investor presentation - aga
TRANSCRIPT
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Investor PresentationAmerican Gas Association Financial ForumMay 17-18, 2015
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FORWARD-LOOKING STATEMENTS DISCLAIMER
Certain written and oral statements contained in this presentation and discussion are forward-looking within the meaning of certain securities laws and reflect the views of Algonquin Power & Utilities Corp. (the “Company”) with respect to future events, based upon assumptions relating to, among others, the performance of the Company's assets and the business, financial and regulatory climates in which it operates. These forward looking statements include, among others, statements with respect to the expected performance of the Company, its future plans and its dividends to shareholders.
Since forward-looking statements relate to future events and conditions, by their very nature they require us to make assumptions and involve inherent risks and uncertainties. We caution that although we believe our assumptions are reasonable in the circumstances, these risks and uncertainties give rise to the possibility that our actual results may differ materially from the expectations set out in the forward-looking statements. Material risk factors include those presented in the Company’s annual financial results, the annual information form and most recent quarterly management’s discussion and analysis. Given these risks, undue reliance should not be placed on forward-looking statements, which apply only as of their dates. Except as required by law, the Company does not intend to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.
NON-GAAP FINANCIAL MEASURES
The terms “adjusted net earnings”, “adjusted earnings before interest, taxes, depreciation and amortization” (“Adjusted EBITDA”), “adjusted funds from operations”, “per share cash provided by adjusted funds from operations”, “per share cash provided by operating activities”, "net energy sales", and "net utility sales", (together the “Financial Measures”) may be used in this presentation. The Financial Measures are not recognized measures under GAAP. There is no standardized measure of the Financial Measures, consequently APUC’s method of calculating these measures may differ from methods used by other companies and therefore may not be comparable to similar measures presented by other companies. A calculation and analysis of the Financial Measures can be found in APUC’s most recent Management Discussion & Analysis. Per share cash provided by operating activities is not a substitute measure of performance for earnings per share. Amounts represented by per share cash provided by operating activities do not represent amounts available for distribution to shareholders and should be considered in light of various charges and claims against APUC.
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A L G O N Q U I N P O W E R & U T I L I T I E S C O R P.
Renewable power generation providing
attractive, growing returns
Non-regulated
50% of 2014 EBITDA
30% Canada / 70% US
$1.9 billion in power assets
1,050 MW gross installed capacity
$1.1 billion investment potential in 486 MW development pipeline
US Distribution Utility providing predictable and
growing earnings
State regulated
50% of 2014 EBITDA
100% US
$2.1 billion in utility assets
489,000 connections
$1.1 billion investment potential in acquisition and organic growth pipeline
A GROWTH FOCUSED GENERATION, TRANSMISSION AND DISTRIBUTION UTILITY COMPANY
D I S T R I B U T I O NG E N E R AT I O N T R AN S M I S S I O N
Regulated transmission utility providing attractive
risk-adjusted returns
Federal/State regulated
Natural gas pipelines and electrical transmission
North American focus
Up to U.S. $400 million investment potential by 2018 through pipeline development
U.S. $55 million investment in electricity transmission project
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G E N E R AT I O N B U S I N E S S G R O U P
RENEWABLE AND CLEAN ENERGY PORTFOLIO Attractive returns and strong cash flow from renewable and
clean energy generation sourced from water, wind, solar, and natural gas
85% of generation under long term power purchase contracts with inflation escalators, growing to 90% in 2018
Target unlevered after-tax IRR of greater than 8% to 11% for renewable assets
GROWTH IN NON-REGULATED RENEWABLE POWER GENERATION
40 renewable and clean energy facilities with more than 990 MW of net capacity.486 MW of contracted wind and solar development projects.
OVER $1.1 BILLION OF POTENTIAL NEW INVESTMENT
2015 - 2016 200 MW wind facility in Minnesota: $409 Million
24 MW wind facility in Quebec: $70 Million
10 MW solar facility expansion in California: $34 Million
75 MW wind facility in Ontario: $273 Million
2016 - 2017 177 MW wind facility in Saskatchewan: $340 Million4
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D I S T R I B U T I O N B U S I N E S S G R O U P
UTILITY PORTFOLIO Predictable earnings, strong cash flow and return
protection from water, electricity and natural gas distribution utility systems
Continued growth through investment and expansion in service territories and the pursuit of accretive acquisitions in supportive regulatory environments
GROWTH THROUGH DIVERSIFIED REGULATED UTILITY ACQUISITIONS, ORGANIC INVESTMENTS AND RATE CASES
31 water/gas/electric utility systems serving 489,000 customers
Pending acquisition of Park Water Company
Distribution EBITDA Seasonality
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KEY REGULATED UTILITY PROJECTS
ACQUISITION OF PARK WATER COMPANY: ~$325M
Water distribution utility in CA and MT 74,000 customers
PIPELINE TRANSMISSION OPPORTUNITY: Up to U.S. $400M
Partnering with Kinder Morgan for development Initial partnership participation of 2.5%; option to subscribe for
additional 7.5% Cumulative capital investment of up to U.S. $400M by 2018 ROE accretive to earnings Additional expansion opportunities available
CALPECO ELECTRIC TRANSMISSION PROJECT: ~U.S. $55M
Upgrade 24 miles of 60kV line to 120 kV Three phase project Regulatory approvals received for phase 1 and 2 Phase 1 construction under way ROE accretive to earnings
Northeast extension pipeline
Existing utility assets
D I S T R I B U T I O N & T R A N S M I S S I O N G R O W T H
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Deep pipeline providing multiple opportunities for growth Significant financial flexibility to execute on growth plans
Relatively low payout ratio provides significant internally generated cash flows DRIP program and tax equity provide additional sources of capital Equity rich capital structure allows for additional leverage
O V E R $ 1 B I L L I O N P I P E L I N E : 2 0 1 6 - 2 0 1 8
Sources of CapitalUses of Capital
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V I S I B L E E A R N I N G S G R O W T H
NON-REGULATED RENEWABLE GROWTH
REGULATED UTILITY GROWTH
Odell Wind Park Water
Morse Wind New Hampshire Gas
Bakersfield Solar Rate Cases
St. Damase Wind Organic Growth
Amherst Island Wind
Val Éo Wind
Chaplin Wind
EBITDA ($M)
ACCRETIVE GROWTH OPPORTUNITIES PROFILE
2018 PROJECTED EBITDA SPLIT
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R O B U S T O V E R A L L B U S I N E S S P R O P O S I T I O N
Well positioned for rising interest rates:
Long term investment grade BBB fixed rate debt financing with no near term maturities
Liberty Utilities equity and debt costs pass through to customer
APCo revenues generally hedged to increased economic activity
Robust growth model:
Low dividend payout disconnects growth from capital market
Conservative bidding assumptions implicit in pipeline of PPAs
Earnings/cash flow growth intended to support continued dividend increases
OPERATING MODEL SUPPORTS LONG TERM SUSTAINABLE DIVIDEND
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F I N A N C I A L P E R F O R M A N C E
SIGNIFICANT YEAR OVER YEAR GROWTH
1. Adjusted EBITDA, Adjusted Earnings Per Share, and Adjusted Funds From Operations Per Share assess the operating performance without the effects of certain accounting adjustments which are derived from a number of non-operating factors, accounting methods and assumptions.
Results & accomplishments 5 utility acquisitions 4 U.S. wind farm acquisitions Completion of 2 renewable energy facilities (wind, solar) Further diversification of portfolio
CDN$ millions 2012 2013 2014 Q1 2015
Revenue $ 348.8 $ 675.3 $ 943.6 $ 381.9
Adjusted EBITDA1 88.1 226.9 290.6 114.5
Adjusted Earnings Per Share1 0.11 0.27 0.37 0.17
Adjusted FFO Per Share1 0.42 0.72 0.92 0.41
Dividend Declared 0.30 0.33 0.37 0.11
Total Assets 2,779 3,473 4,114 4,531
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I N V E S T M E N T G R A D E C A P I T A L S T R U C T U R E
S&P: BBB
INVESTMENT GRADE DEBT PLATFORMS: Generation bond platform
8 year, 4.8% CDN $150 million private placement (swapped to $U.S. 4.4%) 7 year, 5.5% CDN $135 million private placement 8 year, 4.65% CDN $200 million private placement (swapped to $U.S. 4.77%)
Distribution bond platform 10 year, 4.38% U.S. $225 million private placement 10 year, 3.81% U.S. $125 million private placement 30 year, 4.13% U.S. $160 million private placement
ENHANCED LIQUIDITY WITH UNSECURED BANK LINES A $65 million bank credit facility at the APUC corporate level A U.S.$200 million Liberty Utilities bank credit facility A $350 million APCo bank credit facility
$000's
Long term liabilities 1,482,700 44.2% Preferred shares 213,805 6.4%Equity 1,658,148 49.4%
Total capitalization 3,354,653 100.0%
March 31, 2015
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R I S K M A N A G E M E N T
Foreign exchange exposure managed through a matching of US$ debt to US$ assets
Assets Debt
CDN$ 18% 15%
US$ 82% 85%
Other risk exposures actively managed to ensure stability of cash flows over the long term
Minimal counterparty risk
Minimal refinancing risk
Minimal floating rate debt risk
Minimal commodity risk
ALGONQUIN PROACTIVELY MANAGES ITS BUSINESS AND FINANCIAL RISKS
Electricity produced on a statistically predictable basis
Production targets are based on long-term average wind and hydrology
Resource fluctuation managed through diversification
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Growth Targets
Annual total shareholder return of >10%
GrowthOpportunities
Contracted power generationRegulated utilities
AcquisitionsOrganicCanada
United StatesLocal expansion
Diversified modalities
G R O W T H O P P O R T U N I T I E S A N D TA R G E T S
PREDICTABLE GROWTH OVER THE
SHORT, MEDIUM AND LONG-TERM
Dividend increases consistent with growth in earnings and cash flows
Growth in per share earningsand cash flow of 7-10% CAGR
Growth in Assets and EBITDA of ~15% CAGR
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C L E A R V I S I O N
OUR VISION IS CLEAR: TO BE THE UTIL ITY COMPANY MOST ADMIRED BY CUSTOMERS,
COMMUNITIES AND INVESTORS FOR OUR PEOPLE, PASSION AND PERFORMANCE
TSX:AQN
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CONTACT INFORMATION
Ian Robertson, Chief Executive Officer905-465-4510
David Bronicheski, Chief Financial Officer905-465-4512
Kelly Castledine, Director, Investor Relations905-465-4576
CORPORATE INFORMATION
Head Office Oakville, ON
Common Share Symbol TSX: AQN
Preferred Share Symbols AQN.PR.A, AQN.PR.D
Shares Outstanding 239,509,670
Dividend U.S. $0.385 per share annually
Price* $9.74
Market Cap $2.3 Billion
* Closing price on May 12, 2015
@AQN_Utilities15