Emera Incorporated (EMA) Earnings Call Transcript

Good afternoon. My name is Dina Bartolacci Seely, Manager of Corporate Communications at Emera. Thank you for joining us for Emera's 2023 Annual Meeting of Shareholders, which is being held in a virtual format. Please note, certain statements made in today's presentations and during the question-and-answer session afterwards, may be forward-looking or may include non-GAAP financial measures and should be received with caution. Any such forward-looking statements are made pursuant to safe harbor provisions contained in applicable securities laws. Actual results and financial performance could differ materially from historical results or any conclusions, forecasts or projections in the forward-looking statements. Certain material factors or assumptions were applied in drawing the conclusions or making the forecasts or projections as reflected in the forward-looking statements. Additional information about the material factors that could cause actual financial performance to differ materially from the conclusions, forecasts or projections in the forward-looking statements can be found in Emera's latest MD&A and financial statements, which are available on SEDAR. Thank you. I will now turn the meeting over to Jackie Sheppard, Chair of the Emera Board of Directors.

Thank you, Dina. Good afternoon, everyone. Welcome to Emera's 2023 Annual Meeting of Shareholders. This year's meeting is fully virtual through live webcast. I am on location with management at Emera's head office in Halifax, which is located in Mi'kmaq, the ancestral and unceded territory of the Mi'kmaq people. Emera seeks to build deep and meaningful relationships with indigenous peoples and organizations across Mi'kmaq and in all other regions where we operate. Employees at Emera begin every meeting with a safety moment, and our Annual Meeting is no different. There's no doubt, you've heard us say this before, and it's something we can't say often enough. The safety of our teams, our customers and our communities is our #1 priority. One of the ways we demonstrate this is by marking safety week across Emera's operations each year. The week features festivities, activities and information sessions for employees, all with the goal of preventing injuries and illness in the workplace, at home and in the community. Safety week is among the many ways we live our safety culture as we continue our work to create an Emera where no one gets hurt. I'd like to thank employees from across the Emera team who attended or helped to organize this year's events. Now to the business of today's meeting. We invited shareholders to vote in advance by proxy, and many of you took advantage of this option. There will also be an opportunity to vote virtually during the meeting through the online platform, and I will provide instructions when we get to the voting process. You must remain connected to the Internet at all times during the meeting in order to vote when voting commences. Thank you for exercising your voting rights through whichever method you have chosen. Joining me today are Scott Balfour, our President and Chief Executive Officer; Greg Blunden, our Chief Financial Officer; and Stephen Aftanas, Emera's Corporate Secretary. Now I'd like to introduce our director nominees in addition to Scott and myself. Biographies of each nominee can be found in our information circular. The director nominees are: Jim Bertram, Calgary, Alberta; Henry Demone, Lunenburg, Nova Scotia; Paula Gold-Williams, San Antonio, Texas; Kent Harvey, New York, New York; Lynn Loewen, Westmount, Quebec; Ian Robertson, Oakville, Ontario; Andrea Rosen, Toronto, Ontario; Karen Sheriff, Picton, Ontario; Jochen Tilk, Toronto, Ontario. Thank you to all the director nominees for your ongoing contribution and commitment to Emera. At this time, I would like to acknowledge Rick Sergel, who is stepping down from the Emera Board this year. Rick joined the Emera Board in September 2010. His deep experience in the U.S. electricity sector, along with his extensive regulatory background, had been of great benefit to Emera over the years. On behalf of the entire team, thank you, Rick, for your tremendous contributions. We wish you the very best. For nearly 2 decades, the Emera team has been working to advance our strategy of safely delivering cleaner, reliable energy in a manner that best manages the impacts on customer costs. With increasing global focus on the critical transition to cleaner energy, it is safe to say this work has never been more important. Scott will highlight the company's progress and last year's financial results later in the meeting. Over the past 10 years, Emera has achieved an 8.8% annualized total shareholder return. While our share price performance fell short of our expectations in 2022, we are well positioned, focused and committed to delivering superior returns for shareholders. Through 2025, we plan to spend $8 billion to $9 billion, with more than 60% of this investment focused on cleaner energy and reliability. Our approach to ESG is guided by a fully independent Risk and Sustainability Committee of the Board, which brings additional focus and rigor to our management of ESG. In 2022, we appointed a Chief Risk and Sustainability Officer and established a new Emera Enterprise Sustainability Team made up of leaders from across the business. I extend my sincere thanks to every employee for your continuing commitment and extraordinary work on behalf of our customers, communities and shareholders. I'd also like to thank the management team and my colleagues on the Board for your leadership and many other contributions to Emera's success. Thank you all. I will now call the meeting to order. In accordance with the company's articles, I will Chair the meeting. Stephen Aftanas will act as Secretary. Representatives of TSX Trust Company, the company's registrar and transfer agent, will act as scrutineers, report on shareholder participation and count the votes. The scrutineers have reported that a quorum is present. The Secretary has confirmed that proper notice of the meeting has been given and that the materials for the meeting were provided to common shareholders, including the financial statements for 2022, which are hereby presented to the meeting, a copy of which the Secretary shall keep with the record of this meeting. With that, I now declare the meeting duly called and properly constituted for the transaction of business. We have received the scrutineers' report on the number of shares represented at this meeting. Mr. Secretary, could you please read the report?

Madam Chair, the scrutineers have provided their preliminary report. There are present at the meeting or represented by proxy more than 127 million shares of the company. This represents over 46% of the outstanding shares. The final report will be kept on file with the record of this meeting.

Thank you, Mr. Secretary. We will now move to the items requiring shareholder approval, and I will explain the voting procedure. The mail out to shareholders provided notice that 5 items would be placed before this meeting for approval. Most shareholders submitted their votes by proxy in advance of this meeting. As mentioned, this meeting is fully virtual, and registered shareholders and duly appointed proxy holders can vote online. If you have already voted by proxy, your vote has been received by the scrutineers, and there is no need to vote online during the meeting. You can vote online by making your selection from the options shown on your screen. Confirmation of your voting choice will appear on the screen. You can change your votes until the end of the voting period by selecting another choice. If you are a registered shareholder or a proxy holder and you have a question on the motions for shareholder approval, please submit it online via the Lumi platform. If your question relates to a matter other than the motions for approval, please wait until the time provided for shareholder questions following the formal business of the meeting. As I mentioned, there are 5 items for approval at today's meeting. I will ask the Secretary and Chief Financial Officer to move and second the motions. The 5 items for approval will appear on your screen. They are: the election of directors, the appointment of auditors, authorization for the directors to establish the auditors' fees and advisory vote on executive compensation and an amendment to the company's senior management stock option plan. I now declare the polls open on all items. I would ask the Secretary to make motions regarding these 5 items. Mr. Secretary.

Madam Chair, I am a shareholder, and I move that: one, each of the nominees as set out on Pages 17 to 27 of the information circular be elected as directors of the company to hold office until the next Annual Meeting or until their successor is elected or appointed; two, Ernst & Young LLP, chartered accountants, be appointed auditors of the company to hold office until the close of the next Annual Meeting of Shareholders or until their successors are appointed; three, the directors of the company be authorized to establish the auditor's fee for the current year in such amounts as they may, in their discretion, determine; four, the resolution as set out on Page 15 of the information circular regarding the company's approach to executive compensation is approved; five, the resolution set forth in Appendix B of the information circular regarding approval of an amendment to the company's senior management stock option plan is approved.

Thank you, Steve. I would now ask Greg Blunden, our Chief Financial Officer, to second these 5 motions.

Madam Chair, I am a shareholder, and I second all 5 motions.

Thank you, Greg. Are there any questions from registered shareholders or proxy holders relating to these motions? I remind everyone, this is not the general question-and-answer period. That session will follow the formal business of the meeting and Scott's remarks.

Madam Chair, there are no questions related to the motions.

Thank you, Dina. As a reminder, voting is open, and the motions and voting options are displayed. If you are voting online, please remember to scroll down the page to ensure you vote on all the motions. We will take a short pause to allow for the voting, and I will announce when the polls are closed. [Voting]

Thank you. The polls are now closed. While the scrutineers are tabulating the votes, Emera's President and Chief Executive Officer, Scott Balfour, will provide some remarks.

Thank you, Madam Chair. And on behalf of the entire Emera team, thank you to everyone joining us for today. As Jackie said, our focus continues to be on leading a responsible and balanced energy transition across our operations. We're making the investments needed to reduce the carbon intensity of the energy we deliver, and doing so in a way that ensures the continued reliability and resiliency of the grid. We know that energy must always be available when customers need it and that the transition must be paced and planned in a way that is mindful of the impact of costs for customers. In doing this, we naturally continue working towards achieving our climate commitment goals and our vision of a net zero by 2050. We're on track to achieve our next goal, a 55% reduction in CO2 emissions across Emera by 2025 compared to 2005 levels. In 2022, we achieved a 41% overall reduction in CO2 emissions compared to 2005 levels. At the same time, renewable energy increased from 4% to 16% of the generation mix across our portfolio. This progress is largely due to investments we've made in cleaner energy, including solar in Florida and the Maritime Link in Nova Scotia. We're proud of our role as leaders in the energy transition and of our progress to date. But we also know there is much more work to do. Government climate policy in many of our jurisdictions is ambitious. And utilities across North America, including those we own, must work to achieve these ambitious targets in very short time frames. Of course, none of what we're achieving on our journey to clean energy would be possible without our teams. In 2022, the Tampa Electric team completed the Big Bend modernization project safely, on time and under budget. This project has reduced emissions by accelerating the retirement and replacement of coal-based generating facilities, enabling us to deliver cleaner energy to customers and saving $700 million in energy costs over its 30-year lifespan. Tampa Electric also saw a significant milestone in their solar program. We now have more than 1,000 megawatts of solar in service in Florida, with plans to install another 239 megawatts by the end of the year. Since acquiring Tampa Electric, we've increased the amount of solar within the company's generation capacity from effectively 0% to an anticipated 22% by the end of this year. Also in Florida, the team at Peoples Gas recently announced the completion of their renewable natural gas facility at Alliance Dairies. The project is part of our commitment to reducing emissions within our regulated gas utilities and is expected to produce enough renewable gas to serve over 4,000 homes annually. In Nova Scotia, more than 1 million megawatt hours of clean, cost-effective hydro energy from Newfoundland and Labrador have been delivered across the Maritime Link so far, displacing around 150,000 tons of coal. I'm pleased to say with increased and stable flows across the link this year, that 40% of Nova Scotia's electricity has come from renewable sources year-to-date in 2023. We intend to keep building on our progress across Emera with our $8 billion to $9 billion capital plan through 2025, focusing on cleaner energy and reliability initiatives for the direct benefit of customers. Innovation and new technologies will play an important role in our ability to achieve carbon reduction targets. We're exploring a variety of emerging technologies, including battery storage, smart chargers, carbon capture and microgrids. We're continuing to test and enhance our BlockEnergy microgrid solution through residential pilot projects and a test facility, with a second pilot expected to be completed later this year. Across our operations, we're pleased to see federal government policies designed to accelerate the clean energy transition while helping to reduce cost impacts for customers. Our teams are looking at opportunities to leverage these policies such as the Inflation Reduction Act in the U.S. and Canada's Clean Electricity Investment Tax Credit for the benefit of our customers. At Emera, we've been making strategic investments along our clean energy journey for over 2 decades. These investments, centered on delivering value for our customers, have also created value for our shareholders. Last year, we successfully executed a $2.6 billion capital plan focused on cleaner and more reliable energy. We reported $850 million in adjusted net income and adjusted earnings per share of $3.20. Excluding the impact of a litigation award received in the fourth quarter, our adjusted annual earnings per share in 2022 were up 8% over 2021. In 2022, we also raised our dividend by 4%, and we're committed to delivering on our 4% to 5% dividend growth target through 2025. This is a continuation of the solid dividend growth we've provided over the long term, with 16 successive years of dividend increases with an average annual increase of 5.4% since the year 2000. And 2023 is off to a strong start. Earlier this month, we released our first quarter results for 2023 with $0.99 of adjusted earnings per share, an 8% increase year-over-year as well as a 36% year-over-year increase in operating cash flow before working capital. Our 2022 Sustainability Report has just been released and is now available on our website. Our commitments to making the environment cleaner, supporting our teams and communities and running our businesses well are foundational to who we are, and they're integrated into our operations and our culture. Creating and maintaining a strong, diverse and inclusive team is an essential part of guiding the complex transition to a clean energy future. We continue to advance initiatives to foster diversity, equity and inclusion across Emera, including finding ways to support our communities as they become more inclusive. In 2022 alone, we invested more than $2 million through Emera's diversity, equity and inclusion fund, part of a total $18 million invested in community-based initiatives across our operations last year. Our teams are deeply committed to fostering a strong safety culture as we work towards an Emera where no one gets hurt. We're doing this by speaking up; by building programs focused on preventing serious injuries and fatalities; by continuously improving our safety programs; and by innovating to find better ways to protect our teams, customers and communities. In closing, I want to extend my sincere thanks to everyone on the Emera team, now more than 7,100 employees strong, including 2,400 right here in Nova Scotia. I also want to thank Emera's Board of Directors for your dedication, your guidance and your insight. Thank you to you, Jackie, as Chair, and to all the directors. Finally, to our shareholders, thank you for your continuing confidence in Emera.

Thank you, Scott. The Secretary advises me that the preliminary voting results have been received. Mr. Secretary?

Madam Chair, the scrutineers report that all 5 items voted upon at the meeting have received more than the number of votes required, and therefore, all items are passed. The final voting results will be posted online at www.sedar.com.

Thank you, Mr. Secretary. With these voting results, I now declare all 5 motions approved. With the formal business of the meeting now complete, and with the consent of the meeting, I now declare the meeting terminated.

We will proceed to the general question-and-answer period and take questions from registered shareholders and proxy holders. So that as many questions as possible can be answered, please be brief and concise and address only one topic per question. Questions on the same topic or otherwise related may be grouped or summarized and answered together. Dina, do we have any questions?

We do, Madam Chair. We've received the following question from a shareholder. It reads, how optimistic are you feeling about the clean transition and the 2030 time line?