Canada-headquartered Algonquin Power & Utilities on Aug. 9 said it has entered into an agreement to sell its non-hydropower renewable energy business to a wholly-owned subsidiary of LS Power for up to $2.5 billion.

Subject to customary closing conditions and regulatory approvals, the transaction is expected to close in fourth-quarter 2024 or first-quarter 2025. The deal consists of $2.28 billion in cash proceeds and $220 million in an earn-out agreement related to certain wind assets, Algonquin CEO Chris Huskilson said Aug. 9 on the company’s second-quarter 2024 earnings call.

“This major milestone, coupled with our previously announced support agreement to sell our Atlantica shares, delivers on our plan to transform Algonquin into a pure play regulated utility, optimize our regulated business activities, strengthen our balance sheet and enhance our quality of earnings,” Huskilson said.

The company plans to use the proceeds to recapitalize its balance sheet and position itself to grow as a utility. It expects to receive net cash proceeds of about $1.6 billion after repaying construction, financing and other customary adjustments.

“Proceeds from the renewable sale plus our Atlantica shares will leave us with a very strong balance sheet,” Algonquin CFO Darren Myers said.

The deal also allows the company to reduce its debt. At the end of June 2024, Algonquin had about $8.3 billion in long-term debt, down slightly from about $8.5 billion a year earlier.

Comprised mostly of solar and wind farms across the U.S. and Canada, Algonquin’s renewable energy assets include nearly four dozen operating assets with more than a combined 3 gigawatts of generating capacity. The deal also includes an 8-GW pipeline of battery energy storage, renewable natural gas, solar and wind projects in various stages of development, according to LS Power.

“This represents a significant strategic investment in and expansion of LS Power’s renewable energy portfolio,” LS Power CEO Paul Segal said in a news release. “This business complements our existing fleet of more than 19,000 MW of top-performing renewable, energy storage, flexible gas and renewable fuels projects. We believe this platform will play a significant role in meeting the challenges of rising electric demand and advancing the energy transition.”

The transaction, which excludes debt, takes place as Algonquin works to establish itself as a pure-play regulated utility. The deal announcement came more than two months after Algonquin said it entered into a support agreement with a private company controlled by Energy Capital Partners to sell its shares in renewable infrastructure company Atlantica.

LS Power said it will incorporate Algonquin’s renewables business into its existing portfolio of renewable companies including EVgo, a fast-charging network for electric vehicles; waste-to-renewable natural gas developer Primary Renewable Fuels; Endurant Energy, a distributed energy infrastructure provider and Rise Light & Power, New York City’s largest generator and developer of clean energy infrastructure, among others.

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