Q1 2022 Algonquin Power & Utilities Corp Earnings Call
Good morning, My name is David and I'll be your conference operator today at this time I'd like to welcome everyone to the Algonquin power and Utilities Corp. First quarter 2022 earnings webcast and conference call. Today's conference is being recorded all lines have been placed on mute to prevent any background noise. After the speakers.
Mark's there'll be a question and answer session if you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad, if you'd like to withdraw your question Press Star one once again, thank you Amelia Tsang Vice President of Investor Relations you May begin your conference.
Thank you good morning, everyone and thanks for joining us this morning for our first quarter 2022 earnings Conference call.
I think on the call today are 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 web site of Banco power and utilities Dotcom, our financial statement.
The discussion and analysis and annual information form 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 earnings capital expenditures pending acquisition capital recycling and growth at the end of the call I won't read a notice regarding both forward looking information.
And non-GAAP measures. Please also refer to our most recent MD&A filed on SEDAR and Edgar and available on our website for additional important information on these items.
On our call. This morning, I 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 any additional questions to allow others the opportunity to participate.
That I will turn it over to a room.
Thank you Emilio and very good morning to those who have been able to join us on the call and online.
In the following key <unk>.
And so metrics.
Q1, adjusted EBITDA was $336 million.
A 17% increase year over year.
And our Q1 adjusted net.
For Q1.
An increase of 5% compared to last year's 20.
We ourselves as a business built from long lived assets and stable operations and we've consistently.
To produce stable and growing financial results.
We remain confident in our plans to continue delivering strong returns to our shareholders.
We believe that Algonquin execution of strategic priorities and our strong financial position.
Has led to support from our board of directors to approve an increase in our common share dividend of 6% which was.
Declared yesterday.
This increase marks the 12th year of consistently increasing dividends each year.
Demonstrating our confidence in and linearity.
Our business model.
We continue to focus our efforts on Algonquin three strategic pillars.
Growth.
Operational excellence.
And sustainability.
And I will provide more details on each of these pillars.
Our growth pillar in our regulated business is focused on deploying capital.
To benefit our customers and investing in our rate base.
I'll review at Empire Electric progressed well.
The sixth.
Generally do the Missouri Public Service Commission.
Its final report and order.
Resulting in a total revenue increase of $39 $5 million.
With new rates expected to be implemented.
On June <unk> 2022.
Recall that Empire electric earlier requested.
A rate increase of $79 $9 million.
Which included $29 $9 million of recoveries related to last year's extreme Midwest weather event.
And subsequently amended.
Request to $50 million.
After updating certain components.
And deferring the recovery of storm Uli costs.
We believe the settlement represents a fair outcome.
For our customers and the company.
We continue to invest in our network.
To deliver mission critical services.
Our communities.
While keeping customer affordability top of mind.
We also received a regulatory outcome for Balco.
Bermuda electric utility in the quarter.
Proving a revenue increase of $22 8 million.
However.
We are appealing the decision with the regulatory authority.
As we believe both parties could benefit.
Better methodology go definition.
The rate making process.
Another growth pillar.
From our acquisitions.
At the beginning of this year.
We closed on the acquisition of Liberty, New York Walker.
<unk>.
7000 customer connections across seven counties in southeastern New York.
And we officially welcomed the employees into loop.
Good morning.
The transition has gone very well.
As we have incorporated.
Gross margin was up.
Other jurisdictions and sharing best practices across our utility businesses.
Staying on the topic of acquisitions.
I want to provide you an update on our pending $2 $8 billion.
Through this transaction.
And look forward to bringing the benefits of our local operating model to eastern Kentucky.
As we speak.
Previously mentioned.
Our expectation of enhancing gently powers local operating model.
Bringing benefits to customers by exploring opportunities to reduce customer needs through investing in lower cost energy.
And creating increased local employment.
Are all attributes that are expected to help customers and local communities.
While driving value.
For shareholders.
To that end.
On may four.
The Kentucky Public Service Commission issued an order.
Including approval of the pending <unk> is one of several steps.
Okay.
The prior on May 3rd.
Temporary.
PSC issued an order authorizing a revised ownership and operating agreement related.
And outstanding from the restaurant.
Virginia Commission.
Okay.
Farooq.
We have already received and Cpus approvals.
To close the transaction in mid 2020.
We do.
After satisfaction of all closing conditions.
We continue to work collaboratively.
Community in Kenya.
Thank you.
Sorry.
In this business.
Our ability to originate and execute.
Projects.
Critical growth lever.
Late last year, we completed the 24 megawatt <unk>.
Val Eo wind facility, which reached commercial operations in Quebec.
With all of the energy being sold I'm pleased to report that the latest project to achieve commercial operations.
175 megawatt blue.
<unk> Hill facility in Saskatchewan.
With all the energy under contract with SaaS power.
Our construction teams continued to execute well.
On the wind side, we'll continue to make progress on shady Oaks team.
And have started construction of Deerfield.
And Sandy Ridge.
On the solar side, we continue to execute as a group on community solar facility reached commercial operation.
Operational community Solar project.
Okay.
Due to lower retail.
Utility bills for over 1300 residential customers.
Construction continues to progress on the utility scaled new market solar project.
And we have started construction on three additional community solar projects in New York State.
Okay.
Staying on the topic of solar.
As it relates to the U S government's solar tariff investigate leave there are two categories.
While investigations impact on us.
Our pipeline.
First.
There are projects currently under construction.
Which could have potential delays.
We are evaluating all options to mitigate potential impacts from the commerce Department's EBIT investigation into foreign manufacturers solar modules.
The second category would be future projects.
Thanks.
We believe the potential consequences of the investigation to be cost balance to BPA pricing in the industry.
As is consistent with our development philosophy.
We generally try and finalize the long supply agreements.
The EPC contract.
And off peaks as close together as possible.
Effort to protect the margins we expect.
Another lever of growth on the renewable side is.
He is developing successful partnerships.
For renewables development with commercial and industrial customers to support sustainable energy.
We are pleased to report that we continue to collaborate with meta.
Formerly known as the face of the company.
And executed an off take agreement between meta and the 112 megawatt Deerfield two wind farm.
Gated in Michigan.
This represents the second offtake agreement with meta.
After the previously announced Alta Vista.
Okay.
Moving on now to our operational excellence.
In a mission critical industry.
Safety and reliability are all of those key areas of focus.
Yes.
I am pleased to share that we are past the impressive milestone of over 800 days.
That is nearly 12 million work hours business.
While keeping our customers and community safe.
And maintaining our system reliability and resiliency.
In fact.
Another Testament to our safety culture is that I am pleased to report a notable achievement.
Garnered liberty was recently recognized.
By the American Gas Association.
<unk>.
As a top safety performer in 2021.
Winning the AGL safety Achievement award for the worst incident rate.
The medium communism utilities category.
Our balance approach.
Operating a local model with central governance continues to be a focus.
We'd like to have our local management team situated close to our assets.
To work closely with the community.
Customers and regulators.
We continue to be innovative.
And invest in our system.
S&P need future customer needs in a D galvanizing world.
One recent example.
Is that Liberty has secured approval.
And is now awaiting the final tariff for a pilot program with the regulatory in Missouri.
Which is making the first utility in the state to obtain approval to earn a regulated return on behind the meter electric vehicle charging equipment.
The pilot is slated to launch by fall.
And includes a number of unique asset and system data insights.
That we will be sharing with the commission staff.
As the program unfolds.
This pilot program is also notable.
Given that its final design reflects nearly a year.
Close collaboration.
Between Liberty.
The Missouri Commission staff.
And the local intervenor community.
Having propose the original framework.
Our liberties and find multiple program features.
In response to stakeholder input.
We are pleased with the final design.
And hope that this type of collaboration becomes a norm when it comes to innovative projects.
And finally.
We remain firmly committed to sustainability.
Through the inclusion of environmental social and governance values in our broader corporate strategy and day to day operations.
We have always said that our sustainability plans and initiatives are embedded into our broader corporate strategy.
And we've taken another important step in that direction.
Re positioning our.
Sustainability business unit.
Bye Helane burner.
We have vice president strategy and sustainability.
Our short medium and long term.
Strategic direction, we'll continue to factor in sustainability.
Our strategic imperative.
I'm sure many in the Investor community will get a chance to meet with Alan in the near future.
During the quarter.
<unk> was also recognized for the second year in a row.
By the global mail.
And report on business magazine women lead here benchmark.
Which acknowledges corporations with the best record of executed gender diversity in Canada.
With that.
I'll pass it over to offer we will speak to our first quarter 2022 financial results.
Arthur.
Thank you Erin and good morning, everyone I'm.
I'm pleased to report strong first quarter results, reflecting the benefits of our diversified and resilient business model.
Our first quarter 2022, consolidated adjusted EBITDA was $330 6 million, which is up approximately 17% from the $282 $9 million, we reported for the same period last year.
The regulated services group delivered $231 2 million in operating profit in the current quarter, which compares to $206 4 million in the <unk>.
Same quarter last year, an increase of $24 $8 million or nearly 12%.
This increase reflects the addition of 600 megawatts of wind generation in the first half of 2021 as part of the Greening The fleet initiative in the Midwest.
These facilities contributed approximately $9 5 million of additional operating profit.
The group also benefited from the implementation of new rates across several of our utilities systems, adding approximately $7 5 million to operating profit as compared to the prior year.
Lastly, our operations at Empire electric although modestly negatively impacted by weather this quarter as compared to long term averages.
Recorded higher operating profit as compared to the prior year due to higher non pass through fuel costs incurred in the prior year, resulting from the impact of store Murray.
Operating profit was negatively impacted this quarter by an operating loss of Liberty in Europe water, which was acquired in January .
As a reminder, this utility is impacted by seasonality and as expected to earn a disproportionate amount of operating profit during the summer months.
The renewable energy group reported first quarter divisional operating profit of $118 6 million, which compares to 95 million in the same quarter last year, representing an increase of $23 6 million or nearly 25%.
During the quarter production at our existing wind and solar generation facilities was more in line with long term averages increasing by 20% over the same period last year and as a result contributed approximately $12 4 million for the year overall increase in operating profit.
Generation from newly commissioned facilities and investments added $8 5 million <unk>.
Primarily from the Maverick Creek wind and Alta Vista solar facilities that both achieved full commercial operations in the second quarter of last year.
Operating results also benefited from incremental dividends received from atlantica, but were partially offset by unfavorable price capture at some of our wind facilities and higher fuel costs other saying our thermal facility in California.
Our investment in the Texas coastal wind facilities, providing a positive contribution to operating profit this quarter with the addition of the West Raymond facility in the second half of last year.
But continues to perform below our expectations, primarily due to higher than anticipated basis costs, resulting from the imposition of the general transmission constraint in the vicinity of the facilities.
In total our Q1 adjusted net earnings per share came in at 21, which compares to <unk> 20 in the prior year.
In addition to the drivers discussed our results were negatively impacted by financing costs associated with the capital deployed in 2021, and an increase in weighted average shares related to the Kentucky power acquisition funding.
These financing costs were and continue to be incorporated into our full year financial outlook for the year.
Moving onto our capital plan for the year for 2022 of <unk> is targeting to spend over $4 3 billion in capital.
With the majority related to the acquisitions of Liberty in Uruguay, which closed earlier this year and Kentucky power, which is expected to close mid this year.
Our capital plan remains on track.
During the quarter. In addition to be approximately $609 million of capital deployed for the closing of Uruguay.
We invested over $225 million of capital into our utilities and continue to invest into a renewable development and construction programs.
We also continue to make good progress on our financing plan for the year, which as a reminder is predicated on maintaining a strong and resilient balance sheet targeting a triple b flat investment grade credit rating.
As mentioned in my remarks last quarter early this year, we issued approximately $1 1 billion of hybrid debt, which we expect to use in connection with the closing of Kentucky power together with the common equity offering completed last year. In total we have raised just over $1 7 billion towards the $2 8 billion purchase price with the remainder being that assume.
And on acquisition, a portion of which we expect to refinance that.
Debt capital markets shortly after.
The remaining funding requirements for the year are expected to be solved by a combination of various funding sources available to us including retained cash additional hybrid debt.
Proceeds from securitization of regulatory assets and long term debt.
In the second half of the year. We may also reactivated our aftermarket offering program to provide flexibility to raise a modest amount of equity capital.
We've also recently commenced a process of exploring the modernization of several of our renewable assets, which we view as another source of potential value accretive capital for us this year.
Considering the various funding sources available we do not expect to require a discrete common equity offering for the rest of this year.
Our liquidity position also remains strong ending the quarter with over $1 8 billion of available liquidity.
Subsequent to the quarter, our regulated services group Upsized and extended its revolving credit facility, increasing it from the $500 to $1 billion for a five year term.
The extension was well oversubscribed, highlighting the strong support for the Companys credit in the bank market.
Our Treasury group remains focused this year on also extending and potentially upsizing, our renewable and corporate revolving credit facilities.
Before turning things over to Ernie I'd like to provide a brief update on our 2022 adjusted net EPS guidance.
We continue to expect our 2022 adjusted net EPS to be within the range of 72 to 77.
These expectations are based on underlying assumptions, including normalized weather patterns as well as research production and realized pricing of renewable generation facilities consistent with long term averages.
Also assuming the acquisition of Kentucky power will be completed in mid 2022, and there'll be no impacts from Covid on operations.
We look forward to continuing to deliver solid earnings which was along with our history of dividend growth. We believe will continue to drive a strong return for our shareholders.
With that I'll now hand, it back to Arun to outline our strategic plans.
Thanks Arthur.
Before we close out our prepared comments this morning.
Let me give you an update on our strategic initiatives.
At our December Investor Day, we.
We updated our five year capital investment program.
Which project $12 $4 billion from 'twenty to 'twenty two through the end of 2026.
With the visible capital plan.
Of that.
We have already closed on Liberty new of water earlier this year.
Executing on our approximately $600 million.
All of the capital plan in January .
While a large portion of the capital plan is being spent on organic investments.
To improve the safety.
Reliability and resiliency of our network.
On the renewable side.
We are excited about the growth potential.
And believe that we have a once in a generation opportunity.
Two accelerated renewables growth.
And add shareholder value.
We all are.
Our investments in over 4000 megawatts of renewable generation.
Which provides us with scale.
With scale, we expect to get incremental benefits.
Including improved negotiating power lower transaction cost and access to greater opportunities.
I've previously spoken about accelerating renewables growth.
And adding shareholder value as we plan to continue to increase our investments in <unk>.
Greenfield development.
Which we expect will.
It will allow us to capture the higher development margin and <unk>.
Take a number of those projects through construction.
Wanted to operations.
We see an opportunity to partner with institutional investors.
Wishing to make ultimate sustainable investments.
And we are seeking a partner with a proven ability to develop.
And deliver on long term contracted renewable assets.
More specifically.
We should be able to sell down to the investors.
While earnings and operating fee.
We could deploy some or all of the capital gains in.
In further Greenfield development.
Creating a potential new recurring source of earnings for our investors.
We are formerly <unk>.
Our inaugural asset recycling process.
Now with the portfolio with numerous and Canadian assets in the range of approximately 750 megawatts.
And we'll provide an updated as the process continues.
Key objectives for us.
Our increase in the scale of our development and operational platform.
Together with increasing the amount of internally generated cash for future growth.
I'm excited about the prospects of Algonquin regulated and renewables businesses.
Which are both well positioned to contribute to <unk>.
And benefit from the Decarbonising some transformation that is currently underway.
And which will only accelerate over the coming years.
Okay.
We welcome you to hear award.
At our upcoming annual General meeting.
Similar to last year.
As a result of our ongoing bundling.
I'll be hosting our AGM virtually this year.
We welcome your participation on June 2nd at four P M Eastern.
The start of 2022.
Has been very productive so far with.
With the global Liberty media water.
And the receipt of orders for our <unk> power acquisition.
On the renewable side.
We are excited about the growth potential.
And believe that we have a once in a generational opportunity to accelerated renewables growth and add shareholder value.
Our three strategic pillars of operational excellence.
Growth and.
And sustainability.
A key foundation.
As we continue to build the business.
And seek to deliver steady earnings.
Dividend growth.
And long term shareholder value.
With that.
I will turn the call over to the operator for any questions from those online.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Okay. We will take our first question from David Quezada with Raymond James Your line is now open.
Hey, Thanks, good morning, everyone.
My first question here just on the.
Given the renewable power side of your business is start I'm, just curious I know that.
I think about 18% of your capacity is not contracted curious what kind of upside you are seeing from higher spot prices today, and if there are any opportunities for contracting.
Essentially those assets in the current environment.
Okay.
Yes sure.
David its Jeff Norman.
Yes, you are.
Absolutely right that there is a portion of.
Of those assets that are not contracted and we are seeing an increase in pricing.
I think part of that.
That will probably lead those open in terms of managing the overall risk and.
So that they can appreciate and the upside and there are some other benefits in terms of balancing with the generation profile of mix to optimize the portfolio.
Okay, great. Thank you for that and then maybe just one on.
On the topic of renewable deployment throughout your regulated footprint.
And certainly appreciate the Kentucky power.
The big opportunity, but I'm just curious at your footprint in the Empire District Electric I know that the case for renewables in the past.
The net it saves customers money I imagine that that math is even more favorable today I'm curious if you.
If you've had any initial discussions with the regulator there about potential additional renewables in the entire footprint.
That is a discussion David we continue to have with all of our regulators throughout our jurisdictions.
Including new jewelry, including California, and Luke.
And those congresses in the water utilities.
We are we are in jurisdictions because.
In fact, David takes a significant amount of energy to move water.
So we are in and looking at how do we follow those energy needs with a renewable energy. So that's something we continue to have given the fact that we.
Certainly.
Additional natural gas fired generation in Missouri over time, we believe that the needy.
More.
Opportunity to confer greening the fleet.
As the prices of renewable energy goes down and we were able to foresee.
The benefits to our customers with.
Excellent. Thank you very much I'll turn it over.
Thank you David.
Okay.
Next we'll go to Nelson, Inc. With RBC capital markets. Your line is open.
Great. Thanks.
First question's for around you mentioned that you've started the capital recycling process first clarify that your are you looking to sell a minority interest in retaining O&M responsibility is that.
The approach you're taking.
So Nelson thanks.
First of all I think the range is.
Is around 750 megawatts I did say that this is done.
In non Google.
Renewable asset recycling.
As we continue to increase on a greenfield pipeline and accelerated growth.
We wanted this to be something of the rebuilding value.
To our shareholders.
<unk>.
As you may have.
Significant amount of flexibility in terms of.
How much we want to sell out.
What is important for us is really to maintain that.
Scale on both the development on the operational side of that is leading the most important thing for us.
And do we really validated the strength of our development platform by doing this build out.
Okay. Thanks, and then my next question.
Churn might be for Jeff So in terms of solar panel supply.
Can you just clarify so there is some projects.
On that.
On that slide that has.
Some solar panels installed like 60%, 70% on the community solar.
New market solar phase one.
Are those.
Are those projects essentially on hold or do you already have.
Panels on the ground and that's.
Yes.
This investigation into tariffs.
I would they impact the projects that are already starting the panel installations and I presumed new market phase two and Chevron.
Have been pushed out a bit.
This issue.
Hello, Nelson its a good question and certainly the department of Commerce decision to investigators has caused some turmoil in the supply chain.
I think maybe stepping back a little bit before answering your specific question.
We feel very fortunate.
The solar projects within our $12 4 billion pipeline only represent about 2%.
And we break that into two chunks of the projects that youre asking specific questions for which are a little over 100 megawatts.
And the remainder which is two projects that are out in 'twenty four 'twenty five timeline and our capital plan.
We don't expect an impact on that.
Majority without in 'twenty four 'twenty five the bulk of time to adjust.
To whatever decision is made by the department of Commerce.
But then specifically to your question.
On the G&A solar projects those are and will continue under construction. The panels are in countries that we expect no impact there.
The two chevron projects, which totaled 45 megawatts.
I've made a joint decision with Chevron to pause those projects until we get the decision from department of Commerce.
So a little bit of an impact there, but pretty small projects.
And then on new market solar.
The.
Remaining 65 megawatts in the schedules that Arun went through is constructed except for panels. So once the patents arrive we can complete construction quite quickly we expect the panels to arrive in time to complete that construction before December 31.
We do expect based on the sourcing of the panels that there is some tariff exposure there, but its only approximately 30 basis points on return.
Excellent. Thanks for the thanks for the color John .
I'll leave it there.
Pat.
Next we will go to what Rupert <unk> with National Bank. Your line is open.
Good morning, getting back to the topic of sell Downs, initially which assets could you be targeting you're looking at.
While assets under construction or contemplating sell down on some operating assets I imagine those wind assets you have coming off of a 10 year tax rate when those could be good candidates I guess what are your thoughts on what gets sold down.
So rupert.
Okay.
The whole idea for us is to de risk.
This project through the development interconnection.
Siting permitting construction and early operations.
And so all of these projects.
In the early stages of.
The operation.
And those are the projects we have in the pipeline in the Balkan.
Canada and the U S.
All.
In our renewable energy projects.
Okay, So youre not contemplating sell down on operating assets at this point.
We are looking at.
These are operating renewable energy projects.
To clarify.
Okay, Okay great.
Secondly, with the the dividend increase can you give us some thoughts on the payout ratio targets, you have near and long term.
And how those came into effect with your dividend increase this quarter.
<unk> Arthur Thanks for the question actually we're expecting that question.
So in terms of our dividend and as we think about our dividend going forward again drove year in a row raising dividends as we look at it.
We want to ensure we are providing a strong yields to a lot of our investors, but also we want to make sure that our dividends are sustainable and Thats what it back in Investor Day, We did lay out our our target payout ratio of about 80% to 90%. We believe with those those payout ratios will ensure a sustainable dividend and really just as a recap on.
How we should think about <unk>.
Those payout ratios it really brings it to a combination of our two businesses on the renewable side, which.
Typically pays out at a proportion of its cash flows and on the regulated side, where we see a lot of our utility guidance of earnings.
Blend those two together you do get above the 80.
Due to 90%.
Earnings payout ratio.
And I would say the only thing I'll say about the payout ratio to the long term payout ratio, we probably do see ourselves.
So potentially exceeding that in the short term, especially with some of the transitional factors. This year as we bring on.
<unk> power.
But.
Certainly in the long term probably post 2023.
Great. Thank you Arthur I'll leave it there.
Thanks Rupert.
Thank you next we'll go to Ben Pham with BMO. Your line is open.
Hi, Thanks, Good morning, I wanted to start off on <unk>.
M&A and I'm curious about your.
<unk> now.
Kentucky power.
Damian.
And in Europe .
Do you have.
If you look on both sides.
Our bias to either one of you.
Hostess versus utilities.
We'll have an update on M&A in the current environment.
Sure.
First of all I do want to point out of that.
Vast majority of our.
Usual.
Growth.
And.
Perhaps.
The last one is a lizard non representative because we have two large acquisitions, but north American water and.
Kentucky power, but if you go to the previous.
At Investor Day, which is more like $94 billion and also included.
$600 million of M&A solar is $48 billion of 91 4 billion Capex program was all.
Organic.
One point of pointing that out first of all so we do.
Do not absolutely dependent on M&A for four hours.
Sure.
Same time we.
Right.
Probably one of the fact that scale does bring certain benefit and where we can execute on M&A.
That fits our strategy.
Fifth all of our financial metrics all of those kinds of things and we will execute.
The MAA is by major blue purely opportunistic.
With the.
And remember the year lager that drives that transition has gone.
Very well.
And in a given hour.
Sure.
Experienced to date in terms of France and.
And assuming.
While utility into a full week.
Anticipate any surprises on continued power as well.
And so.
Given all of that.
The right opportunity pumps, and we will look at M&A opportunities, but again, we are always very very disciplined.
When it comes to fit the strategy.
All of our financial metrics, so on and so forth.
Thanks for that.
And those are Marc I'm wondering also.
Not sure what year was last year, you were a little bit.
Keen on on gas M&A.
But maybe you crank situation is that how does that change at all in your thinking.
Look I think one of the things that we've made very clear is around sustainability.
As to fit.
And as you saw on.
The continued power of transaction.
We did.
Did a lot of structuring.
Yeah.
Transactions fit.
Our long term sustainability.
<unk> and profile when it comes to natural gas I am going to focus on really several things first of all.
We want a new mines.
Our.
And so if you look at our <unk>, Massachusetts gas.
A lot of industry is growing.
On the replacing.
Even your views.
The iron pipes with with a plastic long lasting plastic pipes.
And that therefore, we're going to continue to do.
In mind or is the existing profile of our gas utility. We also have filed.
Our renewable natural gas.
<unk>.
Filings in front of four different commissions, so far and are willing to that in a regular due process on the renewable side we acquired.
Our platform in Wisconsin with the.
Two brands in the late stage development strategy, which we.
Expect to come into operation this month in fact.
And two others.
In development that we are working on a renewable natural gas and longer term.
A number of studies.
We are all participating in our newer states.
Bob.
Program.
Hydrogen as well and over long term, we see that.
<unk>.
Very much.
Potential however, we wanted to make sure that we have a good line of sight on green hydrogen and the economics of that before transacting further on natural gas assets.
China's on dividends all my questions have been asked.
When you said, the 6% and I just thought of.
Different factors driving that.
Also considering your ability to maintain.
Is that right.
A couple of years.
If I can move around every year based on the inputs that you are putting on.
Look I absolutely the.
Firstly I would classify them as that is really our board.
That dictates that in the dividend policy and.
The level of dividends is really important and I think Arthur only due to some of the factors we consider.
In terms of when you look at the setting dividends and sustainability of dividends is an absolute must right. So the absolute.
Absolutely.
Okay. Thank you.
Thanks, Brett.
Thank you next we'll go to Julien Dumoulin Smith with Bank of America. Your line is now open.
Hey, good morning team thanks for that side of the opportunity to connect can you hear me.
Yes Julien.
Thanks, Arun <unk>.
Greetings, Indeed, hey, listen just actually just to clarify that last response I want to make sure I heard you right just I've got a follow up here, but.
When you said dividends at the sustainability sustainability of growth rate I think that's what Ben was after when he was asking about the 6%.
A second ago.
Not just sustainable dividend, but I think that you were affirming our confidence on a certain degree of growth.
That's absolutely correct, yes. Thank.
It wasn't clear in your response, but I thought you meant that so thank you.
Alright, alright, so back to the regularly scheduled question.
Just with respect to your Kentucky acquisition and the returns I know we've talked about this.
At various points.
Timeline, there right so coming back to that payout ratio comments from earlier it sort of seems as if it's tied to the earned ROE.
Achieving a certain level and normalizing your overall earnings profile such whats your latest sense on when you get closer to earning those quote unquote authorized levels wherever that settles.
Two facility that clearly.
With the expiry of the walk forward.
<unk> purchase agreement and our service level.
This now allows us to deliver there that.
<unk>.
We recovered so that's obviously one step toward getting back closer to a liability.
And the next opportunity for us it will clearly be on the rate case that we plan to file in 2023, which goes into.
In fact in 2034 and as we've talked before there is a number of mechanisms.
I have already been <unk>.
Among all among other.
Investor owned utilities in Kentucky, and we plan to.
<unk> of the allow ourselves of those as well and then finally <unk>.
As we start layering in both lower cost.
<unk> purchases.
Once the once the Rockwood epa's expired and the Mitchell.
<unk>.
It gets retired from our from our Kentucky power perspective, and as we bring in lower cost renewable energy, we should be able to pass on both those benefits to customers as well as <unk>.
Yes.
<unk> as well as the.
Subdivide step progression that we build into our aggregate model and we remain confident in the EMEA execute against that.
Excellent. Thank you and a further one one quick clarification. If I can you you said in your prepared remarks.
The process of exploring the modernization of several of your renewable assets, which you would give us another source of potential value accretive capital.
What does it modernization.
Of your renewable assets look like in the form of financing I just want to be crystal clear about this I know we've talked.
On the call earlier about potential monetization of the asset.
I think you've got certain modernization I just want to make sure I heard that right.
Sorry, maybe maybe bed modern trade.
Transcripts coming across a little odd maybe.
One moment Julien.
Can you hear please. Please proceed go ahead Julien with your question.
And Julian J D.
Yes.
Nothing happens technology glitch here.
So.
First of all.
Okay.
GSM.
Julian.
Monetization model.
Yes.
Okay.
I don't know.
Yes.
As we move.
Hey, guys.
Hey, good morning, everyone.
Okay.
Lot of my questions have been asked one question on.
That you've formalized for.
So partners.
Alright.
I missed it but can you give us context on it.
Reaching conclusions there.
But by the end of the year.
Sure.
Yes.
Okay, Thanks, and maybe a question for Jeff.
Deploy.
That capital towards earlier stage development opportunities.
Given the scale you are at now.
Most of what you've got.
Got news sources yourselves built yourselves.
Can you speak to the Greenfield opportunity set versus.
Acquiring early stage portfolios of projects and using that to build to grow.
For later stage renewable development.
Opportunity.
Yes.
Absolutely, Sean and so we continue to shift more towards green.
A lot of the.
Early junior developers.
Thank you.
We see the.
Ability to create more value.
By going in earlier.
Our platform has gotten bigger and bigger in the U S and our ability and tools for doing that.
<unk>.
Okay.
Thanks for that detail, that's all I have everyone. Thanks.
Thank you next we'll go to Rob Hope with Scotiabank. Your line is open.
Good morning, everyone, just two follow up questions Syed.
Take a look at these processes when you're taking a look at how much you want to sell.
Does consolidator in our equity accounting these assets come into play and by that I mean.
Have some renewable assets that could where quite a bit of debt and so these are equity accounted for you could put asset level.
Financing merit and lever them up and not impact the overall balance sheet is that a factor that we could see come into play here.
Let me first.
The first consideration most critical procedures in for US is how to maximize I find.
The most important consideration.
And a comment on the accounting treatment I was kind of going to echo the same.
Okay.
Alright, I appreciate that and then just a follow up on Kentucky.
We are seeing some conditions.
Conditions in the filings does that alter your expected Roe.
Moving forward there or is there or has that played out largely as expected so far.
Largely as expected Rob I mean, we obviously.
And orders.
Collaborating closely with EEP.
Those on resolving all outstanding issues.
Outstanding.
The regulatory requirements are from West, Virginia on mutual and FERC.
We remain confident on resolving those again.
Midyear.
And we continue to believe that.
The economics that we've laid out earlier.
Through that.
He brings an order.
Alright, I appreciate the clarity thank you.
Thank you Rob.
Thank you and next we'll go to <unk>.
By doing with IAA capital markets. Your line is now open.
Hi, Good morning, just two questions on the asset sales.
Do you expect.
So they are success this year to perhaps lead to more regular pace or a specific scale.
Recycling initiatives going forward.
The idea is to have on the renewable side regarding.
Meanwhile, as itself.
The allowance and to be able to recognize.
And validate the value we created through the development process.
And as we've said.
Is it on the prepared remarks.
This is an inaugural asset recycling program. So yes, there will be a part doing a biopsy and hopefully.
Continuing.
Scale.
Okay got it I guess so far.
There's no specific target can add to the portfolio over time, but it's sort of this is step one but you do expect it to have more regularly.
That's exactly correct.
Okay and then just one quick question on <unk>.
The Deerfield partnership with <unk>.
As a matter of.
U E.
Looked at May be replicating the Chevron framework with this client or with some other clients in the us in Canada.
We would obviously like to do right.
Including.
Cds.
Dmitry may reduce.
Transaction costs.
Certainly.
We'd like to develop all of these relationships into those kinds of framework agreement.
As you know.
But the important part about this one with my thought was the fact that it is a second one.
And so.
Brazil is something we spend a lot of diamond effort and focus on making sure that we're delivering value to.
To our customers so.
We'll go through a framework agreement or repeated.
Partners.
Please.
And project debt that is the model that we do one area.
Got it understood. Thank you.
Thank you Ravi.
Next we'll go to Richard Sunderland with Jpmorgan. Your line is now open.
Hi, Thank you for your time today, just wanted to circle back quickly to the tariff comments earlier Q&A.
Just wanted to clarify the carrier the careful exposure just on new market solar field and not on the first phase or the community solar is that correct.
Correct and there will be tariff exposure also on on shelf.
Chevron assets, we just need to sort through exactly what the decision is and where we source those panels.
Right understood. Thank you for the clarity.
And then secondly over the past <unk> talked about your storage pipeline, just curious where your efforts stand there.
Yes, so we will have the 70 to 100 megawatt hour stories.
Pipeline Greenfield Richard and we are at the point with the storage economics and everything that we do look at steward on every one of our renewable.
Everyone have a renewable project development and everyone.
Thinking through.
Interconnect things of the sword.
<unk> grew four.
Storage capability.
In England in cases.
Outlook.
Inquiries are battery storage. So we do believe that battery storage will continue to.
Both.
They will continue to be price reduction as well as capacity increases in those numbers.
Hours of storage, so we are pretty bullish on.
On the battery storage side of the business and.
And we already have actually.
Quite a bit of a battery stores on a regular pattern of the business.
Kind of walk us through the operational but also.
Again, all in all excited about the battery storage opportunities.
Thanks for the color.
Thank you Richard.
There are no further questions at this time, a roomba Dakota I'll turn the call back over to you for any additional or closing remarks.
Thank you for taking the time on our call today with that please stay on the line for our disclaimer.
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Forward looking information is based on.
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Sure.
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Okay.
Okay.
Okay.
Yeah.
Okay.
Okay.
Okay.
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