Hello, and welcome to the Algonquin Power & Utilities Corporation First Quarter 2025 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. [Operator Instructions]. I will now turn the conference over to Mr. Brian Chin, Interim Chief Financial Officer and Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining us for our first quarter 2025 earnings conference call. Joining me on the call today will be Rod West, Chief Executive Officer; and Sarah MacDonald, Chief Transformation 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. Actual results could differ materially from any forecast or projection contained in such forward-looking information. Certain material factors and assumptions were applied in making the forecast and projections reflected in such forward-looking information. Please note and review the related disclaimers located on Slide 2 of our earnings call presentation at the Investor Relations sections of our website at 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, Rod will provide brief commentary on his first 60 days at Algonquin, followed by a review of key highlights and operational updates for the quarter. I will then detail our financial results. We will then open the line for questions. We kindly ask that you restrict your questions to two, then re-queue if you have any additional questions to allow others the opportunity to participate. With that, I'll turn things over to Rod.

Thank you, Brian, and good morning, everyone. Before I provide my opening remarks on the quarter and my first 60 days, I first want to acknowledge the heartbreaking incident that occurred on April 9 in Lexington, Missouri, within our gas service territory. As members of the community, our thoughts and prayers remain with the affected families whose lives have been devastated by the tragedy. Our hearts are with you. Nothing's more important to me and to this company than the safety of our customers, employees, and communities. We remain fully committed to working with the authorities to support the ongoing investigation into the cause of the accident and we will continue to work in partnership with the community on restoration and recovery initiatives. Moving now to my comments on the quarter, I'd like to start things off by thanking you for your interest in Algonquin, for continuing to support the company through this transformative journey, and for welcoming Brian and I into our new respective roles. It's been a busy first 60 days for me, having had the opportunity to meet with many of our stakeholders and visit several of our regional offices. My observations are consistent with the remarks I shared on the Q4 call. I see significant opportunity ahead, but there's still a tremendous amount of work to do. Algonquin has real potential to be a premium utility. We have solid, diversified asset base, and many talented and hardworking employees, but we have yet to consistently evidence the practices that set premium utilities apart from the rest. Some areas of improvement that come to mind include improving our customer outcomes first and community engagement, leveraging our economies of scale. I look forward to sharing more insights on our path forward. As promised, we plan to provide a forward-looking…

Thanks, Ron. In a short summary, it was an encouraging quarter for our key financial metrics. First quarter adjusted net earnings from continuing operations were $111.6 million, up from -- up 39% from $80.1 million in 2024. 43% increase of $40.8 million in net earnings for the Regulated Services Group was primarily due to the implementation of new rates of $15.7 million and lower interest expense of $13.6 million as a result of debt repayment with the proceeds from the sales of the renewables business and our Atlantica stake. Our depreciation expense was relatively flat year-over-year. Our usual organic growth in depreciation expense was partly offset by $8.2 million in non-recurring favorable pickups related to regulatory orders in New Hampshire and Arizona. The $13.4 million increase in net earnings for the Hydro Group was primarily due to a one-time tax recovery related to the sale of the renewable energy business. Our expectations of an effective tax rate in the mid to low-20% range for the year has not changed and as we have said before, we do expect a bit of lumpiness in our quarterly tax profile. On the corporate side, our adjusted net earnings decreased by $22.7 million related to the removal of Atlantica dividends. Moving to our EPS walk, Q1 adjusted earnings -- net earnings per share were $0.14, which is flat to last year's Q1 2024 adjusted net earnings per share of $0.14, which includes renewables. And yet above last year's Q1 2024 continuing operations adjusted net EPS of $0.11 excluding renewables. Starting with last year's $0.14 including renewables, year-over-year drivers include a negative $0.03 attributed to the renewables sale, an increase of $0.03 for new rate case contributions from New York Water, BELCO, and Midstates Gas as well as increased customer demand. And another $0.02 of…

Thanks, Brian. As per our press release this morning, I want to highlight to our listeners to save the date for our Investor Update Call on June 3, which I referenced earlier. We expect this outlook, which will be primarily based on the current portfolio will include projected adjusted net EPS ranges for 2025, 2026, and 2027, with more detailed thoughts on the company and its potential after my first 90 days. I also aim to share my broader strategic thinking on the broader portfolio later this year. Thanks to everyone for joining us on the call this morning. I am excited and motivated by the opportunities ahead and now the management team is available to answer your questions. Operator?

Thank you. [Operator Instructions]. Your first question comes from the line of Robert Hope with Scotiabank. Your line is open.

I won't ask about the forward outlook, but maybe a little bit backwards looking. Rod, you've been here for a number of weeks, months now. Can you maybe walk us through kind of what you think the most impactful changes you've made to the organization so far have been?

Yes, it's interesting that you say months because it is literally two months. So the S in month look back is literally one month. But my focus and the initial sort of impact has been setting a vision for what a premium pure play utility looks like and setting the attributes of a pure play utility to the corporation, which informs the work we're doing to lower our overall cost profile, to make room to do more on the capital and O&M front. But also a focus on improving our stakeholder engagement capacity and sort of discipline. Again, these things are notional because I'm communicating them to the organization as I'm setting ourselves up to actually execute on those plans and the way that they will ultimately play out are on outcomes for our stakeholders from -- for the investment community. We're talking more and we'll be talking more about total shareholder return from the customer perspective. We'll be talking about Net Promoter Score and specific customer outcomes that will drive our capital plan and our sort of organizational health, the motivation, the health, the alignment of our employees actions to create sustainable value for those four key stakeholders and the metrics that we're paying attention to are the types of things that will give us our stage gates along the way, so everybody has a clear understanding of where we're headed and what are the milestones along the way that, that will separate us from good to great. The good thing is that, that we have a lot to work with and that's the biggest part of my initial evaluation is that we have really quality assets and we have a group of employees who are really motivated to turn our performance around.

All right. Appreciate that color. Second question, moving over to the SPP projects, so you have two tranches with good clarity right now. Do you know how much capital that could be versus the $750 million to $800 million that you referenced as well as when would that capital start being spent?

We haven't disclosed anything beyond what is currently public. And so I don't anticipate that we'll do so until we're further along. But the short answer is my expectation is that if we're successful in executing on what's in front of us, we'll be in a better position to capture and execute on additional CapEx opportunities in that space.

All right. Thank you. I'll jump back into queue.

Your next question comes from the line of Sean Steuart with TD Cowen. Your line is open.

A couple questions. I want to start with investigations. So there's another investigation in Arkansas and an audit in New Hampshire. And I'm just trying to gauge are these the same billing issues that you're dealing with in the Missouri investigation and do you have any perspective on timing resolution for these various investigations and audits?

I don't believe New Hampshire is a customer-related investigation, but the other investigations have to do with the billing issues, the timeliness of billing associated with the deployment of an overhaul of a new system. And we're working with the regulators and the state in each of those circumstances. From my initial observation that our challenges were not unlike other utilities who have gone through system deployment, I think where we have fallen short and are seeking to remedy it is that we did not do a good job of stakeholder engagement prior to the deployment of the system, which left a lot of folks surprised when the normal, what I would consider to be the normal hiccups associated with the scale of the system overhaul that we implemented. We didn't -- in my view at least do the conditions precedent to making it a smoother transition for customers and regulators. But we're closing that gap as we speak. And I don't -- I am not surprised at all by the Attorney General Zagora was initiating investigations because we put them in a position where they had to do that. I do expect us to work through them and I have personally gone to those respective states to represent my commitment to follow through and cure the issues that the customers have been experiencing, but we'll continue to participate and support the work of the states in closing out these customer complaints.

Okay. Thank you for that context. Second question, wondering if there's any update on your thinking around the Hydro portfolio potential timeline towards divestiture, how the thinking's evolved in the current valuation environment.

Yes. And I'll -- if we do a double click, I'll let Brian talk more about it. But my perspective is consistent with the position we've taken. We're looking to transact but the condition precedent has to be it being value accretive, not from a singular EPS perspective, but certainly from a balance sheet and a strategy accretive perspective as well. And we're monitoring the market environment for potential off takers. But it has to be something that is that we view as net accretive. And I don't know that that there's a specific timeline that we are -- we feel forced to pursue but should that opportunity arise, I have given the go ahead that we'll transact if those conditions are met. Brian?

Yes. And Sean, as a reminder, our thought process is that we would be looking at that in the first portion of this year, obviously with the leadership transition. And our thought process on the portfolio strategy has been evolving here. We've pushed back the timetable a little bit, but everything that we said before about it being value accretive on a number of fronts that remains consistent.

Got it. Okay, thanks very much guys. Much appreciated.

Your next question comes from the line of Nelson Ng with RBC Capital Markets. Your line is open.

Great, thanks, and good morning, everyone. Quick question on the CRM implementation. Can you just comment about I think in the past you talked about how the CRM implementation would result in cost savings and I just had a look at the operating expenses of the utility division. I think costs have increased by just 1.5% year-over-year. So that's obviously lower than inflation. So that's good. But can you just talk about realizing cost savings in the business, that big picture and maybe give a bit more color going forward as well?

Sure. Nelson, it's Sarah MacDonald. So the implementation was not just about cost savings. There were a lot of other customer benefits that we're now coming to fruition. When we were starting to implement, we had multiple systems, no integration, and issues in making sure that customers had access, visibility, ability to go online and look at their bills. And so there was certainly a lot more benefits to the customer coming in. Ultimately, when the system is functioning optimally, you will start to see cost. We'll start to be able to realize the benefits of that integration. But for now we're looking -- we're focused on getting it implemented right and making sure the customer experience is better.

And the cost benefits are not going to be specifically called out solely to the implementation of the platform. But you would expect to see more digital channels, lower calls from customers because we're providing more self-help options and lower paper expenses. But those would be reflected in our overall O&M numbers and not just attributed to one specific platform, just on a future basis to understand where we'll be coming from.

Okay. Thanks for the color. And then the second question probably relates to Brian. So just a quick one on the non-controlling interest earnings of $18.9 million. I know in the past you kind of singled out HLBV as a line item. Is this item, is it all HLBV or are there several items lumped together into earnings attributable to non-controlling interest…

Yes. So it's primarily HLBV income. The other significant piece of that, and it's a relatively small piece is the minority interest related to the ownership stake in Suralis down in Chile.

Got it. Thanks. I'll get back in the queue.

Your next question comes from the line of Rupert Merer with National Bank. Your line is open.

If I could start with a follow-up on the operating costs. I think with the billing issues you've had in previous quarters, it did incur some added costs. Are you still seeing added costs related to those issues or is that largely in the rearview mirror now? And when we look at those operating costs, are they more representative of what we should expect in future quarters?

Yes, Rupert. So when we started experiencing those billing issues, the extra cost that we did callout in the Q4 materials was bad debt expense and that's where we saw the majority of that. You saw a little bit of that this quarter, but it wasn't really enough for us to callout specifically. And definitely the trend line is moving in a more improved direction. I think going forward from here that we would expect that that would temper off just given the trajectory of where our customer billings exceptions are at. So the short answer, Rupert is we recorded the majority of that in Q4.

And last quarter, you talked about some dissynergies related to the sale of the renewable group. It seems like the costs in the renewables and corporate group have come down significantly. Have you largely dealt with these dissynergies, are there any other sort of plans you can discuss to lower costs in the near-term? I understand some of this may be things you want to talk about on June 3.

Yes, Rupert, so last year, if you look at the year in aggregate, we had roughly $18 million in dissynergies that affected our OpEx numbers last year. For the first quarter, it's at a smaller amount. It's less than $0.01 of dissynergies that we're seeing. We didn't call it out specifically in the materials just because of the size. We do expect that as we're continuing to execute greater operational and capital discipline on the company, that the eventual removal of those dissynergies will manifest themselves through the outlook. But at this stage for the quarter, it just simply wasn't large enough for us to callout. So we do think that that's a helpful stage and that's something you should expect for us here.

Sounds very good. I'll leave it there. Thank you.

Your next question comes from the line of Ben Pham with BMO. Your line is open.

Hey, thanks. Good morning. How do your peers on conference calls highlight customer affordability as a topic of interest these days with all that's going on with markets and inflation, slight change? Can you add some flavor to conversation and think about some of your comments previously on cost initiatives and narrowing that [indiscernible]?

Yes, I'll certainly start on that. If I think about the guardrails of the company and you heard me make reference to premium utilities. We aren't capital constrained if we have constructive regulatory mechanisms and we have a platform for customer-centric investment to meet evolving customer demands for our services. But I think the -- at this point, the one thing that gives us credibility when coming in to our regulatory environment asking for support is that we've done everything that we can to lower the cost profile, the actual cost of service for our customers. And so from my vantage point, the one constraint is not capital constraint, its affordability. And so the conversation that we are having internally and for the entirety of my tenure here in our pursuit to be a premium utility is driving the cost down, so that we could put productive capital to work on behalf of our stakeholders in a way that minimizes the impact on customer bills. It's embedded in what you just heard Brian make reference to about capital discipline. But we're also constantly going to be benchmarking ourselves against best-in-class on our overall cost profile. So that I can make, we can make a credible case to our stakeholders that we're responsible stewards of our service. So you'll see that in our O&M numbers. And I'll talk a little bit more about it in our outlooks on June 3. But I think discipline should be your takeaway. And we're comparing our objectives. We're not there yet. Obviously, we're a ways away, but our objective is to compare ourselves to best-in-class on both capital and O&M discipline.

Okay, got it. And I provide some details on the June update you mentioned also later in the year. Just wanted to clarify the June portion with 2025 to 2027 is the focus on EPS numbers rate base CapEx in that time frame and then later in year, it's a beyond 2027 guidance.

It's fair to say that you're absolutely right on 2025, 2026, and 2027. And I know that there are going to be questions about broader points of view on a portfolio strategy. And what we're saying is that we're prepared to go public with the guidance and outlooks for that three-year time frame. And while we are definitely thinking through the broader strategic portfolio questions, we think we'll be in a better position to talk about it publicly later in 2025.

Okay, got it. Thanks so much.

[Operator Instructions]. Your next question comes from the line of Mark Jarvi with CIBC. Your line is open. Mark, your line is open.

Sorry about that. Yes, questions on New Hampshire, you've got settlements now at Energy North and Granite State, obviously there's still the audit in terms of the systems there, updated perspective in terms of the path forward there when you could get back in to file for new rates and try to get through some of those revenue requests that didn't come through on the prior settlements.

Yes, Mark. So just to be clear, we do have an order approving the settlement for Granite State. We are in settlement discussions at Energy North and that's part of the prepared commentary that we've got a little bit more time as granted by the commission to negotiate that settlement. So just to clarify that. But with regards to when we can go back in for new rates, so for Granite State, what we have in the settlement is a stay out period until we can file a new rate case on January 1, 2026. And that, that is a helpful data point in those. And given that similar parties, similar timescales for the rate cases, I think that's something to think about as we're looking at concluding settlement negotiations in Energy North.

Got it. And then maybe updated views in terms of inside CalPeco the application for interim rates, any feedback yet in terms of whether or not that's feasible and just probably how you see timeline progressing in CalPeco.

So it's absolutely feasible. We wouldn't have filed otherwise. We haven't got any feedback yet, but we're continuing to answer any questions that come up. But it's certainly an option open to us that we're taking every advantage of.

When do you think you get clarity? Because I believe the -- ask was for interim rates by middle of this year and you know that's not that far away at this point.

Yes. The -- California is a slower jurisdiction to hear back, so I actually -- I can't say when we'll hear.

Got it. Okay. Thanks for the time this morning.

Thanks, Mark.

There are no further questions at this time. I will turn the call to Mr. Rod West.

All right. Thanks again for your interest and your questions this morning. And we look forward to visiting with you again in just a few weeks on June 3. Have a great rest of the day.

This concludes today's conference call. You may now disconnect.