Algonquin Power & Utilities Corp. Common Shares

Hello and welcome to the Algonquin Power and Utilities Corp. Third Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remark, there will be a question and answer session. If you would 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.

Thank you, operator, and good morning, everyone. Thank you for joining us for our third quarter 2024 earnings conference call. Joining me on the call today will be Chris Huskelson, 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, algonquinpower.com. Our financial statements and management discussion and analysis are also available on the website, as well as on Cedar Plus 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 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 our website. Please also refer to our most recent MD&A filed as indicated earlier and available on our website for important information, additional information. On the call this morning, Chris will provide an update on the company's ongoing strategic transition to a pure play regulated utility. Darren will then review key highlights pertaining to our regulated business and our third quarter financial results, followed by some final remarks from Chris. We will then open the lines for questions. 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. And with that, I'll turn it over to Chris. Thank you, Brian, and good evening or good morning, everyone.

Thank you once again for your interest in Algonquin and for supporting us on our continued journey towards a pure play regulated utility. I'd like to start with a quick review. of how far we've come in our strategic transition. But first, I want to welcome Sarah McDonald, our Chief Transformation Officer, to the call. Welcome, Sarah. In 2023, we made the strategic decision to simplify and focus the business as a core regulated utility. It was and continues to be our belief that separating the regulated and renewables platforms would, after a transition period, allow both businesses to be more ideally capitalized and ultimately lead to longer-term growth and value. We began to streamline our capital structure early for this year. This started with paying off our margin loan with Atlantica and collapsing our development joint venture this past winter and successfully remarketing our green equity units this past spring. In May of this year, we announced our support for Atlantica's strategic sale agreement, which is now expected to close on December 12th, 2024. In August, we announced an agreement to sell our renewables business, excluding the hydro fleet, for up to $2.5 billion, representing an attractive valuation for our platform. This transaction is expected to close in the fourth quarter of 2024, for the first quarter of 2025. These changes are a considerable evolution for the business. And upon close of renewables and Atlantica transactions, we will effectively be a regulated utility business with significantly reduced complexity. As we've mentioned in the past, we will be looking to monetize our hydro fleet as part of the separation transaction. We continue to focus our efforts on successfully closing the renewables transaction, and as such, we have not yet officially launched the process for hydro. We would expect to begin the sale process sometime in the first half of 2025 once the renewables transaction is closed. It's important to note that the hydro business represents an annual EBITDA run rate of approximately $25 million. and we intend to only enter into a transaction if it creates value for our shareholders. At the end of the day, we're confident in the actions we're taking to position the business to deliver customer value and growth through simplification and focus. While the journey at times has been challenging, I'm excited to lead the company through this transition period to brighter days ahead. While we've been executing our strategic simplification plan, we've also been busy optimizing the core regulated business. When I started as CEO, I highlighted that one of my main priorities was to get the regulated business up and running. Early in the company's history, the business primarily grew in a piecemeal fashion. Our opportunity is to more effectively standardize and apply best practices to create additional value for our customers and shareholders. Despite near-term challenges, I'm confident we're taking the right steps. First, we completed the rollout of our customer-first SAP-based IT platform in the spring. We're in the typical stage where we're adapting to our new system and our processes. We recently rolled out the next phase of business services, which will help simplify and harmonize customer service and back office processes, leveraging our new platform. These key milestones in our transition to a more focused regulated utility business. Although our system implementation has caused some short-term regulatory lag and has in part impacted the timing of rate cases, We are excited by the longer-term potential these steps will provide. Second, we're evaluating our regulated utility infrastructure expertise, and we've just added in the last few quarters new members to our board and new executive leadership, all of which have extensive regulated experience. Third, we're reorganizing our utility structure to group by commodity, to drive best practices throughout our network. We have revamped a number of our internal processes in an effort to drive more consistent results. These approaches are our approaches that I've successfully used in the past and I'm beginning to see positive change and increased accountability within the organization. To be clear, this is a journey, but we're heading in the right direction. Looking ahead, One of our main priorities is to recover and earn a return on capital that we've already invested but have not yet captured in authorized rates. There are three large rate cases that we expect to improve our return on capital. I'm pleased to say that we recently filed rate cases for Empire Electric in Missouri and Calpico in California and expect to file Litchfield Park in Arizona in the first half of 2025. The general rate case for Empire Electric Missouri was filed yesterday and includes a request to increase rate base by approximately $534 million. The filing includes a 53.1% equity layer and 10% allowed return on equity, resulting in a requested revenue requirement increase of approximately $92.1 million. Historically, Empire's electric rate cases take about one year to resolve. Galpico's general rate case was filed in September and includes a request to increase rate base by approximately $154 million through 2025. The filing is based on a 52.5% equity layer and 11% allowed return on equity, resulting in a requested revenue requirement increase of approximately $39.8 million. Based on typical timing, we would expect this rate case to be resolved sometime in the first half of 2026. Concurrent with the rate case, we filed a request to adjust rates retroactively. We're aiming to file a rate case at the Litchfield Water and Sewer Facility in Arizona in the first half of 2025. As we indicated on prior calls, the Saravelle Wastewater Plant is a substantial investment in the community, and it serves significant manufacturing development along a key corridor in the greater Phoenix area. The plant itself represents approximately $108 million in investment, offset by approximately $23 million in connection fees. This results in our seeking approval to increase rate base by approximately $85 million. Historically, Arizona rate cases can take up to 18 months to complete, so we expect financial benefit from the rate case to start in 2026. These three rate cases constitute over $700 million in potential net increases in our authorized rate base. As we turn to 2025, it will be the first year we will be in a position to focus completely on our regulated business. As I mentioned on our last call, there's no question that our short-term results will be impacted by the timing of rate cases. On the other hand, we are taking the right steps and I'm confident that we have a tremendous opportunity to improve our rate case outcomes, leverage our IT platform, and run the business more effectively. The filings of Empire and CalPICO, along with other actions I've described, are positioning us well to increase our momentum beyond 2025. And with that, I'll ask Darren to review this quarter's operational and financial results. Darren?