Scotia commentsFrom Scotia's initial reaction yesterday:
Through its strategic review process, the Board of Directors has determined that a sale of its Renewable Energy business is the best path forward. It is of the view that the value of its assets are not being fully realized in the current structure. Our $9.25 target price includes a $4.85b valuation for the renewables business, which is based on $3.6b for Algonquin’s projects at an 11x multiple as well as $1.3b for its stake in Atlantica Yield (AY-US, though mark-to-market for the recent share price implies a $1.1b value). With the rise in interest rates and compression in renewable valuation multiples, it could be a challenging market to sell these assets. We had previously thought that partial asset sales were the most likely scenario.
I would observe that at an 11 X multiple, Scotia is not shooting for the moon with that estimate of proceeds. Also, it looks to me that Atlantica is being valued at about $26.05 which is again not an excessive expectation.
If these numbers come to pass, $4.85 Billion in proceeds, I would throw out a wild guess that $3.8 Billion could be applied to reduce debt from the current $9.87 Billion and $1 Billion could be used to buy back 125 million shares at $8. Proforma, you're looking at debt of $6 Billion or a bit more, and shares outstanding of 575 million.