberta and the Northwest Territories.

Storage & Industrial Water adjusted earnings of $2 million in the first quarter of 2021 were $1 million higher than the same period in 2020. Higher earnings were mainly due to demand for natural gas storage services.

ENERGY INFRASTRUCTURE RECENT DEVELOPMENTS

Central West Pumped Storage Hydro Project

On February 1, 2021, ATCO announced an agreement to acquire the rights to develop the 325-MW Central West Pumped Storage Hydro project, located approximately 175 km west of Sydney, Australia. The acquisition marks ATCO's first renewable energy investment on Australia’s east coast. The project is in close proximity to significant renewable energy resources and will be integral in supporting the development of new renewable generation capacity in the state of New South Wales. A final investment decision on project construction is expected in 2023.

CANADIAN UTILITIES CORPORATE & OTHER

Canadian Utilities' Corporate & Other segment includes Retail Energy through ATCOenergy which provides retail electricity and natural gas services in Alberta. Corporate & Other also includes the global corporate head office in Calgary, Canada, the Australia corporate head office in Perth, Australia and the Mexico corporate head office in Mexico City, Mexico. In addition, Canadian Utilities Corporate & Other includes CU Inc. and Canadian Utilities preferred share dividend and debt expenses.

ADJUSTED EARNINGS

ADJUSTED EARNINGS
		Three Months Ended
			March 31
($ millions)	2021	2020	Change
Canadian Utilities Corporate & Other	(10)	(7)	(3)

Including intersegment eliminations, Canadian Utilities' Corporate & Other adjusted earnings in the first quarter of 2021 were $3 million lower than the same period in 2020 mainly due to the timing of certain expenses, partially offset by improved earnings at ATCOenergy.

17 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

OTHER EXPENSES AND INCOME

A financial summary of other consolidated expenses and income items for the first quarter of 2021 and 2020 is given below. These amounts are presented in accordance with IFRS accounting standards. They have not been adjusted for the timing of revenues and expenses associated with rate-regulated activities and other items that are not in the normal course of business.

not in the normal course of business.
		Three Months Ended
			March 31
($ millions)	2021	2020	Change
Operating costs	611	574	37
Depreciation and amortization	170	156	14
Earnings from investment in associate company	3	3	—
Earnings from investment in joint ventures	14	7	7
Net finance costs	102	99	3
Income tax expense	45	63	(18)

OPERATING COSTS

Operating costs, which are total costs and expenses less depreciation and amortization, were $37 million higher in the first quarter of 2021 compared to the same period in 2020. Higher operating costs were mainly due to higher flow-through Alberta-system natural gas transmission costs in the Utilities, higher electricity costs in ATCOenergy, and the recognition of termination and transition costs in the first quarter of 2021 related to the early termination of the Master Services Agreement with Wipro for managed IT services.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization increased by $14 million in the first quarter of 2021 compared to the same period in 2020 mainly due to continued capital investment to expand ATCO Structures' space rental fleet and in Canadian Utilities' regulated businesses.

EARNINGS FROM INVESTMENT IN ASSOCIATE COMPANY

Earnings from investment in associate company relate to our 40 per cent ownership interest in Neltume Ports, a leading port operator and developer in South America with operations in 16 port facilities and three port operation services businesses located in Chile, Uruguay, Argentina, and Brazil.

Earnings from investment in associate company in the first quarter of 2021 were comparable to the same period in 2020.

EARNINGS FROM INVESTMENT IN JOINT VENTURES

Earnings from investment in joint ventures is mainly comprised of Canadian Utilities' ownership positions in electricity generation plants, LUMA Energy electricity operations and maintenance in Puerto Rico, and the Strathcona Storage Limited Partnership which operates hydrocarbon storage facilities at the ATCO Heartland Energy Centre near Fort Saskatchewan, Alberta.

Earnings from investment in joint ventures increased by $7 million in the first quarter of 2021 compared to the same period in 2020 mainly due to earnings at LUMA Energy with the commencement of transition work under the Operations and Maintenance Agreement in June 2020.

NET FINANCE COSTS

Net finance costs increased by $3 million in the first quarter of 2021 when compared to the same period in 2020 mainly due to lower interest income resulting from lower interest rates received on bank balances.

ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 18

INCOME TAX

Income taxes were lower by $18 million in the first quarter of 2021 compared to the same period in 2020 mainly due to lower earnings before income taxes as a result of the timing of certain revenues and expenses, termination and transition costs from the early termination of the Master Services Agreement with Wipro for managed IT services, and a foreign exchange adjustment to the deferred tax asset in Mexico.

19 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

LIQUIDITY AND CAPITAL RESOURCES

Our financial position is supported by Regulated Utilities and long-term contracted operations. Our business strategies, funding of operations, and planned future growth are supported by maintaining strong investment grade credit ratings and access to capital markets at competitive rates. Primary sources of capital are cash flow from operations and the debt and capital markets.

Under normal market conditions, we consider it prudent to maintain enough liquidity to fund approximately one full year of cash requirements to preserve strong financial flexibility. Liquidity is generated by cash flow from operations and is supported by appropriate levels of cash and available committed credit facilities.

At March 31, 2021, ATCO and its subsidiaries had the following lines of credit.

($ millions)	Total	Used	Available
Long-term committed	3,104	946	2,158
Uncommitted	571	164	407
Total	3,675	1,110	2,565

Of the $3,675 million in total lines of credit, $571 million was in the form of uncommitted credit facilities with no set maturity date. The other $3,104 million in credit lines was committed, with maturities between 2022 and 2024, and may be extended at the option of the lenders.

Of the $1,110 million in lines of credit used, $660 million was related to ATCO Gas Australia Pty Ltd. Long-term committed credit lines are used to satisfy all of ATCO Gas Australia Pty Ltd.'s term debt financing needs. The majority of the remaining usage is for the issuance of Canadian Utilities' letters of credit and ATCO Structures & Logistics' funding to expand its global rental fleet and working capital needs on workforce housing projects.

Lines of Credit ($ millions)

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$3,675
$2,565
$(1,110)
Total Used Available
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CONSOLIDATED CASH FLOW

At March 31, 2021, the Company's cash position was $1,147 million, an increase of $47 million compared to December 31, 2020 mainly due to funds generated by operations achieved during the quarter and the recovery of incurred costs related to the termination of the La Laguna Cogeneration facility contract in the first quarter of 2021, partially offset by dividends paid and cash used to fund the capital investment program.

Funds Generated by Operations

Funds generated by operations were $491 million in the first quarter of 2021, $25 million lower compared to the same period in 2020. The decrease was mainly due to the timing of certain revenues and expenses. Lower funds generated by operations were partially offset by higher customer contributions for Canadian Utilities' Electricity Transmission capital investments.

Funds generated by operations in 2021 are expected to be adversely impacted as a result of ATCO's decision to provide rate relief to customers through the deferral of rate increases for Electricity Distribution and Natural Gas Distribution and the proposal to the AUC to collect these deferred amounts beginning in 2023.

ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 20

Cash Used for Capital Investment

Cash used for capital investment was $253 million in the first quarter of 2021, $50 million lower compared to the same period in 2020 mainly due to lower investment in ATCO Structures' rental fleet, the timing of capital investment in the Utilities, and the completion of construction in the first quarter of 2020 on the Pembina-Keephills transmission pipeline in Canadian Utilities' Natural Gas Transmission business.

Capital investment for the first quarter of 2021 and 2020 is shown in the table below.

			Three Months Ended	Three Months Ended
				March 31
($ millions)		2021	2020	Change
Structures & Logistics		18	38	(20)
Neltume Ports		—	—	—
ATCO Corporate & Other		5	6	(1)
		23	44	(21)
Canadian Utilities
Utilities
Electricity Distribution		54	66	(12)
Electricity Transmission		34	42	(8)
Natural Gas Distribution		56	57	(1)
Natural Gas Transmission		60	73	(13)
International Natural Gas Distribution		16	11	5
		220	249	(29)
Energy Infrastructure
Electricity Generation		—	2	(2)
Storage & Industrial Water		8	6	2
		8	8	—
CU Corporate & Other		2	2	—
Canadian Utilities Total Capital	Investment	230	259	(29)
ATCO Total Capital Investment	(1) (2) (3)	253	303	(50)

(1) Includes capital expenditures in joint ventures of $5 million (2020 - $2 million) for the first quarter of 2021.

(2) Includes additions to property, plant and equipment, intangibles and $3 million (2020 - $5 million) of interest capitalized during construction for the first quarter of 2021.

(3) Includes $56 million (2020 - $26 million) of capital investment, mainly in the Utilities, that were funded with the assistance of customer contributions.

Base Shelf Prospectus - CU Inc. Debentures

On September 16, 2020, CU Inc. filed a base shelf prospectus that permits it to issue up to an aggregate of $1.2 billion of debentures over the 25-month life of the prospectus. As of April 28, 2021, aggregate issuances of debentures were $150 million.

Dividends and Common Shares

We have increased our common share dividend each year since 1993, a 28-year track record. Dividends paid to Class I and Class II Share owners totaled $51 million in the first quarter of 2021.

On April 14, 2021, the Board of Directors declared a second quarter dividend of 44.83 cents per share. The payment of any dividend is at the discretion of the Board of Directors and depends on our financial condition and other factors.

Normal Course Issuer Bid

We believe that, from time to time, the market price of our Class I Shares may not fully reflect the value of our business, and that purchasing Class I Shares represents a desirable use of available funds. The purchase of Class I Shares, at appropriate prices, will also minimize any dilution resulting from the exercise of stock options.

On March 9, 2020, we commenced a normal course issuer bid to purchase up to 1,014,684 outstanding Class I Shares. This bid expired on March 8, 2021. During this period, 150,000 shares were purchased for $6 million.

21 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

On March 9, 2021, we commenced a normal course issuer bid to purchase up to 1,013,478 outstanding Class I Shares. The bid will expire on March 8, 2022. From March 9, 2021 to April 27, 2021, no shares were purchased.

SHARE CAPITAL

ATCO's equity securities consist of Class I Shares and Class II Shares.

At April 27, 2021, we had outstanding 101,356,899 Class I Shares, 13,196,129 Class II Shares, and options to purchase 1,102,600 Class I Shares.

CLASS I NON-VOTING SHARES AND CLASS II VOTING SHARES

Each Class II Share may be converted into one Class I Share at any time at the share owner’s option. If an offer to purchase all Class II Shares is made, and such offer is accepted and taken up by the owners of a majority of the Class II Shares, and, if at the same time, an offer is not made to the Class I Share owners on the same terms and conditions, then the Class I Shares will be entitled to the same voting rights as the Class II Shares. The two share classes rank equally in all other respects, except for voting rights.

Of the 10,200,000 Class I Shares authorized for grant of options under our stock option plan, 1,998,550 Class I Shares were available for issuance at March 31, 2021. Options may be granted to our officers and key employees at an exercise price equal to the weighted average of the trading price of the shares on the Toronto Stock Exchange for the five trading days immediately preceding the grant date. The vesting provisions and exercise period (which cannot exceed 10 years) are determined at the time of grant.

ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 22

QUARTERLY INFORMATION

The following table shows financial information for the eight quarters ended June 30, 2019 through March 31, 2021.

($ millions, except forper share data)	Q2 2020	Q3 2020	Q4 2020	Q1 2021
Revenues	938	897	1,053	1,072
Earnings attributable to Class I and Class II Shares	45	54	66	83
Earnings per Class I and Class II Share_($)_	0.39	0.48	0.58	0.73
Diluted earnings per Class I and Class II Share_($)_	0.39	0.47	0.58	0.72
Adjusted earnings per Class I and Class II Share_($)_	0.61	0.47	1.07	1.04
Adjusted earnings (loss)
Structures & Logistics	21	12	17	14
Neltume Ports	2	3	7	3
ATCO Corporate & Other	(1)	—	—	1
Canadian Utilities
Utilities	57	47	102	106
Energy Infrastructure	2	3	7	5
Canadian Utilities Corporate & Other	(11)	(11)	(11)	(10)
Total adjusted earnings	70	54	122	119
($ millions, except forper share data)	Q2 2019	Q3 2019	Q4 2019	Q1 2020
Revenues	1,103	1,097	1,182	1,056
Earnings attributable to Class I and Class II Shares	158	160	83	87
Earnings per Class I and Class II Share_($)_	1.38	1.40	0.73	0.76
Diluted earnings per Class I and Class II Share_($)_	1.37	1.40	0.72	0.76
Adjusted earnings per Class I and Class II Share_($)_	0.68	0.65	0.88	0.93
Adjusted earnings (loss)
Structures & Logistics	7	13	14	7
Neltume Ports	4	3	4	3
ATCO Corporate & Other	—	3	(9)	1
Canadian Utilities
Utilities	68	48	92	99
Energy Infrastructure	10	20	8	3
Canadian Utilities Corporate & Other	(11)	(13)	(8)	(7)
Total adjusted earnings	78	74	101	106

Our financial results for the previous eight quarters reflect the cyclical demand for workforce housing and space rental products and services in ATCO Structures and ATCO Frontec, cargo volumes and margins at Neltume Ports, and in Canadian Utilities, the timing of utility regulatory decisions, and the seasonal nature of demand for natural gas and electricity.

ADJUSTED EARNINGS

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$122M $119M
$101M $106M
$78M $74M $70M
$54M
Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021
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23 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

Adjusted earnings in the second and third quarters of 2019 and 2020 were impacted by lower seasonal demand in Canadian Utilities' Natural Gas Distribution business. Adjusted earnings in the fourth quarter of 2020 and first quarter of 2021 were positively impacted by ATCO Structures' workforce housing sale and rental activity and space rental activity as well as additional client work requests for COVID-19 proactive and preventative safety measures at ATCO Frontec. Adjusted earnings in the fourth quarter of 2020 and first quarter of 2021 in Canadian Utilities were higher compared to the same periods in 2019 and 2020 mainly due to continued cost efficiencies, rate base growth and earnings from International Electricity Operations.

EARNINGS ATTRIBUTABLE TO CLASS I AND CLASS II SHARES

Earnings attributable to Class I and Class II Shares include timing adjustments related to rate-regulated activities and unrealized gains or losses on mark-to-market forward and swap commodity contracts. They also include one-time gains and losses, significant impairments, and other items that are not in the normal course of business or a result of day-to-day operations recorded at various times over the past eight quarters. These items are excluded from adjusted earnings and are highlighted below:

In the second, third and fourth quarters of 2019, Canadian Utilities closed a series of transactions related to the sale of its Canadian fossil fuel-based electricity generation business and Alberta PowerLine resulting in a gain on sale of operations of $65 million (after-tax and non-controlling interests). As these transactions were one-time in nature, they were excluded from adjusted earnings.
In 2020, impairment and other costs not in the normal course of business of $20 million (after-tax and non-controlling interests) were recorded. These costs mainly related to certain assets that no longer represent strategic value for the Company. As these costs were one-time in nature, they were excluded from adjusted earnings.
In the fourth quarter of 2020 and first quarter of 2021, Canadian Utilities signed Master Services Agreements with IBM Canada Ltd. and IBM Australia Limited, respectively, to provide managed information technology services. These services are currently provided by Wipro under a ten-year MSA expiring in December 2024. The transition of the managed IT services from Wipro to IBM commenced on February 1, 2021 and is expected to be completed by the third quarter of 2021. ATCO recognized costs of $32 million (after-tax and non-controlling interests) in the fourth quarter of 2020 and termination and transition costs of $6 million (after-tax and non-controlling interests) in the first quarter of 2021. As these costs are not in the normal course of business, they have been excluded from adjusted earnings.

ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 24

NON-GAAP AND ADDITIONAL GAAP MEASURES

Adjusted earnings are defined as earnings attributable to Class I and Class II Shares after adjusting for the timing of revenues and expenses associated with rate-regulated activities and unrealized gains or losses on mark-to-market forward and swap commodity contracts. Adjusted earnings also exclude one-time gains and losses, significant impairments, and items that are not in the normal course of business or a result of day-to-day operations.

Adjusted earnings present earnings from rate-regulated activities on the same basis as was used prior to adopting IFRS - that basis being the US accounting principles for rate-regulated activities. Management’s view is that adjusted earnings allow for a more effective analysis of operating performance and trends. A reconciliation of adjusted earnings to earnings attributable to Class I and Class II Shares is presented in this MD&A. Adjusted earnings is an additional GAAP measure presented in Note 3 of the unaudited interim consolidated financial statements.

Adjusted earnings per Class I and Class II Share is calculated by dividing adjusted earnings by the weighted average number of shares outstanding for the period.

Funds generated by operations is defined as cash flow from operations before changes in non-cash working capital. In management’s opinion, funds generated by operations is a significant performance indicator of the Company’s ability to generate cash during a period to fund capital expenditures. Funds generated by operations does not have any standardized meaning under IFRS and might not be comparable to similar measures presented by other companies. A reconciliation of funds generated by operations to cash flows from operating activities is presented in this MD&A.

Capital investment is defined as cash used for capital expenditures, business combinations, and cash used in the Company's proportional share of capital expenditures in joint ventures, and cash used for equity investment in associate companies. In management's opinion, capital investment reflects the Company's total cash investment in assets. Capital expenditures includes additions to property, plant and equipment and intangibles as well as interest capitalized during construction. A reconciliation of capital investments to capital expenditures is presented in this MD&A.

25 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

RECONCILIATION OF ADJUSTED EARNINGS TO EARNINGS ATTRIBUTABLE TO CLASS I AND CLASS II SHARES

Adjusted earnings are a key measure of segment earnings that management uses to assess segment performance and allocate resources. It is management’s view that adjusted earnings allow a better assessment of the economics of rate regulation in Canada and Australia than IFRS earnings.

($ millions) Three Months Ended March 31	($ millions) Three Months Ended March 31	($ millions) Three Months Ended March 31
2021 Structures & Logistics Neltume Ports ATCO Corporate & Other 2020	Canadian Utilities Limited Utilities Energy Infrastructure CUL Corporate & Other Consolidated	ATCO Consolidated
Revenues 167 — (2) 171 — —	790 52 65 907	1,072
	789 50 46 885	1,056
Adjusted earnings (loss) 14 3 1 7 3 1 Unrealized gains on mark-to-market forward and swap commodity contracts — — — — — — Rate-regulated activities — — — — — — IT Common Matters decision — — — — — — Transition of managed IT services — — — — — — Other — — — — — 1	106 5 (10) 101	119
	99 3 (7) 95	106

	— — — —	—
	— — 3 3	3
	(28) — — (28)	(28)
	(17) — — (17)	(17)
	(2) — — (2)	(2)
	(2) — — (2)	(2)
	(6) — — (6)	(6)
	— — — —	—
	— — — —	—
	— (4) — (4)	(3)
Earnings (loss) attributable to Class I and Class II Shares 14 3 1 7 3 2	70 5 (10) 65	83
	80 (1) (4) 75	87

UNREALIZED GAINS ON MARK-TO-MARKET FORWARD AND SWAP COMMODITY CONTRACTS

The Company’s retail electricity and natural gas business in Alberta enters into fixed-price swap commodity contracts to manage exposure to electricity and natural gas prices and volumes.

These contracts are measured at fair value. Unrealized gains and losses due to changes in the fair value of the fixedprice swap commodity contracts are recognized in the earnings of the Corporate & Other segment.

ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 26

The CODM believes that removal of the unrealized gains or losses on mark-to-market forward and swap commodity contracts provides a better representation of operating results for the Company's operations.

Realized gains or losses are recognized in adjusted earnings when the commodity contracts are settled.

RATE-REGULATED ACTIVITIES

Electricity Distribution and Transmission and their subsidiaries, ATCO Electric Yukon, Northland Utilities (NWT) and Northland Utilities (Yellowknife), as well as Natural Gas Distribution, Natural Gas Transmission and International Natural Gas Distribution are collectively referred to as the Regulated Utilities.

There is currently no specific guidance under IFRS for rate-regulated entities that the Company is eligible to adopt. In the absence of this guidance, the Regulated Utilities do not recognize assets and liabilities from rate-regulated activities as may be directed by regulatory decisions. Instead, the Regulated Utilities recognize revenues in earnings when amounts are billed to customers, consistent with the regulator-approved rate design. Operating costs and expenses are recorded when incurred. Costs incurred in constructing an asset that meet the asset recognition criteria are included in the related property, plant and equipment or intangible asset.

The Company uses standards issued by the Financial Accounting Standards Board (FASB) in the United States as another source of generally accepted accounting principles to account for rate-regulated activities in its internal reporting provided to the CODM. The CODM believes that earnings presented in accordance with the FASB standards are a better representation of the operating results of the Company’s rate-regulated activities. Therefore, the Company presents adjusted earnings as part of its segmented disclosures on this basis. Rate-regulated accounting (RRA) standards impact the timing of how certain revenues and expenses are recognized when compared to non-rate regulated activities, to appropriately reflect the economic impact of a regulator's decisions on revenues.

Rate-regulated accounting differs from IFRS in the following ways:

Timing Adjustment	Items	RRA Treatment	IFRS Treatment
Additional	Future removal and site	The Company defers the	The Company recognizes
revenues billed in	restoration costs, and impact of	recognition of cash	revenues when amounts are
current period	colder temperatures	received in advance of	billed to customers and costs
		future expenditures.	when they are incurred.
Revenues to be	Deferred income taxes, impact of	The Company recognizes	The Company recognizes
billed in future	warmer temperatures, and	revenues associated with	costs when they are
periods	impact of inflation on rate base	recoverable costs in	incurred, but does not
		advance of future billings	recognize their recovery until
		to customers.	customer rates are changed
			and amounts are collected
			through future billings.
Regulatory	Regulatory decisions received	The Company recognizes	The Company does not
decisions received	which relate to current and prior	the earnings from a	recognize earnings from a
	periods	regulatory decision	regulatory decision when it is
		pertaining to current and	received as regulatory assets
		prior periods when the	and liabilities are not
		decision is received.	recorded under IFRS.
Settlement of	Settlement of amounts	The Company recognizes	The Company recognizes
regulatory	receivable or payable to	the amount receivable or	earnings when customer
decisions and	customers and other items	payable to customers as a	rates are changed and
other items		reduction in its regulatory	amounts are recovered or
		assets and liabilities when	refunded to customers
		collected or refunded	through future billings.
		through future billings.

27 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

The significant timing adjustments as a result of the differences between rate-regulated accounting and IFRS are as follows:

follows:
				Three Months Ended
					March 31
($ millions)			2021	2020	Change
*Additional revenues billed in current period*
Future removal and site restoration costs	(1)		15	12	3
Impact of colder temperatures (2)			—	3	(3)
*Revenues to be billed in future periods*
Deferred income taxes (3)			(14)	(18)	4
Distribution rate relief (4)			(21)	—	(21)
Impact of warmer temperatures (2)			(1)	—	(1)
Impact of inflation on rate base (5)			(3)	(2)	(1)
Settlement of regulatory decisions and other items		(6)	(4)	(12)	8
			(28)	(17)	(11)

(1) Removal and site restoration costs are billed to customers over the estimated useful life of the related assets based on forecast costs to be incurred in future periods.

(2) Natural Gas Distribution customer rates are based on a forecast of normal temperatures. Fluctuations in temperatures may result in more or less revenue being recovered from customers than forecast. Revenues above or below the normal in the current period are refunded to or recovered from customers in future periods.

(3) Income taxes are billed to customers when paid by the Company.

(4) In the first quarter of 2021, Electricity Distribution and Natural Gas Distribution recorded a decrease in earnings of $21 million related to interim rate relief for customers as applied for by ATCO and approved by the AUC to hold current distribution base rates in place. This will be recovered from customers in future periods.

(5) The inflation-indexed portion of International Natural Gas Distribution's rate base is billed to customers through the recovery of depreciation in subsequent periods based on the actual or forecasted annual rate of inflation. Under rate-regulated accounting, revenue is recognized in the current period for the inflation component of rate base when it is earned. Differences between the amounts earned and the amounts billed to customers are deferred and recognized in revenues over the service life of the related assets.

(6) In the first quarter of 2020, Electricity Distribution recorded a decrease in earnings of $14 million related to the payment of transmission costs. This is being recovered from customers in future periods.

IT COMMON MATTERS DECISION

Consistent with the treatment of the gain on sale in 2014 from the IT services business by the Company, financial impacts associated with the IT Common Matters decision are excluded from adjusted earnings. The amount excluded from adjusted earnings for the three months ended March 31, 2021 was $2 million (2020 - $2 million).

TRANSITION OF MANAGED IT SERVICES

In the fourth quarter of 2020 and first quarter of 2021, Canadian Utilities signed Master Services Agreements with IBM Canada Ltd. and IBM Australia Limited, respectively, to provide managed information technology services. These services are currently provided by Wipro under a ten-year MSA expiring in December 2024. The transition of the managed IT services from Wipro to IBM commenced on February 1, 2021 and is expected to be completed by the third quarter of 2021.

For the three months ended March 31, 2021, ATCO recognized termination and transition costs of $6 million (aftertax and non-controlling interests). As these costs are not in the normal course of business, they have been excluded from adjusted earnings.

OTHER

The Company adjusts the deferred tax asset which was recognized as a result of the 2015 Tula Pipeline Project impairment. During the three months ended March 31, 2021, the Company recorded a foreign exchange loss of nil after tax and non-controlling interests (2020 - a foreign exchange loss of $4 million) due to a difference between the tax base currency, which is the Mexican peso, and the US dollar functional currency.

ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 28

RECONCILIATION OF FUNDS GENERATED BY OPERATIONS TO CASH FLOWS FROM OPERATING ACTIVITIES

companies.
($ millions)
2021	Three Months Ended
2020	March 31
Funds generated by operations	491
	516
Changes in non-cash working capital	53
	62
Cash flows from operating activities	544
	578

29 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

RECONCILIATION OF CAPITAL INVESTMENT TO CAPITAL EXPENDITURES

Capital investment is defined as cash used for capital expenditures, business combinations, and cash used in the Company's proportional share of capital expenditures in joint ventures, and cash used for equity investment in associate companies. In management's opinion, capital investment reflects the Company's total cash investment in assets. Capital expenditures includes additions to property, plant and equipment and intangibles as well as interest capitalized during construction.	Capital investment is defined as cash used for capital expenditures, business combinations, and cash used in the Company's proportional share of capital expenditures in joint ventures, and cash used for equity investment in associate companies. In management's opinion, capital investment reflects the Company's total cash investment in assets. Capital expenditures includes additions to property, plant and equipment and intangibles as well as interest capitalized during construction.	Capital investment is defined as cash used for capital expenditures, business combinations, and cash used in the Company's proportional share of capital expenditures in joint ventures, and cash used for equity investment in associate companies. In management's opinion, capital investment reflects the Company's total cash investment in assets. Capital expenditures includes additions to property, plant and equipment and intangibles as well as interest capitalized during construction.
($ millions) Three Months Ended March 31
2021 Structures & Logistics Neltume Ports ATCO Corporate & Other 2020	Canadian Utilities Limited Utilities Energy Infrastructure CUL Corporate & Other Consolidated	ATCO Consolidated
Capital investment 18 — 5 38 — 6 Capital expenditure in joint ventures — — — — — —	220 8 2 230	253
	249 8 2 259	303
	— (5) — (5)	(5)
	— (2) — (2)	(2)
Capital expenditures 18 — 5 38 — 6	220 3 2 225	248
	249 6 2 257	301

ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 30

OTHER FINANCIAL INFORMATION

INTERNAL CONTROL OVER FINANCIAL REPORTING

There was no change in the Company’s internal control over financial reporting that occurred during the period beginning on January 1, 2021, and ended on March 31, 2021, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

FORWARD-LOOKING INFORMATION

Certain statements contained in this MD&A constitute forward-looking information. Forward-looking information is often, but not always, identified by the use of words such as “anticipate”, “plan”, “estimate”, “expect”, “may”, “will”, “intend”, “should”, and similar expressions. Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. The Company believes that the expectations reflected in the forward-looking information are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking information should not be unduly relied upon.

The Company’s actual results could differ materially from those anticipated in any forward-looking information contained in this MD&A as a result of regulatory decisions, competitive factors in the industries in which the Company operates, prevailing economic conditions (including as may be affected by the COVID-19 pandemic) and other factors, many of which are beyond the control of the Company.

Any forward-looking information contained in this MD&A represents the Company’s expectations as of the date hereof, and is subject to change after such date. The Company disclaims any intention or obligation to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required by applicable securities legislation.

ADDITIONAL INFORMATION

ATCO has published its unaudited interim consolidated financial statements and MD&A for the three months ended March 31, 2021. Copies of these documents may be obtained upon request from Investor Relations at 3rd Floor, West Building, 5302 Forand Street S.W., Calgary, Alberta, T3E 8B4, telephone 403-292-7500, fax 403-292-7532 or email [email protected].

31 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

GLOSSARY

AESO means the Alberta Electric System Operator.

Alberta Power Pool means the market for electricity in Alberta operated by AESO.

Alberta Utilities means Electricity Distribution, Electricity Transmission, Natural Gas Distribution and Natural Gas Transmission.

AUC means the Alberta Utilities Commission.

Average weekly earnings (AWE) is an indicator of short-term employee earnings growth.

Class I Shares means Class I Non-Voting Shares of the Company.

Kilowatt (kW) is a measure of electric power equal to 1,000 watts.

LNG means liquefied natural gas.

Megawatt (MW) is a measure of electric power equal to 1,000,000 watts.

NCI means non controlling interest.

PBR means Performance Based Regulation.

Regulated Utilities means Electricity Distribution, Electricity Transmission, Natural Gas Distribution, Natural Gas Transmission and International Natural Gas Distribution.

Class II Shares means Class II Voting Shares of the Company.

CODM means Chief Operating Decision Maker, and is comprised of the Chair & Chief Executive Officer, and the other members of the Executive Committee.

Company means ATCO Ltd. and, unless the context otherwise requires, includes its subsidiaries and joint arrangements.

Consumer price index (CPI) measures the average change in prices over time that consumers pay for a basket of goods and services.

Customer Contributions are non-refundable cash contributions made by customers for certain additions to property, plant and equipment, mainly in the Utilities. These contributions are made when the estimated revenue is less than the cost of providing service.

Earnings means Adjusted Earnings as defined in the Non-GAAP and Additional GAAP Measures section of this MD&A.

ECM means Efficiency Carryover Mechanism by which the AUC incents efficiency improvements for the distribution utilities based on certain criteria. If the efficiency improvement criteria are met in a prior PBR term, the ECM provides up to an additional 0.5 per cent return on equity for the first two years of the next PBR term.

GAAP means Canadian generally accepted accounting principles.

GHG means greenhouse gas.

IFRS means International Financial Reporting Standards.

ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS 32

33 ATCO LTD. 2021 MANAGEMENT'S DISCUSSION & ANALYSIS

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ATCO LTD. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2021

ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS [34]

TABLE OF CONTENTS
	Page
Consolidated Statements of Earnings..................................................................................................................................	36
Consolidated Statements of Comprehensive Income........................................................................................................	37
Consolidated Balance Sheets................................................................................................................................................	38
Consolidated Statements of Changes in Equity..................................................................................................................	39
Consolidated Statements of Cash Flows..............................................................................................................................	40
Notes to Consolidated Financial Statements
*General Information*
1. The Company and its Operations.......................................................................................................................................	41
2. Basis of Presentation............................................................................................................................................................	41
*Information on Financial Performance*
3. Segmented Information.......................................................................................................................................................	43
4. Revenues................................................................................................................................................................................	48
5. Earnings per Share...............................................................................................................................................................	49
*Information on Financial Position*
6. Property, Plant and Equipment...........................................................................................................................................	49
7. Long-Term Debt....................................................................................................................................................................	50
8. Class I Non-Voting and Class II Voting Shares...................................................................................................................	50
9. Retirement Benefits..............................................................................................................................................................	50
*Information on Cash Flow*
10. Cash Flow Information.........................................................................................................................................................	51
*Risk*
11. Financial Instruments...........................................................................................................................................................	52

35 ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF EARNINGS

OF EARNINGS
		Three Months Ended
			March 31
(millions of Canadian Dollars except per share data)	Note	2021	2020
Revenues	4	1,072	1,056
Costs and expenses
Salaries, wages and benefits		(140)	(131)
Energy transmission and transportation		(64)	(53)
Plant and equipment maintenance		(37)	(48)
Fuel costs		(29)	(26)
Purchased power		(77)	(65)
Materials and consumables		(82)	(96)
Depreciation and amortization		(170)	(156)
Franchise fees		(81)	(81)
Property and other taxes		(18)	(18)
Other		(83)	(56)
		(781)	(730)
Earnings from investment in associate company		3	3
Earnings from investment injoint ventures		14	7
Operating profit		308	336
Interest income		4	6
Interest expense		(106)	(105)
Net finance costs		(102)	(99)
Earnings before income taxes		206	237
Income tax expense		(45)	(63)
Earnings for theperiod		161	174
Earnings attributable to:
Class I and Class II Shares		83	87
Non-controllinginterests		78	87
		161	174
Earnings per Class I and Class II Share	5	$0.73	$0.76
Diluted earnings per Class I and Class II Share	5	$0.72	$0.76

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS [36]

OF COMPREHENSIVE INCOME

			Three Months Ended	Three Months Ended
				March 31
(millions of Canadian Dollars)		Note	2021	2020
Earnings for theperiod			161	174
Other comprehensive income, net of income taxes
Items that will not be reclassified to earnings:
Re-measurement of retirement benefits	(1)	9	146	202
Items that are or may be reclassified subsequently to earnings:
Cash flow hedges (2)			11	(17)
Foreign currency translation adjustment	(3)		(33)	(2)
Share of other comprehensive income(loss)in associate company			1	(4)
			(21)	(23)
Other comprehensive income			125	179
Comprehensive income for theperiod			286	353
Comprehensive income attributable to:
Class I and Class II Shares			144	172
Non-controllinginterests			142	181
			286	353

(1) Net of income taxes of $(44) million for the three months ended March 31, 2021 (2020 - $(60) million).

(2) Net of income taxes of $(4) million for the three months ended March 31, 2021 (2020 - $6 million).

(3) Net of income taxes of nil.

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

37 ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

		March 31	December 31
(millions of Canadian Dollars)	Note	2021	2020
ASSETS
Current assets
Cash and cash equivalents	10	1,148	1,103
Accounts receivable and contract assets		692	727
Finance lease receivables		10	9
Inventories		75	76
Prepaid expenses and other current assets		125	124
		2,050	2,039
Non-current assets
Property, plant and equipment	6	18,341	18,327
Intangibles		698	685
Retirement benefit asset	9	35	—
Right-of-use assets		94	97
Goodwill		82	82
Investment in joint ventures		201	186
Investment in associate company		438	460
Finance lease receivables		164	166
Deferred income tax assets		86	85
Other assets		73	73
Total assets		22,262	22,200
LIABILITIES
Current liabilities
Bank indebtedness		1	3
Accounts payable and accrued liabilities		757	695
Lease liabilities		15	16
Provisions and other current liabilities		144	164
Long-term debt		201	196
		1,118	1,074
Non-current liabilities
Deferred income tax liabilities		1,516	1,443
Retirement benefit obligations	9	286	439
Customer contributions		1,798	1,756
Lease liabilities		82	84
Other liabilities		117	132
Long-term debt		9,392	9,423
Total liabilities		14,309	14,351
EQUITY
Class I and Class II Share owners' equity
Class I and Class II shares	8	178	178
Contributed surplus		7	6
Retained earnings		3,962	3,880
Accumulated other comprehensive loss		(30)	(12)
		4,117	4,052
Non-controlling interests		3,836	3,797
Total equity		7,953	7,849
Total liabilities and equity		22,262	22,200

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS [38]

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

						Accumulated
			Class I and			Other		Non-
(millions of Canadian Dollars)		Note	Class II Shares	Contributed Surplus	Retained Earnings	Comprehensive Loss	Total	Controlling Interests	Total Equity
December 31, 2019			173	12	3,832	(17)	4,000	3,858	7,858
Earnings for the period			—	—	87	—	87	87	174
Other comprehensive income			—	—	—	85	85	94	179
Gains on retirement benefits transferred to
retained earnings			—	—	108	(108)	—	—	—
Shares issued, purchased and cancelled			1	—	—	—	1	—	1
Dividends		8	—	—	(50)	—	(50)	(76)	(126)
Share-based compensation			2	(2)	—	—	—	—	—
Other			—	—	—	—	—	2	2
March 31, 2020			176	10	3,977	(40)	4,123	3,965	8,088
December 31, 2020			178	6	3,880	(12)	4,052	3,797	7,849
Earnings for the period			—	—	83	—	83	78	161
Other comprehensive income			—	—	—	61	61	64	125
Gains on retirement benefits transferred to
retained earnings			—	—	79	(79)	—	—	—
Shares purchased and cancelled			—	—	—	—	—	(58)	(58)
Dividends		8	—	—	(51)	—	(51)	(76)	(127)
Share-based compensation			—	1	—	—	1	—	1
Changes in ownership interest in subsidiary company	(1)		—	—	(29)	—	(29)	29	—
Other			—	—	—	—	—	2	2
March 31, 2021			178	7	3,962	(30)	4,117	3,836	7,953

(1) The changes in ownership interest in subsidiary company are due to Canadian Utilities Limited's purchases of Class A shares under the normal course issuer bid program. See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

39 ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Three	Months Ended
			March 31
(millions of Canadian Dollars)	Note	2021	2020
Operating activities
Earnings for the period		161	174
Adjustments to reconcile earnings to cash flows from operating activities	10	330	342
Changes in non-cash workingcapital		53	62
Cash flows from operating activities		544	578
Investing activities
Additions to property, plant and equipment		(216)	(278)
Proceeds on disposal of property, plant and equipment		29	—
Additions to intangibles		(29)	(18)
Investment in joint ventures		(4)	(5)
Changes in non-cash workingcapital		22	19
Cash flows used in investing activities		(198)	(282)
Financing activities
Issue of long-term debt	7	1	59
Repayment of long-term debt	7	(25)	(71)
Repayment of lease liabilities		(5)	(4)
Purchase of shares by subsidiary company		(58)	—
Net issue of Class I Shares		—	1
Dividends paid to Class I and Class II Share owners		(51)	(50)
Dividends paid to non-controlling interests		(76)	(76)
Interestpaid		(82)	(81)
Cash flows used in financing activities		(296)	(222)
Increase in cash position (1)		50	74
Foreign currency translation		(3)	(7)
Beginningofperiod		1,100	1,140
End ofperiod	10	1,147	1,207

(1) Cash position includes $33 million which is not available for general use by the Company (2020 - $55 million).

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS [40]

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

MARCH 31, 2021

(Tabular amounts in millions of Canadian Dollars, except as otherwise noted)

1. THE COMPANY AND ITS OPERATIONS

ATCO Ltd. was incorporated under the laws of the province of Alberta and is listed on the Toronto Stock Exchange. Its head office and registered office is at 4th Floor, West Building, 5302 Forand Street SW, Calgary, Alberta T3E 8B4. ATCO Ltd. is controlled by Sentgraf Enterprises Ltd. and its controlling share owner, the Southern family.

ATCO Ltd. is engaged in the following business activities:

Structures & Logistics (workforce and residential housing, innovative modular facilities, construction, site support services, workforce lodging services, facility operations and maintenance, defence operations services, and disaster and emergency management services);
Canadian Utilities Limited, including:
Utilities (electricity and natural gas transmission and distribution and international electricity operations);
Energy infrastructure (electricity generation, energy storage and industrial water solutions);
Retail Energy (electricity and natural gas retail sales) (included in the Corporate & Other segment); and
Neltume Ports (ports and transportation logistics).

The unaudited interim consolidated financial statements include the accounts of ATCO Ltd. and its subsidiaries. The statements also include the accounts of a proportionate share of the Company's investments in joint operations, its equity-accounted investments in joint ventures and its equity-accounted investment in associate company. In these financial statements, "the Company" means ATCO Ltd., its subsidiaries, joint arrangements and the associate company.

Principal operating subsidiaries are:

Canadian Utilities Limited (52.7 per cent owned) and its subsidiaries; and
ATCO Structures & Logistics and its subsidiaries.

2. BASIS OF PRESENTATION

STATEMENT OF COMPLIANCE

The unaudited interim consolidated financial statements are prepared according to International Accounting Standard (IAS) 34 Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and IFRS Interpretations Committee (IFRIC). They do not include all the disclosures required in annual consolidated financial statements and should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2020, prepared according to IFRS.

The unaudited interim consolidated financial statements are prepared following the same accounting policies used in the Company’s most recent annual consolidated financial statements, except for income taxes. In interim periods, income taxes are accrued using an estimate of the annualized effective tax rate applied to year-to-date earnings.

41 ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The unaudited interim consolidated financial statements were authorized for issue by the Audit & Risk Committee, on behalf of the Board of Directors, on April 28, 2021.

BASIS OF MEASUREMENT

The unaudited interim consolidated financial statements are prepared on a historic cost basis, except for derivative financial instruments, retirement benefit obligations and cash-settled share-based compensation liabilities which are carried at remeasured amounts or fair value.

Revenues, earnings and adjusted earnings for any quarter are not necessarily indicative of operations on an annual basis. Quarterly financial results may be affected by the seasonal nature of the Company’s operations, the timing of utility rate decisions, the timing and demand of natural gas storage capacity sold, changes in natural gas storage fees and changes in market conditions for workforce housing and space rentals operations.

SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS

Use of judgments and estimates around the COVID-19 pandemic

For the three months ended March 31, 2021, the Company performed an assessment of the impacts of uncertainties around the COVID-19 pandemic on its consolidated financial position, financial performance and cash flows. The assessment required use of judgements and estimates and resulted in no material impacts.

ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS [42]

3. SEGMENTED INFORMATION

Results by operating segment for the three months ended March 31 are shown below.

2021 Structures Neltume Corporate	2021 Structures Neltume Corporate	2021 Structures Neltume Corporate	2021 Structures Neltume Corporate	Canadian Utilities Limited ATCO	Canadian Utilities Limited ATCO
2020 & Logistics Ports & Other				Utilities (1) Energy Infrastructure Corporate & Other Consolidated	Consolidated
Revenues - external Revenues - intersegment	167	—	(2)	787 34 86 907	1,072
	171	—	—	786 34 65 885	1,056
	—	—	—	3 18 (21) —	—
	—	—	—	3 16 (19) —	—
Revenues Operating expenses (2) Depreciation and amortization	167	—	(2)	790 52 65 907	1,072
	171	—	—	789 50 46 885	1,056
	(134)	—	4	(377) (38) (66) (481)	(611)
	(153)	—	8	(350) (42) (37) (429)	(574)
	(15)	—	(1)	(147) (4) (3) (154)	(170)
	(12)	—	(1)	(139) (4) — (143)	(156)
Earnings from investment in associate company Earnings from investment in joint ventures Net finance costs
	—	3	—	— — — —	3
	—	3	—	— — — —	3
	1	—	—	7 6 — 13	14
	1	—	—	— 6 — 6	7
	(1)	—	(4)	(93) (3) (1) (97)	(102)
	(1)	—	(4)	(92) (3) 1 (94)	(99)
Earnings (loss) before income taxes Income tax (expense) recovery	18	3	(3)	180 13 (5) 188	206
	6	3	3	208 7 10 225	237
	(4)	—	4	(41) (4) — (45)	(45)
	1	—	(1)	(51) (9) (3) (63)	(63)
Earnings (loss) for the period	14	3	1	139 9 (5) 143	161
	7	3	2	157 (2) 7 162	174
Adjusted earnings (loss)for theperiod	14	3	1	106 5 (10) 101	119
	7	3	1	99 3 (7) 95	106
Total assets (3)	1,044	442	409	18,444 963 960 20,367	22,262
	1,069	460	375	18,310 993 993 20,296	22,200
Capital expenditures (4)	18	—	5	220 3 2 225	248
	38	—	6	249 6 2 257	301

(1) Includes the collective results of the Electricity and the Natural Gas operating segments. Details of the results by operating segments included in the Utilities are disclosed below.

(2) Includes total costs and expenses, excluding depreciation and amortization expense.

(3) 2020 comparatives are at December 31, 2020.

(4) Includes additions to property, plant and equipment and intangibles and $3million of interest capitalized during construction for the three months ended March 31, 2021 (2020 - $5 million).

43 ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Results of the operating segments included in the Utilities for the three months ended March 31 are shown below.

Results of the operating segments included in the Utilities	for the three months ended March 31 are shown below.
2021	Utilities
2020	Electricity Natural Gas Intersegment eliminations Consolidated
Revenues - external Revenues - intersegment	337 450 — 787
	317 469 — 786
	3 1 (1) 3
	3 1 (1) 3
Revenues Operating expenses (1) Depreciation and amortization Earnings from investment in joint ventures Net finance costs	340 451 (1) 790
	320 470 (1) 789
	(131) (247) 1 (377)
	(122) (229) 1 (350)
	(79) (68) — (147)
	(77) (62) — (139)
	7 — — 7
	— — — —
	(56) (37) — (93)
	(58) (34) — (92)
Earnings before income taxes Income tax expense	81 99 — 180
	63 145 — 208
	(18) (23) — (41)
	(15) (36) — (51)
Earnings for the period	63 76 — 139
	48 109 — 157
Adjusted earnings	48 58 — 106
	41 58 — 99
Total assets (2)	10,369 8,075 — 18,444
	10,326 7,985 (1) 18,310
Capital expenditures (3)	88 132 — 220
	108 141 — 249

(1) Includes total costs and expenses, excluding depreciation and amortization expense.

(2) 2020 comparatives are at December 31, 2020.

(3) Includes additions to property, plant and equipment and intangibles and $3 million of interest capitalized during construction for the three months ended March 31, 2021 (2020 - $5 million).

ADJUSTED EARNINGS

Adjusted earnings are earnings attributable to Class I and II Shares after adjusting for:

the timing of revenues and expenses for rate-regulated activities;
one-time gains and losses;
unrealized gains and losses on mark-to-market forward and swap commodity contracts;
significant impairments; and
items that are not in the normal course of business or a result of day-to-day operations.

Adjusted earnings are a key measure of segment earnings used by the Chief Operating Decision Maker (CODM) to assess segment performance and allocate resources. Other accounts in the unaudited interim consolidated financial statements have not been adjusted as they are not used by the CODM for those purposes.

ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS [44]

The reconciliation of adjusted earnings and earnings for the three months ended March 31 is shown below.

2021	Structures Neltume Corporate	Structures Neltume Corporate	Structures Neltume Corporate	Canadian Utilities Limited	ATCO
2020	& Logistics Ports & Other			Utilities Energy Infrastructure Corporate & Other Consolidated	Consolidated
Adjusted earnings (loss) Transition of managed IT services	14	3	1	106 5 (10) 101	119
	7	3	1	99 3 (7) 95	106

	—	—	—	(6) — — (6)	(6)
	—	—	—	— — — —	—
Unrealized gains on mark-to-market forward and swap commodity contracts	—	—	—	— — — —	—
	—	—	—	— — 3 3	3

Rate-regulated activities IT Common Matters decision	—	—	—	(28) — — (28)	(28)
	—	—	—	(17) — — (17)	(17)

	—	—	—	(2) — — (2)	(2)
	—	—	—	(2) — — (2)	(2)
Other
	—	—	—	— — — —	—
	—	—	1	— (4) — (4)	(3)
Earnings (loss) attributable to Class I and Class II Shares	14	3	1	70 5 (10) 65	83
	7	3	2	80 (1) (4) 75	87
Earnings attributable to non-controlling interests					78
					87
Earnings for the period					161
					174

Transition of managed IT services

In 2020, and during the three months ended March 31, 2021, the Company signed Master Services Agreements (MSA) with IBM Canada Ltd. and IBM Australia Limited (IBM), respectively, to provide managed information technology (IT) services. These services are currently provided by Wipro Ltd. (Wipro) under a ten-year MSA expiring in December 2024. The transition of the managed IT services from Wipro to IBM commenced on February 1, 2021 and is expected to be completed by the third quarter of 2021.

In 2020, and during the three months ended March 31, 2021, the Company recognized onerous contract provisions of $75 million ($32 million after-tax and non-controlling interests (NCI)) and $6 million ($2 million after-tax and NCI), respectively, which represents management’s best estimate of the costs to exit the Wipro MSA. The provisions are included in provisions and other current liabilities in the consolidated balance sheets. The provision of $6 million is included in other expenses in the consolidated statements of earnings for the three months ended March 31, 2021. The actual costs are expected to be finalized later in 2021. The onerous contract provision is not in the normal course of business and has been excluded from Adjusted Earnings.

In addition, for the three months ended March 31, 2021, the Company recognized transition costs of $9 million ($4 million after-tax and NCI). The transition costs relate to activities to transfer the managed IT services from Wipro to IBM. As these costs are not in the normal course of business, they have been excluded from Adjusted Earnings.

Unrealized gains and losses on mark-to-market forward and swap commodity contracts

The Company’s retail electricity and natural gas business in Alberta enters into fixed-price swap commodity contracts to manage exposure to electricity and natural gas prices and volumes. These contracts are measured at fair value. Unrealized gains and losses due to changes in the fair value of the fixed-price swap commodity contracts are recognized in the earnings of the Corporate & Other segment.

45 ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Realized gains or losses are recognized in adjusted earnings when the commodity contracts are settled.

Rate-regulated activities

ATCO Electric and its subsidiaries, ATCO Electric Yukon, Northland Utilities (NWT) and Northland Utilities (Yellowknife), as well as ATCO Gas, ATCO Pipelines and ATCO Gas Australia are collectively referred to as the Utilities.

There is currently no specific guidance under IFRS for rate-regulated entities that the Company is eligible to adopt. In the absence of this guidance, the Utilities do not recognize assets and liabilities from rate-regulated activities as may be directed by regulatory decisions. Instead, the Utilities recognize revenues in earnings when amounts are billed to customers, consistent with the regulator-approved rate design. Operating costs and expenses are recorded when incurred. Costs incurred in constructing an asset that meet the asset recognition criteria are included in the related property, plant and equipment or intangible asset.

Rate-regulated accounting differs from IFRS in the following ways:

	Timing Adjustment	Items	RRA Treatment	IFRS Treatment
1.	Additional revenues	Future removal and site	The Company defers the	The Company recognizes
	billed in current	restoration costs, and impact	recognition of cash received	revenues when amounts are
	period	of colder temperatures.	in advance of future	billed to customers and costs
			expenditures.	when they are incurred.
2.	Revenues to be	Deferred income taxes,	The Company recognizes	The Company recognizes
	billed in future	impact of warmer	revenues associated with	costs when they are incurred,
	periods	temperatures, and impact of	recoverable costs in advance	but does not recognize their
		inflation on rate base.	of future billings to	recovery until customer rates
			customers.	are changed and amounts
				are collected through future
				billings.
3.	Regulatory	Regulatory decisions received	The Company recognizes the	The Company does not
	decisions received	which relate to current and	earnings from a regulatory	recognize earnings from a
		prior periods.	decision pertaining to	regulatory decision when it is
			current and prior periods	received as regulatory assets
			when the decision is	and liabilities are not
			received.	recorded under IFRS.
4.	Settlement of	Settlement of amounts	The Company recognizes the	The Company recognizes
	regulatory	receivable or payable to	amount receivable or	earnings when customer
	decisions and other	customers and other items.	payable to customers as a	rates are changed and
	items		reduction in its regulatory	amounts are recovered or
			assets and liabilities when	refunded to customers
			collected or refunded	through future billings.
			through future billings.

ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS [46]

For the three months ended March 31, the significant timing adjustments as a result of the differences between rate-regulated accounting and IFRS are as follows:

			Three Months Ended	Three Months Ended
				March 31
			2021	2020
Additional revenues billed in current period
Future removal and site restoration costs	(1)		15	12
Impact of colder temperatures (2)			—	3
Revenues to be billed in future periods
Deferred income taxes (3)			(14)	(18)
Distribution rate relief (4)			(21)	—
Impact of warmer temperatures (2)			(1)	—
Impact of inflation on rate base (5)			(3)	(2)
Settlement of regulatory decisions and other items		(6)	(4)	(12)
			(28)	(17)

(1) Removal and site restoration costs are billed to customers over the estimated useful life of the related assets based on forecast costs to be incurred in future periods.

(2) Natural Gas Distribution's customer rates are based on a forecast of normal temperatures. Fluctuations in temperatures may result in more or less revenue being recovered from customers than forecast. Revenues above or below the normal in the current period are refunded to or recovered from customers in future periods.

(3) Income taxes are billed to customers when paid by the Company.

(5) The inflation-indexed portion of ATCO Gas Australia's (part of Natural Gas Distribution) rate base is billed to customers through the recovery of depreciation in subsequent periods based on the actual or forecasted annual rate of inflation. Under rate-regulated accounting, revenue is recognized in the current period for the inflation component of rate base when it is earned. Differences between the amounts earned and the amounts billed to customers are deferred and recognized in revenues over the service life of the related assets.

IT Common Matters decision

Other

47 ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

4. REVENUES

The Company disaggregates revenues based on the nature of revenue streams. The disaggregation of revenues by each operating segment for the three months ended March 31 is shown below:

2021 Structures	2021 Structures	Utilities Energy Corporate	Utilities Energy Corporate	Utilities Energy Corporate	Utilities Energy Corporate
& Logistics 2020		Electricity (1) Natural Gas (1) Total	Infrastructure & Other (2) Consolidated
Revenue Streams *Sale of Goods* Electricity generation and delivery Commodity sales Modular structures - goods
	—	— — —	7	—	7
	—	— — —	7	—	7
	—	— — —	8	1	9
	—	— — —	7	—	7
	50	— — —	—	—	50
	22	— — —	—	—	22
Total sale of goods	50	— — —	15	1	66
	22	— — —	14	—	36
*Rendering of Services* Distribution services Transmission services Modular structures - services Logistics and facility operations and maintenance services Lodging and support Customer contributions Franchise fees Retail electricity and natural gas services Storage and industrial water
	—	130 291 421	—	—	421
	—	119 307 426	—	—	426
	—	173 76 249	—	—	249
	—	173 72 245	—	—	245
	38	— — —	—	—	38
	77	— — —	—	—	77
	27	— — —	—	—	27
	26	— — —	—	—	26
	17	— — —	—	—	17
	21	— — —	—	—	21
	—	9 5 14	—	—	14
	—	8 6 14	—	—	14
	—	9 72 81	—	—	81
	—	8 73 81	—	—	81
	—	— — —	—	83	83
	—	— — —	—	60	60
	—	— — —	6	—	6
	—	— — —	2	—	2
Total rendering of services	82	321 444 765	6	83	936
	124	308 458 766	2	60	952
*Lease income* Finance lease Operating lease
	—	— — —	3	—	3
	—	— — —	3	—	3
	35	— — —	—	—	35
	25	— — —	—	—	25
Total lease income	35	— — —	3	—	38
	25	— — —	3	—	28
*Other*	—	16 6 22	10	—	32
	—	9 11 20	15	5	40
Total
	167	337 450 787	34	84	1,072
	171	317 469 786	34	65	1,056

(1) For the three months ended March 31, 2021, Electricity and Natural Gas segments include $108 million of unbilled revenue (2020 - $105 million). At March 31, 2021, $108 million of the unbilled trade accounts receivables are included in trade accounts receivable and contract assets (December 31, 2020 - $132 million).

(2) Includes revenues from the Corporate & Other in Canadian Utilities Limited and ATCO Ltd.

ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS [48]

5. EARNINGS PER SHARE

Earnings per Class I Non-Voting (Class I) and Class II Voting (Class II) Share are calculated by dividing the earnings attributable to Class I and Class II Shares by the weighted average shares outstanding. Diluted earnings per share are calculated using the treasury stock method, which reflects the potential exercise of stock options and vesting of shares under the Company's mid-term incentive plan (MTIP) on the weighted average Class I and Class II Shares outstanding.

The earnings and average number of shares used to calculate earnings per share for the three months ended March 31 are as follows:

	2021	2020
Average shares
Weighted average shares outstanding	114,302,031	114,352,363
Effect of dilutive stock options	5,459	63,590
Effect of dilutive MTIP	243,920	315,629
Weighted average dilutive shares outstanding	114,551,410	114,731,582
Earnings for earnings per share calculation
Earnings for the period	161	174
Non-controllinginterests	(78)	(87)
Earnings attributable to Class I and Class II Shares	83	87
Earnings and diluted earnings per Class I and Class II Share
Earningsper Class I and Class II Share	$0.73	$0.76
Diluted earningsper Class I and Class II Share	$0.72	$0.76

6. PROPERTY, PLANT AND EQUIPMENT

A reconciliation of the changes in the carrying amount of property, plant and equipment is as follows:

	Utility Transmission & Distribution	Electricity Generation	Land and Buildings	Construction Work-in- Progress	Other	Total
Cost
December 31, 2020	21,004	140	998	647	1,804	24,593
Additions	6	—	12	199	3	220
Transfers	114	—	3	(164)	47	—
Retirements and disposals	(14)	—	(4)	(29)	(11)	(58)
Changes to asset retirement costs	—	(2)	—	—	(5)	(7)
Foreign exchange rate adjustment	(3)	(4)	—	(5)	(6)	(18)
March 31, 2021	21,107	134	1,009	648	1,832	24,730
Accumulated depreciation
December 31, 2020	5,119	18	216	78	835	6,266
Depreciation and impairment	122	1	7	—	24	154
Retirements and disposals	(14)	—	(4)	—	(7)	(25)
Foreign exchange rate adjustment	(1)	(1)	—	(2)	(2)	(6)
March 31, 2021	5,226	18	219	76	850	6,389
Net book value
December 31, 2020	15,885	122	782	569	969	18,327
March 31, 2021	15,881	116	790	572	982	18,341

The additions to property, plant and equipment included $3 million of interest capitalized during construction for the three months ended March 31, 2021 (2020 - $5 million).

49 ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

7. LONG-TERM DEBT

In the first quarter of 2020, ATCO Power Australia, a subsidiary of Canadian Utilities Limited, refinanced its $63 million Australian dollars (equivalent of $55 million Canadian dollars) credit facility with a new lender at Bank Bill Swap Benchmark Rate (BBSY) plus margin fee, extending the credit facility's maturity from February 2020 to June 2025. The floating BBSY interest rate is hedged to June 2025 with an interest rate swap agreement which fixes the interest rate at 1.68 per cent.

8. CLASS I NON-VOTING AND CLASS II VOTING SHARES

At March 31, 2021, there were 101,356,899 (December 31, 2020 - 101,347,899) Class I Shares and 13,196,129 (December 31, 2020 - 13,196,129) Class II Shares outstanding. In addition, there were 1,102,600 options to purchase Class I Shares outstanding at March 31, 2021, under the Company's stock option plan.

DIVIDENDS

The Company declared and paid cash dividends of $0.4483 per Class I and Class II Share during three months ended March 31, 2021 (2020 - $0.4352). The Company’s policy is to pay dividends quarterly on its Class I and Class II Shares. The payment of any dividend is at the discretion of the Board and depends on the financial condition of the Company and other factors.

On April 14, 2021, the Company declared a second quarter dividend of $0.4483 per Class I and Class II Share.

NORMAL COURSE ISSUER BID

On March 9, 2021, ATCO Ltd. began a normal course issuer bid to purchase up to 1,013,478 outstanding Class I Shares. The bid expires on March 8, 2022. The prior year normal course issuer bid to purchase up to 1,014,684 outstanding Class I Shares began on March 9, 2020 and expired on March 8, 2021.

No shares were purchased during the three months ended March 31, 2021 and 2020.

9. RETIREMENT BENEFITS

At March 31, 2021, the discount rate assumption which is used to measure the accrued benefit obligations increased to 3.34 per cent from 2.58 per cent at December 31, 2020. The discount rate assumption was based on market interest rates of high quality bonds that match the timing and amount of expected benefit payments.

Due to the re-measurement of the accrued benefit obligations and related plan assets, the funded status (market value of assets less accrued benefit obligations) increased from a net deficit of $439 million at December 31, 2020 to a net deficit of $251 million at March 31, 2021. The deficit of $251 million is net of a retirement benefit asset of $35 million related to Retirement Plan for Employees of Canadian Utilities Limited and Participating Companies (CU Plan).

At March 31, 2021, the Company has recognized a retirement benefit asset of $35 million and retirement benefit obligations of $286 million.

ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS [50]

10. CASH FLOW INFORMATION

ADJUSTMENTS TO RECONCILE EARNINGS TO CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile earnings to cash flows from operating activities for three months ended March 31 are summarized below.

	2021	2020
Depreciation and amortization	170	156
Earnings from investment in associate company	(3)	(3)
Dividends received from associate company	15	17
Earnings from investment in joint ventures, net of dividends and distributions received	(11)	(3)
Income tax expense	45	63
Unrealized losses (gains) on derivative financial instruments	1	(7)
Contributions by customers for extensions to plant	56	26
Amortization of customer contributions	(14)	(14)
Net finance costs	102	99
Income taxes paid	(36)	(8)
Other	5	16
	330	342

CASH POSITION

Cash position in the consolidated statements of cash flows at March 31 is comprised of:

	2021	2020
Cash	1,110	1,148
Short-term investments	5	4
Restricted cash (1)	33	55
Cash and cash equivalents	1,148	1,207
Bank indebtedness	(1)	—
	1,147	1,207

(1) Cash balances which are restricted under the terms of joint arrangement agreements are considered not available for general use by the Company.

51 ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

11. FINANCIAL INSTRUMENTS

FAIR VALUE MEASUREMENT

Financial instruments are measured at amortized cost or fair value. Fair value represents the estimated amounts at which financial instruments could be exchanged between knowledgeable and willing parties in an arm’s length transaction. Determining fair value requires management judgment. The valuation methods used to determine the fair value of each financial instrument and its associated level in the fair value hierarchy is described below.

Financial Instruments	Fair Value Method
Measured at Amortized Cost
Cash and cash equivalents, accounts receivable	Assumed to approximate carrying value due to their
and contract assets, bank indebtedness, and	short-term nature.
accounts payable and accrued liabilities
Finance lease receivables	Determined using a risk-adjusted interest rate to discount
	future cash receipts (Level 2).
Long-term debt	Determined using quoted market prices for the same or similar
	issues. Where the market prices are not available, fair values
	are estimated using discounted cash flow analysis based on
	the Company’s current borrowing rate for similar borrowing
	arrangements (Level 2).
Measured at Fair Value
Interest rate swaps	Determined using interest rate yield curves at period-end
	(Level 2).
Foreign currency contracts	Determined using quoted forward exchange rates at
	period-end (Level 2).
Commodity contracts	Determined using observable period-end forward curves and
	quoted spot market prices with inputs validated by publicly
	available market providers (Level 2).
	Determined using statistical techniques to derive period-end
	forward curves using unobservable inputs or extrapolation
	from spot prices in certain commodity contracts (Level 3).

FINANCIAL INSTRUMENTS MEASURED AT AMORTIZED COST

The fair values of the Company’s financial instruments measured at amortized cost are as follows:

	March 31, 2021 December 31, 2020
Recurring Measurements	Carrying Value Fair Value Carrying Value Fair Value
Financial Assets Finance lease receivables Financial Liabilities Long-term debt	174 243 175 254 9,593 10,821 9,619 11,987

ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS [52]

FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

The Company's derivative instruments are measured at fair value. At March 31, 2021, the following derivative instruments were outstanding:

interest rate swaps for the purpose of limiting interest rate risk on the variable future cash flows of longterm debt;
foreign currency forward contracts for the purpose of limiting exposure to exchange rate fluctuations relating to expenditures denominated in Mexican pesos and U.S. dollars; and
natural gas and forward power sale and purchase contracts for the purpose of limiting exposure to electricity and natural gas market price movements.

The balance sheet classification and fair values of the Company’s derivative financial instruments are as follows:

Subject to Hedge Accounting	Subject to Hedge Accounting	Not Subject to Hedge Accounting	Not Subject to Hedge Accounting
Recurring Measurements	Interest Rate Swaps Commodities	Commodities Foreign Currency Forward Contracts	Total Fair Value of Derivatives
March 31, 2021 Financial Assets Prepaid expenses and other current assets Other assets (1)

	— 31 — 13	4 — 4 —	35
			17
Financial Liabilities Provisions and other current liabilities Other liabilities (1)
	3 7 14 6	8 — 2 —	18 22
December 31, 2020 Financial Assets Prepaid expenses and other current assets Other assets (1)	— 25 — 12	5 — 4 —	30 16
Financial Liabilities Provisions and other current liabilities Other liabilities (1)	3 6 27 4	8 — 3 —	17 34

(1) At March 31, 2021, financial liabilities and financial assets include $9 million and $6 million, respectively, of Level 3 derivative financial instruments (December 31, 2020 - financial liabilities and financial assets included $9 million and $8 million, respectively, of Level 3 derivative financial instruments).

53 ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Notional and maturity summary

The notional value and maturity dates of the Company's derivative instruments outstanding are as follows:

Subject to Hedge Accounting	Subject to Hedge Accounting	Not Subject to Hedge Accounting
Notional value and maturity	Interest Rate Swaps Natural Gas (1) Power (2)	Natural Gas (1) Power (2) Foreign Currency Forward Contracts
March 31, 2021 Purchases (3) Sales (3) Currency Canadian dollars Australian dollars Mexican pesos
	— 8,057,600 2,775,895 — 2,516,917 664,699	— — —
		6,488,359 976,622 —

	92 — — 738 — — 570 — —	— — —
		— — —
		— — 100
Maturity	2023-2028 2021-2025 2021-2025	2021-2024 2021-2024 2021
December 31, 2020 Purchases (3) Sales (3) Currency Canadian dollars Australian dollars Mexican pesos	— 10,593,800 2,203,836 — 3,238,242 759,246 93 — — 738 — — 570 — —	— — — 7,867,560 1,089,495 — — — — — — — — — 100
Maturity	2023-2028 2021-2025 2021-2025	2021-2024 2021-2024 2021

(1) Notional amounts for the natural gas purchase contracts are the maximum volumes that can be purchased over the terms of the contracts.

(2) Notional amounts for the forward power sale and purchase contracts are the commodity volumes committed in the contracts.

(3) Volumes for natural gas and power derivatives are in GJ and MWh, respectively.

ATCO LTD. 2021 UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS [54]

AI assistant

ATCO LTD. — Interim / Quarterly Report 2021

42708_rns_2021-05-06_c969661d-1aa2-451d-9841-c41f90036b64.pdf

ATCO LTD. FINANCIAL INFORMATION

Q1 2021 INVESTOR FACT SHEET

TRACK RECORD OF DIVIDEND GROWTH

DIVERSIFIED ESSENTIAL SERVICES

$0.4483

GLOBAL GROWTH

ATCO AT A GLANCE

ATCO SHARE INFORMATION

We continue to grow and expand our international business

CONSOLIDATED REVENUES

CONSOLIDATED ADJUSTED EARNINGS

STRUCTURES & LOGISTICS

ADJUSTED EARNINGS

NELTUME PORTS

ADJUSTED EARNINGS

CANADIAN UTILITIES

ADJUSTED EARNINGS

2021 FIRST QUARTER FINANCIAL INFORMATION

INVESTOR FACT SHEET

TABLE OF CONTENTS

ATCO LTD.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2021

TABLE OF CONTENTS

PERFORMANCE OVERVIEW

FINANCIAL METRICS

REVENUES

ADJUSTED EARNINGS

Adjusted Earnings ($ Millions)

EARNINGS ATTRIBUTABLE TO CLASS I AND CLASS II SHARES

FUNDS GENERATED BY OPERATIONS

COMMON SHARE DIVIDENDS

CAPITAL INVESTMENT

BUSINESS UNIT PERFORMANCE

REVENUES

ADJUSTED EARNINGS

ATCO STRUCTURES

Manufacturing Hours

Rental Fleet

Global Space Rentals

Global Workforce Housing

ATCO STRUCTURES RECENT DEVELOPMENTS

Canada

Brucejack - Pretium Exploration Inc.

United States

China Lake Military Rebuild - Environmental Chemical Corporation

ATCO FRONTEC

ATCO FRONTEC RECENT DEVELOPMENTS

ADJUSTED EARNINGS

ADJUSTED EARNINGS

UTILITIES

REVENUES

ADJUSTED EARNINGS

Electricity Distribution

Electricity Transmission

International Electricity Operations

Natural Gas Distribution

Natural Gas Transmission

International Natural Gas Distribution

UTILITIES REGULATORY DEVELOPMENTS

COMMON MATTERS

2021 Rate Relief Application

Distribution Regulatory Framework - Post 2022

Generic Cost of Capital (GCOC)

ELECTRICITY TRANSMISSION

2020-2022 General Tariff Application (GTA)

NATURAL GAS TRANSMISSION

Natural Gas Transmission 2021-2023 General Rate Application (GRA)

ENERGY INFRASTRUCTURE

REVENUES

ADJUSTED EARNINGS

Electricity Generation

Storage & Industrial Water

ENERGY INFRASTRUCTURE RECENT DEVELOPMENTS

Central West Pumped Storage Hydro Project

CANADIAN UTILITIES CORPORATE & OTHER

ADJUSTED EARNINGS

ATCO LTD. Interim / Quarterly Report 2021