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Algonquin Power & Utilities Corp T.AQN

Alternate Symbol(s):  AQN | T.AQN.PR.A | AGQPF | T.AQN.PR.D

Algonquin Power & Utilities Corp. is a Canada-based diversified international generation, transmission, and distribution company. The Company through its two business groups, the Regulated Services Group, and the Renewable Energy Group, provides sustainable energy and water solutions through its portfolio of electric generation, transmission, and distribution utility investments to over one million customer connections, largely in the United States and Canada. The Company is engaged in renewable energy through its portfolio of long-term contracted wind, solar, and hydroelectric generating facilities. The Company owns, operates, and/or has net interests in over four gigawatts (GW) of installed renewable energy capacity. The Company is focused on its expanding global pipeline of renewable energy and electric transmission development projects, organic growth within its rate-regulated generation, distribution and transmission businesses, and the pursuit of accretive acquisitions.


TSX:AQN - Post by User

Comment by Capharnaumon Oct 28, 2021 12:56pm
284 Views
Post# 34059516

RE:RE:RE:RE:RE:RE:AEP to sell Kentucky operations to Liberty

RE:RE:RE:RE:RE:RE:AEP to sell Kentucky operations to Liberty
TickerTwit wrote:
Capharnaum wrote:
Most of the latest transactions for regulated assets have been done between 1.8 and 2.0 times the base rate (basically the book value of assets for the regulator). Kentucky Power was acquired at 1.3 times the base rate

There was assumed debt, so the net purchase price was $2.846B+$1.221B = $4.067B. The rate base is important for future income, but the actual bought equity appears to be about $1B at a purchase price of $2.846B, implying an acquisition premium of 185%. And the future liability for converting from coal generation is yet to come.

I freely admit my lack of experience in regulated utility analysis. Someone please correct me if I'm wrong; I do not like these numbers. I also don't like that this deal is being marqueed as "accretive to adjusted net EPS", which borders on non-GAAP meaninglessness.


The debt is included in the purchase price, it's not in addition to the $2.725B acquisition.

Within the $2.725B, they are taking over $1.2B in debt and they will finance the remainder $1.6B using the public offering of $0.6B-0.7B and the remainder of $0.9B-1.0B will be hybrid debt/equity (like they did previously this year) or monetization of non-regulated assets/investments. (Slide 13 of their presentation)

Hence, they paid approx 1.3x the rate base. Since the rate base is $2.2B and there was $1.2B of debt, assuming that the regulator works with an actual capitalization (most regulators work with a presumed capital structure instead), that would mean $1B of the rate base was equity.

Please note that transactions are always done based on the rate base, and that the rate base always includes a portion of debt that varies between 40-60% for all utilities.

Also, when you purchase a utility that requires investment in the future, your investment will slowly but surely reduce the premium spent compared to the base rate.

As to my background, I'm well versed in utilities as I'm a bit of an expert in the field (accounting, M&A and regulatory filings).

Lastly, considering the perpetual nature of utilities and the guaranteed return on money invested into it through time delayed rate adjustments, adjusted results are likely a better performance measure than GAAP results for utilities.
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