Investment Overview

I am delighted to report to you on our 2007 results, your Corporation’s best-ever year which reflects a tremendous effort and commitment to excellence by our people:

Earnings of $386.7 million – up 19 per cent;
Adjusted earnings of $343.8 million – up 7 per cent;
Total assets of $7.3 billion – up $291.9 million; and
The number of people at your Corporation has grown
by 500 – up 8 per cent.

These accomplishments continue to be underscored by our focus on safety and reliability in order to deliver sustainable growth for our share owners.

I also want to draw attention to the accumulated business strength created through the diversity of our operations; a vigorous advantage that serves the Corporation well. This long-standing strategy of diversification over multiple business sectors has enabled the Corporation to capitalize on a variety of opportunities.

I would like to congratulate the 6,500 men and women of Canadian Utilities who have worked so industriously this year to deliver excellence and record results to our share owners.

Nancy Southern
President &
Chief Executive Officer

Canadian Utilities' 2007 Financial Achievements

Canadian Utilities’ record earnings in 2007 of $386.7
million ($3.08 per share) were attributable to all three of the Company’s business groups – Utilities, Power Generation and Global Enterprises.
Canadian Utilities’ 2007 revenues decreased primarily due to the refund of future income tax balances which also reduced the income tax expense in ATCO Electric. This decrease was partially offset by increased revenue in ATCO Gas and ATCO Midstream.
Canadian Utilities’ adjusted earnings in 2007 were
$343.8 million ($2.74 per share) compared to $320.8 million ($2.54 per share) in 2006. ⁽¹⁾
Canadian Utilities’ balance sheet remains strong and positions the company for future growth. Cash balances of $747.2 million have remained relatively consistent for the last four years. ⁽²⁾
Canadian Utilities share owner’s Equity at the end of 2007, including Equity Preferred Shares, was $3.1 billion. The Company’s non-recourse debt has also been reduced over the last four years. In addition to regular scheduled payments on non-recourse debt, ATCO Power also applied a $52.7 million payment in 2007 towards the debt on the Barking Power Plant.
On October 18, 2007, Standard and Poor’s increased its rating on Canadian Utilities’ senior debt from ‘A-’ to ‘A’.
Return on equity for 2007 was 16.0% compared to 14.3% in 2006. This was achieved even though the regulated utilities are subject to a formula driven return on equity regime that resulted in a rate of 8.51% for 2007. Therefore, the overall Canadian Utilities’ rate of 16.0% was driven by results of the non-regulated entities in the Company.
Dividends paid to common share owners were $1.25 per share in 2007. This compares to a $1.15 dividend per share in 2006, excluding the impact of the $0.25 per share special dividend paid in 2006. Excluding the impact of the special dividend in 2006, dividends per share have increased each year since 1972 – 35 years.
Funds generated by operations increased to $725.9 million in 2007 compared to $657.5 million in 2006. This increase was primarily attributable to higher earnings and increased availability incentives at Alberta Power (2000)’s power generating stations. ⁽³⁾
The robust growth in the Alberta economy has resulted in significant growth in total capital expenditures for Canadian Utilities. This growth is primarily attributable to the Utilities Business Group. The total for 2007 was $700.8 million compared to $567.7 million in 2006. Furthermore, capital expenditures to maintain capacity, meet planned growth, and fund future development activities are expected to be approximately $900 million in 2008. The majority of these expenditures are uncommitted and relate primarily to the Utility operations. Capital expenditures for 2008 to 2010 are expected to be approximately $3.0 billion for the Utilities operations.
The price of Canadian Utilities Class A and Class B shares, on the Toronto Stock Exchange, closed the year at levels consistent with the prices from the end of 2006. The closing prices for Class A and Class B shares at the end of 2007 were $46.40 and $46.00, respectively, compared to $47.73 and $47.66 at the end of 2006.

⁽¹⁾ Adjusted earnings are defined as earnings attributable to Class A and Class B shares after adjustment for items that are not in the normal course of business nor a result of day to day operations. The majority of these adjustments in 2007 related to tax issues. This measure is not defined by Generally Accepted Accounting Principles and may not be comparable to similar measures used by other companies.

⁽²⁾ Cash is defined as cash and short-term investments less bank indebtedness.

⁽³⁾ Funds generated by operations is defined as cash generated from operations before changes in non-cash working capital. This measure is not defined by Generally Accepted Accounting Principles and may not be comparable to similar measures used by other companies.

Karen Watson
Senior Vice President &
Chief Financial Officer