Emera Inc (EMA) 2014 Q2 法說會逐字稿

Good morning. My name is Laurel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Emera second-quarter 2014 results conference call.

(Operator Instructions)

As a reminder, today's call is being recorded today, August 12, 2014, at 10 AM Atlantic Time. I would now like to turn the call over to Scott LaFleur, Manager, Investor Relations.

Please go ahead, Mr. LaFleur.

Good morning, everyone, and thank you for joining us on our second-quarter conference call this morning.

Joining me from Emera are Chris Huskilson, President and Chief Executive Officer; Scott Balfour, EVP and Chief Financial Officer; and other members of the management team. Emera's second-quarter earnings release were distributed last evening via newswire. And the financial statements and Management's discussion and announcements are available on our website at Emera.com.

This morning, 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 ten minutes, after which we will be happy to take questions from analysts.

Please note that all amounts are in Canadian dollars, with the exception of Emera Maine and Emera Caribbean, where segment result 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.

Thanks, Scott.

Good morning, everyone. Emera delivered another solid quarter in Q2, with adjusted net income of CAD44.2 million, or CAD0.31 per share, in line with the CAD42.6 million, or CAD0.32 per share, reported in Q2 last year. Overall, Emera has had a great start to the year. Net income year to date is CAD227.3 million, or CAD1.59 per share, up 35.5% from the CAD167.7 million, or CAD1.27 per share, for the same period in 2013.

Scott Balfour will take you through the details of the quarter later in his remarks. But first I'd like to touch on some of the key strategic and operational milestones Emera reached this quarter.

I'll start with our most recent progress on Maritime Link. The construction of Maritime Link continues to progress as planned. The project is on schedule and on budget. An important project milestone was announced on July 30, with the signing of labor agreements with the IBEW and the Cape Breton Island Building and Construction Trades Council. These agreements will allow us to have labor security and stability throughout the construction period of Maritime Link.

Earlier this quarter, we awarded the contract for the two converter stations. This contract award, and the award earlier this year of the sub-sea cable contract, account for over 50% of the costs of Maritime Link. The only remaining major contracts to be awarded our the transmission line construction contracts, which will be awarded later this year. We continue to be happy with supplier interest in the project and expect to have in excess of 70% of the project costs under contract by the end of this year.

Emera Energy's trading and marketing group continued its momentum from the first quarter with another strong quarter. The scale of the business continues to grow, with an extensive network of counterparties and gas transportation capacity from which to source and sell gas. Our New England gas plants have been performing as expected, and the long-term market conditions are encouraging. Plant retirements in the region are being announced earlier than forecast. And the capacity auction price for 2017/2018 was more than double the previous auction results. As the market changes, the New England gas plants are well-positioned to capitalize; and we are increasingly confident about their future contributions.

There is a New England-wide initiative underway that focuses on improving access to natural gas by building new and enhancing existing natural gas pipeline infrastructure. The cost of this would be borne by electricity customers, and the states have agreed on a cost-sharing mechanism. The New England states remain interested in a regional solution to meet clean energy goals and to provide price stability and reduce the overall reliance on natural gas generation.

There is also a New England initiative focused on increasing the supply of clean electricity and the reduction of GHG emissions. A bill that was before the Massachusetts legislature, which would've established a solicitation for clean energy, ultimately did not pass at the end of the session. We expect this will cause a delay in the electricity initiative while Massachusetts decides on next steps.

In Maine, Emera Maine announced an MOU with Central Maine Power to develop projects to efficiently collect wind in Northern Maine. We have been working on transmission solutions to get renewable generation to market. And through this MOU, we are renewing our commitment to expanding these efforts. It's a challenge to get additional wind and hydro to market, and this MOU seeks to jointly address those challenges.

In the Caribbean, our plan to move CNG from Florida to Grand Bahama is progressing. We submitted an export application to the US Department of Energy seeking two authorizations. First, to export CNG to free-trade agreement countries and to export CNG to non-free-trade agreement countries. Our application to export CNG to free-trade agreement countries was recently approved. And the authorization to export to non-free-trade countries, such as the Bahamas, is being reviewed separately. This aligns with our strategy in the Caribbean to introduce generation alternatives, including lower emissions gas and renewables with a focus on affordability and fuel cost stability.

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

Scott?

Thank you, Chris.

Good morning, everyone.

Our second-quarter financial results were announced yesterday and are now available on the Emera website. Emera's consolidated net income for the second quarter was CAD24.5 million, or CAD0.17 per share, compared to CAD44.9 million, or CAD0.34 per share, in the second quarter of 2013. When the second quarter results are normalized for mark-to-market impacts, adjusted net income was CAD44.2 million, or CAD0.31 per share, this quarter compared to CAD42.6 million, or CAD0.32 per share, for the same quarter last year.

The CAD1.6 million increase in adjusted net earnings is primarily due to higher contributions from Emera Energy, which is also the primary contributor for the strong year-to-date results. I'll provide more detail on Emera Energy's quarter when I discussed the segmented results.

Cash flow from operations for the first six months of the year was CAD410.2 million this year compared to CAD233.2 million for the same period a year ago. The near 76% increase is primarily due to the higher cash earnings contributions from Emera Energy's trading and marketing group.

Turning now to our segmented results. Nova Scotia Power contributed CAD17.1 million to consolidated net income in the second quarter of 2014 compared to CAD18.5 million in the second quarter last year. The decrease in the quarter was primarily due to the timing of regulatory deferrals and increased income tax expense. In 2014, we expect Nova Scotia Power to earn within its allowed rate of return and to have earnings similar to that of 2013.

Emera Maine contributed $7 million to consolidated net income in the second quarter this year compared to $8.9 million for the same period in 2013. The lower net income was primarily due to decreased transmission pool revenue as result of weather in the New England region. Emera Caribbean contributed $7.8 million to consolidated net income in the second quarter of 2014 compared to $8.0 million in the second quarter last year. The lower net income is primarily due to the second-quarter 2013 impact of the $2.2 million gain for the acquisition of DOMLEC, partially offset with improved operational results this year.

The Pipelines segment contributed CAD8.3 million to consolidated net income in the second quarter of 2014 compared to CAD6.8 million last year. The CAD1.5 million increase was primarily due to refinancing initiatives that lowered interest expense.

Emera Energy built on an outstanding first quarter with a strong second quarter, delivering adjusted net income of CAD5.2 million compared to a loss of CAD1.4 million in the second quarter last year. The higher net income was primarily due to increased contributions from trading and marketing operations, Bear Swamp, as well as cost savings at our Northeast Wind joint venture.

Our Corporate and Other segment contributed a CAD1.2 million loss in the second quarter this year compared to earnings of CAD1.8 million in the same period a year ago. The lower net income was primarily due to an increase in income tax expense.

Before I conclude, I'd like to note the Maritime Link is now accounted for on an equities basis. As planned, with all the required approvals and project financing in place and pursuant to US GAAP, and as PML, is now accounted as an equity accounted investment. This means that our interest in the Maritime Link project will now only be reflected in income from equity-accounted investments line on our income statement and similarly only Emera's net investment in Maritime Link will be reflected on Emera's balance sheet, together with our other equity accounted investments.

That's all for my financial overview. And now we will be happy to take your questions.

(Operator Instructions)

Linda Ezergailis, TD Securities.

Great. Thank you. I appreciate the update on the bill in Massachusetts -- a bit disappointing that the legislature didn't pass. Can you explain to us maybe what we might look forward to in the next steps of timelines of how these initiatives might get back on track?

Yes, Linda. It's Chris. Well, first of all, I think that's pretty hard to predict at this point because I think it is going to be up to how Massachusetts and other states want to proceed. We do know that [NESCO] is very much focused on this issue and we do expect that something, at least a tentative type of RFP, would come out to actually give us an idea of what it is that we'd be getting into.

But from our perspective, the real focus right now is the work that we're doing with Central Maine Power, in Maine. Because there are, in fact, wind-generation facilities that have been contracted, but that we would believe are congested in the marketplace. And so, we think that those contracts will need more transmission in order to be perfected. I think that creates a substantial opportunity to build more AC transmission in the State of Maine. And that's really where our focus is on the short term. We continue to be focused on a longer-term solution that probably comes to a DC outcome, but there's lots of work to do to just get the existing generation to market.

And can you talk maybe about order of magnitude of investment on that AC opportunity in Maine?

Well, I mean, I think we're talking about a need to move 500, 600 megawatts of wind, so it's in that kind of magnitude.

Helpful. Thank you. And just a follow-up detailed question, the NSPI FAM disallowance recommendation with the final decision in Q4, what sort of procedural steps would there be leading into Q4 that might allow you to have them reconsider that? And, I guess the other question is, would this have an impact, potentially, on 2014 earnings, or on ongoing basis, if the final decision is unfavorable?

Hi, Linda. Bob Hanf here. Procedurally, there will be a hearing in October and that's an opportunity for us to present our view, which would have no disallowance. As to impact on 2014, I think it -- was it 2014? The answer is no impact, in my view

Okay. And can you just describe to us maybe again what the nature of the audit recommendation was in terms of why they wanted to disallow that?

So, generally, the audit was actually quite favorable on many, many areas and there were probably three or four issues where we disagreed on their findings. One of them involves our hedging program, albeit they approved the hedging program. There's just a question around timing, so it's something of that nature. There's another issue about hedging -- or, sorry, not hedging, but dredging of a harbor and whether -- how that should be accounted for, so it's just an accounting issue, but nothing of great significance. And, there is a holdover issue on a gas contract from the last audit, and we just have a different way of valuing that outcome, so that's the nature of the issues that we're talking about.

Great. Thank you.

Thanks, Linda.

Paul Lechem, CIBC.

Thank you. Good morning.

Good morning, Paul.

Good morning. I just -- reading through the MD&A, it seems that the Labrador Island link cost has gone up to CAD2.8 billion. If I'm correct, last -- at least it was CAD2.6 billion. I was just wondering, does that have any impact on Emera? Can you remind me again, is there any cost overrun sharing initiative, or you just benefit from the higher equity investment? How does that work for you guys?

Yes. At this point, it's not completely clear exactly how it will affect us. We don't have any cost overrun exposure, so that won't be an effect for us. But, in the end, our arrangement is to own 49% of the total transmission, and so it will really depend on what the final costs are of all the transmission elements before we really know exactly how it'll flow through. I think we've estimated what we think the numbers would be at this point, and that's about a CAD350-million equity investment in that project. But, until it's completely done, we won't know. But, from a cost perspective, we don't have an exposure.

Okay. And, at the end of the day, do you -- if your 49% resulted in a higher number, then you'd actually just be earning on a bigger equity investment then?

That's correct. It'll be based on the equity.

Okay. Thanks. In Maine, a couple of decisions it seems like -- one on the distributions returns and one on the transmission returns, if I'm reading this right -- there's a FERC ruling on the transmission at 10.57%? Is that in line with what you were hoping for? And, can you remind me, what are you booking right now? Are you still at the 11.17%, or whatever the number is, are you still booking at that? How does that work with -- how does that compare to what you were expecting?

Could we just ask Gerry if he'd speak to that?

Yes. So, on the -- I think you started with the distribution case, Paul, and I think we saw a reasonable result from that. We basically were able to implement rates three months ahead of time and also include in that rate increase the expenses from the ice storm that occurred at the end of 2013. So, all in all, I think it was a positive result for us.

In the FERC ROE case, the FERC made a decision on the first complaint -- the refund period for the first complaint at 10.57%, as you mentioned, and we had accrued for that, back in 2013, approximately $2.4 million pretax. As a result of the FERC's decision, we had to accrue another $900,000 in the second quarter of this second quarter because of a cap that was set on one of the larger investments that we have, the NRI line. Going forward, there is a second complaint that is being heard that the FERC will make a decision on, probably into the 2015 time frame, and at that one, we understand what the kind of the going-forward ROE is expected to be. We'll make a decision on what we need to accrue for that. At this point in time, I believe we've been -- that will be based on a 10.57% going forward, as far as I'm aware.

That's correct, Gerry.

Yes.

And I think, Paul, the other thing is there is, in fact, a third complaint that's been filed. So I think, while we're seeing a bit of uncertainty relative to the cost of capital, I think you're probably going to see this continue for a little while. But I do think that it will stabilize over the next period. And I think, at the end of the day, the FERC is continuing to try to incent more transmission to be built because, in fact, New England does need more transmission, and I think that, that factors into all of this.

Thank you very much.

Thank you.

Ben Pham, BMO Capital Markets.

Could you just give us a commercial update on the Northeast Energy Link?

Sure, Ben. Gerry, did you want to go ahead?

Sure. I guess what I'd say -- Chris spoke about some of the events that were happening in New England and the Massachusetts legislation. Underlying all of that, I think the important thing to understand is that there's a lot of pressure on the states to meet both their GHG, greenhouse gas, objectives and their renewable portfolio objectives and that kind of underlying pressure is going to continue to put pressure on them to do something. So, really, the -- Chris spoke about the CMP MOU and the NEL project is -- those are both projects that are designed to help the states meet that pressure, that gap in their portfolios.

The NEL continues to be developed. We're going through a siting process right now with the State of Maine that I expect will continue throughout the course of this year and probably into next. However, we're really positioning the project in order to respond -- to be able to respond to a request for proposals from NESCO when that comes out.

Yes. And I think, Ben, that's the important distinction, I believe. That the DC projects are likely to be required relative to a solicitation or a request from the states as a broader clean energy initiative, whereas the AC upgrades that we're talking about are -- I would say, are required now because of the fact that contracts have been signed to move more clean energy. So, in the short term, you're going to see us focused on those AC activities. But, in the longer term, we believe, as Gerry said, that there'll be a need and that these types of projects will be important offerings.

Okay.

I was just going to add to that, Chris. While Massachusetts is 50% of the pool and the legislation did not pass, other states like Connecticut and Rhode Island continue to release requests for smaller components. And that's why the AC components will continue to fill that gap, in a kind of an incremental fashion.

Okay. Thanks for that. And maybe I can switch gears over to the Caribbean. If you can provide some context about CNG, just the timing of that opportunity and just what you're seeing on the acquisition front in the Caribbean? There's also a bit of a tweak on the CapEx for 2014 in the Caribbean. Can you talk a little bit more about that, too?

Sure. Well, first of all, on CNG, as I said in my remarks, we continue to be focused on getting the permit to non-free-trade countries. That's the key milestone that needs to happen. We're -- we feel in good shape because of the fact that we do have most of our environmental work done and, within this year, we'll finish our environmental work on that project. We believe that, that puts it in good shape, compared to other projects that are in the queue. Other projects don't have their environmental work in shape, and so that's an important piece of the milestone that we need to hit in order to get this approval. So, we're -- continue to work on that and we continue to be optimistic that, that will come together in the next -- in the near term.

As it relates to acquisitions, frankly, we're primarily focused in the Caribbean right now on these fuel issues and on clean generation. An example of that is that we now have a project in Barbados where we're putting between 8 and 10 megawatts of solar -- utility-class solar in place. We continue to see opportunities to do that and, as well, we also believe that there is a requirement for some dual-fuel generation capacity in the marketplace, and we're working towards that. So that's really where our focus is right now. I guess lastly -- and Sarah McDonald, who's the leader down there, is continuing to integrate the operations of the business across the Caribbean region. She's seeing opportunities to do that and that is generating value for us overall. So, when we look at the activities in the Caribbean, it's primarily about cleaner energy and renewables in that marketplace.

Scott, did you want to just touch on capital?

Yes. We're still expecting to see increased capital investment in the Caribbean overall in 2014 with about $30 million worth of capital at this point looking to be invested relative to about $24 million last year. That $30 million estimate is a little less than where we thought we might be at the beginning of the year and that's just a reflection of timing of investment in some generation-related initiatives through the quarter end.

Okay. Great. That's it for me. Thanks, everybody.

Thanks, Ben.

Matthew Akman, Scotia Bank.

Thank you. Good morning.

Good morning.

Good morning, guys. On Nova Scotia Power, I'm just wondering if you were aware of the impact, I guess, of the Nova Scotia legislation on energy efficiency when you decided not to file a rates case for 2015.

Matthew, Bob here. If my memory serves me correct, we made that call before that legislation was in place.

Do you think that might've changed your decision?

I do not think it would, no.

Okay. I guess a bigger-picture question around a discussion that's been ongoing on this call is, with the Northeast renewable standards and greenhouse gas regulations and meeting those, there are two broad options, it feels like. One is to build more pipeline capacity and generate more electricity with gas, and the other is to build more transmission into the region for, primarily, renewable. And I'm just wondering, maybe Chris, is -- how do you see Emera positioning for either of those? Which would you prefer, as a Company? Which option does your strategy better align with, I guess, or do you feel that you're indifferent to which direction the scales tip there?

Well, so, Matthew, I think that's -- that is a very good question, and one that the region will sort through over the next number of years, probably over the next decade, I suspect. But I mean, that's one of the main reasons why we're investing in a portfolio of generation in that region and that we are continuing to concentrate our activities relative to gas and electricity there. We're very well positioned for either outcome. We think that the outcome will be a combination of the two, as in, there will be need for more gas and we're starting to see that in the capacity markets as they begin to unfold in that new entrants are looking like they're going to be called at some point.

But, as well, at some point, the amount of gas in the market is going to dictate that there'll have to be zero emissions contributions as well. Wind has certainly been the contribution of choice recently, but most of the wind is very remote and so that the transmission is required in order to make that work. As well, I think there's going to be some requirement for the ISO to continue to look at wind differently and the system needs to be planned somewhat differently, which is really what's generating the opportunity around the AC investments we're talking about. I just think that, as a Company, we're well positioned for either path. We will continue to participate on both sides.

As it relates to gas directly, we have a need for gas in the Maritimes as well. And we're working -- if you think about the three big strategies we're working on right now, the first is clean energy directly, and so whether that's hydro or wind or a combination and transmission route that relates to that. The second is about gas and for us gas to the Maritimes will also mean more gas capacity in the northern part of New England, and so that's an area where we believe we can participate because of our actual domestic needs. And then, lastly, the gas and alternative energies into the Caribbean.

Those are the three bigger issues that we're working on right now. We feel that we are well positioned in each one of those categories, and we're able to go either direction. I really do think that it's about pace and timing that all the options will have to be on the table in the long term.

Okay. Great. Thanks very much for those comments.

Thank you, Matthew.

(Operator Instructions)

Robert Kwan, RBC Capital Markets.

Good morning. If I can just come back to the central Maine MOU and Northeast Energy Link. If I'm understanding correctly, is the MOU mostly both sorting or kind of reinforcing and extending the grid in Maine, or is there some crossover with that MOU that would potentially give you another project against Northeast Energy Link?

Well, I think it is primarily focused on Maine, but I just asked Gerry to comment a little bit further.

Yes. Robert, the northern part of the state, where a lot of the wind wants to be sited, is really a generation rich and a load -- and there's not much load there. It really needs to be collected through an AC system. Parts of it can be delivered through the existing AC system. But, as it gets collected and the demand gets higher and higher, it really enables a project like NEL to carry a larger quantity of that wind from point A in Maine to point B in the load centers in Massachusetts. So, they do kind of fit together. One of them, I think, needs to occur, really, before the other one -- before the second one, the NEL, can actually happen. So, they fit together pretty tightly and they're kind of a natural sequence of projects.

Okay. That's great. And then, just on Northeast Energy Link itself, it sounds like it's really demand pull that might be slowing down the process. Is that fair? And, as well, how much did the first wind uncertainty impact the progress on NEL?

So maybe I can start with the demand piece of it. I wouldn't say it's driven by the lack of demand, because the demand is certainly there. It's driven by the timing that it will take sort of the collective the New England states to figure out how to best make it work, how to most efficiently make it work. So, just as an example, the RPS standards for -- collectively for the New England states over the last five years have increased from 3,000 to 9,000 megawatts over the last five years. The supply in New England has only increased by 500 megawatts, from 7,500 to about 8,000 megawatts. So, those curves have crossed and the demand slope continues at a pretty steep slope.

So it's really not driven by the demand. I'd say the greenhouse gas requirements are on a similar slope in Massachusetts. So, it's really about the timing that it will take the states to figure out how to do it.

I think, Robert, the other piece to recognize is that these are 1,200-megawatt step changes. So, they are big decisions, and so I think the states taking their time to figure out exactly how they want to do it is very appropriate. We believe that we're well positioned to be helpful, and that's really what we want to do. But, as Gerry says, in the meantime, there's still lots of wind to be collected. And, in fact, what we're seeing right now is wind producers are having to make their own investments and decisions around transmission, which we would see as sub-optimal. We think the two utilities working together in that marketplace will be able to provide much better solutions for the customer base.

Okay. And I guess just a follow-up on that, you've done a kind of a good job now with the MOU kind of bolting on to NEL and then putting together a lot of generation to back the line. You're talking about more wind. Do you see additional pieces as you look forward that you need to add -- or not necessarily need to add, but that you could add to really kind of bring NEL to fruition?

Well, our work is to pull together a portfolio of clean energy that will create the critical mass necessary to move this kind of a project forward. That's really the challenge. What's going on with the AC, though, is that, in fact, there are contracts that have already been signed by wind producers to both Massachusetts and Connecticut that essentially can't get to market. There is too much congestion in that today for many of these new projects to go forward. And so, we would say that, that AC upgrade is going to be required, even just to fulfill contracts that have already been signed.

Okay. That's great. And just my last question, turning to NSPI -- and I recognize it's a small part, or the disallowance is pretty small to begin with, and then the hedging sounds like it's only one piece. But, if you combine that with historical fuel kind of rulings, let's put it that way, as you look forward, do think that there might be a need for a dynamic kind of approval process as it relates to fuel hedging?

So, Robert -- Bob here. I just want to restate that the review is over -- the audit for the FAM was over a two-year period, and the findings are actually very positive and very supportive and, I think, reflective of some very positive work on the part of the utility. And certainly being viewed that way by Liberty as well. So, we're quite confident that we have a good working relationship and we're doing what we need to do in the best interest of our customers. We feel very confident there. I would say that -- to look at the audit, that the FAM is actually working from that perspective. But we're going to continue to find ways to work better and to make sure that we're doing everything we can on the front of affordability for our customers, and that's our focus.

But to the extent that there was any disallowance -- and obviously you disagree with that -- do think that, that can be cured by somehow having everything fully approved in advance?

Well, Robert, I think that the recommendations that we have implemented have provided opportunities such that the costs are being fully collected and approved, so that is working. I think there's an opportunity for some of the recommendations that are being made that we, frankly, agree with and we'll continue to do that, and the result is that the fuel expenditure is being approved. I mean, obviously, that's the goal, 100%. And, as I say, we're quite confident that, that we'll -- we will recover those costs. They were prudent, and the hearing is on October 27, so we look to presenting our position.

That's great. Thank you very much.

Thank you.

Andrew Kuske, Credit Suisse.

Thank you. Good morning. I guess my question's for Scott, and it just relates to the language in the MD&A where you said pretty clearly that, I believe, it was along the lines of there's no equity injections into the now-correlated transmission projects for 2014, the remainder of 2014, but could you give us a little bit of view into 2015? And then, also along that line, where you anticipate those cash flows coming from. Just operating cash flow as a (technical difficulty), something along that lines?

So, you may have to help me a little bit with the second question, but let me start with the first one, Andrew, and then we'll come back to it. So, yes, we don't expect any further equity injections by us into Labrador Island Link in 2014, nor for that matter do we expect in Maritime Link either. Both projects, in a sense, are at the same stage where now, with the federally guaranteed project debt financing in place, we're able to draw down on that debt in order to catch the debt-to-equity balance up to the levels that have been approved, which really allows us to spend 100% debt dollars until we get that ratio in place, which, in the case of Maritime Link is 70/30 and in the case of Labrador Island Link is 75/25.

I don't have a perfect window yet as to when, in 2015, we'll look to see the first equity contribution. I don't believe it will be in the first quarter. Past that, it's hard to say at this point. Really, it depends upon sort of the timing of spend as Nalcor proceeds with their construction cost profile and the like, but would expect to see some additional equity injections made in 2015, but certainly not in the first quarter. And, I'm sorry -- I wasn't clear on your second question. You were wondering where operating cash flow was coming from?

Sure. So if you think about it from a [Numera] Holdco standpoint, the cash flows that you'll be injecting into the Maritime Link and to the oil projects, where do anticipate those coming from? Is it really taking cash from NSPI or other operating subs flowing into Holdco and then down in -- or to anticipate tapping the market from a prep standpoint or enhancing your drip or anything to that effect?

Yes. I'd say for us it's continuing to do what we've been doing, which is continuing to grow cash flow and, obviously, that starts with earnings growth. So, as we've seen strong earnings contributions over the tail end of 2014 and -- sorry, tail end of 2013, and certainly thus far in 2014, that's obviously also driving strong performance on cash. And, internally, we, of course, work to ensure that there's appropriate efficiency as it relates to the utilization of that cash that's generated within each of our affiliates and appropriately dividend or distributed up to the parent Company. That's just an ongoing process for us and something that happens as an ordinary course basis. So it's that strength and ongoing cash flow that's being driven both by a discipline on cash and by growing earnings that's providing the first and primary contributor to our capital injections and our equity injections into those projects.

And then, we continue to finance any balance of requirements in our capital program, as you've heard me say before, around continuing to keep an eye on our balance sheet and balance sort of our component parts of capital between common equity, preferred equity, and debt to ensure that we maintain a good balance of that capital structure, which remains today in target of range of 35% common, 10% preferred share, and the balance with debt. So we continue to do that. But, to your point, largely right now, a lot of it's coming from strength of operating cash flows.

Okay. That's very helpful. And then, just if I may, I have a bit of a broader question. When you think about the balancing act between the cash flows coming out of the power business, they've been really the New England assets that you acquired that aren't hedged at this point in time are really very few contracts on them versus the core utility business. How do you think about that balancing act between the cash flows of those two businesses? In particular, if we look at what happened in Q1 -- obviously, really great cash flows coming off of those power assets and you're setting up for a pretty good second half. So, when you think about the proportionality of cash flows from those two very different business streams, how should we think about that today versus when the transmission projects are online several years from now, just on a percentage basis?

Yes. I mean, truthfully, there won't be a whole bunch of difference in relation to the cash throw off from our businesses as there will be from our earnings. Certainly in some cases there's more of a lag as to cash coming to the Holdco. When you start to get into the Caribbean, for example, cash there comes to Emera Inc. more slowly. Certainly, in Nova Scotia, there's a well-established process where earnings are appropriately distributed, similar to how Emera Inc has distributed its earnings to its shareholders. So I think the best proxy for you to look at, Andrew, really is sort of the earnings contributions. And, today, Nova Scotia Power is about 44% of Emera Inc.'s earnings contributions and the cash would not be all that dissimilar from that.

And I think, Andrew -- it's Chris. The other thing I would say is that we continue to be focused on maintaining the balance we have today. We do think that it's critical that we have a substantive amount of contracted and regulated cash flows, and that's really a continued focus. And so you'll see us working towards that on an ongoing basis.

Okay. That's very helpful. Thank you.

Thanks.

There are no further questions. At this time, I turn the call back to the presenters.

Okay. Well, thank you very much, everyone, for taking the time today, for your participation on this call, and for your interest in Emera. And I hope everyone enjoys the rest of their summer. So, thanks a lot.

This concludes today's conference call. You may now disconnect.