May 14, 2008 / 8:08 PM / 10 years ago

Atco wants higher returns from Alberta regulators

CALGARY, Alberta, May 14 (Reuters) - Atco Ltd ACOx.TO said on Wednesday it plans to spend C$3 billion ($3 billion) over the next three years on energy infrastructure in the booming province of Alberta, but wants regulators to allow it to have higher returns in exchange for the outlay.

Atco, a conglomerate that operates utilities, power plants, housing and other industrial businesses, wants regulators in the Canadian province to agree to raise the company’s return by a full percentage point, Chief Executive Nancy Southern said.

Southern said at company’s annual meeting that the 8.7 percent return regulators allow Alberta utilities is lower than Atco’s cost of capital and well below the 17 percent return from nonregulated business.

If a higher rate isn’t allowed, she said Atco’s A-grade credit rating could be at risk.

“If the regulator continues to insist on suboptimal returns...it is very likely our credit rating would be negatively impacted,” Southern said. “If the rating agencies downgraded Atco...it would translate into additional debt costs.”

Southern said a 1 percentage point boost to the regulated return would add 50 Canadian cents to the average bill for the company’s Alberta customers. However a rating cut would raise bills by 80 Canadian cents.

Atco is required to raise almost C$2 billion of its C$3 billion in planned spending in the debt market.

The C$3 billion in spending over the next three years will go mostly to new electricity transmission lines. In December, Atco committed itself to spend C$226 million to build a high-voltage line to meet demand in northwest Alberta.

Electricity demand in Alberta is on the rise as oil and gas companies expand their operations and the province gains new businesses and residents seeking to take advantage of its booming economy.

Atco said last month its first-quarter profit rose 13 percent to C$92.3 million, or C$1.60 a share, from C$81.6 million, or C$1.40, on higher earnings from its utilities and its modular structures businesses.

Atco’s X class nonvoting shares rose 2 Canadian cents to C$52.44 on the Toronto Stock Exchange on Wednesday. The shares have dropped 1.6 percent over the past 12 months. ($1=$1.00 Canadian) (Reporting by Scott Haggett; Editing by Peter Galloway)

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