"In the first quarter of 2023, we achieved operational milestones in line with our targets," said
First Quarter Financial Highlights
- Adjusted EBITDA1 of
$341.0 million , an increase of 3%; - Adjusted Net Earnings1 of
$119.9 million , a decrease of 15%; and - Adjusted Net Earnings1 per common share of
$0.17 , a decrease of 19%, in each case on a year-over-year basis.
All amounts in | Three months ended | ||
2023 | 2022 | Change | |
Revenue | $ 778.6 | $ 733.2 | 6 % |
Net earnings attributable to shareholders | 270.1 | 91.0 | 197 % |
Per common share | 0.39 | 0.13 | 200 % |
Cash provided by operating activities | 34.2 | 166.2 | (79) % |
Adjusted Net Earnings1 | 119.9 | 141.2 | (15) % |
Per common share | 0.17 | 0.21 | (19) % |
Adjusted EBITDA1 | 341.0 | 330.5 | 3 % |
Adjusted Funds from Operations1 | 210.9 | 220.2 | (4) % |
Dividends per common share | 0.1085 | 0.1706 | (36) % |
1 Please refer to "Non-GAAP Measures" below for further details. |
Quarterly Results
- Solid Regulated Growth from New Rate Implementations – Operating profit for the
Regulated Services Group increased to$255.3 million from$231.2 million , up$24.1 million from the prior year. The year-over-year increase in operating profit was primarily driven by new rates at a number of the Company's utilities, most notably at theEmpire Electric andPark Water systems. - Stable Year-Over-Year Renewable Operating Performance Reduced by HLBV Roll Offs – Operating profit, excluding Hypothetical Liquidation at Book Value ("HLBV") income, for the Renewable Energy Group during the three months ended
March 31, 2023 was effectively flat year-over-year. Total operating profit for the Renewable Energy Group was$106.5 million , down$11.4 million from the prior year. The decline was driven by lower HLBV income primarily as a result of the end of production tax credit eligibility on 2012 vintage facilities, as previously experienced in the latter half of 2022. Additionally, modestly lower production from the Company's renewable assets was offset by improved results at its Texas Coastal Wind Facilities. - Higher Interest Expenses Reflect Growth Financing and Macro Environment – Interest expense increased by
$24.0 million year-over-year, with approximately two-thirds of this increase attributable to higher short-term borrowing costs and approximately one-third attributable to financings to support growth initiatives.
Other Recent Highlights
- Termination of
Acquisition of Kentucky Power Company andAEP Kentucky Transmission Company, Inc. – OnApril 17, 2023 , the Company announced it had mutually agreed with American Electric Power Company, Inc. andAEP Transmission Company, LLC to terminate the stock purchase agreement regarding the acquisition ofKentucky Power Company andAEP Kentucky Transmission Company, Inc. (the "Kentucky Power Transaction Termination"). - Key California Rate Case Resolved; Settlement Approved – On
April 27, 2023 , the Company received a final order in itsCalPeco Electric system rate case, with an annual revenue increase of$27.0 million , including approximately$7.1 million due to increases in rate base. The order approved an authorized return on equity ("ROE") of 10% and an equity ratio of 52.5%. A one-time net earnings benefit of approximately$11.4 million is expected in the second quarter of 2023. - New Rate Cases Filed by New York Water and Empire Electric Arkansas – On
May 4, 2023 , the Company filed a New York Water rate application seeking a revenue increase of$39.7 million , based on an ROE of 10% and an equity ratio of 50%. Similarly, onFebruary 14, 2023 , the Company filed anEmpire Electric (Arkansas ) rate application seeking a revenue increase of$7.3 million based on an ROE of 10.25% and an equity ratio of 56% to be phased in over three years. - Completion of the Deerfield II Wind Facility – On
March 23, 2023 , the Company achieved full commercial operations at its 112 MW Deerfield II Wind Facility, located inHuron County, Michigan . The Deerfield II Wind Facility has agreed to sell all of its output toSiculus, Inc. , a subsidiary of Meta, pursuant to a renewable energy purchase agreement. - Sustainable Financing Activity & Ratings Improvements Reflect Algonquin's ESG Commitment – On
March 31, 2023 , the Company completed an amendment and restatement of its senior unsecured revolving credit facility, which increased from$500 million to$1 billion and now includes sustainability-linked performance targets. Separately, onMarch 10, 2023 , MSCI upgraded AQN to a "AAA" ESG rating, placing AQN among the top 13% of companies reviewed. - Credit Rating Affirmed at BBB with Outlook Improved to Stable – In
April 2023 , each of DBRS, Fitch, S&P and Moody's made announcements regarding the credit ratings of the Company and its subsidiaries. DBRS and Fitch both affirmed their ratings and stable outlook, S&P revised its outlooks from negative to stable, and Moody's affirmed its Baa2 ratings and stable outlooks ofLiberty Utilities Co. and Liberty Utilities Finance GP1. These actions follow a similar improvement in outlook to stable from DBRS inFebruary 2023 . - Atlantica Strategic Review – On
February 21, 2023 ,Atlantica Sustainable Infrastructure plc ("Atlantica") announced that its board of directors had commenced a strategic review process. AQN, which owns approximately 42% of Atlantica, supports the commencement of that process.
Outlook
- Reiterate Estimated 2023 Adjusted Net Earnings Per Common Share – The Company reiterates its previously-disclosed estimate of Adjusted Net Earnings per common share for the 2023 fiscal year within a range of
$0.55-$0.61 (see "Non-GAAP Measures" below). - Organic Capital Investment Expectations Maintained – With the Kentucky Power Transaction Termination, the Company expects to spend approximately
$1 billion on capital investment opportunities in the 2023 fiscal year. Of this amount, approximately$700 million is expected to be spent by theRegulated Services Group and approximately$300 million is expected to be spent by the Renewable Energy Group. - Remain Focused on Optimizing Balance Sheet – The Company remains committed to a BBB credit rating and does not expect any new equity financings through 2024.
AQN's Management Discussion & Analysis for the three months ended
Earnings Conference Call
AQN will hold an earnings conference call at
Date: | ||
Time: | ||
Conference Call: | Toll Free Dial-In Number | 1-800-806-5484 |
Toll Dial-In Number | (416) 340-2217 | |
Event Passcode | 8220700# | |
Webcast: | https://bell.media-server.com/mmc/p/hm4w86az | |
Presentation also available at: www.algonquinpowerandutilities.com |
About
Visit AQN at www.algonquinpowerandutilities.com and follow us on Twitter @AQN_Utilities.
Caution Regarding Forward-Looking Information
Certain statements included in this news release constitute ''forward-looking information'' within the meaning of applicable securities laws in each of the provinces and territories of
Given these risks, undue reliance should not be placed on these forward-looking statements, which apply only as of their dates. Other than as specifically required by law, AQN undertakes no obligation to update any forward-looking statements to reflect new information, subsequent or otherwise.
Non-GAAP Measures
AQN uses a number of financial measures to assess the performance of its business lines. Some measures are calculated in accordance with generally accepted accounting principles in
The terms "Adjusted Net Earnings", "Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization" (or "Adjusted EBITDA"), and "Adjusted Funds from Operations", which are used in this news release, are non-GAAP financial measures. An explanation of each of these non-GAAP financial measures can be found in the section entitled "Caution Concerning Non-GAAP Measures" in the Interim MD&A, which section is incorporated by reference into this news release, and a reconciliation to the most directly comparable
AQN does not provide reconciliations for forward-looking non-GAAP financial measures as AQN is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing or amount of various events that have not yet occurred, are out of AQN's control and/or cannot be reasonably predicted, and that would impact the most directly comparable forward-looking
Reconciliation of Adjusted EBITDA to Net Earnings
The following table is derived from and should be read in conjunction with the consolidated statement of operations. This supplementary disclosure is intended to more fully explain disclosures related to Adjusted EBITDA and provides additional information related to the operating performance of AQN. Investors are cautioned that this measure should not be construed as an alternative to
Three months ended | |||
(all dollar amounts in $ millions) | 2023 | 2022 | |
Net earnings attributable to shareholders | $ 270.1 | $ 91.0 | |
Add (deduct): | |||
Net earnings attributable to the non-controlling interest, exclusive of HLBV | 14.4 | 4.1 | |
Income tax expense | 24.7 | 9.5 | |
Interest expense | 81.9 | 57.9 | |
Other net losses1 | 3.5 | 4.7 | |
Unrealized loss on energy derivatives included in revenue | — | 0.6 | |
Pension and post-employment non-service costs | 5.0 | 2.6 | |
Change in value of investments carried at fair value2 | (179.4) | 40.5 | |
Gain on derivative financial instruments | (2.2) | (0.7) | |
Loss on foreign exchange | 1.4 | 0.3 | |
Depreciation and amortization | 121.6 | 120.0 | |
Adjusted EBITDA | $ 341.0 | $ 330.5 |
1 | See Note 16 in the unaudited interim consolidated financial statements. |
2 | See Note 6 in the unaudited interim consolidated financial statements. |
Reconciliation of Adjusted Net Earnings to Net Earnings
The following table is derived from and should be read in conjunction with the consolidated statement of operations. This supplementary disclosure is intended to more fully explain disclosures related to Adjusted Net Earnings and provides additional information related to the operating performance of AQN. Investors are cautioned that this measure should not be construed as an alternative to consolidated net earnings in accordance with
The following table shows the reconciliation of net earnings to Adjusted Net Earnings exclusive of these items:
Three months ended | |||
(all dollar amounts in $ millions except per share information) | 2023 | 2022 | |
Net earnings attributable to shareholders | $ 270.1 | $ 91.0 | |
Add (deduct): | |||
Gain on derivative financial instruments | (2.2) | (0.7) | |
Other net losses1 | 3.5 | 4.7 | |
Loss on foreign exchange | 1.4 | 0.3 | |
Unrealized loss on energy derivatives included in revenue | — | 0.6 | |
Change in value of investments carried at fair value2 | (179.4) | 40.5 | |
Adjustment for taxes related to above | 26.5 | 4.8 | |
Adjusted Net Earnings | $ 119.9 | $ 141.2 | |
Adjusted Net Earnings per common share | $ 0.17 | $ 0.21 |
1 | See Note 16 in the unaudited interim consolidated financial statements. |
2 | See Note 6 in the unaudited interim consolidated financial statements. |
Reconciliation of Adjusted Funds from Operations to Cash Provided by Operating Activities
The following table is derived from and should be read in conjunction with the consolidated statement of operations and consolidated statement of cash flows. This supplementary disclosure is intended to more fully explain disclosures related to Adjusted Funds from Operations and provides additional information related to the operating performance of AQN. Investors are cautioned that this measure should not be construed as an alternative to cash provided by operating activities in accordance with
The following table shows the reconciliation of cash provided by operating activities to Adjusted Funds from Operations exclusive of these items:
Three months ended | |||
(all dollar amounts in $ millions) | 2023 | 2022 | |
Cash provided by operating activities | $ 34.2 | $ 166.2 | |
Add (deduct): | |||
Changes in non-cash operating items | 164.8 | 48.1 | |
Production based cash contributions from non-controlling interests | 9.1 | 3.7 | |
Acquisition-related costs | 2.8 | 2.2 | |
Adjusted Funds from Operations | $ 210.9 | $ 220.2 |
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