VERESEN $13.32 (Toronto symbol VSN; Shares outstanding: 198.4 million; Market cap: $2.7 billion; TSINetwork Rating: Average; Yield: 7.5%) owns pipelines, power plants and gas processing facilities across North America. A major holding is 50% of the Alliance gas line, which runs 3,000 kilometres between Chicago and Fort St. John, B.C. Enbridge owns the other 50%. Veresen also owns the Alberta Ethane Gathering System, and Veresen and Enbridge together hold 85.4% of the Aux Sable NGL plant.
In February 2012, Veresen paid Encana Corp. $920 million for the Hythe/Steeprock natural gas gathering and processing complex. Encana signed a long-term deal to buy most of this facility’s gas.
To diversify beyond pipelines and gas-processing plants, Veresen continues to expand its power generation business. It now owns hydroelectric facilities in New York State and B.C.; natural gasfired plants in Ontario, California and Colorado; and waste-heat plants in B.C. and Saskatchewan.
In the quarter ended December 31, 2012, cash flow rose 6.2%, to $56.5 million from $53.2 million a year earlier. Cash flow per share fell 9.4%, to $0.29 from $0.32, on more shares outstanding.
Profit margins at Aux Sable have declined along with NGL prices. However, Veresen’s longer-term outlook is sound, and it trades at 12.1 times its forecast 2013 cash flow of $1.10 a share. The stock yields a high 7.5%, and the dividend appears safe.
Veresen is still a buy.
