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Algonquin Power eyes global investments after strong Q1 performance

Algonquin Power & Utilities Corp. extolled its robust first-quarter earnings to investors, and executives said the company is looking to make future investments around the world while proceeding with electric and natural gas infrastructure investments in the U.S. and Canada.

Ontario-headquartered Algonquin reported first-quarter adjusted EBITDA of $279.2 million, a 45% increase from $192.3 million in the same quarter of 2017. Results were reported in U.S. currency.

"Q1 marked a strong start to 2018," Algonquin CEO Ian Robertson told investors on a May 11 call. He attributed the strong across-the-board operational performance of its utility and renewables businesses to a colder winter and favorable resource conditions. In addition, Robertson said new investments and the positive impact of recent U.S. federal corporate income tax reform also influenced the first-quarter results.

As a result of the strong performance, Algonquin Power's board of directors raised the company's quarterly dividend by 10% to 12.82 cents per common share from 11.65 cents per common share. The dividend equates to 51.28 cents per share, in U.S. currency, on an annualized basis.

Various factors contributed to Algonquin's sharp increase in EBITDA. CFO David Bronicheski said New Hampshire utility subsidiary Liberty Utilities (Granite State Electric) Corp., which does business as Liberty Utilities, saw its EBITDA increase 16% year over year. Also contributing was a full quarter of results from the 149-MW Deerfield wind farm in Huron County, Mich., which represents approximately $13 million of additional EBITDA.

In March, Algonquin Power completed the formation of AAGES, a joint venture with Abengoa SA to develop clean energy and water infrastructure around the world. Algonquin Power also completed the acquisition of a 25% stake in Atlantica Yield PLC from Abengoa in March and announced in April an acquisition of an additional 16.5% interest for a total stake of 41.5%. However, Robertson said Algonquin Power only intends to acquire all of Abengoa's interest in Atlantica Yield and does not foresee acquiring more than 50% of the yieldco.

The company also said the first 75-MW portion of the Great Bay solar facility in Maryland is fully contributing to financial results, and construction of its 75-MW Amherst Island Wind Project in Ontario is well advanced, with the last of its turbines set to be installed the week of May 14.

Algonquin Power noted that progress continues on its $340 million Granite Bridge natural gas pipeline and LNG storage project in New Hampshire that was announced in December 2017. The developer said the New Hampshire Department of Transportation has given Liberty Utilities preliminary approval for the proposed 16-inch pipeline's route through the state. Algonquin said it expects a final regulatory decision in 2019 on the project to relieve New England of high energy costs and wintertime constraints in natural gas supplies.

In Missouri, Algonquin said subsidiary Empire District Electric Co. reached a settlement with regulators on the company's transformation of its generating fleet away from coal with the addition of 600 MW of new wind capacity. The plan has yet to be approved. "We believe that our 'greening the fleet' plan in our Midwest region has the ability to generate cost savings for our customers of over $300 million over the coming 20 years," Robertson said.

Algonquin continues to actively evaluate investment opportunities around the world, Robertson said. This includes a high-voltage transmission line in Peru, which he said has many of the attributes Algonquin Power wants in an international investment, such as offering revenue certainty provided by a 30-year concession agreement paid in U.S. dollars, support of a government guarantee and a commercially secured opportunity for Algonquin and AAGES. He said a decision on the project will be reached in the second half.