Emera Inc (EMA) 2010 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to the Emera conference call.

I would now like to turn the meeting over to Ms. Jennifer Nicholson, Senior Director, Stakeholder Relations. Please go ahead, Ms. Nicholson.

Thank you, Dave.

Good afternoon, everyone, and thank you for joining us for our second quarter conference call this afternoon. Joining me from Emera are Chris Huskilson, President and Chief Executive Officer; Nancy Tower, Executive Vice President and Chief Financial Officer; Rob Bennett, President and CEO of Nova Scotia Power; and Bob Hanf, Chief Executive Officer of Bangor Hydro. Emera's second quarter earnings release, financial statements and management's discussion and analysis were distributed today via Newswire. These documents are also available on our website at www.emera.com.

This afternoon, Chris will begin with a corporate update and a high-level overview of the financial results for the second quarter of 2010. Nancy will then review the second quarter financial results in more detail. We expect the presentation segment to last about 10 minutes, after which we will be happy to take questions from analysts and investors. Please note that all amounts are in Canadian dollars with the exception of Bangor Hydro Electric, where segment results are reported in US dollars.

I will take a moment to remind you that this conference call may contain forward-looking information which involves 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, but are not limited to, 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 live webcast.

And now I will turn things over to Chris.

Thank you, Jen, and good afternoon, everyone. I'd like to start by saying that we are very pleased with our strong results for the first half of 2010. And we're on track to meet our growth targets for this year. We experienced record earnings this year to date, and made progress on our growth strategy.

Consolidated earnings for Q2 of 2010 were CAD29.6 million or CAD 0.26 per share, compared to CAD38.1 million or CAD 0.34 per share in the second quarter of 2009. As you know, mark-to-market accounting adjustments at Bear Swamp sometimes have a significant impact on our reported results. Excluding those adjustments, our earnings increased to CAD110.8 million for the first half of 2010 from CAD103.6 million for the first six months of 2009. Nancy will go into more detail about our results later in her remarks.

We've certainly been busy this past quarter throughout all of our businesses. Our teams are hard at work on several projects, and we're pleased with the progress so far this year. All three of the wind projects in Nova Scotia are expected to be built and delivering energy to customers by the end of the year. And will contribute towards achieving the Company's targets under the renewable energy standards. As of this past Wednesday, all of the 11 turbines at Point Tupper Wind Farm are commissioned and operating.

Also on the renewable energy front, biomass plays a critical role in renewable energy strategies around the world, displacing foreign fossil fuels with local renewable energy. We believe it will play an important role here in Nova Scotia as well. Last quarter, Nova Scotia Power announced its intention to develop a 60-megawatt biomass co-generation facility with its largest customer, NewPage for Hawkesbury and Cape Breton. This partnership is consistent with our commitment to only pursue projects where we are assured that sustainable harvesting practices will be employed. This energy will be firm supply, which is easy to integrate into the electricity system. The regulatory process for this project is ongoing and a decision is expected in the fall. If approved, the CAD208.6 million investment will go into Nova Scotia Power's rate base.

We can't talk about renewable energy without addressing transmission. Last month, Emera was pleased to participate in the announcement by the provinces of Nova Scotia and New Brunswick to work towards an agreement to develop a new transmission from Colchester County in Nova Scotia through Southern New Brunswick. This is a great first step, but there is much work to be done.

New transmission capacity in Nova Scotia and New Brunswick benefits everyone in our region. It improves our options for future renewable energy development. It enhances the reliability of our system, and these kinds of transmission improvements will create the potential for a regional approach to dispatching energy resources. Emera is very pleased to work with our partners in the region towards integration of energy assets. This kind of opportunity creates tremendous value for all involved.

In Maine, the process to merge with Maine and Maritimes Corporation, a regulated utility in Northern Maine, is proceeding well. Maine and Maritimes shareholders voted to approve the transaction on July 22. This is a significant step forward. The regulatory process is continuing and a decision is expected in the fall. Keeping with our strategy, this merger allows us to grow our service territory in the northeast. Maine plays an important role in the Maritime and New England energy markets. We look forward to serving the customers of Northern Maine and building on a strong community reputation established by the Maine Public Service Company.

The regulatory process continues for our acquisition of the California assets of Sierra Pacific. On June 8, a hearing before the administrative law judge was held in California, and we expect a preliminary decision in September. We are starting to build scale in the Caribbean with the closing of our acquisition of 38% of Light and Power Holdings Company in Barbados. We're excited about our investment in this high-quality regulated utility business, which serves 120,000 customers on the island of Barbados. Barbados Light and Power is generally recognized as one of the best-run utilities in the region. This investment makes us the largest shareholder in the Company. We're now doing business in Barbados and working directly with Barbados Light and Power.

We're pleased with our results and progress so far this year and continue to see many opportunities in both our new and existing businesses.

With that, I'll turn things over to Nancy, who will give a more detailed update on our financial results for the quarter.

Thank you, Chris, and good afternoon, everyone.

As Jen mentioned, our second quarter financial results were released earlier today and are on the Emera website. Emera's consolidated net earnings were CAD29.6 million in the second quarter of 2010, compared to CAD38.1 million for the same period in 2009. Quarterly earnings per share were CAD 0.26 compared to CAD 0.34 in 2009. Mark-to-market adjustments were not a factor this quarter.

In the first half of the year, earnings were up to CAD110.8 million or CAD 0.98 per share in 2010, compared to CAD103.6 million or CAD 0.92 per share in the first half of 2009. These results exclude the effect of mark-to-market accounting adjustments. Consistent with prior periods, the mark-to-market accounting adjustment relates to Bear Swamp's long-term contract with the Long Island Power Authority. Nova Scotia Power earned CAD14.9 million in Q2 2010, compared to CAD22.8 million in Q2 2009. This change was due to reduced electric margin and higher operating costs driven by pension expense and Customer Service initiatives.

The lower margin was caused by two main factors. Higher fuel costs meant we were unable to earn the fuel incentive as set out in the fuel adjustment mechanism as we did in 2009. And warm weather in the quarter reduced electric load. The decrease was offset by the continued benefit of tax incentives related to our significant renewable investments. Although NSPI's earnings were down in the quarter, they are ahead of last year for the first half of the year. We are pleased with NSPI's outlook for this year. The utility is executing on its significant capital program, and we expect NSPI will earn within its rate of return range for the year.

Bangor Hydro contributed $7 million to consolidated earnings in Q2 2010, compared to $5.3 million in Q2 2009. This increase was caused by transmission revenue increases and recovery of regionally funded transmission investments. The pipeline segment contributed CAD8.7 million to consolidated net earnings, compared to CAD4.7 million in the second quarter of 2009. This increase is due to higher earnings from Brunswick Pipeline as it commenced operations in July 2009. And finally, NSPI issued CAD300 million of 30-year medium-term notes in June at a very favorable rate of 5.6%, and Emera had a successful preferred share offering in the quarter, strengthening our balance sheet.

That's all for my financial overview. Thank you, and we'll be happy to take your questions.

Thank you. Questions will now be taken from the telephone lines.

(Operator Instructions)

The first question is from Linda Ezergailis with TD Newcrest. Please go ahead.

Thank you. I have some questions related to the proposed transmission line between Nova Scotia and New Brunswick. I guess first of all it would be good to know what the potential timeline would be in terms of crystallizing the opportunity and ultimately bringing it into service. But also I'd be interested to get a sense of what the preliminary thoughts are on order of magnitude of the size of the investment and how that might be split between New Brunswick Power and Nova Scotia Power, given that Nova Scotia Power probably has better access to capital.

Yes. Thank you, Linda. It's Chris. It's a little bit early to answer some of those detailed questions. I think at the highest possible level, the project would be somewhere between CAD300 million and CAD500 million, that kind of order of magnitude. The project is likely to be something that if in fact it goes forward would happen in the next two, three, four years, maximum.

But it's still very, very early, and so we're working closely with all of the stakeholders involved and seeing whether or not there's something that we can get done here. I think what we were quite encouraged by is that the two provinces actually very much endorsed the approach. The two provinces I think believe that it's an important evolution of the electric system in the area. And there's a lot of goodwill I think in the market right now in order to cooperate and to move the advancement of the system. So, all those things I think are in the interest of the whole maritime region, and we're just pleased that we're taking those steps.

Great. And just as a follow-up on specifically on your quarter. Emera Energy was a little bit lighter than I would have expected. And maybe I wasn't factoring in the Bayside as much as I should have. But maybe you could give a sense of if there were any other moving parts or market dynamics going on to affect Emera Energy's earnings this quarter and what the outlook might be for that part of your business.

Linda, it's Nancy. If you look at Emera Energy for the six months and take out the mark-to-market for Bear Swamp, you get about a CAD7.8 million first six months of the year. So, while the quarter was low, that same number is about -- as we said, the mark-to-market is very significant in the quarter, so it takes it to about CAD2 million -- sorry, CAD200,000, so flat for the quarter but still fairly strong. It's a little bit affected by some mark-to-market in the Emera Energy business itself and to some extent a little bit in Bayside. But CAD7.8 million of EBIT we think is pretty strong and bodes well for the year.

And I think, Linda, the other thing I would add is that in fact the gas coming out of the offshore in Nova Scotia is declining quite rapidly now. That declining gas volume is actually affecting the marketing business that we have there. And so one of the things that we're doing strategically is beginning to get that business much more involved in assets. So, its acquisition of Bayside, the movement of Bear Swamp into that business, those are all steps that we're taking in order to begin to change the business out of Emera energy, and to move them much, much closer to the assets as opposed to being open to marketing. Just simply because the supply is getting much less over time.

So, CAD7.8 million is a really good first half of the year. The expectation would be that you could potentially match that for the second half?

Yes, it will be in that range.

Okay. Great. Thank you.

Thank you. The next question is from Sam Kanes with Scotia Capital. Please go ahead.

I'm also curious in the quarter and your capability of controlling I guess certain expenditures, starting, let's say, with pensions. Usually, in mid-year, you wouldn't have a pension adjustment. You've had some kind of reassessment or income that's different or something like that, I guess. Was any of that reflective of Q1, or is it just a go-forward? How would you characterize that?

Sam, it's Nancy. There wasn't really any pension adjustment. The pension costs are as we knew them as of January of this year, so it's just you can see them affecting the OM&G a little bit. I think that if you look at Nova Scotia Power's OM&G number, I think for the first six months, that's a pretty good run rate on a six month basis. And we would see that level of OM&G continue through the year.

Okay. The accelerated CCA you've been able to use, I presume you're using the maximum extent possible. Is that true? And how will that roll forward? Obviously, it's tougher for us on our side of the street to estimate tax provisions.

Yes, it does. We are taking the maximum. The way that we do it is we estimate our total tax provision for the year, and then we attribute that to each quarter. And so I think from a tax perspective, I think that if you look at the tax we take for the first half, it's probably a good indication on where we're be on a --

On a run rate.

Yes, on a percentage basis against earnings for the other half of the year.

Okay. Lastly, planned, unplanned outages. Obviously, you were a little light on Hydro, bought more purchase power, which raised of course costs. Was there anything unplanned in the quarter?

It's Rob here. No, there wasn't anything significant unplanned. It's just regular purchases to facilitate our annual maintenance program on the power plants and often when we're making import purchases it's because it's an economic advantage for our customers, and we buy in that market.

Okay. So, some of that was opportunistic buying, hypothetically.

I would say most of it was opportunistic buying.

Okay. Thank you.

Thank you. The next question is from Bob Hastings with Canaccord. Please go ahead.

Thank you. Chris, you mentioned that you saw many new opportunities in existing areas and some new ones. Is there any kind of strategic shift happening or -- I mean, because of these opportunities? Or is it still all in the same areas you've talked about before. They're just getting closer?

No, it's all in the same areas. And we continue to be focused on the renewable development work that we're doing and that intensifies. Transmission, we've done a lot of work on transmission in New England. We're now starting to see the opportunity to do more and more of that broader, more than just in and around our Bangor assets, so transmission is going to be big. And I think as we start to look at the various assets that we have, each one of them has opportunity for each one of the different things that we're trying to accomplish. And last but not least, we continue to see opportunities on the gas side. And so we will do more work both with gas generation and also with transportation.

So, those are all very much the same theme. You've got to remember, Bob, we're sticking to our knitting, doing the things we know how to do. And we just continue to see more and more of that activity available to us.

Well, then, to your credit, you started off on the transmission very early, have been pursuing this and had some strategic acquisitions it looks like. So, now that you've progressed this far and you're seeing a lot more, would you be so bold to maybe give a range of what you see as opportunities? And I won't hold you to whether you make them or not.

Well, I think as we've been saying in our investor presentations and just generally, we see a number of major projects which will turn into several billion dollars of investment over the next number of years. And we've quantified that in the various businesses publicly, and we continue to see that opportunity. So, we're quite bullish on the next five years and we're quite excited about the opportunities.

The other thing that you will note that has happened is that, because of the number of projects we've taken on as a business, we've really enhanced the capacity of our organization to take on these projects. And so the management of these things is actually happening deeper in the organization all the time. An example of that is the fact that the Bangor Hydro team has basically been completely responsible for the work of Maine and Maritimes. In the past, that would have happened more at an Emera level. At this point, it's actually being conducted very, very well by Bob and Jerry and the team there, and things are going well. So, that's helping us to multiply our capabilities and capacity.

Okay. And just to pursue what you were talking about there on gas, you mentioned that the gas offshore is getting leaner, but yet you saw more opportunities. Can you expand on that?

Well, so at the same time the Sable project is going down, there's a new project offshore that's coming up. So, as you look at what's happening in the maritimes, that's going to be a dynamic that changes. As well, more and more gas is coming into the LNG terminal in Saint John and so we're excited about that and look to play a role there. And we can't ignore what's going on in shale even right here in the maritimes. So, there are activities that are occurring right now. And we see eventually, we think, all of those things will turn into more, and we will make sure that we're well positioned to be able to participate in some way.

So, to be clear, you're not looking at getting in the gas exploration production business. You're really looking to transport it by pipeline or burn it and make more power as you try to get off coal.

Right. And as we said, sticking to our skills and sticking to the things that we've been successful in so far is how we're going to be successful.

Okay. Well, that's great. And then just something on the Caribbean strategic-wise. Dollars invested to date. You're getting the returns that you want, or what needs to get done there to get there?

Yes, I'd say we're very pleased with both our Saint Lucia and our Barbados investment. Obviously early days in Barbados, but already it's starting to produce very well for us. And that's obviously helping this year, and that's a big part of what our year end will look like.

The other thing, we're still not happy with Grand Bahama. We still continue to advise and to work with the team there and progress is happening a little more slowly than we'd like. But we firmly believe that that utility will turn around in the right cycle and will also become a good producer for us. But it takes time, when something needs work with long-lived assets as we have in this business. It takes a while to get them in the right place.

Okay. Thank you.

Thank you.

Thank you. The next question is from [Michael] Ackerman with Macquarie.

It must be Friday afternoon.

Is that what you said, Matthew?

Hi, Chris. Nancy, questions on Barbados. I guess following up on that. It looks like the Caribbean had a good quarter, so going to assume that's in large part Barbados, as you commented. I'm just wondering whether we should look at it just like that, or whether we, in order to get the full picture of Barbados earnings, have to look at some offsets of that in the rising corporate costs. Or is that rising corporate cost not to be linked with an acquisition like Barbados? How do you think about that?

So, the Barbados of course, the contribution from Barbados is just beginning, probably about CAD1 million of that CAD2.1 million. So, as Chris said, we're going to start to see the contribution from that coming in the second half of the year, which we're happy about. In terms of corporate, was your question, Matthew, was your question --

How do you look at that? Is that because of some of the acquisition activity that corporate costs are rising?

Yes, a little bit. To some extent, Maine and Maritimes and our work in Barbados, those costs would be reflected there and likely will end up being capitalized at the end on Maine and Maritimes, for example, once that transaction closes.

Okay. I see. So, part of that is the acquisition activity.

And Calpeco as well. As the regulated process goes forward, we're still spending money there on that acquisition.

Those three projects, Matthew, all had significant due diligence, legal costs, et cetera, of two regulatory processes. Put all those things together, they do turn into some big numbers, but most of those on closing will actually roll into the businesses.

Okay. I have two more questions, you led me into one on Calpeco. Chris, you said how the organization is staffing up to deal with more activity. But what is the role of Emera in the Calpeco process right now versus what is the role of Algonquin in that process.

Well, the agreement we have with Algonquin is that we're going to work with them as they move into that and advance their skills in that area. So, in the early days, we will be more involved. In the later days, we will be less involved. And it's our objective that Algonquin would ultimately end up running that utility but we will -- and we have said this to the California regulator as well. We will provide our utility expertise as needed, and we'll also provide people as needed in the short term, looking to see Algonquin step into that role in the longer term.

But right now, you're pretty deeply involved in the due diligence and the regulatory approval process?

Well, we are, but that doesn't turn into a lot of people. We probably have maybe three Emera people in total involved, and probably not even in a full-time way. So, but in fact, Ralph Cadesko, who retired from Nova Scotia Power but is still working with us, is the lead senior person on that particular project.

Okay. That's good. Mostly wanted to make sure you guys were directly involved. And then my last question is on Bayside. So, is Bayside actually losing -- did it lose money in the quarter, then? Is that what happened? And then I guess given the warm weather we've seen in the northeast during the summer, is that just going to reverse in Q3?

Yes, so Bayside. Year-to-date, it earned several million dollars. I would say in the quarter, due to some mark-to-market stuff, it actually lost in the quarter. But year-to-date, it's positive.

Okay.

Yes.

And then the third quarter, is it benefiting then from some of the big peak pricing we're seeing? Are you selling that into New England?

No, at this point most of -- so, the focus for Bayside is for us to get that plant contracted. So, it has a five-month contract today and it does very well during the month because it has that five-month contract. It's then fairly open in the summer period, although we contracted it now for both this summer -- or majority of the plant for this summer and now again for next summer. So, we're beginning to get it contracted in the way we want. We're continuing to work hard to actually get it much more fully contracted. So, that's really the secret to the plant.

The reason that its margins go down in the summertime when gas prices are low is simply that it is about the spark spread involved. And so if you have high gas prices, it does better. If you have low gas prices, it doesn't do quite as well just because there's a spread there. So, our focus for that plant is to get it contracted. We're making great progress there, and we will be happy with it when we have it contracted the way that we want.

Okay. Thanks. Those are my questions.

Okay. Thank you.

Thank you. The next question is from Michael McGowan with BMO Capital Markets. Please go ahead.

Hi. Good afternoon.

Good afternoon.

Hi, Michael.

I had a question about your guidance regarding earnings growth. Talking about 4% to 6% earnings growth. And if you actually essentially do the same as you did last year for the last half of the year, you'll be coming in around 3%. So, really, in what business segments do you see the growth occurring?

Well, our growth has been occurring right across our business, and so we would continue to see that happening. And all we're saying is that over the last five years we've been able to achieve growth in our business. Our annualized rate over the last five years has been 9%. We think that this year we absolutely will meet our 4% to 6%, and if things go well, we'll exceed that. But at a minimum we'll meet our 4% to 6% growth. And that's what our target is, and that's what our objective is. But it's across the whole business. It comes from every part of the business.

And Mike, you can't forget that Nova Scotia Power's got a significant capital program. And so if you look at that against this depreciation and the growth in the rate base, you will see some earnings increase in Nova Scotia Power, and we've said they're going to earn within their allowed rate of return.

Well, most of the earnings NSPI this year have really been due to tax savings on the renewable investment, so we're going to start to see earnings from the rate base additions in the last half?

Well, I think those are earnings essentially from the rate base additions. If we've got tax savings because we're on cash taxes, then we don't need to go to the customers to ask for more money. So, that is part of the rate base growth, and it does form part of the return on rate base.

I think, Michael, we prefinanced a number of the projects, so there's some higher-cost financing in there right now. That will obviously be consumed over the next number of months. The AFUDC on the projects will come in. That will be helpful from an earnings perspective. And it's a regulated business. You couldn't go to the regulator and ask for revenue requirement when you actually don't need it. And with the tax savings, we don't need revenue requirement at this moment.

So, it really doesn't matter what the source of that revenue or what the source of that cost savings is. What matters is what the Company needs in order to earn within its allowed band. It's doing that. It continues to do that. It's putting more capital at work. We're very pleased with the way that Company's performed.

Michael, it's Rob here. I should just point out that at this point in the year, we are almost exactly where we thought we would be in our business plan. In fact, we're a little bit ahead in the first two quarters, so we're quite happy and we see the end of the year working out within our allowed range of return.

Okay. No, that's very helpful. Thanks. I do have a follow-up question on Emera Energy, though. You're talking about CAD7.8 million of earnings for the first six months, ex mark-to-markets there. And now that you have Bear Swamp in there, it usually does operational earnings of CAD3 million to CAD4 million a quarter. So, was the contribution from Bayside and Emera energy, the trading and marketing business, really even that material in the first half?

So, I think that the Bayside and the Emera Energy is the difference between those numbers, and you're probably in about the right range for Bear Swamp absent the mark-to-market. So, CAD8 million, probably CAD3 million or so from Bear Swamp, CAD3 million to CAD4 million. So, the other half came from Bayside and Energy on their business.

I'm sorry. You're only saying CAD3 million of operational earnings from Bear Swamp?

Well, I think usually we expect -- it's CAD3 million to CAD4 million.

Per quarter, isn't it?

Yes, sorry, CAD3 million to CAD4 million per quarter.

And if you did CAD7.8 million for the first half, wouldn't the contribution from Bayside from Emera Energy be fairly small?

Yes, it is reasonably small. But, again, as Chris said, we've contracted that plant up in the winter months, and we're expecting stronger earnings from them from the last half of the year.

Michael, I think you're getting to the approach we're taking with Emera Energy, which is that we're putting more assets involved with the skills that exist from the marketing side. And so we're building the business in a somewhat different direction than it originally existed in. And so that's the stage that we're in with that business right now, building it and putting some assets in there.

Great. Those were my questions.

Thank you.

Thank you. The next question is from Andrew Kuske with Credit Suisse. Please go ahead.

Good afternoon. Not sure if this is a question for Chris or for Rob, but if you could just give us an update on what's happening with your title power initiatives.

Yes. It's Rob here. The title power unit is still in the Bay of Fundy right now. We're doing the environmental testing program that we had intended to carry out through the balance of the spring and summer. As we reported earlier in the year, we did find some evidence of damage to that title unit. We believe the two blades on the machine had been damaged. That was discovered by Open Hydro, the technology manufacturer. And the plan is in place now to pull the unit up and do a full inspection late in the summer or early fall. We're still nailing down the exact time frame that works best for us with the title cycles and also with the people who are operating around us, doing the environmental assessments.

And how challenging do you anticipate some of those maintenance activities to be? Those units are actually quite sturdy and sinking them and also hauling them back up is challenging.

It was designed with this in mind. It has a special frame and [bearage] system that comes with the unit to lower it and raise it off the bottom. Work is being done right now on the planning aspect of moving that into a safe harbor and doing all of the inspection work that we need to do somewhere in the Bay of Fundy area.

Andrew, I think what we're now experiencing is all the things that we need to understand about the nature of this technology, the nature of the Bay. All those kinds of things are what's being learned now. We do have to be able to recover these things. We do have to be able to test those designs. Those are all things that need to happen if this technology is going to ultimately be deployed.

The other thing that's going to happen, once it's out of the water, is we're going to look at what needs to be done. Was this a freak situation? Was this something that could be predicted? And what modifications need to happen to the technology in order to be able to go for the next round of tests. I mean, all this is learning. We expect it to be a learning experience, and so far, so good.

That's helpful. And I'm not sure if this is a question either for Chris or for Nancy. You're going to become a US GAAP reporter in 2011. And you've also disclosed that you're going to become a US registrant. So, I'm just curious on I guess a few points. Do you plan on having a New York Stock Exchange listing or retaining a listing that Maine and Maritimes has at this point when that deal closes?

No, we don't. We're not actually planning on listing in the short term, anyway, Andrew. But as you say, we are today -- Nova Scotia Power is actually a registrant and Emera will become one in early 2011.

And so Andrew, we're moving gradually. We're becoming a foreign issuer first, and that would allow us to raise capital in the US. And we'll just look over time at what kind of access to those capital markets we need. And as we see that changing, then we would change our status. But for now, we're a foreign issuer and we'll move from there.

Okay. That's great. Thank you.

Thank you. The next question is from Robert Kwan with RBC Capital Markets. Please go ahead.

Thank you. Just first with respect to the proposed federal greenhouse gas regulations. Can you just run down what the proposed decommissioning dates under that plan on the 45 years would be for the NSPI units?

I think Rob is best to do that, but I think it's not completely that clear, I wouldn't say, that that's where we are with the federal plans.

No, it certainly isn't. It is very early in the process from a proposal point of view from the Federal Government in terms of understanding exactly what impact that might have on our business in Nova Scotia. What we do know is there are firm caps on carbon at the Nova Scotia provincial level that we've been working to today, and all of our plans include meeting those out to 2020. Those firm caps on Nova Scotia are about equivalent to the desired carbon reductions that the Federal Government is trying to achieve, so we'll have to wait and see and work with the people in Ottawa to determine how to best implement their plans in Nova Scotia.

Have you been in any discussions since then with the UARB with respect to maybe accelerating some plans for gas-fired units?

No, not at this time. Again, we're still working to understand the details of how the federal regulations will evolve, and when we understand that, we will modify our current thinking in Nova Scotia to align with those plans.

And I think, Robert, it's important to note Nova Scotia Power has a plan to gets them to 2020 around the caps that Nova Scotia has put in place. There's not a difference between the outcome of the caps that are in place in Nova Scotia from what the federal framework contemplates. So, Nova Scotia Power's in very good shape with its plan to 2020. And clearly there's some work to be done post-2020, but that's what the team is working on today.

Okay. I was just wondering if there was some benefit of accelerated rate based capital spend. I guess the other question. Just a little bit similar to that. You've talked about your outlook for NSPI's growth as 2% to 4% over the next five years. But if you look at the CAD600 million of spend this year, continued renewables, maybe there's something on the transmission side, the growth at least this year seems to be high single-digit rate-based growth. So, I'm just wondering what else you might be seeing that would moderate the overall earnings growth down into that 2% to 4% range.

You mean for the entire organization?

Well, I think you had just talked about, yes, NSPI expecting earnings growth of 2% to 4%. I would have thought that based on what we're seeing for rate-based growth that it would be quite a bit above that.

Well, I think that when we talk about that, we talk about over the next five years, it looks in that kind of range. And when we look at the various projects that the Company has on the go. We still feel that that's pretty comfortable from a numbers perspective, and then that feeds into our 4% to 6% growth for the entire Company. Again, at this point we feel pretty good about those numbers and we would still be sticking with them.

Would you view that maybe as a conservative estimate based on the most visible projects that you can point to specifically, rather than what could evolve, based on needing to meet the renewable standards?

We have a very detailed plan, and that plan is aligned with meeting the renewable standards here in Nova Scotia and other capital enhancements that we're going to make they the business to improve reliability and service. And it's that plan that's reflected in the growth targets that Chris spoke of earlier.

So, Robert, I think the most important part here. So, could the capital be higher than that? You know, it's possible to envision that it could be higher. But something that's very important is this evolution, and it is an evolution, from our existing carbon intensity down to a much, much lower carbon intense system. And it's happening not just in Nova Scotia. It's happening in the maritimes. It's happening in the northeast. It's happening right across the whole region. So, it also still those be paced at such a rate that it works for the customers and for market participants. And I think that's the balancing act that we all try to meet, is making sure that it's the right pace.

But if we can find capital investments that reduce costs and achieve lower carbon, and we're always looking for those, but if we can find those, then yes, we'll put more capital in the business. But we have to balance that all the time. The potential transmission investments that we were talking about earlier are some of those kinds of investments. If they do lower costs, then that helps and that could increase the capital. But it's a balancing act that you have to strike the right balance.

Okay. Just my last question. I think it's probably for Nancy. Just with the preferred shares you issued, can you just talk about how you see the funding plan unfolding over, say, the next 12 to 18 months and specifically just on your thoughts on equity?

Yes, so I guess I'll start by saying we said we're going to be in the market on a regular basis, and we've certainly done that this year. We've issued debt, as you know, and then issued prefs in June. Those prefs really serve to strengthen our balance sheet. So, I think for the time being, we're happy with where our ratios are and we don't see any need to do anything further in the near term. But certainly over the longer term, we feel we'd need to be back in the markets, as we said.

When you talk about longer term, are you thinking 2011 longer term, or even further up than that?

No, I think probably 2011.

Okay. Perfect. Thank you very much.

Thank you, Robert.

Thank you. The next question is a follow-up question from Bob Hastings with Canaccord. Please go ahead.

Thank you. Chris, I don't know if you want to answer this one. But I think I saw you quoted when all the kerfuffle was going on with New Brunswick power and after Hydro-Quebec walked away, that would you be looking at it. And I think your response was we look at everything and we'd be interested in talking. Do you see that as any really kind of possibility or real opportunity that may or may not come to fruition?

Well, Bob, I think what you see us doing is very much what we are focused on. We think that the energy assets in this region can be optimized, can continue to be optimized. That's going to require investment. So, we're talking about transmission. We're talking about generation. And those are the things that we think will happen, and those are the things that we're really focused on.

I think beyond that, the kinds of things you're talking about are decisions that have to be made in the province where the issues are. And I think that's something that we leave to them. But fundamentally, we see a lot of opportunity to invest around our existing assets, around the areas where we work. And we think all of that can turn into more stable, potentially lower cost for customers, and also help to transform the sector to a much lower carbon world. So, that's really where we're focused and we'll continue to be focused there.

Just wondered, if that were to come for sale, that might be a game changer for you in terms of what you're able to do beyond that. Because it would be a big thing to swallow and it would take a long time to pursue those other things that you're trying to do now. And so I just wondering if it was coming up and if you're really that interested if it did come up.

I think my answer would stand.

Okay. Thank you very much.

Thanks, Bob.

Thank you. The next question is from Petro Panarites with CIBC. Please go ahead.

Thank you. Good afternoon. I guess now that you've elected to stay in the Caribbean, could you give us an update of what your investment outlook is there over the next four, five years.

Yes, Petro. I think what we've said consistently over the past period is that we're looking to put somewhere between CAD250 million and CAD400 million to work over the next three to five years. We're at about CAD150 million right now. We continue to see opportunity, and so I wouldn't modify that at this stage. That's about where we are.

Okay. Thank you.

Thank you.

Thank you. There are no further questions registered. I'd now like to turn the meeting back over to Mr. Huskilson.

Okay. Well, thank you very much. I'd just like to thank everyone for their participation in the call today and your interest in Emera. And I hope everyone has a great weekend. Thank you all very much.

Thank you. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.