EMERA INC. $21 – Toronto symbol EMA

EMERA INC. $21 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 112.4 million; Market cap: $2.4 billion; Price-to-sales ratio: 1.7; SI Rating: Average) has expanded beyond Nova Scotia in the past few years. The company supplies 95% of that province’s electrical power.

For example, Emera will pay $27.6 million for 9.9% of Algonquin Power Income Fund (Toronto symbol APF.UN). Algonquin owns or has interests in 41 hydroelectric facilities in Canada and the U.S. Separately, Emera and Algonquin have formed a 50/50 joint venture that will pay $116 million U.S. for a power generation and distribution business in Lake Tahoe, California. After these transactions close in 2010, they should add $6 million to $7 million to Emera’s annual earnings.

Meanwhile, Emera earned $38.1 million, or $0.33 a share, in the second quarter of 2009. That’s down 11.2% from $42.9 million, or $0.37 a share, a year earlier. Under a new arrangement with Nova Scotia power regulators, Emera incurred an extra $16.3 million of fuel expenses in the quarter. However, the deal also let it increase power rates, which will help it recover most of these extra costs. Revenue by 5.2%, to $334.2 million from $317.6 million.

The company should earn $1.33 a share this year, and the stock trades at 15.8 times that estimate. The $1.01 dividend yields 4.8%.

Emera is a buy.

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