Algonquin Power & Utilities Corp. remains committed to finalizing its deal for American Electric Power Co. Inc.'s Kentucky businesses but has about $1 billion of capital spending plans to pursue outside of that transaction, management said March 17.
Oakville, Ontario-headquartered Algonquin plans to deploy about $3.6 billion of capital in 2023, inclusive of the $2.65 billion deal, executives said on the company's fourth-quarter 2022 earnings call.
The company plans to spend the remaining capital on investments tied to "safety, reliability and resiliency."
However, management provided few details on the spending plan and its confidence in closing the Kentucky acquisition.
"We certainly have a lot more growth opportunities on both the regulated side of the business and the renewable side of the business," Algonquin President and CEO Arun Banskota told analysts and investors. "I don't want to speculate on what happens, but we have lots of options to deploy capital, but we'll obviously be looking at it from customer affordability, our own capital intensity requirements, funding requirements and all of those factors."
Algonquin subsidiary Liberty Utilities Co. and AEP are again seeking approval from the Federal Energy Regulatory Commission for their deal involving AEP's Kentucky assets.
FERC denied the sale of Kentucky Power Co. and AEP Kentucky Transmission Co Inc. to Liberty Utilities "without prejudice" in December 2022, saying the parties "have failed to show that the proposed transaction will not have an adverse effect on rates."
The new application includes several measures Liberty agreed to take over the next five years to resolve concerns raised in FERC's order.
AEP and Liberty are asking FERC for an expedited review to close the deal by April 26.
Asset sales
Algonquin in January said it would lower its dividend by about 40% to free up about $1 billion over a five-year period to help fund organic growth and offset headwinds. Algonquin also intends to trim capex in 2023 by 15% and targets $1 billion of additional asset sales to help combat near-term economic challenges such as rising interest rates and inflation.
"With over $17 billion worth of assets in our portfolio, the $1 billion taken in context is a fairly small amount," Banskota said. "We have quite a number of different optionalities for that $1 billion of proceeds."
Algonquin's portfolio of businesses includes regulated electric, gas, water and wastewater utilities serving more than 1 million customers in 13 U.S. states and the Canadian province of New Brunswick, plus about 4 GW of renewable energy assets either in operation or under construction.
In addition, Algonquin is the largest shareholder of U.K.-headquartered Atlantica Sustainable Infrastructure PLC, which is undergoing a strategic review.
Atlantica's portfolio includes more than 2 GW of renewables, as well as 343 MW of natural gas-fired power generation, 55 MW of thermal district heating capacity and 1,229 miles of electric transmission lines, according to its website. Atlantica also has 2 GW of renewable energy resources and 5.6 GWh of storage in its development pipeline for North America, Europe and South America.
Algonquin management said they support the review.
Earnings results
Algonquin on March 17 reported fourth-quarter 2022 adjusted net earnings of $151 million, or 22 cents per share, compared to adjusted net earnings of $137 million, or 21 cents per share, in the fourth quarter of 2021. The S&P Capital IQ normalized consensus EPS estimate for the quarter was 20 cents.
For full year 2022, Algonquin reported adjusted net earnings of $474.9 million, or 69 cents per share, compared to $449 million, or 71 cents per share, in 2021. The S&P Capital IQ normalized consensus EPS estimate for 2022 was 67 cents.
The company reported fourth-quarter 2022 adjusted EBITDA of $358.3 million, a 20% increase from $298.3 million in the prior-year period. Algonquin reported 2022 adjusted EBITDA of about $1.26 billion, a 17% increase from about $1.08 billion in 2021.
The S&P Capital IQ consensus adjusted EBITDA estimate for the fourth quarter was about $346.9 million, with the consensus estimate for full year 2022 at about $1.24 billion.
Algonquin reaffirmed its 2023 adjusted earnings guidance of 55 cents to 61 cents per share.
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