Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Algonquin Power & Utilities Corp (AQN, Financial) is progressing towards becoming a pure-play regulated utility, simplifying its business structure.
- The company has announced the sale of its renewables business for up to $2.5 billion, which is expected to close by early 2025, providing significant capital.
- AQN has successfully implemented a new SAP-based IT platform to enhance customer service and back-office processes.
- The company has filed several rate cases, including Empire Electric in Missouri and CalPeco in California, which could increase the rate base by over $700 million.
- AQN's third-quarter financial performance showed year-over-year growth in revenue and adjusted EBITDA, driven by new rates across its regulated businesses.
Negative Points
- The transition to a pure-play regulated utility has introduced short-term regulatory lag, impacting the timing of rate cases and financial results.
- Higher operating expenses, depreciation, and interest expenses have offset revenue growth, leading to a decrease in adjusted net earnings and earnings per share.
- The issuance of 76.9 million common shares has diluted earnings per share, impacting shareholder value.
- The company faces challenges in recovering and earning a return on capital already invested but not yet captured in authorized rates.
- There is uncertainty regarding the sale of the hydro fleet, which contributes significantly to the business, and the decision will depend on creating shareholder value.
Q & A Highlights
Q: Can you provide more details on the rate case submissions, specifically the $700 million target recovery and the remaining $300 million?
A: We are not providing a detailed breakdown of the remaining $300 million. We will continue to file rate cases, with Litchfield being the next focus. The target is a moving number as we continue to invest, and we expect this process to extend into 2027. - Darren Myers, CFO
Q: What impact could the Empire rate case have on 2025, and how much of it could be retroactive?
A: Historically, Empire's rate cases take about 12 months to resolve. The impact on 2025 will be minimal, with the full benefit expected in 2026. - Darren Myers, CFO
Q: Can you update us on the deferrals of depreciation and the regulatory allowances?
A: We have submitted applications in New Hampshire and Arizona but have not yet received responses. - Christopher Huskilson, CEO
Q: Regarding the hydro assets, is the sale process underway, and what are the expressions of interest?
A: We have received significant interest but have not started the sale process. We plan to market the hydro assets in the first half of next year, but a sale will only occur if it creates economic value. - Christopher Huskilson, CEO
Q: If you sell the hydro assets, how might you use the proceeds? Could it lead to share buybacks or accelerated utility investments?
A: Our priority is maintaining an investment-grade rating and self-funding. We aim to use proceeds to maintain flexibility and invest in the business, depending on regulatory lag and capital spend timing. - Darren Myers, CFO
Q: Could the purchase price for the power business change again, and how does this affect the overall economics?
A: The purchase price range increased due to bringing $200 million on balance sheet, with no economic effect. The range accounts for project completion costs, and we are comfortable with it. Timing of tax attributes also affects proceeds. - Darren Myers, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
