is surrounded by uncertainty, but one thing is clear: As a stand-alone utility, it looks like a compelling investment.The utilities side of the business distributes electricity, water and natural gas to 1.2 million customers, mostly located in four U.S. states. Algonquin also owns and develops renewable energy – specifically, wind and solar power – and has an ownership stake in Atlantica Sustainable Infrastructure PLC.
“Despite a confident tone from Algonquin on the ability to transact at a fair valuation, it offered no details on timeline and expected proceeds,” Mark Jarvi, an analyst at CIBC Capital Markets, said in a note. As a regulated utility, Algonquin could shine. Without the renewables business, the utility will offer investors a simpler and more predictable business that can be easily compared with other utilities.letter to Algonquin’s strategic review committeeThe investor believes that the water distribution business is extremely valuable, and should trade at a premium relative to electricity and gas utility assets.
Not everyone is so sure about this rosy outlook, though. Mr. Jarvi, for one, believes that the valuation of the utility will lag the peer average, given specifics related to Algonquin’s jurisdictional footprint. He estimates the P/E ratio will be just 14, which could undermine a recovery in the stock.
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