Contents
Energy Utilities, Pipelines, and IPPs – Market Weight, Bias To Underweight 3
2009 Energy Utility/IPP Stock Preferences and Q1/09 Changes 6
Quarterly Review 6
Scotia Capital Observations/Conclusions 7
Group Outperformance History 7
Comparison to 1873 and 1929 Still Relevant 12
Credit Thawing, Defensives Take a Break 14
2009-10E EPS Growth, ROEs, and Valuation 15
Rating Changes in Q1/09 20
2009 Interest Rate Outlook 21
2009E EPS and ROE 21
2009 Economic and Yield Curve Forecasts 22
Q2/09 Geopolitical Issues Same as Q1/09 22
Normalized Total Return Expectations Unchanged 23
Dividend Yields Versus Government Bond Yields 24
EV/EBITDA Comparison with Energy Utility Income Trusts and LPs 27
Frontier Gas Pipelines on Back Burner Again 29
Conclusion: Market Weight, Bias to Underweight 29
Q4/08 Canadian EPS Summary and Observations 30
Canadian versus U.S. Energy Utility Stocks 32
Changes in Canadian and U.S. Energy Utility Taxation – 2008-09 34
Canadian Dividend History 35
Credit and Financing 37
Q1/09 Canadian Credit Observations 37
Q1/09 U.S. Credit Observations 38
Q1/09 Financing/Restructuring 40
M&A Activity 41
Recent Initial Public Offerings/Equity Financings 43
North American Power Market Highlights 44
United States Overview 44
Canada Overview 44
U.S. Influence on Canada 44
U.S. Trends 45
2008 U.S. Coal Trends 46
U.S. Regulatory Overview 52
Coal/Petroleum Coke Gasification Developments 52
U.S. 2009 ROE and Equity Bases Remain Higher than Canada’s, For Now 54
Canadian Regulatory Overview 56
Canadian Power Trends 58
Provincial Energy Developments 58
Liquefied Natural Gas Developments 70
LNG Outlook 70
Canada LNG 71
U.S. LNG 71
Summary Conclusion – Sharp Global LNG Import Growth Price Sensitive 72
Major Gas Pipeline Projects 74
Horn River Gas Pipeline Competition Starts to Heat Up 74
Frontier Gas Pipelines 74
Natural Gas Pipeline Consolidation 77
Major North American Oil / Condensate / CO2 / Ethanol Pipeline Projects 81
Other Enbridge Oil Pipeline Proposals 82
Condensate Pipeline Projects 84
CO2 Pipelines 86
Oil/Condensate/CO2/Ethanol Pipeline Project Conclusion – Bullish 87
Nuclear Power Update 89
Nuclear Power Gaining Acceptance, Again 89
New Nuclear Plant Construction Costs 93
New Nuclear Plant Features 93
Global Warming, Kyoto, and Carbon Trading Update 94
Canada Update 95
U.S. Update 96
Global/Kyoto Update 97
Global Warming Facts 98
Carbon Trading to Soar 101
CO2 Capture Technologies 102
Biopower Growth 105
Non-Carbon Growth Conclusions 105
Appendix 1 – Canadian Energy Utilities & Pipelines – Forecasts and Recommendations 106
Appendix 2 – High Yielding Energy Utilities’ and
Pipelines’ Share Price Performance, Dividend Yields, and P/E Ratios 107
ATCO Ltd. 107
Canadian Utilities Ltd. 108
Emera Inc. 109
Enbridge Inc. 110
Fortis Inc. 111
TransAlta Corporation 112
TransCanada Corporation 113
S&P/TSX Composite Index 114
Appendix 3 – Tax Rates for Dividends and Interest 115
Appendix 4 – Provincial Energy and Conservation Initiatives 116