ATCO, Canadian Utilities Expand Renewables Operations Through Accretive Acquisition

Canadian Utilities (TSE:CU), in which ATCO (TSE:ACO.X) has a majority stake, announced that it is acquiring wind and solar assets from Suncor Energy (TSE:SU) for a total of C$730 million. These assets are located in Alberta and Ontario, and the deal is expected to close in Q1 of next year. It is also anticipated to be accretive to both earnings and cash flow in 2023 (although it wasn’t specified how accretive it will be), and it will expand ATCO’s renewables portfolio.

This will help ATCO reach its target of “owning, developing or managing more than 1,000 MW of renewable energy by 2030” while bringing the company closer to its net-zero greenhouse gas emissions target by 2050.

The acquisition brings with it an array of wind projects, such as the Forty Mile project located in Alberta (202 megawatts), which is anticipated to be in operation by the end of 2022.

Is Canadian Utilities Stock a Buy?

According to analysts, CU stock earns a Hold consensus rating based on four Holds and one Sell rating assigned in the past three months. The average CU stock price target of C$40.30 implies 11.5% upside potential.

Is ATCO Stock a Buy?

Since ATCO owns CU, it makes sense to check out this company’s average price target as well. Interestingly, ATCO has a Moderate Buy consensus rating based on two Buys and one Hold rating assigned in the past three months. The average ATCO price forecast of C$52.00 implies 22% upside potential.

One thing that separates the two companies is that ATCO has a fairly large amount of insider buying from its CEO, giving it a Positive insider confidence signal.

Conclusion: A Promising Acquisition

Canadian Utilities and ATCO are interesting companies to look at because they take part in the renewable energy trend that is seeing continued growth. The acquisition, if it goes through, looks promising, as it is expected to be accretive.

Disclosure