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Brookfield Renewable powered by hydro station acquisitions

Editor's note: This column has been updated to reflect a correction in the price target for Thompson Creek Metals.

Brookfield Renewable Energy Partners L.P.

Brookfield Renewable Energy Partners L.P. has acquired an "attractive portfolio of hydro assets at the bottom of the market" through its shared $600-million (U.S.) purchase of four hydro-electric generation stations from Alcoa Power, says BMO Nesbitt Burns analyst Bert Powell.

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The renewable energy producer will own about 25 per cent of the 378-megawatt hydro portfolio in the southern United States, while an institutional fund run by Brookfield Management Inc. will own the remaining portion. The transaction is expected to close before year end.

"The transaction is modestly accretive, and is expected to be easily folded into the company's [Brookfield Renewable] operations, where it can leverage its energy trading and operating expertise," Mr. Powell wrote in a note to clients.

"Alcoa was motivated to sell the assets as it has been shutting down smelter capacity and decided to run an auction."

Brookfield Renewable's forecast annual distribution next year will be about $1.50 (Canadian) per unit for a payout ratio of 66 per cent, he suggested.

Upside: Mr. Powell, who maintains an "outperform" rating, raised his one-year target to $32 a share from $31.


Algonquin Power & Utilities Inc. (AQN-TSX)

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With three utility acquisitions completed, Algonquin Power & Utilities will likely be amenable to another dividend increase during the second half of this year, said M Partners analyst John Safrance. A minimum dividend increase of 2-to 4-cents a share beyond the current annual 28-cent dividend is likely, he suggested.

Upside: Mr. Safrance has a "buy" rating with a one-year target of $7.70 a share on the operator of power generation assets across North America.


Thompson Creek Metals Co. Inc. (TCM-TSX)

The molybdenum producer expects lower second-quarter production at its Thompson Creek and Endako mines, and lower commodity prices in the second half of this year, said TD Securities analyst Craig Hutchison.

"While the company has not formerly changed its 2012 production guidance, it did not confirm them either."

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Downside: Mr. Hutchison cut his one-year target to $5 a share from $6, but maintains his "buy" rating.


Archer Daniels Midland Co. (ADM-NYSE)

Citigroup analyst David Driscoll downgraded the stock of the global food processing company and ethanol producer because the current corn crop is in "significant danger due to the emergence of drought conditions not seen since 1988."

Rising corn prices are raising the cost structure of an already struggling ethanol industry, he said.

Downside: He reduced his rating to a "neutral" from a "buy," and slashed his one-year target price to $32 (U.S.) a share from $38.


Pan American Silver Corp. ( PAAS-Nasdaq)

BMO Nesbitt Burns analyst Andrew Kaip slashed his target on the silver miner after it warned that it would have to suspend further investment in its Navidad project in Argentina because of a new draft law in Chubut province. The proposed legislation contains an increase the tax burden and imposes "economic participation" by the province, such as receiving a portion of sales.

Downside: The analyst cut his one-year target to $27.50 a share from $35, but maintains an "outperform" rating.

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