Fourth Quarter 2018 Business Update and Financial Results February - - PowerPoint PPT Presentation

Fourth Quarter 2018

Business Update and Financial Results

February 19, 2019

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Forward-Looking Information

This document contains “forward-looking information” and statements which reflect the current view with respect to the Company’s expectations regarding future growth, results of operations, performance, business prospects and opportunities and may not be appropriate for other purposes within the meaning of applicable Canadian securities laws. All such information and statements are made pursuant to safe harbour provisions contained in applicable securities legislation. The words “anticipates”, “believes”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “projects”, “schedule”, “should”, “budget”, “forecast”, “might”, “will”, “would”, “targets” and similar expressions are often intended to identify forward-looking information, although not all forward-looking information contains these identifying words. The forward-looking information reflects management’s current beliefs and is based on information currently available to Emera’s management and should not be read as guarantees of future events, performance or results, and will not necessarily be accurate indications of whether, or the time at which, such events, performance or results will be achieved. The forward-looking information is based on reasonable assumptions and is subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information. Factors that could cause results or events to differ from current expectations are discussed in the Business Overview and Outlook section of Management’s Discussion and Analysis (“MD&A”) and may also include: regulatory risk; operating and maintenance risks; changes in economic conditions; commodity price and availability risk; capital market and liquidity risk; future dividend growth; timing and costs associated with certain capital projects; the expected impacts on Emera of challenges in the global economy; estimated energy consumption rates; maintenance of adequate insurance coverage; changes in customer energy usage patterns; developments in technology that could reduce demand for electricity; weather; commodity price risk; unanticipated maintenance and

• ther expenditures; system operating and maintenance risk; derivative financial instruments and hedging; interest rate risk; credit risk; commercial relationship risk; disruption of fuel supply; country risks;

environmental risks; foreign exchange; regulatory and government decisions, including changes to environmental, financial reporting and tax legislation; risks associated with pension plan performance and funding requirements; loss of service area; risk of failure of information technology infrastructure and cybersecurity risks; market energy sales prices; labour relations; and availability of labour and management resources. Readers are cautioned not to place undue reliance on forward-looking information as actual results could differ materially from the plans, expectations, estimates or intentions and statements expressed in the forward-looking information. All forward-looking information in this document is qualified in its entirety by the above cautionary statements and, except as required by law, Emera undertakes no obligation to revise or update any forward-looking information as a result of new information, future events or otherwise. Nothing in this document should be construed as an offer or sale of securities of Emera or any other person.

Non-GAAP Measures

Emera uses financial measures that do not have standardized meaning under USGAAP and may not be comparable to similar measures presented by other entities. Emera calculates the non-GAAP measures by adjusting certain GAAP measures for specific items the Company believes are significant, but not reflective of underlying operations in the period. Refer to the Non-GAAP Financial Measures section of our MD&A for further discussion of these items.

Forward-Looking Information and Non-GAAP Measures

Business Update

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Business Update

Scott Balfour President & CEO

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▪ EMERA NEWFOUNDLAND & LABRADOR ▪ EMERA INC ▪ NOVA SCOTIA POWER ▪ EMERA UTILITY SERVICES ▪ EMERA MAINE ▪ EMERA NEW BRUNSWICK ▪ EMERA ENERGY ▪ TAMPA ELECTRIC ▪ PEOPLES GAS ▪ NEW MEXICO GAS ▪ GRAND BAHAMA POWER ▪ DOMINICA ELECTRICITY SERVICES ▪ ST LUCIA ELECTRICITY SERVICES ▪ BARBADOS LIGHT & POWER

17%

annual adjusted EPS(1)(3)

39%

annual cash flow(2)(3)

$1,806

2018 cash flow(2)

DELIVERING SOLID GROWTH

Our strategic positioning has enabled our businesses to capitalize on earnings growth opportunities which is driving strong financial results

(1) Adjusted EPS is a non-GAAP measure. A reconciliation to the nearest GAAP measure can be

found in the appendix.

(2) Operating cash flow pre-working capital in millions of dollars (3) Compared to the 2017 annual period

$2.88

2018 adjusted EPS(1)

FLORIDA SOLAR

Investing approximately US$850 million to install 600 MW of solar generation by 2021

• Tranche 1 (145 MW) – in service September 2018
• Tranche 2 (260 MW) – 175 MW in service; remaining 85

MW to be in service later this spring

• Tranche 3 (145 MW) – Q1 2020
• Tranche 4 (50 MW) – Q1 2021

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BIG BEND MODERNIZATION

• Investing approximately US$850 million

to repower Unit 1 with natural gas combined-cycle technology and retire Unit 2

• Expect simple-cycle to be operational in

2021 and full combined-cycle in 2023

• Investment will improve land, water and

air emissions, generate customer savings of approximately US$750 million and increase plant operating efficiency

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• Invested $1.6 billion to construct a 500 MW, 110 mile HVDC

undersea link to connect Nova Scotia to the island of Newfoundland

• Placed the link into service on January 15, 2018; rate base of $1.8

billion has an approved ROE of 8.75-9.25% on 30% equity thickness

• Investment is generating cash earnings; recovered through NSPI

fuel rates

MARITIME LINK – ON TIME AND ON BUDGET

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Our Strategy in Action

SOLAR & BIG BEND

$2.2B

Capital Investment

$130M

Net Income

54% equity; 10.25% ROE

MARITIME LINK

$1.6B

Capital Investment

$50M

Net Income

30% equity; 9% ROE

9 $2.3 $2.2 $1.9 $0.2 $1.1

$2.3 $2.4 $3.0

2019F 2020F 2021F

Forecasted Capital Spend (1)

Baseline Forecast Opportunities Under Development

(1) In billions of Canadian dollars. U.S. dollar denominated capex is translated at a forecasted average USD/CAD exchange rate of 1.30 in 2019-2021. Capital spend

forecast by affiliate can be found in the appendix. Forecast is subject to change in the normal course of business.

Visible Plan to Invest $6.5B+ in Rate Base

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$18.7 $20.3 $21.0 $22.3

2018A 2019F 2020F 2021F

Forecasted Rate Base (1)

(1) Average total rate base in billions of Canadian dollars. U.S. dollar denominated rate base is translated at the actual USD/CAD exchange rate of 1.30 in 2018 and a

forecasted exchange rate of 1.30 in 2019-2021. Only approved and ordinary course capital projects are included. Details by affiliate can be found in the appendix. Forecast is subject to change in the normal course of business.

Capital Program Drives Rate Base Growth

Florida rate base expected to grow by 9% over the forecast period

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• Invest $2.3 billion in accretive rate

base investments, primarily in Florida and Nova Scotia

• Continue to strengthen our balance

sheet as we execute on our funding plan, including closing the NEGG transaction and retiring over $900 million of holdco leverage

• Advance our regulatory agenda,

including filing for fuel rates in Nova Scotia

Looking Ahead to 2019

Financial Results

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Financial Results

Greg Blunden CFO

13 $137 $167

2017 2018 Q4

$0.64 $0.71

2017 2018 Q4

$524 $671

2017 2018 2018

$2.46 $2.88

2017 2018 2018

Adjusted Net Income(1) Adjusted Earnings per Share(1)

+28% +22% +11% +17%

Strong Adjusted Earnings and EPS Growth

(1) Adjusted net income and adjusted EPS are non-GAAP measures. A reconciliation to the nearest GAAP measure can be found in the appendix.

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$1,297 $1,806

2017 2018

Annual Operating Cash Flow

Pre Working Capital +39%

Growing Operating Cash Flow

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$0.64 $0.71 $0.08 $0.07 $0.06 $0.04 $0.03 $0.07 $0.14

Q4 2017 Emera Florida & New Mexico Emera Energy Caribbean NSPI/Emera Maine Foreign Exchange WA Share Impact Corporate and Other Q4 2018

(3) (5) (6) (2) (4)

(1) Adjusted EPS is a non-GAAP measure. A reconciliation to the nearest GAAP measure can be found in the appendix. (2) Increase due to customer growth, favourable weather and the completion of the first tranche of solar projects as well as higher AFUDC earnings at Tampa Electric (3) Increase is attributable to the favourable impact of reduced pipeline maintenance in Q4/18 and increased capacity prices for Emera Energy Generation (4) Increase primarily due to increased earnings at Grand Bahama Power Company (GBPC), the timing of regulatory adjustments at Barbados Light and Power and the

impairment charge recognized in Q4/17 as a result of Hurricane Maria

(5) Average exchange rate of 1.32 in Q4/18 compared to 1.27 for the same period in 2017 (6) Reflects increase in the number of common shares issued and outstanding through normal course of business and the impact of issuing 14.6 million shares on December

28, 2017

(7) Decrease for quarter due to the timing of performance based compensation costs and changes in project costs

Key Drivers of Q4 2018 Adjusted EPS Performance(1)

(7)

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$2.46 $2.78 $2.88 $0.45 $0.21 $0.07 $0.06 $0.22 $0.25 $0.10

2017 Emera Energy Emera Florida & New Mexico Maritime Link & LIL NSPI/Maine/ Caribbean Other WA Share Impact Normalized 2018 Tax Benefit 2018

(2)

(1) Adjusted EPS is a non-GAAP measure. A reconciliation to the nearest GAAP measure can be found in the appendix. (2) The increase was a result of the impact of favourable weather in 2018 on the business overall as well as increased capacity revenue for Emera Energy Generation (3) Increase due to customer growth, favourable weather and the completion of the first tranche of solar projects as well as higher AFUDC earnings as the result of the first

and second tranches of solar projects and the Big Bend Modernization project at Tampa Electric

(4) Driven by Emera Caribbean, increase primarily due to higher earnings at GPBC as a result of favourable weather, higher load and lower OM&G, and the impairment charge

recognized in Q4/17 as a result of Hurricane Maria

(5) Increased loss due to higher project costs at Emera Utility Services, increased interest and preferred dividend expenses and lower tax recovery due to the reduction of the

U.S. federal corporate income tax rate

(6) Reflects increase in the number of common shares issued and outstanding through normal course of business and the impact of issuing 14.6 million shares on December

28, 2017

(3) (4)

Key Drivers of Annual Adjusted EPS Performance(1)

(5) (6)

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• Op. Cash

Flow Dividends Holdco Debt Repayments OpCo Debt Issuances NEGG Proceeds Other Select Asset Sales Common Equity DRIP Preferred Equity Total

2019-2021 Funding Plan

~$0.3B ~$1.5B ~$1.5B Total Capex $6.5B ~$0.7B $0B - $0.6B

Executable Plan to Fund Rate Base Growth

Proceeds from select asset sales are expected to materially reduce or potentially eliminate common equity requirements

$0.6B - $1.2B $0.8B

~25% 12% 8% - 18% 0% - 10% ~10% ~5%

~$2.0B ~$5.5B Reinvested Cash Flow ~$2.0B (30%) Asset Sale Proceeds + Common Equity ~$2.0B (~30%)

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64.0% 25.6% 10.4%

September 30, 2016

Notes: (1) Preferred equity includes hybrid debt (2) Equity includes the NCI and excludes AOCI

55% 35% 10%

2020 Target

Transitioning the Capital Structure

60.8% 28.5% 10.6%

December 31, 2018

Debt Equity Preferred equity

• 2019 will be a transition year for Emera
• Short term earnings dilution from NEGG sale due to the profile of New

England capacity revenues

• One-time $0.10 benefit in 2018 earnings related to the revaluation of

deferred income taxes

• Above-average 2018 earnings from the Marketing & Trading business

Expectations for EPS Growth

Over the long term, adjusted EPS is expected to grow, on average, at a rate comparable to rate base growth

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UPCOMING EVENTS

Expected Earnings Release Dates

Q1/19 – Thursday, May 9, 2019 Q2/19 Friday, August 9, 2019

Appendix

February 19, 2019

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Capital Forecast by Affiliate

(1) U.S. dollar denominated capex is translated at a forecasted average USD/CAD exchange rate of 1.30 in 2019-2021

Capital Forecast (CAD millions)(1) 2019F 2020F 2021F Total Tampa Electric $ 1,260 1,010 980 3,250 Peoples Gas 310 340 310 960 New Mexico Gas Company 100 190 140 430 Nova Scotia Power 340 330 350 1,020 Emera Maine 90 150 110 350 Emera Caribbean 160 70 70 300 Emera Newfoundland

• 190
• 190

Other (incl. Seacoast) 80 80 60 220 Less: Asset Sale Program Adjustment

• (140)

(110) (250) Subtotal – Baseline Capital Forecast $ 2,340 2,220 1,910 6,470 Add: Opportunities Under Development

• 190

1,130 1,320 Total Capital Forecast 2,340 2,410 3,040 7,790

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Rate Base Forecast by Affiliate

Rate Base (CAD millions)(1) 2018A 2019F 2020F 2021F 2018-2021 CAGR Tampa Electric(2) $ 8,300 9,200 9,925 10,550 8.3% Peoples Gas(2) 1,250 1,475 1,700 1,900 15.0% New Mexico Gas Company 725 750 850 925 8.5% Nova Scotia Power 3,775 3,950 4,200 4,350 4.8% Emera Maine 925 925 1,000 1,050 4.3% Emera Caribbean 800 925 925 925 5.0% Maritime Link(3) 1,800 1,800 1,800 1,750

• 0.9%

Labrador Island Link(4) 1,150 1,225 1,575 1,875 17.7% Less: Expected Asset Sales

• (1,000)

(1,000) n.a. Total $ 18,725 20,250 20,975 22,325 6.0%

(1) Average rate base. U.S. dollar denominated rate base is translated at an actual average rate of 1.30 in 2018 and a forecasted average USD/CAD exchange rate of 1.30 in 2019-2021. (2) Capital structures that support the rate base include deferred tax liabilities (DTL). DTL is a zero cost-of-capital component of the capital structure in Florida. The 2018 capital structures

included $1,700 million at Tampa Electric and $240 million at Peoples Gas.

(3) Maritime Link begins to depreciate in 2020 when Muskrat Falls is fully operational (4) Implied rate base based on a 45% equity thickness.

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(1) In millions of U.S. dollars.

Florida Solar – Investment Profile

$95 $506 $192 $58

2017A 2018A 2019F 2020F

Forecasted Capital Spend(1)

~US$850 million

Total capital, excluding AFUDC

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$37 $233 $219 $200 $107 $55

2018A 2019F 2020F 2021F 2022F 2023F

Forecasted Capital Spend(1)

Generation Transmission

Big Bend Modernization – Investment Profile

~US$850 million

Total capital, excluding AFUDC

(1) In millions of U.S. dollars.

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Normalized Adj. Net Income ($ millions) Q4 2018 Q4 2017 Q4 2016 Q4 2015 Emera Florida and New Mexico $ 101 80 63

• NSPI

28 23 34 40 Emera Maine 11 8 11 5 Emera Caribbean 14 1 8 14 Emera Energy 44 26 5 35 Corporate and Other(1) (31) (1) (20) 14 Normalized Adj. Net Income $ 167 137 101 108 Weighted Average Shares 235 215 204 147 Normalized Adj. EPS $ 0.71 0.64 0.50 0.73 Quarterly Normalized Adj. EPS as a % of Annual Normalized Adj. EPS 26% 26% 21% 30%

(1) Earnings normalized to remove, TECO acquisition costs (2016 – ($13) million; 2015 - $30 million) and gains and losses related to APUC transactions (2016 –

($10) million; 2015 - $9 million)

Quarterly Results by Segment

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(1) Emera acquired TECO Energy on July 1, 2016 (2) 2016 earnings normalized to remove $43 million after-tax gain related to the Self-Insurance Fund (3) 2015 earnings normalized to remove gain on sale of interest in Northeast Wind Partnership II (2015 - $12 million) (4) Earnings normalized to remove net gains on Florida state tax benefit (2018 - $23 million), APUC related transactions (2016 - $189 million; 2015 - $9 million)

and TECO acquisition costs (2016 - $166 million; 2015 - $53 million)

2018 Annual Results by Segment

Normalized Adj. Net Income ($ millions) 2018 2017 2016 2015 Emera Florida and New Mexico(1) $ 428 382 172

• NSPI

131 129 130 130 Emera Maine 44 46 47 45 Emera Caribbean(2) 45 31 57 41 Emera Energy(3) 120 24 24 118 Corporate and Other(4) (120) (88) (21) 28 Normalized Adj. Net Income $ 648 524 410 362 Weighted average shares 233 213 171 146 Normalized Adj. EPS $ 2.78 2.46 2.39 2.48

28 For the millions of Canadian dollars (except per share amounts) Three months ended December 31 Year ended December 31 2018 2017 2018 2017 Net income (loss) attributable to common shareholders $ 231 (228) 710 266 Revaluation of US non-regulated deferred income taxes $

• (317)
• (317)

After-tax mark-to-market gain (loss) $ 64 (48) 39 59 Adjusted net income attributable to common shareholders $ 167 137 671 524 Weighted average shares 235 215 233 213 Earnings per common share – basic $ 0.98 (1.06) 3.05 1.25 Adjusted earnings per common share – basic $ 0.71 0.64 2.88 2.46

Non-GAAP Reconciliation