Q3 2020 Algonquin Power & Utilities Corp Earnings Call
[music].
Thank you for standing by this is the conference operator, welcome to the Algonquin power and Utilities Corp, 2023rd quarter Earnings Conference 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 questions.
To join the question queue you May Press Star then one on your telephone keypad.
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I would now like to turn the conference over to Amelia, saying the.
Nice President Investor Relations of Algonquin power and Utilities Corp. Please go ahead.
Thank you good morning, everyone and thanks for joining us this morning for our 2023rd quarter Earnings Conference call. My name is the millions thing and I'm, the Vice President of Investor Relations Algonquin power and Utilities Corp.
That's the on the call today are built on SCADA, our president and Chief Executive Officer, and Arthur talk because of our Chief Financial Officer.
Also joining us this morning for the question and answer part of the call will be Jeff Norman Our Chief Development Officer, and Johnnie Johnston, our Chief operating officer.
To accompany our earnings call today, we have a supplemental webcast presentation available on our website oclock on power and utilities Dot com.
Our financial statements and management's discussion and analysis are also available on the website as well of SEDAR and Edgar.
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 in capital expenditures 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 I notice regarding forward looking information and non-GAAP financial measures.
We also refer to our most recent mdna filed on SEDAR and Edgar and available on our website for additional important information on these items.
On our call. This morning are rune will provide an overview of the strategic achievements for Q3 2020 on.
Arthur will follow with the Q3 financial results and then the Rune will conclude with an update on our strategic plan for the business.
We will then open the line for questions and I ask that you restrict your questions to two and then re queue. If you have any additional questions to allow others the opportunity to participate the.
Before we turn it over to a room to discuss our progress in Q3, we will have Chris Gerard makes on farewell humor, Chris.
Great. Thanks Amelia from.
Before we start 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 it will be the locks on all of the on these calls.
The co founder of the organization had the on on a surgeon on employees investors and customers for the past during the two years I have the hi, it's been an incredible strength the part of growing the company on the single room opposite of it can be any it starts of the $12 billion asset Rich company, which we are today.
Im incredibly proud of our long term accomplishments on 32 years of growth strategy. Our successful long term financial performance and our success of being recognized as one of the of sustainable of companies in the world.
As everybody knows the leadership succession in any organization is inevitable and therefore needs to be an ongoing initiative honestly believe telecom on succession of the position of the organization for continued success going forward. In addition to recruiting and you're transitioning a return to the role of CEO. You have also seen that our senior leadership.
The team has been significantly expanded and strengthened I'm, leaving the organization confident that the new generation of leadership, we'll be successful at executing on the existing strategy, but probably more importantly, contributing new ideas, new energy and new skilled.
And lastly, well I'm really proud of my role over the past 32 years from building the organization I must acknowledge the contributions of so many talented and committed employees throughout the company.
Well the is our directors, who have also been vital to the success of the organization.
Many of these individuals by non historically the the front the standards of on factors and now an analyst day.
Their contributions have been of men and Algonquin is simply not the where we are today without their involvement on extremely thankful to have had some of the teammates and I wish them the best.
The next quarter I'm going to be at the other end of these quarterly calls of an extremely interested long term shareholder.
I'll pass it over to Irwin, though right.
Thank you Chris.
And the good morning.
Due loans, we've been able to join us on the call and online.
On our diversified business model delivered standard the result, and I'm pleased that we have a strong flow Walker.
Disruptions due to the global Bond index.
Bobby do you see on adjusted net earnings per share of 15 cents on probably.
The 14 cents per share last year.
Looking more of our recommended the so this is a true we handle the business by the mission critical energy and water services to our customers.
We do have people from low wolf from a financial and operational standpoint, asthma navigate through the impacts of moving 19th.
Do you one of the resiliency of our business model. The company has been able to provide on interrupted utility services since the onset of the pandemic without compromising on the safety and quality of those services.
As expected given the changing consumption patterns of our customers.
We have seen some moderate the decreases in customer demand across all of our utilities.
Impacting our third quarter adjusted net EPS by one cents and bringing the year to date the effects of cool the two cents per share.
We have been able to offset the decline in operating profit by implementing cost containment strategies that year to date have provided $18 million of savings already above the $50 million, we are committed for the year.
Also we will provide more commentary on the his financial impacts.
Operations at all the renewable energy generation facilities have naturally supported so sort of just dancing and would the lion's share of our renewable energy generation under long term contracts with great worthy Counterparties, we have not experienced any negative over the 19 impacts to that side of our operating.
Yes.
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 ebooks three strategic pillars grew.
Gross.
Operational excellence.
And sustainability.
I would like to spend a bit of time now with updates from each pillar.
Firstly as you will know on.
I'm going to have the 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 assault.
Our first international water utility in Chile, with approximately 230000, plus don't work the Nexus.
We remain by on Lars on North American Energy water company and and when it came to looking outside of North America, We look the long and hard at picks up.
We feel good about investing in Chile, with one of the highest the GDP growth rates and the lowest cost of three risks.
In Latin America.
The transaction was completed at a very attractive multiple and considerably increases organic loans water utility footprint.
As you may have seen last week we.
We also completed the acquisition of Ascendant, which.
Which true its wholly owned subsidiary Bermuda Electric Light Company limited is the sole electric utility in Bermuda.
With the completion of the assault on book will acquisitions, which mark our 26th and 27th regulated utility the acquisitions respectively.
I'm proud to say that we have achieved a significant milestone with Algonquin now having over 1 million customer connections within our regulated footprint.
This means that an estimate of 2.7 million people benefit from the essential energy and water services, we provide to the hopes.
Moving on now to operational excellence, which is all about having a laser focus on improving our digital service delivery and efficiency on all areas.
I was pleased that in this quarter, we were able to celebrated in our renewable generation 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 Dick's real leadership and focus.
We bring the same focus to our M&A acquisitions as the become part of the family.
Including the recent additions of assault and build on that I just discussed.
Not only does Algonquin to have 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 redoing, our utilities with the aim of driving consistent improvement in our key performance metrics the drive value for our customers and investors.
The order to reduce even more seamlessly.
We are making investments in technology.
And on making good progress on our customer first program.
We rolled out a number of releases in Q4, including improvements to our customer payments platform procurement income.
The employee experience.
And are on track for our first major releases in Massachusetts in Q2 of next year.
And finally, we remain firmly committed to sustainability through the inclusion of environmental social and governance values in of broader corporate strategy and day to day operations.
From the earliest days of our company the history.
Sustainability have underpin how do we think act and operate.
By virtue of the business when interacting with the environment to bring energy and water do communities sustainability in Green on Asia.
That's why I'm. So pleased to report that last month, we released our Twentytwenty sustainability report outlining our progress on our EPS the goals.
The pointing toward the report provides a higher level of disclose or detail around our nine priority issues.
On other enhancement includes the addition of new emissions the from reasons, such as schools, three and SS six emissions and third party verification of our 2019 emissions inventory.
We are targeting to issue our Twentytwenty climate change the assessment report in the.
The alignment with the financial stability Board's task force on climate relative financial guidelines in Q4.
This is the our first CCSP aligned Discloser and we'll lay out how climate related considerations intersect with our value proposition to the communities we serve.
And to our shareholders.
We are also browed to acknowledge that we are among the leaders of our representative peer group with respect to 2019 skewed to the nuisance 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 also from a review of our Q3 Twentytwenty financial results on.
Thank you Aaron and good morning, everyone.
In the third quarter of 2014, our business operations performed well amid the cobot like team endemic.
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 in the previous year.
The regulated services group delivered a $145.6 million in operating profit in the current quarter, which compares to $135.3 million in the same quarter last year.
The increase 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 customer demand from the impacts of cold of 90.
The renewable energy group reported Q3 divisional operating profit of $65.6 million, which was in line with last year of 65.9 billion.
Higher overall production or on our wind facilities on the addition of the Great day to solar facility was offset by lower HIV, the income and non capitalized the bulk of cost.
Our Q3 adjusted net earnings per share came in at the 15 cents, which compares to 14 cents reported last year and was above our guidance range of between 11 and 13 cents.
Our results were positively impacted by cost savings implemented during the quarter of tax credits earned from our renewable generation projects, but were partially offset by the delay in the closing of the local and the impacts of COVID-19.
Now, we'd like to provide a few more financial updates from the quarter.
First bid.
Even more detail on the financial impacts from coal the 19 pandemic.
As mentioned on the regulated services group has experienced load reductions due to the increased demand, resulting from coal the 19.
This impact the divisional operating profit by an estimated $4.2 million in the quarter at $14 million for the first nine months of the year as compared to the same period last year.
We have seen the impacts on consumption patterns start to ease from the early peaks of the economy has begun to reopen.
On a regulated services group continues to attract the incremental impacts related to pull the 19 that we'll be seeking recovery of all of his regulatory jurisdictions.
The date total regulatory jurisdictions already have mechanisms in place or of approved the accounting orders the truck these impacts.
Second.
As discussed previously we began implementing cost containment strategies in response of the demand decreases caused by the pandemic and unfavorable weather.
I'm pleased to report on on a year to date basis, we achieved 18 million on the cost savings and expect to achieve further reductions of approximately $5 million to $10 million in the fourth quarter.
Some of the reductions are occurring naturally like lower travel expenses. However, also taking proactive measures to recur operating expenses, where possible such as 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 our customers.
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 of during the year.
The self monetization of tax credits, which we have spoken about of past investor day rates continues to be on the ongoing strategy to opportunistically optimized the economics from our renewable energy projects, but prudently utilizing our available tax attributes in place or as a complement to 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 us federal elections, we felt it would be prudent to solve for equity needs for this year and put us in a position of strength for the 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 it all growth 600 million 10 year senior unsecured notes into the US 144, a market with an attractive coupon of 2.05%.
In keeping with our core value of sustainability. It qualified as a green ball with the proceeds of the offering to be used to finance wind energy projects and other green investments.
We now have to complete the green financings on both the regulated and the renewable side of our business.
Considering both our equity and debt offerings of also has well over $3 billion of liquidity available on establishing the the leaving us well positioned to continue to execute on our over 9.2 billion five year capital plan through the end of 2024.
When combined with our predictable cash flows from operations, our balance sheet positioning remains in line with our commitment to maintain triple B flat investment grade credit metrics.
Before turning things over to the Rune 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 on controllable items, including the total 19 pandemic on a favorable weather as the delay of Gulf of clothes for the first quarter to the fourth quarter.
The worth of to offset some of these impacts from the cost savings program that is already exceeding the $15 million, we committed to it.
All 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 to 70 cents.
With that I will true and of as things over back to route to discuss the future growth.
Thanks Oliver.
Before we close on 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.
We remain on track for our five year 9.2 billion dollar capital plan through the end of the under 24 and in fact plan to exceed that with our newly announced accretive investments in EPS up.
Now Rignet services group, we have a successful track record of acquiring the utilities and have a very specialized skill set of integrating them into the Algonquin family.
We recently completed two acquisitions the.
Total and ESOP and the acquisition of New York American water is expected to close in 2021.
In addition, we of smaller organic tuck in opportunities in existing areas of our operations that contribute to our customer growth each year.
All of these acquisitions over the years have allowed us to reach our latest milestone of 1 million customer connections.
Another lever of growth as we transition to low carbon energy is our greening of fleet initiatives into.
Including our customer savings plan were construction in the Midwest continues to be underweight.
And we will look for similar opportunities in Bermuda.
In addition, we expect to realize strong the rate base growth from our organic investments as we improve the safety and reliability of our infrastructure.
In our renewable energy group, we also have many growth levers into.
Including the ability to execute on the company's largest good 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 are located.
And therefore construction has proceeded throughout the book of 19 vendor on it.
At the end of the last quarter, we had approximately 1600 megawatts of renewable energy projects under construction.
Since that time, nearly 275 megawatts have been placed in service with the further 850 megawatts, we expect to be to be placed in service by year end income.
Including 380 megawatts from our Midwest 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.
The should the peak 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 of 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 127 turbines installed and.
And with the mean energy buyers being general Mills and Kimberly Clark.
This leads to another lever of our growth has Algonquin remains very well positioned in the CNS space were important long term customers are supporting the renewable growth as the are looking to achieve the on sustainability goals.
The last growth the legal that I'd like to touch on is our significant focus on Greenfield development, which allows us to efficiently identify high quality 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 that we look forward to discussing in more detail at our upcoming Investor day.
These multiple levers of growth that I've described both in 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 of 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 14th.
With quarterly of 19 restrictions this year's 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 April.
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 the will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you'll 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.
We will pause for a moment as college during the Q.
Our first question comes from Sean Stewart of TD Securities. Please go ahead.
Thank you good morning, everyone.
Couple of questions.
So you know I'm wondering if you can discuss the the legislation in New York in more detail and how this might affect the thinking around the the proposed acquisition of New York American water.
Sure Sean good morning.
So the the legislation has the.
Recently come out and we obviously digging into a lot of details.
Yes at first glance, our conclusion is that it's primarily and.
Words.
The emergency response install a storm response from the utilities in the state.
There is also provisions for increase the.
Fines and penalties.
That the commission income equals on on the regulated utilities.
There is also a provision in the bill for a study on the municipal Allison.
And from our perspective.
We welcome this kind of sub.
Public debate and discussion at the end of the day. We believe we are best positioned to provide those the essential water services to the customers of near the American water.
And we are looking forward to engaging with all of the stakeholders as we go through this process. We're still remain confident that the at the end of the day, we will be able to close this transaction the 2020 one.
And we are we remain very engaged with the commission and other stakeholders in the state currently.
Okay, Thanks for that detail.
The second question is for Arthur the the tax credit tailwind this quarter related to the Ptcs in Itcs can you give us a sense of which projects were wrapped up in that number and.
I guess just trying to gauge how we should think about that line item going forwards and.
The Q4 and into early next year as well.
Yes, sure good morning show the.
Maybe might be useful to provide a little bit of context. The on on how we think about the self monetization over the.
The renewable energy project you mentioned some of this back in our 2019.
Investor day, but when you think about the so most of the position really coming out of the complements to exercise.
From the value of our projects as a complement the tax equity.
Think about it on our wind projects for example, the wind projects are placed in service as you know not all at once but but by replacing serve the sequentially.
On the tax equity only funds whatever all the projects of the fully commissions of Theres typically about the.
On the lag between when the first turbine gross commission that starts generating tax credits to on we actually could get the tax equity fund. So that's a profit opportunity for us to be able to use some of our total tax appetite and actually the.
And monetize some of those those tax credits.
The other places that we use the.
As of modernization is what maybe or projects where tax equity made up the the most efficient choice to use.
The there's there's certainly a cost benefit of the of arranging tax equity. So again as we look at maybe some smaller projects or projects what were the we see the cost of tax equity being a little bit higher.
We will look to potentially self monetized.
So the answer to the basically.
Responsive to your question in terms of the projects, it's a little bit of all of them to the say the word we're commissioning this year because if you think about the on the wind project sales. We are commissioning in total the bolt on 1.4 gigawatts of renewable such as the there's there's a lot of opportunity to to.
The monetize ptcs, but we also have a couple of solar projects the.
The word modest sized this year as well.
Okay.
Thanks, very much of the detail on congratulations Chris on the the retirement.
Yes, thanks, Chuck the ship.
Our next question comes from Nelson the ink of RBC capital markets. Please go ahead.
Great. Good morning, everyone My.
My first question relates to the.
The Chilean water the acquisition.
Will you be discussion is or will you be doing anything different at the company in terms of like are there any capital.
The checks at the Cup day didn't pursue that you're now looking to revisit.
And can you just comment on the the.
The drought situation in Chile, and how that opens up any potential opportunities on finally.
How all of that translates to your expected rate base growth or for that investment.
Sure.
Good morning Nelson.
So look the primarily we remain on the North American.
Energy and water company right. So when this transaction.
This opportunity of become available, we really looked long and hard because.
There is of the Theres a lot of things, we really like the about the transaction water utilities are not easy to come by.
Significant number of our of customer connections we.
We did a lot of analysis around the country risk chip.
Chile as the very very solid.
The country risk and that is very little country risk, obviously, it has a strong and stable regulatory environment.
And.
Finally, the the transaction price was of was very compelling so.
We we are confident in our ability to acquire and integrate utilities.
And that we believe is one of our you know the special skill set and that's the process, we're going through right now in terms of integrating srl into our overall mix and operational excellence.
In terms of how that affects our capital Atlanta and the we remain committed to our 9.2 billion dollar five year capital investment plan on its I would in fact, the DM our decision on.
On top of that $9.2 billion net.
Okay. Thanks, and then this might be a preview to the investor day, but in terms of.
On your renewable development side.
The side in terms or develop pipeline.
Can you just give an update in terms of how much.
TC qualified wind turbines and ITC qualified solar equipment you have in terms of just the I.
I guess the.
Potential opportunities to fund future projects.
Yes, Hi, Hey, Nelson, its Jeff and Jim.
We have been very active as you know for years in terms of.
Identifying and securing PTC qualified equipment.
Going back to 2016, when we secured debt of $56 million worth of equipment to.
On the note the 100% PTC program that we're now seeing constructed.
We have transferred a lot of the effort of last year and this year in the transformer from.
Process and we are.
In the.
Process of securing the safe harbor for all of our.
Five year pipeline EBITDA.
Between what we've done the in the past we have.
We'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 have already secured.
Yes, I think it's too soon to tell what the button government going to do although clearly should be good friend of renewables in one way or another the.
The benefit of using Transformers as of big chunk of our of our qualification of those transformers will be because no matter, what whether we use them for all.
Qualifications or whether we just use them as a critical component of the projects that we're going to be building. So we see.
Lots of upside, but no downside.
Okay. Thanks.
Good day and get back in the queue.
Thanks.
Our next question comes from David Kizomba of Raymond James. Please go ahead.
Thanks, Good morning, everyone on my.
My first question here just wondering if you could provide us an update on 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 the time now to go through with an appeal before you go back in for rate.
In Missouri.
Yes. Thank you David So as you know on one of the things we have appealed.
The against the equity fitness that the.
What was the given to US I mean, we believe that we have a strong case of for a larger equity sickness and we have appealed.
Back to Susan that obviously is going to be going through the.
The process.
And we will of we will obviously look at where that stands in terms of timing with our next to rid keys, which will probably be some time in the 2021 in Missouri.
Okay, great. Thank you for that and then maybe just another question on on.
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 of John because of the season. 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 of so.
So far this year, probably looking the save foot so three of another five.
The next year.
Well kind of think about it as the as broken down into the maybe the three buckets one.
<unk> expenses of Basi are naturally would have the save the anyways pick the books.
Lower on travel expenses and so forth.
But the other one is maybe a bit of a deferrals.
Deferrals of such as the holding Brazil.
The positions open and EPS.
So for the last bucket is really taking a hard look the assets and really trying to find efficiencies whether looking at our procurement processes and so the.
Looking at ways to deploy capital et cetera of those is really the those those three buckets of that service cost savings come from.
John do you want to add some color.
Yeah. Thank you all of the morning, David and somebody is not a huge amount of modus the AD of the maybe I think.
I was getting visibility of the challenges that we had 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 early startups that is coated start to kick in really just increased the focus across the team of making sure that we didn't leave any stone unturned sort of so the.
Rest of the and I guess, we can see the results through that but let me see.
You covered off so the really the buckets of where the sales of coming from a pretty well.
Great. Thanks, everyone. Appreciate it I'll get back in the queue.
Thanks, David.
Our next question comes from Julien Dumoulin Smith of Bank of America. Please go ahead.
Hi, good morning, Thanks, and again, congrats Chris on that.
Thanks for the time and opportunity I'm just wanted to talk to you guys about growth trajectory and thoughts around it obviously I'm hearing you guys talk very.
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 that you guys had last year, because it sounds like everything reaffirming the trajectory. Despite some challenges here I just want to understand.
On 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.
Yep, Yeah, Julien good morning, Yeah.
I was hoping you do the asked me that question during your Investor day, but [laughter], Let me give you a preview of unique is look I mean did the were one time.
The balance of downsides of we face this year like our COO of it and whether.
Especially cool the that were on toward the not anticipated and on the local news really of statuary statutory requirement. The closes by March 1st and that was really part of the final assumption then sort of the deal is certainly impacted the financials.
However, what we believe is the one we provided to the to the market was a five year 90, 11%.
Giggled rules and we remain confident that we will be good, but we're going to be able to bounce back in that book of 2021, and again I look forward of providing a lot more details on the during Investor day.
Absolutely. Thanks debt you rent it maybe if I can follow up on that perhaps a little bit nearer term as the think about that trajectory of the 9% to 11% not just from the 20 with the 21 should we still think about being able to achieve that trajectory off the 19 base in 21.
Obviously, there's a lot of moving factors in 20, you alluded to the second ago, including from new found the cost savings in the back half of the year here. So just curious on how the sustainability of those efforts in the 21 and ultimately if a good proxy for now it should still be on the implied CAGR for 21 of our guidance.
So for now Julian on I would say the.
You know I would still stay with the analysis of that 90, 11% Cagar growth.
Obviously, the like you alluded on a lot of different moving bars in the.
On 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 in the when you go into on but again.
Those are the all of the duty 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 the lease that.
Within that range is what I would say Julien.
Excellent. Thank you again for the clarity and look forward to the it'll take a few weeks alright take care everyone.
Packaging of.
Our next question comes from Rob Hope of Scotia Bank. Please go ahead.
Hi, good morning, everyone and congratulations on the upcoming retirement Chris.
Great. Thanks, Eric.
Maybe just to start on the kind of your international strategy.
It looks like you May 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 in the organization to facilitate the international growth we've seen you.
Do some potential international renewables on your own balance sheet pass all of US on your on balance sheet, how does Atlanta cash and agents kind of fit into the structure currently.
Sure. The great question, Thanks, Rob up so by and large.
We plan to do all the regulated utilities and North American.
The business of two Algonquin right, we were very happy with our investments in Atlanta.
The very strong long term assets.
With a weighted average lot of human the life of 18 years.
And so so we like the long term nature of of that do the infrastructure.
And so when it comes to the international non regulated.
Assets, we really look at it on on a case by case. This is as to whether it makes more sense for a long time to.
Go after that and operating versus versus the Atlantic and so it really becomes the case by case the decision.
By and large the we believe that if its the if it's anything outside of North American on the regulated.
The regulated that Atlantic on media, a good position to pursue look but not absolute.
Our average net.
You see a clear answer or non but.
Yes, the there's the absolutely force absolute formula, but other than the that all North American.
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 $15 million of incremental tax benefits will be realized in Q4, and then are you in essence kind of realizing future tax savings so in essence.
On the 2020 cash of 20 tax guidance I gave at your Investor day at it looks like you'll outperform that but potentially at the expense of future tax expenses.
Yeah sure. So so so the.
Maybe take the question of course, the so the yes.
The answer to the first question is yes, I mean, the the 50 million is going to apply to project that that will be placed in service Fisher of that will be on have been placed in service.
This years certainly.
In terms of.
Whether we are.
Well its shifting the tax.
I would say.
No I mean I mean.
Certainly the the the year, we monetize some of the assets you get you get on a bigger shift but in essence it is the tax.
It is true tax savings for us as all of the or on the equivalent of basis, it's not like we're shifting our tax liability sales.
The future years.
That was your question the retro if all of the 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 congratulations Chris on the retirement and the success of that okay.
Thanks Robert.
If I could could start with the.
The follow up on Asia, how should we think about your partnership with having go of going forward.
And the many many changes from the ownership and should the creeks now that the it's completed I believe that was acquired by aegis.
Yes, sure the Rupert and good morning.
Well again, it's pretty public knowledge that I've been what has been a challenging pocket right I mean.
The whole market news of the.
The the restructuring and other challenges that they are going through.
So the.
Consequently ages has been a challenging vehicle for us, but but despite that the there are a series of development projects that the agency has under the umbrella into the of pipeline of solar development Greenfield development projects in Spain or the.
The last year would be a 20 megawatt solar project in the Columbia, that's under construction with SEC on coming into the commercial operations in Q1 and Theres other projects in Latin America the.
The are following what the I will be the force to admit that.
With the advent of was our as our partner it has not been the most effective vehicle for us.
So if you do buyouts.
On a go is interesting NHS, what what does Hs what could it looked like in the future and one of the the implications on some of the other projects. The two you.
Haven't development NHS.
I think we will be the turning aegis of them what's wars tool into.
International development pipeline.
We have a very very strong the.
His development team that covers a regulated and everything in North America.
It is was always supposed to do that vehicle and again the need to the first on the that he does not been extremely effective on the on that from what we would look to reposition the strength on it.
And create a much more robust the you know pipeline of development projects in the similar to what we have in North America.
The based on the earlier comments about the non regulated business.
On the assets in North America, where the weather.
We anticipate that the development projects NHS will ultimately be held that the Algonquin, though.
Uh huh.
The interest is the development of vehicle right of.
Well the was development of bugs are are actually.
Held an operated is the.
Yeah sure is that we have a whether that's the app with Algonquin whether that be on with a plan to GAAP and but again by and large our view is that everything North America and everything are regulated will will be owned and operated by a.
The Algonquin and the person who is more around international assets I don't know, Jeff do you want to add anything to that I think maybe of the only other thing Rupert I might add is you had asked about the the sugar Creek auction and like number of our construction projects, we maintain an auction on bump on maintains an option to debt.
Hi out the remaining 50% and we do fully anticipate now that Weve completed construction on that project that we will be.
Firing on a percent ownership within all of them.
Great. Thank you and then just quickly on the on CSP wind farms, you've got some not progressing to register on the quite soon can you remind us what the impact will be on the or reported results when those hit the cod and what the impact of the planes in service accounting maybe.
Much of that should be coming on line.
By the end of this year with Google did on 19, we have certainly been challenged by a weak so the our global supply chain issues.
Issues, but the despite.
Despite that we remain confident that the the do I'm not going to the any material delays on some of the the door volume that the expenses delays.
In getting due to the U.S. and to the probably the site. We remain confident that we've got to be able to get all of them online in Q1 of the next year.
Okay, Great I'll leave it there thank you.
Thank you.
Our next question comes from Mark Turvy of the Sea RBC capital markets. Please go ahead.
Thanks, Good morning, everyone and have the retirement Chris.
Following up on the front of Roberts.
Question on.
On.
At presenting with to file or some kind of around here and to try to get the covering of investments for the for the wind in the rate case at Empire.
From me here is that still the plan or maybe just go back to what his question or on answers the kind of what is the regulatory plan again take a recovery and then maybe I think you guys started occurring in each of anything income curving end of year of once our answer has.
Oh sure Mark I'm going to start on maybe turn it over to John for more color on on on this one sort of.
As you know we look good for a piece of the the plant in sort of is accounting, which does give us some more flexibility in terms of exactly when we have to go back to Rick is on for rate cases in Missouri.
And the side gives us the.
The the ability.
Two in fact wouldn't the on our read these assets Lance coming to service. So we've got the Johnny do you want to on more color to that.
Yes, so as the the Transco lives where April.
Effectively true up the.
The next rate case 85 cents of.
The depreciation from the date so they go into service. So I think is this you could looking to sarlo net rate case.
Our net next.
The next early next year once the club so operational on say, we'll see them sort of the fully represented in rights as they go in service in 2022.
So there will be set on so were going sort of lag the recovery a little bit on our assets.
[laughter], 85% of it effectively were able to track from the soon if they go into service I'd say the majority of the lag is is.
He's picked up I guess, the the new rates will ultimately be effective.
In 2022, but will.
We will be able to to have a regulatory account to a.
The true up of push that rate case.
And are there any comment on the they showed late in the conversation, let's say sort of currently the field of view will be we'll be able to start recognizing the us there.
Well.
Okay.
And then now with the local coal is the naming the only give us a bit more of a force in the data type of Investor day, but is there any guidance share in terms of.
Of Ah implementation of the RP and timeline for sort of hit the ground running in terms of any color on investment at the end moving to pick on the rate case at the Alco is it to the 2021 of the start to see income it on vessels or is it the little that off from that.
Yeah Rupert.
In the sense. Thanks for that of course, and as you know we just closed the transaction so with the food Nineteena.
One of the impacts of the unit at the level of India's meant the of what was not as robust as we would have hoped.
In fact, the Johnny on some of our other force is just getting back from Bermuda.
The restarting that the Congress season, obviously.
On the economy of Bermuda would oh like to see investments of the earlier the better.
We have proposed and some of the agreement the fleet initiatives. We were excited about that given the very high cost of of.
Offline electricity on on the on the island as well as the fact that the much of it is.
The generated by with the diesel engine. So we do see a lot of scope of work is bringing the feed initiatives. We will continue the doors.
Interactions.
With with the government and the hopefully.
We'll be able to structure something in the two in.
On that front you can do on the timeframe.
Okay. Thanks Roger.
Thanks.
Our next question comes from Ben Pham of BMO. Please go ahead.
Hi, Thank you.
In spite of it more contract signing on Grand a day and the how much you fan.
You spent on it so far.
On the recover.
Sure. So congrats on beyond just the didn't give you some context of was of.
Pipeline and with the LNG storage facility and we went to the wider great Lynn in developing that Oh facility of.
But at some point.
The big begin pipeline capacity of really well that was not the before so obviously you were looking at and we want to do the.
The make the best investment from that's the right from our customers as well. So we have this newly formed of that long from a pipeline capacity. So the the ground on bridge plugs as it was as we're used to it is not going to be the same kind of a profit. Although we do think that there's going to be.
Quite a bit of a.
The investments required to strengthen you know sort of some of the the.
The reliability.
Of of those of the system and pipeline thinks of the source of we do believe that there's still room for some investment, but it's not going to be the same school as before I don't know, if Johnny or just want to add anything to that.
Yes, and I would just add that the I.
I think you've done a great job of summarizing what we did on the and how it turned out the that's creating that option, which was the option of being able to get additional supply to meet our customers' growing needs through the pipeline on the LNG the ultimate.
Ultimately gave us the very strong negotiating position the benefit the customers and so.
The investment that was made we believe created value and we're working on it.
The two.
Alright are getting.
All of the feedback that the.
They see that value on the creation of us there.
In addition to we will need to put in the resiliency investment to facilitate the incremental capacity from the price.
Okay.
Hi can go back to the.
Stems from the tax question from of I don't consider myself more from waiting at the shed can I just I wanted to confirm is.
As tax true is that.
Weighted tier your past guidance around.
Becoming a tax equity investor yourselves because of your corporate tax rates going up or is this.
Basically accruing ahead.
Really the share of of the tax equity investors attributes ahead of time for a day comment.
Okay. Good morning about so of the Mark.
Yes, yes, it is us becoming our old tax equity investor we are not currently get the cash tax payer, but do it.
Do but you ourselves being a cash taxpayer a few years out so to some extent it is taking some of those the tax attributes that will use we could see ourselves using the that's the.
Two to three years.
Okay Yeah.
That makes sense on.
And now it's one of the confronting when you.
Your mind quieting that yourself the come in and that's true that was.
Was that all within your Capex plan.
On financing.
Walk or you have to tweak that kind of.
Okay.
I would say, we do it call it opportunistically together to optimize around the.
The tax equity investments at the thought are there so to some extent, yes. It it's thus form a portion of our plan, but again it.
We've got to think about it opportunistically because the summer. So we don't know what the call it up going back to the Ptcs. The how long of the lag is going to be between the four the first turbine its commission and went on some of the tax equity funds. So that is a little bit of fluid.
But but the but we certainly use of strategic assets.
Okay, and then maybe on the round up the attitude that bid here when when you first introduced us a bit more aggressively appears back on you mentioned that the Pat your tax rate could be 5%.
First though in any way in.
Note that the 10%.
In the last Investor day sales.
Is this the accrual of tax credits.
Hey, how are you going back debt at 5%.
Two years ago or is that the 10% of sale I resolve.
The to use going forward.
Yeah, I think certainly in the near term year footwear of where were you ended up so from monetizing attributes of those push for tax rate.
No.
But to the extent that said if you look at on an overall run rates.
The next rate called the <unk>.
Our debt itself monetize anything.
The next.
The next few years I think the guidance that we've given the the Investor day still holds.
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 on thanks for the time here, maybe starting on first with the truly acquisition you curious to get some some color on the on environmental issues. The the assets of AD and maybe risks and opportunities around that specifically on to your ownership going forward.
Yes.
Sure.
Good morning, Richard.
So obviously to the during our due diligence and do a lot of some of the things that we looked at very carefully and also no incident. The also saw on some of the rain water spills, the but that have occurred.
And.
Our due diligence was really around out if there's something fundamentally broken are these one time the ER issues on that are fixable and the yen we made the determination that.
Oh by the buys Genfund the culture of the safety security reliability within as sales that we would be able to get the company back on track and make sure that we did not incur those kinds of incidents in the future.
On the right on what what has happened in the past Doug has impacted at all in terms of of it's the reputation and the the view of the community around the south and so we clearly have our work on carve out, but we feel confident that with our of.
The culture of operational excellence of that we are going to be able to get that the company back.
Back on track.
Great. Thank you and then.
You touched on this earlier briefly around kind of the growth outlook, the just thinking about.
The dividend specifically any updated thoughts on the dividend policy given the elevated payout ratio of this year on year. Certainly appreciate that there are the one off impacts 2020, you spoke to but shall we think about that going forward.
Yes, that's true good morning, Richard the start there some of the maybe I'll try to take on so yes. Some of your observation. Our payout ratio is the is maybe a bit higher than the than our use of peers of and maybe of some of our the tiers as well, but we don't.
Let's say the us keep in mind the the we're also one third IP business.
What about your utility.
In terms of the dividends the maybe we'll talk a little bit more of both the or Investor day, but maybe what I'll leave with you today. It is the we certainly use the dividend growth of the.
Importance up part of the total shareholder return.
Right.
Great. Thank you.
Thanks Richard.
Our next question comes from now she way of doing it of industrial of <unk> Securities. Please go ahead.
Hi, and good morning, I'm, just going back to the 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 that would you say, it's sort of a recurring or run rate savings.
Savings that you think you can maintain and out into next year and beyond.
Does the that's a tough question I mean, it's a the certainly probably not not zero, but.
It all depends on kind of what the the new normal is.
Certainly yes.
Hi, built on some efficiencies, but as I said with the there's also maybe a little bit of a.
Well the powder side of fixed costs of the look of the seat.
How much of that as the going to translate call. It into the next year, but I mean, I think certainly the is argiro in terms of the cost savings we've identified.
The could be sustainable.
Okay on a it might be a bit of too early to tell how things will play out, but do you think the or other sort of savings.
Savings that you are looking at the maybe being able to to the target for next year too.
We're always looking at sales is probably the answer on NRG I mean, that's one of the leaders we have on the night I talk about operational excellence of a you know.
If it's all about how how can you maximize the output of the given.
In the says set of inputs and that's on that that formula of something we look at the all the time absolutely.
And especially this year given the.
The significant impact on on on our EPS with the with Delco delays and and pools and the and whether.
That is something we've both returned over at least on a in.
In the company, but but that's something that we look at it all the time.
Okay. Okay. Thanks for the detail and just the can you just remind us I think you of a another big year coming up the next year for rate filings on 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.
Johnny the only thing that.
Sure, Yes, I mean, there's no doubt that the the biggest FID and we've got the next series. The is the NPL rate case as Youre, probably aware of we're in the middle of ER and achieve north rate case.
The momentum.
And then we've got a couple of of the rate case filing. So we're looking to do it for the smaller so it seems like a Illinois gas.
Right. Okay. So yeah I think the you got the big one the other big on coming through is already knocks capex.
Okay. Okay I'll leave it there. Thank you on the I'll Echo the comments the Chris Congrats on the what's on.
I'm going on.
This concludes the question and answer session I would like to turn the conference back over to Mr., Ben Scott of for closing remarks.
Thank you operator, and the thank you everyone for taking the time on our call today with that lease day on the line from disclaimer.
Thanks drew.
Our discussion during this call contains certain forward looking information, including but not limited to our expectations regarding future earnings potential Fisher cost savings future placed in service date, the potential future impact of COVID-19 debt.
Forward looking information is the.
Based on certain assumptions.
Moving those described in 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 results anticipated 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 beliefs estimates projections expectations opinions and assumptions of management as of today.
There can be no assurance the forward looking information will prove to the 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 assets such forward looking information, except as required by applicable of off. In addition, during the course of this call. We may have referred 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 growth.
No standardized measure of such non-GAAP financial lecture income.
Consequently, apex method of calculating the measures may differ from that that is the other company and therefore, they may not be comparable similar measures presented by the company.
For more information about the pulled 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 in Canada or elsewhere in the United States and the therefore on the website. Thank you.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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