Canada's Algonquin eyeing overseas RE investments, CEO says

Canada’s Algonquin Power & Utilities is sizing up renewables opportunities beyond North America, chief executive Ian Robertson confirms, following recent reports that the growing company may be interested in buying a stake in Abengoa’s Atlantica Yield.

In a conference call Friday, Robertson emphasised that Algonquin continues to see a sizeable growth runway in North America, and is not desperate to push overseas.

Empire District Electric, a regulated utility in the central US that Algonquin acquired earlier this year for C$3.2bn ($2.5bn), may add 800MW of wind capacity over the next few years as it retires ageing coal-fired assets.

Meanwhile, Algonquin is currently building its 75MW Amherst Island wind farm in Ontario, and its 177MW Blue Hill wind project in Saskatchewan could be on line by 2019.

Yet for all of these more proximate opportunities, Algonquin is spending time these days looking abroad, Robertson acknowledges. “I don’t think it’s unfair to say that the North American market is a very competitive landscape.”

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“Recently we’ve been expanding our knowledge of international jurisdictions and available development opportunities,” he says. “The work we’ve done has made us increasingly comfortable that there is an economic thesis to be pursued in looking at things outside of Canada and the US.”

Any investments would need to be made in countries with a “stable political environment, stable electricity market, strong rule of law, capital repatriation pathways”, Robertson says.

Western Europe would certainly fit the bill. So too would Chile and Peru, he says, adding, “I’d have to think a little bit about Brazil.”

US-listed Atlantica Yield owns a variety of clean-energy assets in the US, Spain, Mexico, Peru, Chile, Uruguay and Algeria. Troubled Abengoa plans to sell its stake to pay its creditors.

The critical thing, Robertson says, is Algonquin doesn’t just want to “buy an asset in Belgium or France” on a one-off basis.

Rather, any push beyond North America would be about “having a programme and looking for an opportunity that brings a pipeline and perhaps a partner that allows us to have opportunities in geographies that we are not ourselves completely familiar with”.

A number of Canadian renewables operators have been expanding their international footprints in recent years, including Northland Power and Brookfield Renewable Partners. 

Algonquin – based near Toronto, and publicly listed in the US and Canada – owns a series of regulated utilities in North America as well as an independent generation arm, recently renamed Liberty Power.

Last year the company invested $75m stocking up on wind turbines in the US, which will allow it to build up to 700MW of capacity that would be fully qualified for the production tax credit.

With regard to Empire’s very sizeable wind expansion plans, Algonquin may decide to develop and build that capacity in-house, or it may look to buy completed projects from external developers. Having both options creates a useful “competitive tension”, Robertson says. Empire will issue an RFP this fall for interested wind developers.

Despite anything the Trump administration may say about coal, “the variable cost of [running an ageing coal plant] is higher than the all-in cost of wind”, he says.

“It’s hard as a utility, which has a kind of fiduciary obligation to its customers, to continue to operate those existing coal plants where there’s an opportunity to reduce costs.”

Algonquin does not plan to bid any wind capacity into Alberta’s upcoming tender, Robertson says, because “we didn’t find anything that was going to be sufficiently competitive that we wanted to put money into”.

The company is instead focused on longer-term solar opportunities in Alberta, he says.