Good morning, everyone. I'm Amelia Tsang, Vice President of Investor Relations at Algonquin Power & Utilities Corp. Thank you for joining us for our second virtual Investor Day. I'd like to extend a warm welcome to our investor community, and thank you for your time and interest. Before continuing, I wanna make our legal team happy by highlighting that our discussion during this management presentation will include certain forward-looking information, including our expectations regarding future earnings, capital expenditures, dividends, planned initiatives, pending acquisitions, and growth. This forward-looking information is subject to the cautionary statements in the supporting slideshow. Actual results may differ. We will also refer to certain non-GAAP financial measures and have a notice about these items at the end of the presentation. In keeping with our company's safety-first culture, we usually start a meeting with a safety moment. Today, I thought I'd do the same.
When one thinks about safety, one usually thinks about physical safety. However, with the ongoing challenges of the pandemic and as the weather starts getting colder and darker earlier, it's a good reminder to be mindful of one's health and taking the time and necessary steps needed to keep you in the right frame of mind. Now on to the presentation. I'd like to introduce our first speaker, Arun Banskota, President and CEO of Algonquin Power & Utilities Corp.
Thank you, Amelia, and welcome to our 2021 analyst and investor presentation. A very good morning to everyone. We are pleased to be with you today to share our strategic overview, track record against commitments made for 2021, and plans for 2022. Our employees have made significant progress in 2021, and these successes are a testament to our entrepreneurial spirit, owner mindset, and customer-centric approach. This, combined with our culture of teamwork and inclusion, translates into delivered results which we look forward to sharing over the next couple of hours. On a personal note, after last year's virtual analyst day, I was really hoping to meet everyone in person today. However, with the new COVID variant, we decided to err on the side of being safe since safety is always first at Algonquin.
Sharing this presentation with me today are Jeff Norman, our Chief Development Officer, Johnny Johnston, our Chief Operating Officer, George Trisic, our Chief Sustainability Officer, and Arthur Kacprzak, our Chief Financial Officer, and Amelia Tsang, Vice President of Investor Relations. Today, we are pleased to present the investment community with an update on our performance, strategic direction in light of critical trends and perspectives on the future, our exciting growth prospects, our sustainability journey, and financial outlook. We have had an exciting 2021. For those of you who joined us at last year's investor day, exactly one year ago today, you will recall that we had an ambitious set of goals. I'm pleased to say that we have largely delivered on many of our priorities, which are positioning us well for the future.
We are also well-positioned to benefit from the decarbonization transformation that is currently underway and which will only accelerate over the coming years. First, I would like to spend a few minutes discussing our business profile. Algonquin Liberty is a North American energy and water company providing mission-critical electricity, water, and natural gas services across both regulated and renewable businesses. Currently, our portfolio comprises approximately 70% regulated, moving to an expected 80% of our portfolio, assuming the closing of our acquisitions of Kentucky Power and New York American Water. We operate across all three modalities of electric, water, and natural gas, and we service over 1 million customer connections, which translates to approximately 3 million customers.
Our renewable business currently represents approximately 30% of our portfolio and directly owns and operates 2,300 MW of net renewable generation capacity, of which approximately 81% is contracted with a weighted average remainder contract length of 13 years. Across both businesses, we own over 4,000 MW net interest in aggregate renewable power generation. There are a number of synergies across the two businesses. Our entrepreneurial culture spans both businesses, and we have been leaders in greening the fleet. We have extensive experience in tax equity, which helps manage the initial capital requirement of renewable generation against customer rate stability for regulated projects. We have technical expertise in both commercial and emerging renewable technologies, including utility scale and community solar, wind, battery storage, and renewable natural gas.
We have a strong balance sheet and have a proven ability to raise green financing. A key differentiator for us is the number of growth levers across our two businesses, which we expect will allow us to deliver superior results in returns on capital, EPS growth, capital deployment, and other measures of shareholder performance. Today, I want to highlight our growth levers. In our regulated business, we focus on deploying capital to benefit our customers. We expect to invest between $800 million and $1.2 billion annually into our rate base to improve safety, security, reliability, and resiliency. When we complete the acquisition of Kentucky Power and New York American Water, this gives us the opportunity to deploy more capital at one times a larger rate base in ways that can benefit our customers.
Additionally, we have a proven playbook of taking on and successfully delivering on key turnaround opportunities. This includes maximizing performance within our regulatory frameworks, retrofitting and investing in our asset base to support a sustainable future. Because we serve customers across 16 jurisdictions, we are able to learn and deploy best practices to improve returns and reduce regulatory lag. We are generally able to achieve at or near our authorized returns. Our Greening the Fleet playbook, which we have successfully utilized at both CalPeco and Empire District, enables us to replace older fossil fuel assets with cleaner renewables and grid investments. Similar to our decarbonizing contribution on the renewable side of the business with renewable energy generation, Greening the Fleet is our unique contribution to decarbonizing the regulated industry.
Our disciplined approach to acquisitions, both publicly announced utility acquisitions and smaller tuck-ins, has allowed us to expand our scale and more efficiently spread our fixed costs. To date, we have successfully closed every one of the 27 utility acquisitions we have announced over the last two decades. We normally do not announce our tuck-ins, but the city of Bolivar, located in Missouri, water utility acquisition is a good example of our tuck-in growth lever. We have recently received regulatory approval to acquire the city's water infrastructure and approximately 10,000 customer connections. The combined effect of these regulated growth levers has enabled us to grow our regulated footprint with rate-based growth at a 37% CAGR over the last 10 years, or up 22-fold over the last decade. Now, turning to the growth levers on our renewable business.
In this business, our ability to originate and execute projects is a critical growth lever. 2021 has been a record year for Algonquin, with 1,400 MW of new renewable projects brought online. The fact that we are able to do this successfully in the midst of the COVID pandemic and supply chain challenges is testament to the hard work and entrepreneurial culture of our employees. We are continuing to advance our greenfield pipeline and grow our capabilities to accelerate delivery of renewable projects. We continue to develop successful partnerships for renewable development with commercial and industrial customers to support sustainable energy. Recent examples of such partnerships are with Microsoft and JP Morgan. We also continue to invest in emerging technologies to position our business for the future. These include renewable natural gas, battery storages, and community solar.
We have achieved significant milestones in key projects like our New York Community Solar with Battery Storage Project and a compelling renewable natural gas platform opportunity in Wisconsin. Finally, our investment in Atlantica Sustainable Infrastructure provides us a vehicle for growth in international non-regulated assets. The Atlantica asset base is attractive, with investments in over 36 long life assets diversified across geographies and technologies. 100% of Atlantica's revenues are contracted or regulated, with remaining average weighted life of 16 years. Atlantica is a recognized leader in ESG. Overall, our growth levers in renewables have enabled us to complete 1,400 MW of new assets commencing operations this year. In fact, our renewable portfolio in terms of net megawatts owned and operated has increased in size by 128% and 494% over the last 5 and 10 years, respectively.
As you are about to see, our development pipeline suggests a continued strong growth trajectory ahead of us. Exactly a year ago today, we outlined our 2021-2025 strategic and capital plan. We have largely delivered on our commitments, and I'm proud of our team at Algonquin who turned our strategic plans into reality. Last Investor Day, we outlined a capital investment plan of $9.4 billion from 2021 to 2025. This was a very front-loaded capital deployment plan, and we had already deployed nearly $3.4 billion by the end of the third quarter while navigating the continued impacts of COVID and supply chain challenges. This capital plan includes the successful completion of our Midwest Greening the Fleet program, as well as investments in improving the safety and reliability of our systems.
We also brought approximately 1,400 MW of renewable generation online, positioning us well for further opportunities in these markets. Last year, we unveiled a 3,400-MW prospective greenfield pipeline for the first time. We have since converted 600 MW from that greenfield pipeline into our new 5-year capital plan, while simultaneously growing the net greenfield backlog to 3,800 MW. This offers strong preliminary validation for our ability to both grow and create value from this greenfield pipeline. We now plan to continue investing in growing this prospective greenfield pipeline, developing viable projects through construction to the operational stage, bringing in low-cost capital to validate our development value creation and provide recurring value to our shareholders.
Increased scale in development and operations will be a self-reinforcing process that is expected to reduce our transaction costs, increase our negotiating position, give us visibility to more opportunities, and allow us to continue investing in technologies and systems that will make us even more operationally excellent. Further proof of our greenfield success is our partnership with Chevron. Last July, we announced a framework agreement with Chevron for over 500 MW of renewable generation. We have now taken the first four projects, totaling 120 MW in the Permian Basin, through the development process and jointly approved final investment decision to commence construction. In addition to Chevron, our existing relationships with key corporate renewable energy customers, such as General Mills and Kimberly-Clark, continue to advance. Since last Investor Day, we have signed or announced new agreements with Microsoft and JP Morgan.
Additionally, we spoke of future levers of growth last year, and I'm pleased to say that we've been executing on that front. We said we would be evaluating growing our battery storage business. We already own and operate 13.5 MWh of battery storage in our regulated business, and we have a solar with battery storage project under construction in our renewable business. This year, I'm pleased to introduce a new prospective pipeline of storage opportunities of 1,700 MWh, which we will discuss later. We continue to grow and make progress on our renewable natural gas projects. We have made applications in three of our regulatory jurisdictions for RNG and are developing a portfolio of projects across every one of our gas utilities.
Recently, in our renewable business, we executed an agreement for an RNG platform in Wisconsin, which includes both operational and development projects, and we plan to build on this experience. In terms of our Greening the Fleet playbook, we successfully finished construction of 600 MW of wind generation in the U.S. Midwest into our rate base. We now have another large Greening the Fleet opportunity with our recent $2.8 billion agreement to acquire Kentucky Power Company. Our recent agreement to acquire Kentucky Power is a great case study in deploying our two proven playbooks of Greening the Fleet and optimizing underperforming assets. First, we have accumulated a significant amount of experience and in-house expertise with our greening the fleet capabilities, and we plan to leverage this going forward. At our Empire District Electric utility, we have reduced Empire's emissions intensity by 33% since 2017.
At CalPeco in California, we have reduced annual emissions by over 38% since 2017. With this strong track record, we plan on leveraging this experience at Kentucky Power, which we believe offers significant opportunities for us to transition the existing fossil fuel generation to rate-based renewables. With the expiry of the Indiana-based Rockport coal purchase agreement in 2022, and the anticipated transfer or retirement of the West Virginia-based Mitchell Plant in 2028, we see an opportunity to replace over 1,100 MW of fossil generation capacity with Kentucky-based renewables. Cleaner renewable assets have lower operating costs, avoid the volatility of fossil fuels, and provide even better customer value while investing in the local communities.
We look forward to partnering with the Kentucky Public Service Commission, or KPSC, through the integrated resource planning process and leveraging our greenfield development expertise to deliver low-cost, clean energy solutions to Kentucky Power's customers as part of our demonstrated greening the fleet capabilities. Given the path we see to decarbonization, this acquisition is very much in line with our commitment to achieve net zero greenhouse gas emissions by 2050. Secondly, our playbook of optimizing underperforming assets. I spoke earlier of our strong track record of identifying and closing acquisitions. Further, we have a specialized skill set of integrating new acquisitions into the Algonquin Liberty family. We look to optimize, implement best-in-class benchmarking, and share best practices. We are a disciplined and selective acquirer, and we will continue to prioritize financially accretive transactions that do not unduly jeopardize our strong balance sheet.
Similar with previous acquisitions, we plan to utilize our local customer-centric operational model to minimize disallowances by having transparency of our costs. This local model allows us to manage our costs within our regulatory allowances. Also contributing to our ability to earn returns is a focus on added regulatory mechanisms. Under our ownership, we have been able to secure revenue decoupling, capital trackers, property tax adjustments, and similar mechanisms, which all help the utilities increase their returns while providing bill stability and deploying the necessary capital to allow us to better serve our customers. You'll hear from Johnny about the improvements we have made in Granite State Electric in New Hampshire and Empire District under Liberty ownership. Kentucky Power is primarily regulated by the KPSC, which we view as a constructive regulatory jurisdiction and rated above average by S&P.
Kentucky Power is a utility that has historically realized ROE below the authorized levels when compared to peers in Kentucky. We see a compelling path forward to improve the earnings profile to achieve an ROE that is closer to the authorized 9.3% for the distribution rate base through the availability of certain key regulatory features. For instance, forward test years are not currently being employed by Kentucky Power despite its approved use by other regulated peers in the state and could provide for more timely recovery of costs. We look forward to working with the Commission on implementing certain improvements to help us deploy the necessary investments to deliver reliable and clean electric services to Kentucky Power's customers.
By the way, the upper-right picture shows Yvette Bailey, our Supervisor at our New Brunswick Gas utility, making sure I am doing the gas locates correctly. Great training, but I'm not sure if I met the very high standards that Yvette holds for her work crew.
I also want to take a moment to discuss some of the strategic considerations and positive tailwinds for our industry. We are undergoing a significant sustainable transformation in the energy and water industries, and both our regulated and renewable businesses are well-positioned to benefit from this transformation. We believe sustainable infrastructure is one of the most significant trends globally, and multiple factors are converging to drive this change. Policy and regulatory changes are promoting sustainable investments. For example, the proposed Build Back Better legislation will potentially support up to half a trillion dollars of investments in clean energy and climate initiatives. While renewable investments are already economically compelling and have moved beyond policy requirements, positive policy and regulatory tailwinds can help accelerate this decarbonization transformation.
Based on industry research and publications, we estimate that the total addressable investment opportunity across electric, natural gas, and water infrastructure over the next 20 years in North America is roughly $16 trillion-$19 trillion. The left chart shows Bloomberg's projection of a potential pathway towards global net zero carbon emissions by 2050. This requires over 14% year-on-year annual carbon reductions. Unlike other areas of the economy, like buildings and agriculture, where cost-effective solutions have yet to widely emerge, power decarbonization solutions are readily available and economic. That means any realistic pathway towards net zero carbon emissions are heavily front-end dependent on the power sector in the next 10-20 years. Most projections find that the energy sector needs to shoulder a considerable majority of the decarbonization burden by 2035 if the combined effort to achieve net zero is to succeed by 2050.
The middle chart shows that approximately 23% of Americans are currently using electricity and alternative fuels, which is forecasted to grow to 72% by 2050, suggesting a $14 trillion-$17 trillion decarbonization opportunity in North America net zero investments required by 2050. The right chart shows a U.S. spending projection by the American Society of Civil Engineers. They forecast a growing spending gap between needed pipeline and water treatment replacement and currently projected levels of spending. This investment opportunity of $2 trillion is needed to address increasing environmental, safety, and leakage issues in the water space. In addition to these, hydrogen has the potential to become a large investment opportunity. Given Algonquin's experience and expertise across all three modalities of electric, water, and gas, we are one of the few companies in this industry that can address the entire spectrum of sustainable opportunities.
We plan to continue investing in our development and operational capabilities to benefit from this once-in-a-generation set of sustainable opportunities. Technology trends are aligning to support required investments and accelerate transition rates over the next decades to address concerns including decarbonization, resiliency, localized energy, and integration management of multiple sources. To cite a few industry projections, through 2030, utility-scale batteries are projected to grow 10x current capacity. Renewable natural gas capacity will expand up to 4x . Community solar should grow up to 22x . It is clear that the energy profile of tomorrow will be different than that of today, both in source and design. Utilities and renewable companies will be critical players in this transformation, thus creating investment and growth opportunities for Algonquin.
Our DNA and roots as an agile, entrepreneurial, forward-thinking business serves us well in this journey, as does our diversified portfolio of sustainable electric, water, and gas assets. Against all this backdrop of strong policy tailwinds, we believe that we have a once-in-a-generation opportunity to accelerate renewables growth and add shareholder value. We plan to increase and accelerate our investments in greenfield development to serve the continued strong demand for renewable energy. This should allow us to capture the higher development margins and take these projects through construction. Once in operations, we see an opportunity to partner with institutional investors wishing to make alternate sustainable investments with our ability to develop and deliver on long-term contracted sustainable assets. In particular, we may be able to sell down to these investors while earning an operating and man-management 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. With scale, we get incremental benefits, including improved negotiating power, lower transaction costs, and access to greater opportunities. You can think of this as a flywheel impact. Increase development to capture the higher upfront margins, de-risk the projects through construction and long-term offtake contracts, sell down to realize the development margins and create recurring management fees, and utilize the capital gains to further accelerate development. We plan to start executing on this opportunity in 2022. The cumulative effect of all this policy backdrop, the large sustainable investment opportunity in front of us, and Algonquin's experience in execution, is a strong financial outlook for Algonquin. Today, we are bringing forward our long-term financial outlook.
We are updating our 5-year capital plan and plan to invest $12.4 billion from 2022 through the end of 2026. Given last year's capital plan was front-end loaded, we invested $3.4 billion through the first 9 months of the year. Our 2022-2026 capital plan represents an additional $6.4 billion in new expenditures compared to the $9.4 billion capital plan from 2021 through 2025 that we announced last year. For the 5-year period from 2022 to 2026, we are targeting an adjusted net EPS CAGR of 7%-9%. We have already identified all the regulated and renewable investments that make up this CAGR range. Let me be clear on the following point.
Our 7%-9% outlook commencing in 2022 is unchanged from our prior 8%-10% outlook for the 2021-2025 period when one considers our adjusted net EPS growth rate in 2021 would be double digits, even at the low end of the forecasted range. Let me conclude my section with a look back at our results so far. With all this backdrop that I just discussed and the continued execution of our three strategic pillars, we have been able to deliver an outstanding track record of performance. We have a history of providing excellent value to our shareholders, and we remain well-positioned to continue this in the future as we have multiple levers of growth across both our regulated and renewable businesses.
Over the last 5 and 10 years, we have delivered 95% and 348% respectively in total shareholder returns, outperforming key market and utilities sector peer group averages. Also, we delivered an adjusted net EPS CAGR of 12.2% from 2015- 2020. We are very proud of these accomplishments, but are even more excited at what lies in store given that we are going through a period of the greatest decarbonization transformation and sustainable investments in the energy and water industries. Both our regulated and renewable businesses are very well-positioned to benefit. Now, we will discuss in greater detail how we plan to continue enhancing our leadership across our three strategic pillars. For growth, you'll hear from Jeff about how we continue to find and pursue attractive investment opportunities in a disciplined way.
For operational excellence, we seek to be close to our customers and communities and operate a local model with strong local teams and accountability with positive regulatory outcomes. Johnny will cover much more on operational excellence in his presentation. On sustainability, we announced our commitment for net zero for scope one and two emissions by 2050 earlier this year. The achievement of our net zero target is supported by our strong decarbonization track record and experience in regulated utility management and renewables development, which George will provide more details on. Arthur will then provide greater details around our financial expectations, strong balance sheet, and financing plan. With that, let me turn it over to Jeff to go into more detail on growth. Jeff?
Thank you, Arun, and welcome everyone. I am looking forward to discussing Algonquin's growth plans with you. Arun has shared the $12.4 billion 5-year capital plan. I'm going to dig into that capital plan and provide some additional details. From a growth perspective, we are very fortunate to have a greenfield development and construction platform ready to execute on the once-in-a-generation investment opportunity Arun has outlined. We have created an investment platform that provides a unique opportunity to enable customer benefits through direct investment in regulated assets and utility acquisitions. This slide shows the three regulated growth drivers which comprise our regulated growth platform. 52% of our 5-year regulated capital plan is driven by the recurring investment required to replace aging assets within our utility footprint and upgrades to deliver water and energy through a reliable and resilient system.
These are the organic investments in blue on the left side of the slide. They tend to be highly predictable year after year. Arthur will discuss the role these investments play in our 5-year CAGR. Johnny will discuss their role in delivering on our commitment to operational excellence. The power of the utility platform to enable organic investments is evident when you think about water utilities. Arun spoke to the $2 trillion in investment required in the water and wastewater sector. With the recent addition of ESSAL and the expected addition of New York American Water, we expect to add approximately 280,000 water and wastewater customer connections. This significantly increases Algonquin's ability to invest in the infrastructure needed to safely and reliably deliver water and collect and treat wastewater.
With the expected addition of New York American Water, water and wastewater utilities will comprise 13% of Algonquin's total rate base for regulated business. The second driver in the center of this slide is for acquisitions. Acquisitions pending close represent 42% of our regulated capital plan. Arun mentioned our disciplined approach to utility acquisitions. This discipline is demonstrated with the 1.4x rate base for New York American Water, a 1.1x rate base for ESSAL, and a 1.3x rate base for Kentucky Power.
Focusing on water for a moment, we believe the price delta between pure play water utilities, which generally trade at 3x rate base in the U.S., and the average price for New York American Water and ESSAL at approximately 1.3x demonstrates the value created by our disciplined approach to water acquisitions within our regulated business. Keep in mind, water utilities can trade at 30x earnings or more. We are proud of our track record in sourcing, closing, and integrating utility acquisitions. That being said, our capital plan only includes signed transactions, so any new acquisition announced in the future would be expected to provide additional upside. The third growth lever is the Greening Playbook. The Greening Playbook is a growth differentiator that delivers customer and shareholder benefits.
The Greening Playbook includes items like investing in community solar assets at Empire District Electric, investing in utility-scale solar and wind generation. This represents the most significant in the greening opportunities. In 2022, our customers will see the benefits of our investment to construct the three wind facilities in our central region that comprise the customer savings plan. The greening opportunity continues to advance with the application of an incremental 60-MW solar and 240 MWh storage investment, which combined are expected to provide low-cost, reliable, renewable energy to our customers at CalPeco. Assuming all goes well with our recent filing, this will be the third application of the greening playbook for CalPeco. We expect to deliver significant benefits by applying our green playbook to Kentucky Power.
It is important to note that Algonquin has transitioned from a long and successful track record of developing single assets to the owner of two mature growth platforms, our regulated growth platform and the renewable growth platform. Earlier this year, we indicated that our investment in greenfield development represented a drag of approximately $0.02 on adjusted net earnings per share. Given the robust environment for renewables we see today, we believe that that decision was the right decision for our shareholders, and we intend to continue to invest in renewables by pursuing a two-pronged approach to development, pure greenfield development and sourcing development sites from our network of junior developers. This approach is generally consistent with other large development platforms in the United States. This slide illustrates how our renewable growth platform applies to the growth drivers Arun discussed.
The majority of our current growth is expected to be driven by three drivers, utility scale wind, utility scale solar, and more recently, utility scale storage. These are on the left side of the slide. Our future growth platform will include community solar, renewable natural gas, and microgrids. These are on the right side of the slide. Working the current growth platform and continuing to build the future growth platform will position Algonquin to continue growing our greenfield pipeline. The greenfield pipeline, in turn, feeds our 5-year capital plan. I do want to share a couple of highlights that demonstrate the progress we made in 2021 on building that future growth platform. We placed our first fully subscribed community solar project into operation, and we have prepared to commence construction of four additional sites in New York during 2022.
On the renewable natural gas side, we have entered into an agreement to acquire 100% of Sandhill Advanced Biofuels. Sandhill is currently developing four RNG projects that are in late-stage development and two projects are placed in commercial operations. More importantly, we see Sandhill as a platform that we can build to help ensure we are active participants in the growing RNG space. We are targeting 16 additional sites over the next 5 years. The progress on our future growth platform does not represent a significant portion of our 5-year capital plan or greenfield pipeline today. That being said, we have made meaningful progress to build the platform for our future. The levelized cost of energy forecasting is a key tool that we use to assess what technologies to include in our greenfield pipeline.
Despite all the great ESG and societal pressure to transition renewables, economics remain the most powerful catalyst for change. I have outlined in purple rectangles the key technologies in our current capital plan. I would like to highlight a couple of items. The first is the cost of solar PV at the community level relative to the cost of PV rooftop, in particular, residential rooftop. In our regulated business and our renewable business, we are investing in community solar over residential rooftop. We're not against residential rooftop and understand the appeal of residential rooftop to some customers, but we currently believe that community solar is more attractive based on customer benefits and scalability. The second is that the cost gap between utility-scale solar and utility-scale wind relative to gas peaking and coal-fired generation, which continues to grow.
Utility-scale wind and solar projects are the best economic choice on a per megawatt-hour basis. Please keep in mind that these are the unsubsidized levelized cost of energy numbers produced by Lazard. We have not assumed that the ITC and PTC extensions contemplated in the Build Back Better legislation will be adopted. That being said, we expect the legislation to pass, which would further reinforce the economic value from renewable energy. Finally, the challenges of integrating renewables, given the intermittency of the generation, is a problem that must be solved. The cost of battery storage is becoming attractive. Bloomberg found that new build batteries can be cost competitive with gas peakers. This is a major and important step forward. It is also consistent with the greenfield storage pipeline I will be discussing in a few slides. Arun spoke to what we said we did.
I wanted to continue the theme by sharing the 2020 capital plan we shared at Investor Day last December. You can see that by the end of Q3 2021, we had successfully executed $3.4 billion of our 2021 plan. The completed items are marked with red checks. They include a combination of renewable project completions like Maverick Creek and organic investments. In 2020, we had a number of questions around our ability to replenish our 5-year capital plan given the size of the 2021 capital program. I will walk through how we have grown our 5-year capital plan to $12.4 billion and how we have expanded our greenfield pipeline to facilitate future growth.
This slide provides a bridge from our 2020 5-year capital plan of $9.4 billion to our 2021 5-year capital plan of $12.4 billion. The first step is the capital plan reduction as a result of successfully completing $1.7 billion in REG investments and $1.7 billion in renewable investments, the investments marked with a red check on the previous slide. The quantum of this investment program, coupled with the fact that we are still standing, proves that we have successfully scaled our growth platform. I suspect nobody's surprised to see the $2.8 billion investment in Kentucky Power, a very important addition. The next addition is the next net increase in our organic investments over the 5 years, which is expected to be $1.5 billion. These organic investments tend to be recurring.
Part of the growth in yearly organic investments is driven by the addition of Kentucky Power. The final proof point is the ongoing success of our development platform, which has resulted in an increase of $2.1 billion in expected renewable projects to the 5-year capital plan. This slide pulls the capital plan together with the REG growth represented by the blue circles on top and the renewable growth represented by the green circles on the bottom. The size of the circles in this chart represent the relative size of each investment. The shading from dark to light represents the project stage. With this additional context, I would like to point out a couple of items. 73% of the 5-year capital plan is linked with signed utility acquisitions, organic CapEx for the utility business and renewable projects already in construction.
This gives us confidence in the 5-year capital plan. You will see new projects representing $0.9 billion that represent conversions from our greenfield pipeline to our 5-year capital plan. On the bottom right, you will see a further $1.4 billion in expected capital plans additions in 2025 and 2026. These are projects that we expect to convert from our 3.8-GW prospective greenfield pipeline to our capital plan. Based on past development success and the size of our greenfield pipeline, we are confident in meeting the 5-year capital plan. The next couple of slides focus on the regulated growth platform. Arun mentioned our track record on greening the fleet. We are very proud of our ability to move from acquiring Empire District Electric in 2017 to having 600 MW of spinning wind in 2021.
We are equally proud of what we have achieved in greening CalPeco. Greening the fleet is a well-executed Algonquin playbook. The key takeaways from this slide are. We have deployed the greening playbook several times and created value for our shareholders while delivering customer benefits. We have a track record of completing greening initiatives on an expedited timeline. We create value by not just building renewable generation. We seize opportunities to actively replace thermal generation, and Kentucky Power is the latest example. Let's talk about Kentucky Power. We are excited about the opportunity to deliver customer and community benefits by deploying our greening playbook. As Arun indicated in his remarks, this opportunity is driven by the expiry of the Rockport unit purchase agreement in 2022 and expected retirement in 2028 from a Kentucky Power perspective of the Mitchell Plant.
Combined, this represents an effective retirement of 1.1 GW of out-of-state generation over a 7-year period. We expect to replace the Kentucky Power coal generation capacity with renewable generation that will ideally be located in Kentucky. The investment in generation should deliver attractively priced energy to Kentucky Power customers, in addition to important community benefits through property taxes, lease payments, and employment. We have already taken steps to refine our diligence on available resources. Our current assumption does not include an extension of the ITC or PTC. However, we believe the Build Back Better legislation will be passed, which should provide additional tailwinds to this initiative. It is still early days, but we currently see solar and potentially wind generation being utilized in our greening playbook. The next few slides focus on renewable growth.
Investor Day 2020 was the first time we provided visibility into our greenfield pipeline. The purpose of the greenfield pipeline is to feed the 5-year capital plan. This year, we converted six projects from the greenfield pipeline to that capital plan. Combined, these projects represent approximately 640 MW. We are very pleased with this level of initial greenfield success. The 5-year capital plan anticipates converting an additional 975 MW from the greenfield pipeline into the 5-year capital plan. Based on our long-term development success, a strong demand for renewable energy, and the success of our greenfield pipeline in 2021, we believe 975 MW is conservative. Now for a quick walk through the greenfield pipeline. In January 2021, we had 3,400 MW greenfield pipeline.
We have converted approximately 640 from the greenfield pipeline, which left us with approximately 2,800 MW. We went to work on the fundamentals of development, securing land, advancing local relationships, advancing interconnection work, understanding customer needs, conducting baseline environmental studies on that 2,800 MW greenfield pipeline. We also prospected for new sites. This work had us adjust the expected project size for some sites up, some sites down as we refined them. We dropped some sites, and we qualified several new sites. Net, we added just over 1 GW to the greenfield pipeline. The result is a greenfield pipeline that has grown by 13% and converted 640 MW of projects to our 5-year capital plan.
As mentioned earlier, given the strong fundamentals behind renewables, we intend to continue to invest and grow our prospective greenfield pipeline, which should lead to even more additions to the capital plan at our next Investor Day. I'll provide a quick overview of the six projects converted from the greenfield pipeline in 2021. The first, Riverbend, is a wind project and represents an opportunity to capitalize on strong customer interest in this project location and build on our success in mid-Michigan with Deerfield I and Deerfield II, which is currently under construction. The second project is Blue Violet. It is a combined wind and solar project. In addition to the solar and wind footprint, we see value in adding storage to this location and have recently submitted a storage interconnection application. We believe storage economics will become increasingly attractive in PJM as the penetration of renewable generation increases.
The remaining four projects were developed in partnership with Chevron. As Arun indicated, we entered into the Chevron partnership in July 2020. By December 2021, we jointly advanced four projects with a combined capacity of 120 MW. Algonquin and Chevron have both agreed that these projects have reached the final investment decision. We are very pleased to have a productive working relationship with our partner, Chevron, and we feel that this initial success of four projects has demonstrated the strength of that partnership. We are also pleased that both parties remain committed to implementing the full growth plan, and we are reviewing ways to expand the relationship, including additional technologies beyond wind and solar and additional Chevron sites.
Understanding the needs of our growing base of large renewable energy buyers allows us to focus on markets that are important to key customers.
Arun mentioned a number of our major customers, including Kimberly-Clark, General Mills, Microsoft, JP Morgan, and Facebook, currently Meta. Meta signed a PPA with our Altavista Solar project in Virginia. As an example, this relationship allows us to better understand the needs of customers with large data center loads in Virginia. Collectively, our stable of customers provide us with valuable insight into which markets we should focus on for our greenfield development. This slide provides an overview of our prospective greenfield generation pipeline and our prospective greenfield storage pipeline, which is focused on customer needs. The pie charts on the left of the slide demonstrate the allocation of projects by region. To avoid confusion, the Chevron projects are represented as a region. The top pie chart is the greenfield generation pipeline. The bottom pie chart is the greenfield battery storage pipeline.
The size of the storage projects are based on storage capacity and megawatt-hours. Generally, we are looking at 4 hours of storage for most of our projects. As you can see from the pie charts, our largest region is PJM for both generation and storage. The next largest region from a generation capacity perspective is MISO. I would point out the New York portion of the generation pie, as New York projects are attractive due to the presence of long-term NYSERDA contracts and a strong push for renewables in the state. The bar charts on the right demonstrate the anticipated commercial operation dates. The purple or dark blue bars represent 100% of the greenfield pipeline allocated by expected COD. The smaller light blue bars represent 30% of the dark bars, assuming a 30% development success rate. Moving to construction.
We have successfully scaled our construction program from a one or two project per year pace several years ago to having nine utility-scale projects under active construction in 2021, in addition to the community solar initiative. Some projects like Maverick Creek reached COD early in the year. Others, like Blue Hill, just completed the final turbine blade lift in the last month. Two points I'd like to make. The number of projects developed from the first cup of coffee with landowners identified as greenfield. These include Blue Hill, Shady Oaks II , Sandy Ridge 2 , and EDR, which was jointly developed with a local partner. Secondly, the construction platform that is capable of scale will allow our greenfield pipeline to capture the value of going through and de-risking construction. In summary, Algonquin's growth plans are not focused on a single project or acquisition.
Our focus is on building scale for two platforms, the regulated growth platform and the renewable platform. The platform on the regulated side allows us to make recurring organic investments in our growing utility footprint, complete large and small acquisitions with a disciplined approach, and utilize our greening playbook. The platform on the renewable side has delivered additions to our 5-year capital plan, expanded the greenfield pipeline, and advanced construction on over 1,000 MW of renewable projects. Both growth platforms are positioned to leverage the political, economic, and social momentum to decarbonize. Before Johnny speaks to operational excellence, we are going to share a short video on Greening the Fleet. Thank you for listening to our growth story.
The Asbury Power Plant, located in Jasper County, Missouri, made the transition from coal to wind power as part of Liberty's ongoing commitment to clean air, lower emissions, and renewable energy.
My name is Chuck Sargent. I've been with Liberty for a little over 18 years now. The purpose of wind farms is to produce energy. The wind farms allow us to do that without the added cost of fuel maintenance and fuel purchases. From the emission side, if you're not burning any fuels, then we don't have any air emissions associated with that.
My name's David Eaton, and I've worked for Empire and Liberty for 35 years. It is extremely exciting to be part of this project. These are the first wind farms that we've had in southwest Missouri. This particular site, Kings Point, with our budgeted wind during the year, will power approximately 49,000 homes if they each have an average of 1,000 kWh usage per month. It's very exciting to see this much generation go up with increasing green energy. We don't have fuel costs, and we don't have emissions to worry about. We're excited to be a part of that.
The cost savings alone over the long haul is what we're after with these wind turbines, and it will allow us to produce the energy needed at a lower rate cost for long term. I think it shows the direction the industry is going and the way of energy savings, cost savings down the road will be, and it's good to be putting the first step forward with that.
Good morning. It's good to be with you again today. As you've heard from Jeff, we have an exciting growth agenda ahead of us. I'm gonna provide more details on our optimizing performance playbook that you heard Arun reference earlier, and how our focus on operational excellence and what matters most to our customers creates incremental value that benefits our customers, the communities we serve, and of course, our investors. Each asset we bring on, we benchmark and compare against our existing assets, looking for opportunities to learn and where we can apply previous learnings. This allows us to continuously improve, and as a result, customer outcomes and business performance generally improve as a result of being within the Algonquin portfolio. This chart gives a great overview of how we have delivered sustained improvements against some of our key metrics. I'm particularly proud of our safety performance.
Our employees are our most critical asset, and we want them to go home safely to their families each evening. In 2021, we're on track to not have a single lost time injury across our whole North American business. To put this in context, this equates to over 9.1 million hours of work since our last lost time injury. This is truly fantastic performance that we remain laser-focused on sustaining. We know that reliability is incredibly important to our customers, whatever the commodity. You can see here how over time we've continued to improve and reduce our average electric outage frequency rate by approximately 20% over the last 5 years. I'm pleased with our progress on J.D. Power customer satisfaction scores too.
For those that aren't close to how this metric is measured, there are some elements around brand recognition that benefit larger utilities that are able to do more advertising. Despite our smaller size, we are making good progress. From where we first measured ourselves back in 2017, we've seen a 60-point improvement. As we deploy our customer first digital customer engagement platform, we can only expect this to continue to increase. The key message I wanna leave you with is that assets under our management have generally performed better than they did before we acquired them. As a result, we're able to provide better service to our customers and to our investors, and we look to do that year over year over year. Despite the operational improvements we've seen this year, we have had a couple of challenges.
On the renewable side, we've seen the average wind speeds at our U.S. sites down 11% versus the expected long run averages. As you can see on the chart on the left, this has had a much broader industry impact than just for us. We've had other weather challenges too on our regulated business with a number of winter months warmer than normal, impacting our non-decoupled utilities in Missouri and New Brunswick. We also saw Winter Storm Uri back in February that impacted a number of our regulated and renewable assets that were in its path. On the right, you can see that there's also been congestion challenges with a new generic transmission constraint being announced that's impacted the basis costs at our Texas coastal wind facilities. As you may remember, we purchased a 51% ownership of these four assets in 2021.
It's been good to see the market respond with the acceleration of a number of grid projects being brought forwards that now have ERCOT approval and have been designated critical as requested by the Public Utility Commission of Texas. These projects should make this a transient impact for us. The impacts of these challenges that we have seen this year have been attenuated by our multi-jurisdictional model, showing just another of the benefits that it brings us. Focusing on our customer needs, we intend to invest $4.6 billion of organic investment in our water, gas, and electric utilities over the next 5 years. $3.8 billion of these dollars are expected in core safety and reliability investments. This will involve the replacing of aging infrastructure, including pipes, wires, and poles, in an effort to ensure we can continue to provide safe and reliable service.
These investments are on top of the greening the fleet initiatives that you heard Jeff mention earlier. It is these investments, alongside our culture and focus on performance, that is bringing the biggest driver of the customer improvements that you saw on my first slide. When you combine these investments with the pending acquisition of New York American Water and Kentucky Power, we're expecting to almost double our rate base in the next 5 years. That's a rate-based CAGR growth of 14.6% or 6.5% on a pro forma basis for the new acquisitions.
A growing area of investment for us is in modernizing our systems to meet future customer needs in a rapidly decarbonizing world through grid modernization, community solar, advanced metering, EV charging infrastructure, and microgrids, as well as deploying a digital customer engagement platform, making it easier for our customers to access their data and to do business with us. It's important to note that these are not just investments in our electric utilities, as we expect to make similar investments in our water and gas utilities too. This slide has some examples of the projects we completed in 2021.
I won't take you through them individually, but in our 5-year capital plan, we have $800 million of the $4.6 billion of organic regulated investment that I referred to in the last slide, that are tagged to investments like these across all our jurisdictions and modalities. Alongside safety and reliability, affordability is a key priority for our customers, and so for us. As we deploy this necessary capital, we keep a very close eye on managing our operating costs. This is always important. However, with the increases that we're seeing on gas prices and the knock-on impact to our customer bills, it's more important than ever. Our adjusted O&M per customer has decreased at a 1% CAGR over the last 8 years. This is even more significant when you map that against the U.S.
inflation rate, which has increased at around 1.5% a year over that same timeframe. You can see over the last 8 years, we've brought down our O&M efficiency ratio. That's our operating cost as a proportion of our revenues from 66% back in 2012 to around 40% in 2020, and we're looking to bring that down further to around 35% by 2026. This means that while we are looking to grow our rate base at over 14% a year, we expect an annual customer bill impact to be around 3% year-over-year in and around the forecasted inflation rates for the same time period. Our multi-jurisdictional model also helps on the regulatory front.
As we deploy this capital necessary for meeting customer needs, it's important for us to leverage our regulatory experience across our jurisdictions to minimize regulatory lag, reducing the impact on our earnings, and so making it easier for us to source the necessary capital for these customer-focused investments. You can see on the chart that we've highlighted some of the key mechanisms in our larger jurisdictions. Revenue assurance or decoupling, accelerated recovery through trackers such as our Gas System Enhancement Plan, or GSEP, CapEx tracker in Massachusetts, or plant in-service accounting mechanism, or PSAs, not pizza, as I've heard some say in Missouri, or post-test year recovery, either through true-ups or forward test years. Each of the green ticks shows mechanisms we have secured over time, leveraging our experience in the other jurisdictions.
It is these mechanisms, combined with our careful focus on timing rate cases around major capital deployments, that's allowed us to minimize our regulatory lag. You can see on the chart that we have an average lag of around 4 months, which is around 60% lower than the industry average for filing rate cases. These mechanisms have helped us to get individual utilities to deliver their allowed returns, but it's really our portfolio that's allowed us to deliver a more stable set of returns, which in turn makes it easier for us to access capital to continue to deliver for our customers. If you think about a hypothetical utility with a historic test year, you would expect following a fair rate case outcome, that it would be earning around its allowed return.
As the years go on and you deploy the necessary capital, that those returns would erode year over year through to the next rate case. You can imagine if you had three similar utilities filing over a 3-year cycle, their test years were phased a year apart, then when you combine the collective returns in any given year, that the average would be pretty constant from year to year, even though in each year, each utility's returns would be a different point in the return cycle. With our multiple jurisdictions, we have this effect happen as rate cases are dispersed across a number of different years, smoothing out the natural variability of returns of any one utility. As you can see on the chart here, over the last 5 years, we've consistently delivered close to our allowed returns on average across the portfolio.
You'll see a slight dip in 2020, which was a test year in our biggest utility with our biggest year of capital deployment to date. However, overall, you can see that our approach has been effective in sustaining solid returns while at the same time deploying nearly $4 billion of much-needed organic capital into our regulated utilities. While the portfolio approach is valuable, we also do need to focus on the individual utilities, and this slide gives case studies of the two previously acquired electric utilities Arun referenced earlier. On the left, we have our Granite State utility in New Hampshire, where we improved the average pre-acquisition returns of close to zero to getting close to on average, delivering our allowed returns.
On the right, you can see Empire in Missouri, which is a similar asset base to Kentucky Power, where we were able to increase average returns by around 20% and close to our allowed returns. In both cases, the improved returns have been measured from the first year of new rates post-acquisition. To deliver these results, we used the same playbook. Firstly, securing additional regulatory mechanisms such as decoupling and property tax trackers in New Hampshire and plant and service accounting or PSA in Empire. Secondly, leveraging our local model that keeps us aligned with local customer and regulatory needs with clear P&L accountability, benchmarking with our other jurisdictions, and keeping a close eye on managing our costs and living within our rate case allowances.
Finally, carefully timing our rate filings to align with our major capital projects and to try to minimize regulatory lag, not just for each individual utility, but across the portfolio. 2022 is gonna be an important year for us from an integration perspective. As context, in 2020 we had our first full year of St. Lawrence Gas and New Brunswick Gas. In 2021, we had our first full years with the Bermuda Electric Light Company and Essal in Chile, together bringing on nearly 300,000 new customer connections. I'm pleased to share that they have both had solid first years in line with our expectations. With every acquisition, we get to further refine and improve our approach.
As we look forward to 2022, subject to successful regulatory processes, we're excited to bring New York American Water and Kentucky Power into the team. For New York American Water, we filed our joint proposal with 6 of 7 intervenor support. Hearings were held on November 16, and it's on the New York PSC's agenda for this Thursday. We expect to close by January 3rd, 2022, bringing on an expected rate base of around $400 million. You heard earlier a fair bit around Kentucky Power. Like New York, we've been really impressed by the local team and are really excited about them joining us. We're due to file for approval with the commission in the next few weeks, and we're expecting this to close in mid-2022, bringing on an estimated $2.2 billion of rate base.
When combined with New York American Water, over 300,000 customer connections and material growth in our water and electric businesses. Both of these utilities are underearning today, and so we'll be looking to utilize the same playbook that I just took you through, and we have confidence that we'll be able to have similar successes. We'll be looking to implement new regulatory mechanisms such as a forward-looking test here in Kentucky, which is something that we're allowed in Kentucky but has yet to be utilized by Kentucky Power. In both New York and Kentucky, we'll be looking to file our first rate cases in 2023, with new rates expected in 2024, providing us the opportunity to get getting closer to meeting our allowed returns.
On the local side, we're moving proven senior leaders from our existing utility businesses to be the president of New York American Water and to lead the transition in Kentucky. These roles are expected to help with cultural integration, building local relationships in the community, and bringing that local focus to living within our regulatory allowances. From our first utility acquisition to reaching our first million customer connections in 2020 took nearly 20 years. With Kentucky Power and New York American Water, that will bring our total customer connection count up to approximately 1.4 million. I think we're on track to march to our second million customer connections far quicker than our first. In conclusion, I hope that you've heard that delivering for our customers through operational excellence is a real driver of value.
We were expecting to invest $4.6 billion while minimizing the impact to customer bills that our playbook of securing fair regulatory mechanisms, leveraging our multi-jurisdictional model with a local approach, and timing our rate case filings around capital deployments helps us to deliver solid and stable returns while meeting customer needs. We've got a solid track record of integrating acquisitions and are poised to successfully deliver on New York American Water and Kentucky Power in 2022. With that, we now have a short video on our net zero commitment, which will be followed by George Trisic, our Chief Sustainability Officer, to talk about how we create value through our approach to sustainability.
The world keeps evolving, and we are evolving with it. We're moving ahead and building pathways to a cleaner, greener future for our children and for generations to come. Sustaining energy and water for life, this purpose drives us to find ways to keep getting better, to keep innovating and improving as we work towards a common future. Our purpose has driven us since we opened our doors more than three decades ago. Since then, we've brought online over 2.8 GW of renewable generation and doubled our renewable footprint in the last 2 years. Our carbon intensity is one of the lowest in the industry. We're proud of our results so far. Our momentum is strong, and we're just getting started.
Our net zero commitment is just one more step on our path toward a cleaner future, and it reflects our leadership role in the transition to a low carbon economy and acting as a catalyst for decarbonization. We've got a plan. We're replacing fossil generation with clean energy, investing in innovative technologies like microgrids and energy storage, upgrading aging infrastructure, and converting our fleet vehicles to cleaner fuel sources. With the right steps, we will reach our goal, powered by our people and inspired by our customers and communities. It will take innovation, teamwork, and the pioneering spirit we've shown since day one to reach net zero tomorrow so that future generations will feel the warmth, hear the flow, and see the light. That's our purpose and our promise.
Good morning. I'm pleased to have the opportunity to speak to you today about one of Algonquin's key strategic pillars, sustainability. Algonquin started in the renewable energy business more than 30 years ago when we entered into the hydro business with our first small hydro dam project. We've come a long way from that time and now have more than 1,000 wind turbines and 1 million solar panels in operation, contributing to a cleaner energy future every day. We've made meaningful progress in driving sustainable business practices in each of our business lines, reducing our annual carbon emissions by more than 1 million metric tons relative to 2017 levels by implementing pipeline upgrades in our natural gas distribution business, resulting in total reduction of 1.5 million metric tons in the aggregate of methane emissions in that business over that same time period.
Last year, we were able to recharge about 2.4 million liters of water back into the water table and enabled the reuse of about 2.1 million liters of recycled water. Sustainability is not a top-down directive in our organization, but something embraced across all of our businesses by our employees. Through the work of regional sustainability councils, our employees drive grassroots initiatives locally in support of our sustainability strategy. Sustainability has not been a bandwagon we jumped on. It's been something we were doing well before the band started playing. This year, we further embedded sustainability into our business strategy by announcing our 2050 net zero carbon emissions target for our scope one and scope two emissions.
This target, approved by our board, is expected to serve as a strategic guardrail for our business groups and drive alignment across all of them for long-term planning and business strategy development. On a pathway to 2050, as we continue to refine our decarbonization initiatives, it's our intent to announce refreshed interim goals as we approach 2023, the end of the timeframe for our nine current interim ESG-linked goals that we announced in 2019. We've already achieved meaningful decarbonization of our business since 2017. During that timeframe, we have reduced our overall enterprise carbon emissions by 31%. Decarbonization of our business and the businesses of our customers underpins our 2050 net zero strategy, and we see this not only as a social imperative, but also as a significant value creation opportunity.
Let me share with you now some additional context around our net zero 2050 target. Before we announced this commitment, our sustainability team worked with our business units to review our current asset base and asset life cycles to get comfortable that we saw a credible path forward to achieving net zero by 2050 without the need to rely on any changes to existing regulatory policy or legislation, and without the need to bank on any new technology development or enhancements. This curve you see to the right is just a baseline curve for us.
As we continue to see dropping LCOE prices for renewable technologies, including battery storage, the commercialization and availability of new technology and emerging green fuels, and the development of supportive government and regulatory policies and programs, we expect to be able to further refine this baseline pathway to net zero and bend this decarbonization curve down even more. Algonquin has a proven and credible track record in greening our business and that of our customers. In fact, the impact that we've had on greening our customers' emissions by providing green energy through power purchase agreements represents an average of 2.4 million metric tons of CO2 emissions avoided annually based on our current efforts.
This, together with our own emission reductions in our business, represents the equivalent or nearly a million gas-powered vehicles being taken off the road each year, or the amount of carbon sequestration annually provided by 5.5 million acres of U.S. forest. At the same time, our decarbonization strategy has been a value creation strategy for our business and for our stakeholders. It has enabled over $1 billion of renewable generation investment. It has provided annual land lease and property tax contributions to the communities where we develop renewables projects of between $15 million-$18 million per year. It has also enabled a prospective greenfield pipeline of renewables of the size of 3,800 MW, as Jeff noted earlier.
It has also provided the opportunity to issue in the developing green financing markets and led to our inclusion in several ESG-focused stock market indices and investment funds. I'd like to now provide a quick update on the progress we've made on our current 2023 interim sustainability goals. To date, we have achieved three of our nine ESG goals, and we're making good progress on the remaining six. When you look at our environmental goals, we've exceeded our target for 1 million metric tons of CO2e emissions reductions in our existing asset base. We've made strong progress towards our goal to invest in at least an additional 2,000 MW of new renewable generation assets and achieve a mix of 75% renewable energy in our current power generation fleet.
Over the past two years, despite the challenges of the COVID pandemic, we will have successfully completed the largest renewable project construction program in our corporate history, reaching full commercial operations on an additional 1,400 MW of renewables. We've also been able to move our renewables mix from 45% of our generating fleet to 65%, a 44% improvement in three years. On our social goals, we are tracking to above market gender representation, both at our board and executive levels, and we're making strong progress in our talent development pipeline. We also continue on our journey towards top-quartile customer satisfaction and employee engagement scores. On the governance side, we've made progress with further embedding climate and sustainability targets in our incentive plans, both in our annual incentive and our long-term management incentive programs.
We continue to make improvements to the data set and scope of our ESG disclosures. This year in October, we published our 2021 sustainability report that you can find available on our website. In this year's report, we've increased our data disclosure level to achieve GRI comprehensive level disclosures, and we continued our alignment to leading ESG disclosure frameworks, SASB, TCFD, and the United Nations Sustainable Development Goals. New this year, for those of you who need access to our sustainability data, is our ESG data hub that's located on our website. There you can get access to our updated data a few months earlier than the publication of our annual sustainability report, as well as data tables presented in a user-friendly way for analysts that want data access.
It's no secret that data quality and assurance are becoming paramount, and over the past three years, we've been laying the groundwork to improve our data scope and quality and putting in place the business processes that should enable broader data audit and accuracy going forward. We use stakeholder engagement to determine which ESG frameworks and ratings are important to our stakeholders. This slide highlights the ratings that we've identified through those engagements. As an organization, we continue to focus on remaining a leader in sustainability and in demonstrating ongoing improvements in our sustainability plans, our efforts, and our disclosures. As our ratings relative to our respective peer groups demonstrate, this has been reflected. In closing, I'd like to leave you with a few key takeaways about Algonquin and sustainability.
First, we have a credible path to net zero emissions by 2050, with expected further decarbonization of both our existing businesses and our newly announced utility business acquisitions. This presents further value creation opportunities through continuing investments in rate base, renewables build-out, and opportunities for customer decarbonization. Secondly, we have an established credibility and a proven track record in greening the fleet and in decarbonizing utilities. Our efforts to date are reflected in our low carbon emissions intensity per revenue of 0.0013 of CO₂e for $1 of 2020 revenue. This represents the third lowest in our 16-member U.S. utilities peer group and said another way, you can think of every 2020 revenue dollar we earned as being at least 50% cleaner as compared to the average of that same peer group.
Finally, we remain committed to continuing our leadership in sustainable business practices and the decarbonization of our business. I want to thank you for this opportunity to update you on our sustainability achievements to date. Now, let me pass things along to Arthur Kacprzak, our Chief Financial Officer.
Thank you, George, and good morning, everyone. Great to be here with you this morning. I'm gonna spend the next several minutes discussing some financial considerations of all the initiatives we have discussed so far. I'll outline how we are thinking about our 5-year capital plan and how we expect that will contribute to driving long-term sustainable adjusted net earnings per share growth. I will also discuss our funding plans that are designed to maintain a strong and resilient balance sheet. Lastly, I'll provide our thoughts on 2022 adjusted net EPS, as well as our longer-term adjusted net EPS growth expectations. The capital plan in 2021 was the largest in Algonquin's history, having successfully deployed approximately $3.4 billion of capital on various growth initiatives on both sides of our businesses.
As we look forward into 2022 and beyond, we see a path to deploying approximately $12.4 billion of capital over the next 5 years, representing an additional $6.4 billion of new investments. Johnny and Jeff have already touched on the components of the capital plan earlier, and I'll discuss the impacts from this plan on our adjusted net EPS in a few minutes. However, as I think it's worthwhile to first reiterate that none of this capital growth is expected to occur at the expense of our balance sheet.
Before moving on to discuss the funding sources for our capital plan, let me touch on this important topic for a few minutes, starting with rating considerations. Algonquin is rated by S&P, Fitch, and DBRS, with all three rating agencies assigning a BB B rating, and we remain highly committed to maintaining these ratings in the long term. We believe that triple B credit rating optimizes our cost of capital, not only by providing for the issuance of cost-effective debt, but also reducing risk to our equity holders. To maintain this rating profile, we manage two main metrics. First, FFO to debt, which is the main governing financial metric. Over the last 3 years, this metric has averaged 15.5%, which is in line with our target of 15%-16% and maintains a buffer to the 14% long-term target set by S&P.
Second, we are focused on maintaining unadjusted EBITDA business mix at or above 70% from our regulated business. The pending acquisition of Kentucky Power is expected to shift this mix to almost 80% regulated, providing incremental headroom and flexibility. Moving on to our balance sheet. We target and maintain a well-capitalized and diversified balance sheet, providing for multiple sources of funding. Based on our latest reported numbers, equity or equity-like instruments accounted for 56% of total capitalization. Our shares are dual-listed on both the NYSE and TSX, allowing access to both the U.S. and Canadian markets. In Canada, we're included in the TSX 60 and S&P/TSX Clean Technology Index indices. This year, we expanded our equity sources through the issuance of green mandatory convertible equity units, which are expected to receive 100% equity credit from S&P.
To our knowledge, this was the first green mandatory convertible equity unit offering ever done, showcasing Algonquin's ongoing leadership and commitment to deploying sustainable capital to support sustainable initiatives. Hybrid securities account for 6% of our total capital. These securities typically receive 50% equity credit from the rating agencies and never convert to common equity. Finally, long-term debt accounts for 38% of total capital and consists primarily of senior unsecured notes issued by our renewable energy and regulated groups. Our balance sheet is supported by over $3.1 billion of committed credit facilities, providing available liquidity to satisfy expected near-term funding requirements. We benefit from the strong relationships we have built with our banking partners across North America and internationally, and have been fortunate to receive their significant support in maintaining the strong liquidity profile. Returning to our capital plan.
As I mentioned, we are expecting to invest over $12.4 billion into the renewable energy and regulated businesses over the next 5 years. This investment is expected to be funded by a combination of retained cash flows, debt, hybrid debt, and equity and equity-like instruments, staying in line with our current capitalization and, of course, credit ratings. In fact, our plan calls for further deleveraging of our balance sheet over the 5-year plan. The pie chart on the left shows the expected proportions for each funding source, and I'll touch on each briefly. Starting with retained cash. After payment of dividends, we expect that approximately $3 billion will be reinvested into the business and will satisfy about 25% of our funding needs. Moving on to debt, which we anticipate will account for the next 25%.
We have multiple debt sources on both the regulated and renewable sides of the business. The regulated side of the business raises debt primarily through a Holdco-level 144A debt platform, but we also access the private placement market for certain utilities. The renewable business sources debt primarily through its Holdco-level bond platform, but we can also source non-recourse financing for projects developed outside of the consolidated group. Moving on to hybrid debt, which we expect will solve for about $2.1 billion of our funding needs and continues to be a cost-effective source of capital for us. As mentioned, hybrid debt is expected to receive 50% equity credit from the rating agencies and never converts to common shares. This treatment is awarded if the equity quantity issued remains below certain thresholds.
We expect to have room to issue up to $1.5 billion of hybrid debt in 2022 and have a total capacity to issue up to $2.5 billion prior to the end of 2026. Moving on to equity and equity-like instruments. First, we have tax equity funding, which will continue to be an important source of equity for us and is expected to account for approximately $1 billion of our funding plan. I should note that this is not predicated on extension of the existing renewable tax credits, which is currently making its way through the U.S. legislative process. If these extensions are passed, tax equity funding may become an even more important funding source for us. Next, we have the DRIP and ATM programs, which allow for the issuance of a base level of equity per year in a cost-effective manner.
We expect that most of our common equity needs will be satisfied through these programs, accounting for up to $1.2 billion over the next 5 years or about $240 million per year on average. Lastly, we have asset recycling, mandatory convertible equity units, and discrete common equity issuance as a source of equity funding, accounting for approximately $2 billion of the funding needs. We look to optimize the proportion of these funding sources based on market conditions at the time. I should note that asset recycling is expected to form a greater proportion of our funding needs than has in the past, and I'll touch on this in a bit more detail next. In summary, we believe that we have a diverse and executable funding plan with limited reliance on common equity, which is expected to maintain and in fact strengthen our balance sheet.
now taking a deeper dive into the asset recycling topic. Arun has touched on how asset recycling can be viewed as not only a source of capital for us, but also an enabler to accelerate renewables development. We see an opportunity to sell down a portion of our current and future operating renewable generation assets to investors that have a low cost of capital and wish to make alternative sustainable investments. This in turn, would be expected to create the flywheel effect that Arun alluded to earlier, by increasing development to capture the higher upfront margins, de-risk the projects through construction and long-term offtake contracts, sell down to realize the development margins and create recurring management fees as operators of the assets.
Referring to the slide, we have shown an example of the potential value uplift that is created at various stages of development in proportion to the capital cost of the project. The example is intended to be illustrative and is not intended to be a midpoint valuation of our current portfolio as actual asset valuations will differ with various factors. However, as you can see, the eco-economics could be very compelling, and Algonquin is positioned to capture the entire value through its proven expertise and focus on the full development cycle. The value created prior to notice to proceed, meaning that offtake, permitting and interconnection have been secured, is about 6% of the total capital cost. Through our focus on greenfield development, we are poised to capture significant upside during these early phases of the project.
Although the risk of project failure is greater, the capital invested is low. For successful projects, Algonquin could capture a significant return on invested capital. Once the project is de-risked through construction, there is an expected additional value capture. This is a natural point where the project can be sold down, and as an operator of renewable assets, Algonquin is well-positioned to continue to earn ongoing management and operating fees. To summarize, asset recycling program could provide a number of advantages. On the funding side, the benefit, of course, is a reduction in future equity needs to fund our continued growth.
Selling down a portion of non-regulated renewable assets would also be expected to help maintain our credit rating business mix targets by reducing top-line earnings from this business while being able to expand our renewables development program at a higher pace and be able to capture more of that upfront value. By remaining operators of the assets, we would continue to expand our operating scale, which would drive further efficiencies while earning management fees. This initiative is still in the early stages, but we expect to provide further details throughout 2022. Turning now to what this all means for our 5-year adjusted net EPS expectations. Upon executing on the capital investment program and some of the other initiatives we have outlined today, we see our adjusted net EPS growing at an aggregate CAGR of 7%-9% over the next 5 years.
This is in line with the forecasted 8%-10% adjusted net EPS CAGR for the 2021-2025 period that we outlined last year's Investor Day. 2021 was our largest capital deployment year, and despite some challenges experienced with wind resources and weather, we expect adjusted net EPS to be at or around the lower end of our previously communicated range, representing double-digit adjusted net EPS growth over the prior year. Moving forward from 2021, we have several growth initiatives that are expected to continue to drive growth. The additions of New York American Water and Kentucky Power are expected to drive long-term EPS growth post-2022 as both acquisitions are anticipated to close next year. We expect to continue to drive value as we execute on our $3.6 billion capital plan focused on development, construction of renewable assets.
In fact, our plan sees a significant ramp-up on investments in greenfield development in the early years that is only conservatively reflected in the current plan. Previously, we indicated that spend on greenfield development would have a -$0.02 impact on our 2021 adjusted net EPS. I'm happy to say that investment appears to have been worth it. As Jeff has pointed out, we have converted approximately 640 MW of this pipeline into later stages of development and added approximately 1,100 MW of new prospective projects. We expect to continue to increase our investment in the upcoming years as we continue to expand our development group to take advantage of the tailwinds impacting the renewable sector. Our effective tax rate also continues to see benefit from increased investment in renewables.
Through additional opportunities to self-monetize renewable tax credits, we anticipate being able to maintain our effective tax rate in the 10%-12% range on average over the next 5 years. We do not expect to pay significant cash taxes during this period, with investments pushing out the cash horizon to 2026 and beyond. On top of the investment in these initiatives, we anticipate to continue to drive value by being prudent and efficient operators of our assets. With that in mind, allow me to take a deeper dive into the drivers of our adjusted net EPS growth. First, we have our foundational core investment. This represents growth from investment into our regulated rate base to continue to provide safe, reliable, and cost-effective service to our customers.
This is primarily driven by the $5.4 billion investment into our regulated group, not counting acquisitions. Second is the value we drive through operational expertise. This includes all initiatives that minimize regulatory lag and allow us to run closer to our allowed ROEs, including the optimizations of earnings from new acquisitions. This accounts for an estimated 2% of our growth trajectory. Lastly, an estimated 1%-3% is derived from the execution on our renewables capital plan and the renewables greenfield pipeline, and captures all of the value drivers from these initiatives. Lastly, I want to touch briefly on new acquisitions. You don't see that listed on the slide since we don't count on new acquisitions in our growth plans, but we are certainly no strangers to finding opportunities that we expect to be accretive to our shareholders.
Any new acquisition opportunities will be viewed on top of our long-term growth targets. In summary, the multiple pathways to achieve our stated growth expectations of between 7%-9% over the next 5 years gives us confidence on the execution of this plan. Now turning to provide a bit more detail on our 2022 adjusted net EPS expectations. 2022 is expected to be a transitional year for us. As a result, we expect adjusted net EPS for next year to be below our long-term 7%-9% growth expectations. The adjusted net EPS walk on the slide illustrates the various drivers. On the positive side, we expect to see our adjusted EPS growing from the 2021 investments and initiatives. We also anticipate the transitional weather factors that negatively impacted 2021 will reverse in 2022.
However, offsetting these positive growth factors are a few transitory items that are expected to negatively impact adjusted net EPS next year. We have two significant acquisitions anticipated to close in the year, New York American Water and Kentucky Power. We do not expect to see the full earnings potential from these utilities next year. Kentucky Power is expected to close in mid-2022, but since we have issued the common equity for that acquisition already, we expect to see dilutive impact from a partial year of operation, as well as initial lower rates of return. The New York American Water acquisition is likely to close in early 2022, but we expect this utility not to fully contribute to earnings during the year due to an initial period of underearning.
Lastly, we expect our adjusted net EPS to be negatively impacted by our investment in the Texas Coastal Wind facilities, primarily due to higher-than-expected basis costs resulting from the general transmission constraint that Johnny touched on earlier. The impact of this additional basis cost is expected to reverse in future years as new grid capacity is built. We remain focused in working with the asset operator in maintaining these impacts to the best extent possible. In summary, factoring in these transitory factors, we are forecasting adjusted net EPS in 2022 to be between $0.72 and $0.77, subject to certain assumptions, including normalized weather patterns and renewable energy production that is in line with long-term averages. The last item I wanted to touch on is our dividend outlook. Our dividend, of course, is at the discretion of our board.
However, I do want to provide some context with respect to how we think about our future dividend growth, which is consistent with the message delivered last year. First, we want to ensure sustainability of our dividend. To do that requires setting an appropriate long-term payout ratio target that is lower than adjusted net EPS. In setting this payout ratio target, we consider the sources of cash flow generation in our business, which currently comes from approximately 70% regulated utilities and 30% IPP businesses. Pure-play utility companies typically have payout ratios of about 60%-70% based on earnings. IPP businesses, however, typically set their payout ratios based on FFO. Combining these two parts points to a payout ratio of somewhere in the range of 80%-90% of normalized EPS, which we believe is a long-term sustainable target for Algonquin.
I want to stress that the payout ratio outline is a long-term target, and we continue to view dividend growth as an important part of the total return we provide our shareholders. In conclusion, I hope you heard that we have a highly visible 5-year capital plan with a large portion expected to be spent on organic investments, which are anticipated to increase our rate base to $11.5 billion over the same time period. We have diverse sources of capital to fund the capital plan, including the compelling value proposition of asset recycling that I spoke in detail about. However, this is all underpinned with our ongoing commitment to maintaining an investment-grade balance sheet. We believe that 2022 will be a transitional year. However, we still expect to deliver year-over-year adjusted net EPS growth.
Our 5-year projected adjusted net EPS CAGR growth remains intact at 7%-9%. With that, I'll turn it over to Arun for some closing remarks. Arun?
Thank you, Arthur. I want to leave you with our key messages on the Algonquin investment thesis that I hope came up through during this morning's presentations. First, we have a track record of providing outstanding long-term total shareholder returns. Second, we have multiple growth levers across both our regulated and renewable businesses that give us high confidence in the execution of our 2022-2026 capital plan. Third, with our mix of regulated and renewables, we have a very resilient business with a strong balance sheet. We are leaders in sustainability as measured by our carbon intensity. Before we open the line for questions, I remain very excited that both of Algonquin's regulated and renewables businesses are well-aligned with the global push towards decarbonization and are well-positioned to benefit from this transformation.
In summary. Our three strategic pillars of growth, operational excellence, and sustainability will be the key foundations as we continue to build the business and work to deliver long-term value to our shareholders. With that, I will turn the call over to the operator for any questions from those on the line.
To ask a question, you will need to press star one on your telephone keypad. Please limit your questions to one question and a follow-up question. For the audience members joining the Q&A portion of this event via conference call, please mute your webcast audio so there is no interference when asking a question on the conference line. We'll pause for a moment to compile the Q&A roster.
Your first question comes from the line of Nelson Ng of RBC.
Great. Thanks. Good morning, everyone. My first question just relates to the EPS growth guidance of 7%-9%. I know you said it's consistent with the 8%-10% in the previous year. But with your capital plan growing to just over $12 billion, like should the EPS growth guidance be a little higher or are you just being a bit conservative and I think Arun mentioned last year that you're more confident on hitting the higher end of the growth range. Is that still the case for this EPS growth guidance?
Nelson, good morning, and thanks for the question. Look, last year Investor Day, we had clearly missed that 2021 was gonna be a very front-loaded growth year, right? We've already deployed $3.4 billion of CapEx by the end of Q3. We had always messed with that 8%-10% was because of that front-loaded capital deployment, and that subsequent years would actually be more in the 7%-9% range. We are sticking with that 7%-9% long-term guidance.
I will also repeat what I said last year, which was that, you know, we are moving more towards a conservative guidance, so that we have more opportunities for upsides for our guidance than perhaps earlier years.
Okay, thanks for the clarification. Just my 1 follow-up question is on the RNG acquisition. You mentioned that you acquired a company with, I think, two operating assets and four under construction and a few more under development. Can you just give some color as to the acquisition costs and also the RNG production capacity of the two assets and also the four that's under construction?
Sure. Let me give a little bit of context, and then I'll turn it over to Jeff for more details here. Look, first of all, one of our different growth levers, renewable natural gas is certainly one of those. Last year, I had basically said that we are looking at renewable natural gas opportunities. By this time of Investor Day, I can tell you that we have filed applications in three of our regulated businesses. We have a pipeline of development projects across each one of our gas LDCs.
We really wanted to make sure that we also deployed capital and you know, learned more about the RNG business in a constructive way on the renewable side of the business as well. We're very excited about Wisconsin because Wisconsin actually represents, after California, the largest addressable opportunity in terms of RNG. This we regard pretty much as a platform opportunity to grow RNG on the renewable side of the business. Jeff, why don't you give more details on that transaction?
Yeah, no, happy to, and thanks for the question, Sean. It is a small acquisition. The project in total is about $20 million once we have the four sites up and operating. It's actually much more about the platform than it is about the individual projects. Just to clarify, they currently have four projects, two that are just hitting operations, and two that are under development. Our intent is to expand that to have 16 additional sites within the next 5 years from that platform. That gives you a little bit of an idea on the context.
Thanks, Jeff. Can I just ask a clarification? Are you guys self-supplying RNG? Is that the intent or are you looking to essentially develop the projects and sell to the market and sell the credits in the market?
Yeah. We are looking to develop the projects, and then sell the RNG in the market.
Okay, thanks. I'll get back to que .
Your next question comes from the line of Sean Steuart of TD Securities.
Thank you. Good morning, everyone, and thanks for all the work putting the event together. First question, I wanted to follow up on Nelson's question with respect to your 5-year EPS growth target. I appreciate, Arun, that you're taking maybe a more conservative approach to that guidance than was the case previously. Even not just year-over-year from what you guys guided towards last year, but over the last 2 years, we've seen a deceleration in that growth trend.
I'm wondering if you can speak to some of that compression, how much of that is attributable to the company reaching a mature stage and with the scale difficult to grow as quickly, how much of it is compression on non-regulated development returns, any other factors that are feeding into that general trend of slower EPS growth over time?
Sure. Sean, the first thing I would push back on perhaps is the term used, which is deceleration, right? If you look at the 2021-2025 capital plan of $9.4 billion, and we've already deployed $3.4 billion in the first three quarters. In fact, the $12.4 billion plan for 2022-2026 represents an addition of $6.4 billion of additional capital deployment over the next 5 years.
On top of that, I think you should keep in mind what we talked about on the renewable side of the business, the once in a generation opportunity we see in front of us to really accelerate on the renewable side of the business as well. You look at our organic growth on the regulated side, last year, I believe we said somewhere in the range of $800 million a year. This year, we're saying more somewhere in the range of $800 million-$1.2 billion a year of organic growth. All in all, I don't see any deceleration.
Now, as we obviously get larger, I mean, Kentucky Power would be the largest transaction on the regulated side for us, for example. Obviously, there is the law of numbers, and so perhaps you know, we may be seeing some impacts of that in terms of the 7%-9% CAGR. But again, I will stress that we don't see that as a change from last year's guidance of 8%-10%. We're you know, given all of the growth levers we have, we remain very confident we're gonna be able to hit that you know, guidance range. I don't know, Arthur, did you have anything to add to that?
No, Arun, I think you covered it well. I mean, I think the guidance that we provided this year is consistent with the guidance last year. We're still within the range, even with the additional additions to the capital plan. We stay within 7%-9%. Again, we view that as a very doable target for us. Then that's one of the reasons actually we've outlined the pathways to growth on how that actually stacks up for us on an ongoing prospective basis.
Okay, understood. Second question, with respect to asset recycling, becoming a larger portion of the mix, should we read that as this would be strictly Algonquin's organic pipeline, or does Atlantica factor into that as well?
Look, you know, we're always looking for opportunities to maximize shareholder value, right? I would never take anything off the table. At the same time, you know, our plans currently that we are showing you today at Investor Day is really around the renewable business and the asset recycling on that part of the business. Obviously, if doing something in Atlantica is much more accretive to our shareholders, like I keep on saying, nothing is off the table, but you know, we are currently laser-focused on the asset recycling on the renewable side of the business for now.
Okay. That's all I have for now. Thank you very much.
Okay. Thanks, Sean.
Next question. Your next question comes from the line of Rich Sunderland of J.P. Morgan.
Hi, good morning. Thanks for taking my questions here. Just, you know, maybe starting with the Texas Coastal Wind, can you quantify that drag to 2022 and then speak a little bit more to the timing for normalization over the planned period, or I guess, when the transmission will get built out and reduce that hit to earnings?
Great question, Rich, and I'll turn that over to Johnny to respond.
Yeah, good morning, Rich. I guess as ever with the grid, there are additions both in terms of supply, transmission, and demand all the way through. It's probably we always expect there to be a degree of congestion as part of how we model out these projects. It is a little bit larger than we expected. If you look at the approved projects already going through the ERCOT process, there's transmission already under construction, and so we're expecting that to come online in the next year or so.
As we think about certainly the plan period, we're expecting this to be mitigated certainly by the end of it. Exactly how that's gonna play out through the plan period, you know, we'll have to wait and see and look to mitigate that as we go through, as best we can.
I think, Rich, the, on the positive side, the ERCOT board has in fact already approved plans to strengthen the grid connectivity in that region to actually take out, you know, that basis risk that Johnny just talked about. That is on the positive side.
Thanks for the color there. For my second question, thinking about the regulated earned returns and the range of that gray bar on your slide, back on slide 42, can you lay out a little bit more about where you see that trending over the course of the plan period? You know, or maybe to put it more simply, just do you expect to get to the high end of the range from the low end currently, you know, by the end? Kind of what are the steps and risks to achieving that thinking about, I guess, the Kentucky forward test year and other factors? Thank you.
Hey, Rich, I actually don't have the slide in front of me. I think you are referring to that illustrative slide that shows the 4% and the 2% and the 1%-3% for renewables. Is that the right slide you're referring to?
I'm also thinking about the slide with the trends in 2016 of the utility returns and then the dip in 2020 that you bounced off in 2021.
Okay. Got it. Okay. Johnny, why don't you take that one?
Yeah. For clarity, Rich, I mean, the gray bar is really covering the range of allowed returns that we have today across our various utilities. You'll have seen, I think, on the prior slide, on average, our allowed returns today across all of our utilities are at about 9.5%. If you look at that last 5-year period, on average, our delivered returns have been 9.4%, so incredibly close to what our allowed returns are on average. That remains our sort of goal going forwards and certainly through to the end of the plan period.
Thanks, Johnny, for remembering the slide numbers.
Great. Thanks for the color.
Thanks, Rich.
Your next question comes from the line of Rupert Merer of National Bank.
Good morning, everyone. Thanks for taking the questions.
Good morning, Rupert.
If I can go back to the EPS growth forecast, 7%-9%, what's the starting point for that? Will that be the actual EPS for 2021 or more of a normalized level? Can you remind us maybe what the normalized level would be if that's still relevant?
Great question. Arthur, do you wanna take that?
Sure. Great. Hey, Rupert, how are you? We are starting that 7%-9% off our guidance range that we've put forth. We are starting that off the bottom range of our guidance. Actually, it actually comes out to the same range if you started off the bottom or the mid part of the guidance.
Okay, great. Is there a baseline assumption on equity issuance or asset recycling that's baked into the forecast?
We've outlined our sources of capital. If you refer back to that chart where we've looked at the different sources of equity capital, we have put in about $1 billion tax equity. We put in $1.2 billion or so over the next 5 years, ATM and DRIP. Then we have a slice of about $2 billion for various sources, including asset recycling, mandatories, and common equity. Like I said in my remarks, we'll be looking to optimize around that $2 billion. We haven't shared exactly how that's gonna break out over the next 5 years. As I said, asset recycling is probably going to be a larger part than it has been in the past.
Okay, great. Secondly, how does inflation feed into your forecasts, looking forward? You mentioned you've had this 1% CAGR and a reduction in operating costs. How do you see that playing out in the future? If you can talk about any impacts you're seeing on construction costs or timing of investment related to supply chain issues as well.
Well, maybe I'll start out and then look around the table to see if anybody wants to add color. Yes, we have seen impacts on inflation on the renewable side of the business, as supply chain impacts and so on and so forth. However, the modus operandi we have is basically firming up both, you know, supply agreements and our EPC contracts. And once they're finalized, they're obviously fixed price contracts, right? Now, on the other side of the ledger, we obviously also do long-term offtake contracts, and we make sure that those are fixed, obviously fixed contracts as well.
Now the, w hat we try to make sure is negotiate those two sides of the agreements as close together as possible so that there's very little daylight that can impact us from an inflation perspective, right? With that strategy, we've been able to continue to preserve our returns. We have seen as with inflation on the supply side, offtake pricings increases as well. Now on the regulated side of the business, you know, in theory, inflationary pressures should be, you know, cost pass-throughs, right? Although, you know, we remain very laser focused on our customer rates, for example. I don't know if folks have any further color to add to that.
From the renewables side, I'd say you covered it well, so maybe over to you, Johnny, if you've got comments on the reg side.
Yeah, I mean, I think, as you've seen, historically, we have taken a very close eye on managing our operating costs to try and create room in the bill for the investment program whilst managing affordability. As you sort of see that O&M efficiency target through to 2026, you can see that we're looking to bring it down further from where we are today. We're absolutely laser focused on managing the cost for our customers.
Great. Well, thank you for the call. I'll get back in que .
Thank you, Rupert.
Your next question comes from the line of Naji Baydoun of iA Capital Markets.
Hi, good morning. I just wanted to start off with a question on the funding plan. Obviously, it makes room for a lot of hybrid issuance. If we think about that part of your financing plan versus previous years, it kind of implies a $1.5 billion incremental hybrid capacity. I'm just wondering if you can talk about if that's how you're thinking about financing the Kentucky Power acquisition, and would assets there be more geared towards new renewables. Is that how we should be thinking about the financing plan?
Arthur.
Hi, Naji. Great question. Look, I mean, the funding is, at the end of the day, fungible, right? I mean, at the end of the day, it all comes into one bucket. Maybe just touching a bit on the hybrid market. Look, the hybrid market is very attractive right now. You're seeing yields out there in about 4% or so. It's a very attractive cost of capital for us, and we've got room in our capital structure for it. It's certainly a market that we wanna continue to access. You know, again, given the yields right now, it would be prudent for us to do so.
Okay. Maybe a question on the greenfield investments. You're adding about 640 MW today, and you're expecting to add, you know, close to another 1 GW going forward. Is that sort of the pace of investments if we think about it, you know, on an average annualized basis that you expect to achieve going forward on the renewable side?
Jeff, you wanna take that?
Yeah, sure. That's a pace that we're very comfortable with, but we're an ambitious group, and we would always hope to exceed that. We think the market opportunity and specifically, if the Build Back Better legislation comes through, that there's a great opportunity to do more.
I would say the 600 MW that you saw from that greenfield pipeline coming into base is probably more like, you know, base case. When we talk about, you know, once in a generation opportunity to really accelerate, we believe we can do better.
Okay. Got it. I'll leave it at that. Thank you.
Thanks, Naji.
Your next question comes from the line of Julien Dumoulin-Smith of Bank of America Merrill Lynch.
Hey, thanks for all the details, team. I really appreciate the time. Well done. Perhaps if I could kick it off here, just coming back to the dividend conversation just briefly. Just wanted to understand how you think about the evolution of your company. I heard the comments about payout ratio, and I was thinking earlier, if I recall right, you kind of compared yourself versus a utility now. Is this kind of an evolution in how you think about yourselves, in comping yourselves increasingly versus kind of yield vehicles and renewable vehicles at large, like, say, Atlantica, as you think about this higher payout?
Hey, Julien, how are you? Look, we have talked about it quite a bit in past investor calls and in other forums as well. I think, Arthur, do you wanna take that?
Sure. No, in terms of the dividend, hey, Julien. Look, I mean, our messaging remains consistent, kind of what we thought of ourselves as last year. Look, we're a mix of a utility and an IPP business. Our dividend is reflective of that, right? We've got a portion of our business and a group of our shareholders that hold us for various reasons, one of which is, you know, a dividend that has an attractive yield. I don't know if that's responsive to you in a way.
It's departing a little bit from utility to be more of a hybrid, it seems like. Actually, maybe more germane as I think about it here, just as you think about the earnings trajectory, you know, 2021 versus 2022, you know, I very much appreciate the dynamics that you very explicitly threw. Can you kind of give us a little bit of a sense on 2023 here? It sounds like, you know, again, if I were to repeat the factors back to you, many of those kind of flip in the other direction in 2023. Is it fair to think that you'd be ahead of shall we call your ratable earnings growth plan in 2023 as many of those kinda kick in, if you will?
Look, 2023 is, again, we're not providing detailed guidance at this stage. Look, as we outlined, some of these factors are gonna definitely reverse in 2023. We'll contribute to 2023 earnings. It's, again, 2022 is a transitional year for us with, again, with the two acquisitions. Like we mentioned, Kentucky Power, for example, we view that as, in 2023, as an acquisition that we expect to be flat or slightly accretive for us. You can take that as well into consideration. We'll see a lot of these factors continuing to reverse.
Got it. I know you talked about financing. I just wanna push a little bit further. How much better than issuing equity could, you know, perhaps some of these financing alternatives look like in terms of, should we say like PE equivalent, you know, issue and metrics, if that's a fair way to ask it, right? Because there's a lot of different ways that you could raise this capital. Just in terms of how accretive it is versus issuing stock today, you know, how much better could it be under what the various plans that you're looking at?
Yeah. That's a good question. I mean, in terms of us, as we kinda think about issuing equity versus of the other sources, we do really look at it on a pecking order of accretion. Look, I mean, like I said, hybrids right now are actually quite accretive to us. I mean, I would say the break-even kind of yield that we look at from a hybrid perspective is closer to about 7.5% yield, and we're seeing yields right now are at about 4% or so, 4%-5%. It's certainly an accretive to issuing common equity. Others, it really depends on the market at the time.
Got it. Fair enough. The baseline for the growth of EPS, just the starting point, just to clarify that. I apologize, given the slides scrolling?
The baseline, I would say, look, if you look at the equity funding plan, I would say a base level of equity is that $1.2 billion that we see, probably covered primarily through our DRIP and potentially some of our ATM as well. Then, after we'll assess obviously the funding sources for kind of the remaining $2 billion that we require.
Got it. The baseline for EPS CAGR is what in terms of, like, a stock point?
Baseline for the starting point for EPS CAGR? Sorry.
Yeah.
Like I answered, it's we're viewing it as a starting point at around the lower end of our this year's guidance.
Okay. All right. Sorry. Got it. I appreciate the clarity there.
Thanks, Julien.
Your next question comes from the line of Robert Hope of Scotiabank.
Hello, Arun. Just a question on the renewable growth project. Taking a look at the 2021 pipeline versus the 2020 pipeline. You know, just noticing a couple of the projects have kinda moved and scheduled. We've got Carvers Creek pushed out to 2025 and Shady Oaks out a little bit there as well. Can you maybe just talk about what you're seeing in terms of project scheduling and whether or not, you know, challenges in the supply chain are affecting some of the schedules here?
Let me just give an overall context, and then I'll turn it over to Jeff for a lot more detail, right? Look, when we show you a 5 -year plan, you know, last year it was front-loaded, $3.4 billion in 2021. The next year, again, it's front-loaded. We obviously have a very high degree of confidence. But I think what should give you confidence is that behind this 5-year plan sits a very large and robust pipeline of development projects. Now this year, for the first time, we're actually showing you a development plan for battery storage projects as well, which is totally incremental to the base plan.
You know, with schedules and things of the sort, there may be some, you know, shifting and things of the sort, but we are very confident that we're gonna be able to more than fill in any shifts. Jeff, why don't you give more details around any of the particular movements?
Yeah, no, happy to. Robert, at a macro level, we definitely are seeing, you know, there's lots of supply constraint issues, there's lots of interconnection issues. Everyone's pretty excited about those markets. The downside of that is there's lots of pressure on those resources. That being said, I'd point back to Arun's comment that we work really hard to make sure we integrate the timing of the PPA signing and the execution of the key contracts. You've got two different situations. Shady Oaks II is slipping by a few quarters. We're not overly concerned about it. It's just a little bit of improvement in accuracy from last year to this year. Then the second one is Carvers. Carvers has some interconnection delays, which we've reflected in the schedule in the full backdrop, we're actually very confident in the capital plan.
One of the things that you know you should take confidence in also is that you know in the midst of our largest development and construction year, 1,400 MW we brought online right in the midst of COVID and all of the supply chain challenges, right. I believe we have a very you know solid and disciplined team that works through all of these issues. These will continue to be challenges as we and everybody else perhaps you know accelerates the growth in renewables. You know that ability that we've proven over the course of the last year should give you confidence in our ability to manage those challenges.
All right. That's helpful. Then maybe a follow-up question just on Kentucky. You know, we're still very, very early days in the process, but how are the conversations gone with stakeholders so far? Are there any issues that you think will have to resolve and you know, maybe just the overall status on that process?
Look, we continue to be extremely excited. I was in Kentucky a few weeks ago, visiting a lot of the stakeholders there as well. In many ways, actually, you know, the landscape for greening the fleet in Kentucky is even better, perhaps, than what we are able to do in the Midwest. Because, keep in mind that in the Midwest, we had a wholly owned coal plant, based in Missouri, employing, you know, local folks, contributing to the local economy, all those kind of things, right? Now you contrast that with Kentucky, where you've got one coal plant, that's based in Indiana, and there's a unit purchase agreement with Rockport, and that's set to expire at the end of 2022.
You've got another coal plant, Mitchell Plant in West Virginia, burning West Virginia coal, and really not contributing to the Kentucky economy, perhaps, right? When you look at all of the sources of power from Kentucky Power currently, which is from these two coal plants and from Big Sandy, which is a natural gas plant, and then from the grid purchases, the highest, the costliest energy that Kentucky Power is purchasing is in fact from these two coal plant sources.
Being able to invest in renewable energy in Kentucky, contributing to the local economy, lower levelized cost of energy as we've shown on our slides, all of those you know provide a really solid backdrop for us to do our greening the fleet in Kentucky. As well as the other playbook that I talked about, which is really optimizing the asset playbook that we've shown elsewhere as well, right? When I've met with all of the stakeholders, they're pretty excited about the you know possibilities in Kentucky. I mean, obviously, we have to go through a process, you know, work with the regulators, partner with them, go through the IRP process.
I believe that the fundamentals are really, you know, well built for us, frankly, even better than perhaps the Midwest. I don't know Arthur or Jeff if you had anything more to add to that.
Yeah, no, I'd just reinforce that the initial round of stakeholder meetings completely are supportive. What Arun is saying has been, you know, better than we could have hoped for. We're pretty excited.
Thank you.
Thanks, Rob.
Your final question comes from the line of David Quezada of Raymond James.
Thanks. Morning, everyone. Just one last one for me. I'm just curious on your conversations with your corporate partners, Microsoft, you know, JP Morgan, Kimberly-Clark. Curious how the potential extension to the tax credits in the U.S., you know, affects the conversations with those partners. Do you think that once we know whether or not that piece of legislation has gone through, could that maybe spark an uptick in those partners looking to purchase more renewable power?
Jeff, you wanna take that?
Yeah. I would say, you know, we expect that the Build Back Better legislation will be passed. It's extremely important to President Biden. There'll be a few impacts, and I think you pointed out one which there will be most likely a lower price per megawatt hour because some of those and a significant amount of the benefits will be passed through the customers. But that will drive more activity, which will give more opportunities for investment. Our discussions with those customers have been positive with excitement towards being able to deliver on their sustainability goals at an economic price point.
The other part of that that's exciting in terms of our impact on customer bills, to the extent that we're able to green and bring those benefits to bear, we can do more for less impact or more savings onto customer bills on the reg side. All in all, we see Build Back Better as a great tailwind, although we haven't factored any of that into our 5-year planning.
David, you know, let me again emphasize that that's why we are so excited, right? You know, while, you know, we showed you that renewables are already from an LCOE perspective, a very compelling value proposition. You add on top of that, you know, all of the policy tailwinds that you're seeing. You look at all of the different commercial and industrial partners of ours who have very ambitious goals to accelerate their own, you know, net zero plans. Then I think Jeff mentioned in his conversation as well, narrative that we have now gone from, you know, building a one-off, you know, one after another project to actually having a real platform.
You see that through the size of the greenfield pipeline we announced last year, the much larger size of more than 1,000 MW. In fact, in addition to that greenfield pipeline, new pipeline of battery storage opportunities that we outlined. The ability to mature that pipeline and actually take 600 MW of that into the base plan from last year's greenfield pipeline. You add all of this together. Now we have a platform that has the recurring level of development growth, construction, being able to take that into operations.
Now that's why we feel confident that, you know, with this, all of the economics and the tailwinds, you know, we're gonna be able to do this asset recycling because we see that now possibility to do that on a recurring basis, right? That's why, you know, we are so excited about this once in a generation opportunity.
Excellent. Thanks for the call, guys. That's all I have.
Thank you, David. Go ahead, operator.
Outside the call back over to the room.
Okay, fantastic. Thank you, operator, and thank you everyone for staying with us for the last, you know, couple of hours or so. Thank you for your time. I'll just end with the same message that I have given before. You know, this Investor Day, we are even more excited about the outlook that we see for Algonquin Liberty to continue on this journey of decarbonization transformation. We just believe that we have a lot of opportunities out there, and we now have a mature platform to really take advantage of that opportunity and continue to add significant value to our shareholders. With that, thank you very much for your time and stay safe. Thank you.
This concludes today's conference call. Thank you for participating. You may now disconnect.
Thank you for joining us today. Hopefully, we can meet in person next year. As I mentioned at the beginning of the call, please stay tuned for our written cautionary statement regarding the forward-looking statements and non-GAAP financial measures used during this presentation. Thank you.