Algonquin to Sell Majority Stake in Chilean Water Utility Suralis
Algonquin Power & Utilities Corp. (TSX/NYSE: AQN) has announced an agreement to sell its approximately 64% ownership interest in Chilean water utility Suralis S.A. to a fund managed by Toesca S.A. Administradora General de Fondos, a Chilean asset manager specializing in alternative investments.
The transaction is expected to generate total proceeds of approximately $126.5 million for Algonquin, with an additional earnout opportunity of up to $1.5 million. The Company plans to use the proceeds primarily to reduce debt and recycle capital into its regulated utility operations as part of its $3.2 billion capital plan for the 2026-2028 period.
The proposed sale represents another step in Algonquin’s broader strategy to simplify its geographic footprint, strengthen its balance sheet and concentrate investment on its core regulated utility businesses. By divesting its majority interest in Suralis, the Company expects to free up capital that can be redirected toward infrastructure investments and other priorities within its regulated utility portfolio.
All financial amounts associated with the transaction are stated in U.S. dollars unless otherwise indicated.
Capital Recycling and Portfolio Simplification
Algonquin said the sale supports its ongoing effort to optimize its portfolio and allocate capital toward businesses and markets that are considered central to its long-term strategy.
The Company expects the $126.5 million in proceeds to support debt reduction while also helping fund its planned capital investments between 2026 and 2028. Algonquin’s $3.2 billion capital plan is designed to support continued investment in regulated utility infrastructure and related operations.
For utility companies, capital allocation remains an important component of long-term growth strategies. Regulated utilities typically require significant and sustained investment in infrastructure, including systems for electricity, natural gas and water services. Companies must therefore balance investment opportunities with debt levels, financing requirements and shareholder expectations.
The sale of the Suralis ownership stake is intended to help Algonquin strengthen that balance by converting an existing investment into capital that can be redeployed across its core regulated operations.
Rod West, Chief Executive Officer of Algonquin, said the transaction is an important development in the Company’s effort to simplify its business.
“This transaction represents an important step in simplifying our geographic footprint while concurrently recycling capital into our core regulated utility businesses,” West said.
The planned divestment reflects Algonquin’s intention to focus more closely on areas where it believes its regulated utility platform can support long-term investment and operational growth.
Appreciation for Customers and Communities
Although Algonquin is preparing to sell its majority ownership interest in Suralis, West emphasized the Company’s relationship with customers and communities served by the Chilean water utility.
Suralis provides water services to customers in the Los Lagos and Los Rios regions of Chile. Water utilities play a central role in local communities by maintaining essential infrastructure and ensuring the continued delivery of water services.
West thanked the customers and communities that worked with Suralis during Algonquin’s ownership period.
“I want to thank our customers and the communities in the Los Lagos and Los Rios regions for allowing us to serve as their trusted water partner, supplier, and neighbor,” West said.
He also recognized the employees and management team at Suralis for their commitment to the utility’s customers.
“I also want to recognize the entire Suralis team for their unwavering commitment to our customers,” West added.
The transaction is expected to involve a transition of ownership rather than a disruption of the utility’s essential operations. Water service will remain a critical responsibility for Suralis, and the buyer has indicated that it expects continuity in the Company’s customer service and community engagement activities.
Toesca Expands Its Investment in Suralis
The buyer in the transaction is a fund managed by Toesca S.A. Administradora General de Fondos, a Chilean asset manager focused on alternative investments.
Toesca already holds an approximately 30% ownership interest in Suralis, making the acquisition of Algonquin’s majority stake a natural expansion of its existing investment.
Carlos Saieh L., Chief Executive Officer of Toesca, said the transaction aligns with the firm’s investment strategy and will allow it to build upon its existing relationship with Suralis.
“This acquisition is a natural fit for Toesca, complementing our existing approximately 30% ownership in Suralis and allowing us to build on the foundation of exceptional customer service and community engagement that Suralis has fostered,” Saieh said.
Toesca’s existing ownership position is expected to provide continuity as the utility moves through the ownership transition. The asset manager is already familiar with the Company and its operations, which could support a smoother transfer of control following the completion of the transaction.
Saieh said the Company expects the transition to proceed smoothly and emphasized the continued importance of providing reliable water service.
“We expect a smooth transition as we continue to provide water to customers and their communities,” he said.
The acquisition would give Toesca a significantly larger ownership position in the Chilean water utility and further establish the firm as the principal investor in Suralis.
Expected Closing Timeline
Algonquin expects the transaction to close within the next two quarters, subject to customary closing conditions.
One of the conditions identified by the Company is merger control approval. The transaction will therefore proceed through the relevant regulatory review process before it can be finalized.
Mergers and acquisitions involving utility assets often require regulatory consideration because the businesses provide essential services and operate within regulated environments. Approval processes can examine ownership changes and other aspects of a proposed transaction before closing.
Algonquin said the agreement remains subject to these customary conditions, and the completion of the transaction will depend on the satisfaction of the required approvals and closing requirements.
Until the transaction closes, Algonquin will continue to hold its ownership interest in Suralis. Following completion, Toesca’s managed fund will acquire Algonquin’s approximately 64% stake.
The total transaction proceeds are expected to reach $126.5 million, subject to the terms of the agreement, while the potential earnout could provide Algonquin with up to an additional $1.5 million.
Supporting Algonquin’s 2026-2028 Investment Plan
The sale comes as Algonquin prepares to execute its $3.2 billion capital plan covering the 2026 through 2028 period.
The planned investments are intended to support the Company’s core regulated utility businesses, where infrastructure spending can contribute to the development and modernization of essential systems.
By directing proceeds from asset sales toward debt reduction and capital investment, Algonquin is pursuing a capital recycling strategy that allows it to reallocate resources from one part of its portfolio to another.
For the Company, the sale of its Suralis stake provides both immediate financial proceeds and the possibility of additional value through the earnout provision. The funds are expected to support the Company’s financial priorities while helping advance its broader investment program.
The decision also demonstrates the continued importance of portfolio discipline within the utility sector. Companies operating across multiple regions and business segments must regularly evaluate where investments can generate the greatest strategic value.
Algonquin’s decision to simplify its geographic footprint suggests that the Company is placing increased emphasis on concentrating capital and management resources on its principal regulated utility operations.
Advisors Supporting the Transaction
Algonquin has appointed Centerview Partners LLC as financial advisor for the transaction.
Carey y Cía. Ltda. is serving as legal counsel to Algonquin.
The involvement of financial and legal advisors will support the Company throughout the transaction process, including the completion of regulatory and customary closing requirements.
As the transaction moves toward closing, Algonquin will focus on completing the sale while continuing to pursue its broader financial and operational priorities.
For Toesca, the acquisition represents an opportunity to expand its existing investment in Suralis and assume a larger ownership role in a utility with established operations and relationships across southern Chile.
For Algonquin, the agreement marks another important portfolio action as it works to simplify its operations, reduce debt and recycle capital into its regulated utility businesses.
The proposed $126.5 million transaction, together with the potential additional earnout, is expected to provide financial flexibility as Algonquin advances its $3.2 billion capital plan for 2026-2028.
While the transaction remains subject to merger control and other customary closing conditions, both Algonquin and Toesca have expressed confidence in the strategic rationale for the ownership transition. Algonquin sees the sale as an opportunity to sharpen its geographic and operational focus, while Toesca views the acquisition as a logical extension of its existing approximately 30% interest in Suralis.
As the expected closing period approaches, the transaction is positioned to reshape ownership of Suralis while maintaining continuity for customers and communities in the Los Lagos and Los Rios regions. The outcome will also provide Algonquin with additional capital to support debt reduction and future investment across its core regulated utility platform.
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