DBRS Places Emera Inc. Under Review with Developing Implications

DBRS has today placed Emera Inc.’s (Emera or the Company) Issuer Rating and related ratings Under Review with Developing Implications. This rating action follows the announcement of the Company’s acquisition of the Bridgeport Energy, Tiverton and Rumford gas-fired generation facilities (the Portfolio) from Capital Power L.P. (rated BBB; the Acquisition). The Acquisition, total value of approximately USD $541 million, is expected to close in the fourth quarter of 2013, subject to various approvals.

The Portfolio is located in Connecticut, Rhode Island and Maine (the U.S. Northeast region) and has approximately 1,050 MW of total non-contracted generation capacity. All output from the facilities is sold into the New England power market. This Acquisition would increase Emera’s installed capacity in New England, as well as the Company’s total generation assets.

Business Risk Profile – Modestly Negative
Based on its preliminary review, DBRS views the proposed acquisition as modestly negative with respect to Emera’s existing business risk profile. Upon completion of the Acquisition, this non-contracted portfolio would account for approximately 25% of Emera’s total generation capacity, exposing the Company to the currently low wholesale pricing environment.

Financial Risk Profile – Neutral to Negative
DBRS expects the Company to fund the Acquisition in a prudent manner, such that there would be minimal impact on its deconsolidated leverage. The Company had a deconsolidated debt-to-capital ratio of 34.2% as of December 31, 2012. As noted in DBRS’s press release dated December 14, 2012 (“DBRS Changes Trend on Emera Inc. to Stable from Negative”), the Stable trend reflects DBRS’s expectation that Emera will continue to reduce its non-consolidated debt-to-capital ratio, in the medium term, to below 30%, to be in line with its current rating category. Should Emera’s financing strategy deviate from the aforementioned leverage improvement, there could be negative rating implications.

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.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

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.