UPDATE 3-Canada's Algonquin mulls sale of renewable energy unit, CEO exits
(Adds shares in paragraph 3, analyst comment in paragraph 6 and background in paragraph 7)
Aug 10 (Reuters) - Canada's Algonquin Power & Utilities said on Thursday it was considering a sale of its renewable energy business to reduce debt, and announced the resignation of CEO Arun Banskota.
The decision comes months after the company initiated a strategic review of the renewable energy division, following a push for changes by Corvex Management and other activist firms.
U.S.-listed shares of Algonquin rose nearly 4% to $8.05 before the bell.
Company insider Christopher Huskilson has taken over as interim CEO effective immediately and the board has commenced a search for a permanent replacement, the utility firm said.
Algonquin is grappling with a $7.5 billion debt burden following a series of acquisitions in recent years. In January, the company announced plans to raise $1 billion through asset sales and said it would slash its dividend by 40% to bolster its finances.
"We expect to use the proceeds of a renewables transaction to reduce our debt and fund share repurchases," said Huskilson.
In April, a deal to buy the Kentucky operations of American Electric Power fell through following multiple delays.
"Due to the failed Kentucky Power acquisition and the poor performance of the AQN share price, we believe the market will not be surprised with the CEO transition," said RBC Capital analyst Nelson Ng.
Algonquin shares fell 52% last year and are up 18.14% year-to-date.
Activist hedge fund Starboard Value last month urged the utility firm to sell a majority of its renewable assets to reduce debt and improve earnings.
The company said on Thursday JPMorgan would act as its financial advisor for the possible sale of the renewable energy unit, which includes all of the company's non-regulated operating and development power generation assets.
Algonquin also posted a wider second-quarter loss of $253.2 million, compared with a loss of $33.4 million a year earlier. (Reporting by Tanay Dhumal in Bengaluru; Editing by Milla Nissi and Devika Syamnath)
