Emera's CEO Hosts Annual General Meeting (Transcript)

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Emera Incorporated (OTCPK:EMRAF) Annual General Meeting Conference Call May 8, 2013 1:30 PM ET


John McLennan - Chairman

Christopher Huskilson - President and Chief Executive Officer

Stephen Aftanas - Corporate Secretary


Unidentified Company Representative

Ladies and gentleman, please welcome the Chair of the Board, John McLennan.

John McLennan

Thank you. Good afternoon, ladies and gentleman. Thank you for joining Emera's shareholders meeting. We are really truly delighted that you could join us here at the Emera Centre Northside. We want you to know that should there be a problem during our meeting, we do have medical care on-hand.

In case there is a need to exit the building in an emergency, I would like to point out there are a number of clearly marked exits throughout the facility. Please take a moment to note the exits around you. In the event of an emergency please proceed to the front entrance and Emera volunteers will direct you to the closets exit.

Our commitment to safety is very important to our businesses. In fact, it is at the forefront of everything we do. It shapes the behaviors of our employees at work and at home. And we're proud of the level of commitment to safety by all of our employees in all of our operations.

So for today's meeting, we have the technology to allow people to join by webcast and by telephone. So today, I would like to acknowledge that we have a number of people who have joined the meeting through this technology.

Throughout the meeting all participants joining us by telephone are in listen-only-mode. Instructions and commenting on a motion over the conference bridge will be provided when we get to the voting process. You can also comment on a motion by email at agm2013@emera.com.

Please ensure that you submit your comment on a motion, only when we are discussing that motion. Instructions on posing a question on bridge will be provided when we get to question-and-answer portion of the meeting. You may also forward your questions by email to agm2013@emera.com.

Now, before we proceed, I would like to ask everyone, who has a cell phone to turn it off, including me. So on stage with me this afternoon is Chris Huskilson, the President and Chief Executive Officer of Emera; and Stephen Aftanas, our Corporate Secretary.

Now, I'd like to take the opportunity to introduce the Emera leadership team and you can hold the applause till the end of this one. And they are all seated here in the front. So I'll start with Mr. Rob Bennett, our Chief Operating Officer; Mr. Scott Balfour, Executive Vice President and Chief Financial Officer; Nancy Tower, CEO of Emera Newfoundland and Labrador and Executive Vice President of Business Development; Barb Meens Thistle, Chief Human Resources Officer; Bruce Marchand, our Chief Legal Officer.

And we also have leaders from the operations, who are with us today. And I would like to take a moment just to introduce them as well. Mr. Bob Hanf, our newly appointed President and CEO of Nova Scotia Power; Gerry Chasse, President and COO of Bangor Hydro and Maine Public Service; Sarah MacDonald, a Cape Bretoner that we're welcoming home from the Caribbean, she is the President of our Emera Caribbean Limited; Judy Steele, another Cape Bretoner, President and COO of Emera Energy; Claudette Porter, another Cape Bretoner, President and COO of Emera Utility Services. I found a lot of this out when we all came up here. Rick Janega, another Cape Bretoner, President of Emera Newfoundland and Labrador. So now you can applaud for the team.

Now, I would like to introduce in addition to Chris and myself, the other director nominees, most of whom are here in the room today. In fact, I think they're all here today. The director nominees are Robert Briggs from Carrabassett Valley, Maine; Sylvia Chrominska from Toronto, Ontario; Allan Edgeworth from Calgary, Alberta; James Eisenhauer from Lunenburg, Nova Scotia; Lynn Loewen from Westmount, Quebec; Don Pether from Dundas, Ontario; Andrea Rosen from Toronto, Ontario; Richard Sergel from Wellesley, Massachusetts; and Jacqueline Sheppard from Calgary, Alberta. That is all as of the Emera Board of Directors. They need a big hand.

The meeting will now come to order. In accordance with the company's by laws, I will chair the meeting. Stephen Aftanas will act as Secretary of the meeting. Representatives of Computershare Trust, the company's registrar and transfer agent will act as scrutineers for this meeting.

They will report on shareholder attendance and will count the votes. The scrutineers have already reported that a quorum is present at this meeting. The secretary has confirmed to me that proper notice of the meeting has been given and that the materials for the meeting were mailed to common shareholders.

I now look declare, the meeting duly called and properly constituted for the transaction of business. So just before, we hear from our CFO on the financial performance for 2012 and the first quarter of 2013, I would just like to make a few remarks as Chairman of this company.

For me, it's a real honor to be the Chair of Emera and represent this Board of Directors that you have elected. I am also very pleased, because I'm a Cape Bretoner as well, that we're able to hold our AGM here in North Sydney at this marvelous facility.

Investing in the communities, where we live and work, remains a very key part of Emera's strategy. Through our involvement in facilities, like this Emera Centre Northside, we're helping to create value in the community, just as our overall business strategy is focused on creating value for our customers and our shareholders.

Our strategy is indeed working. We're creating value for customers in our core operations, which we continue to deliver to very high standards. We're creating value for shareholders by diversifying and growing our earnings and our portfolio, all things consistent with our strategic plans.

We're investing in various places in North America and the Caribbean, but our routes truly remain in Nova Scotia. We're investing in this province through projects that will decrease our reliance on fossil fuels and help us meet government requirements for renewable energy use.

The Maritime Link will play an important role in helping us achieve these goals. As well as transforming Nova Scotia from an energy held post to a central player in a regional power loop. My colleagues on the Board are central players in Emera's success. Through their work with Emera's management, they provide robust advice, governance, knowledge and leadership. I would specially like to thank them for the commitment they all make and the time they invest to be with us.

We're very pleased to welcome Lynn Loewen, newest member of our Board, who's just joining. She is the Chief Operating Officer of Minogue Medical Inc., prior to that she served as President of Expertech Network Installation Inc., and she's held financial leadership roles with Bell Canada Enterprises, as well as executive positions with Air Canada Jazz. Her business experience and financial acumen will definitely be an asset to your Board of Directors.

Now, I'd like to welcome Scott Balfour, Emera's Executive Vice President and Chief Financial Officer to provide his report.

Scott Balfour

Thank you, John, and good afternoon, everyone. I'll focus my remarks today on recapping some of Emera's financial successes in 2012, and then conclude with a short summary of our results for the first quarter of 2013, which we just released yesterday.

Emera delivered consolidated net income of $221 million in 2012 compared to $241 million in 2011. Both years included mark-to-market accounting adjustments and 2011 included a large accounting gain on an acquisition. Excluding those impacts, our 2012 adjusted net income was $231 million compared to $216 in 2011, representing a 7% increase over the prior year.

Adjusted earnings per share was $1.85, was 4% higher than that in 2011. Over the past five years, between 2007 and 2012, we delivered annualized growth in earnings per share of 8%, which exceeds our targeted rolling average of 4% to 6%.

Looking ahead, our average EPS growth of 4% to 6% to over three to five years remains intact with a strong core business and a robust portfolio of development projects in front of us. We believe that annualized growth in this range strikes an appropriate balance between driving growth and managing risk.

Delivering strong shareholder return is a key focus at Emera, and our performance on this measure demonstrates the strength of your company and the success of our strategy. As of March 31, 2013, Emera's five-year total returned to shareholders was 15.7% annualized.

This performance was among the highest in our sector and well ahead of the S&P/TSX cap utility index, an index that we benchmark ourselves against, which provided 5.6% over the same period. We similarly outperformed the utilities index over the past three and one year periods.

To show it another way, this performance graph compares Emera's cumulative total shareholder return with that of the TSX utilities index and the S&P/TSX composite index. The performance in here assumes making a single investment of $100 with dividends reinvested.

So you can see from this chart, that if you invested a $100 on December 31, 2007, you'd now have $197. Well, if you'd invested the same $100 in the TSX utilities index, you'd have about a $124 and only $104 if you'd invested in the TSX composite index. We're proud of these results and we're driven to continue to deliver results that outperform.

Since 2008, we've nearly doubled the value of your company, increasing its value by over $2.3 billion over this period. Today, Emera's market capitalization or the value of all of its common shares outstanding is approximately $4.8 billion. Similarly, Emera's total assets have increased 42% since 2008, reflecting a $7.5 billion asset base at the end of 2012.

Nova Scotia Power continues to be an important contributor to Emera. But as you can see from these charts, your company is about much more than Nova Scotia Power today. Fiver years ago NSPI made up about two-thirds of Emera's total asset base, but now Emera's other statements are increasingly as important, with NSPI representing only about half of our total asset base by the end of 2012.

On the earning side, you can see that Nova Scotia Power similarly makes up about half of Emera's earnings today compared to about three-quarters of our earnings five years ago. Overall, we're seeing real success in diversifying your company beyond Nova Scotia Power.

In September of 2012, we increased the dividend on Emera's common shares by $0.05 to $1.40 annualized. Emera's dividend has seen a compound annual growth rate of 8% over the last five years, similar to the growth in earnings per share over the same period. And looking ahead, we remain committed to increasing the dividend in line with earnings growth.

There continues to be strong take up on our dividend reinvestment program or DRIP. Today approximately 30% of Emera's common share dividends are being reinvested through participation in the DRIP. This program has become an important and cost effective element of our equity financing strategy. And it's also a vote of confidence from investors, who know us best. And so, thank you to all the shareholders, who are choosing to participate.

Emera continues to have very strong access to capital markets, and we continue to take advantage of opportunities to add attractive financings into our capital structure as we finance Emera's growth. We've raised just over $1.6 billion over the last two years, with what we see as very favorable terms and rates. In fact, Nova Scotia Power is $250 million medium-term note issue in the first quarter of 2012, represented the second lowest long-dated coupon in the history of the Canadian debt capital markets at that time at 4.15% for 30 years.

At the end of 2012, Emera's capital structure was comprised of 57% debt, 37% common equity and 6% preferred shares. We continue to target a 55% debt, 35% common equity and 10% preferred share composition for the business, as we believe today that that is the optimal capital structure. These percentages are of course not written in stone and will change over time, but they serve as a current guide posts in maintaining a strong balance sheet, while we finance our growth capital needs.

Emera continues to generate strong cash flow from operations with $398 million generated for the year ended December 31, 2012. These strong cash flows provide us with secured cash coverage on our dividend and will help fund a large portion of our capital plan.

Notably, at the end of 2012, NSPI made a special one-time contribution of $90 million to its pension plan. This contribution reduces NSPI's near-term pension costs, strengthened the funding position of the pension plan and created a one-time tax savings of $31 million, which will benefit Nova Scotia Power and its customers.

Emera's strong cash flow is of course important in financing, what is Emera's largest capital plan in its history. More than $5 billion is expected to be spent over the next five years. Of course, a large portion of this plan relates to our Maritime Link and Labrador-Island Link equity investments, where we'll be investing more than $800 million over the next five years.

Another large portion relates to the debt that we'll be raising to finance the Maritime Link, which excluding capitalized interest costs is another $1.1 billion over this period. The remaining $3 billion of our plan relates to investments in all our other subsidiaries. Primarily, these investments include renewable and reliability investments across our businesses and transmission investments, such as our proposed Northeast Energy Link Project.

Our capital plan for the next five years builds upon the success to date, and provides reason for optimism and confidence in the growth of Emera's future's earnings cash flow and dividend. Regulated businesses and assets with long-term contracts provide confidence in our cash flow and earnings growth targets. And while we have a lot of work ahead of us, we assure you that our future investments will be made with the same criteria that we've always maintained.

Turning now to the results of Emera's first quarter of 2013, which we released yesterday. When our Q1 results are normalized from mark-to-market accounting adjustments, adjusted net income in the first quarter of 2013 rose 41% to $115 million or $0.88 per share from $82 million or a $0.66 per share in the first quarter of last year. As you can see from this slide, all of our operating segments performed well this quarter.

Product services, renewables and other segment, saw the largest increase over last year. And this was primarily due to three factors. First, Emera Energy achieved an $8.5 million increased earnings from its natural gas marketing and trading operations. Just past winter, New England gas prices experienced significant volatility over a prolonged period.

Emera Energy used its in-depth experience and market knowledge to optimize its pipeline transportation portfolio to assist its clients through this period of volatility. Delivering strong margin contributions, while staying well within Emera's very tight risk parameters. We also realized an $18.1 million gain in the quarter, when we converted Algonquin subscription receipts into common shares of Algonquin Power. We now hold a 24.5% interest in Algonquin.

And finally, there was a $6.8 million contribution from our interest in Northeast Wind Partners as a result of settling all of its entitlements under various guarantee, warranty and performance obligations from one of its turbine suppliers. All-in-all, it was another good quarter providing us with a very solid start into 2013.

That's all for my financial review, and I'll now turn you back to your Chair. John?

John McLennan

Thank you, Scott. The secretary has received the scrutineer's report on the number of shares to be voted at today's meeting. Mr. Secretary, could you please read the report.

Stephen Aftanas

Yes, Mr. Chairman. The scrutineers have provided their preliminary report. They are present at the meeting and person represented by proxy over 50 million shares of the company. And this represents over 38% of the outstanding shares. And the final report will be kept on file with the record of this meeting.

John McLennan

Thank you, Stephen. We will now deal with the matters, which require shareholder approval and I will explain the voting procedure. The mailing to shareholders included the notice, that four matters would be placed before the meeting for approval. Most shareholders took advantage of internet, telephone voting or mailed their proxy in advanced.

Shareholders here in the room, who have not already voted and who want to vote at the meeting, were given a ballot by Computershare personnel at the registration desks today. Any shareholder in the room, who has not already voted and did not receive a ballot at the desk should raise your hand now, and we will give you a ballot. And the ballots look exactly like that. There's one right here. And no others, okay.

In order for your ballot to be valid and your vote counted, please on the ballot, mark whether you are a resident or a non-resident of Canada. Your ballot must be eligible and must indicate your voting intention, pertaining to each motion. If a box is not marked with your voting intention, your vote cannot be counted. The ballot will be collected after all motions have been presented to the meeting.

Shareholders in the room, who wish to comment on a motion, may do so by coming to one of the two micro phones at the front of the room here. For those of you on the conference call, our conference operator will provide direction for you on how to participate. For those of you on our webcast, please send your comment via email to agm2013@emera.com.

As said out in the information circular, the number of directors to be elected at this meeting is 11. May I have a motion to elect the persons listed in the information circular as directors?

Unidentified Company Representative

Mr. Chairman, my name is Brad George. I am a shareholder of the company. I move that the following be elected as directors of the company, until the next annual meeting or until their successors are elected or appointed.

Robert S. Briggs, Sylvia D. Chrominska, Allan L. Edgeworth, James D. Eisenhauer, Christopher G. Huskilson, B. Lynn Loewen, John T. McLennan, Donald A. Pether, Andrea S. Rosen, Richard P. Sergel, Jacqueline Sheppard.

John McLennan

Thank you, Brad. Is there a second for the motion?

Unidentified Company Representative

Mr. Chairman, my name is Archie McDonald. I am a shareholder of the company. And I second the motion.

John McLennan

Thank you, Archie. Brad is Nova Scotia Power's Senior Plant Manager at Lingan; and Archie McDonald, lives right here in Cape Breton. And would you believe that he is Sarah MacDonald's father. This motion appears as motion number one on the ballot. Is there any discussion from our shareholders here in the room? Is there any discussion from our shareholders on the conference call?


(Operator Instructions) I have no one on the phone lines.

John McLennan

Thank you. And finally, have we received any email comments on this motion?

Unidentified Company Representative

Mr. Chairman, there are no email comments on this motion.

John McLennan

Thank you. Please take a moment to mark your ballot for motion number one. The next motion is the appointment of auditors for the current year. The firm of Ernst & Young are the current auditors of the company. May I have a motion to appoint auditors for the current year?

Unidentified Company Representative

My name is David Deane, and I'm a shareholder of the company. I move that Ernst & Young chartered accounts be auditors of the company to hold office until the close of the next annual meeting of shareholders or until their successors are appointed.

John McLennan

Thank you, David. Is there a second for the motion?

Unidentified Company Representative

Mr. Chairman, my name is (Jason March). I'm a shareholder of the company. And I second this motion.

John McLennan

Thank you very much Jason. David is a Plant Engineer at the Point Aconi Generating Station. And Jason is the Senior Mechanical Supervisor at the Point Aconi Generating Station. This motion appears as motion number two on the ballot. Is there any discussion from our shareholders here in the room? Is there any discussion from our shareholders on the conference call?


I have no discussions on the lines from the phone call.

John McLennan

And finally, have we received any email comments on this motion?

Unidentified Company Representative

Mr. Chairman, there are no email comments on this motion.

John McLennan

Thank you very much. Next is the fee of the auditors for the current year. May I have a motion in this regard?

Unidentified Company Representative

Mr. Chairman, my name is (Ivan Lafond), and I am a shareholder of the company. I move that the directors of the company be authorized to establish the auditors' fee for the current year in such amounts as they may in their discretion determine.

John McLennan

Thank you, Evan. Merci. Is there a second here for the motion?

Unidentified Company Representative

Mr. Chairman, my name is (technical difficulty) proxyholder. And I second the motion.

John McLennan

Thank you, Rob. Evan is a Senior Electrical Engineer with the Eastern Service Territory. Rob is an Engineering Trainee with Nova Scotia Power's Sydney office. This motion appears as motion number three on the ballot. Is there any discussion from our shareholders here in the room? Is there any discussion from our shareholder on the conference call?


There is no discussion from the phone lines on the conference call.

John McLennan

And finally, have we received any email comments on this motion?

Unidentified Company Representative

Mr. Chairman, there are no email comments on this motion.

John McLennan

Thank you. Please take a moment to mark your ballot for motion number three. Next is the amendment to the company's employee common share purchase plan. May I have a motion in this regard?

Unidentified Company Representative

Mr. Chairman, my name is Blair George. I am a proxyholder. I move that the resolution set out on the ballot and on Page 64 (technical difficulty) information circular authorizing amendments to the employee common share purchase plan in the company is approved.

John McLennan

Is there a second here for the motion?

Unidentified Company Representative

Mr. Chairman, my name is (inaudible). I am a shareholder of the company. And I second the motion.

John McLennan

Thanks, John. Blair is the Control Supervisor at the Lingan Generating Station. John is a Business Systems Analyst with the Emera's IT Department. This motion appears as motion number four the ballot. Is there any discussion from our shareholders here in the room? Is there any discussion from shareholders on the conference call?


There is no discussion from the phone lines.

John McLennan

And finally, have we received any email comments on this motion?

Unidentified Company Representative

Mr. Chairman, there are no email comments on this motion.

John McLennan

Thank you very much. Please take a moment to mark your ballot for motion number four. Now, would you please pass your completed ballots to the end of the row. They will be collected and counted by Computershare, along with the votes submitted by proxy prior to the meeting. We're just going to wait a minute, just to allow the ballots to be collected.

Thank you. I would now ask Emera's President and Chief Executive Officer, Chris Huskilson, to come forward and say a few words.

Christopher Huskilson

Well, thank you, John, and good afternoon, everyone. Welcome to Emera's Annual General Meeting. Let me start by saying how proud I am that we're hosting this 2013 AGM here at the beautiful Emera Centre Northside. What a fabulous facility. I'd like to thank Leo Steele and the Board of Directors of the Northside Centre Society.

Leo and his team envisioned a new arena in 1995 and worked tirelessly ever since to make this beautiful Community Centre a reality. And also we'd like to thank Monique Cashin, General Manager of Emera Centre Northside, who has worked with our team to make today's event come together.

We're very proud to be partners to bring this facility to the people of North Sydney and the surrounding communities. It's important to Emera that we give back to the communities that have contributed to our success. Cape Breton as a whole has certainly been a great contributor to Emera and particularly to Nova Scotia Power.

Cape Breton has literally served as a powerhouse for Nova Scotia, at Point Aconi, Lingan, Point Tupper, Wreck Cove and even a while at Glace Bay. But beyond the coal, the hydro and the wind, beyond the boilers, turbines and generators, it's been the people of Cape Breton, who helped fuel our success.

Talented and innovative Cape Bretoners are working throughout Nova Scotia Power and Emera. Engineers, lawyers, project managers, accountants, trades people, you name a job and there is a Cape Bretoner doing it somewhere in the Emera family of companies. Even our Chair of the Board is proud Cape Bretoner as he said earlier.

For me personally, my family and I lived in Sydney River for about six years in the mid-1990s. It was a wonderful time for us all. And as someone, who grew up in small town Nova Scotia, but makes me most (technical difficulty) is the people.

As we've grown Emera, starting here in Nova Scotia and expanding throughout Atlantic Canada, Northeastern U.S. and the Caribbean, we've provided great jobs and opportunities for Nova Scotians, for Mainers, for Bohemians, Barbarians, and people who have grown up with our company. We've taken our talent and ingenuity and hard work and we've shown it to the world.

But Nova Scotia based companies aren't supposed to be able to do this, are they? Well, we have. We've taken a broken power plant in Massachusetts, a broken utility in the Bahamas, and we fixed them to the benefit of customers and shareholders. We've built wind farms throughout the region. We've built pipelines and we buy and sell energy on the North American market everyday. Yes, we can.

Based right here in Nova Scotia, we can and have done all these things and much, much more. We're providing our employees with some of the best jobs anywhere in the world. And Emera's growth as a family of companies is adding more great opportunities to new and existing employee's everyday.

Do you know what else we can do? I think we can be partners in one of most ambitious energy projects in Canadian history. I think we can work hand-in-hand with regional partners to harness the tremendous power of the Lower Churchill River. I think we can engineer and build a subsea link from Newfoundland to Cape Breton and deliver clean, renewable electricity to Nova Scotians at a stable, affordable price.

I know this is the right opportunity at the right time, and that Emera has the right team to do the job. If you can tell, I'm just a little bit excited about the Maritime Link. This historic project will change energy in Atlantic Canada forever. It's been a big part of my life for the past eight years now. But let me speak a little bit more broadly about our company and our strategic direction for a moment.

Our strategy remains substantially unchanged over the past number of years. It continues to deliver a success. Fundamentally, we're focused on growing shareholder value by finding energy solutions that provide value to our customers. The two go hand-in-hand. We can only achieve shareholder value by building value for our customers.

Our strategy has delivered an average total shareholder return of 15.7% per year over the past five years. Scott has already given you a great overview of our financial performance. So I won't go further. But I do want to say that there is considerable investment on our horizon.

With Maritime Link and other projects, Emera is executing the largest capital plan in our history. We expect to spend more than $5 billion over the next five years. We have a lot of work ahead of us. But I commit to you today, that each investment will be made with the same discipline and focus that's driven our success-to-date.

Our strategy is centered on the transformation of generation from higher (technical difficulty) to cleaner source of electricity. We also capitalized on unique opportunities to strategically link the various businesses together. Just as one example our investment in the Bayside power plant in New Brunswick created a unique opportunity for Emera to invest in the Labrador-Island Link. This is because Bayside has access to transmission capacity through southern New Brunswick, where Nalcor needs to move that energy (technical difficulty) interest we've created a great investment for both of us.

Creating shareholder value by doing the right thing for customers, and the right thing for the environment, this is a simple durable strategy. And it drives our success. Speaking of Emera's success, I just want you to see some of the success that our employees are creating. So let's watch the video.

Christopher Huskilson

Well, thank you Rob and to the whole team. In fact, I am very proud of the results of all the teams work. As you can see we have strong leaders at Emera. And that's important, because strategy alone does not create success. The people who implement strategy create the success, not just at the executive level, but at every level of the company, form the boardroom to the customer doorstep. I want to offer my heartfelt thanks to the 3,400 members of the Emera family and their commitment to our business, for their personal dedication to the communities they serve and for the outstanding work that they do everyday.

We hire the best talent from the communities where we do business and from around the world. But I would like to think that once they join the Emera family they capture a little bit of Nova Scotia. I also want to thank the Board of Directors, their experience and engagement in our business is an essential ingredient of our success. And finally, I want to thank, you, our shareholders, the owners of Emera, for your continued support. You have enabled the success of Emera and all of those of us who have the pleasure of working in this great and growing company. Thank you.

John McLennan

Thank you, Chris, the Secretary advices me that the voting results have now been received. Mr. Secretary?

Stephen Aftanas

Mr. Chairman, the scrutineers report that all motions voted upon at the meeting have received more than the majority required. And therefore all motions are passed.

John McLennan

Thank you, Mr. Secretary. In light of the results of the voting, I now declare all motions carried. Ladies and gentlemen that concludes the formal business of the meeting. We will now take questions from shareholders. We're going to take questions initially from shareholders here in the room, then we will take questions from shareholders on the conference call and finally we will respond the questions from shareholders received by email at agm2013@emera.com.

We ask that shareholders with questions please give your full name. I would ask that each person limit their question to just a few minutes. So perhaps, Chris could come forward join me to answer shareholder questions. And of course, Chris will be supported by the business leaders as appropriate to answer the questions.

Are there any questions, which any shareholder would like to raise at this time? I think we're going to have a question over here at microphone number one.

Question-and-Answer Session

Unidentified Company Representative

My name is (Ralph Pick) and I am a shareholder in Emera. This year mainly my statement or comments with one little question at the end. I feel our executives are doing a good job. They are doing a good job for us, doing a good job for the others. However, I feel that you're being a bit overpaid maybe. However, I suggested in a letter to the editor that the President of Nova Scotia Power would have to work for seven years to earn as much as Sydney Crosby earns in 10 months, and I was taking the task by that that Crosby is worth every saying.

Anyway I disagree with that, but when I see CEOs and others receiving compensations every year, and amounts that are more than I never made in my life and most of the rest of us well in the year, it hurts. Compared to the banks and many of the other companies of similar or lesser size than Emera, perhaps you are underpaid, but who needs over $3 million a year to survive.

I often attempt to defend your compensation pay, these are the good fellows I have coffee with, but you fellows aren't helping me. Anyway, the increases that you get, because all they see and me too is that your compensation goes and our power bills go up. I realize that it's not your compensation that puts our power bills up very much, but that's just another thing.

I would like to be able to see compensation reports in the paper that would say that you didn't receive any increases this year, however, I doubt if the news people will report it because that would make good news as you note from the comments that I made last year, there was about 10 seconds worth it made the news and nothing else. And that sometimes makes me even wonder a bit about the coverage of question period in parliament and in the provincial government.

And one other thing I got here too is that I wonder how many shareholders realize that as they bought shares in Nova Scotia Power when they first became available, I think in 1992 that those shares are now are three-and-a-half times as much as they were then and the actual return on those today is 14%. And you can't find that much of anywhere else.

Now my question is this, the link between Nova Scotia and/or between Cape Breton and Newfoundland, is there going to be more than one cable, and if so how far apart will it be so that we wouldn't necessarily lose all shoot match at once. That's my question.

Christopher Huskilson

So relative to the Maritime Link, there will be two cables between here and the shore in Newfoundland. There will be some separation. I think that's part of what we're trying to figure out at this point as exactly how much separation will be there, but because of the fact there will be grounding sites as well at both sites, they will actually end up having complete redundancy. So in fact the 250 megawatts that any one cable can carry will be redundant. So we'll have full back.

In fact, if you go all the way back to the Muskrat facility itself. You would actually find that there is a substantial amount of redundancy all the way back to Muskrat. So it will be a very reliable supply of electricity, but as we all know it's in front of the Nova Scotia, you told interview Board right now. The decision is being made. And we're working hard to make sure that Nova Scotians have the information they need to be able to make this very important decision.

John McLennan

Thank you, Chris. And I want to reiterate that as a Chairman I'm very proud that this is a Nova Scotia based company that has done very well.

Christopher Huskilson

Thank you, Ralph. Ralph, I want to thank you for your comments and I want to thank you for your question, I think I would like to ask Mr. Allan Edgeworth, who is the Chairman of our compensation committee, just to make a comment on your comments about our compensation. So this is at the end of a lot of hard work to figure out exactly what compensation should be, so Mr. Edgeworth.

Allan Edgeworth

Thank you very much Ralph. And that's a first today. We've had not a question from the floor, but a question from the Chairman. But I think Ralph, you and I will have to go for coffee one day and I can explain in more detail. I Chair the compensation committee at Emera. And we take compensation very seriously. And I think what you and all the shareholders recognize when you looked at the five year performance of the company and the number of the executives in our various business units, the leaders of the company, our Emera enterprise is changing.

And we're not only competing for capital throughout North America, but we're competing for people as well. And I am a shareholder of Emera and what we really strive to do is want to provide competitive market rates and we do that through a number of different processes by utilizing recognized companies like Mercer and Towers Watson, who go out and compare executives at similar size companies both utilities and other companies, not just here in Maritimes, but elsewhere across the country.

And as I explained last year at the AGM, our target is to pay at the median. And I think all the data that our committee and we've reported and shared with Board is that we're paying at the median. And also for all our executives we have 50% to 70% of their pay is at risk. And it's based on performance and it's tied to adding shareholder value and financial metrics and in the case of the various utilities, safety and customer services and so on.

So we have a rigorous process and I hear this quite a bit about compensation, but it is very important. You would not have achieved the value as a shareholder without proper leadership in the company. I'm not a Cape Bretoner, I am from away, but I can tell you that as an independent Director, I'm very proud of Emera and the leadership and the team. I think they've added lot of value for shareholders. They're paid fairly on a competitive basis and we must do that in the reality of the business where all that we live in today.

And we'll have coffee sometime and thought I could even share some more thoughts with you. But for other shareholders as well that we've made a real effort in our Management Information Circular to provide very thorough documentation on our processes, the companies we compare ourselves with and the targets that we set each year on our performance. So I would encourage you to have a look at that. Thank you very much.

Stephen Aftanas

Are there any other questions from shareholders in the room? We have a question, coming to microphone number one.

Unidentified Company Representative

(Eric MacDonald) and I am recently retired employee of Nova Scotia Power for 37 years and very proud of that fact, and also proud to be Cape Bretoner. The event, the Maritime Link coming here and how it's going to affect our total generation perhaps in the province? And how will this affect the employment, especially here in Cape Breton, because that's a main concern.

And what hear is with the Link coming perhaps that will either demise at Lingan and a lot of good paying jobs. And I know we employ a lot of Cape Bretoners throughout the Emera companies, and we like to keep the shoe in home and keep them working here and good jobs and help develop this area and keep developing facilities like this that people can be here to use. So that's my question.

Christopher Huskilson

Well, actually very nice to see you again, (Eric) and hopefully you're happily retired. Well again, I think the Maritime Link project is a very important project for the province. And one, that actually creates a new world for energy and electricity in Atlantic Canada. It will bring clean energy into this market and ultimately if we use this product to displace what otherwise might be generated here by something like natural gas, I mean, that's the alternative really.

If we don't bring clean hydro into market in Nova Scotia, then we will have to burn natural gas and supplement with some other things like a bit of wind. If that's the approach that we take, thing you have to realize about natural gas is it produces carbon dioxide as well. And so the more natural gas you burnt, the more carbon dioxide would be produced by that fuel, and therefore the less coal we can burn in our existing facilities.

So in fact, what you'd find is that having completely clean energy coming from the hydro system and coming across the Maritime Link will allow us to keep our existing facilities going longer and will allow us too basically to maximize the use of our existing facilities. So that will good both for customers, because it will keep investments that we have continuing to go and it will good for the environment as well, because we'll able to maximize the overall value and the balance that we have. So that's really the balance that we see.

Another thing that's very important to note about not just the Maritime Link, but how CO2 emissions are evolving, basically in Nova Scotia, but in Canada as a whole. Nova Scotia government has negotiated with the federal government, what's called an equivalency agreement. And that equivalency agreement is allowing us to essentially put a cap on CO2, but not necessarily take those generating stations out of service.

And so what that will actually allow us to do is to meet all the obligations that we have to the federal rules, but to do at our way as opposed to do it just simply by taking the units off when the get a certain age. That will also allow us to optimize the use of the existing infrastructure that we have. And it will also provide us with a backup to the Maritime Link.

So when you put that whole equation together what we find is, first of all, the Maritime Link and the Lower Churchill project give us the lowest long-term cost for electricity in Nova Scotia. And at the same time, it let's us use the existing infrastructure in a much more effective and efficient way. And in combination with the equivalency agreement, we're able to decide over time, how we reduce carbon dioxide emissions under that cap. So it actually allows the best of both worlds, in fact.

John McLennan

Thank you, Chris. Are there any other questions from any shareholders in the room? Not seeing any. I'd like to move to questions from our conference call. Conference operator, do we have any questions from shareholders participating by telephone?


(Operator Instructions) I have no questions from the phone lines.

John McLennan

Thank you, operator. And lastly have we received any email questions from shareholders.

Unidentified Company Representative

Mr. Chairman, we do have one email question. This question is from shareholder (Ken Prush) and he is looking for an update on Fundy tidal power?

John McLennan

Christopher, do you want to handle that? Do you want to handle it or?

Christopher Huskilson

Yes, I'll be happy to unless (Nancy) would like too. Well, Fundy tidal power continues to be a great opportunity for the province. And Emera and Nova Scotia Power continue to be very much engaged in the tidal power opportunity. First of all, I would say, that it's an emerging technology, not a mature technology. It's one that continues to need some development. And so we see it as part of our future, but it's not something that we're going to see actually happening right away.

As everyone knows, we participated in putting a machine in the water couple of years ago. We learned a lot from that exercise and in fact that what those learning's have now gone back to OpenHydro, who was the partner that we had on the technology side and they are in the process of creating a new machine that we'll be able to work in this environment, to work in the Fundy environment.

And so when we look at how this is emerging, we see the opportunity to begin to take those next steps as the technology providers begin to provide us with the various options that they believe will work in the Bay of Fundy. In the meantime, there is still a lot of work to do. There is work to do with things like the community projects that are going on in tidal. There are small projects that can be done around the province.

There are some great opportunities in some emerging technologies in a much, much smaller scale. And so we see that those particular opportunities will get developed. I also want to circle back to the Maritime Link and the Lower Churchill connection as well, because one of the things that you'll find about where we are today in renewable development in Nova Scotia is from an intermittent or variable supply, which wind and tidal will both be.

We're pretty much at our limit with the amount of wind that has been or is going to be added in the next little while. Maritime Link however, will allow us to add more clean energy, done right here at Nova Scotia, because it's going to provide us a new connection to the rest of North America, as going to allow us to use the hydro in Newfoundland to help to balance those intermittent resources.

So in fact, again, Maritime Link is an enabler of more investment in Nova Scotia in renewables. And quite specifically, if we had a large tidal project available to us today, we would not be able to do it, because the interconnections and the connections to the rest of world would not be strong enough.

But with the Maritime Link, we will be able to do a project of scale in the Bay of Fundy and in the tidal estuaries around the province. And so it also becomes an enabler to that future investment and future development. So Emera is going to continue to be there working on tidal, but it is something that it's a little way often the distance.

John McLennan

Thank you, Chris. Would there be any other question via email.

Unidentified Company Representative

Mr. Chairman, there are no further email questions from shareholders.

John McLennan

Thank you, very, very much indeed. And I would very much like to thank all of you for coming today all those shareholders. It has been a real pleasure to be back here in Cape Breton, I can tell you. So following the National Anthem you are welcome to join us for refreshments and a chat with your fellow shareholders, up on the second level. Stares are located to the left as you exit the arena. Emera volunteers in the blue shirts will direct you upstairs. An alleviator is also available in the lobby, should you require assistance. Please let one of our volunteers know, and they would be happy to escort you. I would now ask for you to stand for the National Anthem.

Thank you, very much, ladies and gentlemen. That concludes our meeting.

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