Emera reported Q3/20 adj. EPS (f.d.) of $0.67 ($0.51 in Q3/19), above consensus of
$0.65 and our $0.62 estimate. The positive variance was due to the Other segment
(better trading/marketing) and Other Electric (Caribbean). EMA also initiated its 2023
capex budget, implying 7.5% rate base CAGR with potential upside to 8.5% including
development opportunities (vs. ~8% previously). The 4-5% dividend growth guidance
through 2022 (70-75% payout ratio) is unchanged.
Key Points
Florida Electric. Earnings of $175M ($153M in Q3/19) exceeded our $172M due to
favorable weather supported by higher AFUDC earnings as a result of the Big Bend
modernization and solar projects.
Canadian Electric. $35M of earnings ($33M in Q3/19) was below our $38M mainly due
to NSPI ($11M vs. our $14M) on lower commercial and industrial sales volumes due
to COVID-19 impact. EMA noted that it expects NSPI to earn at the lower end of the
allowed ROE range (8.75-9.25%).
Other Electric Utilities. $6M ($23M in Q3/19) was above our $1M despite COVID-19 and
Hurricane Dorian negatively impacting electricity sales.
Gas Utilities & Infrastructure. $20M ($25M in Q3/19) was in line with our $20M.
Other. -$70M (-$112M in Q3/19) was a better result than our -$77M, supported
by improved marketing and trading, and lower interest expense. EMA noted that
marketing/trading earnings could fall short of the annual US$15-30M normal run-rate
given low volatility in core geographies.
Initiates 2023 capex budget with rate base CAGR of 7.5-8.5%. EMA updated its
2021 (to $2,350M vs. $2,340M) and 2022 (to $2,690M vs. $2,260M) capex plans and
initiated a 2023 capex budget of $2,360M. This total base $7.4B capex investment
plan is consistent with the prior 2020-2022E $7.5B capex program and implies a ~7.5%
rate base CAGR (vs. ~8% previously). EMA also flagged additional opportunities under
development of: $170M in 2021, $440M in 2022, and $590M in 2023, which could boost
the growth to ~8.5%. The sources of funding for 2021-2023 will come from reinvested
cash flow (50-55%), new debt issuances (25-35%), and DRIP/ATM/hybrids (15-25%).