| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 12.87 | 96 |
| Intrinsic value (DCF) | 1.88 | -71 |
| Graham-Dodd Method | n/a | |
| Graham Formula | 9.93 | 52 |
Algonquin Power & Utilities Corp. (NYSE: AQN) is a diversified North American utility and renewable energy company with operations in regulated utilities and clean power generation. Headquartered in Oakville, Canada, AQN operates through two key segments: the Regulated Services Group, which provides essential electric, natural gas, and water/wastewater services to over 1 million customer connections across the U.S., Canada, Chile, and Bermuda; and the Renewable Energy Group, which develops and operates hydroelectric, wind, solar, and thermal power assets. With a market cap of ~$4.3 billion, AQN combines stable utility cash flows with growth opportunities in renewables, positioning it at the intersection of energy transition and infrastructure resilience. The company’s dual focus on rate-regulated assets (providing predictable revenue) and renewable generation (aligned with decarbonization trends) makes it a unique player in the utilities sector. However, its high leverage (total debt of $6.7 billion) and recent net losses ($1.38 billion in FY2023) highlight execution risks amid rising interest rates and project delays.
Algonquin Power & Utilities presents a mixed investment case. Its regulated utilities offer stable cash flows (evidenced by $481.7M operating cash flow in FY2023) and a dividend yield of ~6.5%, appealing to income investors. However, the Renewable Energy Group faces headwinds from rising financing costs and project execution risks, contributing to recent losses (diluted EPS of -$1.90). The company’s high debt load ($6.7B) and negative free cash flow (-$390.7M in FY2023 after CapEx) raise concerns about dividend sustainability. AQN’s low beta (0.66) suggests defensive characteristics, but investors must weigh its renewable growth potential against balance sheet stress. Catalysts include asset sales to reduce leverage and improved margins in renewables, while risks include further cost overruns and regulatory hurdles.
Algonquin Power & Utilities competes in two distinct arenas: regulated utilities and renewable energy. In regulated utilities, its scale (1M+ customer connections) is modest compared to giants like NextEra Energy (NEE), but its geographic diversification (U.S., Canada, Latin America) mitigates regional risks. The Renewable Energy Group’s 2.4 GW portfolio (hydro, wind, solar) is smaller than pure-play renewables leaders like Brookfield Renewable (BEP), but AQN’s hybrid model provides cash flow stability from utilities to fund renewable projects. A key competitive advantage is its vertically integrated approach, combining generation (renewables) with distribution (utilities), though execution has been uneven. AQN’s debt-heavy financing strategy (debt-to-equity of ~200%) contrasts with peers like Fortis (FTS), which prioritize lower leverage, making AQN more vulnerable to interest rate volatility. Its renewable pipeline is also less scalable than NextEra Energy Resources’ (50+ GW), limiting growth upside. However, AQN’s niche in smaller-scale hydro and thermal assets provides operational flexibility. The company must balance dividend commitments with reinvestment needs to avoid falling behind in the capital-intensive renewables race.