Leases, Lessee

12 Months Ended

Dec. 31, 2019

18. LEASES

Lessee

The Company has operating leases for buildings, land, telecommunication services, and rail cars. Emera’s leases have remaining lease terms of 1 year to 66 years, some of which include options to extend the leases for up to 65 years. These options are included as part of the lease term when it is considered reasonably certain that they will be exercised.

As at		December 31
millions of Canadian dollars	Classification		2019
Right-of-use asset	Other long-term assets	$	64
Lease liabilities
Current	Other current liabilities		5
Long-term	Other long-term liabilities		61
Total lease liabilities		$	66

The Company has recorded lease expense of $172 million for the year ended December 31, 2019, of which $156 million relates to variable costs for power generation facility finance leases, recorded in “Regulated fuel for generation and purchased power” in the consolidated statements of income.

Future minimum lease payments under non-cancellable operating leases for each of the next five years and in aggregate thereafter are as follows:



millions of Canadian dollars	2020		2021		2022		2023		2024			Thereafter		Total
Minimum lease payments	$	8	$	8	$	7	$	6	$	5	$	102	$	136
Less imputed interest														(70)
Total	$	8	$	8	$	7	$	6	$	5	$	102	$	66

Additional information related to Emera's leases is as follows:

	Year ended December 31
For the			2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases (millions of Canadian dollars)		$	7
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (millions of Canadian dollars)		$	16
Weighted average remaining lease term (years)			39
Weighted average discount rate- operating leases			4.07%

Lessor

The Company’s net investment in direct finance and sales-type leases relate to Brunswick Pipeline, compressed natural gas (“CNG”) stations and heat pumps.

Direct finance and sales-type lease unearned income is recognized in income over the life of the lease using a constant rate of interest equal to the internal rate of return on the lease and is recorded as “Operating revenues – regulated gas” and “Other income (expense), net” on the Consolidated Statements of Income.

The Company manages its risk associated with the residual value of the Brunswick Pipeline lease through proper routine maintenance of the asset.

Customers have the option to purchase CNG station assets at any time after 2021 by paying a make-whole payment at the date of the purchase based on a targeted internal rate of return or may take possession of the CNG station asset at the end of the lease term for no cost. Customers have the option to purchase heat pumps at the end of the lease term for a nominal fee.

Net investment in direct finance and sales-type leases consist of the following⁽¹⁾:

As at	December 31
millions of Canadian dollars		2019
Total minimum lease payment to be received	$	1,066
Less: amounts representing estimated executory costs		(189)
Minimum lease payments receivable	$	877
Estimated residual value of leased property (unguaranteed)		183
Less: unearned finance lease income		(532)
Net investment in direct finance and sales-type leases	$	528
Principal due within one year (included in "Receivables and other current assets")		17
Net investment in sales-type leases - long-term (included in "Other long-term assets")		38
Net Investment in direct finance leases - long-term	$	473
(1) The net investment in direct finance lease balance as of December 31, 2018, primarily related to New Brunswick Pipeline, consisted of net minimum lease payments receivable of $865 million less an unguaranteed residual value of $183 million and unearned finance income of $564 million.

As at December 31, 2019, future minimum lease payments to be received for each of the next five years and in aggregate thereafter are as follows:



millions of Canadian dollars	2020		2021		2022		2023		2024		Thereafter		Total
Minimum lease payments to be received	$	76	$	74	$	73	$	73	$	74	$	696	$	1,066
Less: executory costs														(189)
Minimum lease payments receivable	$	76	$	74	$	73	$	73	$	74	$	696	$	877