Viewing cable 10HALIFAX4, Nova Scotia's Emera Inc.: A Unique Energy Entity Poised for

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FM AMCONSUL HALIFAX
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INFO RHEBAAA/DEPT OF ENERGY WASHINGTON DC
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SUBJECT: Nova Scotia's Emera Inc.: A Unique Energy Entity Poised for 
Growth in New England and Beyond 
 
REF: HALIFAX 0002 AND PREVIOUS 
 
¶1. Sensitive, but unclassified. Not for Internet distribution - 
please protect. 
 
 
 
¶2. (SBU) INTRODUCTION/SUMMARY: Consul General met recently with 
James Spurr, a senior executive with Emera Inc. (www.emera.com), an 
investor-owned, diversified energy company that owns Nova Scotia's 
electricity monopoly, other electric utilities, and interests in 
natural gas pipelines. Emera's assets now total $(Can.) 5.2 
billion, but Spurr and his colleagues want to diversify and expand, 
focusing on its established presence in New England and the 
Caribbean. Closer to home, Emera could also have a role in 
transmitting power from Labrador's Lower Churchill project, 
although this idea comes with some trepidation including the spirit 
of the negotiations with the Government of Newfoundland-Labrador 
and the impact of the sale of New Brunswick Power to Hydro Quebec. 
Spurr also commented on low natural gas prices and the effect that 
this could have on further developing Nova Scotia offshore sector 
as well as the impact on regional energy giant Irving. END 
INTRODUCTION/SUMMARY 
 
 
 
Emera in Expansion Mode: New England and the Caribbean Target Areas 
 
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¶3. (U) Spurr, who has had a long career in both the Nova Scotia 
provincial government and the private energy sector, provided an 
overview of Halifax-based Emera and how it has become a successful 
investor-owned company in a region dominated by provincially-owned 
utilities. Emera's core business strategy is to diversify and 
expand its interests with a simple goal in mind - increasing the 
profits for its shareholders. Along with its anchor utility, Nova 
Scotia Power Inc., Emera also owns the Bangor Hydro Electric 
Company, a utility in eastern Maine that it acquired in 2001. It 
also has a 50-percent ownership in Bear Swamp, a hydro-electric 
facility in Massachusetts. Spurr commented that these holdings, 
with Emera's stake in natural gas pipelines going into New England, 
make his company an important component in a more integrated 
northeast energy market. A secondary target area for expansion is 
in the Caribbean where Emera already has holdings in St. Lucia and 
the Bahamas. 
 
 
 
Emera and the Lower Churchill: "Are we being used here?" 
 
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¶4. (SBU) Closer to home Spurr talked about another possible venture 
for Emera: transmitting power from the proposed Lower Churchill 
River project in Labrador to New England. Nova Scotia and 
Newfoundland-Labrador (N-L) have an MOU to explore this option 
which would require the construction of sub-sea and overland power 
lines to transmit the power. Money issues aside, there would be 
technological challenges to overcome in this scenario. However, 
Spurr emphasized that with Emera's experience in dealing with 
transmission systems, natural gas pipelines and its knowledge of 
regulatory processes, it would not be an impossible feat. The 
unknown factor, as Spurr explained, is N-L Premier Danny Williams. 
Spurr explained that N-L had been the victim of bad resource deals 
in the past which have left Williams very cautious if not 
suspicious in his business negotiations. Given that legacy, Spurr 
remarked that he and his senior colleagues are equally cautious in 
dealing with the premier, with knowledge it makes more financial 
sense for N-L to do a deal with Quebec than with them. In fact, 
Spurr indicated he wouldn't be surprised if William ended up doing 
just that, and leaving Spurr and colleagues to speculate that 
Williams might be using them to exert more pressure on Quebec to 
offer a better deal for N-L. 
 
 
 
The NB Power-Hydro Quebec Deal: "A Grave Political Misstep" 
 
 
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¶5. (SBU) Also with Quebec, Spurr commented on the issue of the 
pending sale of New Brunswick Power to Hydro Quebec, a development 
which would have ramifications for Emera in delivering Churchill 
power to the U.S. market. For that reason Spurr came out to 
endorse Nova Scotia Premier Dexter's demands that his province and 
N-L get a guaranteed transmission corridor through New Brunswick 
should the deal be ratified. As an aside, Spurr pondered why New 
Brunswick Premier Shawn Graham took the bold step in trying to sell 
the heavily indebted utility. While Spurr considered the move to 
be a smart one economically, politically, he termed it a grave 
misstep, pondering why advance polling that would have predicted 
the adverse reaction had not been undertaken. Spurr predicted the 
Graham government would not survive this political storm, and as 
the CG heard on a January 8 trip to New Brunswick, there are those 
strongly urging the Premier to do some major rethinking to avoid 
losing his September 2010 re-election bid. In fact, well-placed 
New Brunswickers told the CG they believe the Premier may be forced 
to abandon the deal altogether. Also with this issue, Spurr said 
Emera has no fears of Hydro Quebec targeting its NSPI for a 
takeover bid, explaining that there were strict, legislative 
measures that prevent outside interests from buying up a majority 
of the utility's shares. 
 
 
 
Negative Tones: Low Gas Prices and Trouble at Irving? 
 
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¶6. (SBU) With Emera's 12.9 percent share in the pipeline that 
transports natural gas from offshore Nova Scotia into New England, 
Spurr was able to provide some insight into how he saw the effect 
that low gas prices were having on Nova Scotia's offshore natural 
gas industry. Specifically, he pondered how this situation was 
affecting Nova Scotia's second natural gas development, the Deep 
Panuke project. He said for now, developer Encana is sticking by 
its original plan to bring the project on stream by late 2010 or 
early 2011. However, he feared that future exploration and 
development could be impacted by a prolonged recovery in prices. 
Spurr also went on to ponder how the powerful Irving empire was 
dealing with the lower prices. He reported Irving had been quick 
to sell off its Bayside natural gas plant in New Brunswick to Emera 
at a price which Spurr said his company never thought possible. 
While Spurr acknowledged the Bayside plant has had serious problems 
with its turbines, Emera believed they were not insurmountable. 
This led him to question if Irving's fiscal situation might be 
deteriorating. 
 
 
 
COMMENT: Emera Fine Tuning Its Growth Strategy 
 
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¶7. (U) As Spurr illustrated by his overview of Emera's holdings and 
business plans, it appears shareholders are pushing the company to 
expand well beyond its Nova Scotia borders. In this introductory 
meeting, Spurr pledged to follow-up with expected implications for 
the New England's energy market. In the short term, he will also 
keep post appraised of how he sees unfolding events in New 
Brunswick, N-L and Quebec having an impact on how Emera might 
structure this growth strategy. After all, unlike its 
provincially-owned counterparts in the neighboring provinces, 
Emera's growth is not confined to its own province. Instead, the 
company plans to expand to areas that promise the best returns to 
its shareholders, not what might be best politically. END COMMENT 
SMITH