DBRS has announced that it:
changed the trends on Algonquin Power & Utilities Corp’s (APUC or the Company) credit ratings to Stable from Positive. Concurrently, Morningstar DBRS also confirmed APUC’s Issuer Rating at BBB and the credit rating on the Company’s Preferred Shares at Pfd-3.
KEY CREDIT RATING CONSIDERATIONS
APUC’s credit ratings are primarily based on the strength and stability of APUC’s subsidiary, Liberty Utilities Finance GP1 (LUF; rated BBB (high) with a Stable trend). LUF’s credit ratings are in turn based on the credit profile of Liberty Utilities Co. (LUCO), a fully regulated and diversified utility service provider. Morningstar DBRS based the credit rating confirmation on the strength and stability of LUCO’s business risk profile as a fully regulated and diversified utility service provider. LUCO’s business risk profile remained stable in 2025, underpinned by its (1) low-risk regulated asset base with reasonable regulatory frameworks across multiple jurisdictions and (2) geographically diversified portfolio with a reasonably sized customer base and large and growing rate base. The Company’s credit rating also incorporates the structural subordination of APUC’s debt to the debt of its subsidiaries.The change in trends to Stable from Positive is concurrent with Morningstar DBRS’ credit rating actions on LUF. LUF’s capital investment plan between 2026 and 2028 is expected to require the issuance of additional debt such that its cash flow-to-debt ratio will remain less than the upgrade threshold of 15.0% over the forecast period. Additionally, upcoming maturities of $1.15 billion at APUC will likely be refinanced at LUCO. Nevertheless, Morningstar DBRS expects LUF’s cash flow-to-debt ratio to average around 12.0% over the forecast period, which is considered strong for the BBB (high) credit rating category, with adequate headroom to absorb any weakness.
There were no significant changes nor material adverse regulatory decisions in 2025 and year-to-date 2026 that affected LUCO’s credit profile. The Company achieved rate case settlements at various utilities including Empire District Electric Company; California–Liberty Utilities (CalPeco Electric) LLC; and New England Gas, which is expected to drive growth in earnings. The Company was also able to lower its operating expenses in 2025 through cost control measures and improve earned return of equity to 6.8% in 2025 (compared with 2024 at 5.5%).
CREDIT RATING DRIVERS
Morningstar DBRS could consider an upgrade if LUF gets upgraded and APUC maintains its financial risk profile. Conversely, APUC’s credit ratings could be downgraded if LUF’s credit ratings are downgraded or if APUC’s credit metrics weaken materially.EARNINGS OUTLOOK
Morningstar DBRS expects APUC’s earnings to stabilize and be more predictable after the Company’s transition to a pure and fully regulated player. Morningstar DBRS also expects lower consolidated revenues from the sale of APUC’s renewable business (other than hydro) in 2025, offset by higher EBITDA margins driven by lower operating costs. Over time, Morningstar DBRS anticipates that APUC’s regulated businesses margins will strengthen as the Company continues to benefit from the implementation of higher approved rates and rate base year over year.FINANCIAL OUTLOOK
APUC’s financial risk profile at year-end 2025 was strong, with actual debt-to-capital ratio less than the average of regulator-approved capital structure at the various regulated utilities. Morningstar DBRS expects cash flow from operations in 2026 to be modestly higher than in 2025 because of higher earnings. However, Morningstar DBRS expects the Company’s key credit metrics to modestly weaken as it raises additional debt to fund its capital investment plan over the next three years. Nevertheless, Morningstar DBRS expects the Company’s cash flow-to-debt ratio to average around 11.0% over the forecast period and stay supportive of the credit rating.CREDIT RATING RATIONALE
APUC’s BBB Issuer Rating incorporates the business risk profile of its operating subsidiary, and APUC’s consolidated financial metrics, and the structural subordination of APUC to its operating subsidiary.Comprehensive Business Risk Assessment (CBRA)
APUC’s CBRA of A/AL reflects its low business risk profile as a pure-play, distribution, transmission and generation business operating under an established and generally reasonable regulatory framework across multiple countries. The Company benefits from stable customer demand from its operating subsidiaries and minimal exposure to commodity or volume risk.Comprehensive Financial Risk Assessment (CFRA)
APUC’s CFRA of AL/BBBH reflects its strong key credit metrics supported by reasonable leverage and adequate access to liquidity.Intrinsic Assessment (IA)
The IA of BBBH is at the lower end of the IA range and is limited by LUF’s credit rating, given that APUC’s debt is structurally subordinate to debt at LUF. The IA assignment considers peer comparisons, among other factors.Additional Considerations
APUC’s credit rating includes a negative adjustment for its structural subordination as the parent to its operating subsidiary.
Affected issues are AQN.PR.A and AQN.PR.D .