![]() The company intends to appeal the penalty caused by delays in commissioning and ongoing testing. Perhaps the straw that broke the Canadian side's back was also the provision for the $10 million in penalty pertaining to renewable energy standards, that Nova Scotia Power had to recognize in the quarter. While Tampa/Florida Electric and Canadian Electric enjoyed the boost from higher rate base, it was more than offset by higher operating and interest expenses. Let us review the recent numbers and elaborate on the reasons for our current sentiment. Our prior article was based on the Q3-2022 data. While it has not beaten the broader market, the stock has performed decently since then. We are issuing a Sell rating here and expect the combination of these headwinds to warrant a dividend freeze, large equity issuance and a move to 15X normalized earnings. That does give it some time, but we have to put our weight behind Moody's here and think the Baa3 (one step above junk) with negative outlook, is more representative of the risks. Some investors may assume that Emera has room considering that both Fitch and S&P are two notches above junk. We had a price target of $45 with an explanation in the conclusion to that piece. ![]() There was no way we would advocate buying this one for 18X earnings that it was trading at the time. Not shoddy at all when compared to its peers.Įstimated debt to EBITDA of 6.4X, capex plus dividend payout in excess of free cash flows, along with downgrades from credit agencies from stable to negative outlook (still investment grade) were reasons enough to place us in the bear camp the last time we covered this stock. At 69 cents/quarter and current price, the stock yields a little over 5%. ![]() The company already has 16 years of consecutive dividend increases, and expects to continue that trend at least for the next three. Emera expects that this capex endeavor will result in a 7%-8% rate base growth and 4%-5% dividend growth over the same time period. The focus on Florida is based on the customer growth trends seen in 2022 and to have the infrastructure to reliably meet the higher energy demands. The company has $40 billion in total assets and expects to spend another $8-$9 billion in capex over the next three years, with most of it concentrated in Florida. Ongoing capital expenditures or capex are not uncommon for utilities and Emera is no different. It owns and operates electric and gas assets in Canada, United States and the Caribbean, majority of which are regulated. Headquartered in Halifax, Nova Scotia, Emera Incorporated ( OTCPK:EMRAF ) ( TSX: EMA:CA ) is one such utility. Often, not all, but a significant portion of company's assets fall under the regulatory purview discussed above. Its not all sunshine and roses though, and we shall see that later in this piece. Often times this also enables the company to consistently increase dividends to its shareholders. This rate setting provides the utility visibility into future earnings and provides reliable cash flow which facilitates better planning. This portion of the rate is often called return on equity. Additionally, it includes a little somethin somethin which forms the return on investment for the utility and its shareholders. The rate zeroed upon compensates the utility for it the expenses (excluding interest and income taxes) it incurs to provide reliable service to its customers. When regulatory authorities determine the rate to be charged by a utility provider, that company is known as a cost-of-service rate-regulated utility. All values are in CAD unless noted otherwise.
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