Earnings Call Transcript - AQN Q3 2020

Operator, Operator

Thank you for standing by. This is the conference operator. Welcome to the Algonquin Power & Utilities Corp. 2020 Third Quarter Earnings Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.

Amelia Tsang, Vice President of Investor Relations

Thank you. Good morning, everyone, and thanks for joining us this morning for our 2020 third quarter earnings conference call. My name is Amelia Tsang, and I'm the Vice President of Investor Relations of Algonquin Power & Utilities Corp. Presenting on the call today are Arun Banskota, our President and Chief Executive Officer; Arthur Kacprzak, our Chief Financial Officer. Also joining us this morning for the question-and-answer portion of the call will be Jeff Norman, our Chief Development Officer; and Johnny Johnston, our Chief Operating Officer. To accompany our earnings call today, 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. Before continuing the call, we would like to remind you that our discussion during the call will include certain forward-looking information, including but not limited to our expectations regarding future earnings and capital expenditures, as well as potential future impacts of COVID-19. We will also refer to certain non-GAAP financial measures, and at the end of this call, I will read a notice regarding both forward-looking information and non-GAAP financial 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 our call this morning, Arun will provide an overview of the strategic achievements for Q3 2020, Arthur will follow with the Q3 financial results, and then Arun will conclude with an update on our strategic plans for the business. We’ll then open the lines for questions, and I ask that you restrict your questions to two and then re-queue if you have any additional questions to allow others the opportunity to participate. Before we turn over to Arun to discuss our progress in Q3, we will have Chris Jarratt make some farewell remarks. Chris?

Chris Jarratt, Co-founder

Great. Thanks, Amelia. Before we start the formal part of the presentation, I'd just like to say a few words to all the analysts and investors who are on this call. As previously announced, I will be retiring at the end of this month, and today will be the last time I'll be on these calls. As a co-founder of the organization, I've had the honor of serving employees, investors, and customers for the past 32 years. I have to tell you it's been an incredible journey to be part of growing a company from a single-room office above a convenience store into a $12 billion asset-rich company, which we are today.

Arun Banskota, President and CEO

Thank you, Chris, and good morning to those who've been able to join us on the call and online. Our diversified business model delivered stable results, and I'm pleased that we had a strong third quarter amid the disruptions due to the global pandemic, reporting Q3 adjusted net earnings per share of $0.15 compared with $0.14 per share last year. Looking at our regulated services group, we are a business providing mission-critical energy and water services to our customers. We continue to perform well, both from a financial and operational standpoint as we navigate through the impacts of COVID-19. Given the resiliency of our business model, the Company has been able to provide uninterrupted utility services since the onset of the pandemic without compromising the safety and quality of those services. As expected, given the changing consumption patterns of our customers, we have seen some moderate decreases in customer demand across some of our utilities, impacting our third quarter adjusted net EPS by $0.01 and bringing the year-to-date effect of COVID to $0.02 per share. We have been able to offset the decline in operating profit by implementing cost containment strategies that year-to-date have provided $18 million of savings, already above the $50 million we had committed for the year.

Arthur Kacprzak, Chief Financial Officer

Thank you, Arun, and good morning, everyone. In the third quarter of 2020, our business operations performed well amid the COVID-19 pandemic.

Arun Banskota, President and CEO

Thanks, Arthur. Before we close out our prepared comments this morning, I want to give an update on our growth initiatives. We'll then open the lines for the question-and-answer period. We remain committed to our strong track record of growth with many different levers at our disposal. We remain on track for our five-year $9.2 billion capital plan through the end of 2024. In fact, we plan to exceed that with our newly announced accretive investments in ESA. In our regulated services group, we have a successful track record of acquiring utilities and possess a very specialized skill set for integrating them into the Algonquin family. We recently completed two acquisitions, BELCO and ESA. The acquisition of Newer American Water is expected to close in 2021. In addition, we have smaller organic tuck-in opportunities in existing areas of our operations that contribute to our customer growth each year. All of these acquisitions over the years have allowed us to reach our latest milestone of 1 million customer connections. Another lever of growth, as we transition to low-carbon energy, is our greening of fleet initiatives, including our customer savings plan, where construction in the Midwest continues to be underway, and we will look for similar opportunities in Bermuda. In addition, we expect to realize strong rate base growth from our organic investments as we improve the safety and reliability of our infrastructure. In our renewable energy group, we also have many growth levers, including our ability to execute on the Company's largest construction program in our history. I wanted to provide you with a couple of project updates. Our major renewable energy construction projects are considered to be essential infrastructure in the jurisdictions in which they are located. Therefore, construction has proceeded throughout the COVID-19 pandemic. At the end of the last quarter, we had approximately 1,600 megawatts of renewable energy projects under construction. Since that time, nearly 275 megawatts have been placed in service, with a further 850 megawatts expected to be placed in service by year-end, including 380 megawatts from our Midwest customer savings plan. I'm pleased to report that the Great Bay 2 solar facility located in Southern Maryland and the Sugar Creek Wind facility located in Illinois have both achieved full commercial operations. The Sugar Creek Wind facility consists of 57 wind turbines and has a total capacity of 202 megawatts. We completed the project on time and under budget, with no lost time injuries, all despite the extraordinary circumstances surrounding the global pandemic of 2020. Our 492-megawatt Maverick wind project located in Texas is advancing well, with 110 of 127 turbines installed and the main energy buyers being General Mills and Kimberly Clark. This leads to another lever of our growth as Algonquin remains very well positioned in the commercial and industrial space, where important long-term customers are supporting renewable growth as they seek to achieve their own sustainability goals. The last growth lever that I'd like to touch on is our significant focus on greenfield development, which allows us to efficiently identify high-quality greenfield sites and advance those sites through the development process. Our investment in development staff and tools has produced a robust pipeline of greenfield development projects that we look forward to discussing in more detail at our upcoming Investor Day. These multiple levers of growth that I've described both in our regulated services group and renewable energy group differentiate Algonquin from our peers and provide us with high confidence in our ability to execute on our five-year capital plan year after year. In summary, our three strategic pillars of operational excellence, growth, and sustainability will be key foundations as we continue to build a business and bring long-term value to our shareholders. We remain well positioned to continue to execute on our growth strategies while pursuing our sustainability goals, guided by maximizing operational excellence on behalf of our investors and customers. Before we open the line for questions, I would like to highlight that we will be hosting our annual Analyst and Investor Day on Monday, December 14. Due to COVID-19 restrictions, this year's Investor Day will be a virtual event. As always, we will provide the investment community the opportunity to hear from key members of the leadership team for an update on our operations, strategic direction, and future growth plans for APUC. We hope you'll be able to join us virtually. With that, I will turn the call over to the operator for any questions from those on the line.

Operator, Operator

Thank you. We will now begin the question-and-answer session. Our first question comes from Sean Stewart of TD Securities.

Sean Steuart, Analyst

A couple of questions. Arun, I'm wondering if you can discuss the legislation in New York in more detail. And how this might affect the thinking around the proposed acquisition of New York American Water?

Arun Banskota, President and CEO

So, the legislation has recently come out, and we're obviously digging into a lot of details. At first glance, our conclusion is that it's primarily geared towards the emergency response and storm response from the utilities in the state. There are also provisions for increased fines and penalties that the commission can impose on the regulated utilities. Additionally, there is a provision in the bill for a study on municipalization. From our perspective, we welcome this kind of public debate and discussion. At the end of the day, we believe we are best positioned to provide those essential water services to the customers of New York American Water, and we are looking forward to engaging with all of the stakeholders as we go through this process. We still remain confident that, at the end of the day, we will be able to close this transaction in 2021, and we remain very engaged with the commission and other stakeholders in the state currently.

Sean Steuart, Analyst

Okay. Second question is for Arthur. The tax credit tailwind this quarter related to the PTCs and ITCs. Can you give us a sense of which projects were wrapped up in that number? And I guess, just trying to gauge how we should think about that line item going forward, maybe Q4 and into early next year as well?

Arthur Kacprzak, Chief Financial Officer

Yes, sure. So, it might be useful to provide a little bit of context on how we think about the sub-monetization of our renewable energy project. As we mentioned before, you can view sub-monetization as a complement to exercise maximum value out of our projects as a part of our tax equity strategy. On our wind projects, for example, the projects are placed in service, as you know, not all at once, but sequentially. However, tax equity only funds whenever all the projects have been fully commissioned. There is typically about a couple of months lag between when the first turbine gets commissioned and starts generating tax credits and when we can actually get the tax equity funded. So that's a perfect opportunity for us to be able to utilize some of our internal tax appetite and monetize some of those tax credits. We also look at smaller projects or projects where tax equity may not be the most efficient choice. So to answer your question regarding the projects, it basically includes all of the projects that we're commissioning this year. We're commissioning a total of about 1.4 gigawatts of renewables, so there are plenty of opportunities to monetize PTCs, along with some solar projects that were also monetized this year.

Operator, Operator

Our next question comes from Nelson Ng of RBC Capital Markets. Please go ahead.

Nelson Ng, Analyst

My first question relates to the Chilean Water acquisition. Will you be doing anything different at the Company in terms of capital projects that you didn't pursue that you're now looking to revisit? Can you also comment on the drought situation in Chile and how that opens up any potential opportunities? Lastly, how all that translates to your expected rate base growth for that investment?

Arun Banskota, President and CEO

Sure, Nelson. Primarily, we remain focused on North American energy and water companies. When this transaction opportunity became available, we really analyzed it because there are many aspects we like about it. Water utilities are not easy to come by, and acquiring one with a significant number of customer connections is a rare opportunity. We conducted extensive analysis around country risk, and Chile has a solid country risk profile with a strong and stable regulatory environment. Finally, the transaction price was very compelling. We are confident in our ability to acquire and integrate utilities. We believe this is one of our special skill sets, and that's a process we're going through right now in terms of integrating ESA into our overall mix and operational excellence. In terms of how that affects our capital plan, we remain committed to our $9.2 billion five-year capital investment plan, and ESA will indeed be an addition on top of that $9.2 billion plan.

Nelson Ng, Analyst

Okay. And then this might be a preview to the Investor Day. In terms of your renewable development side and the development pipeline, can you update us on how much PTC qualified wind turbines and ITC qualified solar equipment you have in potential opportunities for funding future projects?

Jeff Norman, Chief Development Officer

Yes. Hi, Nelson, it's Jeff. We have been very active, as you know, for years in terms of identifying and securing PTC qualified equipment. Going back to 2016, we secured about $56 million worth of equipment to fund the 100% PTC program that we're now seeing returns from. We have transferred much of that effort into the transformer process last year and this year, and we are in the process of securing safe harbor for our five-year pipeline between what we've done in the past and what we will be doing before year-end.

Nelson Ng, Analyst

Okay. What are your thoughts on any potential extension of tax credits under a potential Biden government? Does that help or hurt what you might potentially have already secured?

Jeff Norman, Chief Development Officer

Yes. I think it's too soon to tell what a Biden government is going to do, though it should clearly be good for renewables in one way or another. The benefit of using transformers as a significant aspect of our qualification is those transformers will be used no matter what, whether we use them for qualification or as critical components of the projects that we're going to be building. So, we see a lot of upside, but no downside.

Operator, Operator

Our next question comes from David Quezada of Raymond James. Please go ahead.

David Quezada, Analyst

My first question here, just wondering if you could provide us an update on where you are with the update or the appeal of the rate order in Missouri; just any recent thoughts there? And maybe if you could mention whether you think you have the time now to go through with an appeal before you go back in for rates in Missouri?

Arun Banskota, President and CEO

Yes. Thank you, David. One of the things we have appealed is against the equity thickness that was given to us. We believe we have a strong case for a larger equity thickness, and we have appealed that decision. That process is ongoing, and we will evaluate where it stands in terms of timing with our next rate case, which will probably be sometime in 2021 in Missouri.

David Quezada, Analyst

Okay, great, thank you for that. Then maybe just another question on cost savings. You've done quite well, and it looks like you're on pace to materially exceed your target. Is there anything particular that drove that? Any bucket that you could point to?

Arthur Kacprzak, Chief Financial Officer

Yes. Maybe I'll start off with this one, and I'll let John add because his team has been doing all the hard work with respect to finding all the cost savings. If you think about the cost savings, we've saved about $18 million so far this year, and we're probably looking to save another 5 to 10 next year. We think about it as broken down into three categories: our expenses that would have naturally been saved anyway, such as lower travel expenses; the second being deferrals like holding positions open; and the last bucket is really focused on looking for efficiencies, including our procurement processes and where we deploy capital. So, those three buckets account for the cost savings we've achieved.

Arun Banskota, President and CEO

John, do you want to add some additional context?

Johnny Johnston, Chief Operating Officer

Yes, thank you, David. In some ways, there’s not much more to add other than that, given the challenges we faced with weather in the first quarter, we were already mobilizing how we could counteract that for the remainder of the year. The onset of COVID only heightened our focus across the team to ensure we addressed all possible cost-saving opportunities for the rest of the year. The results we’ve seen are a testament to that proactive approach, but as you mentioned, Arthur covered well where the savings are coming from.

Operator, Operator

Our next question comes from Julien Dumoulin-Smith of Bank of America. Please go ahead.

Julien Dumoulin-Smith, Analyst

And again, congrats, Chris. Thanks for the time and opportunity. I just wanted to talk to you about growth trajectory and thoughts around it. Obviously, hearing you talk very confidently about the CapEx outlook. How does that translate back to the 9% to 11% growth that we’ve talked about off a 2019 basis of $0.62? How are you thinking about that CapEx relative to the earnings trajectory you had last year? Because it sounds like everything is reaffirming the trajectory despite some challenges here. I just want to understand how you're thinking about that, and then potentially even more, as you've alluded to. I know you have an Analyst Day around the corner, but just trying to get a little bit of a preview on the earnings implications too.

Arun Banskota, President and CEO

Yes, Julien. I was hoping you'd ask me that question during Investor Day, but let me give you a preview in any case. There were one-time downsides we faced this year, such as COVID and weather. The COVID impact was completely unanticipated. On BELCO, there was a statutory requirement to close by March 1 that was part of our original assumption. The delay certainly impacted the financials. However, what we provided to the market was a five-year 9% to 11% CAGR growth, and we remain confident we'll be able to bounce back in 2021. Again, I look forward to providing a lot more details during the Investor Day.

Julien Dumoulin-Smith, Analyst

Absolutely. If I can follow-up on that, perhaps a little bit nearer term. As you think about that trajectory, the 9% to 11%, should we still think about being able to achieve that trajectory off the 2019 base in '21? Obviously, there are moving factors in '20. You alluded to a second ago, including some newfound cost savings in the back half of the year here. So, just curious how the sustainability of those efforts play into '21, and ultimately, if that’s a good proxy for guidance?

Arun Banskota, President and CEO

For now, Julien, I would maintain that analysis of that 9% to 11% CAGR growth. As you noted, there are various moving parts with the cost savings. We also acquired ESA, which is not part of that five-year plan. With all that in mind, we believe we’re getting back on track in 2021. But again, those are all the details we'll dive into during the Investor Day.

Operator, Operator

Our next question comes from Rob Hope of Scotiabank. Please go ahead.

Rob Hope, Analyst

Maybe just to start on your international strategy. It seems you have now purchased an option to buy the rest of Aegis. How are you thinking about the structures you have in the organization to facilitate this international growth? We've seen you do some potential international renewables on your own balance sheet. ESSAL was on your own balance sheet. How do Atlantica and Aegis fit into the current structure?

Arun Banskota, President and CEO

Sure. Great question. Thanks, Rob. By and large, we plan to do all regulated utilities and North American business through Algonquin. We're very happy with our investment in Atlantica, which features very strong long-term assets with a weighted average mine life of 18 years. We see value in having international non-regulated assets, but we evaluate each on a case-by-case basis as to whether it makes more sense for Algonquin to manage it or Atlantica. So really, it depends on the project. Generally, everything in North American regulated business will fall under Algonquin's operation.

Rob Hope, Analyst

All right, perfect. And circling back on the tax question, how should we think about those $15 million of incremental tax benefits? Will those be realized in Q4, and are you essentially realizing future tax savings?

Arthur Kacprzak, Chief Financial Officer

Yes, of course. The answer to your first question is yes. The $50 million will apply to projects that will have been placed in service this year. As for shifting tax liabilities, I would say no. When we monetize some of the assets, you can get greater shifts, but it is true tax savings for us. So, on an equivalent basis, it's not like we're delaying our tax liability to future years.

Operator, Operator

Our next question comes from Rupert Merer of National Bank. Please go ahead.

Rupert Merer, Analyst

Congratulations, Chris, on your retirement and success at Algonquin.

Chris Jarratt, Co-founder

Great. Thanks, Rupert.

Rupert Merer, Analyst

Maybe if I could start with just a follow-up on Aegis. How should we think about your partnership with Abengoa going forward? Are there any changes to the ownership in Sugar Creek now that it has been completed? I believe it was acquired by Aegis.

Arun Banskota, President and CEO

Yes, sure, Rupert. It's public knowledge that Abengoa has been a challenging partner. The whole market knows the restructuring and other challenges they are going through, therefore Aegis has been a challenging vehicle for us. Nonetheless, there are several development projects that Aegis encompasses, including a pipeline of solar development and greenfield projects in Spain. Last year, we acquired a 20-megawatt solar project in Colombia, which is under construction and is expected to come online in Q1. There are other projects in Latin America that we are following. I admit that Abengoa has not been the most effective partner for us.

Rupert Merer, Analyst

If you were to buy out Abengoa's interest in Aegis, what might that look like for the future? And what are the implications for some of the other development projects?

Arun Banskota, President and CEO

We would turn Aegis more towards an international development pipeline. We have a very strong development team that covers regulated and everything in North America. Aegis was initially intended as that vehicle, but we would look to reposition it, strengthen it, and create a more robust pipeline of development projects, similar to our North American approach.

Rupert Merer, Analyst

Based on your earlier comments about the non-regulated business and assets in North America, would we anticipate development projects ultimately being held at the Algonquin level?

Arun Banskota, President and CEO

Aegis is primarily a development vehicle. Where those development projects are actually held and operated is a choice we have, whether that's with Algonquin or Atlantica. However, our main focus is that everything within North America, and all regulated operations, will remain under Algonquin.

Jeff Norman, Chief Development Officer

The only other thing I'd add is that we maintain an option regarding Sugar Creek, as we do on other construction projects. We anticipate acquiring 100% ownership within Algonquin now that we have completed construction on that project.

Rupert Merer, Analyst

Great. Just quickly on the CSP wind farms. You've got some progressing to COD quite soon. Can you remind us what the impact will be on your reported results when those hit COD and what the impact of plant and service accounting may be?

Arun Banskota, President and CEO

A lot of that should come online by the end of this year. Due to COVID-19, we faced global supply chain challenges, but we remain confident there will not be any material delays. We are optimistic about getting all the turbines online in Q1 of next year.

Operator, Operator

Our next question comes from Mark Jarvi of CIBC Capital Markets. Please go ahead.

Mark Jarvi, Analyst

Happy Retirement, Chris. Just following up on Rupert's question. Previously, I think you mentioned you would file around year-end to recover investments for the wind in the rate base at Empire for midyear. Is that still the plan? Perhaps you could return to his question about plant services accounting and recovery?

Arun Banskota, President and CEO

Sure, Mark. We elected for Plant in Service Accounting, which gives us flexibility in terms of when we need to file for a rate case in Missouri. ESA allows us to place it on our rate base as plants come into service. Johnny, would you like to add more detail?

Johnny Johnston, Chief Operating Officer

Yes. As the plants go live, we're able to effectively true-up at the next rate case, 85% of the depreciation from the dates they go into service. As you mentioned, we're looking to file our next rate case early next year, once the plants are all operational. We'll see them fully represented in rates as they go into service in 2022.

Mark Jarvi, Analyst

So there will be some regulatory lag in recovery a little bit on earnings?

Johnny Johnston, Chief Operating Officer

Correct. We’ll be able to track 85% of it as soon as they come online, but the new rates will become effective in 2022.

Mark Jarvi, Analyst

And is there any comment on-site contributions?

Arthur Kacprzak, Chief Financial Officer

We'll start recognizing it as they are on our balance sheet.

Mark Jarvi, Analyst

Now that BELCO is closed, can you give us a bit more of an update at Investor Day regarding the implementation of the IRP and the timeline for investments to grow the rate base at BELCO starting in 2021?

Arun Banskota, President and CEO

Yes, Rupert, thanks for that question. As you know, we just closed the transaction. Due to COVID-19, our engagement level was not as high as we would have liked. In fact, Johnny and some of our other team members just returned from Bermuda. We're restarting that conversation with the government. They would like investments sooner rather than later. We have proposed some greening the fleet initiatives, and we see significant opportunity for those initiatives, given the high cost of electricity on the island and how much is still generated by diesel. We hope to structure something in the 2021 timeframe.

Operator, Operator

Our next question comes from Ben Pham of BMO. Please go ahead.

Ben Pham, Analyst

Can you provide a bit more context on Granite Bay? How much have you spent on it so far that you plan to recover?

Arun Banskota, President and CEO

Sure. Granite Bay was a project that included a pipeline with an LNG storage facility. We invested significantly in developing that facility, but ultimately pipeline capacity became available that wasn't there previously. We want to ensure that we make the best investment for our customers. We've essentially formed that long-term pipeline capacity, but the original Granite Bridge project will not remain the same scope. However, we do see opportunities for investment to improve the system's reliability and capacity.

Johnny Johnston, Chief Operating Officer

Yes, Arun, I would just add that the option provided us with leverage to meet our customers' growing needs through the LNG pipeline while creating additional value for our customers. We're getting positive feedback regarding the value we’ve created and will need to implement resilience investments to facilitate growth in capacity from the pipeline.

Ben Pham, Analyst

Can I go back to the tax questions? I hope I don't complicate things further. Just wanted to confirm, is tax accrual related to your past guidance around becoming a tax acute investor yourself because your corporate tax rate is going up? Or is it accruing ahead regarding the share of tax equity investors?

Arthur Kacprzak, Chief Financial Officer

Yes, it is related to us becoming our own tax equity investor. We are not currently a cash taxpayer, but expect to become one in a few years. To some extent, this means we are taking on tax attributes that we will use over the next two to three years.

Ben Pham, Analyst

That makes sense. When you’re monetizing that yourself while becoming an investor, was that always in your CapEx plan and financing outlook, or do you have to adjust that going forward?

Arthur Kacprzak, Chief Financial Officer

We consider it opportunistically, again to optimize around our tax equity investments. So, yes, it forms a portion of our plan. But we also think about it in response to shifting circumstances like knowing the lag between when the first turbine is commissioned and when tax equity ultimately funds.

Ben Pham, Analyst

Okay, rounding off a bit here. When you first introduced this aggressive strategy a few years back, you mentioned your tax rate could be around 5% or so, but you moved up to 10% in the last Investor Day. So, is this accrual of tax credits bringing you back to that 5% level or is the 10% still reasonable moving forward?

Arthur Kacprzak, Chief Financial Officer

Yes. In the near term, the self-monetization situation does push our tax rate down. If we don't self-monetize anything in the coming year, I think the Investor Day guidance still holds fairly well.

Operator, Operator

Our next question comes from Richard Sunderland of JP Morgan. Please go ahead.

Richard Sunderland, Analyst

To start with the Chile acquisition, could you provide some color on the environmental issues that the assets have faced, along with risks and opportunities surrounding them under your ownership moving forward?

Arun Banskota, President and CEO

Sure, Richard. During our due diligence, we thoroughly examined those issues, including some rainwater spills that have occurred. Our diligence focused on whether there’s something fundamentally broken or if these are one-time issues that can be fixed. In the end, we determined that by strengthening the culture of safety and reliability within ESA, we can get the company back on track and avoid incurring those kinds of incidents in the future. Those past issues have affected ESA’s reputation and the community’s perception. We recognize the road ahead requires significant effort, but we are confident that, due to our commitment to operational excellence, we will restore the company.

Richard Sunderland, Analyst

Great. As for the dividend, any updated thoughts on the policy given the elevated payout ratio this year? We appreciate the one-off impacts on 2020, but how should we think about this going forward?

Arthur Kacprzak, Chief Financial Officer

Yes, Richard, I’ll take that one. Your observation about our payout ratio being higher than that of our U.S. and Canadian peers is correct. That said, we do have a third of our business based on IPP, so we aren't a pure utility. I’ll share more about our dividend growth on our Investor Day. For now, it’s important to note that we consider dividend growth to be a significant part of the total shareholder return we provide.

Naji Baydoun, Analyst

Going back to the cost savings initiatives, Arthur, I appreciate the details on the three different savings buckets. How recurring do you believe those are, and can you maintain them into next year?

Arthur Kacprzak, Chief Financial Officer

It's certainly not zero, but it depends on what the new normal is. We have built in some efficiencies this year. However, variable items like locking in lower travel expenses are more dependent on circumstances.

Naji Baydoun, Analyst

Are there other potential savings you're looking to target next year as well?

Arun Banskota, President and CEO

We’re always looking for savings, for sure. Maximizing output with a given set of inputs is an ongoing focus for us, especially this year due to significant impacts on our EPS from BELCO delays, COVID, and weather factors; that’s something we are always aiming to optimize.

Naji Baydoun, Analyst

Could you remind us about any major filings you expect to complete next year, besides the Empire rate case?

Johnny Johnston, Chief Operating Officer

The biggest filings next year will be the Empire rate case. In the middle of our Energy North rate case at the moment, we have a couple of smaller filings we’re looking at but none on the same scale as Empire's case.

Operator, Operator

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Banskota for closing remarks.

Arun Banskota, President and CEO

Thank you, operator, and thank you, everyone, for taking the time on our call today. With that, please stay on the line for our disclaimer.

Amelia Tsang, Vice President of Investor Relations

Thanks, Arun. Our discussion during this call contains certain forward-looking information, including but not limited to our expectations about future earnings, potential future cost savings, placed-in-service dates, and potential future impacts of COVID-19. This forward-looking information is based on certain assumptions, including those described in our most recent MD&A filed on SEDAR and EDGAR and available on our website. It is subject to risks and uncertainties that could cause actual results to differ materially from historical results or from results anticipated by this forward-looking information. Forward-looking information provided during this call speaks only as of the date of this call, based on management's plans, beliefs, estimates, projections, expectations, opinions, and assumptions. There can be no assurance the forward-looking information will prove to be accurate, and you should not place undue reliance on it. We disclaim any obligation to update any forward-looking information or to explain any material differences between subsequent actual events and such forward-looking information, except as required by applicable law. In addition, during this call, we may have referred to certain non-GAAP financial measures, 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 these non-GAAP financial measures. Consequently, APUC's method of calculating these measures may differ from methods used by other companies, and therefore they may not be comparable to similar measures presented by other companies. For more information about both forward-looking information and non-GAAP financial measures, including a reconciliation of non-GAAP measures to the corresponding GAAP measures, please refer to our most recent MD&A filed on SEDAR in Canada or EDGAR in the United States and available on our website. Thank you.

Operator, Operator

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.