Q2 2021 Emera Inc Earnings Call
Good day, and thank you for standing by and welcome to the and Mirror second quarter 2021 analyst call. At this time all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one on your telephone.
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I would now like to hand, the conference over to your speaker today.
Mr. David Bezanson.
Vice President of Investor Relations Sir Please go ahead.
Thank you Brenda and thank you all for joining us this morning and there.
<unk> second 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 and mirror dotcom.
Joining me for this morning's call are Scott Bell for Emera is president and Chief Executive Officer, Greg Blunden, and there is chief financial Officer, and other members of and mirrors management team.
Before we begin and I'll take a moment to advise you that this morning's discussion will include forward looking information, which is subject to the cautionary statement contained and the supporting slide today's discussion and presentation will also include references to non-GAAP financial measures you should refer to the appendix.
Just for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure and now.
Now I will turn things over to Scott.
Thank you, Dave and good morning, everyone.
This morning, we released our second quarter results and I'm pleased to say that we continue to see solid results and steady growth and our business.
We delivered quarterly adjusted earnings per share of 54.
And increase of <unk> over last year.
And year to day adjusted earnings per share of $1.40, non cash up 22, <unk> over 2020, one despite facing pressure from foreign exchange rates.
Our team also continues to safely execute on our capital program and we're on track to complete our $2.4 billion 2021 plan.
The team is also making significant progress on the regulatory front.
Last Friday, and we filed a settlement agreement related to our request for a general base rate increase at Tampa Electric.
Unanimously supported by all intervening consumer parties and it's a balanced agreement that supports Tampa electric and EMEA, our strategy to advance a cleaner energy and investments and grid modernization and reliability all the while never losing sight of affordability for customers.
As you know Tampa electric has been significantly reducing the carbon intensity of its generation mix with major investments in solar and the Big Bend modernization project today, Tampa Electric and Florida's top producer of solar energy on a per customer basis.
This three year agreement allows Tampa electric to continue this progress providing great support for investments already made as well as those planned over the period, giving us confidence and our ability to continue to deliver on many fronts.
If approved we will see an increase in base revenues of $122.7 million, starting in 2020 to Israel and U S dollars, a further U S $90 million and 2023 and U S $21 million in 2020 for you.
Agreement also creates the clean energy transition mechanism, which will allow Tampa electric to collect revenue of 69 U S million dollars annually over the next 15 years, starting January one 2022 to recover the full carrying interest minimal costs of Big Bend units, one two and three.
This together with the base rate increase and 2022 that I mentioned means rates will increase by a U S $191 million starting January one 2022 and with the full one.
<unk> and 'twenty, three and 'twenty four.
The agreement also provides for a 9% to 11% ROE band with a midpoint and set at $9.95 per cent for ratemaking purposes.
And no other change no no change for equity thickness.
Thank you for the team and Florida for their hard work and reaching this outcome.
In fact this agreement reflects the hard work of all parties involved and secure and rate certainty through the end of 2024 for Tampa electric customers, while positioning the utility to make continued investments and resiliency customer solutions and a greener energy future.
Tampa Electric settlement is the third important rate case, and our U S utilities over the past year and.
As Youll recall peoples gas and new Mexico gas concluded rate cases last year and.
This is in addition to the successful application to recover and Boston.
Associated with Winter Storm, Geary, and new Mexico, and a mid force adjustment for fuel cost recovery at Tampa Electric.
This track record is a testament to the caliber and regulatory teams as well as the quality of the regulatory jurisdictions, where we operate.
It also speaks to the collaborative approach, we take that ensures balanced outcomes for all involved.
I know this is not easy work and I want to take a moment to thank all of those involved for their expertise and efforts.
We also announced another significant milestone on Monday morning.
Delivery of the Nova Scotia book of clean energy from the Muskrat Falls hydroelectric project will begin to flow through the maritime link to Nova Scotia power customers This coming weekend.
This is a significant step that brings us closer to the shared goal of having 80% of Nova Scotia's energy coming from renewable sources by 2023.
The Maritime link was a bold idea and it will deliver clean energy to Nova Scotia for generations to come and.
It's part of our long term vision to support the energy transition and this region.
And we see the maritime link is the first step and the regional transmission interconnections that are critical to support more local renewables and enable continued carbon reduction and Nova Scotia on.
All moving us towards achieving the vision to achieve net zero cotwo emissions by 2015.
The Maritime link project was completed on time and within budget and.
It was and absolutely massive project executed safely and expertly for the Mira team and many partners who helped to make it a reality.
Thank you and the Mira team and all our partners and stakeholders, who share our commitment to a greener energy future true building stronger regional connections.
This project is the result of the vision and hard work of so many including indigenous partners and for governments. The federal government now for and countless local regional and National partners.
The commencement of the Nova Scotia Block, Florida on the Maritime link is a significant part of delivering on our climate commitments.
With the Nova Scotia Block, Nova Scotia power is on track to generate approximately 60% developed its electricity from renewable sources by 2022.
And this helps deliver on <unk> overall commitment to a 55% reduction of Cotwo by 2025.
And in Tampa Electric and we continued to build out and continue the build out of our solar program with $5.3 million patents currently up and operating and another 700000 to be installed this year.
And early July we released our 2020 sustainability report, which highlights our progress on all our environmental social and governance commitments through December 31.2020.
The report captures not only for the progress, we're making but the commitment from our team to advance our strategy.
We continued to enhance our ESG disclosures and remain committed to transparently reporting on the factors that are most important to our investors and stakeholders.
Meanwhile, whoever COVID-19 continues to challenge and many of our communities.
Nova Scotia, and case numbers from remained low case counts and Florida are concerning for us.
Sadly, we lost one of our employees and yesterday due to complications related to COVID-19.
This tragic loss illustrates that this pandemic is far from over.
This is a difficult loss for our entire team.
And we extend our condolences to bill's colleagues and families.
I want to thank our employees for continuing to do their part not only for our customers, but also for each of each other.
Whether that is getting vaccinated continuing to follow a public health guidelines and always keeping health and safety first of mind.
You've heard me say it before but our response to the pandemic has really highlighted the strength of our team and strategy.
And here is on solid ground.
Difficult progress on the regulatory front, we have good visibility into our cash flows for the next few years and this allows us to focus our attention on growing the business by continuing to invest and our strategy of safely delivering clean reliable and affordable energy to our customers.
Before I hand, it over to Greg to walk through our financials I'd like to officially welcome Youll notice to <unk> board of directors.
It is currently president and CEO of the New York Power Authority.
And 30 year for extends across regulated and unregulated utility markets public utilities and state and local governments.
He is and industry industry energy industry leader.
With deep experience and driving innovation, new technologies and cleaner energy solutions for customers.
And we're fortunate to have you on the Mira team.
And now I'll turn you over to Greg to walk you through our financial results Greg.
Thank you Scott and good morning, everyone.
This morning, we reported second quarter adjusted earnings of $137 million and adjusted earnings per share of 54 cents.
For the six months year to date adjusted earnings were $380 million and adjusted earnings per share was $1.49 or.
Our adjusted earnings exclude Mark to market adjustments that I will discuss in a few minutes.
And mirrors adjusted earnings per share increased for the quarter and year to date, despite foreign exchange headwinds for <unk> and <unk>, respectively.
The Q2 increase of <unk> <unk> per share was driven by strong by a strong quarter and the gas utilities and infrastructure segment led by peoples gas with the segment contributing $10 million more than in Q2.2020.
Peoples gas continues to benefit from new rates and continued growth and its customer base.
The timing of preferred share dividends also gave us a year over year increase of $12 million as we recorded two dividends and Q2.2020 and only one in Q2.2021.
The Canadian utilities contributed modestly to the growth with a higher contribution from the maritime link and Labrador Island link projects.
And lower corporate interest expense as a result of our efforts to reduce corporate debt continued this quarter.
On the Nonregulated front, we continue to see better results at emera energy due to strength and market pricing and increased volatility.
These positive changes were partially offset by the impact of a stronger Canadian dollar and by slightly lower earnings at Tampa Electric which experienced increased AUM and G and depreciation resulting from our continued investments in solar and Big Bend and the effect of a regulatory settlement that led to an 8 million U S dollar amortization credit last year.
Adjusted for the foreign exchange impact and the amortization credit and in 2020, Tampa electric was modestly up quarter over quarter.
Year to date and increases in adjusted earnings per share of <unk> 22 were due to higher earnings from the gas utilities and infrastructure segment as discussed a moment ago and better results and marketing and trading.
Lower interest expense and corporate AUM and G and the preferred share dividend timing also improved earnings and the first half of 2021 versus 2020.
These increases over last year were partially offset by the impact of a stronger Canadian dollar, which negatively impacted our earnings by approximately $20 million or <unk> and EPS.
We continue to be partially hedged for the remainder of 2021 at a rate of $1.42 for approximately $25 million per quarter and we look.
And we look to layer on more hedges as foreign exchange rates return to normal levels as we have seen recently.
The recording of the amortization credit and Tampa Electric last year, and the sale of a mere Maine and this.
And two approximately five or $14 million and earnings that we didnt have this year.
And finally higher share count reduced EPS by <unk>, and the quarter and <unk> on a year to date basis.
Overall, we are pleased with 2021 so far.
And mirrored mirror Energy's Q2, Mark to market loss had a material impact on reported earnings. Many of you will remember that we had a similar situation in 2016.
And I take a minute to give a refresher on what is going on here.
Mary and energy has a number of asset management agreements or M as with gas and power utilities and natural gas producers.
Whether they buy or sell gas for specific term and take a corresponding release of the counterparties gas transportation or storage capacity.
And mark to market adjustments on those andas arise when the on the price difference between the point, where the gas and source and where it is sold at.
At inception, and Mark to market adjustment was fully offset by the value of the corresponding gas transportation asset of.
Of course, the gas price has changed over the term of the EMA, which means the value of the transportation also changes. However, the two elements are accounted for differently the gases mark to market and the transportation is amortized evenly over the term.
This resulted in some net mark to market gains or losses recorded in income Ulta.
Ultimately, though the gas transportation asset and the mark to market adjustment reduces to zero at the end of the contract term.
It is important to emphasize that these arrangements have no actual economic market exposure, because regardless of the differences and the value of the gas between the receipt and delivery points Emera energy has transportation capacity that enables us to move the gas to the point at which at this price.
Well year to date, we have seen a decrease in cash flow from operations before changes in working capital. It can be largely attributed to the significant increase in gas costs, and new Mexico gas related to winter storm hurry.
Adjusting for that cash flow impact cash flow from operations before working capital was up slightly over last year.
And looking for it there are a number of events that have occurred recently that will positively impact operating cash flow going forward, both in terms of incremental cash and greater certainty around the cash flow that we've been expecting.
As a point of reference every $50 million of Canadian of cash flow improves our credit metrics by approximately 30 basis points.
In Q2, we received regulatory approval for a mechanism for collecting $108 million of incremental fuel costs, and new Mexico that we disclosed last quarter.
Starting on July 1st of this year, we will collect the full amount plus carrying costs over a 30 month period.
And while simply timing this will have the effect of increasing operating cash flow over the following 30 months.
This will provide $43 million and incremental cash flow and each of the next two years as well as an additional 22 million U S dollars and the second half of 2020 one.
This month, we also received approval for a mid course correction related to our fuel adjustment clause and Tampa electric.
As approved it will provide for an additional 83 million U S dollars and revenue over the remainder of 2021.
And looking forward to 2020 two we continue to make significant progress on improving our cash flow with the rate cases of our three yes, three U S utilities behind us our corporate interest cost coming down and the Maritime link and Labrador Island link soon contributing their full amounts we love a good line of sight and the strengthening cash flow positioning going forward.
And with that I'll turn the presentation back over to Dave.
Thank you Greg. This concludes the presentation, we would now like to open the call for questions from analysts.
Yeah.
Thank you at this time I would like to take any questions from my time for RSV.
As a reminder, if you would like to ask a question simple press Star then the number one on.
On your telephone keypad.
We have all of our price question from the line of Ben Pham from BMO. Please go ahead.
Hi, Thanks, good morning, and whats the catalyst.
And I'm like recognize you got to get approval for that and.
Yes, it does.
And on a non Mexico, GAAP steel costs and low has come in and do you have.
But our confidence now in terms of where the cash flow is going to go on in 2022.
Good morning, Ben It's Greg we do I mean, I think we you know I think it's fair to say, we always had coughing and certainly.
And the settlement that we reached are in alignment with what our expectations would have been and and I think it's fair to say what the expectations are the rating agencies would have been so.
The target of 12% <unk> CFO to debt in 2020 two it is very much achievable.
[noise] achievable at this point and time.
Okay.
And.
When you actually.
Yes up towards 2020 two.
And a step change and a Florida based on that and on the cash coming and view.
And you think it could be in a position where you can self funding our capex program calls for 2022.
So on the backend and but as you look for it is that okay and kissing probability of that.
Yeah, I think that nothing has changed from.
Our expectation and I wonder if funding requirements are for the 'twenty one through 'twenty three period, we'll of course refresh that in the fall and when we also refreshed our capital forecast, but you know at this point and time, we're committed to maintaining our drip at the at the level. We are the ATM program is functioning quite well.
From a from our perspective, and and we'll continue to access that for probably and the $50 million to $60 million a quarter on average going forward for the next at least the next couple of years.
Okay and.
Can you comment on maybe high level, you think your Capex program and to some advanced metering and vascular and from there. After he either is there more to go maybe just by automation and and.
Implementing digital assistance and whatnot, and they're my upside and opportunity for us.
Wow.
Ben I think broadly across the portfolio as we continue to make investments to modernize the grid and and make investments and customer facing technologies.
Yes for sure that'll be part of our our Capex plan.
And going forward, there's aspects of that obviously within the plan and now Hanoi and smart meters had been obviously, the most significant part of that and part of that we've talked about but there have been other components of that as well on across the portfolio and so for certain that'll continue to be and important part of our capital program moving forward and part of the.
Transition that to them that we're driving as well.
Okay. That's great. Thank you.
Yeah.
Thank you. Our next question is from the line Mark Jarvi from CIBC capital markets. Please go ahead.
Thanks, Good morning, everyone just wanted to come back.
Around the funding and now that we've got the settlement agreement.
Maybe Greg when you look at that sort of a funding Pie chart and you had equity at 15% to 25% I understand now you're kind of trending towards that and it'll take 20% equity one and <unk>.
Talked about $50 million a quarter for the ATM.
Is that sort of where your guidance and the midpoint of.
On the equity requirements in place before.
Yeah and market I'd say.
No.
And I don't think there's anything that would necessarily suggest that we'd wanted to tighten that range I think that range for equity requirements over the three years is still appropriate.
And I mentioned in response to Ben's question, you know, we'll update that when we update our capital program later in the year and but at this point and time.
That's the most appropriate guidance for us to have out there.
Fair enough and then coming to the Tampa the fuel charge recovery.
Was there a bit of a drag and in this quarter last quarter in terms of just carrying the higher fuel costs and just wondering on that $83 million of higher revenue that comes through on on the new range because they didn't had a bit of a catch up for that I'll, just adjusting to where commodity costs are trying and.
More on the back half of this year.
Yeah, and it's a combination mark of a catch up for the first half of the year as well as capturing.
And what we expect the incremental fuel costs would be above what's in the base fuel cost of rates and the second half of the year as well and.
And any way to sort of give us a little bit of a color on how much of a grind and might've been on Tampa earnings and the last quarter.
So it won't have any impact on on or on earnings at all Mark because it just flows through the fuel clause.
Okay fair enough.
And my last question is just on the you know the Muskrat falls and there's always going for a block coming through now.
What what sort of the.
Backup plan, if there was ever any unplanned outages and on that or issues with you on transmission lines in terms of.
Obligations on a sort of renewable electricity.
Nick commitment and stuff in terms of how you guys and there would be exposed on any penalties or.
How you would feel and if it was that maybe something temporary and losses are not powerful and true.
Yeah, Mark I'll start and then Peter and I was on the phone and he can.
Sort of backfill.
My answer, but broadly we expect now with the Nova Scotia block are flowing.
And will also enable incremental energy beyond the Nova Scotia power block also to flow we expected.
Uh huh.
That will effectively allow.
Allow me to switch power to procure the renewable energy that it needs. In addition to that and it's already being generated natively here in our in the province to be able to meet that meet that standard but.
Peter over and over to you to add any more clarity for.
Yeah, Thanks, Scott and I Mark.
In terms of if there were to be any transmission outages on that line.
And it's part of our reliability planning, we need to ensure we've got a portfolio of resources available to the to fill any gaps and.
So you know you see.
Continuing we will continue to utilize our coal fleet as we.
And those down over the next number of years, we've got gas facilities from that existing renewables. We've got hydro facilities. We've also got the timeline and to enter New Brunswick, and so you know we've got options and that's what we do every day.
And for those contingencies to make sure we can provide a reliable source of power.
Okay. Thanks for.
Thank you our next question and that's from Maurice Choy from RBC capital markets. Please go ahead.
Thank you and good morning, My first question is on Tampa Electric.
And you were obviously open to go right to the and on a fully litigated case.
But you're also willing to engage and sentiment, which obviously was a route that you took.
And you mentioned and I did a disagreement and aligned with your expectations, but if you look at this package Holistically can you discuss the puts and takes that net.
And you to accept the settlement and also how this deal may compare to the ones that you're peers and Florida.
<unk> also filed do you go through this year as well as the IPO yesterday.
Yeah. Thanks for the question.
So our accumulative and get you to answer the first part of that question and then I'll answer the second.
Sure very good thanks, Scott good morning Maurice.
So on mortgage I think what you're what you're you're.
First half for the question was where are we prepared to go the full distance on a fully litigated rate case, and we absolutely were.
The team here.
You know was was in.
In parallel with the settlement we were working on was busily prepping themselves for.
And for being on the witness stand during the hearing and preparing filing testimony et cetera et cetera. So we were fully prepared to go all the way and we all and we felt good and continue to feel good about.
The strength of our case and the value that it represented for both customers and shareholders.
Our interest and engaging in a settlement to win that opportunity.
Was presented to US was really one of.
Yeah.
Is there a way for us to work through this and achieve an outcome that we believe is equal to if not better than what we might what we might derive from our fully litigated settlement.
And.
Is there a way to do it that brings certainty to what the price increases will be for customers on the first of January of 2022, there are other reasons as well on reputation on and otherwise why we would have.
Fit to engage with the.
On the consumer parties the deal the agreement that we ultimately reached is one we feel really good about for us as an organization and where we sit today. It is.
It is a settlement that represents a.
And a significant derisking of our business.
It is a prudency determination on all of the assets that we were seeking recovery for us 100% recovery on all of those assets, including those that we intend to retire.
So we feel really good about what we have achieved.
For us it certainly has it as a platform for for growth on.
I'll, let a pace that we believe customers can afford and that.
And that was and that is an important element for us as we work through this settlement.
When we look at the settlement, we look at it and its entirety as opposed to looking at any one element of it.
And I say that because we.
We look at it as an entire package of not just derisking and and affordable pace and a platform for growth, but we also look at it from the perspective of do ability and.
We know what we negotiated and we feel extremely confident.
Is that.
The agreement that we have reached will allow.
Allow Tampa electric to perform in the higher end of that ROE range, We don't view the 90.95.
The midpoint as a mid point do we view that as quite frankly as a starting point.
And based upon what we have negotiated with the consumer priorities.
We are extremely confident that that is a starting point.
I don't want to comment on what other what other sin.
And the state have have negotiated I mean, yes, FPL announce something yesterday, and we haven't had a chance to work through that yet we wish them well.
Through their through their process.
And it does appear to have a pretty robust roe, but without knowing the entire contents of the agreement, it's really hard to get a sense of.
And of how it compares how the how the how their settlement.
With a subset of their intervenors compares to the settlement that we have achieved.
With all of our consumer properties.
Anything else Scott.
Yes, I think I think you covered it and I think that largely answered. The second question to mortgage I think you know I think as Archie said you know what.
Well, we have in front of us the settlement agreement that we have in front of US unanimously supported I think it gives us a clear pathway to approval. There is of course, a process that needs to go through with the Florida Public Service Commission, but obviously with all of the intervening party and supporting that agreement, we have confidence in and.
And the outcome and the settlement agreement will allow us to deliver on our plans our plans for our customers and our plans for our shareholders as well so.
And I think I think that's really the right answer to the question and energies reference to you need to look at things and the whole package, which certainly.
We've done and we're happy with the settlement package that we've achieved.
Thanks, and maybe just a follow up to those comments.
995 is your starting point and.
Obviously, the higher and 11% can you compare that.
Expectations to what you see cheaper and a lot a few years.
From from my recollection is probably around 10% or just above 10%.
Happy to share your thoughts on that.
And I'm already sits Greg.
It's fair to say that we probably and.
And you know maybe one year might have been slightly higher than this for one year and slightly lower but I think we've generally been in and around 10, and the quarter to 10, and 5% ROE vs. The Tampa electric and and.
And I think this settlement and it's.
And its totality probably positions as well, but on average we would expect to kind of maintain that level of performance at the utility.
Great and and just my follow up question on Investor day that niche scheduled for December.
Notwithstanding that you're obviously still waiting for it to this from from the regulator and Florida, but what.
Perhaps with two or three things that you're still waiting on over the next three or four months.
In order to provide us.
And an update to the Capex and funding plan.
Yeah, I wouldn't say, there's anything Maurice that we're waiting for from a regulatory perspective running that we're just going through it's a natural part of our planning cycle right now at a mirror, where we're going through and and reviewing capital plans for all of our businesses and Theres just some internal work that needs to get rolled up and we.
We review that with our board.
And make sure that we have their full support and so it's really more of an internal processing and then anything else.
Thank you very much.
Youre welcome.
Thank you. The next one we have from Rob Hope from Scotia Bank. Please go ahead.
Good morning, everyone. Just a follow up question on the Teco on ROA. So just just wanted to you know further kind of clarify your understanding here.
And you know how and what are the key drivers that will move you kind of city upper end of the band and then three the agreement do you think you'll kind of start towards the upper end and then you know I was.
And a little bit on rate lag sets and you could kind of drift lower to get you to that overall 10 and the quarter average.
Yes, I mean, I think the greatest variability that we'll see over the next couple of years is is weather and load related Rob.
Obviously, we're experiencing some customer growth and we expect that to continue over the period and with that customer growth. Obviously comes from some low growth. We do have also step changes in revenue and both 23 and 24, which also help so again on its whole we would expect to maintain a fairly consistent ROA.
Profile with probably the variable being weather and then ultimately residential load as a result of that weather.
Alright, Thanks for that and then just in terms of your kind of capital outlook.
Opportunities under development, but you've been talking about for some time to have multiple of just under 200 million of potential Capex. That's here and over 400 next year, where are we and and moving those opportunity and from under development and then to the secured bucket.
Yeah, it's a well as you've heard us articulate before about half of it is projects related to the Atlantic loop or or direct investments and elastic loop and and as we've said, we expect to have greater clarity and be able to provide some additional color around that and the fall of this year.
So some of the other projects.
Well.
I can't say, we're seeing necessarily material changes and we are seeing some progress and some of our utilities and new Mexico. As an example, where we're starting to look at gas storage and.
As an opportunity and reaction to what was experienced with.
Winter storm <unk>, so theres, a few things like that Robert but I wouldn't say, there's necessarily anything significant to call out for you.
Alright, Thank you I appreciate the color.
Youre welcome.
Thank you. The next one we have from Linda and Youre Galus from DB Securities.
Yeah and number of my questions have been answered, but maybe I'll switch to focus a little bit to your.
Operating results and I'm wondering if you could give us a sense of.
The puts and takes and your operating expenses as it relates to any sort of inflationary pressures, you're seeing versus any sort of ongoing or new productivity initiatives, especially.
Perhaps leveraging learnings from remote learning and adopting new technologies during the pandemic.
Well I can start Linda and then maybe Scott can add.
It's a big question.
I can say on or kind of our day to day operating expenses.
If you think of kind of corporate expenses and things like that where we're not really seeing any inflationary increases yet, but although I'm not sure what the level of activity would necessarily highlight that at this point and time, because clearly nobody's traveling and and some of those things. So we're still seeing a lot of benefit from that side of it.
Thank you know how and what we've experienced over the last year, how that will continue I think there's no question that the volume of travel.
Some.
Conferences, and things like that investor conferences, and things like that I think.
And Theres no question and some of them will stay virtual and I think we will see some benefit from from that side of it.
On our core operating utilities.
Again minimal impact so far I would say from a place share perspective, maybe the area. We're starting to see some is on things like Poles and wires and kind of just the day to day maintenance of our system.
But we're still you know for.
Chile, where cost of service utilities, those are inevitably get pass through to customers a lot of our costs are labor and labor related costs.
And that are.
You know through agreements with our unionized work force as you know interest rates are certainly being helpful. So I think collectively as a whole is something we're watching but it's not something that we've seen any kind of impact on our financial results to date.
And I think in terms of in terms of cost efficiencies Linda.
And I think sort of for more remote aspect of.
For.
And I'm not sure that it would point to anything.
Notable scale, there, but where we are certainly seeing some efficiencies as we continue to invest in.
And in.
And cleaner energy things like the conversion of our.
Coal units, two and natural gas fired units.
It drives a lot of operating cost efficiency and the labor component of.
And a gas plant is much less than that of of running a coal plant and on the same again when you think you'll go and renewable so we're seeing we're seeing those kinds of.
And of efficiencies as well the and.
The impact of of technology smart meters and and the impact they are taking away from the manual processes that were required not just reading of meters and as.
It was required and and Nova Scotia for example, but even the ability to remote disconnect and reconnect without needing to roll a truck in order to two.
And to perform that service so we're seeing those kinds of efficiencies.
<unk> business is benefiting from and and that's it.
Ongoing focus area for us.
For sure.
Thank you and as a follow on.
Recognizing it's not a significant part of your.
Business, but it is one of the more variable aspects Youre emera energy I'm wondering if you can give us a sense of whether some of the hot weather. We've been seeing recently this summer has translated into them.
Market dislocations and opportunities Q3 to date and.
And any sort of visibility or observations for the balance of the year beyond Q3 would be helpful.
And on tax.
So the net Judy good morning.
So I guess the way for the second one first and we're having and much better year in 2020 women and we had and twice a year 90.
And I feel comfortable saying that we will be and are.
We expect to be with us in our earnings range, which is $15 million to $30 million.
I would say, we're hopeful to be toward the higher and there, but the reality is about 40% on the year is still kind of happens in November and December so.
And I can kind of I can't predict that and as confidently as I can say that I'm certainly well within the range.
And there hasn't been and Theres been a little July has been okay, but not certainly not as Swedish July I guess, how I would describe it and it's been hot and high and the west.
And it kind of and our prime territory not that it's just not.
Not too exciting.
That's helpful context, Thank you and maybe just another quick follow on recognizing that.
On your annual planning process needs to run its course I'm, just wondering how any sort of conversations with both your equity and debt investors are informing your thoughts going into that process around potentially expanded our investor base are you seeing some of your <unk>.
Staying on ability initiatives and reporting and targets are translating into potentially a broader access to new classes and investors or potentially shifting your investor base, a little bit any any context around that would be helpful.
And I'm not I'm not sure I would necessarily and it's interesting questions and im not sure it necessarily say we've seen.
And I really notable shift or extension, but I wouldn't say that we've been getting really good feedback from existing investors and prospective new investors, who are focused on ESG space around our disclosure around the language and we're using as it relates even tour.
And our carbon reduction initiatives and.
And efforts and look we've been working hard to try and tell the story better and we've had we've had a good story to tell for a long time, we just haven't really focused on.
On telling it as wells, we have and the last year.
A year or two and and making steps that we did too.
To really bring some.
On a robustness to our sustainability report.
And one.
And issued about a month ago.
And now are not just telling the story about the carbon reduction.
And efforts that have already been achieved but but what our plans and our goals are moving forward as part of our climate commitments.
And I think frankly being candid with our investors around you know.
Our visibility to achieving and 80% reduction by 2040, but the net zero.
And component of our climate commitment being more and more visionary and more of an ambition.
And the ability to have perfect line of sight as to how that could it be achieved accordingly, as we sit and.
Today, So I think and I think all of those messages.
And have resonated and in order for it.
And frankly within our two largest emitters, Nova Scotia power and Tampa Electric just even the clarity of the significant progress that both have already made in terms of carbon reduction.
And I think has been something that our shareholders are welcomed more clarity around the significance of the achievements every day.
Thank you I'll jump back in the queue.
Thanks Linda.
Thank you. Our next question is from Andrew <unk> from Credit Suisse.
Your line is open.
Thank you good morning.
Our renewable power generation exposure has largely been tied to your rate base activities and your utility businesses several jurisdictions.
And what appetite do you have to either build or acquire renewables outside of the regulated framework.
Yeah and.
It's a really good question and of course, one that we best.
About I think we continue to be comfortable with our with our approach obviously of.
On.
And with it with an eye on the pace of investment given its impact on affordability.
But is.
And to really focus on the.
Transition of.
Our generation based inside.
On a regulated utilities towards towards renewables looking it at it outside of our regulated service territories. We do we do look at it and we do think about and of course, our our efforts with the newer technologies today.
<unk> today is in a way a part of.
And that in terms of looking at how.
And distributed.
Renewable generation and backup.
And storage and battery storage can be part of a system, whether that's inside our service territories or in the service territories.
Others and so.
And so that that today would be our primary focus and but it's it's an area that are that we've looked at it but.
But primarily our focus is rate based investments in renewables and continuing to push along our block energy concept.
And mirror technology sits and has developed.
So that's very helpful context, and and so maybe it's just really a function of somewhat growth within the embedded rate basis, and you're trying to avoid rate shocks and that's really the focus right now because it's effectively captive solar efforts for example on Florida.
Yeah, exactly right and we look at the risk return trade off and doing something outside of <unk>.
And the investment opportunity for fault that we have now and and so we keep directing our capital towards those areas, where we think the risk return.
Balance is is most in favor of our shareholders.
One small question and maybe a bit of a blast from the past, but also talking about and renewable power side of things and really just on title power.
Are there any initiatives going on on the title power side at this point and time.
Not not not by us and I know the province here in Nova Scotia continues to look at it but but no we've.
We've obviously taken two kicks in.
And and it's a really interesting concept, but it's it's a long way from being commercial and so our share capital continues to be focused on those places where the risk return profile is to to the best advantage of shareholders and so that's not an area that we're currently pursuing.
Okay. Thank you.
Thank you our next question and that's from David <unk> from Raymond James. Please go ahead.
Thanks morning, everyone. My first question here just on and.
Maritime link I believe Theres, a comment and the MD&A that you have the.
And the potential to purchase additional power from nalco or under a energy access agreement just curious what would cause you to exercise that and and how you could make use of it potentially.
Potentially I guess.
And flexibility on the cap and trade program or requirements and in Nova Scotia.
Peter are you comfortable to answer that.
Yeah, Rick and Rick can add as well hi, David.
Certainly and option and as we look to Decarbonize our resource fleet.
Yes, it makes.
And sense economically to expand that source of power when you compare it to two other options.
I would say it is an option for us to to further decarbonize its as we shut down coal.
But we'll judge that based on you know how it stacks up to other options as Scott mentioned before as we Decarbonize and most important thing for US is that we view that and and affordable way.
And it would need to be cost competitive option.
For us.
Yes.
I think Peter said, a great David and it really is it is it.
Something that's available for Nova Scotia power, if fits and the best economic interest of its customers and so it's got that option to procure that energy and but if it can procure other energy or generate other energy for.
And for less cost than then it will do and will do that and it really provides that incremental benefit to our Nova Scotia power and power planning and push for.
For our customers as it relates to cost and affordability of energy moving forward. So.
I think that.
That's probably the best way to describe it Rick was there anything else that you'd like that wasn't sure. If you were on and that Rick So.
No no you've covered it.
Thank you.
Great great. Thank you for that color appreciate it and then maybe just one on kind of.
A high level question on the U S. I'm just wondering if you have any thoughts on.
And how potential clean energy standard a federally.
Could could affect things are or I guess create opportunities maybe even across.
Across your footprint.
Yeah, I think the way.
I'd describe it David is look we have and up.
As a regulated utility through regulation, we have an obligation to produce for customers. The cheapest electron and it is compliant to whatever the rules and regulations and legislation.
And in that environment, and so you know the renewables at Nova Scotia power and its been investing and over the last few years have been part of that journey to meet the 40% renewable requirement that that was set provincially here the renewables that are.
Being invested in in Florida and.
And have been made on the basis for that.
They are the most cost effective and sources of energy.
And for.
For the overall mix for for Tampa Electric so to the extent that there is a renewable standards imposed it's another.
And it's another consideration that's another factor as it relates to the generation planning for for <unk>.
Tampa Electric.
U S based or Florida based standard.
It may change I E accelerate the pace of.
On the investment in order to produce that and.
Cheapest electrons and that is compliant with with regulation. So if it would be directionally positive, but and the moment.
<unk> electric continues to.
To decarbonize.
Its fleet, both with things like Big Bend modernization, and the investment and renewables, because it's and customers' best interest now even before consideration for renewable energy standards. So it is not holding us back from from doing the right thing for customers today.
And if there was a change obviously can't for electric and and factored that into which on planning and that might cause an acceleration, but we also want to make sure that we're balancing affordability for customers at all times and and that would be part of the planning as well.
Excellent. Thank you very much for that Scott.
Thank you our next question and that's from there yes.
Zhang from Bank of America. Please go ahead.
Hi, Good morning, Thank you for taking my question.
Just wanted to clarify and and follow up on the inflation comments from earlier, specifically as it relates to your solar initiatives and Florida.
Are you seeing much as far as inflationary pressures on the price of the panels or things like that or it sounded like maybe the answer is no but I'll, let you respond there.
Archie.
Yes happy to take that good morning, Darius we're not seeing any inflation on the panels because.
We would have purchased those and advance we have a long term agreement with first solar at fixed pricing that goes out for the full term of the construction period.
And that goes beyond just the panels that goes to the Inverters the trackers.
And and other and other elements that we had to safe harbor as part of that.
Those investments and orders to secure the investment tax credit. So we're seeing some inflation on things like.
The steel that's used for the post and some other smaller aspects of the projects, but nothing substantive.
It changes the economics of those investments.
Okay excellent. Thank you very much and one more if I can just now that you've.
Regular regulated outlook is relatively de risked following the proposed settlement and Florida, just curious how youre thinking about your dividend now and in the near term and the intermediate term and as far as the growth or potentially the payout ratio just curious how you're thinking about it.
Yeah, you know I don't think for thinking about any differently today than we than we were.
And last week or last year, and you know on.
The and any.
And the dividend is always purview of of book.
<unk> board of directors.
But it's typically a discussion that we have on an annual basis typically are in the in the fall.
And look when we you know when we set the dividend growth target.
At the level that it currently is we did that with with an eye to the long term as to what we believed was sustainable over the over the long term and of course, our guidance period will be adjusted from time to time, but.
But really had.
Our view as to what do we believe the earnings growth potential of the business is on an EPS basis, and looking to ensure that we see and earnings growth potential that exceeds the rate of growth of the dividend over the long term and that's and how and why the.
The dividend growth.
Target of 45% was was set a few years ago and and.
<unk> to look through that.
And with that outlook today as we have for four.
Excellent. Thank you very much and I'll leave it there.
Thank you.
I am showing no further questions at this time.
And since Scott Balfour and discontinued.
Yeah.
Okay zone.
And thank everybody for participating in the call and we look forward to.
On our call up as part of the third quarter and wish everybody, a healthy and safe balance for summer.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
Thanks.
Okay.
And.
And now.
Hi.
And.
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