DBRS Confirms Emera Inc. at BBB (high) and Pfd-3 (high), Stable

DBRS has today confirmed the Issuer Rating, Medium-Term Notes and Cumulative Preferred Shares ratings of Emera Inc. (Emera or the Company) at BBB (high), BBB (high) and Pfd-3 (high), respectively, all with Stable trends. The ratings reflect Emera’s strong portfolio of regulated businesses operating in a reasonable regulatory environment and the stability of its primary subsidiary, Nova Scotia Power Inc. (rated A (low)), which offsets the relatively lower credit quality of Emera’s other subsidiaries and investments. When the Maritime Link Project (Maritime Link) is completed (expected in 2017), and assuming there are no material cost overruns, it will be viewed as a modest credit positive.

The Company’s business risk profile is viewed as good, as Emera’s earnings and cash flow are largely generated by its relatively low-risk regulated subsidiaries (regulated subsidiaries accounted for over 90% of consolidated net income in 2012). Over the medium to long term, Emera’s regulated earnings and cash flow are expected to grow significantly once the Maritime Link is completed (pending approval from the Nova Scotia Utility and Review Board).

DBRS assesses Emera’s financial profile based on a non-consolidated basis. On December 14, 2012, DBRS changed the trend on Emera to Stable from Negative to reflect DBRS’s expectations that Emera will continue to reduce its non-consolidated debt-to-capital ratio to below 30% by 2015 to be in line with its rating category. Emera is currently on track to deleverage its non-consolidated balance sheet as reflected by (1) a $250 million preferred shares offering in June 2012 and (2) an equity offering of approximately $200 million in December 2012. The Company’s non-consolidated debt-to-capital ratio was 34.2% as of December 31, 2012, versus its peak of 41.5% in Q2 2012. Going forward, DBRS expects Emera to fund significant unforeseen costs or cash shortfalls (including potential cost overruns associated with the Maritime Link) with equity (including preferred shares and dividend re-investment proceeds) and to continue to deleverage its non-consolidated balance sheet to a level that is commensurate with the current BBB (high) rating.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology is Rating Companies in the North American Energy Utilities (Electric and Natural Gas) Industry (May 2011), which can be found on our website under Methodologies.