Q4 2020 Algonquin Power & Utilities Corp Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by and welcome to the Algonquin power and utilities Corp, 2024th quarter and full year earnings webcast and conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
Ask a question during the session you will need to press Star then one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press Star then zero I would now like to hand, the conference over to your speaker today, Amelia Tsang Vice President Investor Relations. Thank you. Please go ahead.
Good morning, everyone. Thanks for joining us this morning for our 2024th quarter and year end earnings Conference call. My name is Amelia Tsang and I'm, the Vice President of Investor Relations Algonquin power and utilities presenting on the call today are Scott <unk>, our president and CEO and Arthur Kasprzak, 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 Johnny Johnston, Our Chief operating officer to accompany our earnings call. Today, we have a supplemental webcast presentation available on our website alcohol from power and utilities Dot com our financials.
And management discussion and analysis are also available on the website as well as on 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 and capital expenditures and the expected impact of outcome of the recent severe winter storms in Texas and the.
Central U S. At the end of the call I will read a notice regarding forward looking information and non-GAAP financial measures. Please also refer to our most recent MD&A filed on SEDAR and Edgar and available on our website for additional important information on EPS.
On our call. This morning are really will provide an overview of our Q4 and full year 2020 per format. Arthur will follow with the financial results and then it really will conclude with an update on our strategic plan for the business.
We will then open the line for questions 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 and with that I'll turn it over to open.
Thank you Amelia and a very good morning to those who have been able to join us on this call and online.
Given that this is our union.
Earnings call I want to provide some highlights and speak to performance, both financial and operational for 2020.
Firstly on financials.
I'm pleased to report steady year over year growth in our key financial metrics.
2020, adjusted EBITDA of $869 $5 million increased 4% year over year, and our 2020 adjusted net earnings per share of <unk> 64 compares to <unk> 63 reported last year.
There were three particular events.
It.
Weather in the central region, and delayed closing of Balco that impacted our results.
Despite these management was able to pull a number of levers including cost savings to continue our growth trajectory.
We exited the year with $13 $2 billion in assets or 21% increase over last year.
Secondly in terms of shareholder value creation.
We continued to generate consistent outstanding returns as proven by our record on delivering total shareholder returns.
In 2020, the company delivered total shareholder returns of 21, 5% on the New York stock exchange compared to the 22, 7% for the utility index and 15, 3%.
S&P PSX GAAP utilities index.
Last year, we reported annual dividends per share of <unk> 61.
Which represents a 10% annual increase for the 10th consecutive year in a row.
Thirdly on operations.
<unk> undertook many successful growth initiatives and achieved numerous milestones in 2020.
We continue to focus our efforts on Algonquin three strategic pillars growth.
Operational excellence.
And sustainability.
For those of you who may have participated at our virtual Investor day in December we discussed this at length.
We operate two businesses regulated and renewables.
What is unique about us or our multiple levers of growth that support our two businesses and which gives us high confidence in delivering outstanding returns.
One lever of growth is acquisitions.
And we completed two utility acquisitions in 2020 as time and attendance.
With the addition of these two utilities Algonquin now has over 1 million customer connections within our regulated footprint.
Additionally, both acquisitions are expected to provide opportunities for future growth.
With New York American water, we submitted a regulatory application to the New York PSC last year.
We are currently growing through the settlement process.
And the hearing date is scheduled for mid May.
We continue to expect this transaction to close in 2021.
On the renewable energy business the company made its largest renewable energy acquisition.
51% ownership interest in a portfolio of three operating book two wind facilities with a combined generating capacity of 641 megawatts in.
Coastal Texas.
These three wind facilities have already achieved commercial operations.
The acquisition of a 51% interest for 240 megawatt South Texas close two facility is expected to occur in the first half of 2021 once the facility reaches commercial operations.
We continue to prove out our C&I growth lever at Algonquin remains very well positioned in the C&I space, where important long term customers are supporting renewables growth.
They are looking to achieve their own sustainability goals.
As further proof of concept, we signed a framework agreement with Chevron last year for the potential development of over 500 megawatts of renewable energy facilities.
This has been an area of focus for us.
And we are working hard to progress that portfolio and expand our customer base.
2020 also marked the Companys largest construction program in our history with approximately 16 100 megawatts of renewable energy projects under construction.
To put that in context, these new projects approximately doubled.
Mountain power overall renewables portfolio.
Within our renewables business.
Two of our projects.
The Great day, two solar facility located in southern Maryland.
And the Sugar Creek wind facility located in Illinois.
<unk> achieved full commercial operations last year.
Furthermore, do more projects are nearing completion with more than half from outside with our soldiers 80 megawatt successfully placed in service with a power purchase agreement with Facebook.
And the remaining megawatts are expected to be completed by the second quarter of this year.
Our 492 megawatt Maverick Creek wind facility in Texas.
Completed commissioning on 111.
After 127 turbines.
And as long term power purchase agreements with general Mills and Kimberly Clark.
Maverick was recently recognized by the American Clean Power Association as the fourth largest single fees wind project in U S history.
And importantly, Baruch growth on the regulated side as we transition to lower carbon energy.
He is our greening the fleet initiatives.
We continue to progress well on our Midwest screening initiative with the development and construction of three wind farms for a total of 600 megawatt capacity.
As we work to generate and deliver more cost effective <unk>.
<unk>.
And sustainable energy options to our customers and communities.
The 150 megawatt north for grids wind facility.
<unk> achieved full commercial operations.
While the 300 megawatt Neosho ridge.
150 megawatt King's point facilities are anticipated to be placed in service prior to the end of this month.
Moving on now to operational excellence.
In a mission critical industry like ours.
Safety is always an area of focus.
And so I'm pleased that we have just passed the impressive milestone for an entire year without a single lost time injury.
I'm very proud of our employees and management for continues to stay focused on safety first even while we had to transition into a very different work environment given COVID-19.
And the priority of keeping our employees and communities safe from the pandemic.
The importance of reliably providing the essential services of electricity water and natural gas to our customers has become even more apparent during the COVID-19 pandemic.
Our diversified asset base, and our and our emergency preparedness highlighted our resilient business model, which has meant that our essential services to customers have not been impacted.
And financially.
As a proof point of how resilient our business model is.
The pandemic had a relatively low impact of <unk>.
In our adjusted net EPS for 2020.
With the onset of the pandemic, we focused on cost containment strategies.
Without sacrificing safety and reliability.
In the first half of 2020.
We have announced we are targeting $15 million of savings for the full year.
And I am pleased.
That we were able to significantly beat that delivering $24 million in savings for the year.
2020 marked the first full year of contributions from new Brunswick gas and simple arens guests.
The integration of these two utilities into the Algonquin Liberty family has gone well.
As growing the business organically in these two facilities is a key initiative.
As with all our previously acquired utilities.
We strive to share learnings among our utilities with the aim of driving consistent improvement in our key performance metrics that drive value for our customers and investors.
And finally.
We remain firmly committed to sustainability.
Through the inclusion of environmental social and governance values.
Our broader corporate strategy.
And day to day operations.
I want to provide a few highlights from 2020.
In March the flow.
Further our power is Asbury coal generation.
Generation facility in Missouri will allow us to reduce annual carbon dioxide emissions by 955000 metric tons.
In the latter part of 2020.
We increased our disclosures around sustainability by releasing our first ever climate assessment report.
In response to guidelines established by the financial stability Board Task force on climate related financial disclosures.
Ft.
We also released our 2020 sustainability report, which not only outlining our progress on our ESG goals.
But provided a higher level of disclosure details.
Our <unk> priority issues.
And in 2021, Youll see us, adding additional ESG linked goals to our compensation program metrics.
Overall I'm pleased with the progress was made in 2020, given COVID-19, and all its challenges and I am confident we will continue to benefit from our strong resilient and diversified business model in 2021.
Before turning to Arthur.
I want to comment on storm already.
And the Midwest extreme weather event, which occurred last month.
First and foremost our thoughts are with the many people whose lives have been disrupted.
By the extreme weather events.
Since the event began.
Our teams have worked tirelessly under very challenging conditions to keep our customers and communities safe.
And to maintain our system reliability and resiliency.
I would like to thank our dedicated employees for their teamwork and continued commitment to our customers.
In our renewables business. We currently have a total of approximately 2500 50 megawatts.
A win.
Solar and hydro projects in operation.
Including our 51% interest in three South, Texas coastal wind facilities.
In accordance with our strategy our portfolio of assets is very diversified across 46 facilities.
15 states and provinces.
And seven Iso's.
We believe this diversified portfolio will continue to be a major advantage in the face of climate change.
In Texas.
We have a diversified operating portfolio of approximately 965 megawatts across five locations.
Two inland.
And free coastal.
This provides the wind resource diversification outlined during our 2020 Investor day.
The Texas portfolio also benefits from offtake diversification.
Maverick Creek 492 megawatts.
And our 51% interest in the East Raymond 200 megawatt facility.
Both operate under long term unit contingent power purchase agreements.
On the remaining Texas assets and operations, we are hedged used.
Using long term fixed financing swaps.
With a total combined hedge position of approximately 140 megawatts.
We saw no material impact.
The coastal wind assets.
While storm Ori didn't have a major impact on our Senate assets.
In total our estimated exposure remains.
What we announced earlier in our press release of $45 million to $55 million before potential mitigating impacts.
We have asserted force majeure at our standard facility.
Given the large scale market failures and extreme weather events.
Story was very unusual in the level of impact across a very large geography.
And temperatures fell to six degrees Fahrenheit.
Near our Senate facility.
Lower by nine degrees compared to the lowest ever reported temperatures in the last 100 years.
Since there may be a dispute and possibly litigation, we do not intend to speculate today on our legal position.
There are also ongoing discussions.
Regarding potential, Texas government or regulatory intervention.
Including questions on the $9000 a megawatt hour pricing.
And this could be another mitigation to our estimated $45 million to $55 million exposure.
In our regulated business.
Which comprises approximately 70% of our portfolio.
We are diversified by modality and.
And operating 16 jurisdictions.
Despite the extreme weather conditions, the regulated service groups electric and gas operations performed well.
During a sustained period of increased consumption.
We did encounter some weather issues in our central region.
And in accordance with instructions from the SPP.
We did some limited load shedding.
The utilities did incur incremental commodity costs during a period of record pricing.
And elevated consumption.
The income to commodity costs.
Incurred by the company are expected to be substantially recovered from customers.
Over an extended period.
We do not expect any material financial impact to our regulated business.
With that I'll pass it over to Arthur will speak to our Q4 and full year 2020 financial results as well as the financial impact of the Midwest X gene weather event.
Arthur.
Thank you rune and good morning, everyone.
As Arun mentioned earlier in 2020, Algonquin has again shown its ability to accretively grow grew earnings through its stable regulated services and low.
Long term contracted renewable power businesses.
Our fourth quarter 2020, consolidated adjusted EBITDA was $253 1 million, which is up approximately 10% from the 234 million we reported in the previous year.
The regulated services group delivered $161 8 million in operating profit in the current quarter, which compares to $159 4 million in the same quarter last year.
The increase primarily reflects the implementation of new rates and the contribution from <unk> and <unk>, which both closed in the quarter.
This was partially offset by decreased customer consumption, primarily at our central utilities due to warmer than usual weather.
The renewable energy group reported a fourth quarter divisional operating profit.
$102 9 million, which compares to $85 9 million in the same quarter last year.
The increase represents generally higher production across our renewables fleet during the quarter.
Our Q4 adjusted net earnings per share came in at 21.
Which compares to 20 reported last year.
Our results were positively impacted by cost savings implemented during the quarter.
Our solid performance from our generation facilities and the contribution of the cell and the <unk> acquisitions.
But were partially offset by the unfavorable weather in the central region as mentioned earlier.
For the full year adjusted net EPS came in at 64 and compares to 63 recorded in the prior year.
For 2020 results included a full year contribution from New Brunswick gas at the St. Lawrence gas systems, which were acquired late last year as well as the implementation of new rates under <unk> and granite state electric distribution systems.
The results were negatively impacted by decreased consumption, resulting from the COVID-19 pandemic as well as significantly unfavorable weather experienced by the central region in early 2020.
The delay in the closing of telco also weighed negatively on our results as compared to expectations for the year.
Despite these challenges the year over year growth in adjusted net EPS demonstrates the stability and resilience of our business model.
Now I'd like to provide a few more financial updates from the quarter.
Firstly on the COVID-19, pandemic and it's financial impacts.
We have seen the impacts of the pandemic and consumption patterns continue to ease as the economy reopens.
The impact to the regulated services groups divisional operating profit was less than $1 million in Q4 with full year, COVID-19 impact coming in at $14 7 million or <unk> and adjusted net EPS.
As reported previously in the second quarter, we began implementing cost containment strategies in response to the demand decrease was caused by the pandemic.
I'm pleased to report that in the fourth quarter, we were able to achieve expense reductions of approximately $6 million, which brings the full year cost savings to $24 million.
I'm also pleased to report that all of the reductions were made without compromising on safety security and reliability of the services, we provide to our customers.
About a third of these reductions occurred naturally to reduce travel and another similar expenses, a third was related to timing and.
And the final third was related to ongoing savings were able to drive in our business and has been factored into our 2021 earnings expectations.
Before turn thing turning things over back to your room I'd like to provide a brief update on our 2021 guidance.
In addition, we expect to benefit from the first full year of operations of Bell tool sales.
And the Texas coastal wind portfolio.
Factoring in these benefits in total we expect our 2020 adjusted.
Adjusted net earnings per share to be in the range of 71 to 76.
This is consistent with what we communicated at our Investor Day last December.
As Robin mentioned earlier last month, our operations were impacted by extreme winter storm conditions experienced in Texas and parts of the Central U S.
The most significantly impacted facility was the Senate wind facility, which has a financial hedge in place that imposes on obligation to deliver energy.
Because of the unusual market disruption related to the extreme weather events that facility was required to purchase power for an extended period of time and exception an exceptionally a fleet of pricing to cover the production shortfalls under its hedge.
This is expected to result in a <unk> <unk> negative impact to 2021 basic net earnings per share.
Which is calculated before any potential recoveries.
We view this market disruption on the Senate facilities as unusual and non representative of the ongoing operating performance of this company.
We have excluded its impacts from the 2021 adjusted net earnings per share expectations discussed earlier.
With that.
Now I'll hand, it back over to Arun to outline our growth plans.
Thank you Arthur.
Before we close out our prepared comments this morning.
I want to give an update on our growth initiatives and capital plan.
At our December Investor Day, we updated our five year capital investment program, which projects $9 $4 billion from 'twenty one.
Through the end of 2020.
Right.
To be spent across our two business groups with the emphasis unregulated services.
We have identified projects that make up the entire $9 $4 billion with most of them under construction or in advanced development.
This core $9 $4 billion does not include any further M&A beyond the previously announced transactions.
Or any success from our three four gigawatt pipeline of Greenfield opportunities.
Over the last year, we have bolstered our internal resources and software tooling to focus even more on Greenfield development opportunities that are originated by us.
For many of these opportunities we already have site control and are in the interconnection queue.
And we will work to bring this can do construction in 2020, 'twenty three and beyond.
Before we open the lines for the question and answer period.
We remain very excited about Algonquin businesses and prospects.
With societies and economies working hard to minimize carbon emissions and.
And many countries core listing around a net zero carbon by 2050 goal.
Algonquin regulated and renewables businesses are well positioned to contribute to and benefit from this decarbonize is in transition.
Our three strategic pillars of operational excellence growth and.
And sustainability will be a key foundation as we continue to build the business and bring long term value to our shareholders.
We remain well positioned to continue to execute on our growth strategies, while enforcing our sustainability goals.
Guided by maximizing operational excellence on behalf of our stakeholders, including investors.
Employees.
And customers.
With that I will turn the call over to the operator for any questions from those on the line.
At this time as a reminder, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
We will pause for just a moment chicken Paul the Q&A roster.
Your first question comes from the line of Rupert <unk> from National Bank. Your line is open.
Good morning, everyone.
Good morning, Rupert So if I could start with the Texas weather event, but you discussed the incremental commodity cost for the regulated utility business from the Midwest.
What's the scale of that incremental cost and can you talk us through how this will manifest itself in our financial results to your book higher costs and revenues here are we going to see an accrual on receivables can you just tell us how we should be looking at that please.
Sure.
Sure.
The total cost is expected to be in the neighborhood of around just over $200 million.
And Thats, primarily all those costs are expected to be.
Pass through to our customers so although the timing over the pass through is obviously subject to discussions with with our regulators. We do expect to set up regulatory assets with respect to those commodity costs.
Okay, Alright, very good. Thank you and then looking at the Texas event and as well as all of the day.
<unk> you have on tap right now can you give us some thoughts on on the balance sheet strength today or liquidity position and capital needs for the remainder of the year or two to fund your construction.
Sure Robert.
So we have very strong liquidity position as you know we've got regular about $1 5 billion of committed credit facilities and we've also.
Call it beef up our liquidity position with another $1 6 billion of true.
From facilities. So right now we're sitting at about $2 8 billion of available liquidity.
To us.
Which certainly is sufficient to fund our ongoing capital plans, but obviously, we plan to also be in the capital markets. This year.
Raising some funding.
Alright, great guys I'll leave it there thank you.
Hubert.
Your next question comes from the line of Sean Stewart from TD Securities. Your line is open.
Thank you and good morning.
Couple of questions I see that subsequent to year end, you sold 32% stake of the sell down pretty shortly after acquiring it can you give us some of the rationale is especially as it looks like you sold it at a little bit of a discount to the initial purchase price.
Sure Sean good morning.
So look.
We are very very comfortable with Chile.
As a country risks in our business risk.
This was our first major.
Investment in Chile.
<unk>.
If you look at the structure of EF saw it had a strong local partner initially and through the tendering process the tender their shares.
We always believed that as a force transaction strategically it was very important for US do you have a good strong local partner.
Who could help us with all kinds of things locally.
And so.
<unk> was a very natural choice.
We have known them for a while.
<unk>.
The non only know the local NRG on water sector very well day in fact also own 50% of another water utility in Chile, So a very very natural partner for us. So it was really a strategy that we hadn't placed long before.
The final acquisition of S out took place.
And no it was not at a discount.
Okay.
Just like a modest one in our math, but maybe I'll follow up on that.
Second question page 22 of the MD&A that goes through.
Some of the variances in the quarterly results for the regulated segment. There was an other bucket of $9 9 million that that goes through several items I'm wondering Arthur or Arun. If you can go through some of those elements specifically in help us clarify that.
That figure and the impact on the results.
Sure sure sure.
I'll try to take a stab at that and it really is.
Much of items in there what are the things as we obviously as youre aware of.
Contracted services.
Some of our utilities.
Net revenue tends to be a little bit more chunky. So it's just a matter of I.
I guess the timing.
Last year net revenue Im referring to report findings.
<unk>.
As an example, and we also have our solid utility.
We actually ended up.
Recognizing.
So some interest in the last year that didn't reoccur this year.
Matter of a comparative.
We also had.
Just lower AFDC capitalization this year compared to last year.
Bunch of.
Let's just thinks all put together.
Okay. Thanks for that Arthur that's all I have for now thank you.
Thank you Sean.
Your next question comes from the line of Julien Dumoulin Smith from Bank of America. Your line is open.
Hey, good morning team, thanks for the time and the opportunity.
Earnings per seat.
Thank you so much listen a couple of different questions for you guys maybe to start higher level.
Can you elaborate a little bit more on ITC PTC extension here, just how you're thinking about the impact to your business I mean, obviously you guys have to.
Accelerating opportunity.
Number of different Counterparties Chevron for instance, just can you elaborate a little bit on how you think about the cadence of the opportunity here.
Hey, Julien this is Jeff and I just wanted if you could reiterate the very beginning of that question on the ITC PTC opportunity just to make sure that I.
Just with the extensions here I mean does this.
Provide a greater sort of five year view on what you think you can do I know this is out of cycle. Your typical December updates, but I'm just curious with that given that we've got these extensions of late.
Yes.
Well, there's a couple of things.
We are very.
Mccain above the Biden administration, and where theyre going to take things and what extensions will go above and beyond what we've already seen.
And obviously the ability to improve some of the economics within our $9 4 billion pipeline to the extent that they are able to qualify for that incremental.
From PTC.
The most significant is the ITC extension, allowing projects to come online a little bit later on the solar side and so we do see upside in the $9 4 billion pipeline on the timing of some of those projects and the ability to bring more projects, which arent yet secured but obviously we're always looking.
The ability to bring more projects and that will take advantage of the full ITC also to add to that Julian It should really help us is.
He is on our 3400 megawatt Greenfield pipeline.
With the extension of the ITC and the PTC, obviously, the economics on those projects will be even better.
Other than what we had.
<unk> before and again as a reminder, that's 3400 megawatt.
Greenfield pipeline is above and beyond our $9 $4 billion five year cash.
Capital plan.
Yes.
And then if I can go back in on some of the details here I just want to understand.
The net.
The New York.
American water piece of it.
Talked about the confidence in getting that closed here I mean, I know, there's lots of talk in the state difficult to discern exactly what's going to transpire, there and on the taxes from just force majeure anything specific we should be watching there and what you're assuming in that sense I just want to make sure I understand what the <unk> assumes an outcome there.
Alright. Thank.
Thank you.
Sure.
Let me start with the New York American water right. So.
As you know there is a law that has been very in the public realm, and im not going to repeat that book.
Our conversations and discussions with the <unk>.
Cognizant has continued.
The <unk> are set for mid May.
As you know Governor Cuomo has come out of the Bill.
And one of the elements of that Bill is to look at potential Municipalize isn't.
We obviously welcome that opportunity to have a public dialogue.
Around the.
Benefits and not of municipal licensing versus private.
Ah well participation.
And we are still confident that that acquisition will close in 2021.
Just a context, though.
Should point out.
We did close St. Lawrence gas in New York State and that wasn't approximately 18 month process. So.
Because of our presence in 16 different jurisdictions, we have a pretty good view of how long with different regulatory processes take and so we believe that will be.
In that.
Kind of a timeframe.
Your second question.
I believe around the Texas and force majeure.
From a.
Announcement was our full fleet of $45 million to $55 million impact before any potential mitigation.
And so we have already issued a force majeure notice I believe.
We obviously.
I'm confident in our in the provisions under which we issued that obviously there is a.
Because it's.
Get into dispute or.
Litigation teachers, and I don't want to comment more on that the other potential mitigation is.
You are well aware Julien I mean, theres a lot of discussion going on at the Texas legislature at the PUC there around the merits of non above the $9000 a megawatt hour pricing and weather.
There is a possibility of part or all of that being rescinded we see that as another potential mitigation because.
By and large from every commentary out there there was a large scale market failures. So there are some of those are some of those mitigation.
Thinking about but that is not included in the 45% to $55 million non where we get.
Given our release.
Thank you so much really appreciate it.
Actually.
Your next question comes from the line of David Cassidy Day from Raymond James Your line is open.
Thank you good morning, everyone. Just my first question here just as it relates to your.
You wind build out in the Midwest.
You know as that customer savings plan I guess complete over the next year or so here I'm wondering what your thoughts are on the potential for future renewables in the rate base there in the Midwest and I guess, maybe even.
How storage could could play a role there as well.
Hey, David Good morning, So let me ask the answer the first part of the question and I may turn in that.
Over so in terms of the 600 megawatt.
Wind projects.
In fact, one of them is already online.
Fourth.
And the two others.
<unk> and Kings point.
They're scheduled to come online in fact.
At the end of this month, so they're clearly very very advanced.
In terms of.
Being in operations.
We do believe that there is a.
More opportunities out there.
In terms of.
Substituting wind or solar.
For other former sales.
Thermal generation, but.
I'll turn it over for more context.
Yes.
Good morning, Joey Thompson, So it's positive.
Ongoing reviews.
ILP plans as part of our central.
Organization were always looking ahead.
Opportunities, we have to make sure we've got the right generation to meet all loans within our plans at the moment we have no.
50 megawatts of solar to be put into place and then 20 megawatts of solar and storage on a sort of more of a community type basis.
And then we continue to review.
That analysis each year as we go forward. It's clearly we still got a number of other aging facilities that are part of our generation fleet.
As those opportunities present themselves, we will be putting them in 12 months and David as you know him and greening the fleet is.
A very key lever that we have we.
We believe we have unique expertise, especially without.
The experience around the tax equity.
As you know in <unk> as well we've added a number of.
So solar generation into that rate base, we are excited about the.
Potential opportunities in Bermuda as well.
Because that certainly is all thermal generation. So this is something that we are continuously evaluating.
Obviously, continuing to hear more from us on our greening the fleet initiatives.
That's great color. Thank you very much maybe just one more from me.
I guess in Europe, you've started too.
Looks like on Earth from opportunities in Spain, and then I guess, a few renewable opportunities in Colombia as well just curious how you see day.
Look on the development of projects progressing through agents.
Just any any comments you could provide there on the momentum youre seeing in those markets.
Sure.
I don't want to give them give context for us right. So.
We are by and large North American NRG on water company Alright.
Hi.
For some years ago.
When we acquired our position in Atlantica, we also felt the need.
For our <unk>.
Development.
Entity.
To go after non regulated international businesses, so the scope of aegis.
That.
Nonregulated and international and the two markets that we have.
<unk> been targeting are Spain, and Colombia, because we believe that from a country risk business risk potential opportunities.
Our own position in those markets, we believe that we have.
Vantage is in those markets.
As you saw I mean, we have in fact dropped down a couple of those assets in Colombia already into Atlantica, we are progressing well on number of blues are solar opportunities in Spain as well.
And we'll update you as we make more progress the other thing I do want to remind you.
Is that non of those projects are part of our $9 $4 billion capital plan, So day would be above and beyond.
Perfect I appreciate that thank you I'll get back in the queue.
Thank you David.
Your next question comes from the line of Rob Hope from Scotiabank. Your line is open.
Good morning, everyone two follow up questions for me.
Firstly, just on the 'twenty 'twenty, one capital outlook are the renewable energy at $1 per $1 75.
So, it's pretty robust there and over half or around half of the five year total spend.
Is that just timing of all of the investments or are you baking in some of your we'll call it.
Lower probability or earlier life stage investments here or is that really just kind of cleaning up the rest of Maverick Sugar Creek and Blue Hills.
Hey, Rob.
So let me try and add.
Answering your question right. So when we were at Investor Day.
And we showed you that $9 4 billion.
On our capital plan, we also assured that.
Really a large portion of that is what we just reported we have already locked and loaded because.
As you know.
In 2020 that was our largest construction year in our history.
Around 60 to 100 megawatts of wind and solar projects that are coming into.
Operations. So basically when you look at it that way right I mean Sugar Creek for example.
That has now recently come online.
Acquisition of our Texas coastal wind facility, which is a fairly which is in fact, the largest acquisition on our renewable side.
That happened earlier.
This year.
Norfolk Ridge came online and we have some large projects that are also coming online fairly shortly including on the revenue decided you got things point unusual.
And then on.
The renewable side and you've got Maverick.
And also just are also coming online so.
So it's just that.
A large portion of that 60 to 100 megawatt construction is really coming in line in the first quarter and in the second quarter and said that's what accounts for that.
<unk>.
A portion of that capital investment plan happening.
Early in 2021.
Alright, that's great color appreciate that and then just as a follow up.
At the Investor Day, you did say that 2021, you could be looking at mandatory equity.
Instruments to fund our capital plan or is that still the case and does the Texas.
Texas will weigh on your credit metrics, a little bit here, but should we assume that.
The equity in the plan that you outlined in December as per the front end loaded here.
Hi, Rob.
Yes, I think you can assume what we laid out at Investor day holds with respect to our funding plans.
So to your question about mandatory adjusted for product that we still are looking at.
As we think about.
We're probably the predominance of our financing would be it would probably be through mandatory but again, we're still evaluating.
Excellent. Thank you.
Thank you Rob.
Your next question comes from the line of Mark Jarvi from CIBC capital markets. Your line is open.
Thanks, Good morning, everyone.
Let's go for a while now.
Yeah, we'll follow that last question Arthur from you and just.
Terms of some of that pressure from the higher commodity costs in the Texas losses, potentially I think I've spoken to the range is in terms of how they would look through this from deal with us in terms of any hit to <unk>.
Does that push you to maybe reengage on the ATM.
Earlier now.
Good morning, Mark.
Yes, we obviously have spoken to the rating agencies.
We view our capital plan more of a long term basis anyway. So it's I wouldn't look at this.
As.
Necessarily.
Impacting our capital plans significantly.
Okay.
And then.
The fourth quarter, the O&M costs on the utilities had a real material step up year over year and also from the from the prior quarter I appreciate that the sell in bulk will come into the fold now can you break.
Break it down in terms of how much of the higher O&M coming from from the new assets that have been.
Got it and in this quarter and then other factors that might have played into the higher opex from Youtube.
Segment.
Yes, I don't have the exact breakdown for you, but I would say majority of it is due to the new acquisitions.
Just give me maybe anecdotally when you think about seasonality a utility like Bill Cole.
We will earn about 70% of earnings will come in the late spring to call. It early fall months. So it is really seasonally shaped here.
So from that perspective, you may see a bit of an impact from margins.
Sorry are you, saying that maybe topline revenues for bell car, a little lower but the text operating costs are fairly still flat across the quarters right.
Yes, Okay I'll leave it there thank you.
Thank you Mark.
Your next question comes from the line of Nelson <unk> from RBC. Your line is open.
Great. Thanks, good morning, everyone.
The first question relates to all the development projects you have on the go so but big picture.
How much do you spend our ore expense on on development costs I know some of your Canadian peers spend anywhere from like $22 million to $100 million, but I'm, just wondering where you guys kind of fall within the range and then secondly, how does that cost get embedded within Europe is there.
At the corporate level or is it in the renewable energy level or I know some of it's in ages, but can you just give a bit more color.
Matt.
Sure maybe.
Jeff Nelson I'll take the first question and maybe Arthur can take the second question.
But generally speaking.
Investor Day, we did indicate that we would be ramping up our spend on new renewables and Unbilled 3400 megawatt early stage Greenfield pipeline.
I believe at that time, we indicated that there would be about a <unk> Greg.
On EPS as a result of those activities and so that accounts for the majority of that spend.
Okay. So two two <unk> per year in general.
Hence why we should expect.
So thats the incremental cost with respect to the Greenfield development that we're looking at.
That will be to get from us.
With respect to your question around.
Our development costs.
Good book through I mean, obviously, we would.
Once the project reaches certain feasibility with starts becoming capitalized on our books, but early stage projects are undertaken through through agents.
<unk> platform.
Again once they reach a specific thresholds. So those costs are then reimburse.
Bob.
Both of our books.
Sorry, Asia does the U S developments as well as international like its all done with NHS.
It's all done within one combined development shop.
Thats leucotomy.
We'll call it aegis, maybe agents is not the right word for it but it's really our one combined development Michelle.
And those costs get reimbursed through our.
Okay.
Through our results once they actually do achieve certain.
Okay got it and then my second question relates to whether so Q4 weather was warmer than usual and that was a negative impact.
Q1, I guess, if you exclude.
The extreme weather was probably colder than usual.
So would that help your utility earnings in Q1, I guess aside from the fact that you had to pay a lot for commodities.
But can you just give.
Some color as to like Q4 was warmer and those negative so Q1 was colder.
But obviously commodity prices are also a lot higher so what would be the net impact excluding the obviously, excluding the Senate wind.
Facility.
Yeah. Good morning, Johnny I think it's fair to say the so called 2021 has been a bit of a Tony old yet.
I saw on the on the weather from and actually if you look at.
So the January was actually a much warmer.
Winter than we were expecting I think it's fair to say that February just being a big total with interest to see where March plays out so and so.
I would say probably all things considered it's almost a wash at the moment.
Yes.
And so not a huge.
I think movement, either up or down as you look at the various moves that we've seen in the first couple of months of the book.
Okay. Thanks, I'll leave it there.
Thanks Nelson.
Your next question comes from the line of Ben Pham from BMO. Your line is open.
Alright. Thanks, Good morning, I wanted to follow up on some of the questions on the impact on your credit ratings from the Midwest.
What are the events and I understand your normalized incur earnings per share like what can you share it.
But clearly that's going to give me some sort of a cash flow impact.
I'm wondering what your conversations with the credit rating agencies.
<unk> can you get the sense that they are going to capitalize that in your your balance sheet or is it going to flow through your <unk> power Theyre, just going to completely ignore it and normalize it out of there per credit metric methodology.
Hey, Brian.
It is early days.
Leo.
One of the few players that got.
That are working through this.
I'll just leave it at that to say it.
Good to have cushion in our metrics.
Especially things like this so we.
We're not concerned about being able to absorb it.
Okay.
It just sounds like S&P hasn't decided what they are not there yet.
They are not decided we had early discussions with them.
Good day to day went back and just say well this is going to impact your credit metrics.
Full transparency in terms of obviously this will have a <unk>.
If a full impact of that.
In fact, this is absolutely transition area. So.
I guess I'll leave it at that and I'm sure we'll be watching it.
We'll see over the next few weeks here.
I'm sure they'll take a position.
Okay that makes sense.
They tend to be somewhat more prospective looking at anything.
Maybe I can start.
Quick turns here to 2020 guidance and I just want to make sure I.
Unpack I mean, do you guys kind of impact from that.
The driver on the headwinds you mentioned that COVID-19 impact too.
Hello average resource conditions in some of the acquisitions were delayed.
But then on the other side.
Surface.
Cost savings and a tax benefit, which I think you said, it's about the flash sensor sales so it sounds like it.
Awash in both sides so.
So when you look at your net versus beginning of the year five.
What else.
And I am missing there in the conversation.
I think you've got to I, just don't think it was a full on watch.
Big impact here it was what's Covid what was.
Was weather, but also obviously the delay in the acquisition as I mentioned earlier.
Free significant seasonality.
Transpires with the with our Delco, Utah.
Utilities, so we've closed that call it a probably the worst time you can close.
During the year, but.
So that's certainly weighing on our results.
Okay.
Great. Thank you for your interest.
Thanks for that your net your next question comes from the line of Richard Sunderland from JP Morgan Your line is open.
Hi, Thanks for taking my questions here, just wanted to circle back to the incremental commodity costs you outlined at the start of the Q&A.
The 200 million are you able to break that down by jurisdiction and utilities.
Yes pretty much.
The majority of that through.
Our Empire.
Utility in central most of our other utilities are on the coasts and really didn't get get hit so hard itself against utility by some way.
So.
It's a mixture of increased natural gas costs total running out of gas generation fleet.
And then some incremental costs from the electricity side to settle it.
Okay got it and then shrinking around recovery at a higher level could you run through maybe some some offsets to the cost per year.
Are you simply thinking about amortization period or are there other other considerations in terms of.
You don't get the recovery dynamics I'm thinking in two parts kind of day.
The Asbury plant recovery could potentially impact as well.
Just sort of the dynamics at large so I'm going to turn out some kind of different Lebron standard just curious how you see the path forward to recovery.
Yes, certainly in terms of these GAAP.
Net and electricity prices we have.
<unk> and well established process through.
Fuel and purchased power adjustment clause or efficacy.
We filed that twice a year and on a six monthly basis and in the normal course of business as you felt you didn't have.
A six month recovery period.
For those that.
Cost of material nature of these incremental costs, we filed.
With the commission and <unk>, an accounting order.
That will allow us to put those costs.
The balance sheet, and then have a conversation with the commission around actually book the right period of time for us to recover those costs in a way that makes sense for us the business, but importantly makes sense from our customers. So you can imagine that this would have a material Rachel.
Really not the best time for them and so we.
We still have those conversations with the commission, but in terms of sort of the process of.
Prudent recovery those is well established and approved documents it already.
Got it and then just one last one if I could just any any dates or timing to watch in terms of those conversations with the commission.
So it should be between now and April so a few.
Fuel adjustment filing is due on Thursday.
So we'll be having those conversations really in the next months.
To agree on the best way to handle the <unk>.
Got it thank you for the color.
Thanks Richard.
Your final question today comes from the line of Noah bedroom.
<unk> from <unk> capital markets.
Your line is open.
Hi, good morning.
Just wanted to go back to M&A for a second.
I guess in a worst case scenario, where the New York water acquisition.
It doesn't go through just wondering if you can talk about your pipeline of acquisitions today and how quickly you can you can take that capital and reinvest it somewhere else.
Sure So <unk>.
As you know historically, we've been a purely.
Transaction oriented company so.
We have done what something in the range of 20 transactions over the last 20 years or so.
Because of that experience and because of our track record of being able to close our transactions.
We're always in the mix.
In terms of discussions around.
These transactions weather.
Book.
Whether it be in the public realm or not so.
Uh huh.
That's something that.
We cannot.
Actually pinpoint as to exactly when those transactions or might happen or if and.
That's why I have as a matter of course, we only include on our.
Five year capital plan.
The M&A transactions that we've already announced that may not have closed. So that's why New York American water is the only one on a five year trajectory from here.
Worst case.
American water doesn't growth, we'll be able to.
Do another transaction.
Overall.
We just started our five year plan.
Obviously, we've got four years 10 months more to go so I would be highly confident in our ability to do more.
M&A transactions.
I appreciate the timing is difficult, but it sounds like you're confident that you can find the other opportunity is fairly quickly.
Hum.
Another question is are there any updates to the Empire.
Our rate case, either the appeal process.
Or just any updates we should be aware of on the new rate case that you expect to fall.
I don't see any material updates from the appeal process is ongoing.
Take care.
Up to a year for that to come through.
We are preparing to file our next case in Missouri later on this year.
Okay, and just one last question.
On the Chevron framework agreement, just any any updates or I guess next steps that you are looking to to achieve this year whichever.
Sure.
As a reminder, I mean, we announced some time in the middle of 'twenty 'twenty.
And so what we have done since that time is.
We have in fact done some joint procurement work to make sure.
We are.
For Harbor equipment.
With us.
We have also filed for.
For interconnection.
Q applications, so those are well underway.
And we are working through in terms of contractual contractual structures.
Starting a detailed.
Engineering and design on those projects. So we are making good progress we're happy with the pace of progress, we're making and so the question is when will we actually be able to announce something that starts construction. We're hopeful sometime this year.
Okay. That's great. Thank you.
Thank you.
That concludes our Q&A today I'll now turn it back to management for closing remarks. Thank you very much and thank you for taking the time on our call today with that please stay on the line for our disclaimer.
Our discussion during this call contains certain forward looking information, including but not limited to our expectations regarding future earnings and capital expenditures future commercial dates and the impact and outcomes of the recent severe winter storms in Texas and essentially use. This forward looking information is based on certain assumptions, including those described in our most recent M D.
You may fill up 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 is based on the plan.
Beliefs estimates projections expectations opinions and assumptions of management.
As of.
Today's date, there can be no assurance that forward looking information.
Proved 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 in such forward looking information, except as required by applicable law. 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 EPS adjusted EBITDA adjusted funds from operations and divisional operating profit. There is no standardized measure of such non-GAAP financial metrics and consequently Ecu.
The method of calculating these measures may differ from methods used by other companies and therefore, they may not be comparable to similar measures presented by other companies.
For more information about both 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 MD&A filed on SEDAR in Canada or Edgar in the United States and available on our website and that concludes the conference call.
Thank you everybody for joining today that concludes your conference call you may now disconnect.
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