Algonquin Power still has upside, says Industrial Alliance

It’s all systems go for Algonquin Power & Utilities (Algonquin Power Stock Quote, Chart, News TSX:AQN) as a newly appointed president looks to take the helm of a company that Industrial Alliance Securities analyst Jeremy Rosenfield thinks is still an amazing growth and income story.

In an update to clients on Thursday, Rosenfield reiterated his “Buy” rating and C$22.00 target price,
representing at the time of publication a projected 12-month return including dividend of 10.9 per cent.

Algonquin Power on Wednesday announced a leadership change, with Arun Banskota, previously managing director Global Power at El Paso Corporation, stepping into the newly-created position of president, in preparation for his assuming the role of CEO later this year.

Current CEO Ian Robertson, a founder of power developer APCI before it became Algonquin Power, is stepping down after 11 years at the post. Also announced was the retirement of CFO David Bronicheski this coming fall, to be replaced by current VP, Treasury and Treasurer Arthur Kacprzak.

“I look forward to working with Arun to ensure a seamless management transition,” said Robertson in a press release. “I am extremely proud of what APUC has achieved over the last 30 years and our five-year, $9.2 billion capital plan positions APUC for continued success and growth in the years ahead.”

The company said Robertson is expected to stay involved with AQN through a “collaborative investment platform” with a focus on “identifying and partnering with APUC on growth and development opportunities.”

Algonquin, which acquires, develops, owns and operates renewable energy projects as well as water, electric and natural gas utility distribution and transmission systems, has seen its share price jump this year after finishing a standout 2019. AQN finished 2019 up 34 per cent and has so far in 2020 climbed another nine per cent.

Rosenfield says there are a number of reasons to be bullish on Algonquin. “AQN remains the most well-balanced growth and income investment option in our coverage universe, supported by the Company’s (1) diversified business model (regulated utilities & non-regulated power), (2) strong near-term organic growth (~8- 10 per cent per year EPS, FFO/share and FCF/share growth through 2024), (3) attractive dividend growth (~10 per cent per year through 2021), (4) international investment opportunities (via the AAGES joint venture and equity stake in AY), and (5) upside from additional growth initiatives that are not included in our forecasts,” Rosenfield wrote.

Ahead of Algonquin’s fourth quarter financials due later this month, the company last posted earnings on November 7, where it reported flat year-over-year revenue at $365.6-million compared to $366.2-million a year earlier and adjusted EBITDA growth of 13 per cent year-over-year to $186.9 million.

Adjusted net earnings climbed to $0.14 per share compared to $0.10 per share a year prior. (All figures in US dollars unless where noted otherwise.)

Over the Q3, Algonquin acquired New Brunswick Gas and St. Lawrence Gas for C$339 million and $61.8 million, respectively, adding almost 30,000 customers to its distribution network which now numbers over 800,000, according to management.