Algonquin Power & Utilities Corp. Q4 FY2025 earnings call

2025 was a turning point for Algonquin with strong results, improved earned returns, operational and regulatory progress, and balance sheet strengthening. Focus on back-to-basics strategy, improving operational discipline, customer outcomes, and regulatory strategy execution. In 2026, priorities include cost discipline, improving safety and reliability, customer experience improvements, regulatory progress like settlement approvals in various rate cases, and onboarding key corporate leaders. Disciplined execution against these priorities underpins financial outlook.

Full year 2025 GAAP net earnings were $208 million compared to $54.8 million in 2024. Full-year adjusted net earnings were $258.8 million, up approximately 17% from $221.6 million in 2024. Fourth quarter 2025 GAAP net earnings were $29.4 million compared to a net loss of $110.2 million in the fourth quarter of 2024. Adjusted net EPS for 2025 was $0.34 per share, up from $0.30 per share in 2024. New utility rates contributed to the earnings, interest expense was reduced due to debt paydown, operating expenses had some changes, and there were tax adjustments. Regulated utility capital expenditure outlook from 2026 - 2028 is approximately $3.2 billion. Rate base at year-end 2025 was approximately $8.2 billion, expected to grow to ~$9.7 billion by year-end 2028 with a CAGR of nearly 6%. Balance sheet was strengthened with debt paydown using proceeds from asset sales, total debt at ~$6.5 billion, and solid investment-grade credit ratings.

Reaffirmed 2026 adjusted net EPS estimate in the range of 35 cents to 37 cents. Revised 2027 expected adjusted net EPS range to 38 to 42 cents due to mid to high 20s effective tax rate range compared to previously anticipated low to mid 20s. Expect majority of tax strategy benefits to be realized after 2027. 2026 financing plan at APOC includes upstreaming from LUCO to fund debt maturities and dividends, with LUCO raising funds through bond issuances.

Actual results could differ materially from forward-looking information. Regulatory environments and rate case outcomes can be uncertain. Affordability concerns can influence regulators' receptivity to rate recovery. Complexity in different jurisdictions and regulatory constructs can impact execution. Wildfire risk in California and related mitigation efforts pose operational and financial risks.

Q: From the revised 2027 guidance, share details on largest drivers of new effective tax rate assumptions.

A: During onboarding, financial projections review led to effective tax rate moving to mid to high 20s, resulting in ~$0.03 per share EPS deduction, and tax optimization strategies expected to have majority benefits after 2027.

Q: Share thoughts on largest levers in near term and potential procedures/processes.

A: Leadership team refocused on regulatory engagement, strong investment-grade balance sheet provides flexibility for organic growth and assessing opportunities.

Q: Frame types of additional opportunities and portfolio optimization.

A: Growth starts with organic growth in existing jurisdictions, portfolio remains under review with opportunistic approach for accretive moves.

Q: Background on Calpico solar project write-off and why not adjusted out.

A: Project in Nevada, economics led to decision not to proceed, viewed as not one-off and reflected in operating expense.

Q: Updates on redomiciling and impact on effective tax rate.

A: Ongoing, work underway on analytics, but no announcements yet.

Q: Incremental color on 2028 CapEx and rate base natural growth.

A: 2028 CapEx back-end weighted due to SPP transmission and ARIS generation projects, natural growth rate related to these projects.

Q: Progress update on operational efficiencies and ROE, surprises and areas to tweak.

A: Reinforced need for consistent operational cadence and standards, stakeholder engagement important, affordability influences regulators' receptivity.

Q: Guidance beyond 2027 and funding through 2028.

A: Working on longer view, but no guidance yet, confident in getting through 2027 without equity issuance.

Q: Progress on Missouri rate case customer metrics and hydro recycling opportunities.

A: Working on validating customer metric achievement for rate implementation, hydro asset not material, no fire sale, open to reasonable terms.

Q: Overall view on California regulatory backdrop and wildfire risk.

A: Navigating complex landscape, engaged in wildfire mitigation plans, spending time and resources on risk reduction