Algonquin Power & Utilities Corp. Investor Presentation May 2010


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Algonquin Power & Utilities Corp. Investor Presentation May 2010

  1. 1. Investor Presentation May 2010
  2. 2. Forward Looking Statements Certain written and oral statements contained in this presentation and information release are forward- looking within the meaning of certain securities laws and reflect the views of Algonquin Power & Utilities Corp. (the “Company”) and its manager with respect to future events, based upon assumptions relating to, to among others the performance of the Company's assets, the business realities facing the Company others, assets Company, the impact of laws and regulations and the state of financial and credit markets. These forward looking statements include, among others, statements with respect to the expected performance of the Company, its future plans and its dividends to shareholders. Statements containing expressions such as "believes", "anticipates", "continues", "could", "expect", "may", "will", "project", "estimates", "intend", "plan" and similar expressions generally constitute forward-looking statements. Since forward-looking statements relate to future events and conditions, by their very nature they require us to make assumptions and involve inherent risks and uncertainties. We caution that although we believe our assumptions are reasonable in the circumstances these risks and uncertainties give rise to circumstances, the possibility that our actual results may differ materially from the expectations set out in the forward- looking statements. Material risk factors include the continued volatility of world financial markets; the impact of movements in exchange rates and interest rates; the effects of changes in environmental and other laws and regulatory policy applicable to the energy and utilities sectors; decisions taken by regulators on monetary policy and taxation; and the state of the Canadian and the US economy and accompanying business climate. We caution that this list is not exhaustive, and other factors could adversely affect our results. Given these risks, undue reliance should not be placed on these forward- looking statements, which apply only as of their dates. Except as required by law, the Company and its manager do not intend to update or revise any forward-looking statements, whether as a result of new forward looking information, future developments or otherwise. 2
  3. 3. Agenda Corporate Organization Business Strategy Overview and History Recent Developments Recent Acquisitions Our Businesses Algonquin Power Co. Liberty Water Co Co. Liberty Electric Co. Financial Information Performance Capital Structure Credit Facilities Analyst Targets Algonquin Power Positioned for Growth 3
  4. 4. Corporate Organization Algonquin Power & Utilities Corp. A Sustainable Power and Utilities Company Liberty Electric Renewable focused portfolio of tf li f Stable d St bl and predictable di t bl Stable d St bl and predictable di t bl independent power earnings from earnings from projects providing regulated water and regulated electric attractive absolute wastewater utilities distribution utilities returns 80 % EBITDA 20 % EBITDA nil % EBITDA 60% by 2H 2010 20% by 2H 2010 20% by 2H 2010 50% Canada / 50% US 100% US 100% US 4
  5. 5. Business Strategy Under the new dividend paying, growth oriented corporate structure Algonquin will strive to: g q Maximize long term shareholder value Deliver t t l shareholder return th D li total h h ld t through h dividends and capital appreciation Focus on growth in earnings and dividend growth based on increasing earnings Medium-term planning horizon targets future annualized per share earnings growth exceeding 5% 5
  6. 6. Overview and History One of the largest Canadian renewable power and utility companies with more than 480 MW of generation and 70,000+ utility customers EBITDA of $80 million annually Enterprise value grown from $100 million to $800 million Traded T d d on th T the Toronto Stock Exchange: t St k E h AQN, AQN.DB, AQN.DB.A, AQN.DB.B 1988 1997 199 2009 Private Hydro Algonquin Power Algonquin Power Development Co Co. IPO Income Fund & Utilities Corp. Corp Algonquin Power Co.: 22 years Liberty Water: Nine years Liberty Electric: One year 6
  7. 7. Recent Developments Red Lily Wind Project – Phase 1 26.4MW wind project near Moosomin, Saskatchewan consisting of 16 Vestas V82 wind turbine generators (WTG)–expected capacity factor of 38.1% Target COD early 2011. All electricity sold to SaskPower under a 25 y PPA with annual escalation of 2% g y y yr APCo providing $17.5 million in debt and will provide development and construction oversight services - ~2.5MM in 2010, and operations and management oversight under 25 year agreement Option to subscribe for a 75% equity interest in the project in exchange for its subordinated debt commitment, exercisable in 2016. Water Utility Acquisition – Galveston Water distribution and waste water collection utility near Galveston, TX serving approximately 260 connections (expaning to 470 connections) Assets include lift stations, pumping equipment, storage tanks, pressure tanks, a supplemental water chlorination system and water distribution and wastewater collection lines Purchase price for the system is US$2,000,000, representing a rate base multiple of 1.0x. Strategic Partnership with Emera Emera agreed to a treasury subscription of approximately 8.5 million shares for gross proceeds of ~$27 million - Closing concurrent with CalPeco closing in latter half of 2010 Strengthens Algonquin’s low-risk utility infrastructure portfolio at an attractive valuation and leverages Emera s long term Emera’s long-term utility expertise Positions Emera to increase renewable energy holdings in North America and leverages Algonquin’s renewable energy operation and development expertise 7
  8. 8. Recent Acquisitions Eastern Canada/US Hydroelectric Facilities Transaction closed January 12, 2010 37 MW hydroelectric generating capacity in Maine and New Brunswick New Brunswick Public Utilities Board regulated transmission lines Long operating life, experienced management, long-term long term employees Expands Algonquin’s geographical diversification Allows access to multiple electricity markets California Pacific Electric Company (CalPeco) Local Electrical Distribution Company Closing expected in Q3 2010 CPUC regulated utility serving Lake Tahoe, CA area More than 47,000 customers in 7 counties Well maintained assets including 12 MW generation Strong customer/rate base and a supportive regulatory environment Strong economy provides for additional growth in rate base To be jointly owned with Emera: 50%/50% 8
  9. 9. Renewable and Clean Energy Generates attractive returns and strong cash flow from renewable and clean energy g gy generation facilities while delivering g g growth from an expanding pipeline of renewable power projects Clean, renewable assets producing environmentally acceptable electricity sourced from water, wind, natural gas, and municipal solid waste 75% of generation under long term power purchase contracts with inflation escalators 56 facilities, 453 Growth MW, MW average PPA of f 12 yrs, ~80% of Greenfield Growth Total EBITDA Phase II Red Lily Wind Project: up to 120MW EBITDA % Ontario Green Energy Act: Wind projects totaling approx. 40 MW Thermal Hydro awaiting Economic Connection Test 34% 37% Organic Growth St. Leon Wind Energy: 20 MW Expansion, 66 MW adjacent farm Wind 29% Energy-from-waste: 40,000 to 100,000 tonne expansion 9
  10. 10. Water Distribution and Waste-Water Treatment Water distribution and waste-water treatment facilities in the United States providing predictable cash flows and return protection Generates stable returns as a provider of safe, high quality, reliable water and wastewater services to over 70,000 customers, with continued growth provided by organic expansion of its service territories and the aggressive pursuit of accretive acquisition opportunities 19 facilities, , Growth over 70,000 connections Organic Growth ~20% of Total Rate Cases: $18 million in revenue increases requested (expect $7 EBITDA million realized in 2H 2010) Expansion of existing service area for nearby developments Waste-water Water Acquisitions q 48% 52% Actively seeking acquisitions in regulated water utilities 10
  11. 11. Liberty Electric Electric Utility Closing expected in latter half of 2010 Will deliver predictable earnings through the provision of regulated electric generation and distribution services to over 47,000 customers following the completion of the acquisition of the California Pacific utility operations Regulated utility in a supportive regulatory environment serving the affluent Lake Tahoe area Pending approval of Growth CA Electricity Distribution Organic Growth Utility, over Strong local economy provides for additional growth i rate b St l l id f dditi l th in t base 47,000 Acquisitions connections Actively seeking acquisitions of regulated electricity distribution utilities 11
  12. 12. Financial Performance in CDN$ millions 2006 2007 2008 2009 Q1 (except per unit) 2010 Assets $1,048 $954 $977 $1,013 $966 Revenue $193.2 $186.2 $213.8 $187.3 $45.9 Adjusted EBITDA1 $81.1 $ $85.1 $ $90.0 $ $79.4 $ $17.9 $ 2009 results Q1 2010 Algonquin felt the effects of the 08/09 Q1 2010 results affected by two main items recession in three areas Energy From Waste facility unplanned lower merchant power rates in the US outage lower steam demand at co-generation Return t full production expected July 2010 R t to f ll d ti t dJ l facilities Unusually low North American wind regime lower natural gas prices result in lower affecting St. Leon production spark spreads at cogeneration facilities Early Q2 results indicate return to more normal wind regime g 1 Adjusted EBITDA assesses the operating performance without the effects of depreciation and amortization expense which are derived from a number of non-operating factors, accounting methods and assumptions. 12
  13. 13. Capital Structure Algonquin’s objectives when managing capital are: Capital structure managed around investment grade credit metrics CDs Investment grade credit rating of g g 21% BBB- (stable) from Standard & Poor’s Equity Maintain debt and equity levels 49% appropriate t each operating i t to h ti subsidiary and consistent with its investment grade credit rating Sr. Debt 30% 13
  14. 14. Credit Facilities Algonquin has access to sufficient cash flow, credit and capital to fund its growth objectives : ensure cash from operations grows to allow for a growing dividend over time to shareholders while retaining cash for growth Fixed Variable have credit facilities available for 50% 50% investment gro th in estment in growth and development opportunities Strong banking syndicate of four Canadian Banks Strong liquidity position of $54.7 Interest rate swaps are in place for 80% of the million at the end of Q1 2010 variable interest rate debt 14
  15. 15. Analyst Targets 12 Month Price Targets 8 7.50 7 5.50 6 Average 5.00 5.35 $5.19 5.25 5.25 5.00 5.00 5 4.50 ($)4 3.50 3 2 1 0 BMO Canaccord Clarus Cormark Fraser Macquarie National Bank Mackie Salman Scotia Capital Adams Mackenzie Research Partners Capital 15
  16. 16. Well Positioned for Growth Financial Demonstrated Experienced Flexibility Achievements Management Team • $70 available annually • 55 acquisitions in 12 years • Over 60 years of combined • Strong cash flow • 12 greenfield projects in experience in • Strong balance sheet 15 years > Feasibility studies • Capex requirements > Environmental assessments funded with cash flow > Permitting from operations > Financing > Acquisitions q > Engineering Opportune Time: current market conditions f t k t diti favor attractive tt ti valuations for power & utility assets 16
  17. 17. Ian Robertson Chief Executive Officer 905-465-4510 David Bronicheski Chief Financial Officer 905-465-4512 Kelly Castledine Manager, Investor Relations 905-465-4576