Algonquin Power & Utilities Corp (AQN) 2015 Q2 法說會逐字稿

Good day and welcome to the Algonquin Power and Utilities Corp. Q2 2015 analyst and investor call conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Alison Holditch, Manager Investor Relations. Please go ahead.

Thank you. Good morning, everyone. Thanks for joining us on our 2015 second-quarter conference call. My name is Alison Holditch, Manager of our Investor Relations function. Joining 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 at Algonquinpowerandutilities.com.

I'd like to note that on this call we will provide information that relates to future events and expected financial positions that should be considered forward-looking. We will provide additional details at the end of the call and I direct you to review our full disclosure on forward-looking information 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, Ian will discuss the highlights for the quarter. David will follow with a review of the financial results and then we will open the line for questions. I would ask that you restrict your questions to two and then requeue if you have any additional questions, to allow others the opportunity to participate. Now I would like to turn things over to Ian to review the quarter's results.

Thanks, Alison, and thanks to everyone for joining us for our Q2 results call from Oakville here. I'd point out that it rained last night, but it's sunny and windy today, which is kind of a trifecta for an organization which is in the hydro, solar, and wind power business.

In summary for the second quarter, we were pleased to see the continuation of increased year-over-year financial results. During the second quarter, we realized a 22% increase in our adjusted EBITDA with CAD81.1 million generated versus the CAD66.4 million we reported the same period a year ago. This growth is the result incremental contributions from both our Generation and Distribution business groups. And I think it's highlighted in the second quarter with two renewable energy facilities having achieved commercial operations in favorable rate case settlements in our regulated utilities.

Within the Generation business group, the Company's eighth generating facility, the 23-megawatt Morse project in Saskatchewan and the Company's second solar facility, the 20-megawatt Bakersfield 1 solar project, located in California. Both achieved commercial operations in April. These facilities operate under 20-year power purchase agreements with large investment-grade electric utilities; effectively extending our average power purchase agreement length. While the resource levels of wind, solar and hydro naturally fluctuate from quarter to quarter, we were pleased that the diversification strategies, on which our portfolio is constructed, worked effectively to mitigate the lower than average resources experienced in the Generation business group. As a note, regarding further reductions in our already competitive cost of capital, in their reaffirmation of the Generation business group's debt rating, DBRS changed their outlook commentary to positive. Obviously, such trend change is consistent with our view of the credit positive activities within this business group.

Moving on, the Distribution business group had a good quarter with a 9% overall increase in net utility sales and a 27% increase in operating profit. Growth in net utility sales is driven primarily by successful rate case outcomes, specifically the EnergyNorth Gas system received a final order on its pending rate case request approving a $12.4 million revenue increase.

Lastly, APUC's Transmission business group announced last November that it's participating in the joint development of Kinder Morgan's Northeast Energy Direct natural gas pipeline transmission project in the Northeast US. We were pleased that in July, the Kinder Morgan Board of Directors approved proceeding with the project development. This opportunity now adds more than $300 million to our growth pipeline.

Before I turn things over to David, I'd like to provide a quick update on our continuing strong relationship with our largest shareholder, Emera. By way of background, Algonquin and Emera entered into a strategic investment agreement, or an SIA as we call it, five years ago, which crafted a collaborative commercial relationship between our respective organizations. Without a doubt, Algonquin has enjoyed benefits from our close relationship with Emera through their endorsement of our growth strategies, their continuing financial commitments, which has helped drive down our cost of capital, and last, but not least, the continuing contributions of Chris Huskilson, Emera's CEO, as a member of our Board.

Over the intervening five years, Algonquin has undergone profound growth and evolution. To put this in perspective, in 2010, APUC was a CAD980 million organization focused primarily on independent power development. In pretty stark contrast, today's APUC is a CAD4.5 billion organization competing across the entire generation, distribution, and transmission utility value spectrum, serving over half a million electric natural gas utility customers, owning over 1,100 megawatts of electric generation, and driving growth through a CAD2.6 billion pipeline of identified opportunities.

It might be important to note that it's not just Emera or Algonquin who's growing and changing. In addition to Algonquin's broadening strategic interests over the past five years, Emera has also continued to evolve its business focus with a recently stated interest in natural gas utilities. In recognition of these natural evolutions in our representative organizations over the past five years, Emera and ourselves jointly concluded that our strategic investment agreement, or SIA, would benefit from an update to its terms and therefore, we're now in the process of updating this agreement to serve us better for the next five years. While the final document is an active work in progress, there are three main areas on which the changes of focused.

First, we're seeking to reflect the pursuit of larger transactions by Algonquin, given the reduced size differential between our respective companies. Second, the amended SIA needs to acknowledge the evolving sectoral and geographic areas of interest of both organizations. And lastly, we will remove the existing share ownership restrictions, which would potentially allow Emera to increase it's interest in Algonquin beyond the current 25%.

In summary, we believe, and I'd hope that Emera would also agree that the relationship embodied in the SIA has served us well for the past five years, delivering significant benefits to both of us and we look forward to continuing to create mutual value with Emera for years to come. With that, I'll turn things over to David to speak to the Q2 results. David.

Thanks, Ian. Good morning, everyone. We're pleased to be reporting yet another solid quarter of earnings. The benefits of the diversification of our portfolio are evident in our results, as well as the benefits from having 80% of our operations in the US, given the recent strength of the US dollar. As an example, should the current exchange rate of $1.30 hold to the end of the year, we would expect this to contribute, over and above everything else we are doing, an additional CAD0.04 per share relative to the $1.10 exchange rate that we experienced in 2014.

Adjusted EBITDA in the second quarter totaled CAD81.1 million, a 22% increase over the amount reported a year ago, which was primarily due to rate case settlements, a full three months of production at our Morse and Bakersfield solar facilities, and of course, as I mentioned, the stronger US dollar. Adjusted EBITDA for the six months came in at CAD195.6 million, a 19% increase over what was reported in the first six months of 2014. Taking a closer look at some of the numbers, our adjusted net earnings came in at CAD22.2 million compared to CAD16.6 million a year ago for the quarter and on a six-month basis, our adjusted net earnings were CAD64.6 million compared to CAD53.6 million last year.

So now let's move into a little bit more detail about our operating subsidiaries beginning with the Generation Group. For this first six months of 2015, the Generation Group's renewable energy division generated electricity equal to 88% of long-term average resources compared to 100% during the first six months of 2014. For the second quarter of this year, the combined operating profit of the Generation group totaled CAD45.9 million as compared to CAD43.3 million during the same period in 2014.

Moving on to our Distribution Group, in the second quarter of 2015, the Distribution Group reported an operating profit of the [CAD]35.4 million compared to the $27.9 million reported in the same quarter a year ago. The increase in the operating profit is primarily due to the impact of rate case settlements. In the first six months of 2015, the Distribution Group reported an operating profit of $98.3 million compared to $86.1 million for the six months of last year. In a little bit more detail, the electricity division within the Distribution Group, had net utility electricity sales totaling $17.4 million compared to $18.1 million last year. For the first six months of 2015, net utility electricity sales totalled $36.1 million, which, adjusting for the retroactive recognition of $2.5 million for new revenues granted under the Granite State Electric System rate case implemented in the first quarter of last year, were consistent basically year over year.

Moving on to the natural gas division, in the second quarter of 2014, net utility natural gas sales and distribution revenue was $34.7 million compared to the $29.9 million of the same period a year ago. We've been quite successful in our rate cases and that accounts for most of that increase.

Moving on to the water division, in the second quarter of 2015, revenue from water distribution and wastewater treatment totalled $15.6 million compared to $15.1 million during the same period in 2014. Again, rate increases and our successful prosecution thereof was a main contributing factor, as was the acquisition of the White Hall water system.

Now an update on recent financing activities. On April 30, 2015, the Distribution Group completed a private placement in the US issuing $160 million of senior unsecured 30-year notes, bearing a coupon of 4.13%. This was the first time the utility group issued 30-year notes and we were very pleased with the offering. The proceeds of the financing will be used to partially finance our pending Park Water system acquisition, which is expected to occur later this year and some it for general corporate purposes. This offering, at very attractive rates and a long tenure, clearly demonstrates the strong currency that our Liberty Utilities bond platform has in the US private placement market.

I'm also pleased to report, as Ian had mentioned, that DBRS has also changed the rating trend to positive on our Generation business, which we view as quite positive and reflective of the strengthening credit of our generation business. I'll now hands things back over to Ian.

Thanks, David. Before we open the line up for questions, as usual, I'd like to provide a quick update on our growth initiatives. Within the Generation business group, construction work at our 200-megawatt Odell Wind Project in Minnesota commenced in May of this quarter and I can report that all of the access roads and foundation excavations have now been completed. Work has started on the collection and [connection] facilities with approximately 3/4 of the transmission line having been installed.

With the California Bakersfield 1 solar facility now completed, the Generation business group's team has begun work on the adjacent 10-megawatt Bakersfield 2 expansion project. During the quarter, the final permit compliance binders were submitted to the county. Engineering design of the facility is well underway and the procurement of long lead time electrical equipment and solar panels has begun.

Within the Distribution business group, applications have now been filed seeking a total of $26.2 million in revenue increases collectively for the Calpeco electric system in California, the Black Mountain sewer system in Arizona, the New England gas system in Massachusetts, and the Missouri natural gas system. Final decisions on all four rate proceedings are expected within the next 12 months. Regarding the acquisition of the Park Water Company, which David spoke, approval from the California Public Utilities Commission and the Montana Public Service Commission are required.

An approval application was filed in November 2014 with the CPUC seeking approval to acquire the two water utilities which are located in California. In this regard, a joint settlement agreement has now been executed with the Office of the Ratepayer Advocate and a joint motion to approve settlement was filed with the CPUC in May. The settlement agreement is currently before the administrative law judge and a decision is expected in the fourth quarter of this year.

In Montana, an approval application was filed in December last year with the Montana Public Service Commission seeking approval to acquire the Montana utility Mountain Water Company. I'd say not withstanding the ongoing twists and turns in the condemnation proceeding with the City of Missoula, our regulatory hearing with the State of Montana is now scheduled for October 19 of this year with a decision on the Montana application expected before the end of the year.

Within the Transmission business group, permitting work on the Northeast Energy Direct continues with the environmental review being filed with the FERC in June and the filing of the formal FERC certificate application planned for October of this year. Construction is currently forecast to begin in January 2017 with the commercial operation targeted for late 2018.

In closing, we trust that shareholders were pleased with the dividend increase that we announced early in Q2. I would point out that this represents the fifth consecutive year of dividend increases, bringing our current five-year dividend CAGR in Canadian dollars to over 15%. APUC has confirmed its expectations for double-digit earnings and cash flow growth to support future targeted dividend increases.

And lastly, before we go to questions, I'd like to offer the commentary that we believe that our current dividend yield is not fully reflective of the fundamental value of our business. In particular, we speculate that perhaps it's not fully appreciated that the material growth in our annualized dividend to more than CAD0.48 per share through our normal course increases, together with appreciation of the US dollar, is actually supported by increased Canadian equivalent earnings coming from the over 80% of our operations which are located in the US. We're confident that, as we continue to communicate this hedging and deliver on the promised earnings cash flow and dividend growth from our clearly identified CAD2.6 billion growth pipeline, this will ultimately be reflected in a continued rise in our share price over the balance of 2015.

So with that, lets open the line up for the question-and-answer session.

(Operator Instructions)

Your first question comes from Rupert Merer with National Bank.

Good morning.

Good morning.

So on growth in M&A with your updated agreement with Emera, it sounds like you could cast your net a little wider for growth. Can you talk about how your focus could change and what are you seeing on transaction multiples recently? Maybe a little color on how prices vary between asset types and what you could see in broader geographies?

Sure. I am not so sure that broader geographies, we clearly, obviously, have been -- I won't say homebodies, because we have a North American focus and I think if your question is would we consider regulated utilities outside of North America -- I don't think it would be unreasonable for us to think that there is -- there may be opportunities for us in OECD countries, obviously outside of our current focus.

In terms of the multiples, I think it's not -- they remain strong and robust. The interest rates are -- continue to be low, though I think we are cautiously optimistic that I think there's an interesting dynamic developing between Canada and the US, as you read every day in the newspaper with the continued slide in the oil and gas prices. The prospect for increases in Canadian interest rates is somewhat muted, whereas in the US, I think the prospect of interest rate increases is probably if not a foregone conclusion, it's certainly a probability. And I think that's creating an interesting dynamic that would improve the competitiveness of Canadian organizations in the M&A space as we think about the US. So perhaps think about it this way, improving PDEs in Canada versus falling PDEs in the US. So I think we're cautiously optimistic, Rupert, that our competitive advantage, generated by the differential between the Canadian environment and the US market will create some very interesting opportunities over the next, call it 12 to 18 months.

Great. And then a follow-up on growth, talking about Kinder Morgan's pipeline. It looks like a COD target November 2018. I believe you mentioned potentially starting construction January 2017. Could you talk about what the milestones look like for that project leading up to construction? What are you going to need to see to be sure you're moving forward with this and what the returns look like compared to some of your other investment opportunities?

Sure. I think we all -- in this business of obtaining the FERC certificate is a huge gaining item right now. The FERC certificate is expected to be filed in October of this year, so October 2015. I think a year worth of prosecution of that application is probably reasonable. Therefore, October 2016 is a reasonable period for -- to expect that FERC certificate. So construction start of January 2017 really kind of follows on the expected receipt of that certificate late in the fall of next year.

I will say that what is ongoing, and I think Algonquin/Liberty can play an important role in it, is all of the outreach programs that are going on, certainly, across New Hampshire. We are taking an active role in demonstrating the benefits that this pipeline can bring to the existing customers of Liberty utilities, but also potential new customers. That pipeline is going through sections of the state which are underserved by natural gas, as I sort of joke, they don't call New Hampshire the Granite State for nothing, and the installation of pipelines is quite expensive. And so I think we're taking a lead role in trying to show that the towns and communities that are -- will now be within economic distance of the pipeline, the opportunity to participate in what is undeniably a convenient and cost effective fuel. I think the next year is going to be busy for us in terms of supporting Kinder's prosecution of the FERC and our own continued outreach in New Hampshire.

You asked the question about returns. I think we're confident that the returns off the Kinder Morgan pipeline are going to meet or exceed the returns that we see from our other utility investments. And, frankly, depending how the capacity of the pipeline is increased through the -- through incremental compression that can get added, the returns could significantly exceed the regulated returns on our distribution utilities. Hope that's helpful, Rupert.

Yes, that's helpful. Thanks very much.

Thanks, Rupert.

Your next question comes from Paul Lechem with CIBC.

Just continuing the question on Northeast Energy Direct. You have an option to increase your ownership from 2.5% to 10%. I was just wondering under what circumstances would you exercise that? Are you looking -- are you waiting out through the FERC process before you do so or is there something else you're waiting for?

No, our option is continuing until the FERC certificate is in hand. Frankly, when we negotiated it with Kinder, the thought was, once the FERC certificate's in hand, it's pretty clear what the future's going to look like. I'm not sure there is really practically any value in exercising the option since it's at book value if you want to think of it that way before that date. So October 2016, we'll be called on to make our decision.

It's hard, frankly, to imagine a circumstance, as we look at the project today, to say that you wouldn't be exercising that option. I think the project is an attractive opportunity to commit, as I said, close to $300 million to an opportunity which will generate returns, which are kind of consistent with our expectations of our other regulated utilities. And so with the approval of Kinder Morgan's Board of Directors of the project, I think, from my perspective, and you know you and I have spoken, and historically, I have always characterized the Northeast Energy Direct opportunity really more -- I ask people to characterize it as an indicia of the entrepreneurial spirit alive and well within Algonquin to be able to suss out this kind of an opportunity. I think now with the approval in hand and the commitment from Kinder Morgan that we start to think of this added to the to-do list, rather than perhaps the speculative nature it might have had before.

Okay. Thanks. And then back on the Emera agreement, given your expanding geographic and/or scope of the acquisitions you would look at, how do you avoid conflict between the two companies when you go after these new expanded opportunity sets? Is there -- are there areas where you will still delineate which Company will go after what or is there potential now for you both to start looking at similar kind of opportunities?

Well, I think I'll start by saying that this has been an incredibly collaborative relationship over the past five years. And while we certainly, we've evolved and Emera's evolved, I'm highly confident that reasonable people can come to a reasonable understanding in terms of what's best for both of us. I think that there is -- there remains, obviously, a size differential. I think Emera would probably agree. They're very, very focused on the Northeast US in terms of -- and Eastern Canada in terms of their -- in terms of their focus.

And so I think there is -- I think there is -- I see way more opportunities for mutual support than for competition, if you want to think of it that way. But I think it is important that we just recognize that what was five years ago probably requires an update. So we're going into this, I want to say positive and enthused. You would have to ask Chris Huskilson, but I would probably say the same from his perspective. It's been a great run and we obviously want it to continue.

Thanks, again.

Thanks, Paul.

Your next question will come from Nelson Ng with RBC Capital Markets.

Thanks. Good morning, everyone.

Good morning, Nelson.

Just to follow up on that Emera arrangement, were there any projects over the last year or so where you actually wanted to pursue, but based on your current arrangement with Emera, you couldn't pursue?

No.

Or is that looking forward?

No. No. I mean, that -- it's not about not being able to pursue and them just saying no or us to say no. Clearly, it's a much more, as I said, collaborative relationship with that. I think, if you read the SIA that existed five years ago, there were some sort of size thought limits in there that probably don't make as much sense anymore. We are clearly with the natural gas -- with the NED have got a foot in the natural gas pipeline business, which was never contemplated before.

I think Chris Huskilson acknowledged on his call that I think their interests for utilities are expanding to include natural gas distribution utilities and that wasn't contemplated. So I think we just need to -- I think it's all about just recognizing that the companies look different today. But I think there remains a commitment to create mutual value. As I said, it's worked really well and we're thrilled with the relationship. I don't know what more I can add because we were obviously in the discussions for it right now. But we're -- we strive to provide transparency in terms of these sort of ongoing relationships and that's kind of why we're talking about it.

And could you just remind us of when you expect to have that agreement revised or completed?

Oh, it's discussions that's going on right now. I think -- but there's a couple of things that we certainly have committed to and I outlined them in the agreement. One of them is, obviously, the agreement made reference to restrictions to Emera's interest in Algonquin. I'm not sure that's totally appropriate anymore given the size of Algonquin and so it's underway right now. It's an active work in progress, Nelson.

Okay. Got it. And then I guess somewhat related, in terms of pursuing M&A or development opportunities, I guess there's a lot of activity in Mexico. I was just wondering whether you would look at doing a transmission or pipeline or power opportunities there?

We actually have looked at some solar projects down in Mexico. Obviously, whenever we -- I don't want to say it's a big step for us to be thinking about introducing country risk and potentially currency risk, depending on how the PPA or -- is denominated. But Mexico is not too far south of our Nogales, Arizona utility. I think there would definitely be a comfort there. I think one of the things, and maybe this is get back to my prepared remarks, I think Algonquin is broadening its horizon a little. As we look forward to the next five years, I think there are opportunities that we need to be at least cognizant of that would be considered international as we think about the US and Canada today. But it might provide reasonable growth and value opportunities for Algonquin shareholders. So I'll give you the short answer to your question, Nelson, is yes. I think we are interested in looking there.

Okay. Got it. And then just one last question, in terms of the Park water acquisition and the Missoula condemnation process, I believe there was a ruling in favor of the city. Can you provide us with an update on the process going forward? I presume you're appealing the decision and how long will that take and when do you think there will be a final decision on that?

Sure. Maybe the best way to couch the answer to your question is to quote the Montana Commission when they were petitioned by the City to dismiss our transfer approval application and the Commission basically said back to the City, man, you're a long way away from actually owning this utility. Until a check is written, we're going to continue on. It's a long road, as you point out, Nelson. We're in the early innings of that game. As you suggest, the ruling on necessity, which is only half of the process, has been appealed by us.

The next part of the process is the valuation section of a condemnation and that's crafted to make sure that under the Fifth Amendment of the US Constitution we get fair and just consideration. And I'll point out that the value application -- the valuation that has been submitted by Park Water in respect of that valuation process is close to $200 million. So we're just, as I said, this is a twists and turns kind of road.

What we are looking forward to is completing the acquisition that we've signed up for with Carlyle and we will continue to prosecute the condemnation part of this -- the condemnation proceeding in the way we would do in any other of our jurisdictions. It's certainly a process that we've been familiar with. You may recall we kind of bumped into this in Texas. And so I see them as two completely independent and parallel processes, Nelson. We are looking forward to completing the acquisition of the whole kit and caboodle late this year.

Okay. Great. Thanks for the clarification.

Thanks, Nelson.

Your next question will come from Matthew Ekman with Scotiabank.

Thank you. Good morning.

Good morning, Matthew.

Hey, guys. My question is just a follow-up on the agreement with Emera. One thing I'm not sure if you mentioned was whether you would you consider doing development with Emera in line with possibly doing larger acquisitions?

That's an interesting thought. Up until now historically, as you're aware, Emera's development has really focused on development within the regulated utility footprints and joint ventures with other developers. And I guess I'll have to be frank and say that's something that we would need to explore to see whether that's of interest with Emera. I think one of the things, and I think this is where the heart of your question is, is that the development, I won't call it a gain, but the development process for power projects is becoming not a gain for moms and pops.

As you know, our Odell project is 1/3 of $1 billion. We've looked at other projects which are significantly larger. And so there may well be an opportunity for a collaboration between Emera and ourselves on some of these larger projects. Up to now, we've been pretty comfortable with the things that we've been able to announce. Emera has obviously implicitly supported our initiatives by stepping up to the plate with continued commitments of equity capital and there has obviously been a history of us working together. You'll recall the CalPeco acquisition was done in direct partnership with Emera and ultimately they rolled their direct interest into us to create an indirect one. I think it's a great thought and certainly something that will be on the table as we're continuing discussions over the coming weeks.

Okay. Thank you. And just one other question is with the Obama administration announcing that they'll be putting in place more incentives for clean energy in the US, I'm wondering if you've started to give any thought to opportunities around your existing US footprints that might arise from that?

I think you're making reference to the whole rule, Section 111(d) of that clean power plan. We think that's a real shot in the arm for -- a positive shot in the arm for the renewable sector. And so for sure, I think, as we contrast the activity that's taking place in Canada versus the US, there's no doubt about it. Our development teams are keeping their Canadian passports in good stead because there's tons of opportunity down there.

And, frankly, to be frank, we actually don't bump into as many, certainly Canadian competitors, who are comfortable with the US tax equity landscape and the US electricity markets. And so for sure, I think the recent announcement, you might phrase it as Obama's continuing war on coal, I think is a really good thing -- it has positive implications for an organization with our focus.

Okay. Thank you very much. Those are my questions.

Thanks, Matthew.

Thanks, Matthew.

Your next question will come from Ben Pham with BMO.

Thanks. Good morning, everybody.

Hey, Ben.

Hey. I just wanted to go back and maybe if you can -- to quantify the size of the ideal opportunity for you in terms of an acquisition. So when you consider your EBITDA mix and just where you want to go geographically going forward?

Sure. I think that in terms of our -- maybe I'll start with the question about EBITDA mix. Currently, we are about 50/50. We are completely comfortable with 50/50, though I'll say we are not wedded to 50/50. Acquisitions, such as the Odell project or Park water, they tend to be lumpy. We don't add our EBITDA a dollar at a time. So we acknowledge that split could temporarily move in one direction or the other.

I think we are mindful of the fact that our credit rating is premised on the organization as a whole, which is obviously reflective of a significant portion of our earnings from regulated utilities. We're mindful of that. In terms of our sweet spot for transactions, I think we were obviously comfortable with the Odell project, that 1/3 of $1 billion. And so arguably maybe our sweet spot has certainly increased as the organization is headed for CAD5 billion in total size. But the good news is projects tend to be getting larger in size and scale as well and so we're tending to find those larger projects.

In terms of M&A acquisitions, I don't think it's an unreasonable rule of thumb to say that quite comfortably, an organization could probably do M&A equal to about 1/3 of its size without creating huge angst in the marketplace. So as we head for CAD5 billion, we're definitely north of CAD1.5 billion in terms of the acquisition that we can to on our own. But just to follow on -- I don't know if it was Matthew's question, but one of the benefits of the relationship with Emera, it's allowing us to punch way above our weight in terms of that scale and scope of M&A activity. I mentioned our California experience, in which Emera took a direct interest in the utility in allowing us to -- it's definitely a hunt in a size range that would be north of that CAD1.5 billion, which would be our left to our own devices kind of a threshold. So I think it's just another example of how we benefited from that opportunity, the Emera relationship to be able to explore opportunities which have a very wide dynamic range.

And you mentioned about the CalPeco JV. Years back when you were first starting, then you went on your own with the utility side of things. When you think about that CAD1 billion from your side and think about Emera's comments about the LDC gas side, are you having more discussions about bringing back that JV structure going forward with Emera?

Well, I think it would -- I think it's obviously circumstantial -- circumstance-dependent. We have -- when you say we've gone it on our own, I think the short answer is we've identified utility acquisitions and growth opportunities that obviously, just seem to make more sense to fit into our portfolio. Park Water is an example that's hard to imagine how a JV with Emera on that would have been strategically aligned for them, but obviously, right on the fairway from our perspective. But I think as we think about some of the larger opportunities and I think we're thrilled that Emera has an interest in gas LDCs because now, all of a sudden, there is a possibility to collaborate on some of the larger LDC sales where Emera would say, yes, we are interested in a direct opportunity. Up until now, to be frank, I think it would have been reasonable to have thought that those JV opportunities would have been pretty much limited to electrical distribution companies, because that's where Emera's focus was. I think it actually just expands the potential scope for -- in terms of modality and in terms of geography for collaborating with Emera. I think it's all good.

Got it. Thanks for that.

Thanks, Ben.

Thanks, Ben.

Your next question will come from Sean Steuart with TD Securities.

Thanks. Good morning, guys.

Hey, Sean.

Thanks for all the general commentary on broader growth ambitions. I just have a couple of project-specific questions. On Odell, you have an option to take full ownership there. Can you give us a little bit of context on your thinking on when that actually happens?

Sure. I think it's important, as we think about managing our balance sheet through the development cycle and as we think about all of the metrics by which we're evaluated, that joint venture structure is a good way to address what is a very short-term part of the overall life of a generating station. And so when you think -- once a generating station hits COD, you've got 30, 40 years of life in front of you, but the development phase is 12 months long. And so we were comfortable putting that development structure in place during the construction phase, but would have to rethink whether we would prefer to own 100% of it come the COD of the project. We've obviously crafted an option to do that. And so I think -- and maybe, Sean, just to be specific and responsive to your question, we would probably evaluate whether we want to own 100% of that project at the end of the development phase once we've gotten through the COD. That's where we'd probably be thinking about it.

Okay. Understood. And on Amherst, you guys gave a little bit of commentary in the MD&A about some recent progress there. Any insight on what we might be looking at for construction beginning and expected appeals from locals? Any general update on Amherst?

Sure. Obviously, we've kind of given up giving specific dates for how we think this process will unfold. But broadly, the REA, which is the renewable energy approval, we're thinking end of summer. The appeal process, which, as you are aware, is called the Environmental Review Tribunal, ERT, is a six-month process. So it sounds like, as we have been managing our construction timing and contracting, that next year, we jump heavily into that construction process at the end of the ERT, which sounds early 2016.

Okay. Thanks very much, Ian.

All right. Thanks, Sean.

(Operator Instructions)

There are no further questions at this time. Please continue.

Great. Well, again, thanks, everyone, for joining us on our Q2 investor call. We appreciate all the questions and interest that you've demonstrated. So with that, I'd ask everyone to remain on the line for a review of our disclaimer. Alison.

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 Corp with respect to future events based upon 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. Since forward-looking statements relate to future events and conditions, by their very nature, they require us to make assumptions and involve inherent risks and uncertainties. We caution that, although we believe our assumptions are reasonable in circumstances, these risks and uncertainties give rise to the possibility that our actual results may differ materially from the expectations set out in the forward-looking statements. Material risk factors include those presented in the Company's most recent annual financial results, the annual information form, and most recent quarterly Management's 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 reviews materials forward-looking information it has presented not less frequently than on a quarterly basis. APUC is not obligated to, nor does it intend to update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise, except as required by law.

With respect to non-GAAP financial measures, the terms adjusted net earnings, adjusted earnings before interest 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 activities, net energy sales and net utility sales, collectively the financial measures, are used on this call and throughout the Company's financial disclosures. The financial measures are not recognized measures under generally accepted accounting principles or GAAP.

There is no standardized measure of these financial measures. Consequently, APUC's method of calculating these measures may differ from methods used by other companies and therefore, may not be comparable to similar measures presented by other companies. A calculation and analysis of the financial measures and a description of the use of non-GAAP financial measures can be found in the most recently published Management's discussion and analysis available on the Company's website and SEDAR.com.

Per share cash provided by operating activities 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 to shareholders and should be considered in light of various changes and claims against APUC.

Ladies and gentlemen, this does conclude the conference call for today. Thank you for participating. You may now disconnect your lines.