Emera Reports Q1 2016 Earnings

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Emera Reports Q1 2016 Earnings

by ahnationtalk on May 10, 2016294 Views

HALIFAX, Nova Scotia—- Emera (TSX:EMA) today reported results for the first quarter of 2016.

Reported Earnings (including after-tax mark-to-market impacts)

  • Reported net income in Q1 2016 was $44.3 million (versus $160.1 million in Q1 2015).
  • Reported earnings per share in Q1 2016 were $0.30 (versus $1.10 in Q1 2015).

Adjusted Earnings (excluding after-tax mark-to-market impacts)

  • Adjusted net income(1) in Q1 2016 was $120.2 million (versus $171.6 million in Q1 2015).
    • Further adjusted to exclude the $17.5 million in after-tax costs ($0.12 per common share) related to the pending acquisition of TECO Energy Inc. (TECO Energy), adjusted net income(1) was $137.7 million in Q1 2016 (versus $171.6 million in Q1 2015).
  • Adjusted earnings per share(1) in Q1 2016 were $0.81 (versus $1.18 in Q1 2015).
    • Further adjusted to exclude the impact of TECO Energy acquisition costs, adjusted earnings per share(1) were $0.93 in Q1 2016 (versus $1.18 in Q1 2015).
  • Included in Q1 2015 adjusted net income(1) is an $11.5 million after-tax gain ($0.08 per common share) on the sale of Northeast Wind Partnership II, LLC (NWP) in Q1 2015.

“Q1 2016 earnings were lower than last year due to TECO Energy acquisition costs, expected lower margins at the New England Gas plants compared to the outstanding results achieved last year, and the impact of a warmer winter this year,” said Chris Huskilson, President and CEO of Emera Inc. “The TECO Energy acquisition remains on track to close in mid-2016, and our integration planning efforts are proceeding very well.”

Consolidated Financial Review:

In Q1 2016, Emera affiliates in the northeastern United States and Atlantic Canada experienced less demand for electricity as a result of unseasonably warm weather. Specifically, NSPI, Emera Maine and Emera Energy’s New England Gas Generating Facilities results were affected. Significant changes in adjusted net income(1)(2) from Q1 2015 to Q1 2016 are outlined below:

Earnings Reconciliation Q1 2015 – Q1 2016 (in millions of $CAD)

Three months ended
March 31

Adjusted Net Income(1)(2) – Q1 2015 $ 171.6 $ 1.18
Emera Energy (largely due to New England Gas Generation Facilities)(3) ($17.0)
NSPI ($15.5)
2015 gain on the sale of NWP ($11.5)

Increased equity earnings from NSP Maritime Link Inc. and Labrador Island Link
Limited Partnership

$ 3.8
Other(3) $ 6.3
Adjusted Net Income(1)(2) – Q1 2016 (excluding the impact of TECO Energy Acquisition costs) $ 137.7 $ 0.93

(1)See “Non-GAAP Measures” noted below.
(2) Adjusted net income(1) excludes the effect of mark-to-market adjustments.
(3)These numbers include the impact of the strengthening USD.

Consolidated Financial Highlights (in millions of $CAD, except per share amounts)

Q1 2016 Q1 2015
Operating revenues $ 877.0 $ 888.5
Operating revenues (excluding mark-to-market impacts) $ 813.0 $ 920.4
Net income attributable to common shareholders $ 44.3 $ 160.1
Earnings per common share – basic $ 0.30 $ 1.10
After-tax mark-to-market gain (loss) ($75.9 ) ($11.5 )
Adjusted EBITDA(1)(2) $ 319.4 $ 384.2
Adjusted net income attributable to common shareholders(1)(2) $ 120.2 $ 171.6
Adjusted earnings per common share – basic(1)(2) $ 0.81 $ 1.18
Costs related to pending acquisition of TECO Energy ($0.12 )
Adjusted earnings per common share(1) excluding TECO Energy acquisition costs $ 0.93 $ 1.18
Other items affecting earnings per common share – basic:
Gain on sale of NWP investment $ 0.08
Effect of foreign currency translation (adjusted earnings per share(1))(3) $ 0.05 $ 0.08
Dividends per common share declared $ 0.4750 $ 0.3875
Total assets (as at March 31) $ 11,448.6 $ 10,211.5

Weighted average shares of common stock outstanding – basic (millions of shares for
the three months ended March 31)

148.7 144.9

(1)See “Non-GAAP Measures” noted below.
(2)Adjusted EBITDA(1), Adjusted net income(1) and Adjusted earnings per common share(1) exclude the effect of mark-to-market adjustments.
(3)Effect of foreign currency translation is calculated by multiplying the current period foreign denominated results by the change in the weighted average foreign exchange from the period prior.

Significant Items Affecting Earnings:

Q1 2016

After-tax mark-to-market adjustments reduced net income by $75.9 million or $0.51 per common share in Q1 2016 compared to $11.5 million or $0.08 per common share in Q1 2015. The increase in after-tax mark-to-market losses is primarily due to the $121.1 million effect of foreign currency translation on USD-denominated currency and foreign currency forward contracts related to the pending TECO Energy acquisition, the majority of which is a reversal of a mark-to-market gain recorded in 2015.

Acquisition related costs: Emera incurred acquisition and financing costs of $17.5 million after tax ($0.12 per common share) in Q1 2016.

Q1 2015

Sale of NWP equity investment: In Q1 2015, Emera completed the sale of its 49 per cent interest in NWP for $282.3 million. This sale resulted in an after-tax gain of $11.5 million ($0.08 per common share).

Consolidated Highlights

Operating revenues decreased 1.3 per cent in Q1 2016 to $877.0 million compared to Q1 2015. The decrease was primarily due to lower revenues at the New England Gas Generating Facilities and decreased electricity sales at NSPI due to the weather. The decrease was partially offset by mark-to-market changes, a stronger USD and higher marketing and trading margin.

Adjusted net income(1) decreased 30.0 per cent to $120.2 million in Q1 2016 compared to Q1 2015. The decrease was primarily due to the expected reduction in contributions from Emera Energy’s New England Gas Generating Facilities, the impact of weather at NSPI and Emera Maine, TECO Energy acquisition related costs and the gain on the sale of NWP in Q1 2015.

Cash flow from operations increased $61.0 million to $180.6 million for Q1 2016 compared to the same period last year. Cash from operations before changes in working capital decreased by $25.1 million in Q1 2016 primarily due to decreased margin at the New England Gas Generating Facilities and the payment of financing costs related to the pending acquisition of TECO Energy. Changes in working capital increased cash flows by $86.1 million primarily due to favourable changes in accounts receivable reflecting lower sales volume at NSPI and changes in inventory at the New England Gas Generating Facilities.

Segmented Results

Emera reports its results in six operating segments: Nova Scotia Power Inc., Emera Maine, Emera Caribbean, Pipelines, Emera Energy, and Corporate and Other.

Quarterly Segmented Results (in millions of $CAD, except per share amounts)

Adjusted Net Income(1)
Q1 2016 Q1 2015
Nova Scotia Power Inc. $ 52.5 $ 68.0
Emera Maine $ 9.3 $ 11.5
Emera Caribbean $ 9.8 $ 8.8
Pipelines(2) $ 9.7 $ 9.9
Emera Energy(2) $ 47.9 $ 76.4
Corporate and Other(2) $ (9.0) $ (3.0)
TOTAL $ 120.2 $ 171.6
Adjusted EPS (basic)(1) $ 0.81 $ 1.18

(1)See “Non-GAAP Measures” noted below.
(2)Adjusted net income(1) excludes after-tax mark-to-market loss in Pipelines, Emera Energy, and Corporate and Other of $75.9 million in Q1 2016 (Q1 2015, after-tax mark-to-market loss of $11.5 million).
Nova Scotia Power Inc.’s net income was $52.5 million in Q1 2016, a decrease of $15.5 million from Q1 2015. This decrease is primarily due to lower electricity sales as a result of unseasonably warmer weather in Q1 2016 compared to colder than normal weather in Q1 2015, and increased OM&G costs primarily due to storm impacts. NSPI earnings for the full year are expected to generally be consistent with prior years.

Emera Maine contributed $9.3 million to consolidated net income in Q1 2016, a reduction of $2.2 million compared to Q1 2015 net income of $11.5 million. The lower net income was primarily as a result of reduced load due to weather, reduced industrial load, increased storm costs and timing of capital expenditures, partially offset by increased rates, and the effect of a stronger USD. Emera Maine’s earnings for the full year are expected to generally be consistent with prior years.

Emera Caribbean’s net income increased 11.4 per cent to $9.8 million in Q1 2016. The higher net income in the quarter was primarily due to the effect of a stronger USD.

Pipelines’ net income, adjusted to exclude mark-to-market changes, decreased 2.0 per cent to $9.7 million in Q1 2016 (Q1 2015: $9.9 million).

Emera Energy’s net income, adjusted to exclude mark-to-market impacts, decreased $28.5 million to $47.9 million in Q1 2016. The decrease was primarily due to reduced contributions from the New England Gas Generating Facilities, mainly due to lower hedged and market power prices in 2016, and the gain on the sale of NWP in Q1 2015. These changes were partially offset by a stronger USD and increased marketing and trading margin.

Corporate and Other’s contribution to consolidated net income, adjusted to exclude mark-to-market changes, was a loss of $9.0 million in Q1 2016 (Q1 2015: $3.0 million loss). The increased quarter-over-quarter loss was primarily due to costs related to the pending TECO Energy acquisition partially offset by increased income from equity investments.

(1) Non-GAAP Measures

Emera uses financial measures that do not have standardized meaning under USGAAP and may not be comparable to similar measures presented by other entities. Emera calculates the non-GAAP measures by adjusting certain GAAP and non-GAAP measures for specific items the Company believes are significant, but not reflective of underlying operations in the period. Refer to the Non-GAAP Financial Measures section of our Management’s Discussion and Analysis (“MD&A”) for further discussion of these items.

Forward-Looking Information

This news release contains forward-looking information within the meaning of applicable securities laws. By its nature, forward-looking information requires Emera to make assumptions and is subject to inherent risks and uncertainties. These statements reflect Emera management’s current beliefs and are based on information currently available to Emera management. There is a risk that predictions, forecasts, conclusions and projections that constitute forward-looking information will not prove to be accurate, that Emera’s assumptions may not be correct and that actual results may differ materially from such forward-looking information. Additional detailed information about these assumptions, risks and uncertainties is included in Emera’s securities regulatory filings, including under the heading “Business Risks and Risk Management” in Emera’s annual Management’s Discussion and Analysis, and under the heading “Principal Risks and Uncertainties” in the notes to Emera’s annual and interim financial statements, which can be found on SEDAR at www.sedar.com.

Teleconference Call

The company will be hosting a teleconference Tuesday, May 10, 2016 at 11:00am Atlantic time (10:00am Toronto/Montreal/New York; 9:00am Winnipeg; 8:00am Calgary; 7:00am Vancouver) to discuss the Q1 2016 financial results.

Analysts and other interested parties in North America wanting to participate in the call should dial (888) 241-0394 at least 10 minutes prior to the start of the call. International participants wanting to participate should dial (647) 427-3413. No pass code is required. The teleconference will be recorded. If you are unable to join the teleconference live, you can dial for playback, toll-free at (855) 859-2056. The Conference ID is 92936268 (available until midnight, May 28, 2016).

The teleconference will also be webcast live at emera.com and available for playback for one year.

About Emera

Emera Inc. is a geographically diverse energy and services company headquartered in Halifax, Nova Scotia with approximately $11.5 billion in assets and 2015 revenues of $2.79 billion. The company invests in electricity generation, transmission and distribution, as well as gas transmission and utility energy services. Emera’s strategy is focused on the transformation of the electricity industry to cleaner generation and the delivery of that clean energy to market. Emera has investments throughout northeastern North America, and in four Caribbean countries. Emera continues to target having 75-85% of its adjusted earnings come from rate-regulated businesses. Emera’s common and preferred shares are listed on the Toronto Stock Exchange and trade respectively under the symbol EMA, EMA.PR.A, EMA.PR.B, EMA.PR.C, EMA.PR.E, and EMA.PR.F and instalment receipts are listed and trade under the symbol EMA.IR. Depositary receipts representing common shares of Emera are listed on the Barbados Stock Exchange under the symbol EMABDR. Additional Information can be accessed at www.emera.com or at www.sedar.com.

Emera
Scott LaFleur, 902-428-6375
Manager, Investor Relations

NT3

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