Emera Incorporated, the Halifax-based energy giant, has consistently positioned Florida as its growth engine. With a rapidly expanding population and booming economy, the Sunshine State accounts for three-quarters of Emera's ambitious $9 billion three-year capital plan. But a closer look at the recent Q1 2024 earnings transcript reveals a potential paradigm shift: Nova Scotia, often considered a mature and stable market, might be on the cusp of becoming a surprising renewable energy powerhouse, quietly rivaling Florida's prominence in Emera's future.

The company's focus on Nova Scotia's potential is evident in several key areas. Firstly, the transcript highlights the province's own burgeoning growth, a factor often overshadowed by Florida's well-publicized economic boom. Nova Scotia Power's new service connection requests have surged by an impressive 28% in the past two years, a testament to the province's increasing attractiveness for both residents and businesses. This demand for energy, coupled with Nova Scotia's aggressive clean energy goals, creates a fertile ground for substantial investment in renewable energy infrastructure.

Secondly, the transcript reveals the critical role the Maritime Link, the high-voltage DC link connecting Nova Scotia to Newfoundland and Labrador's hydroelectric power, will play in this transition. The link's exceptional performance in 2023, exceeding contractual requirements by 30% and achieving a remarkable 99.9% availability, demonstrates its capacity to serve as a conduit for cleaner energy. With the Labrador Island Link now fully operational, doubling the energy supply available to Nova Scotia, the Maritime Link stands poised to facilitate a significant shift towards renewables.

The third, and perhaps most compelling piece of evidence, lies in the province's commitment to ambitious renewable energy projects. The recent approval of three 50-megawatt grid-scale battery projects, supported by substantial government funding and financing, showcases Nova Scotia's determination to accelerate its energy transition. These batteries will not only smooth the integration of new wind energy into the grid, but also serve as a critical foundation for a more resilient and adaptable energy system.

"We were pleased that the New Mexico gas team and all interveners achieved a settlement in New Mexico gases rate case supporting an annual base revenue increase of US$30 million to take effect October 1st of this year. Pending final review and support by the PRC. The ROE and capital structure remain unchanged at 9.375% and 52% respectively. - Scott Balfour, President & CEO, Emera Incorporated"

Furthermore, the creation of a new dedicated energy regulator and the development of an independent system operator in Nova Scotia, as recommended by the province's Clean Electricity Solutions task force, signify a structural shift that could unlock further renewable energy potential. These new entities will streamline the procurement and integration of renewable energy projects, fostering a more efficient and competitive market for clean energy.

Capital Investment Breakdown

Emera's capital plan in Nova Scotia, while currently overshadowed by its Florida commitments, still represents a significant investment in the province's energy future. The $800 million Nova Scotia portion of the Atlantic Reliability tie project alone, half of which will be funded by Emera, demonstrates the company's commitment to strengthening the province's transmission infrastructure, preparing it for the influx of renewable energy expected in the coming years.

However, the potential for Nova Scotia's renewable energy "tsunami" extends far beyond Emera's direct investments. The province's Clean Power Plan, aiming for 80% renewable energy by 2030, requires a massive expansion of wind energy capacity, primarily through independent power producers. This government-led procurement of renewable energy resources, facilitated by the new ISO, could unlock billions of dollars in additional investment, creating a dynamic and rapidly evolving clean energy ecosystem in Nova Scotia.

Earnings Growth Potential

This shift towards renewables in Nova Scotia could have significant implications for Emera's future earnings and growth profile. While the company has emphasized Florida's importance for near-term growth, Nova Scotia's increasing demand for energy, coupled with its commitment to clean energy, could create a sustained long-term growth engine. The province's unique combination of abundant renewable resources, strong government support, and a rapidly evolving regulatory landscape, sets the stage for a potential renewable energy boom, one that could surprise even the most seasoned energy analysts.

Hypothesis: Shifting Capital Investment

Given the evidence presented, we hypothesize that Emera's capital investments in Nova Scotia, currently projected at roughly 25% of their overall plan, could significantly increase in the coming years. This increase could be driven by:

Surging customer growth: The 28% growth in new service connection requests suggests a rapid increase in energy demand, necessitating further investment in both generation and transmission infrastructure.

Accelerated renewable energy deployment: Nova Scotia's 80% renewable energy target by 2030 will require substantial investments in wind energy, grid-scale batteries, and other supporting infrastructure.

Enhanced regulatory environment: The creation of a dedicated energy regulator and an independent system operator is expected to streamline the approval and development of renewable energy projects, facilitating further investment.

Potential Impact

Increased capital deployment in Nova Scotia: Emera's capital allocation to Nova Scotia could increase from the current 25% to potentially 35% or more of their overall plan in the next three years.

Shifted earnings mix: While Florida is expected to remain a key contributor to Emera's earnings in the near term, Nova Scotia's contribution could grow substantially in the long term, creating a more balanced earnings profile.

Earnings Comparison: Florida vs. Nova Scotia

The following chart compares hypothetical earnings contributions from Emera's Florida and Nova Scotia operations, based on their current and projected capital plans and growth trends.

Conclusion

While the spotlight remains firmly fixed on Florida, a quiet revolution is brewing in Nova Scotia. The province's commitment to a rapid transition to renewable energy, coupled with its burgeoning growth and evolving regulatory landscape, is creating a hidden growth engine for Emera, one with the potential to redefine the company's future and cement its position as a leader in the clean energy transition.

"Fun Fact: Nova Scotia is home to the Fundy Ocean Research Center for Energy (FORCE), which boasts one of the world's highest tides, making it a prime location for testing and developing tidal energy technologies."