Ladies and gentlemen, thank you for standing by, and welcome to the Q2 Earnings Call for Algonquin Power and Utilities Corporation. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and Answer Session. I'd now like to hand the conference over to your speaker today, Ms. Amelia Song.
Thank you. Please go ahead, Amelia.
Thank you. Good morning, everyone. Thanks for joining us this morning for our Q2 earnings conference call. Presenting the call today are Arun Banskoda, our President and Chief Executive Officer and Arthur Kasprzak, our Chief Financial Officer. Also joining us this morning for the question and answer part of the call will be Jess Norman, Chief Development Officer and Johnny Johnson, our Chief Operating Officer.
To accompany our earnings call today, we have a supplemental webcast presentation available on our website, algonquinpowerandutilities.com. Our financial statements and management discussion and analysis are also available on the website as well as on SEDAR and EDGAR. Before continuing the call, we would like to remind you that our discussion during the call will include certain forward looking information, including but not limited to our expectations regarding future earnings and capital expenditures. At the end of the call, will read a notice regarding both forward looking information and non GAAP financial measures. Please also refer to our most recent MD and A filed on SEDAR and EDGAR and available on our website for additional important information on these items.
On our call this morning, Arun will provide an overview Of our Q2 performance, Arthur will follow with the financial results and then Arun will conclude with an update on our strategic plan for the business. We will then open the lines for questions. I ask that you restrict your questions to 2 and then re queue if you have Any additional questions to allow others the opportunity to participate. And with that, I'll turn it over to Arun.
Thank you, Amelia, And a very good morning to those who've been able to join us on the call and online. And a special welcome to today since it's the I'm pleased to report solid year over year growth in our key financial metrics for the Q2 of the year. Q2 adjusted EBITDA was $244,900,000 A 39% increase year over year and our Q2 adjusted net earnings per share was $0.15 An increase of 67% compared to last year's $0.09 I'm pleased to report solid year over year Earnings growth from the addition of approximately 1400 megawatts of new renewable generation projects. These were in construction over the course of last year and this year. And this quarter's progress The 1600 megawatts of projects that began construction in 2020 close to completion.
We are also starting to see benefits from the 1st full year of operations from our Bermuda Electric Utility as well as the Essar Water Utility in Chile, which both closed late last year and have both performed in line with our expectations. I'm pleased to report that the company's operating results were not materially impacted by the pandemic this quarter. Recall that in the Q2 last year, the pandemic did have a $0.01 impact on earnings per share. Generally speaking, we have not seen negative impacts from COVID on our growth at this stage as business conditions in the regions we operate in slowly returned to normal. Approximately 60% of the company's workforce continues to work remotely Over the coming months, the company is planning to return to base operations As the impact of the pandemic further diminish, however, we will continue to keep watch For any developments with the Delta variant and adjust accordingly.
Our team continues to focus our efforts on Algonquin's 3 strategic pillars: growth, operational excellence and Sustainability. We operate through 2 primary businesses, regulated and renewables, And we'll spend some time on each for an update. On the regulatory side, One important lever of growth is our greening the fleet initiatives. We continue to make investments for the benefit of our customers As we accelerate our transition to a clean energy future, during the Q2, we successfully completed our Midwest Green Fleet initiative As all three wind facilities, North Fork Ridge, Kings Point and Neosho Ridge has been placed in service and has been acquired by the Empire District Electric Company. The related closure of the Ash Bay coal plant in March 2020 comes approximately 15 years ahead of its original retirement schedule.
In accordance with our most recently filed integrated resource plan and is expected to reduce emissions By nearly 1,000,000 metric tons of carbon dioxide, as we work to generate and deliver cost effective, Diverse and sustainable energy solutions for our customers and communities. We continue to be responsible stewards of our energy infrastructure assets as we are an early pioneer in seeking to build renewables into rate base. The early retirement of Asbury has also contributed to the reduction in the company's total Scope 1 greenhouse gas emissions as well as reducing Scope 1 and Scope 2 emissions intensity per dollar of revenue by 26% since 2017, the year in which the company acquired Empire. The completion of the Midwest Greening initiative is just one more step on our path to reduce emissions. Liberty recently filed an application with the California Public Utilities Commission to approve financing, construction And operations of the Luling expansion project, which is expected to be a combined 60 Megawatt solar facility And 240 Megawatt Hour Lithium Ion Battery Storage Facility that will benefit Liberty's customers by adding reliability, resiliency and price stability in addition to meeting Liberty's renewable portfolio standards, Energy supply objectives.
Since 2017, we have already reduced the carbon intensity of CalPeco by 46%. And this new investment, if approved, will help us continue to decarbonize and provide cost savings over the long term to our customers. Another important growth lever In the regulated business is the organic investments in improving the safety and reliability of our mission critical infrastructure. Working with our local regulators, we strive to make that ongoing necessary investments to improve service for our customers, While managing the affordability of the bill, rate case activity across our jurisdictions continues to be quite active And I wanted to provide you with a few regulatory updates in some of the jurisdictions that we operate in. In the Q2, we filed our Missouri electric rate case with the commission at the end of May, which included seeking cost recovery of the 3 recently completed 600 megawatts of wind generation facilities mentioned earlier.
In addition, while our original filing included costs related to the impact of winter storm Puri, Legislation has subsequently been passed, which will allow for these items to be securitized, a path which we intend to pursue. Apple Valley, which operates in California, was a subject of a condemnation lawsuit filed by the town of Apple Valley. For the last few years, we have been in legal proceedings over the water system and recently received a tentative statement of decision that supports our continued ownership and operation of the system. We have a track record of Providing safe and reliable water services and we look forward to working with the town of Apple Valley to continue those services for the benefit of our customers. Staying on the topic of California, we filed our CalPeople rate case in May and filed our Park Water Apple value rate case in July.
Our California utilities will be the 1st to file rate cases seeking recovery of Customer First, which I'll provide more details on later. In addition, We recently reached a tentative agreement for our Energy North Gas System in New Hampshire. As part of the settlement, the commission authorized a permanent rate increase, which is expected to result in a revenue increase of 7 point $6,000,000 based on a return on equity of 9.3% and equity capital structure of 52%. In addition, Energy North received an authorization for a property tax tracking mechanism, which is Expected to further increase the predictability of earnings. Further, step adjustments of $4,000,000 for 2021 And $3,200,000 for 2022 were authorized as part of the settlement, pending further diligence and hearings.
Lastly, on the regulatory front, we reached our constructive rate case outcome with the regulatory authority of Bermuda, marking the 1st completed rate case since the acquisition of Belco in the Q4 of last year. Another lever of growth is acquisitions and we completed 2 utility acquisitions In Q4 of 2020, Essam and Ascendant. The integration of these two utilities Into the Algonquin Liberty family continues to go well. With our pending acquisition of New York American Water, We are currently going through the settlement process. As important work continues to determine the best path forward on resolving issues Related to the special franchise tax, we remain confident that Liberty is the best long term owner of the utility and expect this transaction to close within the recently extended timeline set out in the stock purchase agreement.
Lastly, looking to the future of our gas utilities, we have begun exploring the utilization of renewable natural gas or RNG to better serve our customers. We have RNG projects in various stages of commercial development And I've already made a regulatory filing in New Hampshire for the approval of supply agreement That includes the purchase option for Liberty to be the ultimate owner of the facility. Moving on now to operational excellence. In a mission critical industry, safety and reliability are always the most important areas of focus. I'm pleased that we have passed the impressive milestone of 5 26 days And over 7,000,000 safety hours without a single lost time injury, while keeping our customers and communities safe and maintaining our system reliability and resiliency.
I also want to highlight Some innovative approaches we are taking to support system resiliency. Our stage end project in Calcutta It's a microgrid at a Berkeley research station at the end of 4 miles of transmission line in wildfire territory. By putting solar and storage onto the site, we are able to take the transmission line out of service During wildfire season, while keeping the lights on for our customers, all for significantly lower cost And installing covered conductors to the 4 miles of transmission line through the environmentally sensitive ports. In the non wildfire season, when the transmission line is back in service, the microgrid is expected to provide additional resiliency. As previously mentioned, we are excited about the new digital experience for our customers through our customer first program.
During the Q2, the team successfully completed the 1st major implementation of our new suite of SAP tools and systems at our Massachusetts Gas Utility. We will be rolling out this enhanced technology platform in a phased approach Across the rest of the organization over the next couple of years. The customer is at the heart of every good operational excellence strategy. We are continuing to bring customer focus into action by asking our customers after interactions with our team about their experience. This quarter, we have started the rollout of net promoter score measurements from our customers.
This is on top of our existing JD Power service and will allow us to collect more timely and specific feedback to drive focused action as we continue to look to meet and exceed our customers' expectations. Turning to the renewable side of the business. In the second quarter, Our 4 92 Megawatt Maverick Creek Wind Facility in Texas reached commercial operations And as a long term power purchase agreement with General Mills and Kimberly Clark. There was a blade manufacturing error, which impacted 26 of the 73 turbines at Maverick Creek. But remediation work was completed in early June, With all 26 affected turbines returning to service, our service agreement contains Liquidated damaged protections in favor of the company for revenue loss due to operating downtime.
Altar Vista Solar, an 18 Megawatt facility located in Virginia, also reached commercial operations in the Q2. The facility has a 12 year power purchase agreement with Facebook. We are also excited to be collaborating with JPMorgan Chase on our Shady Oaks 2 wind construction project in Illinois, With JPMorgan Chase agreeing to purchase approximately 70% of the wind energy output, which will contribute towards their 100 percent renewable energy commitment. All these projects showcase our strong relationships with key Commercial and Industrial C and I customers. The demand from C and I customers who are helping to drive an Acceleration towards clean energy is expected to be an attractive source of growth for Algonquin in the coming years.
And Algonquin is well positioned to help them advance their own sustainability targets. We recently closed the acquisition of a 51% interest in the West Raymond wind facility, which reached Commercial operation in the Q3 and as a generating capacity of approximately 2 40 megawatts, which we had previously agreed to purchase from RWE. With the close of West Raymond, We have completed the acquisition of our 51 percent ownership interest in 4 wind projects from RWE located in South Texas With a total capacity of 861 Megawatts and a net capacity of 4 39 Megawatts. And finally, we remain firmly committed to sustainability through the inclusion of environmental, Social and governance values in our broader corporate strategy and day to day operations. Last year, we released our 2020 Sustainability Report, which not only outlined our progress on our ESG goals, but also provided a higher level of detail around 9 priority issues.
I'm pleased to say that we are making excellent progress on achieving our goals. We reset important milestone With Algonquin now only, operating and having net interest in 4,000 megawatts of renewable generation across our 2 businesses. We are well on our way to achieving 75% Renewable energy generation by 2023, another one of our sustainability targets. We have also added sustainability metrics to both our annual and long term compensation for our leaders this year, Embedding sustainability into our compensation model. Another key ESG goal set out in our sustainability report is to add 2,000 megawatts of renewable power generating capacity between 2019 and the end of 2023.
By the end of Q2, we have added over 1400 megawatts of renewable generation, and we remain on track to achieving our 2023 target. We are focused On progressing and advancing our E and C disclosures to our stakeholders. I'm pleased to report That we recently launched a new data hub that can be found in the sustainability section of our corporate website, which is further evidence of our increasing breadth and transparency on ESG data. I encourage you to take a look at the data hub, which provides detailed information around our operational metrics, governance and policy amongst many other measures. Our efforts in sustainability continue to pay off and we continue to receive excellent validation, Including the recent inclusion of Algonquin, we do Corporate Knights 2021 best 50 corporate citizens.
Ranking within the top quarter of our peer group of power, transmission and distribution companies. With that, I I'll pass it over to Arthur, who will speak to our Q2 2021 financial results. Arthur?
Thank you, Arun, and good morning, everyone. Pleased to report that Algonquin has made good progress to meeting its financial targets for 2021 with solid financial results for the Q2. The Q2 results are underpinned by Algonquin's diversified and resilient business model and proven track record of ambitious but responsible growth. Turning to Slide 11. Our Q2 2021 consolidated adjusted EBITDA was $244,900,000 which is up approximately 39% from the $176,300,000 we reported in the previous year.
The regulated services group delivered $165,900,000 in operating profit in the current quarter, which compares to 114,500,000 in the same quarter last year. The year over year improvement is primarily attributable to the additional contribution from Delco, our Bermuda Electric Utility and Accel, Our Chile and water utility, as both acquisitions closed in Q4 of last year, as well as from the contribution of our wound facilities that were placed in service as part of the Greening the Fleet initiative that Arun spoke of earlier. Results also benefited from new rates Implemented at the Granite State and Calpico Electric Systems, but were partially offset by higher fuel costs in the central region resulting from out of period resettlements relating to storm Uri and increased operating expenses. I should also note that the regulated services group did not experience any material impacts COVID-nineteen this quarter, but the comparative results from Q2 of 2020 were negatively impacted by the pandemic by approximately 9,600,000. The Renewable Energy Group reported Q2 divisional operating profit of 97,900,000 which compares to $82,700,000 in the same quarter last year.
The increase is primarily due to the addition of the Sugar Creek and Maverick Creek wind facilities and the Great Bay 2 solar facility. This was partially offset by lower production due to resource shortfalls primarily across our wind portfolio. Excluding the impact of the newly added facilities, production at our renewable facilities was approximately 7% lower than last year or approximately 12% below the long term average expected production. I should also mention That our investment in Atlantica Sustainable Infrastructure continues to provide benefit to the Renewable Energy Group's operating profit with dividends received increasing by 2,100,000 Corporate and administrative expenses remained generally flat. Interest and depreciation expenses both increased due to higher property, plant and equipment and the associated financing related to the acquisitions that closed late in 2020.
Income tax expense was lower and benefited from renewable energy tax credits recognized. In total, our Q2 adjusted net earnings per share came in
at $0.15 which is up 67%
from the $0.09 reported last year. Moving on to Slide 12 to provide some updates on our 2021 capital plan and Financing activities. During the quarter, Algonquin deployed approximately $1,200,000,000 of capital Pertaining primarily to the previously discussed initiatives and initiatives relating to the safety and reliability of our electric, water and gas system. This brings the total capital deployed so far this year to approximately $3,100,000,000 and on track to our expected capital deployment in 2021 of over $4,000,000,000 Moving on to financing activities. I'm pleased to say that during the quarter we made great progress in derisking our 5 year financing plan, further strengthening our balance sheet And reinforcing our commitment to BBB flat credit metrics.
During the quarter, Algonquin completed a green mandatory equity units offer. Due to strong demand, the deal was upsized from the indicated $900,000,000 size and the full over allotment option granted to the underwriters was exercised, bringing the total gross proceeds from the offering to $1,150,000,000 The units are expected to receive 100% equity credit from Standard and Poor's. The transaction represents several first for Algonquin and the market in general. To our knowledge, this was the first green mandatory equity unit Ever Done showcasing Algonquin's ongoing leadership and commitment to deploying capital to support sustainable initiatives. This was also the first offering by a Canadian issuer of a mandatory equity unit, which are more frequently used by some of our utility peers in the U.
S. As you maybe heard me mention in the past, what we find attractive about the mandatory equity units is the natural match they provide to our business in terms of when we pay for our capital when we earn on it. The securities deferred the issuance of shares until conversion after a 3 year period, but received 100% equity credit immediately from S and P. Investors benefit from an enhanced yield and the issuer can partly benefit from share price appreciation, which can result in an overall lower cost of capital compared to common equity. Through this issuance, we have further expanded and diversified Algonquin's investor base and introduced another tool to fund future potential During the quarter, the company also utilized its ATM program, raising approximately $135,000,000 of common equity.
We view the ATM program as allowing us for cost effective and opportunistic issuance of our common stock, but plan to remain disciplined in its use. Today, we have also received funding from over $1,000,000,000 from tax equity investors, monetizing the tax Benefits associated with the renewable energy projects in the U. S. In total, I would say that we have satisfied the preponderance of our capital needs for the year and have positioned our balance sheet to continue to execute on Algonquin's growth plans. For the rest of the year, we will continue to monitor the hybrid debt markets as potential opportunistic source of capital in the current low yield environment.
Before I turn things over back to Arun, I'd like to provide a brief update on our 2021 guidance. Algonquin continues to execute well against its 2021 financial targets. As discussed, we have already delivered approximately 1400 megawatts of new renewable generation capacity from our 2020 construction pipeline. In addition, we have and continue to expect to benefit from the 1st full year of operations from Belco and Accel. Excluding the impact of the market disruption on the Senate wind facility related to storm Uri in Q1, we continue to expect Our 2021 adjusted net earnings per share to be within the range of $0.71 to $0.76 as communicated previously.
We continue to assume that our earnings expectation, normalized weather patterns as well as resource availability and production at our renewable generation facilities that are within long term averages. We also assume that the closing of New York American Water will occur sometime within the Q4 of 2021. Although a further delay in the closing is not itself expected to materially impact our 2021 adjusted net earnings per share estimates. I also want to reiterate that our 5 year capital plan of $9,400,000,000 remains on track. Having already deployed over 3,000,000,000 Of capital this year, we are well on our way to meeting our 5 year targets.
With that, I'll now hand it back to Arun to outline our growth plans.
Thanks, Arthur. Before we close out our prepared comments this morning, I want to give an update on our strategic initiatives. As we look to simplify our business further, on August 6, we took a step towards simplification by exercising the option to acquire Abengoa's interest in Aegis. Given the change in ownership, We will be referring to Aegis and associate entities as Liberty Development. Liberty Development will remain focused on advancing Algonquin's non regulated development pipeline in North America and selected international markets.
ABLDOR's interest is expected to be acquired by funds Managed by the infrastructure and power strategy of Ares Management LLC, with Algonquin retaining the right to acquire 100 percent of Liberty Development Projects. We also anticipate that Carys will remain involved in projects until commercial operations. At Investor Day, We spoke about our $9,400,000,000 5 year investment plan from 2021 through 2025, WeChat identified projects that make up the entire $9,400,000,000 with most of them now in operation, Under construction or in advanced stages of development. Let me provide the latest update. The following projects have reached commercial operations since last November.
Maverick Creek, Sugar Creek, Alta Vista on the renewable side, while on the regulated side, our 3 Midwest wind projects Totaling $1,100,000,000 in investments were also completed. On the construction side, Our 175 Megawatt Blue Hill Wind Project in Saskatoon and 24 Megawatt Vale Hill Wind project in Quebec continue to progress well with turbine deliveries in flight. We are also progressing well on our new sites, demonstrating the ongoing execution of our development portfolio. Chevy Oaks 2 has signed an agreement with JPMorgan Chase, as I discussed earlier, and the project commenced construction in May. We have also included 2 PGM solar projects that were at incremental additions at Investor Day.
In the Q1 of 2021, we completed the acquisition of these 2 Ohio solar projects, which has an expected combined capacity of 235 Megawatts with the first project, NewmarketSolar At 100 Megawatts having begun construction in May. We also recently executed equipment procurement contracts for both our Deerfield 2 and Sandy Ridge 2 wind projects. I note that recent inflation and commodity pricing trends will likely result in higher project costs. Conversely, AUSTED contracts have seen similar increases in pricing recently, which may help to offset the impact, if any, of increased commodity risk. The Renewable Energy Group seeks to mitigate impact on project returns by locking in generating interest in Construction prices and offtake as close to content per ASLE as possible.
We continue to invest in the 3,400 Megawatts Greenfield Pipeline that we discussed at Investor Day. As a reminder, this Greenfield pipeline investment is over and above our $9,400,000,000 capital plan. Our Greenfield investments are focused on securing new opportunities and continuing to advance the projects comprising the 3,400 The Chevron projects are included in the 3,400 Megawatt Greenfield pipeline. These projects continue to progress well and we are on track to achieve final investment decisions for the initial projects by year end. As discussed in the past, the Greenfield pipeline is being built to replenish The more advanced projects included in our 5 year $9,400,000,000 capital plan.
I'm proud of all we've accomplished so far this year, but even more excited for what lies ahead. With society and economies working hard to minimize carbon emissions, I'm excited about how Algonquin's regulated And Renewables Businesses position the company to contribute to and benefit from this decarbonization transition. We have multiple levers of growth across our two businesses that I've spoken about throughout today's call, which gives me further confidence in our ability to execute and deliver on our 5 year investment and growth plan. In summary, 2021 has been a very productive year so far as we continue to execute and deliver on the company's largest construction program in its history, with approximately 1400 megawatts of the 1600 megawatts already placed in service. For context, these new projects are expected to approximately double the size of the company's portfolio of renewable energy generation facilities that we own and operate.
Our 3 strategic pillars of growth, operational excellence and sustainability will be a key foundation as we continue to build the business and strive to deliver steady earnings and dividend growth, creating long term shareholder value. With that, I will turn the call over to the operator for any questions from those on the line.
Thank And your first question comes from the line of Sean Steuart with TD Securities.
Thank you. Good morning and thanks for all the detailed commentary. A couple of questions. With With respect to the Empire rate request, 10% ROE and 52% equity thickness, that looks similar to what was Rejected last year. Can you give us some thoughts on the request this time?
What gives you confidence that this is Reasonable and how things might have changed over the last year to give you that confidence?
Sure. Sean, good morning and thanks for that question. So look, first of all, it's still early. We just very recently filed for that rate case. As we've said in prior calls, we continue to be confident in our position on equity sickness.
And we believe we will get the right outcome around equity fitness.
Okay. And further to that, the securitization of the costs tied to the weather event,
can you
walk us through that process and how that could evolve to get the $30,000,000 there?
Sure. As you know, Sean, The legislature has recently passed legislation that approves securitization of such Extraordinary costs. And we do plan to avail of that mechanism. We are looking at We started the internal process around that. Just as a reminder, of the $80,000,000 Increase $30,000,000 of that is from Stornuri.
And outside of that, our Our rate case increase is more in the 7% range, which translates approximately into 1.4% CAGR when you look at it from the last rate increase in 2017.
Okay. And then one last question, maybe for Arthur. You guys seem very focused on, obviously, growth here, but Any updated thoughts on capital recycling as a longer term funding source to feed the broader Growth ambitions for the company, any updated thoughts on potential for asset sales to fund earlier stage developments?
So before I turn to Arthur, I will say that look, capital recycling is always on the agenda for us. When we announced that back in at Investor Day, we're still about 6, 7 months now from that point onwards. Still early days, but capital recycling is absolutely something we continue to look at as an option.
I don't really have anything to add, Sean. It's on the radar. We look at it. It's nothing concrete to talk about at this stage.
Okay. Thanks very much, guys. I'll get back in the queue.
And your next question comes from the line of Rupert Merer with National Bank.
Good morning, everyone.
Good morning, Rupert.
So getting back to the rate cases that you filed, can you give us A sense of the timing of the hearings here and are you seeking any additional smoothing mechanisms and maybe a move off PISA accounting with the rate case you filed with Empire?
Sure. So we filed the rate case just late May. Now let me turn it to Time for further details.
Yes. So hearing scheduled will be later on towards the back end. I think This year, we're not expecting a decision until Q2 of next year. And we will work through with the Commission and our stakeholders in terms of the best way to implement any increase. So we're certainly open to smoothing rates a way that works for our
customers. Great. And Arun, you've completed the Greening the fleet initiative in Missouri, you're looking at some new regulated investments at CalPeco. Is there more to come here? How soon before you could look at, So greening the fleet Phase 2 in Missouri, is there political support for doing many more investments like this across your asset base?
We are doing so, Rupert. And again, we're proud of the fact that we are pretty much entrepreneurs in this area. We look at it across our existing fleet. In fact, even on our water utilities, which There's a lot of energy that goes into moving water and we look at that as well as an option. Even when we acquired Belco, one of the attractions for us was the fact that in an highland economy, It is pretty much all of it is a thermal generation and with customers paying over $0.30 per kilowatt hour And we strongly believe that there's a lot of ability to clean the fleet in that case as well.
So that's something we look at in pretty much every instance, whether it be with our existing portfolio or anything Possibilities we look at as well.
So how long before you think we could see some more greening fleet initiatives I'd like at Telco, for example.
Stay tuned, Rupert. We're obviously excited to let Everybody knows as soon as we are able to announce it.
Okay. I'll leave it there. Thank you.
Thanks, Rupert.
And your next question comes from the line of Nelson Ng.
Great. Thanks, everyone. Just to follow-up on Rupert's Question, now that you have finished greening or you've finished the first phase of greening Empire, I'm just wondering like bigger picture, Now that you've kind of gone over that hump on your capital plan spending about a third Of the of your 5 year capital plan in the 1st 6 months. If you I guess the question is, if you see an opportunity that's similar to Empire, where you had the opportunity to Like buy some assets that has coal, like would you do it? Like would you buy A utility with significant coal assets.
Does that is that something you would look to do?
Look, it's a speculative question and so I'll answer in a similar way, right. So first of all, we have a very attractive ESG profile. When you look at our carbon intensity at 0.0013 per dollar for revenue, that's among the lowest among our peers, Right. And in our history, Nelson, I like to repeat this fact. In our 33 years of existence, we never Our sales developed and therefore added to the world's stock of indices.
And at the same time, we are very good stewards of infrastructure. And so some of the numbers we gave you around Midwest Greening with a reduction of 26% carbon intensity in just 3 years In CalPeco, a 46% reduction in impairment intensity in just 3 years. I think besides What we do on the renewable energy side of the business in terms of investing in renewable energy assets for the good of our customers and our shareholders and the world at large, I think it's a similar profile on the regulated side of bringing the fleet, which I believe is good for our Our customers, our shareholders and the world at large. So if there are similar kinds of opportunities where we can utilize our Greening the fleet initiatives, we will take a hard look at that.
Okay. Thanks. That's clear. And then just moving over to Calpico in terms of the rate case filing, I haven't gotten a chance to go through it, but The roughly $36,000,000 increase seems like a big increase for a utility That's not that big. Could you just run through some kind of big picture items in terms of what's driving The rate increase there at Calpico?
Yes, let me give the big picture and I'll turn it over to Johnny. So the vast Majority of that increase is really associated with wildfire mitigation. As you know, I mean, in California in that greater geography, that's obviously something extremely important. We want to make sure we keep our customers and community safe. Johnny?
Yes. I mean, I think the short story is, it's really is what our wildfire costs have Driven that increase and it's the investments that we're making to reduce the risk of future impact in the area. It's the ongoing activities Increasing our tree trimming and monitoring so that we are able to sort of take our lines out of service at High risk times and periods of time. I think maybe the important point to note despite the significant increase Even with if it were fully approved, we'd still be one of the lowest cost rates in California. And actually, if you look at what the other California utilities have been filing in terms of their rate increases.
The majority of them have had 30% to 40% increases That's sort of in this timeframe really driven by similar activity. So it is a big step up. There's no doubt. We're always very focused On the bill impact for our customers, really this has been driven by the evolving landscape in California.
And just to follow-up
on that, like is that Increase like is it mostly to service higher operating costs? Or are you making a lot
of capital investments?
What's the mix roughly?
It's roughly fifty-fifty. And so it is there is significant investment going in terms of putting in That's modernizing our switching and fusing technology as well as kind of some of the operating cost expenses That have covered on those. This is roughly 50%.
Okay, thanks. I'll get back in the queue.
Thanks, Nelson.
And your next question comes from the line of Ryan Greenwalt with Bank of America.
Good morning, everyone. Good morning, Ryan. Good morning. Appreciate your commentary earlier on potential coal opportunities and transition. But Kind of given the media reports earlier this week, can you comment a bit more broadly just on your overall assessment of the regulated M and A landscape ahead of the pending CapEx update at the end of the year here?
Sure. So as everybody well knows, just the number of regulated M and A opportunities out there, when you look at it in 2010, for example, or 2,000 versus now, That landscape has significantly shortened, right? So just a number of utilities out there Fewer, we feel some of the consolidation that has been going on. And If you look at our $9,400,000,000 5 year plan, right, we only include acquisitions that we've already announced. So you can find New York American Water in there.
Our $9,400,000,000 power plant does not Depends on any future acquisitions. But having said that, we do look at that as a possible lever, Another growth lever to enhance our growth even further and provide more shareholder value. So that's really the context.
Great. Thank you for that. And then given broader concerns around the supply chain and inflationary pressures, Is this having any impact in the way you think about the development pipeline? Any hesitation to go through with some of the potential projects given pressure on returns?
So far we have not seen that Ryan. And again, what we have seen is some of the increases on the Supply chain has been offset by price increases on the offtake side of the ledger. And also one of the strategies we've deployed is trying to finalize The supply contracts, the construction contracts and the offtake contracts as close together as possible so that there is very little Risk to a risk that we're taking in terms of commodity increases and the like. So far, we are we continue to accelerate our greenfield pipeline and other such projects, but We always have the options of delaying anything if such a parts agency does that.
Great. I'll leave it there. Thanks for the time.
Thanks, Ryan.
And your next question comes from the line of Rob Hope with Scotiabank.
Good morning. First question is just on the 2021 EPS outlook that you reiterated. As we're kind of halfway through the year, can you talk about the puts and takes? It looks like taxes have been a pretty strong tailwind so far. Was that originally anticipated?
Or is that offsetting kind of some of the biggest we're seeing in the renewable generation side?
Yes. Good morning, Rob. It's Arthur here. So sure, I can speak to that. So in terms of our outlook for the rest of the year, like I mentioned in my prepared Commentary, we are reiterating our guidance between the $71,000,000 $76,000,000 And in terms of when setting that guidance, I mean, we factored in Several things.
One of the things obviously being impacts of COVID, which thankfully we actually didn't see. So that is providing us A little bit of room on the flip side. I mean we did have a little bit of milder weather obviously throughout the year as well. So those two things are To some extent offsetting. Now to your second question around tax credits and I would say Portion of the tax credits, yes, were not unplanned, but maybe it's more of a function of geography or where they're recorded.
And I'll explain A little bit further where as you're aware, we had the delays in the final commissioning of Maverick and Sugar Creek Due to the blade issues there, so what that basically did is in essence it delayed the final investment by tax equity into those projects. So Normally what we would have seen for the year is tax equity invested, we would have seen that those credits that were generated from The turbines that we're operating going through HLBV versus here, we had the opportunity to obviously take these credits and self monetize So you're maybe seeing a little bit more in the tax line versus what you would have been seeing a little bit more in the EBITDA line Otherwise, that wasn't the case. But overall, it kind of washes in the results.
That's some great color. Thank you. And then maybe just a follow-up question on the Ares partnership there. Can you just walk us through You're thinking of not taking 100 percent of Aegis as well as whether or not I guess what does Ares bring to the table and kind of What future partnerships to look at?
So Rob, just to give you context, as you know, Abengoa was our 50% partner on Aegis. And given all of the challenges that we were having with the restructuring, we So it was timely for us to find a new partner. And so we have exercised the option. And we I believe ARRIS does provide quite a bit of constructive Experience and know how in this sector, they were in 2020, for example, one of the 10 largest wind financiers. They also have companies that are in the construction business as well.
So we believe that They bring both the development and construction expertise as well as financing capability to develop and to Finance our construction activity and that's where the fit is.
Thank you.
Thanks, Ross.
And your next question comes from the line of Ben Pham with BMO.
Hey, thanks. Good morning. I just had a couple of follow-up questions on utility M and A. Can you comment More broadly, the criteria that you're most focused on now, size, geographic diversification, Synergies, anything else you can share? And more specifically, just listening to your answers To earlier questions and with these Kentucky assets, would that fit into your overall The preferences are targeting?
Sure. Ben, lots of questions in there. So let me try I'll just talk through those questions, right? So first of all, geography is pretty clear. I mean, it's North America.
And again, we don't say never Other than North America, so for example, Chile was a case in point, but by and large, the geography is North America, right? We are one of the few companies that are across all three modalities, electric, water and gas. We are very, very bullish on electric and water. They fit extremely well with our P and C profile. Right now on the gas side, we are focused much more on deploying renewable natural gas into our facilities.
We have filed the first one in New Hampshire. We're looking at a pipeline of a lot more. And we're also looking at green hydrogen. In New Brunswick, for example, we We're participating in a maritime study and we are following a number of other pilot projects that are out there in green hydrogen. That's our focus on The gas modality.
So, but on specifically transactions, we have a policy never to comment on
Okay. And then accretion, you want accretion out of the gate?
On the financial, absolutely. I mean, look, we don't we look at from a strategy perspective, clearly, it has to fit All of our strategic objectives, but we do not make do transactions based upon strategy. And these transactions absolutely have to stand on their own. We look at a lot of different metrics and we are extremely disciplined around those and we obviously End of not doing many more transactions than we end up transacting on. So absolutely extremely disciplined around the financial
Okay. And then the second one is based
on the funding side and here, we execute something made It's larger than you see every month, your balance sheet offers, net of car convert to the room, you mentioned the hybrid. But How would you think about that impacting your funding plan?
Yes. I mean, and from our perspective, I mean, one thing I would say maybe generally, look, We've never kind of fallen behind on our balance sheet strength. We always we've maintained a strong balance sheet. I think that itself kind of brings us For a position of strength, call it. To some extent, I mean, I'm speculating around any funding sources.
As I said in my prepared remarks, Lots of tools in the shed, right, in terms of what to be able to work where to source capital.
Okay, that's great. Thank you.
And your next question comes from the line Mark Jarvi with CIBC.
Thanks. Good morning, everyone. Just wanted to clarify one thing on the response to Ben's We talked about the different financial metrics you look at for a deal making sense. Was EPS accretion sort of
Absolutely. We look at our EPS accretion, that's Yes, most fundamental and most important metric we look at. Absolutely, Mark.
Perfect. Thanks for that. And then, I'll see lots of wildfire action in California this year and we've seen reports of the ICE Energy deenergizing lines Hi, Caltecho.
Can you just update us in terms
of any earnings hit or any potential liabilities that might be faced or so far you've been unscathed by The wildfire action?
Sure. So I think, Mark, we did report earlier, we talked about The Mountain Dew wildfire, the investigation continues on that one. We also recently faced another wildfire, The Tamarac wildfire is a much smaller one in comparison. That one is largely contained. We look, our utility does an amazing job in terms of mitigating that wildfire And bringing all of the customers back online in a very, very short period of time.
It is Extremely impressive to see what our employees were able to do out there in bringing generators in place Even for just a few customers, reliability is so important. And yes, and that It was all of the background and context behind what we're seeking for in terms of the new rate case because we do believe we need to continue to invest In wildfire mitigation aspects and that is really the context behind the most recent rate case. Okay.
And then just one more thing, just on the Ares partnership and the simplification. Maybe Arthur, you can explain in terms of Will all investments flow through your own financial statements? Is there still some SPVs involved in some of that stuff? And any capital commitments from Ares On any investments going forward?
So maybe the simplest answer is, in essence, how it's going to flow through the financial statements. It's basically Status quo in terms of how you currently see it to the extent that you will still see basically being accounted for as a joint venture. Okay. Thanks a lot.
And your next question comes from the line of Najee and Bey Dun with IA Capital Markets.
Hi, good morning. I just wanted to start with the renewable projects that are already In the hopper, can you just remind us of what's contracted? So Shady Oaks, you have the contract from JPMorgan. What about the Ohio Solar Projects or some of the other projects coming on the pipeline?
Yes. Thanks, Arun. Happy to hear that. You're absolutely right with Shady Oaks too in terms of the offtake with JPMorgan. The new market That portfolio is also contracted and all the projects that we have under active
Okay. I guess the other projects that are And let's call them advanced development. Are those what's still left to be contracted from those?
Yes. So the 2, we've got the Sandy Ridge 2, which is in advanced development, which is contracted and we've got Deerfield 2, which we're in active discussions On contracting, but have not signed the contract yet.
Okay, okay. Got it. That's good. And just on the line
Just for context, I mean, the offtake contracting happens towards the really very end before what we need to say internally as notice to proceed. So that's That's what we try to make sure we supply contract, the construction contract and the off day contract comes together And that's when you go northeast to proceed. So usually, it really happens towards the end of the development cycle.
No, you're So, I fully agree on that. We're very intentional on our part for the reasons that you cited earlier in terms of making sure we get alignment between costs and the offtake contract.
Understood. And just on the Lunning project, is this both the solar and the storage system Together that you're working
on? That is correct. It's a solar plus of 2 40 megawatt hour battery storage. That's correct.
Okay. I just want to get your thoughts broadly on, I guess, how you're thinking about storage. This is maybe the first project within the utility business, but Just wondering how you're thinking about storage, both within the regulated portfolio, but also maybe the non regulated side of the house?
Actually, we already have around, what, 20 megawatts worth of capacity on the regulated side of the business on storage. And on the renewable energy side of the business, our first project in New York State It's under construction that it's a solar plus battery storage project. Look, and given the prices On storage and the ability to shape up perhaps the energy outflows, We look at stories on every wind and solar project to see if it makes sense. And so it's very much part of the equation already.
Okay. So it sounds like there's maybe opportunities on to add on both sides. Absolutely.
And again, the reason I was telling you about the 20 megawatt plus on the regulated side is we are already deeply in it. We already have a lot of know how and experience in operating these battery storage systems. So we absolutely will continue to look at storage That has been yet another area of technology growth.
Understood. That's very helpful. Just, I guess last question on that is What I also meant by regulated versus non regulated, maybe how you think about the risk and the returns? And if you had to choose a project, would you On the storage side, does it make more sense for you today to have it within the utilities or not?
I mean, Look, the risk profile is somewhat different on those two sides, but not that much given the fact that even on our Renewable side of the business, it's largely contracted. It was a long term contract. The remainder average weighted life was 13 years. But still, there is some Risk reward difference. But it's not large enough for us to say we're going to put all of our capital on stores on one side or the other.
We believe that there's a lot of opportunities on both the regulated and the renewable side of the business.
Okay, got it. Thank you.
Thanks, Najee.
And your final question comes from the line of David Qazada with Raymond James.
Thanks. Good morning, everyone. Just one quick one for me. Arun, you mentioned Renewable natural gas a little bit in your comments. Just wondering if there's any color you could provide around the timing and maybe the quantum of that opportunity.
And given The tax credit that has been, I guess, proposed, could you look
at that outside of the regulated footprint?
Absolutely, David. We are already looking at it outside our regulatory footprint as well. We have A development pipeline across every one of our gas utilities that is looking at renewable natural gas. We believe that at its maximum, It could actually substitute for approximately 25% of all of the natural gas that flows through our gas LDC system. So it's pretty hard tracking from that perspective.
The pricing is something obviously we're working on. One of the things we're very focused on is trying to make sure that It doesn't impact customer bills. So we're looking at different kinds of structures. It reminds me of the days of renewable energy A decade ago when the prices were higher, but there were enough of a customer based out there that were willing to pay higher prices For the sustainability gain for renewable energy, and I think we see a similar pattern on the renewable natural gas side as well, where there's enough Of our commercial and industrial customer base, that is willing to pay the initial higher prices on renewable natural gas. Now a lot of the stuff that is going on in with the Biden Administration Climate Action build Should help in terms of bringing that cost down even further.
So we're absolutely looking at that and have fairly
That's great color. Thank you very much.
Okay. David, thank you very much and thank you everyone for taking the time on our call today. With that, please stay on the line for our disclaimer.
Thanks, Arun. Our discussion during this call contains certain forward looking information, including but not limited to our expectations regarding earnings, capital expenditures Recent MD and A filed on SEDAR and EDGAR and available on our website and is subject to risks and uncertainties that could cause Actual results to differ materially from historical results or results anticipated by the forward looking information. Forward looking information provided during this call Speaks only as of the date of this call and is based on the plans, beliefs, estimates, projections, expectations, opinions and assumptions of management as of today's date. There can be no assurance that forward looking information will prove to be accurate and you should not place undue reliance on forward looking information. We disclaim any obligation to update any forward looking information or to explain any material difference between subsequent actual events and such forward looking information except as required by applicable law.
In addition, during the course of this call, we may have referred to certain non GAAP financial measures, Including but not limited to adjusted net earnings, adjusted net earnings per share or adjusted net EPS, adjusted EBITDA, adjusted Funds from operations and divisional operating profit. There is no standardized measure of such non GAAP financial measures and consequently AQM's method Calculating these measures may differ from methods used by other companies and therefore they may not be comparable to similar measures presented by other companies. For more information about both forward looking information and non GAAP financial measures, including a reconciliation of non GAAP measures to the corresponding GAAP measures,
And this concludes today's conference call. Thank you for your participation. You may now all disconnect.