Emera (EMA) Q2 2024 earnings summary

Executive summary

• Announced major portfolio optimization actions, including the sale of New Mexico Gas and Labrador Island Link, a $500M US hybrid offering, and securitization of $117M unrecovered fuel costs, providing ~$2B in liquidity and reducing holding company debt by ~$1.3B.

• Achieved significant balance sheet improvements, including closing a $1.2B CAD Labrador Island Link transaction and announcing the sale of NMGC for $750M USD net proceeds, expected to close in late 2025.

• Adjusted dividend growth rate to align with 5%-7% EPS growth target, aiming for a steady improvement in payout ratio.

• Remain confident in medium-term 5%-7% EPS growth guidance despite a weak start to 2024.

• Focused investments in high-growth jurisdictions and ongoing capital plan execution, with strong operational performance and customer growth in Florida utilities.

Financial highlights

• Q2 2024 adjusted earnings: $151M and adjusted EPS: $0.53, down from $162M and $0.60 in Q2 2023; reported EPS: $0.45, up from $0.10, driven by LIL sale gain.

• Year-to-date adjusted earnings: $367M and adjusted EPS: $1.28, down from $430M and $1.58 in 2023; reported YTD EPS: $1.17, down from $2.17.

• Excluded $107M after-tax gain from Labrador Island Link sale from adjusted earnings (would have added $0.37 to EPS).

• Q2 2024 operating cash flow before working capital was $231M, up from $135M in Q2 2023; year-to-date operating cash flow: $1.2B, up 7% year-over-year.

• Segment contributions to adjusted EPS growth included Gas Utilities & Infrastructure, Florida Electric, and Canadian Electric.

Outlook and guidance

• Maintain 5%-7% medium-term EPS growth guidance and 1-2% dividend growth.

• $8.8B baseline capital investment plan through 2026, with 7-8% forecasted rate base growth through 2029.

• Expect payout ratio to approach 80% by 2027, with continued reduction thereafter.

• 2024 cash flow to debt metric expected in the 11.5%-13.5% range; pro forma for NMGC sale, 12%-13% for rating agencies.

• Confident in ability to grow EPS at targeted pace, supported by lower interest rates and recent debt repayments.