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Management changes, missed estimates weigh on Canadian power stocks in Q3'18

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Management changes, missed estimates weigh on Canadian power stocks in Q3'18

Most power companies trading on the Toronto Stock Exchange and covered by S&P Global Market Intelligence saw stock prices decline during the third quarter of 2018.

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AltaGas Ltd. shares plunged 24.3% to close the quarter with a C$20.55 share price and a market capitalization of C$5.47 billion.

During the quarter, David Harris agreed to resign as president, CEO and director of AltaGas due to a complaint under review by the board. AltaGas also unveiled plans to sell noncore natural gas midstream and power assets in Canada and the U.S. for about C$560 million to pay down a significant part of the bridge facility related to its recently closed acquisition of WGL Holdings Inc.

Just Energy Group Inc. lost 15.4% to end at C$4.01, Boralex Inc. tumbled 14.4% to finish at C$18.03, and Northland Power Inc. shed 11.5% to conclude at C$21.7, after reporting earnings that fell short of consensus estimates.

Just Energy booked fiscal first-quarter 2019 base EBITDA of C$27.3 million, missing the S&P Global Market Intelligence consensus estimate of C$39.7 million. Boralex recorded second-quarter EBITDA of C$68.0 million, falling below the consensus estimate of C$78.7 million. Northland Power posted second-quarter adjusted EBITDA of C$183.0 million, missing the consensus estimate of C$212.3 million.

Shares of Hydro One Ltd. retreated 2.0% to close the quarter at C$19.64, with a market capitalization of C$11.70 billion. On July 12, Hydro One stock price slipped 3.22% after announcing the immediate retirement of Mayo Schmidt as CEO and the replacement of the board of directors. The move disrupted the procedural schedule for the pending merger between Hydro One and Avista Corp., prompting the companies to extend the end date to March 29, 2019.

Top-performing stocks

Capital Power Corp. settled 13% higher at C$28.51, leading gains among Canadian power companies during the period. The company struck a deal to purchase the 580-MW Arlington Valley Energy combined-cycle, gas-fired facility in Arizona from funds managed by Oaktree Capital Management LP and co-investors for US$300 million. At the end of the quarter, Capital Power had a market cap of C$2.92 billion.

Aside from Capital Power, only TransAlta Corp. and Algonquin Power & Utilities Corp. recorded gains for the third quarter. TransAlta shares closed 10.2% higher at C$7.27, giving the company a market cap of about C$2.09 billion, while Algonquin shares climbed 5.2% to finish at C$13.36, with a market cap of about C$6.33 billion.

In July, TransAlta announced the retirement of the 280-MW mothballed unit 2 of the Sundance coal-fired plant in Alberta. During the same month, Fitch assigned first-time, BBB long-term issuer default ratings to Algonquin and its unregulated and regulated subsidiaries. In September, Algonquin also received approval from the Saskatchewan government to construct the 177-MW Blue Hill wind energy project in the province.