Canexus reports before the merger

        On May5 Canexus, a chemical producer, reported before being acquired by Superior Plus.On October 6,2015 Canexus (CUS) announced that it had agreed to be acquired by Superior Plus,another Canadian chemical and energy producer.The deal is supposed to be carried out by the end of the first half, that is, by the end of June.It is a cash and stock deal.But Canexus refers to it as an all stock deal.The proposal is .1531 shares of Superior Plus for every Canexus share.This would mean that an additional 27 million shares must be issued to buy all Canexus shares.
                                              

      Highlights of the Quarter
   Canexus reported cash operating profit (COP) of $31 million compared to $27 million in Q4 of 2015 and $32 million in the first quarter of 2015.This is an unusual term and should be equal to EBITDA with interest and tax expenses removed so EBITDA would be $41 million.Canexus says their performance is because of the strong performance from North American sodium chlorate and the Brazil business units. Sodium Chlorate COP made up $22 million or about 70% of the total. Sodium chlorate sales were 5% higher than 2015 and there was a positive effect from the  weaker Canadian dollar.North American chlor alkali had a COP of only $2.5 million which was down from  the same quarter in 2015 and Q4 2015.Their Brazilian operations generated a COP of $8 million compared to $7 million in 2015 and $6 million in the fourth quarter.
    The Upcoming Transaction
 Canexus refers to the merger or acquisition as "the transaction".Superior Plus estimates that it is valued at about $316 million;they intend to acquire all issued and outstanding shares of Canexus. SPB had excellent timing in it's offer as Canexus had just taken a hit on unloading it's oil transshipment operation called NATO.In fact, CUS took a further writeoff on NATO in this quarter.So Canexus had a short term liquidity problem and SPB made it's offer.                                                                                                   It was intended to be carried out by the end of the first half of 2016.That means it would be done by the end of June.But that will add another almost 20% of new shares to Superior Plus.So in effect that would dilute earnings by about 20% if done all at once.This blog calls for only a third to a half of the Canexus shares to be converted by the end of the third quarter.Perhaps then Superior Plus will re evaluate and buy only 50 to 75% of the total outstanding shares.Either way this blog does not see all of Canexus shares being acquired by December 2016.However on the positive side this does look like an accretive acquisition based on this quarterly report by Canexus.               see evaluation of Canexus merger  ;see analysis of two Cdn. chemical cos. 

Algonquin Power moves into Regulatory mode

On May 12,2016 Algonquin Power came out with it's first quarter results.Revenues and net earnings and adjusted net earnings were lower.However the measure of performance that most investors use for an utility is adjusted EBITDA and it was healthy and showing an increase;it showed almost a 30% increase over the first quarter of 2015.AQN is keeping it's regulated and operational costs in line.Adjusted EBITDA, at $148 million is ahead of $114 million in Q1 of 2015.Furthermore it is on track to hit $475 to $525 million for 2016.This is after an increase in 2014 from about $305 million to about $400 million in 2015.If Algonquin continues to perform as it did in the first quarter it could hit $500 million of EBITDA (the middle of the range).
  The new earnings is likely because of their new acquisition called Park water System located in western USA.It is another regulated American utility but it is not generating power ;it is a water system.Perhaps only a slight change but a profitable one as it seems.The big move will come after it acquires the Empire utility located in southern USA.This will be finalized in June but it has approval of two regulators now.The final vote by shareholders should not be cataclysmic but it may throw a few  conditions in.Either way Algonquin now has a significant share of it's assets under the American regulated umbrella.Although it is true that not all is now under the American regulated power umbrella.

Increased Earnings

 The acquisition of the Park water System seems to have been beneficial to earnings.Earnings as measured by adjusted EBITDA has increased from the $305 to $325 million range in 2014  to about $400 million in 2015.Now Algonquin is on track to hit adjusted EBITDA of $475 to $525 million for 2016 as evidenced by the solid first quarter.If this does happen then adjusted EBITDA or earnings per share will be about $1.92 to $2.00 per share This should be possible if the Park water System continues to perform as in the first quarter.

Prospects for 2016

Algonquin Power has improved it's revenue stream and earnings power since 2013.This blog has warned that AQN has too many assets under the American regulated power umbrella.It's new acquisition is also regulated  but it is not under the regulated power umbrella.In order to appease regulators this blog even suggested  that AQN consider filing American depository receipts see blog on American depository receipts.Still this blog feels that it has too many assets in the same risk class.However it is true that it's earnings do seem to be quite solid and will only be better if it acquires Empire utility in late June.In addition, it has increased it's dividend 10% to $.4235 U.S. per share.At a price of $12 per share and a price/earnings ratio of 6 to 7 times this blog feels that AQN is a screaming buy.                                  use workathon for analysis of Cdn. utilities;see recent blog on AQN