emera

FORTIS INC. $24 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) supplies electrical power to around 915,000 customers in five Canadian provinces. It also owns or invests in electrical utilities in New York State, Belize and the Cayman Islands. Its real estate division owns hotels and other commercial properties, mainly in Atlantic Canada. The company has increased its dividend in each of the past 32 years. The current rate of $0.64 a share yields 2.7%. That’s lower than TransAlta, TransCanada and Emera, but we feel that Fortis’s focus on expanding its operations outside of Atlantic Canada should enhance its earnings growth, and let it continue its policy of annual dividend increases. In the second quarter of 2006, Fortis earned $37.9 million, down slightly from $38.2 million a year earlier; per-share earnings remained unchanged at $0.37....

EMERA INC. $20 (Toronto symbol EMA; Income Portfolio, Utilities sector; SI Rating: Average) is the main supplier of electrical power in Nova Scotia, and Bangor, Maine. Emera’s high market share and largely regulated operations give it plenty of steady cash flow to increase dividends (its current dividend of $0.89 a share yields 4.5%) and fund new projects. For example, Emera recently agreed to build a $350 million pipeline that would transport natural gas from a proposed liquefied natural gas (LNG) terminal near Saint John, N.B. to the U.S. portion of the Maritimes & Northeast Pipeline in Maine. (Emera owns 12.9% of the Maritimes & Northeast pipeline.)...

Bonds provide investors with steady income, and preservation of capital. While there’s not as much room for interest rates to fall, higher rates could lead to major losses on fixed-income investments. In our opinion, most income-seeking investors are better off in high-quality, well-managed utility stocks, such as these four. In taxable accounts, these stocks provide roughly as much income as most long-term bonds, after the dividend tax credit. They also give investors the possibility of a capital gain....

EMERA INC. $20 (Toronto symbol EMA; SI Rating: Average) supplies roughly 95% of Nova Scotia’s electricity needs. This business accounts for over 80% of its income. It also owns the main electrical utility in Bangor, Maine, and holds interests in other power-related projects. In the three months ended December 31, 2005, Emera earned $0.34 a share from continuing operations, up 25.9% from $0.27 a year earlier. The savings from a new natural gas supply deal helped offset higher oil and coal costs. Revenue rose 3.7%, to $297.1 million from $286.5 million. Nova Scotia regulators let the company raise its power rates by 5.3% in 2005. Emera is now asking for a 13% hike in 2006, to cover its higher fuel costs. However, regulators will probably reject this request and approve a smaller rate hike....

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....

EMERA INC. $20 (Toronto symbol EMA; SI Rating: Average) stands to gain from a new natural gas supply contract signed by wholly owned subsidiary Nova Scotia Power Inc. The deal should increase Emera’s 2005 profits by about $0.07 a share, to around $1.04 a share. The stock now trades at 19.2 times that figure. The deal should also cut Emera’s 2006 overall fuel costs by $22 million. That’s equal to about 15% of the company’s annual income. However, Emera still plans to ask regulators for a 13% rate hike to cover rising costs for other fuels such as coal and oil, which account for over half of its power output. Emera is a buy.