Good morning. My name is David, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Algonquin Power & Utilities Corp first quarter 2022 earnings webcast and conference call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question-and-answer session. If you'd like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one once again. Thank you. Amelia Tsang, Vice President of Investor Relations. You may begin your conference.
Thank you. Good morning, everyone, and thanks for joining us this morning for our first quarter 2022 earnings conference call. Presenting on the call today are 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, management discussion and analysis, and annual information form 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 earnings, capital expenditures, pending acquisitions, capital recycling and growth.
At the end of the call, I will read a notice regarding both forward-looking information and non-GAAP measures. 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 plans for the business. We will then open the lines for questions, and I ask that you restrict your questions to two and then re-queue if you have any additional questions to allow others the opportunity to participate. With that, I'll turn it over to Arun.
Thank you, Amelia, and a very good morning to those who have been able to join us on the call and online. I am pleased to report that we are on track with steady year-over-year growth in the following key financial metrics. Q1 adjusted EBITDA was $330.6 million, a 17% increase year-over-year. Our Q1 adjusted net earnings per share was $0.21, an increase of 5% compared to last year's $0.20. We see ourselves as a business built from long-lived assets and stable operations, and we've consistently been able to produce stable and growing financial results and remain confident in our plans to continue delivering strong returns to our shareholders.
We're pleased that Algonquin's execution of strategic priorities and our strong financial positioning has led to support from our board of directors to approve an increase in our common share dividend of 6%, which was declared yesterday. This increase marks the twelfth year of consistently increasing dividends each year, demonstrating our confidence in and the resiliency of our business model. We continue to focus our efforts on Algonquin's three strategic pillars. Growth, operational excellence, and sustainability. I will provide more details on each of these pillars. The growth pillar in our regulated business is focused on deploying capital to benefit our customers and investing in our rate base. Our rate review at Empire District Electric progressed well.
On April 6, 2022, the Missouri Public Service Commission issued its final report and order, resulting in a total revenue increase of $39.5 million, with new rates expected to be implemented on June 1st, 2022. Recall that Empire District Electric had earlier requested a rate increase of $79.9 million, which included $29.9 million of recovery related to last year's extreme Midwest weather event, and subsequently amended the rate request to $50 million after updating certain components and deferring the recovery of Storm Uri costs. We believe the settlement represents a fair outcome for customers and the company. We continue to invest in our network to deliver mission-critical services to our communities while keeping customer affordability top of mind.
We also received a regulatory outcome for BELCO, our Bermuda electric utility, in the quarter, approving a revenue increase of $22.8 million. However, we are appealing the decision with the regulatory authority. As we believe both parties could benefit from better methodological definition around the rate making process. Another growth pillar on the regulated side is from our acquisitions. At the beginning of this year, we closed on the acquisition of Liberty New York Water, which services over 127,000 customer connections across seven counties in southeastern New York. We officially welcomed the employees into Liberty. The transition has gone very well as we have incorporated the operations into our East region. Similar to past acquisitions, we are sharing knowledge, benchmarking with our other jurisdictions, and sharing best practices across our utility businesses.
Staying on the topic of acquisitions, I want to provide you an update on our pending $2.8 billion acquisition of Kentucky Power Company and AEP Kentucky Transmission Company. We remain firmly committed to this transaction and look forward to bringing the benefits of our local operating model to Eastern Kentucky. As we've previously mentioned, our expectation of enhancing Kentucky Power's local operating model, bringing benefits to customers by exploring opportunities to reduce customer rates through investing in lower cost energy and creating increased local employment are all attributes that are expected to help customers and the local communities while driving value for shareholders. To that end, on May 4th, the Kentucky Public Service Commission issued an order including an approval of the pending acquisition, subject to certain conditions. The order issued is one of several steps required to complete the transaction.
The day prior, on May 3rd, the Kentucky PSC issued an order authorizing a revised ownership and operating agreement related to the Mitchell Plant. Orders on that subject remain outstanding from the West Virginia Commission and FERC. We have already received Hart-Scott-Rodino and CFIUS approvals. We expect to close the transaction in mid-2022 after satisfaction of all closing conditions. We continue to work collaboratively with AEP and look forward to bringing benefits to the customers and communities in East Kentucky. Turning to the growth levers on our renewable business. In this business, our ability to originate and execute projects is a critical growth lever. Late last year, we completed the 24-MW Anse-à-Valleau wind facility, which reached commercial operations in Quebec, with all of the energy being sold to Hydro-Québec.
I'm pleased to report that the latest project to achieve commercial operations is the 175 MW Blue Hill facility in Saskatchewan, with all the energy under contract with SaskPower. Our construction teams continue to execute well. On the wind side, we continue to make progress on Shady Oaks II and have started construction of Deerfield II and Sandy Ridge II. On the solar side, we continue to execute as our Croton Community Solar Facility reached commercial operations in December. Croton is Algonquin's first operational community solar project and is expected to lower retail utility bills for over 1,300 residential customers. Construction continues to progress on the utility-scale New Market Solar project, and we have started construction on three additional community solar projects in New York State. Staying on the topic of solar as it relates to the U.S. government solar tariff investigation for the renewable sector.
We believe there are two categories where the investigation's impact on our industry might affect our pipeline. First, there are projects currently under construction which could have potential delays. We are evaluating all options to mitigate potential impacts from the Department of Commerce's investigation into foreign-manufactured solar modules. The second category would be future projects. We believe the potential consequences of the investigation could be costs passed through to PPA pricing in the industry. As is consistent with our development philosophy, we generally try and finalize the large supply agreements, the EPC contract, and offtakes as close together as possible in an effort to protect the margins we expect. Another lever of growth on the renewable side is developing successful partnerships for renewable development with commercial and industrial customers to support sustainable energy.
We are pleased to report that we continue to collaborate with Meta, formerly known as the Facebook company, and executed an offtake agreement between Meta and the 112 MW Deerfield two wind farm located in Michigan. This represents the second offtake agreement with Meta after the previously announced Alta Vista. Moving on now to operational excellence. In a mission-critical industry, safety and reliability are always key areas of focus. I am pleased to share that we have passed the impressive milestone of over 800 days. That is nearly 12 million work hours without a single lost time injury across our North American business while keeping our customers and communities safe and maintaining our system reliability and resiliency.
In fact, another testament to our safety culture is that I'm pleased to report a notable achievement as Algonquin Liberty was recently recognized by the American Gas Association, AGA, as a top safety performer in 2021, winning the AGA Safety Achievement Award for the lowest incident rate in the medium combination utilities category. Our balanced approach of operating a local model with central governance continues to be a focus. We like to have our local management team situated close to our assets to work closely with the community, customers, and regulators. We continue to be innovative and invest in our system in an effort to meet future customer needs in a decarbonizing world.
One recent example is that Liberty has secured approval and is now awaiting the final tariff for a pilot program with a regulator in Missouri, which would make it the first utility in the state to obtain approval to earn a regulated return on behind-the-meter electric vehicle charging equipment. The pilot is slated to launch by fall and includes a number of unique asset and system data insights that we will be sharing with the Missouri Public Service Commission staff as the program unfolds. This pilot program is also notable given that its final design reflects nearly a year of close collaboration between Liberty, the Missouri Public Service Commission staff, and the local intervener community. Having proposed the original framework, Liberty refined multiple program features in response to stakeholder input. We are pleased with the final design and hope that this type of collaboration becomes a norm when it comes to innovative projects.
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. We've always said that our sustainability plans and initiatives are embedded into our broader corporate strategy, and we've taken another important step in that direction by repositioning our sustainability business unit under our corporate strategy group, which is being led by Helen Bremner, Executive Vice President, Strategy and Sustainability. Our short, medium, and long-term strategic direction will continue to factor in sustainability as a core strategic imperative. I'm sure many in the investor community will get a chance to meet with Helen in the near future.
During the quarter, Algonquin was also recognized for a second year in a row by The Globe and Mail and Report on Business magazine's Women Lead Here benchmark, which acknowledges corporations with the best record of executive gender diversity in Canada. With that, I'll pass it over to Arthur, who will speak to our first quarter 2022 financial results. Arthur?
Thank you, Arun, and good morning, everyone. I'm pleased to report strong first quarter results reflecting the benefits of our diversified and resilient business model. Our first quarter 2022 consolidated adjusted EBITDA was $330.6 million, which is up approximately 17% from the $282.9 million we reported for the same period last year. The Regulated Services Group delivered $231.2 million in operating profit in the current quarter, which compares to $206.4 million in the same quarter last year, an increase of $24.8 million or nearly 12%. This increase reflects the addition of 600 MW of wind generation in the first half of 2021 as part of the Greening the Fleet initiative in the Midwest.
These facilities contributed approximately $9.5 million of additional operating profit. The group also benefited from the implementation of new rates across several of our utility systems, adding approximately $7.5 million to operating profit as compared to the prior year. Lastly, our operations at Empire Electric, although moderately negatively impacted by weather this quarter as compared to long-term averages, recorded higher operating profit as compared to the prior year due to higher non-pass-through fuel costs incurred in the prior year resulting from the impacts of Storm Uri. Operating profit was negatively impacted this quarter by an operating loss at Liberty New York Water, which was acquired in January. As a reminder, this utility is impacted by seasonality and is expected to earn a disproportionate amount of its operating profits during the summer months.
The Renewable Energy Group reported first quarter divisional operating profit of $118.6 million, which compares to $95 million in the same quarter last year, representing an increase of $23.6 million or nearly 25%. During the quarter, production at our existing wind and solar generation facilities was more in line with long-term averages, increasing by 20% over the same period last year, and as a result contributed approximately $12.4 million to the year overall increase in operating profit. Generation from newly commissioned facilities and investments added $8.5 million, primarily from the Maverick Creek Wind and Alta Vista Solar facilities that both achieved full commercial operations in the second quarter of last year.
Operating results also benefited from incremental dividends received from Atlantica, but were partially offset by unfavorable price capture at some of our wind facilities and higher fuel costs at our Sanger Thermal facility in California. Our investment in the Texas Coastal wind facilities provided a positive contribution to operating profit this quarter, with the addition of the West Raymond facility in the second half of last year, but continues to perform below our expectations, primarily due to higher than anticipated basis costs resulting from the imposition of the general transmission constraint in the vicinity of the facilities. In total, our Q1 Adjusted Net Earnings per share came in at $0.21, which compares to $0.20 in the prior year.
In addition to the drivers discussed, our results were negatively impacted by financing costs associated with the capital deployed in 2021 and an increase in weighted average shares related to the Kentucky Power acquisition funding. These financing costs were and continue to be incorporated into our financial outlook for the year. Moving on to our capital plans for the year. For 2022, Algonquin is targeting to spend over $4.3 billion in capital, with the majority related to the acquisitions of Liberty New York Water, which closed earlier this year, and Kentucky Power, which is expected to close mid this year. Our capital plan remains on track.
During the quarter, in addition to the approximately $609 million of capital deployed for the closing of New York Water, we invested over $225 million of capital into our utilities and continue to invest into our renewables development and construction programs. We also continue to make good progress on our financing plan for the year, which as a reminder, is predicated on maintaining a strong and resilient balance sheet, targeting a BBB flat investment grade credit rating. As mentioned in my remarks last quarter, early this year we issued approximately $1.1 billion of hybrid debt, which we expect to use in connection with the closing of Kentucky Power.
Together with the common equity offering completed last year, in total we have raised just over $1.7 billion towards the $2.8 billion purchase price, with the remainder being debt assumed on acquisition, a portion of which we expect to refinance in the debt capital market shortly after. The remaining funding requirements for the year are expected to be solved by a combination of various funding sources available to us, including retained cash, additional hybrid debt, proceeds from securitization of regulatory assets and long-term debt. In the second half of the year, we may also reactivate our at-the-market equity program to provide flexibility to raise a modest amount of equity capital. We've also recently commenced a process exploring the modernization of several of our renewable assets, which we view as another source of potential value accretive capital for us this year.
Considering the various funding sources available, we do not expect to require a discrete common equity offering for the rest of this year. Our liquidity position also remains strong, ending the quarter with over $1.8 billion of available liquidity. Subsequent to the quarter, our Regulated Services Group upsized and expanded its revolving credit facility, increasing it from $500 million to $1 billion for a five-year term. The extension was well oversubscribed, highlighting the strong support for the company's credit in the bank market. Our treasury group remains focused this year on also extending and potentially upsizing our renewable and corporate revolving credit facilities. Before turning things over to Arun, I'd like to provide a brief update on our 2022 adjusted net EPS guidance. We continue to expect our 2022 adjusted net EPS to be within the range of $0.72-$0.77.
These expectations are based on underlying assumptions, including normalized weather patterns as well as resource production and realized pricing at renewable generation facilities consistent with long-term averages. We've also assumed the acquisition of Kentucky Power will be completed in mid-2022, and there'll be no impacts from COVID on operations. We look forward to continuing to deliver solid earnings, which was along with our history of dividend growth, we believe will continue to drive a strong return for our shareholders. With that, I'll now hand it back to Arun to outline our strategic plans.
Thanks, Arthur. Before we close out our prepared comments this morning, I want to give an update on our strategic initiatives. At our December Investor Day, we updated our five-year capital investment program, which projects $12.4 billion from 2022 through the end of 2026, with a visible capital plan. Of that, we have already closed on Liberty New York Water earlier this year, executing on approximately $600 million of the capital plan in January. A large portion of the capital plan is being spent on organic investments to improve the safety, reliability, and resiliency of our network. On the renewable side, we are excited about the growth potential and believe that we have a once in a generation opportunity to accelerate renewables growth and add shareholder value.
We own or have investments in over 4,000 MW of renewable generation, which provides us with scale. With scale, we expect to get incremental benefits, including improved negotiating power, lower transaction costs, and access to greater opportunities. I've previously spoken about accelerating renewables growth and adding shareholder value as we plan to continue to increase our investments in greenfield development, which we expect will allow us to capture the higher development margins and take a number of those projects through construction. Once in operations, we see an opportunity to partner with institutional investors wishing to make alternate sustainable investments and who are seeking a partner with a proven ability to develop and deliver on long-term contracted sustainable assets. More specifically, we should be able to sell down to these investors while earning an operating fee.
We could then deploy some or all of the capital gains in further greenfield development, creating a potential new recurring source of earnings for our investors. We have formally commenced our inaugural asset recycling process now with a portfolio with U.S. and Canadian assets in the range of approximately 750 MW, and we'll provide an update as the process concludes. Key objectives for us are increasing the scale of our development and operational platform together with increasing the amount of internally generated cash for future growth. I'm excited about the prospects of Algonquin's regulated and renewables businesses, which are both well-positioned to contribute to and benefit from the decarbonization transformation that is currently underway and which will only accelerate over the coming years. We welcome you to hear more at our upcoming Annual General Meeting.
Similar to last year, and as a result of the ongoing pandemic, we will be hosting our AGM virtually this year. We welcome your participation on June 2nd at 4:00 P.M. Eastern. The start of 2022 has been very productive so far with the close of Liberty New York Water and the receipt of orders for our Kentucky Power acquisition. On the renewable side, we are excited about the growth potential and believe that we have once in a generation opportunity to accelerate renewables growth and add shareholder value. Our three strategic pillars of operational excellence, growth, and sustainability will be a key foundation as we continue to build the business and seek to deliver steady earnings, dividend growth, and long-term shareholder value. With that, I will turn the call over to the operator for any questions from those online.
Thank you. At this time, I'd like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Okay, we'll take our first question from David Quezada with Raymond James. Your line is now open.
Hey, thanks. Morning, everyone. My first question here, just on the, maybe on the renewable power side of your business to start. I'm just curious, I know that, I think about 18% of your capacity is not contracted. Curious what kind of upside you're seeing from higher spot prices today, and if there are any opportunities for contracting, potentially those assets in the current environment?
Yeah, sure. Hey, David, it's Jeff Norman. You're absolutely right that there is a portion of those assets that are not contracted, and we are seeing an increase in pricing. I think we will probably leave those open in terms of managing the overall risk, and so that they can appreciate in the upside. There's some other benefits in terms of balancing with the generation profile and mix that optimize the portfolio.
Okay, great. Thank you for that. Then maybe just one on topic of renewable deployment throughout your regulated footprint. Certainly appreciate that Kentucky Power is the big opportunity. I'm just curious at your footprint in Empire District Electric. I know that the case for renewables in the past has been that it saves customers money. I imagine that that math is even more favorable today. I'm curious if you've had any initial discussions with the regulator there about potential additional renewables in the Empire footprint?
Look, that is a discussion, David, we continually have with all of the regulators throughout our jurisdictions, including Missouri, including California. Look, we even have those conversations with the water utilities, where we are in jurisdictions because it in fact takes a significant amount of energy to move water. We are even looking at, you know, how do we power those energy needs with the renewable energy. That's something we continually have. You know, given the fact that we certainly have additional natural gas fired generation in Missouri.
Over time, we believe that there may be more opportunities for Greening the Fleet, as the prices of renewable energy goes down and we're able to foresee the benefits to our customers there.
Excellent. Thank you very much. I'll turn it over.
Thank you, David.
Next, we'll go to Nelson Ng with RBC Capital Markets. Your line's open.
Great, thanks. First question's for Arun. You mentioned that you've started the capital recycling process for 750 MW. Can you just clarify? Are you looking to sell a minority interest in retaining O&M responsibility? Is that the approach you're taking?
Nelson, thanks. You know, first of all, I think the range is around 750 MW. I did say that this is an inaugural renewable asset recycling because, you know, as we continue to increase our greenfield pipeline and accelerate growth, we want this to be something that's of recurring value to our shareholders. We [audio distortion] have a significant amount of flexibility in terms of, you know, how much we want to sell down. What is important for us is really to maintain that scale on both the development and the operational side. That is really the most important thing for us, and to really validate the strength of our development platform by doing this sell-down.
We will retain flexibility in terms of the exact ownership to really maximize shareholder value.
Okay, thanks. Then my next question might be for Jeff. In terms of solar panel supply, can you just clarify? There are some projects on that slide that has some solar panels installed, like 60%-70% on the community solar and the New Market Solar phase I. Are those projects essentially on hold, or do you already have panels on the ground and this investigation into tariffs would they impact the projects that are already starting the panel installations? I presumed New Market phase II and Chevron, those have been pushed out a bit due to this issue.
You know, Nelson, it's a good question, and certainly the Department of Commerce decision to investigate has caused some turmoil in the supply chain. I think maybe stepping back a little bit before answering your specific question, we feel very fortunate that the solar projects within our $12.4 billion pipeline only represent about 2%. You break that into two chunks, the projects that you're asking specific questions for, which are a little over 100 MW, and the remainder, which is two projects that are out in 2024, 2025 timeline in our capital plan.
We don't expect an impact on that majority that's out in 2024, 2025. That we'll have time to adjust to whatever decision is made by the Department of Commerce. Specifically to your question on the community solar projects, those are and will continue under construction. The panels are in country, so we expect no impact there. The two Chevron projects, which total 45 MW, we have made a joint decision with Chevron to pause those projects until we get the decision from Department of Commerce. A little bit of an impact there, but pretty small projects. On New Market Solar, the remaining 65 MW in the schedule that Arun went through is constructed except for panels. Once the panels arrive, we can complete construction quite quickly.
We expect the panels to arrive in time to complete that construction before December 31st. We do expect, based on the sourcing of the panels, that there is some tariff exposure there, but it's only approximately 30 basis points on return.
Excellent. Thanks for the color, Jeff. I'll leave it there.
Thanks.
Next, we'll go to Rupert Merer with National Bank Financial. Your line's open.
Good morning. Getting back to the topic of sell downs. Initially, which assets could you be targeting? Are you looking at all assets under construction or are you contemplating sell down on some operating assets? I imagine those wind assets you have coming off ten-year tax credit windows could be good candidates. Just what are your thoughts on what gets sold down?
Rupert, the whole idea for us is to de-risk these projects through the development, interconnection, siting, permitting, construction and early operations, right? All of these projects are in early stages of the operation. Those are the projects we have in the pipeline, and they're both in, you know, Canada and the U.S. They're all, you know, renewable energy projects.
Okay. You're not contemplating sell down on operating assets at this point?
Look, these are operating the renewable energy projects, just to clarify.
Okay, great. Secondly, with the dividend increase, can you give us some thoughts on the payout ratio targets you have near and long term and how those came into effect with your dividend increases quarter?
Yeah, sure, Rupert. It's Arthur. Thanks for the question. Actually, we were expecting that question. In terms of our dividend and as we think about our dividend going forward, again, 12th year in a row raising dividends. As we look at it, we wanna ensure we're providing a strong yield to a lot of our investors, but also we wanna make sure that our dividends are sustainable. That's why back in Investor Day, we did lay out our target payout ratios of about 80%-90%. We believe with those payout ratios will ensure a sustainable dividend. Really just as a recap on how we think about those payout ratios, it really brings the combination of our two businesses.
On the renewable side, which, you know, it typically pays out a proportion of its cash flows. On the regulated side, where we see a lot of our utility peers paying out between 60% and 70% of earnings. If you blend those two together, you do get about the 80%-90% earnings payout ratio. I would say the only thing I'll tell you about the payout ratio, it is a long-term payout ratio. We probably do see ourselves potentially exceeding that in the short term, especially with some of the transitional factors this year as we're bringing on Kentucky Power.
Certainly in the long term, probably post-2023, we would see ourselves within that, so that payout ratio, assuming the 6% increase that we're seeing today.
Great. Thank you, Arthur. I'll leave it there.
Thanks, Rupert.
Thank you. Next, we'll go to Ben Pham with BMO. Your line's open.
Hi. Thanks. Good morning. I wanted to start off on M&A and hear sort of your philosophy now with Kentucky Power pending and your comments around not meeting equity needs. Are you looking both at electric and gas? Is there a bias to either one? Are you seeing more opportunities around renewables versus utilities? Would love an update on how you think about M&A in the current environment?
Sure. Look, Ben, you know, first of all, I do wanna point out that the vast majority of our you know usual capital plan is organic growth. Perhaps you know the last one is a little non-representative because we have two large acquisitions, New York American Water and Kentucky Power. If you go to the previous Investor Day, which is more like $9.4 billion and also included $600 million of M&A. You know, $8.8 billion of that $9.4 billion CapEx program was all you know the organic growth, right? I do wanna point that out first of all.
We do not absolutely depend on M&A for our growth. We are cognizant of the fact that, you know, scale does bring certain benefits. Where we can execute on M&A that fits our strategy, that fits all of our financial metrics, all of those kind of things, you know, we will execute. M&A, you know, is by its very nature fairly opportunistic. We have closed Liberty New York Water. That transition has gone very well, no surprises. Given our experience base in terms of transitioning acquired utilities into our fold, we do not anticipate any surprises on Kentucky Power as well.
Given all of that, if the right opportunity comes, we will look at M&A opportunities. Again, we are always very, very disciplined when it comes to fit with strategy, fit with all of our financial metrics, so on and so forth.
Arun, I mean, thanks for that, those remarks. I'm wondering also, not sure what year it was? Maybe last year, you were a little bit keen on gas M&A, but with maybe Ukraine situation, has that changed at all in your thinking?
Look, you know, one of the things that, you know, we've made very clear is around sustainability. That it has to fit. As you saw on the Kentucky Power transaction, we did a lot of structuring to make sure that transaction fit our long-term sustainability goals and profile. When it comes to natural gas, look, we focus on really several things. You know, first of all, we wanna minimize our emissions. If you look at our utilities like Liberty Utilities, there's a lot of investments going on replacing either bare steel and the iron pipes with plastic long-lasting plastic pipes.
With that effort, we're gonna continue to minimize the emissions profile of our gas utilities. We also have filed renewable natural gas filings in front of four different commissions so far and are going through that regulatory process. On the renewable side, we acquired a platform in Wisconsin with two plants in the late stages of construction, which we expect to come into operation this month, in fact, and two others in development. We are working on renewable natural gas. Longer term, we are looking at hydrogen. I mean, we participate in a number of studies. We are a participant in the New York State's program on hydrogen as well.
Over long term, we see that as a very much of a potential. However, we wanna make sure that we have a good line of sight on green hydrogen and the economics of that before transacting further on natural gas assets.
Okay, got it. The other question I was on the dividends on the questions that have been asked. When you set the 6%, I know there's a lot of different factors driving that. Are you also considering your ability to maintain that rate over the next couple years, or it can move around every year based on the inputs that you're putting in?
Look, absolutely. The first thing I would clarify, Ben, is that it's really our board that dictates, you know, dividend policy and the level of dividend. That's really important. I think Arthur alluded to, you know, some of the factors we consider in terms of when you look at setting dividends and sustainability of dividends is an absolute must, right? Absolutely.
Okay, thank you.
Thanks, Ben.
Thank you. Next, we'll go to Julien Dumoulin-Smith with Bank of America. Your line is now open.
Hey, good morning, team. Thanks for the time and the opportunity to connect. Can you hear me?
Yeah, of course, Julien. Great.
Hey, thanks, Arun. Greetings indeed. Hey, listen, just actually to clarify that last response, I wanna make sure I heard you right. Just, I've got a follow-up here, but when you said dividend impact, the sustainability of growth, right? I think that's what Ben was after when he was asking about the 6% DPS a second ago. It's not just sustainability of dividend, but I think that you were affirming a confidence on a certain degree of growth.
That, that's absolutely correct. Yes.
Excellent. Thank you. It wasn't clear in your response, but I thought you meant that. Thank you. All right, sorry. Back to the regularly scheduled question. Just with respect to your Kentucky acquisition and the earned returns, I know we've talked about this at various points, but the timeline there, right? Coming back to that payout ratio comment from earlier, it sort of seems as if it's tied to the earned ROE, you know, achieving a certain level and normalizing your overall earnings profile as such. What's your latest sense on when you get closer to earning those quote-unquote authorized levels, wherever that settles?
Sure. In theory, with the expiry of the Rockport unit power agreement, in a certain level of the disallowances that will be recovered. That's obviously one step towards getting back closer to allowable return. The next opportunity for us will clearly be on the rate case that we plan to file in 2023, which goes into effect in 2024. As we talked before, there's a number of mechanisms that have already been common among other investor-owned utilities in Kentucky, and we plan to try and avail ourselves of those as well.
Finally, as we start layering in, you know, both, you know, lower cost grid purchases, you know, once the Rockport UPA expires and the Mitchell, it gets retired from a Kentucky perspective. As we bring in lower cost renewable energy, you know, we should be able to pass on, you know, both those benefits to customers as well as enhance our ROE as well. It's a step-by-step, you know, progression that we built into our acquisition model, and we remain confident in being able to execute against that.
Excellent. Thank you. Further one quick clarification, if I can. You said in your prepared remarks you'd commence the process exploring the modernization of several of your renewable assets, which you would view as another source of potential value accretive capital. What does the modernization of your renewable assets look like in the form of financing? I just want to be crystal clear about this? I know we've talked on the call earlier about potential monetization of the assets, but I think you used the term modernization. I just want to make sure I heard that right? Sorry, Arun. Maybe you meant modern. The transcript's coming across a little odd, maybe.
One moment, Julien. Can you hear us?
Please proceed. Go ahead, Julien. What's your question?
Hey, Julien.
Yep.
Yeah. Something happened. Technology glitch here. First of all, it is really a case of pronunciation, Julien. I said monetization, not modernization.
All good. I'm reviewing the transcript here, and it says modernization. All good. Thank you so much.
Thanks.
Cheers, guys.
Thank you. Next, we'll go to Sean Steuart with TD Securities. Your line's open.
Thank you. Good morning, everyone. A lot of my questions have been asked. One question on the non-regulated renewable platform. I guess two questions. The process that you formalized for potential asset sales to institutional partners. I might have missed it. Can you give us context on the timeline for reaching conclusions there?
By the end of the year.
Okay.
We do plan to conclude that. Yes.
Okay. Thanks, Arun. Maybe a question for Jeff. As you look to redeploy that capital towards earlier stage development opportunities, given the scale you're at now, most of what you've done, you've sourced yourselves and built yourselves. Can you speak to the greenfield opportunity set versus acquiring early-stage portfolios of projects and using that to build the growth going forward? Any comments on the bias one way or another for earlier stage renewable development opportunities?
You know, absolutely, Sean. We continue to shift more towards greenfield than acquisition of facilities just because of two factors. One, we do see a lot of the early junior developers being acquired by strategics and by financial players. Two, we see the ability to create more value by going in earlier. Our platform has gotten bigger and bigger in the U.S., and our ability and tools for doing that have become improved.
Okay. Thanks for that detail. That's all I have, everyone. Thanks.
Thank you. Next, we'll go to Rob Hope with Scotiabank. Your line's open.
Morning, everyone. Just two follow-up questions. First on the asset monetization side. You know, as you take a look at these processes, you know, when you're taking a look at how much you want to sell, does consolidating or equity accounting these assets come into play? By that I mean, you know, you have some renewable assets that could bear quite a bit of debt. So if these are equity accounted for, you could put asset level financing there and lever them up and not impact the overall balance sheet. Is that a factor that we could see come into play here?
Let me first say that the first consideration, most critical consideration for us, is how to maximize value. That is by far the most important consideration. I'll let Arthur comment on accounting treatment.
Yeah. I was gonna echo the same thing. The value is the number one piece, but obviously if we can optimize around financing structures through our assets monetization, we'll certainly look at that.
All right. Appreciate that. Then just to follow up on Kentucky, you know, we've seen, you know, some conditions in the filings. Does that alter your expected ROEs moving forward there, or has this played out largely as expected so far?
Largely as expected, Rob, I mean, you know, we obviously are cognizant of all of the items that came out in the orders. We are collaborating closely with AEP on those on resolving all the outstanding issues. We said the outstanding regulatory requirements are from West Virginia on Mitchell and FERC. We remain confident on resolving those again at mid-year. We continue to believe that the economics that we've laid out earlier hold through that kind of Kentucky permission order.
All right. Appreciate the clarity. Thank you.
Thank you, Rob.
Thank you. Next we'll go to Naji Baydoun with iA Capital Markets. Your line is now open.
Hi, good morning. Just two questions. On the asset sales, do you expect sort of your success this year to perhaps lead to more regular pace or a specific scale of capital recycling initiatives going forward?
The idea is to have on the renewable side a recurring, you know, theme of asset sell downs and to be able to recognize and validate the value we've created through the development process. Yes, as we've said in you know the prepared remarks you know this is an inaugural asset recycling program. Yes, there will be a part two and a part three and hopefully a continuing scale.
Okay. Got it. I guess so far there's no specific targets because as you know, you talked about 750 MW this year, and then obviously it's gonna depend on how much more you can add to the portfolio over time, but it's sort of this is step one, but you do expect to do it more regularly.
That's exactly correct.
Just one quick question on the Deerfield partnership with Meta. Have you looked at maybe replicating the Chevron framework with this client or with some other clients in the U.S. or in Canada?
No, we'd obviously like to, right? We like the Chevron framework agreement because having that certainty around offtake does a lot of things, including, you know, significantly reduce transaction costs. We certainly would like to develop all of these relationships into those kinds of framework agreements. As you know, the important part about this one with Meta was the fact that it is a second one. This whole C&I partnership is something we spend a lot of time and effort and focus on making sure that we're delivering value to our customers.
whether through a framework agreement or repeated, you know, partnerships on repeat projects, that is the model that we do wanna retain. Yes.
Got it. Understood. Thank you.
Thank you, Naji.
Next we'll go to Richard Sunderland III with JP Morgan. Your line is now open.
Hi. Thank you for the time today. Just wanted to circle back quickly to the tariff comments earlier in the Q&A. Just wanted to clarify. The tariff exposure is just on New Market Solar Two and not on the first phase or the community solar. Is that correct?
That's correct. There will be tariff exposure also on Chevron assets. We just need to sort through exactly what the decision is and where we source those panels.
Right. Understood. Thank you for the clarity there. Secondly, over the past, you talked about your storage pipeline. Just curious where your efforts stand there.
Yeah. We announced a 1,700-MWh storage pipeline, greenfield, Richard. We are at the point with storage economics and everything that we basically you know look at storage on every one of our renewable when we're looking at every one of our renewable project development. Even when we're thinking through you know interconnects, things of the sort, we make room for storage capability even when in case we may not start out with including battery storage. We do believe that battery storage will continue to you know both there will continue to be price reduction as well as capacity increases in terms of number of hours of storage.
We are pretty bullish on the battery storage side of the business. We already have actually, you know, quite a bit of battery storage on the regulated side of the business. We have learned a lot through the operations of those. Yes, again, all in all excited about the battery storage opportunity.
Thank you for the color.
Thank you, Richard.
There are no further questions at this time. Arun Banskota, I'll turn the call back over to you for any additional or closing remarks.
Thank you for taking the time on our call today. With that, please stay on the line for our disclaimer.
Our discussion during this call contains certain forward-looking information, including but not limited to our expectations regarding earnings, capital expenditures, pending acquisitions, capital recycling, and growth. This forward-looking information is based on certain assumptions, including those described in our most recent MD&A filed 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 plans, 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.
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This concludes today's conference call. You may now disconnect.