Emera says TECO Energy a 'perfect fit' for power portfolio

Emera Inc.'s $10.4 billion US purchase of TECO Energy is a "perfect fit," says Emera CEO Chis Huskilson.

"The primary thing that was attractive to us was that it is a purely regulated business serving about 1.6 million customers in Florida and New Mexico," he said.

Emera's investors find regulated industries attractive, Huskilson said, because of the consistent return. TECO has three divisions: Tampa Electric serves about 700,000 customers in West-Central Florida; People's Gas is the major gas distributor in Florida, with 350,000 customers; and New Mexico Gas is the major gas company for New Mexico, with about 510,000 customers.

Tampa Electric is allowed a return on equity of 9.25 to 11.25 per cent.

And like Nova Scotia Power, Tampa Electric is primarily a coal-based electric utility. Both are on similar trajectories as they move to more low-emission forms of generation, said Huskilson.

Risky deal with potential for big rewards

TECO is currently trying to sell its coal division, with mines in Kentucky and Virginia, but the assets are of questionable value since U.S. President Barack Obama put strict new limits on emissions.

The deal adds 3,700 employees to Emera's existing 3,700 employees and more than doubles the company's assets. The scale of the new operation will give Emera more easy access to capital, and will mean the cost of that capital will be less, said Huskilson.

A report on the deal for BMO Capital Markets says the deal is risky, in part because of the increased debt load for Emera, but it also has the potential for strong rewards.

TECO has accumulated $1.7 billion US in net operating losses, but the economies in Florida and New Mexico are continuing to strengthen, after a low point in the 2008-09 housing crisis.