Algonquin Power & Utilities Corp. Announces 2023 Fourth Quarter and Full Year Financial Results
- Strong financial performance in Q4 with a 13% increase in Adjusted EBITDA and an 18% increase in Adjusted Net Earnings.
- Annual Adjusted EBITDA increased by 4% to $1,235.4 million, while Annual Adjusted Net Earnings decreased by 11% to $372.0 million.
- Regulated Services Group saw double-digit Divisional Operating Profit growth due to new rate implementations and investments.
- Renewable Energy Group added 453 MW of wind and solar generation in 2023, showcasing continued growth.
- The Company simplified development activities by purchasing the remaining 50% of Liberty Development JV Inc. and Liberty Development Energy Solutions B.V.
- Issuance of Securitized Utility Tariff Bonds and Senior Unsecured Notes to address extraordinary costs and repay indebtedness.
- AQN refrains from providing Adjusted Net Earnings guidance for 2024 due to the planned sale of its renewable energy business.
- Annual Adjusted Net Earnings per common share decreased by 13% on a year-over-year basis.
- Dividends per common share decreased by 40% compared to the previous year.
- Renewable Energy Group Divisional Operating Profit decreased by 9% in 2023.
- Long-term Debt increased by 13% to $8,516.0 million.
- Uncertainty regarding the planned sale of the renewable energy business impacts financial outlook for 2024.
Insights
The reported increase in Adjusted EBITDA and Adjusted Net Earnings per common share for the fourth quarter indicates a robust operational performance for Algonquin Power & Utilities Corp. during that period, despite a year-over-year revenue decrease. The growth in Divisional Operating Profit within the Regulated Services Group suggests successful rate implementations which could translate into a stable revenue stream, given the typically predictable nature of regulated utilities. However, the annual figures present a mixed picture, with a notable decrease in Adjusted Net Earnings and per share earnings. This decline, coupled with the company's decision to sell its renewables business, may lead to investor concern about future earnings potential and business focus.
The decrease in dividends per common share is significant and could impact investor sentiment, potentially leading to a reevaluation of the stock's attractiveness as an income investment. The increase in long-term debt should also be scrutinized, as it may affect the company's leverage and financial flexibility. Investors will likely monitor how the proceeds are used and whether they contribute to a more efficient operating profile as mentioned by the Interim CEO.
The strategic shift implied by the termination of the Kentucky Power transaction and the planned sale of the renewables business is a pivotal move. It's essential to consider the implications of divesting from a sector that is generally seen as growth-oriented and aligned with global sustainability trends. While the addition of 453 MW of wind and solar generation capacity in 2023 is a positive development, the long-term strategy post-sale will be critical for stakeholders. The renewable energy sector is rapidly evolving and the company's exit from this market segment might raise questions about its future growth trajectory and ability to capitalize on clean energy trends.
Furthermore, the Securitized Utility Tariff Bonds issuance to recover costs from Winter Storm Uri and the retirement of the Asbury plant underscores the financial impact of extreme weather events and the transition to cleaner energy sources. These bonds, often used to spread the cost of such events over time to mitigate rate shocks for customers, indicate the ongoing financial challenges utilities face in a changing climate and energy landscape.
The market's reaction to Algonquin Power & Utilities Corp.'s financial results and strategic decisions will likely be influenced by the broader industry context. The utility sector is generally favored for its defensive characteristics and stable dividends, so the 40% dividend cut might be particularly disconcerting for investors. The company's decision not to provide earnings guidance for 2024 due to the uncertainty surrounding the sale of its renewables business could add to the market's uncertainty. Investors may seek clarity on the company's vision and how the repositioning aligns with industry trends towards decarbonization and investment in renewable infrastructure.
It is also worth noting the company's proactive steps in rate case proceedings, which have led to revenue increases. This adept regulatory management is a key factor in the utility industry, impacting the ability to recover costs and earn a return on investment. The market will likely assess whether these regulatory successes can offset the potential risks associated with strategic shifts and a changing revenue mix.
"2023 was a decision year for the Company, with the termination of the Kentucky Power transaction and announcement of the planned refocusing of the Company, including the proposed sale of our renewables business. We expect 2024 to be a transition year as we seek to reposition the Company towards a more efficient operating profile and a renewed strategy for the future," said Chris Huskilson, Interim Chief Executive Officer of AQN. "Despite headwinds in 2023, we made progress. Our Regulated Services Group posted double-digit Divisional Operating Profit1 growth primarily from new rate implementations, reflecting recovery of and returns on investments we made in our systems. Additionally, our renewables business placed in service 453 MW of wind and solar generation. We are excited that in the midst of taking steps to simplify and focus the Company, our two businesses continued to grow."
Fourth Quarter and Full Year Financial Results
- Fourth Quarter Adjusted EBITDA1 of
$334.3 million 13% ; - Fourth Quarter Adjusted Net Earnings1 of
$115.5 million 18% ; - Fourth Quarter Adjusted Net Earnings1 per common share of
$0.16 14% ; - Annual Adjusted EBITDA1 of
$1,235.4 million 4% ; - Annual Adjusted Net Earnings1 of
$372.0 million 11% ; - Annual Adjusted Net Earnings1 per common share of
$0.53 13% , in each case on a year-over-year basis.
All amounts in | Three months ended December 31 | Twelve months ended December 31 | |||||
2023 | 2022 | Change | 2023 | 2022 | Change | ||
Revenue | $ 666.9 | $ 748.0 | (11) % | (2) % | |||
Regulated Services Group Revenue | 564.9 | 636.6 | (11) % | 2,315.7 | 2,330.0 | (1) % | |
Renewable Energy Group Revenue | 82.1 | 88.6 | (7) % | 296.3 | 350.8 | (16) % | |
Net earnings (loss) attributable to shareholders | 186.3 | (74.4) | 350 % | 28.7 | (212.0) | 114 % | |
Per common share | 0.27 | (0.11) | 345 % | 0.03 | (0.33) | 109 % | |
Cash provided by operating activities | 200.7 | 214.6 | (6) % | 628.0 | 619.1 | 1 % | |
Adjusted Net Earnings1 | 115.5 | 97.6 | 18 % | 372.0 | 420.3 | (11) % | |
Per common share | 0.16 | 0.14 | 14 % | 0.53 | 0.61 | (13) % | |
Adjusted EBITDA1 | 334.3 | 295.5 | 13 % | 1,235.4 | 1,192.8 | 4 % | |
Regulated Services Group Divisional Operating Profit1 | 238.3 | 214.4 | 11 % | 954.1 | 863.6 | 10 % | |
Renewable Energy Group Divisional Operating Profit1 | 107.6 | 101.5 | 6 % | 371.8 | 410.7 | (9) % | |
Adjusted Funds from Operations1 | 198.9 | 191.9 | 4 % | 724.6 | 790.3 | (8) % | |
Dividends per common share | 0.1085 | 0.1808 | (40) % | 0.4340 | 0.7130 | (39) % | |
Long-term Debt | 8,516.0 | 7,512.0 | 13 % | 8,516.0 | 7,512.0 | 13 % | |
1 Please refer to "Non-GAAP Measures" below for further details. |
Fourth Quarter and Full Year 2023 Highlights
- Regulated growth from new rate implementations – The Regulated Services Group recorded year-over-year growth in Divisional Operating Profit of
10.5% due to the implementation of new rates and recovery of investments at the Company's CalPeco, Empire, Granite State and Bermuda Electric Systems as well as the Park Water and Pine Bluff Water Systems (see "Non-GAAP Measures" below). During March and April 2023, the Regulated Services Group received final rate case orders at its Apple Valley Water, Park Water and CalPeco Electric systems, with aggregate annual revenue increases of$29.6 million $9.7 million - New renewable energy facilities constructed within the Renewable Energy Group – The Renewable Energy Group placed in service approximately 453 MW of new wind and solar generation in 2023. This was comprised primarily of the approximately 108 MW Shady Oaks II Wind Facility located in
Illinois , the approximately 112 MW Deerfield II Wind Facility located inMichigan , the approximately 88 MW Sandy Ridge II Wind Facility located inPennsylvania , the approximately 100 MW New Market Solar Facility located inOhio , and the 25 MW Hayhurst Solar Facility in New Mexico.
Subsequent Events
- Simplification of development activities – On January 4, 2024, the Company purchased the remaining
50% of the equity of Liberty Development JV Inc. and Liberty Development Energy Solutions B.V. for$7.9 million - Issuance of approximately
$305.5 million $180.5 million 4.943% Securitized Utility Tariff Bonds with a maturity date of January 1, 2035, and$125 million 5.091% Securitized Utility Tariff Bonds with a maturity date of January 1, 2039, to recover previously incurred qualified extraordinary costs associated with Winter Storm Uri and energy transition costs related to the retirement of the Asbury generating plant. - Issuance of
$850 million $500 million 5.577% senior notes due January 31, 2029 and$350 million 5.869% senior notes due January 31, 2034. The net proceeds were used to repay indebtedness.
Outlook
- Financial outlook – Due to the uncertainty regarding the planned sale of its renewable energy business, the Company is not providing Adjusted Net Earnings per common share guidance for 2024 (see "Non-GAAP Measures" below).
AQN will file its annual consolidated financial statements, annual management discussion & analysis (the "Annual MD&A"), and Annual Information Form, each for the year ended December 31, 2023, with the applicable Canadian securities regulatory authorities. Copies of these documents and other supplemental information on AQN is made available on its website at www.AlgonquinPowerandUtilities.com and in its corporate filings on SEDAR+ at www.sedarplus.com (for Canadian filings) and EDGAR at www.sec.gov/edgar (for
Earnings Conference Call
AQN will hold an earnings conference call at 8:30 a.m. eastern time on Friday, March 8, 2024, hosted by Interim Chief Executive Officer, Chris Huskilson, and Chief Financial Officer, Darren Myers.
Date: | Friday, March 8, 2024 | |
Time: | 8:30 a.m. ET | |
Conference Call: | Toll Free Dial-In Number | 1 (800) 715-9871 |
Toll Dial-In Number | 1 (647) 932-3411 | |
Conference ID | 7706966 | |
Webcast: | https://edge.media-server.com/mmc/p/4njwh3q5 | |
Presentation also available at: www.algonquinpowerandutilities.com | ||
About Algonquin Power & Utilities Corp. and Liberty
Algonquin Power & Utilities Corp., parent company of Liberty, is a diversified international generation, transmission, and distribution utility with approximately
Visit AQN at www.algonquinpower.com and follow us on Twitter @AQN_Utilities.
Caution Regarding Forward-Looking Information
Certain statements included in this news release constitute ''forward-looking information'' within the meaning of applicable securities laws in each of the provinces and territories of
Other
The term "rate base" is used in this document. Rate base is a measure specific to rate-regulated utilities that is not intended to represent any financial measure as defined by
Non-GAAP Measures
AQN uses a number of financial measures to assess the performance of its business lines. Some measures are calculated in accordance with generally accepted accounting principles in
The terms "Adjusted Net Earnings", "Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization" (or "Adjusted EBITDA"), "Adjusted Funds from Operations", "Divisional Operating Profit", "Net Utility Sales" and "Net Energy Sales", which are used in this news release, are non-GAAP financial measures. An explanation of each of these non-GAAP financial measures can be found in the section titled "Caution Concerning Non-GAAP Measures" in the Annual MD&A, which section is incorporated by reference into this news release, and a reconciliation to the most directly comparable
Reconciliation of Adjusted EBITDA to Net Earnings
The following table is derived from and should be read in conjunction with the consolidated statement of operations. This supplementary disclosure is intended to more fully explain disclosures related to Adjusted EBITDA and provides additional information related to the operating performance of AQN. Investors are cautioned that this measure should not be construed as an alternative to
Three months ended | Twelve months ended | ||||||
December 31 | December 31 | ||||||
(all dollar amounts in $ millions) | 2023 | 2022 | 2023 | 2022 | |||
Net earnings (loss) attributable to shareholders | $ 186.3 | $ (74.4) | $ 28.7 | $ (212.0) | |||
Add (deduct): | |||||||
Net earnings attributable to the non-controlling interest, | 16.5 | 6.0 | 53.5 | 18.9 | |||
Income tax recovery | (1.2) | (28.6) | (86.3) | (61.5) | |||
Interest expense | 87.9 | 78.0 | 353.7 | 278.6 | |||
Other net losses1 | 13.9 | 2.1 | 132.9 | 21.4 | |||
Unrealized loss (gain) on energy derivatives included in revenue2 | 0.5 | (2.1) | 7.5 | 0.9 | |||
Asset impairment charge | 23.5 | 159.6 | 23.5 | 159.6 | |||
Impairment of equity-method investee | — | 75.9 | — | 75.9 | |||
Pension and post-employment non-service costs | 4.8 | 4.6 | 19.9 | 11.0 | |||
Change in value of investments carried at fair value3 | (122.8) | 14.7 | 230.0 | 499.1 | |||
Costs related to tax equity financing | — | — | 1.2 | — | |||
Gain on derivative financial instruments | (0.6) | (6.4) | (4.6) | (4.4) | |||
Gain on sale of renewable assets | — | (62.8) | — | (64.0) | |||
Loss on foreign exchange | 3.4 | 14.1 | 8.4 | 13.8 | |||
Depreciation and amortization | 122.1 | 114.8 | 467.0 | 455.5 | |||
Adjusted EBITDA | $ 334.3 | $ 295.5 | $ 1,235.4 | $ 1,192.8 | |||
1 | See Note 19 in the annual consolidated financial statements. |
2 | Includes |
3 | See Note 8 in the annual consolidated financial statements. |
Reconciliation of Adjusted Net Earnings to Net Earnings
The following table is derived from and should be read in conjunction with the consolidated statement of operations. This supplementary disclosure is intended to more fully explain disclosures related to Adjusted Net Earnings and provides additional information related to the operating performance of AQN. Investors are cautioned that this measure should not be construed as an alternative to consolidated net earnings in accordance with
The following table shows the reconciliation of net earnings to Adjusted Net Earnings exclusive of these items:
Three months ended | Twelve months ended | ||||||
December 31 | December 31 | ||||||
(all dollar amounts in $ millions except per share information) | 2023 | 2022 | 2023 | 2022 | |||
Net earnings (loss) attributable to shareholders | $ 186.3 | $ (74.4) | $ 28.7 | $ (212.0) | |||
Add (deduct): | |||||||
Gain on derivative financial instruments | (0.6) | (6.4) | (4.6) | (4.4) | |||
Gain on sale of renewable assets | — | (62.8) | — | (64.0) | |||
Other net losses1 | 13.9 | 2.1 | 132.9 | 21.4 | |||
Asset impairment charge | 23.5 | 159.6 | 23.5 | 159.6 | |||
Impairment of equity-method investee | — | 75.9 | — | 75.9 | |||
Loss on foreign exchange | 3.4 | 14.1 | 8.4 | 13.8 | |||
Unrealized loss (gain) on energy derivatives included in revenue2 | 0.5 | (2.1) | 7.5 | 0.9 | |||
Change in value of investments carried at fair value3 | (122.8) | 14.7 | 230.0 | 499.1 | |||
Costs related to tax equity financing | — | — | 1.2 | — | |||
Adjustment for taxes related to above | 11.3 | (23.1) | (55.6) | (70.0) | |||
Adjusted Net Earnings | $ 115.5 | $ 97.6 | $ 372.0 | $ 420.3 | |||
Adjusted Net Earnings per common share | $ 0.16 | $ 0.14 | $ 0.53 | $ 0.61 | |||
1 | See Note 19 in the annual consolidated financial statements. |
2 | Includes |
3 | See Note 8 in the annual consolidated financial statements. |
Reconciliation of Adjusted Funds from Operations to Cash Provided by Operating Activities
The following table is derived from and should be read in conjunction with the consolidated statement of operations and consolidated statement of cash flows. This supplementary disclosure is intended to more fully explain disclosures related to Adjusted Funds from Operations and provides additional information related to the operating performance of AQN. Investors are cautioned that this measure should not be construed as an alternative to cash provided by operating activities in accordance with
The following table shows the reconciliation of cash provided by operating activities to Adjusted Funds from Operations exclusive of these items:
Three months ended | Twelve months ended | ||||||
December 31 | December 31 | ||||||
(all dollar amounts in $ millions) | 2023 | 2022 | 2023 | 2022 | |||
Cash provided by operating activities | $ 200.7 | $ 214.6 | $ 628.0 | $ 619.1 | |||
Add (deduct): | |||||||
Changes in non-cash operating items | (1.8) | 41.2 | 86.3 | 221.6 | |||
Production based cash contributions from non-controlling | — | — | 9.1 | 6.2 | |||
Gain on sale of renewable assets | — | (62.8) | — | (64.0) | |||
Costs related to tax equity financing | — | — | 1.2 | — | |||
Acquisition-related costs | — | (1.1) | — | 7.4 | |||
Adjusted Funds from Operations | $ 198.9 | $ 191.9 | $ 724.6 | $ 790.3 | |||
Reconciliation of Net Utility Sales and Regulated Services Group Divisional Operating Profit to Revenue
The following table is derived from and should be read in conjunction with the consolidated statement of operations and consolidated statement of cash flows. This supplementary disclosure is intended to more fully explain disclosures related to Divisional Operating Profit and Net Utility Sales and provides additional information related to the operating performance of AQN. Investors are cautioned that these measures should not be construed as an alternative to revenue in accordance with
The following table shows the reconciliation of Net Utility Sales and Regulated Services Group Divisional Operating Profit to revenue:
Three months ended | Twelve months ended | ||||||
December 31 | December 31 | ||||||
(all dollar amounts in $ millions) | 2023 | 2022 | 2023 | 2022 | |||
Revenue | |||||||
Regulated electricity distribution | $ 297.0 | $ 325.8 | $ 1,295.5 | $ 1,278.9 | |||
Less: Regulated electricity purchased | (95.7) | (124.2) | (429.8) | (465.5) | |||
Net Utility Sales - electricity | 201.3 | 201.6 | 865.7 | 813.4 | |||
Regulated gas distribution | 167.4 | 221.8 | 621.2 | 686.7 | |||
Less: Regulated gas purchased | (71.6) | (125.5) | (267.1) | (340.8) | |||
Net Utility Sales - natural gas | 95.8 | 96.3 | 354.1 | 345.9 | |||
Regulated water reclamation and distribution | 100.5 | 89.0 | 399.1 | 364.4 | |||
Less: Regulated water purchased | (5.9) | (8.6) | (19.6) | (18.3) | |||
Net Utility Sales - water reclamation and distribution | 94.6 | 80.4 | 379.5 | 346.1 | |||
Other revenue1 | 11.6 | 14.5 | 51.1 | 54.2 | |||
Net Utility Sales2 | 403.3 | 392.8 | 1,650.4 | 1,559.6 | |||
Operating expenses | (193.4) | (185.8) | (786.6) | (736.5) | |||
Income from long-term investments | 11.6 | 5.2 | 45.0 | 21.9 | |||
HLBV3 | 16.8 | 2.2 | 45.3 | 18.6 | |||
Divisional Operating Profit4 | $ 238.3 | $ 214.4 | $ 954.1 | $ 863.6 | |||
1 | See Note 21 in the annual consolidated financial statements. |
2 | This table contains a reconciliation of Net Utility Sales to revenue. The relevant sections of the table are derived from and should be read in conjunction |
3 | HLBV income represents the value of net tax attributes monetized by the Regulated Services Group in the period at the Luning and Turquoise Solar Facilities |
4 | This table contains a reconciliation of Divisional Operating Profit to revenue for the Regulated Services Group. The relevant sections of the table are derived |
Reconciliation of Net Energy Sales and Renewable Energy Group Divisional Operating Profit to Revenue
The following table is derived from and should be read in conjunction with the consolidated statement of operations and consolidated statement of cash flows. This supplementary disclosure is intended to more fully explain disclosures related to Divisional Operating Profit and Net Energy Sales and provides additional information related to the operating performance of AQN. Investors are cautioned that these measures should not be construed as an alternative to revenue in accordance with
The following table shows the reconciliation of Net Energy Sales and Renewable Energy Group Divisional Operating Profit to revenue:
Three months ended | Twelve months ended | |||||||
December 31 | December 31 | |||||||
(all dollar amounts in $ millions) | 2023 | 2022 | 2023 | 2022 | ||||
Revenue1 | ||||||||
Hydro | $ 9.0 | $ 13.1 | $ 35.4 | $ 51.5 | ||||
Wind | 59.4 | 64.5 | 199.5 | 221.4 | ||||
Solar | 6.6 | 2.8 | 31.0 | 30.1 | ||||
Thermal | 7.1 | 8.2 | 30.4 | 47.8 | ||||
Total Non-Regulated Energy Sales | $ 82.1 | $ 88.6 | $ 296.3 | $ 350.8 | ||||
Less: | ||||||||
Cost of Sales - Energy2 | (0.3) | (0.2) | (2.6) | (7.1) | ||||
Cost of Sales - Thermal | (3.7) | (5.2) | (16.9) | (34.5) | ||||
Net Energy Sales 3 | $ 78.1 | $ 83.2 | $ 276.8 | $ 309.2 | ||||
Renewable Energy Credits4 | 5.9 | 7.6 | 27.5 | 27.8 | ||||
Other Revenue | 2.0 | 0.3 | 5.9 | 0.6 | ||||
Total Net Revenue | $ 86.0 | $ 91.1 | $ 310.2 | $ 337.6 | ||||
Expenses & Other Income | ||||||||
Operating expenses | (30.5) | (31.7) | (119.0) | (114.5) | ||||
Dividend, interest, equity and other income5 | 32.8 | 21.6 | 109.3 | 91.2 | ||||
HLBV income6 | 19.3 | 20.5 | 71.3 | 96.4 | ||||
Divisional Operating Profit7,8 | $ 107.6 | $ 101.5 | $ 371.8 | $ 410.7 | ||||
1 | Many of the Renewable Energy Group's power purchase agreements ("PPAs") include annual rate increases. However, a change to the weighted average production levels resulting from higher average production from facilities that earn lower energy rates can result in a lower weighted average energy rate earned by the division as compared to the same period in the prior year. |
2 | Cost of Sales - Energy consists of energy purchases in the Maritime Region to manage the energy sales from the Tinker Hydro Facility which is sold to retail and industrial customers under multi-year contracts. |
3 | This table contains a reconciliation of Net Energy Sales to revenue. The relevant sections of the table are derived from and should be read in conjunction with the consolidated statement of operations and Note 21 in the annual consolidated financial statements, "Segmented information". This supplementary disclosure is intended to more fully explain disclosures related to Net Energy Sales and provides additional information related to the operating performance of AQN. Investors are cautioned that Net Energy Sales should not be construed as an alternative to revenue. |
4 | Qualifying renewable energy projects receive renewable energy certificates ("RECs") for the generation and delivery of renewable energy to the power grid. The RECs represent proof that 1 MW-hr of electricity was generated from an eligible energy source. |
5 | Includes dividends received from Atlantica Sustainable Infrasctructure plc and related parties (see Notes 8 and 16 in the annual consolidated financial statements) as well as the equity investment in the Stella, Cranell, East Raymond and West Raymond Wind Facilities. |
6 | HLBV income represents the value of net tax attributes earned by the Renewable Energy Group in the period primarily from electricity generated by certain of its |
Production tax credits ("PTCs") are earned as wind energy is generated based on a dollar per kW-hr rate prescribed in applicable federal and state statutes. For the twelve months ended December 31, 2023, the Renewable Energy Group's eligible facilities generated 3,299.0 GW-hrs representing approximately | |
7 | Certain prior year items have been reclassified to conform to current year presentation. |
8 | This table contains a reconciliation of Divisional Operating Profit to revenue for the Renewable Energy Group. The relevant sections of the table are derived from and should be read in conjunction with the consolidated statement of operations and Note 21 in the annual consolidated financial statements, "Segmented Information". This supplementary disclosure is intended to more fully explain disclosures related to Divisional Operating Profit and provides additional information related to the operating performance of the Renewable Energy Group. Investors are cautioned that Divisional Operating Profit should not be construed as an alternative to revenue. |
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SOURCE Algonquin Power & Utilities Corp.
FAQ
What were Algonquin Power & Utilities Corp.'s Q4 2023 Adjusted EBITDA and Adjusted Net Earnings?
What was the Annual Adjusted EBITDA for Algonquin Power & Utilities Corp. in 2023?
How much renewable energy generation did the Renewable Energy Group add in 2023?
What major financial events occurred in 2024 for Algonquin Power & Utilities Corp.?
Why did Algonquin Power & Utilities Corp. refrain from providing Adjusted Net Earnings guidance for 2024?
