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9. NV Energy

NV Energy ( NVE) is Fitch's second largest energy sector takeover candidate with a $3.76 billion market cap. The Reno, N.V. -based utility has six wholly owned subsidiaries that provide electricity to over 2.4 million state residents and an estimated 40 million Nevada tourists. The 150-year old company serves electricity customers in Las Vegas, Reno-Sparks, Henderson and Elko, N.V, and provides natural gas to an additional 145,000 Reno-Sparks customers.

NV Energy gained its statewide foothold through a July 1999 merger between Nevada Power, Sierra Pacific Power and Sierra Pacific Resources. NV Energy offers electricity and gas services under the names of those three units. The company's shares rose over 15% in 2011, beating the Utilities Select Sector SPDR Fund.

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

The company is expected to earn 3 cents a share when it reports fourth quarter earnings on Feb. 21, according to Zacks consensus estimates. NV Energy is expected to have revenue of $3.2 billion and net profits of $200 million in 2011, according to Bloomberg consensus estimates. In 2012, those sales and profit numbers are expected to rise to $3.3 billion and $285 million, respectively.

Analysts give NV Energy an average price target of $17.06 a share, a n over 5% premium to the company's current share price of $16.24. For more on NV Energy's shares, see 6 utility stocks to light up a portfolio .

Goldman Sachs, which sees the utilities sector significantly underperforming consensus estimates on falling energy and gas prices, rates NV Energy as one of only three "buy" rated regulated utility stocks. "We recommend owning small cap NV Energy given significant dividend growth coming in late 2012," writes Goldman analysts in a Jan. 16 research note that gives its utilities outlook for 2012.

The firm estimates that from 2010 through 2013, NV Energy will have a compounded annual dividend growth rate of 16%, among the highest in the sector

Currently, Goldman Sachs is 6% below 2012 consensus utilities earnings estimates and 3% below 2013 estimates because it assumes that diversified utilities will sell natural gas for $3.10 per MMBtu this year and at $4.25 MMBtu next year, well below the $5.50 MMBtu prices that utilities need for "normalized" earnings.

Utilities investors will need an especially long-term investment time horizon if they are to expect strong earnings, according to Goldman Sachs. Earnings will recover as coal plants get phased out, cutting energy supplies and giving natural gas more investable prices. "Power market fundamentals will eventually improve - but largely when coal retirements occur in the next 5-7 years," writes Goldman Sachs. For more on coal retirements, see why old king coal is heading to the retirement home .

In the meantime, Goldman Sachs recommends that investors seek value utilities stocks like NV Energy that are trading at low price-to-earnings ratios and with high dividend growth prospects.

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