Algonquin Power & Utilities Corp. Q3 FY2025 earnings call

• Leadership update: Robert Stefani will join as Chief Financial Officer effective January 5, 2026; Brian Chin to continue as key member of finance team. - Third quarter was constructive and solid with strong financial results, double-digit year-over-year increases in adjusted net earnings and EPS. - Operational updates: Approval of EnergyNorth rate case settlement, CalPeco rate case pending; Empire Electric filed settlement but needs to align on metrics and milestones with commission; hearings in December on New England Natural Gas rate case, intervenor testimony due in Jan 2026 for Litchfield Park case. - Portfolio optimization strategy: Initiated screens of portfolio for value accretion, dilution, credit strength, and strategic fit; focus on lowering cost curve, improving operational performance, and stakeholder engagement; poised to be opportunistic if value-enhancing and transactable.

Third quarter adjusted net earnings from continuing operations were $71.7 million, up approximately 10% from $64.9 million in 2024. For the Regulated Services Group, net earnings were up year-over-year, fueled by growth from approved rates across several gas and water utilities and favorable weather at the Empire Electric system. Lower operating and interest expenses contributed positively, though higher income tax expense due to higher earnings before tax offset some gains. The Hydro Group's net earnings were essentially flat for the quarter. The Corporate Group saw a decrease of $14.7 million primarily related to the removal of dividends from the company's investment in Atlantica (sold in Q4 2024), partially offset by lower interest expense of $8.9 million.

• 2025 financial outlook remains unchanged. - Third quarter adjusted net earnings per share were $0.09, up 13% from Q3 2024. - Expect effective tax rate for the year in the mid-to-low 20% range remains unchanged. - Expect a little bit of reversal on OpEx timing in Q4.

• Any adjustments in rates can be challenging for some customers, with affordability a concern. - OpEx timing reversal in Q4 could impact expectations. - Risks related to portfolio optimization including enterprise risk to value.

Q: Congratulations on the strong quarter. Just looking at the OpEx improvement, could you share any color as to what were the main drivers of this and if it's sustainable?

A: It's across the board, myriad of improvements in efficiency and discipline across the board, but expect a little bit of reversal of that in Q4.

Q: If you can provide some color on, if there's been any incremental conversations with data center players and/or if you expect any large-sized projects that would or could meaningfully contribute to your system or rate base?

A: We wouldn't be talking about any conversations with customers unless they were aligned with us disclosing those conversations; focus on creating conditions precedent to serving customers, increasing transmission capacity in Southern Missouri and stabilizing generation portfolio.

Q: Just a quick follow-up on the operating costs. So I think out of the $9 million of -- sorry, out of the $11 million of cost reductions we saw in Q3, $9 million was due to timing. So are -- so Brian, should we expect to see the $9 million all get pushed into Q4?

A: The timing aspect for Q4 is going to be an item that does crop up; order of magnitude is correct but will see what happens as we progress through Q4.

Q: And then also in the quarter, I think restructuring costs were about $9.6 million for the quarter and I think $22 million year-to-date. Can you just talk about when you expect to see restructuring costs gradually roll off?

A: We're in the early innings of our restructuring efforts still; stay tuned for more, early innings description.

Q: As part of the portfolio optimization review, do you take a look at the domicile of the company just given the fact that the majority is now in the U.S.?

A: It is an active conversation and consideration; work and analysis is in flight, expect to opine on pursuit at some point.

Q: Are the settlements at the various utilities kind of better or worse than you were expecting in your financial update in June? And more broadly, on the next go around for these regulatory filings, how would you as the new management team do things differently?

A: Won't comment on whether above or below expectations; future management team would spend more time engaging with stakeholders long before regulatory filing to reduce contested issues.

Q: Just on the activities at Empire, you had a nonunanimous settlement, OPC hasn't signed off yet. Are you in ability to negotiate with them and do a revised sort of more fulsome settlement in parallel to the public hearings that were ongoing?

A: We're going to always be open to resolving disputes between stakeholders; objective is to get commission support by bringing stakeholders along.

Q: I'm also curious how you guys think about updating the market in terms of the journey on the cost cutting and navigating these rate cases. If you had sort of final decisions on CalPeco and Empire at some point in earlier 2026 and you've seen some progress on the cost reductions, would there be a view to update potentially '26 and '27 guidance at some point early or sort of midyear 2026?

A: Yes, would want new CFO to weigh in; would update if there's a material change in outlooks, arrival of CFO gives chance to reflect with fresh eyes.

Q: Maybe just going back to the portfolio optimization aspect. I'm just wondering if you can elaborate a little bit on the risk reduction commentary. Is that chiefly a comment around utility or state-specific regulatory risk? Or are there other aspects of the portfolio optimization process where you see risk reduction opportunities as enhanced potential...

A: The short answer is all of the above; anything that would reflect a risk to achieving steady, predictable outcomes for the long term is a consideration, generic enterprise risk to value.

Q: Maybe just one more on your customer and billing and data systems. I appreciate the challenges that we've talked about on previous calls, are pretty backward looking at this point. But can you just give us a sense of how that system is operating broadly across your utility footprint at this point?

A: Encouraged with progress made; with Amy Walt as Chief Customer Officer and SAP deployment experience, making progress towards better customer outcomes, and have opportunity in Missouri to show sustainable improvements.