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2. Black Hills Corp.

Fitch Ratings notes Black Hills Corp ( BKH) as a potential takeover target in coming years. Currently, the company has a market cap of $1.33 billion and it carries a dividend yield of 4.41%.

The Rapid City, S.D.-based company operates both a regulated utilities unit and a non-regulated energy business. Within its regulated utility unit, the company operates Black Hills Power and Cheyenne Light Fuel & Power, which combined serve over 100,000 customers in South Dakota and Wyoming. In 2007, the unit also bought a Kansas based gas and utility operation from struggling utility Aquila, which brought on gas operations in Colorado, Iowa and Nebraska for $940 million.

In addition, Black Hills operates an oil and gas exploration and production company that produces oil and gas in New Mexico, Wyoming and Colorado. It also runs a non-regulated wholesale natural gas & oil marketing and production company called Enserco Energy, and a coal mine in Wyoming's Powder River Basin called Wyodak. In October 2010, the company suspended operations at its 34.5-megawatt coal-fired Osage Power Plant in Osage, Wyo.

Fitch notes that the company operates in four regulatory jurisdictions, all of which would have to approve any merger or takeover.

The company is expected to earn 57 cents a share when it reports fourth quarter earnings on Feb. 2, according to Zacks consensus estimates. Black Hills is expected to have revenue of $1.3 billion and net profits of $76.1million in 2011, according to Bloomberg consensus estimates. In 2012, those sales and profit numbers are expected to rise to $1.42 billion, and $94 million, respectively.

On Jan. 18, the company lowered its 2012 earnings per share guidance to between $2 and $2.20 a share, but raised its 2011 EPS guidance to $1.90 - $1.96. In the announcement, Black Hills said it received "multiple unsolicited inquiries" for its Enserco unit in the third quarter.

Analysts give Black Hills an average price target of $34 a share, a small premium to the company's current share price of $33.59. For more on Black Hills shares, see the KJP 2012 Carbon Flash Fund portfolio.

In 2011, the company's shares gained over 11%, slightly below overall sector returns.

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