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Hello and welcome to Powering Sustainable Ideas. A new podcast series from RBC Capital Markets, where we interview the leaders and companies powering the sustainable future. I'm your host for this episode, Joe Coletti. Today, we're broadcasting from RBC's Global Energy, Power and Infrastructure Conference here in New York, and we'll be talking to Greg Blunden, CFO at Emera. Greg has a story background working across various aspects of Americas business, including corporate finance, business development, utility operations, customer service, renewable energy and regulatory policy.
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As a diversified energy company headquartered in Nova Scotia, Canada, the mayors business includes a portfolio of high quality utilities and has been committed to decarbonization for over two decades in an effort to secure future energy needs in key markets. In this episode, we'll explore America's sustainability priorities as well as their capital and funding plans. As his invests and orchestrates a decarbonized future across North America.
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Greg, it's great to have you on. Thanks, Joe. Pleasure to be here. So I want to give our audience a little bit better understanding about your company. You've been at America for over 20 years now, I understand. And I love we could start with you, maybe talk, giving a little bit of an overview, and also maybe sharing a little bit of background for yourself at the company.
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Well, thank you. And appreciate the opportunity to be here today. At its core, America is a regulated utility traded on the Toronto Stock Exchange. We're really four core utilities, two electric utilities and two natural gas utilities. The electric utilities being Nova Scotia Power vertically integrated electric utility, covering the province of Nova Scotia. Tampa Electric servicing, the greater Tampa area.
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That would be by far and away our largest, utility and two natural gas, distribution utilities, one in New Mexico servicing the Albuquerque and Santa Fe regions and People's Gas, which is the largest gas LDC in Florida. And combined, those four utilities represent about 90% of our earnings. And overall, 95% of earnings would be regulated. So when it comes to energy transition, we are in the middle of this transition in, both the United States and Canada and and hopefully can share some of those thoughts with you.
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Excellent. I, I'd like to get a little bit more, maybe about your own evolution into becoming CFO, and maybe you could talk a little bit about some of your top priorities in this role. Yeah. It's it's look, it's it's been incredibly fun. If, you know, if I think back to before I joined America, which is now coming up to 25 years, I don't think I would have envisioned the journey that our industry is on or that I personally have been on.
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And it's been fascinating. You know, if I think back to some of the things that have changed over the years, you know, you go back it wasn't that many years ago where there was lots of thought leaders in the United States saying that the electric industry was in a death spiral. Was a quote commonly used by, you know, a prominent consulting firm.
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And now we're at a point where I think we're going to see unprecedented growth in our sector over the next two decades, and to to be a kind of the front and center of that over the last 20 years, as has been fascinating. As I said, I joined America 25 years ago and had the opportunity to work on in both Canada and the U.S., largely from, business development and the financial perspective, although I did spend some time in customer service and, and field operations in Nova Scotia Power and assumed the role as chief financial officer in 2016.
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So I'm now in my ninth year as chief financial officer for the company. That's that's quite a journey that you've had with the mayor and maybe as CFO, you talk about a little bit about managing financial risks, particularly associated with energy transition. How are you guys sort of approaching and thinking about that? Yeah, it's a great question. And it's very topical.
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Because we are we are the face I think of some of the challenges this transition is, is inevitably going to be faced with. And so what we're trying to do is be responsible to our stakeholders, to our customers, but also be transparent with people and and effectively where we're at is what we're calling the energy trilemma, trying to balance customer affordability, the pace at which you can decarbonize this, the sector while also improving reliability.
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And all three of those components are incredibly important. And so we think we play a large role in being a leader of being thoughtful about this, making sure customers, regulators, political leaders understand, you know, what's appropriate, the pace of that, transition and what the ultimate cost for customers is, and doing so in a way that minimizes any kind of rate shock for customers and our jurisdictions.
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When you think about, you know, the financial metrics that you're paying attention to or other metrics sort of in general, which ones are you kind of monitoring maybe most closely when you think about sort of the long term stability. Yeah, and I think that that evolves and changes over time is as I think of today, it's probably a very different answer than I would have given a few years ago.
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But we're in an entirely different cost of capital environment. And so if you think back to a few years ago, utilities could afford to make some investments and maybe carry that incremental investment for a period of time. As you know, we call regulatory lag before ultimately getting cost recovery from customers because the cost of that incremental capital was relatively cheap.
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That's not the environment we're in today. And so it's coming increasingly important that there's minimal regulatory lag, that the financing of those investments gets a timely recovery on and off capital, which means you have to be prudent. And when you spend the capital and how you spend it and working with stakeholders and and looking for solutions to how to minimize that regulatory lag, whether it's through the introduction of rate riders on specific capital projects and things like that.
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But I think the days of the discipline around capital allocation in this environment, given the pressures on investing capital over the next decade, is becoming more acute than it ever has been. Now you're here at RBC's, Global Energy Power Infrastructure Conference, and obviously you're you're meeting with investors, you're talking to investors. Can you talk about just in general, some of your conversations?
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You know, we talk about trying to balance sort of investor expectations with what you're trying to accomplish. You know, what are your conversations like? What kind of things are you guys discussing in that category? Yeah, I think the themes are probably consistent with what has been going on for the last couple of years. I mean, first and foremost, everybody is preoccupied with the macro themes.
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Our sector has been out of favor, for a while now. And obviously that's partially driven by the interest rate environment we're in. Fortunately, the Bank of Canada has made the first step in on reversing, their policy over the last four years this morning, which I think will be helpful. But, you know, a lot of conversations around the macro environment and how people are feeling like that after that really gets into more specific stuff is, is balance sheet what kind of financing flexibility you have to invest in these capital projects?
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You know, what is the timeliness of cost recovery from customers? Can customers afford it? Can you accelerate some of the decarbonization? How are you dealing with resiliency on the system with, you know, more and more weather events that we're experiencing, in particular in our service territories and in Tampa and in Nova Scotia? So a little bit of regulatory, a little bit of financial and a little bit of operational is is generally the themes that we're hearing from our investors.
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Let's maybe turn to your M&A and partnership strategy a little bit. Would love to talk a little bit about sort of your philosophy and your approach and your thinking around this. Could you talk about or maybe provide a little insight into, you know, what you're doing at KKR, the indirect minority stake in the Labrador Island Link clean energy transmission project?
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Yeah. So, about a week ago, we announced that we were selling our interests in the Labrador Island link, which is a transmission line in the province of Newfoundland. And that, I can say past tense work as the transaction closed, yesterday. Congratulations. Thank you. We were a passive investor, so just a financial investor. And again, I think it builds off, you know, some of the comments have already made that we're in an environment where cost of capital matters and where you allocate that capital matters.
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And it was clearly an investment that we had that was most likely better suited for an infrastructure player, a pension plan that's looking for a long term stream of cash flow. We didn't have any operational experience or responsibilities related to that particular line. So so for us, it was putting that investment in the hands of somebody probably best suited to own the investment and at the same time freeing up capital for ourselves to reinvest in our regulated utilities and support the growth that we're seeing in support of our customers.
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So maybe thinking a little bit more broadly on this topic and looking out at this sort of energy landscape in general, do you expect to see additional consolidation, particularly in Canada's industry, throughout the rest of the year? Yeah, I don't I wouldn't use the word consolidation, often through my lens. When I think of consolidation, I think of companies joining forces.
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I think there'll be more integration. I think we're at a point now where it's becoming clear that each province in Canada, each state in the United States, can't go off on their own and have their own plan to reduce carbon. There's going to be a reliance. And on other provinces, other states, that means more inter-provincial agreements on transmission lines, billing the energy sources where it makes sense, i.e. building wind, where it's windy, putting solar where it's solar, but making sure the interconnections are there.
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You're going to see more, I think, distributed generation, that's going to require a different skill set. And, you know, more and more opportunities for, for folks like the First Nations and Canada to invest in some of these projects, which we're proud of them and we're working on, with them right now. So I think it's going to be more of an integration as opposed to a pure play consolidation over the next number of years.
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So I want to shift back to you guys a little bit again, and maybe talk about your plans to achieve net zero emissions by 2050. Can you talk a little bit about how you guys are approaching it, what your plan is, but also some of the specific strategies or initiatives that you're focused on to try to make that happen?
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Yeah, it's going to be very region dependent. And so I'll give you two examples. What we're doing in Nova Scotia and and what we see happening in the state of Florida, Nova Scotia. It's going to be largely replacing our coal fired generation with a combination of wind imported hydro generation from neighboring provinces, which is going to require transmission investments, like the maritime link that we have built to import hydro from Newfoundland, Labrador.
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There'll be battery storage put in place, potentially going further down the road, likely in Nova Scotia, offshore wind development as well. And then you'll see fossil fuels like natural gas be more just over peaking or capacity units in the province. So I think that'll be the path in Nova Scotia. And that'll get us largely there. That'll allow the coal plants to shut down in around 2030 and effectively be in a in a location in a province in Nova Scotia where will be 80% plus renewables by the end of the decade.
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In Florida, it'll be more replacing coal fired generation, which we've largely have done now. Only about 1 or 2% of our generation. Tampa Electric is coal fired generation, but that has largely being replaced with natural gas fired generation. And the build out of solar. The solar will be, of course, complemented with battery storage. And then ultimately the next step on reducing the carbon emissions from the natural gas plants in Florida will be introducing carbon capture and sequestration.
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And in particular, we've got a very interesting project at the Polk Power Station, which the Department of Energy in the U.S. would say is probably the best site for carbon capture and sequestration in all the U.S. and we're advancing that project. But natural gas will remain a pretty important fuel source. So the challenge for us, and I think the opportunity for us will be to capture those emissions and rather than emitting them in the atmosphere, but actually storing them underground.
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So very diversified strategy. And obviously the geographic differences in the strategy are deploying very smart and hopefully effective. And it has to be because if you think about it, every region is different. Solar works very well in Florida. That won't be a surprise to any of the listeners. Not so much in Nova Scotia. And wind is kind of the opposite.
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Wind works very well in Nova Scotia, but, you know, less so in the state of Florida. So it will be region dependent. I think every area will have to have their own solution to the problem, but the interconnection of the regions will be will be important as well. So I want to close with one final question for you.
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A few years ago, you announced plans to shut down coal power plants by 2040. Can you talk about the catalysts that enable you to push these retirement plans up, and what challenges you still face to really make this goal a reality today? Yeah, and so our last coal plant in Nova Scotia is scheduled to retire in 2040. We've accelerated that to 2030, largely in response to legislation both from the federal government and the provincial government.
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I don't know if it'll be exactly 2030, but it'll be 2030 ish and be very close to 2030. And and the path is clear. It'll just be a timing of execution. It'll be the build out of more wind, the adding a battery storage, strengthening inter ties with neighboring jurisdictions both to the west and east of US as well.
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Building out some modest gas for our generation is back up and capacity. So I think that opportunity is well in front of us. The execution of it is is fairly straightforward. Getting from 80% to 100% might be a little bit more challenging and might require the advancement of some developing technologies which that which are under development. Now think small modular reactors as an example.
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But the path we're on to get to kind of the end of the decade in Nova Scotia is is fairly well laid out right now, and lots of activity taking place every single day of the week to to advance. And Greg, we really appreciate your time and thanks for stopping by and good luck with the rest of the conference.
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Thanks, Joe. Appreciate it. Well, that's all for our conversation. Thanks again for listening to Powering Sustainable Ideas, brought to you by RBC Capital Markets. Please remember to subscribe to get more great content and be alerted about future episodes. This episode was recorded on June 5th, 2024. If you'd like to learn more or continue the conversation, please visit RBC.
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