Q4 2024 Algonquin Power & Utilities Corp Earnings Call
Operator: Hello and welcome to the Algonqn Pwr & Utilities Corp 4th Quarter and Year 2024 Earnings Conference. All lines have been placed on mute to prevent any back After this peak is demarced, there will be a question and answer session.
Hello, and welcome to the Algonquin power and Utilities Corp, fourth quarter and year end 2024 earnings conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
Operator: If you would like to ask a question during this time, simply press star and the number one on your telephone.
If you would like to ask a question. During this time simply press star and the number 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. Thank you, operator. And good morning, everyone.
I'll now turn the conference over to Mr. Brian Chin, Vice President of Investor Relations. Please go ahead.
Brian Chin: Thank you operator, and good morning, everyone. Thank you for joining us for our fourth quarter and full year 2024 earnings conference call.
Brian Chin: Thank you for joining us for our fourth quarter and full year 2024 earnings conference call.
Brian Chin: Joining me on the call today will be Chris Huskilson, Chief Executive Officer, Rod West, Incoming Chief Executive Officer, Darren Myers, Chief Financial Officer, 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 and analysis are also available on the website as well as on CDERplus and Edgar. We would like to remind you that our discussion during the call will include certain forward-looking information and non-GAP measures. Actual results could differ materially from any forecast or projection contained in such forward-looking information.
Chris Husk: Joining me on the call today will be Chris Husk, Wilson, Chief Executive Officer, Rod West incoming Chief Executive Officer, Darren Myers, Chief Financial Officer, and Sara Mcdonald Chief Transformation Officer.
Chris Husk: To accompany today's earnings call, we have a supplemental webcast presentation available on our website Algonquin power Dot com.
Our financial statements and management's discussion and analysis are also available on the website as well as on Cedar plus and Edgar.
Chris Husk: You 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.
Brian Chin: 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 at the investor relations section of our website at algonqinpower.com.
Chris Husk: Certain material factors or assumptions were applied in making the forecasts and projections reflected in such forward looking information.
Chris Husk: Please note and review the related disclaimers located on slide two of 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 files on CDERplus and EDGAR and available on our website for additional important information on these items. On the call this morning, Chris and Rod will provide comments on the company's recently announced leadership transition. Chris will then review key highlights and operational updates for the quarter, followed by Darren and myself with our financial results and forward-looking commentary. We will then open the lines for questions.
Chris Husk: Please also refer to our most recent MD&A filed on SEDAR and Edgar and available on our website for additional important information on these items.
Speaker Change: On the call. This morning, Chris and Rod will provide comments on the Companys recently announced leadership transition.
Speaker Change: Chris will then review key highlights in operational updates for the quarter, followed by Darren and myself with our financial results and forward looking commentary.
Speaker Change: We will then open the lines for questions. We ask that you kindly restrict your questions to two and then re queue. If you have any additional questions to allow others the opportunity to participate and with that I'll turn it over to Chris.
Brian Chin: We ask that you kindly restrict your questions to two, then requeue if you have any additional questions to allow others the opportunity to participate.
Chris Huskilson: And with that, I'll turn it over to Chris. Thank you, Brian, and good morning, everyone. Thank you once again for your interest in Algonqin.
Chris Husk: Thank you, Brian and good morning, everyone.
Speaker Change: Thank you once again for interest your interest in Algonquin and for supporting Us through our strategic transformation journey.
Chris Huskilson: Before I jump into our regular quarterly update, it's my distinct pleasure to introduce Roderick West, our incoming CEO. Rod has over 25 years of experience at Andrew. where he was responsible for leading Energy's regulated utilities and helped engineer that company's transition. Integrated Utility to a Pure Play Regulator. I'm confident Rod has the right set of leadership skills, expertise, experience, and vision To lead Algonqin to new heights as a regulated...
Before I jump into our regular quarterly update it's my distinct pleasure to introduce Roderick west our incoming CEO.
Speaker Change: Rod has over 25 years of experience at Entergy, where he was responsible for leading energy's regulated utilities and help engineer that companies transition from an integrated utility to a pure play regulated one.
Speaker Change: I am confident rod has the right set of leadership.
Speaker Change: Leadership skills expertise experience and vision.
Speaker Change: To lead Algonquin to new Heights, as a regulated utility.
Chris Huskilson: As of noon today, Rod will be stepping into the Chief Executive Officer position. I will be resuming my prior place as a member of the Board of Directors, and I'm committed to facilitating a smooth transition. Rod, I can say without a doubt that everyone here, from our employees to the board, is extremely excited to start this new chapter with you. Welcome. We're delighted to have you.
Speaker Change: As of noon today, Rod will be stepping into the chief Executive officer position.
Speaker Change: I will be resuming my prior place as a member of the board of directors.
Speaker Change: Committed to facilitating a smooth transition.
Speaker Change: Rod I can say without a doubt that everyone here from our employees to the board is extremely excited to start this new chapter with you welcome. We're delighted to have you here.
Rod West: Well, greetings and good morning, everyone. It's a pleasure to be here. And thank you, Chris, for your kind introduction. Under your leadership, Algonqin has made significant strides. paving the way for a brighter future. very much align with the strategic direction taken by the company under your and the board's leadership. And as I considered joining Algonqn, I saw a unique opportunity to create sustainable value with a diversified utility asset base. And I also saw a company that's making significant customer-centric investments. with a focus on operational performance and safety, which, in my view, is foundational to a successful pure-play utility.
Speaker Change: Greetings and good morning, everyone.
Speaker Change: It's a pleasure to be here and thank you Chris for your kind introduction.
Speaker Change: Under your leadership Algonquin has made significant strides in paving the way for a brighter future.
Speaker Change: I'm very much aligned with the strategic direction taken by the company under your and the Board's leadership.
Speaker Change: And as I considered joining Algonquin I saw a unique opportunity to create sustainable value with a diversified utility asset base.
Speaker Change: I also saw a company, that's making significant customer centric investments.
Speaker Change: With our focus on operational performance and safety, which in my view is foundational to a successful pure play utility.
Rod West: And what I found compelling, personally, is the tremendous opportunity to create value. I'm excited to bring my experience and background to Algonquin as we look to drive value for our stakeholders. The company has undergone tremendous change in a short period of time. Now, as a pure play utility, Algonqn is primed to focus on accelerating its performance to all of its stakeholders. We're focused on improved customer service, of course, creating value and ultimately returning. to a sustained growth trajectory.
And what I found compelling personally is the tremendous opportunity to create value.
Speaker Change: I'm excited to bring my experience and background to Algonquin is as we look to drive value for our stakeholders.
Speaker Change: The company has undergone tremendous change in a short period of time.
Speaker Change: Now as a pure play utility.
Speaker Change: Algonquin is prime to focus on accelerating its performance to all of its stakeholders.
Speaker Change: We are focus on improved customer service of course, creating value and ultimately returning to a sustained growth trajectory.
Rod West: I'll let Chris and the team summarize the company's recent results, but I'm excited to dive right in on transforming Algonquin. And my aim is to come back to shareholders in approximately 90 days or so to provide more transparency on our outlook. in detail on our Performance Acceleration Plan. I want to personally thank Chris and the team for all the work getting us to this point. And I am tremendously excited by the future and the opportunity in front of us.
Speaker Change: I'll, let Chris and the team summarize the company's recent results, but I'm excited to dive right in on transforming Algonquin.
Speaker Change: And my aim is to come back to shareholders in approximately 90 days or so to provide more transparency on our outflows.
Speaker Change: Detail on our performance acceleration plan.
Speaker Change: I want to personally thank Chris and the team for all the work.
Speaker Change: Getting us to this point.
Speaker Change: And I am tremendously excited by the future and the opportunity in front of Us Chris.
Chris Huskilson: Chris, back. Thank you, Rod.
Chris Husk: Back to you.
Chris Huskilson: And as I said, we're very On the same note, let me also briefly touch on the CFO.
Chris Husk: Thank you Rod and as I said, we're very excited.
Chris Husk: On the same note.
Chris Husk: Let me also briefly touch on the CFO transition.
Chris Huskilson: As previously announced, Darren has accepted an offer to join Canadian Tire as its Chief Financial Officer. And today will be his last as CFO of Algonqn. I'd like to extend my sincere appreciation to Darren, who helped steer Algonqin through its most significant transformation. The company and I were fortunate to benefit from his strong leadership through this.
Chris Husk: As previously announced Darren has accepted an offer to join Canadian tire as its chief financial Officer, and today will be his last as CFO of Algonquin.
Chris Husk: I'd like to extend my sincere appreciation to Darren who help steer algonquin through its most significant transformation.
Chris Husk: Our company and I were fortunate to benefit from his strong leadership through this period. Thank you Darren.
Chris Huskilson: With Darren's upcoming departure, the company has engaged a national firm as part of a comprehensive search process for a permanent CFO.
Chris Husk: With Darren upcoming departure, the company has engaged a national firm as part of a comprehensive search process for a permanent CFO.
Brian Chin: And while this search is underway, our VP of Investor Relations, Brian Chin, has agreed to step into the interim CFO role. Brian has more than two decades of utilities. I'm a senior executive in several finance roles here at Algonqn and American Banking. And as the lead North American Utilities Equity Analyst for both Bank of America Merrill Lynch and Citigroup. I'm confident Bryan has the right capabilities to help ensure a smooth transition for our finance Thank you, Brian, for taking on the role.
Speaker Change: And while this search is underway, our VP of Investor Relations, Brian Chin has agreed to step into the interim CFO role.
Speaker Change: Brian has more than two decades of utilities experience as a senior executive and several finance roles here at Algonquin at American water.
Speaker Change: And as the lead North American utilities equity analyst for both Bank of America Merrill Lynch and Citi for.
Speaker Change: Confident Brian has the right capabilities to help ensure a smooth transition for our finance and executive teams.
Speaker Change: You, Brian for taking on the role.
Speaker Change: Yes.
Chris Huskilson: Now turning to the closure of our 2023 The company set out to achieve a few key objectives. These include the sale of our renewables business. uplifting our regulated utilities, and applying a greater degree of focus and discipline to the company overall. At this stage, the company has completed the sale of its renewables. as well as at stake in Atlanta. Marking two major milestones.
Speaker Change: Now turning to the closure of our 2023 strategic review.
Speaker Change: The company set out to achieve a few key objectives.
Speaker Change: These include the sale of our renewables business.
Speaker Change: Uplifting, our regulated utilities and applying a greater degree of focus and discipline to the company overall.
Speaker Change: At this stage the company has completed the sale of its renewables business as well as its stake in atlantica.
Speaker Change: American two major milestones and its trends transition to a pure play regulated utility company.
Chris Huskilson: Now, the critical focus points for the company remain continuing to improve our utilities. Optimizing and Leveraging Our IT Platform. http://TheBusinessProfessor.com Streamlining How We Operate in Driving Operational Efficiency and Customer Success.
Speaker Change: Now the critical focus points for the company remained continuing to improve our utilities.
Speaker Change: Optimizing and leveraging our it platform, which we completed last year.
Speaker Change: Streamlining how we operate.
Speaker Change: And driving operational efficiency and customer service.
Chris Huskilson: When I look at the opportunity within the regulated utilities business, I believe Algonqin has a great portfolio of assets. in Attractive Jurisdictions & Commodities. These investments were made by our employees for the benefit of our community. While Algonqn is authorized to achieve a 9.2% ROI. It's actual earned ROE is several hundred basis points below that allowable target. This requires The company is aiming to achieve its allowed returns on equity with all possible means. To bridge this gap, we must accelerate reductions in regulatory lag. and improve our operational This means uplifting and upscaling the regulated utilities.
Speaker Change: When I look at the opportunity within the regulated utilities business.
Speaker Change: I believe Algonquin has a great portfolio of assets and attractive jurisdictions and commodities.
Speaker Change: These investments were made by our employees for the benefit of our customers.
Speaker Change: Algonquin is authorized to achieve a nine 2% Roe.
Speaker Change: It's actual earned ROE is several hundred basis points below that allowable target.
Speaker Change: This requires improvement.
Speaker Change: The company is aiming to achieve its allowed returns on equity with all possible speed.
Speaker Change: The bridge this gap, we must accelerate reductions in regulatory lag and improve our operational efficiency.
Speaker Change: This means uplifting and upscaling, the regulated utilities and improving our focus and discipline to capture the tremendous opportunity ahead of the company today.
Chris Huskilson: We are improving our focus and discipline to capture the tremendous opportunity ahead. We're committed to improving and enhancing our efficiency and effectiveness. The benefit of our customers, community.
Speaker Change: We're committed to improving and enhancing our efficiency and effectiveness for the benefit of our customers communities and investors.
Chris Huskilson: It's been a privilege to lead Algonqn during this momentous period, and I want to thank Algonqn's employees.
Speaker Change: It's been a privilege to lead Algonquin during this momentous period and I want to thank all <unk> employees, whom I have had the honor of working alongside during this short but significant time.
Chris Huskilson: whom I have had the honor of working alongside during this short With that, let me now turn to operational. of which there have been several since our last call. Let's start with Atlantica and the renewable. The Atlantica transaction resulted in net proceeds of approximately $1.1 billion, which we used to reduce debt as referenced in our balance sheet as of year end. From the sale of renewables business, we expect to receive proceeds of approximately $2.1 billion, which reflects our originally announced value of $2.5 billion after subtracting taxes, transaction fees, and other preliminary closing adjustments. and less, the $220 million cash.
Speaker Change: With that let me now turn to operational update of which there have been several since our last call.
Speaker Change: Yeah.
Speaker Change: Let's start with atlantica in the renewables business.
Speaker Change: Atlantica transaction resulted in net proceeds of approximately $1 1 billion, which.
Speaker Change: Which we used to reduce debt as referenced in our balance sheet as of year end.
Speaker Change: From the sale of renewables business, we expect to receive proceeds of approximately $2 1 billion.
Speaker Change: Which reflects our originally announced value of $2 5 billion.
Speaker Change: After subtracting taxes transaction fees and other preliminary closing adjustments.
Speaker Change: And less the $220 million cash earn out.
Darren Myers: Darren will discuss this in more detail.
Speaker Change: Darren will discuss this in more detail later.
Chris Huskilson: I'll turn now to our regulatory updates for the quarter. I'm pleased with the progress we've made in several cases. In our Missouri Water case, the Commission approved an all-party settlement and new rates are effective March 1.
Speaker Change: I'll turn now to our regulatory updates for the quarter.
Speaker Change: I am pleased with the progress we've made in several cases.
Speaker Change: In our Missouri water case, the commission approved an all party settlement and new rates are effective March one.
Speaker Change: And our Arkansas water case the commission all Theyre also approved a previously reached settlement and new rates are effective also March one.
Chris Huskilson: Newsom & Co. In our gas New Brunswick rate case, we received an order in December approving new rates which took effect January 1st this year. https://www.youtube.com It involved four small water utilities. We have reached a settlement. Parties in this case agreed to full consolidation of all four water systems. Next steps include a settlement hearing and a recommended order. We also recently received a constructive staff proposed order with regards to depreciation deferrals for our Cerebell wastewater treatment facility. Our CalPICO rate case, filed in September 24, is proceeding New Hampshire Granite State Raid Case Has Reached an All-Party Settlement Despite the progress in these other cases, I'm disappointed with the initial filing of our Empire Electric, Missouri.
Speaker Change: And our gas New Brunswick rate case, we received an order in December approving new rates, which took effect January one this year.
Speaker Change: And our Arizona proceedings.
Speaker Change: And that involved for small water utilities.
Speaker Change: We reached a settlement agreement the parties in this case agreed to full consolidation of all for water systems, which is consistent with our plan to streamline our business.
Speaker Change: Next steps include a settlement hearing and a recommended order from the assigned judge.
Speaker Change: We also recently received a constructive staff proposed order with regards to depreciation deferrals for our <unk> wastewater treatment facility.
Speaker Change: And our Litchfield Park futility.
Speaker Change: Our <unk> rate case filed in September 24 is proceeding on schedule.
Speaker Change: Our new Hampshire granite state rate case has reached an all party settlement, which is now in front of the commission hearing is scheduled for March.
Speaker Change: Despite the progress in these other cases I'm disappointed with the initial filing of our Empire Electric Missouri rate case.
Chris Huskilson: where we've recently had to delay. In short, the late revision to our tariff calculations has prompted us to restart the case. Meaning the case is now expected to be resolved in the first half of 2026 rather than the late portion of 2025 as previously expected. Additionally, the Missouri Commission has announced an investigation into customer service and billing. We view this as driven partially by our recent implementation of our IP. Can we take this investigation seriously? We are committed to getting this done right for our community. We understand the Commission's frustration with our initial customer experience.
Speaker Change: We've recently had to delay our timetable.
Speaker Change: In short the late revision to our tariff calculations has prompted us to restart the case.
Speaker Change: Meaning the case is now expected to be resolved in the first half of 2026, rather than the late portion of 2025 as previously expected.
Speaker Change: Additionally, the Missouri Commission has announced an investigation into customer service and billing issues.
Speaker Change: We view this is driven partially by our recent implementation of our it platform and.
Speaker Change: And we take this investigation seriously and intend to work with the commission to address these concerns.
Speaker Change: We're committed to getting this done right for our customers.
Speaker Change: We understand the commissioning commissions frustration with our initial customer experience and we welcome this opportunity to show the improvements that the new system will allow to our customer experience.
Chris Huskilson: And we welcome this opportunity to show the improvements that the new system will allow to our community. Ultimately, we are confident this system will lead to better.
Speaker Change: Ultimately we are confident this system will lead to better customer service.
Chris Huskilson: Shifting to translation. As many of you are aware, the Southwest Power Pool is conducting an Integrated Transition The SPP Board of Directors approved its plan in October of 24, and in February of 25, approved a series of projects in our Empire Elections. along with several other utilities. The total projects that have been approved by SPP, or Empire's Service Territory, total over $700 million in cumulative capital. over the potential five next We are currently in the 90 day window in which we will respond as part of SPP's process. So we expect to provide more updates on this as material development.
Speaker Change: Shifting to transmission.
Speaker Change: As many of you are aware the southwest power pool is conducting an integrated transmission planning process.
Speaker Change: The SPP board of directors approved a plan in October of 24 and in February of 'twenty five approved a series of projects in our Empire electric footprint along with several other utilities.
Speaker Change: The total projects that have been approved by SPP for Empire service territory total over $700 million in cumulative capital spending over the potential five next five to seven years.
Speaker Change: We are currently in the 90 day window in which we will respond as part of Spp's process.
Speaker Change: So we expect to provide more updates on this as material developments occur.
Chris Huskilson: As part of the process, we expect our next steps are to develop detailed plans for the https://www.youtube.com & Accept the Notice of Dismissal. These projects could represent an exciting multi-year opportunity to invest in our community.
Speaker Change: As part of the process, we expect our next steps are to develop detailed plans to.
Speaker Change: Met them to SPP and accept the notices to construct.
Speaker Change: These projects could represent an exciting multi year opportunity to invest in our communities and infrastructure to improve reliability for our customers.
Darren Myers: And with that, I'll hand things over to Darren. Quarters Financial Results. Thanks, Chris, and good morning, everyone.
Speaker Change: And with that I'll hand things over to Darren to review the quarter's financial results Darren.
Darren: Thanks, Chris and good morning, everyone.
Darren Myers: As a reminder from last quarter, we separated our results into continuing operations and discontinued operations. Our continuing operations include our regulated business, hydro business, and ownership stake in Atlantica, which was sold during the fourth quarter. It also includes all debt except debt specific to our renewables business, which has been netted into assets held for sale. We have recorded our ownership stake in Atlantica and the final associated dividend in continuing operations in accordance with generally accepted counting principles. Starting with EBITDA, Q4 Consolidated Adjusted EBITDA was $248.6 million, down 5.2% from the prior quarter, prior year, pardon me.
Darren: As a reminder from last quarter, we separated our results into continuing operations and discontinued operations.
Darren: Turning operations include a regulated business hydro business and ownership stake in Atlantica, which was sold during the fourth quarter.
Darren: It also includes all debt, except that specific to our renewables business, which has been netted into assets held for sale.
Darren: We have recorded our ownership stake in atlantica and the final associated dividend in continuing operations in accordance with generally accepted accounting principles.
Darren: Starting with EBITDA Q4, consolidated adjusted EBITDA was $248 6 million down five 2% from the prior quarter. Prior year pardon me fourth quarter, adjusted EBITDA was lower driven by an $18 million year over year decline in our corporate segment as a result of the lower dividend.
Darren Myers: Fourth quarter adjusted EBITDA was lower, driven by an $18 million year-over-year decline in our corporate segment as a result of the lower dividend from Atlantica, and certain corporate allocations which under discontinued operations cannot be allocated to our renewables business. Our regulated adjusted EBITDA was $234.4 million in the quarter, up 2.4% from 2023. On a full year basis, our consolidated adjusted EBITDA was approximately $1.04 billion, up 2.6% from 2023. Our consolidated adjusted EBITDA was negatively impacted by the reduced Atlantica dividend in the fourth quarter while we delivered regulated adjusted EBITDA of $940.2 million up 4.2% from 2023.
Darren: Atlantica, and certain corporate allocations, which under discontinued operations cannot be allocated to our renewables business.
Darren: Our regulated adjusted EBITDA was $234 4 million in the quarter up two 4% from 2023.
Darren: On a full year basis, our consolidated adjusted EBITDA was approximately $1.04 billion up two 6% from 2023.
Darren: Our consolidated adjusted EBITDA was negatively impacted by the reduced Atlantic a dividend in the fourth quarter, while we delivered regulated adjusted EBITDA of $942 million.
Darren: Up four 2% from 2023.
Darren Myers: Our increased regulated EBITDA was driven by new rates in the year and higher HLBV on weather normalization, which more than offset higher operating expenses, which included approximately $18 million in non-recurring expenses that were recorded in 2024. Fourth quarter adjusted net earnings were $45.2 million, down from $81.3 million in 2023. The decline in adjusted net earnings is primarily attributable to lower consolidated adjusted EBITDA, $8.5 million of higher depreciation as a result of continued capital expenditures, approximately $6 million in higher interest expense, and $8.6 million in higher adjusted taxes. Our actual year-over-year increase in interest expense was $13.6 million, but it includes approximately $7 million relating to a reclass of the margin loan, with no impact on net income.
Darren: Our increased regulated EBITDA was driven by new rates in the year and higher HBV on weather normalization, which more than offset higher operating expenses, which included approximately $18 million in nonrecurring expenses that were recorded in 2024.
Darren: Fourth quarter, adjusted net earnings were $45 $2 million down from $81 3 million in 2023.
Darren: Decline in adjusted net earnings is primarily attributable to lower consolidated adjusted EBITDA of $8 $5 million of higher depreciation as a result of continued capital expenditures approximately $6 million and higher interest expense and $8 6 million.
Darren: Dollars in higher adjusted taxes.
Darren: Our actual year over year increase in interest expense was $13 6 million, but it includes approximately $7 million relating to a re class of the March alone with no impact on net income.
Darren Myers: It is worth noting that the $6 million increase in interest was primarily related to funding of the renewables business, which has not been recorded in discontinued operations based on generally accepted counting principles. Full year adjusted net earnings were $232.1 million, down from $279.4 million in 2023. Growth in adjusted EBITDA was more than offset by $41.7 million of higher depreciation, $29 million of higher interest expense, and $11.4 million in higher adjusted taxes. Our actual year-over-year increase in interest expense was $55.1 million and included $26 million relating to a reclass of the margin loan with no impact on net income.
Darren: It's worth noting that the $6 million increase in interest was primarily related to funding of the renewables business, which has not been recorded in discontinued operations based on generally accepted accounting principles.
Darren: Full year adjusted net earnings were $232 $1 million down from $279 4 million in 2023.
Darren: Growth in adjusted EBITDA was more than offset by $41 7 million of higher depreciation $29 million of higher interest expense and 11 4 million in higher adjusted taxes.
Darren: Our actual year over year increase in interest expense was $55 1 million and included $26 million relating to reclassify emerge alone with no impact on net income.
Darren Myers: We estimate approximately $16 million of the increased interest expense related to the funding of the renewables business. Moving to our earnings per share, Q4 earnings adjusted net earnings per share were $0.06 vs. $0.12 in the prior year, while full year adjusted net earnings per share were $0.30 vs. $0.39 in 2023. The year-over-year decline for both periods was driven by reduced adjusted net earnings as well as the higher share count as a result of the equity unit conversion in mid-2024.
Darren: We estimate approximately $60 million of the increased interest expense related to the funding of the renewables business.
Darren: Okay.
Darren: Moving to our earnings per share Q4 earnings adjusted net earnings per share was there were <unk> versus 12 in the prior year, while full year adjusted net earnings per share were <unk> 30 versus 39 in 2023 a.
Darren: The year over year decline for both periods was driven by reduced adjusted net earnings as well as the higher share count as a result of the equity unit conversion in mid 2024.
Darren Myers: With regards to our balance sheet, our December 31st balance sheet included the effects of the Atlantica sale but excluded the January 8th closing of our sale of our renewables energy business. On our year-end balance sheet, we have $6.7 billion in continuing operations debt and a further $1.35 billion in debt related to discontinued operations for a total gap debt of $8.05 billion.
Darren: With regards to our balance sheet. Our December 31st balance sheet included the effects of the atlantica sale, but excluded the January 8th closing over sale of our renewable energy business.
Darren: On our year end balance sheet, we have $6 $7 billion and continuing operations debt and a further 135 billion in debt related to discontinued operations for a total GAAP debt of $8.05 billion.
Darren Myers: Let me provide some further color on the proceeds from the $2.5 billion sale of our renewables business, which closed on January 8, 2025. As a reminder, the sale includes a $220 million earn out associated with the performance of certain wind assets. Against our year-end balance sheet, we expect to receive $2.1 billion in proceeds after customary transaction costs and estimated remaining construction costs for certain projects. Adjusting for the consolidation of certain construction debt in the fourth quarter, the $2.1 billion represents the high end of the range we provided last quarter. Approximately $150 million of the net proceeds are expected to be received later in 2025 upon monetization of certain tax attributes.
Darren: Let me provide some further color on the proceeds from the $2 $5 billion sale of our renewables business, which closed on January eight 2025.
Darren: As a reminder, the sale includes a $220 million earn out associated with the performance of certain wind assets.
Darren: Against our year end balance sheet, we expect to receive $2 1 billion in proceeds after customary transaction costs and estimated remaining construction costs for certain projects.
Adjusting for the consolidation of certain construction debt in the fourth quarter. The $2 1 billion represents the high end of the range, we provided last quarter.
Darren: Approximately approximately $150 million of the net proceeds are expected to be received later in 2025 upon monetization of certain tax attributes.
Darren Myers: Putting this all together, you should expect our year-end gap debt of approximately $8.05 billion to be reduced by an estimated $1.95 billion, with a further $150 million to be received later in 2025.
Darren: Putting this all together you should expect our yearend GAAP debt of approximately 8.05 billion to be reduced by an estimated $1 95 billion with a further $150 million to be received later in 2025.
Darren Myers: As a last point, let me touch on our rate base. As of year-end 2024, we estimate our rate base to be approximately $7.8 billion, up from $7.2 billion a year earlier. As a reminder, our rate base estimate represents our authorized rate base plus prudently invested capital for the benefit of our customers on which we aim to both recover and earn a rate of return. Our rate base increased by approximately $740 million due to spending and invested capital in 2024, offset by approximately $350 million in depreciation and increases in accumulated deferred income tax. The remainder of the increase primarily relates to pre-2024 spending on our IT platform software whose implementation was completed earlier this year and is now included in our estimate of rate base.
Darren: As a last point, let me touch on our rate base.
Darren: As of year end 2024, we estimate our rate base to be approximately $7 8 billion.
Darren: Up from $7 2 billion a year earlier.
Darren: As a reminder, our rate base estimate represents our authorized rate base plus prudently invested capital for the benefit of our customers on which we aim to.
Darren: Aimed to both recover and earn a rate of return.
Darren: Our rate base increased by approximately $740 million due to spending and invested capital in 2024, offset by approximately $350 million in depreciation and increases in accumulated deferred income taxes.
Darren: The remainder of the increase primarily relates to pre 2020 for spending on our it platform software, whose implementation was completed earlier this year and is now included in our estimate of rate base.
Darren Myers: Let me conclude with some final comments on my time with Algonqn. It has been a privilege to serve as CFO during such a transformational period for the company. While we have faced challenges, we have made significant progress to reposition Algonqn through decisive action. Although there is still more work to be done, I am confident the company is now in a stronger position with great opportunities in front of it. I look forward to seeing the company accelerate its performance and earnings. Thank you to the entire Algonqn team and all of our investors.
Speaker Change: Let me conclude with some final comments on my time with they'll go up and it has been a privilege to serve as CFO during such a transformational period for the company. While we have faced challenges we've made significant progress to reposition will go up and through decisive actions.
Brian Chin: Although there is still more work to be done I'm confident the company is now in a stronger position with great opportunities in front of US I look forward to seeing the company accelerate its performance and earnings. Thank you to the entire <unk> team and all of our investors I'll now hand things over to Brian to provide some forward looking commentary Brian.
Brian Chin: I'll now hand things over to Brian to provide some forward-looking commentary. Thanks, Darren. Two key adjustments to remember looking ahead versus 2024 are that our continuing operations will no longer have dividends from Atlanta. And our interest expense will be affected by proceeds used from both the Renewables and Atlantica transactions. As a remember, the December 31st balance sheet reflects proceeds from the Atlantica sale, but the interest expense reductions related to that sale were only for a few weeks. For operating expenses, we expect normal inflationary pressures to continue next year, and we will be working down the dis-energies associated with exiting our renewables business.
Brian Chin: Thanks, Darrin to key adjustments to remember looking ahead versus 2024.
Brian Chin: Our that our continuing operations will no longer have dividends from atlantica and our interest expense will be affected by proceeds used from both the renewables and atlantica transactions as.
Brian Chin: As you remember the December 31 balance sheet reflects proceeds from the atlantica sale, but the interest expense reductions related to that sale were only for a few weeks.
Brian Chin: For operating expenses, we expect normal inflationary pressures to continue next year, and we will be working down the dis synergies associated with exiting our renewables business.
Brian Chin: Against this backdrop, we will be aiming to accelerate our operating efficiency measures, particularly as this will essentially be our first year as a pure play regulated utility.
Brian Chin: Against this backdrop, we will be aiming to accelerate our operating efficiency measures, particularly as this will essentially be our first year as a pure play regulated utility.
Brian Chin: Please note that we're not providing guidance at this time, but as Rod mentioned, we expect to provide substantially more detail in our outlook and our plan in the coming months. We very much see 2025 as a transition year, and we believe that off that base, Algonqin has the opportunity to grow earnings above peer averages with substantial longer-term opportunities to grow our rate base for the benefit of our customers through prudent investments in our service territory. With regards to capital expenditures, we also intend to provide a more fulsome update, but for now we'll say that we plan to continue to exercise discipline, which we expect will result in directionally lower capital spend year over year.
Brian Chin: Please note that we're not providing guidance at this time, but as Rod mentioned, we expect to provide substantially more detail on our outlook and our plan in the coming months, we very much see 2025 as a transition year and we believe that off that base Algonquin has the opportunity to grow earnings above peer averages with substantial <unk>.
Brian Chin: Longer term opportunities to grow our rate base for the benefit of our customers through prudent investments in our service territories.
Brian Chin: With regards to capital expenditures, we also intend to provide a more fulsome update but for now we will say that we plan to continue to exercise discipline, which we expect will result in directionally lower capital spend year over year.
Brian Chin: We also intend to provide more color on our financing plan. As a general principle, we continue to favor financing self-sufficiency while we work to improve our asset returns and lower our cost to capital.
Brian Chin: We also intend to provide more color on our financing plans as a general principle, we continue to favor financing self sufficiency, while we work to improve our asset returns and lower our cost of capital.
Brian Chin: Last, I'll comment on some high-level thoughts on the opportunity in front of us. We estimate our earned ROE stands in approximately the mid fives percent range, excluding HLBV on our 2024 average rate base of 7.5 billion. To be clear, our goal is to substantially improve our earned ROE to move it much closer to our authorized ROE weighted average of 9.2% and achieve or improve upon our previously stated comments related to our targeted dividend payout ratio of 60-70%.
Brian Chin: Last I'll comment on some high level thoughts on the opportunity in front of us.
Brian Chin: We estimate our earned ROE stands and approximately the mid 5% range, excluding HBV on our 2024 average rate base of $7 5 billion.
Brian Chin: To be clear our goal is to substantially improve our earned ROE to move it much closer to our authorized ROE weighted average of nine 2% and achieve or improve upon our previously stated comments related to our targeted dividend payout ratio of $60 to 70%.
Brian Chin: In closing, it's a privilege and a responsibility to take on this role, and I'm looking forward to accelerating our progress.
Rob: In closing, it's a privilege and a responsibility to take on this role and I'm looking forward to accelerating our progress and with that I'll turn things back to Rob for some quick closing remarks.
Rod West: And with that, I'll turn things back to Rob for some quick closing remarks. Well, thanks, Brian, and thank you, everyone, for joining us on the call this morning. I am, as I stated before, excited to begin leading the team here at Algonqin in just a few hours. And I truly believe that there is significant opportunity ahead, and we're looking forward to your questions.
Rob: Well, thanks, Brian and thank you everyone for joining us on the call. This morning.
Speaker Change: I am as I stated before excited to begin leading the team here at Algonquin in just a few hours.
Speaker Change: Truly believe that there is significant opportunity ahead, and we're looking forward to your questions back to you operator.
Operator: Back to you, Operator.
Speaker Change: Thank you.
Operator: If you have a question, please press star 1 on your telephone. If you would like to withdraw your question, please press star 1 again. One moment please for your first question.
Speaker Change: If you have a question please press <unk>.
Speaker Change: One on your telephone keypad.
Speaker Change: Withdraw your question. Please press star one again.
Speaker Change: One moment. Please for your first question.
Sean Steuart: And with your first question, this comes from the line of Sean Steuart from TD Cowen. The line's open.
Speaker Change: And with your first question comes from the line of Sean Stewart from TD Cowen.
Speaker Change: Your line is open.
Sean Steuart: Thank you. Good morning, everyone. And congratulations to Rod, Darren and Brian.
Sean Stewart: Thank you and good morning, everyone and congratulations to Rob Darren and Brian.
Sean Steuart: I want to start first, I guess, for Chris or Rod, the optimization of the utility platform, as mentioned, is an ongoing effort outside of the rate case docket, including the three big initiatives. Can you give us a little more context on what are the focus areas for improvement, how concentrated it is in specific utilities, or is it still an ongoing broader effort? I think, first of all, from our overall perspective, it is about working on ourselves. We do have quite a complicated service co-arrangement as we are today, and so we see that as the location of our biggest opportunity.
Speaker Change: I wanted to start first.
Speaker Change: I guess for Chris or Rod the optimization of the utility platform. As you mentioned is an ongoing effort.
Speaker Change: Side of the rate case docket, including the three big initiatives can you give us a little more context on what are the focus areas for improvement how concentrated it is it specific utilities or is it still an ongoing broader effort.
Speaker Change: Yes, I mean, I think first of all from our overall perspective. It is about working on our service calls we do have quite a complicated service co arrangement as we are today and so we see that as the as the.
Speaker Change: The location of our biggest opportunities.
And we're putting together a plan to actually execute a reduction of the overall overhead.
Speaker Change: Various utilities.
Chris Huskilson: The other thing that we're doing, which As I think I said from day one, we've raised up the utilities. They are now our primary. We put utility leaders, utility presidents in place, and they are accountable for all aspects. And we're moving that forward quite rapidly. So when we put those two things together, we can see tremendous operational efficiency.
Speaker Change: The other thing that we're doing which.
Sarah could speak to in more detail, but the other thing that we're doing is actually changing the accountability structure within within the organization as a whole.
Speaker Change: No.
Speaker Change: I said from day, one we've raised up the utilities. They are now our primary.
Primary focal point, we flipped utility leaders utility President's in place and they are accountable for all aspects of the businesses that those utilities have and and we're moving that forward quite rapidly and so when we put those those two things together, we can see tremendous operational efficiency.
Speaker Change: And improvements in our customer experience and those are the two primary things we're focused on right now.
Chris Huskilson: Thanks for that, Chris.
Chris Husk: Okay. Thanks for that Chris.
Brian Chin: And then question for Brian, or Darren. Brian, you touched on your perception that the company's long term EPS growth potential will outpace the peer group. What timeframe are you thinking of when you talk about that potential? Presumably it's not a 2025 Do you have any parameters you can put around on time frame and what EPS growth potentially might think is reasonable over the long term?
Speaker Change: And then question for Brian or Darren.
Speaker Change: Brian you touched on your perception that the Companys long term EPS growth potential will outpace the peer group.
Speaker Change: What timeframe.
Speaker Change: Are you thinking of when you talk about that potential and presumably it's not a 2025.
Speaker Change: Story, but.
Speaker Change: And do you have any parameters you can put around on timeframe and what EPS growth potentially might think is reasonable over the long run.
Brian Chin: Yeah, thanks for the question, Sean. So at this point, no comments on timeframe. But let me remind everybody, what we've said in the past, we indicated previously that our targeted dividend payout ratio of 60 to 70% could be achieved in a few years time. That timeframe hasn't changed. In fact, if anything, we think there's a possibility to accelerate that particularly given the arrival of Rod and his just tremendous experience. With regards to the opportunity to grow our EPS, I can put it no more simply than we're an under-earning utility, but for the first time in the company's history, we're now singularly focused on a single business model.
Sean Stewart: Yes, thanks for the question Sean.
Brian Chin: So at this point no comments on timeframe, but let me remind everybody what we said in the past we indicated previously that our targeted dividend payout ratio of $60 to 70% could be achieved in a few years' time that timeframe Hasnt changed in fact, if anything we think theres a possibility to accelerate that.
Brian Chin: Given the arrival of Rod and his just tremendous experience.
Brian Chin: With regards to the opportunity to grow our EPS I can put it no more simply then werent under earning utility but for the first time in the company's history. We are now singularly focused on a single business model the opportunity for us to execute here is tremendous and we need to get it right.
Brian Chin: The opportunity for us to execute here is tremendous, and we need to get it right. So I think that we're excited about being able to talk about the future. But first, we've got to make sure that Rod has a chance to come in and take a look and see where we have additional opportunities.
Speaker Change: I think that we're excited about being able to talk about the future, but first we got to make sure that rod has a chance to come in and take a look and see where we have additional opportunities in front of us.
Sean Steuart: Okay, that's all I have for now. Thanks, everyone.
Brian Chin: Okay.
Brian Chin: Thats all I have for now thanks, everyone.
Brian Chin: Thanks, Sean.
Sean Stewart: Thank you.
Nelson Ng: Our next question comes from the line of Nelson Ng from RBC. The line's open. Great, thanks.
Speaker Change: Our next question comes from the line of Nelson, Inc. From RBC.
Sean Stewart: Your line is open.
Speaker Change: Great, Thanks, and Rob Congrats new your new role I think Dara and best of luck of Canadian tire on Chris.
Nelson Ng: And Rod, congrats on your new role.
Nelson Ng: I think, Darren, best of luck at Canadian Tire. And Chris, I guess we look forward to your continued involvement on the board.
Speaker Change: So we look forward to your continued involvement on the board.
Chris Huskilson: First question just relates to the hydro sales process. Are you able to provide any kind of high level comments on how that process is going? No more detail than we would have had last time, which is that, you know, within this half year, we will at least go to market and take a look from an indicative perspective.
First question just relates to the hydro sales process are you able to provide any kind of high level comments on.
Speaker Change: How that process is going.
Speaker Change: Yeah.
Speaker Change: No more detail than we would've had last time, which is that within this half year.
Speaker Change: Will.
Speaker Change: At least to go to market and take a walk from an indicative perspective.
Chris Huskilson: But I would repeat what I've repeated, what I've said in the past, which is that we're not going to do any more dilutive transactions. http://TheBusinessProfessor.com https://www.youtube.com Our position is a pure play, you know, we have greater than 90% of our. And secondly, we continue to need Canadian income, so it definitely helps in that area. Yeah, that's great.
Speaker Change: But I would repeat what ive repeated what I've said in the past, which is that we're not going to do anymore dilutive transactions at the end of the day, if we can achieve an accretive transaction by selling the IPO, we will do so if not.
As it is on the one hand not.
Speaker Change: Reducing our position as a pure play.
Speaker Change: Greater than 90% of our business that is in the regulated space.
Speaker Change: Secondly, we continue to need Canadian Canadian income and so it definitely helps from that area as well.
Speaker Change: Okay. That's great. Thanks, Chris and then a question for Darren So Darren you talked about the rate base at the end of the year and obviously the rate base growth year over year. It looks like there was quite a bit higher than that growth Capex. I think you mentioned that there were some adjustments related to spend.
Nelson Ng: Thanks.
Darren Myers: And then a question for Darren. So Darren, you talked about the rate base at the end of the year, and obviously the rate base growth year over year, it looks like it was quite a bit higher than the growth capex. And I think you mentioned that there were some adjustments related to spend prior to 2024 that you decided to include. Are there any other Spend prior to 2024 or other periods that you haven't included into your rate base set. Yeah, Nelson, that that was really the the our IT platform. So as they sit in corporate, we don't include them in the rate base.
Speaker Change: Prior to 2024 that you decided to include are there any other.
Speaker Change: Spend prior to 2024 or other parents that you haven't included into rate base that.
Speaker Change: They'd be included this year or any other further adjustments.
Speaker Change: Could take place this year.
Yes, Nelson that was really the our it platform so as they sit in corporate we don't include them in the rate base, but as the programs push out when they are included so that's really the bulk of the lion's share theres nothing more significant that's going to come.
Darren Myers: But as as the programs push out, then they're included. So that's, you know, really the fault, the lion's share, there's nothing more significant that's going to come forward like that.
Speaker Change: Forward like that.
Darren Myers: Okay, and then just one related question in terms of the transition, I think in Q4, there were some one off expenses.
Speaker Change: Okay, and then just one related question in terms of the.
Speaker Change: Transition I think in Q4, there were some one off expenses and maybe that's a question for Darren or or Brian but.
Darren Myers: Maybe this question for Darren or, or Brian, but Do you expect to see any kind of material transition expenses this year? So Nelson, as you may recall from my prepared remarks, we did see some associated costs related to the synergies on the renewables that occurred in 2024. So it will take us a little bit of time to work that down in 2025. But part of the reason why we call that out is because those are not ongoing costs that we see as part of the value of the business. So we just want to reiterate that point.
Speaker Change: Do you expect to see any kind of material transition expenses.
Speaker Change: This year.
Speaker Change: Related to the sale of renewables.
Speaker Change: So Nelson as you may recall from my prepared remarks, we did see some associated costs related to dis synergies on the renewables that occurred in 2024.
Speaker Change: So it will take us a little bit of time to work that down in 2025.
Speaker Change: But part of the reason why we call that out is because those are not those are not ongoing costs that we see as part of the value of the business. So we just want to add.
Speaker Change: Reiterate that point and then also maybe the other thing I'd just add.
Darren Myers: And Nelson, maybe the other thing I'd just add, in the quarter, as I called out, there's certain allocations, kind of indirect allocations that hit the continuing operations. So part of that, this synergy is already in the run rate of the fourth quarter.
Speaker Change: In the quarter as I called out there are certain allocation kind of indirect allocations that hit the continuing operations.
Speaker Change: So part of that Dis synergy is already in the run rate of the fourth quarter.
Continuing operations.
Nelson Ng: Thanks everyone, I'll leave it there.
Speaker Change: Thanks, everyone I'll leave it there.
Speaker Change: Thanks Nelson.
Speaker Change: Okay.
Speaker Change: Thank you.
Rob Hope: Our next question comes from the line of Rob Hope from Scotiabank. The line's open. All right, good morning, everyone.
Speaker Change: Our next question comes from the line of Rob Hope from Scotiabank.
Speaker Change: Your line is open.
Rob Hope: Alright, good morning, everyone. Congrats Robin Brian on linear roles and Christian Darrin, it's been a pleasure working with you about all the best.
Rob Hope: Yeah, congrats to Rod and Brian on the new roles, and Chris and Darren, it's been a pleasure working with you both, so all the best as well. Thank you, we appreciate it.
Speaker Change: As well.
Speaker Change: Thank you we appreciate it.
Rob Hope: I guess maybe the first call question is, you know, I understand you're not providing a 2025 Outlook or capital, you know, looking back at the Q3 call, you were expecting to provide an update with the Q4 call. I'm just wondering what has changed. Is this just a function of a new manager or new CEO coming in and some time to take a lay of the land? Is it the uncertainty of the Missouri delay? Or are there any other factors driving that?
Speaker Change: I guess, maybe the first question is I understand you're not providing 2025 outlook our capital.
Speaker Change: Looking back at the Q3 call that you were expecting to provide an update with the Q4 call I'm. Just wondering what has changed is this just a function of a new manage our new CEO coming in and some time too.
Speaker Change: Take a lay of the land is.
Speaker Change: The uncertainty of the Missouri delay.
Speaker Change: Or are there any other factors driving that.
Brian Chin: Now, Rob, thanks for thanks for asking the question. When Rod's announcement was first made, the thought process at the time was that we would be on track to provide a baseline outlook as of the timing of the Q4 call. That actually hasn't changed in that we do have a baseline outlook as of now. But what has changed on further reflection was our recognition that with Rod's insight and fresh eyes, The opportunity to have him take a look at what we were doing and perhaps find ways to accelerate that progress. really meant that we needed to give him time to to see what opportunities we could capture and put into the outline.
Rob: No Rob Thanks for thanks for asking the question.
Speaker Change: When rods announcement was first made the thought process at the time was that we would be on track to provide a baseline outlook as of the timing of the Q4 call.
Speaker Change: That actually hasn't changed and that we do have a baseline outlook as of now.
Speaker Change: But what has changed on further reflection, whereas our recognition that with rods insight and fresh eyes.
Speaker Change: The opportunity to.
Speaker Change: Have him take a look at what we were doing and perhaps find ways to accelerate that progress really meant that we needed to give him time to see what opportunities, we can capture and put into the outlook.
Brian Chin: The developments in Missouri, the developments in any of our other operations, did not have any factor with regards to the timing of when we have chosen to give an out. Yeah, and Rob, I would just say that, you know, when you think about it, Rod truly has not started yet. He's starting at noon today. And so we really do need to be fair to him and give him time to get his feet on the ground and understand the business so he can put his stamp on it. And then you folks can rely on what he says.
Speaker Change: The developments in Missouri, the developments in any of our other operations did not have any factor with regards to the timing of when we have chosen to given out guidance.
Speaker Change: And Rob I would just say that you know when you think about it rod truly has not started yet he is starting at noon today and so we really do need to be fair to him and give him time to get his feet on the ground and understand the business. So he can put his stamp on it and then and then you folks can rely on what he's saying.
Rob Hope: Fair point. Busy first day.
Fair point per se.
Rob Hope: Maybe turning over to Missouri, can you maybe add a little bit more color on the customer solutions technology platform problems that you're seeing there, kind of the path forward there, as well as the Missouri investigation on the billing practices? Sure.
Speaker Change: Maybe turning over to Missouri can you maybe add a little bit more color on the <unk>.
Speaker Change: Customer solutions technology platform problems that youre seeing there kind of the path forward there as well as the misery investigation on the billing practices.
Sarah McDonald: Hi, Rob. It's Sarah McDonald. You know, the customer investigation is something we're spending a lot of time on. But, you know, our SAP implementation was a massive undertaking. We changed almost all of the systems we use to run our business, not just finance, not just customer. And the majority of those are working well. But it doesn't take away from the billing issues we've experienced, We're disappointed with the pace at which we've been able to fix these issues, and we understand the frustration our customers are experiencing. We understand the frustrations the Commission is experiencing, and frankly, we're frustrated as well.
Speaker Change: Sure Hi, Robert Fair at Mcdonalds.
Speaker Change: The customer investigation is something we're spending a lot of time on that.
Speaker Change: S&P implementation was a massive undertaking we changed almost all of the systems, we use to run our business not just finance not just customer and the majority of those are working well and but it doesn't take away from the billing issues we've experienced.
Speaker Change: We're disappointed with the pace at which we've been able to fix these issues and we understand the frustration of our customers are experiencing we understand the frustration. The commission is experiencing and frankly, we're frustrated as well.
Sarah McDonald: So we are encouraged because the pace of improvements has increased, and through the investigation, we'll be able to share our progress to date and our plan to complete all the improvements with the Commission in the coming weeks. So we're welcoming the opportunity to share our improvements. Yeah, and I think, you know, the other point that I would make is that, you know, it has taken more time than we had hoped to get the system working the way it is. But as we're seeing the system start to work, we're seeing the opportunity that exists there, and we're absolutely convinced that this will be a better customer experience in the end.
Speaker Change: We are encouraged because the pace of improvement has increased.
Speaker Change: And through the investigation will be able to share our progress to date and our plan to complete.
Speaker Change: All of the improvements with the commission in the coming weeks, so where we are welcoming the opportunity to share our improvements.
Speaker Change: And I think the other point that I would make is that it has taken more time than we had hoped to get the system working the way it is but as we're seeing the systems start to work, we're seeing the opportunity that exists there and we're absolutely convinced that this will be a better customer experience in the end.
Rob Hope: You know, it's unfortunate, and we apologize to customers for how long it's taken, but for sure it will be better. I appreciate the color. Thank you. Yeah, thanks for the trouble.
Speaker Change: It's unfortunate and we apologize to customers for how long, it's taken but for sure it will be better in the future.
Speaker Change: I appreciate the color. Thank you.
Speaker Change: Yes, thanks, Rob Thanks, Rob.
Speaker Change: Thank you.
Rupert Merer: Our next question comes from the line of Rupert Merer from National Bank. The line is open.
Speaker Change: Our next question comes from the line of Mirror from National Bank.
Speaker Change: Your line is open.
Rupert Merer: Good morning, everyone. I'll echo the sentiment of the other analysts. Congratulations to all.
Speaker Change: Hi, good morning, everyone I'll Echo the sentiments of the other analyst's congratulations to all.
Rod West: Rod, if I could start with you, you're going to come back with an outlook for us in 90 days. So what are your key areas of focus for the first 90 days? How are you going to get into this business and then figure out? Yeah, it's a it's a great question. And I won't get ahead of my conversations I'll have with the with my internal stakeholders here, but it starts with the people Getting them aligned on what good to great looks like. And beyond that, it's focusing on the aspects of the business where we have the quickest opportunity to put productive capital to work.
Speaker Change: Rod if I could start with you you are going to come back with an outlook for us in 90 days what are your key areas of focus for the first 90 days, how how are you going to get into this business and then figure out everything you need to know.
Speaker Change: It's a great question.
Speaker Change: I won't get ahead of my conversations I will have with the with my internal stakeholders here, but it starts with the people.
Speaker Change: Getting getting them aligned on what good to great looks like.
Speaker Change: <unk> is focusing on the aspects of the business, where we have the quickest opportunity to put productive capital to work and as you think about what the mission is as I come from.
Rod West: And as you think about what the mission is, as I come from an experience at Entergy, every decision we make at the end of the day will be assessed through the lens of its impact on our ability to create sustainable value for each of our four key stakeholders. Starting with the customers, the employees, the communities we serve, and at the end of the day, the outcomes that matter most to you. And I think communicating that in a clear, concise way to the employees will also help me get my hands around where my attention should be placed first, with the objective of accelerating the great work that Chris and his leadership team have been working so hard on.
Speaker Change: And experience at <unk>.
Speaker Change: Entergy every decision we made good the end of the day.
Speaker Change: B.
Speaker Change: Assess through the lens of its impact on our ability to create sustainable value for each of our four key stakeholders.
Speaker Change: Starting with the customers' employees the communities we serve.
Speaker Change: At the end of the day the outcomes that matter most to two U and I think communicating that and a clear concise way to the employees will also help me get my hands around where my attention should be placed first with the objective of accelerating the great work.
Speaker Change: Chris and his leadership team have been working so hard on so when I come back in.
Rod West: So when I come back in the next 90 days or so, I want to have the conviction that gives you confidence in the outlooks that we ultimately out. And that's my objective, and I don't wish to obfuscate the point that I like where this company is heading. And I think my objective at the end of the day is to try and help accelerate the benefits. Maybe it's too early, but are there any high-level thoughts given the collection of assets that Algonqin has? Maybe a little more distributed than... previously, many, many opportunities. challenges that you see with this asset base relative to where you Now, it's early.
Speaker Change: And the next 90 days or so.
Speaker Change: We want to have the conviction that gives you confidence in the outlook that we ultimately out in that.
Speaker Change: That's my objective and I know I don't wish to to be topped up.
Speaker Change: Hub to hub few skate the point that I like where this company is heading.
Speaker Change: I think my objective at the end of the day is trying to help accelerate the benefits we've committed to to you.
Speaker Change: And maybe it's too early but are there any high level thoughts just given the collection of assets that Algonquin has maybe a little more distributed than what you worked with previously at any many opportunities.
Speaker Change: Or challenges that you see with this asset base relative to where you've come from.
Rod West: It's early to opine on that. Just know that I am looking to answer the question, where can we put productive capital to work to create value and doing it as quickly as we can. So I'll be consistent with that. And the other thing I would just say, Rupert, is that R.O.D. has tremendous regulatory I look forward to seeing how Rod takes that on and the improvement. I'll say that about where I think this will go.
Speaker Change: It's early it's early to opine on that just know that I am looking to answer the question, where can we put productive capital to work to create value and and doing it as quickly.
Speaker Change: As we can so I'll be consistent with that theme.
Speaker Change: And the other thing I would just say Robert is that Rod has tremendous regulatory experience.
Speaker Change: <unk> been very focused on that over his career and especially in the last few years and that's clearly an area that the company needs. Some work and so you know I look forward to just seeing how rod takes it on and the improvements we can make it as he works out in that area. So so.
Speaker Change: I'll say that about where I think this will go.
Rod West: Okay, very good. And then secondly, you know, we have a very dynamic political situation here in North America. And as I look at Algonquin, it's it's now more than ever a company focused In the US with US management, do you see any potential for change in the way that companies run? move headquarters down to the U.S. and the opportunities that could surface from doing Yeah, Rupert, I think it's premature to make any comments on that. I do think that you're right to point out it's a pretty volatile environment out there. So while I'm, I think that it's a little premature to directly answer that question, I really do think that what's interesting about our story is in spite of quite a bit of the macro volatility out there.
Speaker Change: Okay very good and then secondly, we have a very dynamic political situation here in North America, and as I look at Algonquin, It's now more than ever a accompany focused.
Speaker Change: In the U S with U S management do you see any potential for change in the way that companies run, meaning any potential to move headquarters either.
Speaker Change: Down to the U S.
Speaker Change: The opportunities that.
Speaker Change: Could surface from doing so.
Speaker Change: Yes, I think it's premature to make any comments on that I do think that you're right to point out, it's a pretty volatile environment out there.
Speaker Change: So while I.
Speaker Change: I think that it's a little premature to directly answer that question I really do think that what's interesting about our story is in spite of quite a bit of the macro volatility out there.
Rod West: This really is a self-help story. It's one of the more unique aspects in the utility space. And that's part of the simplicity of why the opportunity here is so interesting and unique.
Speaker Change: This really is a self help story, it's one of the more unique aspects in the utility space and Thats part of the simplicity of why the the opportunity here is so interesting and unique.
Rupert Merer: All right, great. Thank you. I'll leave it there. Congrats. Thanks, Rupert.
Speaker Change: Alright, great. Thank you I'll leave it there congrats to all.
Richard: Thanks Richard.
Richard: Thank you.
Operator: And if you would like to ask a question, please press star and the number one on your telephone keypad.
Speaker Change: Again, if you would like to ask a question. Please press star and the number one on your telephone keypad.
Benjamin Pham: And the next question comes from the line of Ben Pham from BMO. Hi, thanks. Good morning.
Speaker Change: And the next question comes from the line Ben Pham from BMO.
Speaker Change: Your line is open.
Ben Pham: Hi, Thanks, good morning.
Benjamin Pham: Just on your comments around the realized RLE and the difference between allowed How does that compare to historical differences between the two? Thanks, Ben, for that question. The last time that the company provided color on the gap between the earned and allowed ROE, it was a few years back, as you recall, from our investor relations materials. So you can point, we can point to that. In terms of if you want to try and look at our numbers since then, the way that we calculated the mid-fives range is you can look at our segmented footnote in our Notes to the Financial Statements.
Speaker Change: Just on your comments around.
Speaker Change: The realized ROE in the difference between allowed.
Speaker Change: How does that compare to a historical.
Speaker Change: Differences between the two.
Ben Pham: Thanks, Ben for that question.
Ben Pham: Last one does the company provided color on the gap between the earned and allowed ROE was a few years back as you recall from our investor.
Ben Pham: Relations materials.
Ben Pham: So you can point, we can point to that in terms of if you want to try and look at our numbers. Since then the way that we calculated the mid fives range as you can look at our segmented footnote in our notes the financial statements you can see our regulated earnings before taxes.
Brian Chin: You can see our regulated earnings before taxes. And if you want to assume a simplified tax rate on that and then divide that by our average rate base, you can actually get pretty close to the mid-fives number that I referenced in the prepared remark. That segmented footnote does exist in all of our financials going backwards. There's a few adjustments here or there, but this year is a relatively clean number, and so I'd advise you to take a look.
Ben Pham: And if you want to assume a simplified tax rate on that and then divide that by our average rate base you can actually get pretty close to the mid fives number that I referenced in the prepared remarks.
Ben Pham: That segment that footnote does exist in all of our financials going backwards. There's a few adjustments here or there, but this year is a relatively clean number and so I would advise you to take a look at that.
Rod West: OK, thanks for Brian and maybe next question for Rod. And I think with the regulatory strategy, that big gap in realized versus allowed ROAs, just based on our experience. What's typically the best approach or step-by-step process to bridge that gap over time?
Okay. Thanks for that Brian and maybe next question for Rod.
Speaker Change: And how you think about the regulatory strategy that.
Speaker Change: Big gap and realize there's a lot of our ways just just based on your experience what's.
Speaker Change: What is typically the best approach or step by step process to bridge that gap over time.
Rod West: Yeah, and I won't go into too much detail, but I think Brian alluded to the story as a self-help story. And the things that you can do, first and foremost, internally, is managing your overall cost structure. Because the regulatory process sometimes takes a while to play itself out. And so the discipline around both capital and O&M, those are decisions that you can make without having to rely on any external party. And that, for me, was what I was alluding to when I said we've already made progress. As I was looking outside in at this opportunity, I liked the direction that the company was headed in.
Speaker Change: Yes.
Speaker Change: I won't go into too much detail, but I think Brian alluded to to the story as a self help story.
Speaker Change: And the things that you can do.
First and foremost internally is managing your overall.
Speaker Change: Cost structure.
Speaker Change: Because the regulatory process, sometimes takes a while to play itself out.
Speaker Change: The discipline around both capital and O&M those are decisions that you could make.
Without having to rely on any external party and that for me was what I was alluding to when I said, we've already made progress as I would think looking outside in.
Speaker Change: At this opportunity I like the direction.
Speaker Change: The company was headed in and I'll have more to more to say.
Rod West: And I'll have more to say as I have an opportunity to assess some of the external levers. But internally, the self-help story is beginning to pay dividends. And it's one of the reasons why I thought this was a viable opportunity to really accelerate the value proposition for the company. And that's not limited to any of the commodities. It's inherent in successful, premium-valued utilities, water, gas, or electricity. Okay, got it.
Speaker Change: I have an opportunity to assess some of the external levers, but internally the <unk>.
Speaker Change: Alf help story is beginning to put to pay dividends and it's one of the reasons why I thought this was a viable opportunity to really accelerate the value proposition for the company and that's not limited to any of the commodities, it's inherent in successful premium value utility.
Speaker Change: Water gas or electric.
Speaker Change: Okay got it thank you and congratulations on the all party.
Benjamin Pham: Thank you and congratulations to all four of you. Thanks, man. Thank you.
Speaker Change: Thanks, Dan.
Speaker Change: Thank you. Our next question comes from the line of Mark Jarvi CIBC capital markets.
Mark Jarvi: Our next question comes from the line of Mark Jarvi from CIBC Cattle and Markets. The line's open. Yeah, good morning, everyone.
Your line is open.
Mark Jarvi: Welcome, Rod. Looking forward to get to know you better. And thanks, Chris and Darren, for your time and engagement in the last couple of years has been very helpful. Yeah, just on Missouri, obviously you talked about the disappointment in the reset of the timelines. Does the billing investigation potentially further extend that horizon on that, if it takes a little bit of time to work through that? And I guess if there is a further extension, even given the current extension, would you seek some interim rates, just given the fact that the decision has been pushed out a few months now?
Mark Jarvi: Yes, good morning, everyone welcome Ron looking forward to it.
Speaker Change: You better and thanks, Kristen Darren for your time and gives them. The last couple of years have been very helpful.
Mark Jarvi: <unk>.
Mark Jarvi: Yeah, just on Missouri, obviously, you talked about a disappointment and the reset of the timelines does the billing investigation potentially further extend that horizon on that if it takes a little bit of time to work through that and I guess, if there is a further extension even given with the current extension would you seek some interim rates.
Mark Jarvi: Just given the fact that the decision has been pushed out.
Mark Jarvi: Few months now.
Sarah McDonald: Hi, it's Sarah again. We'll be fully cooperating with the investigators. We'll take it seriously and we'll make sure we can figure out a way to restore trust. It has our full attention, but the rate case stands on its own, so we don't see it further delaying.
Speaker Change: Hi, Sir again, so no we will be fully cooperating with the investigation investigators will take it seriously and we will make sure we can figure out a way to restore restore trust.
Speaker Change: It has our full attention, but the rate case stands on its own. So we don't see it further delaying it.
Chris Huskilson: And anything on interim rates? At this time, I don't believe so. The other thing to take into account, Mark, is that we've already answered an awful lot of DRs as we sit right now. So the rate case is. All of the staff are developing quite well, the intervenors are getting lots of information, and so that I think is helpful in the restart.
Speaker Change: And anything on interim rates.
At this time I don't believe so.
Speaker Change: The other thing to take into account Mark is that we've already answered an awful lot of.
Speaker Change: <unk> is as we sit right now and so the rate cases.
Speaker Change: Developing quite well the intervenors are getting lots of information in and so that I think is helpful. In the restart to keep things moving along.
Rod West: Yeah, makes sense, Chris. Rod, you know, I know it's early days, and you talked a bit about some of the things you want to accelerate and improve on. As you look at sort of the regulatory relationships there and the processes set up today, do you think there's refinement that's required? And then even you think with the billing issues, do you still believe that the current customer first SAP system is adequate enough? Does it require further investments, just sort of in terms of beefing up systems and processes to improve the regulatory outcomes? It's early in the assessment, but I know enough to say this.
Chris Husk: That makes sense Chris.
Rod: I'm Rod I know, it's early days and you talked a bit about some of the things you want to accelerate or improve on as you look at sort of the regulatory relationships there and the processes that are today do you think theres refinement, that's required and then even anything with the billing issues you still believe that the current customer first S&P system is adequate enough does it require further.
Rod: Their investments just sort of in terms of beefing up our systems and processes to improve the regulatory outcomes.
Rod: Yes, it's early in the assessment, but I knew enough to say this.
Rod West: The systems that we have deployed have been used in other utilities to success the process of technological deployment around AMI, communication systems, the mesh networks, all of those things. I have bumpy experiences on the front end. I have lived through it at Entergy, as well as many in the space. The objective, though, at the end of the day, is tried and true improvements in customer experiences. And despite sort of the bumpy beginnings, my conviction in the direction that we're headed for customers... really gives me confidence that that we will get it. We will get it right.
Rod: The systems that we have.
Rod: Deployed.
Rod: <unk> had been used in other utilities to success the process of technological deployment around <unk>.
Rod: <unk> system, the mesh networks all of those things.
Rod: Have bumpy experiences on a Friday and I have lived through it at entergy as well as <unk>.
Rod: As many in the space.
Rod: The objective, though at the end of the day is tried and true improvements in customer experiences and despite the bumpy beginnings my conviction.
Rod: In the direction that we're headed for customers.
Rod: It gives me confidence that we will get it we will get it right and so I know, it's a bumpy start but I like where this is headed.
Sarah McDonald: And so I know it's a it's a bumpy start, but I like Just to sort of get it to where you need it to be, does it require some incremental capital? I have no doubt about that because it's customer expectations are constantly evolving. And if I might properly use a hockey reference coming from my background, which is American football, we constantly have to skate to where the puck is going to be. And that's going to require... https://www.kenhub.com we adapt.
Rod: Just to sort of get it to where you need it could be does it require some incremental capital.
Rod: I have no doubt about that because it's customer expectations are constantly evolving and if I might properly use.
Speaker Change: <unk> referenced coming from my background, which is American football.
Speaker Change: We constantly have to skate to where the puck is going to be in.
Speaker Change: And that's going to require.
Speaker Change: Additional capex, it's not a terminal investment proposition it will be an evolving one as we adapt to evolving customer expectation. So yes, just the other thing I would add so we're already in the capital budget for this year, putting in a new IV air system that IV <unk> system will be extremely helpful.
Sarah McDonald: Yeah, and just the other thing I would add, so we're already in the capital budget for this year putting in a new IVR system. That IVR system will be extremely helpful. https://www.sap.gov.au It has many more moving parts. Rod referenced things like AMI and so on. And so it just was a bit more of a complicated deployment. But that doesn't change the fact that we're committed to getting this working. We firmly believe that this will be better for our customer experience in the long haul. We just have to accelerate.
Speaker Change: Thank to interfacing with our customers and making sure that we're rapidly responding to them and the only other thing I'd say about the SAP implementation in Missouri is it's a much more complicated utility than the utilities that we had implemented before it has has many more moving parts and.
Speaker Change: As Rob referenced things like am I, and so on and so it just was a bit more of a complicated deployment, but that doesn't change. The fact that we're committed to getting this working.
Speaker Change: Currently believe that this will be better for our customer experience and the long haul.
Speaker Change: Just have to have to accelerate the improvement.
Mark Jarvi: Understood. Thanks for your time today, everyone.
Speaker Change: Understood. Thanks for your time for everyone.
Speaker Change: Thank you.
Speaker Change: Thank you.
Operator: There are no further questions.
Speaker Change: There are no further questions at this time I will turn the call to Mr. Rob West.
Rod West: I will turn the call to Mr. Rod West. Well, I'll simply say thanks for your interest and certainly for the well wishes this morning. Brighter days are ahead. I want to thank in advance to the employees who might be listening in. I look forward to engaging you and to the investment community. I commit to you, as my predecessor has, to be as transparent as I can. And I expect that you're not going to be surprised by what we do because we're going to bring you along on the journey as we have before. So thanks for your ongoing interest and continued support.
Rob West: Well I'll simply say, thanks for your interest and certainly for the well wishes. This morning.
Speaker Change: Days are ahead I want to thank in advance.
Speaker Change: The to the employees, who might be listening in I look forward to engaging you in and to the investment community.
Speaker Change: I commit to you as my predecessor has to.
Speaker Change: To be as transparent as I can.
Speaker Change: And I expect that youre not going to be surprised.
Speaker Change: By what we do because we are going to bring you along on the journey as we have before us. So thanks for your ongoing interest in and continued support for us.
Speaker Change: Thank you everyone.
Speaker Change: Okay.
This concludes today's conference call. You may now... Thanks for watching!
Speaker Change: This concludes today's conference call you may now disconnect.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.