Algonquin Power & Utilities (AQN) is beloved by Canadian analysts because of a border hop side-effect: earnings in greenbacks as well as loonies, suggests international expert Vivian Lewis, editor of Global Investing.
Canada has long been more green-minded than the USA. Algonquin is a play on renewables; it's shares are listed both in Toronto and on the Big Board. Its business and even its name also straddle the border. It is our top pick for 2019 for those seeking a solid income earner.
Algonquin is serious about its Liberty Utilities program adding over US$5.3 billion from its organic capital to its regulated electric generation business. But the lure for me is its Liberty Power non-regulated renewables line with a power generation capacity of 957 megaWatts.
This represents about 20% of total capacity. Eventually there will be $7.5 billion of new investments in 2019-2023 so $2.2 billion will be for renewables. Algonquin forecasts the new businesses will produce a compound annual [earnings] growth rate of 10%. The most recent addition to this was the purchase of New Brunswick gas, the first Algonquin Canada gas distribution business.
Its plans don't stop at North America. The company is growing its renewables business also in Latin America, for example with the ATN3 transmission system being built in Chile and Peru, and other renewable and water projects still to come.
As a 50% partner with Abengoa SA of Seville, Spain, in the operation of Atlantica Yield (AY), Algonquin gets to manage sustainable global water and energy businesses which Abengoa builds. Atlantica Yield, spun off by Abengoa, is a British private firm co-generating electricity and steam from natural gas, solar, and wind plants, plus other green operations.
The new entity is called AAGES and has its own management. Alqonquin provides the finance and Abengoa the project development and execution. It declared for FY 2017-8 a 12.82 cents (US)/share dividend to be paid Jan. 15, 2019 to shareholders of record Dec. 31. (Canadians get their dividend in loonies.)
AAGES projects currently include a desalination plant in Ghana, a solar-thermal power plant in Israel, a desalination plant in Qingdao, China.
Atlantica Yield shelved its plans to borrow from the bond market when Algonquin increased its stake buying another 16.5% from Abengoa in November which has not yet closed. These moves make Algonquin a North American leader in renewable power from hydro, thermal, wind, and solar, water distribution, and waste-water collection.
Algonquin has $9 billion (US) of total assets in natural gas, water, power generation, electricty transmission and utility distribution. There is more in the pipeline. AQN has a high p/e ratio because of deals in process, 29.75x. It yields 4.72% in dividends and the company expects CAGR to rise 10% over the next 5 years. Here's a chance to earn green from green!
