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Michael.Thompson


Algonquin Power & Utilities Plans Sale of Renewables Business

2023-08-10

Algonquin Power & Utilities held an earnings call meeting to discuss the company's financial performance and provide insights into non-GAAP measures and ratios. The meeting included participation from company executives and analysts from financial institutions.

The primary focus of the meeting was the planned sale of the company's renewables business and the potential valuation of the transaction. This announcement indicates that Algonquin Power & Utilities is actively seeking opportunities to divest its assets and generate value for shareholders. The CEO mentioned receiving interest from potential buyers and expressed confidence in the attractiveness and appropriate valuation of the portfolio.

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The company conducted modeling to assess the future prospects of the regulated business after the divestiture, aligning with the expectations of JPM. This suggests that Algonquin Power & Utilities has thoroughly analyzed the potential impact of the divestiture on the remaining business and anticipates its success.

The market outlook for the company is mixed, with reported increases in borrowing costs and a decline in earnings. However, the planned renewables sale is seen as a potential benefit to the business. Algonquin Power & Utilities' diverse operating portfolio is considered to hold significant value. Despite weather impacts, the company expects to track towards the lower end of its guidance. Overall, the market outlook remains uncertain, but the company is taking steps to improve its financial position and maintain its credit rating.

The key drivers of the business discussed during the meeting were growth potential, capital constraints, scale, and the interest rate environment. Algonquin Power & Utilities plans to focus on clean, affordable, and reliable energy and water in its regulated business. The company intends to invest approximately $1 billion of capital per year to standardize infrastructure, improve reliability, and create economies of scale for customers. They also seek investment opportunities that enhance service and customer affordability through opex to capex investments. Modernizing utility systems, supporting safe and reliable service delivery, assisting customers in transitioning towards net zero, and maintaining average aggregate rate increases roughly in line with inflation are among the company's goals. Additionally, Algonquin Power & Utilities aims for annual adjusted net EPS growth in the 4% to 7% range over time and intends to maintain its investment-grade BBB credit rating.

Regarding the company's outlook for the quarter and year, Algonquin Power & Utilities stated that it is tracking towards the lower half of its previously disclosed 2023 guidance. The second quarter was negatively impacted by weather conditions, resulting in adjusted net earnings of $56.2 million and adjusted earnings per share of $0.08, representing a year-over-year decline of approximately 50%. The company's guidance assumes continuing operations accounting treatment for the renewables business.

The company's capital spending plans involve investing approximately $1 billion of capital per year. The focus will be on standardizing infrastructure, improving reliability, and creating economies of scale for customers. Algonquin Power & Utilities aims to find investment opportunities that enhance service and customer affordability by shifting operating expenses to capital expenditures. Modernizing utility systems, supporting safe and reliable service delivery, assisting customers in transitioning towards net zero, and maintaining average aggregate rate increases roughly in line with inflation are among the company's objectives.

During the earnings call, key participants included Chris Huskilson (Interim CEO), Darren Myers (CFO), Jeff Norman (Chief Development Officer), Johnny Johnston (COO), and Brian Chin (VP, Investor Relations). The article also mentions the leadership changes within the company, including the appointment of Chris Huskilson as interim CEO and the departure of Arun Banskota. It highlights the engagement of a search firm to identify a permanent CEO. Darren Myers reviewed the company's second-quarter performance and financial results, and participants had the opportunity to engage with the management team through a question-and-answer session.

In conclusion, Algonquin Power & Utilities' earnings call meeting provided valuable insights into the company's financial performance and strategic plans. The planned sale of the renewables business and the potential valuation of assets were key topics of interest, indicating the company's proactive approach to optimizing its portfolio. Despite challenges in the market, Algonquin Power & Utilities remains focused on clean, affordable, and reliable energy and water in its regulated business while seeking opportunities for growth and maintaining its credit rating.