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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2024
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | 28. COMMITMENTS AND CONTINGENCIES Commitments As at December 31, 2024, contractual commitments (excluding pensions and other post-retirement obligations, long-term debt and asset retirement obligations) for each of the next five years and in aggregate thereafter consisted of the following: millions of dollars 2025 2026 2027 2028 2029 Thereafter Total Purchased power (1) $ 307 $ 277 $ 368 $ 368 $ 369 $ 4,487 $ 6,176 Transportation (2)(3) 742 545 544 454 412 3,228 5,925 Capital projects 604 287 24 - - - 915 Fuel, gas supply and storage (4) 591 94 21 5 - - 711 Other 160 95 80 59 59 264 717 $ 2,404 $ 1,298 $ 1,037 $ 886 $ 840 $ 7,979 $ 14,444 As detailed below, contractual obligations at December 31, 2024 includes those related to NMGC. On completion of the sale of NMGC, all remaining future contractual obligations will be transferred to the buyer. For further details on the pending transaction, refer to note 4. (1) Annual requirement to purchase electricity production from IPPs or other utilities over varying contract lengths. (2) Includes $ 86 million related to NMGC (2025: $ 30 million, 2026: $ 24 million, 2027: $ 16 million, 2028: $ 12 million, 2029: $ 4 million). (3) Purchasing commitments for transportation of fuel and transportation capacity on various pipelines. Includes a commitment of $ 135 million related to a gas transportation contract between PGS and SeaCoast through 2040. (4) Includes $ 177 million related to NMGC (2025: $ 109 million, 2026: $ 52 million, 2027: $ 13 million, 2028: $ 3 million) NSPI has a contractual obligation to pay NSPML for use of the Maritime Link over approximately 38 years from its January 15, 2018 in-service date. In November 2024, the UARB approved the collection of up to $ 197 million from NSPI for the recovery of Maritime Link costs in 2025. The timing and amounts payable to NSPML for the remainder of the 38 -year commitment period are subject to UARB approval. Emera has committed to obtain certain transmission rights in New Brunswick during summer periods (April through October, inclusive) for NLH's use, if requested, effective August 15, 2021 and continuing for 50 years. As transmission rights are contracted, the obligations are included within “Other” in the above table. Legal Proceedings Superfund and Former Manufactured Gas Plant Sites Previously, TEC had been a potentially responsible party (“PRP”) for certain superfund sites through its Tampa Electric and former PGS divisions, as well as for certain former manufactured gas plant sites through its PGS division. As a result of the separation of the PGS division into a separate legal entity, Peoples Gas System, Inc. is also now a PRP for those sites (in addition to third party PRPs for certain sites). While the aggregate joint and several liability associated with these sites has not changed as a result of the PGS legal separation, the sites continue to present the potential for significant response costs. As at December 31, 2024, the aggregate financial liability of the Florida utilities is estimated to be $ 17 million ($ 12 million USD), primarily at PGS. This estimate assumes that other involved PRPs are credit-worthy entities. This amount has been accrued and is primarily reflected in the long-term liability section under “Other long-term liabilities” on the 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 the Florida utilities. The estimates to perform the work are based on the Florida utilities’ 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 believed to be currently credit- worthy and are likely to continue to be credit-worthy for the duration of the remediation work. However, in those instances that they are not, the Florida utilities could be liable for more than their actual percentage of the remediation costs. Other factors that could impact these estimates include 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 base rate proceedings. Other Legal Proceedings Emera and its subsidiaries may, from time to time, be involved in other legal proceedings, claims and litigation that arise in the ordinary course of business which the Company believes would not reasonably be expected to have a material adverse effect on the financial condition of the Company. Principal Financial Risks and Uncertainties Emera believes the following principal financial risks could have a material adverse effect on Emera or its subsidiaries, or their business operations, liquidity or access to or cost of capital, financial position, prospects, and/or results of operations (herein considered a “Material Adverse Effect”). Risks associated with derivative instruments and FV measurements are discussed in note 16 and note 17. Sound risk management is an essential discipline for running the business efficiently and pursuing the Company’s strategy successfully. Emera has an enterprise-wide risk management process, overseen by its Enterprise Risk Management Committee (“ERMC”) and monitored by the Board of Directors, to ensure risks are appropriately identified, assessed, monitored and subject to appropriate controls. The Board of Directors has a Risk and Sustainability Committee (‘RSC”) to assist in carrying out its risk and sustainability oversight responsibilities. The RSC’s mandate includes oversight of the Company’s Enterprise Risk Management framework, including the identification, assessment, monitoring and management of enterprise risks. Regulatory and Political Risk The Company’s rate-regulated subsidiaries and certain investments are subject to complex legislative and regulatory frameworks that cover material aspects of their businesses. These frameworks influence key factors such as rates and cost structures, revenue requirements, allowed ROEs, capital structures, rate base and capital investments, and the recovery of purchased electricity and fuel costs and other costs. Regulators also review the prudency of costs and make other decisions that can impact customer rates and the reliability of service. Emera’s cost -of-service utilities must obtain regulatory approvals for material aspects of their businesses, including changing or adding rates and/or riders. Such approvals often require public hearing proceedings involving numerous stakeholders, and there is no assurance in the outcomes or impact of any regulatory process or decision. If Emera is unable to recover in a timely manner a material amount of costs or a return on invested capital through regulatory mechanisms or otherwise, is disallowed the recovery of certain costs, is subject to regulatory penalties, is not permitted to make certain capital investments, or is not permitted to invest in or divest certain utility assets, it could result in a Material Adverse Effect, including valuation impairments. Regulatory lag, the time between the incurrence of costs and the granting of the rates to recover those costs by regulators, may also result in a Material Adverse Effect. Aspects of the acquisition, ownership, operations, siting, planning, construction, and decommissioning of electric generation, storage, transmission and distribution facilities and natural gas transportation and distribution systems are also subject to regulatory processes and approvals of regulators, government departments and agencies, and other third parties. The failure to obtain, maintain, and renew such approvals or significant changes in the terms and conditions thereof could have a Material Adverse Effect. The regulatory framework, process and regulatory decisions may also be adversely affected by changes in government, shifts in government or public policy, legislative changes, regulatory decisions, geopolitical changes, changes in the economic environment, or other factors. Government interference in the regulatory process or regulatory decisions can undermine regulatory stability, predictability, and independence. Any such changes could have a Material Adverse Effect. Foreign Exchange Risk The Company is exposed to foreign currency exchange rate changes. Emera operates internationally, with a significant amount of the Company’s net income earned outside of Canada. As such, Emera is exposed to movements in exchange rates between the CAD and, particularly, the USD, which could positively or adversely affect results. Emera manages currency risks through matching US denominated debt to finance its US operations and may use foreign currency derivative instruments to hedge specific transactions and earnings exposure. The Company may enter FX forward and swap contracts to limit exposure on certain foreign currency transactions such as fuel purchases, revenue streams and capital expenditures, and on net income earned outside of Canada. The regulatory framework for the Company’s rate-regulated subsidiaries permits the recovery of prudently incurred costs, including FX. 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 do not impact net income as they are reported in AOCI. Liquidity and Capital Markets Risk Liquidity risk relates to Emera’s ability to ensure sufficient funds are available to meet its financial obligations. Emera’s access to capital and cost of borrowing is subject to several risk factors, including financial market conditions, market disruptions and ratings assigned by various market analysts, including credit rating agencies. Disruptions in capital markets could prevent Emera from issuing new securities or cause the Company to issue securities with less than preferred terms and conditions. Emera’s growth plan requires significant capital investments in PP&E and the risk associated with changes in interest rates could have an adverse effect on the cost of financing. The Company’s future access to capital and cost of borrowing may be impacted by various market disruptions . The inability to access cost-effective capital could have a material impact on Emera’s ability to fund its growth plan. 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, its regulatory framework and legislative environment, political interference in the regulatory process, the ability to recover costs and earn returns, diversification, leverage, liquidity and increased exposure to climate change-related impacts, including increased frequency and severity of hurricanes and other severe weather events. A decrease in a credit rating could result in higher interest rates in future financings, increased 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. For certain derivative instruments, if the credit ratings of the Company were reduced below investment grade, the full value of the net liability of these positions could be required to be posted as collateral. The Company has exposure to its own common share price through the issuance of various forms of stock-based compensation, which affect earnings through revaluation of the outstanding units every period. The Company uses equity derivatives to reduce the earnings volatility derived from stock-based compensation. General Economic Risk The Company has exposure to the macro-economic conditions in North America and in other geographic regions in which Emera operates. Like most utilities, economic factors such as consumer income, employment and housing affect demand for electricity and natural gas and, in turn, the Company’s financial results. Adverse changes in general economic conditions and inflation may impact the ability of customers to afford rate increases arising from increases to fuel, operating, capital, environmental compliance, and other costs, and therefore could have a Material Adverse Effect. This may also result in higher credit and counterparty risk, adverse shifts in government policy and legislation, and/or increased risk to full and timely recovery of costs and regulatory assets. 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. For Emera’s regulated subsidiaries, the cost of debt is a component of rates and prudently incurred debt costs are recovered from customers. Regulatory ROE will generally follow the direction of interest rates, such that regulatory ROEs are likely to fall in times of reducing interest rates and rise in times of increasing interest rates, albeit not directly and generally with a lag period reflecting the regulatory process. Rising interest rates may also negatively affect the economic viability of project development and acquisition initiatives. Interest rates could also be impacted by changes in credit ratings. For more information, refer to “Liquidity and Capital Markets Risk”. As with most other utilities and other similar yield-returning investments, Emera’s share price may be affected by changes in interest rates and could underperform the market in an environment of rising interest rates. Inflation Risk: The Company may be exposed to changes in inflation that may result in increased operating and maintenance costs, capital investment, and fuel costs compared to the revenues provided by customer rates. Commodity Price Risk The Company’s utility fuel supply and purchase of other commodities is subject to commodity price risk. In addition, Emera Energy is subject to commodity price risk through its portfolio of commodity contracts and arrangements. Regulated Utilities: The Company’s utility fuel supply is exposed to broader global market conditions, which may include impacts on delivery reliability and price, despite contracted terms. Supply and demand dynamics in fuel markets can be affected by a wide range of factors which are difficult to predict and may change rapidly, including but not limited to, currency fluctuations, changes in global economic conditions, natural disasters, transportation or production disruptions, and geo-political risks, such as political instability, conflicts, changes to international trade agreements, tariffs, trade sanctions or embargos. Prolonged and substantial increases in fuel prices could result in decreased rate affordability, increased risk of recovery of costs or regulatory assets, and/or negative impacts on customer consumption patterns and sales, any of which could result in a Material Adverse Effect. Emera Energy Marketing and Trading: The majority of Emera Energy’s portfolio of electricity and gas marketing and trading contracts and, in particular, its natural gas asset management arrangements, are contracted on a back -to-back basis, avoiding any material long or short commodity positions. However, the portfolio is subject to commodity price risk, particularly with respect to basis point differentials between relevant markets in the event of an operational issue, imposition of tariffs or counterparty default. Changes in commodity prices can also result in increased collateral requirements associated with physical contracts and financial hedges, resulting in higher liquidity requirements and increased costs to the business. Income Tax Risk The computation of the Company’s provision for income taxes is impacted by changes in tax legislation in Canada, the US and the Caribbean and any such changes could have a Material Adverse Effect. The value of Emera’s existing deferred income tax assets and liabilities are determined by existing tax laws and could be negatively impacted by changes in laws. Guarantees and Letters of Credit Emera has guarantees and letters of credit on behalf of third parties outstanding. The following significant guarantees and letters of credit were not included within the Consolidated Balance Sheets as at December 31, 2024 : TECO Holdings, Inc. (“TECO Holdings”) has a guarantee in connection with SeaCoast’s performance of obligations under a gas transportation precedent agreement. The guarantee is for a maximum potential amount of $ 45 million USD if SeaCoast fails to pay or perform under the contract. The guarantee expires five years after the gas transportation precedent agreement termination date, which was terminated on January 1, 2022. The counterparty has the right to require TECO Holdings to provide replacement credit support either in the form of a substitute guarantee from an affiliate with an investment grade credit rating or a letter of credit or cash deposit of $ 27 million USD. TECO Holdings has a guarantee in connection with SeaCoast’s performance obligations under a firm service agreement, which expires December 31, 2055, subject to two extension terms at the option of the counterparty with a final expiration date of December 31, 2071. The guarantee is for a maximum potential amount of $ 13 million USD if SeaCoast fails to pay or perform under the firm service agreement. The counterparty has the right to require TECO Holdings to provide replacement credit support in the form of either a substitute guarantee from an affiliate with an investment grade credit rating or a letter of credit or cash deposit of $ 13 million USD. Emera has a guarantee of $ 66 million USD relating to outstanding notes of ECI. This guarantee will automatically terminate on the date upon which the obligations have been repaid in full. NSPI has guarantees on behalf of its subsidiary, NS Power Energy Marketing Incorporated, in the amount of $ 104 million USD (2023 – $ 104 million USD) with terms of varying lengths. The Company has standby letters of credit and surety bonds in the amount of $ 105 million USD (December 31, 2023 – $ 103 million USD) to third parties that have extended credit to Emera and its subsidiaries. These letters of credit and surety bonds typically have a one-year term and are renewed annually as required. Emera, on behalf of NSPI, has a standby letter of credit to secure obligations under a supplementary retirement plan. The expiry date of this letter of credit was extended to June 2025. The amount committed as at December 31, 2024 was $ 58 million (December 31, 2023 – $ 56 million). Emera has provided an indemnity to a counterparty in relation to certain future tax amounts that could arise from specific future changes in Canadian federal law, subject to certain conditions and limitations. No such changes in law have been proposed at this time. A reasonable estimate of the potential amount of future payments that could result from future claims under this indemnity cannot be calculated, but the risk of having to make any significant payments under this indemnity is considered to be remote. Collaborative Arrangements For the years ended December 31, 2024 and 2023, the Company has identified the following material collaborative arrangements: Through NSPI, the Company is a participant in three wind energy projects in Nova Scotia. The percentage ownership of the wind project assets is based on the relative value of each party’s project assets by the total project assets. NSPI has power purchase arrangements to purchase the entire net output of the projects and, therefore, NSPI’s portion of the revenues are recorded net within regulated fuel for generation and purchased power. NSPI’s portion of operating expenses is recorded in “OM&G” on the Consolidated Statements of Income. In 2024, NSPI recognized $ 12 million net expense (2023 – $ 8 million) in “Regulated fuel for generation and purchased power” and $ 3 million (2023 – $ 3 million) in “OM&G” on the Consolidated Statements of Income.

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