Algonquin Power & Utilities Corp. Common Shares

Hello and welcome to the Algonquin Power and Utilities Corp second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star 1 on your telephone keypad. I will now turn the conference over to Mr. Brian Chin, Vice President of Investor Relations. Please go ahead.

Thanks and good morning, everyone. Thank you for joining us for our second quarter 2024 earnings conference call. Speaking on the call today will be Chris Huskelson, Chief Executive Officer, Darren Myers, Chief Financial Officer, Jeff Norman, President of Renewables, and Sarah McDonald, Chief Transformation Officer. To accompany today's earnings call, we have a supplemental webcast presentation available on our website, AlgonquinPower.com. Our financial statements and management discussion 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-GAAP measures. Actual results could differ materially from any forecast or projection contained in such forward-looking information. Certain material factors and assumptions were applied in making the forecast 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 alconconpower.com. Please also refer to our most recent MD&A filed on Cedar Plus and Edgar and available on our website for additional important information on these items, including the material factors that could cause actual results to differ materially and the factors and assumptions applied in making such forecasts and projections. On the call this morning, Chris will provide an update surrounding the Renewable Sales Agreement, which was press released this morning, and on the company's ongoing strategic transition to a pure play regulated utility. Then Darren will review key highlights pertaining to our regulated and renewables business groups and our second quarter financial results. Darren will also provide some color on the financial outlook following the expected sale of the renewables business. And then Chris will close with some final remarks. We will then open the lines for the question and answer period. We ask that you kindly restrict your questions to two, then re-queue if you have any additional questions to allow others the opportunity to participate. With that, I'll turn it over to Chris.

Thank you, Brian, and good morning, everyone. After being in the CEO role for a year, I'm more convinced than ever that our current path towards a pure play regulated utility supports our goals to create long-term value, increase our quality of earnings, and bring increased focus to improving our execution. A year ago, I set three priority goals. To sell the renewables business, optimize the value of AY, and to get the regulated business up and running. Today, I'm pleased to announce the successful sale of our renewables business at a valuation of $2.5 billion. As we set out to accomplish in our 2023 strategic review, we've achieved a deal at a compelling value for our platform business with strong assets and scale. As we set out to accomplish this agreement between Algonquin and LS Power for the company's non-hydro renewable energy business, consisting of $2.28 billion in cash proceeds, and $220 million in an earn-out agreement relating to certain wind assets. I just want to take this moment to thank the team from across Algonquin for the tireless efforts that they put in. It was a great job, team. Thank you very much. This major milestone, coupled with our previously announced support agreement to sell our Atlantica shares delivers on our plan to transform Algonquin into a pure play regulated utility, optimize our regulated business activities, strengthen our balance sheet, and enhance our quality of earnings. As Darren will touch on shortly, we expect to use the proceeds upon close in late 24 or early 2025 to recapitalize our balance sheet and position ourselves for future growth. We're also making progress on our goal to get the regulated business up and running. We reorganized along commodity lines to improve operational efficiency. We recently completed the implementation of our customer-first enterprise platform, which promises to deliver value to our customers and substantial efficiencies. We added three new experienced board members with extensive infrastructure and regulated utility experience. We're implementing fundamental changes to how we operate the company with increased accountability. This is the beginning of a multi-year journey to unlock the value of our regulated business. In addition, we're making changes at the executive level. Yesterday, the company appointed Sarah McDonald as Chief Transformation Officer. In her new role, Sarah will assume responsibility for utility operations and customer service. Sarah is a lawyer by training and has more than two decades of legal human resources and operational experience. She has a broad background, having worked in the utility sector for more than 20 years, including roles in utility construction, as president and CEO of AmeriCaribbean, and as president of TECO Services. As part of this announcement, Chief Operating Officer Johnny Johnston has left the company. I'd like to personally thank Johnny for his dedication and service and his commitment as we wish him the best for his future endeavors. As we look forward, we're focused on delivering value to our shareholders in a more self-sufficient manner. We see tremendous value in the business from investments we have made for our customers that are not yet in rates. We need to improve our recoveries, reduce our regulatory lag, and absorb our growth. As a result, we will be reducing our regulated capex for 2025. Also, as part of our objective to be more self-sufficient, the board has decided to right-size the dividend so we're not chasing a high payout ratio and excessive equity raises. These are necessary steps that we expect to unlock more value in the long term for our shareholders. Now let me provide more details on the business, starting with the investments not yet in rates. We currently estimate over $1 billion in assets are not yet authorized in rates or receiving optimized regulatory treatment. This represents a rare capital light path to earnings growth. An example of this is our Saravelle Wastewater Treatment Plant in Arizona. The plant is an important and currently operating asset, enabling the local community to grow, but is not yet in customer rates. Another is our Customer First SAP program, which, as I mentioned earlier, just completed its final implementation. Our investment in the platform has been approved in six of our smaller jurisdictions, but is not yet reflected in customer rates for the majority of our utilities. Our Customer First program is a world-class platform designed to facilitate greater operational efficiency and utility integration for improved customer service. It's worth calling out that we are now in the typical post-conversion adjustment period for these types of systems. Our system implementation, combined with our most active rate case calendar, in our history is causing some delays in our rate case filings, which we're working through. In terms of our rate case filings, I also want to call out changes to our expected regulatory calendar in a few of our jurisdictions, namely Missouri, New Hampshire, and California. In respect to these jurisdictions, we're expecting delays of one to two quarters, which will shift the beginning of our recoveries closer to 2026. These delays will, of course, impact short-term earnings. While we have some challenges in the short term, the substantial value here is a disciplined capital light trajectory to improve returns. With that, I'll turn it over to Darren.