Dive Brief:
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Algonquin Power & Utilities Corp has agreed to sell its renewable energy business, with the exception of its hydropower assets, to developer and independent power producer LS Power for up to $2.5 billion, the company announced on Friday.
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LS Power will pay $2.28 billion in cash at closing, plus up to $220 million in an earn out agreement tied to certain wind assets, according to the announcement.
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Algonquin Power will use the funds to pay down debt while it focuses on growing the regulated utility side of the business, CEO Chris Huskilson said during a second quarter earnings call on Friday.
Dive Insight:
Algonquin Power is looking to pay down debt and become more “disciplined” in its finances with Friday's $2.5 million deal, Huskilson said.
While the company still anticipates growth in the future, “we also believe we need to put a substantial amount of discipline into this business. And so as we work through accountability and how we want to structure and run our utilities, at the end of the day, the main word is discipline,” he said.
Huskilson said the sale was the first of three goals he set when he assumed the role of CEO about a year ago. The second — capitalizing on Algonquin Power's 42.2% stake in Atlantica Sustainable Infrastructure — was realized in May with the sale of those shares to a private investment fund controlled by Energy Capital Partners, Huskilson said. That leaves his final objective: growing and strengthening the company's regulated utility business.
“This major milestone, coupled with our previously announced support agreement to sell our Atlantica shares, delivers on our plan to transform Algonquin into a pure-play regulated utility, optimize our regulated business activities, strengthen our balance sheet, and enhance our quality of earnings,” Huskilson told investors on Friday.
The company also appointed Sarah MacDonald as chief transformation officer, with the role of overseeing the company's utility operations and customers service.
Proceeds from the sale should allow the company to spend capital on new investments in the long-run, but in the immediate future will be used to pay down the company's debts, Darren Myers, chief financial officer for Algonquin Power, said.
“This is all going to debt repayment,” Myers said. “And with that strong balance sheet, we will have some flexibility to make different choices from there, but the primary focus is really to be more self-sustaining, earn on what we have today and just be in a position of strength.”
Huskilson declined to answer additional questions from investors about the company's earnings trajectory, citing plans to release further details in late 2024 or early 2025 when the sale is expected to close.
