HALIFAX, Nova Scotia & TAMPA Fla.--(BUSINESS WIRE)--Emera Inc. (“Emera”) (TSX: EMA):
Highlights:
- EPS accretion expected in the first full year of operations (2017)1, growing to more than 10 percent by the third full year (2019)1.
- TECO Energy shareholders will receive US$27.55 per share in cash, a 48 percent premium to the unaffected closing share price of July 15, 2015.
- The Transaction provides additional support to Emera’s 8 percent dividend growth target through 2019 and positions Emera to extend the dividend growth target beyond 2019.
- Upon closing, Emera will have approximately US$20 billion in assets, making it a top 20 North American regulated utility.
- The Transaction’s rate base multiple, excluding Net Operating Tax Losses, is 1.6 times2.
- The acquisition of TECO Energy is an ideal strategic fit for Emera due to its business and generation mix and expanded U.S. presence in constructive regulatory jurisdictions. The acquisition provides Emera with a new platform in growth markets, and further opportunities to supply customers with cleaner generation.
- Pro forma for the Transaction, Emera expects to maintain a strong investment grade credit profile with greater than 80 percent in regulated earnings.
- TECO Energy, Tampa Electric, Peoples Gas and New Mexico Gas Co. will maintain existing corporate headquarters in Tampa and Albuquerque.
Emera Inc. (“Emera”) (TSX: EMA) and TECO Energy, Inc. (“TECO Energy”) (NYSE:TE) today announced a definitive agreement for Emera to acquire TECO Energy (the “Transaction”), creating a North American energy leader, with over US$20 billion of assets and more than 2.4 million electric and gas customers. Upon closing, TECO Energy will become a wholly owned subsidiary of Emera.
Under the terms of the all-cash deal, which has been unanimously approved by the Board of Directors of both companies, TECO Energy shareholders will receive US$27.55 per common share, a 48 percent premium based on TECO Energy’s unaffected closing stock price on July 15, 2015 (the last trading day prior to news reports regarding TECO Energy’s strategic review) and 25 percent above TECO Energy’s unaffected 52-week high. This represents an aggregate purchase price of approximately US$10.4 billion including assumption of approximately US$3.9 billion of debt.
The closing of the Transaction, which is expected to occur by mid-2016, is subject to TECO Energy common shareholder approval and certain regulatory and government approvals, including approval by the New Mexico Public Regulation Commission, the Federal Energy Regulatory Commission and compliance with any applicable requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the satisfaction of customary closing conditions.
Transforms Emera from Regional to North American Energy Leader
The
Transaction creates a top 20 North American regulated utility with
geographic diversity and significant growth potential. Based on pro
forma financial information as at June 30, 2015, following the
completion of the Transaction Emera’s total assets will increase to
approximately US$20 billion, with 56 percent of those assets in Florida,
23 percent in Canada, 10 percent in New England, 6 percent in New Mexico
and 5 percent in the Caribbean.
“Our patient approach and disciplined investment criteria have resulted in a pure-play regulated utility transaction that we expect to be significantly accretive for Emera’s shareholders, and one that advances our strategic objectives,” said Chris Huskilson, President and CEO of Emera Inc. “We have found our ideal match in TECO Energy.”
TECO Energy President and CEO John Ramil said, “TECO Energy’s team members have worked hard to consistently generate strong financial and operating results from our regulated businesses and have positioned the company well for long-term earnings growth. We are proud that Emera has recognized the value of our business and that our shareholders will be rewarded for their confidence in our company. The TECO team looks forward to contributing to Emera’s bright future and the opportunities for growth across the organization.”
Commitments to TECO Energy’s Communities and Customers
“The
acquisition of TECO Energy is underpinned by a deep commitment to TECO’s
existing employees and the Florida and New Mexico customers and
communities they serve,” Mr. Huskilson said. “Emera recognizes that TECO
Energy and its employees are a vital presence in Florida and New Mexico,
and will look to preserve that presence by further investing in TECO
Energy’s existing employee base and communities, as has been done in
other Emera acquisitions.”
TECO Energy, Tampa Electric and Peoples Gas headquarters will remain in Tampa, Florida, and New Mexico Gas Co. headquarters will remain in Albuquerque, New Mexico. As part of Emera’s commitment to the customers and communities in which it operates, operating boards will be established in Florida and New Mexico with local representation on both boards.
Emera will work expeditiously with TECO Energy to engage the Florida regulators and to process the required New Mexico state regulatory application in order to close the Transaction as promptly as possible, with closing expected by mid-2016. Emera has committed to comply with all of the conditions contained in the New Mexico Public Regulation Commission order approving TECO Energy’s acquisition of New Mexico Gas Co. Emera has a history of successfully executing acquisitions in the U.S. and working constructively through the related regulatory processes at the U.S. state and federal levels.
Rates charged by Tampa Electric, Peoples Gas and New Mexico Gas Co. will remain unchanged except as allowed under Tampa Electric’s 2013 rate case settlement or as approved by the Florida Public Service Commission and the New Mexico Public Regulation Commission.
Transaction Highlights
The acquisition of TECO Energy
accelerates Emera’s financial goals.
The Transaction is expected to be significantly accretive to Emera’s earnings per common share, with accretion expected in the first full year of operations (2017)1, growing to more than 10 percent by the third full year (2019)2. Further, it provides additional support to Emera’s 8 percent dividend growth target through 2019, and upon closing positions Emera to extend the dividend growth target beyond 2019.
Emera’s pro forma regulated earnings are projected to be greater than 80 percent of its total earnings. The Transaction further diversifies cash flows and, pro forma for the Transaction, Emera expects to maintain a strong investment grade credit profile.
Emera and TECO Energy operations are aligned.
Emera and TECO Energy both have commitments to environmental leadership. Tampa Electric and Emera’s Nova Scotia Power are both vertically integrated electric utilities on similar paths to reduce emissions and provide cleaner generation for their customers.
TECO Energy operates in growth economies.
TECO Energy’s operations are located in vibrant markets experiencing job growth and a strong housing market that are expected to contribute to some of the strongest customer growth in the U.S. The operations are also concentrated in what Dominion Bond Rating Service describes as the “highly constructive regulatory jurisdiction” of Florida3.
TECO Energy provides a new growth platform for Emera to apply its strategy, adding new geographies, regulatory and business diversification.
Upon closing, the Transaction expands Emera’s geographic platform into Florida and New Mexico – adding two new regions beyond its existing U.S. base in the Northeast. The Transaction will also establish Emera in the regulated natural gas local distribution business, which shares many of the key competencies of a regulated electric utility such as a safety culture, a customer service focus, asset management expertise and regulatory experience.
There are significant near-term capital and customer service investment opportunities. Taken together, the pro forma capital expenditure profile of the two companies includes approximately $6.4 billion in capital investments from 2016 to 2019.
TECO Energy’s utility operations will remain focused on reliably, safely and cost effectively providing energy and energy-related services at prices below national averages. Tampa Electric expects to invest more than US$2 billion over the next five years on facilities and infrastructure to serve customers, including the completion of the Polk Power Station Units 2 – 5 combined cycle conversion project. Peoples Gas expects to invest approximately US$100 million annually to maintain and expand its system to serve its growing customer base and reliably provide service. New Mexico Gas Co. expects to invest approximately US$60 million annually to support customer growth and improve reliability.
TECO Coal
Emera fully supports TECO’s ongoing efforts to
divest TECO Coal, and expects TECO Coal to be divested at or prior to
Transaction close.
Financing
Emera has a fully committed US$6.5 billion bridge
financing facility in place with JP Morgan Chase and Scotiabank.
Permanent financing of the transaction is expected to be obtained by one
or more placements of common equity, preferred equity and long term
debt, the timing of which is expected to be influenced by the regulatory
approvals process and subject to prevailing market conditions.
Advisors
J.P. Morgan acted as lead financial advisor and
Scotiabank acted as financial advisor to Emera. Legal advisors to Emera
were Davis Polk & Wardwell LLP and Osler, Hoskin & Harcourt LLP.
Morgan Stanley acted as the lead strategic and financial advisor and Moelis & Company acted as financial advisor to TECO Energy. Skadden Arps, Slate, Meagher & Flom LLP and Holland & Knight LLP acted as legal counsel.
Forward Looking Information
This news release contains
forward-looking statements within the meaning of applicable securities
laws including the Private Securities Litigation Reform Act of 1995.
Statements that are not historical facts, including statements about
beliefs, expectations, estimates, projections, goals, forecasts,
assumptions, risks and uncertainties, are forward-looking statements.
Forward-looking statements are often characterized by the use of words
such as “believes,” “estimates,” “expects,” “projects,” “may,”
“intends,” “plans,” “anticipates,” “pro forma,” “predicts,” “seeks,”
“could,” “would,” “will,” “can,” “continue” or “potential” and the
negative of these terms or other comparable or similar terminology or
expressions. The forward-looking statements in this news release
include, without limitation, statements relating to Emera’s proposed
acquisition of TECO Energy, the transformation of Emera to a North
American energy leader, dividend growth targets, earnings per share
accretion, increases in regulated assets and earnings, strengthening
credit metrics, new growth platforms, scale and diversification, capital
expenditures, rate base growth, industry and geographic trends and
forecasts, stakeholder commitments, stockholder and regulatory
approvals, and the completion of the Transaction. These statements
reflect Emera and TECO Energy’s management’s current beliefs and are
based on information currently available to Emera management or TECO
Energy management. Forward-looking statements involve significant risk,
uncertainties and assumptions. Certain factors or assumptions have been
applied in drawing the conclusions contained in the forward-looking
statements. Emera and TECO Energy caution readers that a number of
factors could cause actual results, performance or achievement to differ
materially from the results discussed or implied in the forward-looking
statements. Important factors that could cause actual results,
performance and results to differ materially from those indicated by any
such forward-looking statements include risks and uncertainties relating
to the following: (i) the risk that TECO Energy may be unable to obtain
shareholder approval for the proposed transaction or that Emera or TECO
Energy may be unable to obtain governmental and regulatory approvals
required for the proposed transaction, or required governmental and
regulatory approvals may delay the proposed transaction; (ii) the risk
that a condition to the closing of the proposed transaction may not be
satisfied; (iii) the timing to consummate the proposed transaction; (v)
disruption from the proposed transaction making it more difficult to
maintain relationships with customers, employees, regulators or
suppliers; (iv) the diversion of management time and attention on the
transaction; (v) general worldwide economic conditions and related
uncertainties; (vi) the effect and timing of changes in laws or in
governmental regulations (including environmental laws and regulations);
(viii) the timing and extent of changes in interest rates, commodity
prices and demand and market prices for electricity; and (xi) other
factors discussed or referred to in the “Risk Factors” section of TECO
Energy’s most recent Annual Report on Form 10-K filed with the
Securities and Exchange Commission (SEC). Additional risks and
uncertainties will be discussed in the proxy statement and other
materials that TECO Energy will file with the SEC in connection with the
proposed transaction. There can be no assurance that the proposed
transaction will be completed, or if it is completed, that it will close
within the anticipated time period or that the expected benefits of the
proposed transaction will be realized. These factors should be
considered carefully and undue reliance should not be placed on the
forward-looking statements. Each forward-looking statement in this news
release speaks only as of the date of the particular statement. For
additional information with respect to certain of the risks or factors,
reference should be made to Emera’s continuous disclosure materials
filed from time to time with Canadian securities regulatory authorities,
and TECO Energy’s filings with the SEC. Except as required by law, each
of Emera and TECO Energy disclaims any intention or obligation to update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
About Emera Inc.
Emera Inc. is a geographically diverse
energy and services company headquartered in Halifax, Nova Scotia with
approximately $10 billion in assets and 2014 revenues of $2.97 billion.
The company invests in electricity generation, transmission and
distribution, as well as gas transmission and utility energy services.
Emera's strategy is focused on the transformation of the electricity
industry to cleaner generation and the delivery of that clean energy to
market. Emera has investments throughout northeastern North America, and
in four Caribbean countries. Emera continues to target having 75-85
percent of its adjusted earnings come from rate-regulated businesses.
Emera common and preferred shares are listed on the Toronto Stock
Exchange and trade respectively under the symbol EMA, EMA.PR.A,
EMA.PR.B, EMA.PR.C, EMA.PR.E, and EMA.PR.F. Additional information can
be accessed at www.emera.com
or at www.sedar.com.
About TECO Energy, Inc.
TECO Energy, Inc. (NYSE: TE) is an
energy-related holding company with regulated electric and gas utilities
in Florida and New Mexico. Tampa Electric serves more than 700,000
customers in West Central Florida; Peoples Gas System serves more than
350,000 customers across Florida; and New Mexico Gas Co. serves more
than 510,000 customers across New Mexico. Other TECO Energy subsidiaries
include TECO Coal, which owns and operates coal-production facilities in
Kentucky, Tennessee and Virginia. Divestiture of TECO Coal is expected
prior to Transaction close.
Teleconference Call
Emera will be hosting a teleconference
Friday, September 4, 2015 at 7:00 pm Atlantic time (6:00 pm
Toronto/Montreal/New York; 5:00 pm Winnipeg; 4:00 pm Calgary; 3:00 pm
Vancouver to discuss this Transaction.
Analysts and other interested parties in North America wanting to participate in the call should dial 1 (888) 241-0551 at least 10 minutes prior to the start of the call. International participants wanting to participate should dial (647) 427-3415. No pass code is required. The teleconference will be recorded. If you are unable to join the teleconference live, you can dial for playback, toll-free at 1-855-859-2056, international participants wanting to listen to the playback can dial (404) 537-3406. The Conference ID is 26383740 (available until midnight, September 21, 2015).
Presentation slides for the conference call will be available and the teleconference will be web cast live at emera.com and available for playback for one year.
Additional Information and Where to Find It
The proposed
Acquisition will be submitted to shareholders of TECO Energy for their
consideration. In connection with the Acquisition, TECO Energy will file
a proxy statement and other materials with the U.S. Securities and
Exchange Commission (the “SEC”). This press release is not a
substitute for the proxy statement or any other document that TECO
Energy may send to its shareholders in connection with the proposed
Transaction.
TECO ENERGY SHAREHOLDERS ARE ADVISED TO READ THE PROXY STATEMENT FOR THE PROPOSED ACQUISITION WHEN IT IS FILED, AND ANY AMENDMENT OR SUPPLEMENT THERETO THAT MAY BE FILED, WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT TECO ENERGY AND THE ACQUISITION. All such documents, when filed, are available free of charge at the SEC’s website (www.sec.gov) or upon request by contacting TECO Energy, Investor Relations, by telephone at 1-800-810-2032 or via email at investorrelations@tecoenergy.com. TECO Energy’s filings with the SEC are also available on TECO Energy’s website at http://investor.tecoenergy.com/investors/SEC-Filings/default.aspx.
Participants in the Solicitation
Emera, TECO Energy and
their respective directors, executive officers and certain other members
of management and employees may be deemed to be participants in the
solicitation of proxies in respect of the proposed transaction.
Information regarding Emera’s directors and executive officers is
available in its Management Information Circular statement filed on
March 5, 2015 in connection with its 2015 annual meeting of
shareholders, and information regarding TECO Energy’s directors and
executive officers is available in its proxy statement filed with the
SEC on March 11, 2015 in connection with its 2015 annual meeting of
shareholders. Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect interests,
by security holdings or otherwise, will be contained in the proxy
statement and other relevant materials to be filed with the SEC when
they become available.
1 Within a stable currency exchange environment; for additional assumptions, see “Forward Looking Information”
2 Includes jurisdictional rate base, assets earning a return through clauses and riders, and construction work in progress
3 “The Regulatory Framework for Utilities: Canada vs. the United States – A Rating Agency Perspective”, dated October 2013