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Algonquin to sell majority of renewables unit for up to $2.5 bln to reduce financial obligation

Canada's Algonquin Power & & Utilities stated on Friday it would offer its renewable resource business, leaving out the hydropower operations, to a system of U.S.based LS Power for as much as $2.5 billion.

Last August, the company said it was thinking about a sale of the renewable resource system under pressure from hedge fund Starboard Value, its biggest shareholder, and other activist firms to reduce debt and boost earnings.

This is all going to debt repayment and naturally with that strong balance sheet we will have some versatility to make different options from there. But, the primary focus is truly to be more self-sustaining, a senior Algonquin executive said on a call to discuss the offer.

Algonquin had a long-lasting debt of about $8.3 billion at the end of June, following a series of acquisitions recently.

The business's shares were last down about 11% in morning trading.

TD Cowen analysts stated though the offer appraisal was constant with financier expectations, the marketplace response was likely due to the dividend cut and plans to limit capex at regulated energies.

Algonquin, which reported second-quarter outcomes on Friday, stated it would decrease its regulated capital investment for 2025 and declared a quarterly dividend of 6.5 cents per share, compared to the 10.85 cents announced in the prior quarter.

The renewables company largely consists of wind and solar possessions located throughout the U.S. and Canada. It consists of 44 running possessions with more than 3,000 megawatts (MW) of generating capacity. The left out hydroelectric operations brought in $35.4 million in income in 2023 and represented 10-15% of the renewables' capital.

LS Power said the acquisition will match its existing fleet of more than 19,000 MW of jobs.

This platform will play a significant role in conference obstacles of rising electrical need and advancing the energy shift, LS Power CEO Paul Segal stated in a declaration.

Starboard and fellow activist-investor Corvex Management did not instantly react to requests for comment.

In March, Starboard chose three prospects to Algonquin's board and two of them were chosen in June.

The deal is expected to close in the fourth quarter of this year or the very first quarter of 2025, the companies said on Friday.

(source: Reuters)