Good day, and thank you for standing by. Welcome to the Emera Q1 2022 Analyst Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Dave Bezanson, Vice President of Investor Relations. Please go ahead.

Thank you, Jerome, and thank you all for joining us this morning at Emera’s first quarter 2022 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. 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.

Thank you, Dave, and good morning, everyone. Emera reported solid first quarter results this morning with $0.92 of adjusted earnings per share and 42% increase in operating cash flow compared to the first quarter of 2021. The $0.04 reduction in year-over-year adjusted earnings per share this year – this quarter was largely driven by decreased contributions from Emera Energy, which in 2021, performed particularly well as a result of market conditions created by winter storm Uri in 2021.

These investments have obviously reduced the carbon intensity of the generation fleet at Tampa Electric, but they've also driven value for our customers through fuel cost savings, something that is particularly beneficial for customers in the current market conditions. And while not the only factor, rising fuel costs are a significant contributor to the current high inflation that we're experiencing and working hard to manage on behalf of our customers. The fuel-to-asset strategy we've been executing on for many years, where we've been investing to reduce the carbon intensity of the energy we deliver to our customers, has also helped to reduce the fuel and operating cost profile of the business. These are helpful contributors to reducing, albeit far from eliminating the inflationary impacts to the business and thus for our customers. We continue to execute well on our capital program, with 9% higher capital investment in the first quarter compared to last year. We're on track to invest close to $3 billion in 2022 and we continue to expect to invest between $8.4 billion and $9.4 billion through the end of 2024 with over 60% of that capital plan focused on cleaner and more reliable energy. Beyond 2024, we believe that the ongoing need for cleaner generation, infrastructure renewal and grid modernization will continue to provide robust investment opportunity and growth for the business. In that context, we talked a lot about our capital plans focus on decarbonizing our generation fleet, but we're also transforming and modernizing our grid. Investments in distributed generation, smart meters, cybersecurity, and data analytics platforms are a vital part of the energy transition. They support the underlying framework that enables the build out of increased renewable generation, and they make the grid more reliable and more responsive to evolving customer demands. The energy transition…

Another example, at New Mexico Gas, the team launched a pilot project this year to test the blending of hydrogen with natural gas that can then be used in typical household appliances. The project is in early stages, but as part of our commitment and strategy to reduce the carbon and emission intensity of the energy we deliver to our customers. The team is also exploring the value of a gas storage project to help manage the risk of supply constraints, as well as the risk of volatile gas prices, and expects to file an application for this project with the regulator later this year. While grid scale of renewable natural gas and hydrogen blending projects might not be commercially economically feasible today, it’s essential that we continue to explore and support emerging technologies like this by making small investments now, so we can be ready to make the best assessment for our customers when these technologies become commercially viable. Our Block Energy initiative is another clear example of our commitment to innovation, and our work to capitalize on customer trends, recognizing that it would have a meaningful impact on our sector, we established Emera Technologies over five years ago to explore the emerging trend of distributed generation. At 2019 a full scale demonstration project was developed and put into service at the Kirkland Air Force base with resounding success. We follow this with our first residential project for 37 homes and a new subdivision in the Tampa Bay area which importantly the Florida’s Public Service Commission approved as a rate base investment for Tampa Electric. Utilities are expert operators, which makes Block Energy a win-win for customers and utilities alike. Customers benefit from more renewable energy with a step change in reliability, but without the upfront costs or ongoing…

Thank you, Scott and thank you all for joining us this morning. This morning, we reported first quarter adjusted earnings of $242 million and adjusted earnings per share of $0.92, compared to $243 million and $0.96 in 2021. As Scott highlighted, our regulated portfolio delivered strong first quarter results. Contributions from our regulated earning utilities increased $30 million over last year or $0.11 of adjusted EPS. This was offset by lower contributions from Emera Energy whose 2021 results benefit from event driven market volatility following winter storm Uri. Emera Energy's earnings will vary both quarter-to-quarter and year-to-year depending on market conditions which causes variability on our consolidated results. While the financial results are not as predictable as those from our regulated portfolio, their low risk operations provide us with potential earnings and cash flow upside and are always positive on an annual basis. Operating cash flow before changes in working capital increased by $142 million or 42% over Q1 of 2021. The increase was primarily due to the 2021 gas cost deferral in New Mexico Gas and winter storm Uri partially offset by higher fuel under recoveries at Tampa Electric as a result of higher gas prices. And although fuel under recoveries can cause temporary cash flow differences, we have regulatory mechanisms across our portfolio to recover prudently incurred fuel costs from customers on a timely basis. Earlier this year, we filed a US $169 million midyear course fuel correction at Tampa Electric which was approved during the quarter. Recovery of these costs began on April 1 and will be recovered over the balance of the year. This strong cash flow was expected and underpins our confidence that we are on track to achieve sustainable credit metrics that support our investment grade credit ratings. Now I’d like to turn our…

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

Thank you. [Operator Instructions] Your first question comes from the line of Linda Ezergailis with TD Securities. Your line is open.

I’m wondering if you could just help us understand if the shifting long-term outlook of the importance of energy security in North America and the Caribbean affect your approach to operating your assets and capital allocation? Might there be a case for accelerating energy transition in any of your jurisdictions? Might there be a case for potentially prioritizing whatever remaining fuel requirements you have to have those contracts that are more hedged long-term? And is this influencing the nature of your conversations with Atlantic Loop potentially?

Hey, Linda, this is Scott, so thanks for the question. It's a complex and an important question and look, largely, the pace of change of the energy transition is going to be driven by economics and by government policy. And government policy will set timelines that utilities like Nova Scotia Power and Tampa Electric and others will need to meet and follow and that can certainly drive timelines. And otherwise, it will be driven by economics to ensure that we're creating a path that's most economic for customers, making sure that we're delivering the cheapest electron for customers or gas molecule for customers, while still being compliant with regulations and legislation that gets set by customer. So certainly, as inflationary impacts and fuel impacts to the extent there is changing price of fuel is a long-term thing, and obviously, that's an open question and we could all have a view. The economics can shift around between the cheapest way to generate those electrons for our customers, while still being and meeting the regulatory and legislative policies that are set. So all to say, this is an ever changing environment. The pace of change, I think, is actually quite quick already. Our responsibility is to make sure that we continue to do that in a way that is most cost effective for customers, while maintaining reliability and availability of energy that obviously all of us and all of our customers depend on.

Thank you. And as it relates to the Atlantic Loop, what sort of things need to happen before you can provide an update for us later on this year in terms of milestones or decisions or policy or anything?

Yes, I mean it's, as we said before, Linda, this is in concept, obviously, this is a simple and important project where we're looking to optimize the energy needs and energy sources in Atlantic Canada amongst the provinces of Quebec, Newfoundland and Labrador, Nova Scotia, and New Brunswick. But it's complicated, because there's a lot of parties involved. And the Federal Government's engagement in this is important. We're encouraged and continue to be encouraged by the engagement by all of the stakeholders in this process. But an important component of it is the participation levels and the funding participation by those parties, particularly including the Federal Government, where we've been clear about the fact that for Nova Scotians, we need support from the Federal Government in order to make this transition and this project affordable. And so it's really just sorting out all of those dynamics. We continue to be encouraged by the progress and continue to work towards a timeline of more clarity by year-end, because of course, we need that in order to be able to have a hope to meet the 2030 timeline to be able to have a project like that in service in delivering clean energy to Nova Scotia to be able to retire the coal plants on that timeline.

Thank you. And just as another follow-up in terms of capital allocation and energy transitions and energy security, recognizing that there's been challenges on a number of fronts getting an East Coast LNG project, export project off the ground on a number of fronts, including complexity. Under what circumstances, if any, would Emera be interested in getting involved in any sort of project like that?

Yes, we're certainly not looking at LNG export capacity, Linda. We certainly think about, as I mentioned earlier, gas storage and LNG is obviously a focal point within that and that's certainly in focus for us right now in both of our gas utilities thinking about gas storage, also important consideration for Tampa Electric. But at this point, we're not looking at the market of thinking about LNG for export purposes. We're looking at trying to create value for our customers.

Thank you.

And your next question comes from the line of Rob Hope with Scotiabank. Your line is open.

Good morning, everyone. A follow-up question on the Atlantic Loop. Just I want to know has the engagement of the Federal Government in your eyes changed over the last couple of months? It was interesting to see the Atlantic Loop specifically called out in the last budget or update, sorry?

Yes. Thanks, Rob. And look, yes I guess in a way, I think you know, you're right, we're seeing the Atlantic Loop project being referenced in many places, but frankly, that's not new. We’ve seen that from the Federal Government for a number of quarters now. So I think we continue to, as I say, be encouraged by their engagement and interest and I think they agree with us that this is an important project for the region. I think they agree it's an important project for Canada. But there's still a lot of details to work out and they and we and others are working our way through all of that complexity to find a way to help to make this happen.

All right, that's helpful. Thank you. And then just switching gears a little bit more relating to the numbers, we’ve seen fuel prices increase, however, you have got some recent wins on fuel cost recoveries. How are you thinking about where fuel prices are currently versus recoveries as well as kind of the target of the $2 billion of cash flow for 2022?

Yes, Rob, it’s Greg. From where we sit right now, everything that we've experienced from any kind of under recovery from the tail end of last year, winter storm Uri or even the early part of this year, we're expecting to recover in the current year and that's largely because of the settlement in New Mexico. Obviously, there's some of that gas cost into Mexico will get recovered in 2023, but also the mid-year course correction at Tampa Electric. If we see gas costs remain elevated at the levels they are over the balance of the year, we'll have to make a determination of whether we file for a second midyear course correction at Tampa Electric. We haven't made or concluded on that yet, again because that would be based on our forecast as we see today. And so that would be the one area that might have some potential variability between this year and next year. But outside of that, and I should mention as well, less of an issue at Nova Scotia Power, because they do a lot of hedging on their fuel costs. So really, it's gas cost at Tampa Electric, and we do have the regulatory mechanisms to recover over the balance of the year, but it would not surprise me if it stayed at these levels and some of that might leak into next year.

All right, I appreciate the color. Thank you.

You are welcome.

And our next question comes from the line of Maurice Choy with RBC Capital Markets. Your line is open.

Thank you, and good morning. My first question is on the capital plan, thanks for confirming the plan, and that there is no material change in relation to inflation and supply chain matters. But you've made it clear that this is obviously an assessment for now. And so is this the case that a more wholesome assessment will be made in the next iteration of the plan or is it a case that you know, 2025 and beyond projects are more impacted and less so for next three years?

Yes, I think that's right Maurice. So when we roll out our capital program we obviously put a lot of thought into that in the fall, and in particular he projects under development and other things we're seeing. What probably will be a little bit different this year is the projects not so much for 2023, obviously but for 2024 and 2025, as we do more scoping of those projects and cost estimates to the extent that inflation weighs in on some of that. We'll incorporate that in November. Nothing discussed, nothing has changed in terms of our plans or execution around it, but we are seeing cost pressures on some of the projects a couple of years out.

And your next question comes from the line of Mark Jarvi with CIBC. Your line is open.

Thanks, good morning everyone. Obviously, you've acknowledged the rising gas and electricity prices. Are you seeing that impact at all customer behavior and usage?

No, maybe a little bit Mark on our gas utility in New Mexico, it seems to be that the usage per customer seems to be off slightly, whether that's tied to the price of gas or not, I'm not so sure. We certainly have not seen it at Peoples Gas at all. Although we have seen a little bit softer usage from our commercial customers, just because restaurants are now operating at full capacity, because of staffing issues, you know, hotels aren't necessarily washing sheets and towels at the same frequency that they were before. I'd say the opposite is actually happening at the two electric utilities, which is probably more meaningful. Right now, electricity relative to other sources of energy is probably the most cost competitive out there and so whether it's electric vehicles, heat pumps here, people working from home, we're actually seeing a little bit of positive growth from a load per customer perspective. So all in all, probably balanced may be slightly favorable because of the electric utility exposure.

Thanks a lot. And then is there anything you’ve done in terms of early refinancing. I think there's some notice in terms of the next year just with the rising rates, so your thoughts on managing maturities?

Yes, it’s a good question, Mark. I mean, obviously, we like I think most if not all of our peers, have been taken advantage of the yield curve over the last number of years and going maybe a little bit farther out on a tenor basis then we traditionally have. Over 85% of our debt is fixed debt with majorities beyond 2026. We don't have a whole lot of necessary required financings over the next couple of years, it's pretty modest. So at this point in time, we're not planning to do anything outside of the normal course of business.

Okay, and the last question from me is just with the leader of that sort of net metering related bill in Florida, your sort of initial thoughts on that and the implications that is for Tampa Electric or also just for Block Energy, if at all?

Yes, I mean, I think, look our view of net metering really hasn't changed, and it's about trying to get great design in a place that's fair to all customers. So our view on that hasn't changed. Obviously we respect the decisions that have been made in Florida and in Nova Scotia both, but we'll continue to work within the tariff design that exists currently. I think fundamentally, these are issues that will surface again, but in the meantime we continue to deliver energy to our customers and support the needs of customers, whether they have solar panels on the roof or not.

And you don't foresee any issues in the near term in terms of fixed charge recovery or something extra cost recoveries if you do see an uptick in residential solar?

No.

Okay, thanks gentlemen.

And your next question comes from the line of David Peters with Wolfe Research. Your line is open.

Yes, hey, good morning everybody. I was just curious as it relates to this Department of Commerce investigation here in the U.S. My understanding is that Solar Wave 2 shouldn't be impacted at all just because of who you're getting your panels from. But I was wondering for wave 3, have you contracted panels yet for those projects and do you see any potential impact, I guess, to 2023 as a result of the investigation?

So no, we don't expect any impacts to the completion of wave 2, which includes the solar generation we expect to put in service through the balance of this year and next. But yes, as it relates to the expectation that at the end of Solar Wave 2, that won't be the last solar generation that makes sense to put into service in Florida. It's quite reasonable to expect that there will be price and supply chain constraints as a result of what's been going on I suspect for solar has become a very popular supplier, as a result of what's gone on. We've been fortunate to have them as a key supplier partner since the beginning of our Solar Initiative. And that's obviously served us well. But no, we're not contracted for panel supply beyond the completion of Solar Wave 2, which is still, what 350-ish megawatts of solar beyond that that we've already got in service.

Okay. And then just one other one, maybe a question for Greg, I know, you guys have used a fair amount of preferred equity in the past as part of your financing plan. So I was first, just hoping you can maybe give us a sense of what you're seeing in that market today in terms of pricing, and just overall openness of the market? And then if you could just remind us where you stand with respect to financing needs this year and next, just with respect to equity or hybrid instruments?

Yes, David. On the preferred market we've always said there's a window of opportunity, sometimes the markets open sometimes it's not. It feels like it's closed right now, doesn't mean you couldn't do a transaction if you wanted to. But I think the terms would be much more favorable to the investor as opposed to the issuer. So we're not planning to do anything in the short term. But we're certainly capable and ready to do something if we find that market demand and pricing is attractive in the second half of the year. From a common equity perspective, it's really normal course business for us. market:

Okay, great. And then last one, just on the Nova Scotia rate case, can you just maybe give an update of where things stand, their expectations in the case, specifically on the ROE sharing and stepping up the equity thickness that you guys requested? And then just how the fuel request sort of squares with what you're seeing today in terms of pricing?

David, this is Peter Gregg. NSP is around, first part of that, so we're on track with the plan for our General Rate Application Filing. So we've just completed round of information requests, where we responded to intervener’s information requests. And we're on track for the hearing to start in early September and we're just, preparations for that are underway. Sorry, can you repeat the second part of your question?

Just wondering, I know there were a few items you guys requested in there, just the higher ROE sharing, stepping up with equity thickness and just I know the fuel component kind of how that squares with what you're seeing today in the market, given how things have changed so fast?

Well, we continue to proceed with the equity thickness request, and that will be subject to the hearing. Let's say certainly everyone has been seeing increase in fuel prices over the last several months for obvious reasons. And so, we're taking a look, a hard look at that, in terms of what updates might need to be required, the budgetary process.

Okay, thank you guys.

Thanks David.

Your next question comes from the line of Matthew Weekes with IA Capital Markets. Your line is open.

Good morning. My questions have actually all been answered at this point. So I'll just turn it back. Thank you.

Thanks Matthew.

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

Hey, good morning, everyone thanks. Just a quick one from me. I’m just curious as it relates to the longer term generation mix at Tampa Electric, I'm curious what you think the ultimate penetration of solar could be there, and under the assumption that you booked forward with additional waves of solar, what kind of complementary investments might be needed to facilitate that?

Do you want to address that?

Sure, I can take that. Good morning David, good morning everyone. So David, I think that a couple of years ago, when we first embarked on this decarbonization journey in an earnest way, with the initial 600 megawatt investment in solar, we had commissioned a study at that time for the size of our system to do kind of perform an assessment of how far could we go, before we might start to have some issues. And we were able to determine that we could get up around 1200, 1400 megawatts of solar, which represents about 21% of our capacity, and not have any issues. To get beyond that requires some investment in battery storage or storage of some form, which is why, in our current three-year capital plan, we've got 280 megawatts of storage in there. And so as we invest in more solar, that paves the way to, or sorry, as we invest in more storage, that paves the way to continue to invest in more renewable energy. So we certainly have designs ongoing beyond the 21% capacity that we're currently forecasting to be at by the end of 2023.

Excellent, thanks. I appreciate that color. And maybe just a quick follow up to that. As it relates to affordability and the high fuel cost environment today, does that high fuel cost environment make it perhaps more palatable from regulators perspective to try to move forward with additional solar investments or does that in a different way, hurt affordability and make it harder to make a case for large capital items?

So yes, so I think I understand your question, David. So really, what the teams do whatever source of new generation or transition and generation is really look at the math and determine what's in the best interest of customers from a financial perspective, as well as making sure, of course, that the energy availability and capacity requirements are there. And so yes, the math is a little different now, but it's yes, we're seeing the cost of everything go up, including, obviously, the cost, as we chatted about before, of solar panels, the plant, of materials, of construction costs, but so too the cost of fuel. As to whether that's fundamentally shifted the lens between looking at early retirements of a thermal generation and accelerated investments in renewables, frankly, it's a little too soon to tell. But in the meantime, obviously, using Tampa Electric as an example, there have been significant investments in renewable generation like solar on the basis that it has been cost effective for customers. Similarly, the early retirement of one unit of Big Bend and the conversion of another to high efficiency natural gas through Big Bend modernization. And really the same exercise goes on at Nova Scotia Power is, as the team there looks to -- how to best achieve the legislative requirements of 2030 in terms of renewable generation and finding the most economic path for customers to be able to do that. And that's one of the reasons why we see the Atlantic Loop project as being important, but also some of the initiatives that the team in Nova Scotia Power is taking in relation to battery storage and additional wind resources and transmission upgrades, all done with a view on the economics relative to the alternatives in making sure that we're always choosing the path that's most economic for customers.

Excellent, I appreciate the color, thanks.

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

Yes, good morning, everybody. Just wanted to delve into the gas storage strategy a little bit more. And I guess, given the portfolio is over 95% regulated today, curious of what the appetite for incorporating unregulated gas storage assets might be, especially given the backwardation in the gas market. It would appear there that there could be some assets shaking loose over the coming months. So just maybe your thoughts on looking at storage assets that may not be physically connected to your utilities, but might still be able to help you manage fuel costs for customers.

Yes, thanks for question, Patrick. So at this point, I'd say across the business storage of whatever kind, right now, frankly, but certainly, gas, gas LNG, we're looking exclusively within regulation in support of the needs of our customers. And that's true in New Mexico Gas, Peoples Gas and Tampa Electric, all of those at this point in time. Not looking at gas storage in Nova Scotia, but more focused on a path to renewables and hydro report.

Got it. And then maybe just on the renewable natural gas front in light of inflationary pressures, are you seeing any change in the pace of development of potential projects that could be blended into the system over time?

No, I don't think so. Helen, will correct me if she's got a different view. No, I don't think it's changing a few around the pace at this point. But it's still, this is a young industry and we're excited to have a couple of projects on the go in Florida and excited about advancing them and bring them into service. But, but I'm not myself aware that it's accelerating or the opposite impact as it relates to any other potential developments in this -- in the state. Helen, anything you'd say different?

No, that's exactly right, Scott. I'd say all we're experiencing is what everybody is across the supply chain, some issues here and there with parts and supplies and that sort of thing, but nothing that's having a material impact.

Okay, that's great. I'll leave it there. Thank you.

And the next question comes from the line of Richard Sunderland with JP Morgan. Your line is open.

Hi, good morning. I just wanted to briefly follow up on the gas storage question. Can you provide more details around the New Mexico evaluation seeking really the timing and magnitude of the capital opportunity?

Yes, Ryan, would you address that?

Yes, I'm happy to address that, Scott. I think as everybody knows, we last year when we had approval of our gas costs from winter storm Uri, the Commission asked us to take kind of a deep dive into various gas storage options for New Mexico Gas Company to own and control here that would work to reduce the impact of gas spikes or just supply in general. So we actually filed that information filing with the Commission just recently in the last 30 days, and so that's on file, it's more of an information filing, but in that filing, we did say that we think the best option for us is LNG. So we will be filing later this year a certificate of convenience and necessity and requesting that the Commission here approved that. In terms of capital spending, we're still working through the pre-feed study and all of that. But we would anticipate that it would be in excess of $100 million of capital that would be spent on the LNG facility. But again, we're still working through the details and we'll have a more much more firm number later this year when we file for that. So I hope that answers your question.

That's helpful, thanks. That's all from me today.

[Operator Instructions] As we don't have any further questions at this time, I'll hand the call back to Dave Bezanson.

Thank you, very much. And thank you for your interest in Emera. That now concludes our call. Have a great day.

Thank you and that concludes today's conference. Thank you all for joining. You may now disconnect.