Shares of Atlantic Power (NYSE:AT) (TSE:ATP) crumbled more than 30 percent on Tuesday after the owner of a fleet of power generation assets in the US and Canada slashed its dividend to 12 cents annually, while also announcing its chief executive officer is stepping down and that a sale is not in the company's current best interests.
Shares tanked 32 percent to C$2.56 in Toronto on Tuesday.
The company had hired financial advisors to conduct a strategic review, which concluded that a sale or merger of the business is not a viable option at this time and that its shareholders would be best served by continuing to execute its business plan.
It said it would continue to assess other potential options, including asset sales or joint ventures in order to raise additional capital or reduce its debt.
Atlantic Power also announced a reduction in its dividend rate to 12 Canadian cents annually from 40 Canadian cents. It will move to a quarterly dividend rate of 3 cents, with the first to be declared in November and paid at the end of December.
The company is targeting additional savings in corporate expense of about $7 million per year in addition to the $8 million goal announced in Q2, for total run-rate savings of $15 million annually in 2015.
As of June 30, it had a liquidity position of $261 million, including $158 million of unrestricted cash, of which $41 million is planned to repay a C$45 million convertible loan maturing in October. Its next convertible debenture maturity is not until March 2017, it said.
Atlantic Power stood by its projected adjusted EBITDA forecast of $280 to $305 million for 2014, and free cash flow outlook of breakeven to $25 million. The company said it plans to continue to allocate a portion of its free cash flow to optimize investments in its existing projects that are expected to produce attractive returns, with $17 million set aside for this in 2014.
As part of its efforts, it is seeking extensions of existing power purchase agreements at several of its projects prior to their expiration dates in 2018 and later.
Finally, the company announced that its president and chief executive officer Barry Welch is stepping down from his role, to be replaced in the interim by director Ken Hartwick, effective immediately. The board has already started the process to find a permanent replacement.
Hartwick has been a board member of Atlantic Power since 2004 and has more than 15 years of management experience in the energy sector and 20 years of experience in the financial sector, according to Atlantic's statement. He was recently the president and CEO of Just Energy Group.
Atlantic Power's power generation projects sell electricity to utilities and other large commercial customers largely under long-term power purchase agreements, which seek to minimize exposure to changes in commodity prices.
Its current portfolio consists of interests in 28 operational power generation projects across 11 states in the United States and two provinces in Canada.