emera

EMERA INC. $33 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 122.2 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 4.1%; TSINetwork Rating: Average; www.emera.com) will invest an extra $83 million U.S. in seven American wind-power projects after its partner, Algonquin Power & Utilities Corp. (Toronto symbol AQN), dropped out of the joint venture. As a result, Emera will pay $333 million U.S. for 49% of this venture; First Wind Holdings LLC owns the remaining 51%. That’s roughly equal to nine months’ cash flow.

Wind power relies heavily on politically sensitive government subsidies. However, wind projects represent just a small portion of Emera’s overall operations.

Emera is a buy.

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Gennum Corp., $13.52, symbol GND on Toronto (Shares outstanding: 35.6 million; Market cap: $481.7 million; www.gennum.com), has accepted a takeover offer from U.S.-based Semtech Corp. (Nasdaq symbol SMTC). Gennum designs electronic equipment and computer chips that let television broadcasters store, edit and transfer video signals without losing picture quality. It also designs chips that make computer networks faster. Semtech is offering $13.55 in cash for each Gennum share. That means the takeover price won’t drop as it might if Semtech was paying with shares instead. For example, Semtech shares could drop along with the market on any negative economic news, like a worsening of the European debt crisis....

EMERA INC. $33 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 122.2 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 4.1%; TSINetwork Rating: Average; www.emera.com) will invest an extra $83 million U.S. in seven American wind-power projects after its partner, Algonquin Power & Utilities Corp. (Toronto symbol AQN), dropped out of the joint venture. As a result, Emera will pay $333 million U.S. for 49% of this venture; First Wind Holdings LLC owns the remaining 51%. That’s roughly equal to nine months’ cash flow. Wind power relies heavily on politically sensitive government subsidies. However, wind projects represent just a small portion of Emera’s overall operations. Emera is a buy.

EMERA INC. $33 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 122.2 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 4.1%; TSINetwork Rating: Average; www.emera.com) gets most of its revenue from Nova Scotia Power Inc., which is Nova Scotia’s main electricity supplier. The rest comes from its investments in pipelines, power plants and wind-power projects in the U.S. and Caribbean.

The company is using its steady cash flow to invest in new projects that will spur its long-term growth. The biggest is a joint venture with the Newfoundland government to transmit power from a proposed hydroelectric plant at Muskrat Falls on Labrador’s Churchill River to Newfoundland. Emera will pay $600 million for 29% of this business.

Emera will also spend $1.2 billion to build an undersea cable which will transmit 20% of the Muskrat Falls plant’s power to Nova Scotia. Emera will own 100% of this cable. The entire project should begin operating around 2016.

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These two utilities have strong businesses in the Maritime provinces, but they continue to expand in Canada and overseas. That enhances their long-term prospects. Still, only one is a buy right now. FORTIS INC. $33 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 186.9 million; Market cap: $6.2 billion; Price-to-sales ratio: 1.7; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.fortis.ca) is the main electricity supplier in Newfoundland and Prince Edward Island. It also operates power plants in other parts of Canada, the U.S. and the Cayman Islands. Fortis had hoped to buy Central Vermont Public Service Corp. (New York symbol CV), which distributes electricity in Vermont, but it was outbid by Quebec natural gas distributor Gaz Metro LP. As a result, Fortis received a breakup fee of $11 million (after tax). Fortis also sold a 40% stake in its power poles in Newfoundland for $46 million. This cash will help the company pursue more acquisitions in the U.S....

Expensive wind and solar power doesn’t make sense economically. However, Algonquin and Innergex sell all of their wind and solar power under long-term, government-guaranteed contracts at above-market prices. That cuts their risk. 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....

EMERA INC. $33 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 121.8 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 4.1%; TSINetwork Rating: Average; www.emera.com) gets 70% of its revenue from Nova Scotia Power Inc., which is Nova Scotia’s main electrical-power supplier. It gets the rest comes from its interests in pipelines and power companies in the U.S. and Caribbean. Emera’s regulated businesses provide over 80% of its earnings. That gives it plenty of steady cash flows for dividends: Emera recently raised its quarterly dividend by 3.8%, to $0.3375 a share from $0.325. The new annual rate of $1.35 yields 4.1%. Emera is a buy....

EMERA INC. $32 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 121.9 million; Market cap: $3.9 billion; Price-to-sales ratio: 1.3; Dividend yield: 4.2%; TSINetwork Rating: Average; www.emera.com) gets 60% of its revenue and 50% of its earnings from Nova Scotia Power Inc., which is Nova Scotia’s main electricity supplier. It gets the rest of its revenue and earnings from its investments in pipelines and power companies in the U.S. and Caribbean. In the three months ended June 30, 2011, Emera’s revenue rose 37.3%, to $500.8 million from $364.7 million a year earlier. The company bought a controlling interest in the main power provider in Barbados in December 2010; the contribution from these operations was the main reason for the higher revenue. Earnings rose 15.0%, to $29.9 million from $26.0 million. Earnings per share rose just 4.3%, to $0.24 from $0.23, on more shares outstanding. The year-earlier earnings figures exclude a one-time gain related to an acquisition. Emera is a buy....

We continue to recommend a number of companies that are now involved in, or are planning to expand into, green power production, including solar and wind energy. 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....

High-cost wind and solar power doesn’t make sense economically. However, Algonquin and Innergex sell all of their wind and solar power under long-term, government-guaranteed contracts at above-market prices. That cuts their risk. 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....