Emera Inc (EMA) 2006 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Emera first quarter results conference call. Please be advised this conference is being recorded. I would now like to turn the meeting over to Miss Judy Steele, Director - Investor and External Relations. Please go ahead, Miss Steele.

Good morning, everyone, and thank you for participating in our call today. Joining me from Emera are Chris Huskilson, President and Chief Executive Officer; Nancy Tower, Chief Financial Officer; Ralph Tedesco, President of Nova Scotia Power; and [Rob Bennett], President of Bangor Hydro and [Greg Blunden], General Manager of Finance for Emera.

Emera's first quarter earnings release, financial statements and management's discussion and analysis were distributed yesterday via Newswire. These documents are also available on our website at www.Emera.com.

Today, we will have Chris begin with a corporate update. Nancy will then review the first quarter financials in more detail. We expect the presentation segment to last about ten minutes after which we will be happy to take questions from analysts and investors.

Please note that all amounts are in C$ with the exception of Bangor Hydro-Electric where segment results are reported in US$. I will take a moment to remind you that this conference call may contain forward-looking information which involve certain assumptions and known and unknown risks and uncertainties that may cause actual results to be materially different from those that are expressed or implied by the comments. Those risks include weather, commodity prices, interest rates, foreign exchange, regulatory requirements and general economic conditions.

In addition, please note that this conference is being widely disseminated via life webcast.

Now I'll turn things over to Chris.

Thank you, Judy, and good morning, everyone.

Emera's consolidated net earnings were $44 million for the first quarter of 2006 compared to $48 million for the same period in 2005. That translates to basic earnings per share of $0.40 compared to $0.44 in '05.

I will remind you that in Q1 of 2005 a portion of corporate taxes, which would otherwise have been expensed, were deferred while we awaited approval of new rates. With those tax deferrals 2005 first quarter earnings would have been $15 million lower. So the quarter over quarter earnings comparison is actually more favorable than it first appears. Nancy will take you to those details in a moment.

Turning to NSPI's recent rate decision, we've now received the final rate order from the utility and review board that grants an average rate increase of 8.7%, effective March 10th of this year. We were satisfied with the key elements of that decision, specifically that improvement noted by the UARB for our fuel procurement process since the 2005 rate decision. The rate decision - coupled with successful renegotiation of our natural gas supply contract - puts Nova Scotia Power on a strong financial footing.

It is our expectation that Nova Scotia Power will earn a return on equity that is within its allowed range of 9.3 to 9.8% for 2006.

The Board of Directors approved two important changes to NSPI's leadership and governance yesterday. Effective May 15th, Ralph Tedesco will be appointed president and CEO of Nova Scotia Power. As Chief Operating Officer, Ralph has brought his determination and drive to see that real change happens at the Company. As president and chief executive, he will be able to build on Nova Scotia Power's commitment to our customers and a cleaner environment.

I believe dedicated leadership is critical for a regulated utility. It is what our customers expect and it provides for an even greater transparency and accountability with stakeholders. I've devoted a considerable amount of my time and energy over the past 18 months to NSPI. So this transition will enable me to place my focus on building Emera's business.

As well, Nova Scotia Power will reconfigure its Board of Directors. John McLennan, a Nova Scotia-born telecommunications executive who has served as chief executive officer of both Bell Canada and Allstream will take over as chairman. He replaces [Derek Oland], who will continue as chairman of Emera. Several Emera directors, myself included, will continue to serve on the reconfigured NSPI board with several new directors to be added in the coming months.

Again, we believe this governance change is appropriate for a regulated utility.

With that I will turn things over to Nancy for the detailed financial update.

Thank you, Chris, and good morning, everyone.

As Judy mentioned our first quarter financial results were released yesterday and are on the Emera website. I will take a few minutes to review them.

Emera's consolidated net earnings were $43.6 million in the first quarter of 2006, compared to 48.3 million for the same period in 2005. As Chris noted in Q1 2005 a portion of Nova Scotia Power's provincial grants and taxes - and income taxes - which would have otherwise been expensed were deferred, pending regulatory approval of new rates. With those tax deferrals, 2005 comparative earnings would have been $15.3 million lower.

NSPI's contribution to quarterly earnings was 37.4 million in Q1 2006, compared to 40.8 million in Q1 2005. The tax deferral I just mentioned is reflected in the 2005 comparative amount.

Electricity margins, which is revenue less the cost of fuel or purchased power, was $26.9 million higher in Q1 2006 compared to Q1 2005, substantially due to three factors. Fire allowed electricity rates effective April 1st, 2005 and March 10th, 2006; sales and production volume decreases, reflecting the temporary shutdown of a large industrial customer and warmer weather. This actually resulted in a net favorable effect on electricity margin quarter-over-quarter because the cost of peak electricity production is greater than the average industrial selling price.

And, finally, increased proceeds from the sale of natural gas, reflecting the renegotiation of NSPI's natural gas supply contract late in 2005.

Bangor Hydro's U.S. dollar Q1 2006 net earnings were 3.2 million - essentially unchanged from 3.3 million in Q1 2005. This translates to a $400,000 decrease in Bangor's contribution to consolidated net earnings as a result of a stronger Canadian dollar.

The earnings contribution of Emera's other operations was 2.5 million 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. Consolidated net cash provided by operating activities improved substantially to 69.1 million in Q1 2006 compared to 18 million in Q1 2005 - clearly highlighting the improved financial position at Nova Scotia Power.

In terms of our full year earnings outlook, Chris noted that we expect Nova Scotia Power to earn within its allowed rate of return in 2006. On a U.S. dollar basis, we further expect Bangor Hydro to earn within its allowed rates of return. That's it for my financial overview.

Thank you and we will be happy to take questions.

(OPERATOR INSTRUCTIONS) Linda Ezergailis of TD Newcrest.

Perhaps you can give us an update on the [S. Stora] strike situation and whether or not this might impact whether one of their facilities will be running long-term? I guess, maybe their newsprint facility?

The most current information that we are available -- aware of is there was a meeting between the company Stora and its union this past week. The meeting ended after, I think, a relatively short discussion of an hour or two is what was reported. And in parallel with that there have been some conversations with Stora with our regulator, ourselves, and other parties with specific regard to a requirement in the last rate decision that we work were with other stakeholders including Stora to see what if anything can be done to address their circumstances. That's about as current as we are.

So if your discussions with the regulator were to go further down, this situation, would that be part of a general rate hearing or would that be a separate sort of process?

It's actually a separate process that will be going forward. But if there were to be any change, that change would not be reflected till January 1.

Of 2007.

Correct.

And is it too preliminary to share what sort of changes there might be or -- ?

Well, it's very difficult to anticipate because this is a circumstance that at the end of the day it's really not up to Nova Scotia Power. It's up to our other stakeholders to decide and how they believe they can support Stora. I mean, it's a very challenging situation for the employees of Stora and folks in the straight area and hopefully other stakeholders will take that into account. Because at the end of the day, if those other stakeholders that are going to have to agree to move money to Stora and, therefore, perhaps they may pay more.

So when Nova Scotia Power forecasts it will earn within its rate of return range for 2006 does that incorporate both the scenario where Stora workers might go back to work tomorrow as well as Stora potentially not resuming operations for the balance of the year like as a worst-case scenario or -- ?

What our outlook reflects is an assumption and that's really all it is, that Stora would return by August 1.

Thank you so much.

[Redmond Filaman] of Credit Suisse.

At the end of the fourth quarter you mentioned a strategy of expanding into the eastern part of Ontario and parts of the U.S. Could you give us an update on that strategy as to whether you are having trouble finding assets or whether you found assets? And what valuations look like?

I think first of all, it's probably a little bit early to start talking about specific transactions. But in general what we say is that we think the opportunities in and around the areas that we are looking are positive. We do believe that asset valuations are quite higher right now so that's something that will very much be on our mind as we are looking at things. We are going to be very disciplined about what we do and how we get there and our approach will be to bring our expertise to bear and to take a look at what's available and then to make some good decisions. So that's really the approach. It's early days and we are moving down that path.

The change we made yesterday in the governance of Nova Scotia Power is a part of that. It certainly on the one hand allows me to be freed up to do -- to pay a lot more attention to the growth of the Company whereas in the past 18 months I've spent a lot of my time around Nova Scotia Power. And on the other hand it has the added benefit of ensuring that we have a very clean and transparent governance relationship for Nova Scotia Power that I think will work well for the regulatory situation here in Nova Scotia as well as for stakeholders.

That's great. Could I just -- I noticed that in Brookfield after management first quarter report they were able to add about four hydro-electric stations with a total capacity of about 50 MWs during the quarter. Would you ever consider possibly partnering with somebody like -- a Brookfield Asset Management?

We have partnered with Brookfield Asset Management. They are one of our partners. We together have an investment in the Bear Swamp Hydra facility in Massachusetts; and we continue to look for opportunities to do more.

Thank you. Just one last question. With respect to the large industrial client that had a plant shutdown - is there a reason why that fact wasn't press released during the quarter?

I think we have been talking actively about that. It's been very active, sort of there's been a lot of press on the subject in general and I think that's been well disclosed.

Bob Hastings of Canaccord.

Just a clarification point and then a question. Clarification is the -- you have August 1 as the timing so I assume a potential assumption of the store coming back. How sensitive to your bottom line is that assumption? Is it pretty modest?

I think I would describe it as being modest yes, one way or the other.

And I think it's very important for you to recognize that's just an assumption that we've made. It's not based on anything other than a guess by us but we just want people to know that we do believe that that mill is coming back online and it's part of our business plan going forward. It is an unfortunate situation right now to have that mill shut down but we believe it will come back.

Thank you. And the question I had was regarding the transmission line. We've seen a lot of pressures being brought on on capital expenditures or cost overruns in many parts of the world and in Canada, as well. I'm just wondering if you're seeing any pressures on that line or the capital cost estimate's still the same?

We are seeing cost pressures on the line like everyone else in North America. It's Rob Bennett here. Good morning. We've followed the experience of other utilities in the US and we are having a similar experience with the line in terms of securing construction labor resources. We are working with ISO New England now to respond to project cost increases that are primarily the result of these market forces in transmission labor. These American increases are consistent with the other utilities' experience in New England as well.

Are there any issues with those pressures in terms of regulatory approvals or changes in return?

No changes in return. No. And we are proceeding in accordance with the ISO New England tariff and their planning procedures. We are confident that we will be able to begin construction this summer and complete in 2007, as planned.

I think it's important to note that the tariff actually contemplates the situation. And in fact, has a process by which we would follow that process and Rob and his team are currently doing that and we expect to get that down the road very shortly.

Can you give us an update on what you think that capital expenditure might end up being?

It will be in the $100 million range.

As opposed to the 90, originally?

Yes.

I think if you go back originally it was always 100 with a 10 million contingency (indiscernible). Just using the contingency?

That's correct.

That's great. Thank you very much.

Robert [Quan] of RBC Capital Markets.

Just maybe just going back to the press release and the earlier comments if I'm understanding this right. On it, do you lose money on the industrial in the winter on an absolute basis or is it by the time you take, say, the industrial price of about $60 MW hour and then back up fuel cost, are you losing on a relative basis? And then you are helped out by the ability to resell your gas?

If you think about that, as you described an industrial price of $60 per MW hour and that marginal cost of peak energy in the winter is higher than that so that, yes, you'd say if you didn't have to supply, there would be a pickup.

Obviously the expectation is that kind of unwinds throughout the year. You know that the industrial customer being down (MULTIPLE SPEAKERS)

Yes as we move into, say, the summer months, it's a more neutral position as higher cost generation comes off the margin. And then again as we move back into the colder months, the opposite occurs.

I guess just looking at the shutdowns of the Stora mill and the long-term buy ability for the forest products industry there. Do you have any views on that? And it sounds like there's some talk of either shifting the rate burden on to other rate payers. Or if the mill shuts down. It sounds like there's upward pressure on rates one way or the other. And it sounds like both the public and the regulator and our team to try to keep rate increases quite a bit lower than what we saw for '06.

Well for sure, I think we've shown that the rates that we have are indeed competitive. And the process that the regulator has outlined will really at the end of the day I think leave it to Stora to make its case to other stakeholders and for other stakeholders to decide whether, indeed, they can support a position of -- in effect, subsidizing that rate at their expense. So that's clearly not a decision for us but it is, indeed, a decision for the other stakeholders.

I guess just maybe looking at the risk here. If the other stakeholders aren't willing to effectively subsidize Stora and the mill were it to shut down, do you feel confident that you would still be able to recover the shortfall in volumes in terms of a rate increase?

There are many moving parts beyond that single customer; but in the large picture, we think the outlook we have is very reasonable. And of course if the situation changes we'd provide further advice. But right now, we think the outlook we have is certainly reasonable and you have a sense of the effect in the first quarter.

When we look at the statement about warmer weather and the effect on marketing margin, you did talk about reduced activities. I assume that is kind of volume driven. Was there anything else in that number in terms of anything on the actual commodity side? Or what you have in terms of pipeline capacity? Was it just strictly volumes?

I think if you're -- I'm not sure what you're getting at but if you're asking about fuels I would describe where we are as right on target and we feel very good about where we are. I don't know if that answers your question or not.

I'm just trying to -- it sounds like the initial explanation of the shortfall is due to activity. So that indicates to me that there was some volume driven. Just wondered whether there was any kind of commodity price that moved against you a little bit or you've got some pipeline capacity, whether you weren't able to either resell that or utilize that. Did that cause anything on the earnings?

I think you are asking about the Energy Services business and the decrease in Energy Marketing margins there. And largely that comes -- the decreased activity comes from the decrease in the volatility of the price. The volatility and higher gas prices provide our Energy Services group of the ability to market gas. To market more gas and so it is truly a volume issue on gas.

Karen Taylor of BMO Nesbitt Burns.

On the effective date of the rates, being obviously not gen first. Can you quantify for me or clarify whether there were interim rates in place that protected you during the period? And if not what was the effect on profitability from the fact that the rates were not effective until really the last month of the quarter?

There are two pieces to that. We have rates that are set for above the line customers and we have rates that are set for so-called below the line customers. Below the line rates were effective January 1. The above the line rates were effective March 10. And if you think in terms of the outlook that we have provided, all that is reflected in there. So we believe we will be earning within our allowed return.

So the fact that the above the line rates didn't come in until March 10th really had a de minimus effect on your quarter?

There was no rate increase last April 2005 so that's provided also year-over-year change. What we outlined is the -- the $28.2 million that we've provided is really the impact of the electricity price increases both of them and some increased export sale.

I'm sorry. Repeat the last part?

And from increased export sales. So there was some increased export sales, as well as the price increase.

Right. And I would just like to come back to what Robert Quan was talking about on the industrial sales. So during the winter if your peak electricity supply costs are greater than the monies that you are recovering to the industrial so -- are the industrial rates as they're designed right now, are you charging them at what I would describe as an interruptible pricing level? What I'm trying to get at is how much subsidy is there already if you are losing peak sales I'm not sure I should be heartbroken that you are not going to make those sales.

Certainly that's a way to think of it but it's also very important to think about those sales as over, say, the duration of a year. That's really not appropriate to single out a particular class or a particular customer, based on what happens in a given month. Rather the rates are set in effect January to December basis to provide our allowed return. So where the industrial rates as a cost of service business are set to reflect a fair return certainly for the above the line customers.

So let me just come back then. I mean in other situations where a system is heavily dependent on one large industrial user, we get a sense of the margin at risk if that client were to disappear. Can you give me a sense of what we're looking at with Stora?

Well I think in terms of where the pricing is today that if Stora were to leave the system we would not have margin at risk.

So if I were to look at a normalized year with a fuel recovery factor that replicated without disallowances let me express it that way, that there is no net change in margin. So that means are they bearing any of your fixed cost service assessments? You're telling me that sounds very -- it would be very small.

Yes I would characterize it as de minimus.

I think it's important to recognize that there is a rate that's actually in effect for extra large industrial customers. The regulator has chosen, however, in the last two years to not use that rate structure and to set specific numbers for those customers. And then this year, to order in the rate proceedings that we would review that all one more time. So there is a formula-driven rate that would normally be used for those customers that's not being used. It's merely a number that's been chosen by the regulator and so it doesn't have the same cost recovery effect that the normal rate would have. And what we are looking for is, as the rate gets reviewed this year that they will come to a decision as to how the contributions will work in the future. But in the last two years it hasn't really been working as it normally would.

So let me just make sure I understand. So you've got an extra large industrial rate that bears some in terms of the cost of service it is recovering more than its variable cost? That rate has not been implemented by the regulator at this point in time.

That's correct. It was implemented three years ago and was in effect at that time. In the last two years in the last two rate proceedings, they have just simply picked numbers and used those as the rate. They've had a basis for those numbers and you can read that in the proceedings. But it has not been based on the formula and so since it's not based on the formula, you don't have the same contribution as you might otherwise have had.

So when we look forward, and we are talking about perhaps redistributing the revenue requirement away from Stora we are now talking about (indiscernible) and revenue requirement on variable cost, pursuant to that sort of non formula-based rate. Is that fair or are you looking at about changing the underlying formula to institutionalize the fact that there is no cost recovery?

The rate that Chris was describing that was put in place a couple of years ago is a cost-based rate. The current rate is not a cost-based rate. And as we move through this process over the next several weeks and months it will certainly be our perspective and we suspect the perspective of other stakeholders that the rates be cost-based but currently they are not.

So the current rate may not have been even a count for a substantial portion of the variable cost of fuels to provide power. Is that fair?

Again depending on the depending on the time of year. If you look at it on an annual basis there is recovery of the variable cost of power - based on our pricing.

But not necessarily in Q1 or Q4?

Correct.

Thanks.

Winfried Fruehauf of National Bank Financial.

I have a question on hedges. Foreign exchange, actually. Economically i.e., cash flow-wise, how well is Emera hedged overall with respect to foreign currency fluctuation?

We are in very good shape, certainly, in Nova Scotia Power which would be our largest exposure on fuel; and for 2006, we would be pretty much fully hedged on FX.

And has that also been true for the first quarter?

Yes.

And what options if any have you with respect to modifying the effect of currency fluctuations on your earnings?

You are saying Bangor-Hydro, for example?

Yes. One example, yes.

We do leave some small portion of our fuel, for example, unhedged just from a volume point in view and that is usually a natural offset to the earnings from Bangor Hydro. So there is a bit of a natural hedge their.

But, overall, I take it there would have been a net net exposure to your earnings in the first quarter?

It would have been small, I would say.

And what about the foreign currency exposure with respect to Bear Swamp?

Again, Win, I would say because it's a small amount the foreign currency exposure is fairly small. You'll remember it is just the earnings because both of those operations are self-sustaining U.S. operations.

I appreciate that. So overall if you are looking at -- across the entire consolidated operations which would also been include Maritime's Northeast pipeline and so on, what was overall the foreign exchange haircut on earnings that you took in the first quarter?

Win, we don't -- I don't think we've gotten into that level of disclosure in terms of breaking out our foreign exchange to that level of detail.

That's something you might consider doing or no?

It's pretty immaterial. Yes, it's (MULTIPLE SPEAKERS) and we are substantially hedged on a material basis we are substantially hedged on fuel, and as I say, for Bangor Hydro - which are the two largest amounts.

I was really referring not to cash flow because we already established that you are more or less fully hedged, that's i.e., economically; I was talking about earnings.

I would say you can see the effect of the Bangor Hydro earnings from a foreign exchange point of view. Knowing of course as I said that some of that, substantially all of it, would be offset by a natural hedge on our open fuel position. And the Maritimes and the Northeast and the Bear Swamp amounts are pretty small.

Thanks very much.

Matthew Ackerman of CIBC World Markets.

I wonder if you could characterized the 1.8 million of [EBIT] at Bear Swamp for the quarter? Was that sort of normal operations and also maybe speak about seasonality. Do we expect that to go up? And Q2 with spring Hydra flows and how should we look at seasonality there?

I think, Matthew, I think Bear Swamp would be normal in its current mode of operation. However what -- we are working hard right now to close an arrangement with Long Island Power as that they've announced publicly that would begin to change the nature of that operation. About half of it would then become contracted to that utility. So I think for now, I think what you saw in the first quarter is pretty typical. It isn't really too seasonal. It actually - because of the fact that it's a margin-based business, the margin actually stays pretty consistent throughout the year.

But I would say that that is going to change if in fact we're able to close this arrangement with Long Island Power.

So you see potentially some significant upside in that aspect, possibly later this year or next year or can you talk about timing on that?

Yes I would say that we will see some upside. I'm not going to use the word significant at this moment. We'll see some upside but more importantly what we will see is, some nice stability from that investment and the other thing is that we are -- the timing at this point is unclear. I think we're working our way through that diligently as two parties and we will see where we end up.

Okay. One last question. Can you give us your outlook preliminary as it would be on the need for a 2007 rate increase, if any?

I think in terms of general rate application for 2007, we obviously have a requirement to begin amortizing certain tax deferrals that I think you are aware of. But just the same, those are only one component of a whole variety of things that we are looking at. We are really not in a position to offer any advice there at this particular time.

What percent of fuel are you hedged for 2007, right now?

For 2007, our fuel hedges are as we sit here today at about 57% hedged for '07.

Based on what you're seeing on pricing there, was that going to create upward rate pressure for 2007?

It's possible. It's what we are looking at very carefully right now; it's what do the fuel markets look like particularly full. I think you are aware that oil has been extraordinarily volatile. And that's obviously one of the factors we are watching very carefully.

So it sounds like it's just a little bit too early to tell; but it might be close.

I think it is too early to tell right now.

But it doesn't necessarily bias one way or the other based on your 57% hedged?

No. I think as I say, as we look at these markets and how things will evolve and we also have to take into account what our load is going to look like, based on some of the other discussions that we've had earlier and a variety of several other factors that we're looking at right now.

Okay. Thanks.

(OPERATOR INSTRUCTIONS) Sam Caines from Scotia Capital.

Just by way of extension if you're 57% hedged on all seven fuel procurements are you also 57% hedged on the currency exposure to that fuel procurement?

We follow that fairly closely. We try to keep our fuel, our currency hedging in a -- we do it in a portfolio manner similar to how we do our fuel. So those two things, we try to keep them fairly close.

Okay. I'm moving on then. Now that we are all aware that Q1 and Q4 in this particular go-round with Stora, you weren't going to get any contribution from above and beyond variable costs. But if your assumption is August 1 they restart, then Q2 you are implying will be a bit weaker than normal and, Q3, you are implying will be a bit stronger than normal - solely due to Stora, coming back on August 1st, and I know that's a guess. Give us some sensitivity impact of that Q2, Q3?

I think the very best I could say is, again, as I suggested earlier during the summer months. We really don't have oil on the margin. So we would look at it as fairly neutral. As we move into the fourth quarter we would see a result that probably looks not unlike what we saw the first quarter of this year if Stora were not to operate. But right now in our outlook it is built in that they will be back.

And, again, I want to emphasize that is our assumption and it is strictly a planning assumption for operating purposes only.

I respect that. Just, we are all trying to guestimate quarterly effects on earnings. Right?

Yes.

But to the explicit, Sam, I believe Ralph is saying that Q2 and Q3 the earnings impact would be minimal.

Okay. We will leave it at that, then. Switching. My last question just what you are seeing hearing doing pre LNG with (indiscernible). They seem to be going ahead at Anadarko - obviously it's taken a 12-month pause unless you've heard something different. Any use or update there?

I guess just to mean it's exciting to us that Maritimes has been actively involved in that and we are looking forward to the potential for a project coming to fruition. So we've been staying very close to that as a result of our involvement with Maritimes Northeast and I'd say, stay tuned.

Thank you.

Winfried Fruehauf. National Bank Financial.

Question on your marine wharf. The first quarter was there a benefit or a disbenefit from the wharf? And whichever it was, what is the extent of that?

The international (indiscernible) here continues to provide significant benefits to our customers, in terms of fuel pricing. And those benefits are reflected in our outlook. So we are very encouraged by what we're seeing. And we continue to test other international deals to take advantage of that.

Does that mean that at least for now you have decided to keep the wharf as a wholly-owned operation? Or are you still thinking about spinning it off?

Like many aspects, this particular asset is currently not in (indiscernible) so that does leave us some flexibility and from time to time people are continuing to express interest in it. From our perspective the bottom-line, really, is so long as that facility provides benefits to our customers, that's our bottom-line.

So we can get a return for our customers and approve a return to shareholders. We are always looking at those options. Right now, we expect at least for the near-term to continue to operate.

And are the contributions from the wharf, are they shown on the other or where do they show up?

They are rolled into our fuel line.

Okay. By the way, congratulations on your appointment.

Thank you very much.

Robert Quan of RBC Capital Markets.

I guess this question may be for Ralph. Just kind of following up on your answer to Sam's question. So if you know if Stora being down isn't very material to Q2 and Q3 and we saw nice benefits here in Q1 and you would expect the same in Q4. Just from a straight earnings perspective, can I draw the conclusion that you would pretty much just rather see Stora down?

Well I certainly wouldn't say that I would like to see a large employer down. What we would like to see is that those folks return to production. Obviously, there are many many other factors beyond electricity and I think you are certainly probably aware of things like the dramatic effect exchange rate is having on their business and there are also of course the issues of trying to resolve that they have with their union.

It would be our hope that that entire issue would be resolved in a way that works for all parties. And as I suggested earlier, with the hearing for the process that's scheduled, there will be an opportunity to maybe look at what other stakeholders might be willing to do in terms of our corner of the earth.

I guess just aside from the social issues, maybe, to knock on reduced residential if the mill were to shut down, just so I'm understanding the earnings from Stora either been in or being out. If Stora is out for the year, you would expect to earn a higher ROE.

Yes we would expect, as I said earlier, a similar pickup from what we described for Q1.

There are no further questions registered at this time. I would like to turn the meeting back over to Mr. Huskilson.

Thank you very much and thank you, everyone, for your participation today and for your interest in Emera. I hope everyone has a great day.

Thank you. This conference has now ended.