Morningstar | Management Meeting: Asset Sales Fund Emera's Sizable Florida Growth Investments
We are reaffirming our CAD 46 per share fair value estimate, narrow moat, and stable moat trend for Emera after meeting with management at the Edison Electric Institute Financial Conference in San Francisco.After lowering its dividend growth target to 4% to 5% in the second quarter from the previous 8%, management turned its attention to assuage investor concerns on potential equity needs to fund its sizable growth plan. Management recently announced that it would sell certain assets to fund 20% to 30% of the $6 billion we forecast Emera will spend over the next three years.
While management is keeping quiet on exactly which assets it is looking to sell, we continue to believe Emera would be wise to focus on divesting its unregulated, no-moat generation unit, which we believe is one of the reasons it trades at a discount to its purely regulated peers. While performing well this year, the unit is susceptible to volatile commodity prices and capacity prices creating cash flow uncertainty, which utility investors tend to view unfavorably.
Much of Emera's growth is coming from its recent acquisition of TECO Energy, which brought high growth and constructive Florida operations under its fold. TECO has installed 145 MW of its approved 600 MW, with the all remaining tranches set to be commissioned by early 2021. Emera sees an opportunity for an additional 600 MW post 2021, and we believe there is a long runway of growth opportunities beyond the initial 1,200 MW. TECO is also investing $850 million in its Big Bend modernization program, which is repowering one unit to natural gas and retiring the other unit.
Investments at the Florida utility, and smaller opportunities across its other operating units, should drive 6% rate base growth supporting management's dividend projections. Management notes that 2021 investment needs will be in line with the $2 billion required annually from 2018-20.
Emera is an energy and services company which invests in electricity generation, transmission and distribution, gas transmission and utility energy services. Co. had six segments: Nova Scotia Power Inc., an electric utility and electricity supplier in Nova Scotia; Emera Maine, which provides electric transmission and distribution services in the U.S.; Emera Caribbean, which includes Emera (Caribbean) Incorporated and its subidiaries; Pipelines, which includes Emera Brunswick Pipeline Company Ltd. and an equity investment in Maritimes & Northeast Pipeline; Emera Energy, which includes Emera Energy Services that provides energy management services; and Corporate and Other.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.