Mark Kane - VP, IR Chris Huskilson - President and CEO Scott Balfour - COO Greg Blunden - CFO

Rob Hope - Scotiabank Ben Pham - BMO Andrew Kuske - Credit Suisse Robert Kwan - RBC Robert Catellier - CIBC Jeremy Rosenfield - Industrial Alliance

Good afternoon, ladies and gentlemen, and welcome to Emera Q1 2017 Earnings Conference Call and Webcast. After the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. Please note that this call is being recorded today, Thursday, May 11, 2017 at 4 o'clock Atlantic Time. I would now like to turn the meeting over to your host for today's call, Mark Kane, Vice President and Investor Relations for Emera. Please go ahead, Mr. Kane.

Thank you, Julie. And thank you all for joining us this afternoon for Emera's first quarter 2017 conference call. Emera's first quarter earnings release was distributed earlier today via Newswire, and the financial statements and management discussion and analysis are available on our website at emera.com. On the call today from Emera is Chris Huskilson, President and Chief Executive Officer; Scott Balfour, Emera's Chief Operating Officer, Greg Blunden, Emera's Chief Financial Officer, and other members of the management team at Emera. This afternoon, Chris will begin with a corporate update and Greg will provide an overview of the financial results. We expect the presentation segment to last about 15 minutes, after which we will be happy to take questions from analysts. I will take a moment to advise you that this conference call will contain forward-looking information and statements with respect to Emera. Forward-looking statements involve significant risks, uncertainties and assumptions. Certain material factors or assumptions have been applied in drawing the conclusions contained in the forward-looking statements. Generally, these factors or assumptions are subject to inherent risks and uncertainties surrounding future expectations. Such risk factors or assumptions include but are not limited to regulation, energy prices, general economic conditions, weather, derivatives and hedging, capital resources, loss of service area, licenses and permits, environment, insurance, labor relations, human resources and liquidity risks. A number of factors could cause actual results, performance or achievements to differ materially from the results discussed or implied in the forward-looking statements. In addition, please note that this conference is being widely circulated via a live webcast. Now, I will turn things over to Chris.

Thank you, Mark and good afternoon everyone. Our first quarter results were driven by improvements at virtually all of our regulated operations. First quarter 2017 adjusted net income was $152 million or $0.72 per share, compared to a $120 million or $0.81 per share in the first quarter of 2016. This quarter did not have any of the charges or gains that we have had in previous quarters. And we think that this is a much better representation of Emera’s real earning power. Despite of 27% increase in adjusted net income, earnings per share declined due to a 47% increase in the weighted average number of shares outstanding. This is the first winter quarter with earnings from Florida and New Mexico operations. Those companies delivered net income of $79 million, or $34 million net of permanent financing costs. Emera Florida and New Mexico results were short of our expectations primarily due to much milder winter weather than 2016. We do expect the Florida operations to earn within their respective allowed ROE ranges and Tampa Electric has already had the benefit of hot temperatures in late April and early May. Florida operations continue to enjoy robust growth in a number of new customer as the 1,000 people move to the state of Florida on a daily basis. While we expect energy sales growth to track growth in the numbers of customers over the long-term, short-term weather conditions do impact energy consumption pattern. Nova Scotia Power delivered net income that was more typical of a winter quarter. 2016 was very mild and had higher than normal storm restoration costs, which produced results. Cold weather in March and a more normal level of storm costs, brought Nova Scotia Power’s result back in line with the first quarter of 2015. We expect 2017 results to be in line with 2016 overall earnings. Emera Energy experienced a weaker than expected first quarter due to mild New England weather in January and February. The hedges that we had in place in the first quarter of 2016 were more favorable at about $35 per megawatt hour. Those hedges were put in place in 2015 following a cold winter. This compares to a $10 spark spread experienced in Q1 of 2017. For the last half of the year, Emera Energy will have the benefit of higher capacity payments, more than double the current level by midyear. In the first quarter, we continued to make good progress on our growth initiatives that we expect will grow earnings and allow us to continue to target our 8% annual dividend growth rate through 2020. In Newfoundland and Nova Scotia work is progressing on the Maritime Link transmission project, which is on budget and on schedule for our planned end of the year in-several stage. To date, we’ve spent about $1.1 billion of the projected $1.6 billion project cost. We started laying the first of two 187-kilometer subsea cables. We expect the first cable to be completed in the next few days. Work is continuing on the overhead transmission lines in Newfoundland and Nova Scotia, and the terminals at each of line. We already have the cost recovery mechanism in place at Nova Scotia Power. Customers are paying a small incremental charge on their bills this year to prefund the project when it comes online next year. As approved by the Utility and Review Board under the rate stabilization plan, rates will adjust slightly in each of the next two years. We have made the required fillings at the UARB for Nova Scotia Power to make the cash payments to Maritime Link, starting next year. We expect a final decision in that proceeding later this year. Labrador Island Link is now expected to be in service about the middle of next year. The project will earn AFUDC earnings until the muskrat Falls hydroelectric project is fully operational, which is now expected between mid-2019 and mid-2020. Massachusetts issued its RFP for clean renewable energy as expected at the end of March, for more than 9 terawatt hours of hydro and onshore wind energy and 1,600 megawatts of offshore wind energy. We've add a robust response to our request for interest from power generators to move power over our proposed Atlantic Link submarine cable into the Boston area. We think our proposed Atlantic link project can help meet the state’s needs for clean energy in a very cost-effective manner. In Florida, after commissioning the 23-megawatt solar facility at the Big Bend station in January, we are continuing to explore opportunities for additional large scale solar facilities. In addition, we are working on opportunities to displace coal-fired generation at Tampa Electric with lower emissions natural gas fired generation. At Peoples Gas, we are working on opportunities to expand the gas infrastructure in the space and for new ways to utilize natural gas in Florida context. In New Mexico, work is underway to develop our strategy to grow that company in the state of New Mexico. With the identified growth initiatives of $6.5 billion to 2020 and the prospects for new investment opportunities in Florida and projects such as Atlantic Link, we look forward to delivering strong earnings and dividend growth over the long term. With that, I'll turn things over to Greg for the financial update. Greg?

Thank you, Chris. As mentioned, earlier today, we released our earnings about our quarterly financial statements and MD&A for the first quarter of 2017. I'll go into some of our segment results in a little more details that Chris provided. In Q1 2017, Emera reported net income of $312 million and earnings per share of $1.48 compared to $44 million and $0.33 per share in Q1 of 2016. Our first quarter adjusted net income and earnings per share which excludes mark-to-market adjustments was $152 million and $0.72 per share in 2017 compared to $120 million and $0.81 per share last year. Despite the higher adjusted net income, our earnings per share declined as a result of the increased number of shares outstanding in the quarter following 2016 share issuances. We reported an increase in cash flow for the quarter of $115 million or 49% to $348 million, up significantly by the addition of Emera Florida and New Mexico operations. Our first quarter net income results included Emera Florida and New Mexico, the $79 million or $34 million net of permanent financing cost; contribution was slightly lower what those businesses experienced a year ago. Florida experienced one of the mildest winters on record; heating degree days contribute more to winter electricity sales than cooling degree days do in February and in March, and unfortunately we had more clean degree days than we did heating degree days in the first quarter. Also at Peoples Gas, sales to weather-sensitive residential and small commercial customers were also below normal. And in New Mexico where New Mexico Gas traditionally earns more than 50% of its net income in the first quarter, the winter was much milder than normal and milder than again last year; heating degree days were 18% below normal and 12% below the first quarter of 2016. However, we expect the Florida utilities to earn within their expected ROE ranges in 2017 and Tampa Electric, as Chris mentioned has already seen very strong electricity sales in April and is experiencing record high temperatures over the last few weeks. Nova Scotia Power delivered net income of $70 million in the first quarter of 2017 compared to $53 million in 2016. The stronger performance reflects the return to a more normalized first quarter earnings. The first quarter of 2016 reflected mild winter weather and higher than normal storm restoration costs. By contrast, the 2017 quarter reflected slightly better winter weather, especially in March, load growth and more normal storm costs. And for the full year, we fully expect Nova Scotia Power to deliver net income consistent with last year. Emera Maine recorded Q1 2017 net income of $13 million compared with $9 million in Q1 of 2016. These results reflect lower storm costs and higher revenues due to some rate changes. The lower results at Emera Caribbean reflect lower energy sales Grand Bahama Power due to loss of several commercial customers following Hurricane Matthew in October of 2016. We expect energy sales to return to more normal levels of Grand Bahama Power by early 2018. Turning to Emera Energy, they reported adjusted net income of $10 million compared to $48 million in Q1 2016. Marketing trading EBITDA was firmly in lower at $21 million compared to $33 million in Q1 of 2016. Weather was relatively warm in the Northeast for the second winter in a row, resulting in lower market prices and volatility in the region. Nonetheless, we would still expect the business to deliver at least at the low end of its earnings band of US$15 million to US$30 million for the full 2017 year. With respect to New England generating facilities, lower systems demand reduced economic dispatch opportunities for the fleet, and around the clock market spreads were in the $7 to $8 per megawatt hour range. Our hedging and commercial optimization allowed us to slightly outperform the market realized in spark spreads in the low to mid-teens. The decrease in EBITDA primarily reflects these market conditions. By comparison, in early 2015, market conditions allowed us to place some very favorable forward hedges on approximately half of our New England capacities for the first quarter of 2016 with resulting realized sparks spreads of approximately US$35 for that comparable period. Our Bridgeport plant suffered an unplanned outage at one of its two units in mid March. The cause was identified and repairs are well underway. Emera Energy elected to take the second unit offline and address the condition that led to the unplanned outage on a proactive basis. Both units are expected to return to service by early June, but given the timing and market conditions in the mean time, we are not listing out much from our market opportunity perspective. And looking ahead, we have approximately 400 megawatts hedged beginning in November through the March of 2018 at around $12 per megawatt around the clock. Also starting in the few weeks, we’ll start to see the lower energy margins begin to be offset in part by higher capacity revenues as prices jump from $3 to $7 and that will add about CAD$30 million in capacity revenues on year-over-year basis. Corporate and other reported a net loss of $27 million compared to nil in first quarter of 2016. Increased loss was primarily due to the higher permit financing cost for the TECO acquisition that are recorded in this segment. Also included in the corporate and other segment is $7 million higher of AFUDC on the Maritime Link and Labrador-Island Link. The Maritime Link is on time and on budget, and as Chris as described, we have major construction activities underway. Now, I'll turn things back to Chris to facilitate the answering your questions.

Operator, I think we are ready for questions.

[Operator Instructions] Your first question comes from the line of Rob Hope with Scotiabank. Your line is open.

I was hoping you could elaborate a little bit further, I believe it is on Chris’s comments on some further opportunities to convert the coal fleet down in Florida to gas. I'm just wondering what the timelines are there, the regulatory process and whether or not these would be larger conversions or more simple ones there?

Well, I’d say, first of all, Rob, we have begun to burn more gas in the facility as gas [ph] fire approach. And in fact, today, we are actually seeing lots of opportunity to bring gas at somewhat lower costs on a regular basis than coal. And so, that’s I think been very helpful for our customers but also has allowed us to start looking at gas in those facilities. So, we are now looking harder at what might be the right long-term approach for the plant. And we do see the opportunities to continue to invest potentially in conversions that would see combined cycle activity et cetera. So, we are working our way through that right now. The decisions aren’t yet made but those are the things that are right in front of us.

And then, just further on in Florida and then I'll jump back in the queue. Just regarding some larger scale solar potential down there as well just wondering with the timeline and scale would be there as well.

Again, we see the opportunity to add more solar. We’ve had some very good performance from the existing solar facilities that we have added to the system. Again we are seeing the opportunity to add those facilities and to meet customers’ desire for cleaner energy, at the same time not continuing to have affordable pricing for customers. In fact, this year, we saw prices actually decline about 1.5% in the market as we brought the facility on line. And so, we think that the opportunity is there to bring some solar in. And that’s something we’d be looking at between now and the end of the decade.

Your next question comes from the line of Ben Pham with BMO. Your line is open.

Chris, I was wondering your thoughts, you had some commentary on the weather impacts in the quarter, and we are seeing that all across North America But, I am wondering -- do you think you are more-sensitive to weather conditions now that you have passed on keep going, and few years back and New England gas assets and you had some weather volatility or is this more just quarterly seasonality that on a full year basis doesn’t concern at all?

I think that whole issue about how sensitive we are to weather is something that I think will play out over this year and give us the pretty good indication. I think we would believe that we may be less-sensitive over an annualized basis than we have been in the past. Because if you think about it relative to a northern situation when the winter goes by if you have a bad winter, that’s it, whereas in our case today we actually have the opportunity to see a strong summer in the south. And so, we actually think we might be a little less sensitive than in the past. That doesn’t mean you won't see weather variations, you certainly will quarter to quarter. But we actually think there is a chance that we are less sensitive. So, that’s something that will play out over the next year and we will get a sense of that as it happens.

Good to hear. And just wondering just moving on to the balance sheet and the debt metrics, can you just refresh us on your refinancing needs and the debt side where you anticipate the debt levels to go, just trying to manage that credit rating and then also perhaps equity needs to the extent that you do need it?

Ben, it’s Greg. Obviously, we are very active over the last year. We have no immediate needs in front us; most of our financing we have taken advantage of the yieldco over the last number of years and pushed things out. So, I don’t think you’ll see any material change. We don’t have any material debt refinancings this year, not plenty to go in pref [ph] market. We did go probably little bit heavier on our equity issue in December than we planned which also puts us in a position where we don’t have any immediate requirements at this point in time. So, I don’t think you will see us do much in the capital markets over the next 7 to 12 months. As always we say that when we think it's appropriate for our balance sheet and for the business, we're not shy, we’re going to markets including the equity markets, directionally still at zero to $300 million of equity year is probably still under that number to have in the back of your mind at some point time, over the next year.

Your next question comes from the line of Andrew Kuske with Credit Suisse. Your line is open.

May be this is the ultimate long-term question, but I guess when you look at the dispute that’s been ongoing between Newfoundland and Quebec as it relates to Churchill Falls and you’ve got a new review of the contract there at the Supreme Court of Canada. [Indiscernible] that would you see any kind of opportunity in the front end to maybe increase the amount of power that you would ultimately take out of the province and take into Atlantic Canada and on say New England?

I mean, I think the objective that we have and Nalcor has is to make sure that we fully utilize the Maritime Link and the Labrador Island Link to their maximum potential. And so, we see the opportunity to do that as we look at the system and as we look at surpluses that they have in their system as a whole. And I think that that will happen over the period. So, at the end of the day, that is the success from our perspective is getting that link fully utilized that will provide great access to clean energy for the Maritime region and I think it should provide some ability to move some of that energy into New England as well. And so, if we get that pulled the that will be the maximum we can do.

Okay. So, then maybe just as a follow-up, if they are successful though, would you see any potential upside beyond just the Muskrat volumes that you're initially going to move?

Well, so, we think we can get the line full with the configuration that’s their today, because there is some surplus coming out of Churchill as it exists today. And so, when we put those volumes together, we think the opportunity is there to...

That’s helpful. And then, maybe just shifting a little bit westward for you from a geography standpoint. Do you see any opportunity just in New Brunswick as they stand? They got a lot of things on their plate as far as hydro rebuild, potential recapitalization, efficiency initiatives you may see from a regional prospective, when you stick to really close to home, are those things that you could offer from a solutions standpoint into New Brunswick that will be beneficial for the region?

Well, we're working closely with New Brunswick today, optimizing a lot of our activities are operational activities. And so, I think that that’s paying dividends for customers right across the region as we sit today. We're also working very closely with New Brunswick Power as it relates to the Atlantic Link activity. And again, I think there will be opportunities to invest in and around that for wind development that could occur in the Maritime region including New Brunswick and also for potential hydro upgrades and hydro investments that could happen. So, all those things are possible and would come along with an Atlantic Link investment. And as I said, we’re working very cooperatively with NB Power and we think we can, again generate some better circumstances for customers, if we can make these investments.

Your next question comes from the line of Robert Kwan with RBC. Your line is now open.

Chris, you talked about the Atlantic Link. I’m just wondering with that “robust response”, can you just talk about what the path forward and timelines might be, options, whether that’s RFPs or I think last call you noted that, you might feel, you got that back and go ahead without a formal RFP to line or two?

Yes. Our current focus, Robert, is to bid into the New England RFP. It’s out now and we expect to be putting a bid in kind of the early part of the summer. But we certainly did receive enough interest that we will be able to put forward a bid. So, that’s quite exciting from our perspective. We also, as I said earlier, have been working with New Brunswick Power and others to make sure that we can balance that additional win that would come into the system. And also looking at surpluses from the hydro systems as well. So, when we look at all of that, we will put forward a bid. If we happen to not be successful, which I’m counting on the fact that we will be successful, but if we were, then I do think that we have a lot of interest in moving energy into that market. And we have a great position in that -- we’re now anchored on going into Pilgrim [ph]. And I do believe that that’s one of the better places to land electricity into the Boston area. So that also looks very good, but we’re really focused right now on the RFP.

Okay. If I can just turn to your thoughts, just on the dividend and payout. I’m wondering, do you think that you’re getting credit or worse getting analyzed for your 8% growth rate?

Robert, it’s Greg. I don’t think we’re getting penalized, but certainly, I think we’ve demonstrated over the past even if you go back a decade, our ability to grow earnings at greater than 8%, grow cash flow at almost double that. So, our cash coverage of the dividend has never been better. Seemingly, the market has been a little bit slow to pick that up. But, there is a lot of macro things that are going on right now in the market. So, it’s hard to differentiate how much of our performance is related to specifically to the dividend guidance and how much is to other macro factors.

Okay. I guess we’ve had a bit of chat about this. I’m just wondering, if there is any additional thoughts about slowing the growth rate down a little bit to see something like a 6% having that having that associated with locking the payout ratio back over the next several years to something kind of say in the 60% to 65% range?

Robert, at this point, we’re very committed to our target of 8% over the period. We expect that, we can move our dividend from a targeted perspective 8% through 2020 and we still believe the earnings will be there to do that. So that’s a focus of ours.

Your next question comes from the line of Robert Catellier with CIBC. Your line is open.

I just wanted to ask about the growth plans for gas distribution. You mentioned New Mexico and plans there. But, I wondered if you still have an appetite to make acquisitions to grow the gas distribution part of the portfolio?

Well, I mean, that's -- it's not our primary focus growing that business through acquisition. Our primary focus is growing it from an organic perspective. The state of Florida, we think has a tremendous opportunity to grow the customer count. And today, they are only 0.5 million customers in the state that actually take natural gas. But natural gas is an important part of the future we believe. And so, we do see an opportunity to continue to grow that and Peoples Gas has an approach and a plan right now that we would see it growing the customer count quite substantially over the next five years. And so, that's really where our focus is right now. We have a similar focus in New Mexico, although we haven’t quite finished the work that we are doing on strategy in New Mexico. And so, until that work is complete it's harder to speak to what the exact next steps will be in New Mexico, but it's pretty clear to us that the opportunity is there to grow customer count in Florida.

Okay. And then, just on the Emera Energy business, I didn’t get the comparative spark spread number. I think you said $10 spark spread but I didn’t catch the number for last year and…

The hedges were on it $35.

Okay. And then, just maybe looking further out, seemingly less volatility in the market and maybe more assets and more optionality for the market. It seems like the ability to generate the higher income from the Emera Energy might be somewhat muted. And so, maybe if you could talk about the path forward and reasonable expectations for recovery in that income?

So, clearly, the business has its best opportunity when there is a little bit of volatility in the market and that can be either weather-driven or can be kind of around physical supply constraints and that kind of things. I don’t think looking at too warm winters in a row is necessarily a long-term predictor of the future. So, from the marketing and trading position, the reality it is kind of normal after a few very, very, very strong years, I don’t think we all -- I don’t think those are gone forever, but I think that there is a little bit more supply in the market and it will take a while for that to be absorbed. On the plant side, electricity pricing is very weak at the moment. Again, people can get very relaxed after two warm winters, but we will see opportunity again as things get either a lot harder or a little bit colder in the winter season. And we will have some hedging opportunities and we should be able to kind of improve on the going forward. So, I don’t think I wouldn’t take it as a kind other long-term trend. I would kind of interpret it more as the result of two warm winters in a row.

And I think the other important point to make is that both of those businesses or both of the aspects of that business are profitable even in these extremely light conditions. And so, I mean I think that speaks to a pretty robust situation for us.

[Operator Instructions] Your next question comes from the line of Jeremy Rosenfield with Industrial Alliance. Your line is open.

Just one quick question on Florida here. You talked about opportunities to build within the rate base new generation. And I am just wondering if you see an opportunity looking over the immediate near term but over the longer term potentially to look at transmission, either as part of the rate base or on a contracted basis but outside of rate base similar to an Atlantic Link type of project to link up the South East to Florida, what you are thoughts on that?

I think first and foremost, we are focused on the generation side of the business because I think that that’s where the trend is. There is a desire for cleaner energy in the state; gas prices are tending toward economic opportunity for investment; and solar because of how quickly the price of solar is coming down, there is an opportunity there as well. So that’s really where we are focused right now. But our history has been to find an ability to invest in transmission where it makes sense. And so, we certainly aren’t ignoring that part; it's just that we are quite busy on the generation side right now. So that will be something that will be pursued over time to see whether or not there is some transmission opportunities as well. I Tampa Electric is not terribly to similar to our main assets in that -- at a starting point is actually has a relatively small transmission investment. So, we have tended to look at that and say there is probably potential for more but its early days on that front because we are so busy on the generation side.

There are no further questions at this time.

Thank you very much for your interest in Emera. And I would remind investors that our annual general meeting will be held tomorrow at 2 pm Atlantic Daylight Savings Time on the Dalhousie campus. And we look forward to your attendance either in person or on the webcast. So, thank you all very much. And enjoy the rest of your day.

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