Capital Power (CPX.TO)

Great company and they definitely deliver on the energy side.

This is one of the stronger components of the Utility Index. Of all the utilities, this is probably one of the better ones.

One of the big themes in this market is people looking for income replacement, and this company plays into that demand. There won’t be a lot of growth, but you are going to get paid a pretty good yield, close to 5%. If you’ve got a little bit of dividend growth along the way, plus your 5%, you’re going to do okay.

You are going to see a big increase in cash flow during the next couple of years as their ENMAX facility comes on stream in 2015. Alongside the cash flow growth, you are going to see dividend growth. What he likes about this versus regulated facilities, is that there is some good merchant exposure. His view is that power prices in Western Canada are going to go up, and this company should benefit. Also, represents very good value in the utility sector. Yield of 4.85%.

A spin off from Epcor in 2009 and did nothing for the last 4 years because Epcor was selling down its stake, which is now down to under 20%. Raised some money to build a big new power station outside of Calgary along with a bunch of wind farms. Because of this, it hasn’t gone anywhere over the last 4-5 years, but now there is starting to be some movement as the CapX falls off. 5.6% yield. Trading at 15X PE. You have good spread by both our source and geography.

Alberta power and it’s not bad but he thinks some of the other companies are more attractive.

Has been a little disappointing operationally. Very exposed to Alberta and there is a lot going on there in the power space.

Have had some problems. Used to be Edmonton Power so every once in a while more stock comes out, which is an overhang for them. All of the power companies haven’t done great lately. Dividend is not growing at this point in time. 6% yield. Will probably be okay a couple of years out.

4.6% bonds maturing 2015. This is a company that is relatively new to the bond market. Have grown a lot more than what the market was expecting. Current spreads of 250 basis points for a 3-year paper is a lot wider than its peer group. Expect these bonds to perform well over the next 3 years.

Dropped significantly. Represents pretty good value. Alberta power prices will drive the stock higher. Capacity additions to 2014 should be able to be absorbed and CPX should grow. Below 70% payout ratio. You need to see stock grow so they can go out and make acquisitions from cash flow.