Algonquin Power & Utilities Corp (AQN) Q1 2021 Earnings Call Transcript

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Algonquin Power & Utilities Corp (AQN 2.36%)
Q1 2021 Earnings Call
May 7, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and thank you for standing by. Welcome to the Algonquin Power & Utilities Corp. First Quarter 2021 Earnings Webcast and Conference Call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Amelia Tsang, Vice President of Investor Relations. Please go ahead.

Amelia Tsang -- Vice President of Investor Relations

Good morning, everyone. Thanks for joining us this morning for our first quarter earnings conference call.

Presenting on the call today is Arun Banskota, our President and CEO and Arthur Kacprzak, our Chief Financial Officer. Also joining us this morning for the question-and-answer part of the call will be Jeff Norman, our Chief Development Officer; and Johnny Johnston, our Chief Operating Officer.

To accompany our earnings call today, we have a supplemental webcast presentation available on our website algonquinpowerandutilities.com. Our financial statements and management discussion and analysis are also available on the website, as well as 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, including but not limited to our expectations regarding future earnings and capital expenditures. At the end of the call, I will a read notice regarding both forward-looking information and non-GAAP financial measure. Please also refer to our most recent MD&A filed on SEDAR and EDGAR and available on our website for additional important information on these items.

On our call this morning, Arun will provide an overview of our Q1 performance. Arthur will follow with the financial results, and then Arun will conclude with an update on our strategic plan for the business. We will then open the lines for questions. And I ask that you restrict your questions to two and then requeue, if you have any additional questions to allow others the opportunity to participate.

And with that, I'll turn it over to Arun.

Arun Banskota -- President & Chief Executive Officer

Thank you, Amelia, and a very good morning to those who've been able to join us on the call and online.

I'm pleased to report solid year-over-year growth in our key financial metrics for the first quarter of the year. Q1 adjusted EBITDA was $282.9 million, or 17% increase year-over-year and our Q1 adjusted net earnings per share was $0.20 an increase of 5% compared to last year's $0.19.

You also note that our Board has approved a 10% increase in the dividends, beginning with the Q2 dividend payable on July 15 of this year. This increase marks the 11th year of consistently increasing dividends by 10% each year. This demonstrates our collective confidence in and the resiliency of our business model. This dividend increase is supported by the groundwork that has been laid down in 2020. As we expect to benefit from the addition of approximately 1400 megawatts of new renewable generation projects that were in construction in 2020.

Our additional investment in Atlantica sustainable infrastructure and the acquisition of our interest in the portfolio of Texas coastal wind facilities. On the regulated side, we expect to benefit from the first full year of operations from our Bermuda electric utility, as well as the ESSAL water utility in Chile, which both closed late last year.

Despite the year-over-year growth in financial metrics, this quarter's adjusted net earnings fell slightly below our expectations. This is primarily the result of increased costs relating to Winter Storm Uri and warmer than normal weather in the central region during much of the quarter.

With respect to COVID-19, the company's operating results were not materially impacted by the pandemic this quarter. Generally speaking, we have not seen negative impacts from COVID on our loads at this days as business conditions in the regions we operate in, slowly return to normal.

Approximately 65% of the company's workforce continues to work remotely. And we continue to employ operational measures intended to protect the health and safety of our employees and customers. Our team continues to focus our efforts on Algonquin's three strategic pillars; growth, operational excellence and sustainability. And we should spend some time on each of these for an update.

We operate through two primary businesses regulated and renewables. Both businesses have multiple levers of growth that support them and gives us high confidence in executing our growth plan. On the regulated side, one lever of growth is our organic investments in improving the safety and reliability of our mission critical infrastructure.

Our solid earnings in the quarter demonstrates the ongoing investments we are making to improve service for our customers, while managing the affordability of their bills. In our central region, by the end of the quarter, we have completed the installation of 172,000 of the 182,000 AMI or Advanced Metering Infrastructure meters that we are installing. And we are on track to complete installation by the end of May.

These meters will not only give our customers much better information to manage their uses. They will allow us to implement time of use tariffs that will further help us to more economically balanced supply and demand providing further benefits for our customers.

Another lever of growth is acquisitions. And we completed two utility acquisitions in Q4 of 2020, ESSAL and Ascendant.

Q1 marked the first full quarter contribution from both acquisitions. The integration of these two utilities into the Algonquin Liberty family has gone well, and they are performing in line with our expectations.

Growing and investing in these two utilities is a key initiative. Our balanced approach of operating a local model with central governance continues to be a focus. As with all our previously acquired utilities, we strive to share learnings and best practices among our utilities, with the aim of driving consistent improvement in our key performance metrics that drive value for our customers and investors.

With New York American Water, we submitted our regulatory application to the New York PCE last year. We are currently going through the settlement process and the hearing date is scheduled for late June.

As important work continues to determine the best path forward on resolving issues related to the special franchise tax. We remain confident that Liberty is the best long-term owner of the utility. And we continue to expect this transaction to close in 2021.

An important lever of growth on the regulated side is greening the fleet initiatives. We continue to make investments to enhance service, our customers as we accelerate our transition to a clean energy future.

I'm pleased to report that we have successfully completed our videos [Phonetic] greening the fleet initiative as all three projects have been placed in service and have been acquired by the Empire District Electric Company.

During the first quarter, our construction team at the Kings Point wind site commissioned the final wind turbine, marking the end of major construction at the three wind sites with a total of 600 megawatts. While construction has taken over a year, the planning and development work began in earnest more than four years ago and had many achievements along the way.

The 150 megawatt North Fork Ridge wind facility reached full commercial operations in December 2020, while the 150 megawatt Kings Point, and 300 megawatt Neosho Ridge reached full commercial operations in April and early May 2021, respectively.

The related closer of the Asbury coal plant in March 2020, is expected to reduce emissions by nearly 1 million metric tons of carbon dioxide as we work to generate and deliver more cost effective, diverse and sustainable energy solutions to our customers and communities. We intend to file our Missouri electric rate case with the commission by the end of May, which will include these wind generation facilities.

2020 marked the company's largest construction program in our history, with approximately 1600 megawatts of renewable energy projects that were under construction. After 1600 megawatts, nearly 1400 megawatts have reached commercial operations and the remainder are on track to be completed by year end.

In addition to the 600 megawatts commissioned on the regulated side, in the renewables business, the 492 megawatt Maverick Creek wind facility in Texas, was completed last month. While Altavista Solar is nearing completion with over 90% of its 80 megawatts placed in service.

The Maverick Creek wind facility has long-term power purchase agreements with General Mills and Kimberly Clark and Altavista Solar has a power purchase agreement with Facebook. These two projects showcase our relationships with key C&I customers.

The demand from C&I customers who were helping to drive an acceleration toward clean energy is expected to be an attractive source of growth for Algonquin in the coming years. And Algonquin is well positioned to help them advance their own sustainability target.

At Invest Day, we spoke about our 3400 megawatt pipeline of potential new Greenfield opportunities, of which at least 500 megawatts includes our partnership with Chevron. And I'm pleased to report that to Chevron, we recently advanced four Permian projects, three in Texas and one in New Mexico from the evaluation phase to the development phase under our framework agreement.

This means that development activities are moving toward a final investment decision. Scale of the project will also be defined at this stage. At our Investor Day, we included two PGM solar projects that were incremental additions in 2020. We have now completed acquisitions of these two Ohio solar development projects, with an expected combined capacity of 235 megawatts with the first 100 megawatt project, just beginning construction, demonstrating the ongoing execution of our development portfolio.

Moving on now to operational excellence. In a mission critical industry, safety and reliability are always key areas of focus. Our utility response to Storm Uri is a testament to our employees who work tirelessly on the very challenging conditions to keep our customers and communities safe and to maintain our system reliability and resiliency.

Staying on the topic of safety, I'm pleased that we have passed the impressive milestone of 6 million safety hours without a single lost time injury. Our improved safety scores also translate into financial performance, as this has led to over a 90% reduction in the number of work-related insurance claims over the past two years.

Our efforts on work safety are being recognized as American Gas Association recently awarded Liberty, the Safety Achievement Award for employee safety for the third year in a row. The customer is at the heart of every good operational excellence strategy. In 2017, we introduced JD Power survey to benchmark and evaluate our customer experience.

As expected, safety and reliability is what customers value most. So it will not surprise you that this has been a key investment focus area for us. I'm pleased to report that in Q1, our JD Power score was up 17 points from the end of 2020 to an overall score of 703. The highest ever for Liberty. However, we know we have a lot more to do, and are excited about the new digital experience we will be launching for our customers through our customer first program.

The team is making the final preparations for our first deployment, which starts in Massachusetts next week. And we will be rolling out in a phased approach across the rest of the organization over the next couple of years.

And finally, we remain firmly committed to sustainability through the inclusion of environmental, social and governance values in our broader corporate strategy and day-to-day operations.

I want to provide a few highlights from this year, including the recent inclusions of Algonquin shares into the S&P Global Clean Energy Index last month. On diversity, equity and inclusion, we are committed to these values and are continually striving to be better.

We are pleased that Algonquin was recently recognized in the Bloomberg Gender Equity Index for the second year in a row and in the Globe and Mail Women Lead Here benchmark.

Also, at the end of Q1, we welcome Carol Leaman to our Board of Directors. Carol brings a wealth of experience in the start-up and technology space. And her knowledge and background will help strengthen the skills and diversity of our Board. With Carol's appointment, the Board composition now stands at 40% female while our executive team is 38% female.

These ratios put Algonquin among the leaders of diversity in the utility space. I'm also pleased to share that our Sustainalytics ESG ratings improved significantly as we continue our efforts on progressing and advancing our ESG disclosures to our stakeholders.

Last year, we released our 2020 sustainability report, which not only outlined our progress on our ESG goals, but also provided a higher level of detail around nine priority issues. This year, UCS adding incremental ESG linked goals to our compensation program metrics.

Before turning to Arthur, I want to provide an update on Storm Uri and the Midwest extreme weather event which occurred earlier this year. The severe and nature of this storm was unusual and the level of impact across a very large geography. And temperatures fell to six degrees Fahrenheit near our Senate wind facility, more by nine degrees compared to the previous lowest recorded temperature in the last 100 years.

Also unprecedented was the length of time the market rates were at the cap $9,000 per megawatt hour. Storm Uri presented us and other participants in the region with a significant challenge. We are proud of how our teams responded to minimize the impact on both our customers and operations. The diversity of our fleet and contracting strategies, both within BELCO and across the rest of our geographically distributed portfolio also served as well in helping to mitigate the impact of Storm Uri on our results.

The most significantly impacted facility was our Senate wind facility in North Central Texas, which has a financial hedge in place that imposes an obligation to deliver energy. Due to icing and market disruption during Storm Uri, the facility was unable to produce the energy to satisfy the quantities required to be delivered under the hedge and was forced to settle in the market at elevated pricing.

We have a solid force majeure under the hedge contract. In our regulated services group, which comprises approximately 70% of our portfolio, we are diversified by modality and operate in 16 jurisdictions. Despite the extreme weather conditions, overall, our businesses performed well from an operational perspective. The utilities did incur incremental commodity costs during a period of record pricing and elevated consumption. Due to the extraordinary nature of these costs, we are working with our regulators to spread these costs over a longer period to make the impacts more manageable for customers. We do not expect any material financial impact to our regulated business from the stone.

With that, I'll pass it over to Arthur, who will speak to our first quarter 2021 financial results. Arthur?

Arthur Kacprzak -- Chief Financial Officer

Thank you, Arun, and good morning everyone.

Our Q1 financial results continue to demonstrate the benefit from Algonquin's diversified and resilient business model, consisting of stable regulated utility services provided across 16 jurisdictions, a portfolio of long-term contracted renewable power assets and an extensive development pipeline.

Our first quarter 2021 consolidated adjusted EBITDA was 282.9 million, which is up approximately 17% and was 242.2 million we reported in the previous year. The Regulated Services Group delivered 204.8 million in operating profit in the current quarter. This compares to 170.2 million in the same quarter last year.

The improvement primarily reflects the first full quarter contribution from BELCO, our Bermuda electric utility, and ESSAL, our Chilean water utility as both acquisitions closed in Q4 last year, as well as from the contribution of Norco bridge, the first of our three wind facilities that was placed in service as part of the greening the fleet initiative that Arun spoke to earlier.

Results also benefited from new rates implemented at our Energy North Gas, Peach State Gas, Granite State Electric and CalPeco Electric System they were partially offset by higher operating expenses. The regulated services group was also negatively impacted by warmer than usual weather in the central region for the majority of the first quarter.

The renewable energy group reported Q1 divisional operating profit of 96.3 million, which compares to 88.4 million in the same quarter last year. The increase was primarily due to the addition of the Sugar Creek and Maverick Creek wind facilities, the Great Bay two solar facility and the Texas coastal wind portfolio. This was partially offset by increased costs incurred at the Maverick Creek and incremental basis costs at the Texas wind portfolio, both related to the extreme weather experienced during February. The results also include the impact of the market, the results do not include the impact of the market disruption related to Storm Uri on Senate Wind facility. The facility was forced to settle under its financial hedge and highly elevated pricing as a result of extensive disruption in the electricity market and extreme lighting conditions which impacted the operations. We view this impact as unusual and not reflective of the ongoing operations.

Our Q1 adjusted net earnings per share came in at $0.20, which is up 5% from last year. Despite the increase, the results were slightly below our expectations, again, primarily due to the on average, warmer than expected weather conditions experienced during the quarter and in our regulated group, as well as the incremental costs partially related to Storm Uri.

Moving on to provide some updates on our financing activities and progress on our 2021 capital plan. As you heard me say before, we are highly committed to maintaining our triple B flat capital structure, which we believe optimizes our cost of capital, benefiting shareholders and retaining our competitive position. The benefits of balance sheet discipline were demonstrated this quarter, as the renewable energy group issued its fifth bond under its well established financing platform, we continue to get $400 million, at a low coupon of 2.85% for 10 years.

This is also the second bond bills qualified as green by the group and the third by the company showcasing our ongoing commitment to environmental and sustainability targets.

During the quarter, Algonquin reestablished this ATM program, allowing for cost effective and opportunistic issuance of our common stock. This reestablishment of the program last year, we issued 11.2 million of revolving shares where total proceeds of 178 million.

With respect to our capital plan, during the quarter Algonquin deployed approximately 1.9 billion of capital pertaining to previously discussed initiative. The renewable energy group completed the buyout of the Maverick Creek and Sugar Creek wind facilities from our joint venture partners, as well as closed the acquisition of three of the four Texas coastal wind projects from [indecipherable].

The Regulated Services Group acquired from our joint venture partners in North Folk Ridge Wind project, which is part of our greening the fleet initiative. I'm glad to say that subsequent to the quarter, we completed the acquisition for the remaining two projects the Kings Point and Neosho Ridge Wind facility. Also subsequent to the quarter, we completed the acquisition of the 80 megawatt Altavista solar project from our JV partner. The preponderance of this financing for these initiatives is being funded by tax equity investments.

Algonquin's balance sheet remains strong with approximately 1.5 billion of available liquidity at the end of the quarter because we continue to monitor the debt and equity capital markets and expect to fulfill our remaining capital needs for the year through a combination of various debt and equity or equity like instruments to maintain our target capital structure.

Before turning things over to Arun, I'd like to provide a brief update on our 2021 guidance. As discussed we have already delivered on our plan adding approximately 1400 megawatts of new renewable generation capacity which will benefit 2021 results. In addition, we expect to benefit from the first full year of operations Algonquin South and the Texas Coastal wind portfolio. Excluding the impact of the market disruption on the Senate Wind facility that I discussed earlier, we expect our 2021 adjusted net earnings per share to be within the range of $0.71 to $0.76 as communicated previously.

With that, I will now hand it back to Arun to outline our growth plans.

Arun Banskota -- President & Chief Executive Officer

Thank you, Arthur. Before we close out our prepared comments this morning.

I want to give an update on our growth initiatives. With society and economies working hard to minimize carbon emissions and many countries coalescing around a net zero carbon by 2050 goal. Algonquin's regulated and renewables businesses are very well positioned to contribute to and benefit from this decarbonisation transition.

We remain encouraged by the Biden administration's focus on clean energy in their infrastructure bill, and the potential for expanded investment opportunities. Several climate bills are pending in the House and Senate and we see exciting potential opportunities in this legislation and the administration's commitment to a clean energy economy. The potential extension of ITC and PTC credits would benefit our 3400 megawatt pipeline of greenfield opportunities.

Looking at long-term growth, our 9.4 billion five-year investment plan from 2021 through 2025, has identified projects that make up the entire $9.4 billion, with most of them now in operation, under construction, or in advanced stages of development. This core $9.4 billion investment plan does not include any further M&A beyond previously announced transactions, or any success from our 3400 megawatt pipeline of greenfield opportunities.

We have multiple levers of growth across our two businesses that I have spoken throughout today's call, which gives me further confidence on our ability to execute and deliver on our five-year investment and growth plan.

Before we open the lines for the question-and-answer period, we remain very excited about Algonquin's businesses and prospects. We welcome you to hear more at our upcoming Annual General Meeting. Similar to last year, and given the protocols related to the ongoing pandemic, we will be hosting our AGM virtually this year. We welcome your participation on June 3 at 4pm Eastern.

In closing, 2021 has been a very productive start to the year as we continued to execute and deliver on the company's largest construction program in its history, with nearly 1400 megawatts of the 1600 megawatts already placed in service. Our three strategic pillars of operational excellence, growth and sustainability will be a key foundation as we continue to build the business and deliver steady earnings and dividend growth, creating long-term shareholder value.

With that, I will turn the call over to the operator for any questions from those on the line.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Nelson Ng with RBC Capital Markets.

Nelson Ng -- RBC Capital Markets -- Analyst

My first question relates to the blade manufacturing error. So can you just give us a bit more color in terms of, I think there were like 83 turbines that were impacted? Like did you have to like shut all of those turbines down or do they still -- can they still partly operate? And then, can you just give more color in terms of what this financial impact is and whether the downtime in Q1 and through the rest of this year would be covered by [indecipherable]?

Arun Banskota -- President & Chief Executive Officer

Nelson, good morning. With me this morning, I also have Johnny Johnston, our Chief Operating Officer and Jeff Norman, our Chief Development Officer, and I think Johnny will respond to that question. Johnny?

Johnny Johnston -- Chief Operating Officer

Probably the most important part of the question is, despite the impact from the turbines, we don't expect there to be a financial impact that we've got availability guarantees as part of the turbines bio green and so that's going to sort of cover the financial aspects, I think from an operational perspective, that the impact of types of Mavericks and Sugar we have plans in place and are expecting the turbines to be up and running again, till the end of the year.

Nelson Ng -- RBC Capital Markets -- Analyst

Okay. Are you able to give a bit more color in terms of what needed to be done with the with the blades?

Johnny Johnston -- Chief Operating Officer

And so, we're taking a mixed approach. So in some instances we are just replacing them and in others we're effectively going through the repair process to have them operational. I think you're aware this is a safety related issue. So until blades are being replaced, repaired, the turbines are out of operation.

Nelson Ng -- RBC Capital Markets -- Analyst

Okay, thanks. And then, my second question relates to the Senate facility and the force majeure declaration. So I presume the counterparty hasn't, I guess can you give some color as to whether the counterparty has accepted the force majeure declaration. I presume they wouldn't have, but that could just be their default response. But were the hedges settled, is cash out the door? And you're looking to get some back or is it still pending?

Arun Banskota -- President & Chief Executive Officer

Nelson, thanks. There seems to be a lot of cracking on the line for some reason. To respond to your question, we have obviously submitted our force majeure to the counterparty. And obviously, since this may be turning into a dispute, or potential litigation, there's only so much I can talk about. But in any case, what we have earlier talked about is a maximum $45 million to $55 million of exposure. And any mitigation would obviously reduce that level of exposure.

Operator

Our next question comes from Julien Dumoulin-Smith of Bank of America, Merrill Lynch.

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

Listen, I suppose, let me start with a high level question for you. Obviously, we've seen some M&A have led across the space and perhaps more elevated valuation than perhaps was perceived coming into the year, especially for gas utilities. How do you think about your own positioning for M&A at this point in light of that, and I'm thinking specifically here set of points, gas LDC deal, but any open comments that I know you, you once again, at least put it on the table as being upside but curious on your latest perspectives here? Are you still a buyer maybe said differently?

Arun Banskota -- President & Chief Executive Officer

And, Julian, is your question, particularly only for gas utilities or is it a general?

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

Broadly, certainly the observation at least the empirical ones are on gas, but more broadly?

Arun Banskota -- President & Chief Executive Officer

Sure. So on a broader context, Julian, you are very aware that this acquisition is something one of our big growth levers. And I believe so in the last 20 years, we've in fact completed exactly 20 utility acquisitions. And we're always in the mix when there's a discussion around M&A.

To specifically respond to your question, yes, we have seen elevated pricing. And but again, that's, I think that there is a lot of capital out there right now chasing targets. So I think it remains a fairly frothy market.

In respect to your other question on gas LDCs. We are, as you know, in all three sectors, the modalities, water, electric and gas, and we do look at the potential acquisition across all three modalities. But on the gas side, we will be disciplined in terms of making sure that it needs our sustainability goals as well.

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

I was going to ask you a little bit more detailed question, as you're thinking about the latest impacts from the Biden tax efforts here. How do you think about that specifically to your company? I bet there's a lot of different puts and takes here. How would you frame the tax side as well as obviously the other perhaps more beneficial sides on especially direct pay, etcetera?

Arthur Kacprzak -- Chief Financial Officer

Julian, good morning. So on the tax side, I mean, in general, the comment is, I mean, it's obviously positive for the renewables industry, in terms of everything that's proposed, both on the Biden and some of the other proposals that are out there, as well. On the tax rate side, that we've talked about that in the past, I mean, basically on the tax rate is a flow through for utilities, such as basically neutral and probably a little bit of -- maybe a slight negative from the -- on the renewable side of the business. But in general, it's basically neutral from a tax rate perspective. Some of the other proposals that are floating out there, but that's way too early to tell what we're monitoring. And we'll see what, which one of them actually prevails.

Arun Banskota -- President & Chief Executive Officer

Jeff, you might want to comment also on the -- some of the tax proposals and how they could potentially benefit us as well on the...

Jeff Norman -- Chief Development Officer

Happy too. And so, definitely a ton of excitement in the industry about the American jobs plan, in particular, in terms of the ITC, PTC extension, for potentially five years, and also the extension of that to potentially impact storage without generation happening to be co-located. So although it's a little early to tell, it's certainly exciting. And I can't help but think there's going to be positive developments that do make it through into the legislation.

Operator

Our next question comes from Rupert Merer with National Bank.

Rupert Merer -- National Bank -- Analyst

If I could start with a housekeeping question for Arthur. Can you remind us how much of a financial benefit you expect to see from the 600 megawatts of wind you will have in the regulated utility and maybe you can give us a little color on the EBITDA run rate changes we might see in Q2 and Q3 relative to Q1 from those assets?

Arthur Kacprzak -- Chief Financial Officer

Most of the benefit from the 600 megawatts of generation actually will be important -- will be through basically our PESA adjustments that will be put in place as we look to get these projects approved through rates over the next year or so.

Rupert Merer -- National Bank -- Analyst

Okay. Are able to quantify what we could see for the remainder of the year with these adjustments?

Arthur Kacprzak -- Chief Financial Officer

Can I get back to you on that one, I can provide a little bit more quantification, maybe you want to follow.

Rupert Merer -- National Bank -- Analyst

Okay. Very good. And then, secondly, then more of a high level question on the organic growth. Maybe a question for Jeff. So you've come through this big growth spurt, 1600 megawatts, can give us a little more color on what we can anticipate the next couple of years? And what pace of growth can we expect to come from your organic development? I know you've got a 3400 megawatt pipeline and we had some goals laid out in the Investor Day. Can you can you exceed the targets in the Investor Day or should we look at the Investor Day is a good proxy for what we can expect next?

Arun Banskota -- President & Chief Executive Officer

Well, actually maybe before turning it over to Jeff, the first thing I would say is that we are very confident in meeting the $9.4 billion five-year plan, like I said, in my prepared remarks, it is very front-end loaded. And many of those projects are actually already in commercial operations already. So that gives us high confidence. And again, as we said, in Investor Day, and after that $9.4 billion program does not include the 3400 megawatt greenfield pipeline, or any incremental M&A activity. So we are confident in meeting and potentially exceeding that $9.4 billion capital plan. But, Jeff, do you want to add more color?

Jeff Norman -- Chief Development Officer

Yes, certainly. And Rupert, you mentioned, the 3400 gigawatt or megawatt pipeline. And we continue to advance. We see opportunity with a number of C&I customers who have set sustainability targets and renewable targets that need to be contracted 23, 24, 25. And if you look back at that 9.4 billion pipeline, it was fairly light on the global event section. And so we don't have anything that we can announce at this time. But the development team is certainly focused on originating projects to populate that prior to the [indecipherable] business.

Operator

[Operator Instructions] Our next question comes from David Quezada with Raymond James.

David Quezada -- Raymond James -- Analyst

My first question here just on your capital plan and appreciate the comments around the growth opportunities over and above it. I'm curious on the regulated side of things now that the initial round of green the fleet has happened. How do you see things developing on the regulated side in the outer years of your capex plan when the capex spend is a bit lower than the pace today?

Arun Banskota -- President & Chief Executive Officer

So, David, very good morning to you. The first thing I will say is that on the regulated side of the business as well, we do have multiple levers, right. And so when you look at some of the levers on the regulated side, the biggest one, in fact, is organic growth and when you say organic growth that refers to more our regular improvements in infrastructure, leading to better safety and reliability and security, right? And that is really the bulk of that. Then the other one is obviously some of the utility there. And I think the third one we referring to, is our greening the fleet. And really proud of the team to say that, that all of the 600 megawatts that was part of that greening the fleet initiative are now fully commercial and online. It is a lot of work from a lot of people on the teams and to get that on.

And as part of that, we also closed down our Asbury 200 megawatt coal facility, so and reducing our carbon intensity by almost a million tons a year. Now, the greening of fleet initiative is something that is somewhat unique to us I believe we are carrying that out in our CalPeco utility as well and we will be looking at places like [indecipherable] and others -- for some of those other greening the fleet initiative as well. Did that answer your question David?

David Quezada -- Raymond James -- Analyst

It does, absolutely. Thanks for that Arun. And then, maybe just one other question for me, looking at the Missouri rate case. I'm curious if you'll look to revisit certain items like revenue decoupling or do you prefer to just go forward with the PESA accounting that you have in place now?

Arun Banskota -- President & Chief Executive Officer

Let me turn that over to Johnny.

Johnny Johnston -- Chief Operating Officer

Yes, David, in the way that we effectively opted to go down the PESA route, following the last rate case, means that we're with that through, certainly until 2023, there's then an opportunity for us since we extended through, I think 2028. And so, but for now, revenue decoupling is something that we'll have to wait in Missouri, certainly making the most of the PESA legislation when you think about some of the investments we've been making through central region in the last few months.

Operator

Our next question comes from Stephen Byrd with Morgan Stanley.

Stephen Byrd -- Morgan Stanley -- Analyst

Thanks for the really thorough ESG update at the beginning, was really helpful, I kind of go thorough everything. But a lot has been covered, I wanted to perhaps go back to the potential for U.S. tax reform, and focus a little bit more specifically on some corporate tax elements, the impact to all of power corporate tax rates, potential for things like minimum taxes, guilty, etcetera, those sorts of dynamic. Would you mind just talking in a little more depth about those sort of corporate taxation elements and the impact to you?

Arun Banskota -- President & Chief Executive Officer

Arthur?

Arthur Kacprzak -- Chief Financial Officer

So on the tax rate, as I mentioned, to the previous question, it's basically a pass through on the regulated side, maybe it's a slight like negative on the renewable side. But I mean, as we look at some of the other noise that is getting out, proposed there, whether it's the shield or looking at whether these remains are some or the other proposals, but it's really early to tell which one is going to wait out, are they going to interact between themselves, whether it would be, the minimum tax we put in and the peak will be repealed, what's going to be creditable that we have to beat. So it really, really too early to make a determination in terms of where what the impacts will be. I'll say on the guilty, we're generally not impacted by any of the guilty proposals that have been put forth. But everything else we continue to watch closely.

Stephen Byrd -- Morgan Stanley -- Analyst

That's fair. We have a lot to figure out in terms of what this is going to really look like. And then, maybe just one other for me on renewals growth there, you gave us a thorough update and a number of questions around that. When you think about kind of the biggest limiting factors or sort of risks that you think about with respect to renewables growth curious, just whether that's supply chain availability, financing tax equity, whatever might be, how do you kind of see, I mean, we're obviously in a very supportive environment overall. So I completely respect that I'm just trying to think about we often get asked about, some practical issues and growth, whether it's a shortage of people, shortage of equipment or increased costs, just any other colleague might be able to provide on sort of what you see is some of the limiting factors?

Arun Banskota -- President & Chief Executive Officer

Jeff, you want to take that?

Jeff Norman -- Chief Development Officer

No, I'm happy to. Stephen, I think it's a great question, because I think that excitement obviously comes with a downside. And I say, a couple of stress points would be one, there probably will be a battle for talent and resources. We do see our location with a lot of development activities here in Huntsville as being a strategic advantage -- it's a good team. But we need to be cognizant of that team being very attractive to others and to keep building. That would be one.

The other one is on interconnection. There's such a demand for renewable build out in the key markets. And it's always been important, but it's going to be even more important over the coming months.

Arun Banskota -- President & Chief Executive Officer

Stephen, it's really the pace, right, I mean, what I like to point out is that in 2020, which was normal than the most friendly -- poor renewables administration was, where we saw our largest construction project in our pipeline history, in our history right, our 1600 megawatts. So we're obviously very excited now, all of the tailwinds we're seeing from this Biden administration. And it's really that as the -- with scaling the challenges are going to be across the board, in terms of, supply chain in terms of permitting, speed, in terms of the interconnection, access, how fast that can move. So it's really going to be felt throughout the different parts of the value chain. But again, we have been very good at managing that even through COVID last year, and even through that largest construction period in our history. So we're confident that we're going to be able to manage our way through.

Stephen Byrd -- Morgan Stanley -- Analyst

So that's a fair point. And these kinds of issues strike me as high class problems. So no point, I will make.

Arun Banskota -- President & Chief Executive Officer

Exactly. Right.

Operator

Our next question comes from Sean Stewart with TD Securities.

Sean Stewart -- TD Securities -- Analyst

Just a couple of questions, Arthur wondering, following up in the last question, can you speak specifically to tax equity, availability, how that's changed in recent months, if at all. And everyone your predecessor used to talk about Obama and becoming its own tax equity partner, once you get that taxable position? Any thoughts on that horizon and how that impacts your funding considerations?

Arthur Kacprzak -- Chief Financial Officer

So in terms of tax equity availability, we have not seen a constraint from our side, I mean, that part of it probably speaks to the fact that we have a well established relationships, strong balance sheets. And so far what we've seen tax equity is there for good projects. And to some extent, I would also say the tax equity market is, in some instances, even lightening up or looking at loosening up some of their rules, whether it would be continuous effort, so looking at potentially financing those types of projects and so forth. The tax equity is there and I think it continues to be there for strong sponsors.

For the second part of your question with respect to self-monetizing that's something that continues to be on the table and with respect to -- even some of the tax changes that are being out there, it is always beneficial to be a company that is able to generate its own tax attributes and be able to use it to offset income intrinsically. So for us that continues to be an option. And we also look at some of the other things that are out there, obviously direct pay of it than ever since for some of our projects as well, so all-in-all, I think, positive developments in this area.

Sean Stewart -- TD Securities -- Analyst

Thanks for that Arthur. You gave a little bit of an update Arun with respect to New York American Water. Can you just review the hearings that are upcoming and an update on your comfort closing that acquisition in advance of the state, completing its review with respect to the municipal ownership potential? Any updated thoughts there?

Arun Banskota -- President & Chief Executive Officer

Sure. And look, there's obviously a lot of political noise around this. But at the end of the day, we're really focused on two things, right? The first is, we continue to believe that we are the best owners and operators of New York American Water. And so we are focused very much on closing that transaction. And second of all, there is something unique with New York in regard to the special franchise tax, which is a burden on New York American Waters customers. And we've been working with different parties to try to see and make that much more equitable for our customers, right?

So beyond that, really, our discussions with the commission have continued as usual. We have now hearings, slated for late-June. That's the target probably. And in the midst of that, there's been a lot of other activity on both legislating front around municipalization studies and as things are restored. But at the end of the day, I think what is also very important to focus on is that the largest base of customer is in the Hampstead. And the Town of Hampstead has come out very strongly against municipalization. So I think with all of that we do continue to have high degree of confidence and we will be able to close out this transaction.

Johnny, is there anything you want to add to that?

Johnny Johnston -- Chief Operating Officer

I think you have covered Arun.

Operator

Our next question comes from Richard Sunderland with JPMorgan.

Richard Sunderland -- JPMorgan -- Analyst

Just two questions on Missouri here. Curious for the first one, if could provide more color around the proposed recovery timing and bill impacts of the incremental commodity costs out of the February weather?

Arun Banskota -- President & Chief Executive Officer

Sure. Johnny?

Johnny Johnston -- Chief Operating Officer

So our normal process, we have a fuel adjustment clause where our fuel costs get passed back over a six month period, whether the delta to normality, because of the materiality of the impact [Phonetic] on energy costs, I think if we were to pass those straight through in the normal fashion, it would have raised our customer bills, probably north of 60% as a result. And clearly that would have been a huge burden for them. So we have filed with the commission to have those pick up over a longer period of time and to address that through our upcoming rate case. So there'll be more to come. But clearly, our ambition here is to try and find the right balance between phasing those costs down, covering our costs of managing that, but making it manageable for our customers as we go through that. So there's more conversations to be had with the regulators and our stakeholders in terms of the exact timing. But that's sort of where we are in the process.

Richard Sunderland -- JPMorgan -- Analyst

Got it. Thank you for the color there. And then separately around the Usher [Phonetic] wind facility. Could you speak to the network upgrades required for that facility and maybe just provide a little bit more color around the performance there, including if there are any kind of performance obligations owed around those wind farms in general?

Jeff Norman -- Chief Development Officer

Sure. Richard, it's Jeff, I'm happy to take that question. And you're referring to the data as to results which came out and impacting at North Fork Ridge, Kings Point and Neosho, I would say we're quite pleased that for Kings Point and North Fork rates that those confirms that there were no upgrades. For Neosho, it is an interesting process. They are indicating that there is a need to upgrade about 18 miles of line. But we are currently generating a connection agreement and operating that facility. We expect to continue doing that moving forward and we know that there are some errors in the [Phonetic] report that pointed out that we'll continue to move forward as expected. In terms of financing, we have moved forward and projects end up operation in [indecipherable]. So happy to answer other questions on that if I didn't get right to the hub of your question.

Operator

Our next question comes from Rob Hope with Scotiabank.

Rob Hope -- Scotiabank -- Analyst

Two questions for me. First one, just on the Chevron agreement moving from evaluation development, can you just maybe add a little bit more color on kind of the potential timelines we can see on those projects in the Permian. And then, also just given, how are these agreements structured? Do you have a kind of set going in prices are targeted to return that you both agree with just from the fact that, it does seem like that a number of these projects are still in flux?

Arun Banskota -- President & Chief Executive Officer

Sure, so let me start off and I'll probably turn it to Jeff. Just to give you a little bit of context. So first of all, we signed a framework agreement with Chevron just last year in July, and it was for over 500 megawatts, right. And so that was just a framework agreement that really governs our partnership, who develops what, who takes the lead on what, all those kinds of details around our framework agreement, right. And so now, ever since that time, we have been scoping each of their facilities and looking at what is the best technology, what is the best size, all of those kinds of things and running the numbers. And now we've really moved from that first phase, to a much more of a development phase, because we now have a much higher level of confidence that on these four sites, we're going to be able to come to an agreement on all things like pricing and all those kinds of things.

At the end of the day, obviously, the both parties need to be able to have confidence that, the project we're doing needs both the hurdles and other requirements on both sides. And that's what we're working toward.

We are also working toward what we're calling in an agreement, a final investment decision, which will then start construction on these projects. And we're hoping to get to that sometime toward the end of the year or so timeframe. Jeff, anything you can any further color on that?

Jeff Norman -- Chief Development Officer

I think you've covered everything except maybe one item, which is just a little bit of color on the discussions in terms of returns. And so there's certainly been an exchange of the expected costs of the facilities and the returns that would be required, make sense for both parties. And so those will be confirmed through the investment decision. But the discussions around those have gone.

Arun Banskota -- President & Chief Executive Officer

And just to give you some more comfort around that. And we've even started procurement activities, right, in order to safeguard safe harbor and those kinds of elements. So, we remain -- both sides remain fairly confident that we are going to be able to execute on that framework agreement.

Rob Hope -- Scotiabank -- Analyst

Okay. And then maybe it's a follow up question just in terms of kind of, capital out the door for Q1, the MD&A says that you've done $1.9 billion of capex so far this year, cash flow statements quite a bit below that, as we look through the rest of the year, how are you thinking about your cash requirements to fund the rest of the capital plan to get to that $4 billion to $4.5 billion as well, as you know, is there a timing mismatch here? Or is it mainly just related to the accounting treatment and tax equity?

Arthur Kacprzak -- Chief Financial Officer

The simple answer is, it's an accounting treatment and the real reason is how these investments actually have been held prior to being bought off, if we hold them as a joint venture. Joint venture partners needs investments, so buying utility become an equity buyout. What we're bringing on to our balance sheet, to the cash flow statement is really the net investment that comes in.

So these previous projects, some construction financing that was brought on a net basis, and we look to repay that construction financing through our long-term bond platforms and overall, in accordance with the capital structure. Is that response helpful?

Operator

Our next question comes from Andrew Kuske from Credit Suisse.

Andrew Kuske -- Credit Suisse -- Analyst

Maybe two related questions. When you look at the construction program you did on the renewable side in the last little while, what do you do for an Encore? And what were the lessons learned from the program?

Arun Banskota -- President & Chief Executive Officer

Great question, Andrew. I'm going to pass it over to Jeff.

Jeff Norman -- Chief Development Officer

It is a great question. How do you how do you exceed the 1600 megawatts and all the 2020 with COVID. Hopefully, we will not have to repeat a COVID construction here of that magnitude. But I do think there's a great deal of opportunity going into this 22, 23, 24 just look at the C&I customers of the demand. And we've already seen a push up in C&I PPA rate as that demand starts to deal with the supply of product out there.

So I think it's going to be pretty exciting going forward, but it won't be as exciting as 2020.

Arun Banskota -- President & Chief Executive Officer

Exactly. And I think it's really that combination of our C&I strategy coupled with our 3400 megawatt greenfield pipeline. And I think that's what we're really excited about.

Andrew Kuske -- Credit Suisse -- Analyst

And then maybe just follow up to that. How do you think of a pipeline replenishment? And clearly in the year-to-date, there's been a lot of turmoil as far as market prices go on renewable stocks. What are you seeing on pipeline replenishment opportunities, in particular among, say, private developers? If you think of its color on that, that'd be great.

Jeff Norman -- Chief Development Officer

Yes. So there has been a consolidation of some of the larger developers, which are pushing forward winning projects. And we think it's important in our 3400 megawatts --to grow that 3400 megawatts and to make sure that there's a focus on wind, because there's a smaller subset of developers to acquire mid and late stage projects from. On the solar side, we're actually still seeing quite a robust pipeline of opportunities. And so going forward on solar will probably see more acquisition in greenfield and wins, it'll be slightly skewed toward greenfield from acquisition.

Operator

Next question comes from Naji Baydoun with iA Capital Markets.

Naji Baydoun -- iA Capital Markets -- Analyst

Appreciate it, a bit over time. But just a couple of quick questions. Can you just remind us for your 2021 guidance, how much is baked in for the New York American Water acquisition?

Arthur Kacprzak -- Chief Financial Officer

So when we did our guidance, back in Investor Day, we need to provide a range and a guidance and some assumptions with respect to that guidance. So with respect to our assumptions we did factor in that on the upper range, we would consider closing of American Water that happens around the third quarter or so. And on the lower rates, one of the factors was later in the year closing. And both those weren't the only assumption. So I would read into that as the entire range difference. I mean, we had other things such as -- we had assumed that on the low end COVID impact similar to this year and uncertainly it hasn't taken place. So there's various assumptions that go into that range.

Naji Baydoun -- iA Capital Markets -- Analyst

Okay, appreciate that Arthur. Just another quick question on sustainability and ESG, I guess not with us very close down. And all the ongoing renewable projects here, well on your way to achieving 75 renewables target by 2023. I get to talk about C&I appetite for clean energy, which is being a tailwind for growth. I'm wondering about your own targets. Maybe you can talk to us about potentially shifting about revising that target going forward and what the implications would be in terms of new renewable build up.

Arun Banskota -- President & Chief Executive Officer

Naji, thanks, a great question. I mean, sustainability is one of our three pillars. We certainly focus on that a lot. And just to tell you, I mean, we are already starting from a very good base, right? I mean, our carbon intensity when you look at that for $1 of revenue is that 0.0017 which is well among the lowest among our peers in the industry.

And even when you look at the fact that when we acquired Empire district that came up with some thermal assets, just since 2017 until now, we have reduced our carbon intensity by 31%, right. And so, some of the other goals we have are that 75% renewables by 2023, which is a pretty aggressive goal, but we are confident in meeting that and as we start now, meeting some of the goals that we have set out in past years targeted toward 2023, we are internally working toward, OK, what are the next set of goals so, keep your eyes open. I mean, we are working on those and we will be coming out with more goals as we continue to meet and exceed our current set of ESG goals.

Operator

There are no further questions in queue. At this time, I'll turn the call over to our Arun Banskota for closing comments.

Arun Banskota -- President & Chief Executive Officer

Thank you very much for all of the questions. Thank you for joining the investor call. Again, we remain extremely excited about the Algonquin platform and all of the opportunities in front of us. And with that, I'll turn it over to Amelia for the disclaimers.

Amelia Tsang -- Vice President of Investor Relations

Thanks for joining us today. Our discussion during this call contains certain forward-looking information, including but not limited to our expectations regarding earnings, capital expenditures and commercial operations.

This forward-looking information is based on certain assumptions, including those described in the most recent MD&A files on SEDAR and EDGAR and available on our website, 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 plan, beliefs, estimates, projections, expectations, opinions and assumptions of management as of today's date. There can be 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 earnings, adjusted net earnings per share or adjusted net EPS, adjusted EBITDA, adjusted funds from operations and divisional operating profit. There is no standardized measure of such non-GAAP financial measures. And consequently, AQN'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.

For more information about both forward-looking information and non-GAAP financial measures, including a reconciliation of 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.

And that concludes our call. Thank you for joining us.

Operator

[Operator Closing Remarks]

Duration: 74 minutes

Call participants:

Amelia Tsang -- Vice President of Investor Relations

Arun Banskota -- President & Chief Executive Officer

Arthur Kacprzak -- Chief Financial Officer

Johnny Johnston -- Chief Operating Officer

Jeff Norman -- Chief Development Officer

Nelson Ng -- RBC Capital Markets -- Analyst

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

Rupert Merer -- National Bank -- Analyst

David Quezada -- Raymond James -- Analyst

Stephen Byrd -- Morgan Stanley -- Analyst

Sean Stewart -- TD Securities -- Analyst

Richard Sunderland -- JPMorgan -- Analyst

Rob Hope -- Scotiabank -- Analyst

Andrew Kuske -- Credit Suisse -- Analyst

Naji Baydoun -- iA Capital Markets -- Analyst

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