Algonquin Power & Utilities Corp to Acquire The Empire District Electric Company Conference Call
Feb 09, 2016 AM EST
AQN.TO - Algonquin Power & Utilities Corp
Algonquin Power & Utilities Corp to Acquire The Empire District Electric Company Conference Call
Feb 09, 2016 / 09:30PM GMT
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Corporate Participants
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* Chris Jarratt
Algonquin Power & Utilities Corp - Vice Chairman
* Ian Robertson
Algonquin Power & Utilities Corp. - CEO
* Brad Beecher
The Empire District Electric Company - President & CEO
* David Bronicheski
Algonquin Power & Utilities Corp. - CFO
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Conference Call Participants
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* Nelson Ng
RBC Capital Markets. - Analyst
* Sean Steuart
TD Securities - Analyst
* Paul Lechem
CIBC - Analyst
* Rupert Merer
National Bank Financial - Analyst
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Presentation
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Operator [1]
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Good day and welcome to the Algonquin Power & Utilities Corp. The Empire District Electric Company acquisition announcement call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Chris Jarratt, Vice Chairman. Please go ahead, sir.
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Chris Jarratt, Algonquin Power & Utilities Corp - Vice Chairman [2]
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Thank you. Good afternoon everyone and thanks for joining us today. We are extremely excited to provide you an overview of our acquisition of The Empire District Electric Company. My name is Chris Jarratt, I am the Vice-Chair of Algonquin Power & Utilities Corp. Joining me on the call today are Ian Robertson, our Chief Executive Officer; David Bronicheski, our Chief Financial Officer; and Brad Beecher, the Chief Executive Officer of The Empire District Electric Company. We will be making reference to an investor presentation prepared in respect to this transaction and that presentation is available for download on our website algonquinpowerandutilities.com.
Just turning to slide 2 of the presentation. I'd like to note that on this call, we will provide information that relates to future events and expected financial positions that should be considered forward-looking. We will provide additional details at the end of the call and I direct you to review the full disclosure on forward- looking and non-GAAP financial measures available on the presentation page of the Investor Center.
As shown on the agenda set out in slide 3, Ian is going to provide details about the transaction followed by a summary of Empire from Brad. Dave will review our financing strategy and the timeline of the events related to the transaction. Ian will then provide a summary of the combined business and wrap up with some concluding thoughts, and then we are going to open the line for questions. And we would ask that you just restrict your questions to two and then requeue if you have additional, just to allow others the opportunity to participate.
And with that, I'd like to turn things over to Ian Robertson.
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [3]
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Thanks, Chris. And good afternoon, everyone. I appreciate you taking the time, today on the call, obviously it's -- in a busy day for everyone with the events earlier this morning and obviously our exciting announcement. I'm obviously thrilled to be here today to be speaking to you about this event in Algonquin history.
Before I get going, I really would like to thank Brad Beecher. As Chris had mentioned, he is the Chief Executive Officer of The Empire Electric District Company, who is joining us on this call this afternoon, who better to give you some information on Empire then its CEO. I think I'm speaking on Brad's behalf, when I say we are both pleased to present the details about this strategic transaction between our respective companies.
Earlier today, the Boards of Directors of both Algonquin and Empire agreed to enter into a transaction, by which Algonquin will purchase all of the issued and outstanding common shares of The Empire Electric District Company. At roughly 3:30 this afternoon, the tradable shares of both Algonquin and Empire were halted and shortly afterwards, the Company has issued a joint press release announcing the transaction. In a separate press release, I hope you noticed that Algonquin also announced that in relation to the transaction, it would raise the equity capital needed in the form of convertible debentures by way of installment receipts. Copies of both of these press releases can be found in our website.
We obviously view the acquisition of Empire as a significant event for Algonquin; one which positions us for exciting growth opportunities that are expected to create material benefits for our shareholders. Our acquisition of Empire is strategically well aligned with our disciplined approach to growth and it provides excellent support for our dividend growth objectives. It strengthens our business mix by adding scale to our regulated utilities operations and following the merger, our regulated businesses will now represent 70% of total EBITDA, represents a solid platform for growth both through its rate based capital expenditures but also for development of new renewable electric generation facilities, which in terms of further greening Empire's generation fleet.
Brad and his management colleagues at Empire will add further bench strength to our already strong Liberty Utilities team. And very importantly to the deal and to shareholders, we expect immediate and enduring accretion over the next three years post closing. We forecast annual EPS accretion of 7% to 9% and per share annual FFO accretion of 12% to 14%. I will say that we diligently assessed this acquisition, and in Empire we see a compelling match.
With that, I'd like to turn to slide 5 of that slide deck to step through some of the specific highlights. First, with respect to purchase price, the offer for the Empire shares is $34 per share, it's going to be paid in cash. This represents a 21% premium to the last close of Empire shares yesterday and we hope that the Empire shareholders find the proposition compelling.
In terms of the transaction drivers, as you can see there, we believe that it's strategically aligned with our disciplined approach to growth, $34 a share. The enterprise value of the acquisition is approximately $2.4 billion, with an equity purchase price of approximately $1.5 billion. Perhaps most importantly, those translate from our perspective to attractive valuation multiples of 9.2 times of the 2017 estimated EBITDA, and 1.49 times the rate base estimated at closing, which for the purposes, this is estimated at the end of this year.
As to financing the transaction, you'll hear from David regarding our robust plan. It's one that's designed to maintain our current strong credit rating. A key element of the plan involves the equity from the convertible debenture offering, which was also launched today. We believe we have clear line of sight to the [remainder] of the capital with an expectation that the debt financing portion will be completed closer to the expected closing in Q1 of next year.
Lastly, the transaction timing as David will describe, is really going to be driven by the approval requirement of the public utility commissions in the state in which Empire operates. Fortunately, Liberty has strong relationships in two of the major states, Missouri and Arkansas, which represent over 90% of the Empire's EBITDA.
Flipping the chart to slide 6, we'd certainly view Empire as an ideal fit for Algonquin. It's consistent with all the themes that I presented to the Capital Markets at our Investor Day last December. But perhaps there are four specific strategic rationales that we might highlight. Firstly, this merger will have a dramatic effect on the scale of our regulated utility operations, incorporating these well-run, high-quality regulated gas, electric, and water distribution generation, transmission operations into Algonquin will result in a significant, over 85% growth in our enterprise value. It also changes our business mix to have over 70% of the combined organization's EBITDA from regulated earnings.
Secondly, we're excited that the growth in this transaction has implications across Algonquin's distribution, transmission and generation business groups. Obviously the existing and regulator supported CapEx projects will continue to add distribution utility rate base. But with respect to our transmission business group, Empire has been active in the development of new transmission lines, including those needed to bring renewable generation into its service territory. And lastly, we fully intend to capitalize on our core competency related to the development of wind and solar facilities in the satisfaction that the growing need for renewable generation for Empire's customers in the context of increasing RPS and the Environmental Protection Agency's Clean Power Plan.
Thirdly, it might be noted that Empire is a multi-jurisdictional utility operating in Missouri, Arkansas, Oklahoma and Kansas. And we are pleased that this transaction will allow us to both deepen the existing relationships with state regulatory agencies in Missouri and Arkansas, and develop important new ones with the regulators in Kansas and Oklahoma.
And lastly, the breadth and depth of the Empire management team is a great facilitator for our regional operations focus. We see a great opportunity to consolidate the senior leadership of our existing mid-states operations under the Empire management, headquartered out of Joplin, Missouri. I can say there is strong alignment between our respective corporate cultures, which we feel will serve us well during the integration process. In short, both Liberty and Empire embrace an operations philosophy, which emphasizes a local, responsive and caring approach to customers, employees, regulators and the communities we serve.
Flipping to slide 7, it might be useful to point out that Liberty has extensive experience in managing the acquisition approval and integration of multi-modality, multi-jurisdictional utilities such as Empire. In fact, this will be our tenth acquisition in the past eight years. As to our strategy for managing that task, I would point out that rather than asking our existing operations group to do double duty in the integration of new businesses into Algonquin, we formed a dedicated group of operations, IT, HR and other professionals dedicated to the successful transition of new businesses into the Algonquin family. They have obviously been busy over the past five or six years integrating those previous nine acquisitions.
We believe that our regionally-focused senior management platform anchored in the central region by the Empire team will help us realize on our vision to be the utility company most admired by our customers, communities and investors for our people, our passion and our performance.
With that, I'd like to flip the slide to slide 8, and then maybe on the way to slide 9, and I turn things over to Brad to give us a summary of the rich history of Empire.
Brad, take it away.
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Brad Beecher, The Empire District Electric Company - President & CEO [4]
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Thank you, Ian. I am so excited to be here. It's been a long couple of days here, but for those of you who don't know Empire, we have been around since 1909, and publicly traded on the New York Stock Exchange since 1944. So there's a lot of information out there about Empire. We're ticker symbol EDE, and you can find more on www.empiredistrict.com.
But just in real, big highlights, we are generally a 100% regulated, vertically integrated electric utility with some gas customers. So, we have about 170,000 customers across four states as Ian mentioned, Missouri, Kansas, Oklahoma, and Arkansas. We have about 44,000 gas customers, all in Missouri and then we serve a few water distribution companies. So much like Algonquin, we cover the gamuts. And so together, we're going to be stronger. The four states that we operate in, again primarily our revenues come from Missouri. We feel we have a very good regulatory relationship in Missouri and I know Missouri gets some bad knocks every once in a while but [we've felt -- and had] Missouri be very constructive with us through the years. And so, I think as we get a bigger footprint, as we combine both Empire and Algonquin, I think it's even going to further our regulatory relationships in Missouri.
Flipping on to slide 10, we've underwent quite a transition in our generation fleet from 2000 to 2014. The graphs on the right represent the capacity that we have, but we've added a lot of gas fire capacity as we've reduced our coal-fired exposure. [Kind of loss in] those charts, we've also got 15% of our wind or 15% of our energy that comes from wind purchase power contracts, those expire in the mid-2020s and I think those are tremendous opportunities as we think about our partnership with Algonquin and building new generation as we go into the future.
We've also been spending quite a little bit on environmental compliance on our coal units. We've recently retired two small coal units at our Riverton Station and we are in the process of finishing up construction on a new combined cycle gas turbine at Riverton. So we have a rate case filed that goes along with that, but between the wind and our gas-fired generation, we've made a lot of moves towards greening our generation fleet.
Finally, on page 11, we've had very modest but steady increases in income and also in rate base growth. And as we look forward, we really see no reason why that kind of modest increases in income and rate base growth won't continue, especially as we think towards things like the Clean Power Plan and increases in renewable portfolio standards that are inevitably looking at us over time. So, that's Empire in a nutshell. So with that I'll turn it back to Ian.
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [5]
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Brad thanks very much. I appreciate that. With that, I'm going to ask David Bronicheski, who will start on slide 13 in the deck. David take it away, talk a little bit about the financing of the transaction.
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David Bronicheski, Algonquin Power & Utilities Corp. - CFO [6]
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Thanks Ian, and good afternoon everybody. I'm pleased to present you today a view of our long-term financing plan for the acquisition of Empire. Just before I get into that on slide 13, I'd just like to comment that along with Empire being a great strategic fit for us, the acquisition also has important financial benefits for our shareholders. The transaction provides immediate and material accretion for our shareholders. We see accretion in EPS and FFO per share in year one, and view the average annual accretion to be between 7% and 9% on EPS and 12% to 14% on FFO per share over the first three years.
Our business risk profile also improves with this transaction, given the significant growth in our regulated utility business from 51% where it stands today to around 72%.
And as you will see, our financing plan is designed to maintain a strong balance sheet and credit quality. I would also add that Empire provides multiple new pass for additional growth whether through more investment in utility rate base or the utility acquisitions or within Algonquin's broader platform through greenfield transmission and generation development opportunities.
Moving on to slide 14. For investors familiar with Algonquin's financing strategies, you will know that we target credit metrics designed to maintain our current BBB flat credit profile. Over the years, Algonquin investors have seen a resolve and commitment to maintain our credit metrics and rating. We have always believed that maintaining strong credit metrics is important, not just for our long-term fixed income investors, but also to our equity investors as well. This commitment is again demonstrated with our acquisition of Empire.
Our long-term investors should take comfort from the fact that our long-term view of our capital structure, credit quality and financing policies remain unchanged. As everyone is aware about an hour ago, we launched a concurrent bought deal offering of convertible debentures by way of installment receipts. This financing is expected to fulfill substantially all of our equity requirements for this transaction once the debentures convert to equity at the close of the transaction.
And as part of this, we will assume all of Empire's existing debt with the remaining financing needs met by a combination of US bond placements in the US private placement market where we've been very successful in the past, and perhaps with some additional US bank debt. As is our practice, we'll issue US dollar debt to act as a natural currency hedge for this 100% US transaction.
We believe that our combined businesses make us both stronger. Our regulated rate base will be over [$4 billion and our total assets will be close to $9 billion]. The scale will improve our liquidity, as well as our access to the debt and equity capital markets in both Canada and the United States.
Moving on to slide 15, I just like to spend a bit of time talking about the timeline for the transaction. There are a number of customary filings and approvals that we will need in order to complete the transaction. In particular, we will need to secure approvals from the state commissioners in Missouri, Arkansas, Kansas and Oklahoma. Algonquin looks forward to meeting and engaging with the regulators as we seek their approvals. We have extensive experience in state regulatory approval process and believe that we bring a compelling proposition as a responsible utility operator committed to maintaining a strong local presence in all of our service territories.
Our approach to Empire's communities will of course be no different. We are in complete alignment with Brad and the entire Empire management team of the benefits of maintaining Empire's historic levels of community involvement, charitable contributions and local support within its existing service territories. Our expectation is that the process for obtaining approvals will take approximately 10 to 12 months. The final transaction closing is expected Q1 2017.
With that, I'd like to hand things back over to Ian Robertson, who will discuss with you a little bit more about the combined business profile. Ian?
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [7]
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Thanks, David. We find our way now through to slide 17 of that posted slide deck. There is probably three or four slides I'll take you through here but I'm going to go relatively quickly because in some respects, I think this business combination should be quite intuitive to everyone who understands the Algonquin story, as Brad had mentioned, it is eerily similar, the business mix of Empire and Liberty Utilities, and so we feel that we're staying very much, if you will, on the fairway as we think about this going forward.
Slide 17, there is really two takeaways that I will leave with you. The first is regarding scale and the second is regarding diversification. The scale is undeniable, as David had mentioned, you can see that our customer count is headed toward 800,000. We are making good on that march to 1 million customer commitment that we had outlined three or four years ago. In terms of the size of the organization, closing in on [$9 billion] of total assets.
I think perhaps as importantly though to scale is the diversification. The little map on the lower left hand side of that slide kind of gives you a sense for how broadly diversified in terms of regulatory jurisdictions, in terms of generation modalities, in terms of generation geography. So I think really as we think about the risk profile going forward, the combined entity will obviously enjoy a broader diversification than either Empire or Algonquin on their own.
Flipping to slide 18 in that slide deck. I guess, a couple of points I'd like to highlight there. First is this material shift in our business mix as a percentage of EBITDA. We're going from approximately 50/50 to well over two-thirds from regulated earnings, as David mentioned, it's the underpinnings for our credit metrics and so we are obviously thrilled with that shift.
The second thing I'd mention and perhaps it's in the lower right-hand side of that chart is, if you will in evening, our distribution utility modalities and so following the integration of Empire District into the Liberty Utilities family will be approximately [a third, a third, a third] between water, gas and electric.
Flipping to slide 19 of that slide deck. Couple of points. The graph on the -- or the little map on the left hand side of the chart shows the presence that we're establishing in the Midwest, most notably obviously in Missouri, but extending to Illinois and obviously two new states for us Kansas and Oklahoma. But we think there is obviously a great, I'll call them, efficacies of scale that we see that we're going to get through the combination of the business in terms of operations, customer service, et cetera.
On the right hand side of this graph, this chart speaks to the strong existing regulatory relationships. As Brad mentioned, sometimes Missouri gets an unfair bad knock, certainly I'd echo Brad's sentiment that with the state has always been fair to us, we're pleased that fair portion of Empire's business is located in that state. I will mention that the state is enjoying a continued improvement in its economic environment, perhaps it's keeping pace with the broader US, but there are a couple of very exciting things that are going on in both Missouri and Arkansas.
In Missouri, there are three legislative initiatives all aimed at, I'll say improving, certainly from our perspective, improving the regulatory environment, most notably related to regulatory lag on investment, some rate stabilization and weather normalization and so we are obviously champions and supporters of those initiatives. We have been following them closely given our presence in Missouri and obviously our confidence that the Missouri regulatory environment will continue to improve.
Flipping the page third to last chart here. Not surprisingly, as Brad had mentioned, there will be continued organic investment by Empire in their distribution, transmission and generation assets. That will continue on for the years to come and it will provide modest and measured growth in CapEx and ultimately in net income and EBITDA.
And so, then the last chart to speak to is that -- speaks to the partnership I'll say that we've been able to strike with Empire. We share a very strong commitment to our customers, our employees, and our communities and that's shared by Empire. We obviously are thrilled that the Empire senior leadership team is available to us to capitalize in terms of consolidating the senior management of our existing mid-states operations into the operations in Joplin, Missouri. The headquarters will remain in Joplin, Missouri and so we think it's a great addition and an ability for us to get best-in-class management expertise into the combined operation.
I was pleased as we spend time in Joplin and getting to know the Empire team that they are as committed to their communities as we are to ours. And Empire plays a big role in Joplin and for those who recall it, it underwent obviously a tragic tornado in 2011 and I can say that Empire was a huge part of pulling that community together and rallying as they've done and the resurgence is nothing less than profound.
So anyway, there certainly is a commonality of corporate cultures and that obviously speaks well to integration. And then lastly, the question that I don't say we always ask ourselves, but whenever we look at a growth opportunity and particularly an acquisition one, we sort of ask ourselves, why are these businesses better off together than separately? And well, the answer to that question can be largely found in the strategic rationale, perhaps it's repositioning slightly to say how do these businesses end up better together than apart.
And the first one is the scale and diversification bringing operational financial efficacy. We said it's not about -- so much about economies of scale, but it's about providing better customer service, safer, more reliable operations and we think the combination of businesses certainly does that. But the financial scale is certainly important, it allows the Algonquin and Empire growth opportunity set to be fully exploited and fully pursued, including the potential to build, as Brad had outlined, additional renewable generation into rate base, which is occasion by growing RPS and clean power plan requirements. The cost of capital to the larger scale and strengthening credit metrics from the change in business mix obviously has a competitive misimplications across our entire business spectrum, including regulated and non-regulated businesses.
Secondly, it does surface growth opportunities across our generation, transmission and business units and we're obviously thrilled that perhaps our entrepreneurial spirit can help unlock value in Empire's pipeline of projects. As Brad said, they've been around since 1904, we haven't been around that long, but certainly anyone who knows us would say that they are highly entrepreneurial bunch and so we're thrilled that the combination of those cultures.
And then lastly, at the end of the day of course, the compelling shareholder value proposition, both for Algonquin and Empire shareholders have to be there. And I think we're confident that with the $34 share offer that the Empire shareholders will find value, but as importantly, the Algonquin shareholders will find value in terms of accretion to their earnings and cash flows, which will continue to support our 10% annual dividend growth.
So with that, we'll open it up for questions. Operator, go ahead.
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Questions and Answers
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Operator [1]
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(Operator Instructions) Nelson Ng, RBC Capital Markets.
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Nelson Ng, RBC Capital Markets. - Analyst [2]
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Great, thanks and congratulations on the transaction. Just a quick question for Empire, can you just roughly give us the ROE, the approved ROE and the equity thickness on average for the regulated utility?
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [3]
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Brad, are you on mute again.
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Brad Beecher, The Empire District Electric Company - President & CEO [4]
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I'm here, I was just contemplating my answer. Our last rate case in Missouri was [stipulated] with a black box, so there is no approved ROE in Missouri and we have typically operated around a 50-50 mixture of debt and equity.
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Nelson Ng, RBC Capital Markets. - Analyst [5]
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And I guess what's the rough ROE or effective ROE from your perspective?
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [6]
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Yes, in our case, Nelson, if you're trying to get to the fox on the current rate cases or historically, it's kind of bid in the mid-9% the way we've been thinking about the business.
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Nelson Ng, RBC Capital Markets. - Analyst [7]
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Okay. Yes, that works. And then just my next question is, in terms of rate base growth, so you've indicated that -- so I was just looking at the CapEx profile. How fixed is that CapEx forecast? I noticed that the generation CapEx declines and then kind of increases in 2019. And are there -- you mentioned the opportunity to green the fleet. And is there an opportunity to accelerate the greening of the fleet, especially given, I guess, the tax incentives that have been extended recently?
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [8]
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Well, to be frank Nelson, that CapEx forecast doesn't contemplate any material reinvestment in generation related to this EPP or RFP changes. And so consequently, really that reflects -- I'll say continuing organic CapEx and obviously I'm speaking on behalf of Brad, but it's really -- as we prepared our financial model, obviously Brad's team had input into it. And so, it really doesn't reflect the upside of a material investment for RPS or CPP compliance.
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Nelson Ng, RBC Capital Markets. - Analyst [9]
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Okay. So from your perspective, I guess from Algonquin's perspective, how do you see the rate base growing over time or grow over the medium term?
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [10]
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Sure. As Brad had estimated or suggested. it's -- I think, absent the ability to put significant capital into some of these RPS or CPP related initiatives, we see kind of in the 4%, 4.5% continual growth over the medium term and that's what that CapEx program would deliver. Obviously to the extent that there are opportunities to invest in CPP and potentially in other areas that might expand. I will -- I don't want to say telling a little bit of a story out of school and Brad can certainly correct me, but one of the things that Empire has done recently is, not that long ago entered into a couple of PPAs for some wind generation and that decision to enter into the PPAs was kind of concurrent with the decision for the investment in Riverton natural gas conversion. And I think Empire felt uncomfortable with the significance of direct investment in the renewable generation.
And so I think there is an opportunity that I might argue, we could say it was an opportunity for investment that you can say what was lost, it was certainly -- I don't think there's anything in prudent about it, but certainly as we think about the combined organization of Algonquin and Empire, the development expertise that we have in renewable energy and I think certainly the access to capital of the combined organization would have us have chosen a different path back when the decisions were made. So I think, Nelson that, as we think about the CapEx program going forward, we've obviously taken what Brad's team has put together. But I'm not sure we spent a lot of time saying is, how can the entrepreneurial spirit and access to capital of Algonquin change that and improve it. So I kind of think of that as a baseline. It's an attractively baseline. I think, it provides the steady growth that we're looking for, but I think there is certainly upside.
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Nelson Ng, RBC Capital Markets. - Analyst [11]
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Okay. Thanks, Ian, I'll get back in the queue.
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [12]
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Thanks Nelson.
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Operator [13]
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Sean Steuart, TD Securities.
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Sean Steuart, TD Securities - Analyst [14]
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Thanks, good afternoon everyone and congratulations on the deal. A couple questions. Could you just give a little bit more background on how the two companies came together? How long this has been under way? Who approached who? Was there any competition in soliciting other bids?
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [15]
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Well, obviously we've known Brad and his team for a long, long time. I mean, I'll say it's a small industry and through EEI and some of the other industry associations, Brad is a very familiar figure at those meetings. And obviously we've known Brad, I think Brad can attest, we pestered him for years to sell us his water utilities. And so I think there has been a connection with the organization. I think there is a little bit, I'll say, of kindred spirit there, given that we have been sort of a similar sized organizations. Very, I guess, more formally and I don't want to speak for Brad and maybe I'll let Brad to speak to the process that they had undertaken, but we were thrilled to participate in. So Brad, if you want to give the more recent history on the journey you guys have been on, maybe that would be helpful.
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Brad Beecher, The Empire District Electric Company - President & CEO [16]
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Sure. Ian. This process was initiated by Empire's Board and we began the process after our October Board meeting. Of course, there was a leak that came out December, but we've been running kind of a typical process through this time period.
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Sean Steuart, TD Securities - Analyst [17]
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Okay, understood.
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [18]
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So, Sean, I guess the short answer is, I don't want to say, it's the worst kept secret. Certainly people have been calling us about the process. I think we're thrilled there has been a cultural alignment behind the objectives of -- between the objectives of Empire and Liberty, which I would hope would -- I would certainly would say makes us a standout fit. So I can't speak to any of the other competition other than I can say, I certainly know they are there and I -- so I think we're comfortable and confident that with the robust process, but there were factors that I think makes us an ideal candidate here.
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Sean Steuart, TD Securities - Analyst [19]
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Got it. Ian, you outlined in the December Investor Day pretty aggressive growth plans across the legacy business for Algonquin, does this acquisition change any thinking in terms of scale or ambition of implementing the growth plan you laid out for the legacy business at all? Do you scale anything back or is it business as usual with the rest of it?
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [20]
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Well, I think it's business as usual. Obviously, one of the things we did talk about at in our Investor Day was the possibility of acquisitions. I think we're probably not looking at any other acquisitions or within the next little while that's what you means Sean. But we have a pipeline of great growth opportunities in the generation business. Jeff Norman is pushing those ahead with all dispatch. I think their part of the trajectory of earnings that the business was able to proudly put up in our Investor morning. I would point out and as we think about the accretion that David and I spoke of, that's accretion to a pretty aggressively trajectored, if that's the word, a growth in EPS and FFO per share. So, we're certainly not talking about accretion to something flat. So, we intend to continue to pursue those businesses -- those opportunities. We certainly think they're going to continue to add value to the business, but we are probably off the acquisition trail for the next year or so, Sean.
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Sean Steuart, TD Securities - Analyst [21]
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Got it. Okay, thanks guys. I'll get back in the queue.
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [22]
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Thanks much.
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Operator [23]
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Paul Lechem, CIBC.
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Paul Lechem, CIBC - Analyst [24]
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Thank you, good afternoon and congrats. Just on the regulatory process to get the deal closed. Can you talk about, are there any net benefit tests you need to pass in any of the states or is it more simple do no harm kind of environment?
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [25]
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They are different, some of the states are net benefits and some of the states are not in the public interest as you have mentioned, Paul. I will say that we're pleased as we looked at the business and looked at the combination of the business. Certainly as we combine these businesses, there is no expectation that there would be any cost increase occasion to any of the rate payers in Missouri, Arkansas, Oklahoma or Kansas.
And so, regardless of whether it's a known net harm or a net benefits test, I think we're comfortable that as we look forward that we would pass both of those tests. I will point out that this is not a story of synergies and let's cut everybody to the bone. That's never been our strategy in the past, it's always about improving customer service and coming up with better service offerings. And so, I think this doesn't differ from that as we go forward, Paul. So, frankly it's about providing better service for slightly less money, but better service. That's really the focus. I don't know if that's helpful, Paul, but --
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Paul Lechem, CIBC - Analyst [26]
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But I was just trying to find out if there was any customer benefits that you need to offer above and beyond -- I mean you haven't elaborate here on anything that you're offering above and beyond, is there anything you anticipate you have to sweeten the deal for the --
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David Bronicheski, Algonquin Power & Utilities Corp. - CFO [27]
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Well, in every acquisition, I mean we always approach it with the thought that we are bringing a benefit to the state and to the rate payers, whether it's opening up local offices or whether it's bringing back more local and custom tailored customer service for the utility. I think that's why certainly in our remarks today, I think we are pretty clear that we are in complete alignment with Empire, and Brad and his team and their commitment to the local service territories that they operate. So again, whether it's a net benefit test or not, we always believe that we bring benefits to the communities that we serve.
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Paul Lechem, CIBC - Analyst [28]
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Okay. Thanks, David. I appreciate it.
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [29]
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And Paul, let me just say that, in sort of conclusion, within our first rodeo, as you might put it in terms of using a Midwest [similarly] and that we've gone through the process in -- certainly in two of the four states. We've got a relationship with those regulators and I think that the Liberty proposition resonated with staff and with the regulators and we're hoping that that would continue on both in Missouri and Arkansas, as well as Oklahoma and Kansas, so.
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Paul Lechem, CIBC - Analyst [30]
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Got you. Thanks, Ian. Just a last question from me. As you noted, the mix of the business skews more to the regulated utility side, just wondering is there any intent? Is there any desire long-term to get the mix back more towards the 50/50 or is any rationale towards going back that way or are you comfortable long-term keeping the split more skewed to the regulated utilities? Thanks.
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [31]
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Well, as you know, we're not hard and fast on any sorts of numbers, I think, we're all with the 70% mix. And as you think about the pipeline as Sean had asked about the pipeline of existing opportunities. Even if we added that pipeline, which is generally splits 50/50. It'll be a long time before we push ourselves back to an overall 50/50 mix. And so I think we're happy to be at the higher amount of regulated earnings, but we are not hard and fast about anything, Paul.
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Paul Lechem, CIBC - Analyst [32]
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Okay. Thanks Ian. Congrats again.
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [33]
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Thanks, Paul.
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Operator [34]
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Rupert Merer, National Bank.
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Rupert Merer, National Bank Financial - Analyst [35]
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Good afternoon everyone, congratulations.
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [36]
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Thanks, Rupert.
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Rupert Merer, National Bank Financial - Analyst [37]
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With the scale of the combined company and your increased weighing down the US, have you had any new thoughts on US listings for accessing the US capital markets?
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [38]
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Well, the thought I might bring is that there is no free lunch in terms of listing in the US. I don't think that unto itself creates value and you and I have spoken about that in the past. I think there may be a value as the Company grows to [stretching] our presence in the US, perhaps for access to capital. But I will say that, I mean we're obviously thrilled that the Canadian capital markets were supportive of this acquisition. And so it's not for want of capital that we want to move down to the US, the story is obviously well known in Canada.
But I think this certainly would be -- would create that opportunity, you mentioned the greater preponderance of US assets versus Canadian assets. We're going from above, I'll call it, 80% to slightly over 90%. So is it a real shift? Sure. But I think we still without a doubt or obviously a US centric company from an asset perspective. And it may make sense that we begin listing our shares in the NYSE. We are an SEC registered, so to be frank, is not going to be perfectly momentous event. I think for this transaction, anyway, the capital that was raised concurrent with this announcement will largely satisfy those equity needs, but perhaps as we think further down the road, we would be get to the US, but there is no need for us to do it, and I think it would be the way I said. David, do you have any other thought for that?
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David Bronicheski, Algonquin Power & Utilities Corp. - CFO [39]
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No, I think that was exactly spot on. We're pleased that we were able to satisfy our capital needs on the equity side here in Canada and as long as you're able to do that, there is not that compelling reason necessarily to go into the states. But as we continue to grow, I think over time that's definitely something that we do have on the radar screen and that is why we continue to keep our SEC registration.
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Rupert Merer, National Bank Financial - Analyst [40]
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Great. And then secondly, looking at your FFO and EPS accretion numbers, you mentioned you're not looking at any significant cuts cutting to the bone looking for cost savings, but how much savings can you find in legal costs and listing costs, maybe even taxes with your headquarters in Canada?
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [41]
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Well, those are obviously two very distinctly different categories, with respect to the public company costs, obviously, those are sort of obvious savings. Brad doesn't have to continue to pay fees to the NYSE going forward. We obviously have some fees we have to pay here in Toronto for the larger equity sized, but there obviously are savings; One annual report and so, but that's not the rationale behind, to be frank, we're behind the accretion.
The accretion for this is premised, to be frank, on just the combination of the businesses. I think it does reflect as you do point out for better or for worse, the candidate enjoys a lower corporate tax rate and I think there are benefits to our shareholders, the ability to pay those taxes in Canada at some level offs, in accordance with the tax treaties. But we're thrilled that those accretion numbers that you see are premised on some major change to either of our businesses and so I think that's part of why we think there is alignment and why it is a compelling proposition.
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Rupert Merer, National Bank Financial - Analyst [42]
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Okay, excellent. Thank you, I will leave it there.
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [43]
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Thanks Rupert.
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Operator [44]
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(Operator Instructions). That will conclude the Q&A session for today. Sir, I will turn it over to you for any closing remarks.
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Ian Robertson, Algonquin Power & Utilities Corp. - CEO [45]
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Great. Well, I appreciate all the thoughts and involvement on the call today. Obviously, this is the start of a journey for this organization. It does represent a significant shift for this Company going forward. It's a strategic acquisition, but we are obviously thrilled to have taken the first step in that journey with everyone today.
So with that, I appreciate your time. Thanks very much.
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Operator [46]
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Ladies and gentlemen this does conclude today's call, thank you for you participation.
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