Stock analysts downgrade Belco parent – The Royal Gazette
Updated: January 15, 2023 2:15 p.m
Arun Banskota, President and CEO of Algonquin Power & Utilities Corp. (photo provided)
Weekend arrival could spell Algonquin Power & Utilities Corp crash stopped very well after shares of the parent company of Bermuda’s only electric utility, Belco, suffered two declines on Thursday and Friday.
Analysts downgraded the stock, which trades on the New York Stock Exchange under the symbol AQN, and fell 6.6 percent in Friday’s trading, extending Thursday’s 3.6 percent decline in U.S. stocks.
The market appeared to be reacting to the corporate actions of the Canada-based diversified international power generation, transmission and distribution utility, which cut its dividend by 40 percent and issued below-consensus earnings guidance for 2023.
Beginning with the first quarter 2023 dividend (expected to be paid in April 2023), AQN intends to reduce the quarterly dividend from $0.1808 to $0.1085 per common share.
The Company will continue to pursue the acquisition of Kentucky Power, its most recent acquisition target.
AQN intends to rebalance its portfolio by targeting approximately $1 billion in additional asset sales. Proceeds from the next phase of recycling of renewable assets and additional asset sales are expected to be used to service debt and fund further growth.
The company is also suspending its dividend reinvestment plan for its common stock.
Algonquin said Thursday from its Oakville, Ontario office that it must address the challenges the company is facing.
Related to an investor update, the statement said decisive actions would be taken to strengthen its financial and strategic positions.
These include actions to rebalance capital allocation, reduce capital expenditures, rebalance the portfolio and reduce the dividend to position the company for sustainable, long-term growth.
President and Chief Executive Officer, Arun Banskota, said, “We remain committed to our long-term energy transition strategy, including continuing the acquisition of Kentucky Power, which we expect will expand our tariff base, expand customer relationships and provide further decarbonization opportunities.
“Our track record of operational excellence and our portfolio of high-quality assets across our regulated and renewable businesses, and the actions we are announcing today, are expected to allow the Company to benefit from industry tailwinds and create significant value for shareholders .
“Going forward, this stronger financial foundation should position the company to maintain a BBB credit rating, sustainably increase the dividend, reduce capital requirements and deliver solid core growth across both businesses.”
Desjardins analyst Brent Stadler downgraded the stock from hold to sell with a price target of $7, down from $10, and said he was “struggling to make a compelling case for owning the name based on fundamentals”.
“2023 guidance was well below expectations, headwinds are expected into 2025 with very little earnings growth (unless it succeeds in KP rate falls) and we believe the current valuation is fair,” Mr. Stadler said in his second downgrade of the stock in the last two months.
Alpha wantedthe crowdsourced content service for financial markets, said that the company’s clearest path to earnings growth is for the company to complete the acquisition of Kentucky Power assets and successfully implement interest cases.
Algonquin Power & Utilities Corp. completed the acquisition of Bermuda Electric Light Company Limited in November 2020 for $365 million.