Algonquin Power & Utilities Corp (AQN) 2014 Q1 法說會逐字稿

Welcome to Algonquin Power & Utilities Corp. Q1 2014 Analyst Investor Conference Call on May 9, 2014.

(Operator Instructions)

I will now hand the conference over to Chris Jarratt, Vice Chair. Please go ahead, sir.

Good morning, everyone. Thanks for joining us on our 2014 First Quarter Conference Call. With me on the call today are Ian Robertson, our CEO; David Bronicheski, our CFO; and Kelly Castledine, our Director of Investor Relations. For your reference, additional information on the results are available for download from our website at algonquinpower.com.

I'd like to note that, in this call, we will provide information that relates to future events and expected financial positions and should be considered forward-looking. Kelly's going to provide some details at the end of the call, but I'd direct you to review our full disclosure on our forward-looking and non-GAAP financial measures in our results published yesterday, which are available on the quarterly results page of the investor center on our website.

This morning, as usual, Ian's going to discuss the highlights for the quarter and David's going to follow with a review of the financial results. After that, we're going to 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 to allow others the opportunity to participate; kind of like the shrimp boat at the party (laughter). I'm going to pass it over to Ian Robertson and he's going to start the presentation.

Great. Thanks, Chris. Appreciate everyone joining us on the call today. In summary, I think the results of the quarter demonstrate the positive impact of our successful growth initiatives over the past couple of years. It's natural to be a little anxious when you're waiting to see whether the predictions and assumptions that one makes for a particular acquisition or development actually hold true.

I think there's two takeaways from this quarter's strong results that I'd leave you with. Firstly, I think it is evident that our initiatives are delivering as planned. To put it in perspective, the close to CAD100 million in EBITDA this quarter exceeds EBITDA for all of 2012. Maybe more importantly, on a per-share basis, the results are materially up.

But secondly, and maybe more significant for the future, we hope that this quarter's performance affirms ours and, hopefully, the capital market's confidence in the value inherent in our portfolio of future growth opportunities. We're hoping that the capital markets view the continued ability of this organization to surface value through growth is effectively de-risking, if you will, the value of our pipeline of opportunities. In terms of my comments today, there's three things that I'll highlight for you for the quarter on this call.

Firstly, as I said, the results evidence the dedication and commitment of both the APCo and Liberty teams in successfully integrating the material growth that we've undergone over the past number of quarters. In summary, we're now serving close to 0.5 million utility customers reliably in Liberty and we're enjoying and demonstrating the benefits over 1100 megawatts of generation on the APCo side.

The second point I'd like to make is that while we believe the results were strong for the quarter, there are a few items that I'd highlight that aren't actually reflected in our performance this quarter. Firstly, the acquisition of the 40% of the 400 megawatts worth of wind power in the United States, which we acquired from Gamesa at the end of March this year. Second, our first solar project was commissioned on March 27 and we're looking forward to the more than CAD6 million in continuing EBITDA from that project.

Lastly, during the quarter, we entered into settlements in New Hampshire and Georgia for rate applications that were previously filed, which will provide continuing revenue gains of over CAD16 million. I think all of those things speak positively to our ability to continue to deliver strong performance going forward. Lastly, before I turn things over to David, I would like to highlight the 2014 progress against the CAD2 billion or so of opportunities which we outlined at our November Investor Morning.

For 2014, we mentioned back in November that we are committed to investing close to CAD500 million in the business going forward. I'm pleased to report that we're progressing nicely against that plan. On the APCo side, we will deliver over CAD300 million in growth in 2014. Construction is underway, 24 megawatts of wind in Quebec, 25 megawatts of wind in Saskatchewan, and our next 26 megawatt solar project in California.

On the Liberty side, we are continuing to execute against the 2014 CAD180 million CapEx budget for our existing utilities. We are pleased with the progress on our investment in the compressed natural gas and liquefied natural gas in [Fersussia], New England, including the CAD130 million natural gas liquefaction plant that we are developing in Massachusetts. With those as highlights, I'll turn things over to David to speak to the Q1 financial results. David?

Thanks, Ian, and good morning, everybody. Bolstered by our Georgia and Massachusetts gas utility acquisitions in 2013, our overall adjusted EBITDA in the first quarter was CAD97.5 million. That's more than a 50% increase over the amount reported in the same quarter a year ago. This is strong evidence, as Ian mentioned, of our continued success with our ongoing growth strategies.

A couple of highlights: revenue CAD343.5 million compared to CAD193.3 million a year ago. Our adjusted net earnings CAD36.8 million compared to CAD19.6 million in the same quarter a year ago. I'd like to get into a little bit more detail from our operating subsidiary results. I'll start with APCo. In our renewable energy division, during first quarter, we experienced varied wind and hydrologic resources generating electricity approximately equal to our long-term projected average resources compared to 91% for the same quarter a year ago.

These results demonstrate the value of having a well-diversified renewable energy portfolio like we have. Net revenue, which includes net energy sales and revenue from renewable energy credits totaled CAD36.6 million compared to CAD37.1 million in same period in 2013. Our operating profit was CAD37.9 million compared to CAD34.3 million in the same quarter a year ago. In our Thermal Energy division, we were pleased with the performance of the division in the first quarter.

Operating profit came in at CAD2.9 million, ahead of the CAD1.2 million that we recorded in the same period one year ago; mainly due to increased average prices and demand at the Windsor Locks thermal facility, as well as the impact of a stronger US dollar. With respect to EFW and BCI, I will note that we did finalize the sale of these facilities shortly after the quarter ended. And as a reminder, these operating results are reported as discontinued operations in our financial statements.

Moving on to Liberty Utilities, in the first quarter, Liberty Utilities total connections as of the end of Q1 2014 was approximately CAD480,000 compared to CAD360,000 reported a year ago. The increase is primarily due to the acquisition of Georgia and New England gas utilities. Overall, the EBITDA for Liberty Utilities compared to the prior year was approximately CAD5 million higher due to the colder weather.

If you were to compare the EBITDA this year against normalized weather winter, it's about CAD3 million higher. Looking to Liberty Utilities West, during the first quarter, water distribution and wastewater treatment revenue was approximately $8.7 million compared to $8.4 million in the same period a year ago. The modest increase is due to increased customer connections over the comparable period.

Liberty Utilities Central, in the first quarter, the region's water distribution and wastewater treatment revenue was $4.5 million and was higher than the $3.6 million a year ago, as a result of a full quarter of our Pine Bluff water system. Also in Q1, net revenue from gas sales and distribution was $12.1 million compared to $10.2 million a year ago.

In the East, net utility sales, both gas and electric, totaled CAD62.2 million during the first quarter compared to CAD28 million in the same period a year ago, with year-over-year increases coming from the acquisition of our Georgia and Massachusetts gas utilities systems and the below seasonal temperatures recorded in the first quarter of this year.

Finally, just a short note on our financing activities, we did issue CAD200 million of bonds on the APCo side of our business, 4.65% senior unsecured debentures with a maturity of February 2022 through a private-placement here in Canada. At the same time, we entered into a currency swap to economically convert the Canadian dollar-denominated debentures into US dollars, as the use of proceeds was, in fact, for US purposes.

Additionally, in the quarter, we had a successful preferred share offering. We issued 4 million cumulative rate reset preferred shares at a price of CAD25 per share, aggregate proceeds of CAD100 million and those [prafs] yield 5% annually. I'll now turn things back over to Ian.

David, thanks very much. Appreciate that. Before we open the lines up for questions, I did want to give you a couple of comments on the pipeline of growth opportunities, other than the ones that I referenced in my opening remarks that are under construction for 2014. On the APCo side of the business, we are continuing to move our 75 megawatt Amherst Island project ahead.

The reapplication was submitted to the Ministry of Environment mid-last year. We were pleased to see it was posted to the environmental registry in January of this year. Therefore, we are looking forward to seeing the reapplication processed by the government by July. Obviously, subject to having to deal with whatever potential appeals get registered, we would plan on starting construction promptly thereafter.

The technical group has been working long and hard to make sure that we're ready for that. It should take about 12 to 18 months to finish construction of that project. Moving to Saskatchewan, I'll note that we're in the environmental review process for our Chaplain project. You'll note from our MD&A, that we're pleased to see that the expected capital costs of the project, as they continue to be refined, have now dropped to CAD340 million from the original estimate of CAD355 million.

In Quebec, I mentioned earlier we are in construction right now for Phase One of our Saint-Damase project. We are planning to submit a proposal for the fill-in100 megawatts phase to Hydro-Quebec under its current request for proposals. Switching over to Liberty Utilities, following on the CAD18 million in rate cases which have been successfully prosecuted by a regulatory affairs team. I'll note that additional CAD12 million of rate increases have been filed. We expect Commission orders for these requests in early 2015.

We have included, in our Q1 MD&A, a table which allows you to review the specifics of those rate cases. To sum up before we go to questions, as we look through the balance of 2014 and beyond, we are committed to continuing to provide long-term accretive growth in the business. This is really, on a per share and a cash flow basis, this is really the underpinning for further capital appreciation and dividend growth. Perhaps I'll mention it just before it gets asked as a question.

We look at the dividend, while we look at it every quarter, the Board is committed to looking at it in-depth following our strategy session, which is held in July. I think the capital markets can anticipate some formal comment on the dividend at our Q2 earnings call, which will be held in early August. Just as I said, to wrap-up, we're pleased that the portfolio of achievable growth opportunities we have is continuing to deliver shareholder value and we are going to stick to the current course and speed. With that, operator, I'd like to open it up for our question-and-answer period.

Thank you, Sir.

(Operator Instructions) Nelson Ng, RBC Capital Markets.

Congratulations on a strong quarter.

Thanks, Nelson. I wish I could take credit for the polar vortices.

That's actually the first question I wanted to ask you. I think I understand the big picture in terms of how the cold-weather impacted APCo and Liberty Utilities, but just I wanted to get some more color. For APCo, was it a net negative because of AES? For the utilities side, how big of a net positive? Are you able to quantify that?

Certainly. Let me start with Liberty, because that's just easier. We joke about the polar vortices, but we need to keep it in context that our objective and frankly, I think, the status generally reflects that we're largely decoupled across the portfolio from commodity consumption. As case in point, in Tahoe, California, I don't care whether you turn on the lights or don't turn on the lights from a rate revenue perspective because we have complete decoupling.

In some respects, as well, we should. We're really there to provide wires that you can use at your convenience. You should pay for the commodity when you use it. To put it in context, just to highlight a comment that David made in his remarks, Nelson, is that the EBITDA impact of the cold in Liberty Utilities compared to what we would expect based on normalized weather was around CAD3 million.

Is it real money? Sure. Is it somehow changed the complexion of how the portfolio is expected to behave going forward? No. As I said, I think it's real money and we need to keep it in mind, but we are striving, actually, to reduce that through further decoupling as we move through rate cases going forward. On the APCo side, it's a little bit more difficult to quantify.

Electricity prices were slightly higher, though, as you know, we don't have very much energy to sell into the merchant markets. I think the wind resources were largely unaffected by the cold weather. I think we generally hit average resources. I'm not sure that we'd look through APCo and say that the weather had a materially positive or negative effect. I don't know if those comments are helpful, Nelson.

Yes. I read some comments in the report about AES and how AES had to pay very high power prices, but partially offset the impact with that CAD4 million hedge.

Let me add some very specific color to that one. You're absolutely right, AES needed to go into the market and buy high prices, but if you look at our financial statement, we actually don't run an unbalanced book. Further down, there is actually a gain that was realized on the hedges that AES put in place to exactly offset that exposure. Really, AES, for all intents and purposes, every quarter is pretty much flat.

The problem, of course, we don't get to net it off just because of the hedge treatment from an accounting perspective that we're not allowed to take. If you look at it in our adjusted EBITDA basis, we really net those off. Really, you're only seeing one side of the story there, Nelson. Really there was no impact of those higher prices, because we don't allow ourselves to be exposed to that in the AES side. I hope that's clear.

Yes. That's great. In terms of the M&A environments, particularly in the US, are you seeing a lot of price inflation and very high value expectations given there seems to be a lot of yield [cos] starting up?

Yes. It would be disingenuine to say that the market is not robust for M&A on both the power and utilities side. I'll say, while that is a negative, the flip side positive is that we look at our growth in areas other than executing on M&A, in which we would be going head to head with all of those, either those yield cos, private equity money, frankly, even large utilities who are just desperate for ways to grow.

On our power side, as you know, we actually see the majority of our value created much, much earlier in the value chain through development. We're not really competing for those set of projects since we're the greenfield guy. On the utilities side, as we highlighted at our Investor Day, it is CAD1 billion worth of organic growth going forward in our utility portfolio, which we're not competing for, to be frank, we have to put in dollar for dollar.

That's really first prize. Are we still continuing on the hunt for acquisitions? Absolutely. Are we going to place stupid prices that are dilutive to value? Absolutely not. We will continue to grow this business accretively and I hope that's what the pipeline of opportunities gives everybody, including yourself, comfort.

Great. Thanks.

Rupert Merer, NBS.

Great quarter. Looking at the investments you have planned for the rest of the year, you're targeting CAD180 million for gas and electric distribution systems. Can you give us an update on where you plan to make those investments and how quickly you think you can get rate adjustments on the investments?

As we mentioned at our Investor Day, the preponderance of the growth that we are looking for in Liberty Utilities actually has near-term visibility to regulatory return. You think of some of the jurisdictions like Georgia, where one makes an investment, files one's rate and recovery initiative at the end of the year and sees it in rates in the next year. In many of the other instances, we have tracker accounts which allow us to, such that investment doesn't fit, if you will, follow, for a long period of time, until we get into the rate recovery process.

I would actually characterize that CAD180 million as both low regulatory execution risk and relatively near-term recovery, less than 12 months. I think while it's spread across the entire portfolio of our utilities, I think that characterizes, in general, the overall investment.

Great. On the balance sheet, looking at your investment plans this year, how do you view the balance sheet? Where does your debt to capital ratio go? How do you finance that growth this year?

Rupert, we've got, I think as you know, a fairly strong balance sheet. We do target about a 50/50 debt to total cap. With the preferred shares that we issued earlier in the quarter, we're certainly not in a position of having to go to the equity markets to finance the growth for this year. Might we be opportunistic? Perhaps. Certainly, there's absolutely no need for us to be tapping the equity capital markets this year.

To add to that, Rupert, as the business is grown, internally generated cash flow is starting to become a very significant part of the financing equation for our growth going forward. Just to echo that, I think, if you look across the spectrum, and I'll just reiterate our point, we will never commit to growth opportunities that will see us with an overhang from an equity perspective. I think we've maintained that today.

Great. Thanks. I'll move to the back of the shrimp line.

Thanks, Rupert. (laughter)

Juan Plessis, Canaccord.

Congratulations on the strong quarter. With respect to Bakersfield Solar, you're now looking at funding about 65% of the projects with tax equity funding the rest. I think that's up 55% funding you were guiding to previously. Can you talk about why that's changing and also, when you expect to finalize the agreement with the tax equity partner?

Let me start by saying is we actually have a signed term sheet with our tax equity partner on that one. That is good news. To put in context why the numbers bounce around a little, obviously, as we're negotiating with the tax equity community and ultimately competitively selecting a partner with whom to deal with for the Bakersfield solar project, as the return expectations of those parties comes clear and we start to factor them into the model, usually the amount of tax equity for a project will bounce around a tad.

The changes in the tax equity really arose as a result of finalization, if you will, of the terms of the tax equity that ultimately we have. Don't expect it to bounce around any more because we've got a signed term sheet for that project.

Okay, thank you for that. On Chaplin wind, the project is going to be built in two phases now. Can you provide a little more color on the size of each phase, as well as the timing for expected in-service of each phase?

Yes. The size of each phase, it's largely broken down to we'll build the first, we'll call it, 35 megawatts, 20% of 177, as the first phase under the [CRC] program, with the balance of the 177 megawatts being built out following the testing of the wind resource in accordance with the guidelines for the CRC tax credit. Really, the project isn't changing in size. It's still 177 megawatts that Saas Power is prepared to buy. It will be broken into an 80/20 split, Juan, if that makes sense.

Sure. It makes sense. In terms of timing?

Obviously, we're not going to commit to the other 80% until the 120-day test period under the CRC regulations has expired, but we're obviously cautiously optimistic that the results of the CRC testing will confirm the assumptions that we've made and that we'll roll right on into the construction of the infill phase after that 120-day period.

Okay, great. Thank you very much.

Paul Lechem, CIBC.

On the [recs], you've got some good rec revenue in the quarter, it talks about increased pricing in Illinois and Pennsylvania. Can you talk a little bit about what's going on there? What are recs being priced at and what's the opportunity, especially with some of your other renewable facilities coming to operation?

Sure. I'm going to guess one of the things that we're noticing from a rec perspective is that they're much higher than we had originally forecast. I'll be frank and say that when we looked at the Gamesa wind assets, that really are the large projects that are able to capitalize on that market, we put relatively modest value on the recs.

I think we have been pleased and I think it's arguably the legislation in action and delivering what the expectations of the legislators have been, which is to generate a robust market that encourages the development of renewable resources. We might have seen CAD1 or CAD2 of value from a forecast perspective in something like PJM for the recs. We're kind of seeing CAD8 and CAD9.

Given that you get one rec for every megawatt hour, it's not an inconsequential adder to the value of the projects. We have no reason to believe that the market won't continue on. In fact, if you look at the forward curves out in those markets, I would point out, though, they're not particularly liquid and they only go out a three- or four-year period. They're forecasted to continue to be strong. We look at it as pleasant upside if you want to think of it that way for these projects.

As the other 40% of those comes into your fold, you expect a benefit?

We now own 100% of those Gamesa projects and we closed, on March 31, the acquisition of the other 40%. You'll start to see that in our results going forward, too, Paul.

Got you. On the development side, you mentioned, on Saint-Damase, you're planning to submit to the Quebec RFP 100 megawatts building out on that. Can you give us a sense of timing on that process? Also, I thought you had a similar opportunity with [Val-Eo]. I was just wondering if you were going to pursue that opportunity and if not, why not?

The RFP, as you know, is being run by Hydro-Quebec. I would actually argue that the change in the government has positive implications for the RFP. I think, arguably, there wasn't a huge political will to do this under Pauline Marois' government. I think there's probably a much stronger initiative to pursue that to get it done. It's a fall of 2014 initiative. We expect to comply with that on Saint-Damase. We have spoken to our community partner on that. They're encouraging that.

With respect to Val-Eo, I think your observation is absolutely correct that we have an opportunity to do the same thing. I will say that it's an extremely competitive industry in Quebec in terms of the pricing and Val-Eo has more challenged wind resource than, perhaps, Saint-Damase. Consequently, you have to ask yourself the question -- don't get me wrong, we haven't answered it to ourselves yet -- you have to ask yourself the question, if you're going to come second, there are no prizes for second in that kind of an RFP.

While our partners are keen on looking at it, we have to be prudent and look at whether it's a competitive offering. That's a decision we haven't made yet and don't actually, frankly, have to make until a little bit later this summer.

I got you. Thanks. The fall 2014 that you mentioned for Saint-Damase, that's for you to submit to the RFP?

Yes. And then you can wait the decade or so for Hydro-Quebec to get back. I'm just kidding. Hydro-Quebec will get back to us in a reasonable period of time, but don't expect a result in a month or two. I suspect early 2015 is probably a reasonable response time.

Okay. You mentioned, in your opening remarks, about moving ahead on CNG, LNG, in Massachusetts. Can you give --

You're really hogging that shrimp boat, but that's okay. No, no, no. Paul, let me answer your question. You've already loaded up the plate. Sure. I think we'd mentioned that at our Investor Day that we saw significant opportunity to capitalize on regulated or pseudo-regulated investments in the Northeast, given the current constrained natural gas supply infrastructure which exists. CNG and LNG, for sure, play a part of that.

We are looking for, on the CNG -- and I'll just repeat the thesis that we advanced at our Investor Day, CNG involves looking for customers who are significant consumers of non-natural fossil fuels, be it propane or fuel oil, who are off a pipeline, but then putting infrastructure in there to truck to them either compressed or liquefied natural gas. There remains a hugely compelling economic proposition to do that. That's one aspect that we're looking at.

The other one is, we are actually in development, and we highlighted it in November, of our own liquefied natural gas plant. Right now, it looks like it's going to be triangulating around 4 billion cubic feet of liquefaction a year. We have a partner in that project called Sampson Energy out of the Midwest. That project is in the CAD130 million to CAD150 million range.

We are targeting the natural gas LDCs, obviously, which include ourselves and Energy North and also the balance of the New England LDCs, who have need for liquefied natural gas for peat-shaving purposes. I think we remain cautiously optimistic that the CNG/LNG sector will provide us an opportunity to grow our business in a way which has no rate impacts on our regulated customers, because, in some respects, we're just helping alleviate constraints that our customers are already paying for in their current gas rate. I hope that is helpful.

Yes. That's great. Thanks very much.

Ben Pham, BMO Capital Markets.

Going back to that question on the Quebec expansions, can you clarify if you have partnerships on those projects or are you planning to engage in partnerships with [munis or first nations]?

Yes and yes. In Saint-Damase, we actually have our community partner there. Having said that, I think, economically, I think it's a fair assumption to make that Algonquin would largely have economic exposure to the lion's share of the partnership. You can imagine the village of Saint-Damase, while they're obviously encouraging and would like to see some long-term value accrue to their citizens, writing that CAD160 million check or half thereof for the expansion would be a difficult thing for them.

We would and have, in our first phase, structured the agreement where the economic exposure really largely rests with us. I don't mean to say that it's academic, Ben, but whether we have a partner or not, but I think from your own thoughts and perhaps modeling perspective, you should think about us kind of having exposure to the lion's share of the opportunity, regardless of whether there's a partner or not.

Okay. To go back to the earlier comment about the potential merger of the yield co model in the US and just potential M&A prices being embedded. When you look at that changing landscape, do you see how that places pressure on you guys to maybe spin out your contracted power business and maintain majority interest?

We looked at it and I think we are gratified that the market is seeing value in our structure. I'm not sure we saw a value proposition that would justify the cost of spinning that out separately. When you look at the multiples of EBITDA, you look at that exists, I'm not sure there's a huge value proposition that would be surfaced as a result of that spinout. We obviously always keep our eyes on that.

I think it's fair to say this is all about the shareholder and if we can create value by creating another entity, of course we'd look at it. I think we just haven't seen that over the past little while. As I said, in some respects, it's because we're gratified that the market is seeing value in us as we exist today.

Okay. Very good.

Sean Steuart, TD Securities.

Ian, you mentioned for Amherst Island, you're on schedule for the REA by July. Can you just go through the remaining steps for you to get the notice to proceed from the OPA at this point?

Sure. As you're aware, Sean, the whole REA process with the Ministry of the Environment is broken down into really two elements. One, what's called the administrative sufficiency or administrative completeness. That, in the original documentation that was advanced in respect to REA, was estimated, call it, 30 to 60 days. The reality was that there was no guidelines or constraints under the regulations, which constrained that to 30 or 60 days. We took 270 days.

That may sound like a lot, but to be frank, we were right in the middle of the pack of everybody else. I think what's been happening, and in some respects, it is what it is, I guess, obviously, we're always impatient guys, but I think what the government has done is spending more time during the administrative completeness phase, not just ticking the box to see whether you have all of the required components addressed, but actually getting into the reports, reading them and seeing that not only are they there but they are on point.

The second phase, and that for us, phase ended on January 2 of this year. The second phase is much more prescriptive in terms of the timeline. It is six months for the government to, following the Dean's administrative completeness, to actually rule on the REA. That's why I say, with some certainty, July of this year. The question that obviously remains outstanding is where do we go after we get the REA?

There is opportunity for people to appeal and they're really appealing the government to the Environmental Review Tribunal to question the issuance of the REA approval. I think I 'm pleased to say that we, I won't say we, but the industry is largely batting a thousand, if you will, on being successful of the ERTs. But I will say that it is a process that can take up to six months to get through.

Depending on whether we get appealed to the ERT, either you would see us moving ahead with construction forthwith after July or we would have to work our way through the ERT, which would show another six months. Having said that, I think we're continuing on all the engineering. We're getting ready for the long lead time procurement issues that we would actually start almost, irrespective of the ERT, probably in July. We have the ability to do that and the right to do it and would probably avail ourselves of that right, Sean.

Okay. That is helpful. Question for David: the breakdown of the CapEx and the MD&A, you had just under CAD45 million in the corporate segment. What was that spending for?

We're busting at the seams here in Oakville. Our offices are spread out, actually, into three locations. We purchased a new office building in Oakville that will allow us to consolidate all of our offices under one location. That is all that is.

I got it. That's all I had. Thanks, guys.

Matthew Akman, Scotia Bank.

What's been evolving with First Wind and sort of the back-and-forth, the to-ing and fro-ing between whether regulated utilities and generation companies, particularly renewables, are allowed to be affiliated or should be more separate? You guys, at your Investor Day, talked about doing a little bit more of both within maybe franchise areas. I'm just wondering where your thoughts are on that now? Obviously, you're close with Emera and as they grind through that, does that give you pause?

I'll start by saying that the fact pattern has changed a little bit for us in the state of Maine from the time the original application was made, that the original docket was open. As you know, we were consolidated. The opportunity for Emera to participate in the ownership of Algonquin was consolidated with Emera's acquisition of First Wind. At the time, we actually did own some generation, albeit relatively small, in the state of Maine.

I'll say that, in accordance with the original order that was issued, we divested ourselves of all of the thermal assets that we had. We are in the process of divesting ourselves of the last, literally few hundred kilowatts, of Hydro sites that we would still own in the state of Maine. Going forward for us, and I mean for us and Emera, in some respects, it becomes a bit of an academic discussion whether separation of church and state generation versus a distribution in transmission is something that the state is very firm on or not.

It will likely have implications to Emera's investment in First Wind and obviously, Chris H. would be the right guy to pose that question to. From our point of view, we're confident that, as we look forward in the state of Maine, the facts are crystal clear that it's just no longer an issue for us however they come down on it. As we think about it going forward for other jurisdictions and whether that separation of church and state is a positive or negative for us, I don't think we have an individual one-size-fits-all answer.

I think just to highlight, and we mentioned at our Investor Day, we actually received positive feedback in the state of California to the construction of a 60 megawatt to 80 megawatt solar project by CalPeco to satisfy its RPS regulations. What that really signifies is a bit of a softening, if you will, of the CPUC's perspective on the ownership of generation by the incumbent utilities.

I'm not sure that it's crystal clear, Matthew, that it's either a good or a bad thing for us. I just don't think it's relevant thing as we think about state of Maine, if that's really where the essence of the question was going.

I was asking both and you answered both. Thank you very much.

(Operator Instructions)

There seem to be no further questions. Please continue.

It sounds like the shrimp boat has been completely consumed. I appreciate everybody's participation on the call today. We look forward to, obviously, continuing this dialogue in our next quarter. Please, I encourage everybody to stay on the line for Kelly's riveting description and disclaimer regarding forward-looking results. 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 and Utilities Corporation with respect to future events based on assumptions relating to, among others, the performance of the Company's assets and the 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, they require us to make assumptions that involve inherent risk 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 expectations that are forward-looking statements. Material risk factors include those presented in the Company's most recent annual financial results, the annual information form, and most quarterly management discussion and analysis.

Given these risks, undue reliance should not be placed on these 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. [APUC] review materials, forward-looking information is presented not less frequently than on quarterly basis.

APUC is not obligated 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, taxes, 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 activity, net energy sales, and net utility sales, selectively the financial measures, are used on this call to address Company's financial disclosures.

The financial measures are not recognized measures under generally accepted accounting principles or GAAP. We have 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 financial measures and the description of the use of non-GAAP financial measures can be found in the most recently published management discussion and analysis available on the Company's website and SEDAR.com. Per share cash provided by operating activity is not a substitute measure of performance for earnings per share.

Amounts represented by per share cash provided by operating activities do not represent amounts available for distribution for shareholders and should be considered in light of various charges and claims against APUC. Thank you.

Thank you. This concludes Algonquin Power & Utilities Corp. Q1 2014 Analyst and Investor Conference Call. Thank you for participating. You may now disconnect.