Algonquin Power & Utilities Corp. (AQN) is pursuing the sale of its renewable energy business, the Renewable Energy Group, to focus on its utilities business.
The decision comes after the company’s board of directors launched a strategic review of its renewables division, AQN said in a press release on Thursday.
Following the successful sale of the division, AQN said it expects to be a “competitive, pure-play capital regulated utility with a stable and healthy growth outlook,” according to the statement.
“Over the past few months, AQN’s Board of Directors, together with our independent financial advisor, has conducted a comprehensive review of our businesses with the goal of enhancing value for our shareholders,” said the AQN Interim CEO Chris Huskilson.
“We have two strong businesses: a well-positioned regulated utilities business with diversified assets and attractive jurisdictions, and a strong and competitive renewables business with scale and strong assets. That said, we believe the value of our assets is not fully realized in our current structure. We therefore determined that focusing on our regulated business going forward and pursuing a sale of the renewables business is the best way forward for AQN,” he added.
“We are confident that the planned sale will unlock the value of AQN as a regulated pure play utility by simplifying our structure and allowing us to focus on lower risk regulated investment opportunities with greater operational efficiency and capital discipline Huskilson continued.
“We expect to use the proceeds of a renewable energy transaction to reduce our debt and fund stock awards. In addition, our objectives for the transaction are to support our current dividend, reduce our cost of capital and maintain our BBB investment grade credit rating.At the same time, we will seek to maximize the value of the renewables business and position it with a new owner who can facilitate its long-term success through the energy transition ongoing”, he added.
JP Morgan will act as AQN’s financial advisor in relation to the sale of the Renewable Energies Group, according to the statement.
AQN reported adjusted net earnings of $56.2 million, a 49 percent decrease compared to Q2 2022 net earnings of $109.6 million, according to the statement.
The company reported revenue of $627.9 million in the second quarter, a one percent increase over the year-ago quarter’s revenue of $619.4 million. Its adjusted EBITDA was $277.7 million, a decrease of four percent compared to $289.2 million in the second quarter of 2022.
“While our results for the second quarter of 2023 were negatively impacted by the unfavorable weather, we remain focused on our prospects for growth and long-term success,” Huskilson said.
In particular, wind installations in the Renewable Energies Group generated 75.1 percent of the long-term average resource, which was a decrease of 22 percent compared to the same period in 2022, the which represented approximately two cents of adjusted net income per common share year-over-year. decrease, AQN said.
The Renewable Energy Group also saw a $14.0 million decrease in the “Hypothetical write-down to book value related to the end of production tax credit eligibility on certain commissioned projects in 2012, as previously experienced in the second half of 2022 and the first quarter of 2023,” AQN. said
In a separate press release, AQN’s board declared a dividend of $0.1085 per common share, payable on October 13 to shareholders of record on September 28 for the period between July 1 and September 30
The board also declared a dividend of $0.24 (CAD 0.32263) per Series A Preferred Share and $0.24 (CAD 0.31819) per Series D Preferred Share, payable in cash on the 2 October to those registered on September 15 during the period from June 30 to but excluding September 30.
AQN also suspended the dividend reinvestment plan for its common shares, effective March 16.
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