Hello and welcome to the Algonquin Power & Utilities Corp. First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. I will now turn the conference over to Mr. Brian Chin, Vice President of Investor Relations. Please go ahead.

Thanks, and good morning, everyone. Thank you for joining us on our first quarter 2024 earnings conference call. Speaking on the call today will be Chris Huskilson, Chief Executive Officer; and Darren Myers, Chief Financial Officer. Also joining us this morning for the question-and-answer portion of the call is 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, algonquinpower.com. Our financial statements and management discussion and analysis are also available on the website, as well as on SEDAR+ and EDGAR. We would like to remind you that our discussion during the call will include certain forward-looking information and non-GAAP measures. Please note and review the related disclaimers located on Slide 2 of our earnings call presentation at the Investor Relations section of our website at www.algonquinpower.com. 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, Chris will provide a business update, including brief comments on the Company's strategic transition and renewable sale. Then Darren will review key highlights pertaining to our regulated and renewable business groups and our first quarter financial results. We will then open the lines for a question-and-answer period. We ask that you kindly 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 Chris.

Thank you, Brian, and good morning, everyone. Before we jump into quarterly results, let me address our leadership announcement included in our press release. It's an honor to be appointed as permanent CEO of Algonquin. It's an exciting time to lead the company. After serving as interim CEO for the last nine months, I'm more convinced than ever that we are on the right path. I see opportunity throughout the business to improve our consistency and profitability as we look to successfully execute on the sale of our renewables business and elevate our utility platform. 2024 will no doubt be a year of transition. As we execute on the sale of the renewables business, the company, for the first time, will be focused on a single regulated business model to create value. Algonquin is in a unique position to capture cost improvements through simplification and better execution while continuing to serve our customers. This is a key reason why I've agreed to accept this role. I'm excited to help Algonquin capture that opportunity, create long-term value and ultimately become the premier mid-cap regulated utility platform in North America. I'd also like to touch on recent and upcoming changes to our Board. We are pleased to welcome Brett Carter, who most recently worked at Xcel Energy as Group President of Utilities and Chief Customer Officer; and nominee Chris Lopez, the outgoing Chief Financial Officer of Hydro One. Each of these individuals brings seasoned regulated utility experience and senior leadership capabilities to the company. Their past experiences and insights will complement the strengths of the current Board of Directors and support Algonquin's ongoing strategic transformation to the pure-play regulated utility. These developments reflect our recently signed cooperation agreement with Starboard in which they proposed Board nominees. Our Board reviewed the nominees and agreed that Brett Carter and Chris Lopez were exceptional additions. We believe these developments reflect our appreciation of investor dialogue, our receptivity to stakeholder input and our decisiveness. In further news, Ken Moore, the current Chair of the Board, has announced his intention to retire and not stand for reelection. And as part of the company's ordinary course nomination cycle, current Board member, Masheed Saidi also indicated she does not intend to stand for reelection. We thank Ken and Masheed for their commitment, dedication and leadership during the respective 14 and 10 years of distinguished service to the company. I personally worked with Masheed since 2005 and Ken since 2009. Masheed and I worked on transmission projects in New England and Ken and I helped to make the Emera Algonquin relationship a success for both companies. I will miss each of them on this Board. Let me now turn to our quarterly update with a few brief comments before handing the call over to Darren. In the first quarter, we continued our efforts to simplify the business and transition towards a pure-play regulated strategy. Our renewables business ended the quarter on target, and we continue to make progress on the renewable sale. Our timetable for sale continues as we expected. As I've said in the past, no news is good news. Moving to our Regulated Services Group, we are pleased that our regulated net utility sales and divisional operating profit organically grew year-over-year. That said, one of my initial key priorities has been to focus on the Regulated Services Group as a stand-alone business. We are making strides here, including simplifying how we operate the business, having recently rolled out the last leg of our enterprise IT platform. But we have plenty more work and opportunity as we raise up our utilities within Algonquin. With the SAP system rollout, we are positioned to focus on the cost structure of the business and continued service to our customers. In the coming quarters, this will become the primary focus for the business. Lastly, it was also a busy quarter on the capital markets front, having closed financings with a value of approximately $2.3 billion. This is the largest non-M&A related quarterly financing in the company's history. We are extremely pleased by the investor interest and confidence in the company and the momentum of our actions to create long-term value for our shareholders. And with that, I'll turn things over to Darren for an update on the business.

Thank you, Chris, and good morning, everyone. I'll start with the Regulated Services Group. In the midst of our ongoing transition, we remain steadfast in our commitment to our customers to deliver utility services in a safe and reliable manner. We are pleased to announce Liberty is the recipient of the 2023 American Gas Association's Employee Safety Award for medium-sized combination utilities in the United States. We have now been awarded this honor for the third time in four years. Moving to our operation. I'm pleased to say that we've now completed the rollout of our enterprise-wide technology system. This system called Customer First, will enable us to run the organization on a single integrated platform, provide better service for our customers and allow us to gain more insight into our business and performance. Like many others that have gone through major system implementations, it will take time to leverage the capabilities and adjust our organization and processes. We are at the normal part of the curve where we are spending more to run the system, but we are confident we will continue to see improvements in that over the long-term, this will provide a competitive advantage for Algonquin. Turning now to an update on regulatory proceedings. During the first quarter of 2024, new rates became effective at our Empire Electric Utility in Arkansas following an order approving the settlement agreement authorizing a revenue increase of $5.3 million late last year. In the quarter, we also filed $36 million in revenue requirement increases adding to an already busy regulatory slate. Our Regulated Services Group currently has pending 15 rate reviews. Our Liberty Utilities pending rate request totaled $129.4 million at the quarter end. This quarter represents the most active concurrent rate case period in the company's history. While we are not going to provide our overall earned ROE at this moment, we note that our active rate case schedule, combined with the investments we've made on our customers' behalf, has caused our earned ROE lag to increase by roughly 20 basis points to 30 basis points over the same period last year. Turning now to an update on our Renewable Energy Group. In alignment with our goal of simplifying the business, we wound down our renewables development joint venture and monetized our interest in three small solar development assets in Spain. We also purchased the remaining 50% equity interest in the Sandy Ridge II Wind Facility, representing an increase of 44 megawatts to our net economic ownership. As a minor update, we also sold our 100% equity interest in Windsor Locks, a 74.9 megawatt thermal facility in Connecticut for $17.7 million. The net effect is that at the end of the first quarter, we continue to hold 2.7 gigawatts of net economic ownership in our renewable assets. The next two major projects the construction group continues to develop are Carvers Creek and Clearview Solar, where site preparations and panel installation are well on their way. Turning to our financial results. Our performance reflects the transition year we are in. On a consolidated basis, our combined Q1 net utility and energy sales were $519.9 million, up 5.7% year-over-year. Adjusted EBITDA was $344.3 million, up slightly from the same period last year. Adjusted net earnings were $95.6 million compared to $119.9 million reported last year, a decrease of 20%. On a per-share level, our first quarter adjusted net earnings per share was $0.14, an 18% decrease year-over-year. Our adjusted net earnings per share was down $0.03 year-over-year as continued growth in our regulated business was offset by an expected decline in our renewables business which was primarily due to our simplification efforts and the wind down of our development joint venture. Breaking it down further, our regulated business grew by $0.02, primarily due to new rate implementations at several of the company's electric and gas utilities. Renewables declined $0.01 driven primarily by our planned consolidation of development venture activities, as we discussed on our last earnings call this past March. It's worth highlighting that our renewables business ended the quarter on budget. Rounding out our year-over-year adjusted net earnings per share performance, our depreciation increased by our typical run rate, lowering adjusted net earnings per share by $0.01. Our borrowing cost to fund growth netted against the planned reduction to minority interest expense lowered adjusted net earnings per share by $0.02 year-over-year. And finally, our tax credit recoveries returned to a more normalized level from last year, lowering adjusted net earnings per share further by another $0.01. Let me now provide an update on our capital markets activity. We had a very successful quarter on the capital front. We closed financings of $2.3 billion with the issuance of unsecured senior notes and securitized utility tariff bonds as well as the successful remarketing of our senior notes related to our green equity units. On average, our financings were 4x oversubscribed. We see these results as evidence that in the midst of our transition, investors share our view of a bright future for Algonquin. And finally, let me briefly comment on our near-term outlook. As stated before, this is a transition year for Algonquin, and as such, we have not provided guidance for the year. As a quick reminder for the second quarter last year, we had unfavorable weather across both businesses and a one-time CalPeco net earnings benefit of $11.2 million. And as for more recent activity, we're in the midst of one of the busiest rate case calendars we've ever tackled. This means rising depreciation and funding costs will continue to weigh on the regulatory lag until we reach constructive resolutions to more of our filings. We would like to thank our investors for your continued support as we transition the company and create long-term value for all of our stakeholders. With that, I will now turn the call over to the operator to open the lines for questions.

Ladies and gentlemen, we'll now begin our question-and-answer session. Thank you. The first question comes from Nelson Ng from RBC Capital Markets. Please go ahead.

Great. Thanks. Hey, Chris, congrats on your permanent role.

Thank you, Nelson. Good morning.

Yes. Good morning. So on that, I think you previously talked about staying on the CEO role as long as it takes. So I guess it will be a bit longer for you. But in the press release, it mentions that you'll be working on the Board for a kind of longer-term CEO succession plan. So I was wondering whether you can give some color on how the CEO search went and whether the company is waiting until it fully transitions into a utility pure-play to potentially start another CEO search.

Yes. Well, so we – I would say we won't be doing another CEO search. When I say succession, I truly mean succession as in we need to develop successors within and from without, if necessary, as well. And so it's not our intention to do another CEO search. So from that perspective, that's the way we're looking at it. And I guess at the end of the day, I think I've said before what the four criteria were. In the end, I think the Board just decided that things were going well and that I fulfill those criteria properly. And so here we are. But fundamentally, we haven't set any timeline. I'm very excited about this opportunity and to have the opportunity to continue the work that I was doing as interim CEO. But of course, we do need to develop a proper and appropriate succession plan, which the company doesn't have today. And so that's really going to be – that's what was referred to in the press release. And I'm just fundamentally committed to the business and committed to the success of this business.

Great. That's good to hear. And then the follow-up question was in terms of some of the asset sales that you guys announced, whether it's some small developments to Atlantica or selling Windsor Locks, can you just provide a bit more color in terms of, I guess, asset divestments and whether it – like things within the renewable sales process versus potential asset sales or other transactions outside of that process? Can you just clarify, like should we expect any other potential divestments outside of the renewable sales process?

Well, I think first of all, Windsor Locks was kind of held for sale for some time, and it just wasn't fitting in any of our future as a company. So that it's really kind of a unique sale process that we went through there. And in fact, I believe that the customer actually had a right of first refusal on that plant anyway. When it comes to the rest of it, it's no different than what we've been saying all along. We're focused on the renewable sale. That's what we're focused on. And we're also focused on making decisions and moving along with our investment in AI. So those are the two things that you can expect that we will move on over the next period. When it comes to the rest of the business, it's just too early to think about the status of the rest of the business and so on. We're really just focused on getting it up and running as a stand-alone rate business. And as I've said in my comments and I've said many times before, I see tremendous opportunity to make that business run better, to reduce the cost of that business and to make it more profitable and to serve our customers – continue serving our customers very well.

And Nelson, just as a reminder, the hydro assets as part of the renewable sale is something that we're selling separately, focus on the rest of the sale first and then the hydro assets.

Darren always needs to say that because I always forget.

All right. Thanks for the clarification. I'll leave it there and come back in the queue.

Thanks, Nelson.

The next question comes from the line of Rupert Merer from National Bank. Please go ahead.

Hello. Good morning everyone and congratulations, Chris.

Thank you very much, and good morning.

So recently, we've seen strong interest in power markets with anticipated demand growth across North America and part of that is from data demand. Are you seeing this interest show up in your asset sales process or in your renewable development pipeline? Has it changed the dynamic in those processes over the last couple of months?

Well, at the end of the day, I think, as I said earlier, no news is good news on the process itself. But as it relates to the development pipeline, certainly, we're continuing to see strong demand. And in fact, we do have over 8 gigawatts of development pipeline in operation now, and it continues to be very successful. And so we're excited about how that is unfolding, and we're excited about how others will look at that as they evaluate our assets. I don't know, Jeff, is there anything you want to add to that?

No, I think I would just reinforce, Chris, that yes, over the last couple of months, as you pointed out, Rupert, things continue to be strong. And so we continue to make progress on the projects within the pipeline and particularly those later stages in the pipeline.

So if you look at that same dynamic and now maybe focus on the regulated utilities, so if I look at the market, the power demand is broadly expected to grow by 5% per year or thereabouts. Are you looking at your regulated jurisdictions as having a similar rate of growth? Is that where the growth is going to keep pace with what we see in North America? And where is that growth coming from? Is data the main driver for you in your regulated utilities? Or is the growth going to come from reshoring or any other drivers?

Well, I think it's all of the above. I mean the whole electrification process that's going on is really what's driving growth. And we are beginning to see traction on the growth side. For the first time in a long time, we've actually put growth in our regulated kilowatt hour numbers. And the other thing that we're seeing is we're also seeing people moving to some of the territories where we are as they move out of concentrated areas like cities and so on. So there's a number of factors that are going into growth. And as I say, we're beginning to see growth for the first time in quite a long time.

So do you think you can keep pace with the growth rates in North America?

Well, we're hopeful about that, right? At the end of the day, as I said, we're just starting to see it materialize. And so we're hopeful that it will materialize as it is everywhere. But electrification is going to be a long-term trend. And that long-term trend is going to drive growth in all of the businesses.

And some investors are really looking for exposure to data centers. Do you have any data center movement in your areas?

I would say at this stage, that's not a major source of our growth. But we're seeing just primarily from normalized electrification.

Okay. Very good. Thank you very much.

Okay. Thank you.

The next question comes from the line of Rob Hope from Scotia Bank. Please go ahead.

Good morning, everyone. And congrats, Chris. I want to follow up on the commentary in the prepared remarks just about cost containment and really focusing on normalized or reducing costs at the operating utilities. As you look through kind of your plan there, do you have a timeline of when we could start to see some results there? And are there any goals you could share with us, whether that would be on a million dollar basis or ROE bps?

Yes. I mean, our concentration up to this point has really been twofold, making sure that we had the organization in the right position to be able to go after its cost and to restructure the cost structure of the business. And secondly, to get the platform in place that will allow us to do that better. So it's a multiyear process. And as you can imagine, our focus has been on the renewable sale. It's been on ensuring that we are ready for that sale and that we're ready to separate the business and those kinds of things. But as we go into H2, you're going to start to see us focus on cost structure and using the system that we've now installed to create more efficiency and effectiveness in our business. So it's really just too early to quantify. But at the end of the day, just based on my experience and looking at it through those eyes, there's lots of opportunity there for us.

Thanks for that. And then just maybe moving over to the structure and the simplification. Is that now largely behind us and everything is ready for a sale? And I guess, maybe any great follow-up there would be, is that $6 million of corporate admin costs that were allocated to renewables. Is that a go-forward run rate?

Well, so yes, we're ready for the sale. We've specifically – I mean, the business is running as a business, and we've allocated employees to that business and created a perimeter around that business. And so yes, from that perspective, we're absolutely ready for the sale. I don't know, did you want to touch on the run rate?

Yes. So maybe – and also just follow-on that simplification is really at the company level, and it doesn't impact the sales process. We are trying to take steps to continue to simplify and make our results easier to understand, and we will continue to do that. I don't think there's anything like the development JV that we're looking at right now. And then in terms of the cost, yes, that's a reasonable run rate. This is what we've had as admin charges before. So we've also opened the disclosure trying to make sure you understand it's not a new cost for the business. It is the allocation of the corporate cost to it.

Thank you.

The next question comes from the line of Ben Pham from BMO Capital.

Hi. Good morning. Maybe first question is for Chris. I'm wondering now with your appointment, was there anything on your cabinet that now that you are permanent CEO that you can advance a bit quicker? And obviously, the renewable stuff is front and center. But was there – is there anything there that you can push or focus on over the near term?

Ben, I'm not really sure I understood the question.

Ben, I'd say from working with Chris, I don't think you've been holding back. I don't think the title change is going to make a difference, but...

Well, so I mean what – I understand that, what I said all along, Ben, was that I was not going to be a caretaker, and that we were going to act with pace. And so that doesn't change. At the end of the day, I think a little more certainty for the company as a whole, as in knowing who the leader is going to be is something that I think helps everybody because the less uncertainty is better than more uncertainty, that's for sure. And the fact that we are going to move into developing a complete succession plan for the entire company. So not just CEO succession, but succession across the company as we begin – when you think about it, the way that the company has run up to this point is that we've essentially done the business of the company centrally and the utilities have operated. What we're doing now is we're actually moving to a model where the utilities are the businesses and we're raising them up in the business. And so the skills and capabilities that will be developed and will exist in the field is going to be a lot stronger. And so we need to develop a succession plan across the entire company to facilitate that development and to continue to be more and more successful as a business being run that way. And so when I talk about succession, it's not just this role, it's the roles that are critical to really running this company better in the future. And so that's the story. So yes, I will be doing more of that, I would say, because we will have time to do that as the renewables process unfolds, but the pace won't change.

Okay. Understood. And I know you mentioned with the renewable sale process. No news is good news. Can you share – I think last quarter, you had the specific timeline end of Q2, I think you mentioned. Is that also still intact in the overall messaging?

Yes, we don't see any change in the timeline as we said. And that's to sign something and then targeting for a closure by the end of the year, as the original timeline.

And Ben, the comments we were making were roughly mid-year for that. And then later portion of 2024 or year-end thereabouts. So we did not give a hard deadline of Q2.

Yes. But nothing has changed. I think that's the primary point there.

Okay. Thank you.

Thanks, Ben.

The next question comes from the line of Mark Jarvi from CIBC. Please go ahead.

Thanks. Good morning, everyone. And perhaps, Chris, you talked about succession planning and building up the organizational strength, talked about need for improvements on the utility side. Do you need to make some hires there and build that up? And if so, what type of people would you be looking to bring in?

So at this point, I think we're actually pretty well positioned to do what we're planning to do. And so at the end of the day, we will work with the team that we have. And I think there's lots of good experience on the water side, there's lots of great experience on the gas side, there's lots of great experience on the electricity side out there. And it's more a matter of surfacing those people in the organization and giving them more autonomy and authority to act. And I think that's really what we're focused on right now. So it's not a boat hiring, it's about enabling.

And you haven't seen any churn, just given some intro to the company, you brought the point that now with the permanent CEO, that brings probably some stability there and good for culture. Has that been a drag on the business in terms of churn?

Yes. In large part, we've been very fortunate. And I think, obviously, the people in the Renewables group are probably the ones that see the most uncertainty right now. But I think they've been very excited by the opportunity to be able to continue to develop and grow their business, which we were holding them back. And so we've been very fortunate that we've been able to keep a very good and active staff through this whole time of uncertainty. I don't know, Jeff, is there anything you want to add to that? Or...

No, I think you nailed it, Chris, that's bang on.

That's good to hear. And just last question for me is just given where you are in your liquidity, balance sheet, the financing year-to-date and the power sale progressing largely than expected, do you think you'll be in a position to buy back shares within the next six to 12 months?

Mark, that's obviously all dependent on our goal – our target and everything we're doing is to make sure we're maintaining that solid BBB balance sheet. And so as the sale process concludes and depending on that price, we'll be looking at how much can we – do we need to invest in the business? Is there excess for buyback. So all that will be determined over the next little while.

Yes, it all depends on the proceeds and a few other factors. I believe those are the main influences on this.

If and when you announce a transaction, would you be in a position then to tell the market whether or not you had buyback capacity relative to your organic investment needs?

Yes. We definitely would plan to come to the market with a proper investor update towards the kind of end of the year or early next year. That is – we want to make sure we're being transparent in giving everybody the direction that we're going as a company.

Sounds good. Thanks for the time this morning.

Okay. Thank you.

Thanks, Mark.

The next question comes from the line of Sean Steuart from TD Cowen. Please go ahead.

Thanks. Good morning, everyone and congratulations, Chris. Just one question. When you're now able to really focus on long-term plans for the regulated platform, do you have any incremental thoughts on the platform you have now, you're spread across electricity, gas, water. Are there opportunities for valuation, optimization by potentially divesting chunks of that portfolio. And I appreciate you're going to want to ramp up investment in the organic rate base growth. But any broader thoughts on the current structure across the regulated platform?

Our focus right now is on the renewable sale. And as Darren keeps pointing out to me and the hydro sale a little bit later, so those are really where our focus points are. And at some point in the future, we'll continue to look at the evolution of the business overall, but it's just too early to have any kind of conversation about that.

Okay. That's all I have. The rest of my questions have answered.

Focus, focus, focus. We've got to stay focused on what we're trying to get done here.

Consistent messaging. Okay. Thanks very much, guys.

Okay, thank you.

As there are no further questions at the queue at this time, we will now conclude our question-and-answer session. I would like to turn the call over back to Mr. Chris Huskilson for brief closing remarks.

Okay. Well, as I said in my opening remarks, I'm very excited about taking on this opportunity for the longer term. And I also appreciate the support of all our shareholders and also appreciate the questions from analysts today. So thank you very much for participating and listening today, and we'll see you next quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.