Q2 2024 Algonquin Power & Utilities Corp Earnings Call

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Operator: Hello, and welcome to the Algonqn Pwr & Utilities Corp 2nd Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Operator: Hello and welcome to the Algonquin Power and Utilities Corp. 2nd quarter of 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Speaker Change: Hello, and welcome to the Algonquin power and Utilities Corp, second quarter 2024 earnings Conference call.

Speaker Change: All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star 1 on your telephone keypad. I will now turn the conference over to Mr. Brian Chin, Vice President of Investor Relations.

Operator: After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star 1 on your telephone t-pad.

Speaker Change: The speaker's remarks, there will be a question and answer session.

Speaker Change: If you'd like to ask a question. During this time simply press star one on your telephone keypad.

Brian Chin: I will now turn the conference over to Mr. Brian Chin, Vice President of Investor Relations. Please go ahead.

Speaker Change: I will now turn the conference over to Mr. Brian Chin, Vice President of Investor Relations. Please go ahead.

Brian Chin: Thanks and good morning everyone. Thank you for joining us for our second quarter 2024 earnings conference call. Speaking on the call today will be Chris Huskilson, Chief Executive Officer, Darren Myers, Chief Financial Officer, Jeff Norman, President of Renewables, and Sarah McDonald, Chief Transformation Officer. To accompany today's earnings call, we have a supplemental webcast presentation available on our website, algonqnpwr.com. Our financial statements and management discussion analysis are also available on the website, as well as on CDER Plus and EDGAR.

Brian Chin: Thanks and good morning, everyone. Thank you for joining us for our 2nd quarter of 2024 earnings conference call. Speaking on the call, today will be Chris Huskilson, Chief Executive Officer, Darren Myers, Chief Financial Officer, Jeff Norman, President of Renewables, and Sarah McDonald, Chief Transformation Officer. To accompany today's earnings call, we have a supplemental webcast presentation available on our website, Algonquin Power.com. Our financial statements and management discussion analysis are also available on the web.

Brian Chin: Thanks, and good morning, everyone. Thank you for joining us for our second quarter 2024 earnings Conference call.

Speaker Change: Speaking on the call today will be Chris Hospital send Chief Executive Officer, Darren Myers, Chief Financial Officer, Jeff Norman President of Renewables, and Sarah Macdonald Chief transformation Officer.

Speaker Change: To accompany today's earnings call, we have a supplemental webcast presentation available on our website at Gulf power Dot com.

Speaker Change: Actual statements and management discussion and analysis are also available on the website as well as on SEDAR plus and Edgar.

Brian Chin: We would like to remind you that our discussion during the call will include certain forward-looking information and non-GAAP measures. Actual results differ materially from any forecast or projection contained in such forward-looking information. Certain material factors and assumptions were applied in making the forecast and projections reflected in such forward-looking information. Please note and review the related disclaimers located on slide 2 of our earnings call presentation at the Investor Relations section of our website at AlgonquinPower.com. Please also refer to our most recent MDNA file on Cedar Plus Medgar and available on our website for additional important information on these items, including the material factors that could cause actual results to differ materially and the factors and assumptions applied in making such forecasts and projections.

Brian Chin: We would like to remind you that our discussion during the call will include certain forward-looking information and non-GAAP measures. However, actual results could differ materially from any forecast or projection contained in such forward-looking information. Certain material factors and assumptions were applied in making the forecasts and projections reflected in such forward-looking information. Please note and review the related disclaimers located on slide two of our earnings call presentation in the investor relations section of our website at algonqnpwr.com.

Speaker Change: We would like to remind you that our discussion during the call will include certain forward looking information and non-GAAP measures actual results could differ materially from any forecast or projection contained in such forward looking information certain material factors and assumptions were applied in making the forecasts or projections reflected in such forward looking information. Please note will review the related disclaimers located on slide two.

Speaker Change: You have our earnings call presentation at the Investor Relations section of our website at Algonquin power Dot com.

Brian Chin: Please also refer to our most recent MD&A filed on CDERplus and EDGAR and available on our website for additional important information on these items, including the material factors that could cause actual results to differ materially and the factors and assumptions applied in making such forecasts and projections.

Speaker Change: Please also refer to our most recent MD&A filed on SEDAR, plus Edgar and available on our website for additional important information on these items, including the material factors that could cause actual results to differ materially and the factors and assumptions applied in making such forecasts or projections.

Brian Chin: On the call this morning, Chris will provide an update surrounding the Renewable Sales Agreement, which was pressed release this morning, and on the company's ongoing strategic transition to a peer-play regulated utility. Then Darren will review key highlights pertaining to our regulated and renewables business groups and our second quarter financial results. Darren will also provide some color on the financial outlook following the expected sales of the Renewables business, and then Chris will close with some final remarks.

Brian Chin: On the call this morning, Chris will provide an update surrounding the Renewable Sales Agreement, which was released this morning, and on the company's ongoing strategic transition to a pure play regulated utility. Then, Darren will review key highlights pertaining to our regulated and renewables business groups and our second quarter financial results. Darren will also provide some color on the financial outlook, following the expected sale of the renewables business.

Speaker Change: On the call. This morning, Chris will provide an update surrounding the renewable sales agreement, which was press released this morning, and all of the company's ongoing strategic transition to a pure play regulated utility.

Speaker Change: Then Dan will review key highlights pertaining to our regulated and renewables business groups and our second quarter financial results. Darren will also provide some color on the financial outlook. Following the expected sales the renewables business and then Chris will close with some final remarks, we will then open the lines for the question and answer period, we ask that you currently restrict your questions to two and re queue.

Brian Chin: And then Chris will close with some final remarks. We will then open the lines for the question and answer period. We ask that you kindly restrict your questions to two, then re-queue if you have any additional questions to allow others the opportunity to participate. With that, I'll turn it over to Chris.

Brian Chin: We will then open the lines for the question-and-answer period. We ask that you kindly restrict your questions to two, then re-cute if you have any additional questions to allow others the opportunity to participate.

Speaker Change: If you have any additional questions to allow others the opportunity to participate with that I'll turn it over to Chris.

Chris Huskilson: With that, I'll turn it over to Chris.

Chris Huskilson: Thank you, Brian, and good morning, everyone. After being in the CEO role for a year, I'm more convinced than ever that our current path towards a pure play regulated utility supports our goals to create long-term value and increase our quality of earnings. https://www.kenhub.com A year ago, I set three priority goals to sell the renewables business. Optimize the Value of AY

Chris Huskilson: Thank you, Ryan, and good morning, everyone. After being in the CEO role for a year, I'm more convinced than ever that our current path towards a pure play regulated utility supports our goals to create long-term value, increase our quality of earnings, and bring increased focus to improving our execution.

Chris: Thank you, Brian and good morning, everyone.

Chris: After being in the CEO role for a year.

Chris: I'm more convinced than ever that our current path towards a pure play regulated utility.

Chris: Parts of our goals to create long term value.

Chris: Increase our quality of earnings and bring increased focus.

Chris: So improving our execution.

Chris Huskilson: A year ago, I set three priority goals to sell the Renewables business, optimize the value of AY, and to get the regulated business up and running. Today, I'm pleased to announce the successful sale of a Renewables business at a valuation of $2.5 billion. As we set out to accomplish in our 2023 Strategic Review, we've achieved a deal at a compelling value for our platform business with strong assets. in Scale. As we set out to accomplish, sorry, this agreement between Algonqn and LS Power for the company's non-hydro-renewable energy business consisting of 2.28 billion in cash proceeds and 220 million in an urnode agreement relating to certain wind assets.

A year ago, I said three priority goals.

Chris: To sell the renewables business.

Optimize the value of any y.

Chris Huskilson: And to get the regulated business up and running. Today, I'm pleased to announce the successful sale of a renewables business at a valuation of $2.5 billion. As we set out to accomplish in our 2023 strategic review, we've achieved a deal at a compelling value for our platform business with strong assets.

Chris: And to get the regulated business up and running.

Chris: Today I'm pleased to announce the successful sale of our renewables business at a valuation of $2 5 billion.

Chris: As we set out to accomplish in our 2023 strategic review.

Chris: We've achieved a deal at a compelling value for our platform business with strong assets and scale.

Chris: As we set out to accomplish I'm sorry.

Chris Huskilson: This agreement between Algonqn and LS Power for the company's non-hydro renewable energy business, $2.28 billion in cash proceeds, and $220 million in an earn-out agreement relating to certain wind assets. I just want to take this moment to thank the team from across Algonq for the tireless efforts that they put in. This is a great job, team. Thank you very much.

Chris: Okay.

Chris: This agreement between Algonquin and L. S power for the company's non hydro renewable energy business, consisting of $2. Two 8 billion in cash proceeds and $220 million and an earn out agreement relating to certain wind assets.

Chris Huskilson: I just want to take this moment to thank the team from across Algonqn for the tireless efforts that they put in. There's a great job team. Thank you very much.

Speaker Change: I just wanted to take this moment to thank the team from Cros.

Cross: Cross Algonquin.

Speaker Change: For the tireless efforts that they've put in.

Speaker Change: Great job team. Thank you very much.

Chris Huskilson: This major milestone, coupled with our previously announced support agreement to sell our Atlantica shares, delivers on our plan to transform Algonqn into a pure play regulated utility. Optimize our regulated business activities, strengthen our balance sheet, and enhance our quality earnings. As Darren will touch on shortly, we expect to use the proceeds upon close in late 24 or early 2025 to recapitalize our balance sheet and position ourselves for future growth. We're also making progress on our goal to get the regulated business up and running. We reorganized along commodity lines to improve operational efficiency. We recently completed the implementation of our Customer First enterprise platform, which promises to deliver value to our customers and substantial efficiencies.

Chris Huskilson: This major milestone, coupled with our previously announced support..., to sell our Atlantica shares, delivers on our plan to transform Algonqn into a pure play regulated utility, optimize our regulated business activities, strengthen our balance sheet, and enhance our quality of earnings. As Darren will touch on shortly, we expect to use the proceeds upon close in late 2024 or early 2025.

Speaker Change: This major milestone coupled with our previously announced support agreement to sell our atlantica shares deliveries on our plan to transform Algonquin into a pure play regulated utility.

Speaker Change: Optimize our regulated business activities.

Speaker Change: Strengthen our balance sheet and enhance our quality of earnings.

Speaker Change: As Darin will touch on shortly we expect to use the proceeds upon close in late 'twenty four or early 2025 to recapitalize, our balance sheet and position ourselves for future growth.

Chris Huskilson: Recapitalize Your Balance Sheet, position ourselves for the future. We're also making progress on our goal to get the regulated business up and running. We reorganized along commodity lines to improve operational efficiency. We recently completed the implementation of our customer-first enterprise platform, which promises to deliver value to our customers and substantial efficiency. We added three new experienced board members with extensive infrastructure and regulated utility experience.

We're also making progress on our goal to get the regulated business up and running.

Darin: We reorganized along commodity lines to improve operational efficiency.

Darin: We recently completed the implementation of our customer first enterprise platform, which promises to deliver value to our customers and substantial efficiencies.

Chris Huskilson: We added three new experienced board members with extensive infrastructure and regulated utility experience. We're implementing fundamental changes to how we operate the company, with increased accountability.

Darin: We added three new experienced board members with extensive infrastructure and regulated utility experience.

Chris Huskilson: We're implementing fundamental changes to how we operate the company with increased accountability. This is the beginning of a multi-year journey to unlock the value of our regular jobs. In addition, we're making changes at the executive level. Yesterday, the company appointed Sarah McDonald as Chief Transformation Officer. In her new role, Sarah will assume responsibility for utility operations & Customer Service. Sarah is a lawyer by training and has more than two decades of legal, human resources, and operational experience.

Darin: We are implementing fundamental changes to how we operate the company with increased accountability.

Chris Huskilson: This is the beginning of a multi-year journey to unlock the value of our regulated business.

Darin: This is the beginning of a multiyear journey to unlock the value of our regulated business.

Chris Huskilson: In addition, we're making changes at the executive level. Yesterday, the company appointed Sarah McDonald as Chief Transformation Officer. In her new role, Sarah will assume responsibility for utility operations and customer service. Sarah is a lawyer by training and has more than two decades of legal human resources and operational experience. She has a broad background having worked in the utility sector for more than 20 years, including roles in utility construction as president and CEO of the AmeriCarabeean and as president of Tico Services.

Darin: In addition, we're making changes at the executive level.

Speaker Change: Yesterday, the company appointed Cerro Mcdonald as Chief transformation Officer.

Speaker Change: In her new role Sarah will assume responsibility for utility operations and customer service.

There is a lawyer by training and has more than two decades of legal human resources and operational experience.

Chris Huskilson: She has a broad background, having worked in the utility sector for more than 20 years, including roles in utility construction, president and CEO of AmeriCaribbean, and president of TECO Service. As part of this announcement, Chief Operating Officer Johnny Johnston has left the company. I'd like to personally thank Johnny for his dedication. Thank you all for your time and service and for his commitment, as we wish him the best for his future endeavors.

Speaker Change: She has a broad background, having worked in the utility sector for more than 20 years.

Speaker Change: <unk> rolls and utility construction as president and CEO of Humira Caribbean.

Speaker Change: And as president of take our services.

Chris Huskilson: As part of this announcement, Chief Operating Officer Johnny Johnston has left the company. I'd like to personally thank Johnny for his dedication and service, and his commitment as we wish him the best for his future endeavors. As we look forward, we're focused on delivering value to our shareholders in a more self-sufficient manner. We see tremendous value in the business from investments we have made for our customers that are not yet in rates. We need to improve our recoveries, reduce our regulatory lag, and absorb our growth.

Speaker Change: As part of this announcement Chief operating Officer, Johnny Johnston has left the company.

Speaker Change: I'd like to personally thank Tony for his dedication and.

Speaker Change: And service and his commitment as we wish him the best for his future endeavors.

Chris Huskilson: As we look forward, we're focused on delivering value to our shareholders in a more self-sufficient manner. We see tremendous value in the business from investments we have made for our customers that are not yet in rates. We need to improve our recoveries, reduce our regulatory lag, and absorb our growth. As a result, we will be reducing our regulated CapEx for 2025. Also, as part of our objective to be more self-sufficient, the board has decided to right-side the dividend.

Speaker Change: As we look forward, we're focused on delivering value to our shareholders and a more self sufficient manner.

Speaker Change: We see tremendous value in the business from investments we have made for our customers that are not yet in rates.

Speaker Change: We need to improve our recoveries reduced our regulatory lag and absorb our growth.

Chris Huskilson: As a result, we will be reducing our regulated CAPEX for 2025. Also, as part of our objective to be more self-sufficient, the board has decided to right-side the dividend, so we're not chasing a high pay-out ratio and excessive equity raises. These are necessary steps that we expect to unlock more value in the long term for our shareholders.

Speaker Change: As a result, we will be reducing our regulated capex for 2025.

Speaker Change: Also as part of our objective to be more self sufficient the board has decided to right size the dividend.

Chris Huskilson: So we're not chasing a high payout ratio and excessive equity risk. These are necessary steps that we expect to unlock more value in the long term for our shareholders. Now, let me provide more details on the business. Starting with the investments, but not yet. We currently estimate over $1 billion in assets are not yet authorized in rates or receiving optimized regulatory treatment. This represents a rare capital-light path to earnings growth. An example of this is our Cerebell Wastewater Treatment Plant in Arizona.

Speaker Change: So we're not chasing a high payout ratio.

Speaker Change: And excess excessive equity raises.

Speaker Change: These are necessary steps that we expect to unlock more value in the long term for our shareholders.

Chris Huskilson: Now let me provide more details on the business, starting with the investments not yet in rates. We currently estimate over $1 billion in assets are not yet authorized in rates or receiving optimized regulatory treatment. This represents a rare capital-like path to earnings growth. An example of this is our Sarah Bell Wastewater Treatment Plant in Arizona. The plant is an important and currently operating asset, enabling the local community to grow, but is not yet in customer rates. Another is our customer first SAP program, which, as I mentioned earlier, just completed its final implementation. Our investment in the platform has been approved in six of our smaller jurisdictions, but is not yet reflected in customer rates for the majority of our utilities.

Speaker Change: Now, let me provide more details on the business starting with investments not yet in rates.

Speaker Change: We currently estimate over $1 billion in assets are not yet authorized and rates are receiving optimized regulatory treatment.

Speaker Change: This represents a rare capital light path to earnings growth.

Speaker Change: An example of this is our survey all wastewater treatment plant in Arizona.

Chris Huskilson: The plant is an important and currently operating asset, enabling the local community to grow, but is not yet in the customer rate, and the other is our customer-first SAP program, which, as I mentioned earlier, just completed its final implementation. Our investment in the platform has been approved in six of our smaller jurisdictions, but is not yet reflected in customer rates for the majority of our utilities. Our Customer First Program is a world-class platform designed to facilitate greater operational efficiency and utility integration for improved customer service.

Speaker Change: <unk> is an important and currently operating asset, enabling the local community to grow but is not yet in customer rates.

Speaker Change: And the other is our customer first S&P program.

Speaker Change: Which as I mentioned earlier just completed its final implementation.

Speaker Change: Our investment in the platform has been approved in six of our smaller jurisdictions, but it is not yet reflected in customer rates for the majority of our utilities.

Chris Huskilson: Our customer first program is a world-class platform designed to facilitate greater operational efficiency and utility integration or improved customer service. It's worth calling out that we are now in the typical post-conversion adjustment period for these types of systems. Our system implementation combined with our most active rate case calendar in our history is causing some delays in our rate case filings, which we're working through.

Speaker Change: Our customer first program is a world class platform designed to facilitate greater operational efficiency and utility integration or improved customer service.

Chris Huskilson: It's worth calling out that we are now in the typical post-conversion adjustment period for these types of systems. Our system implementation combined with our most active rate case calendar in our history is causing some delays in our rate case filings. In terms of our rate case filings, I also want to call out changes to our expected regulatory calendar in a few of our jurisdictions, namely Missouri, New Hampshire, and California. In respect of these jurisdictions, we're expecting delays of one to two quarters, which will shift the beginning of our recoveries closer to 2026.

Speaker Change: It's worth calling out that we are now in the typical post conversion adjustment period for these types of systems.

Speaker Change: Our system implementation combined with our most active rate case calendar.

And our history is causing some delays in our rate case filings.

Speaker Change: Which we're working through.

Chris Huskilson: In terms of our rate case filings, I also want to call out changes to our expected regulatory calendar in a few of our jurisdictions, namely Missouri, New Hampshire, and California. In respect to these jurisdictions, we're expecting delays of one to two quarters, which will shift the beginning of our recovery closer to 2026. These delays will, of course, impact short-term earnings. While we have some challenges in the short term, the substantial value here is a disciplined capital-like trajectory to improve returns.

Speaker Change: In terms of our rate case filings I also want to call out changes to our expected regulatory calendar and a few of our jurisdictions, namely, Missouri, New Hampshire in California.

Speaker Change: In respect to these jurisdictions, we're expecting delays of one to two quarters.

Speaker Change: <unk> will shift at the beginning of our recoveries closer to 2026.

Chris Huskilson: These delays will, of course, impact short-term earnings. Well, we have some challenges in the short term, but the substantial value here is a disciplined capital light trajectory to improved returns. With that, I'll turn it over to Darren.

Speaker Change: These delays will of course impact short term earnings.

Speaker Change: Well, we have some challenges on the short term there is substantial value here.

Speaker Change: Is a disciplined capital light trajectory to improve returns.

Darren Myers: With that, I'll turn it over to Darren. Thank you, Chris, and good morning, everyone. I'll start with the Regulated Services group. During the second quarter of 2024, we received the final order for our Valco utility in Bermuda, authorizing a revenue increase totaling $33.6 million over two years. New rates became effective on August 1st, 2024. In New York, we filed a joint proposal with the New York Department of Public Services staff, resolving all contested issues. A final order is expected sometime in the third quarter. The regulated services group currently has pending 14 rate reviews, totaling $131 million as of quarter end.

Speaker Change: With that I'll turn it over to Darren.

Darren Myers: Thank you, Chris, and good morning, everyone. I'll start with the regulated services group. During the second quarter of 2024, we received the final order for our Belco utility in Bermuda, authorizing a revenue increase totaling $33.6 million over 2 years. New rates became effective on August 1st, 2024. In New York, we filed a joint proposal with the New York Department of Public Services staff resolving all contested issues, and a final order is expected sometime in the third quarter.

Darren: Thank you, Chris and good morning, everyone.

Darren: I'll start with the regulated services group during the second quarter of 2024, we received the final order for our belko utility in Bermuda authorizing a revenue increase totaling $33 $6 million over two years.

Darren: New rates became effective on August one 2024.

Darren: In New York, We filed a joint proposal with the New York Department of public services stuff resolving all contested issues and a final order is expected sometime in the third quarter.

Darren Myers: The regulated services group currently has pending 14 rate reviews, totaling $131 million as of quarter end. Turning now to a brief update on our Renewables Energy Group. Our construction trajectory for renewables remains on track.

Darren: The regulated services group currently has pending 14 rate reviews.

Darren: Totaling $131 million as of quarter end.

Darren Myers: Turning now to a brief update on a Renewable Energy Group, our construction trajectory for renewables remains on track. Our construction loan balances fall into $405 million due to the buyout of the New Market Solar in Shady Oaks II Project. By year end, we expect that loan balance to round trip back up to similar level where we started the year due to the completion of construction at Carver's Creek and Clearview.

Darren: Turning now to a brief update on our renewable energy group, our construction trajectory for renewables remains on track our construction loan balances fall into $405 million due to the buyout of the new market solar and shady Oaks two projects.

Darren Myers: Our construction loan balances fell to $405 million due to the buyout of the New Market Solar and Shady Oaks II projects. By year end, we expect that loan balance to round trip back up to a similar level where we started the year due to the completion of construction at Carver's Creek and Clearview. I'll now turn to our financial results. Our second quarter financial performance delivered growth in each of our key financial metrics, EBITDA, adjusted net earnings, and adjusted net earnings per share, with double-digit increases compared to the same period last year.

Darren: By year end, we expect that loan balance to round trip back up to similar level, where we started the year due to the completion of construction of Carver's Creek and clear view.

Darren Myers: We'll now turn to our financial results. Our second quarter financial performance delivered growth in each of our key financial metrics. EBITDA adjusted net earnings and adjusted net earnings per share with double-digit increases compared to the same period last year. Operating profit growth for both the regulated renewables business were largely as expected, with regulated growing 7% and renewables growing 31%. Adjusted EBITDA was $311 million, up 12% from the same period last year. Adjusted net earnings worth $65.2 million, an increase of 16%. On a per share level, our second quarter adjusted net earnings per share was $0.9, a 13% increase in the second quarter of last year.

Darren Myers: Operating profit growth for both the regulated and renewables business was largely as expected, with the regulated business growing 7% and renewables growing 31%. Adjusted EBITDA was $311 million, up 12% from the same period last year. Adjusted net earnings were $65.2 million, an increase of 16%. On a per share basis, our second quarter adjusted net interest per share was $0.09, a 13% increase from the second quarter of last year. Let me briefly discuss individual EPS drivers.

I'll now turn to our financial results.

Speaker Change: Our second quarter financial performance delivered growth in each of our key financial metrics EBITDA adjusted net earnings and adjusted net earnings per share with double digit increases compared to the same period last year.

Speaker Change: Operating profit growth for both the regulated renewables business were largely as expected with regulated growing 7% and renewables growing 31% adjusted EBITDA was $311 million up 12% from the same period last year. Adjusted net earnings were $65 2 million an increase of 16%.

Speaker Change: On a per share level, our second quarter adjusted net earnings per share was 9% to 13% increase from the second quarter of last year.

Darren Myers: Let me briefly discuss individual EPS drivers. First, whether return to a more normalized level, contributing approximately three cents to the upside year over year. Second, a regulated business operating profit grew organically by two cents, primarily due to new rate implementations at several of the company's electric, gas, and water utilities. However, this was offset by a negative two cents year over year due to last year's benefit of a one-time retroactive rate order in California. Renewables also organically grew by two cents, driven by contributions from new wind facilities to your fuel, to and Sandy rich to brought online last year.

Speaker Change: Let me briefly discuss individual EPS drivers first weather returned to a more normalized level contributing approximately <unk> <unk> to the upside year over year.

Darren Myers: First, weather returned to a more normalized level, contributing approximately $0.03 to the upside year over year. Second, regulated business operating profit grew organically by two cents, primarily due to new rate implementations at several of the company's electric, gas, and water utilities. However, this was offset by a negative two cents year over year due to last year's benefit of a one-time retroactive rate order in California. Renewables also organically grew by two cents, driven by contributions from new wind facilities Deerfield 2 and Sandy Ridge 2 brought online last year.

Speaker Change: Second our regulated business operating profit grew organically by <unk> <unk>, primarily due to new rate implementation that several of the company's electric gas and water utilities. However, this was offset by negative <unk> <unk> year over year due to last year's benefit of a onetime retroactive rate order in California.

Speaker Change: Renewables also organically grew by <unk> <unk> driven by contributions from new wind facilities, Deerfield, too and Sandy rich to brought online last year. This was offset by a negative penny due to development cost expenses in part as a result of the simplification of our JV entity as discussed in prior quarters.

Darren Myers: This was offset by negative penny due to development cost expenses in part as a result of the simplification of our JV entity, as discussed in prior quarters. Depreciation contributed negative two cents, and interest expense contributed negative penny, excluding the impacts of our empire bond securitization. And lastly, tax credits were a little better this year than we had projected, being flat year over year.

Darren Myers: This was offset by a negative penny due to development cost expenses, in part, as a result of the simplification of our JV entity, as discussed in prior quarters. Repreciation contributed a negative two cents, and interest expense contributed a negative penny excluding the impacts of our empire bond securitization.

Speaker Change: Depreciation contributed negative <unk> <unk> and interest expense contributed a negative penny excluding the impacts of our Empire bond securitization.

Darren Myers: And lastly, tax credits were a little better this year than we had projected, being flat year over year. During the quarter, the company settled the purchase contracts from its green equity units as expected, issuing approximately 76.9 million common shares for proceeds of $1.15 billion. These proceeds were used to reduce existing indebtedness and for general corporate purposes. We ended the quarter with approximately 767 million shares issued and outstanding.

Speaker Change: Lastly tax credits were a little better this year than we had projected being flat year over year.

Darren Myers: Turning now to key financing activities. During the quarter, the company settled the purchase contracts from its green equity units as expected, issuing approximately $76.9 million common shares for proceeds of $1.15 billion. These proceeds were used to reduce existing indebtedness and for general corporate purposes. We ended the quarter with approximately $767 million shares issued and outstanding. With the conclusion of the equity unit remarketing and as of June 30, 2024, we have refinanced approximately $2.5 billion of our borrowings over the trailing 12 months, and we have simplified our capital structure.

Speaker Change: Turning now to key financing activities.

Speaker Change: During the quarter the company settled the purchase contracts from its green equity units as expected issuing approximately $76 9 million common shares for proceeds of 1.15 billion.

Speaker Change: These proceeds were used to reduce existing indebtedness and for general corporate purposes. We ended the quarter with approximately 767 million shares issued and outstanding.

Darren Myers: With the conclusion of the equity unit remarketing, and as of June 30, 2024, we have refinanced approximately $2.5 billion of our borrowings over the trailing 12 months, and we have simplified our capital structure. As Chris mentioned earlier, we are pleased to announce the sale of our renewables business. The transaction proceeds and valuation are compelling. We expect to close the sale in late 2024 or early 2025 and receive net cash proceeds of approximately $1.6 billion after repaying construction financing and other customary adjustments. Proceeds from the renewable energy sale, plus our Atlantica shares, will leave us with a very strong balance sheet.

Speaker Change: With the conclusion of the equity unit remarketing and as of June 32024, we have refinanced approximately $2 5 billion of our borrowings over the trailing 12 months and we have simplified our capital structure.

Darren Myers: As Chris mentioned earlier, we are pleased to announce the sale of our Renewables business. The transaction proceeds and valuation are compelling. We expect to close the sale of late 2024 or early 2025 and receive net cash proceeds of approximately $1.6 billion after repaying construction financing and other customary adjustments. Proceeds from the Renewables sale plus our Atlantica shares will leave us with a very strong balance sheet.

Speaker Change: As Chris mentioned earlier, we are pleased to announce the sale of our renewables business the transaction proceeds and valuations are compelling.

Chris: We expect to close the sale in late 2024 or early 2025 and received net cash proceeds of approximately $1 6 billion.

Chris: After repaying construction financing and other customary adjustments.

Chris: Proceeds from the renewable sale plus our atlantica shares will leave us with a very strong balance sheet.

Darren Myers: In addition, as we look forward, we are making changes to be more self-sufficient. We are looking at spending capital at a level just above requisite maintenance, safety, and environmental requirements in order for the company to digest the impacts of investments already made on behalf of our customers. Once we improve our returns to a more appropriate level, we will have the opportunity to increase our capital spending in a disciplined way. With regards to our newly reduced dividend, we see our revised dividend payout as roughly 60 to 70% of our optimized core regulated earnings power on our current assets.

Darren Myers: In addition, as we look forward, we are making changes to be more self-sufficient. We are looking at spending capital at a level just above requisite maintenance, safety, and environmental requirements in order for the company to digest the impacts of investments already made on behalf of our customers. Once we improve our returns to a more appropriate level, we will have the opportunity to increase our capital spending in a disciplined way. With regard to our newly reduced dividend, we see our revised dividend payout as roughly 60-70% of our optimized core regulated earnings power on our current assets. And although we are not providing guidance at this time, as described earlier, 2025 earnings will be impacted by rate case timing. With that, I'll hand it back to Chris for some closing remarks.

Speaker Change: In addition, as we look forward, we are making changes to be more self sufficient we are looking at spending capital at a level just above requisite maintenance safety and environmental requirements in order for the company to digest the impacts of investments already made on behalf of our customers.

Speaker Change: Once we improve our returns to a more appropriate level, we will have the opportunity to increase our capital spending in a disciplined way.

Speaker Change: With regards to our newly reduced dividend, we see our revised dividend payout is roughly 60% to 70% of our optimized core regulated earnings power on our current assets.

Darren Myers: And although we are not providing guidance at this time, as described earlier, 2025 earnings will be impacted by rate case timing.

Speaker Change: And although we are not providing guidance at this time as described earlier 2025 earnings will be impacted by rate case timing.

Chris Huskilson: With that, I'll hand it back to Chris for some closing remarks.

Speaker Change: With that I'll hand, it back to Chris for some closing remarks.

Chris Huskilson: Okay, thank you, Darren. In summary, we've achieved several major milestones and are delivering on our plan to transform Algonquin into a pure play regulated utility. For reducing our capital spend and dividend, the position of the company for greater long-term value creation. As we look forward, we expect to have a solid balance sheet, a healthy payout ratio, a capital light path towards earnings, and ultimately dividend growth, all under, for the first time, a focused company with a singular business model. It's a tremendous story, and we're excited for the future.

Chris: Okay. Thank you Darren.

Chris: In summary, we have achieved several major milestones and are delivering on our plan to transform algonquin into a pure play regulated utility.

Speaker Change: Reducing our capital spend and dividend to position the company for greater long term value creation.

Chris: As we look forward, we expect to have a solid balance sheet, a healthy payout ratio our capital light path towards earnings and ultimately dividend growth.

Chris: All under for the first time, a focused company with a singular business model.

Speaker Change: Its a tremendous story and we're excited for the future.

Operator: Thank you. If you have a question, please press star 1 on your telephone keypad to withdraw your questions. Simply press star 1 again. One moment, please, for your first question. And your first question comes from the line of Rupert Merer from National Geographic.

Operator: With that, we'll open the lines for calls operating.

Speaker Change: With that we.

Speaker Change: We'll open the lines for calls operator.

Speaker Change: Yeah.

Operator: Thank you. If you have a question, please press star one on your telephone keypad. So, withdraw your question; simply press star one again.

Thank you.

Speaker Change: If you have a question. Please press star one on your telephone keypad.

Speaker Change: So withdraw your question.

Speaker Change: Simply press Star one again.

Operator: One moment, please, for your first question.

Speaker Change: One moment. Please for your first question.

Rupert Merer: And your first question comes from the line of Rupert Merer from National Bank. The line is open.

Rupert <unk>: And your first question comes from the line of Rupert <unk>.

Rupert: From National Bank.

Rupert Merer: The line is open. Hi. Good morning, everyone. Congratulations on getting to the conclusion of that deal. Thank you. So, if I can start by asking about the net cash proceeds of $1.6 billion, what does the walk-down look like from the sell price? How much?

Speaker Change: Your line is open.

Rupert Merer: Hi, yeah. Good morning, everyone. Congratulations on getting to the conclusion of that deal. Thank you, Rupert.

Rupert <unk>: Good morning, everyone and congratulations on getting to the conclusion of that deal.

Robert: Thank you Robert.

Rupert Merer: Of that difference is related to taxes, transaction fees, and versus construction debt.

Darren Myers: So, if I can start by asking about the net cash proceeds of 1.6 billion, what does the walk-down look like from the sell price? How much of that difference is related to taxes, transaction fees versus construction debt repayment? Yeah, I mean, Rupert's primarily the construction loans. Is very little tax friction on the deal, consistent with our original expectations. So, the majority of it would be construction loans and then really just the transaction cost and some of the break fees on the APCO bonds would be included in that as well.

Rupert <unk>: So if I can start by asking about the net cash proceeds of one 6 billion. What is the walk down looked like from the sell price how much.

Speaker Change: Of that difference is related to taxes transaction fees versus construction debt repayment.

Darren Myers: Yeah, I mean, Rupert, it's primarily the construction loans. There is very little tax friction on the deal consistent with our original expectations. So the majority of it would be construction loans. And then, you know, really just the transaction costs and some of the break fees on the APCO bonds would be included in that as well.

Rupert <unk>: Yes.

Speaker Change: It's primarily the construction loans theres very little tax friction on the deal consistent with our original expectations.

Speaker Change: So the majority of that would be construction loans and then.

Just the transaction costs and some of the break fees on the the optical bonds would be included in that as well.

Rupert Merer: Okay, great.

Darren Myers: Okay, great. And that construction debt is that debt that is currently off the balance sheet or yet to be incurred on your development pipeline? Yeah.

Speaker Change: Okay, great and that construction debt that debt, that's currently off balance sheet or yet to be incurred on your development pipeline.

Darren Myers: And that construction debt is that debt that's currently off balance sheet or yet to be incurred on your development pipeline? Yes, as I mentioned.

Darren Myers: Yes, as I mentioned, the balance is lower as of the end of Q2, but we expect it to get back to, you know, similar levels that it was to call it around the 700 million mark or just below that by the end of the year as we continue to build out clear viewing carvers.

Yes, as I mentioned, so so we the balance is lower.

Darren Myers: So, the balance is lower as of the end of Q2, but we expected to get back to similar levels that were around the 700 million marks or just below that by the end of the year as we continue to build out clear viewing carvers. Great.

Speaker Change: The end of Q2, but we expect it to get back to similar levels that it was call. It around the 700 million mark or just below that by the end of the year as we continue to build out clear viewing carvers.

Rupert Merer: Great. And then on the transaction itself, can you walk us through your thoughts on the valuation? How much of this is it for your development pipeline versus your operating assets, and what's your perspective on the multiple that you're getting on the deal?

Speaker Change: Great and then on the the transaction itself can you walk us through your thoughts on the valuation how much of this is.

Darren Myers: And then on the transaction itself, can you walk us through your thoughts on the evaluation? How much of this is for your development pipeline versus your operating assets? And what's your perspective on the multiple that you're getting on Deel. Yeah, listen, we think it's an excellent multiple in a strong transaction. It's always hard to, you know, decipher what you're getting for the, you know, the platform, but clearly, you know, we see this as a, you know, with the urn out at, you know, 12 and a half times type multiple of next year's, you know, epita, like estimated epita.

Speaker Change: Before your development pipeline versus your operating assets and what's your perspective on the multiple that youre getting on the deal.

Chris Huskilson: Yeah, listen. We think it's an excellent multiple and a strong transaction. It's always hard to decipher what you're getting for the platform. But clearly, we see this as a with the earn out at 12 and a half times the type multiple of next year's EBITDA, estimated EBITDA, and without the earn out, more like close to 11 and a half. So really strong multiples. And so clearly, there was value seen and you know what the team built over 30 years in the strong development pipeline and just the strength of the organization. So we're quite pleased with where that ended up.

Speaker Change: Yes, listen we think it's excellent multiple and a strong transaction, it's always hard to.

Speaker Change: Decipher, what what youre getting for the platform, but clearly we see this as a.

Speaker Change: As a with the earn out at 12 five times type multiple of next year's EBITDA only estimated EBITDA.

Chris Huskilson: And, you know, without the urn out, you know, more like a close 11 and a half. So, you know, really strong multiples. And so clearly there was value seen. And, you know, with the teams built over 30 years in the strong development to pipeline and just the strength of the organization.

Speaker Change: The earn out more like close to 11 and a half so really strong multiples and so clearly there was value seen in what the team has built over 30 years and the strong development.

Rupert <unk>: Pipeline and just the strength of the organization. So we're quite pleased with where that ended up in Rupert I think we said all along that in order for us to get to a sale of this business we have to see value for the development pipeline. So we haven't tried to quantify that but it's pretty clear to us that we did get paid for that.

Chris Huskilson: So, we're quite pleased with where that ended up.

Chris Huskilson: And Rupert, I think we said all along that in order for us to get to a sale of this business, we had to see value in the development pipeline. So you know, we haven't tried to quantify that, but it's pretty clear to us that we did get paid.

Chris Huskilson: Yeah, and Rupert, I think we said all along that in order for us to get to a sale of this business, we had to see value for the development pipeline. So, you know, we haven't tried to quantify that, but it's pretty clear to us that we did get paid for that. Very good.

Rupert Merer: Very good. I'll leave it there and get back in the queue. Thank you very much. Great. Thanks, Rupert.

Rupert Merer: Well, I'll leave it there and get back in the queue. Thank you very much. Thanks, Rupert.

Rupert <unk>: Very good I'll leave it there and get back in the queue. Thank you very much Greg Thanks Robert.

Sean Stewart: Thank you. Your next question comes from the line of Sean Stewart from TD Cohen. Line is open. Thanks. Good morning, everyone. Congrats on getting us over the line. Chris, the 60 to 70% pay a ratio on EPS.

Speaker Change: Thank you.

Sean Steuart: Your next question comes from the line of Sean Steuart from T.D. Cohen.

Speaker Change: Our next question comes from the line of Sean Stewart from TD Cohen.

Speaker Change: Your line is open.

Sean Steuart: Thanks. Good morning, everyone, and congrats on getting this over the line.

Sean Stewart: Thanks, Good morning, everyone and congrats on getting this over the line.

Chris Huskilson: Chris, the 60 to 70% payout ratio on EPS, am I to take it that is from the starting point 2025 post this asset sale, or is that relative to where you would expect EPS to get to, Al-Zer? Your rate case is normalized, I suppose. Yes.

Sean Stewart: Chris the 60% to 70% payout ratio on EPS am I take it that is from the starting point 2025 post. This this asset sale or is that relative to where you would expect EPS to get to.

Sean Stewart: Am I to take it that is from the starting point 2025 post this, this asset sale, or is that relative to where you would expect EPS to get to as your rate cases normalize, I suppose. Yes, Sean, it's down here.

Sean Stewart: As.

Sean Stewart: Your.

Speaker Change: Your rate cases normalizes suppose.

Darren Myers: Yes, Sean. It's Darren here. Let me just jump in. The target payout has been set based on our current regulatory assets, you know, fully earning or earning, you know, closer to fully earning. You know, clearly, we're, you know, next year will be our first year as a pure play regulated utility. We're on a multi-year journey, and as Chris highlighted in his prepared remarks, we have the most active rate cases we've had in history, plus the implementation of a major system. So, you know, from a timing perspective, we do expect some delays in 2025 with improvements in 2026 of investments we've already made that are not in right now.

Speaker Change: Yes, Sean it's Darren here.

Darren Myers: Let me just jump in real. The target payout has been set based on our current reg assets; you know, fully earning or earning, you know, closer to the fully earning. You know, clearly, you know, we're, you know, next year will be our first year as a pure play regulated utility.

Speaker Change: I'll just jump in.

Speaker Change: The target payout is has been set based on our current rig assets.

Speaker Change: Fully earning our earning closer to fully earning clearly.

Chris: Next year will be our first year as a pure play regulated utility we are in a multiyear journey and as Chris highlighted through his prepared remarks, we have the most active rate cases, we've had in history plus the implementation of a major system. So from a timing perspective, we do expect some delays in 2025 with no improvements in 'twenty.

Darren Myers: We're in a multi-year journey, and as Chris highlighted through his, you know, prepare remarks. You know, we have the most active rate cases we've had in history, plus the implementation of a major system. So, you know, from a timing perspective, we do expect some delays in 2025 with improvements in 2026. But just for clarity, you know, that dividend rate has been set based on, you know, the current assets, including the billion dollars, you know, getting recover in that billion dollars of investments we've already made that's not in rates.

Chris: 26, but just for clarity.

Speaker Change: Dividend rate has been set based on the current assets, including the $1 billion in getting recovery on that billion.

Speaker Change: Of investments, we've already made that's not in rates.

Sean Stewart: Okay. And then the follow-on question there is you've indicated constraints, capital investment and the regulated base and capital light approach putting these assets that haven't been recognized in the rate base. How long do you anticipate that capital light approach to last, and how does this feed into your expectation of midterm EPS growth off the reset base? Yeah, well, certainly it really depends on how quickly we can advance the rate cases that we need to advance and our success rate on those. But I think we're talking about a few years. I mean, that's the kind of timeframe we'd be expecting.

Speaker Change: Okay.

Chris Huskilson: And then the following question there is, you've indicated constrained capital investment in the regulated base and a capital light approach, putting these assets that haven't been recognized into the rate base. How long do you anticipate that capital light approach to last? And how does this feed into your expectation of midterm EPS growth off the reset base?

Speaker Change: And then the follow on question there is you've indicated constrain.

Constrained <unk>.

Speaker Change: Capital investment in the regulated base and capital light approach, putting these assets that haven't been recognized.

Speaker Change: Rate base, how long do you anticipate.

Speaker Change: That capital light approach to last.

Speaker Change: And how does this feed into your expectation of midterm EPS growth off the.

Speaker Change: A reset base.

Chris Huskilson: Yeah, well, certainly, it really depends on how quickly we can advance the rate cases that we need to advance and our success rate on those. But I think we're talking about a few years. I mean, that's the kind of time frame we'd be expecting.

Speaker Change: Yes. It was certainly it really depends on how quickly we can advance the rate cases that we need to advance and our success rate on those but I think we're talking about a few years I mean, that's the kind of timeframe, we'd be expecting and at the end of the day, what we're really focused on doing is raising our game when it comes.

Darren Myers: And at the end of the day, what we're really focused on doing is raising our game when it comes to how we... We work through things with regulators, how we actually make decisions around regulatory investments, and how we just advance this business. There's a substantial amount of work going on to improve the accountability across the business and to improve the ability of our utility leaders to actually run those businesses. And all those things are going to be important parts of all this.

Chris Huskilson: And at the end of the day, what we're really focused on doing is, you know, raising our game when it comes to how we work through things with regulators, how we actually make decisions around regulatory investments, and how we just advance this business. You know, there's a substantial amount of work going on to improve accountability across the business and to improve the ability of our utility leaders to actually run those businesses. And all those things are going to be important parts of all this.

Speaker Change: <unk> two how we.

Speaker Change: Work through things with regulators, how we how we actually make decisions around regulatory investments and how we just advance this business.

Speaker Change: There is a substantial amount of work going on to improve the accountability across the business and to improve the ability of our utility leaders, who actually run those businesses and all of those things are going to be important parts of all of this.

Darren Myers: John, we have to prove just that to what Chris is saying that we can add more capital in a disciplined way and get appropriate returns with very little regulatory lag. And that's, you know, I'm with Chris, probably a few years of restraint, but you know, we do seed growth after that. And you know, from the kind of 2025 starting point, we see its ability really to grow earnings without growing capital. So, you know, just by increasing the returns and getting more efficient in the business. Understood.

Sean Steuart: Yeah, John, we also have to prove just that to Chris, who is saying that we can add more capital in a disciplined way and get appropriate returns with very little regulatory lag. And that's, you know, I'm with Chris, it's probably a few years of restraint, but you know, we do see growth after that. And, you know, from the kind of 2025 starting point, we see an ability to really grow earnings without growing capital. So, you know, just by increasing returns and getting more efficient in the business. understood.

Speaker Change: Yes, John we have thoughts that we have to prove just add to what Chris is saying that we can.

John: Had more capital in a disciplined way and get appropriate returns with very little regulatory lag.

Thats.

John: With Chris are probably a few years of our strength, but we do see growth after that from the end of 2025, starting point, we see it ability really to grow earnings without growing capital. So.

John: Just by increasing the returns and getting more efficient in the business.

Sean Steuart: Okay, that's all I have for now. Thanks, guys.

Speaker Change: Understood. Okay. That's all I have for now thanks, guys.

Sean Stewart: Okay, that's all I have for now. Thanks, guys. Thank you.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you.

Operator: Again, if you'd like to ask a question, press star, then the number one on your telephone t-pad.

Operator: Again, if you'd like to ask a question, press star then the number 1 on your telephone keypad. Our next question comes from the line of Nelson Ng from RBC Capital.

Speaker Change: Again, if you'd like to ask a question press Star then the number one on your telephone keypad.

Nelson Ng: Our next question comes from the line of Nelson in from our VC Capital Markets. The line's open and go. Thank you, and congrats on the transaction. So the first question I just want to have a quick clarification in terms of the 12, 11 and a half to 12 and a half times next year's EBITDA. Is it roughly the run rate EBITDA of the assets, assuming that they're fully constructed and commissioned? And does it exclude the development expenses that you have within that business? Yeah, you got it.

Nelson Ng: Thank you and congratulations on the transaction. So, the first question, I just want to have a quick clarification in terms of that twelve, eleven and a half to twelve and a half times next year's EBITDA, is that roughly the run rate EBITDA of the assets, assuming that they're fully leased? Yeah, you got it, Nelson. Yeah, you got it.

Speaker Change: Our next question comes from the line of Nelson <unk> from.

Nelson: From RBC capital markets.

Your line is open.

Nelson <unk>: Thank you and congrats on the transaction. So the first question I just want to have a quick clarification in terms of that.

Speaker Change: 11, and a half to 12 five times next.

Speaker Change: Next year's EBITDA.

Speaker Change: All right.

Speaker Change: Is it roughly the run rate EBITDA of the assets assuming that they're fully.

Speaker Change: Constructed and commissioned and does it exclude.

Speaker Change: Exclude the development expenses that you have within that business.

Nelson Ng: Yeah, okay. And then the next question is this more about capital allocation. Like obviously you will need to start the hydro sales process shortly if you haven't already started.

Speaker Change: Got it.

Speaker Change: Yes, Okay got it perfect.

Nelson Ng: And then the next question is this more of a capital allocation, like obviously you will need to start the hydro sales process shortly if you haven't already started, but with the proceeds. Can you just talk about capital allocation in terms of debt reduction?,,, utility growth sometime, whether that's next year or the year after that.

And then the next question is this more about capital allocation obviously you.

Speaker Change: We will need to start the hydro sales process. Shortly if you have already started but like with the proceeds.

Darren Myers: But like with the proceeds, can you just talk about capital allocation in terms of jet reduction, share buybacks, and. And I guess it's utility growth sometime, what that's next year or the year after? Yeah, Nelson, I mean, really for us it's around getting that strong balance sheet, you know, right side of the dividend. You know, primarily this is all going to debt repayment. And of course, you know, with that strong balance, we will have some flexibility to make different choices from there. But the primary focus is really to be more self-sustaining, you know, earn on what we have today and just being in a position of strength.

Speaker Change: Can you just talk about capital allocation in terms of.

Debt reduction.

Speaker Change: Share buybacks and.

Speaker Change: And I guess utility growth sometime well, that's next year or the year after.

Chris Huskilson: Yeah, Nelson, I mean, really, for us, it's around getting that strong balance sheet, you know, the right size of the dividend, primarily, this is all going to debt repayment. And of course, with that strong balance sheet, we will have some flexibility to make different choices from there. But the primary focus is really to be more self-sustaining, you know, build on what we have today and just be in a position of strength.

Speaker Change: Yes, Nelson I mean really for us it's around getting that strong balance sheet right sizing the dividend.

Speaker Change: Primarily this is all going to that debt repayment and of course with that strong balance sheet. We will have some flexibility to make different choices from there, but the primary focus is really to be more self sustaining.

Speaker Change: On what we have today and just being in a position of strength.

Darren Myers: Yeah, and I'd say, Nelson, we're not ruling out buybacks, but at the end of the day, it's flexibility that we want and strength in our balance sheet. Those are those are the two things that are that are primarily on our minds. And so you know, at the end of the day, we'll make those decisions as time unfolds. Okay, so primarily debt repayment, but not ruling out buybacks. Correct, that's right.

Chris Huskilson: And I'd say, Nelson, we're not ruling out buybacks, but at the end of the day, it's flexibility that we want and strength in our balance sheet. Those are the two things that are primarily on our minds, and so, you know, at the end of the day, we'll make those decisions as time unfolds. Okay, so primarily...

Speaker Change: And I would say no we're not ruling out buybacks, but at the end of the day, it's flexibility that we want and strengthen our balance sheet. Those are those are the two things that are that are primarily on our minds and so.

Operator: Hello and welcome to the Algonqn Power and Utilities Corp. 2nd quarter of 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Speaker Change: At the end of the day, we'll make those decisions as time unfolds.

Operator: After the speaker's remarks, there will be a question-in-answer session. If you'd like to ask a question during this time, simply press star 1 on your telephone t-pad.

Nelson Ng: Okay, so primarily debt repayment but not ruling out buyback. Correct. That's right. Okay. Thank you. I'll leave it there and get back.

Speaker Change: Okay. So it primarily debt repayment, but not ruling out buybacks.

Speaker Change: Correct that's right.

Nelson Ng: Okay, thank you.

Brian Chin: I will now turn the conference over to Mr. Brian Chin, Vice President of Investor Relations. Please go ahead. Thanks and good morning, everyone.

Nelson Ng: I'll leave it there and get back in the queue. Okay, thank you.

Speaker Change: Thank you I'll leave it there and get back in the queue.

Speaker Change: Okay. Thank you.

Speaker Change: Yes.

Operator: Thank you.

Speaker Change: Thank you.

Mark Jarvi: Our next question comes from the line of Mark Jarvi from CIBC Capital Markets. The line is open. Okay, come on in one. Can you give us a bit more, yeah, lots on Pac here, very busy. Can you explain the sort of change in tone around the Tilly spend? And the reason it was that if the balance sheet was in a better position, you got the proceeds; you could accelerate spend. It's kind of going the opposite way here. I get the issues of regulatory lag, but just understand what's kind of transpired a lot. A few months here or quarter that really does have you really cutting back is it just more challenging regulatory environment to push out into the right cases.

Operator: Our next question comes from the line of Mark...

Speaker Change: Our next question comes from the line of Mark Jarvi from.

Operator: Thank you for joining us for our 2nd quarter of 2024 earnings conference call.

Mark Jarvi: CIBC capital markets.

Brian Chin: Speaking on the call, today will be Chris Huskilson, Chief Executive Officer, Darren Myers, Chief Financial Officer, Jeff Norman, President of Renewables, and Sarah McDonald, Chief Transformation Officer. To accompany today's earnings call, we have a supplemental webcast presentation available on our website, Algonqn Power.com. Our financial statements and management discussion analysis are also available on the web. We would like to remind you that our discussion during the call will include certain forward-looking information and non-gap measures.

Speaker Change: Line is open.

Mark Jarvi: Hey, good morning, everyone.

Mark Jarvi: Can you give us a bit more? Yeah, yeah, lots unpacked here, very busy, that's the deal. Can you explain the sort of change in tone around utility spend? Originally, it was that if the balance sheet was in a better position, you got the proceeds, you could accelerate spend. It's kind of going the opposite way here. I get the issues of regulatory lag, but just to understand what's kind of transpired over the last few years, Thanks so much. Thanks.

Speaker Change: Hi, Good morning can you give us a bit more yeah, yeah lots of unpack here very busy collectively.

Mark Jarvi: Can you explain that sort of change in tone around the utility has been originally it was that if the balance sheet is in a better position you've got the proceeds we could accelerate spend kind of going the opposite way here I guess the issue the regulatory lag, but just to understand what's kind of transpired or a lot.

Brian Chin: Actual results differ materially from any forecast or projection contained in such forward-looking information. Certain material factors and assumptions were applied in making the forecast and projections reflected in such forward-looking information. Please note and review the related disclaimers located on slide 2 of our earnings call presentation at the Investor Relations section of our website at Algonqn Power.com. Please also refer to our most recent MDNA file on Cedar Plus Medgar and available on our website for additional important information on these items, including the material factors that could cause actual results to differ materially and the factors and assumptions applied in making such forecast and projections.

Speaker Change: Few months here or a quarter that really does have you really cutting back is it is it just more challenging regulatory environment pushed out into the rate cases.

Darren Myers: It does seem a bit of a departure from what you guys were signaling before. Yeah, well, so we still see that future as has been described as our future, but at the end of the day, we also believe we need to put a substantial amount of discipline into this business. And so, as we work through accountability and how we want to structure and run our utilities, at the end of the day, you know, the main word is discipline. And so, you know, we want to be absolutely certain that we understand when we put a dollar of capital in the business, how we're going to recover that dollar of capital and how that's going to advance our relationship with our customers, service to our customers.

It does seem a bit of a departure from what you guys were cyclical before.

Chris Huskilson: Yeah, well, so we still see that future as it has been described as our future. But at the end of the day, we also believe we need to put a substantial amount of discipline into this business. And so as we, you know, as we work through accountability and how we want to structure and run our utilities, at the end of the day, you know, the main word is discipline. And so, you know, we want to be absolutely certain that we understand when we put a dollar of capital in the business, how we're going to recover that dollar of capital, and how we are going to, how that's going to advance our relationship with our customers, service to our customers, and ultimately the value for our shareholders.

Speaker Change: Yeah, well, so and we still see that future as as has been described as our future but at the end of the day. We also believe we need to put a substantial amount of discipline into this business.

Speaker Change: And so as we as we work through accountability and and how we want to structure and run our utilities at the end of the day.

Speaker Change: The main word is discipline and so we want to be absolutely certain that we understand when we put a dollar of capital in the business, how we're going to recover that dollar of capital and how we're going to to how thats going to advance our relationship with our customers service to our customers and ultimately value for our.

Chris Huskilson: On the call this morning, Chris will provide an update surrounding the Renewable Sales Agreement, which was pressed release this morning, and on the company's ongoing strategic transition to a peer-play regulated utility.

Darren Myers: Then Darren will review key highlights pertaining to our regulated and renewables business groups and our second quarter financial results.

Chris Huskilson: And ultimately, the value for our shareholders. And so that's really what we're working on as we speak. And as I said, you know, one of my three goals originally was to get the business up and running, the regulated business up and running as a normal regulated utility. And I said to people all along for the past year that this utility was cobbled together. It wasn't running the way I would have expected it to run. And as we learn more about how it runs and the discipline that it needs in order to be a good solid investment for folks, that's really what we've come to.

Speaker Change: Shareholders and so thats really what were working as we speak and as I said at one of my three one of my three goals originally was to get the business up and running the regulated business up and running.

Operator: Darren will also provide some color on the financial outlook following the expected sales of the Renewables business, and then Chris will close with some final remarks. We will then open the lines for the question and answer period. We ask that you kindly restrict your questions to two, then re-cute if you have any additional questions to allow others the opportunity to participate.

Chris Huskilson: And so that's really what we're working on as we speak. And as I said, you know, one of my three original goals was to get the business up and running, the regulated business up and running as a normal regulated utility. And I've said to people all along for the past year that this utility was cobbled together and wasn't running the way I would have expected it to run.

Speaker Change: As a normal regulated utility.

Speaker Change: I've said to people all along for the past year.

Chris Huskilson: With that, I'll turn it over to Chris. Thank you, Ryan, and good morning everyone. After being in the CEO role for a year, I'm more convinced than ever that our current path towards a pure play regulated utility supports our goals to create long-term value, increase our quality of earnings, and bring increased focus to improving our execution.

Speaker Change: Utility was cobbled together it wasn't running the way I would have expected it to run and as we learn more about how it runs and the discipline that it needs in order to be a good solid investment for folks that's really that's really what we've come to.

Chris Huskilson: And as we, you know, learn more about how it runs and the discipline that it needs in order to be a good, solid investment for folks, that's really, that's really what we've come to. And that opportunity to do, to do capital-light growth is one that is pretty unique. And we're happy to be able to take advantage of that. And Mark, maybe just, you know, just to add to that, nothing has changed from our view that we originally came out with, which is the ability to invest a billion dollars a year in this business.

Chris Huskilson: Okay, thank you, Drew. In summary, we have achieved several major milestones and are delivering on our plan to transform Algonqin into a pure-play regulated utility. We're reducing our capital spend and dividend to position the company for greater long-term value creation. As we look forward, we expect to have a solid balance sheet, a healthy payout ratio, and a capital-light path towards earnings & ultimately Dividend Group. All under, for the first time, a focused company with a singular business model. It's a tremendous story, and we're excited. With that, we'll open the lines for calls. Operator.

Darren Myers: And that opportunity to do to do capital light growth is one that is pretty unique, and we're happy to be able to take advantage of that. Mark, we would just, you know, yeah, just that that is nothing is changed from our view that we originally came out with, which is the ability to invest a billion dollars a year in this business. But I would say, you know, I don't know if it's a change in tone because we've been very consistent. We need to get more discipline in the business. And if we don't have that right discipline, we can't go spend the capital.

Speaker Change: And that opportunity to do to do capital light growth is one that is pretty unique and were happy to be able to take advantage of that and mark maybe just.

Chris Huskilson: A year ago, I set three priority goals to sell the Renewables business, optimize the value of AY, and to get the regulated business up and running. Today, I'm pleased to announce the successful sale of a Renewables business at a valuation of $2.5 billion. As we set out to accomplish in our 2023 Strategic Review, we've achieved a deal at a compelling value for our platform business with strong assets, in Scale. As we set out to accomplish, sorry, this agreement between Algonqn and LS Power for the company's non-hydro-renewable energy business consisting of 2.28 billion in cash proceeds and 220 million in an urnode agreement relating to certain wind assets. I just want to take this moment to thank the team from across Algonqn for the tireless efforts that they put in. There's a great job team. Thank you very much.

Mark Jarvi: I'll just add.

Mark Jarvi: Nothing has changed from our view that we originally came out with which is the ability to invest $1 billion a year in this business, but I would say I don't know if it.

Speaker Change: Change in tone, because we think being very.

Speaker Change: Consistent we need to get more discipline in the business and if we don't have that rate discipline. We can't go spend the capital we need to be good stewards of our capital.

Chris Huskilson: But I would say, you know, I don't know if it's a change in tone because we think being very consistent, we need to get more discipline in the business. And if we don't have that right discipline, we can't go and spend the capital. We need to be good stewards of capital and do good things for our customers and for our shareholders. So you're seeing us, you know, we're not. We need to be better at our returns. And once we are there, we will spend more capital.

Darren Myers: We need to be good stewards of a capital, and we've been things for our customers and for our shareholders. So you're seeing us; you know, we're not, we need to be better on our returns. And once we are there, we will spend more capital. Understood. And then Darren, coming back to the question of where does the proceeds go. It doesn't sound like it's buyback. You did mention that the Afco bonds was a break free. So I assume those get repaid as well as obviously the construction to financing. If you think about then the residual proceeds, what you expect to get from Atlantica, you may be at a point where you don't have to pay more, you know, point rate debt or variable rate debt, and your credit metrics.

Speaker Change: Things for our customers and for our shareholders, So youre seeing us.

Speaker Change: We need to be better on our returns and once we are there we will spend more capital.

Mark Jarvi: Understandable. And then Darren, coming back to the question of where the proceeds go, it doesn't sound like it's a buyback. You did mention that the APCO bonds were a break-free bond, so I assume those get repaid as well as obviously the construction financing. If you think about then the residual proceeds, what do you expect to get from Atlantica? You may be at a point where you don't have to pay more, you know, employment rate debt or variable rate debt and your credit metrics. Will you sit on a cash balance for a while? Is that the expectation here as you work through the repositioning of the utility franchise?

Speaker Change: Understood.

Speaker Change: And then Darren coming back to the question of where does the proceeds go it doesn't feel like it's buybacks you did mention that the opco bonds was a breakthrough I assume those get repaid as well as obviously the construction financing. If you think about then the residual proceeds what do you expect to get from Atlantica.

Speaker Change: You may be at a point, where you don't have to pay more floating rate debt or variable rate debt and you'll be at your credit metrics will you sit on our cash balance for a while.

Darren Myers: Will you sit on a cash balance for a while? Is that the expectation here as you work through the reposition of the utility franchise? Yeah, I think we'll continue to look at what's with most optimal capital structure is after I think there's lots of options to repaid debt but have the ability to obviously flex up credit facilities up and down. So we'll give more of that, and we do plan, as we've said before, and we get closer to the closure of the renewables business, to provide an investor, investor day update to give you lots of the questions that I know that you have.

Speaker Change: The expectation here is as you work through the repositioning of the utility franchise.

Darren Myers: Yeah, I think we'll continue to look at what the optimal capital structure is after. I think there are lots of options to repay debt but have the ability to, you know, obviously flex up credit facilities up and down. So we'll give more of that. And we do plan, you know, as we've said before, when we get closer to the closure of the renewables business, to provide an Investor Day update to give you, you know, lots of the questions that I know that you have.

Speaker Change: Yes, I think we will continue to look at what's the most optimal capital structure is after I think theres lots of options to repay debt, but have the ability to obviously flex up credit facilities up and down. So we will we will give more of that and we do plan as we've said before and we get closer to the closure of the renewables business to provide an investor.

Chris Huskilson: This major milestone coupled with our previously announced support agreement to sell our Atlantica shares delivers on our plan to transform Algonqn into a pure play regulated utility. Optimize our regulated business activities, strengthen our balance sheet, and enhance our quality earnings. As Darren will touch on shortly, we expect to use the proceeds upon close in late 24 or early 2025 to recapitalize our balance sheet and position ourselves for future growth. We're also making progress on our goal to get the regulated business up and running.

Speaker Change: Investor Day update to give you lots of the questions that I know that you have.

Chris Huskilson: And just remember, a fair bit of time will pass before this cash actually comes to us. So that's another factor in this. It's going to take some time to get through the regulatory approvals and so on that we need for these transactions, including AY. We're not sure exactly when that will get approved either.

Darren Myers: And just remember a fair bit of time. We'll pass before this cash actually comes to us, so that's another factor in this. It's going to take some time to get through the regulatory approvals and so on that we need for these investments for these transactions, including AY. We're not sure exactly when that will get approved either. Right.

Speaker Change: And just to remember so a fair bit of time will pass before this cash actually comes to us. So that's another factor in this it's going to take some time to get through the regulatory approvals and so on that we need for these investments or these transactions, including anyway. We're not we're not sure exactly when that will get approved.

Mark Jarvi: And then just, Darren, as a follow-up, improve disclosure assurance and views, and pro forma utility business after the close of the sale. I know you're trying to infer to us where the earnings are going to be with the payout ratio, but is there something where you could actually show the trajectory as you go into 2025, 2026, and 2027? Is there something where you think you could be a bit more explicit on the earnings outlook on an annual basis, whether that's guidance on a multi-year basis or just the cadence of the EPS?

Speaker Change: <unk>.

Speaker Change: Right.

Mark Jarvi: And then just there's that follow up, some improved disclosure sharing some views, perform utility business after the close of the sale. I know you're trying to infer to us where the earnings is going to be with the payout ratio, but is there something where you could actually show the trajectory as you go into 25, 26, 27. Is it something where you think you could give it more explicit on the earnings outlook on our annual basis, whether that's guidance on a multi-year basis or we're just a cadence of the EPS, you know, uplift over time. Yeah, no, absolutely.

Speaker Change: And then just ended up volatile.

Chris Huskilson: We reorganized along commodity lines to improve operational efficiency. We recently completed the implementation of our customer first enterprise platform which promises to deliver value to our customers and substantial efficiencies. We added three new experienced board members with extensive infrastructure and regulated utility experience. We're implementing fundamental changes to how we operate the company with increased accountability.

Speaker Change: Fiscal interference and views pro forma utility business. After the close of the sale I know youre trying to infer to us where the earnings is going to be with the payout ratio, but is there something where you could actually show that trajectory as we go into 'twenty five 'twenty six seven it is something where you think you could be a bit more explicit on the Perry Ellis look on an annual basis guidance.

Speaker Change: On a multiyear basis or just the cadence of that.

Speaker Change: EPS.

Speaker Change: Uplift over time.

Darren Myers: Yeah, no, absolutely. We will, like I said, at an investor day, give you as much transparency as we can, so that you understand what we're doing and what you should be holding us accountable for. We're not prepared to do that today, but we definitely will, as we get closer to closure of the deal, give you more.

Speaker Change: Yes, no absolutely we will like I said at Investor Day, we'll give you.

Mark Jarvi: We will, like I said, at an investor day, will give you, you know, as much transparency as we can so that you understand what we're doing and what you should be holding us accountable to. We're not prepared to do that today, but we definitely will as we get closer to closer of the deal, give you more. And as we get into these regulatory processes, we'll have a better idea as to when these things might close. So, you know, that will be the biggest, biggest factor is when, when did we actually see the proceeds? Hunter said, "Thanks for the time today."

Chris Huskilson: This is the beginning of a multi-year journey to unlock the value of our regulated business.

Speaker Change: As much transparency as we can so that you understand what we're doing and what you should be holding us accountable too we're not prepared to do that today, but we definitely will as we get closer to closure of the deal will give you more.

Chris Huskilson: In addition, we're making changes at the executive level.

Chris Huskilson: Yesterday, the company appointed Sarah McDonald as chief transformation officer. In her new role, Sarah will assume responsibility for utility operations and customer service. Sarah is a lawyer by training and has more than two decades of legal human resources and operational experience. She has a broad background having worked in the utility sector for more than 20 years, including roles in utility construction as president and CEO of the AmeriCarabeean and as president of Tico Services.

Chris Huskilson: Yeah, and as we get into some of these regulatory processes, we'll have a better idea as to when these things might close. So, you know, that'll be the biggest factor: when do we actually see the proceeds.

Speaker Change: As we get into some of these regulatory processes, we will have a better idea as to when these things might close so that'll.

Speaker Change: That'll be the biggest biggest factor is.

Speaker Change: When do we actually see the proceeds.

Mark Jarvi: Understandable. Thanks for the time today. I appreciate it. Yep. Thanks, Mark.

Speaker Change: Understood. Thanks for the time I appreciate it thanks, Mark Thank you.

Mark Jarvi: Appreciate it. Yep.

Operator: Thanks, Mark.

Operator: Next, Mark. Thank you.

Speaker Change: Yes.

Speaker Change: Thank you.

Chris Huskilson: There are no further questions at this time. I'll try to call over to Mr. Chris Huskelson. Okay.

Chris Huskilson: There are no further questions at this time. I'll turn the call over to Mr. Chris Huskilson.

Speaker Change: There are no further questions at this time I'll turn the call over to Mr. Chris hospitals.

Chris Huskilson: Okay, well, with that, we'd like to thank everyone for their interest in Algonquin. And, and also, again, I want to thank the team from across the entire business that actually pulled this together. The folks on the renewable side and the folks across the business. It was a tremendous effort and obviously very successful. So thank you all for that, and thank you for your time today.

Chris Huskilson: Well, with that, we'd like to thank everyone for their interest in Ogonquin, and also, again, I want to thank the team from across the entire business that actually pulled this together. The folks in the renewable side and the folks across the business. This was a tremendous effort and obviously very successful. So thank you all for that, and thank you for your time today.

Chris hospitals: Okay, well with that.

Speaker Change: Alright.

Chris: We'd like to thank everyone for their interest in Algonquin and also again I want to thank the team.

Chris Huskilson: As part of this announcement, chief operating officer Johnny Johnston has left the company. I'd like to personally thank Johnny for his dedication and service and his commitment as we wish him the best for his future endeavors. As we look forward, we're focused on delivering value to our shareholders in a more self-sufficient manner. We see tremendous value in the business from investments we have made for our customers that are not yet in rates.

Chris: From across the entire business that actually pulled this together.

Chris: The folks in the renewable side and the folks across the across the business. This was a tremendous effort.

Chris: Obviously very successful so thank you all for that and thank you for your time today.

Operator: This concludes today's conference call. You may now disconnect. Thank you.

Operator: This concludes today's conference call. You may now disconnect.

Speaker Change: This concludes today's conference call you may now disconnect.

Chris Huskilson: We need to improve our recoveries, reduce our regulatory lag and absorb our growth. As a result, we will be reducing our regulated CAPEX for 2025. Also as part of our objective to be more self-sufficient, the board has decided to right-side the dividend, so we're not chasing a high pay-out ratio and excessive equity raises. These are necessary steps that we expect to unlock more value in the long term for our shareholders.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Okay.

Chris Huskilson: Now let me provide more details on the business, starting with the investments not yet in rates. We currently estimate over $1 billion in assets are not yet authorized in rates or receiving optimized regulatory treatment. This represents a rare capital-like path to earnings growth. An example of this is our Sarah Bell wastewater treatment plant in Arizona. The plant is an important and currently operating asset, enabling the local community to grow, but is not yet in customer rates.

Chris Huskilson: Another is our customer first SAP program, which as I mentioned earlier just completed its final implementation. Our investment in the platform has been approved in six of our smaller jurisdictions, but is not yet reflected in customer rates for the majority of our utilities. Our customer first program is a world-class platform designed to facilitate greater operational efficiency and utility integration or improved customer service. It's worth calling out that we are now in the typical post-conversion adjustment period for these types of systems. Our system implementation combined with our most active rate case calendar in our history is causing some delays in our rate case filings, which we're working through.

Chris Huskilson: In terms of our rate case filings, I also want to call out changes to our expected regulatory calendar in a few of our jurisdictions, namely Missouri, New Hampshire and California. In respect to these jurisdictions, we're expecting delays of one to two quarters, which will shift the beginning of our recovery closer to 2026. These delays will, of course, impact short-term earnings. While we have some challenges in the short-term, the substantial value here is a disciplined capital-like trajectory to improve returns.

Darren Myers: With that, I'll turn it over to Darren. Thank you, Chris, and good morning, everyone.

Darren Myers: I'll start with the regulated services group. During the second quarter of 2024, we received the final order for our Valco utility in Bermuda, authorizing a revenue increase totaling $33.6 million over two years. New rates became effective on August 1st, 2024. In New York, we filed a joint proposal with the New York Department of Public Services staff resolving all contested issues in a final order is expected sometime in the third quarter. The regulated services group currently has pending 14 rate reviews, totaling $131 million as of quarter end.

Darren Myers: Turning now to a brief update on a Renewable Energy Group, our construction trajectory for Renewables remains on track. Our construction loan balances fall into $405 million due to the buyout of the new market solar in Shady Oaks II Project.

Darren Myers: By year end, we expect that loan balance to round trip back up to similar level where we started the year due to the completion of construction at Carver's Creek and Clearview.

Darren Myers: We'll now turn to our financial results. Our second quarter financial performance delivered growth in each of our key financial metrics. EBITDA adjusted net earnings and adjusted net earnings per share with double digit increases compared to the same period last year. Operating profit growth for both the regulated renewables business were largely as expected with regulated growing 7% and renewables growing 31%. Adjusted EBITDA was $311 million up 12% from the same period last year. Adjusted net earnings worth $65.2 million in increase of 16%. On a per share level, our second quarter adjusted net earnings per share was $0.9, a 13% increase in the second quarter of last year.

Darren Myers: Let me briefly discuss individual EPS drivers. First, whether return to a more normalized level, contributing approximately three cents to the upside year over year. Second, a regulated business operating profit grew organically by two cents, primarily due to new rate implementations at several of the company's electric gas and water utilities. However, this was offset by a negative two cents year over year due to last year's benefit of a one-time retroactive rate order in California.

Darren Myers: Renewables also organically grew by two cents driven by contributions from new wind facilities to your fuel to and Sandy rich to brought online last year. This was offset by negative penny due to development cost expenses in part as a result of the simplification of our JV entity at discussed in prior quarters. Depreciation contributed negative two cents and interest expense contributed negative penny excluding the impacts of our empire bond securitization. And lastly, tax credits were a little better this year than we had projected being flat year over year.

Darren Myers: Turning now to key financing activities. During the quarter, the company settled the purchase contracts from its green equity units as expected, issuing approximately $76.9 million common shares for proceeds of $1.15 billion. These proceeds were used to reduce existing indebtedness and for general corporate purposes.

Darren Myers: We ended the quarter with approximately $767 million shares issued and outstanding. With the conclusion of the equity unit remarketing and as of June 30, 2024, we have refinanced approximately $2.5 billion of our borrowings over the 12 trailing 12 months and we have simplified our capital structure.

Darren Myers: As Chris mentioned earlier, we are pleased to announce the sale of our Renewables business. The transaction proceeds and valuation are compelling. We expect to close the sale of late 2024 or early 2025 and receive net cash proceeds of approximately $1.6 billion after repaying construction financing and other customary adjustments. Proceeds from the Renewables sale plus our Atlantica shares will leave us with a very strong balance sheet.

Darren Myers: In addition, as we look forward, we are making changes to be more self-sufficient. We are looking at spending capital at a level just above requisite maintenance, safety, and environmental requirements in order for the company to digest the impacts of investments already made on behalf of our customers, once we improve our returns to a more appropriate level, we will have the opportunity to increase our capital spending in a disciplined way. With regards to our newly reduced dividend, we see our revised dividend payout as roughly 60 to 70% of our optimized core regulated earnings power on our current assets.

Darren Myers: And although we are not providing guidance at this time, as described earlier, 2025 earnings will be impacted by rate case timing.

Chris Huskilson: With that, I'll hand it back to Chris for some closing remarks. Okay, thank you, Darren. In summary, we've achieved several major milestones and are delivering on our plan to transform Algonqn into a pure play regulated utility.

Operator: For reducing our capital spend and dividend, the position of the company for greater long-term value creation. As we look forward, we expect to have a solid balance sheet, a healthy payout ratio, a capital light path towards earnings, and ultimately dividend growth, all under for the first time a focused company with a singular business model. It's a tremendous story and we're excited for the future. With that, we'll open the lines for calls operating. Thank you. If you have a question, please press star one on your telephone keypad. So, withdraw your question simply press star one again. One moment please for your first question.

Rupert Merer: And your first question comes from the line of Rupert Merer from National Bank. The line is open. Hi, yeah.

Darren Myers: Good morning, everyone. Congratulations on getting to the conclusion of that deal. Thank you, Rupert. So, if I can start by asking about the net cash proceeds of 1.6 billion, what does the walk-down look like from the sell price? How much of that difference is related to taxes, transaction fees versus construction debt repayment? Yeah, I mean, Rupert's primarily the construction loans is very little tax friction on the deal consistent with our original expectations. So, the majority of it would be construction loans and then really just the transaction cost and some of the break fees on the APCO bonds would be included in that as well.

Darren Myers: Okay, great. And that construction debt is that debt that's currently off balance sheet or yet to be incurred on your development pipeline? Yes, as I mentioned. So, the balance is lower as of the end of Q2, but we expected to get back to similar levels that were around the 700 million marks or just below that by the end of the year as we continue to build out clear viewing carvers.

Darren Myers: Great. And then on the transaction itself, can you walk us through your thoughts on the evaluation? How much of this is for your development pipeline versus your operating assets? And what's your perspective on the multiple that you're getting on Deel. Yeah, listen, we think it's an excellent multiple in a strong transaction. It's always hard to, you know, decipher what you're getting for the, you know, the platform, but clearly, you know, we see this as a, you know, as a, you know, with the urn out at, you know, 12 and a half times type multiple of next year's, you know, epita, like estimated epita.

Darren Myers: And, you know, without the urn out, you know, more like a close 11 and a half. So, you know, really strong multiples. And so clearly there was value seen. And, you know, with the teams built over 30 years in the strong development to pipeline and just the strength of the organization. So, we're quite pleased with where that ended up. Yeah, and Rupert, I think we said all along that in order for us to get to a sale of this business, we had to see value for the development pipeline. So, you know, we haven't tried to quantify that, but it's pretty clear to us that we did get paid for that.

Rupert Merer: Very good. Well, I'll leave it there and get back in the queue. Thank you very much. Thanks, Rupert.

Operator: Thank you.

Sean Stewart: Your next question comes from the line of Sean Stewart from TD Cohen. Line is open. Thanks.

Sean Stewart: Good morning, everyone. Congrats on getting us over the line. Chris, the 60 to 70% pay a ratio on EPS. Am I to take it that is from the starting point 2025 post this, this asset sale, or is that relative to where you would expect EPS to get to as your rate cases normalize, I suppose. Yes, Sean, it's down here. Let me just jump in real. The target payout has been set based on our current reg assets, you know, fully earning or earning, you know, closer to the fully earning.

Sean Stewart: You know, clearly, you know, we're, you know, next year will be our first year as a pure play regulated utility. We're in a multi year journey and as Chris highlighted through his, you know, prepare remarks. You know, we have the most active rate cases we've had in history, plus the implementation of a major system. So, you know, from a timing perspective, we do expect some delays in 2025 with improvements in 2026.

Sean Stewart: But just for clarity, you know, that dividend rate has been set based on, you know, the current assets, including the billion dollars, you know, getting recover in that billion dollars of investments we've already made that's not in rates.

Chris Huskilson: Okay. And then the follow on question there is you've indicated constraints, capital investment and the regulated base and capital light approach putting these assets that haven't been recognized in the rate base. How long do you anticipate that capital light approach to last and how does this feed into your expectation of midterm EPS growth off the reset base? Yeah, well, certainly it really depends on how quickly we can advance the rate cases that we need to advance and our success rate on those.

Chris Huskilson: But I think we're talking about a few years. I mean, that's the kind of timeframe we'd be expecting. And at the end of the day, what we're really focused on doing is raising our game when it comes to how we... We work through things with regulators, how we actually make decisions around regulatory investments and how we just advance this business. There's a substantial amount of work going on to improve the accountability across the business and to improve the ability of our utility leaders to actually run those businesses.

Chris Huskilson: And all those things are going to be important parts of all this. John, we have to prove just that to what Chris is saying that we can add more capital in a disciplined way and get appropriate returns with very little regulatory lag. And that's, you know, I'm with Chris, probably a few years of restraint, but you know, we do seed growth after that. And you know, from the kind of 2025 starting point, we see it ability really to grow earnings without growing capital. So, you know, just by increasing the returns and getting more efficient in the business.

Sean Stewart: Understood. Okay, that's all I have for now. Thanks, guys.

Operator: Thank you. Again, if you'd like to ask a question, press star, then the number one on your telephone t-pad.

Nelson Ng: Our next question comes from the line of Nelson in from our VC capital markets. The line's open and go. Thank you, and congrats on the transaction. So the first question I just want to have a quick clarification in terms of the 12 11 and a half to 12 and a half times next year's EBITDA. Is it roughly the run rate EBITDA of the assets assuming that they're fully constructed and commissioned? And does it exclude the development expenses that you have within that business?

Nelson Ng: Yeah, you got it. Yeah, okay. And then the next question is this more about capital allocation. Like obviously you will need to start the hydro sales process shortly if you haven't already started. But like with the proceeds, can you just talk about capital allocation in terms of jet reduction, share buybacks and. And I guess it's utility growth sometime what that's next year or the year after? Yeah, Nelson, I mean, really for us it's around getting that strong balance sheet, you know, right side of the dividend.

Nelson Ng: You know, primarily this is all going to debt repayment. And of course, you know, with that strong balance, we will have some flexibility to make different choices from there. But the primary focus is really to be more self-sustaining, you know, earn on what we have today and just being a position of strength. Yeah, and I'd say Nelson, we're not ruling out buybacks but at the end of the day, it's flexibility that we want and strength in our balance sheet.

Nelson Ng: Those are those are the two things that are that are primarily on our minds. And so you know, at the end of the day, we'll make those decisions as time unfolds. Okay, so primarily debt repayment, but not ruling out buybacks. Correct, that's right. Okay, thank you. I'll leave it there and get back in the queue. Okay, thank you.

Darren Myers: Thank you.

Mark Jarvi: Our next question comes from the line of Mark Jarvi from CIBC Capital Markets. The line is open. Okay, come on in one. Can you give us a bit more, yeah, lots on Pac here, very busy. Can you explain the sort of change in tone around the Tilly spend? And the reason it was that if the balance sheet was in a better position, you got the proceeds, you could accelerate spend. It's kind of going the opposite way here.

Mark Jarvi: I get the issues of regulatory lag, but just understand what's kind of transpired a lot. A few months here or quarter that really does have you really cutting back is it just more challenging regulatory environment to push out into the right cases. It does seem a bit of a departure from what you guys were signaling before.

Chris Huskilson: Yeah, well, so we still see that future as has been described as our future, but at the end of the day, we also believe we need to put a substantial amount of discipline into this business. And so as we work through accountability and how we want to structure and run our utilities at the end of the day, you know, the main word is discipline. And so, you know, we want to be absolutely certain that we understand when we put a dollar of capital in the business, how we're going to recover that dollar of capital and how we're going to how that's going to advance our relationship with our customers, service to our customers. And ultimately, the value for our shareholders. And so that's really what we're working as we speak.

Chris Huskilson: And as I said, you know, one of my three goals originally was to get the business up and running the regulated business up and running as a normal regulated utility. And I said to people all along for the past year that this utility was cobbled together. It wasn't running the way I would have expected it to run. And as we learn more about how it runs and the discipline that it needs in order to be a good solid investment for folks, that's really what we've come to.

Chris Huskilson: And that opportunity to do to do capital light growth is one that is pretty unique and we're happy to be able to take advantage of that. Mark, we would just, you know, yeah, just that that is nothing is changed from our view that we originally came out with, which is the ability to invest a billion dollars a year in this business. But I would say, you know, I don't know if it's a change in tone because we've been very consistent.

Chris Huskilson: We need to get more discipline in the business. And if we don't have that right discipline, we can't go spend the capital. We need to be good stewards of a capital and we've been things for our customers and for our shareholders. So you're seeing us, you know, we're not, we need to be better on our returns. And once we are there, we will spend more capital. Understood.

Darren Myers: And then Darren, coming back to the question of where does the proceeds go. It doesn't sound like it's buyback. You did mention that the Afco bonds was a break free. So I assume those get repaid as well as obviously the construction to financing. If you think about then the residual proceeds, what you expect to get from Atlantica, you may be at a point where you don't have to pay more, you know, point rate debt or variable rate debt and your credit metrics.

Darren Myers: Will you sit on a cash balance for a while? Is that the expectation here as you work through the reposition of the utility franchise? Yeah, I think we'll continue to look at what's with most optimal capital structure is after I think there's lots of options to repaid debt but have the ability to obviously flex up credit facilities up and down so we'll give more of that and we do plan as we've said before and we get closer to the closure of the renewables business to provide an investor, investor day update to give you lots of the questions that I know that you have.

Darren Myers: And just remember fair bit of time. We'll pass before this cash actually comes to us, so that's another factor in this. It's going to take some time to get through the regulatory approvals and so on that we need for these investments for these transactions, including AY, we're not sure exactly when that will get approved either. Right. And then just there's that follow up some improved disclosure sharing some views, perform utility business after the close of the sale.

Darren Myers: I know you're trying to infer to us where the earnings is going to be with the payout ratio, but is there something where you could actually show the trajectory as you go into 25, 26, 27. Is it something where you think you could give it more explicit on the earnings outlook on our annual basis, whether that's guidance on a multi-year basis or we're just a cadence of the EPS, you know, uplift over time.

Darren Myers: Yeah, no, absolutely. We will, like I said, at an investor day will give you, you know, as much transparency as we can so that you understand what we're doing and what you should be holding us accountable to. We're not prepared to do that today, but we definitely will as we get closer to closer of the deal, give you more. And as we get into these regulatory processes, we'll have a better idea as to when these things might close. So, you know, that will be the biggest, biggest factor is when, when did we actually see the proceeds? Hunter said, thanks for the time today. Appreciate it. Yep. Next, Mark. Thank you.

Operator: There are no further questions at this time.

Chris Huskilson: I'll try to call over to Mr. Chris Huskelson. Okay.

Chris Huskilson: Well, with that, we'd like to thank everyone for their interest in Ogonquin and also, again, I want to thank the team from across the entire business that actually pulled this together. The folks in the renewable side and the folks across the business. This was a tremendous effort and obviously very successful. So thank you all for that and thank you for your time today.

Operator: This concludes today's conference call. You may now disconnect. Thank you.