Q1 2025 Emera Inc Earnings Call
Speaker Change: Good morning and welcome to the Emera Q1 2025 earnings conference call. At this time all lines are in listen only mode.
Speaker Change: Following the presentation, we will conduct a question-and-answer session. If at any time during the call you require immediate assistance, please press star zero for the operator.
Speaker Change: This call is being recorded on Thursday, May 8th, 2025. I would now like to turn the conference over to Dave Bezanson. Please go ahead.
Dave Bezanson: 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 by a newswire. And the financial statements, management's discussion and analysis, and the presentation being referenced on this call are available on our website at amira.com.
Dave Bezanson: Joining me for this morning's call are Scott Balfour, Emera's President and Chief Executive Officer, Gregg Blunden, Emera's Chief Financial Officer, and other members of Emera's Management Team.
Dave Bezanson: 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.
Dave Bezanson: Today's discussion and presentation will also include references to non-GAAP financial measures. You should refer to the appendix for reconciliation of historical non-GAAP measures to the closest GAAP financial measure. And now I will turn things over to Scott.
Thank you, Dave, and good morning, everyone. Good morning.
Scott Balfour: This morning we reported first quarter adjusted earnings per share of $1.28, representing a 68% increase over the same period in 2024.
Scott Balfour: 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 five to seven percent earnings growth per share range in 2025.
Scott Balfour: Our first quarter results were driven by robust performance across regulated utilities.
Scott Balfour: 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.
Scott Balfour: and at Nova Scotia Powers, results benefited from the colder weather we experienced here in Nova Scotia this winter.
Scott Balfour: The results from the regulated utilities were further bolstered by a record quarter from a mere energy.
Scott Balfour: 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.
Scott Balfour: 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.
Scott Balfour: Last year, we successfully executed on our asset sale program. Strengthened our balance sheet, adjusted our dividend growth guidance, and finalized two important great cases.
Scott Balfour: These actions strengthen their company and positioned us well going into this year to translate our rate-based growth into meaningful earnings per share and cash flow growth.
Scott Balfour: You can see this reflected in our first quarter results and we're confident that we will see strong performance for the year overall.
Scott Balfour: We also remain confident in our five to seven percent average earnings per share guidance through 2027.
Scott Balfour: Teams across the mirror have deployed over $700 million in customer focused capital in the first quarter.
Scott Balfour: putting us well on track to execute our $3.4 billion capital plan for the year.
Scott Balfour: Major projects underway, including our solar development, 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.
Scott Balfour: We continue to see strong population and economic growth in Florida. With customer growth at Tampa Electric and People's Gas, continuing at a rate of over 1.5% and 3.5% respectively, driving significant investment demand.
Scott Balfour: Between the projected increases in tample electrics capacity needs, sewing to organic load growth, coupled with their desire to enable economic development in West Central Florida.
Scott Balfour: Tampa Electric has brought certainty to their generation expansion plan to ensure resource adequacy by contracting for the supply of two gas turbines to be delivered in 2028.
Scott Balfour: These investments as well as continued investments in reliability, resiliency, renewable integration and technology are the key components of our 7-8% forecasted rate-based growth and the foundational driver of our long-term earnings growth expectations.
Scott Balfour: Against an uncertain macroeconomic backdrop, we are laser focused on managing our capital deployment.
Scott Balfour: focusing on both customer affordability and the timely recovery in rates. [inaudible]
Scott Balfour: To the extent that we see tariff or supply chain impacts on our capital plan, we currently expect that we will work to re-profile our capital spend to maintain our 7-8% rate-based growth, so as not to negatively impact affordability while also meeting the needs of our customers.
Scott Balfour: As a result, we do not expect to make any material changes to our five-year capital plan.
Scott Balfour: 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.
Scott Balfour: 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. [inaudible]
Scott Balfour: 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.
Scott Balfour: 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.
Scott Balfour: Importantly, despite the current tear of exposure, the business case for storage remains intact, as batteries remain the lowest cost alternative for customers.
Scott Balfour: Given the intense sector focus on this, I would note that our $20 billion five-year capital plan does not include any major capital to support data centers.
Scott Balfour: To the extent that we capture any of these new customer opportunities, the revenue and capital investment opportunities would be upside to our plan.
Thank you.
Scott Balfour: On the regulatory front, our focus is in three key areas.
Scott Balfour: The closing of the sale of New Mexico gas, where the regulatory process continues as expected.
Scott Balfour: The next milestone is the hearing scheduled to begin on June 23rd of this year.
We continue to expect closing in Q4 of 2025.
Scott Balfour: 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 allowed Nova Scotia Power to continue making important reliability and resiliency investments for customers.
As you know these processes take time. [inaudible]
Scott Balfour: And while we would like to have more to share on our call today, we are encouraged by the progress and confident that we will have more to share in the second quarter.
Scott Balfour: 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 fourth quarter.
Scott Balfour: And with that, I'll turn it over to Greg to take you through our financial results
Greg Blunden: Thank you, Scott, and thank you all for joining us this morning.
Greg Blunden: 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 76 cents in 2024.
Greg Blunden: 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.
Greg Blunden: As you'll recall, our 2024 cash flow was impacted by the $464 million US dollar storm to throw a 10-fold 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.
Greg Blunden: 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. [inaudible]
Greg Blunden: 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 toward 12% target on a trailing 12-month basis.
Greg Blunden: Proformer with the sale of New Mexico gas, we are north of this target on on the trailer 12 month basis supporting our confidence in achieving targeted credit metrics at already in agencies in 2025.
Greg Blunden: We are pleased to see that S&P Returner will look to stable in recognition of our successful efforts to deliver and reflect their confidence in our cash flow growth for 2025.
Greg Blunden: Turning to the drivers of our results, increased contributions from a regulated utilities, Amira Energy, and Lower Corporate Costs from a 68% increase in adjusted EPS this quarter.
Greg Blunden: At Tampa Electric, New Rates, reflecting a level of capital we've invested on behalf of customers, increased contributions by 12 cents or 85% compared to the first quarter of 2024.
Greg Blunden: 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 Link last year. [inaudible]
Greg Blunden: Emera Energy had their best quarter in their history with adjusted earnings of 48 million US dollars in 2025 compared to 33 million US dollars last year.
Greg Blunden: Cold weather brought higher pricing and market volatility which the business was able to capitalize on.
Greg Blunden: As most of you are aware, we generally see some earnings erosion over the summer because there is less margin opportunity while we are amortizing the cost of transport equally over the year. [inaudible]
Greg Blunden: That said, in light of a 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.
Thank you. Thank you. Thank you.
Greg Blunden: The strength in the U.S. dollar had a meaningful impact on earnings from a U.S. Utilities and Emera Energy driving a $0.7-cent increase in adjusted EPS compared to Q1 2024.
Greg Blunden: Net have had just that are reflected in corporate, this was a five cent increase. So the remainder of the year we continue to expect that every petty change in the Canada, US dollar, foreign exchange rate will have a roughly one cent impact on our justice earnings per share.
Greg Blunden: New Raid to New Mexico Gas, increased contributions from our gas utilities during the quarter, which were partially offset by modestly lower contributions from people's gas. [inaudible]
Greg Blunden: Corporate cost contributed four cents to the quarter or quarter earnings improvement primarily driven by timing differences from evaluation of long-term compensation and related edges in Q1 of last year. [inaudible]
Greg Blunden: and finally, contributions from our other electric utilities to be curious and modestly driven primarily by higher operating costs.
Greg Blunden: The Strategic Actions undertaken in 2024 to strengthen our balance sheet and reduce our exposure to variable rate debt establish a strong foundation for growth and performance in 2025.
Greg Blunden: As a March 31st, only 11% of our debt portfolio is variable rate, with 5% at corporate and 6% at our operating companies.
Greg Blunden: A variable rate exposure to 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.
Greg Blunden: 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 be recovered and repaid over the next 18 months.
Scott Balfour: and with that I'll turn the call back to Scott.
Scott Balfour: Against an uncertain macroeconomic environment, we remain strategically well-positioned with our high-quality portfolio of regulated assets to deliver consistent, predictable performance.
Scott Balfour: 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.
Scott Balfour: with our strong foundation and expert team, our strategy will continue to allow us to deliver value for customers and shareholders.
Scott Balfour: And now we'd like to open the call up for questions from our analysts.
Thank you.
Scott Balfour: Smith. If you do wish to ask a question, please press star 1 on your telephone keypad.
Scott Balfour: If you wish to withdraw your question, you may do so by pressing star two again to cancel. Once again, please press star one to register for a question. There will be a brief pause while questions are being registered.
Speaker Change: Your first question comes from the line of Rob Hope from Scotia Bank. Your line is now open.
Speaker Change: Morning, everyone. Maybe to 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 should we should be watching in the coming weeks and months? Thank you.
Hey, Rob. Look, I think we're into the...
Speaker Change: and well into the process now, and every regulatory process involves, you know, state of position from both sides. There's nothing that's unexpected from our perspective in terms of where we're at. [inaudible]
Speaker Change: Tearing, 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 a call, we continue to expect a successful outcome from that process and closing in the fourth quarter.
Speaker Change: 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 Tiko, how the pace has gone and how they are kind of progressing versus expectations. Thank you very much.
Chair Archie, would you like to address that please?
Sure, good morning, Rob.
Speaker Change: Lots of, you know what I think what I would say is there's lots of discussions happening with data center developers.
Speaker Change: Nothing that has developed to a point yet that we are putting pen to paper on agreements, but we continue to feel
Speaker Change: Optimistic Confident that the developers are going to see the merits of citing in the West Central Florida Geography.
Speaker Change: In fact, you know, we continue to take steps to enable data center development by shoring up the supply chain. The two CDs that Scott referenced are certainly in line with that. But, um,
Speaker Change: So we continue to be optimistic. I would say that recently we have felt a bit of the chill coming over. I think the entire data center community because of interest rate uncertainty, tariff uncertainty. Indeed.
Speaker Change: But things are still progressing in a good direction with all of the developers we're speaking with.
All right, appreciate that. Thank you.
Thank you.
Speaker Change: Your next question comes to line of Morris Choy from RBC Capital Markets, your line is now open.
Morris Choi: Thank you, and good morning everyone. I just want to come back to the discussion about terror of explosion. I appreciate the preparatory marks and tackling the hit on. It sounds like a significant portion of your Capix plan has been locked, has a cost locked in.
Speaker Change: 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 didn't touch on or any areas where you might have a little bit of a hard time passing a cost to customers.
Thank you.
Woo!
Speaker Change: Thanks for the question, Maurice. I wouldn't say our anxiety is very high at the moment and of course the team is working hard to...
Speaker Change: to address sort of terror of exposure which is not that significant as you would have picked up from...
Speaker Change: Managing Supply Chain Processes, and, you know, when it's during, we've got, you know, good supply chain relationships and alternatives that would be to the other key area focus for the teams.
Thank you. Bye.
I missed it. Maybe just focusing on Canada for a moment here.
Speaker Change: Last year we saw quite a number of supportive actions done by various governments for NSPI, not that we obviously have the Canadian government placed and there's a lot of discussion about.
Speaker Change: Fort Bailey just curious as to what you think might emerge here, whether as part of provincial, federal, level, or even both together in terms of helping the discussions and ahead of your potential rate case.
Thank you.
Speaker Change: Maurice, Peter Gregg from Nova Scotia Power, a great question. Early days yet, obviously, with the federal government, but I do think there's strong alignment between the economic development goals that the Houston government has here in Nova Scotia. [inaudible]
Speaker Change: with what we're hearing are early goals of the Karni administration. I think certainly the premier has been vocal about his desire to develop offshore wind resources that are quite strong in Nova Scotia.
Speaker Change: We do have a critical mineral strategy that is developing in Nova Scotia. That's a priority of Prime Minister Karnie. 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. [inaudible]
and I just had, you know, encouraged by...
Speaker Change: What would seem to be some momentum in thinking around East-West, Energy Corridors that obviously is...
Speaker Change: and 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, you know, it's still early days, of course. [inaudible]
Speaker Change: Just on that note about Heathrow's corridor, how do you envision this playing out and what role if any do you think an SPI will play?
Thank you for watching. Bye.
Speaker Change: Yeah, it's early, 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 been a lot of work done on that, but I think can be refreshed. It probably would not look the same as that. It's my expectation, but a lot of that thinking has been done. [inaudible]
Speaker Change: Obviously our interest at the Nova Scotia power side would be on the transmission, investing in the transmission access of the east-west grid. [inaudible] I'm sorry, I'm sorry
Speaker Change: and if there is going to be development of offshore wind, what's the rooting 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.
[inaudible]
Thank you very much.
Speaker Change: Thank you. Your next question comes from the line of Ross Fowler at Bank of America. Your line is now open.
Morning, Scott. Morning, Greg. How are you?
Let me go back to the Mexico for a minute. I mean... [inaudible]
Speaker Change: 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?
Speaker Change: I mean, a settlement can happen at any time, of course, the later in the process that the settlement is, it has some risk of impact on schedule.
Speaker Change: But yes, a settlement can happen at any point in time. But the team remains focused on...
Speaker Change: on the upcoming hearing and putting its case in front of the regulator and demonstrating how, in fact, this transaction is beneficial for customers.
Speaker Change: Thanks, Scott. And then on the U.S. listing, you're still planning on that.
Speaker Change: within the context of, I guess the spring, I guess we're still in spring, June 21st is summer, so wait for the solstice, but we still on time for that.
Speaker Change: Even though we're well into the season of spring, we continue to guide that we expect is listing in New York in the spring of 2025.
Speaker Change: Perfect. And then given the FX volatility we've seen in April , are you thinking any difference in strategy around your hedging policy or how you look at hedging that going forward?
Craig: Hey Ross, this Greg. No, at this point in time, you know, the volatility or experience is not uncommon for the Canadian dollar and at this point in time we have no plans to change our approach to hedging our US dollar earnings.
That perfect. Thank you.
Speaker Change: Thank you. Your next question comes to a line of Mark Jarvi from CIBC. Your line is now open.
Speaker Change: Good morning everyone. Maybe we're back again to New Mexico just given some of the staff filing that want to see some more commitments from the buyer. There be a need to amend the application before they hearing or we just try to advocate between yourselves and the buyers on the conditions that have been established on regional filing.
Speaker Change: Through the process, of course, we will respond, we will provide rebuttal effectively to the filings of the interveners to respond to their concerns.
Speaker Change: and that evidence will be part of the deliberations that the Commission is will consider at the hearing.
Speaker Change: Okay. And Trina Florida, if you look through some of the statistics that were presented by next year at FPL, in terms of customer growth.
Speaker Change: Labour Market. It seems like things are moderated in Florida. Are you seeing the same trends in your tamphelectric 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 deriver of high-rebased growth potential next to peers?
Speaker Change: and I wouldn't say we've seen anything particularly.
Speaker Change: Notable in Florida, but it's certainly something that we're watching for. We're certainly not seeing growth accelerate in this.
Speaker Change: and this environment, but I would say it's an environment probably in both Canada and the US, where
Speaker Change: because of the sort of the broader economic conditions, you know, I think we and everyone are probably paying attention to what's happening in terms of growth drivers.
Speaker Change: 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. [inaudible]
Archie, anything that you'd want to add to that? No.
Archie: I agree with everything you just said, Scott. The only thing that I would add is like our economic development team.
He's as active as they've ever been.
Speaker Change: and the files that they're managing are not exclusively data center files. We have the...
Speaker Change: Lots of companies looking to relocate to Florida and you know in there's a you can sense there's a real movement around the like the onshoreing and so you know I think there's opportunities that might provide to us in West Central Florida as well. [inaudible]
Speaker Change: VRT had the mix in terms of growth coming from the residential, obviously there was creed migration trends for a while, the shifted more to the C and I type customers then.
Speaker Change: Well, certainly from an 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 number of years. [inaudible]
Speaker Change: But, you know, I think there is a bit of, there's some concern from economists that there's at this 10 seconds, there's a
Speaker Change: You know, people are being more thoughtful about decisions they make given the economic uncertainty, but all things being equal in the US floor to consider it continues to be a preferred destination for folks to relocate to. [inaudible] I'm sorry, I'm sorry
Okay, good to hear it. Thanks, everyone.
Speaker Change: Thank you. As a reminder, if you wish to ask a question, please press star one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing star two again.
Speaker Change: Your next question comes to line of Ben Pham from BMO. Your line is now open.
Ben Pham: Hi, thanks. Good morning. First of all, Nova Scotia Parry, you put it a good quarter, ITC's.
Ben Pham: They were wetter conditions, and I'm just wondering with what that first quarter behind you, how does that reconcile with the RLE language in terms of being below that for the year. Thank you very much.
Thank you. Bye.
Ben Pham: Hi, Dennis 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. [inaudible]
And you're great, yeah.
Speaker Change: Yeah, just, you know, we're not going to provide specific guidance, but, you know, we had an ROE kind of mid eight and a half percent range last year, and I think it's fair to say that we would expect to be somewhat similar this year.
Okay, I've got it.
I know a few questions on New Mexico. Colin,
the staff.
Speaker Change: Commentary, DOJ, and whatnot. We'll see how that plays out in the next little bit. But can you compare? I know the owners is on the bar to prove.
Speaker Change: The Benefits of Proposed Deal. But can you share from your perspective just this application versus your application? [inaudible]
Speaker Change: 10 plus years ago in terms of just really any big differences and how the approach is and also your own qualitative view on the commission makeup today versus the past. Is it more supportive than before or is it the same? Yeah.
Speaker Change: 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 [inaudible]
Speaker Change: You know, very balanced, very balanced outcomes, and you know, a regulatory...
Speaker Change: Experiencing in New Mexico has reflected that, I think. And, you know, from, you know, our view, I think, you know, Bernhard Capital Partners.
Speaker Change: 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 are experienced owners and operators of businesses and they have investments in New Mexico.
Speaker Change: 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 in the hearing in June .
Scott Balfour: 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 positioned to be able to achieve those expectations in terms of the regulatory requirements. [inaudible]
Thank you.
Scott Balfour: At this time there are no further questions, I will return the call to Dave Bezanson for closing remarks.
Dave Bezanson: Thank you, Michael. Thank you all for your interest in Emera. That concludes our call for today. Have a safe day.
Speaker Change: Thank you. This now concludes our presentation. Thank you all for attending. You may now disconnect.