Algonquin Power & Utilities Corp. Q2 FY2025 earnings call

• Q2 financial results were solid and on track to meet the 2025 financial outlook. - Regulatory schedule proceeded as expected with notable rate case filings totaling $73.6 million, including at Arizona Litchfield Park Water and New England natural gas. - Strengthened executive management team with appointments of Noel Black as Chief Regulatory and External Affairs Officer and Amy Walt as Chief Customer Officer. - On June 3, announced a 3-year financial outlook and Back to Basics customer-centric plan focused on improving customer outcomes, driving operational efficiencies, and achieving constructive regulatory outcomes. - Regulatory updates: Arizona Corporation Commission approved a $4.2 million revenue adjustment at 4 water and wastewater facilities, and a settlement agreement with New Hampshire Public Utilities Commission is awaiting approval.

Regulated Services group: Net earnings were essentially flat year-over-year. Hydro group: Net earnings increased by $5.8 million primarily due to the finalization of a one-time tax recovery. Corporate: Adjusted net earnings decreased by $10.2 million primarily related to the removal of Atlantica dividends.

• Q2 financial results put the company on track to meet its 2025 financial outlook. - Announced a 3-year financial outlook and customer-centric plan, including estimated adjusted net EPS outlook for 2025-2027, expected improvements in earned ROE and operating expenses as a percent of revenues, anticipated organic capital investment deployment, continued maintenance of BBB investment-grade credit rating, and expectation of no common equity financings through 2027. - Expectation of an effective tax rate in the low to mid-20% range for 2025.

• Actual results could differ materially from forward-looking information. - Uncertainties associated with regulatory proceedings and rate case outcomes.

Q: Rod, are you still anticipating some type of portfolio update this year? I'm curious if you have any sense on timing there and what you're evaluating across the business in advance of that?

A: Yes. What we said, and I think I just alluded to it that we'll give a strategy update on the portfolio on the back end of the year. We haven't made a formal announcement, although I did declare that we would -- we plan to attend the EEI financial conference in early November, but we've not made any formal pronouncements as of yet.

Q: Quick questions for Brian. You mentioned that you've finalized some of the tax items for the Hydro business. So -- and you recognize some one-time benefits in Q1 and Q2. Should we expect to see any tax recoveries in Q3?

A: No. The majority of the tax adjustments related to Hydro were taken in Q1, as you know. There was a follow-on true-up in Q2, and that's really -- we're not expecting any further updates on that.

Q: Quick questions for Brian. You mentioned that you've hired Noel and Amy recently. There's a lot of heavy lifting involved. Should we expect any additional hires in the near term? Do you have the right team in place right now?

A: That will be a conversation that I would simply make announcements when I do no different than with Noel and Amy. I won't signal that I'm planning to do X, Y or Z with a specific role. Just know that we're constantly asking the question, do we have the right skills in the right places for our objectives. And that's my -- that will be my MO on a go-forward basis. I won't anticipate it. I'm simply letting everyone know that we're constantly asking that question. That's what I view as my job to make sure I got the right people in the right place to achieve our objective.

Q: Just a couple of questions. The first piggybacking off of a prior question on costs reductions. Just wondering where you might be focused now? Is it really more on the opco level? Or would it be on the holdco level? And wondering also how you think we might be able to gauge the progress over the year on those cost reductions efforts?

A: Yes, you won't see us providing updates on the cost-out program. You'll see us producing on a quarter-by-quarter basis, the outcomes at the jurisdictions. And by outcomes, I mean the -- our rate case settlements, but more importantly, our overall production as a firm. And I think the signals that we've been -- when given to the marketplace around O&M as a percentage of revenues are best and right now, only public pronouncement to give you a sense of what we're seeking to accomplish from an enterprise perspective because it's not just an operating company conversation, our holdco or corporate center conversation. It's an enterprise effort to lower our overall cost profile for the benefit of our stakeholders. And so we'll be deliberate about how we talk about it publicly, but it's an enterprise effort.

Q: On the Empire Electric proceedings, do you believe that the stakeholders might be willing to engage in a negotiated settlement? And if yes, any potential time lines for settlement discussions or resolution?

A: Well, the short answer is always, and the timeline is a function of the procedural schedule, and we have some of the early postures from staff and OPC and we'll have our rebuttals, I think, in the coming weeks. And around that November time frame after the initial posture from the stakeholders and our rebuttal to it, I think that's usually when the process of negotiations officially begin. But from our vantage point and our stakeholder engagement objectives, we're in a constant state of negotiations with the various stakeholders to that outcome. So I won't give you a timeline, but again, I don't ever want to get ahead of the ultimate decision makers there. But that process is well underway.