The utility has agreed to sell its power generation business in order to focus on its predominant area of expertise, pipelines.
VERESEN (Toronto symbol VSN; www.vereseninc.com) owns pipelines, power plants and natural gas-processing facilities across North America.
Those holdings include 50% of the Alliance gas line, spanning the 3,000 kilometres between Chicago and Fort St. John, B.C.; and 50% of the Ruby pipeline, which runs 1,100 kilometres from Wyoming to Oregon. The company also owns the Alberta Ethane Gathering System and 42.7% of the Aux Sable liquids plant.
Veresen reported strong cash flow of $0.20 a share in the three months ended December 31, 2016. That’s up 25.0% from $0.16 a year earlier.
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Energy Stocks: $1.18 billion from power-generation sale
The company has now found buyers for its power generation business. Together, those sales will let it focus on its pipelines and gas-processing activities. From a total of three separate deals, Veresen should realize a gain of $1.18 billion. The company has yet to disclose the names of the buyers, but says the transactions should close in mid-2017.
Veresen feels that its area of expertise is pipelines. As well, many new renewable energy projects have started up, and the company believes they will cut the returns it can make from power generation.
The stock trades at 12.0 times Veresen’s forecast 2017 cash flow of $1.13 a share. It yields a high 7.4%, but the company’s cash flow is steady, and it plans to maintain its current dividend rate.
One of the minor problems I have is deciding into which of the five categories a stock belongs. Veresen is to become a pipeline oriented company, but is it a utility? Are its rates set by government? Perhaps, Pat, you can provide some direction on how to classify into your five categories.
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One of the minor problems I have is deciding into which of the five categories a stock belongs. Veresen is to become a pipeline oriented company, but is it a utility? Are its rates set by government? Perhaps, Pat, you can provide some direction on how to classify into your five categories.
Natural gas is a resource which is transported by pipeline. A utility sells directly to consumers or businesses and Vereseen does not do that.