Chris Jarratt - Vice Chairman of the Board Ian Robertson - CEO David Bronicheski - CFO Kelly Castledine - Director, IR.

Nelson Ng - RBC Sean Steuart - TD Securities Paul Lechem - CIBC Ben Pham - BMO Capital Markets.

Welcome to the Alqonquin Power & Utilities Corporation Q1 2015 Analyst And Investor Conference Call. Today's conference being recorded. At this time I would like to turn the conference over to Mr. Chris Jarratt. Please go ahead..

Thank you. Good morning and thanks for joining us on our 2015 first quarter conference call. With me on the call today are as usual, Ian Robertson our Chief Executive Officer. David Bronicheski, our Chief Financial Officer and Kelly Castledine, our Director of Investor Relations.

For your reference, additional information on the results is available on our web site www.algonquinpower.com. I would like to note on this call we will provide information that relates to future events and expected financial position that should be considered forward-looking and Kelly is going to provide additional details at the end of the call.

I also direct you to review our full disclosure on forward-looking information and non-GAAP financial measures in the results that were published yesterday. These are also available on our web site.

This morning, Ian is going to start with a discussion regarding the highlights of the quarter and David will follow with a full review of the financial results and then we will open up the lines for questions.

And we would ask that you restrict your questions to two and then requeue if you have additional questions which will allow others the opportunity to participate. And with that I will pass it over to Ian Robertson..

Good morning and thanks, Chris. I appreciate everyone joining us on this beautiful sunny May day. I will say with the company's increased exposure to the solar sector I have a new appreciation for days like today.

But, in summary for the first quarter, we did continue to see the positive impact of our growth strategy with 2014's achievements now being reflected in a full quarter of results. I do hope that shareholders are satisfied with the dividend increase which was announced this quarter.

We are pleased to confirm that the recently completely growth initiatives which are obviously showing up in our 2015 results now and our pipeline of near term commercially available expansion opportunities has given the Board confidence to endorse our targeted annual dividend growth rate of 10%.

We view the just announced dividend increase as consistent with the earnings cash flow and dividend growth guidance that we provided at our most recent investor morning last November. Specifically for this quarter, adjusted EBITDA at s$114.5 million continues on its upward trajectory. A 17% increase from the same period a year ago.

I think contributions from our generation and distribution groups with two new renewable energy projects having achieved commercial operations and favorable rate case settlements in the first quarter of this year can take a large portion of the credit for that continuing growth.

We remain focused on building and maintaining our well balanced diversified portfolio across utility spectrum and as always our continued success as a result of the dedication and commitment of our employees across our generation, distribution and most recently transmission business sectors.

For the Generation Group, Q1 marked the first full quarter production from the Saint-Damase wind facility in gas [indiscernible] region of Quebec which achieved commercial operation in late 2014. Contributions from Saint-Damase helped offset weaker than expected wind resources through the quarter.

I will mention that our diversified portfolio is the only practical way to hedge against these naturally occurring fluctuations in resource availability and we’re pleased that our portfolio is showing the strength of that diversification.

The Generation Group experienced a year-over-year increase in revenue due to the addition of solar power generation to the portfolio with the Cornwall Solar facility being fully operational for the first quarter of this year. Recently, the Generation Group completed construction of two of its renewable energy projects.

The 23 megawatt Morse Wind Project in Saskatchewan and a 20 megawatt Bakersfield I Solar Project in California.

These facilities are expected to generate a combined 157 gigawatt hours of energy per year with both of the projects selling their offtake under 20 year power purchase agreements with large investment grade utilities, exactly the model we strive for.

With the recent completion of these facilities the 2015 construction program for the Generation Group shifts to focus on three new projects representing approximately 235 megawatts and about $0.5 billion of capital investment and I will give you a little more color on those at the end of the call.

Moving on to the distribution business group, successful rate case settlements significantly contributed to the quarter's financial growth, the implementation of new rates at four of the group's utilities represent cumulative accumulative annual revenue requirement increase of approximately $14.3 million.

Early in the quarter the Distribution Group completed its acquisition of New Hampshire Gas, a tuck-in regulated gas distribution utility which added a little over a thousand customer connections to the group's expanding service territory.

And lastly, the transmission group was pleased to have received final permitting approvals from the California Public Utilities Commission and other agencies for the construction of its $50 million California based transmission line which is dedicated to serving the Distribution Group's CalPeco utility and construction on that project will start this summer.

With that back ground I will hand things over to David to speak specifically to the Q1 financial results.

David?.

Thanks, Ian. Good morning everybody. We’re pleased to be reporting today record Q1 revenues, record EBITDA and record cash flow. Our adjusted EBITDA in the first quarter as Ian said totaled $114.5 million, a 17% increase over the amount reported in the same quarter a year ago.

And it was primarily due to a strong quarter from our gas utilities given the colder than usual winter we had with the addition of the impact of rate case settlements started production at our Saint-Damase Wind Facility and our Cornwall facility as well as a stronger U.S. dollar.

Certainly the benefits of our diversified portfolio of regulated distribution utilities and independent power generation are evident in our results. So as we look at some of the key metrics, top line revenue $381.9 million compared to $343 million in the same quarter a year ago. Our adjusted net earnings were $42.5 million compared to $36.9 million.

So let's move on to a bit more detail from our operating subsidiaries beginning with the Generation Group and the Generation Group the first quarter of 2015 the combined operating profit totaled $45.6 million, as compared to $40.2 million during the same period in 2014.

In the first quarter, the Generation Group's renewable energy division which consists of wind, hydro and solar, generated electricity equal to 89% of long-term average resources compared to 97.5% for the prior year.

The decrease was primarily due to low hydrology as a result of below seasonal temperatures, the Donnacona hydro facility in Quebec being offline and weaker wind resources as well as additional icing and snow on the solar panels at our Cornwall facility.

For the first quarter of 2015, total net revenue which includes net energy sales and revenue from renewable energy credits totaled $46.6 million compared to $40.2 million in the same period last year.

Moving on to the Distribution Group, in the first quarter, the Distribution Group reported operating profit of $63.5 million compared to $58.4 million in the same quarter a year ago.

The increase in operating profit is primarily due to the impact of rate case settlements and below seasonal temperatures experienced in the New Hampshire service territory. For the electricity distribution utilities during the first quarter net utility electricity sales totaled $18.8 million compared to $21.7 million in the same period a year ago.

It was down slightly due to the fact that severe winter weather caused certain commercial and industrial businesses to be closed for a brief period of time in February. Natural gas in the first quarter net utility gas sales and distribution revenue was $63.2 million compared to $51.6 million compared to the same period a year ago.

And in the water division in the first quarter revenue from water distribution and wastewater treatment totaled $13.8 million compared to $13.3 million in the same period last year.

Just a brief update on our financing activities, you probably noticed we put out a press release related to our entry into the private placement market shortly after the end of the quarter. We were quite pleased with that financing.

We completed a private placement issuing $160 million of senior unsecured 30 year notes bearing what we believe to be an attractive 4.13% coupon. We are going to draw the funds in two tranches.

We have already drawn $90 million shortly after the end of Q1 and we will be drawing another $70 million in Q3 and certainly we believe that the offering demonstrates the strong currency of our liberty utilities bond platform in the US private placement market and the offering we believe contributes to the overall accretion of our pending Park Water acquisition.

So with that I will hand things back over to Ian..

Thanks, David. Appreciate that.

Before as always we open the lines up for questions I would like to provide an update on some of our growth and development initiatives specifically as I mentioned at the start of the call our 2015 construction program is underway with our 200 megawatt Odell Wind project in Minnesota, another 25 megawatt wind project in Quebec referred to a Val-Eo and the 10 megawatt expansion Bakersfield 2 solar project underway in California.

We are pleased that the Odell wind project located in Minnesota construction is now underway. The project just by way of background has a 20 year power purchase agreement with the [indiscernible] company with a subsidiary of Xcel Energy, so a highly credit worthy counter party.

For our Bakersfiled one solar facility, it's now operational and so the Generation Group is shifting its focus to the adjacent second phase of this project and in Q1 of this year the final permitting submissions were made and the interconnection work is now underway.

Switching over to the Distribution Growth, last year the energy nor gas system in New Hampshire filed a rate case application for approximately $16 million, temporary interim rates of an increase of 7.5 million was approved in November and we’re expecting that the new premier rates will be included in the third quarter of this year but just to remind everyone other than New Hampshire regulatory construct these rates will be retroactive back to November of 2014.

Regarding the acquisition of Park Water company, approval from both the California Public Utilities Commission and the Montana Public Services Commissions are required. The requisite applications were filed in California in November of 2014 and decision is expected in the second half of this year from the State of California.

Additionally, the approval application for the that of Montana was filed in December of last year. Both those applications are moving purposefully forward and we are answering the questions that posed to us but we are satisfied with the progress that’s been made.

And sum up just before we go to questions I would like to say that I hope that people are comfortable and confident that Algonquin is continuing to execute on its growth objectives. We have a clearly identified project pipeline of over a $1 billion over the next two or three years.

And we are committed to continuing to create long term accretive growth in the business which delivers value to the shareholders. So operator, with that I would like to open the line up for questions..

[Operator Instructions]. And we will take our first question from [indiscernible] with National Bank..

So looking at your growth pipeline in the power sector and also looking at your recent financing can you discuss your financing alternatives for your power projects? What will be your preferred source of debt? Will you be looking at corporate debt for those projects or maybe project finance? And what kind of factors are you looking at there.

I know cost is obviously one but anything else you are looking at?.

We haven't changed our strategy as far as the long-term financing with respect to the projects on the power side of the business. We have got an excellent platform for issuing bonds there.

What we are doing, however, is during the construction phase of the project we are looking to arrange construction financing through the construction of the project so that has really been the change and approach rather than drawing on our general credit lines, we are looking for construction financing during construction..

And as the portfolio of assets grows, will you look at some amortizing facilities for the power projects?.

We don't really think that we need to do that. I think we can manage the amortization of our debt on the power side, simply during the maturity process of the bullet bonds that we have out there.

You know, the weighted average length of our debt is not unlike the weighted average tenure of project specific financing if you look at the certain projects that get the 20 year financing, they end up being secured, they are more heavily covenanted but they don't benefit from any better coupon than what we are able to achieve on our bond platform and their weighted average tenure is in or above the 12 year mark and we are going be looking to put out at least 10 year bonds on the power side of the business.

So, we still believe that we have done an excellent financing platform..

And it is Ian, just to add a little color to that, I think when you think about our bond platform and our approach to amortization I think you’ve to think about and keep in mind our payout ratio on our dividend.

Unlike organizations you have a payout ratio which is if you will eating into the depreciation of projects which is for all intents and purposes is that return of capital, our payout ratio being within our net income, I think allows us the flexibility to redeploy 100% of the depreciation that return out capital appropriately and so I think that is perhaps a distinguishing characteristic of our organization against other companies in the IPP space..

And then secondly, of course you talked about your growth pipeline in the power sector.

Can you give us an update on the outlook for organic growth in the Distribution Group or is the market evolving at all, have your thoughts changed at all on the rate of investment into the Distribution Group and increasing the rate base?.

Well, organically I think we remain as optimistic as we ever have just to give you a couple of data points.

We have made great progress on the construction of a solar project in California by our Distribution Group, our CalPeco Distribution Group to meet its renewable portfolio standards and held a little RFP, selected a couple of entries and we are well into an approval process and that is not inconsequential.

That would be 60 megawatts worth of solar and probably 4100 million of total that we would consider to be organic growth. So the organic growth continues to be strong and I think you should comfort from that, if I think we would be remiss if we didn't touch on the acquisition market place.

And I don't think these comments will be different than previous quarters. It's an expensive market out there right now. I think as David mentioned to unveil I guess 30 year money at 4.13% but that has an impact to be frank you know that exact cost of capital on the value of acquisition candidates in the utility sector in the U.S.

And so while we are thrilled and happy that we continue to invest organically it is a tough market as we start to continue to think about acquisitions.

And I guess the only good news from our point of view as you know [indiscernible] we tend to be hunting in the smaller sector which perhaps there is a little bit less competition but the prices are still robust..

And our next question comes from Nelson Ng with RBC..

Just a quick question on the Q1 results, roughly what was the impact from the colder than usual winter? And also can you remind me which utilities still have volume risk?.

Sure.

Well, I think the impact of the colder man usual winter in some respects was offset by the positive impact by the negative impact of our wind because really the only utilities that which we have really a volumetric risk is New Hampshire and is our primary risk and perhaps to a lesser extent some of the mid-stake in New Hampshire and Massachusetts but it's much more muted because of the regulatory constructs there.

So really the big one is energy north in New Hampshire and so the total impact there is a couple of million dollars just to put it in context..

And then one more question just on the tuck-in the New Hampshire Gas acquisition. Can you just give some color to what the rate base was and then also I was just wondering whether there is any like other strategic rationale for the acquisition? Is it located right next to the your other utilities.

I notice that it was a propane distribution business, so is there an opportunity to switch to gas or grow the--.

Sure. When I say it is propane, don't think of it as a superior propane with trucks driving around selling dotted tanks, this is a propane air system.

So it just so happens there are pipes in the ground running all through the town of Keene and so it happens to use air propane as the fuel but it looks identical to a natural gas distribution system for all intents and purposes.

And the question is what is the strategic rationale? I think you should take it as evidence of our commitment that we will put a, try to plant a flag regulatory in a jurisdiction we want to look around that flat and find all the opportunities that we can find to tuck in and expand the service territory.

And that as - where there is an interesting comp convergence between the work that’s being done in the transmission group and the work that’s being done in the Distribution Group the Northeast Energy direct project is now slated to move through New Hampshire and there is 22 communities just by way of example that will now be within a reasonable distance of that new pipeline that we can bring natural gas to those utilities and in the case of New Hampshire Gas that would be one that we would probably convert to natural gas.

Though having said that, obviously the cost of the commodity is passed through to our rate payers and unless there is a compelling cost proposition we are happy to continue to have propane air mixture running through those pipes rather than natural gas but certainly that would be something that we would ultimately look to do as part of the expansion efforts that will be occasioned by the Northeast Energy Direct..

My other question was do you have an update on the Park Water acquisition in terms the regulatory approval time frame? Has anything changed?.

No, it hasn't changed. Right now hearings are scheduled both in New Hampshire - in Montana and California for early Q3 so July of this coming summer. And then it as matter of working through the process. We are in discussions and negotiations with all of the stakeholder groups including [indiscernible] advocates in California.

We’re answering data requests in Montana. And that is proceeding along.

You didn't ask the question but I'm happy to add the additional color, the hearing for the first half of the hearing on the condemnation by the city - town of Missoula whether concluded back in early April and a decision from the judge is pending so don't know anything more on that part of it..

And the completion of the transaction is still expected to be about yearend?.

Let's put it this way. We fully expect you to include a full year of 2016 earnings in your model from Park Water and as you know we are loath to handicap exactly the timing of regulatory approval processes but I think that is a totally safe..

And we will take our next question from Sean Steuart with TD Securities.

A couple of questions. I know there is a lot of moving parts with respect to the table for [indiscernible].

Can you remind us when does the asset need to be online under the terms of the PPA with I guess the ISO now?.

I think the final and we call it the long date is under the PPA is 2018 is I guess that is the long date. Without any further extensions by the government. And so just to give you context of where we stand right now, the real work is just about finished from our perspective.

You may recall that the ministry of environment asked us to do some more public consultation on the concrete batch plant which is obviously required for the construction of the facility. the question period for that closed on at the end of April and we are responding to all the comments and questions that came in about the batch plant.

I mean hopefully they are relatively routine, it's a pretty well-known piece of equipment and we will be answering all those. I guess we are optimistic to getting the [indiscernible] in relatively short order and so consequently that long date, if you will, will hopefully not really factor into our thinking all that much..

So construction under your current time table starts 2016, I guess?.

I mean actually it may start in the fall. We will have to look at it - look at, scheduling some things. There is docs and stuff that need to go in. You can imagine it is an [indiscernible] after all and may make sense to build those over the course of the fall rather than waiting for the ice to come in. But it's that kind of stuff..

Second question I had more on some of your perspective growth opportunities. You talked in the past about CNG and LNG opportunities in Massachusetts.

Any update you can give on progress on that front?.

Sure. We have an LNG plant that we are working on developing right now and we are pleased that we have got sufficient lead customers committed to that project that we believe the economic feasibility of the project has been confirmed. I will say it's not a huge project, it's a $135 million capital project.

We are partnering up with an experienced engineering and EPC firm in the development of that project. But I think it is a great opportunity for us to start planting some flags in the LNG, CNG business in New England.

And so I think the answer is yes and I think you should look at this - and again evidence of when we have a presence in the sector how do we find all of the opportunities that exist and building this LNG facility and having long term uptake contracts with local utilities is exactly the way for us to exploit that. So it's smoother to hedge on..

Our next question comes from Paul Lechem with CIBC..

Just continuing on the question of longer date development projects, you mentioned Ian if I heard correctly that you’ve got approvals for one of your transmission projects, your electric transmission project in California.

Is there anything else required for that to move ahead?.

No, construction is underway. I will mention that it's broken in a couple of phases. The first phase is what is going be constructed over the course of the summer.

It's about $20 million of the total $50 million and that’s underway and there are in the approvals for that the commission asked us to come back and provide some sort of follow-up information on subsequent phases but I think we are kind of hoping and I think the evidence would be to extent that the requirement for the first phase is established that it would be hard to find that the second phases don't enjoy sort of the same requirements.

It will be undertaken over the next couple of years but the first phase this summer, Paul, is $20 million..

So you had another transmission project that you are pursuing in Nevada.

Can you talk about any progress there or where that is?.

That one is I will not say it's going slower. Unfortunately, just to give you a little bit of color on the way projects get moved through the socialization process in California, they all get submitted in a planning process application in the fall that gets reviewed by CALISO over the course of the spring and announced in March.

Unfortunately, the project that you are making reference to didn't get picked up in this last round of the TPP the transmission planning process by the CALISO. I don't think it tells us the project is dead, it's just that as the CALISO looked at the project that stood in front of it, it didn't get down to the level.

But we are optimistic that we will be pushing on it to get that project. Additionally, and that we are continuing to explore opportunities jointly with NV Energy, you know, the Nevada Utility which is the provider of energy and capacity for our CalPeco project.

We are exploring a number of joint opportunities for expansion of transmission capacity in and around the state border between Nevada and California and I think we are optimistic that some more stuff will be freed up in that to go into the transmission group..

Just wondering David maybe you can give some color on this in terms of seasonality now on the utility side especially with the new rate cases. How should we think about the split between the quarters.

Is Q1 a more seasonal quarter than typical that we might see some softness therefore in some of the other quarters? How should we think about the split between different quarters?.

Certainly there is seasonality in the utility business largely drive by the gas utilities. At our Investor Day and I'm happy to share the slides with you, we gave pretty specific guidance in terms of the seasonality percentages that you could expect quarter by quarter through the year. And what we also had it for the power side as well.

So happy to get you that information..

Q1 track to that expectation in terms of the split?.

Yes..

And the rate case settlements would follow the same kind of pattern?.

Sure, just add some color to that. Obviously the rate case settlements proportionately affect every quarter the same if you want to think about of it that way, if you are just increasing the rates and the EBITDA is expected to go up by $100. It really generally - those proportional splits should be applicable to the notional $100, Paul..

[Operator Instructions]. And we will next move to Ben Pham with BMO Capital Markets..

I just want to move back to Amherst Island and reading in the press and there is this wind project very close to Amherst Island at the Ontario court denied an application just because of impact on endangered species.

And since it's so close to Amherst Island, I just to check does the project face the same type of implications and have you seen an increase in public opposition since the that court ruling?.

In terms of the similarities from what we understand on that particular project that you are talking about it's a very specific issue. And I think there is probably a couple of other differences between that project and ours primarily that one is constructed on public lands and I think that is a pretty significant distinct.

I would say you can't really compare the two propane and the actual specific issues on that. The second part of the question have we seen additional involvement with the public, I would say no. I mean it has been a project that is under the fair amount of scrutiny and we are going through all the processes and approval permits and we always have been.

I think the punch line is if we still feel the project has numerous benefits to the township as well as the island of Amherst Island and so we’re kind of just working our way through the process..

I just wanted to go back to the commentary about the M&A market being robust. I wanted to clarify, is that commentary for both contracted at par and regulated U.S.

utility?.

To be specific, Ben, I was speaking of the regulated utility sector. As you know, on the contracted power business, we are not really in the market place to buy operational contracted assets. And I think you know we are kind of acknowledging that that’s a sector that’s being dominated by the U.S. yield cos in terms of pricing.

And in some respects I don't want to say we are fine to leave it to them, our focus is really on development projects. We think they add value during that development phase and harvest that over the operational life of the project.

So yes, to your question that the market in contracted IPP assets is very robust, but no it was not a market that we see ourselves participating in at this stage. We are just not sure that we are going to create value for our shareholders the way we want to..

Any thoughts on redeploying instead?.

You mean if we are not buyers should we be sellers?.

Yes..

Well, we look at it always. It would about remiss if as a management team we weren't always looking at how to maximize shareholder value and obviously we look at the yield co phenomenon, is that something that we can take advantage of, how would we take advantage of it, are we leaving money on the table.

Nothing to announce at this stage other than to say this kind of stuff is always on our radar scope, Ben..

And ladies and gentlemen with no further questions in queue I would like to turn the conference back over to management for any closing remarks..

Great, thanks, everyone. Appreciate you guys taking the time for our Q1 2015 call. And as always, stay on the line for a review of our disclaimer.

Kelly?.

Certain written and oral statements contained in this call are forward-looking within the meaning of certain securities laws and reflect the views of Algonquin Power & Utilities with respect to future events based upon assumptions relating to among others, the performance of the company’s assets and 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. These forward-looking statements relate to future events and conditions by their very nature and require us to make assumptions and involvements here 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 most recent annual financial results, the annual information found in most recent quarterly management discussion and analysis. Given these risks, undue reliance should not be placed on any forward-looking statements.

In addition such statements are made based on information available and expectations as of the date of this call and such expectations may change after this date. APUCs reviews materials, forward-looking information that is presented not less frequently than on a quarterly basis.

APUC is not obligated to nor does it intend to update or revise any forward-looking statements whether as a result of new information, future developments, or otherwise except as required by law.

With respect to non-GAAP financial measures, the terms adjusted net earnings, adjusted earnings before interest tax and depreciation and amortization, or 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 are collectively the financial measures are used on this call and throughout the company’s financial disclosures.

The financial measures are not recognized measures under generally accepted accounting principles or GAAP.

There is no standardized measure of these 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.

The calculation and analysis of the financial measures and a description of the use of non-GAAP financial measures can be found in the most recent and published management discussion and analysis available on the company’s website and cedar.com.

Per share cash provided by operating activities is not a substitute measure of performance or 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 clearance against APUC. Thank you. Goodbye..