Emera Reports Q1 2009 Earnings of $62.8 million



    HALIFAX, May 5 /CNW/ - (EMA-TSX): Emera Inc.'s consolidated net earnings
were $62.8 million in Q1 2009, compared to $69.4 million for the same period
in 2008. Excluding the effect of mark-to-market accounting adjustments in Bear
Swamp, net earnings were $66.3 million in the first quarter of 2009, compared
to $66.6 million in Q1 2008. Earnings per share were $0.56 or $0.59 excluding
the mark-to-market adjustments for Q1 2009 and $0.62 or $0.60 excluding the
mark-to-market adjustments for Q1 2008.
    Nova Scotia Power's (NSPI) earnings were $52.5 million in Q1 2009, in
comparison to $57.9 million in Q1 2008. This decrease relates to higher fuel
costs partially offset by increased electric revenue due to the rate increase
effective January 1st. The implementation of the Fuel Adjustment Mechanism was
also effective January 1st and decreases the impact of volatile fuel costs on
NSPI's earnings.
    "We are pleased with our strong results this quarter," said Chris
Huskilson, President and CEO of Emera. "In addition, our new strategic
partnership with Algonquin and the acquisition of development rights for the
Nuttby Mountain wind farm position Emera to increase our investment in
renewable energy."
    Bangor Hydro Electric contributed $6.4 million to consolidated net
earnings in Q1 2009, compared to $5.5 million in Q1 2008. The increase was
primarily due to the weaker Canadian dollar.
    Emera's Other operations contributed $3.9 million to net earnings in Q1
2009, compared to $6.0 million in Q1 2008. Excluding the effect of
mark-to-market accounting related to a long-term contract at the Bear Swamp
generating facility, net earnings from Other operations were $7.4 million in
the first quarter of 2009 compared to $3.2 million in Q1 2008. This increase
relates primarily to increased capitalization of financing costs (AFUDC)
during construction of the Brunswick Pipeline, partially offset by increased
interest expense on short-term debt.

    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

    The company will be hosting a teleconference at 4:00 pm Atlantic time
today (3:00 pm Toronto/Montreal/New York; 2:00 pm Winnipeg; 12:00 pm
Vancouver) to discuss the Q1 2009 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
1352410# (available until midnight, Tuesday, May 19, 2009). 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 $5.3 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 600,000 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 and 25% of
Grand Bahama Power Company which serves 19,000 customers on the Caribbean
island of Grand Bahama. In addition to its electric utility investments, Emera
owns the Brunswick Pipeline, a 145 km gas pipeline in New Brunswick; 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; a 7.4% interest in Open Hydro and Emera Energy
Services which manages energy assets on behalf of third parties. Visit Emera
on the web at www.emera.com.

    
    Management's Discussion & Analysis

    As at May 5, 2009

    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 2009 relative to 2008, and its
financial position at March 31, 2009 relative to December 31, 2008. 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, 2009 and the Emera Inc. MD&A
and annual audited consolidated financial statements and supporting notes as
at and for the year ended December 31, 2008. Emera follows Canadian Generally
Accepted Accounting Principles ("GAAP"), including the application of
rate-regulated accounting policies for Emera's rate-regulated subsidiaries.
Emera's wholly-owned subsidiaries Nova Scotia Power Inc. ("NSPI"), Bangor
Hydro-Electric Company ("BHE") and Brunswick Pipeline are subject to rate
regulation and the accounting policies used by these entities may differ in
regard to the timing of recognition of certain assets, liabilities, revenue
and expenses, from those used by Emera's non rate-regulated companies. NSPI's
accounting policies are subject to examination and approval by the Nova Scotia
Utility and Review Board ("UARB"). BHE's accounting policies are subject to
examination and approval by the Maine Public Utilities Commission ("MPUC") and
the Federal Energy Regulatory Commission ("FERC").
    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 BHE 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

    Emera is a Canadian energy holding company headquartered in Halifax, Nova
Scotia. The company invests in electricity generation, transmission and
distribution as well as gas transmission and energy marketing.
    Most of Emera's revenues are earned by NSPI and BHE, two wholly-owned
regulated electric utilities, which operate in northeastern North America.
NSPI is an electricity generation, transmission and distribution company with
$3.5 billion of assets providing service to 483,000 customers in the province
of Nova Scotia, and BHE is an electricity transmission and distribution
company with $843 million of assets serving 117,000 customers in eastern
Maine. Both businesses operate as monopolies in their service territories, and
together comprise the majority of Emera's consolidated revenues. 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. The essential nature of the services provided, the monopoly
positions, and the regulated market structures mean that NSPI and BHE can
generally be expected to produce stable earnings streams within regulated
ranges. Nova Scotia and Maine are mature electricity markets, with annual
energy consumption growth of approximately 1%. Accordingly, Emera looks beyond
its existing regulated electricity business to supplement organic growth.
    Emera's goal is to deliver annual consolidated earnings growth of 4% to
6%, and build and diversify its earnings base. To accomplish this, Emera will
continue to seek growth from its existing businesses and will leverage its
core strength in the electricity business as it pursues both acquisitions and
greenfield development opportunities in regulated electricity transmission and
distribution and low risk generation. Emera's growth strategy also includes
serving the United States and Caribbean markets by capitalizing on
opportunities in related energy infrastructure businesses appropriate to its
risk profile, where its development, commercial and operational skills are
needed.
    Emera has grown its business through the following investments:

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

    - Brunswick Pipeline, a 145 kilometer pipeline that delivers natural gas
      from the Canaport(TM) Liquefied Natural Gas import terminal near
      Saint John, New Brunswick, to markets in Canada and the northeastern
      United States. The pipeline was mechanically complete, and received
      National Energy Board approval for shipping gas, in January 2009. This
      accommodates the needs and schedule of the customer, Repsol, and the
      timing of completing the Canaport(TM) LNG terminal, expected in Q2
      2009.

    - A 12.9% interest in the $2 billion, 1,400 kilometer Maritimes &
      Northeast Pipeline ("M&NP") that transports natural gas to markets in
      Maritime Canada and the northeastern United States.

    - Emera Energy Services, a physical energy business which purchases and
      sells natural gas and electricity and provides related energy asset
      management services.

    - A 19% interest in St. Lucia Electricity Services Limited ("Lucelec"),
      a vertically integrated electric utility on the Caribbean island of
      St. Lucia.

    - A 25% interest in Grand Bahama Power Company Limited ("GBPC"), a
      vertically integrated electric utility on Grand Bahama Island, acquired
      in September 2008.

    - A 7.35% interest in OpenHydro Group Limited ("OpenHydro"), an Irish
      renewable energy company, acquired in February 2008.

    Strategic Partnership with Algonquin Power Income Fund

    In April 2009, Emera signed an agreement giving it rights to acquire a
9.9% interest in Algonquin Power Income Fund ("APIF") through a private
placement of 8.5 million APIF units for a purchase price of $27.6 million.
Under the transaction agreements, Mr. C.G. Huskilson, President and Chief
Executive Officer, Emera Inc., will be nominated for election to the Board of
Trustees of APIF at the next general meeting of APIF unitholders. Emera also
has rights to acquire a further 5% of APIF over the next two years. Emera and
APIF have committed to acquire the electricity distribution and related
generation assets of Sierra Pacific Power Company for approximately USD $116
million from NV Energy. This California-based utility currently provides
electric distribution service to approximately 47,000 customers in the Lake
Tahoe region. Under the terms of the agreement, Emera and APIF will jointly
own and operate the utility through a newly formed entity, California Pacific
Electric Company ("California Pacific"). Emera's 50% investment in the common
shares of California Pacific will be approximately USD $27 million. This
transaction is subject to approval by the California Public Utilities
Commission which is expected in 2010.
    The purchase of the 8.5 million units of APIF will happen concurrently
with the closing of the California Pacific transaction and combined these
transactions are expected to add approximately $6 to $7 million to Emera's
annual consolidated net earnings. Emera will finance these acquisitions with
existing credit facilities.

    Structure of MD&A

    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 Bear Swamp,
Brunswick Pipeline, M&NP, Emera Energy Services, Lucelec, GBPC, OpenHydro, 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 (except earnings per              Three months ended
     common share)                                                  March 31
    -------------------------------------------------------------------------
                                                          2009          2008
    -------------------------------------------------------------------------
    Nova Scotia Power Inc.                               $52.5         $57.9
    Bangor Hydro-Electric Company                          6.4           5.5
    Other                                                  3.9           6.0
    -------------------------------------------------------------------------
    Consolidated net earnings                            $62.8         $69.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per common share - basic                    $0.56         $0.62
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per common share - diluted                  $0.53         $0.58
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per common share - basic, absent the
     Bear Swamp after-tax mark-to-market adjustment      $0.59         $0.60
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Review of 2009

    Emera Inc.'s consolidated net earnings decreased $6.6 million to $62.8
million in Q1 2009 compared to $69.4 million in Q1 2008. Highlights of the
changes are summarized in the following table:

                                                          Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
    Consolidated net earnings - 2008                                   $69.4
    Decreased net earnings in NSPI due primarily to
     increased fuel expense, partially offset by increased
     electric revenue                                                   (5.4)
    Increased net earnings in BHE due primarily to a
     weaker Canadian dollar                                              0.9
    Increased net earnings in Other due primarily to
     allowance for funds used during construction
     ("AFUDC") on construction of the Brunswick Pipeline,
     partially offset by increased interest expense on
     short-term debt used to finance the construction of
     the pipeline                                                        4.2
    Decreased net earnings in Other related to the
     after-tax mark-to-market adjustment on the commodity
     price position in Bear Swamp as discussed in
     Significant Items                                                  (6.3)
    -------------------------------------------------------------------------
    Consolidated net earnings - 2009                                   $62.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic earnings per share were $0.56 in Q1 2009 compared to $0.62 in Q1
    2008.


    Significant Items

    Bear Swamp Mark-to-Market Adjustment

    As part of its long-term energy and capacity supply agreement with the
Long Island Power Authority ("LIPA"), Bear Swamp has contracted with its
parents to provide the power necessary to produce the requirements of the LIPA
contract. One of the contracts between Bear Swamp and Emera's joint venture
partner is marked-to-market through earnings as it does not meet the stringent
accounting requirements of hedge accounting. As at March 31, 2009, the fair
value of the derivative was a net liability of $0.9 million (December 31, 2008
- $4.9 million net asset), which is subject to market volatility of power
prices, and will reverse over the life of the agreement as it is realized. The
agreement expires in 2021.
    The mark-to-market adjustments were as follows:


     millions of dollars (except earnings per             Three months ended
      common share)                                                 March 31
    -------------------------------------------------------------------------
                                                          2009          2008
    -------------------------------------------------------------------------
    Mark-to-market (loss) gain                           $(5.9)         $4.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    After-tax mark-to-market (loss) gain                 $(3.5)         $2.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per common share - basic                    $0.56         $0.62
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per common share - basic, absent the
     after-tax mark-to-market adjustment                 $0.59         $0.60
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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.
The company is regulated by the UARB under a cost-of-service model, with rates
set to recover prudently incurred costs of providing electricity service to
customers, and provides an opportunity to earn a prescribed return on equity
("ROE").

    Nuttby Mountain Wind Project

    On April 27, 2009, NSPI purchased the development rights for a proposed 45
MW wind farm located at Nuttby Mountain, Nova Scotia. The Nuttby Mountain
development rights were owned by Calgary-based EarthFirst Canada Inc.'s
subsidiary EarthFirst Nuttby Inc., and included land leases and transmission
interconnection rights as well as provincial environmental approval. The
project is expected to cost approximately $100 million and will be subject to
UARB approval.

    2009 Rate Decision

    In September 2008, NSPI reached a settlement agreement with stakeholders
on its 2009 rate application. The UARB approved that settlement agreement in
November 2008 which included an average rate increase of 9.4% for most
customer segments effective January 1, 2009. The settlement agreement also
includes a Fuel Adjustment Mechanism ("FAM") also effective January 1, 2009,
with the first rate adjustment under the FAM occurring on January 1, 2010. The
UARB will oversee the FAM, including review of fuel costs, contracts and
transactions. With the implementation of the FAM, NSPI's ROE range has been
reduced to 9.1% - 9.6% with 9.35% used to set rates.

    Review of 2009

    NSPI Q1 Net Earnings
    millions of dollars (except earnings per              Three months ended
     common share)                                                  March 31
    -------------------------------------------------------------------------
                                                          2009          2008
    -------------------------------------------------------------------------
    Electric revenue                                    $347.8        $323.0
    Fuel for generation and purchased power              148.6         110.8
    Fuel adjustment                                       (5.8)            -
    Operating, maintenance and general                    51.2          47.8
    Provincial grants and taxes                           10.1          10.1
    Depreciation                                          35.4          33.2
    Regulatory amortization                                4.2           3.8
    Other revenue                                         (3.0)         (3.1)
    -------------------------------------------------------------------------
    Earnings before financing charges and income
     taxes                                               107.1         120.4
    Financing charges                                     35.6          30.4
    -------------------------------------------------------------------------
    Earnings before income taxes                          71.5          90.0
    Income taxes                                          19.0          32.1
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings            $52.5         $57.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Contribution to consolidated earnings per common
     share                                               $0.47         $0.52
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    NSPI's contribution to consolidated net earnings decreased $5.4 million to
$52.5 million in Q1 2009 compared to $57.9 million in Q1 2008. Highlights of
the earnings changes are summarized in the following table:

                                                          Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2008                   $57.9
    Increased electric revenue                                          24.8
    Increased fuel expense                                             (37.8)
    Deferral of fuel expense as a result of FAM
     implementation                                                      5.8
    Increased operating expenses due primarily to
     increased storm activity partially offset by
     decreased pension expense                                          (3.4)
    Increased financing charges due to foreign exchange
     losses                                                             (5.2)
    Decreased income taxes due to lower earnings, a lower
     statutory rate and increased pension contributions                 13.1
    Other                                                               (2.7)
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2009                   $52.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    With the implementation of the FAM, NSPI earnings are less affected by
volatile fuel costs and more so by load changes and the associated mix of
sales volume.


    Electric Revenue

    Q1 Electric Sales Volumes            Q1 Electric Revenues
    Gigawatt hours ("GWh")               millions of dollars
    -----------------------------------  ------------------------------------
                  2009    2008    2007                  2009    2008    2007
    -----------------------------------  ------------------------------------
    Residential  1,432   1,398   1,330   Residential  $179.2  $160.8  $146.7
    Commercial     877     865     869   Commercial     93.1    83.8    82.1
    Industrial     839   1,049   1,012   Industrial     63.9    68.1    62.2
    Other           98      88      93   Other          11.6    10.3    10.3
    -----------------------------------  ------------------------------------
    Total        3,246   3,400   3,304   Total        $347.8  $323.0  $301.3
    -----------------------------------  ------------------------------------
    -----------------------------------  ------------------------------------


    Q1 Average Revenue / Megawatt hour
     ("MWh")
    -----------------------------------
                  2009    2008    2007
    -----------------------------------
    Dollars per
     MWh          $107     $95     $91
    -----------------------------------
    -----------------------------------

    Electric revenue increased $24.8 million to $347.8 million in Q1 2009
compared to $323.0 million in Q1 2008. Highlights of the changes are
summarized in the following table:

                                                          Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
    Electric revenue - 2008                                           $323.0
    Increased electricity prices effective January 1, 2009              31.6
    Increased residential and commercial sales volumes                   4.6
    Decreased industrial sales volumes due to decreased
     sales to several large industrial customers                       (11.4)
    -------------------------------------------------------------------------
    Electric revenue - 2009                                           $347.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The change in average revenue per MWh in 2009 compared to 2008 reflects
the January 1, 2009 rate increase.


    Fuel for Generation and Purchased Power

    Q1 Production Volumes
    GWh
    -----------------------------------
                  2009    2008    2007
    -----------------------------------
    Coal &
     petcoke     2,377   2,461   2,487
    Natural gas    304     434     158
    Oil            262      71     429
    Renewable      313     370     300
    Purchased
     power         205     277     194
    -----------------------------------
    Total        3,461   3,613   3,568
    -----------------------------------
    -----------------------------------
    Purchased power includes 42 GWh of
    renewables in Q1 2009 (2008 -
    48 GWh; 2007 - 50 GWh).


    Q1 Average Unit Fuel Costs
    -----------------------------------
                  2009    2008    2007
    -----------------------------------
    Dollars per
     MWh           $43     $31     $37
    -----------------------------------
    -----------------------------------

    Fuel for generation and purchased power increased $37.8 million to $148.6
million in Q1 2009 compared to $110.8 million in Q1 2008. Highlights of the
changes are summarized in the following table:

                                                          Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
    Fuel for generation and purchased power - 2008                    $110.8
    Commodity price increases                                           15.8
    Decreased net proceeds on resale of natural gas                      8.2
    Decreased sales volume                                              (9.8)
    Decreased hydro production                                           4.9
    Mark-to-market on natural gas hedges not required in
     2009 primarily due to decreased production volumes                 14.6
    Plant performance                                                    3.2
    Other                                                                0.9
    -------------------------------------------------------------------------
    Fuel for generation and purchased power - 2009                    $148.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    NSPI manages fuel risk for customers utilizing a portfolio strategy
combining physical fixed price contracts and financial instruments providing
fixed or maximum prices. Foreign exchange risk is managed through forward and
option contracts.

    Fuel Adjustment

    The UARB approved the implementation of a FAM in NSPI's 2009 General Rate
Decision effective January 1, 2009. As at March 31, 2009, the difference
between actual fuel costs and amounts recovered from customers has been
deferred to a FAM regulatory asset in other assets. The FAM is subject to an
incentive portion with NSPI retaining or absorbing 10% of the over or
under-recovered amount less the difference between the incentive threshold and
the base fuel cost to a maximum of $5 million. The company has recognized a
future income tax expense related to the fuel adjustment based on NSPI's
applicable statutory income tax rate. The FAM is recognized by NSPI as a
regulatory asset as future rates will be adjusted to provide recovery from
customers in the following year. As at March 31, 2009, NSPI's FAM regulatory
asset was $5.7 million (2008 - nil), and future income tax liability was $1.9
million (2008 - nil).

    Outlook

    In Q1 2009, industrial electric sales volume decreased due to reduced
production at two large paper mills.
    The company anticipates the reduced production may continue during the
remainder of 2009. NSPI has revised its financial outlook to incorporate the
effect of this circumstance and expects to earn a regulated ROE within its
allowed range in 2009.


    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 energy that is delivered
through the BHE T&D network. BHE operates under a traditional cost-of-service
regulatory structure.

    Review of 2009

    Bangor Hydro Q1 Net Earnings
    millions of dollars (except earnings per              Three months ended
     common share)                                                  March 31
    -------------------------------------------------------------------------
                                                          2009          2008
    -------------------------------------------------------------------------
    T&D electric revenues                                $26.3         $24.8
    Resale of purchased power                              4.9           5.2
    Transmission pool revenue                              2.9           4.7
    -------------------------------------------------------------------------
    Total revenue                                         34.1          34.7
    Fuel for generation and purchased power                8.7           9.1
    Operating, maintenance and general                     8.6           6.5
    Property taxes                                         1.6           1.5
    Depreciation                                           4.0           3.8
    Regulatory amortization                                1.9           3.1
    Other                                                 (1.6)         (1.2)
    -------------------------------------------------------------------------
    Earnings before financing charges and income
     taxes                                                10.9          11.9
    Financing charges                                      2.6           2.9
    -------------------------------------------------------------------------
    Earnings before income taxes                           8.3           9.0
    Income taxes                                           3.1           3.5
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - USD       $5.2          $5.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - CAD       $6.4          $5.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Contribution to consolidated earnings per common
     share - CAD                                         $0.06         $0.05
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings weighted average foreign exchange
     rate - CAD/USD                                      $1.24         $1.00
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    BHE's contribution to consolidated net earnings decreased by $0.3 million
to $5.2 million in Q1 2009 compared to $5.5 million in Q1 2008. Highlights of
the earnings changes are summarized in the following table:

                                                          Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2008                    $5.5
    Increased T&D electric revenues due to higher sales
     volumes and increased transmission rates                            1.3
    Lower transmission pool revenue due to increased
     regional charges                                                   (0.9)
    Increased operating, maintenance and general expenses
     due to increased storm activity                                    (0.5)
    Other                                                               (0.2)
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2009                    $5.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    BHE's increased contribution to consolidated net earnings in CAD was due
to the $1.2 million effect of the weaker Canadian dollar.


    Electric Revenue

    Q1 Electric Sales Volumes            Q1 Electric Revenues
    GWh                                  millions of dollars
    -----------------------------------  ------------------------------------
                  2009    2008    2007                  2009    2008    2007
    -----------------------------------  ------------------------------------
    Residential    162     158     160   Residential   $13.1   $12.6   $13.3
    Commercial     151     155     152   Commercial      8.7     8.8     9.2
    Industrial      79      80      89   Industrial      2.7     2.0     3.1
    Other            2       2       3   Other           1.8     1.4     1.0
    -----------------------------------  ------------------------------------
    Total          394     395     404   Total         $26.3   $24.8   $26.6
    -----------------------------------  ------------------------------------
    -----------------------------------  ------------------------------------


    Q1 Average Revenue / MWh
    -----------------------------------
                  2009    2008    2007
    -----------------------------------
    Dollars per
     MWh           $67     $63     $66
    -----------------------------------
    -----------------------------------

    The change in average revenue per MWh in 2009 compared to 2008 reflects
the increase in transmission rates on July 1, 2008.


    OTHER

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

    - 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 145 kilometer pipeline that delivers natural gas
      from the Canaport(TM) Liquefied Natural Gas import terminal near Saint
      John, New Brunswick, to markets in Canada and the northeastern United
      States. The pipeline was mechanically complete, and received National
      Energy Board approval for shipping gas, in January 2009. This
      accommodates the needs and schedule of the customer, Repsol, and the
      timing of completing the Canaport(TM) LNG terminal, expected in Q2
      2009.

    - A 12.9% interest in the $2 billion, 1,400 kilometer M&NP that
      transports natural gas to markets in Maritime Canada and the
      northeastern United States.

    - Emera Energy Services, a physical energy business which purchases and
      sells natural gas and electricity 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.

    - A 19% interest in Lucelec, a vertically integrated electric utility on
      the Caribbean Island of St. Lucia.

    - A 25% interest in GBPC, a vertically integrated utility serving
      19,000 customers on Grand Bahama Island, which was acquired in
      September 2008.

    - A 7.35% interest in OpenHydro, an Irish renewable tidal energy company,
      which was acquired in February 2008.

    - Certain corporate-wide functions such as executive management,
      strategic planning, treasury services, tax planning, business
      development, corporate governance, and financing costs and income taxes
      associated with the corporation's business outside of its two wholly-
      owned regulated electric utilities.

    Review of 2009

    Bear Swamp, Brunswick Pipeline, and Emera Energy Services are reported on
an earnings before interest and other income taxes basis ("EBIT"), and M&NP,
Lucelec and GBPC are reported on an equity earnings basis.

    Other Q1 Earnings
    millions of dollars (except earnings per              Three months ended
     common share)                                                  March 31
    -------------------------------------------------------------------------
                                                          2009          2008
    -------------------------------------------------------------------------
    Bear Swamp - operational                              $2.7          $3.6
    Bear Swamp - mark-to-market                           (5.9)          4.7
    Brunswick Pipeline                                     8.3           0.8
    M&NP                                                   3.3           2.5
    Emera Energy Services                                  1.6           3.2
    GBPC                                                   1.1             -
    Lucelec                                                0.5           0.3
    Corporate costs and other                             (3.8)         (3.5)
    -------------------------------------------------------------------------
                                                           7.8          11.6
    Interest expense                                       5.9           3.2
    -------------------------------------------------------------------------
                                                           1.9           8.4
    Income taxes                                          (2.5)          2.4
    -------------------------------------------------------------------------
                                                           4.4           6.0
    Non-controlling interest                              (0.5)            -
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings             $3.9          $6.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Contribution to consolidated earnings per common
     share                                               $0.03         $0.05
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings,
     absent the Bear Swamp after-tax mark-to-market
     adjustment                                           $7.4          $3.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Contribution to consolidated earnings per common
     share, absent the Bear Swamp after-tax mark-to-
     market adjustment                                   $0.06         $0.03
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The contribution of Other to consolidated net earnings decreased $2.1
million to $3.9 million in Q1 2009 compared to $6.0 million in Q1 2008.
Highlights of the earnings changes are summarized in the following table:

                                                          Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2008                    $6.0
    Decreased Bear Swamp - operational primarily due to
     mark-to-market losses in 2009 on power hedges not
     required                                                           (0.9)
    Decreased Bear Swamp - mark-to-market due to an
     unfavourable commodity price position                             (10.6)
    Decreased Emera Energy Services primarily due to
     reduced transportation mitigation opportunities and
     mark-to-market losses in 2009                                      (1.6)
    Increased Brunswick Pipeline due to AFUDC on
     construction of the pipeline                                        7.5
    Increased equity earnings in M&NP due to proceeds
     related to a settlement agreement, a reduction in
     interest expense on the US portion of the pipeline
     related to repayment of M&NP debt in Q3 2008, along
     with a weaker Canadian dollar                                       0.8
    Increased interest due to increased short-term debt
     used to finance the construction of Brunswick
     Pipeline and an equity contribution to M&NP to repay
     debt on the US portion of the pipeline in Q3 2008,
     along with foreign exchange losses in 2009                         (2.7)
    Decreased income taxes due mainly to decreased Bear
     Swamp - mark-to-market                                              4.9
    Equity earnings from GBPC acquired in Q3 2008                        0.6
    Other                                                               (0.1)
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2009                    $3.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Outlook

    Net earnings for 2009, after adjusting for the mark-to-market effect of
the commodity price position in Bear Swamp, will increase over 2008 due to
continued AFUDC on the Brunswick Pipeline while waiting to receive gas from
the Canaport(TM) LNG terminal and revenue from the pipeline's customer once
the terminal is operational, which is expected in Q2 2009, but no later than
September 2009. Also contributing to increased earnings in 2009 over 2008 is a
full year of equity earnings from GBPC, which was purchased in Q3 2008.

    Consolidated Balance Sheets

    Significant changes in the consolidated balance sheets between March 31,
2009 and December 31, 2008 include:

                           Increase
    millions of dollars   (Decrease)  Explanation
    -------------------------------------------------------------------------
    Assets
    Accounts receivable       $24.2   Increased accounts receivable due to a
                                       rate increase effective January 1,
                                       2009 in NSPI and increased posted
                                       margin to counterparties.
    Prepaid expenses           17.3   Timing of payments.
    Derivatives in a           29.2   Favourable USD price positions and new
     valid hedging                     hedges. The effective portion of the
     relationship                      change is recognized in accumulated
     (including long-term              other comprehensive income.
     portion)
    Held-for-trading          (91.2)  Unfavourable commodity price positions.
     derivatives                       The portion related to NSPI's
     (including long-term              regulatory liabilities is recognized
     portion)                          in other liabilities.
    Other assets               47.4   Increased regulatory asset due to the
                                       accounting standard amendment
                                       requiring rate-regulated operations to
                                       recognize regulatory assets and
                                       liabilities related to future income
                                       taxes effective January 1, 2009.
    Future income tax          24.9   Accounting standard amendment requiring
     assets                            rate-regulated operations to recognize
                                       future income tax assets and
                                       liabilities effective January 1, 2009.
                                       The portion expected to be recovered
                                       from customers in future rates is
                                       recognized in other assets.
    Investments subject        12.1   Additional investment in MN&P, equity
     to significant                    earnings and the effect of the weaker
     influence                         Canadian dollar.
    Property, plant &          46.5   Capital spending primarily in NSPI and
     equipment and                     Brunswick Pipeline along with the
     construction work in              effect of the weaker Canadian dollar.
     progress
    -------------------------------------------------------------------------
    Liabilities and
     Shareholders' Equity
    Accounts payable          (31.2)  Timing of payments.
    Derivatives in a           12.7   Unfavourable commodity price positions.
     valid hedging                     The effective portion of the change is
     relationship                      recognized in accumulated other
     (including long-term              comprehensive income.
     portion)
    Future income tax         102.6   Accounting standard amendment requiring
     liabilities                       rate-regulated operations to recognize
                                       future income tax assets and
                                       liabilities effective January 1, 2009.
                                       The portion expected to be recovered
                                       from customers in future rates is
                                       recognized in other assets.
    Other liabilities         (90.9)  Decreased regulatory liability related
                                       to financial instruments.
    Short-term debt and        52.1   Increased debt levels to finance
     long-term debt                    Brunswick Pipeline and the effect of
     (including current                the weaker Canadian dollar.
     portion)
    Accumulated other          34.2   Primarily represents the favourable
     comprehensive income              effect of the weaker Canadian dollar
                                       on the company's investment in Bangor
                                       Hydro, and changes in USD and
                                       commodity price hedge positions.
    Retained earnings          34.5   Net earnings in excess of dividends
                                       paid.
    -------------------------------------------------------------------------


    Outstanding Share Data
                                                                Common Share
                                                                     Capital
                                                   Millions of   millions of
    Issued and Outstanding:                             Shares       dollars
    -------------------------------------------------------------------------
    December 31, 2007                                   111.47      $1,066.2
    Issued for cash under purchase plans                  0.39           8.0
    Options exercised under senior management
     share option plan                                    0.35           6.4
    Share-based compensation                                 -           0.8
    -------------------------------------------------------------------------
    December 31, 2008                                   112.21      $1,081.4
    Issued for cash under purchase plans                  0.10           2.0
    Options exercised under senior management
     share option plan                                       -           0.1
    Share-based compensation                                 -           0.1
    -------------------------------------------------------------------------
    March 31, 2009                                      112.31      $1,083.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at April 22, 2009 the number of issued and outstanding common shares
was 112.37 million.


    Liquidity and Capital Resources

    North American financial markets experienced significant volatility
beginning in 2007 and continuing throughout Q1 2009 due to concerns related to
the state of both the global debt market and economy. In the past, the company
has been able to access capital markets and expects that access to capital
markets to continue, although possibly at a higher cost given the current
state of financial markets. NSPI and BHE are each capable of paying dividends
to Emera provided they do not breach their debt to capitalization ratios after
giving effect to the dividend payment.
    The pressure on global debt markets may affect the credit worthiness of
certain counterparties of Emera and its subsidiaries. Counterparty credit risk
is mitigated through established credit management techniques, including
conducting financial and other assessments to establish and monitor a
counterparty's creditworthiness, setting exposure limits, monitoring exposures
against these limits, utilizing master netting arrangements and obtaining
financial assurances where warranted. In general, financial assurances include
guarantees, letters of credit and cash.
    The company generates cash primarily through its operations in regulated
utilities involving the generation, transmission and distribution of
electricity. NSPI's and BHE's customer bases are diversified by both sales
volumes and revenues among residential, commercial, industrial and other
customers. Circumstances that could affect the company's ability to generate
cash include general economic downturns in our markets, the loss of one or
more large customers, and regulatory decisions affecting customer rates. The
UARB approved a FAM that reduces NSPI's exposure to fuel price volatility
effective January 1, 2009, providing a mechanism for NSPI to recover these
fuel costs beginning in 2010.
    In addition to internally generated funds, Emera and NSPI have in
aggregate access to $1.1 billion committed syndicated revolving bank lines of
credit, of which $446 million is undrawn and available as at March 31, 2009.
Emera has access to $600 million of this facility and NSPI has access to $500
million. NSPI has an active commercial paper program for up to $400 million,
of which outstanding amounts are 100% backed by the bank lines referred to
above and this results in an equal amount of that credit being considered
drawn.
    Emera's and NSPI's revolving bank lines have a maturity date in June 2009
which can be extended annually for an additional 364 days with the approval of
the syndicated banks. Emera and NSPI have each provided a formal request to
its agent seeking extension approvals from the syndicated banks for each of
these revolving facilities. At each maturity date, Emera and NSPI have the
option to convert all amounts drawn on the bank credit line to a one year
non-revolving term credit.
    In October 2008, the company negotiated an additional $200 million in a
committed non-revolving bank line of credit as a bridge facility for Brunswick
Pipeline. As at March 31, 2009, the facility was fully drawn at $200 million.
This facility matures in June 2009 and the company intends to refinance
Brunswick Pipeline with an extended term debt facility at that time.
    BHE has a $60 million USD revolving bank line of which $17 million USD was
undrawn and available as at March 31, 2009. This facility matures in June
2010.
    In December 2008, NSPI completed a $150 million medium-term note issue,
proceeds of which were used to pay down outstanding commercial paper debt. In
January 2009, NSPI completed a $50 million medium-term note issue, which was
also used to pay down outstanding short-term debt. On April 1, 2009, NSPI
redeemed the $125 million Series C preferred shares using short-term credit
facilities. In June 2009, NSPI has $125 million long-term notes maturing and
has sufficient capacity to refinance these notes in their entirety by drawing
upon its short-term credit facility or by issuing medium-term notes in the
public debt markets under NSPI's existing debt shelf prospectus. As at March
31, 2009, Emera and NSPI had debt shelf prospectuses in the amounts of $400
million and $200 million respectively.

    As at March 31, 2009             Credit Line                 Undrawn and
    millions of dollars                Committed      Utilized     Available
    -------------------------------------------------------------------------
    NSPI                                  $500.0        $133.2        $366.8
    Emera                                  600.0         520.8          79.2
    Emera bridge facility                  200.0         200.0           0.0
    BHE - in USD                            60.0          43.0          17.0
    -------------------------------------------------------------------------

    NSPI issues commercial paper, 100% backed by the syndicated bank line of
credit, to finance short-term cash requirements and it had access to the
commercial paper market as required throughout Q1 2009.

    Consolidated Cash Flow Highlights

    Significant changes in the consolidated cash flow statements between March
31, 2009 and 2008 include:

    Three months ended
     March 31
    millions of dollars       2009     2008   Explanation
    -------------------------------------------------------------------------
    Cash and cash
     equivalents,
     beginning of period     $12.2    $26.4
    Provided by (used in):
    Operating activities      46.6     45.9   In 2009 and 2008, cash earnings
                                               partially offset by increased
                                               non-cash working capital.
    Investing activities     (60.4)  (130.4)  In 2009, capital spending,
                                               including Brunswick Pipeline.
                                              In 2008, capital spending,
                                               including Brunswick Pipeline,
                                               and acquisition of a 7.35%
                                               interest in OpenHydro.
    Financing activities      13.2     84.9   In 2009, increased debt levels,
                                               partially offset by dividends
                                               on common shares.
                                              In 2008, increased debt levels,
                                               partially offset by dividends
                                               on common shares and decreased
                                               accounts receivable
                                               securitized.
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period                  $11.6    $26.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Financial and Commodity Instruments

    The UARB approved the implementation of a FAM effective January 1, 2009,
reducing NSPI's exposure to price volatility and providing a mechanism for
NSPI to recover actual fuels costs if different than what is recovered from
customers in rates. The first rate adjustment under the FAM will occur January
1, 2010.
    The company uses various financial instruments to hedge its customers'
exposure to foreign exchange, interest rate, and commodity price risks. In
addition, the company has contracts for the physical purchase and sale of
natural gas, and physical and financial contracts held-for-trading ("HFT").
Collectively these contracts are referred to as derivatives.
    The company recognizes the fair value of all its derivatives on its
balance sheet, except for non-financial derivatives that qualify and are
designated as contracts held for normal purchase or sale.
    Derivatives that meet stringent documentation requirements, and can be
proven to be effective both at the inception and over the term of the
instrument qualify for hedge accounting. Specifically, for cash flow hedges,
the effective portion of the change in the fair value of derivatives is
deferred to other comprehensive income and recognized in earnings in the same
period the related hedged item is realized. Any ineffective portion of the
change in the fair value of derivatives is recognized in net earnings in the
reporting period.
    For fair value hedges, the change in fair value of the hedging derivatives
and the hedged item are recorded in net earnings. Any ineffective portion of
the change in fair value is recognized in net earnings in the reporting
period.
    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.
    HFT derivatives 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.

    Hedging Items Recognized on the Balance Sheet

    The company has the following categories on the balance sheet related to
derivatives in valid hedging relationships:

                                                      March 31   December 31
    millions of dollars                                   2009          2008
    -------------------------------------------------------------------------
    Inventory                                             $1.6         $(7.1)
    Derivatives in a valid hedging relationship           11.8          (4.7)
    Long-term debt                                         0.3           0.4
    -------------------------------------------------------------------------
                                                         $13.7        $(11.4)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Hedging Impact Recognized in Earnings

    The company recognized in net earnings the following gains and losses
related to effective portion of hedging relationships:

                                                          Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
                                                          2009          2008
    -------------------------------------------------------------------------
    Fuel and purchased power decrease                    $18.1         $10.9
    Financing charges increase                            (1.4)            -
    -------------------------------------------------------------------------
    Effectiveness gains                                  $16.7         $10.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The effectiveness gains and losses reflected in the above table would be
offset in net earnings by the change in the hedged item realized in the
period.
    The company recognized in net earnings the following gains and losses
related to the ineffective portion of hedging relationships:

                                                          Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
                                                          2009          2008
    -------------------------------------------------------------------------
    Fuel and purchased power increase                   $(13.9)        $(0.1)
    Financing charges increase                            (0.5)            -
    -------------------------------------------------------------------------
    Ineffectiveness losses                              $(14.4)        $(0.1)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Held-for-trading Items Recognized on the Balance Sheet

    The company has recognized a net unrealized fair value of HFT derivatives
liability of $0.5 million as at March 31, 2009 (December 31, 2008 - $85.7
million asset) on the balance sheet.

    Held-for-trading Derivatives Gains (Losses) Recognized in Earnings

    The company has recognized the following realized and unrealized gains and
losses with respect to HFT derivatives in earnings:

                                                          Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
                                                          2009          2008
    -------------------------------------------------------------------------
    Electric revenue increase                                -          $0.8
    Other revenue (decrease) increase                    $(7.0)          8.5
    Fuel and purchased power decrease                        -           2.0
    Financing charges increase                            (0.1)         (0.2)
    -------------------------------------------------------------------------
    Held-for-trading derivative (losses) gains           $(7.1)        $11.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    In determining the fair value of derivative financial instruments, the
company has relied on quoted market prices as at the reporting date. The
company has a derivative, a power swap, where no observable market exists,
therefore modeling techniques are employed using assumptions reflective of
current market rates, yield curves and forward prices as applicable, to
interpolate certain prices.

    Transactions with Related Parties

    In the ordinary course of business, Emera purchased natural gas
transportation capacity totaling $7.0 million (2008 - $4.7 million) during the
three months ended March 31, 2009 from the M&NP, 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. As at March 31, 2009
the amount payable to the related party is $3.3 million (December 31, 2008 -
$4.1 million), is non-interest bearing and is under normal credit terms.

    Changes in Accounting Policies

    The Canadian Institute of Chartered Accountants ("CICA") has issued new
accounting standard 3064 Goodwill and Intangibles, various new accounting
standards related to accounting for rate-regulated operations, and Emerging
Issues Committee Abstract of Issue Discussed 173 Credit Risk and the Fair
Value of Financial Assets and Financial Liabilities ("EIC-173"), which are
applicable to Emera's 2009 fiscal year. The following provides more
information on each change.

    Goodwill and Intangibles: Goodwill requirements have not changed. The
requirements for intangible assets now clarify that costs may only be deferred
when they relate to an item that meets the definition of an asset. An
intangible asset must be identifiable; be a resource over which the company
has control; generate probable future economic benefits; and have a reliably
measurable cost. The Company has applied the new standard retrospectively with
restatement of prior periods, which resulted in a decrease to property, plant
and equipment of $86.2 million as at January 1, 2009 (January 1, 2008 - $76.0
million) a decrease to construction work in progress of $15.6 million as at
January 1, 2009 (January 1, 2008 - $7.8 million), and an increase in
intangibles of $101.8 million as at January 1, 2009 (January 1, 2008 - $83.8
million).
    Intangibles are comprised of the following:

                                                                       As at
    millions of dollars                                       March 31, 2009
    -------------------------------------------------------------------------
                                                   Accumulated           Net
                                            Cost  Amortization    Book Value
    -------------------------------------------------------------------------
    Transmission                           $72.9         $15.2         $57.7
    Distribution                            24.2           6.5          17.7
    Other                                   50.9          22.4          28.5
    -------------------------------------------------------------------------
                                          $148.0         $44.1        $103.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                                       As at
    millions of dollars                                    December 31, 2008
    -------------------------------------------------------------------------
                                                   Accumulated           Net
                                            Cost  Amortization    Book Value
    -------------------------------------------------------------------------
    Transmission                           $72.2         $15.1         $57.1
    Distribution                            23.7           6.4          17.3
    Other                                   48.5          21.1          27.4
    -------------------------------------------------------------------------
                                          $144.4         $42.6        $101.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization expense for the three months ended March 31, 2009 was $1.2
million (March 31, 2008 - $1.0 million). Straight line amortization method was
used. The amortization period is 64 years.

    Rate-Regulated Operations: These new standards include removing the
temporary exemption in Section 1100 Generally Accepted Accounting Principles
pertaining to the application of the section to the recognition and
measurement of assets and liabilities arising from rate regulation; and
amending Section 3465 Income Taxes to require the recognition of future income
tax assets and liabilities for the amount of future income taxes expected to
be included in future rates and recovered from or paid to future customers. As
a result of the new standards, Emera recognized future income tax assets and
liabilities of its wholly-owned regulated subsidiaries. In accordance with the
Company's regulated accounting policies covering income taxes, Emera deferred
any future income taxes to a regulatory asset or liability where the future
income taxes are expected to be included in future rates. The Company has
applied the new standard retrospectively without restatement of prior periods,
which resulted in the following increases:

                                                                       As at
    millions of dollars                                      January 1, 2009
    -------------------------------------------------------------------------
    Assets
    Current assets
      Future income tax assets                                         $28.7
    -------------------------------------------------------------------------
    Other assets                                                        33.6
    -------------------------------------------------------------------------
                                                                       $62.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity
    -------------------------------------------------------------------------
    Future income tax liabilities                                      $62.3
    -------------------------------------------------------------------------
                                                                       $62.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Financial Instruments: EIC-173 requires that a company take into account
its own credit risk and the credit risk of the counterparty in determining the
fair value of financial assets and financial liabilities. The Company has
applied the new requirements retrospectively without restatement of prior
periods, the effect of which was immaterial.
    The above accounting policy changes did not affect earnings.

    Future Accounting Policy Changes

    Changeover to International Financial Reporting Standards ("IFRS"): In
April 2008, the CICA issued an IFRS Omnibus Exposure Draft which proposes that
publicly accountable enterprises be required to apply IFRS effective for
Emera's 2011 fiscal year with consistent comparative information required for
2010. The company is currently assessing the effect of IFRS on its accounting
policies, information systems, internal controls, financial statements, and
other business activities. Due to anticipated changes in IFRS during the
transition period and up to January 1, 2011, and the uncertainty around the
future of rate regulated accounting, the company is not in a position to
determine the impact on its financial results at this time.
    In order to prepare for the transition, Emera has established a formal
project and governance structure which includes a steering committee
consisting of senior management from finance, information technology, and
human resources. Quarterly updates are provided to the Audit Committee. Emera
has engaged an external advisor to assist with the changeover to IFRS.

    Summary of Quarterly Reports

    For the quarter ended
    millions of dollars (except earnings per common share)
    -------------------------------------------------------------------------
                  Q1      Q4      Q3      Q2      Q1      Q4      Q3      Q2
                2009    2008    2008    2008    2008    2007    2007    2007
    -------------------------------------------------------------------------
    Total
     reve-
     nues     $403.7  $337.3  $295.8  $317.6  $381.2  $343.9  $310.3  $325.4
    -------------------------------------------------------------------------
    Net
     earnings
     appli-
     cable
     to
     common
     shares     62.8    25.3     6.5    42.9    69.4    36.6    40.9    34.1
    -------------------------------------------------------------------------
    Earnings
     per
     common
     share -
     basic      0.56    0.23    0.05    0.39    0.62    0.33    0.37    0.30
    -------------------------------------------------------------------------
    Earnings
     per
     common
     share -
     diluted    0.53    0.22    0.05    0.37    0.58    0.32    0.35    0.30
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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. Quarterly
results are also affected by items outlined in the Significant Items section.

    Financial Statements

    Consolidated Statements of Earnings (Unaudited)

    -------------------------------------------------------------------------
    For the
    millions of dollars (except earnings per              Three months ended
     common share)                                                  March 31
    -------------------------------------------------------------------------
                                                          2009          2008
    -------------------------------------------------------------------------
    Revenue
      Electric                                          $397.4        $362.0
      Other                                                6.3          19.2
    -------------------------------------------------------------------------
                                                         403.7         381.2
    -------------------------------------------------------------------------
    Cost of operations
      Fuel for generation and purchased power            165.5         123.6
      Fuel adjustment (note 6)                            (5.8)            -
      Operating, maintenance and general                  68.9          61.1
      Provincial, state, and municipal taxes              12.8          12.1
      Depreciation                                        40.8          37.3
      Regulatory amortization                              6.6           6.8
    -------------------------------------------------------------------------
                                                         288.8         240.9
    -------------------------------------------------------------------------
                                                         114.9         140.3
    Equity earnings                                        4.8           2.9
    Financing charges (note 7)                            36.1          35.6
    -------------------------------------------------------------------------
                                                          83.6         107.6
    Income taxes (note 8)                                 20.3          38.2
    -------------------------------------------------------------------------
                                                          63.3          69.4
    Non-controlling interest (note 9)                      0.5             -
    -------------------------------------------------------------------------
    Net earnings applicable to common shares             $62.8         $69.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per common share - basic                    $0.56         $0.62
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per common share - diluted                  $0.53         $0.58
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the unaudited consolidated financial
    statements.

    Weighted average number of common shares
     outstanding (millions)
    - basic                                              112.3         111.6
    - diluted (note 11)                                  125.8         124.9


    Consolidated Balance Sheets (Unaudited)

    -------------------------------------------------------------------------
                                                                 December 31
                                                                        2008
    As at                                             March 31   (restated -
    millions of dollars                                   2009        note 3)
    -------------------------------------------------------------------------
    Assets

    Current assets
      Cash and cash equivalents                          $11.6         $12.2
      Restricted cash                                      0.3           0.8
      Accounts receivable                                409.3         385.1
      Income tax receivable                                5.9          15.7
      Inventory                                          136.9         131.2
      Prepaid expenses                                    25.6           8.3
      Future income tax assets (notes 6, 8)               31.5           7.1
      Derivatives in a valid hedging relationship         55.8          48.4
      Held-for-trading derivatives                        29.8          73.0
    -------------------------------------------------------------------------
                                                         706.7         681.8
    -------------------------------------------------------------------------
    Long-term receivable                                  62.3          56.4
    -------------------------------------------------------------------------
    Derivatives in a valid hedging relationship          138.5         116.7
    -------------------------------------------------------------------------
    Held-for-trading derivatives                          16.8          64.8
    -------------------------------------------------------------------------
    Other assets (note 6)                                467.5         420.1
    -------------------------------------------------------------------------
    Future income tax assets (note 8)                     18.1          17.6
    -------------------------------------------------------------------------
    Goodwill                                             105.2         102.0
    -------------------------------------------------------------------------
    Intangibles                                          103.9         101.8
    -------------------------------------------------------------------------
    Investments subject to significant influence         329.7         317.6
    -------------------------------------------------------------------------
    Available-for-sale investments                        16.3          16.2
    -------------------------------------------------------------------------
    Property, plant and equipment                      2,902.5       2,873.5
    Construction work in progress                        518.4         500.9
    -------------------------------------------------------------------------
                                                       3,420.9       3,374.4
    -------------------------------------------------------------------------
                                                      $5,385.9      $5,269.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity

    Current liabilities
      Current portion of long-term debt                 $131.5        $131.4
      Current portion of preferred shares issued
       by subsidiary                                     125.0         125.0
      Short-term debt                                    225.0         157.9
      Accounts payable and accrued charges               275.9         307.1
      Income tax payable                                  10.0           7.9
      Dividends payable                                    3.2           3.2
      Derivatives in a valid hedging relationship        107.8         109.8
      Held-for-trading derivatives                        42.5          37.8
    -------------------------------------------------------------------------
                                                         920.9         880.1
    -------------------------------------------------------------------------
    Derivatives in a valid hedging relationship           74.7          60.0
    -------------------------------------------------------------------------
    Held-for-trading derivatives                           4.6          14.3
    -------------------------------------------------------------------------
    Future income tax liabilities (note 8)               212.9         110.3
    -------------------------------------------------------------------------
    Asset retirement obligations                          89.2          88.0
    -------------------------------------------------------------------------
    Other liabilities                                    145.8         236.7
    -------------------------------------------------------------------------
    Long-term debt (note 10)                           2,144.1       2,159.2
    -------------------------------------------------------------------------
    Preferred shares issued by subsidiary                135.0         135.0
    -------------------------------------------------------------------------
    Non-controlling interest (note 9)                     41.4          39.6
    -------------------------------------------------------------------------
    Shareholders' equity
      Common shares (note 11)                          1,083.6       1,081.4
      Contributed surplus                                  3.6           3.4
      Accumulated other comprehensive income             (35.0)        (69.2)
      Retained earnings                                  565.1         530.6
    -------------------------------------------------------------------------
                                                       1,617.3       1,546.2
    -------------------------------------------------------------------------
                                                      $5,385.9      $5,269.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Changes in accounting policy (note 3), Subsequent events (note 13)
    See accompanying notes to the unaudited consolidated financial
    statements.

    Approved on behalf of the Board of Directors

    "Derek Oland"                                     "Christopher Huskilson"

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


    Consolidated Statements of Cash Flow (Unaudited)

    -------------------------------------------------------------------------
    For the                                               Three months ended
    millions of dollars                                             March 31
    -------------------------------------------------------------------------
                                                          2009          2008
    -------------------------------------------------------------------------
    Operating activities
    Net earnings applicable to common shares             $62.8         $69.4
    Non-cash items:
      Depreciation                                        40.8          37.3
      Amortization of deferred charges                     3.4           3.4
      Equity earnings                                     (4.8)         (2.9)
      Regulatory amortization                              6.6           6.8
      Allowance for funds used during construction       (10.3)         (1.6)
      Future income taxes                                  2.0           7.1
      Post-retirement benefits                            (1.0)          2.4
      Non-controlling interest                             0.5             -
      Other non-cash operating items                      11.8          (9.9)
    Other cash operating items                             4.1           0.5
    -------------------------------------------------------------------------
                                                         115.9         112.5
    Change in non-cash operating working
     capital (note 12)                                   (69.3)        (66.6)
    -------------------------------------------------------------------------
    Net cash provided by operating activities             46.6          45.9
    -------------------------------------------------------------------------
    Investing activities
    Property, plant and equipment                        (55.9)       (109.9)
    Intangibles                                           (2.1)         (2.5)
    Acquisitions                                             -         (15.4)
    Retirement spending net of salvage                    (1.3)         (1.0)
    Decrease in restricted cash                            0.5           0.2
    Investments                                           (1.6)         (1.8)
    -------------------------------------------------------------------------
    Net cash used in investing activities                (60.4)       (130.4)
    -------------------------------------------------------------------------
    Financing activities
    Retirement of long-term debt                             -          (0.7)
    Issuance of long-term debt                            50.0             -
    (Decrease) increase in short-term debt               (12.2)        133.2
    Issuance of common shares                              2.1           2.9
    Dividends on common shares                           (28.3)        (26.5)
    Accounts receivable securitization                       -         (25.0)
    Other financing                                        1.6           1.0
    -------------------------------------------------------------------------
    Net cash provided by financing activities             13.2          84.9
    -------------------------------------------------------------------------
    (Decrease) increase in cash and cash equivalents      (0.6)          0.4
    Cash and cash equivalents, beginning of period        12.2          26.4
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period             $11.6         $26.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents consists of:
    Cash                                                 $10.2          $5.1
    Cash equivalents                                       1.4          21.7
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period             $11.6         $26.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental disclosure of cash paid:
      Interest                                           $29.2         $31.9
      Income and capital taxes                            $8.9         $18.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the unaudited consolidated financial
    statements.


    Consolidated Statements of Changes in Shareholders' Equity (Unaudited)

    -------------------------------------------------------------------------
    For the three months                        Accumula-
     ended March 31, 2009                      ted Other
    millions of dollars                           Compre-              Total
                                        Contri-  hensive            AOCI and
                              Common     buted    Income  Retained  Retained
                              Shares   Surplus   ("AOCI") Earnings  Earnings
    -------------------------------------------------------------------------
    Balance,
     December 31, 2008      $1,081.4      $3.4    $(69.2)   $530.6    $461.4
    -------------------------------------------------------------------------
    Comprehensive Income:
    Net earnings applicable
     to common shares              -         -         -      62.8      62.8
    Net gain on derivatives
     in a valid hedging
     relationship                  -         -       3.3         -       3.3
    Reclassification of
     hedging losses
     included in income            -         -       6.9         -       6.9
    Reclassification of
     hedging losses
     included in inventory         -         -       8.6         -       8.6
    Reclassification of
     hedging gains
     included in
     construction work in
     progress                      -         -      (2.1)        -      (2.1)
    Unrealized gain on
     translation of self-
     sustaining foreign
     operations                    -         -      17.5         -      17.5
    -------------------------------------------------------------------------
    Total comprehensive
     income                        -         -      34.2      62.8      97.0
    -------------------------------------------------------------------------
    Dividends declared on
     common shares                 -         -         -     (28.3)    (28.3)
    Common shares issued
     under purchase plans        2.0         -         -         -         -
    Senior management stock
     options exercised           0.1         -         -         -         -
    Stock option expense           -       0.2         -         -         -
    Other share-based
     compensation                0.1         -         -         -         -
    -------------------------------------------------------------------------
    Balance,
     March 31, 2009         $1,083.6      $3.6    $(35.0)   $565.1    $530.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    For the three months                                               Total
     ended March 31, 2008               Contri-                     AOCI and
    millions of dollars       Common     buted            Retained  Retained
                              Shares   Surplus      AOCI  Earnings  Earnings
    -------------------------------------------------------------------------
    Balance,
     December 31, 2007      $1,066.2      $3.0   $(209.0)   $499.6    $290.6
    -------------------------------------------------------------------------
    Accounting policy
     change                        -         -         -      (3.3)     (3.3)
    -------------------------------------------------------------------------
    Comprehensive Income:
    Net earnings applicable
     to common shares              -         -         -      69.4      69.4
    Net gain on derivatives
     in a valid hedging
     relationship                  -         -      79.3         -      79.3
    Reclassification of
     hedging gains
     included in income            -         -     (11.1)        -     (11.1)
    Reclassification of
     hedging losses
     included in inventory         -         -       1.8         -       1.8
    Unrealized gain on
     translation of self-
     sustaining foreign
     operations                    -         -      15.4         -      15.4
    Other                          -         -      (0.2)        -      (0.2)
    -------------------------------------------------------------------------
    Total comprehensive
     income                        -         -      85.2      69.4     154.6
    -------------------------------------------------------------------------
    Dividends declared on
     common shares                 -         -         -     (26.5)    (26.5)
    Common shares issued
     under purchase plans        2.0         -         -         -         -
    Senior management stock
     options exercised           1.0      (0.1)        -         -         -
    Stock option expense           -       0.3         -         -         -
    Other share-based
     compensation                0.1         -         -         -         -
    -------------------------------------------------------------------------
    Balance,
     March 31, 2008         $1,069.3      $3.2   $(123.8)   $539.2    $415.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the unaudited consolidated financial
    statements.


    Notes to the Interim Unaudited Consolidated Financial Statements
    March 31, 2009

    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,
2008.
    "Company", "Emera Inc." and "Emera" refer to Emera Inc. and all of its
consolidated subsidiaries and affiliates.
    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,
2008, 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 ("CICA") has issued new
accounting standard 3064 Goodwill and Intangibles, various new accounting
standards related to accounting for rate-regulated operations, and Emerging
Issues Committee Abstract of Issue Discussed 173 Credit Risk and the Fair
Value of Financial Assets and Financial Liabilities ("EIC-173"), which are
applicable to Emera's 2009 fiscal year. The following provides more
information on each change.

    Goodwill and Intangibles: Goodwill requirements have not changed. The
requirements for intangible assets now clarify that costs may only be deferred
when they relate to an item that meets the definition of an asset. An
intangible asset must be identifiable; be a resource over which the company
has control; generate probable future economic benefits; and have a reliably
measurable cost. The Company has applied the new standard retrospectively with
restatement of prior periods, which resulted in a decrease to property, plant
and equipment of $86.2 million as at January 1, 2009 (January 1, 2008 - $76.0
million) a decrease to construction work in progress of $15.6 million as at
January 1, 2009 (January 1, 2008 - $7.8 million), and an increase in
intangibles of $101.8 million as at January 1, 2009 (January 1, 2008 - $83.8
million).
    Intangibles are comprised of the following:

                                                                       As at
    millions of dollars                                       March 31, 2009
    -------------------------------------------------------------------------
                                                   Accumulated           Net
                                            Cost  Amortization    Book Value
    -------------------------------------------------------------------------
    Transmission                           $72.9         $15.2         $57.7
    Distribution                            24.2           6.5          17.7
    Other                                   50.9          22.4          28.5
    -------------------------------------------------------------------------
                                          $148.0         $44.1        $103.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                                       As at
    millions of dollars                                    December 31, 2008
    -------------------------------------------------------------------------
                                                   Accumulated           Net
                                            Cost  Amortization    Book Value
    -------------------------------------------------------------------------
    Transmission                           $72.2         $15.1         $57.1
    Distribution                            23.7           6.4          17.3
    Other                                   48.5          21.1          27.4
    -------------------------------------------------------------------------
                                          $144.4         $42.6        $101.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization expense for the three months ended March 31, 2009 was $1.2
million (March 31, 2008 $1.0 million). Straight line amortization method was
used. The amortization period is 64 years.

    Rate-Regulated Operations: These new standards include removing the
temporary exemption in Section 1100 Generally Accepted Accounting Principles
pertaining to the application of the section to the recognition and
measurement of assets and liabilities arising from rate regulation; and
amending Section 3465 Income Taxes to require the recognition of future income
tax assets and liabilities for the amount of future income taxes expected to
be included in future rates and recovered from or paid to future customers. As
a result of the new standards, Emera recognized future income tax assets and
liabilities of its wholly-owned regulated subsidiaries. In accordance with the
Company's regulated accounting policies covering income taxes, Emera deferred
any future income taxes to a regulatory asset or liability where the future
income taxes are expected to be included in future rates. The Company has
applied the new standard retrospectively without restatement of prior periods,
which resulted in the following increases:

                                                                       As at
    millions of dollars                                      January 1, 2009
    -------------------------------------------------------------------------
    Assets
    Current assets
      Future income tax assets                                         $28.7
    -------------------------------------------------------------------------
    Other assets                                                        33.6
    -------------------------------------------------------------------------
                                                                       $62.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity
    Future income tax liabilities                                      $62.3
    -------------------------------------------------------------------------
                                                                       $62.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Financial Instruments: EIC-173 requires that a company take into account
its own credit risk and the credit risk of the counterparty in determining the
fair value of financial assets and financial liabilities. The Company has
applied the new requirements retrospectively without restatement of prior
periods, the effect of which was immaterial.
    The above accounting policy changes did not affect earnings.

    Future Accounting Policy Changes

    Changeover to International Financial Reporting Standards ("IFRS"): In
April 2008, the CICA issued an IFRS Omnibus Exposure Draft which proposes that
publicly accountable enterprises be required to apply IFRS effective for
Emera's 2011 fiscal year with consistent comparative information required for
2010. The Company is currently assessing the effect of IFRS on its financial
statements and developing its changeover plan.

    4. Segment Information

    -------------------------------------------------------------------------
                                          Bangor
                              Nova         Hydro-
    millions of             Scotia      Electric
     dollars             Power Inc.      Company         Other(*)      Total
    -------------------------------------------------------------------------
    For the three
     months ended
     March 31, 2009:
    Revenues from
     external customers     $350.8         $44.2          $8.7        $403.7
    Net inter-segment
     revenues (expenses)      16.6          (0.2)        (16.4)            -
    Net earnings
     applicable to
     common shares            52.5           6.4           3.9          62.8
    As at March 31, 2009
    Total assets           3,518.6         842.5       1,024.8       5,385.9
    -------------------------------------------------------------------------

    For the three
     months ended
     March 31, 2008:
    Revenues from
     external customers     $326.0         $35.9         $19.3        $381.2
    Net inter-segment
     revenues (expenses)      12.6          (0.2)        (12.4)            -
    Net earnings
     applicable to
     common shares            57.9           5.5           6.0          69.4
    As at March 31, 2008
    Total assets           3,249.5         635.6         535.6       4,420.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Other includes corporate activities and adjustments to reconcile to
        consolidated balances.


    5. 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, 2009 is $5.4 million (2008 - $8.5 million).

    6. Fuel Adjustment

    The Nova Scotia Utility and Review Board ("UARB") approved the
implementation of a Fuel Adjustment Mechanism ("FAM") in Nova Scotia Power
Inc.'s ("NSPI") 2009 General Rate Decision effective January 1, 2009. As at
March 31, 2009, the difference between actual fuel costs and amounts recovered
from customers has been deferred to a FAM regulatory asset in other assets.
The FAM is subject to an incentive portion with NSPI retaining or absorbing
10% of the over or under-recovered amount less the difference between the
incentive threshold and the base fuel cost to a maximum of $5 million. The
Company has recognized a future income tax expense related to the fuel
adjustment based on NSPI's applicable statutory income tax rate. The FAM is
recognized by NSPI as a regulatory asset as future rates will be adjusted to
provide recovery from customers in the following year. As at March 31, 2009,
NSPI's FAM regulatory asset was $5.7 million (2008 - nil), and future income
tax liability was $1.9 million (2008 - nil). In the absence of UARB approval,
fuel costs would not have been deferred and earnings for the three months
ended March 31, 2009 would be $5.7 million ($3.8 million after-tax) lower
(2008 - nil).

    7. Financing Charges

    Financing charges consist of the following:

                                                          Three months ended
    For the                                                         March 31
    -------------------------------------------------------------------------
    millions of dollars                                   2009          2008
    -------------------------------------------------------------------------
    Interest - long-term debt                            $28.3         $27.0
             - short-term debt                             4.8           4.1
    Preferred share dividends paid by subsidiary           3.5           3.5
    Amortization of defeasance cost                        3.0           3.1
    Amortization of debt financing costs                   0.5           0.4
    Allowance for funds used during construction         (10.3)         (1.6)
    Foreign exchange losses (gains)                        6.3          (0.9)
    -------------------------------------------------------------------------
                                                         $36.1         $35.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    8. Income Taxes

    The income tax provision differs from that computed using the statutory
rates for the following reasons:

                                                          Three months ended
    For the                                                         March 31
    -------------------------------------------------------------------------
    millions of dollars                      2009                       2008
    -------------------------------------------------------------------------
    Earnings before
     taxes                   $83.6                      $107.6
    Income taxes, at
     statutory rates          29.3          35.0%         38.2          35.5%
    Unrecorded future
     income taxes on
     regulated earnings          -             -          (4.5)         (4.2)
    Future income taxes
     on regulated
     earnings deferred
     to regulatory
     assets                  (10.1)        (12.0)            -             -
    Net tax effect of
     equity earnings          (1.3)         (1.5)         (1.0)         (0.9)
    Non-deductible
     preferred share
     dividends                 1.2           1.4           1.2           1.1
    Other                      1.2           1.4           4.3           4.0
    -------------------------------------------------------------------------
                              20.3          24.3%         38.2          35.5%
    Income taxes -
     current                  18.3                        31.2
    Income taxes -
     future (note 6)          $2.0                        $7.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    The future income tax assets and liabilities comprise the following:

                             Current portion            Long-term portion
                         ----------------------------------------------------
    As at                 March 31   December 31      March 31   December 31
    millions of dollars       2009          2008          2009          2008
    -------------------------------------------------------------------------
    Future income tax
     assets:
    Tax loss carry
     forwards                 $0.6          $1.9         $14.0         $13.2
    Property, plant and
     equipment                   -             -           1.2           1.4
    AOCI                      22.2             -             -             -
    Other                      8.7           5.2           2.9           3.0
    -------------------------------------------------------------------------
                             $31.5          $7.1         $18.1         $17.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Future income tax
     liabilities:
    Property, plant and
     equipment                   -             -        $225.0        $116.1
    Deferred charges             -             -           6.8           7.1
    Deferred credits             -             -           1.4         (10.6)
    Tax loss carry
     forwards                    -             -         (21.2)         (5.4)
    AOCI                         -             -          37.5             -
    Asset retirement
     obligations                 -             -         (41.0)            -
    Other                        -             -           4.4           3.1
    -------------------------------------------------------------------------
                                 -             -        $212.9        $110.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Included in the amounts above is a net future income tax liability of
$68.6 million relating to Emera's wholly-owned regulated subsidiaries. The
offset to this amount has been recorded as a regulatory asset in other assets.
These amounts include a gross up to reflect the income tax associated with
future revenues required to fund these net future income tax liabilities. See
note 3 for additional information.

    9. Acquisitions

    ICD Utilities Limited ("ICDU")

    In September 2008, Emera purchased 50% of the shares of ICDU of the
Bahamas for $42.3 million USD ($45.3 million CAD). ICDU owns 50% of Grand
Bahama Power Company Limited ("GBPC") which is a vertically integrated utility
serving 19,000 customers on Grand Bahama Island.
    GBPC has 137 megawatts of installed oil-fired generating capacity. The
Grand Bahama Port Authority Limited regulates the utility and has granted GBPC
a licensed, regulated and exclusive franchise to produce, transmit, and
distribute electricity on the island until 2054. There is a fuel pass through
mechanism and flexible tariff adjustment policies to ensure that costs are
recovered and a reasonable return is earned.
    The acquisition has been accounted for under the purchase method of
accounting as Emera has determined it has control of ICDU, and accordingly,
the results of operations since the date of acquisition have been included in
the consolidated statements of earnings. ICDU is included in the segment
"Other" in note 4 Segment Information. The following summarizes the
transaction:

    Net assets acquired                                  millions of dollars
    -------------------------------------------------------------------------
    Long-term investment                                               $78.8
    Non-controlling interest                                           (33.5)
    -------------------------------------------------------------------------
    Cash paid                                                          $45.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The purchase price allocation has not yet been finalized as the Company
has not completed the valuation of the long-term investment in GBPC.

    10. Long-Term Debt

    As of March 31, 2009, long-term debt includes $1.4 million (December 31,
2008 - $2.2 million) in capital lease obligations.

    11. Common Shares

    As at March 31, 2009 there were 112.3 million (December 31, 2008 - 112.2
million) issued and outstanding common shares, 4.5 million (December 31, 2008
- 4.5 million) common shares reserved and available for issuance under the
senior management stock option plan, and 0.8 million (December 31, 2008 - 0.8
million) common shares reserved and available for issuance under the employee
common share purchase plan.
    During the three months ended March 31, 2009, the Company issued 0.1
million (2008 - 0.1 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.
    Diluted weighted average number of common shares outstanding includes the
conversion of preferred shares of NSPI, restricted share units, deferred share
units, and senior management share options.

    12. Cash Flow Information

    The change in non-cash operating working capital consists of the
following:

                                                          Three months ended
    For the                                                         March 31
    -------------------------------------------------------------------------
    millions of dollars                                   2009          2008
    -------------------------------------------------------------------------
    Increase in accounts receivable                     $(23.6)       $(20.8)
    Increase in inventory                                 (5.5)        (23.7)
    Increase in prepaid expenses                         (15.4)         (8.2)
    Increase in long-term receivables                     (6.0)        (15.6)
    Changes in posted margin included in accounts
     payable and accounts receivable                       2.4         (24.7)
    (Decrease) increase in other accounts payable
     and accrued charges                                 (33.1)         11.8
    Increase in income tax payable                        11.9          14.6
    -------------------------------------------------------------------------
                                                        $(69.3)       $(66.6)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    13. Subsequent Events

    Algonquin Power Income Fund: In April 2009, Emera signed an agreement
giving it rights to acquire a 9.9% interest in Algonquin Power Income Fund
("APIF") through a private placement of 8.5 million APIF units for a purchase
price of $27.6 million. Under the transaction agreements, Mr. C.G. Huskilson,
President and Chief Executive Officer, Emera Inc., will be nominated for
election to the Board of Trustees of APIF at the next general meeting of APIF
unitholders. Emera also has rights to acquire a further 5% of APIF over the
next 2 years. Emera and APIF have committed to acquire the electricity
distribution and related generation assets of Sierra Pacific Power Company for
approximately USD $116 million from NV Energy. This California-based utility
currently provides electric distribution service to approximately 47,000
customers in the Lake Tahoe region. Under the terms of the agreement, Emera
and APIF will jointly own and operate the utility through a newly formed
entity, California Pacific Electric Company ("California Pacific"). Emera's
50% investment in the common shares of California Pacific will be
approximately USD $27 million. This transaction is subject to approval by the
California Public Utilities Commission which is expected in 2010.
    The purchase of the 8.5 million units of APIF will happen concurrently
with the closing of the California Pacific transaction and combined these
transactions are expected to add approximately $6 to $7 million to Emera's
annual consolidated net earnings. Emera will finance these acquisitions with
existing credit facilities.

    Preferred shares of subsidiary: On April 1, 2009, NSPI redeemed its
outstanding Cumulative Redeemable First Preferred Shares, Series C for a
redemption price of $25 per share for a total of $125 million.

    14. Comparative Information

    Certain of the comparative figures have been reclassified to conform to
the consolidated financial statement presentation adopted for 2009.
    




For further information:

For further information: Nancy Tower, FCA, Chief Financial Officer,
(902) 428-6991; Jennifer Nicholson, CA, Director Investor Relations and
Strategic Development, (902) 428-6347

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Emera Inc.

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