In Play? Capital Power announced its intention to implement a shareholder rights plan. According to the company, “The objective of the right plan is to ensure, to the extent possible, the fair treatment of all shareholders in connection with any take- over bid for the securities of the Company, and to provide the Board with sufficient time to evaluate unsolicited take-over bids and to explore and develop alternatives to maximize shareholder value”. The company also made it clear that the Plan is not intended to and will not prevent a take-over of the company. A Bay Street analyst commented that the company’s decision to implement this plan is not overly surprising in light of its YTD share price decline and the medium term outlook for a suppressed Alberta power price. Further, while the press release states that the company is unaware of any specific take-over bid, this could indicate the company has been receiving some interest. This shouldn’t come as a huge surprise as the market seems to be overlooking the company’s strong growth prospects, including $1.4 billion of organic growth from the development of four wind farms. Canaccord Genuity Power & Pipeline Analyst Juan Plessis notes that in 2013, the company should benefit from a full year contribution from the late 2012 startup of Halkirk and Quality Wind and a modest improvement in power prices should help provide earnings growth in 2013. The stock also offers an attractive 5.8% dividend yield. With 2013 free cash flow (after maintenance capex) estimated at almost 3x the current dividend, the company has ample ability to implement a dividend increase following the startup of Halkirk and Quality wind farms, in Plessis’ view. Additionally, Capital Power continues to maintain a very conservative balance sheet with only 36% net debt and is trading at just 0.8 times book value. Note, the Plan is still subject to acceptance for filing by the TSX and will be presented to shareholders for ratification by shareholders at Capital Power's next annual meeting scheduled for April 26, 2013. If the Plan is ratified by shareholders it would remain until the annual meeting of shareholders in 2016. If not ratified at the April 26, 2013 annual meeting, the Plan will be terminated.

Source: Canaccord Genuity