Algonquin Power (AQN) Bets Big on a US Move While Earnings Slip

Algonquin Power & Utilities, based in Canada, announced its second-quarter earnings on August 7. Management highlighted two key developments: a plan to redomicile to the United States and regulatory wins. The company secured approvals in Missouri, Kansas, and New York, totaling $138 million in revenue adjustments. Additionally, the Department of Energy reimbursed Algonquin $5 million for an AMI grant.

Management also revealed plans to move its headquarters to Chicago while maintaining a presence in Oakville, Ontario. This move aims to reduce cross-border tax inefficiencies and improve its position in US equity indexes. However, Algonquin's earnings fell short of expectations, with GAAP net earnings dropping to $4.9 million from $14.8 million previously.

Adjusted net earnings also declined to $29.2 million from $33.6 million. The company attributes part of the earnings gap to $25.7 million in favorable items from the previous year, including a tax basis step-up recovery. Interest expense increased due to new debt and higher commercial paper usage, while operating expenses rose due to increased gas safety and compliance costs.

Despite the regulatory wins and redomiciling plan, the earnings trend has not yet caught up to the positive narrative.