Executive Summary / Key Takeaways

• Emera Incorporated (TSX: EMA) stands as a robust regulated utility, strategically focused on delivering stable returns and consistent dividend growth through significant capital investments in grid modernization and the energy transition across North America and the Caribbean.
• The company demonstrated strong financial performance in the second quarter of 2025, reporting a 49% increase in adjusted earnings per share, alongside its 19th consecutive year of common share dividend increases.
• A substantial $20 billion five-year capital plan through 2029, with 80% allocated to Florida, underpins Emera's commitment to enhancing grid reliability, integrating renewables, and driving technological innovation to meet evolving customer needs.
• Management projects a compelling outlook, targeting 5% to 7% annual average adjusted EPS growth through 2027 and 7% to 8% forecasted rate base growth through 2029, supported by its strategic investment program.
• While Emera benefits from a diversified asset base and regulatory expertise, investors should consider risks such as managing debt levels, potential impacts from cybersecurity incidents, and the liquidity of its debt securities.

A Foundation of Regulated Energy

Emera Incorporated, established in Nova Scotia, Canada, in 1998, has evolved into a geographically diverse energy and services company with a strategic footprint across the United States, Canada, and the Caribbean. Its core business centers on regulated electricity generation, and electricity and gas transmission and distribution, underpinned by a commitment to safely delivering cleaner, affordable, and reliable energy to its customers. This foundational focus on regulated assets provides a stable revenue base, a hallmark of utility investments.

The company's corporate structure includes key subsidiaries like Emera US Holdings Inc. (EUSHI), incorporated in 2001 to manage U.S. assets, and EUSHI Finance, Inc., formed in 2016 for intercompany financings. This structure facilitates its broad operational scope, which encompasses Florida Electric Utility (Tampa Electric), Canadian Electric Utilities (Nova Scotia Power Inc. and Emera Newfoundland & Labrador Holdings Inc.), Gas Utilities and Infrastructure (including Peoples Gas System and Emera Brunswick Pipeline Company Limited), and Other Electric Utilities in the Caribbean.

Competitive Landscape: A Diversified Approach in a Dynamic Sector

Emera operates within a competitive yet largely regulated energy sector, where its diversified geographic and operational portfolio provides a distinct advantage. Compared to its peers, Emera's market positioning benefits from its balanced exposure across different regulatory environments and energy sources, including gas, which offers a hedge against the intermittency of renewables.

Direct competitors like Duke Energy and NextEra Energy in the U.S. market, and Fortis Inc. in Canada, present varying competitive dynamics. While Duke Energy (DUK) demonstrates strong operational scale and grid modernization initiatives, Emera's geographic diversification, particularly its presence in the Caribbean, helps mitigate regional market volatility. NextEra Energy (NEE), with its aggressive focus on renewable energy, often exhibits faster growth trajectories in innovative areas, potentially outpacing Emera in high-growth green energy segments. However, Emera's balanced approach across traditional and emerging energy segments offers a more stable, albeit potentially slower, growth profile.

Against Fortis Inc. , another Canadian utility, Emera's international presence enhances its market positioning, though Fortis (FTS) may demonstrate superior cost efficiency in shared regulated markets. MYR Group Inc. , specializing in electrical construction and infrastructure services, represents an indirect competitor whose project-specific innovation could challenge Emera's transmission segment. Emera's strength lies in its integrated energy solutions, fostering broader customer loyalty, while MYR Group (MYRG) excels in specialized projects.

Technological Advancement: Powering the Future Grid

Emera's strategic vision is deeply intertwined with technological advancement, focusing on modernizing its infrastructure to meet the demands of a decarbonizing, decentralized, and digitalized energy landscape. While not centered on a single proprietary technology, Emera's approach involves substantial capital allocation to enhance its grid and integrate cleaner energy solutions.

The company has unveiled a significant five-year capital investment plan totaling $20 billion through 2029, with a substantial 80% earmarked for Florida. This investment is strategically directed towards grid modernization, the integration of renewable energy sources such as solar, wind, and battery storage, and broader technological innovations. These initiatives are designed to advance operational efficiency, achieve cost savings, and enhance service delivery, ultimately improving reliability, storm hardening, and resilience for its customers. For instance, investments in smart grid technologies aim to improve outage response times and optimize energy distribution. The strategic intent behind these investments is to support customer growth and facilitate the transition to a lower-carbon energy future, thereby strengthening Emera's competitive moat through improved service and operational capabilities.

Financial Performance: Resilient Growth and Shareholder Returns

Emera's financial performance reflects its stable, regulated business model and strategic capital deployment. For the second quarter of 2025, the company reported a significant 49% increase in adjusted earnings per share, reaching $0.79, with reported EPS at $0.45. This growth was primarily fueled by increased earnings at Tampa Electric, Emera Energy Services, and New Mexico Gas Company, coupled with reduced corporate costs. Year-to-date, adjusted net income for 2025 climbed to $615 million, or $2.07 per common share, marking a $248 million increase over the same period in 2024.

The company's revenue for Q2 2025 stood at $1.88 billion, surpassing expectations. For the full year 2024, Emera reported approximately CAD7.2 billion in revenues. Profitability metrics underscore its operational effectiveness, with a trailing twelve-month (TTM) operating margin of 19.01% and a net margin of 11.54%.

Cash flow generation remains robust, with operating cash flow for the first half of 2024 increasing by 7% to $1.2 billion compared to the prior year, resulting in a reported operating cash flow to debt ratio of approximately 12.5% as of June 30, 2025. This strong cash flow supports ongoing capital investments and shareholder returns.

Capital Structure and Liquidity: Funding Future Growth

Emera maintains a proactive approach to its capital structure and liquidity, essential for funding its extensive investment plans. The company recently filed a registration statement to offer and issue up to US$3.0 billion in senior and/or subordinated unsecured debt securities over a 25-month period. The net proceeds from these offerings are intended for general corporate purposes, including the repayment of existing indebtedness.

As of June 30, 2025, Emera had US$2.95 billion in senior unsecured notes and junior subordinated notes outstanding, fully guaranteed by Emera and Emera US Holdings Inc. While some analyses indicate "concerning debt levels," the company's forward-looking statements suggest a continued ability to access capital and manage its debt maturities, repayments, and renewals. This access to capital is crucial for executing its $3.4 billion customer-focused capital investment plan for 2025, with over $1.7 billion already deployed in the first half of the year.

Strategic Outlook and Guidance: A Clear Path Forward

Emera's management has provided clear guidance, reinforcing its commitment to predictable growth and shareholder value. The company targets an annual average adjusted EPS growth of 5% to 7% through 2027. This growth is expected to be driven by a forecasted rate base growth of 7% to 8% through 2029, reflecting the continuous need for infrastructure investments to enhance reliability, storm harden assets, and support economic and customer growth.

In a move to optimize its financial health and ensure sustainable returns, Emera is adjusting its dividend growth rate to 1% to 2% per year. This strategic adjustment aims to reduce the dividend payout ratio of adjusted net income to approximately 80% by the end of 2027, with further improvements anticipated thereafter. This disciplined approach to capital allocation and dividend policy underscores management's focus on long-term financial stability and value creation for shareholders.

Key Risks: Safeguarding the Investment

Investing in Emera, while offering stability, is not without its risks. A notable recent challenge is the "Cybersecurity Incident" identified on April 25, 2025, involving unauthorized access to parts of Emera's Canadian network. While the company has activated incident response protocols and engaged experts, and importantly, reported no disruption to its physical operations or ability to serve customers, the full financial impact and duration of IT system restoration remain ongoing considerations.

Furthermore, the enforceability of civil liabilities under U.S. federal securities laws may be challenging for holders of Debt Securities, given that Emera is incorporated in Nova Scotia and some key personnel and assets are located outside the United States. The potential lack of a listed trading market for newly issued debt securities could also affect secondary market pricing and liquidity. Finally, while Emera's debt levels are actively managed, they warrant careful monitoring, as noted by some financial analyses.

Conclusion

Emera Incorporated presents a compelling investment thesis rooted in its stable, regulated utility operations and a clear strategic roadmap for growth. The company's consistent track record of dividend increases, now in its 19th consecutive year, underscores its commitment to shareholder returns, supported by a robust capital investment plan focused on grid modernization and the energy transition. With ambitious targets for adjusted EPS growth and rate base expansion through the end of the decade, Emera is strategically positioning itself to capitalize on evolving energy demands and decarbonization trends.

While the company faces inherent risks, including cybersecurity threats and managing its debt profile, its diversified asset base, regulatory expertise, and disciplined capital allocation strategy provide a strong foundation. Emera's focus on delivering cleaner, affordable, and reliable energy, coupled with its proactive investments in technological advancements, reinforces its competitive standing and long-term value proposition for discerning investors seeking stable growth in the utilities sector.