Emera Inc (EMA) 2012 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to the Emera second-quarter 2012 conference call.

I would like to turn the meeting over to Ms. Jill MacDonald, Manager of Investor Relations. Please go ahead, Ms. McDonald.

Thank you. Good afternoon, everyone, and thank you for joining us for our second-quarter conference call this afternoon. Joining me in Halifax are Chris Huskilson, President and Chief Executive Officer of Emera; Scott Balfour, Executive Vice President and Chief Financial Officer of Emera; Rob Bennett, President and Chief Executive Officer of Nova Scotia Power; and in Maine, Gerry Chasse, President and Chief Operating Officer of Emera's Maine utilities.

Emera's second-quarter earnings release was distributed earlier today via newswire. And the financial statements and Management's discussion and analysis are available on our website at Emera.com.

This afternoon Chris will begin with a corporate update, and then Scott will review the financial results in 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 Emera's Maine Utility Operations where segment results are reported in US dollars.

I'll 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 this conference is being widely disseminated via live webcast.

And now I'll turn things over to Chris.

Thank you, Jill, and good afternoon, everyone.

This has been another good quarter for Emera. With net income for Q2 of 2012 of CAD53.2 million or CAD0.43 per share, compared to CAD29.9 million or CAD0.24 per share in Q2 of 2011. Scott will take you through the details of the quarter later in his remarks.

I'm proud of what has been accomplished this quarter. And especially pleased that on July 31, we completed and signed the commercial agreements with Nalcor Energy regarding the Lower Churchill project. The signing of these agreements was a key milestone for a project that will be transformational for the region. The 13 signed agreements are now publicly available online on Emera, Newfoundland and Labrador's website.

With the signing of these agreements now behind us, I want to provide some perspective on what Emera's next steps are for the Maritime Link. Next, we'll file our formal application with the Nova Scotia Utility and Review Board. This will occur this fall and will lead to a public hearing on the Maritime Link and the project construct as a whole.

Our team is working hard to finalize the Level 2 engineering estimates, and that work is progressing well. We expect final investment, decision, engineering and cost work to be complete by the end of 2013.

We're also at the front end of the major contracting strategies to firm up supply schedules and costs for major components. For example, we're now working with our cable supply and install approach, a substantial portion of the project. Work continues to advance on the environmental assessment in both provinces. And we have people on the ground beginning land surveys and talking to land owners to define the optimal routing and to answer their questions.

We have completed open houses as part of our environmental review. And continue to work with [Migma] communities as we look forward to an environmental assessment decision early in 2013. Each of these initiatives, along with receiving regulatory approvals, will provide Emera with the information required to formally approve our investment in the Maritime Link project. Construction is expected to commence in 2014.

Now we'll move to the progress we made during the quarter in the rest of the business. Our services business had a great Q2. On the energy marketing side, the month of June was one of the best summer months in Emera Energy's history. It has been Emera Energy's focus on producers in the Marcellus region over the past 12 months that has increased our access to both natural gas production and transportation which allowed us to take greater advantage of the hot June weather in the Northeast.

Also, on the services side our Bayside power plant had a strong quarter and great first half of the year. For the first six months of 2012, Bayside achieved a 97.5% availability and a 99.9% reliability. These results are particularly impressive considering the plant is beyond the fourth year of a four-year operating cycle.

Bayside is scheduled to be removed from service during the third quarter, for us to complete major maintenance and an upgrade. The shutdown is expected to last roughly two months. And the work completed will increase the plant's generation capacity by 30 megawatts, improve operating efficiencies by 2% to 3%, and reduce operating costs by about 10%.

In Nova Scotia, we're pleased that Nova Scotia Power recently was awarded all three win developments in the latest competition as a minority owner. In fact, the three projects totaling 116 megawatts were the only winning bids chosen by the independent renewable electricity administrator as part of the province's renewable energy strategy. These results clearly show that Nova Scotia Power is the lowest-cost wind producer in the market. And that our participation in these projects leads to a better value for customers.

Also in Nova Scotia, construction continues on schedule for the Nova Scotia Power 60-megawatt biomass plant. The facility will be an excellent source of stable, reliable clean energy that will create jobs in our province. And help change our dependence on foreign-source coal, as required by environmental regulations.

In Maine, we're pleased to have closed our 49% investment in First Wind's Northeast assets. By having a larger presence in the Northeast US, we see many opportunities to continue to develop and invest in this market.

Another investment we continue to be pleased with is our investment in Algonquin Power. We recently filed an application with the Maine Public Utilities Commission that requests approval for us to increase our ownership in Algonquin to 25%. During the quarter, we exercised CAD12 million subscription receipts in connection with Algonquin's New Hampshire transaction. And were able to realize an after-tax gain of CAD11.6 million.

In July we exercised an additional CAD9.6 million subscription receipts in connection with Algonquin's Gamesa and Atmos transactions bringing our current ownership interest in Algonquin up to 17.85%. Algonquin continues to grow and raise its dividend in concert with this growth.

We continue to make progress on the development of the Northeast energy link with our partners National Grid. We're pleased the FERC issued its order on May 17 in response to our petition filed in July of last year. The order found that our proposal under which First Wind would fund the project in exchange for priority rights to use the line's capacity, is consistent with the Commission's open access requirements. This was an important milestone as we continue to build a renewable portfolio aimed at helping New England meet the renewable energy requirements.

Also in New England, the Massachusetts legislature recently passed an updated Green Communities Act. Under the Act, distribution companies will be required to solicit proposals from renewable energy developers for post 2013 generation. Contracts will be 10 to 20 years and are intended to satisfy an additional 4% of their peak load from renewables. Given Emera's investment in First Wind, Emera is well-positioned to identify opportunities as a result of this new legislation being in place.

Our Maine utilities continue to execute on key transmission investments. A substantial piece of Bangor Hydro's transmission outlook is their $60 million Down East reliability project, which is on track to be placed in service this year. Additionally, Bangor Hydro and Maine Public Service have approximately $150 million in transmission projects to complete in the next three to five years.

We saw strong results in the Caribbean this quarter. In the Bahamas our 52-megawatt West Sunrise plant went online on June 28. Effective July 1, we have a restructured rate plan in place at Grand Bahama that will allow for the recovery of the investment in the new West Sunrise plant, at a lower all-in cost to customers. And this summer rates have actually decreased for customers.

In Barbados, we continue to see operating efficiencies and remain focused on developing a clean energy strategy for the island. We're working closely with all stakeholders to ensure the success of the nation's renewable energy and energy efficiency plan. And expect to see this plan introduced into legislation this year.

All in all, it's been a great quarter, and we're pleased with our results for the year so far. We're making great progress with the execution of our strategy. And this is translating into record shareholder returns.

In fact, Emera shares recently hit a high of CAD35.72 and have provided a total annualized return to shareholders of 16.1% over the last five years. This result is one that we're particularly proud of as it is proof that our strategy is working.

Looking ahead, our EPS growth target of 4% to 6% averaged over the next five years remains intact. And this year, we are trending towards the lower end of that range. Important to note, our growth targets do include our activity with Algonquin Power.

And now Scott will walk you through the results in detail. Scott?

Thank you, Chris.

As Chris referenced, Emera's consolidated net income for the second quarter of 2012 was CAD53.2 million, or CAD0.43 per share, compared to CAD29.9 million or CAD0.24 per share in the second quarter of 2011. In our MD&A you'll see that we have modified the disclosure in our consolidated financial review to include two new non-GAAP measures, adjusted net income applicable to common shares and adjusted earnings per common share basic. In the past, we would have disclosed a similar non-GAAP measure under significant items. But adjusted Emera's net income and earnings per share for any mark-to-market adjustments related to our investment in Bear Swamp.

Our new measures represent Emera's net income and earnings per share absent all of Emera's mark-to-market adjustments which primarily result from Emera Energy's business, as their contracts fluctuate in value due to market price volatility. Management believes excluding the effect of these mark-to-market valuations from income until they settle better matches the underlying cash flows from these contracts. This also better reflects how we look at and manage the business.

At this point it's also important to note that these adjusted net income and earnings per share numbers do not normalize for the gains we have booked on the conversion of subscription receipts into Algonquin common shares. We view these gains as a proxy, albeit imperfect, to our share of Algonquin earnings had we invested directly in Algonquin's common shares at the outset, rather than the prudent and interim step of investing through subscription receipts. With that additional perspective, Emera's adjusted net income for the second quarter of 2012 was CAD46.3 million or CAD0.37 per share, compared to CAD32 million or CAD0.26 per share last year, an CAD0.11 differential.

The gains realized on our Algonquin subscription receipts account for CAD11.6 million or CAD0.09 of that. Additional conversions of subscription receipts to Algonquin common shares have already occurred in the third quarter. And more conversions are expected later this year and into next year. We've added a table within our MD&A that sets out all of the details of these actual and expected conversions.

Turning to our segmented results, notably our services, renewables and other investment segment, had higher earnings than Nova Scotia Power this quarter, contributing CAD23 million in the second quarter compared to a loss of CAD1.9 million last year. In addition to the improved operating performance Chris mentioned earlier, the increase is primarily due to the gain we realized on Algonquin subscription receipts, as previously noted. As well as mark-to-market gains in Emera Energy Services.

Nova Scotia Power contributed CAD16.8 million to consolidated net income in the second quarter of 2012 compared to CAD16.7 million last year. Earnings are pretty flat year-over-year as the impact of residential and industrial load reductions offset increased rates. Management remains focused on cost reduction. And Nova Scotia Power is still on track to earn within the regulated ROE band this year.

Maine utility operations contributed $7.3 million to consolidated net income in the second quarter of 2012 compared to $8.4 million for the same period last year. The decrease in net income is primarily a result of lower capitalized construction overheads due to lower capital spending in 2012. And lower revenues due to reduced load caused by unfavorable weather.

Caribbean utility operations contributed CAD5.4 million to consolidated net income this year, compared to CAD3.4 million in the second quarter last year. The primary driver for increased earnings was increased AFUDC earnings on the West Sunrise plant and improved efficiencies within Barbados Light & Power.

Pipelines net income contribution was consistent in both years at CAD7.3 million this quarter compared to CAD7.2 million in the same quarter last year. Lastly, Emera continues to generate strong cash flows from operations with CAD266 million as at June 30, 2012, an increase of 75% from this time last year. These strong cash flows provide us with secure cash coverage on our dividend and will help fund a large portion of our capital plan.

That's all for my financial review, but I'd like to conclude my remarks with some personal thought and perspective as a newcomer to Emera's executive team. I've been in the CFO seat now for almost four months, and it's very clear already that I've joined a very strong business and a very strong team within what I already knew to be an exciting and dynamic industry. It's already clear to me that there's a solid balance here at Emera between disciplined management practices and an entrepreneurial growth focus. And that's a balance that's often challenging to strike.

The quality and depth of Emera's team is impressive. And that's across-the-board, from the executive team to our various operations teams to the finance group and, of course, the Board. This is a highly capable group of individuals that truly work and excel together as a team, notwithstanding the breadth of different businesses and geographies in which we operate. And part of the reason for this that I can see is that Emera really doesn't just focus on results, although that's clearly a big focus. But we also have a huge focus on our people.

I came from a company where we made the journey to become one of the 50 best employers in Canada. And I see many of the same attributes and strengths here at Emera. And the growth opportunities for Emera are many, frankly, more than I expected when I joined, and more than I appreciated even just a few months ago. There's a great funnel of potential growth opportunities here and, frankly, that's exciting. All of these things bode well for a great future for Emera as I see it. And all in all, I'm very pleased I decided to join this team.

That concludes my remarks and now we would be happy to take your questions.

(Operator Instructions)

Linda Ezergailis from TD Securities.

I'm looking at your liquidity and capital resources for the quarter. And I see that you have a significant amount of undrawn and available credit facility at the Emera level. So I'm just wondering if you could maybe give us an update on any discussions you might have had with the debt rating agencies. And your views on Plan A for a financing plan. And maybe a ranking of your different financing options over the next little while.

Yes, thanks, Linda. It's Scott speaking.

Our Treasurer, Ken, has had a number of conversations over the last number of months with both the key rating agencies for us. And we're organizing introductions and the like over the next two months with myself in September, I believe.

And I think the conversations to date have been one of clarity and understanding, both as to the sensitivities that the rating agencies have expressed within their report. But importantly also helping them to understand the very question that you're asking around our capital financing plan. The process around the regulatory environment in regards to some of the capital spend that we have underway. And all that information flow has been very positive to date.

As it relates to our capital structure, we've continued to carry on a path as we look towards a very significant capital spend over the next five years. And we've disclosed the broad expectations of that. And we've communicated our targeted capital structure as to our blend of debt, preferred shares and equity. And we've, as you've noted that we've, over the last year, been active in the debt and preferred share markets. And it would be reasonable to assume that we will continue to look to the capital markets in order to continue to finance that growth.

While we do have undrawn capacity within the line of credit, we will continue to balance our utilization under that against our forecasted capital plans. And so, as I say, we would continue to tap into capital markets, as well, to finance that growth always with a mind to maintaining that balance of capital structure as between debt, preferred shares and common shares.

So I think I'm looking at that and looking where our capital structure sits today, I think you could make some assumptions as to the pace of activity or the sequence around when we're using debt, preferred shares and common share equity. And we don't have any specific plans at this moment. But, as I say, we will be active in the capital markets over the quarters to come, as we continue to finance that capital plan moving forward.

And Linda, it's Chris. Just a couple of other things that I think the rating agencies are looking for. They're looking for some certainty around the regulatory side. And so we've got a number of proceedings that we're going through right now. That will all be helpful as we come through those proceedings.

And I think the second thing they're interested is seeing the federal loan guarantee for the project at Lower Churchill actually turn into a formal and final agreement. And I think when we get those things behind us that will also help firm up our situation.

So they will give you credit for the federal loan guarantees when it happens?

Certainly, the entities will be financed as standalone entities with the guarantee attached.

Great, thank you.

Juan Plessis from Canaccord Genuity.

The text at the beginning of your MD&A now states that income from rate regulatory subsidiaries comprise about 80% of Emera's net income which is down from 90% that you previously indicated. Is that swing of 10% due to the increased ownership of Algonquin shares and the investment in Northeast Wind? Or is there something else in there that impacted that number?

Yes, I think that's more indicating what our target is than our actual situation. It is that we are targeting to stay above 80%. I think we're probably slightly above that at this point.

But you're right, some of those other activities like Algonquin and our investment in First Wind will have reduced the actual regulated component over the last little while. I think it's worth remembering that Algonquin has a lot of regulated investments, as well.

Right, thank you for that. And it also looks like your CapEx budget for major transmission projects at the Maine utilities came down by $30 million for 2012. Is that spend that will be moved into 2013 or is that a project that's no longer going ahead?

Juan, this is Gerry. Yes, it's a factor of the lumpiness of the spend of those capital projects. We still have, above and beyond the CapEx that we have this year, another $100 million to $150 million of CapEx that we will implement over the next three to five years. So it really is just a factor of the lumpiness of that.

Okay, so it's a timing issue?

It is.

Okay, great, thank you.

Andrew Kuske from Credit Suisse.

In your financial disclosures you highlight some of your counterparty exposure to Repsol. But I'm just curious. Repsol has made some announcements recently that they are looking to divest their LNG business. So just wondering, if it was to be divided into packages, what would your interest be in something like Canaport?

Thank you, Andrew. I wouldn't expect that things would be packaged up that way. My sense would be that if they're selling the business they would sell the business. And so we would look to see another strong counterparty there.

But at this point, our counterparty is Repsol. We continue to be comfortable with that relationship. And should they choose to sell a business then that's something that we'll look at, at that time.

And then just on the theme of Spanish companies, could you just highlight any discussions you may have had with any of the companies with exposure, utility exposure in particular, in New England that may be looking to divest certain assets. Just because we have seen some assets trade hands in the last few months, in particular, and anticipate there may be more things happening toward the end of the year.

Andrew, it's Chris again. I think there is lots of activity with European companies right now and we see people at least testing the market. I don't think we would go into details on any of those kinds of things that are going on. But there's no question that we do see an increase in activity at this point. And as always we're always looking in those areas and we would continue to see opportunities.

And then finally, if I may, not to beat the horse to death but just to stay on that theme, although a little bit different. Would you see yourselves supplementing your acquisition activities with pension fund capital on a private basis? Whether a pension fund would directly invest in Emera at a holdco entity or really take a partial interest in an underlying acquisition that you may make?

I think, Andrew, just in general, we've entered into lots of partnerships to enable us to do larger transactions. And also built some very good relationships with a number of key parties. So we're always interested in partnerships. They've worked out very well for us and continue to be a way for us to put our skills to work in the market. So that's certainly something that we would always be interested in.

But I think, as you look at how this whole thing unfolds, you can't forget that we are still quite focused on greenfield projects. We have a number of greenfield projects. Those projects are extremely strong, will be extremely strong contributors to our business. And they certainly do have our attention right now. And our experience would be that, in general, we get a lot more value out of those projects.

I'm not ruling out transactions but what I'm saying is that we actually are quite focused on the value we can create from our activities. And at this moment, those greenfield projects look the best. That doesn't mean to say that some of these divestitures, if they do occur, couldn't also be attractive. But our focus continues to be greenfield today.

Okay, that's very helpful, thank you.

Matthew Ackerman from Scotiabank.

Chris, I wonder if you could just characterize -- you've got the agreement in place now on the partnership with Nalcor. I'm just wondering if you could characterize the remaining political hurdles around the project, maybe province by province, as they might present themselves in Newfoundland and in Nova Scotia.

I think there are very few steps left as we go through the project. If you start with Newfoundland, there is going to be a debate in the House of Assembly in Newfoundland sometime late summer, early fall time frame. And so we're looking forward to that being the point at which they will sanction the projects from their perspective. And so we're looking forward to that.

In Nova Scotia, I think the legislative and regulatory framework is now in pretty good shape, pretty well known. And we see our next step here as being a regulatory filing. And so it is moving through the steps and making sure that Nova Scotians are very well able to understand both the opportunities and the costs associated with the project. And have a very good and fulsome hearing in front of the regulator on the project. And that's going to be the next step there.

And then, lastly, we do have to finalize the federal loan guarantee. It's a very important part of the project. It will directly reduce the cost of this project for customers and rate payers in both provinces by something in the order of 10%. So it is an absolute material piece. And the value of that loan guarantee will pass directly to customers in the provinces.

So that's a very important piece, as well. But, again, I think it's in good shape. It's just a matter of getting to the conclusion, just as it was a matter of getting to the definitive agreements.

Do you feel that the government of Newfoundland has enough data and information and evidence in front of them to finalize the debate on the topic?

Again, my understanding is that that will be a very transparent process. And I believe that that is coming together as we speak.

Okay. And in Nova Scotia would you characterize the debate as more at what return you get on this investment or does this investment make sense at all? My sense is that there's a general buy-in that this investment makes sense, it's the best way to meet the targets and it's more just the details of the rate-making around it. Is that how you'd characterize it?

Yes, I would say so. The void of information in Nova Scotia at this moment is about costs and rates. And it is simply because we are just finalizing those numbers, as we speak.

The Level 3 estimate, or the Level 3 cost figures coming out of Newfoundland are just beginning to be available. And I think in a short while that will happen. Those, along with our Level 2 numbers will help us put together the final rate-making case for customers in Nova Scotia.

And so it will be a combination of looking at the value that will come from the power year one through year 35. And, as well as the opportunity it creates in Nova Scotia. Because the project allows things to change in this market in a way that they've never changed before. It will allow a lot more access to additional power. It will allow us to build more wind. It would facilitate the opportunity to build title if that becomes commercial.

So all those pieces have to be added into this equation, as well. And I think those pieces are becoming better and better understood and there certainly will be a lot of information on the table once we make the filing before the regulator.

Finally, you guys were saying you hope to have all of this in place, I think, by the end of this year. Is that still really feasible or are we looking at maybe a bit of a delay?

Again, I think what we're looking at is being in front of the regulator in the fall. That has now in the, I think it's the legislative framework, has said that that will be a 180-day process. And so we expect 180 days from the day we file to actually get a decision from the regulator. So that's going to be in the early spring of 2013.

We will still be planning to make an investment decision in 2013 but it might be late 2013 at this point which puts us still on schedule for a 2017 commercial date.

Okay, thank you very much. Those are my questions. Thanks, Chris.

Ben Pham from BMO Capital Markets.

Just on your outlook section in Maine, I know you can't control the weather there but you had two quarters now gone and since July and August. And I'm just wondering, is the outlook in Maine for earnings, do you still expect it to be slightly higher than last year?

This is Gerry. I think over the horizon we expect 4% to 6% growth in earnings, consistent with Emera's objectives. But we will see lumpiness in that. And certainly soft load over the first few months of the winter has had an impact on that this year.

Okay. Just shifting gears to the Caribbean. You talked about, Chris, some of the things you're doing near term. I'm just curious about just what you're trying to accomplish over the long term in the Caribbean.

Years ago you had probably taken a more cautious approach there and looked at partnerships. But how are you looking at that business now and where do you see it in longer term?

I think we haven't really changed our view on the Caribbean at this point. We now are well established into fairly strong businesses. There's a lot more work to be done in the Bahamas and we're doing that work.

But we think the short-term opportunity in that region is about fuel substitution. And that, along with some renewables investments, we think, will make a huge difference to the cost structure in the region. So that's really where our focus is. Opportunities to get some substitute fuels, a few renewables,

Barbados has done a very good job in the past number of years of getting at least solar on the water heating side of their activities. There is opportunity to continue to do more in that area. And also we have to find a way to get natural gas into those markets. And that's something that both the Barbados government and Emera is spending a fair bit of time on.

And the same thing is true in the Bahamas. We would like to get a fuel substitute and if it could be natural gas that would be very good.

Okay, thanks, Chris. Those are my questions.

Robert Kwan from RBC Capital Markets.

Chris, if I can just come back to the federal loan guarantee. I'm just wondering what are you seeing with respect to the potential timing? Is it tied to the FID decision or should we expect something sooner?

No, we expect to be able to conclude our work with the federal government this year. That certainly has been in the objective of all of the parties, which would be both provincial government, the federal government and the two companies. And so I think that's our horizon, Scott?

I agree with that. We do have a memorandum of agreement already. And what we're doing is working to refine and define the specific terms of that and the timeline Chris set out, I think, is exactly right.

Okay, that's great. If I can just, last, come to the growth rate, that 4% to 6%. And just to be completely clear, that does include the Algonquin gains?

Yes, that's correct. And I'd highlight the same kind of message that you heard from Gerry is true on a consolidated global basis, as well. That 4% to 6% can and will be lumpy.

Notwithstanding that, yes, in answer to your question. As we look at that, we include the Algonquin gains for the reason that we spoke of earlier. We see that as a core part of our business.

And I think, Robert, the other thing is, we're starting to get some real earnings and cash flow from Algonquin now and so that's going to be very helpful.

Right. And this may be just a slight change but if I can maybe parse the words between this quarter and last. You had talked about this quarter being towards the low end of that range. Although I think last quarter you were talking about it being challenging to even meet the range.

So is it fair to say that your outlook for the year maybe has improved a little bit? And if so, can you just talk about where you see some of the, at least the directional moving parts?

I don't think we're trying to telegraph any subtlety or difference. I think we're saying the same thing that we were before. And that is that our goal continues to be to deliver earnings per share growth of 4% to 6%. That achieving that 4% to 6%, that we look at that as an annualized average over a number of years.

And it gets dangerous to think about getting that, calculating that, precisely and looking at that on a quarter-by-quarter and a year-by-year basis. Because it can be lumpy based upon impacts of weather, of the timing of capital investment, the timing of investments into some of the companies that we've been acquiring. And so we're just trying to be clear that one shouldn't look at it and say we're going to have a very predictable, exactly specific 4% to 6% every year. That we will deliver, on average, as we have for a number of years, an earnings profile that demonstrates a 4% to 6% growth, and nothing has changed.

And, Robert, if you just think about the two transactions -- the two bigger transactions we've done this year, one being the First Wind transaction and the other being our investments in Algonquin, because of regulatory timing and a whole bunch of things, those were later. They came into the business later than we expected. That's the nature of the beast.

And, to Scott's point, that and the nature of the greenfield projects we're doing, makes us pretty lumpy. So it's one of those things, we're very bullish on where this business is going over the next five years. But, as always, we have lumpy growth.

Okay, thank you very much.

(Operator Instructions)

Paul Lechem from CIBC.

Just a question on NSPI and the fixed cost recovery that's being set up. It seems to be trending around CAD11 million a quarter. Is that a number that's expected to be consistent through the year? Is there some seasonality to that?

There's not a lot of seasonality to it because it's based on the revenues from the pulp and paper industrial load, which was pretty steady over each quarter of the year. It will build a little bit because the mill at Bowater here in Nova Scotia has closed operations. And while they were on a load retention rate they were making very little fixed cost contribution.

Now the fact that they're closed means that that deferral amount will increase slightly. But that's a good number to use in the CAD11 million to CAD14 million, CAD13 million range per quarter.

Okay. And have there been any further discussions around the future recovery of this deferral amount?

It's included as a discussion in the general rate application that's going forward with the UARB right now. And the hearings will happen in early September. So it's certainly a topic of discussion there, yes.

But it's still projected that that will start to be recovered in 2015?

That's correct.

What would that imply for a rate increase at that point in time?

We think it will be offset by other regulatory amortizations that are coming off in that period. There's a Section 21 amount that will be paid off in the spring of 2015. And that generally offsets the increase that would be included in paying down those current deferrals of these fixed cost recoveries. We believe a minimal impact on rates if any at all.

Okay, thanks. There's also some commentary about you expect NSPI to earn within its allowed range this year. Can you give any more specific? Are you expecting, given the general comments, is it trending towards the lower end of that range that we might expect?

We can only say it's going to be within the range. We're at the halfway point of the year and we know we've had a mild first half of the year weather-wise. But we're working hard on cost controls in the business and there are things happening. It's early in the year still. It's the fall period, depending a lot on weather and storms.

Okay, great. Thanks. And just last question, on the Northeast Energy Link, Chris, I think you mentioned you got the FERC discussion back, or the approval of your funding methodology. Can you talk about what the next steps might be on the Northeast Energy Link?

I might ask Gerry to do that, Paul.

Certainly, some of the next steps would be to continue to firm up supply. But we also expect to be working on routing over the course of the next year.

In particular with the state of Maine, which has convened a panel to basically provide oversight and certification of about 80% to 85% of the route. Which is obviously a critical factor in any greenfield project. We would expect to be filing a letter of expression of interest with this panel, called the Interagency Review Panel, to begin an early process on sighting the project over the next couple of months.

And, Paul, the other thing is we're quite encouraged by the legislative change that just occurred in Massachusetts. That certainly helps firm up some more contracting of renewables in that market. So that feels pretty good.

Okay, great. So we should watch for your filings with the panel over the next quarter or so?

That's correct.

Okay, thank you.

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

Okay. Thank you very much. We would just like to thank everyone today for their participation and your interest in Emera. It's a beautiful day here today. Hopefully everyone will have a great weekend.

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