Ladies and gentlemen, thank you for standing by and welcome to the Emera Q2 2020 Analyst Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised, today's conference is being recorded. Today Wednesday, August 12, 2020 at 9:30 Atlantic Time. I would now like to hand the conference over to your speaker today, Scott Hastings, Emera's Senior Director Capital Markets. Please go ahead.

Thank you, Chris and thank you all for joining us this morning for Emera's second quarter 2020 conference call and live webcast. Emera's 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, at emera.com. Joining me for this morning's call are Scott Balfour, Emera's President and Chief Executive Officer; Greg Blunden, Emera's Chief Financial Officer and other members of the Emera management team. Before we begin, I'll take a moment to advise you that this morning's discussion will include forward-looking information which is subject to the cautionary statements contained on the supporting slide. Today's discussion and presentation will also include references to non-GAAP financial measures. You should refer to the appendix for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. And now, I'll turn things over to Scott Balfour.

Thank you, Scott and good morning everyone. As the global COVID-19 pandemic continues, our team remains focused on safely delivering the essential energy our customers are relying on in all of our service areas. The rate of infection of the virus in the communities we serve have varied significantly. For example in Atlantic Canada, we experienced very little community spread of COVID-19 and in parts of the Caribbean and New Mexico spread has also been relatively contained. Clearly, it's a much different situation in the State of Florida where they're facing much higher spread in infection rates. However, no matter where we operate our number priority is the health and safety of our team, our customers and our communities. Our teams have adapted in every jurisdiction to new procedures and protocols to continue to deliver despite the impactful challenges of COVID-19. Well we have never stopped working many of our employees have been productively operating from homes since mid-March. As public health officials lift restrictions, we've been focused on a responsible re-entry plans to phase our employees safely back to the traditional workplaces. Our re-entry will be measured and will be reflective of the rates of transmission and public health guidelines in each of our service territories. We understand that the pandemic continues to drive financial pressure in our customers and our local communities. From the beginning, our utilities have been working with customers on relief initiatives and donating to organization to help the vulnerable at our communities. In addition to corporate donations, our employees recently mobilized to support food banks in their communities and to assist local organizations and businesses, illustrating the compassion and community spirit of our employees above and beyond their unwavering commitment to delivering for customers during this pandemic. I've shared with our team many times that our response to this pandemic. It's more like a marathon than a sprint. They've continued to adapt and deliver for our customers and our communities that have returned. I'm proud of them and grateful for their contributions to Emera's strength and resiliency. As expected, while the COVID-19 pandemic has of course had many impacts. Our business is nonetheless continuing to perform very well. We're generally experiencing lower commercial and industrial sales because of the economic impact of the pandemic. But this has been personally offset by increased sales to residential customers where the contribution to recovery of fixed costs are structurally higher. We expect this trend to continue throughout 2020 as we continue to manage the impacts of the pandemic. Our balance sheet has also been strengthened. With benefit of the proceeds from the sale of Emera Maine and as Greg will discuss in a moment, our businesses have been able to grow cash flow from operations on a year-to-date basis. These actions combined with our reaffirmed credit ratings from Moody's and Fitch reflect our strong and stable financial position. With additional health and safety procedures in place. Emera's capital program continues to advance and as reported on our first quarter call. We're pleased that our major projects are continuing without any significant supply disruptions or delays. This includes both the Big Bend Modernization project and the solar developments in Florida. We expect to continue to fully deliver on our capital program. We remained confident in our long-term value proposition to shareholders which is supported by the strength and resiliency of our strategy and our team. Across the business, our teams continue to work with regulatory agencies to ensure customer affordability, reliable service and maintaining financially healthy utilities. This includes a number of important regulatory filings in our service territories. Throughout the pandemic, our teams have been working with regulators to advance these filings with any major delays. This includes rate cases of New Mexico Gas and Peoples Gas. These regulatory actions are important for the business and we're pleased with the progress to-date. In addition just this week, the Florida Public Service Commission approved Tampa Electric Stipulation Agreement related to the storm protection plan which allows for the implementation of this cost starting January 1, 2021. Lastly, both Peoples Gas and New Mexico Gas have filed for regulatory relief related to the deferral of COVID related financial impacts including increased bad debt expense. The New Mexico Regulator approved this filing in the second quarter and the Peoples Gas filing is expected to be reviewed by the Florida Public and Service Commission in the third quarter. As of the end of Q2, 2020 no COVID-19 related deferral accounts have been recorded. The impact of COVID-19 has been devastating to many communities, economies, industries and individuals around the world, and it's clear that it is far from over. Well we have employees who tested positive. I'm relieved to say that we've had very little workplace spread and our employees that have been impacted are doing well. We also feel fortunate that we have such a strong portfolio of businesses that continue to benefit from diversification. Although some of our utilities have experienced larger COVID-19 impacts than others. Overall the pandemic has not had a material financial impact to-date. We know there are more challenges ahead with governments look towards economic recovery and we remain committed to doing our part, not only in continuing to provide the cleaner, affordable and reliable energy our customers and communities rely on. But to help with community support and the economic restarts in all of our jurisdictions. And with that, I'll turn it over to Greg to take you through our financial results for the quarter.

Thank you, Scott and thank you all for joining us this morning. Our portfolio of regulated utilities has remained strong and performed very well, delivering adjusted earnings growth of 4% for the year-to-date despite dealing with the impacts of the pandemic. We're pleased with the results which was primarily driven by strong earnings from Tampa Electric. Our regulated utilities are in premium jurisdiction with support of regulatory relationship and Emera continues to see its earnings quality improve. Now let's get into details about the results. Earlier today we reported second quarter adjusted earnings of $118 million and adjusted earnings per share of $0.48. For the six months year-to-date adjusted earnings were $311 million and adjusted earnings per share was $1.27. Emera's adjusted earnings per share increased for the quarter and year-to-date were normalized for the impacts of asset sales and the timing difference related to the declaration of preferred dividends. These increases were driven by favorable results in Tampa Electric partially offset by reduced earnings at Nova Scotia Power and Emera's Gas in Caribbean Utilities. With the sale of the unregulated gas plants in Emera Maine, we expected there to be a fluctuation in results due to lost [ph] earnings contributions from these businesses. By normalizing the earnings contribution from asset sales, there's more transparency and the performance of our ongoing businesses. For the second quarter 2019 results were normalized for the sales of Emera Maine would have been $0.49 and for year-to-date 2019 the reported adjusted earnings per share was $1.49 which included $0.22 from assets that have been subsequently sold. These assets include the unregulated gas plant, Emera Maine and the sale of the Florida property. Therefore the normalized earnings per share for the year-to-date 2019 would have been a $1.27. Growth from the normalized Q2, 2019 base to $0.49 was largely driven by the strong performance of Tampa Electric. During the quarter Tampa Electric contributed $146 million of earnings an increase of $21 million over the second quarter of 2019. Tampa Electric's growth was driven by increased sale to residential customers, higher AFUDC earnings from the Big Bend Modernization and solar project, lower operating expenses and lower depreciation and amortization expenses result of a regulatory settlement. Second quarter earnings from Emera Energy's Marketing and Trading business contributed approximately $0.05 more earnings per share than in Q2, 2019. This increase was due to lower fixed commitments for gas transportation and storage assets and more favorable market conditions specifically increased volatility as compared to Q2, 2019. Emera's other utilities experienced lower earnings for the quarter. The earnings in the Canadian utilities segment were lower than Q2, 2019 due to impacts of COVID-19 on sales volume, increased income taxes and higher storm cost partially offset by the timing of regulatory deferral. And the Caribbean earnings were negatively impacted by COVID-19 and the ongoing impact of Hurricane Dorian on Grand Bahama Power Company. The gas utilities and infrastructure segment experienced lower earnings in Q2, 2020 as compared to the same period in 2019. The second quarter of 2019 includes it's regulatory of decision in New Mexico that contributed $0.05 in EPS and was one-time in nature. Excluding this regulatory adjustment the gas LDCs were basically flat quarter-over-quarter. So on a normalized basis, Emera's earnings per share from second quarter of 2020 was $0.53 versus $0.49 in 2019, Q2 representing a growth of 8%. Lastly for the quarter, there was a change in the timing of the declaration of preferred share dividends in Q2, 2020 causing a $0.05 impact in the quarter. In 2019, this amount was recorded in Q3 and this is definitely a timing difference and there'll be no impact on the annual amount of preferred dividends paid. Similar to the quarter, year-to-date growth in the normalized 2019 base of $1.27 was largely driven by the strong performance of Tampa Electric. For the year-to-date 2020 Tampa Electric contributed $225 million of earnings an increase of $39 million over year-to-date 2019. Again Tampa Electric's growth was largely driven by higher base revenues related to favorable weather in Q1, higher AFUDC, lower operating cost, customer growth and lower depreciation and amortization expenses result of the regulatory settlement. Emera's other utilities experienced lower earnings for the year-to-date 2020 mainly because of same drivers I mentioned earlier for the quarter including the regulatory decision in New Mexico. So on a normalized basis, Emera's 2020 utility EPS was up marginally in Q2, a $1.30 as compared to $1.27 from 2019. And as I previously mentioned the timing of the preferred share dividend declaration caused $0.05 timing difference that will reverse in Q3. And finally, Emera Maine's contribution to the Emera EPS in Q1, 2020 has been highlighted for transparency purposes. Moving to adjusted EBITDA and cash flow. Year-over-year EBITDA that's earnings before interest taxes depreciation and amortization was lower decreasing by $63 million or 5%. Most of this decline was related to the sale of gas plant in Emera Maine. Operating cash flow for year-to-date 2020 was up $41 million or 5% compared to 2019. This growth was led by Tampa Electric which experienced an increase of $77 million or 18%. This increase in regulated cash flows is a further signal on Emera's improving cash flow quality which is a priority for our team [ph]. In closing, the quality and diversification of Emera's portfolio prove strong results for Q2, 2020 despite dealing with the impacts of COVID-19. Our businesses continue to resilient and are committed to both the safety of our employees and customers as we work through the pandemic. Our strong year-to-date operating cash flows and available liquidity have the company well positioned for possible future COVID-19 related challenges to the business. Our major capital projects continue to progress without significant disruptions and are on-time and on budget including the Big Bend Modernization and solar projects in Tampa. And lastly the regulatory teams across their businesses are advancing important initiatives including rate cases at our gas LDCs in Florida and New Mexico. Our business is strong and well positioned for future growth. And with that, I'll turn the presentation back over to Scott.

Thank you, Greg. This concludes the presentation and we'd now like to open the call for questions from analysts.

[Operator Instructions] and your first question comes from Ben Pham of BMO. Your line is open.

My first question is on COVID-19. I know you mentioned the impact isn't material year-to-date. You're not booking deferrals accounts and whatnot. Can you provide a sense of any sort of quantification or directional impact that you experienced? Is it a couple million here and there in each segment? Or is it something else? Any context will be appreciated.

Ben, its Greg. I think probably the easiest way or the way that we think about is probably kind of in three buckets, so from an operating cost perspective, incremental, PP&E those types of things. It's really been for the most part probably offset by savings that we're experiencing because of the work environment we're in right now, so effectively no impact at all. Obviously, we've seen some load impact, if I think of the second category across our businesses some a little bit more, higher than others. But Ben, in some cases more than offset by weather or a mix of sales by customer class where some customer classes obviously contribute more to fixed cost than others. And then the third is, bad debt expense and I think it's too early to tell where that will end up. Obviously like everybody else we're anticipating but we will have an increased bad debt expense this year. Across the business it would be single digits of millions of dollars that we would anticipate at this point in time.

All right. And then you mentioned a couple of rate cases that are ongoing or didn't go on track. My question more is that beyond the bonds you have. What's the plan around Tampa Electric in terms of filings? And can you remind us with Nova Scotia Power, when do you have to address or let the regulatory know your thoughts around cost of service or just any sort of expansion to the rate agreement?

So Nancy, you want to start with Tampa Electric and then Rick, you can respond for Nova Scotia Power.

Sure.

Yes, sure Scott. I didn't quite catch the sound it was little muzzled on my end, I apologize. So maybe if you clarify the Tampa Electric piece that would be appreciated.

Yes, not a problem. My question was really the timing on the next rate case, if that's the plan.

Okay, sorry. And in terms of regulatory filings generally things have been moving along quite well in the states. We have the approval of the SPP on Monday which was great. We've had other settlements and other agreements and so the business of the Florida Public Service Commission is continuing on really without disruption. In terms of next rate case, we would anticipate - we're on a stay out until 2021. We can't have new rates before 2022. We've been doing a lot of building as you know and so we would anticipate going in as soon as we can to get new rates for all the capital, we put in place.

And Ben, it's Rick Janega with Nova Scotia Power. So Nova Scotia is operating under another rate stability plan that was negotiated with customers and the regulator. So that will cover so till 2022 as well, the intent of it would be to work with the customers to look for other opportunities to continue those types of creative approaches to managing rates knowing that we're heading into investments that are aimed at increasing renewable contents and looking at the future state of coal generation in Nova Scotia, that will probably be the biggest driver to what we're doing next on rates and filings for general rate application in Nova Scotia. So nothing in the imminent term and we'll be able to keep you updated as things progress. But quite stable in any good state in Nova Scotia.

Okay. So it sounds like, Rick, the bias now and I haven't decided is more the similar sort of mechanisms like the existing one containing inflation versus more of a full-blown cost of service application?

Yes, we do look at rates and potential for GR [ph] raise [ph] but we do that review on a regular basis, that's part of our ongoing financial management both for rate classes to make sure they're balanced between the customer classes and for the recoveries. Right now things are in pretty good state and we'll monitor that. We usually do that with lots of lead time for the regulator to be able to prepare for filing dates and so on. But there is nothing in the works right now for that. But that's a regular part of our business to do the assessment and bring that plan in forward kind of with six to 12 months advance notice of to take report of this, require to get geared up with the regulator and customers.

That's great. Thanks for the color.

Your next question comes from Mark Jarvi of CIBC Capital Markets. Your line is open.

Obviously with the potential of change in initiation you asked chatter about reversal corporate tax rate. Greg is there any thoughts that maybe pause on reduction of holding company debt or just wait to see how that plays out in the next six months?

Mark it's a good question. I clearly wanted coming up more often than I don't have any better crystal ball, what's going to happen in the US and to anybody else and of course it would be a process, any new administration would have to go through. I think we'll fairly get some increased visibility on that over the next six months. But so we're going to continue on the path that we're on and then reduction of holding company debt and reevaluate if circumstances change.

Okay and then can you just walk us through the lower depreciation and amortization at Tampa Electric? Maybe it's an intangible software asset adjustment or it's sort of one-time in nature and how that plays through in the back half of the year as well. I think there's still another $8 million to be recognized.

Yes, in all regulatory environments you find yourself periodically in situations where some of your specific assets because of the pooled depreciation methodology get over depreciated that's not uncommon and it was something that we're working through in Tampa. And got resolution to take that excess depreciation that we had under books in bringing in income this year and so you're right, so its $16 million settlement half of which was booked in Q2 and in the rest, we'll disclose through the balance of the year on a quarterly basis.

Okay and then just, one other question just following-up some of the bad debts not an issue. But in terms of the aging receivables, is there certain areas that you're seeing more of that or something we should be mindful in terms of geographic concentration?

That's a good question. I don't think so, we made a deliberate decision not to disconnect people for non-payment or for delayed payments in the current environment. We'll start to move away from that as we get into Q3 and the economy has opened up. So as a result of that not surprisingly maybe a little bit more on the residential side. You're seeing that customers have been little bit slower to pay. Some of it also gets clouded by seasonality. So in Nova Scotia of course we're at a period of time now where bills are lower than they normally would be and so we're not seeing as much of an impact percentage-wise maybe you've seen an impact but not as much on the dollar side. So it's kind of mixed across, Mark. But I wouldn't say that there's one particular area that is more concerning than other and as we started to do an outreach and let people know about the plans towards the end of the year. There's been a tremendous response from customers, looking for payment plans or starting to drew up their accounts. So we're optimistic. There'll be some kind of incremental bad debt expense this year. But fortunately we're in an industry where we're starting from a really, really low point to begin with.

Right, okay. That's it from me. Thanks.

Your next question comes from Robert Kwan of RBC Capital Markets. Your line is open.

If I can just come back to tax and potential US election outcomes, more so related to your disclosure back in 2018 you highlighted that tax reform was going to have a 3% to 5% negative EPS impact and somewhere in the range of $50 million to $200 million negative cash flow impact before mitigation. I'm just wondering what has actually played out and if you can maybe just talk about now like it took a while for New Mexico to ticking through, what's actually playing out in the current period relative to the original guidance?

So I'll give it provided somewhat directional, I would say, it's probably been kind of in the midpoint of those ranges, Robert. I mean we had a pretty good sense because it's somewhat of a mathematical exercise in terms of what the EPS impact would be as a result of the after-tax cost for US debt obviously it became higher with the 2017 tax reform. So there wasn't too much complicated about that. From a cash flow perspective, we had a reasonable view on what the refund to customers will be at Tampa Electric and we've now worked through the other states that are transpired. I think upon reflection I would expect that we were probably in or around the midpoint of that range that we provided.

Got it and that midpoint that includes I think there was some AMT credits that were going to flow through. And I believe that also included anything in the cross borders structures. Is that correct?

Correct.

I understand with the PGS rate filing outside of normal rate base growth is - I think it was $62 million that you're looking for in terms of an increased revenue requirement. Is any of that for anticipated cost that you're not currently incurring or is this really to get you back into the ROE range?

I'll get T.J. to help you with that, T.J.? T.J. Szelistowski: Sure, so the $62 million includes to get us back within the range. But also anticipated additional cost to maintain and operate the system in 2021.

Okay, do you have a sense as to how much increased cost that you're not incurring right now just kind of build into that? T.J. Szelistowski: Yes, I'm sorry I don't have that in front of me. A lot of its due - really a lot of our rate cases is due to investments that we're making in the system. And so the return on that investment on the rate base side, that's the bulk of it.

And just to be clear, the $62 million is net of other items, they're moving just within rate riders? T.J. Szelistowski: That's correct, we're moving around $20 million from one of the riders into - for cast iron and bare steel replacement into base rates.

Great. Thank you very much.

Just to add onto that sorry, it's Scott again. I think T.J. it's something like a $1.6 billion something like of rate base investment that has been made and it's still in the process of being made in Peoples Gas system to respond to system expansion and system integrity investments and those kinds of things, since the last rate case. And so it's almost substantially all that capital investment in the system to deal with that growth that is really driving the revenue requirement. T.J. Szelistowski: Yes, that's correct.

Your next question comes from Rob Hope of Scotiabank. Your line is open.

I want to follow-up on one of the US tax reform questions. As we look out to your rate filing schedule, could we see you pause planning something like a TECO rate application in 2021, just to see if there is a change in tax legislation as well as to see if the regulator will look at it on a standalone basis? Or if it will have to be addressed in the GRA?

Rob, I mean we have made those decisions. Clearly the first step of your hypothesis would be an election result in November which will obviously take place well in advance of us filing. And then it will be subsequent to that obviously. I think most people in the call are referring to the potential of Senator Biden being successful and leading a partial reversal of the 2017 Tax Reform. I think we'll have lots of visibility around that in terms of who's successful in the election, what their likely path is, as well as the timing of that. I think we'll have all of those data points before we actually file anything in Tampa Electric. So obviously that will be taken into consideration at that time.

All right, appreciate that. And then just secondly, just given government is potentially looking to stimulus measures. Could we see or are you interfacing with some government with a potential to help with some infrastructure investment in your various geographies?

I think largely Rob, we continue to invest in the business and drive investment in system and upgrades and alike in the way that we normally have, of course if there are stimulus package initiatives that are a fit, that can help to reduce the cost of system investment for our customers and for sure we'll be taking advantage of that. But there's nothing that's currently on the near-term radar at the moment that would fit into that category.

All right. Thank you.

And your final question today comes from Linda Ezergailis of TD Securities. Your line is open.

I realize there's a lot of moving parts on a number of fronts. But I'm wondering if you could help us understand your recent thoughts on your funding plans for the next year kind of a Plan A and what might change that overtime, might there be some incremental asset sales, how are you looking at the relative attractiveness of various funding options on the equity side etc.?

Well, I'll start with the first part of the question, Linda and then Scott can jump in. so nothing's changed from our funding plan that we would have laid out to investors and analysts in February in Tampa. We're continuing down that path. We're starting to see as you know, we have a little bit of room in our capital structure for some preferred shares or hybrid equity that market looks like it might be starting to open up. But again it will be a relatively modest transaction for us. Yes, the equity markets have remained constructive for our sector and we're thankful for that, equally so or maybe more so the debt capital markets have also remained incredibly constructive for our sector. And so all this is - we're just going to continue on our path. Our cash flows are - despite COVID are really where we expected them to be and at this point, haven't really seen anything that would cause us to deviate from our original communication and commitment to investors.

Thank you for the color.

Scott, I don't know if you want to add anything on asset sales?

No, I think you covered it well, Greg. We set out a specific target as it relates to capital raise from asset sales as part of the funding of the capital plan that's in front of us today. And we've obviously fully delivered and been successful on that, that doesn't mean that we won't as always continue to exercise discipline in our allocation of capital and continue to review the portfolio from time-to-time. But as it relates to the funding plan. We were successful with achieving our targets and so Greg's answer I think, the full perspective on how we're looking at it today.

Thank you and maybe it's just an incremental follow-up. How might any sort of recent discussions with the debt rating agencies inform those plans? And can you give us some context around your sense of how the rating agencies are thinking both at an industry level as well as for your specific businesses? Anything that might be shifting or reinforced given the passage of time?

Linda its Greg. So let me start with our sales. I mean obviously since I guess April through to the end of June all three rating agencies have come out with their updated reports on Emera. Scott referenced in the call both Fitch and Moody's in June reaffirmed our ratings and outlook. So I think you can read into that they're quite comfortable that we're continuing on the path, we had committed to follow and have executed on our plans that we're doing. Obviously if we go back April we were disappointed that S&P took us down a notch, but you'll recall also at the same time broke apart from Group rating methodology and reaffirmed the ratings at our regulated utilities which in the current environment our rating [ph] is actually a very constructive thing because we're not finding to raise any holding company that in the immediate near term. So with all three of those behind us, we don't find ourselves in the situation where there is any kind of sense of urgency with the rating agencies. They've all published their report relatively recently. We'll continue to execute as we've had previously done and I think given where they're at and with all three of them now, stable outlooks. I think you can read into that which should be right into it. In terms of how they're looking at the sector. I hate to speak for them but they're speaking a little bit more publicly about this in various conferences. I think as they've gone back and looking back through time. This industry has proven to be incredibly resilient, no matter if it's a financial crisis or COVID or some other things. And one that I can't remember which one recently did a report and found out that, BBB rated utility defaulted that 20% of the time, BBB corporate with defaulter, a non-utility. So I think they're re-evaluating - I think how they look at the business risk overall for utilities. I'll say it doesn't seem to be any anxiety for any of the rating agencies right now with our particular sector. It's specifically with us.

Okay, thank you. And just another incremental follow-up with regards to funding and capital expenditures. There was some mention in your MD&A that you're continuing to review the timing of capital expenditures in light of the evolving pandemic. And I'm wondering that just refers to the need for social distancing, the potential for stimulus or might there be some other moving parts around renewable policy or mobile, technologies or other things that might cause big changes in the composition of your capital expenditures or timing or size?

Yes, Linda it's really just about the execution of those capital projects. For example, Nova Scotia is an example we probably have the most restrictive policies in Canada in terms of people entering the province have to self-isolate for 14 days that's still in existence today. And so there's certain capital projects that we deliberately slowed down or deferred to next year. Just in the events that, once they get started, we could find ourselves in the position or we couldn't get the resources in from other province to complete them to the extent they were contracted. On a $2 million to $2.5 million capital program, we're talking probably less than 10% of the overall capital program. And these are projects that will not get done, at worst case. They'll get done over the next year or two and some of it could actually be starting up this fall. So it's more related to the practicality of getting some of these projects done and particularly in Nova Scotia.

Thank you.

And those were our final questions. I will now return the presentation to the speakers.

I'd like to thank everyone for joining the call this morning and your ongoing interest in Emera. Enjoy the rest of your day. Thank you.

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