EMERA INC. $33 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 147.9 million; Market cap: $4.9 billion; Price-to-sales ratio: 2.2; Dividend yield: 4.4%; TSINetwork Rating: Average; www.emera.com) is Nova Scotia’s main power supplier. It also holds interests in electrical utilities in the U.S. and the Caribbean. Other operations include the Brunswick pipeline, which pumps natural gas from the U.S. to a liquefied natural gas plant in New Brunswick.
Emera aims to start working on a new hydroelectric project on Labrador’s Churchill River by the end of this year. It will invest $600 million for a 29% stake in a new regulated utility, which will transmit power from Churchill River to the island of Newfoundland.
In addition, Emera will spend $1.5 billion to build an undersea cable, called the Maritime Link, that will transmit 20% of the plant’s power to Nova Scotia. Emera will own 100% of this cable. These two projects should begin operating by 2017.
In the three months ended March 31, 2013, Emera earned $122.8 million, up 53.1% from $80.2 million a year earlier. Due to more shares outstanding, earnings per share rose at a slower pace of 43.8%, to $0.92 from $0.64.
Emera uses hedging contracts to lock in prices for coal, oil and other fuels. If you disregard gains and losses on these agreements and other unusual items, earnings per share would have gained 4.6%.
Revenue rose 12.3%, to $638.1 million from $568.0 million, thanks to colder-than-normal weather in Nova Scotia and higher power rates at its Caribbean operations.
The stock trades at 18.5 times the $1.78 a share that Emera will probably earn in 2013. That’s a reasonable p/e ratio in light of Churchill River and Maritime Link’s earnings potential. The $1.40 dividend yields 4.2%.
Emera is a buy.
