RE:RE:RE:RE:RE:New 52wk low yesterdaybmbruce wrote: Algonquin's share price will likely bottom when interest rates reach their peak and start declining again....watch the 10-year Treasury yield, as it keeps rising towards 5%..... signs of easing inflation or weaker growth could cause yields to peak and fall, buoying Algonquin's share price... but without the Fed signaling a slower pace of hikes, yields may keep rising until monetary policy shifts....Algonquin's valuation depends on interest rate trends and Fed actions...its share price may struggle until rates top out... IMO
The above is typically true for all utility companies, pipeline companies, telecomms, and other sectors that tend to carry a lot of debt as a means of growing their businesses because of the reliability of their cash flow.
Eg. today's close:
FTS down 1.86%
EMA down 3.27%
H down 4.31%
AQN down 4.85%
The difference is that (at least to date) these other companies can handle their debt load even when rates increase upon debt renewals. AQN seemingly can't without risking a credit rating downgrade - thus the desire to sell their Renewables business. Problem is, this is probably the worst time to be a seller of such assets as other power and utility companies also have to spend more to finance their debt, don't have a lot of cash lying around given much of it is likely already earmarked for new projects, their share prices are also down significantly so an equity raise to fund such an acquisition would not be shareholder friendly, etc.
Now, companies like Brookfield (Renwable Partners) often like to sieze the opportunity in these situations and buy assets at depressed prices, so I have no doubt AQN can sell their renewable power assets - it's just a matter of how much they can get for them if they sell them in the near future. I'm sure they are fielding offers, but I suspect the market doubts AQN will get full and fair value of these assets and believe AQN can't want too long to reap the proceeds of the sale and pay down debt.
Like I stated in a previous post, I think the activist investor (Starboard) thought the Renewables were worth much more than what (likely lowball) firm offers may have been presented to date - or potential suitors may still be doing their due diligence via non-disclosure agreements with AQN. In any event, AQN will likely have to bite the bullet and sell their Renewables business for what it will fetch, then let the market take a look at what they got for those assets vs. what the market thought they were worth, the resulting paydown of debt, and expected revenue / earnings going forward as a pure utility play.
Whether the share price has hit bottom is anyone's guess as there are still unknowns as outlined above.