Algonquin Power reduces dividend as utility lowers guidance
Algonquin Power & Utilities (AQN.TO)(AQN) has announced a plan to lower its quarterly dividend and target US$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 now anticipates 2023 adjusted earnings per common share between $0.55- $0.61, a decrease from its previous lower estimate of $0.66- $0.69 that it issued last year when it reported third quarter financial results.
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 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 claims it is working to reduce capital costs and refocus its portfolio. This includes aiming for US$1 Billion in additional asset sales, to reduce debt growth and to pay down bankroll growth.
Algonquin claims it intends to purchase Kentucky Power through Liberty Utilities, its American subsidiary. Mid-December saw the U.S. Federal regulators deny the transaction. Algonquin must pay an additional US$65 million to Ohio-based American Electric Power in order to terminate the agreement.
Jeff Lagerquist, a senior reporter for Yahoo Finance Canada, is Jeff Lagerquist. Follow him on Twitter @jefflagerquist.
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