Algonquin Power starts to "go international"
On May 10 Algonquin Power released it's first quarter report and it revealed a surprise.First Algonquin says in it's quarterly report that "over 90% of APUC's consolidated revenue,EBITDA and assets are derived from operations in the United States".And most of this comes from regulated utilities that produce and distribute water and power.Algonquin buys utilities that are distressed or run down and modernizes them. Most of these utilities are regulated,so,in effect, American regulated utilities control their earnings.This is a stabilizing effect and removes large movements in the stock price both upwards and downwards.And the chief asset is Liberty Utilities which is a huge regulated utility in Kansas and Missouri.Liberty controls their path going forward and APUC has a huge investment in Liberty.This blog feels that any future growth is tied into Liberty Utility.
First Quarter Highlights
AQN put up some good numbers in Q1 and revealed it's international growth strategy.It successfully formed the Aages Joint Venture and took a substantial position in a Spanish company called Atlantica Yield.While revenues increased 17% to $495 million and adjusted EBITDA increased 45% to $279 million.In addition, adjusted funds from operations increased by 15% to $180 million.This puts Algonquin on track to hit $800 to $900 million adjusted funds from operations and $1150 adjusted EBITDA for 2018 according to their press release.The problem is that both Funds from Operations and EBITDA are controlled by American regulators.Rate awards are rarely on time and the same as what is asked for.The overall effect is that Canadian investors have discounted these healthy expected earnings.
Gaining liberty through Liberty Utilities
Liberty Utilities was a huge acquisition and most shareholders ,including me, did not think that Algonquin Power would get it.Algonguin has included many previous and later acquisitions as a part of Liberty.Liberty now has a NYSE listing but it is not clear to this blog just how big it is.But this blog has warned AQN about having too many assets under the American regulated umbrella.And my last blog on Workathon suggested that AQN could have a large secondary equity issue of up to $1 billion and invest the funds in other jurisdictions.This would leave them holding 75 to 80% possibly of their built-up equity in Liberty Utilities.At this time it is not clear how much equity would be left in their prize possession.
First Quarter Highlights
AQN put up some good numbers in Q1 and revealed it's international growth strategy.It successfully formed the Aages Joint Venture and took a substantial position in a Spanish company called Atlantica Yield.While revenues increased 17% to $495 million and adjusted EBITDA increased 45% to $279 million.In addition, adjusted funds from operations increased by 15% to $180 million.This puts Algonquin on track to hit $800 to $900 million adjusted funds from operations and $1150 adjusted EBITDA for 2018 according to their press release.The problem is that both Funds from Operations and EBITDA are controlled by American regulators.Rate awards are rarely on time and the same as what is asked for.The overall effect is that Canadian investors have discounted these healthy expected earnings.
Gaining liberty through Liberty Utilities
Liberty Utilities was a huge acquisition and most shareholders ,including me, did not think that Algonquin Power would get it.Algonguin has included many previous and later acquisitions as a part of Liberty.Liberty now has a NYSE listing but it is not clear to this blog just how big it is.But this blog has warned AQN about having too many assets under the American regulated umbrella.And my last blog on Workathon suggested that AQN could have a large secondary equity issue of up to $1 billion and invest the funds in other jurisdictions.This would leave them holding 75 to 80% possibly of their built-up equity in Liberty Utilities.At this time it is not clear how much equity would be left in their prize possession.
Algonquin Power "goes international"
Algonquin has two more American projects "in the works";Great Bay Solar Project which is a 75MW operation that has come into operation on March29,2018.And a 600MW wind farm.Both will be a part of Liberty Utilities.But it also bought a 42% chunk of a Spanish utility called Atlantica Yield for $953 million.The last deal was financed by about $450 million of equity on the TSX (not the NYSE).This may be the start of a "go international" trend.But this trend will not likely go very far without raising equity and debt from Liberty Utilities.Algonquin now must see if Americans discount their assets as much as Canadians discount their earnings.So far no new equity issues have been made on Liberty shares. www.manulife.com
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