Algonquin Power & Utilities Corp. Announces Pricing of Subordinated Debt Offerings

Rhea-AI Summary

Algonquin Power & Utilities Corp. (AQN) announced its pricing for two public offerings totaling US$750 million in the U.S. and C$400 million in Canada. Both offerings consist of junior subordinated notes due January 18, 2082. The net proceeds will primarily finance the company's acquisition of Kentucky Power Company, while short-term proceeds will reduce outstanding credit facilities. The offerings are set to close on or about January 18, 2022.

Positive

• Pricing of US$750 million and C$400 million offerings indicates strong market demand.
• Funds raised will support acquisition of Kentucky Power Company, enhancing growth prospects.

Negative

• Debt offerings may increase leverage and financial risk for AQN.
• Dependence on successful acquisition could pose integration challenges.

OAKVILLE, ON, Jan. 12, 2022 /PRNewswire/ - Algonquin Power & Utilities Corp. ("AQN" or the "Company") (TSX: AQN) (NYSE: AQN) today announced that it has priced the previously announced (i) underwritten public offering in the United States (the "U.S. Offering") of US$750 million aggregate principal amount of 4.75% fixed-to-fixed reset rate junior subordinated notes series 2022-B due January 18, 2082 (the "U.S. Notes"); and (ii) underwritten public offering in Canada (the "Canadian Offering" and, together with the U.S. Offering, the "Offerings") of C$400 million (approximately US$320 million) aggregate principal amount of 5.25% fixed-to-fixed reset rate junior subordinated notes series 2022-A due January 18, 2082 (the "Canadian Notes" and, together with the U.S. Notes, the "Notes"). Concurrent with the pricing of the Offerings, the Company entered into a cross currency interest rate swap, coterminous with the Canadian Notes, to convert the Canadian dollar denominated proceeds from the Canadian Offering into U.S. dollars, resulting in an effective interest rate to the Company of approximately 5.08% throughout the initial fixed-rate period of the Canadian Notes. The Offerings are expected to close on or about January 18, 2022, subject to customary closing conditions.

AQN intends to use the net proceeds of the Offerings to partially finance the Company's previously announced acquisition of Kentucky Power Company and AEP Kentucky Transmission Company, Inc. (the "Kentucky Power Acquisition"), provided that, in the short-term, prior to the closing of the Kentucky Power Acquisition, the Company expects to use the net proceeds of the Offerings to reduce amounts outstanding under existing credit facilities of the Company and its subsidiaries.

The U.S. Offering is being made to the public in the United States pursuant to a prospectus supplement filed under the Company's base shelf prospectus dated November 18, 2021 (the "Base Shelf Prospectus"), which will form part of the Company's effective registration statement filed with the U.S. Securities and Exchange Commission ("SEC"). The Canadian Offering is being made to the public in each of the provinces and territories of Canada pursuant to a prospectus supplement filed under the Base Shelf Prospectus.

The joint book-running managers for the U.S. Offering are BofA Securities and Wells Fargo Securities and the lead underwriters for the Canadian Offering are RBC Capital Markets and TD Securities. The terms of the U.S. Notes will be set forth in a final prospectus supplement to be filed by AQN under AQN's issuer profile on SEDAR at www.sedar.com and with the SEC at www.sec.gov and the terms of the Canadian Notes will be set forth in a final prospectus supplement to be filed by AQN under AQN's issuer profile on SEDAR at www.sedar.com. The Base Shelf Prospectus and the related prospectus supplements will contain important information about the U.S. Notes and the Canadian Notes, respectively. Investors should read the Base Shelf Prospectus and the applicable prospectus supplement before making an investment decision. Copies of the Base Shelf Prospectus and the prospectus supplement relating to the U.S. Notes may be obtained for free by visiting www.sedar.com or EDGAR on the SEC's website at www.sec.gov and copies of the Base Shelf Prospectus and the prospectus supplement relating to the Canadian Notes may be obtained for free by visiting www.sedar.com. Alternatively, AQN, any underwriter or any dealer participating (i) in the U.S. Offering will arrange to send you the Base Shelf Prospectus and the prospectus supplement relating to the U.S. Notes if you request it by calling BofA Securities, Inc. toll-free at 1-800-294-1322; or Wells Fargo Securities, LLC toll-free at 1-800-645-3751 and (ii) in the Canadian Offering will arrange to send you the Base Shelf Prospectus and the prospectus supplement relating to the Canadian Notes if you request it by calling RBC Capital Markets at 416-842-6311; or TD Securities at 416-982-5676.

The U.S. Notes will not be qualified for distribution to purchasers in Canada, or to residents of Canada, under the securities laws of any province or territory of Canada. The U.S. Notes may not be, directly or indirectly, offered, sold or delivered in Canada or to residents of Canada.

The Canadian Notes will not be registered under the U.S. Securities Act of 1933, as amended, or any state securities laws, and may not be offered or sold in the United States or to U.S. persons without registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act of 1933 and applicable securities laws. 

This news release shall not constitute an offer to sell or the solicitation of an offer to buy the securities described in this news release, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

All dollar amounts referenced herein are in U.S. dollars unless otherwise noted.

About Algonquin Power & Utilities Corp.

Algonquin Power & Utilities Corp., parent company of Liberty, is a diversified international generation, transmission, and distribution utility with over $16 billion of total assets. Through its two business groups, the Regulated Services Group and the Renewable Energy Group, AQN is committed to providing safe, secure, reliable, cost-effective, and sustainable energy and water solutions through its portfolio of electric generation, transmission, and distribution utility investments to over one million customer connections, largely in the United States and Canada.  AQN is a global leader in renewable energy through its portfolio of long-term contracted wind, solar, and hydroelectric generating facilities. AQN owns, operates, and/or has net interests in over 4 GW of installed renewable energy capacity.

AQN is committed to delivering growth and the pursuit of operational excellence in a sustainable manner through an expanding global pipeline of renewable energy and electric transmission development projects, organic growth within its rate-regulated generation, distribution, and transmission businesses, and the pursuit of accretive acquisitions.

AQN's common shares, Series A preferred shares, and Series D preferred shares are listed on the Toronto Stock Exchange under the symbols AQN, AQN.PR.A, and AQN.PR.D, respectively. AQN's common shares, Series 2018-A subordinated notes, Series 2019-A subordinated notes and equity units are listed on the New York Stock Exchange under the symbols AQN, AQNA, AQNB, and AQNU, respectively.

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 Canada and the respective policies, regulations and rules under such laws and ''forward-looking statements'' within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 (collectively, ''forward-looking statements"). The words "will", "expects", "intends" and similar expressions are often intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Specific forward-looking statements in this news release include, but are not limited to, statements regarding closing of the Offerings and the expected use of proceeds of the Offerings. These statements are based on factors or assumptions that were applied in drawing a conclusion or making a forecast or projection, including assumptions based on historical trends, current conditions and expected future developments. Since forward-looking statements relate to future events and conditions, by their very nature they rely upon assumptions and involve inherent risks and uncertainties. AQN cautions that although it is believed that the assumptions are reasonable in the circumstances, these risks and uncertainties give rise to the possibility that actual results may differ materially from the expectations set out in the forward-looking statements. Material risk factors and assumptions include those set out in AQN's Management Discussion and Analysis and Annual Information Form for the year ended December 31, 2020 and AQN's Management Discussion and Analysis for the three months and nine months ended September 30, 2021, each of which is available on SEDAR and EDGAR, and those set out in the prospectus supplements related to the Offerings. Given these risks, undue reliance should not be placed on these forward-looking statements, which apply only as of their dates. Other than as specifically required by law, AQN undertakes no obligation to update any forward-looking statements to reflect new information, subsequent or otherwise.

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SOURCE Algonquin Power & Utilities Corp.

FAQ

What is the amount of Algonquin's subordinated debt offerings?

Algonquin Power & Utilities Corp. has priced US$750 million and C$400 million in subordinated debt offerings.

When is the closing date for the subordinated debt offerings of AQN?

The closing date for the subordinated debt offerings is expected to be on or about January 18, 2022.

What will Algonquin do with the proceeds from the debt offerings?

The proceeds will be used to finance the acquisition of Kentucky Power Company and to reduce existing credit facility amounts.

What is the interest rate for the subordinated notes offered by AQN?

The U.S. Notes will have a fixed interest rate of 4.75%, while the Canadian Notes will have a rate of 5.25%.

What risks are involved with AQN's subordinated debt offerings?

The offerings may increase the company's financial leverage and pose risks if the acquisition of Kentucky Power does not go as planned.