Starboard Value issued a presentation on Algonquin Power & Utilities

Key summary: Starboard advised Algonquin Power & Utilities Corp selling renewables to reduce leverage and boost EPS. Presented at C4K Investors Conf. on Oct 17, 2023, highlighting value creation without sale.

Market Cap: $3.9 billion | Algonquin Power & Utilities Corp., a renewable energy and utility company, that provides energy and water solutions and services in North America and internationally. 

Background

On July 6, 2023, Starboard (5.1%) delivered a letter to the company stating that a sale of the company's renewable business could help it reduce leverage and provide a safer dividend. Starboard suggested two key objectives: reducing leverage to industry-standard levels of around 5x gross leverage, with excess proceeds used for share repurchases to drive EPS growth, and improving EPS to align with peers, targeting an achievable EPS of 75 cents in FY 2025. By achieving these objectives, Algonquin would enhance its financial position, increase shareholder value, and bring its dividend payout ratio in line with industry standards. It noted, "For example, if, following the sale of the Renewable Energy Group, Algonquin were to also sell its Water Utility and use the majority of the proceeds to repurchase shares, we believe that it could increase pro forma EPS to nearly 90 cents."

Update

On October 17, 2023, Starboard delivered a presentation at the 2023 Capitalize for Kids Investors Conference, highlighting value creation opportunities at the company. It expressed its belief that the company was opportunistic even without a sale of renewables.