Q4/16 Results Support Our Thesis

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1 I N S T I T U T I O N A L E Q U I T Y R E S E A R C H Robert Catellier, CFA 1 (416) Robert.Catellier@cibc.com Ollie Primak, CFA 1 (416) Ollie.Primak@cibc.com Ian Woodward, CFA 1 (416) Ian.Woodward@cibc.com j Algonquin Power & Utilities Corp. Q4/16 Results Support Our Thesis Stock Rating: E A R N I N G S U P D A T E March 5, 2017 Utilities O U T P E R F O R M E R What's Changed Conclusion: In adjusting for the retroactive application of the CalPeco rate case, Algonquin reported Q4 results broadly in line with our expectations. The company is in good position to execute its growth plan and these results are supportive of our investment thesis. We maintain Outperformer rating/$14 price target. Algonquin reported a strong Q4 with adjusted EBITDA/EPS of $138MM/$0.18 compared to CIBC of $129MM/$0.12 and consensus of $121MM/$0.12. $11.9MM of the variance is due to the implementation of new rates at CalPeco retroactive to January 1, 2016, partially offset by weaker contributions from the Generation segment. A number of projects were placed into service including the 10 MW Bakersfield II Solar project in California and the 50 MW Luning Solar facility in Nevada. The 150 MW Deerfield Wind project in Michigan was also placed into service on February 21. Tax equity is in place, and the company holds an option to acquire the remaining 50% interest within 90 days of COD. Algonquin is well positioned to execute its $1.1B to $1.3B capital plan for 2017, a third of which is expected to be tax equity financed. Recent debt placements also provide some funding, as will free cash flow. Key Ratios and Statistics mo. Price Target $14.00 AQN-TSX (3/3/17) $12.40 Key Indices: Toronto, TSXUtils 52-week Range $10.47-$12.67 Shares Outstanding 274.1M Float 274.1M Shrs Avg. Daily Trading Vol. 1,632,229 Market Capitalization $3,398.7M Dividend/Div Yield $0.61 / 4.9% Fiscal Year Ends December Book Value $6.24 per Shr 2017 ROE (E) 6.1% Net Debt $4,161.6M Common Equity $1,709.8M Convertible Available Yes EPS Current $0.46A $0.57A $0.81E $0.70E Prior $0.52E $0.78E $0.67E Estimates (Dec. 31) EBITDA ($mln)-curr $375.4A $476.9A $894.9E $924.9E EBITDA ($mln)-prior $467.7E $890.8E $924.4E Div Per Share-Curr $0.49A $0.55A $0.63E $0.68E Div Per Share-Prior $0.55E $0.63E $0.68E Valuation (Dec. 31) P/E-Curr 27.0X 21.8X 15.3X 17.7X P/E-Prior 23.8X 15.9X 18.5X EV/EBITDA-Curr 13.7X 17.5X 12.0X 12.6X EV/EBITDA-Prior 17.9X 12.1X 12.6X Dividend Yield-Curr 3.9% 4.4% 5.1% 5.5% Dividend Yield-Prior 4.4% 4.6% 4.6% Company Description Algonquin Power & Utilities Corp. operates a ~1,100 net MW portfolio of renewable and thermal energy facilities in the U.S. and Canada. It also owns U.S. regulated water and energy utilities. All figures in Canadian dollars, unless otherwise stated CIBC World Markets Corp., the U.S. broker-dealer, and CIBC World Markets Inc., the Canadian broker-dealer (collectively, CIBC World Markets Corp./Inc.) do and seek to do business with companies covered in its research reports. As a result, investors should be aware that CIBC World Markets Corp./Inc. may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For required regulatory disclosures please refer to "Important Disclosures" beginning on page 6. Please see "Price Target Calculations" and "Key Risks to Price Target" information on page(s) 3 to 4. Find CIBC research on Bloomberg, Reuters, firstcall.com CIBC World Markets Inc., P.O. Box 500, 161 Bay Street, Brookfield Place, Toronto, Canada M5J 2S8 (416) and ResearchCentral.cibcwm.com CIBC World Markets Corp., 425 Lexington Avenue, New York, NY (212)

2 $MM $ MM Q4/16 Results Support Our Thesis - March 05, 2017 Algonquin Power & Utilities Corp. AQN TSX Price as at March 3, 2017: Month Price Target: Outperformer Robert Catellier (416) Robert.Catellier@cibc.ca $12.40 Ollie Primak (416) Ollie.Primak@cibc.ca $14.00 Ian Woodward (416) Ian.Woodward@cibc.ca All figures in Canadian millions, except per share data. Market Data Share Price Net Debt 4,162 Shares Outstanding Preferred Shares 214 Market Capitalization 3,399 Non-Controlling Interests 592 Enterprise Value 8,366 Company Profile Algonquin Power & Utilities Corp. operates ~1,200 net MW portfolio of 36 renewable and thermal energy generation facilities in the U.S. and Canada with an average PPA life of 15 years. It also owns a regulated utility business which provides water, electricity and natural gas services to ~782,000 customers 13 states across the U.S. Valuations E 2018E P/E Current 27.0x 21.8x 15.3x 17.7x P/E Target 30.4x 24.6x 17.3x 20.0x P/E Sector Average 29.5x 29.4x 33.5x 23.7x EV / EBITDA Current 13.7x 17.5x 12.0x 12.6x EV / EBITDA Target 14.8x 18.5x 12.7x 13.3x EV / EBITDA Sector Average 14.4x 13.6x 11.3x 10.0x Dividend Yield Current 3.9% 4.4% 5.1% 5.5% Dividend Yield Target 3.5% 3.9% 4.5% 4.8% Dividend Yield Sector Average 4.8% 4.6% 5.0% 4.6% Operating Metrics Production (GWh Sold) Other Data E 2018E Renewable Generation 2,717 2,840 2,869 3,253 Dividend per Share $0.49 $0.55 $0.63 $0.68 Thermal Generation Payout ratio - as a % of FFO 43.0% 52.4% 33.0% 39.6% Book Value per Share $6.73 $6.24 $7.55 $8.03 Distribution Assets (US$) 1,171 1,312 1,381 1,741 Price/Book Value 1.8x 1.8x 1.9x 1.6x Distribution Connections 480, , , ,000 Cash per Share $0.45 $0.40 $0.53 $0.53 Total Debt/Capitalization 39.1% 62.9% 59.1% 58.3% Segmented Operating Profit Net Debt/EBITDA (x) 3.6x 8.7x 5.8x 6.1x 1,100 Income Statement E 2018E Generation Operating Profit Distribution Operating Profit Other Income & Expenses Administrative Expenses (41) (46) (60) (61) Adjusted EBITDA Total EBIT Interest Expense (66) (132) (178) (215) Other Expenses (30) (36) 0 0 Income Tax Expense (44) (37) (72) (64) Earnings/(Loss) to Common from Con't Ops Non-Controlling Interests Preferred Share Dividend (10) (10) (10) (10) Adjustments Adjusted Net Earnings Adjusted Funds from Operations Adjusted EPS $0.46 $0.57 $0.81 $0.70 Adjusted FFO/Share $1.13 $1.04 $1.90 $1.71 Weighted Average Shares Outstanding Basic Investment Thesis Algonquin has undergone a period of significant growth over the last few years, mainly fueled by acquisitions in its renewable power and utilities divisions. Going forward, we see strong growth continuing, albeit at a more sustainable pace. The additions of Odell Wind and Park Water enhance an already impressive slate of projects coming into service, all of which are cost-of-service (utilities) or long-term contracted (renewable generation) assets. The acquisition of Empire District adds additional scale, diversity and a platform for further growth. Algonquin has also safe harboured PTC eligibility on up to $1.5 billion of pending renewable projects in the U.S. 1, Major Sources and Uses of Cash 6, E 2018E Generation Operating Profit Distribution Operating Profit Cash Flow E 2018E Net Income Depreciation and Amortization Operating Cash Flow Capital Expenditures/Acquisitions (208) (838) (4,575) (1,354) Dividends/Distributions (66) (110) (255) (286) Net Increase in Long Term Liabilities 53 2,331 1, Issuance of Common Shares ,000 2,000 Balance Sheet E 2018E Cash and Cash Equivalents Property, Plant and Equipment 3,874 4,890 9,179 10,216 Total Assets 4,989 8,249 10,562 11,594 Total Debt 1,487 4,272 5,332 5,832 Preferred Shares Non-Controlling Interests Shareholders' Equity 1,721 1,710 2,890 3,359 Source: Company reports, Factset, and CIBC World Markets Inc E 2018E Cash dividends Total capital expenditures Acquisitions of operating entities Adjusted funds from operations AFFO + Equity/Debt Issuance 2

3 Changes To Our Model We have revised our financial model to reflect Q4/16 actual results. Our model has also been revised to reflect revised project timelines and expenses, the recent US$750 million private placement, and CalPeco rate case. Exhibit 1. Financial Forecast ($mlns., except per share) ($ mlns., except per share) 2016E E 2017E 2018E 2018E Previous Actual Previous Current Previous Current Segmented EBITDA Generation Operating Profit Distribution Operating Profit Other Income & Expenses Administrative Expenses (46) (46) (60) (60) (61) (61) Adjusted EBITDA Total EBIT Interest Expense (128) (132) (183) (178) (224) (215) Other Expenses (27) (36) Income Tax Expense (39) (37) (71) (72) (62) (64) Earnings/(Loss) from Continuing Operations Non-Controlling Interests Preferred Share Dividend (10) (10) (10) (10) (10) (10) Net Earnings/(Loss) to Common Shareholders Adjustments Adjusted Net Earnings/(Loss) to Common Shareholders Basic EPS Adjusted EPS Adjusted Funds From Operations Adjusted FFO/share Dividend per share Payout Ratio - As a % of Adjusted Earnings 106% 96% 80% 78% 101% 97% Payout Ratio - As a % of FFO 42% 52% 34% 33% 41% 40% Weighted Average Shares Outstanding - Basic Source: Company reports and CIBC World Markets Inc. Price Target Calculation We maintain our DCF-based $14 price target, which reflects Algonquin s improving organic growth opportunity outlook across both regulated and nonregulated operations and post-acquisition of Empire District. Exhibit 2. DCF Assumptions DCF Assumptions Risk-Free Rate 3.00% Cost of Equity 9.12% Market Risk Premium 9.00% Equity Weighting 45.0% Beta 0.68 Cost of Debt 5.0% Terminal Growth Rate 0.98% Debt Weighting 53.0% WACC 6.19% Cost of Prefs 4.86% DCF Valuation: $13.98 Pref Weighting 2.0% Source: Company reports and CIBC World Markets Inc. 3

4 Exhibit 3. Valuation Summary Methodology Price Target Metric DCF $13.98 Terminal growth rate of 1% DDM $ year 10% dividend CAGR at a 7% discount rate EV/EBITDA $13.44 Multiple of 11.0x 2018 EBITDA FCF Yield $14.32 Required yield of 12.5% on 2018 AFFO (excl. Utility depreciation) Average $13.98 Source: Company reports and CIBC World Markets Inc. Key Risks To Price Target Resource Conditions: Production from renewable power facilities can fluctuate with near-term climatic conditions, and poor performance against long-term averages can negatively affect short-term financial results. Merchant Risk: Algonquin s total uncontracted production/merchant power sales equates to roughly 5% of APCo revenues. The profitability of this generation depends on the prevailing prices of fuel inputs, wind conditions, and regional power prices. Adverse changes in these factors could reduce profitability. Permitting And Approvals: Delays or non-approvals of acquisitions or permits related to development of its power generation assets could impact Algonquin s growth outlook. Construction Risk: Cost and/or schedule overruns on a power generation facility could adversely affect Algonquin s profitability on that project. Rate Case Implementations For Its Utility Business: Approvals of utility rate cases often face time delays and, given the challenging financial conditions for municipal utilities in the U.S., rate increases are facing increased scrutiny. Delayed approvals or non-approval of future revenue increases for Liberty Utilities could negatively affect our valuation. Foreign Exchange Risk: Algonquin conducts significant business in the United States, and while the company has an active hedging program in place, fluctuations in the strength of the U.S. dollar relative to the Canadian dollar can negatively affect financial performance. Tax/Subsidy-related Risk: Algonquin benefits from advantageous tax treatment and/or subsidies in both the U.S. and Canada for renewable power generation assets. The expiry of these benefits could dampen investment opportunities in this sector. 4

5 Our EPS estimates are shown below: 1 Qtr. 2 Qtr. 3 Qtr. 4 Qtr. Yearly 2015 Current $0.17A $0.08A $0.06A $0.15A $0.46A 2016 Prior $0.21A $0.11A $0.09A $0.12E $0.52E 2016 Current $0.21A $0.11A $0.09A $0.18A $0.57A 2017 Prior $0.29E $0.17E $0.22E $0.10E $0.78E 2017 Current $0.30E $0.17E $0.23E $0.11E $0.81E 2018 Prior $0.67E 2018 Current $0.70E Our EBITDA ($mln) estimates are shown below: 1 Qtr. 2 Qtr. 3 Qtr. 4 Qtr. Yearly 2015 Current $114.5A $81.1A $70.2A $109.6A $375.4A 2016 Prior $147.9A $99.2A $91.4A $129.2E $467.7E 2016 Current $147.9A $99.2A $91.4A $138.3A $476.9A 2017 Prior $263.9E $190.0E $217.1E $219.8E $890.8E 2017 Current $266.5E $190.7E $218.0E $219.7E $894.9E 2018 Prior $924.4E 2018 Current $924.9E Our DPS estimates are shown below: 1 Qtr. 2 Qtr. 3 Qtr. 4 Qtr. Yearly 2015 Current $0.11A $0.12A $0.13A $0.13A $0.49A 2016 Prior $0.13A $0.14A $0.14A $0.14E $0.55E 2016 Current $0.13A $0.14A $0.14A $0.14A $0.55A 2017 Prior $0.15E $0.16E $0.16E $0.16E $0.63E 2017 Current $0.15E $0.16E $0.16E $0.16E $0.63E 2018 Prior $0.68E 2018 Current $0.68E 5

6 IMPORTANT DISCLOSURES: Analyst Certification: Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst's personal views about the company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report. Analysts employed outside the U.S. are not registered as research analysts with FINRA. These analysts may not be associated persons of CIBC World Markets Corp. and therefore may not be subject to FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Potential Conflicts of Interest: Equity research analysts employed by CIBC World Markets Corp./Inc. are compensated from revenues generated by various CIBC World Markets Corp./Inc. businesses, including the CIBC World Markets Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. CIBC World Markets Corp./Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets Corp./Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers. In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, CIBC World Markets Corp./Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest. Important Disclosure Footnotes for Algonquin Power & Utilities Corp. (AQN) Algonquin Power & Utilities Corp. is a client for which a CIBC World Markets company has performed investment banking services in the past 12 months. CIBC World Markets Inc. has managed or co-managed a public offering of securities for Algonquin Power & Utilities Corp. in the past 12 months. CIBC World Markets Inc. has received compensation for investment banking services from Algonquin Power & Utilities Corp. in the past 12 months. CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from Algonquin Power & Utilities Corp. in the next 3 months. 6

7 CIBC World Markets Corp./Inc. Stock Rating System Abbreviation Rating Description Stock Ratings OP Outperformer Stock is expected to outperform similar stocks in the coverage universe during the next months. NT UN Neutral Underperformer Stock is expected to perform in line with similar stocks in the coverage universe during the next months. Stock is expected to underperform with similar stocks in the coverage universe during the next months. NR Not Rated CIBC World Markets does not maintain an investment recommendation on the stock. R Restricted CIBC World Markets is restricted (due to potential conflict of interest) from rating the stock. Stock Ratings Prior To December 09, 2016 SO Sector Outperformer Stock is expected to outperform the sector during the next months. SP Sector Performer Stock is expected to perform in line with the sector during the next months. SU Sector Underperformer Stock is expected to underperform the sector during the next months. NR Not Rated CIBC World Markets does not maintain an investment recommendation on the stock. R Restricted CIBC World Markets is restricted (due to potential conflict of interest) from rating the stock. Sector Ratings (note: Broader market averages refer to S&P 500 in the U.S. and S&P/TSX Composite in Canada.) O Overweight Sector is expected to outperform the broader market averages. M Marketweight Sector is expected to equal the performance of the broader market averages. U Underweight Sector is expected to underperform the broader market averages. NA None Sector rating is not applicable. "Speculative" indicates that an investment in this security involves a high amount of risk due to volatility and/or liquidity issues. Ratings Distribution*: CIBC World Markets Corp./Inc. Coverage Universe (as of 05 Mar 2017) Count Percent Inv. Banking Relationships Count Percent Outperformer (Buy) % Outperformer (Buy) % Neutral (Hold/Neutral) % Neutral (Hold/Neutral) % Underperformer (Sell) % Underperformer (Sell) % Restricted % Restricted % Ratings Distribution: Utilities Coverage Universe (as of 05 Mar 2017) Count Percent Inv. Banking Relationships Count Percent Outperformer (Buy) % Outperformer (Buy) % Neutral (Hold/Neutral) % Neutral (Hold/Neutral) % Underperformer (Sell) 0 0.0% Underperformer (Sell) 0 0.0% Restricted % Restricted % *Although the investment recommendations within the three-tiered,relative stock rating system utilized by CIBC World Markets Corp./Inc.do not correlate to buy, hold and sell recommendations, for the purposes of complying with FINRA rules, CIBC World Markets Corp./Inc. has assigned buy ratings to securities rated Outperformer, hold ratings to securities rated Neutral, and sell ratings to securities rated Underperformer. The distributions above reflect the combined historical ratings of CIBC World Markets Corp. and CIBC World Markets Inc. Important disclosures required by applicable rules can be obtained by visiting CIBC World Markets on the web at Important disclosures for each issuer can be found using the "Coverage" tab on the top left of the Research Central home page. Access to the system for rating investment opportunities and our dissemination policy can be found at the bottom of each page on the Research Central website. These important disclosures can also be obtained by writing to CIBC World Markets Corp., 425 Lexington Avenue, New York, NY ( ) or CIBC World Markets Inc.,161 Bay Street, 4th Floor, Toronto, ON M5H 2S8, Attention: Research Disclosures Request. 7

8 CIBC World Markets Corp./Inc. Price Chart HISTORICAL PERFORMANCE OF CIBC WORLD MARKETS CORP./INC. RECOMMENDATIONS FOR ALGONQUIN POWER & UTILITIES CORP. (AQN) Date Change Type Closing Price Rating Price Target Coverage 03/13/ SP 8.25 Paul Lechem 08/21/ SP 9.00 Paul Lechem 09/05/ R - Paul Lechem 11/19/ SP 9.00 Paul Lechem 11/20/ SO Paul Lechem 12/02/ R - Paul Lechem 12/11/ SO Paul Lechem 03/16/ SO Paul Lechem 05/08/ SO Paul Lechem 10/19/ R - Paul Lechem 10/20/ SO Paul Lechem 11/23/ R - Paul Lechem 12/02/ SO Paul Lechem 12/03/ SO Paul Lechem 01/31/ SO Paul Lechem 02/09/ R - Paul Lechem 03/01/ SO Paul Lechem 03/01/ SO Paul Lechem 09/02/ SO Robert Catellier, CFA 11/30/ OP Robert Catellier, CFA The chart above reflects the combined historical recommendations of CIBC World Markets Corp. and CIBC World Markets Inc. 8

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