Algonquin Power is on track to hit $500 to $525 million EBITDA (2016)

On August11,2016 Algonquin Power gave it's second quarter results.It was a solid performance and an improvement over the first quarter.Almost all operational figures were improved over the same quarter in 2015.But the important story for this blog is that adjusted EBITDA was $99 million compared to $81 million in 2015 for Q2.And $247 million versus $196 million for the first half.Algonquin has given guidance of $475 to $525 million of adjusted EBITDA for 2016 and this blog sees no problem in hitting the mid-point or $500 million of adjusted EBITDA for the year.
      Financial Data
       Usually this section contains a ream of operational data but suffice it to say that revenues were ahead of 2015 by almost 15% and adjusted EBITDA was ahead by almost 20%.While adjusted EBITDA was almost $250 million for six months.There should be little trouble in achieving $500 million mentionned in guidance.This will be a 25% increase over the $400 million achieved in 2015.This has allowed AQN to increase the dividend by 10% in 2016.And this blog calls for a small dividend increase in 2016 if they meet earnings guidance.AQN'S yield is below most of it's peers.
       New Projects
       Algonquin Power spent a lot of time and money on meeting all regulatory requirements for Park Water Systems in the western USA. Now all requirements have been met and it is bringing in earnings.It also has finished construction of the O'dell wind park in Minnesota and it is fully commissioned.Lately it got a $10 million revenue increase for it's Calpeco Electric System and it has shareholder approval for the Empire Electric System.It is these new projects that are likely to push adjusted EBITDA beyond $500 million for 2016.But this blog expects almost no earnings from Empire in 2016; there will likely be further regulatory hurdles to meet.

                                        

       Regulatory Risk
   Algonquin Power has done tremenduously well based on the best measure of earnings and earnings per share,that is, adjusted EBITDA.Adjusted EBITDA has grown from $305 million in 2014 to $400 million for 2015 and now is on track to hit $500 to $525 million for 2016.The chief wild cards will be the  amount of earnings from the O'dell wind farm and Empire Electric.This puts earnings per share at $5.10 to $5.25 per share (at a minimum) and the price/earnings ratio at slightly more than 2 times.Why does an utility with such solid growth only get a multiple of 2 when it's peers are getting 10 to 20? It is apparent that investors have sensed the risk to earnings from having too many of it's assets in the American regulatory basket.Is this a real or imagined risk?This blog is betting on the latter as I am a shareholder in this tremenduous growth stock.             see recent analysis of AQN stock performance;  see analysis of the underperformance of AQN