Algonquin Power & Utilities (US:AQN)2022-11-11 16:12Financial Data and Key Metrics Changes - The company's Q3 2022 consolidated revenue was $666.7 million, up from $528.6 million in Q3 2021, representing a year-over-year increase of approximately 26% [19] - Adjusted EBITDA for Q3 2022 was $276.1 million, a 10% increase from $252 million in the same period last year [19] - Adjusted net earnings decreased to $73.5 million from $97.6 million year-over-year, primarily due to a $23.3 million increase in interest expense [19][20] - Adjusted net earnings per share for Q3 2022 was $0.11, down from $0.15 in the prior year [20] Business Line Data and Key Metrics Changes - The regulated services group reported an operating profit of $229.3 million, an increase of 17% from $195.7 million in the same quarter last year, driven by the acquisition of Liberty New York Water and new rate implementations [21] - The renewable energy group had an operating profit of $71.5 million, relatively flat compared to the previous year, with existing facilities contributing approximately $4 million offset by higher costs from Texas Coastal Wind Facilities [22] Market Data and Key Metrics Changes - The company is experiencing pressure from rising interest rates and capital market volatility, impacting its growth initiatives [8][9] - Approximately 22% of the company's consolidated debt is subject to variable interest rates, with a potential $16 million annual impact from a 100 basis point increase [25] Company Strategy and Development Direction - The company is focused on three strategic pillars: growth, operational excellence, and sustainability, with a commitment to reducing reliance on raising equity [9][30] - The pending acquisition of Kentucky Power Company is expected to close in January 2023, with a revised purchase price of approximately $2.6 billion [10][28] - The company is actively pursuing asset recycling opportunities to finance its growth, having signed an inaugural asset recycling transaction expected to generate approximately $278 million [24][29] Management's Comments on Operating Environment and Future Outlook - Management described the current operating environment as challenging due to higher interest rates and project delays, but remains optimistic about long-term growth in regulated and renewable sectors [8][27] - The company expects adjusted net earnings per share for 2022 to be in the range of $0.66 to $0.69, reflecting pressures from interest rates and project timelines [26] Other Important Information - The company released its 2022 ESG report, highlighting progress in diversity, equity, and inclusion, as well as third-party verification of emissions data [15][16] - The Inflation Reduction Act has reinforced the company's strategy to invest in renewable assets by increasing tax credit levels [13] Q&A Session Summary Question: Does the new EPS guidance range include the $55 million to $60 million gain on the asset sales? - Yes, it does [31] Question: Will most of the $2.1 billion available liquidity be allocated towards the closing of the Kentucky Power Acquisition? - Yes, liquidity is expected to be in the range of $2.5 billion as the year ends, with credit facilities used to fund the transaction [32] Question: Is equity on the table at current valuation levels? - The company aims to reduce reliance on equity markets and is confident in continuing asset recycling to fund growth [35][36] Question: Are there pressures on asset prices due to rising rates? - Despite rising interest rates, there remains robust interest in renewable assets from long-term investors [41][43] Question: What are the plans for capital recycling next year? - The company is in planning stages and will provide more details at the Investor Day [50] Question: What are the key priorities for the Kentucky business next year? - The company plans to file an Integrated Resource Plan (IRP) in early 2023 to outline its service strategy for Kentucky [54]