December 6, 2011 / 3:24 PM / in 6 years

UPDATE 2-Capstone cuts 2012 EBITDA view, warns on dividend

* Sees 2012 EBITDA of about C$120 mln

* Says will re-evaluate dividend policy

* Shares hit life-low of C$3.55 (Rewrites throughout, adds analyst comments)

By Maneesha Tiwari

Dec 6 (Reuters) - Canada’s Capstone Infrastructure Corp cut its adjusted EBITDA view for the next year by about 14 percent and warned it will re-evaluate its dividend policy as rising costs weigh on some of its main projects.

Shares of the company, which runs power infrastructure and utilities businesses in Canada, Sweden and the United Kingdom, shed more than a third of their value on Tuesday to hit a life-low of C$3.55.

Toronto-based Capstone, which has paid dividend for the last 8 years, said it was “facing some near-term challenges” and expects lower returns from its Cardinal business.

“A big portion of the investor base is interested in the dividend,” National Bank Financial analyst Jeremy Mersereau said. “And when you get a dividend cut from such a company, you tend to get a very sharp decline in share price.”

Jacob Securities’ analyst John Mcilveen expects the stock to stay volatile until the company announces its actual dividend.

In October Capstone had bought a 70 percent stake in British water utility Bristol Water and said the deal would help sustain its annual dividend of 66 Canadian cents through 2014.

“I wouldn’t be surprised if they cut their dividend in 2012 itself,” National Bank’s Mersereau added.

The company sees adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of about C$120 million for 2012.

Adjusted EBITDA for 2011 is expected to be about C$70-C$75 million, compared with its previous view of about C$75 million.

Capstone’s gas co-generation plant in Cardinal, Ontario, is expected to have lower returns as gas transportation costs go up, the company said.

Shares of the company were trading at C$3.67 on the Toronto Stock Exchange. (Reporting by Maneesha Tiwari in Bangalore; Editing by Supriya Kurane)

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