Enhanced Investments - Financial Portal

Published: 2020-11-12

Unaudited Interim Consolidated Financial Statements ofAlgonquin Power & Utilities Corp.For the three months and nine months ended September 30, 2020 and 2019

Algonquin Power & Utilities Corp.
Unaudited Interim Consolidated Statements of Operations
	Three months ended	Nine months ended
(thousands of U.S. dollars, except per share amounts)	September 30	September 30
	2020		2019	2020		2019
Revenue
					Regulated electricity distribution	$	218,669 $		221,396 $	562,967 $	602,452
					Regulated gas distribution		55,669		47,588	318,906	296,184
					Regulated water reclamation and distribution		39,354		39,004	102,076	98,487
					Non-regulated energy sales		56,053		52,706	182,288	175,940
					Other revenue		6,370		4,872	18,417	13,306
							376,115		365,566	1,184,654 1,186,369
Expenses
					Operating expenses		116,759		116,248	367,835	356,548
					Regulated electricity purchased		58,106		68,281	158,154	188,223
					Regulated gas purchased		13,254		10,670	96,174	111,564
					Regulated water purchased		3,747		2,719	9,234	5,958
					Non-regulated energy purchased		4,969		3,531	11,714	13,110
					Administrative expenses		13,812		14,929	47,127	41,571
					Depreciation and amortization		71,528		65,782	226,075	206,642
					Loss (gain) on foreign exchange		(936)		(859)	(5,630)		75
							281,239		281,301	910,683	923,691
Operating income							94,876		84,265	273,971	262,678
Interest expense							(45,560)		(45,668)	(136,626)	(134,129)
Income (loss) from long-term investments (note 6)							(2,701)		90,055	169,447	270,189
Other net losses (note 16)							(16,928)		(5,683)	(44,758)	(14,050)
Pension and other post-employment non-service costs
(note 8)							(2,369)		(4,994)	(9,342)	(10,034)
Gain on derivative financial instruments (note 21(b)(iv))	301		15,379	1,747		15,592
							(67,257)		49,089	(19,532)	127,568
Earnings before income taxes							27,619		133,354	254,439	390,246
Income tax recovery (expense) (note 15)
					Current		524		(5,041)	(5,585)	(14,990)
					Deferred		19,179		(16,927)	(7,927)	(42,614)
							19,703		(21,968)	(13,512)	(57,604)
Net earnings							47,322		111,386	240,927	332,642
Net effect of non-controlling interests (note 14)
					Non-controlling interests		11,294		11,377	47,270	47,066
					Non-controlling interests held by related party		(2,765)		(7,009)	(9,924)	(20,923)
						$	8,529 $		4,368 $	37,346 $	26,143
Net earnings attributable to shareholders of Algonquin
Power & Utilities Corp.						$	55,851 $		115,754 $	278,273 $	358,785
Series A and D Preferred shares dividend (note 12)							2,102		2,137	6,259	6,352
Net earnings attributable to common shareholders of
Algonquin Power & Utilities Corp.						$	53,749 $		113,617 $	272,014 $	352,433
Basic net earnings per share (note 17)						$	0.09 $		0.23 $	0.50 $	0.71
Diluted net earnings per share (note 17)						$	0.09 $		0.23 $	0.49 $	0.71
								consolidated financial statements
See accompanying notes to unaudited interim

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

	Three months ended	Nine months ended
(thousands of U.S. dollars)	September 30	September 30
	2020		2019	2020		2019
Net earnings					$	47,322 $	111,386 $	240,927 $		332,642
Other comprehensive income (loss) (“OCI”):
						Foreign currency translation adjustment, net of tax
						recovery of $954 and tax expense of $1,828
						(2019 - tax recovery of $493 and $606),
						respectively (notes 21(b)(iii) and 21(b)(iv))	10,812		(11,910)	(17,245)		45
						Change in fair value of cash flow hedges, net of tax
						recovery of $1,821 and $9,210 (2019 - tax
						recovery of $2,198 and tax expense of $2,902),
						respectively (note 21(b)(ii))	(4,761)		(5,775)	(25,062)	7,855
						Change in pension and other post-employment
						benefits, net of tax expense of $81 and $72 (2019
						- tax recovery of $132 and $82), respectively
						(note 8)	196		(185)	175	(230)
Other comprehensive income (loss), net of tax						6,247	(17,870)	(42,132)		7,670
Comprehensive income						53,569	93,516	198,795		340,312
Comprehensive loss attributable to the non-controlling
interests						(7,055)	(5,610)	(39,986)		(24,680)
Comprehensive income attributable to shareholders of
Algonquin Power & Utilities Corp.					$	60,624 $	99,126 $	238,781 $		364,992
See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.
Unaudited Interim Consolidated Balance Sheets
(thousands of U.S. dollars)
	September 30,	December 31,
	2020	2019
ASSETS
Current assets:
			Cash and cash equivalents	$		318,164 $	62,485
			Accounts receivable, net (note 4)			202,369	259,144
			Fuel and natural gas in storage			33,040	30,804
			Supplies and consumables inventory			81,665	60,295
			Regulatory assets (note 5)			62,282	50,213
			Prepaid expenses			40,150	29,003
			Derivative instruments (note 21)			13,493	13,483
			Other assets			8,993	7,764
				760,156	513,191
Property, plant and equipment, net		7,282,409 7,231,664
Intangible assets, net				51,840	47,616
Goodwill		1,030,517 1,031,696
Regulatory assets (note 5)				713,432	509,674
Long-term investments (note 6)
			Investments carried at fair value		1,369,333 1,294,147
			Other long-term investments			396,908	121,968
Derivative instruments (note 21)				45,367	72,221
Deferred income taxes				29,526	30,585
Other assets				60,452	58,708
	$ 11,739,940 $ 10,911,470
See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.
Unaudited Interim Consolidated Balance Sheets
(thousands of U.S. dollars)
	September 30,	December 31,
	2020	2019
LIABILITIES AND EQUITY
Current liabilities:
			Accounts payable	$		145,298 $	150,336
			Accrued liabilities			236,638	307,952
			Dividends payable (note 12)			92,305	73,945
			Regulatory liabilities (note 5)			42,018	41,683
			Long-term debt (note 7)			6,925	225,013
			Other long-term liabilities (note 9)			57,711	57,939
			Derivative instruments (note 21)			43,754	5,898
			Other liabilities			10,221	9,300
				634,870	872,066
Long-term debt (note 7)		3,970,780 3,706,855
Regulatory liabilities (note 5)				548,544	556,379
Deferred income taxes				498,268	491,538
Derivative instruments (note 21)				63,497	78,766
Pension and other post-employment benefits obligation				217,850	224,094
Other long-term liabilities (note 9)				268,516	243,401
		6,202,325 6,173,099
Redeemable non-controlling interests (note 14)
			Redeemable non-controlling interest, held by related party (note 13(b))			306,234	305,863
			Redeemable non-controlling interests			22,896	25,913
				329,130	331,776
Equity:
			Preferred shares			184,299	184,299
			Common shares (note 10(a))		4,907,933 4,017,044
			Additional paid-in capital			57,556	50,579
			Deficit			(362,540)	(367,107)
			Accumulated other comprehensive loss (“AOCI”) (note 11)			(49,253)	(9,761)
			Total equity attributable to shareholders of Algonquin Power & Utilities Corp.		4,737,995 3,875,054
			Non-controlling interests
			Non-controlling interests			409,958	457,834
			Non-controlling interest, held by related party (note 13(c))			60,532	73,707
				470,490	531,541
			Total equity		5,208,485 4,406,595
Commitments and contingencies (note 19)Subsequent events (notes 3, 6, 7 and 10)
	$ 11,739,940 $ 10,911,470
See accompanying notes to unaudited interim consolidated financial statements


Algonquin Power & Utilities Corp.
Unaudited Interim Consolidated Statement of Equity
(thousands of U.S. dollars)
For the three months ended September 30, 2020
			Algonquin Power & Utilities Corp. Shareholders
	Additional	Non-
				Common	Preferred	paid-in		Accumulated	controlling
				shares	shares	capital	Deficit					OCI	interests	Total
Balance, June 30, 2020				$ 4,181,365 $ 184,299 $		51,834 $ (323,404) $	(54,026) $ 483,261 $ 4,523,329
Net earnings (loss)					—	—	—							55,851	—		(8,529)	47,322
Redeemable non-
controlling interests not
included in equity
(note 14)					—	—	—	—	—						(1,049)	(1,049)
Other comprehensive
income					—	—	—	—				4,773			1,474	6,247
Dividends declared and
distributions to non-
controlling interests					—	—	—							(74,885)	—		(4,667)	(79,552)
Dividends and issuance of
shares under dividend
reinvestment plan					20,047	—	—							(20,047)	—	—		—
Common shares issued
upon conversion of
convertible debentures					36	—	—	—	—	—						36
Common shares issued
upon public offering, net
of cost					705,437	—	—	—	—	—	705,437
Issuance of common
shares under employee
share purchase plan					1,048	—	—	—	—	—						1,048
Share-based
compensation					—	—							6,792	—	—	—		6,792
Common shares issued
pursuant to share-based
awards					—	—	—							(55)	—	—		(55)
Acquisition of redeemable
non-controlling interest					—	—							(1,070)	—	—	—		(1,070)
Balance, September 30,
2020				$ 4,907,933 $ 184,299 $		57,556 $ (362,540) $	(49,253) $ 470,490 $ 5,208,485
See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.
Unaudited Interim Consolidated Statement of Equity

(thousands of U.S. dollars)
For the three months ended September 30, 2019
			Algonquin Power & Utilities Corp. Shareholders
	Additional	Non-
				Common	Preferred	paid-in		Accumulated	controlling
				shares	shares	capital	Deficit					OCI	interests	Total
Balance, June 30, 2019				$ 3,614,020 $ 184,299 $		45,414 $ (499,344) $	3,636 $ 569,145 $ 3,917,170
Net earnings (loss)					—	—	—		115,754		—					(4,368)	111,386
Redeemable non-
controlling interests not
included in equity
(note 14)					—	—	—		—	—						(4,744)	(4,744)
Other comprehensive loss
					—	—	—	—	(16,628)						(1,242)	(17,870)
Dividends declared and
distributions to non-
controlling interests					—	—	—	(54,530)		—					(5,231)	(59,761)
Dividends and issuance of
shares under dividend
reinvestment plan					18,000	—	—	(18,000)		—	—					—
Contributions received
from non-controlling
interests					—	—	—	—	—	—					—
Common shares issued
upon conversion of
convertible debentures					—	—	—	—	—	—					—
Common shares issued
upon public offering,
net of cost					15,609	—	—	—	—	—					15,609
Share-based
compensation					—	—							3,056	—	—	—			3,056
Common shares issued
pursuant to share-based
awards					7,628	—							(1,414)			(6,747)	—	—		(533)
Balance, September 30,
2019				$ 3,655,257 $ 184,299 $		47,056 $ (462,867) $ (12,992) $ 553,560 $ 3,964,313
See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.
Unaudited Interim Consolidated Statement of Equity
(thousands of U.S. dollars)
For the nine months ended September 30, 2020
			Algonquin Power & Utilities Corp. Shareholders
	Additional	Non-
				Common	Preferred	paid-in		Accumulated	controlling
				shares	shares	capital	Deficit					OCI	interests	Total
Balance, December 31,
2019				$ 4,017,044 $ 184,299 $		50,579 $ (367,107) $	(9,761) $ 531,541 $ 4,406,595
Net earnings (loss)					—	—	—	278,273		—					(37,346)	240,927
Redeemable non-
controlling interests not
included in equity
(note 14)					—	—	—	—	—					(4,733)	(4,733)
Other comprehensive loss			—	—	—	—					(39,492)	(2,640)	(42,132)
Dividends declared and
distributions to non-
controlling interests					—	—	—	(211,696)		—					(19,703)	(231,399)
Dividends and issuance of
shares under dividend
reinvestment plan					45,869	—	—									(45,869)	—	—		—
Contributions received
from non-controlling
interests					—	—	—	—	—					3,371	3,371
Common shares issued
upon conversion of
convertible debentures					48	—	—	—	—	—					48
Common shares issued
upon public offering,
net of cost					823,737	—	—	—	—	—	823,737
Issuance of common
shares under employee
share purchase plan					3,006	—	—	—	—	—					3,006
Share-based
compensation					—	—							19,301	—	—	—			19,301
Common shares issued
pursuant to share-based
awards					18,229	—							(11,254)			(16,141)	—	—		(9,166)
Acquisition of redeemable
non-controlling interest					—	—							(1,070)	—	—	—			(1,070)
Balance, September 30,
2020				$ 4,907,933 $ 184,299 $		57,556 $ (362,540) $	(49,253) $ 470,490 $ 5,208,485
See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.
Unaudited Interim Consolidated Statement of Equity

(thousands of U.S. dollars)
For the nine months ended September 30, 2019
			Algonquin Power & Utilities Corp. Shareholders
	Additional	Non-
				Common	Preferred	paid-in	Accumulated	Accumulated	controlling
				shares	shares	capital	deficit						OCI	interests	Total
Balance, December 31,
2018				$ 3,562,418 $ 184,299 $		45,553 $ (595,259) $ (19,385) $ 519,896 $ 3,697,522
Adoption of ASU
2017-12 on hedging					—	—	—									(186)	186	—				—
Net earnings (loss)					—	—	—		358,785		—	(26,143)	332,642
Redeemable non-
controlling interests not
included in equity
(note 14)					—	—	—		—	—		(14,011)	(14,011)
Other comprehensive
income					—	—	—	—					6,207				1,463	7,670
Dividends declared and
distributions to non-
controlling interests					—	—	— (158,446)		—	(27,963) (186,409)
Dividends and issuance of
shares under dividend
reinvestment plan					51,447	—	—	(51,447)		—	—						—
Contributions received
from non-controlling
interests					—	—	—	—	—	100,318	100,318
Common shares issued
upon conversion of
convertible debentures										90	—	—	—	—	—					90
Common shares issued
upon public offering, net
of cost					20,702	—	—	—	—	—									20,702
Issuance of common
shares under employee
share purchase plan					2,042	—	—	—	—	—						2,042
Share-based
compensation					—	—								9,364	—	—	—				9,364
Common shares issued
pursuant to share-based
awards					18,558	—								(7,861)	(16,314)		—	—				(5,617)
Balance, September 30,
2019				$ 3,655,257 $ 184,299 $		47,056 $ (462,867) $ (12,992) $ 553,560 $ 3,964,313
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 September 30	Nine months ended September 30
	2020		2019	2020		2019
Cash provided by (used in):Operating Activities
					Net earnings	$				47,322 $	111,386	$			240,927 $	332,642
					Adjustments and items not affecting cash:
					Depreciation and amortization					71,528	65,782				226,075	206,642
					Deferred taxes					(19,179)	16,927				7,927	42,614
					Unrealized gain (loss) on derivative financial instruments					(2,015)	(25,643)				(4,194)	(15,968)
					Share-based compensation expense					6,588	2,681				18,228	7,896
					Cost of equity funds used for construction purposes					134	(1,428)				(1,903)	(2,588)
					Change in value of investments carried at fair value					23,394	(64,372)				(95,690)	(178,410)
					Pension and post-employment expense in excess of (lower
					than) contributions					(214)		276				2,570	3,507
					Distributions received from equity investments, net of
					income					1,494	1,762				3,566	6,455
					Others					16,075	9,952				14,051	10,475
					Net change in non-cash operating items (note 20)					(23,695)	70,764				(80,324)	30,535
						121,432	188,087					331,233	443,800
Financing Activities
					Increase in long-term debt		1,450,979		734,260	2,787,634		2,845,045
					Decrease in long-term debt		(1,639,150)		(229,591)	(2,712,318)		(1,918,815)
					Issuance of common shares, net of costs					699,888	15,856				820,145	22,223
					Cash dividends on common shares					(63,847)	(51,559)		(186,415)	(143,773)
					Dividends on preferred shares					(2,102)	(4,246)				(6,259)	(6,352)
					Contributions from non-controlling interests, related party					—		—						—	96,752
					Contributions from non-controlling interests and redeemable
					non-controlling interests (note 14)					—		—				2,649			475
					Production-based cash contributions from non-controlling
					interest					—		—				3,371	3,565
					Distributions to non-controlling interests, related party
					(note 13(b) and (c))					(4,710)		—				(20,622)	(10,867)
					Distributions to non-controlling interests					(2,462)	(24,014)				(9,687)	(29,534)
					Payments upon settlement of derivatives					—		—						—	(8,732)
					Shares surrendered to fund withholding taxes on exercised share
					options					—	(1,341)				(4,644)	(5,282)
					Acquisition of non-controlling interest					(1,935)		—				(1,935)			—
					Increase in other long-term liabilities					3,581	3,436				10,782	7,488
					Decrease in other long-term liabilities					(1,266)	(1,413)				(6,292)	(15,192)
						438,976	441,388					676,409	837,001
Investing Activities
					Additions to property, plant and equipment and intangible
					assets					(182,662)	(190,247)		(524,971)	(403,297)
					Increase in long-term investments					(118,031)	(130,616)		(223,198)	(546,303)
					Acquisitions of operating entities					354		—				(2,697)	(1,350)
					Increase in other assets					(7,651)	(903)				(15,415)	(13,914)
					Receipt of principal on development loans receivable					2,789		—				13,743	10,601
					Proceeds from sale of long-lived assets					—		—				415			—
						(305,201)	(321,766)		(752,123)	(954,263)
Effect of exchange rate differences on cash and restricted cash						3,923	(412)					2,173		313
Increase in cash, cash equivalents and restricted cash						259,130	307,297					257,692	326,851
Cash, cash equivalents and restricted cash, beginning of period						85,834	85,327					87,272	65,773
Cash, cash equivalents and restricted cash, end of period	$					344,964 $	392,624	$				344,964 $	392,624

Algonquin Power & Utilities Corp.
Unaudited Interim Consolidated Statements of Cash Flows
(thousands of U.S. dollars)	Three months ended September 30	Nine months ended September 30
	2020		2019	2020		2019
Supplemental disclosure of cash flow information:Cash paid during the period for interest expense
	$				43,666 $	40,677	$	143,254 $	124,001
Cash paid during the period for income taxes	$				2,367 $	3,421	$	4,291 $	12,959
Non-cash financing and investing activities:Property, plant and equipment acquisitions in accruals
	$				73,117 $	29,671	$	73,117 $	29,671
Issuance of common shares under dividend reinvestment plan and
share-based compensation plans	$				21,093 $	24,877	$	67,104 $	70,070
Sale of property, plant and equipment, intangible assets and accrued
liabilities in exchange of note receivable	$				— $	21,107	$		— $	21,107

See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
Algonquin Power & Utilities Corp. (“APUC” or the “Company”) is an incorporated entity under the Canada Business Corporations Act. APUC'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 and Canada; the Renewable Energy Group owns and operates a diversified portfolio of non-regulated renewable and thermal electric generation assets. Subsequent to quarter-end, the Company acquired a regulated electric utility in Bermuda and a water and wastewater provider in Chile (note 3(a) and (b), respectively).
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 APUC are consistent with those disclosed in the consolidated financial statements of APUC for the year ended December 31, 2019, except for adopted accounting policies described in note 2(a) and note 1(e).
	(b)	COVID-19 pandemicThe preparation of these unaudited interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The ongoing outbreak of the novel strain of coronavirus (“COVID-19”) has resulted in business suspensions and shutdowns that have caused changes in consumption patterns of the Company's customers. Force majeure or similar notices have been received from suppliers and/or contractors for all of the Company's major renewable energy construction projects. Certain manufacturing, transportation and delivery delays have occurred, and similar future disruptions are possible due to COVID-19. However, in the second quarter, the U.S. Internal Revenue Service extended by one year the “continuity safe harbor” deadline by which renewable projects must be placed in service to qualify for the maximum permissible U.S. federal tax credits. The Company’s business, financial condition, cash flows and results of operations, are subject to actual and potential future impacts resulting from COVID-19, the full extent of which is not currently known. The Company has made estimates of the impact of COVID-19 within its financial statements and there may be changes to those estimates in future periods.
	(c)	SeasonalityAPUC'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. APUC's different 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 experience higher demand than during the summer period. APUC’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. APUC’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 APUC's wind energy assets, wind resources are typically stronger in spring, fall and winter and weaker in summer. APUC's solar energy assets experience greater insolation in summer, weaker in winter.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
1.	Significant accounting policies (continued)(d)
		Foreign currency translationAPUC’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$” immediately prior to the stated amount. Effective January 1, 2020, the functional currency of APUC, the non-consolidated parent entity, changed from the Canadian dollar to the U.S. dollar based on a balance of facts, taking into consideration its operating, financing and investing activities. As a result of the entity's change of functional currency, changes were made to certain hedging relationships to mitigate the remaining Canadian dollar risk (note 21(b)(iii)).
	(e)	Current expected credit lossesThe Company adopted the U.S. Financial Accounting Standards Board (“FASB”) Financial Instruments —Credit Losses Topic 326 (“ASC 326”) in the first quarter of 2020 using a modified retrospective approach. The Company has trade accounts receivable and loans receivable from its equity method investees in both the Regulated Services and Renewable Energy Group. New allowance policies were implemented for the Company's loans receivable and the Renewable Energy Group's trade accounts receivable. The impact to the Company's bad debt expense upon adoption was not significant.
2.	Recently issued accounting pronouncements(a)
		Recently adopted accounting pronouncements
		The FASB issued accounting standards update (“ASU”) Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 to reduce diversity in practice on how entities account for transactions on the basis of different views of the economics of a collaborative arrangement. The adoption of this Update during the first quarter did not have an impact on the unaudited interim consolidated financial statements.The FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities to improve general purpose financial reporting. The update clarifies that indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. The adoption of this Update during the first quarter did not have an impact on the unaudited interim consolidated financial statements.The FASB issued ASU 2017-04, Business Combinations (Topic 350): Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The update is intended to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measured a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the amendments in this update, the impairment loss will be measured as the amount by which the carrying amount of the reporting unit exceeds the reporting unit’s fair value. The Company will follow the pronouncements prospectively for goodwill impairment testing.The FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The adoption of this topic in the first quarter did not have a significant impact on the unaudited interim consolidated financial statements (note 1(e)).

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
2.	Recently issued accounting pronouncements(b)
		Recently issued accounting guidance not yet adopted
		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 amendments in this Update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company is currently assessing the impact of this Update.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 amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently assessing the impact of the reference rate reform and this Update.
3.	Business acquisitions(a) Acquisition of Bermuda Electric Light Company
	Subsequent to quarter-end, on November 9, 2020, the Company completed the acquisition of Ascendant Group Limited (“Ascendant”), parent company of Bermuda Electric Light Company (“BELCO”). BELCO is the sole electric utility providing regulated electrical generation, transmission and distribution services to Bermuda's residents and businesses. The purchase price of approximately $365,600 for the acquisition of BELCO was funded through the Company's existing credit facilities. The costs related to this acquisition have been expensed through the unaudited interim consolidated statement of operations.Due to the timing of the acquisition, the Company has not completed the fair value measurements necessary for the allocation of the purchase price to the assets acquired and liabilities assumed.
	(b) Acquisition of Empresa de Servicios Sanitarios de Los Lagos S.A.
	Subsequent to quarter-end, the Company acquired 51% and 42.97% of Empresa de Servicios de Los Lagos S.A. (“ESSAL”) on October 13, and October 17, 2020, respectively. Through its 93.97% interests, the Company controls and consolidates ESSAL. The remaining 6.03% of ESSAL will be recorded as non-controlling interest by APUC. ESSAL is a vertically integrated, regional water and wastewater provider in Southern Chile.The purchase price of approximately $162,100 for the acquisition of ESSAL was funded through the Company's existing credit facilities. Acquisition costs related to this acquisition have been expensed through the unaudited interim consolidated statement of operations.Due to the timing of the acquisition, the Company has not completed the fair value measurements necessary for the allocation of the purchase price to the assets acquired and liabilities assumed.
	(c) Acquisition of Enbridge Gas New Brunswick Limited Partnership & St. Lawrence Gas Company, Inc.
	The Company completed the acquisition of Enbridge Gas New Brunswick Limited Partnership (“New Brunswick Gas”) on October 1, 2019, and St. Lawrence Gas Company, Inc. (“St. Lawrence Gas”) on November 1, 2019. New Brunswick Gas is a regulated utility that provides natural gas. The purchase price recorded in 2019 was $256,011 (C$339,036). A closing adjustment of $1,213 (C$1,884) was made in 2020 to reduce goodwill. St. Lawrence Gas is a regulated utility that provides natural gas in northern New York State. The total purchase price recorded in 2019 for the transaction was $61,820. A closing adjustment of $1,328 was made in 2020 to increase goodwill. The fair value measurements related to these acquisitions have been finalized.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
4.	Accounts receivableAccounts receivable as of September 30, 2020 include unbilled revenue of $45,988 (December 31, 2019 - $80,295) from the Company’s regulated utilities. Accounts receivable as of September 30, 2020 are presented net of allowance for doubtful accounts of $10,094 (December 31, 2019 - $4,939).
5.	Regulatory mattersThe operating companies within the Regulated Services Group are subject to regulation by the public utility commissions of the states and provinces 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. 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 consolidated financial statements based on regulatory approval obtained to the extent that there is a financial impact during the applicable reporting period. The following regulatory proceeding were recently completed:
						Annual revenue
				Regulatory proceeding		increase
		Utility	State		type	(decrease)	Effective date
	Energy North Gas		New	Cast Iron/Bare Steel		$1,613		July 1, 2020
	System		Hampshire	Replacement Program
				Results
	Granite State		New	General Rate Review		$5,474		July 1, 2020. The regulator also
	Electric System		Hampshire					approved a one-time recoupment of
								$1,836 for the difference between the
								final rates and temporary rate increase
								of $2,093 granted on July 1, 2019.
	Empire Electric		Missouri	General Rate Review					$992	September 16, 2020
	(Missouri System)
	Peach State Gas		Georgia	General Rate Review		$1,566		August 1, 2020
	System
	Calpeco Electric		California	General Rate Review		$5,277		Retroactive to January 1, 2019
	System
	Various		California	General Rate Review		($657)

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(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:
		September 30,		December 31,
			2020	2019
	Regulatory assets
					Retired generating plant (a)	$	195,465 $		—
					Environmental remediation		88,853			82,300
					Pension and post-employment benefits		133,288	143,292
					Income taxes		73,022			71,506
					Debt premium		37,075			42,150
					Fuel and commodity cost adjustments		15,479			23,433
					Rate adjustment mechanism		91,065			69,121
					Clean energy and other customer programs		25,634			26,369
					Deferred capitalized costs (b)		31,271			38,833
					Asset retirement obligation		26,068			23,841
					Long-term maintenance contract		16,217			13,264
					Vegetation management		18,747		5,043
					Other		23,530			20,735
	Total regulatory assets	$	775,714 $	559,887
	Less: current regulatory assets		(62,282)				(50,213)
	Non-current regulatory assets	$	713,432 $	509,674
	Regulatory liabilities
					Income taxes	$	323,441 $	321,960
					Cost of removal		192,303	196,423
					Fuel and commodity costs adjustments		20,197			16,645
					Rate adjustment mechanism		4,817			10,446
					Deferred capitalized costs - fuel related						—	7,097
					Pension and post-employment benefits		23,172			22,256
					Other (a)		26,632			23,235
	Total regulatory liabilities	$	590,562 $	598,062
	Less: current regulatory liabilities		(42,018)				(41,683)
	Non-current regulatory liabilities	$	548,544 $	556,379
	(a)				Retired generating plant On March 1, 2020, the Company's 200 MW coal generation facility located in Asbury, Missouri, ceased operations. The Company transferred the remaining net book value of Asbury’s plant retired from plant in-service to a regulatory asset. The ultimate valuation of the regulatory asset will be determined in future commission orders. The Company is also assessing the decommissioning requirements associated with the retirement of the facility. Per commission orders in its jurisdictions, the Company is required to track the impact of Asbury's retirement on rates for consideration in the next rate case. The Company expects to defer such amounts collected from customers until new rates become effective. The accrual for this estimated amount includes revenues collected related to Asbury that will be subject to a future rate review proceeding and possible refund to customers. The ultimate resolution of this matter is uncertain.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
5.	Regulatory matters (continued)(b)
		Deferred capitalized costsDuring the quarter, Empire Electric made an election under Missouri law to apply the plant-in-service accounting (“PISA”) regulatory mechanism, that permits Empire Electric to defer, on a Missouri jurisdictional basis, 85% of the depreciation expense and carrying costs at the applicable weighted average cost of capital (“WACC”) on certain property, plant, and equipment placed in service after the election date and not included in base rates. The portions of regulatory asset balances that are not yet being recovered through rates shall include carrying costs at the WACC, plus applicable federal, state, and local income or excise taxes. Regulatory asset balances included in rate base shall be recovered in rates through a 20-year amortization beginning on the effective date of new rates. The Company recognizes the cost of debt on PISA deferrals as reduction of interest expense. The difference between the WACC and cost of debt will be recognized in revenue when recovery of such deferrals is reflected in customer rates. The regulatory asset associated with PISA as at September 30, 2020 is not material.
6.	Long-term investmentsLong-term investments consist of the following:
			September 30,		December 31,
				2020	2019
	Long-term investments carried at fair value
		Atlantica (a)	$ 1,285,792 $ 1,178,581
	Atlantica Yield Energy Solutions Canada Inc.			83,541		88,494
	San Antonio Water System (b)						—	27,072
			$ 1,369,333 $ 1,294,147
	Other long-term investments
		Equity-method investees (b), (c)	$	167,414 $		82,111
		Development loans receivable from equity-method investees (c)		224,433		36,204
	Other			5,061		3,653
		Total other long-term investments	$	396,908 $	121,968

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
6.	Long-term investments (continued)Income (loss) from long-term investments from the three and nine months ended September 30 is as follows:
		Three months ended	Nine months ended
		September 30	September 30
		2020		2019	2020		2019
	Fair value gain (loss) on investments carried at
	fair value
	Atlantica					$	(22,022) $		60,939 $	98,190 $	191,930
	Atlantica Yield Energy Solutions Canada
	Inc.						(1,372)		3,455	(2,617)	(11,960)
	San Antonio Water System						—	—	117				—
						$	(23,394) $		64,394 $	95,690 $	179,970
	Dividend and interest income from investments
	carried at fair value
	Atlantica					$	18,876 $		17,977 $	55,728 $	50,881
	Atlantica Yield Energy Solutions Canada
	Inc.						1,877		2,591	10,594	20,219
	San Antonio Water System						—	—	2,113				—
						$	20,753 $		20,568 $	68,435 $	71,100
	Other long-term investments
										Equity method loss	(1,764)	(482)	(3,888)	(5,208)
										Interest and other income	1,704	5,575	9,210	24,327
						$	(2,701) $		90,055 $	169,447 $	270,189
	(a)									Investment in AtlanticaAAGES (AY Holdings) B.V. (“AY Holdings”), an entity controlled and consolidated by APUC, has a share ownership in Atlantica Yield plc (“Atlantica”) of approximately 44.2% (December 31, 2019 - 44.2%). APUC has the flexibility, subject to certain conditions, to increase its ownership of Atlantica up to 48.5%. The shares were purchased at a cost of $1,036,414. The Company accounts for its investment in Atlantica at fair value, with changes in fair value reflected in the unaudited interim consolidated statements of operations.
	(b)									San Antonio Water SystemOn December 30, 2019, the Company and a third party each contributed C$1,500 to the capital of a new joint venture, created for the purpose of investing in infrastructure opportunities. The Company sold its investment in Abengoa Water USA, LLC to the joint venture and has elected the fair value option under ASC 825, Financial Instruments to account for its investment in the joint venture, with changes in fair value reflected in the unaudited interim consolidated statements of operations.On July 2, 2020, APUC acquired the third-party developer's 50% interest in the joint venture for C$1,581. As a result, the Company now consolidates Abengoa Water USA, LLC and its 20% interest in the San Antonio Water System (“SAWS”). The Company accounts for its 20% interest in SAWS using the equity method.
	(c)									Equity-method investeesThe Company has non-controlling interests in various partnerships and joint ventures with a total carrying value of $167,414 (December 31, 2019 - $82,111) including investments in variable interest entities (“VIEs”) of $144,620 (December 31, 2019 - $59,091).During quarter, the Blue Hill wind project net assets of $20,029 (C$27,205) were transferred into a joint venture entity in exchange for 50% equity interests in the joint venture. The Company holds an option to acquire the remaining 50% interest at a pre-agreed price.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
6.	Long-term investments (continued)(c)
		Equity-method investees (continued)Subsequent to quarter-end, effective October 21, 2020, APUC paid $1,500 to Abengoa S.A. (“Abengoa”) for a 12-month exclusive, transferable, and irrevocable option to purchase all of Abengoa's interests in Abengoa-Algonquin Global Energy Solutions (“AAGES”) B.V., AAGES Development Canada Inc., and AAGES Development Spain, S.A. During the term of the option, the Company is obligated to provide cash advances in an aggregate amount not exceeding $7,233 in any calendar year to be used only in accordance with the baseline operating budget. Summarized combined information for APUC's investments in significant partnerships and joint ventures is as follows:
			September 30,		December 31,
				2020	2019
		Total assets	$ 3,021,039 $		833,791
		Total liabilities		2,727,771		697,751
		Net assets		293,268	136,040
		APUC's ownership interest in the entities		120,206		63,624
		Difference between investment carrying amount and underlying equity in
		net assets(a)		47,208		18,487
		APUC's investment carrying amount for the entities	$	167,414 $		82,111
		(a) The difference between the investment carrying amount and the underlying equity in net assets relates primarily to interest capitalized while the projects are under construction, the fair value of guarantees provided by the Company in regards to the investments, development fees and transaction costs.
		The Company has committed loan and credit support facilities with some of its equity investees. During construction, the Company is obligated to provide cash advances and credit support in amounts necessary for the continued development and construction of the equity investees' projects. As of September 30, 2020, the Company had issued letters of credit and guarantees of obligations: under a security of performance for a development opportunity; wind turbine or solar panel supply agreements; engineering, procurement, and construction agreements; purchase and sale agreements; interconnection agreements; energy purchase agreements; renewable energy credit agreements; equity capital contribution agreements; landowner agreements; and construction loan agreements. The fair value of the support provided recorded as at September 30, 2020 amounts to $11,356 (December 31, 2019 - $9,493). Summarized combined information for APUC's VIEs is as follows:
			September 30,		December 31,
				2020	2019
		APUC's maximum exposure in regards to VIEs
		Carrying amount	$	144,620 $		59,091
		Development loans receivable		223,621		35,000
		Commitments on behalf of VIEs		958,281 1,364,871
			$ 1,326,522 $ 1,458,962
		The commitments are presented on a gross basis assuming no recoverable value in the assets of the VIEs. The majority of the amounts committed on behalf of VIEs in the above relate to wind turbine or solar panel supply agreements as well as engineering, procurement, and construction agreements.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
7.	Long-term debtLong-term debt consists of the following:
			Weighted
			average			September 30,		December 31,
		Borrowing type	coupon	Maturity	Par value		2020	2019
	Senior unsecured revolving credit
	facilities (a)			—	2023-2024				N/A $	— $	141,577
	Senior unsecured bank credit
	facilities (b)			—	2020-2021				N/A	—	75,000
	Commercial paper			—								2020	N/A	—	218,000
	U.S. dollar borrowings
	Senior unsecured notes (c)		3.46 %	2022-2047 $ 1,700,000		1,688,128 1,219,579
	Senior unsecured utility notes		6.01 %	2020-2035 $	212,000		227,572	233,686
	Senior secured utility bonds (d)		4.71 %	2026-2044 $	556,197		562,285	672,337
	Canadian dollar borrowings
	Senior unsecured notes (e)		4.28 %	2021-2050 C$ 1,150,669			858,608	728,679
	Senior secured project notes		10.21 %								2027 C$	26,498		19,859		21,961
						$ 3,356,452 $ 3,310,819
	Subordinated U.S. dollar borrowings
	Subordinated unsecured notes		6.50 %	2078-2079 $	637,500		621,253	621,049
						$ 3,977,705 $ 3,931,868
	Less: current portion						(6,925)	(225,013)
						$ 3,970,780 $ 3,706,855
	Short-term obligations of $177,452 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 February 24, 2020, the Renewable Energy Group increased its uncommitted letter of credit facility to $350,000 and extended the maturity to June 30, 2021.
	(b)	Senior unsecured bank credit facilitiesGiven the uncertainty caused by the COVID-19 pandemic, the Company secured additional liquidity as an additional margin of safety intended to ensure the Company can continue to move forward with its 2020 capital expenditure program and committed acquisitions independent of the state of the capital markets. The additional liquidity is in the form of three new senior unsecured delayed draw non-revolving credit facilities for a total of $1,600,000 maturing in April 2021. Subsequent to quarter-end, on October 5, 2020, these facilities were replaced with two new syndicated revolving credit facilities for a total of $1,600,000 maturing December 31, 2021.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
7.	Long-term debt (continued)Recent financing activities (continued):(c)
		Senior unsecured notesOn September 23, 2020, the Regulated Services Group's debt financing entity issued $600,000 senior
		unsecured notes bearing interest at 2.05% with a maturity date of September 15, 2030.On July 31, 2020, the Company repaid, upon its maturity, a $25,000 unsecured note. On April 30, 2020, the Company repaid, upon its maturity, a $100,000 unsecured note.
	(d)	Senior secured utility bondsOn June 1, 2020, the Company repaid, upon its maturity, a $100,000 secured utility bond at Empire.
	(e)	Canadian dollar senior unsecured notes On February 14, 2020, the Regulated Services Group issued C$200,000 senior unsecured debentures bearing interest at 3.315% with a maturity date of February 14, 2050. The debentures are redeemable at the option of the Company at a price based on a make-whole provision.
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 nine-month periods ended September 30:
			Pension benefits
				Three months ended	Nine months ended
				September 30	September 30
				2020	2019	2020	2019
	Service cost					$	3,607 $	3,226 $	11,310 $	9,286
	Non-service costs
	Interest cost						3,808	6,854	12,711	15,283
	Expected return on plan assets						(6,279)	(5,106)	(18,789)	(15,317)
	Amortization of net actuarial loss						1,782	872	4,072	2,616
	Amortization of prior service credits						(403)	(196)	(1,207)	(586)
	Amortization of regulatory assets/liabilities						3,169	2,292	11,476	6,563
						$	2,077 $	4,716 $	8,263 $	8,559
	Net benefit cost					$	5,684 $	7,942 $	19,573 $	17,845

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
8.	Pension and other post-employment benefits (continued)
		OPEB
			Three months ended	Nine months ended
			September 30	September 30
			2020		2019	2020		2019
	Service cost						$	1,626 $		1,201 $	4,559 $	3,603
	Non-service costs
	Interest cost							2,307		1,809	5,881	5,427
	Expected return on plan assets							(2,176)		(1,650)	(6,561)	(4,951)
	Amortization of net actuarial loss (gain)							409	(238)		382	(714)
	Amortization of prior service credits							—	(52)				—	(157)
	Amortization of regulatory assets/liabilities							(248)	409		1,377	1,870
							$	292 $	278 $		1,079 $	1,475
	Net benefit cost						$	1,918 $		1,479 $	5,638 $	5,078
	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.
9.	Other long-term liabilitiesOther long-term liabilities consist of the following:
		September 30,							December 31,
				2020		2019
	Advances in aid of construction	$		62,317 $		60,828
	Environmental remediation obligation			65,460		58,061
	Asset retirement obligations			60,612		53,879
	Customer deposits			31,652		31,946
	Unamortized investment tax credits			17,922		18,234
	Deferred credits			18,856		18,952
	Preferred shares, Series C			13,166		13,793
	Hook up fees			13,757		9,610
	Lease liabilities			13,619		9,695
	Contingent development support obligations			11,356		9,446
	Other			17,510		16,896
		$		326,227 $		301,340
	Less: current portion			(57,711)		(57,939)
		$		268,516 $		243,401

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
10.	Shareholders’ capital(a)
		Common sharesNumber of common shares
			Nine months ended September 30
			2020	2019
		Common shares, beginning of period
				524,223,323	488,851,433
		Public offering		66,130,063	1,756,799
		Dividend reinvestment plan		3,532,823	4,749,570
		Exercise of share-based awards (b)		1,421,766	1,211,448
		Conversion of convertible debentures			6,225	11,883
		Common shares, end of period		595,314,200	496,581,133
		On July 17, 2020, APUC issued 57,465,500 common shares at $12.60 (C$17.10) per share pursuant to agreements with a syndicate of underwriters and an institutional investor for gross proceeds of $723,926 (C$982,660) before issuance costs of $24,755 (C$33,602). Forward contracts were used to manage the Canadian dollar risk (note 21(b)(iv)).On May 15, 2020, APUC re-established its at-the-market equity program (“ATM program”) that allows the Company to issue up to $500,000 of common shares from treasury to the public from time to time, at the Company's discretion, at the prevailing market price when issued on the TSX, the NYSE, or any other existing trading market for the common shares of the Company in Canada or the United States. During the nine months ended September 30, 2020, the Company issued 8,664,563 common shares under the ATM program at an average price of $13.92 per common share for gross proceeds of $120,634 ($119,126 net of commissions). Other related costs, primarily related to the re-establishment of the ATM program, were $1,163.Since the initial launch of the ATM program in February 2019, the Company has issued an aggregate of 10,421,362 common shares under the ATM program at an average price of $13.69 per share for gross proceeds of $142,668 ($140,830 net of commissions). Other related costs, primarily related to the establishment and re-establishment, as applicable, of the ATM program, were $3,285.
	(b)	Share-based compensationFor the three and nine months ended September 30, 2020, APUC recorded $6,588 and $18,228, respectively (2019 - $2,814 and $7,287, respectively) in total share-based compensation expense. The compensation expense is recorded as part of administrative expenses in the unaudited interim consolidated statements of operations, except for $3,169 and $10,121 related to management succession and executive retirement expenses discussed below, which was recorded in other net losses (note 16(b)) for the three and nine months ended September 30, 2020. The portion of share-based compensation costs capitalized as cost of construction is insignificant.As of September 30, 2020, total unrecognized compensation costs related to non-vested options and performance share units (“PSUs”) were $1,039 and $13,797, respectively, and are expected to be recognized over a period of 1.43 and 1.61 years, respectively.Management succession and executive retirements:The Company announced succession plans for the role of Chief Executive Officer (“CEO”) and the pending retirements of the Chief Financial Officer (“CFO”) and Vice Chair. In order to facilitate an orderly and planned transition, the Company entered into Retirement Agreements with Messrs. Robertson, Bronicheski and Jarratt. Messrs. Robertson and Bronicheski retired on July 17, 2020 and September 18, 2020, respectively. Mr. Jarratt will retire at the end of November 2020.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
10.	Shareholders’ capital (continued)(b)
		Share-based compensation (continued)Retirement restricted share units (“RSUs”) were granted to Messrs Robertson, Jarratt and Bronicheski. The retirement RSUs vest on each executive’s respective retirement date and settle at various times between the first and fifth anniversary of the day of grant. The compensation cost is recorded over the period from the effective date of the retirement agreement to the retirement date. For the three and nine months ended September 30, 2020, the Company recorded compensation cost of $1,560 and $4,608, respectively, in other net losses (note 16(b)). All unvested PSUs held by an executive will remain outstanding. All options held by an executive will continue to vest and be exercisable as if the executive were still employed until such Options otherwise expire in accordance with their terms and conditions. The fair value of these PSUs and options is being recognized over their vesting period. As a result of the retirement agreement the recognition of the compensation cost is accelerated and recorded over the period from the effective date of the retirement agreement to the retirement date. For the three and nine months ended September 30, 2020, the Company recorded accelerated compensation expense of $623 and $3,564, respectively, in other net losses (note 16(b)). For the three and nine months ended September 30, 2020, the Company recorded other succession and retirement expense of $986 and $1,949, respectively, in other net losses (note 16(b)). Share option plan:During the nine months ended September 30, 2020, the Board of Directors of the Company (the “Board”) approved the grant of 999,962 options to executives of the Company. The options allow for the purchase of common shares at a weighted average price of C$16.78, the market price of the underlying common share at the date of grant. One-third of 948,347 options vest on each of December 31, 2020, 2021, and 2022. One-third of 51,615 options vest on each of January 1, 2021, 2022, and 2023. The options may be exercised up to eight years following the date of grant.The following assumptions were used in determining the fair value of share options granted:
			2020
		Risk-free interest rate		1.2 %
		Expected volatility		24 %
		Expected dividend yield		4.1 %
		Expected life	5.50 years
		Weighted average grant date fair value per option			C$	2.72
		During the nine months ended September 30, 2020, 2,386,275 share options were exercised at a weighted average price of C$12.52 in exchange for 748,786 common shares issued from treasury, and 1,637,489 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 units:During the nine months ended September 30, 2020, a total of 1,168,552 PSUs, RSUs and retirement RSUs discussed above were granted to executives of the Company. The awards vest based on the terms of each agreement ranging from July 2020 to January 2023. During the nine months ended September 30, 2020, the Company settled 825,859 PSUs in exchange for 441,342 common shares issued from treasury, and 384,517 PSUs were settled at their cash value as payment for tax withholdings related to the settlement of the PSUs. Subsequent to quarter-end, in October 2020, a total of 30,319 additional PSUs were granted to employees of the Company.During the nine months ended September 30, 2020, 135,409 bonus deferral RSUs were granted to employees of the Company. The RSUs are 100% vested. In addition, the Company settled 13,778 bonus deferral RSUs in exchange for 6,401 common shares issued from treasury, and 7,377 RSUs were settled at their cash value as payment for tax withholdings related to the settlement of the RSUs.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
10.	Shareholders’ capital (continued)(b)
		Share-based compensation (continued)Directors' deferred share units:During the nine months ended September 30, 2020, 65,536 deferred share units (“DSUs”) were issued pursuant to the election of the Directors to defer a percentage of their Directors' fee in the form of DSUs.
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, 2019		$	(74,189) $	64,333 $			(9,529) $	(19,385)
	Adoption of ASU 2017-12 on hedging							—	186	—			186
	Other comprehensive income (loss)			7,795	19,177			(7,999)	18,973
	Amounts reclassified from AOCI to the
	unaudited interim consolidated statement of
	operations							—	(8,597)	1,490	(7,107)
	Net current period OCI		$	7,795 $	10,580 $			(6,509) $	11,866
	OCI attributable to the non-controlling
	interests			(2,428)						—	—	(2,428)
	Net current period OCI attributable to
	shareholders of APUC		$	5,367 $	10,580 $			(6,509) $	9,438
	Balance, December 31, 2019		$	(68,822) $	75,099 $	(16,038) $	(9,761)
	Other comprehensive loss			(17,244)	(15,932)			—	(33,176)
	Amounts reclassified from AOCI to the
	unaudited interim consolidated statement of
	operations							—	(9,130)	175	(8,955)
	Net current period OCI		$	(17,244) $	(25,062) $			175 $	(42,131)
	OCI attributable to the non-controlling
	interests							2,640	—	—	2,640
	Net current period OCI attributable to
	shareholders of APUC		$	(14,604) $	(25,062) $			175 $	(39,491)
	Balance, September 30, 2020		$	(83,426) $						50,037 $	(15,863) $	(49,252)
	Amounts reclassified from AOCI for unrealized gain (loss) on cash flow hedges affected revenue from non-regulated energy sales while those for pension and post-employment actuarial changes affected pension and post-employment non-service costs.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
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 September 30
		2020	2019
		Dividend per	Dividend per
				Dividend	share	Dividend	share
	Common shares			$	92,830 $	0.1551 $	70,392 $	0.1410
	Series A preferred shares			C$				1,549 C$	0.3226 $	1,549 $	0.3226
	Series D preferred shares			C$				1,273 C$	0.3182 $	1,273 $	0.3182
		Nine months ended September 30
		2020	2019
		Dividend per	Dividend per
				Dividend	share	Dividend	share
	Common shares			$	251,282 $	0.4512 $	203,542 $	0.4102
	Series A preferred shares			C$				4,646 C$	0.9679 $	4,646 $	0.9679
	Series D preferred shares			C$				3,818 C$	0.9546 $	3,796 $	0.9489
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 nine months ended September 30, 2020, the Company charged its equity-method investees $6,280 and $15,698, respectively (2019 - $5,350 and $18,203, respectively). Additionally, one of the equity-method investees provides development services to the Company on specified projects, for which it earns a development fee upon reaching certain milestones. The development fee charged to the Company has not been significant.
	(b)								Redeemable non-controlling interest held by related partyRedeemable non-controlling interest held by related party represents a preference share in a consolidated subsidiary of the Company acquired by AAGES B.V. in 2018 for $305,000. Redemption is not considered probable as at September 30, 2020. The Company incurred non-controlling interest attributable to AAGES B.V. of $2,765 and $9,924, respectively (2019 - $7,009 and $20,923, respectively) and recorded distributions of $2,680 and $9,552, respectively (2019 - $3,815 and $14,682, respectively) during the three and nine months ended September 30, 2020 (note 14).
	(c)								Non-controlling interest held by related partyNon-controlling interest held by related party represents interest in a consolidated subsidiary of the Company acquired by Atlantica Yield Energy Solutions Canada Inc. (“AYES Canada”) in May 2019. The Company recorded distributions of $2,196 and $11,069, respectively (2019 - $2,715 and $20,517, respectively) during the three and nine months ended September 30, 2020.
	(d)								Long Sault Hydro FacilityEffective December 31, 2013, APUC acquired the shares of Algonquin Power Corporation Inc. (“APC”), which was partially owned by Senior Executives. APC owns the partnership interest in the 18 MW Long Sault Hydro Facility. A final post-closing adjustment related to the transaction remains outstanding.
	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 StatementsSeptember 30, 2020 and 2019(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 for the three and nine months ended September 30 consists of the following:
		Three months ended	Nine months ended
		September 30	September 30
		2020		2019	2020		2019
	HLBV and other adjustments attributable to:
	Non-controlling interests - tax equity
	partnership units					$	10,135 $	9,674 $	43,870 $	42,009
	Non-controlling interests - redeemable tax
	equity partnership units						1,716	2,267	5,191	6,912
	Other net earnings attributable to:
	Non-controlling interests						(557)	(564)	(1,791)	(1,855)
						$	11,294 $	11,377 $	47,270 $	47,066
	Redeemable non-controlling interest, held by
	related party						(2,765)	(7,009)	(9,924)	(20,923)
	Net effect of non-controlling interests					$	8,529 $	4,368 $	37,346 $	26,143
	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.The Turquoise Solar Facility, a 10 MWac solar generating facility located in Washoe County, Nevada, was placed in service on December 31, 2019. The Class A partnership units are owned by a third-party tax equity investor who funded $1,403 on the execution date, $2,000 on December 31, 2019 and an installment of $2,649 during the second quarter.
15.	Income taxes For the nine months ended September 30, 2020, the Company's tax rate varied from the statutory rate of 26.5% due primarily to the tax benefit from tax credits accrued, the beneficial impact of differences in effective tax rates on transactions in foreign jurisdictions, and the favorable tax impact on the income associated with its investment in Atlantica. These adjustments are offset by deferred tax expense associated with the non-controlling interest share of income, and the impact of the finalization of certain regulations related to U.S. Tax Reform as further described below. For the nine months ended September 30, 2019, the Company's tax rate varied from the statutory rate of 26.5% due primarily to the favorable tax impact on the income associated with its investment in Atlantica, and the impact of the differences in effective tax rates on transactions in foreign jurisdictions. The Company recognizes tax credits on a quarterly basis using an overall effective income tax rate anticipated for the full year which may differ significantly from recognizing tax credits as either wind energy is generated and sold or as solar assets are placed in service. Tax credits can significantly affect the Company's effective income tax rate depending on the amount of pretax income. For the nine months ended September 30, 2020, the Company has accrued $25,000 of tax credits. The tax credits that have been accrued are primarily investment tax credits associated with renewable energy projects that have either been placed in service or are expected to be placed in service by the end of 2020. On April 8, 2020, the IRS issued final regulations with respect to rules regarding certain Hybrid arrangements as a result of U.S. Tax Reform. As a result of the final regulations, the Company has recorded a one-time income tax expense of $9,300 to reverse the benefit of deductions taken in the prior year.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(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	Nine months ended
		September 30	September 30
		2020		2019	2020		2019
	Acquisition and transition-related costs						(2,908)		(2,786)	(6,050)	(5,175)
	Tax reform (a)						—	—	(11,728)					—
	Management succession and executive
	retirement (b)						(3,169)					—	(10,121)		—
	Other (c)						(10,851)		(2,897)	(16,859)	(8,875)
						$	(16,928) $		(5,683) $	(44,758) $	(14,050)
	(a)									Tax reformAs a result of the Tax Cuts and Jobs Act enacted in 2017, regulators in the states where the Regulated Services Group operates contemplated the rate making implications of federal tax rates from the legacy 35% tax rate and the new 21% federal statutory income tax rate effective January 2018. On July 1, 2020, the Company received an order from the Public Service Commission of the State of Missouri that requires Empire to refund to customers over five years the revenue requirement collected at the higher tax rate between January 1, 2018 and August 31, 2018 before new rates came into effect. Therefore, an accounting loss was recognized for approximately $11,728 during the quarter.
	(b)									Management succession and executive retirementThe Company announced succession plans for the role of CEO, and the pending retirements of the CFO and Vice Chair. As part of the Retirement Agreements, the Company recorded $3,169 and $10,121, for the three and nine months ended September 30, 2020, respectively, of expenses during the quarter in relation to these executives’ share-based compensation agreements (note 10(b)).
	(c)									OtherOther losses primarily consists of costs related to the condemnation of Liberty Utilities (Apple Valley Ranchos Water) Corp. (note 19(a)) and some of the costs related to the Granite Bridge Project, a proposed natural gas pipeline to provides service to the Energy North Gas System. During the quarter, the Company decided to discontinue the Granite Bridge Project and to instead seek approval of a significantly less expensive contract for additional capacity on a mainline gas artery. The Company is seeking recovery of all costs involved with pursuing the Granite Bridge Project. However, for GAAP purposes, the related asset will be recorded on the Company's balance sheet following review by the regulator at the next general rate proceeding.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
17.	Basic and diluted net earnings per shareBasic and diluted earnings per share have been calculated on the basis of net earnings 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 per share is computed using the weighted-average number of common shares, subscription receipts outstanding, 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 resulting from the application of the treasury stock method to outstanding share options and additional shares issued subsequent to quarter-end under the dividend reinvestment plan. The reconciliation of the net earnings and the weighted average shares used in the computation of basic and diluted earnings per share are as follows:
		Three months ended	Nine months ended
		September 30	September 30
		2020		2019	2020		2019
	Net earnings attributable to shareholders of
	APUC					$	55,851 $	115,754 $	278,273 $	358,785
	Series A preferred shares dividend						1,154	1,173	3,435	3,496
	Series D preferred shares dividend						948			964	2,823	2,856
	Net earnings attributable to common
	shareholders of APUC – basic and diluted					$	53,749 $	113,617 $	272,015 $	352,433
	Weighted average number of sharesBasic
						585,403,736 495,912,305 547,031,170 493,192,919
	Effect of dilutive securities						5,291,986	5,144,344	5,096,871	4,798,346
	Diluted					590,695,722 501,056,649 552,128,041 497,991,265
	The shares potentially issuable for the three and nine months ended September 30, 2020, as a result of 51,615 and 51,615 securities (2019 - nil and 1,113,775) are excluded from this calculation as they are anti-dilutive.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(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 and Canada; 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. Subsequent to quarter-end, the Company acquired a regulated electric utility in Bermuda and a water and wastewater provider in Chile (note 3(a) and (b), respectively).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 are 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 and unrealized portion of any gains or losses on derivative instruments not designated in a hedging relationship are not considered in management’s evaluation of divisional performance and are therefore allocated and reported under corporate.
		Three months ended September 30, 2020
			Regulated	Renewable
			Services Group	Energy Group	Corporate	Total
	Revenue (1)(2)		$	316,696 $			59,419 $	— $	376,115
	Fuel, power and water purchased							75,107	4,969	—	80,076
	Net revenue			241,589			54,450	—	296,039
	Operating expenses							98,215	18,544	—	116,759
	Administrative expenses			9,231				7,054	(2,473)	13,812
	Depreciation and amortization							51,520	18,885	1,123	71,528
	Gain on foreign exchange			—				—	(936)	(936)
	Operating income							82,623	9,967	2,286	94,876
	Interest expense
				(25,224)	(12,077)			(8,259)	(45,560)
	Income from long-term investments			300				20,028	(23,029)	(2,701)
	Other			(11,209)			(2,291)	(5,496)	(18,996)
	Earnings before income taxes		$					46,490 $	15,627 $	(34,498) $	27,619
	Capital expenditures		$	161,285 $			10,636 $	10,741 $	182,662
	(1) Renewable Energy Group revenue includes $3,661 related to net hedging gains from energy derivative contracts for the three-month period ended September 30, 2020 that do not represent revenue recognized from contracts with customers.(2) Regulated Services Group revenue includes $12,673 related to alternative revenue programs for the three-month period ended September 30, 2020 that do not represent revenue recognized from contracts with customers.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
18.	Segmented information (continued)
		Three months ended September 30, 2019
			Regulated	Renewable
			Services Group	Energy Group	Corporate	Total
	Revenue (1)(2)		$	310,106 $	55,460 $			— $	365,566
	Fuel, power and water purchased			81,670					3,531	—	85,201
	Net revenue			228,436	51,929			—	280,365
	Operating expenses			96,562	19,686			—	116,248
	Administrative expenses			7,038						7,543	348	14,929
	Depreciation and amortization			47,100	18,435			247	65,782
	Loss on foreign exchange			—						—	(859)	(859)
	Operating income			77,736					6,265	264	84,265
	Interest expense			(23,713)	(14,486)	(7,469)	(45,668)
	Income from long-term investments			2,041		23,253	64,761	90,055
	Other								(7,831)	15,302	(2,769)	4,702
	Earnings before income taxes		$	48,233 $	30,334 $	54,787 $	133,354
	Capital expenditures		$	130,619 $	59,628 $			— $	190,247
	(1) Renewable Energy Group revenue includes $2,071 related to net hedging gains from energy derivative contracts for the three-month period ended September 30, 2019 that do not represent revenue recognized from contracts with customers.(2) Regulated Services Group revenue includes $3,805 related to alternative revenue programs for the three-month period ended September 30, 2019 that do not represent revenue recognized from contracts with customers.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
18.	Segmented information (continued)
		Nine months ended September 30, 2020
			Regulated	Renewable
			Services Group	Energy Group			Corporate	Total
	Revenue (1)(2)		$	992,214 $	192,440 $			— $ 1,184,654
	Fuel, power and water purchased			263,562					11,714	—	275,276
	Net revenue			728,652	180,726			—	909,378
	Operating expenses			311,649					56,186	—	367,835
	Administrative expenses								27,916	19,594	(383)	47,127
	Depreciation and amortization			157,159					67,316	1,600	226,075
	Gain on foreign exchange			—						—	(5,630)	(5,630)
	Operating income			231,928					37,630	4,413	273,971
	Interest expense			(74,161)	(40,174)	(22,291)	(136,626)
	Income from long-term investments			5,910						66,373	97,164	169,447
	Other			(35,901)					(2,340)	(14,112)	(52,353)
	Earnings before income taxes		$	127,776 $					61,489 $	65,174 $	254,439
	Property, plant and equipment		$ 4,842,614 $ 2,404,626 $		35,169 $ 7,282,409
	Investments carried at fair value			—		1,369,333			—	1,369,333
	Equity-method investees								42,730	124,684			—	167,414
	Total assets			7,141,546	4,303,321	295,073 11,739,940
	Capital expenditures		$	458,558 $					55,672 $	10,741 $	524,971
	(1) Renewable Energy Group revenue includes $20,400 related to net hedging gains from energy derivative contracts for the nine-month period ended September 30, 2020 that do not represent revenue recognized from contracts with customers.(2) Regulated Services Group revenue includes $20,403 related to alternative revenue programs for the nine-month period ended September 30, 2020 that do not represent revenue recognized from contracts with customers.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
18.	Segmented information (continued)
		Nine months ended September 2019
			Regulated	Renewable
			Services Group	Energy Group	Corporate	Total
	Revenue (1)(2)		$ 1,002,737 $		183,632 $	— $ 1,186,369
	Fuel and power purchased			305,745		13,110	—	318,855
	Net revenue			696,992		170,522	—	867,514
	Operating expenses			300,558		55,990	—	356,548
	Administrative expenses			19,017		22,432	122	41,571
	Depreciation and amortization			142,551		63,356	735	206,642
	Loss on foreign exchange			—					—	75		75
	Operating income			234,866		28,744	(932)	262,678
	Interest expense			(74,862)		(46,930)	(12,337)	(134,129)
	Income from long-term investments								5,152	83,800	181,237	270,189
	Other			(18,587)		15,229	(5,134)	(8,492)
	Earnings before income taxes		$	146,569 $		80,843 $	162,834 $	390,246
	Capital expenditures		$	332,792 $		70,505 $	— $	403,297
					December 31, 2019
	Property, plant and equipment		$ 4,754,373 $ 2,444,382 $	32,909 $ 7,231,664
	Investments carried at fair value			27,072 1,267,075			— 1,294,147
	Equity-method investees			29,827		53,670	—	83,497
	Total assets		$ 6,816,063 $ 4,014,067 $	81,340 $ 10,911,470
	(1) Renewable Energy Group revenue includes $13,711 related to net hedging gains from energy derivative contracts for the nine-month period ended September 30, 2019 that do not represent revenue recognized from contracts with customers.(2) Regulated Services Group revenue includes $244 related to alternative revenue programs for the nine-month period ended September 30, 2019 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.APUC operates in the independent power and utility industries in both Canada and the United States. Information on operations by geographic area is as follows:
			Three months ended	Nine months ended
									September 30	September 30
			2020		2019	2020	2019
	Revenue
										Canada	$				27,412 $	20,104 $	109,080 $	60,268
										United States		348,703	345,462	1,075,574 1,126,101
			$	376,115 $		365,566 $ 1,184,654 $ 1,186,369
	Revenue is attributed to the two countries based on the location of the underlying generating and utility facilities.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
19.	Commitments and contingencies(a)
		ContingenciesAPUC 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 APUC’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 consolidated financial statements at the time it is concluded that its occurrence is probable and the related liability is estimable.Claim by Gaia Power Inc.On October 30, 2018, Gaia Power Inc. (“Gaia”) commenced an action in the Ontario Superior Court of Justice against APUC and certain of its subsidiaries, claiming damages of not less than $345,000 and punitive damages in the sum of $25,000. The action arises from Gaia’s 2010 sale, to a subsidiary of APUC, of Gaia’s interest in certain proposed wind farm projects in Canada. Pursuant to a 2010 royalty agreement, Gaia is entitled to royalty payments if the projects are developed and achieve certain agreed targets. The parties have since agreed to arbitrate the dispute, and it is scheduled to be heard in the first quarter of 2021. It is too early to determine the likelihood of success in this lawsuit; however, APUC intends to vigorously defend it.Condemnation expropriation proceedingsLiberty Utilities (Apple Valley Ranchos Water) Corp. is the subject of a condemnation lawsuit filed by the town of Apple Valley. A court will determine the necessity of the taking by Apple Valley and, if established, a jury will determine the fair market value of the assets being condemned. The evidentiary portion of the right-to-take condemnation trial finished on July 15, 2020 and a decision is expected from the Court in the first half of 2021. Any taking by government entities would legally require fair compensation to be paid; however, there is no assurance that the value received as a result of the condemnation will be sufficient to recover the Company's net book value of the utility assets taken.
	(b)	CommitmentsIn addition to the commitments related to the proposed acquisitions and development projects disclosed in notes 3 and 6, the following significant commitments exist as of September 30, 2020.APUC 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)	$ 23,453 $ 11,335 $ 11,564 $ 11,738 $ 11,972 $ 170,428 $ 240,490
		Gas supply and
		service
		agreements (ii) 73,388 58,945 49,165 41,617 39,593						123,305	386,013
		Service
		agreements	49,801 43,127 47,341 48,326 46,359					257,959	492,913
		Capital
		projects	570,480							—	—	—	—	—	570,480
		Land
		easements		6,657	6,691	6,775	6,863	6,940	194,643	228,569
		Total	$ 723,779 $ 120,098 $ 114,845 $ 108,544 $ 104,864 $ 746,335 $ 1,918,465
		(i) Power purchase: APUC’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 of September 30, 2020. However, the effects of purchased power unit cost adjustments are mitigated through a purchased power rate-adjustment mechanism.
		(ii) Gas supply and service agreements: APUC’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 StatementsSeptember 30, 2020 and 2019(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	Nine months ended
		September 30	September 30
		2020		2019	2020		2019
	Accounts receivable					$	(13,024) $	19,317 $	43,922 $	31,038
	Fuel and natural gas in storage						(5,295)	(3,404)	(2,236)	6,657
	Supplies and consumables inventory						(377)	(1,144)	(21,335)	(6,065)
	Income taxes recoverable						(1,464)	(11,072)	(3,353)	(4,271)
	Prepaid expenses						(4,680)	(3,086)	(12,024)	(8,554)
	Accounts payable						68,585	(13,153)	5,248	(23,261)
	Accrued liabilities						(36,400)	77,898	(76,439)	22,187
	Current income tax liability						3,264	15,108	4,980	15,802
	Asset retirements and environmental obligations	(1,475)		(746)	(2,174)		(2,168)
	Net regulatory assets and liabilities						(32,829)	(8,954)	(16,913)	(830)
						$	(23,695) $	70,764 $	(80,324) $	30,535

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(in thousands of U.S. dollars, except as noted and per share amounts)
21.	Financial instruments (a)
		Fair value of financial instruments
			Carrying	Fair
		September 30, 2020	amount	value	Level 1	Level 2	Level 3
		Long-term investments
		carried at fair value	$ 1,369,333 $ 1,369,333 $ 1,285,792 $					— $	83,541
		Development loans and
		other receivables		241,959	262,437					—	262,437				—
		Derivative instruments (1):
											Energy contracts
											designated as a cash
											flow hedge		54,163	54,163			—	—	54,163
											Energy contracts not
											designated as cash
											flow hedge
												115	115			—	—		115
											Commodity contracts
											for regulated
											operations		1,022	1,022			—	1,022			—
											Cross currency swap
											designated as a net
											investment hedge		3,498	3,498			—	3,498			—
											Total derivative
											instruments		58,798	58,798			—	4,520	54,278
		Total financial assets	$ 1,670,090 $ 1,690,568 $ 1,285,792 $			266,957 $	137,819
		Long-term debt	$ 3,977,705 $ 4,524,796 $ 2,244,613 $ 2,280,184 $							—
		Convertible debentures										283	549			549	—		—
		Preferred shares, Series C		13,166	14,813					—	14,813				—
		Derivative instruments (1):
											Energy contracts
											designated as a cash
											flow hedge		3,304	3,304			—	—	3,304
											Energy contracts not
											designated as a cash
											flow hedge								184	184		—	—	184
											Cross-currency swap
											designated as a net
											investment hedge		92,961	92,961			—	92,961			—
											Forward interest rate
											swaps designated as a
											hedge		10,641	10,641			—	10,641			—
											Commodity contracts
											for regulated
											operations								161	161		—	161	—
											Total derivative
											instruments		107,251	107,251			—	103,763	3,488
		Total financial liabilities	$ 4,098,405 $ 4,647,409 $ 2,245,162 $ 2,398,760 $				3,488
		(1) Balance of $62 associated with certain weather derivatives have been excluded, as they are accounted for based on intrinsic value rather than fair value.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(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, 2019	amount	value	Level 1	Level 2	Level 3
		Long-term investment
		carried at fair value	$ 1,294,147 $ 1,294,147 $ 1,178,581 $			27,072 $	88,494
		Development loans and
		other receivables		37,050	37,984			—	37,984		—
		Derivative instruments:
									Energy contracts
									designated as a cash
									flow hedge	65,304	65,304	—		—	65,304
									Energy contracts not
									designated as a cash
									flow hedge	20,384	20,384	—		—	20,384
									Commodity contracts
									for regulatory					16	16	—	16	—
									operations
									Total derivative
									instruments	85,704	85,704	—		16	85,688
		Total financial assets	$ 1,416,901 $ 1,417,835 $ 1,178,581 $			65,072 $ 174,182
		Long-term debt	$ 3,931,868 $ 4,284,068 $ 1,495,153 $ 2,788,915 $					—
		Convertible debentures								342	623	623		—	—
		Preferred shares, Series C		13,793	15,120			—	15,120		—
		Derivative instruments:
									Energy contracts
									designated as a cash
									flow hedge					789	789		—		—	789
									Cross-currency swap
									designated as a net
									investment hedge	81,765	81,765	—	81,765		—
									Currency forward
									contract not
									designated as hedge					38	38	—	—	38
									Commodity contracts
									for regulated	2,072	2,072	—	2,072		—
									operations
									Total derivative
									instruments	84,664	84,664	—	83,837		827
		Total financial liabilities	$ 4,030,667 $ 4,384,475 $ 1,495,776 $ 2,887,872 $					827
		The Company has determined that the carrying value of its short-term financial assets and liabilities approximates fair value as of September 30, 2020 and December 31, 2019 due to the short-term maturity of these instruments.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.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(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 Company’s level 1 fair value of long-term debt is measured at the closing price on the New York Stock Exchange and the Canadian 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 APUC's common shares on a converted basis.The Company’s level 2 fair value derivative instruments primarily consist of swaps, options, rights 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 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 $11.09 to $104.64 with a weighted average of $22.71 as of September 30, 2020. 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 the Company's AYES Canada investment are the expected cash flows, the discount rates applied to these cash flows ranging from 8.10% to 8.85% with a weighted average of 8.76%, and the expected volatility of Atlantica's share price ranging from 18% to 22% as of September 30, 2020. 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 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:
			2020
		Financial contracts: Swaps		2,507,167
				Options		875,506
					Forward contracts		2,000,000
				5,382,673
		The accounting for these derivative instruments is subject to guidance for rate regulated enterprises. Therefore, the fair value of these derivatives is recorded as current or long-term assets and liabilities, with offsetting positions recorded as regulatory assets and regulatory liabilities in the consolidated balance sheets. 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.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(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 following table presents the impact of the change in the fair value of the Company’s natural gas derivative contracts had on the unaudited interim consolidated balance sheets:
			September 30,	December 31,
			2020	2019
		Regulatory assets:
					Swap contracts	$		739 $	28
					Option contracts			23	38
					Forward contracts	$		210 $	1,830
		Regulatory liabilities:
					Swap contracts	$		39 $	743
					Option contracts	$		27 $	—
	(ii)	Cash flow hedges The Company reduces the price risk on the expected future sale of power generation at Sandy Ridge, Senate and Minonk 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)
									674,318	December 2028	34.43	PJM Western HUB
									3,099,067	December 2027	25.02	NI HUB
									2,430,425	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, APUC anticipates having to purchase a portion of its energy requirements at the ISO NE spot rates to supplement self-generated energy. The Company designated a contract with a notional quantity of 99,080 MW-hours, a price of $38.95 per MW-hr and expiring in February 2022 as a hedge to the price of energy purchases. The Company also mitigates 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)).In January 2019, the Company entered into a long-term energy derivative contract to reduce the price risk on the expected future sale of power generation at the Sugar Creek Wind Project. On September 30, 2019, the Company sold the derivative contract together with 100% of its ownership interest in Sugar Creek Wind Project to AAGES Sugar Creek Wind, LLC. The novation and transfer of the derivative contract was subject to counterparty approval, which was received in the first quarter of 2020. As a result, the hedge relationship for the Sugar Creek Wind Project energy derivative was discontinued. Amounts in AOCI of $15,765 and related tax were reclassified from AOCI into earnings in 2019.The Company was party to a 10-year forward-starting interest rate swap beginning on July 25, 2018 in order to reduce the interest rate risk related to the probable issuance on that date of a 10-year C$135,000 bond. During 2018, the Company amended and extended the forward-starting date of the interest rate swap to begin on March 29, 2019. During 2019, the Company settled the forward-starting interest rate swap contract as it issued C$300,000 10-year senior unsecured notes with an interest rate of 4.60%.In September 2019, the Company entered into 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. The Company designated the entire notional amount of the three 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.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(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	Nine months ended
			September 30	September 30
			2020		2019	2020		2019
		Effective portion of cash flow hedge	$	(3,042) $		9,050 $	(15,932) $		19,137
		Amortization of cash flow hedge		(555)				(8)	(1,663)	(24)
		Amounts reclassified from AOCI		(1,164)		(14,817)	(7,467)		(11,258)
		OCI attributable to shareholders of APUC	$	(4,761) $		(5,775) $	(25,062) $		7,855
		The Company expects $7,854 and $1,797 of unrealized gains currently in AOCI to be reclassified, net of taxes into non-regulated energy sales and interest expense, respectively, 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 APUC's operations is the U.S. dollar. Effective January 1, 2020, the functional currency of APUC, the non-consolidated parent entity, changed from the Canadian dollar to the U.S. dollar based on a balance of facts, taking into consideration its operating, financing and investing activities. As a result of that entity's change of functional currency, changes were made to certain hedging relationships to mitigate the remaining Canadian dollar risk.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 are reported in the same manner as the translation adjustment (in OCI) related to the net investment. A foreign currency loss of $278 and $83 for the three and nine months ended September 30, 2020, 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 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 APUC 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 APUC'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 are reported in the same manner as the translation adjustment (in OCI) related to the net investment. A foreign currency loss of $10,080 and gain of $9,503 for the three and nine months ended September 30, 2020, respectively, was recorded in OCI.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(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. APUC manages 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 are reported in the same manner as the translation adjustment (in OCI) related to the net investment. A foreign currency loss of $nil and $3,581 for the three and nine months ended September 30, 2020 (2019 - loss of $6,891 and gain of $17,116), respectively, was recorded in OCI.The Company is party to C$650,000 cross currency swaps to effectively convert Canadian dollar debentures (note 7) 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 gain of $15,472 and loss of $11,719 for the three and nine months ended September 30, 2020 (2019 - loss of $13,029 and gain of $7,176), respectively, was recorded in OCI.
	(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.During the quarter, the Company executed on currency forward contracts to purchase in total $682,500 for approximately C$923,243 in order to manage the currency exposure to the Canadian dollar shares issuance (note 10(a)). A foreign currency gain of $2,363 was recorded as a result of the settlement.

Algonquin Power & Utilities Corp.Notes to the Unaudited Interim Consolidated Financial StatementsSeptember 30, 2020 and 2019(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)For derivatives that are not designated as hedges, the changes in the fair value are immediately recognized in earnings. 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	Nine months ended
			September 30	September 30
			2020		2019	2020		2019
		Change in unrealized gain (loss) on
		derivative financial instruments:
							Energy derivative contracts	$	(165) $	(398) $	462 $			—
							Currency forward contract					—	(459)				—	(876)
		Total change in unrealized gain (loss) on
		derivative financial instruments	$	(165) $		(857) $	462 $		(876)
		Realized gain (loss) on derivative financial
		instruments:
							Energy derivative contracts		(289)						—	(970)	(207)
							Currency forward contract		2,363	(373)	2,363	200
		Total realized gain (loss) on derivative
		financial instruments	$	2,074 $		(373) $	1,393 $			(7)
		Gain (loss) on derivative financial
		instruments not accounted for as hedges		1,909		(1,230)	1,855		(883)
		Amortization of AOCI gains frozen as a
		result of hedge dedesignation		755		15,777	2,255		15,799
			$	2,664 $		14,547 $	4,110 $		14,916
		Amounts recognized in the unaudited
		interim consolidated statements of
		operations consist of:
		Gain on derivative financial instruments	$	301 $		15,379 $	1,747 $		15,592
		Gain (loss) on foreign exchange		2,363		(832)	2,363		(676)
			$	2,664 $		14,547 $	4,110 $		14,916
	(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 mitigate these risks to the extent possible on a cost effective basis.
22.	Comparative figuresCertain of the comparative figures have been reclassified to conform to the financial statement presentation adopted in the current period.