Emera Earns $39.4 Million in Q1 2007



    HALIFAX, April 27 /CNW/ - (EMA-TSX): Emera Inc.'s consolidated net
earnings were $39.7 million in Q1 2007, compared to $43.6 million for the same
period in 2006. Earnings were $11.3 million lower quarter over quarter at Nova
Scotia Power, but higher across the rest of Emera's investment portfolio.
Earnings per share were $0.36 in Q1, 2007, compared to $0.40 in the prior
year.
    "We achieved some important milestones in Q1 on our two key goals,
improving returns in our existing businesses and growing Emera through higher
return investments," said Chris Huskilson, President and Chief Executive
Officer of Emera Inc. "Nova Scotia Power worked productively with stakeholders
to a successful rate settlement, which is key to improving the consistency of
its returns. Bangor Hydro's new international transmission line is 60%
complete. Bear Swamp finalized a capacity agreement that will add new revenue.
Brunswick Pipe received a positive environmental report from the NEB. And
Energy Services completed a contract to manage natural gas purchases and
associated power sales for the largest combined cycle gas generating station
in the country. It was a productive quarter."
    Nova Scotia Power's contribution to consolidated earnings was
$26.1 million in Q1 2007, compared to $37.4 million in Q1 2006. Electricity
margin (revenues less fuel for generation and purchased power) was
$12.1 million lower quarter over quarter ($7.5 million after tax). This
reflects the return to operation of a large industrial customer, which
increased sales volume but was serviced by higher marginal cost production,
and lower natural gas resale margins. In addition, operating, maintenance and
general expenditures were $4.1 million higher quarter over quarter
($2.5 million after tax), primarily due to higher storm costs and increased
plant maintenance. Nova Scotia Power implemented an average 3.8% electricity
rate increase on April 1, 2007. Hearings on the establishment of a Fuel
Adjustment Mechanism are scheduled to begin June 18, 2007.
    "We knew Nova Scotia Power's earnings would be pressured in Q1 because of
the timing of new rates," said Mr. Huskilson. "We are satisfied with what NSPI
was able to achieve under challenging circumstances this quarter."
    Bangor Hydro Electric contributed $6.8 million to consolidated net
earnings in Q1 2007, compared to $3.7 million in Q1 2006, primarily due to the
capitalization of $2.2 million of overhead expenses and allowance for funds
used during construction to the Northeast Reliability Interconnect project.
Also, colder temperatures quarter-over-quarter increased residential revenues.
    Emera's Other operations contributed $6.8 million to net earnings in
Q1 2007, compared to $2.5 million in Q1 2006. Emera Energy Services, the
Maritimes & Northeast Pipeline (M&NP), and the Bear Swamp merchant generating
facility all reported higher earnings. Energy Services benefited from cold
weather in the northeast, which increased its natural gas marketing
opportunities. M&NP received approval from the US Federal Energy Regulatory
Commission to expand the US portion of the pipeline system to carry volumes
from the proposed Brunswick Pipeline. As a result, M&NP was able to capitalize
certain related costs in Q1 2007 which had been expensed in prior periods.
    The Bear Swamp generating station is a pumped-storage hydro facility that
typically pumps water into its reservoir using lower priced off-peak power,
and uses that hydro capacity to generate electricity during higher priced
on-peak periods. During the quarter, Bear Swamp finalized a long term Power
Purchase Agreement with the Long Island Power Authority (LIPA) providing LIPA
with 345 MW of capacity to May 31, 2010, and 100 MW thereafter, to April 30,
2021. In addition, Bear Swamp will provide LIPA with 12,200 MW/hr of super
peak and peak energy weekly, at an escalating fixed price over the
14 year term of the agreement. Bear Swamp has contracted with its parent
companies, Emera and Brookfield Power for the power supply necessary to
produce the requirements of the LIPA agreement.
    "Contracting a portion of Bear Swamp provides a dependable earnings
stream, but still preserves an opportunity for upside that is necessary to
optimize a merchant facility," said Mr. Huskilson.

    Forward Looking Information

    This news release contains forward looking information. Actual future
results may differ materially. Additional financial and operational
information is filed electronically with various securities commissions in
Canada through the System for Electronic Document Analysis and Retrieval
(SEDAR).

    Teleconference Call

    Emera is hosting a teleconference at 3:00 pm Atlantic time today
(2:00 pm Toronto/Montreal/New York; 1:00 pm Winnipeg; 11:00 am Vancouver) to
discuss the Q1 2007 financial results.
    Analysts and other interested parties wanting to participate in the call
should dial 1-888-575-8232 (in Toronto 416-406-6419) at least 10 minutes prior
to the start of the call. No pass code is required. The teleconference will be
recorded. If you are unable to join the teleconference live, you can dial for
playback toll-free at 1-800-408-3053 (in Toronto 416-695-5800), access code
3220368# (available until midnight, Friday, May 11, 2007). The teleconference
will also be web cast live at www.emera.com and available for playback for one
year.

    About Emera

    Emera Inc. (EMA-TSX) is an energy and services company with $4.0 billion
in assets. Electricity is Emera's core business. The company has two
wholly-owned regulated electric utility subsidiaries, Nova Scotia Power Inc.
and Bangor Hydro-Electric Company, which together serve 590,000 customers.
Emera also owns 19% of St. Lucia Electricity Services Limited, which serves
more than 50,000 customers on the Caribbean island of St. Lucia. In addition
to its electric utility investments, Emera has a joint venture interest in
Bear Swamp, a 600 megawatt pumped storage hydro-electric facility in northern
Massachusetts; a 12.9% interest in the Maritimes & Northeast Pipeline; and
Emera Energy Services which manages energy assets on behalf of third parties
and provides related services. Visit Emera on the web at www.emera.com.


    
    Management's Discussion & Analysis
    As at April 27, 2007

    Management's Discussion and Analysis ("MD&A") provides a review of the
results of operations of Emera Inc. and its primary subsidiaries and
investments during the first quarter of 2007 relative to 2006, and its
financial position at March 31, 2007 relative to 2006. Certain factors that
may affect future operations are also discussed. Such comments will be
affected by, and may involve, known and unknown risks and uncertainties that
may cause the actual results of the company to be materially different from
those expressed or implied. Those risks and uncertainties include, but are not
limited to, weather, commodity prices, interest rates, foreign exchange,
regulatory requirements and general economic conditions. To enhance
shareholders' understanding, certain multi-year historical financial and
statistical information is presented.
    This discussion and analysis should be read in conjunction with the
Emera Inc. unaudited consolidated financial statements and supporting notes as
at and for the three month period ended March 31, 2007 and the Emera Inc. MD&A
and annual audited consolidated financial statements and supporting notes as
at and for the year ended December 31, 2006. Emera follows Canadian Generally
Accepted Accounting Principles ("GAAP"). Emera's wholly-owned subsidiary, Nova
Scotia Power Inc.'s accounting policies are subject to examination and
approval by the Nova Scotia Utility and Review Board. Emera's wholly-owned
subsidiary, Bangor Hydro-Electric Company's accounting policies are subject to
examination and approval by the Maine Public Utilities Commission and the
Federal Energy Regulatory Commission. The rate-regulated accounting policies
of Nova Scotia Power and Bangor Hydro may differ from GAAP for non
rate-regulated companies.
    Throughout this discussion, "Emera Inc." and "Emera" refer to Emera Inc.
and all of its consolidated subsidiaries and affiliates.
    All amounts are in Canadian dollars ("CAD") except for the Bangor Hydro
section of the MD&A, which is reported in US dollars ("USD") unless otherwise
stated.
    Additional information related to Emera, including the company's Annual
Information Form, can be found on SEDAR at www.sedar.com.

    INTRODUCTION AND STRATEGIC OVERVIEW

    The core business of Emera is electricity. The company owns and operates
two regulated electric utilities in northeastern North America. Both
businesses operate as monopolies in their service territories, and together
typically comprise approximately 90% of Emera's consolidated earnings:

    - Nova Scotia Power Inc. ("NSPI") is an electricity generation,
      transmission and distribution company, providing service to the vast
      majority of the province of Nova Scotia. NSPI has over $3 billion in
      assets, and 475,000 customers.

    - Bangor Hydro-Electric Company ("BHE") is an electricity transmission
      and distribution company with $650 million in assets serving
      115,000 customers in eastern Maine. BHE is a cost of service utility,
      with an alternate rate plan ("ARP") for its distribution operations.

    The success of Emera's electric utilities is integral to the creation of
shareholder value, providing substantial earnings and cash flow to fund
dividends and reinvestment. Nova Scotia and Maine are mature electricity
markets, with annual demand growth of approximately 2%. Accordingly, Emera
must look beyond its existing regulated electricity business to supplement
organic growth.
    Emera's plan for growth leverages its core strength in the electricity
business. Emera will pursue investments in both acquisitions and greenfield
development opportunities in regulated electricity transmission and
distribution and low risk generation. Emera will also capitalize on investment
opportunities in related energy infrastructure businesses appropriate to its
risk profile, where its development, commercial and operational skills are
needed.

    Emera's other investments include:

    - Emera Energy Services, a wholly owned subsidiary, which purchases and
      sells natural gas and electricity on behalf of third parties and
      provides related energy asset management services.

    - Bear Swamp, a 50/50 joint venture in a 600 megawatt pumped storage
      hydro-electric facility in northern Massachusetts.

    - A 12.9% interest in the $2 billion, 1,300 kilometer Maritimes &
      Northeast Pipeline ("M&NP") that transports Nova Scotia's offshore
      natural gas to markets in Maritime Canada and the northeastern United
      States.

    - Brunswick Pipeline, a proposed 145 kilometer greenfield pipeline
      project under development that will deliver natural gas from the
      planned Canaport(TM) Liquefied Natural Gas import terminal near
      Saint John, New Brunswick, to markets in Canada and the US northeast.

    Most recently, Emera invested $22 million USD in January 2007 to acquire a
19% equity interest in St Lucia Electricity Services Limited ("Lucelec"), a
vertically integrated electric utility serving more than 50,000 customers on
the Caribbean island of St. Lucia.

    Implementation of New Accounting Standards in Q1 2007

    The Canadian Institute of Chartered Accountants ("CICA") has introduced
new classification and measurement requirements for financial instruments,
which Emera has adopted in the preparation of its Q1 2007 financial
statements. These changes affect the accounting for several elements of
Emera's business including:

    - hedges the company uses to manage risk of fluctuations in commodity
      prices, interest rates, and foreign exchange;
    - Nova Scotia Power's natural gas supply contracts; and
    - forward sales of electricity at Bear Swamp.

    In some instances, the new accounting requirements result only in a
reclassification of amounts to new balance sheet accounts. For example,
"energy marketing assets and liabilities" have been reclassified as "assets
held for trading". A more significant change is the new requirement to record
the fair value of hedges, Nova Scotia Power's natural gas contracts, and
forward sales of electricity at Bear Swamp as assets and liabilities on the
company's balance sheet. The recognition of these items beginning January 1,
2007 increased Emera's total assets by $193.6 million, with a corresponding
increase of $193.6 million on the liabilities and shareholders' equity side of
the balance sheet. The net effect for the three month period ended March 31,
2007 of the implementation of these changes is a $0.7 million after-tax
reduction in net earnings.
    More detail on the implementation of these new accounting standards is
provided later in this Management's Discussion and Analysis, and in Note 3 to
the financial statements.

    Structure of MD&A

    This MD&A has been prepared in accordance with the Canadian Securities
Administrators National Instrument 51-102 Management's Discussion & Analysis.
    This Management's Discussion and Analysis begins with an overview of
consolidated results; then presents information on the company's two primary
subsidiaries, NSPI and BHE. All other operations, including the Emera Energy
Services, Bear Swamp, Brunswick Pipeline, Maritimes & Northeast Pipeline,
Lucelec, and corporate activities are grouped and discussed as "Other".
Significant changes in the consolidated balance sheets, outstanding share
data, liquidity and capital resources, financial and commodity instruments,
transactions with related parties, changes in accounting policies, and
selected quarterly trend information are presented on a consolidated basis.


    EMERA CONSOLIDATED

    Q1 Operating Unit Contributions
    millions of dollars                                   Three months ended
    (except earnings per common share)                              March 31
    -------------------------------------------------------------------------
                                                             2007       2006
    -------------------------------------------------------------------------
    Nova Scotia Power                                      $ 26.1     $ 37.4
    -------------------------------------------------------------------------
    Bangor Hydro-Electric                                     6.9        3.7
    -------------------------------------------------------------------------
    Other                                                     6.7        2.5
    -------------------------------------------------------------------------
    Consolidated net earnings                              $ 39.7     $ 43.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per common share - basic                      $ 0.36     $ 0.40
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per common share - diluted                    $ 0.35     $ 0.38
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Review of 2007

    Emera Inc.'s consolidated earnings decreased $3.9 million to $39.7 million
in Q1 2007 compared to $43.6 million for the same period in 2006. Highlights
of the changes are summarized in the following table:


                                                          Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
    Consolidated net earnings - 2006                                  $ 43.6
    -------------------------------------------------------------------------
    Decreased net earnings in NSPI due to reduced
     electric margin and higher operating, maintenance
     and general expenses                                              (11.3)
    -------------------------------------------------------------------------
    Increased net earnings in Bangor Hydro due to
     increased capitalized costs associated with the
     Northeast Reliability Interconnect transmission project             3.2
    -------------------------------------------------------------------------
    Increased net earnings in Other due to increased natural
     gas marketing opportunities and M&NP's capitalization
     of prior years' expansion costs, partially offset by
     increased business development activity                             4.2
    -------------------------------------------------------------------------
    Consolidated net earnings - 2007                                  $ 39.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Q1 basic earnings per share were $0.36 in 2007 compared to $0.40 in 2006.


    NOVA SCOTIA POWER INC.

    Overview

    NSPI is the primary electricity supplier in Nova Scotia, providing over
95% of electricity generation, transmission and distribution in the province.
Nova Scotia Power is regulated under a cost of service model, with rates set
to recover prudently incurred costs of providing electricity service to
customers, and provide an opportunity to earn a prescribed return on equity.
The company is regulated by the Nova Scotia Utility and Review Board ("UARB").

    2007 Rate Decision

    In February 2007 the UARB approved an average increase in electricity
rates of 3.8% effective April 1, 2007. The rate increase was part of a
settlement agreement between NSPI and key stakeholders. NSPI's return on
equity range was unchanged, at 9.3% to 9.8%.
    A central provision of the settlement is an agreement in principle that
the UARB should establish a fuel adjustment mechanism ("FAM") for Nova Scotia
Power to ensure actual fuel costs are recovered from customers. FAM hearings
are scheduled to begin June 18, 2007.


    Review of 2007

    NSPI Q1 Net Earnings
    millions of dollars                                   Three months ended
    (except earnings per common share)                              March 31
    -------------------------------------------------------------------------
                                                             2007       2006
    -------------------------------------------------------------------------
    Electric revenue                                     $  301.3   $  261.0
    -------------------------------------------------------------------------
    Fuel for generation and purchased power                 130.9       78.5
    -------------------------------------------------------------------------
    Operating, maintenance and general                       50.3       46.2
    -------------------------------------------------------------------------
    Provincial grants and taxes                              10.1       10.0
    -------------------------------------------------------------------------
    Depreciation                                             32.6       31.8
    -------------------------------------------------------------------------
    Regulatory amortization                                   1.5        1.5
    -------------------------------------------------------------------------
    Other                                                    (2.4)      (2.4)
    -------------------------------------------------------------------------
    Earnings before interest and income taxes                78.3       95.4
    -------------------------------------------------------------------------
    Interest                                                 25.0       25.8
    -------------------------------------------------------------------------
    Amortization of defeasance costs                          3.2        3.2
    -------------------------------------------------------------------------
    Earnings before income taxes                             50.1       66.4
    -------------------------------------------------------------------------
    Income taxes                                             20.7       25.7
    -------------------------------------------------------------------------
    Net earnings before preferred dividends                  29.4       40.7
    -------------------------------------------------------------------------
    Preferred dividends                                       3.3        3.3
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings            $   26.1   $   37.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Contribution to consolidated earnings per common
     share                                               $   0.24   $   0.34
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    NSPI's contribution to consolidated net earnings decreased $11.3 million
to $26.1 million in Q1 2007, compared to $37.4 million in Q1 2006. Highlights
of the earnings changes are summarized in the following table:


                                                          Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2006                  $ 37.4
    -------------------------------------------------------------------------
    Increased electric revenue due to electricity price
     increase in mid-March 2006, higher industrial sales
     volume, and colder weather year over year, partially
     offset by lower export sales volume                                40.3
    -------------------------------------------------------------------------
    Increased fuel expense                                             (52.4)
    -------------------------------------------------------------------------
    Increased operating expenses due primarily to higher
     storm costs and increased plant maintenance                        (4.1)
    -------------------------------------------------------------------------
    Decreased income taxes primarily due to lower taxable income         5.0
    -------------------------------------------------------------------------
    All other                                                           (0.1)
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2007                  $ 26.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Electric Revenue

    Q1 Electric Sales Volume             Q1 Electric Sales Revenues
    Gigawatt hours ("GWh")               millions of dollars
    ----------------------------------   ------------------------------------
                  2007    2006    2005                  2007    2006    2005
    ----------------------------------   ------------------------------------
    Residential  1,330   1,259   1,288   Residential  $146.7  $131.0  $123.1
    ----------------------------------   ------------------------------------
    Commercial     869     837     829   Commercial     82.1    75.6    70.5
    ----------------------------------   ------------------------------------
    Industrial   1,012     635   1,040   Industrial     62.2    39.1    56.7
    ----------------------------------   ------------------------------------
    Other           93     183     107   Other          10.3    15.3     9.9
    ----------------------------------   ------------------------------------
    Total        3,304   2,914   3,264   Total        $301.3  $261.0  $260.2
    ----------------------------------   ------------------------------------
    ----------------------------------   ------------------------------------


    Q1 Average Revenue /
    Megawatt hour ("MWh")
    ----------------------------------
                  2007    2006    2005
    ----------------------------------
    Dollars
     per MWh       $91     $90     $80
    ----------------------------------
    ----------------------------------

    Electric revenues increased by $40.3 million to $301.3 million in Q1 2007
from $261.0 million for the same period in 2006. Revenue increases are
substantially due to the 8.7% rate increase effective March 10, 2006,
increased sales volume due to a large industrial customer returning to
operations in late 2006, and colder weather year over year, partially offset
by lower export sales.


    Fuel for Generation and Purchased Power

    Q1 Production Volume
    GWh
    ----------------------------------
                  2007    2006    2005
    ----------------------------------
    Coal &
     petcoke     2,487   2,451   2,483
    ----------------------------------
    Natural gas    158      68      41
    ----------------------------------
    Oil            429     221     550
    ----------------------------------
    Renewable      300     316     303
    ----------------------------------
    Purchased
     power         194      76     164
    ----------------------------------
    Total        3,568   3,132   3,541
    ----------------------------------
    ----------------------------------
    Purchased power includes 50 GWh of
    wind power in 2007 (2006 - 30 GWh;
    2005 - 20 GWh).


    Q1 Average Unit Fuel Costs
    ----------------------------------
                  2007    2006    2005
    ----------------------------------
    Dollars
     per MWh       $37     $25     $30
    ----------------------------------
    ----------------------------------

    For the three months ended March 31, 2007, fuel for generation and
purchased power increased $52.4 million to $130.9 million, compared to
$78.5 million in Q1 2006. Highlights of the changes are summarized in the
following table:

                                                          Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
    Fuel for generation and purchased power - 2006                    $ 78.5
    -------------------------------------------------------------------------
    Increased sales volume due to the return to operation
     of a large industrial customer that had been shut-down
     for most of 2006 and colder weather year over year                 39.0
    -------------------------------------------------------------------------
    Commodity price increases                                            8.5
    -------------------------------------------------------------------------
    Decreased net proceeds from the resale of natural gas                7.7
    -------------------------------------------------------------------------
    Decreased hydro production                                           1.1
    -------------------------------------------------------------------------
    Decreased export sales volume                                       (3.8)
    -------------------------------------------------------------------------
    All other                                                           (0.1)
    -------------------------------------------------------------------------
    Fuel for generation and purchased power - 2007                    $130.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Q1 average unit fuel costs increased in 2007 because sales volume
increases necessitated use of higher marginal cost production, and also due to
a reduction in natural gas margins.


    Regulatory Amortization

    The UARB has approved recovery, over eight years, of a $147.1 million
regulatory asset related to pre-2003 income taxes that have been paid, but not
yet recovered from customers; and a $16.7 million regulatory asset related to
Q1 2005 taxes not included in rates. Amortization of these regulatory assets
will begin April 1, 2007.


    BANGOR HYDRO-ELECTRIC COMPANY

    All amounts in the Bangor Hydro section are reported in US dollars unless
    otherwise stated.

    Overview

    BHE's core business is the transmission and distribution ("T&D") of
electricity. Electricity generation is deregulated in Maine, and several
suppliers compete to provide customers with the commodity that is delivered
through the BHE T&D network. BHE is a cost of service utility with an
alternate rate plan for its distribution operations.
    BHE estimates the construction of the Northeast Reliability Interconnect
("NRI") electricity transmission line is approximately 60% complete at the end
of the quarter, and on schedule to be in service in Q4 of this year. In
Q1 2007, BHE filed updates to its total project cost estimate with regulatory
agencies and the Independent System Operator in New England. The project cost
is now forecast at $135-$140 million, an approximate 20% increase over earlier
estimates. The change reflects higher costs of mitigating effects of the line
on the Maritimes & Northeast Pipeline, with which it shares a utility
corridor; and increased construction costs due to a wet fall and short winter
construction season. The new cost estimate will be incorporated into rates
effective June 1, 2007.


    Review of 2007

    Bangor Hydro Q1 Net Earnings
    millions of dollars                                   Three months ended
     (except earnings per common share)                             March 31
    -------------------------------------------------------------------------
                                                             2007       2006
    -------------------------------------------------------------------------
    T&D electric revenues                                $   26.6   $   25.9
    -------------------------------------------------------------------------
    Resale of purchased power                                 3.6        3.9
    -------------------------------------------------------------------------
    Total electric revenue                                   30.2       29.8
    -------------------------------------------------------------------------
    Purchased power and fuel for generation                   8.4        7.4
    -------------------------------------------------------------------------
    Operating, maintenance and general                        5.3        7.3
    -------------------------------------------------------------------------
    Property taxes                                            1.4        1.4
    -------------------------------------------------------------------------
    Depreciation                                              3.3        3.3
    -------------------------------------------------------------------------
    Regulatory amortization                                   2.6        3.8
    -------------------------------------------------------------------------
    Other                                                    (2.6)      (1.2)
    -------------------------------------------------------------------------
    Earnings before interest and income taxes                11.8        7.8
    -------------------------------------------------------------------------
    Interest                                                  2.7        2.4
    -------------------------------------------------------------------------
    Earnings before income taxes                              9.1        5.4
    -------------------------------------------------------------------------
    Income taxes                                              3.2        2.2
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - USD      $    5.9   $    3.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - CAD      $    6.9   $    3.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Contribution to consolidated earnings per common
     share - CAD                                         $   0.06   $   0.03
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings weighted average foreign exchange
     rate - CAD/USD                                      $   1.17   $   1.15
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Bangor Hydro's contribution to consolidated net earnings increased by $2.7
million to $5.9 million in Q1 2007 compared to $3.2 million in Q1 2006.
Highlights of the earnings changes are summarized in the following table:

                                                          Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2006                  $  3.2
    -------------------------------------------------------------------------
    Increased overheads and AFUDC capitalized primarily
     as a result of capital expenditures on the NRI
     transmission project                                                1.9
    -------------------------------------------------------------------------
    Increased residential energy sales due to colder
     weather year over year                                              0.8
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2007                  $  5.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Bangor Hydro's contribution to consolidated net earnings increased
$3.2 million CAD to $6.9 million CAD in Q1 2007 compared to $3.7 million CAD
in Q1 2006, due to the Canadian dollar equivalent of the variances discussed
above.


    Electric Revenue

    Q1 Electric Sales Volume             Q1 Electric Sales Revenues
    GWh                                  millions of dollars
    ----------------------------------   ------------------------------------
                  2007    2006    2005                  2007    2006    2005
    ----------------------------------   ------------------------------------
    Residential    160     154     160   Residential   $13.3   $12.6   $14.2
    ----------------------------------   ------------------------------------
    Commercial     152     151     150   Commercial      9.2     9.0     9.9
    ----------------------------------   ------------------------------------
    Industrial      89      95      98   Industrial      3.1     3.2     3.9
    ----------------------------------   ------------------------------------
    Other            3       3       3   Other           1.0     1.1     1.3
    ----------------------------------   ------------------------------------
    Total          404     403     411   Total         $26.6   $25.9   $29.3
    ----------------------------------   ------------------------------------
    ----------------------------------   ------------------------------------

    Q1 Average Revenue / MWh
    ----------------------------------
                  2007    2006    2005
    ----------------------------------
    Dollars
     per MWh       $66     $64     $71
    ----------------------------------
    ----------------------------------

    Electric revenues increased by $0.7 million in Q1 2007, to $26.6 million
compared to $25.9 million in Q1 2006 substantially due to increased
residential energy sales due to colder weather year over year.


    Regulatory Amortization

    Regulatory amortization was $1.2 million lower in Q1 2007 at $2.6 million,
compared to $3.8 million in Q1 2006, primarily due to current year reductions
in amortizations associated with the implementation of a stranded cost rate
reduction effective March 1, 2005.


    OTHER

    All activities of Emera other than its two wholly-owned regulated electric
utilities are incorporated into Other, including:

    - Emera Energy Services, a wholly owned subsidiary, which purchases and
      sells natural gas and electricity on behalf of third parties and
      provides related energy asset management services. Emera Energy
      Services operates with minimal day-to-day commodity risk exposure.
      Volatility in natural gas markets usually results in increased
      opportunities for Emera Energy Services.

    - Bear Swamp, a 50/50 joint venture in a 600 megawatt pumped storage
      hydro-electric facility in northern Massachusetts. Bear Swamp typically
      pumps water into its reservoir using lower priced off-peak power, and
      uses that hydro capacity to generate electricity during higher priced
      on-peak periods.

    - Brunswick Pipeline, a proposed 145 kilometer greenfield pipeline
      project under development that will deliver natural gas from the
      planned Canaport(TM) Liquefied Natural Gas import terminal near
      Saint John, New Brunswick, to markets in Canada and the US northeast.
      Assuming approval from the National Energy Board is granted, the
      pipeline is expected to be in service by the end of 2008.

    - A 12.9% interest in the $2 billion, 1,300 kilometer Maritimes &
      Northeast Pipeline that transports Nova Scotia's offshore natural gas
      to markets in Maritime Canada and the northeastern United States.

    - A 19% interest in St. Lucia Electricity Services ("Lucelec"), a
      vertically integrated electric utility on the Caribbean Island of
      St. Lucia, which was acquired in January 2007. Additional details are
      provided below.

    - Certain corporate-wide functions such as executive management,
      strategic planning, treasury services, tax planning, business
      development, and corporate governance; and financing for the
      corporation's business outside of its regulated electric utilities.

    Investment in St. Lucia Electricity Services

    St. Lucia Electricity Services Limited is a vertically integrated electric
utility serving more than 50,000 customers on the Caribbean island of St.
Lucia. Emera acquired a 19% equity interest in Lucelec for $22 million USD in
January 2007.
    Lucelec has an exclusive license to generate, transmit and distribute
electricity on the island to 2045. The utility has 66 MW of generating
capacity, primarily oil fired, and 800 kilometers of electricity transmission
and distribution assets. Lucelec is a cost of service utility, with a minimum
rate of return of 10% on a 50% equity base. Emera financed the acquisition
with existing credit facilities. Lucelec is expected to add approximately
$1-$2 million to Emera's annual consolidated net earnings.
    Emera's strategy recognizes that the Caribbean market has attractive
growth prospects and opportunities for the company to deploy its operational
expertise. This modest investment in Lucelec provides Emera with a low risk
vehicle to assess whether there is broader business potential for the company
in the region, and at the same time, provides immediately accretive and
attractive returns.


    Review of 2007

    Other Q1 Net Earnings
    millions of dollars                                   Three months ended
     (except earnings per common share)                             March 31
    -------------------------------------------------------------------------
                                                             2007       2006
    -------------------------------------------------------------------------
    Emera Energy Services earnings before interest
     and taxes ("EBIT")                                  $    5.1   $    3.4
    -------------------------------------------------------------------------
    Bear Swamp EBIT                                           3.7        1.8
    -------------------------------------------------------------------------
    M&NP equity earnings                                      3.9        1.5
    -------------------------------------------------------------------------
    Lucelec equity earnings                                   0.2          -
    -------------------------------------------------------------------------
    Corporate costs and other                                (3.6)      (2.5)
    -------------------------------------------------------------------------
    Earnings before interest and income taxes                 9.3        4.2
    -------------------------------------------------------------------------
    Interest                                                  2.1        2.6
    -------------------------------------------------------------------------
    Earnings before income taxes                              7.2        1.6
    -------------------------------------------------------------------------
    Income taxes                                              0.5       (0.9)
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings            $    6.7   $    2.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Contribution to consolidated earnings per common
     share                                               $   0.06   $   0.02
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The contribution of Other to consolidated net earnings increased
$4.2 million to $6.7 million in Q1 2007, compared to $2.5 million in Q1 2006.
Highlights of the earnings changes are summarized in the following table:

                                                          Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2006                  $  2.5
    -------------------------------------------------------------------------
    Increased Emera Energy Services EBIT due to increased
     natural gas marketing opportunities as a result of
     colder weather in the northeast                                     1.7
    -------------------------------------------------------------------------
    Increased Bear Swamp EBIT due mainly to a change in the
     recognized fair value of the Long Island Power Authority
     agreement and associated contracts                                  1.9
    -------------------------------------------------------------------------
    Increased M&NP equity earnings due to the capitalization
     of prior years' expansion costs                                     2.4
    -------------------------------------------------------------------------
    Increased corporate costs and other primarily due to
     increased business development activity                            (1.1)
    -------------------------------------------------------------------------
    All other                                                           (0.7)
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2007                  $  6.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Emera Energy Services

    During Q1 2007, Emera Energy Services ("EES") contracted to manage
Canada's largest combined cycle gas-fired electricity generating facility. The
new Greenfield Energy Center, a 1,010 MW facility located near Sarnia, Ontario
is expected to be in test operations this summer. EES will act as agent for
the facility, managing approximately 197,000 mmbtu/day of natural gas
purchases and associated power sales.

    Bear Swamp

    During the quarter, Bear Swamp finalized a long-term power purchase
agreement with the Long Island Power Authority ("LIPA") providing LIPA with
345 MW of capacity to May 31, 2010 (approximately 55% of Bear Swamp's total
capacity); and 100 MW thereafter, to April 30, 2021. In addition, Bear Swamp
will provide LIPA with 12,200 MW/hr of super-peak and peak energy weekly,
(approximately 35% of the plant's available energy) at a fixed price over the
14 year term of the agreement. Bear Swamp has contracted with its parent
companies, Emera and Brookfield Power for the power supply necessary to
produce the requirements of the LIPA agreement.

    M&NP

    Equity earnings for M&NP increased $2.4 million quarter over quarter to
$3.9 million in Q1 2007 compared to $1.5 million in Q1 2006 primarily due to
the capitalization of prior years' expansion costs previously expensed now
that FERC approval for the expansion has been obtained.

    Brunswick Pipeline

    In Q1 2007, the National Energy Board ("NEB") issued its Environmental
Assessment Report ("EA Report") on the proposed Brunswick Pipeline project.
The main finding of the EA Report is that the project is not likely to result
in significant adverse environmental effects, provided Brunswick Pipeline
meets all of its environmental commitments, and all of the NEB's
recommendations are implemented.
    The regulatory process will now see the Federal government prepare a
response to the EA Report, which will require Cabinet approval. The EA Report,
combined with the government's response, will be considered by the NEB as it
makes its regulatory decision under the National Energy Board Act to either
approve or deny Brunswick Pipeline's application. Provided regulatory approval
is received, Brunswick Pipeline is expected to be in service in Q4 2008.

    Consolidated Balance Sheets

    Significant changes in the consolidated balance sheets between March 31,
2007 and December 31, 2006 include:

                          Increase
    millions of dollars  (Decrease)    Explanation
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Assets
    -------------------------------------------------------------------------
    Accounts receivable      $79.3     Lower accounts receivable securitized,
                                       higher sales volume due to seasonality
                                       and a higher receivable from a natural
                                       gas supplier in NSPI, and increased
                                       trading activity in Emera Energy
                                       Services, partially offset by timing
                                       of payments related to the LIPA
                                       contract in Bear Swamp.
    -------------------------------------------------------------------------
    Derivatives in a          25.0     Implementation of new accounting
    valid hedging                      standards related to financial
    relationship (including            instruments and hedges. Balance
    long-term portion)                 represents the fair value of NSPI's
                                       hedges.
    -------------------------------------------------------------------------
    Held for trading         186.5     Implementation of new accounting
    securities (including              standards related to financial
    long-term portion)                 instruments and hedges. Balance
                                       represents the fair value of certain
                                       of NSPI's natural gas contracts,
                                       trading instruments in Emera Energy
                                       Services, and instruments held by NSPI
                                       that are not considered valid hedges.
    -------------------------------------------------------------------------
    Deferred charges         (11.9)    As a result of implementing new
                                       accounting standards, reclassification
                                       of deferred financing costs, now
                                       netted against long-term debt,
                                       partially offset by the new regulatory
                                       asset recognized in NSPI as a result
                                       of fair valuing certain natural gas
                                       contracts. On-going amortization also
                                       contributed to the decrease.
    -------------------------------------------------------------------------
    Investments subject to    29.5     Q1 2007 investment in Lucelec.
    significant influence
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and
     Shareholders' Equity
    -------------------------------------------------------------------------
    Short-term debt          145.2     Increased issuance of short-term notes
                                       in NSPI and increased borrowings to
                                       finance the NRI project in Bangor
                                       Hydro.
    -------------------------------------------------------------------------
    Accounts payable and     (37.5)    Timing of payments.
    accrued charges
    -------------------------------------------------------------------------
    Income tax payable       (26.7)    Increased payments in Q1 2007 in NSPI.
    -------------------------------------------------------------------------
    Derivatives in a valid    24.2     Implementation of new accounting
     hedging relationship              standards related to financial
    (including long-term               instruments and hedges. Balance
    portion)                           represents the fair value of NSPI's
                                       hedges.
    -------------------------------------------------------------------------
    Held for trading          13.4     Implementation of new accounting
    securities (including              standards related to financial
    long-term portion)                 instruments and hedges. Balance
                                       represents the fair value of certain
                                       of NSPI's natural gas contracts, the
                                       fair value of Bear Swamp's LIPA
                                       contract, trading instruments in Emera
                                       Energy Services, and instruments held
                                       by NSPI that are not considered valid
                                       hedges.
    -------------------------------------------------------------------------
    Deferred credits         192.6     Implementation of new accounting
                                       standards. Change primarily represents
                                       the new regulatory liability
                                       recognized in NSPI as a result of fair
                                       valuing certain natural gas contracts.
    -------------------------------------------------------------------------
    Long-term debt           (30.3)    Decreased short-term debt reclassified
    (including current                 to long-term debt and the netting of
    portion)                           deferred financing costs against
                                       long-term debt as a result of
                                       implementing new accounting standards.
    -------------------------------------------------------------------------
    Shareholders' equity      12.4     Net earnings in excess of dividends
                                       paid.
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Additional information on the new accounting standards is outlined in the
Changes in Accounting Policies section below.


    OUTSTANDING SHARE DATA

                                                                      Common
                                                                       Share
                                                                     Capital
                                                         Millions   millions
                                                               of         of
    Issued and Outstanding:                                Shares    dollars
    -------------------------------------------------------------------------
    January 1, 2006                                        110.10   $1,039.2
    -------------------------------------------------------------------------
    Issued for cash under purchase plans                     0.45        8.6
    -------------------------------------------------------------------------
    Options exercised under senior management share
     option plan                                             0.38        6.7
    -------------------------------------------------------------------------
    Share-based compensation                                    -        0.7
    -------------------------------------------------------------------------
    December 31, 2006                                      110.93   $1,055.2
    -------------------------------------------------------------------------
    Issued for cash under purchase plans                     0.11        2.4
    -------------------------------------------------------------------------
    Options exercised under senior management share
     option plan                                             0.02        0.4
    -------------------------------------------------------------------------
    Share-based compensation                                    -        0.1
    -------------------------------------------------------------------------
    March 31, 2007                                         111.06   $1,058.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at April 13, 2007 the number of issued and outstanding common shares
was 111.12 million.

    Liquidity and Capital Resources

    Emera and Nova Scotia Power have debt shelf prospectuses in the amounts of
$300 million and $400 million respectively that provide the companies with
access to long-term debt. Emera and Nova Scotia Power have $300 million and
$150 million respectively that remained unused at March 31, 2007. The
prospectuses expire in April 2007 and will be renewed in 2007.

    Consolidated Cash Flow Highlights

    Significant changes in the consolidated cash flow statements between March
31, 2007 and March 31, 2006 include:


    Three months ended
    March 31
    millions of dollars       2007     2006    Explanation
    -------------------------------------------------------------------------
    Cash and cash             $7.6    $21.5
    equivalents, beginning
    of period
    -------------------------------------------------------------------------
    Provided by (used in):
    -------------------------------------------------------------------------
    Operating activities     (15.2)    69.1    In 2007, increased non-cash
                                               working capital, partially
                                               offset by cash earnings.
    -------------------------------------------------------------------------
                                               In 2006, cash earnings,
                                               partially offset by increased
                                               non-cash working capital.
    -------------------------------------------------------------------------
    Investing activities     (57.4)   (27.3)   In 2007, capital spending,
                                               including NRI and Brunswick
                                               Pipeline projects, acquisition
                                               of 19% interest in Lucelec,
                                               partially offset by decreased
                                               restricted cash related to
                                               posted margin.
    -------------------------------------------------------------------------
                                               In 2006, capital spending and
                                               increased restricted cash
                                               related to posted margin.
    -------------------------------------------------------------------------
    Financing activities      74.3    (54.5)   In 2007, increased debt
                                               levels, partially offset by
                                               dividends on common shares and
                                               decreased accounts receivable
                                               securitized.
    -------------------------------------------------------------------------
                                               In 2006, reduced debt levels,
                                               dividends on common shares,
                                               and decreased accounts
                                               receivable securitized.
    -------------------------------------------------------------------------
    Cash and cash             $9.3     $8.8
    equivalents, end of
    period
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Financial and Commodity Instruments

    The company enters into swap contracts on commodities to limit exposure to
(hedge) fluctuations in natural gas and oil prices; foreign exchange forwards,
options and swap contracts to hedge currency rate fluctuations; and interest
rate contracts to hedge interest rate fluctuations. In addition, the company
has contracts for physical purchases and sales of natural gas and electricity.
Collectively, these contracts are referred to as derivatives.
    Derivatives that meet stringent documentation requirements, and can be
proven to be effective hedges both at the inception and over the term of the
derivative qualify for hedge accounting. That enables amounts paid or received
to be deferred and recognized in earnings in the same period that the related
hedged item is realized.
    As a result of implementing new accounting standards related to financial
instruments and hedges in 2007, the company is now recognizing the fair value
of derivatives in valid hedging relationships on its balance sheet. Further,
the effective portion of the hedging relationship is now recognized in other
comprehensive income. Any ineffective portion of the hedging relationship is
recognized in net earnings in the reporting period. In Q1 2007, the total
ineffectiveness recognized by the company was a $0.1 million loss.
    Amounts paid or received in connection with derivatives that do not
qualify as hedges are in net earnings in the period incurred.
    Derivatives held for trading are recorded on the balance sheet at fair
value, with changes normally recorded in net earnings of the period, unless
deferred as a result of regulatory accounting.
    Where the documentation or effectiveness requirements are not met, the
derivative instruments are recognized at fair value with any changes in fair
value recognized in net earnings in the reporting period.
    The company has the following categories on the balance sheet related to
derivatives in valid hedging relationships:

    Deferred Hedging Losses Recognized on the Balance Sheet
    millions of dollars
    -------------------------------------------------------------------------
                                                            March   December
                                                               31         31
                                                             2007       2006
    -------------------------------------------------------------------------
    Inventory                                            $    1.6   $    5.2
    -------------------------------------------------------------------------
    Derivatives in a valid hedging relationship               0.8          -
    -------------------------------------------------------------------------
    Long-term debt                                            0.8          -
    -------------------------------------------------------------------------
    Deferred charges                                            -        0.9
    -------------------------------------------------------------------------
    Deferred hedging losses                              $    3.2   $    6.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the three month period ended March 31, the impacts of derivatives in
valid hedging relationships recognized in earnings were recorded in the
following categories:

    Hedging Impact Recognized in Earnings                 Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
                                                             2007       2006
    -------------------------------------------------------------------------
    Fuel and purchased power decrease                    $    1.4   $   17.6
    -------------------------------------------------------------------------
    Interest expense increase                                (0.2)      (0.1)
    -------------------------------------------------------------------------
    Hedging earnings impact                              $    1.2   $   17.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The company has recognized a net unrealized fair value of held for trading
securities of $174.3 million (December 31, 2006 - $1.2 million) on the balance
sheet. The company has recognized the following realized and unrealized gains
and losses with respect to held for trading securities in earnings:

    Held for Trading Securities Gains (Losses)
     Recognized in Earnings                               Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
                                                             2007       2006
    -------------------------------------------------------------------------
    Electric revenue                                     $    0.8   $    0.3
    -------------------------------------------------------------------------
    Other revenue                                             1.6       (1.7)
    -------------------------------------------------------------------------
    Fuel and purchased power                                 (4.3)         -
    -------------------------------------------------------------------------
    Interest                                                 (0.1)         -
    -------------------------------------------------------------------------
    Held for trading securities losses                   $   (2.0)  $   (1.4)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    In determining the fair value of derivative financial instruments, the
company has relied on quoted market prices as at the reporting date.

    Transactions With Related Parties

    In the ordinary course of business, Emera purchased natural gas
transportation capacity totaling $6.8 million (2006 - $8.4 million) during the
three months ended March 31, 2007 from the Maritimes & Northeast Pipeline, an
investment under significant influence of the company. The amount is
recognized in fuel for generation and purchased power or netted against energy
marketing margin in other revenue, and is measured at the exchange amount. At
March 31, 2007 the amount payable to the related party is $3.2 million
(December 31, 2006 - $3.4 million), is non-interest bearing and is under
normal credit terms.

    Changes in Accounting Policies

    The Canadian Institute of Chartered Accountants ("CICA") has introduced
new classification and measurement requirements for financial instruments,
including increased use of fair value measurement. These new accounting
standards are incorporated in CICA Handbook Sections 1530 Comprehensive
Income, 3855 Financial Instruments - Recognition and Measurement, and
3865 Hedges, and are effective as of January 1, 2007 for Emera Inc.
    In accordance with the new accounting standards, the accounting policy
changes were applied retroactively without restatement of prior periods. The
following provides more information on each standard.

    Comprehensive Income

    As a result of the recently issued standard, a new item, accumulated other
comprehensive income ("AOCI"), is recognized in the shareholders' equity
section of the consolidated balance sheets. AOCI includes the unrealized
foreign exchange translation adjustments on the company's self-sustaining
foreign operations, the effective portion of changes in fair value of
derivatives meeting the requirements for cash flow hedges, and unrealized
gains and losses on financial assets classified as available-for-sale.

    Financial Instruments - Recognition and Measurement

    According to the new standard, financial assets are now classified as
loans and receivables, held for trading, available for sale, or held to
maturity. Financial liabilities are classified as either held for trading, or
other than held for trading. The financial assets and liabilities are subject
to different methods of measurement and classification in the financial
statements, as set out in the accompanying table:

    -------------------------------------------------------------------------
    Financial Instrument                     Measured at      Classified in
    -------------------------------------------------------------------------
    - Loans and receivables                  Amortized cost   N/A
    - Held to maturity financial assets
    - Other than held for trading financial
      liabilities
    -------------------------------------------------------------------------
    - Held for trading financial assets      Fair value       Net earnings
      and liabilities                                         unless deferral
                                                              permitted under
                                                              regulatory
                                                              accounting
    -------------------------------------------------------------------------
    - Available for sale financial assets    Fair value       Other
                                                              comprehensive
                                                              income
    -------------------------------------------------------------------------

    In accordance with the new standard, transactions costs associated with
the issuance of long-term debt are included in long-term debt and amortized
using the effective interest method.

    Hedges

    The new standard outlines the criteria for applying hedge accounting to
cash flow hedges, fair value hedges, and hedging foreign currency fluctuations
on self-sustaining foreign operations.
    Cash flow hedges are recognized on the balance sheet at fair value with
the effective portion of the hedging relationship recognized in other
comprehensive income. Any ineffective portion of the cash flow hedge is
recognized in net earnings. Amounts recognized in AOCI are reclassified to net
income in the same periods in which the hedged item is recognized in net
earnings.
    Fair value hedges and the related hedged items are recognized on the
balance sheet at fair value with any changes in fair value recognized in net
income. To the extent the fair value hedge is effective, the changes in fair
value of the hedge and the hedged item will offset each other.
    Hedges of self-sustaining foreign operations are recognized at fair value
with any changes in fair value recognized in other comprehensive income.

    Accounting for the impact of rate-regulation:

    In accordance with the new accounting standards as outlined above, Nova
Scotia Power determined that its contracts for the purchase or sale of natural
gas for its Tufts Cove generating station ("TUC") should be considered
derivative financial instruments and accordingly recognized at fair value as a
held for trading ("HFT") asset or liability as applicable. This reflects
NSPI's history of buying and reselling any natural gas not used in the
production of electricity at TUC.
    Changes in the fair value of HFT assets and liabilities are recognized in
net earnings. In accordance with Nova Scotia Power's accounting policy
covering physical and financial contracts relating to fuel at TUC, NSPI has
deferred any changes in fair value to a regulatory asset or liability as
appropriate, which are reflected in deferred assets or credits. Absent the
accounting policy, which has been approved by the UARB, NSPI's net earnings
for Q1 2007 would have been $22.2 million ($13.7 million after-tax) higher.
    Details of the amounts recognized upon implementation of the new
accounting standards, and the effect on the consolidated balance sheet as at
January 1, 2007 are summarized below:

                                             Balance                 Balance
                                              Before   Effect of       After
    Consolidated Balance Sheet              Implemen-   Implemen-   Implemen-
    Selected Information                      tation      tation      tation
    millions dollars                      Adjustment  Adjustment  Adjustment
    -------------------------------------------------------------------------
    Current assets
      Energy marketing assets               $   37.3     $ (37.3)   $      -
    -------------------------------------------------------------------------
      Derivatives in valid hedging
       relationship                                -        13.9        13.9
    -------------------------------------------------------------------------
      Held for trading securities                  -        76.0        76.0
    -------------------------------------------------------------------------
    Energy marketing assets                      2.0        (2.0)          -
    -------------------------------------------------------------------------
    Derivatives in a valid hedging
     relationship                                  -        17.9        17.9
    -------------------------------------------------------------------------
    Held for trading securities                    -       136.4       136.4
    -------------------------------------------------------------------------
    Deferred charges                           468.2       (11.3)      456.9
    -------------------------------------------------------------------------
    Investments                                 98.5       (98.5)          -
    -------------------------------------------------------------------------
    Investments subject to significant
     influence                                     -        98.5        98.5
    -------------------------------------------------------------------------
                                                         $ 193.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Current liabilities
      Current portion of long-term debt     $    3.4     $  (0.2)   $    3.2
    -------------------------------------------------------------------------
      Energy marketing liabilities              36.7       (36.7)          -
    -------------------------------------------------------------------------
      Derivatives in a valid hedging
       relationship                                -        26.6        26.6
    -------------------------------------------------------------------------
      Held for trading securities                  -        39.7        39.7
    -------------------------------------------------------------------------
    Energy marketing liabilities                 1.4        (1.4)          -
    -------------------------------------------------------------------------
    Derivatives in a valid hedging
     relationship                                  -        10.6        10.6
    -------------------------------------------------------------------------
    Held for trading securities                    -         2.6         2.6
    -------------------------------------------------------------------------
    Deferred credits                            66.1       173.1       239.2
    -------------------------------------------------------------------------
    Long-term debt                           1,657.4       (12.7)    1,644.7
    -------------------------------------------------------------------------
    Shareholders' equity
      Foreign exchange translation
       adjustment                             (100.2)      100.2           -
    -------------------------------------------------------------------------
      Accumulated other comprehensive
       income                                      -      (105.5)     (105.5)
    -------------------------------------------------------------------------
      Retained earnings                        450.9        (2.7)      448.2
    -------------------------------------------------------------------------
                                                         $ 193.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The effect on the January 1, 2007 balances can be further explained as
follows:

    Energy marketing assets and liabilities: The balances have been
reclassified to held for trading securities.

    Derivatives in a valid hedging relationship: This new account represents
the fair value of Nova Scotia Power's hedges. These derivatives are all
designated as hedging future expected cash flows.

    Held for trading securities: This new account includes the fair value of
certain of Nova Scotia Power's natural gas contracts, the fair value of Bear
Swamp's LIPA contract, amounts previously recognized as energy marketing
assets and liabilities, and the fair value of any derivatives that are not
considered valid hedges.

    Deferred charges: The adjustment represents the reclassification of
deferred financing costs which are now netted against the related debt,
partially offset by the regulatory asset resulting from the fair value
recognition of certain of Nova Scotia Power's natural gas contracts.

    Investments: The adjustment represents the reclassification of equity
accounted investments to investments subject to significant influence.

    Investments subject to significant influence: This new account represents
the reclassification of equity accounted investments from the investments
account as noted above.

    Deferred credits: The adjustment represents the regulatory liability
resulting from the fair value recognition of certain of Nova Scotia Power's
natural gas contracts.

    Long-term debt (including current portion): The adjustment represents the
netting of deferred financing costs against the related debt.

    Foreign exchange translation adjustment: The adjustment represents the
reclassification of foreign exchange losses on self-sustaining foreign
operations to accumulated other comprehensive income.

    Accumulated other comprehensive income: The adjustment represents the
effective portion of the fair value of Nova Scotia Power's hedges and the
cumulative foreign exchange loss on self-sustaining foreign operations.

    Retained earnings: The adjustment represents the fair value of Bear
Swamp's interim LIPA contract.

    As a result of implementing the accounting policy changes, net earnings
for 2007 has decreased by $0.7 million after-tax. There has been no effect on
the consolidated statement of changes of cash flow.
    The fair value of derivatives held in a valid hedging relationship and
held for trading securities are estimated by obtaining prevailing market rates
from investment dealers.

    Summary of Quarterly Reports

    For the quarter ended
    millions of dollars
     (except earnings
      per common share)
    -------------------------------------------------------------------------
                         Q1     Q4     Q3     Q2     Q1     Q4     Q3     Q2
                       2007   2006   2006   2006   2006   2005   2005   2005
    -------------------------------------------------------------------------
    Total
    revenues         $359.9 $307.0 $272.4 $275.9 $310.7 $297.1 $281.1 $280.1
    -------------------------------------------------------------------------
    Net earnings
     from continuing
     operations      $ 39.7 $ 33.5 $ 19.5 $ 29.2 $ 43.6 $ 37.7 $ 18.1 $ 19.1
    -------------------------------------------------------------------------
    Net earnings
     applicable to
     common shares   $ 39.7 $ 33.5 $ 19.5 $ 29.2 $ 43.6 $ 37.7 $ 15.9 $ 19.3
    -------------------------------------------------------------------------
    Earnings per
     common share -
     basic:
      Continuing
       operations    $ 0.36 $ 0.30 $ 0.18 $ 0.26 $ 0.40 $ 0.34 $ 0.16 $ 0.18
    -------------------------------------------------------------------------
      Discontinued
       operations         -      -      -      -      -      -  (0.02)     -
    -------------------------------------------------------------------------
                     $ 0.36 $ 0.30 $ 0.18 $ 0.26 $ 0.40 $ 0.34 $ 0.14 $ 0.18
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per
     common share -
     diluted:
      Continuing
       operations    $ 0.35 $ 0.30 $ 0.18 $ 0.26 $ 0.38 $ 0.34 $ 0.16 $ 0.18
    -------------------------------------------------------------------------
      Discontinued
       operations         -      -      -      -      -      -  (0.02)     -
    -------------------------------------------------------------------------
                     $ 0.35 $ 0.30 $ 0.18 $ 0.26 $ 0.38 $ 0.34 $ 0.14 $ 0.18
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Quarterly total revenues and net earnings applicable to common shares are
affected by seasonality, with Q1 and Q4 the strongest periods, reflecting
colder weather and fewer daylight hours at those times of year.


    Financial Statements

    Consolidated Statements of Earnings (Unaudited)
    -------------------------------------------------------------------------
    For the
    millions of dollars (except earnings per              Three months ended
     common share)                                                  March 31
    -------------------------------------------------------------------------
                                                             2007       2006
    -------------------------------------------------------------------------
    Revenue
      Electric                                           $  347.8   $  301.7
      Other                                                  12.1        9.0
    -------------------------------------------------------------------------
                                                            359.9      310.7
    -------------------------------------------------------------------------
    Cost of operations
      Fuel for generation and purchased power               148.3       90.1
      Operating, maintenance, and general                    63.2       60.3
      Provincial, state, and municipal taxes                 12.2       12.1
      Depreciation                                           37.0       36.1
      Regulatory amortization                                 4.6        5.9
      Allowance for funds used during construction           (2.6)      (1.0)
    -------------------------------------------------------------------------
                                                            262.7      203.5
    -------------------------------------------------------------------------
    Earnings from operations                                 97.2      107.2
    Equity earnings                                           4.1        1.5
    -------------------------------------------------------------------------
    Earnings before interest and income taxes               101.3      108.7
    Interest (note 7)                                        30.2       31.3
    Amortization of defeasance costs                          3.2        3.2
    -------------------------------------------------------------------------
    Earnings before income taxes                             67.9       74.2
    Income taxes                                             24.9       27.3
    -------------------------------------------------------------------------
    Net earnings before non-controlling interest             43.0       46.9
    Non-controlling interest                                  3.3        3.3
    -------------------------------------------------------------------------
    Net earnings applicable to common shares             $   39.7   $   43.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per common share - basic                    $   0.36   $   0.40
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per common share - diluted                  $   0.35   $   0.38
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the unaudited consolidated financial
    statements.

    Weighted average number of common shares
     outstanding (millions)
    - basic                                                 111.0      110.2
    - diluted                                               124.1      123.8


    Consolidated Balance Sheets (Unaudited)
    -------------------------------------------------------------------------
                                                            March   December
    As at                                                      31         31
    millions of dollars                                      2007       2006
    -------------------------------------------------------------------------
    Assets
    Current assets
      Cash and cash equivalents                          $    9.3   $    7.6
      Restricted cash                                         3.2       11.9
      Accounts receivable                                   332.9      253.6
      Income tax receivable                                   2.0        5.3
      Inventory                                             112.1      113.6
      Prepaid expenses                                       55.7       53.9
      Future income tax assets                               16.9       18.9
      Derivatives in a valid hedging relationship
       (note 3)                                               8.1          -
      Held for trading securities (note 3)                   84.0       37.3
    -------------------------------------------------------------------------
                                                            624.2      502.1
    -------------------------------------------------------------------------
    Derivatives in a valid hedging relationship (note 3)     16.9          -
    -------------------------------------------------------------------------
    Held for trading securities (note 3)                    141.8        2.0
    -------------------------------------------------------------------------
    Deferred charges (note 3)                               456.3      468.2
    -------------------------------------------------------------------------
    Future income tax assets                                  9.8       10.0
    -------------------------------------------------------------------------
    Goodwill                                                 96.1       97.1
    -------------------------------------------------------------------------
    Investments subject to significant influence
     (note 3)                                               128.0       98.5
    -------------------------------------------------------------------------
    Property, plant and equipment                         2,744.8    2,756.4
    Construction work in progress                           137.2      125.5
    -------------------------------------------------------------------------
                                                          2,882.0    2,881.9
    -------------------------------------------------------------------------
                                                         $4,355.1   $4,059.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity
    Current liabilities
      Current portion of long-term debt (notes 3 and 8)  $    3.3    $   3.4
      Short-term debt                                       278.4      133.2
      Accounts payable and accrued charges                  248.5      286.0
      Income tax payable                                     12.6       39.3
      Dividends payable                                       3.2        3.2
      Future income tax liabilities                           0.6          -
      Derivatives in a valid hedging relationship
       (note 3)                                              14.3          -
      Held for trading securities (note 3)                   36.1       36.7
    -------------------------------------------------------------------------
                                                            597.0      501.8
    -------------------------------------------------------------------------
    Derivatives in a valid hedging relationship (note 3)      9.9          -
    -------------------------------------------------------------------------
    Held for trading securities (note 3)                     15.4        1.4
    -------------------------------------------------------------------------
    Future income tax liabilities                            87.4       86.2
    -------------------------------------------------------------------------
    Asset retirement obligations                             79.1       78.1
    -------------------------------------------------------------------------
    Deferred credits (note 3)                               258.7       66.1
    -------------------------------------------------------------------------
    Long-term debt (notes 3 and 8)                        1,627.2    1,657.4
    -------------------------------------------------------------------------
    Non-controlling interest                                260.7      260.7
    -------------------------------------------------------------------------
    Shareholders' equity
      Common shares (note 9)                              1,058.1    1,055.2
      Contributed surplus                                     2.4        2.2
      Accumulated other comprehensive income (note 3)      (104.1)    (100.2)
      Retained earnings                                     463.3      450.9
    -------------------------------------------------------------------------
                                                          1,419.7    1,408.1
    -------------------------------------------------------------------------
                                                         $4,355.1   $4,059.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the unaudited consolidated financial
    statements.

    Approved on behalf of the Board of Directors

    "Derek Oland"                "Christopher Huskilson"
     Derek Oland                  Christopher Huskilson
     Chairman                     President and Chief Executive Officer


    Consolidated Statements of Cash Flow (Unaudited)
    -------------------------------------------------------------------------
    For the                                               Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
                                                             2007       2006
    -------------------------------------------------------------------------
    Operating activities
    Net earnings before non-controlling interest         $   43.0   $   46.9
    Non-cash items:
      Depreciation                                           37.0       36.1
      Amortization of deferred charges                        3.5        3.5
      Equity earnings                                        (4.1)      (1.5)
      Regulatory amortization                                 4.6        5.9
      Allowance for funds used during construction           (2.6)      (1.0)
      Future income taxes                                     4.2        3.2
      Post-retirement benefits                                3.3        3.7
      Other non-cash operating items                          1.8        2.7
    Other cash operating items                                2.2       (1.2)
    -------------------------------------------------------------------------
                                                             92.9       98.3
    Change in non-cash operating working capital           (108.1)     (29.2)
    -------------------------------------------------------------------------
    Net cash (used in) provided by operating activities     (15.2)      69.1
    -------------------------------------------------------------------------
    Investing activities
      Property, plant and equipment                         (39.8)     (19.2)
      Acquisition (note 4)                                  (25.7)         -
      Retirement spending net of salvage                     (0.6)      (0.8)
      Decrease (increase) in restricted cash                  8.7       (6.2)
      Other investing activities                                -       (1.1)
    -------------------------------------------------------------------------
    Net cash used in investing activities                   (57.4)     (27.3)
    -------------------------------------------------------------------------
    Financing activities
      Retirement of long-term debt                           (0.6)      (0.6)
      Increase (decrease) in short-term debt                130.8      (20.7)
      Issuance of common shares                               2.8        3.7
      Dividends on common shares                            (24.7)     (24.5)
      Dividends paid by subsidiaries to non-controlling
       interest                                              (3.3)      (3.3)
      Accounts receivable securitization                    (30.0)     (10.0)
      Other financing                                        (0.7)       0.9
    -------------------------------------------------------------------------
    Net cash provided by (used in) financing activities      74.3      (54.5)
    -------------------------------------------------------------------------
    Increase (decrease) in cash and cash equivalents          1.7      (12.7)
    Cash and cash equivalents, beginning of period            7.6       21.5
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period             $    9.3   $    8.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents consists of:
    Cash                                                 $    4.4   $    7.6
    Cash equivalents                                          4.9        1.2
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period             $    9.3   $    8.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental disclosure of cash paid:
      Interest                                           $   31.1   $   30.5
      Income and capital taxes                           $   47.1   $   18.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the unaudited consolidated financial
    statements.


    Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
    -------------------------------------------------------------------------
    For the three months                          Accu-
     ended March 31, 2007                      mulated
    millions of dollars                          Other
                                                Compre-                Total
                                     Contri-   hensive              AOCI and
                          Common      buted     Income   Retained   Retained
                          Shares    Surplus    ("AOCI")  Earnings   Earnings
    -------------------------------------------------------------------------
    Balance,
     December 31, 2006  $1,055.2      $ 2.2    $(100.2)    $450.9     $350.7
    Implementation
     adjustment
     (note 3)                  -          -       (5.3)      (2.7)      (8.0)
    Comprehensive
     Income:
    Net earnings
     applicable to
     common shares             -          -          -       39.7       39.7
    Net gain on
     derivatives in
     a valid hedging
     relationship              -          -        1.6          -        1.6
    Reclassification
     of hedging losses
     included in income        -          -        3.2          -        3.2
    Reclassification
     of hedging losses
     included in
     inventory                 -          -        1.6          -        1.6
    Unrealized loss on
     translation of
     self-sustaining
     foreign operations        -          -       (5.0)         -       (5.0)
    -------------------------------------------------------------------------
    Total comprehensive
     income                    -          -        1.4       39.7       41.1
    -------------------------------------------------------------------------
    Dividends declared
     on common shares          -          -          -      (24.6)     (24.6)
    Common shares
     issued under
     purchase plans          2.4          -          -          -          -
    Senior management
     stock options
     exercised               0.4          -          -          -          -
    Stock option expense       -        0.2          -          -          -
    Other share-based
     compensation            0.1          -          -          -          -
    -------------------------------------------------------------------------
    Balance, March 31,
     2007               $1,058.1      $ 2.4    $(104.1)    $463.3     $359.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    For the three months                                               Total
     ended March 31, 2006            Contri-                        AOCI and
    millions of dollars   Common      buted              Retained   Retained
                          Shares    Surplus       AOCI   Earnings   Earnings
    -------------------------------------------------------------------------
    Balance,
     December 31, 2005  $1,039.2      $ 1.8    $ (98.2)    $423.4     $325.2
    Comprehensive
     Income:
    Net earnings
     applicable to
     common shares             -          -          -       43.6       43.6
    Unrealized loss on
     translation of
     self-sustaining
     foreign operations        -          -       (2.5)         -       (2.5)
    -------------------------------------------------------------------------
    Total comprehensive
     income                    -          -       (2.5)      43.6       41.1
    -------------------------------------------------------------------------
    Dividends declared
     on common shares          -          -          -      (24.5)     (24.5)
    Common shares
     issued under
     purchase plans          2.2          -          -          -          -
    Senior management
     stock options
     exercised               1.6       (0.1)         -          -          -
    Stock option expense       -        0.2          -          -          -
    Other share-based
     compensation            0.1          -          -          -          -
    -------------------------------------------------------------------------
    Balance,
     March 31, 2006     $1,043.1      $ 1.9    $(100.7)    $442.5     $341.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the unaudited consolidated financial
    statements.



    Notes to the Interim Unaudited Consolidated Financial Statements
    March 31, 2007


    1. Basis of Presentation

    The disclosures in these unaudited interim consolidated financial
statements do not conform in all respects to the requirements of Canadian
Generally Accepted Accounting Principles for annual audited financial
statements and should be read in conjunction with Emera Inc.'s annual
consolidated financial statements as at and for the year ended December 31,
2006.
    These consolidated financial statements follow the same accounting
policies and methods of computation as Emera Inc.'s annual audited
consolidated financial statements as at and for the year ended December 31,
2006, with the exception of the accounting policy changes disclosed in note 3.


    2. Seasonal Nature of Operations

    Interim results are not necessarily indicative of results for the full
year due primarily to seasonal factors. Sales and related production vary
significantly over the year, with Q1 and Q4, the strongest periods, reflecting
colder weather and fewer daylight hours in the winter season.


    3. Changes in Accounting Policy

    The Canadian Institute of Chartered Accountants has issued new accounting
standards 1530 Comprehensive Income, 3855 Financial Instruments - Recognition
and Measurement, and 3865 Hedges, which are applicable to the Company
effective January 1, 2007. In accordance with the new accounting standards,
the accounting policy changes were applied retroactively without restatement
of prior periods. The following provides more information on each standard.

    Comprehensive Income

    As a result of the recently issued standard, a new item, accumulated other
comprehensive income ("AOCI"), is recognized in the shareholders' equity
section of the consolidated balance sheets. AOCI includes the unrealized
foreign exchange translation adjustments on the company's self-sustaining
foreign operations, the effective portion of changes in fair value of
derivatives meeting the requirements for cash flow hedges, and unrealized
gains and losses on financial assets classified as available-for-sale.

    Financial Instruments - Recognition and Measurement

    According to the new standard, financial assets are now classified as
loans and receivables, held for trading, available for sale, or held to
maturity. Financial liabilities are classified as either held for trading, or
other than held for trading. The financial assets and liabilities are subject
to different methods of measurement and classification in the financial
statements as follows:

    -------------------------------------------------------------------------
    Financial Instrument                     Measured at      Classified in
    -------------------------------------------------------------------------
    - Loans and receivables                  Amortized cost   N/A
    - Held to maturity financial assets
    - Other than held for trading financial
      liabilities
    -------------------------------------------------------------------------
    - Held for trading financial assets and  Fair value       Net earnings
      liabilities                                             unless deferral
                                                              permitted under
                                                              regulatory
                                                              accounting
    -------------------------------------------------------------------------
    - Available for sale financial assets    Fair value       Other
                                                              comprehensive
                                                              income
    -------------------------------------------------------------------------

    In accordance with the new standard, transactions costs associated with
the issuance of long-term debt are included in long-term debt and amortized
using the effective interest method.
    The Company has chosen January 1, 2003 as the transition date for embedded
derivatives and as a result, embedded derivatives existing prior to the
transition date are not reflected as separate assets and liabilities on the
balance sheet. An embedded derivative is a component of a contract with
characteristics similar to a derivative.

    Hedges

    The new standard outlines the criteria for applying hedge accounting to
cash flow hedges, fair value hedges, and hedging foreign currency fluctuations
on self-sustaining foreign operations.
    Cash flow hedges are recognized on the balance sheet at fair value with
the effective portion of the hedging relationship recognized in other
comprehensive income. Any ineffective portion of the cash flow hedge is
recognized in net earnings. Amounts recognized in AOCI are reclassified to net
income in the same periods in which the hedged item is recognized in net
earnings.
    Fair value hedges and the related hedged items are recognized on the
balance sheet at fair value with any changes in fair value recognized in net
income. To the extent the fair value hedge is effective, the changes in fair
value of the hedge and the hedged item will offset each other.
    Hedges of self-sustaining foreign operations are recognized at fair value
with any changes in fair value recognized in other comprehensive income.

    Accounting for the impact of rate-regulation:

    In accordance with the new accounting standards as outlined above, Nova
Scotia Power determined that its contracts for the purchase or sale of natural
gas for its Tufts Cove generating station ("TUC") should be considered
derivative financial instruments and accordingly recognized at fair value as a
held for trading ("HFT") asset or liability as applicable. This reflects
NSPI's history of buying and reselling any natural gas not used in the
production of electricity at TUC.
    Changes in the fair value of HFT assets and liabilities are recognized in
net earnings. In accordance with Nova Scotia Power's accounting policy
covering physical and financial contracts relating to fuel at TUC, NSPI has
deferred any changes in fair value to a regulatory asset or liability as
appropriate, which are reflected in deferred assets or credits. Absent the
accounting policy, which has been approved by the UARB, NSPI's net earnings
for Q1 2007 would have been $22.2 million ($13.7 million after-tax) higher.

    Details of the amounts recognized upon implementation of the new
accounting standards, and the effect on the consolidated balance sheet as at
January 1, 2007 are summarized below:

                                             Balance                 Balance
                                              Before   Effect of       After
    Consolidated Balance Sheet              Implemen-   Implemen-   Implemen-
    Selected Information                      tation      tation      tation
    millions dollars                      Adjustment  Adjustment  Adjustment
    -------------------------------------------------------------------------
    Current assets
      Energy marketing assets               $   37.3     $ (37.3)          -
    -------------------------------------------------------------------------
      Derivatives held in valid hedging
       relationship                                -        13.9    $   13.9
    -------------------------------------------------------------------------
      Held for trading securities                  -        76.0        76.0
    -------------------------------------------------------------------------
    Energy marketing assets                      2.0        (2.0)          -
    -------------------------------------------------------------------------
    Derivatives in a valid hedging
     relationship                                  -        17.9        17.9
    -------------------------------------------------------------------------
    Held for trading securities                    -       136.4       136.4
    -------------------------------------------------------------------------
    Deferred charges                           468.2       (11.3)      456.9
    -------------------------------------------------------------------------
    Investments                                 98.5       (98.5)          -
    -------------------------------------------------------------------------
    Investments subject to significant
     influence                                     -        98.5        98.5
    -------------------------------------------------------------------------
                                                         $ 193.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Current liabilities
      Current portion of long-term debt     $    3.4     $  (0.2)   $    3.2
    -------------------------------------------------------------------------
      Energy marketing liabilities              36.7       (36.7)          -
    -------------------------------------------------------------------------
      Derivatives held in a valid hedging
       relationship                                -        26.6        26.6
    -------------------------------------------------------------------------
      Held for trading securities                  -        39.7        39.7
    -------------------------------------------------------------------------
    Energy marketing liabilities                 1.4        (1.4)          -
    -------------------------------------------------------------------------
    Derivatives in a valid hedging
     relationship                                  -        10.6        10.6
    -------------------------------------------------------------------------
    Held for trading securities                    -         2.6         2.6
    -------------------------------------------------------------------------
    Deferred credits                            66.1       173.1       239.2
    -------------------------------------------------------------------------
    Long-term debt                           1,657.4       (12.7)    1,644.7
    -------------------------------------------------------------------------
    Shareholders' equity
      Foreign exchange translation
       adjustment                             (100.2)      100.2           -
    -------------------------------------------------------------------------
      Accumulated other comprehensive income       -      (105.5)     (105.5)
    -------------------------------------------------------------------------
      Retained earnings                        450.9        (2.7)      448.2
    -------------------------------------------------------------------------
                                                         $ 193.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The effect on the January 1, 2007 balances can be further explained as
follows:

    Energy marketing assets and liabilities: The balances have been
reclassified to held for trading securities.

    Derivatives in a valid hedging relationship: This new account represents
the fair value of Nova Scotia Power's hedges. These derivatives are all
designated as hedging future expected cash flows.

    Held for trading securities: The new account includes the fair value of
certain of Nova Scotia Power's natural gas contracts, the fair value of Bear
Swamp's contract with the Long Island Power Authority ("LIPA"), amounts
previously recognized as energy marketing assets and liabilities, and the fair
value of any derivatives that are not valid hedges.

    Deferred charges: The adjustment represents the reclassification of
deferred financing costs which are now netted against the related debt,
partially offset by the regulatory asset resulting from the fair value
recognition of certain of Nova Scotia Power's natural gas contracts.

    Investments: The adjustment represents the reclassification of equity
accounted investments to investments subject to significant influence.

    Investments subject to significant influence: This new account represents
the reclassification of equity accounted investments from the investments
account as noted above.

    Deferred credits: The adjustment represents the regulatory liability
resulting from the fair value recognition of certain of Nova Scotia Power's
natural gas contracts.

    Long-term debt (including current portion): The adjustment represents the
netting of deferred financing costs against the related debt.

    Foreign exchange translation adjustment: The adjustment represents the
reclassification of foreign exchange losses on self-sustaining foreign
operations to accumulated other comprehensive income.

    Accumulated other comprehensive income: The adjustment represents the
effective portion of the fair value of Nova Scotia Power's hedges, and the
cumulative foreign exchange loss on self-sustaining foreign operations.

    Retained earnings: The adjustment represents the fair value of Bear
Swamp's interim LIPA contract.

    As a result of implementing the accounting policy changes, net earnings
for 2007 has decreased by $0.7 million after-tax.
    For the three month period ended March 31, 2007 the pre-tax impact of
hedges recognized in earnings was a $1.2 million gain (2006 - $17.5 million).
    The fair value of derivatives in a valid hedging relationship and held for
trading securities are estimated by obtaining prevailing market rates from
investment dealers.


    4. Acquisition

    On January 16, 2007 Emera acquired a 19% interest in St. Lucia Electricity
Services Limited ("Lucelec") for a purchase price of $25.7 million. Lucelec is
a vertically integrated electric utility with an exclusive license to
generate, transmit and distribute electricity on the island of St. Lucia to
2045. The utility has 66 MW of generating capacity and 800 kilometers of
electricity transmission and distribution assets. Lucelec is a cost of service
utility, with a minimum rate of return of 10% on a 50% equity basis.
    The acquisition has been accounted for as an equity investment, and
accordingly, the investment was initially recorded at cost. Emera's pro-rata
share of the results since acquisition have been included in the investment
and consolidated statements of earnings. Any dividends received or receivable
reduces the investment. Lucelec is included in the segment "Other" in Note 5
Segment Information.


    5. Segment Information
                                       Nova
                                     Scotia     Bangor
    millions of dollars               Power      Hydro      Other(*)   Total
    -------------------------------------------------------------------------
    Three months ended March 31,
     2007:
    Revenues from external
     customers                     $  303.4     $ 36.1     $ 20.4   $  359.9
    -------------------------------------------------------------------------
    Net earnings applicable to
     common share                      26.1        6.9        6.7       39.7
    -------------------------------------------------------------------------
    Net inter-segment revenues/
     (expenses)                        34.8       (0.3)     (34.5)         -
    -------------------------------------------------------------------------
    As at March 31, 2007
    Total assets                    3,316.2      648.4      390.5    4,355.1
    -------------------------------------------------------------------------

    Three months ended March 31,
     2006:
    Revenues from external
     customers                        263.0       35.0       12.8      310.8
    -------------------------------------------------------------------------
    Net earnings applicable to
     common share                      37.4        3.7        2.5       43.6
    -------------------------------------------------------------------------
    Net inter-segment revenues/
     (expenses)                        50.2       (0.5)     (49.7)         -
    -------------------------------------------------------------------------
    As at March 31, 2006
    -------------------------------------------------------------------------
    Total assets                    3,081.1      578.8      314.4    3,974.3
    -------------------------------------------------------------------------
    (*) Other consists of corporate activities and adjustments to reconcile
        to consolidated balances.


    6. Employee Future Benefits

    Emera maintains contributory defined-benefit and defined-contribution
pension plans, which cover substantially all of its employees, and plans that
provide non-pension benefits for its retirees. The Company's estimated total
benefit cost, related to these plans, for the three month period ended
March 31, 2007 is $10.7 million (2006 - $10.8 million).


    7. Interest

    Interest expense consists of the following:
                                                          Three months ended
                                                                    March 31
    -------------------------------------------------------------------------
    million of dollars                                       2007       2006
    -------------------------------------------------------------------------
    Interest on long-term debt                           $   25.7   $   27.3
    -------------------------------------------------------------------------
    Interest on short-term debt                               4.9        4.0
    -------------------------------------------------------------------------
    Amortization of debt financing                            0.5        0.5
    -------------------------------------------------------------------------
    Foreign exchange gains                                   (0.9)      (0.5)
    -------------------------------------------------------------------------
                                                         $   30.2   $   31.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    8. Long-Term Debt

    As of March 31, 2007, long-term debt includes $3.8 million (December 31,
2006 - $3.8 million) in capital lease obligations.


    9. Common Shares

    As of March 31, 2007 there were 111.06 million (December 31, 2006 - 110.93
million) issued and outstanding common shares, 4.88 million (December 31, 2006
- 4.90 million) common shares reserved and available for issuance under the
senior management stock option plan, and 1.12 million (December 31, 2006 -
1.15 million) common shares reserved and available for issuance under the
employee common share purchase plan.
    During the three months ended March 31, 2007, the Company issued
0.13 million (2006 - 0.19 million) common shares. Common shares were issued
through the employee common share purchase plan, the senior management stock
option plan, and the dividend reinvestment plan.


    10. Comparative Information

    Certain of the comparative figures have been reclassified to conform to
the consolidated financial statement presentation adopted for 2007.
    




For further information:

For further information: Nancy Tower, FCA Chief Financial Officer, (902)
428-6991; Judy Steele, FCA Director, Investor and External Relations, (902)
428-6999

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