Q1 2021 Algonquin Power & Utilities Corp Earnings Call
Good day, and thank you for standing by.
From to the Algonquin power and utilities Corp, first quarter 2021 earnings webcast and conference call.
At this time all participants are in a listen only mode. After.
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 one on your telephone.
You require any further assistance please press star zero.
I would now like to hand, the conference over to your Speaker today, Amelia Tsang Vice President of Investor Relations. Please go ahead.
Good morning, everyone. Thanks for joining us this morning for our first quarter earnings conference call presenting on the call today is a roomba and SCADA, 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 Algonquin power and utilities Dot com.
And our financial statements and management discussion and analysis and 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 at the end of the call I'll read a notice regarding both forward looking information and non-GAAP financial measures. Please also refer.
Our most recent MD&A filed on SEDAR and Edgar and available on our website for additional important information on these items.
And our call. This morning are rune will provide an overview of our Q1 performance Arthur will follow with the financial results and then a rune will conclude with an update on our strategic plan for the business.
We will then open the lines for questions and I ask that you restrict your questions to two and then re queue. If you have any additional questions to allow others the opportunity to participate and with that I'll turn it over to Arun.
Okay.
Thank you Emilia and and a very good morning to those who've been able to join us on the call and online.
I'm pleased to report solid year over year growth and our key financial metrics for the fourth quarter of the year.
Q1, adjusted EBITDA was 282 $9 million power.
17% increase year over year.
And our Q1 adjusted net earnings per share was <unk> 20.
And increase of five per cent compared to last year's 19.
You will also note that our board has approved a 10% increase and the dividend.
Beginning with the Q2 dividend payable on July 15 of this year.
This increase marks the 11th year of consistently increasing dividends by 10% each year.
This demonstrates our collective confidence in.
And the resiliency of our business model.
This dividend increase is supported by the groundwork that has been laid down in 2020.
As we expect to benefit from the addition of approximately 1400 megawatts of new renewable generation projects.
That were in construction in 2020.
Our additional investment in atlantica and sustainable infrastructure.
And the acquisition of our interest in the portfolio of Texas coastal wind facilities.
Okay.
And the regulated side.
We expect to benefit from the first full year of operations from our Bermuda electric utilities as.
As well as the S a water utility and Chile, which both closed late last year.
Despite the year over year growth and financial metrics.
This quarter's adjusted net earnings fell slightly.
Our expectations.
This is Brian Murray and the result of increased costs relating to winter storm worry.
And warmer than normal weather in the central region during much of the quarter.
Yeah.
With respect to COVID-19.
The company's operating results were not materially impacted by the pandemic this quarter.
Generally speaking, we have not seen negative impacts from COVID-19 and our loads at this day is as business conditions in the regions, we operate and slowly return to normal.
Approximately 65 per cent.
Of the company's workforce continues to work remotely.
And we continue to employ operational measures intended to protect the health and safety of our employees and customers.
Our team continues to focus our efforts on Algonquin and three strategic pillars.
Growth.
Operational excellence.
And sustainability.
And we should spend some time on each of these four and update.
We operate through two primary businesses.
Well regulated and renewables.
Both businesses and multiple levels of growth that support them and gives us high confidence in executing our growth plan.
On the regulated side.
One lever of growth is our organic investments.
And improving the safety and reliability of our mission critical infrastructure.
Our solid earnings in the quarter.
Demonstrates the ongoing investments we are making.
To improve service for our customers.
While managing the affordability of their bills.
And our central region.
And the end of the quarter.
We have completed the installation of 172000.
Of the 182000 and EMI.
For advanced metering infrastructure meters.
That we are installing.
And we are on track to complete installation by the end of May.
These meters will not only give our customers much better information to manage their usage.
And it will allow us to implement time of use Darius that will further help us to more economically balanced supply and demand.
Providing further benefits for our customers.
Another lever of growth and acquisitions.
And we completed two utility acquisitions in Q4 of 2020.
And Sal and ascendant.
Q1 marked the first full quarter contribution from both acquisitions.
The integration of these two utilities into the Algonquin Liberty family.
Has gone well.
And we are performing in line with our expectations.
Growing and investing in these two utilities is a key initiative.
Our balanced approach of operating a local model with central governance continues to be a focus.
As with all our previously acquired utilities.
We strive to share learnings and best practices among our utilities.
With the aim of driving consistent improvement and our key performance metrics that drive value for our customers and investors.
With New York American water.
And we submitted a regulatory application to the New York PSC last year.
We are currently going through the settlement process.
And the hearing date is scheduled for late June.
As important work continues to determine the best path forward and resolving issues related to the special franchise tax.
We remain confident.
That Liberty is the best long term owner of the utility.
And we continue to expect this transaction to close in 2020 one.
And important lever of growth on the regulated side is our greening the fleet initiatives.
We continue to make investments and.
And service.
Our customers as we accelerate our transition to a clean energy future.
I'm pleased to report that we have successfully completed.
Our Midwest Greening the fleet initiative.
And all three projects have been placed and serviced.
And have been acquired by the Empire District Electric company.
During the first quarter.
Construction team and the Kings point.
Wind site.
From this and the final wind turbine.
Marking the end of major construction at the three wind sites with a total of 600 megawatts.
While construction has taken over a year.
The planning and development work began in earnest more than four years ago.
And had many achievements along the way.
The wondering and 50 megawatt north for grid wind facility.
Reached full commercial operations in December 2020.
While the 150 megawatt King's point, and 300 megawatt Neosho Ridge.
And its full commercial operations in April.
And early May 2021, respectively.
The related closer of the Asbury coal plant in March 2020.
<unk> to reduce emissions by nearly 1 million metric tons of carbon dioxide.
As we work to generate and deliver more cost effective diverse and sustainable energy solutions to our customers and communities.
We intend to file our Missouri electric rate case with the commission by the end of May.
Which will include these wind generation facilities.
2020, and marked the company's largest construction program and our history with approximately 16 100 megawatts of renewable energy projects.
And that were under construction.
After 60 and 100 megawatts.
Nearly 40 and 100 megawatts have reached commercial operations.
And the remainder are on track to be completed by year end.
In addition to the 600 megawatts commissioned on the regulated side.
In the renewables business.
492 megawatt Maverick Creek wind facility in Texas.
It was completed last month.
While Alta Vista solar is nearing completion with over 90% of its 80 megawatts placed in service.
The Maverick Creek wind facility has long term power purchase agreements with general Mills and.
And Kimberly Clark.
And I'll, let this day solar has a power purchase agreement with Facebook.
These two projects showcase our relationships with key C&I customers.
The demand from C&I customers, who are helping to drive an acceleration towards clean energy.
Expect it to be an attractive source of growth for Algonquin in the coming years.
And Algonquin is well positioned to help them advance their own sustainability targets.
At Investor Day.
And we spoke about our 3400 megawatt pipeline.
Potential new Greenfield opportunities.
Foods at least 500 megawatts includes our partnership with Chevron.
And I'm pleased to report that with Chevron, we recently advanced for Permian projects.
And in Texas, and one in new Mexico from the valleys and phase two.
And to the development phase.
Under our framework agreement.
This means.
And that development activities are moving towards a final investment decision.
Scale of the projects will also be defined at this stage.
And our Investor Day, we included two P. G M solar projects that were incremental additions in 2020.
We have now completed acquisitions of these two Ohio solar development projects.
And expected combined capacity of 235 megawatts.
With the first 100 megawatt project just beginning construction.
Demonstrating the ongoing execution of our development portfolio.
Okay.
Moving on now to operational excellence.
And our mission critical industry.
Safety and reliability are always key areas of focus.
Our utility and response to storm OUI.
He is a testament to our employees, who worked tirelessly and they're very challenging conditions.
To keep our customers and communities safe.
And to maintain our system reliability and resiliency.
Staying on the topic of safety.
I'm pleased that we have passed the impressive milestone of 6 million 50 hours without a single lost time injury.
Our improved safety scores also translate into financial performance.
And this has led to over a 90 per cent reduction and the number of work and lead related insurance claims over the past two years.
Our efforts on worker safety.
Are being recognized.
Has the American gas associates and recently awarded Liberty.
Safety Achievement award for employee safety for a third year in a row.
The customer is at the heart of every good operational excellence strategy.
In 2017.
We introduced J D power surveys.
Benchmark and evaluate our customer experience.
As expected.
Safety and reliability is what customers value most.
So it will not surprise you that.
And this has been a key investment focus area for us.
I'm pleased to report that in Q1, our J D. Power score was up 17 points from the end of 2022 and overall score of 703.
The highest ever for Liberty.
However.
We know we have a lot more to do.
And are excited about the new digital experience, we will be launching for our customers through our customer first program.
The team is making the final preparations for our first deployment, which starts in Massachusetts next week.
And we will be rolling out in a phased approach across the rest of the organization over the next couple of years.
And finally.
We remain firmly committed to sustainability through.
Through the inclusion of environmental social and governance values and our broader corporate strategy.
And day to day operations.
I want to provide a few highlights from this year.
Including the recent inclusion of Algonquin shares and.
And do the S&P global clean Energy Index last month.
And diversity.
Equity and inclusion.
We are committed to these values.
And are continually striving to be better.
We are pleased that Algonquin was recently recognized in.
And the Bloomberg gender equity index for the second year in a row.
And in the global mail women need here and benchmark.
Also at the end of Q1, we welcomed Garo Lehman to our board of directors.
Gary brings a wealth of experience and the startup and technology space.
And our knowledge and background will help strengthen the skills and diversity of our board.
With <unk> appointment.
The board composition and now stands at 40% female.
While our executive team is 38% female.
These ratios.
John Quinn amongst the leaders of diversity and the utility space.
I'm also pleased to share that our sustainability ESG ratings improved significantly.
As we continue our efforts on progressing and advancing our ESG disclosures to our stakeholders.
Last year.
We released our 2020 sustainability report.
Which not only outline our progress on our ESG goals, but also provided a higher level of detail around nine priority issues.
This year, you'll see us, adding incremental ESG linked goals.
Our competencies and program metrics.
Before turning to Arthur.
I want to provide and update on storm Woody.
And the Midwest X gene weather event, which occurred earlier this year.
The severe and nature of the storm was unusual in the level of impact across a very large geography.
And temperatures fell to six degrees Fahrenheit near our Senate wind facility.
Nor by nine degrees compared to the previous lowest recorded temperature and the last 100 years.
Also unprecedented.
The length of time that market rates, whereas the capped $9000 per megawatt hour.
Store, where he presented us and.
And other participants in the region with a significant challenge.
We are proud of how our teams responded to minimize the impact on both our customers and operations.
The diversity of our fleet.
And contracting strategies, both food and archive and across the rest of our geographically distributed portfolio.
Also served as well.
And helping to mitigate the impact of storm blurry on our results.
The most significantly impacted facility.
Our Senate wind facility in North Central Texas.
Which is a financial hedge in place that infosys and obligation to deliver energy.
Do do I see.
And market disruption during storm worry.
Facility was unable to produce the energy to satisfy the quantities required to be delivered under the hedge.
And was forced to settled in the market.
At elevated pricing.
We have a solid force majeure under the hedge contract.
And our regulated services group.
Which comprises approximately 70% of our portfolio.
We are diversified by modality.
And operating 16 jurisdictions.
Despite the extreme weather conditions.
Overall, our businesses performed well from an operational perspective.
The utilities did incur incremental commodity costs during a period of record pricing and.
And elevated consumption.
Due to the extraordinary and nature of these costs.
We are working with our regulators to spread those costs over a longer period to make the impact more manageable for customers.
We do not expect any material financial impact to our regulated business from the storm.
With that.
I'll pass it over to Arthur will speak to our first quarter 2021 financial results.
Arthur.
Thank you Ryan and good morning, everyone.
Our Q1 financial results continued to demonstrate the benefit from our golf and diversified and resilient business model.
Listing of stable regulated utilities services provided across 16 jurisdictions.
Our portfolio of long term contracted renewable power assets and.
And extensive development pipeline.
Our first quarter 2021, consolidated adjusted EBITDA was $282 9 million, which is up approximately 17% from the $242 2 million, we reported and the previous year.
The regulated services group delivered $204 8 million and operating profit and the current quarter, which compares to $172 million and the same quarter last year.
The improvement primarily reflects the first full quarter contribution from <unk>, our Bermuda electric utility NSO, our Chilean water utilities.
Both acquisitions closed in Q4 last year.
As well as from the contribution of Norfolk Rich the first of our three wind facility that was placed in service as part of the Greening The fleet initiative and remove spoke to earlier.
Results also benefited from new rates implemented on our energy North gas Peach state gas granite state electric and got people electric systems.
And were partially offset by higher operating expenses.
The regulated services group was also negatively impacted by warmer than usual weather and the central region with the majority of the first quarter.
The renewable energy group reported Q1 divisional operating profit of $96 3 million, which compares to $88 4 million and the same quarter last year.
The increase was primarily due to the addition of the Sugar Creek and Maverick Creek wind facilities.
Greenway II solar facility and the Texas coastal wind portfolio.
This was partially offset by increased costs incurred at the Maverick Creek and incremental basis costs at the Texas wind portfolio, both related to the extreme weather experienced during February.
The results also include the impact of the market. The results do not include the impact of the market disruption related to storm brewery and Senate wind facility.
The facility was forced to settle and there is a financial hedge and highly elevated pricing as a result of extended disruption and New York on electricity market and extremely and conditions, which impacted the operations.
We view this impact is unusual and non reflective of the ongoing operations.
Our Q1 adjusted net earnings per share came and up 20, which is up 5% from last year.
Despite the increase the results were slightly below our expectations again, primarily due to the on average warmer than expected weather conditions experienced during the quarter.
And our regulated group as well as the incremental costs, partially related storm volume.
Moving on to provide some updates on our financing activities and progress on our 2021 capital plan.
As you heard me say before we are highly committed to maintaining our triple B flat capital and capital structure, which we believe optimizes, our cost of capital benefiting shareholders and retaining our competitive position.
The benefits of this balance sheet discipline, we've demonstrated this quarter.
Our renewable energy group issued its fifth fund under its well established financing platform brings and Canadian and 400 million and the.
A low coupon of two 5% for 10 years.
This was also the second bar and those qualified as Green light by the group and the third by the company showcasing our ongoing commitment to environmental and sustainability targets.
During the quarter Algonquin reestablish this ATM program, allowing for cost effective and opportunistic issuance of our common stock.
Since re establishment of the program last year, we have issued $11 $2 million per common shares for a total proceeds of $178 million.
With respect.
Spectrum capital and during the quarter, a bump and deployed approximately $1 9 billion of capital pertaining to previously discussed initiatives.
The renewable energy group completed the volume of the Maverick Creek and sugar frequent facilities from our joint venture partners as well as closed the acquisition of three of the four Texas coastal wind projects from R. W.
The regulated services group acquired from our joint venture partner to North Ridge Wind project, which.
Which is part of our lean and the feed initiative.
And I'm glad to say that subsequent to the quarter. We completed the acquisition of the remaining two projects the Kings point, and Yorkshire, which puts us Neosho Ridge wind facility.
Also subsequent.
Sequent to the quarter.
We completed the acquisition of the 80 megawatt <unk> solar project from our JV partners.
The preponderance of this financing the growth of the financing for these initiatives is being funded by tax equity investors.
<unk> balance sheet remains strong with approximately $1 5 billion of available liquidity at the end of the quarter.
We continue to monitor the debt and equity capital markets and expect to fulfill our remaining capital needs for the year through a combination of various debt and.
The equity or equity like instruments to maintain our target capital structure.
Before turning things over to Arun I'd like to provide a brief update on our 2021 guidance.
As discussed we have already delivered on our plan of adding approximately 4800 megawatts of new renewable generation capacity, which will benefit 2021 results.
In addition, we expect to benefit from the first full year of operations and development of cell and the Texas coast to wind portfolio.
Excluding the impact of the market disruption on the Senate wind facility that I discussed earlier, we expect our 2021 adjusted net earnings per share to be within the range of 71 to 76 as communicated previously.
With that I will.
And back to your room to outline our growth plans.
Thank you Arthur.
Before we close out our prepared comments this morning.
I wanted to give an update on our growth initiatives.
Which societies and economies working hard to minimize carbon emissions.
And many countries coalescing around a net zero carbon by 2050 goals.
Oh <unk> regulated.
And renewables businesses.
Are very well positioned to contribute to and benefit from this decarbonize and transition.
We remain encouraged by the bite and administrations focus on clean energy and the infrastructure build.
And the potential for expanded investment opportunities.
Several climate bills are pending and the house and Senate.
And we see exciting potential opportunities in this legislation and.
And the administration's commitment to a clean energy economy.
The potential extension of ITC and PTC credits.
And would benefit our 3400 megawatt pipeline of Greenfield opportunities.
Yeah.
Looking at long term growth.
Nine 4 billion five year investment plan from 'twenty, one 'twenty one through 'twenty.
20 to 25 has identified projects that make up the entire nine $4 billion with most of them now in operation.
Under construction.
Or in advanced stages of development.
This core nine 4 billion dollar investment plan does not include.
Any further M&A beyond previously announced transactions.
Or any success from our 3400 megawatt pipeline of Greenfield opportunities.
We have multiple levers of growth across our two businesses that I've spoken throughout today's call.
Which gives me further confidence on our ability to execute and deliver on our Pfizer investment and growth plans.
Before we open the lines for the question and answer period.
We remain very excited about Algonquin businesses and prospects.
We welcome you to hear more at our upcoming annual General meeting.
Similar to last year, and given the protocols related to the ongoing pandemic.
We will be hosting our AGM virtually this year.
We welcome your participation on June 3rd.
At four P M eastern.
In closing.
2021 has been a very productive start to the year.
As we continue to execute and deliver on the company's largest construction program and its history with nearly 40 and 100 megawatts of the 1600 megawatts already placed and serviced.
Our three strategic pillars of operational excellence.
Growth.
And sustainability will be a key foundation.
As we continue to build the business.
And deliver steady earnings and dividend growth.
Getting long term shareholder value.
With that.
I will turn the call over to the operator for any questions from those on the line.
Thank you as a reminder, ladies and gentlemen, if you would like to ask a question. Please press star followed by the number one and your telephone keypad.
Our first question comes from Nelson <unk> with RBC capital markets.
Your line is open.
Great. Thanks, and good morning, everyone.
My first question just relates to the <unk>.
This blade manufacturing error. So can you just give a bit more color in terms of I think there was like 30, sorry, 83 turbines that were impacted as I did did you have to like shut all of those turbines down.
Or do they still.
And they still partly operate and then can you just give more color in terms of.
What the financial impact is and weather.
The downtime in Q1 and through through the rest of this year would be covered by <unk>.
Nelson and good morning.
With me and Arthur This this morning I also have.
Johnny Johnston, our Chief operating officer, and Jeff normal or normal and our Chief development Officer, and I think.
Johnny will respond to that question Jonny.
Yeah, Good morning Nelson.
Probably the most important part of the question is.
Despite the impact from the turbines and we don't expect that it would be a financial impact that we've got availability guarantees as part of.
The turbine supply agreements and so that's going to sort of cover the financial aspects I think from and operational perspective.
The impact aside from African sugar, we have plans in place and are expecting that the turbines to be up and running again.
And there will be and of the year.
Yes.
Okay and are you able to give a bit more color in terms of what the like what needed to be done with the with the blades.
And so we are taking a mixed approach so in some instances, we're just replacing them.
And and others.
Effectively gone through our repair process too.
And have them operational.
And I think you are aware this is a safety related issues. So until later either replacement were pad.
Zone.
Rich.
Okay. Thanks.
And then my second question just relates to the Senate facility and the force majeure or debt declaration.
So.
I presume the counterparty has and I guess can you give some color as to whether the counterparty has.
Except that the force Majeure Declaration I.
Presume day they would.
I wouldn't have but.
That could just be their default response, but where there were.
Where are they.
Hedges settled and like it's cash out the door and Youre looking to get some back or or is it still pending.
Yeah.
So.
Nelson and thanks.
There seems to be a lot of static on the line for some reason.
So to do it to respond to your question.
We have obviously.
Some of them are force majeure.
To the counterparty and obviously since this maybe.
And then turning into a dispute.
Or potential litigation.
There's only so much.
And I can talk about.
But in any case.
We have earlier talked about is a maximum of $45 $5 million of exposure and any mitigation wood obviously.
And we use that that level of exposure.
Okay, that's great.
And I'll get back in the queue.
Our next question comes from Julien Dumoulin Smith with Bank of America Merrill Lynch. Your line is open.
Hey, good morning team can you hear me.
Loud and clear Julien good morning, how are you.
Excellent. Thank you so much and listen I suppose I'll, let me start with a high level question for you.
Obviously, we've seen some M&A of late across the space and perhaps more elevated valuation than perhaps was perceived coming into the year.
Especially for gas utilities, and how do you think about your own positioning for for M&A at this point and in light of that and I'm thinking specifically year of Centerpoint gas LDC deal, but and.
And any open comments there I know you you once again at least put it on the table as being upside, but curious on your latest perspectives here are you still a buyer and maybe said differently.
Okay.
And Julian is your question, particularly only for gas utilities or is it a general question.
Broadly certainly the observation at least the empirical ones are on gas, but more broadly sure.
So on a broader.
Context, Julien I'd RIDEA you were very aware that acquisition is something that one of our big growth levers and I believe in the last 20 years. We've in fact completed exactly 20.
Utility acquisitions.
And we're always in the mix when there was a day.
Questions around M&A.
And did two specifically and respond to your pushed and yes, we.
We have seen elevated oh pricing.
And but again that debt.
I think that there there is a lot of capital out there right now choosing.
If you choose and targets. So I think it remains a fairly frothy market.
In respect to your other question oil and gas ldcs.
We are as you know in all three sectors.
Sectors, and modalities, you water electric and gas and.
And we.
We do look at the potential acquisition across all three modalities.
But on the gas side.
And we will be disciplined in terms of making sure that it meets our sustainability goals as well.
Excellent. Thanks.
I'll go for it.
No no go ahead.
Great No I was going to ask you a little bit more detailed question that you're thinking about the latest impacts and the the bite and tax efforts here. How are you thinking about that specifically to your company I bet. There's a lot of different puts and takes here how would you frame the tax side as well as obviously the other perhaps more beneficial sides.
And especially direct pay et cetera.
R R.
And I'll take that sure Julien good morning.
On the tax side and journals and the comment is I mean, it's obviously positive for the renewables industry in terms of everything that's proposed both from the from the buyer and in some some of the other proposals that are out there as well.
On the tax rate side.
Talked about that and the past.
And on the tax rate.
Flow through for our utilities, and so it's basically a neutral and probably a little bit of.
And maybe it's like negative from the.
From the renewable side of the business, but but but in general it's basically neutral from a tax rate perspective, some of the other proposals that are floating out there.
And that's way too early to tell but we're monitoring it.
And we'll see which one of them actually prevails.
Jeff you might want to comment also on the some of the tax proposals on how they are.
Could potentially benefit us as well.
And on the good day.
And I'm happy to and so definitely a ton of excitement and in the industry about.
And the American jobs plan and particular in terms of the ITC.
ATC extension for potentially five years and also the extension of debt to potentially impact.
Storage without generation happen to be co located.
So it's a little early to tell it's certainly exciting and at night.
Can't help but think there's going to be positive developments that do make it through and into the legislation.
Got it alright fair enough guys I'll leave it there and have a great weekend.
Thank you Julien.
Our next question comes from Rupert <unk> with National Bank. Your line is now open.
Hi, good morning, everyone.
Good morning Rupert.
And if I could start with a housekeeping question for Arthur.
Can you remind us how much of a financial benefit do you expect to see from the 600 megawatts of a wind you'll have and our regulated utility and and maybe you can give us a little color on the EBITDA run rate changes, we might see and in Q2 and Q3 relative to Q1 from those assets.
Good morning.
I mean, most of most of the benefit from the 600 megawatts of generation.
She is getting put in will be through basically our pizza adjustments that will be put in place.
As we look to get these projects approved through through rates over and over the next year or so.
Okay and are you able to quantify what we could see for the remainder of the year, but the other piece of adjustments.
Okay.
And if we get back to you on that one and I can provide you a chart a little bit more quantification, maybe one and okay.
Okay, very good and then secondly, and more of.
A high level.
And on the organic growth, maybe maybe a question for Jeff So you've come through this this big growth spurt of six to 800 megawatts and give us a little more color on what we can anticipate the next couple of years and and what pace of growth can we expect to come from and from the organic development I know you've got a 3400 megawatt pipeline.
And we had some.
Some goals laid out and the Investor day.
Can you can you exceed the targets from the Investor day or should we look at the Investor day is.
Good proxy for what we can expect next.
Well actually maybe turning it before turning it over to Jeff. The first thing I would say is that.
We are very confident in meeting the $9 $4 billion five year plan like I said in my prepared remarks.
It is very front and loaded.
And many of those projects are actually already in.
Commercial operations already.
So that's it.
Gives us high confidence and again as we said in Investor day, and after that $9 4 billion dollar program does not include the <unk> 400 megawatt greenfield pipeline or any incremental M&A activity. So we are confident and meeting and.
And exceeding that $9 4 billion dollar capital plan, but Jeff do you want to add more color.
Yes, certainly and Robert you mentioned the 3400 gig.
Gigawatt or megawatt pipeline and we continue to advance we see.
<unk>.
And number of C&I customers, who upset sustainability targets and renewable targets.
Hum.
Needs to be contracted and 23 $2004 25, and if you look back at that $9 4 billion pipeline. It was fairly light on renewables and that section and so we don't have anything that we can announce at this time, but the development team is certainly focused on originating projects to populate that part and we believe the fire.
Right.
Great. Thanks for the color and I'll leave it there.
As a reminder, callers please mute your line when listening to the answer after you have asked your question.
Our next question comes from David Keith on it with Raymond James Your line is open.
Thanks, Good morning, everyone and my first question here just on.
On your on your capital plan and appreciate the comments around the growth opportunities over and above it and I'm curious on the on the regulated side of things now that the initial round of Greening. The fleet has and has happened hum.
How do you see things developing on the regulated side and the and the outer years of your Capex plan and when.
And when the Capex spend is a bit lower and the pace today.
So David a very good morning to you.
First thing I will say is that on the regulated side of the business as well, we do have multiple levers right and so when you look at some.
Some of them reverse on the regulated side the biggest one in factories and organic growth and when we say organic growth that'd be forced to more a regular.
Yeah.
And in infrastructure.
Leading to better safety and reliability and security and that is really the bulk.
Of that debt. The other one is obviously and some of them some of the M&A and we have a New York American water in there and I think the third one that you're referring to is our greening the fleet and I'm really proud of the team to say that.
All of the 600 megawatts that was part of that Greening. The fleet initiative are now fully commercial and online and it was a lot of work from from a lot of people on the beams and to get that on and as part of that and we also pulls down power Ashbury 200 megawatt coal facility.
And so and reducing our carbon intensity by almost a million tons a year.
Now the Greening. The fleet initiative is something that is somewhat unique to us I believe where we are.
And getting that out in our Cal Pico utility as well.
And that will be looking at places like Bermuda and others for some of those other greening the fleet initiatives as well.
Does that answer that question David.
It does absolutely. Thanks for that are in and then maybe just one other question from me I'm looking at the Missouri rate case.
I'm curious if you'll look to revisit certain items like like revenue decoupling or do you prefer to just go forward with the pizza accounting that you have in place now.
Let me turn that over to Johnny.
Yes, David.
And the way that we effectively.
Opted to go down the piece and route following the last rate case means that win with that through.
Suddenly until 2023, there's been an opportunity for that to potentially be extended through I think 2028 and <unk>.
And now revenue decoupling.
Something that we will have to wait and Missouri suddenly.
Making the most of the the Pisa legislation when you think about some of the investments, we've been making through and central region and the loss.
A few months.
Excellent. Thank you for that and I'll get back in the queue.
Our next question comes from Stephen Byrd with Morgan Stanley. Your line is open.
Hey, good morning.
Good morning, Stephen.
Thanks for the a really thorough ESG update at the beginning and it's really helpful to kind of go through through everything.
A lot has been covered I wanted to perhaps go back to.
And the potential for U S tax reform and focus a little bit more specifically on some.
And some corporate tax elements the impact to all of our power corporate tax rates and potential for things like minimum taxes guilty et cetera. Those sorts of dynamics would you mind, just talking about and a little more depth about those sort of corporate taxation elements and the impacts to you.
Sure.
Okay.
And Stephen so on the tax rate as I mentioned in my previous two.
And the previous question and it's basically a pass through and the regulated side, maybe it's a slight negative on the on the renewable side, but I mean, as we look at some of the other noise that is getting a proposed there whether it's the shield or.
Looking at it whether it be remains or some or all of the other proposals.
It's really early to tell which one is going to to wait out how theyre going to interact with them.
And themselves whether it would be the minimum tax would be put in and the <unk> will be repealed what's going to be creditable that gets beads and so it really really is too early to make a determination in terms of.
Where.
What the impacts will be let's say on the guilty.
And generally not not impacted by any of the guilty proposals that have been put forth.
But everything else, we continue to watch closely.
That's fair.
Lot to to figure out in terms of what this is going to really look like.
And then maybe just one other from me on renewables growth. There you gave us a thorough update there and the number of questions around.
And that when you think about kind of the biggest limiting factor sort of sort of risk that you think about when with respect to renewables growth curious just whether that supply chain availability financing tax equity whatever it might be how do you kind of see I mean, we're obviously very supportive environment overall, so I completely respect that.
I'm just trying to think about we often get asked about you know.
Some practical issues and growth, whether it's a shortage of people and shortage of equipment or and increased costs. Just any other color you might be able to provide on sort of what you see as some of the limiting factors.
Jeff do you want to take that.
Yeah, no and I'm happy to and Stephen and I think it's a great question, because I think that excitement obviously comes with a downside and I'd say a couple of the stress points.
It would be one there probably will be it.
A battle for talent and resources.
And see our location with a lot of people and activity here.
So that's been a strategic advantage and we're able to build them.
It's a good team up we need to be cognizant of that team being very attractive to others and.
And to keep building.
And that would be one day the other one is on interconnection.
And as such.
And it.
And the need for renewable build out and the key markets.
It's always been important but it is going to be EBIT more important over this coming from.
That's right.
And it's really the piece right I mean and what.
And what I like to point out is that.
And then in the 2020, which was.
Not with the most friendly.
And our pro Renewables administration was where we saw our largest construction project.
And I pipeline history, and our history of $60 a megawatt. So we're obviously very excited now of the all of the deal wins, we're seeing from this Uh huh.
Bite and administration, and and it's really that and.
With the scheming the challenges are going to be across the board in terms of.
Supply chain in terms of power meeting.
Speed and in terms of the Interconnects and.
Access how fast that can move and so it's really going to be felt throughout the different parts of the value chain, but again.
We have been very good at managing that you've been through COVID-19 last year and even through that debt.
And our largest construction period and our history. So we you know we were.
Confident that we're going to be able to manage our way through.
So that's a fair point and these kinds of issues strikes me as high class problems. So no point.
Exactly right.
So much that's all I had thanks, Thank you Steven.
Our next question comes from Sean Stewart with TD Securities. Your line is now open.
Thanks, Good morning, guys.
Just a couple of questions.
Arthur I'm wondering following up and the last question can you speak specifically to tax equity availability, how that's changed in recent months if at all.
And ruin your predecessor used to talk about all day.
Ocwen and becoming its own tax equity partner once you get that taxable position any.
Any thoughts on that horizon and.
And.
How that impacts your funds and considerations.
Yeah.
Good morning, Sean.
So in terms of the tax equity availability, we have not seen a constrained from a.
On our side I mean that.
Part of it probably speaks to the fact that.
But we have well established relationships and strong balance sheet.
And so far from what we've seen tax equity is there.
And for good projects and to some.
And I would also say the tax equity market is.
To some instances even.
Lightening up or looking at loosening some of their rules, whether it would be.
And its efforts.
Looking at.
Potentially financing those type of projects and so forth and tax equity is there and I think it continues to be there for strong sponsors.
The second part of your question with respect to self monetizing.
Attributes.
And that's something that continues to be on the table and.
With respect to.
Even some of the tax changes.
Our being out there and it's always beneficial to be.
A company that's able to generate.
And tox attributes and be able to use it.
Offsetting income intrinsically.
For us that continues to.
And option and.
And we also look at from some of the other things that are out there.
Obviously direct pay of endeavor.
For some of our projects as well, so all and all I think positive.
Developments in this area.
Thanks for that Arthur.
You gave a little bit of and update Arun with respect to New York American water.
Can you just review the hearings that are there are coming and and update on on your comfort closing that acquisition and and.
And the state.
And pleading its review.
With respect to the municipal ownership potential.
Any updated thoughts there.
Sure and and.
I mean, there's obviously a lot of political noise around this but at the end of the day are.
We really focus on two things right.
The first is.
We continue to believe that we're the best owners and operators of <unk>.
New York American water and so we are focused very much on closing that transaction and second of all there is something unique.
In New York and with regard to the special franchise tax, which is a burden on New York American water's customers and we've been working with different parties to try to see and make that much more equitable for our customers right. So.
Beyond that really our discussions with the commission have continued as usual.
We have knowledge hearings.
Weighted for for a late June.
And that's the target accordingly, and in the midst of that there's been a lot of other activity on both the legislative from around municipal libraries and studies and.
And things of the sort.
But at the end of the day I think what is also very important to focus on is that the largest.
Based on customer is and the hamster.
And the town of Amps and has come out very strongly.
Against the Muni Supervisors and so I think it was all of that we do continue to have a high degree of confidence in being able to close out this transaction.
Johnny and anything you want to add to that.
And I think he covered it well.
That's a that's great detail I appreciate it thanks.
Thanks, Sean.
Our next question comes from Richard Sunderland with Jpmorgan. Your line is open.
Hi, Good morning, just two questions on Missouri here curious for the first one if you could.
Provide more color around the proposed recovery timing and bill impact of the incremental commodity costs out of.
The February weather.
Sure Johnny.
Yes, good morning, Richard.
So the normal process, we have a fuel adjustment clause, where our fuel costs get passed back over six month period, where there's a delta.
Normality and because of the materiality.
The the.
And the impact still Muriel and on energy cost I think if we would've passed straight through and the normal fashion. It would have raised our customer bills.
And probably north of 60 per cent.
As a result, and clearly that would have been a huge burden for them to pay so we have filed with the commission to her.
Picked up over a longer period of time and to address that through our upcoming rate cases.
And there'll be more to come but clearly our ambition here is to try and find day.
Right balance between.
Placing those costs out covering off the coast of managing that but making it manageable from customers as we go through that.
More conversations to be had with the regulator and all stakeholders in terms of the exact timing for.
And so that sort of where we are and the price.
Got it and so you can put any color there and then separately around the DDR.
And I shouldn't wind facility could you speak to the.
And the network upgrades required for that facility and maybe just provide a little bit more color around the performance there, including is there any kind of performance obligations owed around.
We and pharmacy general.
Yeah.
Sure Richard This is Jeff and happy to take that question and.
You're referring to the day, two results, which came out and <unk>.
Impacting our North Park Ridge, King's point, and Neosho I would say that we're quite pleased that for kings.
Kings point, and North Fork rates that those confirmed that there were no upgrades.
Sure Neosho and intricate process they are indicating that there is a need to.
Great about 18 miles of line.
We are currently generating under interim interconnection agreement and and.
The facility, we expect to continue doing that.
Moving forward and.
And we know that there are some air Dices.
<unk> reports that the point.
Pointed out.
And we'll continue to get rate moving forward.
Yes.
Good result in terms of it.
In terms of.
Financing.
And at low.
Forward and debt.
The projects and the operation and the sales and fire from like the earlier.
And earlier.
So happy.
Happy to answer other questions all.
Right to the Hubbell here of your question.
Yeah.
No that's great. Thank you for the times a day.
Thank you thank you rich.
Our next question comes from Rob Hope with Scotiabank. Your line is open.
Yes. Good morning, everyone. Two questions from me first one just on the Chevron agreement and moving from evaluations and development can you just maybe add a little bit more color on kind of the potential timelines and we can see on those projects and the Permian and then also just given.
How are these agreement structure do you have any kind of set going in price is there a targeted to return that you both agree with just given the fact that.
It does seem like that and number of these projects are still low and flex.
Sure. So let me start out and alcohol and you're trying to do Jeff.
Just to give you a little bit of context, Rob So first of all.
We signed a framework agreement with Chevron just last year in July and it goes for over 500 megawatts right.
And so.
That was just a framework agreement that really.
Governs our partnership develops what who takes the lead on what all of those kinds of details around all of our framework agreement right and so now and.
Since that time, we have been scooping each of their facilities.
And looking at what is the best technology, what is the best side all of those kinds of things and running the numbers and now we've really moved from that first phase to much more of a development phase because we now have.
Much higher level of confidence and on these four sites, we're going to be able to come to you and agreement on all the things like pricing and all those kinds of things and at.
At the end of the day, obviously and that both parties need to be able to have confidence debt.
The project, we're doing meets booths.
The hurdles and other requirements on both sides.
And that's what we're working towards.
We are also working towards a what we're calling and that agreement a final investment decision, which would then start construction on this project and we're hoping to get to that sometime towards the end of the year or so timeframe, Jeff anything you can and even for the color on that.
I think you've covered it.
And everything except maybe one item, which is just a little bit of color on the discussions in terms of returns and so theres certainly been exchange.
Expected cost of the facilities and the <unk>.
And so it would be required it makes sense for both parties and so those will be confirmed for the final investment decision, but the discussions around those have gone.
Alright. Thank you I appreciate the color and then just engine and.
And just to give you some some more comfort around that.
We've even started procurement activities right.
In order to safeguard our safe harbor and those kinds of elements.
And we remain both sides you mean.
And you know fairly contract and then we're going to be able to execute on that framework agreement. Okay. And then maybe just a follow up question just in terms of kind of.
And capital out the door for Q1.
And the MBNA. It says that you you've done $1 $9 billion of Capex. So far this year, our cash flow statement is quite a bit below that as we look through the rest of the year. How are you thinking about your cash requirements to fund.
The rest of the capital planning to get you to that four to $4 $5 billion and.
And as well as you know is there a timing mismatch here or is it mainly just related to the.
And the accounting treatment and tax equity.
Thanks, and good morning, Rob.
So.
The simple answer is it's an accounting treatment and the real.
The reason is how this is and investments actually had been held prior to being bought because we hold them as a joint venture we're joint venture partners and these investments total buying these sales have become.
And equity buyouts.
And what we're bringing on to our balance sheet through the cash flow statement is really the net investment income.
So there is pretty projects.
Construction financing.
And that was.
Brought on a net basis, and we will look to repay the construction financing through our long term bond platforms and.
And overall in accordance with our capital structure.
I don't know.
Sponsor we're hopeful.
Thank you.
Our next question comes from Andrew Kuske with Credit Suisse. Your line is open.
Thanks, Good morning, and thanks for squeezing me in.
Maybe two related questions. When you look at the construction program you did on the renewable side and the last little while what do you do for non core and what were the lessons learned from the program.
Great and address I'm going to pass it over to Jeff.
And it is a great question that is how do you how do you exceed the six to 800 megawatts and all of the 2020 with COVID-19.
Hopefully, we will not have to repeat a COVID-19 construction Europe of that magnitude, but I do think there's a great deal.
Opportunity going into those 'twenty, two 'twenty three 'twenty four and just.
And look at the C&I customers and the day ban and.
And.
We've already seen a push up and see you.
And I PPA rates.
Is that demand starts to starts to deal with the supply of product out there to meet it. So I think it's it's going to be pretty exciting going forward, but it wont be as exciting as 2020.
Yes.
Goodbye.
Exactly and I think it's really that combination of our C&I strategy, coupled with our 4400 megawatt.
Greenfield pipeline and I think that's what we're really excited about.
And then maybe just a follow up to that how do you think about pipeline replenishment and clearly a hot and year to date theres been a lot of turmoil as far as market prices go and renewable stocks and what are you seeing on pipeline replenishment opportunities and particular amongst the private developers.
And if you could give us color on that that'd be great.
Yeah. So there has been a consolidation of some of the larger developers, which are pushing forward wind projects. So we think it's important and our 3400 megawatts.
And to fund growth at 3400 megawatts and tune it and make sure that there's a focus on when and because there is a smaller subset of developers to acquire mid and late stage projects from on the solar side, we're actually still seeing quite a robust pipeline of opportunities and so.
Going forward.
And we'll probably see more act.
Acquisition, and Greenfield and <unk>.
And it'll be slightly skewed towards greenfield from.
From acquisition.
Okay. Thank you very helpful.
Thanks, Andrew.
Our next question comes from Maggie Baidu with IAG capital markets. Your line is now open.
Hi, good morning, I appreciate it.
But over time, but just a couple of quick questions can.
Can you just remind us from your 2021 guidance how much is baked in for the New York and American water acquisition.
Hey, good morning, guys.
So when we did put out our guidance back in Investor day.
And we didn't provide a range and our guidance and some assumptions with respect to that guidance. So with respect to our assumptions, but we did we did factor and debt on the upper range. We would we would consider a closing of Europe.
And water.
And that happens around the third quarter or so and so.
Lower range one of the factors was it was a later and you're closing doesn't.
And those are the only assumption so I wouldn't read into it that is the entire the entire range difference I mean, we had other things such as we are.
Assumed on the low and the COVID-19 impact similar to this year and.
And then and certainly obviously hasn't taken place.
There's various assumptions that go into that range.
Okay, I appreciate that Arthur and.
Just another quick question more on sustainability and.
S. G I guess not with us very close down and all the ongoing renewable projects are you you know what.
Well on your way to achieving a 75 renewables target by 2023.
And I guess, just talk about C&I appetite for clean energy.
Being a tailwind for growth and I'm wondering about your own targets.
Maybe you can talk to us about potentially if you think about revising that target going forward and what the implications would mean in terms of new renewable buildup.
Okay. Yeah. Thanks have a great question and I mean sustainability is one of our three pillars are we certainly are.
Focus on that a lot and and just to tell you I mean, we are already starting from a very good base right I mean, our carbon intensity. When you look at that for a dollar of revenue is that 0.0017, which is well among the lowest among our peers in the industry.
And.
Even when you look at the fact that you know when we acquired Empire District that came up with some thermal assets just since 2017 to now we have reduced debt carbon intensity by 31% right.
And so some of the other goals, we have are about 75% renewables by 2020, three which is a pretty aggressive goal, but we are confident and you do that and.
And as we start now.
Meeting some of the goals that we had set out and fast yours targeted towards 2020 three we are internally working towards okay.
What are the next set of goals so so.
Keep your line's open up and do we we are working on those and we will be coming out with more goals as we've continued to meet and exceed our current set of ESG goals.
Okay. Thank you everyone look forward to hearing more about that.
Absolutely.
There are no further questions in queue at this time and I'll turn the call over to Iran, and that's good for closing comments.
Thank you very much for all of our questions. Thank you for joining our investor call and again, we remain extremely excited about the Algonquin platform and all of the opportunities in front of us and with that I'll turn it over to Amelia for a debt disclaimers.
Yeah.
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