Emera Incorporated (EMA) Q3 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the Emera Q3 2020 Analyst Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Scott Hastings. Please go ahead.

Thank you, Marcela and thank you all for joining us this morning for Emera's third quarter 2020 conference call and live webcast. Emera's third quarter earnings release was distributed this morning via newswire and the financial statements, management's discussion and analysis and the presentation being referenced on this call are available on our website, at emera.com. Joining me for this morning's call are Scott Balfour, Emera's President and Chief Executive Officer; Greg Blunden, Emera's Chief Financial Officer and other members of the Emera management team. Before we begin, I 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 slide. Today's discussion and presentation will also include references to non-GAAP financial measures. You should refer to the appendix for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. And now, I will turn things over to Scott Balfour.

Thank you, Scott and good morning everyone. We are pleased to report that overall, our business remains strong. Despite the impacts of the global COVID-19 pandemic. Our teams continue to deliver the essential energy our customers count on every day. And as the pandemic continues, we understand the increasing financial pressure many are facing. So, in addition to our significant community investments and relief programs, our employees continue to work with customers on payment plans to connect them to financial aid programs available to help reduce the financial pressure. In these ways, and many others are teams at our gas and electric utilities continue to be customer centric. And this quarter, we saw strong customer satisfaction scores at our electric and gas utilities. Peoples Gas for the eighth consecutive year was named the top rated utility in customer satisfaction among midsize natural gas companies in the sales region by JD Power. In doing so, they received the highest customer satisfaction scores in the nation. Our teams have also been advancing our 2020 capital program, which focuses on investments in cleaner and reliable energy. Even with the additional COVID-19 driven health and safety measures in place. I'm pleased to say again this quarter there are large capital projects, including the Big Bend Modernization and our solar projects in Florida, continue to be on time and on budget. These projects and our capital program as a whole, reflect our strategy and action, facilitating our transition to lower carbon and improving reliability, all the while never losing sight of customer affordability. With that, I'm pleased to share that our updated capital plan anticipates the investment of between 7.4 billion and 8.6 billion over the next three years. As in the past, the baseline capital plan only contains committed projects that we are highly confident will proceed over the forecast period. Our baseline capital forecast includes previously announced projects like the Big Bend Modernization project, investment in solar, storm hardening in Florida, and hydro refurbishments in Nova Scotia. In addition to the baseline forecast, we do see incremental upside that could provide an additional $1.2 billion of investment opportunities in development. I will speak about one of those development opportunities in a few moments. Our capital program is directed towards regulated investments that support our strategy, and growth and earnings. Over the next three years, almost 80% of our capital will be deployed in our electric utilities. Well, our investments in renewable and cleaner generation, grid resiliency and smart meters. The remaining 20% will be invested in our gas utilities, where the focus is on system expansion to support customer growth, and investments that enhance reliability. Notably, about 70% of our capital is expected to be invested in the state of Florida, optimizing our capital allocation to a jurisdiction with favorable equity thickness and returns. And notably on a combined basis, over 60% of our $7.4 billion baseline capital program will be invested in projects that promote cleaner and more reliable energy. This robust capital program will drive rate base growth between 7.5% and 8.5% from 2019 to 2023. We will continue to update both the baseline and development opportunity forecast in the future to keep the market up-to-date on significant advancements. We are very proud of the growth that Emera has demonstrated and as we look to the future, we are excited about the opportunities that we see for our company. Our strategy, team and focus capital plan are driving real and meaningful contributions to national, provincial and state level responses to climate change, reducing greenhouse emissions from our operations and strengthening the resiliency of our energy system. As compared to a 2005 base period, our two largest utilities Tampa Electric and Nova Scotia Power have reduced their greenhouse gas emissions by over 35% in 2019 and forecasting and overall 50% reduction in 2023. While we are proud of our track record, we know we still have work to do as we continue to transition to a lower carbon economy. The reality is that, when it comes to emissions reductions, and our sustainability efforts and positioning, overall, we have a very good story to tell, and we are working hard to tell it better. In October, we published our annual sustainability update, which provides a complete picture of our performance on environmental, social and governance matters. This year, we added two new disclosure frameworks, SASB and TCFD, and we look forward to continuing to build on our ESG disclosures and future reports. The integration of renewables and natural gas has significantly transformed and there is generation fleet. With our committed capital program in place, it is anticipated that in 2023 Tampa Electric and Nova Scotia Power will have reduced their percentage of coal generation by combined by more than 80%, as compared to a base period of 2005, an 80% reduction, compared to 2005. Our service territories are unique, which of course drives our approach to achieving these reductions in each jurisdiction. In 2023, Tampa Electric will have over 1,250 megawatts of solar connected to their system, as compared to just four megawatts when Emera acquired the utility in 2016, our Big Bend Modernization project is also contributing to the significant reduction in GHG in our Florida operations. Nova Scotia Power is a leader in wind generation, with 18% of its energy coming from the wind, one of the highest penetrations of wind to energy in North America. In 2019, 30% of Nova Scotia's energy came from renewable sources and we are on-track to increase that to almost 60% in 2023. Nova Scotia Power has already exceeded the commitments made by Canada at the Top 21 Forum. Investments in renewable and cleaner generation and transmission to bring renewables to market will remain a central part of our strategy for years to come, while never losing sight of the cost for our customers. On that note, as I mentioned earlier, Emera's capital program includes both baseline capital and development opportunities. These development opportunities are projects that our teams are currently working on that are not committed to the point of being considered base line. One such opportunity is the potential development of a new large scale transmission project that would enable the movement of clean energy and fern capacity through the Atlantic region. This project was referenced recently in the Federal Government’s strong speech as the Atlantic Group. Emera has been working with our partners to advance this exciting idea, and we are encouraged by that recent progress. But it is important to note that it is still very early days, and the number of provinces and utilities potentially involved, makes for a very complex project. However, we see tremendous benefits for the whole region with this transformative initiative. Before I pass the call to Greg, I would like to recognize Peter Greg who has recently joined the Emera team as President and CEO of Nova Scotia Power. Peter brings deep experience in the Canadian energy sector with a focus on energy efficiency, renewables and innovation. Welcome Peter. And with that, I will turn it over to Greg to take you through her financial results for the quarter.

Thank you, Scott, and thank you all for joining us this morning. Our portfolio of regulated utilities remained strong and performed very well, delivering adjusted earnings growth of 10% year-to-date. We are very pleased with these results, which was primarily driven by strong earnings from Tampa Electric, which I will discuss in a moment. Our regulated utilities are in premium jurisdictions with supportive regulatory relationships. This point is further supported by the recent constructive settlement agreements filed by our gas utilities related to their general rate cases. These settlements include a number of great design improvements, and will provide clarity around the earnings and capital growth of these utilities. Earlier today, we reported third quarter adjusted earnings of $166 million, adjusted earnings per share of $0.67. For the nine-month year-to-date adjusted earnings were $477 million and adjusted earnings per share $1.93. Emera's adjusted earnings per share increased with the quarter and year-to-date when normalized for the asset sales and the timing of preferred dividends. These increases were mostly driven by favorable results in Tampa Electric and the other segments. Now let's get into details about the results. With the sale of the unregulated gas plants in Emera Maine, we expected there to be a fluctuation in our results to the last earnings contributions from these businesses. By normalizing the earnings impact of the asset sales, there is greater transparency of the performing of our ongoing business. For the third quarter of 2019 results when normalizing for the sale of Emera Maine would have been $0.44. And for the year-to-date, 2019, adjusted earnings per share was $1.99, which included $0.29 from assets that have been subsequently sold. These assets include the unregulated gas plants in the Emera Maine the sale of property in Florida in 2019. Therefore, the normalized earnings per share year-to-date 2019 would have been $1.70. These normalized results $0.44 for Q3, 2019 and $1.70 for 2019 year-to-date, become the starting point to compare results for the third quarter and year-to-date 2020. Growth in the normalized Q3 2019 base of $0.44 was largely driven by strong performance by Tampa Electric and other segments. During the quarter Tampa Electric contributed $175 million of earnings, an increase of $22 million over the third quarter of 2019. Tampa Electric’s growth was driven by increased sales for residential customers, higher sober revenues, higher AFUDC earnings from the Big Bend Modernization and another other non-solar solar projects and lower depreciation and amortization expense. Third quarter earnings from our other segment improved when excluding the targeted preferred dividends, which is shown separately on the slide. This increase in earnings was mostly due to lower interest costs and the fact that in Q3 2019. results include a onetime expense related to the impact of Hurricane Dorian on Grand Bahama Power Company. In addition, Emera Energy's marketing training business improved results by $8 million in Q3 2020 due to lower fixed cost commitments for gas transportation and storage assets. Dorian Emera Utilities combined for a $0.02 decrease in EPS for the quarter. The Caribbean earnings were lower because of the pandemic the impact on the tourism industry in the economy, in particular in Barbados. In addition, at Grand Bahama power company, the company continues to recover from the effects of Hurricane Dorian. We don't expect this trend to continue over the long-term and short term results for this segment are expected to underperform on a full-year basis as compared to 2019. The gas utilities and infrastructure segments experienced lower earnings in the third quarter of 2020, as compared to the same period in 2019. But including the $7 million impacts of regulatory decision in New Mexico in Q3 2019, New Mexico Gas has higher earnings driven primarily by lower operating costs. At Peoples Gas lower base revenues due to the impact of COVID-19 on commercial sales were offset by higher customer growth, increased AFUDC earnings and higher return on investments in our cast iron their steel replacement volume. The earnings in the Canadian utility segments were up compared to Q3 2019 due to an increase in equity earnings from the Maritime Link and Labrador and Link investments. This increase was partially offset by a decrease in Nova Scotia Power's earnings due to the impact of COVID-19 on sales volume, increased income taxes in the reversal of fixed costs deferrals in 2019. So on a normalized basis, Emera's earnings per share for the third quarter of 2020 was $0.58 versus $0.44 from Q3 2019, representing the growth rate of 32%. Lastly for the quarter, our timing of preferred share declaration in Q3 2019 versus Q3 2020 caused a $0.09 impact for the quarter. This is simply a timing difference and there will no impact on the annual amounts of preferred dividends. Similar to the quarter, year-to-date growth on an normalized 2019 based was $1.70 was largely driven by the strong performance of Tampa Electric. For the year-to-date 2020 Tampa Electric contributed $400 billion of earnings, an increase of $61 million or 15% growth over the 2019 year-to-date. Tampa Electric's growth was driven by higher base revenues related to favorable weather, customer growth and a greater mix of residential sales. In addition, Tampa Electric earnings benefited from higher AFUDC from the Big Bend Modernization and non-solar projects and lower depreciation and amortization expense. The other segment has increased earnings for Emera Energy from higher marketing trading margin. As I mentioned, for the quarter, the 2019 results included one-time corporate cost related to hurricane Dorian's impact of Grand Bahama. Adding to the positives for Emera Energy and the corporate costs, foreign exchange has been a tailwind for the year, contributing $0.03 per share. And lastly, share dilution for the year-to-date was approximately $0.07. The 2019 results included the results of two separate regulatory rulings in New Mexico that had a positive impact on our earnings, the recognition of tax benefits related to a change in treatment of net operating loss carry forwards and the recognition of tax reform benefits from 2018, collectively pulling $19 million or $0.08 per share. And lastly, our remaining utilities in total were slightly lower than the year-to-date 2019. Similar to the quarterly results, the other electric utilities, excluding Emera Maine have lower earnings in 2020 due to the ongoing impacts of COVID on the tourism industry in Caribbean and the continued recovery from hurricane Dorian and Grand Bahamas Power Company. Canadian electricity utilities has had lower earnings year-to-date and Nova Scotia Power has had lower earnings from increasing from tax expense unfavorable weather and decreased commercial other and industrial sales volumes, primarily relates to the impact of COVID-19. These negative impact for Nova Scotia Power partially offset higher equity earnings again for the Maritime Link in Labrador and Link Investments. Within the gas utilities and infrastructure segment, earnings decreased for the year-to-date when excluding one-time regulatory adjustments in New Mexico gas, this increase was due to higher customer growth, increased AFUDC earnings and higher returns from our past iron bare steel replacement investments at Peoples Gas and lower operating expenses in New Mexico gas. And these positives were partially offset by lower base revenues at Peoples Gaps through the impacts of COVID-19 on commercial sales. So on a normalized basis, Emera's 2020 year-to-date EPS was $1.85 compared to $1.70 from 2019 a growth rate of 9%. And as I previously mentioned, the cognitive preferred dividend declaration caused a [five tenth] (Ph) difference year-to-date, and finally it will remain contributor to Emera EPS for the Q1 2020. So, in the interest of transparency, we have identified that separately moving. Moving to adjusted EBITDA and cash flow, year-over-year earnings before interest, taxes, depreciation and amortization was lowered, decreasing by $38 million for 2%. As expected the majority of this decline was related to the sale of the gas plants and Emera Maine. Operating cash flow for the year-to-date 2020 was down at $81 million, or 7% compared to 2019. Again, as unsustainable so this decline was due to the sale of Emera Maine in Q1 2020 and our unregulated gas plants in the first quarter of 2019. The quality and growth of Emera's regularly capital continues to be a priority for our team. The Scott highlight that we are pleased with a $7.4 billion capital program and the growth of this will generate and rate based on future earnings for Emera. Consistent with a three year funding plan, you will find in our messaging February, we have used the current funding plan has returned to normal course business following the completion of our asset sales program earlier this year. We have always managed their funding program to maintain our target capital structure 55% debt 35% common equity and 10% hybrid preferred equity. To achieve this target, we climbed the cost of capital under the minimize our equity requirements while maintaining a strong balance sheet. Our funding plan maximizes reinvesting operating cash flows and manages our businesses regulatory capital structures for the issuance of operating company debt. And then finally Emera's assures common in hybrid equity capital the balance to our targeted capital structure. Our equity requirements over the next three years is expected to be raised or dividend reinvestment plan, which is expected to raise $200 million to $250 million per year. And consistent with our previous funding plan, or at the market program, a very efficient and cost effective ways to issue common equity will be used to complete common equity requirements. And finally, the company will continue to manage the hybrid and preferred capital portion of the capital structure at approximately 10%, which is consistent with our terminal capital structure. Thank you. With that, I will turn the presentation back over to Scott.

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

[Operator instructions] Linda Ezergailis from TD Securities. Your line is open.

Thank you. Good morning. I'm wondering if you could help us understand this Atlantic link opportunity for the region and for Emera? Can you give us a sense of what the book is the possibilities of timing of development of this might be realizing it is in the very early stages, what the bookends of possibilities might be in terms of absolute size on our total basis, as well as what the bookends of possibilities might be for Emera's equity participation in this?

Yes. Linda it is Scott. Good morning. And at this point, I would say it is still a little early to get into sort of hearing narrowing some of those items, but I will say this is a project multiples of the scale of the Maritime Link Project for us. And the project overall and I think it is the timing really, the center point of this, of this strategy. And really the original impetus for this project as a whole is a recognition that is if we can think about Eastern Canada, Atlantic Canada more as a region and think about the clean hydro resources that exist in Labrador and the province of Quebec where at this juncture there is more energy than they consume natively themselves. And so, can we think about the region as a whole and look at the provinces of Nova Scotia and New Brunswick where additional clean hydro energy can assist with the process of decarbonizing. And so for us, really, when you think of the coal generation that exist in Nova Scotia, as you know, pursuant to an equivalency to you agreement has a timeline to 2040 for retirement. And this project is really about whether we can accelerate that timing. Can we find a path that would allowing us to retire those coal plants earlier and ideally by 2030, which would align with the federal government's objectives around coal generation in the country broadly. And so, when you think about timing, the aspects of this project, if we can make this all come together, would be leading to a very ambitious project that ideally would have in service in 2030 or thereabout. So, it was possible that we could see some element of CapEx within the three year capital plan period. But a lot of it would follow between then and closer to a 2030 a day spread over that period. And so, beyond that, it is tough to get into some of the details until we have got more clarity on the path that is ahead, but it is, a project that albeit ambitious, I think, we are excited about and encouraged by some of the early progress. But, we will update you on as that progress continues to develop.

Thank you. And I realize there is a lot of complexity and moving parts, but can you give us a sense of maybe what some of the initial risk factors execution might be in terms of major milestones or sticking points that will be the most challenging to overcome to get this over the finish line or is that really just giving comments on that?

I think I made reference to it and in my remarks, and this is when you start to talk about regional projects, it means there is a lot of stakeholders involved, and that adds complexity. And so, I think that that really is the most significant aspect of this. Obviously, all the Federal Government is engaged and, and we are encouraged by the referencing in the [indiscernible] speech, but there is also a provincial governments and of course utilities engaged in. So, it is that front end work window that really is the most complicated and as that starts to take shape, and if we can line up the stars to see support broadly through the regions then I think there will be an ability to speak more clearly about what that means in terms of scale and timing and those aspects. So, I think it is really that the multiparty nature of it, and working in which we that over the next little bit is what to watch for.

Hopefully it remains a priority for everyone, and the momentum continues. Maybe moving more to a question just as follow-up with respect to the Q4 for Outlook. How has the opportunities look to-date for the energy marketing and trading business. And beyond this year, any comments on the outlook regarding your six commitments for natural gas transmission and storage and how they might continue to step down or, or what the 2021 outlook looks like right now would be appreciated.

So, Linda it is Judy, good morning. So, you can see from the MD&A, that currently, we set our expectation that we think 2020 will be a better year than 2019, which was obviously particularly weak. But that we may, there is a risk that we fall short of the low end of our earnings guidance. It is an unusual year 2020, obviously. So, there has been a little bit of dampening of demand. As a result of, various economic slowdown and the weather has been unappealing. So, the reality is, we do the best we can to provide those predictions, but 40% of our money off and get there into November and December. So, it until the last day of the year, it is really hard to know where we will wind up exactly. It has been a little bit warm for the first week and a half of November, which of course, we don't love that. But the forwards are more robust than current pricing. So, the market hasn't given up on the winter, and either have we. So, that is kind of where we are. You will remember in terms of the our fixed costs for transportation, that they are things that we set their positions that we generally acquire kind of on a short-term basis in competitive bidding processes. And the reality is they kind of tend to reflect last year's market. So, the reason we had a lower investment, kind of in Q3 of 2020, was that we were able to acquire our positions at a lower rate, I don't see any kind of increase in the value of gas transportation looking out into the coming year. So, we are that kind of positions us is we kind of have the same opportunity set for days when there is real money to be made. But we have a lower cost of entry going in, which is limit on the downside risk. So, I would never I would never say anything a year in advance other than we would generally expect to be able to earn within our earnings range for 2021 at this point.

Thank you. I always appreciate the context you provide. I will join back in the queue.

Rob Hope from Scotiabank. Your line is open.

Good morning, everyone. I appreciate the comments on the opportunities in development in regards to delay the project. But if we take a look at Florida, can you just give us an understanding of, how much additional capital could be put to work, I guess, in Chico related to storm hardening as well as incremental, recoverable renewable generation?

Rob, I think, as we look at that billion two projects under development, I think it is fair to say that probably, 30% to 40% of that would be projects that, that we are looking at, in Tampa, specifically. And storm hardening would be part of that. So, it could be any number that so, I say it is a relatively modest amount on their overall capital program over that three years, but some of those things are still being fine too.

Alright, thanks for that. And then just turning over to kind of your existing Atlantic transmission lines. We saw that your equity contribution got pushed off. How do you view these assets longer-term? Do you have an ability to optimize them? Or are they largely kind of government-backed bonds?

I would just say Rob that, they are core assets for us and an important part of the asset base group for Emera and obviously an important part of energy supply profile for Nova Scotia Power. So, they are attractive financially, frankly, and important strategically.

And then just to clarify, on LIL, I guess you will earn on that incremental equity investment until the front half of 2022?

Yes. So it is really once unit three from muskrat falls starts extending. It provides an Nova Scotia block and the Labrador and Link is in service. We are expecting both of those milestones to occur in 2021. And so, will be in full service for us fully in full-year for 2022.

Alright. I appreciate the color. Thank you.

Ben Pham from BMO. Your line is open.

Hi. Good morning. I want to follow-up on Rob's question on Maritime Link. You mentioned it is core. It is obviously generating solid cash flows for you guys for a long time, and if it is a carrier that renewable energy to some extent. But how do you cut it from more of a messaging standpoint for you, look at your rate base cagr tables, the rate based at the client overtime, the earnings is frequently going to decline. So to Robs point, are there ways to optimize your rate base and quite what is a lot higher if you strip out Maritime Link?

What you say is I'm not sure. So go ahead Greg.

No. I think that is what he says and when once those projects are fully operational and 100% cash returns, it is certainly not going to have an incremental investment requirement going forward. And so, yes, as we go overtime, the rebates investment in those assets will just mathematically be smaller each every year as they are continuing to be amortize.

Okay. So there is no, there is really no. So you are comfortable with what is really that Maritime Link being a grinded your EPS and your rate-based categories. Maybe it is not the right word. I can't think of a better word here.

So, look, when year say is right, the contributions from these assets will reduce overtime. However, Rob referred to it, like a - bond it would have the same financial profile as something like said. These are critical strategic assets for us, for the province of Nova Scotia and Nova Scotia Power. And so, we can certainly think about, how we are how we are looking at our rate base growth and those types of things to make it clear that those things are a little a little different, because you are right. Those are those assets will not naturally grow. But as it relates to the cornice of those of those assets to the portfolio not to suggest your thinking we should, we should monetize them in some way. That would not be on the table. These are core assets for us, they contribute positively financially. They certainly contribute strategically, we can think about, how we make sure that there is full transparency to investors as it relates to the profile that they result in as around things like rte base case.

Thanks. And then on your financing slide, it seemed like, really much, much change from before, same CapEx. So how do you think to go about financing the additional development opportunity to get the extra equity to fund that? And there is a reference to I believe, hybrids, as brief as a rebalancing mechanism. Can you clarify what you meant by that?

Yes Ben this is Greg. So, obviously, all of the additional development opportunities, which in fairness to her a little bit back and loaded our, our old rate regulated investments, so it would follow the traditional funding, approximately half of that would be funded with operating company debt, and the balance with common equity and preferred shares. To the extent that we needed to, and that there wasn't incremental cash flow coming in at the same time. So, all those things will get into the mix. But it would be a relatively modest incremental equity requirement towards the back end, as those projects do, in fact, unfold the ways in we hold. On a preferred share size. I think the way to think of it is we probably have, certainly with the balance sheet growing, probably have room for, $500 million worth of preferred shares or hybrid equity to do this period, no rush to do it, that markets can kind of the pricing event market doesn't really fit into our capital structure very well, right now, looks like it might be starting to open up I think at some point time over the three year fair, you might see as to kind of in that range of preferred shares or hybrid equity.

Alright that is great. Very helpful thank you.

Robert Kwan from RBC Capital Markets. Your line is open.

Hey good morning. I'm going back to the capital planner, you have given a little bit of color in Florida, you had 200 to 500 million of opportunities before so the first part is just, can you add into the 2021 to 2023. base plan, and you have got some specifics on that. And then as you think about the 1.2 billion of bots, you have already carved out Florida, but are there other couple of 100 million plus type initiatives in that would be in that number?

Yes, I think, Robert, I would say probably - there has been a little bit of what is called criminalization, I think is the word you use in terms of things that were under development before the interface plan. Probably the most material that over this period is over the next two years, I guess trying to compare a plan, the plan would be able to an additional 100 million for the storm protection plan investments in Tampa Electric. There would be some smaller other items, but that would be probably the most significant one.

And just the 1.2 outside of Florida, what else would be larger pieces speaking of that bucket.

Yes. So, about 40% of it would be targeted towards the tail-end of the forecast brief for the Atlantic loop or something like that, as we look at various alternatives to accelerate, the reduction of coal fired generation even further in Nova Scotia. And then probably about 30% of that total is quite frankly everything else across all of our other utilities in our portfolio.

Okay. That is great. You just finished the dividend in past years, you extended the dividend growth guidance and you announced an increase which wasn't the case this year. I mean now you have rolled out capital plan out for 2023. So, I'm just wondering initial thoughts on what is going on internally and around evaluation around dividend policy?

No. I don't, I wouldn't read that into it, Robert. We will look probably with our more traditional schedule again next fall, and timing with the dividend discussion and decision that directors will make then as to sort of extending out the timeline and really just a reflection at right now that in order to the environment that we are living in right now is a little different obviously than all of us thought. And so I think, the words that I have said before, I would repeat as, when we sent this dividend growth rate of 4% to 5%, while directors will make a decision around dividend increases at each moment in time where they are having those discussions. The reality is when we set that we were looking to start that at a rate that we believe was sustainable overtime, and that continues to be true. So I wouldn't read anything into it. We will look to think about the timing and extension around the given guidance as directors go through that process with us on the annual basis, as we do in the summer next year.

So, since you have rolled out next year would we be getting two more years or how you are thinking about it coming on. The timing?

Yes. I won't prejudge what the discussion and decision from that is, Robert. But, we understand that, dividend growth and dividend growth guidance is helpful to our investors. And so, that will be certainly a funding center as we have our discussions with directors and make sure that we are providing the most helpful pieces of guidance to our investors as it relates to what our growth profile looks like. But as I said dividend growth rate that we established was one that we put in place thinking it will be sustainable over a long period of time, and I would suggest to you that continues to be true in my view.

That is great. Thanks so much.

Mark Jarvi from CIBC. Your line is open.

Thanks. Good morning everyone. I wanted to come back to the Atlantic Group I know there is hell a lot of work to be done there and a lot of unknown. But when you talked about an earlier phase and bringing in cheaper renewables and not putting undue pressure for your customers. Just curious, can you also create a little bit more, buffer for further investments? Like I'm thinking the fuel costs come down even more dramatically, that you can even pull earlier plus, find room for further investments at Nova Scotia Power?

So, certainly marketing that that really has been or our DNA for a long, long time is you would have heard us talk about filled asset strategies. And so to the extent that we are able to take advantage of removing higher cost higher carbon generation and replacing it with rich with renewables that eliminates the fuel expense in the house and effectively redirect that towards, towards the cost of capital of renewables. Absolutely, we will do that. And look just like, more solar is absolutely part of the energy future for Tampa Electric. And more wind is also part of energy future for Nova Scotia, mass storage is going to be an important aspect in both utilities as we, as we put more intermittent renewables onto the system. And in Nova Scotia space, as mentioned, the ability to enhance the existing transmission infrastructure, in order to optimize the system, all those parts together is really what will allow and enable an earlier retirement of cool and the trick and the challenge of that is in nature. As answered Linda's question is getting all the stakeholders aligned in that and that is complicated, and two is making sure that it is not putting an incremental cost burden on those Nova Scotia Power customers relative to a path to doing it to the existing 2040 timeline. So, that is really the work that we are doing and continuing to frame out and, and we look forward to sharing more as that work advances.

Okay, great. And then my last question is for Greg, this looks like a little bit different, depending on your Scotia Power. Is there anything else that you need from 2020 into the 2021 or subsequent years for your CapEx spend?

No, I don't think so. Mark, really just the some of the projects is on Scotia Power. And mostly because as you are probably aware, Nova Scotia is one of the strictest I guess, public policies around people coming into our jurisdiction. And so at the beginning of the pandemic, projects that were going to require resources from outside the area, it was determined was probably prudent to do some of those. Other than that, I can't really think of anything material in any of the other jurisdictions at this point. Everything else has been pretty much on plan.

Okay, great. Thanks.

Welcome.

David Quezada from Raymond James. Your line is open.

Thanks good morning guys. Question on Florida. And I guess broadly the topic of renewable natural gas. I'm wondering if that factors into your plans or part of that incremental CapEx opportunity or I guess even hydrogen as well, what kind of timeframe do you think for that?

Yes, well, certainly on the first on the first one, David, I would say both Peoples Gas and the mix for gas are working on and looking at renewable, natural gas I will pass it to TJ in a second and he can give you a sense as to his perspective on Florida. As hydrogen I would say, it is something that we are talking a lot about. We don't have any active projects on at the moment. Obviously hydrogen is one of those areas that has a lot of investor in capital markets attention right now. The math is pretty tough today for hydrogen. But, that could change in future, which is obviously why we are spending a lot of time thinking about it and talking about it. But we don't have any active projects right now. And with that, TJ, you want to get a bit of color on RG in Florida.

Sure. Happy to. We have several projects in the development stage now that we are discussing the opportunity. We do see that as a really bright opportunity within Florida for Peoples Gas and for the environment both. So we do have several projects on the drawing board that we are working through, with potential suppliers currently. And I agree on the comments regarding the hydrogen certainly further out on the hydrogen in Florida. But, the renewable natural gas is a viable option for us right now, and we are working through several projects.

Excellent. Thank you for that color. I appreciate it. And then maybe just one question I guess on COVID-19 as we started to see, it seems like cases are going higher again, especially in the U.S. and maybe this question is on Florida, specifically as the duration of the pandemic kind of drags out here and appreciate that it is been a minimal impact so far as the duration drags out. Do you expect that it will still be a minimal impact or just the longer timeframe of it starts to mean it is a more material impact?

Yes. I think obviously in 2020, all jurisdictions, including Florida went through periods of lockdowns and that changed the way that our customers use energy. But it changed things more for some businesses than for others. And so, the businesses TJ leads, for example, Peoples Gas it had a more dramatic impact because an important customer base for him are many commercial businesses, that obviously weren't operating and therefore weren't consuming natural gas or in that period. So I think there are pockets where if this continues, Caribbean would be another example until there is a recovery of tourism, things are going to be a little tougher in Barbados as an example, until planes start flying again, and tourism activity starts to return. For Tampa Electric, for sure there are impacts of course, and making sure that we are continuing to stay sensitive to our customers and supporting them through the period. But weather impacts frankly have been material in Florida and that is been having on balance a more material impact on changes of ore for Tampa Electric that has, the way that our customers are using our energy. That makes sense?

Yes, absolutely. Thank you. That is great. I appreciate it. I will get back in the queue.

Andrew Kuske from Credit Suisse. Your line is open.

Thank you. Good morning and I guess the questions need to be in the spirit measured to and cut lengths. But when you think about storm hardening from the substantial structure that you have, how do you think for those that just are regulatory mechanism and clearly you have one in Florida, just more broadly from an MPV basis of building more resilient infrastructure that lasts through strong cycles, versus the build rebuild on a more regular basis, typically some color on that and how that varies through the franchises that you own?

Yes, so let me try this. I'm trying to get to the ahead of your part of your question, Andrew, and so let me know, if I don't, or Rick or Greg can help me. But you are right in order the regulatory mechanisms as it relates to storm hardening or reliability investments are a little different first, jurisdiction by jurisdiction. Obviously, the most different right now is in Florida with Tampa Electric and the SPP, the Storm Protection Plan, that is now in place in place there with, something that arose as a result of, underlying need in recognition of the impact of, of major hurricanes in past years, but also with significant government supporting initiative to, to ensure that there was actions being taken in order to accelerate those efforts. In most other jurisdictions, storm hardening or reliability investments become part of the capital plan and the profiling that each business conducts and reviews with its regulator. In some cases before the capital is spent, in other cases, after the capital is spent, depending on the jurisdiction, and there always needs to be a lens of regulators will apply a lens of prudency as it relates to as it relates to those investments. And so you are right, is thinking about how those investments are made. And the cost of rebuilding for some damaged infrastructure versus making them harder, so that you don't need to rebuild as often is a really important party analysis that the teams do and review as part of that working. And the environment that we are in, is changing here in Nova Scotia the instances of higher winds are more frequent than they have been in the past. And so the team works through that as well, in order to make sure that they are planning for a system that is going to experience more frequent levels of higher wind and that would, that would be true in terms of the work and analysis that goes on across the system.

But maybe I could add just a bit of color to it, Andrew, as Scott mentioned, outside of Florida, each of the utilities have transmission and distribution investments that include improvements in reliability, rain, dust, storm hardening and the ability for the system to stand up in those severe events. Each of the utilities have it within their normal investment programs, but also a key component of it is you are replenishing with newer technologies, they are slightly more expensive to give you better reliability. So, the investment profile as an example in Nova Scotia Power for TMD is about 40% of the overall capital program for 2021 captures a significant portion of it focusing on reliability and enhancement from the system.

And maybe follow-up on that. What role do you see batteries playing within your utility footprints and Nova Scotia PI data example is long radio lines do you opportunities to really put batteries much closer to a load and maybe even on individual house-by-hose basis some - liability and then I think it will be [indiscernible] time as turn back?

Scott, do you want me to address that?

Yes, please.

It is Rick again, Andrew. Batteries, we have battery system in Barbados, in Nova Scotia as well on a feeder. Most of the development right now is focused on trying to figure out how to extract the highest benefit from battery systems we are deploying. So, we know the technology, the costs are coming down. Technology is improving and within ETL and Emera Technologies also they are developing the micro grid approach with the GC system that has battery components embedded. So, a lot of work with Emera, each of the utilities, tackling different challenges within each of the utilities and how to deploy them. But we will be a big part of it. We are just watching to make sure, we are deploying the capital cost effectively.

Great. Thank you very much.

Andrew, it is Nancy. I will just add, if you look at 10-year site plan here in Florida and the work that we did last year on the IRP, that served as the basis for it and in our next 10-year site plan, you will see of course ongoing investment in solar, but with battery. We think that is key and we think the prices will be such that, that will make sense for us.

Very helpful. Thank you Nancy.

[Operator Instructions]. Elias Foscolos from Industrial Alliance. Your line is open.

Hi, good morning, everybody. Most of my questions have been asked, but, probably one broad question. Probably initially directed towards, maybe Ryan and TJ, despite economics, some U.S. cities have been making headlines by banning natural gas in the buildings. I can't find anything sort of related to that in Florida, but maybe you can give an outlook on that. And then maybe a broader question to take back to Greg or Scott is you consider yourself relatively hedged if that occurs.

Sure. Ryan do you want give from a Mexico perspective.

Yes. Sure, Scott. I think here in New Mexico, we have not had any cities or anybody come forward requesting those types changes. So, we feel pretty good here, but we also know that there is environmental groups out there pushing this all the time. So, we are very aware of that. New Mexico is an interesting state because natural gas and oil are a big part of this state, so very important to the state's economy. So, we don't see a huge push in that direction anytime soon, and with the abundance of natural gas here in the affordability, we think it is a good source of energy for our customers.

Yes. And on the Florida side, very similar. We do have environmental groups actually in terms of cities, you mentioned, we actually have, there are a handful of cities that over the last several years have made proclamations or resolutions to be cleaned by 2050 to be carbon neutral that type of thing. When you look at kind of the grassroots demand for natural gas across Florida is really strong, both residential and commercial. And so we as with Ryan, we see the demand for natural gas continuing in Florida. We do hear those voices across the state from Sierra Club and others that, are promoting no fossil fuels. It is just that that is not practical nor affordable at this point for customers and certainly natural gas in Florida has been a one of the reasons that we have had reduced Co2 is profit state over the last 15-years and the continued and use of natural gas for the foreseeable future is really critical. I think that having continued advancements in terms of the environment, and so we are certainly part of the answer, they are not part of the issue. And working closely with electrics to be a partner with renewables is where we see ourselves and, and again, all of that, combined with a very strong and use demand for natural gas by customers. I think we will see natural gas in Florida for some time to come.

Look, I don't mean, I understand the point is to do it as a as a as a hedge. And I wouldn't, I wouldn't say that is a driving force strategy, but I would say that, and understand, people are asking different questions about gas overseas, within capital markets from our perspective. We are happy with the gas overseas, that we have, I think you are Mexico and Florida both. I will use my own words in this but I think broadly, both of those states see the natural gas LDC as an enabler of de-carbonizing the electric side, and therefore, an important part, frankly, of that journey to carbon reduction. We would agree with that premise, frankly. And so, today, we are happy we are happy with, with the roles that those guests overseas are playing in their jurisdictions. We are happy with the role that they are playing within the portfolio as well.

Great. I appreciate that color. Thank you very much.

There are no further questions at this time, I will turn the call back over to the presenters.

I would like to thank you for joining the call today and your interest in Emera and I hope you enjoy the rest of your day. Thank you.

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