Ladies and gentlemen, thank you for standing by, and welcome to the Emera Q4 2019 Analyst Call. At this time all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Scott Hastings. Please go ahead.

Thank you, Sharon, and thank you all for joining us this morning for Emera's fourth quarter 2019 conference call and live webcast. Emera's fourth quarter earnings release was distributed this morning through Newswire and financial statements, management's discussion and analysis and the presentation being referred on this call are available on our website at emera.com. Joining me for this morning's call are Scott Balfour, Emera's President and Chief Executive Officer; Greg Blunden, Emera's Chief Financial Officer; and other members of the Emera management team. Before we begin, I will take a moment to advise you that this morning's discussion will include forward-looking information, which is subject to the cautionary statements contained on the supporting slides. Today's discussion and presentation will also include references to non-GAAP financial measures. You should refer to the appendix for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. And now, I'll turn things over to Scott Balfour.

Thanks, Scott, and good morning everyone. This morning we reported fourth quarter adjusted earnings per share of $0.60 and full year 2019 adjusted earnings per share of $2.59. While consolidated results are down compared to last year, the core of our business, our portfolio of regulated utilities remained strong and performed very well, delivering adjusted earnings growth of 10% for the year. We're very pleased with this level of growth, which was primarily driven by strong earnings from Tampa Electric and our gas utilities. And similar to our Q3 results, the financial results for 2019 were weaker due to four main factors. Two of those factors were expected: the loss of earnings contributions from our merchant gas plants that we sold in the first quarter of 2019 and the non-recurring tax benefits we recorded in the third quarter last year. The other two factors were the impacts of Hurricane Dorian and unfavorable market conditions negatively impacting Emera Energy's marketing and trading operations. Collectively, the earnings impact of these four items outweighed the growth and our utilities for the year. Emera’s portfolio of regulated utilities continues to be the primary driver of our growth and the underlying performance of these businesses is delivering strong earnings growth consistent with our expectations. The contributions from our portfolio of utilities has been steadily and predictably growing through both ongoing rate-based investments and through greenfield investments like the Maritime Link and Labrador Island Link projects. Over the past six years, we've grown contributions from our portfolio of regulated utilities by an average annual earnings growth rate of 11%. Growth has been achieved by making smart investments in fuel to assets and OMG and to assets opportunities by disciplined O&M management and by working constructively with our regulators and customer groups, all helping to avoid putting…

Thank you, Scott, and thank you all for joining us this morning. As Scott referenced, our 2019 results were impacted by the sale of our merchant gas plants, Hurricane Dorian and weaker marketing and trading conditions. However, we continue to be very pleased with the earnings growth that is being delivered from a regulated portfolio. As I’ll walk you through in a moment, strong growth from regulated utilities has fully offset the earnings impact of the sale of our gas plants and we expect our regulated earnings to continue to grow in 2020. This growth combined with the opportunities identified in our new capital program reinforces our confidence that we will continue to deliver long-term earnings growth to our shareholders. While the growth in our regulated earnings was significant for the year, this growth did not offset the impacts of Hurricane Dorian and weaker marketing and trading conditions. As a result, we experienced lower annual adjusted earnings per share than 2018. Without those these negative impacts, adjusted earnings per share for 2019 would have been consistent with the normalizing 2018 results despite the sale of our gas plants in Q1. And now let's get into the details about the quarter. In the fourth quarter of 2018, Emera delivered adjusted earnings per share of $0.71, or $0.62 on a normalized basis. Growth from the normalized 2018 base of $0.62 was largely driven by very strong performances by the Canadian electric utilities and the gas utilities. During the quarter, Nova Scotia Power and Maritime Link contributed $58 million of earnings, an increase of $11 million for the fourth quarter of 2018. Growth in the quarter was driven by increased income from our equity investments in the Maritime Link and Labrador Island Link, decreased income taxes and lower non-current service pension costs. Earnings…

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

[Operator Instructions] First question comes from the line of Ben Pham [BMO Capital Markets]. Please go ahead.

Hi. Thanks. Good morning. Just one of your slides, you highlight – it looks like your utility businesses, good growth. You look at normalizing all the adjustments you've seen during the quarter. So my question is, I mean, I guess, it's a good point to highlight from various standpoint. But when you guys look at calculating EPS trajectory and your payout ratios and whatnot and the targets. Are you guys taking that same approach, where you're just mostly looking at the utility business, ignoring Emera Energy trading, which could be volatile every year?

Ben, it’s Scott. Let me take a crack and Greg can add on. I mean, look, I mean, of course, we're looking at our consolidated adjusted EPS and EPS growth. But what we're wanting to highlight as we go through this transition is of course with a lots of contributions from the merchant gas fleet and then prospectively from Emera Maine. Really just trying to highlight what's going on within the core and continuing business profile is, you know, these businesses are performing really well and delivering growth. And yes, Emera Energy will – the marketing and trading operation will continue to have some volatility to it. I would highlight, of course, it's a small portion of the overall $2.5 billion, $2.4 billion of EBITDA that this business generates. So if you look at that sort of core portfolio of regulated utilities, which represents 95% of the going forward business. Those businesses are driving strong growth year-over-year. They have been for some time and we expect that will continue to be the case in the future.

And Ben, this is Greg. The only thing I would add to that is maybe to try to address your specific question, when we target a dividend payout ratio and growth over time, we would, in our long-term forecast, expect Emera Energy and the marketing and trading side of the business to deliver that $15 million to $30 million on an annualized basis, recognizing that there'll be years where we'll be above that range, midpoint of that range, and there'll be years where we'll be below it, similar to 2019.

Okay. All right. And can you remind us the development opportunity, that $0.5 billion to $1 billion, what's in that? And maybe just a refresh on the time line and the storm hardening?

Yes, Ben, we'll give some deeper color to that at Investor but it's continuing to include the same theme of things that we've talked about before, as we continue to refine expectations around things like more solar investments in Florida, things like storm hardening, as that becomes clearer, continued cleaning of the generation fleet in Nova Scotia Powers, we worked on some refurbishment of hydro-related resources. So those kinds of things, all form part of that, but we'll give some more color to that at Investor Day.

All right. Sounds good. And good timing on the capacity payment, just swapping out of that. Thanks a lot.

Thanks Ben.

Next question comes from Linda Ezergailis with TD Securities.

Thank you. I am wondering if you could just give us a sense, just further to Ben's question about storm hardening and your capital. I know you're going to be providing some more disclosure at your Investor Day, but in Canada, the CSA is looking at implementing some more resiliency standards. And I'm wondering if, given your recent experience with Nova Scotia Power, if that might suggest some opportunities to further storm-harden that utility? Or if that is already kind of as resilient as it can get, given the Maritime geography?

So I'll start and Wayne, feel free to add in, it's helpful. So look, I'd say making reliability investments, every utility is focused on that, including ours, of course, including Nova Scotia Power, of course, the topography, the geology in Nova Scotia means undergrounding system here is very difficult and very expensive. But a significant amount of effort has gone in by Nova Scotia Power over the last number of years to continue to storm-harden the system as what we're seeing is increases in wind speeds, sequence peaks, more frequently. And so the team continues to work to ensure the system is improving its reliability as we continue to respond to what we're seeing is, at times where winds are stronger more frequently than they used to be. And so a good part of Nova Scotia Power's maintenance and capital program is focused on that. Wayne, anything you'd like that? Wayne O’Connor: Linda, I just would say that – a couple of things. So reliability, obviously, is pretty important to us and our customers. So we continue to look at ways to improve that. So as Scott has highlighted, we've been doing that for quite some time and continue to look for new ways to do that. So we've been engaged with customers and the regulators here on some more innovative projects and pilot projects that allow us to test out things like micro grids and batteries. So we do see that as a growing opportunity for us going into the future as we look to improve upon the liability and make the grid more resilient.

Thank you. And just some follow-up, maybe on your Q4 results, specifically in 2019. Maybe you could just give us an update on your thinking about long-term outlook and benefits related to your Marketing and Trading business? I know historically, there was a view that it provided kind of strategic and industry insights that kind of punched above the weight of the – beyond the direct contribution. But now that you've sold your gas plants and given some of the volatility and softness we're seeing, I'm wondering if you're thinking about changing the scope of what you do there or the strategy or if you expect it to see it continuing for the foreseeable future?

Linda it's Judy. So the Marketing and Trading business existed for 10 years before we owned the gas plants. So it's kind of raise on debt to Emera has been around for a lot longer than that five-year term. If you kind of look and see – it operates within its earnings range, generally, of 15 to 30. And if you kind of look over the last several years, the average is around 28 or 29, which is very close to top end of that range. 2019 was a hard year for it, but that was frankly more unusual than normal circumstances. We still think there's opportunity in that business, and our goal continues to be to manage it with an appropriate downside risk and be there on the – for the times when it can provide us with upsized returns.

Okay, and then maybe just a quick question on your New Mexico Gas business. Can you comment on the biggest changes in your regulatory application? And where you expect most of the discussion to be as it goes through the regulatory process.

So yes, Linda, I don't think Ryan is on. If so, Ryan, feel free to speak up. But this will be the second rate case that we filed in New Mexico since we acquired New Mexico Gas. The first rate case, which – was seeking a modest increase in revenue, but also seeking a weather tracker, if you will, where in New Mexico it's principally a winter-based system, providing gas for home heating. But the winter season can be quite short, and so that first application successfully, on a period trial basis, brought in place a weather tracking system that we think is constructive for customers, but also important for the utility. The second rate case is really just catching up to some of the capital investment initiatives that are going on in the system. In New Mexico, adding the resiliency of that system, improving the integrity of that system. And so seeking additional revenues in order to support that capital investment that – and this rate case is being done on a forward test- year basis, this will be the first forward-test year basis for New Mexico rate application.

Thank you.

Next question comes from Robert Kwan with RBC Capital Markets.

Good morning. If I can just turn to Slide 13, you provided the normalized 2018 number, and you've shown the waterfall to 2019. I'm just wondering, what would that normalized number for 2019 will look like when you think about energy services in Dorian, which you've outlined, but as well as things like NMGC, weather and some of the regulatory, I guess, just as well, if you can comment on do you have what the earned ROEs at the utilities were for 2019?

Robert, it's Greg. On Slide 13, if you took the $259 million and adjusted to a midpoint for Marketing and Trading and Hurricane Dorian, you'd effectively get back to the $278 million level that we would've had in 2018. So it's really those two items that would have been the difference between what we reported in 2018. Remember, absent that Florida tax adjustment and what we realized in 2019. Obviously, there wasn't a lot of other differences through the individual line items. But for the most part, it's a result of that. In terms of ROEs, NSPI had an ROE towards the top end of their band, very consistent with what they had over the last number of years at around 9.25%. Tampa Electric and Peoples Gas were both kind of in and around the 10.25% to 10.5% ROE. New Mexico, I was 9%, 10%. I'd have to get back to you, Robert, on New Mexico. I think New Mexico was kind of in the high 9s last year, but I'd have to get back to you on that to confirm the exact number.

Okay. And I guess, just on that though, for PGS, how far below do you expect PGS to be for 2020?

It will be somewhat weather-dependent, Robert. But it won't be – I wouldn't expect to be too materially below the low end of the band.

Okay, but obviously enough to file the rate case?

Yes, we don’t need to be below the band to file for rates, but we do need rates for 2021. And as you would expect, in particular, in state of Florida as you get a year out from requiring rates, you generally have a degradation of your ROE, and that's what we're seeing. But regardless of what we would expect to receive in 2020 with open rates, that number would be lower in 2021.

Got it. If I can just finish with sustainability or ESG-related topics. You talked about – a lot about that within your presentation, things that you're doing. I'm just wondering, how do you think about your gas distribution businesses? Whether that's just the way the market's viewing gas distribution? Or more long term, the existential risk to those businesses?

Yes, Robert. It’s a good question and one that we're mindful about. I will say, certainly today in both the state of Florida and New Mexico, both the state and ourselves, in many ways, see the gas LDC as an enabler to the continued electrification and decarbonization of the electricity sector in those states. And so we know that this is a growing topic, but the reality is that the natural gas is demanded by our customers in those states, it's seen as a cleaner, affordable fuel, there's a high-efficiency factor, of course, of that supply direct to the customer. And so at this point, as I say, we see those LDCs as enabling the decarbonization of the electricity sector. But of course, we're paying attention to what's going on in other markets. But right now, I think we're in a good place in both New Mexico and Florida.

It’s great. Thank you very much.

Next question comes from Andrew Kuske with Credit Suisse.

Thank you, good morning. What are your expectations around getting your block power off of Muskrat Falls for later in 2020?

Yes, so we continue to expect that we'll see the Muskrat Falls projects commissioned and delivering energy for us in mid-2020. And so our – as we see it, we continue to be sort of tracking all of our expectations for Nova Scotia Power, consistent, of course, with [indiscernible] representations as well. So mid-2020.

Appreciate that. And then how much headroom does that give you on multiple fronts and effectively lowering fuel costs in Nova Scotia for ratepayers, the emissions profile and really transitioning out of the pet coke, the oil and then the coal?

Yes, So clearly, Maritime Link has long been an important part of Nova Scotia Power's journey to reduce its coal-related generation, but particularly to reduce its carbon emissions. We'll be with benefit of Muskrat at Muskrat energy once that starts to be delivered at 40% renewable in Nova Scotia Power, and it's almost 60% non-emitting. And so when you think about that in the context of the COP21 objectives and goals that were set, which was a 60% reduction by 2030, the journey for Nova Scotia has been a really good one. And so we would expect to see sort of on a full year basis in 2021, 40% renewable and 60% non-emitting, which is great progress for the province of Nova Scotia.

Great thank you, one final one. Just on expectations around the northern pulp mill. Do you see any impact on just regional load dynamics? Wayne O’Connor: So Northern Pulp as you know is – in the longer running, the dynamics probably more are on the pulp and paper industry as compared to our overall load or generation. So it's probably more keenly felt in that sector. We have a biomass facility in Port Hawkesbury that can burn more wood, if we can get it at the right price. So that's probably the biggest impact less to our overall load on an annual basis.

Okay, that is great, thank you.

[Operator Instructions] We have question from Julien Dumoulin-Smith with Bank of America.

Good morning guys. This is actually Ryan Greenwald on for Julian. Just kind of curious how you guys are framing EPS growth for 2020, kind of given the discrete headwinds that emerged in the back half of the year, any color you guys can kind of provide there?

Hi Ryan, it's Greg. As you're probably aware, we don't provide earnings or EPS growth targets or guidance. What we have provided is a three year capital plan that has a rate base growing by roughly 7%, and we would expect all things being equal over that planning period, EPS growth would approximate that.

Fair enough and then I guess, how are you guys kind of thinking about your ability to earn authorized returns in the outer years as you guys kind of go in for rate cases in the key subsidiaries here in Florida?

Ryan, it's Greg again. I mean, what has been our experiences as you have – the year leading up to or the years leading up to the need for rates that you often see some degradation. Generally, our experience is once you come out of giving new rates set that we would have an expectation to be at the midpoint or slightly higher than that over that period of time until, again, you really have to go back in for rates and it starts degradation.

Got it. And then lastly as you guys kind of think about your rate base predominantly being in Florida and ahead of the Analyst Day down there next week, just kind of curious on your latest thoughts of potential for a possible U.S. listing?

Yes, Ryan I don’t think anything's changed. When we think of what the benefits and costs are with the U.S. listing, we don't certainly see that there is a material valuation gap between where we think we would trade if we were dual-listed versus just Canada. And we reached that conclusion by looking at some of our peers that are listed in both countries. We don't feel like we have any kind of restrictions on access to capital or anything like that. So we'll continually monitor. But right now, it's not something that's a priority for us.

Got it. Thanks for the time.

Thanks Ryan.

[Operator Instructions] And we do not have any telephone questions at this time. I will turn the call over to the presenters.

Well, thank you for attending the Q4 2019 Emera call. If you have follow-up questions, please feel free to reach out.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.