Emera (Symbol-EMA)

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Dudsy
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Re: Emera (Symbol-EMA)

Post by Dudsy »

This is a big transaction for Emera. Half their earnings will now come from Florida and New Mexico.

Emera has paid up for TECO; Enterprise Value/EBITDA multiple of 11.6x. However, they are projecting EPS accretion year 1 and 10% accretion by 2019. This also adds to diversification and regulated EBITDA increases to 90%.

I've been a big fan of Emera's management, especially of late.
- Capital Power (CPX) bought 3 New England gas plants in 2011. Only 2 years later, Emera bought them for around $140 million less than CPX paid. Emera saw value with the upcoming coal retirements in the New England power markets. Based on recent power capacity auctions, capacity revenue alone will increase by $100 million per year in 2018.
- they very successfully navigated the regulatory approval of the Maritime link and Labrador link projects which adds considerably to their regulated rate base and cash flow by 2018.

Based on the above, and as has been noted, EMA increased their dividend 22% and increased their dividend growth target to 8% through 2019. In the following presentation, they note the TECO acquisition will allow them to extend their dividend growth target beyond 2019. EMA is up around 14% year-to date.

http://investors.emera.com/Cache/100120 ... ID=4072693

Disclosure: EMA is one of my bigger holdings
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Re: Emera (Symbol-EMA)

Post by brad911 »

I've had this stock on my watchlist for years, but never saw a compelling valuation through which I felt warranted a position. Yes the dividend growth has been superb, but it appears utilities are willing to take on a surprising amount of debt in a low interest rate environment without a significant consolidation pattern in the industry.

They appear to have paid a significant premium on this new transaction which will improve earnings, but paying off that debt won't really be accelerated by those new numbers.

Now FTS did something similar so I guess in a way they're all doing the same thing, but with a P/E of roughly 18 I'm not sold this is a buy yet.
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Arby
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Re: Emera (Symbol-EMA)

Post by Arby »

A benign reaction to the TECO acquisition from DBRS.
DBRS Limited (DBRS) has today placed the BBB (high) Issuer Rating, BBB (high) Medium-Term Notes and Pfd-3 (high) Preferred Shares – Cumulative ratings of Emera Inc. (Emera or the Company) Under Review with Developing Implications. These rating actions follow the announcement that the Company has agreed to acquire TECO Energy Incorporated (TECO) for a total consideration of approximately USD 10.4 billion including assumption of USD 3.9 billion of debt (the Acquisition). The rating actions reflect DBRS’s view that the Acquisition would have a relatively neutral impact on Emera’s business risk assessment (BRA) while the impact on the financial risk assessment (FRA) is uncertain since the financing plan has not been finalized.
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Re: Emera (Symbol-EMA)

Post by Sensei »

Hi,

'Scratching one's head' is the operative phrase since there are some reasons to be concerned. That said I will probably not react to this news in any way except to hold.

I'm just a bit player in the Canadian market. I had been considering adding a new utility to my modest Canadian portfolio, but guess what, I couldn't find any better alternatives than Emera or FTS. There are higher yields, and some might say I'm a yield chaser, but after several hours of reading, no thanks to anything else. I'm used to the stability on the US side of names like SO, NGG, and recently DUK (88 years of paying dividends). Nothing other than these too satisfy that requirement.


However, here are some interesting comparison stats. I bought both Emera and Fortis around the same time and owned both in December 2009.

According to my most recent TDW list of holdings:

Emera 100 Book Value = 2335 Market Value = 4403 Yield: 4.31%
Fortis 100 Book Value = 2400 Market Value = 3491 Yield: 3.89%

I don't think I've ever spent more than 10 minutes worrying about either of these over six years. Clearly, if past performance is any indication, and often it is, Emera is still the better bet, but Fortis is not a bad bet either. Would I add to either now though? Probably not.
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Re: Emera (Symbol-EMA)

Post by 2 yen »

Maybe not quite a done deal yet.

http://finance.yahoo.com/news/teco-ener ... 00218.html

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Re: Emera (Symbol-EMA)

Post by Sensei »

Hi,
2 yen wrote:Maybe not quite a done deal yet.

http://finance.yahoo.com/news/teco-ener ... 00218.html

2 yen
Maybe.

Actually, I just went through a protracted takeover battle with PartnerRe. In my case, it was a perfect storm of proxy votes arriving in the mail almost daily. Originally, PartnerRe had accepted a takeover bid from Axis, but Exor made a better offer (which was rejected by Partner). This went on for quite a while and finally Exor and Partner came to an agreement. Shortly after, there were several challenges from US law firms trying to collect clients. As far as I know, there is no change to the Exor deal although I think dissenters have until September 15 to mount a challenge.

My guess is that the Louisiana state attorney does not have the power to stop the deal unless he or she attracts an extraordinary number of Teco shareholders to his cause. Down the road, some lucky Teco shareholders might squeeze a bit more out of Emera, but most will just accept a nice cheque and move on. Thus the deal will most likely go through, but several challenges will be litigated afterwards.
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Re: Emera (Symbol-EMA)

Post by Shakespeare »

Ah, yes. The best justice that money can buy. :roll:
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Re: Emera (Symbol-EMA)

Post by schmuck »

Sensei wrote: My guess is that the Louisiana state attorney does not have the power to stop the deal unless he or she attracts an extraordinary number of Teco shareholders to his cause.
That would be my guess as well. Hopefully, I'm covered either way as my shares could recover sooner rather than later from yesterday's drop if the deal does not go through....and if the deal does go through, I hope a substantial portion of my order for the new issue of convertible debentures gets filled.
I was surprised to see a utility company of Emera's quality choose the convertible debenture route over the more common preferred share route, and despite all the ifs & buts in the offering, I was even more surprised that the issue did not sell out faster.
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Re: Emera (Symbol-EMA)

Post by AltaRed »

The new convertible debenture issue is way too iffy for me. I looked at it pretty hard but oo many things tied to the approval of the Teco acquisition. EMA must think there is some material regulatory (or competing offer) risk.
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Re: Emera (Symbol-EMA)

Post by schmuck »

AltaRed wrote:The new convertible debenture issue is way too iffy for me. I looked at it pretty hard but oo many things tied to the approval of the Teco acquisition. EMA must think there is some material regulatory (or competing offer) risk.
Certainly one of the most complicated offerings I've come across. Don't know what the chances are of resolving all the iffs, but it looked too good to pass up in case they do get resolved. If not, the debentures would be redeemed at issue price with accrued interest at various opportunities.
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Re: Emera (Symbol-EMA)

Post by cn_habs »

Is the stock too expensive at this point? I was waiting for a dip that never came despite the recent downturn.
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Re: Emera (Symbol-EMA)

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An ace up the sleeve is the Labrador power coming on stream with the ocean floor transmission line. It send large quantities of CO2 free electrical power into the USA NE.
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Re: Emera (Symbol-EMA)

Post by bpither »

cn_habs

When you say "expensive" what do you mean? What are your metrics ... market price? diversification? Graham Price? dividend yield? I picked up Emera in 2009 and it is now - happily - my third largest equity holding. It has been good to me! With the new Teco deal they'll have 56% of their assets earning US dollars passed on to me in high single digit CDN dollar dividend growth

But I'm going to suggest that although it barely budged downward during the latest market dip you may get another crack at it later on ... in fact I urge caution as the Alberta effect on the TSX is not over in my opinion. Even companies with earnings which grow - like Emera - could get sold off for many reasons unrelated to its corporate health.
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Re: Emera (Symbol-EMA)

Post by AltaRed »

And when the loonie returns to parity or higher in the years ahead, those US earnings will not be nearly as prominent overall. It mystifies me why Cdn companies are spending loonies to buy US assets at this time. The only way it could make sense is if those acquisitions are funded with USD.
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Re: Emera (Symbol-EMA)

Post by Thegipper »

cn_habs wrote:Is the stock too expensive at this point? I was waiting for a dip that never came despite the recent downturn.
16 times earnings isn't overly expensiive for a utility.
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Re: Emera (Symbol-EMA)

Post by Dudsy »

As you can see upthread, I've been a big fan of Emera management for several years. A key criteria for me is management that delivers what they promise. I increased my holdings in 2013 when they bought the 3 gas plants in New England from Capital Power... their premise at the time was coal retirements would tighten up that market and they were bang-on right as shown in the last several capacity auctions. EMA has exceeded the TSX Capped Utilities Index by 10% per year over the last 5 years!

PS. Over 80% of the TECO transaction is financed in US$.
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Re: Emera (Symbol-EMA)

Post by cn_habs »

Thegipper wrote:
cn_habs wrote:Is the stock too expensive at this point? I was waiting for a dip that never came despite the recent downturn.
16 times earnings isn't overly expensiive for a utility.
Emera's PE is over 18 whereas Fortis' stands at a bit over 14.

If you have it already I'd never sell but it's clearly overvalued to initiate a position at this pricepoint.
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Re: Emera (Symbol-EMA)

Post by Thegipper »

cn_habs wrote:
Thegipper wrote:
cn_habs wrote:Is the stock too expensive at this point? I was waiting for a dip that never came despite the recent downturn.
16 times earnings isn't overly expensiive for a utility.
Emera's PE is over 18 whereas Fortis' stands at a bit over 14.

If you have it already I'd never sell but it's clearly overvalued to initiate a position at this pricepoint.
That very much depends on top end and bottom line growth prospects. Fortis just swallowed an elephant in the USA and in so doing added a lot of debt to it's balance sheet.
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Re: Emera (Symbol-EMA)

Post by 2 yen »

Update on Emera / Teco deal.

http://www.bizjournals.com/albuquerque/ ... ?ana=yahoo

If one had suggested that something like this would have been possible even 10 years ago, the reaction may well have been laughter.

Let's hope it all works out. I am optimistic.

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Re: Emera (Symbol-EMA)

Post by bpither »

A Nova Scotia moat utility with a now bigger regulated footprint in the US than in Canada. A stunning 23% dividend increase last year and a projected annual dividend growth of 8% for the next several years. My third largest holding since February, 2009.

What's not to like?
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Re: Emera (Symbol-EMA)

Post by AltaRed »

A market darling (and 2 year recent performer) for sure, but how about an insatiable appetite for debt and equity issues? How do you know this is "really" accretive? I remember investors wetting their pants over Crescent Point too.
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Shakespeare
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Re: Emera (Symbol-EMA)

Post by Shakespeare »

Down today on a bought deal.

http://www.marketwired.com/press-releas ... 242823.htm
The purchase price of $47.90 per Common Share will result in gross proceeds to Emera of $700,010,600 ($750,066,100 if the Over-Allotment Option is exercised in full). The net proceeds of the offering will be used to support the Company's recently announced growth initiatives and general corporate purposes.
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Re: Emera (Symbol-EMA)

Post by JaydoubleU »

Bought by RBC, CIBC, BNS and TD.

Let me guess, RBC, CIBC, BNS and TD to come out with "outperform / buy" ratings in the coming weeks :roll:
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Re: Emera (Symbol-EMA)

Post by AltaRed »

JaydoubleU wrote: 07 Dec 2017 11:21 Bought by RBC, CIBC, BNS and TD.

Let me guess, RBC, CIBC, BNS and TD to come out with "outperform / buy" ratings in the coming weeks :roll:
The analysts will have out in force in 3 days. That said, the underwriters probably already have all their allotments completely spoken for by through 'expressions of interest'. Many investors wet their pants when they see secondary offerings of this nature, especially priced 2-5% below recent market prices.

If I was interested, I would have had my trigger finger ready at market opening today. Such stocks often trade below offering price at least temporarily in such instances. Could have been bought as low as $47.74 this morning.
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Re: Emera (Symbol-EMA)

Post by Peculiar_Investor »

From Emera Falls as Nova Scotia Moves to Limit Power Rate Hikes - Bloomberg
Bloomberg wrote:The owner of Nova Scotia’s biggest electric utility fell as much as 10% in Toronto following a trading halt, before paring losses to close down 4.7% to C$51.68 in Toronto. It was the biggest one-day decline since April 1, 2020.

Emera is clashing with Nova Scotia’s provincial government on plans to hike electricity prices while Canadians struggle with high inflation. The eastern Canadian province introduced legislation on Wednesday to cap price hikes to a total of 1.8% between now and 2024.
Who said utilities are boring investments?
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