Speaker 1:

From the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, welcome Inside the ICE House. Our podcast from Intercontinental Exchange is your go-to for the latest on markets, leadership, vision and business. For over 230 years, the NYSE has been the beating heart of global growth. Each week we bring you inspiring stories of innovators, job creators, and the movers and shakers of capitalism here at the NYSE and ISIS exchanges around the world. Now let's go Inside the ICE House. Here's your host Lance Glinn.

Lance Glinn:

Welcome into another episode of the Inside the ICE House Podcast. Today's guest is Scott Balfour, President and CEO of Emera. That's NYC ticker symbol EMA. Scott joined Emera in 2012 and stepped into the CEO role in 2018. Since then, he's guided the company through some of its most transformative moments, including a major milestone earlier this year, Emera's listing on the New York Stock Exchange in May. He joins us in the library to talk about Emera's remarkable journey from its roots as a single utility to a North American energy leader and how he and his team are shaping the company's next chapter in the industry. Scott, thanks so much for joining us Inside the ICE House.

Scott Balfour:

Happy to be here.

Lance Glinn:

So earlier this year in May, Emera celebrated a major milestone listing here on the New York Stock Exchange under the ticker symbol EMA. Just from a strategic standpoint, how does this listing fit into Emera's long-term vision and really position the company for the months and years ahead?

Scott Balfour:

Yeah. So Emera of course has been a publicly traded company for many years on Toronto Stock Exchange, TSX 60 Company, one of the larger companies on the Toronto Exchange. But today, as we sit here, 70% of our business is in the US. And as we continue to grow and continue to invest capital in that growth as we serve our customers and create value for our shareholders, getting access to broader capital markets, to one of the most iconic markets in the world here, the New York Stock Exchange is part of that. So we can tell our story to a broader audience, but also have access to broader pools of capital as we continue to invest and grow to create value for our shareholders.

Lance Glinn:

And Emera has already had a US presence, especially through Tampa Electric, which we'll obviously speak to a little bit later in our conversation because I know that 2016 acquisition was an important moment for the company. But for you as CEO, what was it like to lead Emera through this process? How did you navigate both challenges as well as obviously opportunities that came with it and what did the experience really teach you about your team and even yourself?

Scott Balfour:

Yeah. So like any industry, any company, any CEO, even challenges to work along the way, but for us, we've got an incredible team and we're used to being in the public markets. There's some procedural extra steps of course to list in the US but team's done an amazing job of working through all those steps. And truthfully, this is really just a natural evolution for us, I think, as part of a strategic evolution, as we continue to focus on growth, particularly here in the US and serve those customers that we have here in the US. It's just really a natural next step for us as we continue to grow.

But of course, it's also really prideful, right? It's really cool to be here, to be on Wall Street as this Canadian company with humble beginnings. To be here on Wall Street with some of the titans in the corporate world that are part of the New York Stock Exchange community. It's really exciting.

Lance Glinn:

While you weren't yet with the company at the time, just when you think about the vision and mission of those that got it started in those early days, how has Emera stayed true to its really core principles even as growth and expansion and scaling have happened?

Scott Balfour:

Yeah, so you're right. In 1992 then provincially-owned utility turned to the capital markets, and we've been public since then. And I think for us, really a lot of it's about culture. The culture to first and foremost keep the team safe. First and foremost, deliver operational excellence to our customers, but also to think big and to find ways to grow, to navigate challenges, to deliver more value for shareholders. And I think along the way we've kind of punched above our weight a little bit as we've done that, including that acquisition that you refer to in 2016 has been a really important catalytic moment in our journey to here for sure. And really excited about how we sit today. This sector has lots going on and there's great things ahead for us. So we're excited.

Lance Glinn:

And when it comes to people and culture, it's those who really make the company go. Obviously, you're overseeing this big brand, this big American company, but it's the people that work in the company that really help make it what it is, helped that success happen. How have you allowed and helped their development, allowed for employee growth, allowed for great cultural at employee safety and made it so that people want to work and enjoy working at Emera?

Scott Balfour:

Yeah. As you say, that's the critical part is the 7,600 people that work for us, for them to feel challenged, for them to feel empowered, for them to be able to do what they do in the best way possible around a common purpose. Sort of an Emera purpose as we look to drive the business forward. And I think as we've grown through acquisition along the way, as we've grown organically along the way, as we've brought on new team members along the way, that culture of collaboration that we've got between us of taking on big things and not being afraid to take on big things. To still be sort of very thoughtful and balanced in our approach to risk management, which is really important in our industry. Of course, those are all some of the key tenets I think that really have helped our 7,600 people get us to this moment today and drive us forward in the future as well.

Lance Glinn:

So I mentioned the Tampa Electric acquisition in 2016. That was obviously a transformative moment for Emera. It helped in obviously its scaling, its growth, its expansion, and it was really a big time for the company in its journey. How did that acquisition just really change the trajectory of Emera and help the company have the success and reach this milestone of listing on the New York Stock Exchange this past year?

Scott Balfour:

Yeah, and you're right. It really was that critical moment, and that was a big deal in all senses of the word. Acquiring TECO was the name of the company at the time, publicly listed that owned three utilities, Tampa Electric, Peoples Gas, which is a gas utility in Florida and New Mexico Gas, a gas utility in New Mexico. TECO was the same size as Emera. So acquiring a company that's of equal size, that took some deep thinking, a lot of work by team and some important financing support from many partners. And really has changed the trajectory for the company, as you say,. The Florida market, of course, the Florida economy is doing fantastic. We're fortunate enough to be in the Tampa Bay area, which itself is a very vibrant community that we're proud to serve the customers in Tampa Bay. And the growth that is happening in that market because of the economic growth, the support for investment in capital and the creation of jobs is really a driving force behind Emera's growth today.

Lance Glinn:

And so we obviously sit towards the end of 2025. Look ahead obviously to 2026. This has been a year that has been, of course, a celebratory one for Emera as it's celebrating its US listing earlier this year. Now we just sort of spoke to its roots, but how would you describe the company's position as we enter this new year in the North American energy landscape right now? What does Emera represent in this current moment to its stakeholders?

Scott Balfour:

Yeah. I think there's a real opportunity as we sit today that people can see the growth profile that's in front for us. And there's been an element after you make a big acquisition as we did back in 2016 of navigating that acquisition, of bringing the best out of those two companies that came together. I think we're there now. Our balance sheet is back on solid footing after being a little strained because of the size that acquisition. But we're back on solid footing and really facing the future with a lot of excitement as today electrification trends are of course the importance of what we do has never been as important as it is today. And the opportunities to invest and to grow as we serve our customers similarly have never been as great as they are today. So we're really excited about what's ahead.

Lance Glinn:

And so we're going to get to some of those electrification trends that you speak of in just a little bit. But the energy industry has been going through, I think, a significant transformation over the last few years. So just a broad question to really open up the conversation on that. What have been some of the most significant shifts over the last few years? I'm talking like 2020 and beyond, and how have these changing trends really impacted and influenced how Emera works?

Scott Balfour:

Yeah, so there've been some broad themes, and of course there's slight differences between the US and Canada and certainly the Caribbean markets. But de-carbonization would've been a theme for a long time, is sort of high grading and modernizing the generation fleet to more efficient units. To cleaner fuels, closing coal plants and re-powering with natural gas, investing in solar, investing in wind, those kinds of things.

I'd say today a lot of the theme is around hardening and modernizing the transmission and distribution system, the poles and wires part of the business. We're using electricity differently today than we were as customers collectively over the last decades. And that requires investment, but also investment in order to deal with the more frequent and more severe storms that we see, of course, in sometimes and making sure that we're hardening the market. And now more recently for the last year or so, it's been about energy adequacy and making sure that we've got enough generation capacity to meet the growth opportunity in front of us. So those would be sort of the big themes that we've seen over the last decade or so in our sector.

Lance Glinn:

And so electrification I think is accelerating across transportation, heating, industry as a whole, but it brings what I think you guys refer to as sort this energy trilemma front and center, right? Accessibility, reliability, affordability are the three main factors. How do you think about just balancing those three priorities as demand for electricity surges? And as you just said, we're using electricity in different ways now, so how do you balance everything?

Scott Balfour:

Yeah. You're right, and trilemmas are hard.

Lance Glinn:

Dilemmas are hard.

Scott Balfour:

Solving two of those things is hard. Adding the third is particularly challenging, and a lot of it comes down to pace and balance. Making sure that as we're making investments to improve reliability that we're doing that at a pace that doesn't sacrifice affordability, which is really important today as we all know.

Lance Glinn:

Of course.

Scott Balfour:

But we also know we have to make those investments because the reliability aspects become even more critical as things more and more of the way we use electricity, energy is electrified, the importance of those devices that we have in our hands or at our fingertips or that we drive or that power our homes. The importance of reliability is equally high. So it's really about pace and balance.

Lance Glinn:

So I want to go through each of those three factors. I want to start with reliability because I think it often feels sort of like the silent hero, right? Customers, they expect the lights to stay on, for example, and their utilities to work no matter what. And they don't really think about it. At least I don't really think about it until they stop working and they don't become reliable. Now obviously we are dealing with hurricanes, wildfires, flash floods, unexpected climate events at a greater frequency than say we even dealt with five years ago, 10 years ago, 15 years ago. It's putting obviously enormous stress on utility infrastructure. So for Emera, what does preparation for these events look like? How do you ensure that the utilities remain reliable and innovate to obviously deal with these added and increased stressors?

Scott Balfour:

Yeah. So there's really two key components to that. One is investing in the system to storm harden it. And so we do that across our portfolio. If I focus on Florida, in fact there there's something called the storm protection plan. We're investing $200 million a year in hardening mostly the TND system, the transmission distribution system, under grounding about 100 miles of distribution system every year, strengthening the poles, replacing wooden poles with concrete or steel poles to harden that system so that they're less susceptible to high winds. Tree trimming. Vegetation management is a big deal in our sector because when the power goes out, more often than not it's because a tree has gone into a line somewhere. So keeping those right of ways as extended as far as we can to prevent that contact is also important. So that's all part of the mitigation part.

The other part is when a storm does happen, is the ability to respond quickly and to get the power back on as quickly as quickly as possible. And some of the grid modernization work that we're doing is part of that where we can use more technology in order to change the circuitry around in the system to feed customers from a different feeder if the power goes out on one. But also part of it is just making sure that we've got the equipment, the resources, the external resources. This is an industry where our peer utilities, we all help each other out in the case of a storm. And so we have resources that come in en masse from other utilities being in a position to be able to respond to those storms when they do occur.

Lance Glinn:

And then obviously there's accessibility. And I think as electrification accelerates, obviously making sure everyone has access to clean, reliable resources and dependable energy, obviously that becomes so critical. How do you define resource accessibility in today's energy landscape? And as demand grows, how is Emera addressing that challenge of making sure that their customers and everyone has that accessible energy?

Scott Balfour:

Yeah. It's really important. It's important on the gas side too. We're making sure that we continue to provide opportunities for our customers to have natural gas connections for an energy alternative, for that choice for them. And so you're right. Ensuring all of our customers have access to that affordable energy as an electric utility, we have an obligation to serve the customers in the regions that we operate, and we take that very seriously. And then that added effort to do that on the most reliable basis possible and of course, to do that on the most affordable means possible is all part of that tricky trilemma. And of course, part of that gets added in some jurisdictions, a little more focused in Canada, but de-carbonization continues to be a driving force and part of that energy trilemma as well.

Lance Glinn:

And then of course there's affordability, and I would say most customer... Affordability is probably most visible to customers. I mean, we all pay our bills every single month. We see it hit our accounts. It's a day I think we all don't always enjoy, but it obviously is necessary in the process of making sure you have utilities, you have energy, have what you need obviously to live life. So two questions for you, Scott. I'll get to the first one. First, one, how do you make sure these costs don't overwhelm households?

Scott Balfour:

Yeah, it's such an important question because of course, we're in this environment where affordability impacts are very broad. This isn't just an energy, electricity, natural gas challenge. It's groceries and it's fuel and it's the costs of living that are a challenge for many people. And energy of course is a necessity. Electricity is a necessity. We're delivering that essential service and no one wants that cost to go up.

But at the same time, of course, we are needing to invest in the system. And so working in order to balance the pace of the investments that we're making, those reliability type investments that we're making, the new generation, generation expansion investments that need to be made to serve new customers and to serve load growth is making sure that we're doing that at a pace, sort of in a timeframe that we're not lumping everything all together up front that can create a shock of price increases.

We pay attention a lot to what's going on with the price of electricity in other markets around us. We're proud of the fact that today Tampa Electric electricity prices lower than the national average. They are not the lowest in the state of Florida, but they're between the lowest and the highest. So kind of in the middle, which is sort of a key focus to make sure that we are being as cost-effective in everything that we do with an ever-present mind on that affordability impact for our customers.

Lance Glinn:

And then two, and you sort of talked about it in your answer just now, but balancing that long-term investment with that short-term affordability, how difficult is it to, like you said, make sure that infrastructure is up to the needs that it needs to weather these ever-increasing storms, making sure that the energy and the electrification is as sustainable as possible? How do you make sure you balance those long-term investments with the short-term affordability?

Scott Balfour:

Yeah, it's tricky. And we'd have a number of our investors who would say, "Look, can't you get more growth out of the business? Can you invest more capital in order to drive more growth?" And places to invest capital is not the challenge. There are lots of things for us that require investment, that have an opportunity investment to continue to deliver better service for our customers, whether it's reliability or technology or generation expansion.

But at the same time, if we balance that against the affordability lens, we've been resistant to... Right now we talk about a seven to 8% growth rate in our rate base, sort of the amount of capital that's invested on behalf of customers. And that gives a bit of a guidepost to our investors as to what they can expect to see in terms of earnings per share growth. It's a connected figure. So that seven to 8% rate-based growth, sure, we could make it higher for a few years, but that would sacrifice the affordability.

For us, we see that seven to 8% rate-based growth profile as being the right balance between delivering value and sustainable growth for our shareholders and not sacrificing affordability for our customers. I just see that seven to 8% growth opportunity is one that has a very long tail to it. I think we'll be seeing that level of growth for a very long period of time. Rather than accelerating it up sooner, sacrificing affordability impacts, and we see some great growth for a few years and that it settles back, I think we're going to see sort of this strong growth profile that we've been able to deliver for a very long time.

Lance Glinn:

That makes a lot of sense. Consistency.

Scott Balfour:

Yeah, exactly.

Lance Glinn:

Consistency and making sure that obviously you're there for your customers in many different ways. So we've talked a lot about how the industry has evolved, the electrification, this trilemma. I want to pivot the conversation real quick to a little bit about you, because you've been with the company since 2012, if I'm correct, through different positions all the way up to CEO. And I'm sure those positions previously helped prepare you ultimately for the role you now serve of overseeing the entire company. Can you unpack that a little bit? How did your time prior to being CEO with Emera help you as you took over this role in 2018?

Scott Balfour:

Yeah. So I think with any leadership role, CEO or otherwise, culture is so important. And those opportunities that I had to serve in other capacities at Emera before the CEO role allowed me to understand the tremendous talent that we've got on this team at Emera, whether that's in Canada, here in the US and even in the Caribbean. We were just blessed with a terrific team.

But it also gave me opportunities through the CFO role and had some opportunities on the operations side as well to really understand the business, to get a sense of what was driving things for the business. What were the challenges? What were the customer expectations? What were the markets like that we were operating in? And those are all really important factors, I think, in terms of bringing that to leadership in the CEO role. But most important within all that of course is team and letting them do what they do best, which is do their work, apply their expertise, giving them opportunities to develop and grow and contribute. That's all such an important part of it.

Lance Glinn:

So employee development, talent, team, growth, I view culture as a whole, as something that's very fluid. I think culture needs to continue to be molded. I don't think there's ever such a thing as a perfect culture. I think employee expectations change. I think companies evolve. The industries that the companies are in evolve. So culture constantly needs to be adjusted to a certain extent to make sure that it stays with the time and then employees continue to be satisfied and love doing what they're doing.

How do you view that sense that culture needs to be constantly worked on? That it isn't really ever 100% locked in? How do you make sure that Emera, whether it be 2020, 2025, 2030 always has that great culture that allows employees to love what they do?

Scott Balfour:

Yeah. I think that's really insightful, that observation, and I agree with it. And part of that evolution and shifting happens as you grow. As you are adding new employees through acquisitions, as you're adding new employees as employees retire and new employees come and work their way through the company, of course you're going to have some of those factors be influenced. And I think part of it is just some core fundamentals, some foundational aspects to culture, because culture also can be very hard to define.

Lance Glinn:

Sure.

Scott Balfour:

But there are some sort of core aspects that I think are important. And for us, collaboration, team-based work, team-based decision making. We're better when we're together making decisions as a team as opposed to siloed hierarchies of leadership. Respectful candor is a phrase I use. I use a lot making sure that we're speaking the truth. How fast does bad news travel so that we can get that on the table, get the right people in the room to talk about it and work our way through. Making sure we're taking opportunities to celebrate our success. I think all important parts of it.

And then as you say, the development of talent, the investment in that talent and making sure that we're providing a rewarding experience with new challenges and creating new opportunities for that talent that we have and the potential that they have to continue to develop it. I think those would be some of the core foundational aspects I think that help to keep anchored in the important parts of culture. And sure, the rest is it's going to evolve a bit. And of course in our sector, safety is one of those things that is non-negotiable.

Lance Glinn:

Absolutely.

Scott Balfour:

And it's an easy one for all of us. You ask any Emera employee talk about culture, talk about who we are. The first thing they'll always talk about is safety. So those foundational things are really important.

Lance Glinn:

And I think to every company, and it's being thrown around a lot. I know I talk about it a lot on these different podcasts with the different leaders that I speak to. This word innovation, it's a word that we hear really everywhere. But in the utility space, I think it can mean sort of different things to different companies depending on what they're innovating and what they are focusing on. So from technologies to new ways to thinking about service, when you talk about innovation in the context of utilities, what does that mean at Emera?

Scott Balfour:

Yeah. Innovation's an interesting thing in our sector, right? Because first of all, we're a utility. We've got a long history, and that comes with some baggage sometimes around creativity. We do high risk work. We don't want our power line technicians when they're at the top of a pole with live feed lines to be innovative in that moment. We want them to follow certain defined procedures that we know help to keep them safe.

But at the same time, of course, the technology is changing quickly, the opportunities for us to adopt new technologies in order to serve our customers better, in order to provide a better customer experience, in order to be more efficient and effective with what we do to invest in reliability. And so we've got a lot of focus around those themes. But I'd say as a sector, and Emera would probably fall in this, we are not bleeding edge around technology, but we like to be fast followers in things that we know work and can be effective, and every once in a while we like to lead the way too.

Lance Glinn:

So does AI play a role in any innovation or what Emera does?

Scott Balfour:

For sure.

Lance Glinn:

Because I've gotten different answers, right? I've gotten answers from, wow, this is changing the industry. Not necessarily with utilities, just as a whole. Wow, this is changing the industry. It's revolutionizing everything we're doing. Everything we've done the last 50 years, can throw that out the window because AI is changing everything. I've gotten those answers. I've gotten answers oh, it helps on the back end. We use ChatGPT, we use Copilot, we use this chatbot, we use that chatbot, and that's pretty much what it does. It helps efficiency, it helps speed, but we just use that as a back end thing. How does Emera integrate it?

Scott Balfour:

Yeah. So I'm not in a yet where I would say it's changing everything that we do. It may at some point, but that wouldn't be our current reality. But it's certainly changing a lot some of the things that we do. And some examples like, well, easy examples in call centers of course. Your listeners would of course understand, but even things like we have a lot of solar farms, and those solar farms need to be inspected. Panels can sometimes go awry and have millions of panels and inspecting those manually is a big deal. It takes a lot of time in workforce in order to do that.

Well, we can now, the combination of drone technology and AI technology is we can fly a solar field with a radar and LIDAR equipped drone and then feed that into some AI technology and very quickly get an assessment of what panels are underperforming. Millions and millions of dollars of annual savings as a result of those kinds of tools. There are lots of different examples like that. So AI for us is changing some. Maybe getting to the point of many of the things that we do in a very serious way. We're not to a point yet anyway where I would say it's changing everything we do.

Lance Glinn:

Absolutely. And like I said, I get answers on both ends of the spectrum because it is a new technology, relatively new. I know it's been around for decades to a certain extent, but it really sort of hit that big boom I would say in 2022-ish, 2023-ish when these chatbots really became kind of part of our everyday lives. So it's a relatively new technology, but obviously it's been around, I know for a while, and I've gotten mixed answers. Some where it's a lot, somewhere it's a little, but it seems like you're sort of in the middle. It changes a lot to some of the things.

Scott Balfour:

That's right.

Lance Glinn:

So as we sort of begin to wrap up our conversation, we obviously spoke earlier about Emera's journey from this single utility to obviously a major player and NYC listed enterprise. So we'll start with the short term. When you look ahead, what's the next near term chapter of Emera's story? What does it look like?

Scott Balfour:

Yeah, so for us right now, it's all about execution. And really we've gone through some portfolio optimization over the last couple of years, really focused on investing capital in our highest growth, highest returning, highest promise businesses. And so we've really simplified the story I think from an investor perspective as we sit today. And executing on that growth opportunity that we've got, this seven to 8% rate-based growth, the APS growth guidance that we've given to the market, continuing to grow our dividend. We just increased our dividend for the 19th consecutive year, all part of our capital market positioning and our promise to investors. So for us right now, it's really about continuing to, pardon the hockey analogy, to continue to put pucks in the net. All about execution.

Lance Glinn:

And then as we look long-term right over the next five, 10 years, if I'm talking to Scott Balfour in 2030 or in 2035 here at the New York Stock Exchange, what does success look like for Emera then? Is it about sustainability, innovation, scale? A mix of these things or something entirely different?

Scott Balfour:

Well, for sure it's a mix of all those things are important. I think scale is increasingly important in our sector. Part of that affordability aspect. Scale can be helpful in terms of reducing cost of capital, which matters to our customers because that cost of capital is part of the affordability challenge that we work through. But also optimizing cost profile, scale can help with that. So all of these things I think are really important. The adoption of technology, again, really important. Reliability benefits, affordability benefits. So I actually think it's a mix of all those things.

Lance Glinn:

Well, Scott, I appreciate you joining us today. I wish your Leafs the best of luck during the rest of the season and hopefully for you into the playoffs. Thank you so much for joining us Inside the ICE House.

Scott Balfour:

Thanks so much. Pleasure.

Speaker 1:

That's our conversation for this week. Remember to rate, review and subscribe wherever you listen and follow us on X at ICE House Podcast. From the New York Stock Exchange, we'll talk to you again next week Inside the ICE House. Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties express or implied as to the accuracy or completeness of the information, and do not sponsor, approve or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.