Algonquin Power & Utilities Corp. Common Shares

for our shareholders. To oversee the review, our board has created a strategic review committee comprised of three of our independent directors. This committee will work with our internal team and external advisors, including JP Morgan, to execute a thorough review and take an open-minded approach to determining the best path forward to drive meaningful long-term value for shareholders. Our team has already initiated the process, and we expect to announce our go-forward plan by our second quarter earnings call. Last, let me touch quickly on guidance. We are reaffirming that our 2023 adjusted net earnings per share outlook of 55 cents to 61 cents is unchanged. In addition, our expectation of a billion dollars in organic capital expenditures for 2023 remains unchanged. And with that, let me turn to our ongoing operations and recent developments. I would first like to touch on the termination of the Kentucky Power acquisition. Last month, We announced with AEP a mutual termination of agreement to acquire Kentucky Power Company and AEP Kentucky Transmission Company. This was not an easy decision. However, our board of directors and management team decided that given the challenging and continuously evolving macroeconomic environment, and regulatory uncertainty over a final order, it was in the best interest of the company to terminate the transaction. I wish to personally extend my gratitude to the teams that worked tirelessly throughout the entire process. Now for a couple of updates from our operations. Late in the first quarter of 2023, the 112 megawatts Deerfield 2 wind project, located in Huron County, Michigan, achieved full commercial operations. Supporting our growth lever of commercial and industrial partnerships, all of the output from Deerfield 2 is being sold to a subsidiary of Meta, pursuant to a power purchase agreement. And on the regulatory services side, We received final rate case orders at three of our California facilities, Apple Valley Water, Park Water, and CalPico Electric, with aggregate annual revenue increases of $29.6 million, which includes approximately $9.7 million due to increases in rate base. A one-time net earnings benefit from the retroactive impact of the orders of approximately $3.7 million for Apple Valley Water and Park Water were recorded in the first quarter of 2023, with a further $11.4 million for Calpico Electric expected in the second quarter of 2023. I would like to touch on a couple of selected recent RIP proceedings. as a core growth strategy of the regulated services group is to responsibly invest in our utility systems and target a constructive return on the rate base across our various utility systems. Subsequent to the end of the first quarter of 2023, the company filed an application at its New York Water utility seeking an increase in revenues of $39.7 million based on an ROE of 10% and an equity ratio of 50%. Additionally, the company filed a new rate application at its Empire Electric Arkansas utility, seeking an increase in revenues of $7.3 million based on an ROE of 10.5% and an equity ratio of 56% to be phased in over three years. These rate cases highlight a broader pattern for us, which is that we place a high emphasis on attempting to earn as close to our authorized ROE as possible. Turning now to growth for our renewable energy group. The first quarter 2023 saw the installation of the remaining panels at our Hayhurst, Texas solar project co-owned with Chevron. as well as further advancements on site preparation and turbine erection at Sandy Ridge 2. As mentioned previously, Deerfield 2 wind project achieved full commercial operations in the first quarter of 2023. Deerfield 2 came online at the tail end of Q1, and as with most wind projects, it contributes the most to financial results in the first and fourth quarters. New to the pipeline this quarter is a 144 megawatt Clearview solar development project located in Champaign County, Ohio, which is scheduled to start construction at the end of May. We currently have nearly 750 megawatts of wind and solar projects in various stages of construction and expect to bring approximately 450 megawatts in service throughout 2023. As for an update on the new market solar projects, 42 megawatts of the remaining 76 megawatts have firm delivery. The remaining 34 megawatts have been shipped and are expected to be delivered by June of 2023. So overall, our construction program continues on track. As we have mentioned in previous quarters, we expect our 2023 renewables operating earnings excluding gains and sales to be relatively flat year-over-year. I will now turn things over to Darren. We will speak to our first quarter 2023 financial results. Darren?

Thank you, Arun, and good morning, everyone. Our first quarter 2023 consolidated adjusted EBITDA was $341 million. which is up approximately 3% from the $330.5 million for the same period last year. The company grew year-over-year adjusted EBITDA by $10.5 million, which was driven by growth in the regulated services group as a result of new rates at a number of the company's utilities. This growth was partially offset by a decline in our renewable energies group operating profit, as expected, driven by lower HLBV from projects commissioned in 2012. Looking further at results on a segmented basis, the regulated services group delivered $255.3 million in operating profit in the first quarter, which compares to $231.2 million in the same quarter last year, an increase of 10%. The year-over-year increase was primarily a result of new rates and a number of the company's utilities most notably the Empire Electric and Park Water systems. Switching now to the Renewable Energy Group, first quarter 2023 divisional operating profit was $106.5 million, compared to $117.9 million in the same quarter last year, a decrease of 10%. The decrease was, as seen in prior quarters, primarily due to lower HLBV income as a result of the end of tax attribute eligibility on projects commissioned in 2012. Excluding the HLBV roll-off, operating profit for the renewable energy group was reflectively flat as we expected with financial contributions from new facilities slated to come online later this year. Corporate interest expense. were $81.9 million compared to $57.9 million in the same quarter last year, a $24 million increase reflecting a higher interest rate environment and higher borrowings to support growth. This quarter's increase over the prior year is primarily similar to the pattern observed in the late 2022 as was in line with our expectations. Looking further down the income statement, first quarter adjusted net earnings were $119.9 million compared to $141.2 million reported last year, a decrease of 15%. Turning to adjusted net earnings per share, the first quarter of 2023 came in at 17 cents compared to 21 cents in the prior year. Our GAAP net earnings were $270.1 million compared to $91 million in the first quarter of 2022 an increase of $179.1 million for the quarter. Looking now at our capital plan for the year, we reiterate that we expect to spend $1 billion in capital in 2023, with approximately $700 million to be spent by the regulated services group and approximately $300 million by the renewable energy group. This is consistent with our prior CapEx plan disclosures, excluding the $2.6 billion we had initially expected for Kentucky. We remain firmly committed to maintaining a BBB credit rating. We are pleased that within the past few months, S&P, Fitch, Moody's and DBRS all reaffirmed their existing ratings. We were also recently removed from negative watch by S&P and in February, DBRS updated Algonquin's outlook to stable. Turning to our earnings outlook, we have reaffirmed our 2023 adjusted net earnings per share expected range of 55 to 61 cents, which, as a reminder, starting this year, will be calculated excluding the impact of any gains or losses on asset sales. Finally, we remain focused on optimizing our balance sheet and providing transparency on our financing needs. As previously stated, we do not expect any new equity financings through the end of 2024. With that, I will now turn the call over to the operator to open the lines for questions. Operator?

Thank you. We will now take the questions from the telephone lines. If you have a question and you are using the speakerphone, please lift up the handset before making your selection. If you have a question, please press star 1 on your keyboard devices. You can cancel the call at any time by pressing star 2. Please press star 1 at this time if you have a question. There will be a brief pause while the participants register. Thank you for your patience. The first question is from Nelson Ng from RBC Capital Markets. Please go ahead. Your line is now open.