Our view: We believe the in line Q4/21 results and reiteration of 2022 guidance will have a neutral impact on the shares of Algonquin. The conference call will be held today at 10:00 AM ET (Dial-in: 888-330-2454; Passcode: 5079453).
First impression
Q4/21 results (including gains) were in line with consensus. Algonquin's Q4/21 Adjusted EPS of $0.21 matched our and consensus estimates. From an EBITDA perspective, the Q4/21 Adjusted EBITDA of $263 million (excluding $35 million of HLBV income) was below our estimate of $287 million. The Adjusted EBITDA including HLBV income of $298 million was in- line with consensus estimates of $302 million (most analysts include HLBV income). The main variance from our estimate was weaker-than-expected results (-$18 million) from the Distribution segment (lower electricity consumption due to the mild weather and higher non-pass through fuel costs at Empire). We note that the Generation segment recognized some equity losses, but also benefited from $29 million of gains from the transfer of development assets to a JV owned by Algonquin and Ares Management. Please refer to Exhibit 1 for additional details.
Reiterating guidance. Management reiterated its Adjusted EPS guidance range of $0.72-0.77 for 2022, which was initially provided at the company's December 2021 investor day. Management also reiterated its 5-year $12.4 billion capital plan through the end of 2026.
Corporate PPAs driving renewable developments. In 2021, the company achieved COD at its 492 MW Maverick Creek wind and 80 MW Altavista solar facilities with the majority of Maverick's output being sold through two long-term PPAs with investment grade rated entities and the majority of Altavista's output being sold to Facebook. The company also partnered with JPMorgan Chase as the primary offtake for the 108 MW Shady Oaks II wind development, and continues to advance on its framework agreement with Chevron.
Busy acquisition schedule. As previously announced, Algonquin closed its ~$600 million acquisition of New York American Water on January 1, 2022. Algonquin also has a small ~$20 million pending acquisition (announced in December 2021) of Sandhill Advanced Biofuels, a renewable natural gas development platform specializing in anaerobic digestion projects. Finally, management continues to expect its pending ~$2.8 billion acquisition of Kentucky Power to close in mid-2022. To date, the company has raised ~ $1.7 billion, fully funding the Kentucky Power equity purchase price.
Conference call: Friday, March 4, at 10:00 AM ET. The dial-in number is 888-330-2454 (Passcode: 5079453). We expect investors to focus on updates regarding the pending acquisition of Kentucky Power, potential impact from elevated energy and commodity costs, and updates on their renewable development pipeline