Good morning. My name is David, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Algonquin Power & Utilities Corp. First Quarter 2022 Earnings Webcast and Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Amelia Tsang, Vice President of Investor Relations, you may begin your conference.

Thank you. Good morning, everyone, and thanks for joining us this morning for our first quarter 2022 earnings conference call. Presenting on the call today are Arun Banskota, our President and CEO; and Arthur Kacprzak, 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, management discussion and analysis and annual information form are also available on the website, as well as on SEDAR 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 earnings, capital expenditures pending acquisitions, capital recycling and growth. At the end of the call, I will read a notice regarding both forward-looking information and non-GAAP measures. Please also refer to our most recent MD&A filed on SEDAR 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 Q1 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. And I ask that you restrict your questions to 2 and then requeue 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 have been able to join us on the call and online. I'm pleased to report that we are on track with steady year-over-year growth in the following key financial metrics: Q1 adjusted EBITDA was $330.6 million, a 17% increase year-over-year, and our Q1 adjusted net earnings per share was $0.21, an increase of 5% compared to last year's $0.20. We see ourselves as a business built from long-lived assets and stable operations, and we've consistently been able to produce stable and growing financial results and remain confident in our plans to continue delivering strong returns to our shareholders. We're pleased that Algonquin's execution of strategic priorities and our strong financial positioning has led to support from our Board of Directors to approve an increase in our common share dividend of 6%, which was declared yesterday. This increase marks the 12th year of consistently increasing dividends each year, demonstrating our confidence in and the resiliency of our business model. We continue to focus our efforts on Algonquin's 3 strategic pillars: growth, operational excellence and sustainability. And I will provide more details on each of these pillars. A growth pillar in our regulated business is focused on deploying capital to benefit our customers and investing in our rate base. Our rate review at Empire Electric progressed well. On April 6, 2022, the Missouri Public Service Commission issued its final report and order, resulting in a total revenue increase of $39.5 million, with new rates expected to be implemented on June 1, 2022. Recall that Empire Electric had earlier requested a rate increase of $79.9 million, which included $29.9 million of recovery related to last year's extreme Midwest weather event and subsequently amended the direct request to $50 million after updating certain…

Thank you, Arun, and good morning, everyone. I'm pleased to report strong first quarter results, reflecting the benefits of our diversified and resilient business model. Our first quarter 2022 consolidated adjusted EBITDA was $330.6 million, which is up approximately 17% from the $282.9 million we reported for the same period last year. The Regulated Services Group delivered $231.2 million in operating profit in the current quarter, which compares to $206.4 million in the same quarter last year, an increase of $24.8 million or nearly 12%. This increase reflects the addition of 600 megawatts of wind generation in the first half of 2021 as part of the Greening the Fleet initiative in the Midwest. These facilities contributed approximately $9.5 million of additional operating profit. The group also benefited from the implementation of new rates across several of our utility systems, adding approximately $7.5 million to operating profit as compared to the prior year. Lastly, our operations at Empire Electric, although moderately negatively impacted by weather this quarter as compared to long-term averages, recorded higher operating profit as compared to the prior year due to higher non-pass-through fuel costs incurred in the prior year resulting from the impacts of Storm Uri. Operating profit was negatively impacted this quarter by an operating loss at the Liberty New York Water, which was acquired in January. As a reminder, this utility is impacted by seasonality and is expected to earn a disproportionate amount of operating profit during the summer months. The Renewable Energy Group reported first quarter divisional operating profit of $118.6 million, which compares to $95 million in the same quarter last year, representing an increase of $23.6 million or nearly 25%. During the quarter, production on our existing wind and solar generation facilities was more in line with long-term averages, increasing by 20%…

Thanks, Arthur. Before we close out our prepared comments this morning, I want to give an update on our strategic initiatives. At our December Investor Day, we updated our 5-year capital investment program, which projects $12.4 billion from 2022 through the end of 2026, with a visible capital plan. Of that, we have already closed on Liberty New York Water earlier this year, executing on approximately $600 million of the capital plan in January. While a large portion of the capital plan is being spent on organic investments to improve the safety, reliability and resiliency of our network. On the renewable side, we are excited about the growth potential and believe that we have a once-in-a-generation opportunity to accelerate renewables growth and add shareholder value. We all have investments in over 4,000 megawatts of renewable generation, which provides us with scale. With scale, we expect to get incremental benefits, including improved negotiating power, lower transaction costs and access to greater opportunities. I've previously spoken about accelerating renewables growth and adding shareholder value as we plan to continue to increase our investments in greenfield development, which we expect will allow us to capture the higher development margins and take a number of those projects through construction. Once in operation, we see an opportunity to partner with institutional investors, wishing to make alternate sustainable investments and we are seeking a partner with a proven ability to develop and deliver on long-term contracted sustainable assets. More specifically, we should be able to sell down to these investors, while earning an operating fee. We could then deploy some or all of the capital gains in further greenfield development, creating a potential new recurring source of earnings for our investors. We have formally commenced our inaugural asset recycling process, now with the portfolio with U.S.…

We'll take our first question from David Quezada with Raymond James.

My first question here, just on the maybe the renewable power side of your business to start. I'm just curious, I know that I think about 18% of your capacity is not contracted. I'm curious what kind of upside you're seeing from higher spot prices today and if there are any opportunities for contracting potentially those assets in the current environment?

Yes. Sure. Hey, David, it's Jeff Norman. The -- yes, you're absolutely right that there is a portion of those assets that are not contracted and we are seeing an increase in pricing. I think part of the -- that we will probably leave those open in terms of managing the overall risk and so that they can appreciate in the upside and there's some other benefits in terms of balancing with the generation profile and mix that optimize the portfolio.

Okay. Great. And then maybe just one on the topic of renewable deployment throughout your regulated footprint. I certainly appreciate that Kentucky Power is the big opportunity. But I'm just curious at your footprint in the Empire District Electric. I know that the case for renewables in the past has been that it saves customers money, I imagine that, that math is even more favorable today. I'm curious if you -- if you've had any initial discussions with the regulator there about potential additional renewables in the Empire footprint?

That is a discussion, David, we continue to have with all the regulators throughout our jurisdictions, including Missouri, including California. And look, we didn't have those conversations with the water utilities where we are in jurisdictions, because it -- in fact, it takes a significant amount of energy to move water. So we are even looking at how do we power those energy needs with renewable energy? So that's something we continue to have, given the fact that we certainly have additional natural gas fire generation in Missouri. Over time, we believe that there will be more opportunities for Greening the Fleet as the prices are renewable and goes down, and we're able to foresee the benefits to our customers there.

Next, we'll go to Nelson Ng with RBC Capital Markets.

Great. First question is for Arun. You mentioned that you started the capital recycling process for 750 megawatts. Can you just clarify that you're -- are you looking to sell a minority interest in retaining O&M responsibility? Is that the approach you're taking?

So Nelson, thanks. So first of all, I think the range is around 750 megawatts. I did say that this is kind of inaugural renewable asset recycling because as we continue to increase our greenfield pipeline and accelerated growth, we want this to be something of recurring value to our shareholders. We may have a significant amount of flexibility in terms of how much we want to sell down. What is important for us is really to maintain the scale on both the development and the operational side. That is really the most important thing for us and to really validate the strength of our development platform by doing this sell down. But we will retain flexibility in terms of the exact ownership to really maximize shareholder value.

Okay. And then my next question might be for Jeff. So in terms of solar panel supply, can you just clarify -- so there are some projects on that slide that has some solar panels install, like 60% to 70% on the community solar to -- and the New Market Solar Phase 1. Are those -- like are those projects essentially on hold? Or do you already have panels on the ground and this -- like the -- this investigation into tariffs, would they impact the projects that are already starting the panel installations? I presume New Market Phase 2 and Chevron, those have been pushed out a bit due to this issue?

No, Nelson, it's a good question. And certainly, the Department of Commerce decision to investigate has caused some turmoil in the supply chain. I think maybe stepping back a little bit before answering your specific question, we feel very fortunate that the solar projects within our $12.4 billion pipeline only represent about 2%. And you break that into 2 chunks, the projects that you're asking specific questions for, which are a little over 100 megawatts, and the remainder, which is 2 projects that are out in '24-'25 timeline in our capital plan. We don't expect an impact on that majority that's out in '24, '25, we'll have time to adjust into whatever decision is made by the Department of Commerce. But then specifically to your question, on the community solar projects, those are and will continue under construction, the panels are in country, so we expect no impact there. The 2 Chevron projects, which totaled 45 megawatts, we have made a joint decision with Chevron to pause those projects until we get the decision from Department of Commerce, and so a little bit of an impact there, but pretty small projects. And then on New Market Solar, the remaining 65 megawatts in the schedule that Arun went through is constructed except for panels. So once the panels arrive, we can complete construction quite quickly. We expect the panels to arrive in time to complete that construction before December 31. We do expect, based on the sourcing of the panel, that there is some tariff exposure there, but it's only approximately 30 basis points on return.

Next, we'll go to Rupert Merer with National Bank.

Getting back to the topic of sell-downs, initially, which assets could you be targeting? You're looking at all assets under construction? Or are you contemplating seldom on some operating assets? I imagine those wind assets you have coming off a 10-year tax rate windows could be good candidates. So just what are your thoughts on what gets sold down?

So Rupert, the whole idea for us is to derisk these projects through the development, interconnection, siting, permitting, constructs and early operations, right? And so all of these projects are in early stages of operations and those are the projects we have in the pipeline and they're both in Canada and the U.S., and they're all in our renewable energy projects.

Okay. So you're not contemplating sell-down and operating assets at this point?

We are looking at -- look, these are operating the renewable energy projects, just to clarify.

Okay. Okay. Great. Secondly, with the dividend increase, can you give us some thoughts on the payout ratio targets you have near and long term? And how those came into effect with your dividend increase this quarter?

Yes. Sure, Rupert. It's Arthur. Thanks for the question. Actually, we're expecting that question. So in terms of our dividend and as we think about our dividend going forward, again, 12th year in a row, raising dividends. As we look at it, we want to ensure we're providing a strong yield to a lot of our investors. But also we want to make sure that our dividends are sustainable. And that's going back in Investor Day, we did lay out our target payout ratio of about 80% to 90%. We believe that those payout ratios will ensure a sustainable dividend. And really, just as a recap on how we think about those payout ratios, it really -- it brings a combination of our 2 businesses on the renewable side, which typically pays out a proportion of its cash flows. And on the regulated side, we see a lot of our utility peers paying out between 60% and 70% of earnings. So if you run those 2 together, you do get about 80% to 90% earnings payout ratio. And I would say the only thing I would say about the payout ratio, it is a long-term payout ratio. We probably do see ourselves potentially exceeding that in the short term, especially with some of the transitional factors this year has been bringing on Kentucky Power. But certainly, in the long term, probably post 2023, we see ourselves within that payout ratio, assuming the 6% increase that we're seeing today.

Next, we'll go to Ben Pham with BMO.

I wanted to start off on M&A and curious about your philosophy now with Kentucky Power pending and your comments around not needing equity needs. You look at both electric and gas, is there a bias to either one? Are you seeing more opportunities in renewables versus utilities? Would love an update on how you think about M&A in the current environment.

Sure. Ben, first of all, I do want to point out that the vast majority of our usual capital plan is organic growth. And perhaps the last one is a little non-representative, because we had 2 large acquisitions, New York American Water and Kentucky Power. But if you go through the previous Investor Day, which is more like $9.4 billion and also included $600 million of M&A, so $8.8 billion of that $9.4 billion CapEx program was all organic growth, right? So I do want to point that out, first of all. So we do not absolutely depend on M&A for our growth. But at the same time, we are cognizant of the fact that scale does bring certain benefits and where we can execute on M&A at the -- that fits our strategy, that fits all of our financial metrics, all of those kind of things, we will execute. M&A is, by its very nature, feel fairly opportunistic. So look, we have closed Liberty New York Water, that transition has gone very well. No surprises. And given our experience base in terms of transitioning, acquiring utilities into our fold, we do not anticipate any surprises on Kentucky Power as well. And so given all of that, if the right opportunity comes, we will look at M&A opportunities. But again, we are always very, very disciplined when it comes to fit with strategy, fit with all of our financial metrics, so on and so forth.

And Arun, I'm wondering also not sure what year was, maybe last year, you were a little bit keen on gas M&A, but with -- or maybe just the Ukraine situation, has that changed at all your thinking? A - Arun Banskota Look, one of the things that we've been very clear is around sustainability, it has to fit. And as you saw on the Kentucky Power transaction, we did a lot of structuring to make sure that, that transaction fit our long-term sustainability goal and profile. When it comes to natural gas, I look really focused on really several things. First of all, we want to minimize our emissions. And so if you look at our utilities like Massachusetts gas, there's a lot of investments going on, on replacing either your bare steel and the iron pipes, with plastic, long-lasting plastic pipes. And with that effort, we're going to continue to minimize our -- the emissions profile of our gas utilities. We also have filed renewable natural gas filings in front of 4 different commissions so far and are going through that regulatory process. On the renewable side, we acquired a platform in Wisconsin with 2 plants in the late stages of construction, which we expect to come into operations this month, in fact, and 2 others in development. So we are working on renewable natural gas. And longer term, we are looking at hydrogen. I mean we participate in a number of studies. We are participating in the New York State's program on hydrogen as well. And over the long term, we see that as very much of a potential. However, we want to make sure that we have a good line of sight on green hydro and the economics of that before transacting further on natural gas assets.

Okay. Got it. And other question I had is on the dividends, some of the questions have been asked, so. When you set the 6%, I know there's a lot of different factors driving that, are you also considering your ability to maintain that rate over the next couple of years? Or can move around every year based on the inputs that you're putting in?

Look, absolutely. And the first thing I would clarify, Ben, is that it's really our Board that dictates dividend policy and the level of dividend that is really important. And I think Arthur alluded to some of the factors we consider in terms of when we look at setting dividends and sustainability of dividends is an absolute must, right? So, absolutely.

Next, we'll go to Julian Dumoulin-Smith with Bank of America.

Hey, listen, actually, just to clarify that last response, I want to make sure I heard you right. Just -- I've got a follow-up here, but when you said dividend sustainability, sustainability of growth, right? I think that it was Ben who asked, when he was asking about the 6% EPS a second ago. It's not just a sustainable dividend, but I think you were affirming a confidence on a certain degree of growth?

That's absolutely correct. Yes. I confirm.

It wasn't clear in your response, I thought you meant that. So thank you. All right. Sorry. So back to the regularly scheduled question. Just with respect to your Kentucky acquisition and the earn returns, I know we've talked about this at various points, but the timeline there, right? So coming back to that payout ratio comment from earlier, it sort of seems as if it's tied to the earned ROE achieving a certain level and normalizing your overall earnings profile as such. What's your latest sense on when you get closer to earning those "authorized" levels wherever that settles?

Sure. So clearly, with the expiry of the Rockport unit purchase agreement, in a certain level of the disallowances were there, that there will be recovered. So that's obviously one step towards getting back closer to a viable return. And the next opportunity for us will clearly be on the rate case that we plan to file in 2023, which goes into effect in 2024. And as we talked before, there's a number of mechanics that have already been common among other investor-owned utilities in entity, and we plan to try and avail ourselves of those as well. And then finally, as we start layering in both lower cost grid purchases, once the Rockport EPA expires. And the Mitchell -- it gets retired from a Kentucky perspective, and as we bring in lower cost renewable energy, we should be able to pass on both those benefits to customers, as well as enhance our ROE as well. So it's a step by step progress that we've built into our acquisition model, and we've remain confident in being able to execute against that.

Excellent. And further, one quick clarification, if I can. You said in your prepared remarks, you've commenced the process exploring the monetization of several of your renewable assets, which you would view as another source of potential value accretive capital. What is the monetization of your renewable assets look like in the form of financing? I just want to be crystal clear about this. I know we've talked on the call earlier about potential monetization of the assets, but I think you used the term monetization. I just want to make sure I heard that right. Sorry, Arun. Maybe you meant -- the transcripts coming across a little odd maybe.

One moment, Julien.

Can you hear us?

Please proceed. Go ahead, Julien, with your question.

Hey, Julien, yes. Something happened. Technology glitch here. So first of all, it is really a case of pronunciation, Julien, I had said monetization, not monetization.

I do. I'm reviewing the transcript here, and it says monetization, all good.

Next, we'll go to Sean Steuart with TD Securities.

A lot of my questions have been asked. One question on the nonregulated renewable platform -- I guess 2 questions. The process that you formalized for potential asset sales to institutional partners. I might have missed it, can you give us context on the timeline for reaching conclusions there?

By the end of this year we do plan to conclude that, yes.

Maybe a question for Jeff. As you look to redeploy that capital towards earlier-stage development opportunities, given the scale you're at now, most of what you've done, you've sourced ourselves and built yourself. Can you speak to the greenfield opportunity set versus acquiring early-stage portfolios of projects and using that to build the growth going forward? Any comment on the bias, one way or another, for earlier-stage renewable development opportunities?

Absolutely, Sean. And so we continue to shift more towards greenfield than acquisition of facilities just because of 2 factors. One, we do see a lot of the early junior developers being acquired by strategics and by financial players; and two, we see the ability to create more value by going in earlier. And our platform has gotten bigger and bigger in the U.S. and our ability and tools for doing that have become improved.

Next, we'll go to Rob Hope with Scotiabank.

Just two follow-up questions. First, on the asset monetization side, as you take a look at these processes, when you're taking a look at how much you want to sell, does consolidating or equity accounting, these assets come into play? And by that, I mean, you have some renewable assets that could wear quite a bit of debt. And so if these are equity accounted for, you could put asset-level financing there and lever them up and not impact the overall balance sheet? Is that a factor that we could see come into play here?

Let me first say that the first consideration, most critical consideration for us is how to maximize value. That is, by far, the most important consideration. I'll let Arthur comment on accounting treatment.

Yes. I was going to echo the same thing. The value is the #1 piece, but obviously, if we could -- if we can optimize around financing structures through asset monetization, we'll certainly look at that.

All right. Appreciate that. And then just a follow-up on Kentucky. We've seen some conditions in the filings, does that alter your expected ROEs moving forward there? Or has this played out largely as expected so far?

Largely as expected, Rob. I mean we obviously are cognizant of all of the items that came out in orders. We are collaborating closely with AEP on those on resolving all the outstanding issues. We did the outstanding regulatory requirements from West Virginia on Mitchell and FERC. We remain confident on resolving those again, midyear. And we continue to believe that the economics that we've laid out earlier hold through that Kentucky Commission order.

Next, we'll go to Naji Baydoun with iA Capital Markets.

Just two questions. On the asset sales, do you expect sort of your success this year to perhaps lead to a more regular pace or a specific scale of capital recycling initiatives going forward?

The idea is to have on the renewable side, a recurring team of asset sellouts and to be able to recognize and validate the value we've created through the development process. So yes. And as we've said, even in the prepared remarks, this is an inaugural asset recycling program. So yes, there will be part 2 and part 3 and hopefully continuing scale.

Okay. Got it. But I guess, so far, there's no specific targets because you talked about 750 megawatts this year. And then obviously, it's going to depend on how much more you can add to the portfolio over time, but it's sort of this a step 1, but you do expect to do it more regularly.

That's exactly correct.

Okay. And just one quick question on the Deerfield partnership with Meta. Have you looked at maybe replicating the Chevron framework with this client or with some other clients in the U.S. or in Canada?

No. We'd obviously like to, right? We like the Chevron framework agreement because having that certainty around offtake, did a lot of things, including significantly reduced transaction costs. And so we certainly would like to develop all of these relationships into those types of framework agreements. As you know, the important part about this one with Meta was the fact that it is a second one. And so -- and this whole C&I partnership is something we spend a lot of time and effort and focus on making sure that we're delivering value to our customers. So whether a true framework agreement or repeated partnerships on repeat projects, that is a model that we do want to retain, yes.

Next, we'll go to Richard Sunderland with JPMorgan.

Just wanted to circle back quickly to the tariff comments earlier in the Q&A. Just wanted to clarify, the tariff exposure is just on New Market Solar 2 and not on the first phase or the community solar, is that correct?

That's correct. And there will be tariff exposure also on Chevron assets. We just need to sort through exactly what the decision is and where we source those panels.

Right. Understood. Thank you for the clarity there. And then separately, over the past, you talked about your storage pipeline. Just curious where your efforts stay on there?

Yes. So we announced the 1,700 megawatt hour storage pipeline, greenfield, Richard. And we are at a point with storage economics and everything that we basically look at storage on every one of our renewable project development. And anyone who is thinking through interconnect, things of the sort, we make room for storage capability, even when in case we did not start out with including battery storage. So we do believe that battery storage will continue to both -- there will continue to be price reduction as well as capacity increases in terms of number of hours of storage. So we are pretty bullish on the battery store side of the business. And we already have actually quite a bit of battery storage on the regulated side of the business, have learned a lot through the operations of those. So yes, again, all in all, excited about the battery storage opportunities.

There are no further questions at this time. Arun Banskota, I'll turn the call back over to you for any additional or closing remarks.

Thank you for taking the time on our call today. With that, please stay on the line for our disclaimer.

Our discussion during this call contains certain forward-looking information, including, but not limited to, our expectations regarding earnings, capital expenditures, pending acquisitions, capital recycling and growth. This forward-looking information is based on certain assumptions, including those described in our most recent MD&A filed on SEDAR and EDGAR and available on our website, and is subject to risks and uncertainties that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information. Forward-looking information provided during this call speaks only as of the date of this call and is based on the plans, beliefs, estimates, projections, expectations, opinions and assumptions of management as of today's date. There can be no assurance that forward-looking information will prove to be accurate and you should not place undue reliance on forward-looking information. We disclaim any obligation to update any forward-looking information or to explain any material difference between subsequent actual events and such forward-looking information, except as required by applicable law. In addition, during the course of this call, we may have referred to certain non-GAAP measures and ratios including, but not limited to, adjusted net earnings, adjusted net earnings per share or adjusted net EPS, and adjusted EBITDA, adjusted funds from operations and additional operating profit. There is no standardized measure of such non-GAAP measures. And consequently, our method of calculating these measures may differ from methods used by other companies, and therefore, they may not be comparable to similar measures presented by other companies. For more information about both forward-looking information and non-GAAP measures, including a reconciliation of non-GAAP financial measures to the corresponding GAAP measures, please refer to our most recent MD&A filed on SEDAR in Canada and EDGAR in the United States and available on our website. That concludes the call.

This concludes today's conference call. You may now disconnect.