Algonquin Power moves into Regulatory mode

On May 12,2016 Algonquin Power came out with it's first quarter results.Revenues and net earnings and adjusted net earnings were lower.However the measure of performance that most investors use for an utility is adjusted EBITDA and it was healthy and showing an increase;it showed almost a 30% increase over the first quarter of 2015.AQN is keeping it's regulated and operational costs in line.Adjusted EBITDA, at $148 million is ahead of $114 million in Q1 of 2015.Furthermore it is on track to hit $475 to $525 million for 2016.This is after an increase in 2014 from about $305 million to about $400 million in 2015.If Algonquin continues to perform as it did in the first quarter it could hit $500 million of EBITDA (the middle of the range).
  The new earnings is likely because of their new acquisition called Park water System located in western USA.It is another regulated American utility but it is not generating power ;it is a water system.Perhaps only a slight change but a profitable one as it seems.The big move will come after it acquires the Empire utility located in southern USA.This will be finalized in June but it has approval of two regulators now.The final vote by shareholders should not be cataclysmic but it may throw a few  conditions in.Either way Algonquin now has a significant share of it's assets under the American regulated umbrella.Although it is true that not all is now under the American regulated power umbrella.

Increased Earnings

 The acquisition of the Park water System seems to have been beneficial to earnings.Earnings as measured by adjusted EBITDA has increased from the $305 to $325 million range in 2014  to about $400 million in 2015.Now Algonquin is on track to hit adjusted EBITDA of $475 to $525 million for 2016 as evidenced by the solid first quarter.If this does happen then adjusted EBITDA or earnings per share will be about $1.92 to $2.00 per share This should be possible if the Park water System continues to perform as in the first quarter.

Prospects for 2016

Algonquin Power has improved it's revenue stream and earnings power since 2013.This blog has warned that AQN has too many assets under the American regulated power umbrella.It's new acquisition is also regulated  but it is not under the regulated power umbrella.In order to appease regulators this blog even suggested  that AQN consider filing American depository receipts see blog on American depository receipts.Still this blog feels that it has too many assets in the same risk class.However it is true that it's earnings do seem to be quite solid and will only be better if it acquires Empire utility in late June.In addition, it has increased it's dividend 10% to $.4235 U.S. per share.At a price of $12 per share and a price/earnings ratio of 6 to 7 times this blog feels that AQN is a screaming buy.                                  use workathon for analysis of Cdn. utilities;see recent blog on AQN