Unaudited Interim Consolidated Financial Statements of
Algonquin Power & Utilities Corp.
For the three and six months ended June 30, 2023 and 2022

Algonquin Power & Utilities Corp.
Unaudited Interim Consolidated Statements of Operations

| Three months ended |  | Six months ended
(thousands of U.S. dollars, except per share amounts) | June 30 |  | June 30
| 2023 |  | 2022 |  | 2023 |  | 2022
Revenue |  |  |  |  |  |  |
Regulated electricity distribution | $ | 326,833 |  |  | $ | 295,558 |  |  | $ | 642,435 |  |  | $ | 576,252 |
Regulated natural gas distribution | 109,539 |  |  | 121,911 |  |  | 380,677 |  |  | 385,345 |
Regulated water reclamation and distribution | 95,861 |  |  | 89,626 |  |  | 183,282 |  |  | 168,257 |
Non-regulated energy sales | 71,694 |  |  | 92,141 |  |  | 150,410 |  |  | 177,901 |
Other revenue | 23,944 |  |  | 20,149 |  |  | 49,694 |  |  | 44,867 |
| 627,871 |  |  | 619,385 |  |  | 1,406,498 |  |  | 1,352,622 |
Expenses |  |  |  |  |  |  |
Operating expenses | 241,482 |  |  | 206,330 |  |  | 461,769 |  |  | 418,332 |
Regulated electricity purchased | 98,337 |  |  | 104,125 |  |  | 223,917 |  |  | 203,308 |
Regulated natural gas purchased | 36,180 |  |  | 51,802 |  |  | 173,881 |  |  | 184,368 |
Regulated water purchased | 3,857 |  |  | 3,329 |  |  | 7,726 |  |  | 6,152 |
Non-regulated energy purchased | 3,782 |  |  | 9,646 |  |  | 11,588 |  |  | 22,585 |
Administrative expenses | 25,692 |  |  | 20,107 |  |  | 43,525 |  |  | 37,559 |
Depreciation and amortization | 118,448 |  |  | 112,547 |  |  | 240,089 |  |  | 232,511 |
Loss on foreign exchange | 6,379 |  |  | 4,464 |  |  | 7,815 |  |  | 4,726 |
| 534,157 |  |  | 512,350 |  |  | 1,170,310 |  |  | 1,109,541 |
Gain on sale of renewable assets | — |  |  | — |  |  | — |  |  | 1,200 |
Operating income | 93,714 |  |  | 107,035 |  |  | 236,188 |  |  | 244,281 |
Interest expense (note 7) | (89,663) |  |  | (64,573) |  |  | (171,581) |  |  | (122,516) |
Loss from long-term investments (note 6) | (277,696) |  |  | (113,380) |  |  | (57,684) |  |  | (124,069) |
Other net losses (note 16) | (40,367) |  |  | (8,652) |  |  | (43,829) |  |  | (13,382) |
Pension and other post-employment non-service costs (note 8) | (5,306) |  |  | (2,258) |  |  | (10,267) |  |  | (4,836) |
Gain (loss) on derivative financial instruments (note 21(b)(iv)) | 1,039 |  |  | (3,313) |  |  | 3,205 |  |  | (2,569) |
Loss before income taxes | (318,279) |  |  | (85,141) |  |  | (43,968) |  |  | (23,091) |
Income tax recovery (note 15) |  |  |  |  |  |  |
Current | (6,300) |  |  | (3,409) |  |  | (12,800) |  |  | (9,713) |
Deferred | 62,258 |  |  | 26,228 |  |  | 44,057 |  |  | 23,080 |
| 55,958 |  |  | 22,819 |  |  | 31,257 |  |  | 13,367 |
Net loss | (262,321) |  |  | (62,322) |  |  | (12,711) |  |  | (9,724) |
Net effect of non-controlling interests (note 14) |  |  |  |  |  |  |
Non-controlling interests | 15,439 |  |  | 32,021 |  |  | 42,018 |  |  | 72,963 |
Non-controlling interests held by related party | (6,349) |  |  | (3,086) |  |  | (12,399) |  |  | (5,661) |
| $ | 9,090 |  |  | $ | 28,935 |  |  | $ | 29,619 |  |  | $ | 67,302 |
Net earnings (loss) attributable to shareholders of Algonquin Power & Utilities Corp. | $ | (253,231) |  |  | $ | (33,387) |  |  | $ | 16,908 |  |  | $ | 57,578 |
Preferred shares, Series A and preferred shares, Series D dividend (note 12) | 2,080 |  |  | 2,220 |  |  | 4,172 |  |  | 4,440 |
Net earnings (loss) attributable to common shareholders of Algonquin Power & Utilities Corp. | $ | (255,311) |  |  | $ | (35,607) |  |  | $ | 12,736 |  |  | $ | 53,138 |
Basic and diluted net earnings (loss) per share (note 17) | $ | (0.37) |  |  | $ | (0.05) |  |  | $ | 0.02 |  |  | $ | 0.08 |

See accompanying notes to unaudited interim consolidated financial statements

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

| Three months ended |  | Six months ended
(thousands of U.S. dollars) | June 30 |  | June 30
| 2023 |  | 2022 |  | 2023 |  | 2022
Net loss | $ | (262,321) |  |  | $ | (62,322) |  |  | $ | (12,711) |  |  | $ | (9,724) |
Other comprehensive income (loss) (“OCI”): |  |  |  |  |  |  |
Foreign currency translation adjustment, net of tax recovery of $3,418 and $3,038 (2022 - tax expense of $1,037 and tax recovery of $2,273), respectively (notes 21(b)(iii) and 21(b)(iv)) | 130 |  |  | (48,440) |  |  | 15,555 |  |  | (40,595) |
Change in fair value of cash flow hedges, net of tax expense of $3,737 and tax recovery of $178 (2022 - tax recovery of $7,596 and $29,894), respectively (note 21(b)(ii)) | 36,421 |  |  | (12,879) |  |  | 54,286 |  |  | (71,765) |
Change in pension and other post-employment benefits, net of tax recovery of $281 and $445 (2022 - tax recovery of $32 and $30), respectively | (823) |  |  | (93) |  |  | (1,303) |  |  | (86) |
OCI, net of tax | 35,728 |  |  | (61,412) |  |  | 68,538 |  |  | (112,446) |
Comprehensive income (loss) | (226,593) |  |  | (123,734) |  |  | 55,827 |  |  | (122,170) |
Comprehensive loss attributable to the non-controlling interests | (8,693) |  |  | (30,375) |  |  | (29,407) |  |  | (68,055) |
Comprehensive income (loss) attributable to shareholders of Algonquin Power & Utilities Corp. | $ | (217,900) |  |  | $ | (93,359) |  |  | $ | 85,234 |  |  | $ | (54,115) |

See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.
Unaudited Interim Consolidated Balance Sheets

(thousands of U.S. dollars) |  |  |
| June 30, |  | December 31,
| 2023 |  | 2022
ASSETS |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 100,258 |  |  | $ | 57,623 |
Trade and other receivables, net (note 4) | 492,844 |  |  | 528,057 |
Fuel and natural gas in storage | 75,693 |  |  | 95,350 |
Supplies and consumables inventory | 152,118 |  |  | 129,571 |
Regulatory assets (note 5) | 136,159 |  |  | 190,393 |
Prepaid expenses | 60,738 |  |  | 58,653 |
Derivative instruments (note 21) | 11,228 |  |  | 12,270 |
Other assets | 19,958 |  |  | 22,564 |
| 1,048,996 |  |  | 1,094,481 |
Property, plant and equipment, net | 12,336,931 |  |  | 11,944,885 |
Intangible assets, net | 97,080 |  |  | 96,683 |
Goodwill | 1,330,987 |  |  | 1,320,579 |
Regulatory assets (note 5) | 1,125,156 |  |  | 1,081,108 |
Long-term investments (note 6) |  |  |
Investments carried at fair value | 1,213,718 |  |  | 1,344,207 |
Other long-term investments | 507,045 |  |  | 462,325 |
Derivative instruments (note 21) | 66,333 |  |  | 71,630 |
Deferred income taxes | 131,622 |  |  | 84,416 |
Other assets | 110,845 |  |  | 127,299 |
| $ | 17,968,713 |  |  | $ | 17,627,613 |

See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.
Unaudited Interim Consolidated Balance Sheets (continued)

(thousands of U.S. dollars) |
| June 30, |  | December 31,
| 2023 |  | 2022
LIABILITIES AND EQUITY |  |  |
Current liabilities: |  |  |
Accounts payable | $ | 194,853 |  |  | $ | 186,080 |
Accrued liabilities | 467,235 |  |  | 555,792 |
Dividends payable (note 12) | 75,223 |  |  | 125,655 |
Regulatory liabilities (note 5) | 74,867 |  |  | 69,865 |
Long-term debt (note 7) | 513,803 |  |  | 423,274 |
Other long-term liabilities (note 9) | 119,495 |  |  | 134,212 |
Derivative instruments (note 21) | 15,687 |  |  | 32,491 |
Other liabilities | 10,317 |  |  | 7,091 |
| 1,471,480 |  |  | 1,534,460 |
Long-term debt (note 7) | 7,569,344 |  |  | 7,088,743 |
Regulatory liabilities (note 5) | 551,708 |  |  | 558,317 |
Deferred income taxes | 580,211 |  |  | 565,639 |
Derivative instruments (note 21) | 86,925 |  |  | 137,830 |
Pension and other post-employment benefits obligation | 124,478 |  |  | 125,579 |
Other long-term liabilities (note 9) | 430,379 |  |  | 461,230 |
| 9,343,045 |  |  | 8,937,338 |
Redeemable non-controlling interests (note 14) |  |  |
Redeemable non-controlling interest, held by related party (note 13(b)) | 307,955 |  |  | 307,856 |
Redeemable non-controlling interests | 10,767 |  |  | 11,520 |
| 318,722 |  |  | 319,376 |
Equity: |  |  |
Preferred shares | 184,299 |  |  | 184,299 |
Common shares (note 10(a)) | 6,224,770 |  |  | 6,183,943 |
Additional paid-in capital | 4,279 |  |  | 9,413 |
Deficit | (1,136,208) |  |  | (997,945) |
Accumulated other comprehensive loss (“AOCI”) (note 11) | (91,737) |  |  | (160,063) |
Total equity attributable to shareholders of Algonquin Power & Utilities Corp. | 5,185,403 |  |  | 5,219,647 |
Non-controlling interests |  |  |
Non-controlling interests - tax equity partnership units | 1,261,067 |  |  | 1,225,608 |
Other non-controlling interests | 337,825 |  |  | 333,362 |
Non-controlling interest, held by related party (note 13(c)) | 51,171 |  |  | 57,822 |
| 1,650,063 |  |  | 1,616,792 |
Total equity | 6,835,466 |  |  | 6,836,439 |
Commitments and contingencies (note 19) |  |  |
Subsequent events (notes 7(b), 9, 13(a)) |  |  |
| $ | 17,968,713 |  |  | $ | 17,627,613 |

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 June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |
| Algonquin Power & Utilities Corp. Shareholders |  |  |  |
| Common shares |  | Preferred shares |  |  |  | Additional paid-in capital |  | Deficit |  | AOCI |  | Non- controlling interests |  | Total
Balance, March 31, 2023 | $ | 6,223,301 |  |  | $ | 184,299 |  |  |  |  | $ | 776 |  |  | $ | (805,515) |  |  | $ | (127,068) |  |  | $ | 1,580,027 |  |  | $ | 7,055,820 |
Net loss | — |  |  | — |  |  |  |  | — |  |  | (253,231) |  |  | — |  |  | (9,090) |  |  | (262,321) |
Effect of redeemable non-controlling interests not included in equity (note 14) | — |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | (6,018) |  |  | (6,018) |
OCI | — |  |  | — |  |  |  |  | — |  |  | — |  |  | 35,331 |  |  | 397 |  |  | 35,728 |
Dividends declared and distributions to non-controlling interests | — |  |  | — |  |  |  |  | — |  |  | (77,449) |  |  | — |  |  | (14,104) |  |  | (91,553) |
Common shares issued upon conversion of convertible debentures | 11 |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 11 |
Contributions received from non-controlling interests, net of cost (note 3(b)) | — |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | 98,851 |  |  | 98,851 |
Common shares issued under employee share purchase plan | 1,405 |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,405 |
Share-based compensation | — |  |  | — |  |  |  |  | 3,602 |  |  | — |  |  | — |  |  | — |  |  | 3,602 |
Common shares issued pursuant to share-based awards | 53 |  |  | — |  |  |  |  | (99) |  |  | (13) |  |  | — |  |  | — |  |  | (59) |
Balance, June 30, 2023 | $ | 6,224,770 |  |  | $ | 184,299 |  |  |  |  | $ | 4,279 |  |  | $ | (1,136,208) |  |  | $ | (91,737) |  |  | $ | 1,650,063 |  |  | $ | 6,835,466 |

See accompanying notes to unaudited interim consolidated financial statements

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

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

See accompanying notes to unaudited interim consolidated financial statements

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

(thousands of U.S. dollars) For the six months ended June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |
| Algonquin Power & Utilities Corp. Shareholders |  |  |  |
| Common shares |  | Preferred shares |  |  |  | Additional paid-in capital |  | Deficit |  | AOCI |  | Non- controlling interests |  | Total
Balance, December 31, 2022 | $ | 6,183,943 |  |  | $ | 184,299 |  |  |  |  | $ | 9,413 |  |  | $ | (997,945) |  |  | $ | (160,063) |  |  | $ | 1,616,792 |  |  | $ | 6,836,439 |
Net earnings (loss) | — |  |  | — |  |  |  |  | — |  |  | 16,908 |  |  | — |  |  | (29,619) |  |  | (12,711) |
Effect of redeemable non-controlling interests not included in equity (note 14) | — |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | (11,737) |  |  | (11,737) |
OCI | — |  |  | — |  |  |  |  | — |  |  | — |  |  | 68,326 |  |  | 212 |  |  | 68,538 |
Dividends declared and distributions to non-controlling interests | — |  |  | — |  |  |  |  | — |  |  | (124,451) |  |  | — |  |  | (33,518) |  |  | (157,969) |
Dividends and issuance of shares under dividend reinvestment plan | 30,482 |  |  | — |  |  |  |  | — |  |  | (30,482) |  |  | — |  |  | — |  |  | — |
Contributions received from non-controlling interests, net of cost (note 3(b)) | — |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | 107,933 |  |  | 107,933 |
Common shares issued upon conversion of convertible debentures | 11 |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 11 |
Common shares issued under employee share purchase plan | 3,113 |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,113 |
Share-based compensation | — |  |  | — |  |  |  |  | 4,695 |  |  | — |  |  | — |  |  | — |  |  | 4,695 |
Common shares issued pursuant to share-based awards | 7,221 |  |  | — |  |  |  |  | (9,829) |  |  | (238) |  |  | — |  |  | — |  |  | (2,846) |
Balance, June 30, 2023 | $ | 6,224,770 |  |  | $ | 184,299 |  |  |  |  | $ | 4,279 |  |  | $ | (1,136,208) |  |  | $ | (91,737) |  |  | $ | 1,650,063 |  |  | $ | 6,835,466 |

See accompanying notes to unaudited interim consolidated financial statements

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

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

See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.
Unaudited Interim Consolidated Statements of Cash Flows

(thousands of U.S. dollars) | Three months ended June 30 |  | Six months ended June 30
| 2023 |  | 2022 |  | 2023 |  | 2022
Cash provided by (used in): |  |  |  |  |  |  |
Operating activities |  |  |  |  |  |  |
Net loss | $ | (262,321) |  |  | $ | (62,322) |  |  | $ | (12,711) |  |  | $ | (9,724) |
Adjustments and items not affecting cash: |  |  |  |  |  |  |
Depreciation and amortization | 118,448 |  |  | 112,547 |  |  | 240,089 |  |  | 232,511 |
Deferred taxes | (62,258) |  |  | (26,228) |  |  | (44,057) |  |  | (23,080) |
Initial value and unrealized gain on derivative financial instruments | (4,882) |  |  | (334) |  |  | (9,851) |  |  | (402) |
Share-based compensation | 3,199 |  |  | 3,860 |  |  | 3,895 |  |  | 3,495 |
Cost of equity funds used for construction purposes | (568) |  |  | (458) |  |  | (1,226) |  |  | (967) |
Change in value of investments carried at fair value | 311,410 |  |  | 143,522 |  |  | 132,026 |  |  | 184,029 |
Pension and post-employment expense in excess of (lower than) contributions | 2,176 |  |  | (823) |  |  | 119 |  |  | (6,436) |
Distributions received from equity investments, net of income | 5,588 |  |  | 1,282 |  |  | 3,554 |  |  | 3,384 |
Other | 38,232 |  |  | 931 |  |  | 36,195 |  |  | 3,536 |
Net change in non-cash operating items (note 20) | 112,380 |  |  | (36,640) |  |  | (53,356) |  |  | (84,788) |
| 261,404 |  |  | 135,337 |  |  | 294,677 |  |  | 301,558 |
Financing activities |  |  |  |  |  |  |
Increase in long-term debt | 224,664 |  |  | 394,008 |  |  | 654,648 |  |  | 2,345,013 |
Repayments of long-term debt | (194,403) |  |  | (220,424) |  |  | (398,179) |  |  | (897,109) |
Net change in commercial paper | (1,187) |  |  | 165,000 |  |  | 91,613 |  |  | (173,700) |
Issuance of common shares, net of costs | 1,405 |  |  | 1,149 |  |  | 3,113 |  |  | 2,455 |
Cash dividends on common shares | (75,493) |  |  | (94,177) |  |  | (171,386) |  |  | (187,558) |
Dividends on preferred shares | (2,080) |  |  | (2,220) |  |  | (4,172) |  |  | (4,440) |
Contributions from non-controlling interests and redeemable non-controlling interests (note 3) | 98,955 |  |  | — |  |  | 98,955 |  |  | — |
Production-based cash contributions from non-controlling interest | — |  |  | 2,478 |  |  | 9,082 |  |  | 6,208 |
Distributions to non-controlling interests, related party (note 14) | (244) |  |  | (8,354) |  |  | (12,300) |  |  | (18,360) |
Distributions to non-controlling interests | (20,746) |  |  | (16,760) |  |  | (33,084) |  |  | (25,109) |
Payments upon settlement of derivatives | — |  |  | — |  |  | — |  |  | (26,254) |
Shares surrendered to fund withholding taxes on exercised share options | — |  |  | (3,494) |  |  | (568) |  |  | (4,120) |
Increase in other long-term liabilities | 6,695 |  |  | 2,069 |  |  | 11,125 |  |  | 7,268 |
Decrease in other long-term liabilities | (255) |  |  | (41,339) |  |  | (20,329) |  |  | (42,573) |
| 37,311 |  |  | 177,936 |  |  | 228,518 |  |  | 981,721 |
Investing activities |  |  |  |  |  |  |
Additions to property, plant and equipment and intangible assets | (245,209) |  |  | (247,538) |  |  | (414,958) |  |  | (575,237) |
Increase in long-term investments | (41,774) |  |  | (49,681) |  |  | (89,379) |  |  | (96,938) |
Acquisitions of operating entities | — |  |  | (86) |  |  | — |  |  | (632,797) |
Increase in other assets | (130) |  |  | (10,340) |  |  | (1,980) |  |  | (12,804) |
Receipt of principal on development loans receivable | — |  |  | 201 |  |  | — |  |  | 323 |
Decrease in long-term investments | 11,749 |  |  | 517 |  |  | 11,749 |  |  | 2,920 |
| (275,364) |  |  | (306,927) |  |  | (494,568) |  |  | (1,314,533) |
Effect of exchange rate differences on cash and restricted cash | 369 |  |  | (2,408) |  |  | 872 |  |  | (1,846) |
Increase (decrease) in cash, cash equivalents and restricted cash | 23,720 |  |  | 3,938 |  |  | 29,499 |  |  | (33,100) |
Cash, cash equivalents and restricted cash, beginning of period | 106,964 |  |  | 124,351 |  |  | 101,185 |  |  | 161,389 |
Cash, cash equivalents and restricted cash, end of period | $ | 130,684 |  |  | $ | 128,289 |  |  | $ | 130,684 |  |  | $ | 128,289 |
Algonquin Power & Utilities Corp. Unaudited Interim Consolidated Statements of Cash Flows (continued)
(thousands of U.S. dollars) | Three months ended June 30 |  | Six months ended June 30
| 2023 |  | 2022 |  | 2023 |  | 2022
Supplemental disclosure of cash flow information: |  |  |  |  |  |  |
Cash paid during the period for interest expense | $ | 75,489 |  |  | $ | 52,268 |  |  | $ | 178,201 |  |  | $ | 113,874 |
Cash paid during the period for income taxes | $ | 2,097 |  |  | $ | 5,147 |  |  | $ | 4,138 |  |  | $ | 6,357 |
Cash received during the period for distributions from equity investments | $ | 28,330 |  |  | $ | 30,762 |  |  | $ | 56,611 |  |  | $ | 61,554 |
Non-cash financing and investing activities: |  |  |  |  |  |  |
Property, plant and equipment acquisitions in accruals | $ | 145,594 |  |  | $ | 127,525 |  |  | $ | 145,594 |  |  | $ | 127,525 |
Issuance of common shares under dividend reinvestment plan and share-based compensation plans | $ | 1,458 |  |  | $ | 25,262 |  |  | $ | 40,816 |  |  | $ | 49,713 |

See accompanying notes to unaudited interim consolidated financial statements

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

Algonquin Power & Utilities Corp. (“AQN” or the “Company”) is an incorporated entity under the Canada Business Corporations Act. AQN's operations are organized across two primary business units consisting of the Regulated Services Group and the Renewable Energy Group. The Regulated Services Group owns and operates a portfolio of regulated electric, water distribution and wastewater collection, and natural gas utility systems and transmission operations in the United States, Canada, Bermuda and Chile; the Renewable Energy Group owns and operates, or has investments in, a diversified portfolio of non-regulated renewable and thermal energy generation assets.
1.Significant accounting policies
(a)Basis of preparation
The accompanying unaudited interim consolidated financial statements and notes have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and follow disclosure required under Regulation S-X provided by the U.S. Securities and Exchange Commission. In the opinion of management, the unaudited interim consolidated financial statements include all adjustments that are of a recurring nature and necessary for a fair presentation of the results of interim operations.
The significant accounting policies applied to these unaudited interim consolidated financial statements of AQN are consistent with those disclosed in the consolidated financial statements of AQN as of and for the year ended December 31, 2022.
(b)Seasonality
AQN's operating results are subject to seasonal fluctuations that could materially impact quarter-to-quarter operating results and, thus, one quarter's operating results are not necessarily indicative of a subsequent quarter's operating results. Where decoupling mechanisms exist, total volumetric revenue is prescribed by the applicable regulatory authority and is not affected by usage. AQN’s electrical distribution utilities can experience higher or lower demand in the summer or winter depending on the specific regional weather and industry characteristics. AQN’s water and wastewater utility assets’ revenues fluctuate depending on the demand for water, which is normally higher during drier and hotter months of the summer. During the winter period, natural gas distribution utilities generally experience higher demand than during the summer period. AQN’s hydroelectric energy assets are primarily “run-of-river” and, as such, fluctuate with the natural water flows. During the winter and summer periods, flows are generally slower, while during the spring and fall periods flows are heavier. For AQN's wind energy assets, wind resources are typically stronger in spring, fall and winter, and weaker in summer. AQN's solar energy assets generally experience greater insolation in summer, weaker in winter.
(c)Foreign currency translation
AQN’s reporting currency is the U.S. dollar. Within these unaudited interim consolidated financial statements, the Company denotes any amounts denominated in Canadian dollars with “C$”, in Chilean pesos with "CLP" and in Chilean Unidad de Fomento with "CLF" immediately prior to the stated amount.
2. Recently issued accounting pronouncements
(a)Recently adopted accounting pronouncements
The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, which requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. See note 21(c) for details.
(b)Recently issued accounting guidance not yet adopted
The FASB issued ASU 2023-02, Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method — a consensus of the Emerging Issues Task Force, which permits a reporting entity, if certain conditions are met, to elect to account for its tax equity investments by using the proportional amortization method regardless of the program from which it receives income tax credits. The amendments in this update are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the applicability and potential impact of the new guidance.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

3.Business acquisition
(a) Kentucky Power Company and AEP Kentucky Transmission Company, Inc.
On October 26, 2021, Liberty Utilities Co., an indirect subsidiary of AQN, entered into an agreement (the “Kentucky Acquisition Agreement”) with American Electric Power Company, Inc. (“AEP”) and AEP Transmission Company, LLC to acquire Kentucky Power Company and AEP Kentucky Transmission Company, Inc. (the “Kentucky Power Transaction”). On April 17, 2023, Liberty Utilities Co. mutually agreed with AEP and AEP Transmission Company, LLC to terminate the Kentucky Acquisition Agreement. The Company recognized other net losses of $43,808 for the three months ended June 30, 2023 and $46,527 for the six months ended June 30, 2023 related to a write-off of costs incurred in preparation for the Kentucky Power Transaction and the termination of the Kentucky Acquisition Agreement. See note 16 for details.
(b) Acquisition of Deerfield II Wind Facility
On June 15, 2023, Algonquin Power Fund (America) Inc., a wholly owned subsidiary of the Company, acquired the remaining 50% ownership in Deerfield II wind farm for consideration of $23,142. The transaction has been accounted for as an asset acquisition. Subsequent to acquisition, the tax equity investors provided additional funding of $98,955, and a third-party construction loan of $158,550 was repaid.
The following table summarizes the allocation of the aggregate purchase price to the assets acquired and liabilities assumed at the acquisition dates.

| Deerfield II
Working capital | $ | (10,709) |
Property, plant and equipment | 194,419 |
Long-term debt | (157,935) |
Asset retirement obligation | (1,030) |
Deferred tax liability | (1,603) |
Total net assets acquired | 23,142 |
Cash and cash equivalents | 1,662 |
Net assets acquired, net of cash and cash equivalents | $ | 21,480 |

4.Accounts receivable
Accounts receivable as of June 30, 2023 include unbilled revenue of $89,745 (December 31, 2022 - $149,015) from the Company’s regulated utilities. Accounts receivable as of June 30, 2023 are presented net of allowance for doubtful accounts of $28,646 (December 31, 2022 - $24,857).

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

5.Regulatory matters
The operating companies within the Regulated Services Group are subject to regulation by the respective jurisdictions in which they operate. The respective Regulators have jurisdiction with respect to rate, service, accounting policies, issuance of securities, acquisitions and other matters. Except for Suralis (formerly called ESSAL), these utilities operate under cost-of-service regulation as administered by these authorities. The Company’s regulated utility operating companies are accounted for under the principles of ASC 980, Regulated Operations. Under ASC 980, regulatory assets and liabilities that would not be recorded under U.S. GAAP for non-regulated entities are recorded to the extent that they represent incurred charges or credits that are probable of being recovered from or refunded to customers through the rate setting process.
At any given time, the Company can have several regulatory proceedings underway. The financial effects of these proceedings are reflected in the unaudited interim consolidated financial statements based on regulatory approval obtained to the extent that there is a financial impact during the applicable reporting period. The following regulatory proceedings were recently completed:

Utility | State or country | Regulatory proceeding type | Details
CalPeco Electric System | California | General rate review | On April 27, 2023, the California Public Utilities Commission (“CPUC”) issued a final order approving a revenue increase of $26,979. New rates became effective in June 2023 retroactive to January 2022. The retroactive impact of this final order was recorded in the second quarter of 2023.
St. Lawrence Gas | New York | General rate review | On June 22, 2023, the New York State Department of Public Services issued an Order authorizing a revenue increase of $5,249 to be implemented over three years. New rates became effective July 1, 2023.
Empire Electric | Missouri | Securitization | In February 2021, the Company's operations were impacted by extreme winter storm conditions experienced in Texas and parts of the central U.S. (“the Midwest Extreme Weather Event”). On January 19, 2022, Empire Electric filed a petition for securitization of the costs associated with the impact of the Midwest Extreme Weather Event. On March 21, 2022, Empire Electric filed a petition for securitization of the costs associated with the retirement of the Asbury generating plant. On August 18, 2022, and September 22, 2022, the Missouri Public Service Commission (“the MPSC”) issued and amended, respectively, a Report and Order authorizing Empire Electric to securitize approximately $290,383 in qualified extraordinary costs (Midwest Extreme Weather Event), energy transition costs (Asbury) and upfront financing costs associated with the proposed securitization. Empire Electric filed an appeal of the MPSC order on November 10, 2022. On August 1, 2023 the court affirmed the amount eligible for securitization of $290,383 as compared to the Company's original aggregate request of $362,420. The Company has until August 16, 2023 to move for rehearing at the Court of Appeals, and/or file a request for transfer to the Missouri Supreme Court. If the Company determines to proceed with securitization without further appeal, the Company may incur a one-time net loss of approximately $45,000.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

5.Regulatory matters (continued)
Regulatory assets and liabilities consist of the following:

| June 30, |  | December 31,
| 2023 |  | 2022
Regulatory assets |  |  |
Fuel and commodity cost adjustments | 321,806 |  |  | 388,294 |
Rate adjustment mechanism | 185,395 |  |  | 136,198 |
Retired generating plant | 176,650 |  |  | 174,609 |
Deferred capitalized costs | 98,438 |  |  | 90,121 |
Income taxes | 98,173 |  |  | 97,414 |
Pension and post-employment benefits | 79,925 |  |  | 80,736 |
Environmental remediation | 68,376 |  |  | 70,529 |
Wildfire mitigation and vegetation management | 51,116 |  |  | 66,156 |
Clean energy and other customer programs | 31,772 |  |  | 28,145 |
Asset retirement obligation | 26,786 |  |  | 27,172 |
Debt premium | 22,056 |  |  | 24,888 |
Cost of removal | 11,084 |  |  | 11,084 |
Rate review costs | 8,621 |  |  | 9,481 |
Long-term maintenance contract | 5,917 |  |  | 6,504 |
Other | 75,200 |  |  | 60,170 |
Total regulatory assets | $ | 1,261,315 |  |  | $ | 1,271,501 |
Less: current regulatory assets | (136,159) |  |  | (190,393) |
Non-current regulatory assets | $ | 1,125,156 |  |  | $ | 1,081,108 |
Regulatory liabilities |  |  |
Income taxes | $ | 302,770 |  |  | $ | 312,671 |
Cost of removal | 191,541 |  |  | 191,173 |
Pension and post-employment benefits | 75,333 |  |  | 68,085 |
Fuel and commodity cost adjustments | 24,376 |  |  | 25,620 |
Clean energy and other customer programs | 12,710 |  |  | 11,572 |
Rate adjustment mechanism | 1,651 |  |  | 343 |
Other | 18,194 |  |  | 18,718 |
Total regulatory liabilities | $ | 626,575 |  |  | $ | 628,182 |
Less: current regulatory liabilities | (74,867) |  |  | (69,865) |
Non-current regulatory liabilities | $ | 551,708 |  |  | $ | 558,317 |

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

6.Long-term investments
Long-term investments consist of the following:

| June 30, |  | December 31,
| 2023 |  | 2022
Long-term investments carried at fair value |  |  |
Atlantica | $ | 1,147,691 |  |  | $ | 1,268,140 |
Atlantica Yield Energy Solutions Canada Inc. | 64,228 |  |  | 74,083 |
Other | 1,799 |  |  | 1,984 |
| $ | 1,213,718 |  |  | $ | 1,344,207 |
Other long-term investments |  |  |
Equity-method investees (a) | $ | 388,516 |  |  | $ | 381,802 |
Development loans receivable from equity-method investees (a) | 91,044 |  |  | 52,923 |
Other | 27,485 |  |  | 27,600 |
| $ | 507,045 |  |  | $ | 462,325 |

Income (loss) from long-term investments for the three and six months ended June 30 is as follows:

| Three months ended June 30 |  | Six months ended June 30
| 2023 |  | 2022 |  | 2023 |  | 2022
Fair value gain (loss) on investments carried at fair value |  |  |  |  |  |
Atlantica | $ | (299,653) |  |  | $ | (137,586) |  |  | $ | (120,449) |  |  | $ | (171,370) |
Atlantica Yield Energy Solutions Canada Inc. | (11,763) |  |  | $ | (5,815) |  |  | (11,567) |  |  | (12,395) |
Other | 6 |  |  | $ | (121) |  |  | (10) |  |  | (264) |
| $ | (311,410) |  |  | $ | (143,522) |  |  | $ | (132,026) |  |  | $ | (184,029) |
Dividend and interest income from investments carried at fair value |  |  |  |  |  |
Atlantica | $ | 21,788 |  |  | $ | 21,543 |  |  | $ | 43,577 |  |  | $ | 43,087 |
Atlantica Yield Energy Solutions Canada Inc. | 4,821 |  |  | 5,397 |  |  | 10,678 |  |  | 12,691 |
Other | 7 |  |  | 12 |  |  | 17 |  |  | 10 |
| $ | 26,616 |  |  | $ | 26,952 |  |  | $ | 54,272 |  |  | $ | 55,788 |
Other long-term investments |  |  |  |  |  |  |
Equity method loss | (2,434) |  |  | (2,918) |  |  | (153) |  |  | (7,449) |
Interest and other income | 9,532 |  |  | 6,108 |  |  | 20,223 |  |  | 11,621 |
| $ | 7,098 |  |  | $ | 3,190 |  |  | $ | 20,070 |  |  | $ | 4,172 |
Loss from long-term investments | $ | (277,696) |  |  | $ | (113,380) |  |  | $ | (57,684) |  |  | $ | (124,069) |

(a)Equity-method investees and development loans receivable from equity investees
The Renewable Energy Group has non-controlling interests in operating renewable energy facilities and projects under construction. The Regulated Services Group has non-controlling interest in a power transmission line project under construction and other non-regulated operating entities owned by its utilities. The Liberty Development JV Inc. platform for non-regulated renewable energy, water and other sectors is reported under Corporate. In total, the Company has non-controlling interests in various corporations, partnerships and joint ventures with a total carrying value of $388,516 (December 31, 2022 - $381,802), including investments in variable interest entities ("VIEs") of $121,176 (December 31, 2022 - $122,752).

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

6.Long-term investments (continued)
(a)Equity-method investees and development loans receivable from equity investees (continued)
During t he six months ended June 30, 2023, t he Company made capital contributi ons of $10,390 to the Texas Coastal Wind Facilities (Stella, Cranell, East Raymond and West Raymond) and $9,823 to p rojects under construction.
Summarized combined information for AQN's investments in partnerships and joint ventures is as follows:

| June 30, |  | December 31,
| 2023 |  | 2022
Total assets | $ | 2,749,895 |  |  | $ | 2,740,132 |
Total liabilities | 1,522,656 |  |  | 1,507,079 |
Net assets | $ | 1,227,239 |  |  | $ | 1,233,053 |
AQN's ownership interest in the entities | 331,600 |  |  | 332,663 |
Difference between investment carrying amount and underlying equity in net assets(a) | 56,916 |  |  | 49,139 |
AQN's investment carrying amount for the entities | $ | 388,516 |  |  | $ | 381,802 |

(a) The difference between the investment carrying amount and the underlying equity in net assets relates primarily to development fees, interest capitalized while the projects are under construction, the fair value of guarantees provided by the Company in regards to the investments and transaction costs.
Summarized combined information for AQN's equity method investees (presented at 100%) is as follows:

| Six months ended June 30
| 2023 |  | 2022
Revenue | $ | 49,467 |  |  | $ | 20,455 |
Net income (loss) | $ | 1,836 |  |  | $ | (30,246) |
Other comprehensive loss (a) | $ | (2,807) |  |  | $ | (125,811) |
Net loss attributable to AQN | $ | (153) |  |  | $ | (7,449) |
Other comprehensive loss attributable to AQN (a) | $ | (2,076) |  |  | $ | (67,352) |

(a) Other comprehensive loss represents the Company’s proportion of the change in fair value, recorded in OCI at the investee level, on energy derivative financial instruments designated as a cash flow hedge.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

6.Long-term investments (continued)
(a)Equity-method investees and development loans receivable from equity investees (continued)
Except for Liberty Development Energy Solutions B.V. (“Liberty Development Energy Solutions”), the development projects are considered VIEs due to the level of equity at risk and the disproportionate voting and economic interests of the shareholders. The Company has committed loan and credit support facilities with some of its equity investees. During construction, the Company has agreed to provide cash advances and credit support for the continued development and construction of the equity investees' projects. As of June 30, 2023, t he Company had issued letters of credit and guarantees of performance obligations under: a security of performance for a development opportunity; wind turbine and solar panel supply agreements; interconnection agreements; engineering, procurement and construction agreements; energy purchase agreements; and construction loan agreements. The fair value of the support provided to all equity-investees a s of June 30, 2023 amount s to $9,129 (December 31, 2022 - $8,824).
Summarized combined information for AQN's VIEs is as follows:

| June 30, |  | December 31,
| 2023 |  | 2022
AQN's maximum exposure in regards to VIEs |  |  |
Carrying amount | $ | 121,176 |  |  | $ | 122,752 |
Development loans receivable | 91,044 |  |  | 52,923 |
Performance guarantees and other commitments on behalf of VIEs | 674,874 |  |  | 658,224 |
| $ | 887,094 |  |  | $ | 833,899 |

The commi tments are presented on a gross basis assuming no recoverable value in the assets of the VIEs. In addition, as of June 30, 2023, the Company had issued $798,717 in letters of credit and guarantees of performance obligations under energy purchase agreements and decommissioning obligations on behalf of operating equity-method investees that are not considered VIEs.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

7.Long-term debt
Long-term debt consists of the following:

Borrowing type |  |  |  |  |  |  |  |  |  | Weighted average coupon |  | Maturity |  | Par value |  | June 30, |  | December 31,
|  |  |  |  |  |  |  |  |  |  | 2023 |  | 2022
Senior unsecured revolving credit facilities (a) |  |  |  |  |  |  |  |  |  | — |  |  | 2024-2028 |  | N/A |  | $ | 801,929 |  |  | $ | 351,786 |
Senior unsecured bank credit facilities and delayed draw term facility |  |  |  |  |  |  |  |  |  | — |  |  | 2023-2031 |  | N/A |  | 788,906 |  |  | 773,643 |
Commercial paper |  |  |  |  |  |  |  |  |  | — |  |  | 2024 |  | N/A |  | 498,613 |  |  | 407,000 |
U.S. dollar borrowings |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Senior unsecured notes (Green Equity Units) |  |  |  |  |  |  |  |  |  | 1.18 | % |  | 2026 |  | $ | 1,150,000 |  |  | 1,143,856 |  |  | 1,142,814 |
Senior unsecured notes (b) |  |  |  |  |  |  |  |  |  | 3.38 | % |  | 2023-2047 |  | $ | 1,490,000 |  |  | 1,481,682 |  |  | 1,496,101 |
Senior unsecured utility notes |  |  |  |  |  |  |  |  |  | 6.34 | % |  | 2023-2035 |  | $ | 142,000 |  |  | 153,435 |  |  | 154,271 |
Senior secured utility bonds |  |  |  |  |  |  |  |  |  | 4.71 | % |  | 2026-2044 |  | $ | 556,203 |  |  | 552,479 |  |  | 554,822 |
Canadian dollar borrowings |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Senior unsecured notes |  |  |  |  |  |  |  |  |  | 3.68 | % |  | 2027-2050 |  | C$ | 1,200,000 |  |  | 903,360 |  |  | 882,899 |
Senior secured project notes |  |  |  |  |  |  |  |  |  | 10.21 | % |  | 2027 |  | C$ | 18,512 |  |  | 13,982 |  |  | 15,024 |
Chilean Unidad de Fomento borrowings |  |  |  |  |  |  |  |
Senior unsecured utility bonds |  |  |  |  |  |  |  |  |  | 3.98 | % |  | 2028-2040 |  | CLF | 1,579 |  |  | 81,532 |  |  | 77,206 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 6,419,774 |  |  | $ | 5,855,566 |
Subordinated borrowings |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Subordinated unsecured notes |  |  |  |  |  |  |  | 5.25 | % |  | 2082 |  | C$ | 400,000 |  |  | 298,033 |  |  | $ | 291,238 |
Subordinated unsecured notes |  |  |  |  |  |  |  | 5.56 | % |  | 2078-2082 |  | $ | 1,387,500 |  |  | 1,365,340 |  |  | 1,365,213 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 1,663,373 |  |  | $ | 1,656,451 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 8,083,147 |  |  | $ | 7,512,017 |
Less: current portion |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (513,803) |  |  | (423,274) |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 7,569,344 |  |  | $ | 7,088,743 |

Short-term obl igations of $760,386 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.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

7.Long-term debt (continued)
The following table sets out the bank credit facilities available to AQN and its operating groups:

|  |  |  |  |  |  | June 30, |  | December 31,
|  |  |  |  |  |  | 2023 |  | 2022
Revolving and term credit facilities |  |  |  |  |  |  | $ | 4,564,000 |  |  | $ | 4,513,300 |
Funds drawn on facilities/commercial paper issued |  |  |  |  |  |  | (2,089,600) |  |  | (1,532,493) |
Letters of credit issued |  |  |  |  |  |  | (407,900) |  |  | (465,200) |
Liquidity available under the facilities |  |  |  |  |  |  | $ | 2,066,500 |  |  | $ | 2,515,607 |
Undrawn portion of uncommitted letter of credit facilities |  |  |  |  |  |  | (307,600) |  |  | (226,900) |
Cash on hand |  |  |  |  |  |  | 100,258 |  |  | 57,623 |
Total liquidity and capital reserves |  |  |  |  |  |  | $ | 1,859,158 |  |  | $ | 2,346,330 |

Recent financing activities:
(a)Senior unsecured revolving credit facilities
Corporate
On June 1, 2023, the Company terminated its former $50,000 uncommitted bi-lateral credit facility.
(b)U.S. dollar senior unsecured notes
Subsequent to quarter-end, on July 31, 2023 the Company repaid a $75,000 senior unsecured note on its maturity.
As of June 30, 2023, the Company had ac crued $71,703 in interest expense (December 31, 2022 - $70,274). Interest expense for the three and six months ended June 30, 2023 and 2022 consists of the following:

| Three months ended June 30 |  | Six months ended June 30
| 2023 |  | 2022 |  | 2023 |  | 2022
Long-term debt | $ | 65,046 |  |  | $ | 65,746 |  |  | $ | 128,814 |  |  | $ | 127,832 |
Commercial paper, credit facility draws and related fees | 27,714 |  |  | 5,466 |  |  | 52,139 |  |  | 9,051 |
Accretion of fair value adjustments | (824) |  |  | (4,471) |  |  | (4,223) |  |  | (9,014) |
Capitalized interest and AFUDC capitalized on regulated property | (4,420) |  |  | (906) |  |  | (8,304) |  |  | (2,136) |
Other | 2,147 |  |  | (1,262) |  |  | 3,155 |  |  | (3,217) |
| $ | 89,663 |  |  | $ | 64,573 |  |  | $ | 171,581 |  |  | $ | 122,516 |

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

8.Pension and other post-employment benefits
The following table lists the components of net benefit costs for the pension plans and other post-employment benefits (“OPEB”) in the unaudited interim consolidated statements of operations for the three and six months ended June 30:

| Pension benefits
| Three months ended June 30 |  | Six months ended June 30
| 2023 |  | 2022 |  | 2023 |  | 2022
Service cost | $ | 3,166 |  |  | $ | 4,532 |  |  | $ | 6,093 |  |  | $ | 8,388 |
Non-service costs |  |  |  |  |  |  |
Interest cost | 7,906 |  |  | 6,778 |  |  | 16,299 |  |  | 12,841 |
Expected return on plan assets | (7,947) |  |  | (10,519) |  |  | (16,263) |  |  | (20,843) |
Amortization of net actuarial losses (gains) | (71) |  |  | 1,257 |  |  | (195) |  |  | 2,046 |
Amortization of prior service credits | (373) |  |  | (389) |  |  | (746) |  |  | (792) |
Impact of regulatory accounts | 4,588 |  |  | 4,664 |  |  | 8,683 |  |  | 11,002 |
| $ | 4,103 |  |  | $ | 1,791 |  |  | $ | 7,778 |  |  | $ | 4,254 |
Net benefit cost | $ | 7,269 |  |  | $ | 6,323 |  |  | $ | 13,871 |  |  | $ | 12,642 |

| OPEB
| Three months ended June 30 |  | Six months ended June 30
| 2023 |  | 2022 |  | 2023 |  | 2022
Service cost | $ | 902 |  |  | $ | 1,554 |  |  | $ | 1,891 |  |  | $ | 3,109 |
Non-service costs |  |  |  |  |  |  |
Interest cost | 2,891 |  |  | 2,282 |  |  | 6,329 |  |  | 4,641 |
Expected return on plan assets | (2,331) |  |  | (2,841) |  |  | (5,077) |  |  | (5,682) |
Amortization of net actuarial gains | (561) |  |  | (86) |  |  | (1,122) |  |  | (172) |
Amortization of prior service credits | (213) |  |  | 6 |  |  | (426) |  |  | 12 |
Impact of regulatory accounts | 1,417 |  |  | 1,106 |  |  | 2,785 |  |  | 1,783 |
| $ | 1,203 |  |  | $ | 467 |  |  | $ | 2,489 |  |  | $ | 582 |
Net benefit cost | $ | 2,105 |  |  | $ | 2,021 |  |  | $ | 4,380 |  |  | $ | 3,691 |

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

9.Other long-term liabilities
Other long-term liabilities consist of the following:

| June 30, |  | December 31,
| 2023 |  | 2022
Contract adjustment payments | $ | 78,056 |  |  | $ | 113,876 |
Asset retirement obligations | 113,678 |  |  | 116,584 |
Advances in aid of construction | 90,096 |  |  | 88,546 |
Environmental remediation obligation | 41,092 |  |  | 42,457 |
Customer deposits | 35,360 |  |  | 34,675 |
Unamortized investment tax credits | 17,419 |  |  | 17,649 |
Deferred credits and contingent consideration | 45,937 |  |  | 39,498 |
Preferred shares, Series C (a) | 12,067 |  |  | 12,072 |
Hook-up fees | 25,813 |  |  | 32,463 |
Lease liabilities | 21,415 |  |  | 21,834 |
Contingent development support obligations | 9,129 |  |  | 8,824 |
Note payable to related party | 25,808 |  |  | 25,808 |
Other | 34,004 |  |  | 41,156 |
| $ | 549,874 |  |  | $ | 595,442 |
Less: current portion | (119,495) |  |  | (134,212) |
| $ | 430,379 |  |  | $ | 461,230 |

(a) Subsequent to quarter-end, on August 9, 2023, 36 Series C preferred shares were redeemed for C$6,906.
10.Shareholders’ capital
(a)Common shares
Number of common shares

|  | Six months ended June 30
|  | 2023 |  | 2022
Common shares, beginning of period |  | 683,614,803 |  |  | 671,960,276 |
Dividend reinvestment plan |  | 4,370,289 |  |  | 3,014,264 |
Exercise of share-based awards (b) |  | 772,591 |  |  | 673,852 |
Conversion of convertible debentures |  | 1,415 |  |  | 754 |
Common shares, end of period |  | 688,759,098 |  |  | 675,649,146 |

On August 15, 2022, AQN re-established an at-the-market equity program (“ATM Program”) that allows the Company to issue up to $500,000 (or the equivalent in Canadian dollars) 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 Toronto Stock Exchange, the New York Stock Exchange (“NYSE”) or any other existing trading market for the common shares of the Company in Canada or the United States.
During the six months ended June 30, 2023, the Company did not issue common shares under the ATM Program. As of August 9, 2023, the Company has issued, since the inception of its initial ATM Program in 2019, a cumulative total of 36,814,536 common shares at an average price of $15.00 per share for gross proceeds of $551,086 ($544,295 net of commissions). Other related costs, primarily related to the establishment and subsequent re-establishments of the ATM Program, were $4,843.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

10.Shareholders’ capital (continued)
(a)Common shares (continued)
Dividend reinvestment plan
The Company has a common shareholder dividend reinvestment plan, which, when the plan is active, provides an opportunity for holders of AQN’s common shares who reside in Canada, the United States, or, subject to AQN’s consent, other jurisdictions, to reinvest the cash dividends paid on their common shares in additional common shares which, at AQN’s election, are either purchased on the open market or newly issued from treasury. Effective March 3, 2022, common shares purchased under the plan were issued at a 3% discount (previously at 5%) to the prevailing market price (as determined in accordance with the terms of the plan). During the six months ended June 30, 2023, AQN issued 4,370,289 common shares under the dividend reinvestment plan. Effective March 16, 2023, AQN suspended the dividend reinvestment plan. Dividends will only be paid in cash while the reinvestment plan is suspended.
(b)Share-based compensation
For the three and six months ended June 30, 2023, AQN recorded $3,199 and $3,895 (2022 - $3,860 and $3,495 respectively) in total share-based compensation expense. The compensation expense is recorded with operating expenses in the unaudited interim consolidated statements of operations. The portion of share-based compensation costs capitalized as cost of construction is insignificant.
As of June 30, 2023, total unrecognized compensation costs related to non-vested share-based awards were $39,515 and are expected to be recognized over a period of 2.27 years
Share option plan
During the six months ended June 30, 2023, the Board of Directors of the Company (the "Board") approved the grant of 1,368,744 options to executives of the Company. The options allow for the purchase of common shares at a weighted average price of C$10.76, the market price of the underlying common shares at the date of grant. One-third of the options vest on each of December 31, 2023, 2024 and 2025. 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:

|  | 2023
Risk-free interest rate |  | 3.4 | %
Expected volatility |  | 27 | %
Expected dividend yield |  | 8.6 | %
Expected life |  | 5.50 years
Weighted average grant date fair value per option |  | C$1.04

Performance and restricted share units
During the six months ended June 30, 2023, a total of 2,349,180 performance share units ("PSUs") and restricted share units ("RSUs") were granted to employees of the Company. The awards vest based on the terms of each agreement ranging from February 2023 to January 2025. During the six months ended June 30, 2023, the Company settled 661,570 PSUs and RSUs in exchange for 331,038 common shares issued from treasury, and 330,532 PSUs and RSUs were settled at their cash value as payment for tax withholding related to the settlement of the awards.
During the six months ended June 30, 2023, the Company settled 52,379 bonus deferral RSUs in exchange for 23,678 common shares issued from treasury, and 28,701 RSUs were settled at their cash value as payment for tax withholding related to the settlement of the awards. During the six months ended June 30, 2023, 72,155 bonus deferral RSUs were granted to employees of the Company. The RSUs are 100% vested.
Directors' deferred share units
During the six months ended June 30, 2023, 85,637 deferred share units ("DSUs") were issued pursuant to the election by Directors of the Company to defer a percentage of their directors' fee in the form of DSUs.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

11.Accumulated other comprehensive income (loss)
AOCI consists of the following balances, net of tax:

| Foreign currency cumulative translation |  | Unrealized gain (loss) on cash flow hedges |  |  |  | Pension and post-employment actuarial changes |  | Total
Balance, January 1, 2022 | $ | (76,615) |  |  | $ | (3,514) |  |  |  |  | $ | 8,452 |  |  | $ | (71,677) |
OCI | (18,013) |  |  | (128,838) |  |  |  |  | 23,722 |  |  | (123,129) |
Amounts reclassified from AOCI to the unaudited interim consolidated statements of operations | (5,489) |  |  | 34,543 |  |  |  |  | 4,039 |  |  | 33,093 |
Net current period OCI | $ | (23,502) |  |  | $ | (94,295) |  |  |  |  | $ | 27,761 |  |  | $ | (90,036) |
OCI attributable to the non-controlling interests | 1,650 |  |  | — |  |  |  |  | — |  |  | 1,650 |
Net current period OCI attributable to shareholders of AQN | (21,852) |  |  | (94,295) |  |  |  |  | 27,761 |  |  | (88,386) |
Balance, December 31, 2022 | $ | (98,467) |  |  | $ | (97,809) |  |  |  |  | $ | 36,213 |  |  | $ | (160,063) |
OCI | 16,343 |  |  | 52,435 |  |  |  |  | — |  |  | 68,778 |
Amounts reclassified from AOCI to the unaudited interim consolidated statements of operations | (788) |  |  | 1,851 |  |  |  |  | (1,303) |  |  | (240) |
Net current period OCI | $ | 15,555 |  |  | $ | 54,286 |  |  |  |  | $ | (1,303) |  |  | $ | 68,538 |
OCI attributable to the non-controlling interests | (212) |  |  | — |  |  |  |  | — |  |  | (212) |
Net current period OCI attributable to shareholders of AQN | $ | 15,343 |  |  | $ | 54,286 |  |  |  |  | $ | (1,303) |  |  | $ | 68,326 |
Balance, June 30, 2023 | $ | (83,124) |  |  | $ | (43,523) |  |  |  |  | $ | 34,910 |  |  | $ | (91,737) |

Amounts reclassified from AOCI for foreign currency cumulative translation affected derivative gain (loss); those for unrealized gain (loss) on cash flow hedges affected revenue from non-regulated energy sales, interest expense and derivative gain (loss); while those for pension and other post-employment actuarial changes affected pension and other post-employment non-service costs.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

12.Dividends
All dividends of the Company are made on a discretionary basis as determined by the Board. The Company declares and pays the dividends on its common shares in U.S. dollars. Dividends declared were as follows:

| Three months ended June 30
| 2023 |  | 2022
| Dividend |  | Dividend per share |  | Dividend |  | Dividend per share
Common shares | $ | 75,379 |  |  | $ | 0.1085 |  |  | $ | 122,636 |  |  | $ | 0.1808 |
Series A preferred shares | C$ | 1,549 |  |  | C$ | 0.3226 |  |  | C$ | 1,549 |  |  | C$ | 0.3226 |
Series D preferred shares | C$ | 1,273 |  |  | C$ | 0.3182 |  |  | C$ | 1,273 |  |  | C$ | 0.3182 |

| Six months ended June 30
| 2023 |  | 2022
| Dividend |  | Dividend per share |  | Dividend |  | Dividend per share
Common shares | $ | 150,765 |  |  | $ | 0.2170 |  |  | $ | 238,209 |  |  | $ | 0.3514 |
Series A preferred shares | C$ | 3,097 |  |  | C$ | 0.6453 |  |  | C$ | 3,097 |  |  | C$ | 0.6453 |
Series D preferred shares | C$ | 2,546 |  |  | C$ | 0.6364 |  |  | C$ | 2,546 |  |  | C$ | 0.6364 |

13.Related party transactions
(a)Equity-method investments
The Company provides administrative and development services to its equity-method investees and is reimbursed for incurred costs. To that effect, during the three and six months ended June 30, 2023, the Company charged its equity-method investees $12,773 and $42,074, respectively (2022 - $26,547 and $33,960, respectively). Additionally, Liberty Development JV Inc. (note 6(a)), an equity-investee of the Company, provides development services to the Company on specified projects, for which it earns a development fee upon reaching certain milestones. However, during the three and six months ended June 30, 2023 and June 30, 2022, no such development fees were charged to the Company.
Subsequent to quarter-end, on July 5, 2023, the Company provided a $35,000 non-interest-bearing loan to Liberty Development JV Inc. The joint venture used these funds to return equity to its shareholders through which the Company received $17,500.
(b)Redeemable non-controlling interest held by related party
Liberty Development Energy Solutions (note 6(a)), an equity investee of the Company, has a secured credit facility in the amount of $306,500 maturing on January 26, 2024. It is collateralized through a pledge of Atlantica Sustainable Infrastructure plc (“Atlantica”) ordinary shares. A collateral shortfall would occur if the net obligation as defined in the agreement would equal or exceed 50% of the market value of such Atlantica shares, in which case the lenders would have the right to sell Atlantica shares to eliminate the collateral shortfall. The Liberty Development Energy Solutions secured credit facility is repayable on demand if Atlantica ceases to be a public company or if certain other events are announced or completed that could restrict AY Holdings’ ability to sell or transfer its Atlantica ordinary shares. Liberty Development Energy Solutions has a preference share ownership in AY Holdings, which AQN reflects as redeemable non-controlling interest held by related party. Redemption is not considered probable as of June 30, 2023. During the three and six months ended June 30, 2023, the Company incurred non-controlling interest attributable to Liberty Development Energy Solutions of $6,348 and $12,399, respectively (2022 - $3,086 and $5,661, respectively) and recorded distributions of $6,302 and $12,300, respectively (2022 - $2,820 and $5,404, respectively).

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

13.Related party transactions (continued)
(c)Non-controlling interest held by related party
Non-controlling interest held by related party represents an interest in a consolidated subsidiary of the Company, acquired by Atlantica Yield Energy Solutions Canada Inc. ("AYES Canada") in May 2019 for $96,752 (C$130,103) and an interest in Algonquin (AY Holdco) B.V., a consolidated subsidiary of the Company, acquired by Liberty Development JV Inc. in November 2021 for $39,376. During the three and six months ended June 30, 2023, the Company recorded distributions of $4,921 and $10,979, respectively (2022 - $5,534 and $12,956, respectively).
The above related party transactions have been recorded at the exchange amounts agreed to by the parties to the transactions.
14.Non-controlling interests and redeemable non-controlling interests
Net effect attributable to non-controlling interests consists of the following:

| Three months ended June 30 |  | Six months ended June 30
| 2023 |  | 2022 |  | 2023 |  | 2022
HLBV and other adjustments attributable to: |  |  |  |  |  |  |
Non-controlling interests - tax equity partnership units | $ | 25,172 |  |  | $ | 31,100 |  |  | $ | 59,743 |  |  | $ | 71,961 |
Non-controlling interests - redeemable tax equity partnership units | 331 |  |  | 1,337 |  |  | 662 |  |  | 2,936 |
Other net loss attributable to: |  |  |  |  |  |  |
Non-controlling interests | (10,064) |  |  | (416) |  |  | (18,387) |  |  | (1,934) |
| $ | 15,439 |  |  | $ | 32,021 |  |  | $ | 42,018 |  |  | $ | 72,963 |
Redeemable non-controlling interest, held by related party | (6,349) |  |  | (3,086) |  |  | (12,399) |  |  | (5,661) |
Net effect of non-controlling interests | $ | 9,090 |  |  | $ | 28,935 |  |  | $ | 29,619 |  |  | $ | 67,302 |

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.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

15.Income taxes
For the three and six months ended June 30, 2023, the income tax recovery in the unaudited interim consolidated statements of operations represents an effective tax rate different than the Canadian enacted statutory rate of 26.5%. The differences are as follows:

| Three months ended June 30 |  | Six months ended June 30
| 2023 |  | 2022 |  | 2023 |  | 2022
Expected income tax recovery at Canadian statutory rate | $ | (84,596) |  |  | $ | (22,562) |  |  | $ | (11,903) |  |  | $ | (6,119) |
Increase (decrease) resulting from: |  |  |  |  |  |  |
Effect of differences in tax rates on transactions in and within foreign jurisdictions and change in tax rates | (5,560) |  |  | (6,562) |  |  | (16,718) |  |  | (19,039) |
Adjustments from investments carried at fair value | 40,357 |  |  | 17,216 |  |  | 11,092 |  |  | 18,229 |
Change in valuation allowance | 676 |  |  | (1,582) |  |  | (791) |  |  | (1,731) |
Non-controlling interests share of income | 2,201 |  |  | 4,587 |  |  | 12,393 |  |  | 15,640 |
Acquisition-related state deferred tax adjustments | — |  |  | — |  |  | — |  |  | 7,600 |
Tax credits | (8,095) |  |  | (11,992) |  |  | (20,505) |  |  | (22,023) |
Amortization and settlement of excess deferred income tax | (2,456) |  |  | (2,296) |  |  | (6,207) |  |  | (6,329) |
Other | 1,515 |  |  | 372 |  |  | 1,382 |  |  | 405 |
Income tax recovery | $ | (55,958) |  |  | $ | (22,819) |  |  | $ | (31,257) |  |  | $ | (13,367) |

The following table illustrates the movement in the deferred tax valuation allowance:

| Three months ended June 30 |  | Six months ended June 30
| 2023 |  | 2022 |  | 2023 |  | 2022
Beginning balance | $ | 97,396 |  |  | $ | 28,959 |  |  | $ | 107,583 |  |  | $ | 27,470 |
Charged to income tax recovery | 676 |  |  | (1,582) |  |  | (791) |  |  | (1,731) |
Charged (reduction) to OCI | (6,418) |  |  | 2,664 |  |  | (15,138) |  |  | 4,302 |
Reductions to other accounts | — |  |  | (211) |  |  | — |  |  | (211) |
Ending balance | $ | 91,654 |  |  | $ | 29,830 |  |  | $ | 91,654 |  |  | $ | 29,830 |

16.Other net losses
Other net losses (gains) consist of the following:

| Three months ended June 30 |  | Six months ended June 30
| 2023 |  | 2022 |  | 2023 |  | 2022
Acquisition and transition-related costs | $ | — |  |  | $ | 2,315 |  |  | $ | — |  |  | $ | 3,940 |
Kentucky termination costs (a) | 43,808 |  |  | 3,535 |  |  | 46,527 |  |  | 4,075 |
Acquisition-related settlement payment (b) | (11,983) |  |  | — |  |  | (11,983) |  |  | — |
Other | 8,542 |  |  | 2,802 |  |  | 9,285 |  |  | 5,367 |
| $ | 40,367 |  |  | $ | 8,652 |  |  | $ | 43,829 |  |  | $ | 13,382 |

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

16.Other net losses (continued)
(a)Kentucky termination costs
The loss related to the termination of the Kentucky Power Transaction includes $38,795 for the write-off of capitalized costs which are primarily related to the implementation of an enterprise software solution. The remaining amount relates to the transaction costs, severance costs, and other termination costs.
(b)Acquisition-related settlement payment
During the period, the Company received $12,814 as an acquisition-related settlement payment in connection with the Suralis (formerly called ESSAL) acquisition. The Company also incurred legal fees of $831 in relation to this settlement.
17.Basic and diluted net earnings (loss) per share
Basic and diluted earnings (loss) per share have been calculated on the basis of net earnings (loss) attributable to the common shareholders of the Company and the weighted average number of common shares and bonus deferral restricted share units outstanding. Diluted net earnings (loss) per share is computed using the weighted-average number of common shares, additional shares issued subsequent to quarter-end under the dividend reinvestment plan, and, if dilutive, potential incremental common shares related to the convertible debentures or resulting from the application of the treasury stock method to the Green Equity Units (note 7) and the weighted average number of outstanding share options, PSUs, RSUs and DSUs outstanding during the period.
The reconciliation of the net earnings (loss) and the weighted average shares used in the computation of basic and diluted earnings (loss) per share are as follows:

| Three months ended June 30 |  | Six months ended June 30 |
| 2023 |  | 2022 |  | 2023 |  | 2022 |
Net earnings (loss) attributable to shareholders of AQN | (253,231) |  |  | (33,387) |  |  | $ | 16,908 |  |  | $ | 57,578 |  |
Series A preferred shares dividend | 1,142 |  |  | 1,219 |  |  | 2,290 |  |  | 2,437 |  |
Series D preferred shares dividend | 938 |  |  | 1,001 |  |  | 1,882 |  |  | 2,003 |  |
Net earnings (loss) attributable to common shareholders of AQN – basic and diluted | $ | (255,311) |  |  | $ | (35,607) |  |  | $ | 12,736 |  |  | $ | 53,138 |  |
Weighted average number of shares |  |  |  |  |  |  |  |
Basic | 687,847,010 |  |  | 674,742,897 |  |  | 688,277,615 |  |  | 674,720,319 |  |
Effect of dilutive securities | — |  |  | — |  |  | 2,127,104 |  |  | 3,046,590 |  |
Diluted | 687,847,010 |  |  | 674,742,897 |  |  | 690,404,719 |  |  | 677,766,909 |  |

This calculation of diluted shares excludes the potential impact of the Green Equity Units and all potential incremental shares that may become issuable pursuant to outstanding securities of the Company for the three months ended June 30, 2023 and 6,350,530 securities for the six months ended June 30, 2023 as they are anti-dilutive. This calculation of diluted shares for the six months ended June 30, 2022 excludes the potential impact of 1,134,711 securities, as they are anti-dilutive.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

18.Segmented information
The Company is managed under two primary business units consisting of the Regulated Services Group and the Renewable Energy Group. The two business units are the two segments of the Company.
The Regulated Services Group, the Company's regulated operating unit, owns and operates a portfolio of electric, natural gas, water distribution and wastewater collection utility systems and transmission operations in the United States, Canada, Bermuda and Chile; the Renewable Energy Group, the Company's non-regulated operating unit, owns and operates a diversified portfolio of renewable and thermal electric generation assets in North America and internationally.
On May 11, 2023, the Company announced that its Board of Directors had initiated a strategic review of the Renewable Energy Group. On August 10, 2023, the Company announced that it will pursue a sale of the Renewable Energy Group.
For purposes of evaluating the performance of the business units, the Company allocates the realized portion of any gains or losses on financial instruments to the specific business units. Dividend income from Atlantica and AYES Canada is included in the operations of the Renewable Energy Group, while interest income from San Antonio Water System is included in the operations of the Regulated Services Group. Equity method gains and losses are included in the operations of the Regulated Services Group or Renewable Energy Group based on the nature of the activities of the investees. The change in value of investments carried at fair value, unrealized portion of any gains or losses on derivative instruments not designated in a hedging relationship and foreign exchange gains and losses are not considered in management’s evaluation of divisional performance and are, therefore, allocated and reported under corporate.

| Three months ended June 30, 2023
| Regulated Services Group |  | Renewable Energy Group |  | Corporate |  | Total
Revenue (1)(2) | $ | 532,233 |  |  | $ | 71,694 |  |  | $ | — |  |  | $ | 603,927 |
Other revenue | 14,200 |  |  | 9,380 |  |  | 364 |  |  | 23,944 |
Fuel, power and water purchased | 138,374 |  |  | 3,782 |  |  | — |  |  | 142,156 |
Net revenue | 408,059 |  |  | 77,292 |  |  | 364 |  |  | 485,715 |
Operating expenses (recovery) | 213,891 |  |  | 27,737 |  |  | (146) |  |  | 241,482 |
Administrative expenses | 13,548 |  |  | 11,044 |  |  | 1,100 |  |  | 25,692 |
Depreciation and amortization | 84,754 |  |  | 33,291 |  |  | 403 |  |  | 118,448 |
Loss on foreign exchange | — |  |  | — |  |  | 6,379 |  |  | 6,379 |
Operating income (loss) | 95,866 |  |  | 5,220 |  |  | (7,372) |  |  | 93,714 |
Interest expense | (42,724) |  |  | (16,420) |  |  | (30,519) |  |  | (89,663) |
Income (loss) from long-term investments | 9,332 |  |  | 26,259 |  |  | (313,287) |  |  | (277,696) |
Other expenses | (41,010) |  |  | (1,197) |  |  | (2,427) |  |  | (44,634) |
Earnings (loss) before income taxes | $ | 21,464 |  |  | $ | 13,862 |  |  | $ | (353,605) |  |  | $ | (318,279) |
Capital expenditures | $ | 225,505 |  |  | $ | 19,704 |  |  | $ | — |  |  | $ | 245,209 |

(1) Renewable Energy Group revenue includes $4,328 related to net hedging gain from energy derivative contracts and availability credits for the three months ended June 30, 2023 that do not represent revenue recognized from contracts with customers.
(2) Regulated Services Group revenue includes $9,083 related to alternative revenue programs for the three months ended June 30, 2023 that do not represent revenue recognized from contracts with customers.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

18.Segmented information (continued)

| Three months ended June 30, 2022
| Regulated Services Group |  | Renewable Energy Group |  | Corporate |  | Total
Revenue (1)(2) | $ | 507,095 |  |  | $ | 92,141 |  |  | $ | — |  |  | $ | 599,236 |
Other revenue | 12,559 |  |  | 7,208 |  |  | 382 |  |  | 20,149 |
Fuel, power and water purchased | 159,256 |  |  | 9,646 |  |  | — |  |  | 168,902 |
Net revenue | 360,398 |  |  | 89,703 |  |  | 382 |  |  | 450,483 |
Operating expenses | 179,258 |  |  | 27,053 |  |  | 19 |  |  | 206,330 |
Administrative expenses | 10,966 |  |  | 8,510 |  |  | 631 |  |  | 20,107 |
Depreciation and amortization | 76,228 |  |  | 36,057 |  |  | 262 |  |  | 112,547 |
Loss on foreign exchange | — |  |  | — |  |  | 4,464 |  |  | 4,464 |
Operating income (loss) | 93,946 |  |  | 18,083 |  |  | (4,994) |  |  | 107,035 |
Interest expense | (23,860) |  |  | (14,862) |  |  | (25,851) |  |  | (64,573) |
Income (loss) from long-term investments | 5,265 |  |  | 26,675 |  |  | (145,320) |  |  | (113,380) |
Other expenses | (2,898) |  |  | (4,723) |  |  | (6,602) |  |  | (14,223) |
Earnings (loss) before income taxes | $ | 72,453 |  |  | $ | 25,173 |  |  | $ | (182,767) |  |  | $ | (85,141) |
Capital expenditures | $ | 179,878 |  |  | $ | 67,660 |  |  | $ | — |  |  | $ | 247,538 |

(1) Renewable Energy Group revenue includes $25,062 related to net hedging loss from energy derivative contracts and availability credits for the three months ended June 30, 2022 that do not represent revenue recognized from contracts with customers.
(2) Regulated Services Group revenue includes $8,811 related to alternative revenue programs for the three months ended June 30, 2022 that do not represent revenue recognized from contracts with customers.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

18.Segmented information (continued)

| Six months ended June 30, 2023
| Regulated Services Group |  | Renewable Energy Group |  | Corporate |  | Total
Revenue (1)(2) | 1,206,394 |  |  | 150,410 |  |  | $ | — |  |  | $ | 1,356,804 |
Other revenue | 28,218 |  |  | 20,751 |  |  | 725 |  |  | 49,694 |
Fuel, power and water purchased | 405,524 |  |  | 11,588 |  |  | — |  |  | 417,112 |
Net revenue | 829,088 |  |  | 159,573 |  |  | 725 |  |  | 989,386 |
Operating expenses | 401,315 |  |  | 60,447 |  |  | 7 |  |  | 461,769 |
Administrative expenses | 21,873 |  |  | 18,474 |  |  | 3,178 |  |  | 43,525 |
Depreciation and amortization | 170,611 |  |  | 68,836 |  |  | 642 |  |  | 240,089 |
Loss on foreign exchange | — |  |  | — |  |  | 7,815 |  |  | 7,815 |
Operating income (loss) | 235,289 |  |  | 11,816 |  |  | (10,917) |  |  | 236,188 |
Interest expense | (81,202) |  |  | (31,315) |  |  | (59,064) |  |  | (171,581) |
Income (loss) from long-term investments | 19,660 |  |  | 59,526 |  |  | (136,870) |  |  | (57,684) |
Other expenses | (45,259) |  |  | (1,197) |  |  | (4,435) |  |  | (50,891) |
Earnings (loss) before income taxes | $ | 128,488 |  |  | $ | 38,830 |  |  | $ | (211,286) |  |  | $ | (43,968) |
Capital expenditures | 372,886 |  |  | 42,072 |  |  | — |  |  | 414,958 |
| June 30, 2023
Property, plant and equipment | $ | 8,757,413 |  |  | $ | 3,550,202 |  |  | $ | 29,316 |  |  | $ | 12,336,931 |
Investments carried at fair value | 1,799 |  |  | 1,211,919 |  |  | — |  |  | 1,213,718 |
Equity-method investees | 57,586 |  |  | 322,141 |  |  | 8,789 |  |  | 388,516 |
Total assets | 12,247,694 |  |  | 5,401,782 |  |  | 319,237 |  |  | 17,968,713 |

(1) Renewable Energy Group revenue includes $11,527 related to net hedging gain from energy derivative contracts and availability credits for the six months ended June 30, 2023 that do not represent revenue recognized from contracts with customers.
(2) Regulated Services Group revenue includes $12,789 related to alternative revenue programs for the six months ended June 30, 2023 that do not represent revenue recognized from contracts with customers.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

18.Segmented information (continued)

| Six months ended June 30, 2022
| Regulated Services Group |  | Renewable Energy Group |  | Corporate |  | Total
Revenue (1)(2) | $ | 1,129,854 |  |  | $ | 177,901 |  |  | $ | — |  |  | $ | 1,307,755 |
Other revenue | 27,547 |  |  | 16,552 |  |  | 768 |  |  | 44,867 |
Fuel, power and water purchased | 393,828 |  |  | 22,585 |  |  | — |  |  | 416,413 |
Net revenue | 763,573 |  |  | 171,868 |  |  | 768 |  |  | 936,209 |
Operating expenses | 363,667 |  |  | 54,643 |  |  | 22 |  |  | 418,332 |
Administrative expenses | 19,036 |  |  | 16,055 |  |  | 2,468 |  |  | 37,559 |
Depreciation and amortization | 156,511 |  |  | 75,474 |  |  | 526 |  |  | 232,511 |
Loss on foreign exchange | — |  |  | — |  |  | 4,726 |  |  | 4,726 |
| 224,359 |  |  | 25,696 |  |  | (6,974) |  |  | 243,081 |
Gain on sale of renewable assets | — |  |  | 1,200 |  |  | — |  |  | 1,200 |
Operating income (loss) | 224,359 |  |  | 26,896 |  |  | (6,974) |  |  | 244,281 |
Interest expense | (45,286) |  |  | (30,575) |  |  | (46,655) |  |  | (122,516) |
Income (loss) from long-term investments | 9,774 |  |  | 54,301 |  |  | (188,144) |  |  | (124,069) |
Other expenses | (7,786) |  |  | (4,978) |  |  | (8,023) |  |  | (20,787) |
Earnings (loss) before income taxes | $ | 181,061 |  |  | $ | 45,644 |  |  | $ | (249,796) |  |  | $ | (23,091) |
Capital expenditures | 435,463 |  |  | 139,774 |  |  | — |  |  | 575,237 |
| December 31, 2022
Property, plant and equipment | $ | 8,554,938 |  |  | $ | 3,360,687 |  |  | $ | 29,260 |  |  | $ | 11,944,885 |
Investments carried at fair value | 1,984 |  |  | 1,342,223 |  |  | — |  |  | 1,344,207 |
Equity-method investees | 56,199 |  |  | 310,103 |  |  | 15,500 |  |  | 381,802 |
Total assets | 12,109,575 |  |  | 5,251,933 |  |  | 266,105 |  |  | 17,627,613 |

(1) Renewable Energy Group revenue includes $29,892 related to net hedging loss from energy derivative contracts and availability credits for the six months ended June 30, 2022 that do not represent revenue recognized from contracts with customers.
(2) Regulated Services Group revenue includes $15,089 related to alternative revenue programs for the six months ended June 30, 2022 that do not represent revenue recognized from contracts with customers.
The majority of non-regulated energy sales are earned from contracts with large public utilities. The Company has sought to mitigate its credit risk by selling energy to large utilities in various North American locations. None of the utilities contribute more than 10% of total revenue.
AQN operates in the independent power and utility industries in the United States, Canada and other regions. Information on operations by geographic area is as follows:

| Three months ended June 30 |  | Six months ended June 30
| 2023 |  | 2022 |  | 2023 |  | 2022
Revenue |  |  |  |  |  |  |
United States | $ | 503,777 |  |  | $ | 492,373 |  |  | $ | 1,144,201 |  |  | $ | 1,091,246 |
Canada | 37,788 |  |  | 41,397 |  |  | 90,916 |  |  | 95,232 |
Other regions | 86,306 |  |  | 85,615 |  |  | 171,381 |  |  | 166,144 |
| $ | 627,871 |  |  | $ | 619,385 |  |  | $ | 1,406,498 |  |  | $ | 1,352,622 |

Revenue is attributed to the regions based on the location of the underlying generating and utility facilities.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

19.Commitments and contingencies
(a)Contingencies
AQN and its subsidiaries are involved in various claims and litigation arising out of the ordinary course and conduct of its business. Although such matters cannot be predicted with certainty, management does not consider AQN’s exposure to such litigation to be material to these unaudited interim consolidated financial statements. Accruals for any contingencies related to these items are recorded in the unaudited interim consolidated financial statements at the time it is concluded that their occurrence is probable and the related liability is estimable.
Mountain View Fire
On November 17, 2020, a wildfire now known as the Mountain View Fire occurred in the territory of Liberty Utilities (CalPeco Electric) LLC ("Liberty CalPeco"). The cause of the fire remains under investigation, and CAL FIRE has not yet released its final report. There are currently 17 active lawsuits that name certain subsidiaries of the Company as defendants in connection with the Mountain View Fire, as well as one non-litigation claim brought by the U.S. Department of Agriculture seeking reimbursement for alleged fire suppression costs. Twelve lawsuits are brought by groups of individual plaintiffs alleging causes of action including negligence, inverse condemnation, nuisance, trespass, and violations of Cal. Pub. Util. Code 2106 and Cal. Health and Safety Code 13007 (one of these twelve lawsuits also alleges the wrongful death of an individual and various subrogation claims on behalf of insurance companies). In another lawsuit, County of Mono, Antelope Valley Fire Protection District, and Bridgeport Indian Colony allege similar causes of action and seek damages for fire suppression costs, law enforcement costs, property and infrastructure damage, and other costs. In four other lawsuits, insurance companies allege inverse condemnation and negligence and seek recovery of amounts paid and to be paid to their insureds. The likelihood of success in these lawsuits cannot be reasonably predicted. Liberty CalPeco intends to vigorously defend them. The Company has wildfire liability insurance that is expected to apply up to applicable policy limits.
(b)Commitments
In addition to the commitments related to the development projects disclosed in note 6, the following significant commitments exist as of June 30, 2023.
AQN has outstanding purchase commitments for power purchases, natural 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 (1) | $ | 83,606 |  | $ | 47,603 |  | $ | 29,461 |  | $ | 12,397 |  | $ | 12,643 |  | $ | 136,244 |  | $ | 321,954 |
Natural gas supply and service agreements (2) | 93,739 |  | 92,102 |  | 51,456 |  | 38,265 |  | 33,088 |  | 171,141 |  | 479,791 |
Service agreements | 73,974 |  | 61,943 |  | 58,602 |  | 48,070 |  | 50,529 |  | 285,567 |  | 578,685 |
Capital projects | 16,537 |  | — |  | — |  | — |  | — |  | — |  | 16,537 |
Land easements and others | 13,967 |  | 14,159 |  | 14,344 |  | 14,514 |  | 14,693 |  | 500,830 |  | 572,507 |
Total | $ | 281,823 |  | $ | 215,807 |  | $ | 153,863 |  | $ | 113,246 |  | $ | 110,953 |  | $ | 1,093,782 |  | $ | 1,969,474 |

(1) Power purchase: AQN’s electric distribution facilities have commitments to purchase physical quantities of power for load serving requirements. The commitment amounts included in the table above are based on market prices as at June 30, 2023. However, the effects of purchased power unit cost adjustments are mitigated through a purchased power rate-adjustment mechanism.
(2) Natural gas supply and service agreements: AQN’s gas distribution facilities and thermal generation facilities have commitments to purchase physical quantities of natural gas under contracts for purposes of load serving requirements and of generating power.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

20.Non-cash operating items
The changes in non-cash operating items consist of the following:

| Three months ended June 30 |  | Six months ended June 30
| 2023 |  | 2022 |  | 2023 |  | 2022
Accounts receivable | $ | 21,450 |  |  | $ | (8,641) |  |  | $ | 35,213 |  |  | $ | (49,253) |
Fuel and natural gas in storage | (12,837) |  |  | (23,362) |  |  | 19,657 |  |  | (7,128) |
Supplies and consumables inventory | (11,678) |  |  | (3,006) |  |  | (22,454) |  |  | (10,775) |
Income taxes recoverable | 5,134 |  |  | (861) |  |  | 5,683 |  |  | 2,071 |
Prepaid expenses | 13,231 |  |  | (5,203) |  |  | 6,183 |  |  | (12,553) |
Accounts payable | 71,253 |  |  | 48,424 |  |  | 18,033 |  |  | 26,759 |
Accrued liabilities | 38,215 |  |  | (22,585) |  |  | (88,895) |  |  | 30,711 |
Current income tax liability | (1,039) |  |  | (1,350) |  |  | 2,563 |  |  | 853 |
Asset retirements and environmental obligations | 363 |  |  | (10,855) |  |  | (706) |  |  | (11,354) |
Net regulatory assets and liabilities | (11,712) |  |  | (9,201) |  |  | (28,633) |  |  | (54,119) |
| $ | 112,380 |  |  | $ | (36,640) |  |  | $ | (53,356) |  |  | $ | (84,788) |

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

21.Financial instruments
(a)Fair value of financial instruments

June 30, 2023 | Carrying amount |  | Fair value |  | Level 1 |  | Level 2 |  | Level 3
Long-term investments carried at fair value | $ | 1,213,718 |  |  | $ | 1,213,718 |  |  | $ | 1,149,505 |  |  | $ | — |  |  | $ | 64,213 |
Development loans and other receivables | 98,313 |  |  | 91,547 |  |  | — |  |  | 91,547 |  |  | — |
Derivative instruments: |  |  |  |  |  |  |  |  |
Commodity contracts for regulatory operations | 139 |  |  | 139 |  |  | — |  |  | 139 |  |  | — |
Interest rate swaps designated as a hedge | 65,711 |  |  | 65,711 |  |  | — |  |  | 65,711 |  |  | — |
Interest rate cap not designated as hedge | 3,490 |  |  | 3,490 |  |  | — |  |  | 3,490 |  |  | — |
Congestion revenue rights not designated as hedge | 7,757 |  |  | 7,757 |  |  | — |  |  | — |  |  | 7,757 |
Cross-currency swap designated as a net investment hedge | 464 |  |  | 464 |  |  | — |  |  | 464 |  |  | — |
Total derivative instruments | 77,561 |  |  | 77,561 |  |  | — |  |  | 69,804 |  |  | 7,757 |
Total financial assets | $ | 1,389,592 |  |  | $ | 1,382,826 |  |  | $ | 1,149,505 |  |  | $ | 161,351 |  |  | $ | 71,970 |
Long-term debt | $ | 8,083,147 |  |  | $ | 7,528,421 |  |  | $ | 2,716,700 |  |  | $ | 4,811,721 |  |  | $ | — |
Notes payable to related party | 25,808 |  |  | 15,188 |  |  | — |  |  | 15,188 |  |  | — |
Convertible debentures | 238 |  |  | 285 |  |  | 285 |  |  | — |  |  | — |
Preferred shares, Series C | 12,067 |  |  | 11,943 |  |  | — |  |  | 11,943 |  |  | — |
Derivative instruments: |  |  |  |  |  |  |  |  |
Energy contracts designated as a cash flow hedge | 64,370 |  |  | 64,370 |  |  | — |  |  | — |  |  | 64,370 |
Energy contracts not designated as hedge | 11,515 |  |  | 11,515 |  |  | — |  |  | — |  |  | 11,515 |
Cross-currency swap designated as a net investment hedge | 15,550 |  |  | 15,550 |  |  | — |  |  | 15,550 |  |  | — |
Cross-currency swap designated as a cash flow hedge | 9,736 |  |  | 9,736 |  |  | — |  |  | 9,736 |  |  | — |
Commodity contracts for regulated operations | 1,441 |  |  | 1,441 |  |  | — |  |  | 1,441 |  |  | — |
Total derivative instruments | 102,612 |  |  | 102,612 |  |  | — |  |  | 26,727 |  |  | 75,885 |
Total financial liabilities | $ | 8,223,872 |  |  | $ | 7,658,449 |  |  | $ | 2,716,985 |  |  | $ | 4,865,579 |  |  | $ | 75,885 |

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

21. Financial instruments (continued)
(a)Fair value of financial instruments (continued)

December 31, 2022 | Carrying amount |  | Fair value |  | Level 1 |  | Level 2 |  | Level 3
Long-term investments carried at fair value | $ | 1,344,207 |  |  | $ | 1,344,221 |  |  | $ | 1,270,138 |  |  | $ | — |  |  | $ | 74,083 |
Development loans and other receivables | 53,680 |  |  | 50,300 |  |  | — |  |  | 50,300 |  |  | — |
Derivative instruments: |  |  |  |  |  |  |  |  |
Energy contracts not designated as hedge | 393 |  |  | 393 |  |  | — |  |  | — |  |  | 393 |
Interest rate swap designated as a hedge | 69,188 |  |  | 69,188 |  |  | — |  |  | 69,188 |  |  | — |
Currency forward contract not designated as a hedge | 2,659 |  |  | 2,659 |  |  | — |  |  | 2,659 |  |  | — |
Congestion revenue rights not designated as hedge | 10,110 |  |  | 10,110 |  |  | — |  |  | — |  |  | 10,110 |
Cross-currency swap designated as a net investment hedge | 1,267 |  |  | 1,267 |  |  | — |  |  | 1,267 |  |  | — |
Commodity contracts for regulated operations | 283 |  |  | 283 |  |  | — |  |  | 283 |  |  | — |
Total derivative instruments | 83,900 |  |  | 83,900 |  |  | — |  |  | 73,397 |  |  | 10,503 |
Total financial assets | $ | 1,481,787 |  |  | $ | 1,478,421 |  |  | $ | 1,270,138 |  |  | $ | 123,697 |  |  | $ | 84,586 |
Long-term debt | $ | 7,512,017 |  |  | $ | 6,699,031 |  |  | $ | 2,623,628 |  |  | $ | 4,075,403 |  |  | — |
Notes payable to related party | 25,808 |  |  | 15,180 |  |  | — |  |  | 15,180 |  |  | — |
Convertible debentures | 245 |  |  | 276 |  |  | 276 |  |  | — |  |  | — |
Preferred shares, Series C | 12,072 |  |  | 11,675 |  |  | — |  |  | 11,675 |  |  | — |
Derivative instruments: |  |  |  |  |  |  |  |  |
Energy contracts designated as a cash flow hedge | 120,284 |  |  | 120,284 |  |  | — |  |  | — |  |  | 120,284 |
Energy contracts not designated as hedge | 8,617 |  |  | 8,617 |  |  | — |  |  | — |  |  | 8,617 |
Cross-currency swap designated as a net investment hedge | 24,371 |  |  | 24,371 |  |  | — |  |  | 24,371 |  |  | — |
Cross-currency swap designated as a cash flow hedge | 15,435 |  |  | 15,435 |  |  | — |  |  | 15,435 |  |  | — |
Commodity contracts for regulated operations | 1,614 |  |  | 1,614 |  |  | — |  |  | 1,614 |  |  | — |
Total derivative instruments | 170,321 |  |  | 170,321 |  |  | — |  |  | 41,420 |  |  | 128,901 |
Total financial liabilities | $ | 7,720,463 |  |  | $ | 6,896,483 |  |  | $ | 2,623,904 |  |  | $ | 4,143,678 |  |  | $ | 128,901 |

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(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 has determined that the carrying value of its short-term financial assets and liabilities approximates fair value as of June 30, 2023 and December 31, 2022 due to the short-term maturity of these instruments.
The fair value of the investment in Atlantica (level 1) is measured at the closing price on the NASDAQ stock exchange.
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 Company’s level 1 fair value of long-term debt is measured at the closing price on the NYSE and the over-the-counter closing price. The Company’s level 2 fair value of long-term debt at fixed interest rates and Series C preferred shares has been determined using a discounted cash flow method and current interest rates. The Company's level 2 fair value of convertible debentures has been determined as the greater of their face value and the quoted value of AQN's common shares on a converted basis.
The Company’s level 2 fair value derivative instruments primarily consist of swaps, options, rights, subscription agreements and forward physical derivatives where market data for pricing inputs are observable. Level 2 pricing inputs are obtained from various market indices and utilize discounting based on quoted interest rate curves, which are observable in the marketplace.
The Company’s level 3 instruments consist of energy contracts for electricity sales, congestion revenue rights ("CRRs") and the 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 fro m $24.27 to $73.20 with a weighted average of $35.79 as of June 30, 2023. 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 m easurement of CRRs are recent CRR auction prices ranging from $nil to $23.98 with a weighted average of $5.04 as of June 30, 2023. 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 fro m 7.81% to 8.31% with a weighted average of 8.12%, a nd the expected volatility of Atlantica's share price ranging fro m 26.99% to 34.89% as of June 30, 2023. Significant increases (decreases) in expected cash flows or increases (decreases) in discount rate in isolation would have resulted in a significantly lower (higher) fair value measurement.
(b)Derivative instruments
Derivative instruments are recognized on the unaudited interim consolidated balance sheets as either assets or liabilities and measured at fair value at each reporting period.
(i)Commodity derivatives – regulated accounting
The Company uses derivative financial instruments to reduce the cash flow variability associated with the purchase price for a portion of future natural gas purchases associated with its regulated natural gas and electric service territories. The Company’s strategy is to minimize fluctuations in natural gas sale prices to regulated customers. As at June 30, 2023, the commodity volume, in dekatherms, associated with the above derivative contracts was 2,755,733.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

21.Financial instruments (continued)
(b)Derivative instruments (continued)
(i)Commodity derivatives – regulated accounting (continued)
The accounting for these derivative instruments is subject to guidance for rate regulated enterprises. Most of the gains or losses on the settlement of these contracts are included in the calculation of the fuel and commodity cost adjustments (note 5). As a result, the changes in fair value of these natural gas derivative contracts and their offsetting adjustment to regulatory assets and liabilities had no earnings impact.
(ii)Cash flow hedges
The Company has sought to reduce the price risk on the expected future sale of power generation at the Sandy Ridge, Senate, Minonk, and Sugar Creek Wind Facilities by entering into the following long-term energy derivative contracts.

Notional quantity (MW-hrs) |  | Expiry |  | Receive average prices (per MW-hr) |  | Pay floating price (per MW-hr)
3,772,462 |  |  | September 2030 |  | $25.00 |  | Illinois Hub
404,612 |  |  | December 2028 |  | $29.00 |  | PJM Western HUB
1,707,551 |  |  | December 2027 |  | $22.00 |  | NI HUB
1,471,065 |  |  | December 2027 |  | $36.00 |  | ERCOT North HUB

The Company is party to two interest rate swap contracts as cash flow hedges to mitigate the risk that interest rates will increase over the life of certain term loan facilities. Under the terms of the interest rate swap contracts, the Company has fixed its interest rate expense on such term loan facilities. The fair value of the derivative on the designation date is amortized into earnings over the remaining life of the contract.
The Company is party to a forward-starting interest rate swap in order to reduce the interest rate risk related to the quarterly interest payments between July 1, 2024 and July 1, 2029 on t he $350,000 subordinated unsecured notes. The Company designated the entire notional amount of the pay-variable and receive-fixed interest rate swaps as a hedge of the future quarterly variable-rate interest payments associated with the subordinated unsecured notes.
In January 2022, the Company entered into a cross-currency interest rate swap, coterminous with the Canadian Notes, to effectively convert the C$400,000 Canadian Offering into U.S. dollars. The change in the carrying amount of the Canadian Notes due to changes in spot exchange rates is recognized each period in the unaudited interim consolidated statements of operations as loss (gain) on foreign exchange. The Company designated the entire notional amount of the cross-currency fixed-for-fixed interest rate swap as a hedge of the foreign currency exposure related to cash flows for the interest and principal repayments on the Canadian Notes. An offsetting portion of the AOCI balance related to changes in fair value of the cross-currency fixed-for-fixed interest rate swap attributable to changes in the spot exchange rates is also immediately reclassified into the unaudited interim consolidated statements of operations as an offsetting loss (gain) on foreign exchange.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

21.Financial instruments (continued)
(b)Derivative instruments (continued)
(ii)Cash flow hedges (continued)
The following table summarizes OCI attributable to derivative financial instruments designated as a cash flow hedge:

| Three months ended June 30 |  | Six months ended June 30
| 2023 |  | 2022 |  | 2023 |  | 2022
Effective portion of cash flow hedge | $ | 29,949 |  |  | $ | (20,298) |  |  | $ | 52,435 |  |  | $ | (81,852) |
Amortization of cash flow hedge | (1,421) |  |  | (3,828) |  |  | (4,908) |  |  | (3,992) |
Amounts reclassified from AOCI | 7,893 |  |  | 11,247 |  |  | 6,759 |  |  | 14,079 |
OCI attributable to shareholders of AQN | $ | 36,421 |  |  | $ | (12,879) |  |  | $ | 54,286 |  |  | $ | (71,765) |

The Company expects $19,722 of unrealized losses currently in AOCI to be reclassified, net of taxes into non-regulated energy sales, investment loss, interest expense and derivative gains, within the next 12 months, as the underlying hedged transactions settle.
(iii)Foreign exchange hedge of net investment in foreign operation
The functional currency of most of AQN's operations is the U.S. dollar. The Company designates obligations denominated in Canadian dollars as a hedge of the foreign currency exposure of its net investment in its Canadian investments and subsidiaries. The related foreign currency transaction gain or loss designated as, and effective as, a hedge of the net investment in a foreign operation is reported in the same manner as the translation adjustment (in OCI) related to the net investment. A foreign currency loss of $9,629 and $9,638 for the three and six months ended June 30, 2023, respectively (2022 - gain of $395 and $220, 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 was recognized each period in the unaudited interim consolidated statements of operations as loss (gain) on foreign exchange. The Company designated the entire notional amount of the cross-currency fixed-for-fixed interest rate swap as a hedge of the foreign currency exposure related to cash flows for the interest and principal repayments on the notes. Upon the change in functional currency of AQN to the U.S. dollar on January 1, 2020, this hedge was dedesignated. The Company redesignated this swap as a hedge of AQN's net investment in its Canadian subsidiaries. The related foreign currency transaction gain or loss designated as a hedge of the net investment in a foreign operati on is reported in the same manner as the translation adjustment (in OCI) related to the net investment. The fair value of the derivative on the redesignation date will be amortized over the remaining life of the original hedge. A foreign currency loss of $6,942 and $7,009 for the three and six months ended June 30, 2023, respectively (2022 - gain of $14,929 and $10,697, respectively) was recorded in OCI.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(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 operations
The Company is exposed to currency fluctuations from its Canadian-based operations. AQN seeks to manage this risk primarily through the use of natural hedges by using Canadian long-term debt to finance its Canadian operations and a combination of foreign exchange forward contracts and spot purchases.
The Company’s Canadian operations are determined to have the Canadian dollar as their functional currency and are exposed to currency fluctuations from their U.S. dollar transactions. The Company designates obligations denominated in U.S. dollars as a hedge of the foreign currency exposure of its net investment in its U.S. investments and subsidiaries. The related foreign currency transaction gain or loss designated as, and effective as, a hedge of the net investment in a foreign operation is reported in the same manner as the translation adjustment (in OCI) related to the net investment. A foreign currency gain of $2,924 and $2,801 for the three and six months ended June 30, 2023, respectively (2022 - loss of $2,149 and $2,544) was recorded in OCI.
The Company is party to a C$300,000 fixed-for-fixed cross-currency interest rate swap to effectively convert Canadian dollar debentures into U.S. dollars. In February 2022, the Company settled the related cross-currency swap related to its C$200,000 debenture that was repaid. The Company designated the entire notional amount of the cross-currency 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 Company’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 $3,967 and $4,348 for the three and six months ended June 30, 2023, respectively (2022 - loss of $8,132 and $6,080, respectively) was recorded in OCI.
The Company is party to a fixed-for-fixed cross-currency interest rate swap to effectively convert the C$400,000 Canadian-dollar-denominated debentures into U.S. dollars. The Renewable Energy Group designated the entire notional amount of the cross-currency 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 Company’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 gai n of C$4,975 and C$4,987 for the three and six months ended June 30, 2023, respectively (2022 - loss of $8,439 and $14,252, respectively) was recorded in OCI.
Chilean operations
The Company is exposed to currency fluctuations from its Chilean-based operations. The Company's Chilean operations are determined to have the Chilean peso as their functional currency. Chilean long-term debt used to finance the operations is denominated in Chilean Unidad de Fomento.
(iv)Other derivatives and risk management
In the normal course of business, the Company is exposed to financial risks that potentially impact its operating results. The Company employs risk management strategies with a view to mitigating these risks to the extent possible on a cost-effective basis. Derivative financial instruments are used to manage certain exposures to fluctuations in exchange rates, interest rates and commodity prices. The Company does not enter into derivative financial agreements for speculative purposes. For derivatives that are not designated as hedges, the changes in the fair value are immediately recognized in earnings.
The Company seeks to mitigate the volatility of energy congestion charges at the ERCOT transmission grid by entering into CRRs, which as of June 30, 2023 had a notional quantit y of 919,014 MW-hours at prices ranging fro m $0.64 per MW-hr to $19.06 per MW-hr with a weighted average of $5.97 per MW-hr for April 2023 to April 2025. These CRRs are not designated as an accounting hedge.

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

21.Financial instruments (continued)
(b)Derivative instruments (continued)
(iv)Other derivatives and risk management (continued)
The Company is party to an interest rate cap agreement in the amount of C$390,000 for the period between January 15, 2023 and January 15, 2024. The Company was party to an interest rate swap to mitigate the interest rate risk related to debt at its Blue Hill Wind Facility. The contract was novated upon the sale of the Blue Hill Wind Facility in 2022. The loss recognized on the derivative was recorded as a reduction of the gain on sale of renewable assets on the unaudited interim consolidated statements of operations.
The Company mitigates the price risk on the expected future sale of power generation of one of its solar facilities through a long-term energy derivative contract with a notional quantity of 388,170 MW-hours, a price of $25.15 per MW-hr and expiring in August 2030 as an economic hedge to the price of energy sales. The derivative contract is not designated as an accounting hedge.
The effects on the unaudited interim consolidated statements of operations of derivative financial instruments not designated as hedges consist of the following:

| Three months ended June 30 |  | Six months ended June 30 |
| 2023 |  | 2022 |  | 2023 |  | 2022 |
Unrealized gain (loss) on derivative financial instruments: |  |  |  |  |  |  |  |
Interest rate swaps | $ | — |  |  | $ | (4,680) |  |  | $ | — |  |  | $ | (4,680) |  |
Energy derivative contracts | 84 |  |  | (2,352) |  |  | 62 |  |  | (3,103) |  |
Commodity contracts | — |  |  | — |  |  | 1,128 |  |  | — |  |
| $ | 84 |  |  | $ | (7,032) |  |  | $ | 1,190 |  |  | $ | (7,783) |  |
Realized gain (loss) on derivative financial instruments: |  |  |  |  |  |  |  |
Energy derivative contracts | (1,537) |  |  | (157) |  |  | (3,830) |  |  | 149 |  |
| $ | (1,537) |  |  | $ | (157) |  |  | $ | (3,830) |  |  | $ | 149 |  |
Loss on derivative financial instruments not accounted for as hedges | (1,453) |  |  | (7,189) |  |  | (2,640) |  |  | (7,634) |  |
Amortization of AOCI gains frozen as a result of hedge dedesignation | 997 |  |  | 1,054 |  |  | 1,994 |  |  | 1,750 |  |
| $ | (456) |  |  | $ | (6,135) |  |  | $ | (646) |  |  | $ | (5,884) |  |
Unaudited interim consolidated statements of operations classification: |  |  |  |  |  |  |  |
Gain (loss) on derivative financial instruments | $ | 1,039 |  |  | $ | (3,313) |  |  | $ | 3,205 |  |  | $ | (2,569) |  |
Non-regulated energy sales | (1,495) |  |  | (2,822) |  |  | (3,851) |  |  | (3,315) |  |
| $ | (456) |  |  | $ | (6,135) |  |  | $ | (646) |  |  | $ | (5,884) |  |

Algonquin Power & Utilities Corp.
Notes to the Unaudited Interim Consolidated Financial Statements
June 30, 2023 and 2022
(in thousands of U.S. dollars, except as noted and per share amounts)

21.Financial instruments (continued)
(c)Supplier financing programs
In the normal course of business, the Company enters into supplier financing programs under which the suppliers can voluntarily elect to sell their receivables. The Company agrees to pay, on the invoice maturity date, the stated amount of the invoices that the Company has confirmed through the execution of bills of exchange. The terms of the trade payable arrangement are consistent with customary industry practice and are not impacted by the supplier’s decision to sell amounts under these arrangements. As of June 30, 2023, accounts payable include confirmed invoices from designated suppliers of $63,328 (December 31, 2022 - $16,785).
22.Comparative figures
Certain of the comparative figures have been reclassified to conform to the unaudited interim consolidated financial statement presentation adopted in the current period.