emera

EMERA INC., $24.56, Toronto symbol EMA, owns Nova Scotia Power Inc., which is Nova Scotia’s main electrical-power supplier. Nova Scotia Power supplies 94% of Emera’s revenue. The remaining 6% comes from investments in power companies in the U.S. and the Caribbean. This week, Nova Scotia Power and U.S.-based NewPage Corp. agreed to build a new biomass power plant at NewPage’s Port Hawkesbury paper mill in northern Nova Scotia. Biomass power plants generate electricity by burning plant materials and wood waste. This new facility should start operating by the end of 2012. It will then supply 3% of Nova Scotia’s power needs. Under the deal, Nova Scotia Power will invest $200 million in the new plant, including $80 million to buy an existing wood-burning generator. Most of the remaining $120 million will go toward building a second generator. NewPage will build and operate the biomass plant. It will also supply the fuel....

Brookfield Asset Management, $26.37, symbol BAM.A on Toronto (Shares outstanding: 572.9 million; Market cap: $15.1 billion), is a holding company that mainly focuses on real estate, infrastructure and power generation. Its holdings include interests in Brookfield Renewable Power Fund and BPO Properties, which owns, develops and manages office buildings. Brookfield Asset Management also holds resource investments, including Norbord. Brookfield Asset Management has a complex holding company structure that could make it difficult to spot problems, should they arise. We see the stock as okay to hold, but don’t recommend it for new buying. RioCan, $18.56, symbol REI.UN on Toronto (Units outstanding: 242.0 million; Market cap: $4.5 billion) – see above – is a buy for income and growth....

PEMBINA PIPELINE INCOME FUND $17.86 (Toronto symbol PIF.UN; Units outstanding: 160.0 million; Market cap: $2.9 billion; SI Rating: Extra Risk; Dividend yield: 8.7%) owns nine pipeline systems with a total length of over 8,000 kilometres. This network is the largest feeder operation in Canada. These pipelines bring oil and gas from fields in northeastern B.C. and western and northern Alberta to refineries, or feed into major pipelines, such as the Enbridge Pipeline System. Pembina also owns the Syncrude, Horizon and Cheecham pipelines, which transport crude oil from the Alberta oil sands. As well, it holds a 50% interest in the Fort Saskatchewan Ethylene Storage Limited Partnership. In June 2009, Pembina paid $300 million for the Cutbank Complex, a network of natural-gas gathering and processing facilities. In the three months ended September 30, 2009, Pembina’s cash flow per unit rose 7.7%, to $0.42 from $0.39 a year earlier. The gain was mainly due to the Horizon pipeline, which was completed in November 2008, and the Cutbank Complex....

TECK RESOURCES LTD., $39.78, Toronto symbol TCK.B, rose 5% this week after the company announced that it had signed a new shipping agreement with Westshore Terminals Income Fund (Toronto symbol WTE.UN). Teck ships coal from its British Columbia mines to Westshore’s Vancouver port, which loads and ships more coal than any other port on North America’s west coast. From there, trains carry Teck’s coal to its North American customers, and ships carry it to Asian steelmakers. Under the new deal, Westshore will process 3 million tonnes of coal a year for the next two years at fixed rates. That’s about 12% of the 25 million tonnes of coal that Teck should produce this year....

TORONTO-DOMINION BANK, $65.33, Toronto symbol TD, had to set aside more funds to cover bad loans in its latest fiscal year. However, the bank still reported higher earnings, as low interest rates spurred strong demand for new loans. TD earned $4.7 billion in the year ended October 31, 2009. That’s up 23.7% from $3.8 billion in the prior year. Earnings per share rose 9.6%, to $5.35 from $4.88, on more shares outstanding. These figures exclude several unusual items, including writedowns of securities the bank holds, and costs to integrate U.S.-based Commerce Bancorp, which TD bought last year. On that basis, the latest earnings beat the $5.07 a share that analysts were expecting. Loan-loss provisions jumped 133.3%, to $2.5 billion from $1.1 billion. Revenue rose 21.8%, to $17.9 billion from $14.7 billion....

MOLSON COORS CANADA INC. $49 continues to benefit from the cost savings generated by last year’s merger of its U.S. brewing operations with those of SABMiller. These savings should continue to help Molson Coors increase its earnings in the face of weak beer sales. Best Buy. BELL ALIANT REGIONAL COMMUNICATIONS INCOME FUND $27 is closing most of its 16 customer-support call centres in Atlantic Canada and merging them into five main centres. This move will cost $13 million, but it should improve Bell Aliant’s efficiency. The fund earned $98.8 million, or $0.62 a unit, in the third quarter. Buy. EMERA INC. $23 reported that its third-quarter earnings rose 40.9%. The gain was partly due to last July’s start up of the Brunswick Pipeline, which pumps natural gas from a liquefied natural gas plant in Saint John, New Brunswick, to markets in New England and Atlantic Canada. Buy.

ALGONQUIN POWER & UTILITIES CORP. $3.33 (Toronto symbol AQN; Shares outstanding: 85.7 million; Market cap: $285.2 million; SI Rating: Extra Risk) is the new name of Algonquin Power Income Fund after its conversion to a dividend-paying corporation. To effect the conversion, TSX-listed Hydrogenics Inc. bought Algonquin, then changed its name to Algonquin Power & Utilities Corp. That lets Algonquin benefit from $192 million in tax losses held by Hydrogenics. Algonquin will use these to defer income taxes to as late as 2015. Algonquin’s monthly distribution remains unchanged, at $0.02 a share, but is now classified as a dividend. The shares yield 7.2%....

ROYAL BANK OF CANADA $56 (Toronto symbol RY; Conservative Growth Portfolio; Finance sector; Shares outstanding: 1.4 billion; Market cap: $78.4 billion; Price-to-sales ratio: 2.1; SI Rating: Above Average) will buy the third party registered investment advisor servicing business of U.S. banking firm J.P. Morgan & Co. (New York symbol JPM). The deal should close in the second quarter of 2010. This business provides custody and clearing services to brokers and investment managers. It will strengthen Royal’s wealth-management operations in the U.S., which account for roughly 7% of the bank’s total revenue. Royal Bank is a buy....

TRANSALTA CORP., $22.73, Toronto symbol TA, received approval from competition regulators this week for its proposed takeover of Canadian Hydro Developers Inc. (Toronto symbol KHD). Canadian Hydro owns and operates 21 power-generating facilities in Alberta, B.C., Ontario and Quebec. These include 12 hydroelectric plants, eight wind farms and one biomass plant, which generates power by burning plant materials and wood waste from lumber mills. Last month, TransAlta launched a hostile takeover bid for Canadian Hydro. The offer is worth $4.55 a share, for a total of $654 million. (That’s equal to 79% of TransAlta’s 2008 cash flow of $828 million, or $4.16 a share.) Buying Canadian Hydro would lower TransAlta’s reliance on power from non-renewable sources, such as coal and natural gas. It would also help TransAlta comply with the tougher new environmental regulations that will likely come into effect over the next few years. So far, Canadian Hydro has resisted the bid, and is looking for a new buyer....

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....