Algonquin Power - a little more power
Algonquin Power reported it's year-end results and later Q1 2014 results on March 10. The C.E.O called 2013 a transformative year.Although net earnings were only $.07 for the year in comparison to $.09 for 2012, revenues were up almost 90%.Revenues went from $348 million in 2012 to $675 in 2013.Operating income went from $42 million to $103 million.Earnings before taxes were $60 million in comparison to $6.5 million in 2012.Algonquin Power was barely profitable and had little revenue in 2012 while in 2013 it had healthy earnings and revenues.However it's earnings per share were lower in 2013.This was only a technicality to reduce taxes.
The transformation
Algonquin had an even better Q1 2014 than that for 2013 .Revenues were up dramatically in 2013 but up again about 75% over the same quarter in 2013.Adjusted EBITDA was up 35% to $98 million just for the quarter.And now earnings per share were up too - from $.09 per share to $.17 per share.Almost double from the good quarter in 2013.
There were a number of reasons for the better performance.One of their properties got a $10.9 million regulated increase.They also made an acquisition of a solar project in Cornwall,Ontario.In addition,they completed the acquisition of the remaining 40% of a wind project in USA.Financially they did well also as they raised $200 million in unsecured debentures at 4.05% and $100 million of preferred shares at 5%.This is cheap long term funding.
Risk diversification
Algonquin is definitely on a positive trajectory for revenues and earnings.There should be more increases in both for the rest of 2014.Also you can expect Algonquin to make more accretive acquisitions in 2014.They have a nice mix of power sources-some solar projects, wind resources and natural gas.This definitely diversifies their risk;they are not completely attached to one source of power.However they may soon find that they are strongly connected to one jurisdiction - American regulatory authorities.This aside they have acquired properties in completely different parts of USA and this again diversifies their risk.It is likely that their acquisitions for the rest of 2014 have already been planned and not subject to change.But for the end of 2014 it might be prudent to look at properties in areas that might spread their risk out.
Price target
Algonquin has made tremenduous gains since 2012 and even since 2013 but it's price has not yet caught up.In 2012 it had assets but barely any profits.It truly did transform itself in 2013 and now it is able to use these profit producing assets to invest in new acquisitions.I believe investors will be watching to see where their new acquisitions are going to be in order to slightly spread out their risk.This will affect their price in 2014.That aside earnings have gone from $.07 for the year to $.17 for the quarter.It is easy to forecast earnings for the year at $.80 to $.85 per share for 2014.This would make Algonquin Power very cheap at it's present price as earnings would have increased by 11 to 12 times.This may be a bit optimistic but earnings of $.60 a share seem entirely reachable.If so then look at Algonquin Power trading in the $10 to $11 range.
The transformation
Algonquin had an even better Q1 2014 than that for 2013 .Revenues were up dramatically in 2013 but up again about 75% over the same quarter in 2013.Adjusted EBITDA was up 35% to $98 million just for the quarter.And now earnings per share were up too - from $.09 per share to $.17 per share.Almost double from the good quarter in 2013.
There were a number of reasons for the better performance.One of their properties got a $10.9 million regulated increase.They also made an acquisition of a solar project in Cornwall,Ontario.In addition,they completed the acquisition of the remaining 40% of a wind project in USA.Financially they did well also as they raised $200 million in unsecured debentures at 4.05% and $100 million of preferred shares at 5%.This is cheap long term funding.
Risk diversification
Algonquin is definitely on a positive trajectory for revenues and earnings.There should be more increases in both for the rest of 2014.Also you can expect Algonquin to make more accretive acquisitions in 2014.They have a nice mix of power sources-some solar projects, wind resources and natural gas.This definitely diversifies their risk;they are not completely attached to one source of power.However they may soon find that they are strongly connected to one jurisdiction - American regulatory authorities.This aside they have acquired properties in completely different parts of USA and this again diversifies their risk.It is likely that their acquisitions for the rest of 2014 have already been planned and not subject to change.But for the end of 2014 it might be prudent to look at properties in areas that might spread their risk out.
Price target
Algonquin has made tremenduous gains since 2012 and even since 2013 but it's price has not yet caught up.In 2012 it had assets but barely any profits.It truly did transform itself in 2013 and now it is able to use these profit producing assets to invest in new acquisitions.I believe investors will be watching to see where their new acquisitions are going to be in order to slightly spread out their risk.This will affect their price in 2014.That aside earnings have gone from $.07 for the year to $.17 for the quarter.It is easy to forecast earnings for the year at $.80 to $.85 per share for 2014.This would make Algonquin Power very cheap at it's present price as earnings would have increased by 11 to 12 times.This may be a bit optimistic but earnings of $.60 a share seem entirely reachable.If so then look at Algonquin Power trading in the $10 to $11 range.
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