Atlantic Power Corp (AT): Cold Hard Cash

Looking ahead
They say the first step to recovery is admitting you’ve got a problem. Atlantic Power Corp (NYSE:AT) did just that during its Q4 earnings report, when it announced it would cut its highly unsustainable dividend by 66%. Shares plummeted, lawsuits poured in – is Atlantic finally ready to recover?

Moving forward, the utility will focus on natural gas and renewables. But with natural gas prices on the rise and PPA’s not panning out as expected, a bet on natural gas isn’t the bargain it was a year ago. With 58% capacity already coming from gas, any new investments will further reduce the company’s diversity.

Renewables might provide a bright spot in sales, but if Exelon Corporation (NYSE:EXC) and PPL Corporation (NYSE:PPL) are any indication, hedging could smudge out any earnings excitement.

Foolish bottom line
Atlantic Power Corp (NYSE:AT) shares are cheap and, under different circumstances, its strategy just might work. But “growth by acquisition” doesn’t jive with heavy debt, unsustainable sales, and a cash flow problem. Larger utilities will weather natural gas’ recent price spike, but it’s another nail in the coffin for Atlantic shares. The utility is trying to dig itself out of the undiversified ditch it’s found itself in, but I think it might just be too little, too late. Buyer beware.

The article Is It Time to Buy Atlantic Power? Part Three originally appeared on Fool.com.

Motley Fool contributor Justin Loiseau has no position in any stocks mentioned, but he does use electricity. You can follow him on Twitter, @TMFJLo, and on Motley Fool CAPS, @TMFJLo.The Motley Fool recommends Exelon.

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