Sentiment: Neutral
Our Take
We believe the slightly better-than-expected Q4/22 results, reiteration of 2023 guidance, and no incremental updates on the pending $2.6 billion Kentucky Power acquisition to have a neutral to modestly positive impact on the shares of Algonquin. On the conference call (Friday, March 17, at 8:30 AM ET), we expect investors to focus on incremental colour on the FERC approval process relating to the pending acquisition of Kentucky Power, asset recycling (target of completing $1 billion of asset sales in 2023), and an update on the company’s exposure to floating interest rates.
Details
Q4/22 results slightly better than expected. Algonquin's Q4/22 Adjusted EPS of $0.22 was slightly higher than our estimate of $0.21 and consensus of $0.20. From an EBITDA perspective, the Q4/22 Adjusted EBITDA of $358 million exceeded our estimate of $313 million and consensus of $341 million. The Renewable Energy division posted stronger-than-expected EBITDA due to the inclusion of the gain on the sale of assets (excluded from our EBITDA forecast).
Reiterating 2023 guidance. AQN continues to expect 2023 Adjusted EPS of $0.55-0.61, which exclude the potential impact from $1 billion of targeted assets sales, assumes that the Kentucky Power acquisition closes, and the company incurs $1 billion of incremental capex (70% regulated utilities / 30% renewable).
No incremental details on the FERC approval process regarding the pending Kentucky Power acquisition. We believe investors have been mostly focused on whether the pending $2.6 billion acquisition of Kentucky Power will receive FERC approval and close by April 26, 2023 (Outside Date). If the transaction is not completed by the Outside Date, all the investors we have spoken to prefers AQN to exercise its option to terminate the transaction and pay a $65 million termination fee.