Algonquin Power & Utilities Cor Q3 FY2025 earnings call

• Leadership update: Robert Stefani to join as Chief Financial Officer effective January 5, 2026; Brian Chin thanked for interim CFO role.
• Financial and operational performance: Strong quarter with double-digit year-over-year increases in adjusted net earnings and EPS; outlooks unchanged.
• Regulatory proceedings: Approval of EnergyNorth rate case settlement; CalPeco rate case pending; Empire Electric filed settlement but needs to align on metrics; New England Natural Gas rate case hearings in December; Litchfield Park case intervenor testimony due January 2026, hearings in March 2026.
• Portfolio optimization strategy: Initiated portfolio screens; focus on lowering cost curve, improving operational performance and stakeholder engagement; poised to be opportunistic if value-enhancing and transactable opportunities arise.

Third quarter adjusted net earnings from continuing operations were $71.7 million, up approximately 10% from $64.9 million in 2024. Net earnings for the Regulated Services Group were up year-over-year, fueled by growth from the implementation of approved rates across several of the company's gas and water utilities as well as slightly favorable weather compared to the prior year at the Empire Electric system. Net earnings for the Hydro Group were essentially flat for the quarter. For the Corporate Group, a decrease of $14.7 million was primarily related to the removal of dividends related to the company's investment in Atlantica, which was sold in the fourth quarter of 2024, partially offset by lower interest expense of $8.9 million. Q3 adjusted net earnings per share were $0.09, up 13% from last year's Q3 2024 adjusted net earnings per share of $0.08. Positive drivers included $0.02 from stronger operational performance from approved rate adjustments and favorable weather, $0.01 from lower operating expenses, $0.01 from the EnergyNorth depreciation deferral. Offset factors included the absence of a benefit from a New York Water retroactive payment, elimination of Atlantica dividends of $0.03, and unfavorable taxes of $0.01, with a $0.02 benefit from lower interest expense.

• 2025 financial outlook remains unchanged.
• Expect reversal of OpEx timing in Q4.
• New CFO arrival in January may lead to update on outlooks if there's material change, but foundation is sound.

• Regulatory risk: Uncertainty in rate case outcomes, customer affordability concerns.
• Operational risk: Potential reversal of OpEx timing, ongoing restructuring challenges.

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: Thanks, Baltej. We have been continuing to work on improving our cost discipline. We do expect a little bit of reversal on OpEx timing to happen in Q4. It's a myriad of improvements in efficiency and discipline across the board.

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: Nelson, I think that the timing aspect for Q4 is going to be an item that does crop up. Is it going to come out exactly at $9 million? We'll see what happens as we continue to progress through Q4, but the order of magnitude, I think, is correct.

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: No, no question about it. It is an active conversation and consideration, as we think about providing sustainable value. The work and that analysis is in flight. And that's all I can say.

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 every -- any and every stakeholder. Our objective is to get the support of the commission by bringing as many of the stakeholders along and resolving disputes.

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: Great question. The short answer is all of the above. It's risk period. So anything that would reflect a risk to our ability to achieve steady, predictable outcomes for the long term would be a consideration.