Ladies and gentlemen, thank you for standing by. Welcome to Emera's Q4 2020 analyst call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. At that time, if you have a question, please press star one on your telephone keypad. Please be advised that today's conference is being recorded Tuesday, February 16, 2021, at 9:30 A.M. Atlantic time. I would now like to hand the conference over to your speaker today, Erin Power, Emera's Manager, Investor Relations. Please go ahead.
Thank you, Chris, and thank you all for joining us this morning for Emera's fourth quarter 2020 conference call and live webcast. Emera's fourth quarter earnings release was distributed this morning via Newswire, and the financial statement, Management Discussion and Analysis, and the presentation being referenced on this call are available on our website at emera.com. Joining me for this morning's call are Scott Balfour, Emera's President and Chief Executive Officer, Greg Blunden, Emera's Chief Financial Officer, and other members of Emera's management team.
Before we begin, I will take a moment to advise you that this morning's discussion will include forward-looking information, which is subject to the cautionary statement contained in the supporting slides. Today's discussion and presentation will also include references to non-GAAP financial measures. You should refer to the appendix for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. Now I will turn things over to Scott.
Thank you, Erin, and good morning, everyone. Let me start with this overarching message. While we never could have anticipated at the start of last year what 2020 would bring, I'm incredibly proud of the way the Emera team responded and continues to navigate through the unprecedented challenges of the COVID-19 pandemic. The financial results we achieved this year and the significant progress we made on advancing our strategy are a testament to the strength and resiliency of our people, our portfolio, and our strategy. Overall, I'm pleased with the financial results that we delivered in 2020. While the results for some of our utilities fell short of expectations we set for ourselves before the year, our adjusted earnings per share for the year was almost exactly in line with our plan for the year.
Key within that, our overall regulated portfolio performed very well and collectively delivered year-over-year earnings growth of 13%. No small feat considering the additional challenges our businesses faced last year. Our regulated portfolio continues to be the primary driver of our growth. Regulated earnings contributions have been steadily and predictably increasing as we continue to make rate base investments to reduce carbon emissions and increase reliability, all while keeping customer rates affordable. At Emera, our priority is always the safety of our employees, customers, and the communities we serve. Last year, with the onset of the COVID-19 pandemic, we adapted quickly to change the way we work, introducing mandatory safety protocols, and in many cases, requiring team to work from home. These measures have been successful. Our teams haven't missed a beat.
They continue to safely deliver the affordable, reliable energy our customers count on while advancing Emera's strategy and supporting our communities notwithstanding the multitude of challenges brought upon by the pandemic. At the same time, in order to support those most impacted by the pandemic, Emera, our operating companies, and our employees donated over CAD 6 million last year to organizations providing critical aid, including help with energy costs, food, shelter, and mental health. I'm proud of how our teams stepped up in 2020 to help our communities and to make meaningful progress on Emera's capital plan, strategy, and other objectives. In March, we completed the sale of Emera Maine, which concluded our asset sale program. Our successful execution of this program significantly strengthened our balance sheet and positions Emera well for future growth.
We executed on the largest annual capital program in our history, and even with the additional health and safety protocols in place, kept our large capital projects on schedule and on budget. This included the final portion of the first 600 MW of solar generation at Tampa Electric, putting 6 million solar panels into service. This is a significant milestone, and notably, Tampa Electric now has more solar generation in service on a per customer basis than any other utility in Florida. We're not stopping there. Last year, we announced and began construction on another 600 MW of solar for benefit of Tampa Electric customers. We also made great progress on the modernization of Big Bend Power Station in Tampa, and we remain on track to bring the first phase of the project online later this year.
We continued to deploy smart meters in Nova Scotia, Florida, and the Caribbean, with well over 1 million now in operation. On the regulatory front, Peoples Gas and New Mexico Gas both negotiated constructive regulatory settlements with new base rates going into effect last month. We further enhanced our environment, social, and governance commitments and disclosures, issuing our fourth sustainability update last fall, which incorporated the SASB and TCFD disclosure frameworks. We're proud of our ESG track record, we believe that we have a great story to tell, and we're working hard to tell it better by providing the data that matters most to our stakeholders and being transparent about our performance. The climate commitment we announced today is an important step in articulating our decarbonization journey over the past 15 years, as well as our commitment to do even more.
Our strategy is designed to both prepare for and capitalize on the trends facing our industry, decarbonization, decentralization, and digitalization. Decarbonization has been central to Emera's strategy for over 15 years. It's more than what we do. It's part of who we are. It's been a key driver of our growth. It's been inspiring us to keep innovating, to deliver the energy our customers count on, while never losing sight of affordability. With our dedicated team, strong track record, and our investments in renewables, low-carbon energy sources, transmission, and grid modernization, we've already transformed the way we deliver energy. Since 2005, we've reduced our CO2 emissions by 39%. We've reduced our coal use by almost 70%. We have what it takes to do even more.
This morning, we announced our climate commitment, three new clear decarbonization goals, and our vision to achieve net zero carbon emissions by 2050. With existing technologies and resources, and the benefit of supportive regulatory decisions, we plan and expect to achieve the following goals compared to 2005 levels. First, we are on track to achieve a 55% reduction in carbon emissions by 2025. Second, we are also on track to achieve an 80% reduction in coal usage by 2023 and the retirement of our last existing coal unit no later than 2040. We have planned to achieve at least an 80% reduction in CO2 emissions by 2040. Last month, we announced that Tampa Electric will permanently shut down Big Bend Unit 3 in 2023, nearly two decades ahead of its scheduled retirement.
In Atlantic Canada, the Atlantic Loop is one such way we could accelerate our coal retirements here in Nova Scotia. While this remains a complex idea, we are encouraged by the momentum we have developed and with the level of engagement by the federal government, provincial governments in the region, and our utility partners. More broadly, we will achieve all these goals and seek to realize our net zero vision by adopting emerging technologies and working constructively with policymakers, regulators, partners, investors, and our communities. Every step of the way, we're committed to never losing sight of affordability and reliability for our customers. Our CAD 7.4 billion capital program supports our climate commitment. Over the next three years, 60% of our capital investment will be directed towards projects that reduce reliance on coal and improve reliability for customers.
By the end of 2023, coal will account for less than 10% of Emera's generation, while our renewable energy production will double from 12% today to 27% in 2023. This is Emera's strategy in action, facilitating our transition to lower carbon and improving reliability, all while never losing sight of customer affordability. By doing all this, we are in turn delivering growth of earnings, cash flow, and dividends for shareholders, creating shareholder value. In this light, our baseline capital program is expected to drive rate base growth of 7.5% from 2019 to 2023. We see further upside. We've identified an additional CAD 1.2 billion capital investment opportunity that, if successful, could increase our rate base growth to 8.5%. We'll continue to update our capital forecasts in the future to keep the market up to date on significant developments.
Beyond 2023, I see opportunities to extend this growth well into the future. To deliver on our goals and realize our net zero vision, we will continue to make investments to decarbonize our portfolio, including investments in renewable generation and energy storage and transmission. We are also focused on capitalizing on the other industry trends of digitalization and decentralization that will continue to provide investment opportunities. This year, we will be focused on the successful completion of the base rate application at Tampa Electric. Florida is one of the fastest-growing states in the nation, and Tampa Electric serves nearly 800,000 customers in the fastest-growing region in the state. To continue delivering value for our customers, we must plan for the long term, making investments now that create a better energy future.
If approved, the rate application we will make later this spring will increase base rates, enabling us to continue to make significant investments in cleaner, greener, and smarter energy solutions, all while keeping rates among the lowest in Florida and well below the national average. The ask outlined in our test year letter reflects a relatively straightforward rate case. Since our last base rate increase in 2013, we've made significant investments to enhance the grid, improve reliability, and reduce our reliance on coal. Our rate case is about having these investments and the investments we'll make over the next three years put into base rates. It's about the capital being invested in projects like Big Bend modernization, automatic smart meters, and in additional solar generation.
The straightforward nature of our case, combined with the deep regulatory experience of our team and our history of constructive regulatory outcomes, leaves us confident in the regulatory path in front of us. 2020 was, without question, an unexpectedly challenging year for all of us. I'm incredibly proud of the success we achieved. As we look forward to 2021, I expect this year will continue to be challenging. I remain confident that Emera is well-positioned to continue to advance our strategy and deliver on our financial commitments. Before I pass the call to Greg, I'd like to take the opportunity to highlight a new board appointment and an important leadership announcement. I'd like to welcome Karen Sheriff to Emera's board of directors. Karen is an accomplished senior executive who brings deep experience in driving innovation, growth, and corporate strategy to the board.
It's my pleasure to share that Archie Collins will be appointed as the next President and CEO of Tampa Electric on May 3rd, 2021. Archie brings more than 30 years of experience in the energy industry, and I am confident that he is the right leader to maintain the positive momentum at Tampa Electric. Nancy Tower will officially retire from Emera at the end of June. This will be her last analyst call with us. While I know we will have plenty of opportunity to formally celebrate Nancy's contributions with the team before her official retirement, let me say this today. Over the past 24 years, Nancy has been a key leader in our business and an important part of Emera's growth story and success.
I know I speak for the entire team when I say she will be truly missed as a leader, as a colleague, and as a friend. Welcome, Karen, and congratulations, Archie and Nancy. With that, I'll turn it over to Greg to take you through our financial results.
Thank you, Scott, and thank you all for joining us this morning. We accomplished a lot in 2020 in very challenging conditions. Our strong regulated portfolio continued to perform well, allowing us to deliver to our investors. We delivered strong earnings growth from a regulating portfolio. As Scott highlighted, our portfolio delivered annual adjusted earnings growth of 13%. We raised our dividend by 4%, keeping our commitment to provide a predictable, sustainable growing income stream to our investors. We improved the quality of our future earnings and cash flow by negotiating constructive settlement agreements at Peoples Gas and New Mexico Gas. We strengthened our balance sheet, completing our asset sale program, retiring CAD 390 million of holding company debt, and issuing CAD 490 million of common equity, primarily through our dividend reinvestment and at the market programs.
This morning, we reported fourth quarter adjusted earnings of CAD 188 million and adjusted earnings per share of CAD 0.75. For the year, adjusted earnings were CAD 665 million and adjusted earnings per share was CAD 2.68. Growth in Emera's adjusted earnings per share for the quarter and year to date were primarily driven by favorable results at Tampa Electric and the other segment. Now let's get into the details about the results. The sales of our unregulated gas plants in Emera Maine business continue to provide or cause variability in our quarterly and annual results. Normalizing for their lost operating earnings contributions better highlights the performance for ongoing business. When normalized for asset sales, our fourth quarter 2019 results would have been CAD 0.56. For the full year 2019, the asset sale normalized adjusted earnings per share was CAD 2.31.
We'll use these normalized results as a starting point to compare our performance for the fourth quarter and full year 2020. Adjusted EPS growth in the fourth quarter was largely driven by strong operating results, the recovery of an outstanding litigation award, and lower corporate interest costs partially offset by higher preferred dividends. In the quarter, Tampa Electric contributed CAD 101 million of earnings compared to CAD 80 million in the fourth quarter of 2019. Consistent with past quarters, Tampa Electric's growth was driven by increased sales to residential customers, higher SoBRA revenues, higher AFUDC earnings from the Big Bend modernization and non-SoBRA solar projects, favorable weather, and customer growth.
Excluding the timing impact of the preferred share dividends, fourth quarter earnings from improved largely due to the receipt of an award related to outstanding legal claim at TECO, lower corporate interest costs, and the fact that Q4 2019 results include a one-time expense related to Dorian from Grand Bahama Power Company. Other changes in the quarter, including the remaining Emera utilities and share were a net decrease of CAD 0.06. Excluding the TECO legal award, on a normalized basis, Emera's Q4 adjusted earnings per share grew by 7% to CAD 0.60 compared to CAD 0.56 in the fourth quarter of 2019. Growth in annual adjusted EPS was driven by many of the same factors. In 2020, Tampa Electric contributed CAD 501 million of earnings, an increase of 20% over 2019.
This growth was driven by higher base revenues related to favorable weather, customer growth, and a greater mix of residential sales. In addition, Tampa Electric's earnings benefited from higher AFUDC from the Big Bend modernization and non-SOBRA solar projects. The impact of favorable weather on Tampa Electric's 2020 results is noteworthy. Compared to 2019, favorable weather conditions increased annual earnings by approximately . As a result, we expect sales volumes and earnings in 2021 will be modestly lower than in 2020. Our remaining electric utilities had lower annual adjusted earnings per share of approximately CAD 0.06. Nova Scotia Power's annual earnings contribution was down CAD 8 million due to exceptionally mild weather conditions and lower commercial sales due to COVID-19 pandemic, partially offset by decreased operating costs and higher residential sales. These negative impacts at Nova Scotia Power were partially offset by higher equity, Maritime Link, and investments.
Results from Nova Scotia Power are below our expectations, but we do expect their earnings to improve next year. Assuming normal weather conditions, we expect their earnings will be higher in 2021 than they were in 2020, and they will earn within their allowed ROE band. In the Caribbean, annual earnings decreased by CAD 7 million due to lower commercial sales, partially offset by higher residential sales volumes and recovering load at Grand Bahama Power Company following Hurricane Dorian. Our short-term earnings expectations for the Caribbean are muted, but we do expect earnings to increase marginally in 2021 as local economies begin to recover from the COVID-19 pandemic and Grand Bahama continues to recover from Hurricane Dorian. Our gas utilities performed well this year in challenging conditions.
When normalized for the one-time tax benefits at New Mexico Gas in 2019, earnings from our gas and infrastructure segment were consistent with 2019 results. Notably, new base rates went into effect at both Peoples Gas and New Mexico Gas last month. Beginning this year, Peoples Gas will be allowed to earn between 8.9% and 11% on an equity thickness of 54.7%. We will also be permitted to reverse $34 million of accumulated depreciation through 2023, largely at our discretion. These new rates are expected to be in place until the end of 2023. At New Mexico Gas, 2021 rates were set based on an implied ROE of 9.75% equity thickness of 52%, compared to an ROE of 9.1% in 2020. These new rates are expected to be in place until the end of 2022.
New base rates, continued customer growth, and a recovery from the COVID-19 pandemic are expected to increase 2021 earnings at the gas. Peoples Gas expects to earn within its allowed ROE band, and New Mexico Gas expects to earn at or near its allowed return on equity. Finally, annual earnings from the other segment improved largely due to the receipt of a payment TECO, lower corporate interest costs, and the fact that the 2019 results included a CAD 15 million one-time item related to the impacts of Hurricane Dorian on Grand Bahama. This was partially offset by the CAD 10 million gain on sale of a Florida property in the first quarter of 2019. On a normalized basis, Emera's annual 2020 adjusted EPS was CAD 2.66 as compared to CAD 2.31 from 2019, a growth rate of 15%. Moving to adjusted EBITDA and cash flow.
Annual EBITDA, that's earnings before interest, taxes, depreciation, and amortization, was modestly higher than in 2019. Higher EBITDA contributions from Tampa Electric more than offset the lost EBITDA from Emera Maine and the sale of our unregulated gas plants. Pre-working capital operating cash flow in 2020 was down CAD 118 million or 11% compared to 2019. As anticipated, most of this decline is due to the sale of Emera Maine in Q1 and our unregulated gas plants in the first quarter of 2019. Over the past couple of years, we have been focused on strengthening our balance sheet. Since 2018, we have successfully executed on our asset sale program and reduced our consolidated leverage by over 700 basis points. As a result, we are now back to our targeted capital structure and our cash to debt metrics have been steadily increasing. We have more work to do.
We have improved the denominator of our credit metrics, and now we are focused on strengthening the numerator. Over the next two years, we expect to see an increase in our annual regulated cash flow as a result of new base rates at Peoples Gas, New Mexico Gas, and Tampa Electric, and increased cash flow from Emera Newfoundland with the completion of Muskrat Falls later this year. These factors are expected to drive a meaningful improvement in our operating cash flow and set us on a clear path to achieve the targeted metrics set by the credit rating agencies. Management continues its focus on strengthening cash flow to mitigate short-term cash flow variability. The CAD 36 million outstanding legal award that we collected in the quarter is an example of these efforts.
This incremental cash flow is a source of funds to finance our capital program and to mitigate the impacts of the COVID-19 pandemic on our business as we transition to new base rates at Tampa Electric in 2022. Executing on our funding plan we outlined last quarter will allow us to credit metrics. Funding for a CAD 7.4 billion capital program is expected to come predominantly from reinvested operating cash flows and debt issued at the regulated operating companies. The balance is expected to be funded through common equity from our dividend reinvestment and at-the-market programs, and preferred equity to balance us to our targeted capital structure. As we've noted in the past, we continually monitor the hybrid security market of opportunities based upon investor demand. Recently, we've noted an improving tone for preferred shares, and we view this as a positive development for the industry and market access overall.
Our approach to hybrid securities offerings has always been disciplined and has historically involved the use of a base shelf respective program. I am pleased with how our resilient portfolio performed in 2020 and the financial results we delivered for our shareholders. We are entering 2021 well-positioned to capitalize on the tremendous growth opportunities we see in front of us. We will continue to execute on our proven strategy, which will drive growth and investment for our investors and deliver cleaner, reliable, affordable energy for our customers. With that, I'll turn the presentation back over to Erin.
Thank you, Greg. This concludes the presentation. We would now like to open the call to take questions from analysts.
If you have a question, please pick up your receiver and press star one on your telephone keypad. Again, that is star one. Your first question comes from Linda Ezergailis of TD Securities. Your line is open.
Thank you. I'm wondering how you're thinking about the outlook for your operations in the U.S. with the new Biden administration, recognizing that there's going to be an accelerated drive to reduce greenhouse gases and the energy transition, in addition to just general electrification driving demand. How might this influence Emera's business and strategy beyond where you've taken it, and where do you expect to see the largest benefits as you grow your franchise?
Thanks, Linda, for the question. Look, I think as you point out, the Biden administration plans to look to accelerate decarbonization across the broad economy, frankly, is directly positive for us. It certainly aligns with our strategy of decarbonizing and continuing the journey to reduce the carbon intensity of the energy that we're delivering for our customers. Obviously, we'll continue to pay attention to policies as they develop and looking to ensure that we're capturing, to the greatest extent possible, those that can benefit our customers and allow Tampa Electric, but frankly, Peoples Gas and New Mexico Gas as well, to do our part, to do their part, as we look to continue that decarbonization journey. If the government policy mandates a faster path than that that we're already on, obviously we will execute that, and from an investor perspective, that creates more opportunities.
Our job in running the utility is to make sure we're transparent around cost impacts and making sure that we're constantly working to manage affordability impacts for customers.
Thank you. As you see these opportunities beyond 2022, I'm wondering what factors you will consider to either extend your 4% - 5% dividend growth or what might cause you to revise that, and when might you deliberate upon that? Can you comment on payout ratio, balance sheet, foreign exchange, and other factors?
Look, obviously, all those things you mentioned go into our considerations around financial policy and target capital structure and dividend policy. I think, obviously, dividends get set by the board of directors, and typically, we do that in the fall of each year. I would expect that is the timing that we would do that again this year. I would also remind you that when we pivoted from the previous dividend growth rate target to the 4%-5% target that we have now, we did that with a view. Obviously, we put a time bound to it, but we did it with a view as to establishing a dividend rate that we thought was likely to be sustainable over the longer term, with an objective that our earnings growth will be higher than our targeted dividend growth that allows us to effectively grow our payout ratio down over time.
All those things continue to remain true today. As to the root of your question, I would expect we'd see some clarity on that in the fall.
Thank you. Maybe more of a operational follow-up question. I'm assuming that the energy marketing and trading business is off to a good start this year, given the cold weather we're seeing. Any commentary about what Q1 is looking like would help us kind of fine-tune our expectations for Q1.
Linda, it's Judy. You're right that we're having a solid start to 2021. Really, I wouldn't go anything beyond that. I know that there's some markets that are ripping into $100 price points. That's not happening in New England. There has been healthy trading ranges between, let's say, $7 and $15, which does provide us with some opportunities. The way things have worked out, we've had access to transportation capacity under several AMAs that we've been able to deploy profitably. I would be very reluctant to start to try to provide quarterly guidance on Emera Energy. I will say that it has been a decent winter so far, January. We would just normally continue to guide that we would expect to be within our normal earnings range of $15 million-$16 million U.S. at this point in the year.
Thank you, Judy, and congratulations to Nancy on a successful career and her retirement. I'll jump back in the queue.
Thank you, Linda.
Your next question comes from Ben Pham of BMO . Your line is open.
Hi. Thanks. Good morning. I wanted to touch base. Atlantic Loop, any updates commercially since the throne speech last year, and also been some changes at the Infrastructure Bank?
Yeah, Ben, it's Scott. Peter Gregg is on too. Peter's been immersed, obviously, in this project initiative, along with other of our colleagues within Emera and Nova Scotia Power. I wouldn't say anything has advanced commercially, Ben. I think, still at this point, this is about shaping the opportunity in terms of alignments of the opportunity that it can create for the region as a whole. Obviously, we're focused on what it means for Nova Scotia. We know for this to come together, it needs to provide benefits to New Brunswick, to Quebec, and to Newfoundland and Labrador as well. We're working with those provinces as well as our utility partners and the federal government, to capitalize on this opportunity to accelerate the decarbonization in Atlantic Canada, from what would otherwise be a 2040 timeframe to as early as 2030.
We're encouraged by the momentum that we seem to be building with this, and the engagement that all those government parties and others have expressed so far. It's a long road ahead. It's very complex given the multi nature of the project. We're hoping to be in a place where we can talk with some more clarity around it by the third quarter. At this point in time, we're just continuing to advance the shaping and discussions and trying to see if we can fit this all together.
Okay. Theoretically, if this project were to be commercialized, then directionally your net zero carbon targets, there could be a 10-year acceleration of potentially?
This is about both the addition of additional transmission or the availability of additional transmission, as well as additional infrastructure build in Nova Scotia, including more renewable generation, including storage technologies. The combination of all those things could position us to enable Nova Scotia Power to retire its coal plants 10 years earlier than what is currently envisioned through the equivalency agreement that is in place between the province of Nova Scotia and the Government of Canada. Could see it accelerate from 2040 to 2030. That's the effort that we put forward. As I say, there's lots of steps to line up still and hoping we have more clarity and perspective that we can share by the third quarter of the year.
Okay. Maybe this question's for Greg next. You had a comment here around the pref market improving. Is that only a function of cost of capital or your cash tax situation that's driving that? Can you also share your thoughts on mandatory converts? Is that a potential lever that you could look at adding to your funding plan?
Yeah, Ben, I think the way to interpret the comments is when we look at how our existing preferred shares are trading and extrapolate that on what we think a new issue would look like, it starts to become pretty competitive versus the other sources of capital that's available to us. I think at this point in time, although we always look at other products that are out there, it's probably reasonable to assume that we'll probably be fairly consistent with what we have done in the past and do a traditional Canadian dollar preferred share offering. We haven't concluded on that at this point in time.
Okay. That's great. I also want to extend my retirement, or to Nancy's best wishes to retirement as well.
Thank you, Ben.
Your next question comes from Robert Kwan of RBC Capital Markets. Your line is open.
Good morning. Maybe I am going to start with the Tampa Electric rate case. You called it or characterized it as being straightforward, but I am just wondering what your thoughts are on a potential negotiated settlement, and specifically, are custom features attractive to you, such as ROE protection against higher interest rates or immediate tax increase recovery flow through? The types of things that we saw in the Duke settlement.
Nancy?
Yep. I'll take that. Good morning, Robert. Negotiated settlement is definitely a possibility here. As you said, Duke got a settlement. They negotiated a settlement in advance of even filing a rate case. The timing of that might come after discovery. I think we're in it now. We filed our test year letter. We'll file our rate case soon, and I suspect that interveners will want to get a sense of our case. We're very confident in our case, of course. Of course, FPL has filed, as you no doubt know, that they've filed as well. It's a busy agenda for the FPSC here in Florida. I think that also is likely that the interveners will want to settle.
That's great. Maybe if I can just finish the question on funding leverage and payout. There was a question earlier just on the Biden administration policies. As you look at those with respect to decarbonization and with that, renewables and electrification, there's quite possibly a bias to upside in future CapEx. I'm just wondering, what's the strategy in terms of responding whenever that shows up? Or do you feel it's prudent to start taking action in the near term to help get in front of that?
I think I'd answer it this way, Robert, and maybe Nancy has some additional perspective that I encourage her to share. I think, largely, Robert, we're already on a path, right? We're very focused already on decarbonizing. If you think about Tampa Electric and four years ago when Emera acquired them, had very little renewable generation in the mix. Today, as you heard, we have more solar generation on a per-customer basis than any other utility. We're looking to effectively double what we now have in place, while at the same time retiring coal units and replacing that with faster-acting, modern, efficient gas generation. Of course, making reliability investments. I think in many ways, I think we're aligned with the objectives of the Biden administration.
Our job as we do that and meet the customers' needs and desires for improved reliability and cleaner energy, we also have to make sure that we're being transparent and upfront as to the impact on cost. That largely comes about making sure that we're doing it at a pace that doesn't sacrifice affordability. That's very much our focus and the plan that Nancy and her team have put forward at Tampa Electric, which is consistent with how we think about it across all of our utilities. If there is something that requires us to move faster by way of government policy, then obviously we'll respond to that. In the meantime, we're going to continue to execute our strategy of continuing to make cleaner and reliability-focused investments without sacrificing affordability. I think we're aligned.
We won't get ahead of and getting ourselves to a point where we're going faster than what our customers would otherwise want us to do. I think directionally aligned with the Biden administration. Frankly, I think the same thing is true in climate policy and energy policy here in Canada as well.
If I get what you're saying, Scott, basically it sounds like, I'm recognizing it's early days, but what you're kind of getting out of the policies, the upside might just be crystallizing that rate base or capital spending upside that you've already set out, but not likely to drive above that high end. You don't feel the need to be out in front of it from the perspective of fee funding or creating balance sheet capacity.
First of all, it's obviously early days and there's no legislation in place or anything like that. What we're responding to and I think, broadly, I think the questions from our investors is about directionally, is this going to provide more opportunities for Emera and our utilities to make investments? I think it probably will. As to the quantum of that, the exact triggers for that, the timing of that obviously remains very uncertain. In the meantime, we're focused on executing the strategy that's in front of us, that's broadly aligned with the initiatives. We'll see what kind of legislation or the like does come into place, both in Canada and the U.S. This is equally true in Canada. Respond to that once that's clear.
In the meantime, keep focused on what we always have, which is making reliability investments, making cleaner energy investments, and making sure we are doing it at a pace and with a transparency about cost that is clear and affordable for our customers.
Understood. Nancy, thank you for the answer earlier, and all the best in retirement.
Thank you, Robert.
Your next question comes from Mark Jarvi of CIBC Capital Markets. Your line is open.
Thanks. Good morning, everyone. I wanted to go back to Tampa Electric and the rate case in the context of the Duke Energy settlement in the ROE ban and then also just the adjuster to the Treasury yield. Is that something that you're open to in terms of those ROE adjusters? Just when you think about where the ban was put for Duke Energy, from your position, is that something that you think is a similar benchmark for you, or is there an argument made from Tampa Electric's perspective to argue for a higher midpoint?
Thank you, Mark. It's Nancy. We obviously watch all the regulatory proceedings pretty closely. Duke Energy did have what we would say is a headline ROE below 10, but as you point out, there are some mechanisms in the settlement to allow them to earn above that, similar to the Peoples Gas settlement that happened earlier. Would we be open to something like that? It's hard to tell outside the context of a full settlement. We've applied for a higher ROE, as you can see in our test letter. Of course, FPL is there with us also applying for a higher ROE. We believe that we can justify that based on the amount of capital that we will put into the utility over the next number of years.
I think it all remains to be seen, but we feel we're on pretty solid ground with our evidence and our ask for ROE.
Okay. That makes sense. Just on the, maybe this is for Scott, the net zero by 2050 and some incredible metrics in terms of milestones as you think about 80% reduction by 2040. To go from that 80% reduction then to net zero from 2040 to 2050, does that require technology improvements or what helps you close that final gap to get to net zero?
Yeah, Mark, it's an important question. I think, we've tried to be clear in our distinction between the goals that we've set out for 2023 and 2025 and 2030, where we have a path there. We can see the path. We're on a track. We can clearly see how that gets achieved. The truth is that that transition, that step from 80% carbon reduction to net zero, the path isn't as clear as we sit today, at least not without sacrificing affordability for customers. Clearly, we remain open to all those things in terms of emerging technologies, in terms of offset markets, and other factors that are going to help us to achieve that vision. Broadly, from our perspective, we look at it that, as you heard me say earlier in the prepared remarks, that we've been executing a decarbonization strategy for 15 years.
We're now setting a target that we believe we can achieve an 80% reduction by 2040. Clearly, we're not going to stop when we get there. We're going to continue to execute on that strategy of decarbonizing and that vision, that ambition for us to achieve net zero is very passionate about it. The fact is the path to get there without sacrificing affordability today, yes, we'll need to rely upon things like emerging technologies, continuing reduction in cost for those emerging technologies, as well as looking at offset markets and other levers that will be important not just for us, but for everyone who is looking at executing a path to net zero. Particularly while we remain so focused on ensuring that we're not sacrificing affordability to achieve that.
Just a follow-up. In terms of getting to the 80% reduction, that can be done with the existing technology, it's really just balancing affordability? Do you still feel like that 80% reduction is still a bit of a stretch goal by 2040?
Well, I think there's a bit of a stretch in the sense that there's a lot of work to do to achieve that. I think it's definitely counting on continuing to see falling prices for things like storage technology, frankly, and factors like that. Largely is in place with a vision around technology that exists today. We're not sort of looking for miracles to appear in order to achieve that 80% reduction. We see both upon the continuation of the path that we're already on with benefit of the generation planning work, and the IRP work, the integrated resource planning work that's been done across our utilities. We can see the path to achieve that just based on naturally what we're doing within the generation profile, particularly for Tampa Electric and for Nova Scotia Power.
For there, we're counting on existing technologies, albeit counting on continuing decreasing pricing, again, in order to make sure that we're constantly keeping customer affordability in sight.
Okay. Thanks, Scott. All the best to you, Nancy, in retirement.
Thank you very much, Mark.
Your next question comes from David Quezada of Raymond James. Your line is open.
Thanks. Morning, everyone. My first question here, just on the CAD 1.2 billion of projects under development that are kind of the upper bound of your CapEx plan. Just wondering if you could touch on how maybe the key elements of that have progressed over the last few months since you first outlined them, and maybe just thoughts on timing about when you would add them to that sort of base capital plan.
David, it's Greg. I can't say there's anything explicit to call out on anything over the last couple of months. We'd likely provide an update on that, consistent with our annual update every fall. I think you've heard us talk about it before. Roughly half of it would be related to the Atlantic Loop or something like that, more regional transmission in the early stages of that. About 25% of that CAD 1.2 is any number of projects at Tampa Electric over the next few years, but that represents less than 10% of their capital spend. Unfortunately, the last balance of it is spread across all of our other businesses. There's nothing outside of the comments that Scott had around the Atlantic Loop. There's nothing significant to highlight at this point.
Okay, great. Thanks for that. Maybe just one other one, just on the general topic of decarbonization. I know you already have 30 MW of battery storage planned at Tampa Electric. I'm just curious if you have additional sites that you think could move forward if we were to see some kind of a tax credit or something like that, potential upside, I guess, to that target.
Nancy, you want to?
Yeah. David, other solar sites, is that what your battery storage sites? If that was your question, as you know, we've been on a very aggressive solar build here in Tampa, 600 MW, and we're now into our second 600 MW. We continue to look for land. In fact, we're going to do a very small sort of solar on water to see what that is, how that works for us. We're also going to do a study this year to understand how we integrate even more solar into our system. Solar battery storage, et cetera. We continue to work every day to understand how we can put more renewables on our system here and work to make sure that we've got the capacity to do it, both from a land perspective and from a system operation technology perspective.
We've got 600 MW to build right in front of us now over the next three years, and we're very focused on executing that.
Excellent. Thanks for that color, and I'll echo the comments. Nancy, congratulations on the retirement.
Thank you very much, David.
Your next question comes from Patrick Kenny of National Bank Financial. Your line is open.
Yeah, good morning. I guess just on the retirement of Unit 3 at Big Bend. Coming back to the conversation around achieving net zero, could you just remind us of the current timeline for retiring Unit 4? Or at least transitioning the unit to full natural gas. Outside of those emerging technologies or sequestration becoming affordable, maybe you can just comment if you're starting to build up your inventory of emission offset credits as we speak, just as, say, a backup plan for achieving net zero by 2035.
Patrick, it's Nancy. I'll answer the Big Bend 3 and 4. As you say, we are retiring Big Bend 3 early. Big Bend 4 today, as you know, operates on coal. We intend to retire that. It's on a path for its useful life. We are doing some work this year, though, that will allow us to operate that at full power, both on coal and natural gas, so it will have the ability to be at full load on natural gas this year. I think the other question was likely for Scott, was it?
Patrick, I think, at this point, no, we're not building up an inventory of credits at this point. As I say, clarity of legislation is still a ways away. I think back tied into the previous question, as climate policy, as energy policy becomes more clear, obviously we'll respond to that. In the meantime, we're just continuing to focus on our own decarbonization.
Okay, that's helpful. Then I guess more broadly speaking, Scott, just wondering if you could provide a bit more color on some of the opportunities you're seeing out there around decentralized generation. Maybe as well on energy efficiency programs. Just maybe clarify how these trends are supporting a tailwind for earnings going forward, as opposed to being a risk to your base outlook.
Yeah. It's a really good question, and one that you described rightly in the context of strategic in nature and thinking about it, and our efforts are focusing on capturing that as an opportunity and managing the risk. Obviously, some would look at decentralization and think, well, what that means is rooftop solar. Yes, it might mean that, but it can mean a whole bunch of other things too, where we are very focused on whether that's in community solar-based initiatives in Tampa. Whether it's in looking at distributed battery storage in Florida and in Nova Scotia Power, initiatives that are underway right now. Additionally, it's looking at emerging technologies or even technologies that we're looking to advance.
You've heard us talk before about BlockEnergy and what a team here led by Rob Bennett has been doing in looking at taking the distributed concept and thinking about it as an in front-of-meter kind of service where we can look to utilize rooftop solar combined with residential battery storage interconnected within a community to community backup generation and maybe even more community renewable-based generation with an intertie to the grid. This is technology that we've developed, is now working. Has actively been working at a demonstration site at Kirtland Air Force Base in Albuquerque, New Mexico. Is now in deployment in a pilot residential subdivision in Florida in partnership with Lennar Homes, one of the largest home builders in the U.S.
Tampa Electric currently has a filing in front of the Florida Public Service Commission in looking to support through the regulatory environment, effectively the rate basing of that infrastructure, where the utility can then operate that clean distributed generation source, interconnect customers, provide a reliability level to customers that is very difficult to achieve within existing technologies. We're excited about that prospect. It's certainly early days. Looking forward to advancing that project in Florida and continuing to advance the story of BlockEnergy as we see as to whether that's a potential and meaningful opportunity for us in the context of decentralization.
Great. Much appreciated, Scott. All the best in advancing your retirement. Congratulations.
Thank you, Patrick.
Your next question comes from Andrew Kuske of Credit Suisse. Your line is open.
Thanks. Good morning. Scott, I think you mentioned earlier on, despite all the health and safety protocols this year, which obviously was challenging, you still managed to execute your largest capital program ever. The question really becomes, given what you've learned over the course of a challenging year, when we return more to normal, does that allow you to scale the capital program to a greater degree with even a higher degree of confidence?
Yeah. It's an interesting question, Patrick. Sorry, Patrick. Andrew. I think largely as it relates to the operations and construction activity that was in execution of that capital plan was really largely about additional protocols that were put in place. How do we manage social distancing, ensuring we've got masking in place? Obviously being a couple of key examples as to the implications of that, also even managing supply chains when those things became more strained and making sure that we were managing that to avoid impacts on our construction activity. I guess notionally, you could look at it and think that that should provide an enhancing impact to our ability to manage these programs. I think more broadly, it was really more just about sort of looking at these things from the perspective of maintaining efficiency, even in the face of changes.
I think from that, there is lots of good learnings for our teams, and I am sure not dissimilar, for all of our industry peers about the ability to respond to those changes, to adapt our processes and continue to execute near flawlessly, frankly, while keeping our team and the community safe through that, I think really was the biggest learning as opposed to any meaningful impact on the ability to scale that execution.
Okay. That's helpful color and context. Maybe if we ran with the argument that there's green stimulus and you could actually ramp your capital program, given what you've learned. How do you think about funding and maybe just some color on what we saw with Duke and GIC? Is that an alternative or an approach that you would potentially contemplate to help surface value and just have additional flexibility?
Yeah, I think it's premature to say that, Andrew. It's Greg. Obviously, effort to sell some assets, in particular our merchant gas plants in Emera Maine, to fund our business going forward. Have no plans to complete that side of it. We have no plans to do anything further at this time. Selling a minority interest in one of our regulated utilities, it's not something we've looked at before. I'm not sure, quite frankly, how I feel about it. In the event that we see some acceleration in our capital plan, we'll do what we always do at that point in time, is look at what's the most effective way of raising that capital and the most cost-effective way as well. I think it's just kind of premature to draw conclusions on what we may or may not do at this stage.
Okay. That's very helpful. Thank you very much.
Your next question comes from Matthew Weekes of iA Capital Markets. Your line is open.
Good morning. I was wondering if you'd be able to provide a little bit of granularity as to sort of your FX hedging program. Going forward, we're seeing a bit of sort of weakness in the U.S. dollar. How we could expect that to maybe impact earnings in 2021?
Matthew, it's Greg. Certainly, as always, we'll see volatility in the Canadian dollar, and that certainly has been the case over the last year or so. Most recently, obviously, some strength. Rough numbers, kind of think of it as every penny change in the currency. 130 to 129, as an example, would be about a penny in EPS. We do some earnings hedges. We have about 25%-30% of our business hedged in 2021 at rates north of 140 right now. We'll continually look at opportunities if we see some additional weakness in the Canadian dollar to put on some incremental hedges.
Okay, thanks very much. I was wondering as well, if you'd be able to provide a sort of similar rough breakdown of how maybe weather impacted earnings in Tampa Electric specifically and how maybe that could reverse going forward with some normalization.
Yeah. Outside, Matthew, what we've already provided, I am not so sure I can be much more helpful. We certainly saw some benefit on a year-over-year basis, probably about $14 million after tax, so on US dollars. Think of it more like probably $20 million pre-tax or $18 million pre-tax, from weather-related. If you are trying to equate that to load, probably the easiest thing, and I have not done the math. It'd be go to the segment information in the MD&A, and you can see the change in load on a year-over-year basis. In general, we would expect that load in 2021 is probably going to be more like 2019 and less like what we experienced in 2020.
Okay, thanks very much. That's it for me. Nancy, congratulations on retirement. All the best.
Thank you, Matthew.
Your next question comes from Elias Foscolos of Industrial Alliance. Your line is open.
Good morning. Just want to follow up on a macro question. First of all, Archie and Nancy, both of you, congratulations. On the macro side, are you seeing any inflationary pressure, particularly in the U.S., and how would you classify that if you do see it? I'll leave it at that.
Elias, it's Scott. Certainly nothing that is driving any particular focus, attention, or concern at my level. I know Nancy and Ryan are both on. I don't know whether they're seeing anything as it relates to their supply chains or anything that would give any clarity of answer to your question. Certainly, Elias, nothing that's caught my attention yet. Nancy?
I would concur, Scott. Nothing that's really caught our attention here for sure.
Ryan, anything on your end?
Yeah, no, we've not seen anything here as well, so I would concur.
Okay. I'll leave it at that. I appreciate that call. It's just we were hearing from our chief economist today, and they said that that's the focal point for the U.S. Fed, so I thought I would bring that up. We'll leave it at that, but thank you very much.
Thanks, Scott.
There are no further questions at this time. I will now return the call to our presenters for closing remarks.
Thank you, Chris, and thank you everyone for joining us this morning and for your continued interest and support in Emera.
Ladies and gentlemen, this concludes today's conference call. Your participation is appreciated.