Morningstar DBRS Comments on Algonquin Power & Utilities Corp. Completing the 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) has completed the sale of its renewable energy business (excluding the Company's hydro fleet) to a wholly owned subsidiary of LS Power. APUC intends to use the net proceeds of the sale to pay down existing debt and strengthen its balance sheet.

We note with the completion of the sale coupled with the recent sale of the Company's 42.2% ownership stake in Atlantica Sustainable Infrastructure plc in December 2024, APUC will become a pure-play regulated utilities group. We do not expect a change in APUC's credit rating at this point, as APUC's rating has been based primarily on the credit quality of its regulated utilities business (Liberty Utilities Finance GP1; rated BBB (high) with a Stable trend) and notched down by one notch for structural subordination to debt at the company's subsidiaries. We view the completion of this sale of relatively higher-risk renewable assets as having an improvement on the Company's business risk profile with highly regulated and stable cash flows, which is partially offset by the decrease in diversification. We also expect the key credit metrics of APUC will strengthen assuming the Company uses the proceeds from the sale to reduce debt as planned.

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

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577