Good morning, ladies and gentlemen, welcome to Emera Q3 Analyst Conference Call. After the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. Please note that this call is being recorded today, November 9, 2018, at 9:00 A.M. Eastern Time. I would now like to turn the meeting over to your host for today's call, Erin Power, Manager of Investor Relations for Emera. Please go ahead, Mrs. Power.
Thank you, Sharon. Thank you all for joining us this morning for Emera's Third Quarter 2018 Conference Call and Live Webcast. Emera's third quarter earnings release was distributed yesterday after market close via Newswire, and the financial statement, management's discussion and analysis, and the presentation being referenced on this call are available on our website at emera.com. Speaking on the call today is Scott Balfour, Emera's President and Chief Executive Officer, and Greg Blunden, Chief Financial Officer. Scott, Greg, and other members of Emera's management team will respond to your questions following their prepared remarks. This morning, Scott will begin with an update of the business and our strategic initiatives, and Greg will follow with an overview of the financial results. We expect the prepared remarks to last about 15 minutes, after which we will be happy to take questions from analysts.
I will take a moment to advise you that this conference call will contain forward-looking information and statements with respect to Emera. Forward-looking statements involve significant risk, uncertainties, and assumptions. Certain material factors or assumptions have been applied in drawing the conclusions contained in the forward-looking statements. Generally, these factors or assumptions are subject to inherent risks and uncertainties surrounding future expectations. Such risk factors or assumptions include, but are not limited to, regulation, operations and maintenance, energy prices, general economic conditions, weather, derivatives and hedging, capital resources, loss of service area, licenses and permits, environment, insurance, labor relations, human resources, and liquidity risk. 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. Now, I will turn things over to Scott.
Thank you, Erin, and good morning, everyone. I'm pleased to report that yesterday evening, Emera announced strong quarter-over-quarter earnings increases across all of our operating companies, driving year-to-date increases in adjusted net earnings of 30%, adjusted earnings per share of 19%, and operating cash flow of 29%. Our strong performance in the quarter was balanced across our affiliates and reflects the tremendous growth opportunities in our portfolio. Our quarterly earnings were further enhanced by our business's ability to capitalize on weather-driven earnings opportunities. Our continued investment in our solar program in Tampa has boosted our 2018 financial results. The third quarter marked a significant milestone in the program as we placed 145 MW into service in September. The team in Tampa worked diligently to complete these projects on time and on budget.
Now that these projects have been placed into service, customer rates have been increased in accordance with the Solar Base Rate Adjustment, or SoBRA, and Tampa Electric is now collecting revenue pursuant to this mechanism. Over the balance of 2018, higher customer base rates as a result of the SoBRA are expected to generate approximately $8 million in revenue. We've continued to make significant progress on our tranche 2 projects and are on track to bring the next 260 MW online in early 2019. Late last month, the Florida Public Service Commission approved the SoBRA on tranche 2, which will adjust customer rates for the full cost recovery as soon as these projects are placed into service. Because the SoBRA mechanism allows for an immediate cash recovery in customer rates, we're able to quickly convert our AFUDC earnings into cash earnings.
By the end of January of 2019, we will have commissioned over 65% of the total project, which will generate an additional CAD 70 million of revenue and approximately CAD 30 million of cash earnings in 2019. We continue to be on track to invest approximately $850 million USD in the first phase of our solar program. As of September 30th, we've invested approximately CAD 530 million and expect to dedicate a further CAD 115 million over the balance of 2018. At this point, with only installation remaining, we're confident that the cost of the project will stay within budget. We continue to explore the opportunity to invest in a second phase of solar in Tampa. We believe that there's further capacity and value in additional solar for Tampa Electric customers, and we are actively looking at the potential to develop an additional 600 MW post-2020.
Our planned $850 million investment to modernize Big Bend by converting one of the units to combined cycle natural gas and retire another unit early complements our investment in solar in the region. A modernized Big Bend will provide customers with cleaner and lower-cost energy while also providing additional fast-acting generation, which is needed to enable additional solar capacity. Over the next three years, investments like our Florida Solar program, the modernization of Big Bend, and our cross-utility AMI rollout are the foundation of more than a CAD 6 billion capital program, which is focused on investments in renewable and clean energy, modernization of aging infrastructure, and customer-focused technologies. Over this period, approximately 85% of our planned capital will be deployed in Florida and Nova Scotia.
We expect that by investing the majority of our capital in the state of Florida, a jurisdiction with above-average equity thickness and double-digit ROEs, we will achieve higher EPS growth and naturally reduce our consolidated leverage over the period. At our investor lunch later this month, we will be rolling out our updated capital forecast through to 2021. We expect that the updated capital plan will be generally consistent with our 2018 to 2020 forecast. We expect our healthy annual rate base growth of over 6% to continue through 2021, driven by highly accretive growth investments in our Florida utilities and sustainable and consistent growth in our other utilities. As we've noted in the past, the rate base profile only includes projects that we are highly confident will proceed. Additional opportunities will sustain or enhance our long-term rate base growth, including a second phase of solar investments in Florida.
In a few minutes, Greg will take you through the quarterly results. Before I turn it over to him, I wanted to speak briefly about Emera's future direction. Over the last several months, we've been taking the board through our annual strategic review. As that process comes to a close, I want to provide you with some perspective about how we're thinking about our business and shaping our path forward. A key question for us in the current environment of a higher cost of equity is how do we continue to both grow and improve the overall financial strength of Emera to provide the best value proposition to our stakeholders? The TECO acquisition transformed our business, and it has delivered growth in cash flow, earnings, and earnings per share. The growth opportunities in front of us are as robust and value-enhancing as they have ever been.
As we're all aware, equity capital market conditions are different and our cost of equity is higher. In response, we're looking more aggressively at internal sources of capital as an important component of our funding plan. This means that in addition to our operating cash flow, select asset sales will form a meaningful part of our funding plan, which will significantly reduce and potentially eliminate our external common equity needs beyond our DRIP. We are optimizing our portfolio so that we can fund our best growth opportunities and establish a strong foundation for our business going forward. We've been evaluating our portfolio through a number of financial and strategic lenses, including value, marketability, and opportunities for future growth.
We know that redeploying capital into the growth investments of our strongest-performing assets will lead to higher quality earnings and cash flows, creating an even stronger Emera and offering the best value proposition for both current and future stakeholders. I'll now turn it over to Greg to take you through our results and to share a bit more of our thinking on the funding plan. Greg?
Thank you, Scott, and thank you all for joining us today. In Q3 2018, Emera reported adjusted net income, which excludes mark-to-market adjustments of CAD 191 million and CAD 0.82 per share compared with adjusted net income of CAD 118 million and CAD 0.55 per share in Q3 2017. For the year-to-date period, our adjusted net income was CAD 504 million or CAD 2.17 per share, compared to CAD 387 million or CAD 1.82 per share for the same period in 2017. Very strong quarterly year-to-date performance, which keeps us on track to deliver strong adjusted EPS and cash flow to our shareholders.
We also reported a significant increase in our year-to-date operating cash flow before changes in net working capital of CAD 281 million or 29% to CAD 1.2 billion. Operating cash flow is a key metric for our business because it is the basis upon which our credit metrics are calculated.
This increase exceeded our forecast. As a result, we expect our annual cash flow growth will exceed adjusted EPS growth. Weather continued to be a theme in Q3. Across many of our service territories, we experienced unseasonably hot summer weather, which created earnings opportunities, and our businesses were well-positioned to capitalize on those opportunities. In the new U.S. Northeast, hot and humid weather conditions provided earnings opportunities for both Emera Energy's generation and marketing trading businesses. These warm weather conditions strengthened energy pricing in the region, which was positive for both the gas marketing and generation sides of the business. In addition to higher energy margins, the generation business continued to realize higher capacity revenues in the quarter as a result of the step-up in capacity revenues that came into effect in June. Here in Nova Scotia Power, we also experienced an unseasonably hot summer, which resulted in increased load.
Nova Scotia Power was especially well-positioned to capitalize on the opportunity provided by the hot weather due to its successful efforts over the past several years to convert customers from oil-based heat to electric heat pumps, which also enable customers to utilize air conditioning during warmer weather. In Tampa, our continuing investment in solar drove a significant increase in quarterly earnings. The quarter-over-quarter earnings increase was largely driven by higher AFUDC earnings and an increase in base rates following the completion of tranche 1, partially offset by higher depreciation and amortization costs. During the quarter, our New Mexico Gas Company utility reached a settlement agreement with all stakeholders on its outstanding rate case. The parties settled on all matters except for the treatment of 2018 tax benefits as a result of U.S. tax reform.
We are pleased with the settlement agreement, which includes a phased-in CAD 2.5 million increase in revenue and a weather tracking mechanism. Going forward, the weather tracker will provide the utility with a smoother, more predictable earnings profile. Now future rate cases will also be based on a forecasted test year. We expect that the final proceedings will conclude in early 2019. Turning to the year-to-date results and looking ahead for the balance of the year. Favorable weather has been a factor in Emera Florida and New Mexico results all year, enhancing the organic customer growth we're experiencing. Tampa Electric has experienced customer growth of approximately 2% in 2018, and Peoples Gas has experienced an impressive 4% increase in its customer count over the same period.
This top-line growth of the utilities has translated into year-to-date earnings growth from the segment on a U.S. dollar basis of almost 10%. We expect this growth trend to continue through the balance of 2018 and anticipate that U.S. dollar earnings from the segment will grow by a modestly higher rate than the 10% growth experienced in 2017. Year-to-date results from Nova Scotia Power, Emera Maine, and Emera Caribbean are in line with our expectations and provide a solid and predictable earnings foundation for the business. Nova Scotia Power has experienced strong organic and weather-driven load growth this year, which is helping to temper the effects of higher-than-expected storm costs in the first half of the year. Nova Scotia Power consistently delivers near the top end of its allowed earnings range. In 2018, the utility expects a modest increase in annual earnings over 2017 levels.
In Maine, the effects of regulatory decisions and late-season winter storms have caused lower earnings in the first three quarters of the year. Despite these challenges, Emera Maine is expected to grow rate base modestly, with annual earnings relatively consistent with 2017. For the year-to-date period, Emera Energy has delivered outstanding earnings growth. In addition to the strong third quarter earnings, the marketing trading business also benefited from favorable weather in early 2018, which led to strong first-quarter results. Given the impressive performance of that business so far this year, we forecast that marketing trading will deliver at the high end of its normal $15 million-$30 million U.S. earnings guidance range. The generation businesses also perform well, realizing higher capacity revenues throughout the year.
I am pleased not only with the growth that we are seeing in our earnings and cash flow, but the improvement in the quality of these earnings. Our Maritime Link investment has been contributing cash earnings throughout 2018. With a CAD 40 million increase on our year-to-date capacity revenues compared with the same period in 2017, as Scott noted, we've also placed the first 140 MW of our Florida solar investments in service, converting AFUDC earnings to cash earnings. These predictable sources of cash, combined with the stable cash flow from our portfolio of regulated utilities, positions us well for the balance of the year and into the future. Having a strong balance sheet is also essential for Emera's growth plans. Over the last 24 months, we have made significant progress in strengthening our balance sheet, decreasing our consolidated leverage by almost 400 basis points to 60%.
We'll continue to move closer to our 2020 targeted capital structure of 55% debt, 35% equity and 10% hybrid capital. Over the past 12 months, we have raised approximately CAD 880 million of common equity through the combination of a public issuance and our dividend reinvestment program. In May, we raised an additional CAD 300 million of preferred equity. With our 2020 targeted capital structure in mind, we are focused on developing a plan that allows us to continue to grow while improving the overall financial strength of Emera. We are fortunate in that with most of our growth planned in Tampa Electric, which has an allowed equity thickness of 54%, organic growth and de-leveraging essentially become one and the same. We have developed targeted allocations for each source of capital, which you can see presented here.
As you can see, our capital plans are heavily weighted towards internal sources of capital, including select asset sales. We are confident that the assets that we have in our portfolio are highly marketable and could attract premium valuations. When all is said and done, we expect our total common equity needs over the next three years beyond our dividend reinvestment plan would not exceed 10% of our total funding requirements. There's a good chance it'll be significantly less than that. Our remaining funding requirements is expected to be met with debt raised at the operating company level in support of the CapEx profile for each business, preferred shares, and the DRIP. We would not expect any additional long-term holding company debt over the forecast period. We are highly confident that our overall funding plan is achievable.
As we have news to share with you on this execution, we will do so. We expect to reach our targeted capital structure in 2020, which by extension, will also serve to improve our credit metrics over the same period. The result is a stronger Emera that is well-positioned for growth today and into the future. We look forward to updating you further on all of this at our upcoming investor luncheon. With that, I'll now turn the presentation back over to Erin.
Thank you, Greg. This concludes the presentation, and we'd now like to open the call up to take questions from analysts.
If you would like to ask a question at this time, please press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Nicholas Campanella with Bank of America Merrill Lynch. Your line is open.
Hey there. Good morning. Congrats on the strong quarter.
Thanks, Nicholas.
Thanks, Nick.
I guess just curious when we think about deleveraging and the targets that the agencies want to get you to, can you maybe talk about where you need to be in order to maintain the IG metrics? Your commitment to maintaining the Baa3 at Moody's specifically, and a kind of a sense of where you are on FFO to debt in 2019 without the asset sales?
Nick, I think both agencies have been reasonably transparent in terms of expectations and thinking of it kind of in and around ±12% on a CFO or FFO to debt basis. Obviously, as things evolve and there's constant assessment of the overall risk profile of the business, some agencies would probably have a slightly different view on that than others. As well as you're well aware, Moody's also has a strong lens through the holdco debt to total debt metric as well, and it's something that we're very sensitive to. We're on a path to meet the targets that they've established. They're obviously insiders, so they're well aware of our plan, and we think we're tracking quite well with where they expect us to be.
I guess on the funding sources and uses slide, the 20%-30% you outlined and then the 0%-10% that could potentially be mitigated with common equity. Have you outlined definitively what is for sale at this point, and is it fair to say that includes assets in addition to the unregulated businesses?
Yeah, Nicholas, it's Scott. No, we haven't been specific, and we don't at this juncture intend to be. I would say, quite frankly, we value all of our assets. We think our portfolio of assets represents something that's really compelling. Market conditions are causing us to look at things through a different lens. With that's formed the basis of our thinking as it relates to the asset sale program. We haven't been specific and don't intend to be specific as to exactly what we're looking at. What I can tell you, though, is that clearly, Nova Scotia Power is home base for us. It's the foundation of Emera as it is today. That's not going to change clearly. Also, you can tell we're investing heavily in the state of Florida. Clearly, that represents a significant portion of our forward-looking prospects.
Beyond that, we're not at a place where we would comment at this point in time. Of course, as our plan develops and unfolds, we will of course keep you apprised.
Thanks. Looking forward to seeing you at EEI.
Thanks.
Next question comes from Linda Ezergailis with TD Securities. Your line is open.
Thank you. I realize there's a limit to what you can share with us in terms of asset sales. I'm wondering potentially if you can give us a sense of what the maximum value of potential assets that have been identified for sale relative to the target value. Also, can you give us a sense of maybe how willing you might be to sell partial interests in businesses and other considerations?
Yeah. I think in terms of the value piece, Linda, I think the slide that Greg referenced gives you a pretty good sense of what we're looking at and targeting there. When you think about that against our CapEx profile, you can kind of get a sense of it. As I said in answer to the earlier question, we're fortunate to have a portfolio of great assets. We do have some optionality that allows us to have the degree of confidence that we do as it relates to that component of our funding plan. It's hard for me to say anything beyond that. Obviously, as we have something to announce, we'll do that in the moment. For the time being, I think that gives the best guidance.
Linda, it's Greg. Just to answer your second question. We haven't made final conclusions on what I think you might have characterized as partial interest, that wouldn't be our area of focus at this point in time.
That's helpful context. Your slide 14 breakdown of percentages of sources of cash was helpful, but I'm just wondering, can you give us the exact dollar billion figure for your 2019 to 2021 capital requirements? I realize it's likely north of CAD 6 billion, but I don't remember seeing it anywhere.
Yeah. Linda, it's Greg. Again, at our investor lunch is generally where we unveil what our updated capital plans are. I think as we roll forward and look at 2019 through 2021, we wouldn't expect it in aggregate to be materially different than the three years that we are currently showing.
That's helpful context. Just one last operational follow-up question. Can you clarify for your year-over-year growth in Florida what the weather effect versus customer growth components would be?
Growth would be slightly less than 2% of the overall load on a year-over-year basis.
Yeah. The customer growth impact in Tampa Electric right now is about 2%. I don't know, Nancy, is there any additional color that you can provide?
I can. We sort of look at customer growth as about 1.7%, around that. Somewhat offset by reduced consumption. Probably closer, let's say to 1.5% or so in terms of overall growth.
What does that translate to from a year-over-year income impact versus the weather dynamic? That would be you can't quantify.
Well, probably around $14 million in bottom line impact.
That's helpful. Thank you.
Okay.
Next question comes from Rob Hope with Scotiabank. Your line is open.
Good morning, everyone. Would like to stay on asset sales. The 20%-30% of your funding goal that you show on slide 14, just want to get a sense if you have price discovery on any of these and the status of any ongoing processes.
Yeah, I think, I don't think we'll get into the details of that now, Rob. I think we've got a pretty good sense of value, I would say that, and a confidence level as to the value. I'd say we're well advanced on portions of this. We would expect to be in a position to provide some clarity on at least a portion of that program by the end of the year.
I appreciate that. I guess just as a follow-up there, just want to get a sense of how you're thinking about the once a sales announcement is announced versus the path to closing, whether or not an extended regulatory review of certain assets could be a possibility, or are you looking for easier to monetize assets?
I'd say it really depends on the nature of the asset itself, Robert. Again, not something I want to get into here in the call, but certainly would say that, I'd say we expect to have clarity on a good portion of the program by the end of this year. Would expect reasonably to have the program either entirely clear or entirely done by the end of next.
Excellent. Thank you for the clarity.
Your next question comes from David Quezada with Raymond James. Your line is open.
Thanks. Morning, guys. My first question just on the CapEx outlook. I know obviously the Florida utilities have a lot of great opportunities right now. I'm wondering if you see anything on the horizon that might lift the outlook for some of the other subsidiaries.
We've actually got pretty healthy growth prospects across a number of our businesses. The themes that we talk a lot about the growth in Tampa Electric just because the numbers are large. The investment that continues to occur in Nova Scotia Power, in New Mexico, across all of our businesses, frankly, continues to be quite robust. It just happens the numbers are biggest in Tampa, we talk about those predominantly. Obviously, we've got some assets, some of our businesses are contributing positively to that average rate base growth profile that Greg and I spoke to. Other assets like, the Maritime Link, of course, is now an accreting asset. That obviously doesn't contribute it. Overall, the themes though are the same, we continue to invest in providing cleaner, affordable, reliable energy to our customers.
We're investing in things like AMI technology that's not just a Florida investment opportunity. Obviously, both Tampa Electric and Nova Scotia Power are well advanced in terms of the implementation of that additional technology that is both good for the business and good for customers. Those things, as well as continuing to clean generation and continuing to invest in our T&D assets would be the driving forces in the electric utilities while the gas utilities are continuing to add infrastructure to support customer growth and replacing aged infrastructure, which is contributing to the growth profiles there. The theme is actually pretty consistent across the portfolio.
That's good context. Thank you. Just one more, specific question. Realize smaller part of the business, Emera Newfoundland, I see in the capital forecast by affiliate, it goes down to virtually nil in 2019 and then is almost, 10% of the total in 2020. Is there a specific opportunity is driving that delta?
Yeah. Sorry. Hey, David, it's Greg. As part of our overall agreement with Nalcor on the transmission, there's a true-up on the overall transmission investment that happens in 2020. Based on where we are today versus our transmission investments and theirs, we have an opportunity to invest another CAD 190 million is our estimate at this point. That will take place in 2020 in the Labrador-Island Link.
Okay, great. Thanks. I'll get back. Thank you.
Thanks, David.
Your next question comes from Robert Catellier with CIBC Capital Markets. Your line is open.
Hi. Good morning. I think I'll try you on the asset sales again. I'm just curious to know how specifically business risk profile plays into the determination on selection of which assets might be sold.
Yeah, Robert. I think it's a natural as mentioned, as we went through the process, we think about things that I mentioned in terms of the marketability and the value of the asset. We're also looking at the strategic things as well. Sure, business risk was certainly a factor in our consideration.
What are the relative implications for Emera Energy then?
Look, Emera Energy is still an important business for us and it's been a part of Emera for a long period of time, and frankly, I think it helps parts of our business as we continue to grow. The commercial expertise within Emera Energy is an important part of that for us and don't see that changing. There are lots of different parts of all of our businesses and beyond that, I really don't want to start to comment on particulars again about what assets that we may be looking at.
Okay, last question for me. It looks like the guidance for Emera Maine was step down a little bit. I'm wondering if there's anything specific there or if that's related to the recent transmission orders from FERC.
Robert, yeah. I wouldn't read too much in it. We were and still hopeful we're going to be in a position flat, maybe slightly above. We felt given that three quarters had gone by, and because of weather low, other external things like decisions coming out of the regulatory rate case, FERC transmission, that our expectations now are just slightly muted. We're talking relatively modest numbers.
Okay. Thanks for that, Greg.
Your next question comes from Ben Pham with BMO. Your line is open.
Hi. Thanks. A couple questions on that funding pie. The pref component 5%, why is it lower than the 10% you've, I know that's probably a different percentage than how you think. Why isn't there more pref in the mix there?
Yes, Ben, I don't want you to read into that we're targeting 5% of our overall capital structure in terms of our capital raise over the next three years. Given where we're currently at of pref, slightly higher than 10% of our overall capital program, we really only see probably doing one additional pref issue, roughly the same size that we did earlier this year. Keep in mind, there's thresholds from a regulatory or from a credit rating agency perspective too, as the total amount of pref. We probably have a little bit more capacity in pref. That's some flexibility that we can exercise some point in the future. As we look forward to the next three years, I think you should be thinking of probably a single pref issue comparable to what we did earlier this year.
Okay. It sounds like there's probably room beyond that wedge there. It's just you don't want to be hitting up the upper bounds of the 15% or what it is that you can get to.
Yes, correct. 15%. Yes.
Yeah. Okay. Can I ask you, there's probably a different iteration you're running. How do you guys think about your payout, how it changes over time? You sell assets, you could see some temporary pressure on the payout. Curious how high you will let the payout go. With that, how do you guys balance the dividend growth in that mix?
Yeah. Nothing has changed from our perspective, Ben. When we look over the 2019-2021 period, quite frankly including 2018 in that and thinking of 2017 as probably the base, we still expect rate base growth to continue at 6%+. Our dividend growth will be less than that. Some years will be higher, like 2018, some years will likely not be at the 6%. We see earnings per share growth kind of in line with rate base growth. Dividend growth slightly less than that. That'll improve that metric over time, and that's all been incorporated into our financial forecasting when we made decisions around the dividend growth and the payout ratio. We'll certainly be higher than our targeted payout ratio over this period as we previously indicated.
I think just to anchor the point that Greg made, Ben. I think this was a question on the Q2 call. If you think about our rate base growth profile as a bit of a proxy for EPS growth, EPS growth can be lumpy, of course. We'll see some years that are higher and some years are lower. You've heard us talk about 2018 as likely outperforming that reference point. If you think about 2017 as the anchor year for us, we remain confident that even with the asset sale program that we have, that all of the disclosure and context that we provided previously about EPS growth and our dividend growth profile remains unchanged. Dividend growth in the 4%-5% range.
We'd expect EPS growth to be a little bit higher than that using 2017 as an anchor year as we work through the next few years in front of us.
Maybe can I last, to clarify that 4%-5%, is there a situation where you got a year where all your assets roll off, and then your payout goes to, I'm just throwing out a number, 90%, and you just grow the dividend a little bit lower than that 4%-5%, but then you pick it up the next year? Is that consistent with the dividend guidance that you've laid out?
No.
No? Okay.
No, Ben, I think we wouldn't see that we would pivot off our dividend growth guidance in a particular year, just because our payout ratio might be slightly higher, nor would we necessarily increase it substantially in a year where our payout ratio might be lower. We're thinking of this more over a longer period of time.
Okay. That clarifies it. Okay. Thanks a lot, everybody.
Okay. Thanks, Ben.
Your next question comes from Andrew Kuske with Credit Suisse. Your line is open.
Thank you. Good morning. Maybe a conceptual question that drills into some of the funding issues. When you think about the public-private market divide that exists on valuation on certain assets, can you capitalize from that by selling down part of an asset, but then you might have a bit more structural complexity? How do you think about that versus selling an asset base. Let's just say Emera Energy or part of Emera Energy, that probably results in an overall portfolio high rating for a corporate valuation. How do you think about the dynamic between those options?
Andrew, I think, again, without commenting about specific assets, but I think as Greg mentioned earlier, while we recognize that there may be a market opportunity to sell minority interests in some assets, that really isn't part of our focus at the moment. As you say, that does add some structural complexity. That's, as I said, that's not in our focus at the moment.
Okay. Thank you. Maybe just looking ahead to opportunities you see for reversing some of the pipes that you own and repurposing them and just the longer-term opportunities for LNG out of Atlantic Canada.
Yeah. I'd say, frankly, that's still a puzzle as to the long-term solution to natural gas supply in Atlantic Canada with the reality of the status of Deep Panuke and Sable. We continue to be an active participant in that market, of course, with our minority interest in Maritimes & Northeast Pipeline and our ownership of Emera Brunswick Pipeline. There does remain to be a market solution that is required for which one hasn't yet been found. It's interesting to note that the new government in New Brunswick is talking about the potential of shale gas and fracking. Whether that comes to pass or not, we don't know. Obviously, something like that could dramatically change the market. We know that there is talk of LNG export out of Nova Scotia.
We don't have any particular lens on the status or activity of that, but are certainly keenly observing.
Okay. That's great. Thank you.
Your next question comes from Robert Kwan with RBC Capital Markets. Your line is open.
Good morning. Just on the funding plan, if I can just tie up a bit of a loose end. What you put forward is 2019 through 2021. Are you still sticking to the statement that you don't need any common equity outside of the DRIP for the remainder of 2018?
That's correct.
Okay. Just generally on the plan, you mentioned that you've been in discussions with the rating agencies. Is that just the normal rating agency update, or have you also engaged the rating services or had enough feedback from the rating agencies that what you're putting forward here and presumably similar to the investor event that that's going to hold IG?
Yeah. Sorry, Robert, didn't mean to cut you off. I'd say it's been normal course. We haven't gone through any evaluation services or anything like that, rating advisory services. It's just been the normal course. We have been, obviously, on a regular basis providing them updates of things we're doing. I would call it normal course business, maybe a little bit more proactive communication with them than normal, but I wouldn't consider it out of the norm.
Do you feel you've got enough feedback that you're going to meet either the metrics that they put forward, but as well, any metrics that they might be thinking of changing?
Well, if they're planning to change something, we wouldn't necessarily have insight into that. Certainly and look, we can't speak for them, but we find the conversations to date have been constructive.
Okay, understood. If I can just finish on just any additional color on the Florida tax change, a little less what ran through corporate, is there an ongoing benefit just given the change in the way you're allocating between the state?
Yeah, it's relatively modest, Robert. It's somewhat of a technical thing, you're right, as you speculated last evening, that it's non-cash and non-recurring. It does mean that ultimately we'll pay slightly less taxes each and every year over the next number of years, it's like CAD 1 million or less. It's not an overly material amount.
Okay. That's great. Thank you.
Thanks, Robert.
Your next question comes from Nicholas Campanella with Bank of America Merrill Lynch. Your line is open.
Hey, sorry, I might have missed it, but just one follow-up. Presumably, 20%-30% plus the 0%-10% means, let's call it 40% of your plan is funded with potential asset sales. That allows you to maintain your current dividend trajectory?
I think the way to think of it, Nick, is the 20%-30% and 0%-10% would put you in a combination of 30%, not 40%. That certainly has been included in our financial forecasting when we made determinations around what our dividend growth should be over that period.
Thanks.
You're welcome.
Your next question comes from Jeremy Rosenfield with Industrial Alliance. Your line is open.
Yeah, most of the questions have been answered. Just wanted to clean one up on New Mexico Gas. I'm wondering if you have the number in terms of the rate base that's being specified in the settlement agreement. If you don't have it, I'm sure we could dig it up, but just curious.
I don't have it in front of me. Ryan Schell, who is our President of New Mexico Gas, I think, is on the phone. Ryan, do you have it up?
Yeah, Greg, I don't have the exact number in front of me, but it's probably about CAD 525 million.
Okay, that's perfect. That's all I had. Thank you, guys.
Okay. That'd be us, Jeremy. We'll circle back if it turns out to be something different than what we represented.
Once again, if you would like to ask a question, please press star one on your telephone keypad. We have a question from Patrick Kenny with National Bank. Your line is open.
Hey, guys. Just wondering if there was any update on the regulatory process for the Big Bend modernization and whether or not that process has any influence on the timing of executing the asset sales.
Hi, it's Nancy. Patrick, we are still pursuing the same path we talked about when we made the announcement, which is, of course, we're earning AFUDC as we build the Big Bend modernization. We will get that in rates the next time we go in for a general rate application.
Okay. Just to circle back on, I guess, the commentary around equity investors resetting their required returns. I guess one could argue that fixed income investors are also resetting their expectations on leverage and whatnot. Just wanted to get a sense as to whether or not there was any internal discussion on recalibrating some of your longer-term capital structure targets, whether it's taking down the 55% debt or bumping up the FFO to debt ratio longer term.
Yeah, Patrick, it's Greg. We still believe that our targeted capital structure is the right structure for us over the long term. Certainly, there's been, I think, a recalibration in the equity markets. To be quite frank, we're not seeing the same recalibration in the fixed income markets.
Okay, that's great. Thanks, guys.