Algonquin Power & Utilities Corp. AQN
Starboard, now AQN's largest holder at 7.5%, says selling the unregulated renewables fixes leverage and the payout ratio, leaving a greener regulated utility worth a peer-premium re-rating.
Thesis
Starboard Value disclosed a 7.5% stake in Algonquin Power & Utilities, making it the largest shareholder, and argues the Regulated Services Group is a top-tier utility masked by an unregulated Renewable Energy Group that has driven excessive leverage, a dividend cut, and the failed Kentucky Power deal. Starboard demands Algonquin sell all or a substantial majority of the renewables business — including the ~42% Atlantica stake — to bring gross leverage to ~5x, shore up the dividend, and repurchase shares to lift FY2025 EPS to ~75 cents. Pro forma, Algonquin would be greener than peers (one-third renewable generation, no coal vs. 26% peer coal) and uniquely exposed to water utilities (~20% of rate base) that trade at roughly double Electric/Gas multiples. A follow-on separation of the Water Utility could push pro forma EPS to ~90 cents.
SCQA
Algonquin is a mid-sized North American utility whose Regulated Services Group is a high-quality, fast-growing regulated utility — greener than peers and uniquely exposed to premium-multiple water utilities through ~20% of rate base.
An unregulated renewables arm has loaded the company with excessive leverage, forced a dividend cut, and — combined with the failed Kentucky Power deal — made AQN uninvestible for traditional utility investors despite the quality of the underlying regulated business.
Sell all or a substantial majority of the Renewable Energy Group including the Atlantica stake, cut gross leverage to ~5x, repurchase shares, and preserve optionality to also separate the Water Utility if the premium isn't realized.
Pro forma FY2025 EPS reaches ~75 cents on the renewables sale, and ~90 cents if the Water Utility is also sold and proceeds largely buy back stock, with a safer dividend and a peer-premium regulated-utility multiple.
The three reasons
- 1
Regulated Services Group is top-tier but trades at a discount due to unregulated renewables drag
- 2
Selling renewables cuts leverage, safens dividend, and unlocks peer-premium multiple
- 3
Water Utility (~20% of rate base) trades at ~2x Electric/Gas multiples — a hidden gem
Primary demands
- Sell all or a substantial majority of the unregulated Renewable Energy Group, including the ~42% stake in Atlantica Sustainable Infrastructure
- Use proceeds to reduce leverage to industry-standard ~5x gross leverage
- Once leverage target is met, repurchase shares to drive EPS accretion toward ~75 cents in FY2025 EPS
- Preserve optionality to separate the Regulated Water Utility to capture water-utility premium multiples
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Notable slides (2)
Notes
Three-page public letter addressed to Chair Ken Moore and Strategic Review Committee Chair Chris Huskilson, CC'd to CEO Banskota and CFO Myers. Starboard discloses it is already AQN's largest shareholder via a recently filed 13D at ~7.5% and references prior private discussions; treated as initial_thesis because this is the first public articulation of the argument. No charts or graphics — plain-text letter on Starboard letterhead with logo only (visual_quality=1). Sum-of-parts framing is implicit in the prose (Regulated Services + Water Utility + Renewable Energy + Atlantica stake), not a visual exhibit. Kentucky Power failed deal is cited as a scar on credibility but without naming specific executives as villains.