Algonquin Power & Utilities Corp. has announced it will sell its renewable energy business, excluding its hydropower operations, to LS Power for up to $2.5 billion. The decision aligns with pressure from major shareholder Starboard Value and other activist investors to reduce debt and enhance earnings.
The sale follows a review process initiated last August, aimed at addressing the company's high debt levels, which stood at approximately $8.3 billion as of June. The proceeds from the transaction will primarily be used for debt repayment, strengthening Algonquin's balance sheet and providing greater operational flexibility.
Algonquin's shares dropped by around 11% following the announcement, reflecting investor concerns over the dividend reduction and planned cutbacks in capital expenditures for its regulated utilities. The company declared a quarterly dividend of 6.5 cents per share, down from 10.85 cents in the previous quarter.
The renewable energy unit includes 44 assets, predominantly wind and solar facilities across the U.S. and Canada, with a combined generating capacity of over 3,000 megawatts. The hydroelectric operations, which contributed $35.4 million in revenue in 2023 and made up 10-15% of the renewables business's cash flow, will remain under Algonquin's ownership.
LS Power, which already operates a portfolio of more than 19,000 megawatts, views this acquisition as a strategic enhancement to its renewable energy assets. CEO Paul Segal emphasized that the new assets will play a crucial role in addressing rising electric demand and advancing the energy transition.
The transaction is expected to be finalized between the fourth quarter of 2024 and the first quarter of 2025.
