By focusing on accretive acquisitions, Algonquin has offered strong returns to shareholders. Dividends are slated to grow 10% annually through 2022.
Algonquin Power & Utilities Corp. has signed a deal to buy Ascendant Group Ltd., the parent company of Bermuda Electric Light Co., for US$365 million.
Algonquin Chief Executive, Ian Robertson, says the deal will be immediately accretive to the company’s earnings.
According to some analysts, like Seeking Alpha, Algonquin (AQN) is a fairly unknown utility; based in Canada, it has a mid-sized market capitalization of only $4.54 billion.
With operations expanding throughout the United States, Canada, and many other countries, however, Algonquin has the ability to keep growing and offer attractive shareholder returns. Management has been delivering a strong dividend and revenue growth, and has a plan to keep on doing so.
All these things make the company an attractive investment for those looking to add a utility to their portfolio.
“The acquisition of Bermuda Electric Light Company builds materially on our international growth program through the addition of this high-quality utility,” Robertson said in a statement.
“In addition to Ascendant customer and employee benefits coming from the scale of our existing utility operations, we are confident that our demonstrated capability in renewable energy development can help Bermuda realize its carbon reduction aspirations.”
Bermuda Electric Light, which has roughly 370 employees, serves 63,000 residents and businesses in Bermuda. The company operates throughout the West, Midwest, Northeast, and several Canadian provinces.
The company operates through two operating segments, Liberty Power and Liberty Utilities. Liberty Power offers renewable energy production and transmission, while Liberty Utilities offers regulated energy power generation and transmission.
Good news for Algonquin arrived every year, at least for their investors. Since 2017, the price of the stock has more than doubled from $2 billion to $5.77 billion.
The company also has a plan to double its EBITDA to $1.2 billion. The company is already generating EBITDA of around 15% of its market cap. If it can hit its projected growth, the company would be generating EBITDA equivalent to more then 25% which is ridiculously high for a stable business like a utility.
Under the deal, Ascendant will maintain its headquarters in Bermuda. Algonquin also says it is committed to retaining and developing the existing management and operations team.
The deal, which is subject to shareholder and regulatory approvals, is expected to close late this year.
Algonquin provides rate-regulated natural gas, water, and electricity generation, transmission and distribution utility services in the United States and Canada. The company also has an international portfolio of long-term contracted wind, solar and hydroelectric generating facilities.