JPMorgan is to act as Algonquin's (AQN) advisor in the process, which is to include all of the Oakville, Ont.-based company's non-regulated operating and development power generation assets.
"Over the past few months, the AQN board of directors, in conjunction with our independent financial advisor, has conducted a thorough review of our businesses with the aim of enhancing value for our shareholders," Chris Huskilson, Algonquin's interim CEO, said in a statement.
"We have two strong businesses – a well-positioned regulated utility business with diversified assets and attractive jurisdictions, and a solid, competitive renewables business with scale and strong assets. That said, we believe the value of our assets is not fully realized in our current structure.
"We therefore determined that focusing on our regulated business going forward and pursuing a sale of the renewables business is the best path forward for AQN."
Huskilson was also one of the leaders of the strategic review of the renewable energy group, which was initiated in May, along with Amee Chande and Dan Goldberg.
AQN is a diversified international energy generation, transmission and distribution utility with over $17 billion of total assets. It has over one million customers, largely in the U.S. and Canada. The company owns or has an interest in over four gigawatts of installed renewable energy capacity.
Algonquin’s renewable energy sale
In its Q2 2023 financials which were also released Thursday, AQN reports revenue totalling approximately $841.6 million, an increase of one per cent. At the same time, its adjusted net earnings were around $75.3 million, a decrease of 49 per cent.
Algonquin also posted a wider Q2 loss of approximately $339.3 million, compared with a loss of around $44.7 million in Q2 2022.
According to a company release, unfavourable weather played a significant role, negatively impacting Q2 adjusted net earnings per common share by approximately three cents compared to the same period in 2022.
The renewable energy group’s wind facilities generated 75.1 per cent of their long-term average resource, a 22 per cent decrease compared to Q2 2022.
The group has 46 wind, solar and water facilities operating across 11 U.S. states and six Canadian provinces. It has a development pipeline of over six gigawatts and an average power purchase agreement length of approximately 10 years.
According to a company presentation, proceeds from a potential sale will be used to repay debt and to buy back common shares.
“As we begin the sale process for the renewables business, our focus remains on executing our value-creation strategies and operating efficiently across both our regulated and renewable asset base,” Huskilson said in a statement.
“I look forward to working with the board and management team during this transition period to build on all the work underway to re-establish AQN as a top-tier utility business and unlock value for shareholders."
Algonquin’s new CEO
Huskilson had been a member of the board since 2020. He previously served as the CEO and director of Emera Inc., a Halifax-based energy and services company. The board is searching for a permanent replacement.
"As AQN prepares to pursue a sale of its renewables business and move forward as a pure-play regulated utility company, the board of directors has determined that now is the right time to transition leadership," Kenneth Moore, chair of the Algonquin board of directors, said in a statement.
"Chris has a record of driving significant growth in the energy industry, and he knows AQN and our business well from his tenures on the AQN board. As we conduct a search for a permanent CEO, we are confident that Chris will ensure a smooth transition while we pursue a sale of the renewables business and position AQN's utility business for its next phase of standalone growth and value creation."
As reported by Reuters in April, a deal for Algonquin to buy the Kentucky operations of American Electric Power (AEP-Q) fell through following multiple delays. This, combined with company shares falling 52 per cent last year and its $7.5 billion in debt from a number of recent acquisitions, meant the move to bring in a new CEO is no surprise, according to some analysts.
"Due to the failed Kentucky Power acquisition and the poor performance of the AQN share price, we believe the market will not be surprised with the CEO transition," RBC Capital analyst Nelson Ng told Reuters.