Algonquin Power & Utilities Corp. (NYSE:AQN) Q4 2025 Earnings Call Transcript

Algonquin Power & Utilities Corp. (NYSE:AQN) Q4 2025 Earnings Call Transcript March 6, 2026

Algonquin Power & Utilities Corp. beats earnings expectations. Reported EPS is $0.06, expectations were $0.04.

Operator: Hello, and welcome to the Algonquin Power & Utilities Corp. Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] I will now turn the conference over to Mr. Brian Chin, Vice President of Investor Relations. Please go ahead.

Brian Chin: Thank you, operator, and good morning, everyone. Thank you for joining us for our fourth quarter and full year 2025 earnings conference call. Joining me on the call today will be Rod West, Chief Executive Officer; and Rob Stefani, Chief Financial Officer, who will share prepared remarks. Other members of the management team are also available to answer your questions during the Q&A portion of the call today. 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. Additionally, all net earnings information to be discussed today is for continuing operations and is attributable to the common shareholders of Algonquin. Certain material factors and assumptions were applied in making the forecasts and projections reflected in forward-looking information. 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 algonquinpower.com. Please also refer to our most recent MD&A on SEDAR+ and EDGAR and available on our website for important additional information on these items. On the call this morning, Rod will provide a business update, and Rob will follow through with details of our financial results.

We’ll then open the line for questions. [Operator Instructions]. And with that, I’ll turn things over to Rod.

Roderick West: Thanks, Brian, and good morning, everyone. Thanks for joining us. 2025 was a turning point for Algonquin. We delivered strong results, improved earned returns, made substantial operational and regulatory progress and meaningfully strengthened our balance sheet. And those results reflect something broader. Algonquin is a different company today than it was a year ago. We are more focused, more disciplined and to each other and to our stakeholders more accountable. We have sharpened our strategy, assembled an experienced leadership team and laid the foundation for a sustained performance culture. In short, we’re advancing toward our goal of becoming a premium pure-play regulated utility. Turning to Slide 5. I’ll begin my remarks today by walking through our accomplishments in 2025.

We delivered full year net earnings per share of $0.27 and adjusted net EPS of $0.34, which exceeded the top end of our guidance range by $0.02. These results demonstrate that our Back-to-Basics strategy is driving measurable improvements in our underlying fundamentals. And as we’ve discussed before, becoming a premium utility starts with getting the fundamentals right. Since I joined Algonquin, we focused on, first, improving operational discipline to improve customer outcomes and driving efficiencies by bending our cost curve; and second, strengthening regulatory strategy execution through more proactive stakeholder engagement, all to drive more constructive and timely outcomes. Our 2025 results provide recent evidence of that focus. We reduced operating expense as a percentage of gross revenue by — from approximately 38% in 2024 to roughly 36% in 2025.

We achieved constructive regulatory outcomes across a range of proceedings, and we improved our earned ROE from 5.5% in 2024 to approximately 6.8% in 2025. We also made progress this year in strengthening our balance sheet. We used net proceeds from the sale of our renewable business, excluding our hydro assets to retire approximately $1.6 billion of debt, materially improving our cap structure and financial flexibility. And finally, we continue to simplify the company and the story, both through portfolio actions and by reducing complexity inside the regulated platform. While we clearly have much more work to do, this was a good start, and we carry that momentum into 2026. Looking ahead to 2026 on Slide 6, our priorities build directly on what we have achieved over the last 12 months.

Operationally, cost discipline remains a core priority. As we transition to a more commodity aligned structure and centralizing shared services around cost and value, we expect to capture additional efficiencies and drive consistency across our gas, water and electric portfolio. As we undertake these efforts, we’re also implementing a centralized capital projects team to improve our execution performance and reducing risk. At the same time, we’re focused on improving the safety and reliability of our system, supporting positive customer outcomes and maintaining affordability across all of our jurisdictions. To drive better customer experiences, we’ve been making improvements across our end-to-end process design, focusing on the moments that matter most to our customers.

This includes more accurate billing and better delivery of information during any kind of disruption. From a regulatory standpoint, we’re pleased to receive approval of our settlement in Empire Electric Missouri’s rate case in January this year. We’re working there to see the rates implemented, which remains subject to evaluation of specific customer metrics. We were also glad to reach settlement agreements at New England Gas, CalPeco Electric and Arizona Litchfield Park Water & Sewer and look forward to advancing them towards approval and implementation. I’ll speak to each rate case in a bit more detail shortly. Finally, at the corporate level, we’ve recently onboarded key leaders, including Rob as our new CFO; Pete Norgeot as our new Chief Operating Officer; and Kristin von Fischer as our new Chief Human Resources Officer.

Our execution against these priorities underpins our financial outlook. For 2026, we’re pleased to reaffirm our earnings guidance. The drivers supporting this year’s guidance range are well defined, and we’re confident in our ability to execute. Relative to where we were last June, we now expect our effective tax rate in 2027 to be in the mid- to high 20s percent range as compared to the previously anticipated low to mid-20s percentage range. We’re continuing to evaluate tax strategies to optimize the tax rate, but expect the majority of the benefits from those strategies to be realized after 2027. This largely results in an updated expected adjusted net EPS range for 2027 of $0.38 to $0.42. With an executive team that brings deep utility experience now in place, in addition to the aforementioned tax optimization work, we’re focused on disciplined execution and constructive regulatory engagement to position the business to deliver sustainable earnings growth over the long term while also looking for additional opportunities to bridge the gap caused by the tax rate relative to last June.

Turning to Slide 7. While there is more to be done to bring resolution to a number of key rate cases, we’re seeing the benefits of our regulatory and stakeholder engagement approach. By prioritizing earlier dialogue to identify areas of common ground as well as advancing more pragmatic filings, we’ve been able to achieve settlement agreements. We expect these agreements will deliver reasonable regulatory outcomes that benefit our customers and allow us to recover investment in our systems efficiently. Let me walk through our key recent proceedings. In January this year, the Missouri Public Service Commission approved our settlement agreement for Empire Electric, which is our largest operating utility. This authorizes a $97 million revenue increase after we meet customer metric performance requirements for 3 consecutive months, with an additional potential $13 million of annual revenue increase based on meeting further performance requirements starting in the second half of 2026.

In California, we received a proposed decision at CalPeco Electric, adopting the proposed settlement agreement, which provides for a $48.6 million revenue increase retroactive to January 2025, an ROE — allowed ROE of 9.75% and an equity ratio of 52.5%. We are awaiting a final decision. In Massachusetts, we reached a settlement for New England Natural Gas, which calls for a $45.3 million revenue adjustment, of which approximately $17.9 million is non-gas system enhancement plan revenue, with 2 additional step-ups in rate base in subsequent years. The settlement includes an allowed ROE of 9.3% and an equity ratio of approximately 52.9% and a rate stay out — the rate case stay out through October 31, 2029. We’ve requested a commission order by the end of this month.

In Arizona, just this week, we filed a proposed settlement for Litchfield Park Water & Sewer. The settlement, which was reached with the Arizona Corporation Commission staff calls for a $15.3 million revenue adjustment and an ROE — allowed ROE of 9.75% with a 54% equity ratio. Hearings are scheduled for late March of this year. And finally, in Kansas, we filed a rate case at Empire Electric in December, requesting a $15.8 million base rate adjustment, which represents a net requested increase of $12.5 million with a 3-year phase-in for a gradual adjustment. Slide 8 helps put all of this in context. Over the past year, we have steadily resolved rate cases across multiple jurisdictions, advancing from filing to constructive resolution to implementation of rates.

As we look ahead, we now have line of sight to resolving a significant portion of the remaining requested revenue adjustments this year, which will inform our forward earnings trajectory. Turning to Slide 9. We are fortunate to operate in high-quality jurisdictions that have attractive regulatory mechanisms. This includes tracker mechanisms, multiyear rate plans, forecasted test years and formula rate structure. These regulatory mechanisms underpin the majority of the expected rate base growth between now and 2028. Building on this foundation, recent legislative and regulatory developments across our states are supporting enhanced investment recovery. Recent advances in Missouri, Arizona, New Hampshire and Oklahoma are further strengthening our regulatory frameworks with the adoption of future test years, CWIP for new gas generation, plant and service accounting and consideration of formula rates.

Overall, these developments reinforce the constructive regulatory environments in which we operate. With that, I’ll turn it over to Rob to walk through our financial update for the quarter and year-end. Rob joined the company just this past January on January 5. Many of our analysts and investors may already know Rob from his time as CFO of Southwest Gas Holdings. He also previously served as CFO and Treasurer of PECO Energy, a Philadelphia-based electric and gas utility subsidiary of Exelon. Rob joins a strong team of experienced utility executives in the C-suite. And as we continue to build our utility platform, Rob’s utility leadership experience, strategic skill set and financial expertise will be leveraged to build a strong foundation for the company as we solidify our strategy and execute on our path to becoming a premium utility.

So again, Rob, and for my last time formally welcoming you, I’ll hand the call over to you.

Robert Stefani: Thanks, Rod, and good morning, everyone. I’ve been immersed in my first 2 months at Algonquin, and I’m excited to partner with Rod and the leadership team here to build a premium utility through disciplined execution across the organization. With that, I’ll turn to our results on Slide 11. We reported full year GAAP net earnings of $208 million compared to $54.8 million in 2024. Full year adjusted net earnings were $258.8 million, up approximately 17% from $221.6 million in 2024. For the fourth quarter, GAAP net earnings were $29.4 million compared to a net loss of $110.2 million in the fourth quarter of 2024. These strong results reflect the progress we are making to deliver steady, predictable earnings. I’ll now discuss the drivers behind this improvement as I walk through our adjusted net EPS results.

On Slide 12, we provide our fourth quarter 2025 adjusted net EPS walk to common shareholders. Fourth quarter adjusted net EPS to common was $0.06 per share, which was flat year-over-year. On the top line, the increase in adjusted net earnings was primarily driven by $10.3 million from the implementation of new utility rates at BELCO Electric, Midstates Gas, Peach State Gas, Missouri Water, New York Water and several of our Arizona water and sewer systems. Moving to interest expense. We realized a $17.9 million reduction, reflecting the paydown of debt using proceeds from both the sale of the renewable energy business and the sale of our ownership stake in Atlantica. This has been a consistent positive driver throughout the year and a direct result of our balance sheet strengthening efforts.

Operating expenses and depreciation were modestly higher by $6.1 million, driven by fourth quarter costs associated with the targeted relief initiative for customers agreed to as part of our Empire Electric Missouri settlement. Full year basis, operating expenses were essentially flat. These benefits were offset by the removal of $10.9 million in Atlantica dividend income, which impacts the corporate group as well as a $7.3 million write-off related to the CalPeco solar project that was discontinued. Taxes were flat year-over-year. Moving on to Slide 13. Full year adjusted net EPS attributed to common was $0.34 per share, up from $0.30 per share in 2024, representing approximately 13% growth. This exceeded the top end of our previously stated guidance range by $0.02 per share, driven by accelerated realization of our operating expense savings, lower depreciation expense resulting from authorized deferrals and tax adjustments.

Let me walk through the key drivers in more detail. New utility rates contributed $41.6 million of benefit from approved rate implementations across several gas, water and electric systems throughout the year. We saw $13.9 million of favorable weather, predominantly at our Empire Electric system. In addition, we benefited from $11.9 million in depreciation deferrals. These factors were partly offset by the costs associated with the targeted relief initiative at Empire and CalPeco write-off mentioned previously. We also recognized a $15.9 million Hydro Group tax adjustment that was largely recognized in the first half of the year from the Hydro reorganization completed in connection with the sale of the renewable energy business. Interest expense declined by $81.1 million, reflecting the paydown of debt using proceeds from the sale of the renewable energy business completed in January 2025 and the prior sale of our Atlantica ownership stake.

The removal of $76.3 million in dividend income from the sale of an ownership stake in Atlantica was the single largest headwind for the year. As a reminder, the repayment of debt using the Atlantica sale proceeds contributes to the interest expense savings across both the Regulated Services Group and the corporate group, which partially offsets the lost dividend income. We also absorbed a higher effective tax rate and common share dilution from the mandatory underlying shares as approximately 77 million common shares were issued upon the settlement of the purchase contracts in 2024. The Regulated Services Group growth was driven by the combination of new rate implementations, favorable weather, lower interest expense and the depreciation deferral benefits, partially offset by higher operating expenses and the solar project discontinuations.

Turning to Slide 14. We are updating our 3-year regulated utility capital expenditure outlook now totaling approximately $3.2 billion from 2026 through 2028. This includes approximately $800 million in 2026, ramping to $1.1 billion in 2027 and approximately $1.3 billion in 2028. Cash flow from the business and existing cash balances are expected to internally fund approximately 65% to 70% of the capital investment requirements. This capital plan is focused on reliably serving our customers with investments in safety, reliability and service across our electric gas and water systems. As you can see on the slide, the capital spend is expected to be diversified across our commodity types. Our large capital expenditure plan supports our strong organic regulated utility growth proposition.

As Rod highlighted, across our jurisdictions, mechanisms exist to pursue recovery via capital trackers, formula rates and other interest rate case mechanisms. I’d note that the 2025 capital expenditures totaled approximately $604 million, down from approximately $757 million in 2024, with the decrease primarily due to investment in our integrated customer solution platform, which was largely completed in 2024. In terms of rate base, year-end 2025 rate base was approximately $8.2 billion, up from $7.9 billion at year-end 2024. We expect our rate base to grow to approximately $8.5 billion by the year-end 2026, $9 billion by the year-end 2027 and approximately $9.7 billion by year-end 2028, representing a compound annual growth rate of nearly 6% from 2025 year-end through 2028.

On Slide 15, our balance sheet was meaningfully strengthened following the completion of the sale of the renewables business in January of 2025. We used approximately $1.6 billion of net proceeds to pay down debt. Combined with proceeds from the sale of our Atlantica ownership stake, we have significantly improved our credit profile. Total debt stands at approximately $6.5 billion. After adjusting for equity credit on our hybrid debt, Empire securitization bonds and preferred equity, our adjusted net debt profile supports our current credit ratings. We have a solid investment-grade credit rating with stable outlooks from S&P and Fitch. Moody’s rates our operating subsidiary, Liberty Utilities at Baa2 with a stable outlook. We continue to expect no equity issuance through 2027.

On the near-term financing front, we plan to refinance the Algonquin unsecured notes that are due in June 2026, and we continue to manage our maturity profile in a disciplined manner. Lastly, we expect to pay an annualized dividend of $0.26 per share, subject to Board approval. On Slide 16, you’ll see a sources and uses table depicting the cash flows between the holding company of our U.S. operating businesses, Liberty Utilities Company, or LUCO, and the publicly traded holding company, Algonquin Power & Utilities Corporation or APUC. Our 2026 financing plan at APUC of approximately $1.6 billion includes nearly $1.45 billion upstream from LUCO. We expect this upstream to fund repayment of the June 2026 APUC of $1.15 billion debt maturity and the approximately $100 million Suralis term loan as well as the Algonquin common equity dividend.

We expect to raise approximately $1.15 billion at LUCO through bond issuances to retire the June maturity at APUC. Cash flow from ops of approximately $500 million and a draw of about $500 million on the credit facility together are expected to fund domestic regulated CapEx and the upstreaming of cash to APUC. Through these actions, we aim to proactively refinance upcoming maturities, fund the business, maintain liquidity and manage leverage without incurring additional incremental debt. Let me walk through our financial outlook on Slide 17. First, we are reaffirming our 2026 adjusted net EPS estimate in the range of $0.35 to $0.37, consistent with the outlook we originally provided in June of 2025. The drivers supporting 2026 performance are underway, and we are confident in their achievability.

As Rod discussed earlier, we are revising our 2027 adjusted net EPS estimate to a range of $0.38 to $0.42. We updated our assumptions regarding the company’s effective tax rate in 2027, which is now expected to be in the mid- to high 20s percent range as compared to the previously anticipated low to mid-20s percent range. We are continuing to evaluate tax strategies to optimize the tax rate, but expect the majority of the benefits from such strategies to be realized after 2027. The guidance revision also reflects expected timing of gas operational excellence activities to extend into 2027 before normalizing. With that, I’ll turn the call back over to Rod for his closing remarks.

Roderick West: Before we open the line for questions, I want to step back and leave you with a few thoughts on where we are and where we’re headed now that literally, this is my 1 year in the job. It was March 7 last year when I began my tenure. When I joined Algonquin just over a year ago, I said that this company had the very real potential to become a premium pure-play utility. In 2025, we began turning that potential into results. Our leadership team is now in place, and we’re delivering results through our Back-to-Basics strategy. We’re focused on driving operational execution and constructive regulatory engagement to drive an attractive near-term financial profile as we close the gap to our authorized return. We have a strengthened balance sheet with a credit rating profile that provides low-cost access to capital and no expected equity needs through 2027.

We’re executing a customer-focused capital plan of approximately $3.2 billion, focused on organic investment to enhance safety, reliability and improve customer service. As we continue to reearn our right to grow, we’re keeping our eye on additional opportunities in our service territories. We believe this adds up to a clear and compelling investment thesis as we position Algonquin as a singularly focused pure-play regulated utility operating across high-quality, increasingly constructive jurisdictions. As you’ve heard me say, every component of our vision, mission and strategy is being developed with achieving sustainable premium attributes at the forefront. We’re staying focused on capturing the opportunity ahead and executing the mission we’ve laid out.

I couldn’t be more excited about what’s in store for 2026 and beyond. Thanks for your time this morning. And with that, I’ll turn it back to the operator for questions.

Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Baltej Sidhu with National Bank of Canada.

Baltej Sidhu: Just on the revised 2027 guidance, can you share details or the largest drivers that underpin the new assumptions towards the mid- to high 20s effective tax rate versus the prior assumptions?

Robert Stefani: Yes. Thanks, Baltej. It’s Rob Stefani. Look, throughout my onboarding, we reviewed the financial projections. And during that assessment, the forward view of the effective tax rate moved from the low to mid-20s to the mid- to high 20s that we currently expect. That resulted in just over about $0.03 per share of EPS deduction. We’re actively looking at tax optimization strategies, but those appear to really move past 2027, if pursued. As a result and in the interest of transparency, we revised that 2027 range down. Anything else I can add there for you?

Baltej Sidhu: No, I think I got it there. And then just a follow-up there for you, Rob, just more from a strategic overview. You’ve been in the seat now for 60 days. Could you share your thoughts on the largest levers that the business can pull in the near term and also potential procedures or processes that Algonquin doesn’t have yet that you’ve seen elsewhere in your prior experience?

Robert Stefani: Yes. I mean, look, I think the strategy that Rod and the team have put together is strong, and that’s really hinges around the rate case cadence and rate case strategy and engaging across our jurisdictions, bringing leaders in from very well-recognized utilities to enhance the operating platform like Amy and Pete and Kristin. And so as I think about kind of levers we can pull as a management team with a lot of experience at premium utilities, I think that’s really at the forefront. And then the balance sheet, we’ve got over $1.4 billion of liquidity. We’ve got a strong investment-grade balance sheet, and that provides us the flexibility to pursue organic growth as well as assess other opportunities. So as you think about levers, the leadership team, that refocus on regulatory engagement and then the sound financial balance sheet provides us a lot of flexibility.

Operator: Our next question comes from the line of Elias Jossen with JPMorgan.

Elias Jossen: I wanted to start on the additional opportunities you mentioned at the end of your remarks. Can you just frame what types of opportunities you see in the market and maybe touch on whether those would include some portfolio optimization opportunities as well?

Roderick West: I’ll start and certainly let Rob weigh in with his early observations. The opportunities from my vantage point aren’t new. Our growth story starts with organic growth within our existing jurisdictions where we have both the opportunity, and I would dare say the mandate to create different customer outcomes in the areas we serve. And the underpinning of our rate base growth is predominantly organic. What we’ve said in prior — the last prior couple of quarters, particularly since last May, is that the portfolio, we’ve done the work on our existing portfolio with all the potential scenarios around puts and takes. And what you’ve heard from us is that we remain opportunistic. There was nothing so compelling given the screening criteria for M&A that keeps us disciplined on our core business.

There was nothing immediately so compelling that it required us to move now. But to the extent that there are opportunities for us to take a look at potential moves within the portfolio, we’re poised to do that. There was a capital recycling opportunity. Again, we have a point of view around things that might be in the dashboard. But our focus still — and remember, it’s only — from my vantage point, at least, it’s only 12 months in. We’re under the hood right now improving the existing portfolio with an eye towards creating sustainable returns from that base. And we’ll continue to be eyes wide open on additional moves, but they got to be accretive. They got to be transactional to be able to be executed, and they can’t so unduly distract us from the commitments we’ve made.

So opportunistic is the word.

Elias Jossen: Great. And then we’ve seen some initial rate case and broader operational execution across the business. But maybe thinking a bit further out, how should we think about this transitioning from an ROE improvement vision to one that is more growth driven by solid rate base trends and growth across the business?

Roderick West: Yes. That’s the right question and the one that’s occupying us. It starts first on our end by improving the outcomes for customers and our own operational discipline, earning the right to make requests for the — and I use the term gently, the tweaks and the regulatory mechanisms in our respective states. I’ll give you a prime example. I’ll use the state of Missouri because I remember off the top of my head, I think it’s Senate Bill 4 that created forward test year formula rate plans for water and gas, I believe, and it did not include electric. But given what we know to be our capital focus to create customer outcomes and support economic development in that Empire region, it would be a helpful component if we didn’t have — if we had the access to forward test years and formula rates in the electric business, right?

But those require legislative adjustments. And I could see where we would align — we can align with our stakeholders there to help support more timely and constructive recovery mechanisms consistent with our customer-centric capital plan. That’s just one example of the types of tweaks where we have an opportunity to close the gap and allow returns by coming to the regulator with an all-out effort to lower cost to be focused on affordability, while at the same time, meeting our aligned objectives around improving customer outcomes, supporting economic development and certainly for us, meeting our financial obligations to our owners.

Operator: Next question comes from the line of Nelson Ng with RBC Capital Markets.

Nelson Ng: Rod, congrats on your first anniversary on the job. My first question just relates to CalPeco, the solar project that was canceled or written down. Can you just give a bit of background on that project and like how big it was? Because I think there are several solar assets at CalPeco already, but I just want to kind of understand — provide a bit of color. And then also, I guess it was also included in adjusted earnings and why it wasn’t adjusted out?

Robert Stefani: Yes. So just regarding the question on the CalPeco solar write-off, that project was in Nevada, was meant to bring power in CalPeco. Just given where the economics of the project were and our assessment of the ability to earn a fair return on it, we decided not to move forward. As far as why it wasn’t included in adjustments, I think as a utility with the rate base, the size of ours, obviously, you’ll have projects that could potentially be abandoned along the way. And so view that more as something that wouldn’t necessarily be classified as one-off. Obviously, you strive to limit those. But in that case, we wanted to reflect it within operating expenses year.

Nelson Ng: Okay. Great. And then my next question is, I know, Rod, you previously talked about potentially redomiciling. Do you have any updates or early indications on that process? And I was just wondering whether that could potentially impact your effective tax rate.

Roderick West: The short answer is it could. And the other answer is it’s ongoing. I won’t be in a position to announce anything on the redomicile question other than to say we are advancing our analytics around answering those types of questions to the extent that a redomicile conversation could influence our point of view on our respective tax strategy and the options available to us. And we’re taking those types of — that type of analysis to our Board to answer those very questions. So — but we don’t have announcements to make. I think those are premature, but the work is without question underway.

Operator: Next question comes from the line of Robert Hope with Scotiabank.

Robert Hope: So I appreciate the incremental color on 2028 CapEx and rate base on the presentation. Can you provide some incremental color on what you think the natural growth rate of your utilities are in a more steady-state environment? The presentation shows 5% to 6% rate base — 5% to 6% rate base CAGR to ’28. But if we actually take a look at ’28 with $1.3 billion of CapEx, you’re closer to 8% growth on the rate base. Is this what you view to be a more indicative number for the natural growth of the business?

Robert Stefani: Yes. Thanks, Robert. I think towards the end of that forecast, I think you have to remember, we’ve got the ARIS generation project as well as our investment in the transmission and SPP, which we’re very excited about. So it’s back-end weighted due to that SPP transmission project and really more of the spend on ARIS. So that’s what really drives the outsized growth towards the end of that forecast period.

Robert Hope: All right. That’s helpful. And then as a follow-up there, maybe just in terms of the SPP transmission, can you provide us an update on where you are with the number of those projects? And would it be fair to assume that, that does hit ’28, but that will be a multiyear project towards the end of the decade?

Roderick West: One, it’s a multiyear project for sure, where the lion’s share of the capital really shows up in the back end of the decade. We’re going through various regulatory processes associated with SPP and our counterparties in both the transmission and the generation projects internally. We’re tracking along with our regulator expectations around how that capital deployment is actually going to flow through rates, and we’re shaping our regulatory strategy around aligning recovery with our capital deployment expectations. And so it’s — as you know already from your history, you know how this works. Given the size of the capital programs, particularly as it relates to the history of Algonquin and the Empire District, it’s one of the largest projects we’ve ever had in the company’s history.

It’s critical for us that we align our CapEx programs with constructive regulatory recovery. And to their credit, the respective states are aware of the significance of us getting that piece right, and we’re bringing them along with us on the journey.

Operator: Next question comes from the line of Ben Pham with BMO.

Benjamin Pham: You mentioned the progress on operational efficiencies for ’25. You mentioned the uptick in ROE. Can you comment then maybe specific for Rod, as you think about the last 12 months, you kind of tracking to what you’re expecting coming in? Was there anything you learned along the way in the last 12 months, surprises, areas you can tweak a bit more. So a progress update on 2025 versus when you first started?

Roderick West: Yes. It’s a great question, and I’ve been in constant both assessment and reflection mode. I think the extent to which I had a point of view around bidding the cost curve and the need for us to rightsize the service company in support of our utility objectives, that’s really been reinforced the deeper I’ve gotten into the organization. The need for consistent operational both cadence and standards for customer outcomes for safety and operational performance, the need is great. To the extent that you have operating entities from, let’s say, Bermuda out from an eastward perspective to CalPeco to the West, you have different operating cultures and experiences. The 13 U.S. states in 4 different countries each have different regulatory cultures.

But from our vantage point, the need to have a singular focus on safety, customer outcomes and operational excellence required more engagement from leadership, which is why I knew that I needed to be surrounded by folks who understood what excellence looks like so that we could role model the very behavior we’re seeking to now reinforce 2, 3, 4 levels down in the company. And the other piece of the puzzle is the stakeholder engagement where I’m bringing and we are intentionally bringing our stakeholders along with us on the journey. It’s really important for us as leaders to show up with our regulators who we’re asking to support us on the journey to create different customer outcomes. And that means putting capital to work. More importantly, all of this stuff is happening in an environment where affordability is an absolute headwind regardless of what the actual price to value might actually be.

The narrative around affordability is influencing our regulators’ receptivity to additional rate recovery. But they recognize being intellectually honest, that customers can’t receive the benefits of economic development and lower cost without efficient investment and timely recovery. And so I’m not surprised by what I’ve seen because I’ve been in the industry long enough to where I’m recognizing pattern recognition, but in every different jurisdiction, context matters and it influences how our employees, our regulators, the communities and the customers that we serve, how they receive our value proposition. My objective then is to provide you as much transparency as our investors in the path ahead and create a predictable pathway of meeting your expectations so that you take the journey with us.

But I’ve been pleasantly surprised by the receptivity of our employees to this pure-play strategy and the standard. And I’m really pleased that I’ve been able to convince my colleagues around the table to join me on this journey of realizing what I still very much believe is a fantastic future for Algon.

Benjamin Pham: Okay. That’s great. And then maybe to turn to some of the other questions highlighted, the 2028 CapEx, the rate base you have there. You now have CFO, Rob in the seat, he’s looked at the numbers in more detail. Are you in a position near term or next couple of months to think about your guidance beyond ’27 with these additional details? Or is even through 2030 guidance, that may be unrealistic just given that you’re still walking and running?

Roderick West: Yes. I think you better believe we’re looking at that. But to the extent that I would give guidance beyond, say, a growth CAGR for earnings, I’m grappling with what level of certainty do I have given the multitude of states, regulatory constructs, investment opportunities, portfolio scenarios on top of the earlier questions that were being asked and continue to be asked around domicile. I don’t know that in the next couple of months, I’m going to give you — be in a position where I’m comfortable giving you a longer view. But from the moment we came on board and now that we’ve settled and Rob has settled in — settling in as CFO, we’re putting the meat on the bones around the longer view and zeroing in on reducing that cone of uncertainty as we and the Board begin making some decisions around the answer to some of those broader questions, whether it’s portfolio, domicile, all of those things influence the tax assumptions for ’27.

But it’s a work in progress, and I don’t — I won’t create an expectation of some big reveal, but I need you to know that we’re under the hood constantly assessing how far out can we have clarity so that we can project transparently that clarity to you. But we are definitely working on that.

Operator: Next question comes from the line of Mark Jarvi with CIBC Capital Markets.

Mark Jarvi: Just in terms of the CapEx ramping through ’27 and again through ’28, Rob, you’ve articulated that you don’t want the company really spending capital unless you can earn a fair return on it. So just as you stand here today, the confidence that the regulatory improvement there, confidence in recovering that invested capital to get across ’27, ’28. And just is that sort of the signal then the higher CapEx through ’28, just that increasing confidence that the earned ROE continues to track higher beyond 2027?

Roderick West: The short answer is yes. And again, for me, looking at — and certainly, Rob, as we’re shaping out the capital plan and matching the earnings, we’re also doing the dance around timing. And what I am trying to get my comfort around, and this kind of goes to my relative visibility into a 5-year plus kind of look is how does the timing play out? I know that I got some big chunky investments in transmission and generation in the next couple or 3 years. Missouri, I got a 2-year stay-out period, right, where I’ll be working to feather in the implementation of the rates that we settled on, while at the same time, knowing I got to put capital to work to advance the larger chunkier projects in transmission and generation, all of which are accretive to the value of the firm.

But the work is ongoing for me, how do I bend the cost curve in the near term to create and maintain the margins while still feathering in investment and getting support of our regulators to, in some instances, perhaps accelerate existing mechanisms to keep us whole. All of those things are part of managing the business. And as we’ve alluded to, there are some areas where we just have to put more resources to work to provide the outcomes to customers to earn the right for those more efficient recovery mechanisms. But Rob and I are — along with the executive team, know that our responsibility to you is to map out how we close the gap between our allowed returns and earned. And we are dead set on remaining focused on achieving those outcomes as quickly and as efficiently as we can.

I need you to know that that’s not — that’s never lost on us.

Mark Jarvi: That makes sense. And then just if I hear you right, would we maybe sort of higher sort of variance potentially on CapEx in ’27, ’28 just because you’re still working through this process? And then I guess, Rob, in terms of the comments around 2027, no equity, just the view in terms of how you fund through 2028?

Robert Stefani: Yes. So we haven’t put out guidance on 2028. And I think to Rod’s earlier point, I think as you look across the business and anything we could do there, I think it’s just premature. But as we look out, as you look at our balance sheet, as you look at bringing in decisions on the regulatory front, we feel confident in that ability to get through 2027 without an equity issuance. I think the capital plan is exciting. It is back-end weighted, but not an insignificant part of that is FERC transmission that would earn a return along the way that’s compelling. So as we think about those kind of opportunities and closing the gap on ROE, I mean, that’s exactly that and getting in on the state side to close the gap on the distribution end.

That’s what we got to be doing. So I think it’s exciting. Those projects, unfortunately, they’re towards the back end. But as Rod highlighted, they do continue past 2028. So something to kind of look forward to in the forecast, but also beyond that.

Operator: Next question comes from the line of John Mould with TD Cowen.

John Mould: I’d just like to start with the Missouri rate case and the customer metrics that you need to have in place there for 3 consecutive months. Could you maybe just — and I appreciate those are metrics that were included in the settlement that you’re comfortable with. I’m just wondering if you could give us some color on your progress on those customer metrics and how you’re thinking about kind of time to hitting that 3 consecutive month window?

Roderick West: Yes. And I have Amy, our Chief Customer Officer, here. I’ll start the question, and I’ll look for some body language from Amy to tell me if I’m off on it. And I’ve shared before that these — the customer metrics were all around items like accuracy, timeliness of billing, which sounds simple, but for us, represented the outcomes of a series of end-to-end processes that presented opportunities for improvement. We did not believe those metrics, all of which would be the types of things that any utility would view as reasonable. We believe we have satisfied those metrics, but we are in the process of validating with the commission the sustainability of — the achievement and sustainability of those metrics so that we could then satisfy for the commission that we met the conditions precedent for rate implementation.

And Amy and her team have literally been working 24/7 to ensure not only the achievement, but the durability of the fixes that created the friction in Missouri. And our expectation is that we’re going to answer the bell for the regulator, but also for our customers to meet that — to meet those time lines and outcomes. So we’re on track, but we’re in the process of validating that with the commission, and that is a condition precedent of rate implementation per for this element. But think about timeliness, think about accuracy of bills and the durability of the system upgrades that we — and tweaks that we have made along the way.

John Mould: Okay. And then just maybe a quick one on the hydro. How should we think about where that sits in the pecking order of potential recycling opportunities? It doesn’t impede your pure-play positioning and wouldn’t displace an equity need over the next couple of years because you don’t need to come to market, but it does represent your only non-reg assets. So how should we think of that relative to the rest of the portfolio and in terms of what you — the kind of interest or conversations you’ve had in the market since you identified that?

Roderick West: Yes. And I’m — it’s not going to be exciting to hear because there isn’t one thing different than what you’ve heard before. And I don’t — well, actually, I do want to sound like a broken record because I want us to be consistent, is no longer what we consider to be material, right, just given where the asset sits within the existing portfolio. We are focused on the pure play. And certainly, our openness and willingness to transact with the hydro asset hasn’t changed. We’ve made the point that it’s not a fire sale circumstance where we’re looking to jettison it at any cost. And to the extent that we have been — have received or are in any stage of conversation with counterparties, we wouldn’t be commenting on it unless we thought we were at a point where we’d have something to transact on.

That being said, it is still very much an asset that we believe is — would better serve us outside the portfolio, assuming we had reasonable terms. And that’s all we’re doing is pursuing reasonable terms, and we’re sure not going to be distracted by any process that isn’t from our vantage point, isn’t creating some level of value on our end. So if Rob has anything to add there by all means, but it’s on the dashboard, and we go through the normal processes around considering inbound from interested parties. But again, this will not be a fire sale.

Operator: [Operator Instructions] We’ll take our last question from Elias Jossen with JPMorgan.

Elias Jossen: One more quick one. Can you just discuss your overall view on the California regulatory backdrop, maybe thinking about wildfire risk at CalPeco and whether the team would consider contributing to a wildfire fund there?

Roderick West: How much time you got?

Elias Jossen: I got all morning.

Roderick West: No, it’s — listen, it’s an ongoing effort for us as we’re not at the same scale as some of my larger colleagues that operate in the state. And that dynamic influences how I think about the backdrop around wildfire. We’re going through a process right now to get our wildfire mitigation plans approved. And it is a complex landscape that we are navigating. We expect to navigate it as is our charge and reduce the risk, both financially, operationally and otherwise to wildfires while managing certainly the cost, but from my vantage point, the recovery mechanisms that — and access to insurance that reduces risk on our end. And I am spending a fair amount of time as is my team, both contributing to and tracking that process.

But — and it is a full-time endeavor. I will tell you. We are spending a fair amount of time and resources keeping up, but I am duty bound to reduce the risk of operating in California, and we’re engaged with our stakeholders in Washington, D.C., and the state of California from the governor’s office to our regulators and other counterparties. We’re fully engaged just given the complexity of managing risk there.

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

Roderick West: All right. Just a general thanks for your continued interest and our commitment to be transparent with you has been the undergirding of our disclosures today. And again, thanks for supporting our path to premium. Have a great day.

Operator: This concludes today’s conference call. You may now disconnect.