Q2 2021 Algonquin Power & Utilities Corp Earnings Call
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, our financial statements and management's discussion and analysis are also available on the web.
Site 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 will read a notice regarding both 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 web site for additional important information on these items.
On our call. This morning are rune will provide an overview of our Q2 performance Arthur will follow with the financial results and then Arun will conclude with an update on our strategic plan for the business.
We will then open the lines for questions I ask that you restrict your questions to two and then re queue. If you have any additional questions to allow others the opportunity to participate and with that I'll turn it over to a room.
Thank you Amelia and a very good morning to those who've been able to join us on the call and online.
And a special welcome to today.
Since it's a Friday the FERC.
I am pleased to report solid year over year growth in our key financial metrics for the second quarter of the year.
Q2 adjusted <unk>.
EBITDA was $244.90 million.
A 39% increase year over year.
And our Q2 adjusted net earnings per share was <unk> 15.
An increase of 67% compared to last year's <unk>.
I'm pleased to report solid year over year earnings earnings growth from the addition of approximately 14 to 100 megawatts of new renewable generation projects.
These were in construction over the course of last year and this year.
And this quarter's progress Bruce a 50 to 100 megawatts of projects that began construction in 2020 close to completion.
We are also starting to see benefits from the first full year of operations from our Bermuda electric utility as it allows the <unk> water utility in Chile.
Which both closed late last year.
All performed in line with our expectations.
I'm pleased to report that the company's operating results. The results were not materially impacted by the pandemic this quarter.
Recall that in the second quarter last year. The pandemic did have a <unk> impact on earnings per share.
Generally speaking, we have not seen negative impacts from COVID-19 on our renewals at this stage.
As business conditions in the regions, we operate in slowly return to normal.
Approximately 60% of the company's workforce.
We need to work remotely.
And we continue to employ operational measures.
Intended to protect the health and safety of our employees and customers.
Over the coming months to.
The company is planning to return to base operations.
As the impact of the pandemic further diminish.
However, we.
We will continue to keep watch for any developments with the Delta <unk> and.
And adjust accordingly.
Our team continues to focus our efforts on Algonquin three strategic pillars.
Group.
Operational excellence.
And sustainability.
We operate through two primary businesses.
Our regulated and renewables.
We spent some time on each frame update.
On the regulatory side, one important lever of growth is our greening the fleet initiatives.
We are continuing to make investments for the benefit of our customers as we accelerate our transition to a clean energy future.
During the second quarter, we successfully completed our Midwest Greening the fleet initiative.
<unk> all seen wind facilities.
Lower for bridge.
Point and new issue rich.
Have been placed in service and has been acquired by the Empire District Electric company.
The related closer of the Asbury coal plant in March 2020.
<unk> approximately 15 years ahead of its original retirement schedule.
In accordance with our most recently filed integrated resource plan.
And is expected to reduce emissions by nearly 1 million metric tons of carbon dioxide.
As we work to generate and deliver cost effective.
Diverse and sustainable energy solutions for our customers and communities.
We continue to be responsible stewards of our energy infrastructure assets as.
As we are an early pioneer in seeking to build renewables into rate base.
The early retirement of Asbury has also contributed to the reduction in the company's total scoop, one greenhouse gas emissions.
As well as reducing scope, one and scope two emissions intensity per dollar of revenue by 46%.
Since 2017.
The year in which the company acquired Empire.
The completion of the Midwest cleaning initiative is just one more step on our path to reduce emissions.
Liberty <unk> recently filed an application with the California Public Utilities Commission.
To approved financing construction and operations of the looming expansion project, which is expected to be a combined 60 megawatt solar facility and.
And 240 megawatt hour lithium ion battery storage facility.
<unk> doesn't liberty's customers by adding reliability resiliency.
And Brian stability. In addition to meeting Liberty's renewable portfolio standards energy supply objectives.
Since 2017.
We have already reduced the carbon intensity of <unk> by 46%.
And this new investment is.
If approved.
Will help us continue to Decarbonize and provide cost savings over the long term to our customers.
Another important growth lever in the regulated business is the organic investments and improving the safety and reliability of our mission critical infrastructure.
Working with our local regulators, we strive to make the ongoing necessary investments to improve service for our customers.
While managing the affordability of the Bill.
Rig activity across our jurisdictions continues to be quite active.
And I wanted to provide you with a few regulatory update and some other jurisdictions that we operate.
In the second quarter.
We filed our Missouri electric rate case with the commission at the end of May.
Which included seeking cost recovery of the three recently completed 600 megawatts of wind generation facilities I mentioned earlier.
In addition, <unk>.
While our original filing included cost related to the impact of winter Storm inquiry.
Legislation has subsequently been path, which will allow for these items to be securitized.
<unk>, which we intend to pursue.
Actual value, which operates in California was the subject of our conduct funded method lawsuit.
By the sound of apples Adam.
For the last few years.
We have been in legal proceeding over the water system and recently received a tentative statement of decision.
That supports our continued ownership and operation of the system.
We have a track record of providing safe and reliable water services and we look forward to working with the town of Apple value to continue those services for the benefit of our customers.
Staying on the topic of California.
We filed our gout people rate case in May.
And filed our Blackwater Apple Valley rate case in July.
Our California utilities due to the first to file rate cases seeking recovery of customer first.
Which I'll provide more details on later.
In addition, we recently reached a tentative agreement for our energy North gas system in New Hampshire.
As part of the settlement the commission authorized a permanent rate increase which is expected to result in a revenue increase of $7.6 million.
Based on our return on equity of nine 3%.
In equity capital structure of 52%.
In addition.
Energy, North Reese's and authorizes deferral property tax tracking mechanics.
Which is expected to further increase the predictability of earnings.
Further adjustments of $4 million for 2021, and <unk> $2 million for 2022 were authorized as part of the settlement.
Ending further detail further diligence and hearings.
Lastly on the regulatory front.
We reached a constructive rate case outcomes with a regulatory authority of Bermuda.
Martin the first completed rate case since the acquisition of <unk> in the fourth quarter of last year.
Another lever of growth is acquisitions.
And we completed two utility acquisitions in Q4 of 2020.
As Tom and attended.
The integration of these two utilities into the Algonquin Liberty family continues to go well.
With our pending acquisition of New York American water. We are currently going through the settlement process.
As important work continues to determine the best path forward on resolving issues related to the specialty franchise tax.
We remain confident that Liberty has the best long term owner of the utility and expect this transaction to close within the recently extended timeline set out in the stock purchase agreement.
Lastly.
Looking to the future of our gas utilities.
We have begun exploring the utilizing some of renewable natural gas or RMG to better serve our customers.
We have R&D projects in various stages of commercial development and have already made our regulatory the regulatory filings and new Hampshire for the approval of a supply agreement that includes a purchase option for liberty to be the ultimate owner of the facility.
Moving on now to operational excellence.
In a mission critical industry.
Safety and reliability are always the most important areas of focus.
I am pleased that we are past the impressive milestone of 502006 days and over 7 million 50 hours without a single lost time injury.
While keeping our customers and communities safe.
And maintaining our system reliability and resiliency.
I also want to highlight some innovative approaches we are taking to support system resiliency.
Our <unk> project in Calgary.
As a micro grid at Berkeley Research station at the end of four miles of transmission line in wildfire territory.
By putting solar and storage onto the site.
We are able to take the transmission line out of service during wildfire season.
While keeping the lights on for our customers.
All for a significantly lower cost than installing cover conductors through the four miles of transmission lines through the environmentally sensitive Florida.
In the non wildfire season, when the transmission line is back in service, but micro grid is expected to provide additional resiliency.
As previously mentioned, we are excited about the new digital experience for our customers through our customer first program.
During the second quarter.
The team successfully completed the first major implementation of our new suite of tools and systems at our Massachusetts gas utility.
We will be rolling out this enhanced technology platform in a phased approach across the rest of the organization over the next couple of years.
The customer is at the August every good operational excellence strategy.
We are continuing to bring customer focused into action.
By asking our customers after interactions with our team about their experience.
This quarter, we have started the rollout of net promoter score measurement from our customers.
This is on top of our existing J D power service and will allow us to collect more timely and specific feedback to drive focused action as we continue to look to meet and exceed our customers' expectations.
Turning to the renewable side of the business.
In the second quarter.
492 megawatt Maverick Creek wind facility in Texas reached.
<unk> commercial operations.
And as a long term power purchase agreement with General Mills.
And Kimberly Clark.
There was a manufacturing error, which in fact is 26 of the 33 turbines at Maverick Creek peak.
What remedies and work was completed in early June.
With all 26 effective turbine returning to service.
Our service agreement contains liquidated damages protections in favor of the company for a revenue loss due to operating downtime.
Alta Vista solar and.
An 80 megawatt facility located in Virginia.
Also reached commercial operations in the second quarter.
The facility has a 12 year power purchase agreement with Facebook.
We are also excited to be collaborating with JP Morgan Chase on our hedging of two wind construction project in Illinois with JP Morgan Chase agreed to purchase approximately 70% of the wind energy output.
Which will contribute towards the 100% renewable energy commitment.
All of these projects showcase our strong relationships with key commercial and industrial C&I customers.
The demand from C&I customers, who are helping to drive an acceleration towards clean energy is expected 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.
We recently closed the acquisition of a 51% interest in the West Raymond Wind facility, which reached commercial operation in the third quarter.
And as a generating capacity of approximately 240 megawatts.
Which we had previously agreed to purchase from arguably.
With the close of Raymond.
We have completed the acquisition of our 51% ownership interest in four wind projects from arguably located in South Texas.
With a total capacity of 161 megawatts and a net capacity of 439 megawatts.
And finally.
We remain firmly committed to sustainability.
The inclusion of environmental social and governance values in our broader corporate strategy and <unk> operations.
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.
<unk> nine priority issues.
I'm pleased to say that.
But we are making excellent progress on achieving our goals.
Interests in 4000.
Within the megawatts of renewable generation across our businesses.
We are well on our way to achieving 75% renewable energy generation by 2023, another one of our sustainability targets.
We have also added sustainability.
Okay. Thanks to both our annual and long term compensation.
For our leaders this year.
Deep into our compensation model.
Another key ESG goals set out in our sustainability report is to add 2000 megawatts of renewable power generating capacity.
The 2019.
And at the end of 2023.
By the end of 'twenty by the end of Q2.
We have added over 40, and 100 megawatts of renewable generation.
And we remain on track to achieving our 2023 target.
We are focused on progressing.
Okay, and advancing our ESG disclosures to our stakeholders.
I am pleased to report that.
But we recently launched a new data hub that can be found in the sustainability section of our call.
And transparency on ESG data.
I encourage you to take a look at the data hub.
To provide detailed information around our operational metrics.
Governance.
And policy amongst.
Many other measures.
Our efforts in sustainability continue to pay off and we continue to receive external validation slovakian into corporate Knights.
50 corporate citizens.
Ranking within the top quartile of our peer group of power transmission and distribution company.
With that ill.
Pass it over to Arthur.
Speak to our second quarter 2021 financial results.
Arthur.
Thank you.
Pleased to report that Algonquin has made good progress.
2021 with solid.
The Q2 results are underpinned by Algonquin diversified and resilient business model and proven track record of ambitious but responsible growth.
Turning to slide 11, our second quarter 2021, consolidated adjusted EBITDA was $244.9 million, which is up approximately 39% from the $176.3 million.
The regulated services group delivered $165.9 million in operating profit.
$14.5 million in the same quarter last year.
The year over year improvement is primarily attributable to the additional contribution.
NFL our Chilean.
Water utilities as both the acquisitions closed in Q4 of last year.
As well as from the contribution of our wind facilities that were placed in service as part of the Greening. The fleet initiative that arena spoke of earlier.
Results also benefited from new rates implemented at the granite state and coffee co electric systems, but were partially offset by higher fuel costs and the central region, resulting from out of period, we settlements relating to store Murray and increased operating expenses.
I should also note that the regulated services group did not experience any material impacts from COVID-19, this quarter, but the comparative results from Q2 of 2020 were negatively impacted by the pandemic by approximately $9.6 million.
The renewable energy group reported.
The Q2 divisional operating profit of $97.9 million, which compares to $82.7 million in the same quarter last year.
The increase was primarily due to the addition of the Sugar Creek.
Seek in Maverick Creek wind facilities, and the Great Bay solar facility.
This was partially offset by lower production due to resource shortfalls, primarily across our wind portfolio.
Excluding the impact of the newly added facilities production other renewable facilities was approximately 7% lower than last year or approximately 12% below the long term average expected production.
I should also mention that our investment in atlantica sustainable infrastructure continues to provide benefit to the renewable energy group's operating profit.
With dividends received increasing by $2.1 million over the comparative quarter supported by Atlantica is continued growth and cash flows.
Quarter over quarter, corporate and administrative expenses remained generally flat interest and depreciation expenses, both increased due to higher property plant and equipment and the associated financing related to the acquisitions that closed late in 2020.
Income tax expense was lower and benefited from renewable energy tax credits recognized.
In total our Q2 adjusted net earnings per share came in at 15.
Which is up 67% from the 92 reported last year.
Moving on to slide 12 to provide some updates on our 2021 capital plan and financing activities.
During the quarter of OCA deployed approximately $1.2 billion of capital pertaining primarily to the previously discussed initiatives and initiatives relating to the safety and reliability of our electric water and gas system.
This brings the total capital deployed so far this year to approximately $3.1 billion and on track to our expected capital deployment in 2021 of over $4 billion.
Moving on to financing activities I'm pleased to say that during the quarter, we made great progress in Derisking, our five year financing plan.
Further strengthening our balance sheet and reinforcing our commitment to triple B flat credit metrics.
During the quarter, although often completed a green mandatory equity units offering.
Due to strong demand the deal was upsized from the indicated 900 million size and the full over allotment option granted to the underwriters was exercised bringing.
Bringing the total gross proceeds from the offering to 115 billion.
The units are expected to receive 100% equity credit from standard <unk> Poor's.
The transaction represents several first rolled off and the market in general to our knowledge. This was the first green mandatory equity unit offering ever done showcasing our dolphins ongoing leadership and commitment to deploying capital to support sustainable initiatives.
This was also the first offering by Canadian issuer of a mandatory equity units, which are more frequently used by some of our utility peers in the U S.
As you may be heard we mentioned in the past when we find attractive about the mandatory equity units as a natural match. It provides to our business in terms of when we pay for our capital and when we earn on it.
The securities deferred the issuance of shares until conversion after a three year period, but received 100% equity credit immediately from S&P.
Investors benefit from an enhanced yield and the issuer can partly benefit from surplus depreciation, which can result in an overall lower cost of capital compared to common equity.
Through this issuance, we have further expanded and diversified our Banca <unk> investor base and introduced another tool to fund future potential accretive growth opportunities.
During the quarter. The company also utilized since ATM program, raising approximately $135 million of common equity.
We view the ATM program is allowing us for cost effective and opportunistic issuance of common stock we plan to remain disciplined in its use.
To date, we have also received funding from over $1 billion from tax equity investors monetizing the tax benefits associated with our renewable energy projects in the U S.
In total I would say that we have satisfied the preponderance of our capital needs for the year and have positioned our balance sheet to continue to execute on our golf as growth plans.
For the rest of the year, we will continue to monitor the hybrid debt markets or the potential opportunistic source of capital in the current low yield low yield environments.
Before I turn things over back to Arun I'd like to provide a brief update on our 2021 guidance.
Although <unk> continues to execute well against its 2021 financial targets as discussed we have already delivered approximately 14.100 megawatts of new renewable generation capacity from our 2020 construction pipeline. In addition, we have and continue to expect to benefit from the first full year of operations from document itself.
Excluding the impact of the market disruption on the Senate wind facility related to storm early in Q1, we continue to expect our 2021 adjusted net earnings per share to be within the range of 71 to 76 plus.
As communicated previously.
We continue to assume that our earnings expectation normalized weather patterns as well as resource availability and production on our renewable generation facilities that are within long term averages.
We also assume that the closing of North American water will occur sometime within the fourth quarter of 2021.
Although a further delay in the closing is not itself expected to materially impact our 2021 adjusted net earnings per share estimates.
I also want to reiterate that our five year capital plan of $9.4 billion remains on track having already deployed over $3 billion of capital. This year, we are well on our way to meeting our five year targets.
With that I'll now hand, the doctoring to outline our roadmaps.
Thanks Albert.
Before we close out our prepared comments this morning.
I wanted to give an update on our strategic initiatives.
As we look to simplify our business further on.
On August six we took a step towards simplification by exercising the option to acquire <unk> interest in agents.
Given the change in ownership, we will be referring to ages and associated ended entities as Liberty development.
New product development will remain focused on advancing Algonquin Nonregulated development pipeline in North America and selected international markets.
<unk> interest is expected to be acquired by funds managed by the infrastructure and power strategy of Ares management LLC.
With Algonquin retaining the right to acquire 100% of Liberty development projects.
We also anticipate that the carriers will remain involved in projects until commercial operation.
At Investor Day.
We spoke about our nine $4 billion five year investment plan from 2021 through 2025, which 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.
Let me provide the latest update.
The following projects have reached commercial operations since last November.
Maverick Creek.
<unk> Creek.
Alpha Delta on the renewable side.
While on the regulated side, our three Midwest route projects totaling $1.1 billion in investments were also completed.
On the construction site.
While our 175 megawatt blue.
Two new wind project in Saskatchewan.
And 24 megawatt Val Eo wind project in Cuba.
You need to progress well.
Third line deliveries in flight.
We are also progressing well on our new site.
Demonstrating the ongoing execution of our development portfolio.
Shady Oaks too.
Signed an agreement with JP Morgan Chase as I discussed earlier.
And the project commenced construction in May.
We have also included two PGM solar project that.
Incremental additions at Investor day.
In the first quarter of 2021, we completed the acquisition of these two Ohio Solar project, which has an expected combined capacity of 235 megawatts with the first project new market solar.
100 megawatts, having begun construction in may.
We also recently executed equipment procurement contracts for both our Deerfield too.
And finally, two wind projects.
I'll note that recent inflation and commodity pricing trends will likely result in higher project costs.
Conversely.
Offtake contracts have seen similar increases in pricing recently.
Which may help to offset the impact if any of increased commodity risk.
The renewable energy group seeks to mitigate impact on profit returns by locking in generating 8%.
Construction prices and Allstate.
At close to <unk>, four and easily as possible.
We continue to invest in the 3400 megawatt Greenfield pipeline that we discussed at Investor day.
As a reminder.
This greenfield pipeline investment is over and above our $9.4 billion.
Capital plan.
Our greenfield investments are focused on securing new opportunities.
And continuing to advance our projects comprising the 3400 megawatts.
The Chevron project are included in the FERC for 100 megawatt Greenfield pipeline.
These projects continue to progress well.
And we are on track to achieve final investment decisions for the initial projects by year end.
As discussed in the past.
The Greenfield pipeline is being built to replenish the more advanced projects included in our five year $9.4 billion.
Capital plan.
I'm proud of all we've accomplished so far this year.
But even more excited for what lies ahead.
With society.
<unk> is working hard to minimize carbon emissions.
I'm excited about how organically is regulated and renewables businesses position the company to contribute to and benefit from this decarbonize energy transition.
We have multiple levers of growth across our key businesses.
<unk> spoken about throughout today's call, which gives me further confidence in our ability to execute and deliver on our fiber investment and growth plan.
In summary.
<unk> has been a very productive year profile as we continue to execute and deliver on the company's largest consistent program in <unk> history.
With approximately 4100 megawatts of the 6100 megawatts already placed in service.
For context. These new projects are expected to approximately double the size of the company's portfolio of renewable energy generation facilities that we own and operate.
Our three strategic pillars of growth operational excellence and sustainability will be a key foundation.
We continue to build the business and strive to deliver steady earnings and dividend growth.
Creating 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 once again, ladies and gentlemen would like to ask a question simply press Star then the number one on your telephone keypad. If you would like to withdraw your question press the pound key and we will now pause purchased one moment compile the Q&A roster.
And your first question comes from the line of Sean Stewart with TD Securities.
Thank you good morning, and thanks struggle the detailed commentary.
Couple of questions with respect to the Empire rate request of 10% ROE and 52% equity thickness.
Similar to what was rejected last year can you give us some thoughts on the request at this time.
What gives you confidence that this is.
Reasonable and how.
How things might have changed over the last year to give you that confidence.
Sure Sean Good morning, and thanks for that question. So look first of all it's too early.
Just very recently filed for a rate case.
As we've said in prior calls we continue to be confident in our in our position on equity thickness.
And we believe we will get the right outcome around equity thickness.
Okay.
And further to that in the securitization of the cost tied to the weather event can you walk us through that process.
And how that can evolve ticket for a $40 million there.
Sure as you know.
Sean.
The legislature has decent in the fast lane.
Legislation.
Approves secret guidance such extra.
Extraordinary Pos and we do plan to do.
Bill effect mechanical.
We are looking at.
We started the profit internal process around that.
Just as a reminder.
Of the $80 million increase and a $30 million of that is from Stuart.
And outside of that our rate case increase is more in the 7%.
Range.
Which transits approximately one 4% CAGR when you look at it from the last release increase in 2017.
Okay and then one last question maybe for Arthur.
You guys seem very focused on obviously growth here, but.
Any updated thoughts on capital recycling as a longer term funding source.
You see the broader growth ambitions for the company any updated thoughts on potential for asset sales too.
Fund earlier stage developments.
Before I turn to Arthur and I will say that in our capital recycling is always on the agenda for us.
Bob.
When we announced that back in.
At Investor Day, we are still so was 67 months now from that point onwards still.
Still early days, but capital recycling is absolutely something we continue to look at as an option.
I don't really have anything to add Charlotte.
It's on the radar we look at it.
Nothing concrete to talk about at this stage.
Okay. Thanks, very much guys I'll get back in the queue.
And your next question comes from the lineup from FERC Mirror with National Bank.
Good morning, everyone.
Good morning Rupert.
So getting back to the the rate cases that you filed can you give us a sense of the timing of the hearings here and are you seeking any additional smoothing mechanisms and maybe move off pizza accounting with the thank.
Hey, Casey filed with Empire.
Sure. So we filed a income just mainly.
Now, let me turn to Tommy for further.
Detailed.
Yes.
Having said that will be later on.
I think the key is an unexpected decision until Q2.
Of next year.
And we will work through.
With the commission and stakeholders in terms of the best plays.
Implement an increase over the OTC smoothing.
Moving.
In a way that works.
Our other customers.
Alright, great. Thanks.
When you've completed the greening the fleet initiatives in Missouri, you're looking at some new regulated investments account Pico is there more to come here. How soon before you could look at say the greening the fleet phase two in Missouri as their political support for doing that.
Many more investments like this across your asset base.
We are building so Rupert and again, we're proud of the fact that we are.
Pretty much entrepreneurs.
In this.
Area.
We look at it.
Across our existing fleet and in fact, even on our water utilities, which are.
There is a lot of energy that goes into moving water and we look at that as well as a as an option.
Even when we acquired vocal.
One of the attractions for US was the fact that the.
On an island economy.
It is pretty much all of it is a thermal gen.
Generation.
And with customers being over 30 per kilowatt hour.
We strongly believe that there is a lot of.
The ability to bring the fleet and in that case as well. So that's something we'd look at it in pretty much every instance, whether it be with our existing portfolio or anything new.
Yes.
Possibility, we'd look at as well.
So how long before you think we could see some some more premium fleet initiatives.
Telecom for example.
Steve you Rupert.
We're obviously excited to let everybody know as soon as we are able to announce it.
Okay I'll leave it there thank you.
Thank you.
And your next question comes from the line of Nelson Inc.
Great. Thanks, everyone just a follow up on the Rupert.
Now that you have finished greening. Our start you finished the first phase of Greening the Empire I'm, just wondering bigger picture.
Now that you've kind of gone over that.
On your capital plan spending about a third of.
Of your five year capital plan in the first six months.
Thank you.
If you I guess the question is if you see an opportunity that's similar to Empire.
Where you had the opportunity to buy.
Some assets that has coal.
But would you do it like would you buy a utility with significant coal assets.
Does that is that something you would look to do.
Nick.
It's a speculative question and so.
I'll answer it in a similar way right. So so first of all we have a very.
Attractive ESG profile I mean, when you look at our carbon intensity at <unk> 0013 per dollar of revenue that is among the lowest lowest among our peers and in our history.
Nelson.
I'd like to repeat this fact.
33 years of existence, we've never ourselves.
Develop and therefore added to the world stock of emissions and at the same time, we are very good stewards of infrastructure.
And so some of the numbers, we gave you around Midwest greening width, and a reduction of 26% carbon intensity in just three years in Calgary, Google a 46% reduction in carbon intensive industry years.
Thank you.
What we do on the renewable energy side of the business in terms of investing in renewable energy assets.
For the good of our customers and our shareholders and the world at large I think it's a similar profile on the regulated side of Greening The fleet, which I believe is good for our.
Customers, our shareholders and the world of water. So is there a is there a similar types of opportunities where we can.
Utilize our hour cleaning.
Greening the fleet initiatives we.
Take a hard look at that.
Okay. Thanks, that's clear.
And then just moving over to Kal Peco in terms of the rate case filing I havent gotten a chance to go through it but the roughly $36 million increase.
Seems like.
Big increase for our four utilities.
That bank could you just.
Run through some kind of big picture items in terms of what's driving the rate increase there at <unk>.
Let me give you the big picture and I'll turn it over to John and solar.
Majority of that increase is really associated with what with wildfire mitigation.
As you know.
California in that geography that obviously for me are extremely important.
We want to make sure we keep our.
Our customers and community safe.
Johnny.
Yes.
The short story is really what our wildfire.
<unk> proven that increased the investments that we're making.
Reduce the risk of the impact of the area.
<unk> activities.
Increasing our tree trimming.
<unk> monitoring sort of if we are able to sort of take the lines out of service at high risk.
Third time, I think maybe the important point to note despite the significant increase.
<unk>.
If it were fully approved we'd still be one of the lowest cost rates in California.
If you look at what the.
Our California utilities filing and so that's a fair rate increases.
The majority of them at 30%, 40% increases.
Sort of in this timeframe pretty driven by lots of activity.
It is a big step up there's no doubt we're always very focused on the pellet plant for our customers, but really this is being driven by the evolving landscape in California.
And just to follow up on that is that increase.
Is it mostly to service higher operating costs or are you, making a lot of capital investments.
What's the mix roughly.
Roughly 50.50.
If there is significant investment going in but again.
Modernizing.
Switching infusing.
As well as some of the operating cost expenses.
The pivotal study is roughly 50%.
Okay. Thanks, I'll get back in the queue.
Thanks, Nova.
And your next question comes from the line of Ryan Greenwald with Bank of America.
Good morning, everyone.
Good morning Rod.
Good morning, I appreciate your commentary earlier on that potential call opportunities in transition.
Kind of given the media reports earlier. This week can you comment a bit more broadly define your overall assessment of the regulated M&A landscape and independent Capex update at the end of the year here.
Sure.
As everybody well knows.
Just a number of regulated.
<unk> opportunities out there when you look at it in 2010 for example, our $2000 versus now that landscape has significantly.
Sure.
Just a number of.
Utilities out there are fewer.
Some of the consolidation that has been going on.
And.
If you look at our $9.4 billion five year plan right.
We only include.
The acquisitions that we've already announced some do you find in Europe and water in there.
940 <unk>.
<unk> does not depend on any future acquisitions.
But having said that we do look at that as a reform.
Possible lever or not.
Other growth lever to enhance our growth even further and provide more shareholder value.
So thats really the context.
Great. Thank you.
And given broader concerns around supply chain and inflationary pressures and this having any impact on the way you think about the development pipeline any hesitation you go through with some of the potential projects given pressure on returns.
So far we are not seeing that the Orion and again.
What we have seen is some of the increase on the supply chain.
Ben.
Offset by by price increases on the offtake side.
Of the ledger.
And also one of the strategies, we deployed is try to.
Finalize the supply contract the construction contract.
And the offtake contracts as close together as possible. So that there is very little.
Residual risk that we're taking in terms of paying a commodity increases.
Right.
So.
So far we are we continue to.
<unk>, our greenfield pipeline and other projects, but we all know that the options of delay anything.
As such.
Our pump inventory does that.
Great I'll leave it there thanks for the time.
Thanks Ryan.
And your next question comes from the line of Rob Hope with Scotiabank.
Good morning.
First question is just on the 2021 and EPS outlook that you've reiterated.
As we're kind of halfway through the year.
Talk about the puts and takes.
Looks like taxes have been a pretty strong tailwind. So far was that originally anticipate or is that offsetting some of them. We kept pressing in the renewable generation side.
Yes, good morning, Rob It's Arthur here, so I can speak to that so.
In terms of outlook for the rest of the year that I mentioned in my prepared commentary, we are reiterating our guidance between the $71.76 and in terms of setting that guidance I mean, we factored in several things one of the things obviously being.
The impacts of Covid, which thankfully, we actually didn't see so that that is providing us a little bit of room on the flip side. I mean, we did have a little bit of <unk>.
Milder weather, obviously throughout the year as well so that those those two things are some extent offsetting that to your second question around tax credits.
I would say a portion of the tax credits, yes, we're not unplanned, but maybe it's more of a function of a geography or whether there are recorded and I'll explain.
A little bit further where is.
As you are aware, we had the delays in.
And the final commissioning of Maverick and Sugar Creek.
Due to the blade issues there so what that basically did is in essence it delayed the final investment by tax equity.
Into those projects normally what we would have seen for the year as say a tax equity investor. We would have seen that those credits that were generated from via the turbines are we're operating flowing through through <unk> versus here, we have the opportunity to obviously take those credits and self monetize them. So you're maybe seeing a little bit more.
And in the tax line versus what you would have been seen a little bit more in the EBIT line, otherwise if that wasn't the case, but by overall.
It kind of washes in the results.
That's some great color. Thank you.
And then maybe just a follow up question on the Aries.
Partnership there can you just walk us through.
Thank you have not taking 100% of Hs as well as.
Whether or not.
What does <unk> bring to the table and kind of.
What future partnerships can look at.
So Rob.
Just to give you context as you know.
And then go out was our 50% partner on aegis.
<unk>.
Given all of the challenges that they're having with the.
Restructuring, we felt it was timely for us to find a new partner.
And so we have exercised the option.
We.
These areas.
It does provide a quite quite a bit of.
I think it's constructive.
Experience and know how in this sector.
In 2020 for example, one of our largest win.
Financers.
Also have.
Companies.
In the construction business as well so we believe that that did bring both the.
Development and construction expertise as well as our financing capability too.
We'll develop and pool.
<unk> construction activity.
And that vessel.
The figures.
Thank you.
Thanks, Ron and Europe.
And your next question comes from the lineup Ben Pham with BMO.
Hey, Thanks, Good morning, I had a couple.
Questions on Italy, M&A negative.
Comment more.
More broadly.
I carry at year multiple cleaned out at five <unk>.
Geographic diversification.
Energy is there anything else you can share.
And then more specifically just lifting a tier two asset.
Earlier questions on when.
When he is Kentucky aspects, so that we would exit emptier there overall.
Capex is our targeting.
Sure lots of questions in there so let me try to.
Electric truck through those questions. So first one first of all geographies, it's pretty clear I mean, it's North America.
And again.
We don't say never on.
Sure.
Yes.
Other than North America. So for example in the <unk> case in point with buy online the geographies North America right.
We are one of the few companies that are across all three modalities electric water and gas.
We are very very bullish on electric and water.
Right now on the gas side, we have focused much more on.
Deploying our renewable natural gas into our facilities. We have filed the first one in new Hampshire, we are looking at a pipeline of a lot more and we're also looking at green hydrogen.
New Brunswick for example, we participated.
In Maryland study.
And we are forming a number of other pilot projects that are out there and green hydrogen and that's our focus.
Transactions that we have a policy never been covenant specialty transaction size volume.
Okay.
<unk>, one accretion added to date.
Clearly it has to fit.
We do we do not make changes.
From a strategy given these transactions are absolutely have to stand on their own we look at a lot of different metrics.
And.
We obviously.
No.
And it will not be meaningful.
And vacuum Alonso.
Yeah.
Okay.
Okay.
Okay, and then and then the second one is.
On our financial guidance here.
Kate.
At larger than <unk>.
The balance sheet our priority.
<unk> convert to their room.
Hi, Brian how.
How would you think about that impacting your funding plans.
Yes.
From our perspective.
One thing I would say maybe.
Strong balance sheets, but I think that that itself kind of brings us.
From a position of strength to call it.
To some extent and speculating around any funding sources as I said in my prepared remarks with lots of tools in the shed right in terms of what.
But to be able to.
Where to source capital.
Okay. That's great. Thank you.
And your next question comes from the line of Mark Jarvi with CIBC.
Thanks, Good morning, I just wanted to clarify one thing on the response to <unk> question. When you talked about the different financial metrics. We look at for a dealmaking why EPS accretion during the top left work, 100% EPS accretion has to be on day one.
Absolutely we look at our EPS accretion Thats, why we are more fundamental and more stuff.
An important metric we look at absolute.
Perfect. Thanks for that.
Cal.
<unk> okay.
Okay in terms of any.
Earnings for any potential liabilities.
<unk>.
Bye.
Doug.
Wildfire option.
Sure So I think.
We did report earlier, we talked about.
The mountain view wildfire investigation continues on that one.
We also recently faced on other wildfire tamarac wildfires.
Smaller one.
In comparison.
That one is largely contained.
We are under.
Without our employees did an amazing job in terms of mitigating a wildfire and bringing all of the customers back online.
A very short time.
It is extremely interesting to see.
But what our employees were able to do out there is bringing.
Generators in places you can sort of just a few customers.
Sure.
Will it be so important.
And yet in that.
Was all of it.
Background and context on what we're seeking for income.
Most of it.
This is because we do need to continue to invest in wildfire mitigation.
Aspects of investors.
<unk> is really the context behind the most recent.
Is that right.
Okay, and then just one more thing just on that earnings partnership and a simplification.
It's an SPV involves Lincoln electric.
<unk>.
Any capital commitments from <unk>.
Hey, Scott.
Being accounted for as a joint venture.
Okay. Thanks, a lot.
Hi, good morning.
I just wanted to start with.
The renewable projects that are already.
In the upper can you just remind us of what's contracted.
So shady Oaks shale the contract Jpmorgan, what about the <unk>.
Ohio solar projects or some of the energy projects coming on pipeline.
Yes, yes.
Thank you, Ron and happy to do that and you're absolutely right with the shady Oaks too in terms of the uptake with J P. Morgan.
New market debt portfolio is also contracted.
All the projects that we have under active construction are contracted at this point.
Okay.
Okay, I guess the other projects that are in what's.
Kauffman Bank development are those whats the electricity contract from those.
Yes.
Two waves.
Andy Ridge, two which is an advanced development, which is contracted and we've got Deerfield to which we're in active discussions on the contract.
Have not signed the contract yet.
Okay.
And just on that number larger.
Just for context.
The offtake contracting happens towards the really very end before what we say internally and notice to proceed. So that's what we're driving to make sure we we.
Hi.
The supply contract contract the construction contract and offtake contract comes together and Thats one.