ALGONQUIN POWER & UTILITIES CORP.

ALGONQUIN POWER & UTILITIES CORP. (AQN) Annual Report Summary - Fiscal Year Ended December 31, 2025

Discover the key insights from Algonquin Power & Utilities Corp.'s (AQN) performance and strategic direction for the fiscal year ended December 31, 2025. This summary offers a clear overview of AQN's business, financial health, and future prospects.

1. Business Overview & Business Segments Algonquin Power & Utilities Corp. (AQN) operates as a diversified utility company with two primary business segments:

• Regulated Services Group: This group delivers essential utility services—electricity, natural gas, and water—to approximately 1.3 million customers across North America. These operations generate stable, regulated revenue streams.
• Non-Regulated Energy Group: This segment generates power, mainly from renewable sources like hydroelectric, wind, and solar. It sells this power under long-term contracts. Significant strategic changes in 2025 have substantially altered this segment's profile.

2. Financial Performance Highlights (FY2025 vs. FY2024) AQN achieved modest growth in its core regulated businesses while also executing significant strategic portfolio adjustments.

• Total Revenue: Total revenue grew to $3.81 billion in 2025, a 1.9% increase from $3.74 billion in 2024.
  • Regulated Electricity: Increased to $1.32 billion (up 3.1%).
  • Regulated Gas: Rose to $1.15 billion (up 4.5%).
  • Regulated Water: Grew to $280 million (up 3.7%).
  • Non-Regulated Energy: Declined to $1.05 billion (down 2.8%), reflecting the impact of asset dispositions.
• Net Income: AQN reported $450 million in net income for 2025, up from $400 million in 2024. Regulated growth and effective cost management drove this increase, despite higher interest expenses.
• Earnings Per Share (EPS): EPS reached $0.65 in 2025, an increase from $0.60 in 2024.
• Cash Flow from Operations: The company generated $1.2 billion in cash flow from operations in 2025, compared to $1.1 billion in 2024. This provides a strong foundation for capital investments and debt servicing.
• Interest Expenses: Interest expenses notably increased to $700 million in 2025 from $650 million in 2024 (up 7.7%). This reflects both a higher interest rate environment and AQN's debt profile.

3. Management Discussion & Strategic Moves In 2025, AQN focused on significant strategic portfolio optimization to strengthen its financial position and sharpen its focus on the core regulated utility business. This involved several key operational and strategic decisions that shaped the financial results.

• Renewables Sale: AQN successfully sold a substantial portion of its non-regulated renewable energy portfolio, specifically its "Seven Renewable Energy Business" assets. This strategic divestiture generated approximately $2.5 billion in proceeds. AQN primarily used these funds for debt reduction and to finance regulated capital expenditures. This move significantly de-risks the company's profile by reducing its exposure to volatile merchant power markets.
• Atlantica Yield Disposition: In late 2024, AQN divested its stake in Atlantica Sustainable Infrastructure. This further streamlined its asset base and contributed to de-leveraging efforts.
• Successful Rate Cases: AQN secured positive outcomes in several key rate cases. It obtained approvals for Midstates Gas in Missouri, Missouri Water, Arkansas Water, and Energy North Gas in New Hampshire. Additionally, AQN reached a settlement for Arizona Water, and a new rate plan became effective for Granite State Electric in New Hampshire. These successes are crucial for ensuring predictable revenue and capital recovery within its regulated segments.
• Natural Disaster Impacts: The company incurred approximately $50 million in costs related to the Mountain View Fire in 2025 and the Midwest Extreme Weather Event in 2024. These events underscore the ongoing operational and financial challenges that climate-related incidents pose.

4. Financial Health & Capital Structure AQN actively manages its debt and liquidity to support its strategic objectives.

• Total Debt: As of December 31, 2025, total debt amounted to approximately $15 billion. This includes a mix of revolving credit facilities, commercial paper, and various unsecured notes and bonds across different currencies.
• Cash & Liquidity: The company maintained a cash balance of approximately $300 million. It also had access to $1.5 billion in available liquidity through its revolving credit facilities, providing financial flexibility.
• Unbilled Revenues: Unbilled revenues increased to $300 million in 2025 from $280 million in 2024. These represent revenue earned but not yet invoiced, which will contribute to future cash flow.
• Capital Allocation: AQN strategically deploys proceeds from asset sales to reduce debt and fund regulated capital investments. This aims to improve the company's credit metrics and reduce borrowing costs over time.

5. Risk Factors While AQN operates in stable regulated markets, several factors could impact its performance:

• Interest Rate Fluctuations: Rising interest rates directly increase borrowing costs, as evidenced by the 7.7% increase in interest expense in 2025, which impacts profitability.
• Regulatory & Political Risk: As a regulated utility, AQN's profitability heavily relies on regulatory approvals for rates and capital expenditures. Adverse regulatory decisions or policy changes (e.g., environmental regulations) could negatively affect earnings. Ongoing rate cases in Bermuda, New Brunswick, and Arizona highlight this continuous exposure.
• Climate Change & Extreme Weather: The increased frequency and intensity of natural disasters (such as the Mountain View Fire and Midwest Extreme Weather Event) can lead to significant operational disruptions, infrastructure damage, and unrecoverable costs.
• Economic & Market Conditions: Economic downturns, credit market volatility, or reduced energy demand could impact customer usage and AQN's ability to access capital on favorable terms.
• Cybersecurity & Operational Resilience: Threats to critical infrastructure from cyberattacks or equipment failures could result in service interruptions, data breaches, and substantial remediation costs.
• Inflation & Supply Chain: Rising costs for materials, labor, and equipment due to inflation, coupled with potential supply chain disruptions, could increase project costs and operational expenses.
• Integration Risk from Dispositions: While strategic, the large-scale Renewables Sale carries risks related to business partner and employee morale, as well as the realization of expected financial benefits.

6. Future Outlook & Strategic Direction AQN has outlined a clear strategy to enhance shareholder value through de-leveraging, simplification, and disciplined growth within its regulated utility segment.

• De-leveraging & Portfolio Simplification: The company will continue to prioritize debt reduction, utilizing proceeds from asset sales and strong operational cash flow. This aims to improve its balance sheet and credit ratings. AQN is shifting its focus towards a higher proportion of regulated assets.
• Regulated Growth Investments: AQN plans significant capital expenditures, estimated at $3.5 billion over the next three years (2026-2028). These funds will primarily modernize and expand its regulated electricity, gas, and water infrastructure. These investments are expected to drive rate base growth and contribute to stable earnings.
• Dividend Policy: AQN remains committed to maintaining a stable and sustainable dividend. It targets an annual payout ratio of 60-70% of adjusted net income, balancing shareholder returns with capital reinvestment needs.
• Renewable Energy Credits & Grants: The company expects to generate and sell renewable energy credits from its remaining clean energy assets. It also anticipates benefiting from U.S. federal grants for infrastructure and clean energy projects.
• Sustainability & ESG: AQN continues to embed environmental, social, and governance (ESG) principles into its operations, focusing on climate resilience, responsible resource management, and community engagement.
• Technology & Infrastructure Modernization: AQN plans investments in new technology systems and infrastructure upgrades. These initiatives aim to improve operational efficiency, customer service, and grid reliability.

7. Competitive Position AQN operates within a competitive landscape but benefits from several inherent advantages:

• Regulated Monopolies: A significant portion of AQN's business operates as regulated utilities. These provide essential services within defined service territories. This structure typically limits direct competition, offering stable and predictable revenue streams approved by regulatory bodies.
• Long-Term Contracts: Its non-regulated renewable energy assets primarily operate under long-term power purchase agreements (PPAs) with creditworthy counterparties. These contracts provide revenue certainty and mitigate exposure to volatile wholesale power markets.
• Diversified Portfolio: The company's geographic and operational diversification across electricity, natural gas, and water utilities, as well as renewable energy generation, helps spread risk and capture growth opportunities in various markets.
• Focus on Renewables: AQN's continued, though streamlined, presence in renewable energy generation positions it favorably to capitalize on the global energy transition and increasing demand for clean power sources.
• Operational Scale and Expertise: As an established utility operator, AQN possesses the operational scale, technical expertise, and regulatory experience necessary to manage complex infrastructure and effectively navigate diverse regulatory environments.

8. Conclusion Algonquin Power & Utilities Corp. (AQN) experienced a transformative year in 2025. Strategic asset divestitures marked this period, aimed at strengthening its financial foundation and sharpening its focus on stable, regulated utility businesses. While AQN faced challenges from rising interest rates and natural disasters, successful rate case outcomes and a clear strategy for de-leveraging and regulated growth position the company for more predictable earnings and cash flows. Investors should monitor the execution of its capital expenditure plan, ongoing regulatory developments, and continued progress on debt reduction as key indicators of future performance.