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HALIFAX, May 5 /CNW/ - (EMA-TSX): Emera Inc.'s consolidated net earnings were $62.8 million in Q1 2009, compared to $69.4 million for the same period in 2008. Excluding the effect of mark-to-market accounting adjustments in Bear Swamp, net earnings were $66.3 million in the first quarter of 2009, compared to $66.6 million in Q1 2008. Earnings per share were $0.56 or $0.59 excluding the mark-to-market adjustments for Q1 2009 and $0.62 or $0.60 excluding the mark-to-market adjustments for Q1 2008.
Nova Scotia Power's (NSPI) earnings were $52.5 million in Q1 2009, in comparison to $57.9 million in Q1 2008. This decrease relates to higher fuel costs partially offset by increased electric revenue due to the rate increase effective January 1st. The implementation of the Fuel Adjustment Mechanism was also effective January 1st and decreases the impact of volatile fuel costs on NSPI's earnings.
"We are pleased with our strong results this quarter," said Chris Huskilson, President and CEO of Emera. "In addition, our new strategic partnership with Algonquin and the acquisition of development rights for the Nuttby Mountain wind farm position Emera to increase our investment in renewable energy."
Bangor Hydro Electric contributed $6.4 million to consolidated net earnings in Q1 2009, compared to $5.5 million in Q1 2008. The increase was primarily due to the weaker Canadian dollar.
Emera's Other operations contributed $3.9 million to net earnings in Q1 2009, compared to $6.0 million in Q1 2008. Excluding the effect of mark-to-market accounting related to a long-term contract at the Bear Swamp generating facility, net earnings from Other operations were $7.4 million in the first quarter of 2009 compared to $3.2 million in Q1 2008. This increase relates primarily to increased capitalization of financing costs (AFUDC) during construction of the Brunswick Pipeline, partially offset by increased interest expense on short-term debt.
Forward Looking Information
This news release contains forward looking information. Actual future results may differ materially. Additional financial and operational information is filed electronically with various securities commissions in Canada through the System for Electronic Document Analysis and Retrieval (SEDAR).
Teleconference Call
The company will be hosting a teleconference at 4:00 pm Atlantic time today (3:00 pm Toronto/Montreal/New York; 2:00 pm Winnipeg; 12:00 pm Vancouver) to discuss the Q1 2009 financial results.
Analysts and other interested parties wanting to participate in the call should dial 1-888-575-8232 (in Toronto 416-406-6419) at least 10 minutes prior to the start of the call. No pass code is required. The teleconference will be recorded. If you are unable to join the teleconference live, you can dial for playback toll-free at 1-800-408-3053 (in Toronto 416-695-5800), access code 1352410(number sign) (available until midnight, Tuesday, May 19, 2009). The teleconference will also be web cast live at www.emera.com and available for playback for one year.
About Emera
Emera Inc. (EMA-TSX) is an energy and services company with $5.3 billion in assets. Electricity is Emera's core business. The company has two wholly-owned regulated electric utility subsidiaries, Nova Scotia Power Inc. and Bangor Hydro-Electric Company, which together serve 600,000 customers. Emera also owns 19% of St. Lucia Electricity Services Limited, which serves more than 50,000 customers on the Caribbean island of St. Lucia and 25% of Grand Bahama Power Company which serves 19,000 customers on the Caribbean island of Grand Bahama. In addition to its electric utility investments, Emera owns the Brunswick Pipeline, a 145 km gas pipeline in New Brunswick; has a joint venture interest in Bear Swamp, a 600 megawatt pumped storage hydro-electric facility in northern Massachusetts; a 12.9% interest in the Maritimes & Northeast Pipeline; a 7.4% interest in Open Hydro and Emera Energy Services which manages energy assets on behalf of third parties. Visit Emera on the web at www.emera.com.
Management's Discussion & Analysis
As at May 5, 2009
Management's Discussion and Analysis ("MD&A") provides a review of the
results of operations of Emera Inc. and its primary subsidiaries and
investments during the first quarter of 2009 relative to 2008, and its
financial position at March 31, 2009 relative to December 31, 2008. Certain
factors that may affect future operations are also discussed. Such comments
will be affected by, and may involve, known and unknown risks and
uncertainties that may cause the actual results of the company to be
materially different from those expressed or implied. Those risks and
uncertainties include, but are not limited to, weather, commodity prices,
interest rates, foreign exchange, regulatory requirements and general economic
conditions. To enhance shareholders' understanding, certain multi-year
historical financial and statistical information is presented.
This discussion and analysis should be read in conjunction with the Emera
Inc. unaudited consolidated financial statements and supporting notes as at
and for the three month period ended March 31, 2009 and the Emera Inc. MD&A
and annual audited consolidated financial statements and supporting notes as
at and for the year ended December 31, 2008. Emera follows Canadian Generally
Accepted Accounting Principles ("GAAP"), including the application of
rate-regulated accounting policies for Emera's rate-regulated subsidiaries.
Emera's wholly-owned subsidiaries Nova Scotia Power Inc. ("NSPI"), Bangor
Hydro-Electric Company ("BHE") and Brunswick Pipeline are subject to rate
regulation and the accounting policies used by these entities may differ in
regard to the timing of recognition of certain assets, liabilities, revenue
and expenses, from those used by Emera's non rate-regulated companies. NSPI's
accounting policies are subject to examination and approval by the Nova Scotia
Utility and Review Board ("UARB"). BHE's accounting policies are subject to
examination and approval by the Maine Public Utilities Commission ("MPUC") and
the Federal Energy Regulatory Commission ("FERC").
Throughout this discussion, "Emera Inc." and "Emera" refer to Emera Inc.
and all of its consolidated subsidiaries and affiliates.
All amounts are in Canadian dollars ("CAD") except for the BHE section of
the MD&A, which is reported in US dollars ("USD") unless otherwise stated.
Additional information related to Emera, including the company's Annual
Information Form, can be found on SEDAR at www.sedar.com.
Introduction and Strategic Overview
Emera is a Canadian energy holding company headquartered in Halifax, Nova
Scotia. The company invests in electricity generation, transmission and
distribution as well as gas transmission and energy marketing.
Most of Emera's revenues are earned by NSPI and BHE, two wholly-owned
regulated electric utilities, which operate in northeastern North America.
NSPI is an electricity generation, transmission and distribution company with
$3.5 billion of assets providing service to 483,000 customers in the province
of Nova Scotia, and BHE is an electricity transmission and distribution
company with $843 million of assets serving 117,000 customers in eastern
Maine. Both businesses operate as monopolies in their service territories, and
together comprise the majority of Emera's consolidated revenues. The success
of Emera's electric utilities is integral to the creation of shareholder
value, providing substantial earnings and cash flow to fund dividends and
reinvestment. The essential nature of the services provided, the monopoly
positions, and the regulated market structures mean that NSPI and BHE can
generally be expected to produce stable earnings streams within regulated
ranges. Nova Scotia and Maine are mature electricity markets, with annual
energy consumption growth of approximately 1%. Accordingly, Emera looks beyond
its existing regulated electricity business to supplement organic growth.
Emera's goal is to deliver annual consolidated earnings growth of 4% to
6%, and build and diversify its earnings base. To accomplish this, Emera will
continue to seek growth from its existing businesses and will leverage its
core strength in the electricity business as it pursues both acquisitions and
greenfield development opportunities in regulated electricity transmission and
distribution and low risk generation. Emera's growth strategy also includes
serving the United States and Caribbean markets by capitalizing on
opportunities in related energy infrastructure businesses appropriate to its
risk profile, where its development, commercial and operational skills are
needed.
Emera has grown its business through the following investments:
- Bear Swamp, a 50/50 joint venture in a 600 megawatt pumped storage
hydro-electric facility in northern Massachusetts.
- Brunswick Pipeline, a 145 kilometer pipeline that delivers natural gas
from the Canaport(TM) Liquefied Natural Gas import terminal near
Saint John, New Brunswick, to markets in Canada and the northeastern
United States. The pipeline was mechanically complete, and received
National Energy Board approval for shipping gas, in January 2009. This
accommodates the needs and schedule of the customer, Repsol, and the
timing of completing the Canaport(TM) LNG terminal, expected in Q2
2009.
- A 12.9% interest in the $2 billion, 1,400 kilometer Maritimes &
Northeast Pipeline ("M&NP") that transports natural gas to markets in
Maritime Canada and the northeastern United States.
- Emera Energy Services, a physical energy business which purchases and
sells natural gas and electricity and provides related energy asset
management services.
- A 19% interest in St. Lucia Electricity Services Limited ("Lucelec"),
a vertically integrated electric utility on the Caribbean island of
St. Lucia.
- A 25% interest in Grand Bahama Power Company Limited ("GBPC"), a
vertically integrated electric utility on Grand Bahama Island, acquired
in September 2008.
- A 7.35% interest in OpenHydro Group Limited ("OpenHydro"), an Irish
renewable energy company, acquired in February 2008.
Strategic Partnership with Algonquin Power Income Fund
In April 2009, Emera signed an agreement giving it rights to acquire a
9.9% interest in Algonquin Power Income Fund ("APIF") through a private
placement of 8.5 million APIF units for a purchase price of $27.6 million.
Under the transaction agreements, Mr. C.G. Huskilson, President and Chief
Executive Officer, Emera Inc., will be nominated for election to the Board of
Trustees of APIF at the next general meeting of APIF unitholders. Emera also
has rights to acquire a further 5% of APIF over the next two years. Emera and
APIF have committed to acquire the electricity distribution and related
generation assets of Sierra Pacific Power Company for approximately USD $116
million from NV Energy. This California-based utility currently provides
electric distribution service to approximately 47,000 customers in the Lake
Tahoe region. Under the terms of the agreement, Emera and APIF will jointly
own and operate the utility through a newly formed entity, California Pacific
Electric Company ("California Pacific"). Emera's 50% investment in the common
shares of California Pacific will be approximately USD $27 million. This
transaction is subject to approval by the California Public Utilities
Commission which is expected in 2010.
The purchase of the 8.5 million units of APIF will happen concurrently
with the closing of the California Pacific transaction and combined these
transactions are expected to add approximately $6 to $7 million to Emera's
annual consolidated net earnings. Emera will finance these acquisitions with
existing credit facilities.
Structure of MD&A
This Management's Discussion and Analysis begins with an overview of
consolidated results; then presents information on the company's two primary
subsidiaries, NSPI and BHE. All other operations, including Bear Swamp,
Brunswick Pipeline, M&NP, Emera Energy Services, Lucelec, GBPC, OpenHydro, and
corporate activities are grouped and discussed as "Other". Significant changes
in the consolidated balance sheets, outstanding share data, liquidity and
capital resources, financial and commodity instruments, transactions with
related parties, changes in accounting policies and selected quarterly trend
information are presented on a consolidated basis.
EMERA CONSOLIDATED
Q1 Operating Unit Contributions
millions of dollars (except earnings per Three months ended
common share) March 31
-------------------------------------------------------------------------
2009 2008
-------------------------------------------------------------------------
Nova Scotia Power Inc. $52.5 $57.9
Bangor Hydro-Electric Company 6.4 5.5
Other 3.9 6.0
-------------------------------------------------------------------------
Consolidated net earnings $62.8 $69.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per common share - basic $0.56 $0.62
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per common share - diluted $0.53 $0.58
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per common share - basic, absent the
Bear Swamp after-tax mark-to-market adjustment $0.59 $0.60
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Review of 2009
Emera Inc.'s consolidated net earnings decreased $6.6 million to $62.8
million in Q1 2009 compared to $69.4 million in Q1 2008. Highlights of the
changes are summarized in the following table:
Three months ended
millions of dollars March 31
-------------------------------------------------------------------------
Consolidated net earnings - 2008 $69.4
Decreased net earnings in NSPI due primarily to
increased fuel expense, partially offset by increased
electric revenue (5.4)
Increased net earnings in BHE due primarily to a
weaker Canadian dollar 0.9
Increased net earnings in Other due primarily to
allowance for funds used during construction
("AFUDC") on construction of the Brunswick Pipeline,
partially offset by increased interest expense on
short-term debt used to finance the construction of
the pipeline 4.2
Decreased net earnings in Other related to the
after-tax mark-to-market adjustment on the commodity
price position in Bear Swamp as discussed in
Significant Items (6.3)
-------------------------------------------------------------------------
Consolidated net earnings - 2009 $62.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic earnings per share were $0.56 in Q1 2009 compared to $0.62 in Q1
2008.
Significant Items
Bear Swamp Mark-to-Market Adjustment
As part of its long-term energy and capacity supply agreement with the
Long Island Power Authority ("LIPA"), Bear Swamp has contracted with its
parents to provide the power necessary to produce the requirements of the LIPA
contract. One of the contracts between Bear Swamp and Emera's joint venture
partner is marked-to-market through earnings as it does not meet the stringent
accounting requirements of hedge accounting. As at March 31, 2009, the fair
value of the derivative was a net liability of $0.9 million (December 31, 2008
- $4.9 million net asset), which is subject to market volatility of power
prices, and will reverse over the life of the agreement as it is realized. The
agreement expires in 2021.
The mark-to-market adjustments were as follows:
millions of dollars (except earnings per Three months ended
common share) March 31
-------------------------------------------------------------------------
2009 2008
-------------------------------------------------------------------------
Mark-to-market (loss) gain $(5.9) $4.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
After-tax mark-to-market (loss) gain $(3.5) $2.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per common share - basic $0.56 $0.62
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per common share - basic, absent the
after-tax mark-to-market adjustment $0.59 $0.60
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOVA SCOTIA POWER INC.
Overview
NSPI is the primary electricity supplier in Nova Scotia, providing over
95% of electricity generation, transmission and distribution in the province.
The company is regulated by the UARB under a cost-of-service model, with rates
set to recover prudently incurred costs of providing electricity service to
customers, and provides an opportunity to earn a prescribed return on equity
("ROE").
Nuttby Mountain Wind Project
On April 27, 2009, NSPI purchased the development rights for a proposed 45
MW wind farm located at Nuttby Mountain, Nova Scotia. The Nuttby Mountain
development rights were owned by Calgary-based EarthFirst Canada Inc.'s
subsidiary EarthFirst Nuttby Inc., and included land leases and transmission
interconnection rights as well as provincial environmental approval. The
project is expected to cost approximately $100 million and will be subject to
UARB approval.
2009 Rate Decision
In September 2008, NSPI reached a settlement agreement with stakeholders
on its 2009 rate application. The UARB approved that settlement agreement in
November 2008 which included an average rate increase of 9.4% for most
customer segments effective January 1, 2009. The settlement agreement also
includes a Fuel Adjustment Mechanism ("FAM") also effective January 1, 2009,
with the first rate adjustment under the FAM occurring on January 1, 2010. The
UARB will oversee the FAM, including review of fuel costs, contracts and
transactions. With the implementation of the FAM, NSPI's ROE range has been
reduced to 9.1% - 9.6% with 9.35% used to set rates.
Review of 2009
NSPI Q1 Net Earnings
millions of dollars (except earnings per Three months ended
common share) March 31
-------------------------------------------------------------------------
2009 2008
-------------------------------------------------------------------------
Electric revenue $347.8 $323.0
Fuel for generation and purchased power 148.6 110.8
Fuel adjustment (5.8) -
Operating, maintenance and general 51.2 47.8
Provincial grants and taxes 10.1 10.1
Depreciation 35.4 33.2
Regulatory amortization 4.2 3.8
Other revenue (3.0) (3.1)
-------------------------------------------------------------------------
Earnings before financing charges and income
taxes 107.1 120.4
Financing charges 35.6 30.4
-------------------------------------------------------------------------
Earnings before income taxes 71.5 90.0
Income taxes 19.0 32.1
-------------------------------------------------------------------------
Contribution to consolidated net earnings $52.5 $57.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Contribution to consolidated earnings per common
share $0.47 $0.52
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NSPI's contribution to consolidated net earnings decreased $5.4 million to
$52.5 million in Q1 2009 compared to $57.9 million in Q1 2008. Highlights of
the earnings changes are summarized in the following table:
Three months ended
millions of dollars March 31
-------------------------------------------------------------------------
Contribution to consolidated net earnings - 2008 $57.9
Increased electric revenue 24.8
Increased fuel expense (37.8)
Deferral of fuel expense as a result of FAM
implementation 5.8
Increased operating expenses due primarily to
increased storm activity partially offset by
decreased pension expense (3.4)
Increased financing charges due to foreign exchange
losses (5.2)
Decreased income taxes due to lower earnings, a lower
statutory rate and increased pension contributions 13.1
Other (2.7)
-------------------------------------------------------------------------
Contribution to consolidated net earnings - 2009 $52.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
With the implementation of the FAM, NSPI earnings are less affected by
volatile fuel costs and more so by load changes and the associated mix of
sales volume.
Electric Revenue
Q1 Electric Sales Volumes Q1 Electric Revenues
Gigawatt hours ("GWh") millions of dollars
----------------------------------- ------------------------------------
2009 2008 2007 2009 2008 2007
----------------------------------- ------------------------------------
Residential 1,432 1,398 1,330 Residential $179.2 $160.8 $146.7
Commercial 877 865 869 Commercial 93.1 83.8 82.1
Industrial 839 1,049 1,012 Industrial 63.9 68.1 62.2
Other 98 88 93 Other 11.6 10.3 10.3
----------------------------------- ------------------------------------
Total 3,246 3,400 3,304 Total $347.8 $323.0 $301.3
----------------------------------- ------------------------------------
----------------------------------- ------------------------------------
Q1 Average Revenue / Megawatt hour
("MWh")
-----------------------------------
2009 2008 2007
-----------------------------------
Dollars per
MWh $107 $95 $91
-----------------------------------
-----------------------------------
Electric revenue increased $24.8 million to $347.8 million in Q1 2009
compared to $323.0 million in Q1 2008. Highlights of the changes are
summarized in the following table:
Three months ended
millions of dollars March 31
-------------------------------------------------------------------------
Electric revenue - 2008 $323.0
Increased electricity prices effective January 1, 2009 31.6
Increased residential and commercial sales volumes 4.6
Decreased industrial sales volumes due to decreased
sales to several large industrial customers (11.4)
-------------------------------------------------------------------------
Electric revenue - 2009 $347.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The change in average revenue per MWh in 2009 compared to 2008 reflects
the January 1, 2009 rate increase.
Fuel for Generation and Purchased Power
Q1 Production Volumes
GWh
-----------------------------------
2009 2008 2007
-----------------------------------
Coal &
petcoke 2,377 2,461 2,487
Natural gas 304 434 158
Oil 262 71 429
Renewable 313 370 300
Purchased
power 205 277 194
-----------------------------------
Total 3,461 3,613 3,568
-----------------------------------
-----------------------------------
Purchased power includes 42 GWh of
renewables in Q1 2009 (2008 -
48 GWh; 2007 - 50 GWh).
Q1 Average Unit Fuel Costs
-----------------------------------
2009 2008 2007
-----------------------------------
Dollars per
MWh $43 $31 $37
-----------------------------------
-----------------------------------
Fuel for generation and purchased power increased $37.8 million to $148.6
million in Q1 2009 compared to $110.8 million in Q1 2008. Highlights of the
changes are summarized in the following table:
Three months ended
millions of dollars March 31
-------------------------------------------------------------------------
Fuel for generation and purchased power - 2008 $110.8
Commodity price increases 15.8
Decreased net proceeds on resale of natural gas 8.2
Decreased sales volume (9.8)
Decreased hydro production 4.9
Mark-to-market on natural gas hedges not required in
2009 primarily due to decreased production volumes 14.6
Plant performance 3.2
Other 0.9
-------------------------------------------------------------------------
Fuel for generation and purchased power - 2009 $148.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NSPI manages fuel risk for customers utilizing a portfolio strategy
combining physical fixed price contracts and financial instruments providing
fixed or maximum prices. Foreign exchange risk is managed through forward and
option contracts.
Fuel Adjustment
The UARB approved the implementation of a FAM in NSPI's 2009 General Rate
Decision effective January 1, 2009. As at March 31, 2009, the difference
between actual fuel costs and amounts recovered from customers has been
deferred to a FAM regulatory asset in other assets. The FAM is subject to an
incentive portion with NSPI retaining or absorbing 10% of the over or
under-recovered amount less the difference between the incentive threshold and
the base fuel cost to a maximum of $5 million. The company has recognized a
future income tax expense related to the fuel adjustment based on NSPI's
applicable statutory income tax rate. The FAM is recognized by NSPI as a
regulatory asset as future rates will be adjusted to provide recovery from
customers in the following year. As at March 31, 2009, NSPI's FAM regulatory
asset was $5.7 million (2008 - nil), and future income tax liability was $1.9
million (2008 - nil).
Outlook
In Q1 2009, industrial electric sales volume decreased due to reduced
production at two large paper mills.
The company anticipates the reduced production may continue during the
remainder of 2009. NSPI has revised its financial outlook to incorporate the
effect of this circumstance and expects to earn a regulated ROE within its
allowed range in 2009.
BANGOR HYDRO-ELECTRIC COMPANY
All amounts in the Bangor Hydro section are reported in US dollars unless
otherwise stated.
Overview
BHE's core business is the transmission and distribution ("T&D") of
electricity. Electricity generation is deregulated in Maine, and several
suppliers compete to provide customers with the energy that is delivered
through the BHE T&D network. BHE operates under a traditional cost-of-service
regulatory structure.
Review of 2009
Bangor Hydro Q1 Net Earnings
millions of dollars (except earnings per Three months ended
common share) March 31
-------------------------------------------------------------------------
2009 2008
-------------------------------------------------------------------------
T&D electric revenues $26.3 $24.8
Resale of purchased power 4.9 5.2
Transmission pool revenue 2.9 4.7
-------------------------------------------------------------------------
Total revenue 34.1 34.7
Fuel for generation and purchased power 8.7 9.1
Operating, maintenance and general 8.6 6.5
Property taxes 1.6 1.5
Depreciation 4.0 3.8
Regulatory amortization 1.9 3.1
Other (1.6) (1.2)
-------------------------------------------------------------------------
Earnings before financing charges and income
taxes 10.9 11.9
Financing charges 2.6 2.9
-------------------------------------------------------------------------
Earnings before income taxes 8.3 9.0
Income taxes 3.1 3.5
-------------------------------------------------------------------------
Contribution to consolidated net earnings - USD $5.2 $5.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Contribution to consolidated net earnings - CAD $6.4 $5.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Contribution to consolidated earnings per common
share - CAD $0.06 $0.05
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings weighted average foreign exchange
rate - CAD/USD $1.24 $1.00
-------------------------------------------------------------------------
-------------------------------------------------------------------------
BHE's contribution to consolidated net earnings decreased by $0.3 million
to $5.2 million in Q1 2009 compared to $5.5 million in Q1 2008. Highlights of
the earnings changes are summarized in the following table:
Three months ended
millions of dollars March 31
-------------------------------------------------------------------------
Contribution to consolidated net earnings - 2008 $5.5
Increased T&D electric revenues due to higher sales
volumes and increased transmission rates 1.3
Lower transmission pool revenue due to increased
regional charges (0.9)
Increased operating, maintenance and general expenses
due to increased storm activity (0.5)
Other (0.2)
-------------------------------------------------------------------------
Contribution to consolidated net earnings - 2009 $5.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
BHE's increased contribution to consolidated net earnings in CAD was due
to the $1.2 million effect of the weaker Canadian dollar.
Electric Revenue
Q1 Electric Sales Volumes Q1 Electric Revenues
GWh millions of dollars
----------------------------------- ------------------------------------
2009 2008 2007 2009 2008 2007
----------------------------------- ------------------------------------
Residential 162 158 160 Residential $13.1 $12.6 $13.3
Commercial 151 155 152 Commercial 8.7 8.8 9.2
Industrial 79 80 89 Industrial 2.7 2.0 3.1
Other 2 2 3 Other 1.8 1.4 1.0
----------------------------------- ------------------------------------
Total 394 395 404 Total $26.3 $24.8 $26.6
----------------------------------- ------------------------------------
----------------------------------- ------------------------------------
Q1 Average Revenue / MWh
-----------------------------------
2009 2008 2007
-----------------------------------
Dollars per
MWh $67 $63 $66
-----------------------------------
-----------------------------------
The change in average revenue per MWh in 2009 compared to 2008 reflects
the increase in transmission rates on July 1, 2008.
OTHER
All activities of Emera other than its two wholly-owned regulated electric
utilities are incorporated into Other, including:
- Bear Swamp, a 50/50 joint venture in a 600 megawatt pumped storage
hydro-electric facility in northern Massachusetts. Bear Swamp typically
pumps water into its reservoir using lower priced off-peak power, and
uses that hydro capacity to generate electricity during higher priced
on-peak periods.
- Brunswick Pipeline, a 145 kilometer pipeline that delivers natural gas
from the Canaport(TM) Liquefied Natural Gas import terminal near Saint
John, New Brunswick, to markets in Canada and the northeastern United
States. The pipeline was mechanically complete, and received National
Energy Board approval for shipping gas, in January 2009. This
accommodates the needs and schedule of the customer, Repsol, and the
timing of completing the Canaport(TM) LNG terminal, expected in Q2
2009.
- A 12.9% interest in the $2 billion, 1,400 kilometer M&NP that
transports natural gas to markets in Maritime Canada and the
northeastern United States.
- Emera Energy Services, a physical energy business which purchases and
sells natural gas and electricity and provides related energy asset
management services. Emera Energy Services operates with minimal day-
to-day commodity risk exposure. Volatility in natural gas markets
usually results in increased opportunities for Emera Energy Services.
- A 19% interest in Lucelec, a vertically integrated electric utility on
the Caribbean Island of St. Lucia.
- A 25% interest in GBPC, a vertically integrated utility serving
19,000 customers on Grand Bahama Island, which was acquired in
September 2008.
- A 7.35% interest in OpenHydro, an Irish renewable tidal energy company,
which was acquired in February 2008.
- Certain corporate-wide functions such as executive management,
strategic planning, treasury services, tax planning, business
development, corporate governance, and financing costs and income taxes
associated with the corporation's business outside of its two wholly-
owned regulated electric utilities.
Review of 2009
Bear Swamp, Brunswick Pipeline, and Emera Energy Services are reported on
an earnings before interest and other income taxes basis ("EBIT"), and M&NP,
Lucelec and GBPC are reported on an equity earnings basis.
Other Q1 Earnings
millions of dollars (except earnings per Three months ended
common share) March 31
-------------------------------------------------------------------------
2009 2008
-------------------------------------------------------------------------
Bear Swamp - operational $2.7 $3.6
Bear Swamp - mark-to-market (5.9) 4.7
Brunswick Pipeline 8.3 0.8
M&NP 3.3 2.5
Emera Energy Services 1.6 3.2
GBPC 1.1 -
Lucelec 0.5 0.3
Corporate costs and other (3.8) (3.5)
-------------------------------------------------------------------------
7.8 11.6
Interest expense 5.9 3.2
-------------------------------------------------------------------------
1.9 8.4
Income taxes (2.5) 2.4
-------------------------------------------------------------------------
4.4 6.0
Non-controlling interest (0.5) -
-------------------------------------------------------------------------
Contribution to consolidated net earnings $3.9 $6.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Contribution to consolidated earnings per common
share $0.03 $0.05
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Contribution to consolidated net earnings,
absent the Bear Swamp after-tax mark-to-market
adjustment $7.4 $3.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Contribution to consolidated earnings per common
share, absent the Bear Swamp after-tax mark-to-
market adjustment $0.06 $0.03
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The contribution of Other to consolidated net earnings decreased $2.1
million to $3.9 million in Q1 2009 compared to $6.0 million in Q1 2008.
Highlights of the earnings changes are summarized in the following table:
Three months ended
millions of dollars March 31
-------------------------------------------------------------------------
Contribution to consolidated net earnings - 2008 $6.0
Decreased Bear Swamp - operational primarily due to
mark-to-market losses in 2009 on power hedges not
required (0.9)
Decreased Bear Swamp - mark-to-market due to an
unfavourable commodity price position (10.6)
Decreased Emera Energy Services primarily due to
reduced transportation mitigation opportunities and
mark-to-market losses in 2009 (1.6)
Increased Brunswick Pipeline due to AFUDC on
construction of the pipeline 7.5
Increased equity earnings in M&NP due to proceeds
related to a settlement agreement, a reduction in
interest expense on the US portion of the pipeline
related to repayment of M&NP debt in Q3 2008, along
with a weaker Canadian dollar 0.8
Increased interest due to increased short-term debt
used to finance the construction of Brunswick
Pipeline and an equity contribution to M&NP to repay
debt on the US portion of the pipeline in Q3 2008,
along with foreign exchange losses in 2009 (2.7)
Decreased income taxes due mainly to decreased Bear
Swamp - mark-to-market 4.9
Equity earnings from GBPC acquired in Q3 2008 0.6
Other (0.1)
-------------------------------------------------------------------------
Contribution to consolidated net earnings - 2009 $3.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Outlook
Net earnings for 2009, after adjusting for the mark-to-market effect of
the commodity price position in Bear Swamp, will increase over 2008 due to
continued AFUDC on the Brunswick Pipeline while waiting to receive gas from
the Canaport(TM) LNG terminal and revenue from the pipeline's customer once
the terminal is operational, which is expected in Q2 2009, but no later than
September 2009. Also contributing to increased earnings in 2009 over 2008 is a
full year of equity earnings from GBPC, which was purchased in Q3 2008.
Consolidated Balance Sheets
Significant changes in the consolidated balance sheets between March 31,
2009 and December 31, 2008 include:
Increase
millions of dollars (Decrease) Explanation
-------------------------------------------------------------------------
Assets
Accounts receivable $24.2 Increased accounts receivable due to a
rate increase effective January 1,
2009 in NSPI and increased posted
margin to counterparties.
Prepaid expenses 17.3 Timing of payments.
Derivatives in a 29.2 Favourable USD price positions and new
valid hedging hedges. The effective portion of the
relationship change is recognized in accumulated
(including long-term other comprehensive income.
portion)
Held-for-trading (91.2) Unfavourable commodity price positions.
derivatives The portion related to NSPI's
(including long-term regulatory liabilities is recognized
portion) in other liabilities.
Other assets 47.4 Increased regulatory asset due to the
accounting standard amendment
requiring rate-regulated operations to
recognize regulatory assets and
liabilities related to future income
taxes effective January 1, 2009.
Future income tax 24.9 Accounting standard amendment requiring
assets rate-regulated operations to recognize
future income tax assets and
liabilities effective January 1, 2009.
The portion expected to be recovered
from customers in future rates is
recognized in other assets.
Investments subject 12.1 Additional investment in MN&P, equity
to significant earnings and the effect of the weaker
influence Canadian dollar.
Property, plant & 46.5 Capital spending primarily in NSPI and
equipment and Brunswick Pipeline along with the
construction work in effect of the weaker Canadian dollar.
progress
-------------------------------------------------------------------------
Liabilities and
Shareholders' Equity
Accounts payable (31.2) Timing of payments.
Derivatives in a 12.7 Unfavourable commodity price positions.
valid hedging The effective portion of the change is
relationship recognized in accumulated other
(including long-term comprehensive income.
portion)
Future income tax 102.6 Accounting standard amendment requiring
liabilities rate-regulated operations to recognize
future income tax assets and
liabilities effective January 1, 2009.
The portion expected to be recovered
from customers in future rates is
recognized in other assets.
Other liabilities (90.9) Decreased regulatory liability related
to financial instruments.
Short-term debt and 52.1 Increased debt levels to finance
long-term debt Brunswick Pipeline and the effect of
(including current the weaker Canadian dollar.
portion)
Accumulated other 34.2 Primarily represents the favourable
comprehensive income effect of the weaker Canadian dollar
on the company's investment in Bangor
Hydro, and changes in USD and
commodity price hedge positions.
Retained earnings 34.5 Net earnings in excess of dividends
paid.
-------------------------------------------------------------------------
Outstanding Share Data
Common Share
Capital
Millions of millions of
Issued and Outstanding: Shares dollars
-------------------------------------------------------------------------
December 31, 2007 111.47 $1,066.2
Issued for cash under purchase plans 0.39 8.0
Options exercised under senior management
share option plan 0.35 6.4
Share-based compensation - 0.8
-------------------------------------------------------------------------
December 31, 2008 112.21 $1,081.4
Issued for cash under purchase plans 0.10 2.0
Options exercised under senior management
share option plan - 0.1
Share-based compensation - 0.1
-------------------------------------------------------------------------
March 31, 2009 112.31 $1,083.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
As at April 22, 2009 the number of issued and outstanding common shares
was 112.37 million.
Liquidity and Capital Resources
North American financial markets experienced significant volatility
beginning in 2007 and continuing throughout Q1 2009 due to concerns related to
the state of both the global debt market and economy. In the past, the company
has been able to access capital markets and expects that access to capital
markets to continue, although possibly at a higher cost given the current
state of financial markets. NSPI and BHE are each capable of paying dividends
to Emera provided they do not breach their debt to capitalization ratios after
giving effect to the dividend payment.
The pressure on global debt markets may affect the credit worthiness of
certain counterparties of Emera and its subsidiaries. Counterparty credit risk
is mitigated through established credit management techniques, including
conducting financial and other assessments to establish and monitor a
counterparty's creditworthiness, setting exposure limits, monitoring exposures
against these limits, utilizing master netting arrangements and obtaining
financial assurances where warranted. In general, financial assurances include
guarantees, letters of credit and cash.
The company generates cash primarily through its operations in regulated
utilities involving the generation, transmission and distribution of
electricity. NSPI's and BHE's customer bases are diversified by both sales
volumes and revenues among residential, commercial, industrial and other
customers. Circumstances that could affect the company's ability to generate
cash include general economic downturns in our markets, the loss of one or
more large customers, and regulatory decisions affecting customer rates. The
UARB approved a FAM that reduces NSPI's exposure to fuel price volatility
effective January 1, 2009, providing a mechanism for NSPI to recover these
fuel costs beginning in 2010.
In addition to internally generated funds, Emera and NSPI have in
aggregate access to $1.1 billion committed syndicated revolving bank lines of
credit, of which $446 million is undrawn and available as at March 31, 2009.
Emera has access to $600 million of this facility and NSPI has access to $500
million. NSPI has an active commercial paper program for up to $400 million,
of which outstanding amounts are 100% backed by the bank lines referred to
above and this results in an equal amount of that credit being considered
drawn.
Emera's and NSPI's revolving bank lines have a maturity date in June 2009
which can be extended annually for an additional 364 days with the approval of
the syndicated banks. Emera and NSPI have each provided a formal request to
its agent seeking extension approvals from the syndicated banks for each of
these revolving facilities. At each maturity date, Emera and NSPI have the
option to convert all amounts drawn on the bank credit line to a one year
non-revolving term credit.
In October 2008, the company negotiated an additional $200 million in a
committed non-revolving bank line of credit as a bridge facility for Brunswick
Pipeline. As at March 31, 2009, the facility was fully drawn at $200 million.
This facility matures in June 2009 and the company intends to refinance
Brunswick Pipeline with an extended term debt facility at that time.
BHE has a $60 million USD revolving bank line of which $17 million USD was
undrawn and available as at March 31, 2009. This facility matures in June
2010.
In December 2008, NSPI completed a $150 million medium-term note issue,
proceeds of which were used to pay down outstanding commercial paper debt. In
January 2009, NSPI completed a $50 million medium-term note issue, which was
also used to pay down outstanding short-term debt. On April 1, 2009, NSPI
redeemed the $125 million Series C preferred shares using short-term credit
facilities. In June 2009, NSPI has $125 million long-term notes maturing and
has sufficient capacity to refinance these notes in their entirety by drawing
upon its short-term credit facility or by issuing medium-term notes in the
public debt markets under NSPI's existing debt shelf prospectus. As at March
31, 2009, Emera and NSPI had debt shelf prospectuses in the amounts of $400
million and $200 million respectively.
As at March 31, 2009 Credit Line Undrawn and
millions of dollars Committed Utilized Available
-------------------------------------------------------------------------
NSPI $500.0 $133.2 $366.8
Emera 600.0 520.8 79.2
Emera bridge facility 200.0 200.0 0.0
BHE - in USD 60.0 43.0 17.0
-------------------------------------------------------------------------
NSPI issues commercial paper, 100% backed by the syndicated bank line of
credit, to finance short-term cash requirements and it had access to the
commercial paper market as required throughout Q1 2009.
Consolidated Cash Flow Highlights
Significant changes in the consolidated cash flow statements between March
31, 2009 and 2008 include:
Three months ended
March 31
millions of dollars 2009 2008 Explanation
-------------------------------------------------------------------------
Cash and cash
equivalents,
beginning of period $12.2 $26.4
Provided by (used in):
Operating activities 46.6 45.9 In 2009 and 2008, cash earnings
partially offset by increased
non-cash working capital.
Investing activities (60.4) (130.4) In 2009, capital spending,
including Brunswick Pipeline.
In 2008, capital spending,
including Brunswick Pipeline,
and acquisition of a 7.35%
interest in OpenHydro.
Financing activities 13.2 84.9 In 2009, increased debt levels,
partially offset by dividends
on common shares.
In 2008, increased debt levels,
partially offset by dividends
on common shares and decreased
accounts receivable
securitized.
-------------------------------------------------------------------------
Cash and cash
equivalents, end of
period $11.6 $26.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Financial and Commodity Instruments
The UARB approved the implementation of a FAM effective January 1, 2009,
reducing NSPI's exposure to price volatility and providing a mechanism for
NSPI to recover actual fuels costs if different than what is recovered from
customers in rates. The first rate adjustment under the FAM will occur January
1, 2010.
The company uses various financial instruments to hedge its customers'
exposure to foreign exchange, interest rate, and commodity price risks. In
addition, the company has contracts for the physical purchase and sale of
natural gas, and physical and financial contracts held-for-trading ("HFT").
Collectively these contracts are referred to as derivatives.
The company recognizes the fair value of all its derivatives on its
balance sheet, except for non-financial derivatives that qualify and are
designated as contracts held for normal purchase or sale.
Derivatives that meet stringent documentation requirements, and can be
proven to be effective both at the inception and over the term of the
instrument qualify for hedge accounting. Specifically, for cash flow hedges,
the effective portion of the change in the fair value of derivatives is
deferred to other comprehensive income and recognized in earnings in the same
period the related hedged item is realized. Any ineffective portion of the
change in the fair value of derivatives is recognized in net earnings in the
reporting period.
For fair value hedges, the change in fair value of the hedging derivatives
and the hedged item are recorded in net earnings. Any ineffective portion of
the change in fair value is recognized in net earnings in the reporting
period.
Where the documentation or effectiveness requirements are not met, the
derivative instruments are recognized at fair value with any changes in fair
value recognized in net earnings in the reporting period.
HFT derivatives are recorded on the balance sheet at fair value, with
changes normally recorded in net earnings of the period, unless deferred as a
result of regulatory accounting.
Hedging Items Recognized on the Balance Sheet
The company has the following categories on the balance sheet related to
derivatives in valid hedging relationships:
March 31 December 31
millions of dollars 2009 2008
-------------------------------------------------------------------------
Inventory $1.6 $(7.1)
Derivatives in a valid hedging relationship 11.8 (4.7)
Long-term debt 0.3 0.4
-------------------------------------------------------------------------
$13.7 $(11.4)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Hedging Impact Recognized in Earnings
The company recognized in net earnings the following gains and losses
related to effective portion of hedging relationships:
Three months ended
millions of dollars March 31
-------------------------------------------------------------------------
2009 2008
-------------------------------------------------------------------------
Fuel and purchased power decrease $18.1 $10.9
Financing charges increase (1.4) -
-------------------------------------------------------------------------
Effectiveness gains $16.7 $10.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The effectiveness gains and losses reflected in the above table would be
offset in net earnings by the change in the hedged item realized in the
period.
The company recognized in net earnings the following gains and losses
related to the ineffective portion of hedging relationships:
Three months ended
millions of dollars March 31
-------------------------------------------------------------------------
2009 2008
-------------------------------------------------------------------------
Fuel and purchased power increase $(13.9) $(0.1)
Financing charges increase (0.5) -
-------------------------------------------------------------------------
Ineffectiveness losses $(14.4) $(0.1)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Held-for-trading Items Recognized on the Balance Sheet
The company has recognized a net unrealized fair value of HFT derivatives
liability of $0.5 million as at March 31, 2009 (December 31, 2008 - $85.7
million asset) on the balance sheet.
Held-for-trading Derivatives Gains (Losses) Recognized in Earnings
The company has recognized the following realized and unrealized gains and
losses with respect to HFT derivatives in earnings:
Three months ended
millions of dollars March 31
-------------------------------------------------------------------------
2009 2008
-------------------------------------------------------------------------
Electric revenue increase - $0.8
Other revenue (decrease) increase $(7.0) 8.5
Fuel and purchased power decrease - 2.0
Financing charges increase (0.1) (0.2)
-------------------------------------------------------------------------
Held-for-trading derivative (losses) gains $(7.1) $11.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
In determining the fair value of derivative financial instruments, the
company has relied on quoted market prices as at the reporting date. The
company has a derivative, a power swap, where no observable market exists,
therefore modeling techniques are employed using assumptions reflective of
current market rates, yield curves and forward prices as applicable, to
interpolate certain prices.
Transactions with Related Parties
In the ordinary course of business, Emera purchased natural gas
transportation capacity totaling $7.0 million (2008 - $4.7 million) during the
three months ended March 31, 2009 from the M&NP, an investment under
significant influence of the company. The amount is recognized in fuel for
generation and purchased power or netted against energy marketing margin in
other revenue, and is measured at the exchange amount. As at March 31, 2009
the amount payable to the related party is $3.3 million (December 31, 2008 -
$4.1 million), is non-interest bearing and is under normal credit terms.
Changes in Accounting Policies
The Canadian Institute of Chartered Accountants ("CICA") has issued new
accounting standard 3064 Goodwill and Intangibles, various new accounting
standards related to accounting for rate-regulated operations, and Emerging
Issues Committee Abstract of Issue Discussed 173 Credit Risk and the Fair
Value of Financial Assets and Financial Liabilities ("EIC-173"), which are
applicable to Emera's 2009 fiscal year. The following provides more
information on each change.
Goodwill and Intangibles: Goodwill requirements have not changed. The
requirements for intangible assets now clarify that costs may only be deferred
when they relate to an item that meets the definition of an asset. An
intangible asset must be identifiable; be a resource over which the company
has control; generate probable future economic benefits; and have a reliably
measurable cost. The Company has applied the new standard retrospectively with
restatement of prior periods, which resulted in a decrease to property, plant
and equipment of $86.2 million as at January 1, 2009 (January 1, 2008 - $76.0
million) a decrease to construction work in progress of $15.6 million as at
January 1, 2009 (January 1, 2008 - $7.8 million), and an increase in
intangibles of $101.8 million as at January 1, 2009 (January 1, 2008 - $83.8
million).
Intangibles are comprised of the following:
As at
millions of dollars March 31, 2009
-------------------------------------------------------------------------
Accumulated Net
Cost Amortization Book Value
-------------------------------------------------------------------------
Transmission $72.9 $15.2 $57.7
Distribution 24.2 6.5 17.7
Other 50.9 22.4 28.5
-------------------------------------------------------------------------
$148.0 $44.1 $103.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
As at
millions of dollars December 31, 2008
-------------------------------------------------------------------------
Accumulated Net
Cost Amortization Book Value
-------------------------------------------------------------------------
Transmission $72.2 $15.1 $57.1
Distribution 23.7 6.4 17.3
Other 48.5 21.1 27.4
-------------------------------------------------------------------------
$144.4 $42.6 $101.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Amortization expense for the three months ended March 31, 2009 was $1.2
million (March 31, 2008 - $1.0 million). Straight line amortization method was
used. The amortization period is 64 years.
Rate-Regulated Operations: These new standards include removing the
temporary exemption in Section 1100 Generally Accepted Accounting Principles
pertaining to the application of the section to the recognition and
measurement of assets and liabilities arising from rate regulation; and
amending Section 3465 Income Taxes to require the recognition of future income
tax assets and liabilities for the amount of future income taxes expected to
be included in future rates and recovered from or paid to future customers. As
a result of the new standards, Emera recognized future income tax assets and
liabilities of its wholly-owned regulated subsidiaries. In accordance with the
Company's regulated accounting policies covering income taxes, Emera deferred
any future income taxes to a regulatory asset or liability where the future
income taxes are expected to be included in future rates. The Company has
applied the new standard retrospectively without restatement of prior periods,
which resulted in the following increases:
As at
millions of dollars January 1, 2009
-------------------------------------------------------------------------
Assets
Current assets
Future income tax assets $28.7
-------------------------------------------------------------------------
Other assets 33.6
-------------------------------------------------------------------------
$62.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
-------------------------------------------------------------------------
Future income tax liabilities $62.3
-------------------------------------------------------------------------
$62.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Financial Instruments: EIC-173 requires that a company take into account
its own credit risk and the credit risk of the counterparty in determining the
fair value of financial assets and financial liabilities. The Company has
applied the new requirements retrospectively without restatement of prior
periods, the effect of which was immaterial.
The above accounting policy changes did not affect earnings.
Future Accounting Policy Changes
Changeover to International Financial Reporting Standards ("IFRS"): In
April 2008, the CICA issued an IFRS Omnibus Exposure Draft which proposes that
publicly accountable enterprises be required to apply IFRS effective for
Emera's 2011 fiscal year with consistent comparative information required for
2010. The company is currently assessing the effect of IFRS on its accounting
policies, information systems, internal controls, financial statements, and
other business activities. Due to anticipated changes in IFRS during the
transition period and up to January 1, 2011, and the uncertainty around the
future of rate regulated accounting, the company is not in a position to
determine the impact on its financial results at this time.
In order to prepare for the transition, Emera has established a formal
project and governance structure which includes a steering committee
consisting of senior management from finance, information technology, and
human resources. Quarterly updates are provided to the Audit Committee. Emera
has engaged an external advisor to assist with the changeover to IFRS.
Summary of Quarterly Reports
For the quarter ended
millions of dollars (except earnings per common share)
-------------------------------------------------------------------------
Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2
2009 2008 2008 2008 2008 2007 2007 2007
-------------------------------------------------------------------------
Total
reve-
nues $403.7 $337.3 $295.8 $317.6 $381.2 $343.9 $310.3 $325.4
-------------------------------------------------------------------------
Net
earnings
appli-
cable
to
common
shares 62.8 25.3 6.5 42.9 69.4 36.6 40.9 34.1
-------------------------------------------------------------------------
Earnings
per
common
share -
basic 0.56 0.23 0.05 0.39 0.62 0.33 0.37 0.30
-------------------------------------------------------------------------
Earnings
per
common
share -
diluted 0.53 0.22 0.05 0.37 0.58 0.32 0.35 0.30
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Quarterly total revenues and net earnings applicable to common shares are
affected by seasonality, with Q1 and Q4 the strongest periods, reflecting
colder weather and fewer daylight hours at those times of year. Quarterly
results are also affected by items outlined in the Significant Items section.
Financial Statements
Consolidated Statements of Earnings (Unaudited)
-------------------------------------------------------------------------
For the
millions of dollars (except earnings per Three months ended
common share) March 31
-------------------------------------------------------------------------
2009 2008
-------------------------------------------------------------------------
Revenue
Electric $397.4 $362.0
Other 6.3 19.2
-------------------------------------------------------------------------
403.7 381.2
-------------------------------------------------------------------------
Cost of operations
Fuel for generation and purchased power 165.5 123.6
Fuel adjustment (note 6) (5.8) -
Operating, maintenance and general 68.9 61.1
Provincial, state, and municipal taxes 12.8 12.1
Depreciation 40.8 37.3
Regulatory amortization 6.6 6.8
-------------------------------------------------------------------------
288.8 240.9
-------------------------------------------------------------------------
114.9 140.3
Equity earnings 4.8 2.9
Financing charges (note 7) 36.1 35.6
-------------------------------------------------------------------------
83.6 107.6
Income taxes (note 8) 20.3 38.2
-------------------------------------------------------------------------
63.3 69.4
Non-controlling interest (note 9) 0.5 -
-------------------------------------------------------------------------
Net earnings applicable to common shares $62.8 $69.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per common share - basic $0.56 $0.62
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per common share - diluted $0.53 $0.58
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to the unaudited consolidated financial
statements.
Weighted average number of common shares
outstanding (millions)
- basic 112.3 111.6
- diluted (note 11) 125.8 124.9
Consolidated Balance Sheets (Unaudited)
-------------------------------------------------------------------------
December 31
2008
As at March 31 (restated -
millions of dollars 2009 note 3)
-------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $11.6 $12.2
Restricted cash 0.3 0.8
Accounts receivable 409.3 385.1
Income tax receivable 5.9 15.7
Inventory 136.9 131.2
Prepaid expenses 25.6 8.3
Future income tax assets (notes 6, 8) 31.5 7.1
Derivatives in a valid hedging relationship 55.8 48.4
Held-for-trading derivatives 29.8 73.0
-------------------------------------------------------------------------
706.7 681.8
-------------------------------------------------------------------------
Long-term receivable 62.3 56.4
-------------------------------------------------------------------------
Derivatives in a valid hedging relationship 138.5 116.7
-------------------------------------------------------------------------
Held-for-trading derivatives 16.8 64.8
-------------------------------------------------------------------------
Other assets (note 6) 467.5 420.1
-------------------------------------------------------------------------
Future income tax assets (note 8) 18.1 17.6
-------------------------------------------------------------------------
Goodwill 105.2 102.0
-------------------------------------------------------------------------
Intangibles 103.9 101.8
-------------------------------------------------------------------------
Investments subject to significant influence 329.7 317.6
-------------------------------------------------------------------------
Available-for-sale investments 16.3 16.2
-------------------------------------------------------------------------
Property, plant and equipment 2,902.5 2,873.5
Construction work in progress 518.4 500.9
-------------------------------------------------------------------------
3,420.9 3,374.4
-------------------------------------------------------------------------
$5,385.9 $5,269.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Current portion of long-term debt $131.5 $131.4
Current portion of preferred shares issued
by subsidiary 125.0 125.0
Short-term debt 225.0 157.9
Accounts payable and accrued charges 275.9 307.1
Income tax payable 10.0 7.9
Dividends payable 3.2 3.2
Derivatives in a valid hedging relationship 107.8 109.8
Held-for-trading derivatives 42.5 37.8
-------------------------------------------------------------------------
920.9 880.1
-------------------------------------------------------------------------
Derivatives in a valid hedging relationship 74.7 60.0
-------------------------------------------------------------------------
Held-for-trading derivatives 4.6 14.3
-------------------------------------------------------------------------
Future income tax liabilities (note 8) 212.9 110.3
-------------------------------------------------------------------------
Asset retirement obligations 89.2 88.0
-------------------------------------------------------------------------
Other liabilities 145.8 236.7
-------------------------------------------------------------------------
Long-term debt (note 10) 2,144.1 2,159.2
-------------------------------------------------------------------------
Preferred shares issued by subsidiary 135.0 135.0
-------------------------------------------------------------------------
Non-controlling interest (note 9) 41.4 39.6
-------------------------------------------------------------------------
Shareholders' equity
Common shares (note 11) 1,083.6 1,081.4
Contributed surplus 3.6 3.4
Accumulated other comprehensive income (35.0) (69.2)
Retained earnings 565.1 530.6
-------------------------------------------------------------------------
1,617.3 1,546.2
-------------------------------------------------------------------------
$5,385.9 $5,269.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Changes in accounting policy (note 3), Subsequent events (note 13)
See accompanying notes to the unaudited consolidated financial
statements.
Approved on behalf of the Board of Directors
"Derek Oland" "Christopher Huskilson"
Derek Oland, Chairman Christopher Huskilson, President and
Chief Executive Officer
Consolidated Statements of Cash Flow (Unaudited)
-------------------------------------------------------------------------
For the Three months ended
millions of dollars March 31
-------------------------------------------------------------------------
2009 2008
-------------------------------------------------------------------------
Operating activities
Net earnings applicable to common shares $62.8 $69.4
Non-cash items:
Depreciation 40.8 37.3
Amortization of deferred charges 3.4 3.4
Equity earnings (4.8) (2.9)
Regulatory amortization 6.6 6.8
Allowance for funds used during construction (10.3) (1.6)
Future income taxes 2.0 7.1
Post-retirement benefits (1.0) 2.4
Non-controlling interest 0.5 -
Other non-cash operating items 11.8 (9.9)
Other cash operating items 4.1 0.5
-------------------------------------------------------------------------
115.9 112.5
Change in non-cash operating working
capital (note 12) (69.3) (66.6)
-------------------------------------------------------------------------
Net cash provided by operating activities 46.6 45.9
-------------------------------------------------------------------------
Investing activities
Property, plant and equipment (55.9) (109.9)
Intangibles (2.1) (2.5)
Acquisitions - (15.4)
Retirement spending net of salvage (1.3) (1.0)
Decrease in restricted cash 0.5 0.2
Investments (1.6) (1.8)
-------------------------------------------------------------------------
Net cash used in investing activities (60.4) (130.4)
-------------------------------------------------------------------------
Financing activities
Retirement of long-term debt - (0.7)
Issuance of long-term debt 50.0 -
(Decrease) increase in short-term debt (12.2) 133.2
Issuance of common shares 2.1 2.9
Dividends on common shares (28.3) (26.5)
Accounts receivable securitization - (25.0)
Other financing 1.6 1.0
-------------------------------------------------------------------------
Net cash provided by financing activities 13.2 84.9
-------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents (0.6) 0.4
Cash and cash equivalents, beginning of period 12.2 26.4
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $11.6 $26.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash and cash equivalents consists of:
Cash $10.2 $5.1
Cash equivalents 1.4 21.7
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $11.6 $26.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental disclosure of cash paid:
Interest $29.2 $31.9
Income and capital taxes $8.9 $18.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to the unaudited consolidated financial
statements.
Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
-------------------------------------------------------------------------
For the three months Accumula-
ended March 31, 2009 ted Other
millions of dollars Compre- Total
Contri- hensive AOCI and
Common buted Income Retained Retained
Shares Surplus ("AOCI") Earnings Earnings
-------------------------------------------------------------------------
Balance,
December 31, 2008 $1,081.4 $3.4 $(69.2) $530.6 $461.4
-------------------------------------------------------------------------
Comprehensive Income:
Net earnings applicable
to common shares - - - 62.8 62.8
Net gain on derivatives
in a valid hedging
relationship - - 3.3 - 3.3
Reclassification of
hedging losses
included in income - - 6.9 - 6.9
Reclassification of
hedging losses
included in inventory - - 8.6 - 8.6
Reclassification of
hedging gains
included in
construction work in
progress - - (2.1) - (2.1)
Unrealized gain on
translation of self-
sustaining foreign
operations - - 17.5 - 17.5
-------------------------------------------------------------------------
Total comprehensive
income - - 34.2 62.8 97.0
-------------------------------------------------------------------------
Dividends declared on
common shares - - - (28.3) (28.3)
Common shares issued
under purchase plans 2.0 - - - -
Senior management stock
options exercised 0.1 - - - -
Stock option expense - 0.2 - - -
Other share-based
compensation 0.1 - - - -
-------------------------------------------------------------------------
Balance,
March 31, 2009 $1,083.6 $3.6 $(35.0) $565.1 $530.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the three months Total
ended March 31, 2008 Contri- AOCI and
millions of dollars Common buted Retained Retained
Shares Surplus AOCI Earnings Earnings
-------------------------------------------------------------------------
Balance,
December 31, 2007 $1,066.2 $3.0 $(209.0) $499.6 $290.6
-------------------------------------------------------------------------
Accounting policy
change - - - (3.3) (3.3)
-------------------------------------------------------------------------
Comprehensive Income:
Net earnings applicable
to common shares - - - 69.4 69.4
Net gain on derivatives
in a valid hedging
relationship - - 79.3 - 79.3
Reclassification of
hedging gains
included in income - - (11.1) - (11.1)
Reclassification of
hedging losses
included in inventory - - 1.8 - 1.8
Unrealized gain on
translation of self-
sustaining foreign
operations - - 15.4 - 15.4
Other - - (0.2) - (0.2)
-------------------------------------------------------------------------
Total comprehensive
income - - 85.2 69.4 154.6
-------------------------------------------------------------------------
Dividends declared on
common shares - - - (26.5) (26.5)
Common shares issued
under purchase plans 2.0 - - - -
Senior management stock
options exercised 1.0 (0.1) - - -
Stock option expense - 0.3 - - -
Other share-based
compensation 0.1 - - - -
-------------------------------------------------------------------------
Balance,
March 31, 2008 $1,069.3 $3.2 $(123.8) $539.2 $415.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to the unaudited consolidated financial
statements.
Notes to the Interim Unaudited Consolidated Financial Statements
March 31, 2009
1. Basis of Presentation
The disclosures in these unaudited interim consolidated financial
statements do not conform in all respects to the requirements of Canadian
Generally Accepted Accounting Principles for annual audited financial
statements and should be read in conjunction with Emera Inc.'s annual
consolidated financial statements as at and for the year ended December 31,
2008.
"Company", "Emera Inc." and "Emera" refer to Emera Inc. and all of its
consolidated subsidiaries and affiliates.
These consolidated financial statements follow the same accounting
policies and methods of computation as Emera Inc.'s annual audited
consolidated financial statements as at and for the year ended December 31,
2008, with the exception of the accounting policy changes disclosed in note 3.
2. Seasonal Nature of Operations
Interim results are not necessarily indicative of results for the full
year due primarily to seasonal factors. Sales and related production vary
significantly over the year, with Q1 and Q4, the strongest periods, reflecting
colder weather and fewer daylight hours in the winter season.
3. Changes in Accounting Policy
The Canadian Institute of Chartered Accountants ("CICA") has issued new
accounting standard 3064 Goodwill and Intangibles, various new accounting
standards related to accounting for rate-regulated operations, and Emerging
Issues Committee Abstract of Issue Discussed 173 Credit Risk and the Fair
Value of Financial Assets and Financial Liabilities ("EIC-173"), which are
applicable to Emera's 2009 fiscal year. The following provides more
information on each change.
Goodwill and Intangibles: Goodwill requirements have not changed. The
requirements for intangible assets now clarify that costs may only be deferred
when they relate to an item that meets the definition of an asset. An
intangible asset must be identifiable; be a resource over which the company
has control; generate probable future economic benefits; and have a reliably
measurable cost. The Company has applied the new standard retrospectively with
restatement of prior periods, which resulted in a decrease to property, plant
and equipment of $86.2 million as at January 1, 2009 (January 1, 2008 - $76.0
million) a decrease to construction work in progress of $15.6 million as at
January 1, 2009 (January 1, 2008 - $7.8 million), and an increase in
intangibles of $101.8 million as at January 1, 2009 (January 1, 2008 - $83.8
million).
Intangibles are comprised of the following:
As at
millions of dollars March 31, 2009
-------------------------------------------------------------------------
Accumulated Net
Cost Amortization Book Value
-------------------------------------------------------------------------
Transmission $72.9 $15.2 $57.7
Distribution 24.2 6.5 17.7
Other 50.9 22.4 28.5
-------------------------------------------------------------------------
$148.0 $44.1 $103.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
As at
millions of dollars December 31, 2008
-------------------------------------------------------------------------
Accumulated Net
Cost Amortization Book Value
-------------------------------------------------------------------------
Transmission $72.2 $15.1 $57.1
Distribution 23.7 6.4 17.3
Other 48.5 21.1 27.4
-------------------------------------------------------------------------
$144.4 $42.6 $101.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Amortization expense for the three months ended March 31, 2009 was $1.2
million (March 31, 2008 $1.0 million). Straight line amortization method was
used. The amortization period is 64 years.
Rate-Regulated Operations: These new standards include removing the
temporary exemption in Section 1100 Generally Accepted Accounting Principles
pertaining to the application of the section to the recognition and
measurement of assets and liabilities arising from rate regulation; and
amending Section 3465 Income Taxes to require the recognition of future income
tax assets and liabilities for the amount of future income taxes expected to
be included in future rates and recovered from or paid to future customers. As
a result of the new standards, Emera recognized future income tax assets and
liabilities of its wholly-owned regulated subsidiaries. In accordance with the
Company's regulated accounting policies covering income taxes, Emera deferred
any future income taxes to a regulatory asset or liability where the future
income taxes are expected to be included in future rates. The Company has
applied the new standard retrospectively without restatement of prior periods,
which resulted in the following increases:
As at
millions of dollars January 1, 2009
-------------------------------------------------------------------------
Assets
Current assets
Future income tax assets $28.7
-------------------------------------------------------------------------
Other assets 33.6
-------------------------------------------------------------------------
$62.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Future income tax liabilities $62.3
-------------------------------------------------------------------------
$62.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Financial Instruments: EIC-173 requires that a company take into account
its own credit risk and the credit risk of the counterparty in determining the
fair value of financial assets and financial liabilities. The Company has
applied the new requirements retrospectively without restatement of prior
periods, the effect of which was immaterial.
The above accounting policy changes did not affect earnings.
Future Accounting Policy Changes
Changeover to International Financial Reporting Standards ("IFRS"): In
April 2008, the CICA issued an IFRS Omnibus Exposure Draft which proposes that
publicly accountable enterprises be required to apply IFRS effective for
Emera's 2011 fiscal year with consistent comparative information required for
2010. The Company is currently assessing the effect of IFRS on its financial
statements and developing its changeover plan.
4. Segment Information
-------------------------------------------------------------------------
Bangor
Nova Hydro-
millions of Scotia Electric
dollars Power Inc. Company Other(x) Total
-------------------------------------------------------------------------
For the three
months ended
March 31, 2009:
Revenues from
external customers $350.8 $44.2 $8.7 $403.7
Net inter-segment
revenues (expenses) 16.6 (0.2) (16.4) -
Net earnings
applicable to
common shares 52.5 6.4 3.9 62.8
As at March 31, 2009
Total assets 3,518.6 842.5 1,024.8 5,385.9
-------------------------------------------------------------------------
For the three
months ended
March 31, 2008:
Revenues from
external customers $326.0 $35.9 $19.3 $381.2
Net inter-segment
revenues (expenses) 12.6 (0.2) (12.4) -
Net earnings
applicable to
common shares 57.9 5.5 6.0 69.4
As at March 31, 2008
Total assets 3,249.5 635.6 535.6 4,420.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(x) Other includes corporate activities and adjustments to reconcile to
consolidated balances.
5. Employee Future Benefits
Emera maintains contributory defined-benefit and defined-contribution
pension plans, which cover substantially all of its employees, and plans that
provide non-pension benefits for its retirees. The Company's estimated total
benefit cost, related to these plans, for the three month period ended March
31, 2009 is $5.4 million (2008 - $8.5 million).
6. Fuel Adjustment
The Nova Scotia Utility and Review Board ("UARB") approved the
implementation of a Fuel Adjustment Mechanism ("FAM") in Nova Scotia Power
Inc.'s ("NSPI") 2009 General Rate Decision effective January 1, 2009. As at
March 31, 2009, the difference between actual fuel costs and amounts recovered
from customers has been deferred to a FAM regulatory asset in other assets.
The FAM is subject to an incentive portion with NSPI retaining or absorbing
10% of the over or under-recovered amount less the difference between the
incentive threshold and the base fuel cost to a maximum of $5 million. The
Company has recognized a future income tax expense related to the fuel
adjustment based on NSPI's applicable statutory income tax rate. The FAM is
recognized by NSPI as a regulatory asset as future rates will be adjusted to
provide recovery from customers in the following year. As at March 31, 2009,
NSPI's FAM regulatory asset was $5.7 million (2008 - nil), and future income
tax liability was $1.9 million (2008 - nil). In the absence of UARB approval,
fuel costs would not have been deferred and earnings for the three months
ended March 31, 2009 would be $5.7 million ($3.8 million after-tax) lower
(2008 - nil).
7. Financing Charges
Financing charges consist of the following:
Three months ended
For the March 31
-------------------------------------------------------------------------
millions of dollars 2009 2008
-------------------------------------------------------------------------
Interest - long-term debt $28.3 $27.0
- short-term debt 4.8 4.1
Preferred share dividends paid by subsidiary 3.5 3.5
Amortization of defeasance cost 3.0 3.1
Amortization of debt financing costs 0.5 0.4
Allowance for funds used during construction (10.3) (1.6)
Foreign exchange losses (gains) 6.3 (0.9)
-------------------------------------------------------------------------
$36.1 $35.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
8. Income Taxes
The income tax provision differs from that computed using the statutory
rates for the following reasons:
Three months ended
For the March 31
-------------------------------------------------------------------------
millions of dollars 2009 2008
-------------------------------------------------------------------------
Earnings before
taxes $83.6 $107.6
Income taxes, at
statutory rates 29.3 35.0% 38.2 35.5%
Unrecorded future
income taxes on
regulated earnings - - (4.5) (4.2)
Future income taxes
on regulated
earnings deferred
to regulatory
assets (10.1) (12.0) - -
Net tax effect of
equity earnings (1.3) (1.5) (1.0) (0.9)
Non-deductible
preferred share
dividends 1.2 1.4 1.2 1.1
Other 1.2 1.4 4.3 4.0
-------------------------------------------------------------------------
20.3 24.3% 38.2 35.5%
Income taxes -
current 18.3 31.2
Income taxes -
future (note 6) $2.0 $7.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The future income tax assets and liabilities comprise the following:
Current portion Long-term portion
----------------------------------------------------
As at March 31 December 31 March 31 December 31
millions of dollars 2009 2008 2009 2008
-------------------------------------------------------------------------
Future income tax
assets:
Tax loss carry
forwards $0.6 $1.9 $14.0 $13.2
Property, plant and
equipment - - 1.2 1.4
AOCI 22.2 - - -
Other 8.7 5.2 2.9 3.0
-------------------------------------------------------------------------
$31.5 $7.1 $18.1 $17.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Future income tax
liabilities:
Property, plant and
equipment - - $225.0 $116.1
Deferred charges - - 6.8 7.1
Deferred credits - - 1.4 (10.6)
Tax loss carry
forwards - - (21.2) (5.4)
AOCI - - 37.5 -
Asset retirement
obligations - - (41.0) -
Other - - 4.4 3.1
-------------------------------------------------------------------------
- - $212.9 $110.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Included in the amounts above is a net future income tax liability of
$68.6 million relating to Emera's wholly-owned regulated subsidiaries. The
offset to this amount has been recorded as a regulatory asset in other assets.
These amounts include a gross up to reflect the income tax associated with
future revenues required to fund these net future income tax liabilities. See
note 3 for additional information.
9. Acquisitions
ICD Utilities Limited ("ICDU")
In September 2008, Emera purchased 50% of the shares of ICDU of the
Bahamas for $42.3 million USD ($45.3 million CAD). ICDU owns 50% of Grand
Bahama Power Company Limited ("GBPC") which is a vertically integrated utility
serving 19,000 customers on Grand Bahama Island.
GBPC has 137 megawatts of installed oil-fired generating capacity. The
Grand Bahama Port Authority Limited regulates the utility and has granted GBPC
a licensed, regulated and exclusive franchise to produce, transmit, and
distribute electricity on the island until 2054. There is a fuel pass through
mechanism and flexible tariff adjustment policies to ensure that costs are
recovered and a reasonable return is earned.
The acquisition has been accounted for under the purchase method of
accounting as Emera has determined it has control of ICDU, and accordingly,
the results of operations since the date of acquisition have been included in
the consolidated statements of earnings. ICDU is included in the segment
"Other" in note 4 Segment Information. The following summarizes the
transaction:
Net assets acquired millions of dollars
-------------------------------------------------------------------------
Long-term investment $78.8
Non-controlling interest (33.5)
-------------------------------------------------------------------------
Cash paid $45.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The purchase price allocation has not yet been finalized as the Company
has not completed the valuation of the long-term investment in GBPC.
10. Long-Term Debt
As of March 31, 2009, long-term debt includes $1.4 million (December 31,
2008 - $2.2 million) in capital lease obligations.
11. Common Shares
As at March 31, 2009 there were 112.3 million (December 31, 2008 - 112.2
million) issued and outstanding common shares, 4.5 million (December 31, 2008
- 4.5 million) common shares reserved and available for issuance under the
senior management stock option plan, and 0.8 million (December 31, 2008 - 0.8
million) common shares reserved and available for issuance under the employee
common share purchase plan.
During the three months ended March 31, 2009, the Company issued 0.1
million (2008 - 0.1 million) common shares. Common shares were issued through
the employee common share purchase plan, the senior management stock option
plan, and the dividend reinvestment plan.
Diluted weighted average number of common shares outstanding includes the
conversion of preferred shares of NSPI, restricted share units, deferred share
units, and senior management share options.
12. Cash Flow Information
The change in non-cash operating working capital consists of the
following:
Three months ended
For the March 31
-------------------------------------------------------------------------
millions of dollars 2009 2008
-------------------------------------------------------------------------
Increase in accounts receivable $(23.6) $(20.8)
Increase in inventory (5.5) (23.7)
Increase in prepaid expenses (15.4) (8.2)
Increase in long-term receivables (6.0) (15.6)
Changes in posted margin included in accounts
payable and accounts receivable 2.4 (24.7)
(Decrease) increase in other accounts payable
and accrued charges (33.1) 11.8
Increase in income tax payable 11.9 14.6
-------------------------------------------------------------------------
$(69.3) $(66.6)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
13. Subsequent Events
Algonquin Power Income Fund: In April 2009, Emera signed an agreement
giving it rights to acquire a 9.9% interest in Algonquin Power Income Fund
("APIF") through a private placement of 8.5 million APIF units for a purchase
price of $27.6 million. Under the transaction agreements, Mr. C.G. Huskilson,
President and Chief Executive Officer, Emera Inc., will be nominated for
election to the Board of Trustees of APIF at the next general meeting of APIF
unitholders. Emera also has rights to acquire a further 5% of APIF over the
next 2 years. Emera and APIF have committed to acquire the electricity
distribution and related generation assets of Sierra Pacific Power Company for
approximately USD $116 million from NV Energy. This California-based utility
currently provides electric distribution service to approximately 47,000
customers in the Lake Tahoe region. Under the terms of the agreement, Emera
and APIF will jointly own and operate the utility through a newly formed
entity, California Pacific Electric Company ("California Pacific"). Emera's
50% investment in the common shares of California Pacific will be
approximately USD $27 million. This transaction is subject to approval by the
California Public Utilities Commission which is expected in 2010.
The purchase of the 8.5 million units of APIF will happen concurrently
with the closing of the California Pacific transaction and combined these
transactions are expected to add approximately $6 to $7 million to Emera's
annual consolidated net earnings. Emera will finance these acquisitions with
existing credit facilities.
Preferred shares of subsidiary: On April 1, 2009, NSPI redeemed its
outstanding Cumulative Redeemable First Preferred Shares, Series C for a
redemption price of $25 per share for a total of $125 million.
14. Comparative Information
Certain of the comparative figures have been reclassified to conform to
the consolidated financial statement presentation adopted for 2009.