Emera to Acquire
TECO Energy
Building to a North
American Energy Leader
September 4, 2015
Forward- Looking Statement
.
Emera Incorporated (“Emera”) includes forward-looking information in these materials within the meaning of applicable securities laws in Canada (“forwardlooking information”), including forward-looking statements regarding, among other things, the proposed acquisition of TECO Energy; the transformation of
Emera to a North American energy leader; the acceleration of financial goals, including estimated dividend growth and dividend growth targets, earnings per
share and cash accretions, increases in regulated earnings and strengthening credit quality; new growth platforms and opportunities including expansion into
LDC business; scale and diversifications; future common and preferred equity, debt and other financings; and cash flows; target ROE; industry and geographic
trends and forecasts; pro forma capital investment profiles; stakeholder commitments; and timeliness to obtain regulatory approvals and acquisition closing.
The purpose of the forward-looking information is to provide management’s expectations regarding the contemplated acquisition and Emera’s future growth,
results of operations, performance, business prospects and opportunities, and it may not be appropriate for other purposes. All forward-looking information is
given pursuant to the safe harbour provisions of applicable Canadian securities legislation. The words “anticipates”, “believes”, “budgets”, “could”, “estimates”,
“expects”, “forecasts”, “intends”, “may”, “might”, “plans”, “projects”, “schedule”, “targets”, “should”, “will”, “would” and similar expressions are often intended to
identify forward-looking information, although not all forward-looking information contains these identifying words. The forward-looking information reflects
management’s current beliefs and is based on assumptions developed using information currently available to Emera’s management in respect of each of
Emera and the acquisition target. Although Emera believes that the forward-looking statements are based on information and assumptions which are current,
reasonable and complete, these statements are necessarily subject to a variety of risks and uncertainties including, but not limited to the ability to obtain
shareholder , regulatory and other approvals and to satisfy conditions to closing and the ability to realize the expected benefits of the acquisition. For additional
information on risk factors that have the potential to affect Emera and the contemplated acquisition, reference should be made to Emera’s continuous
disclosure materials filed from time to time with Canadian securities regulatory authorities, to the heading “Business Risks and Risk Management” in Emera’s
annual Management Discussion and Analysis, to the heading “Principal Risks and Uncertainties” in the notes to Emera’s annual and interim financial
statements. Except as required by law, Emera undertakes no obligation to revise or update any forward-looking information as a result of new information,
future events or otherwise after the date of this material. Nothing in this document should be construed as an offer or sale of securities of Emera or any other
person.
The pro forma information set forth in these materials should not be considered to be what the actual financial position or other results of operations would
have necessarily been had the TECO Energy acquisition and related financing activities been completed, as, at, or for the periods stated.
Emera uses financial measures regarding itself and TECO Energy in these materials, such as EBITDA, that do not have standardized meaning under U.S.
GAAP and may not be comparable to similar measures presented by other entities (“non-GAAP measures”). Emera calculates the non-GAAP measures by
adjusting certain U.S. GAAP measures for specific items that Emera believes are significant, but not reflective of underlying operations in the applicable period.
Further information relating to non-GAAP measures, are set out in Emera’s annual and interim Management Discussion and Analysis under the heading “NonGAAP Financial Measures”
Unless otherwise specified, all references to “$” or “CAD$ in this presentation are to Canadian dollars and all references to USD$ in this presentation are to
United States dollars..
2
Agenda
Patience Pays Off: Emera Finds Ideal Match
Chris Huskilson
President & CEO
Emera Inc.
TECO Overview
John Ramil
President & CEO
TECO Energy
Financing Overview
Combined Business Profile
Scott Balfour
Executive Vice President & CFO
Emera Inc.
North American Energy Leader
Stakeholders and Timeline
Closing Remarks
3
Chris Huskilson
President & CEO
Emera Inc.
“Our patient approach, and disciplined
investment criteria have resulted in a
pure-play regulated utility transaction
that we expect to be significantly
accretive for Emera’s shareholders and
one that advances our strategic
objectives. We have found our ideal
match in TECO”
Chris Huskilson, President & CEO,
Emera Inc.
4

Significantly accretive to
EPS: accretive in first full
year, growing to >10%
accretive by third full year1

Accelerates growth of
regulated earnings and
cash flows: Pro forma
earnings ~80% regulated

Enhances ability to support
8% dividend growth target
through 2019 and beyond

Expands regulatory
platform to include natural
gas distribution

Increases scale; making
Emera a top 20 North
American regulated utility.
1 Current management estimate based on certain assumptions, including, among others, a stable currency exchange environment; see “Forward
Looking Statements”
Excludes one-time transaction costs.
Patience Pays Off:
Emera Finds Ideal Match
5
Transaction of scale
•
Emera to acquire TECO for USD$27.55 per TECO common share (100%
cash consideration)
•
Equity purchase price of USD$6.5bn
•
•
Total enterprise value of USD$10.4bn, including assumed TECO debt
•
•
•
LTM enterprise value / EBITDA2 multiple of 11.6x
Acquisition includes TECO’s USD$1.7bn of NOLs and AMT (alternative minimum
tax) credits which provides significant accretion to Emera’s cash position
•
Tax-value adjusted LTM enterprise value / EBITDA2 multiple of 10.8x
•
Tax-value adjusted enterprise value / rate base3 multiple of 1.6x
Transaction supported by USD$6.5bn fully committed bridge loans
•
•
Bridges led by J.P. Morgan and Scotiabank
Expected acquisition close: Mid 2016
Unaffected price and 52-week high as of July 15, 2015, the last day prior to TECO’s announcement on July 16, 2015 that it was exploring
strategic alternatives; 2 LTM as of June 30, 2015;3 Includes jurisdictional rate base, assets earning a return through clauses and riders, and
construction work in progress. Note: Non-GAAP measures – Emera uses financial measures that do not have standardized meaning under U.S.
GAAP and may not be comparable to similar measures presented by other entities. See “Forward Looking Information”
1
6
48% premium to TECO’s unaffected share price and 25% to TECO’s
unaffected 52-week high1
Patience pays off
•
Growth track record has prepared Emera for such a transaction
• Organic rate base growth
• Cleaner affordable energy
• Transmission development
• Greening of generation; Fuel to asset strategy
• Balance sheet strength and cash flow growth
• Strong growth in profits
• Disciplined capital allocation and focus on cash flows
• Complementary, accretive, cash flow generating businesses: New England Gas Plants
and Trading & Marketing
• Organizational capacity – leadership development expanding
capability and depth
• Proven strategy
• Emera has a history of successfully executing acquisitions, including in the U.S.
• Driving growth from new platforms
7
Building to a North American energy leader
•
Acquisition of TECO accelerates achievement of financial goals
•
•
Earnings per share accretion expected in the first full year of operation (2017), growing to more
than 10% by the third full year (2019)1
•
Provides additional support to Emera’s 8% dividend growth target through 2019 and positions
Emera to extend the dividend growth target beyond 2019.
•
Increases Emera’s pro forma regulated earnings to greater than 80% and strengthens credit
profile.
Emera and TECO Energy alignment
•
Operational and strategic alignment
• Tampa Electric – regulated vertically integrated electric utility moving from coal to cleaner
energy sources
•
•
8
Experienced management teams with cultures focused on safety and customer service
Provides new growth platform
1
•
Operations concentrated in growth markets and constructive regulatory jurisdictions
•
Expansion into natural gas Local Distribution Companies (LDC) business
•
Further growth opportunities in expanded U.S. platform
Current management estimate based on certain assumptions, including a stable currency exchange environment
Building to a North American energy leader
•
•
9
Transaction achieves transformational scale without complexity
•
Tampa Electric operationally similar to Nova Scotia Power
•
One step transformation achieves scale and diversification
•
Pure-play regulated businesses
Geographic, regulatory and business mix diversification
•
Diversification provides stability to earnings and complementary seasonality
•
Peoples Gas and New Mexico Gas add scaled entry into natural gas LDC market
•
Diversifies Emera’s geographic platform into two new regions
TECO Overview
10
TECO – company profile
Utility service area
Tampa Electric
• Regulated electric
utility
• Serves >700,000
customers in West
Central Florida
• Owns and operates
four power plants
located in Florida
• Expected rate base
Peoples Gas
• Regulated gas
utility
• Largest gas utility
in Florida
• Serves >350,000
customers in all
major metropolitan
areas of the state
• 2014 annual gas
growth of 7%
through 2017
throughput of
~1.5bn therms
• Total generation
• ~12,000 pipeline
fleet capacity is
~4.7GW
New Mexico Gas
• Regulated gas
Florida
utility
• Largest gas utility
in New Mexico
• Serves >510,000
customers
• Expected rate base
New Mexico
Power plants
Transmission lines
Gas territory
Electric territory
growth of ~4%
• ~12,000 pipeline
Business mix1
miles
miles
New Mexico Gas
8%
New Mexico Gas
9%
Peoples
Gas
12%
New Mexico Gas
33%
Peoples
Gas
12%
• Expanding
generation into
renewables
• Divestiture of TECO Coal is expected prior to transaction close
Tampa
Electric
80%
Total net income2
USD$226mm
LTM net income and average customer count and as of June 30, 2015. Tampa electric and Peoples gas average rate base based on
earnings surveillance reports filed with FPSC in December 2014. NMGC rate base as of September 30, 2014 as disclosed by TECO;
Includes other income and corporate eliminations (not shown in pie graph).3Numbers do not add to 100% due to rounding
1
11
2
Peoples
Gas
22%
Tampa
Electric
45%
Total customers
~1,560,000
Tampa
Electric
80%
Total rate base
USD$6,078mm
Constructive regulatory jurisdictions
•
Tampa Electric and Peoples Gas regulated by Florida Public Service Commission; New
Mexico Gas regulated by New Mexico Public Regulation Commission
•
Allowed and achieved ROEs:
•
12
•
Tampa Electric is earning above midpoint 10.25% allowed ROE
•
Peoples Gas is earning above midpoint 10.75% allowed ROE
•
New Mexico Gas’ goal is to achieve allowed ROE of 10.00%
Constructive rate design with mechanisms in place to adjust rates on a timely basis
•
Tampa Electric has recovery clauses for fuel, purchased power and environmental costs;
September 2013 rate case settlement provided for USD$180mm of base rate increases
through 2017; Polk generation expected in-service date
•
Peoples Gas has recovery clauses for purchased gas and cast iron / bare steel
replacement; higher increased fixed monthly customer charge reduces volume
sensitivity
•
New Mexico Gas has a purchased gas adjustment clause
Positive economic outlook in Florida and New Mexico
GDP Growth
Florida
New Mexico
3.2%
2.5%
3.4%
2.7%
2.5%
2.5%
2015E
2016E
1.7%
1.0%
1.0%
2013
2014
0.6%
0.1%
‐0.6%
Unemployment rate
2011
2012
2013
2014
2015E
2016E
2011
2012
9.9%
8.0%
6.2%
2011
2012
2013
6.6%
6.4%
6.4%
6.1%
2011
2012
2013
2014
5.6%
2014
Strengthening economies with declining unemployment and strong GDP growth
13
Sources: U.S. Department of Commerce – Bureau of Economic Analysis; University of Central Florida; National Conference of State Legislatures;
University of New Mexico Bureau of Business & Economic Research
Financing Overview
14
Financing strategy supports existing credit profile
•
Transaction supported by USD$6.5bn fully committed bridge
loans
•
•
15
Bridges led by J.P. Morgan and Scotiabank
Long term acquisition financing expected to be structured to
maintain existing credit rating profile
•
Permanent financing of the transaction is expected to be obtained by one or more
placements of common equity, preferred equity and long term debt, the timing of
which is expected to be influenced by the regulatory approvals process and
subject to prevailing market conditions.
•
Most of the preferred share and debt financing targeted in USD$, providing
significant natural currency hedge.
Combined Business Profile
16
Pro forma Emera will be a top-20 North American
regulated utility
North American regulated utility industry: Ranked by asset size (USD$bn)
Pro forma Emera1
Standalone Emera
$119
$74
$62 $61
Emera becomes one of the largest
North American utility / power /
pipeline industry companies with
access to both the Canadian and
U.S. capital markets
$56
$51
$40
$38 $37
$29 $28
$26
$21
$20 $19
PF EMA
$16
Rank
17
1
2 3
4
5 6
7
$12
$11 $8
$10 $9 $9
$8 $7 $7
$6 $6 $5 $5 $5 $5 $5
$5 $5 $5 $5 $4 $4
$3 $3 $3 $3 $3
$2 $2
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
Assets as of Q2 2015 including goodwill based on purchase price.
Source: Public filings as of Q2 2015
Note: Includes integrated electric utilities and gas distribution companies
1
$15 $14$14
EMA
$23 $23
Expanded geographic and regulatory diversification
Pro forma regulatory snapshot
Pro forma asset map
Grand
Bahama
Power
Company
Florida
Grand
Bahama
Dominican
Republic
Barbados
Light &
Power Company, DOMLEC, Lucelec
Florida
New Mexico
Pipelines
Power plants
Maritime Link (ML) and Labrador Island Link (LIL) are equity accounted
Electric and Peoples gas average rate base based on earnings surveillance reports filed to
FPSC in December 2014. NMGC rate base as of September 30, 2014 as disclosed by TECO
1
18
Transmission lines
2 Tampa
Nova Scotia Power
Rate base
CAD$3.7bn
Allowed ROE
8.75% – 9.25%
Equity capitalization
37.5 – 40.0%
Emera Maine (Transmission / Distribution)
Rate base
CAD$400mm / CAD$300mm
Allowed ROE
10.57% – 11.74% / 9.55%
Equity capitalization
62.0% / 49.0%
Emera Caribbean
Rate Base
CAD$0.9bn
Allowed Return on Rate Base
10.0% –15.0%
Emera Newfoundland /Labrador Transmission (estimated 2017)1
Rate Base
~CAD$2.0bn
Allowed ROE
9.0% (ML) / 8.8% (LIL)
Equity capitalization
30.0% (ML) / 100.0% (LIL)
Tampa Electric
Rate base
~USD$4.8bn2
Allowed ROE
9.25% – 11.25%
Equity capitalization
54.0%
Peoples Gas
Rate base
USD$715mm2
Allowed ROE
9.75% – 11.75%
Equity capitalization
54.7%
New Mexico Gas
Rate base
USD$517mm2
Allowed ROE
10.0%
Equity capitalization
52.0%
Pro Forma 2,400,000 customers
Increased regulated business mix: Earnings and EBITDA1
Total segmented EBITDA (June 30, 2015 LTM)
Caribbean
9%
Pro forma 90% regulated EBITDA1
(June 30, 2015 LTM)
New Mexico
4%
Canada
27%
New England
34%
Florida
47%
Canada
56%
Pro Forma EBITDA1
U.S.$1.8bn (June 30, 2015 LTM)
New England
16%
Caribbean
4%
Total segmented earnings (June 30, 2015 LTM)
Pro forma 84% regulated earnings
(June 30, 2015 LTM)
NMGC
4%
ENL
6%
PGS
6%
NSPI
17%
NSPI
33%
Emera Energy
30%
Emera
Maine
13%
1Non-
Pipeline
9%
Tampa
Electric
38%
Emera
Caribbean
7%
GAAP Measures: Emera uses financial measures that do not have standardized meaning under US GAAP and may not be comparable to similar
measures presented by other entities. Numbers in chart may not add owing due to rounding.
Note: Emera segmented earnings %’s LTM ended June 30 2015, and are based on Net Income before corporate costs.
Net Income and EBITDA excludes TECO Coal, corporate and other;
19
Emera
Energy
16%
ENL
3%
Pipelines
5%
Emera Maine
7%
Emera
Caribbean
4%
Pro forma capital investment plan to drive growth
Pro forma capital expenditure profile (CAD$mm)1
• Total current expected capital investment of approximately
CAD$6.4bn from 2016-’19E
$4,234
• Additional opportunities expected given scale and scope of
pro forma Emera:
• Transmission development, gas LDC expansion, carbon
reduction investments, electric utility, gas pipeline, electric
transmission and competitive generation
$2,115
$1,963
$2,144
$909
$969
$2,119
$994
2015E
$1,235
2016E
2017-2019E
Emera
20
1
Includes debt-financed portion of Maritime Link
TECO
Energy
Committing to Local
Communities
21
Committing to local communities
•
•
•
22
Customers
•
Commitment to honor all stipulations in respect of 2014 TECO acquisition of New
Mexico Gas
•
Commitment to a high level of customer service and operational excellence
•
Continuing to invest in cleaner, reliable and affordable energy
Communities
•
Continued investment in Florida and New Mexico communities
•
Preservation of existing Florida and New Mexico headquarter locations
•
Local operating company board of directors in Florida and New Mexico
Employees
•
Commitment to TECO’s existing employees
•
Seek to retain existing management team and employees
•
Important company values alignment
Indicative timeline to obtain regulatory approvals and close
Q3 2015
Merger announcement
Initiate regulatory filings in
New Mexico and with U.S.
federal regulatory
agencies1
Q4 2015
Q1 2016
Mid 2016
TECO shareholder merger
approval
New Mexico and applicable U.S. federal regulatory approvals
File proxy statement
Develop and initiate transition implementation plans
Expected
transaction close
23
Note: Emera shareholder vote is not required
1 U.S. federal approval required from FERC; filings required under HSR and with CFIUS
Closing Remarks
24
Building to a North American energy leader
 Significantly accretive to ongoing Emera EPS
 Accelerates growth of regulated earnings and cash flows
 Enhances ability to support dividend growth target
 Expands regulatory platform to include natural gas distribution
 Significantly increases scale and improves credit profile
 Transaction is expected to drive benefits for shareholders,
customers, employees and the local communities
25
Appendix
26
Emera’s strategy
MARKET OPPORTUNITY:
Demand for cleaner affordable energy
EMERA STRATEGY:
Leverage the unique linkages and
adjacencies of Emera’s assets, capabilities
& relationships to create growth and
development opportunities
DRIVERS
FOCUS
 Environmental regs & standards
 Social & political demand
 Fuel-source diversification
 Energy independence & stability
 Renewables
 Transmission (renewables to market)
 Gas Generation and Transportation
 Utilities
STRATEGIC INITIATIVES:
Maritime Link
and Labrador
Island Link
27
New England
Transmission
New England
Gas
Generation
Gas supply in
Maritimes,
New England
& Caribbean
‘Fuel to assets’
projects
‘Greening’ of
generation
Focus on
customer
affordability
Emera today – regional energy leader
Regional energy leader in Northeast & Caribbean
5-Year average annualized total return (as at August 31, 2015)
Emera (CAD$)
16.3%
S&P 500 Utilities Sector (USD$)
11.0%
S&P/TSX Capped Utilities (CAD$)
6.0%
Emera’s strong dividend growth history
$2.40
$2.20
$2.00
$1.90
$1.80
$1.66
$1.60
$1.40
$1.20
$1.31
$1.36
$1.41
$1.48
$1.16
$1.00
10
28
(1) In
11
August 2015, Emera adopted an annual dividend growth target of 8% through 2019 and its Board of Directors approved a 19%
increase in its annual common share dividend from $1.60 to $1.90 per common share
12
13
14
15(1)
16E(1)