Algonquin Power & Utilities Corp. (AQN) Earnings Call Transcript & Summary

Thank you for standing by. This is the conference operator. Welcome to the Algonquin Power & Utilities Corp. 2020 Investor Day Webcast and Conference Call. [Operator Instructions] This meeting is being recorded. It's recommended that anyone with Internet access this morning participate via the webcast in order to view the slides. The webcast will provide the audio track as well. So it's not necessary to connect your phone line until the last portion of the meeting when there is an opportunity to ask questions. At that time, you are welcome to use the 'Call Me' link provided within the webcast frame to be joined to the conference call. [Operator Instructions] I would now like to turn the conference over to Amelia Tsang, Vice President of Investor Relations for Algonquin Power & Utilities Corp. Please go ahead.

Good morning, everyone. Thanks for joining us this morning for our Virtual 2020 Analyst and Investor Day presentation. My name is Amelia Tsang, and I'm the Vice President of Investor Relations at Algonquin Power & Utilities Corp. To accompany our presentation today, we have a supplemental webcast presentation available on our website at algonquinpowerutilities.com. Before continuing, we would like to remind you that our discussion will include certain forward-looking information, including, but not limited to, our expectations regarding future earnings, capital expenditures and growth. This forward-looking information is subject to the cautionary statement contained in the supporting slide show. Actual results may differ materially from the forecast or projections included in the forward-looking information presented today. During the presentation, we will also refer to certain non-GAAP financial measures. Please stay tuned at the end of this presentation for a more fulsome notice, regarding both forward-looking information and non-GAAP financial measures. Another housekeeping item I wanted to note, after our executive team completes their formal presentation, we will then open the lines for questions at the end. [Operator Instructions] And with that, I'd like to turn it over to your host for the next 2 hours, Arun Banskota, President and CEO of Algonquin Power & Utilities, who will provide a strategic overview.

Thank you, Amelia. And welcome to our 2020 Analyst and Investor Call. A very good morning to everyone. On a personal note, I have now been with Algonquin Liberty for almost a full year, and today, I am pleased to be with our investors. I have 30 years of experience in the energy, renewables and clean tech sectors, and spent the last several years at a high-profile growth, ultra-customer-focused company, Amazon. I'm very excited to be here at Algonquin and to share with you our strong record of performance, industry-leading growth and our exciting prospects given the societal backdrop of decarbonization. What is more challenging to convey is our strong culture that drives this record of performance. We are entrepreneurs with an owner mindset, very customer-centric and driven by delivering results. I am also very pleased with our teamwork culture, and we have a strong leadership team. We wish we could be with you in person, but the pandemic has forced us into a digital format and we certainly hope 2021 will bring back normality. Sharing the presentation with me are, in the order they follow me: Jeff Norman, our Chief Development Officer; Johnny Johnston, our Chief Operating Officer; George Trisic, our Chief Governance Officer; and Arthur Kacprzak, our Chief Financial Officer. Once again, welcome to everyone. With society and economies commit to minimize carbon emissions, Algonquin's regulated and renewables businesses are well positioned to contribute to and benefit from this decarbonization transition. Continually lower cost and improved efficiency of renewables, projected retirements of coal and nuclear facilities, transitioned from gasoline to electric transport, increasing customer demand for sustainable energy and now the potential for a proactive climate policy from the Biden administration are expected to continue to provide strong tailwinds for the growth of Algonquin's businesses. Research has shown that investment in new zero-emission power generation assets is expected to exceed $10 trillion by 2050, and renewable generation is projected to comprise 50% of total generation by 2050, providing a strong pipeline of opportunities in our business. In addition, it is anticipated that similar levels of investment will be required in the energy distribution systems to enable this transition to a low-carbon economy. Algonquin Liberty operates through 2 core businesses, regulated and renewables, primarily in North America. There are a number of synergies across the 2 businesses, including our proven capability to green the fleet, experience in tax equity, presence in multiple jurisdictions, entrepreneurial culture and diversity in thinking and focus. A key differentiator for us is the number of growth levers within each of these 2 businesses, which we expect will allow us to consistently deliver exceptional results in total shareholder returns, EPS growth, capital deployment and other measures of growth. Our regulated business, which comprises 70% of our portfolio, is well positioned to benefit from increasing renewable investments into our rate base. Given our D&A and expertise in renewables, Algonquin was an early pioneer in greening the fleet initiatives which we first announced at our Empire Electric utility. With the thesis that the price of new renewables is lower than the operating cost of existing thermal facilities, we retired our Asbury coal plant this March and are getting close to finishing construction of our $1.1 billion 600 megawatts of wind projects, with the majority being placed in service by the end of this year. What makes this especially compelling is that this initiative is also expected to reduce customer rates over the long term and reduce our carbon emissions by around 1 million tons per year. We've had similar successes in CalPeco, with our Turquoise and Luning solar facilities and are now looking for Greening the Fleet opportunities in Bermuda. Our renewable business represents 30% of our portfolio and is comprised of 35 renewable and clean energy facilities, representing more than 1.7 gigawatts of generating capacity. Fully 85% of the revenues from this business are contracted under long-term offtake agreements and the remaining average weighted life of these contracts is over 13 years. We are currently executing on the company's largest construction program in our history, with approximately 1,600 megawatts of renewable energy projects under construction this year. To put that in context, these new projects approximately double the amount of our overall renewables portfolio. Given our deep experience and expertise, we are now partnering with our C&I customers to green their fleet as many of them have set ambitious corporate targets for cleaner energy. Throughout this presentation, we will be touching on the Algonquin's investment theses. First, we have consistently provided outstanding returns as proven by our record on delivering total shareholder returns, TSR. Our 10-year cumulative TSR was 619%, and we delivered a 10% dividend growth of CAGR between 2010 and 2020. Second, we have always been among the leaders in our industry in delivering exceptional growth as measured by adjusted net EPS and capital plan. This is something we are very focused on, and we have high confidence in the execution of our 2021 to 2025 capital plan. Third, with our mix of regulated and renewables, we have a very resilient business with a strong balance sheet. While 2020 has proven challenging with the COVID pandemic, financially, it has had a relatively low impact of $0.02 in adjusted net EPS. And finally, we are leaders in environment, social and governance, ESG. As measured by our carbon intensity, our 2023 targets and achievements to date, as we have disclosed in our recently published 2020 sustainability report. We have a stellar track record of delivering strong total shareholder returns. Up to the end of November, our 1-year TSR is 14%, while our 5-year cumulative TSR is 148%. We plan to continue this track record. For those of you who have been following our company for a long time, taking a look back to the Investor Day 2015, we had announced a 5-year capital plan of $4.1 billion from the 2015 base of $4.8 billion in assets. Based on our current assets of approximately $11 billion, we have increased that investment amount by nearly 25% compared to what we set out 5 years ago. This year, we were included in the S&P/TSX 60 here in Canada. This is a tremendous accomplishment with Algonquin now part of what is often described as the blue-chip index and should generate additional volumes and make us more visible to investors. And this year, we crossed the million customer connections mark in our regulated business, a huge milestone for us. Today, we are updating our 5-year capital plan and plan to invest $9.4 billion from 2021 through the end of 2025. Given our projected investment of $1.3 billion in 2020, our 2021 to 2025 capital plan represents an increase of $1.5 billion from the $9.2 billion capital plan from 2020 through 2024 that we announced last year. We have identified projects that make up the entire $9.4 billion with most of them under construction or in advanced development. This core $9.4 billion does not include any further M&A beyond previously announced transactions or any success from our pipeline of greenfield opportunities. With our successful track record in accretive M&A transactions and confidence in our greenfield pipeline, we expect to meet and exceed this number. Our new 5-year plan through 2025 includes additional investments like the Carvers Creek Solar project in Virginia and our pending acquisition of a 51% ownership interest in a portfolio of 4 operating wind facilities with a combined generating capacity of over 800 megawatts in South Texas, which will be Algonquin's largest ever renewable energy acquisition. Further, upon execution of our 5-year plan, our rate base is expected to grow from $4.9 billion to $8.3 billion, which translates to an 11.2% compounded annual growth rate. For the 5-year period from 2021 to 2025, we are targeting an EPS CAGR of 8% to 10%. We have already identified all the regulated and renewable investments that make up the midpoint of this CAGR. Through new investments, execution on our greenfield pipeline and M&A opportunities over that 5-year period, we are confident in our ability to come in at the mid- to upper range -- end of this range. This year, we have moved somewhat to the under-promise and over-deliver mode for our guidance. While the entire range of our guidance retains a leadership position among our peers, we'll aspire to deliver at the mid- to higher levels of our guidance and we'll be disappointed if we've come below the midpoint of our guidance range. Let me now turn to our multiple levers of growth that support our 2 businesses and our guidance and which gives us high confidence in delivering outstanding returns. Every year, we invest approximately $800 million into our rate base, as we improve the safety, security and reliability of our mission-critical infrastructure. We balance this organic growth with the need to ensure customer affordability. Another lever is our tuck-in strategy in existing areas of our operations that contribute to our customer growth and helps to spread our fixed costs. In 2020, as an example, we expect to add over 14,000 customer connections through transactions that have either closed or where we have signed purchase agreements and are awaiting regulatory approval. These acquisitions are completed at attractive multiples, averaging 1.1x rate base. A third lever of growth as we transition to lower carbon energy is our Greening the Fleet initiatives, including our Midwest greening, CalPeco and possibly Bermuda and we have already touched on this. Acquisitions are another lever of growth, and we have a successful track record of identifying, securing regulatory approval and closing acquisitions. To date, we have closed every one of the 24 utility acquisitions we have announced since 2001. New York American Water is the only utility acquisition that is included in our rate -- in our base $9.4 billion capital plan. We remain confident in closing this transaction in 2021. Further, we have a very specialized skill set of integrating new acquisitions into the Algonquin Liberty family. We always look to optimize, implement best-in-class benchmarking and share best practices. We are a disciplined and selective acquirer, and we'll continue to prioritize financially accretive transactions that do not unduly jeopardize our strong balance sheet. In our renewable business, we also have multiple growth levers. Algonquin remains very well positioned in the C&I space where imported long-term customers are supporting renewables growth as they are looking to achieve their own sustainability goals. This has been an area of focus for us, and we are working hard to expand that portfolio. Earlier this year, we signed a framework agreement with Chevron for over 500 megawatts of renewable energy and plan to start construction next year on the first of these projects. We have additional C&I offtakers in General Mills, Kimberly Clark, Facebook, Starbucks and a company I know well, Amazon, and we will work to develop these established relationships into more opportunities. Algonquin has had a lot of success in partnering with other developers on early-stage development projects and leveraging our specialized expertise in financing, development and construction to advance these projects to commercial operations. Projects like Sugar Creek, Altavista, Maverick Creek are examples. Over the last year, we have bolstered our internal resources and software tooling to focus even more on greenfield development opportunities that are originated by ourselves. I am glad to report that in a short time span, we have already developed a potential pipeline of over 3,400 megawatts of greenfield opportunities. For many of these opportunities, we already have site control and our interconnection queue , and we will work to bring this into construction in 2023 and beyond. We fully realize that not all of these greenfield opportunities will make into commercial operations. But even discounting for those, we project a healthy return on this greenfield portfolio. We have successfully developed and brought into operations the Great Bay Solar I project in Maryland with the federal government as the offtaker. Should the federal government directly contract for future renewables, we have developed the accounting, reporting and regulatory systems to be able to capitalize on these opportunities. With its strong emphasis on tackling climate change, this is one of the levers the Biden administration can pull through an executive order. Finally, and importantly, we have a very compelling investment in Atlantica, which is our primary vehicle for growth in international, nonregulated assets. We like the Atlantica asset base with investments in over 25 long-life assets diversified across geographies and technologies. 100% of revenues are contracted or regulated with remaining average weighted life of 18 years. Atlantica is a leader in ESG and has been rated #1 of renewable energy companies by Sustainalytics. This continues to be a very accretive investment for us. As proof of our growing partnership, we have just completed an agreement to drop down 3 solar projects in Colombia into Atlantica. One of these projects is a 20-megawatt solar plant that is under construction and is expected to come online in mid-2021. The other 2 solar projects are a total of 30 megawatts that are in development. We will continue to look for future similar drop-down opportunities for nonregulated international assets. We also have our eyes wide open to technologies and initiatives that may not be mainstream today but that are already commercial and hold long-term growth potential. Energy storage is an area where we have been developing and executing on opportunities. The cost and capacity improvements on storage have followed a similar trend as in the semiconductor industry. And we are confident on the long-term potential of storage. In our regulated business, we already have approximately 12 megawatts of battery storage in operations. We also have another 18 megawatts of storage in our development pipeline. In our renewables business, we are constructing a 3-megawatt solar and storage in New York state, and we have a pipeline of a further 30 megawatts of development opportunities. We will continue to execute on this pipeline and add further commercial opportunities to grow the pipeline. Our Greening the Fleet strategy is not limited to our electric utilities. We are also working on several renewable natural gas, RNG, initiatives and have made some real progress. Our New York Kinderhook project has been filed with regulators, which, if approved, will allow St. Lawrence Gas to achieve 3% RNG in its system. This RNG is sourced from dairy and food waste and has a carbon intensity of negative 100, providing a path to material emissions reductions. We have a pipeline of RNG projects in development across our gas utilities and we expect to file for regulatory approvals in 2021. Finally, while hydrogen is further out on our road map, we are closely tracking the increased investments in the technology and the pilot project in Europe and the U.S. We will update you on these initiatives and the progress on our pipeline of opportunities as these mature. We continue to focus our efforts on Algonquin's 3 strategic pillars: growth, operational excellence and sustainability. I have covered growth, so let me touch on operational excellence and sustainability. We are a mission-critical industry, providing the daily needs of electricity, water and natural gas to our customers, and today, have an asset base of over $11 billion. Given the size and scale of our operations, we believe our strategic pillar of operational excellence will continue to provide significant benefits in the years to come. To be successful, we believe we need to be as close to our customers, communities and assets as possible. And we, therefore, operate a decentralized model with strong local teams and leadership. At the same time, we have rigor around our practices of best-in-class benchmarking and continuous learning. We aspire to be top quartile on our safety, reliability and customer metrics. We are unique in owning and operating smaller utilities across multiple jurisdictions. We are also fairly acquisitive and are continually adding to the Algonquin's family and bringing in new cultures, processes and systems. Despite these challenges, we are already close to the top decile when it comes to our safety metrics and are improving every year and getting closer to the top quartile cohort in terms of our reliability and customer metrics. In 2020, our intense focus on cost containment strategies have resulted in $18 million of savings, already above the $15 million we had committed for the year and we expect to get to $23 million to $28 million in savings for the full year. We have a very resilient business model built from long-lived assets and stable operations, and this became quite apparent during COVID-19 with only a $0.02 impact to adjusted net EPS year-to-date. We are very focused on achieving at least the permitted ROEs on each of our jurisdictions, and our differentiated strategy of decentralized operations is key to this achievement. In 2021, we expect to achieve a 9.5% weighted average ROE versus a permitted weighted average 9.6% ROE across our 16 jurisdictions. Always, in our industry, the balance is customer affordability, and we benchmarked well in our jurisdictions against many of our peers. We are also investing in upgrading customer benefits and efficiency through our Customer First Program, which will provide us with a common IT platform across all our assets and functions. Johnny will cover much more on operational excellence in his presentation. Finally, on our sustainability pillar, we released our 2020 sustainability report earlier this year, which provides a higher level of disclosure as well as other enhancements, including third-party verification of our 2019 emissions inventory. Last week, we released our task force for climate-related financial disclosure, TCFD report, which aligns our business strategy with societal priorities around climate change. All this focus has positioned us among the leaders in our industry, and our greenhouse gas emissions intensity is about 46% below a select peer group average. We are committed to continuing on this journey and maintaining a leadership position on environmental, social and governance metrics with clear targets and execution against those. We are also getting external validation on our ESG leadership with Corporate Knights naming us the tenth most sustainable company in the world and MSCI giving us a AA rating. ESG funds currently have $1.2 trillion of assets under management with European funds comprising over 85% of the total. With our strong ESG leadership, we are well positioned to attract an increasing share of investments from such ESG funds. Now let me turn it over to Jeff to provide more details on growth. Jeff?

Thank you, Arun, and good morning, everyone. As Chief Development Officer, I am responsible for working with our regulated and renewable operating teams to grow Algonquin's portfolio. I'm going to walk through the construction, development and acquisition activities that have kept us busy in 2020, starting with an overview of the $9.4 billion capital plan that Arun mentioned. You will notice a concentration of bubbles or projects on the left side of the chart for earlier years 2021 through 2023. This is normal as we can project more project certainty in this period of time. We anticipate additional projects in 2024 and 2025 to come from our greenfield pipeline and ongoing acquisition work. I will be sharing details of our 3.4 gigawatt greenfield pipeline today. The organic investments, which you can see in the middle of the chart, represent capital expected to be deployed in our existing utility footprint. Johnny is going to provide more information on these investments when he discusses operational excellence. Those paying close attention will notice a number of movements as we advance projects and refine time lines and costs. The most significant change, being the Granite Bridge project, which has been reduced to approximately $50 million in organic investments for proposed upgrades to accommodate additional pipeline capacity instead of building an LNG facility. This is great news for our customers as we found a lower cost alternative to provide safe and reliable service, while accommodating new customers being added to our system. From a capital plan perspective, the Granite Bridge project was easily replaced with a host of new opportunities, which are outlined in the dotted line on the chart that you see in front of you. I will explain more about these in the coming slides. But taking a step back, it's important to note, 86% of the capital plan is comprised of late-stage development projects, facilities that are already under construction, organic investments in our utility footprint and other transactions and investments that we are confident will be completed. The remaining 14%, although earlier stage, are currently expected to have greater than 50% probability of advancing. Now I'll have a few slides on the renewable business, starting with recent additions. On the wind side, we announced earlier today the acquisition of a 51% ownership interest in 4 wind projects located in South Texas, with a total capacity of 861 megawatts and a net capacity of 439 megawatts. We refer to this as our Texas coastal wind projects. This initiative was driven by the wind origination team, and the average contract duration for the 4 projects is over 11 years. A little bit of a step back to talk about our assets in Texas. The existing assets have a Central Texas wind profile. The third quarter production from these assets is represented by the purple line on the chart on the right side of this slide. The new projects have a coastal wind resource that builds through late afternoon. You can see the Gulf of Mexico in the background of the total at the top. This wind resources represented by the purple -- or sorry, by the blue line on the chart, and you can see how the 2 production profiles work to provide diversification benefits to our Texas portfolio. We're excited to have these new assets in our portfolio. On the solar side, we continue to make significant additions to our portfolio, driven by macro growth in the solar market and the success of our solar origination team. I will highlight the 3 larger additions. Carvers Creek scheduled to achieve COD in 2023 has a 12-year power purchase agreement with Amazon and a 15-year power purchase agreement with Starbucks. It's important to note that we see strong long-term value in Virginia, given the concentration of data centers, who are looking to secure renewable generation. The other 2 projects are located in Ohio. For these projects, we have signed purchase agreements and closing for each is expected to occur in late 2020 and early 2021. The first project, the 100 megawatts, is scheduled to achieve COD in Q4 2021; and the second at 135 megawatts is scheduled to achieve COD in 2022. PPA discussions are advanced on both projects, as outlined in the details on the slide. Once again, from a long-term perspective, Ohio has a growing renewable market and growing data center market like Virginia. Moving to the construction program. In addition to expanding our footprint of projects in our capital plan, we have been busy completing the most significant construction project in Algonquin history with 1,600 megawatts of active construction between the regulated growth and renewable growth sides of the business. This slide gives you a brief visual of the major elements of constructing a new wind facility. Working through the sequence, you start with building the access roads and foundations, then delivery of the major components are what we call the big white stuff, in anticipation of the crane work required to erect the turbines, followed by commissioning and then COD. You can see that Sugar Creek has achieved commercial operations in November of 2020 and Maverick is nearing completion. Access roads and turbine components delivered to site are at 99% and 97%, respectively, and 91% of the turbines are erected. Completion is planned for 2021. The Blue Hill project is 175-megawatt project in Saskatchewan. On this project, we elected to divide the construction into 2 seasons. This year, we completed 100% of the access roads and foundations. This facilitates the early delivery of turbine components and should allow us to take advantage of favorable summer weather to complete the turbine erection phase of the project. On the renewable side, the solar construction sequence starts with site preparation. For Altavista, contracted with Facebook, it's an 800-acre site. Although the photo makes it look simple, there's actually a significant amount of work in this stage. Once the site is prepared, you move forward with installing thousands of pools with the pilings and racking before panel installation and then moving to COD commissioning to COD. We have 2 solar projects under construction this year. Great Bay Solar II and expansion of our Great Bay Solar I project that Arun mentioned achieved COD in August 2020 and the Altavista project in Virginia, which is currently our largest project. We are on track to achieve COD with 50% of the panels installed now, and we're moving through commissioning of that 50% by the end of December. The rest of the project is expected to be completed by Q2 of 2021. This is the greenfield pipeline that Arun mentioned and that we are very excited about. It will help ensure our construction teams never run out of work. We are busy advancing new projects with our origination group, which is focused on early-stage site prospecting and the development teams, which are responsible for permitting, contracting and interconnection. We have developed the 3.4-gigawatt pipeline in addition to adding the multiple projects to our capital plan this year. We have had great success in 2019 and 2020, identifying and securing these new sites. You can see the specific projects by ISO and technology on the chart. All of these sites were selected based on and expected availability of capacity -- interconnection capacity, strong energy pricing and a strong resource in addition to local support. Given these factors, we expect the conversion rate from entry on this chart to ultimately achieving COD to be between 25% and 30%. As a result, I expect 600 megawatts to 1 gigawatt in new North American projects. This excludes the Chevron initiatives and the international projects. If the North American projects were sold when we achieved NDP -- NTP, we would expect our return on greenfield capital to be in excess of 50% a year. This calculation is based on typical development fees that we would otherwise need to pay. However, we intend to add these projects to our future capital plans, so the anticipated benefit will be a savings of $50,000 to $100,000 per megawatt. The Chevron projects are not included in the $9.4 billion CapEx plan, so we have included them here in our greenfield pipeline despite these significant milestones being achieved on these projects, as Arun mentioned. The final component of this table is the AAGES international pipeline, which is focused in Colombia and Spain. From AAGES or international milestones this year, we have secured an option to acquire, having a goal as 50% in AAGES and entered into the agreement that Arun mentioned for the first drop down to Atlantica, represented by the 20-megawatt [indiscernible] project in addition to agreeing to further the development and construction of 2 additional sites to be dropped down to Atlantica, totaling 30 megawatts. These accomplishments reinforce the international mandate of AAGES, which is to develop renewables and target markets outside of North America. To be clear, the international team at AAGES does not pursue regulated investments or investments in North America. An important component of renewable economics in the U.S. market are ITCs and PTCc, investment tax credits and production tax credits. Securing maximum available investment tax credits and production tax credit is done through either the start of physical work or a larger investment to meet the 5% safe harbor test. We have deployed both approaches. And both can be accomplished by acquiring turbine components, or and more commonly, physical work is completed by acquiring transformers. The ITC, PTC rules get a bit complicated, but essentially, the ITC percentage, 30% or 26% or 22%, depending on the timing or the PTC rate, 100% of the production tax credit or 80% or 60%, once again, depending on timing, is driven by 2 dates. The date of start construction or achieve safe harbor and the date you place the assets in service. We want to share with you today some of the projects that we anticipate using this equipment for. Firstly, we have sufficient 100% PTC safe harbor equipment that we acquired in 2016 to build 2 100-megawatt wind projects. Qualification for the 100% PTC rate is conditional upon documenting continuous efforts which we expect to do. We also anticipate using the 2018 start of physical work equipment to qualify 100-megawatt project for the 30% ITC. And similar in 2019, we acquired the equipment which we will use for 135-megawatt project. In addition, we have acquired equipment in 2020, totaling 1,730 megawatts. All in, this represents 2,165 megawatts of safe harbor equipment that is available for building our projects in our capital plan, advancing our greenfield pipeline and for -- using with future acquisitions. Arthur will discuss how ITC and PTC projects fit into our tax strategy. As we move to be much more customer focused, we are proud to announce that we have secured 675 megawatts of new offtake agreements in the last 18 months with a weighted average life of 13 years. Based on signed contracts, we will be supplying an impressive list of customers with renewable energy by 2023. Arun mentioned these names, but it's hard not to repeat them. It's an impressive list: the U.S. government, Amazon, Starbucks, Facebook, Kimberly Clark and General Mills. Building on these customer relationships is a core skill for Algonquin. Transitioning to the regulated side of the business. This slide is dedicated to our Midwest greening initiative. The ability to envision and complete these projects is what makes Algonquin a unique and exciting place to work and invest. We combine the renewable skills and entrepreneurial drive of Algonquin, the original developer, with the knowledge and skills of our utilities to solve real problems. This is expected to create value for our shareholders, savings for our customers and significant environmental benefits for everyone. A little bit of a fun fact is the towers at the St. Leon wind project are 80 meters tall with 82-meter rotors. The towers on these new projects are 120 meters tall, 1.5x the height, allowing them to capture the great resource. For those worried about the impact of COVID-19 on our construction activities, I would point out that the most significant COVID risk is the international supply chain associated with the major components to construct these sites. And this is behind us with 100% of the globally sourced turbines on site for both this right growth construction program, Maverick and Sugar Creek projects. As Arun mentioned, we are not done greening the fleet yet. We are advancing an expansion of the Luning solar project to include another 60 megawatts of solar generation and 240-megawatt hours of storage, demonstrating that a dedicated team that is driven and supported can make a difference. I'd like to just cover a little coast-to-coast overview. In New Hampshire, we have advanced and are the only utility in the U.S. with behind-the-meter battery storage with 118 batteries installed to date in our customers' homes. In New York, as Arun mentioned, we have reached agreement with a large institutional customer on our St. Lawrence Gas system, subject to regulatory approval, to supply them with 100% renewable natural gas, meeting their aggressive ESG targets. And in California, we completed the first micro grid that enables the customer to completely disconnect during the wildfire season, while providing additional system resilience in the winter. These examples demonstrate our ability and commitment to evolving our utilities, to utilize new proven technologies and being responsive to customers. Before handing things over to Johnny, I want to take a moment to reinforce that the advanced nature of the projects that comprise our $9.4 billion capital plan. As the capital plan only includes signed utility acquisitions, like New York American Water, but no other acquisitions, new utility acquisitions are difficult to predict, but it is important to note that we have added 24 utility acquisitions and $4.5 billion in regulated investments over the last 10 years, and as Arun pointed out, we have surpassed 1 million customer connections. We are advancing a 3.4 gigawatt pipeline with the expectation of adding another 600 megawatts to 1,000 megawatts into our capital plan. And we anticipate further growth through our framework agreement with Chevron and our AAGES international pipeline. I believe we are positioned to expand our capital plans beyond $9.4 billion. Thank you. I'll turn things over to Johnny now.

Thanks, Jeff. Good morning. My name is Johnny Johnston, and it's good to be with you again. As the Chief Operating Officer, I am accountable for the safe, reliable, efficient and customer-centric operations of both our regulated and renewable assets across our Liberty businesses. Sustainable growth does not just need the strong development capabilities that you've just heard Jeff talk about but also capabilities around integrating, running and improving them. In other words, operational excellence. We have built a highly competent and experienced team, and with just my top 7 leaders, we have a combined experience of over 200 years of working with the energy and utility industry. It's this experience that is key to the improved customer outcomes we deliver through our scalable local model. I'm excited this morning to talk with you about our operational excellence approach, how that drives our organic investment program, provide you with an update on our regulatory approach and finish with our recent portfolio additions. And the story to look back on 2020, the dominant topic will inevitably be COVID-19, and so it feels right to start there. Despite the devastating impact that COVID had across the communities that we serve, the combination of our diversified assets, our resilient business model, our emergency preparedness has meant that our essential services to customers have not been impacted. And overall, we've weathered COVID incredibly well so far. This has been helped by the phenomenal response of our employees who seamlessly pivoted how our organization runs almost overnight, and so a huge thank you goes out to all of them. They really have been amazing. As you'd expect, safety was our immediate priority and has remained the guiding principle all the way through. Like our construction progress you heard Jeff discuss, our renewable operations have been largely unimpacted by the pandemic and performed well. On the regulated side, initially with lockdowns, we did see a dip in demand, driven predominantly by our commercial customers. These impacts were somewhat offset by our increased residential load and further mitigated by the 61% of our revenues that are decoupled. These initial load impacts we experienced in Q2 have reduced significantly in Q3. And of course, it's impossible for us to predict the future impacts, but we expect to be able to continue to manage these as we have done this year through a laser focus on our costs. Our anticipated full year savings of $23 million to $28 million effectively break down into 3 roughly even buckets of long-term repeatable savings, one-off short-term reductions as we have reduced things like travel, and finally, some of the costs where we've had flexibility to defer the future years, but importantly, without sacrificing safety or reliability. At the heart of any good operational excellence strategy has to be the customer. We believe in the virtuous circle that good business decisions lead to happy customers, which in turn lead to better regulatory outcomes. These support the necessary investments that further benefit our customers and deliver a fair return to our investors. In 2017, we introduced J.D. Power surveys to more closely understand our customers' needs. This clearly showed us that safety and reliability is what customers value most. So I'll not surprise you that this is an area that has been a key focus for us. The 3 charts on the screen in front here represent the progress we're making. On the left for safety, we have our lost time injury rate, showing our most severe injuries. The average industry rate is just around 0.8%. You can see the excellent progress that we've made over the last few years with a 90% reduction to a rate of 0.04%. This is aligned with the best companies in the world in our sector and can only be achieved by a highly engaged team. In the middle for reliability, I've shown our electric saving performance, but I could have similarly shown improvements for both our gas and water businesses, too. Again, you can see a solid progress with 12% improvement over the last 3 years, and we continue to be focused investing in this area to help us reach our ambition of top quartile reliability performance. On the right, you can see our J.D. Power customer satisfaction scores with our thesis proving out that as we are investing to improve our safety and reliability, we see an increase in customer satisfaction, too. We're very pleased with the trend here, but we know we have more to do. For those of you that have seen our sustainability report that George will reference later, you'll see that we've committed to reaching a top quartile score of 724 by 2023. It's this relentless focus on our customers that's driving our organic investment program. From 2021 through to the end of 2025, in total, we're planning to invest $4.1 billion in and around our existing assets. This is on top of the future acquisitions and Greening the Fleet initiatives that you heard Jeff discuss earlier. These are core utility investments that are recovered through our tracker mechanisms and our regular rate case filing cycle. $2.9 billion of this is on safety and reliability. These are our key investments in modernizing and replacing aged electric wires, gas and water mains, to ensure continued safe and reliable service for our customers. Of course, in 2020, while safety and reliability is critical to our customers, it's not sufficient. Many of them are looking for a digital experience, too. We have a number of investments that we're making where we're responding to this through our customer-first program to deliver a step change in the services and experience we offer, but also building a robust platform that will support future growth. It includes a digital customer portal that will make it easier for our customers to do business with us. AMI metering that will give our customers greater visibility and control of their usage and building our data and insight capabilities that will allow us to make better decisions for our customers, and of course, better manage our costs, too. The $900 million for quality efficiency and choice cover these investments as well as customer-focused grid modernization investments, including microgrids, resiliency and electric vehicle infrastructure. Lastly, we have $300 million linked to the customer growth, both in terms of connecting new customers within our service territory and the tuck-ins that you heard Arun mentioned earlier. Finally, on the right-hand side, you can see how this investment, combined with the regulated investments that Jeff talked about, grows our rate base from $4.9 billion today to an expected $8.3 billion in 2025 and grows as part of that, our water assets from 14% to 21% of our regulated portfolio, more than doubling on a dollar basis through the 5 years. With our recent additions to -- we now operate across 16 regulatory jurisdictions, we see this really as a real opportunity as it not only reduces our risk of being too heavily weighted in any one jurisdiction but gives us the opportunity to take learnings from region to region. Our regulatory teams are all local, which helps us to understand local needs and have local relationships. Our overall authorized ROEs across all our jurisdictions is 9.6%, which is slightly down from the 9.7% that we reported last year. One of the key things that we look for is adding mechanisms that help us to stabilize revenues for us and stabilize rate impacts for our customers, reduce regulatory lag, which helps us to meet our commitment to make the necessary investments for our customers. On the chart, you can see the mechanisms to support revenue assurance or decoupling, accelerated recovery or tracker mechanisms and post-test year recovery and at least one of our modalities across our bigger jurisdictions. The green ticks show the new mechanisms that we've been able to introduce as we've worked with our regulators over the years as well as the new mechanisms with our recent transactions One of the key mechanisms that we've added this year is PISA or plant in service accounting in Missouri. We elected to take this as we are entitled to through Missouri legislation. PISA, not pizza, as I've heard some, call it, allows us to record and defer 85% of our depreciation expense and return for new qualifying electric plant immediate once the asset is placed in service. For the next rate case, the projects are put forward to be fully included in rates and the deferred costs are recovered over a 20-year period. This is a neat mechanism as it provides customer benefit by smoothing the rate impact of new investments, while also helping the utility by reducing regulatory lag. On the chart on the right, you can see the cumulative effect of PISA, combined with our other mechanisms that our overall average lag is around half the industry average at just under 4 months. For our regulated businesses, one of the key metrics we watch is our actual ROEs or return on equity versus our allowed ROEs, demonstrating that we can manage our costs and live within our allowances. I'm pleased to say that we have a strong track record here, having met our average allowed return consistently over the last 3 years. While it's impossible to guarantee future rate case outcomes, all unforeseen operational challenges, our forward plan does anticipate average ROE performances at or close to our allowed returns each year to enable us to deliver our returns while deploying -- the capital that we're deploying necessitates regular rate case filings through our local teams. In 2021, we expect to be filing 10 cases, including our Missouri electric rate case, which will include our Midwest greening project with new rates expected in 2022. We also have filings in California for both our electric and water businesses. As a result of the customer-focused capital we're deploying, we're expecting to see our rate base grow by an average of 11.2% CAGR through the 5-year period. Importantly, by focusing on investments that are expected to be flat or negative to bill impacts and managing our costs through operational excellence, we expect to be able to limit the average customer bill impact to 3.5% CAGR over the same 5-year period. As it comes to the end of my section, I did want to give a quick update on how we've been progressing with our previously announced projects. Successfully integrating these is a key part of our operational excellence strategy. In 2019, we closed our New Brunswick Gas and St. Lawrence Gas acquisitions, and the integration there has gone well. Moving into 2020 has been a busy year so far with ESSAL in Chile joining in October, Ascendant in Bermuda in November. And while it's early days, we're pleased with the progress and the opportunities that we see ahead. On the renewable side, we've onboarded Great Bay Solar II and are preparing for the 2021 projects where we'll be onboarding a further -- more than 1,200 megawatts, including Sugar Creek, Texas Coastal, Maverick Creek and Altavista. Each of these feeds into our central performance system, which allows us to track and optimize performance right down to a minute-by-minute basis. On the regulated side, we have the Midwest greening projects and expect to close on our pending acquisition of New York American Water, bringing another 125,000 water connections. We've submitted our regulatory application to the New York PSC and are currently going through the settlement process. If you've been following it closely you'll see that New York has recently proposed utility reform legislation that includes a call for the PSC to conduct a study of the benefits of a public takeover of the New York American Water system. We welcome the study as we believe it will show that investor-owned utilities with appropriate regulation provides the best outcome for customers and remain confident that we will close this transaction with American Water in 2021. So as I close, I hope you've heard how operational excellence adds value and supports our growth. I'm proud of our skilled and experienced team and their track record of completing, integrating and improving the investments that we have. I know they're excited to navigate it successfully through this next phase of our growth story. You have heard how our diversified utility platform is expected to enable us to deploy $6.3 billion from 2021 through to 2025 as we focus on customer-centric investments. And finally, it's our local approach that allows us to listen to what customers want, build strong relationships with our regulators and drive the performance of our business through operational excellence to deliver benefits for our customers and to meet our allowed returns. And with that, I'll hand over to George.

Thanks, Johnny. Good morning, everybody. My name is George Trisic, and I lead our sustainability team here at Algonquin. Pleased to have the opportunity today to discuss with you our sustainability efforts. At Algonquin, we view the management of ESG issues as an essential element of our business strategy, enabling us to create meaningful value for all of our stakeholders. A key driver for our business growth has been our strategy to develop and operate renewable generation. We view our expertise and our track record as a renewables developer and as a strong ESG performer as a competitive advantage in a number of ways. It's enabled us to apply our knowledge and expertise in renewables over into our regulated utility businesses to drive the decarbonization of those businesses. This dynamic led to the development of the Midwest Greening the Fleet initiative that you heard Arun mention earlier. When we're bidding on RFPs or M&A transactions, it gives us credibility with target companies, governments and regulators, as we can demonstrate expertise and a track record of decarbonization. We believe this was a key consideration in our successful bid for the recent Bermuda acquisition. Our strong ESG performance provides credibility with customers who are seeking to meet their own renewable energy needs. Recently, we've contracted about 675 megawatts of renewable energy offtake to customers in the U.S., many of them recognized strong brands globally. We believe our ESG performance and renewables experience was a key factor in the announcement earlier this year of our master agreement with Chevron to work with them to achieve their own renewable energy goals as their due diligence process in selecting a partner included a review of our own sustainability credentials, track record and achievements. Our strong ESG performance provides access to green financing opportunities. Our most recent green debt offering transaction was oversubscribed and this resulted in a very favorable pricing to us. And finally, a strong ESG story helps us to attract and retain talent. Let me share with you how we're doing as an organization in meeting our own sustainability goals. Last year, we set 9 sustainability goals that were related to key initiatives that existed in our business strategy that we had identified is linked with ES or G matters. I'm pleased to report today that we're making strong progress in all of them. The closure of our Asbury coal generation facility in Missouri earlier this year will enable us to achieve by 2021 our goal of reducing emissions annually by 1 million metric tons of CO2 ahead of schedule. And with approximately 1,400 of new megawatts of new wind and solar generation projects under construction and the additional projects that Jeff talked about in our $9.4 billion capital plan, we are well on track to achieve our goals of 75% renewables and 2,000 megawatts of new renewables capacity in our fleet by 2023, doubling our renewable generation portfolio. On our socially linked goals, we're making strong progress and on the cusp of achieving top quartile performance in our customer and employee stakeholder-related goals. On our governance goals, we've been progressing well by ensuring our compensation is linked to our sustainability goals and by continuing to build a strong compliance-based culture. And in 2021, you'll see us adding additional ESG-linked goals to our compensation program metrics. We're also pleased to report that we've achieved our third governance-related goal by releasing our first ever TCFD-aligned report last week. Our sustainability efforts have been recognized, as evidenced by our AA MSCI rating, which was recently reaffirmed and our addition to a number of ESG-linked stock indices over the past 2 years. Now let's have a look at how we're doing from a carbon accounting perspective. Decarbonization is a key component of our business strategy. We've been successful in reducing our own CO2 emissions by more than 30% over our 2017 baseline. And when you look at the renewable energy produced by us from our wind and solar fleet, from 2018 to 2020, we have avoided approximately 4 million tons of CO2 equivalent emissions. If you put this in another way, if you were to use as a proxy, the average carbon intensity of the National Power Grid in Canada or the U.S., depending on where the asset is located, what we've done is equivalent to taking about 900,000 cars off the road per year or planting over 66 million trees. And if you look on the right side of the slide, you'll see that relative to a representative group of U.S. peers, we've got an attractive carbon intensity profile as a business. This makes us an attractive investment for those portfolio managers who are looking to lower their own portfolio of carbon intensity metrics. And one thing I'd like to note is that you might see our total carbon numbers fluctuate from time to time as we do acquisitions. This was the case when we acquired the Empire District Electric company and is also the case with our recent acquisition of Ascendant in Bermuda. But I want to confirm that as we've demonstrated with Empire, this organization has both the expertise and the track record to green those assets over time. A bit now about our recent sustainability reporting. This fall, we released our 2020 sustainability report, demonstrating our ongoing commitment to increase transparency and improve disclosure in our ESG reporting. The report contains more data to meet GRI core standards as well as additional SASB data disclosures. We also added, for the first time, Scope 3 and SF6 data emissions, and we had our 2019 emissions data reviewed by KPMG. We understand the necessity to continue to improve data quantity and quality and our sustainability team remains focused on that as we move forward. We also understand the importance of good quality data for many of you who are being increasingly required to add additional ESG elements and considerations in your own research and reporting on companies. Another important milestone for us has been the publication just last week of our first ever TCFD aligned report on the impact of climate-related opportunities and risks to our business. And while the climate change scenario workshops that we held this year confirmed for us that we're on the right track with a number of our key business strategies and risk management initiatives in addressing some of the climate-related impacts we identified in our business, we do acknowledge there's more work to be done. The other thing I'd like to point out is that our TCFD work highlighted that our business strategy of geographic and commodity diversity provides a natural mitigant to the regional impacts that climate change might bring about. And as I wrap up, I'd like to leave you with a few key points about how you might want to think about Algonquin in the sustainability context. There's a strong linkage between our business strategy and sustainability. We see our renewables expertise as a key competitive advantage to us. And when you think about climate change, Algonquin's geographic and commodity diversity is an asset. Our carbon intensity profile is lower than many of our utility peers. And as you heard from Jeff, in his presentation, with a robust 3.4 gigawatt greenfield renewables pipeline in addition to the opportunities outlined in our $9.4 billion capital investment program, Algonquin remains a business that's well positioned for continuing growth in the transition to a lower carbon world. And with that, I'd like to turn it over to Arthur Kacprzak, our CFO.

Thank you, George, and good morning, everyone. Great to be here with you this morning. My name is Arthur Kacprzak. I'm the Chief Financial Officer of Algonquin. And including my previous role as Treasurer, I have been with the company for over 8 years now. I'm going to spend the next several minutes discussing on how some financial considerations tie into our future plans. First, I'll spend a few minutes covering off some additional facts about our updated 5-year capital plan. Then I'm going to review how we are positioning our balance sheet to support this plan, including how we intend to finance it. I'll then touch briefly on our tax position and how that supports our growth plans. And lastly, I'll review outlooks for adjusted net earnings per share and dividends per share. As Arun and Jeff mentioned, we are on track to complete over $1.3 billion of the $9.2 billion investment plan we have set up for ourselves last year. This year, we are adding an incremental $1.5 billion to our CapEx plan, which brings it to a new total of $9.4 billion of expected investment over the next 5 years. We see both our regulated and renewables businesses growing in roughly the same proportion as they are today. As a result, we project our adjusted EBITDA growing by a 5-year CAGR of 15%, while maintaining conservative business mix of approximately 70% coming from regulated utilities. Upon executing on this plan, we expect to add approximately 2.1 gigawatts of renewables to our fleet, and our rate base is expected to grow by $3.3 billion, which translates to an 11.2% annual growth rate. As noted earlier, this $9.4 billion plan is not predicated on any incremental M&A and does not factor in successful completion, the potential future greenfield developments Jeff discussed earlier. Before I discuss some of the financial impacts of this growth plan, including how we intend to finance it, I would like to touch briefly on how Algonquin has been evolving and diversifying its sources of capital. We believe that having diversified sources of capital not only derisks funding but also provides for an overall lower cost. As everyone knows, capital markets can ebb and flow, and with the menu of various financing options, we can choose capital sources that are most cost advantageous to us at the time. Our sources of capital have evolved with the company and its needs. Over the last 10 years, as the company grew, we kept pace by scaling funding sources accordingly. As the company needs evolve, we have also been able to find funding sources that met those businesses. I want to highlight some of the recent sources of capital that we have added to our toolbox. In 2019, we launched our ATM program in both Canada and the U.S., allowing from what we believe is a cost-effective means to raise base equity capital. Also, in 2019, we completed an inaugural U.S. marketed offering, which introduced Algonquin to a new pool of high-quality investors in the U.S. In 2020, Liberty Utilities expanded its financing platform and issued a U.S. 144a bond, providing Liberty with a new pool of capital that is scalable for larger offerings. As George mentioned, to highlight our commitment to sustainability, we qualify this as a green bond. Looking forward to 2021, we are evaluating the issuance of mandatory convertible equity units, which are used frequently by some of our utility peers in the U.S. What is attractive about the security is the ability to better match cash flows of when investments are made with when the returns are received, the securities deferred the issuance of shares until conversion in 3 years or provide the issuers with 100% equity credit immediately. Investors benefited from an enhanced yield and the issuer can partly benefit from share price appreciation, which potentially results in an overall lower cost of capital compared to common equity. Turning now to take a closer look at our balance sheet and how these sources of capital are currently used. We maintain a strong BBB flat balance sheet that is well diversified and positioned to support future growth. Let me walk you through some of the main categories in our capital structure. A stable equity underpinning represents approximately 55% of our capital structure. We are dual-listed in Canada and in the U.S. on the TSX and on the NYSE. In Canada, our strong equity franchise has recently been recognized with Algonquin's addition to the blue-chip TSX 60 index. As mentioned earlier, we have also been expanding our investor base in the U.S. after our inaugural offering in 2019. Tax equity continues to be an important source of funding for our renewable projects. Our strong balance sheet and development experience makes us a preferred partner to the key players there. Moving to the left on the pie chart. Long-term debt represents approximately 36% of our capital structure. We have 2 key independent debt platforms that provide deep access to the North American debt markets. On the renewable side, we believe our platform there provides us with a competitive advantage in obtaining flexible and cost-effective financing for a portfolio of projects. The debt platform on the regulated side provides for scale to our diversified family of utilities, allowing them competitive access to the net capital markets. Lastly, hybrid securities are approximately 9% of our capital structure right now. Hybrid securities provide another pool of cost-effective capital. With characteristics of both debt and equity, they receive 50% equity credit from the rating agencies. Algonquin has 2 series of callable subordinated 60-year fixed to floating notes outstanding and has room for up to 15% of its capital structure to issue new hybrid securities, which currently translates to approximately $800 million. Liquidity support for these financing platforms comes from over $1.5 billion of long-term committed senior unsecured revolving credit facilities. In addition, this year, in response to the uncertainty in the markets, we've also secured short-term credit facilities, providing for an incremental $1.6 billion of liquidity for a total liquidity capacity in excess of $3 billion to support our growth. Turning now to provide a bit more detail on how we think about managing our credit metrics. First and foremost, we are highly committed to maintaining our BBB flat credit rating. Algonquin is rated by S&P, Fitch and DBRS, with all 3 rating Algonquin as BBB flat. We believe our BBB credit rating optimizes our cost of capital by not only providing for the issuance of cost-effective debt but also reducing the risk to our equity holders. We consider FFO to debt as our main governing metric for rating purposes, targeting 15% or better. We strive to maintain sufficient headroom in our credit metrics to allow us to mitigate against unexpected events, like COVID-19, but also provide us with some flexibility to take advantage of strategic growth opportunities. So with that backdrop, I will now turn to how we expect to finance the $9.4 billion 5-year capital plan. Looking at the pie chart on the right, as you can see, our uses of capital are anticipated to be split approximately 70-30 between regulated and renewable businesses. The pie chart also highlights the certainty of the expected uses with the deeper shades being more certain. Turning to financing. Looking at the pie chart on the left. The easiest way to think about our sources of capital is to break the pie into approximate 1/3. 1/3 or $3.1 billion of our financing needs are expected to be solved with the cash we generate and retain in the business. The next 1/3 is expected to come from debt issue, primarily from 2 bond platforms I discussed earlier, but also from incremental hybrid debt, which receives both debt and equity credit from the rating agencies. The remaining 1/3 is expected to come from equity. Our equity sources themselves are further subdivided with a large portion coming from tax equity that is used as a financing source for renewable investments. The remainder comes from a variety of sources as follows: a base level of equity funding can be sold for by our Drift program, which has enjoyed consistent participation over the years as well as our ATM program, which is another tool that we started to use last year and this year. Turning to discrete funding. There are also multiple sources of capital that receive equity credit available to us. Hybrid debt, as I just mentioned, provides us with 50% equity credit. And as discussed earlier, mandatory convertible equity units are an attractive security we are evaluating, that is expected to provide us with 100% equity credit. Finally, we have well-established access to the Canadian and U.S. equity markets for common share offerings, which can be used to access equity capital opportunistically. The last source of capital I would like to mention is capital recycling. We have introduced this potential last year. And although there are no concrete plans currently, as any company, we continue to evaluate our assets for potential value creation. Since this is a long-term plan, I would be remised not to include it. Next, I want to touch briefly on Algonquin's tax position. Algonquin's Canadian domicile offers opportunities for tax planning and financing its U.S. operations. As a result, Algonquin enjoys an advantage through a lower overall effective tax rate. Algonquin currently does not pay material cash taxes but absent further tax planning is expected to do so sometime in 2025. This allows for a potential opportunity to take advantage of tax credits generated by our renewables business, sheltering up to $400 million of cash taxes and further pushing out this cash tax horizon. Self-monetizing tax credits is complementary to Algonquin's strategy of utilizing tax equity financing. It allows for the optimization of otherwise stranded production tax credits that are generated during the commissioning phase of a wind project but before tax equity investments. We also look to self-monetize credits from projects where the cost of obtaining tax equity financing may not be economical. Our current plan calls for modernization of approximately $30 million of tax credits in 2021 with future monetization possible where it is optimal to do so. Now I'd like to turn to how all this ties into our future expected results. But before looking forward to 2021 and beyond, I wanted to spend just a minute on 2020. I have to acknowledge that 2020 has been a challenging year for us like many businesses. We have endured through the impacts of COVID-19, unfavorable weather conditions in the first part of the year and delays in the closing of our Bermuda acquisition. However, working through these challenges also highlighted the resiliency of this company. We responded to offset some of the negative earnings pressures by implementing cost containment measures that are expected to save up to $28 million this year. We continue to provide safe and reliable service to all of our customers. Construction of our renewable energy projects continued uninterrupted and is expected to be generally completed on time. We continue to invest this plan in our rate base and we have maintained a strong balance sheet with ample liquidity. So looking forward to 2021, we expect to see the full benefits of some of the groundwork that has been laid down in 2020. Our results in 2021 are expected to include the benefits of the addition of approximately 1,400 megawatts of new renewable generation projects that have been in construction this year and -- or are expected to be completed later this year or early next. In addition, the investment in the 861-megawatt Coastal Texas wind project that Jeff discussed earlier is expected to close in January and will also add to next year's earnings. In 2021, we will also benefit from the first full year of operations from our Bermuda electric utility as well as the ESSAL water utility in Chile, which both closed later -- late this year. As mentioned, in 2021, we expect to invest significantly in greenfield development on which we expect to earn significant returns that will potentially drive future accretion. However, since most of these investments are initially treated as noncapital, they will have a negative impact on our adjusted earnings per share in 2021. In total, we expect our 2021 adjusted net earnings per share to be within a range of $0.71 to $0.76. To arrive at the lower end of the range, we have assumed a pessimistic COVID-19 scenario, closing New York American Water in the fourth quarter of 2021, which is the least advantageous from an earnings seasonality perspective and a conservative renewable energy estimate. To arrive at the upper end of the range, we have assumed a very minimal COVID-19 impact scenario, closing of New York American Water in Q2 2021 and renewable energy generation in line with long-term average targets. Looking forward over the next 5 years, we expect to see adjusted net earnings per share growth of 8% to 10% per year. We believe the growth range indicated here is achievable and our base plan currently falls around the middle of this range, but we will be targeting and we'll be disappointed if we do not hit the top end of this range. As mentioned before, the 2021 planned investments into greenfield development are expected to drive meaningful IRR and accretion. But to be conservative, we have not factored in any success from this development into our base plan, but have, of course, forecasted for all of the anticipated costs. We have also not factored in any further M&A success into our base plans. Success in both these areas could drive growth into the top end of the range. The self-monetization of renewable energy tax credits is another potential upside to the plan that we have not considered in our base case. As mentioned earlier, we expect to have room to shelter up to $400 million future cash taxes through self-monetization. Combined with the investments we have made into safe harbored equipment, along with our development pipeline, there is a potential for further optimization of returns. I would like to remind everyone that our growth plan is based on maintaining a BBB flat investment-grade balance sheet which we expect to further strengthen during this forecast period. We believe a strong balance sheet is critical to maintaining execution flexibility and long-term value creation. The last item I wanted to touch on is our dividend outlook. Our dividend, of course, is at the discretion of our Board. And as management, we are focused on ensuring adjusted net EPS growth. However, we do want to provide some context with respect to how we think about future dividend growth. First of all, we want to ensure sustainability of our dividend. To do so requires setting an appropriate long-term payout ratio target that is based on adjusted net EPS. In setting this payout ratio, we consider the sources of cash flow generation in our business, which currently comes from approximately 70% regulated utilities and 30% IPP business. Pure play utility companies typically have payout ratios of about 60% to 70% based on our earnings. IPP businesses, however, set their payout ratios based on FFO. Combining these 2 parts together points to a payout ratio of somewhere in the range of 80% to 90% which we believe is a long-term sustainable target for Algonquin. For 2021, we expect that our adjusted net EPS growth will support a 10% dividend increase and will bring our payout ratio to within the upper end of this long-term guidance. Future dividend growth will be guided by the target payout ratio and will consider current and projected adjusted EPS growth, capital reinvestment opportunities, and of course, will be at the discretion of our Board of Directors. I want to stress that the payout ratio of line is a long-term target, and we continue to view dividend growth as an important part of the total return we provide to our shareholders. With that, I will turn it over to Arun for some closing remarks. Arun?

Thanks, Arthur. And before we open the line for questions, I wanted to leave you with our key messages that I hope came through during this morning's presentations. I remain very excited that Algonquin's lines of businesses are aligned with the largest societal journey towards decarbonization, and we are well positioned to benefit from this. Given this alignment and our growth levers across both our regulated and renewables businesses, we expect to continue providing our shareholders with outstanding returns. As we have detailed, we are confident in our capital plan and our ability to continue to deliver exceptional growth as measured by adjusted net EPS. With our mix of regulated and renewables, we have a very resilient business with a strong balance sheet, and we are a leader in sustainability as measured by our carbon intensity. In summary, our 3 strategic pillars of growth: operational excellence and sustainability will be the key foundation as we continue to build the business and 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.

[Operator Instructions] Our first questioner is Nelson Ng of RBC Capital Markets.

My first question is in relation to the RWE Wind acquisition. I think historically, on the renewable side, you've acquired projects that were construction ready. And my understanding was the expected returns would have been a little bit higher. Whereas in this case, I guess, you'll essentially be buying the assets when they're all operating. Could you just give us a bit of color as to kind of what brought you to this specific transaction? I presume it was a competitive process, but can you just give a bit more color on how this transaction transpired?

Sure. It's a great question. So you're absolutely right, Nelson, I mean, we usually like to build out -- bring our full expertise and skill set in terms of development, financing and construction management into our renewable development portfolio. At the same time, this one was a fairly compelling one, given the fact that it's a coastal wind regime, really nicely balances out our other wind projects in Texas. And we believe that it is also very derisked and because of the fact that 2 of them are already in operation. And on top of that, we felt that we were able to get in there at a very compelling price for us. Finally, I mean, we're always a company that likes to continue to learn. And while we own and operate the vast majority of our assets, RWE as one of the biggest owners and operators of renewable energy, we believe will be a really good partner for us as a partner for us to continue to learn with them as well. Jeff, is there anything to add?

Nelson, it's Jeff. And I think the only thing I would add to what Arun laid out is that RWE was definitely looking for a strategic investor and that allowed us to transact at a price that was attractive to both of us.

My next question just relates to M&A. I know it's been a core part of your growth strategy. But on the regulation or the regulated utility side, can you just give us some of your thoughts on water, gas versus electric? And I know you have assets in each one. But I know in today's environment, gas assets are being viewed less favorably. Can you talk about your view on gas, whether there's any value on regulated -- whether you see value on regulated gas assets? And then secondly, on geography for M&A, now that you've officially expanded into Bermuda and Chile, could you just talk about potential additional geographies? Or whether you're more focused on North America versus international on the regulated M&A side?

Sure, Nelson. So first of all, on electric water versus gas, we believe that being in key modalities is actually a really big strength for us in terms of being able to learn a lot from each of other modalities. There's very unique ways of owning and operating these different modalities. So we believe that's a definite strength as well as it diversifies our risk base as well. So if you look at the last -- this year's M&A, clearly, those were both in the electric and in the water sector. On gas side, I would like to point out from a bigger future perspective that, frankly, a lot of the decarbonizes that happened, frankly, this century was actually largely attributed to Shell gas substituting for coal. So we believe that gas has been a significant decarbonizing fuel. And if we are able to find that unique characteristics where gas will continue to be decarbonizing fuel, while at the same time, we're on the right side of public policy. We could look at M&A acquisitions on the gas side as well. But we will be very disciplined on that front. Your other question around geography, Bermuda and Chile. Bermuda, we believe that it's false click in North America. So really, the only exception is Chile. Chile, we went in there because there is a low business risk, strong regulatory regime. So there's a lot we liked about Chile as well as the fact that it's a water utility that we were able to get that at a very compelling price. So all of that to say that, by and large, we will remain North American energy and water company and it would have to be a very compelling transaction for us to be -- go outside our North American footprint.

Our next question comes from Sean Steuart of TD Securities.

A couple of questions. The overall 5-year EPS CAGR target of 8% to 10% is down a little bit from the 9% to 11% range you would have given last year, which I suppose is partly a function of the company maturing. Can you comment on implicit assumptions, though, in your development returns on the nonregulated side? How you expect regulated ROEs to trend over that horizon? And how that factors into the overall EPS growth target?

Sean, greeting, lots of questions and sub-questions. So let me start and then I'll probably turn it to Arthur and others to provide some of the details and colors as well. So first of all, 8% to 10%, look, we believe that it still retains our leadership ability. If you look at any one of our peers, we're certainly at the very high end of the kind of growth CAGR that we're able to provide in the industry. There are several reasons, I think it's somewhat moderated. I mean first of all, look, a lot of the numbers itself, right, I mean, as we grow larger, it's going to be difficult to maintain the kinds of returns we had as a smaller company. But on the -- also, combined with that, there's a number of things that we are doing to make sure that our growth trajectory stays high over the long term as well. And so as we talked about on this call, we're investing significantly in our 3,400 megawatt greenfield pipeline, and we'll continue to deliver against that and add to that pipeline. We're also -- I think I talked about in my narrative, we have a lot of assets and also we have owned and operated smaller utilities across a broad number of jurisdictions. So we are, in fact, investing heavily to make sure we have the IT platform and a software tooling that will provide us the level of efficiency and a platform that allows us to continue to grow as well, right? And the third thing we're investing in strengthening our balance sheet as well. So all of those are foundations that we're strengthening that will allow us to keep that kind of leadership growth over the long term. Arthur, any more details?

No, I don't have too much more to add. Maybe I'll just leave up with your second part of the question. I mean it's good to have a crystal ball and see where ROEs are going. I mean we have ROEs right now around 9.6%. I mean we're assuming, obviously, at fairly stable trend over the forecast period. Just being a drive to response to that.

Okay. And Arthur, just wanted to follow up on your comments with respect to asset recycling. Some of your peers in the nonregulated side are taking a more aggressive approach given arguably frothy valuations for M&A potential there. Can you give us a bit more detail on how your thought process there is evolving? And I think you qualified it as sort of a long-term or midterm alternative for a portion of the funding plans, but any context on scale you might be thinking of there and specific opportunities?

Sure. Let me start, and then I'll turn it over to Arthur. So asset recycling is clearly one of the tools that we're always looking at. We are continuously evaluating all of our assets to find out if we are the best owners and operators of those assets or someone else. Frankly, the Columbia transaction we just announced is a part of asset recycling as well from our perspective. But -- and when it was announced, it was part of a 5-year plan. There could be more over those -- that 5-year plan horizon.

Yes. I really don't have too much more about. I mean as we think about asset recycling, this, in general, is looking at -- we are really the best owner of the assets and, look, we don't love any of our assets so much that we would not get rid of them. But if anything, it's probably on the renewable side that might lend itself easier to asset recycling. But again, no quick concrete plans. It's a long-term plan for us right now.

Our next question comes from David Quezada of Raymond James.

My first question here, just on the -- on your greenfield development pipeline, the 3.4 gigawatts. And I believe you mentioned 600 megawatts to a gigawatt of that you expect to be built. Just wondering how that squares with the 2.1 gigawatts or so of safe harbor projects. And if you contemplate, I guess, potentially selling down some of those development projects later on -- at a later stage.

Yes. Thanks, David. It's Jeff. And the safe harbor is a couple of answers, I guess, to dig into that. But the 2.1 gigawatts of safe harbor are effectively, when we look out over the 5-year plan, what we would hope to build out. And then as we go into asset recycling and the overall capital plan, we will need to decide whether those are all built and continue to be owned by us or whether they'd become part of a partnering or sell-down strategy or -- as we move forward. And so I think the sizing of safe harbor was to meet our growth appetite for the next 5 years.

Okay, great. That's helpful.

Yes. Sorry, and did I -- David, did I get your full -- did I answer your question on the 3.4, moving to 600 to 1,000 megawatts?

Yes, I believe. So, thank you, yes. So just one other one for me. The move to 75% renewables, I guess, from 49% today, just curious if that contemplates any other asset closures? Or is that primarily achieved just through the Asbury closure plus the addition of other renewable assets?

Sorry, I was confused for a second, but I think he's referring to the 75% renewables in our sustainability objective.

For 2023.

That's right, Johnny, 2023, in terms of the impact or the total number. So the -- if I look at our goal in terms of what's in the pipeline and what's being built, the gap really is closed by what's in our capital plan already. So I don't think there's much that hasn't been identified or not to assume that. So we're fairly confident in that.

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

Congratulations on all the updates. So where to start? I know 2 questions here. But if you can, maybe let's just start with this, that's unpack '21 guidance and the year-over-year walk. I noticed that there were some tax rate changes from where you had articulated prior for '21. It seems like that might be one of the bigger deltas. But you mentioned a variety of different things for the course of the call. At risk of repeating them all, can you rehash a little bit about the -- what drives the year-over-year growth, both the positives and the negatives there? And then I've got a follow-up.

Yes. Sure, Julien. It's Arthur. So I mean, I'd say, reiterated, 2020 was a bit of a base setting year for us. We've been quite busy in 2020. So 2021 is going to see a lot of benefits from what we've accomplished in 2020, including BELCO, ESSAL, we've got the coastal Texas wind. So without again rehashing this too much, so all those are going to be incremental to EPS. On the flip side, we are investing in greenfield development. And it is a significant investment that we're looking somewhere in the $15 million to $20 million range next year. So that is going to have an offsetting negative impact to EPS. And the last one, yes, as you did mention -- as you mentioned, tax rate changes. So we are looking at self-monetizing a few projects for next year. That's going to -- for a total amount of around $30 million, just under $30 million in terms of projects being self-monetized. So that is going to have, on the flip side, a positive impact as well.

And just to clarify that very quickly. With respect to the tax rates going forward, you would expect to have continued self-monetize? I just want to understand because, obviously, that provides benefits in 2021, but what about on an ongoing basis? And then separately, my real second question, if I can. Going back strategically, you mentioned upper end of the 8% to 10%, I mean, and you've articulated some of the points within the upper and lower bounds of '21. But on a 5-year view, what gets you to the upper end there? And I'll leave it open-ended there. I'm curious where you would focus your efforts, what we should be paying attention to? Because a lot of different things you will point to, whether it's RNG or some of the other things you didn't emphasize much here.

I mean if you think about the upper end right now, as mentioned, the greenfield development pipeline, we've assumed no success there right now. We're actually -- that's very conservative in our base case forecast. And our base case, by the way, is the middle of that range. So any success there is going to drive us towards the upper end. M&A success potentially. And again, M&A, you can't count on M&A, and it's not something that we factor into. So -- but given our prior history, you can probably assume that there will be a transaction here and there that will come in over the next 5 years. So that will certainly drive to the upper end of the range. And the other thing we mentioned we are also investing in IT technologies. IT technologies that support not only customer choice, but also support our back-office system. And those things -- that's a little bit harder to quantify what the impact of those investments are. But you can certainly say there will be a benefit to that. You really can't quantify it, but to some extent, that does provide some upside potential as well.

And Julien, just one more thing to add, besides the M&A and the greenfield that Arthur referred to. I mean you just look through the new investments that we made -- announcements we made this year, which were not in our 2019 Investor Day, for example, the Texas coastal wind we just announced; ESSAL, which was not in the 2019 plan; Carvers Creek; Chevron. So over the next 5 years, we remain very confident that we're going to be -- continue to be doing these kinds of new investments that will more than compensate for some of the things that may fall off, right? I mean, for example, one of the ones that fell off from last year was Granite Bridge that's because we were able to find a much better solution for our customers. But it is a 5-year plan, and there will be some slight variations from time to time, but we remain very confident that our pipeline of -- between -- among M&A, greenfields and new opportunities we get, we'll more than compensate for anything else and will take us to the higher end of that growth range.

Our next question comes from Robert Hope of Scotiabank.

First question is just on your international strategy, taking a look at your kind of capital backlog here is very North American centric. So I guess the question is, do you need the international strategy on the Atlantica side? And are you generating sufficient returns there, especially given the fact that you're putting new shares into Atlantica at relatively robust levels?

Sure. Robert. So look, I mean, like I said in my remarks, we believe that Atlantica has been a very compelling investment for us. It's also part of -- when you look at -- on our renewable side of the business, it's really our growth opportunity for nonregulated international opportunities. And I think Atlantica has done a great job over the last several years. And especially when you look at when we actually entered into that transaction and from the economics, so that absolutely has been a very, very compelling transaction for us. And again, we look upon it as one of the growth levers that we have in our renewables business.

All right. That's great. And then just a bit more detail into it. As we take a look at you monetizing some tax attributes into 2021 as well as 2022, can you help us understand kind of what are the key drivers of that? Is it that you will see some additional cash taxes in the near term? Or is it kind of just a discrepancy between what tax equity rates are versus the potential for cash taxes in the future?

Robert, it's Arthur. I'll try to be responsive to that. So our cash tax horizon, first of all, is 2025. So it's anything we monetize right now really pushes out the cash tax horizon. So there's no immediate, call it, requirement to do anything. At the same time, by self-monetizing, we are being opportunistic and I'll give you an example. First one is with respect to, as I mentioned in my prepared remarks, around the -- during the commissioning phase of a wind farm, you have just naturally some PTCs that would call it, not be efficiently used because tax equity doesn't fund. Turbines are basically placed in service turbine by turbine and tax equity fund that's when the whole thing is done. So there's some natural efficiency there. And given the amount of projects we're putting in service late this year and early next year that, that creates some opportunity. The other area is just opportunistically looking at places where tax equity might be a little bit more expensive and not as efficient. An example, we have a fleet of some community solar that is a combination of several smaller projects that really lends itself a lot better to being able to use our internal tax capacity and from an economic perspective, pencils better for us. So those are the type of 2 examples that we look at. I mean we tend to use our tax appetites. We're most beneficial to do so. And next year, there were some good opportunities for that. And as we look forward into 2022 and so forth, I'm sure, as we look at the greenfield pipeline and even some of the projects that are on the Board right now, there may be opportunities to optimize around those, but we haven't forecasted anything right now. It's just a bit too early for that.

[Operator Instructions] Our next question comes from Mark Jarvi of CIBC.

First question is for Arthur. Just on the funding mix, if I look at the slices of the pie, this year versus last year, free cash flow goes up a little bit on an absolute dollar basis. I guess just as you increase the scale of business, that kind of comes down a little bit and equity stays flat. Can you just maybe help us understand sort of pushes and pulls that change that slices of the pie this year?

Absolutely. And good observation. I mean free cash flow is going up because, I mean, we're adding just 1 more year, call it, to the plan. And as you imagine, the back end of the year is going to have a lot more cash flow than the front end of the year. So given the scale of the business and how it's increasing, it's just going to naturally start becoming to be a larger piece. But proportionately, it's staying roughly the same kind of, call it, what it was last year. With respect to debt, yes, debt is dropping as a funding source a little bit. And I did mention we are looking to strengthen our balance sheet over the next 5 years. And again, this is over the next 5 years. So as we think about 2024, 2025 and maybe even a little bit sooner, we'll be looking to target to have our FFO to debt somewhere 16 and north of that as a base target. So there is certainly a little bit of strengthening of the balance sheet there that we believe just provides us with more financial flexibility. And on the equity side, if you really look to roll the equity requirements this year over last, I mean it's staying fairly consistent given the fact that we are adding $1.5 billion of additional new investment opportunities. If you kind of try to break that out and see how that would be financed, you'll find that, that all hangs together.

Okay. That makes sense. And then my next question, I guess, is just if you think about investment split between utility and unregulated power business, obviously, some element of the CapEx utilities is just a hold rate base flat and so -- versus actually growing the earnings. And then it seems like a lot -- a bit more of the upside drivers you've highlighted today are on the greenfield side for the unregulated power. So just curious if the earnings mix sort of have been shifting a little bit higher towards the renewables and you started to come down below 70% towards 60%, how do you kind of reset that balance? Is it asset sales? Is it expectations that M&A on the utility side sort of rebalance that preferred asset mix? Or would you be fine to kind of see the utility earnings mix come down a little bit from here?

Sure. So Mark, I mean, on your overall question, we really haven't had any issues, given the number of growth levers we have in finding and transacting on opportunities out there, right? And given our strong desire to remain at BBB flat, one of the things we do look at is our business mix and we want to keep it at that approximately 70% and approximately 30% mix between the regulated and renewables. And again, so far, we really have not had any issue to that. The one thing that probably is more lumpy is probably more the M&A transactions on the regulated side. And if anything, actually, it could bias us towards having that business mix be higher on the regulated side, just given the lumpiness of some of those M&A transactions on the regulated side.

So even if you kind of hit the ball out of the park on the greenfield development pipeline, you wouldn't foresee a need to sell some assets to get that earnings and mix back to the right sweet spot?

Right now, we don't see so. But again that's something that we follow very closely. I mean every time we look at any transactions, we're looking at a lot of different metrics, including things like FFO to debt and business mix and things of the sort. So we've been pretty disciplined about keeping that kind of a business mix intact so far. So -- but in the future, if the greenfield opportunities in 2023 and beyond becomes so much bigger, I mean, there's a lot of things we could do. We could, in fact, sell some of the development projects, have somebody else construct them and operate them. So obviously, we'll be looking at all kinds of options at that point in time.

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Banskota for closing remarks.

Fantastic. Thank you, operator, and thank you very much to all the analysts and investors who joined us today. Thank you for your time. And we are always available for our investors. So if you have any questions or want to get hold of us, please do feel free to reach out. And with that, I'll turn it over to Amelia.

Thank you. Our discussion during the presentation contains certain forward-looking information, including, but not limited to, our expectations regarding future earnings, capital expenditures and growth. This forward-looking information based on certain assumptions, including those described in the accompanying slides shown and our most recent MD&A filed on SEDAR and EDGAR and available on our website. This forward-looking information 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 presentation speak only as of today's date 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 presentation, 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, APUC's method of 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, please refer to the accompanying slides shown into our most recent MD&A filed on SEDAR in Canada and EDGAR in the United States and available on our website. And that concludes our 2020 Investor Day presentation.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.