Algonquin Power & Utilities Stock

Algonquin Power & Utilities Corp. (AQN) owns and operates a diversified portfolio of regulated and non-regulated generation, distribution, and transmission assets.

Most of the company’s business is conducted through subsidiary entities, including those entities, which hold project assets.

The company’s operations are organized across two primary business units consisting of: the Regulated Services Group, which primarily owns and operates a portfolio of regulated assets in the United States, Canada, Bermuda and Chile; and the Renewable Energy Group, which owns and operates, or has investments in, a diversified portfolio of renewable generation assets. The company also undertakes business development activities for both business units, primarily in North America, working to identify, develop, acquire, invest in, or divest of renewable energy facilities, regulated utilities and other complementary infrastructure projects.

Regulated Services Group

The Regulated Services Group primarily operates a diversified portfolio of regulated utility systems located in the United States, Canada, Bermuda and Chile serving approximately 1,244,000 customer connections as of December 31, 2022. The Regulated Services Group seeks to provide safe, high quality and reliable services to its customers and to deliver stable and predictable earnings to the company. In addition to encouraging and supporting organic growth within its service territories, the Regulated Services Group seeks to deliver long-term growth through accretive acquisitions of additional utility systems and pursuing ‘greening the fleet’ opportunities.

Renewable Energy Group

The Renewable Energy Group generates and sells electrical energy produced by its diverse portfolio of renewable power generation and clean power generation facilities primarily located across the United States and Canada. The Renewable Energy Group seeks to deliver growth through new power generation projects and complementary projects, such as energy storage. The Renewable Energy Group operates, and directly owns interests in hydroelectric, wind, solar, RNG and thermal facilities with a combined gross generating capacity of approximately 2.5 GW and a net generating capacity (attributable to the Renewable Energy Group) of approximately 2.1 GW.

In addition to the assets that the Renewable Energy Group operates, the Renewable Energy Group has investments in generating assets with approximately 1.4 GW of net generating capacity, which includes the company’s 51% interest in the Texas Coastal Wind Facilities and approximately 42% indirect beneficial interest in Atlantica Sustainable Infrastructure plc (‘Atlantica’), a NASDAQ-listed company that acquires, owns and manages a diversified international portfolio of contracted renewable energy, power generation, electric transmission and water assets. AQN reports its investment in Atlantica under the Renewable Energy Group.

Regulated Services Group

The Regulated Services Group operates a diversified portfolio of rate-regulated utilities located in the United States, Canada, Chile and Bermuda that, as of December 31, 2022, provided distribution services to approximately 1,244,000 customer connections in the electric (approximately 309,000 customer connections), water and wastewater (approximately 560,000 customer connections) and natural gas sectors (approximately 375,000 customer connections).

The Regulated Services Group’s electrical distribution utility systems and related transmission and generation assets are located in the states of Arkansas, California, Kansas, Missouri, New Hampshire, and Oklahoma, and in Bermuda. The Regulated Services Group’s water distribution and wastewater collection utility systems are located in the states of Arizona, Arkansas, California, Illinois, Missouri, New York and Texas, and in Chile. The Regulated Services Group’s natural gas distribution utility systems are located in the province of New Brunswick and the states of Georgia, Illinois, Iowa, Massachusetts, Missouri, New Hampshire and New York. The Regulated Services Group also owns and operates generating assets with a gross capacity of approximately 2.0 GW and has investments in generating assets with approximately 0.3 GW of net generation capacity.

Operations

Electric Distribution Systems

Method of Providing Services and Distribution Methods

Electric distribution is the final stage in the delivery system of providing electricity to end users. An electric distribution utility sources and distributes electricity to its customers through a network of buried or overhead lines. The electricity is sourced from power generation facilities. The electricity is transported from the source(s) of generation at high voltages through transmission lines and is then reduced through transformers to lower voltages at substations. The electricity from the substations is then delivered through distribution lines to the customers where the voltage is again lowered through a transformer for use by the customer.

The electric utilities located in Arkansas, California, Kansas, Missouri, New Hampshire and Oklahoma are subject to state regulation and rates charged by these utilities must be reviewed and approved by their respective state regulatory authorities. Similarly, the electric utility in Bermuda, BELCO, is subject to regulation by the RAB and its rates must be approved by the RAB.

Principal Markets and Regulatory Environments

The Regulated Services Group operates electrical distribution systems in the states of Arkansas, California, Kansas, Missouri, New Hampshire and Oklahoma, and in Bermuda under a cost-of-service methodology.

Selected Facilities

CalPeco Electric System

The CalPeco Electric System provides electric distribution service to the Lake Tahoe basin and surrounding areas. The service territory, centered on a highly popular tourist destination, has a customer base spread throughout Alpine, El Dorado, Mono, Nevada, Placer, Plumas and Sierra counties in northeastern California. CalPeco Electric System’s connection base is primarily residential. Its commercial connections consist primarily of ski resorts, hotels, hospitals, schools and grocery stores. The CalPeco Electric system is regulated by the CPUC.

The company entered into a new multi-year services agreement with NV Energy that commenced in December 2020 and expires in December 2025. The services agreement obligates NV Energy to use commercially reasonable efforts to supply the CalPeco Electric System with sufficient renewable power to, when combined with the output of the CalPeco Electric System’s Luning Solar Facility and Turquoise Solar Facility, satisfy the current California Renewables Portfolio Standard requirement for the term of the services agreement. This agreement lowers fixed rates for customers, while providing the opportunity to add renewable generation capacity. The CalPeco Electric System received approval from CPUC to recover the costs it will incur under this agreement. The CalPeco Electric System has authorization for rate recovery of the costs that the CalPeco Electric System has or will incur to acquire, own and operate the Luning Solar Facility and the Turquoise Solar Facility.

Granite State Electric System

The Granite State Electric System provides distribution service in southern and northwestern New Hampshire, centered around operating centres in Salem in the south and Lebanon in the northwest. The Granite State Electric System’s customer base includes a mixture of residential, commercial and industrial customers. The Granite State Electric System consists of approximately 900 circuit miles, 40 distribution circuits and 12 electric distribution substations.

The Granite State Electric System is regulated by the NHPUC and FERC. The Granite State Electric System is required to provide electric commodity supply for all customers who do not choose to take supply from a competitive supplier (‘Energy Service’) in the New England power market and is allowed to fully recover its costs for the provision and administration of Energy Service under the Energy Service Adjustment Factor, as approved by the NHPUC. The Granite State Electric System must file with the NHPUC twice a year to adjust for market prices of power purchased.

Empire District Electric System

Based in Joplin, Missouri, Empire is a regulated utility providing electric and natural gas in parts of Missouri, Kansas, Oklahoma and Arkansas. The largest urban area served is the city of Joplin, Missouri, and its immediate vicinity. The vertically-integrated regulated electricity operations of Empire represent around half of the Regulated Services Group’s operating revenues and assets. Empire’s customer base includes a mixture of residential, commercial, and industrial customers. Empire also operates a fibre optics business.

Empire is subject to regulation by the MPSC, the KCC, the OCC, the APSC and FERC.

Empire has various owned generation located in Missouri and Kansas, all of which operate in the SPP. Its facilities include, among others, the approximately 150 MW North Fork Ridge Wind Facility located in northwestern Jasper County and southwestern Barton County, Missouri; the approximately 150 MW Kings Point Wind Facility located in Barton County, southwestern Dade County, northeastern Jasper County, and northwestern Lawrence County, Missouri; the approximately 460 MW State Line thermal generation plant, located in Joplin, Missouri; the approximately 288 MW Energy Center, a thermal generation plant located in Sarcoxie, Missouri; the approximately 300 MW Neosho Ridge Wind Facility located in Neosho County, Kansas and the approximately 320 MW Riverton thermal generation plant located in Riverton, Kansas.

BELCO Electric System

BELCO is the sole provider of electricity transmission, distribution, and retail services to all customers in Bermuda and is a bulk generator of electricity on the island. BELCO’s customer base includes a mixture of residential, commercial, and industrial customers. Its network includes approximately 1,000 km of high voltage distribution lines, approximately 600 km of low voltage overhead service lines, approximately 200 km of underground transmission cables and 34 substations.

BELCO is regulated by the RAB, the sole utility regulator in Bermuda. The Electricity Act 2016 brought changes to Bermuda’s electricity market which included the development of the first integrated resource plan, the encouragement of competitive electricity generation and a new retail tariff methodology.

Water Distribution and Wastewater Collection Systems

Method of Providing Services and Distribution Methods

A water and/or wastewater utility services company provides utility water supply and/or wastewater collection and treatment services to its customers.

A water utility sources, treats and stores potable water and subsequently distributes it to its customers through a network of buried pipes (distribution mains). The raw water for human consumption is sourced from the ground and extracted through wells or from surface water, such as lakes or rivers. The water is treated to potable water standards that are specified in federal and state regulations as administered and which are typically enforced by a federal, state or local agency. Following treatment, the water is either pumped directly into the distribution system or pumped into storage reservoirs from which it is subsequently pumped into the distribution system. This system of wells, pumps, storage vessels and distribution infrastructure is owned and maintained by the private utility. The fees or rates charged for water are consisted of a fixed charge component plus a variable fee based on the volume of water used. Additional fees are typically charged for other services, such as establishing a connection, late fees and reconnects.

A wastewater utility collects wastewater from its customers and transports it through a network of collection pipes, lift stations and manholes to a centralized facility where it is treated, rendering it suitable for discharge to the environment or for reuse, usually as irrigation. The wastewater is ultimately delivered to a treatment plant. Primary treatment at the plant consists of the screening out of larger solids, floating material and other foreign objects and, at some facilities, grit removal. These removed materials are hauled to a landfill. Secondary treatment at the plant consists of biological digestion of the organic and other impurities, which is performed by beneficial bacteria in an oxygen enriched environment. Excess and spent bacteria are collected from the bottom of the tanks, digested and/or dewatered, and the resulting solids are sent to landfill or to land application as a soil amendment. The treated water, referred to as ‘effluent’, is then used for irrigation or groundwater recharging or is discharged by permit into adjacent surface water. The standards to which this wastewater is treated are specified in each treatment facility’s operating permit and the wastewater is routinely tested to ensure its continuing compliance therewith. The effluent quality standards are based on federal and state regulations which are administered, and continuing compliance is enforced by the state agency to which federal enforcement powers are delegated.

Principal Markets and Regulatory Environments

The Regulated Services Group’s water and wastewater facilities are located in the United States in the states of Arizona, Arkansas, California, Illinois, Missouri, New York and Texas, and in Chile. The water and wastewater utilities are generally subject to regulation by the public utility commissions of the jurisdiction in which they operate. The respective public utility commissions have jurisdiction with respect to rate, service, accounting procedures, issuance of securities, acquisitions and other matters. These utilities generally operate under cost-of-service regulation as administered by these regulatory authorities. The utilities generally use a historic or forward-looking test year in the establishment of rates for the utility and pursuant to this method the determination of the rate of return on approved rate base, recovery of depreciation on plant, together with all reasonable and prudent operating costs, establishes the revenue requirement upon which each utility’s customer rates are determined.

Selected Facilities

Litchfield Park Water System

The Litchfield Park Water System is a regulated water and wastewater utility located in and around the cities of Avondale, Goodyear and Litchfield Park west of Phoenix, Arizona that has a service area that includes the City of Litchfield Park and sections of the cities of Goodyear and Avondale, as well as portions of unincorporated Maricopa County. Litchfield Park Water System’s operations consist of thirteen well sites, two reservoir sites, and approximately 500 km of water mains and distribution lines. Wastewater operations at the Litchfield Park Water System consists of two lift stations, approximately 400 km of collection mains to the Palm Valley Water Reclamation Facility with a permitted treatment capacity of 6.55 million gallons per day. The Litchfield Park Water System’s customer base includes a mixture of residential, commercial, and industrial customers. The Litchfield Park Water System is regulated by the Arizona Corporate Commission.

Liberty Park Water and Liberty Apple Valley Water System

Liberty Utilities (Park Water) Corp. (‘Liberty Park Water’) provides, owns and operates the water system in central Los Angeles. Liberty Park Water also wholly owns Liberty Utilities (Apple Valley Ranchos Water) Corp. (‘Liberty Apple Valley Water’), which is a regulated utility providing water utility services to customers in and around the Town of Apple Valley, California. Liberty Park Water’s and Liberty Apple Valley Water’s customer base includes a mixture of residential, commercial, and industrial customers. The Liberty Park Water system consists of approximately 400 km of pipeline, 10 wells, 8 booster pump stations, and 6.9 million gallons of storage reservoirs and tank capacity. The Liberty Apple Valley Water system consists of approximately 800 km of pipeline, 21 wells, 8 booster pump stations, and 12 million gallons of storage reservoirs and tank capacity. Liberty Park Water and Liberty Apple Valley Water are regulated by the CPUC and use a forward-looking, multi-year rate plan.

ESSAL System

ESSAL is a vertically integrated water and wastewater utility company in Southern Chile. The utility operates 51 potable water production systems, 29 sewage plants, approximately 2,270 km of drinking water distribution networks and approximately 1,980 km of sewage networks covering 31 municipalities in the provinces of Valdivia, Ranco, Osorno, Llanquihue, Chiloé and Palena in the regions of Los Lagos and Los Ríos. The company indirectly owns approximately 64% of the outstanding shares of ESSAL. ESSAL’s customer base includes a mixture of residential, commercial, and industrial customers. ESSAL is regulated by the Superintendence of Sanitary Services of Chile.

New York Water System

The New York Water System is a regulated water and wastewater utility serving customers across eight counties in southeastern New York. Operations include approximately 1,270 miles of water mains and distribution lines, 92 groundwater wells, 52 treatment stations and 41 tanks. Approximately 86% of the New York Water System’s customer base is residential, with 98% of customers located in Nassau County on Long Island.

The New York Water System is regulated by the New York Public Service Commission. The New York Water System has a reconciliation mechanism designed to allow the company to recover or refund, through a surcharge or credit, the annual difference between projections of revenues, production costs, and property taxes and the actual amounts experienced by the New York Water System. The New York Water System also utilizes an infrastructure surcharge mechanism to recover water quality and system improvement investments, and a pension and other post-employment benefits tracker mechanism that tracks changes from authorized expenses.

Natural Gas Distribution Systems

Method of Providing Services and Distribution Methods

Natural gas is a fossil fuel composed almost entirely of methane (a hydrocarbon gas) usually found in deep underground reservoirs formed by porous rock. In making its journey from the wellhead to the customer, natural gas may travel thousands of miles through interstate pipelines owned and operated by pipeline companies. Along the route, the natural gas may be stored underground in depleted oil and gas wells or other natural geological formations for use during seasonal periods of high demand. Interstate pipelines interconnect with other pipelines and other utility systems and offer system operators flexibility in moving the natural gas from point to point. The interstate pipeline companies are regulated by FERC. Typically, the distribution network operates pipelines (including transmission and distribution pipelines), gate stations, district regulator stations, peak shaving plants and natural gas meters. The natural gas distribution utilities owned by the Regulated Services Group are subject to state or provincial regulation and rates charged by these facilities may be reviewed and altered by the state or provincial regulatory authorities from time to time.

Principal Markets and Regulatory Environments

The Regulated Services Group owns and operates natural gas distribution systems, under cost-of-service regulation in the states of Georgia, Illinois, Iowa, Massachusetts, Missouri, New Hampshire and New York and the province of New Brunswick.

Selected Facilities

EnergyNorth Gas System

The EnergyNorth Gas System is a regulated natural gas utility providing natural gas distribution services in 31 communities covering five counties in New Hampshire. Its franchise service area includes the communities of Nashua, Manchester, Concord, Keene, and Berlin. The EnergyNorth Gas System’s customer base includes a mixture of residential, commercial, industrial and transportation customers. The EnergyNorth Gas System operates and maintains approximately 2,370 km of underground distribution mains, approximately 71,100 service lines, and approximately 73 local and district regulator stations.

The EnergyNorth Gas System is regulated by the NHPUC. The EnergyNorth Gas System has a revenue per customer decoupling mechanism to recover lost distribution revenue associated with energy efficiency and to otherwise account for the effects of abnormal weather and economic conditions, and includes a real-time weather normalization adjustment. In addition, the EnergyNorth Gas System has a cost of gas adjustment mechanism that allows for monthly adjustments to account for commodity cost changes.

Empire District Gas System

EDG is engaged in the distribution of natural gas in Missouri serving customers in northwest, north central and west central Missouri. EDG’s customer base includes a mixture of residential, commercial, industrial and transportation customers.

EDG is regulated by the MPSC.

Peach State Gas System

The Peach State Gas System is a regulated natural gas system providing natural gas distribution services in 13 communities covering six counties in Georgia. The Peach State Gas System franchise service area includes the communities of Columbus, Gainesville, Waverly Hall, Oakwood, Hamilton and Manchester. The Peach State Gas System’s customer base primarily includes a mixture of residential, commercial, industrial, and transportation customers. In addition, the Peach State Gas System has a 50-year privatization agreement to operate and maintain the natural gas system at Fort Benning.

The Peach State Gas System is regulated by the Georgia Public Service Commission. The Peach State Gas System’s rates are reviewed and updated annually through a tariff provision called the Georgia Rate Adjustment Mechanism. Georgia allows recovery of natural gas costs (including commodity price, transportation, reservation and demand costs, hedging costs, storage costs).

New England Gas System

The New England Gas System is a regulated natural gas utility providing natural gas distribution services in nine communities, including Fall River, North Attleborough, Blackstone and surrounding communities, located in the southeastern portion of Massachusetts through approximately 1,000 km of gas distribution pipeline. The New England Gas System’s customer base includes a mixture of residential, commercial, and industrial customers.

The New England Gas System is regulated by the MDPU.

Midstates Gas Systems

The Midstates Gas Systems own regulated natural gas utilities providing natural gas distribution services to approximately 203 communities in the states of Illinois, Iowa and Missouri. The franchise service area includes the communities of Virden, Vandalia, Harrisburg and Metropolis in Illinois, Keokuk in Iowa, and Butler, Kirksville, Canton, Hannibal, Jackson, Sikeston, Malden and Caruthersville in Missouri. The Midstates Gas Systems’ customer base includes a mixture of residential, commercial, industrial and transportation customers.

The Midstates Gas Systems are regulated by the Illinois Commerce Commission, the Iowa Utilities Board and the MPSC.

New Brunswick Gas System

The New Brunswick Gas System is regulated by the NB Energy Board and has a distribution network that includes approximately 1,200 kilometers of natural gas pipeline, and provides service to customers in 14 communities in New Brunswick. The NB Energy Board’s regulatory activities in the natural gas sector are primarily in relation to the New Brunswick Gas System which is the exclusive holder of the natural gas distribution franchise for the Province of New Brunswick, which expires in 2044 and is extendable for an additional 25-year period. The New Brunswick Gas System’s customer base includes a mixture of residential, commercial, and industrial customers.

St. Lawrence Gas System

The St. Lawrence Gas System is a regulated natural gas utility operating approximatively 1,100 km of natural gas distribution pipeline. It distributes natural gas to customers in more than 20 communities in northern New York State, including the Villages of Canton, Malone, Massena, Potsdam and Ogdensburg located in St. Lawrence County, Franklin County and a portion of Lewis County. The St. Lawrence Gas System’s customer base includes a mixture of residential, commercial, industrial, and electric generation customers.

The St. Lawrence Gas System is regulated by the New York State Public Service Commission.

Electric and Natural Gas Transmission

Method of Providing Services and Transmission Methods

Electric transmission is the bulk transportation of generated electricity over long distances from a generating site, such as a power plant, to an electrical substation. Transmission lines move large amounts of power at a high voltage level to a substation for voltage step-down and on to a lower voltage distribution network resulting in electricity delivered to homes and businesses. Transmission services obtained through FERC-governed OATT include network and point-to-point transmission service along with other ancillary services. Some examples of these types of services would be spinning and non-spinning reserves, black-start capability, regulation and voltage support and system control and dispatch.

Pipelines offer a variety of services under their FERC tariffs to include firm and interruptible transportation, along with other services to provide commercial markets additional flexibility. Some examples of these types of services would be park and loan, pooling and balancing services. In addition, firm service tariff features would also provide additional features to support secondary market activity to include, but not limited to capacity assignment, capacity releases, segmentation and renewal options.

Principal Markets and Regulatory Environments

Empire’s transmission rates and services and electric wholesale sales of electric energy in interstate commerce and its facilities are subject to the jurisdiction of FERC, under the Federal Power Act.

The operations and rates of AQN’s transmission facility in New Brunswick are regulated by the NB Energy Board. It is entitled to recover the transmission revenue requirement, pursuant to the transmission tariff administered by New Brunswick Power Corporation. Any increase to its revenue requirement would result in an increase to the transmission rates under the OATT.

BELCO’s transmission rates are regulated by the RAB. BELCO’s transmission function and bulk generation functions are regulated under two licences held by BELCO: one for electricity transmission, distribution, and retail services and one for bulk generation.

Interstate natural gas pipeline transmission assets are regulated primarily by FERC under the Natural Gas Act. Under this framework, this agency authorizes and certifies all construction, and or abandonment of interstate natural gas pipeline facilities, requires certificate holders, once operational, to establish and maintain an OATT and publicly post capacity available for transportation, and the agency periodically reviews, under just and reasonable standards, the tariff rates to be charged by the certificate holder. In addition, FERC prescribes operating and safety standards to be followed along with other federal agencies, such as Department of Transportation and the Occupational Safety and Health Administration.

Selected Facilities

Empire Transmission Facilities

The Empire electric transmission facilities are located within a four state area of Missouri, Kansas, Oklahoma and Arkansas and primarily consist of approximately 22 miles of 345 kV lines, approximately 405 miles of 161 kV lines, approximately 750 miles of 69 kV lines and approximately 82 miles of 34.5 kV lines.

Empire is a member of the SPP, which spans an area from the Canadian border in Montana and North Dakota in the north to parts of New Mexico, Texas and Louisiana in the south. The transmission facilities are offered for service under an OATT approved by FERC and administered by SPP. Service requests are placed in the SPP Open Access Same-Time Information System (OASIS) and is evaluated by SPP for available capacity. SPP determines who is offered available transmission capacity subject to the SPP Tariff and SPP Market Rules and is offered on a non-discriminatory basis. Service requests can be either point-to-point or network service, where network service is used for serving electric load. Empire is subject to four different states’ regulatory bodies, the Midwest Reliability Organization regional entity for NERC compliance, SPP Market Rules, and FERC.

Seasonality

Electricity Systems

The CalPeco Electric System’s demand for energy sales fluctuate depending on weather conditions. The CalPeco Electric System is a winter-peaking utility. The CalPeco Electric System has implemented a BRRBA rate mechanism that removes the annual variations of recorded revenues to ensure that it recovers its authorized base revenues (gross revenues less fuel, purchased power, and other non-base revenues) over each rate case cycle.

The Granite State Electric System experiences peak loads in both the winter and summer seasons, due to heating and cooling loads associated with New England weather.

The Empire District Electric System experiences peak loads in both the winter and summer seasons, due to heating and cooling loads associated with weather in its service territory.

BELCO system’s demand is largely driven by peak loads in a six-month period of hot, humid weather followed by six months of relatively mild weather. Demand is driven by cooling requirements with a very small amount of heating required.

Water and Wastewater Systems

The Regulated Services Group attempts to mitigate the risk of reduced water usage by seeking regulatory mechanisms in rate case proceedings. Certain regulatory jurisdictions have approved regulatory mechanisms that address changes in the actual recorded water usage as compared to the authorized water usage. For example, for the Liberty Park Water system, the water revenue adjustment mechanism tracks the difference between the CPUC authorized commodity revenue and the actual recorded commodity revenue to ensure recovery of fixed costs that are recovered through the commodity or quantity charge. The purpose of the mechanism is to de-couple water usage from revenues. Not all regulatory jurisdictions in which the Regulated Services Group operates have approved mechanisms to mitigate reduced water usage and the resulting reduction in revenues.

Natural Gas Systems

The Regulated Services Group’s primary demand for natural gas from its natural gas distribution systems is driven by the seasonal heating requirements of its residential, commercial and industrial customers. The colder the weather, the greater the demand for natural gas to heat homes and businesses. As such, the natural gas distribution systems’ demand profile typically peaks in the winter months of January and February and declines in the summer months of July and August.

The Regulated Services Group attempts to mitigate the above noted fluctuations by seeking regulatory mechanisms during rate case proceedings. Certain jurisdictions have approved constructs to mitigate demand fluctuations. For example, at the Peach State Gas System, EnergyNorth Gas System and Midstates Gas Systems, a weather normalization adjustment is applied to customer bills that adjusts commodity rates to stabilize the revenues of the utility for changes in billing units attributable to weather patterns. Most regulatory jurisdictions in which the Regulated Services Group operates have approved mechanisms to mitigate natural gas demand fluctuations.

Renewable Energy Group

The Renewable Energy Group generates and sells electrical energy, capacity, ancillary products and renewable attributes produced by its diverse portfolio of renewable and clean power generation facilities primarily located throughout the United States and Canada. The Renewable Energy Group seeks to deliver growth through new power generation projects and other complementary projects, such as RNG and energy storage.

The Renewable Energy Group operates, and directly owns interests in hydroelectric, wind, solar, RNG and thermal facilities with a combined gross generating capacity of approximately 2.5 GW and a net generating capacity (attributable to the Renewable Energy Group) of approximately 2.1 GW. Approximately 81% of the electrical output is sold pursuant to long-term contractual arrangements, which as of December 31, 2022 had a production-weighted average remaining contract life of approximately 11 years. In addition to the assets that the Renewable Energy Group operates, the Renewable Energy Group has investments in generating assets with approximately 1.4 GW of net generating capacity, which includes the company’s 51% interest in the Texas Coastal Wind Facilities and approximately 42% indirect beneficial interest in Atlantica. Atlantica owns and operates a portfolio of international clean energy and water infrastructure assets under long term contracts with a Cash Available for Distribution (CAFD) weighted average remaining contract life of approximately 14 years as of December 31, 2022.

Operations

Wind Power Generating Facilities

Production Method

There are 16 completed wind power generating facilities that the Renewable Energy Group both operates and owns interests in. These 16 wind facilities have a combined gross generating capacity of approximately 2.0 GW and a net generating capacity (attributable to the Renewable Energy Group) of approximately 1.6 GW. The Renewable Energy Group also owns a 51% equity interest in, but does not operate, the Texas Coastal Wind Facilities, a group of four wind facilities with a gross installed capacity of 861 MW, representing a net installed capacity to the Renewable Energy Group of 439 MW.

Principal Markets and Distribution Methods

The principal markets for the Renewable Energy Group’s completed wind facilities in Canada are Manitoba, Ontario, Saskatchewan and Québec. The electricity generated by the wind turbines is connected to the local transmission system and purchased by Manitoba Hydro, the IESO, SaskPower and Hydro-Québec, in the respective provinces. The principal markets for the Renewable Energy Group’s completed wind facilities in the United States are PJM, MISO and ERCOT.

Selected Canadian Facilities

St. Leon Wind Facility

The St. Leon Wind Facility is an approximately 120 MW (including phase 1 and phase 2) wind powered electrical generating facility located near St. Leon, Manitoba, approximately 150 km southwest of Winnipeg. The St. Leon Wind Facility entered into a long-term PPA with Manitoba Hydro under which all electricity produced is sold to Manitoba Hydro.

Amherst Island Wind Facility

The Amherst Island Wind Facility is an approximately 74 MW wind powered electric generating facility located on Amherst Island near the village of Stella, approximately 15 km southwest of Kingston. The Renewable Energy Group's interest in the project was previously held in a joint venture with the EPC contractor. In May 2019, the company entered into a partnership, in which the company holds a 98.5% interest and Atlantica holds a 1.5% interest, in respect of the Amherst Island Wind Facility. The electricity generated by the project is being sold under a long-term PPA awarded as part of the IESO FIT program.

Blue Hill Wind Facility

The Renewable Energy Group owns a 20% interest in, and operates, the Blue Hill Wind Facility, a 175 MW wind powered electrical generating facility located in southwest Saskatchewan, approximately 200 km west of Regina, Saskatchewan. The output from the Blue Hill Wind Facility is being sold through a long-term power purchase agreement with an investment grade entity.

Selected United States Facilities

Shady Oaks Wind Facility

The Shady Oaks Wind Facility is a 109.5 MW wind powered electrical generating facility located in Lee County, Illinois, approximately 80 km west of Chicago. The Shady Oaks Wind Facility is party to a long-term power sales contract with the largest electric utility in the state of Illinois, Commonwealth Edison. The power sales contract is structured to hedge the preponderance of the Shady Oaks Wind Facility’s production volume against exposure to PJM ComEd Hub current spot market rates. Annual production is subject to contingent curtailment based on certain regulatory constraints of the electricity purchaser. Ancillary services, including capacity, reactive power and RECs, are sold into the PJM market.

Sandy Ridge Wind Facility

The Sandy Ridge Wind Facility is a 50 MW wind powered electrical generating facility located in Centre County, Pennsylvania, 180 km east of Pittsburgh. Sandy Ridge Wind, LLC is party to an energy production hedge (a ‘Primary Energy Production Hedge’) with respect to most of its production, which expires in 2030. In addition, under a long-term agreement with an energy services retailer, the Sandy Ridge Wind Facility will sell energy and RECs on a generator firm basis. Ancillary services, including capacity, reactive power and RECs, are sold into the PJM market.

Minonk Wind Facility

The Minonk Wind Facility is a 200 MW wind powered electrical generating facility located near Minonk, IL, approximately 200 km southwest of Chicago, Illinois. The Minonk Wind Facility is party to a Primary Energy Production Hedge with an energy trading company. Ancillary services, including capacity, reactive power and RECs, are sold into the PJM market.

Senate Wind Facility

The Senate Wind Facility is a 150 MW wind powered electrical generating facility located near Graham, Texas, approximately 200 km west of Dallas, Texas. The Senate Wind Facility is party to a long-term Primary Energy Production Hedge with an energy trading company. RECs are sold into the ERCOT market.

Maverick Creek Wind Facility

The Maverick Creek Wind Facility is an approximately 492 MW wind powered electric generating facility located in Concho County, Texas, approximately 250 km northwest of Austin, Texas. The majority of the output of the Maverick Creek Wind Facility is being sold through two long-term PPAs with investment-grade entities.

Odell Wind Facility

The Renewable Energy Group owns a 51% interest in, and operates, the Odell Wind Facility, a 200 MW wind powered electrical generating facility located near Windom, Minnesota, approximately 230 km southwest of Minneapolis, Minnesota. The Odell Wind Facility is party to a long-term PPA with an investment grade utility under which all electricity and RECs produced at the facility are sold.

Deerfield Wind Facility

The Renewable Energy Group owns a 51% interest in, and operates, the Deerfield Wind Facility, a 149 MW wind powered electrical generating facility located in central Michigan, approximately 180 km north of Detroit, Michigan. All energy, capacity, and RECs produced at the facility are sold to a local electric distribution utility pursuant to a long-term PPA.

Sugar Creek Wind Facility

The Renewable Energy Group owns a 51% interest in, and operates, the Sugar Creek Wind Facility, a 202 MW wind powered electric generating facility located in Logan County, Illinois, approximately 275 km southwest of Chicago, Illinois. The majority of the output of the Sugar Creek Wind Facility is being sold through a long-term financial hedge. All RECs from the facility are sold under long-term contracts to utilities in the state. Ancillary services, primarily capacity, are sold into the MISO market.

Texas Coastal Wind Facilities

The Renewable Energy Group owns a 51% interest in, but does not operate, a portfolio of four wind facilities operated by RWE Renewables, a subsidiary of RWE AG, located in the coastal region of south Texas. The four wind facilities (Stella, Cranell, East Raymond and West Raymond) that make up the Texas Coastal Wind Facilities represent 861 MW of installed capacity. The four wind facilities have a weighted average offtake duration of approximately 10 years.

Solar Power Generating Facilities

Production Method

The company’s solar generation facilities utilize photovoltaics, which convert light into electric current using the photovoltaic effect. The array of a photovoltaic power system produces direct current power, which fluctuates with the sunlight’s intensity. For practical use, commercial installations convert this direct current generated power to alternating current through the use of inverters. The Renewable Energy Group owns and operates six completed utility-scale solar power generating facilities and two community solar power generating facilities with a combined gross generating capacity of approximately 242 MW.

Principal Markets and Distribution Methods

The principal markets for the Renewable Energy Group’s completed solar facilities are Ontario, California and PJM. The electricity generated by the solar panels is transmitted via electrical collection lines to the facility substation for subsequent delivery to the distribution/transmission system under control of the local distribution company and the ISO.

Selected Facilities

Bakersfield I Solar Facility

The Bakersfield I Solar Facility is a 20 MW solar powered electric generating facility located near Bakersfield, California, 150 km northwest of Los Angeles, California. The Bakersfield I Solar Facility has a long-term fixed rate PPA with an investor-owned utility.

Great Bay I Solar Facility

The Great Bay I Solar Facility is a 75 MW solar powered electric generating facility located in Somerset County in southern Maryland, approximately 15 km south of Salisbury, Maryland. All energy from the Great Bay I Solar Facility is sold to the U.S. Government Services Administration pursuant to a long-term PPA. All RECs from the project are retained by the project company and sold into the Maryland market.

Great Bay II Solar Facility

The Great Bay II Solar Facility is a 43 MW solar powered electric generating facility located in Somerset County in southern Maryland, approximately 15 km south of Salisbury, Maryland. The majority of the output of the Great Bay II Solar Facility is sold through a long-term financial hedge. All RECs from the project are sold into the Maryland market.

Altavista Solar Facility

The Altavista Solar Facility is an 80 MW solar powered electric generating facility located in Campbell County, Virginia, approximately 185 km west of Richmond, Virginia. The majority of the output of the Altavista Solar Facility is being sold to a wholly-owned subsidiary of Meta, pursuant to a long-term PPA.

Hydroelectric Generating Facilities

Production Method

The Renewable Energy Group owns and operates 14 hydroelectric power generating facilities with a combined gross generating capacity of approximately 115 MW.

Principal Markets and Distribution Methods

The principal markets in which the Renewable Energy Group operates hydroelectric generating facilities in Canada are Alberta, Ontario, New Brunswick and Québec. In the U.S., the principal market is Maine. The majority of generated hydroelectricity is conveyed from the relevant facility to the purchasers under the terms of long-term PPAs. The electricity is generally transferred by transmission line from the generating facility to the delivery point for the purchaser, and it is distributed through the grid to end user customers of the purchaser.

Selected Facility

Tinker Hydro Facility

The Tinker Hydro Facility is located approximately 8 km north of Perth-Andover, New Brunswick and is situated near the mouth of the Aroostook River. The facility has a total nameplate capacity of approximately 33 MW.

As part of the generation assets in New Brunswick, the company owns an electrical transmission system used to interconnect the Tinker Hydro Facility to the New Brunswick transmission network, provide transmission service to Perth Andover Electric Light Commission, and provide export/import capacity between Maine and New Brunswick.

The output of the Tinker Hydro Facility is actively marketed together with any applicable environmental attributes less any associated transportation costs. Additional energy and applicable environmental attributes are purchased from the market to supplement the energy generated from the Tinker Hydro Facility in order to service customer demand.

Thermal (Cogeneration) Electric Generating Facilities

Production Method

The Renewable Energy Group owns and operates two thermal electric power generating facilities with a combined gross generating capacity of approximately 127 MW.

Principal Markets and Distribution Methods

The principal markets for the company’s cogeneration facilities are California and Connecticut. The electricity produced from these facilities is conveyed from the relevant facility to the electricity markets either under the terms of long-term contracts or according to ISO rules. In addition to grid sales of electricity and power, electricity and thermal energy are sold to onsite or adjacent third-party thermal host facilities for use in production.

Selected Facilities

Sanger Thermal Facility

The Sanger thermal cogeneration facility is a 56 MW natural gas-fired generating facility located in Sanger, California. The facility enters into resource adequacy offtake agreements on an annual basis (for one year term) and is contracted through 2023.

Windsor Locks Thermal Facility

The Windsor Locks thermal cogeneration facility (the ‘Windsor Locks Thermal Facility’) is a 71 MW natural gas-fired generating facility located in Windsor Locks, Connecticut. The Windsor Locks Thermal Facility supplies thermal steam energy and a portion of electrical generation to Ahlstrom Corporation pursuant to a ground lease and an energy services agreement. Payments under the energy services agreement are fully indexed to the cost of natural gas consumed by the Windsor Locks Thermal Facility. The additional installed capacity at the site is sold into the ISO-NE capacity market and energy is sold in the day ahead energy market as required under the ISO-NE capacity market rules.

Seasonality

Wind Power Generating Facilities

The Renewable Energy Group’s wind generation facilities are impacted by seasonal fluctuations and year to year variability of the wind resource. During the fall, winter and spring periods, winds are generally stronger than during the summer period.

Solar Power Generating Facilities

The Renewable Energy Group’s solar generation facilities are impacted by seasonal fluctuations and year to year variability in solar radiance. For instance, there are more daylight hours in the summer than there are in the winter, resulting in higher production in the summer months.

Hydroelectric Generating Facilities

The Renewable Energy Group’s hydroelectric operations are impacted by seasonal fluctuations and year to year variability of the available hydrology. These assets are primarily ‘run-of-river’ and as such fluctuate with natural water flows. During the winter and summer periods, flows are generally lower, while during the spring and fall periods flows are generally higher.

Corporate Development Activities

The company undertakes business development activities, primarily in North America, working to identify, develop, acquire, invest in, construct or divest of renewable energy facilities and other complementary infrastructure projects, and to invest in, or divest of, electric, water distribution and wastewater collection and natural gas utility systems.

Development of Regulated Services Group Assets

The Regulated Services Group’s strategy is to grow its business organically and through earnings-accretive acquisitions.

Development of Renewable Energy Group Assets

The Renewable Energy Group seeks to deliver growth through new power generation projects and other complementary projects, such as RNG and energy storage. The Renewable Energy Group is committed to working proactively with stakeholders, including local communities. The Renewable Energy Group also has a pipeline of prospective greenfield projects that remain at an early stage of development.

Principal Revenue Sources

AQN owns, directly or indirectly, interests in renewable generation facilities, thermal generation facilities, electricity distribution utilities, natural gas and propane distribution utilities, and water distribution and wastewater utilities.

History

Algonquin Power & Utilities Corp. was founded in 1988. The company was incorporated under the Canada Business Corporations Act in 1988.