May 7, 2008

Energy firm Emera reacts to credit crunch by looking for home-grown projects

Rising interest rates rule out acquisitions

HALIFAX

North America’s credit crunch has forced Nova Scotia energy firm Emera Inc., to look in its own backyard for growth.

Rather than borrowing money in tight markets to finance acquisitions, it wants to build new projects from scratch.

“Assets became very, very expensive through that period... less and less was it possible to do acquisitions, and that caused us to re-look at our strategy,” Emera’s CEO Chris Huskilson said in a recent interview at his downtown Halifax office.

The new strategy has already borne fruit.

Earlier this year, Emera invested $15 million in OpenHydro, an Irish company which has partnered with Nova Scotia Power to put a test turbine in the Bay of Fundy.

And last week Emera, along with partners National Grid and Spectra Energy, presented a proposal to American regulators to build a $2-billion underground power line from a spot outside Bangor to Boston.

Emera’s share in this project would be 25 to 33 per cent, or $500 million to $700 million.

Emera hopes it can make a buck by sending green-generated electricity from tidal or wind power to the U.S., where governments are getting fussier about the source of electricity.

And then there’s the really big project that Huskilson wants to land.

Emera is taking a hard look at whether it can tie into the Lower Churchill Falls hydro electric development.

It’s a tough deal to close, but both parties are persistent.

A memorandum of understanding, signed in January with Newfoundland and Labrador Hydro, has just been extended for another two months.

Huskilson said the company is exploring three options to bring the energy to the Maritimes and New England: a subsea cable to New Brunswick, one to Nova Scotia and a direct route to the United States across the Scotian Shelf.

Construction is expected to begin in 2009.

Huskilson, a former NSP engineer-turned-executive, took over the helm of the holding company two years ago.

The 51-year-old Shelburne, N.S.-born executive then handed over the job of running the electrical utility to Ralph Tedesco, while he zeroed in on growing the business through Emera’s other subsidiaries.

Before launching this new strategy of building new projects with partners, Emera bought some old business — most notably Bangor Hydro.

The unregulated holding company also acquired other investments, including a 12.9 per cent interest in the Sable gas pipeline.

In 2005, Emera also teamed up with Brascan Power Inc. in a 50-50 joint venture to acquire the Bear Swamp hydro-electric generating facility northern Massachusetts for US$92 million.

In 2006, Huskilson told industry analysts he was taking the company, with assets of more than $4 billion, on a new road — toward growth in “select U.S. markets” and into Central and Western Canada.

Last winter’s purchase of a $22-million stake in St. Lucia Electric Services was as far afield as Emera ventured in its growth-through-acquistion phase.

Huskilson said the company might not be finished with the Caribbean but these days it has shifted its focus back to northeastern North America.

The continental strategy has been quietly shelved in the face of rising interest rates.

Canadian Press

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