Algonquin Power & Utilities Corp T.AQN

RBC

[retiredcf]

Algonquin Power & Utilities

Outperform (US$18.00 one-year price target)
Third quarter earnings and EPS (release date: November 11)

We expect Algonquin’s Q3/21 adjusted EPS to be US$0.14, slightly below the US$0.15 recorded in Q3/20. We forecast Q3/21 Adjusted EBITDA of US$239 million, above Q3/20 Adjusted EBITDA of US$186 million, driven by EBITDA contribution from the acquisition of the water utility ESSAL in Chile (October 2020), BELCO in Bermuda (November 2020), and a 51% interest in the Texas Coastal Wind facilities (Q1/21). In addition, Algonquin completed the construction of three wind facilities totaling 600 MW in its Missouri utility (H1/21), and commissioned various renewable development projects over the past year. From an EPS perspective, we expect the increase in EBITDA to be offset by higher depreciation, interest, and the additional shares outstanding (related to the equity offering that closed in mid-July 2020 and shares issued under the ATM program). We note that our adjusted EBITDA forecast does not include HLBV income (Q2/21 HLBV income was US$27 million).

We expect investors to focus on updates regarding the pending acquisition of water assets in New York State, updates on the development pipeline, and potential M&A opportunities (e.g., Kentucky Power). The FactSet mean EPS estimate for Q3/21 is US$0.15 (14 estimates ranging from US$0.13 to US$0.19).