Algonquin Power & Utilities Corp. (AQN) Q3 2026 earnings review
Weather lifts Algonquin's profit, but its wildfire costs keep rising
Algonquin earned more this quarter, but favourable summer weather in Missouri did the work rather than its new rates. Finance chief Rob Stefani credited rates and weather together. His own bridge puts weather at $0.02 a share, the whole of the gain. The year's outlook is unchanged, so by our math the fourth quarter must earn $0.07–0.09 a share.
| Profit per share, excluding one-offs | $0.11 $0.09 a year ago; weather added $0.02 |
|---|---|
| Revenue | $642.5M +10% from a year ago |
| Wildfire costs this quarter | $16.6M $33.8M so far this year, all excluded from adjusted profit |
| Full-year profit outlook | Unchanged $0.35–0.37 a share; by our math the fourth quarter needs $0.07–0.09 |
⚖️ Verdict: ⚪ Neutral
The story is unchanged, because the quarter matched the pace the full-year plan implied and weather supplied the margin. The good news: Missouri's rates reached only two months of the quarter, the Chilean sale closed, and the cash-flow-to-debt ratio moved away from the downgrade line. The bad news: California added $16.6 million of unrecoverable fire costs, and regulators there proposed a penalty on top.
The question now is whether earnings keep rising once the weather turns ordinary. Either a full quarter of Missouri rates carries the fourth quarter, or flat running costs and fire charges eat the gain. The fourth-quarter results in March will tell.
🐂 Bull Case
New Rates Have Started to Lift Utility Earnings
Algonquin earns most of its money from regulated utilities, where regulators set the prices customers pay. The utility group's adjusted earnings rose to $101.0 million from $95.7 million, because four rate decisions have taken effect since spring.
Missouri's Empire Electric began charging new rates on August 3, so the quarter caught only two months of a $97 million annual increase. The rest arrives from October. By our math a full quarter adds about $24 million, roughly double the $11.2 million booked.
- Net rate relief: $11.4 million, after higher wildfire insurance and a timing gap in Massachusetts gas revenue
- CalPeco, its California electric utility: $12.1 million from new rates
- Litchfield Park water and sewer in Arizona: $14.9 million a year approved, effective September 1
Not every decision went its way. Arizona set Litchfield Park's return at 9.4%, below the settlement's 9.75%. New York looks harder. Staff there countered the water utility's $37.6 million request with $12.6 million, and settlement talks pushed the decision to next summer.
What to watch: Missouri's contribution in the fourth quarter, the first with three full months of new rates. A figure near $24 million would mean the rate case is delivering what the outlook needs.
Selling the Chilean Utility Pays Down Debt
Algonquin owned 64% of Suralis, a water utility in Chile that brought in about 4% of regulated revenue. Chief executive Rod West wants a simpler portfolio, and the sale, he said, is "further simplifying our portfolio and enabling the prospect of capital recycling into our regulated utility businesses".
The deal moved fast: the group signed it on August 28 and closed it on October 30. It received $126.4 million, and $204.7 million of Suralis debt left the balance sheet with the business. It also booked an $8.3 million loss to mark the business down to the sale price, outside adjusted earnings.
Finance chief Rob Stefani called the sale "slightly credit positive on a forward-looking basis" and said a tax benefit makes it roughly neutral to this year's earnings. The utility has not disclosed how much Chilean profit it gives up, so the test is whether next year's outlook holds without it.
What to watch: the 2027 outlook at the fourth-quarter results in March. An unchanged $0.38–0.42 range would mean the debt saving covers the lost Chilean earnings.
Redomicile Gains a Date and a Payoff
Algonquin is incorporated in Canada but runs over 80% of its operations in the United States, so dividends and interest crossing the border attract extra tax. It plans to move its incorporation to Delaware and now targets completion in the first half of 2027.
"We estimate an annualized adjusted net EPS benefit of $0.02 to $0.03 per share with a partial benefit beginning in 2027," finance chief Rob Stefani said. Set against the $0.38–0.42 outlook for next year, a full year of savings is worth about 6% of profit by our math.
The missing number is the cost. The move triggers a one-time Canadian exit tax and a US toll charge, and Stefani has not yet put a range on either, pending an IRS private letter ruling the company says is "progressing as expected".
What to watch: the shareholder circular due in the first half of 2027, which must state the one-time tax cost. Only that number shows whether a few years of savings repay the move.
Positives this quarter didn't test
Three growth items advanced on paper this quarter, but none of them produced a revenue, customer or capital figure that the numbers can test yet.
- Missouri large-load tariff: filed September 11 "to support economic development and large-load investment while protecting residential and small-business customers"; chief executive Rod West called it "the first public signal toward that end" and named no customer. Commission approval is the next reading.
- SPP transmission projects: FERC agreed on August 31 to let Empire earn on construction spending before the lines operate and to recover costs if projects are abandoned. The dollar size of Empire's share is still undisclosed, and the projected-test-year request is pending.
- New rate cases: Oklahoma asks $7.0 million and New Hampshire's Granite State $12.3 million, with hearings in February and decisions during 2027.
🐻 Bear Case
Weather, Not Rates, Delivered the Higher Profit
"Our third quarter was solid, helped by new rates in multiple jurisdictions as well as favorable weather," finance chief Rob Stefani said. His own bridge tells a narrower story. Weather contributed $0.02 a share, which is the entire increase. New rates added $0.01, and higher operating and depreciation costs took that $0.01 back.
The weather showed up in Missouri's electricity use. Residential customers of Empire Electric used 14% more power than a year earlier, and the group's electricity sales net of fuel rose 17%. Gas use fell 2% because the autumn was mild, so gas earnings slipped.
This matters because Stefani held the outlook rather than raising it, even with a $0.02 tailwind. By our math adjusted earnings landed within 1% of the pace the full-year plan implied, so the plan absorbed the weather rather than beating it. Strip it out and profit per share stood at $0.09, equal to a year ago.
What to watch: the fourth quarter, which by our math needs $0.07–0.09 a share against $0.06 last year, with a full quarter of Missouri rates and no summer heat to lean on. Earning that range without weather would show the rate increases are doing the work.
The Wildfire Bill Keeps Growing
CalPeco, Algonquin's electric utility in California, is still paying for the 2020 Mountain View Fire. It has settled all 22 lawsuits, but California regulators decide how much of the cost customers cover, and that answer is still pending.
This quarter brought $16.6 million of "non-recoverable costs and additional accruals", taking the year's fire charges to $33.8 million. All of it sits outside adjusted earnings. In June a judge proposed letting CalPeco recover 75% of its request, spread over five years rather than three.
Then on September 28 the commission's safety division proposed a further $16.0 million penalty for alleged breaches of overhead-line safety rules. CalPeco called the penalty "unsubstantiated, excessive, and unlawful" and asked for a hearing. Wildfire insurance also costs $5.5 million more than a year ago, although rates now recover it.
Why it matters: the outlook counts none of these charges, so adjusted profit looks steady while cash leaves the business. Each new accrual also tests how much of the $178.4 million total loss customers will ultimately fund.
What to watch: the commission's vote on the cost recovery, scheduled for November 19, and the penalty hearing. A vote at 75% or lower, plus a penalty, would mean the fire's cost keeps landing on shareholders.
Operating Costs Are Not Falling as Planned
Algonquin's turnaround depends on spending less to run its utilities. Finance chief Rob Stefani targets operating costs in the low-to-mid 30s as a share of revenue, and pointed to outsourcing and software rationalisation, saying "there's opportunities to continue to take cost out".
The nine-month ratio has not moved: operating expenses took 34.5% of revenue, against 34.4% a year earlier. The quarter looked better. Costs fell to 34.4% of revenue, down 1.2 points, but only because weather added revenue while spending kept climbing. Gas operating costs rose $4.4 million on safety work and labour, and depreciation rose 13% as new plant entered service.
Stefani said severance and consulting costs for the programme sit outside adjusted earnings but inside the operating line, which is why the ratio does not yet show savings. He expects to "bend that cost curve back". Operating margin nonetheless slipped 0.5 points to 25.2%.
What to watch: the full-year ratio of operating cost to revenue at the fourth-quarter results, against 35.8% last year. A reading above that would mean the restructuring spending is not yet buying lower running costs.
Debt Is Rising Ahead of the Spending Ramp
Algonquin funds a growing capital plan while holding a BBB rating, and the number its rating agency watches is cash flow relative to debt. That ratio improved to 12.2% over the last twelve months, from 11.9% a quarter earlier. The downgrade line, by the company's estimate, sits near 11%.
The improvement came from cash flow, not less debt. Commercial paper, the short-term borrowing the utilities use between bond deals, grew to $564 million from $337 million at year-end. Bonds did not fall either. Debt on the rating agency's measure rose 3% to $5.9 billion.
The Chilean sale helps, because its debt leaves with it, and finance chief Rob Stefani called it "slightly credit positive on a forward-looking basis". But the capital plan steps up next year and again in 2028, and the group has pledged to issue no shares through 2027, so new borrowing is the only source.
What to watch: the same ratio at year-end, after the fourth quarter's heavier spending. Holding above 12% would show the plan is fundable with debt alone for now.
👓 Other Themes
California Court Backs Liberty in Apple Valley Case
The Town of Apple Valley has tried since 2016 to take Liberty's local water system by eminent domain. On August 24 the California Supreme Court reversed an appeal ruling that had gone the town's way and sent the case back under a standard that lets Liberty rebut the town's claims at trial. The case continues, but Liberty now defends it on better legal terms.
💲 Other KPIs
Spending rose 40% from a year ago, after falling in the first quarter, a swing the company says is "mainly due to the timing of capital expenditures incurred". Nine months total $448.4 million, 56% of the full-year plan. That leaves the heaviest quarter for last. By our math the fourth quarter needs about $352 million, 60% above the same quarter last year.
Up 7% from a year ago but a touch below last quarter's $77.1 million, so the rise is slowing after June's refinancing moved $1.15 billion of notes from the parent to the utility subsidiary. Utility interest rose $21.8 million and parent interest fell $16.9 million; commercial paper costs climbed with higher balances.
Nearly double a year ago, mostly because working capital released cash: receivables fell to $359 million from $461 million at year-end as unbilled amounts shrank. For nine months cash from operations is up 22%. One caution: the allowance for customer bills the group may never collect rose to $41.0 million from $31.1 million.
Up 21,300, or 1.6%, from a year earlier. All three commodities grew. Electric connections reached 343,000 and water and wastewater 594,000; the water figure still includes the Chilean utility sold in October, so the next count drops.
🔮 Guidance
Unchanged. The middle of the range is $0.36, about 6% above last year. Nine months finished level with 2025. By our math the fourth quarter must earn $0.07–0.09 against $0.06 a year ago, with a full quarter of Missouri rates helping. The range has now held for four quarters, and last year's result finished above the top of its own range.
Unchanged. The middle of the range, $0.40, implies 11% growth over the middle of this year's range. Finance chief Rob Stefani kept it after selling the Chilean utility, which earned part of the profit, and said the redomicile adds a partial benefit from 2027. Management trimmed the range by about $0.03 a year ago for a higher tax rate and has held it since.
Unchanged. Nine months of spending reached $448 million, so the plan needs about $352 million in the fourth quarter by our math, more than any quarter this year. The company says quarter-to-quarter swings reflect timing. A shortfall would leave year-end rate base below the $8.5 billion the plan assumes.
Unchanged. The plan steps up each year, reaching about $1.3 billion in 2028, with electric systems taking just over half. Nothing this quarter changed the total. The Chilean utility's future spending leaves with the sale, and Algonquin has not said whether the total shrinks to match.
Unchanged. Rate base, the invested capital regulators let the utilities earn on, grows from about $8.2 billion to $9.7 billion by the end of the plan. The path is back-loaded: about 3% this year by our math, and faster in each of the two years after, as transmission and generation projects enter the base. Fourth-quarter spending decides whether this year's step arrives.
Unchanged. The board declared $0.065 for the fourth quarter, payable in January. The payout stays high. Over nine months dividends took about 70% of adjusted profit, so there is little room to raise it until earnings do, and the plan assumes no new shares through 2027.
Confirmed. Finance chief Rob Stefani now puts the recurring saving at $0.02–0.03 a share, with part arriving in 2027 if shareholders and regulators approve the move in the first half. The one-time exit tax remains unquantified, so the net benefit stays unknown.
❓ Key Questions
How much will the redomicile exit tax cost?
Stefani now quantifies the recurring saving at $0.02–0.03 a share but still gives no range for the one-time Canadian exit tax and US toll charge. Without it, nobody can say how many years of savings the move consumes.
How much of the $97 million is in Missouri rates today?
The settlement phases the increase over three years. Two months produced $11.2 million, below a straight monthly share, and Stefani said "you'd have about half of that available for this year" of the extra $13.7 million. The split between phasing and seasonality decides the fourth quarter.
What replaces CalPeco's power supply from May 2027?
The California utility's supply contract with NV Energy ends in May 2027. Nobody raised it on the call. The cost and timing of replacement power will shape California earnings next year.
Where does the cash-flow-to-debt ratio end the year?
The ratio reached 12.2% with three quarters of spending behind it, but the fourth quarter carries the heaviest capital outlay by our math and the Chilean proceeds only partly offset it. A year-end figure, and the plan if it nears 11%, would settle the equity question.
What has the cost programme saved so far?
Restructuring charges reached $36.6 million for nine months, all excluded from adjusted profit, while the operating-cost ratio stayed flat. Stefani named outsourcing and software rationalisation but gave no savings figure. A savings number by bucket would show whether the spending buys a lower run-rate.