Emera Announces Q2 2018 Earnings, Increases Dividend and Updates Dividend Growth Guidance
Today Emera (TSX: EMA) announced financial results for the second
quarter ended June 30, 2018, and increased the annual common share
dividend to $2.35.
Q2 2018 and Year-to-Date Highlights:
Reported Net Income
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Q2 2018 reported net income was $90 million, or $0.38 per common
share, compared with net income of $101 million, or $0.47 per common
share, in Q2 2017.
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Year-to-date reported net income was $361 million, or $1.56 per common
share, compared with net income of $413 million, or $1.95 per common
share, in the 2017 period.
Adjusted Net Income (1)
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Q2 2018 adjusted net income was $111 million, or $0.48 per common
share, compared with $117 million, or $0.55 per common share, in Q2
2017.
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Year-to-date adjusted net income was $313 million, or $1.35 per common
share, compared with net income of $269 million, or $1.27 per common
share, in the 2017 period.
Cash Flow
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Year-to-date operating cash flow, before changes in working capital,
increased $64 million, or 9 per cent, to $767 million, compared with
$703 million in the 2017 period.
(1)
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See “Non-GAAP Measures” noted below.
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“While timing, weather and foreign exchange rates negatively impacted
results for the quarter, we are nonetheless on track with where we
expected to be for the first half of the year, and we continue to expect
solid full year EPS growth in 2018,” said Scott Balfour, President and
CEO of Emera Inc. “During the quarter we made significant progress on
our strategic growth initiatives in Florida and announced that we will
be proceeding with an $850 million USD investment to modernize our Big
Bend Power Station. We are excited by the growth opportunities we see in
Florida and we look forward to commissioning the first tranche of our
solar projects in September.”
Dividends:
Emera’s Board of Directors has approved an increase in the annual common
share dividend to $2.35 per common share from $2.26 per common share and
has revised its annual dividend growth rate target to a range of four to
five per cent through 2021. The first quarterly payment of $0.5875 per
common share is expected to be payable to common shareholders on and
after November 15, 2018. Including this increase, Emera’s compound
annual dividend growth rate over the past four years is 11 per cent.
“Emera has significant regulated rate base investment opportunities,
including $1.7 billion USD of investment at Tampa Electric in 600 MW of
new solar generation and a modernization of the Big Bend station,” said
Scott Balfour. “These projects will drive both significant value for
customers and strong investment returns for shareholders. We believe
that it is prudent to incorporate a higher component of internally
generated funds in the capital plans to fund these accretive investments
and as a result have modified our annual dividend growth target. Emera’s
average EPS growth is expected to exceed dividend growth over the
guidance period.”
Financial Highlights:
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For the
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Three months ended
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Six months ended
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millions of Canadian dollars (except per share amounts)
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June 30
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June 30
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2018
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2017
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2018
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2017
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Net income attributable to common shareholders
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$
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90
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$
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101
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$
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361
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$
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413
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After-tax mark-to-market gain (loss)
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(21)
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(16)
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48
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144
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Adjusted net income attributable to common shareholders(1)(2)
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$
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111
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$
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117
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$
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313
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$
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269
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Earnings per common share – basic
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$
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0.38
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$
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0.47
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$
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1.56
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$
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1.95
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Adjusted earnings per common share – basic (1)(2)
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$
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0.48
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$
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0.55
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$
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1.35
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$
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1.27
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Weighted average shares of common stock outstanding - basic
(millions of shares)
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233
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213
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232
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212
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(1)
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See “Non-GAAP Measures” noted below.
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(2)
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Adjusted net income and Adjusted earnings per common share
exclude the effect of mark-to-market adjustments.
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After-tax mark-to-market losses increased $5 million to $21 million in
Q2 2018 compared to $16 million in Q2 2017. Year-to-date, after-tax
mark-to-market gains decreased $96 million to a $48 million gain in 2018
compared to a $144 million gain for the same period in 2017. This
decrease is mainly due to changes in existing positions on long-term
natural gas contracts in the first quarter of 2017 and a larger reversal
of mark-to-market losses in the first quarter of 2017 compared to 2018,
partially offset by lower amortization of gas transportation assets in
2018.
The strengthening of the CAD decreased earnings by $3 million and
adjusted earnings by $4 million in Q2 2018 compared to Q2 2017. The
strengthening of the CAD decreased earnings by $13 million and adjusted
earnings by $11 million year-to-date in 2018 compared to the same period
in 2017.
Consolidated Financial Review:
The following table highlights significant changes in adjusted net
income from 2017 to 2018 in the second quarter and year-to-date periods.
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For the
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Three months ended
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Six months ended
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millions of Canadian dollars
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June 30
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June 30
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Adjusted net income – 2017 (1)(2)
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$
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117
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$
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269
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Emera Energy
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13
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58
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NSPML and LIL equity earnings
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7
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16
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NSPI
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(6)
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(11)
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Emera Florida and New Mexico
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(6)
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5
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Emera Maine
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(6)
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(9)
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Other
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(8)
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(15)
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Adjusted net income – 2018 (1)(2)
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$
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111
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$
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313
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(1)
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See “Non-GAAP Measures” noted below.
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(2)
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Excludes the effect of mark-to-market adjustments.
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Segmented Results:
Emera reports its results in six operating segments: Emera Florida and
New Mexico, Nova Scotia Power Inc. (“NSPI”), Emera Maine, Emera
Caribbean, Emera Energy, and Corporate & Other.
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Three months ended
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Six months ended
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For the
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June 30
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June 30
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millions of Canadian dollars (except per share amounts)
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2018
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2017
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2018
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2017
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Adjusted net income
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Emera Florida and New Mexico
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$
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97
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$
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103
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$
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187
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$
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182
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NSPI
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23
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29
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88
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99
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Emera Maine
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6
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12
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16
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25
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Emera Caribbean (2)
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12
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11
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17
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18
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Emera Energy (2)
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2
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(11)
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57
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(1)
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Corporate & Other (2)
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(29)
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(27)
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(52)
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(54)
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Adjusted net income (1)
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$
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111
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$
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117
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$
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313
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$
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269
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After-tax mark-to-market gain (loss)
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(21)
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(16)
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48
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144
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Net income attributable to common shareholders
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$
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90
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$
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101
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$
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361
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$
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413
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EPS (basic)
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$
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0.38
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$
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0.47
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$
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1.56
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$
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1.95
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Adjusted EPS (basic) (1)(2)
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$
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0.48
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$
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0.55
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$
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1.35
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$
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1.27
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(1)
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See “Non-GAAP Measures” noted below.
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(2)
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Excludes the effect of mark-to-market adjustments.
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Emera Florida and New Mexico’s net income was $97 million in Q2
2018 compared to $103 million in Q2 2017. The decrease is primarily due
to the impact of less favourable weather and a stronger Canadian dollar
partially offset by customer load growth. Year-to-date, Emera Florida
and New Mexico’s net income increased $5 million to $187 million from
$182 million in 2017. The increase is primarily due to higher sales
volumes as the result of customer load growth and favourable Q1 2018
weather partially offset by a stronger Canadian dollar.
NSPI’s net income was $23 million in Q2 2018 compared to $29
million in Q2 2017. NSPI’s net income year-to-date was $88 million
compared to $99 million for the same period in 2017. NSPI’s net income
decreased in Q2 2018 and year-to-date due to increased depreciation
primarily as a result of information technology investments, legislated
increases in demand-side management costs and increased interest costs
due to a higher FAM liability and increased short term interest rates,
partially offset by residential load growth. The year-to-date decrease
is also due to an increase in storm costs in the first quarter. The
year-to-date shortfall versus prior year is expected to reverse over the
balance of the year.
Emera Maine’s net income was $6 million in Q2 2018 compared to
net income of $12 million in Q2 2017. Emera Maine’s net income
year-to-date was $16 million compared to $25 million for the same period
in 2017. Results for the quarter and year-to-date were driven by reduced
transmission revenues and increased OM&G and depreciation and
amortization partially offset by lower income tax expense. The increase
in OM&G for the quarter and year-to-date was due to lower capitalized
overheads as a result of lower capital spending and adjustments related
to the distribution rate case. The year-to-date increase is also due to
higher storm costs in the first quarter. The year-to-date shortfall
versus prior year is expected to reverse over the balance of the year.
Emera Caribbean’s net income, adjusted to exclude mark-to-market
losses, of $12 million in Q2 2018 was consistent with Q2 2017 net income
of $11 million. Emera Caribbean’s net income year-to-date, adjusted to
exclude mark-to-market losses, was $17 million in 2018 compared to $18
million for the same period last year.
Emera Energy’s net income, adjusted to exclude mark-to-market
losses, was $2 million in Q2 2018 compared to an $11 million loss in Q2
2017. This increase is primarily attributable to higher capacity prices
in Q2 2018 in the New England electricity market, and an unplanned
outage at the Bridgeport facility in Q2 2017. Emera Energy’s net income
year-to-date, adjusted to exclude mark-to-market gains, was $57 million
compared to a $1 million loss for the same period in 2017. In addition
to the items noted for the quarter, the year-to-date increase is also as
a result of the favourable impact of cold weather in early 2018 in
several of Emera Energy Services key market areas.
Corporate & Other’s net loss, adjusted to exclude
mark-to-market, was $29 million in Q2 2018 compared to $27 million in Q2
2017. The increased loss was primarily due to decreased income tax
recovery and increased interest expense partially offset by higher
equity earnings from NSP Maritime Link (“NSPML”) and Labrador Island
Link (“LIL”). Corporate & Other’s net loss year-to-date, adjusted
to exclude mark-to-market, was $52 million compared to $54 million for
the same period in 2017 for the same reasons as noted in the quarter.
The Maritime Link went into service on January 15, 2018. Cash earnings
from NSPML were $15 million in Q2 2018 and $30 million for the
year-to-date compared to AFUDC earnings of $9 million in Q2 2017 and $16
million for the year-to-date period.
Non-GAAP Measures
Emera uses financial measures 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 by adjusting
certain GAAP and non-GAAP measures for specific items the Company
believes are significant, but not reflective of underlying operations in
the period. Refer to the Non-GAAP Financial Measures section of our
Management's Discussion and Analysis ("MD&A") for further discussion of
these items.
Forward-Looking Information
This news release contains forward-looking information within the
meaning of applicable securities laws. The words “anticipates”,
“believes”, “budget”, “could”, “estimates”, “expects”, “forecasts”,
“intends”, “may”, “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 includes, but is not limited to, statements regarding:
Emera’s revenue, earnings and cash flow; the growth and diversification
of Emera’s business and earnings base; future annual net income and
dividend growth; forecasted capital expectations; and the nature, timing
and costs associated with certain capital projects. By its nature,
forward-looking information requires Emera to make assumptions and is
subject to inherent risks and uncertainties. These statements reflect
Emera management’s current beliefs and are based on information
currently available to Emera management. There is a risk that
predictions, forecasts, targets, conclusions and projections that
constitute forward-looking information will not prove to be accurate,
that Emera’s assumptions may not be correct and that actual results may
differ materially from such forward-looking information. Additional
detailed information about these assumptions, risks and uncertainties is
included in Emera’s securities regulatory filings, including its Annual
Information Form, annual and interim Management’s Discussion and
Analysis, and in the notes to Emera’s annual and interim financial
statements, which filings can be found on SEDAR at www.sedar.com.
Teleconference Call
The company will be hosting a teleconference Friday, August 10, 2018 at
10:00am Atlantic time (9:00am Toronto/Montreal/New York; 8:00am
Winnipeg; 7:00am Calgary; 6:00am Vancouver) to discuss the Q2 2018
financial results.
Analysts and other interested parties in North America are invited to
participate by dialing 1-866-521-4909. International parties are invited
to participate by dialing 1-647-427-2311. Participants should dial in at
least 10 minutes prior to the start of the call. No pass code is
required.
A live and archived audio webcast of the teleconference will be
available on the Company's website, www.emera.com.
A replay of the teleconference will be available two hours after the
conclusion of the call until September 7, 2018 by dialing 1-800-585-8367
and entering pass code 9749359.
About Emera
Emera Inc. is a geographically diverse energy and services company
headquartered in Halifax, Nova Scotia with approximately $30 billion in
assets and 2017 revenues of more than $6 billion. The company invests in
electricity generation, transmission and distribution, gas transmission
and distribution, and utility energy services with a strategic focus on
transformation from high carbon to low carbon energy sources. Emera has
investments throughout North America, and in four Caribbean countries.
Emera continues to target achieving a minimum of 75% of its adjusted net
income from rate-regulated businesses. Emera’s common and preferred
shares are listed on the Toronto Stock Exchange and trade respectively
under the symbol EMA, EMA.PR.A, EMA.PR.B, EMA.PR.C, EMA.PR.E, EMA.PR.F
and EMA.PR.H. Depositary receipts representing common shares of Emera
are listed on the Barbados Stock Exchange under the symbol EMABDR and on
The Bahamas International Securities Exchange under the symbol EMAB.
Additional Information can be accessed at www.emera.com
or at www.sedar.com.
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