Algonquin Power & Utilities Corp T.AQN

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

Utilities Utilities - Diversified

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.

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Algonquin Power & Utilities Corp

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Post by retiredcfon Feb 04, 2021 9:42am

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Post# 32469133

TD

Algonquin Power & Utilities Corp.

(AQN-N, AQN-T) US$17.13 | C$21.91

Takeaways from Virtual Investor Meetings Event

Last week, we hosted meetings between Algonquin management and institutional investors. Discussions concentrated on the company's growth prospects — both the five-year, $9.4-billion, investment plan and prospective growth for the company's non-regulated renewable power platform.

Impact: NEUTRAL

We reiterate our BUY rating and 12-month share-price target of US$20.00. As we have previously reviewed the company's five-year investment plan in detail, this note concentrates on prospective growth potential, commentary on investment return trends, and regional growth bias.

Prospective renewable power growth was a focus for investors. Most of Algonquin's five-year investment plan is concentrated on its regulated segment (67% of planned spending), but the prospective 3.4 GW greenfield renewable pipeline garnered disproportionate investor attention. The prospective pipeline is weighted to 2023 and later. Management expects levered after-tax returns in the 9-10% range (near regulated ROEs for its utility investments).
U.S. remains the growth driver. Although peers in our renewable IPP coverage universe are increasingly concentrated on international expansion, Algonquin management believe that North America (especially the U.S.) offers an ongoing compelling opportunity-set. Management is committed to Algonquin's 44% equity stake in Atlantica (AY-US, not covered) as the international growth vehicle.
There were relatively few questions regarding funding plans. We attribute less investor focus on funding to ongoing valuation expansion for the sector (i.e., an implicit assumption that equity financing is available, if needed, and that Algonquin can supplement liquidity with mandatory converts and asset recycling). There were also few questions regarding dividend growth (less focus as yields have contracted).

TD Investment Conclusion

We believe that Algonquin offers a compelling valuation in the context of an extensive growth pipeline that includes development activity, potential acquisitions, utility rate base investments, and measured international expansion. As the company has diverse investment opportunities and comfortable leverage, we believe that above- sector-average dividend growth is realistic.