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 $1 billion in asset sales, as the Ontario-based power utility attempts to strengthen its financial position and reassure investors.
Arun Banskota (Algonquin CEO) stated in a Thursday press release that the company must address its challenges. 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. 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 claims it is working to reduce capital costs and refocus its portfolio. This includes aiming for $1 billion in additional asset sale to reduce debt and increase 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 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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