Q4 2020 Algonquin Power & Utilities Corp Earnings Call
[music].
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 to ask a question.
During the session you will need to press Star then one on your telephone please be advised the today's conference is being recorded.
Or any further assistance. Please press Star then zero I would now like to hand, the conference over to your speaker of 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.
He was annoying thing and I'm, the vice President of Investor Relations that Algonquin power and utilities.
Is there anything on the call today are.
And then thought of.
Our president and CEO and Arthur Casper that our Chief Financial Officer also the cleaning at this morning for the question and answer part of the call will be testing, our net our chief development Officer, and Tony Johnston, Our Chief operating officer to accompany our earnings call today, we have the supplemental webcast presentation avail.
On our website about the power and utility of Dot Com, our financial statements and management's 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 the outcome of the recent severe winter storms in Texas and the Sn.
For the 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 these items.
On the call. This morning of renewable provide an overview of our Q4 and full year 2020 performance Arthur will follow with the financial results and then of Rune 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 some of your questions to two and then re queue. If you of any additional questions to allow others the opportunity to participate and with that I'll turn it over to events.
Thank you Amelia and a very good morning to those we've been able to join US on this call and online.
Given that this is our year end earnings call I'll provide some highlights and speak to performance, both financial and operational for 2020.
Yeah.
Firstly on financials.
I am pleased to report steady year over year of growth in our key financial metrics.
2020, adjusted EBITDA of $869 $5 million.
Increased 4% year over year, and our 2020 of adjusted net earnings per share of <unk> 64.
Compares to 63 reported last year.
There were three particular events.
It.
Weather in the Central region and delayed closing of does go that impacted our results.
Despite these management was able to pull a number of the leavers, including cost savings to continue our growth trajectory.
We exited the year with $13 $2 billion in assets of 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% for the 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 <unk>.
<unk> consecutive year in the road.
Thirdly on operations.
The company of undertook many successful growth initiatives and achieved numerous milestones in 2020.
We'll continue to focus our efforts on all Congress three strategic pillars growth.
Operational excellence.
And sustainability.
For those of you who may have participated out of our virtual Investor day in December we discussed this at length.
We operate two businesses the regulated and renewables.
What is unique about us all of 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.
<unk> 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 year to date is scheduled for mid May.
We continue to expect this transaction growth in 2021.
On the renewable energy business the company made the largest renewable energy acquisition.
Wiring of 51% ownership interest in a portfolio of pre operating force the wind facilities with the combined generating capacity of 641 megawatts in.
Of course to Texas.
These two wind facilities have already achieved commercial operations.
The acquisition of a 51% interest in a four 240 megawatt South Texas of course, two facility is expected to occur in the first half of 2021 once the facility reaches commercial operations.
We continued 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 sustainability goals.
As further proof of concept, we signed the 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 company's largest construction program in our history with.
With approximately 16 100 megawatts of renewable energy projects under construction.
To put that in context with new projects approximately doubled the.
The amount of power overall renewables portfolio.
Within our renewables business.
Two of our projects.
The Greg the two solar facility located in the southern Maryland.
And the Sugar Creek wind facility located in Illinois.
Both of achieved full commercial operations last year.
Furthermore, two more projects are nearing completion with more than half from alpha restart solar of 80 megawatts successfully placed in service with the 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 of.
111.
After 127 turbines.
And as long term power purchase agreements with general Mills and Kimberly Clark.
Maverick was recently recognized by the American cleaning power Association as a floor for the largest single fail wind project in the U S history.
An important lever of growth on the regulated side as we've transitioned the lower carbon energy.
As our greening the fleet initiatives.
We continue to progress well on our Midwest screening initiative with the development of construction of three wind farms for a total of 600 megawatt capacity.
As we work to generate and deliver more cost effective diverse.
And sustainable energy options to our customers and communities.
The 150 megawatt north for groups of wind facility.
<unk> achieved full commercial operation.
One of the 300 megawatt Neosho ridge.
150 megawatts of Kings point facilities are anticipated to be placed in service prior to the end of this month.
Moving on now to operational excellence.
In the mission critical industry like ours.
Safety is always an area of focus.
And so I am pleased that we have of just past the impressive milestone of 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 the while we have the 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 emergency preparedness.
Highlighting 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.
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 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 the contribution from New Brunswick gas and St. Lawrence gas.
The integration of these two utilities into the Algonquin Liberty family has gone well.
As good as this organically in these two facilities is a key initiative.
As with all of our previously acquired utilities.
<unk> drive 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 wanted to provide a few highlights from 2020.
In March the pool.
Moser of our Asbury coal generated.
Generation facility in the 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 change the assessment report.
In response to guidelines established by the financial stability Board Task force on climate related financial disclosures.
The FD.
We also released our 2020 sustainability report, which not only outlined our progress on our ESG goals, but.
But provided the higher level of disclosure detailed.
Our nine priority issues.
And in 2021, you'll see of adding additional ESG linked ghouls too.
Pumping systems program metrics.
Overall.
I'm pleased with the progress we've made in 2020, given COVID-19, and all of the 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 store inquiry.
And the Midwest X gene weather event, which occurred last month.
First and foremost our fraud out of the many people whose lives have been disrupted by.
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 the teamwork and continual commitment to our customers.
In our renewables business. We currently have a total of approximately 2500 50 megawatts.
On wind.
Solar and hydro project in operations.
Including our 51% of interest in cleaning South Texas of course to wind facilities.
In accordance with our strategy our portfolio of assets is very diversified across 46 facilities.
15 states and provinces.
And several of Isos.
We believe this diversified portfolio will continue to be of major advantages in the face of climate change.
In <unk>.
We are of diversified operating portfolio of approximately 965 megawatts across five locations.
Two inland.
And three postal.
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.
Using long term fixed finance from swaps.
With a total combined hedge position of approximately 120 megawatts.
We saw no material impact.
The coastal wind assets.
While the storm did have a major impact on our standard Patrick.
In total our estimated exposure remains.
What we announced earlier in our press release of $45 million to $55 million before potential of mitigating impacts.
We have asserted force majeure at our standard facility.
Given the large scale market failures and X gene weather events.
Store.
It was very unusual in the level of impact across a very large geography.
And temperatures fell to six degrees Fahrenheit near.
Near our standard facility.
Lower by nine degrees compared to the lowest ever record of temperature and the last 100 years.
Since there may be of dispute.
And possibly litigation, we do not intend to speculate today on our legal position.
There are also ongoing discusses.
Regarding potential of 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 operating 16 jurisdictions.
Despite the extreme weather conditions.
The recognition of 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 from Samsung.
The income 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 result, as well as a financial impact of the Midwest extreme weather event.
Arthur.
Thank you Arun and good morning, everyone.
The real mentioned earlier in 2020 of the also has again shown its ability to accretively grow grow earnings through its stable regulated services.
Long term contracted renewable power of businesses.
Our fourth quarter 2020, consolidated adjusted EBITDA was $253 1 million, which is up approximately 10% from the $230 4 million, we reported in the previous year.
The regulated services group delivered of $161 8 billion and 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 ESL and bulk of 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 of divisional operating profit of.
The $102 9 million, which compares to $85 9 million in the same quarter last year.
The increase represents generally higher production across the renewables fleet during the quarter.
Our Q4 adjusted net earnings per share came in at 21.
Which compares to the 20 <unk> reported last year.
Our results were positively impacted by cost savings implemented during the quarter of <unk>.
Our performance from our generation facilities and the contribution of itself as the bulk of acquisitions.
But were partially offset by the unfavorable weather at et cetera of region as mentioned earlier.
For the full year adjusted net EPS came in at 64 and compares to 53 recorded in the prior year.
The 2020 results included the full year contribution from New Brunswick gas at the St. Lawrence gas system.
Which were acquired late last year as well as the implementation of new rates are equal in granite state electric distribution systems.
The results were negatively impacted by a decreased consumption, resulting from the COVID-19 pandemic.
As well as significantly unfavorable weather experienced by the central region in early 2020.
The delay of the closing of total also weighed negatively on our results as compared to our expectations for the year.
Despite these challenges the year over year growth in adjusted net EPS demonstrates the stability and the resilience of our business model.
Now I would 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 of consumption patterns continue to ease of the economy reopens.
The impact of the regulated services groups divisional operating profit was less than $1 million of Q4 with full year of 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 strategy.
Sponsored the demand decreases caused by the pandemic.
Im 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 of $24 million.
I'm also pleased to report that all of the reduction from made without compromising on safety security and reliability of the services, we provide to our customers.
Although the third of these reductions occurred naturally the reduced travel and another similar expenses.
A third of was related to timing.
And the final third is related to ongoing savings, we were able to drive in our business has been factored into our 2021 earnings expectations.
Before turning things turning things over factor of roof I'd like to provide a brief update on our 2021 guidance.
In 2021 of our results are expected to benefit from the addition of approximately 14 100 megawatts of new renewable generation capacity completed late last year or early in the first half of this year.
In addition, we expect the benefit from the first full year of operations of vessel sales.
And the text of course, the wind portfolio.
Factoring all of these benefits in total we expect our 2020.
Adjusted net earnings per share to be in the range of 70, 170 success, which is consistent with what we communicated at our Investor Day last December.
As Robert mentioned earlier last month, our operations were impacted by extreme winter storm condition experienced in Texas and parts of the Central U S.
The most significantly impacted facility was the Senate wind facilities, which are the financial hedge in place that imposes on the 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 exceptional exceptionally of fleet of pricing to cover the production shortfall of the roads hedge.
This is expected to result in of <unk> negative impact of 2021 basic net earnings per share.
Which is calculated before any potential recoveries.
We view this market disruption of the Senate facilities of unusual and not representative of the ongoing operating performance of the company and boost of the excluded the impacts of the 2021 of adjusted net earnings per share expectations discussed earlier.
With that ill now.
Now I'll hand, it back over to the route 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 2025.
To be spent across our two business groups with the emphasis on regulated services.
We have identified projects that make up the entire nine $4 billion with most of them under construction or in advanced development.
This core nine $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 into construction in 2020, 'twenty three and beyond.
Before we open the lines for the question and answer period.
We remain very excited about our concrete businesses and prospects.
With society in economies working hard to minimize carbon emissions.
And many countries core of lifting around a net zero carbon by 2050 goal.
Algonquin deregulated and renewables businesses are well positioned to contribute to and benefit from this decarbonization transition.
Our three strategic pillars of operational excellence growth.
And sustainability will be of key foundation.
<unk> continued 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 pursuing our sustainability goals.
<unk> 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'll pause for just a moment chicken part of 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, Reuben So if I could start with the Texas weather, then you discuss the incremental commodity cost of the regulated utility business from the Midwest.
But what's the scale of that incremental cost and can you talk us through how this will manifest itself from the financial results to you book higher costs and revenues here with what you see in the accrual on receivables and just tell us.
We should be looking at that price.
Sure.
Sure.
The total cost is expected to be in the neighborhood of around just over $200 million.
The primarily all of those costs are expected to be.
Through to our customers so although the at the timing of over the pass through.
Subject to discussions with our regulators, we do expect to set up the regulatory assets with respect to those commodity costs.
Okay, Alright very good.
And then looking at the Texas event, and as well as all of the the <unk>.
<unk> you have on tap right now can you give us some thoughts on the balance sheet strength today.
Liquidity position and capital needs for the remainder of the year or two.
The fund your construction.
Sure.
So we are of very strong liquidity position as you know Scott the regular about $1 5 billion of committed.
Facilities and we've also.
Call it the footwear, our liquidity position with another $1 6 billion of term facilities. So right now we're sitting at about $2 8 billion of available liquidity.
Yes.
Certainly.
Sufficient to fund our ongoing capital plans, but but I'll, let <unk> to also be in the capital markets. This year.
Raising from funding.
Okay I'll leave it there thank you.
Thank you to book.
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.
Subsequent to year end, you sold the 32% stake of the sell down.
Pretty shortly after acquiring it can you give us some of the rationale of especially as it looks like you sold it at a little bit of a discount to the the initial purchase price.
Sure Sean good morning.
So the look.
While we are very very comfortable with the Chile.
As a country risk and the end of business risk.
This was our first of major.
Investment in Chile.
If you look at the structure of <unk>. It had a strong local partner initially and through the tendering process the tender their shares.
<unk> always believed that as of forest transact them strategically it was very important for US do you have.
Strong local partner.
Could help us with all kinds of things locally.
And so.
Two of Scott was a very natural choice.
We have non them for awhile and.
The non on the northern local NRG on water sector, very well the impact also own 50% of another Walker of utility in Chile, So dealer of very very natural partner for us. So it was really a strategy that we.
We hadn't placed long before.
The final acquisition of its out of place.
And no it was not at a discount.
Okay.
Just like a modest one thing in our math and maybe I'll follow up on that.
And the second question on page 22 of the MD&A that goes through.
Some of the variances in the the quarterly results for the regulated segment. There was an other bucket of $9 9 million debt that goes through several items I'm wondering Arthur or Arun. If he can go through some of those elements specifically in and help us clarify that.
That figure and the impact on the results.
Sure sure.
All of <unk>.
Take a stab of that and it really is the.
Fletcher of items in there, but one of the things as we always sales youre aware of.
The contracted services.
Some of our utility.
And of that revenue tends to be a little bit more chunky.
The matter of timing.
Timing of luxury.
The last year of that revenue in the freight.
I think of.
The facility.
As an example, and we also have our style of utility.
We actually ended up.
Recognizing.
So it's of interest in the last year of didn't reoccur this year.
As a matter of of a comparative.
We also at the.
The slower AFDC cash.
The patients this year compared to last year.
The cluster of clubs.
But it takes all of that together.
Okay. Thanks for that Arthur that's all I have for now thank you.
Thank you Sean.
Our next question comes from the line of Julien Dumoulin Smith from Bank of America. Your line is open.
Hey, good morning, Thanks for the time of the opportunity.
Good morning, Jerry.
Thank you so much listed a couple of different questions for you guys maybe to start higher level.
Can you elaborate a little bit more of an ITC PTC extension here, just how you're thinking about the impact to your business I mean, obviously you guys have the.
Accelerating opportunity.
The different Counterparties Chevron for instance, just can you elaborate a little bit on how you think about the pay 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 ICC PTT opportunities just to make sure the right.
Just with the extensions here I mean the.
Net.
Provide a greater sort of five year view on what you think you can do I know this is out of cycle with the typical December update, but I'm just curious with the <unk>.
Given that we've got these extension of the blades.
Yes.
There's a couple of things.
We are very.
Keen about the bank and the administration, and where theyre going to take things in.
What extensions will go above and beyond book, we've already seen.
Obviously, the ability to improve some of the economics within our $9 4 billion pipeline to the extent that they're able to qualify for the incremental.
PTC ITC. The most significant is the ITC extension, allowing projects that come online a little bit later on the solar side.
We do see upside in the $9 4 billion pipeline on the <unk>.
And some of those projects and the ability to bring more projects, which are get 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 the agenda and we should really help us.
As an out of 34 100 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 the <unk>.
<unk> before and again as a reminder, that's 3400 megawatt.
Greenfield pipeline is above and beyond our $9 $4 billion of five year cash.
Capital plan.
Yes.
And then if I can go back on some of the details the I just want to understand.
The.
The New York.
The American water piece of the key.
<unk> talked about the confidence in getting that closed here I mean I know the.
Lots of talk of the state.
The determine exactly what's going to transpire there.
And on the taxes from just force majeure anything specific we should be watching there and what youre assuming in that six months I just want to make sure I understand what the sequence of assumes an outcome there.
Alright. Thank.
Thank you.
Sure.
Julien, Let me start with the New York American water.
As you know there is a law that of an.
In the in the public Xeon and I'm not going to repeat that but the.
Our conversations and discussions with the <unk>.
Cognizant has continued.
Of the year earnings are set for mid May.
As you know of our Governor Cuomo has come out of the Bill.
And one of the elements of the Bill is to look at potential Municipalize Ethan.
We obviously welcome that opportunity to have a public dialogue.
Around the.
Benefits and not of municipal licensing versus in the private.
Participation.
And we are still confident that the acquisition will close in 2021.
Just a context, though I should point out.
We did flow of central on GAAP in New York State and that wasn't of approximately 18 month process. So.
Because of operating in 16 different jurisdictions, and we have a pretty good view of how long the different regulatory processes take and so we believe that will be.
In that book.
Kind of a timeframe.
Your second question of what.
That was I believe around the Texas and the force majeure.
Yes from a point here.
Our announcement was full of fleet of $45 million to $55 million impact before any potential litigation and so we have already issued of force majeure notice.
The.
We obviously remain confident in our in the provisions of under which we issued that obviously there is of.
Because it is good.
Given the dispute of Ara.
We give them to choose and I don't want to comment more on that the other potential litigation is.
Are you well aware Julien I mean, there is a lot of discussion going on at the Texas legislature of at the PUC there around the merits of non above the $9000 a megawatt hour pricing and the weather.
There is a possibility of part or all of that being rescinded.
See that.
Another potential mitigation because.
And by and large from every commentary out there there was a lot of scale market failures. So there are some of those are some of the mitigation.
Thinking about but that is not included in the 45% to $55 million number of <unk>.
Given the release.
Thank you so much really appreciate it.
Accurate.
Your next question comes from the line of David <unk> from Raymond James Your line is open.
Thank you and good morning, everyone. Just my first question here just as it relates to your.
Youre wind build out in the Midwest.
As that customer savings plan I guess completes 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 the.
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 of 90 minutes on that.
Over solar in terms of the 600 megawatt.
Wind project.
In fact, one of them is already online.
Fourth.
And the two others.
Inertial and Kings point.
They're scheduled to come online in fact.
At the end of this month. So there clearly is very very advanced.
In terms of.
Being in the operations.
We do believe that there is a.
More opportunities out there.
In terms of.
The substituting wind or solar.
For other of force.
Thermal generation.
The I'll turn it over for more context.
Yes.
Good morning, Johnny Johnston.
Ongoing review.
ILP plans as part of the central.
Organization were always looking ahead.
Opportunities, we have to make sure we've got the right generation to meet our loan.
Fans of the amendment we have.
No the 50 megawatts of solar.
The placements 20 megawatts of.
Most of the sooner in the storage on a sort of more of a community type basis, and then we continue to review.
It's the CPU as we go forward.
The number of the aging facilities of the part of our generation from that and as those.
Those opportunities present themselves will be from individuals and David as you know him and greening the fleet is of.
During the key lever that we have where we believe we have unique expertise, especially without the.
The experience around the tax equity as you know in <unk> as well, we've added and the number of.
So the solar generation into that rate of base.
We're excited about the.
The potential opportunity the Bermuda as well.
Because that certainly is all formal generated from so this is something that we are continuously evaluating in the end you obviously continue to yield more from us on our greening the fleet initiative.
That's great color. Thank you very much maybe just one more from me.
I guess in Europe, you have started to look.
It looks like on some opportunities in Spain, and then I guess the few renewable opportunities in Colombia as well just curious how you see the outlook and 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 do want to give the pilot give context for the strike so.
We are by and large of North American energy on water company Alright.
The.
For some years ago.
We acquired our business in the <unk>.
Atlantica, we also felt the need.
For <unk>.
Development.
Entity.
To go after non regulated international business.
The scope of <unk> is just that.
The nonregulated and international and the two markets that we have.
<unk> been targeting are Spain, and Colombia, because we believe that from a contributive business risk.
The pencil opportunities and our own positioning of the market.
We believe that we have.
Advantages in those markets.
As you saw I mean, we have in fact dropped down.
Couple of those assets in Colombia already into Atlantica, we are progressing well.
On a number of those are solar opportunities in Spain as well.
And we will update you as we make more progress the other thing I do want to remind you.
Is that none of those projects are part of our $9 $4 billion of 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.
Hi, Good morning, everyone two follow up questions for me the <unk>.
Some of the 'twenty 'twenty, one capital outlook, the renewable energy at one of our $1 75.
It's pretty robust there and over half of our around half of the five year total spend.
Is that just the timing of all of the investments or are you baking in some of your of we'll call. It.
Lower probability or earlier life stage investments there or is that really just kind of cleaning up the rest of the Maverick Sugar Creek and the slowdown.
Hey, Rob.
Good morning, so net.
Let me try and answer your questions. So when we were at Investor day.
And we showed you the $9 4 billion.
On our capital plan, we also shows that.
And the really a large portion of that in one week of reports to have all of these locked and loaded because.
As you know in.
In 2020 that was our largest construction year in our history.
We had 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 is now recently come online.
Acquisition of our fixes post the wind facility, which as of 30, which is in fact, the largest acquisition on our renewable side that happened earlier.
This year on the North Fork Ridge came online and we of some large projects that are also coming online.
The shortly including on the regulator side, you've got the Kings point unusual.
And then.
On the renewables items of Maverick and out of the start also coming on line. So the.
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 so that's what accounts for the.
The.
But a lot of a portion of that capital investment plan of happening.
Early in 2021.
Alright, Thats 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.
The instruments the fund the capital plan is that still the case the end does the Texas.
The Texas will weigh on the credit metrics of the level of bad share, but should we assume that the.
Of the equity in the plan that you outlined in December as per the front end loaded here.
Hi, Robert.
But yes, I think you can assume what we laid out of Investor day.
With respect to our funding plan.
The two to your question of a mandatory adjusted the product that we still are looking at.
As we think about the.
We're probably the predominance of refinancing would view of 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.
So first of all higher level, yes.
We'll follow the last question Arthur from you and just in terms of some of that pressure from the higher commodity costs and the text of thoughtful potentially I think I've spoken to the range and you can kind of how they would look through that sort of deal with us in terms of any hit the <unk>.
Does that push it and anything to engage on the ATM.
Earlier now.
Good morning Marco.
We are obviously us focus of the rating agencies.
It's still early days as you know we're not the only company the <unk>.
The growth.
Through this I think the rating agencies are still evaluating obviously this transition.
Does the does weigh down on the the credit metrics from the top line. So we.
We view of our capital plan more of the long term basis anyway.
Look at the.
Necessarily.
Impacting our GAAP in the months significantly.
Okay and then.
In the fourth quarter the <unk>.
All of the admin costs on the utility had a real material step up year over year and also from the from the prior quarter I appreciate the <unk> come into the fold now can you.
Breaking 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 in light of played into the higher opex from the until.
All of the 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 the seasonality of utility like telco will earn about 70% of the earnings will come in in the late spring to call. It early fall months alright.
It is really seasonally shaped.
The from that perspective, you may see of it.
The margins.
Sorry, if this area of saying that maybe topline revenue for balkar of little lower but the fixed operating costs of parallel lot of cost per quarter.
Great.
Okay all of 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 sort of.
The first question relates to all of the development projects you have on the go so but big picture.
How much do you spend our expense on on development costs I know some of your Canadian peers spend anywhere from like $28 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.
The corporate level or is it in the renewable energy level or I know some of it's in Asia, but can you just get the more color on that.
Sure maybe allstate.
Yes, Nelson I'll take the first question and maybe Arthur can take the second question.
But generally speaking.
The Investor Day, we did indicate that we would be ramping up our spend.
On the.
The renewables and the Unbilled the 3400 megawatts early stage Greenfield pipeline.
I believe at that time, we indicated the <unk> be about of <unk> Greg.
On EPS as a result of those activities and so that accounts for the majority of the spin.
Okay.
Per year in general.
As long as you would expect.
The incremental cost with respect to all of the thinks.
Moving to the development that we're looking at.
Net.
The.
Of the the upfront.
With respect to your question around <unk>.
The development cost.
The book.
Okay.
The reach of certain capability.
The becoming a capitalized but our book.
Early stage projects are undertaken through through agents.
The development platform.
I guess, what's the reach a specific threshold.
That would be of course.
Bob.
All of it.
Thanks.
So Asia does the U S developments as well as international I think it's all done with NHS.
It's all done within the one of the combined development shop.
First of the sentiment.
All of the call. It Asia, maybe Asia is of the right word for it but it's really our one combined development.
And those costs get reimbursed through our.
Yes.
Three of our results of what they actually do achieve.
Bob.
Okay got it and then my second question relates to whether so Q4 weather was warmer than usual and that was the negative impact.
Q1, I guess, if you exclude.
The extreme weather was probably colder than usual.
Would that help your utility earnings in Q1, I guess aside from the fact that you have to pay a lot for commodities.
But can you just give us.
Some color as to the Q4 was warmer than those negative so Q1 was coal there.
But obviously commodity prices are also a lot higher so what would be the net impact excluding the obviously, excluding the Senate wind.
The facility.
Yeah. Good morning announcement is joining us set of.
Thank you so far of 2021 has been a bit of a plenty of all of it.
On the weather from and actually looked at the facility of January.
Much walnut.
Linked to the and we were expecting that of say the February the C code.
Out of with interest the landmarks plays out so.
<unk> undertakes appropriately.
It's almost the books at the moment.
Yes.
And so.
I think moving either up or down as you look at the various receivable.
And the first couple of months of the fourth.
Okay. Thanks, I'll leave it there.
Excellent.
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 that.
A question on.
The impact on your credit ratings from the Midwest.
What are the event and I understand you're going to amortize the curve earnings per share like like you share it.
But clearly there's some sort of the cash flow impact.
I'm wondering really what your conversations with the credit rating agency that at $50 <unk> can you get the sense that day.
The cap like that in your your balance sheet or is it going the flow through your <unk> all of our Texas kind of complete ignore it and normalize it out of their per credit metric technology.
The benefits of Arthur is early days.
We're probably of what.
One of the few players because I've got the.
That are working through this but I think I'll just leave it at that the state I mean, we target of cushion in our metrics.
The four especially things like this.
We're not concerned about being able to absorb it.
Okay.
And it sounds like S&P hasn't decided what the an NPA.
They have not decided we had early discussions with them.
The went back and just say well put added Dr of your credit metrics.
The full transparency in terms of obviously this will have the of.
The full impact the full.
Pulling back the.
Absolutely transition area. So.
I guess I'll EBITDA.
I'm sure we'll be watching it.
Both of them.
Sure.
Sure the uptick of position.
Okay.
Mark perspective, looking at anything that.
Maybe I can.
The term tier 2020 guidance and I just want to make sure.
And Pat from you guys kind of impact the timing of.
The <unk> on the headwinds you mentioned, the COVID-19 impact too.
The oil average resource conditions in some of the acquisitions were delayed but then on the other side.
So I'll start this.
Cost savings and the tax benefit, which I think you set up of the product sensor sales. So it sounds like the <unk>.
Awash in both sides.
So when you look at your net versus beginning of the year five.
What else.
And I'm guessing they're in the conversation.
I think you've got of those ticket was the full on watch.
Big impact here was lets COVID-19 what was.
Was.
Was weather, but also obviously the.
The acquisition as I mentioned earlier.
The significant seasonality.
Transpires.
With our Alco, Utah.
The utility so we've closed the call out of probably the worst time, you can close the books.
During the year, but.
So that's certainly weighing on our results.
Okay.
Alright, Thank you very range.
You've already met your next question comes from the line of Richardson of them from Jpmorgan. Your line is open.
Hence the case of my question here, just wanted to circle back to the incremental commodity cost you outlined we started with the Q&A.
The 200 million are you able to break that down by jurisdiction.
Yes.
Yes pretty.
Pretty much.
The majority of that through.
Our Empire.
Each of the feed and in central of most of our other utilities on the.
The coastal region.
Set of audits.
The utility by some way.
So.
It's a mixture of increased natural gas costs of running our cash generation fleet.
And then some incremental costs on the electricity side sales.
All of it.
Okay got it and then seeking around recovery at a higher level could you run through maybe some some offsets to the cost here.
Are you simply thinking about amortization period or.
Are there other considerations in terms of.
The recovery of dynamics MTGE, a cheap part is kind of a day.
Actually plant recovery that could potentially impact as well.
Sort of get accused the dynamics at large so.
Then came out of some kind of get the leverage there, but just curious how you see the cat four to recovery.
Yes, certainly in terms of the gas and electricity prices, we have approved and well established process through.
A few of them.
Adjusted for FX.
We filed at twice the year six monthly base system and it's the normal course of business.
As depot that the that have a six month recovery period.
All of those that because of the material nature of <unk>.
These incremental costs of the file.
The mentioned NII of an accounting order that will allow us to put those costs onto the.
The balance sheet and then how the compensation of the commission around.
Most of the right period of time for us to recover those costs in a way that makes sense for us of the business, but importantly, some of our customers you can imagine.
It would have a material rate show up.
Really not the best time for them.
We still accomplished conversations with the commission of but in terms of sort of of the process of.
The prudent recovery of those wells.
The pathogen.
Documents of the range.
Got it and 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.
Youll adjusted filing is due on the first.
So we'll be having those conversations per day minute.
Agree on the best way to the absolutely.
Net.
Got it thank you for the color.
Thanks Roger.
Your final question today comes from the line of.
Bedroom from.
<unk> capital markets. Your line is open.
Hi, good morning.
Just wanted to go back to M&A.
<unk>.
I guess on a worst case scenario, where the New York water acquisition.
And 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 Matthew.
As you know historically, we've been a fairly.
The transaction oriented company so.
We have done what something in the range of 20 transactions over the last 20 years or so.
We because of that experience and because of our track record of being able to close our true.
Transactions.
We will already of the mix.
In terms of discussions around.
These transactions weather.
Book.
Whether it be in the probably the arm or not so.
That's something that.
We cannot.
It's been blind as to exactly windows, 10 transactions or might happen or if.
And Thats why as a matter of quarters of we only include on our.
Five year capital plan the.
The M&A transactions that have been volume announced that may not have closed.
That is our New York American water is the only one on the five year trajectory.
Your point worst case the newer.
American water doesn't growth would you be able to.
Do another transaction of over over the.
We just started our five year plan.
Obviously, we've got four years of them.
Mortgage growth.
The heightened confidence.
EBITDA is do more.
The new transactions.
I appreciate the timing is difficult, but it sounds like.
Confident.
You can find the other opportunities fairly quickly.
I guess on the another question.
And the updates to the Empire.
Rate case, either the appeal process.
Just any updates we should be aware of on the new rate case that you expect the fall.
I don't see any.
Serial updates of the appeal process the failure.
Could take.
To the year for that to come through.
We are preparing to file an ex case city, Missouri later on the Street.
Okay.
And just one last question on the on the Chevron framework agreement just any of any updates.
I guess next steps that you are looking to two of change the tail which of them.
Sure sort of nausea, as a reminder, we announced on the west sometime in the middle of 2020.
And so what we have done since that time is.
And in fact that I've done some joint procurement work to make sure.
We have.
<unk>.
For hardware equipment.
With us.
We have also filed the.
For interconnection.
The key applications of those those are well underway.
And we are working through in terms of <unk>.
The actual contractual structures.
Stocking of detailed.
Engineering design on the projects. So we are making good progress we're happy with the pace of progress that we're making and so the question is when will we actually be able to announce something that starts construction. The note. We're hopeful sometime this year.
Okay, 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 out of disclaimer.
Our discussion during this call contain certain forward looking information, including but not limited to expectations regarding future earnings and capital expenditure Ctrip commercial dates and the impact of an outcome of the recent severe winter storms in Texas and essentially U S.
Forward looking information of eight answering assumptions, including those described in our most recent MD&A.
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. The plant. The forward looking information forward looking information provided during this call speak only as of the date of the call and is based on the plans beliefs estimates.
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As of.
Today's date it can be the no assurance that forward looking information.
True to be accurate and you should not place undue reliance on forward looking information we disclaim any.
Any obligation to update any forward looking information or to explain any material difference between subsequent actually in such forward looking information ex.
As required by applicable law.
In addition, during the course of the call you 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.
Adjusted EBITDA adjusted funds from operations and divisional operating profit there is no standardized measure of such non.
GAAP financial metrics and consequently, <unk> method of calculating these measures may.
The differ from the methods used by other companies and therefore may not be comparable similar measures presented by the company for more information about both forward looking information of a 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 anchor of any added eight and available on our website and that concludes the conference call.
Thank you everybody for joining today of that concludes your conference call you may now disconnect.
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