Morningstar | With Asset Sales Complete, Emera Focuses on Attractive Growth Opportunities
We are reaffirming our CAD 48 per share fair value estimate, along with our narrow economic moat and stable moat trend ratings, after Emera reported first-quarter operating earnings of $0.95 per share versus $0.87 in the same year-ago period. Management does not issue earnings guidance. Emera's 4% to 5% annual dividend growth target supported by 6% to 7% rate base growth stands.Management has finalized its plan to fund its capital investment, which was supported by two asset divestitures. Emera exited the merchant generation for $800 million in proceeds, and is in the process of selling its Emera Maine for $1.3 billion. Rounding out the financing plan is $900 million in equity, which includes dividend reinvestment, at-the-market equity, and hybrid capital. This plan will improve Emera's balance sheet, more in line with its 55% 2020 leverage target. Debt/capital was 64% as of 18 months ago.
Investments at Emera's Florida utility account for roughly half of the company's 3-year, $6.5 billion capital plan. Emera is investing $850 million for 600 megawatts of solar in the state, with 405 MW already in place. The $850 million Big Bend modernization, which repowers Unit 1 to natural gas, is on schedule.
Emera also notes $1.3 billion of additional capital investment opportunities are not in its plan. This includes the potential for another 600 MW in solar beyond 2020. If management is able to secure these investments, it could lead us to increase our fair value estimate up to $2 per share and push rate base growth towards 7%.
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.
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