Algonquin Power & Utilities Corp. Common Shares

Ladies and gentlemen, thank you for standing by and welcome to the Algonquin Power and Utilities Corporation 2020 fourth quarter and full year earnings webcasting conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star then one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star, then zero. I would now like to hand the conference over to your speaker today, Amelia Tsang, Vice President, Investor Relations. Thank you. Please go ahead.

Good morning, everyone. Thanks for joining us this morning for our 2020 fourth quarter and year-end earnings conference call. My name is Amelia Tsang, and I'm the Vice President of Investor Relations at Algonquin Power and Utilities. Presenting on the call today are Arun Banskara, our President and CEO, and Arthur Kasperczak, our Chief Financial Officer. Also joining us this morning for the question and answer part of the call will be Jeff Norman, our Chief Development Officer, and Johnny Johnston, our Chief Operating Officer. To accompany our earnings call today, we have a supplemental webcast presentation available on our website, AlgonquinPowerandUtilities.com. Our financial statements and management discussion and analysis are also available on the website, as well as on CDAR and EDGAR. Before continuing the call, we would like to remind you that our discussion during the call will include certain forward-looking information, including but not limited to our expectations regarding future earnings and capital expenditures and the expected impact and outcomes of the recent severe winter storms in Texas and the central U.S. At the end of the call, I will read a notice regarding both forward-looking information and non-GAAP financial measures. Please also refer to our most recent MD&A filed on Cedar and Edgar, and available on our website for additional important information on these items. On our call this morning, Arun will provide an overview of our Q4 and full year 2020 performance. Arthur will follow with the financial results, and then Arun will conclude with an update on our strategic plan for the business. We will then open the lines for questions. I ask that you 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 Arun.

Thank you, Amelia, and a very good morning to those who've been able to join us on this call and online. Given that this is our year-end earnings call, I want to provide some highlights and speak to performance. both financial and operational for 2020. Firstly, on financials, I'm pleased to report steady year-over-year growth in our key financial metrics. 2020 adjusted EBITDA of $869.5 million increased 4% year-over-year and our 2020 adjusted net earnings per share of 64 cents compares to 63 cents reported last year. There were three particular events, COVID, weather in the central region, and delayed closing of Delco that impacted our results. Despite these, management was able to pull a number of levers, including cost savings, to continue our growth trajectory. We exited the year with $13.2 billion in assets, a 21% increase over last year. Secondly, in terms of shareholder value creation, we continue to generate consistent outstanding returns as proven by our record on delivering total shareholder returns. In 2020, the company delivered total shareholder returns of 21.5% on the New York Stock Exchange compared to the 22.7% for the utility index and 15.3% for the S&P TSX capped utilities index. Last year, we reported annual dividends per share of 61 cents which represents a 10% annual increase for the 10th consecutive year in a row. Thirdly, on operations, the company undertook many successful growth initiatives and achieved numerous milestones in 2020. We continue to focus our efforts on Alcancon's three strategic pillars, growth, operational excellence, and sustainability. For those of you who may have participated at our Virtual Investor Day in December, we discussed this at length. We operate through two businesses, regulated and renewables. What is unique about us are our multiple levers of growth that support our two businesses and which gives us high confidence in delivering outstanding returns. One lever of growth is acquisitions. and we completed two utility acquisitions in 2020, Essam and Ascendant. With the addition of these two utilities, Algonquin now has over 1 million customer connections within our regulated footprint. Additionally, both acquisitions are expected to provide opportunities for future growth. With New York American Water, We submitted our regulatory application to the New York PSC last year. We are currently going through the settlement process, and the hearing date is scheduled for mid-May. We continue to expect this transaction to close in 2021. On the renewable energy business, the company made its largest renewable energy acquisition acquiring a 51% ownership interest in a portfolio of three operating coastal wind facilities with a combined generating capacity of 621 megawatts in south coastal Texas. These three wind facilities have already achieved commercial operations. The acquisition of a 51% interest in a 240 megawatt South Texas coastal facility is expected to occur in the first half of 2021 once the facility reaches commercial operations. We continue to prove out our CNI growth lever as Algonquin remains very well positioned in the CNI space where important long-term customers are supporting renewables growth as they are looking to achieve their own sustainability goals. As further proof of concept, we signed a framework agreement with Chevron last year for the potential development of over 500 megawatts of renewable energy facilities. This has been an area of focus for us, and we are working hard to progress that portfolio and expand our customer base. 2020 also marked the company's largest construction program in our history with approximately 1,600 megawatts of renewable energy projects under construction. To put that in context, these new projects approximately doubled the amount of our overall renewables portfolio. Within our renewables business, two of our projects The Great Bay 2 solar facility located in southern Maryland and the Sugar Creek Wind Facility located in Illinois both achieved full commercial operations last year. Furthermore, two more projects are nearing completion with more than half of Alta Vista Solar's 80 megawatts successfully placed in service with a power purchase agreement with Facebook. and the remaining megawatts are expected to be completed by the second quarter of this year. Our 492 megawatt Maverick Creek Wind Facility in Texas completed commissioning on 111 of the 127 turbines and has long-term power purchase agreements with General Mills and Kimberly Clark. Maverick was recently recognized by the American Clean Power Association as the fourth largest single-phase wind project in U.S. history. An important lever of growth on the regulated side as we transition to lower carbon energy is our Greening the Fleet initiative. We continue to progress well on our Midwest Greening Initiative with the development and construction of three wind farms for a total 600 megawatt capacity as we work to generate and deliver more cost-effective, diverse, and sustainable energy options to our customers and communities. The 150 megawatt North Fork Ridge Wind Facility has achieved full commercial operation while the 300 megawatt New Osho Ridge and 150 megawatt Kings Point facilities are anticipated to be placed in service prior to the end of this month. Moving on now to operational excellence. In a mission-critical industry like ours, safety is always an area of focus. And so I'm pleased that we have just passed the impressive milestone of an entire year without a single lost time injury. I'm very proud of our employees and management for continuing to stay focused on safety first, even while we had to transition into a very different work environment given COVID-19, and the priority of keeping our employees and communities safe from the pandemic. The importance of reliably providing the essential services of electricity, water, and natural gas to our customers has become even more apparent during the COVID-19 pandemic. Our diversified asset base and our emergency preparedness highlighted our resilient business model, which has meant that our essential services to customers have not been impacted. As a proof point of how resilient our business model is, the pandemic had a relatively low impact of two cents in adjusted net EPS for 2020. With the onset of the pandemic, we focused on cost containment strategies without sacrificing safety and reliability. In the first half of 2020, we announced we were targeting $15 million of savings for the full year. And I'm pleased that we were able to significantly beat that, delivering $24 million in savings for the year. 2020 marked the first full year of contribution from New Brunswick Gas and St. Lawrence Gas. The integration of these two utilities into the Algonquin Liberty family has gone well. as growing the business organically in these two facilities is a key initiative. As with all our previously acquired utilities, we strive to share learnings among our utilities with the aim of driving consistent improvement in our key performance metrics that drive value for our customers and investors. And finally, we remain firmly committed to sustainability through the inclusion of environmental, social, and governance values in our broader corporate strategy and day-to-day operations. I want to provide a few highlights from 2020. In March, the closure of our Ashbury coal generation facility in Missouri will allow us to reduce annual carbon dioxide emissions by 955,000 metric tons. In the latter part of 2020, we increased our disclosures around sustainability by releasing our first ever Climate Change Assessment Report in response to guidelines established by the Financial Stability Board's Task Force on Climate-Related Financial Disclosures, PCFD. We also released our 2020 Sustainability Report, which not only outlined our progress on our ESG goals, but provided a higher level of disclosure details around our nine priority issues. And in 2021, you'll see us adding additional ESC-linked goals to our compensation program metrics. Overall, I'm pleased with the progress we've made in 2020, given COVID-19 and all its challenges, and I'm confident we'll continue to benefit from our strong, resilient, and diversified business model in 2021. Before turning to Arthur, I want to comment on storm Uri and the Midwest extreme weather event which occurred last month. First and foremost, our thoughts are with the many people whose lives have been disrupted by the extreme weather events. Since the events began, Our teams have worked tirelessly under very challenging conditions to keep our customers and communities safe and to maintain our system reliability and resiliency. I would like to thank our dedicated employees for their teamwork and continual commitment to our customers. In our renewables business, we currently have a total of approximately 2,550 megawatts of wind, solar, and hydro projects in operation, including our 51% interest in three south Texas coastal wind facilities. In accordance with our strategy, our portfolio of assets is very diversified across 46 facilities, 15 states and provinces, and seven ISOs. We believe this diversified portfolio will continue to be a major advantage in the face of climate change. In Texas, we have a diversified operating portfolio of approximately 965 megawatts across five locations, two inland and three coastal. This provides the wind resource diversification outlined during our 2020 investor day. The Texas portfolio also benefits from off-take diversification. Maverick Creek, 492 megawatts, and our 51% interest in the East Raymond 200 megawatt facility both operate under long-term unit contingent power purchase agreements. On the remaining Texas assets in operation, we are hedged using long-term fixed financial swaps with a total combined hedge position of approximately 120 megawatts. We saw no material impact at the coastal winter assets, while storm Uri did have a major impact on our Senate assets. In total, our estimated exposure remains what we announced earlier in our press release of $45 to $55 million before potential mitigating impacts. We have asserted force majeure at our standard facility, given the large scale market failures and extreme weather events. Storm Uri was very unusual in the level of impact across a very large geography and temperatures fell to six degrees Fahrenheit near our standard facility. lower by nine degrees compared to the lowest ever recorded temperature in the last 100 years. Since there may be a dispute and possibly litigation, we do not intend to speculate today on our legal position. There are also ongoing discussions regarding potential Texas government or regulatory intervention. including questions on the $9,000 a megawatt hour pricing. And this could be another mitigation to our estimated $45 to $55 million exposure. In our regulated business, which comprises approximately 70% of our portfolio, we are diversified by modality and operate in 16 jurisdictions. Despite the extreme weather conditions, The regulated service group's electric and gas operations performed well during a sustained period of increased consumption. We did encounter some weather issues in our central region, and in accordance with instructions from the SPP, we did some limited load shedding. The utilities did incur incremental commodity costs during a period of record pricing and elevated consumption. The incremental commodity costs incurred by the company are expected to be substantially recovered from customers over an extended period. We do not expect any material financial impact to our regulated business. With that, I'll pass it over to Arthur We will speak to our Q4 and full-year 2020 financial results, as well as the financial impact of the Midwest Exchange Weather Event.