Q3 2020 Algonquin Power & Utilities Corp Earnings Call
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I would now like to turn the conference over to Amelia, saying, Vice President Investor Relations of Algonquin Power and Utilities Corp. Please go ahead.
Thank you good morning, everyone and thanks for joining us this morning, gross or 2023rd quarter earnings Conference call. My name is the millions thing and I'm, the vice President of the Investor Relations Algonquin power and utilities Corp.
That's the on the call today, Arb, and that's Gotta, our president and Chief Executive Officer.
And are there cost of our Chief financial Officer.
Also joining us this morning for the question and answer part of the call will be just more of it our chief development Officer, and Johnnie Johnston, our Chief operating officer true.
True accompany our earnings call today, we have a focus on local webcast presentation available on our website, a GAAP and power and utilities Dot com.
Our financial statements and management discussion and analysis are also available on the website at <unk>.
Before continuing the call we would like to remind you that our discussion during the call will include certain forward looking information, including but not limited to our expectations regarding future earnings and capital expenditure as.
As well as potential future impacts of COVID-19.
We will also refer to certain non-GAAP financial measures at the end of the call I will read and notice regarding forward looking information and non-GAAP financial measure.
We also refer to our most recent mdna filed on SEDAR and Edgar and available on our website for additional important information on these.
On our call this morning.
And we'll provide an overview of the strategic achievements for Q3 2020.
Our third will follow with the Q3 financial result, and.
And then a rule will conclude with an update on the strategic plan for the business.
The well then open the line for questions and <unk>.
I ask that you restrict your questions to two and then re queue. If you have any additional questions two out of other the opportunity to participate.
Before we turn it over to the rhythm to discuss our progress in Q3, we will have Chris true makes of farewell and Chris.
Great. Thanks a million.
Well, we started the formal part of the presentation I just like the say a few words all the analysts and investors who are on the call as previously announced I will be retiring at the end of this month and.
Well, the Alaska and all the on these calls and.
That's the co founder of the organization and the honor of sort of <unk> employees and investors and customers for the past.
The two years.
Hi, it's been an incredible it's right the part of growing the company on a single room opposite of it can be any it starts with the $12 million average company, which we are today.
I'm incredibly proud of our long term accomplishments of 32 years of growth strategy Arssix on a long term financial performance and our success of being recognized as one of the most sustainable companies and the world.
And everybody knows the leadership succession, and any organization and inevitable and therefore needs to be an ongoing initiative and.
Honestly believe telecom and succession of position of the organization for continued success going forward. In addition to recruiting and transitioning a return to the role of CEO. You have also seen that our senior leadership team and the signal.
Secondly, expanded and strengthened and leaving the organization confident the new generation of leadership will be successful and executing on the existing strategy, but probably more importantly, contributing new ideas and new energy and news the guilt.
And lastly, well I'm really proud of my role over the past 32 years of building the organization and must acknowledge the contribution of the so many talented and committed employees throughout the company and what was our directors who also been vital to the success of the organization.
Many of these individuals and not historically been the front and center on doctors and out and analyst day.
Their contribution and a man and Algonquin the company not the where we are today without their involvement on extremely back what's the what had the the teammates and I wish them the best.
The next quarter I'm going to me on the other end of these quarterly calls and an extremely interested long term shareholder and.
I'll pass it over to her and though right.
Thank you Chris.
And good morning to those who've been able to join us on the call and online.
Our diversified business model delivered stable result, and I'm pleased that we had a strong third quarter amid the disruptions due to the global pandemic.
Reporting and you'll see on adjusted net earnings per share of 15 cents compared with 14 cents per share last year.
Looking at our regulated the services group.
We are of the business, providing mission critical energy and water services to our customers.
We continued to perform well both from a financial and operational standpoint, as we navigate through the impacts of moving 90.
You Wonder resiliency of our business model the GAAP.
And he has been able to provide on interrupt the utilities services since the onset of the pandemic without compromising on the safety and the quality of those services.
As expected given the changing from Simpson patterns of our customers, we have seen some moderate and decreases in customer demand across some of our utilities.
Impacting our sort of walk through our adjusted net EPS by one cents and bringing the year to date is that the school the true two cents per share.
We have been able to offset the decline in operating profit by implementing cost containment strategies by the year to date have provided $18 million of savings already above the $50 million, we had committed for the of.
Arthur will provide more commentary on the his financial impacts.
Operations out of renewable energy generation facilities have naturally supported so-so distancing and with the Lions share of the fire renewable energy generation and under long term contracts with great and what are the Counterparties, we have not experienced any negative well the night and impact does that side of our operator.
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Overall I'm pleased with the progress we've made so far this year and I'm confident we will continue to benefit from our strong the resilient and diversified business model for the remainder of Twentytwenty.
Since our last quarterly call, we have been continuing to focus efforts on it books three strategic pillars growth.
No.
Operational excellence.
And the sustainability.
I would like to spend a bit of time now with updates from each pillar.
Firstly as you well know Algonquin and had a strong history of growth and we are committed to continuing this growth trajectory and adding value to our shareholders.
During the quarter, we announced the acquisition of Islam.
Our first international Walker of utility in Chile, with approximately 230000 custom work the Nexus.
We remain by and large on North American energy water company and and when it came to looking outside of North America, We look the long and hard and we.
We feel good about investing in Chile, with one of the highest the GDP growth rates and lawyers on the risks in Latin America.
The transaction was completed at a very attractive multiple and considerably increased the oh God of puns walking into the footprint.
As you may have seen last week.
We also completed the acquisition of the Ascendant, which true its wholly owned subsidiary where meat on electric Light Company limited is the sold the electric utilities in Bermuda.
With the completion of the Islam, and the acquisitions, which mark on 26th and 27th regulated utility acquisitions, respectively. I'm proud to say that we have achieved a significant milestone with Algonquin now having over 1 million of customer connections within our regulated footprint.
This means that an estimated 2.7 million people benefit from the essential energy and water services, we provide to their hopes.
Moving on now to operational excellence, which is all about having a laser focus on improving our day to day service delivery and if the CMC on all the areas.
I was pleased that ended the quarter, we were able to celebrate in our renewable generous and business six years without a lost time injury the injury.
That is more than a million hours worked a fantastic achievement.
To do this well Dickson real leadership and focus.
We bring the same focus do art and many acquisitions as they become part of the family, including the recent additions of the salt and built cool and I just discussed.
Not only does Algonquin out of a strong track record of closing on these acquisitions, what do we have a very specialized skill set of integrating the.
Without missing a beat in delivering the central services to our customers.
We share learnings and been doing our utilities with the aim of driving consistent improvement in the key performance metrics the drive value from our customers and investors.
The order to the do this even more seamlessly.
We are making investments in technology.
And on making good progress on our customer first of all right.
We rolled out a number of the release is in Q4.
Including improvements to our customer payment platform.
Procurement.
The employee experience and.
And are on track for our first major releases in Massachusetts, and cute June of next year.
And finally, we remain firmly committed to sustainability through the inclusion of environmental social and governance values, you know the broader corporate strategy and day to day operations.
From the earliest days of our company's history sustainability has underpinned, how we think act and operate.
By virtue of the business would and interacting with the environment, the bring energy and water do communities sustainability and green and agent.
That's why I'm. So pleased to report that last month, we released our plenty plenty of sustainability report outlined the our progress on our EPS you goals.
The pointing towards the report provides a higher level of disclose or detail around our nine priority issues.
On other enhancement includes the addition of new emissions information and such I School, three and that's the six emissions and third party verification of our 2019 emissions inventory.
We are targeting the issue our Twentytwenty climate change assessment report in alignment with the financial stability boards that force on climate relative financial guidelines in Q4.
This is the our first D.C.F.D. aligned Discloser and will lead the out how blind the admitted the considerations intersect.
Our value proposition to the communities we serve.
And to our shareholders.
We are also brown to acknowledge the study we are among the leaders of were represented the peer group with respect to 2019 fewer do and recent intensity per dollar of revenue.
Later on this call I will provide an update with respect to our major capital projects.
With that I'll pass it over to honestly the for a review of our Q3 Twentytwenty financial results on.
Thank you Erin and good morning, everyone.
And the third quarter of 2020, our business operations performed well amid the cold and my team and the.
Our third quarter Twentytwenty adjusted EBITDA on a consolidated basis was 197.9 billion, which is up approximately 6% from the 186.9 million, we reported and the previous year.
The regulated services group delivered a 145.6 million and operating profit and the current quarter, which compares to 135.3 million and the same quarter last year.
The interest is primarily due to the implementation of new rates as well as operating cost savings realized during the quarter and as the partially offset by decreased custard, the man and the impacts of cold and my team.
The renewable energy group reported Q3 divisional operating profit of 65.6 million, which was in line with last year at 65.9 million.
Higher overall production on <unk> on our wind facilities and the addition of the Great day to solar facility was offset by lower HIV, the income and non capitalized the bulk of it.
Our Q3 adjusted net earnings per share came in at the team sets, which compares to 14 cents reported last year and was above the guidance range of between 11 and 13 cents.
Our results were positively impacted the cost savings implemented during the quarter and.
Tax credits earned from our renewable generation projects.
Were partially offset by the delay and the closing of the local and the impacts of cold at 19.
Now I would like to provide a few more financial updates from the quarter.
First the.
Good morning detail on the financial impacts from Cold and 19 and on it.
As mentioned the regulated services group has experienced low reductions due to the increased demand, resulting from cold the 19th.
The impact the divisional operating profit by an estimated 4.2 million and the quarter and 14 million for the first nine months of the year as compared to the same period last year.
We have seen the impacts of the consumption pod and start to east from the early peaks of the economy has begun to reopen and.
The regulated services group continues to attract the incremental impacts related to cold and my team and we'll be seeking recovery and all of its regulatory jurisdictions.
The day, however, regulatory jurisdictions already have mechanisms in place or of approved the accounting orders and truck these impacts.
The second.
As discussed previously we began implementing cost containment strategies and response to the demand decreases caused by the pandemic and unfavorable weather.
I'm pleased to report and on a year to date basis, we achieved 18 million of the cost savings and expect to achieve further reductions of approximately five to 10 million and the fourth quarter.
Some of the reductions are occurring naturally like lower travel expenses. However, also taking price measure to recur operating expenses, where possible. So just driving efficiencies through procurement and increasing focus on capital work.
This of course comes without compromising on safety security and reliability of the services, we provide to work on.
Third during the quarter, we have accrued approximately 50 million of tax credits associated with renewable energy projects. The other half are expected to be placed in service during the year.
The self monetization of tax credits, which we have spoken about the past investor day rates continues to be on ongoing strategy to opportunistically optimized the economics from on renewable energy projects, but prudently utilizing our available tax attributes and place or as a complement to the external tax equity finance.
Now turning over to the balance sheet.
Given the potential disruption within the capital markets with the second wave of cobot and the pending U.S federal elections, we felt it was the crude salt for equity needs for this year and put us in a position of strength for next year early.
Early in the quarter, we successfully completed the accomplish this by completing on equity offering for total gross proceeds of 724 million.
On the debt side Liberty utilities issued on and all those 600 million 10 year senior unsecured notes into the U.S. 144 day market with an attractive coupon of 2.05%.
In keeping with our core value of sustainability. It qualified as the Green bar with the proceeds of the offerings of used to finance wind energy projects and other meaning the best.
We now have the complete the green financings on both the regulated and the renewable side of our business.
Considering both our equity and debt offerings of Volcker has now over 3 billion of liquidity available on its balance sheet. The day, leaving us well positioned to continue to execute on our over 9.2 billion five year capital plan through the end of 22 at the board.
When combined with our predictable cash flows from operations, our balance sheet position and remains in line with our commitment to maintain triple B flat investment grade credit metrics.
Before turning things over to root and I'd like to provide a brief update on how we are tracking to our previously provided earnings guidance.
This year, we experienced several unforeseen and uncontrollable items, including the profit 19, pandemic and a favorable weather and the delay of Gulf of clothes for the first quarter to the fourth quarter.
The work that to offset some of these impacts from the cost savings program that is already exceeding the $15 million we committed.
Well actual 2020 adjusted EPS results remain uncertain based on the results to date and certain future assumptions. We expect the finished the year around the lower end of our most recently issued guidance of 65 cents the seventies.
With that I will turn and other and things over back to remove the discuss future growth.
Thanks out of there.
Before we close our prepared comments this morning, I want to give an update on on growth initiatives.
Well then open the lines for the question and answer period.
We remain committed to our strong track record of growth with many different levers at our disposal moving.
We remain on track for our five year 9.2 billion dollar capital plan through the end up on the 24 and in fact land to exceed that with our newly announced the accretive investments in EPS up.
Not a regular the services group, we have a successful track record of acquiring utilities and have a very specialized skill set of integrating them into the Algonquin family.
We recently completed two acquisitions.
Okay, and I saw the and the acquisition of New York American water is expected to close in pointed on you want.
In addition, we of smaller organic tuck in opportunities exist the areas of our operations and contribute to our customer growth each year.
All of these acquisitions over the years and allows us to reach our latest milestone of 1 million customer connections.
On another lever of growth as we transition to low carbon energy is on greening the fleet initiatives interest.
The including our customer savings plan work construction in the Midwest continues to be underway.
And we will look for similar opportunities in Bermuda.
In addition, we expect to realize strong the rate based growth from our organic investments as we improve the safety and reliability of our infrastructure.
And our renewable energy group, we also have many growth leavers, including.
Including the ability to execute on the company's largest the construction program in our history and.
And I wanted to provide you with a couple of project updates.
Our major renewable energy construction projects are considered to be essential infrastructure in the jurisdictions in which the I look at it.
And therefore construction has proceeded throughout the day will get 90 and pandemic.
At the end of the last quarter, we had approximately 1600 megawatts of renewable energy projects under construction.
Since the time nearly 275 megawatts have been placed in service with a further 850 megawatts and expect to be to be placed and serviced by year end include.
The including 380 megawatts from our Midwest the customer savings plan.
I'm pleased to report that the great day to solar facility located in southern Maryland, and the should the Greek wind facility located Illinois have growth achieved full commercial operations.
That's true the Creek wind facility consists of 57 wind turbines and as the total capacity of 202 megawatts.
We completed the project on time and under budget with no lost time injuries.
All despite the extraordinary circumstances surrounding the global pandemic of Twentytwenty.
Our 492 megawatt Maverick Creek wind project located in Texas is advancing well with 110 of one on and 27 turbines installed and with the mean energy buyers being general Mills and Kimberly Clark.
This leads to another lever of high growth and Algonquin remains very well positioned in the C. and I speak were important long term customers are supporting the renewable growth and they are looking to achieve the on system level of the goals.
The last growth lever that I'd like to touch on is our significant focus on Greenfield development, which allows us to efficiently identify high quality and greenfield sites and advance those sites through the development process.
Our investment in development staff and tools has produced a robust pipeline of Greenfield development projects and we look forward to discussing in more detail at our upcoming Investor day.
These multiple levers of growth and I've described moving on a regular the services group and renewable energy group differentiates Algonquin from our peers and provide us with high confidence in our ability to execute on our five year capital plan year after year.
In summary.
Our three strategic pillars of operational excellence growth and sustainability will be a key foundation as we continue to build the business and continue to bring long term value to our shareholders.
We remain well positioned to continue to execute on our growth strategies, while pursuing our sustainability goals.
Guided by maximizing operational excellence on behalf of our investors and customers.
And before we open the line for questions I.
I would like to highlight that we will be hosting our annual analyst and Investor day on Monday December 14.
With Gordon the magazine restrictions this newest investor day will be of virtual event.
As always we will be providing the investment community the opportunity to hear from key members of the leadership team for an update on our operations.
Strategic direction.
And future growth plans for the book.
We hope you'll be able to join us virtually.
With that I will turn the call over to the operator for any questions from those on the line.
Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you will hear a tone. The acknowledging your request. If you are using the speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then too low.
We will pause for a moment as callers join the queue.
Our first question comes from Sean Stewart of TD Securities. Please go ahead.
Thank you good morning, everyone.
Couple of questions.
So really no and wondering if you can discuss the and the legislation and New York and in more detail and.
And how this might affect the the thinking around the the proposed acquisition of New York American water.
Sure Sean good morning.
So sort of the the legislation has.
The recently come out and we obviously digging into a lot of details.
At first glance, our conclusion is that it's primarily and.
Words.
The emergency response and started the storm response from the utilities in the steep.
And also provisions for increased.
Fines and penalties.
That the commission and can equals on on the regulated utilities.
There is also a provision in the Bill I'll first study on municipal allies Jason.
And Nick.
Our perspective.
We welcome and this kind of.
Public debate and discussion.
At the end of the day, we believe we are best positioned to provide those essentially the water services to the customers of New York American water and.
And we are looking forward to engaging with all of the stakeholders as we go through this process. We still remain confident that at the end of the day, we will be able to close the transaction you 2021.
And we are we remain very engaged with the commission and other stakeholders in the state of current.
Okay, Thanks for that detail.
The second question is for Arthur the tax credit tailwind this quarter.
Related to the Ptcs and Itcs can.
Can you give us a sense of which projects were wrapped up and that number and.
Guess, just trying to gauge how we should think about that line item going forwards and the Q4 and and into early next year as well.
Yes, sure good morning, Sean So maybe it might be useful to provide a little bit of context. The on on how we think of both the self monetization of our.
The renewable energy project and we mentioned some of this back and our 2019 Investor day, but you can think about the some of the nation really coming out of the complements to exercise.
Maximum value out of the projects as a complement the tax equity.
And you think about it on our wind projects for example, the.
The wind projects are placed and service as you know not all at once but but by replacing sort of the sequentially.
The tax equity on the funds whatever and all the projects of that fully commissions and Theres typically of both so a couple of months a lag between when the first turbine gets commissioned and starts generating tax credits to and we actually could get the tax equity funds and so that's a perfect opportunity for us to be able to use some of our internal tax appetite and.
Cash the.
And monetize some of those those tax credits.
The other places that we use the self monetization is what maybe or projects where tax equity made up the the most efficient choice to use the.
Theres certainly a cost benefit of arranging tax equity. So again, the as we look at maybe some smaller projects or projects will work and we see the cost of tax equity being a little bit higher.
We will look to potentially self monetized.
So that's it so the the basically a free.
The responsive to your question in terms of the project, it's a little bit of the all of them to say the word.
We're on commissioning this year, because if you think of both the the wind projects and we are commissioning and total of about 1.4 gigawatts of renewables and so there's there's a lot of opportunity to.
To monetize Ptcs and we also have a couple of solar projects.
The modest size the this year as well.
Okay.
Thanks, very much of the detail and congratulations Chris on the the retirement.
Yeah, Thanks, Scott the ship.
Our next question comes from Nelson the Ng of RBC capital markets. Please go ahead.
Great. Good morning, everyone My.
My first question relates to the Chile and water acquisition.
Will you be just question has or will you be doing anything different about the company in terms of like are there any capital projects at the Cup day didn't pursue that and you're now looking to revisit.
And can you just comment on the the drought situation and Chile, and how that opens up and any potential opportunities and finally.
How all of that translates to your expected rate base growth or for that investment.
Sure.
Good morning Nelson.
So look the primary.
Primarily we remain on North American.
Energy and water right. So when this transaction.
This opportunity and become available moving.
The looked long and hard because.
In terms of Theres, a lot of things, we really like the by the transaction water utilities are not easy to come by.
Significant number of of customer connections we.
We did a lot of analysis around the country risk June.
Julie as the very very solid Uh huh.
Our country risk and that is very low country risk obviously, it has a strong and stable regulatory environment.
And.
Finally, the the transaction price was of was very compelling so.
You know, we we are confident in our ability to acquire and integrated utilities.
And that we believe the is one of our the special skill set and that's the process, we're going through right now interest the integrating its volume to our overall mix and and operational excellence.
Yeah in terms of how that all six out of capital Atlanta and.
We remain committed to our 9.2 billion dollar five year capital investment plan and if not would in fact and B and our decision on.
On top of that $9.2 billion net.
Okay. Thanks, and then and this might be a previous to the Investor day, but in terms of on your renewable development side and tims are developed pipeline.
Can you just give an update in terms of how much Pete.
PTC qualified wind turbines and ITC qualified silver equipment you have in terms of just the.
Yes.
Potential opportunities to fund the future projects.
Yes, Hi, and Nelson its Jeff and we.
We have been very active as you know for years and in terms of.
The identifying and securing PTC qualified equipment.
Going back to 2016, when we secured debt of 50.
$56 million worth of equipment to.
On the.
The 100% PTC program that we're now seeing constructed.
We have transferred a lot of the effort and last year and this year and the transformer from.
The us and we are in the.
The process of securing the safe harbor for all of our.
On your pipeline.
Between what we've done in the past.
They'll be doing before year end.
Okay and.
Like what's your thoughts on that.
Like any potential extension of the.
Tax credits from a potential bite and government and and does that.
The help or hurt the what you might potentially a have already secured.
Yes, I think it's too soon to tell what the buy and government going to do although clearly should be good free and renewables and one way or another the.
The benefit of using Transformers as a big chunk of our of our qualification of those transformers will be used no matter, what the that we use them for qualification.
Qualification or whether we just use them as a critical component of the projects that we're going to be buildings and we see.
Lots of upside, but no downside.
Okay, Thanks, and I'll leave the that and get back on the Q.
Thanks.
Our next question comes from David Kizomba of Raymond James. Please go ahead.
Thanks, Good morning, everyone.
My first question here just wondering if you could provide us an update on where you are with the the update or a the appeal of the rate order in Missouri I'm, just just any any recent thoughts there and maybe if you can mention if the if you think you have or the time now to go through with an appeal before you go back and for rates.
And Missouri.
Yes, Thank you, David so and as you know.
One of the things we have appealed it.
The against the equity thickness that.
What was the given to US I mean, we believe that we have a strong case for a larger equity thickness and we of abuse.
Back this isn't that obviously is going and going through the.
The process.
And we will and we will obviously look at where that stands in terms of timing and with our next rate case, which will probably be some time in the 2021 and resort.
Okay, great. Thank you for that and then maybe just another question on and.
The cost savings you, you've done quite well and looks like you're on pace to materially exceed your target is there anything particular that the that drove that any any bucket that we you could point to.
So maybe I'll start off of this one of the John yacht.
The teams of the do it all the hard work with respect to a plenty of all the cost savings, but I mean, if you think about the cost savings, we will save the votes of 15 to 18 million or.
So far this year or the looking to save but sort of three of another five and.
The next year.
Well kind of think about it as a as broken down and maybe the three buckets one.
The expenses that basically are naturally would of been save the anyway to think about the lower travel expenses and so.
The other one is the maybe a bit of a deferrals of such as a holding Brazil.
The positions open and the.
And the last bucket is the is really.
Really taking a hard look and.
And really trying to find efficiencies, whether looking at our procurement processes and so.
Looking at ways to deploy capital et cetera, those is really the those those three buckets of that.
On the cost savings come from.
John do you want to add some color.
Yes, Thank you off the morning, David and somebody and not a huge amount more of the out of the may be I think I was getting visibility of the challenges that we have with weather in the first quarter, we will already sort of mobilizing how we could counteract that through the rest of the year and suddenly the earliest.
And it's kind of it started to kick in and let me just increase the focus across the team of making sure that we didn't leave any study in him to and so for the rest of the <unk> and <unk>.
We can see the results through the.
Also you covered off the the really the buckets of where the savings are coming from a pretty well.
Great. Thanks, everyone appreciate and I'll get back in the queue.
Hi, David.
Our next question comes from Julien Dumoulin Smith of Bank of America. Please go ahead.
[noise] and good morning, Tim and and again, congrats Chris and thanks for the time and opportunity I'm just wanted to talk to you guys about growth trajectory and thoughts around and obviously I'm hearing you guys talk.
Very confidently about the of the Capex outlook, how does that translate back to the 9% to 11% growth that we've talked about off of 2019 base of 62 cents. How are you thinking about that capex relative to the earnings trajectory. There and then you guys had last year because it sounds like everything reaffirming the trajectory. Despite some challenges the I just want to understand.
And how you're thinking about that and then potentially even more as you've alluded to a night and I apologize I know you of an analyst day around the corner here, but just trying to get a little bit perhaps of a preview of you as you think about on the earnings implications too.
Yeah, Yeah, Julie and good morning, Yeah.
I was hoping you'd asked me that question during our Investor day, but [laughter]. The live let me give you a preview and unique is look I mean did the were onetime balance downsides and we faced this year like moving and whether.
Especially for the day.
George and not anticipated and on the local do is really of statuary statutory.
Requirement the closes by March for Us and that was really part of the final assumption and then so the.
The deal is certainly a and b.
Back to the financials. However, what we believe is the what we provided to the to the market where the five year 90, 11% a giggle.
Giggled rules and we remain confident that we will.
But we're going to be able to bounce back in the 2021 and again I look forward and providing a lot more details on the during Investor day.
Absolutely. Thanks, Thank you and if I can follow up on that perhaps a little bit nearer term as you think about that trajectory of the 911% not just from the 20, but the 21 should we still think about being able to achieve that trajectory off the 19 base and 21.
Obviously, there's a lot of moving factors and 20, you alluded to the second ago, including some new found the cost savings in the back half of the year here. So just curious on how the sustainability of those efforts into the 21 and ultimately if a good proxy for now it should still be on the implied CAGR for 21 and guidance.
Well for now Julian on I would say.
I would still stay with the analysis of that 90, 11% cagar growth or.
Obviously, the like you alluded on a lot of different moving parts and you know.
The cost savings the.
We also acquired as part of which was not part of that five year plan and with all of that and we believe we're going to be getting back on track and that one's going you on but again.
Those are the all of the Dirty details, we look forward the providing you during investor day.
Got it so it sounds like given some of the incremental points, you're saying, perhaps at least that.
Within that range is what I would say Judy.
Excellent. Thank you again for the clarity and look forward to the analyst day in a few weeks all right take care of your bank.
Packaging and.
Our next question comes from Rob Hope of Scotia Bank. Please go ahead.
Good morning, everyone and congratulations on the upcoming retired the Chris.
Hey, Thanks Tyler.
Maybe just the start and kind of your and your international strategy.
And it looks like you've made Oh, you have now purchased an option to buy the rest of day Jess.
How are you thinking about some of the structures you have and the organizations to facilitate the international growth we've seen you.
Do some potential international renewables on your own balance sheet I saw was on your on balance sheet, how does Atlanta cash and age and it's kind of fit into the structure of <unk>.
Sure. The good question Thanks, Rob.
So the bio ours and we.
We plan to do all regulated utilities and North American.
The business of two Algonquin right, we were very happy with our investment in the Atlantic.
A very strong long term assets with a weighted average of lot of human the life of 18 years.
And so so we like the that the and low.
Long from these are on all of that goes on infrastructure.
And so when it comes to the international non regulated.
Assets, we really look at it on on the case by case basis as to whether it makes more sense of for a long Glenn do.
Go after that and and Oh President vs versus the Atlantic and so it really becomes a case by case the decision.
By and large we believe that if its the if it's anything outside of North America and non regulated.
Regulated that Atlantic on media.
It is and to pursue the look but not of absolute.
All right how are you got the.
Your answer and on but.
Yes, the there's the absolutely absolutely the formula, but other than the that all North American.
ER and regulated business will be under the auspices of hold on.
Alright, perfect and then just circling back on the kind of the original tax question.
How should we think about those $50 million of incremental tax benefits will be realized in the Q4, and then are you in essence kind of realizing future tax savings so in essence.
Yeah, the 2020 cash and 20 tax guidance I gave at your Investor day, and looks like Yelp outperformed that but potentially at the expense of future tax expenses.
Yeah sure. So so so the maybe maybe take the question and of course, the so the the.
The answer the first question is yes, I mean, the of the $50 million is going to apply to the project. The that will be placed and serviced this year and that will be on had been placed and serviced.
This year is the certainly [noise].
In terms of.
Whether where our.
Call it shifting.
The fact that I would say.
No I mean I mean.
Certainly the the the year and we monetize some of the assets that you get you get to a bigger shift but in essence. It is the tax.
It is true tax savings for us and so on of course.
Well the the basis, it's not like we're shifting our tax liabilities dealt to future years.
That was your question, the retro and fold and correctly.
No that was great. Thank you.
Our next question comes from Rupert Merer of National Bank. Please go ahead.
Hi, good morning, everyone and and congratulations Chris on the retirement and the success of that I'll call and.
Great. Thanks, Robert.
And if I could could start with a just a follow up on age of how should we think about your partnership with having go and going forward.
And and how many many changes and the ownership and ensure the creeks out of it. It's completed I believe that and was acquired by interest.
Yes sure.
Good morning.
Look and it's pretty public knowledge that I've been what has been a challenging bognor right I mean, the whole market news.
The the restructuring and other challenges that they are going through.
So.
Consequently, the.
And just has been a challenging vehicle for us, but despite that the there are a series of development projects that the aegis has under the umbrella into the.
On a pipeline of solar development of Greenfield development policies and Spain.
The last year, because I've been doing a lot of.
Solar project in Colombia, and that's under construction with that kind of coming into the commercial operations in Q1 and Theres other projects in Latin America and the that the are following what the I wouldn't be the force to admit that with the I've been wise on our as our partner it has not been the most effective.
The equals lots.
So if and if you do buyouts and go as interest and NHS, what what does Hs, what could and look like in the future and one of the of the implications on some of the other projects the two.
And then development NHS.
I think we will be the turning aegis of them, which wars tool into and.
International development pipeline.
We have a very very strong the.
The development team that covers a regulated and everything and North America.
Interest was always supposed to be that vehicle and again the will be the first of all I meant that the does not been extremely effective on on that from what we would look to reposition the strength on it and via the once more robust the unit pipeline on the development project in the similar to what we have in North America.
The based on the earlier comments about the non regulated business and.
Assets and North America.
We anticipate that the development projects and they just will ultimately be held that the Algonquin low.
Uh huh.
The interest is a development of the right will do is do you have all of the bugs are actually.
Held and operated is is the.
The choice and we have a whether that's the <unk> with Algonquin, whether that be and without the plans, we got and but again by and large our view is that everything North America and everything.
In the regulated will will be yeah owned and operated by Algonquin and what's the new is more around international assets and I don't know, Jeff do you want to add and you can do that I think maybe the only other thing Rupert I might add as you and asked about the the sugar Creek auction and and like.
And number of our construction projects, we maintain and auction of Franklin Mint and and option to the buyout the remaining 50% and and we fully anticipate and now that Weve completed construction on that project that we will be.
Firing on a percentage ownership within all of them.
Great. Thank you and then just quickly on the on CSP wind farms and got some month of wrestling to register on the quite soon can you remind us what and what the impact will be on your on reported results when those hit the ceiling and and what the impact of the plant and service accounting maybe.
Much of that should be coming on line.
By the end of this year with Google the 19.
We have certainly been challenged by a with the our global supply chain issues.
Issues of but the.
Despite that we remain confident that the the do I'm not going to the any material delays on some of the of the door volume that the expenses delays and are.
In getting due to the U.S. and to the project site. We remain confident that we've got to be able to get all of them online in Q1 of the next year.
Okay and I'll leave it there thank you.
Thank you.
Our next question comes from Mark Derby of the Sea RBC capital markets. Please go ahead.
Thanks, Good morning, everyone and.
On the retirement Chris.
Following up on and on a repurchase a question on.
Pretty setting with to file sometime around here and to try to get the coverage of the investments for the for the the wind and the rate day said Empire, but from me here and that's still the plan or maybe just go back to what his question around and of course, I can and what is the regulatory plan to get cash recovery and then maybe arc and you guys started occurring until the thing income or the.
And in a year of was there and sort of.
Oh sure Mark I'm going to start and maybe turn it over to John for more color on on on this one so no.
As you know we looked at for a bit.
The the plant and service accounting, which does give us some more flexibility in terms of exactly when we have to go back to a rig and so for repurchase in Missouri.
And the side gives us the.
The.
The the ability.
To the fact wouldn't on on <unk> bees, and Lance and coming to service. So would that Johnny do you want to add more out of color to that.
Yes, so as the the Tom's go lives were.
The effectively true up the.
The next rate case 85 cents of.
The depreciation from the date so they go into some of it. So I think as this you could and looking to fall on the rate case net.
The next early next year once the clubs so operational on say, we'll see them sort of the fully represented in rights as they do and so that's and 2022.
So there will be so somewhere and sort of lag the recovery a little bit on her and [noise] too.
Well [laughter], 85% of it effectively were able to track the from the soonest. They go into service I'd say the majority of the lag is is picked up I guess, the the new rates will ultimately be effective.
20, it's way too, but we.
We will be able to soon have a regulatory accounts, who are to true up post.
Gross that rate case.
And our current any comment on and they should lead the contributions, let's say circa <unk>. They show the B will be we'll be able to start.
Yes.
Uh huh.
Okay.
And then now with the OCO close the meeting and get Us a the more of a fall from of data type Investor day, but is there any guys and share in terms of of implementation of the ERP and and timeline for sort of hit the ground running in terms of incremental investment and moving to a tick on the way. They set the OCO is it to the 2021 of the if I just see income at all and vessels or is it the little bit.
The awful lot.
Yes, the Rupert.
In the sense. Thanks for that question and I was you know we just closed the the transaction so with the well had 19 Oh you know one of the impacts has been that I've been level of engagement of.
It was not as robust as we knew that of Wolfe.
And in fact, the Johnny and some of our other a uniform and just getting back from Bermuda.
The the restarting that the conversation obviously, a the economy of Bermuda would.
I would like to see investments and the earlier the better.
We have proposed and integrating the fleet initiatives, we were excited about that given the very high cost of.
Offline electricity and on on the island as well as the fact that much of it is Oh, you know generated by with the diesel engine. So we do see a lot of school of.
For the remainder of feed initiatives, we will continue the doors the interactions are of a with the government and hopefully.
We'll be able to structure something in.
And that brings you can do on the timeframe.
Okay Thats true.
Thanks.
Our next question comes from Ben Pham of BMO. Please go ahead.
Hi, Thank you.
In spite of it more context on.
Grand a day and the how much you.
The spent so far.
On the recover.
Sure. So congrats on beyond just the you didn't give you some context of was a five.
Pipeline and how it was LNG storage facility and we went to the.
The wider grade Len and.
Developing that Oh facility.
But at some point of their big became pipeline capacity available and that was not there before so obviously you were looking at and we want to do the make the best investment from that's the right from our customers as well. So we have basically form the of that long from a pipeline capacity. So.
The the granite ridge applauded as it was and where would you was too it is not and not going to be the same kind of a profit. Although we do think that there's going to be a quite a bit of a investments required to strength and you know sort of some of the the reliability.
Of the of the system and pipelines thinks of the source of we do believe that the there's still room for us on investment, but it's not going to be the same school.
Before I don't know, if Johnny or just want to add anything to that.
Yeah, and I would just add the the.
I think you've done a great job of summarizing what we did and the and how it turned out the the creating that option, which was the option of being able to get additional supply to meet our customers' growing needs through the pipeline and the LNG and ultimately gave us and very strong negotiating position the benefit the customers and so on the.
The investment that was made we believe created value and.
We're working on.
Okay.
Our getting.
Oh, the feedback the they see that value and the creation of was there.
In addition to we will need to put in the resiliency investment to facilitate the incremental capacity from the price.
Okay and.
Okay kind of go back to the.
Stems from the tax question.
Oh, I don't think the getting myself more waiting at the Ash had and I, just I wanted to confirm and as.
The attacks crew and that the latest here your past guidance around.
Becoming a tax at the investor yourselves because of your corporate tax rates going up or is this.
Basically accruing ahead.
Really the their share of of the tax equity investors attributes at a time, where it and they come in.
Hey, good morning, but so the mark.
Yes, yes, it is us becoming our old tax equity investor.
Our non core.
And to get the cash tax payer, but due to the.
Do but you ourselves being a cash taxpayer a few years out so the sun.
Thats the it is taking some of those the tax attributes.
True.
The will use and we could see ourselves using the that's the.
Three years.
Okay, and and I'd make sense on.
And I and all of us want it and the Friday and when you.
I'm on quite thing that yourself, the coming and I've asked her and that was.
And that always and your Capex plan.
And financing.
And you have to tweak that and.
Okay.
I would say, we do it call it opportunistically again to optimize around the.
The tax equity investments that are there sort of so much the yes. It it's thus form a portion of our plant, but again it.
We kind of think about it opportunistically because the summer. So we don't all of the call it on going back to the Ptcs.
How long of the lag is going to be between the where the first turbine. Its commission that went off of the talks equity funds and so the.
It is a little bit of fluid Ah, but but we'd be certainly use that as of June GAAP.
Okay, and then maybe on the round up that you said that aired and when when the of course introduced at the bit more aggressively and here is the fact that you mentioned that the attack the tax rate could be five per cent per.
The first though and I mean the.
The moved up the 10%.
And the last Investor day, so as.
And as they say a crew of tax credits.
Hey, how are you going back the at 5%.
Two years ago or is that that 10% of sale I result.
On the to use going forward.
Yeah, I think certainly in the near term here what were you added of self monetizing attributes that does push for tax rate.
No.
The the extent to and you look at on an overall.
Run rates a tax rate called the.
We've worked did and so monetize it.
Anything.
So.
The next few years.
Guidance given the.
Yesterday the.
Okay.
Yeah, that's very helpful. Thank you everybody.
Thanks Ben.
Our next question comes from Richard Sunderland of JP Morgan. Please go ahead.
Hi, good morning, and thanks for the time here, maybe starting on a first with the Sealy acquisition.
Curious to get some some color on the on environmental issues that the assets of pad and maybe risks and opportunities around that's the surgically under your ownership going forward.
Sure.
Good morning, Richard So.
So obviously the during our due diligence and do that some of the things that we looked at the very carefully and also no incident Oh also so on some of the RIN water spills the better have upward.
And you know our due diligence was really around out if there's something fundamentally broken out of these one time the issues.
The issues and that are fixable, and yet and we made the determination that you know oh by the by strengthening the culture of the safety security reliability within ESS out on that we would be able to get out of the company back on track and and make sure that we did not incur those kinds of.
Incidents in the future.
On the right and what has happened in the past Doug has all the that impacted and solid in terms of Ah Ah, it's a reputation and and the the view of the community around the south and so we clearly have I worked on carve out, but we feel confident that a with the hour.
Oh sort of operational excellence, a that we were going to be able to get that a company back.
Back on track.
Great. Thank you and then.
You touched on this early of regionally around kind of the growth outlook, but just thinking about the dividend specifically any updated thoughts on the dividend policy good and the elevated payout ratio of this year on.
Certainly appreciate that there are the one off index 2020, you spoke to but how to think about that going forward.
That's true good morning, Richard the start there. So it's the maybe I'll try to take on so yes. Some of your observation our payout ratio is maybe a bit higher than the the U.S. fears of and maybe over the years as well.
Oh lets say kind of keep in mind. The there were also a one third IP business.
Part of your utility.
In terms of the the maybe we'll talk a little bit more of both the or Investor day, and maybe what I'll leave.
Today. It is a we certainly you the dividend growth of the.
So part of it.
Total shareholder return.
Right.
Great. Thank you.
Thanks Richard.
Our next question comes from non Shibu of industrial and <unk> Securities. Please go ahead.
Hi, and good morning, I'm, just going back to the the cost savings initiatives are on.
Arthur appreciate the details are provided on on sort of the three different buckets of where those are coming from how much of the <unk>, when you say and sort of a recurring or on a run rate.
<unk> savings that you think you can maintain and out into next year and and beyond.
The that's the that's a tough question.
And it's a certainly probably not the zero, but.
It all depends on kind of what the the new normal is Ah Ah.
Certainly the.
Built and some efficiencies, but as I said with the there's also maybe a little bit of a.
Well the powder type of type costs of the.
On the seat.
How much of that is the ability to trade as they call it into the next year, but but I mean, I think certainly the it's not zero in terms of the cost savings we've identified.
It could be sustainable.
Okay, and it might be a bit of solely to tell how things will play out but do you think the or other sort of savings that you are looking at that and maybe being able to target for next year too.
We're always looking at Cvs is probably the answer the NRG I mean, that's one of the leaders we have on Tonight I talk about operational excellence and.
You know if it's all about non how how can you maximize the output of the given a it's a set of inputs and that's I'm not that formula and something we look at the all the time absolute.
And and especially this year given.
The the significant impact on our on our EPS was there was no good day, ladies and and pools and and weather.
That is something we broadly of turned over at least on a.
And in the company, but but that's something that we look at it all the time.
Okay. Okay. Thanks for the detail and and just the can you just remind us I think you of a another big year coming up the next year for rate filings other than the Empire rate case can you just remind us what are some of the other major.
Filings that you expect to to complete the next year.
Joining the you want to take that.
Yes, I mean, there's no doubt the the the biggest spot and we got the next year is the is the NPL rate case as Youre, probably aware of we're in the middle of Oh, and the G North rate case.
On the moving and then we've got a couple of of the rate case filing. So we're looking to do next year, but the smaller so it seems like a illinois gas.
A rate case, so yeah I think the you got the big one the of the big on coming through is already the Genosse capex.
Okay. Okay I'll leave it there thank you and I'll Echo the comments the clutch rests on the autonomous.
And you're not you.
This concludes the question and answer session and we'd like to turn the conference back over to Mr., Ben Scott of for closing remarks.
Thank you operator, and thank you everyone for taking the time on our call today with that lease day on the line from the disclaimer.
Thanks true artists.
Our discussion during this call contain certain forward looking information income.
Moving but not limited to our expectations regarding future earnings potential future cost savings future placed in service date and potential teacher impact of current.
This forward looking information.
Based on current assumptions and.
Moving those described and our most recent mdna filed on SEDAR and Edgar and available on our website and is subject to risks and uncertainties that could cause actual results to differ materially from historical results or we don't anticipate and by the forward looking information.
Forward looking information provided during this call speak only as of the date of this call and its day on the plans believes estimates projections expectations opinions and assumptions of management as of today.
There can be no share the forward looking information will prove to be accurate and you should not place undue reliance on forward looking information.
We disclaim any obligation to update any forward looking information or to explain any material difference between subsequent actually that and such forward looking information.
Except as required by applicable law. In addition, during the course of the Oh, we may have refer to certain non-GAAP financial measures, including but not limited to adjusted net earnings adjusted net earnings per share or adjusted net yeah I.
Adjusted EBITDA adjusted funds from operations and divisional operating profit.
There is no standardized measure of such non-GAAP financial measure and consequently apex method of calculating the measures may differ from method and use the other company and therefore, they may not be comparable similar measures presented by the company.
For more information about both the forward looking information and non-GAAP financial measures, including a reconciliation of non-GAAP measures to the corresponding GAAP measures. Please refer to our most recent mdna filed on SEDAR, and Canada, or <unk>, and the and 88 and available on our website. Thank you.
This concludes today's conference call you may disconnect. Your line. Thank you for participating and have a pleasant day.
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