Good morning, ladies and gentlemen, and welcome to Emera's Q1 2019 Analyst Conference Call. [Operator Instructions] Please note that this call is being recorded today, Friday, May 10, 2019, at 8:30 AM Eastern Time. I would now like to turn the meeting over to your host for today's call, Erin Power, Manager, Investor Relations for Emera. Please go ahead, Ms. Power.

Thank you, Melissa, and thank you all for joining us this morning for Emera's first quarter 2019 conference call and live webcast. Emera's first 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 Emera's management team. Before we begin, I will take a moment to advise you that this morning's discussion will include forward-looking information, which is subject to the cautionary statement contained in the supporting slide show. Today's discussion and presentation will also include references to non-GAAP financial measures. You should refer to the supporting slides for definitional information and reconciliation, historical non-GAAP measures to the closest GAAP financial measure. And now, I'll turn things over to Scott.

Thanks, Erin, and good morning, everyone. Our businesses continued to perform well during the first quarter. As a result this morning, Emera reported adjusted first quarter earnings per share of $0.95, an increase of 9% towards the first quarter of 2018. Growth in the quarter was largely driven by strong results at Nova Scotia Power and our gas utilities. I'm also pleased with the operating cash flow being generated by our business. Although cash flow was down modestly compared to the first quarter of 2018, I expect this trend to reverse over the course of the year. All to say, we're off to a strong start and the results of the first quarter give us increased confidence that we will deliver adjusted EPS for the year that is consistent with 2018 levels, when normalized for onetime impacts in both years notwithstanding the sale of our gas plants and resulting loss of those earning contributions for the balance of the year relative to 2018. Our financial success is a direct result of how we've been consistently executing on our proven strategies. By continuing to focus on delivering clean, affordable, reliable energy to our customers, we've been able to create unique and innovative opportunities to invest and have provided value to customers and shareholders alike. Ensuring that energy is affordable for our customers is always a focus when we're looking to invest. One way we've been able to successfully manage customer rates, while growing rate base just by looking for opportunities to convert costs like fuel and O&M into rate base investment opportunities. Our investments in expanding solar generation, modernizing Big Bend and deploying smart meters are great examples of this strategy and action. Today, Tampa Electric has over 445 megawatts of solar capacity in 2019 solar energy will account for approximately…

Thank you, Scott, and thank you all for joining us this morning. As Scott highlighted, we are off to a strong start in 2019. Our operating assets have performed exceptionally well, delivering continued EPS growth to our shareholders. For the first quarter of 2019, Emera reported adjusted net income, which excludes mark-to-market adjustments of $224 million or $0.95 per share compared to adjusted net income of $202 million and $0.87 per share in first quarter of 2018. This represents a 9% increase in adjusted EPS. Growth in the quarter was driven by strong results in Nova Scotia Power and our gas utilities. For the quarter, the business delivered operating cash flow before changes in net working capital of $418 million, compared to $444 million in the first quarter of 2018. This modest decrease is primarily related to costs associated with asset sales including taxes and advisor fees, whereas the gross proceeds are included in our investing cash flows. I expect that this decrease will reverse over the balance of the year and our business will deliver annual cash flow which is consistent with 2018. Operating cash flow is an important metric for our business as it is the basis of how our credit metrics are calculated. And as I'll take you through in a few moments, our improved cash flow, combined with results of our funding initiatives has expected to drive continued improvement in our cash flows debt metrics in both 2019 and 2020. Growth in first quarter EPS was largely driven by our strong results in our gas utilities and Nova Scotia Power. In the quarter, New Mexico Gas Company contributes $23 million to net earnings, an increase of $7 million or 35% compared to the first quarter of 2018. These strong results were driven by favorable weather conditions…

Thank you, Greg. This concludes the presentation. We would now like to open up the call to take questions from analysts.

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

Good morning everyone. Congrats on a good quarter. I want to start off down in Florida. Just want to get a sense of what quantum of opportunities do you think you can get out of battery storage as well as some of these communities storage opportunities longer-term? Or is it really the focus more on the larger scale solar?

Thanks, Rob. Nancy, do you want to take that question?

I can start, Scott. I'll say a few things, you may want to finish. We're starting on the community solar. We're starting with 17.5 megawatts and we'll see where that goes. I think we still believe that there is more utility scale solar and we're pursuing land acquisition and continuing to assess the building of the next 300 megawatts or 600 megawatts of solar. So that's – we still believe that's an opportunity. I think the battery storage will help us to understand integration of batteries into solar and help us to make that – that solar generation more efficient than it is today.

Rob, thanks. It’s fair to say. I mean, obviously, we've started with a robust program at the sort of large scale with the first 600 megawatts and planning to continue to build on that as it relates to community solar and storage. It's still early days. We're excited about work and go. We've got some meaningful projects that are underway now, but we haven't fully framed up what the opportunity is. And that – opportunities that will continue to clarify itself and frankly grow is the technology and the cost competitiveness of it continues to improve.

All right. And then as a follow up, Lakeland is looking to shut down a coal unit. Is this an opportunity for you to potentially add some generation in your territory to serve that territory which would be quite close?

Rob, we haven't specifically looked at that. We obviously know Lakelands fairly well and we've got a good relationship with them, but we haven't specifically looked at that opportunity.

All right, thank you.

Thanks, Rob.

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

Good morning. I'm just looking at the funding waterfall and the residual $900 million number. I'm just wondering how do you thinking about that? Like where's the priority? Is it in balance sheets strengthening therefore, DRIP and ATM being the full equity products would have the greatest impact? Or do you see it more minimizing dilution, i.e., minimizing share count?

Hi, Robert. It’s Greg. I think the answer is both and there is also a timing component in terms of when the capital gets spent, but we've been fairly disciplined through all this. We want to raise our capital in the most cost effective ways that is most supportive of credit metrics at the same time not being dilutive to existing shareholders and we'll continue to do that. I think when you look at that waterfall and the $900 million, that's over a three year period. And so, the timing of each and every one of those components will vary based on other factors.

Got it. And I guess just to clarify on the pace, it sounds like it's more about taking your time with it since most of the heavy lifting is done in pacing of the capital plan versus just trying to get it out of the way upfront.

That is correct.

Okay. If I can just ask, one more question here is, you think about your long-term kind of funding and financial setup strategy. I'm just wondering what's on or off the table as you think about your payout and leverage, 70% to 75% long term target and you've got your 4% to 5% dividend growth. I guess, is there any contemplation of following the dividend growth or even going no growth to drive that payout ratio faster down to something in that 60% range light like the U.S. peers?

So I'd say that's not our contemplation at the current moment, Rob and we don’t suggest any increases in the purview of the board, but obviously when we established the 4% to 5% dividend growth rate target, we did that with clarity and understanding and to the path that we were on including the asset sales and our view is to the capital investment program that's in front of us and the earnings growth that can drive and comfort this dividend payout ratio will reduce itself overtime while our cash flow metrics continues to be strong. So we're comfortable with the path that we're on and frankly don't see a need to make any changes. But all that said, of course I'm highlighting the fact that dividend increases are ultimately determined by the board on an annual basis.

Understood, great. Thank you very much.

[Operator Instructions] Your next question comes from the line of Ben Pham from BMO. Your line is open.

Okay. Thanks guys. Good morning. Just with re-segmentation, looking at the Florida Electric Utilities you saw earnings flat year-over-year provided some variances for that. But was it mostly a weather that was negatively impacting, just some of the positive AFUDC currency tailwind that you saw?

Yes, Ben, it's Greg, it's virtually all weather. If you think of Q1 last year, Florida at unusually cold weather in the first six weeks or so which was helpful in the load and then it immediately got extremely hot and we called that was kind of mitigated in the next couple of quarters and then kind of bounced over the course of the year. We're probably seeing much more, I'd say normalized weather in the first quarter of this year compared to what we saw in last year. And of course we're just getting into the second and third quarters where typically load picks up materially at Tampa Electric.

And secondly going back to some of the questions on the funding waterfall, you just had the press hybrid then in a separate bucket, now you're kind of getting together on equity and so is the thinking now that the really the props side it's not definitive now and whether you could access that market and that’s really just looking at all of the above and seeing what's the best cost of capital.

Yes. Ben, I mean certainly, when you compare the equity markets in the bond markets to the differed markets, differed markets really haven't come back and balanced the way the other markets have. Certainly, we would be able to issue press if we want it to be or unless we're sure we would necessarily like the pricing, we'd see this current market. And so our thinking is collectively that whether it's potential at the market program, whether it's a drip or whether it's press, if the funding requirement is there, we'll do what is the most cost effective for the business overall at that particular point in time.

Okay. That's great. Thank you.

Your next question comes from the line of Nicholas Campanella from Bank of America Merrill Lynch, your line is open.

Hey, good morning.

Hi Nick.

So, I was just wondering, just to go back to the Florida opportunities, I think we all saw some recent legislation passed as it relates to undergrounding of the distribution network. If you can kind of talk about what's in your CapEx budget currently or just a sense of how much Emera's electric distribution network is above ground and whether this is an opportunity into your next CapEx update. Thanks.

Well, I can start an Nick question and Nancy you can add-on, in our current capital forecast, it's still early days, so the legislation that you would reference still has to go to the PUC for rulemaking, et cetera. So it's too early to speculate on the timing and what that could effectively mean. And as a result of that, our baseline is $6.5 billion CapEx program doesn't include anything that would review the results of that legislation.

Greg, I'll just add that about – today about 40% of our distribution is underground. So there certainly is – there's certainly a desire in Florida as a result of the hurricanes to get more of that underground obviously. And this legislation sort of proves that out. So to Greg's point, we think this will be – we will put to put together a plan as required by the legislation, and be ready to file it once the rulemaking is done.

Thanks. Appreciate that. And then Greg, I just wanted to clarify your comments. Is it 12% FFO to debt you're targeting by the end of 2020 now?

Yes, over kind of the end of this year and through 2020, we would expect to enter that over that – sometime over that 12 month period.

Thank you.

[Operator Instructions] Your next question comes from the line of David Quezada from Raymond James. Your line is open.

Thanks, good morning, guys. My first question just on the sale of Emera Maine, it looks like you got a pretty attractive multiple there. I'm wondering if you can provide any color on what the sale process was like there, degree of competition, et cetera?

Yes. So I mean we did run a process. It was competitive and ultimately, obviously MX was successful, better through that process. But it was highly competitive and we're pleased with the please with the results and working with focus towards the regulatory approval process that's in front of us that as I mentioned, we expect should be done by the end of the year.

Okay, great. Thanks for that. And then maybe just a broader question, just thinking about how much better the regulatory characteristics tend to be in the U.S. and obviously your capital program is weighted there. I’m wondering what kind of catalyst you'd need to deploy more capital in Canada, I guess, the projects were there, is it a matter of opportunities or a matter of waiting for the regulators to maybe improve characteristics in Canada?

Look I mean, think at the end of the day, it's about balance. And we – as mentioned in my remarks, as we continue to invest in equity in order to bring in new technology, in order to clean generation, in order to renew existing or aging infrastructure. All of that has to be done obviously with supportive of upregulators and other important stakeholders in the process. And an important part of that is making sure that it remains affordable for customers. And so then they know the businesses all across Emera but certainly, here in Nova Scotia is working very hard in order to meet those needs of customers and invest in those technologies. But to do it in a way that isn't putting undue pressure on rates. And we're proud of what we've been able to accomplish there over the last few years with no increases in base rates for quite a number of years that now. And focusing on things like deploying smart meters in AMI where it can not only provide benefits to customers but create some efficiencies within the business, helps to meet that affordability goals. So these are all things that we do and we've done this for a long period of time and the opportunity to continue to invest in the capital program that's in front of us that will continue to grow and roll out as we keep doing our three year refresh, we’ll always be done with that lines in mind.

Thank you for that. That's it for me. Thanks.

Your next question comes from the line of Patrick Kenny from National Bank Financial. Your line is open.

Yes, good morning everyone. I'm just wanted to ask from an ESG perspective, in light of your recent divestitures and continued focus on Florida Solar and installing smart meters, where you guys might be at, roughly speaking with respect to your GHG emission goals relative to a couple of years ago. Directionally are you tracking above or below targets? And maybe you could touch on how these environmental targets outside of rate based growth or influencing your capital allocation decisions over the next three years?

Yes. So Patrick, it’s Scott again. So I think we're really proud of what we've been able to accomplish on ESG front and environmental and carbon emissions, GHG emissions, among that and we've achieved now a 70% reduction in the amount of coal usage across the premise. And turns it to Nova Scotia where this journey began sometime ago, we've already exceeded the COP2 goals that were established as it relates to reductions, carbon reductions against the 2005 baseline and have a goal of a further reductions. It would actually see us doubling the – we're near doubling the COP2 goal by 2030. So this is I think where Emera strategy has been so beneficial as it relates to that goal of a cleaner energy and with – focus on reliability and affordability. But the investments that we've been making towards a cleaner generation and transmission, looking at cleaner generation to market has helped us to achieve some pretty, I think, impressive goals and standards, certainly here in Nova Scotia and now with that same focus and same great progress also in Tampa.

All right. That's perfect. Thanks Scott.

There are no further questions at this time.

Well, thank you all for joining us for this morning’s call. And we look forward to speaking with you again next quarter.

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