The Canadian parent of electricity supplier, Belco, is facing biting criticism from activist shareholder, Starboard Value LP, which claims new leadership is needed.

The US investor has nominated three candidates to join the utility's nine-member board, as the hedge fund seeks a direction change in corporate policy.

Starboard, Algonquin Power & Utilities Corp’s largest shareholder with an ownership of about 9 per cent, wrote to the Algonquin board Thursday saying that after working with the board and management over the last year, some needed changes have been made, but not enough.

Algonquin responded Friday, saying they were making important progress executing on its key initiatives, including pursuing a sale of its renewable energy business, continuing its search for a permanent chief executive officer and repositioning the company towards a more efficient operating profile and a simplified strategy for the future.

Algonquin said: “The Corporate Governance Committee of Algonquin's board will review the proposed nominees in accordance with the company's guidelines.

“The board will present its formal recommendation with respect to the election of directors in the company's management information circular, to be filed with Canadian securities regulatory authorities and the Securities and Exchange Commission and delivered to shareholders eligible to vote at the 2024 annual meeting of shareholders.”

But the Starboard letter, signed by managing member Jeffrey C Smith, said: “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.”

Algonquin’s annual meeting has been scheduled for June 4, and Starboard served notice that they “will be seeking to remove several long-serving directors with a history of presiding over some of the company’s most value-destructive decisions”.

Starboard said Algonquin has made several important changes since its intervention, such as starting the process to change the CEO and the start of a strategic review “that has not yet yielded a positive result”.

The investor letter said: “Algonquin is at a critical juncture – it is currently in the process of selecting its next CEO and is exploring a sale of its Renewable Energy Group (the ‘Unregulated Renewables’ business).

“It is therefore essential that Algonquin have directors with the expertise, fresh perspective and shareholder-focused mindset to properly evaluate what may be a wide range of strategic options.

“Unfortunately, the current board has a long history of making value-destructive decisions.

“This is most clearly evidenced by the board’s poor succession planning around former chief executive officer Ian Robertson’s departure, the pursuit of the Kentucky Power acquisition (which, thankfully, was terminated because it could not receive regulatory approval), and careless management of the company’s balance sheet, which led to a material reduction in the dividend.

“As a result, Algonquin’s stock has drastically underperformed its peers.

“Given the critical decisions and processes currently under way to recruit the next CEO and explore a sale of the unregulated renewables business, we have urged board leadership for the better part of a year to work with us to refresh the board with highly credentialled directors, including shareholder representatives and directors with relevant expertise unburdened by the poor decisions of the past.

”Unfortunately, these conversations with the board have only confirmed our strong view that substantial change is necessary.“

Bloomberg estimated that shares in Algonquin have fallen almost a quarter over the last 12 months, giving the company a market value of about $5.7 billion.

Algonquin Power & Utilities Corp was trading at $6.11 Friday, marginally up 2 cents (+0.33 per cent) for the day.

• To read the Starboard Value LP Nomination letter, see Related Media

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