Emera Incorporated M&A announcement

Please go ahead. Thank you, Jenny, and good morning, everyone.

Thank you for joining us on such short notice. Earlier today, Emera and Canadian Utilities announced a definitive agreement to combine in a predominantly all-share transaction, creating a leading North American regulated utility company. Today's call will provide an overview of the strategic rationale for this merger and outline the approval process and next steps. Before we begin, I will remind everyone that today's discussion includes forward-looking information. Actual results may differ materially from those expressed or implied. Please review the cautionary language in today's news release, the accompanying investor presentation, and the company's public filings. We will also refer to non-GAAP financial measures and ratios. Definitions and reconciliations, where applicable, are included in the presentation and related disclosure materials. Unless otherwise stated, all financial information referenced is in CAD.

Joining me today are Scott Balfour, President and Chief Executive Officer of Emera, Bob Myles, Chief Executive Officer of Canadian Utilities, Jared Green, Chief Financial Officer at Emera, and Katie Patrick, Chief Financial Officer at ATCO and Canadian Utilities. We will not be doing a page turn of the accompanying deck, but rather Scott will begin with the strategic and financial rationale for the transaction. Bob will then discuss the Canadian Utilities perspective, including growth opportunities, continuity for customers and communities, and the benefits for employees and shareholders. Following Scott and Bob's remarks, Jared and Katie will join Scott and Bob in answering your questions. With that, I'll turn the call over to Scott.

Thank you, Dave, and good morning. Today is an important day, not only for Emera and Canadian Utilities, but for Canada's energy future. By bringing together two of Canada's leading utility and energy infrastructure companies, we are creating a Canadian champion with the scale, financial capacity and expertise to help power decades of economic growth. This transaction creates a stronger company, positioned to invest in the infrastructure needed to support electrification, industrial development, energy security, data centers, and the growing demand of customers across North America. At its core, this merger is about preparing for the next era of growth. Across North America, demand for electricity and natural gas is rising, driven by population growth, electrification, industrial investment, and the need for a more resilient energy system.

At the same time, utilities are being called upon to modernize aging infrastructure, strengthen resilience, and connect new sources of economic growth, and delivering these investments while keeping service affordable for customers. Meeting that challenge will require unprecedented levels of capital, expertise, and execution. Together, Emera and Canadian Utilities will create a top 20 North American utility and energy infrastructure company with an enterprise value of approximately CAD 72 billion, approximately CAD 45 billion of rate base, approximately 6 million customers across 12 regulated utilities, and approximately 95% of expected 2026 earnings coming from regulated operations. With approximately 80% of adjusted earnings generated in Florida and Alberta, and roughly 70% of the combined rate base invested in electric and natural gas transmission and distribution infrastructure, the combined company will be anchored in the essential networks that support economic growth and everyday life.

Importantly, this transaction brings together two of North America's most attractive growth markets. Florida remains a core growth engine for Emera, fueled by population growth and continued economic expansion. Alberta provides a similar and complementary platform with strong investment momentum, expanding industrial activity, a growing energy sector, and emerging demand from large load customers. Together, these jurisdictions offer a compelling foundation for long-term growth. Across North America, utilities are being called upon to make significant investments in transmission, distribution, and supporting infrastructure. We believe larger, financially stronger companies will be best positioned to deliver those investments while maintaining affordability and reliability. We also believe this transaction is important for Canada. As the demand for energy infrastructure accelerates, Canada needs companies with the scale and capabilities to compete for capital, attract talent, execute large projects, and support economic growth. The company we are creating today is designed to do exactly that.

A Canadian-headquartered champion with meaningful operations across North America and a long-term commitment to investing in the communities it serves. The question facing our industry is no longer whether investment is needed. The question is whether utilities can mobilize the capital, talent, technology, and partnerships required to deliver it at the pace customers and economies demand. The combined company will be well-positioned to answer that challenge with greater financial strength, broader access to capital, and an enhanced ability to invest in the infrastructure that powers growth and supports reliability. It will deepen our technical, operational, and regulatory capabilities, strengthen relationships throughout our supply chain, and improve our ability to execute an increasingly complex portfolio of projects. Just as importantly, scale allows us to learn from one another.

By sharing proven practices across safety, operations, cybersecurity, procurement, and major project delivery, we can build an even stronger utility platform while preserving the local accountability that is essential to serving customers well. This is worth underscoring. This transaction is not about centralizing local utility operations, because they won't be. Our utilities will remain locally governed and deeply connected to the customers, communities, and regulators they serve. What changes is the strength of the platform behind them. The company we're creating will be stronger, more balanced, and better positioned for long-term growth. Following the transaction, no single jurisdiction is expected to represent more than half of the combined rate base. Florida and Alberta will become the company's two largest jurisdictions, representing approximately 45% and 34%, respectively.

That gives us meaningful scale in two attractive growth markets while preserving the stability and predictability of a predominantly regulated business. Just as importantly, this combination enhances the quality of our growth profile. The combined company is expected to deliver high single-digit rate base growth of 7%-8% through 2030, supporting Emera's long-term 5%-7% adjusted earnings per share growth guidance and 1%-2% dividend growth target. In Florida, Tampa Electric has delivered approximately 2% annual growth since 2020 and is forecast to deliver more than 8% annual rate base growth through 2030. Peoples Gas has also benefited from strong market fundamentals, achieving approximately 4% annual customer growth over the same period. In Alberta, Canadian Utilities is positioned at the center of one of North America's most attractive infrastructure growth opportunities.

Its rate base is forecasted to grow from approximately CAD 15.1 billion in 2025 to CAD 21.4 billion by 2030, supported by a province that has grown its population by approximately 2.4% annually since 2020 and continues to attract investment in industry, energy development, and other emerging sources of demand. What excites us the most is that this is not simply a larger company. It's a stronger platform for long-term value creation with greater capacity to invest in critical infrastructure, supporting growing demand, and to deliver sustainable growth for shareholders. The transaction also strengthens the company's financial profile. It's structured principally as a share-for-share combination using the fixed exchange ratios outlined in today's materials. This structure minimizes financing execution risk while creating a larger, more diversified, regulated cash flow base. The result is a company with greater financial flexibility, enhanced access to capital, and a stronger foundation for future investment.

We expect the transaction to be accretive to earnings per share in the first full year following close and to improve credit rating thresholds, providing greater financial flexibility. We remain committed to disciplined allocation of capital and a strong dividend. Emera intends to maintain its current dividend policy and targeted dividend growth rate of 1%-2% while continuing to improve the payout ratio. Canadian Utilities are expected to benefit from the adoption of Emera's quarterly dividend, subject to the final transaction terms and closings. This transaction brings together two highly experienced leadership teams and reflects a shared commitment to long-term value creation. Under the proposed transaction, Canadian Utilities will become shareholders of the merged entity, which continues as Emera. ATCO shareholders will become both shareholders of Emera and the new ATCO entity.

Under the proposed transaction, Canadian Utilities will receive Emera voting shares based upon the fixed exchange ratio set out in today's materials. Following closing, Emera shareholders are expected to own approximately 60% of the combined company, and Canadian Utilities and ATCO shareholders combined will own the remaining approximately 40%. I will continue as President and Chief Executive Officer of the combined company, and Jared Green will continue as Chief Financial Officer. Bob Myles will become a senior executive at Emera and continue as the CEO of Canadian Utilities, reporting directly to me. Becky Penrice will also join the Emera leadership team as Executive Vice President, Corporate Transformation and Integration. Leadership across Canadian Utilities' operating companies will not change. The board of directors will reflect the strength of both organizations.

The combined company will have a 13-member board of directors, with six directors put forward by Canadian Utilities and seven directors from the current Emera board. Nancy Southern will serve as our Co-Chair alongside Emera's Chair, Karen Sheriff. Emera will continue to trade on the Toronto Stock Exchange and the New York Stock Exchange. Finally, the company will maintain a meaningful presence across its key jurisdictions. The combined company's public company headquarters will remain in Halifax. Canadian Utilities' corporate and operational headquarters will continue in Calgary with a continued presence in Edmonton and Perth. Emera's U.S. operations will continue to be headquartered in Tampa. That reflects an important principle of this transaction. We're building a stronger company with greater scale and capability while preserving the local leadership, expertise, and community connections that have made both organizations successful.