Morningstar DBRS Comments on Algonquin Power & Utilities Corp.'s Announced Sale of Its Renewable Energy Business to LS Power

DBRS Limited (Morningstar DBRS) notes that Algonquin Power & Utilities Corp. (APUC or the Company; rated BBB with a Stable trend by Morningstar DBRS) has entered into a definitive agreement to sell its renewable energy business Algonquin Power Co. (APCO; rated BBB with a Stable trend by Morningstar DBRS) -- excluding hydro -- to a wholly owned subsidiary of LS Power for a total consideration of up to $2.5 billion, excluding debt. The sale proceeds will be used to strengthen APUC's balance sheet and enhance the quality of its earnings. The transaction is expected to close in Q4 2024 or Q1 2025, subject to the satisfaction of customary closing conditions, including the approval of the U.S. Federal Energy Regulatory Commission and approvals under applicable competition laws.

Morningstar DBRS notes that after the sale, APUC will become a pure-play regulated utilities group, which will modestly benefit the Company, underpinned by a stronger business profile with highly regulated and stable cash flows. Morningstar DBRS does not expect a change in APUC's rating at this point as after the sale, APUC's credit rating will be based solely on the credit quality of its regulated utilities (Liberty Utilities Finance GP1; rated BBB (high) with a Stable trend by Morningstar DBRS) notched down by one notch because of structural subordination to debt at its subsidiaries.

Notes:
All figures are in U.S. dollars unless otherwise noted.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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