Good morning, ladies and gentlemen, and welcome to the Algonquin Power & Utilities Corp. First Quarter 2023 Earnings Webcast and Conference Call. Following the presentation, there will be a question-and-answer session. I would now like to turn the meeting over to Mr. Brian Chin, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us for our first quarter 2023 earnings conference call. Speaking on the call today will be Arun Banskota, President and Chief Executive Officer; and Darren Myers, Chief Financial Officer. Also joining us this morning for the question-and-answer part of the call will be Jeff Norman, Chief Development Officer; and Johnny Johnston, Chief Operating Officer. To accompany today's earnings call, we have a supplemental webcast presentation available on our website, algonquinpowerandutilities.com. Our financial statements and management discussion and analysis are also available on the website as well as on SEDAR and EDGAR. We'd like to remind you that our discussion during the call will include certain forward-looking information, including, but not limited to, expectations regarding earnings, capital expenditures, growth, and the strategic review of the renewable energy group. At the end of the call, I will read a notice regarding forward-looking information and non-GAAP measures. Please also refer to our most recent MD&A filed on SEDAR and EDGAR and available on our website for additional important information on these items. On the call this morning, Arun will comment on our renewable strategic review and provide an overview of our first-quarter performance, and Darren will follow with the financial results. We will then open the lines for the question-and-answer period. Please restrict your questions to two and then re-queue if you have any additional questions to allow others the opportunity to participate. And with that, I'll turn it over to Arun.

Thank you, Brian, and good morning to everyone joining the call. Before we get into the results for the quarter, I'd like to provide some context around our announcement this morning of our strategic review of the Renewable Energy Group. Both our Renewable Energy Group and our Regulated Services Group have grown into strong businesses with scale and high-quality assets. And both are positioned to benefit from the energy transition. But we believe our assets are undervalued. We have, therefore, initiated our strategic review of our renewables business to explore alternatives to maximize shareholder value. By doing so, we aim to lower the company's cost of capital and better position the company for success. The review will focus on whether separating our Renewable Energy Group from our Regulated Services Group would advance that objective. As part of the process, we will review the best structure to position our company for continued growth and value creation for our shareholders. To oversee the review, our Board has created a strategic review committee comprised of three of our Independent Directors. This committee will work with our internal team and external advisers to execute a thorough review and take an open-minded approach to determining the best path forward to drive meaningful long-term value for shareholders. Our team has already initiated the process and we expect to announce our go-forward plan by our second quarter earnings call. Last, let me touch quickly on guidance. We are reaffirming that our 2023 adjusted net earnings per share outlook of $0.55 to $0.61 is unchanged. In addition, our expectation of $1 billion in organic capital expenditures for 2023 remains unchanged. And with that, let me turn to our ongoing operations and recent developments. I would first like to touch on the termination of the Kentucky Power acquisition. Last month, we announced with AEP a mutual termination of the agreement to acquire Kentucky Power Company and AEP Kentucky Transmission Company. This was not an easy decision. However, our Board of Directors and management team decided that given the challenging and continuously evolving macroeconomic environment and regulatory uncertainty over a final order, it was in the best interest of the company to terminate the transaction. I wish to personally extend my gratitude to the teams that worked tirelessly throughout the entire process. Now for a couple of updates from our operations. Late in the first quarter of 2023, the 112 megawatt Deerfield II wind project located in Huron County, Michigan achieved full commercial operations. Supporting our growth lever of commercial and industrial partnerships, all of the output from Deerfield II is being sold to a subsidiary of Meta, pursuant to a power purchase agreement. On the regulated services side, we received final rate case orders at three of our California facilities: Apple Valley Water, Park Water, and CalPeco Electric, with aggregate annual revenue increases of $29.6 million, which includes approximately $9.7 million due to increases in rate base. A one-time net earnings benefit from the retroactive impact of the orders of approximately $3.7 million for Apple Valley Water and Park Water was recorded in the first quarter of 2023, with a further $11.4 million for CalPeco Electric expected in the second quarter of 2023. I would like to touch on a couple of selected recent rate proceedings as a core growth strategy of the Regulated Services Group is to responsibly invest in our utility systems and target a constructive return on the rate base across our various utility systems. Subsequent to the end of the first quarter of 2023, the company filed an application at its New York Water utility, seeking increased revenues of $39.7 million based on an ROE of 10% and an equity ratio of 50%. Additionally, the company filed a new rate application at its Empire Electric Arkansas utility, seeking an increase in revenues of $7.3 million based on an ROE of 10.5% and an equity ratio of 56% to be phased in over three years. These rate cases highlight a broader pattern for us, which is that we place a high emphasis on attempting to earn as close to our authorized ROE as possible. Turning now to growth for our Renewable Energy Group. The first quarter of 2023 saw the installation of the remaining panels at our Texas solar project co-owned with Chevron, as well as further advancements on site preparation and turbine erection at Sandy Ridge II. As mentioned previously, the Deerfield II wind project achieved full commercial operations in the first quarter of 2023. Deerfield II came online at the tail end of Q1 and, as with most wind projects, it contributes most to financial results in the first and fourth quarters. New to the pipeline this quarter is a 144 megawatt Clearview solar development project located in Champaign County, Ohio, which is scheduled to start construction at the end of May. We currently have nearly 750 megawatts of wind and solar projects in various stages of construction and expect to bring approximately 450 megawatts in service throughout 2023. As for an update on the New Market Solar project, 42 megawatts of the remaining 76 megawatts have firm delivery. The remaining 34 megawatts have been shipped and are expected to be delivered by June of 2023. So overall, our construction program continues on track. As we have mentioned in previous quarters, we expect our 2023 renewables operating earnings, excluding gains on sales, to be relatively flat year-over-year. I will now turn things over to Darren, who will speak to our first quarter 2023 financial results.

Thank you, Arun, and good morning, everyone. Our first quarter 2023 consolidated adjusted EBITDA was $341 million, which is up approximately 3% from the $330.5 million for the same period last year. The company grew year-over-year adjusted EBITDA by $10.5 million, which was driven by growth in the Regulated Services Group as a result of new rates at a number of the company's utilities. This growth was partially offset by a decline in our Renewable Energy Group operating profit, as expected, driven by lower HLBV from projects commissioned in 2012. Looking further at results on a segmented basis, the Regulated Services Group delivered $255.3 million in operating profit in the first quarter, which compares to $231.2 million in the same quarter last year, an increase of 10%. The year-over-year increase was primarily a result of new rates in a number of the company's utilities, most notably the Empire Electric and Park Water Systems. Switching now to the Renewable Energy Group. First quarter 2023 divisional operating profit was $106.5 million compared to $117.9 million in the same quarter last year, a decrease of 10%. The decrease was as seen in prior quarters, primarily due to lower HLBV income as a result of the end of tax attributed eligibility on projects commissioned in 2012. Excluding the HLBV roll-off, operating profit for the Renewable Energy Group was effectively flat as we expected, with financial contributions from new facilities slated to come online later this year. Corporate interest expenses were $81.9 million compared to $57.9 million in the same quarter last year, a $24 million increase, reflecting a higher interest rate environment and higher borrowings to support growth. This quarter's increase over the prior year is primarily similar to the pattern observed in late 2022, and is in line with our expectations. Looking further down the income statement, first quarter adjusted net earnings were $119.9 million compared to $141.2 million reported last year, a decrease of 15%. Turning to adjusted net earnings per share, the first quarter of 2023 came in at $0.17 compared to $0.21 in the prior year. Our GAAP net earnings were $270.1 million compared to $91 million in the first quarter of 2022, an increase of $179.1 million for the quarter. Looking now at our capital plan for the year, we reiterate that we expect to spend $1 billion in capital in 2023, with approximately $700 million to be spent by the Regulated Services Group and approximately $300 million by the Renewable Energy Group. This is consistent with our prior CapEx plan disclosures, excluding the $2.6 billion we had initially expected for Kentucky. We remain firmly committed to maintaining a BBB credit rating. We are pleased that within the past few months, S&P, Fitch, Moody's, and DBRS all reaffirmed their existing ratings. We were also recently removed from negative watch by S&P, and in February, DBRS updated Algonquin's outlook to stable. Turning to our earnings outlook, we have reaffirmed our 2023 adjusted net earnings per share expected range of $0.55 to $0.61, which, as a reminder, starting this year will be calculated excluding the impact of any gains or losses on asset sales. Finally, we remain focused on optimizing our balance sheet and providing transparency on our financing needs. As previously stated, we do not expect any new equity financing through the end of 2024. With that, I will now turn the call over to the operator to open the lines for questions.

Thank you. We will now take questions from the telephone lines. The first question is from Nelson Ng from RBC Capital Markets. Please go ahead. Your line is now open.

Great. Thanks and good morning, everyone. My first question relates to the strategic review. While you're conducting the strategic review, are you still on track with the targeted $1 billion of asset sales? Can you discuss how the two processes interconnect or differ and provide more details on the scope of the strategic review?

Sure. Nelson, good morning. As we announced this morning, we have started a strategic review process. The Board has also decided to create a strategic review committee that will oversee the entire process. We plan to conclude the discussions by the Q2 earnings call. Regarding your other question about the $1 billion asset sale, we remain committed to our plans as outlined in the January 12 update. Our top priority has always been to strengthen our balance sheet, and the actions we announced on January 12 were all aimed at that. Therefore, we continue to uphold our $1 billion asset divestiture program as well.

Okay. So is it safe to say you won't be making any big asset sales prior to the conclusion of the strategic review in August or the Q2 call?

I'm not going to speculate on the timing on that, Nelson. But like I said, both processes are continuing at the same time.

Okay. I understand. My second question is about the number of rate cases you have. Have you noticed if higher interest rates and increased cost of capital have led to a rise in rate case requests? Has that been a significant influence on the additional rate requests from your perspective? Are you experiencing any pushback from regulators and consumer groups?

Well, Nelson, we continue to have very constructive dialogues and discussions with our regulators. Of course, things like interest rates and inflation and others are part of the overall discussions. But it is business as usual for us in terms of the number of rate cases we are looking to file and as expected as part of our business plan.

Okay. Thanks. I’ll leave it there.

Thank you. The next question is from Rupert Merer from National Bank Financial. Please go ahead. Your line is now open.

Hi. Good morning. Thanks for taking the question. Arun, you highlight that the market may not be valuing your renewable assets appropriately. And we have seen public market valuations on some of your peers come down a bit recently. Now no doubt, you're in tune with the market with your asset divestiture plan. So I was wondering if you could comment on the state of the M&A market. How much of that market do you think is in private transactions? And are private market valuations that you're seeing still healthy and how are they trending relative to the public market?

Sure. So Rupert, as you know, we did our first inaugural asset sell-down that was completed in December. We continue to see a very robust set of interest in that asset size and frankly, from all different types of financial players and strategic players and also from all geographies. So we have continued to see very robust interest. As you know, we have an ongoing conversation with various participants in the market. We believe that the public market and private market, while obviously cognizant of the interest rate environment, there does seem to be continued interest in long-lived renewable energy assets.

Okay. Thanks for the color. Now the strategic review likely will impact the outlook for Atlantica yield too. Will they be involved in your process to any degree? And how important is it that they complete their strategic review at the same time you complete yours?

Rupert, those are two totally separate processes. The Atlantica Board is running the strategic review for Atlantica. As we announced before, we remain supportive of that strategic review process. Our strategy review process is totally different, and there is really no linkage between those two strategy review processes.

I imagine you're somewhat involved in their process as well. Does that inform your process to any degree?

Of course, given the fact that we were in the market until December on our own set of assets and the visibility we have through the Atlantica strategy review process, obviously, that would be a data point in what we're looking at as well.

All right. I’ll get back in the queue. Thank you.

Hi. Just wondering if you have some comment on the timing of this. I'm wondering why it wasn't initiated earlier, strategic review given some of the things you've been trying to solve over the last couple of quarters? And I guess is there anything else aside from the strategic review that you might consider doing now, given feedback and investor engagement that maybe you didn't consider earlier this year or back in 2022?

Sure, Mark. So look, our first focus and priority was really around our balance sheet. That was absolutely the most important thing for us. So in January, we announced a series of actions, including reducing our capital intensity, dividend reset, asset divestitures. All of those actions were geared towards firming up our balance sheet. As you know, at the same time, we were in the middle of continuing to execute on the Kentucky Power transaction, which would have been our largest M&A transaction to date. The focus was on continuing to use reasonable best efforts to complete that transaction. Once both the seller and we decided it was in the interest of both parties to terminate the transaction, that's when we started looking at what are the other opportunities out there for us to make sure we get the right values for our strong set of assets. We continue to have a regular dialogue between management and the Board, and this strategic review came out as the one where we believe we can unlock perhaps the most value.

So just a follow-up. So you're saying the strategic review is more about unlocking value, not singularly focused on solving the funding issues? And then maybe just to my other part, is there anything else now post Kentucky Power deal being terminated that you're considering in terms of optimizing and trying to surface value for shareholders?

No, nothing new besides executing on our January 12 update and executing on our strategy review.

And Mark, maybe I'll just add just to your question and just make sure I heard it right. The strategic review is not being put in place because of a funding problem. Just to be clear, the strategic review is to figure out the best option, the most optimal way to structure the company to get the best valuation and the lowest cost of capital for the company.

Makes sense. And then just to follow up on that, Darren. If you did split apart the renewables and divested all or most of it, becoming predominantly regulated, is there a path forward when you go back to the credit rating agencies and look to change their perception of business risk and try to lower your FFO to debt metrics, which may give you a bit more balance sheet flexibility?

Yeah, Mark. I certainly don’t want to speculate on outcomes today as to where this may go. We are open-minded to all the different options in front of us, and obviously, we look at all the different levers that each option presents and try to come up with the best answer for the company and for shareholders.

Thanks. Good morning. A couple of questions. It looks like you're reiterating your CapEx plans this year, which calls for a pretty conservative investment in rate-based growth this year, one of the lowest levels we've seen in several years. With more flexibility in your capital structure post Kentucky Power, can you speak to your ability to potentially ramp up that spending in your rate base into 2024?

Sure, Sean. Happy to take that question. So yes, as you've observed, we have reduced our capital intensity, which was all really with a view to strengthening our balance sheet. But at the same time, as you pointed out, we do have the ability to invest more in our regulated business for further growth. At the same time, we always look at things like inflation and customer bill impact. We thought that this year was a good year for us to moderate the capital intensity, but there is the ability to invest more on the regulated side of the business, yes.

Yeah, and Sean, you probably just want to add to that. I think you're thinking about it right as we look beyond this year into next year and after that. There is more opportunity to invest in our rate base. I think from where we are today and with the announced actions we have, it's really about paying down debt and investing in the business. Again, that's for all the actions that we've announced to date.

Thank you. Good morning. Maybe just on the core utility business. You've given us the rate basis again and the authorized ROEs, which is much appreciated. But could you give us maybe a context on where you are in aggregate maybe on the gap of realized versus the authorized that you have?

I believe we have already given that information, Andrew, that our weighted average ROE is right in the range of 9%.

Okay. I might have missed that in the deluge of stuff this morning. So maybe just in the context of investing more in the utilities business, Arun, I think when you took over the seat a while ago, you talked more about pivoting in the utility investments. Is the strategic review process maybe a culmination of the plan that you set out a few years ago to really improve the balance sheet and maybe derisk the overall company and improve the funding situation?

Absolutely, Andrew. The first priority was to strengthen the balance sheet. Especially in light of the macro environment, we had to take very decisive steps, which we announced in January. Both of our platforms are very strong, the regulated business and the renewable business. Both are benefiting hugely from the energy transition and are positioned to continue to benefit over the years. It really is not a lack of opportunities for us. So first of all, strengthen the balance sheet; second, continue to focus on value creation growth; and continue to create long-term value for our shareholders. That absolutely remains our focus.

Hi. Good morning. Just going back to the strategic review, I understand you're keeping sort of open-minded, keeping flexibility. But just based on where you stand today, is there a preference for either a full monetization or maybe a partial monetization like you did last year, bringing in partners?

No, we're not going to be doing anything right away, Naji, before we have the full result of the strategy review. So we will look at all different ways to maximize shareholder value. Again, we are going into this with a very open mind and looking at all possible pathways.

And I assume one of those pathways would include a spin-off of the renewable business as well so that they would be two standalone public entities. How does sort of similar initiatives that have been undertaken by your peers in North America inform your decision to maybe do a spin-off?

Sure. Naji, we have obviously just started the strategy review process. We will be looking at market considerations and experience of our peers, absolutely. Again, everything is on the table. The two primary outcomes we're looking for are to continue to strengthen our balance sheet and maximize the valuation of our assets, both regulated and renewables for our shareholders. Those are the outcomes we will continue to look at.

Thanks. Good morning, everyone. Maybe my first question, just assuming you do sort of refocus strategically on the regulated side of the business going forward, could you talk about what your main priorities are or what you see as the big opportunities there on the regulated side? Any particular region or modality that you think has a lot of potential?

Sure. And again, let us not presuppose what exactly is going to be the end result of the strategy review process. So I'll answer your question around opportunities on the regulated side of the business. Look, if you just look at all of the organic growth requirements from things like safety, security, and reliability improvements, we are constructing a 161 KV line in the State of Missouri. We have growth opportunities in Arizona, constructing a new wastewater system. In our CalPeco jurisdiction, we are putting in renewable energy to increase the amount of clean energy on that grid. So there continue to be both the core requirements for again, safety, security, and reliability, but also beyond that to account for growth in multiple ways where we could manage converting OpEx into CapEx and thereby help manage customer bills as well. So all-in-all, we see a very robust set of opportunities on the regulated side of the business. Look, as with any development project on the renewable side, sizing and interconnection are really core to moving the process forward. As you know, interconnection has been more challenging in PJM, and there has actually been a stop hold on new interconnection agreements. But we continue to make advancements, and we have accounted for the increased timing in our plans and our expectations in the renewable projects.

Yeah. I think that last point I'd just reinforce that what is in our plan is considered and thought through the interconnection delays. There's definitely, as we see excitement about the energy transition, interconnection timing is going to be a key factor. I would point out that our portfolio of development projects, our greenfield pipeline, we've got different vintages, and we've been investing in that pipeline for a number of years. There are some projects that are in front of that way, and there are some projects that we'll have to deal with that way. But we feel good about what we've put forward for the next five years.

Thank you, operator, and thank you, everyone, for taking the time to listen to our first quarter 2023 call today. Please continue to stay on the line for our disclaimer.

Thanks, Arun. Our discussion during this call contains certain forward-looking information, including, but not limited to our expectations regarding earnings, capital expenditures, growth, and the strategic review of the Renewable Energy Group. This forward-looking information is based on certain assumptions, including those described in our most recent MD&A and annual information form filed on SEDAR and EDGAR and is subject to risks and uncertainties that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information. Forward-looking information provided during this call speaks only as of the date of this call and is based on the plans, beliefs, estimates, projections, expectations, opinions, and assumptions of management as of today's date. There can be no assurance that forward-looking information will prove to be accurate, and you should not place undue reliance on forward-looking information. We disclaim any obligation to update any forward-looking information or to explain any material difference between subsequent actual events and such forward-looking information except as required by applicable law. In addition, during the course of this call, we may have referred to certain non-GAAP measures and ratios including, but not limited to adjusted net earnings, adjusted net earnings per share or adjusted net EPS, adjusted EBITDA, adjusted funds from operations, and divisional operating profit. There is no standardized measure of such non-GAAP measures. Consequently, our method of calculating these measures may differ from methods used by other companies and therefore may not be comparable to similar measures presented by other companies. For more information about forward-looking information and non-GAAP measures, including a reconciliation of non-GAAP financial measures to the corresponding GAAP measures, please refer to our most recent MD&A filed on SEDAR in Canada and EDGAR in the United States and available on our website. Thank you, and that concludes today's call.

Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.