Download CIBC Annual Whistler Institutional Investor Conference

Emera
CIBC Annual Whistler
Institutional Investor Conference
Whistler, BC
January 26, 2017
1
Forward-Looking Information
This document contains “forward-looking information” and statements which reflect the current view with respect to Emera Incorporated’s (“Emera”)
expectations regarding future growth, results of operations, performance, business prospects and opportunities and may not be appropriate for other
purposes within the meaning of applicable securities laws. All such information and statements are made pursuant to safe harbor provisions contained in
applicable securities legislation. The words “anticipates”, “believes”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “projects”, “schedule”,
“should”, “budget"," forecast”, “might”, “will”, “would”, “targets” and similar expressions are often intended to identify forward-looking information, although
not all forward-looking information contains these identifying words.
The forward-looking information reflects management’s current beliefs and is based on information currently available to Emera’s management and
should not be read as guarantees of future events, performance or results, and will not necessarily be accurate indications of whether, or the time at
which, such events, performance or results will be achieved. The forward-looking information is based on reasonable assumptions and is subject to risks,
uncertainties and other factors that could cause actual results to differ materially from historical results or results anticipated by the forward-looking
information. Factors which could cause results or events to differ from current expectations are discussed in the Outlook section of our Management’s
Discussion and Analysis as at November 7, 2016 and may also include: regulatory risk; operating and maintenance risks; changes in economic
conditions; commodity price and availability risk; capital market and liquidity risk; future dividend growth; timing and costs associated with certain capital
projects; the expected impacts on Emera of challenges in the global economy; estimated energy consumption rates; maintenance of adequate insurance
coverage; changes in customer energy usage patterns; developments in technology could reduce demand for electricity; weather; commodity price risk;
construction and development risk; unanticipated maintenance and other expenditures; and derivative financial instruments and hedging availability;
interest rate risk; credit risk; commercial relationship risk; disruption of fuel supply; country risks; environmental risks; foreign exchange; regulatory and
government decisions, including changes to environmental, financial reporting and tax legislation; risks associated with pension plan performance and
funding requirements; loss of service area; risk of failure of information technology infrastructure and cyber security risks; market energy sales prices;
labour relations; and availability of labour and management resources.
Readers are cautioned not to place undue reliance on forward-looking information as actual results could differ materially from the plans, expectations,
estimates or intentions and statements expressed in the forward-looking information. All forward-looking information in this document is qualified in its
entirety by the above cautionary statements and, except as required by law, Emera undertakes no obligation to revise or update any forward-looking
information as a result of new information, future events or otherwise.
Nothing in this document should be construed as an offer or sale of securities of Emera or any other person.
2
Emera at a Glance
$CAD
Ticker Symbol: EMA (TSX) – Member TSX 60 Index
An index designed to represent leading companies in leading industries in Canada
$9bn
Market
Capitalization
9.6%
18.3%
10.0%
2016 Annualized TSR
3-year annualized TSR
5-Year Annualized TSR
(S&P TSX Capped Utilities Index
17.4%)
(S&P TSX Capped Utilities Index S&P TSX Capped Utilities Index
9.3%)
4.9%)
• Target 8% annual dividend growth through 2020
• Approximately 90% regulated earnings fully
covering dividend
• Strong market liquidity with more than 1.2 million
shares daily trading volume across all exchanges
3
Emera
Newfoundland
& Labrador
Where
We Operate
Emera
New
Brunswick
• 2.5 million customers
• 7,200 employees
HALIFAX
Emera
Maine
Nova Scotia
Power
Emera
Energy
New Mexico
Gas
Grand
Bahama
Power
DOMLEC
LUCELEC
Tampa Electric/
Peoples Gas
4
Barbados
Light &
Power
Our Businesses
RI
Emera
Florida and
New Mexico
Tampa Electric
ROE 9.25 – 11.25%
Rate base $5.5
billion
Equity 54%
Customers 730,000
RI
NOVA SCOTIA
POWER
ROE 8.75 9.25%
Rate base $3.8
billion
Equity 40%
Customers
509,000
Peoples Gas
ROE 9.75 – 11.75%
RI
EMERA
MAINE
ROE 10.3%
Rate base $0.9
billion
RI
EMERA
NEWFOUNDLAND/
LABRADOR
EMERA
CARIBBEAN
ROE 8.5%
Estimated $2.1
billion in assets
by 2017
>10% return on
rate base
Equity 49%
Customers
158,000
RI
Maritime Link*
(100%)
Customers
181,000
$1.3 billion
in assets
Labrador
Island Link*
(59%)
Rate base $0.8
billion
Equity 54.7%
Customers 370,000
New Mexico Gas
ROE 10%
Rate base $0.5
billion
Equity 50%
Customers 518,000
RI
Regulated Investments
Note: Emera Florida, New Mexico, Maine Energy and Caribbean dollar amounts are $US, all other are $CAD..
Assets are as at September 30, 2016. *Maritime Link and Labrador Island Link are equity accounted and are in the Corporate
and Other segment of the financial statements.
5
EMERA
ENERGY
$1.5 billion
in assets
CORPORATE
AND OTHER
$0.8 billion in
assets
Strategy
LOW CARBON
HIGH CARBON
Market
Opportunity
Meet the demand for cleaner, affordable energy.
Emera
Strategy
Leverage the unique linkages and adjacencies of Emera’s assets,
capabilities and relationships to create growth and development
opportunities.
Strategic
Focus
Renewables | Utilities | Transmission | Gas Generation & Transportation
Dividend Target: 8% CAGR through 2020
Strategic
Initiatives
6
‘Greening’ of
Generation
‘Fuels to
Assets’
Projects
Maritime
Link &
Labrador
Island Link
75-85% Regulated Earnings Target
New England
Transmission
Creating the
Grid of the
Future
Focus on
Customer
Solutions
Business Diversity
Pro-forma Contribution*
Tampa Electric
Emera Caribbean
Emera Maine
Maritime Link / LIL
New Mexico
Nova Scotia Power
Emera Energy
Pipelines
People's Gas
* excludes Corporate & Other
7
• Approximately 90%
regulated
• Well-diversified
geographically and by
regulatory jurisdiction
• Portfolio now includes gas
LDC’s
• New utilities are in stronger
economic growth markets
and offer improved capital
structures and higher
allowed ROE’s
• Quarterly earnings profile
more consistent post
TECO acquisition
Capital Investment Forecast
2017
2018
2019
2020
795
$ 1,100
$ 1,110
$ 1,010
$ 4,015
Regulated Canadian and
Caribbean Operations
830
550
455
375
2,210
Unregulated Operations
90
50
75
35
250
$ 1,715
$ 1,700
$ 1,640
$ 1,420
$ 6,475
Regulated US Electric &Gas
Total
$
Total
C$6.5bn Capital Expenditure Profile from 2017-20201
Additional opportunities above those specifically identified are expected given
new scale and scope of Emera:
Transmission development, gas LDC expansion, carbon reduction
investments, electric utility, gas pipeline, electric transmission and
competitive generation
1.
8
Includes debt-financed portion of Maritime Link; FX USD/CAD $1.3
Capital Investment Highlights
• Hydro refurbishment, transmission and distribution system
upgrades at Nova Scotia Power
• Renewable energy (solar) in Barbados
• Generating unit capacity and heat rate improvements at
Emera Energy
• Transmission system improvements at Emera Maine
• Maritime Link and Labrador Island Link
• CNG vehicles in Florida: attractive economics and
environmental profile
• Economic development opportunities in New Mexico
9
LOWER CHURCHILL
Phase 1 and Maritime Link
Churchill Falls
MUSKRAT FALLS (MF)
GENERATION & LABRADOR
TRANSMISSION (LTA)
•
•
•
•
Gull Island
$5.7 billion project value
824 MW hydroelectric facility
4.9 TWh/yr
100% Nalcor owned
Muskrat Falls
QUEBEC
LABRADOR ISLAND LINK (LIL)
•
•
•
•
$3.4 billion project value
900 MW capacity
690 mile
Emera to invest up to $600 million
for ≈ 59% partnership capital of
LIL
Bottom
Brook
NEWFOUNDLAND
Cape
Ray
$1.577 billion project value
500 MW capacity
110 mile undersea link
100% Emera owned for 35 years
Utility Service Area
Existing Infrastructure
10
ST. JOHN’S
Granite
Canal
NEW
BRUNSWICK
MARITIME LINK (ML)
•
•
•
•
LABRADOR
ME
PEI
NOVA
SCOTIA
HALIFAX
VT
NH
Point
Aconi
Soldier’s
Point
Massachusetts Clean Power Options
HVDC transmission, backed by surplus hydro and wind
Maine Renewable Energy
Interconnect (MREI)
• 345kV AC solution that
optimizes existing utility
systems and rights-of-way.
• 150 miles of new transmission
lines and associated
substation equipment to deliver
up to 1,200 MW of wind
energy from Northern Maine
wind projects.
MAINE GREEN LINE OPTION
• Proposed up to 1000 MW
transmission line from Maine to
Massachusetts.
• Option to participate.
NORTHEAST ENERGY
LINK (NEL) OPTION
• Proposed 230-mile, 1100 MW
transmission line.
• 50/50 partnership between
Emera and National Grid.
11
ATLANTIC LINK OPTION
• Subsea cable running from New
Brunswick or Nova Scotia to Boston.
• Collects and transmits Northern Maine
Wind, Atlantic Canada. Wind/Hydro.
• Scalable, 600-900MW capacity.
Florida Operations – Solar
•
•
•
•
•
12
23MW Big Bend – under construction
2MW Central Florida theme park – under construction
2MW Tampa International Airport – completed
FPSC innovative support for Solar
• Approved FPL settlement for Solar Base Rate
Adjustment (SoBRA)
Exploring significant large investment opportunities
for additional utility scale solar
Consistent EPS* Growth
$4.022
$1.12
$2.631
$0.37
$2.90
$1.70
2010
$2.02
$1.85
$1.96
$2.23
$2.26
2011
2012
2013
2014
2015
Q3 2016
TTM
*Adjusted EPS calculated as basic EPS, adjusted for mark-to-market adjustments.
12015 adjusted EPS includes $0.36 of TECO acquisition related costs, excluding the TECO acquisition related costs 2015 adjusted
EPS is $2.63.
22016 TTM ended September 30, 2016 adjusted EPS includes $1.12 of TECO acquisition related costs, excluding the TECO
acquisition related costs 2016 TTM ended September 30, 2016 adjusted EPS is $4.02.
13
Dividends
$2.20
$2.09
$2.00
$1.80
$1.66
$1.60
$1.48
$1.40
$1.20
$1.31
$1.36
70-75% payout
ratio target
$1.41
$1.16
$1.00
10
14
11
12
13
14
15
16E
17
18
19
20
Dividends
Cash Flow from Operations
Coverage of Dividend
Payout Ratio
100%
6.0
5.5
90%
80%
73%
72%
66%
70%
69%
5.0
5.0
4.5
4.2
4.0
60%
50%
3.0
40%
30%
2.0
20%
1.0
10%
0%
2013
15
2014
2015
TTM
2016
0.0
2013
2014
2015
TTM
2016
Step Change in Operating Cash Flow
$1,8783
TECO Energy
pro forma
adjustment –
9-months
ended June
30, 2016
$763
$419
2010
12012
16
$400
2011
$4881
2012
$7262
$564
2013
2014
operating cash flows reflect a $90 million voluntary contribution to Nova Scotia Power’s
pension plan.
22015 operating cash flows excludes TECO acquisition related costs
3TTM ended September 30, 2016 operating cash flows excludes $134 million of TECO acquisition
related costs, and includes approximately$765 million of cash from TECO Energy operations for
the 9-months prior to the acquisition close.
2015
Q3 2016
TTM
Cash Flow and Capital Structure
• Year to date cash from operations of
$867 million, an increase of $305
million as compared to 2015
• Credit metrics support current
ratings
• Expected improvement in credit
metrics in 2017, 2018 and 2019
• De-leveraging plan includes
optimizing cash generation and
additional equity issuances,
including existing DRIP
• Target capital structure to be
achieved by 2020
NOTE: Calculations exclude AOCI from common equity and total capitalization
17
Targeted Capital Structure
10%
35%
55%
 Debt
 Equity
 Preferred Shares /
hybrid securities
2017 Results Drivers
• Full year of TECO Florida and New Mexico
̶
Tampa Electric $110 million base rate increase effective January 2017 –
Polk Unit 2 in service
̶
Florida utilities expected to earn near top of allowed ROE ranges
̶
Customer growth consistent with 2016 expected to continue
• Higher capacity payments for New England generating
plants mid-year 2017
• Continued investment in Maritime Link – expected
completion late 2017
– Higher AFUDC on higher investment balance
18
USD Exposure
• 70-75% of net earnings will be in US dollars
• Percentage of funds from operations in USD aligned with
USD debt so credit metrics will not be materially impacted
by changes in currency
• USD cash flow will be used to reinvest in growing US
utilities and to pay down existing USD holdco debt
• Reported accounting earnings not hedged, weaker
Canadian dollar will be positive for earnings
• Sensitivity - $0.01 change in FX rates will have a $2-4M
effect on net earnings
19
Why invest in Emera
• 75-85% regulated earnings target.
STABLE EARNINGS
• Adjusted earning per share CAGR of almost 15% over last 5 years.
• 8% Annual Growth Rate target through 2019.
DIVIDENDS
GROWING OPERATING
CASH FLOWS
VISIBLE GROWTH PLAN
• Dividend Yield of ≈4.7%; Dividend per share CAGR
of 12% over last 6 years.
• Secure cash coverage on our dividend.
• Almost 14% CAGR in operating cash flows over last 5 years.
• $6.5 billion capital investment plan to drive growth
(2017-2020)
• Strong project pipeline.
DISCIPLINED
INVESTMENT CRITERIA
20
• Central to every investment decision.
Appendix
21
2016 Financing Activity
Timeline
Financing
May
 Sold the majority of Emera’s investment in Algonquin
Power for gross proceeds of $544 million
June
 Issued $1.2 billion of US hybrid securities at 6.75%
June
 Issued $3.25 billion of USD debt at an weighted average
rate of 3.6%
June
 Issued $500 million of seven year CDN debt at 2.9%
August
 Converted $2.2 billion of convertible debentures into
equity – 51.9 million shares
December
 Issuance of $345M of common equity
December
 Sale of the balance of Emera’s investment in Algonquin
Power for gross proceeds of $142 million
Year to date
 Raised over $100 million of common equity in 2016
through Emera’s Dividend Reinvestment Plan
Approximately $10 billion raised over past 16 months
22
TECO Energy Earnings
% By Quarter
35%
30%
25%
20%
15%
10%
5%
0%
Q1
23
Q2
Q3
Q4
Estimated Investments
Maritime Link
(CAD$mm)
Maritime Link - Equity
Maritime Link - Debt
$384
$290
$137
$150
2016
2017
$315
$146
$27
2011-2012
$35
$80
2013
2014
$13
2015
• Net earnings being earned at a 9.0% regulated ROE.
• All earnings through to the end of 2017 are in the form of AFUDC.
• Cash earnings forecasted to begin in 2018 when the Maritime Link is in service.
24
Estimated Investments
Labrador Island Link
(CAD$mm)
$200
$195
$119
$68
$28
2013
2014
2015
2016
2017
2018
* Timing of $200mm investment dependent upon commercial factors
including the LIL completion date.
• Net earnings being earned at a 8.5% regulated ROE.
• All earnings will be in the form of AFUDC until Muskrat Falls is in service,
currently forecasted for mid-2020.
• Cash earnings forecasted to begin late 2020.
25
2019*
New England Capacity Markets
Facility
Bridgeport
Tiverton
Rumford
Bear Swamp
(50% Owner)
Nameplate
Capacity (MW)
560
265
265
600
Location
Connecticut
Rhode
Island
Maine
Massachusetts
Rumford
HALIFAX
The Changing Landscape
•
•
In FCA9 a sloped demand curve was introduced driving prices
higher. In FCA10 under the same curve the auction was able to
procure 2,000 MW’s of new capacity
FCA11 will be the first year in up to a three year transition to a new
sloped demand curve that will see reduced capacity prices for
FCA14 all else remaining equal
Capacity Revenues
($USDmm)
FCA6
(‘15-’16)
FCA7
(‘16-’17)
Tiverton
Bridgeport
FCA8
(‘17-’18)
FCA9
(‘18-’19)
FCA10
(‘19-’20)
Bridgeport
$18.7
$17.2
$38.5
$54.5
$42.9**
Tiverton
$10.0
$9.2
$20.6
$33.6
$22.7
Rumford
$10.0
$9.2
$20.6
$28.0
$20.6
$6.7
$9.0
$20.0
$26.9
$19.7
$45.4
$44.6
$99.7
$143.1
$105.9
$3.129
$2.950
$7.025
$9.55 - $11.08*
$7.03
Bear Swamp (Emera’s 50%)
Total
$/KW Month
26
Bear Swamp
* - FCA 9 ($/KW Month): Rumford and Bridgeport $9.55, and Tiverton $11.08
** - includes Bayside / NEG composite offer
Emera Energy
•
Adjusted Net Earnings (millions)
•
$140
$120
$100
$80
•
$60
$40
$20
$0
2012
2013
2014
2015
Significant growth and outperformance
over past several years
Capitalized on market opportunities –
high and volatile market prices in New
England – while maintaining same
moderate risk profile
Historical results contributed net
earnings and substantial cash flow, but
are not expected to be maintained in
current market
TTM Q3
16
• Market facing business also provides strategic market intelligence
• Emera Energy business facilitates other Emera investments, e.g. Maritime
Link
27
Marketing & Trading Overview
•
•
•
•
15 year track record of success, effective risk management, and demonstrated material
upside
Four business activities – buying and selling physical gas; contracting for pipeline capacity;
storing gas for short and medium terms; and buying financial swaps to hedge physical
exposures.
Minimal outright commodity exposure; locational spread risk materially offset by pipeline
capacity with known downside; gas storage in low priced regions managed seasonally
Moderate risk model intended to deliver a reliable level of earnings with opportunity for
upside - earnings range of $15M to $30 M can generally be expected
̶
Margin of $45 M and $70 M required to deliver earnings expectations at low and high end
̶
Business is seasonal with Q1 and Q4 the strongest; often the year is made in November and
December
$80
Millions
$60
Marketing and Trading Earnings Range
$70
Net Earnings
EBIT
Margin
$45
$40
$30
$25
$20
$45
$15
$Low
28
High
New England Generation
• Step change in capacity payments in 2017, with visibility on a material revenue
stream to 2020.
• Energy margin (spark spreads) suffers in a low gas price environment; at current
market heat rates around 11,000 all other things equal, a $1 change in gas price
results in a $4 change in energy only margin
• Spark spreads forecast in low to mid-teens over medium term; low/high cases based
on $10 and $15, at 50%-55% capacity level fleet wide, consistent with 2016
• Plants continue to transact in the region at premium values
Margin and EBITDA Outlook
29