Algonquin sees USD-55m blow on earnings from Texas' freeze

Canadian utility Algonquin Power & Utilities Corp (TSE:AQN) expects to take an up to USD-55-million (EUR 45.4m) potential hit to its adjusted EBITDA this year due to the extreme winter conditions in Texas and parts of central US.

The Canadian utility said on Friday the operation of its wind parks in Texas has been hampered by the deep freeze, while its networks retained "strong reliability". These wind parks generate revenues under a mixture of financial hedges/swaps, long term unit-contingent power purchase agreements (PPAs), and market energy settlements.

"The financial hedges/swaps impose an obligation to deliver energy and, as a result of the production impacts caused by the recent weather events, the relevant facilities may be required to settle at elevated pricing in order to meet obligations. The Company's number one priority is to safely return the turbines back online as soon as weather conditions permit," Algonquin said.

More than four million people in the US state are suffering power outages after an unprecedented cold spell. Algonquin is still assessing the net impact on its business and financial performance. According to initial calculations, its 2021 adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) will be reduced by between USD 45 million and USD 55 million, or about 5% to 6% of 2019 earnings.

At this point, Algonquin has declared force majeure on contracts and is assessing other potential mitigating options. It plans to make another update on the effects of the Texas freeze on its financial results in March.

(USD 1.0 = EUR 0.826)

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