Log In

Reset Password

Stock analysts downgrade Belco parent

Arun Banskota, Algonquin Power & Utilities Corp. president and CEO (Photograph supplied)

The arrival of the weekend may very well have stopped the slide of Algonquin Power & Utilities Corp after stock of the parent of Bermuda’s sole electricity supplier, Belco, faced two price drops on Thursday and Friday.

Analysts downgraded the stock, which trades under the symbol AQN on the New York Stock Exchange, and it was down 6.6 per cent in Friday trading, extending Thursday's 3.6 per cent slide on its US shares.

The market appeared to be reacting to corporate action from the Canadian-based diversified international generation, transmission, and distribution utility that slashed its dividend by 40 per cent and issued below-consensus earnings guidance for 2023.

Effective for its first quarter 2023 dividend (expected to be payable in April 2023), AQN intends to lower its quarterly dividend from $0.1808 to $0.1085 per common share.

The company will continue to pursue the acquisition of Kentucky Power, its latest takeover target.

AQN intends to refocus its portfolio by targeting approximately $1 billion of additional asset sales. Proceeds from the next phase of renewable asset recycling and additional asset sales are expected to be used to pay down debt and continue to fund growth.

The company is also suspending its dividend reinvestment plan for its common shares.

Algonquin said on Thursday from its Oakville, Ontario, offices that it must address challenges facing the business.

In connection with an investor update, the statement said decisive actions were being taken to strengthen its financial and strategic positions.

These include taking steps to realign capital allocation, reduce capital expenditures, refocus the portfolio, and reduce the dividend in order 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 the pursuit of the Kentucky Power acquisition, which we expect will add to our rate base, grow customer connections and provide further decarbonisation opportunities.

“Our track record of operational excellence and portfolio of high-quality assets across our regulated and renewable businesses, coupled with the actions we are announcing today, are expected to enable the company to capitalise on industry tailwinds and create meaningful value for shareholders.

“Moving forward, this stronger financial foundation is expected to position the company to maintain a BBB credit rating, increase the dividend sustainably, reduce equity capital needs and deliver solid core growth across both businesses."

Desjardins analyst Brent Stadler downgraded shares to “sell” from “hold” with a $7 price target, cut from $10. He said that he "struggle(s) to make a compelling case to own the name based on fundamentals".

"Guidance for 2023 was well below expectations, headwinds are anticipated through 2025 with very little earnings growth (unless it is successful with KP rate cases) and we believe the current valuation is fair," Mr Stadler said in his second downgrade of the stock in the past two months.

Seeking Alpha, the crowdsourced content service for financial markets, said the company’s clearest path to earnings growth was if it closed on the acquisition of Kentucky Power assets and successfully implemented rate cases.

Algonquin Power & Utilities Corp. completed its acquisition of the Bermuda Electric Light Company Limited in November 2020 for $365 million.

You must be Registered or to post comment or to vote.

Published January 16, 2023 at 7:42 am (Updated January 16, 2023 at 10:41 am)

Stock analysts downgrade Belco parent

What you
Need to
1. For a smooth experience with our commenting system we recommend that you use Internet Explorer 10 or higher, Firefox or Chrome Browsers. Additionally please clear both your browser's cache and cookies - How do I clear my cache and cookies?
2. Please respect the use of this community forum and its users.
3. Any poster that insults, threatens or verbally abuses another member, uses defamatory language, or deliberately disrupts discussions will be banned.
4. Users who violate the Terms of Service or any commenting rules will be banned.
5. Please stay on topic. "Trolling" to incite emotional responses and disrupt conversations will be deleted.
6. To understand further what is and isn't allowed and the actions we may take, please read our Terms of Service
7. To report breaches of the Terms of Service use the flag icon