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Algonquin Power & Utilities Corp. (NYSE:AQN)
Q4 2019 Earnings Call
Feb 28, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you for standing by. This is the conference operator. Welcome to the Algonquin Power & Utilities Corp. 2019 Fourth Quarter and Full-Year Analyst and Investor Earnings 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.

Christopher Jarratt -- Vice Chair

Great, thanks. Good morning, everyone, and thanks for joining us on our 2019 fourth quarter and full-year earnings result conference call. As mentioned, my name is Chris Jarratt, and I'm the Vice Chair of Algonquin Power & Utilities Corp. And joining me on the call today are Ian Robertson, Chief Executive Officer; and David Bronicheski, Chief Financial Officer.

We have a supplemental webcast presentation that accompanies the call and this can be accessed from our website at algonquinpowerandutilities.com. Our audited financial statements and management discussion analysis are also available on the website and also on SEDAR and EDGAR.

Before continuing the call, we would like to remind you that our discussion during the call will include certain forward-looking information and may also refer to certain non-GAAP financial measures. And at the end of the call, Amelia from our Investor Relations team will read a not so brief legal notice in respect of both forward-looking information and non-GAAP financial measures.

We've had, what we believe to be a pretty good fourth quarter and full-year. And so today, Ian is going to start with the strategic highlights followed by David summarizing the financial highlights, who will then turn things back to Ian and conclude the prepared portion of the call, with an overview of our strategic growth plan for 2020 and beyond. And then as usual, we'll open up the lines for questions. Also as usual, we'll ask you to restrict your questions to a maximum of two and then requeue if you have additional questions, to allow others the opportunity to participate.

Now with that, I'll turn things over to Ian and he will discuss the main focus areas of 2019. Thanks Chris. And good morning to everyone who is able to join us. We're coming to you from our offices here in Oakville on a sunny, but cold morning. I always welcome the opportunity on the last quarterly call of the year to reflect on the progress we made over the course of the previous year with a number of corporate achievements supporting a solid year of financial performance, we'll then spend some time looking in a bit more detail on our plans for the current year and longer term as our team works on successful execution against our recently updated five year strategic plan. Before I begin my formal remarks, I wanted to extend a warm welcome to Arun Banskota, who has now been with us for three weeks. Arun brings to APUC, a unique combination of experience in renewable energy, development, proven financial acumen and a results driven leadership style. I'm sure you'll share our confidence that Arun's background makes him a great addition to Algonquin's executive leadership team. Over the coming year, I'll be working closely with Arun to help them expand his knowledge of our business in the newly created role as President of our company to provide the opportunity for Arun to fully engage in our business and the culture, which so distinguishes this company making it the fastest growing utility in North America. Over the coming months, I hope you'll all have the opportunity to meet and build a relationship with Arun. I trust everyone takes comfort from financial result that confirm, it's business as usual as we continue to deliver solid performance and execute on our $9 billion pipeline of growth. I'm personally enthused by the prospect, but when the time is right for me to transition away from the direct management role as CEO of being able to continue to contribute to APUC's success. We've been cooperating on the creation of independent investment platform to collaborate with APUC on incremental growth opportunities, which is intended to provide for a continuation of the passion and forces, which have driven this company's extraordinary track record, obviously these plans are in early stage, but the measured pace of our leadership transition process will give us all time to sort of things out. And lastly, after almost 14 years on the APUC rocket ship, David Bronicheski has decided to retire this coming fall. He shared that family considerations at this stage of his life have made it the right time for him to move forward toward retirement and allow our deep talent base and our finance team to step forward. Well, we'll certainly wish David the best when he finally embarks on his well deserved retirement later this year. The strong financial program that contributed to our success will remain in capable hands with Arthur Kacprzak, assuming the role of Deputy Chief Financial Officer. Given that this is our year-end earnings call, let's start with some of the highlights for 2019 and how those initiatives contributed to another year of solid financial performance. Firstly, I'm pleased to report strong and stable year-over-year growth in our key financial metrics. Top line profit continue to grow with 2019 adjusted EBITDA of close to $840 million. Secondly, as we discussed at our recent Investor Day, excluding the one-time impact related to US tax reform from our 2018 EPS, 2019 EPS of $0.63 represents year-over-year growth of approximately 10%. The organization exited 2019 with nearly $11 billion in assets, a 16% increase over 2018 levels. We're very mindful of the important role our dividend plays in the total return expectations of our shareholders and we delivered annual dividends per share of approximately $0.55, which represents a 10% increase from the previous year. Secondly, the company completed many successful growth initiatives and achieved a number of important milestones during the year. I'm proud to say that we completed two acquisitions in the past quarter. We closed the acquisition of our first Canadian utility, New Brunswick Gas together with St. Lawrence Gas in New York. Both acquisitions are expected to provide opportunities for future growth. During the quarter, we also announced an agreement for the acquisition of New York -- of American Water's New York jurisdictional assets. It represents a sizable regulated water and wastewater acquisition, with the addition close to 125,000 customer connections across seven counties in southeastern New York. During 2019, the Regulated Services Group successfully completed several rate reviews representing a cumulative annualized revenue increase of approximately $8.5 million. And lastly, before I turn things over to David I wanted to highlight the positive impact that our recent utility acquisitions have had on our growing customer count, putting the March to a Million campaign milestone squarely in our sights. As previously mentioned, the completion of our two recent acquisitions and the two acquisitions we announced in 2019, the Bermuda Electric Company and American Water's New York jurisdictional assets, will bring the a millionth customer into view. Not that long ago our Regulated Services Group was 100% based in the United States and we're thrilled that these recent acquisitions have provide the company with the opportunity to expand our skill set beyond those borders and serve the utility needs of customers in Canada, the United States, and soon to be Bermuda. And with that, I'll turn things over to David for a review of Q4 and the full-year financial results. David?

David Bronicheski -- Chief Financial Officer

Thanks Ian, and good morning everyone. As Ian mentioned, earlier in 2019 APUC as again showed its ability to grow its business in an accretive way through a stable utility and long-term contracted renewable platform. We ended 2019 pretty much where we guided at Investor Day in December, with an EPS of $0.63.

On a consolidated basis, our Q4 results were positively impacted by solid operations at our existing facilities in addition to new utilities, which came on board in the fourth quarter as well as our investment in Atlantica, which combined to increase our Q4 adjusted EBITDA to $231.5 million, an increase of $32.6 million over the same period last year. On an annualized basis, we posted adjusted EBITDA for the full-year 2019 of $838.6 million, an increase of 4% over the prior year.

With respect to our earnings per share and our adjusted net earnings per share was $0.63, which after adjusting for the one-time effects of US tax reform in 2018 of approximately $0.09 per share of which we spoke of at Investor Day, our adjusted net EPS has grown by just over 10%.

Looking first at our Regulated Services Group. The business unit delivered $565.4 million in operating profit in 2019 compared to $551.6 million in the prior year. We saw improved contributions from our gas and water facilities as well as the contribution of New Brunswick Gas and St. Lawrence Gas, which closed in the fourth quarter and helped to offset lower results from our electric utilities. In addition, the Regulated Services Group were in $6 million related to the development of our San Antonio water system project or SAWS as we like to call it, which is being jointly developed with third parties. This is consistent with our expectation that for jointly developed projects, we will learn fees consistent with our contributions to the project through the development process. Going forward, we expect in 2020 to earn approximately $2.5 million from SAWS.

On a year-over-year basis, our Renewable Energy Group delivered strong results in 2019, posting $328.5 million of operating profit, compared to $303.6 million in 2018. The increase of adjusted EBITDA is related to our investment at Atlantica as well as increased production from our newer wind and solar facilities.

The final topic I'd like to cover off relates to our capital structure and the steps we took in 2019 to strengthen our balance sheet. As you are aware APUC targets a BBB flat capital structure, which we believe is optimal from a cost of capital perspective. In January of last year, we were quite proud of our inaugural green bond offering pricing at CAD300 million 10-year senior unsecured bond at an attractive 4.6% interest rate. This is a key element of our continual commitment to sustainability, with the proceeds from the bonds used for sustainable purposes. In May of 2019, we issued $350 million of 60-year fixed to floating 6.2% subordinated notes. Concurrent with the offering, we entered into a cross currency swap to convert the US dollar denominated coupon and principal payments from the offering into Canadian dollars resulting in an effective interest rate of approximately 5.96%. This shows the power and efficiency of being able to be opportunistic on either side of the border with respect to our financings. I would also point out that the notes also provide us with additional equity credit to our rating agencies.

In October, we issued $354.4 million of common equity through our inaugural US marketed equity offering, which was three times oversubscribed. It increased our US shareholder base with new long only investors and improve the liquidity of our shares trading on the NYSE.

Finally, earlier this month with our new bond platform here in Canada, Liberty Utilities Canada, we issued a 30-year CAD200 million senior unsecured debentures at an interest rate of 3.315%. This is the longest duration bond we've issued and the lowest coupon we've ever issued. This offering provides us with a strong debt platform in which to grow our utility base Canada. The proceeds were used to partially finance the acquisition of New Brunswick Gas.

Before we turn things back over to Ian, I'd like to touch briefly on our earnings guidance that we put out at Investor Day last December and reiterate that we continue to target our adjusted net earnings per share for 2020 to be in the range of $0.68 to $0.70.

With that, I'll turn things back over to Ian.

Ian Robertson -- Chief Executive Officer

Thanks, David. Before we open up the lines for our question-and-answer period, I want to spend a couple of minutes speaking about some of the growth initiatives we're pursuing in the context of our five year strategic plan.

At our Annual Investor morning typically held in early December, our leadership team meet with investors and analysts, many of whom are likely on the call today to discuss our current operations and our plans for the future. While I know quite of you -- a quite a few of you will have feel like you just heard this from us in December. In our view, a positive story bears repeating. Our updated five year capital investment program projects $9.2 billion to be spent across our two business groups, with the emphasis on a Regulated Services team over the coming five years.

On the non-regulated side of the business, construction is proceeding in earnest on close to 850-megawatt of wind and solar projects. We're pleased that execution on our development pipeline will preserve our attractive average PPA line. On the Regulated Services side, following receipt of the final regulatory approvals last year, construction is now under way on all three projects comprised pricing the 600-megawatt of new wind in the Midwest. These wind farms are expected to be completed by the end of 2020 and will contribute to earnings next year.

Perhaps a couple of comments on coronavirus are in order. We are obviously taking all appropriate precautions for the health and well-being of our employees and customers, including managing the travel requirement for our team. With respect to our renewable energy projects both regulated and non-regulated, these projects are generally located in the heartland of the continental United States and as such, do not appear to be immediately exposed to coronavirus considerations. Having said that, we're actively monitoring the potential impact health protection measures might have on the global renewable energy supply chain, but based on our investigations of the current situation, we remain confident that our projects will be completed generally in accordance with the planned schedule.

With respect to our two newest utility acquisition, Bermuda Electric Company and American Water's New York jurisdictional assets, I'd like to turn things over to Chris Jarratt for some additional color. Chris?

Christopher Jarratt -- Vice Chair

Yeah, thanks, Ian. So just on those. With respect to Bermuda, people may have noticed that the timeframe for the regulatory approval was extended by the government to October 4. From our perspective, I don't think we would read too much into that. We understand that the date was somewhat arbitrarily picked to be one year from the date of the original application. While the timeframe was originally four month, the government always had that ability to extend this date. And while this is new territory for the Bermuda regulator, we don't expect it will actually take that long, but that of course will be up to the government. Just a little bit more on Bermuda. In the last little while we've got some great dialog with the government, and we are as excited as ever about the opportunity and the benefits of the transaction for the country. For example, we've committed $300 million of investment into renewables, which is totally aligned and accelerate Bermuda's objective of reaching 85% renewables. The sale of Ascendant will also inject about $200 million into the Bermuda economy.

And we've also announced something that we call 5 plus 5 plan and that consists of two components, the first 5, we've identified operational savings of about $5 million per year with no company initiated job cuts, which will reduce rates for customers. And the second component of the 5 plus 5 plan is the investment in a sustainable Bermuda foundation of $5 million. And this will promote green energy in Bermuda and is totally aligned with our own sustainability objectives. So just in summary, I'd say we are as excited as ever and we are looking forward to collaboration with the government and the people Bermuda.

With respect to American Water, the story is a little bit shorter. The application is being submitted today and we've had some good discussions while socializing in the application with the state senators and the assembly men and women. We expect this transaction will close sometime in 2021.

Ian Robertson -- Chief Executive Officer

Thanks, Chris. And finally, at the end of 2019 we had approximately $7 million in pending rate reviews within our Regulated Services Group. Organic rate based capital expenditures are primarily related to the maintenance and expansion of existing assets to improve quality and efficiency of service to our customers. It's a core strategy of our Regulated Services Group to ensure that an appropriate return is earned on the rate base investments at our various utility system.

Before ending my formal remarks, I want to touch on the subject of sustainability. We believe that a commitment to sustainability is not simply something we do or rather something we are. It touches everyone of our business strategies and operations. This past quarter saw us publishing our 2019 sustainability report and hosting our well attended inaugural sustainability morning. I'm pleased that our commitment is being recognized with Corporate Knights ranking Algonquin as the world's 10th most sustainable company on its recently released recent release list of the 100 Most Sustainable Corporations. We're proud to be the highest ranked Canadian company and the highest rank electric utility on the list.

To our decarbonization initiatives, the renewables growth. You can see that our fleet is turning a nice shade of green. For instance, we're advancing our plans to shut down an operational coal plant in favor of $1.1 billion of new wind generation, an initiative which is good for our customers by saving the money as well as good for the planet. You can clearly see that our organization is very well positioned to be on the right side of the shift of social sentiment to renewable energy.

To wrap up my prepared comments for today, I'm proud of the team's 2019 accomplishments. I think we proved that an agile entrepreneurial culture, all growing in the same direction is indeed a powerful force. We have an ambitious, but achievable growth plan in front of us and we're committed to extending our track record of creating shareholder value in the current year and beyond.

And with that operator, I'd like to open up the lines for question.

Questions and Answers:

Operator

Certainly. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Sean Steuart of TD Securities. Please go ahead.

Sean Steuart -- TD Securities -- Analyst

Thanks, good morning.

Ian Robertson -- Chief Executive Officer

Good morning Sean.

Sean Steuart -- TD Securities -- Analyst

Few questions before I get back in the queue.

Ian Robertson -- Chief Executive Officer

You will only get two.

Sean Steuart -- TD Securities -- Analyst

Two. Ian, I gather you are still working out the details based on your prepared comments, but any context you can provide on the structure of what's envisioned for the collaborative development platform that you might establish?

Ian Robertson -- Chief Executive Officer

Well, I think it -- I mean it's all based in a belief that there is an opportunity to potentially marry the characteristics of Algonquin's competitive capital with those of some private capital to be the winning bid, if you will, as we continue to pursue infrastructure projects, particularly internationally. And so I think it's all founded on fundamentally that we want to continue to win here and we will do what's necessary and capitalize on those opportunities to continue to be a winner. I don't know if -- I wish at 10 second, Sean I could -- could give you more details, but I think -- I think there is an opportunity for -- for us to make us winners through collaboration.

Sean Steuart -- TD Securities -- Analyst

Okay, understood. And maybe related to that question, any updated thoughts you can provide on asset recycling initiatives? How that might be structured and how contingent all of this is on the Atlantica Yield strategic review wrapping up hopefully sometime? How does that play into all of this?

Ian Robertson -- Chief Executive Officer

Well, I mean -- I'm not sure that the two are related. You know at our Investor Day, we outlined that capital recycling would be part of our five year, and I reiterate five year $9.2 billion plan. And so it's not feeling like it's something that is near term that we need to realize on. We've got a capital plan for 2020, which may or may not include capital recycling. So I'm not sure that, that I see capital recycling at the top of the list. We spoke of things like mandatory converts and some of those other securities as an important part of our 2020 capital plan.

Sean Steuart -- TD Securities -- Analyst

Okay, that helps. I'll get back in the queue. Thanks guys.

Ian Robertson -- Chief Executive Officer

No, Sean I'll give you one more.

Sean Steuart -- TD Securities -- Analyst

I mean any comment you want to provide on the Atlantica review. They didn't provide a lot of detail on the call yesterday, but your patience, with that investment at this stage?

Ian Robertson -- Chief Executive Officer

Well, I guess in some respects I would say I think it's appropriate that Atlantica was the best guys to comment on Atlantica's strategic review. And so I don't think -- I don't think I have anything constructive to add to that, obviously we sort of remain interested spectators to the whole thing and hopefully -- hopefully I should say they will conclude soon.

Sean Steuart -- TD Securities -- Analyst

Okay. Thanks, Ian.

Ian Robertson -- Chief Executive Officer

Thanks Sean.

Operator

Our next question comes from Mark Jarvi with CIBC Capital Markets. Please go ahead.

Mark Jarvi -- CIBC World Markets -- Analyst

Yeah, thanks. Good morning everyone.

Ian Robertson -- Chief Executive Officer

Good morning, Mark

Mark Jarvi -- CIBC World Markets -- Analyst

Just picking up on that last comment, given where Atlantica Yield had moved, I mean obviously today is a different day and lot of pain in the market, but in terms of asset recycling, does monetizing your interest in Atlantica Yield, if that's the path that Atlantica wants to take it out to become more a viable option for you guys at this stage?

Ian Robertson -- Chief Executive Officer

Well, that's a big question. You know, we never invested in Atlantica Yield as to I'll say hold to sell. The thesis for Atlantica Yield was to give us instant economies of scale as we built out our international presence. It would feel a little bit like a strategic shift to sort of say now it's time to sell and I get look these -- all -- none of our assets are I'll say my personal children and so that everything has to be considered for sale, but I think we would have to look at that in the context of our international operations and whether that made sense going forward. I think we've spoken in the past that we like the assets that Atlantica Yield has and candidly we probably like to have maximum visibility into the value proposition associated with each one of those assets, that would be our aspiration. As to whether there, I'll say ready to -- our interest is on the block to be sold. I'll say this, I don't I think anything has changed from what we said in the past.

Mark Jarvi -- CIBC World Markets -- Analyst

Okay. And then on looking at results. Operating expense on utilities is down year-over-year. It looks like very good cost control. Is that a function of timing or have you guys being able to find permanent savings in utility business across the platform?

Ian Robertson -- Chief Executive Officer

Well, you know we look at cost savings across the utility platform as kind of one of those dials that allows us to earn our regulatory return and it will -- it will vary somewhat depending on the various rate case cycles that we -- that we happen to be in. And I think for this year, it just so happened that we were in a position where we could kind of move the dial back a little bit on that and help us end the year I think earning pretty much a full regulatory return on an average basis across all of the utility. So it really is just one more dial that we'll use over time.

David Bronicheski -- Chief Financial Officer

And Mark just kind of add a couple of words to that you know that the fundamental basis of an opex for capex -- capex for opex shift is replacing the cost that customers incurred from an operating point of view with general rates include for rate base. And so I guess the question a few you might be asking is do we see a continued a drop in operating cost? And the answer is, certainly, yes. As we continue to invest in capex, which is intended to reduce those operating cost and that's how we are of the belief that we can keep customer rates constant while doing good things for our customers and our -- in terms of enhanced reliability and our shareholders enhanced investment.

Mark Jarvi -- CIBC World Markets -- Analyst

So just to clarify, a bit of both from the opex to capex, but maybe a bit more it sounded like what David was saying was managing regulatory lag this year in terms of how you are allocating dollars?

Ian Robertson -- Chief Executive Officer

It's really both. And that's how we look at it. I mean I think over the next couple of years, you're actually going to see that play out even more as we look to decommission the coal plant build out the wind. I mean, the long-term thesis of that obviously is to lower customer rates. Now that will be in the commodity cost line, which is a little bit higher up on the income statement, but you'll see it play out there over the next couple of years as well.

Mark Jarvi -- CIBC World Markets -- Analyst

Right. Okay, thanks.

Ian Robertson -- Chief Executive Officer

Thanks, Mark.

Operator

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

Nelson Ng -- RBC Capital Markets -- Analyst

Great, thanks. And congrats on the good quarter and also with the leadership transition plan. The first question relates to the Empire's wind projects. You guys mentioned about two of the three projects have started construction. And the third one will start construction this quarter. Could -- is it the -- is it the small one or the big one that has yet to start construction like the 150-megawatts or the 300-megawatts. I was just wondering --.

Ian Robertson -- Chief Executive Officer

They are all under way now. They are now I'll say all under way. There was one final permit that was -- that was coming in on Kings Point. It was received and so they are digging holes as we speak.

Nelson Ng -- RBC Capital Markets -- Analyst

Okay. I just want to ask about timing risk and whether you see any issues given that there is going to be a glut of wind projects reaching completion by the end of this year?

Christopher Jarratt -- Vice Chair

Well, let me say that the time for that worry, I'll say was certainly before now and it was one that we are focused on and it's about getting quality contractors and locking up cranes and all the things that you need in order for these projects to come in on time. So the good news is while we are certainly mindful of December 31, 2020 I think we've taken all the necessary steps to make sure that I'll say the contractual infrastructure is there to make it happen. Clearly, I mean you heard in my prepared remarks obviously, we are also mindful of shocks to the supply chain infrastructure, from coronavirus, we're obviously mindful of those things, but I think the machine is robust and we're looking forward to integrating these projects all done on time.

Nelson Ng -- RBC Capital Markets -- Analyst

Okay, good. And then the second item might be for David. On the utility side, there was I think about $10 million of other income included in EBITDA, just wondering whether that relates to non-regulated services and I think -- I think in previous years you provided some services to the military, the US military or army.

David Bronicheski -- Chief Financial Officer

I mean you've touched on it exactly. So in the other income category that you're talking about, it really falls into -- into I'll say three buckets. One, I touched on in my prepared remarks where it relates to the fees earned from our SAWS joint development project that we're -- that we're working on and we'll continue to earn on that in the coming years. Next year it will probably be about $2.5 million as an example. But yes, we also provide utility services to Fort Benning and so that amounted to a few million dollars last year as well. And then the final bucket that falls into that is AFUDC, which as you know, is a utility construct that allows us to capitalize to the project the regulated equity thickness as we're building out the construction project. So, it really falls into those three buckets.

Nelson Ng -- RBC Capital Markets -- Analyst

Okay, got it. I'll leave it there and get back into queue.

Ian Robertson -- Chief Executive Officer

Thanks Nelson.

Operator

Our next question comes from Rupert Merer with National Bank. Please go ahead.

Rupert Merer -- National Bank -- Analyst

Good morning everyone.

Ian Robertson -- Chief Executive Officer

Hi Rupert.

Rupert Merer -- National Bank -- Analyst

Like to ask about your view on bond yields. I'm watching the US 10-year reach record lows today, obviously could be good for refinancing, could be support of equity values, can you give an update on your view for your larger rate cases? And do you see any potential impact for the low bond yields to lower ROEs in your upcoming rate cases?

David Bronicheski -- Chief Financial Officer

Okay. Well, let me -- I'll start off by just talking about the -- the impact that we see on the debt and I'll transition it over to Ian to talk about our views on future ROEs. With respect to debt, I mean where you're really seeing that benefit, I mean we just issued a 30-year bond here in Canada for our New Brunswick Gas utility. And in New Brunswick I mean this is like fantastic news because for that utility, it really is all about driving down operating cost for customers and making gas more competitive in that market and so that's going to be saving that utility about $2 million a year, which you can do the quick math when it's spread out over 12,000 customers works out to almost $10 to $15 per month per customer. I mean that's a tremendous benefit that we're able to do there. And certainly we're -- as far as our existing debt goes, I mean, most of our debt, as you know is long-term fixed. So we have limited ability to -- to I'll say refinance that without some horrendous make-whole. So that's likely not in the cards for us, but we will be looking at being able to come to market whenever we see the opportunity because you're right, I mean I think we absolutely do want to take advantage of long-term rates and we look to go for as long as a tenure as given where they are right now. So with that, I will pass it over to Ian to just discuss ROEs.

Ian Robertson -- Chief Executive Officer

Sure. And Rupert, I will say, you know that one thinks of ROEs as a long term proxy for equity returns in the capital markets, but many times people look at utility ROEs in the context of a premium over I will say the US 10-year treasury. Historically, I will say that -- that premium has been banded at the top end at about 700 basis points. Well as the US treasury continues to fall unless, you can say, weirdly imagine if it went negative, I don't think that -- I think that would obviously cause people to think about their CAPM models for ROEs. And so, I will say, we keep our eye on it. As David said though in the short term, our interest cost that we bring to bear in our rate case, they are kind of driven by the existing portfolio of bonds that are issued within Liberty Utilities. And so I am not sure that our ROEs would be immediately affected, but I think your consideration is a fair one. You have to be thinking about those equity returns in the context of the risk free rate. So I wish I had something more insightful to talk for you Rupert, but that's kind of the way this thing unfolds.

Rupert Merer -- National Bank -- Analyst

All right. Very good. I will leave it there. Thank you very much.

Ian Robertson -- Chief Executive Officer

Thanks Rupert.

Operator

Our next question comes from Rob Hope with Scotiabank. Please go ahead.

Rob Hope -- Scotiabank -- Analyst

Good morning everyone and congratulations on the transition plans.

Ian Robertson -- Chief Executive Officer

Thank you.

Rob Hope -- Scotiabank -- Analyst

I wanted to circle back on Sean's initial question, just in terms of the collaborative investment platform. You did mention that you could bring private capital to bear on international opportunities. Any sense on how this platform could interplay with AAGES or Atlantica, given that potentially they could be going after similar investments?

Ian Robertson -- Chief Executive Officer

Okay. Well, let's start by saying that in our world, our international investment initiative was characterized by two specific tactics. The first was to acquire an interest in Atlantica Yield is a HoldCo for projects that got developed internationally. And the second tactic was the creation of a development group jointly with Abengoa to pursue the origination, development and construction of those initiatives. And I think, it comes as a shock, we have spoken on various calls in the past that Abengoa isn't exactly the strongest financial partners. So one could imagine that to the extent that we found or we are able to take advantage of some incremental private capital to collaborate in Abengoa's stead in terms of AAGES, what a great opportunity to continue to drive that growth going forward. And so I will start by maybe -- I am not sure that this has really candidly anything to do with Atlantica one way or the other. Atlantica is what it is. As I have mentioned in answer to Sean's question, we like the assets that happen to exist in it, within the Atlantica right now, I am not sure, though, it really plays one way or the other in terms of growth going forward. Atlantica, unto itself and maybe just to touch at the very end, Atlantica unto itself is for all intents and purposes a HoldCo. It's not a developer. It's not a development capable platform. And candidly, that's not what we invested in it for. So I don't if, Rob, that's kind of the additional color you are looking for.

Rob Hope -- Scotiabank -- Analyst

That's great. Thank you. And then maybe for David. SAWS looks like it had a dividend of $6 million in 2019. When we are looking at the 2020 guidance, any outsized contributions from development platforms that you didn't highlight, so aside from the $2.5 million from SAWS?

David Bronicheski -- Chief Financial Officer

That's all that we are seeing right now, but obviously we are a pretty active company. So I mean people shouldn't be surprised if a new project happens to come along. There could be additional income coming from that. But at the present time, that would be what we are looking at.

Rob Hope -- Scotiabank -- Analyst

Okay. Thank you.

Ian Robertson -- Chief Executive Officer

Thanks Rob.

Operator

Our next question comes from Julien Dumoulin-Smith with Bank of America. Please go ahead.

Ian Robertson -- Chief Executive Officer

I think you are on mute, Julien.

Julien Dumoulin-Smith -- Bank of America -- Analyst

Hi. Sorry guys. I appreciate the heads-up there. And thank you again for the time.

Ian Robertson -- Chief Executive Officer

I am sure the question was incredibly insightful, but you still have to repeat it.

Julien Dumoulin-Smith -- Bank of America -- Analyst

Let me get going again here, right. Let's do it again Friday morning. So well first off, congrats on the succession all around here. And then maybe to that point first, easy question. How do you think about EV strategy playing into the company altogether in the future? I mean obviously very, very early days from a utility perspective. That being said, you guys are ones to venture off into non-rate base opportunities when you see it. Is there any thought on that front given the background here?

Ian Robertson -- Chief Executive Officer

Well, right now, I will say, our biggest EV initiative has been on the rate side. I mean, you can imagine a dollar of rate base is fungible with every other dollar. And to the extent that we can invest that rate base in infrastructure that happens to grow load, that improves the economics for everybody on the system. So I will start by saying that to-date, our primary focus has been on investing in those states that allow the inclusion of EV infrastructure into rate base. And that's not everyone and you can imagine it's jurisdictionally specific.

In terms of how easy infrastructure is going to, I will say, the value proposition, the revenue model outside of the regulated construct, we are obviously keeping our eyes on this. The Edison Electric Institute has an entire Electric Transportation Working Group that we are sort of actively involved in. And I agree with you, I mean if ultimately EVs progress the way that, I will say, on the trajectory that one thinks that they are going to be, I am not sure that the regulated construct is going to be the most effective way to do it. And if you are here in Canada, organizations like Suncor are pioneering, they call it their Electric Highway which is a coast-to-coast network of charging stations. You hear about the same things on I-95, heading south from the Canadian border down to Florida. So look, we are on it. It is definitely feels, Julien, like something we need to keep our attention on as an entrepreneurial organization. You hit the nail on the head where we never want to let an opportunity go by the by. I just don't have anything at this 10 second beyond our focus in the regulated utility space.

Julien Dumoulin-Smith -- Bank of America -- Analyst

All right. Excellent. And then I will keep it two here. Second question, going back to some of the strategic private capital you talked about at Analyst Day last -- in December here. Can you discuss again what the purpose is? Because I hear with respect to some of the various commentary in the call thus far, but to be very specific about this, I thought the private capital piece was to address otherwise ordinary common equity needs that you might otherwise have here as well as to try to show the value underlying the renewables business and the renewable platform, but talk to us broadly around the thought process behind sourcing the private capital? What assets might be, at least as you see today sort of in the vein of meriting sell down or however you want to frame it, but I guess I want to come back to this private capital conversation.

Ian Robertson -- Chief Executive Officer

Sure. Well, I actually am not sure it's a new theme. The investment internationally, our international investment is predicated to achieve, I will say, the accounting treatment we looking for as having a party on the other side of owning, I will say, call it a 50% interest in those international assets. As you know, they are generally funded using a limited recourse project debt and perhaps in quantities that exceed what we might do directly under our North America current credit metrics and so I think the thesis was to have a strong off balance sheet partner in that venture going forward.

I will say that as we think about private capital and we think about infrastructure return profile, I think we believe that there is an opportunity to bring the character of private capital which you can imagine might be more returns focused, might be more patient, might have -- I will say a different credit interest. Combined that with public capital of Algonquin, which is obviously a recognized global player from a development and operations point of view, that feels like it could be a winning bid in international projects. And so you know, if it sounds like we are further ahead than that it's probably not correct. I mean, it's just that we do believe and since we are actively out there in the marketplace looking to win in this place having as another tool in the Algonquin toolbox a credit worthy partner for international development that brings an appetite with low-cost capital, that was always the premise. And so I think we have mentioned at our Investor Day, we are committed to making that a reality. And it is a great win, win for us both.

Julien Dumoulin-Smith -- Bank of America -- Analyst

But to clarify that, it's more of a strategic growth initiative rather than necessarily finding someone with a lower cost of capital in order to avoid common equity otherwise?

Ian Robertson -- Chief Executive Officer

Yeah, no, no, you shouldn't see this as a strategic shift from Algonquin's point of view. It isn't about substituting, I will call it their capital for our capital. It never was from an international point of view. We just wanted to make sure that whoever our partner is internationally, wasn't hamstringing our development initiatives. And you know that we sort of made historic comments that historically Atlantica's access to capital in the public capital market, I am not sure brings the exact same character that private capital from an institution or name your favorite pension fund brings. They have their own set of constraints, their own depth of access to capital that public markets impose. So no, you shouldn't think of this as, first of all, as any strategic shift. You should think of it as a continued execution on the strategy of making sure that we have a co-investor to realize on our international investment aspirations.

Julien Dumoulin-Smith -- Bank of America -- Analyst

Excellent. Thank you guys for the time. I will keep myself honest here.

Ian Robertson -- Chief Executive Officer

All right Julien. Thanks very much.

Operator

Our next question comes from David Quezada with Raymond James. Please go ahead.

David Quezada -- Raymond James -- Analyst

Thanks. Good morning everyone.

Ian Robertson -- Chief Executive Officer

Good morning David.

David Quezada -- Raymond James -- Analyst

A question here just on the regulated side of your business. Thinking about your -- you made a lot of progress with your rate making mechanisms, some of those key features a and assuming things go to plan was with Empire and Granite State, you will have revenue assurance accelerated recovery and post test year recovery at most of your major utilities. I am wondering if you see any other rate making mechanisms that you could still add or have you gotten, call it, the low hanging fruit from a regulatory lag perspective here?

Ian Robertson -- Chief Executive Officer

What's interesting, well first of all this is a never-ending journey because every time we add a new jurisdictions aka New York or New Brunswick, we are always going to be advocating for regulatory mechanisms that don't just reduce risk for us, it reduces risk for customers too. And so I think what you have seen and if you have followed us, historically look back at the progression of those regulatory mechanisms, David, I think we have been pleased that we have continued to fill out that chart every year at our Investor Day over time. Now there are jurisdictions that we are continuing to agitate and advocate for those mechanisms. I would say, we are thrilled that Missouri has adopted them, New Hampshire, our first rate case, where we are going to be seeking weather normalization. Those are all under way. But every time we had a new jurisdiction, we are obviously going to be advocating for those. So I think it's not just in the utility' best interest, it's in the customer's best interest too. And I think that's why you are seeing states adopt these construct of regulatory mechanisms such as trackers and weather normalization.

David Quezada -- Raymond James -- Analyst

Okay, great. Thank you. That's good color. And then just one other one, I guess, more generally across your utility footprint. If you had any reason I guess IRP type discussions with the regulators and any recent thoughts on how storage and renewables could fit in there going forward?

Ian Robertson -- Chief Executive Officer

Well, I said I know you are aware that in Bermuda, there is a very active IRP discussion going on where the government kind of targeted 85% renewables. We actually think the number can be definitely higher than that. We are in regulatory planning strategy work in California, literally as we speak this week on our California 100, this idea of bringing some additional solar and energy storage to bear to meet California's objective of having 100% renewable. So that is definitely a theme. I don't think we done "greening the fleet" yet David that we got a number of a number of initiatives under way, with the whole idea of bringing low-cost renewables to reduce costs for customers going forward.

David Quezada -- Raymond James -- Analyst

Thank you very much for that, Ian. I appreciate it. I will get back in the queue.

Ian Robertson -- Chief Executive Officer

Thank you David.

Operator

Our next question comes from Neil Kalton with Wells Fargo. Please go ahead.

Neil Kalton -- Wells Fargo -- Analyst

Hi guys. Thanks for taking my question.

Ian Robertson -- Chief Executive Officer

Hi Neil.

Neil Kalton -- Wells Fargo -- Analyst

So I just wanted to follow-up on the supply chain. So it seems like things are still a little fluid, but just if you did have some slippage beyond the end of this year, is there an ability, you think, to go to the IRS and get an extension? And then the second question kind of along these lines is, if not, who bears the risk, especially on the regulated wind farms, would that risk be born by Algonquin shareholders or would there be some ability to go to the regulator and sort of share it with customers?

Ian Robertson -- Chief Executive Officer

Well, let me start by saying is we could have a half hour conversation about this whole point, but I will start by saying is I will say, three lines of defense against that. The first is, as you say, well it appears sort of fluid right now. It is something we are actively on top of just given the quantum of our investment in renewable energy over the course of 2020. It's visible to the extent that kind of I am sitting on a biweekly committee where we kind of understand what's happening from a supply chain point of view. So the vigilance is the first, I will say strategy. And the good news is, so far I think the supply chain appears to be holding up at least in our instance. You know, obviously, the problem isn't digging holes for turbines in Kansas and Missouri, that's under way just fine. Thanks very much and that's moving ahead. I think that the second approach that you mentioned is that and maybe it's probably worthwhile sort of being clear is that, right now the production tax credits, I will say don't fall off if the entire project isn't completed by December 31, 2020. Production tax credits are allocated on a turbine-by-turbine basis. And so to the extent, imagine if one out of the 400 turbines we are erecting across the entire fleet got done in January, only that turbine would be if you will, I will say, under consideration for a discussion about the 100% PTCs, if it got commissioned in January.

And the last one is and I think this is where you touched on is that December 31, 2020 is really, I am going to say, it's an arbitrary date. It's a date that was developed by the treasury in the terms of regulations that gives developers comfort that if your project was done before that point in time is de facto conclusion that you did apply, I will call it continues effort to get your project complete. But if you didn't get it done by January -- by December 31, 2020, that doesn't conclude that you didn't apply continuous efforts, which is really the standard in the test for 100% PTCs. And so we are confident that, I will say every one of our projects, we have been continual in pursuing and to the extent that there was a delay it's hard not to think of coronavirus as being a fair argument for force majeure against those continuous efforts. And so I think we are probably a long way away from having to sort of have a conversation about whether that's a shareholder risk, is it a customer risk in the context of the regulated utilities and candidly how large the risk is.

And so while we are mindful of it, I think we have confidence that we have taken all the steps to kind of manage that risk. And I am not trying to be hedgy here Neil. It's just that I think the solution to this is kind of managing it right up front rather than waiting to the end and kind of having to deal with it in the context of a problem. So as I was just saying, we are cautiously comfortable and confident in our ability to manage against the risk.

Neil Kalton -- Wells Fargo -- Analyst

Very helpful. Thank you very much.

Ian Robertson -- Chief Executive Officer

All right Neil. You get another one. You know you are pay for two.

Neil Kalton -- Wells Fargo -- Analyst

Well, that was the one I had.

Ian Robertson -- Chief Executive Officer

All right Neil. Thanks much.

Operator

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

Ian Robertson -- Chief Executive Officer

Well, thanks everyone. I appreciate you taking the time. I see, we are just coming up to the top hour and I know everybody has things to do. So we will speak to you next quarter, God willing. And with that, stay on the line for our not so brief, but still riveting disclaimer from Amelia. Amelia?

Amelia Tsang -- Vice President, Investor Relations

Thanks Ian. Our discussion during this 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. There can no assurance that forward-looking information will prove to be accurate and you should not place undue reliance on forward-looking information. We disclaim any obligation to update any forward-looking information or to explain any material difference between subsequent actual events and such forward-looking information except as required by applicable law.

In addition, during the course of this call, we may have referred to certain non-GAAP financial measures including, but not limited to adjusted net earnings, adjusted EBITDA, adjusted funds from operations and adjusted earnings per share. There is no standardized measure of such non-GAAP financial measures and consequently APUC's method of calculating these measures may differ from methods used by other companies and therefore they may not be comparable to similar measures presented by other companies.

For more information about both forward-looking information and non-GAAP financial measures, including a reconciliation of the non-GAAP measures to the corresponding GAAP measures, please refer to our most recent MD&A filed on SEDAR in Canada and EDGAR in the United States and available on our website. Thank you.

Operator

[Operator Closing Remarks]

Duration: 58 minutes

Call participants:

Christopher Jarratt -- Vice Chair

David Bronicheski -- Chief Financial Officer

Ian Robertson -- Chief Executive Officer

Amelia Tsang -- Vice President, Investor Relations

Sean Steuart -- TD Securities -- Analyst

Mark Jarvi -- CIBC World Markets -- Analyst

Nelson Ng -- RBC Capital Markets -- Analyst

Rupert Merer -- National Bank -- Analyst

Rob Hope -- Scotiabank -- Analyst

Julien Dumoulin-Smith -- Bank of America -- Analyst

David Quezada -- Raymond James -- Analyst

Neil Kalton -- Wells Fargo -- Analyst

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