Algonquin Power cuts dividend as utility lowers guidance
Algonquin Power & Utilities (AQN.TO)(AQN) has announced a plan to lower its quarterly dividend and target $1 billion in asset sales, as the Ontario-based power utility attempts to strengthen its financial position and reassure investors.
Arun Banskota, CEO of Algonquin, stated that the company must address the challenges facing it in a press release. The company’s stock has been under pressure since November, when Banskota outlined headwinds from higher interest rates and inflation, to construction delays for renewable energy projects.
“We have reached an inflection point,” Banskota stated in Thursday’s release. “The board of directors and management team are taking decisive actions to strengthen our financial and strategic position.”
Algonquin expects 2023 adjusted net earnings per share of $0.55 to $0.61. This is down from the $0.66- $0.69 estimate it had when it released third quarter financial results last year.
Algonquin will reduce its quarterly dividend to $0.1808 per common share, in order to increase financial flexibility. It will also suspend its dividend investment program for its common stock at that point.
Last week, Wells Fargo noted the company’s current payout dwarfs Algonquin’s utility peers, and seems to clash with its “capital-intensive ambitions.”
Those ambitions appear to have been reined in, according to Thursday’s update. Algonquin states it is working hard to reduce capital costs, refocus its portfolio and even target $1 billion in asset sales to help pay down debt and grow bankrolls.
Algonquin claims it intends to purchase Kentucky Power through Liberty Utilities, its American subsidiary. The transaction was denied by U.S. federal regulators in mid-December. Algonquin must pay the Ohio-based American Electric Power a break fee of US$65 millions if the deal is terminated.
Jeff Lagerquist works as a senior reporter at Yahoo Finance Canada. Follow him on twitter @jefflagerquist.
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