Acquisitions Raise Risk for These Two Trusts

Article Excerpt

EPCOR POWER, L.P. $17.41 (Toronto symbol EP.UN; Shares outstanding: 53.9 million; Market cap: $938.3 million; SI Rating: Extra risk) owns 20 power plants in Canada and the U.S. with total generating capacity of 1,464 megawatts. In the three months ended September 30, 2008, revenues fell 10%, to $138 million from $153.4 million. The decline came mostly from currency related factors. Despite the lower revenue, however, cash flow per unit rose 8.5%, to $0.64 from $0.59. EPCOR pays a quarterly distribution of $0.63 per unit. That gives the units a current annual yield of 14.5%. The company paid out 101% of its cash flow in the latest quarter. But that high level came largely from unusually high maintenance expenditures. That spending has now slowed, and the payout ratio should drop below 100%. That should also let EPCOR hold its distributions steady. EPCOR recently completed the acquisition of Morris Cogeneration from Mitsubishi Corp. of Japan for $72.7 million U.S. The acquired plant uses a combination…

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