ALGONQUIN POWER & UTILITIES CORP. $5.60 (Toronto symbol AQN; Shares outstanding: 112.8 million; Market cap: $631.7 million; TSINetwork Rating: Extra Risk; Dividend yield: 5.0%; www.algonquinpower.com) holds interests in 45 hydroelectric plants in Canada and the northeastern U.S. It also owns 12 thermal-energy facilities. Algonquin’s wholly owned subsidiary, Liberty Water Co., owns 19 water-distribution and sewage treatment plants in the U.S.

The company also has a partnership with Emera Inc. (Toronto symbol EMA), which is a recommendation of The Successful Investor, our conservative growth advisory. Emera holds a 24.4% interest in Algonquin. This partnership, called Liberty Energy Utilities, continues to make acquisitions.

Liberty Energy’s purchases include NV Energy, which sells power to 47,000 customers near Lake Tahoe; Atmos Energy, which distributes natural gas to 84,000 customers in Missouri, Iowa and Illinois; and two other utilities that sell electricity and natural gas to 130,000 customers in New Hampshire.

Algonquin has also made a number of wind power investments: it owns wind farms in Manitoba and Saskatchewan, and is developing other projects in Ontario and Quebec. As well, Emera and Algonquin are forming a joint venture called Northeast Wind to build wind energy projects in the northeastern U.S.

In the three months ended June 30, 2011, Algonquin earned $0.07 a share, compared to nil per share a year earlier. Cash flow per share rose 41.7%, to $0.17 from $0.12.

Algonquin yields 5.0%, and trades at just 6.5 times its forecast 2011 cash flow of $0.86 a share.

Algonquin Power & Utilities is still a buy.

INNERGEX RENEWABLE ENERGY $9.61 (Toronto symbol INE; Shares outstanding: 80.4 million; Market cap: $772.6 million; TSINetwork Rating: Extra Risk; Dividend yield 6.0%; www.innergex.com) owns and operates 23 hydroelectric and wind power facilities in Quebec, Ontario, B.C. and Idaho.

Innergex gets about 80% of its power from hydroelectric plants. The remaining 20% comes from wind farms.

The company aims to rapidly expand its hydroelectric and wind power capacity. It is now developing or building 11 projects. In addition, Innergex will start up its first solar power project in early 2012.

Before one-time items, earnings per share fell to $0.01 in the quarter ended June 30, 2011, from $0.06 a year earlier. However, cash flow per share rose 5.9%, to $0.28 from $0.22.

Innergex’s shares yield 6.0%. The stock trades at 7.6 times forecast 2011 cash flow of $1.26 a share.

Innergex Renewable Energy is a buy.

Brookfield Renewable now owns interests in 42 hydroelectric generating stations on 16 river systems in Quebec, Ontario, B.C. and New England, as well as two wind farms. It has 1,700 megawatts of generating capacity in total.

The combined entity, which will be called Brookfield Renewable Energy Partners L.P., will own 179 power plants generating 4,800 megawatts of electricity. Roughly 40% of its generating capacity will be in Canada, with another 40% in the U.S. and 20% in Brazil.

We think the merger is positive for Brookfield Renewable unitholders. The new company will raise its distribution from the current $1.30 per unit to $1.35. That will give it a yield of 4.9%, based on today’s price. The move also enhances the company’s growth prospects. The deal should close by the end of 2011.

Brookfield Renewable Power is still a buy.

Pat McKeough responds to many personal questions on stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of the most intriguing questions of the past week go out to all Inner Circle members. And every Friday, we offer you one of the highlights from these Q&A sessions.

An interesting question came up this week about Ocean Power Technologies, a company that is generating electricity from ocean waves. This raised the issue of the risks and rewards associated with a renewable energy stock. In particular, Pat drew the comparison between the long-term prospects of wave power and wind power.

Q: What do you think of Ocean Power Technologies? What is the buy/hold/sell status of the stock, please?

A: Ocean Power Technologies (symbol OPTT on Nasdaq; www.oceanpowertechnologies.com) is trying to develop and commercialize a system that generates electricity from the mechanical energy created by the rising and falling of ocean waves. The company began trading on Nasdaq in May 2006 at $1.80 a share (split adjusted).

Founded in 1994, Ocean Power focuses on commercializing its PowerBuoy system, which is able to respond to changing wave conditions. Most of the PowerBuoy is underwater, so it has less visible impact on the surrounding environment than wind turbines. Wave power is also steadier and more consistent than wind power.

In 2004, Ocean Power formed a joint venture with Iberdrola (a major Spanish utility) to build a wave farm on the north coast of Spain. Ocean Power deployed and tested its first PowerBuoy off the coast of Spain in September 2008.

In October 2008, the company deployed one of its PowerBuoy systems near Kaneohe Bay, on the island of Oahu, under its ongoing program with the U.S. Navy. This PowerBuoy will be connected to the Oahu power grid.

Renewable energy stock: Ocean Power adds contract from U.S. Department of Energy

In addition, Ocean Power continues to work under a contract with the Scottish government. As well, Ocean Power recently signed agreements to develop wave power projects off Australia’s eastern and southern coasts.

The company recently won a $2.4-million contract awarded from the U.S. Department of Energy to promote the development of renewable marine energy. To that end, Ocean Power has teamed up with Lockheed Martin to develop wave power projects in North America.

You can see Pat’s recommendation on Ocean Power Technologies in this week’s Inner Circle Q&A. In his analysis, he looks at how soon the company is likely to be commercially viable and generate a profit for shareholders. He also considers whether it can continue to attract government and commercial development contracts.

Inner Circle members see Pat’s analysis and recommendations on the stocks other members have asked about in each week’s Inner Circle Q&A. You can view it immediately when you become a member of this special investment group. You will get Pat McKeough’s answers to your personal investment questions, full access to our members-only Inner Circle section, and many other membership privileges. Click here to get started right away.

(Note: If you are a current member of the Inner Circle, please click here to view Pat’s recommendation. Be sure to log in first.)

Meanwhile, Fortress has been converting the plant to produce a type of cellulose called dissolving pulp, which is mainly used in viscose fibre, or rayon. The conversion should be fully operational shortly. Dissolving pulp prices remain high, and Fortress has already signed contracts with a number of companies in China.

Fortress is also building a 25-megawatt biomass-fuelled cogeneration facility to supply electricity for the Thurso plant.

Biomass facilities burn plant materials and waste. Cogeneration involves recovering heat that is created in the initial generating process and recycling it to produce more electricity.

Fortress’ outlook is positive, and the dissolving pulp plant should make a big contribution to its earnings.

Fortress Paper is still a buy.

However, while alternative energy investments appeal to a lot of investors on an emotional and conceptual level, many offer only limited investment potential. That’s because they may need a long time to move from the research or concept stage to profitability.

In addition, many governments around the world are cutting subsidies for alternative energy investments as they look for ways to deal with their ballooning budget deficits.

To cut your risk, we recommend that you focus on established firms that have a sound base of other operations. That helps cut the risk of their alternative energy investments.

Another way to offset the risk of subsidy cuts is to look for alternative energy producers that have secured long-term, government-guaranteed contracts for the power they generate.

Alternative energy investments: Algonquin Power has made a big move into wind

In the latest issue of Canadian Wealth Advisor, our newsletter for safety-conscious investing, we’ve published a special update on two companies that are making big alternative energy investments. (Read on to learn how you can get this issue—which gives you our clear buy/sell/hold advice on both of these stocks—absolutely FREE.)

One of these companies is Algonquin Power & Utilities Corp. (symbol AQN on Toronto). Algonquin holds interests in 44 hydroelectric plants in Canada and the northeastern U.S. It also owns 12 thermal-energy facilities. Algonquin’s wholly owned subsidiary, Liberty Water Co., owns 19 water-distribution and waste-water plants in the U.S.

In Wall Street Stock Forecaster, you get an investment advisory that's 100% focused on U.S. value stocks identified by my ValuVesting System™. What's more, today's low U.S. dollar provides you with a rare opportunity to add world-dominating U.S. stocks to your portfolio at bargain prices. Don’t miss out. Click here to learn how Wall Street Stock Forecaster can help you tap into high-quality opportunities in the U.S. stock markets.

Algonquin has made a number of big wind-power investments: the company owns wind farms in Manitoba and Saskatchewan, and is developing other wind projects in Ontario and Quebec.

As well, Emera Inc. (symbol EMA on Toronto) and Algonquin are forming a joint venture called Northeast Wind to build wind-energy projects in the northeastern U.S. Emera holds a 24.4% interest in Algonquin.

In addition to its renewable power assets, Algonquin has a separate partnership with Emera called Liberty Energy Utilities. This partnership continues to make acquisitions.

So far, Liberty Energy’s purchases include NV Energy, which sells power to 47,000 customers near Lake Tahoe; Atmos Energy, which distributes natural gas to 84,000 customers in Missouri, Iowa and Illinois; and two other utilities that sell electricity and natural gas to 130,000 customers in New Hampshire.

Algonquin is also a dividend paying stock. Its shares yield a high 4.9%.

Get our up-to-the-minute advice on Algonquin and 19 other safety-conscious investments FREE

As I mentioned, investing in renewable-power projects like wind farms adds longer-term risk. In the latest Canadian Wealth Advisor, we look to see if Algonquin’s government electricity contracts and its other operations (including its partnerships with Emera) are enough to help it offset the risk of cuts to politically sensitive green-power subsidies.

We’ve concluded our analysis with our clear advice on whether you should buy, hold—or sell—the shares.

Best of all, in addition to the latest issue of Canadian Wealth Advisor, your FREE trial contains 5 in-depth Special Reports and much more. Don’t wait! Click here start your 1-month FREE trial to Canadian Wealth Advisor now.

ALGONQUIN POWER & UTILITIES CORP. $5.71 (Toronto symbol AQN; Shares outstanding: 94.3 million; Market cap: $677.1 million; TSINetwork Rating: Extra Risk; Dividend yield: 4.6%; www.algonquinpower.com) holds interests in 44 hydroelectric plants in Canada and the northeastern U.S. It also owns 12 thermal-energy facilities. Algonquin’s wholly owned subsidiary, Liberty Water Co., owns 19 water-distribution and waste-water plants in the U.S.

The company also has a partnership with Emera Inc. (Toronto symbol EMA), which is a recommendation of The Successful Investor, our conservative growth advisory. Emera holds a 24.4% interest in Algonquin. This partnership, called Liberty Energy Utilities, continues to make acquisitions.

Liberty Energy’s purchases include NV Energy, which sells power to 47,000 customers near Lake Tahoe; Atmos Energy, which distributes natural gas to 84,000 customers in Missouri, Iowa and Illinois; and two other utilities that sell electricity and natural gas to 130,000 customers in New Hampshire.

Algonquin has also made a number of wind-power investments: it owns wind farms in Manitoba and Saskatchewan, and is developing other projects in Ontario and Quebec. As well, Emera and Algonquin are forming a joint venture called Northeast Wind to build wind-energy projects in the northeastern U.S.

In the three months ended March 31, 2011, Algonquin’s earnings per share rose 25%, to $0.05 from $0.04. Cash flow rose 77.8%, to $0.16 a share from $0.09 a share.

Algonquin yields 4.6%, and trades at just 6.6 times its forecast 2011 cash flow of $0.86 a share.

Algonquin Power & Utilities is still a buy.

INNERGEX RENEWABLE ENERGY $9.70 (Toronto symbol INE; Shares outstanding: 55.6 million; Market cap: $785.2 million; TSINetwork Rating: Extra Risk; Dividend yield 6.0%; www.innergex.com) owns and operates 23 hydroelectric and wind-power facilities in Quebec, Ontario, B.C. and Idaho.

Innergex gets about 81% of its power from hydroelectric plants. The remaining 19% comes from wind farms.

The company aims to rapidly expand its hydroelectric and wind-power capacity. It is now developing or building 11 projects. In addition, Innergex will start up its first solar power project next year.

In the quarter ended March 31, 2011, Innergex’s earnings per share doubled, to $0.08 from $0.04. Cash flow per share rose 5.9%, to $0.18 from $0.17.

Innergex’s shares yield 6.0%. The stock trades at 7.7 times forecast 2011 cash flow of $1.26 a share.

Innergex Renewable Energy is a buy.

Today’s tip: “How to avoid the pitfalls of ‘theme investing’”

Theme investing can pay off from time to time. Today’s popular investment themes include green energy stocks, such as solar, wind, and geothermal, and emerging markets, such as China and India.
However, theme investing can turn out badly for investors, especially those who get in late or forget about investment quality. Here’s how:

• Popular themes can distract investors. When you indulge in theme investing, you allow a theme or concept to take a central place in your investing decisions. Usually the theme or concept includes some prediction about the future that has some truth in it, and will make noticeable changes in society. You may assume that if you can just get aboard that theme or find an investment whose future is tied up with it, you are bound to make money.
  
  In other words, you are buying what you might call a “Big Idea” without making certain that a particular investment has a workable business concept, or the management strength and integrity that it needs to overcome competition and profit from it.

In Wall Street Stock Forecaster, you get an investment advisory that's 100% focused on U.S. value stocks identified by my ValuVesting System™. What's more, today's low U.S. dollar provides you with a rare opportunity to add world-dominating U.S. stocks to your portfolio at bargain prices. Don’t miss out. Click here to learn how Wall Street Stock Forecaster can help you tap into high-quality opportunities in the U.S. stock markets.

• Themes like green energy stocks can cause you to overlook crucial details. A key problem is that if the theme is your overriding investment consideration, it’s all too easy to get sloppy about the details. You may come around to the view that the theme is so powerful that you can safely disregard p/e ratios and other measures of value and risk. You may wind up basing investment decisions on offhand projections or self-serving advice from promoters.
  
  Mind you, facts support most popular investment themes. Keeping those facts in mind can help you spot stocks with extra potential. But if you let the theme make the decision for you, you are sure to overlook risk.

How we judge stocks that are part of a popular theme. Before we give any advice on stocks that are part of a popular theme, we always look for clear signs of investment quality.

For example, the theme of renewable energy has become more popular in the past few years, as concern over the environment has grown. However, as with all investment themes, we’ve always recommended that you choose green energy stocks very carefully to profit. That’s because many of these companies have only limited investment appeal.

These firms often need a long time to move from the research or concept stage to profitability. As well, many governments are cutting subsidies for renewable energy development as they struggle with high budget deficits.

To cut your risk, we recommend that you focus on green energy stocks that already have a sound base of other operations, preferably businesses that provide steady revenue streams. That helps offset the risks of expanding into renewable-power production.

Suntech Power: A good example of a stock tied to the green power theme

A member of our Inner Circle service recently asked about Suntech Power Holdings (symbol STP on New York), a China-based company that designs, develops, makes and markets solar cells and panels.

Suntech’s products are used by public utilities, and in homes, offices and factories. Clients use Suntech’s solar equipment to generate power for the electricity grid, and for off-grid uses, such as mobile-phone networks. The company sells its products to solar distributors, engineering and design firms, installers and property developers.

Suntech’s revenue has moved up steadily since 2006 on strong solar-power demand, particularly in Europe and China.

The company’s shares jumped 17%, to $9.37, in the wake of the Japanese earthquake/tsunami/nuclear disaster. That’s because some investors believe solar power could gain if the disaster slows the use of nuclear energy. The shares have since drifted down to around $7.63.

Our buy/sell/hold advice on Suntech, based on the company’s current market position and the outlook for solar energy, is only available to members of our Inner Circle. You can’t get it anywhere else! (Note: If you are a current Inner Circle member please click here to view Pat’s recommendation. Be sure to log in first.)

If you’re looking for authoritative advice on investment issues, or fundamental analysis of stocks you’re considering buying (or selling), you should join Pat McKeough’s Inner Circle. It’s Canada’s most exclusive investment group.

Inner Circle members always get clear, concise investment advice that’s 100% independent, and untainted by commissions or other undisclosed influences. We guarantee it. Click here to learn more.

Next Wednesday, June 22, 2011, Investor Toolkit will show you how you can profit from growth stocks with less risk.

Stardale is forecast to start up early next year, and could increase Innergex’s power generating capacity by 6%. The project will cost roughly $129 million to complete.

Solar power relies heavily on government subsidies to be profitable. However, the Ontario government has already signed 20-year firm contracts to buy all of Stardale’s power.

Innergex Renewable Energy is a buy.

Emera will receive Algonquin shares for its California Pacific stake. That will increase its ownership of Algonquin from 15% to 25%.

Emera and Algonquin are also forming a 50/50 joint venture called Northeast Wind. This new business will team up with First Wind Holdings LLC to build and operate wind-energy projects in Maine, Vermont and New York State.

Algonquin Power & Utilities is still a buy.

An Inner Circle member recently asked for our recommendation on Electrovaya Inc. This green energy stock’s lightweight batteries can be used in renewable-energy projects and hybrid cars. To give you a sense of how the Inner Circle works, I’d like to share this question, and our answer, with you. I hope you enjoy and profit from it.

Q: Hello Mr. McKeough: Recently there has been interest in Electrovaya Inc., which has signed an agreement to provide batteries to Chrysler. What is your opinion on this stock? Regards.

A: Electrovaya Inc., $2.06, symbol EFL on Toronto (Shares outstanding: 70.9 million; Market cap: $175.2 million; www.electrovaya.com), has developed a “SuperPolymer” lithium-ion battery technology. The company believes its super thin, lightweight batteries have a higher energy density than competing rechargeable batteries.

The company began operating in September 1996. It first applied its technology to batteries for portable computers and similar devices. It also makes a tablet computer with an LCD screen on which users can write using a special-purpose pen, or stylus.

In Wall Street Stock Forecaster, you get an investment advisory that's 100% focused on U.S. value stocks identified by my ValuVesting System™. What's more, today's low U.S. dollar provides you with a rare opportunity to add world-dominating U.S. stocks to your portfolio at bargain prices. Don’t miss out. Click here to learn how Wall Street Stock Forecaster can help you tap into high-quality opportunities in the U.S. stock markets.

Chrysler deal caused a big jump in this green energy stock’s share price

In 2002, the company switched its focus to developing batteries for hybrid and electric-powered vehicles. In March 2010, Chrysler agreed to test the green energy stock’s batteries in its new plug-in hybrid electric vehicles in various environments over the next three years. The announcement caused the stock to jump from around $0.75 to $4.46. It has since settled back to its current $2.06.

Besides car batteries, Electrovaya is developing batteries that can store electricity for electrical-power companies. Storing electricity for later use would help make renewable-energy projects, like solar panels and wind farms, more feasible.

In the three months ended December 31, 2010, Electrovaya’s revenue jumped 142.9%, to $2.2 million from $920,000 a year earlier (all amounts except share price and market cap in U.S. dollars). However, losses rose to $455,000, or $0.01 a share, from $244,000, or nil per share.

Electrovaya’s long-term debt of $5.0 million is a low 2.8% of its market cap. It holds cash of $8.5 million, or $0.12 a share. The company is using up its cash at a rate of around $125,000 per quarter, so it has enough to continue to develop its products. Electrovaya spent 19.0% of its revenue on research in the latest quarter.

The company’s products have promise, and its association with Chrysler gives it credibility. However, it faces strong competition from larger firms with more resources.

Our buy/sell/hold advice on Electrovaya, based on our outlook for green-power demand and the prospects for its lithium-ion battery technology, is only available to members of our Inner Circle. You can’t get it anywhere else! (Note: If you are a current Inner Circle member please click here to view Pat’s recommendation. Be sure to log in first.)

Don’t miss your chance to start profiting from the Inner Circle today!

If you’re looking for authoritative advice on investment issues, or fundamental analysis of investments you’re considering buying, you should join Pat McKeough’s Inner Circle. It’s Canada’s most exclusive investment group.

But you must act quickly! You see, recent world events have prompted more investors to ask for my personal investment advice. As a result, the Inner Circle is nearing its membership limit. Once we hit that limit, we’ll be forced to close the Inner Circle to new members.

That means this could be your last chance to get in. Once we hit our limit, we’ll only be able to accept new members if a current member cancels or fails to renew.

Here’s just a small sampling of what you get when you join the Inner Circle today:

• Just to start, all 4 of our investment newsletters (The Successful Investor, Stock Pickers Digest, Wall Street Stock Forecaster and Canadian Wealth Advisor) for one special low price.
• Plus, you get to ask me and my team of investment experts your own personal investment questions. This valuable benefit sets my Inner Circle apart from any other investment service in Canada — maybe even the world! You get to ask the questions, and you always get clear, concise investment advice that’s 100% independent, and untainted by commissions or other undisclosed influences. I guarantee it.
• In addition, you’ll not only receive the answers to your questions, but you’ll also get to see all other members’ questions, and our answers (of course, we eliminate any personal information). Some of our most valuable recommendations come about because one of our Inner Circle members asked the right question!

I urge you not to miss this valuable opportunity. Give yourself an advantage over other investors and join my Inner Circle today. Click here to learn how.