Capital Power (CPX.TO)

Whenever he looks at an investment, he wants to know if he likes the macro of the sector, the financials of the business, and the technicals. On this one, the technicals are starting to turn around. The financials are okay. The macro is what he is worried about. Anybody producing power in Alberta right now that isn’t clean, he doesn’t know what is going to happen in the future. If they have any contracts with the government, they are all rolling off in the future. He would rather be invested in a clean power producer.

The yield is safe. It is a wait and see, with their coal assets.

Alberta power prices are pretty terrible. This is a good way to play exposure to Alberta power utilities. Their coal powered plants present uncertainty to the market.

Unless there is an extreme overshoot by the market, he has an NAV of $17-$18. They could be compensated by the Alberta government for BV destruction. The dividend is high. He models 49% payout ratio, so it looks pretty safe. The company is guiding to a 7% annual growth.

(Market Call Minute.) Produces electricity in Alberta using coal. The NDP government does not want any more coal, so this is not a place you want to be.

His company has it with a $27 target and as a sector perform. Feels the 6.3% dividend yield is sustainable.

(A Top Pick June 9/14. Down 10.38%.) This is been negatively affected by 2 main things, lower commodity prices and the NDP win in Alberta. There is some speculation that there will be an acceleration of coal retirement power generation facilities. Has been trimming his holdings for the past 6 months.

Look at the dividend and then what the company is expected to make in the coming year and it is cutting it very fine. Can the balance sheet stand the paying out of capital? It is okay, but not fabulous. Earnings projections are sloping off. You don’t have the propellant of increasing year over year results. He hopes it will hold at $21 on the downside. It is muddling through.

(Top Pick Jun 9/14, Down 2.71%) The drop was due to the decline in oil prices. Retiring coal facilities early would negatively impact this stock. Hold for now.

This is a good name. He sees it going higher and has a $32 target on it. One of the problems with this space right now is that Alberta power prices are weak. Fortunately they have hedges in place for 2015-2016 and they have accretive projects coming on later this year. Nice dividend and a low payout ratio.

This is essentially an Alberta-based power generator. Within the utility space, this has the most upside exposure and downside risk to Alberta Power prices. Management has done a good job of diversifying away from Alberta, and it generates a significant amount of free cash flow. Over the next 2 years, he thinks it can generate roughly $300 million of free cash flow. If you are looking for a business that gives you merchant power exposure to Alberta at depressed power prices this is interesting, but you have to be cognizant that you are taking on a fair amount of volatility and risk.

(A Top Pick March 17/14. Up 1.92%.) Just treading water. This is an Alberta-based utility. Basically seen as a proxy as to what is happening in interest rates. He continues to like this. 4.5% dividend yield.

As a reasonable conservative company, he thinks the dividend is sustainable. This is going to be more of a yields story as opposed to growth. The new premier of Alberta is very keen to get the Keystone approved, and there is talk and advocacy for carbon tax in Alberta as a quid pro quo for the Americans green lighting Keystone. There may be some more onerous measures that could affect this company. If you own, consider diversifying half of your position into something else with similar characteristics, but not in the Alberta geography.

For a long time hold, this is probably one of the better utility names that he likes. A good play. Power prices have been quite low in Alberta where they have a lot of their business. Struggled in this most recent quarter and got hit pretty hard for a utility. A more interesting name, that has more upside in the next 6 to 24 months, would be Brookfield Asset Management (BAM.A-T).

Smaller utility company in Alberta. Likes the space of regulated utilities. Not so many ups and downs. Prefers larger companies like FTS-T, EMA-T in the east.