Q3 2023 Canadian Utilities Ltd Earnings Call

Operator: Thank you for standing by. This is the conference operator. Welcome to the 3rd quarter 2023 Results Conference call for Canadian Utilities Limited. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question to you, you may press star then one on your telephone keypad. Did you need assistance during the conference call? You may signal an operator by pressing star and zero.

Lawrence Gramson: I would now like to turn the conference over to Mr. Lawrence Gramson, Director, Corporate Finance. Please go ahead, Mr. Gramson.

Lawrence Gramson: Thank you. Good morning, everyone. We're pleased you could join us for Canadian Utilities 3rd quarter 2023 conference call. With me today is Canadian Utilities Executive Vice President and Chief Financial Officer Brian Skrobot, as well as Aqua Empower Chief Operating Officer Bob Miles and Aqua Energy Systems Chief Operating Officer Wayne Stensby. Before we move into our formal agenda, I would like to take a moment to acknowledge the numerous traditional territories and home lands on which our global utilities are located.

Lawrence Gramson: Today, we are speaking to you for Aqua Park Head Office in Calgary, which is located in the Treaty 7 region. This is the ancestral territory of the Blackfoot Confederacy comprise of the Sixthika, Kainai, and Picani nations, the Chutina nation, and the Stonina code of nations that include the Chiniki, Kwarezpa, and Good Stony First Nations. The Seventh Calgary is also home to the matey nation of Alberta region 3. We honor and respect the diverse history, languages, ceremonies, and culture of the indigenous peoples who call these areas home.

Lawrence Gramson: Brian will begin today with some opening comments on our financial results and recent company developments, including regulatory decisions. Following these prepared remarks, Brian, Bob, and Wayne will take questions from the investment community. Please note that a replay of the conference call, a short supplementary presentation, and a transcript will be available on our website at Canadianutilities.com and can be found in the investor's section under the heading events and presentations. I'd like to remind you all that our remarks today will include forward-looking statements which are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the report filed by Canadian utilities with the Canadian Securities Regulators.

Lawrence Gramson: And finally, I'd also like to point out that during this presentation, we may refer to certain non-GAP and other financial measures, such as total of segment measures adjusted earnings, adjusted earnings per share, and capital investment. These measures do not have a standardized meaning under IFRS. And as a result, they may not be comparable to similar measures presented in other entities.

Lawrence Gramson: And now I'll turn the call over to Brian for his opening remarks. Thanks, Lawrence. And good morning, everyone.

Brian Skrobot: Thank you all very much for joining us today for third quarter 2023 conference call. Canadian utilities achieved adjusted earnings of 87 million or 32 cents per share in the third quarter of this year, compared to 120 million in the third quarter of last year. As you know, we concluded a successful second cycle performance-based regulation in our Alberta distribution utilities in 2022. 2021 is a single cost of service rebasing year and in 2024, we will start the third cycle of performance base regulation with final rebase rates.

Brian Skrobot: Performance base regulation facilitates affordability, which is important to the long-term sustainability of the business, as the savings and efficiencies generated in the second PBR cycle are returned to customers through the rebasing process. As expected, the impact of our Alberta distribution utilities rebasing resulted in lower year-over-year earnings in the third quarter. On its own, this rebasing contributed to a year-over-year decline in earnings of approximately 17 million. This is a significant impact to 2023 earnings, but for anyone who has listened to our conference calls throughout last year and this year, this is not unexpected trend.

Brian Skrobot: It is a direct result of the exceptional performance that we drove throughout our second PBR cycle and the savings and efficiencies that are now being returned to customers. As our utility teams continue to work hard to find new efficiencies and drive down costs, we expect to see their earnings pressure associated with this rebasing begin to soften in the fourth quarter of this year.

Brian Skrobot: Looking ahead to 2024 and beyond within our Alberta utility businesses, I want to briefly touch on two key regulatory decisions that received earlier this month. First, the Alberta Utilities Commission or AUC released the parameters for Alberta's third performance-based regulation cycle or PBR-3 for short, which will be the framework in which our Alberta distribution utilities operate for the period between 2024 and 2028. Included in our MDNA for this quarter is a detailed breakdown of the differences and similarities between PBR-3 and our outgoing PBR-2 framework.

Brian Skrobot: At a high level, while PBR-3 does include a tiered earnings sharing mechanism, we continue to believe that this framework would create opportunities for us to deliver strong up performance and growth throughout the term. And importantly, this framework allows us to make investments needed to drive both efficiencies and long-terms stability for our energy distribution systems in the province.

Brian Skrobot: Also in October, they used to deliver its decision on the generic cost of capital or GCOC for short and the parameters for 2024 and beyond. As was signaled throughout the year, the commission has adopted the use of a formula for setting R.E, and this decision also reaffirmed equity thickness set at 37% for a Alberta Utilities. The established formula for R.E, utilizes a base rate of 9%, and takes the count two variables to adjust this base rate.

Brian Skrobot: First, the changes in 30-year government-accounted upon yields and changes in utility spreads. The commission will update the R.E, annually and issue the following years R.E, in November of the current year. Now while the final 2024 R.E, will still not be known as an November of this year, current market data suggests that R.E, in the range of 9 to 9.2% up from the current rate of 8.5%. Now as we begin to operate under these new frameworks in 2024, we will continue to apply the ownership principles that we have historically used to drive efficiencies in operation excellence across our businesses, and we expect us to drive continual reforms and growth for our business. Importantly, the receipt of both these critical regulatory decisions well in advance of the respective operating years further reinforces the strides we've seen in reducing regulatory lag in the province and providing prosperity.

Brian Skrobot: Moving on to our natural gas distribution business in Australia, we continue to see strong growth in key operating metrics such as new connections, terrafraids, and system volumes. The narrative for this business, however, remains focused on Australia's in-country inflation profile, which continues to tribute to a year over year earnings pressure. As we alluded to in our second quarter, 2023 conference call, it is important to remember that inflation in 2022 built rapidly in the second half of last year, with full year inflation reaching almost 8% by the year end 2022.

Brian Skrobot: As a result of this building profile in the prior year, our third quarter, 2022 earnings were exceptionally strong, creating a comparable that is difficult to compete with in 2023 as inflation levels began to moderate. This trend resulted us reporting year over year decline of $8 million for this business in the quarter. Similar to the messaging we delivered throughout this year, we continue to expect Q4 and full year earnings for this business to be lower than 2022 as the CPI trend continues to moderate in Australia. For added context, in-country estimates continue to suggest full year inflation in Australia between 4% to 5%, which is consistent with the in-market estimates from last quarter.

Brian Skrobot: Now, before I move on to our Aqua and Power businesses, I want to briefly touch on the capital investments we made in the third quarter. The third quarter saw us invest $331 million in our business with $307 million of the spending being within our existing utilities. This ongoing utility investment ensures a continued generation of stable earnings and reliable cash flows will also drive in sustainable rate-based growth. The remaining capital was primarily related to our ongoing renewable generation initiatives of Aqua and Power.

Brian Skrobot: Moving on to Aqua and Business, we delivered adjustments of 9 million compared to 12 million for the same period last year. While our newly required and recently completed renewable assets contributed to earnings lower demand in our natural gas storage business, timing of cost, and seasonally low wind output pressure earnings. As we continue to drive the numerous development processes already underway to completion, and these assets begin to contribute additional earnings, we're confident that the earnings power of these assets will become more pronounced.

Brian Skrobot: Now, moving to the development side of the discussion, it's been a busy quarter and one highlighted by the creation and formalization of a number of key strategic partnerships that are paramount for us advancing growth strategy. University.

Brian Skrobot: In September, we announced our partnership with the Chanicki and Goodstoney First Nations, which saw them become joint owners of the Dearfoot and Barlow Solar Facilities. Nurturing Indigenous partnerships that promote social and economic development has long been a hallmark of our method of operating, and we're proud to announce that this agreement with our new partners. The Dearfoot and Barlow Solar Facilities are some of the largest solar installations in an urban setting in Western Canada, and I'm proud to say that our Barlow Facility achieved full commercial operations in the second quarter of this year.

Brian Skrobot: And we expect our Dearfoot project to achieve the same in the fourth quarter of this year. This month, we also announced a virtual power purchase agreement with a large Canada, which will see them receive 100% of the energy produced at our Empress Solar Facility. Again, we are proud to be at the forefront of the energy transition and providing solution to help customers like with Farge, reduce their own carbon emissions, and it remains a key priority for us in our low strategy.

Brian Skrobot: Agreements like this also line with our target of having approximately 75% of the renewable generation portfolio contracted under long-term agreements with high quality counterparties. This portfolio view to contractiveness helps ensure a stable and secure cash flow stream for the long term, while ensuring that we obtain the needed flexibility to maximize value within the portfolio and capture near-term economic benefits as they arise. For our Empress project, we expect to see achieve full commercial operations in the fourth quarter of this year.

Brian Skrobot: Now, looking ahead to our development pipeline, I think it's also valuable to briefly touch on the AUC's decision to pause approvals for the newly renewable electricity generation projects until February of next year. First and foremost, this announcement does not impact our projects under construction, which are the upgrading of the 40-mile wind asset or the near-term development of our 40-mile solar project. For our renewable development pipeline more broadly, we continue to progress our near-term projects and our development timelines did not contemplate a need to file any new AUC applications in advance of the expected lifting of this moratorium and February next year.

Brian Skrobot: We also continue to be focused on developing the 40-mile solar project, and we do not expect the project delays related to this government pause. I would say that throughout this process, we've been working collaboratively with the AUC to ensure that the importance of developing these assets for the benefit of our province and its decarbonization goals is well understood.

Brian Skrobot: Finally, we remain committed to our hydrogen project with an Alberta's industrial heartland and continue to move development of that project for. Since last quarter, we've actively re-engaged discussions with both financial and strategic partners, along with the off-takers that are key to underwriting the business case on a project of this scale. We continue to believe that the demand of this area exceeds the facility capacity. These negotiations are in advance stages, and we expect to be able to provide further clarity on timing and next steps in the coming months.

Brian Skrobot: Now, on the topic of hydrogen, early this week, it was also announced that our at-cool Australian business was named a preferred partner in the delivery of the South Australian Government's Hydrogen Drops Plan. Under this plan, we will work as part of this consortium with our partner to deliver a strategy and development program for a 250-megawatt hydrogen production facility, along with the 200-megawatt hydrogen-fueled electricity generation facility, and related hydrogen storage. While this project is in its early days, projects like this further cement our global hydrogen strategy and our position as leaders in the global transition to a cleaner energy.

Brian Skrobot: So summing up overall, our third quarter results were aligned with our expectations for a rebasing year. The Uranus pressures that we expected related to rebasing and Australian inflation were evident in the quarter, but we expected this rebasing pressure to begin to ease in the fourth quarter. Now, looking again ahead to 2024, our Alberta Utilities now have prospected its E following the regulatory decision on PBR-3 and the GCOC that was received earlier this month.

Brian Skrobot: As I said in the past, no matter what the regulatory environment we operate in Iran, we remain focused on driving exceptional results for all shareholders and position our businesses maximized sustainable growth and earnings. I look forward to sharing our full 2023 performance and providing further updates on the progress of our numerous growth initiatives on our next call in early 2024.

Brian Skrobot: Now, that concludes my prepared remarks, but before we open the call to questions from that analysis community, I just want to give everyone a chance to hear from both Bob Miles on our Aquaman Power business and Wayne Stensby on our Aquaman Energy Systems business. Bob, the Aquaman Power business has made numerous strides in 2023 towards the achievement of its renewable generation and clean-fueled growth practice. In the light of this progress, could you comment on the growth you're seeing in the business and where you expect things to go from in the near-term? Thanks, Brian.

Bob Miles: It's hard to talk about where we're going without looking at what we've done in 2023. I'm proud to say that we have fully integrated the acquisition that we acquired earlier this year for the the Suncorpornoobles acquisition. We have fully integrated our two wind assets that are operating, so that's the great accomplishment. We've also completed the pretty well-completed all of the construction on our three solar projects here in Alberta as you indicated a little earlier, so I think that was a great accomplishment as well.

Bob Miles: The next project that we're pursuing right now is our 40-mile solar project. You touched on that and you know that's a 220-mangle lot solar project also in Alberta and so that's fairly far along. We hope to make FID on that later this year or early into 2024. On the clean-fuel side, you did indicate that we're progressing quite nicely on our hydrogen project both domestically and with regards to exports, so definitely a busy time right now, so lots on the go. Thanks, Bob Lot, great opportunities on the horizon, as we said, and deciding to see these initiatives convert to stronger as contributions.

Wayne Stensby: Wayne, in a similar vein, the third quarter saw your Acroenergy System business received two key regulatory decisions, the generic class of capital and the formalization of the framework for the third year PBR cycle. Now that you're back in Canada and refocused on our Canadian-based businesses for the utilities, can you comment on how you're thinking of Acroenergy Systems businesses moving forward and what we expect in the coming years? Thanks, Brian, and let me start by just saying I'm very excited to be back in leading the Utilities portfolio.

Wayne Stensby: Luma is in a good place or a good position with Juan Sacca stepping into the CEO role and I'm very confident that the more than 3,500 hardworking women and men who are in Puerto Rico in Luma will continue to build on the substantial early progress that we were all able to make. So as you say, maybe a little closer to home here in Alberta and as you mentioned, a number of regulatory decisions have now been received and I look forward to working with our teams to build on what really is phenomenal progress that the utilities have made through the first two PBR cycles or periods in the distribution businesses and also the strong progress in the transmission businesses.

Wayne Stensby: These past periods have yielded great efficiencies for our customers and I see them as providing a very strong foundation as we now move to invest and perhaps get a little more oriented on growth to serve our customers growing and evolving needs in the province. Thanks, Gwen, that's great insight. Thank you.

Lawrence Gramson: We'll now turn the call back to Lawrence to bring us to the formal Q&A component of the call. Thanks, Brian. In interesting time, we ask you to limit yourself to two questions. If you have additional questions, you're welcome to rejoin the queue.

Operator: I'll now turn it over to the conference coordinator for questions. Thank you.

Operator: We will now begin the question-answer session to join the question queue. You may press a star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speaker phone, please pick up your handset before pressing any keys to withdraw from the question queue, please press a star then two.

Linda Ezergailis: The first question comes from Linda Ezregales with TD Securities. Please go ahead.

Brian Skrobot: Thank you. Very interested to hear your updated thoughts on what sort of optimization and cost efficiencies you're working on so that your distribution utilities can meet or beat any sort of productivity factors that they're working towards. I guess the second part of that question is we are still seeing some inflationary pressures in various cost buckets and I'm just wondering in your view how well the inflation indices reflect your true underlying inflation or like there is some mismatches for better or for worse on that front. Thanks, Linda.

Brian Skrobot: Appreciate your question. Yeah, in terms of forms as I've indicated on previous calls. And we have a long track record of finding new and creative ways to drive down our costs for customers. And, you know, we continue to see that throughout this year, although we've had the expected rebasing. I would say that the teams have done a great job.

Brian Skrobot: And the first part of 2023 that defines additional savings throughout our business, and that's throughout whether it's through some tax efficiencies, whether it's through our operations, of course, the wildfire also diverted some of our from our teams onto that response efforts. So overall, I guess I would kind of give guidance that we are confident that we can drive that continued efficiencies. As we mentioned, maybe it's in the one to 200 basis. This point range for this year, obviously, we'll have another resetting in PBR 3 and we get into 2024. But for this year, the teams are doing extremely well.

Brian Skrobot: In terms of inflationary pressures, like I would say in the past, you know, we've done really well to kind of work with our vendors and suppliers to maintain or expected cost increases in line with kind of general inflation and sometimes improve. We've had a little bit of delay over a period of time on some of our materials, especially some of our long leads. And we've just changed our practices to going forward to make sure that we get well well ahead of ordering long term expected supplies for some of our projects.

Brian Skrobot: And we did that on our solar facilities, getting ahead and over and all the panels. So Bob, if you mentioned, can hit those timelines. So overall, I think we're not expecting any inflationary pressures that are outside of what we're seeing, I guess, generally in the market. Thank you.

Brian Skrobot: And maybe just moving to Australia, just trying to understand kind of what the financial benefit might be on this hydrogen project. Beyond just leveraging the learnings for future projects, is there some sort of revenue model here or is it driving business through your existing assets? Can you comment on kind of what the what the end game is in the magnitude of any sort of economic participation given that my understanding is the Australian government will own the facilities. Yeah, it may all start in and I'll ask Bob to help chip in here.

Brian Skrobot: And so, first of all, I would just kind of comment that it's very early days. And yeah, we're very excited to work with the South Australian government on this project. And it really sees kind of the benefit of kind of our outward approach to the hydrogen strategy globally and how we're recognized in the jurisdictions that we operate in.

Bob Miles: And again, it's too early to talk about funding model and how big this project will be. I think that's part of this project is part of what we've been engaged to do is to provide that preliminary review. But I do think it's great for a business and kind of builds on some of the work that we've been doing across our various business units and maybe Bob, I'll turn it over to you to maybe provide some sort of color. Yeah, maybe it's only other things.

Bob Miles: By the way, Highland, the only thing I'd add to what Brian said is, is this project I could say I would say could be one of three things. It could be engineering procurement construction. It could be engineering procurement construction and operation. And there's the potential of equity ownership as well. So as Brian indicated, it is early days, but all of three of those scenarios have all been discussed with the South Australia government as well. Thank you. I appreciate the context.

Rob Hope: The next question comes from Rob Hope with Scotia Bank. See you Rob, come there.

Rob Hope: So just wonder if you could give us an update on how you're thinking about financing the renewable power business. Yeah, and maybe I'll start off and on the financing side. Yeah, like as we talked about in the second quarter, you know, we're looking at, you know, the long term. Well, how we're going to find the business and we must consider how we best optimize the value for she will see well shareholders and each step of the way.

Rob Hope: Well, in the media term, our funding needs are tied to the continued development of our renewables pipelines and the pre FID hydrogen work. So the support this need for continuing to consider partnerships options, particularly in the short term, longer term that will continue to value private and public sources of funding for the continue growth of the company. So, you know, with all the strategic decisions that we make, well continue to value with these opportunities to the lens of shareholder value creation and the long term growth, the ability of this business. Any further comments, Bob, you want to make Rob?

Brian Skrobot: The other thing is on the larger projects and then power specifically the large hydrogen projects. It's not just a matter of the financing. We're also looking at who we partner with strategically with regards to strong operating partners, strong offtake partners. And with that, they also bring the financing side as well. So that's all very much part of the strategy as we we build out at co in power. I appreciate that. And then maybe more broadly, with the strong balance sheet, you were able back to capital, a little over a month ago, attractive rates.

Brian Skrobot: As well as kind of the choppiness we're seeing the market, you know, have you thought, or kind of what are your views on acquiring assets, a little counter cyclical stick and tell that cyclically in this environment and using your balance sheet to maybe buy them for values. Yeah, thanks Rob. And yeah, I would say that we're constantly evaluating opportunities, whether through mary or other other parts of business and. You know, that doesn't change it.

Brian Skrobot: Yes, there's some volatility cycle right now and and appreciate that we're the couple of markets are today. But yeah, like I say that we're constantly evaluating, you know, all of our aspects are business and your graphical locations opportunities. And if there is something out there that is attractive and creative will certainly look at it. Thank you.

Maurice Choy: The next question comes from Maurice Choi with RBC capital market. Please go ahead. Maurice, your line is open. Thank you for having me. Sorry about that. You know, myself good morning, everyone.

Maurice Choy: Just wanted to follow up on the ethical and power. Sorry if I missed this, but when are we expecting to provide, when are we expecting to hear a meaningful update on this? If not, the position.

Maurice Choy: And also, I know that you've been doing some market feedback on the potential options on this. So any thoughts on on what you've been hearing, recognizing our fears? Just as I call you mentioned, the market was choppy.

Brian Skrobot: Sorry, I'm just to clarify, update on on some of our projects or update on, I'm sorry, and how we looked to find more, well, empowers potential separation specifically, how you respond to the previous question, but, you know, timing wise when can we have clarity on it? Yeah, like, you know, in terms of timing, again, we're not rushing into anything we said that we would evaluate as we kind of went through the previous question, you know, as we looked to build out and some of these bigger projects come online, you know, we'd be evaluate all options where the capital markets are today is Bob kind of alluded to certainly partnerships is kind of a key probably near term solution and focus. But over the long term as as previous comment on the quarter, we're going to look at all opportunities in alternatives, including the public and private markets.

Brian Skrobot: And just to be clear, as Bob mentioned, partnerships on the high region projects specifically, when it comes to the entire at co and power entity. Are you suggesting that there's a partnership for the entity or more like on a project by project basis? It's more of a project by project basis. And again, like we're going to evaluate all those those those come up and you've seen us just announced a partnership on some of our renewables and and so that's kind of evidence of what we're looking at.

Brian Skrobot: So is it fair to say that at come power at least from a base case will remain within at CU and with the see partnerships. From this panel. Like again, listen, we will evaluate all opportunities, but for now, yes, we were considering the partnerships and as we grow up the business, I'm not going to suggest that all any options are not on the table, but certainly we see partnerships within CU is being. A meaningful way to fund the near term projects of this nature. Great. That makes sense.

Patrick Kenny: Maybe I just want to finish off on the government's review of the electricity pricing market, including reducing TND costs. I know in the last call, you mentioned that you weren't expecting anything negative from this review.

Brian Skrobot: But obviously cost capital is higher, notwithstanding that you are we now look to rise next year. So as you look at the cost structure for TND for customer bills, where would you see costs coming down for government to achieve this TND cost reduction? Yeah, like it's a great question.

Wayne Stensby: And I think as I alluded to in prior calls, you know, what we can directly do in our business is what we trying to focus on. And certainly, we as we kind of communicated, we've worked really hard to drive down our costs for customers and you've seen a rate reduction. And both in our transmission business and our distribution business with the PBR rebasing. So that is the meaningful thing that we can do as a utility company.

Wayne Stensby: That said, we continue work with the ISO and in terms of project designs and market studies to help how we best source and do the right pricing those to get the most efficient way of connecting new generation. But also how do we ensure that our distribution and transmission grids can provide continue to provide the safe and reliability of the energy delivery. I know we need anything else that you'd want to offer.

Wayne Stensby: You know, maybe what I would kind of just add, Brian, is we completely recognize the challenges for ability, you know, here in Alberta and across Canada, right? And so we're well aware of that. We empathize with our customers as they have seen cost increases. The cost on the bill is of course the sum of the transmission and distribution of the delivery costs and the generation costs. And you know, as you would recognize there's been some volatility in all of that in the last few months and even years.

Wayne Stensby: As Brian indicated, as we move forward, I think our emphasis is going to be on how do we continue to invest in those networks and bring reliability improvements and the climate adaptation and resiliency improvements that our customers are really demanding. So I see it as far more than just a cost conversation. And I think that's very important in our role as we have these distribution and transmission utilities here in Alberta and our role as a broader energy provider. Thanks for the color.

Mark Derby: The next question comes from Mark Derby with CIBC, Capital Markets. Please go ahead. Yeah, thanks. Good morning everyone.

Brian Skrobot: So just coming to the decisions, the formula of the ROE and the PBR parameters including an urn trained mechanism, how would you think that all shakes out? You know, obviously the base are always going higher, but you then move into earning cherry mechanism on above 200 basis points. Do you think the all in earned ROE changes at all under the new construct relative to what you're operating under previously? Yeah, thanks, Mark. Yeah, great question.

Brian Skrobot: And you know, overall I think we're, you know, in terms of generic costs, the capital decision, as a kind of expect of the commission move to a formula with the goal of reducing regulatory lag. That said, you know, I were thankful that the base are we has gone up. That said, it's probably below what we'd like it to be, but it's still going in the right direction. You know, in terms of the earning sharing mechanism, at least, you know, the first 200 basis points is on the count of shareholders and that above that, there starts to become in a sharing, which, you know, as I think is a balance of the commission struck at the end of the day, providing a supportive net framework. I'm sorry, I'm kind of mixing that with the PBR, but I do think they're both tied in terms of the ability to share and have in a proper ROE.

Brian Skrobot: So I do think that it's kind of in line with what we would have expected. And I think as a supportive framework, I think on the PBR side, in terms of having that the formula way approved it is, having some capital tracker mechanisms allow us to pursue decarb opportunities is supportive. And they even put in some creative mechanism on a pilot project to say if we could, because if we have a capital versus an O&M decision to make to extent that we could prove that it's benefit of customers to have an O&M solution that we're allowed to earn on that program. So I think the commission has taken a positive step forward in this decisions. And yeah, I think we're now that we have the rules unknown.

Wayne Stensby: And again, go back to our previous tried and true ability to find ways to generate value for our shareholders throughout any PBR or cost of our generic cost of capital framework. And just to follow up on the comments made earlier about the annual updates, you've gotten the clarity that under you know the distribution utilities operate under PBR that they'll be an annual ROE update because I know in some jurisdictions, they said at the beginning of the five year window and then you kind of operate under that base ROE and I guess if you do have an annual updates, does that make it harder to manage through PBR in terms of how you think about timing and working through cost savings through the five year period?

Wayne Stensby: No, like in terms of the annual update for the the generic cost of capital rate flowing through, is that referring to them? Yeah, yeah, yeah, yeah, no, yeah, and no, that's not, you know, it doesn't change the thing is in terms of our form of normal compensation for inflation and that is a typical thing through a PBR framework, but the update to ROE instead of being flat, yeah, they will change maybe up or maybe down depending on kind of online parameters those two, but I don't think it's going to materially change throughout the five year period and and it'll be set November each year and like I said in the on my opening remarks, we expect that to be north of 9% for the for 2024.

Wayne Stensby: Okay, and then just one last question for me is just as you look into the medium term, particularly your Alberta utilities, are you seeing anything changing in terms of the outlook, demand, regional needs, technology changes, any sort of factoring into what you think the rate base outlook looks like for any of the utilities in Alberta, maybe on a three to five year outlook?

Wayne Stensby: Yeah, maybe I'll let Wayne kind of answer this one. I think he kind of hit it off in terms of in terms of what our outlook looks like and certainly all of those factors are something that are currently on our on a regular maybe Wayne, do you want to get your views on that? Yeah, and I think you hit the the kind of key elements in a way, but you know, I'm almost building on the affordability conversation from from a couple of questions.

Wayne Stensby: We are seeing strong demand growth from our customers across the problems, Alberta, the Alberta economy is doing well and you know in an inflationary situation right so we are seeing customer growth, we are seeing I would say ever increasing needs from our customers or wants from our customers from their utilities. And so we are building strong plans as we move forward to invest and support that those growing customer needs and growing numbers of customers.

Wayne Stensby: So we are we see the next three to five years as a very positive for our for over utilities. Who was that expected to manifest itself into higher rate base growth when you look at maybe in a five year horizon? Yes. Okay, I'll leave it there. Thanks.

Patrick Kenny: The next question comes from Patrick Kenny with National Bank Financial. So you go ahead. Thank you, good morning. You guys touched on the on Luma in your prepared remarks, but any updated guidance on when we might see a transition from the supplemental to the ONM agreement. I'll pass that on to Wayne. Good morning, Patrick. Yes, it is the question we've been facing, I suppose, for two or three years at this point in time. But maybe I can offer you a little more color there.

Wayne Stensby: It's been in the public markets that the court dates or the confirmation hearing dates have been set for the first two weeks of March of next year. I, you know, it's possible those are delayed, but I think it's highly unlikely at this point in time that's a US federal bankruptcy court. And so the judge will hold those confirmation hearings. If you follow then kind of conventional thinking from March, I think that that plan will take, you know, they'll have to be the hearing or the trial, I guess, then the evidence, then the eventual ruling, that will probably take you all the way till middle of next year.

Wayne Stensby: And then there's the implementation of the plan. So on broad strokes, we would imagine that the prep emerges from bankruptcy, perhaps towards the end of 2024. That said, as you know, Luma extended the supplemental period with no deadline, roughly a year ago. And so if it takes longer, it takes longer. I think our real focus, you know, organizationally is to continue to build on what we were hired to do, which is fundamentally transforming electric system and Puerto Rico and rebuild and improve that system.

Wayne Stensby: And so that's where I would tell you the vast majority of the focus is as we follow through the bankruptcy. As you know, once we move out of the supplemental period, we move into the 15 year term of the contract. Right. Okay. That's perfect. Thank you for the update.

Brian Skrobot: And then maybe just shifting gears to the balance sheet. Ryan, you've issued some 30 year paper late in the quarter.

Brian Skrobot: You just provide maybe an update on your funding needs for the remainder of the year and maybe into 2024. Are there any other upcoming maturities or catback spend that you might be able to pre fund and maybe take some additional market risk off the table. Yeah, thanks for your question. Yeah, you mentioned our, our issue that we did earlier in a year and, and, you know, very, very successful, very happy with the outcome of that, that debt issue got very favorable rates and well over subcribed.

Brian Skrobot: And it's also the kind of the first issue since withdrawing from a range from S&P. And so in terms of the rest of the year, no, we don't expect to have to access the market for their maintenance this year. And then to next year, I'd see that, you know, we have some definitely some flexibility there and, at least on that, the CU inside, we expect to be probably around the same range of this year for our needs, but with some flexibility.

Operator: Thank you. Got it. Thanks for that. I'll leave it there, guys. Once again, anyone on the conference call who wishes to ask the question may press the star of one at this time.

Ben Pham: The next question comes from Ben Femme, BMO, please go ahead. Hi, good morning.

Brian Skrobot: I wanted to go back to the Alberta Rebasing. I know you've mentioned that it's tracking in line with your expectations, the rebase and where earnings are going for 2021-23. I wanted to reconcile that with some of your comments early in the year. I think you mentioned Q3 was going to be a peak rebase and then you would see growth in Q4. Is that still the trend because it looks like Q3 ended up not being as bad as Q2? Yeah, no, thanks Ben.

Brian Skrobot: Comments and I'd say generality in terms of the seasonality of that's typically the case and I would say there's all that said there's always some timing of cost and initiatives that happened through the year and then I would say for the third quarter here we did have some time, especially in our electric distribution business. That's timing of some costs which probably improved us versus were kind of above the normal seasonality would be.

Brian Skrobot: So I guess, yes, overall, we would expect but with that kind of a proviso that we do have on a typical year some timing of operating issues from one year to the next. And whether it's us working on well for a restoration that changes some of our time of our own and costs. Those are kind of examples which could, you know, from a typical year over year comparison and cause some noise.

Brian Skrobot: Is that the key three timing and that may to work is that question to keep for then maybe you won't keep growth year over year? Yeah, I think, you know, I say we're still back in line with what we expect for when we communicated this we know we're coming off 2022 performance and I think you see in the regulatory filings and the specific outperforms we achieved we do expect to come back down to kind of that one to 200 basis point range by the end of the year.

Brian Skrobot: So I do see a little bit of that adversity and Q4 but but again, I do think it's in line with the guidance that we've already provided each of that one to 200 basis point range. I'm interested in and I know usually with the second question is on on cat backs and no news means is no change in that utility cat backs budget.

Brian Skrobot: I wanted to check those some reference to maybe rate base growth, maybe moving better than expect is that more references to your beyond your guidance timeframe. Yeah, that's a great question.

Operator: I think I think Wayne kind of alluded to in kind of his his comments like we do see some significant growth in our jurisdictions here and certainly, you know, be mindful of the affordability of our customers, but we are seeing pressures from the growth and evolving demands from our customers. And also we recognize there's a little bit of a pause on the renewables, but reality is we do need to connect and make sure that we continue to provide a network which has faith and reliable energy and serving our needs.

Operator: So, you know, I think this is evolving, you know, we expect to give an update. You know, typically we provide a further update at the end of in the year, so in February, we'll provide kind of a more refined guidance than in terms of what our expectations and outlook is for the next three to five years. Thank you. This concludes the question as their session.

Lawrence Gramson: I would like to turn the conference back over to Mr. Lawrence Gramson for any closing remarks. Thank you operator, and thank you all for participating today. We appreciate you're interested in getting utilities and we look forward to speak with you again soon. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Thank you for standing by this is the conference operator.

Welcome to the third quarter 2023 results conference call for Canadian Utilities limited.

As a reminder, all participants are in listen only mode.

And the conference is being recorded.

After the presentation, there will be an opportunity to ask questions.

To join the question queue you May Press Star then one on your telephone keypad.

If you need assistance during the conference call you may signal, an operator by pressing star zero.

I would now like to turn the conference over to Mr. Lawrence Crimson Director of corporate Finance. Please go ahead Mr. Crimson.

Lawrence Gramson: Go ahead, Mr. Gramson. Thank you. Good morning, everyone. We're pleased you could join us for the Canadian Utilities third quarter 2023 conference. With me today is Canadian Utilities Executive Vice President and Chief Financial Officer Brian Shkrobot, as well as ACWA NPower's Chief Operating Officer Bob Myles and ACWA Energy Systems' Chief Operating Officer Wayne Stensby. Before we move into our formal agenda, I would like to take a moment to acknowledge the numerous traditional territories and homelands on which our global utilities are located.

Thank you. Good morning, everyone. We're pleased you could join us for Canadian Utilities third quarter 2023 conference call with.

With me today is Jane utilities, Executive Vice President and Chief Financial Officer, Brian scrub Lotte as well as the Alco empower Chief operating officer, Bob miles and Atco Energy systems, Chief operating Officer Wayne Stansby.

Before we move into a formal agenda I would like to take a moment to acknowledge the numerous traditional territories and all brands on which our global facilities are located.

Lawrence Gramson: Today, we are speaking to you from our ACO Park head office in Calgary, which is located in Treaty 7 territory. This is the ancestral territory of the Blackfoot Confederacy, comprised of the Siksika, Kainai, and Pekanee Nations, the Chitina Nation, and the Stony Nakoda Nations that include the Chinooki, Bear's Paw, and Good Stony First Nations.

Today, we are speaking to you from Echo Park head office in Calgary, which are located in the Treaty seven region. This is the ancestral territory of the Blackfoot Confederacy.

Zika kind I am Canyon nations that you'd seen a nation and as Tony that Coordinations that include the Cherokee Bears PA and good Stony first nations.

The ZIP Calgary is also home to <unk> nation of Alberta region three.

We honor and respect the diverse history languages ceremonies and culture of indigenous peoples, who called these areas.

Lawrence Gramson: The City of Calgary is also home to the Métis Nation of Alberta, Regent. We honor and respect the diverse history, languages, ceremonies, and culture of the indigenous peoples who call these areas home. Brian will begin today with some opening comments on our financial results and recent company developments, including regulatory developments. Following these prepared remarks, Brian, Bob, and Wayne will take questions from the investment community. Please note that a replay of the conference call, a short supplementary presentation, and a transcript will be available on our website at canadianutilities.com and can be found in the Investors section under the heading Events and Presentations.

Brian will begin today with some opening comments on our financial results and recent company developments, including regulatory decisions.

Following these prepared remarks, Brian Bob and Wayne will take questions from the investment community.

Please note that a replay of the conference call at short supplementary presentation, and a transcript will be available on our website at Canadian utilities Dot com and can be found in the investors section under the heading events and presentations.

Lawrence Gramson: I'd like to remind you all that our remarks today will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reports filed by Canadian Utilities with the Canadian Securities Regulators. And finally, I'd also like to point out that during this presentation, we may refer to certain non-GAAP and other financial measures, such as total of segment measures, adjusted earnings, adjusted earnings per share, and capital investment. These measures do not have a standardized meaning under IFRS, and as a result, they may not be comparable to similar measures presented by other entities.

To remind you all that our remarks today will include forward looking statements, which are subject to important risks and uncertainties for more information on these risks and uncertainties. Please see the reports filed by <unk> and utilities with the Canadian Securities regulators.

And finally I'd also like to point out that during this presentation, we may refer to certain non-GAAP and other financial measures such as total segment measures adjusted earnings adjusted earnings per share and capital investments.

These measures do not have any standardized meaning under item for us and as a result, they may not be comparable to similar measures presented in other entities.

Lawrence Gramson: And now I'll turn the call over to Brian for his opening remarks. Thanks, Lawrence. And good morning, everyone.

And now I'll turn the call over to Brian for his opening remarks.

Brian Shkrobot: Thank you all very much for joining us today for our third quarter 2023 conference call. Canadian Utilities achieved adjusted earnings of $87 million, or $0.32 per share, in the third quarter of this year, compared to $120 million in the third quarter of last year. As you know, we concluded a successful second cycle performance-based regulation in our Alberta distribution utilities in 2022. 2023 is a single cost of service rebasing year, and in 2024, we will start the third cycle of performance-based regulation with final rebase rates. Performance-based regulation facilitates affordability, which is important to the long-term sustainability of the business, as the savings and efficiencies generated in the second PBR cycle are returned to customers through the rebasing process. As expected, the impact of our Alberta distribution utilities rebasing resulted in lower year-over-year earnings in the third quarter. On its own, this rebasing contributed to a year-over-year decline in earnings of approximately $17 million.

Thanks, Lawrence and good morning, everyone. Thank you all very much for joining us today for our third quarter 2023 conference call.

Canadian utilities achieved adjusted earnings of $87 million or <unk> 32 per share in the third quarter of this year compared to $120 million in the third quarter of last year as.

As you know we concluded a successful second cycle performance based regulation in our Alberta distribution utilities and 2022.

2023 is a single cost of service re basing here and in 2024, we will start the third cycle of performance based regulation with final rebase rates.

Performance based regulation facilitates affordability, which is important to the long term sustainability of the business.

The savings and efficiencies generated in the second PBR cycle are returned to customers through the re basing process.

As expected the impact of our Alberta distribution utilities re basing.

Faulted and lower year over year earnings in the third quarter.

On its own this rebase and contributed to our U year over year decline in earnings of approximately $17 million.

Brian Shkrobot: This is a significant impact on 2023 earnings. But for anyone who has listened to our conference calls throughout last year and this year, this is not an expected trend. It is a direct result of the exceptional performance that we drove throughout our second PBR cycle and the savings and efficiencies that are now being returned to customers. As our utility teams continue to work hard to find new efficiencies and drive down costs, we expect to see the earnings pressure associated with this rebasing begin to soften in the fourth quarter of this year, looking ahead to 2024 and beyond within our Alberta utility businesses.

This is a significant impact to 2023 earnings.

For anyone who has listened to our conference calls throughout last year and this year. This is not unexpected trend. It is a direct result of the exceptional performance that we drove throat or second PBR cycle and the savings and efficiencies that are now being returned to customers.

As our utility teams continue to work hard to find new efficiencies and drive down costs, we expect to see the earnings pressure associated with this freebasing begin to soften in the fourth quarter of this year.

Brian Shkrobot: I want to briefly touch on two key regulatory decisions that were received earlier this month. First, the Alberta Utilities Commission, or AUC, released the parameters for Alberta's third performance-based regulation cycle, or PBR3 for short, which will be the framework in which our Alberta distribution utilities operate for the period between 2024 and 2028. Included in our MD&A for this quarter is a detailed breakdown of the differences and similarities between PBR 3 and our outgoing PBR 2 framework.

Looking ahead to 2024 and beyond within our Alberta utility businesses I want to briefly touch on two key regulatory decisions that received earlier this month.

First to the Alberta Utilities Commission or AUC released the parameters for Albertas third performance based regulation cycle or <unk> for short.

Which will be the framework in which our Alberta distribution utilities operate for the period between 2024 and 2028.

Included in our MD&A for this quarter is a detailed breakdown of the differences and similarities between <unk> three and our outgoing PBR two framework.

Brian Shkrobot: At a high level, while PBR 3 does include a tiered earnings sharing mechanism, we continue to believe that this framework would create opportunities for us to deliver strong outperformance and growth throughout the term. And importantly, this framework allows us to make investments needed to drive both efficiencies and long-term stability for energy distribution systems in the province. Also in October, the AUC delivered its decision on the generic cost of capital, or GCOC for short, and the parameters for 2024 and beyond.

At a high level, while P. B R. Three does include a tiered earnings sharing mechanism. We continue to believe that this framework will create opportunities for us to deliver strong outperformance and growth throughout the term.

And importantly, this framework allows us to make investments needed to drive both efficiencies and long term stability stability for our energy distribution systems in the province.

Also in October the AUC delivered its decision on the generic cost of capital or <unk> for short and the parameters for 2024 and beyond.

Brian Shkrobot: As has been signaled throughout the year, the Commission has adopted the use of a formula for setting ROE, and this decision also reaffirmed equity thickness set at 37% for the Alberta utilities. The established formula for RWE utilizes a base rate of 9% and takes into account two variables to adjust this base rate.

Asthma signaled throughout the year. The commission has adopted the use of a formula for setting the Roe.

And this decision also reaffirmed equity thickness at set at 37% for the Alberta utilities.

The established format for our we utilize as a base rate of 9% and takes the cow two variables to justice space right.

Brian Shkrobot: First, changes in 30-year government-to-Canada bond yields and changes in utility spreads. The Commission will update the RWE annually and issue the following year's RWE in November of the current year. Now, while the final 2024 RWE will still not be known until November of this year, current market data suggests an RWE in the range of 9 to 9.2%, up from the current rate of 8.5%. As we begin to operate under these new frameworks in 2024, we'll continue to apply the ownership principles that we have historically used to drive efficiencies and operation excellence across our businesses.

First the changes in 30 year government of Canada bond yields and changes and utility spreads.

The Commission will update there are we annually and issue. The following years are we in November of the current year.

Now while the final 2024 are we.

Still not be known until November of this year current market data suggests that an ROE in the range of nine to nine 2% up from the current rate of eight 5%.

Now as we begin to operate under these new frameworks in 2024.

Brian Shkrobot: And we expect this to drive continual outperformance and growth for our business. Importantly, the receipt of both these critical regulatory decisions well in advance of the respective operating years further reinforces the strides we've seen in reducing regulatory lag in the province and providing prospectivity. Moving on to our natural gas distribution business in Australia, we continue to see strong growth in key operating metrics such as new connections, tariff rates, and system volumes. The narrative for this business, however, remains focused on Australia's inflation profile, which continues to contribute to year-over-year earnings pressure.

We will continue to apply the ownership process balls that we have historically used to drive efficiencies in our operation excellence across our businesses and we expect this to drive continued outperformance and growth for our business.

Partly the receipt of both these critical regulatory decisions well in advance of the respective operating years further reinforces the strives to be seen and reducing regulatory lag in the province, and providing prospectively.

Moving to onshore natural gas distribution business in Australia, we continue to see strong growth in key operating metrics, such as new connections tariff rates and system volumes.

Narrative for this business. However remains focused on Australia is in country inflation profile, which continues to attribute to a year over year earnings pressure.

Brian Shkrobot: As we alluded to in our second quarter 2023 conference call, it is important to remember that inflation in 2022 built rapidly in the second half of last year, with full year inflation reaching almost 8% by the year end. As a result of this building profile in the prior year, our third quarter 2022 earnings were exceptionally strong, creating a comparable that is difficult to compete with in 2023 as inflation levels begin to moderate. This trend resulted in us reporting a year over year decline of $8 million for this business in the quarter.

As we alluded to in our second quarter 2023 conference call. It is important to remember that inflation in 2022 built rapidly in the second half of last year.

With full year inflation, reaching almost 8% by the year end 2022.

As a result of this building profile in the prior year, our third quarter 2022 earnings were exceptionally strong creating a comparable that is difficult to compete with in 2023 as inflation levels began to moderate.

This trend resulted in us reporting year over year decline of $8 million for this business in the quarter.

Brian Shkrobot: Similar to the messaging we delivered throughout this year, we continue to expect Q4 and full-year earnings for this business to be lower than 2022 as the CPI trend continues to moderate in Australia. For added context, in-country estimates continue to suggest full-year inflation in Australia between 4 to 5%, which is consistent with the in-market estimates from last quarter. Now, before I move on to our aquaculture and power businesses, I want to briefly touch on the capital investments we made in the third quarter.

Similar to the messaging we delivered throughout this year, we continue to expect Q4 and full year earnings for this business to be lower than 2022 as the CPI trend continues to moderate in Australia.

For added context in country estimates continue suggest full year inflation in Australia between 4% to 5%, which is consistent with the end market estimates from last quarter.

Brian Shkrobot: The third quarter saw us invest $331 million in our business, with $307 million of the spending being within our existing utilities. This ongoing utility investment ensures a continued generation of stable earnings and reliable cash flows while also driving sustainable rate-based growth. The remaining capital was primarily related to our ongoing renewable generation initiatives at Aqua and Power. Moving on to Accu and Power Business, we delivered adjusted earnings of $9 million compared to $12 million for the same period last year.

Now before I move onto our Aqua empower businesses I want to briefly touch on the capital investments we made in the third quarter.

The third quarter saw us invest $331 million in our business with $307 million of the spending being within our existing utilities.

This ongoing utility investment ensures the continued generation of stable earnings and reliable cash flows while also driving sustainable rate base growth.

The remaining capital was primarily related to our ongoing renewable generation initiatives.

Echo empower.

Moving onto Alco empower business, we delivered adjusted earnings of $9 million compared to $12 million for the same period last year.

Brian Shkrobot: Well, our newly required and recently completed renewable assets contributed to earnings lower demand in our natural gas storage business, timing of costs, and seasonally low wind output pressured earnings. As we continue to drive the numerous development processes already underway to completion, and these assets begin to contribute additional earnings, we're confident that the earnings power of these assets will become more pronounced. Now moving to the development side of the discussion, it's been a busy quarter, and one highlighted by the creation and formalization of a number of key strategic partnerships that are paramount for us in advancing our growth strategy.

Our newly required and recently completed renewable assets contributed journey is lower demand in our natural gas storage business timing of costs and seasonally low wind output pressured earnings.

As we continue to drive the numerous development processes already underway to completion and these assets begin to contribute additional earnings we're confident that the earnings power of these assets will become more pronounced.

Now moving to the development side of the discussion it's been a busy quarter and one highlighted by the creation and formalization of a number of key strategic partnerships that are paramount for us events and growth strategy.

Brian Shkrobot: In September, we announced our partnership with the Chenickie and Gidstonie First Nations, which saw them become joint owners of the Deerfoot and Barlow Solar Facilities. Nurturing Indigenous partnerships that promote social and economic development has long been a hallmark of our way of operating, and we're proud to announce this agreement with our new partners. The Deerfoot and Barlow solar facilities are some of the largest solar installations in an urban setting in Western Canada.

In September we announced our partnership with the Janicki and gets Tony first nations, which saw them become joint owners of the deer foot embargo solar facilities.

Nurturing and digital partnerships that promote social and economic development has long been a hallmark of our method of operating and we're proud to announce that this agreement with our new partners.

The deer foot and Barbara for Sip solar facilities are some of the largest solar installations in an urban setting in western Canada, and I'm proud to say that our barela facility achieved full commercial operations in the second quarter of this year.

Brian Shkrobot: And I'm proud to say that our Barlow facility achieved full commercial operations in the second quarter of this year, and we expect our Deerfoot project to achieve the same in the fourth quarter of this year. This month, we also announced a virtual power purchase agreement with Lafarge Canada, which will see them receive 100% of the energy produced at our Empress Solar Facility. Again, we are proud to be at the forefront of the energy transition and providing solutions to help customers like Lafarge reduce their own carbon emissions, and it remains a key priority for us in our growth strategy.

And we expect our Dear foot project to achieve the same in the fourth quarter of this year.

Okay.

This month, we also announced a virtual power purchase agreement, but thus far it's Canada, which will see them receive 100% of the energy produced at our Empress solar facility.

Again, we are proud to be at the forefront of the energy transition and providing solution to help customers like lafarge reduce their own carbon emissions and it remains a key priority for us and our growth strategy.

Brian Shkrobot: Agreements like this also align with our target of having approximately 75% of the renewable generation portfolio contracted under long-term agreements with high-quality counterparties. This portfolio view to contractiveness helps ensure a stable and secure cash flow stream for the long term, while ensuring we retain the needed flexibility to maximize value within the portfolio and to capture near-term economic benefits as they arise.

Agreements like this also aligns with our target of having approximately 75% of the renewable generation portfolio contracted under long term agreements with high quality Counterparties.

This portfolio of U two contracting this helps ensure a stable and secure cash flow stream for the long term, while ensuring we retain the needed flexibility to maximize value within the portfolio and the capture near term economics benefits as they arise.

Brian Shkrobot: For our Empress project, we expect to achieve full commercial operations in the fourth quarter of this year. Looking ahead to our development pipeline, I think it's also valuable to briefly touch on the AUC's decision to pause approvals for new renewable electricity generation projects until February of next year. First and foremost, this announcement does not impact our projects under construction, which are the upgrading of the 40-mile wind asset or the near-term development of our 40-mile solar project.

For our <unk> project, we expect to see achieve full commercial operations in the fourth quarter of this year.

So looking ahead to our development pipeline I think it's also valuable to briefly touch on the Auc's decision to pause approvals for the newly the new renewable electricity generation projects until February of next year.

First and foremost this announcement does not impact our projects under construction.

Which are the upgrading of the 40 mile wind asset or the near term development of our 40 miles solar project.

Brian Shkrobot: For our Renewables Development Pipeline more broadly, we continue to progress our near-term projects, and our development pipelines did not contemplate a need to file any new AUC applications in advance of the expected lifting of this moratorium in February next year. We also continue to be focused on developing the 40 Mile Solar Project, and we do not expect project delays related to this government pause.

For our renewables development pipeline more broadly we continue to progress our near term projects and our development pipe timelines did not contemplate a need to file any new AUC applications in advance of the expected lifting of this moratorium in February next year.

We also continue to be focused on developing the 40 mile Solar project and we do not expect it to project delays related to this government pause.

Brian Shkrobot: I would say that throughout this process, we've been working collaboratively with the AUC to ensure that the importance of developing these assets for the benefit of our province and its decarbonization goals is well understood. Finally, we remain committed to our hydrogen project within Alberta's industrial heartland and continue to move the development of that project forward. Since last quarter, we've actively reengaged discussions with both financial and strategic partners, along with the offtakers that are key to underwriting the business case on a project of this scale. We continue to believe that demand in this area exceeds the facility capacity.

I would say that throughout this process, we've been working collaboratively with the AUC to ensure that the importance of developing these assets for the benefit of our province, and his decarbonization goals is well understood.

Finally, we remain committed to our hydrogen project, but in Alberta is industrial Heartland and continue to move development of that project forward.

Since last quarter, we've actively re engaged discussions with both financial and strategic partners along with the off takers that are key to underwriting the business case on a project of this scale.

We continue to believe that demand of this area exceeds the facility capacity.

Brian Shkrobot: These negotiations are in advanced stages, and we expect to be able to provide further clarity on timing and next steps in the coming months. On the topic of hydrogen, earlier this week, it was also announced that our ACO Australia business was named a preferred partner in the delivery of the South Australian government's hydrogen jobs plan. Under this plan, we will work as part of a consortium with our partner to deliver a strategy and development program for a 250-megawatt hydrogen production facility, along with a 200-megawatt hydrogen-fueled electricity generation facility and related hydrogen storage.

These negotiations are in advanced stages, and we expect to be able to provide further clarity on timing and next steps in the coming months.

Now on the topic of hydrogen earlier. This week. It was also announced that our Alco.

Australia business was named a preferred partner in the delivery of the South Australian governments hydrogen drops plan.

Under this plan, we will work as part of this.

<unk> with our partner to deliver our strategy and development program for a 250 megawatt hydrogen production facility along with a 200 megawatt hydrogen fueled electricity generation facility and related hydrogen storage.

Brian Shkrobot: While this project is in its early days, projects like this further cement our global hydrogen strategy and our position as leaders in the global transition to cleaner energy. So summing up, overall, our third-quarter results were in line with our expectations for a rebasing year; the earnings pressures that we expected related to rebasing and Australia inflation were evident in the quarter, but we expected this rebasing pressure to begin to ease in the fourth quarter.

While this project is in its early days projects like this further Smith, our global hydrogen strategy and our position as leaders in the global transition to cleaner energy.

Yes.

So summing up overall, our third quarter results were in line with our expectations for a rebase in year. The earnings pressures that we expected related to re basing and Australia inflation were evident in the quarter, but we expected this rebase and pressure to begin.

To ease in the fourth quarter.

Unknown Executive: Thank you for standing by.

Operator: This is the conference operator. Welcome to the third quarter 2023 results conference call for Canadian Utilities Limited. As a reminder, all participants are in listen only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question to you, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero.

Brian Shkrobot: Looking again, ahead to 2024, our Alberta utilities now have prospective E following the regulatory decisions on PBR3 and the GCOC that were received earlier this month. In other words, as I have said in the past, no matter what the regulatory environment we operate in, we remain focused on driving exceptional results for all shareholders and positioning our businesses to maximize sustainable growth and earnings. I look forward to sharing our full 2023 performance and providing further updates on the progress of our numerous growth initiatives on our next call in early 2024. Now, that concludes my prepared remarks.

Now looking again ahead to 2020 for our Alberta utilities know how prospective eve following the regulatory decisions on <unk> three and the GC C that was received earlier this month.

As I said in the past a matter what the regulatory environment. We operated Ren we remained focused on driving exceptional results for all shareholders and position our businesses to maximize sustainable growth in earnings.

I will look forward to sharing our full 2023 performance and providing further updates on the progress of our numerous growth initiatives on our next call in early 2024.

Lawrence Gramson: I would now like to turn the conference over to Mr. Lawrence Gramson, Director, Corporate Finance. Please go ahead, Mr. Gramson. Thank you. Good morning, everyone. We're pleased you could join us for Canadian Utilities third quarter 2023 conference call. With me today is Canadian Utilities Executive Vice President and Chief Financial Officer Brian Shkrobot, as well as Aqua Empower Chief Operating Officer Bob Miles and Aqua Energy Systems Chief Operating Officer Wayne Stensby.

Brian Shkrobot: But before we open the call to questions from the analyst community, I just want to give everyone a chance to hear from both Bob Myles on our aqua and power business and Wayne Stensby on our aqua energy systems business. Bob, the aqua power business has made numerous strides in 2023 towards the achievement of its renewable generation and clean fuels growth. In light of this progress, can you comment on the growth you're seeing in business and where you expect things to go from here in the near term? Thanks, Brian.

Now that concludes my prepared remarks, but before we open the call to questions from analyst community I, just wanted to give everyone a chance to hear from both Bob miles on our Alco empower business and Wayne Stansby Honor Atco energy systems business.

Bob.

Power business has made numerous strides in 2023 towards the achievement of its renewable generation and clean fuels growth factors.

Lawrence Gramson: Before we move into our formal agenda, I would like to take a moment to acknowledge the numerous traditional territories and home lands on which our global utilities are located. Today, we are speaking to you for Aqua Park Head Office in Calgary, which is located in the Treaty Seven Region. This is the ancestral territory of the Blackfoot Confederacy comprise of Sixthika, Kainai, and Picani Nations, the Chutina Nation, and the Stonina Coda Nations that include the Chineke, Bearspa, and Good Stony First Nations. The Seventh Calgary is also home to the ceremonies and culture of the indigenous peoples who call these areas home.

In light of this progress can you comment on the growth Youre seeing in the business and where you expect things to go from in the near term.

Bob Myles: It's hard to talk about where we're going without looking at what we did in 2023. You know, I'm proud to say that we have fully integrated the acquisition that we acquired earlier this year for the Suncor Renewables acquisition; we have fully integrated our two wind assets that are operating. So that's a great accomplishment.

Thanks, Brian it's hard to talk about where we're going without looking at what we've done in 2023.

I'm proud to say that we have fully integrated the acquisition that we acquired earlier this year for the Suncor.

Suncor renewables acquisition, we have fully integrated our two wind assets that are operating so that that's a great accomplishment.

And we've also completed a pretty well completed all of the construction on our three solar projects here in Alberta as you indicated a little earlier. So I think that was a great accomplishment as well. The next project that were pursuing right. Now is our 40 miles solar project you touched on that and you know that's a 220 Meg.

Lawrence Gramson: Brian will begin today with some opening comments on our financial results and recent company developments, including regulatory decisions. Following these prepared remarks, Brian, Bob, and Wayne will take questions from the investment community.

Bob Myles: And you know, we've also pretty much completed all of the construction on our three solar projects here in Alberta, as you indicated a little earlier. So I think that was a great accomplishment as well. The next project that we're pursuing right now is our 40 Miles Solar Project. You touched on that. And you know, that's a 220 megawatt solar project, also in Alberta. And so that's fairly far along; we hope to make FID on that later this year or early in 2024. On the clean fuel side, you did indicate that we're progressing quite nicely on our hydrogen project, both domestically and with regard to export. So definitely a busy time right now, so lots on the go.

<unk> Solar project also in Alberta, and so that's fairly far along we hope to make F. D. On that later this year or early into 2024.

Lawrence Gramson: Please note that a replay of the conference call, a short supplementary presentation, and a transcript will be available on our website at KennedyNutilities.com and can be found in the investor's section under the heading events and presentations. I'd like to remind you all that our remarks today will include forward-looking statements which are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the report filed by Canadian utilities with the Canadian Securities Regulators.

On the clean fuel side, you did indicate that we're progressing quite nicely on our hydrogen project, both domestically and with regards to export so.

We are busy time right now so lots undergo.

Wayne Stensby: Thanks, Bob. A lot of great opportunities on the horizon, as you said, and it's exciting to see these initiatives convert to stronger earnings contributions. Wayne, in a similar vein, the third quarter saw your aqua energy system business receive two key regulatory decisions, the generic cost of capital and the formalization of the framework for the third year PBR cycle. Now that you're back in Canada and refocused on our Canadian-based businesses for the utilities, can you comment on how you think of Agri-Energy Systems businesses moving forward and what we expect in the coming years? Thanks, Brian.

Thanks, Bob lot of great opportunities on the horizon as we said in deciding to see these initiatives convert to strong earnings contributions.

Lawrence Gramson: And finally, I'd also like to point out that during this presentation, we may refer to certain non-gap and other financial measures, such as total of segment measures adjusted earnings, adjusted earnings per share, and capital investment. These measures do not have a standardized meaning under IFRS, and as a result, they may not be comparable to similar measures presented in other entities.

Wait in a similar vein the third quarter saw your Atco energy system business received two key regulatory decisions the generic cost of capital and the formalization of the framework for the third year PBR cycle.

Brian Shkrobot: And now I'll turn the call over to Brian for his opening remarks. Thanks, Lawrence. And good morning, everyone. Thank you all very much for joining us today for our third quarter 2023 conference call. Canadian utilities achieved adjusted earnings of 87 million or 32 cents per share in the third quarter of this year, compared to 120 million in the third quarter of last year. As you know, we concluded a successful second cycle performance-based regulation in our Alberta distribution utilities in 2022.

Now that you're back in Canada, and refocused on our Canadian based businesses for the utilities can you comment on how youre thinking of Atco energy systems businesses moving forward and what can we expect in the coming years.

Thanks, Brian.

Wayne Stensby: And, you know, let me start by just saying I'm very excited to be back and leading the utilities portfolio. Luma is in a good place or a good position with Juan Saca stepping into the CEO role. And I'm very confident that the more than 3,500 hardworking women and men who are in Puerto Rico at Luma will continue to build on the substantial early progress that we were all able to make. So, as you say, maybe a little closer to home here in Alberta.

And let me start by just saying.

I'm very excited to be back and leading the utilities portfolio.

Luna is in a good place our good position with one soccer stepping into the CEO role and I'm very confident that the more than 3500 hard working women and men who are in Puerto Rico.

Brian Shkrobot: 2023 is a single cost of service rebasing year and in 2024 we will start the third cycle of performance base regulation with final rebase rates. Performance base regulation facilitates affordability, which is important to the long-term sustainability of the business. As the savings and efficiencies generated in the second PBR cycle are returned to customers through the rebasing process. As expected, the impact of our Alberta distribution utilities rebasing resulted in lower year-over-year earnings in the third quarter.

In Luma, we will continue to build on the substantial early progress that we were all able to me.

Wayne Stensby: And, as you mentioned, a number of regulatory decisions have now been received, and I look forward to working with our teams to build on what really is phenomenal progress that the utilities have made through the first two PBR cycles or periods in the distribution businesses and also the strong progress in the transmission business. These past periods have yielded great efficiencies for our customers, and I see them as providing a very strong foundation as we now move to invest and perhaps get a little more focused on growth to serve our customers' growing and evolving needs in the province. Thanks, Wayne.

As you say, maybe a little closer to home here in Alberta.

And as you mentioned a number of regulatory decisions have now been received and I look forward to working with our teams to build on what really is.

Phenomenal progress that the utilities have made through the first two PBR cycles or periods and the distribution businesses and also the strong progress in the transmission businesses. These past periods of lead have yielded great efficiencies for our customers and I see them as providing a very strong foundation.

Brian Shkrobot: On its own, this rebasing contributed to a year-over-year decline in earnings of approximately 17 million. This is a significant impact to 2023 earnings, but for anyone who has listened to our conference calls throughout last year and this year, this is not unexpected trend. It is a direct result of the exceptional performance that we drove throughout our second PBR cycle and the savings and efficiencies that are now being returned to customers. As our utility teams continue to work hard to find new efficiencies and drive-down costs, we expect to see their earnings pressure associated with this rebasing begin to soften in the fourth quarter of this year.

As we now move to.

Invest in and perhaps get a little more oriented on growth to serve our customers' growing and evolving needs and the problems.

Lawrence Gramson: That's a great insight. Thank you. I will now turn the call back to Lawrence to bring us to the formal Q&A component of the call.

Great that's great insight. Thank you.

I will now turn the call back to Lawrence to bring us to the formal Q&A component of the call.

Thank you Brian in interest of time, we ask you to limit yourself to two questions. If you have additional questions Youre welcome to rejoin the queue.

Lawrence Gramson: In the interest of time, we ask you to limit yourself to two questions. If you have additional questions, you're welcome to rejoin the discussion. I will now turn it over to the conference coordinator. Thank you. We will now begin the question and answer session. To join the question queue, you may press a star and then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys.

Now I'll turn it over to the conference coordinator for questions.

Operator: To withdraw from the question queue, please press star then two. The first question comes from Linda Ezergailis with TD Securities. Please go ahead. Thank you. I'm very interested to hear your updated thoughts on what sort of optimization and cost efficiencies you're working on so that your utilities, your distribution utilities can meet or beat any sort of productivity factors that they're working towards. And I guess the second part of that question is that we are still seeing some inflationary pressures in various cost buckets. And I'm just wondering, in your view, how well the inflation indices reflect your true underlying inflation, or might there be some mismatches, for better or for worse, on that front? Thanks, Linda.

Thank you we will now begin the question answer session kitchen line. The question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request.

Brian Shkrobot: Looking ahead to 2024 and beyond within our Alberta utility businesses, I want to briefly touch on two key regulatory decisions that received earlier this month. First, the Alberta Utilities Commission, or AUC, released the parameters for Alberta's third performance-based regulation cycle or PBR-3, for short, which will be the framework in which our Alberta distribution utilities operate for the period between 2024 and 2028. Included in our MDNA for this quarter is a detailed breakdown of the differences and similarities between PBR-3 and our outgoing PBR-2 framework.

You are using a speakerphone please pick up your handset before pressing any keys.

Withdraw from the question queue. Please press Star then two.

Brian Shkrobot: At a high level, while PBR-3 does include a tiered earnings sharing mechanism, we continue to believe that this framework would create opportunities for us to deliver strong up performance and growth throughout the term. And importantly, this framework allows us to make investments needed to drive both efficiencies and long-term stability for our energy distribution systems in the province.

Our first question comes from Linda <unk> with TD Securities.

Please go ahead.

Thank you.

I'm very interested to hear your updated thoughts on what sort of optimization and cost efficiencies.

You're working on so that your utilities, you distribution utilities can meet or beat any set of productivity factors that they're working towards and I guess the second part of that question is we are still seeing some inflationary pressures in various.

Cost buckets and I'm just wondering in your view how well.

The inflation index.

Indices reflect your true underlying inflation or might there be some mismatches for better for worse.

Brian Shkrobot: Also, in October, the AUC delivered its decision on the generic cost of capital or GCOC, for short, and the parameters for 2024 and beyond. As was signaled throughout the year, the commission has adopted the use of a formula for setting RWE, and this decision also reaffirmed equity thickness set at 37% for a Alberta Utilities. The established formula for RWE utilizes a base rate of 9%, and takes the count two variables to adjust this base rate.

On that front.

Brian Shkrobot: I appreciate your question. Yeah, in terms of terms of performance, I've indicated on previous calls, and we have a long track record of finding new and creative ways to drive down our costs for our customers. And, you know, we continue to see that throughout this year, although we've had the expected rebasing, I would say that the teams have done a great job in the first part of 2023 to define some additional savings throughout our business, and that's throughout, whether it's through some tax efficiencies, whether it's through our operations. Of course, the wildfire also diverted some of our resources from our teams onto that response effort.

Thanks, Linda I. Appreciate your question in terms of terms of Oh pharmacist.

Brian Shkrobot: First, the changes in 30-year government-acandidate modules and changes in utility spreads. The commission will update the RWE annually and issue the following years RWE in November of the current year. Now, while the final 2024 RWE will still not be known as an November of this year, current market data suggests that RWE in the range of 9 to 9.2% top from the current rate of 8.5%. Now, as we begin to operate under these new frameworks in 2024, we will continue to apply the ownership principles that we have historically used to drive efficiencies in operation excellence across our businesses, and we expect us to drive continued outperforms and growth for our business.

<unk> indicated on previous calls.

We have a long track record of finding new and creative ways to drive down our costs for for our customers and.

We continue to see that throughout this year, although we had the expected re basing I.

I would say that the teams have done a great job in the first part of 2020 threes to define some additional savings.

Throughout our business and it's in a throat.

Whether it's through some tax efficiencies, whether it's through our operations of course, the wildfire also.

Diverted some of our from our teams onto that response efforts. So overall I guess I would kind of give guidance that we are confident that we can drive.

Brian Shkrobot: So, overall, I guess I would kind of give guidance that we are confident that we can drive that continued efficiencies, as we mentioned, maybe it's in the 1 to 200 basis points range for this year. Obviously, we'll have another reset in PBR 3 and we get into 2024, but for this year, the teams are doing extremely well.

Continued efficiencies as we mentioned maybe it's in the 1% to 200 basis points range for this year. Obviously, we will have another resetting and P. B R. Three and when we get into 2024, but for this year. The teams are doing extremely well.

Brian Shkrobot: In terms of inflationary pressures, like I would say in the past, you know, we've done really well to kind of work with our vendors and suppliers to maintain our expected cost increases in line with kind of general inflation. It's sometimes improved. We've had a little bit of delay over a period of time on some of our materials, especially some of our long leads. We've just changed our practices to going forward to make sure that we get well ahead of ordering long-term expected supplies for some of our projects, and we did that on our solar facilities, getting ahead and ordering all the panels, so Bob, as you mentioned, can hit those timelines. So overall, I think we're not expecting any inflationary pressures that are outside of what we're seeing, I guess, generally in the market. Thank you.

In terms of inflationary pressures.

I would say in the past.

We've done really well to kind of work with our vendors and suppliers to maintain our expected cost increases in line with kind of general inflation, it's been sometimes improve.

Brian Shkrobot: Importantly, the receipt of both these critical regulatory decisions well in advance of the respective operating years further reinforces the strides we've seen in reducing regulatory lag in the province and providing pro-specivity. Moving on to our natural gas distribution business in Australia, we continue to see strong growth in key operating metrics such as new connections, terrafraids and system volumes. The narrative for this business, however, remains focused on Australia's in-country inflation profile, which continues to tribute to a year over year earnings pressure.

We've had a little bit of delay over a period of time on some of our materials.

Especially some of our long leads and we've just changed our practices going forward to make sure that we get well ahead of ordering long term expected supplies for some of our projects and we did that on our solar facilities getting ahead and not ordering all the panels. So Bob as you mentioned can hit those timelines. So overall I think.

We're not expecting any inflationary pressures that are outside of what we're seeing.

Brian Shkrobot: As we alluded to in our second quarter, 2023 conference call, it is important to remember that inflation in 2022 built rapidly in the second half of last year, with full year inflation reaching almost 8% by the year end 2022. As a result of this building profile in the prior year, our third quarter, 2022 earnings were exceptionally strong, creating a comparable that is difficult to compete with in 2023 as inflation levels began to moderate.

I guess generally in the market.

Brian Shkrobot: Anne, maybe just moving to Australia, just trying to understand kind of what the financial benefit might be on this hydrogen project beyond just leveraging the learnings for future projects. Is there some sort of revenue model here? Or is it driving business through your existing assets? Can you comment on kind of what the end game is and the magnitude of any sort of Economic Participation, given that my understanding is the Australian government will own the facility? Yeah, I'll start, and then I'll ask Bob to chip in here.

Thank you.

Maybe just start moving to Australia, just trying to understand kind of what the.

Financial benefit might be almost hydrogen project beyond just leveraging the learnings for future projects.

Brian Shkrobot: This trend resulted in us reporting year over year decline of $8 million for this business in the quarter. Similar to the messaging we delivered throughout this year, we continue to expect Q4 and full year earnings for this business to be lower than 2022 as the CPTI trend continues to moderate in Australia. For added context, in-country estimates continue to suggest full year inflation in Australia between 4% to 5%, which is consistent with the in-market estimates from last quarter.

Is there some sort of.

Revenue model here or is it driving business through your existing assets can you comment on kind of what the what the endgame is and the magnitude of any sort of economic.

Participation given that my understanding is the Australian government will own the facilities.

Yes, let me I'll start and then I'll ask Bob to help chip in here and.

Brian Shkrobot: And so, first of all, I would just kind of comment that it's very early days. And yeah, we're very excited to work with the South Australian government on this project. And it really sees kind of the benefit of our outward approach to the hydrogen strategy globally and how we're recognized in the jurisdictions that we operate in. And again, it's too early to talk about the funding model and how big this project will be.

So first of all I would just kind of comment that it's very early days and we're very excited to work with the South Australian government on this project in.

And it really is kind of the the benefit of kind of our outward.

Brian Shkrobot: Now, before I move on to our Aqua and Power businesses, I want to briefly touch on the capital investments we made in the third quarter. The third quarter saw us invest $331 million in our business with $307 million of the spending being within our existing utilities. This ongoing utility investment ensures a continued generation of stable earnings and reliable cash flows while also driving sustainable rate-based growth. The remaining capital was primarily related to our ongoing renewable generation initiatives of Aqua and Power.

Our approach to the hydrogen strategy globally, and how were recognized in the jurisdictions that we operate in and again, it's too early to talk about funding model.

And how big this project will be I think that's part of this project is part of what we've been engaged to do is to provide a preliminary review, but I do think it's great for our business and kind of builds on some of the work that we've been doing across our various business units. So maybe Bob I'll turn it over to you to then maybe provide some further color yes, maybe the only other thing.

Brian Shkrobot: I think that's part of this project, part of what we've been engaged to do is to provide that preliminary review. But I do think it's great for our business and kind of builds on some of the work that we've been doing across our various business units. And maybe, Bob, I'll turn it over to you to maybe provide some further color. Yeah, maybe do some other things.

Bob Myles: By the way, hi Linda. The only thing I'd add to what Brian said is that this project could be one of three things. It could be engineering, procurement, and construction.

And by the way Hi, Linda the only thing I'd add to what Bryan said is is this project I could say I would say it could be one of three things it could be.

Brian Shkrobot: Moving on to Aqua and Power business, we delivered adjustments of $9 million compared to $12 million for the same period last year. While our newly required and recently completed renewable assets contribute to earnings lower demand in our natural gas storage business, timing of cost and seasonally low wind output pressure earnings. As we continue to drive the numerous development processes already underway to completion and these assets begin to contribute additional earnings, we're confident that the earnings power of these assets will become more pronounced.

Engineering procurement construction it could be engineering procurement construction and operation and there is the potential of equity ownership as well so as Brian indicated it is early days, but the all of three of those scenarios have all been discussed with the South Australia government as well.

Bob Myles: It could be engineering, procurement, construction, and operation. And there's the potential for equity ownership as well. So, as Brian indicated, it is early days. But all three of those scenarios have been discussed with the South Australian government as well. Thank you. I appreciate the question. The next question comes from Rob Hope with Scotiabank. Please go ahead. Good morning, everyone.

Thank you I appreciate the context.

The next question comes from Rob Hope with Scotiabank. Please go ahead.

Brian Shkrobot: Now, moving to the development side of the discussion, it's been a busy quarter and one highlighted by the creation and formalization of a number of key strategic partnerships that are paramount for us advancing growth strategy. In September, we announced our partnership with the Channicky and Goodstoney First Nations, which saw them become joint owners of the Dearfoot and Barlow Solar Facilities. Nurturing Indigenous partnerships that promote social and economic development has long been a hallmark of our method of operating, and we're proud to announce that this agreement with our new partners.

Robert Hope: I want to circle back on the in-power business. It's been a little choppy out there in terms of valuations, and the pause. And on the Q2 call, you talked about the potential for looking at other financing opportunities for this business, whether there would be a number of outcomes there. So just wonder if you could give us an update on how you're thinking about financing Renewable Power. Yeah, maybe I'll start off on the financing side.

Good morning, everyone.

Wanted to circle back on the on the in our business, it's been a little choppy out there in terms of valuations the pause and on the Q2 call you had talked about the potential for looking at other financing opportunities for this business whether it would be.

A number of outcomes. There. So just wondering if you could give us an update on how youre thinking about.

Financing the renewable power business.

Brian Shkrobot: Yeah, like, as we talked about in the second quarter, we're looking at the long term, how we're going to grow the business, and we must consider how we best optimize the value for CWEL shareholders each step of the way. Well, in the immediate term, our funding needs are tied to the continued development of our renewables pipelines and the pre-FID hydrogen work. So to support this need, we're continuing to consider partnership options, particularly in the short term.

Yeah, maybe I'll start off and on the financing side as we talked about in the second quarter.

Brian Shkrobot: The Dearfoot and Barlow Solar Facilities are some of the largest solar installations in an urban setting in Western Canada, and I'm proud to say that our Barlow Facility achieved full commercial operations in the second quarter of this year. And we expect our Dearfoot project to achieve the same in the fourth quarter of this year.

We're looking at.

The long term.

Well how are we going to fund the business and we must consider how we best optimize the value for Sheila seawell shareholders and each step of the way.

Well in the immediate term our funding needs are tied to the continued development of our renewables pipelines in the pre FID hydrogen work.

Brian Shkrobot: This month, we also announced a virtual power purchase agreement with a Farge Canada, which will see them receive 100% of the energy produced at our Empress Solar Facility.

So to support this need we're continuing to consider partnerships options, particularly in the short term longer term, Delaware will continue to evaluate both private and public sources of funding for the continued growth of the company.

Brian Shkrobot: Again, we are proud to be at the forefront of the energy transition and providing solution to help customers like with Farge, reduce their own carbon emissions, and it remains a key priority for us in our low strategy. Agreements like this also line with our target of having approximately 75% of the renewable generation portfolio contracted under long term agreements with high quality counterparties. This portfolio view to contracting this helps ensure a stable and secure cash flow stream for the long term, while ensuring we obtain the needed flexibility to maximize value within the portfolio and to capture near term economic benefits as they arise.

Brian Shkrobot: Longer term, though, we'll continue to evaluate both private and public sources of funding for the continued growth of the company. So, you know, with all the strategic decisions that we make, we'll continue to evaluate these opportunities through the lens of shareholder value creation and the long-term growth and stability of this business. Any further comments, Bob, do you want to make?

So with all of the strategic decisions that we make will continue to evaluate these opportunities through the lens of shareholder value creation in the long term growth.

Billy at this business.

He has further comments Bob do you want to make Rob. The other thing is on our on the larger projects and power specifically the large hydrogen projects. It's not just a matter of the financing. We're also looking at who we partner with strategically with regards to strong operating partners strong off.

Bob Myles: Rob, the other thing is on the larger projects in NPower, specifically the large hydrogen projects, it's not just a matter of the financing. We're also looking at who we partner with strategically with regard to strong operating partners, strong offtake partners, and with that, they also bring the financing side as well. So that's all very much part of the strategy as we build out Atco NPower. I appreciate that.

Take partners.

And with that they also bring the financing side as well. So that's all very much part of the strategy as we build out agco in power.

Brian Shkrobot: For our Empress project, we expect to see achieve full commercial operations in the fourth quarter of this year.

Brian Shkrobot: And then maybe more broadly, with the strong balance sheet, you're able to access capital a little over a month ago at attractive rates, as well as kind of the choppiness we're seeing in the market. Have you thought about, or kind of what are your views on acquiring assets that are a little countercyclical, cyclical, cyclical? in this environment and using your balance sheet to maybe buy them? Yeah, thanks, Rob. And, yeah, I'd say that we're constantly evaluating opportunities, whether it's through MRA or other parts of business. And, you know, that doesn't change it.

I appreciate that and then maybe more broadly with a strong balance sheet, you are able to access capital a little over a month ago at attractive rates.

Brian Shkrobot: Looking ahead to our development pipeline, I think it's also valuable to briefly touch on the AUC's decision to pause approvals for the newly, so the new renewable electricity generation projects until February of next year. First and foremost, this announcement does not impact our projects under construction, which are the upgrading of the 40 mile wind asset, or the near term development of our 40 mile solar project. For our renewable development pipeline more broadly, we continue to progress our near term projects and our development pipelines did not contemplate a need to file any new AUC applications in advance of the expected lifting of this or Torium and February next year.

As well as kind of the Choppiness, we're seeing in the market have you thought or kind of what are your views on acquiring assets a little counter cyclical cyclicality cyclically.

Brian Shkrobot: We also continue to be focused on developing the 40 mile solar project, and we do not expect the project delays related to this government pause. I would say that throughout this process, we've been working collaboratively with the AUC to ensure that the importance of developing these assets for the benefit of our province and its decarbonization goals is well understood.

This environment and using your balance sheet to maybe bottles for values.

Yeah, Thanks Robin Yeah.

I'd say that we're constantly evaluating.

Evaluate opportunities, whether it's through M&A or other other parts of business.

But that doesn't change that yes, there is some volatility in the cycle right now.

And appreciate that where the capital markets are today, but yeah, I think I'd say that we're constantly evaluating all of their aspects of our business and enduro graphic locations opportunities and if there is something out there that is attractive and accretive we'll certainly look at it.

Brian Shkrobot: Yes, there's some volatility in the cycle right now and I appreciate that where the capital markets are today. But yeah, like, I'd say that we're constantly evaluating all of our aspects of our business and, and geographic locations, opportunities. And if there's something out there that is attractive and creative, we'll certainly look at it. The next question comes from Maurice Choy with RBC Capital Markets. Please go ahead.

Thank you.

We'll go next question comes from Maurice Choy with RBC capital markets.

Please go ahead.

Brian Shkrobot: Finally, we remain committed to our hydrogen project with an Alberta's industrial heartland and continue to move development of that project for. Since last quarter, we've actively re-engaged discussions with both financial and strategic partners, along with the off takers that are key to underwriting the business case on a project of this scale.

Maurice Choy: Maurice, your line is open. About that myself. Good morning, everyone.

Your line is open.

Maurice Choy: Just wanted to follow up on the Atco Empower. Sorry if I missed this, but when are we expecting to hear a meaningful update on this? If not a position.

Sorry about that.

Myself and good morning, everyone just wanted to follow up on the Atco empower.

Sorry, if I missed this but when are we expecting to provide a win win.

Are we expecting to hear.

A meaningful update on this.

Brian Shkrobot: We continue to believe that the demand of this area exceeds the facility capacity. These negotiations are in advance stages, and we expect to be able to provide further clarity on timing and next steps in the coming month.

Brian Shkrobot: And also, I know that you've been doing some market feedback on the potential options for this. So any thoughts on what you've been hearing, recognizing, obviously, as my colleague mentioned, the market is choppy. Sorry, Maurice, just to clarify, an update on some of our projects or an update on how we look to fund ours? or Empower's potential separation specifics.

If not in a position and also I know that you've been doing some market feedback on the potential options on this so any thoughts on on what you've been hearing recognizing obviously, yes.

I call you mentioned the market is choppy.

Brian Shkrobot: Now, on the topic of hydrogen, early this week, it was also announced that our at-cool Australian business was named a preferred partner in the delivery of the South Australian Government's Hydrogen Drops Plan. Under this plan, we will work as part of this consortium with our partner to deliver a strategy and development program for a 250-megawatt hydrogen production facility, along with the 200-megawatt hydrogen-fueled electricity generation facility, and related hydrogen storage. While this project is in its early days, projects like this further cement our global hydrogen strategy and our position as leaders in the global transition to a cleaner energy.

Sorry, just to clarify update on.

On some of our projects or update on <unk>.

Alright, and how we look to find Howard.

Well empowers potential separation specifically.

Brian Shkrobot: I don't recognize how you responded to the previous question, but you know, timing wise, when can we have clarity on that? Yeah, like, you know, in terms of timing, again, we're not rushing into anything, we said that we would evaluate, as we kind of went through the previous question, you know, as we look to build out and some of these bigger projects come online, you know, we evaluate all options, where the capital markets are today, as Bob kind of alluded to, certainly partnerships is kind of a key, probably near term solution and focus, but over the long term, as, as, as a previous comment on the quarter, we're going to look at all opportunities and alternatives, including the public and private market.

Okay.

On to the previous question, but tie.

Timing wise when can we have clarity on it.

Yes.

Terms of timing again, we're not rushing into anything we said that we would evaluate as we kind of went through the previous question.

As we look to build out in some of these bigger projects come online.

We would be evaluating all options for the capital markets are today as Bob kind of alluded to certainly partnerships is kind of a key probably near term solution and ends in focus but over the long term as his previous comment on the quarter, we're going to look at all opportunities and alternatives.

Brian Shkrobot: So summing up overall, our third quarter results were in line with our expectations for a rebasing year. The Uranus pressures that we expected related to rebasing and Australian inflation were evident in the quarter, but we expected this rebasing pressure to begin to ease in the fourth quarter. Now, looking again ahead to 2024, our Alberta Utilities now have prospected at E following the regulatory decision on PBR-3, and the GCOC that was received earlier this month. As I said in the past, no matter what the regulatory environment we operate at then we remain focused on driving exceptional results for all shareholders and position our businesses maximized sustainable growth and earnings.

Including the public and private markets.

Brian Shkrobot: And just to be clear, as Bob mentioned partnerships on the High Region project specifically, when it comes to the entire ATCO MPower entity, are you suggesting that this was a partnership for the entity or more like on a project-by-project basis? It's more of a project-by-project basis, Maurice.

And just to be clear as Bob mentioned partnerships on the hydrogen project specifically when it comes to the entire Atco empower entity.

Are you, suggesting that this is a partnership for the entity or more like on a project by project basis.

Brian Shkrobot: And again, like we're going to evaluate all those that come up. And you've seen us just announcing partnerships on some of our renewables. And, and so that's kind of evidence of what we're looking at. So is it fair to say that Atcom Power, at least from a base case, will remain within CU and with the C partnership? upon a word.

It's more of a project by project basis.

And again like we're going to evaluate all of those those those come up and you've seen us just announced a partnership on some of our renewables.

Brian Shkrobot: I look forward to sharing our full 2023 performance and providing further updates on the progress of our numerous growth initiatives on our next call in early 2024.

And so that's kind of evidence of what we're looking at.

So is it fair to say that that compound at least from a base case will remain within C U.

Bob Miles: Now, that concludes my prepared remarks, but before we open the call to questions from the analyst community, I just want to give everyone a chance to hear from both Bob Miles on our Aquaman Power Business and Wayne Stensby on our Aquaman Energy Systems Business. Bob, the Aquaman Power Business has made numerous strides in 2023 towards the achievement of its renewable generation and clean-fueled growth practice. In light of this progress, could you comment on the growth you're seeing in the business and where you expect things to go from in the near-term?

And well just see partnerships.

From this point onward.

Brian Shkrobot: Yeah. Again, listen, we will evaluate all opportunities. But for now, yes, we were considering partnerships. And as we grow the business, I'm not going to suggest that all options are not on the table. But certainly, we see partnerships within CU as being, you know, a meaningful way to fund near-term projects of this nature. Great, that makes sense.

Again listen.

We will evaluate all opportunities, but for now yes, we are considering the partnerships and as we grow up the business.

I'm not going to suggest at all any options or not on the table, but certainly we see partnerships within <unk> has been.

A meaningful way to fund the near term projects of this nature.

Brian Shkrobot: Maybe I just want to finish off on the government's review of the electricity pricing market, including and D. I know in the last call you mentioned that you weren't expecting anything negative from this review. But obviously, the cost of capital is higher, notwithstanding that you are renowned to rise next year. So as you look at the cost structure for T&D on customer bills, where would you see costs coming down for the government to achieve this T&D cost reduction? Yeah, like, okay, it's a great question.

Great that makes sense, maybe I just wanted to finish off on.

Bob Miles: Thanks, Brian. It's hard to talk about where we're going without looking at what we've done in 2023. I'm proud to say that we have fully integrated the acquisition that we acquired earlier this year for the Suncorpornoobles acquisition. We have fully integrated our two wind assets that are operating, so that's a great accomplishment. We've also completed the pretty well-completed all of the construction on our three solar projects here in Alberta, as you indicated a little earlier, so I think that was a great accomplishment as well.

The government's review of the electricity pricing market, including reducing T&D cough.

I know in the last call you mentioned that you weren't expecting anything negative from this review.

But obviously cost of capital is higher notwithstanding that you already know looks to rise next year.

So if you look at the cost structure for T&D for customer bills, where.

Where would you see costs coming down four to come in to achieve this T&D cost reduction.

Bob Miles: The next project that we're pursuing right now is our 40-mile solar project. You touched on that, and that's a 220-mangle watt solar project also in Alberta, and so that's fairly far along. We hope to make FID on that later this year or early into 2024. On the clean-fuel side, you did indicate that we're progressing quite nicely on our hydrogen project both domestically and with regards to exports, so definitely a busy time right now, so lots on the go.

Brian Shkrobot: And I think, as I alluded to in prior calls, you know, what we can directly do in our business is what we try to focus on. And certainly, as we've kind of communicated, we've worked really hard to drive down our costs for our customers. And we've seen a rate reduction, both in our transmission business and our distribution business with PBR rebasing. So that is the meaningful thing that we can do as a utility company.

Yeah, It's great question, and I think as I alluded to in prior calls.

What we can directly do in our business is what we tried to focus on and certainly we as we've kind of communicated we've worked really hard to drive down our cost for our customers and you've seen that rate reduction.

In our transmission business and our distribution business with PBR re basing so that is the meaningful thing that we can do as a utility company that said, we continue to work with the ISO and in terms of project designs and market studies to help how do we best source and do the right price signals to get the most efficient.

Brian Shkrobot: That said, we continue to work with the ISO, as you know, in terms of project designs and market studies to help how we best source and use the right price signals to get the most efficient way of connecting new generation, but also how do we ensure that our distribution and transmission grids can continue to provide the safe and reliability of energy delivery. I don't know, Wayne. Anything else that you'd want to offer?

Brian Shkrobot: Thanks, Bob Lot, a great opportunity on the horizon, as we said, and deciding to see these initiatives convert to stronger and as contributions.

Way of connecting new generation, but also how do we ensure that our distribution and transmission grids can provide continue to provide the safety and reliability of the energy delivery.

Wayne Stensby: Wayne, in a similar vein, the third quarter saw your act of energy system business received two key regulatory decisions, the generic class of capital and the formalization of the framework for the third year, PBR cycle.

I know Wayne anything else that you'd want to offer.

Wayne Stensby: Now that you're back in Canada and refocused on our Canadian based businesses for the Utilities, can you comment on that? On how you're thinking of that energy systems businesses moving forward and what we expect in the coming years.

Wayne Stensby: You know, maybe what I would kind of just add, Brian. We completely recognize the challenges of affordability, you know, here in Alberta and across Canada, right? And so, we're well aware of that. We empathize with our customers as they have seen cost increases. The cost of the bill is, of course, the sum of the transmission and distribution or the delivery costs and the generation costs.

Maybe what I would.

Kind of just add Brian is.

We completely recognize the challenges.

Affordability here in Alberta, and across Canada, right and so.

Wayne Stensby: Thanks, Brian. And you know, let me start by just saying, I'm very excited to be back and leading the Utilities portfolio. Luma is in a good place or a good position with one sack of stepping into the CEO role, and I'm very confident that the more than 3500 hard working women and men who are in Puerto Rico in Luma will continue to build on the substantial early progress that we were all able to make.

So we're well aware of that we we empathize with our customers as they have seen cost increases the cost on the Bill is of course are the some of the transmission and distribution or the delivery costs and the generation costs and.

Wayne Stensby: And, you know, as you would recognize, there's been some volatility in all of that in the last few months and even years. As Brian indicated, as we move forward, I think our emphasis is going to be on how do we continue to invest in those networks and bring reliability improvements and the climate adaptation and resiliency improvements that our customers are really demanding. So I see it as far more than just a cost conversation. And I think that's very important in our role as we have these distribution and transmission utilities here in Alberta and our role as a broader energy provider. Thanks for the color.

As you would recognize theres been some volatility in all of that in the last few months and even years.

Wayne Stensby: So as you say, maybe a little closer to home here in Alberta. And as you mentioned, a number of regulatory decisions have now been received and I look forward to working with our teams to build on what really is phenomenal progress that the Utilities have made through the first two PBR cycles or periods in the distribution businesses and also the strong progress in the transmission businesses. These past periods of lead have yielded great efficiencies for our customers. And I see them as providing a very strong foundation as we now move to invest and perhaps get a little more oriented on growth to serve our customers growing and evolving needs in the province.

As Brian indicated as we move forward I think.

Our emphasis is going to be on how do we continue to invest in those networks and brain.

Reliability improvements and the climate adaptation and resiliency improvements that our customers are really demanding so I see it is far more than just a cost conversation.

And I think that's very important in our role as we have these.

These distribution and transmission utilities here in Alberta, and our role as a as a broader energy provider.

Great. Thanks for the color.

Mark Jarvi: The next question comes from Mark Jarvi with CIBC Capital Markets. Please go ahead. Yeah, thanks. Good morning, everyone.

The next question comes from Mark Jarvi with CIBC capital markets.

Brian Shkrobot: Thanks, Gwen, that's great insight.

Unknown Executive: Thank you.

Please go ahead.

Lawrence Gramson: We'll now turn the call back to Lawrence to bring us to the formal Q&A component of the call. Thanks, Bren.

Brian Shkrobot: So just coming to the decisions, the formula for the ROE and the PBR parameters, including an earned sharing mechanism. How do you think that all shakes out? You know, obviously, the base ROE is going higher, but you then move into an earning sharing mechanism above 200 basis points. Do you think the all-in earned ROE changes at all under the new construct relative to what you were operating under previously? Yeah, thanks, Mark. Yeah, a great question.

Yeah. Thanks, Good morning, everyone, just coming to the decisions the formula if the ROE.

Unknown Executive: In interesting time, we ask you to limit yourself to two questions. If you have additional questions, you're welcome to rejoin the queue.

The PBR parameters in clean air and train mechanism.

How would you think that all shakes out you know obviously the base ROE he's going higher but you didn't move into an earning sharing mechanism.

Operator: I'll now turn it over to the conference coordinator for questions. Thank you. We will now begin the question answer session to join the question. You may press a star. Then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speaker phone, please pick up your handset before pressing any keys to withdraw from the question to you, please press star. Then two.

How about 10 basis points do you think the all in or all in earned ROE changes at all under the new construct relative to what you were operating under previously.

Brian Shkrobot: And, you know, overall, I think we're, we're, you know, in terms of the generic cost of capital decision as a kind of expected commission move to a formula with the goal of reducing regulatory lag. That said, you know, I, we're, we're, thankful that the base ROE has gone up. That said, it's probably below what we'd like it to be, but it's, it's, it's still going in the right direction. You know, in terms of the earnings sharing mechanism, at least the first 200 basis points are on the count of shareholders.

Yes, thanks Mark.

Yes, great question.

Overall I think we are.

Sure.

And in terms of generic cost of capital decision.

As a kind of expected the commission moved to a formula.

Linda Ezergailis: The first question comes from Linda Azargales with TD Securities. Please go ahead. Thank you.

With the goal of reducing regulatory lag.

That said.

We're we're thankful that the base ROE V has gone up that said, it's probably below what wed like it to be but it's it's it's still going in the right direction.

Brian Shkrobot: Very interested to hear your updated thoughts on what sort of optimization and cost efficiencies you're working on so that your utilities, your distribution utilities can meet or beat any sort of productivity factors that they're working towards. And I guess the second part of that question is we are, you know, still seeing some inflationary pressures in various cost buckets. And I'm just wondering, in your view, how well the inflation indices reflect your true underlying inflation.

<unk>.

In terms of the earnings sharing mechanism at least the first 200 basis points.

On the account of shareholders.

Brian Shkrobot: And above that, there starts to be a sharing, which, you know, I think is a balance that the commission struck at the end of the day, providing a supportive net framework. I'm sorry, I'm kind of mixing that with the PBR. But I do think they're both tied in terms of the ability to share and having a proper RWE.

Above that there starts to become and to sharing which either way.

<unk> is a balance of the commission struck at the end of the day, providing a support of net.

Framework.

Brian Shkrobot: So I do think that it's kind of in line with what we would have expected. And I think as a supportive framework, I think on the PBR side, in terms of having the formula the way it is, having some capital tracker mechanisms that allow us to pursue DCARB opportunities is supportive. And they even put in some creative mechanisms in the pilot project to say if we could, because if we have a capital versus an O&M decision to make to the extent that we could prove that it's a benefit to customers to have an O&M solution that we're allowed to earn on that program.

I am sorry, I am kind of mixing that with the PBR, but.

Because I do think they are both tied in terms of the.

Ability to share and having a proper ROE. So I do think that it's kind of in line with what we would expected and I think as a support of a framework I think on the PPR side in terms of having that the formula Whey approved it is having some capital tracker mechanisms.

Brian Shkrobot: And I'm like, there is some mismatches for better or for worse on that front. Thanks, Linda. Appreciate your question. Yeah, in terms of terms of, oh, performances they've indicated on on previous calls and we have a long track record of finding new and creative ways to drive down our costs for for our customers. And you know, we continue to see that throughout this year, although we've had the expected rebasing. I would say that the teams have done a great job.

Now us too.

Pursue D carb.

Brian Shkrobot: So I think the Commission has taken a positive step forward in these decisions. And yeah, I think we're, now that we have the rules unknown, and again, going back to our previous tried and true ability to find ways to generate value for our shareholders throughout any PBR or cost of our generic cost of capital framework. And just to follow up on the comments made earlier about the annual updates, you've gotten the clarity that even under the distribution utilities operating under PBR, there'll be an annual ROE update. Because I know in some jurisdictions, they set the ROE at the beginning of the five-year window, and then you kind of operate under that base ROE.

Opportunities as supportive and they even put in some creative.

Mechanism on a pilot project to say, if we could because if we have a capital versus an O&M decision in may to extent that we can prove that its beneficial to customers to have an old modem solution that were allowed to earn on that program. So I think the commission has taken a positive step forward and this and this.

Brian Shkrobot: And the first part of 2023 that defines additional savings throughout our business and that's throughout whether it's through some tax efficiencies, whether it's through our operations, of course, the wildfire also diverted some of our from our teams onto that response efforts. So overall, I guess I would kind of give guidance that we are confident that we can drive that continued efficiencies, as we mentioned, maybe it's in the one to 200 basis.

And this decisions and I think we're now that we have the rules.

And again go back to a previous tried and shrewd.

Ability to find ways to generate value for our shareholders throughout any <unk> or cost of our generic cost of capital framework.

Brian Shkrobot: Point range for this year, obviously, we'll have another resetting in PBR 3 and we get into 2024. But for this year, the teams are doing extremely well. In terms of inflationary pressures, like I would say in the past, you know, we've done really well to kind of work with our vendors and suppliers to maintain or expected costs increases in line with kind of general inflation and sometimes improve. We've had a little bit of delay over a period of time on some of our materials, especially some of our long leads.

Brian Shkrobot: And I guess if you do have an annual update, does that make it harder to manage through PBR in terms of how you think about timing and working through cost savings through the five-year period? No, like in terms of the annual update for the generic cost of capital rate flowing through, is that referring to Mark? Yep, yep, yep. Yeah, no.

And just a follow up on the comment you made earlier about the annual updates you've gotten the clarity that the under even though the distribution utilities operate under a PDR that there'll be an annual Roe.

Update because I know in some jurisdictions. They said at the beginning of this five year window, and then you kind of operator in that base are we and I guess, if you do have an annual updates does that make it harder to manage through P. B or in terms of how you think about timing and working through cost savings through the five year period.

No I like in terms of the annual update for that.

The generic cost of capital rate flowing through is that referring to Mike Yeah, Yeah no yeah.

Brian Shkrobot: And we've just changed our practices to going forward to make sure that we get well well ahead of ordering long term expected supplies for some of our projects and we did that on our solar facilities, get ahead and open all the panels. So Bob, as you mentioned, can hit those timelines. So overall, I think we're not expecting any inflationary pressures that are expected. So we're outside of what we're seeing, I guess, generally in the market. Thank you.

Brian Shkrobot: Yeah, and no, that's not, you know, that doesn't change. The thing is, in terms of our formula, normal compensation for inflation, and that is a typical thing through a PBR framework, but the update to ROEs, instead of being flat, yeah, they will change, maybe up or maybe down, depending on the kind of underlying parameters, but I don't think it's going to materially change throughout the five- And it'll be set in November each year.

No that's not.

It doesn't change the thing is in terms of our form a normal compensation for inflation and that is a typical thing through a PBR framework, but the update to ROE.

Instead of being flat, yeah, they will change maybe up or maybe down depending on kind of online parameters those too, but I don't think its going to materially change throughout the five year period.

Brian Shkrobot: And like I said in my opening remarks, we expect that to be north of 9% for the year 2024. Okay, and then just one last question for me is just, as you look into the medium term, particularly for your Alberta utilities, are you seeing anything changing in terms of the outlook, demand, regional needs, technology changes, any sort of factoring into what you think the rate base outlook looks like for any of the utilities in Alberta, maybe on a three to five year outlook? Yeah, maybe I'll let Wayne kind of answer this one.

Brian Shkrobot: And maybe just moving to Australia, just trying to understand kind of what the financial benefit might be on this hydrogen project beyond just leveraging the learnings for future projects. Yes, is there some sort of revenue model here or is it driving business through your existing assets?

And it'll be set they've ever each year and like I said in my opening remarks, we expect that to be north of 9% for the <unk>.

For 2024.

Okay and then just one last question from me is just as you look into the medium term, particularly your Alberta utilities are you seeing anything change in terms of the outlook demand regional needs technology changes any sort of factoring into what you think the rate base outlook looks like for any of the utilities in Alberta.

Brian Shkrobot: Can you comment on kind of what the what the end game is in the magnitude of any sort of economic participation given that my understanding is the Australian government will own the facilities. Yeah, me all started and I'll ask Bob to help chip in here. And so, first of all, I would just kind of comment that it's it's very early days and yeah, we're very excited to work with the South Australian government on on this project and and it really sees kind of the benefit of kind of our outward approach to the hydrogen strategy globally and how we're recognized in the jurisdictions that we operate in.

On a three to five year outlook.

Brian Shkrobot: I think he kind of hit it off in terms of what our outlook looks like, and certainly all of those factors are something that are currently on our radar. Maybe, Wayne, do you want to get your views on that? Yeah, and I think you hit the kind of key elements in a way, but You know, and I'm almost building on the affordability conversation from a couple of questions ago, but we are seeing strong demand growth from our customers across the province, Alberta. The Alberta economy is doing well.

Yeah, maybe I'll, let Wayne kind of answer this one and I think he kind of hit it off in terms of in terms of what our outlook looks like.

Certainly all of those factors are something that are currently on our underwriter, maybe Wayne do you want to get your views on that.

I think you hit the.

The kind of key elements in a way but.

And I'm almost building on the affordability conversation from from a couple of questions ago, but we are seeing strong demand growth from our customers across the province, Alberta.

Brian Shkrobot: And again, it's too early to talk about the funding model and how big this project will be. I think that's part of this project is part of what we've been engaged to do is to provide that preliminary review. But I do think it's great for a business and kind of builds on some of the work that we've been doing across our various business units and maybe Bob, I'll turn it over to you to maybe provide some sort of color.

The Alberta economy is doing well.

And in an inflationary situation right. So we are seeing customer growth we are seeing.

Wayne Stensby: And you know, in an inflationary situation, right? So we are seeing customer growth; we are seeing, I would say, ever increasing needs from our customers or wants from our customers for their utilities, and so we are building strong plans as we move forward to invest in and support those growing customer needs and growing numbers of customers. So we are we see the next three to five years as very positive for our four LBREs, and was that expected to manifest itself into higher rate-based growth when you look at maybe a five year horizon? Yes, Okay, I'll leave it there. Thanks. The next question comes from Patrick Kenny with National Bank Financial. Please go ahead. Thank you. Good morning.

I would say ever increasing needs from our customers or wants from our customers from their utilities.

Brian Shkrobot: Yeah, maybe it's only other things. So, by the way, Highland, the only thing I'd add to what Brian said is, is this project. I could say I would say could be one of three things. It could be engineering procurement construction. It could be engineering procurement construction and operation and there's the potential of equity ownership as well. So, as Brian indicated, it is early days, but all of three of those scenarios have all been discussed with the South Australia government as well.

Bob Miles: Thank you. I appreciate the context.

And so we are building strong plans as we move forward to invest and support.

That those growing customer needs and growing numbers of customers. So.

Where we see the next three to five years.

It was very positive for our four over utilities.

And was that expected to manifest itself into higher rate base growth. When you look at it maybe in a five year horizon.

Yes.

Okay I'll leave it there thanks.

Yeah.

Patrick Kenny: You guys touched on LUMA in your prepared remarks, but any update or guidance on when we might see a transition from the supplemental to the O&M agreement? I'll pass that along to Wayne. Good morning, Patrick. Yes, it is the question we've been facing, I suppose, for two or, you know, two or three years at this point in time. But maybe I can offer you a little more kind of color there.

And the next question comes from Patrick Kenny with National Bank financial.

Go ahead.

Rob Hope: The next question comes from Rob Hope with Goshi Bank. See you. Go ahead.

Thank you good morning.

Brian Shkrobot: Good morning, everyone. One of us are going back on the on the in power business. It's been a little choppy up there in terms of valuations, the pause, and on the Q2 call you had talked about the potential for looking at other financing opportunities for this business, whether it be a number of outcomes there. So just wonder if you could give us an update on how you're thinking about financing the renewable power business.

You guys touched on the.

On luma in your prepared remarks, but any update or guidance on when we might see a transition from the.

The supplemental to the O&M agreement.

I'll pass that one to win.

Good morning, Patrick Yes, it is the.

It is the question we've been.

Brian Shkrobot: Yeah, maybe I'll start off and on the financing side. Yeah, like as we talked about in the second quarter, you know, we're looking at, you know, the long term, we'll have we're going to find the business and we must consider how we best optimize the value for SQL shareholders and each step of the way. Well, in the media term, our funding needs are tied to the continued development of our renewables pipelines and the pre-FID hydrogen work.

We've been facing I suppose for two or.

Two or three years at this point in time.

But maybe I can offer you a little more color.

Any color there.

Wayne Stensby: It's in the public markets that the court dates or the confirmation hearing dates have been set for the first two weeks of March of next year. Out. You know, it's possible that those results are delayed, but I think it's highly unlikely at this point in time. That's a U.S. federal bankruptcy court, and so the judge will hold those confirmation hearings. You follow the kind of, you know, conventional thinking from March, think that that plan will take, you know, there will have to be the hearing or the trial, I guess, then the evidence, then the eventual ruling, that will probably take you all the way till the middle of next year.

It's in the public.

Markets that the court.

Dates or the confirmation hearing dates have been set for the first two weeks of March of next year.

You know it's possible those are delayed but I think it's highly unlikely at this point in time, it's a U S federal bankruptcy.

Brian Shkrobot: So the support this need for continuing to consider partnerships, options, particularly in the short term, longer term that will continue to valuable private and public sources of funding for the continued growth of the company. So, you know, with all the strategic decisions that we make, well, continue value with these opportunities to the lens of shareholder value creation and the long-term growth the ability of this business. Any further comments, Bob? Do you want to make?

Course, and so the judge will hold those confirmation hearings. If you follow then kind of.

Conventional thinking from March.

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Wayne Stensby: And then there's the implementation of the plan. So, and on broad strokes, we would imagine that PREPA emerges from bankruptcy, perhaps towards the end of 2024. That said, as you know, LUMA extended the supplemental period with no deadline roughly a year ago. And so if it takes longer, it takes longer.

I think that that plan, we'll take.

There will have to be the hearing or the trial I guess than the evidence than the eventual ruling.

Brian Shkrobot: Rob, the other thing is on the larger projects and end power, specifically the large hydrogen projects. It's not just a matter of the financing, we're also looking at who we partner with strategically with regards to strong operating partners, strong off-take partners and with that, they also bring the financing side as well. So that's all very much part of the strategy as we we build out at Coenpower.

That will probably take you all the way till middle of next year and then there is the implementation of the plan so and on broad strokes, we would imagine that.

The PREPA emerges from bankruptcy, perhaps towards the end of.

2024.

That said.

As you know luma extended the supplemental period with no deadline.

<unk> a year ago, and so if it takes longer it takes longer I think our real focus.

Bob Miles: I appreciate that. And then maybe more broadly, with the strong balance sheets, you were able to back up to a little over a month ago at attractive rates as well as kind of the choppiness we're seeing in the market. You know, have you thought, or kind of what are your views on acquiring assets, a little counter-cyclical, sticking to capital, cyclically, in this environment and using your balance sheet to maybe buy things for values?

Wayne Stensby: I think our real focus, you know, organizationally, is to continue to build on what we were hired to do, which is fundamentally transform the electric system in Puerto Rico and rebuild and improve that system. So that's where I would tell you the vast majority of the focus is as we go through the bank. I guess I should have added, of course, as you know, once we move out of the supplemental period, we move into the 15-year term of the contract. That's perfect.

Organizationally is to continue to build on what we were hired to do which is fundamentally transform the electric system in Puerto Rico.

And rebuild and improve that system and so that's where I would tell you. The vast majority of the focus is as we followed through the bankruptcy.

Bob Miles: Yeah, thanks, Rob. And, yeah, I would say that we're constantly evaluating opportunities, whether it's through MRA or other parts of business. And, you know, that doesn't change. Yes, there's some volatility in the cycle right now, and appreciate that we're the capital markets are today. But, yeah, like I'd say that we're constantly evaluating all of our aspects of our business and your graphical locations, opportunities. And, if there is something out there that is attractive and creative, we'll certainly look at it.

Hey, guys I should have added of course as you know once we move.

Rob Hope: Thank you.

Move out of the supplemental period, we move into the 15 year term of the contract.

Right. Okay. That's perfect. Thank you for the update.

Patrick Kenny: Thank you for the update. And then maybe just shifting gears to the balance sheet. Brian, you issued some 30 year paper late in the quarter. Can you just provide maybe an update on funding needs for the remainder of the year and maybe into 2024? Are there any other upcoming maturities or capex spend that you might be able to prefund and maybe take some additional market risk off the table?

And then maybe just shifting gears to the balance sheet.

Brian you've issued some 30 year paper late in the quarter can.

Can you just provide maybe an update on your funding needs for the remainder of the year and maybe into 2024.

Are there any other upcoming maturities or capex spend that you might be able to pre fund and maybe take some additional market risk off the table.

Maurice Choy: The next question comes from Maurice Choi with RBC Capital Market. Please go ahead. Maurice, your line is open. Thank you for your time, Ben. Sorry about that.

Brian Shkrobot: Yeah, thanks, Patrick, for the question. Yeah, you mentioned our, our, our issue that we did earlier in the year and, you know, very, very successful, very happy with the outcome of that debt issue, got very favorable rates, and well oversubscribed. And it's also the first issue since withdrawing from our ratings from S&P.

Yeah. Thanks, Patrick for the question, Yeah, you mentioned R. R.

Our issue that we did earlier in the year.

Very very success very happy with the outcome.

That that debt issue.

Got very favorable rates and well over subscribed.

Brian Shkrobot: You know, myself good morning, everyone. Just wanted to fall up on the ethical and power. Sorry if I missed this, but when are we expecting to provide, when are we expecting to hear a meaningful update on this? If not, the position. And also I know that you've been doing some market feedback on the potential options on this. So any thoughts on on what you've been hearing, recognizing our fears. Yes, as I call you mentioned, the market was choppy.

And it's also the kind of the first issue since withdrawing from our ratings from S&P and <unk>.

So in terms of the rest of the year no. We don't expect to have to access the market for the remainder of this year.

Brian Shkrobot: And so in terms of the rest of the year, no, we don't expect to have to access the market for the remainder of this year. And then, for the next year, I'd see that, you know, we definitely have some flexibility there. And at least on the CU side, we expect to be probably around the same range for our needs this year, but with some flexibility. Got it.

And into the next year I see that we have some definitely some flexibility there.

Based on that the Cu, Inc side, we expect to be probably around the same range of this year for our needs, but with some flexibility.

Brian Shkrobot: Sorry, we're just to clarify update on on some of our projects were update on empowers and how we looked to find ours. Well, empowers potential separation specifically, how you respond to the previous question, but, you know, timing wise when can we have clarity on it? Yeah, like, you know, in terms of timing, again, we're not rushing into anything. We said that we would evaluate as we kind of went through the previous question, you know, as we looked to build out and some of these bigger projects come online.

Patrick Kenny: Thanks for that. I'll leave it there, guys. Once again, anyone on the conference call who wishes to ask a question may press star one at this time. The next question comes from Ben Pham with BMO. Please go ahead. Good morning. I wanted to go back to the laboratory base.

Got it thanks for that I'll leave it there guys.

One quick one on the conference call, who wishes to ask a question in the practice of Star one at this time.

The next question comes from Ben Pham BMO.

Please go ahead.

Ben Pham: I know you mentioned that it's tracking, in line with your expectations, the rebates and where earnings are going in 2023. I wanted to reconcile that with some of your comments early in the year. I think you mentioned that Q3 was going to be a peak rebase and then. Grosvenor Q4, Is that still the trend because it looks like Q3 ended up not being as bad as, Yeah, no, no, thanks, Ben. Comments, and I'd say generality in terms of the seasonality of that which is typically the case.

Hi, Good morning, I wanted to go back to the Alberta rate basing I know you you mentioned that it's tracking in.

In line with your expectations to Rebase, and where earnings are going for 2023.

Brian Shkrobot: You know, we'd be evaluating all options where the capital markets are today is Bob kind of alluded to certainly partnerships is kind of a key probably near term solution and focus. But over the long term as as previous comment on the quarter, we're going to look at all opportunities in alternatives, including the public and private markets. And just to be clear, as Bob mentioned, partnerships on the hydrogen projects specifically, when it comes to the entire ethical and power entity.

I wanted to reconcile that with some of your comments earlier in the year I think he mentioned Q3 was going to be a peak Rebase and then you would see growth in Q4.

Is that still.

The trend because it looks like Q3 ended up not being as bad as Q2.

Brian Shkrobot: And I would say, with all that said, there's always some timing of costs and initiatives that happen throughout the year. And I would say for the third quarter here, we did have some time, especially in our electric distribution business, timing of some costs, which probably improved us versus where kind of above the normal seasonality would be. So, I guess, overall, we would expect, but with that kind of proviso that we do have on a typical year, some timing of operating issues from one year to the next.

Yes, no no. Thanks.

Comments and I would say generality in terms of the seasonality of that's typically the case and I would say theres. All that said, there's always some timing of costs and initiatives that happened throughout the year and I would say for the third quarter here. We did have some time, especially in our electric distribution business.

Brian Shkrobot: Are you suggesting that there's a partnership for the entity or more like on a project by project basis? It's more of a project by project basis, Reese. And again, like, we're going to evaluate all those those those come up and you've seen us with the analysis partnership on some of our renewables and and so that's kind of evidence of what we're looking at. So is it fair to say that that come power at least from a base case will remain within at CU and with the C partnerships from this point onward?

Timing of some costs, which probably improved us versus where kind of above the normal seasonality would be so I guess, yes overall.

Brian Shkrobot: And whether it's us working on welfare restoration, that changes some of our timing of our own M costs. Those are kind of examples which could, you know, from a typical year over year comparison and cause some noise. And that K-3 timing and some of that.

We would expect but with that kind of a proviso that we do have on a typical year some timing of opera initiatives from one year to the next and whether it's us working on wildfire a restoration that changes some of our timing of our O&M costs.

Brian Shkrobot: Like again, listen, we will evaluate all opportunities, but for now, yes, we were considering the partnerships and as we grow up the business. I'm not going to suggest that all any options are not on the table, but certainly we see partnerships within CU as being, you know, a meaningful way to fund the near term projects of this nature.

Or kind of examples which could.

A typical year over year comparison and caused some some noise.

Yeah.

Brian Shkrobot: Great. That makes sense.

And that that Q3 yet.

That.

Brian Shkrobot: Maintenance, Wargazette, Bush, maybe then maybe you won't see growth year over year. Yeah, I think, you know, I say we're still back in line with what we expect when we communicate. Listen, we know we're coming off a 2022 outperformance. And I think you've seen the regulatory filings and the significant outperformance we achieved. We do expect to come back down to kind of that one to 200 basis point range by the end of the year. So I do see a little bit of that volatility in Q4.

Maintenance work is that.

Washington, taking before that maybe.

You won't see growth year over year.

Brian Shkrobot: But again, I do think it's in line with the guidance that we've already provided each of that, you know, one to 200 basis point range. I'm interested in, and I know usually the second question is on CapEx. I mean, no news means there's no change in that utility CapEx budget. I wanted to check if there's some reference to maybe a rate-based, Growth Pay Movement, which is better than expected. Is that a reference to your beyond? guidance timeframe? Yeah, that's a great question, Ben.

Yes, I think.

Brian Shkrobot: Maybe I just want to finish off on the government's review of the electricity pricing market, including reducing TND costs. I know in the last call you mentioned that you weren't expecting anything negative from this review, but obviously cost of capital is higher, notwithstanding that you are we now look to rise next year.

I'd say, we're still back in line with what we expect for when we communicated. This we know we're coming off a 2022 outperformance and you think you've seen the regulatory filings in the sniff. It out performance fee. We achieved we do expect to come back down to kind of that one to 200 basis point range by the end of the year.

<unk>, so I do see a little bit of that reverse in Q4, but again I do think it's in line with the guidance that we've already provided each of that one to 200 basis point range.

Brian Shkrobot: So as you look at the cost structure for TND for customer bills, where would you see costs coming down for the government to achieve this TND cost reduction? Yeah, like it's a great question and I think as I alluded to in prior calls, you know, what we can directly do in our business is what we try to focus on and certainly we as we kind of communicated we've worked really hard to drive down our costs for customers and you've seen a rate reduction.

I understand and then I know you usually with a second question is on Capex I mean, no news means there's no.

Change in that utility Capex budget.

I wanted to check there was some reference to maybe rate base.

Growth moving.

Better than expected is that a reference to your beyond.

Guidance timeframe.

Brian Shkrobot: And both in our transmission business and our distribution business with the PBR rebasing. So that is the meaningful thing that we can do as a utility company. That said, we continue work with the ISO and, you know, in terms of project designs and market studies to help how we best source and do the right pricing those to get the most efficient way of connecting new generation. But also how do we ensure that our distribution and transmission grids can provide, continue to provide the safe reliability of the energy delivery.

Brian Shkrobot: I think Wayne kind of alluded to in his comments, like we do see some significant growth in our jurisdictions here. And certainly, you know, we should be mindful of the affordability of our customers, but we are seeing pressures from the growth and evolving demands from our customers. And also, we recognize there's a little bit of a pause on renewable energy, but the reality is, we do need to connect and make sure that we continue to provide a network which has safe and reliable energy and serves our needs.

Yes, that's great question, Ben and I think I think Wayne kind of alluded to and kind of as his comments like we do see some significant growth in our jurisdictions here and certainly.

Be mindful of affordability of our customers, but we are seeing pressures.

The growth and evolving demands from our customers.

Also we recognize there's a little bit of a pause on the renewables, but reality is we do need to connect and make sure that we continue to provide a network, which has safe and reliable energy and serving their needs. So I think this is evolving.

Wayne Stensby: I know we need anything else that you'd want to offer. You know, maybe what I would kind of just add, Brian, is we completely recognize the challenges for ability, you know, here in Alberta and across Canada, right? And so we're well aware of that. We empathize with our customers as they have seen cost increases, the cost of the bill is of course the sum of the transmission and distribution of the delivery costs and the generation costs. And, you know, as you would recognize, there's been some volatility in all of that in the last few months and even years.

Brian Shkrobot: So, you know, I think this is evolving. We expect to give an update. Typically, we provide a further update at the end of the year. So in February, we'll provide kind of a more refined guidance in terms of what our expectations and outlook are for the next, say, three to five years.

Expect to give an update.

Typically we provide a further update at the end of the year. So in February we'll provide kind of a.

More refined guidance in terms of what our expectations and outlook is for the next phase three to five years.

Okay. That's great. Thank you.

Brian Shkrobot: That's great. Thank you. This concludes the question and answer session. I would like to turn the conference back over to Mr. Lawrence Gramson for any closing remarks. Thank you, operator. And thank you all for participating today. We appreciate your interest in Canadian utilities, and we look forward to speaking with you again. This concludes today's conference call. You may disconnect your line.

Okay.

That's the question answer session I would like to turn the conference back over to Mr. Lyons Grantham for any closing remark.

Okay. Thank you operator, and thank you all for participating today. We appreciate your interest in clean utilities, and we look forward to speak with you again soon.

Wayne Stensby: As Brian indicated, as we move forward, I think our emphasis is going to be on, how do we continue to invest in those networks and bring reliability improvements and the climate adaptation and resiliency improvements that our customers are really demanding. So I see it as far more than just a cost conversation. And I think that's very important in our role as we have these distribution and transmission utilities here in Alberta and our role as a broader energy provider.

Okay.

Today's conference call you may disconnect your lines.

Lawrence Gramson: Thank you for participating and have a pleasant day., Buy and Want to Pay? Find Out More Here Look for the bulbs on sale now. [music] Please see the complete disclaimer at https://sites.google.com or at www.google.com in English.

Thank you for participating and have a pleasant Paul.

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Unknown Executive: Thanks for the color.

Mark Derby: The next question comes from Mark Derby with CIBC, Capital Markets. Please go ahead. Yeah, thanks.

Brian Shkrobot: Good morning, everyone. So just coming to the decisions, the formula of the ROE and the PBR parameters, including an earn-training mechanism, how would you think that all shakes out? Obviously, the base are always going higher, but you then move into an earning-training mechanism on above 200 basis points. Do you think the all-in earned ROE changes at all under the new construct relative to what you were operating under previously? Yeah, thanks, Mark.

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Brian Shkrobot: Yeah, great question. And overall, I think we're in terms of our cost-accountable decision, as a kind of expected commission move to a formula with the goal of reducing regulatory lag. That said, we're thankful that the base are we has gone up. That said, it's probably below what we'd like it to be, but it's still going in the right direction. You know, in terms of the earning-training mechanism, at least, you know, the first 200 basis points is on the count of shareholders, and above that, there starts to become a sharing, which, you know, as I think is a balance of the commission struck at the end of the day, providing a supportive net framework.

Brian Shkrobot: I'm sorry, I'm kind of mixing that with the PBR, but I do think they're both tied in terms of the ability to share and having a proper ROE. So I do think that it's kind of in line with what we would have expected. And I think it's a supportive framework, I think on the PBR side, in terms of having the formula way approved it is, having some capital tracker mechanisms allow us to pursue decarb opportunities is supportive.

Brian Shkrobot: And they even put in some creative mechanism on the pilot project to say if we could, because if we have a capital versus an O&M decision to may to extend that we could prove that it's benefit of customers to have an O&M solution that we're allowed to earn on that program. So I think the commission has taken a positive step forward in this decisions. And yeah, I think we're now that we have the rules unknown. And again, go back to our previous tried and true ability to find ways to generate value for our shareholders throughout any PBR or costs of our generic cost of capital framework.

Brian Shkrobot: And just to follow up on the comments made earlier about the annual updates, you've gotten the clarity that you know the distribution utilities operate under PBR that they'll be an annual ROE update, because I know in some jurisdictions they said at the beginning of the five year window and then you kind of operate under that base ROE. And I guess if you do have an annual updates, does that make it harder to manage through PBR in terms of how you think about timing and working through cost savings through the five year period?

Brian Shkrobot: No, like in terms of the annual update for the generic cost of capital rate flowing through, is that referring to work? Yeah, yeah, yeah, no, yeah, and no, that's not, you know, it doesn't change the thing is in terms of our form of normal compensation for inflation and that is a typical thing through a PBR framework, but the update to ROE instead of being flat, yeah, they will change maybe up or maybe down depending on current and online parameters those two, but I don't think it's going to materially change throughout the five year period and and it'll be set November each year and like I said in the on my opening remarks, we expect that to be north of 9% for the for 2024 Okay, and then just one last question for me is just as you look into the medium term, particularly your Alberta utilities, are you seeing anything changing in terms of the outlook, demand, regional needs, technology changes.

Wayne Stensby: Any sort of factoring into what you think the rate base outlook looks like for any of the utilities in Alberta, maybe on a three to five year outlook.

Wayne Stensby: Yeah, maybe I'll let Wayne kind of answer this one. I think he kind of hit it off in terms of in terms of what our outlook looks like and certainly all of those factors are something that are currently on our, on our radar, maybe Wayne, do you want to get your views on that? Yeah, and I think you hit the kind of key elements in a way, but you know, I'm almost building on the affordability conversation from from a couple of questions ago, but we are seeing strong demand growth from our customers across the problems, Alberta, the Alberta economy is doing well.

Wayne Stensby: And you know, in an inflationary situation, right, so we are seeing customer growth, we are seeing, I would say, ever increasing needs from our customers or wants from our customers from their utilities, and, and so we are building strong plans as we move forward to invest and support that those growing customer needs.

Wayne Stensby: And growing numbers of customers, so we are, we, we see the next three to five years as, I was very positive for our for over utilities. It was that expected to manifest itself into higher rate base growth, when you look at maybe in a five year horizon. Yes. Okay, I'll give it there. Thanks.

Patrick Kenny: The next question comes from Patrick Kenny with National Bank Financial, so you go ahead. Thank you, good morning. You guys touched on the on Luma in your prepared remarks, but any updated guidance on when we might see a transition from the supplemental to the O&M agreement.

Wayne Stensby: I'll pass that on to Wayne. Good morning, Patrick. Yes, it is the question we've been facing, I suppose, for two or three years at this point in time, but maybe I can offer you a little more color there. It's been in the public markets, but the core of it's been court dates or the confirmation hearing dates have been set for the first two weeks of March of next year. I, you know, it's possible those are delayed, but I think it's highly unlikely at this point in time.

Wayne Stensby: That's a US federal bankruptcy court. And so the judge will hold those confirmation hearings. If you follow then kind of, you know, conventional thinking from March. I think that, that plan will take, you know, they'll have to be the hearing or the trial, I guess, and the evidence, then the eventual ruling, that will probably take you all the way till middle of next year. And then there's the implementation of the plan.

Wayne Stensby: So on broad strokes, we would imagine that the prepa emerges from bankruptcy, perhaps towards the end of 2024. That said, as you know, Luma extended the supplemental period with no deadline, roughly a year ago. And so if it takes longer, it takes longer, I think our real focus, you know, organizationally is to continue to build on what we were hired to do, which is fundamentally transforming electric system and Puerto Rico and rebuild and improve that system.

Wayne Stensby: And so that's where I would tell you the vast majority of of the focus is as we follow through the bankruptcy. I guess I could have added, of course, as, as you know, once we move out of the supplemental period, we move into the 15 year term of the contract. Right. Okay.

Wayne Stensby: That's perfect. Thank you for the update.

Brian Shkrobot: And then maybe just shifting gears to the balance sheet, Ryan, you issued some 30 year paper late in the quarter. You just provide maybe an update on your funding needs for the remainder of the year, and maybe into 2024. Are there any other upcoming maturities or cat-backed spend that you might be able to pre-fund and maybe take some additional market risk off the table?

Brian Shkrobot: Yeah, thanks better for your question. Yeah, you mentioned our issue that we did earlier in a year and, you know, very, very successful. Very happy with the outcome of that, that debt issue got very favorable rates and well over subcribed. And it's also the kind of the first issue since withdrawing from Marines from S&P. And so in terms of the rest of the year, no, we don't expect to have to access the market for their maintenance this year.

Brian Shkrobot: And then to next year, I'd see that, you know, we have some definitely some flexibility there and, at least on the CU inside, we expect to be probably around the same range of this year for our needs, but with some flexibility.

Brian Shkrobot: Thank you. Got it. Thanks for that.

Unknown Executive: I'll leave it there, guys.

Ben Pham: Once again, anyone on the conference call who wishes to ask the question may press the star of one at this time. The next question comes from Ben Femme, BMO, please go ahead. Hi, good morning.

Brian Shkrobot: I wanted to go back to the Alberta Rebasing. I know you've, you mentioned that it's tracking in line with your expectations, the rebase and where earnings are going for 2021, 23. I wanted to reconcile that with some of your comments early in the year. I think you mentioned Q3 was going to be a peak rebase and then you would see growth in Q4. Is that still the trend because it looks like Q3 ended up not being as bad as Q2?

Brian Shkrobot: Yeah, no, no, thanks Ben. Comments and I'd say generality in terms of the seasonality of that's typically the case and I would say there's all that said it was always some timing of costs and initiatives that happened through the year and then I would say for the third quarter here. We did have some time, especially in our electric distribution business, timing of some costs, which probably improved us versus were kind of above the normal seasonality would be.

Brian Shkrobot: So I guess, yes, overall, we would expect but with that kind of a proviso that we do have on a typical year, some timing of operating issues from one year to the next. And whether it's us working on well for a restoration, that changes some of our time of our own end costs. Those are kind of examples, which could, you know, from a typical year over year comparison and cause some noise.

Brian Shkrobot: Is that the key three timing and some maintenance work is that question to keep for them maybe you won't keep growth year over year? Yeah, I think, you know, I say we're still back in line with what we expect for when we communicated. So we know we're coming off a 2022 outperformance and I think you see in the regulatory filings and the specific outperforms we achieved. We do expect to come back down to kind of that one to 200 basis point range by the end of the year. So I do see a little bit of that adversity and Q4 but but again, I do think it's in line with the guidance that we've already provided each of that one to 200 basis point range.

Brian Shkrobot: I'm interested in and I know usually with the second question is on on CapEx.

Brian Shkrobot: I mean, no news means is no change in that utility CapEx budget. I wanted to check those some reference to maybe rate base. Growth be moving better than expect is that more references to your beyond your guidance timeframe. Yeah, that's great question, Ben. I think I think Wayne kind of alluded to and kind of his his comments like we do see some significant growth in our jurisdictions here and certainly, you know, be mindful of the affordability of our customers, but we are seeing pressures from the growth and evolving demands from our customers.

Brian Shkrobot: And also, we recognize there's a little bit of a pause on the renewables, but reality is, we do need to connect and make sure that we continue to provide a network which has faith and reliable energy and serving our needs.

Brian Shkrobot: So, you know, I think this is evolving, you know, we expect to give an update.

Brian Shkrobot: You know, typically we provide a further update at the end of in the year, so in February, we'll provide kind of a more refined guidance than in terms of what our expectations and outlook is for the next three to five years. Thank you.

Unknown Executive: This concludes the question as their session.

Lawrence Gramson: I would like to turn the conference back over to Mr. Lawrence Gramson for any closing remarks. Thank you operator and thank you all for participating today. We appreciate your interesting gain utilities and we look forward to speak with you again soon.

Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day. You You