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Algonquin may pursue international assets, concedes interest in Atlantica Yield

While highlighting the successful close of its acquisition of Joplin, Mo.-headquartered Empire District Electric Co. at the beginning of the year, management for Algonquin Power & Utilities Corp. said the Canadian company will likely shift its primary focus to assets overseas.

"I think the work that we have done has made us increasingly comfortable that there is an economic thesis to be pursued at looking at things outside of Canada, the U.S.," Algonquin President and CEO Ian Robertson said Aug. 11 on the company's second-quarter 2017 earnings call. "That doesn't in any way mean that we don't see value in the Canadian and the U.S. market places. We just acknowledge that it's a competitive market. I think we are comfortable our cost of capital and our development ingenuity will allow us to be successful. But as the company continues to grow ... I think it would be a mistake for us to not look internationally."

Robertson made the comment in response to an analyst's question after the CEO, in his prepared remarks, said Algonquin is "interested in geographically broader prospects for renewable generation" and is expanding its knowledge of international opportunities. Many analysts, in turn, questioned whether the Oakville, Ontario-headquartered company is moving away from the North American market and whether returns for M&A in international markets are more attractive.

"We do not feel the pressure to 'Oh my God, we've got to get international.' Our pipeline ... has got billions of dollars of stuff to do over the near term," Robertson said, acknowledging that the company needs to weigh the risk-return profile of acquiring international assets.

"I think you want us to be looking abroad," the CEO added. "But you don't want us to start looking abroad when the cupboard is bare. And I'd say the cupboard is not bare right now."

Robertson also appeared to confirm the company's interest in Abengoa SA's stake in yieldco Atlantica Yield plc.

"Without commenting on specific opportunities that you saw in the press, of course we looked at Atlantica. Why wouldn't we have?" Robertson said in response to an analyst's question. "I've never gone to a management presentation for an investment opportunity and come away stupider than I walked in. So, we go to these things and we just get smarter."

The company also is likely not done pursuing opportunities in the U.S.

"I think we are comfortable that I think we've put the Empire transaction ... we've put a tick beside it on the success column," Robertson said. "So, hopefully, the capital markets would see kind of the benefits and the results that we promised are actually coming to fruition. We are interested in repeating that experience."

The CEO pointed to Hydro One Ltd.'s acquisition of U.S. utility Avista Corp. as an example of the size and scale that Algonquin could be interested in.

"I think Avista would have been something now, with ourselves kind of close to [C$11 billion] in total size, something that might be on our radar scope today that it wouldn't have been on our radar scope before we had completed Empire and kind of demonstrated our ability to digest something of that scale and make sure that it's functioning operationally," Robertson said. "So, there's kind of an example of something that we would obviously have liked to have done. We like the hydro generation in there and we are actually very familiar with the Alaska operations. We had looked at them before Avista had bought them."

Empire District to solicit for wind

Outside of M&A opportunities, Robertson pointed out that Empire District Electric has filed an interconnection request with the Southwest Power Pool for 500 MW of new wind projects. The CEO said the request covers two projects and added that the utility will likely issue a request for proposals in September or October for additional wind capacity.

"Clearly, the intention is for the commitment to get these projects online before 2020 to secure 100% of the [production tax credits]," Robertson said.

He acknowledged that the "greening" of Empire District's fleet includes the shutdown of its 198-MW Asbury coal plant in Jasper County, Mo. He did not reveal a specific retirement date for the plant, which came online in June 1970. According to S&P Global Market Intelligence data, the Asbury plant in 2016 received coal from sources including Cloud Peak Energy Inc.'s Antelope Coal Mine in Converse County, Wyo., Peabody Energy Corp.'s North Antelope Rochelle Mine in Campbell County, Wyo., and Arch Coal Inc.'s Black Thunder mine, also in Campbell County, Wyo.