Northland Power Inc (NPI.TO)

An independent power producer, producing 1400 MW. The attraction is the growth in offshore wind in Europe where they have 2 projects currently coming on. One is coming on right now, and the other will be coming on in 2017-2018, which will bump their cash flow by 50%-60%. There is potential for pretty big increases in dividends over the next couple of years. In July, they announced that they were doing a strategic review. One family owns 30% of the company, and the question is, do they want out. There is a potential that the assets could be sold. He likes the company long term, because he thinks the dividends are going up. Dividend yield of 4.59%. (Analysts’ price target is $25.60.)

The key thing to be cautious of is that the company is for sale. He would expect a takeout offer in the next few weeks or months. The question is price. If they don’t sell themselves it could be negative for them.

Wind player in the North Sea. They’ve spent a lot of money building capacity up, and now they are going to start benefiting from the cash flow in the income stream. Dividend yield of 4.99%. He expects significant dividend increases as the cash flow goes up 60%-65% over the next 2-3 years. (Analysts’ price target is $25.60.)

They put themselves up for sale and if they get bought, it will be at market or higher so you don’t lose. The stock dropped because bond yields went up.

(A Top Pick Nov 10/15. Up 26.22%.) Had been purchasing this ahead of what he thought would be some catalysts on some alternative wind projects they were building in Europe. Those have come through. They’ve done a great job of executing. They are now under strategic review where they are thinking of selling the company. There is great cash flow in this business.

Strong regulations in Canada take care of our utility companies. They consistently get 4-5% return on invested capital. A really good company.

When interest rates start going up, there will be a selloff in all of these utility names. You could also see a potential selloff when there is a rotation in money moving from sector to sector. Some of the utilities, REITs and telcos had been bought for yield/safety and are starting to get a little bit stretched now. This now has a strategic review, so there is the potential that this could get taken out at a higher level.

This is at an elevated level, because they are looking at possibly being sold, and are looking at strategic alternatives. There are some views that this should sell for $35. At the end of the day, it really depends on a lot of private equity pension funds globally, as they are the ones that are probably going to benefit. Their EBITDA should double over the next few years.

Just announced they have begun a process of evaluating their future. To compete in these very large projects, they probably feel they are too small and cost of capital is perhaps high. They usually work with a partner, but in the process they might be acquired. The process might take a while. She would wait for things to calm down, because it has just been announced.

Great chart, good price momentum, good volatility characteristics and a reasonable yield of 4.9%. The challenge he has with all these power producers is that they tend to be expensive. You really are paying to get that dividend yield. You don’t have a lot of backstop in terms of valuation if things go wrong. Trading at 22X EV to EBITDA, and 6X book.

Considering how much we pay on our monthly bills, the future is quite good for most utilities. He likes this one. Dividend yield of 4.9%.

He is Short this, and it really comes down to a valuation call. Very similar for a lot of utilities. They have had a huge run in the last couple of months, and become bond proxies. Long dated US treasuries have moved up pretty sharply ever since the Fed raised rates. That has lifted a lot of the safe utility yield stocks with it. The problem now is that valuations are really high. Trading at 21X EBITDA and 60X PE. They all carry a lot of leverage, which is fair enough for a utility, they can do that. What you are really getting is yield and low volatility. A slow and stable stock. Yield of about 5%.

Wind in Europe has been a great bet by management. They pay their debt off on a project basis. They were buying when no one else was looking. He thinks you will get a capital gain on this one as well as the dividend.

(Market Call Minute.) Great company. 35% is owned by management. They have projects in Europe that are progressing very well, on time and on budget. However, this is fully valued right now. This will come down when their projects come online in 2018. He would be selling Calls on this.

He holds some of their convertible bonds, but thinks the equity is fine. It has always been a solid performer. A well-run good company.