Q4 2024 Algonquin Power & Utilities Corp Earnings Call
Gary: Hello, and welcome to the Algonquin Power & Utilities Corp. 4th quarter and year in 2024 Ernst Conference Call. All lines have been placed on me to prevent any background noise.
Gary: After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star and the number one on your telephone keypad.
Speaker Change: I will now turn the conference over to Mr. Brian Chinn, 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.
Speaker Change: Joining me on the call today will be Chris Huskelson, Chief Executive Officer, Rod West, Incoming Chief Executive Officer, Darren Myers, Chief Financial Officer, and Sarah McDonald, Chief Transformation Officer.
Speaker Change: To accompany today's earnings call, we have a supplemental webcast presentation available on our website, AlgonquinPower.com. Our financial statements and management discussion and analysis are also available on the website as well as on Cedar Plus and Edgar.
Speaker Change: 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.
Speaker Change: Certain material factors and assumptions were applied in making the forecasts and projections reflected in such forward looking information.
Speaker Change: 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 AlgonquinPower.com.
Speaker Change: Please also refer to our most recent MDNA filed on Cedar Fluson Edgar and available on our website for additional important information on these items.
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.
Chris Huskilson: Thank you, Brian and good morning, everyone.
Chris Huskilson: Thank you once again for our interest your interest in Algonquin and for supporting Us through our strategic transformation journey.
Speaker Change: Before I jump into our regular quarterly update it's my distinct pleasure to introduce Roderick west our incoming CEO.
Roderick West: 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 leadership.
Roderick West: Leadership skills expertise experience and vision.
Roderick West: To lead Algonquin to new Heights, as a regulated utility.
Roderick West: 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 and I am 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.
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.
Speaker Change: Paving the way for a brighter future.
Speaker Change: Very much aligned with the strategic direction taken by the company under your and the Board's leadership.
As I considered joining algonquin.
Speaker Change: Saw a unique opportunity to create sustainable value with the diversified utility asset base.
Speaker Change: 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.
Speaker Change: And what I found compelling personally is the tremendous opportunity to create value.
Speaker Change: Im 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 now.
Speaker Change: Now as a pure play utility.
Speaker Change: <unk> 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.
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 and.
Speaker Change: Detail on our performance acceleration plan.
Speaker Change: I want to personally thank Chris and the team for all the work getting us to this point.
Speaker Change: And I am tremendously excited by the future and the opportunity in front of Us Chris.
Speaker Change: Back to you.
Chris Huskilson: Thank you Rod and as I said, we're very excited.
Speaker Change: On the same note.
Speaker Change: Let me also briefly touch on the CFO transition.
Speaker Change: As previously announced Daren has accepted an offer to join Canadian tire as its chief financial Officer, and today will be his last as CFO of Algonquin.
Speaker Change: I'd like to extend my sincere appreciation to Darren who help steer algonquin through its most significant transformation.
Speaker Change: Our company and I were fortunate to benefit from his strong leadership through this period. Thank you Darren.
Speaker Change: With Darren upcoming departure, the company has engaged a national firm as part of a comprehensive search process for a permanent CFO.
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 and American water and.
Speaker Change: And as the lead North American utilities equity analyst for both Bank of America Merrill Lynch and Citicorp.
Speaker Change: <unk>, Brian has the right capabilities to help ensure a smooth transition for our finance and executive teams.
Speaker Change: Brian for taking on the role.
Speaker Change: Yes.
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.
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.
Streamlining how we operate.
Speaker Change: And driving operational efficiency and customer service.
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: To 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.
Speaker Change: We're committed to improving and enhancing our efficiency and effectiveness for the benefit of our customers communities and investors.
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.
Speaker Change: With that let me now turn to operational updates 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.
Speaker Change: Darren will discuss this in more detail later.
Speaker Change: I'll turn now to our regulatory updates for the quarter.
Speaker Change: And 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.
Speaker Change: The Commission all Theyre also approved a previously reached settlement and new rates are effective also March one.
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: In our Arizona proceedings.
Speaker Change: And that involves four small water utilities.
Speaker Change: We reached a settlement agreement with <unk>.
Speaker Change: <unk> 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: Our Litchfield Park utility.
Speaker Change: Our Cal Pico rate case filed in September 24 is proceeding on schedule.
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.
Speaker Change: Where 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, meaning.
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 are 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 <unk> to our customer experience.
Speaker Change: Ultimately we are confident this system will lead to better customer service.
Speaker Change: Shifting to transmission 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 its 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 utility.
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.
Speaker Change: As part of the process, we expect our next steps are to develop detailed plans.
Speaker Change: I 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.
Speaker Change: And with that I'll hand things over to Darren to review the quarter's financial results Darren.
Darren Myers: 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 a regulated business hydro business and ownership stake in Atlantica, which was sold during the fourth quarter.
Darren Myers: It also includes all debt, except that specific to our renewables business, which has been netted into assets held for sale.
Darren Myers: We have recorded our ownership stake in atlantica and the final associated dividend in continuing operations in accordance with generally accepted accounting principles.
Darren Myers: Starting with EBITDA Q4, consolidated adjusted EBITDA was $248 6 million.
Darren Myers: Down five 2% from the prior quarter prior year pardon me.
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.
Darren Myers: Our regulated adjusted EBITDA was $234 4 million in the quarter up two 4% from 2023.
Darren Myers: On a full year basis, our consolidated adjusted EBITDA was approximately $1.04 billion up two 6% from 2023 or.
Darren Myers: 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 Myers: Up four 2% from 2023.
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 Myers: Fourth quarter, adjusted net earnings were $45 $2 million down from $81 3 million in 2023.
Darren Myers: The decline in adjusted net earnings was primarily attributable to lower consolidated adjusted EBITDA of $8 $5 million of higher depreciation as a result of continued capital expenditures.
Darren Myers: $6 million and higher interest expense and $8 6 million.
Darren Myers: In higher adjusted taxes.
Darren Myers: 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 margin alone with no impact on net income.
Darren Myers: 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 Myers: Full year adjusted net earnings were $232 $1 million down from $279 4 million in 2023.
Darren Myers: 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 Myers: 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 $60 million of the increased interest expense related to the funding of the renewables business.
Darren Myers: Moving to our earnings per share Q4 earnings adjusted net earnings per share was there were <unk> versus 12 <unk> in the prior year, while full year adjusted net earnings per share were <unk> 30 versus 39 in 2023 a.
Darren Myers: 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 over sale of our renewable energy business.
Darren Myers: 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 eight 2025.
Darren Myers: As a reminder, the sale includes a $220 million earn out associated with the performance of certain wind assets.
Darren Myers: 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.
Darren Myers: 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 Myers: 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 yearend GAAP debt of approximately eight points <unk> 5 billion to be reduced by an estimated $1 95 billion with a further $150 million to be received later in 2025.
As a last point, let me touch on our rate base.
Darren Myers: As of year end 2024, we estimate our rate base to be approximately $7 8 billion.
Darren Myers: Up from $7 2 billion a year earlier.
Darren Myers: 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 Myers: And to both recover and earn a rate of return.
Darren Myers: 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 Myers: 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.
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.
Speaker Change: While we have faced challenges we have made significant progress to reposition all go up and through decisive actions. 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 it I look forward to seeing the company accelerated its performance and earnings. Thank you to the entire <unk> team and all of our investors.
Speaker Change: I'll now hand things over to Brian to provide some forward looking commentary Brian.
Brian Chin: Thanks, Darren to key adjustments to remember looking ahead versus 2024.
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.
Speaker Change: 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 law.
Speaker Change: <unk> term opportunities to grow our rate base for the benefit of our customers through prudent investments in our service territories.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Last I'll comment on some high level thoughts on the opportunity in front of us.
Speaker Change: We estimate our earned ROE stands and approximately the mid 5% range, excluding <unk> on our 2024 average rate base of $7 5 billion.
Speaker Change: 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 achieved or improve upon our previously stated comments related to our targeted dividend payout ratio of.
Speaker Change: 60% to 70%.
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.
Rob: Well, thanks, Brian and thank you everyone for joining us on the call. This morning.
Speaker Change: As I stated before excited to begin leading the team here at Algonquin in just a few hours.
Speaker Change: Truly believed that there is significant opportunity ahead, and we're looking forward to your questions back to you operator.
Speaker Change: Thank you.
Speaker Change: And if you have a question please press star.
Speaker Change: One on your telephone keypad.
Speaker Change: Dry a question please press star one again.
Speaker Change: One moment. Please for your first question.
Sean Stewart: And with your first question comes from the line of Sean Stewart from TD Cowen.
Speaker Change: Your line is open.
Sean Stewart: Thank you and good morning, everyone and congratulations to Rod Darin and Brian.
Speaker Change:
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.
Speaker Change: And we're putting together a plan to actually execute a reduction of the overall overhead.
Speaker Change: Various utilities.
Speaker Change: The other thing that we're doing which.
Speaker Change: 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: So we've.
Speaker Change: I said from day, one we've raised up the utilities. They are now our primary.
Speaker Change: Our 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.
Speaker Change: Okay. Thanks for that Chris.
Speaker Change: And then a 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 time frame.
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.
Sean Stewart: Thanks for the question Sean.
Sean Stewart: So at this point no comments on timeframe, but let me remind everybody what we said in the past.
Sean Stewart: 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 particularly given the arrival of rod and his just tremendous experience.
Sean Stewart: 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.
Sean Stewart: I think that.
Speaker Change: Cited 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 Stewart: Okay.
Sean Stewart: Thats all I have for now thanks, everyone.
Sean Stewart: Thanks, Sean.
Sean Stewart: Thank you.
Speaker Change: Our next question comes from the line of Nelson Cheung from RBC.
Speaker Change: 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.
Speaker Change: So we look forward to your continued involvement on the board.
Speaker Change: First question just relates to the hydro sales process are you able to provide any kind of high level comments on AR.
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 look from an indicative perspective.
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.
Speaker Change: As it is on the one hand not.
Reducing our position as a pure play we have greater than 90% of our business that is in the regulated space.
Speaker Change: And 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 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 that growth Capex. I think you mentioned that there were some adjustments related to spend.
Speaker Change: Prior to 2024 that you decided to include are there any other.
Spend prior to 2024 or other parents that you haven't included into rate base that.
Speaker Change: It'd be included this year or any other further adjustments.
Speaker Change: Could take place this year.
Speaker Change: 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 goal.
Speaker Change: The Lions share Theres, nothing more significant that's going to come.
Speaker Change: Forward like that.
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.
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.
Darren Myers: 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.
Darren Myers: So it will take us a little bit of time to work that down in 2025.
Darren Myers: 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.
Reiterate that point and then also maybe the other thing I'd just add.
Darren Myers: In the quarter as I called out there are certain allocation kind of indirect allocations that hit the continuing operations.
Darren Myers: So part of that Dis synergy is already in the run rate of the fourth quarter.
Darren Myers: Continuing operations.
Darren Myers: Thanks, everyone I'll leave it there.
Darren Myers: Thanks Nelson.
Darren Myers: Thank you.
Speaker Change: Our next question comes from the line of Rob Hope from.
Darren Myers: Scotiabank.
Darren Myers: Your line is open.
Speaker Change: Alright, good morning, everyone. Congrats Robin Brian on linear roles and Christian Darrin, it's been a pleasure working with you about so all the best.
Darren Myers: As well.
Speaker Change: Thank you we appreciate it.
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.
Speaker Change: No Rob Thanks for thanks for asking the question.
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 could capture and put into the outlook.
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.
Speaker Change: Fair point per se.
Speaker Change: Maybe turning over to Missouri can you maybe add a little bit more color on the 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.
Robert: Sure Hi, Robert Fair at Mcdonalds.
Robert: The customer investigation is something we're spending a lot of time on that.
Robert: 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.
Robert: 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.
Robert: We are encouraged because the pace of improvement has increased.
Robert: And through the investigation will be able to share our progress to date and our plan to complete.
Robert: All of the improvements with the commission in the coming weeks, so where we are welcoming the opportunity to share our improvements.
Robert: 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.
It's unfortunate and we apologize to customers for how long, it's taken but for sure it will be better in the future.
Robert: I appreciate the color. Thank you.
Speaker Change: Yes, Thanks Ram pickup.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Mirror from National Bank.
Speaker Change: Your line is open.
Speaker Change: Hi, good morning, everyone I'll Echo the sentiments on the other analyst's congratulations to all.
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 <unk>.
Speaker Change: Internal stakeholders here, but it starts with the people.
Speaker Change: Getting giving them aligned on what good to great looks like.
Speaker Change: Beyond that it's 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.
Speaker Change: And experience at 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 the 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.
Speaker Change: Chris and his leadership team have been working so hard on so when I come back in.
Speaker Change: And the next 90 days or so.
Speaker Change: I want to have the conviction that gives you confidence in the outlook that we ultimately out that's my objective and I know I don't wish to.
Speaker Change: To be.
Speaker Change: To have few skate the point that I like where this company is heading.
Speaker Change: <unk> 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: Challenges that you see with this asset base relative to where you've come from.
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.
Speaker Change: To create value and and doing it as quickly.
Speaker Change: As we can so I'll be consistent with that theme.
And the other thing I would just say Robert is that Rod has tremendous regulatory experience. He's he's 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 he can make it.
Speaker Change: As he works out in that area. So so.
Speaker Change: I'll say that about where I think this will go.
Speaker Change: Okay very good and then secondly, we have a very a 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 the companies run, meaning many 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, <unk> 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.
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.
Speaker Change: Alright, great. Thank you I'll leave it there congrats to all.
Speaker Change: Thanks Richard.
Speaker Change: Thank you.
Again, if you would like to ask a question. Please press star and the number one on your telephone keypad.
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.
Speaker Change: Just on your comments around.
Speaker Change: I realize early in.
Speaker Change: The difference between allowed.
Speaker Change: How does that compare to historical.
Speaker Change: Differences between the two.
Ben Pham: Thanks, Ben for that question.
Ben Pham: The last time that the company provided color on the gap between the earned and allowed ROE was a few years back as you recall from our Investor Relations.
Ben Pham: 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 to the financial statements you can see our regulated earnings before taxes.
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 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 would advise you to take a look at that.
Ben Pham: Okay. Thanks for that Brian and maybe next question for Rod.
Ben Pham: And how you think about the regulatory strategy that.
Ben Pham: Big gap and realize there's a lot of our ways just based on your experience what's.
What is typically the best approach or step by step process to bridge that gap over time.
Ben Pham: 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.
Ben Pham: And the things that you can do.
Ben Pham: First and foremost internally is managing your overall.
Ben Pham: Cost structure.
Ben Pham: Because the regulatory process, sometimes takes a while to play itself out.
Ben Pham: So the discipline around both capital and O&M those are decisions that you can make.
Ben Pham: Without having to rely on external party and that for me was what I was alluding to when I said, we have already made progress as I would think looking outside in.
Ben Pham: At this opportunity I like the direction that the company was headed in and I'll have more to more to say.
Ben Pham: As I have an opportunity to assess some of the external levers but internally the.
Ben Pham: The self help story is beginning to put to pay dividends and it's one of the reasons why.
Ben Pham: This was a viable opportunity to really accelerate the value proposition for the company and that's not limited to any of the commodities.
Ben Pham: Inherent in successful premium valued utilities water gas or electric.
Ben Pham: Okay got it thank you and.
Speaker Change: Congratulations on the all party.
Pat: Thanks Pat.
Speaker Change: Thank you. Our next question comes from the line of Mark Jarvi.
Pat: <unk> capital markets.
Speaker Change: Your line is open.
Speaker Change: Yes, good morning, everyone welcome Ron looking forward to get to know you better in thanks, Kristen Darren for your time and gives them. The last couple of years would be very helpful.
Speaker Change:
Speaker Change: 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 or even given the current extension would you seek some interim rates.
Speaker Change: Just given the fact that the decision has been pushed out.
Speaker Change: Few months now.
Speaker Change: Yeah, Hi, Sir again, so no we will be fully cooperating with the investigation investigators will take it seriously and we'll 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.
Speaker Change: And then anything on interim rates.
Speaker Change: At this time I don't believe so.
Speaker Change: Yes, the other thing to take into account Mark is that we've already answered an awful lot of.
Speaker Change: Ours is as we sit right now and so the rate cases.
Speaker Change: Developing quite well the intervenors are getting lots of information and and so that I think is helpful. In the restart to keep things moving along.
Chris Huskilson: That make sense Chris.
Rod West: 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 if you think about the billing issues you still believe that the current customer first S&P system is adequate enough does it require further.
Rod West: Investments just sort of in terms of beefing up our systems and processes to improve the regulatory outcomes.
Yes, it's early in the assessment, but I know enough to say this.
Rod West: The systems that we have.
Rod West: <unk> deployed.
Rod West: <unk> had been used in other utilities to success the process of technological deployment around <unk> communications system. The mesh networks all of those things.
Rod West: Have bumpy experiences on a Friday and I have lived through it at entergy as well as us.
Rod West: As many in this space.
Rod West: 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 West: In the direction that we're headed for customers.
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.
Speaker Change: Just to sort of get it to where you need it could be does it require some incremental capital.
Speaker Change: 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.
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, and just the other thing I would add so we're already.
Speaker Change: In the capital budget for this year, putting in a new IV air system that <unk> system will be extremely helpful. I think 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 utilities.
Speaker Change: And the utilities that we had implemented before it has has many more moving parts and 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 we firmly believe that.
Speaker Change: This will be better for our customer experience and the long haul.
Speaker Change: Just have to have to accelerate the improvement.
Speaker Change: Understood. Thanks for the time for everyone.
Speaker Change: Thank you.
Speaker Change: Thank you there are no further questions at this time I will turn the call to Mr. Rob West.
Speaker Change: Well I'll simply say, thanks for your interest and certainly for the well wishes. This morning.
Speaker Change: Brighter days are ahead I want to thank in advance.
Speaker Change: The to the employees who might be listening in.
Speaker Change: Look forward to engaging you in and to the investment community.
Speaker Change: I commit to you as my predecessor has.
Speaker Change: To be as transparent as I can and.
And I expect that youre not going to be surprised 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.
Speaker Change: This concludes today's conference call you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
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Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.