Q4 2019 Earnings Call
Thank you for standing by.
This is a conference operator, welcome to the Algonquin power and Utilities Corp, 2019, fourth quarter and full year analyst and Investor earnings call.
As a reminder, all participants are in listen only mode and the conference is being recorded after the presentation there will be an opportunity to ask a question.
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I would now like to turn the conference over to Christopher Jared Vice Chair of Algonquin Power and Utilities Corp. Please go ahead Mr. Gerard.
Great. Thanks, Good morning, everyone and thank you for joining us on or 2019th fourth quarter and full year earnings results Conference call as mentioned in my Name's, Chris Jarratt I'm, the vice terrible Gong to parity until these core and joining me on the call. Today are you in Roberts, our Chief Executive Officer, and David Bronicheski, Our Chief Financial Officer.
We have a supplemental webcast presentation that accompanies the call. This can be accessed via our web web site at Algonquin power and utilities Dot com.
Our audited financial statements that management discussion and out there are also available on the website and also on SEDAR and Edgar.
Before continuing the called me would like to remind you that our discussion during the call will include certain forward looking information may also refer to certain non-GAAP financial measures and at the end of the call Amelia from our Investor Relations team will read and not so brief legal notice. It's in respect of both forward looking information and non-GAAP financial measure.
Sure.
We've had what we believed to be a pretty good fourth quarter and full year. So today is going to start with the strategic highlights followed by David summarized in the financial highlights.
Well that in turn things back to E. M. I conclude the prepared portion of the call with an overview of our strategic growth plan for 2020 and beyond.
And then as usual, we'll open up the lines for questions.
So as usual, we'll ask you to restrict your questions to a maximum of too and then re queue. If you have additional questions to allow others the opportunity to participate.
And now with that I'll turn things over the yen and he'll discuss the main focus areas of 2019.
Thanks, Chris and good morning to everyone who's able to join US we're coming to from our offices here at all Carolina, Sunny, but cold a morning, I always welcome the opportunity on the last quarterly call of the year to reflect on the progress we made over the course of the previous here with a number of corporate achievements supporting.
Solid year financial performance.
Then spend some time looking in a bit more detail at our plan for the current year and longer term as our team works on successful execution against our recently updated five year strategic plan.
Before I begin my formal remarks, I want it to extend a warm welcome to a room PENSCO <unk>, who has now been with US a for three weeks.
A room brings tape hockey unique combination of experience a renewable energy development grew in financial acumen in a results driven leadership style Im sure youre share our confidence that around his background makes him a great addition to all caulkins executive leadership team.
Over the coming year I'll be working closely with a really to help them expand his knowledge of our business and the newly created role as president of our company should provide the opportunity for around to fully engage in our business and the culture, which has so distinguishes company, making it the fastest growing utility in North America or the coming months I hope, you'll all have the opportunity to meet and build a relationship with <unk>.
I Trust, everyone takes comfort from financial results confirm it's business as usual as we continue to deliver solid performance and execute on our 9 billion dollar pipeline of growth.
I'm personally enthused by the prospect, but limited time is right for me to transition away from the direct management role as CEO of being able to continue to contribute capex success, we've been cooperating on the creation of independent investment platform to collaborate with a block on incremental growth opportunities, which is intended to provide for a continuation of the passion and forces which have dry.
Given this companys extra ordinary track record, obviously these plans or an early stage, but the measured pace of our leadership transition process will give us all time to sort of thing so.
And lastly, after almost 14 years on the PUC rocket ship, David Bronicheski has decided to retire this coming fall he shared that family considerations at this stage of his life have made at the right time for him to move forward towards retirement that allow our deep talent base in our finance team to step for it.
Well, we'll certainly wish Dave at the best when you finally embarks on his well deserved retirement later this year the strong for natural program. That's contributed to our success will remain and capable hands with Arthur Kasprzak, assuming the role of Deputy Chief Financial Officer.
Given that this is our yearend earnings call, let's start with some of the highlights for 2019 and how those initiatives contributed to another year or solid financial performance.
Personally I'm pleased to report strong and stable year over year growth in our key financial metrics.
Applied profit continued to grow with 2019, adjusted EBITDA of cost $840 million.
Secondly, as we discussed at our recent Investor day, excluding the onetime impact related to U.S. tax reform from our 2018 bps 2019 bps of 63 cents represent year over year growth of approximately 10%.
The organization exited 2019, but nearly $11 billion enough, that's a 16% increase over 2018 level.
We're very mindful of the important role our dividend plays in the total return expectations of our shareholders and we delivered annual dividends per share approximately 55 cents, which represents a 10% increase over the previous year.
Secondly, the company completed many successful growth initiatives and achieved a number of important milestones during the year.
I'm proud to say that we completed two acquisitions in the past quarter. We closed the acquisition of our first Canadian utility New Brunswick gas together with safeguards gap in New York.
Both acquisitions are expected to provide opportunities for future growth.
During their corridor, we also announced an agreement for the acquisition of New York of America Watered, New York jurisdictional assets. It represents a sizeable regulated water and wastewater acquisition with the addition code 225000 customer connections across southern counties Southeastern New York.
During 2019, the regulated services group successfully completed several rape reviews, representing a cumulative annualized revenue increased approximately half a million dollars.
And lastly, before I turn things over to David I wanted to highlight the positive impact that our recent utility acquisitions have had on our growing customer count putting the March to a million campaign milestone squarely in our sites.
As previously mentioned the completion of our two recent acquisitions and the two acquisitions, we announced in 2019, the Bermuda Electric Company and America Waters, New York Jurisdictional assets will bring the millionth customer interview.
Not that long ago, our regulated services group was 100% based in the United States were thrilled that these recent acquisitions.
By the company with the opportunity to expand our skills that beyond those borders and serve the utility needs of customers in Canada.
The United States and soon to be Bermuda, and with that I'll turn things over to David for review Q4, and the full year financial results, David Thanks, and good morning, everyone. As he had mentioned earlier in 2019, a Buck is again showed its ability to grow its business in at accretive way through a stable utility and long term contracted renewable.
Platform, we ended 2019 pretty much where we guided at Investor day in December with an EPS of 63 cents on a consolidated basis. Our Q4 results were positively impacted by solid operations that are existing facilities. In addition to new utilities, which came onboard in the fourth quarter as well as earn back.
But in Atlantic, which combined to increase our Q4 adjusted EBITDA to 231.5 million an increase of 32.6 million over the same period last year.
On an annualized basis, we posted adjusted EBITDA for the full year 2019 of 838.6 million an increase of 4% over the prior year.
With respect to where earnings per share and our adjusted net earnings per share was 63 cents, which after adjusting for the onetime effects of U.S. tax reform in 2018 up approximately nine cents per share of which we spoke of at Investor day, Our adjusted net Aes has grown by just over 10%.
Looking first at our regulated services group the business unit delivered $565.4 million, an operating profit in 2019 compared to 551.6 million in the prior year, we saw improved contributions from our gas and water facilities as well as the contribution of New Brunswick gas in Saint Lawrence guys.
Which closed in the fourth quarter and helped to offset lower results from our electric utilities.
In addition, the regulated services group learn $6 million related to the development of our San Antonio water system project or saws as we'd like to call. It which has been jointly developed with third parties.
This is consistent with our expectation that bird jointly developed projects, we will learn fees consistent with our contributions to the project through the development process going forward, we expect to in 2020 to earn approximately $2.5 million from saws.
On a year over year basis, our renewable energy group delivered strong results in 2019, posting 328.5 million of operating profit compared to 303.6 million in 2018, the increase of adjusted EBITDA is related to our investment at Atlantic as well as increased production from our newer wind.
And solar facilities.
The final topic I'd like to cover off relates to our capital structure. The steps we took in 2019 to strengthen our balance sheet as you're aware a buck targets, a triple B flat capital structure, which we believe is optimal from a cost of capital perspective.
In January of last year, we're quite proud of our inaugural Green bond offering price into 300 million dollar Canadian 10 year senior unsecured bond at an attractive 4.6% interest rate.
This is a key element of our continual commitment to sustainability with the proceeds from the bonds use for sustainable purposes.
In May of 2019, we issued $350 million of 60 year fixed to floating 6.2% subordinated notes.
Current with the offering we entered into a cross currency swap to convert the U.S. dollar denominated coupon and principal payments from the offering into Canadian dollars, resulting in an effective interest rate of approximately 5.96%. This shows the power and deficiency.
Being able to be opportunistic on either side of the border with respect to our financings.
I'd also point out that the notes also provide us with additional equity credit to our rating agencies.
In October we issued 354.4 million of common equity through our inaugural U.S. marketed equity offering which was three times oversubscribed. It increased our U.S. shareholder base with new long only investors and improve the liquidity of our shares trading on the NYSE.
Finally earlier this month with our new bond platform here in Canada, Liberty Utilities, Canada, We issued a 30 year 200 million dollar Canadian senior unsecured debentures at an interest rate of 3.315%.
This is the longest duration bond, we've issued and the lowest coupon we've ever issued this offering provides us with a strong that platform on which to grow our utility base in Canada. The proceeds were used to partially financed the acquisition of New Brunswick guess.
Before we turn things back over to Ian I'd like to touch briefly on our earnings guidance that we put out at Investor Day last December and reiterate that we continue to target our adjusted net earnings per share for Twentytwenty to be in the range of 68 cents to 70 cents.
With that I'll turn things back over to you.
Thanks, David.
Before we open up the lines for our question and answer period I want to spend a couple of minutes speaking about some of the growth initiatives. We're pursuing the context of our five year strategic plan.
At our annual Investor morning, typically held in early December our leadership team meets with investors and analysts many of whom are likely on the call today to discuss our current operation and our plans for the future.
Well I know quite a view a quite a few of you will have feel like you just heard as from US in December in our view of caused the story bears repeating.
Our updated five year capital investment program projects $9.2 billion to be spent across our two business groups with the emphasis on a regulated services team over the coming five years.
On the non regulated side of the business construction is proceeding in earnest or close to 850 megawatt of wind and solar projects. We're pleased that execution on our development pipeline will preserve our attractive average PA line.
On the regulated services side following receipt of the final regulatory approvals last year construction is now underway on all three projects comprise pricing Thats 600 megawatts of new wind in the Midwest. These wind farms are expected to come to be completed by the end of 2020.
We will contribute to earnings next year.
Perhaps a couple of comments on Corona virus, our and order.
We are obviously, taking all appropriate precautions to the health and wellbeing of our employees and customers, including managing their travel requirement for our team.
With respect to our renewable energy projects, both regulated and non regulated. These projects are generally located in the heartland of the continental United States and as such.
Do not appear to be immediately exposed to corona virus considerations.
Having said that we're actively monitoring the potential impact helped protection measures might have on the global renewable energy supply chain.
But based on our investigations of the current situation, we remain confident that our projects will be completed generally in accordance with the planned schedules.
With respect to our two newest utility acquisition, Bermuda Electric company and American Water's, New York jurisdictional lots I'd like to turn things over to Chris Chair for some additional color Chris Yes. Thanks, Ian So just on though is with respect to Bermuda people may have noted that the timeframe for their regulatory approval with extended by.
The government to October the four.
From our perspective, I don't think we would read too much into that we understand that the date with somewhat arbitrarily picked to be one year from the data the original application.
While the timeframe as originally form the government always had that ability to extend this date and while this is new territory for the Bermuda regulator, we don't expect it will actually take that long, but that of course, it will be up to the government.
Just a little bit more on Bermuda.
In the last little why we've got some great dialogue with the government and we are as excited as ever about the opportunity and the benefits of the transaction for the country.
Example, we've committed $300 million of investment into renewables, which is totally aligned and accelerate from either the objective of reaching 85% renewable.
The sale of Ascendant will also injected about $200 million, it's the Bermuda economy, and we've also announced something that we call our five plus five plants.
And that consist of two components. The first five we've identified operational savings of about $5 million per year, but no company initiated job cuts, which will reduce grades for customers and the second component of the five plus five plant is the investment in a sustainable Bermuda Foundation.
A $5 million and this will promote green energy in Bermuda, and it's totally aligned with our own sustainability objectives. So just in summary, I'd say, we're as excited as ever and where you are looking forward to the collaboration with the government and the people that Bermuda.
With respect to American water the story the little bit shorter the application is being submitted today.
And we've had some good discussions while socializing the application with the state Senator and the assembly men and women.
We expect this transaction will close sometime in 2021.
Thanks, Chris.
And finally at the end of 2019, we had approximately $7 million and pending rate reviews within our regulated services group.
Organic rate base capital expenditures are primarily related to the maintenance that expansion of existing assets to improve quality and efficiency of service to our customers. It's a core strategy our regulated services group to ensure that an appropriate return is earned on the rate based investments at our various utility system.
Before ending my formal remarks, I wanted to touch on the subject of sustainability.
We believe that a commitment to sustainability is not simply something we do but rather something we are it touches every one of our business strategies and operations.
This past quarter saw us publishing our 2019 sustainability report and hosting our well attended inaugural sustainability morning.
I'm pleased that our commitment is being recognized with corporate nights ranking Algonquin as the world tense most sustainable company on his recently realist recent released list of Dot 100, most sustainable corporations.
We're proud to be the highest ranked Canadian company and the highest ranked electric utility on the lift.
Through our de carbonization initiatives and renewables growth you can see that our fleet is turning a nice shade of greed.
For instance, we are advancing our plans to shut down and operational coal plant in favour of $1.1 billion of new wind generation.
And initiative, which is good for our customers.
By saving the money as well as good for the planet.
You can clearly see that our organization is very well positioned to be on the right side of the shift of social sentiment to renewable energy.
To wrap up my prepared comments for today I'm proud of the teams 2019 accomplishments I think we've proved that an agile entrepreneurial culture all growing in the same direction is indeed, a powerful force.
We haven't ambitious but achievable growth plan in front of us and we're committed to extending our track record of creating shareholder value in the current year and beyond with that operator, I'd like to open up the delighted for questions.
Certainly.
We will now begin the question answer session.
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Our first question comes from Sean Stewart with TD Securities. Please go ahead.
Thanks, Good morning.
Thanks, Sean a few questions before I get back in the cable to get too.
To to.
And I I gather you're you're still working at the details based on your prepared comments, but any context, you can provide on the structure of whats envision for the collaborative development platform that you might establish.
Well I think it I mean, it's all based in a belief that there is an opportunity to potentially Mary the characteristics of of Algonquin competitive capital with those of some private capital to be the winning bid. If you will as we continue to pursue infrastructure projects.
Particularly internationally and so I think it's all founded on a fundamentally that we want to continue to win here and we will do what is necessary and capitalize on those opportunities to continue to be a winter I don't know if at all I wish I look at this had second Sean I could give you more.
Tell us, but I think I.
I think there is an opportunity for for a call out for us to make us winter through collaborations okay understood and maybe related to that question.
Any updated thoughts you can provide on asset recycling initiatives, how that might be structured and and how contingent all of this is on the Atlantic a yield strategic review wrapping up hopefully sometime.
How does that all this.
Well I mean I'm not sure that the two are related to you know at our Investor day.
We outlined that capital recycling would be part of our five year I reiterate five year up 9.2 billion dollar plan and so.
It's not feeling like it.
It's something that is near term that we need to to realize on we've got a capital plan for 2020.
Which may or may not to include capital recycling, so I'm not sure that that I see capital recycling at the top of the list.
We spoke of things like mandatory converts and some of those other securities as an important part of R 22.
2020 capital plan.
Okay.
That helps I'll get back in the queue. Thanks, guys know, Sean I'll give you one more time.
I mean, a any common you want to provide on.
Atlantic ever view, they they didn't provide and a lot of detail on on the call yesterday, but.
Your your patience with that investment at this stage.
Well I guess in some respects you.
Okay, I think it's appropriate that Atlantic are the best guys to comment on Atlantic Coast Strategic review and so it.
I don't think I don't think I would have anything constructive to add to that obviously.
We sort of remain interested spectators to the whole thing and and hopefully hopefully as you said it will conclude.
Okay. Thanks again.
Sean.
Our next question comes from Mark Jarvi.
Capital markets. Please go ahead.
Thanks, Good morning.
Anywhere just just pick up on that last comment.
Given where atlantica yield hadn't moved I mean, obviously todays a different day and lot of paying the market but.
Terms asset recycling does monetizing your interest in Atlantic yield if that's the pop that on a go let's take it out.
More of a viable option for you guys at this stage.
Well that's the Big question, you know, we never invested in Atlanta, K yield as to allocate a whole to sell.
The thesis for Atlantica yield was to give us instant economies of scale as we built out our international presence.
It would feel a little bit like like us.
A teacher shift to sort of say now it's time to sell that I get lucky.
All of none of our assets are I'll say my personal children and so.
The that everything has to be consider for sale, but I think we would have to look at that in the context of our international operations and whether that made sense going forward I think we've spoken in the past that we'd like the assets that.
I think a yield hogs and candidly.
We'd like to have maximo visibility into the value proposition of associated with each one of those asset.
It would be our aspiration as to whether.
There it will have to say ready to our interest is is on the block to be sold I'll say this 10 seconds housing anything's changed from what we said in the in the past.
Okay.
And then on we're going to results operating expenses utilities is down year over year looks like very good cost control is that a function of timing or have you guys unable to find permanent savings in utility business Cross platform.
Well you know we look at a cost savings.
Across the utility platform as kind of one of those dials that allows us to earn our our regulatory return and it'll you know it will vary somewhat depending on.
You know with the various rate case cycles that we that we happy it happened to be in and.
I think for for this year.
It just so happens that we were in a position where we could.
Kind of move the dial back a little bit on that and help us end the year.
I think earning a pretty much your full regulatory return on a on a on an average basis across all of the utilities. So is it really is just one more dial that that will use overtime.
And Mark just cannot add a couple of words to that you know that the fundamental basis of of an opex for capex or capex for Opex shift.
Is replacing.
Caustic customers incurred from an operating point of view with general rates include for rate base and so I get the question. If you might be asking is do we see a continued a drop in in operating cost. The answer is certainly yes, as we continue to invest in income.
Capex, which is intended to to reduce those operating costs and that's how we are of the belief that we can keep customer rates caused that well doing good things for our customers and are in terms of enhance reliability and our shareholders in terms in Korea in enhanced invest.
So just to clarify a bit of both from the opex or capex, but maybe a bit more sound like would it was saying was managing regulatory lag. This year in terms of higher allocating dollars. It's a it's really both and and and that's how we look at it I mean, you know I think the over the next couple of years, you're actually going to see that play out even even more as we.
Look to decommission the coal plant build out the win in the long term thesis of that obviously is to lower customer rates now that'll be in the commodity cost line, which is a little bit higher up on the income statement, but you'll you'll see it play out the there over the next couple of years as well.
Right Okay. Thanks.
Thanks Bert.
Our next question comes from Nelson Ng with RBC capital markets. Please go ahead.
Great. Thanks, and congrats on the good quarter and also with the leadership transition plan.
The first question relates to the the.
Empires when projects you guys mentioned that two of the three projects have started construction.
The third one will start construction this quarter.
Thanks.
Is it the because of the small one or the big one that has yet to start construction like the 150 or the 300 megawatts.
I'm, just wondering I'm sure you're all underway now.
There are no now I'll say all underway. There was one final permit that was that was coming in on on Kings point. It was received in so.
There are digging holes as we speak.
Okay, No I just want to ask about timing risk.
And whether you see any issues given that there's going to.
A lot of wind projects, reaching completion by the end of this year.
Well, let me say.
That the time for that worry.
I'll say, what certainly before now and it with one that we are focused on and it's about getting quality contractors and locking up cranes that all the things that you need in order for these projects to come in on time. So the good news is while we are certainly mindful of December 30, Onest 2020, I think.
We've taken all the necessary steps to make sure that that I'll say the contractual infrastructure is there to make it happen clearly I think you heard in my prepared remarks. Obviously, we are also mindful of a of shocks to the supply chain infrastructure.
Corona virus, we're obviously mindful of those things, but I think the machine is robust and were looking forward to are you getting these projects to all done on time.
Okay. Good and then the second item might be for David on the utility side. There was I think about $10 million of other income included in EBITDA, just wondering whether that relates to.
Nonregulated services and I think I.
I think in previous years you provided.
Some services to to the military the U.S. military or army.
Yeah.
I mean, you've touched on it the exactly so and in the other income category that you're talking about it really falls into into I'll say three buckets.
You know one a I touched on in my prepared remarks, where it relates to a you know the fees earned from our SaaS Joint development project that were that we're working on and you know we will continue to.
It took to earn on that in the coming years next year, it'll probably be about two and a half million dollars as an example.
But the but yes, we also provide utility services to Fort Benning and and.
So.
That.
I wanted to to a few million dollars last year as well and the final bucket a that that falls into that is that a few the C, which as you know as a utility construct.
That that allows us to capitalize to the pro Jack the.
The regulated equity sickness as we're building out the construction projects. So it really falls into those three buckets.
Okay got it I'll leave it there and get back into queue.
Nothing.
Our next question comes from Rupert Merer with National Bank. Please go ahead.
Hi, good morning, everyone Rupert.
Like task.
View on bond yields I'm watching the U.S. tenure reached record lows today.
Obviously could be good for refinancing could be supportive of equity values can you give an update on your view for.
Your larger rate cases.
And do you see any potential impact for the low bond yields too.
To lower our always in your upcoming rate cases.
Okay, well, let me I'll start off by just a talking about the.
The impact that we see on the debt and I'll transition it over to end to talk about.
Our views on on future are always.
With respect to debt I mean, you know where you're really seeing that benefit I mean, we just issued a 30 year bond here in Canada for our New Brunswick gas utility and.
In New Brunswick, I mean, this is like fantastic news, because where that utility. It really is all about driving down operating cost for customers and making gas more competitive in that market and so that's going to be.
Saving that utility about $2 million, a year, which you can do the quick math when it's spread out over 12000 customers works out to boy almost 10 to $15 per month per customer I mean, that's a that's a tremendous benefit the work that we're able to do.
There and certainly were as far as our existing debt goes I mean, most of our debt. As you know is long term fixed so we have limited ability to to two I'll say refinance that without some horrendous make wholes. So that's likely not in the cards for us.
But we will be looking at being able to come to market.
Whenever we see the opportunity because because you're right I mean, I think we we absolutely do want to take advantage of a long term rates and we look to go for as long that tenant responsible given where they are right now so with that I'll pass it over to end. The just discuss our are we sure and.
And Rupert as a you know that.
One thinks of are always as long term proxy for equity returns in the capital market.
Many times people look at utility are always in the context of a premium over I'll say the U.S. It 10 year Treasury, historically, though I'll say that that that premium has been banded at the top end at about 700 basis points well as the U.S Treasury continues to fall.
Paul unless even say weirdly imagine if it went negative.
I don't think that I think that would obviously caused people to think about about their cap and models for our ways and so I'll say, we keep our eye on it.
As David said, though in the short term our interest costs that we bring to bear in our rate case, there kind of driven by the existing portfolio of of bonds that are issued within liberty utilities and and so I'm not sure that are are we would be immediately effective but I think your consideration is that fair why do you have to.
Be thinking about a boat those equity returns in the context of their risk free rate. So I wish I had something more insightful to offer you a rupert but just kind of the that's the kind of the way. The this thing unfolds.
Alright, very good I'll leave it there thanks very much thanks Rupert.
Our next question comes from Rob I Hope with Scotia Bank. Please go ahead.
Good morning, everyone and congratulations on the transition plans.
Thank you.
What are sort of back on a sean's initial question and just in terms of the collaborative investment.
Form you did mention that you could bring private capital to bear on international opportunities.
Any sense on how this platform could interplay with aegis or Atlantic given that potentially they could be going after similar investments.
Well when you okay, well, that's let's start by saying that in our world our.
Our international investment initiative was characterized by Q.
Two specific tactics that first was to acquire an interest in Atlantic a yield at the Holdco.
For for projects that got the developed internationally.
And the second tactic was the creation of a development group.
Well I jointly with up and go out to pursue a the origination development and construction of those initiatives that I think it comes as a as a shock we've spoken on earnings calls in the past that up and go up isn't exactly the strongest financial partners. So one could imagine that.
The to the extent that we found in Oh, we're able to take advantage of some incremental private capital to collaborate in Abengoas said in terms of Asia, what a great opportunity to continue to drive that growth going forward and so I'll start by maybe.
The you know I'm not sure that this has really candidly anything to do with Atlantic one way or the other atlantica is what it is as I've mentioned.
In answer to Sean's question, we like the assets that happened to exist in it within the Atlantic and right now I'm not sure, though it really plays one way or the other in terms of growth going forward Atlantic unto itself and maybe just to touch has a very at Atlantic onto itself is for all intents purposes.
Holdco, it's not a developer or it's not a the development capable of platform and candidly that's not what we invested in it for so I don't know fraud that kinda the additional color you're looking for.
That's great. Thank you.
And then maybe for David I'm.
Solves looks like it had to dividend of $6 million in 2019, when we're looking at the 2020 guidance any outside it's kinda contributions from development platforms that you Didnt highlight so aside from the two and a half million from sauce.
Ah that's all that we're seeing right now, but obviously, we're pretty active company. So I.
I mean.
We shouldn't be surprised if a new project happens to come along.
There could be.
There could be additional income coming from that but at the present time that that would be what we're what we're looking at.
Thank you.
Thanks, Rob.
Our next question comes from Julien Dumoulin Smith with Bank of America. Please go ahead.
I think you're on mute Julien.
Oh, Hey, sorry, guys I appreciate the heads up there and thank you again for the time answering the question was incredibly insightful.
[laughter], let me get going again here right, let's let's start again Friday morning.
So well first off congrats on the succession.
Around here and then maybe to that 0.1st easy question. How do you think about TV strategy playing into the company all together in the future I mean, obviously very very early days for utility perspective that being said you guys. There one to the venture off into non rate base opportunities. When you see it is there any thought on that front.
Given the background here well right now our Oh, I'll say, our biggest I'll eat the initiatives have been on the rate side. I mean, you can imagine a dollar of rate base is fungible with every other dollar and to the extent that we can invest that rate base in infrastructure that.
Happens to grow load that improves the economics for everybody on the system. So I'll start by saying that it to date. Our primary focus has been on investing in those states that allow the inclusion of easy infrastructure into rate base and I thought everyone and you can imagine its jurisdiction.
Specific in terms of how he the infrastructure is going to.
I'll say the value proposition the revenue model outside of the regulated construct we're obviously keeping our our eyes on that side. The Edison Electric Institute has that entire electric transportation.
Working group that we are a set of actively involved in and I agree with you I mean, if if ultimately ease progressed the way that.
I'll say on the trajectory that one thinks that they're going to be a I'm not sure that the regulated construct.
It's going to be the most effective way to do it in your view here in Canada organizations like Suncor, our pioneering a they call. It there are electric highway which is a.
Which is a coast to coast.
Network of charging stations you hear about the same things on I 95, heading south from.
From the Canadian border down to Florida. So look we're on it I it it definitely feel Julian like something we need to keep our our attention on as an entrepreneurial organization you hit the nail into head, where we're never want to like an opportunity go by the by just don't have anything at this and second beyond our focus in the regulator.
Good utility space.
All righty excellent and then.
I'll keep it the two here I'm second question going back to some of the strategic private capital you've talked about at analyst day last in December here.
Can you discuss again.
The purpose is because I hear with respect to you know some of the various commentary on the call thus far but just to be very specific about this.
Thought the private capital piece.
Was to address.
Otherwise ordinary common equity needs that you might otherwise have here.
As well as to try to show the value underlying the renewables business in the renewable platform, but talk to me talk to us broadly around the thought process behind sourcing the private capital.
What assets might be at least as you see today out sort of in the in the vein of.
Meriting sell down or however, you. However, you want I frame, it, but I guess I want to come back to private capital conversation.
Well, well I I actually not sure it's.
It's a new theme.
The the investment.
In a internationally our international investment is predicated on to achieve that I'll say the accounting treatment, we look for as having a party on the other side of owning a policy call, let a 50% interest in our those international assets you know they are generally.
Lee funded using a limited recourse project debt and perhaps in in quantities that exceed what we might we might do directly under our under our in North America to our current credit metrics and so I think the thesis was to have a strong off balance sheet.
A partner.
Hi Inn in that venture going for it.
I'll say that that as we think about a private capital and we think about infrastructure a return profile.
I think we believe that there is an opportunity to bring the character of private capital, which you can imagine might be more return focused might be more patient.
We have.
You know I'll say, a different a credit a interest.
And combine that with public capital of I'll call couldn't which is obviously a recognized global player from a from a development and operations point of view that feels like it can be a winning bid.
In international projects and so.
If it sounds like where further ahead the not it's.
Probably not correct I mean, it's just that we do believe and since we are actively out there in the marketplace.
Looking to win.
In this place.
Having having as another tool in the Algonquin toolbox.
Credit worthy.
Nerve for international development that brings an appetite with low cost capital that that was always the premise and so I think we've mentioned at our Investor day, we're committed to making that a reality and isn't there. So.
And at a great <unk> win win for Us both.
But the clarify that states, it's more of a strategic growth initiatives rather than necessarily finding someone for the lower cost of capital in order to avoid common equity or otherwise Oh, yes, no no no you shouldn't you shouldn't see this as a strategic shift from Algonquin point of view.
It isn't about substituting I'll call it their capital for our capital. It never was from an international point of view, we just want to make sure that whoever our partner it internationally or was it hamstringing our development initiatives and you know that weve sort of made historic comments that.
That historically at Atlantic has access to capital in the public capital market.
I'm not sure brings the exact same character that that private capital from a an institutional name your favorite pension fund brings.
They have their own instead of constraints around a depth of access to capital.
I know that public markets imposed.
So no you shouldn't think of this is first of all as any strategic shifts you should think of it as a continued execution on the strategy of of making sure that we have a co investor to realize on our international that's been aspirations.
Excellent. Thank you guys for the time I'll keep my head of honest there.
All right Julien thanks very much.
Our next question comes from David Canada with Raymond James. Please go ahead.
Next morning, everyone learning David.
A question here just on the regulated side of your business I'm thinking about your you made a lot of progress with your rate, making mechanisms. Some some of those key features in a you know.
When things go to plan was the with Empire granted stay you'll have revenue assurance accelerated recovery and post test year recovery at most of your major utilities I'm wondering if you see any other kind of remaking mega mechanisms that you could still at or or have you.
Gotten called the low hanging fruit from a from a regulatory lag perspective here.
Well, it's interesting well first of all this is a never ending journey because every time, we added new jurisdiction aka.
New York or New Brunswick, we're always going to be a advocating for for regulatory mechanisms that don't just reduce risk for us it reduced risk for customers to and so I think what you've seen in and if you followed us historically look back at the progression.
Of those regulatory mechanism mechanisms, David I think we've been pleased that we've we've we've continued to fill out that chartered at every year at our Investor day overtime now.
There are jurisdiction that we're continuing to add to take an advocate for those mechanisms I'd say, we're thrilled that Missouri is adopted them New Hampshire, our first rate case.
Where we're going to be a seeking.
Seeking a weather normalization that those are all underway, but every time, we added new jurisdiction, we're obviously going to be advocating for those so.
I think it's not too and it's not just in the utilities best interest in the customer has been true best interest to it I think that's why you're seeing states adopt a these constructive regulatory mechanisms such as trackers and weather normalization.
Okay, great. Thank you that's good color and then just just one other one I guess.
More generally across your utility footprint. If you had any recent I guess I R. P type discussions with the regulators and any recent thoughts on how stored in renewables.
Could fit in there and going forward.
Well you I I said I know you're aware that in Bermuda.
There is a very active IR p. discussion going on that.
Where the government's kinda tolerate a targeted a 85% renewables, we actually think the number can be definitely higher than that we are in.
Regulatory planning strategy work in California, literally as we speak this week on our California 100, this idea of bringing some additional solar and energy storage to bear to meet California, its objective of having 100% renewables.
So if that is definitely a theme I don't think ridden quote greening the fleet yet David.
That we've got another a number of initiatives underway with the whole idea of bringing a low cost renewable is to reduce cost for customers going for.
Thank you very much for that and appreciate it onto that David.
Our next question comes from Neil Calton with Wells Fargo. Please go ahead.
Hi, guys.
Hey, Neil So it's going to fall, it's yes, once all on a follow up on the supply chain. So it seems like things are still a little bit fluid but.
Just if you did have some slippage beyond that the ended this year or is there an ability you think you go the IRS soon and get an extension.
And then the second question come along these lines.
It's not.
There's the risk, especially on the regulated.
Wind farms that risk born going on common shareholders or would there be some ability to the regulator and then sort of shared with customers.
Well, let me start by saying as we could we could have a half our conversation about but this whole point, but but I'll start by sort of saying is let's say three lines of of defense against a against that the first is.
As you say well it appears sort of fluid right now.
It is something we are actively on top of.
Oh, just given the quantum up our investment in renewable energy over the course of 2020.
It's it's visible to the extent that kind of I'm sitting on a on a biweekly committee where are we kind of understand whats happening from a supply chain point of view, so Uh huh.
The vigilance is the first.
I'll say strategy and and the good news is so far.
No I think the supply chain appears to be holding up at least in our its unit you know obviously the problem is digging holes for turban in a in Kansas and Missouri, that's underway I just find Ah thanks, very much and and that's moving ahead that I think that the.
Second approach.
That you mentioned is that and maybe it's probably worthwhile.
I have a being clear is that.
Right now.
The the production tax credits.
I will say don't fall off or if the entire project isn't completed by December 30, Onest 2020.
Production tax credits are allocated on our turban by turban basis, and so to the extent imagine if one out of the 400, turbans, where erecting across the entire of fleet.
Got done in January only that turban would be if you will I'll say a under consideration for a discussion about a 100% ptcs.
If it got commissioned in January and the last one is that I think this is where you touched on is that that the December 31st 2020 is really I'm going to stay it's an arbitrary date. It's a date that was developed by the treasury and determined that the regulations that.
Developers comfort that if you're a project was done before that point in time is defacto conclusion that you did apply I'll call. It continuous efforts to get your project complete but it does it if you didn't get it done by January I by December 31st 2020 that doesn't.
Clues that you didn't apply continuous effort.
Which is really the standard and the test.
Were 100% Ptcs and so we're confident that I'll say every one of our projects we have been continually pursuing and to the extent that there was a delay it's hard not to think of carota virus as being a fair argument offer force majeure a against those continue continuous efforts and so.
I think we're probably a long way away from having to set of have a conversation about whether that's a shareholder risk.
Is that a customer risk in the context of the regulated utilities and candidly how large the risk is and so well we're mindful of it I.
I think we have confidence that we've taken all the steps to to kind of manage that risk and im not trying to beat but be hedged here. Neil. It's just that I think the solution to that is kind of managing it right up front, rather than waiting to the end and kind of having to deal with it in the context up a problem.
So I I just thing is.
We are we are cautiously comfortable and and confident in our ability to manage against the risk.
That's helpful. Thank you very much.
All right now.
You got another one unit you pay for too.
But that was both weren't at and so I'll call it.
Okay.
Thanks, Neil Neil Thanks much.
This concludes the question and answer session I would like to turn the conference back over to the presenters for any closing remarks.
Well. Thanks, everyone. Appreciate you taking the time I see where just coming up to the top are and I know everybody has things to do so with a wheel SBQ next quarter and God willing and.
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Actual results could differ materially.
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Forward looking information provided during this call speak only as of the Dina call and its Dave on the plan, we estimate projection.
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Uh huh.
Yeah and car in the United States and available on our but.
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