Chris Huskilson, President and Chief Executive Officer of Emera Inc.JENNIFER ROBERTS/The Globe and Mail
Emera Inc.'s $6.5-billion (U.S.) deal for a Florida energy company puts the Halifax-based multinational squarely in the path of President Barack Obama's aggressive climate strategy and the politically charged "war on coal."
Emera chief executive officer Chris Huskilson said Tuesday the acquisition of Tampa-based TECO Energy Inc. is an opportunity for the company to apply the emissions-reduction lesson in Nova Scotia and New England to the southern U.S. market.
Emera said Tuesday it will issue a $1.9-billion (Canadian) bought-deal for convertible debentures that will help finance the acquisition of TECO Energy, which was announced Friday and will more than double the company's asset base. Emera will also assume $3.9-billion (U.S.) of TECO's debt.
"The beauty of this is that the company is very similar to us today," Mr. Huskilson said in an interview from Tampa, where he was meeting with TECO employees.
"If you look at Tampa Electric and compare it to Nova Scotia Power [subsidiaries of TECO and Emera, respectively], you'll see a company that has similar strategy, similar challenges, similar opportunities and a similar customer base. So we actually feel very good about that."
Both Nova Scotia and Tampa utilities have been heavily reliant on coal-fired power, and are shifting under pressure from government policy to reduce greenhouse gas emissions and embrace renewable electricity. A centrepiece of Emera's effort is its investment – in partnership with Nalcor Energy – in the Lower Churchill hydroelectric project and the maritime link that will bring the electricity from Newfoundland to Nova Scotia.
With the completion of that project in 2018, Nova Scotia Power will have shifted from as much as 90-per-cent coal-based to producing 70 per cent of energy from clean sources. "We see the same kind of transformation happening" in Florida, he said. "It begins with high utilization of natural gas, but eventually will turn into more and more clean energy."
Coal supporters have condemned Mr. Obama's clean-power plan, which will force utilities to dramatically cut their reliance on coal in favour of natural gas and renewable sources such as wind and solar. Industry executives and Republicans in Congress accuse Mr. Obama of launching a "war on coal" that will drive up electricity costs to consumers and cost mining jobs in key coal-producing regions.
But Mr. Huskilson said both Emera and TECO see the shift away from coal as an opportunity rather than a threat. The Florida company has converted some coal plants to natural gas, installed a high-efficiency integrated coal gasification combined-cycle plant at one location, and is investing in a small solar generating station.
"Tampa Electric is already on that path and we see the opportunity to continue on that path as an opportunity for our business," Mr. Huskilson said. "And it's a big part of the growth we see happening in these new businesses in the next five to 10 years."
Emera owns utilities and energy assets in the northeastern United States and a utility in Barbados. Mr. Huskilson said the vast majority of TECO's assets – which include natural-gas distributors in Florida and New Mexico – are regulated entities. Emera was determined to boost its regulated returns as a percentage of earnings.
TECO is currently attempting to sell its coal division, which has mines in Kentucky and Virginia. The company struck a deal last year but that fell apart as the value of coal properties in the United States has plummeted under the combined weight of environmental policies and competition from cheap natural gas.
Coal production in the United States has been falling since 2008, and is down by 8.5 per cent for the first eight months of 2015 compared with the same period last year. Several producers have filed for bankruptcy protection. TECO took a $51-million (U.S) charge against its coal operations in the previous quarter, but last month shelved an offer to sell the assets to Cambrian Coal.
Mr. Huskilson said the proposed sale is not material to the Emera transaction because TECO has essentially written them off, and will either sell them or close them before the transaction is closed next year. "We believe they will be successful in the sale, but at this point, there is no value ascribed," he said.