10:47 AM EDT, 04/17/2023 (MT Newswires) -- Algonquin Power & Utilities Corp. (AQN.TO) reported Monday the termination of its US$2.6 billion deal to buy American Electric Power's Kentucky operations comprising Kentucky Power Co. and AEP Kentucky Transmission Co. Inc.
Algonquin's shares soared 7.8% on US pre-market trading following the news.
"After careful consideration, and in light of the evolving macro environment, our board of directors and management team have determined that continuing with the transaction is not in the best interest of the company," Algonquin President and CEO Arun Banskota said.
"Looking forward, AQN remains supported by a high-quality asset base, a strong balance sheet, and is well-positioned to deliver sustainable, long-term growth, capitalize on the energy transition and create value for shareholders."
Meanwhile, the company reaffirmed its adjusted EPS guidance range of $0.55 to $0.61 for 2023.
Algonquin plans to release its first-quarter results on May 11 before market open.
Meanwhile, National Bank of Canada said the termination was not surprising while noting that it would remove risk and uncertainty on Algonquin's outlook.
According to the bank, the transaction would have increased Algonquin's leverage in a time of higher interest rates and necessitated the sale of more than $1 billion in assets to support the balance sheet.
"The outlook for AQN beyond 2023E will depend on its ability to recycle assets and its next moves as it redeploys capital from the sell-downs and its mandatory purchase contract next year," National Bank said.
The bank expects Algonquin to trade higher on the news as investor sentiment on the deal was negative.
National Bank gave Algonquin a sector perform rating with a US$10.00 price target.
Price: 11.70, Change: +0.15, Percent Change: +1.34