Thank you for standing by. This is the conference operator. Welcome to the Algonquin Power & Utilities Corp. Second Quarter 2019 Analyst and Investor Earnings Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.

[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..

Good morning, everyone. Thanks for joining us on our 2019 second quarter earnings conference call.As mentioned, my name is Chris Jarratt, and I am Vice Chair of Algonquin Power & Utilities Corp.

As usual, joining me on the call today are Ian Robertson, our Chief Executive Officer; and David Bronicheski, our Chief Financial Officer.To accompany our earnings call today, there is a supplemental webcast presentation available on our website, algonquinpowerandutilities.com.Over the course of this call, we will be providing information that relates to events and expected financial positions which should be considered forward-looking.

And we direct you to our full disclosure on forward-looking information and non-GAAP financial measures are available on our website, and we will read the interesting full disclaimer at the end of this call.We had a great, busy and exciting quarter.

On our call this morning, Ian is going to provide details regarding our recent announcements and strategic achievements in the quarter. David is going to follow up with financial highlights. And then, Ian will conclude with an update on the areas of growth that we’re focused on in 2019 and beyond as we execute on our strategic plan.

We’ll then open up the lines for questions. And as usually, we ask you to restrict your questions to two, and then requeue if you have additional questions, to allow others the opportunity to participate.And with that, I will turn things over to Ian to talk about our strategic achievements in the quarter..

Thanks, Chris, and welcome everyone to our Q2 earnings call. I appreciate you taking the time to be with us today.So, I’ll start the conversation today with the main highlights in the quarter.

Firstly, in terms of financial results, while our quarterly EBITDA was generally in accordance with our expectations, our diversified portfolio, delivered a story of puts and takes with some higher-than-average dividend income contributions from our renewable energy assets offset by year-over-year weather-impacted earnings in our Midwest electric utility.

We will clearly welcome the implementation of revenue decoupling in Missouri during our 2020 Empire rate case.Secondly, adjusted earnings per share of $0.11 was slightly below our expectations, primarily due to unbudgeted carrying costs for the committed capital earmarked for our previously announced New Brunswick Gas acquisition, and actuarially driven increases in our noncash pension expense in New Hampshire, a request for recovery of which will be included in our upcoming Energy North rate case.Lastly, consistent with our commitment to tangibly deliver the benefits of our growth to shareholders, the Board of Directors increased the dividends paid by AQN by 10%, in May of this year.Looking now, at our recent announcements, we had a very busy and exciting quarter.

In early June, we announced an agreement to extend our regulated utility footprint internationally through the acquisition of the Bermuda Electric Light Company.

This transaction is expected to close later this year.Secondly, in the Midwest, we were pleased to receive the final certificate of convenience and necessity from the Missouri Public Service Commission in respect of our Greening the Fleet wind development initiatives.

We would note that consistent with this role of being the reason to opposition, the Missouri Office of the Public Counsel filed the rehearing request on our approvals.

While using production tax credits to subsidize rate-based generation may be perceived as somewhat innovative, we are confident in the compelling savings which would be delivered to our customers, which benefits have been proven to the last two years of public proceedings.Thirdly, as you will have noted in our MD&A, we have fully executed on our strategy to capitalize on the opportunities presented by the U.S.

PTCs with the addition to our growth pipeline of a participation in the development of the 470 megawatt Texas-based Maverick Creek wind project.And lastly, in addition to these new projects, I want to highlight progress made on our existing pipeline of opportunities.

Firstly, we made final investment decision to proceed with our previously disclosed Great Bay II solar project, our 75 megawatt expansion to our existing 75 megawatt solar project located in Maryland. The energy and renewable energy credits produced by an incremental generating capacity will be sold under a 10-year synthetic PPA.

Secondly, we hope that our organization’s commitment to sustainability has been formally recognized by the capital markets with the successful completion of our first $300 million Canadian dollar green bond offering, the proceeds of which are committed to our renewable wind and solar energy developments.

And finally, we’re pleased with our second offering of subordinated debt in the U.S.

capital markets with $350 million of bonds being issued to help fund our CapEx plans.All told, we believe we took positive new steps to build the business and bring value to shareholders in the quarter.And with that, I’ll pass it over to David for a review of our Q2 2019 financial results.

David?.

Thanks, Ian, and good morning, everyone.In the second quarter of 2019, our business operations overall performed slightly below our expectations, but they were still within the normal variability that can be expected from weather-dependent externalities.Our Q2 adjusted EBITDA on a consolidated basis was a $189.8 million, an increase of about $29 million or 18% over the same period last year.

And while there are one-time pluses and minuses in the results, we still view this as solid growth, nevertheless, particularly given the backdrop of U.S.

tax reform where lower rates have now been implemented in virtually all of our regulated utilities.Within Liberty Power, the business generated a divisional operating profit of $93.4 million, an increase of $41.1 million compared to Q2 of 2018.

The increase in adjusted EBITDA for Liberty Power is related to the addition of new 75 megawatts of wind in our Amherst Island wind facility as well as our incremental investment in Atlantica.

And speaking of Amherst, just for a second, Algonquin together with Atlantica has now created a dropdown vehicle, named Atlantica Yield Energy Solutions or AYES. This now allows us to work more closely with Atlantica on identifying assets that may be better held in Atlantica.

The initial dropdown into AYES has been an interest in our recently commissioned Amherst Island project.

Following windup of the construction joint venture and the dropdown of the project interest to AYES, we were able to release by way of dividends, the net cash, which had been accumulated in Amherst Island.Combined with higher resources and production from our fleet of renewables compared to the same period last year, the increased investment in Atlantica and the way AYES investment contributed $31.6 million incremental adjusted EBITDA over Q2 in 2018.On the utility side of our business, Liberty Utilities generated divisional operating profit of a $109.6 million, a decrease of $11.8 million over the same period last year, which was primarily a result of fewer cooling degree days and lower consumption, primarily in our central division, combined with the implementation of lower rates in most of our utilities due to U.S.

tax reform.Adjusted EPS, well, we came in at $0.11 per share for Q2, consistent with the same period last year, we’ve pre-raised the capital in anticipation of closing our New Brunswick Gas and St. Lawrence Gas utility acquisitions, which now look to be closing late Q3, rather than early Q3, as we had originally anticipated.

This contributed to higher interest costs in the quarter.Our earnings were also negatively impacted by higher pension and non-service costs by approximately $5 million, primarily due to the downturn of the equity markets at the end of 2018, which in turn affected return on plan assets. And even though markets recovered early in 2019, U.S.

GAAP is very prescriptive about measuring return on plan assets at the end of the fiscal period.

Both of these items weighed in earnings even as our EBITDA grew year-over-year.With respect to our capital expenditure program, we have adjusted up slightly our capital investments for 2019, which stems from our joint development of the Maverick Wind project in Texas that Ian touched on earlier.

This development advances into 2019, some capital that was otherwise planned for 2020 and therefore leaves our total direct capital investments over the two years at about the same level that we were expecting.

It does not change our expectations around equity either that’s required to maintain our targeted credit metrics over the next two years.And now, turning to some treasury matters. During the second quarter, on May 23, 2019, APUC issued $350 million of 60-year non-call fixed-to-floating 6.2% subordinated notes.

Concurrent with the offering, we also entered into a cross currency swap to convert the U.S. denominated coupon and principal payments from the offering into Canadian dollars, which resulted in the effective interest rate to APUC of approximately 5.96%.

These notes give APUC a 50% equity credit with rating agencies and therefore was an integral part of our 2019 equity plan. This offering represents APUC’s second issuance into the U.S. public debt markets. The offering was very well received by the U.S.

capital markets and was more than 2 times oversubscribed by institutional investors and at a strong retail component. In particular, we believe that this financing represents a perfect example of how Algonquin can now execute opportunistically in either the U.S. or Canadian markets to meet its financing needs.

The notes are listed on the NYSE under the ticker symbol AQNB.Investors will also note that we activated our at-the-market equity program in the second quarter. The ATM program, as it’s called, allows us to raise what we expect to be a modest amount of equity on a very cost effective basis.

We reported that the Company has issued 1 million common shares under the ATM program at an average price of about U.S.

$12.30 per share for gross proceeds of approximately $13.2 million.And finally, while we need to continue to provide the fuel to our growth program, not only here in North America, but globally as well, so we’ve now put in place a new syndicated $500 million bank credit facility at the APUC level to provide additional liquidity to the entire corporate group and to support the growth pipeline we are building in our international development activities.

The facility is backed by a well-balanced syndicate of Canadian, U.S. and international banks.With that, I’ll hand things back to Ian..

Thanks, David.Before we close out our prepared comments this morning and open the line for the question-and-answer period, I wanted to give you a quick update on some of our 2019 areas of focus on growth.For those of you who’ve been following APUC for the past few years, you’ll recall that to capitalize on the opportunity presented by the phase-out of the U.S.

PTCs, we purchased a number of safe harbor turbines, sufficient to support the development of 500 to 600 megawatts of projects that would qualify for 100% PTCs.

We’re pleased that with our petition -- patient in the Maverick Creek Wind project and our now under construction 200 megawatts Sugar Creek project, we will have at least 670 megawatts in capacity, which we expect to qualify for 100% PTCs.

Perhaps as importantly, the Maverick Creek project provides additional flexibility in the time table for development of the other already identified projects, which are included in our pipeline.

In essence, we believe undertaking this near-term development opportunity effectively derisks the execution on the rest of our growth pipeline.As to expanding our regulated utility footprint, we’re pleased with the commencement of construction on the three projects comprising 600 megawatts of wind in Missouri and Kansas, under our customer savings plan, following receipt of final regulatory approval.

This $1.1 billion initiative comprises an important part of our growth program and affirms our public commitment to sustainability.Additionally, we are confident that the closings of our previously announced utility acquisitions in New Brunswick and upstate New York are eminent, and both are expected to contribute to earnings within 2019.With respect to our acquisition of the Bermuda Electric utility, the approval of the transaction is expected to be confirmed today at the shareholder general meeting with closing anticipating following regulatory approval later this year.I hope you share our perspective that the highly certain nature of these initiatives should bring even greater confidence in the organization’s ability to deliver on the five-year $7.5 billion pipeline of growth that will bring value to our shareholders.And with that, I’ll turn the call back over to the operator for questions from those on the line.

Operator?.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Julien Dumoulin-Smith of Bank of America Merrill Lynch..

So, just if I could kick it off the BELCO acquisition, would be [Technical Difficulty] the detail [Technical Difficulty] I know the [Technical Difficulty] and even how the current investment plan could shift into the IRPs. Just wanted to understand sort of the broader scope of what you contemplated here.

And then, if you can elaborate just more on that how is the debt being treated just so we get it right because I know there’s a little nuance there.

If you can provide that detail at the same time?.

So, Julien, I’m going to restate your question, if I could, just because -- I guess, you’re on a cellphone and you kind of cut out half way through. So, I kind of got I’ll say -- we lost the first half of the question.

But I think your question to kind of juxtaposition kind of the response on the Integrated Resource Plan from the regulatory authority, what it might mean in terms of the investment in BELCO. That was the first part.

And then, second of all, talk a little bit about the OpCo debt and how we’re thinking about it from a consolidation point of view? Did I get the question right, Julien?.

You got it, you got it..

Okay. So, as everyone on the call will recall that we announced in June the opportunity -- an agreement to acquire the parent company of Bermuda Electric Company.

And while it’s -- I won’t say, it’s a great utility in a highly stable and fairly well-off socioeconomic service territory, what really enthused us about it is the fact that, believe it or not, that the utility supplies, I’ll say almost 100% of its energy from fossil fuel resources. And there’s two consequences of it.

Obviously, I don’t think Bermuda is achieving its objectives from an ESG perspective, and second of all, maybe where the real opportunity comes from, energy is very expensive in Bermuda, like $0.40 a kilowatt hour, with almost $0.20 of that being attributed to fuel.We obviously see a great opportunity to kind of replicate what we’re doing in the Midwest, in terms of our replacement of fossil fuel generation with renewables.

And gosh, when you’re paying $0.20 for the energy alone, that certainly clearly there’s a value proposition there.What Julien’s question was alluding to is that the regulatory authority in response to the Integrated Resource Plan submitted by BELCO, or Bermuda Electric Company, really very much came down heavily on the side of a program to aggressively replace fossil fuel generation with renewables.

You can imagine, that with the underpinning of our interest in Bermuda and music to our ears, Julien. And so, I think all it has done from our perspective, it has advanced the timing of our expectations of continued investment to replace fossil with renewables. So, I think it’s great news.Secondly, your comments about the debt within BELCO.

I’ll start by saying BELCO is a relatively low levered utility, certainly at the OpCo level.

And clearly, our intent is to kind of maintain credit metrics that are consistent with our BBB flat credit metrics, though, I think with -- given that it will be held internationally, kind of in the same way as we hold our other projects to Atlantica, we won’t be consolidating that debt.

So, Julien, all you’ll see on our financial statements is the equity interest in BELCO. And then, we’ll be obviously recognizing dividends that come up from it.

I don’t know Julien, is that kind of the color you’re looking for?.

Exactly. And then, maybe if you could just elaborate briefly, Missouri, congratulations on moving forward on the project there. Any anything to the OPC appeal there? And then, secondly, anything on Granite Bridge that you would flag to us, just progress wise….

Okay. You’re going for three or four questions Julien, but we’ll [Technical Difficulty] on this one. So….

Yes. If anything is [Technical Difficulty]..

Okay. All right. So, I think, as I tried to give some comfort in my prepared remarks, I mean, I think it’s not unfair to say that the role of the role OPC is to be the reason to opposition to these -- to almost any proceeding in front of the Commission. And I think, they’re playing that role.

I will say that we are, candidly, probably -- it isn’t crystal clear to us with the specificity of the objections that may be being raised by the OPC.

And so, in the lack of kind of clarity in terms of what the opposition is, and the fact that no new -- nothing new was raised in the content appeal, I guess we’re resting on the decision that came from the Commission that basically took into account OPC’s objections during the -- as intervener during the process.

So, while I certainly would never be dismissive of their role, I think we remain comfortable and confident that this whole Greening the Fleet program is going to deliver significant benefits to our customers, and thus recognized by the Commission.In terms of Granite State -- or Granite Bridge, just to roll that forward, we have a procedure of schedule, kind of shows that there’ll be a continuation of the technical hearings in front of the Commission, as we move into the fall, kind of knock wood with the regulatory decision on that coming close to the end of the year.

And so,, we remain as optimistic as we were before, Julien. So, hopefully that’s kind of the color you’re seeking..

That’s great. Thanks for your patience. Good luck..

Thanks, Julien..

Our next question comes from Nelson Ng of RBC Capital Markets..

Great, thanks. First question related….

Good morning, Nelson..

Good morning. My first question relates to Maverick wind.

And could you just provide a bit of background in terms of how you guys got involved in the project? Did RES essentially run a sales process to get bids? And then, like, what do you guys provide to the -- what value do you guys provide to the JV, other than the turbines, given that I presume that RES was fully capable of doing these projects on their own?.

Yes. I think -- well, let me start by saying, you know our relationship with RES goes back a long time. We entered into a JV with RES in respect of our Deerfield project in Michigan, and that got completed, I want to say a couple of years ago.

So, I think, we’re a known entity to RES, which I’m hoping they’re expecting and believe in our ability to kind of execute on these sorts of projects. There no doubt about it, it’s a bit undertaking. 470 megawatts is a big project.

And so, I think I would hope that RES are happy with a partner who has not only obviously financial wherewithal but brings some development expertise to the party, in addition, as you mentioned, sort of securing the safe harbor turbines.I think, as you know, in the same way as in Deerfield, we have structured our arrangements such that we have -- there’s optionality for us to acquire the other half of the JV, post COD.

And so, I think that as we think about our long-term aspirations, you know they’re in the ownership and aspiration of these assets and maybe RES has a shorter term perspective. So, I think it’s a high quality project. Just to kind of give you some color, we’ve been actually having conversations with RES on this project.

Gosh, it’s got gone back almost six months. And I appreciate while they’ve been talking to other parties, I’m hoping our attributes are showing through. I think, it’s a great project and it’s perfectly aligned with our strategy. I don’t know if I hit what you were looking for, Nelson. I’m happy to keep rambling on but maybe you can help me focus..

Yes.

Could you just provide a bit more color on the financial details in terms of the project cost? And I presume, Texas hedge prices are probably in the sub-$20 region, is that about right?.

Yes. And so, maybe just to put, as you said, some color to the cost. The total capital cost in and around the $700 million range. The cash -- the sponsor equity, if you will, the equity that we’re getting involved in after PTCs is probably in the $250 million range. So, it’s a [indiscernible] but not too larger project.

I think generates, as we put in the MD&A, just under 2,000 gigawatt hours a year.

And given the high capacity factor, you can imagine, obviously, as I said, a big chunk of the capital costs are funded with tax equity.I think, your assessment that kind of captured costs in the Texas market in the 20s between the portion which is contracted under the long-term PPAs with a couple of investment-grade counterparties and a portion that we will either sell into the merchant markets or maybe enter the heads for, is as I said, probably 20s is not an unreasonable pricing zone.

So, hopefully, you can kind of do the math to sort of say -- go back your way through it and sort of come to conclusion that it doesn’t feel dissimilar to the other projects that we’ve undertaken..

Our next question comes from Sean Steuart of TD Securities..

Thanks. Good morning, guys. Few question or I guess two. AYES, can you give us context on your decision to move ahead with this structure with Atlantica and putting Amherst Island into it? I guess, background on the structure and your ambition to feed more assets into the structure..

Sure. I think, you will hopefully recall, almost at the time we announced our interest in Atlantica, we saw opportunity to optimize the ownership of assets. And we’ve kind of historically mentioned, projects that might be longer on cash and shorter on GAAP earnings, would be a candidate to be held in Atlantica.

And I think, you would see the AYES structure is really just creating an umbrella under which we could -- we can go to our portfolio and find projects that met that criteria. Amherst Island recently commissioned long-term PPA, seems like a project that met the criteria.

I think, there is strong interest on Atlantica’s part to establish a bit of a, I’ll say, a beachhead in North American wind -- contracted wind projects, and there was interest from their perspective. And so, really, I think, this is just an execution on I’d say, an initiative that we’d laid out for you at the time of our investment into Atlantica.

And I think it makes sense for us to go through our portfolio of regulated -- or non-regulated renewable energy assets to kind of see what makes -- where are things optimally held, I mean are they optimally held to Atlantica or held directly to us. So I’ll say, no magic there, Sean.

I don’t know if that’s kind of giving you the color that you’re looking for. I could add more, but….

No. That helps. And just so I understand that the dividend of $17.5 million, that was the cash at Amherst. And, David, I guess going forward, we should expect that to normalize at a much lower level quarter-to-quarter..

Yes. I mean, I think, we tried to be clear that during the pendency of the original construction JV, obviously we were sending cash out. And so, I think that’s a totally fair observation, Sean, that what a great -- I would say, what a great one-timer on the upside to help deal with the one-timer on the downside of the weather that we hit in Missouri.

But, I think, you’re absolutely right, on a go forward basis that kind of should normalize to what you’d normally expect coming off of a project the size of Amherst..

Our next question comes from Robert Hope of Scotiabank..

Good morning. I just want to follow up on Sean’s question there.

So, when you look at AYES and the potential further dropdown into that vehicle, what’s the gating factor there? Is it Atlantica’s access to capital, is it you taking back shares to maybe move up to that 50%, or is it really just a work through the portfolio and dropping down as we see fit?.

Well, I won’t be glint, [ph] but I’ll say yes to all of the factors that you combined there. I tried to give a little bit of color to Sean that there was strategic interest in the Atlantica -- from Atlantica’s part in Amherst and establishing that beached. And so, clearly, their board will have to look at further dropdowns.

I think their cost of capital has always been a challenge. I think, we have made no secret that we are encouraging of Atlantica’s strategic review process because clearly we don’t think their cost of capital reflects the value of the assets that they hold. And so, we want them to improve their cost of capital. So, that is not a factor going forward.

But, I guess, -- but the main thing that will drive it is, as we think about our portfolio, where is the best place to hold a particular asset.

And I don’t think it’s lost on any one on the call that you can look at the earnings profile off of assets, and they are different based on their PPAs and how old are they, what’s the original capital cost from a depreciation point of view and it goes to the portfolio and the size that maybe there’s one or two more that would be appropriate dropdown candidate, subject to meeting all the other issues that you just raised, Rob..

All right. Thanks for that. And then, just moving over to the Empire, let’s call it the IRP that was put out in June as well. Quite a lot of talk about adding solar in Missouri on a standalone basis, plus in batteries.

But, I just want to get a sense of kind of what magnitude of capital do you think you can put in further generation in Missouri?.

Well, it’s a good question. And as you know, we are very keen on -- and think that solar with storage is a great addition. It certainly helps off that transmission cost. As you know, storage can kind of interestingly look like both generation and transmission sort of at the same time.

Now, it’s probably in the hundreds of millions of dollars, it’s not $1 billion. I mean, I think, we are pleased that $1.1 billion of wind from the customer savings plan today is going to satisfy a big chunk of their need. But, on the margin, I think there’s still growth going forward.

And as you know, the complementary generation profile between wind and solar that we want to take advantage of. So, it’s real. But I wouldn’t want you to be putting $1 billion into your model, Rob. That’s just overstating the opportunity..

Our next question comes from Ben Pham of BMO Capital Markets..

Okay. Thanks. Just on some of the questions on this Amherst JV with Atlantica. Sort of optimizing your structure and whatnot, releasing capital, I imagine you’re starting this probably longer term game planning in place or flexibility.

But, is this really -- would you ever consider the public route at all at some point? I mean, it’s -- project is too small now, but is that the long-term thought process on that?.

I’ll start by saying, Ben, that isn’t the long-term strategy at this 10 seconds, because for exactly what you described, the last thing we want to create is an entity which kind of feels orphan, they’re stranded in the capital markets.

But clearly, I think, the relationship with Atlantica, providing Atlantica had -- to sort of cost of capital, kind of allows us to achieve the majority of those benefits, without ending up with the stranded entity.Having said that, as who knows what the future holds and as 700 or 470 megawatts of new wind in Texas, and as we continue to execute on the rest of the game plan, gosh, it’s going to be nudging up to 2.5 or 3 gigawatts worth of generation.

So, that’s going to have some real size. But, the optimal management of that, I guess, you’ll just have to trust us that we’re keeping our eye on all the opportunities that you’re probably seeing. But at this 10 seconds, I think it’s on the margin.

I don’t want people to walk away from this earnings call to think that there’s some strengths to spot strategic change going on. On the margin, we saw a great opportunity to do something that felt optimizing. And maybe there’s a few more things in the portfolio.

But, gosh, there’s nothing in there that size that you should feel represents a strategic change. What you described clearly is the strategic move about what this is focused on..

Okay, all right. And I’m thinking that also just how you think about deploying capital, North American International, like you go international like Bermuda, hopefully there is a return over North America. But, I’m curious, like, now you’ve got to Maverick, and you got Greening the Fleet.

Like, how are you thinking about the returns between the two asset classes, now? I mean, is there still a spread there for you guys?.

Well, when you say the two asset classes, just so I can clarify, are you speaking between reg and non reg or domestic and international?.

Yes.

I’ve always been of the view or I’ve seen historically it’s non-regs a better return profile than regulated but maybe that’s different now?.

Well, I think, one is an apple and one is an orange. You can imagine from a risk profile perspective, but what we like about the regulated side, so just think about earning -- owning the -- the customer saving plan, one generation in rate base, arguably, our shareholders don’t take the residual risk, if you will, the residual value risk.

On the other hand, they are not able to -- our shareholders, our customers do; they’ll capture the upside of the value of those assets in the marketplace. And so, I think it’s probably a fair observation that there is a higher return available in the non-regulated space.

But I think on a risk-adjusted basis, we’re actually comfortable with both investments. And I think this is kind of getting to the question of business mix. You know that we don’t have hard and fast rules on business mix. We will be opportunistic. I think Maverick is a great example of we’ll be opportunistic.

So, to the extent we see something that needs our risk-adjusted return profile, then we’re going to go ahead and pursue it. We’re comfortable with our 70-30 reg, non-reg business mix and I don’t see that actually changing anytime soon. So, if you look at our $7.5 billion of growth, it’s pretty much split 70-30.

So, if like our business mix today, five years from now, it won’t be any different, absent kind of a more strategic move to kind of split the businesses, which is just not -- it’s not on the thought process right now.So, I’d actually -- and maybe this is going to sound a little childish, [ph] but we love both our children, in terms of the business.

And really at this 10 seconds, wouldn’t be sort of saying we prefer one to the other. We are fortunate that the capital markets have been supportive enough that we haven’t been had to make that Sophie’s choice, if you will, between assets..

Our next question comes from David Quezada of Raymond James..

Thanks. Good morning, guys. My first question here is just on the North American wind strategy.

And as we think about the economics for wind projects beyond -- or as we move into 2020, do you think that returns on those projects will decline as the PTC steps down, or do you see offsets there, either on the cost side or maybe in terms of slightly better PPA prices holding returns on those projects, somewhat constant?.

Well, isn’t that the uncertainty that we all face as we stare into the fog? I think, a couple of data points.

I think that after the noise of the PTCs is fully out of the market, then to the extent the price of new wind -- the marginal price of new wind is setting the cost in the market, then ultimately it will reflect whatever the then correct cost is, I think over that five-year or so of the phase-out of the PTCs, I think we all can look forward to some technological advancements in terms of larger machines, which could actually help offset the loss of the PTCs as it steps down, certainly from 100 to 80, maybe from 80 to 60 I think where we’re going to have to see what the world holds for us thereafter.What I am comfortable and confident in is that there is both an economic and societal push that renewables are going to continue to build out through the U.S.

And that will be driven by the economics because there’s just no way that fossil fuels can compete, even today, absent thee PTCs for that next kilowatt of generation. So, I think the future continues to be strong.

I get it, your comment about some uncertainty in the market over the next few years as the turbulence of the phase-out, the PTCs comes along. It’s one of the reasons that candidly we’re very pleased to have added Maverick to our portfolio of projects.

I hope that you see the addition of Maverick in the same way we do, which is it derisks our ability to execute on that $7.5 billion, because to the extent some projects suffer permitting delays or whatever, may get pushed out from 2020 to 2021, we have locked in the value that we wanted to lock in, in the 100% PTC.

So, as a hardcore entrepreneur, David, I guess, where others see uncertainty, we see opportunity. But, so far, we’re pretty pleased with our positioning..

I totally agree. That’s great color. Thank you. And then, maybe for my second question, just switching gears a little bit.

I wonder if you could talk, just from a high level on your -- I know sustainability is important to you guys, talk about your strategy on ESG and how you think about the various sustainability rating agencies out there, and if you have any goals in that regard?.

Sure. What a timely question. We are going to be publishing our report this fall. We’re going to be holding a sustainability, I’m going to grandiosely day but it’s probably going to be a couple-hour meeting with analysts to walk through the report. We kind of laid it on FASB as the framework that under which we intend to report.

You can imagine there’s tons of other qualitative observations that we want to make about our commitment to sustainability. I think it’s not lost on any one that our involvement in renewable energy made us kind of green before it was hit to be green, as a company.

And as we move forward, with things like the Greening the Fleet initiative in the Midwest, you’re knocking off some of these KPIs in terms of carbon intensity reduction, those sort of things. So, those are going to be for sure available to us. And so, you’re going to hear a lot more from us at that call.

I hope you can attend our sustainability report unveiling and maybe -- is that the color you’re kind of looking for, David?.

Absolutely. Thank you. We’ll look forward to that..

All right, thanks so much..

Our next question comes from Mark Jarvi of CIBC Capital Markets..

I just wanted to go back to the OPC and the filing. It’s a little uncertain and you’re not seeing much change in with the base of the case.

But, who bears the risk, if this causes a delay or an amended them into what the CC&E [ph] has provide you? Is it getting exposure, ors it completely on the developer right now?.

Well, I’d say it’s completely on the developer, except for the fact that, I think -- we’ve entered into agreements to buy these assets.

I trust that they’re not going to be frustrated if -- I think we’re hoping that the uncertainty associated with the OPC’s request or rehearing is resolved, before there’s too many holes dug in the ground and too many turbines planted because clearly the developer will have concerns associated with that.

And then ultimately, we will realize our objective of being able to invest the capital.So, I’d say that financially, it’s actually not the issue right now. The issue is clearly one of timing though.

I think you pointed -- the point that you made, which is -- as I said I’m trying not to be dismissive, but there is no new story for us to try to interpret in the context of the rehearing that wasn’t fully vetted and opined on in the orders issued by the Commission.

So, it’s hard for us to -- well we certainly are concerned about the timing, it’s hard for us to kind of infer that there’s sort of new concerns that would arise. I don’t know what more to say, Mark..

That’s helpful. We’ll keep an eye on it..

Yes. I think -- but keep in mind, and while there is no hard and fast clock for the commission to response or rehearing request, we’re clicking into a month now. And so, I think, they are -- we’re hoping they are going to be responsive to this..

Okay.

And then, just pivoting back to Maverick and some of your safe harbor turbines, how does that -- how should we interpret that and signal towards other projects that either may not proceed? So, is Maverick completely additive or maybe a partial substitution, as you think about your CapEx the last few years?.

I think, it provides us optionality is the way we would ask you to think about it is that -- as you know, the 5% commitment for Safe Harbor isn’t a cap, it’s in fact a floor.

So, we have other project as you know in the pipeline Broad Mountain and Walker Ridge and Shady Oaks II and while we actually are confident that these projects have legs, what see Maverick is doing has us taking the edge off from a timing point of view. We’re working our way through, certain permitting issues at Broad Mountain.

And I think, while we are confident that Broad Mountain is likely to go ahead, it’s not -- it’s not a must do, if you know what I mean that if it gets bump to 2021 -- and I will point out that moving to 2021, particularly for a project like Broad Mountain doesn’t mean that it won’t qualify for 100% PTCs.

It won’t qualify under a safe harbor rule but continue its efforts is certainly recognized under the regulations governing the PTCs as a strategy for us to preserve PTCs and something like Broad Mountain.So, I guess, I wouldn’t ask you to think about it as substituting, i.e. throwing away, it does provide us optionality.

But more importantly, I think, I’m hoping that everybody on the call sees the inclusion of Maverick, as we call it kind of derisking our ability to execute on the $7.5 billion pipeline of growth. That’s kind of how we’re thinking about it..

Our next question comes from Rupert Merer of National Bank..

In the quarter, you had acquisition of 3.4 million shares from Atlantica. It looks like you purchased 1.4 million, a little less than $22 a share, and you’ve got a prepayment that looks like it will settle in about six months at a higher price.

Can you give some color on why the share -- acquisition is structured that way?.

Sure. We’ve done -- as you know and I think we’ve been pretty transparent that we’re neither buyers nor sellers of Atlantica largely, but on the margin, our aspirations are to have significant but non-controlling, i.e. less than 49% interest in Atlantica. And we subscribed for some treasury shares.

And then, mostly recently, we entered into an arrangement with the counterparty to sell us 2.5 million shares, 2 million of which were delivered immediately and the other 500,000, as you point out, will set before the end of the year.

It’s just a way to affect an acquisition, if you will, in the marketplace but without disturbing the trading dynamics. That’s kind of in the short of it. It’s called an accelerated share purchase program and it’s a pretty conventional approach or well trodden approach to maintaining or building one’s position in a public company.

So, I’d say nothing secretive about it. That’s just the way the mechanics work..

Okay. All right. Great. And then, also the mechanics of AYES, I think I’m reading this right. But it looks like the plan is to move Amherst Island to Atlantica post May 2020.

Is that correct? And why is the transaction structured that way? And is the intention to move the entire Amherst Island wind farm over to Atlantica in the long run?.

No. And happy to kind of take this offline, Rupert, to kind of understand. No, I think, it was May of 2019 that the transaction took place. So, not exactly sure where 2020 comes into it. And candidly, there’s no plans beyond the partial interest, which has been transferred into AYES to transfer more. So, maybe I’m a little bit confused as to where it is.

But, if you want to give me a shout after the call, Rupert, I’m happy to kind of walk through specifically..

Okay. Yes, will do that. Thank you..

Okay, perfect. Thanks, Rupert..

[Operator Instructions] Our next question comes from Jeremy Rosenfield of Industrial Alliance Securities..

Just a couple of cleanups, first on Maverick.

Is the intention to have an external tax equity partner? I know in the past, we’ve discussed the ability or the possibility of Algonquin being the tax equity providers for itself, maybe you could just sort of clarify that?.

Yes. Great question, Jeremy. As you alluded to our cash taxability horizon is coming distinctly into view as we look into the early 2020s. And so, therefore, we have seen an opportunity for us to put some capital to work as our own tax equity. I think, Maverick gives us an opportunity to execute on that strategy.

I will say that it’s probably bigger than our appetite for tax equity. So, maybe a partial participation in the tax equity is what the chef will cook up on this one. But, so for sure, some third-party tax equity, but maybe a participation of ourselves in some part of it..

All right. That sounds delicious. Thanks, Ian. And then, just in terms of, I guess, ATM that was used in the quarter, Ian or David, maybe, can you just talk about why you would want to continue to use that? Is it really just opportunistic for small bite sized amounts of equity they’re required? Just help us understand that a little bit more..

Sure. I mean, our objective on the ATM program is to just again, give us another tool in the toolbox in order to meet our equity needs over time. I mean, I think at the onset of this, we’re kind of thinking of it in size and scope similar to -- you know our DRIP program.

So, we can then issue equity in kind of modest amounts and do it on a very cost effective basis. And that’s the primary objective.

The other advantage is that you have seen in other companies that have ATM programs is again the ability to execute on an opportunistic basis for a block trade that might come through where you have a new shareholder, he wants to come in to the stock, and assuming that we’ve got the equity need, and they’ve got the appetite to invest, we could execute a block trade through that as well.

So, it really is just a matter of giving us one more tool to meet our financing objectives..

This concludes the question-and-answer session. I’d like to turn the conference back over to the presenters for any closing remarks..

Thanks, operator. And I appreciate everyone taking the time on our Q2 call. Look forward and God willing, we’ll speak to you next quarter. Thanks very much..

Our discussion during this call included certain forward-looking information that is based on certain assumptions and is subject to risks and uncertainties that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information.Forward-looking information provided during this call speaks only as of the date of this call and is based on the plans, beliefs, estimates, projections, expectations, opinions and assumptions of management, as of today’s date.

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This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day..