Unaudited Interim Financial Statements

Emera Incorporated

Condensed Consolidated Statements of Income (Unaudited)

For the	Three months ended March 31
millions of Canadian dollars (except per share amounts)		2017	2016

Operating revenues
Regulated electric	$	1,162	$	574
Regulated gas		313		13
Non-regulated		382		290
Total operating revenues		1,857		877

Operating expenses
Regulated fuel for generation and purchased power		389		198
Regulated cost of natural gas		126		-
Regulated fuel adjustment mechanism and fixed cost deferrals		11		18
Non-regulated fuel for generation and purchased power		84		110
Non-regulated direct costs		10		2
Operating, maintenance and general		358		176
Provincial, state and municipal taxes		81		16
Depreciation and amortization		217		87
Total operating expenses		1,276		607
Income from operations		581		270

Income from equity investments (note 5)		26		26
Other income (expenses), net (note 6)		2		(139)
Interest expense, net (note 7)		175		75
Income before provision for income taxes		434		82

Income tax expense (recovery) (note 8)		112		27
Net income		322		55

Non-controlling interest in subsidiaries		3		4
Net income of Emera Incorporated		319		51

Preferred stock dividends		7		7
Net income attributable to common shareholders	$	312	$	44

Weighted average shares of common stock outstanding (in millions)
Basic		211.6		148.7
Diluted		212.2		149.3

Earnings per common share (note 10)
Basic	$	1.48	$	0.30
Diluted	$	1.47	$	0.30

Dividends per common share declared	$	0.5225	$	0.4750

The accompanying notes are an integral part of these condensed consolidated financial statements.

Emera Incorporated

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

For the	Three months ended March 31
millions of Canadian dollars		2017		2016
Net income	$	322	$	55
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment (1)		(48)		(162)
Unrealized gains (losses) on net investment hedges (2)		13		-
Cash flow hedges
Net derivative gains (losses)		2		14
Less: reclassification adjustment for losses (gains) included in income (3)		-		1
Net effects of cash flow hedges		2		15
Unrealized gains on available-for-sale investment
Unrealized gain (loss) arising during the period		3		-
Less: reclassification adjustment for (gains) recognized in income		(1)		-
Net unrealized holding gains (losses)		2		-
Net change in unrecognized pension and post-retirement benefit obligation		8		9
Other comprehensive loss (4)		(23)		(138)
Comprehensive income (loss)		299		(83)
Comprehensive income (loss) attributable to non-controlling interest		2		(3)
Comprehensive Income (Loss) of Emera Incorporated	$	297	$	(80)

The accompanying notes are an integral part of these condensed consolidated financial statements.

1) Net of tax expense of nil (2016 - $2 million tax recovery) for the three months ended March 31, 2017.
2) The Company has designated $1.2 billion United States dollar denominated Hybrid Notes as a hedge of the foreign currency exposure of its net investment in United States dollar denominated operations.
3) Net of tax expense of $1 million (2016 - $2 million tax expense) for the three months ended March 31, 2017.
4) Net of tax expense of $1 million (2016 - nil) for the three months ended March 31, 2017.

Emera Incorporated

Condensed Consolidated Balance Sheets (Unaudited)

As at	March 31		December 31
millions of Canadian dollars		2017		2016
Assets
Current assets
Cash and cash equivalents	$	255	$	404
Restricted cash		85		87
Receivables, net		996		1,014
Income taxes receivable		39		33
Inventory		442		472
Derivative instruments (notes 12 and 13)		135		145
Regulatory assets (note 14)		79		80
Prepayments and other current assets		277		276
Total current assets		2,308		2,511

Property, plant and equipment, net of accumulated depreciation
and amortization of $7,843 and $7,787, respectively		17,255		17,290

Other assets
Income taxes receivable		48		48
Deferred income taxes		61		125
Derivative instruments (notes 12 and 13)		117		131
Pension and post-retirement assets (note 16)		8		9
Regulatory assets (note 14)		1,274		1,242
Net investment in direct financing lease		487		488
Investments subject to significant influence (note 5)		1,030		947
Investment securities		55		48
Goodwill		6,165		6,213
Other long-term assets		138		169
Total other assets		9,383		9,420

Total assets	$	28,946	$	29,221

The accompanying notes are an integral part of these condensed consolidated financial statements.

Emera Incorporated
Condensed Consolidated Balance Sheets (Unaudited) – Continued

As at	March 31		December 31
millions of Canadian dollars		2017		2016
Liabilities and Equity
Current liabilities
Short-term debt (note 17)	$	1,007	$	961
Current portion of long-term debt		473		476
Accounts payable		970		1,242
Income taxes payable		17		19
Derivative instruments (notes 12 and 13)		137		325
Regulatory liabilities (note 14)		291		362
Pension and post-retirement liabilities (note 16)		24		58
Other current liabilities		330		281
Total current liabilities		3,249		3,724

Long-term liabilities
Long-term debt (note 18)		14,268		14,268
Deferred income taxes		1,719		1,672
Convertible debentures		5		8
Derivative instruments (notes 12 and 13)		110		150
Regulatory liabilities (note 14)		1,265		1,277
Asset retirement obligations		168		170
Pension and post-retirement liabilities (note 16)		644		669
Other long-term liabilities		476		467
Total long-term liabilities		18,655		18,681

Commitments and contingencies (note 19)

Equity
Common stock (note 9)		4,785		4,738
Cumulative preferred stock		709		709
Contributed surplus		75		75
Accumulated other comprehensive income (note 11)		83		106
Retained earnings		1,278		1,076
Total Emera Incorporated equity		6,930		6,704
Non-controlling interest in subsidiaries		112		112
Total equity		7,042		6,816
Total liabilities and equity	$	28,946	$	29,221

The accompanying notes are an integral part of these condensed consolidated financial statements.

Approved on behalf of the Board of Directors

“M. Jacqueline Sheppard” “Christopher G. Huskilson”

Chair of the Board President and Chief Executive Officer

Emera Incorporated
Condensed Consolidated Statements of Cash Flows (Unaudited)

For the	Three months ended March 31
millions of Canadian dollars		2017		2016
Operating activities
Net income	$	322	$	55
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		218		91
Income from equity investments, net of dividends		(19)		(13)
Allowance for equity funds used during construction		(3)		(1)
Deferred income taxes, net		101		9
Net change in pension and post-retirement liabilities		(8)		6
Regulated fuel adjustment mechanism and fixed cost deferrals		13		17
Net change in fair value of derivative instruments		(249)		(29)
Net change in regulatory assets and liabilities		(38)		(5)
Net change in capitalized transportation capacity		20		56
Foreign exchange loss (gain)		-		45
Other operating activities, net		(9)		2
Changes in non-cash working capital (note 20)		(182)		(52)
Net cash provided by operating activities		166		181
Investing activities
Additions to property, plant and equipment		(305)		(87)
Net purchase of investments subject to significant influence, inclusive of acquisition costs		(69)		(53)
Other investing activities		(5)		1
Net cash used in investing activities		(379)		(139)
Financing activities
Change in short-term debt, net		53		(7)
Proceeds from long-term debt, net of issuance costs		40		-
Retirement of long-term debt		(4)		(4)
Net borrowings (repayments) under committed credit facilities		56		21
Issuance of common stock, net of issuance costs		3		15
Dividends on common stock		(69)		(47)
Dividends on preferred stock		(7)		(7)
Dividends paid by subsidiaries to non-controlling interest		(2)		(2)
Other financing activities		(4)		(15)
Net cash provided by (used in) financing activities		66		(46)
Effect of exchange rate changes on cash and cash equivalents		(2)		(69)
Net decrease in cash and cash equivalents		(149)		(73)
Cash and cash equivalents, beginning of period		404		1,073
Cash and cash equivalents, end of period	$	255	$	1,000
Cash and cash equivalents consists of:
Cash	$	235	$	261
Short-term investments		20		739
Cash and cash equivalents	$	255	$	1,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

Emera Incorporated
Condensed Consolidated Statements of Changes in Equity (Unaudited)

							Accumulated
							Other
							Comprehensive				Emera		Non-
		Common	Preferred		Contributed		Income (Loss)		Retained		Total		Controlling		Total
millions of Canadian dollars	Stock		Stock		Surplus		(“AOCI”)		Earnings		Equity		Interest		Equity
For the three months ended March 31, 2017
Balance, December 31, 2016	$	4,738	$	709	$	75	$	106	$	1,076	$	6,704	$	112	$	6,816
Net income of Emera Incorporated		-		-		-		-		319		319		3		322
Other comprehensive income (loss), net of tax expense of $1 million		-		-		-		(23)		-		(23)		(1)		(24)
Issuance of common stock, net of after-tax issuance costs		3		-		-		-		-		3		-		3
Dividends declared on preferred stock (Series A: $0.15970/share, Series B: $0.14730/share, Series C: $0.25625/share, Series E: $0.28125/share and Series F: $0.265625/share)		-		-		-		-		(7)		(7)		-		(7)
Dividends declared on common stock ($0.5225/share)		-		-		-		-		(110)		(110)		-		(110)
Common stock issued under purchase plan		43		-		-		-		-		43		-		43
Stock-based compensation		1										1				1
Other		-		-		-		-		-		-		(2)		(2)
Balance, March 31, 2017	$	4,785	$	709	$	75	$	83	$	1,278	$	6,930	$	112	$	7,042

The accompanying notes are an integral part of these condensed consolidated financial statements.

Emera Incorporated
Condensed Consolidated Statements of Changes in Equity (Unaudited) – Continued

							Accumulated
							Other				Emera		Non-
	Common		Preferred		Contributed		Comprehensive		Retained		Total		Controlling		Total
millions of Canadian dollars	Stock		Stock		Surplus		Income (“AOCI”)		Earnings		Equity		Interest		Equity
For the three months ended March 31, 2016
Balance, December 31, 2015	$	2,157	$	709	$	29	$	137	$	1,168	$	4,200	$	134	$	4,334
Net income of Emera Incorporated		-		-		-		-		51		51		4		55
Other comprehensive income (loss), net of tax expense of nil		-		-		-		(131)		-		(131)		(7)		(138)
Dividends declared on preferred stock (Series A: $0.1597/share, Series B: $0.1425/share, Series C: $0.25625/share, Series E: $0.28125/share and Series F: $0.265625/share)		-		-		-		-		(7)		(7)		-		(7)
Dividends declared on common stock ($0.4750/share)		-		-		-		-		(70)		(70)		-		(70)
Common stock issued under purchase plan		25		-		-		-		-		25		-		25
Stock-based compensation		14		-		(1)		-		-		13		-		13
Acquisition of non-controlling interest of ECI		3				7						10		(24)		(14)
Other		-		-		-		-		-		-		(1)		(1)
Balance, March 31, 2016	$	2,199	$	709	$	35	$	6	$	1,142	$	4,091	$	106	$	4,197

The accompanying notes are an integral part of these condensed consolidated financial statements.

Emera Incorporated

Notes to the Condensed Consolidated Interim Financial Statements (Unaudited)

As at March 31, 2017 and 2016

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Emera Incorporated (“Emera” or the “Company”) is an energy and services company which invests in electricity generation, transmission and distribution, gas transmission and distribution and utility energy services.

Emera’s primary rate-regulated subsidiaries and investments at March 31, 2017 included the following:

· Emera Florida and New Mexico represents TECO Energy, Inc. (“TECO Energy”), a holding company with regulated electric and gas utilities in Florida and New Mexico which was acquired on July 1, 2016. TECO Energy’s holdings includes:

· Tampa Electric Company (“TEC”), which holds the Tampa Electric Division (“Tampa Electric”), an integrated regulated electric utility, serving approximately 743,000 customers in West Central Florida and Peoples Gas System Division, (“PGS”) a regulated gas distribution utility, serving approximately 372,000 customers across Florida;

· New Mexico Gas Company, Inc. (“NMGC”), a regulated gas distribution utility, serving approximately 523,000 customers across New Mexico;

· TECO Finance, Inc. (“TECO Finance”), a wholly owned financing subsidiary of TECO Energy;

· Nova Scotia Power Inc. (“NSPI”), a fully integrated electric utility and the primary electricity supplier in Nova Scotia, serving approximately 511,000 customers;

· Emera Maine provides electric transmission and distribution services to approximately 157,000 customers in Maine;

· Emera Caribbean represents Emera (Caribbean) Incorporated (“ECI”) includes:

· The Barbados Light & Power Company Limited (“BLPC”), a vertically integrated utility and sole provider of electricity on the island of Barbados, serving approximately 128,000 customers;

· a 50.0 per cent direct and 30.4 per cent indirect interest (through a 60.7 per cent interest in ICD Utilities Limited) in Grand Bahama Power Company Limited (“GBPC”), a vertically integrated utility and sole provider of electricity on Grand Bahama Island, serving approximately 19,000 customers;

· a 51.9 per cent interest in Dominica Electricity Services Ltd. (“Domlec”), an integrated utility on the island of Dominica, serving approximately 36,000 customers;

· a 19.1 per cent indirect interest in St. Lucia Electricity Services Limited (“Lucelec”), a vertically integrated regulated electric utility on the island of St. Lucia;

· Emera Brunswick Pipeline Company Limited (“Brunswick Pipeline”), a 145-kilometre pipeline delivering re-gasified liquefied natural gas from Saint John, New Brunswick to the United States border under a 25-year firm service agreement with Repsol Energy Canada, which expires in 2034;

· Emera Newfoundland & Labrador Holdings Inc. (“ENL”), focused on two transmission investments related to the development of an 824 megawatt (“MW”) hydroelectric generating facility at Muskrat Falls on the Lower Churchill River in Labrador, scheduled to be generating first power in 2019 and full power in 2020. ENL’s two investments are:

· a 100 per cent investment in NSP Maritime Link Inc. (“NSPML”), which is developing the Maritime Link Project, a $1.56 billion transmission project, including two 170-kilometre sub-sea cables, connecting the island of Newfoundland and Nova Scotia. This project is scheduled to be completed in Q4 2017 and then be in service by January 1, 2018;

· a 62.7 per cent investment in the partnership capital of Labrador-Island Link Limited Partnership (“LIL”), a $3.4 billion electricity transmission project in Newfoundland and

The preparation of consolidated financial statements in accordance with USGAAP requires management to make estimates and assumptions. These may affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Management evaluates the Company’s estimates on an ongoing basis based upon historical experience, current conditions and assumptions believed to be reasonable at the time the assumption is made, with any adjustments recognized in income in the year they arise. Actual results may differ significantly from these estimates.

Seasonal Nature of Operations

Interim results are not necessarily indicative of results for the full year, primarily due to seasonal factors. Electricity and gas sales and related transmission and distribution, vary over the year. The first quarter is typically the strongest period, reflecting colder weather and fewer daylight hours in the winter season in northeastern North America, where historically a substantial portion of Emera’s electricity business is located. However, with the addition of Emera Florida and New Mexico, the third quarter will provide stronger earnings for Emera than prior to the acquisition due to the summer being the peak electricity season in Florida. Certain quarters may also be impacted by weather and the number and severity of storms.

2. FUTURE ACCOUNTING PRONOUNCEMENTS

The Company considers the applicability and impact of all Accounting Standard Updates (“ASU”) issued by Financial Accounting Standards Board (the "FASB"). The ASUs that have been issued, but that are not yet effective, are consistent with those disclosed in the 2016 audited consolidated financial statements, with the exception of the items noted below.

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which creates a new, principle-based revenue recognition framework, which has been codified as Accounting Standards Codification (“ASC”) Topic 606. The FASB issued amendments to ASC Topic 606 during 2016 to clarify certain implementation guidance and to reflect narrow scope improvements and practical expedients. The guidance will require additional disclosures regarding the nature, amount, timing and uncertainty of revenue and related cash flows arising from contracts with customers. This guidance will be effective for annual reporting periods, including interim reporting within those periods, beginning after December 15, 2017 and will allow for either full retrospective adoption or modified retrospective adoption. The Company will adopt this guidance effective January 1, 2018.

The Company implemented a project plan in 2016, and is in the process of reviewing material revenue streams in line with this plan, with conclusions on the impact on the streams expected in Q2 and Q3 2017. In addition, the Company is evaluating the available adoption methods, the impact of collectability risk, and disclosure requirements. In Q1 2017, the Company has concluded that the accounting for contributions in aid of construction will be out of the scope of the new standard. The Company continues to monitor the assessment of ASC Topic 606 by the AICPA Power and Utilities Revenue Recognition Task Force.

Leases

In February 2016, the FASB issued ASU 2016-02, Leases. The standard, codified as ASC Topic 842, increases transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet for leases with terms of more than 12 months. Under the existing guidance, operating leases are not recorded as lease assets and lease liabilities on the balance sheet. The effect of leases on the Consolidated Statements of Income and the Consolidated Statements of Cash Flows is largely unchanged. The guidance will require additional disclosures regarding key information about leasing arrangements. This guidance is effective for annual reporting periods, including interim reporting within those periods, beginning after December 15, 2018. Early adoption is permitted, and is required to

millions of Canadian dollars
Purchase Consideration	$	8,447

Fair value assigned to net assets:
Current assets (1)	$	619
Regulatory assets (including current portion)		624
Property, plant and equipment, net		10,023
Other long-term assets		71
Current liabilities		(747)
Assumed long-term debt (including current portion)		(5,409)
Regulatory liabilities (including current portion)		(1,117)
Deferred income taxes		(800)
Pension and post-retirement liabilities (including current portion)		(480)
Other long-term liabilities		(146)
	$	2,638
Cash and cash equivalents		38
Fair value of net assets acquired	$	2,676
Goodwill	$	5,771
(1) Includes accounts receivables with fair value of $334 million comprised of gross contract value of $337 million, and $3 million of contractual receivables not expected to be collected.

Goodwill has been preliminarily allocated to the TECO Energy reporting units and is subject to change as additional information is obtained through the purchase price allocation process. There has been no change in goodwill disclosed at December 31, 2016.

millions of Canadian dollars
Reporting Unit	Goodwill

Tampa Electric	$	4,552
PGS		744
New Mexico Gas		475
Goodwill	$	5,771

Goodwill is subject to an annual assessment for impairment at the reporting unit level. Adverse changes in assumptions could result in a material impairment of Emera’s goodwill.

Acquisition Related Expenses

There were no acquisition related expenses incurred for the three months ended March 31, 2017. Acquisition related expenses totaling $26 million ($18 million after tax) were included in Interest expense, net on the Condensed Consolidated Statements of Income for the three months ended March 31, 2016.

Supplemental Pro Forma Data

The unaudited pro forma financial information below gives effect to the acquisition of TECO Energy as if the transaction had occurred at the beginning of 2016. This pro forma data is presented for information purposes only, and does not purport to be indicative of the results that would have occurred had the acquisition taken place at the beginning of 2016, nor is it indicative of the results that may be expected in future periods.

Pro forma net income attributable to common shareholders excludes all non-recurring acquisition-related expenses incurred by TECO Energy and Emera and includes adjustments for pro forma financing costs associated with the acquisition. The three months ended March 31, 2016 after-tax adjustments resulted in a decrease in net income attributable to common shareholders of $33 million.

For the	Three months ended
millions of Canadian dollars	March 31, 2016
Pro forma operating revenues	$	1,784
Pro forma net income attributable to common shareholders	$	113

4. SEGMENT INFORMATION

Emera manages its reportable segments separately due in part to their different geographical, operating and regulatory environments. Segments are reported based on each subsidiary’s contribution of revenues, net income attributable to common shareholders and total assets as reported to the Company’s chief operating decision maker.

As at March 31, 2017, Emera has six reportable segments, specifically:

· Emera Florida and New Mexico;

· NSPI;

· Emera Maine;

· Emera Caribbean;

· Emera Energy; and

· Corporate and Other (Emera Utility Services, ENL, Emera Brunswick Pipeline, Corporate, other strategic investments and holding companies).

	Emera Florida										Corporate			Inter-
	and New				Emera		Emera		Emera		and			Segment
millions of Canadian dollars	Mexico		NSPI		Maine		Caribbean		Energy		Other			Eliminations	Total
For the three months ended March 31, 2017
Operating revenues from external customers (1)	$	889	$	395	$	79	$	104	$	366	$	25	$	-	$	1,858
Inter-segment revenues (1)		-		1		-		-		4		4		(10)		(1)
Total operating revenues		889		396		79		104		370		29		(10)		1,857
Net income attributable to common shareholders (2)		79		70		13		7		170		(27)		-		312
For the three months ended March 31, 2016
Operating revenues from external customers (1)	$	-	$	397	$	80	$	98	$	288	$	15	$	-	$	878
Inter-segment revenues (1)		-		1		-		-		3		6		(11)		(1)
Total operating revenues		-		398		80		98		291		21		(11)		877
Net income attributable to common shareholders		-		53		9		10		93		(121)		-		44
(1) All significant inter-company balances and inter-company transactions have been eliminated on consolidation except for certain transactions between non-regulated and regulated entities that have not been eliminated because management believes that the elimination of these transactions would understate property, plant and equipment, operating, maintenance and general expenses, or regulated fuel for generation and purchased power. Inter-company transactions which have not been eliminated are measured at the amount of consideration established and agreed to by the related parties. Eliminated transactions are included in determining reportable segments.
(2) Corporate and Other net income has been increased by amortization of $4 million related to the unregulated long-term debt fair market value adjustment recognized on the acquisition of TECO Energy.

5. INVESTMENTS SUBJECT TO SIGNIFICANT INFLUENCE AND EQUITY INCOME

Investments subject to significant influence consisted of the following:
					Equity Income				Percentage
	Carrying Value as at				For the three months ended				of
	March 31		December 31		March 31				Ownership
millions of Canadian dollars		2017		2016		2017		2016	2017
LIL (1)	$	437	$	400	$	9	$	5	62.7
NSPML		363		315		7		4	100.0
M&NP (2)		172		175		6		6	12.9
Lucelec (2)		39		39		1		1	19.1
Bear Swamp (3)		-		-		3		1	50.0
Algonquin Power and Utilities Corp ("APUC") (4)		-		-		-		9	-
Other Investments		19		18		-		-
	$	1,030	$	947	$	26	$	26
(1) Emera indirectly owns 100 per cent of the Class B units, which comprises 24.9 per cent of the total units issued.
(2) Although Emera’s ownership percentage of these entities is relatively low, it is considered to have significant influence over the operating and financial decisions of these companies through Board representation. Therefore, Emera records its investment in these entities using the equity method.
(3) The investment balance in Bear Swamp is in a credit position primarily as a result of a $179 million distribution received in Q4 2015. Bear Swamp's credit investment balance of $213 million (2016 - $217 million) is recorded in "Other long-term liabilities" on the Condensed Consolidated Balance Sheets.
(4) In two separate transactions in 2016, Emera sold a total of 63 million common shares in APUC. Emera no longer holds any interest in APUC.

Equity investments include a $13 million difference between the cost and the underlying fair value of the investees' assets as at the date of acquisition. The excess is attributable to goodwill.

Emera accounts for its variable interest investment in NSPML as an equity investment (note 21). NSPML's consolidated summarized balance sheet is illustrated as follows:

As at		March 31	December 31
millions of Canadian dollars		2017	2016
Balance Sheet
Current assets	$	458	$	439
Property, plant and equipment		1,286		1,132
Non-current assets		204		276
Total assets	$	1,948	$	1,847
Current liabilities	$	269	$	219
Long-term debt		1,288		1,288
Non-current liabilities		28		25
Equity		363		315
Total liabilities and equity	$	1,948	$	1,847

6. OTHER INCOME (EXPENSES), NET

Other income (expenses), net consisted of the following:

For the	Three months ended March 31
millions of Canadian dollars		2017		2016
Allowance for equity funds used during construction	$	3	$	1
Amortization of defeasance costs		(2)		(2)
Foreign exchange gains (losses) and mark-to-market adjustments related to the TECO Energy acquisition		-		(140)
Other		1		2
	$	2	$	(139)

7. INTEREST EXPENSE, NET

Interest expense, net consisted of the following:

For the	Three months ended March 31
millions of Canadian dollars		2017		2016
Interest on debt	$	168	$	49
Interest on Convertible Debentures (1)		-		22
Allowance for borrowed funds used during construction		(2)		(1)
Other		9		5
	$	175	$	75
(1) In 2015, Emera completed the sale of $2.185 billion four per cent convertible unsecured subordinated debentures represented by instalment receipts which were substantially all converted to equity in 2016.

8. INCOME TAXES

The income tax provision differs from that computed using the statutory income tax rate for the following reasons:

For the	Three months ended March 31
millions of Canadian dollars	2017			2016
Income before provision for income taxes	$	434	$	82
Statutory income tax rate		31%		31%
Income taxes, at statutory income tax rate		135		25
Deferred income taxes on regulated income recorded as regulatory assets and regulatory liabilities		(24)		(13)
Foreign tax rate variance		8		(1)
Financing deductions		(4)		(3)
Tax effect of equity earnings		(3)		(3)
Non-deductible portion of foreign exchange losses and mark-to-market adjustments related to the TECO Energy acquisition		-		22
Tax effect of foreign exchange		-		(2)
Other		-		2
Income tax expense (recovery)	$	112	$	27
Effective income tax rate		26%		33%

The statutory income tax rate of 31 per cent represents the combined Canadian federal and Nova Scotia and New Brunswick provincial corporate income tax rates, which are the relevant tax jurisdictions for Emera.

The following reflects the composition of taxes on income from continuing operations presented in the Condensed Consolidated Statements of Income:

For the	Three months ended March 31
millions of Canadian dollars		2017		2016
Income tax expense (recovery) – current	$	11	$	18
Income tax expense (recovery) – deferred		101		9
Income tax expense (recovery)	$	112	$	27

NSPI and the Canada Revenue Agency (“CRA”) are currently in a dispute with respect to the timing of certain tax deductions for NSPI’s 2006 through 2010 taxation years. The ultimate permissibility of the tax deductions is not in dispute; rather, it is the timing of those deductions. The cumulative net amount in dispute to date is $62 million, including interest. NSPI has prepaid $23 million of the amount in dispute, as required by CRA.

Should NSPI be successful in defending its position, all payments including applicable interest will be refunded. If NSPI is unsuccessful in defending any portion of its position, the resulting taxes and applicable interest will be deducted from amounts previously paid, with the excess, if any, owing to CRA.

The related tax deductions will be available in subsequent years. Should NSPI receive similar notices of reassessment for years not currently in dispute, further payments will be required; however, the ultimate permissibility of these deductions would be similarly not in dispute.

NSPI and its advisors believe that NSPI has reported its tax position appropriately and NSPI is disputing the reassessments through the CRA Appeal process. NSPI continues to assess its options to resolving the dispute however the outcome of the Appeal process is not determinable at this time.

9. COMMON STOCK

Authorized: Unlimited number of non-par value common shares.

Issued and outstanding:	millions of shares	millions of Canadian dollars
Balance, December 31, 2016	210.02	$	4,738
Conversion of Convertible Debentures (1)	0.08		3
Issued for cash under Purchase Plans at market rate	0.98		43
Options exercised under senior management share option plan	0.03		1
Balance, March 31, 2017	211.11	$	4,785
(1) In Q1 2017, 0.08 million common shares of Emera were issued relating to the conversion of the Convertible Debentures. As at March 31, 2017, a total of 52.07 million common shares of the Company were issued, representing conversion into common shares of more than 99.7% of the Convertible Debentures.

10. EARNINGS PER SHARE

The following table reconciles the computation of basic and diluted earnings per share:

For the		Three months ended March 31
millions of Canadian dollars (except per share amounts)		2017		2016
Numerator
Net income attributable to common shareholders	$	312.4	$	44.3
Diluted numerator		312.4		44.3
Denominator
Weighted average shares of common stock outstanding		210.6		147.7
Weighted average deferred share units outstanding		1.0		1.0
Weighted average shares of common stock outstanding – basic		211.6		148.7
Stock-based compensation		0.5		0.6
Convertible Debentures		0.1		-
Weighted average shares of common stock outstanding – diluted		212.2		149.3
Earnings per common share
Basic	$	1.48	$	0.30
Diluted	$	1.47	$	0.30

11. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive income (loss), net of tax, are as follows:

millions of Canadian dollars	(Losses) gains on derivatives recognized as cash flow hedges		Net change in unrecognized pension and post-retirement benefit costs		Net change in net investment hedges		Net change in available-for-sale investments		Unrealized (loss) gain on translation of self-sustaining foreign operations		Total AOCI
For the three months ended March 31, 2017
Balance, January 1, 2017	$	(21)	$	(309)	$	(49)	$	(1)	$	486	$	106
Other comprehensive income (loss) before reclassifications		2		-		13		3		(48)		(30)
Amounts reclassified from accumulated other comprehensive income loss (gain)		-		8		-		(1)		-		7
Net current period other comprehensive income (loss)		2		8		13		2		(48)		(23)
Balance, March 31, 2017	$	(19)	$	(301)	$	(36)	$	1	$	438	$	83


millions of Canadian dollars	(Losses) gains on derivatives recognized as cash flow hedges		Net change in unrecognized pension and post-retirement benefit costs		Net change in net investment hedges		Net change in available-for-sale investments		Unrealized (loss) gain on translation of self-sustaining foreign operations		Total AOCI
For the three months ended March 31, 2016
Balance, January 1, 2016	$	(35)	$	(318)	$	-	$	-	$	490	$	137
Other comprehensive income (loss) before reclassifications		14		-		-		-		(155)		(141)
Amounts reclassified from accumulated other comprehensive income loss (gain)		1		9		-		-		-		10
Net current period other comprehensive income (loss)		15		9		-		-		(155)		(131)
Balance, March 31, 2016	$	(20)	$	(309)	$	-	$	-	$	335	$	6

The reclassifications out of accumulated other comprehensive income (loss) are as follows:

For the		Three months ended March 31
millions of Canadian dollars		2017		2016
	Affected line item in the Condensed Consolidated Statements of Income	Amounts reclassified from AOCI
Losses (gain) on derivatives recognized as cash flow hedges
Power and gas swaps	Non-regulated fuel for generation and purchased power	$	(4)	$	(4)
Foreign exchange forwards	Operating revenue - regulated		3		3
Total before tax			(1)		(1)
	Income tax expense (recovery)		1		2
Total net of tax		$	-	$	1
Net change in unrecognized pension and post-retirement benefit costs
Actuarial losses (gains)	OM&G	$	10	$	11
Past service costs (gains)	OM&G		(2)		(2)
Total net of tax		$	8	$	9
Net change in available-for-sale investments
	Other income (expenses), net	$	(1)	$	-
Total net of tax		$	(1)	$	-
Total reclassifications out of AOCI, net of tax, for the period		$	7	$	10

12. DERIVATIVE INSTRUMENTS

The Company enters into futures, forwards, swaps and option contracts as part of its risk management strategy to limit exposure to:

· commodity price fluctuations related to the purchase and sale of commodities in the course of normal operations;

· foreign exchange fluctuations on foreign currency denominated purchases and sales; and

· interest rate fluctuations on debt securities.

The Company also enters into physical contracts for energy commodities. Collectively, these contracts are considered “derivatives”. The Company accounts for derivatives under one of the following four approaches:

1. Physical contracts that meet the normal purchases normal sales (“NPNS”) exemption are not recognized on the balance sheet; they are recognized in income when they settle. A physical contract generally qualifies for the NPNS exemption if the transaction is reasonable in relation to the Company’s business needs, the counterparty owns or controls resources within the proximity to allow for physical delivery, the Company intends to receive physical delivery of the commodity, and the Company deems the counterparty credit worthy. The Company continually assesses contracts designated under the NPNS exemption and will discontinue the treatment of these contracts under this exception if the criteria are no longer met.

2. Derivatives that qualify for hedge accounting are recorded at fair value on the balance sheet. Derivatives qualify for hedge accounting if they meet stringent documentation requirements and can be proven to effectively hedge the identified cash flow risk both at the inception and over the term of the derivative. Specifically for cash flow hedges, the effective portion of the change in the fair value of derivatives is deferred to AOCI and recognized in income in the same period the related hedged item is realized. Any ineffective portion of the change in fair value from cash flow hedges is recognized in net income in the reporting period.

Derivative assets and liabilities relating to the foregoing categories consisted of the following:
		Derivative Assets				Derivative Liabilities
As at	March 31		December 31		March 31		December 31
millions of Canadian dollars		2017		2016		2017		2016
Current
Cash flow hedges
Power swaps	$	5	$	5	$	2	$	2
Foreign exchange forwards		-		-		11		12
		5		5		13		14
Regulatory deferral
Commodity swaps and forwards
Coal purchases		30		26		7		9
Power purchases		3		3		1		1
Natural gas purchases and sales		14		28		-		-
Heavy fuel oil purchases		1		6		5		4
Foreign exchange forwards		45		56		-		-
Physical natural gas and biofuel energy purchases and sales		1		-		2		-
		94		119		15		14
HFT derivatives
Power swaps and physical contracts		58		33		65		44
Natural gas swaps, futures, forwards, physical contracts		108		93		174		357
		166		126		239		401
Other derivatives
Foreign exchange forwards		-		-		-		1
		-		-		-		1
Total gross current derivatives		265		250		267		430
Impact of master netting agreements with intent to settle net or simultaneously		(130)		(105)		(130)		(105)
Total current derivatives		135		145		137		325
Long-term
Cash flow hedges
Power swaps		1		5		2		3
Foreign exchange forwards		-		-		6		10
		1		5		8		13
Regulatory deferral
Commodity swaps and forwards
Coal purchases		51		57		-		-
Power purchases		2		4		3		3
Natural gas purchases and sales		2		5		2		2
Heavy fuel oil purchases		2		4		5		3
Foreign exchange forwards		38		50		-		-
Physical natural gas and biofuel energy purchases and sales		-		-		2		-
		95		120		12		8
HFT derivatives
Power swaps and physical contracts		18		14		25		27
Natural gas swaps, futures, forwards and physical contracts		34		18		95		127
		52		32		120		154
Other derivatives
Interest rate swap		-		-		1		1
		-		-		1		1
Total gross long-term derivatives		148		157		141		176
Impact of master netting agreements with intent to settle net or simultaneously		(31)		(26)		(31)		(26)
Total long-term derivatives		117		131		110		150
Total derivatives	$	252	$	276	$	247	$	475
Derivative assets and liabilities are classified as current or long-term based upon the maturities of the underlying contracts.

Details of master netting agreements, shown net on the Condensed Consolidated Balance Sheets, are summarized in the following table:

		Derivative Assets				Derivative Liabilities
As at	March 31		December 31		March 31		December 31
millions of Canadian dollars		2017		2016		2017		2016
Regulatory deferral	$	8	$	10	$	8	$	10
HFT derivatives		153		121		153		121
Total impact of master netting agreements with intent to settle net or simultaneously	$	161	$	131	$	161	$	131

Cash Flow Hedges

The Company enters into various derivatives designated as cash flow hedges. Emera enters into power swaps to limit Bear Swamp’s exposure to purchased power prices. The Company also enters into foreign exchange forwards to hedge the currency risk for revenue streams denominated in foreign currency for Brunswick Pipeline.

As previously noted, the effective portion of the change in fair value of these derivatives is included in AOCI, until the hedged transactions are recognized in income. The ineffective portion is recognized in income of the period. The amounts related to cash flow hedges recorded in income and AOCI consisted of the following:

For the	Three months ended March 31
millions of Canadian dollars				2017				2016
			Foreign				Foreign
	Power		Exchange		Power		Exchange
	Swaps		Forwards		Swaps		Forwards
Unrealized gain (loss) in Non-regulated fuel for generation and purchased power – ineffective portion	$	-	$	-	$	(1)	$	-
Realized gain (loss) in Non-regulated fuel for generation and purchased power		4		-		4		-
Realized gain (loss) in Operating revenue – Regulated		-		(3)		-		(3)
Total gains (losses) in Net income	$	4	$	(3)	$	3	$	(3)

As at	March 31				December 31
millions of Canadian dollars				2017				2016
			Foreign				Foreign
	Power		Exchange		Power		Exchange
	Swaps		Forwards		Swaps		Forwards
Total unrealized gain (loss) in AOCI – effective portion, net of tax	$	-	$	(17)	$	2	$	(22)

The Company expects $13 million of unrealized losses currently in AOCI to be reclassified into net income within the next twelve months, as the underlying hedged transactions settle.

As at March 31, 2017, the Company had the following notional volumes of outstanding derivatives designated as cash flow hedges that are expected to settle as outlined below:

millions		2017		2018		2019		2020		2021
Foreign exchange forwards (USD) sales	$	40	$	45	$	30	$	30	$	-

Regulatory Deferral

As previously noted, Tampa Electric, PGS, NMGC, NSPI, Emera Maine and GBPC defer gains and losses on certain derivatives documented as economic hedges, including certain physical contracts that do not qualify for the NPNS exemption.

The Company has recorded the following changes in realized and unrealized gains (losses) with respect to derivatives receiving regulatory deferral:

For the
millions of Canadian dollars	Three months ended March 31, 2017
	Commodity swaps and forwards		Physical natural gas and biofuel energy purchases and sales		Foreign exchange forwards
Unrealized gain (loss) in regulatory assets	$	(20)	$	(5)	$	-
Unrealized gain (loss) in regulatory liabilities		-		1		(6)
Realized (gain) loss in regulatory liabilities		(1)		-		-
Realized (gain) loss in inventory (1)		(5)		-		(12)
Realized (gain) loss in regulated fuel for generation and purchased power (2)		(2)		-		(5)
Total change in derivative instruments	$	(28)	$	(4)	$	(23)
(1) Realized (gains) losses will be recognized in fuel for generation and purchased power when the hedged item is consumed.
(2) Realized (gains) losses on derivative instruments settled and consumed in the period; hedging relationships that have been terminated or the hedged transaction is no longer probable.

For the
millions of Canadian dollars		Three months ended March 31, 2016
	Commodity swaps and forwards		Physical natural gas purchases and sales		Foreign exchange forwards
Unrealized gain (loss) in regulatory assets	$	4	$	-	$	3
Unrealized gain (loss) in regulatory liabilities		1		(1)		(50)
Realized (gain) loss in regulatory assets		2		-		-
Realized (gain) loss in inventory (1)		-		-		(19)
Realized (gain) loss in regulated fuel for generation and purchased power (2)		6		-		(9)
Total change in derivative instruments	$	13	$	(1)	$	(75)
(1) Realized (gains) losses will be recognized in fuel for generation and purchased power when the hedged item is consumed.
(2) Realized (gains) losses on derivative instruments settled and consumed in the period; hedging relationships that have been terminated or the hedged transaction is no longer probable.

Commodity Swaps and Forwards

As at March 31, 2017, the Company had the following notional volumes of commodity swaps and forward contracts designated for regulatory deferral that are expected to settle as outlined below:

	2017	2018-2020
millions	Purchases	Purchases
Coal (metric tonnes)	-	2
Natural Gas (Mmbtu)	24	24
Heavy fuel oil (bbls)	-	2

Foreign Exchange Swaps and Forwards

As at March 31, 2017, the Company had the following notional volumes of foreign exchange swaps and forward contracts related to commodity contracts that are expected to settle as outlined below:

	2017		2018-2020
Foreign exchange contracts (millions of US dollars)	$	154	$	240
Weighted average rate		1.0946		1.1138
% of USD requirements		114%		51%

The Company reassesses foreign exchange forecasts periodically and will enter into additional hedges or unwind existing hedges, as required.

Held-for-Trading Derivatives

In the ordinary course of its business, Emera enters into physical contracts for the purchase and sale of natural gas, as well as power and natural gas swaps, forwards and futures, to economically hedge those physical contracts. These derivatives are all considered HFT.

The Company has recognized the following realized and unrealized gains (losses) with respect to HFT derivatives:

For the	Three months ended March 31
millions of Canadian dollars		2017		2016
Power swaps and physical contracts in non-regulated operating revenues	$	1	$	(5)
Natural gas swaps, forwards, futures and physical contracts in non-regulated operating revenues		323		228
Natural gas swaps, forwards, futures and physical contracts in non-regulated fuel for generation and purchased power		3		1
Power swaps, forwards, futures and physical contracts in non-regulated fuel for generation and purchased power		(1)		(2)
Foreign exchange options in non-regulated operating revenue		-		(1)
	$	326	$	221

As at March 31, 2017, the Company had the following notional volumes of outstanding HFT derivatives that are expected to settle as outlined below:

millions		2017		2018		2019	2020	2021
Natural gas purchases (Mmbtu)		318		110		75	50	44
Natural gas sales (Mmbtu)		262		55		27	10	1
Power purchases (MWh)		8		2		-	-	-
Power sales (MWh)		13		1		-	-	-
Foreign exchange options (USD)	$	9	$	4	$	-	-	-

Other Derivatives

The Company has recognized the following realized and unrealized gains (losses) with respect to cash flow hedges for which documentation requirements have not been met:

						Three months ended
For the		March 31
millions of Canadian dollars				2017				2016
		Interest		Foreign		Interest		Foreign
		rate		exchange	rate		exchange
		swaps		forwards	swaps		forwards
Unrealized gain (loss) in other income (expense)	$	-	$	-	$	-	$	(95)
Total gains (losses) in net income	$	-	$	-	$	-	$	(95)

As at March 31, 2017, the Company had interest rate swaps in place for the $250 million non-revolving term credit facility in Brunswick Pipeline for interest payments until the debt matures in 2019.

Credit Risk

The Company is exposed to credit risk with respect to amounts receivable from customers, energy marketing collateral deposits and derivative assets. Credit risk is the potential loss from a counterparty’s non-performance under an agreement. The Company manages credit risk with policies and procedures for counterparty analysis, exposure measurement, and exposure monitoring and mitigation. Credit assessments are conducted on all new customers and counterparties, and deposits or collateral are requested on any high risk accounts.

The Company assesses the potential for credit losses on a regular basis, and where appropriate, maintains provisions. With respect to counterparties, the Company has implemented procedures to monitor the creditworthiness and credit exposure of counterparties and to consider default probability in valuing the counterparty positions. The Company monitors counterparties’ credit standing, including those that are experiencing financial problems, have significant swings in default probability rates, have credit rating changes by external rating agencies, or have changes in ownership. Net liability positions are adjusted based on the Company’s current default probability. Net asset positions are adjusted based on the counterparty’s current default probability. The Company assesses credit risk internally for counterparties that are not rated.

It is possible that volatility in commodity prices could cause the Company to have material credit risk exposures with one or more counterparties. If such counterparties fail to perform their obligations under one or more agreements, the Company could suffer a material financial loss. The Company transacts with counterparties as part of its risk management strategy for managing commodity price, foreign exchange and interest rate risk. Counterparties that exceed established credit limits can provide a cash deposit or letter of credit to the Company for the value in excess of the credit limit where contractually required. The Company also obtains cash deposits from electric customers. The Company uses the cash as payment for the amount receivable or returns the deposit/collateral to the customer/counterparty where it is no longer required by the Company.

The Company enters into commodity master arrangements with its counterparties to manage certain risks, including credit risk to these counterparties. The Company generally enters into International Swaps and Derivatives Association agreements (“ISDA”), North American Energy Standards Board agreements (“NAESB”) and, or Edison Electric Institute agreements. The Company believes that entering into such agreements offers protection by creating contractual rights relating to creditworthiness, collateral, non-performance and default.

As at March 31, 2017, the Company had $104 million (December 31, 2016 - $104 million) in financial assets, considered to be past due, which have been outstanding for an average 68 days. The fair value of these financial assets is $89 million (December 31, 2016 - $91 million), the difference of which is included in the allowance for doubtful accounts. These assets primarily relate to accounts receivable from electric and gas revenue.

Cash Collateral

The Company’s cash collateral positions consisted of the following:

As at	March 31		December 31
millions of Canadian dollars		2017		2016
Cash collateral provided to others	$	123	$	91
Cash collateral received from others		49		52

Collateral is posted in the normal course of business based on the Company’s creditworthiness, including its senior unsecured credit rating as determined by certain major credit rating agencies. Certain derivatives contain financial assurance provisions that require collateral to be posted if a material adverse credit-related event occurs. If a material adverse event resulted in the senior unsecured debt to fall below investment grade, the counterparties to such derivatives could request ongoing full collateralization.

As at		March 31, 2017
millions of Canadian dollars		Level 1		Level 2		Level 3		Total
Assets
Cash flow hedges
Power swaps	$	6	$	-	$	-	$	6
		6		-		-		6
Regulatory deferral
Commodity swaps and forwards
Coal purchases		-		74		-		74
Power purchases		5		-		-		5
Natural gas purchases and sales		3		13		-		16
Heavy fuel oil purchases		-		2		-		2
Foreign exchange forwards		-		83		-		83
Physical natural gas purchases and sales		-		-		1		1
		8		172		1		181
Held-for-trading ("HFT") derivatives
Power swaps and physical contracts		(1)		-		4		3
Natural gas swaps, futures, forwards, physical contracts and related transportation		-		35		27		62
		(1)		35		31		65
Total assets		13		207		32		252
Liabilities
Cash flow hedges
Power swaps		4		-		-		4
Foreign exchange forwards		-		17		-		17
		4		17		-		21
Regulatory deferral
Commodity swaps and forwards
Power purchases		4		-		-		4
Heavy fuel oil purchases		-		9		-		9
Natural gas purchases and sales		2		-		-		2
Physical natural gas and biofuel energy purchases and sales		-		5		-		5
		6		14		-		20
HFT derivatives
Power swaps and physical contracts		16		-		1		17
Natural gas swaps, futures, forwards and physical contracts		2		31		155		188
		18		31		156		205
Other derivatives
Interest rate swap		-		1		-		1
		-		1		-		1
Total liabilities		28		63		156		247
Net assets (liabilities)	$	(15)	$	144	$	(124)	$	5

As at		December 31, 2016
millions of Canadian dollars		Level 1		Level 2		Level 3		Total
Assets
Cash flow hedges
Power swaps	$	10	$	-	$	-	$	10
		10		-		-		10
Regulatory deferral
Commodity swaps and forwards
Coal purchases		-		74		-		74
Power purchases		7		-		-		7
Natural gas purchases and sales		8		25		-		33
Heavy fuel oil purchases		3		5		1		9
Foreign exchange forwards		-		106		-		106
		18		210		1		229
HFT derivatives
Power swaps and physical contracts		(7)		1		-		(6)
Natural gas swaps, futures, forwards, physical contracts and related transportation		-		4		39		43
		(7)		5		39		37
Total assets		21		215		40		276
Liabilities
Cash flow hedges
Power swaps	$	4	$	-	$	-	$	4
Foreign exchange forwards		-		23		-		23
		4		23		-		27
Regulatory deferral
Commodity swaps and forwards
Power purchases		4		-		-		4
Heavy fuel oil purchases		-		6		-		6
Natural gas purchases and sales		1		1		-		2
		5		7		-		12
HFT derivatives
Power swaps and physical contracts		12		5		-		17
Natural gas swaps, futures, forwards and physical contracts		4		24		389		417
		16		29		389		434
Other derivatives
Foreign exchange forwards		-		1		-		1
Interest rate swaps		-		1		-		1
		-		2		-		2
Total liabilities		25		61		389		475
Net assets (liabilities)	$	(4)	$	154	$	(349)	$	(199)

The change in the fair value of the Level 3 financial assets for the three months ended March 31, 2017 was as follows:

	Regulatory Deferral				HFT Derivatives
millions of Canadian dollars	Oil financial derivatives		Physical natural gas purchases and sales		Power		Natural gas		Total
Balance, January 1, 2017	$	1	$	-	$	-	$	39	$	40
Unrealized gains (losses) included in regulatory assets or liabilities		(1)		1		-		-		-
Total realized and unrealized gains (losses) included in non-regulated operating revenues		-		-		4		3		7
Net transfers out of level 3		-		-		-		(15)		(15)
Balance, March 31, 2017	$	-	$	1	$	4	$	27	$	32

The change in the fair value of the Level 3 financial liabilities for the three months ended March 31, 2017 was as follows:

	Regulatory Deferral				HFT Derivatives
millions of Canadian dollars	Oil financial derivatives		Physical natural gas and biofuel energy purchases and sales		Power		Natural gas		Total
Balance, January 1, 2017	$	-	$	-	$	-	$	389	$	389
Total realized and unrealized gains (losses) included in non-regulated operating revenues		-		-		-		(238)		(238)
Net transfers into Level 3		-		-		1		4		5
Balance, March 31, 2017	$	-	$	-	$	1	$	155	$	156

The Company evaluates the observable inputs of market data on a quarterly basis in order to determine if transfers between levels is appropriate. For the three months ended March 31, 2017, transfers out of Level 3 were a result of an increase in observable inputs. For the three months ended March 31, 2017, transfers into Level 3 were a result of a decrease in observable inputs.

Emera’s Enterprise Risk Management group is responsible for valuation policies, processes and the measurement of fair value. Fair value accounting rules provide a three level hierarchy that prioritizes the inputs used to measure fair value. When possible, determining fair value is based primarily on observable market inputs in active markets.

Contracts with quoted prices available in active markets and exchanges for identical assets or liabilities are classified as Level 1 in the hierarchy. For those contracts whereby pricing inputs are either directly or indirectly observable through markets, exchanges or third party sources, but do not qualify as Level 1, are classified as Level 2 in the hierarchy. For a Level 3 classification, the processes and methods of measurement for third-party pricing information and illiquid markets are developed with input and using the market knowledge of the trading operations within Emera and its affiliates.

Significant unobservable inputs used in the fair value measurement of Emera’s natural gas and power derivatives includes third-party-sourced pricing for instruments based on illiquid markets; internally developed correlation factors and basis differentials; own credit risk; and discount rates. Internally developed correlations and basis differentials are reviewed on a quarterly basis based on statistical analysis of the spot markets in the various illiquid term markets. Where possible, Emera also sources multiple broker prices in an effort to evaluate and substantiate these unobservable inputs. Discount rates may include a risk premium for those long-term forward contracts with illiquid future price points to incorporate the inherent uncertainty of these points. Any risk premiums for long-term contracts are evaluated by observing similar industry practices and in discussion with industry peers. Significant increases (decreases) in any of these inputs in isolation would result in a significantly lower (higher) fair value measurement.

The following table outlines quantitative information about the significant unobservable inputs used in the fair value measurements categorized within Level 3 of the fair value hierarchy:

As at		March 31, 2017
millions of Canadian dollars		Fair Value	Valuation Technique	Unobservable Input	Range	Weighted average
Assets
Regulatory deferral – Physical	$	1	Modelled pricing	Third-party pricing	$4.84 - $5.60	$5.14
natural gas purchases and sales				Probability of default	0.04%	0.04%
HFT derivatives –		4	Modelled pricing	Third-party pricing	$24.75 - $83.15	$56.12
Power swaps and				Probability of default	0.00% - 0.01%	0.00%
physical contracts				Discount rate	0.00% - 0.14%	0.02%
HFT derivatives –		18	Modelled pricing	Third-party pricing	$2.16 - $5.35	$3.21
Natural gas swaps,				Probability of default	0.00% - 0.03%	0.00%
futures, forwards,				Discount rate	0.00% - 0.21%	0.04%
physical contracts		9	Modelled pricing	Third-party pricing	$2.23 - $9.79	$3.95
and related transportation				Basis adjustment	0.04% - 0.63%	0.50%
				Probability of default	0.00% - 0.02%	0.00%
				Discount rate	0.00% - 0.10%	0.01%
Total assets	$	32
Liabilities
HFT derivatives –	$	1	Modelled pricing	Third-party pricing	$24.75 - $83.15	$46.08
Power swaps and				Own credit risk	0.00% - 0.01%	0.00%
physical contracts				Discount rate	0.00% - 0.14%	0.01%
HFT derivatives –	$	153	Modelled pricing	Third-party pricing	$2.06 - $8.61	$3.92
Natural gas swaps, futures,				Own credit risk	0.00% - 0.07%	0.01%
forwards and physical contracts				Discount rate	0.00% - 0.32%	0.04%
		2	Modelled pricing	Third-party pricing	$2.92 - $9.79	$4.85
				Basis adjustment	0.26% - 0.63%	0.61%
				Own credit risk	0.00% - 0.07%	0.00%
				Discount rate	0.00% - 0.10%	0.01%
Total liabilities	$	156
Net assets (liabilities)	$	(124)

The financial assets and liabilities included on the Condensed Consolidated Balance Sheets that are not measured at fair value consisted of the following:

As at					March 31, 2017
millions of Canadian dollars		Carrying Amount		Fair Value		Level 1		Level 2		Level 3		Total
Long-term debt (including current portion)	$	14,741	$	15,748	$	76	$	14,842	$	830	$	15,748

As at					December 31, 2016
millions of Canadian dollars		Carrying Amount		Fair Value		Level 1		Level 2		Level 3		Total
Long-term debt (including current portion)	$	14,744	$	15,723	$	78	$	14,843	$	802	$	15,723

The fair values of long-term debt instruments, classified as Level 1 in the fair value hierarchy, are valued using unadjusted quoted closing market prices that are traded in active markets.

Those classified as Level 2 are valued either by using recent quoted market prices for the instrument where the instrument is not frequently traded, by using quoted closing market prices for similar issues that are frequently traded in an active market or by using quoted market prices and applying estimated credit spreads, provided by third-party pricing services, to the par value of the security.

Those classified as Level 3 are valued by discounting the future cash flows of the specific debt instrument at an estimated yield to maturity equivalent to benchmark government bonds with similar terms to maturity, plus a credit risk premium equal to that of issuers of similar credit quality.

The Company has designated $1.2 billion United States dollar denominated Hybrid Notes as a hedge of the foreign currency exposure of its net investment in United States dollar denominated operations. A foreign currency gain of $13 million was recorded in Other Comprehensive Income for the three months ended March 31, 2017 (2016 – nil). There was no ineffectiveness for the three months ended March 31, 2017 (2016 – nil).

All other financial assets and liabilities, such as cash and cash equivalents, restricted cash, accounts receivable, short-term debt and accounts payable, are carried at cost. The carrying value approximates fair value due to the short-term nature of these financial instruments.

14. REGULATORY ASSETS AND LIABILITIES

A summary of the Company’s regulatory assets and liabilities is provided below. For a detailed description regarding the nature of the Company’s regulatory assets and liabilities, refer to note 17 in Emera’s 2016 annual audited consolidated financial statements.

As at		March 31		December 31
millions of Canadian dollars		2017		2016
Regulatory assets
Deferred income tax regulatory assets	$	672	$	632
Pension and post-retirement medical plan		367		373
Environmental remediation		46		49
Unamortized defeasance costs		38		39
2015 demand side management deferral		31		32
GBPC Hurricane Matthew restoration		28		28
Stranded cost recovery		27		27
Deferrals related to derivative instruments		21		15
Debt basis adjustment		18		19
Cost-recovery clauses		14		12
Deferred bond refinancing costs		9		9
Other		82		87
	$	1,353	$	1,322
Current	$	79	$	80
Long-term		1,274		1,242
Total regulatory assets	$	1,353	$	1,322
Regulatory liabilities
Accumulated reserve - cost of removal	$	983	$	990
Deferrals related to derivative instruments		182		230
Cost-recovery clauses		122		153
Regulated fuel adjustment mechanism		106		94
Transmission and delivery storm reserve		62		75
Deferred income tax regulatory liabilities		34		26
Self-Insurance fund (note 21)		29		30
Bill reduction credit		7		10
Other		31		31
	$	1,556	$	1,639
Current	$	291	$	362
Long-term		1,265		1,277
Total regulatory liabilities	$	1,556	$	1,639

15. RELATED PARTY TRANSACTIONS

In the ordinary course of business, Emera provides energy, construction and other services and enters into transactions with its subsidiaries, associates and other related companies on terms similar to those offered to non-related parties. Inter-company balances and inter-company transactions have been eliminated on consolidation, except for the net profit on certain transactions between non-regulated and

regulated entities in accordance with accounting standards for rate-regulated entities. All material amounts are under normal interest and credit terms.

Significant transactions between Emera and its associated companies include:

· Natural gas transportation capacity revenues from M&NP reported in the Condensed Consolidated Statements of Income. Revenues from M&NP, reported in Operating revenues, Non-regulated, totalled $10 million for the three months ended March 31, 2017 (2016 - $8 million).

· Transmission construction revenues from NSPML reported in the Condensed Consolidated Statements of Income. Revenues from NSPML, reported in Operating revenues, Non-regulated, totalled $7 million for the three months ended March 31, 2017 (2016 - nil).

There are no significant amounts between Emera and its associated companies reported on Emera’s Condensed Consolidated Balance Sheets as at March 31, 2017 and December 31, 2016.

16. EMPLOYEE BENEFIT PLANS

Emera maintains a number of contributory defined-benefit and defined-contribution pension plans, which cover substantially all of its employees. In addition, the Company provides non-pension benefits for its retirees. These plans cover employees in Nova Scotia, New Brunswick, Newfoundland and Labrador, Florida, Maine, Connecticut, Massachusetts, Rhode Island, New Mexico, Barbados, Dominica and Grand Bahama Island. For details of the Company’s employee benefit plan, refer to note 21 in Emera’s 2016 annual audited consolidated financial statements.

The net benefit cost of providing the defined benefit pension and non-pension benefit plans is detailed below:

For the		Three months ended March 31
millions of Canadian dollars		2017		2016
Defined benefit pension plans
Service cost	$	12	$	5
Interest cost		25		15
Expected return on plan assets		(33)		(17)
Current year amortization of:
Actuarial losses (gains)		9		10
Regulatory asset		4		-
Total defined benefit pension plans		17		13
Non-pension benefits plan
Service cost		1		1
Interest cost		4		1
Expected return on plan assets		(1)		-
Current year amortization of:
Actuarial losses (gains)		1		1
Past service costs (gains)		(2)		(2)
Total non-pension benefits plans		3		1
Total defined benefit plans	$	20	$	14

17. SHORT-TERM DEBT

Emera’s short-term borrowings consist of commercial paper issuances, advances on revolving and non-revolving credit facilities and short-term notes. For details regarding short-term debt refer to note 24 in Emera’s 2016 annual audited consolidated financial statements.

Recent financing activities

millions of Canadian dollars		2017		2018		2019		2020		2021	Thereafter			Total
Purchased power (1)	$	194	$	225	$	206	$	203	$	200	$	2,306	$	3,334
Transportation (2)		450		409		308		280		196		1,620		3,263
Fuel and gas supply		552		212		115		32		27		-		938
Long-term service agreements (3)		81		64		64		31		41		218		499
Equity investment commitments (4)		235		-		-		190		-		-		425
Leases and other (5)		59		16		13		11		8		69		176
Capital projects		125		1		-		-		-		-		126
Demand side management		28		48		13		-		-		-		89
	$	1,724	$	975	$	719	$	747	$	472	$	4,213	$	8,850
(1) Annual requirement to purchase electricity production from independent power producers or other utilities over varying contract lengths.
(2) Purchasing commitments for transportation of fuel and transportation capacity on various pipelines.
(3) Maintenance of certain generating equipment, services related to a generation facility and wind operating agreements, outsourced management of computer and communication infrastructure and vegetation management.
(4) Emera has a commitment in connection with the Federal Loan Guarantee to complete construction of the Maritime Link. Thirty per cent of the financing of this project will come from Emera as equity. Emera also has a commitment to make equity contributions to the Labrador Island Link Limited Partnership upon draw requests from the general partner. The amounts forecasted are a combination of equity investments for both projects and are subject to change in both timing and amounts as the projects advance through construction.
(5) Operating lease agreements for office space, land, plant fixtures and equipment, telecommunications services, rail cars and vehicles.

NSPI has a contractual obligation to pay NSPML for use of the Maritime Link over approximately 35 years. The timing and amounts payable to NSP Maritime Link Inc. and NSPI’s future rate recoveries are dependent upon the in-service date of the Maritime Link, UARB decisions and the final costing of the Maritime Link after construction is complete.

B. Legal Proceedings

Emera Florida and New Mexico

TECO Coal

TECO Coal was sold by TECO Energy on September 21, 2015 to Cambrian Coal Corporation (“Cambrian”), prior to Emera’s acquisition of TECO Energy. On March 18, 2016, Cambrian delivered a notice of a purported claim to TECO Diversified. The claim asserted breach of certain representations, and fraud and willful misconduct in connection therewith, of the Securities Purchase Agreement dated September 21, 2015 by and between TECO Diversified and Cambrian related to the purchase of TECO Coal by Cambrian. While the outcome of such matter is uncertain, management does not believe that its ultimate resolution will have a material adverse effect on the Company’s results of operations, financial condition or cash flows.

TECO Guatemala Holdings (“TGH”)

On December 19, 2013, the International Centre for the Settlement of Investment Disputes (“ICSID”) Tribunal hearing the arbitration claim of TGH, a wholly owned subsidiary of TECO Energy, against the Republic of Guatemala (Guatemala) under the Dominican Republic Central America – United States Free Trade Agreement, issued an award in the case (“the Award”). The ICSID Tribunal unanimously found in favour of TGH and awarded damages to TGH of approximately $21 million USD, plus interest from October 21, 2010 at a rate equal to the U.S. prime rate plus 2 per cent.

On April 18, 2014, Guatemala filed an application for annulment of the entire Award (or, alternatively, certain parts of the Award) pursuant to applicable ICSID rules.

On April 18, 2014, TGH separately filed an application for partial annulment of the Award on the basis of certain deficiencies in the ICSID Tribunal’s determination of the amount of TGH’s damages.

On April 5, 2016, an ICSID ad hoc Committee issued a decision in favour of TGH in the annulment proceedings. In its decision, the ad hoc Committee unanimously dismissed Guatemala’s application for annulment of the award and upheld the original $21 million USD award, plus interest. In addition, the ad hoc Committee granted TGH’s application for partial annulment of the award, and ordered Guatemala to pay certain costs relating to the annulment proceedings. As a result, TGH had the right to resubmit its arbitration claim against Guatemala to seek additional damages (in addition to the previously awarded $21 million USD), as well as additional interest on the $21 million USD, and its full costs relating to the original arbitration and the new arbitration proceeding.

On September 23, 2016, TGH filed a request for resubmission to arbitration. On October 3, 2016, ICSID issued a notice of registration for TGH’s request for resubmission. A new tribunal has been constituted and it issued its first procedural order. TGH’s memorial is due on September 1, 2017. In addition, TGH has sued Guatemala in Washington, D.C. court to enforce the $21 million USD due and owing. Results to date do not reflect any benefit.

Superfund and Former Manufactured Gas Plant Sites

TEC, through its Tampa Electric and PGS divisions, is a potentially responsible party (“PRP”) for certain superfund sites and, through its PGS division, for certain former manufactured gas plant sites. While the joint and several liability associated with these sites presents the potential for significant response costs, as at March 31, 2017, TEC has estimated its ultimate financial liability to be $40 million ($30 million USD), primarily at PGS. This amount has been accrued and is primarily reflected in the long-term liability section under “Other long-term liabilities” on the Condensed Consolidated Balance Sheets. The environmental remediation costs associated with these sites are expected to be paid over many years.

The estimated amounts represent only the portion of the cleanup costs attributable to TEC. The estimates to perform the work are based on TEC’s experience with similar work, adjusted for site-specific conditions and agreements with the respective governmental agencies. The estimates are made in current dollars, are not discounted and do not assume any insurance recoveries.

In instances where other PRPs are involved, most of those PRPs are creditworthy and are likely to continue to be creditworthy for the duration of the remediation work. However, in those instances that they are not, TEC could be liable for more than TEC’s actual percentage of the remediation costs. Factors that could impact these estimates include the ability of other PRPs to pay their pro-rata portion of the cleanup costs, additional testing and investigation which could expand the scope of the cleanup activities, additional liability that might arise from the cleanup activities themselves or changes in laws or regulations that could require additional remediation. Under current regulations, these costs are recoverable through customer rates established in subsequent base rate proceedings. The FPSC has approved, as part of the PGS depreciation settlement, an agreement to accelerate the amortization of the regulated asset associated with this reserve.

Emera Maine

On September 30, 2011, a group including the Attorney General of Massachusetts, New England utilities commissions, state public advocates and end users filed a complaint with the FERC alleging that the 11.14 per cent base ROE under the ISO-New England (“ISO-NE”) Open Access Transmission Tariff (“OATT”) was unjust and unreasonable.

On June 19, 2014, the FERC issued an order (the “FERC Order”) in connection with this complaint that changed the methodology used to set the ROE and resulted in a lower base transmission ROE of 10.57 per cent and a lower total ROE (inclusive of incentive adders) of 11.74 per cent for the period of October 1, 2011 to December 31, 2012. The ROE was confirmed by FERC in two subsequent orders and the FERC Order was appealed by a group of New England Transmission Owners, including Emera Maine and by customers, to the U.S. Court of Appeals for the District of Columbia Circuit. On June 30, 2016, Emera Maine completed the processing of refunds to customers to reflect the 10.57 per cent ROE. On April 14, 2017, the U.S. Court of Appeals vacated the FERC Order. The Court concluded that FERC failed to make an explicit finding that the existing base ROE of 11.14 per cent was unjust and

The Company’s rate-regulated subsidiaries and certain investments subject to significant influence are subject to risk of the recovery of costs and investments. As cost-of-service utilities with an obligation to serve customers, Tampa Electric, PGS, NMGC, NSPI, Emera Maine, BLPC, GBPC, and Domlec must obtain regulatory approval to change electricity rates and/or riders from their respective regulators. Costs and investments can be recovered upon approval by the respective regulator as an adjustment to rates and/or riders, which normally requires a public hearing process or may be mandated by other governmental bodies. In addition, the commercial and regulatory frameworks under which Emera and its subsidiaries operate can be impacted by significant shifts in government policy (including shifts in policy which could occur as a result of climate change concerns) and changes in governments. Emera’s investments in entities in which it has significant influence and which are subject to regulatory risk include: NSPML, LIL, M&NP and Lucelec.

During public hearing processes, consultants and customer representatives scrutinize the costs, actions and plans of these rate-regulated companies and their respective regulators determine whether to allow recovery and to adjust rates based upon the evidence and any contrary evidence from other parties. In some circumstances, other government bodies may influence the setting of rates. The subsidiaries manage this regulatory risk through transparent regulatory disclosure, ongoing stakeholder and government consultation and multi-party engagement on aspects such as utility operations, fuel-related audits, rate filings and capital plans. The subsidiaries employ a collaborative regulatory approach through technical conferences and, where appropriate, negotiated settlements.

Weather and Climate Risk

Shifts in weather patterns affect energy sales and associated revenues and costs. Extreme weather events generally result in increased operating costs associated with restoring service to customers as a result of unplanned outages. Emera responds to outages which occur as a result of significant weather events according to each subsidiary’s respective emergency services restoration plan.

Changes in Environmental Legislation

Emera is subject to regulation by federal, provincial, state, regional and local authorities with regard to environmental matters; primarily related to its utility operations. This includes laws setting greenhouse gas (“GHG”) emissions standards and air emissions standards. Emera is also subject to laws regarding the generation, storage, transportation, use and disposal of hazardous substances and materials.

In addition to imposing continuing compliance obligations, there are permit requirements, laws and regulations authorizing the imposition of penalties for non-compliance, including fines, injunctive relief and other sanctions. The cost of complying with current and future environmental requirements is, and may be, material to Emera. Failure to comply with environmental requirements or to recover environmental costs in a timely manner through rates could have a material adverse effect on Emera. In addition, Emera’s business could be materially affected by changes in government policy, utility regulation, and environmental and other legislation that could occur in response to environmental and climate change concerns.

New emission reductions requirements for the utilities sector are being established by governments in Canada and the United States. Changes to GHG emissions standards and air emissions standards could adversely affect Emera’s operations and financial performance. Stricter environmental laws and enforcement of such laws in the future could increase Emera’s exposure to additional liabilities and costs. These changes could also affect earnings and strategy by changing the nature and timing of capital investments.

Emera manages its environmental risk by operating in a manner that is respectful and protective of the environment and with the objective of achieving full compliance with applicable laws, legislation and company policies and standards. Emera has implemented this policy through the development and application of environmental management systems in its operating subsidiaries. Comprehensive audit programs are also in place to regularly test compliance with such laws, policies and standards.

Foreign Exchange Risk

The Company is exposed to foreign currency exchange rate changes. Emera operates globally, with an increasing amount of the Company’s adjusted net income earned outside of Canada. As such, Emera is exposed to movements in exchange rates between the Canadian dollar and, particularly, the US dollar, which could positively or adversely affect results.

Consistent with the Company’s risk management policies, Emera manages currency risks through matching US denominated debt to finance its US operations and uses short-term foreign currency derivative instruments to hedge specific transactions. The Company enters into foreign exchange forward and swap contracts to limit exposure on certain foreign currency transactions such as fuel purchases, revenues streams, capital expenditures and capital projects. The regulatory framework for the Company’s rate-regulated subsidiaries permits the recovery of prudently incurred costs, including foreign exchange.

The Company does not utilize derivative financial instruments for foreign currency trading or speculative purposes, or to hedge the value of its investments in foreign subsidiaries. Exchange gains and losses on net investments in foreign subsidiaries are included in AOCI.

Capital Market and Liquidity Risk

Emera’s operations and projects in development require significant capital investments in property, plant and equipment. Consequently, Emera is an active participant in the debt and equity markets. After giving effect to the TECO Energy acquisition, Emera now has total debt of $15 billion. Any disruption in capital markets could have a material impact on Emera’s ability to fund its operations. Capital markets are global in nature and are affected by numerous events throughout the world economy. Capital market disruptions could prevent Emera from issuing new securities or cause the Company to issue securities with less than preferred terms and conditions.

Emera is subject to financial risk associated with changes in its credit ratings. There are a number of factors that rating agencies evaluate to determine credit ratings, including the company’s business and regulatory framework, the ability to recover costs and earn returns, diversification, leverage, and liquidity. A change to a credit rating as a result of changes in any of these items could result in higher interest rates in future financings, increase borrowing costs under certain existing credit facilities, limit access to the commercial paper market or limit the availability of adequate credit support for subsidiary operations.

Liquidity risk relates to Emera’s ability to ensure sufficient funds are available to meet its financial obligations. Emera manages this risk by forecasting cash requirements on a continuous basis to determine whether sufficient funds are available. Liquidity and capital needs will be financed through internally generated cash flows, short-term credit facilities, and ongoing access to capital markets. The Company reasonably expects liquidity sources to exceed ordinary course capital needs.

Interest Rate Risk

Emera utilizes a combination of fixed and floating rate debt financing for operations and capital expenditures, resulting in an exposure to interest rate risk. Emera seeks to manage interest rate risk through a portfolio approach that includes the use of fixed and floating rate debt with staggered maturities. The Company will, from time to time, issue long-term debt or enter into interest rate hedging contracts to limit its exposure to fluctuations in floating interest rate debt.

For Emera’s regulated subsidiaries, the cost of debt is a component of rates and prudently incurred debt costs are recovered from customers. While regulatory ROE will generally follow the direction of interest rates, such that regulatory ROE’s are likely to fall in times of reducing interest rates and raise in times of increasing interest rates, albeit not directly and generally with a lag period reflecting the regulatory

harmless from any losses incurred that arise out of the coal mining permits during the period commencing on the closing date through the date all permit approvals are obtained.

Emera has a standby letter of credit in the amount of $21 million to guarantee the performance of the obligations of the EUS-Rokstad joint venture. The letter of credit expires in August 2017. EUS-Rokstad is a joint venture between EUS and Rokstad Power, formed for the purpose of constructing the high voltage direct current components of NSPML’s transmission line. Rokstad Power has issued a separate letter of credit to Emera for their portion of the work to be performed under the contract. EUS and Rokstad Power are jointly and severally liable for completion of the project.

20. SUPPLEMENTARY INFORMATION TO CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the	Three months ended March 31
millions of Canadian dollars		2017		2016
Changes in non-cash working capital:
Receivables, net	$	11	$	(54)
Income taxes receivable		(5)		(7)
Inventory		27		48
Prepayments and other current assets		(27)		(23)
Accounts payable		(236)		(2)
Income taxes payable		(1)		4
Other current liabilities		49		(18)
Total non-cash working capital		(182)		(52)

Supplemental disclosure of non-cash activities:
Common share dividends reinvested	$	40	$	23

21. VARIABLE INTEREST ENTITIES

The Company performs ongoing analysis to assess whether it holds any Variable Interest Entities (“VIE”). To identify potential VIEs, management reviews contracts under leases, long-term purchase power agreements, tolling contracts and jointly-owned facilities.

VIEs of which the Company is deemed the primary beneficiary must be consolidated. The primary beneficiary of a VIE has both the power to direct the activities of the entity that most significantly impact its economic performance and the obligation to absorb losses of the entity that could potentially be significant to the entity. In circumstances where Emera is not deemed the primary beneficiary, the VIE is accounted for using the equity method.

Emera holds a variable interest in NSPML, a VIE for which it was determined that Emera is not the primary beneficiary since it does not have the controlling financial interest of NSPML. In Q2 2014, when the critical milestones were achieved, Nalcor Energy was deemed the beneficiary of the asset for financial reporting purposes as they have authority over the majority of the direct activities that are expected to most significantly impact the economic performance of the Maritime Link Project. Thus, Emera began recording the Maritime Link Project as an equity investment.

BLPC has established a Self-Insurance Fund (“SIF”) primarily for the purpose of building a fund to cover risk against damage and consequential loss to certain generating, transmission and distribution systems. ECI holds a variable interest in the SIF for which it was determined that ECI was the primary beneficiary and, accordingly, the SIF must be consolidated by ECI. In its determination that ECI controls the SIF, management considered that, in substance, the activities of the SIF are being conducted on behalf of ECI’s subsidiary BLPC and BLPC, alone, obtains the benefits from the SIF’s operations. Additionally, because ECI, through BLPC, has rights to all the benefits of the SIF, it is also

As at		March 31, 2017				December 31, 2016
			Maximum				Maximum
millions of Canadian dollars		Total assets	exposure to loss			Total assets	exposure to loss
Unconsolidated VIEs in which Emera has variable interests
NSPML (equity accounted)	$	363	$	440	$	315	$	577