Atlantic Power: A 10% Dividend Yield And Potential Sale

Atlantic Power shares have lost over 70% of their value in the past six months primarily driven by a poorly communicated reduction in monthly dividends. The fall in share price has highlighted the need for the company to sell itself to a larger more efficient operator. Atlantic Power owns a desirable collection of non-coal power plants with Power Purchase Agreements that are best owned by a firm that has a low cost of capital and a low percentage of administrative expenses.

Unfortunately, for shareholders, the current structure is just the opposite: AT has a high cost of capital and a high percentage of administrative expenses. The good news is that there should be many energy firms interested in acquiring Atlantic Power's portfolio. For example, Berkshire Hathaway's MidAmerican Energy Unit recently agreed to spend approximately $10 billion to purchase NV Energy. Our back of the envelope calculation is that a buyer with a high credit rating can pay in excess of $8.00 per share and still achieve excellent investment returns.

Source: Seeking Alpha

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