canadian utilities

CANADIAN UTILITIES LTD. $37 (Toronto symbol CU (old symbol CU.NV); Income Portfolio, Utilities sector; SI Rating: Above average) is one of Alberta’s leading suppliers of natural gas (940,000 customers) and electricity (211,000 customers). It also operates power plants in other parts of Canada, Australia, and the UK, and provides engineering and related services to other gas and power companies. The company is slowly shifting its focus to its regulated businesses, which supply about half of its revenue and income. While that limits its growth prospects, it greatly cuts its risk and helps provide it with more predictable cash flows.

Canadian Utilities still on a diet

Two years ago, Canadian Utilities sold its retail gas and electric operations. Deregulation opened up this market to competition, and the company decided it would rather focus on its wholesale business....

CANADIAN UTILITIES LTD. $38 will pay a special dividend of $0.25 a share in September 2006. It has also increased its regular quarterly dividend 1.8%, from $0.285 a share to $0.29. The new annual rate of $1.16 yields 3.1%. Buy. PENGROWTH ENERGY TRUST $24 earned $0.41 a unit in the first quarter of 2006, up 10.8% from $0.37 a year earlier, while cash flow per unit rose 7.3%, to $0.88 from $0.82. Although oil prices rose 22%, Pengrowth’s total production remained unchanged, as acquisitions of new properties offset maintenance slowdowns and asset sales. Excluding acquisitions, Pengrowth’s average daily production in 2006 should grow to around 56,500 barrels per day, up 3% from its earlier forecast. Buy. FORTIS INC. $21 earned $0.35 a share (total $36.6 million) in its first quarter, down 12.5% from $0.40 a share ($39.2 million) a year earlier. If you disregard a one-time gain of $7.9 million in the year-earlier quarter, Fortis’s earnings would have grown 17%, thanks to higher power rates in Western Canada. Revenue grew 2.4%, to $390.8 million from $381.8 million. Buy.

CANADIAN UTILITIES LTD. $39 (Toronto symbol CU.NV; SI Rating: Above average) supplies electricity and natural gas to over 1 million customers, primarily in Alberta. It also invests in overseas gas and electricity assets. In the three months ended December 31, 2005, earnings fell to $0.69 a share from $0.71 a year earlier, mostly due to higher gas franchise fees paid to municipalities. Higher electricity rates helped push revenue up 6.8%, to $680.3 million from $637.0 million. The company generated cash flow of $5.17 a share in 2005, up 22.2% from $4.23 in 2004. However, that failed to fully cover its capital costs of $4.13 a share, and its $1.10 dividend....

Deregulation in Canada’s power industry has helped fuel strong growth at many electrical utilities in the past few years. However, some power providers prefer regulation, since it virtually guarantees that they will earn a profit without the risk that deregulated plants face. It’s now common to find power companies that operate both types of plants. They’re also expanding to other parts of Canada and the world to cut their exposure to single region or regulatory board. Here are four top buys in the electrical utility sector. However, more conservative investors should probably choose Canadian Utilities and Emera, over Fortis and TransAlta....