Bad weather, high interest rates to hit earnings, says Algonquin

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Algonquin Power & Utilities (AQN.TO)(AQN) is warning that bad weather for wind and solar energy, plus higher interest rates, will weaken earnings this year.

Algonquin reported third-quarter financial results on Friday. The Oakville, Ont.-based company booked a $5 million year-over-year drop in profits from its portfolio of hydroelectric, wind, solar, renewable natural gas, and thermal assets. That’s the side of the business management is attempting to sell in order to focus on regulated utilities, which saw profits climb in the latest quarter.

At the same time, Algonquin says its interest expenses ballooned by $19.2 million year-over-year in Q3.

Interim CEO Chris Huskilson said on Friday that he now expects to hit the lower-end of Algonquin’s previously announced fiscal 2023 adjusted net earnings per share guidance of between $0.55 and $0.61.

Toronto-listed shares fell 1.62 per cent to $7.61 as at 11:08 a.m. ET on Friday, after losing more than five per cent earlier in the trading session. The stock price has been cut nearly in half over the past 12 months.

“Overall, I would describe the third quarter as a mixed quarter, with underlying growth in the business offset by impacts of weather and higher interest costs,” Huskilson told analysts on a Friday morning conference call.

He plans to serve as Algonquin’s leader until the company settles on a permanent chief executive, which is expected over the next six to 12 months.

Meanwhile, Huskilson is overseeing Algonquin’s plan to shed its renewable energy assets in a bid to become a pure-play regulated utility company focused on electricity, water distribution, wastewater collection, and natural gas. He said on Friday that Algonquin is in the process of responding to interested buyers.

“We think that platform is a unique offering that we believe people will pay for,” he said. “By no means will our assets be sold at a fire sale [price].”

Three-quarters of Algonquin’s renewable energy assets are located in the United States, where Huskilson points to significant investor interest driven by the Biden administration’s historic clean energy spending plans. So far, Huskilson says the preference among buyers he is meeting with is to buy the portfolio as a whole, rather than in parts.

“We’re in the process of responding to buyers who are interested,” he said. “We still would expect that we can get something done here in 2024.”

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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