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Published: 2022-08-11

Unaudited Interim Consolidated Financial Statements ofAlgonquin Power & Utilities Corp.For the three and six months ended June 30, 2022 and 2021

Algonquin Power & Utilities Corp.
Unaudited Interim Consolidated Statements of Operations
	Three months ended	Six months ended
(thousands of U.S. dollars, except per share amounts)			June 30	June 30
	2022			2021	2022			2021
Revenue
						Regulated electricity distribution	$ 295,558 $ 280,011 $ 576,252 $ 613,984
						Regulated gas distribution		121,911		92,711	385,345		291,325
						Regulated water reclamation and distribution		89,626		58,042	168,257		112,592
						Non-regulated energy sales		97,015		77,890	185,235		108,673
						Other revenue		20,149		18,869	44,867		35,491
		624,259			527,523 1,359,956 1,162,065
Expenses
						Operating expenses		206,330		171,082	418,332		351,139
						Regulated electricity purchased		104,125		118,892	203,308		288,291
						Regulated gas purchased		51,802		26,105	184,368		99,486
						Regulated water purchased		3,329		3,406	6,152		6,148
						Non-regulated energy purchased		11,698		6,061	26,604		13,989
						Administrative expenses		20,107		17,122	37,559		33,765
						Depreciation and amortization		112,547		98,161	232,511		195,600
						Loss on foreign exchange		4,464		1,283	4,726		2,145
		514,402			442,112 1,113,560	990,563
Gain on sale of renewable assets (note 13(d))			—				—	1,200				—
Operating income		109,857			85,411	247,596			171,502
Interest expense		(64,573)			(58,182)	(122,516) (107,762)
Gain (loss) from long-term investments (note 6)		(113,380)			60,506	(124,069)			9,999
Other net losses (note 16)		(8,652)			(1,813)	(13,382)			(10,197)
Pension and other post-employment non-service costs (note 8)	(2,258)			(3,861)	(4,836)			(7,545)
Loss on derivative financial instruments (note 21(b)(iv))		(6,135)			(1,354)	(5,884)			(265)
Earnings (loss) before income taxes		(85,141)			80,707	(23,091)			55,732
Income tax recovery (expense) (note 15)
						Current		(3,409)		(3,864)	(9,713)		(7,239)
						Deferred		26,228		8,059	23,080		33,072
		22,819			4,195	13,367			25,833
Net earnings (loss)		(62,322)			84,902	(9,724)			81,565
Net effect of non-controlling interests (note 14)
						Non-controlling interests		32,021		20,937	72,963		40,902
						Non-controlling interests held by related party		(3,086)		(2,617)	(5,661)		(5,298)
	$	28,935 $			18,320 $	67,302 $			35,604
Net earnings (loss) attributable to shareholders of Algonquin
Power & Utilities Corp.	$	(33,387) $ 103,222 $	57,578 $ 117,169
Preferred shares, Series A and preferred shares, Series D
dividend (note 12)		2,220			2,276	4,440			4,490
Net earnings (loss) attributable to common shareholders of
Algonquin Power & Utilities Corp.	$	(35,607) $ 100,946 $	53,138 $ 112,679
Basic net earnings (loss) per share (note 17)	$	(0.05) $			0.16 $	0.08 $			0.19
Diluted net earnings (loss) per share (note 17)	$	(0.05) $			0.16 $	0.08 $			0.18
See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.
Unaudited Interim Consolidated Statements of Comprehensive Income

	Three months ended	Six months ended
(thousands of U.S. dollars)			June 30	June 30
	2022			2021	2022			2021
Net earnings (loss)						$	(62,322) $			84,902	(9,724) $			81,565
Other comprehensive income (loss) (“OCI”):
							Foreign currency translation adjustment, net of
							tax expense of $1,037 and tax recovery of
							$2,273 (2021 - tax recovery of $822 and
							$1,359), respectively (notes 21(b)(iii) and
							21(b)(iv))		(48,440)			(2,995)	(40,595)		(3,268)
							Change in fair value of cash flow hedges, net of
							tax recovery of $7,597 and $29,894 of (2021 -
							$12,969 and $10,283), respectively (note
							21(b)(ii))		(12,879)			(31,791)	(71,765)		(24,147)
							Change in pension and other post-employment
							benefits, net of tax recovery of $32 and $30
							(2021 - tax expense of $196 and $335),
							respectively (note 8)		(93)						545	(86)	2,165
OCI, net of tax							(61,412)			(34,241)	(112,446)			(25,250)
Comprehensive income (loss)							(123,734)			50,661	(122,170)			56,315
Comprehensive loss attributable to the non-
controlling interests							(30,375)			(16,776)	(68,055)			(33,675)
Comprehensive income (loss) attributable to
shareholders of Algonquin Power & Utilities Corp.						$	(93,359) $			67,437 $	(54,115) $			89,990
See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.
Unaudited Interim Consolidated Balance Sheets
(thousands of U.S. dollars)
	June 30,	December 31,
	2022	2021
ASSETS
Current assets:
			Cash and cash equivalents	$	84,997 $	125,157
			Trade and other receivables, net (note 4)		431,415	403,426
			Fuel and natural gas in storage		81,338		74,209
			Supplies and consumables inventory		116,280	103,552
			Regulatory assets (note 5)		136,428	158,212
			Prepaid expenses		65,340		54,548
			Derivative instruments (note 21)				6,636	3,486
			Other assets		22,673		16,153
		945,107	938,743
Property, plant and equipment, net	11,881,779 11,042,446
Intangible assets, net		100,543	105,116
Goodwill		1,297,597	1,201,244
Regulatory assets (note 5)		1,124,093	1,009,413
Long-term investments (note 6)
			Investments carried at fair value		1,663,092	1,848,456
			Other long-term investments		523,751	495,826
Derivative instruments (note 21)		46,340			17,136
Deferred income taxes		46,123			31,595
Other assets		109,451			95,861
	$ 17,737,876 $ 16,785,836
See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.
Unaudited Interim Consolidated Balance Sheets (continued)
(thousands of U.S. dollars)
	June 30,	December 31,
	2022	2021
LIABILITIES AND EQUITY
Current liabilities:
			Accounts payable	$	145,375 $	185,291
			Accrued liabilities		485,055	428,733
			Dividends payable (note 12)		122,078	114,544
			Regulatory liabilities (note 5)		72,956		65,809
			Long-term debt (note 7)		182,497	356,397
			Other long-term liabilities (note 9)		157,827	167,908
			Derivative instruments (note 21)		48,409		38,569
			Other liabilities				7,651	7,461
		1,221,848 1,364,712
Long-term debt (note 7)		7,272,637 5,854,978
Regulatory liabilities (note 5)		557,867	510,380
Deferred income taxes		497,554	530,187
Derivative instruments (note 21)		138,618			81,676
Pension and other post-employment benefits obligation		224,925	226,387
Other long-term liabilities (note 9)		476,592	515,911
		10,390,041 9,084,231
Redeemable non-controlling interests (note 14)
			Redeemable non-controlling interest, held by related party (note 13(b))		306,795	306,537
			Redeemable non-controlling interests				9,973	12,989
		316,768	319,526
Equity:
			Preferred shares		184,299	184,299
			Common shares (note 10(a))		6,082,511 6,032,792
			Additional paid-in capital				261	2,007
			Deficit		(475,356)	(288,424)
			Accumulated other comprehensive loss (“AOCI”) (note 11)		(183,370)		(71,677)
			Total equity attributable to shareholders of Algonquin Power & Utilities Corp.		5,608,345 5,858,997
			Non-controlling interests
			Non-controlling interests		1,355,022 1,441,924
			Non-controlling interest, held by related party (note 13(c))		67,700		81,158
		1,422,722 1,523,082
			Total equity		7,031,067 7,382,079
Commitments and contingencies (note 19)Subsequent events (notes 7(a), 10(b))
	$ 17,737,876 $ 16,785,836
See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.
Consolidated Statement of Equity
(thousands of U.S. dollars)
For the three months ended June 30, 2022
			Algonquin Power & Utilities Corp. Shareholders
	Additional	Non-
				Common	Preferred	paid-in			controlling
				shares	shares	capital	Deficit	AOCI	interests	Total
Balance, March 31, 2022
				$ 6,057,249 $ 184,299 $	1,158 $ (315,879) $ (123,398) $ 1,471,378 $ 7,274,807
Net loss					—	—	—					(33,387)	—					(28,935)	(62,322)
Effect of redeemable non-
controlling interests not
included in equity
(note 14)					—	—	—	—	—				(1,529)	(1,529)
OCI					—	—	—	—							(59,972)	(1,440)	(61,412)
Dividends declared and
distributions to non-
controlling interests					—	—	—	(103,616)		—				(19,230)	(122,846)
Dividends and issuance of
shares under dividend
reinvestment plan					21,239	—	—					(21,239)	—	—						—
Contributions received
from non-controlling
interests (note 3), net of
cost					—	—	—	—	—				2,478	2,478
Common shares issued
under employee share
purchase plan					1,149	—	—	—	—	—				1,149
Share-based
compensation					—	—					4,042	—	—	—					4,042
Common shares issued
pursuant to share-based
awards					2,874	—					(4,939)	(1,235)	—	—					(3,300)
Balance, June 30, 2022				$ 6,082,511 $ 184,299 $	261 $ (475,356) $ (183,370) $ 1,422,722 $ 7,031,067
See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.
Consolidated Statement of Equity

(thousands of U.S. dollars)
For the three months ended June 30, 2021
			Algonquin Power & Utilities Corp. Shareholders
	Additional	Non-
				Common	Preferred	paid-in			controlling
				shares	shares	capital	Deficit	AOCI	interests	Total
Balance, March 31, 2021
				$ 5,092,691 $ 184,299 $	59,631 $ —	$ (40,330) $ (20,272) $ 678,642 $ 5,954,661
Net earnings (loss)					—	—	—	103,222		—	(18,320)					84,902
Redeemable non-
controlling interests not
included in equity
(note 14)					—	—	—	—	—						(910)	(910)
OCI					—	—	—	—	(35,785)							1,544	(34,241)
Dividends declared and
distributions to non-
controlling interests					—	—	—	(84,427)		—						(7,166)	(91,593)
Dividends and issuance of
shares under dividend
reinvestment plan					23,557	—	—	(23,557)		—	—						—
Contributions received
from non-controlling
interests					—	—	—	—	—	820,971	820,971
Common shares issued
upon conversion of
convertible debentures									16	—	—	—	—	—				16
Common shares issued
upon public offering,
net of tax effected cost					133,801	—	—	—	—	—	133,801
Contract adjustment
payments					—	—	(62,240) (160,138)			—	— (222,378)
Issuance of common
shares under employee
share purchase plan					1,256	—	—	—	—	—				1,256
Common shares issued
pursuant to share-based
awards									487	—							(904)			(534)	—	—	(951)
Share-based
compensation					—	—							3,513	—	—	—			3,513
Balance, June 30, 2021				$ 5,251,808 $ 184,299 $	— $ (205,764) $ (56,057) $ 1,474,761 $ 6,649,047
See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.
Consolidated Statement of Equity
(thousands of U.S. dollars)
For the six months ended June 30, 2022
			Algonquin Power & Utilities Corp. Shareholders
	Additional	Non-
				Common	Preferred	paid-in			controlling
				shares	shares	capital	Deficit	AOCI	interests	Total
Balance, December 31,
2021				$ 6,032,792 $ 184,299 $	2,007 $ (288,424) $	(71,677) $ 1,523,082 $ 7,382,079
Net earnings (loss)					—	—	—						57,578	—			(67,302)	(9,724)
Effect of redeemable non-
controlling interests not
included in equity
(note 14)					—	—	—	—	—					(2,725)	(2,725)
OCI					—	—	—	—	(111,693)						(753)	(112,446)
Dividends declared and
distributions to non-
controlling interests					—	—	—	(199,870)		—					(35,788)	(235,658)
Dividends and issuance of
shares under dividend
reinvestment plan					42,779	—	—						(42,779)	—	—			—
Contributions received
from non-controlling
interests (note 3), net of
cost					—	—	—	—	—					6,208	6,208
Common shares issued
upon conversion of
convertible debentures					6	—	—	—	—	—						6
Common shares issued
under employee share
purchase plan					2,455	—	—	—	—	—					2,455
Share-based
compensation					—	—					5,664	—	—	—			5,664
Common shares issued
pursuant to share-based
awards					4,479	—					(7,410)		(1,861)	—	—			(4,792)
Balance, June 30, 2022				$ 6,082,511 $ 184,299 $	261 $ (475,356) $ (183,370) $ 1,422,722 $ 7,031,067
See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.
Consolidated Statement of Equity

(thousands of U.S. dollars)
For the six months ended June 30, 2021
				Algonquin Power & Utilities Corp. Shareholders
	Additional	Retained	Non-
					Common	Preferred	paid-in	earnings		controlling
					shares	shares	capital	(deficit)	AOCI	interests	Total
Balance, December 31,
2020					$ 4,935,304 $ 184,299 $	60,729 $	45,753 $ (22,507) $ 458,612 $ 5,662,190
Net earnings (loss)						—	—	—		117,169		—	(35,604)						81,565
Redeemable non-
controlling interests not
included in equity
(note 14)						—	—	—		—	—								(1,873)	(1,873)
OCI						—	—	—	—	(27,179)								1,929	(25,250)
Dividends declared and
distributions to non-
controlling interests						—	—	— (158,604)		—	(13,367) (171,971)
Dividends and issuance of
shares under dividend
reinvestment plan						46,208	—	—	(46,208)		—	—							—
Contributions received
from non-controlling
interests, net of cost						—	—							6,919	—								(6,371) 1,035,923 1,036,471
Common shares issued
upon conversion of
convertible debentures												16	—	—	—	—	—				16
Common shares issued
upon public offering, net
of tax effected cost						261,228	—	—	—	—	—	261,228
Contract adjustment
payments						—	—	(62,240) (160,138)			—	— (222,378)
Issuance of common
shares under employee
share purchase plan						2,572	—	—	—	—	—					2,572
Share-based
compensation						—	—							5,074	—	—	—				5,074
Common shares issued
pursuant to share-based
awards						6,480	—	(10,482)								(3,736)	—	—				(7,738)
Acquisition of redeemable
non-controlling interest						—	—	—	—	—							29,141	29,141
Balance, June 30, 2021					$ 5,251,808 $ 184,299 $	— $ (205,764) $ (56,057) $ 1,474,761 $ 6,649,047
See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.Unaudited Interim Consolidated Statements of Cash Flows
(thousands of U.S. dollars)	Three months ended June 30	Six months ended June 30
	2022		2021	2022		2021
Cash provided by (used in):Operating Activities
					Net earnings (loss)	$	(62,322) $		84,902	$	(9,724) $		81,565
					Adjustments and items not affecting cash:
					Depreciation and amortization		112,547		98,161		232,511		195,600
					Deferred taxes		(26,228)		(8,059)		(23,080)		(33,072)
					Unrealized loss (gain) on derivative financial instruments
						(334)	1,141						(402)	198
					Share-based compensation						3,860	3,189		3,495	4,386
					Cost of equity funds used for construction purposes						(458)	(140)				(967)	(131)
					Change in value of investments carried at fair value		143,522		(27,342)		184,029		44,402
					Pension and post-employment expense lower than
					contributions						(823)	(2,390)		(6,436)	(6,048)
					Distributions received from equity investments, net of
					income						1,282	1,374		3,384	6,911
					Other						931	4,282		3,536	6,300
					Net change in non-cash operating items (note 20)		96,670		(51,829)		48,522		(440,346)
		268,647		103,289		434,868		(140,235)
Financing Activities
					Increase in long-term debt		2,707,508		4,405,745		5,280,038		6,928,966
					Repayments of long-term debt		(2,407,355)		(4,790,743)		(4,044,265)		(6,537,824)
					Issuance of common shares, net of costs						1,149	137,941		2,455	266,684
					Cash dividends on common shares		(94,177)		(70,769)		(187,558)		(140,777)
					Dividends on preferred shares		(2,220)		(2,276)		(4,440)		(4,490)
					Contributions from non-controlling interests and redeemable
					non-controlling interests						—	698,011				—	908,684
					Production-based cash contributions from non-controlling
					interest						2,478			—	6,208	4,832
					Distributions to non-controlling interests, related party
					(note 13(b) and (c))		(8,354)		(6,976)		(18,360)		(13,958)
					Distributions to non-controlling interests		(16,760)		(2,910)		(25,109)		(3,998)
					Payments upon settlement of derivatives						—			—	(26,254)	(33,782)
					Shares surrendered to fund withholding taxes on exercised share
					options		(3,494)		(4,243)		(4,120)		(5,052)
					Increase in other long-term liabilities						2,069	239,771		7,268	278,645
					Decrease in other long-term liabilities		(2,908)		(2,812)		(4,142)		(3,304)
		177,936		600,739		981,721		1,644,626
Investing Activities
					Additions to property, plant and equipment and intangible
					assets		(380,848)		(407,743)		(708,547)		(703,132)
					Increase in long-term investments		(49,681)		(201,179)		(96,938)		(668,385)
					Acquisitions of operating entities (note 3)						(86)			—	(632,797)					—
					Increase in other assets		(10,340)		(27,405)		(12,804)		(27,852)
					Receipt of principal on development loans receivable						201			—				323	—
					Decrease in long-term investments						517			—	2,920					—
					Other proceeds						—			—				—	4,344
		(440,237)		(636,327)		(1,447,843)		(1,395,025)
Effect of exchange rate differences on cash and restricted cash		(2,408)								477		(1,846)				527
Increase (decrease) in cash, cash equivalents and restricted cash						3,938	68,178		(33,100)		109,893
Cash, cash equivalents and restricted cash, beginning of period		124,351		171,733		161,389		130,018
Cash, cash equivalents and restricted cash, end of period	$	128,289 $		239,911	$	128,289 $		239,911

Algonquin Power & Utilities Corp.
Unaudited Interim Consolidated Statements of Cash Flows (continued)
(thousands of U.S. dollars)	Three months ended June 30	Six months ended June 30
	2022		2021	2022		2021
Supplemental disclosure of cash flow information:Cash paid during the period for interest expense
	$	52,268 $		55,964	$	113,874 $		112,325
Cash paid during the period for income taxes	$				5,147 $	2,660	$	6,357 $	1,675
Cash received during the period for distributions from equity
investments	$	35,364 $		35,855	$	69,455 $		62,641
Non-cash financing and investing activities:Property, plant and equipment acquisitions in accruals
	$	127,525 $		149,069	$	127,525 $		149,069
Issuance of common shares under dividend reinvestment plan and
share-based compensation plans	$	25,262 $		25,300	$	49,713 $		55,260
Issuance of common shares upon conversion of convertible
debentures	$				— $	16	$			— $	16
Property, plant and equipment, intangible assets and accrued
liabilities in exchange of note receivable	$				— $	604	$			— $	87,732
See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
Algonquin Power & Utilities Corp. (“AQN” or the “Company”) is an incorporated entity under the Canada Business Corporations Act. AQN's operations are organized across two primary business units consisting of the Regulated Services Group and the Renewable Energy Group. The Regulated Services Group owns and operates a portfolio of regulated electric, natural gas, water distribution and wastewater collection utility systems and transmission operations in the United States, Canada, Bermuda and Chile; the Renewable Energy Group owns and operates a diversified portfolio of non-regulated renewable and thermal electric generation assets.
1.	Significant accounting policies(a)
		Basis of preparationThe accompanying unaudited interim consolidated financial statements and notes have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and follow disclosure required under Regulation S-X provided by the U.S. Securities and Exchange Commission. In the opinion of management, the unaudited interim consolidated financial statements include all adjustments that are of a recurring nature and necessary for a fair presentation of the results of interim operations.The significant accounting policies applied to these unaudited interim consolidated financial statements of AQN are consistent with those disclosed in the consolidated financial statements of AQN as at and for the year ended December 31, 2021.
	(b)	SeasonalityAQN's operating results are subject to seasonal fluctuations that could materially impact quarter-to-quarter operating results and, thus, one quarter's operating results are not necessarily indicative of a subsequent quarter's operating results. Where decoupling mechanisms exist, total volumetric revenue is prescribed by the applicable regulatory authority and is not affected by usage. AQN's electrical distribution utilities can experience higher or lower demand in the summer or winter depending on the specific regional weather and industry characteristics. During the winter period, natural gas distribution utilities generally experience higher demand than during the summer period. AQN’s water and wastewater utility assets’ revenues fluctuate depending on the demand for water, which is normally higher during drier and hotter months of the summer. AQN’s hydroelectric energy assets are primarily “run-of-river” and as such fluctuate with the natural water flows. During the winter and summer periods, flows are generally slower, while during the spring and fall periods flows are heavier. For AQN's wind energy assets, wind resources are typically stronger in spring, fall and winter, and weaker in summer. AQN's solar energy assets generally experience greater insolation in summer, weaker in winter.
	(c)	Foreign currency translationAQN’s reporting currency is the U.S. dollar. Within these unaudited interim consolidated financial statements, the Company denotes any amounts denominated in Canadian dollars with “C$”, in Chilean pesos with "CLP" and in Chilean Unidad de Fomento with "CLF" immediately prior to the stated amount.
2.	Recently adopted accounting pronouncementsThe FASB issued ASU 2021-05, Leases (Topic 842): Lessors — Certain Leases with Variable Lease Payments to address concerns relating to day-one losses for sales-type or direct financing leases with variable payments that do not depend on a reference index or rate. The update amends the lease classification requirements for lessors to align them with past practice under Topic 840, Leases. The adoption of this update did not have an impact on the unaudited interim consolidated financial statements.The FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity to address the complexity associated with accounting for certain financial instruments with characteristics of liabilities and equity. The number of accounting models for convertible debt instruments and convertible preferred stock is being reduced and the guidance has been amended for the derivatives scope exception for contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions. The adoption of this update did not have an impact on the unaudited interim consolidated financial statements.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
2.	Recently adopted accounting pronouncements (continued)The FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to ease the potential burden in accounting for reference rate reform. The amendments apply to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. The FASB issued an update to Topic 848 in ASU 2021-01 to clarify that the scope of Topic 848 includes derivatives affected by the discounting transition. The adoption of this update did not have an impact on the unaudited interim consolidated financial statements.
3.	Business and assets acquisitionsAcquisition of New York American Water Company, Inc.Effective January 1, 2022, the Company completed the acquisition of New York American Water Company, Inc. (subsequently renamed Liberty Utilities (New York Water) Corp. (“Liberty NY Water”)). Liberty NY Water is a Merrick, New York based regulated water and wastewater utility company, serving customers in seven counties in southeastern New York.A purchase price of $608,000 (before closing adjustments) was paid for this acquisition. The costs related to this acquisition have been expensed through the unaudited interim consolidated statement of operations. The following table summarizes the preliminary allocation of the acquisition prices of the assets acquired and liabilities assumed at the acquisition date:
		Working capital	$	4,703
		Property, plant and equipment		517,591
		Goodwill		95,181
		Regulatory assets		68,379
		Other assets		4,507
		Pension and other post-employment obligations		(13,402)
		Regulatory liabilities		(59,636)
		Other liabilities		(8,026)
		Total net assets acquired		609,297
		Cash and cash equivalents		49
		Net assets acquired, net of cash and cash equivalents	$	609,248
	The determination of the fair value of assets acquired and liabilities assumed is based upon management's estimates and certain assumptions. Due to the timing of the acquisition, the Company has not finalized the fair value measurements. The fair value of property, plant and equipment was reduced by $9,194 in Q2 2022 to reflect the time value of money of assets that will not be included in rate base until the next rate case. The valuation of regulatory assets and liabilities and deferred income taxes have not been completed. The Company will continue to review information and perform further analysis prior to finalizing the fair value of assets acquired and liabilities assumed.Goodwill represents the excess of the purchase price over the aggregate fair value of net assets acquired. The contributing factors to the amount recorded as goodwill include future growth, potential synergies, and cost savings in the delivery of certain shared administrative and other services.
4.	Accounts receivableAccounts receivable as at June 30, 2022 include unbilled revenue of $85,928 (December 31, 2021 - $102,693) from the Company’s regulated utilities. Accounts receivable as at June 30, 2022 are presented net of allowance for doubtful accounts of $24,521 (December 31, 2021 - $19,327).

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
5.	Regulatory mattersThe operating companies within the Regulated Services Group are subject to regulation by the respective authorities of the jurisdictions in which they operate. The respective public utility commissions have jurisdiction with respect to rate, service, accounting policies, issuance of securities, acquisitions and other matters. Except for ESSAL, these utilities operate under cost-of-service regulation as administered by these authorities. The Company’s regulated utility operating companies are accounted for under the principles of ASC 980, Regulated Operations. Under ASC 980, regulatory assets and liabilities that would not be recorded under U.S. GAAP for non-regulated entities are recorded to the extent that they represent probable future revenue or expenses associated with certain charges or credits that will be recovered from or refunded to customers through the rate setting process.
	At any given time, the Company can have several regulatory proceedings underway. The financial effects of these proceedings are reflected in the unaudited interim consolidated financial statements based on regulatory approval obtained to the extent that there is a financial impact during the applicable reporting period.
	Utility	State or	Regulatory	Details
		country	proceeding type
	Empire Electric	Missouri	General rate		On April 6, 2022, the regulator approved an annual base rate
	System		review		revenue increase of $35,516, as well as another $4,000 in
					revenues associated with the Empire Wind Facilities. Empire
					Electric System filed updated tariffs in May 2022 for new rates to
					become effective in the second quarter of 2022.
					Empire Electric filed a petition for securitization of the costs
					associated with the impact of the Midwest Extreme Weather Event
					and the retirement of Asbury in January 2022 and March 2022,
					respectively. On April 27, 2022, the MPSC issued an order
					consolidating, for purposes of hearing, these two cases regarding
					the quantum financeable through securitization, which hearing was
					held the week of June 13, 2022. The MPSC must issue an order
					on the Midwest Extreme Weather Event securitization request no
					later than August 22, 2022. It is expected that the Asbury
					securitization request will be addressed in that same order. The
					order could result in a lower quantum of costs being financeable
					through securitization than sought by the Company.
	BELCO	Bermuda General rate			On March 18, 2022, the regulator issued a final decision
			review		authorizing $224,056 and $226,160 in revenue for 2022 and
					2023 respectively at a weighted average cost of capital or return of
					7.16% in each year. The new rates are effective from April 1,
					2022. On April 7, 2022, BELCO filed an appeal in the Supreme
					Court of Bermuda challenging the decisions made through the
					recent Retail Tariff Review.
	Empire Electric	Kansas	General rate		On May 27, 2021, submitted an abbreviated rate review seeking to
	System		review		recover costs associated with the addition of the Empire Wind
					Facilities, the retirement of Asbury and non-growth related plant
					investments since the 2019 rate review. In May 2022, the
					Commission approved the unanimous partial settlement resolving
					the rate treatment of the Asbury retirement and the non-wind
					investments resulting in a base rate decrease of $636, and granted
					Empire Electric's motion to withdraw its request to recover cost
					associated with the Empire Wind Facilities. New rates became
					effective in July 2022.
	Empire District	Missouri	General rate		In June 2022, the Commission approved an annual increase of
	Gas Company		review		$1,000 in base rate revenues to become effective in August 2022.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
5.	Regulatory matters (continued)Regulatory assets and liabilities consist of the following:
		June 30,	December 31,
		2022	2021
	Regulatory assets
				Fuel and commodity cost adjustments		348,115	339,900
				Retired generating plant		176,622	185,073
				Pension and post-employment benefits		137,759	134,141
				Rate adjustment mechanism		126,710	117,309
				Income taxes		98,148		79,472
				Environmental remediation		73,652		81,802
				Deferred capitalized costs		83,069		62,599
				Wildfire mitigation and vegetation management		48,453		35,789
				Debt premium		27,843		34,204
				Asset retirement obligation		38,559		26,810
				Clean energy and other customer programs		26,677		26,015
				Rate review costs				8,664	9,167
				Long-term maintenance contract				7,445	9,134
				Other		58,805		26,210
	Total regulatory assets	$ 1,260,521 $ 1,167,625
	Less: current regulatory assets		(136,428)	(158,212)
	Non-current regulatory assets	$ 1,124,093 $ 1,009,413
	Regulatory liabilities
				Income taxes	$	322,131 $	295,720
				Cost of removal		192,900	191,981
				Pension and post-employment benefits		59,670		34,468
				Clean energy and other customer programs		16,204		14,829
				Fuel and commodity costs adjustments				9,542	18,229
				Rate adjustment mechanism				3,000	3,316
				Rate base offset				3,954	4,998
				Other		23,422		12,648
	Total regulatory liabilities	$	630,823 $	576,189
	Less: current regulatory liabilities		(72,956)			(65,809)
	Non-current regulatory liabilities	$	557,867 $	510,380

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
6.	Long-term investmentsLong-term investments consist of the following:
		June 30,	December 31,
		2022	2021
	Long-term investments carried at fair value
				Atlantica	$ 1,579,544 $ 1,750,914
	Atlantica Yield Energy Solutions Canada Inc.		81,506			95,246
				Other					2,042	2,296
		$ 1,663,092 $ 1,848,456
	Other long-term investments
				Equity-method investees (a)	$	396,305 $	433,850
				Development loans receivable from equity-method investees (a)		99,770			31,468
	Other		27,676			30,508
		$	523,751 $	495,826
	Income (loss) from long-term investments from the three and six months ended June 30 is as follows:
							Three months ended June 30	Six months ended June 30
							2022	2021	2022			2021
	Fair value gain (loss) on investments carried at fair value
	Atlantica						$ (137,586) $	28,888 $ (171,370) $	(35,545)
	Atlantica Yield Energy Solutions Canada Inc.								(5,815)	(1,948)	(12,395)	(9,259)
	Other								(121)	402	(264)	402
							$ (143,522) $	27,342 $ (184,029) $	(44,402)
	Dividend and interest income from investments carried at fair value
	Atlantica						$		21,543 $	21,054 $	43,087 $	41,618
	Atlantica Yield Energy Solutions Canada Inc.								5,397	4,376	12,691	8,721
	Other								12	315	10		315
							$		26,952 $	25,745 $	55,788 $	50,654
	Other long-term investments
				Equity method loss					(2,918)	(2,816)	(7,449)	(8,370)
				Interest and other income					6,108	10,235	11,621	12,117
							$		3,190 $	7,419 $	4,172 $	3,747
	Income (loss) from long-term investments						$ (113,380) $	60,506 $ (124,069) $	9,999
	(a)			Equity-method investees and development loans receivable from equity investeesThe Company has non-controlling interests in various corporations, partnerships and joint ventures with a total carrying value of $396,305 (December 31, 2021 - $433,850), including investments in variable interest entities ("VIEs") of $105,941 (December 31, 2021 - $86,202).During 2021, the Company acquired a 51% interest in four operating wind facilities located in Texas (“Texas Coastal Wind Facilities”). All facilities have achieved commercial operations. The Company does not control the entities and therefore accounts for its 51% interest using the equity method. As at June 30, 2022, the Company had issued $119,750 in letters of credit and guarantees of performance obligations under energy purchase agreements and decommissioning obligations on behalf of the Texas Coastal Wind Facilities.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
6.	Long-term investments (continued)
		Summarized combined information for AQN's investments in significant partnerships and joint ventures is as follows:
			June 30,	December 31,
			2022	2021
		Total assets	$	2,347,076 $ 2,126,934
		Total liabilities		1,282,385	945,971
		Net assets	$	1,064,691 $ 1,180,963
		AQN's ownership interest in the entities		278,664	327,555
		Difference between investment carrying amount and underlying equity in
		net assets(a)		117,641	106,295
		AQN's investment carrying amount for the entities	$	396,305 $	433,850
		(a) The difference between the investment carrying amount and the underlying equity in net assets relates primarily to development fees, interest capitalized while the projects are under construction, the fair value of guarantees provided by the Company in regards to the investments and transaction costs.
		Except for Liberty Global Energy Solutions B.V. (“Liberty Global Energy Solutions”), the development projects are considered VIEs due to the level of equity at risk and the disproportionate voting and economic interests of the shareholders. The Company has committed loan and credit support facilities with some of its equity investees. During construction, the Company has agreed to provide cash advances and credit support for the continued development and construction of the equity investees' projects. As at June 30, 2022, the Company had issued letters of credit and guarantees of performance obligations under: a security of performance for a development opportunity; wind turbine and solar panel supply agreements; interconnection agreements; engineering, procurement and construction agreements; energy purchase agreements; and construction loan agreements. The fair value of the support provided recorded as at June 30, 2022 amounts to $6,535 (December 31, 2021 - $4,612). Summarized combined information for AQN's VIEs is as follows:
			June 30,	December 31,
			2022	2021
		AQN's maximum exposure in regards to VIEs
		Carrying amount	$	105,941 $		86,202
		Development loans receivable		99,770		31,468
		Performance guarantees and other commitments on behalf of VIEs		456,217	409,232
			$	661,928 $	526,902
		The commitments are presented on a gross basis assuming no recoverable value in the assets of the VIEs.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
7.	Long-term debtLong-term debt consists of the following:
		Weighted			June 30,	December 31,
		average
	Borrowing type	coupon	Maturity	Par value	2022	2021
	Senior unsecured revolving credit
	facilities (a)		—	2022-2024				N/A $	370,031 $	368,806
	Senior unsecured bank credit
	facilities (b)		—	2022-2031				N/A	768,107	141,956
	Commercial paper		—						2023	N/A	165,000	338,700
	U.S. dollar borrowings
	Senior unsecured notes
	(Green Equity Units)	1.18 %	2026 $ 1,150,000 1,141,763			1,140,801
	Senior unsecured notes	3.47 %	2022-2047 $ 1,620,000 1,610,497			1,689,792
	Senior unsecured utility notes	6.34 %	2023-2035 $	142,000	154,748	155,571
	Senior secured utility bonds	4.71 %	2026-2044 $	556,216	556,514	558,177
	Canadian dollar borrowings
	Senior unsecured notes (c)	3.68 %	2027-2050 C$1,200,000		928,339	1,099,403
	Senior secured project notes	10.21 %						2027	C$ 21,596	16,759			18,344
	Chilean Unidad de Fomento borrowings
	Senior unsecured utility bonds	4.12 %	2028-2040 CLF 1,695		72,730				77,963
					$ 5,784,488 $ 5,589,513
	Subordinated borrowings
	Subordinated unsecured notes (d)	5.25 %						2082	C$ 400,000 $	306,290 $				—
	Subordinated unsecured notes (d)	5.56 %	2078-2082 $ 1,387,500 1,364,356			621,862
					$ 1,670,646 $	621,862
					$ 7,455,134 $ 6,211,375
	Less: current portion					(182,497)	(356,397)
					$ 7,272,637 $ 5,854,978
	Short-term obligations of $824,692 that are expected to be refinanced using the long-term credit facilities are presented as long-term debt.Long-term debt issued at a subsidiary level (project notes or utility bonds) relating to a specific operating facility is generally collateralized by the respective facility with no other recourse to the Company. Long-term debt issued at a subsidiary level whether or not collateralized generally has certain financial covenants, which must be maintained on a quarterly basis. Non-compliance with the covenants could restrict cash distributions/dividends to the Company from the specific facilities.Recent financing activities:(a)
											Senior unsecured revolving credit facilitiesOn April 29, 2022, the Regulated Services Group entered into two new senior unsecured syndicated
											revolving credit facilities: a $1,000,000 senior unsecured revolving credit facility with an initial maturity
											date of April 29, 2027 (the “Long Term Regulated Services Credit Facility”) and a $500,000 short-term
											senior unsecured revolving credit facility maturing on March 31, 2023. Subject to the terms and
											conditions therein, the Long Term Regulated Services Credit Facility may be extended for two additional
											one-year periods. In conjunction with the new facilities, the Regulated Services Group’s $500,000 senior
											unsecured syndicated revolving credit facility was cancelled.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
7.	Long-term debt (continued)(a)
		Senior unsecured revolving credit facilities (continued)On June 24, 2022, the Regulated Services Group entered into a new $25,000 senior unsecured bilateral
		revolving credit facility in Bermuda that matures on June 24, 2024.Subsequent to quarter-end on July 22, 2022, the Renewable Energy Group’s senior unsecured syndicated
		revolving credit facility was amended and restated with a new maturity date of July 22, 2027. Subsequent to quarter-end on July 22, 2022, the Renewable Energy Group entered into a new $250,000 uncommitted bilateral letter of credit facility.
	(b)	Senior unsecured bank credit facilitiesOn December 20, 2021, the Regulated Services Group entered into a $1,100,000 senior unsecured syndicated delayed draw term facility, which matures on December 19, 2022. On January 3, 2022, the purchase price, plus certain adjustments and acquisition costs, for the acquisition of Liberty NY Water (note 3) of approximately $610,400 was funded through a draw on the senior unsecured syndicated delayed draw term facility.
	(c)	Canadian dollar senior unsecured notesOn February 15, 2022, the Company repaid a C$200,000 senior unsecured note on its maturity. Concurrent with the repayments, the Renewable Energy Group unwound and settled the related cross-currency fixed-for-fixed interest rate swap (note 21(b)(iii)).On April 30, 2022, the Company repaid a $80,000 senior unsecured note on its maturity.Subsequent to quarter-end on August 1, 2022, the Company repaid a $115,000 senior unsecured note on its maturity.
	(d)	Subordinated unsecured notesOn January 18, 2022, the Company closed: (i) an underwritten public offering in the United States (the “U.S. Offering”) of $750,000 aggregate principal amount of 4.75% fixed-to-fixed reset rate junior subordinated notes series 2022-B due January 18, 2082 (the “U.S. Notes”); and (ii) an underwritten public offering in Canada (the “Canadian Offering” and, together with the U.S. Offering, the “Offerings”) of C$400,000 (approximately $320,000) aggregate principal amount of 5.25% fixed-to-fixed reset rate junior subordinated notes series 2022-A due January 18, 2082 (the “Canadian Notes” and, together with the U.S. Notes, the “Notes”). Concurrent with the pricing of the Offerings, the Company entered into a cross currency interest rate swap to convert the Canadian dollar denominated proceeds from the Canadian Offering into U.S. dollars, and a forward starting swap to fix the interest rate for the second five-year term of the U.S. Notes (note 21(b)(ii)), resulting in an anticipated effective interest rate to the Company of approximately 4.95% throughout the first ten-year period of the Notes.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
8.	Pension and other post-employment benefitsThe following table lists the components of net benefit costs for the pension plans and other post-employment benefits (“OPEB”) in the unaudited interim consolidated statements of operations for the three and six months ended June 30:
		Pension benefits
			Three months ended June 30	Six months ended June 30
			2022	2021		2022	2021
	Service cost		$			4,532 $	4,508 $				8,388 $	8,336
	Non-service costs
	Interest cost					6,778	3,511		12,841	10,217
	Expected return on plan assets			(10,519)	(6,616)		(20,843)	(17,780)
	Amortization of net actuarial loss					1,257	2,540				2,046	4,812
	Amortization of prior service credits					(389)	(406)				(792)	(813)
	Impact of regulatory accounts					4,664	4,825		11,002	11,009
			$			1,791 $	3,854 $				4,254 $	7,445
	Net benefit cost		$			6,323 $	8,362 $		12,642 $	15,781
								OPEB
			Three months ended June 30	Six months ended June 30
			2022	2021		2022	2021
	Service cost		$			1,554 $	1,772 $				3,109 $	3,544
	Non-service costs
	Interest cost					2,282	3,031				4,641	4,052
	Expected return on plan assets					(2,841)	(2,510)		(5,682)	(5,021)
	Amortization of net actuarial loss (gain)					(86)	436				(172)	873
	Amortization of prior service credits					6	—				12		—
	Impact of regulatory accounts					1,106	(950)				1,783	196
			$			467 $		7 $	582 $	100
	Net benefit cost		$			2,021 $	1,779 $				3,691 $	3,644
	The service cost components of pension plans and OPEB are shown as part of operating expenses within operating income in the unaudited interim consolidated statements of operations. The remaining components of net benefit cost are considered non-service costs and have been included outside of operating income in the unaudited interim consolidated statements of operations.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
9.	Other long-term liabilitiesOther long-term liabilities consist of the following:
		June 30,	December 31,
		2022	2021
	Contract adjustment payments	$	150,837 $	187,580
	Asset retirement obligations		129,399	142,147
	Advances in aid of construction		86,265		82,580
	Environmental remediation obligation		46,914		55,224
	Customer deposits		33,154		32,633
	Unamortized investment tax credits		17,209		17,439
	Deferred credits and contingent consideration		35,191		35,982
	Preferred shares, Series C		12,738		13,348
	Hook-up fees		30,268		21,904
	Lease liabilities		22,036		22,512
	Contingent development support obligations				6,535	4,612
	Note payable to related party		25,808		25,808
	Other		38,065		42,050
		$	634,419 $	683,819
	Less: current portion		(157,827)	(167,908)
		$	476,592 $	515,911
10.	Shareholders’ capital(a)
						Common sharesNumber of common shares
		Six months ended June 30
		2022	2021
						Common shares, beginning of period	671,960,276	597,142,219
						Public offering	—	16,789,922
						Dividend reinvestment plan	3,014,264	2,926,494
						Exercise of share-based awards (b)	673,852	679,834
						Conversion of convertible debentures	754		1,886
						Common shares, end of period	675,649,146	617,540,355
						As at August 11, 2022, the Company has issued since the inception of its at-the-market share offering program (the “ATM program”) in 2019 a cumulative total of 33,952,827 common shares at an average price of $15.08 per share for gross proceeds of $512,163 ($505,761 net of commissions). Other related costs, primarily related to the establishment and subsequent re-establishments of the ATM program, were $4,285.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
10.	Shareholders’ capital (continued)(b)
		Share-based compensationFor the three and six months ended June 30, 2022, AQN recorded $3,860 and $3,495, respectively (2021 - $3,189 and $4,386, respectively) in total share-based compensation expense. The compensation expense is recorded with payroll expenses in the unaudited interim consolidated statements of operations. The portion of share-based compensation costs capitalized as cost of construction is insignificant.As at June 30, 2022, total unrecognized compensation costs related to non-vested share-based awards was $17,049 and is expected to be recognized over a period of 1.9 years.Share option planDuring the six months ended June 30, 2022, the Board of Directors of the Company (the "Board") approved the grant of 646,090 options to executives of the Company. The options allow for the purchase of common shares at a weighted average price of C$19.11, the market price of the underlying common shares at the date of grant. One-third of the options vest on each of December 31, 2022, 2023 and 2024. The options may be exercised up to eight years following the date of grant.The following assumptions were used in determining the fair value of share options granted:
			2022
		Risk-free interest rate	1.9 %
		Expected volatility	23 %
		Expected dividend yield	4.3 %
		Expected life		5.50 years
		Weighted average grant date fair value per option		C$	2.44
		During the six months ended June 30, 2022, 40,074 share options were exercised at a weighted average price of C$15.78 in exchange for 3,999 common shares issued from treasury, and 36,075 options settled at their cash value as payment for the exercise price and tax withholdings related to the exercise of the options.Performance and restricted share unitsDuring the six months ended June 30, 2022, a total of 434,990 performance share units ("PSUs") and restricted share units ("RSUs") were granted to employees of the Company. The awards vest based on the terms of each agreement ranging from February 2023 to January 2025. During the six months ended June 30, 2022, the Company settled 893,786 PSUs and RSUs in exchange for 454,943 common shares issued from treasury, and 438,843 PSUs and RSUs were settled at their cash value as payment for tax withholding related to the settlement of the awards.During the six months ended June 30, 2022, the Company settled 4,108 bonus deferral RSUs in exchange for 1,908 common shares issued from treasury, and 2,200 RSUs were settled at their cash value as payment for tax withholding related to the settlement of the awards. During the six months ended June 30, 2022, 48,552 bonus deferral RSUs were granted to employees of the Company. The RSUs are 100% vested. Directors' deferred share unitsDuring the six months ended June 30, 2022, 44,880 deferred share units ("DSUs") were issued pursuant to the election by Directors of the Company to defer a percentage of their directors' fee in the form of DSUs. In addition, the Company settled 5,176 DSUs in exchange for 2,403 common shares issued from treasury, and 2,773 DSUs were settled at their cash value as payment for tax withholding related to the settlement of the awards.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
11.	Accumulated other comprehensive income (loss)AOCI consists of the following balances, net of tax:
				Pension and
		Foreign		post-
		currency	Unrealized	employment
		cumulative	gain on cash	actuarial
		translation	flow hedges	changes	Total
	Balance, January 1, 2021	$	(39,725) $	50,817 $	(33,599) $	(22,507)
	OCI		(25,982)	(97,103)			32,247	(90,838)
	Amounts reclassified from AOCI to the
	unaudited interim consolidated statements of
	operations		(4,288)	42,772			9,804	48,288
	Net current period OCI	$	(30,270) $	(54,331) $			42,051 $	(42,550)
	OCI attributable to the non-controlling
	interests						(249)	—	—	(249)
	Net current period OCI attributable to
	shareholders of AQN	$	(30,519) $	(54,331) $			42,051 $	(42,799)
	Amounts reclassified from AOCI to non-
	controlling interest		(6,371)						—	—	(6,371)
	Balance, December 31, 2021	$	(76,615) $						(3,514) $	8,452 $	(71,677)
	OCI		(39,864)	(81,852)						—	(121,716)
	Amounts reclassified from AOCI to the
	unaudited interim consolidated statements of
	operations						(731)	10,087	(86)	9,270
	Net current period OCI	$	(40,595) $	(71,765) $			(86) $	(112,446)
	OCI attributable to the non-controlling
	interests						753	—	—	753
	Net current period OCI attributable to
	shareholders of AQN	$	(39,842) $	(71,765) $			(86) $	(111,693)
	Balance, June 30, 2022	$	(116,457) $	(75,279) $			8,366 $	(183,370)
	Amounts reclassified from AOCI for foreign currency cumulative translation affected interest expense and derivative gain (loss); those for unrealized gain (loss) on cash flow hedges affected revenue from non-regulated energy sales, interest expense and derivative gain (loss), while those for pension and other post-employment actuarial changes affected pension and other post-employment non-service costs.
12.	DividendsAll dividends of the Company are made on a discretionary basis as determined by the Board. The Company declares and pays the dividends on its common shares in U.S. dollars. Dividends declared were as follows:
			Three months ended June 30
							2022		2021
			Dividend per		Dividend per
		Dividend	share	Dividend	share
	Common shares	$	122,636 $						0.1808 $	105,707 $	0.1706
	Series A preferred shares	C$ 1,549 $						0.3226 C$ 1,549 $	0.3226
	Series D preferred shares	C$ 1,273 $						0.3182 C$ 1,273 $	0.3182

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)

12.

Dividends (continued)

Six months ended June 30

2022

2021

Dividend per

Dividend

Common shares

238,209 $

0.3514 $

200,322 $

0.3257

Series A preferred shares

C$ 3,097 $

0.6453 C$ 3,097 $

0.6453

Series D preferred shares

C$ 2,546 $

0.6364 C$ 2,546 $

0.6364

13.

Related party transactions(a)

Equity-method investmentsThe Company provides administrative and development services to its equity-method investees and is reimbursed for incurred costs. To that effect, during the three and six months ended June 30, 2022, the Company charged its equity-method investees $11,174 and $18,587, respectively (2021 - $6,006 and $12,320, respectively). Additionally, one of the equity-method investees (Liberty Development JV Inc.), provides development services to the Company on specified projects, for which it earns a development fee upon reaching certain milestones. During the three and six months ended June 30, 2022, the development fees charged to the Company were $nil and $nil, respectively (2021 - $nil and $738, respectively).In 2021, the Company issued a promissory note of $25,808 payable to New Market Solar Investco, LLC, an equity investee of the Company.

(b)

Redeemable non-controlling interest held by related partyLiberty Global Energy Solutions (note 6(a)), an equity investee of the Company, has a secured credit facility in the amount of $306,500 maturing on January 26, 2024. It is collateralized through a pledge of Atlantica Sustainable Infrastructure plc (“Atlantica”) ordinary shares. A collateral shortfall would occur if the net obligation as defined in the agreement would equal or exceed 50% of the market value of such Atlantica shares, in which case the lenders would have the right to sell Atlantica shares to eliminate the collateral shortfall. The Liberty Global Energy Solutions secured credit facility is repayable on demand if Atlantica ceases to be a public company. Liberty Global Energy Solutions has a preference share ownership in AY Holdings which AQN reflects as redeemable non-controlling interest held by related party. Redemption is not considered probable as at June 30, 2022. During the three and six months ended June 30, 2022, the Company incurred non-controlling interest attributable to Liberty Global Energy Solutions of $3,086 and $5,661, respectively (2021 - $2,617 and $5,298, respectively) and recorded distributions of $2,820 and $5,404, respectively (2021 - $2,503 and $5,046, respectively) (note 14).

(c)

Non-controlling interest held by related partyNon-controlling interest held by related party represents an interest in a consolidated subsidiary of the Company, acquired by Atlantica Yield Energy Solutions Canada Inc. ("AYES Canada") in May 2019 for $96,752 (C$130,103) and an interest in Algonquin (AY Holdco) B.V., a consolidated subsidiary of the Company, acquired by Liberty Development JV in November 2021 for $39,376. During the three and six months ended June 30, 2022, the Company recorded distributions of $5,534 and $12,956, respectively (2021 - $4,473 and $8,912).

(d)

Transactions with AtlanticaDuring 2021, the Company sold Colombian solar assets to Atlantica for consideration of $23,863, with a gain on sale of $878, and contingent consideration of $2,600, if certain milestones are met. During the six months ended June 30, 2022 a gain of $1,200 relating to the contingent consideration has been recognized.

The above related party transactions have been recorded at the exchange amounts agreed to by the parties to the transactions.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
14.	Non-controlling interests and redeemable non-controlling interestsNet effect attributable to non-controlling interests consists of the following:
		Three months ended June 30	Six months ended June 30
		2022		2021	2022		2021
	HLBV and other adjustments attributable to:
	Non-controlling interests - tax equity
	partnership units	$				31,100 $	19,579 $	71,961 $		41,521
	Non-controlling interests - redeemable tax
	equity partnership units					1,337	1,707			2,936	3,425
	Other net earnings attributable to:
	Non-controlling interests					(416)	(349)	(1,934)		(4,044)
		$				32,021 $	20,937 $	72,963 $		40,902
	Redeemable non-controlling interest, held by
	related party					(3,086)	(2,617)	(5,661)		(5,298)
	Net effect of non-controlling interests	$				28,935 $	18,320 $	67,302 $		35,604
	The non-controlling tax equity investors (“tax equity partnership units”) in the Company's U.S. wind power and solar power generating facilities are entitled to allocations of earnings, tax attributes and cash flows in accordance with contractual agreements. The share of earnings attributable to the non-controlling interest holders in these subsidiaries is calculated using the Hypothetical Liquidation at Book Value ("HLBV") method of accounting.
15.	Income taxes For the three and six months ended June 30, 2022, the provision for income taxes in the unaudited interim consolidated statements of operations represents an effective tax rate different than the Canadian enacted statutory rate of 26.5% (2021 - 26.5%). The differences are as follows:
		Three months ended June 30	Six months ended June 30
						2022	2021			2022	2021
	Expected income tax expense (recovery) at Canadian
	statutory rate	$				(22,562) $	21,387 $			(6,119) $	14,769
	Increase (decrease) resulting from:
								Effect of differences in tax rates on transactions
								in and within foreign jurisdictions and change
								in tax rates				(6,562)		(6,948)	(19,039)	(21,885)
								Adjustments from investments carried at fair				17,216		(5,088)	18,229			(955)
								value
								Non-controlling interests share of income				4,587		4,012	15,640	16,327
								Acquisition related state deferred tax
								adjustments								—	—		7,600	—
								Tax credits				(11,992)	(14,934)		(22,023)	(26,519)
								Amortization and settlement of excess deferred
								income tax				(2,296)		(2,384)	(6,329)			(7,000)
								Other				(1,210)		(240)	(1,326)			(570)
	Income tax recovery	$				(22,819) $			(4,195) $	(13,367) $	(25,833)

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
16.	Other net lossesOther net losses consist of the following:
		Three months ended June 30	Six months ended June 30
		2022		2021	2022		2021
	Acquisition and transition-related costs	$				5,850 $	882 $		8,015 $	2,984
	Other					2,802	931		5,367	7,213
		$				8,652 $	1,813 $	13,382 $	10,197
17.	Basic and diluted net earnings (loss) per shareBasic and diluted earnings (loss) per share have been calculated on the basis of net earnings (loss) attributable to the common shareholders of the Company and the weighted average number of common shares and bonus deferral restricted share units outstanding. Diluted net earnings (loss) per share is computed using the weighted-average number of common shares, additional shares issued subsequent to quarter-end under the dividend reinvestment plan, PSUs, RSUs and DSUs outstanding during the period and, if dilutive, potential incremental common shares related to the convertible debentures or resulting from the application of the treasury stock method to outstanding share options and Green Equity Units (note 7).
	The reconciliation of the net earnings (loss) and the weighted average shares used in the computation of basic and diluted earnings (loss) per share are as follows:
		Three months ended June 30	Six months ended June 30
		2022		2021	2022		2021
	Net earnings (loss) attributable to shareholders of
	AQN		(33,387)		103,222	57,578		117,169
	Series A preferred shares dividend					1,219	1,249		2,437	2,464
	Series D preferred shares dividend					1,001	1,027		2,003	2,026
	Net earnings (loss) attributable to common
	shareholders of AQN – basic and diluted	$	(35,607) $ 100,946 $	53,138 $ —		$ 112,679
	Weighted average number of shares
	Basic	674,742,897 614,013,963 674,720,319 606,876,299
	Effect of dilutive securities					— 5,982,644 4,412,593 5,813,565
	Diluted	674,742,897 619,996,607 679,132,912 612,689,864
	This calculation of diluted shares excludes the potential impact of the Green Equity Units and all potential
	incremental shares that may become issuable pursuant to outstanding securities of the Company for the three
	months ended June 30, 2022 and 1,134,711 securities for the six months ended June 30, 2022 as they are anti
	dilutive. This calculation of diluted shares for the three and six months ended June 30, 2021 excludes the
	potential impact of 488,621 and 437,006 securities, respectively as they are anti-dilutive.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
18.	Segmented information
	The Company is managed under two primary business units consisting of the Regulated Services Group and the Renewable Energy Group. The two business units are the two segments of the Company.The Regulated Services Group, the Company's regulated operating unit, owns and operates a portfolio of electric, natural gas, water distribution and wastewater collection utility systems and transmission operations in the United States, Canada, Bermuda and Chile; the Renewable Energy Group, the Company's non-regulated operating unit, owns and operates a diversified portfolio of renewable and thermal electric generation assets in North America and internationally. For purposes of evaluating the performance of the business units, the Company allocates the realized portion of any gains or losses on financial instruments to the specific business units. Dividend income from Atlantica and AYES Canada is included in the operations of the Renewable Energy Group, while interest income from San Antonio Water System is included in the operations of the Regulated Services Group. Equity method gains and losses are included in the operations of the Regulated Services Group or Renewable Energy Group based on the nature of the activities of the investees. The change in value of investments carried at fair value, unrealized portion of any gains or losses on derivative instruments not designated in a hedging relationship and foreign exchange gains and losses are not considered in management’s evaluation of divisional performance and are therefore, allocated and reported under corporate.
		Three months ended June 30, 2022
			Regulated	Renewable
			Services Group	Energy Group	Corporate	Total
	Revenue (1)(2)		$	507,095 $	97,015 $	— $	604,110
	Other revenue			12,559	7,208	382	20,149
	Fuel, power and water purchased			159,256	11,698	—	170,954
	Net revenue			360,398	92,525	382	453,305
	Operating expenses			179,258	27,053	19	206,330
	Administrative expenses			10,966	8,510	631	20,107
	Depreciation and amortization			76,228	36,057	262	112,547
	Loss on foreign exchange			—			—	4,464	4,464
	Operating income (loss)			93,946	20,905	(4,994)	109,857
	Interest expense			(23,859)	(27,615)	(13,099)	(64,573)
	Income (loss) from long-term investments					5,265	26,675	(145,320)	(113,380)
	Other expenses					(2,898)	(7,545)	(6,602)	(17,045)
	Earnings (loss) before income taxes		$	72,454 $	12,420 $	(170,015) $	(85,141)
	Capital expenditures		$	313,188 $	67,660 $	— $	380,848
	(1) Renewable Energy Group revenue includes $25,062 related to net hedging loss from energy derivative contracts and availability credits for the three months period ended June 30, 2022 that do not represent revenue recognized from contracts with customers.(2) Regulated Services Group revenue includes $8,811 related to alternative revenue programs for the three months period ended June 30, 2022 that do not represent revenue recognized from contracts with customers.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
18.	Segmented information (continued)
		Three months ended June 30, 2021
			Regulated	Renewable
			Services Group	Energy Group	Corporate	Total
	Revenue (1)(2)		$	430,764 $	77,890 $	— $	508,654
	Other revenue			14,100	4,372	397	18,869
	Fuel, power and water purchased			148,403	6,061	—	154,464
	Net revenue			296,461	76,201	397	373,059
	Operating expenses			145,723	25,357	2	171,082
	Administrative expenses (recovery)					9,912	6,425	785	17,122
	Depreciation and amortization			67,520	30,369	272	98,161
	Loss on foreign exchange			—						—	1,283	1,283
	Operating income (loss)			73,306	14,050	(1,945)	85,411
	Interest expense			(27,114)	(20,452)	(10,616)	(58,182)
	Income from long-term investments					9,293	25,988	25,225	60,506
	Other expenses			(4,155)	(2,778)	(95)	(7,028)
	Earnings before income taxes		$	51,330 $	16,808 $	12,569 $	80,707
	Capital expenditures		$	341,431 $	66,312 $	— $	407,743
	(1) Renewable Energy Group revenue includes $4,996 related to net hedging gain from energy derivative contracts for the three months period ended June 30, 2021 that do not represent revenue recognized from contracts with customers.(2) Regulated Services Group revenue includes $5,118 related to alternative revenue programs for the three months period ended June 30, 2021 that do not represent revenue recognized from contracts with customers.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
18.	Segmented information (continued)
		Six months ended June 30, 2022
			Regulated	Renewable
			Services Group	Energy Group	Corporate	Total
	Revenue (1)(2)			1,129,854		185,235 $	— $ 1,315,089
	Other revenue			27,547		16,552	768	44,867
	Fuel, power and water purchased			393,828		26,604	—	420,432
	Net revenue			763,573		175,183	768	939,524
	Operating expenses			363,667		54,643	22	418,332
	Administrative expenses			19,036		16,055	2,468	37,559
	Depreciation and amortization			156,511		75,474	526	232,511
	Loss on foreign exchange			—					—	4,726	4,726
				224,359		29,011	(6,974)	246,396
	Gain on sale of renewable assets			—			1,200	—	1,200
	Operating income (loss)			224,359		30,211	(6,974)	247,596
	Interest expense			(45,285)		(43,328)	(33,903)	(122,516)
	Income (loss) from long-term investments							9,774	54,301	(188,144)	(124,069)
	Other expenses							(7,786)	(8,293)	(8,023)	(24,102)
	Earnings (loss) before income taxes		$	181,062 $		32,891 $	(237,044) $	(23,091)
	Property, plant and equipment		$ 8,176,765 $ 3,674,155 $	30,859 $ 11,881,779
	Investments carried at fair value							2,042	1,661,050			—	1,663,092
	Equity-method investees			37,228		343,322	15,755	396,305
	Total assets		11,543,883	5,981,313	212,680 17,737,876
	Capital expenditures		$	568,773 $		139,774 $	— $	708,547
	(1) Renewable Energy Group revenue includes $29,892 related to net hedging loss from energy derivative contracts and availability credits for the six months period ended June 30, 2022 that do not represent revenue recognized from contracts with customers.(2) Regulated Services Group revenue includes $15,089 related to alternative revenue programs for the six months period ended June 30, 2022 that do not represent revenue recognized from contracts with customers.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
18.	Segmented information (continued)
		Six months ended June 30, 2021
			Regulated	Renewable
			Services Group	Energy Group	Corporate	Total
	Revenue (1)(2)		$ 1,017,901 $		108,673 $	— $ 1,126,574
	Other revenue			25,566		9,142	783	35,491
	Fuel, power and water purchased			393,925		13,989	—	407,914
	Net revenue			649,542		103,826	783	754,151
	Operating expenses			297,905		53,229	5	351,139
	Administrative expenses			17,455		12,608	3,702	33,765
	Depreciation and amortization			135,087		59,947	566	195,600
	Loss on foreign exchange			—					—	2,145	2,145
	Operating income (loss)			199,095		(21,958)	(5,635)	171,502
	Interest expense			(51,415)		(36,745)	(19,602)	(107,762)
	Income (loss) from long-term investments			10,467		48,405	(48,873)	9,999
	Other expenses			(12,646)		(3,654)	(1,707)	(18,007)
	Earnings (loss) before income taxes		$	145,501 $		(13,952) $	(75,817) $	55,732
	Capital expenditures		$	553,950 $		149,182 $	— $	703,132
					December 31, 2021
	Property, plant and equipment		$ 7,394,151 $ 3,615,915 $	32,380 $ 11,042,446
	Investments carried at fair value							2,296 1,846,160	— 1,848,456
	Equity-method investees			37,492		375,460	20,898	433,850
	Total assets		10,512,799 6,123,888	149,149 16,785,836
	(1) Renewable Energy Group revenue includes $44,587 related to net hedging loss from energy derivative contracts for the six months period ended June 30, 2021 that do not represent revenue recognized from contracts with customers.(2) Regulated Services Group revenue includes $7,479 related to alternative revenue programs for the six months period ended June 30, 2021 that do not represent revenue recognized from contracts with customers.
	The majority of non-regulated energy sales are earned from contracts with large public utilities. The Company has sought to mitigate its credit risk by selling energy to large utilities in various North American locations. None of the utilities contribute more than 10% of total revenue.AQN operates in the independent power and utility industries in the United States, Canada and other regions. Information on operations by geographic area is as follows:
			Three months ended June 30	Six months ended June 30
			2022		2021	2022	2021
	Revenue
									United States	$		497,247 $ 415,431 $ 1,098,580 $ 927,258
									Canada			41,397	35,952	95,232	83,803
									Other regions			85,615	76,140	166,144	151,004
			$					624,259 $ 527,523 $ 1,359,956 $ 1,162,065
	Revenue is attributed to the regions based on the location of the underlying generating and utility facilities.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)

19.

Commitments and contingencies(a)

ContingenciesAQN and its subsidiaries are involved in various claims and litigation arising out of the ordinary course and conduct of its business. Although such matters cannot be predicted with certainty, management does not consider AQN’s exposure to such litigation to be material to these unaudited interim consolidated financial statements. Accruals for any contingencies related to these items are recorded in the unaudited interim consolidated financial statements at the time it is concluded that their occurrence is probable and the related liability is estimable.Mountain View FireOn November 17, 2020, a wildfire now known as the Mountain View Fire occurred in the territory of Liberty Utilities (CalPeco Electric) LLC ("Liberty CalPeco"). The cause of the fire remains under investigation, and CAL FIRE has not yet released its final report. There are currently 10 active lawsuits that name the Company and/or certain of its subsidiaries as defendants in connection with the Mountain View fire. Five of these lawsuits are brought by groups of individual plaintiffs alleging causes of action including negligence, inverse condemnation, nuisance, trespass, and violations of Cal. Pub. Util. Code 2106 and Cal. Health and Safety Code 13007. In the sixth active lawsuit, County of Mono, Antelope Valley Fire Protection District, Toiyabe Indian Health Project, and Bridgeport Indian Colony allege similar causes of action and seek damages for fire suppression costs, law enforcement costs, property and infrastructure damage, and other costs. In three other lawsuits, insurance companies allege inverse condemnation and negligence and seek recovery of amounts paid and to be paid to their insureds. The tenth lawsuit alleges the wrongful death of an individual, along with causes of action similar to those alleged in the cases filed by groups of individual plaintiffs. The likelihood of success in these lawsuits cannot be reasonably predicted. Liberty CalPeco intends to vigorously defend them. The Company has wildfire liability insurance that is expected to apply up to applicable policy limits

(b)

Commitments In addition to the commitments related to the development projects disclosed in note 6, the following significant commitments exist as at June 30, 2022.AQN has outstanding purchase commitments for power purchases, gas supply and service agreements, service agreements, capital project commitments and land easements. Detailed below are estimates of future commitments under these arrangements:

Year 1

Year 2

Year 3

Year 4

Year 5

Thereafter

Total

Power

purchase (i)

$ 110,990 $ 53,417 $ 53,594 $ 32,367 $ 12,397 $ 148,887 $ 411,652

Gas supply and

service

agreements (ii) 108,351 80,109 52,985 38,258 25,596

166,289

471,588

Service

agreements

66,323 58,865 57,395 55,144 46,585

323,799

608,111

Capital

projects

58,522

—

58,522

Land

easements and

others

13,160 13,308 13,482 13,657 13,824

467,691

535,122

Total

$ 357,346 $ 205,699 $ 177,456 $ 139,426 $ 98,402 $ 1,106,666 $ 2,084,995

(i) Power purchase: AQN’s electric distribution facilities have commitments to purchase physical quantities of power for load

serving requirements. The commitment amounts included in the table above are based on market prices as at June 30, 2022. However, the effects of purchased power unit cost adjustments are mitigated through a purchased power rate-adjustment mechanism.

(ii) Gas supply and service agreements: AQN’s gas distribution facilities and thermal generation facilities have commitments to

purchase physical quantities of natural gas under contracts for purposes of load serving requirements and of generating power.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
20.	Non-cash operating itemsThe changes in non-cash operating items consist of the following:
		Three months ended June 30	Six months ended June 30
		2022		2021	2022		2021
	Accounts receivable	$				(8,641) $	63,721 $	(49,253) $		33,975
	Fuel and natural gas in storage		(23,362)		(12,043)	(7,128)		5,929
	Supplies and consumables inventory					(3,006)	(1,283)	(10,775)		(4,386)
	Income taxes recoverable					(861)	(1,002)			2,071	(1,167)
	Prepaid expenses					(5,203)	(8,014)	(12,553)		(9,043)
	Accounts payable					48,424	(5,002)	26,759		(44,332)
	Accrued liabilities		110,725		(22,062)	164,021		(91,420)
	Current income tax liability					(1,350)	773			853	5,625
	Asset retirements and environmental obligations		(10,855)						(72)	(11,354)		(531)
	Net regulatory assets and liabilities					(9,201)	(66,845)	(54,119)		(334,996)
		$				96,670 $ (51,829) $	48,522 $ (440,346)

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
21.	Financial instruments (a)
		Fair value of financial instruments
			Carrying	Fair
		June 30, 2022	amount	value	Level 1	Level 2	Level 3
		Long-term investments carried at
		fair value	$ 1,663,092 $ 1,663,092 $ 1,581,586 $					— $	81,506
		Development loans and other
		receivables		95,196	93,161					—	93,161				—
		Derivative instruments:
											Interest rate swap designated
											as a hedge		45,728	45,728			—	45,728				—
											Energy contracts not
											designated as cash flow
											hedge								513	513				—	—	513
											Congestion revenue rights
											designated as a cash flow
											hedge		2,690	2,690			—	—	2,690
											Congestion revenue rights not
											designated as a cash flow
											hedge		2,248	2,248			—	—	2,248
											Commodity contracts for
											regulated operations		1,719	1,719			—	1,719				—
											Cross-currency swap
											designated as a cash flow
											hedge								78	78	—	78	—
											Total derivative instruments		52,976	52,976			—	47,525	5,451
		Total financial assets	$ 1,811,264 $ 1,809,229 $ 1,581,586 $			140,686 $	86,957
		Long-term debt	$ 7,455,134 $ 7,063,790 $ 2,855,182 $ 4,208,608 $							—
		Notes payable to related party		25,808	25,808					—	25,808				—
		Convertible debentures										261	473			473	—		—
		Preferred shares, Series C		12,738	12,465					—	12,465				—
		Derivative instruments:
											Energy contracts designated
											as a cash flow hedge		126,114	126,114			—	—	126,114
											Energy contracts not
											designated as a cash flow
											hedge		1,005	1,005			—	—	1,005
											Cross-currency swap
											designated as a net
											investment hedge		35,763	35,763			—	35,763				—
											Cross-currency swap
											designated as a cash flow
											hedge		16,699	16,699			—	16,699				—
											Interest rate swaps
											designated as a hedge								255	255				—	255	—
											Interest rate swaps not
											designated as a hedge		4,655	4,655			—	4,655				—
											Commodity contracts for
											regulated operations		2,536	2,536			—	2,536				—
											Total derivative instruments	187,027	187,027			—	59,908	127,119
		Total financial liabilities	$ 7,680,968 $ 7,289,563 $ 2,855,655 $ 4,306,789 $				127,119

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
21.	Financial instruments (continued)(a)
		Fair value of financial instruments (continued)
			Carrying	Fair
		December 31, 2021	amount	value	Level 1	Level 2	Level 3
		Long-term investment
		carried at fair value	$ 1,848,456 $ 1,848,456 $ 1,753,210 $					— $	95,246
		Development loans and
		other receivables		32,261	33,286					—	33,286				—
		Derivative instruments:
											Energy contracts
											designated as a cash
											flow hedge		15,362	15,362			—	—	15,362
											Interest rate swap
											designated as a hedge	1,581	1,581			—	1,581			—
											Commodity contracts
											for regulatory
											operations		1,721	1,721			—	1,721			—
											Cross-currency swap
											designated as a net
											investment hedge		1,958	1,958			—	1,958			—
											Total derivative
											instruments		20,622	20,622			—	5,260	15,362
		Total financial assets	$ 1,901,339 $ 1,902,364 $ 1,753,210 $			38,546 $ 110,608
		Long-term debt	$ 6,211,375 $ 6,543,932 $ 2,418,580 $ 4,125,352							—
		Notes payable to related
		party		25,808	25,808					—	25,808				—
		Convertible debentures										277	519			519	—		—
		Preferred shares, Series C		13,348	14,580					—	14,580				—
		Derivative instruments:
											Energy contracts
											designated as a cash
											flow hedge		60,462	60,462			—	—	60,462
											Energy contracts not
											designated as a cash
											flow hedge		1,169	1,169			—	—	1,169
											Cross-currency swap
											designated as a net
											investment hedge		50,258	50,258			—	50,258			—
											Interest rate swaps
											designated as a hedge	7,008	7,008			—	7,008			—
											Commodity contracts
											for regulated
											operations		1,348	1,348			—	1,348			—
											Total derivative
											instruments		120,245	120,245			—	58,614	61,631
		Total financial liabilities	$ 6,371,053 $ 6,705,084 $ 2,419,099 $ 4,224,354 $				61,631
		The Company has determined that the carrying value of its short-term financial assets and liabilities approximates fair value as at June 30, 2022 and December 31, 2021 due to the short-term maturity of these instruments.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
21.	Financial instruments (continued)(a)
		Fair value of financial instruments (continued)The fair value of development loans and other receivables (level 2) is determined using a discounted cash flow method, using estimated current market rates for similar instruments adjusted for estimated credit risk as determined by management. The fair value of the investment in Atlantica (level 1) is measured at the closing price on the NASDAQ stock exchange.The Company’s level 1 fair value of long-term debt is measured at the closing price on the NYSE and the over-the-counter closing price. The Company’s level 2 fair value of long-term debt at fixed interest rates and Series C preferred shares has been determined using a discounted cash flow method and current interest rates. The Company's level 2 fair value of convertible debentures has been determined as the greater of their face value and the quoted value of AQN's common shares on a converted basis.The Company’s level 2 fair value derivative instruments primarily consist of swaps, options, rights, subscription agreements and forward physical derivatives where market data for pricing inputs are observable. Level 2 pricing inputs are obtained from various market indices and utilize discounting based on quoted interest rate curves, which are observable in the marketplace. The Company’s level 3 instruments consist of energy contracts for electricity sales, congestion revenue rights ("CRRs") and the fair value of the Company's investment in AYES Canada. The significant unobservable inputs used in the fair value measurement of energy contracts are the internally developed forward market prices ranging from $19.84 to $180.57 with a weighted average of $42.72 as at June 30, 2022. The weighted average forward market prices are developed based on the quantity of energy expected to be sold monthly and the expected forward price during that month. The change in the fair value of the energy contracts is detailed in notes 21(b)(ii) and 21(b)(iv). The significant unobservable inputs used in the fair value measurement of CRRs are recent CRR auction prices ranging from $1.87 to $11.79 with a weighted average of $4.49 as of June 30, 2022. The significant unobservable inputs used in the fair value measurement of the Company's AYES Canada investment are the expected cash flows, the discount rates applied to these cash flows ranging from 9.21% to 9.71% with a weighted average of 9.59%, and the expected volatility of Atlantica's share price ranging from 25% to 37% as at June 30, 2022. Significant increases (decreases) in expected cash flows or increases (decreases) in discount rate in isolation would have resulted in a significantly lower (higher) fair value measurement.
	(b)	Derivative instruments Derivative instruments are recognized on the unaudited interim consolidated balance sheets as either assets or liabilities and measured at fair value at each reporting period.
	(i)	Commodity derivatives – regulated accounting The Company uses derivative financial instruments to reduce the cash flow variability associated with the purchase price for a portion of future natural gas purchases associated with its regulated gas and electric service territories. The Company’s strategy is to minimize fluctuations in gas sale prices to regulated customers. The following are commodity volumes, in dekatherms (“dths”), associated with the above derivative contracts:
			June 30, 2022
		Financial contracts: Swaps		2,882,075
				Options	113,504
				2,995,579

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)

21.

Financial instruments (continued)(b)

Derivative instruments (continued)

(i)

Commodity derivatives – regulated accounting (continued)The accounting for these derivative instruments is subject to guidance for rate regulated enterprises. Most of the gains or losses on the settlement of these contracts are included in the calculation of the fuel and commodity costs adjustments (note 5). As a result, the changes in fair value of these natural gas derivative contracts and their offsetting adjustment to regulatory assets and liabilities had no earnings impact.

(ii)

Cash flow hedges The Company has sought to reduce the price risk on the expected future sale of power generation at the Sandy Ridge, Senate, Minonk, and Sugar Creek Wind Facilities by entering into the following long-term energy derivative contracts.

Notional quantity

Receive average

Pay floating price

(MW-hrs)

Expiry

prices (per MW-hr)

(per MW-hr)

4,297,565

September 2030

$24.54

Illinois Hub

463,336

December 2028

$30.62

PJM Western HUB

2,194,497

December 2027

$22.86

NI HUB

1,803,817

December 2027

$36.46

ERCORT North HUB

The Company provides energy requirements to various customers under contracts at fixed rates. While the production from the Tinker Hydroelectric Facility is expected to provide a portion of the energy required to service these customers, AQN anticipates having to purchase a portion of its energy requirements at the ISO NE spot rates to supplement self-generated energy. The Company seeks to mitigate the risk by using short-term financial forward energy purchase contracts. These short-term derivatives are not accounted for as hedges and changes in fair value are recorded in earnings as they occur (note 21(b)(iv)). A prior contract used as a hedging instrument expired in February 2022.The Company is party to two interest rate swap contracts as cash flow hedges to mitigate the risk that LIBOR-based interest rates will increase over the life of term loan facilities. Under the terms of the interest rate swap contracts, the Company has fixed its LIBOR interest rate expense on $87,627 and $8,875 to 3.28% and 3.02%, respectively, on its two term loan facilities. The fair value of the derivative on the designation date is amortized into earnings over the remaining life of the contract.The Company is party to a forward-starting interest rate swap in order to reduce the interest rate risk related to the quarterly interest payments between July 1, 2024 and July 1, 2029 on the $350,000 subordinated unsecured notes and between April 18, 2027 and April 18, 2032 on the $750,000 subordinated unsecured notes. The Company designated the entire notional amount of the pay-variable and receive-fixed interest rate swaps as a hedge of the future quarterly variable-rate interest payments associated with the subordinated unsecured notes. In January 2022, the Company entered into a cross-currency interest rate swap, coterminous with the Canadian Notes, to effectively convert the C$400,000 Canadian Offering into U.S. dollars. The change in the carrying amount of the Canadian Notes due to changes in spot exchange rates is recognized each period in the unaudited interim consolidated statements of operations as loss (gain) on foreign exchange. The Company designated the entire notional amount of the cross-currency fixed-for-fixed interest rate swap as a hedge of the foreign currency exposure related to cash flows for the interest and principal repayments on the Canadian Notes. An offsetting portion of the AOCI balance related to changes in fair value of the cross-currency fixed-for-fixed interest rate swap attributable to changes in the spot exchange rates is also immediately reclassified into earnings.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
21.	Financial instruments (continued)(b)
		Derivative instruments (continued)
	(ii)	Cash flow hedges (continued)The following table summarizes OCI attributable to derivative financial instruments designated as a cash flow hedge:
			Three months ended June 30	Six months ended June 30
			2022		2021	2022		2021
		Effective portion of cash flow hedge	$	(20,298) $		(32,436) $	(81,852) $		(63,167)
		Amortization of cash flow hedge					(3,828)	(214)	(3,992)	(1,112)
		Amounts reclassified from AOCI					11,247	859	14,079	40,132
		OCI attributable to shareholders of AQN $	(12,879) $		(31,791) $	(71,765) $		(24,147)
		The Company expects $43,250 of unrealized losses currently in AOCI to be reclassified, net of taxes into non-regulated energy sales, investment loss, interest expense and derivative gains, within the next 12 months, as the underlying hedged transactions settle.
	(iii)	Foreign exchange hedge of net investment in foreign operationThe functional currency of most of AQN's operations is the U.S. dollar. The Company designates obligations denominated in Canadian dollars as a hedge of the foreign currency exposure of its net investment in its Canadian investments and subsidiaries. The related foreign currency transaction gain or loss designated as, and effective as, a hedge of the net investment in a foreign operation is reported in the same manner as the translation adjustment (in OCI) related to the net investment. A foreign currency gain of $395 and $220 for the three and six months ended June 30, 2022, respectively (2021 - loss of $178 and $446, respectively) was recorded in OCI. On May 23, 2019, the Company entered into a cross-currency swap, coterminous with the subordinated unsecured notes, to effectively convert the $350,000 U.S.-dollar-denominated offering into Canadian dollars. The change in the carrying amount of the notes due to changes in spot exchange rates is recognized each period in the unaudited interim consolidated statements of operations as loss (gain) on foreign exchange. The Company designated the entire notional amount of the cross-currency fixed-for-fixed interest rate swap as a hedge of the foreign currency exposure related to cash flows for the interest and principal repayments on the notes. Upon the change in functional currency of AQN to the U.S. dollar on January 1, 2020, this hedge was dedesignated. The OCI related to this hedge will be amortized into earnings in the period that future interest payments affect earnings over the remaining life of the original hedge. The Company redesignated this swap as a hedge of AQN's net investment in its Canadian subsidiaries. The related foreign currency transaction gain or loss designated as a hedge of the net investment in a foreign operation is reported in the same manner as the translation adjustment (in OCI) related to the net investment. The fair value of the derivative on the redesignation date will be amortized over the remaining life of the original hedge. A foreign currency gain of $10,697 and $6,465 for the three and six months ended June 30, 2022, respectively (2021 - loss of $7,453 and $11,467, respectively) was recorded in OCI.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
21.	Financial instruments (continued)(b)
		Derivative instruments (continued)
	(iii)	Foreign exchange hedge of net investment in foreign operation (continued)Canadian operationsThe Company is exposed to currency fluctuations from its Canadian-based operations. AQN seeks to manage this risk primarily through the use of natural hedges by using Canadian long-term debt to finance its Canadian operations and a combination of foreign exchange forward contracts and spot purchases. The Company’s Canadian operations are determined to have the Canadian dollar as their functional currency and are exposed to currency fluctuations from their U.S. dollar transactions. The Company designates obligations denominated in U.S. dollars as a hedge of the foreign currency exposure of its net investment in its U.S. investments and subsidiaries. The related foreign currency transaction gain or loss designated as, and effective as, a hedge of the net investment in a foreign operation is reported in the same manner as the translation adjustment (in OCI) related to the net investment. A foreign currency loss of $2,149 and $2,544 for the three and six months ended June 30, 2022, respectively (2021 - gain of $70 and $1,991, respectively) was recorded in OCI.The Company was party to C$500,000 cross-currency swaps to effectively convert Canadian dollar debentures into U.S. dollars. The Company designated the entire notional amount of the cross-currency fixed-for-fixed interest rate swap and related short-term U.S. dollar payables created by the monthly accruals of the swap settlement as a hedge of the foreign currency exposure of its net investment in the Renewable Energy Group's U.S. operations. The gain or loss related to the fair value changes of the swap and the related foreign currency gains and losses on the U.S. dollar accruals that are designated as, and are effective as, a hedge of the net investment in a foreign operation are reported in the same manner as the translation adjustment (in OCI) related to the net investment. A loss of $8,132 and $6,080 for the three and six months ended June 30, 2022, respectively (2021 - gain of $6,534 and $13,274, respectively) was recorded in OCI. During the six months ended June 30, 2022, the Renewable Energy Group settled the related cross-currency swap related to its C$200,000 debenture that was repaid (note 7(c)).On April 9, 2021, the Renewable Energy Group entered into a fixed-for-fixed cross-currency interest rate swap, coterminous with the senior unsecured debentures (note 7(b)), to effectively convert the C$400,000 Canadian-dollar-denominated offering into U.S. dollars. The Renewable Energy Group designated the entire notional amount of the fixed-for-fixed cross-currency interest rate swap as a hedge of the foreign currency exposure of its net investment in its U.S. operations. The gain or loss related to the fair value changes of the swap are reported in the same manner as the translation adjustment (in OCI) related to the net investment. A loss of $8,439 and $14,252 for the three and six months ended June 30, 2022, respectively (2021 - loss of $2,653 and $2,653, respectively) was recorded in OCI.Chilean operationsThe Company is exposed to currency fluctuations from its Chilean-based operations. The Company's Chilean operations are determined to have the Chilean peso as their functional currency. Chilean long-term debt used to finance the operations is denominated in Chilean Unidad de Fomento.
	(iv)	Other derivatives Derivative financial instruments are used to manage certain exposures to fluctuations in exchange rates, interest rates and commodity prices. The Company does not enter into derivative financial agreements for speculative purposes.For derivatives that are not designated as hedges, the changes in the fair value are immediately recognized in earnings.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsJune 30, 2022 and 2021(in thousands of U.S. dollars, except as noted and per share amounts)
21.	Financial instruments (continued)(b)
		Derivative instruments (continued)
	(iv)	Other derivatives (continued)The effects on the unaudited interim consolidated statements of operations of derivative financial instruments not designated as hedges consist of the following:
			Three months ended June 30	Six months ended June 30
			2022		2021	2022		2021
		Change in unrealized loss on derivative
		financial instruments:
							Interest rate swaps	$		(4,680) $	— $	(4,680) $	—
							Energy derivative contracts	$		(2,352) $	(2,305) $			(3,103) $	(2,627)
		Total change in unrealized loss on derivative
		financial instruments	$					(7,032) $	(2,305) $		(7,783) $	(2,627)
		Realized gain (loss) on derivative financial
		instruments:
							Energy derivative contracts			(157)	196			149	359
		Total realized gain (loss) on derivative
		financial instruments	$					(157) $	196 $		149 $	359
		Loss on derivative financial instruments not
		accounted for as hedges						(7,189)	(2,109)		(7,634)	(2,268)
		Amortization of AOCI gains frozen as a result
		of hedge dedesignation						1,054	755		1,750	2,003
			$					(6,135) $	(1,354) $		(5,884) $	(265)
		Amounts recognized in the consolidated
		statements of operations consist of:
		Loss on derivative financial instruments	$					(6,135) $	(1,354) $		(5,884) $	(265)
	(c)	Risk management In the normal course of business, the Company is exposed to financial risks that potentially impact its operating results. The Company employs risk management strategies with a view to mitigating these risks to the extent possible on a cost-effective basis. Derivative financial instruments are used to manage certain exposures to fluctuations in exchange rates, interest rates and commodity prices. The Company does not enter into derivative financial agreements for speculative purposes.This note provides disclosures relating to the nature and extent of the Company’s exposure to risks arising from financial instruments, including credit risk and liquidity risk, and how the Company manages those risks.
22.	Comparative figuresCertain of the comparative figures have been reclassified to conform to the unaudited interim consolidated financial statement presentation adopted in the current period.