Emera Inc (EMA) 2025 Q1 法說會逐字稿

Good morning and welcome to the Emera Q1 2025 earnings conference call.(Operator Instructions)

This call is being recorded on Thursday, May 8th, 2025. I would now like to turn the conference over to Dave Byzanson. Please go ahead.

Thank you, Mike, and thank you all for joining us this morning for Emera 's first quarter 2025 conference call and live webcast. Emera's first quarter earnings release was distributed this morning via Newswire, and the financial statements, management's discussion and analysis, and the presentation being referenced on this call are available on our website at www.emera.com

Joining me for this morning's call are Scott Belfour, Emera's President and Chief Executive Officer, Gregory Blunden, Emera's Chief Financial Officer, and other members of Emera's management team.

Before we begin, I'd like to advise you that this morning's discussion will include forward-looking information which is subject to the cautionary statement contained in the supporting slide.

Today's discussion and presentation will also include references to non-gap financial measures. You should refer to the appendix for reconciliations of historical non-gap measures to the closest GAAP financial measure.

And now I will turn things over to Scott.

Thank you, Dave, and good morning, everyone.

This morning we reported first quarter adjusted earnings per share of $1.28 representing a 68% increase over the same period in 2024.

I'm proud to say this represents the strongest first quarter performance in the company's history and sets us up well sets us up to deliver well above our 5% to 7% earnings growth per share range in 2025.

Our first quarter results were driven by robust performance across our regulated utilities.

Tampa Electric and New Mexico Gas both benefited from new rates that reflect the rate-based investments they've been making in support of their customers.

And at Nova Scotia Powers results benefited from the colder weather we experienced here in Nova Scotia this winter.

The results from our regulated utilities were further bolstered by a record quarter from Air Energy.

Cold weather in the Northeast resulted in higher pricing and market volatility, creating opportunities that the business was once again able to capitalize on to deliver exceptional results.

Our performance this quarter is also in many ways a direct result of the actions we took in 2024, which provided the strong foundation of our execution this year.

Last year, we successfully executed on our asset sale program, strengthened our balance sheet, adjusted our dividend growth guidance, and finalized two important grade cases.

These actions strengthened our company and positioned us well going into this year to translate our rate-based growth into meaningful earnings per share and cash flow growth.

You can see this reflected in our first quarter results, and we're confident that we will see strong performance for the year overall.

We also remain confident in our 5% to 7% average earnings per share guidance through 2027.

Teams across America have deployed over $700 million in customer-focused capital in the first quarter, putting us well on track to execute our $3.4 billion dollar capital plan for the year.

Major projects underway including our solar development deployment and reliability investments at Tampa Electric, energy storage and reliability upgrades in Nova Scotia, and gas infrastructure expansion at People's Gas are progressing as planned.

We continue to see strong population and economic growth in Florida with customer growth, the Tampa Electric and People's Gas continuing at a rate of over 1.5% and 3.5% respectively, driving significant investment demand.

Between the projected increases in Tampa Electric's capacity needs owing to organic load growth coupled with their desire to enable economic development in West Central Florida, Tampa Electric has brought certainty to their generation expansion plan to ensure resource adequacy by contracting for the supply of 2 gas turbines to be delivered in 2028.

These investments, as well as continued investments in reliability, resiliency, renewable integration, and technology, are the key components of our 7% to 8% forecasted rate-based growth and the foundational driver of our long-term earnings growth expectations.

Against an uncertain macroeconomic backdrop, we are laser focused on managing our capital deployment.

Focusing on both customer affordability and the timely recovery in rates.

To the extent that we see tariffs or supply chain impacts on our capital plan, we currently expect that we will work to reprofile our capital spend to maintain our 7% to 8% rate-based growth so as not to negatively impact affordability while also meeting the needs of our customers.

As a result, we do not expect to make any material changes to our 5 year capital plan.

Our teams are also working diligently to mitigate supply chain risk and identify alternative domestic supply opportunities to reduce any direct exposures to tariffs on behalf of our customers.

To that end, we've already secured and received panels for our solar investments through 2026, after which new panels will be 100% domestic supplied with any tariff risk contractually mitigated through 2029, de-risking the major.

The largest major project in our capital plan.

At People's gas, pricing has been locked in for major projects, and at Nova Scotia Power, approximately 95% of their capital spend is already sourced from Canadian suppliers.

In addition, I want to highlight that we have very limited direct exposure to Chinese tariffs, with the only material exposure being planned energy storage investments at Tampa Electric.

Importantly, despite the current tariff exposure, the business case for storage remains intact as batteries remain the lowest cost alternative for customers.

Given the intense sector focus on this, I would note that our $20 billion [and $0.05] year capital plan does not include any major capital to support data centers. To the extent that we capture any of these new customer opportunities, the revenue and capital investment opportunities would be upside to our plan.

On the regulatory front, our focus is in 3 key areas.

The closing of the sale of New Mexico gas, where the regulatory process continues as expected the next milestone is the hearing scheduled to begin on June 23rd of this year we continue to expect closing in Q4 2025

At Nova Scotia Power, the team has been working constructively with key stakeholders in the province on a path forward to secure financial stability for the utility and allow Nova Scotia Power to continue making important reliability and resiliency investments for customers.

As these processes take time.

And while we would like to have more to share on our call today, we're encouraged by the progress and confident that we will have more to share in the 2nd quarter.

And a people's gas, the rate application is also proceeding as expected, with a hearing set for September and a final decision expected in the 4th quarter.

And with that, I'll turn it over to Greg to take you through our financial results.

Thank you, Scott, and thank you all for joining us this morning.

Turning to the details of our financial performance this morning we reported record first quarter adjusted earnings of $379 million and adjusted earnings per share of $1.28 compared to $216 million and $0.76 in 2024.

The robust earnings growth from across the business translated into a meaningful 37% increase in operating cash flow when normalized for fuel and storm deferrals.

As you'll recall, our 2024 cash flow was impacted by the $464 million US dollars storm deferral at Tampa Electric from the major storms we experienced last fall.

Recovery of these costs began on March 1st, and we will be collecting them over an 18 month period through August of 2026.

And while the typical recovery period for storm costs in Florida is 12 months, we are recovering the cost over 18 months to prioritize affordability for customers by modestly extending the recovery period.

This quarter's cash flow growth has delivered important progress towards our credit metric targets with an over 200 basis point improvement in key metrics since the first quarter of 2024, bringing us closer to our 12% target on a trailing 12 month basis.

Pro forma with the sale of New Mexico gas, we are north of this target on the trailing 12 month basis, supporting our confidence in achieving targeted credit metrics at all rating agencies in 2025.

We were pleased to see that S&P returned her outlook to stable in recognition of her successful efforts to delever and reflecting their confidence in our cash flow growth for 2025.

And while we can't control the timing, we are confident that our actions to date and visible cash flow growth positions us well for Moody's and Fitch to also return our outlook to stable this year.

Turning to the drivers of our results, increased contributions from regulated utilities, Emera Energy, and lower corporate costs drove a 68% increase in adjusted EPS this quarter.

At Tampa Electric, new rates reflecting the level of capital we've invested on behalf of customers increased contributions by $0.12 or 85% compared to the first quarter of 2024.

For Canadian electric utilities, the recognition of income tax credits related to our battery storage projects and favorable weather increased contributions from Nova Scotia Power, which more than offset the lower contributions from equity investments resulting from the sale of Labrador Island last year.

Emera Energy had the best quarter in their history with adjusted earnings of $48 million US dollars in 2025 compared to $33 million US dollars last year.

Cold weather brought higher pricing and market volatility, which the business was able to capitalize on.

As most of you are aware, we generally see some earnings erosion over the summer because there is less margin of opportunity while we are advertising the cost of transport equally over the year.

That said, in light of our strong Q1 performance, we are adjusting Emera Energy's earning guidance upward for 2025 from the usual $15 to $30 million US dollars to a range of $35 to $45 million US dollars.

The strengthening US dollar had a meaningful impact on earnings from our US utilities and Emera Energy, driving a 7% increase in adjusted EPS compared to Q1 2024.

Net of hedges that are reflected in corporate, this was a $0.05 increase. For the remainder of the year, we continue to expect that every penny change in the Canada US dollar foreign exchange rate will have a roughly $0.01 impact on our adjusted earnings per share.

New rates at New Mexico gas increased contributions from our gas utilities during the quarter, which were partially offset by modestly lower contributions from people's gas.

Corporate costs contributed $0.04 to the quarter over quarter earnings improvement primarily driven by timing differences in the evaluation of long-term compensation and related hedges in Q1 of last year.

And finally, contributions from other electric utilities decrease modestly driven primarily by higher operating costs.

The strategic actions undertaken in 2024 to strengthen our balance sheet and reduce our exposure to variable rate that established a strong foundation for growth and performance in 2025.

As of March 31st, only 11% of our debt portfolio is variable rate, with 5% at corporate and 6% at our operating companies.

Our variable rate exposure, the approximately $1 billion variable rate debt at the holding company level is expected to be repaid with the proceeds from the sale of New Mexico gas.

And at the operating company level, the variable rate debt includes the incremental short-term debt we incurred to finance the storm deferrals at Tampa Electric. And as I mentioned, recovery of those costs began on March 1st and will recovered and repaid over the next 18 months.

And with that, I'll turn the call back to.

Scott. Against an uncertain macroeconomic environment, we remain strategically well positioned with our high quality portfolio of regulated assets to deliver consistent, predictable performance.

As always, we're focused on execution to safely deploy over $3 billion in customer focused capital to prudently operate our utilities and look for cost saving opportunities as well.

With a strong foundation and expert team, our strategy will continue to allow us to deliver value for customers and shareholders.

And now we'd like to open the call up for questions from our analysts.

Thank you.

(Operator Instructions)

Robert Hope, Scotiabank

Morning everyone. Maybe just start off in New Mexico, just going through all the stakeholder positions, anything of note that you see out of the ordinary and any key steps we should be watching, in the coming weeks and months.

Hey Rob, look, I think we're into the, well into the process now, and every regulatory process involves, stated positions from both sides. There's nothing that's unexpected from our perspective in terms of where we're at hearing coming up in June is the next milestone to pay attention to, and the team's focused on getting ready for that. And as I said on the call, we continue to Expect a successful outcome from that process and closing in the 4th quarter.

All Right, thanks for that. And then maybe moving over to Florida, can you maybe add a little bit more color on kind of where conversations are regarding data centers for to how the pace has gone and how they're kind of progressing Versus expectations.

Chaurchi, would you like to address that, please?

Sure.

Good morning, Robert

I think what I would say is there's lots of discussions happening with data center developers.

Nothing that has developed to a point yet that we, are putting pen to paper on agreements, but, we continue to feel optimistic, confident that that the developers are going to see the merits of sighting in the West Central Florida geography.

In fact, we continue to take steps to enable data center development by shoring up the supply chain, the two CTs that Scott referenced are certainly in line with that So we continue to be optimistic. I would say that recently we have felt a bit of a chill coming over. I think the entire data center community because of interest rate uncertainty, tariff uncertainty, but things are still progressing in a good direction with all of the developers we're speaking with.

I appreciate that.

Thank you.

Maurice Choy, RBC Capital Markets.

Thank you and good morning everyone. I just want to come back to the discussion about tariff explosion. I appreciate the prepared remarks and tackling that head on. It sounds like a significant portion of your caps plan has been locked, has a cost locked in. So I'm just curious if there's any other areas that you're spending a little bit more time focused on in terms of tariff exposure that you can touch on, or any areas where you might have a little bit of a hard time passing the cost to the customers.

Thanks for the question, Maurice. No, I wouldn't say, our anxiety is very high at the moment. I mean of course the team's working hard to address, sort of tariff exposure, which is not that significant as you, would have picked up from our calls. But an effort to continue to ensure we are managing affordability impacts for customers, it's of course a high priority item for the team.

I think the other aspect to tariffs is just, supply chain constraints. It's disrupting supply chains and so managing supply chain processes and ensuring we've got, good supply chain relationships and alternatives that would be sort of the other key area of focus for the teams.

Maybe just focusing on Canada for a moment here. Last year, we saw quite a number of supportive actions done by various governments, for NSPI.

Now that we obviously have the Canadian government in place and there's a lot of discussion about, affordability, just curious as to what you think might emerge here. Whether it's part of the provincial or federal level, or even both together in terms of helping Nova Scotians and ahead of your potential case.

Hi Maurice, it's Peter Gregg from Nova Scotia Power. Great question. Early days yet, obviously with the federal government, but I do think there's a strong alignment between the economic development goals that the Houston government has here in Nova Scotia with what we're hearing are early goals of the Carney administration.

I think, certainly the premier has been vocal about his desire to develop offshore wind resources that are quite strong in Nova Scotia.

We do have a critical mineral strategy that is developing in Nova Scotia. That's a priority of Prime Minister Carney. So I think there's alignment and good potential opportunity there that we're going to stay close to.

But again saying it's obviously very early days.

And I just, encouraged by What would seem to be some momentum and thinking around east west energy corridors that obviously is something of value and importance, I think, to Canada nationally but particularly to Atlantic Canada as well. And so you know those kinds of things I think are encouraging, but as Peter said, it's still early days, of course.

It's just on that note about East West corridor, how do you envision this playing out and what role, if any, do you think NSPI will play?

Yeah, it's really, but you remember we did a lot of work a few years back on what we at that point called the Atlantic loop. So there's been a lot of work done on that, but I think can be refreshed. It probably would not look the same as that is my expectation, but a lot of that thinking has been done.

Obviously our interest at the Nova Scotia Power side would be on the transmission, investing in the transmission access of the east west grid. And if there is going to be development of offshore wind, what's the routing of that? We'd be interested in, where that meets land in Nova Scotia, making sure we have the transmission aspects of that.

So really, our interests from Nova Scotia Power would be on the transmission side.

Yes, sir.

Thank you very much.

Ross Fowler, Bank of America.

Morning Scott. Morning, Greg. How are you? .

Just let me go back to New Mexico for a minute. I mean, the settlement window, correct me if I'm wrong, is expired, but could you still settle this before the June 23rd hearing date? Would that kind of be a goal to get settled before hearing if that's possible?

Yeah, I mean, a settlement can happen at any time, of course, the later in the process that the settlement is, has some risk of impact on schedule, but yes, the settlement can happen at any point in time and you know it's, but the team remains focused on. On the upcoming hearing and putting its case in front of the regulator and demonstrating how in fact this transaction is beneficial for customers.

Thanks, Scott. And then on the US listing you're still planning on that Within the context of, I guess the spring, I guess we're still in spring, June 21, this summer, so.

I'll wait.(inaudible)

For the solstice, but we still on time for that. (inaudible)

Yeah, even though, we're well into the season of spring, we continue to guide that we expect a listing in in New York in the spring of 2025.

Perfect. And then given the FX volatility we've seen in April, are you taking any difference in strategy around your hedging policy or how you look at hedging that going Forward?

Hey, Ross, it's Craig. No, at this point in time, the volatility experience is common for the Canadian dollar, and at this point in time we have no plans to change our approach to hedging our US dollar earnings.

Okay, perfect. Thank you.

TMark Jarvi, CIBC

Hey, good morning everyone. Maybe going back again to New Mexico, just given some of the

Staff filings that want to see some more commitments from the buyer. Would there be a need to amend the application before the hearing, or do you just try to advocate between yourselves and the buyers on the conditions that have been established on the original Filing?

Yeah, I don't think the intention is to amend the application, Mark. I wouldn't say that, but through the process, of course we will respond. We will provide rebuttal effectively to the filings of the interveners to respond to their concerns, and that that evidence will be part of the deliberations that the commission will consider at the hearing.

Okay. And turning to Florida If you look through some of the statistics that were presented by next.

Year at FPL In terms of customer growth and labour market.

It seems like things are moderated in Florida. Are you seeing the same trends in your Tampa Electric territories or something a bit different between your areas, and I guess if economic growth, population growth is moderated is data centers really the only sort of upward driver of higher rate-based growth potentially in the next couple of years?

So let me let me start and Archie can chime in, I think, obviously we pay attention to, sort of economic growth signals across all our portfolios, and I wouldn't say we've seen anything particularly notable in Florida, but it's certainly something that we're watching for, we're certainly not seeing growth accelerate in this.

In this environment, but I would say it's an environment, probably in both Canada and the US where because of the sort of the broader economic conditions, I think we and everyone are probably paying attention to what's happening in terms of in terms of growth drivers underlying it, we still see the economy in Florida continuing to be strong.

We've still seen strong customer growth in the first quarter, not really expecting any change to that, but it's certainly something we're paying attention to Archie, anything that you'd want to add to that?

I agree with everything you just said, Scott. The only thing that I would add is like our economic development team is as active as they've ever been, and the files that they're managing are not exclusively data center files. We have lots of companies looking to relocate to Florida and there's a you can sense there's a real movement around the like the onshoring and so, I think there's opportunities that might provide to us in West Central Florida as well.

Has the mix in terms of growth coming from the residential, obviously there was great migration trends for a while. It shifted More to the CNI type customers then.

Well, certainly from an economic, our economic development work is exclusively CNI residential customer migration into our service territory, as Scott said, first quarter was consistent with where it's been for the last for the last number of years.

But I think there is a bit of, there is some concern from economists that there's at this ten seconds, there's a people are being more thoughtful about decisions they make given the economic uncertainty, but all things being equal in the US, Florida considered continues to be a preferred destination for folks to relocate to.

Okay, good to hear. Thanks a lot.

(Operator Instructions)

Ben Pham, BMO Capital Markets

Hi, thanks, good morning, first off on Nova Scotia Power, you put in a good quarter. ITCs, they were wetter conditions. I'm just wondering with that first quarter behind you, like how does that reconcile with the ROE language in terms of being below that for the year?

It is Peter, yeah, our outlook for the balance of the year is still consistent with the language we put in there. It's earning just below the allowed rate of return band.

So even with a good first quarter, we still think that is the appropriate guidance for the year.

Okay, and you're.

Yeah, just, we're not going to provide specific guidance, but we had an ROE kind of mid 8.5% range last year, and I think it's fair to say that we would expect it to be somewhat similar this year.

Okay, got it. And I know a few questions on New Mexico and the staff, commentary, DOJ and whatnot, we'll see how that plays out in the next little bit, but can you compare, I know that the onus is on the bar to prove, the benefits of the proposed deal, but can you share from your perspective just this application versus your application 10+ years ago in terms of just really Any big differences in how the approaches and also your own qualitative view on the commission makeup today versus the past is it more supportive than before, or is it or the same?

Yeah, well, first of all, the constitution of the commission is different today in that now it is appointed with our filing it was elected. I'm not in a place to assess as to whether there's any difference in that. I'd say our experience with this commission right from the beginning has been, very balanced outcomes, and you know our regulatory.

Experience in New Mexico has reflected that, I think, and from, our view, I think, Bernhardt Bernard Capital Partners, while they are a private equity owner, we obviously are not, they do operate a number of businesses.

They are not sort of a traditional private equity type firm. They have their hands on and our experienced owners and operators of businesses, and they have investments in New Mexico and are very committed to delivering value for customers and also, committed to proceed through the regulatory process demonstrating benefit for customers and that's what we expect will be, evident through the rebuttal testimony that's filed and the hearing in June. Karen, anything that you'd want to add to that?

No, Scott, I think that's exactly right. We're working through the process.

It is a net benefit test that we need to demonstrate in New Mexico, and we're all aware of that and aligned on that. So we continue to engage with all parties and work through the process, and we're confident that we're that we're positioned to be able to achieve those expectations in terms of the regulatory requirements.

Okay, got it.

Thank you very much.

Thank you.

At this time there are no further questions. I'll return the call to Dave Bezanson for closing remarks.

Thank you, Michael.

Thank you all for your interest in Emera. That concludes our call for today. Have a safe day.

Thank you. This now concludes our presentation.