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ANDREW WILLIS

Thursday, November 02, 2017

Algonquin Power & Utilities Corp. moved into global renewable-energy markets on Wednesday with the purchase of a portfolio owned by troubled Spanish energy company Abengoa SA.

Oakville, Ont.-based Algonquin, which only owns projects in North America and has been looking for international expansion opportunities for several years, is paying $602million (U.S.) to acquire a 25-percent stake in Atlantica Yield PLC from Abengoa, which will continue to own a 15-per-cent interest.

Atlantica owns solar and wind power plants, electrical transmission lines and desalinization facilities in Europe, South America and Africa. The company is publicly traded and based in London, England; it was spun out of Abengoa in 2014.

Algonquin is also launching a joint venture with Seville-based Abengoa, which is emerging from a bruising $10-billion debt restructuring that saw a number of its subsidiaries seek creditor protection.

The deal comes after Algonquin spent the past 18 months courting Abengoa as a potential partner, rather than simply trying to buy its assets. According to recent news reports, a number of suitors offered to buy Abengoa's entire stake in Atlantica. In an interview, Algonquin chief Ian Robertson said: "The joint venture and the investment in Atlantica represents our measured approach to international expansion."

"For Abengoa, our partnership was more enticing than simply money, because it gives them the opportunity to continue to develop exciting projects," Mr. Robertson said.

As part of its investment, Algonquin has a near-term opportunity to invest approximately $300-million in Abengoa projects, and an additional $800-million in projects in the development pipeline at Atlantica.

Mr. Robertson said the transaction, which is expected to close in the first quarter of 2018, will have an immediate positive financial impact at Algonquin and is consistent with the company's goal of increasing dividends by 10 per cent annually.

Algonquin owns $10-billion (Canadian) of assets, including renewable-power plants and water and electrical distribution networks, and has 2,200 employees. Abengoa has 13,750 employees and operations in 50 countries and is one of Spain's largest renewable energy companies.

Algonquin paid for the lion's share of the Atlantica stake by selling $500-million of shares late on Wednesday in a bought deal financing. Investment banks Raymond James Ltd. and Scotia Capital were Algonquin's financial advisers on the deal, along with law firms Husch Blackwell and Pinsent Masons.

Algonquin (AQN)

Close: $13.75, down 6¢

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