Acquisitions add growth — and some risk

Article Excerpt

EPCOR POWER, L.P. $13.80 (Toronto symbol EP.UN; Shares outstanding: 53.9 million; Market cap: $743.8 million; SI Rating: Extra Risk) has interests in 26 power plants in Canada and the U.S. In total, the plants generate 1,502 megawatts. In the three months ended December 31, 2008, EPCOR’s revenue fell 9%, to $103.8 million from $114.1 million. The decline came mostly from currency-related factors. Cash flow per unit fell 6.3%, to $0.59 from $0.63, mainly because of higher operating costs at some plants. EPCOR pays a quarterly distribution of $0.63 per unit, for a yield of 18.3%. The company paid out 107% of its cash flow in the latest quarter. The high level came largely from unusually high maintenance costs. That spending has now slowed, but the payout ratio could still be as high as 102% this year. That makes a distribution cut a possibility. However, the trust has room to cut while maintaining a high yield. Late last year, EPCOR bought Morris Cogeneration for…

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