Algonquin Power & Utilities Corp. Announces 2020 Second Quarter and Year to Date Financial Results

OAKVILLE, ON, Aug. 13, 2020 /PRNewswire/ - Algonquin Power & Utilities Corp. (TSX: AQN) (NYSE: AQN) ("APUC" or the "Company") today announced financial results for the second quarter ended June 30, 2020. All amounts are shown in United States dollars ("U.S. $" or "$"), unless otherwise noted.

"APUC's Regulated Services Group maintained safe reliable utility services to our customers amid the COVID-19 pandemic which reduced some volume related revenues in the quarter, while our Renewable Energy Group posted solid results unaffected by the pandemic," said Arun Banskota, Chief Executive Officer of APUC. "We continue to execute on our 5-year $9.2 billion capital program and are making good progress on projects under construction. We are also pleased that in line with our ESG commitment and our commercial and industrial growth strategy, we have reached a framework agreement with Chevron where APUC will seek to develop, build and operate renewable energy solutions taking advantage of Chevron's global operations to reduce their carbon footprint over the next several years."

Q2 2020 Financial Highlights

    --  Revenues of $343.6 million, consistent with the previous year;
    --  Adjusted EBITDA(1) of $176.3 million, compared to $190.0 million in
        2019;
    --  Adjusted Net Earnings(1) of $47.4 million, compared to $54.5 million in
        2019; and
    --  Adjusted Net Earnings(1) per share of $0.09, compared to $0.11 in 2019.

Key Financial Information


                   All amounts in
                    U.S. $ millions
                    except per share
                    information              Quarter ended June 30        Six months ended June 30

    ===

            
            
              2020        2019                   Change                     2020         2019        Change

                                 ===


       Revenue                       343.6             343.6                                        808.5       820.8         (1)%


        Net earnings
         attributable to
         shareholders                 286.2             156.6                                   83%  222.4       243.0         (8)%


                   Per share           0.54              0.31                                   74%   0.41        0.49        (16)%


        Cash provided by
         operating
         activities                   142.9             133.6                                    7%  209.8       255.7        (18)%


        Adjusted Net
         Earnings(1)                   47.4              54.5                                 (13)%  150.7       148.6           1%


                   Per share           0.09              0.11                                 (18)%   0.28        0.29         (3)%


        Adjusted
         EBITDA(1)                    176.3             190.0                                  (7)%  418.5       421.5         (1)%


        Adjusted Funds
         from
         Operations(1)                 93.4             127.2                                 (27)%  272.9       301.2         (9)%


        Dividends per
         share                       0.1551            0.1410                                   10% 0.2961      0.2692          10%




     
     
     1 Please refer to Non-GAAP
             Financial Measures and Use
             of Non-GAAP Financial
             Measures at the end of
             this document for further
             details.

Impact of COVID-19 on Quarterly Operating Results

    --  The COVID-19 pandemic and resulting business suspensions and shutdowns
        have changed consumption patterns of residential, commercial and
        industrial customers across all three modalities of utility services,
        including decreased consumption among certain commercial and industrial
        customers. Primarily as a result of the decreased demand, total
        Divisional Operating Profit (see "Non-GAAP Financial Measures") of the
        Regulated Services Group for the three months ended June 30, 2020, has
        decreased by approximately $9.6 million as compared to the same period
        the prior year. This represents a reduction of approximately $0.01 on
        Adjusted Net Earnings per share during the three months ended June 30,
        2020. For the three months ended June 30, 2020, the Renewable Energy
        Group's results were not adversely impacted by the pandemic, due to a
        largely contracted and diversified generation fleet.

APUC Business Highlights

    --  Common Equity Financing - APUC has now satisfied all of its equity needs
        for 2020 and into 2021 through the issuance of approximately 57.5
        million of its common shares subsequent to the quarter at a price of
        C$17.10 per share (the "Offering") to a syndicate of underwriters and an
        institutional investor for gross proceeds of approximately $724 million
        (C$982.7 million) and approximately 8.7 million of its common shares
        during the quarter under its at-the-market ("ATM") equity program at an
        average price of $13.92 (C$18.96) per common share for total proceeds of
        approximately $120.6 million. The combined gross proceeds of both the
        Offering and the issuances pursuant to the ATM program were
        approximately $845 million. The proceeds are expected to be used to
        partially finance APUC's previously announced renewable development
        growth projects and for general corporate purposes. APUC has suspended
        further sales under its ATM program for the balance of 2020.


    --  Renewable Energy Development Framework Agreement - On July 30, 2020,
        Chevron U.S.A Inc. ("Chevron") and APUC announced an agreement seeking
        to co-develop renewable power projects that will provide electricity to
        strategic assets across Chevron's global portfolio. Under the four-year
        agreement, Chevron plans to generate more than 500 MW of its existing
        and future electricity demand from renewable sources. Initial renewable
        power projects are expected to be sited on Chevron land and construction
        is planned to start in 2021. The projects will be focused on powering
        Chevron's operations in the U.S. Permian Basin (Texas and New Mexico),
        Argentina, Kazakhstan and Western Australia. Projects will be jointly
        owned and co-developed by both parties. APUC will lead the design,
        development, and construction of the projects. Chevron will purchase
        electricity from the jointly owned projects through power purchase
        agreements.
    --  Missouri Water Acquisition - In November 2019, Liberty Utilities
        (Missouri Water) LLC ("Missouri Water"), executed an asset purchase
        agreement with the City of Bolivar to acquire, control, manage, operate
        and maintain the water and sewer systems in Bolivar, Missouri, which
        serves approximately 9,000 water and wastewater connections. On June 2,
        2020, the City of Bolivar residents voted to approve the transfer. The
        purchase price is approximately $23.5 million and closing of the
        acquisition is subject to review and approval of the Missouri Public
        Service Commission. This purchase is consistent with previous tuck-in
        acquisitions and highlights organic growth opportunities available to
        APUC.

Outlook

    --  2020 Guidance - The Company re-iterates its capital investment estimates
        for the 2020 fiscal year of between $1.3 billion and $1.75 billion. The
        Company also re-iterates its current Adjusted Net Earnings per share
        guidance of $0.65-$0.70 for the 2020 fiscal year, and will continue to
        monitor the impacts of COVID-19 and other factors on its 2020 Adjusted
        Net Earnings per share estimates throughout 2020. These estimates are
        based on, and should be read in conjunction with, the assumptions set
        out under "Outlook - 2020 Adjusted Net Earnings per Share Guidance" and
        "Forward-Looking Statements and Forward-Looking Information" in APUC's
        Management Discussion & Analysis for the three and six months ended June
        30, 2020, which will be available on SEDAR and EDGAR. Please also refer
        to "Caution Regarding Forward-Looking Information" and "Non-GAAP
        Financial Measures and Use of Non-GAAP Financial Measures" at the end of
        this document.
    --  Cost Containment Strategies - In response to the unfavorable weather
        variance experienced in the first quarter of 2020 and impacts from
        COVID-19, the Company began implementing cost containment strategies
        that would not impact safe and reliable delivery of utility services to
        customers. For the three months ended June 30, 2020, APUC was able to
        achieve approximately $5.0 million in cost savings. The Company expects
        to achieve further expense reductions of approximately $10.0 million in
        the last six months of 2020.

APUC's supplemental information is available on the web site at www.AlgonquinPowerandUtilities.com and in our corporate filings on SEDAR at www.sedar.com and EDGAR at www.sec.gov.

Earnings Conference Call

APUC will hold an earnings conference call at 10:00 a.m. eastern time on Friday, August 14, 2020 hosted by Chief Executive Officer, Arun Banskota and Chief Financial Officer, David Bronicheski. Also in attendance on the call will be Vice Chair, Chris Jarratt and Senior Vice President and Deputy Chief Financial Officer, Arthur Kacprzak.


        Date:             
     Friday, August 14, 2020


        Time:             
     10:00 a.m. ET


        Conference Call
         Access:          
     
                Toll Free Canada/US:                                
     1-800-319-4610


                          
     
                Toronto local:                                      
     416-915-3239


                                         Please ask to join the Algonquin Power & Utilities
                                          Corp. conference call


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         Access:                                         algonquinpower20200814.html

                            Presentation also available at:
                             www.algonquinpowerandutilities.com



        Call Replay:      
     
                Toll Free Canada/US:                                
     1-855-669-9658

        (available until
         August 28, 2020)



     
     Vancouver local:  
     1-604-674-8052


                          
     
                Access code:                                                         4873

About Algonquin Power & Utilities Corp.

APUC is a diversified international generation, transmission, and distribution utility with approximately $11 billion of total assets. Through its two business groups, APUC is committed to providing secure, safe, reliable, cost-effective, and sustainable energy and water solutions through our portfolio of electric generation, transmission, and distribution utility investments to approximately 807,000 connections in the United States and Canada. APUC is a global leader in renewable energy through its portfolio of long-term contracted wind, solar, and hydroelectric generating facilities representing over 2 GW of installed capacity and approximately 1.6 GW of incremental renewable energy capacity under construction.

APUC is committed to delivering growth and the pursuit of operational excellence in a sustainable manner through an expanding global pipeline of renewable energy, electric transmission, and water infrastructure development projects, organic growth within its rate-regulated generation, distribution, and transmission businesses, and the pursuit of accretive acquisitions.

APUC's common shares, Series A preferred shares, and Series D preferred shares are listed on the Toronto Stock Exchange under the symbols AQN, AQN.PR.A, and AQN.PR.D, respectively. APUC's common shares, Series 2018-A subordinated notes and Series 2019-A subordinated notes are listed on the New York Stock Exchange under the symbols AQN, AQNA and AQNB, respectively.

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 of Canada and the respective policies, regulations and rules under such laws and ''forward-looking statements'' within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 (collectively, ''forward-looking statements"). The words "will", "expects", "plans", "intends" and similar expressions are often intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Specific forward-looking statements in this news release include, but are not limited to: expectations with respect to the timing and amounts of APUC's growth plans, earnings, cash flow and dividend amounts; expectations regarding the use of proceeds from equity financing; expectations regarding potential future projects with Chevron; expectations regarding APUC's Adjusted Net Earnings per share for the 2020 fiscal year; and expectations and plans with respect to capital investments for the 2020 fiscal year; and expectations regarding future expense reductions. These statements are based on factors or assumptions that were applied in drawing a conclusion or making a forecast or projection, including assumptions based on historical trends, current conditions and expected future developments. Since forward-looking statements relate to future events and conditions, by their very nature they require making assumptions and involve inherent risks and uncertainties. APUC cautions that although it is believed that the assumptions are reasonable in the circumstances, these risks and uncertainties give rise to the possibility that actual results may differ materially from the expectations set out in the forward-looking statements. Material risk factors and assumptions include those set out in APUC's most recent annual and interim Management Discussion & Analysis and Annual Information Form. 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, APUC undertakes no obligation to update any forward-looking statements to reflect new information, subsequent or otherwise.

Non-GAAP Financial Measures and Use of Non-GAAP Financial Measures

The terms "Adjusted Net Earnings", "Adjusted EBITDA", "Adjusted Funds from Operations" and "Divisional Operating Profit" are used in this press release. The terms "Adjusted Net Earnings", "Adjusted EBITDA", "Adjusted Funds from Operations" and "Divisional Operating Profit" are not recognized measures under U.S. GAAP. There is no standardized measure of "Adjusted Net Earnings", "Adjusted EBITDA", "Adjusted Funds from Operations" and "Divisional Operating Profit"; 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 "Adjusted Net Earnings", "Adjusted EBITDA", "Adjusted Funds from Operations" and "Divisional Operating Profit", including a reconciliation to the U.S. GAAP equivalent, where applicable, can be found in APUC's Management Discussion & Analysis for the three and six months ended June 30, 2020.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP measure used by many investors to compare companies on the basis of ability to generate cash from operations. APUC uses these calculations to monitor the amount of cash generated by APUC as compared to the amount of dividends paid by APUC. APUC uses Adjusted EBITDA to assess the operating performance of APUC without the effects of (as applicable): depreciation and amortization expense, income tax expense or recoveries, acquisition costs, litigation expenses, interest expense, gain or loss on derivative financial instruments, write down of intangibles and property, plant and equipment, earnings attributable to non-controlling interests, non-service pension and post-employment costs, cost related to tax equity financing, costs related to management succession and executive retirement, costs related to prior period adjustments due to U.S. Tax Reform, costs related to condemnation proceedings, gain or loss on foreign exchange, earnings or loss from discontinued operations, changes in value of investments carried at fair value, and other typically non-recurring items. APUC adjusts for these factors as they may be non-cash, unusual in nature and are not factors used by management for evaluating the operating performance of the Company. APUC believes that presentation of this measure will enhance an investor's understanding of APUC's operating performance. Adjusted EBITDA is not intended to be representative of cash provided by operating activities or results of operations determined in accordance with U.S. GAAP, and can be impacted positively or negatively by these items.

Adjusted Net Earnings

Adjusted Net Earnings is a non-GAAP measure used by many investors to compare net earnings from operations without the effects of certain volatile primarily non-cash items that generally have no current economic impact or items such as acquisition expenses or litigation expenses that are viewed as not directly related to a company's operating performance. APUC uses Adjusted Net Earnings to assess its performance without the effects of (as applicable): gains or losses on foreign exchange, foreign exchange forward contracts, interest rate swaps, acquisition costs, one-time costs of arranging tax equity financing, litigation expenses and write down of intangibles and property, plant and equipment, earnings or loss from discontinued operations, unrealized mark-to-market revaluation impacts (other than those realized in connection with the sales of development assets), costs related to management succession and executive retirement, costs related to prior period adjustments due to U.S. Tax Reform, costs related to condemnation proceedings, changes in value of investments carried at fair value, and other typically non-recurring items as these are not reflective of the performance of the underlying business of APUC. The Non-cash accounting charge related to the revaluation of U.S. deferred income tax assets and liabilities as a result of implementation of the effects of the Tax Cuts and Jobs Act is adjusted as it is also considered a non-recurring item not reflective of the performance of the underlying business of APUC. APUC believes that analysis and presentation of net earnings or loss on this basis will enhance an investor's understanding of the operating performance of its businesses. Adjusted Net Earnings is not intended to be representative of net earnings or loss determined in accordance with U.S. GAAP, and can be impacted positively or negatively by these items.

Adjusted Funds from Operations

Adjusted Funds from Operations is a non-GAAP measure used by investors to compare cash flows from operating activities without the effects of certain volatile items that generally have no current economic impact or items such as acquisition expenses that are viewed as not directly related to a company's operating performance. APUC uses Adjusted Funds from Operations to assess its performance without the effects of (as applicable): changes in working capital balances, acquisition expenses, litigation expenses, cash provided by or used in discontinued operations and other typically non-recurring items affecting cash from operations as these are not reflective of the long-term performance of the underlying businesses of APUC. APUC believes that analysis and presentation of funds from operations on this basis will enhance an investor's understanding of the operating performance of its businesses. Adjusted Funds from Operations is not intended to be representative of cash flows from operating activities as determined in accordance with U.S. GAAP, and can be impacted positively or negatively by these items.

Divisional Operating Profit

Divisional Operating Profit is a non-GAAP measure. APUC uses Divisional Operating Profit to assess the operating performance of its business groups without the effects of (as applicable): depreciation and amortization expense, corporate administrative expenses, income tax expense or recoveries, acquisition costs, litigation expenses, interest expense, gain or loss on derivative financial instruments, write down of intangibles and property, plant and equipment, gain or loss on foreign exchange, earnings or loss from discontinued operations, non-service pension and post-employment costs, and other typically non-recurring items. APUC adjusts for these factors as they may be non-cash, unusual in nature and are not factors used by management for evaluating the operating performance of the divisional units. Divisional Operating Profit is calculated inclusive of interest, dividend and equity income earned from indirect investments, and Hypothetical Liquidation at Book Value ("HLBV") income, which represents the value of net tax attributes earned in the period from electricity generated by certain of its U.S. wind power and U.S. solar generation facilities. APUC believes that presentation of this measure will enhance an investor's understanding of APUC's divisional operating performance. Divisional Operating Profit is not intended to be representative of cash provided by operating activities or results of operations determined in accordance with U.S. GAAP.

Capitalized terms used herein and not otherwise defined will have the meanings assigned to them in the Company's most recent AIF.

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 APUC. Investors are cautioned that this measure should not be construed as an alternative to U.S. GAAP consolidated net earnings.


                                                       Three Months Ended                Six Months Ended
                                                June 30                                            June 30


                     (all dollar
                      amounts in $
                      millions)         2020                           2019      2020          2019

    ===

        Net earnings
         attributable to
         shareholders                        $
             
                286.2            $
        156.6          $
     
     222.4 $
     243.0


        Add (deduct):


        Net earnings
         attributable to
         the non-
         controlling
         interest,
         exclusive of
         HLBV(1)                         4.0                            7.6       8.4          15.2


        Income tax expense              46.9                           20.8      33.2          35.6


        Interest expense                44.9                           45.9      91.1          88.5


        Other net
         losses(3)                      26.9                            5.8      27.8           8.4




        Pension and post-
         employment non-
         service costs                   3.6                            3.7       7.0           5.0


        Change in value of
         investments
         carried at fair
         value(2)                    (309.9)                       (121.4)  (119.1)      (115.6)


        Gain on derivative
         financial
         instruments                   (1.3)                         (0.4)    (1.4)        (0.2)


        Realized loss on
         energy derivative
         contracts                     (0.6)                                  (0.7)        (0.2)


        Loss (gain) on
         foreign exchange                                              1.5     (4.7)          0.9


        Depreciation and
         amortization                   75.6                           69.9     154.5         140.9



                     Adjusted EBITDA         $
             
                176.3            $
        190.0          $
     
     418.5 $
     421.5

    ===




              1               HLBV represents the value of net
                                tax attributes earned during
                                the period primarily from
                                electricity generated by
                                certain U.S. wind power and
                                U.S. solar generation
                                facilities.  HLBV earned in the
                                three and six months ended June
                                30, 2020 amounted to $17.3
                                million and $37.2 million as
                                compared to $18.3 million and
                                $37.0 million during the same
                                period in 2019.



              2               See Note 6 in the unaudited
                                interim consolidated financial
                                statements



              3               See Note 16 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 APUC. Investors are cautioned that this measure should not be construed as an alternative to consolidated net earnings in accordance with U.S. GAAP.

The following table shows the reconciliation of net earnings to Adjusted Net Earnings exclusive of these items:


                                                         Three Months Ended                 Six Months Ended
                                                  June 30                                             June 30


                     (all dollar
                      amounts in $
                      millions except
                      per share
                      information)       2020                            2019      2020           2019

    ===

        Net earnings
         attributable to
         shareholders                         $
              
                286.2            $
         156.6          $
      
      222.4 $
      243.0


        Add (deduct):


        Gain on derivative
         financial
         instruments                    (1.4)                          (0.4)    (1.4)         (0.2)


        Realized loss on
         energy derivative
         contracts                      (0.6)                                   (0.7)         (0.2)


        Other net
         losses(2)                       26.9                             5.8      27.8            8.4


        Loss (gain) on
         foreign exchange                                                1.5     (4.7)           0.9


        Change in value of
         investments
         carried at fair
         value(1)                     (309.8)                        (121.4)  (119.1)       (115.6)


        Other non-
         recurring
         adjustments                                                              1.0


        Adjustment for
         taxes related to
         above                           46.1                            12.4      25.4           12.3

    ---

                     Adjusted Net
                      Earnings                 $
              
                47.4             $
         54.5          $
      
      150.7 $
      148.6


                     Adjusted Net
                      Earnings per
                      share                    $
              
                0.09             $
         0.11           $
      
      0.28  $
      0.29

    ---




              1               See Note 6 in the unaudited
                                interim consolidated financial
                                statements



              2               See Note 16 in the unaudited
                                interim consolidated financial
                                statements

Reconciliation of Adjusted Funds from Operations to Cash Flows from 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 APUC. Investors are cautioned that this measure should not be construed as an alternative to funds from operations in accordance with U.S GAAP.

The following table shows the reconciliation of funds from operations to Adjusted Funds from Operations exclusive of these items:


                                                           Three Months Ended             Six Months Ended
                                                    June 30                                         June 30


                     (all dollar amounts
                      in $ millions)       2020                            2019      2020      2019

    ===

        Cash flows from
         operating
         activities                             $
              
                142.9  $
     133.6                    $
     
     209.8 $
     255.7


        Add (deduct):


        Changes in non-
         cash operating
         items                           (52.6)                          (6.8)     56.6      39.5


        Production based
         cash contributions
         from non-
         controlling
         interests                                                                  3.4       3.6


        Acquisition-
         related costs                      3.1                             0.4       3.1       2.4

    ---

                     Adjusted Funds from
                      Operations                 $
              
                93.4  $
     127.2                    $
     
     272.9 $
     301.2

    ===

Visit APUC at www.algonquinpowerandutilities.com and follow us on Twitter @AQN_Utilities.

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SOURCE Algonquin Power & Utilities Corp.