Welcome to the Algonquin Power & Utilities Corp Second Quarter 2017 Conference Call. [Operator Instructions] I would now like to turn the conference over to Christopher Jarratt, Vice Chair of Algonquin Power & Utilities Corp. Please go ahead, Mr. Jarratt..

Great, thanks. Good morning, everyone and thanks for joining us on our 2017 second quarter earnings conference call. As mentioned, my name is Chris Jarratt. I am the Vice Chair of Algonquin Power & Utilities Corp. Also with me on the call today are Ian Robertson, our Chief Executive Officer; and David Bronicheski, our Chief Financial Officer.

For your reference, additional information on the results is available for download from our website AlgonquinPower.com. We also have a webcast presentation to accompany this earnings call that you can access from that website.

Over the course of this call, we will be providing information that relates to future events and expected financial positions, which is forward-looking. I direct you to review our full disclosure on forward-looking information and non-GAAP financial measures, which is also available on our website.

We will read the full disclaimer at the end of the call. Kicking off the call this morning will be Ian with a review of our Q2 2017 strategic achievements and then David will follow up with some financial highlights, and then we’ll go back to Ian and conclude with the future outlook and details on our growth plan.

We'll then open the lines for questions and as usual we ask you to restrict to two and if you have additional questions please get back in the queue. And with that, I'll turn things over to Ian..

Thanks Chris. Good morning, everyone and thanks for taking time out of your day to join us for our Q2 2017 call. For the quarter I'm pleased to report that APUC delivered another quarter of increasing financial and strong operational results. I think it's clear that these results were driven by the significant growth we've undergone in recent years.

In APUC, we pride ourselves in having this say-do mindset, and I think that means that one should say what intends to do and then ultimately do what one says and we believe that we remain on the growth trajectory promise over the past few years.

80% year-over-year increase in adjusted net earnings per share, 99% year-over-year increase in adjusted EBITDA and near doubling of our assets, I think those are all indicia of our value creation through growth philosophy.

For this quarter our growth can be attributed to accretion for the Empire acquisition and earnings contributions from new renewable long-term contracted generating facilities.

As on the screen where you can see that the quantum of our growth seems dramatic, I think we're comfortable and confident that this growth represents continued execution against our stated strategic business plan to maintain the stability and strength of our overall business.

In addition to the strong financial results, we were comfortable with the recent operational accomplishments within Liberty Utilities six rate cases where we successfully completed in the quarter which collectively will add close to US$14 million in net incremental revenues to our utility business.

And you will note that the board also recently approved the acquisition of two small water distribution systems from the city of Perris which will add close to 4000 new water customers to our operations in California.

Within our new energy - renewable energy generation group, Liberty Power progress continues to be made on our two active 2017 construction projects. For a new 10 megawatt solar project located in Nevada, it has been added to the development to do list.

Construction of this project is currently being overseen by Liberty Power development team and the facility will be added to the generation rate based to serve the needs of liberty utilities California distribution customers when it's complete late next year.

The Turquoise Solar Project is similar to the 50 megawatt Luning solar facility that reached COD earlier this year, and is currently in service satisfying the energy needs of our CalPeco customers.

I think I'd offer the Turquoise project up as further example of the ability to combine the core competencies of our two business groups at the same time demonstrating our continuing commitment to renewable energy and the ability to reliably and cost effectively serve the needs of our utility customers.

And with that overview, I’ll turn things over to David to give you a bit of a deeper look into our Q2 financial results.

David?.

Thanks Ian, and good morning everybody. We're pleased again to be reporting strong financial results compared to the same period last year. This marks a continuation of the strong growth experienced in the first quarter driven by our acquisition of Empire.

In fact the accretion of the Empire being a strong as it is, might overshadow some of our other major drivers to the strong results namely important contributions from new generating assets such as Odell, Deerfield and Bakersfield II. Strong production from our existing facilities and successful rate cases on the Liberty Utility side.

The diversity of our overall business certainly is a key component of our continued ability to deliver strong sustainable financial performance. Now turning to the financial metrics for the quarter. Our adjusted EBITDA was basically double on a year-over-year basis to $197.6 million for Q2 2017 up an impressive 99%.

Our total of $94.9 million of adjusted EBITDA growth was sourced from new facilities including Empire within the Liberty Utilities Group and commissioning of new facilities within Liberty Power.

Taking a closer look at our individual business units and starting with Liberty Power, Liberty Power operating profit grew 42% over the second quarter compared to 2016 on a production basis, Q2 production from our fleet of Hydro facilities was 15% higher than the previous year.

As mentioned previously, our win fleet was having a strong contributor to the quarter, existing assets were 40% stronger than Q2 2016 and above long-term averages and production from our two new facilities Odell and Deerfield was in line with our expectations.

With the addition of the two new wind farms, the collective production from our point of wind facilities was 76% higher than the previous year and 2% higher than expected long-term averages.

Finally, while production from our solar facilities was 40% higher than the previous year due to the commissioning of the 10 megawatt Bakersfield solar project in 2017. In total, our renewables fleet certainly benefited from diversification by modality with a strong wind production offsetting more modern result from Solar and Hydro.

Now looking at our Liberty Utilities Group. Q2 operating profit more than doubled over the corresponding quarter in 2016 with the acquisition of Empire and there's also - Empire contributed $81 million to the operating profit in Q2.

Even aside from Empire, though the implementation of new rates from successful rate cases is a key component of the Liberty Utilities Group's growth strategy and that contributed $6.9 million to the Liberty Utilities operating profit in Q2 2017. The growth and EBITDA is not important if it doesn't translate into meaningful growth in our EPS.

Our adjusted EPS grew 18% to $0.13 per share for the second quarter of 2017. Adjusted funds from operations grew 54%, a $119.6 million during Q2 and revenue increased 103% to $453.2 million.

With the full effect of Empire now reflected in our results for the second quarter in a row, APUC has demonstrated that we are well positioned to deliver material growth through the remainder of 2017. I’d like to make two capital markets comments before turning things back over to Ian.

First, a quick update on our convertible debentures, 99.7% of the convertible debentures have now been converted to equity. I would once again encourage those few remaining debenture holders to contact their broker to complete the conversion to common shares.

Second, I'm pleased to report that our Board of Directors yesterday approved changes to our dividend reinvestment plan or DRIP as it's called to make our DRIP now available to our U.S. shareholders in addition to our Canadian shareholders. Extending our DRIP to the U.S.

is a natural extension of our efforts to deliver value to our expanding base of shareholders in the United States and it aligns well with the dual listing of our common shares on the New York Stock Exchange last November.

As mentioned in our dividend press release yesterday afternoon, shares under our DRIP for Q3 will be issued at a discount to market as defined in our plan of 5%. Now I’ll pass things back to Ian..

Thanks David. Before opening up the lines to address questions, with the successful first half of 2017 behind us, I did want to provide an update on our growth initiatives for the remainder of the year and beyond.

Within the Liberty Utilities Group, our continued investment in system improvements as evidenced by our revolving list of completed impending rate cases.

As I had mentioned earlier so far in 2017 six rate cases have collectively added US$14 million in annualized revenues and another five rate cases totaling US$33 million and requested incremental revenues are in current pursuit.

I believe that this continual stream of rate cases serves as a backdrop to highlight the benefits that we gain from the diversity of our utilities business. With more than 30 regulated utilities across the U.S., every year sees the prosecution of multiple smaller rate cases.

This diversification into a larger number of smaller rate cases avoids the volatility and uncertainty that might accompany the outcome of a large rate case in a single regulatory jurisdiction.

Our regulatory team is structured and, frankly, staffed for this cadence of rate cases and I hope that you would agreed that our capabilities on this front are evident by our track record of successful rate case outcomes.

Another key element of our growth strategy involves the cross functional work between our Utility and Power Groups in furtherance of our greening the fleet strategy in Missouri, Arkansas, Oklahoma and Kansas.

We remain convinced that our utility customers will drive long-term public-interest benefits to the transition from the current coal dominated generation mix to a future where low cost environmentally beneficial renewable of the primary source of luxuries is served by customers.

Current plans could see up to 800 megawatts of new wind generation representing total capital investment over US$1.2 billion.

To support a portion of this new generation for those of you who follow the SPP interconnection filings, we did file an interconnection request during the quarter by Empire for 500 megawatts of new wind generation within the SPP itself.

And the development projects that are being pursued directly by Empire continue to be advanced within the service territory.

Our updated integrator resource planning special study which I had mentioned on previous calls is being ready for filing in Missouri in the coming weeks and I would mention that we are pleased with the recent filings by other electric utilities which echo the compelling economic proposition associated with replacement of coal and other fossil fuel fired generation with new wind generation.

In addition to the ongoing organic investment, we continue to pursuit of additional service territories to which Liberty Utilities can bring its local and responsive customer oriented business model.

Recent internal approval with the acquisition of two small water distribution systems in the city of Perris, California which is about 70 miles east of LA is a good example of Liberty Utilities ability to create value for our customers, our it's communities and shareholders frankly to the acquisition of smaller tuck-in utility systems.

Given the proximity of these 4100 customers to our existing Southern California operations, we look forward to working with the City as they progress toward the electoral vote on the acquisition in November of this year and then working with them to do regulatory approval process next.

Within the Liberty Power Group we are advancing the portfolio of commercially secure construction development projects more than 350 megawatts across five projects. Construction is proceeding in Maryland at our 75 megawatts Great Bay solar facility with commercial operations expected early next quarter.

And construction activities at our 75 megawatt Amherst Island project are underway with road and foundation work plan for the coming months. In addition to prosecuting the existing pipeline of development projects, we are maintaining our commitment to new developments in the U.S.

renewable energy markets which is underlined by our safe harbor turbine purchased last year. In this regard, we've identified our 135 megawatt California development project for which we can use it for - we will be able to use a portion of our safe harbor turbines. And lastly, a couple of thoughts on international geography.

As I confirmed in previous calls, we continue to be interested in geographically broader prospect for renewable generation. Recently we've been expanding our knowledge of international jurisdictions and available development opportunities.

With consistent with our statements last Investor Day, our focus remains on opportunities which accrete to our earnings, our cash flows, perhaps importantly our growth profile which operate in stable market for the strong rule of law, and clear capital repatriation pathways.

I guess before we open up to questions in summary, we are confident that the investment thesis that we articulated at our Investor Day last year remains intact and is one against which we continue to mark our progress.

I trust everyone sees this quarter's results as a continuation of a seven-year string of earnings and cash flow growth that supports our guidance for continued dividend growth. And with that, operator, like to open it up for questions now on the call please..

[Operator Instructions] The first question comes from Rupert Merer with National Bank. Please go ahead..

So Ian you finished talking about international investment opportunities. Some reports recently that Algonquin was participating in the sale process of Abengoa's stake in Atlantica Yield. You may not want to comment on that process specifically but can you give us your thoughts on the price of assets in the M&A market today.

And now that you're starting to learn more about international markets, are the returns in the international markets more attractive than what you can see in North America?.

Well let me start by saying yes, I don't think it's appropriate that we comment on any specific bid or business development opportunity. But I will say that you want us and we do see all of the opportunities that that really come across the transom. I think something is not working in our system if we’re not seeing these things.

So my second comment is and maybe just using Atlantica as an example if nothing else. These are long-term - we like long-term contracted assets with sort of stable currency expectations and stable political regimes.

And with the respect to your question about returns, I don’t think it’s unfair to say that the North American market is a very competitive landscape. And there may be outside returns offered in some of the jurisdictions for which if you find a partner is their home turf and so you take away the fact that it’s a foreign environment.

And so, I know I think the work that we have done has made us increasingly comfortable that there is an economic thesis to be pursued at looking at things outside of Canada and the U.S. It doesn't in any way mean that we don’t see value in the Canadian and the U.S.

marketplaces, we just acknowledge that it’s a competitive market, I think we are comfortable our cost of capital and our development ingenuity will allow us to be successful but if the company continues to grow and as the size of it, I think it would be a mistake for us to not look internationally.

So I don't know if that's responsive to your question Rupert..

Yes, that’s great. And then secondly you mentioned you filed the interconnection request for 500 megawatts of wind in Empire territory. Can you walk us through the next steps to moving those plans along and given the support from the top in the U.S.

for coal is there any push back by some who may want to support the coal industry?.

Well, okay two separate questions which is knock into one question I might point over Rupert, but first of all with respect to kind of the coming months in Missouri specifically the 500 megawatts that I mentioned that we filed interconnection request for are for two projects that Empire would be kind of developing itself.

I think Empire is a little bit agnostic as to whether the best value for its customers is created by developing its own project. So frankly on a bill transfer basis for other projects, but we want to make sure that by having our own projects in the queue we maintain competitive tension in there.

And so we have two projects that we filed in the interconnection - for interconnection request for and so we will continue to develop those, but the expectation frankly is will be issuing an RFP likely in late September or early October for other developers to bring project that they would build and ultimately sell to Empire since some inspection competition to our own undertakings at the end of the day, we'd be both getting the best deal for customers.

So over the course of the fall, you’ll see that our PV completed with some regulatory filings looking for prudent determination sometime early next year. Clearly the intention is for commitment to get these projects online before 2020 to secure 100% of the PTCs. And so we are moving purposely ahead on that.

So I guess in terms of then - I’ll say your corollary question about kind of the U.S. administration's view on coal and the proposition we have for replacement of coal-fired generation with wind. I'm not sure it actually is in any way trading on administrative or legislative support. I mean, in large part this is largely just an economic argument.

And I think when you look at some of the other filings that have been done, their premise is that with the current PTC market, the variable cost of coal are higher than the all-in cost of wind, and it's hard as a utility which has kind of a fiduciary obligation to its customers to continue to operate those existing coal plants when there is an opportunity to reduce costs.

And it really doesn't have anything to do with administrative support. Now if your question is going to, could there be some counterintuitive measure introduced that somehow subsidize coal on behalf of - against wind, I guess presumably that's always the case. I will point out that in Missouri, there are no coal miners.

The coal that gets burned in Missouri is Powder River basin coal and all comes by train. So it would be a little bit counterintuitive that wouldn’t be an initiative.

Certainly, that would have any impact on the jurisdiction in which we serve, and I appreciate that doesn’t necessary isn’t conclusive of whether or not somebody might try to advance that kind of initiative.

But man, it just feels strange when the economics are in favor of something which is societally good that somebody would come out with that kind of counterintuitive program. But, man, like nothing is beyond the beyond. But we don’t anticipate it right now, Rupert. And as I said, we’re advancing our arguments solely on the basis of economics..

It does seem like there could be some subsidies for coal coming, but I guess we’ll see what happens. But thank you very much..

The next question is from Nelson Ng with RBC Capital Markets. Please go ahead..

Could you provide a bit more color on the Perris water? I guess it's a privatization.

Like do they -- why did they run the process in terms of like, do they need cash? Do they need a, like, better operator? Is there like a large CapEx requirement? It's -- yes, like, could you just kind of give a bit more color on the process and, I guess, why -- like, why you looked at the opportunity given....

First of all, as you know, we're always on the hunt to kind of add tuck-ins to our system where operational synergies and economies of scale can benefit everyone. And in the city of Perris, with the acquisition of Park Water last year certainly would fall into that category. So I’d start with that.

What’s driving up in the city of Perris's perspective, it’s a little bit complicated in the city of Perris itself is actually served by a couple of different water providers. And I think the objective in the city of Perris is perspective, is really to consolidate their operations so that they have uniform rates across their entire service territory.

I think you do allude to one of the concerns that I think exists broadly in the U.S. municipal water business is that there are latent capital investment obligations that might be politically tough for the municipalities to advance, but which are easier for investor-owned utility to advance.

And certainly that's the thesis that we saw play out in White Hall where in Arkansas and I think that's probably an underlying objective from the city of Perris's perspective. I think there is an economy of scale, I mean, that the customers in the city of Perris would realize.

So I think it's a little bit of kind of all the things that you’ve mentioned, Nelson. But at the end of the day, as you know, we’ve largely built our organization on this acquisition and I won’t use the word [indiscernible] because the city of Perris sort of doesn’t fall into that same category.

But I think we are an efficient and effective consolidator of smaller utilities. And this obviously isn’t a blockbuster deal from Algonquin's perspective, but I would offer it up as kind of evidence of their ability to kind of continue to execute on that consolidation of thesis..

And then my next question is, did you guys participate in the Alberta wind RFQ? And I guess what are your plans there?.

Well, to be frank actually in Alberta, our focus is really frankly more on the solar side of things rather than on the wind side. As we looked at the opportunities that might be available, we didn't find anything that was going to be sufficiently competitive that we wanted to put money into it.

There is no prize for second place in these sort of things, but you can spend a lot of money to run that race. And so, I think our focus has been more on the solar side. We are looking at a couple of other couple of development opportunities for future RFPs maybe.

But to be frank, we didn't find anything that we felt was sufficiently competitive toward the investment..

And I presume you're working with a local development partner in Alberta?.

Yes..

I’ll get back in the queue..

All right Nelson and we’re sorry for holding the call an hour earlier from Vancouver. I know it makes it an early day for you..

The next question is from Sean Steuart from TD Securities. Please go ahead..

Couple questions Ian, with the successful integration of Empire, maybe just give us a sense of your appetite for larger scale utility M&A from here. And with respect to scale, how big is too big from your perspective.

What’s your appetite in terms of capital deployment on that end?.

Sure well, think we are comfortable that I think we put the Empire transaction. We’ve put a tick beside it on the success column. And so hopefully the capital markets would see the kind of the benefits and the results that we promised are actually coming to fruition. So we are interested in repeating that experience.

We watched, I won’t say with NV, but we certainly – we’re familiar with Avista that obviously Hydro One bought. I don't think it’s unfair to say that they were in a unique position from a capital structure perspective to win that.

And more power to them and that worked out, but maybe just as an example of scale and size, I think Avista would have been something now with ourselves kind of close to 11 billion in total size is something that might be on our radar scope today that it wouldn't have been on our radar scope before we had completed Empire and kind of demonstrated our ability to digest something of that scale and make sure that it's functioning operationally.

And so there is kind of an example of something that we would obviously have liked to have done. We like the hydro generation in there. And we were actually very familiar with the Alaska operations and we had looked at them before Avista had bought them. So there’s a good example I think Sean, of something scale-wide that we pursue.

Obviously, the smaller -- we will go right down to $11 million in the city of Perris, California. So it’s a pretty broadband that we I think are effective in competing on. So the top ends moved up, and I wouldn’t say the bottom ends moved up from our perspective..

Second question is, with respect to your comments on offshore opportunities.

Can you give us a little more detail and update us on which jurisdictions specifically you’re spending most time getting up to speed on?.

Sure well, I’ll start by saying we’re little agnostic as to specific jurisdiction, but the principles that I kind of outlined, this idea of stable political environment, stable electricity market, strong rule of law, capital repatriation pathways, and then if you wanted to offer up some examples that I think would fit that rule list, OECD countries clearly fall into it.

Number of countries in I think South America, Chile, I think Peru would fall into it I have to think a little bit about Brazil, but certainly -- anything in Western Europe would fall into it.

I think really that the challenge that we have – as we look at these international opportunities is we want to make sure that this isn’t just about buying an asset in Belgium or in France. It’s about having a program that kind of is accretive to the growth thesis that we have going forward is adding that single asset.

I don’t think it adds value and in fact in some respects, it adds complexity. It’s having a program and looking for an opportunity that brings the pipeline and perhaps arguably a partner that allows us to kind of harvest those opportunities in geographies that we are not ourselves completely familiar with.

And so I know it's a long list of what we're looking for, but that certainly kind of gives us some color for what we’re trying to accomplish as we think about moving internationally..

The next question is from Ben Pham with BMO Capital Markets. Please go ahead..

I believe an analyst throwed up some questions on the international commentary that you guys mentioned. And in the past, the topic has typically been initiated by us analysts, and now it's coming from you guys, that's interesting to see that. And you guys have talked about Chile and Europe before, so that's not surprising.

But in the past, you have mentioned that you have a ton of opportunity in North America that international is obviously more on opportunistic side of things, and you weren't buying a lot of tickets heading outside.

So just curious, has that changed now from your perspective, Ian, in terms of just the pace at what you're going out and learning foreign jurisdiction and how you think about your existing portfolio today?.

Well and I appreciate your observation Ben let me just, I will say a correct premise that you'd operated up in. I think perhaps historically I said we’re probably buying a lot of airline tickets to look at things internationally. We just weren't I don’t say, ready to print any transactions.

And I wouldn’t say that -- and I’ve always couched our comments about international saying is, going to a geography that is outside your kind of home province or state is something that you want to do in a measured way, that you’ve taken your time to fully understand. And I still feel that way.

I do not feel, we do not feel the pressure to oh my God, we've got to get international. Our pipeline, as you accurately point out, has got billions of dollars of stuff to do over the near term.

I think as we stare off into the future, and I think my job and arguably the rest of the executive team here is to try to peer into the clouds, down the road, the foggy road and see what comes out. And I think consistent with Rupert’s first question is it’s a competitive landscape here in North America.

And the question is are there returns that justify whatever your perception of the increased risk are internationally, is our risk return profile which is attractive. And as we think, as I said about this organization continue to meet a growth trajectory. We’re $11 billion in size.

I think you want us to be looking abroad, but you don't want us to start looking abroad when the cupboard is bare. And I’d say the cupboard is not bear right now and I think that was your opening premise. So we are continuing to look abroad.

I think there are things that we have looked at and as I said, without commenting on specific opportunities that you saw in the press, of course we’ve look at Atlantica why wouldn’t we have? These are -- I've never gone to a management presentation for investment opportunity and come away stupider than I walked in.

And so we go to these thing and we just get smarter. And so Ben, I wouldn’t want you to characterize your comment that there is any increased level of desperation on this organization’s part. It is just a continued evolution of what we’ve said in the past..

And then I'm just curious also, other than just returns you got from your typical acquisition strategy, I mean, are you -- is there anything else that you'd look at in international transaction maybe strategically? And do you guys buy the thought process that seeing some of your -- maybe some peers going international, seeing their own multiple compressed on the back, even though know it's accretive, are you guys thinking about that in your analysis when you look outside North America?.

Well, obviously all of those things are considerations. Let me start by saying, when we think about international and when we think about things outside, everything is done in measure.

So I don't think you would ever see us announce a transaction that you would go, oh my gosh, there is a significant portion of their growth profile or asset base now in a jurisdiction that I’d never considered. And therefore I think that could lead to multiple compression. These are always about incrementalism.

It’s always about, we’ll add and create value in any opportunity.

Even as we think about regulatory jurisdictions that we might get into, is there a strategic alignment here, is it create opportunities, are our investors going to be comfortable with this? And we say the word, “international”, that's a big word, but there's a big difference between Botswana and Belgium.

And so I think you just have to be very measured and very disciplined. I should think about any diversification initiative, but it would always be that, Ben, a diversification initiative as opposed to a whole strategic shift..

The next question is from Robert Hope with Scotiabank. Please go ahead..

Just a clarification on the 500 megawatts of Missouri wind.

Is this tied to the shutdown of Asbury? Or would the greening of the fleet in Missouri be above and beyond that?.

The greening of the fleet definitely involves the shutdown of Asbury, Robert. The 500 megawatt interconnection request were just for Empire's own projects that I kind of perhaps [fumbly] try to explain are potentially an element of Empire's procurement of up to 800 megawatts total of wind.

They’re a little bit Empire, we are a little bit indifferent as to whether we develop our own projects for which I had mentioned, we did that interconnection request. Or buy projects that have been developed on our behalf by other developers.

But it is all in the context of shutting down Asbury, greening the energy mix, and reducing cost for customers. So they’re all kind of one in the same, Robert..

And then in your prepared remarks, you mentioned that you had a checkmark next to Empire being a successful integration.

Any potential upside you're seeing there? And also, how are you tracking versus your 2017 guidance?.

Well, in short, any upside, I’m going to have to say, no. But that’s actually a good thing because there is a downside.

I mean, if there was upside that we didn't see before -- but then theoretically there could’ve been downside that we would’ve missed as well -- as I mentioned when we very first announced the Empire acquisition, it’s pretty transparent in terms of what you're getting there.

And I think it's a well run conservatively managed utility in a jurisdiction where customers pay their bills. And that provides some predictability and stability.

So I'll say that Empire absent the climatological issues which I think we talked about last quarter, and for which we actually had made a commitment that we will try to make that ground up through cost control. And I think we’re well on our way to do that.

Absent those issues, Empire is delivering kind of in accordance with the expectations that we articulated which mean that we remain comfortable with the guidance we gave before. And I’ve got to an asterisk beside it saying, and as you know, that you have to be careful about which currency you speak in terms of our guidance.

Obviously, we’re a Canadian company and we report in Canadian dollars. But a fair chunk, in fact, the vast lion share, probably between 80% and 90% of our operations are actually in the U.S. And so currency swings have a big impact on us. So I don't want to mislead because we are subject to do that going forward. And I know you're aware of that.

But I just thought in the interest of making sure that we add transparency to that..

The next question is from David Quezada with Raymond James. Please go ahead..

My first question just on tax equity financing general theme. It’s been a while now since we heard anything of the U.S. on updated ideas on tax reform there.

Do you have any insight or idea of what tax rate that these tax equity deals are assuming today?.

That’s an interesting question. I guess the plus and the minus of this right now is that we’re not sort of actively in the market during this period of uncertainty.

And so that I think I will start by saying is that’s a good thing because in periods of uncertainty where it is a seller’s market for the tax equity perspective, they would push that risk over to us. And so right now we’re not seeing that market sort of upfront and experiencing that. In terms of the tax rate, no, actually I don't have a good idea.

I think a lot of it will come down to the perception of weather tax reform really does have legs. And I think as you accurately pointed out in setting your question up, none of us have really heard in the cacophony that’s come out of Washington, a concerted effort in terms of where tax reform is going.

So I know it's an unsatisfying answer to an insightful question, David. But I wish I had something more for you..

And my only other question is that, you hear a lot kind of in the trade journals about the concept of repowering wind assets in the U.S. I am wondering if you see any set of circumstances where that could be an opportunity for you..

Yes. And so we have looked at a number of opportunities. Where that thesis really make sense, where the economics of repowering really makes sense, is where you can take a project that has, I'll say by today's standard, a poor capacity factor.

And by retrofitting new equipment, larger rotors, more efficient machines, you increase the energy output for that. And so it’s more than just kind of refreshing the PTCs.

There are a couple of projects coincidentally in Empire service territory which are actually a part of Empire’s energy mix through PPA that we have looked at as potential repowering candidates. I'm not sure that they’re better, frankly, than building new ones ourselves to meet the needs of shutting down Asbury.

So those projects, while there might still be an interesting economic thesis associated with them, they're not the optimal things from our customer’s perspective.

And so while I agree that repowering does have a place, we’re not really seeing it, frankly, right now for the two opportunities that are in front and center for us within Empire service territory..

The next question is from Mark Jarvi with CIBC. Please go ahead..

Few questions on Amherst. It hasn’t gone as smoothly as you want or there has been some headwinds.

At this point now, is there any consideration to fully divest or may be sell that interest for some of capital and put it into other higher return opportunities?.

Well, we say it has definitely taken longer and has been a bumpier road than when we’ve got into this six or seven years ago. Whether we would sell down an interest to surface some capital, I think it's kind of a separate question. We’re obviously committed to getting Amherst over the finish line.

And I think when you look at what these projects are trading at, I think if your question is premised that we could surface a profit on the sale of Amherst, I think that would be that is definitely true. And the question would be though would St. Leon or any of the other projects be as a good candidate to recycle some of the capital.

So I think there is two kind of premises are baked into your questions.

So on the first one, yes I don't think anyone would deny Amherst has been a bumpy road, but and I think as we sit here today in this 10 seconds maybe the bumps are smoothing out or picking up a little speed on the road which is good because we’re kind of heading into our commissioning at next year.

Whether we want to be the long-term owner of all or some of that asset I think it's the same question that we would ask ourselves, is it time for us to recycle capital in our other assets. And so I think right now we haven't seen that as the value maximizing thesis, but I think you and we want to keep our eye on that one going forward.

So, but the bumpiness in Amherst wouldn’t cause me to think of Amherst any differently than I think of St. Lean. We’re going to get that one done and it will have a profit baked into it if you want to think of it that way in terms of valuation perspective..

And then going back to your prepared remarks, you made a comment about a wind project at least at California.

Can you give us any more details around the contract possibilities on that and the entire month?.

I specifically referred to it as a development project, we are working our way through the permitting and frankly contracting issues, I'm hoping - before the end of the year, we’ve kind of got some specifics on it really what my intention was to say we are - I want to give the NOS committee some comfort that we’re not going to end up with 75 megawatts of turbines in our parking lots here in Oakville and that we are identifying what look like attractive opportunities.

We’ll certainly give you the details as the project come together Mark but it’s probably one of the most advanced from the development perspective.

But not far enough ahead for you to be thinking about the economic implications, but perhaps far enough ahead for you to be taking some comfort that there are homes - attractive homes for those PTC turbines that we are committed to last year and that was kind of really the purpose of it..

The next question is from Jeremy Rosenfield with Industrial Alliance Securities. Please go ahead..

I’ll take one of those wind turbines if you may give it?.

Yes, okay you got to ship it though..

Just want to come back on this chat about the acquisitions, one trend that's a lot of the other players have been moving towards is the use of large institutions to finance some of their acquisitions or to finance their growth strategy.

I'm just wondering how you view Algonquin’s access to capital markets always been strong in the past, but how you view that as playing into the potential size for transactions that you could do going forward and whether you've considered or you would consider a large co-investors or other investors alongside Algonquin?.

And just to be clear Jeremy, I assume you're making kind of a reference to PST and Pattern and Boralex and Caisse de Depot and that sort of thing. Yes, I think you accurately are inferring that in the renewable energy gain cost of capital is I want to say a critical success factor it’s arguably the critical success factor.

And so whatever brings the most competitive cost of capital to that - to an opportunity is likely going to be the winning one.

And so yes we have thought about it, is there a role for kind of a sidecar vehicle because there is a couple of different ways to address your cost of capital you look at something like NextEra who I think we would aspirationally put ourselves up against one of their concept is through their sidecar publicly traded renewable energy vehicle allows probably more effective cost to capital than the utility proper and so that's one way to do it.

Obviously what Boralex has done with Caisse is interesting. So we are looking at a number of different vehicles Jeremy but you are correct when you ask that, is the objective all about optimizing your cost of capital is definitely yes, it’s definitely is..

So second question is just around the condemnations and specifically with mountain water, so the second of the utilities has moved in that direction, and I'm just wondering if - from a higher level perspective, there's a - maybe a reason to try to explore the sale of some assets where maybe the towns or other interested parties would be interested in acquiring those assets rather than getting into these condemnation proceedings and then having them drag on for a period of time..

Well I'll start by saying clearly our plan isn't to shrink our way to greatness from with respect to our utility assets. I'd go further to say, the condemnation process is a very specific opportunity for a town to ultimately acquire an asset that they were required but under the Fifth Amendment of the U.S.

Constitution, sort of fair and just compensation is constitutionally guaranteed to you. And it is that guarantee upon which one looks to end up with a price that ultimately might be better than one would get just through bilateral negotiations.

I'm actually - I think when you look at the way that the evaluation phase of the condemnation process, I'm not sure that that's the way one would go into it if one was negotiating.

So I'm not sure that there really is an opportunity for us to sit down with the city of Goodyear and say, hey we'd like to tell you our water business but by the way we want you to pay us condemnation rates. I don’t think that's - is a practical reality even if we wanted to voluntarily engage in that process to sell our asset.

I think if you look at the historic record, the prices paid in condemnation however you want to measure it, dollars per rate base, dollars per customer, dollars per EBITDA acquired had generally outpaced and outsized the negotiated prices that have existed in any bilateral transaction and so consequently I don't think I voluntarily subject myself to a lower price and as I said even if shrinking our way to greatness was part of our thesis, which it is not..

[Operator Instructions] This concludes the question-and-answer session. I would like to turn the conference back over to the presenters for any closing remarks..

Well, I appreciate everyone's time today. And we’ll speak to you next quarter. And as always, stay on the line for review of our disclaimer. Thanks everyone..

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