Post by
perplexed01 on May 11, 2023 10:35am
cibc analyst: Price Target (12-18 mos.): US$10.00
Q1/23 First Look: In-line Results And Guidance Reiterated; New Strategic Review On Renewables
Business
Summary: AQN reported largely in-line results, with Adjusted EBITDA 3% above our/consensus estimates and Adjusted EPS of $0.17 that matched consensus. Solid utility results were partially offset by higher taxes (vs. our forecast). 2023 guidance and capex budget are maintained. What’s more noteworthy is that AQN is launching a strategic review on its renewables (unregulated) business. There were few details on what this entails but it could involve selling part or all of this business to become more focused on regulated utilities. We believe this review could be driven by discussion with activist investors (as reported in the media). We don’t believe this would preclude AQN from divesting its stake in Atlantica Sustainable Infrastructure. This review and other potential actions to improve funding and AQN’s outlook will be the focus on this morning’s call.
Operating Results
Adjusted EBITDA: Reported $341MM vs. consensus of $329MM (range: $311MM-$352MM) and our estimate of $331MM. Utility results were slightly stronger (+1%) than our forecast and Corp. costs were lower, partially offset by slightly weaker Power results (2% below our forecast).
Adjusted EPS: Reported $0.17, which was in line with consensus of $0.17 (range: $0.14-$0.19) and one cent above our estimate of $0.16. The Adjusted EBITDA beat was partially offset by higher taxes, vs. our forecast.
Additional Takeaways Strategic Review Of Renewable Business:
AQN announced it will conduct a strategic review of its renewables (unregulated) business in an effort to “maximize” shareholder value. Details are scarce and AQN will provide more details with Q2 earnings. This could lead to a splitting of the company, more likely a divestiture than spinning into a new public company, in our view.
Capex & Growth Update: 2023 capex budget is unchanged. Deerfield is completed. AQN invested $213MM in Q1 (we assumed $246MM).
2023 Guidance: Reiterated. AQN maintained Adjusted EPS guidance of $0.55-$0.61—we are at $0.59 and consensus is at $0.58.
Liquidity/Funding: Liquidity was ~$2.5B at the end of Q1. No ATM usage, as expected. Aside from the Strategic Review noted above, no additional comments on asset sales/AY stake.
Regulatory: Completed Calpeco rate case with a 10% ROE. Company filed new rate cases at New York Water and Empire Arkansas utilities, seeking ~$47MM in new revenues.