Algonquin Power & Utilities Corp. Completes Sale of Renewable Energy Business to LS Power

Rhea-AI Summary

Algonquin Power & Utilities Corp. (AQN) has completed the sale of its non-regulated renewable energy business to LS Power, marking a significant step in its strategic transition to become a pure-play regulated utility. The transaction, combined with the recent sale of its 42.2% stake in Atlantica Sustainable Infrastructure on December 12, 2024, represents a pivotal milestone in reducing the company's complexity.

The company plans to utilize the net proceeds from the transaction to reduce existing debt and strengthen its balance sheet. The deal excludes AQN's hydro fleet. J.P. Morgan acted as the exclusive financial advisor, while Gibson, Dunn & Crutcher LLP and Blake, Cassels & Graydon LLP served as legal advisors for the transaction.

Positive

• Strategic transition to pure-play regulated utility model reduces business complexity
• Net proceeds will be used to reduce debt and strengthen balance sheet
• Successful completion of two major asset sales (renewable business and Atlantica stake)

Negative

• Reduction in business diversification through divestment of renewable energy assets
• Loss of potential growth opportunities in the renewable energy sector

Insights

Financial Analyst

The completion of AQN's renewable energy business sale represents a transformative transaction for the company's financial structure and business model. Moving to a pure-play regulated utility model should result in more predictable cash flows and reduced earnings volatility. The strategic debt reduction from the sale proceeds will strengthen the balance sheet, potentially improving the company's credit metrics and borrowing costs.

The timing aligns well with the recent Atlantica Sustainable Infrastructure stake sale, demonstrating efficient execution of AQN's strategic transition. This streamlined business model could appeal to investors seeking stable utility returns, though it may reduce growth potential compared to the previous hybrid model. The focus on regulated operations typically implies lower but more consistent returns, which could help stabilize the stock's performance.

Utility Industry Expert

This strategic pivot to a pure-play regulated utility model positions AQN more conventionally within the utility sector. Regulated utilities typically benefit from stable returns on equity approved by regulatory bodies, providing more predictable revenue streams compared to merchant renewable operations. The sale of the renewable business reduces operational complexity and exposure to merchant power price volatility.

The transaction's completion reflects broader industry trends where utilities are increasingly focusing on their core regulated businesses. This strategic clarity could improve AQN's standing with utility-focused investors who prefer straightforward, regulated business models. The retention of the hydro fleet suggests a balanced approach, maintaining some valuable legacy assets while streamlining the overall portfolio.

Market Research Analyst

With a market cap of $3.4 billion, this transaction fundamentally reshapes AQN's investment profile. The move to a pure-play regulated model could lead to a potential valuation re-rating as the company aligns more closely with traditional utility peers. The debt reduction focus addresses a key concern among utility investors, potentially reducing the equity risk premium assigned to the stock.

The involvement of J.P. Morgan as financial advisor and the clean execution of both the renewable business and Atlantica stake sales demonstrates strong institutional backing for this strategic shift. The market typically rewards such decisive strategic moves, especially when they result in simpler, more focused business models with clearer paths to value creation.

Marks key achievement in strategic transition to pure-play regulated utility

OAKVILLE, Ontario--(BUSINESS WIRE)-- Algonquin Power & Utilities Corp. (TSX/NYSE: AQN) (“AQN” or the “Company”) announced today it has completed the sale of its non-regulated renewable energy business (excluding the Company’s hydro fleet) to a wholly owned subsidiary of LS Power.

“We are pleased with the timely and successful completion of the sale of our renewable energy business,” said Chris Huskilson, Chief Executive Officer of AQN. “This transaction, coupled with the recent sale of our 42.2% ownership stake in Atlantica Sustainable Infrastructure plc on December 12, 2024, achieves a pivotal step in our journey to transform AQN into a pure-play regulated utility with reduced complexity. Though there is still work to be done, passing this milestone should enable a greater focus on increasing the pace of this transition.”

AQN intends to use the net proceeds from the transaction to pay down existing debt and strengthen its balance sheet.

J.P. Morgan served as the exclusive financial advisor to AQN in connection with the transaction. Gibson, Dunn & Crutcher LLP and Blake, Cassels & Graydon LLP served as legal advisors.

About Algonquin Power & Utilities Corp. and Liberty

Algonquin Power & Utilities Corp., parent company of Liberty, is a diversified international generation, transmission, and distribution utility. AQN is committed to providing safe, secure, reliable, cost-effective, and sustainable energy and water solutions through its portfolio of generation, transmission, and distribution utility investments to over one million customer connections, largely in the United States and Canada. AQN's common shares, preferred shares, Series A, and preferred shares, Series D are listed on the Toronto Stock Exchange under the symbols AQN, AQN.PR.A, and AQN.PR.D, respectively. AQN's common shares and Series 2019-A subordinated notes are listed on the New York Stock Exchange under the symbols AQN and AQNB, respectively.

Visit AQN at www.algonquinpower.com and follow us on X.com @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 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”, “intends”, “should” and “expects” (and grammatical variations of such terms) 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: the expected pace of the Company’s transition to a pure-play regulated utility; and the expected use of proceeds from the sale of Company’s renewable energy business. 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 require making 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. There can be no assurance that any of the intended benefits and aims of the sale of the Company’s renewable energy business will be realized. Forward-looking statements contained herein are provided for the purposes of assisting in understanding the Company and its business, operations, risks, financial performance, financial position and cash flows as at and for the periods indicated and to present information about management’s current expectations and plans relating to the future and such information may not be appropriate for other purposes. Material risk factors and assumptions include those set out in AQN's Annual Information Form and Annual Management Discussion and Analysis for the year ended December 31, 2023, and Management Discussion and Analysis for the three and nine months ended September 30, 2024, each of which is available on SEDAR+ and EDGAR. 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250107984388/en/

Investor Inquiries:

Brian Chin

Vice President, Investor Relations

Algonquin Power & Utilities Corp.

E-mail: InvestorRelations@APUCorp.com

Telephone: (905) 465-4500



Media Inquiries:

Stephanie Bose

Director, Corporate Communications

Liberty

E-mail: Corporate.Communications@libertyutilities.com

Telephone: (905) 465-4500

Source: Algonquin Power & Utilities Corp.

FAQ

What assets did AQN sell to LS Power in its recent transaction?

AQN sold its non-regulated renewable energy business to LS Power, excluding the Company's hydro fleet.

How will AQN use the proceeds from the LS Power transaction?

AQN plans to use the net proceeds to pay down existing debt and strengthen its balance sheet.

What percentage stake did AQN sell in Atlantica Sustainable Infrastructure?

AQN sold its 42.2% ownership stake in Atlantica Sustainable Infrastructure plc on December 12, 2024.

What is AQN's strategic goal with these recent asset sales?

AQN aims to transform into a pure-play regulated utility with reduced complexity through these strategic divestitures.

Who were the advisors for AQN's renewable energy business sale?

J.P. Morgan served as financial advisor, while Gibson, Dunn & Crutcher LLP and Blake, Cassels & Graydon LLP served as legal advisors.