malx1 wrote: Accountprince wrote: I love this stock - a beaten down regulated utility! Bash away if you want but you're being Penny foolish as the saying goes. Now that tax loss season is over look at the facts:
1. Regulated utility - this is conceptually costs plus a return on capital. So when cost of capital (interest rates) rise then so do the allowable return rates for utilities. Short term lag only until the next rate adjustment.
2. Tax credits - timing issue only. These will arrive in due course.
3. Kentucky Power acquisition - probably the biggest opportunity. If approval is stalled because of keeping utility rates low for the consumer then - after the April deadline - Algonquin is in the best position of anyone to buy at a lower market price based on the revised DCF at today's cost of capital! Splendid position to be in. And if they are smart enough to go floating rates when interest rates peak next year they will enjoy the windfall when rates start to decline.
I see nothing but upside on this. Oh yeah - management has bought in the $12 a share range. We can buy at sub $9 a share. Don't you think it'll get back to $12 a share in a relatively short time? The bargain basement prices can't last long. And you can collect the divi in the meantime.
Is it?
Would you pay $2.8B for $1.6B in assets that historically generated just 6.6% ROE from 2015 to 2020?
Debt costs have changed.
Coal costs and natural gas costs much higher.
Interest rates materially higher today vs early 2021.
For a company who professes clean power, Kentucky is a coal producing and coal consuming state.
So many red flags here.
Can't issue equity at today's valuation.
If deal goes through I'd suspend common stock dividend until debt levels are 1.5x Debt/Equity.
Executives who endorsed this transaction might need to take some time off, rethink their career paths.
Get new CFO and CEO. These guys are a gong show.
Maybe AQN team ate some Trudeau brownies with green stuff hidden inside.
Maybe they are getting their debt cost guidance from Deputy Crime-Minister Freeland.
Walk, maybe run, from deal. Pay the $65mm break fee. Suspend dividend. Get spanked in the market and then rebuild balance sheet.
AQN now in the dog house for a few years.
BAM may come in and offer $5 or $6/sh.
Nobody interested in overpaying now that rates are materially higher than during covid induced panic.