Western Wind Energy Corp.
Tuesday's close: $2.78 a share, down 2 cents
52-week trading range: $1.08 to $2.85 a share
Annual dividend: none
Analyst ratings: There are two "speculative buys," one "hold" and no "sells," according to Bloomberg data. Targets range from $2.70 to $3 a share.
Recent history: Shares of the Canadian operator and developer of wind farms in California tumbled to a 52-week low last summer amid worries about reduced government incentives for renewable energy. Investors may have also grown weary of Western Wind's takeover potential after Algonquin Power & Utilities Corp. said in the fall of 2011 that it was no longer interested in acquiring the company. But Western Wind's stock got a shot in the arm again after it put itself up for sale last July, and was the subject of a hostile takeover bid at $2.50 a share in November from Brookfield Renewable Energy Partners LP, which has a 16 per cent stake in the wind operator. Western Wind's board has rejected Brookfield's offer [which expires Jan. 28], but its shares have continued to trade higher as traders anticipate higher bids.
Outlook: Western Wind's shares hit a 52-week high last week after the U.S. Congress extended the key 2.2-cent-per-kilowatt-hour wind production tax credit for this year. Other incentives that were extended include an investment tax credit, which covers 30 per cent of the costs of a U.S. wind project, and accelerated depreciation over five years. The company also announced it had redesigned its solar project in Puerto Rico to incorporate new equipment after the original supplier ran into financial problems. This project, too, could benefit from the government incentives.
With the formal sale process for Western Wind still under way, the recent developments are potential catalyts that could boost bids to the $3.50- to $3.75-a-share range, suggested Robert McWhirter, president of Selective Asset Management Inc. and owner of its stock. "There are a number of buyers who have moved to the second stage, and are looking long and hard ... at things like contracts, financing and power purchase agreements."
U.S. utilities are potential acquisitors, but there are names - though not confirmed - like Algonquin Power, Northland Power Inc. and Boston-based Atlantic Power Corp. which could be kicking the tires, too, Mr. McWhirter added. Brookfield could also extend and increase its unsolicited bid as its proposed purchase price does not incorporate the potential from the renewed tax credits, or the Puerto Rico project, he added. "I think the bargain-basement value of $2.50 a share that Brookfield is offering is the downside."