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. Algonquin will also suspend its dividend-reinvestment program for common shares.
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 taking steps in order to reduce capital costs, refocus its portfolio and even target $1 billion in asset sales to help pay down debt and grow bankroll.
Algonquin states it will continue to buy Kentucky Power through Liberty Utilities’ American subsidiary. Mid-December saw the U.S. Federal regulators deny the transaction. Algonquin must pay American Electric Power (based in Ohio) a break fee of US$65 Million if the deal is to be terminated.
Jeff Lagerquist works as a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.