Management's Discussion & Analysis – Form 6-K
Management's Discussion & Analysis
As at
Management's Discussion & Analysis ("MD&A") provides a review of the results of operations of
This discussion and analysis should be read in conjunction with the Emera unaudited condensed consolidated interim financial statements and supporting notes as at and for the three and nine months ended
The accounting policies used by Emera's rate-regulated entities may differ from those used by Emera's non-rate-regulated businesses with respect to the timing of recognition of certain assets, liabilities, revenues and expenses. At
Emera Rate-Regulated Subsidiary or |
Accounting Policies Approved/Examined By | |
Subsidiary | ||
Peoples Gas System ("PGS") - |
FPSC | |
FPSC | ||
Canadian Energy Regulator ("CER") | ||
Equity Investments | ||
UARB | ||
CER and |
||
All amounts are in Canadian dollars ("CAD"), except for the Florida Electric Utility,
Additional information related to Emera, including the Company's Annual Information Form, can be found on SEDAR at www.sedar.com.
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TABLE OF CONTENTS
Forward-looking Information |
2 | |||
Introduction and Strategic Overview |
3 | |||
Non-GAAP Financial Measures and Ratios |
4 | |||
Consolidated Financial Review |
6 | |||
Significant Items Affecting Earnings |
6 | |||
Consolidated Financial Highlights |
6 | |||
Consolidated Income Statement Highlights |
8 | |||
Business Overview and Outlook |
10 | |||
COVID-19 Pandemic |
10 | |||
Florida Electric Utility |
10 | |||
|
11 | |||
|
14 | |||
Other |
15 | |||
Other |
15 | |||
Consolidated Balance Sheet Highlights |
16 | |||
Other Developments |
17 | |||
Financial Highlights |
18 | |||
Florida Electric Utility |
18 | |||
|
19 |
|
20 | |||
Other |
21 | |||
Other |
22 | |||
Liquidity and Capital Resources |
23 | |||
Consolidated Cash Flow Highlights |
24 | |||
Contractual Obligations |
25 | |||
Guarantees and Letters of Credit |
26 | |||
Debt Management |
26 | |||
Credit Ratings Outstanding Stock Data |
27
28 |
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Transactions with Related Parties |
28 | |||
Risk Management including Financial Instruments |
29 | |||
Disclosure and Internal Controls |
30 | |||
Critical Accounting Estimates |
31 | |||
Changes in Accounting Policies and Practices |
31 | |||
Future Accounting Pronouncements |
31 | |||
Summary of Quarterly Results |
31 |
FORWARD-LOOKING INFORMATION
This MD&A contains "forward-looking information" and statements which reflect the current view with respect to the Company's expectations regarding future growth, results of operations, performance, carbon dioxide emissions reduction goals, business prospects and opportunities, and may not be appropriate for other purposes within the meaning of applicable Canadian securities laws. All such information and statements are made pursuant to safe harbour provisions contained in applicable securities legislation. The words "anticipates", "believes", "budget", "could", "estimates", "expects", "forecast", "intends", "may", "might", "plans", "projects", "schedule", "should", "targets", "will", "would" and similar expressions are often intended to identify forward-looking information, although not all forward-looking information contains these identifying words. The forward-looking information reflects management's current beliefs and is based on information currently available to Emera's management and should not be read as guarantees of future events, performance or results, and will not necessarily be accurate indications of whether, or the time at which, such events, performance or results will be achieved.
The forward-looking information is based on reasonable assumptions and is subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information. Factors that could cause results or events to differ from current expectations include without limitation: regulatory risk; operating and maintenance risks; changes in economic conditions; commodity price and availability risk; liquidity and capital market risk; future dividend growth; timing and costs associated with certain capital investments; expected impacts on Emera of challenges in the global economy; estimated energy consumption rates; maintenance of adequate insurance coverage; changes in customer energy usage patterns; developments in technology that could reduce demand for electricity; global climate change; weather; unanticipated maintenance and other expenditures; system operating and maintenance risk; derivative financial instruments and hedging; interest rate risk; counterparty risk; disruption of fuel supply; country risks; environmental risks; foreign exchange ("FX"); regulatory and government decisions, including changes to environmental, financial reporting and tax legislation; risks associated with pension plan performance and funding requirements; loss of service area; risk of failure of information technology infrastructure and cybersecurity risks; uncertainties associated with infectious diseases, pandemics and similar public health threats, such as the COVID-19 novel coronavirus ("COVID-19") pandemic; market energy sales prices; labour relations; and availability of labour and management resources.
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Readers are cautioned not to place undue reliance on forward-looking information, as actual results could differ materially from the plans, expectations, estimates or intentions and statements expressed in the forward-looking information. All forward-looking information in this MD&A is qualified in its entirety by the above cautionary statements and, except as required by law, Emera undertakes no obligation to revise or update any forward-looking information as a result of new information, future events or otherwise.
INTRODUCTION AND STRATEGIC OVERVIEW
Based in
Emera's investment in rate-regulated businesses is concentrated in
Emera's capital investment plan is
Emera has provided annual dividend growth guidance of four to five per cent through 2025. The Company targets a long-term dividend payout ratio of adjusted net income of 70 to 75 per cent and, while the payout ratio is likely to exceed that target through and beyond the forecast period, it is expected to retuto that range over time. For further information on the non-GAAP measure "Dividend Payout Ratio of Adjusted Net Income", refer to the "Non-GAAP Financial Measures and Ratios" section.
Seasonal patterns and other weather events affect demand and operating costs. Similarly, mark-to-market adjustments and foreign currency exchange can have a material impact on financial results for a specific period. Emera's consolidated net income and cash flows are impacted by movements in the US dollar relative to the Canadian dollar and benefit from a weaker Canadian dollar. Emera may hedge both transactional and translational exposure. These impacts, as well as the timing of capital investments and other factors, mean results in any one quarter are not necessarily indicative of results in any other quarter, or for the year as a whole.
Energy markets worldwide are facing significant change and Emera is well positioned to respond to shifting customer demands, digitization, decarbonization, complex regulatory environments, and decentralized generation.
3
Customers are looking for more choice, better control, and enhanced reliability in a time where costs of decentralized generation and storage have become more competitive in some regions. Advancing technologies are transforming the way utilities interact with their customers and generate and transmit energy. In addition, climate change and extreme weather are shaping how utilities operate and how they invest in infrastructure. There is also an overall need to replace aging infrastructure and further enhance reliability. Emera sees opportunity in all of these trends. Emera's strategy is to fund investments in renewable energy and technology assets which protect the environment and benefit customers through fuel or operating cost savings.
For example, significant investments to facilitate the use of renewable and low-carbon energy include the Maritime Link in
Building on its decarbonization progress over the past 15 years, Emera is continuing its efforts by establishing clear carbon reduction goals and a vision to achieve net-zero carbon dioxide emissions by 2050.
This vision is inspired by Emera's strong track record, the Company's experienced team, and a clear path to Emera's interim carbon goals. With existing technologies and resources and the benefit of supportive regulatory decisions, Emera plans and expects to achieve the following goals compared to corresponding 2005 levels:
• |
A 55 per cent reduction in carbon dioxide emissions by 2025. |
• |
The retirement of Emera's last existing coal unit no later than 2040. |
• |
An 80 per cent reduction in carbon dioxide emissions by 2040. |
Emera seeks to deliver on its Climate Commitment while maintaining its focus on investing in reliability and staying focused on the cost impacts for customers. Emera is also committed to identifying emerging technologies and continuing to work constructively with policymakers, regulators, partners, investors and customers to achieve these goals and realize its net-zero vision.
Emera is committed to world-class safety, operational excellence, good governance, excellent customer service, reliability, being an employer of choice, and building constructive relationships.
NON-GAAP FINANCIAL MEASURES AND RATIOS
Emera uses financial measures and ratios that do not have standardized meaning under USGAAP and may not be comparable to similar measures presented by other entities. Emera calculates the non-GAAP measures and ratios by adjusting certain GAAP measures for specific items. Management believes excluding these items better distinguishes the ongoing operations of the business and allows investors to better understand and evaluate the business. These measures and ratios are discussed and reconciled below.
Adjusted Net Income Attributable to Common Shareholders, Adjusted Earnings Per Common Share - Basic and Dividend Payout Ratio of Adjusted Net Income.
Emera calculates an adjusted net income attributable to common shareholders ("adjusted net income") measure by excluding the effect of mark-to-market ("MTM") adjustments and the impact of the NSPML unrecoverable costs.
4
Management believes excluding from net income the effect of these MTM valuations and changes thereto, until settlement, better aligns the intent and financial effect of these contracts with the underlying cash flows, and excludes these MTM adjustments for evaluation of performance and incentive compensation. The MTM adjustments are related to the following:
• |
held-for-trading ("HFT") commodity derivative instruments, including adjustments related to the price differential between the point where natural gas is sourced and where it is delivered, and the related amortization of transportation capacity recognized as a result of certain |
• |
the business activities of |
• |
equity securities held in BLPC and a captive reinsurance company in the Other segment; and |
• |
FX cash flow hedges entered to manage FX earnings exposure. |
For further detail on MTM adjustments, refer to the "Consolidated Financial Review", "Financial Highlights - Other
In
Adjusted earnings per common share - basic and dividend payout ratio of adjusted net income are non-GAAP ratios which are calculated using adjusted net income, as described above.
Emera calculates adjusted net income and adjusted earnings per common share - basic for the
The following reconciles net income (loss) attributable to common shareholders to adjusted net income:
Three months ended | Nine months ended | |||||||||||||||
For the |
||||||||||||||||
millions of dollars (except per share amounts) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Net income (loss) attributable to common shareholders |
$ | 167 | $ | (70) | $ | 462 | $ | 186 | ||||||||
MTM loss, after-tax (1) |
(36) | (245) | (132) | (369) | ||||||||||||
NSPML unrecoverable costs (2) |
- | - | (7) | - | ||||||||||||
Adjusted net income |
$ | 203 | $ | 175 | $ | 601 | $ | 555 | ||||||||
Earnings (loss) per common share - basic |
$ | 0.63 | $ | (0.27) | $ | 1.75 | $ | 0.73 | ||||||||
Adjusted earnings per common share - basic |
$ | 0.76 | $ | 0.68 | $ | 2.27 | $ | 2.17 | ||||||||
(1) Net of income tax recovery of |
||||||||||||||||
(2) Emera accounts for NSPML as an equity investment and therefore the after-tax unrecoverable costs were recorded in "Income from equity investments" on Emera's Condensed Consolidated Statements of Income. |
EBITDA and Adjusted EBITDA
Earnings before interest, income taxes, depreciation and amortization ("EBITDA") and adjusted EBITDA are non-GAAP financial measures used by Emera. These financial measures are used by numerous investors and lenders to better understand cash flows and credit quality. EBITDA is useful to assess Emera's operating performance and indicates the Company's ability to service or incur debt, invest in capital, and finance working capital requirements.
5
Similar to adjusted net income calculations described above, adjusted EBITDA represents EBITDA absent the income effect of MTM adjustments and the NSPML unrecoverable costs.
The following is a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA:
Three months ended | Nine months ended | |||||||||||||
For the |
||||||||||||||
millions of dollars | 2022 | 2021 | 2022 | 2021 | ||||||||||
Net income (loss) (1) |
$ | 184 | $ | (56) | $ | 510 | ||||||||
Interest expense, net |
184 | 150 | 503 | 460 | ||||||||||
Income tax expense (recovery) |
2 | (92) | 31 | (91) | ||||||||||
Depreciation and amortization |
238 | 228 | 698 | 675 | ||||||||||
EBITDA |
$ | 608 | $ | 230 | $ | 1,742 | ||||||||
MTM loss, excluding income tax |
(50) | (345) | (183) | (518) | ||||||||||
NSPML unrecoverable costs (2) |
- | - | (7) | - | ||||||||||
Adjusted EBITDA |
$ | 658 | $ | 575 | $ | 1,932 |
(1) Net income (loss) is before Non-controlling interest in subsidiaries and Preferred stock dividends.
(2) Emera accounts for NSPML as an equity investment and therefore the after-tax unrecoverable costs were recorded in "Income from equity investments" on Emera's Condensed Consolidated Statements of Income.
CONSOLIDATED FINANCIAL REVIEW
Significant Items Affecting Earnings
Earnings Impact of MTM Loss, After-Tax
MTM loss, after-tax decreased
Consolidated Financial Highlights
For the |
Three months ended | Nine months ended | ||||||||||||
millions of dollars |
||||||||||||||
Adjusted net income | 2022 | 2021 | 2022 | 2021 | ||||||||||
Florida Electric Utility |
$ | 199 | $ | 169 | $ | 472 | ||||||||
|
39 | 42 | 176 | 174 | ||||||||||
|
33 | 29 | 149 | 143 | ||||||||||
Other |
12 | 8 | 21 | 15 | ||||||||||
Other |
(80) | (73) | (217) | (154) | ||||||||||
Adjusted net income |
$ | 203 | $ | 175 | $ | 601 | ||||||||
MTM loss, after-tax |
(36) | (245) | (132) | (369) | ||||||||||
NSPML unrecoverable costs |
- | - | (7) | - | ||||||||||
Net income (loss) attributable to common shareholders |
$ | 167 | $ | (70) | $ | 462 |
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The following table highlights significant changes in adjusted net income from 2021 to 2022:
For the |
Three months ended | Nine months ended | ||||
millions of dollars | ||||||
Adjusted net income - 2021 | $ | 175 | ||||
Operating Unit Performance | ||||||
Increased earnings at |
30 | 95 | ||||
Increased earnings at NSPI driven by higher sales volumes, partially offset by increased OM&G primarily due to increased information technology, storm restoration and power generation expenses | 2 | 10 | ||||
Increased earnings at PGS due to reversal of accumulated depreciation as a result of the rate case settlement and higher off-system sales, partially offset by higher OM&G. Year-over-year also increased due to customer growth | 3 | 8 | ||||
Increased earnings at Seacoast due to commencement of a 34-year pipeline lateral lease in 2022 | 2 | 6 | ||||
Increased earnings at |
16 | - | ||||
Corporate | ||||||
Increased OM&G, pre-tax due to the timing of long-term compensation and related hedges | (17) | (36) | ||||
Increased FX loss, pre-tax, primarily due to realized gains in 2021 on FX hedges entered into to hedge USD denominated operating unit earnings exposure | (6) | (19) | ||||
Increased preferred stock dividends due to issuance of preferred shares in 2021 | (2) | (11) | ||||
Increased interest expense, pre-tax, due to higher interest rates and increased total debt | (10) | (10) | ||||
Other Variances | 10 | 3 | ||||
Adjusted net income - 2022 | $ | 203 | ||||
For further details of reportable segments contributions, refer to the "Financial Highlights" section. |
For the |
Nine months ended |
|||
millions of dollars | 2022 | 2021 | ||
Operating cash flow before changes in working capital |
||||
Change in working capital |
149 | 71 | ||
Operating cash flow |
||||
Investing cash flow |
||||
Financing cash flow |
||||
For further discussion of cash flow, refer to the "Consolidated Cash Flow Highlights" section. |
||||
As at |
||||
millions of dollars | 2022 | 2021 | ||
Total assets |
||||
Total long-term debt (including current portion) |
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Consolidated Income Statement Highlights
For the |
Three months ended | Nine months ended | ||||||||||||||||||||
millions of dollars |
||||||||||||||||||||||
(except per share amounts) |
2022 | 2021 | Variance | 2022 | 2021 | Variance | ||||||||||||||||
Operating revenues | $ | 1,835 | $ | 1,148 | $ | 687 | $ | 5,230 | $ | 3,897 | ||||||||||||
Operating expenses | 1,496 | 1,201 | (295) | 4,321 | 3,483 | (838) | ||||||||||||||||
Income from operations | $ | 339 | $ | (53) | $ | 392 | $ | 909 | $ | 414 | ||||||||||||
Net income (loss) attributable to common shareholders | $ | 167 | $ | (70) | $ | 237 | $ | 462 | $ | 186 | ||||||||||||
Adjusted net income | $ | 203 | $ | 175 | $ | 28 | $ | 601 | $ | 555 | ||||||||||||
Weighted average shares of common stock outstanding (in millions) (1) | 266.6 | 258.5 | 8.1 | 264.3 | 256.0 | 8.3 | ||||||||||||||||
Earnings (loss) per common share - basic | $ | 0.63 | $ | (0.27) | $ | 0.90 | $ | 1.75 | $ | 0.73 | ||||||||||||
Earnings (loss) per common share - diluted | $ | 0.63 | $ | (0.27) | $ | 0.90 | $ | 1.74 | $ | 0.73 | ||||||||||||
Adjusted earnings per common share - basic | $ | 0.76 | $ | 0.68 | $ | 0.08 | $ | 2.27 | $ | 2.17 | ||||||||||||
Dividends per common share declared | $ | 0.6625 | $ | 0.6375 | $ | 0.0250 | $ | 1.9875 | $ | 1.9125 | ||||||||||||
Adjusted EBITDA | $ | 658 | $ | 575 | $ | 83 | $ | 1,932 | $ | 1,785 |
(1) Effective
Operating Revenues
For Q3 2022, operating revenues increased
Operating Expenses
For Q3 2022, operating expenses increased
Net Income and Adjusted Net Income
For Q3 2022, net income attributable to common shareholders compared to Q3 2021, was favourably impacted by the
8
Year-to-date 2022, net income attributable to common shareholders, compared to the same period in 2021, was favourably impacted by the
Earnings and Adjusted Earnings per Common Share - Basic
Earnings and adjusted earnings per common share - basic were higher for Q3 2022, and year-to-date 2022, due to the impact of higher earnings as discussed above, partially offset by the impact of the increase in weighted average shares of common stock outstanding.
Effect of Foreign Currency Translation
Emera operates in
In general, Emera's earnings benefit from a weakening CAD and are adversely impacted by a strengthening CAD. The impact in any period is driven by rate changes, the timing and percentage of earnings from foreign operations, and the impact of entered FX cash flow hedges to manage FX earnings exposure.
Results of foreign operations are translated at the weighted average rate of exchange, and assets and liabilities of foreign operations are translated at period end rates. The relevant CAD/USD exchange rates for 2022 and 2021 are as follows:
Three months ended | Nine months ended | Year ended | ||||||||||||||||
For the |
2022 | 2021 | 2022 | 2021 | 2021 | |||||||||||||
Weighted average CAD/USD |
$ | 1.35 | $ | 1.28 | $ | 1.30 | $ | 1.27 | ||||||||||
Period end CAD/USD |
$ | 1.37 | $ | 1.27 | $ | 1.37 | $ | 1.27 |
The table below includes Emera's significant segments whose contributions to adjusted net income are recorded in USD currency.
Three months ended | Nine months ended | |||||||||||||||
For the | ||||||||||||||||
millions of USD |
2022 | 2021 | 2022 | 2021 | ||||||||||||
Florida Electric Utility |
$ | 153 | $ | 135 | $ | 367 | $ | 302 | ||||||||
|
19 | 16 | 98 | 93 | ||||||||||||
Other |
9 | 6 | 16 | 12 | ||||||||||||
Other segment (2) |
(30 | ) | (39 | ) | (80 | ) | (78 | ) | ||||||||
Total (3) |
$ | 151 | $ | 118 | $ | 401 | $ | 329 | ||||||||
(1) Includes USD net income from PGS, NMGC, SeaCoast and M&NP. | ||||||||||||||||
(2) Includes Emera Energy's USD adjusted net income from EES, Bear Swamp and interest expense on |
||||||||||||||||
(3) Net of |
The impact of the unrealized losses on FX hedges, partially offset by weakening of the CAD decreased net income by
9
BUSINESS OVERVIEW AND OUTLOOK
COVID-19 Pandemic
The Company's priorities continue to be reliable delivery of essential energy services to meet customers' demands while maintaining the health and safety of its customers and employees and supporting the communities in which Emera operates. While the ongoing COVID-19 pandemic has had varying effects on the service territories in which Emera operates, on a consolidated basis, COVID-19 is not expected to have a material financial impact in 2022. For further information on COVID-19 and its potential future impacts on Emera and its businesses, refer to the "Business Overview and Outlook" and "Liquidity and Capital Resources" sections in Emera's 2021 annual MD&A.
Florida Electric Utility
Florida Electric Utility consists of
The mid-course fuel adjustment requested by
On
In 2022, capital investment in the Florida Electric Utility segment is expected to be approximately
10
NSPI
NSPI anticipates earning near the low end of its allowed ROE range in 2022 and expects earnings to be consistent with 2021. Warmer than normal weather adversely affected NSPI's sales volumes in 2021. NSPI expects sales volumes to be higher than 2021.
On
NSPI is currently operating under a three-year fuel stability plan which results in an average annual overall rate increase of 1.5 per cent to recover fuel costs for the period of 2020 through 2022. The 2022 rates include approximately
On
On
• |
requires revenue generated from the non-fuel rate increase to be used only to improve the reliability of service to ratepayers; |
• |
limits NSPI's retuon equity to 9.25 per cent and equity ratio to 40 per cent; and |
• |
limits the rate used to accrue interest on regulatory deferrals to the |
11
Actions required to address the impact of this legislation are likely to include a material reduction in NSPI's planned capital investments and operating costs over the 2023 through 2024 period. As a result, planned expenditures for 2023 and 2024 will be deferred, resulting in higher customer costs in future periods. The legislation will have a direct and negative impact on the expected financial performance of NSPI such that it is not expected to eawithin its currently allowed retuon equity band in 2023 and 2024 at the currently approved equity ratio of 37.5 per cent. The Company has updated its principal risks disclosure to reflect this development. Refer to the "Risk Management and Financial Instruments" section and note 20 in the Q3 2022 unaudited condensed consolidated financial statements for this risk update.
Energy from renewable sources has increased with
In 2022, NSPI expects to invest
Environmental Legislation and Regulations
NSPI is subject to environmental laws and regulations set by both the
NSPI is a participant in the Nova Scotia Cap-and-Trade Program and is subject to the 2019 through 2022 compliance period. NSPI received granted emission allowances under the Cap-and-Trade Program and is permitted to purchase up to five per cent of the credits available at provincial auctions or reserve credits, which are anticipated to be priced at a premium, from the provincial government. Lower than forecasted
12
Carbon Pricing Regulations:
On
Nova Scotia Renewable Energy Regulations:
The alternative compliance plan, under the provincially legislated Renewable Energy Regulations, requires NSPI to achieve 40 per cent of electric sales generated from renewable sources over the 2020 through 2022 period. With delivery of the NS Block commencing later than anticipated, as well as further interruptions in supply due to delays in the LIL, NSPI is not forecasting the ability to achieve the requirements of the alternative compliance plan. The Renewable Energy Regulations require NSPI to have acted in a duly diligent manner. If NSPI is found not to have acted in a duly diligent manner, it could be subject to a maximum penalty of
ENL
Absent the NSPML unrecoverable costs and potential holdback, equity earnings from NSPML and LIL are expected to be consistent in 2022, compared to 2021. Both NSPML and LIL investments are recorded as "Investments subject to significant influence" on Emera's Condensed Consolidated Balance Sheets.
NSPML
Equity earnings from the Maritime Link are dependent on the approved ROE and operational performance of NSPML. NSPML's approved regulated ROE range is 8.75 per cent to 9.25 per cent, based on an actual five-quarter average regulated common equity component of up to 30 per cent.
The Maritime Link assets entered into service on
On
In
NSPML does not anticipate any significant capital investment in 2022 (2021 -
13
LIL
ENL is a limited partner with Nalcor in LIL. Construction of the LIL is complete and Nalcor is working toward final commissioning in 2022.
Equity earnings from the LIL investment are based upon the book value of the equity investment and the approved ROE. Emera's current equity investment is
Cash earnings and retuof equity will begin after commissioning of the LIL by Nalcor, and until that point Emera will continue to record AFUDC earnings.
PGS anticipates earning within its allowed ROE range in 2022 and expects rate base and USD earnings to be higher than in 2021. PGS expects favourable customer growth in 2022 and residential and commercial sales volumes in 2022 are expected to increase at a level slightly below customer growth. The PGS rate case settlement, which was approved in
In
NMGC anticipates earning below its authorized ROE in 2022 and expects rate base to be higher than 2021. NMGC expects customer growth rates to be consistent with historical trends.
On
In 2018, SeaCoast executed a 34-year agreement to provide long-term firm gas transportation service via a 21-mile,30-inch pipeline lateral. The lease of the pipeline lateral commenced
In 2022, capital investment in the
14
Other
Other
On
Other
Effective
On
On
In 2022, capital investment in the
Other
The Other segment includes business operations that in a normal year are below the required threshold for reporting as separate segments; and corporate expense and revenue items that are not directly allocated to the operations of Emera's subsidiaries and investments.
Business operations in the Other segment include
Corporate items included in the Other segment are certain corporate-wide functions including executive management, strategic planning, treasury services, legal, financial reporting, tax planning, corporate business development, corporate governance, investor relations, risk management, insurance, acquisition and disposition related costs, gains or losses on select assets sales, and corporate human resource activities. It includes interest revenue on intercompany financings recorded in "Intercompany revenue" and interest expense on corporate debt in both
15
Earnings from EES are generally dependent on market conditions. In particular, volatility in natural gas and electricity markets, which can be influenced by weather, local supply constraints and other supply and demand factors, can provide higher levels of margin opportunity. The business is seasonal, with Q1 and Q4 usually providing the greatest opportunity for earnings. EES is generally expected to deliver annual adjusted net income within its guidance range of
The adjusted net loss from the Other segment is expected to be higher in 2022 due to higher Corporate OM&G which is primarily driven by the timing of long-term compensation and related hedges, realized FX gains on cash flow hedges in 2021, increased interest expense, and additional preferred dividends. This is expected to be partially offset by decreased taxes due to a higher net loss.
The Other segment does not anticipate any significant capital investments in 2022. (2021 -
CONSOLIDATED BALANCE SHEET HIGHLIGHTS |
Significant changes in the Condensed Consolidated Balance Sheets between |
millions of dollars | Increase (Decrease) |
Explanation | ||||
Assets |
||||||
Cash and cash equivalents | $ | 132 | Increased due to proceeds from short-term debt issuance at |
|||
Inventory | 184 | Increased due to higher commodity prices at |
||||
Derivative instruments (current and long-term) | 396 | Increased due to higher commodity prices at NSPI and reversal of 2021 contracts at |
||||
Regulatory assets (current and long-term) | 865 | Increased due to higher fuel cost recovery clauses at |
||||
Receivables and other assets (current and long-term) | 1,116 | Increased due to higher gas transportation assets and cash collateral at |
||||
PP&E, net of accumulated depreciation and amortization | 2,202 | Increased due to the effect of a weaker CAD on the translation of Emera's foreign affiliates, and capital additions. These were partially offset by reclassification of Seacoast's pipeline lateral on commencement of the lease | ||||
Net investment in direct finance and sales type leases | 101 | Increased due to commencement of the pipeline lease at Seacoast | ||||
462 | Increased due to the effect of a weaker CAD on the translation of Emera's foreign affiliates |
16
millions of dollars | Increase (Decrease) |
Explanation | ||||
Liabilities and Equity | ||||||
Short-term debt and long-term debt (including current portion) | $ | 1,974 | Increased due to the effect of a weaker CAD on the translation of Emera's foreign affiliates, issuance of short-term debt at |
|||
Accounts payable | 586 | Increased due to the effect of a weaker CAD on the translation of Emera's foreign affiliates, higher cash collateral position on derivative instruments at NSPI, increased commodity prices at |
||||
Deferred income tax liabilities, net of deferred income tax assets | 120 | Increased due to tax deductions in excess of accounting depreciation related to PP&E and increase in net regulatory assets, partially offset by net increase in tax loss carryforwards | ||||
Derivative instruments (current and long-term) | 1,119 | Increased due to new contracts in 2022 and changes in existing positions, partially offset by reversal of 2021 contracts at |
||||
Regulatory liabilities (current and long-term) | 317 | Increased due to deferrals related to derivative instruments at NSPI and the effect of a weaker CAD on the translation of Emera's foreign affiliates, partially offset by decreased storm reserve at |
||||
Other liabilities (current and long-term) | 392 | Increased due to accrued emissions compliance charges at NSPI, higher investment tax credits related to solar projects at |
||||
Common stock | 433 | Increased due to Emera's ATM equity program and shares issued under the dividend reinvestment program | ||||
Accumulated other comprehensive income | 638 | Increased due to the effect of a weaker CAD on the translation of Emera's foreign affiliates | ||||
Retained earnings | (63) | Decreased due to dividends paid in excess of net income |
OTHER DEVELOPMENTS
USGAAP Reporting Extension
Emera was granted exemptive relief by Canadian securities regulators on
Increase in Common Dividends
On
17
Appointments
Effective
Effective
FINANCIAL HIGHLIGHTS
Florida Electric Utility
All amounts are reported in USD, unless otherwise stated.
Three months ended | Nine months ended | |||||||||||||||
For the | ||||||||||||||||
millions of USD (except as indicated) |
2022 | 2021 | 2022 | 2021 | ||||||||||||
Operating revenues - regulated electric |
$ | 753 | $ | 634 | $ | 1,926 | $ | 1,613 | ||||||||
Regulated fuel for generation and purchased power |
$ | 270 | $ | 217 | $ | 631 | $ | 501 | ||||||||
Contribution to consolidated net income |
$ | 153 | $ | 135 | $ | 367 | $ | 302 | ||||||||
Contribution to consolidated net income (CAD) |
$ | 199 | $ | 169 | $ | 472 | $ | 377 | ||||||||
Electric sales volumes (Gigawatt hours ("GWh")) |
6,259 | 6,003 | 16,002 | 15,332 | ||||||||||||
Electric production volumes (GWh) |
6,341 | 6,256 | 16,675 | 16,211 | ||||||||||||
Average fuel cost per megawatt hour ("MWh") |
$ | 43 | $ | 35 | $ | 38 | $ | 31 |
The impact of the change in the FX rate increased CAD earnings for the three and nine months ended
Highlights of the net income changes are summarized in the following table:
For the millions of USD |
Three months ended |
Nine months ended |
||||||
Contribution to consolidated net income - 2021 |
||||||||
Increased operating revenues due to higher fuel recovery clause revenue as a result of increased fuel costs, new rates effective |
119 | 313 | ||||||
Increased fuel for generation and purchased power due to higher natural gas prices | (53) | (130) | ||||||
Increased OM&G expenses due to timing of deferred clause recoveries, higher benefit costs, and higher transmission and distribution costs. Year-over-year also due to higher insurance costs | (18) | (46) | ||||||
Increased depreciation and amortization due to additions to facilities and the in-service of generation projects | (4) | (10) | ||||||
Increased interest expense due to higher interest rates and higher borrowings to support |
(11) | (16) | ||||||
Decreased AFUDC earnings due to the timing of power plant modernization and solar projects | (3) | (6) | ||||||
Increased income tax expense primarily due to increased income before provision for income taxes | (11) | (36) | ||||||
Other | (1) | (4) | ||||||
Contribution to consolidated net income - 2022 |
18
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For the |
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millions of dollars (except as indicated) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Operating revenues - regulated electric |
$ | 370 | $ | 328 | $ | 1,254 | $ | 1,112 | ||||||||
Regulated fuel for generation and purchased power (1) |
$ | 239 | $ | 169 | $ | 777 | $ | 554 | ||||||||
Contribution to consolidated adjusted net income |
$ | 39 | $ | 42 | $ | 176 | $ | 174 | ||||||||
NSPML unrecoverable costs |
$ | - | $ | - | $ | (7) | $ | - | ||||||||
Contribution to consolidated net income |
$ | 39 | $ | 42 | $ | 169 | $ | 174 | ||||||||
Electric sales volumes (GWh) |
2,262 | 2,263 | 7,833 | 7,570 | ||||||||||||
Electric production volumes (GWh) |
2,397 | 2,402 | 8,320 | 8,062 | ||||||||||||
Average fuel costs per MWh |
$ | 100 | $ | 70 | $ | 93 | $ | 69 | ||||||||
(1) Regulated fuel for generation and purchased power includes NSPI's FAM and fixed cost deferrals on the Condensed Consolidated Statements of Income, however it is excluded in the segment overview. |
Three months ended | Nine months ended | |||||||||||||||
For the |
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millions of dollars |
2022 | 2021 | 2022 | 2021 | ||||||||||||
NSPI |
$ | 20 | $ | 18 | $ | 108 | $ | 98 | ||||||||
Equity investment in NSPML (1) |
5 | 12 | 28 | 39 | ||||||||||||
Equity investment in LIL |
14 | 12 | 40 | 37 | ||||||||||||
Contribution to consolidated adjusted net income |
$ | 39 | $ | 42 | $ | 176 | $ | 174 | ||||||||
(1) Excludes |
Highlights of the net income changes are summarized in the following table:
For the | Three months ended | Nine months ended | ||||||
millions of dollars | ||||||||
Contribution to consolidated net income - 2021 |
||||||||
Increased operating revenues due to increased electric revenues related to recovery of fuel costs from an industrial customer, increased residential and commercial class sales volumes, and increased sales volumes due to weather | 42 | 142 | ||||||
Increased regulated fuel for generation and purchased power due to increased |
(70) | (223) | ||||||
Increased FAM and fixed cost deferrals due to current period under-recovery of fuel costs | 29 | 104 | ||||||
Increased OM&G year-over-year, primarily due to increased information technology, storm restoration, and power generation expenses | (2) | (27) | ||||||
Decreased income from equity investment in NSPML primarily due to the Maritime Link holdback | (7) | (11) | ||||||
Decreased income tax expense primarily due to increased tax deductions in excess of accounting depreciation and amortization related to PP&E and deferrals, and decreased non-deductible pension expense | 6 | 11 | ||||||
NSPML unrecoverable costs |
- | (7) | ||||||
Other |
(1) | 6 | ||||||
Contribution to consolidated net income - 2022 |
19
The provision for the Nova Scotia Cap-and-Trade program was
All amounts are reported in USD, unless otherwise stated.
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For the | ||||||||||||||
millions of USD (except as indicated) |
2022 | 2021 | 2022 | 2021 | ||||||||||
Operating revenues - regulated gas (1) |
$ | 260 | $ | 189 | $ | 924 | ||||||||
Operating revenues - non-regulated |
4 | 3 | 10 | 10 | ||||||||||
Total operating revenue |
$ | 264 | $ | 192 | $ | 934 | ||||||||
Regulated cost of natural gas |
$ | 115 | $ | 57 | $ | 433 | ||||||||
Contribution to consolidated net income |
$ | 25 | $ | 22 | $ | 117 | ||||||||
Contribution to consolidated net income (CAD) |
$ | 33 | $ | 29 | $ | 149 | ||||||||
Gas sales volumes (Therms) |
636 | 609 | 2,123 | 2,089 |
(1) Operating revenues - regulated gas includes
Three months ended | Nine months ended | |||||||||||||
For the | ||||||||||||||
millions of USD |
2022 | 2021 | 2022 | 2021 | ||||||||||
PGS |
$ | 16 | $ | 14 | $ | 65 | ||||||||
NMGC |
(4) | (4) | 13 | 18 | ||||||||||
Other |
13 | 12 | 39 | 35 | ||||||||||
Contribution to consolidated net income |
$ | 25 | $ | 22 | $ | 117 |
The impact of the change in the FX rate increased CAD earnings for the three and nine months ended
Highlights of the net income changes are summarized in the following table:
For the millions of USD |
Three months ended |
Nine months ended |
||||
Contribution to consolidated net income - 2021 |
||||||
Increased gas revenues due to higher purchased gas adjustment clause revenues at PGS and NMGC as a result of higher gas prices, and higher off-system sales at PGS. Year-over-year also increased due to customer growth at PGS | 71 | 225 | ||||
Increased cost of natural gas sold due to higher gas prices at PGS and NMGC, and higher off-system sales at PGS | (58) | (197) | ||||
Increased OM&G primarily due to higher labour and benefits costs at PGS and NMGC | (9) | (19) | ||||
Decreased depreciation and amortization expense due to reversal of accumulated depreciation as a result of the rate case settlement at PGS, partially offset by increases due to asset growth at PGS and NMGC | 2 | 8 | ||||
Increased interest expense due to higher interest rates | (4) | (6) | ||||
Other |
1 | (7) | ||||
Contribution to consolidated net income - 2022 |
20
Other
All amounts are reported in USD, unless otherwise stated.
Three months ended | Nine months ended | |||||||||||||||
For the | ||||||||||||||||
millions of USD (except as indicated) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Operating revenues - regulated electric |
$ | 104 | $ | 96 | $ | 300 | $ | 257 | ||||||||
Regulated fuel for generation and purchased power |
$ | 58 | $ | 46 | $ | 169 | $ | 123 | ||||||||
Contribution to consolidated adjusted net income |
$ | 9 | $ | 6 | $ | 16 | $ | 12 | ||||||||
Contribution to consolidated adjusted net income (CAD) |
$ | 12 | $ | 8 | $ | 21 | $ | 15 | ||||||||
Equity securities MTM loss |
$ | (1) | $ | - | $ | (5) | $ | (1) | ||||||||
Contribution to consolidated net income |
$ | 8 | $ | 6 | $ | 11 | $ | 11 | ||||||||
Contribution to consolidated net income (CAD) |
$ | 10 | $ | 8 | $ | 14 | $ | 14 | ||||||||
Electric sales volumes (GWh) |
329 | 337 | 938 | 932 | ||||||||||||
Electric production volumes (GWh) |
352 | 365 | 1,004 | 1,002 |
Other
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For the | ||||||||||||||||
millions of USD | 2022 | 2021 | 2022 | 2021 | ||||||||||||
GBPC |
$ | 6 | $ | 3 | $ | 9 | $ | 8 | ||||||||
BLPC |
3 | 3 | 6 | 5 | ||||||||||||
Other |
- | - | 1 | (1) | ||||||||||||
Contribution to consolidated adjusted net income |
$ | 9 | $ | 6 | $ | 16 | $ | 12 |
The impact of the change in the FX rate on CAD earnings for the three months and nine months ended
Highlights of the net income changes are summarized in the following table:
For the | Three months ended | Nine months ended | ||
millions of USD | ||||
Contribution to consolidated net income - 2021 |
||||
Increased operating revenues - regulated electric due to higher fuel revenue at BLPC as a result of higher fuel prices, partially offset by the sale of Domlec in Q1 2022 | 8 | 43 | ||
Increased regulated fuel for generation and purchased power as a result of higher fuel prices at BLPC | (12) | (46) | ||
Decreased OM&G due to the sale of Domlec in Q1 2022 and lower generation costs at GBPC, partially offset by the recognition of Hurricane Dorian insurance proceeds at GBPC in 2021 | 6 | 6 | ||
Other | - | (3) | ||
Contribution to consolidated net income - 2022 |
21
Other
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For the | ||||||||||||||||
millions of dollars | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Marketing and trading margin (1) (2) |
$ | 24 | $ | (4) | $ | 71 | $ | 63 | ||||||||
Other non-regulated operating revenue |
3 | 8 | 13 | 25 | ||||||||||||
Total operating revenues - non-regulated |
$ | 27 | $ | 4 | $ | 84 | $ | 88 | ||||||||
Contribution to consolidated adjusted net income (loss) |
$ | (80) | $ | (73) | $ | (217) | $ | (154) | ||||||||
MTM loss, after-tax (3) |
(34) | (245) | (125) | (368) | ||||||||||||
Contribution to consolidated net income (loss) |
$ | (114) | $ | (318) | $ | (342) | $ | (522) |
(1) Marketing and trading margin represents EES's purchases and sales of natural gas and electricity, pipeline and storage capacity costs and energy asset management services' revenues.
(2) Marketing and trading margin excludes a MTM loss, pre-tax of
(3) Net of income tax recovery of
Other's contribution to consolidated adjusted net income (loss) is summarized in the following table:
Three months ended | Nine months ended | |||||||||||||||
For the | ||||||||||||||||
millions of dollars | 2022 | 2021 | 2022 | 2021 | ||||||||||||
|
$ | 8 | $ | (5) | $ | 29 | $ | 37 | ||||||||
Corporate - see breakdown of adjusted contribution below |
(84) | (59) | (230) | (174) | ||||||||||||
Emera Technologies |
(3) | (7) | (13) | (13) | ||||||||||||
Other |
(1) | (2) | (3) | (4) | ||||||||||||
Contribution to consolidated adjusted net income (loss) |
$ | (80) | $ | (73) | $ | (217) | $ | (154) |
Highlights of the net income changes are summarized in the following table:
For the | Three months ended | Nine months ended | ||||||
millions of dollars | ||||||||
Contribution to consolidated net income (loss) - 2021 |
$ | (318) | $ | (522) | ||||
Increased marketing and trading margin due to higher natural gas prices and volatility, which created profitable opportunities for |
28 | 8 | ||||||
Increased OM&G, pre-tax, primarily due to the timing of long-term compensation and related hedges | (17) | (36) | ||||||
Increased interest expense, pre-tax, due to increased interest rates and increased total debt | (10) | (10) | ||||||
Increased FX loss, pre-tax, primarily due to realized gains in 2021 on FX hedges entered into to hedge USD denominated operating unit earnings exposure | (6) | (19) | ||||||
Increased income tax recovery primarily due to increased losses before provision for income taxes | 3 | 20 | ||||||
Increased preferred stock dividends due to issuance of preferred shares in 2021 | (2) | (11) | ||||||
Decreased MTM loss, after tax, quarter-over-quarter, primarily due to changes in existing positions, partially offset by higher amortization of gas transportation assets in 2022 and larger reversal of MTM losses in 2021 at |
211 | 243 | ||||||
Other |
(3) | (15) | ||||||
Contribution to consolidated net income (loss) - 2022 |
$ | (114) | $ | (342) |
22
Corporate
Corporate's adjusted loss is summarized in the following table:
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For the | ||||||||||||||||
millions of dollars | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Operating expenses (1) |
$ | 27 | $ | 10 | $ | 63 | $ | 27 | ||||||||
Interest expense |
75 | 65 | 208 | 199 | ||||||||||||
Income tax recovery |
(29) | (18) | (74) | (57) | ||||||||||||
Preferred dividends |
16 | 14 | 47 | 36 | ||||||||||||
Other (2) |
(5) | (12) | (14) | (31) | ||||||||||||
Corporate adjusted net loss |
$ | (84) | $ | (59) | $ | (230) | $ | (174) |
(1) Operating expenses include OM&G and depreciation. In 2021, OM&G and depreciation were offset by changes in long-term compensation. The value of long-term compensation and related hedges are impacted by the changes in Emera's period end share price.
(2) 2021 includes
LIQUIDITY AND CAPITAL RESOURCES
The Company generates internally sourced cash from its various regulated and non-regulated energy investments. Utility customer bases are diversified by both sales volumes and revenues among customer classes. Emera's non-regulated businesses provide diverse revenue streams and counterparties to the business. Circumstances that could affect the Company's ability to generate cash include changes to global macro-economic conditions, downturns in markets served by Emera, impact of fuel commodity price changes on collateral requirements and timely recoveries of fuel costs from customers, the loss of one or more large customers, regulatory decisions affecting customer rates and the recovery of regulatory assets, and changes in environmental legislation. Emera's subsidiaries are generally in a financial position to contribute cash dividends to Emera provided they do not breach their debt covenants, where applicable, after giving effect to the dividend payment, and maintain their credit metrics.
For information on COVID-19 and its potential future impacts on Emera's liquidity and capital resources, refer to the "Business Overview and Outlook" and "Liquidity and Capital Resources" sections in Emera's 2021 annual MD&A.
Emera's future liquidity and capital needs will be predominately for working capital requirements, ongoing rate base investment, business acquisitions, greenfield development, dividends and debt servicing. Emera has an
Emera plans to use cash from operations and debt raised at the utilities to support normal operations, repayment of existing debt, and capital requirements. Debt raised at certain of the Company's utilities is subject to applicable regulatory approvals. Equity requirements in support of the Company's capital investment plan are expected to be funded through the issuance of preferred equity and the issuance of common equity through Emera's dividend reinvestment plan and ATM program.
Emera has credit facilities with varying maturities that cumulatively provide
23
Consolidated Cash Flow Highlights
Significant changes in the Condensed Consolidated Statements of Cash Flows between the nine months ended
millions of dollars | 2022 | 2021 | Change | |||||||
Cash, cash equivalents, and restricted cash, beginning of period |
$ | 417 | $ | 254 | ||||||
Provided by (used in): |
||||||||||
Operating cash flow before change in working capital |
806 | 1,035 | (229) | |||||||
Change in working capital |
149 | 71 | 78 | |||||||
Operating activities |
$ | 955 | $ | 1,106 | ||||||
Investing activities |
(1,685) | (1,576) | (109) | |||||||
Financing activities |
844 | 693 | 151 | |||||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
18 | (1) | 19 | |||||||
Cash, cash equivalents, and restricted cash, end of period |
$ | 549 | $ | 476 |
Cash Flow from Operating Activities
Net cash provided by operating activities decreased
Cash from operations before changes in working capital decreased
Changes in working capital increased operating cash flows by
Cash Flow from Investing Activities
Net cash used in investing activities increased
Capital investments, including AFUDC, for the nine months ended
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24
Cash Flow from Financing Activities
Net cash provided by financing activities increased
Contractual Obligations
As at
millions of dollars | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | |||||||||||||||||||||
Long-term debt principal |
$ | 9 | 596 | 1,606 | 511 | 3,185 | 10,079 | $ | 15,986 | |||||||||||||||||||
Interest payment obligations (1) |
269 | 695 | 674 | 625 | 532 | 7,497 | 10,292 | |||||||||||||||||||||
Transportation (2) |
183 | 616 | 475 | 396 | 364 | 2,917 | 4,951 | |||||||||||||||||||||
Purchased power (3) |
77 | 268 | 247 | 242 | 232 | 2,394 | 3,460 | |||||||||||||||||||||
Fuel, gas supply and storage |
487 | 991 | 305 | 170 | 37 | - | 1,990 | |||||||||||||||||||||
Capital projects |
399 | 253 | 88 | 4 | 1 | - | 745 | |||||||||||||||||||||
Asset retirement obligations |
7 | 7 | 2 | 2 | 1 | 415 | 434 | |||||||||||||||||||||
Pension and post-retirement obligations (4) |
8 | 40 | 35 | 34 | 34 | 173 | 324 | |||||||||||||||||||||
Equity investment commitments (5) |
- | 240 | - | - | - | - | 240 | |||||||||||||||||||||
Other |
46 | 86 | 81 | 60 | 44 | 223 | 540 | |||||||||||||||||||||
$ | 1,485 | $ | 3,792 | $ | 3,513 | $ | 2,044 | $ | 4,430 | $ | 23,698 | $ | 38,962 |
(1) Future interest payments are calculated based on the assumption that all debt is outstanding until maturity. For debt instruments with variable rates, interest is calculated for all future periods using the rates in effect at
(2) Purchasing commitments for transportation of fuel and transportation capacity on various pipelines. Includes a commitment of
(3) Annual requirement to purchase electricity production from Independent Power Producers or other utilities over varying contract lengths.
(4) The estimated contractual obligation is calculated as the current legislatively required contributions to the registered funded pension plans (excluding the possibility of wind-up), plus the estimated costs of further benefit accruals contracted under NSPI's Collective Bargaining Agreement and estimated benefit payments related to other unfunded benefit plans.
(5) Emera has a commitment to make equity contributions to the LIL upon its commissioning.
NSPI has a contractual obligation to pay NSPML for the use of the Maritime Link over approximately 38 years from its
Once LIL has been commissioned, the commercial agreements between Emera and Nalcor require true ups to finalize the respective investment obligations of the parties relating to the Maritime Link and LIL.
Emera has committed to obtain certain transmission rights for Nalcor, if requested, to enable it to transmit energy which is not otherwise used in
25
Guarantees and Letters of Credit
Emera's guarantees and letters of credit are consistent with those disclosed in the Company's 2021 annual MD&A, with material updates as noted below:
The Company has standby letters of credit and surety bonds in the amount of
Debt Management
In addition to funds generated from operations, Emera and its subsidiaries have, in aggregate, access to committed syndicated revolving and non-revolving bank lines of credit in either CAD or USD, per the table below.
millions of dollars | Maturity | Credit Facilities |
Utilized | Undrawn and Available |
||||||||||||
Emera - Unsecured committed revolving credit facility |
$ | 900 | $ | 583 | $ | 317 | ||||||||||
TEC (in USD) - Unsecured committed revolving credit facility (1) |
800 | 351 | 449 | |||||||||||||
NSPI - Unsecured committed revolving credit facility |
600 | 120 | 480 | |||||||||||||
TEC (in USD) - Unsecured non-revolving facility (2) |
500 | 500 | - | |||||||||||||
Emera - Unsecured non-revolving facility |
400 | 400 | - | |||||||||||||
|
400 | 348 | 52 | |||||||||||||
NSPI - Unsecured non-revolving facility |
400 | 400 | - | |||||||||||||
Emera - Unsecured non-revolving facility |
400 | 400 | - | |||||||||||||
NMGC (in USD) - Unsecured revolving credit facility |
125 | 39 | 86 | |||||||||||||
NMGC (in USD) - Unsecured non-revolving facility |
80 | 80 | - | |||||||||||||
Other (in USD) - Unsecured committed revolving credit facilities |
Various | 21 | 11 | 10 |
(1) This facility is available for use by
(2) This facility is available for use by
Emera and its subsidiaries have certain financial and other covenants associated with their debt and credit facilities. Covenants are tested regularly, and the Company is in compliance with covenant requirements as at
26
Recent significant financing activity for Emera and its subsidiaries are discussed below by segment:
On
On
On
On
On
Other
On
Other
On
Credit Ratings
On
On
On
27
Outstanding Stock Data Common Stock |
||||||||
Issued and outstanding: | millions of shares |
millions of dollars |
||||||
Balance, |
261.07 | $ | 7,242 | |||||
Issuance of common stock under ATM program (1) |
3.79 | 233 | ||||||
Issued under the Dividend Reinvestment Program, net of discounts |
2.86 | 171 | ||||||
Senior management stock options exercised and Employee Share Purchase Plan |
0.51 | 29 | ||||||
Balance, |
268.23 | $ | 7,675 |
(1) In Q3 2022, 1,715,056 common shares were issued under Emera's ATM program at an average price of
As at
If all outstanding stock options were converted as at
Preferred Stock
As at
TRANSACTIONS WITH RELATED PARTIES
In the ordinary course of business, Emera provides energy and other services and enters into transactions with its subsidiaries, associates and other related companies on terms similar to those offered to non-related parties. Intercompany balances and intercompany transactions have been eliminated on consolidation, except for the net profit on certain transactions between non-regulated and regulated entities, in accordance with accounting standards for rate-regulated entities. All material amounts are under normal interest and credit terms.
Significant transactions between Emera and its associated companies are as follows:
• |
Transactions between NSPI and NSPML related to the Maritime Link assessment are reported in the Condensed Consolidated Statements of Income. NSPI's expense is reported in Regulated fuel for generation and purchased power, totalling |
• |
Natural gas transportation capacity purchases from M&NP are reported in the Condensed Consolidated Statements of Income. Purchases from M&NP reported net in Operating revenues, Non-regulated, totalled |
There were no significant receivables or payables between Emera and its associated companies reported on Emera's Condensed Consolidated Balance Sheets as at
28
RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
There have been no material changes in Emera's risk management profile and practices from those disclosed in the Company's 2021 annual MD&A, except for the following additional disclosure under "Regulatory and Political Risk":
On
Derivatives Assets and Liabilities Recognized on the Balance Sheet
As at | ||||||||
millions of dollars | 2022 | 2021 | ||||||
Regulatory Deferral: |
||||||||
Derivative instrument assets (1) |
$ | 447 | $ | 237 | ||||
Derivative instrument liabilities (2) |
(32) | (20) | ||||||
Regulatory assets (1) |
61 | 23 | ||||||
Regulatory liabilities (2) |
(448) | (241) | ||||||
Net asset (liability) |
$ | 28 | $ | (1) | ||||
HFT Derivatives: |
||||||||
Derivative instrument assets (1) |
$ | 245 | $ | 53 | ||||
Derivatives instruments liabilities (2) |
(1,724) | (662) | ||||||
Net liability |
$ | (1,479) | $ | (609) | ||||
Other Derivatives: |
||||||||
Derivative instrument assets (1) |
$ | 5 | $ | 11 | ||||
Derivatives instruments liabilities (2) |
(45) | - | ||||||
Net asset (liability) |
$ | (40) | $ | 11 |
(1) Current and other assets.
(2) Current and long-term liabilities.
29
Realized and Unrealized Gains (Losses) Recognized in Net Income
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For the | ||||||||||||||||
millions of dollars | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Regulatory Deferral: |
||||||||||||||||
Regulated fuel for generation and purchased power (1) |
$ | 51 | $ | 13 | $ | 142 | $ | 9 | ||||||||
HFT Derivatives: |
||||||||||||||||
Non-regulated operating revenues |
$ | (567) | $ | (235) | $ | (635) | $ | (226) | ||||||||
Non-regulated fuel for generation and purchased power |
- | - | - | 1 | ||||||||||||
Net losses |
$ | (567) | $ | (235) | $ | (635) | $ | (225) | ||||||||
Other Derivatives: |
||||||||||||||||
OM&G |
$ | (12) | $ | 3 | $ | (21) | $ | 9 | ||||||||
Other income, net |
(32) | (1) | (31) | 2 | ||||||||||||
Net gains (losses) |
$ | (44) | $ | 2 | $ | (52) | $ | 11 | ||||||||
Total net losses |
$ | (560) | $ | (220) | $ | (545) | $ | (205) |
(1) Realized gains (losses) on derivative instruments settled and consumed in the period, hedging relationships that have been terminated or the hedged transaction is no longer probable. Realized gains (losses) recorded in inventory will be recognized in "Regulated fuel for generation and purchased power" when the hedged item is consumed.
As of
DISCLOSURE AND INTERNAL CONTROLS
Management is responsible for establishing and maintaining adequate disclosure controls and procedures ("DC&P") and internal control over financial reporting ("ICFR"), as defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings. The Company's internal control framework is based on the criteria published in the Internal Control - Integrated Framework (2013), a report issued by the
Management recognizes the inherent limitations in internal control systems, no matter how well designed. Control systems determined to be appropriately designed can only provide reasonable assurance with respect to the reliability of financial reporting and may not prevent or detect all misstatements.
There were no changes in the Company's ICFR during the quarter ended
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CRITICAL ACCOUNTING ESTIMATES
The preparation of unaudited condensed consolidated interim financial statements in accordance with USGAAP requires management to make estimates and assumptions. These may affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Significant areas requiring the use of management estimates relate to rate-regulated assets and liabilities, accumulated reserve for cost of removal, pension and post-retirement benefits, unbilled revenue, useful lives for depreciable assets, goodwill and long-lived assets impairment assessments, income taxes, asset retirement obligations, and valuation of financial instruments. Management evaluates the Company's estimates on an ongoing basis based upon historical experience, current and expected conditions and assumptions believed to be reasonable at the time the assumption is made, with any adjustments recognized in income in the year they arise. There were no material changes in the nature of the Company's critical accounting estimates from those disclosed in Emera's 2021 annual MD&A.
CHANGES IN ACCOUNTING POLICIES AND PRACTICES
Future Accounting Pronouncements
The Company considers the applicability and impact of all Accounting Standard Updates ("ASU") issued by the
SUMMARY OF QUARTERLY RESULTS
For the quarter ended millions of dollars |
Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | ||||||||||||||||||||||
(except per share amounts) | 2022 | 2022 | 2022 | 2021 | 2021 | 2021 | 2021 | 2020 | ||||||||||||||||||||||
Operating revenues |
$ | 1,835 | $ | 1,380 | $ | 2,015 | $ | 1,868 | $ | 1,148 | $ | 1,137 | $ | 1,612 | ||||||||||||||||
Net income (loss) attributable to common shareholders |
$ | 167 | $ | (67) | $ | 362 | $ | 324 | $ | (70) | $ | (17) | $ | 273 | ||||||||||||||||
Adjusted net income |
$ | 203 | $ | 156 | $ | 242 | $ | 168 | $ | 175 | $ | 137 | $ | 243 | ||||||||||||||||
Earnings (loss) per common share - basic |
$ | 0.63 | $ | (0.25) | $ | 1.38 | $ | 1.24 | $ | (0.27) | $ | (0.07) | $ | 1.08 | ||||||||||||||||
Earnings (loss) per common share - diluted |
$ | 0.63 | $ | (0.25) | $ | 1.38 | $ | 1.20 | $ | (0.27) | $ | (0.07) | $ | 1.08 | ||||||||||||||||
Adjusted earnings per common share - basic |
$ | 0.76 | $ | 0.59 | $ | 0.92 | $ | 0.64 | $ | 0.68 | $ | 0.54 | $ | 0.96 |
Quarterly operating revenues and adjusted net income are affected by seasonality. The first quarter provides strong earnings contributions due to a significant portion of the Company's operations being in northeasteNorth America, where winter is the peak electricity usage season. The third quarter provides strong earnings contributions due to summer being the heaviest electric consumption season in
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