Contents
Underweight Utilities/IPPs, Market Weight Pipes Short Term 4
2009 Energy Utility/IPP Stock Preferences and Q1/09 Changes 7
Quarterly Review 8
Scotia Capital Observations/Conclusions 10
Group Outperformance History 10
Comparison to 1873 and 1929 Less Relevant 15
Credit Thawing, Defensives Take a Break 17
2009E-2010E EPS Growth, ROEs, and Valuation 17
No Major Rating Changes in Q1/09 24
Q3/09-Q3/10 Interest Rate Outlook 25
2009E EPS and ROE 25
Q3/09 Geopolitical Issues Ease 26
Normalized Total Return Expectations Unchanged 27
Dividend Yields Versus Government Bond Yields 28
EV/EBITDA Comparison With Energy Utility Income Trusts and LPs 30
Frontier Gas Pipelines on Back Burner Again 32
Conclusion: Underweight Energy Utilities/IPPs, Market Weight Pipes 32
Q1/09 Canadian EPS Summary and Observations 33
Q1/09 U.S. EPS Summary and Observations 34
Canadian Versus U.S. Energy Utility Stocks 35
Changes in Canadian and U.S. Energy Utility Taxation – 2008-2009 37
Canadian Dividend History 38
Credit and Financing 40
Q2/09 Canadian Credit Observations 40
Q2/09 U.S. Credit Observations 42
Q2/09 Financing/Restructuring 43
M&A Activity 44
Recent Initial Public Offerings/Equity Financings 46
North American Power Market Highlights 47
United States Overview 47
Canada Overview 47
U.S. Influence on Canada 48
U.S. Trends 48
2009 U.S. Coal Trends 50
U.S. Regulatory Overview 56
Coal/Petroleum Coke Gasification Developments 57
U.S. 2009 ROE and Equity Bases Remain Higher than Canada’s, for Now 59
Canadian Regulatory Overview 61
Canadian Power Trends 63
Provincial Energy Developments 63
Global Warming, Kyoto, and Carbon Trading Update 76
Canada Update 76
U.S. Update 79
Global Climate Change Update 81
Global Warming Facts 82
Carbon Trading to Soar 90
CO2 Capture Technologies 90
Biopower Growth 94
Non-Carbon Growth Conclusions 94
Liquefied Natural Gas Developments 95
LNG Outlook 95
Canada LNG 96
U.S. LNG 96
Summary and Conclusion – Sharp Global LNG Import Growth Price-Sensitive 97
Major Gas Pipeline Projects 99
Horn River Gas Pipeline Competition Starts to Heat Up 99
Frontier Gas Pipelines 99
Natural Gas Pipeline Consolidation 101
Major North American Oil / Condensate / CO2 / Ethanol Pipeline Projects 106
Other Enbridge Oil Pipeline Proposals 108
Condensate Pipeline Projects 110
CO2 Pipelines 111
Oil / Condensate / CO2 / Ethanol Pipeline Project Conclusion: Bullish 113
Nuclear Power Update 114
Nuclear Power Gaining Acceptance, Again 114
New Nuclear Plant Construction Costs 117
New Nuclear Plant Features 118
Appendix 1 – Canadian Energy Utilities & Pipelines – Forecasts and Recommendations 120
Appendix 2 – High Yielding Energy Utilities’ and Pipelines’ Share Price Performance,
Dividend Yields, and P/E Ratios 121
Atco Ltd. 121
Canadian Utilities Ltd. 122
Emera Inc. 123
Enbridge Inc. 124
Fortis Inc. 125
Transalta Corporation 126
Transcanada Corporation 127
S&P/TSX Composite Index 128
Appendix 3 – Tax Rates for Dividends and Interest 129
Appendix 4 – Provincial Energy and Conservation Initiatives 130