The largest investor in Algonquin Power & Utilities Corp. says “substantial change is necessary” in the company’s governance and has nominated three executives—one of them a former C-level executive at Xcel Energy Inc.—to replace current board members.
The managers of Starboard Value LP, which owns about 9% of Ontario-based Algonquin, say they are excited about the company’s prospects, the planned divestiture of its unregulated renewable energy division and its work with Atlantica Sustainable Infrastructure plc, of which it owns 42%, on that venture’s strategic review. But, they added in a letter sent to Algonquin March 21, the company is at a critical juncture and the board as a whole “has a long history of making value-destructive decisions” that include the failed acquisition of Kentucky Power from American Electric Power Co.
Starboard Managing Member Jeffrey Smith said in the letter that his team has worked intensely with Algonquin’s nine directors in the past year, including on the removal of CEO Arun Banskota, who abruptly resigned last August.
“However, this has not been an easy engagement, with certain influential members of the board impeding progress and the majority of the board either passive or complicit,” Smith said, adding that “careless management” of Algonquin’s balance sheet has contributed to the company’s stock lagging those of many peer utilities—many of which are making similar moves to slim down and focus on regulated assets.
Hence the firm’s slate of three director candidates. They are:
Brett Carter, who was Xcel’s chief customer officer a as an executive vice president and group president of its utilities until last October. Before joning Xcel in May 2018, Carter spent 10 years in senior roles at Duke Energy Corp. and nearly three years at Bank of America Corp.
Christopher Lopez, the chief financial and regulatory officer of Hydro One Ltd., where he has worked since 2016 after spending roughly 17 years at clean energy venture TransAlta Corp.
Robert Schriesheim, a restructuring expert and corporate strategist who is a past CFO of Sears Holdings Corp. and human resources company Hewitt Associates Inc.
In a statement, Algonquin’s directors said they will review Starboard’s nominees and present their recommendations to shareholders ahead of the company’s annual meeting. That gathering has been scheduled for June 4.
“Algonquin maintains open communications with its shareholders and appreciates constructive input that advances its goal of enhancing shareholder value,” the board said in its statement. “The company is making important progress executing on its key initiatives, including pursuing a sale of its renewable energy business, continuing its search process for a permanent CEO and repositioning the Company towards a more efficient operating profile and a simplified strategy for the future.”
Shares of Algonquin (Ticker: AQN) didn’t move much on word of Starboard’s board goals. In afternoon trading March 22, they were changing hands at $6.07, down slightly on the day. Over the past six months, they have lost more than 10% of their value, shrinking the company’s market capitalization to about $4.2 billion.
