EMERA INC. $35 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 131.0 million; Market cap: $4.6 billion; Price-to-sales ratio: 2.2; Dividend yield: 4.0%; TSINetwork Rating: Average; www.emera.com) gets 60% of its revenue and 50% of its earnings from Nova Scotia Power Inc., which is that province’s main electricity supplier. It also holds interests in electrical utilities in the U.S. and the Caribbean. Other operations include the Brunswick pipeline, which pumps natural gas from the U.S. to a liquefied natural gas plant in New Brunswick.
The Newfoundland government recently approved a new hydroelectric project on Labrador’s Churchill River. Emera will participate in this operation by paying $600 million for a 29% stake in a new regulated utility that will transmit power from Churchill River to the island of Newfoundland. In addition, Emera will spend $1.5 billion to build an undersea cable (called the Maritime Link) that will transmit 20% of the plant’s power to Nova Scotia. Emera will own 100% of this cable. These two projects should begin operating by 2017.
Meanwhile, Emera earned $220.8 million in 2012, down 8.4% from $241.1 million in 2011. Due to more shares outstanding, earnings per share fell at a faster pace of 10.7%, to $1.76 from $1.97.
Emera uses hedging contracts to lock in prices for coal, oil and other fuels. If you disregard unusual items, such as gains and losses on these agreements, earnings per share would have gained 3.9%, to $1.85 from $1.78.
Overall revenue was flat in 2012, at $2.06 billion. Revenue at its regulated businesses (93% of the total) rose 1.1%. However, lower power prices and planned maintenance outages cut revenue at its unregulated operations (7% of the total) by 15.9%.
The company’s 2013 earnings will likely fall to $1.77 a share, and the stock trades at 19.8 times that forecast. However, the Churchill River and Maritime Link projects enhance Emera’s long-term earnings potential. The $1.40 dividend yields 4.0%.
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