Cash Flow Improves Substantially
HALIFAX, May 9 /CNW/ - (EMA-TSX): Emera Inc.'s consolidated net earnings
were $43.6 million in Q1 2006, compared to $48.3 million for the same period
in 2005. Net cash provided by operating activities improved substantially, to
$69.1 million in Q1 2006, compared to $18.0 million in the first quarter of
2005. Earnings per share were $0.40, compared to $0.44 in 2005.
"We're gaining a more solid financial footing in 2006," said Chris
Huskilson, President and CEO of Emera. "Our goal with our regulated businesses
is to provide returns that are reasonable and dependable."
Nova Scotia Power's contribution to consolidated earnings was
$3.4 million lower in Q1 2006, at $37.4 million, compared to $40.8 million in
Q1 2005. However, in Q1 2005, a portion of provincial grants and taxes and
income taxes, which would have otherwise been expensed, were deferred, pending
regulatory approval of new rates. Without that deferral, 2005 comparative
earnings would have been $15.3 million lower. Electricity margin (revenues
less fuel for generation and purchased power) was $26.9 million higher in Q1
2006 compared to Q1 2005, substantially due to three factors:
- higher allowed rates, effective April 2005 and mid-March 2006;
- sales and production volume decreases, reflecting the temporary
shutdown of a large industrial customer and warmer weather. This
resulted in a net favourable effect on electricity margin quarter over
quarter because the cost of peak electricity production is greater
than the average industrial selling price;
- increased proceeds from the resale of natural gas, reflecting the
renegotiation of NSPI's natural gas supply contract late in 2005.
Bangor Hydro Electric (BHE), Emera's electricity transmission and
distribution utility in Maine, contributed $3.7 million to consolidated net
earnings in Q1 2006, compared to $4.1 million in Q1 2005, reflecting a
stronger Canadian dollar.
Emera's Other operations contributed $2.5 million to net earnings in Q1
2006, compared to $3.4 million in Q1 2005. The addition of the Bear Swamp
hydro-electric facility in Q2 2005 added $1.8 million in earnings before
interest and taxes quarter over quarter. This was offset by lower energy
marketing margins, reflecting reduced activity due to warmer weather quarter
over quarter.
The increase in consolidated cash provided by operating activities
reflects improved earnings, and working capital changes.
About Emera Inc.
Emera Inc. (EMA-TSX) is an energy and services company with $4.0 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 580,000 customers.
Nova Scotia Power supplies over 95% of the electric generation, transmission
and distribution in Nova Scotia. Bangor Hydro provides electricity
transmission and distribution service to 110,000 customers in eastern Maine.
Emera's other investments include a 12.9% interest in the Maritimes &
Northeast Pipeline and Emera Energy Services which manages energy assets on
behalf of third parties and provides related services. Visit Emera on the web
at www.emera.com.
Teleconference Call
Emera is holding a teleconference tomorrow, May 10, 2006, at 10:00 AM
Atlantic (9:00 AM Eastern, 6:00 AM Pacific) to discuss the Q1, 2006 financial
results. Analysts and other interested parties wanting to participate in the
call should dial 1-866-898-9626 (in Toronto 416-340-2216) 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 3184792 followed by the number sign (available until midnight,
Monday, May 15). The teleconference will also be web cast live at
www.emera.com and available for playback for one year.
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).
Management's Discussion & Analysis
As at May 9, 2006
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 2006 relative to 2005, and its
financial position at March 31, 2006 relative to December 31, 2005. Certain
factors that may impact 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.
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, 2006, and the Emera Inc. MD&A
and annual audited consolidated financial statements and supporting notes as
at and for the year ended December 31, 2005. Emera follows Canadian Generally
Accepted Accounting Principles ("GAAP"). Emera's subsidiary, Nova Scotia Power
Inc.'s accounting policies are subject to examination and approval by the Nova
Scotia Utility and Review Board. Emera's subsidiary, Bangor Hydro-Electric
Company's accounting policies are subject to examination and approval by the
Maine Public Utilities Commission and the Federal Energy Regulatory
Commission. The rate-regulated accounting policies of Nova Scotia Power and
Bangor Hydro may differ from GAAP for non rate-regulated companies.
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 Bangor Hydro
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 at SEDAR at www.sedar.com.
INTRODUCTION
The core business of Emera is electricity. The company owns and operates
two regulated electric utilities in northeastern North America. Both
businesses operate as monopolies in their service territories, and together
comprise approximately 95% of consolidated revenues:
- Nova Scotia Power Inc. ("NSPI") is an electricity generation,
transmission and distribution company, providing service to the vast
majority of the province of Nova Scotia. NSPI has $3.0 billion of
assets, and 470,000 customers. NSPI is a cost of service utility. As
such, regulated electricity rates are set to enable the company to
recover all prudently incurred costs, with an opportunity to earn a
prescribed rate of return. The company is regulated by the Nova Scotia
Utility and Review Board ("UARB").
- Bangor Hydro-Electric Company ("BHE") is an electricity transmission
and distribution company with $580 million of assets serving
110,000 customers in eastern Maine. BHE's transmission operations are
regulated by the Federal Energy Regulatory Commission ("FERC"), and
its distribution operations are regulated by the Maine Public
Utilities Commission ("MPUC"). BHE is a cost of service utility, with
an alternate rate plan ("ARP") for its distribution operations.
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 means that NSPI and
BHE can generally be expected to produce relatively stable earnings streams,
within regulated ranges. Nova Scotia and Maine are mature electricity markets,
with annual demand growth of approximately 2%. Accordingly, Emera must look
beyond its existing regulated electricity business to supplement organic
growth.
Emera's plan for growth seeks to add energy infrastructure assets to its
portfolio. The company is focused on building on its core electricity
business, specifically in regulated transmission and distribution operations,
and low risk generation facilities. The company's most recent acquisition was
Bear Swamp, a 600 megawatt ("MW") pumped storage hydro-electric facility in
northern Massachusetts, which was purchased in 2005.
Structure of MD&A
This quarterly MD&A has been prepared in accordance with the Canadian
Securities Administrators National Instrument 51-102 Management's Discussion &
Analysis.
This Management's Discussion and Analysis begins with an overview of
quarterly consolidated results; then presents quarterly information on the
company's two primary subsidiaries, NSPI and BHE. All other operations,
including the Maritimes & Northeast Pipeline, Emera Energy Services, Bear
Swamp, 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, and selected quarterly trend information
are presented on a consolidated basis.
<<
EMERA CONSOLIDATED
Q1 Operating Unit Contributions
(millions of dollars, except Three months ended
earnings per common share) March 31
-------------------------------------------------------------------------
2006 2005
-------------------------------------------------------------------------
Nova Scotia Power $37.4 $40.8
Bangor Hydro-Electric 3.7 4.1
Other 2.5 3.4
-------------------------------------------------------------------------
Consolidated net earnings $43.6 $48.3
-------------------------------------------------------------------------
Earnings per common share - basic $0.40 $0.44
-------------------------------------------------------------------------
Earnings per common share - diluted $0.38 $0.42
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Review of Q1 2006
Emera Inc.'s consolidated net earnings decreased $4.7 million to
$43.6 million in Q1 2006 compared to $48.3 million for the same period in
2005. Key factors in the quarter over quarter earnings comparison are:
- The deferral in Q1 2005 of $15.3 million in provincial grants and
taxes and income taxes in NSPI, while the company was awaiting
regulatory approval of new rates;
- Electricity price increases in NSPI, effective April 1, 2005 and
March 10, 2006;
- The temporary shutdown of one of NSPI's large industrial customers;
and
- Increased natural gas sales margin.
The financial impact of these factors is summarized in the following
table:
Three months ended
(millions of dollars) March 31
-------------------------------------------------------------------------
Consolidated net earnings - 2005 $48.3
Increased electric revenue in NSPI due to
electricity price increases and increased export sales 28.2
Decreased electric revenue in NSPI due to reduced
industrial sales volume and warmer weather quarter
over quarter (27.4)
Decreased fuel expense in NSPI due to reduced load
and increased natural gas sales margin 44.1
Increased fuel expense in NSPI due to higher commodity
prices and increased export sales (18.0)
Increased taxes in NSPI due to higher taxable income (12.2)
Deferral of Q1 2005 taxes in NSPI (15.3)
All other (4.1)
-------------------------------------------------------------------------
Consolidated net earnings - 2006 $43.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Q1 basic earnings per share were $0.40 in 2006, compared to $0.44 in
2005.
NOVA SCOTIA POWER INC.
Overview
2006 Rate Application
On March 10, 2006, the Nova Scotia Utility and Review Board granted NSPI
an average rate increase of approximately 8.7% effective March 10, 2006. The
rate decision is expected to increase NSPI's total electric revenues by
$90 million, including increases to Annually Adjusted Rates. NSPI's allowed
return on equity ("ROE") was maintained between 9.3% and 9.8%.
The UARB noted numerous improvements NSPI had made in fuel procurement,
but determined that a previous finding related to 2002 and 2003 fuel
procurement carried over into 2006. As a result, $15.7 million in fuel costs
was disallowed for 2006. The UARB noted that this would be the final
disallowance related to this issue.
The company has revised its financial outlook to incorporate the expected
effect of the rate case decision and other factors, and is expecting to earn
within its allowed ROE range in 2006.
Review of Q1 2006
NSPI Q1 Net Earnings
(millions of dollars, except Three months ended
earnings per common share) March 31
-------------------------------------------------------------------------
2006 2005
-------------------------------------------------------------------------
Electric revenue $261.0 $260.2
-------------------------------------------------------------------------
Fuel for generation and purchased power 78.5 104.6
Operating, maintenance and general 46.2 46.3
Provincial grants and taxes 10.0 10.1
Provincial grants and taxes deferral - (4.9)
Depreciation 31.8 29.5
Regulatory amortization 1.5 1.5
Other (2.4) (2.0)
-------------------------------------------------------------------------
Earnings before interest and income taxes 95.4 75.1
Interest 25.8 24.6
Amortization of defeasance costs 3.2 3.3
-------------------------------------------------------------------------
Earnings before income taxes 66.4 47.2
Income taxes 25.7 13.5
Income taxes deferral - (10.4)
-------------------------------------------------------------------------
Net earnings before preferred dividends 40.7 44.1
Preferred dividends 3.3 3.3
-------------------------------------------------------------------------
Contribution to consolidated net earnings $37.4 $40.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Contribution to consolidated earnings
per common share $0.34 $0.37
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NSPI's net earnings decreased $3.4 million to $37.4 million in Q1 2006,
compared to $40.8 million in Q1 2005. Highlights of the earnings changes are
summarized in the following table:
Three months ended
(millions of dollars) March 31
-------------------------------------------------------------------------
Contribution to consolidated net earnings - 2005 $40.8
Increased electric revenue due to electricity price
increases and increased export sales 28.2
Decreased electric revenue due to reduced industrial
sales volume and warmer weather quarter over quarter (27.4)
Decreased fuel expense due to reduced load and increased
natural gas sales margin 44.1
Increased fuel expense due to higher commodity prices
and increased export sales (18.0)
Increased depreciation due to increase in UARB approved
depreciation rates (2.3)
Increased taxes due to higher taxable income (12.2)
Deferral of Q1 2005 taxes (15.3)
All other (0.5)
-------------------------------------------------------------------------
Contribution to consolidated net earnings - 2006 $37.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Electric Revenue
Q1 Electric Sales Volume Q1 Electric Sales Revenues
(Gigawatt hours ("GWh")) (millions of dollars)
--------------------------------- -------------------------------------
2006 2005 2004 2006 2005 2004
--------------------------------- -------------------------------------
Residential 1,259 1,288 1,307 Residential $131.0 $123.1 $124.1
Commercial 837 829 789 Commercial 75.6 70.5 67.6
Industrial 635 1,040 1,017 Industrial 39.1 56.7 56.2
Other 183 107 97 Other 15.3 9.9 9.7
--------------------------------- -------------------------------------
Total 2,914 3,264 3,210 Total $261.0 $260.2 $257.6
--------------------------------- -------------------------------------
--------------------------------- -------------------------------------
Q1 Average Revenue / Megawatt hour ("MWh")
------------------------------------------
2006 2005 2004
------------------------------------------
Dollars per MWh $90 $80 $80
------------------------------------------
------------------------------------------
Electric revenues increased $0.8 million to $261.0 million in Q1 2006
compared to $260.2 million in Q1 2005. This increase is due to the
April 1, 2005, 5.3% rate increase and the March 10, 2006, 8.7% rate increase
approved by the UARB. These increases were partially offset by decreased load
in Q1 2006 due to the temporary shutdown of a large industrial customer and
warmer weather quarter over quarter.
The increase in average revenue per MWh reflects the rate increases noted
above, and a change in sales mix, specifically a reduction in lower priced
industrial sales.
Fuel for Generation and Purchased Power
Q1 Production Volume
(GWh)
----------------------------------------
2006 2005 2004
----------------------------------------
Coal and petcoke 2,451 2,483 2,532
Natural gas 68 41 36
Oil 221 550 604
Renewable 316 303 257
Purchased power 76 164 112
----------------------------------------
Total 3,132 3,541 3,541
----------------------------------------
----------------------------------------
Purchased power includes 30 GWh of wind power in 2006 (2005 - 20 GWh).
Q1 Average Unit Fuel Costs
----------------------------------------
2006 2005 2004
----------------------------------------
Dollars per MWh $25 $30 $23
----------------------------------------
----------------------------------------
For the three months ended March 31, 2006, fuel for generation and
purchased power decreased $26.1 million to $78.5 million, compared to
$104.6 million in Q1 2005. Highlights of the changes are summarized in the
following table:
Three months ended
(millions of dollars) March 31
-------------------------------------------------------------------------
Fuel for generation and purchased power - 2005 $104.6
Decreased load due to the temporary shutdown of a
large industrial customer and warmer weather
quarter over quarter (27.8)
Increased net proceeds from the resale of natural gas (16.3)
Commodity pricing increase 15.4
Increased export sales as a result of reduced in-province load 2.9
All other (0.3)
-------------------------------------------------------------------------
Fuel for generation and purchased power - 2006 $78.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Provincial Grants and Taxes
In Q1 2005, the UARB agreed to allow NSPI to defer taxes not reflected in
rates for the period from January 1, 2005 until April 1, 2005, the date when
new rates became effective. As a result, NSPI deferred a portion of provincial
grants and taxes relating to Q1 2005. The amortization period is subject to
approval by the UARB.
Interest
Interest expense increased $1.2 million, to $25.8 million in Q1 2006,
compared to $24.6 million in Q1 2005, primarily due to the issuance in
November 2005 of a $150 million 5.67% medium-term note which partially
refinanced short-term debt.
Income Taxes
In addition to the deferral of provincial grants and taxes referred to
above, NSPI deferred a portion of federal capital taxes and income taxes
reflecting increases in these taxes since rates were last set in 2002 relating
to Q1 2005. The amortization period is subject to approval by the UARB.
Outlook
The company has revised its financial outlook to incorporate the expected
effect of the 2006 Rate Case Decision and the reduced industrial load to date.
Nova Scotia Power expects to earn a regulated return on equity within its
allowed ROE range in 2006.
BANGOR HYDRO-ELECTRIC COMPANY
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 commodity that is delivered
through the BHE T&D network.
All amounts in the Bangor Hydro section are reported in US dollars unless
otherwise stated.
Review of Q1 2006
Bangor Hydro Q1 Net Earnings
(millions of dollars, except Three months ended
earnings per common share) March 31
-------------------------------------------------------------------------
2006 2005
-------------------------------------------------------------------------
T&D revenues $25.9 $29.3
Resale of purchased power 3.9 2.2
-------------------------------------------------------------------------
Total electric revenue 29.8 31.5
Purchased power and fuel for generation 7.4 8.0
Operating, maintenance and general 7.3 8.0
Property taxes 1.4 1.4
Depreciation 3.3 3.1
Regulatory amortization 3.8 3.9
Other (1.2) (0.9)
-------------------------------------------------------------------------
Earnings before interest and income taxes 7.8 8.0
Interest 2.4 2.5
-------------------------------------------------------------------------
Earnings before income taxes 5.4 5.5
Income taxes 2.2 2.2
-------------------------------------------------------------------------
Contribution to consolidated net earnings - USD $3.2 $3.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Contribution to consolidated net earnings - CAD $3.7 $4.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Contribution to consolidated earnings per
common share - CAD $0.03 $0.04
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings weighted average foreign exchange rate
- CAD/USD $1.15 $1.22
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Bangor Hydro's contribution to consolidated net earnings was $3.2 million
in Q1 2006, compared to $3.3 million in Q1 2005.
Bangor Hydro's contribution to consolidated net earnings was $3.7 million
CAD in Q1 2006 compared to $4.1 million CAD in Q1 2005.
Electric Revenue
Q1 T&D Sales Volume Q1 T&D Sales Revenues
(GWh) (millions of US dollars)
--------------------------------- -------------------------------------
2006 2005 2004 2006 2005 2004
--------------------------------- -------------------------------------
Residential 154 160 165 Residential $12.6 $14.2 $15.1
Commercial 151 150 155 Commercial 9.0 9.9 10.9
Industrial 95 98 70 Industrial 3.2 3.9 3.9
Other 3 3 3 Other 1.1 1.3 1.3
--------------------------------- -------------------------------------
Total 403 411 393 Total $25.9 $29.3 $31.2
--------------------------------- -------------------------------------
--------------------------------- -------------------------------------
Q1 Average Revenue / MWh
----------------------------------------
2006 2005 2004
----------------------------------------
Dollars per MWh $64 $71 $79
----------------------------------------
----------------------------------------
Electric revenues decreased by $3.4 million in Q1 2006, to $25.9 million
compared to $29.3 million in Q1 2005. Highlights of the changes are summarized
in the following table:
Three months ended
(millions of dollars) March 31
-------------------------------------------------------------------------
T&D revenues - 2005 $29.3
Stranded cost rate reduction on March 1, 2005 (2.7)
Decreased energy sales largely due to warmer weather
quarter over quarter (0.7)
-------------------------------------------------------------------------
T&D revenues - 2006 $25.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
On February 25, 2005, the MPUC approved BHE's stranded cost rates for the
three-year period March 1, 2005 to February 29, 2008. The stranded cost rates
were reduced to reflect the completion of a major regulatory amortization, and
increases in the rate at which BHE's power purchases under long-term power
supply agreements will be resold to a third party. Accordingly, the impact on
net earnings is expected to be minimal.
Resale of Purchased Power
Resale of purchased power increased in 2006 due to an increase in the
rate at which BHE's power purchases are resold to a third party.
Operating, Maintenance and General Expenses
Operating expenses were $7.3 million in Q1 2006 compared to $8.0 million
in Q1 2005 primarily due to increased overheads being capitalized as a result
of increased capital expenditures on transmission construction projects.
OTHER
All activities of Emera other than its two regulated electric utilities
are incorporated in Other, including:
- Emera Energy Services, which manages energy assets on behalf of third
parties and provides related energy management services. Emera Energy
Services operates with minimal day-to-day commodity risk exposure.
- A 12.9% interest in the $2 billion, 1,300 kilometre Maritimes &
Northeast Pipeline ("M&NP") that transports Nova Scotia's offshore
natural gas to markets in Maritime Canada and the northeastern United
States.
- Bear Swamp, a 50-50 joint venture in a 600 megawatt pumped storage
hydro-electric facility in northern Massachusetts, which was acquired
on May 24, 2005.
- Certain corporate-wide functions such as executive management,
strategic planning, treasury services, tax planning, business
development, and corporate governance; and financing for the
corporation's business outside of its regulated electric utilities.
Review of Q1 2006
Other Q1 Net Earnings
(millions of dollars, Three months ended
except earnings per common share) March 31
-------------------------------------------------------------------------
2006 2005
-------------------------------------------------------------------------
Electric revenue $6.3 -
Energy marketing margin 5.1 $7.3
Equity earnings 1.5 1.8
-------------------------------------------------------------------------
Total revenue 12.9 9.1
Purchased power 3.1 -
Operating, maintenance and general 5.5 5.0
Business development 0.3 (0.2)
Depreciation 0.5 0.2
Other (0.7) (0.8)
-------------------------------------------------------------------------
Earnings before interest and income taxes 4.2 4.9
Interest 2.6 2.6
-------------------------------------------------------------------------
Earnings before income taxes 1.6 2.3
Income taxes (0.9) -
-------------------------------------------------------------------------
Net earnings from continuing operations 2.5 2.3
Earnings from discontinued operations, net of tax - 1.1
-------------------------------------------------------------------------
Contribution to consolidated net earnings $2.5 $3.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Contribution to consolidated earnings per
common share $0.02 $0.03
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The contribution of Other operations to consolidated net earnings
decreased $0.9 million quarter over quarter. Highlights of the changes are
summarized in the following table:
Three months ended
(millions of dollars) March 31
-------------------------------------------------------------------------
Contribution to consolidated net earnings - 2005 $3.4
Decreased energy marketing margin as a result of
decreased natural gas marketing opportunities
due to warmer weather quarter over quarter (2.2)
Addition of Bear Swamp hydro-electric facility earnings
before interest & taxes 1.8
Earnings from discontinued operations, net of tax (1.1)
All other 0.6
-------------------------------------------------------------------------
Contribution to consolidated net earnings - 2006 $2.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Electric Revenue and Purchased Power
Electric revenue and purchased power represents Emera's pro-rata share of
electric revenue and purchased power from Bear Swamp, which was acquired in
May 2005.
Energy Marketing Margin
Emera Energy Services net margin decreased quarter over quarter to
$5.1 million in Q1 2006, from $7.3 million in Q1 2005 as a result of decreased
natural gas marketing opportunities due to warmer weather quarter over
quarter.
Equity Earnings
Equity earnings from the Maritimes & Northeast Pipeline were $1.5 million
in Q1 2006, compared to $1.8 million for the same period in 2005.
In 2004 Maritimes & Northeast Pipeline filed a Notice of Rate Increase
for its US operations. Effective January 1, 2005 M&NP was permitted to collect
proposed rates from customers, pending approval of new rates. In the event
approved rates are lower than proposed, any excess will be returned to
customers. On June 28, 2005 M&NP submitted an offer of settlement to the FERC.
The company has recognized its best estimate of rates in equity earnings and
energy marketing margin in Emera Energy Services based on the terms of the
proposed settlement. The decision from the FERC is expected by Q2 2006.
Discontinued Operations
Effective September 30, 2005, Emera sold its oil distribution business.
Consolidated Balance Sheets
Significant changes in the consolidated balance sheets between
March 31, 2006 and December 31, 2005 include:
- $20.4 million decrease in accounts receivable, reflecting decreased
activity in Emera Energy partially offset by increases in Nova Scotia
Power related to the 2005 and 2006 electricity price increases and
lower securitization.
- $20.3 million increase in inventory, reflecting higher fuel inventory
volumes and pricing.
- $17.3 million increase in prepaid expenses, reflecting the timing of
the provincial grants in lieu and insurance payments.
- $11.4 million decrease in deferred charges, reflecting normal
amortization and a reduction in NSPI's prepaid pension asset.
- $18.3 million decrease in property, plant and equipment, reflecting
depreciation expense in excess of capital additions.
- $37.5 million decrease in accounts payable and accrued charges,
reflecting decreased activity in Emera Energy.
- $12.6 million increase in income tax payable due to tax expense being
higher than year-to-date installments in Nova Scotia Power.
Outstanding Share Data
Common
Issued and Outstanding: Millions of Share
(millions of dollars) Shares Capital
-------------------------------------------------------------------------
January 1, 2005 108.87 $1,019.2
Issued for cash under purchase plans 0.43 7.9
Options exercised under senior management
share option plan 0.80 13.0
Share-based compensation - 0.9
-------------------------------------------------------------------------
December 31, 2005 110.10 1,041.0
Issued for cash under purchase plans 0.11 2.20
Options exercised under senior management
share option plan 0.08 1.50
Share-based compensation - 0.30
-------------------------------------------------------------------------
March 31, 2006 110.29 $1,045.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liquidity and Capital Resources
Emera and Nova Scotia Power have debt shelf prospectuses in the amount of
$300 and $400 million respectively that provide the companies with access to
long-term debt. Emera and Nova Scotia Power have $300 million and $150 million
respectively that remained unused as at March 31, 2006 and December 31, 2005.
The prospectuses expire in April 2007.
In Q1 2006, Standard & Poor's rating agency placed the credit ratings of
Emera and Nova Scotia Power on CreditWatch negative while they assess the
longer-term implications of the NSPI 2006 Rate Decision. Management expects
the assessment to be completed in Q2 2006.
Consolidated Cash Flow Highlights
Three months ended
(millions of dollars) March 31
-------------------------------------------------------------------------
2006 2005
-------------------------------------------------------------------------
Net cash provided by operating activities $69.1 $18.0
Net cash used in investing activities (27.3) (9.6)
Net cash used in financing activities (54.5) (20.8)
-------------------------------------------------------------------------
Decrease in cash and cash equivalents $(12.7) $(12.4)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated net cash provided by operating activities was $69.1 million
in Q1 2006, compared to $18.0 million in Q1 2005. Highlights of the changes
are summarized in the following table:
Three months ended
(millions of dollars) March 31
-------------------------------------------------------------------------
Net cash provided by operating activities - 2005 $18.0
Increased cash flow from earnings 23.3
Increased inventory in NSPI mainly due to higher
fuel inventory levels and pricing (23.9)
Lower trade receivables largely reflecting a reduction
in receivables outstanding in Energy Services 56.3
Lower trade payables largely reflecting a reduction in payables
outstanding in Energy Services (11.1)
All other 6.5
-------------------------------------------------------------------------
Net cash provided by operating activities - 2006 $69.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated net cash used in investing activities was $27.3 million in
Q1 2006 compared to $9.6 million in Q1 2005. Highlights of the changes are
summarized in the following table:
Three months ended
(millions of dollars) March 31
-------------------------------------------------------------------------
Net cash used in investing activities - 2005 $(9.6)
Increased restricted cash related to posted margin (18.5)
All other 0.8
-------------------------------------------------------------------------
Net cash used in investing activities - 2006 $(27.3)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated net cash used in financing activities was $54.5 million in
Q1 2006, compared to $20.8 million in Q1 2005. Highlights of the changes are
summarized in the following table:
Three months ended
(millions of dollars) March 31
-------------------------------------------------------------------------
Net cash used in financing activities - 2005 $(20.8)
Reduction of short-term debt (34.8)
All other 1.1
-------------------------------------------------------------------------
Net cash used in financing activities - 2006 $(54.5)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Financial and Commodity Instruments
The company manages its exposure to foreign exchange, interest rate, and
commodity risks in accordance with established risk management policies and
procedures. The company uses derivative instruments consisting mainly of
foreign exchange forward contracts, interest options and swaps, and oil and
gas options and swaps.
Instruments 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, amounts paid or
received are deferred and recognized in earnings in the same period as the
related hedged item is realized. Where the documentation or effectiveness
requirements are not met, the non-qualifying instruments are marked-to-market
and recognized in earnings in the reporting period.
The company has deferred payments and receipts on derivative instruments
that are designated and effective as hedges and are recognized in the
following categories on the balance sheet:
Deferred Hedging Losses (Gains) Recognized on the Balance Sheet
(millions of dollars)
----------------------------------------------------------------
March 31 December 31
2006 2005
----------------------------------------------------------------
Inventory $(1.0) $0.2
----------------------------------------------------------------
Deferred hedging (gains) losses $(1.0) $0.2
----------------------------------------------------------------
----------------------------------------------------------------
For the three months ended March 31, the impacts of effective hedges
recognized in earnings were recorded in the following categories:
Hedging Impact Recognized in Earnings Three months ended
(millions of dollars) March 31
----------------------------------------------------------------
2006 2005
----------------------------------------------------------------
Fuel and purchased power decrease
(increase) $17.6 $(3.7)
Interest expense increase (0.1) (0.5)
----------------------------------------------------------------
Hedging impact on earnings $17.5 $(4.2)
----------------------------------------------------------------
----------------------------------------------------------------
The company also enters into non-hedging derivative financial and
commodity instruments. These instruments, along with the non-qualifying hedges
referred to above, are marked-to-market at each reporting date.
The company has recorded the following mark-to-market transactions
included on the balance sheet and recognized in earnings.
Mark-to-Market Gains (Losses) Recognized on the Balance Sheet
(millions of dollars)
----------------------------------------------------------------
March 31 December 31
2006 2005
----------------------------------------------------------------
Accounts receivable $4.2 $8.5
Energy marketing assets 10.2 20.1
Energy marketing liabilities (6.9) (15.0)
----------------------------------------------------------------
Mark-to-market gains $7.5 $13.6
----------------------------------------------------------------
----------------------------------------------------------------
Mark-to-Market Gains (Losses)
Recognized in Earnings Three months ended
(millions of dollars) March 31
----------------------------------------------------------------
2006 2005
----------------------------------------------------------------
Other revenue $(1.7) $(0.6)
Fuel and purchased power 0.3 -
----------------------------------------------------------------
Mark-to-market losses $(1.4) $(0.6)
----------------------------------------------------------------
----------------------------------------------------------------
In determining the fair value of derivative financial instruments, the
company has relied on quoted market prices as at the reporting date.
Transactions With Related Parties
In the ordinary course of business, Emera purchased natural gas
transportation capacity totaling $8.4 million (2005 - $5.1 million) during the
three months ended March 31, 2006, from the Maritimes & Northeast Pipeline, 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. At
March 31, 2006 the amount payable to the related party is $6.0 million
(December 31, 2005 - $4.5 million), and is under normal interest and credit
terms.
Summary of Quarterly Reports
For the quarter ended
(millions of dollars, except earnings per common share)
-------------------------------------------------------------------------
Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2
2006 2005 2005 2005 2005 2004 2004 2004
-------------------------------------------------------------------------
Total revenues $310.7 $297.1 $281.1 $280.1 $309.7 $286.5 $260.1 $268.8
-------------------------------------------------------------------------
Net earnings
from continuing
operations $43.6 $37.7 $18.1 $19.1 $47.2 $30.7 $22.0 $29.5
-------------------------------------------------------------------------
Net earnings
applicable
to common
shares $43.6 $37.7 $15.9 $19.3 $48.3 $31.4 $22.1 $29.8
-------------------------------------------------------------------------
Earnings per
common share -
basic:
Continuing
operations $0.40 $0.34 $0.16 $0.18 $0.43 $0.29 $0.20 $0.27
Discontinued
operations - - (0.02) - 0.01 0.01 - -
-------------------------------------------------------------------------
$0.40 $0.34 $0.14 $0.18 $0.44 $0.30 $0.20 $0.27
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per
common share -
diluted:
Continuing
operations $0.38 $0.34 $0.16 $0.18 $0.41 $0.27 $0.20 $0.27
Discontinued
operations - - (0.02) - 0.01 0.01 - -
-------------------------------------------------------------------------
$0.38 $0.34 $0.14 $0.18 $0.42 $0.28 $0.20 $0.27
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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.
Financial Statements
Consolidated Statements of Earnings (Unaudited)
-------------------------------------------------------------------------
For the
millions of dollars Three months ended
(except earnings per common share) March 31
-------------------------------------------------------------------------
2006 2005
-------------------------------------------------------------------------
Revenue
Electric $301.7 $299.0
Other 9.0 10.7
-------------------------------------------------------------------------
310.7 309.7
-------------------------------------------------------------------------
Cost of operations
Fuel for generation and purchased power 90.1 114.4
Operating, maintenance, and general 60.3 61.0
Provincial, state, and municipal taxes 12.1 12.0
Provincial tax deferral (note 8) - (4.9)
Depreciation 36.1 33.7
Regulatory amortization 5.9 6.2
Allowance for funds used during construction (1.0) (0.8)
-------------------------------------------------------------------------
203.5 221.6
-------------------------------------------------------------------------
Earnings from operations 107.2 88.1
Equity earnings (note 6) 1.5 1.8
-------------------------------------------------------------------------
Earnings before interest and income taxes 108.7 89.9
Interest (note 7) 31.3 30.3
Amortization of defeasance costs 3.2 3.3
-------------------------------------------------------------------------
Earnings before income taxes 74.2 56.3
Income taxes 27.3 16.2
Income taxes deferral (note 8) - (10.4)
-------------------------------------------------------------------------
Net earnings before non-controlling interest 46.9 50.5
Non-controlling interest 3.3 3.3
-------------------------------------------------------------------------
Net earnings from continuing operations 43.6 47.2
Earnings from discontinued operations,
net of tax (note 3) - 1.1
-------------------------------------------------------------------------
Net earnings applicable to common shares $43.6 $48.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per common share - basic
Continuing operations $0.40 $0.43
Discontinued operations - 0.01
-------------------------------------------------------------------------
$0.40 $0.44
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per common share - diluted
Continuing operations $0.38 $0.41
Discontinued operations - 0.01
-------------------------------------------------------------------------
$0.38 $0.42
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to the unaudited consolidated financial
statements.
Weighted average number of common shares
outstanding (millions)
- basic 110.2 109.1
- diluted 123.8 122.5
Consolidated Statements of Retained Earnings (Unaudited)
For the three months ended March 31
-------------------------------------------------------------------------
millions of dollars 2006 2005
-------------------------------------------------------------------------
Retained earnings, beginning of year $423.4 $399.6
Net earnings applicable to common shares 43.6 48.3
-------------------------------------------------------------------------
467.0 447.9
Dividends 24.5 24.2
-------------------------------------------------------------------------
Retained earnings, end of period $442.5 $423.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to the unaudited consolidated financial
statements.
Consolidated Balance Sheets (Unaudited)
-------------------------------------------------------------------------
As at March 31 December 31
millions of dollars 2006 2005
-------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $8.8 $21.5
Restricted cash 12.0 5.8
Accounts receivable 211.4 231.8
Income tax receivable 13.3 15.1
Inventory 96.4 76.1
Prepaid expenses 33.2 15.9
Future income tax assets 11.9 9.3
Energy marketing assets 8.3 16.0
-------------------------------------------------------------------------
395.3 391.5
-------------------------------------------------------------------------
Long-term receivables 53.2 48.4
-------------------------------------------------------------------------
Energy marketing assets 1.9 4.1
-------------------------------------------------------------------------
Deferred charges 496.9 508.3
-------------------------------------------------------------------------
Future income tax assets 15.5 19.0
-------------------------------------------------------------------------
Goodwill 97.2 97.1
-------------------------------------------------------------------------
Investments (note 9) 101.7 101.0
-------------------------------------------------------------------------
Property, plant and equipment 2,768.5 2,786.8
Construction work in progress 44.1 40.0
-------------------------------------------------------------------------
2,812.6 2,826.8
-------------------------------------------------------------------------
$3,974.3 $3,996.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Current portion of long-term debt $152.8 $152.9
Short-term debt 104.2 88.1
Accounts payable and accrued charges 211.1 248.6
Income tax payable 14.1 1.5
Dividends payable 3.2 3.2
Energy marketing liabilities 6.1 12.1
-------------------------------------------------------------------------
491.5 506.4
-------------------------------------------------------------------------
Energy marketing liabilities 0.8 2.9
-------------------------------------------------------------------------
Future income tax liabilities 80.8 78.9
-------------------------------------------------------------------------
Asset retirement obligations (note 10) 72.7 71.7
-------------------------------------------------------------------------
Deferred credits 82.0 77.5
-------------------------------------------------------------------------
Long-term debt (note 11) 1,598.9 1,631.8
-------------------------------------------------------------------------
Non-controlling interest 260.8 260.8
-------------------------------------------------------------------------
Shareholders' equity
Common shares (note 12) 1,045.0 1,041.0
Foreign exchange translation adjustment (100.7) (98.2)
Retained earnings 442.5 423.4
-------------------------------------------------------------------------
1,386.8 1,336.2
-------------------------------------------------------------------------
$3,974.3 $3,996.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Contingencies (Note 14)
See accompanying notes to the unaudited consolidated financial
statements.
Approved on behalf of the Board of Directors
Derek Oland Christopher Huskilson
Chairman President and Chief Executive Officer
Consolidated Statements of Cash Flow (Unaudited)
-------------------------------------------------------------------------
For the Three months ended
millions of dollars March 31
-------------------------------------------------------------------------
2006 2005
-------------------------------------------------------------------------
Operating activities
Net earnings before non-controlling interest $46.9 $50.5
Non-cash items:
Depreciation 36.1 33.7
Deferral of provincial taxes and income taxes - (15.3)
Amortization of deferred charges 11.0 7.7
Equity earnings (1.5) (1.8)
Regulatory amortization 5.9 6.2
Allowance for funds used during construction (1.0) (0.8)
Future income taxes 2.7 (0.3)
Other non-cash operating items 5.7 0.8
Discontinued operations - 1.1
Other cash operating items (7.5) (6.8)
-------------------------------------------------------------------------
98.3 75.0
Change in non-cash operating working capital (29.2) (57.0)
-------------------------------------------------------------------------
Net cash provided by operating activities 69.1 18.0
-------------------------------------------------------------------------
Investing activities
Property, plant and equipment (19.2) (19.7)
Retirement spending net of salvage (0.8) (0.7)
(Increase) decrease in restricted cash (6.2) 12.3
Other investing activities (1.1) (1.5)
-------------------------------------------------------------------------
Net cash used in investing activities (27.3) (9.6)
-------------------------------------------------------------------------
Financing activities
Retirement of long-term debt (0.6) (1.2)
(Decrease) increase in short-term debt (20.7) 14.1
Issuance of common shares 3.7 4.1
Dividends on common shares (24.5) (24.2)
Dividends paid by subsidiaries to
non-controlling interest (3.3) (3.3)
Accounts receivable securitization (10.0) (10.0)
Other financing 0.9 (0.3)
-------------------------------------------------------------------------
Net cash used in financing activities (54.5) (20.8)
-------------------------------------------------------------------------
Decrease in cash and cash equivalents (12.7) (12.4)
Cash and cash equivalents, beginning of year 21.5 42.7
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $8.8 $30.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash and cash equivalents consists of:
Cash $7.6 $27.7
Cash equivalents 1.2 2.6
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $8.8 $30.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental disclosure of cash paid:
Interest $30.5 $29.6
Income and capital taxes $16.8 $12.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to the unaudited consolidated financial
statements.
Notes to the Interim Unaudited
Consolidated Financial Statements
March 31, 2006
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, 2005.
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, 2005.
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. Discontinued Operations
Effective September 30, 2005 Emera Fuels, a subsidiary of Emera, sold
its heating oil distribution business. Emera Fuels is included in the
segment "Other" in Note 4 Segment Information.
Emera Fuels has been accounted for as a discontinued operation.
Accordingly, prior periods have been reclassified to reflect this
change. The following provides additional information with respect to
amounts included in earnings from discontinued operations on the
consolidated statements of earnings:
---------------------------------------------------------------------
For the Three months ended
millions of dollars March 31
---------------------------------------------------------------------
2006 2005
---------------------------------------------------------------------
Revenue - $29.2
Earnings before income taxes - $1.4
---------------------------------------------------------------------
---------------------------------------------------------------------
4. Segment Information
Segmented financial information for the three months ended and as at
March 31, 2006:
-------------------------------------------------------------------------
NSPI Bangor Other(x) Total
millions of dollars Hydro
-------------------------------------------------------------------------
Revenues from external
customers $263.0 $35.0 $12.8 $310.8
Depreciation 31.8 3.8 0.5 36.1
Cost of operations, including
depreciation 167.7 26.0 9.9 203.6
Net intersegment operating
revenues/(expenses) 50.2 (0.5) (49.7) -
Equity earnings - - 1.5 1.5
Interest expense 25.8 2.9 2.6 31.3
Income taxes 25.7 2.5 (0.9) 27.3
Net earnings from continuing
operations 37.4 3.7 2.5 43.6
Net earnings applicable to common
shares 37.4 3.7 2.5 43.6
Assets 3,081.1 578.8 314.4 3,974.3
Goodwill - 97.2 - 97.2
Capital expenditures 11.6 7.6 - 19.2
-------------------------------------------------------------------------
Segmented financial information for the three months ended and as at
March 31, 2005:
-------------------------------------------------------------------------
NSPI Bangor Other(x) Total
millions of dollars Hydro
-------------------------------------------------------------------------
Revenues from external customers $261.7 $39.4 $8.6 $309.7
Depreciation 29.5 4.0 0.2 33.7
Cost of operations, including
depreciation 186.7 29.5 5.4 221.6
Net intersegment operating
revenues/(expenses) 32.5 (0.7) (31.8) -
Equity earnings - - 1.8 1.8
Interest expense 24.6 3.1 2.6 30.3
Income taxes 13.5 2.7 - 16.2
Net earnings from continuing
operations 40.8 4.1 2.3 47.2
Net earnings applicable to common
shares 40.8 4.1 3.4 48.3
Assets 3,029.7 598.6 338.9 3,967.2
Goodwill - 100.8 7.4 108.2
Capital expenditures 11.2 8.5 - 19.7
-------------------------------------------------------------------------
(x) Other consists of items related to corporate activities and other
subsidiaries.
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 cost, related to these plans, for the three month period
ended March 31, 2006 is $10.8 million (2005 - $7.3 million).
6. Equity Earnings
Equity earnings of $1.5 million (2005 - $1.8 million) for the three
months ended March 31, 2006, consists of the Company's pro-rata share
of after-tax earnings from Maritimes and Northeast Pipeline, an
investment under significant influence of the Company.
7. Interest
Interest expense consists of the following:
Three months ended
March 31
---------------------------------------------------------------------
millions of dollars 2006 2005
---------------------------------------------------------------------
Interest on long-term debt $27.3 $26.8
Interest on short-term debt 4.0 3.3
Amortization of debt financing 0.5 0.3
Foreign exchange gains (0.5) (0.1)
---------------------------------------------------------------------
$31.3 $30.3
---------------------------------------------------------------------
---------------------------------------------------------------------
8. Provincial Tax Deferral and Income Tax Deferral
The UARB agreed to allow NSPI to defer taxes not reflected in rates
for the period January 1, 2005 until April 1, 2005, the date when new
rates became effective. In Q1 2005, NSPI deferred a portion of
provincial and federal grants and taxes. The amortization period is
subject to approval by the UARB.
9. Investments
Investments are comprised of the following:
March 31 December 31
millions of dollars 2006 2005
---------------------------------------------------------------------
Equity accounted investments
Maritimes & Northeast Pipeline ("M&NP") $94.2 $92.8
Maine Yankee Atomic Power Company 2.1 2.4
Maine Electric Power Company Inc. 1.2 1.5
Intragas Energy 1.9 1.9
---------------------------------------------------------------------
Total equity investments 99.4 98.6
Long-term portfolio investments 2.3 2.4
---------------------------------------------------------------------
$101.7 $101.0
---------------------------------------------------------------------
---------------------------------------------------------------------
10. Asset Retirement Obligations
Some of the Company's transmission and distribution assets may have
asset retirement obligations. As the Company expects to use the
majority of its installed assets for an indefinite period, no removal
date can be determined and consequently a reasonable estimate of the
fair value of any related asset retirement obligation cannot be made
at this time.
11. Long-Term Debt
Long-term debt includes a private placement in the amount of
$10.0 million (December 31, 2005 - $10.0 million), which is secured
by a letter of credit.
Long-term debt includes $5.2 million (December 31, 2005 -
$0.9 million) in capital lease obligations.
12. Common Shares
As of March 31, 2006 there were 110.3 million (December 31, 2005 -
110.1 million) issued and outstanding common shares, 0.2 million
(December 31, 2005 - 0.3 million) common shares reserved and
available for issuance under the senior management stock option plan,
and 1.2 million (December 31, 2005 - 1.3 million) common shares
reserved and available for issuance under the employee common share
purchase plan.
During the three months ended March 31, 2006, the Company issued
0.2 million (2005 - 0.2 million) common shares for cash proceeds of
$3.7 million (2005 - $4.1 million). Additionally, $0.3 million (2005
- $0.2 million) was recognized as share compensation. Common shares
were issued through the employee common share purchase plan, the
senior management stock option plan, and the dividend reinvestment
plan.
13. Related Party Transactions
In the ordinary course of business, the Company purchased natural gas
transportation capacity totaling $8.4 million (2005 - $5.1 million)
for the three months ended March 31, 2006 from the Maritimes &
Northeast Pipeline, 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, 2006
the amount payable to the related party is $6.0 million
(December 31, 2005 - $4.5 million), and is under normal interest and
credit terms.
14. Contingencies
The Company may, from time to time, be involved in legal proceedings,
claims and litigation that arise in the ordinary course of business
which the Company believes would not reasonably be expected to have a
material adverse effect on the financial condition of the Company.
Effective January 1, 2005 M&NP was permitted to collect proposed
rates from customers, pending regulatory approval of new rates. Any
cash collected in excess of the new rates, once approved, will be
returned to customers. On June 28, 2005 M&NP submitted an offer of
settlement to the Federal Energy Regulatory Commission. The Company
recognized its best estimate of $1.0 million (2005 - $2.0 million)
for the three months ended March 31, 2006 in equity earnings and
energy marketing margin, which represents revenue recognized in
excess of existing approved rates, and is based on the terms of the
proposed settlement.
As part of an ongoing litigation against a coal supplier, NSPI was
required to post an $11.5 million bond. The bond may be called if
NSPI does not prosecute the claim without delay, or if the claim is
not successful. It is not determinable whether NSPI will be
successful with its claim, accordingly, an estimate of the potential
contingent loss cannot be made.
15. Comparative Information
Certain of the comparative figures have been reclassified to conform
to the consolidated financial statement presentation adopted for
2006.
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