An ATCO Company

CU INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2024

This Management's Discussion and Analysis (MD&A) is meant to help readers understand key operational and financial events that influenced the results of CU Inc. (our, we, us, or the Company) during the year ended December 31, 2024.

This MD&A was prepared as of February 26, 2025, and should be read with the Company's audited consolidated financial statements (2024 Consolidated Financial Statements) for the year ended December 31, 2024. Additional information, including the Company's Annual Information Form (2024 AIF) that will be filed on March 31, 2025, is available on SEDAR+ at www.sedarplus.ca.

The Company is controlled by Canadian Utilities Limited (Canadian Utilities or CU), which in turn is controlled by ATCO Ltd. (ATCO) and its controlling share owner, Sentgraf Enterprises Ltd. and its controlling share owner, the Southern family.

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

Our Company ... 2
Shaping The Future: CU Inc.'s Ambitions ... 3
CU Inc.'s Strategy ... 4
Utilities Performance ... 5
2024 Developments ... 7
Regulatory Information ... 7
Sustainability, Climate Change and Energy Transition ... 10
Policy and Regulatory Updates ... 11
Other Expenses and Income ... 13
Liquidity and Capital Resources ... 14
Share Capital ... 16
Quarterly Information ... 17
Business Risks and Risk Management ... 18
Other Financial and Non-GAAP Measures ... 29
Reconciliation of Adjusted Earnings to Earnings for the Period ... 31
Reconciliation of Rate Base to Property, Plant and Equipment, and Intangible Assets ... 36
Other Financial Information ... 37
Glossary ... 40
Appendix 1: Fourth Quarter Financial Information ... 41

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

OUR COMPANY

CU Inc. is a wholly-owned subsidiary of Canadian Utilities Limited, an ATCO Company. CU Inc. is an Alberta-based corporation with approximately 3,700 employees and assets of $19 billion comprised of rate-regulated utility operations in electricity and natural gas distribution and transmission. More information about CU Inc. can be found on the Canadian Utilities Limited website at www.canadian utilities.com.

THE UTILITIES

The Company's activities are conducted through regulated businesses in two Business Units within western and northern Canada: Electricity, which includes Electricity Distribution and Electricity Transmission, and Natural Gas, which includes Natural Gas Distribution and Natural Gas Transmission.

SIMPLIFIED ORGANIZATIONAL STRUCTURE

The 2024 Consolidated Financial Statements include the accounts of CU Inc. and all of its subsidiaries. The 2024 Consolidated Financial Statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) and the reporting currency is the Canadian dollar.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

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CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

OUR BUSINESSES

The Company's activities are conducted through regulated businesses in two Business Units within western and northern Canada: Electricity and Natural Gas.

ELECTRICITY

FAST FACTS
75,000 KM
Powerlines
(Owns and Operates)	264,761
Average monthly
customers in 2024	240
Communities served
in Alberta

Our Electricity business unit is comprised of two regulated businesses: Electricity Distribution and Electricity Transmission.

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. Electricity Transmission provides 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.

NATURAL GAS

FAST FACTS
51,100 KM
Pipelines
(Owns and Operates)	1,312,619
Average monthly
customers in 2024	100+
Years of operations

Our Natural Gas business unit is comprised of two regulated businesses: Natural Gas Distribution and Natural Gas Transmission.

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

SHAPING THE FUTURE: CU INC.'S AMBITIONS

CREATING PROSPERITY AND OPPORTUNITY FOR GENERATIONS TO COME

CU Inc. is committed to a bold and extraordinary future for our companies, our customers, and our owners. We play a key role in supporting ATCO, our ultimate parent company, and together our companies are charting a course for the future with an ambitious set of objectives that build upon the long corporate history of bringing prosperity and opportunity to the communities we serve.

OUR STRATEGIC IMPERATIVES

Our actions reflect our core values of safety, integrity, agility, caring, and collaboration. These core values guide us as we balance the short- and long-term economic, environmental and social considerations of our businesses.

Innovation, growth and financial strength provide the foundation from which we built our Company. Our long-term success depends on our ability to continue offering our customers premier, comprehensive and integrated solutions to meet their

evolving needs and expand into new markets. Our strategic imperatives, as noted below, are supported by our unwavering commitment to financial strength, operational excellence, our customers, our people and the communities we are privileged to serve.

Valuing a long-term outlook.
Building on our core utility businesses.
Taking a leadership role in the energy transition.
Advancing equitable partnerships with Indigenous communities.
Collaborating for the betterment of communities.
Supporting the talent and diversity of the CU Inc. team.

CU INC.'S STRATEGY

At the heart of CU Inc.'s strategy is the desire to be a unified provider of energy, an essential service for our customers, allowing them to avoid the challenges of relying on a fragmented network of providers. Energy is one of life's essential services. Without safe, reliable, resilient and affordable access to energy, prosperity and opportunity cannot thrive. Essential services, like energy, are resilient to macroeconomic headwinds, geopolitical conflict and natural disasters and are a significant driver of economic growth.

CU Inc.'s value proposition is delivering essential energy for an evolving world that requires more energy to provide quality of life to a growing population, advance economies and power industry. Our customers need resilient and reliable services that are balanced with sustainability and affordability. We safely deliver this reliable and affordable energy by actively leading and constructively participating in a responsible and equitable energy transition, investing to serve the evolving needs of our customers, being a trusted partner, and providing the integral energy infrastructure required for the expanding population and industry. Our networks are critical to Alberta's prosperity, and we are investing significantly in infrastructure for the growing population and economy, ensuring that energy is available for industrial expansion to the benefit of communities. Our people, capabilities and experience have positioned us for success, we also create opportunities for equitable partnerships with local and indigenous communities in areas we operate to create value for all parties.

CAPITAL EXPENDITURE PLAN

Our three year capital expenditure plan includes a minimum expected expenditure of $5.8 billion of planned capital spending in capital projects that will serve the evolving needs of our customers and support population and business growth, system reliability and safety, climate resiliency and adaptation, decarbonization, and technology to further improve operating

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

efficiencies. Increases to expenditures could result from the timing of certain regulatory applications to be made in 2025, as well as the expansion of Alberta's electric transmission system as assigned by the Alberta Electric System Operator (AESO).

2025-2027 Capital Expenditures Plan ($ billions)

(1) Mid-year rate base is a non-GAAP financial measure and mid-year rate base CAGR is a non-GAAP ratio (each as defined in National Instrument 52-112 - Non-GAAP and Other Financial Measures Disclosure (NI 52-112)). Mid-year rate base is not a standardized measure under the reporting framework used to prepare the Company's financial statements and may not be comparable to similar measures disclosed by other issuers. The most directly comparable measures to mid-year rate base reported in accordance with IFRS are property, plant and equipment and intangible assets. See "Other Financial and Non-GAAP Measures" and "Reconciliation of Rate Base and Mid-Year Rate Base to Property, Plant and Equipment and Intangible Assets" in this MD&A.
(2) CAGR means compound annual growth rate.

Growth in mid-year rate base is a leading indicator of a utility's earnings trend. The three year plan includes expected rate base growth of 5.4 per cent.

Rate base is a measure specific to rate-regulated utilities and is used by the regulatory authority, the Alberta Utilities Commission (AUC). The Company finances infrastructure investments, referred to as rate base, through a combination of equity and debt. Regulatory proceedings establish the approved rate of return on equity (ROE) and the equity ratio – the proportion of utility investments financed with equity, with the remainder financed by debt. Both the ROE and the equity ratio are determined based on the concept of "fair return," which includes three main components: (i) comparability, (ii) financial integrity, and (iii) financial attractiveness. The costs of equity and debt are included in the amounts collected as revenues. More information about rate base is described in the "Reconciliation of Rate Base to Property, Plant and Equipment, and Intangible Assets" section in this MD&A.

UTILITIES PERFORMANCE

REVENUES

Revenues of $822 million and $3,043 million in the fourth quarter and full year of 2024 were $39 million and $112 million higher compared to the same periods in 2023. Revenues were positively impacted by growth in the Alberta regulated rate base and an increase in ROE following the 2023 AUC decision which set the 2024 ROE at 9.28 per cent, partially offset by lower flow-through revenue in Electricity Distribution.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

ADJUSTED EARNINGS

($ millions)	Three Months Ended December 31			Year Ended December 31
	2024	2023	Change	2024	2023	Change
Electricity
Electricity Distribution (1)	46	47	(1)	150	150	—
Electricity Transmission (1)	47	36	11	190	162	28
Total Electricity (1)	93	83	10	340	312	28
Natural Gas
Natural Gas Distribution (1)	69	62	7	142	120	22
Natural Gas Transmission (1)	28	22	6	95	91	4
Total Natural Gas (1)	97	84	13	237	211	26
Corporate & Other and Intersegment Eliminations (1)	(5)	—	(5)	(20)	(1)	(19)
Total Utilities (2)	185	167	18	557	522	35

(1) Non-GAAP financial measures (as defined in NI 52-112). The most directly comparable measure reported in accordance with IFRS is Earnings for the Period. See "Other Financial and Non-GAAP Measures" and "Reconciliation of Adjusted Earnings to Earnings for the Period" in this MD&A.
(2) Total of segments measure (as defined in NI 52-112). The most directly comparable measure reported in accordance with IFRS is Earnings for the Period. See "Other Financial and Non-GAAP Measures" and "Reconciliation of Adjusted Earnings to Earnings for the Period" in this MD&A.

Utilities adjusted earnings of $185 million and $557 million in the fourth quarter and full year of 2024 were $18 million and $35 million higher than the same periods in 2023 mainly due to growth in rate base and an increase in ROE, and lower earnings in the second quarter of 2023 due to the 2018-2021 Deferral Application decision which denied Electricity Transmission recovery of forgone return on rate base related to certain cancelled projects. Higher earnings were partially offset by tax adjustments recorded by Electricity Distribution over the final two quarters of 2023, and Natural Gas Transmission's 2024-2025 General Rate Application which included cost efficiencies implemented in prior periods that are being passed on to customers.

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

Electricity Distribution

Electricity Distribution adjusted earnings of $46 million and $150 million in the fourth quarter and full year of 2024 were comparable to the same periods in 2023.

Electricity Transmission

Electricity Transmission provides 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 $47 million and $190 million in the fourth quarter and full year of 2024 were $11 million and $28 million higher than the same periods in 2023 mainly due to growth in rate base and an increase in ROE. Additionally, adjusted earnings were higher due to the 2018-2021 Deferral Application decision received in the second quarter of 2023 which denied recovery of forgone return on rate base related to certain cancelled projects.

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 $69 million and $142 million in the fourth quarter and full year of 2024 were $7 million and $22 million higher than the same periods in 2023 mainly due to growth in rate base and an increase in ROE.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

7 CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

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 $28 million and $95 million in the fourth quarter and full year of 2024 were $6 million and $4 million higher than the same periods in 2023 mainly due to growth in rate base and an increase in ROE, partially offset by the impact of the 2024-2025 General Rate Application which included cost efficiencies implemented in prior periods that are being passed on to customers.

CORPORATE & OTHER AND INTERSEGMENT ELIMINATIONS

Including intersegment eliminations, Corporate & Other adjusted earnings in the fourth quarter and full year of 2024 were $5 million and $19 million lower than the same periods in 2023 mainly due to higher interest expense resulting from short-term borrowings.

2024 DEVELOPMENTS

Yellowhead Mainline Project

On May 8, 2024, the Company announced its largest ever energy infrastructure project, the Yellowhead Mainline, with the projected spend estimated at $2.8 billion, subject to further detailed engineering and tendering of supply contracts. On September 18, 2024, the Company announced the filing of a comprehensive regulatory application that establishes the need for the Yellowhead Mainline natural gas project and represents the first of two applications to the AUC. This Alberta project consists of approximately 200-230 kilometres of high-pressure natural gas pipeline and related control and compression facilities that will run from the Edson area to the northeast Edmonton area and is expected to have the capability to deliver about 1,200 terajoules (or 1.1 billion cubic feet) per day of incremental natural gas. Subject to regulatory and the Company's approvals, construction is expected to commence in 2026 and the pipeline is expected to be on-stream in the fourth quarter of 2027.

Central East Transfer Out (CETO) project

In 2024, Electricity Transmission began construction of the CETO project, an electric transmission system project direct assigned to both ATCO Electric and AltaLink LP by the AESO. The construction of the 135-km 240kV transmission line will support renewable energy integration in Alberta and transport electricity in the counties of Red Deer, Lacombe and Stettler, supplying more than 1,500-MW of electricity to Alberta's grid. Construction commenced in the third quarter of 2024 and is being executed over two winter seasons, with expected completion in 2026. Electricity Transmission is building 85-km of the transmission line and AltaLink is constructing the remaining 50-km.

REGULATORY INFORMATION

REGULATED BUSINESS MODELS

Regulated Business Models

The Alberta business operations of Electricity Distribution, Electricity Transmission, Natural Gas Distribution, and Natural Gas Transmission are regulated mainly by the AUC. The AUC administers acts and regulations covering such matters as rates, financing and service area.

Natural Gas Transmission and Electricity Transmission operate under Cost of Service (COS) regulation. Under this model, the regulator establishes the revenues to provide for a fair return on utility investment using mid-year calculations of the total investment less depreciation, otherwise known as mid-year rate base. Growth in mid-year rate base is a leading indicator of the business' earnings trend, depending on changes in the approved equity component of the mid-year rate base and the rate of return on common equity.

Natural Gas Distribution and Electricity Distribution operate under Performance Based Regulation (PBR). Under PBR, revenue is determined by a formula that adjusts customer rates for inflation less an estimated amount for productivity improvements. The AUC reviews the utilities' results annually to ensure the rate of return on common equity is within certain upper and lower

boundaries. To complete these calculations, the AUC uses mid-year rate base. For this reason, growth in mid-year rate base can be a leading indicator of the business' earnings trend, depending on the ability of the business to maintain costs based on approved going-in rates and on the formula that adjusts rates for inflation and productivity improvements.

(1) Mid-year rate base is a non-GAAP financial measure. See "Other Financial and Non-GAAP Measures" and "Reconciliation of Rate Base to Property, Plant and Equipment, and Intangible Assets" in this MD&A.

PERFORMANCE BASED REGULATION

After the conclusion of the second generation PBR term (PBR2) in 2022, and following a one-year COS rebasing in 2023, the Natural Gas Distribution and Electricity Distribution businesses moved to a third generation of PBR (PBR3) for the years 2024 to 2028.

On October 4, 2023, the AUC issued its decision regarding the parameters of the PBR3 plans that set rates for the distribution utilities for the years 2024 to 2028. The AUC approved continuation of the incremental capital funding mechanism based on historical five years of actual capital spend as well as the ability to seek additional funding for capital that meets certain eligibility criteria. The AUC also introduced a new productivity factor premium and an asymmetric, two-tiered Earnings Sharing Mechanism. The AUC did not include an Efficiency Carryover Mechanism (ECM) for PBR3, however, 2023 and 2024 had ECM revenue related to the second PBR term.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

PBR Third Generation

Timeframe	2024 to 2028
Inflation Adjuster (I Factor)	Inflation indices (FWI and CPI) adjusted annually with a true up applied
Productivity Adjuster (X Factor)	0.40% (includes 0.3% for productivity factor premium)
O&M	Based on 2023 approved COS Applications; inflated by I-X through the PBR term
Return on Operating Cost Investment	Ability to apply for return on operating solutions
Treatment of Capital Costs	a. Recovered through going-in rates inflated for I-X and a K Bar (the AUC allowance for capital additions under PBR) that is based on inflation adjusted average historical capital costs for the period 2018-2022. The K Bar is calculated annually and adjusted for the actual weighted average cost of capital (WACC)
b. Significant extraordinary capital costs not previously incurred, required by a third party or directly caused by applicable law related to net-zero objectives recovered through a “Type I” K Factor
Return On Equity (ROE)	a. Based on the established Generic Cost of Capital (GCOC) formula (results released November of each year)
b. + 0.5% ROE efficiency carry-over mechanism (ECM) achieved from PBR Second Generation added to 2023 and 2024
Earnings Sharing Mechanism (ESM)	Two-tiered, asymmetric ESM;
• the utilities retain 100% of the first 200 bps of earnings above the authorized ROE
• a 60/40 utility/customer split for the next 200 bps of earnings, and
• a 20/80 utility/customer split for any earnings over 400 bps
Reopener	- 300 bps of the approved ROE for two consecutive years or +/- 500 bps of the approved ROE for any single year
ROE Used for Reopener Calculation	• 2024: Based on the GCOC formula excluding impact of ECM
• 2025-2028: Based on the GCOC formula
Quantification and Tracking of Efficiencies	Utility must report a select set of operational metrics annually to the AUC

REGULATORY UPDATES

COMMON MATTERS

Second Generation Performance Based Regulation Re-openers

In June 2023, the AUC initiated a proceeding for Electricity Distribution and Natural Gas Distribution as the re-opener clause was triggered by both utilities in 2022, the final year of PBR2. The PBR2 reopener thresholds were triggered if a utility's earnings are +/- 500 basis points from the approved ROE in one year or +/- 300 basis points from the approved ROE in two consecutive years. On May 22, 2024, the AUC issued its decision and advanced to the second phase of the proceeding.

The Company filed a Review & Variance (R&V) of the decision and Permission to Appeal with the Alberta Court of Appeal. On August 1, 2024, the AUC denied the R&V of the decision. The Permission to Appeal on the Re-Opener Phase I Decision was heard by the Alberta Court of Appeal on October 31, 2024 and a favourable ruling on the Permission to Appeal was received December 10, 2024. Based on the positions advanced in these submissions, we do not anticipate any impact to earnings as a result of this proceeding.

ATCO Gas and ATCO Electric were the only utilities in Alberta to lower rates in 2023 due to efficiencies being passed onto customers. Similar to the first generation of PBR, the increase in earnings in the second generation of PBR was a direct result of management's response to the incentive to implement efficiency improvements.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

ELECTRICITY TRANSMISSION

ATCO Electric Settlement Application

On June 24, 2024, AUC Enforcement and ATCO Electric filed a joint submission seeking the AUC’s approval of a settlement agreement involving two matters ATCO Electric had previously self-reported to AUC Enforcement staff. These historical items related to disclosure requirements for two independent matters included in applications filed in 2015 and 2019, for projects constructed between 2012 and 2015. They were identified following an extensive internal investigation supported by independent third parties. There is no material impact to customer rates (or bills) as a result of these matters.

On September 25, 2024, the AUC released their decision approving the settlement agreement as filed, including the associated costs that were recognized in the second quarter of 2024.

NATURAL GAS TRANSMISSION

2024 - 2026 General Rate Application (GRA)

On July 31, 2023, ATCO Pipelines filed a GRA for 2024 through 2026. A comprehensive Negotiated Settlement Agreement (NSA) was reached with all participating interveners in December 2023, and an application was filed with the AUC in January 2024. On March 27, 2024, the AUC issued a decision approving the NSA for 2024 and 2025 in its entirety but limited the approval to two years.

SUSTAINABILITY, CLIMATE CHANGE AND ENERGY TRANSITION

Within the ATCO group of companies (including CU Inc.), we balance the short- and long-term economic, environmental and social considerations of our businesses while creating value for our customers, employees, share owners, and Indigenous and community partners. As a provider of essential services in diverse communities around the world, we operate in an inclusive and responsible manner to meet the needs of society today and for generations to come while consistently delivering safe, reliable and affordable services.

SUSTAINABILITY REPORTING

The ATCO group of companies’ 2024 Sustainability Report, which will be published in May 2025, focuses on the following material topics:

Governance and Responsible Business – corporate governance, business ethics, responsible supply chain, and government relations and political advocacy;
Resilience and Safety – emergency preparedness and response, system reliability and availability, cybersecurity, public health and safety, and employee safety and well-being;
Energy Transition and Environment – energy transition and climate change, greenhouse gas (GHG) emissions, and land use and biodiversity; and
People and Partners – Indigenous relations, economic opportunities and reconciliation, community engagement and investments, customer experience and satisfaction, human capital development, retention, and attraction, and diversity, equity and inclusion.

Our Sustainability Report is guided by the IFRS International Sustainability Standards Board (ISSB) recommendations, which incorporate the Sustainability Accounting Standards Board (SASB) standards and climate-related disclosure recommendations from the Task Force on Climate-related Financial Disclosures (TCFD). It is also based on the internationally recognized Global Reporting Initiative (GRI) Standards.

The 2023 Sustainability Report, ESG Datasheet, materiality assessment, and additional details and other disclosures are available on our website at www.canadianutilities.com.

CLIMATE CHANGE AND ENERGY TRANSITION

As we strive to support the energy transition and contribute to society's long-term sustainability goals, we continue to pursue initiatives to integrate cleaner fuels, renewable energy, and energy storage. This includes looking at ways to modernize our energy infrastructure to accommodate new and innovative sources of energy as well as ways to further use energy more efficiently. We are working to reduce the carbon footprint of our operations and enabling our customers to transition to lower emitting sources of energy, while maintaining safety, reliability and affordability.

POLICY AND REGULATORY UPDATES

We constructively work with all levels of government to advocate for enabling policy and regulation, and to identify barriers that impede cost-effective, economy-wide solutions. We participate in a wide number of discussions, and the following are examples of where we focus our efforts on policies or regulations most relevant to our existing or planned projects.

CANADA

Government of Canada Fall Economic Statement Act and Budget Implementation Act

On June 20, 2024, the Fall Economic Statement Implementation Act (Bill C-59) and the Budget Implementation Act (Bill C-69) received Royal Assent. These Acts implemented certain income and indirect tax measures from the federal budget and certain measures from the fall economic statement.

Below are some relevant highlights:

Clean Economy investment tax credits (ITC) – apply to qualified expenditures related to Carbon Capture, Utilization, and Storage (CCUS), Clean Technology, and Clean Hydrogen.
Competition Act (Canada) – a new prohibition against "greenwashing" (i.e., misleading claims about a company's environmental practices or the environmental benefits of a product) came into effect on June 20, 2024, and a new private right of action will come into effect on June 20, 2025. The amendments place a reverse onus on companies to prove the representations they make, including that they are in line with "internationally recognized methodology", which is not defined. The Competition Bureau intends to publish final guidelines with respect to claims and the private right of action, following a consultation period which ends on February 28, 2025. We continue to assess and seek guidance on how these amendments may impact our future disclosures.
Excessive Interest and Financing Expenses Limitation (EIFEL) – rules regarding the introduction of an additional interest deduction limitation applicable to tax years beginning on or after October 1, 2023. Following the release, in the 2024 Fall Economic Statement (FES) released on December 16, 2024, intentions were restated to provide exceptions for purpose-built rental housing and regulated energy utilities.
Indigenous Loan Guarantees – a $5 billion loan guarantee program to help unlock access to capital for Indigenous communities and help remove historical barriers to Indigenous equity investment in natural resources and energy projects.

Clean Electricity Regulations (CER)

On December 17, 2024, the Canadian government finalized the CER, a key component of its climate strategy which aims to achieve a net-zero electricity grid and economy-wide net-zero emissions by 2050. Key regulatory changes and provisions include:

Emissions Limits: The regulations adopt an absolute emissions approach with an annual limit of 65 t/GWh before 2050, replacing the previous 30 t/GWh limit. Units may emit up to 35 t/GWh above this limit by using eligible offset credits. After 2050, the limit reduces to zero, though facilities may use up to 42 t/GWh in offset credits.
Compliance Mechanisms: A new compliance credit system rewards generating units operating below emissions limits. Credits can be banked for future use or traded among units, though no new credits will be issued after 2049. The system includes provisions for credit trading and pooling within provinces.
Implementation Timeline: The regulations will apply to most units by January 1, 2035, with certain planned or "in-flight" units having until January 1, 2050. Units converted from coal to gas may have later compliance dates based on commissioning dates and other factors.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

Emergency Operations: The regulations simplify emergency protocols, allowing system operators to independently authorize high-emissions unit operation for up to 30 days during emergencies, replacing the previous requirement for ministerial approval.

Carbon Pricing/Output-Based Pricing Systems

On April 1, 2024, the carbon price in Canada increased from $65 to $80 per tonne. The Government of Canada's plan on climate change proposes to increase the carbon price by $15 per tonne each year, rising to $170 per tonne by 2030.

Government of Canada Green Buildings Strategy

On July 16, 2024, the Government of Canada released the Canada Green Buildings Strategy (CGBS). The document centers around three priorities to advance the decarbonization of buildings, focusing on energy efficiency and affordability: i) accelerating retrofits, ii) building green and affordable buildings from the start, and iii) shaping the buildings sector of the future. The document is limited to addressing heating oil and does not target natural gas and propane heating sources. The CGBS commits the government to introducing a regulatory framework that will allow the phase-out of the installation of oil heating systems in new construction, as early as 2028.

Prorogation of Parliament and Pending Resignation of the Prime Minister

On January 6, 2025, the Governor General prorogued Parliament until March 24, 2025 at the request of the Prime Minister. Prorogation suspends the work of Parliament by ending its current session, but differs from dissolution which would result in the termination of Parliament. Prorogation results in the termination of all bills that have not yet received Royal Assent. While legislative business ceases with prorogation, the Cabinet may continue to meet, and routine spending and policy decisions are allowed to proceed. Parliament is obliged to begin a new session before March 31, 2025.

Concurrently, the Prime Minister announced he would step down as Leader of the Liberal Party of Canada (Liberal Party) and Prime Minister after the Liberal Party selects a new leader.

ALBERTA

Alberta Restructured Energy Market

On March 11, 2024, the Government of Alberta directed the AESO to develop a Restructured Energy Market (REM) for the Alberta electricity grid, prioritizing affordability, reliability, and sustainability. On July 3, 2024, the Government of Alberta directed the AESO to advance the technical design of the REM and provided its decision for future transmission policy.

On December 3, 2024, the Government of Alberta provided further directions for REM, including future changes to the transmission planning and design of the Independent System Operator (ISO) tariff. In 2025, the government will bring forward the legislative tools and amendments necessary to implement all market and transmission policies.

Below are some of the decisions and directions made in July and December of 2024:

Market Policy

Introducing a mandatory day-ahead market and allowing energy prices to be determined by market participants' strategic offers, with market mitigation to prevent excessive market power.
Maintaining a province-wide uniform electricity price.
REM must consider components such as Security Constrained Economic Dispatch, shorter settlement intervals, price floor and ceiling review, and co-optimization of energy and ancillary services.
The AESO will develop a market-based congestion management mechanism that recognizes incumbency and considers the participation of controllable load and energy storage.
The AESO will collaborate in an Alberta Utilities Commission-led initiative to implement 5-minute settlement for transmission-connected loads, generators, and interties by 2032 and for all loads by 2040.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

Transmission Policy

Move away from the current zero-congestion transmission planning standard to an optimally planned transmission planning standard.
Allocate new transmission infrastructure costs and all ancillary services costs based on cost causation principles.
Require the AESO to increase the path rating (maximum amount of power that can be transmitted reliably) of the Alberta-Saskatchewan intertie as part of the McNeil Converter’s end-of-life replacement.
Require the AESO to restore the Alberta-British Columbia intertie by December 31, 2026, and procure and maintain high levels of ancillary services to support full import flows on the Alberta-British Columbia intertie and the Montana-Alberta Tie Line.
Remove competitive procurement requirements for upgrades or enhancements to the path ratings of interties.
Recover line losses through a system-wide average starting on January 1, 2027.

OTHER EXPENSES AND INCOME

A financial summary of other consolidated expenses and income items for the fourth quarter and full year of 2024 and 2023 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.

($ millions)	Three Months Ended December 31				Year Ended December 31
	2024	2023	Change	2024	2023	Change
Operating costs	404	383	21	1,488	1,418	70
Depreciation, amortization and impairment	148	176	(28)	586	607	(21)
Net finance costs	102	94	8	396	361	35
Income tax expense	33	25	8	126	118	8

OPERATING COSTS

Operating costs, which are total costs and expenses less depreciation, amortization and impairment, increased by $21 million and $70 million in the fourth quarter and full year of 2024 compared to the same periods in 2023. Higher operating costs were mainly due to higher restructuring costs incurred in 2024, higher flow-through expense in Natural Gas Distribution, and increased electricity rates at ATCO Electric Yukon.

DEPRECIATION, AMORTIZATION AND IMPAIRMENTS

Depreciation, amortization and impairment decreased by $28 million and $21 million in the fourth quarter and full year of 2024 compared to the same periods in 2023 mainly due to the recognition of an impairment of certain computer software assets in the fourth quarter of 2023, and an impairment of certain electricity generation assets that had been removed from service and determined to have no remaining value in Electricity Transmission in the second quarter of 2023. Decreases were partially offset by ongoing capital investment in the Regulated Utilities.

NET FINANCE COSTS

Net finance costs increased by $8 million and $35 million in the fourth quarter and full year of 2024 compared to the same periods in 2023 mainly due to higher interest expense on additional debt issued to fund the ongoing capital investment.

INCOME TAX EXPENSE

Income taxes increased by $8 million in the fourth quarter and full year of 2024 compared to the same periods in 2023 mainly due to higher IFRS earnings before income taxes.

13
CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

LIQUIDITY AND CAPITAL RESOURCES

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 flows from operations, debt and capital markets, and injections of equity from Canadian Utilities Limited. Liquidity is generated by cash flows from operations and is supported by appropriate levels of cash and available committed credit facilities.

CREDIT RATINGS

The following table shows the credit ratings assigned to CU Inc. at December 31, 2024.

	DBRS	Fitch
CU Inc.
Issuer	A (high)	A-
Senior unsecured debt	A (high)	A
Commercial paper	R-1 (low)	F2
Preferred shares	PFD-2 (high)	BBB+

On February 20, 2025, Fitch Ratings affirmed its 'A-' issuer rating with a stable outlook on CU Inc.

On July 23, 2024, DBRS Limited affirmed its 'A (high)' long-term corporate credit rating and stable outlook on CU Inc.

LINES OF CREDIT

At December 31, 2024, CU Inc. and its subsidiaries had the following lines of credit.

($ millions)	Total	Used	Available
Long-term committed	900	—	900
Uncommitted	100	47	53
Total	1,000	47	953

Of the $1,000 million in total lines of credit, $100 million was in the form of uncommitted credit facilities with no set maturity date. The other $900 million in credit lines was committed, with maturities between 2026 and 2027, and may be extended at the option of the lenders. The majority of the credit lines are provided by Canadian banks.

CONSOLIDATED CASH FLOWS

At December 31, 2024, the Company's cash position was $(163) million. This represents a decrease in the fourth quarter and full year of 2024 of $92 million compared to the same periods in 2023. Major movements are outlined in the following table:

	Three Months Ended December 31			Year Ended December 31
($ millions)	2024	2023	Change	2024	2023	Change
Cash position, beginning of period	(28)	12	(40)	(71)	(12)	(59)
Cash from (used in):
Operating activities	414	332	82	1,596	1,476	120
Investing activities	(438)	(319)	(119)	(1,327)	(1,136)	(191)
Financing activities	(111)	(96)	(15)	(361)	(399)	38
Cash position, end of the period	(163)	(71)	(92)	(163)	(71)	(92)

The opening cash position of $(28) million and $(71) million in the fourth quarter and full year of 2024 was $40 million and $59 million lower compared to the same periods in 2023 mainly due to the funding of capital projects, and the timing of payables.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

Operating Activities

Cash flows from operating activities of $414 million and $1,596 million in the fourth quarter and full year of 2024 were $82 million and $120 million higher than the same periods in 2023 mainly due to growth in rate base, a higher return on rate base, and the timing of certain revenues and expenses, partially offset by restructuring costs incurred in 2024, and lower customer contributions.

Investing Activities

Cash flows used in investing activities of $438 million and $1,327 million in the fourth quarter and full year of 2024 were $119 million and $191 million higher than the same periods in 2023 mainly due to increased capital expenditures related to ongoing system upgrades, projects related to system reliability and safety and climate resiliency and adaptation, and growth projects for new customers. Increases were partially offset by the timing of settlement of accounts payable on capital projects.

Cash Used for Capital Expenditures

Capital expenditures for the fourth quarter and full year of 2024 and 2023 are shown in the table below.

($ millions)	Three Months Ended December 31				Year Ended December 31
	2024	2023	Change	2024	2023	Change
Electricity Distribution	136	125	11	455	391	64
Electricity Transmission	133	55	78	306	239	67
Natural Gas Distribution	111	109	2	407	355	52
Natural Gas Transmission	91	46	45	231	145	86
Total (1) (2)	471	335	136	1,399	1,130	269

(1) Includes additions to property, plant and equipment, intangibles, and $4 million and $14 million (2023 - $3 million and $15 million) of capitalized interest during construction for the fourth quarter and full year of 2024.
(2) Includes $23 million and $100 million for the fourth quarter and full year of 2024 (2023 - $8 million and $116 million) of capital expenditures that were funded with the assistance of customer contributions and government grants.

Cash used for capital expenditures was $471 million and $1,399 million in the fourth quarter and full year of 2024, $136 million and $269 million higher compared to the same periods in 2023 mainly due to increased spending related to ongoing system upgrades and growth projects for new customers, including the Central East Transfer Out project in Electricity Transmission.

Capital expenditures in 2024 were $199 million higher than the projected capital expenditures provided by the Company in the second quarter of 2024, mainly due to increased spending related to ongoing system upgrades and growth projects for new customers.

Financing Activities

Cash flows used in financing activities were $111 million in the fourth quarter of 2024, $15 million higher than the same period in 2023 mainly due to higher dividends paid, and higher interest paid due to a higher debt issuance net of debt repayment in 2024.

Cash flows used in financing activities were $361 million in the full year of 2024, $38 million lower than the same period in 2023 mainly due to a higher 2024 debt issuance net of debt repayment, and lower dividends paid, partially offset by higher interest paid.

Debenture Issuance

On September 11, 2024, CU Inc. issued $410 million of 4.664 per cent 30-year debentures. Proceeds from the issue are being used to finance capital expenditures, to repay existing indebtedness and for other general corporate purposes.

Debenture Repayments

On March 6, 2024, CU Inc., repaid $120 million of 6.215 per cent debentures upon maturity.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

Cash Requirements

Contractual financial obligations and other commitments for the next five years and thereafter are shown below:

($ millions)	2025	2026	2027	2028	2029	2030 and thereafter
Financial Liabilities (1)
Accounts payable and accrued liabilities	623	—	—	—	—	—
Accounts payable to parent and affiliate companies	30	—	—	—	—	—
Long-term debt:
Principal	—	7	—	125	—	8,930
Interest expense	387	387	386	382	379	6,533
	1,040	394	386	507	379	15,463
Commitments (1)
Purchase obligations:
Operating and maintenance agreements	409	365	403	462	398	105
Capital expenditures	577	—	—	—	—	—
Other	22	6	6	6	6	6
	1,008	371	409	468	404	111
Total	2,048	765	795	975	783	15,574

(1) Additional detail is discussed in Note 19 ("Risk Management") and Note 25 ("Commitments") of the 2024 Consolidated Financial Statements.

SHARE CAPITAL

CU Inc. equity securities consist of Class A shares and Class B shares.

At February 25, 2025, the Company had outstanding 3,570,322 Class A shares and 2,188,262 Class B shares.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

QUARTERLY INFORMATION

The following table shows financial information for the eight quarters ended March 31, 2023 through December 31, 2024.

($ millions)	Q1 2024	Q2 2024	Q3 2024	Q4 2024
Revenues	880	696	645	822
Earnings for the period	200	49	63	135
Adjusted earnings (loss) (1)
Electricity (2)	88	76	83	93
Natural Gas (2)	121	23	(4)	97
Corporate & Other and Intersegment Eliminations (2)	(4)	(5)	(6)	(5)
Total adjusted earnings (1)	205	94	73	185
($ millions)	Q1 2023	Q2 2023	Q3 2023	Q4 2023
Revenues	877	670	601	783
Earnings for the period	209	77	36	105
Adjusted earnings (loss) (1)
Electricity (2)	82	64	83	83
Natural Gas (2)	113	23	(9)	84
Corporate & Other and Intersegment Eliminations (2)	(1)	—	—	—
Total adjusted earnings (1)	194	87	74	167

(1) Total of segments measure (as defined in NI 52-112). See "Other Financial and Non-GAAP Measures" and "Reconciliation of Adjusted Earnings to Earnings for the Period" in this MD&A.
(2) Non-GAAP financial measures (as defined in NI 52-112). See "Other Financial and Non-GAAP Measures" and "Reconciliation of Adjusted Earnings to Earnings for the Period" in this MD&A.

Our financial results for the previous eight quarters reflect the timing of utility regulatory decisions, and the seasonal nature of demand for natural gas and electricity.

ADJUSTED EARNINGS

Adjusted earnings in the first quarter of 2024 were higher than the same period in 2023 mainly due to growth in rate base and an increase in ROE. Higher earnings were partially offset by Natural Gas Transmission's 2024-2025 General Rate Application which included cost efficiencies implemented in prior periods that are being passed on to customers.

Adjusted earnings in the second quarter of 2024 were higher compared to the same period in 2023 mainly due to growth in rate base and an increase in ROE, and the 2023 decision received from the AUC on the 2018-2021 Deferral Application decision which denied Electricity Transmission's recovery of forgone return on rate base related to certain cancelled projects. Higher earnings were partially offset by Natural Gas Transmission's 2024-2025 General Rate Application which included cost efficiencies implemented in prior periods that are being passed on to customers.

Adjusted earnings in the third quarter of 2024 were lower compared to the same period in 2023 mainly due to higher interest expense resulting from short term borrowings, and tax adjustments recorded by Electricity Distribution over the final two quarters of 2023, partially offset by growth in rate base and an increase in ROE.

Adjusted earnings in the fourth quarter of 2024 were higher compared to the same period in 2023 mainly due to growth in rate base and an increase in ROE. Higher earnings were partially offset by higher interest expense resulting from short term borrowings and tax adjustments recorded by Electricity Distribution over the final two quarters of 2023.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS 18

EARNINGS FOR THE PERIOD

Earnings for the period include timing adjustments related to rate-regulated activities. They also include one-time gains and losses, impairments, dividends on equity preferred shares, 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 first quarter of 2023, the Company recognized legal and other costs of $2 million (after-tax) related to the early termination of the Wipro Master Services Agreement (MSA) for managed IT services. This matter was concluded on February 26, 2023.
In the second quarter of 2023, the Company recognized an impairment of $8 million (after-tax) relating to certain electricity generation assets in Electricity Transmission. These assets had been removed from service as it was determined that they no longer had any remaining value.
In the fourth quarter of 2023, the Company recognized an impairment of $34 million (after-tax) mainly related to certain computer software assets which are not expected to be used in the Company.
In the second and fourth quarters of 2024, the Company recorded restructuring costs of $32 million (after-tax) and $5 million (after-tax), respectively, mainly related to staff reductions and associated severance costs.
In the second quarter of 2024, the Company recorded an $8 million (after-tax) reduction to earnings related to an AUC enforcement decision on two historical matters the Electric Transmission business had self-reported to AUC Enforcement staff.

BUSINESS RISKS AND RISK MANAGEMENT

The Board is responsible for understanding the principal risks of the businesses in which the Company is engaged. The Board strives for a prudent balance between risks incurred and the potential return to the share owner and confirms appropriate controls are in place that effectively monitor and manage those risks for the Company's long-term viability.

The Board has an Audit Committee, which reviews significant risks associated with future performance and growth. This committee is responsible for confirming that management has procedures in place to appropriately manage identified risks.

We have an established enterprise risk management process that allows us to identify and evaluate our risks by both severity of impact and probability of occurrence. Materiality thresholds are reviewed annually by the Audit Committee. Non-financial risks that may have an impact on the safety of our employees, customers or the general public and reputation risks are also evaluated. Details regarding business risks, both financial and operational, and our risk management approach are discussed below.

FINANCIAL RISKS

Project Execution / Capital Investment

DESCRIPTION AND CONTEXT

The Company's growth strategy includes multiple growth projects, which could strain the Company's ability to deliver projects on time and on budget. This could lead to financial impacts and missed opportunities. Poorly managed projects could result in project deliverables not being achieved or delivered as expected, which could lead to a loss of market confidence and future opportunities.

The Company is subject to normal risks associated with major capital projects, including cancellations, delays, and cost increases. As it relates to the Company's energy transition investments, the Company faces additional risks, including policy uncertainty, the pace of energy transition, commodity and environmental attribute price risk, and climate-related risks.

RISK MANAGEMENT APPROACH

The Company strives to reduce the risks of project delays and cost increases through careful project feasibility, development and management processes, reliable procurement practices and entering into fixed price contracts when possible.

Planned capital investments for the Alberta Utilities are based on a number of significant assumptions, including: projects identified by the AESO will proceed as currently scheduled; the remaining planned capital investments are required to maintain safe and reliable service and meet planned growth in the Alberta Utilities' service areas; regulatory approval for capital projects can be obtained in a timely manner; and access to capital market financings can be maintained.

The Company reduces risks associated with policy uncertainty, the pace of energy transition, commodity and environmental attribute price risk, and climate-related risks by leveraging our competitive advantages and assigning clear accountability and leadership for executing and realizing capital investment. The Company believes these assumptions are reasonable.

Financing

DESCRIPTION AND CONTEXT

The Company's financing risk relates to price volatility and availability of external financing to fund the Company's capital expenditure program and refinance existing debt maturities. Financing risk is directly influenced by market factors. As financial market conditions change, these risk factors can affect the availability of capital and the relevant financing costs.

RISK MANAGEMENT APPROACH

To address this risk, the Company manages its capital structure to maintain strong investment grade credit ratings that allow continued ease of access to the capital markets. The Company also considers it prudent to maintain sufficient liquidity to fund approximately one full year of cash requirements to preserve strong financial flexibility. This liquidity is generated by cash flows from operations and supported by appropriate levels of cash and available committed credit facilities and provides flexibility in the timing of and amount of external financing.

Liquidity

DESCRIPTION AND CONTEXT

Liquidity risk is the risk that the Company will not be able to meet its financial obligations.

RISK MANAGEMENT APPROACH

Cash flows from operations satisfy a substantial portion of the Company's cash requirements. Additional cash requirements are met with the use of existing cash balances and externally through credit facility borrowings and the issuance of long-term debt, and preferred shares, and may be satisfied through the issuance of common equity. Commercial paper borrowings and short-term bank loans under available credit lines are used to provide flexibility in the timing and amounts of long-term financing. At December 31, 2024, there were available committed and uncommitted lines of credit of approximately $953 million, which can be utilized for general corporate purposes.

Liquidity risk includes contractual financial obligations, which the Company plans to meet with cash flows from operations, existing cash balances and external financing, if necessary. See the "Liquidity and Capital Resources" section of this MD&A for the Company's contractual financial obligations for the next five years and thereafter.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS 20

Credit

DESCRIPTION AND CONTEXT

For cash and cash equivalents and accounts receivable and contract assets, credit risk represents the carrying amount on the consolidated balance sheet. Derivative and finance lease receivable credit risk arises from the possibility that a counterparty to a contract fails to perform according to the terms and conditions of that contract. The maximum exposure to credit risk is the carrying value of loans and receivables and derivative financial instruments.

RISK MANAGEMENT APPROACH

The Company reduces cash and cash equivalents credit risk by investing in instruments issued by credit-worthy financial institutions and in federal government-issued short-term instruments.

The Company minimizes other credit risks by dealing with credit-worthy counterparties, following established credit approval policies, and requiring credit security, such as letters of credit.

The Alberta Utilities are able to recover an estimate for doubtful accounts through approved customer rates and to request recovery through customer rates for any material losses from the retailers beyond the retailer security mandated by provincial regulations.

Foreign Exchange

DESCRIPTION AND CONTEXT

The Company is exposed to transactional foreign exchange risk through transactions denominated in a foreign currency.

RISK MANAGEMENT APPROACH

In conducting its business, the Company may use forward contracts to manage the risks arising from known fluctuations in exchange rates. Such instruments are used only to manage risk and not for trading purposes. The foreign exchange impact is partially offset by hedging activities.

Inflation Risk

DESCRIPTION AND CONTEXT

Inflation has the potential to impact the economies and business environments in which the Company operates. Increased inflation and any economic conditions resulting from governmental monetary policy intended to reduce inflation may negatively impact demand for products and services and/or adversely affect profitability.

RISK MANAGEMENT APPROACH

The Company monitors the impacts of inflation on the procurement of goods and services and seeks to minimize its effects in future periods through pricing strategies, productivity improvements, and cost reductions. The majority of the impact on costs resulting from inflation is mitigated through the regulatory construct, long-term contractual terms, and pricing of short-term contractual sales. The Company maintains strong investment grade ratings, which helps mitigate the risk of higher interest costs, and the vast majority of the Company's outstanding debt carries fixed rate interest, which helps to alleviate the impact of increasing short-term interest rates.

OPERATIONAL RISKS

Health and Safety

DESCRIPTION AND CONTEXT

The operation of the Company's businesses inherently involves risk to the health and safety of both employees and the public. Such hazards include but are not limited to: the uncontrolled release of substances from our natural gas transmission and distribution systems resulting in blowouts, fires, explosions, or gaseous leaks; and exposure to an unintended release of electrical energy from our transmission and distribution wires system, including contact with an energized circuit, electrical component, or equipment.

The failure to identify or inadequately identify worksite and/or work environment hazards or implement adequate controls may cause loss of life or personal injury.

RISK MANAGEMENT APPROACH

Safety is one of the Company's core values and is the first consideration in everything we do. The Company has controls in place to mitigate these risks through pipeline and facility integrity programs, inspection programs, operator training, emergency response full mobilization and tabletop exercises, mutual aid agreements (with others in industry and municipalities), external awareness and education training through its damage prevention department.

The Company has a number of safety programs, specialized training, detailed work methods and processes to ensure the safety of our employees and contractors as they perform their work duties to help mitigate these risks. From a public safety perspective, the Company participates in a number of public communication campaigns and joint utility working groups and various other public safety activities and campaigns at the regional level.

Cybersecurity

DESCRIPTION AND CONTEXT

The Company's reliance on technology, which supports its information and industrial control systems, is subject to potential cyber-attacks, which may include but are not limited to: unauthorized access of confidential information, outage of critical infrastructure and/or ransomware attacks.

RISK MANAGEMENT APPROACH

The Company has an enterprise-wide cybersecurity program covering all technology assets. The cybersecurity program includes employee awareness, layered access controls, continuous monitoring, network threat detection, and coordinated incident response through a centralized security operations centre. The Company's cybersecurity management is consolidated under a common, centralized organization structure to increase effectiveness and compliance across the entire enterprise.

Regulatory

DESCRIPTION AND CONTEXT

The Regulated Utilities are subject to risks associated with the regulator's approval of customer rates that permit a reasonable opportunity to recover service costs on a timely basis, including a fair return on rate base. The Regulated Utilities are also subject to the potential risk of the regulator disallowing costs incurred. Electricity Distribution and Natural Gas Distribution operate under PBR. Under PBR, revenues are formula driven, which raises the uncertainty of cost recovery.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

RISK MANAGEMENT APPROACH

Electricity Transmission and Natural Gas Transmission file forecasts in the rate-setting process to recover the costs of providing services and earn a fair rate of return. The determination of a fair rate of return on the common equity component of rate base is determined in a GCOC proceeding in Alberta. The Regulated Utilities continuously monitor various regulatory decisions and cases to assess how they might impact the Company's regulatory applications for the recovery of costs. The Regulated Utilities are proactive in demonstrating prudence and continuously look for ways to lower operating costs while maintaining service levels.

Climate Change - Transition Risk

Climate-related risks and opportunities are integrated into our risk management processes and are identified, assessed and managed in the same manner as other risks. In some cases, there could be an overlap between the climate-related risks noted below, and business risks noted elsewhere in this document. However, we understand that specifically disclosing climate-related information guided by the ISSB recommendations is useful for the investment community.

POLICY RISKS

Description and Context

The Company has operations in jurisdictions that are subject to emissions regulations, including carbon pricing, output-based performance standards, and other emissions management policies.

The potential of aggressive shifts in government decarbonization policies with limited transitional periods could create risk as well as concerns over the energy transition being completed in an effective, reliable and affordable manner. Future reliability of energy systems has also become a concern for system regulators and operators.

Part of the Company's growth strategy is taking a leadership role in the energy transition and associated projects. A lack of clarity on proposed regulations and funding creates revenue uncertainty for these projects.

Risk Management Approach

The Company's exposure to climate-related policy risk is mitigated to some extent for the Regulated Utilities because GHG emission charges are generally recovered in rates. In addition, future requirements, such as upgrading equipment to further reduce methane emissions in the natural gas utilities, are expected to be included in rate base on a go-forward basis.

The Company is actively and constructively working with all levels of government to raise awareness of the impacts and costs of proposed policy changes and the pace of energy transition. Where appropriate, the Company is also working with its peers and industry associations to develop common positions and strategies.

The Company is investing in climate change resilient initiatives and is working with different levels of government, communities, and Indigenous partners to advance the opportunities, policy needs, market access, and funding requirements for projects that help support society's energy transition goals while maintaining essential infrastructure and services.

MARKET RISKS

Description and Context

The Company has operations which generate carbon offsets, emission performance credits, and renewable energy certificates through projects that have voluntarily reduced or avoided GHG emissions. Additionally, the Company participates in various compliance and voluntary carbon markets. Changes in carbon pricing and policies, fluctuations in commodity pricing, and uncertainties in carbon markets could negatively impact revenue streams and operational costs.

Risk Management Approach

The Company is mitigating exposure to market risk by actively participating in policy consultations with governments and engaging with peer market participants on an ongoing basis to raise awareness of the impacts and costs from policy changes.

The Company has taken steps to reduce exposure to this risk through commercial contracting efforts and developing strategies to manage and optimize our carbon credit portfolio.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

23 CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

TECHNOLOGY RISKS

Description and Context

The pace of the energy transition is dependent on innovation and technological advancements, which introduces both risk and opportunity for the Company and its customers. Replacement of current products or services with lower-emitting options could increase the risk of stranded assets. In addition, changing customer behaviours and an increase in the prosumer movement will change energy load profiles in the future.

A transition to lower emitting energy systems provides opportunities to utilize expertise in generation, integration and delivery of new energy sources such as hydrogen, supporting electric vehicle networks, and transmission and distribution infrastructure to ensure energy network reliability and security, however, there is a risk that the development of technology does not materialize as expected, negatively impacting the ability to achieve GHG reduction targets, or that political or public opinion regarding such technologies may continue to change.

Risk Management Approach

The Company continues to invest in innovation and technology, providing or enabling a suite of lower-emitting technology solutions so our customers can choose the right solutions for their unique situations.

REPUTATIONAL RISKS

Description and Context

Changing public and stakeholder perception of climate-related risk, as it relates to the energy industry in particular, could negatively impact the Company's businesses and its reputation.

Risk Management Approach

The Company undertakes authentic engagement and collaboration with municipalities and customers to better understand their needs for the future, and to guide the development of strategic partnerships and common advocacy efforts where possible. The Company also provides transparent reporting on sustainability activities, including with respect to emissions reduction efforts and initiatives.

Climate Change - Physical Risks

DESCRIPTION AND CONTEXT

Physical risks associated with climate change include those arising from an increase in extreme weather events such as floods, wildfires, extreme winds, and ice storms. While most assets within the Company's businesses are exposed to extreme weather events, the potential impact to our above ground linear infrastructure has been identified as being the most material climate-related physical risk to the Company.

As seen recently in Alberta with the significant wildfire activity of the last two years, these events are becoming more common and place increased risk on our communities and assets.

In addition to these acute physical risks, reoccurring physical risks include those arising from longer-term shifts in weather patterns such as changes in seasonal temperatures or precipitation levels.

RISK MANAGEMENT APPROACH

The Company continues to carefully manage physical risks, including preparing for, and responding to, extreme weather events through activities such as proactive route and site selection, asset hardening, regular maintenance, and insurance. The Company follows regulated engineering codes, continues to evaluate ways to create greater system reliability and resiliency and, where appropriate, submits regulatory applications for capital expenditures aimed at creating greater system reliability and resiliency. The Company invests in wildfire mitigations for its linear infrastructure and obtains approval of its costs from the Alberta Utilities Commission. The Company also benefits from agreements to limit exposure to wildfire suppression costs as well as liability and damages protections contained within legislation in Alberta. Risk to linear infrastructure is typically not insured and, as such, any restoration costs are generally recovered through regulatory processes subject to prudency review.

Prevention activities include vegetation management for electricity transmission and distribution operations, as well as burying power lines in select areas. The majority of the Company's natural gas pipeline network is in the ground, making it less susceptible to extreme weather events.

The Company maintains in-depth emergency response measures for extreme weather events, including robust Wildfire Management Plans. When planning for capital investment or acquiring assets, site specific climate and weather factors, such as flood plain mapping and extreme weather history, are considered.

Pipeline Integrity

DESCRIPTION AND CONTEXT

Natural Gas Transmission and Natural Gas Distribution have significant pipeline infrastructure. Although the probability of a pipeline failure is very low, the consequences of a failure could be severe.

RISK MANAGEMENT APPROACH

Programs are in place to monitor the integrity of the pipeline infrastructure and replace pipelines or pipeline infrastructure as required to address safety, reliability, and future growth. These programs include Natural Gas Transmission's integrity programs, and Natural Gas Distribution's Mains Replacement programs. The Company also carries property and liability insurance. The Company actively engages in damage prevention initiatives including proactive direct engagement with the building and excavation communities. The Company also promotes ground disturbance and excavation safety to homeowners and the excavation community.

Political

DESCRIPTION AND CONTEXT

The Company's operations are exposed to a risk of change in the business environments in which we operate due to political and legislative changes. Legislative or policy changes may impact the financial performance of operations. This could negatively impact earnings, ROE and assets, and credit metrics.

RISK MANAGEMENT APPROACH

Participation in policy consultations with governments and engagement of stakeholder groups ensure ongoing communication and that the impacts and costs from changes and proposed policies are identified and understood. Where appropriate, the Company works with its peers and industry associations to develop common positions and strategies. Geographic diversification of assets by region and by country reduces the impact of political and legislative changes.

US Tariffs and Canadian Retaliatory Measures

DESCRIPTION AND CONTEXT

Recent changes in trade policies between Canada and the US, including the implementation of tariffs or other trade restrictions could have an adverse effect on our business, financial condition and results of operations. As new tariffs are introduced, our costs could increase, project timelines could be affected, and profitability could be negatively impacted. Additionally, the Canadian government may implement retaliatory tariffs or other countermeasures in response to US trade actions. Certain goods used by the Company in its operations are procured from the US. Any retaliatory measures imposed by the Canadian government could disrupt supply chains, increase procurement costs, or create regulatory uncertainty affecting market access. Any escalation in trade disputes between Canada and the US may also affect investor confidence and capital markets, potentially influencing our cost of capital and ability to secure funding for future investments.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

RISK MANAGEMENT APPROACH

We continue to monitor trade developments and may take appropriate measures to mitigate risks, however, the details and timing of the implementation of any US tariffs or Canadian retaliatory measures remain subject to significant uncertainty at this time, and as such, we cannot predict the scope, duration, or impact of potential tariffs and trade restrictions on our business.

Reputation

DESCRIPTION AND CONTEXT

The Company’s operations and growth prospects require strong relationships with key stakeholders, including regulators, governments and agencies, Indigenous communities, landowners, and environmental organizations. Inadequately managing expectations and issues important to stakeholders, including those arising during construction of major capital projects and operation of critical energy infrastructure, could affect the Company’s reputation as well as have a significant impact on its operations and infrastructure development.

There is risk of non-compliance with the Company’s internal policies, including its Code of Ethics, or anti-bribery and anti-corruption laws by the Company’s employees, affiliates, independent contractors and/or agents, which may potentially lead to reputational damage, in addition to fines, penalties, or litigation.

Any accusation of poor operational, leadership, or governance actions and/or practices that may be levelled against the Company could create reputational risk for the Company, even with respect to issues or events that are largely outside of our control, including but not limited to: protests, activist activity, sabotage, terrorism, failure of supply, weather, catastrophic events and natural disasters, fires, floods, explosions, earthquakes and other similar events, government policy, economic and/or social circumstances, and/or actions of third parties, which may affect safety or quality of life of citizens.

Rising costs and uncertainty regarding the changing landscape of energy due to the ongoing energy transition, can contribute to customer dissatisfaction, frustration or confusion, leading to potential reputational and/or financial impacts on the Company.

RISK MANAGEMENT APPROACH

To address these risks, the Company has robust frameworks, practices, and training programs for employees in place with respect to operations and maintenance, safety, whistleblower complaints, governance, and community engagement. The Company will continue to ensure a rapid and effective operational response is in place when responding to fires, line strikes, extreme weather events or similar events that may affect our services. The Company prepares communication plans and key messages for customers and media as rate changes are approved by the regulator and ready to be applied to the customers’ bills. These plans address the specific reasons and drivers for changes in rates.

The Company’s Marketing & Communications team is engaged at the outset on all customer-facing initiatives and issues ensuring information is accurate, clear and concise to minimize negative perception by customers. The Company also allocates resources and personnel to support public consultation around capital work, educational safety campaigns and business development efforts.

The Company has a strong focus on community investment and communications efforts ensuring the Company’s commitment to being a positive contributor to our community is demonstrable to the public and our customers.

Other Operational Risks

DESCRIPTION AND CONTEXT

The Company’s operations are subject to the risks normally associated with the operating and development of power systems and facilities, and the storage and transportation of natural gas. These can include, without limitation; mechanical failure, transportation problems, physical degradation, operator error, manufacturer defects, constraints on natural resource development, delay of or restrictions on projects due to climate change policies and initiatives, protests, activist activity, sabotage, terrorism, failure of supply, weather, catastrophic events and natural disasters, fires, floods, explosions, earthquakes, and other similar events. These types of events could result in injuries to personnel, third parties, including the public, damage to property and the environment, as well as unplanned outages or prolonged downtime for maintenance and

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

repair. Among other things, these events can increase operational and maintenance expenses and reduce revenues. The occurrence or continuation of any of these events could result in significant losses for which insurance may not be sufficient or available. Environmental damage could also result in increased costs to operate and insure the Company's assets and have a negative impact on the Company's reputation and its ability to work collaboratively with stakeholders.

RISK MANAGEMENT APPROACH

To mitigate these risks, the Company has policies and an associated system of standards, processes and procedures to identify, assess and mitigate safety, operational and environmental risks across our operations. In addition, the Company maintains a comprehensive insurance program with respect to our assets and operations. The occurrence of an event that is not fully covered by our insurance program could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Third Party Risk

DESCRIPTION AND CONTEXT

Certain of the Company's assets are jointly owned and are governed by partnership, joint venture, or shareholder agreements entered into with third parties. As a result, certain decisions relating to these assets require the approval of a simple or special majority of the partners or owners, while others require unanimous approval of the owners. In addition, certain of these assets are constructed, maintained, and operated by unrelated third-party entities. The success of these assets is, to some extent, dependent on the effectiveness of the business relationship and decision-making among the Company and the other partner(s) or owner(s) and the expertise and ability of any third-party constructors, material suppliers, consultants and operators to operate and maintain the assets. There can be no assurance that the Company will not encounter disputes with partners or owners or that assets operated by third parties may not perform as expected. Such events could impact operations or cash flows of these assets or cause them to not operate as the Company expects, which could, in turn, have a negative impact on the Company's business operations and financial performance.

RISK MANAGEMENT APPROACH

The Company believes that it has prudent governance and other contractual rights in place, along with robust third-party selection due diligence to help mitigate third party risk, reduce the likelihood of disputes and ensure assets operated by third parties perform as expected.

Technological Transformation and Disruption

DESCRIPTION AND CONTEXT

The introduction and rapid, widespread adoption of transformative technology could lead to disruption of the Company's existing business models and introduce new competitive market dynamics. Failure to effectively identify and manage disruptive technology and/or changing consumer attitudes and preferences may result in disruptions to the business and an inability to achieve strategic and financial objectives.

RISK MANAGEMENT APPROACH

The strategic plans of each business unit incorporate transformative technology into the evolution of their business and ensure that the best available technology is deployed to support current state operational efficiency and reliability. The business seeks opportunities to minimize costs by monitoring trends occurring in other jurisdictions that may be ahead of the technological curve.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

Indigenous Land Claims and Consultation

DESCRIPTION AND CONTEXT

Indigenous peoples assert and claim, or have established, Aboriginal and/or Treaty rights and/or Aboriginal title in relation to a substantial portion of the lands and waters in Canada, where the Company operates.

There is a risk of project delays and relationship challenges caused by changes to consultation and engagement policies and expectations and formal challenges at the community, provincial and federal levels. In addition, the United Nations Declaration on the Rights of Indigenous Peoples Act (the UNDRIP Act) is in place and being implemented within Canada. The UNDRIP Act provides a roadmap for the Government of Canada and Indigenous peoples to work together to implement the United Nations Declaration on the Right of Indigenous Peoples based on lasting reconciliation, healing, and cooperative relations.

The ongoing implementation of the UNDRIP Act and the associated Action Plan, released on June 21, 2023, is intended to provide direction to the Government of Canada's continued efforts to break down barriers, combat systemic racism and discrimination, close socio-economic gaps, and promote greater equality and prosperity for Indigenous peoples. The impact of the UNDRIP Act and the Action Plan and how they will be implemented and interpreted as part of Canadian law is still in the process of being defined, often via the court, and therefore the Company is currently not fully able to assess the effect that any land claims, cumulative impact claims, consultation requirements with Indigenous peoples, or the UNDRIP Act and the Action Plan may have on the Company's business. However, the potential impact could have a material adverse effect on the Company's operations.

ATCO, CU Inc.'s ultimate parent company, has a long history of successful partnerships with Indigenous communities with over 40 current partnerships, however, ongoing efforts need to be undertaken to truly engage and include Indigenous communities into the economy. Indigenous communities throughout the areas of Canada and internationally where the Company operates have indicated their desire for this inclusion and participation in the economy with a focus being shown towards energy infrastructure ownership.

RISK MANAGEMENT APPROACH

It is evident to the Company that the desire for Indigenous energy autonomy and ownership is increasing, so it is imperative that the Company continues to evaluate options, educates key parties on the regulatory, financial and operational risks, and determines our stance and goals for these engagements. The Company views a proactive approach as our best strategy to continue to be leaders in the Indigenous equity space.

Workforce Retention

DESCRIPTION AND CONTEXT

Should the Company face a low level of retention in its workforce, especially within critical roles, this could result in a shortage of personnel that may hamper Company operations and negatively impact the ability of the Company to meet its business objectives.

RISK MANAGEMENT APPROACH

The Company's investment in our people provides an attractive environment that fosters retention. The Company continuously reviews and enhances its people resourcing and management strategy. This includes enhancing ATCO branding and highlighting our Company values, building strong partnerships with educational institutions to attract new graduates and co-operative education students, aligning total rewards, including compensation, benefits, pension and employee share purchase programs, with market practice, and delivering orientation and onboarding for cultural and strategy awareness. We promote and support the development of our people, complete succession and development planning annually with a significant focus on critical roles and skills, and provide leadership training for leaders and individual development programs for all employees. The annual performance management program facilitates discussions on annual goals, development plans and career planning.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

To promote a culture of inclusiveness we have an established and active Diversity, Equity and Inclusion (DE&I) Council and a Well-being@ATCO program, and we continue to build an environment where people feel safe (physically and psychologically), have equal opportunity, and feel included. To understand more deeply the risks to retention, exit interviews are conducted and employee engagement surveys are conducted. Results are reviewed to inform areas of risk and engagement action plans are developed by leaders to address risks. As a result, the Company's retention rates continue to be at or higher than global benchmarks in a majority of the industries in which we operate.

Labour Relations

DESCRIPTION AND CONTEXT

Most of the Company's business units employ members of associations or labour unions under collective bargaining agreements. Should any developments result in a strained relationship with any of our associations and/or labour unions and/or work interruptions involving the Company's workforce, this could create risk for our businesses, which may result in increased grievances, arbitrations, and/or collective bargaining, which may impede our ability to make progress on our business agenda.

RISK MANAGEMENT APPROACH

The Company has dedicated labour relations resources which focus on resolving issues, grievances and arbitrations. The Company ensures all Human Resources Business Partners and business leaders who manage large in-scope employee populations attend labour relations training to provide practical day-to-day knowledge of our collective agreements and to develop capability in the areas of performance management and investigations. The Company is committed to early and open dialogue with our associations and labour unions regarding business changes and employee impacts in order to maintain a mutually beneficial relationship. Two of our larger associations, Canadian Energy Workers Association (CEWA) and Natural Gas Employees' Association (NGEA), have collective bargaining agreements that do not provide bargaining unit employees with the right to strike and that prohibit lock-outs by management.

Litigation and Claims

DESCRIPTION AND CONTEXT

In the ordinary course of business, the Company or entities in which it has an interest may be subject to demands, disputes, proceedings, arbitrations and/or litigation (Claims) arising out of or related to our operations and other contractual relationships, and any such Claims may be material. Due to the nature of our operations, various types of Claims may be raised, including, but not limited to, failure to comply with applicable laws and regulations including health and safety, environmental damage, climate change and the impacts thereof, breach of contract, negligence, product liability, antitrust, bribery and other forms of corruption, tax, disclosure, securities class actions, derivative actions, patent infringement, privacy, employment matters or labour relations, personal injury, and in relation to a cyber attack, breach or unauthorized access to the Company's information technology and infrastructure. Litigation is subject to uncertainty, and it is possible that Claims could result in unfavourable judgments, decisions, fines, sanctions, monetary damages, temporary or permanent suspensions of operations, or the inability to engage in certain transactions. In addition, unfavourable outcomes or settlements of Claims could encourage further Claims. The Company may also be subject to adverse publicity and reputational impacts associated with such matters, regardless of whether the Company is ultimately found liable. There is a risk that the outcome of any such Claims may be materially adverse to the Company and/or that the Company may be required to incur significant expenses or devote significant resources in defence of such Claims, the success of which cannot be guaranteed.

RISK MANAGEMENT APPROACH

The Company reviews all Claims it receives, including the nature of each Claim, the amount in dispute or claimed and the availability of insurance coverage, and allocates internal or external resources in defence of such Claims, as it deems appropriate.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

Pandemic Risk

DESCRIPTION AND CONTEXT

An outbreak of infectious disease, a pandemic or a similar public health threat, such as the COVID-19 pandemic, or a fear of any of the foregoing, could adversely impact the Company by causing operating, supply chain and project development delays and/or disruptions, inflation risk, labour shortages and/or shutdowns as a result of government regulation and prevention measures. These impacts could increase strain on employees and compromise levels of customer service, either of which could have a negative impact on the Company's operations.

Any deterioration in general economic and market conditions resulting from a public health threat could negatively affect demand for electricity and natural gas, revenue, operating costs, timing and extent of capital expenditures, results of financing efforts, or credit risk and counterparty risk, any of which could have a negative impact on the Company's business.

RISK MANAGEMENT APPROACH

The Company's investments in essential services are largely focused on our Regulated Utilities and long-term contracted businesses with strong counterparties, creating a resilient investment portfolio. CU Inc. has a comprehensive pandemic plan that is activated when a pandemic is declared. The plan includes travel restrictions, limited access to facilities, a direction to work from home whenever possible, physical distancing measures and other protocols (including the use of personal protective equipment while at a work premise). Additionally, the Company follows recommendations by local, provincial and national public health authorities in Canada to adjust operational requirements as needed to ensure a coordinated approach across the Company.

OTHER FINANCIAL AND NON-GAAP MEASURES

This MD&A should be read with the Company's 2024 Consolidated Financial Statements. The 2024 Consolidated Financial Statements are prepared according to IFRS as issued by the International Accounting Standards Board (IFRS Accounting Standards).

This MD&A contains various "total of segments measures" (as such term is defined in NI 52-112), "non-GAAP financial measures" (as such term is defined in NI 52-112), and "non-GAAP ratios" (as such term is defined in NI 52-112), which are described in further detail below.

Total of Segments Measure

NI 52-112 defines a "total of segments measure" as a financial measure disclosed by an issuer that is a subtotal or total of two or more reportable segments of an entity, is not a component of a line item disclosed in the primary financial statements of the entity, is disclosed in the notes to the financial statements of the entity, and is not disclosed in the primary financial statements of the entity.

Consolidated adjusted earnings (loss) is a total of segments measure, as defined in NI 52-112.

The consolidated adjusted earnings (loss) total of segments measure is most directly comparable to total earnings for the period. A comparable total of segments measure for the same period in 2023 has been calculated using the same composition and is disclosed alongside the current total of segments measure in this MD&A. A reconciliation of the total of segments measure with total earnings (loss) for the period is presented in this MD&A.

Non-GAAP Financial Measures

NI 52-112 defines a "non-GAAP financial measure" as a financial measure disclosed by an issuer that (a) depicts the historical or expected future financial performance, financial position or cash flows of an entity, (b) with respect to its composition, excludes an amount that is included in, or includes an amount that is excluded from, the composition of the most directly

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

comparable financial measure disclosed in the primary financial statements of the entity, (c) is not disclosed in the financial statements of the entity, and (d) is not a ratio, fraction, percentage or similar representation.

Adjusted earnings (loss) and mid-year rate base for each of Electricity Distribution, Electricity Transmission, Total Electricity, Natural Gas Distribution, Natural Gas Transmission, and Total Natural Gas are non-GAAP financial measures, as defined in NI 52-112.

Adjusted earnings (loss) are defined as earnings (loss) for the period after adjusting for the timing of revenues and expenses associated with rate-regulated activities and dividends on equity preferred shares of the Company. Adjusted earnings (loss) also exclude one-time gains and losses, impairments, and items that are not in the normal course of business or a result of day-to-day operations.

Adjusted earnings (loss) present earnings from rate-regulated activities on the same basis as was used prior to adopting IFRS Accounting Standards - that basis being the US accounting principles for rate-regulated activities. Management's view is that adjusted earnings (loss) allow for a more effective analysis of operating performance and trends. A reconciliation of adjusted earnings (loss) to earnings (loss) for the period is presented in this MD&A. Adjusted earnings (loss) are presented in Note 3 of the 2024 Consolidated Financial Statements.

Adjusted earnings (loss) are most directly comparable to earnings (loss) for the period but is not a standardized financial measure under the reporting framework used to prepare our financial statements. Adjusted earnings (loss) may not be comparable to similar financial measures disclosed by other issuers. For investors, adjusted earnings (loss) may provide value as they exclude items that are not in the normal course of business and, as such, provide insight as to earnings resulting from the issuer's usual course of business. A reconciliation of adjusted earnings (loss) to earnings (loss) for the period of the Company is presented in this MD&A.

Mid-year rate base is a non-GAAP financial measure. Mid-year rate base for a given year is calculated as the average of the opening rate base and the closing rate base. Growth in mid-year rate base is a leading indicator of a utility's earnings trend, depending on changes in the equity ratio of the mid-year rate base and the rate of return on common equity. Mid-year rate base is not a standardized financial measure under the reporting framework used to prepare our financial statements and may not be comparable to similar financial measures disclosed by other issuers. Management views mid-year rate base as a key metric for determining the Company's profitability. The most directly comparable measures to mid-year rate base reported in accordance with IFRS are property, plant and equipment and intangible assets. A reconciliation of mid-year rate base to property, plant and equipment and intangible assets is presented in this MD&A.

Non-GAAP Ratio

NI 52-112 defines a "non-GAAP ratio" as a financial measure disclosed by an issuer that (a) is in the form of a ratio, fraction, percentage or similar representation, (b) has a non-GAAP financial measure as one or more of its components, and (c) is not disclosed in the financial statements of the entity. Mid-year rate base CAGR is a non-GAAP ratio, as defined in NI 52-112.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

RECONCILIATION OF ADJUSTED EARNINGS TO EARNINGS FOR THE PERIOD

Adjusted earnings are earnings for the period after adjusting for the timing of revenues and expenses associated with rate-regulated activities and dividends on equity preferred shares of the Company. Adjusted earnings also exclude one-time gains and losses, 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 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 than IFRS earnings. Additional information regarding this measure is provided in the "Other Financial and Non-GAAP Measures" section of this MD&A.

($ millions) Three Months Ended December 31
2024	Electricity	Natural Gas	Corporate & Other	Intersegment Eliminations	Consolidated
2023
Revenues	354	469	—	(1)	822
	371	416	—	(4)	783
Adjusted earnings (loss)	93	97	(5)	—	185
	83	84	—	—	167
Restructuring	(3)	(2)	—	—	(5)
	—	—	—	—	—
Rate-regulated activities	(40)	(1)	—	—	(41)
	(12)	(13)	—	—	(25)
IT Common Matters decision	(3)	(3)	—	—	(6)
	(2)	(3)	—	—	(5)
Impairments	—	—	—	—	—
	(12)	(22)	—	—	(34)
Dividends on equity preferred shares of the Company	1	1	—	—	2
	1	1	—	—	2
Earnings (loss) for the period	48	92	(5)	—	135
	58	47	—	—	105

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

($ millions)
Year Ended December 31

2024	Electricity	Natural Gas	Corporate & Other	Intersegment Eliminations	Consolidated
2023
Revenues	1,395	1,655	—	(7)	3,043
	1,397	1,542	—	(8)	2,931
Adjusted earnings (loss)	340	237	(20)	—	557
	312	211	(1)	—	522
Restructuring	(16)	(21)	—	—	(37)
	—	—	—	—	—
ATCO Electric settlement decision	(8)	—	—	—	(8)
	—	—	—	—	—
Rate-regulated activities	(76)	26	—	—	(50)
	(45)	7	—	—	(38)
IT Common Matters decision	(12)	(10)	—	—	(22)
	(11)	(9)	—	—	(20)
Impairments	—	—	—	—	—
	(20)	(22)	—	—	(42)
Transition of managed IT services	—	—	—	—	—
	(1)	(1)	—	—	(2)
Dividends on equity preferred shares of the Company	4	3	—	—	7
	4	3	—	—	7
Earnings (loss) for the period	232	235	(20)	—	447
	239	189	(1)	—	427

RESTRUCTURING

The Company recorded restructuring costs of $32 million (after-tax) in the second quarter of 2024 and $5 million (after-tax) in the fourth quarter of 2024. These costs are mainly related to staff reductions and associated severance costs. As these costs are not in the normal course of business, they have been excluded from adjusted earnings.

ATCO ELECTRIC SETTLEMENT DECISION

On June 24, 2024, AUC Enforcement and ATCO Electric filed a joint submission seeking the AUC's approval of a settlement agreement involving two matters ATCO Electric had previously self-reported to AUC Enforcement staff. These historical items related to disclosure requirements for two independent matters included in applications filed in 2015 and 2019, for projects constructed between 2012 and 2015. They were identified following an extensive internal investigation supported by independent third parties.

The settlement agreement includes an administrative penalty of $3 million, and a refund to customers through a billing adjustment to the AESO of $4 million. On September 25, 2024, the AUC approved the settlement agreement as filed.

For the year ended December 31, 2024, the Company recognized costs of $8 million (after-tax) related to ATCO Electric's settlement agreement. These costs were comprised of the administrative penalty, refund to customers and legal and other costs related to the settlement agreement. As these costs are not in the normal course of business, they were excluded from adjusted earnings.

RATE-REGULATED ACTIVITIES

ATCO Electric Transmission, ATCO Electric Distribution, ATCO Electric Yukon, Northland Utilities (NWT) (operating as Naka Power Utilities (NWT)), Northland Utilities (Yellowknife) (operating as Naka Power Utilities (Yellowknife)), ATCO Gas and ATCO Pipelines are collectively referred to as the Regulated Utilities.

There is currently no specific guidance under IFRS Accounting Standards 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

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

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.

The Company uses standards issued by the Financial Accounting Standards Board (FASB) in the US as another source of generally accepted accounting principles to account for rate-regulated activities in its internal reporting provided to the Chief Operating Decision Maker (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 Accounting Standards in the following ways:

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

For the fourth quarter and full year of 2024 and 2023, the significant timing adjustments as a result of the differences between rate-regulated accounting and IFRS Accounting Standards are as follows:

($ millions)	Three Months Ended December 31			Year Ended December 31
	2024	2023	Change	2024	2023	Change
Additional revenues billed in current year
Future removal and site restoration costs (1)	29	28	1	123	118	5
Revenues to be billed in future periods
Deferred income taxes (2)	(50)	(39)	(11)	(143)	(149)	6
Impact of warmer temperatures (3)	(8)	(23)	15	(9)	(33)	24
Settlement of regulatory decisions and other items
Distribution rate relief (4)	—	5	(5)	—	18	(18)
Other (5)	(12)	4	(16)	(21)	8	(29)
	(41)	(25)	(16)	(50)	(38)	(12)

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

33 CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

(3) 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 normal temperatures in the current period are refunded to or recovered from customers in future periods.

(4) In 2021, in response to the then ongoing COVID-19 Pandemic, Electricity Distribution and Natural Gas Distribution applied for and received approval from the AUC for interim rate relief for customers to hold current distribution base rates in place. Based on direction from the AUC, collection of 2021 deferred rate amounts commenced in 2022 and for the fourth quarter and year ended December 31, 2023, $5 million (after-tax) and $18 million (after-tax) was billed to customers.

(5) In 2024, Natural Gas Distribution recorded a decrease in earnings of $6 million (after-tax) related to payments of gas pipeline system load balancing costs, and Electricity Distribution recorded a decrease in earnings of $4 million (after-tax) related to deferral of generation expenses and $4 million (after-tax) related to final rate decisions.

IT COMMON MATTERS DECISION

Consistent with the treatment of the gain on sale in 2014 from the IT services business by CU Inc.'s parent, Canadian Utilities, financial impacts associated with the IT Common Matters decision are excluded from adjusted earnings. The amount excluded from adjusted earnings in the fourth quarter and full year of 2024 was $6 million and $22 million (after-tax) (2023 - $5 million and $20 million (after-tax)).

IMPAIRMENTS

For the year ended December 31, 2023, impairments of $42 million (after-tax) were recognized, relating to assets that no longer represent value to the Company.

Of these impairments, $33 million (after-tax) related to impairments of certain computer software assets which are no longer expected to be used in the business and $8 million (after-tax) related to certain electricity generation assets in Electricity Transmission which had been removed from service.

TRANSITION OF MANAGED IT SERVICES

In 2023, the Company recognized additional legal and other costs of $2 million (after-tax) related to the Wipro MSA matter that was concluded on February 26, 2023.

SEGMENTED RECONCILIATION OF ADJUSTED EARNINGS TO EARNINGS FOR THE PERIOD

The following table reconciles adjusted earnings for Utilities to the directly comparable financial measure, earnings for the period.

($ millions)
2024	CU Inc.
2023	Electricity			Natural Gas			Consolidated
	Electricity Distribution	Electricity Transmission	Consolidated Electricity	Natural Gas Distribution	Natural Gas Transmission	Consolidated Natural Gas
Adjusted earnings	46	47	93	69	28	97	190
	47	36	83	62	22	84	167
Restructuring	(2)	(1)	(3)	(1)	(1)	(2)	(5)
	—	—	—	—	—	—	—
Rate-regulated activities	(19)	(21)	(40)	6	(7)	(1)	(41)
	(6)	(6)	(12)	(5)	(8)	(13)	(25)
IT Common Matters decision	(2)	(1)	(3)	(3)	—	(3)	(6)
	(1)	(1)	(2)	(3)	—	(3)	(5)
Impairments	—	—	—	—	—	—	—
	(12)	—	(12)	(22)	—	(22)	(34)
Dividends on equity preferred shares of the Company	1	—	1	1	—	1	2
	1	—	1	1	—	1	2
Earnings for the period	24	24	48	72	20	92	140
	29	29	58	33	14	47	105

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

($ millions)

Year Ended
December 31

2024	CU Inc.
2023	Electricity			Natural Gas			Consolidated
	Electricity Distribution	Electricity Transmission	Consolidated Electricity	Natural Gas Distribution	Natural Gas Transmission	Consolidated Natural Gas
Adjusted earnings	150	190	340	142	95	237	577
	150	162	312	120	91	211	523
Restructuring	(10)	(6)	(16)	(17)	(4)	(21)	(37)
	—	—	—	—	—	—	—
ATCO Electric settlement decision	—	(8)	(8)	—	—	—	(8)
	—	—	—	—	—	—	—
Rate-regulated activities	(42)	(34)	(76)	40	(14)	26	(50)
	(3)	(42)	(45)	21	(14)	7	(38)
IT Common Matters decision	(7)	(5)	(12)	(9)	(1)	(10)	(22)
	(6)	(5)	(11)	(8)	(1)	(9)	(20)
Impairments	—	—	—	—	—	—	—
	(12)	(8)	(20)	(22)	—	(22)	(42)
Transition of managed IT services	—	—	—	—	—	—	—
	(1)	—	(1)	(1)	—	(1)	(2)
Dividends on equity preferred shares of the Company	2	2	4	2	1	3	7
	2	2	4	2	1	3	7
Other	—	—	—	—	—	—	—
	3	(3)	—	—	—	—	—
Earnings for the year	93	139	232	158	77	235	467
	133	106	239	112	77	189	428

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

RECONCILIATION OF RATE BASE TO PROPERTY, PLANT AND EQUIPMENT, AND INTANGIBLE ASSETS

The Company refers to rate base and mid-year rate base throughout the MD&A. Growth in mid-year rate base is a leading indicator of a utility's earnings trend. Rate base is a measure specific to rate-regulated utilities and is used by the regulatory authorities in the jurisdictions in which a company operates, which in Alberta, is the AUC.

The Regulated Utilities finance infrastructure investments, referred to as rate base, through a combination of equity and debt. Regulatory proceedings establish the approved rate of ROE and the equity ratio – the proportion of utility investments financed with equity, with the remainder financed by debt.

Both the ROE and the equity ratio are determined based on the concept of "fair return," which includes three main components: (i) comparability, (ii) financial integrity, and (iii) financial attractiveness. The costs of equity and debt are included in the amounts collected as revenues.

Mid-year rate base for a given year is calculated as the average of the opening rate base and the closing rate base. The Company determines its customer rates by multiplying its rate base by the approved equity ratio and the approved rate of ROE, as well as recovering forecast costs and return of capital. As such, the Company's earnings will trend based on changes in the approved ROE, the approved equity ratio, and the mid-year rate base.

SEGMENTED RECONCILIATION OF RATE BASE TO PROPERTY, PLANT AND EQUIPMENT, AND INTANGIBLE ASSETS

The most comparable financial measures under IFRS with respect to rate base are property, plant and equipment and intangible assets. Additional information regarding this non-GAAP measure is provided in the "Other Financial and Non-GAAP Measures" section of this MD&A.

The following table reconciles rate base and mid-year rate base to property, plant and equipment and intangible assets for 2024, 2023 and 2022.

($ billions)	2024	2023	2022
Property, plant and equipment (1)	17.8	17.0	16.5
Intangible assets (2)	0.9	0.8	0.8
	18.7	17.8	17.3
Adjustments:
Customer contributions (3)	(2.0)	(2.0)	(1.9)
Removal costs collected from customer rates	(1.6)	(1.5)	(1.3)
Other	(0.3)	(0.2)	(0.2)
Rate Base (4)	14.8	14.1	13.9
Mid-Year Rate Base (4)	14.5	14.0	13.6

(1) Please refer to Note 9 - Property, Plant and Equipment section of the Company's 2024 and 2023 Consolidated Financial Statements.
(2) Please refer to Note 10 - Intangibles section of the Company's 2024 and 2023 Consolidated Financial Statements.
(3) Please refer to Note 13 - Customer Contributions section of the Company's 2024 and 2023 Consolidated Financial statements.
(4) Non-GAAP financial measure.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

OTHER FINANCIAL INFORMATION

OFF BALANCE SHEET ARRANGEMENTS

CU Inc. does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the financial performance or financial condition of the Company, including, without limitation, the Company's liquidity and capital resources.

CONTINGENCIES

The Company is party to a number of claims, disputes, lawsuits and other legal matters. The Company believes the ultimate liability arising from these matters will have no material impact on its 2024 Consolidated Financial Statements.

MATERIAL ACCOUNTING JUDGMENTS AND ESTIMATES

The Company's material accounting estimates are described in Note 21 of the 2024 Consolidated Financial Statements, which are prepared in accordance with IFRS. Management makes judgments and estimates that could materially affect how policies are applied, amounts in the consolidated financial statements are reported, and contingent assets and liabilities are disclosed. Most often these judgments and estimates concern matters that are inherently complex and uncertain. Judgments and estimates are reviewed on an ongoing basis; changes to accounting estimates are recognized prospectively.

FINANCIAL INSTRUMENTS

Financial instruments are measured at amortized cost or fair value. The valuation methods used to measure financial instruments are described in Note 18 of the 2024 Consolidated Financial Statements, which are prepared in accordance with IFRS.

RELATED PARTY TRANSACTIONS

Transactions with related parties in the normal course of business are measured at the exchange amount. Transfers of assets between entities under common control are measured at the carrying amount. For further information, please refer to Note 26 of the 2024 Consolidated Financial Statements.

NEW OR AMENDED IFRS ACCOUNTING STANDARDS ADOPTED

The following outlines the IFRS Accounting Standards adopted by the Company for the year ended December 31, 2024, and their impact on the Company's consolidated financial statements.

Presentation of Non-Current Liabilities with Covenants

The Company has adopted amendments to IAS 1, Presentation of Financial Statements that are effective January 1, 2024. The amendments clarified the requirements for classifying current or non-current liabilities and introduced additional disclosures to assist users of financial statements in understanding the risk that non-current liabilities with covenants may become payable within the next twelve months after the balance sheet date. The adoption of the amendments did not have an impact to the Company's consolidated financial statements.

IFRS ACCOUNTING STANDARDS NOT YET ADOPTED

Certain new or amended IFRS Accounting Standards were recently issued by the International Accounting Standards Board (IASB). The following outlines the IFRS Accounting Standards that are applicable to, or may have a future material effect on, the Company's consolidated financial statements or note disclosures.

Settlement by electronic payments

In May 2024, the IASB issued amendments to IFRS 9, Financial Instruments, to clarify the date of recognition and derecognition of financial assets and liabilities, with a new exception for financial liabilities settled using electronic forms of payment. The amendments are effective for annual periods beginning on or after January 1, 2026, with earlier application permitted. The Company is assessing the impact of the amendments to its consolidated financial statements.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS
38

Presentation and disclosure in financial statements

In April 2024, the IASB issued IFRS 18, Presentation and Disclosure in Financial Statements, which will replace IAS 1 Presentation of Financial Statements. IFRS 18 sets out the requirements for presentation and disclosures in financial statements with focus on the income statement and reporting of management-defined performance measures (often referred to as non-GAAP measures). The new standard is effective for annual periods beginning on or after January 1, 2027, with earlier application permitted. The Company is assessing the impact of the standard to its consolidated financial statements, with a focus on specific developments in its industry.

DISCLOSURE CONTROLS AND PROCEDURES

As of December 31, 2024, management evaluated the effectiveness of the Company's disclosure controls and procedures as required by the Canadian Securities Administrators. This evaluation was performed under the supervision of, and with the participation of, the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO).

Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by the Company in documents filed by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in the securities legislation. The disclosure controls and procedures also seek to assure that information required to be disclosed by the Company is accumulated and communicated to management, including the CEO and the CFO, as appropriate, to allow timely decisions on required disclosure.

Management, including the CEO and the CFO, does not expect the Company's disclosure controls and procedures will prevent or detect all errors. The inherent limitations in all control systems are that they can provide only reasonable, not absolute, assurance that all control issues and instances of error, if any, within the Company have been detected.

Based on this evaluation, the CEO and the CFO have concluded that the Company's disclosure controls and procedures were effective at December 31, 2024.

INTERNAL CONTROL OVER FINANCIAL REPORTING

The certification of annual filings for the year ended December 31, 2024, requires that the Company disclose in the annual MD&A any changes in the Company's internal controls over financial reporting (ICFR) that occurred during the period that have materially affected, or are reasonably likely to materially affect, the Company's ICFR. The Company confirms that no such changes were identified in the Company's ICFR during the period beginning on January 1, 2024 and ending on December 31, 2024.

The Company's ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, ICFR can provide only reasonable assurance regarding the reliability of financial statement preparation and may not prevent or detect all misstatements.

As of December 31, 2024, management evaluated the effectiveness of the Company's ICFR as required by the Canadian Securities Administrators. This evaluation was performed under the supervision of, and with the participation of, the CEO and the CFO.

Based on this evaluation, the CEO and the CFO have concluded that the Company's ICFR was effective at December 31, 2024.

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", "goals", "targets", "strategy", "future", and similar expressions. In particular, forward-looking information in this MD&A includes, but is not limited to, references to: strategic plans and targets; emissions reduction efforts and initiatives; expected growth and expansion and diversification opportunities; the expected timing of commencement, completion or commercial operations of activities, contracts and projects; the expected term of contracts; the impact or benefits of contracts, including economic and other benefits for the Company and its partners and counterparties; expected inflation; planned efficiency improvements; the Utilities' three-year capital expenditure plan of planned capital spending in capital growth projects; anticipated rate base growth; the anticipated size, specifications and incremental natural gas delivery capacity of the Yellowhead Mainline project, and the number of regulatory applications and expected timing for commencement of construction and bringing the Yellowhead Mainline project on-stream; expectations regarding the PBR2 reopener appeal; the

expected impact of new legislation; the expected timing and impact of policy and regulatory decisions and new policy and regulatory announcements; and the Company's liquidity, capital resources and contractual financial obligations and other commitments.

Although the Company believes that the expectations reflected in the forward-looking information are reasonable based on the information available on the date such statements are made and processes used to prepare the information, such statements are not guarantees of future performance and no assurance can be given that these expectations will prove to be correct. Forward-looking information should not be unduly relied upon. By their nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties, and other factors, which may cause actual results, levels of activity, and achievements to differ materially from those anticipated in such forward-looking information. The forward-looking information reflects the Company's beliefs and assumptions with respect to, among other things, growth of energy demand; inflation; certain regulatory applications being made and approved in 2025; expected rate base growth; the development and performance of technology and technological innovations and the ability to otherwise access and implement all technology necessary to achieve business objectives; continuing collaboration with certain business partners and engagement with new business partners, and regulatory and environmental groups; the performance of assets and equipment; demand levels for oil, natural gas, gasoline, diesel and other energy sources; certain levels of future energy use; future production rates; future revenue and earnings; the ability to meet current project schedules, and complete proposed development projects at currently estimated project budgets; the availability of financing sources on acceptable terms; and other assumptions inherent in management's expectations in respect of the forward-looking information identified herein.

The Company's actual results could differ materially from those anticipated in this forward-looking information as a result of, among other things, risks inherent in the performance of assets; capital efficiencies and cost savings; applicable laws, regulations and government policies; including uncertainty with respect to recent amendments to the Competition Act (Canada); regulatory decisions; competitive factors in the industries in which the Company operates; prevailing market and economic conditions; credit risk; interest rate fluctuations; the availability and cost of labour, materials, services, and infrastructure; the development and execution of projects; prices of electricity, natural gas, natural gas liquids, and renewable energy; the development and performance of technology and new energy efficient products, services, and programs including but not limited to the use of zero-emission and renewable fuels, carbon capture, and storage, electrification of equipment powered by zero-emission energy sources and utilization and availability of carbon offsets; potential termination or breach of contract by contract counterparties; the occurrence of unexpected events such as fires, extreme weather conditions, explosions, blow-outs, equipment failures, transportation incidents, and other accidents or similar events; global pandemics; the imposition of customs duties, tariffs or other trade restrictions; geopolitical tensions and wars; and other risk factors, many of which are beyond the control of the Company. Due to the interdependencies and correlation of these factors, the impact of any one material assumption or risk on a forward-looking statement cannot be determined with certainty. Readers are cautioned that the foregoing lists are not exhaustive. For additional information about the principal risks that the Company faces, see the "Business Risks and Risk Management" section in this MD&A.

This MD&A may contain information that constitutes future-oriented financial information or financial outlook information, all of which are subject to the same assumptions, risk factors, limitations and qualifications set forth above. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise or inaccurate and, as such, undue reliance should not be placed on such future-oriented financial information or financial outlook information. The Company's actual results, performance and achievements could differ materially from those expressed in, or implied by, such future-oriented financial information or financial outlook information. The Company has included such information in order to provide readers with a more complete perspective on its future operations and its current expectations relating to its future performance. Such information may not be appropriate for other purposes and readers are cautioned that such information should not be used for purposes other than those for which it has been disclosed herein. Future-oriented financial information or financial outlook information contained herein was made as of the date of this MD&A.

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.

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

ADDITIONAL INFORMATION

Additional information relating to the Company, including the Company's 2024 Consolidated Financial Statements and most recent Annual Information Form dated March 27, 2024, can be found on SEDAR+ at www.sedarplus.ca.

Copies of these documents may also 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, or email [email protected]. Corporate information is also available on the Company's website at www.canadianutilities.com.

GLOSSARY

AESO means Alberta Electric System Operator.

Alberta Utilities, the Utilities, or Regulated Utilities means Electricity Distribution, Electricity Transmission, Natural Gas Distribution and Natural Gas Transmission, and their related subsidiaries.

AUC means the Alberta Utilities Commission.

CAGR means compound annual growth rate.

Class A shares means Class A non-voting common shares of the Company.

Class B shares means Class B common shares of the Company.

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

Company means CU Inc. and, unless the context otherwise requires, includes its subsidiaries.

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

COS means Cost of Service.

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

ECM means efficiency carry-over mechanism.

ESG means Environmental, Social and Governance.

FWI means Fixed Weighted Index of average hourly earnings for all employees, by industry, monthly.

GAAP means Canadian generally accepted accounting principles.

GHG means greenhouse gas.

Gigawatt hour (GWh) is a measure of electricity consumption equal to the use of 1 billion watts of power over a one-hour period.

GRA means general rate application.

IFRS means International Financial Reporting Standards.

I-X means the Inflation Adjuster (I Factor) minus Productivity Adjuster (X Factor).

K Bar means the AUC allowance for capital additions under Performance Based Regulation.

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

O&M means operating and maintenance.

PBR means Performance Based Regulation.

ROE means return on equity.

APPENDIX 1:

FOURTH QUARTER FINANCIAL INFORMATION

Financial information for the three months ended December 31, 2024 and 2023 is shown below.

CONSOLIDATED STATEMENTS OF EARNINGS

	Three Months Ended December 31
(millions of Canadian Dollars)	2024	2023
Revenues	822	783
Costs and expenses
Salaries, wages and benefits	(77)	(64)
Energy transmission and transportation	(78)	(71)
Plant and equipment maintenance	(55)	(57)
Fuel costs	(5)	(5)
Purchased power	(20)	(14)
Depreciation, amortization and impairment	(148)	(176)
Franchise fees	(79)	(70)
Property and other taxes	(17)	(17)
Other	(73)	(85)
	(552)	(559)
Operating profit	270	224
Interest income	2	1
Interest expense	(104)	(95)
Net finance costs	(102)	(94)
Earnings before income taxes	168	130
Income taxes	(33)	(25)
Earnings for the period	135	105

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended
December 31

(millions of Canadian Dollars)	2024	2023
Operating activities
Earnings for the period	135	105
Adjustments to reconcile earnings to cash flows from operating activities	318	301
Changes in non-cash working capital	(39)	(74)
Cash flows from operating activities	414	332
Investing activities
Additions to property, plant and equipment	(440)	(301)
Proceeds on disposal of property, plant and equipment	—	2
Additions to intangibles	(27)	(31)
Changes in non-cash working capital	22	(8)
Other	7	19
Cash flows used in investing activities	(438)	(319)
Financing activities
Repayment of lease liabilities	(1)	(1)
Dividends paid on equity preferred shares	(2)	(2)
Dividends paid to Class A and Class B share owner	(9)	—
Interest paid	(98)	(90)
Other	(1)	(3)
Cash flows used in financing activities	(111)	(96)
Decrease in cash position	(135)	(83)
Beginning of period	(28)	12
End of period	(163)	(71)

CU INC. 2024 MANAGEMENT'S DISCUSSION & ANALYSIS

AI assistant

CU Inc. — Management Reports 2025

44857_rns_2025-02-27_57577e67-6320-4ed5-9cb2-eec2267c0d71.pdf

An ATCO Company

CU INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

TABLE OF CONTENTS

OUR COMPANY

THE UTILITIES

SIMPLIFIED ORGANIZATIONAL STRUCTURE

OUR BUSINESSES

ELECTRICITY

NATURAL GAS

SHAPING THE FUTURE: CU INC.'S AMBITIONS

CREATING PROSPERITY AND OPPORTUNITY FOR GENERATIONS TO COME

OUR STRATEGIC IMPERATIVES

CU INC.'S STRATEGY

CAPITAL EXPENDITURE PLAN

UTILITIES PERFORMANCE

REVENUES

Electricity Distribution

Electricity Transmission

Natural Gas Distribution

Natural Gas Transmission

CORPORATE & OTHER AND INTERSEGMENT ELIMINATIONS

2024 DEVELOPMENTS

Yellowhead Mainline Project

Central East Transfer Out (CETO) project

REGULATORY INFORMATION

REGULATED BUSINESS MODELS

Regulated Business Models

PERFORMANCE BASED REGULATION

REGULATORY UPDATES

COMMON MATTERS

Second Generation Performance Based Regulation Re-openers

ELECTRICITY TRANSMISSION

ATCO Electric Settlement Application

NATURAL GAS TRANSMISSION

2024 - 2026 General Rate Application (GRA)

SUSTAINABILITY, CLIMATE CHANGE AND ENERGY TRANSITION

SUSTAINABILITY REPORTING

CLIMATE CHANGE AND ENERGY TRANSITION

POLICY AND REGULATORY UPDATES

CANADA

Government of Canada Fall Economic Statement Act and Budget Implementation Act

Clean Electricity Regulations (CER)

Carbon Pricing/Output-Based Pricing Systems

Government of Canada Green Buildings Strategy

Prorogation of Parliament and Pending Resignation of the Prime Minister

ALBERTA

Alberta Restructured Energy Market

Market Policy

LIQUIDITY AND CAPITAL RESOURCES

CREDIT RATINGS

LINES OF CREDIT

CONSOLIDATED CASH FLOWS

Operating Activities

Investing Activities

Cash Used for Capital Expenditures

Financing Activities

Debenture Issuance

Debenture Repayments

Cash Requirements

SHARE CAPITAL

QUARTERLY INFORMATION

ADJUSTED EARNINGS

EARNINGS FOR THE PERIOD

BUSINESS RISKS AND RISK MANAGEMENT

FINANCIAL RISKS

Project Execution / Capital Investment

DESCRIPTION AND CONTEXT

RISK MANAGEMENT APPROACH

Financing

DESCRIPTION AND CONTEXT

RISK MANAGEMENT APPROACH

Liquidity

DESCRIPTION AND CONTEXT

RISK MANAGEMENT APPROACH

Credit

DESCRIPTION AND CONTEXT

CU Inc. Management Reports 2025