Algonquin Power & Utilities Corp. Common Shares

Hello and welcome to the Algonquin Power and Utilities Court Fourth Quarter 2025 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 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 fourth quarter and full year 2025 earnings conference call. Joining me on the call today will be Rod West, Chief Executive Officer, and Rob Stefani, Chief Financial Officer, who will share prepared remarks. Other members of the management team are also available to answer your questions during the Q&A portion of the call today. 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. Additionally, all net earnings information to be discussed today is for continuing operations and is attributable to the common shareholders of Algonquin. Certain material factors and assumptions were applied in making the forecasts and projections reflected in 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 algonquinpower.com. Please also refer to our most recent MD&A on Cedar Plus and EDGAR and available on our website for important additional information on these items. On the call this morning, Rod will provide a business update and Rob will follow through with details of our financial results. We'll then open the line for questions. We kindly ask that you restrict your questions to two and then recue if you have any additional questions to allow others the opportunity to participate. And with that, I'll turn things over to Rod.

Thanks, Brian, and good morning, everyone. Thanks for joining us. 2025 was a turning point for Algonquin. We delivered strong results, improved earned returns, made substantial operational and regulatory progress and meaningfully strengthened our balance sheet. And those results reflect something broader. Algonquin is a different company today than it was a year ago. We are more focused, more disciplined, and to each other and to our stakeholders, more accountable. We have sharpened our strategy, assembled an experienced leadership team, and laid the foundations. for a sustained performance culture. In short, we're advancing toward our goal of becoming a premium pure play regulated utility. Turning to slide five, I'll begin my remarks today by walking through our accomplishments in 2025. We delivered full year net earnings per share of 27 cents and adjusted net EPS of 34 cents. which exceeded the top end of our guidance range by two cents. These results demonstrate that our back to basic strategy is driving measurable improvements in our underlying fundamentals. And as we've discussed before, becoming a premium utility starts with getting the fundamentals right. Since I joined Algonquin, we focused on first improving operational discipline to improve customer outcomes and driving efficiencies by bending our cost curve. And second, strengthening regulatory strategy execution through more proactive stakeholder engagement, all to drive more constructive and timely outcomes. Our 2025 results provide recent evidence of that focus. We reduced operating expense as a percentage of gross revenue from approximately 38% in 2024 to roughly 36% in 2025. We achieved constructive regulatory outcomes across a range of proceedings, and we improved our earned ROE from 5.5% in 2024 to approximately 6.8% in 2025. We also made progress this year in strengthening our balance sheet. We use net proceeds from the sale of our renewable business, excluding our hydro assets to retire approximately $1.6 billion of debt, materially improving our cap structure and financial flexibility. And finally, we continue to simplify the company and the story both through portfolio actions and by reducing complexity inside the regulated platform. While we clearly have much more work to do, this was a good start and we carry that momentum into 2026. Looking ahead to 2026 on slide six, our priorities build directly on what we've achieved over the last 12 months. Operationally, cost discipline remains a core priority. As we transition to a more commodity aligned structure and and centralizing shared services around cost and value, we expect to capture additional efficiencies and drive consistency across our gas, water, and electric portfolio. As we undertake these efforts, we're also implementing a centralized capital projects team to improve our execution performance and reducing risk. At the same time, we're focused on improving the safety and reliability of our system, supporting positive customer outcomes and maintaining affordability across all of our jurisdictions. To drive better customer experiences, we've been making improvements across our end to end process design, focusing on the moments that matter most to our customers. This includes more accurate billing, and better delivery of information during any kind of disruption. From a regulatory standpoint, we're pleased to receive approval of our settlement in Empire Electric Missouri's rate case in January this year. We're working there to see the rates implemented, which remains subject to evaluation of specific customer metrics. We were also glad to reach settlement agreements at New England Gas, Calpico Electric, and Arizona Litchfield Park Water and Sewer, and look forward to advancing them towards approval and implementation. I'll speak to each rate case in a bit more detail shortly. Finally, at the corporate level, we've recently onboarded key leaders, including Rob as our new CFO, Pete Norjo as our new Chief Operating Officer, and Kristen Von Fisher as our new Chief Human Resources Officer. Our execution against these priorities underpins our financial outlook. For 2026, we're pleased to reaffirm our earnings guidance. The drivers supporting this year's guidance range are well-defined and we're confident in our ability to execute. Relative to where we were last June, we now expect our effective tax rate in 2027 to be in the mid to high 20s percent range as compared to the previously anticipated low to mid 20s percentage range. We're continuing to evaluate tax strategies to optimize the tax rate, but expect the majority of the benefits from those strategies to be realized after 2027. This largely results in an updated expected adjusted net EPS range for 2027 of 38 to 42 cents. With an executive team that brings deep utility experience now in place, in addition to the aforementioned tax optimization work, we're focused on disciplined execution and constructive regulatory engagement to position the business to deliver sustainable earnings growth over the long term, while also looking for additional opportunities to bridge the gap caused by the tax rate relative to last June. Turning to slide seven, while there is more to be done to bring resolution to a number of key rate cases, we're seeing the benefits of our regulatory and stakeholder engagement approach. By prioritizing earlier dialogue to identify areas of common ground, as well as advancing more pragmatic filings, we've been able to achieve settlement agreements. We expect these agreements will deliver reasonable regulatory outcomes that benefit our customers and allow us to recover investment in our systems efficiently. Let me walk through our key recent proceedings. In January this year, the Missouri Public Service Commission approved our settlement agreement for Empire Electric, which is our largest operating utility. This authorizes a $97 million revenue increase after we meet customer metric performance requirements for three consecutive months, with an additional potential $13 million of annual revenue increase based on meeting further performance requirements starting in the second half of 2026. In California, we received a proposed decision at Calpico Electric adopting the proposed settlement agreement, which provides for a $48.6 million revenue increase retroactive to January 2025, an allowed ROE of 975, and an equity ratio of 52.5%. We are awaiting a final decision. In Massachusetts, we reached a settlement for New England natural gas, which calls for a $45.3 million revenue adjustment, of which approximately $17.9 million is non-gas system enhancement plan revenue, with two additional step-ups in rate base in subsequent years. The settlement includes an allowed ROE of 9.3% and an equity ratio of of approximately 52.9%. And a rate stay out the rate case stay out through October 31 of 2029. We've requested a commission order by the end of this month. In Arizona, just this week, we filed a proposed settlement for Litchfield Park water and sewer. The settlement, which was reached with the Arizona Corporation Commission staff calls for a $15.3 million revenue adjustment and an ROE, a loud ROE, of 9.75%, with a 54% equity ratio. Hearings are scheduled for late March of this year. And finally, in Kansas, we filed a rate case at Empire Electric in December requesting a $15.8 million base rate adjustment, which represents a net requested increase of $12.5 million with a three-year phase in for gradual adjustment slide eight helps put all of this in context over the past year we have steadily resolved rate cases across multiple jurisdictions advancing from filing to constructive resolution to implementation of rates as we look ahead we now have line of sight to resolving a significant portion of the remaining requested revenue adjustments this year, which will inform our forward earnings trajectory. Turning to slide nine, we are fortunate to operate in high-quality jurisdictions that have attractive regulatory mechanisms. This includes tracker mechanisms, multi-year rate plans, forecasted test years, and formula rate structure. These regulatory mechanisms underpin the majority of the expected rate-based growth between now in 2028. Building on this foundation, recent legislative and regulatory developments across our states are supporting enhanced investment recovery. Recent advances in Missouri, Arizona, New Hampshire, and Oklahoma are further strengthening our regulatory frameworks with the adoption of future test years, CWIP for new gas generation, plant and service accounting, and consideration of formula rates. Overall, these developments reinforce the constructive regulatory environments in which we operate. With that, I'll turn it over to Rob to walk through our financial update for the quarter and year end. Rob joined the company just this past January, on January 5th. Many of our analysts and investors may already know Rob from his time as CFO of Southwest Gas Holdings. He also previously served as CFO and treasurer of Pico Energy. the Philadelphia-based electric and gas utility subsidiary of Exelon. Rob joins a strong team of experienced utility executives in the C-suite. And as we continue to build our utility platform, Rob's utility leadership experience, strategic skill set, and financial expertise will be leveraged to build a strong foundation for the company as we solidify our strategy and execute on our path to becoming a premium utility. So, Again, Rob, and for my last time, formally welcoming you, I'll hand the call over to you.