Emera Reports Q2 2008 Earnings of $42.9 million



    HALIFAX, August 1 /CNW/ - (EMA-TSX): Emera Inc.'s consolidated net
earnings were $42.9 million in Q2 2008, compared to $34.1 million for the same
period in 2007. Earnings per share were $0.39 in Q2 2008, compared to
$0.30 for the second quarter of 2007.
    Nova Scotia Power's earnings were $31.0 million in Q2 2008, in comparison
to $23.9 million in Q2 2007. Income taxes were lower in the quarter. Although
commodity prices were higher in the quarter as expected, the increase was
offset by an increased valuation of a long-term receivable. Excluding the
effect of the long-term receivable NSPI's earnings would have been
$21.5 million in the quarter. Higher fuel costs in quarters three and four
will moderate NSPI's earnings for the remainder of the year. NSPI's outlook is
to earn within its allowed range.
    "We had a solid second quarter and are pleased with our results so far
this year," said Chris Huskilson, President and CEO of Emera. "All
subsidiaries continue to perform well. Brunswick Pipeline construction is
proceeding as planned and is on target to meet a Q4 in-service date as
expected. Transmission activities in New England continue to advance."
    Bangor Hydro Electric contributed $4.5 million to consolidated net
earnings in Q2 2008, compared to $4.8 million in Q2 2007. This slight decrease
relates to the stronger Canadian dollar.
    Emera's Other operations contributed $7.4 million to net earnings in
Q2 2008, compared to $5.4 million in Q2 2007. This increase relates to higher
earnings and mark-to-market accounting gains in Bear Swamp offset by higher
income taxes. Excluding the effect of this mark-to-market accounting gain in
Bear Swamp, quarterly earnings per share would have been $0.35.

    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 2:00 pm Atlantic time
today (1:00 pm Toronto/Montreal/New York; 12:00 pm Winnipeg; 10:00 am
Vancouver) to discuss the Q2 2008 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
3264932# (available until midnight, Friday, August 15, 2008). The
teleconference will also be webcast live at www.emera.com and available for
playback for one year.

    About Emera

    Emera Inc. (EMA-TSX) is an energy and services company with $4.7 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. In addition
to its electric utility investments, Emera has a joint venture interest in
Bear Swamp, a 600 megawatt pumped storage hydro-electric facility in northern
Massachusetts; a 12.9% interest in the Maritimes & Northeast Pipeline; 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 August 1, 2008

    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 second quarter of 2008 relative to 2007, and its
financial position at June 30, 2008 relative to December 31, 2007. 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
including supplier fulfillment of contractual agreements and obligations,
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 six month period ended June 30, 2008 and the Emera Inc. MD&A and
annual audited consolidated financial statements and supporting notes as at
and for the year ended December 31, 2007. Emera follows Canadian Generally
Accepted Accounting Principles ("GAAP"). Emera's wholly-owned subsidiary, Nova
Scotia Power Inc.'s accounting policies are subject to examination and
approval by the Nova Scotia Utility and Review Board. Emera's wholly-owned
subsidiary, Bangor Hydro-Electric Company's accounting policies are subject to
examination and approval by the Maine Public Utilities Commission and the
Federal Energy Regulatory Commission. The rate-regulated accounting policies
of Nova Scotia Power and Bangor Hydro may differ from GAAP for non
rate-regulated companies.
    Throughout this discussion, "Emera Inc." and "Emera" refer to Emera Inc.
and all of its consolidated subsidiaries and affiliates.
    All amounts are in Canadian dollars ("CAD") except for the Bangor Hydro
section of the MD&A, which is reported in US dollars ("USD") unless otherwise
stated.
    Additional information related to Emera, including the company's Annual
Information Form, can be found on SEDAR at www.sedar.com.


    Introduction and Strategic Overview

    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 transportation and energy marketing.
    Most of Emera's revenues are earned by its two regulated electric
utilities which it owns and operates in Northeastern North America. Nova
Scotia Power Inc. ("NSPI") is an electricity generation, transmission and
distribution company with $3.5 billion of assets providing service to
480,000 customers in the province of Nova Scotia, and Bangor Hydro-Electric
Company ("BHE") is an electricity transmission and distribution company with
$630 million of assets serving 117,000 customers in eastern Maine. Both
businesses operate as monopolies in their service territories, and together
comprise approximately 92% 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 means 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
demand 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% - 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' market through transmission development
and capitalizing on opportunities in related energy infrastructure businesses
appropriate to its risk profile, where its development, commercial and
operational skills are needed.

    Emera is growing 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.

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

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

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

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

    Investment in Renewable Technology

    In February 2008 Emera acquired a 7.35% interest in OpenHydro Group
Limited ("OpenHydro"), an Irish renewable tidal energy company for
(euro)10.2 million ($15.4 million CAD). OpenHydro designs and manufactures
marine turbines for harnessing energy from tidal currents in the world's
oceans. The company is testing its commercial scale Open-Centre Turbine at the
European Marine Energy Centre in Orkney, Scotland. In 2007, NSPI selected
OpenHydro's Open-Centre Turbine technology for deployment in a tidal energy
demonstration project in the Bay of Fundy. Emera financed the investment with
cash from operations.

    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, Emera
Energy Services, Maritimes & Northeast Pipeline, Lucelec, Brunswick Pipeline,
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, dividends and selected
quarterly trend information are presented on a consolidated basis.


    EMERA CONSOLIDATED

    Q2 Operating Unit Contributions
    millions of dollars
     (except earnings             Three months ended        Six months ended
     per common share)                       June 30                 June 30
    -------------------------------------------------------------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Nova Scotia Power              $31.0       $23.9       $88.9       $50.0
    -------------------------------------------------------------------------
    Bangor Hydro-Electric            4.5         4.8        10.0        11.7
    -------------------------------------------------------------------------
    Other                            7.4         5.4        13.4        12.1
    -------------------------------------------------------------------------
    Consolidated net earnings      $42.9       $34.1      $112.3       $73.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per common
     share - basic                 $0.39       $0.30       $1.01       $0.66
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per common
     share - diluted               $0.37       $0.30       $0.95       $0.65
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Review of 2008

    Emera Inc.'s consolidated net earnings increased $8.8 million to
$42.9 million in Q2 2008 compared to $34.1 million in Q2 2007. Year-to-date,
Emera's consolidated net earnings increased $38.5 million to $112.3 million in
2008 compared to $73.8 million in 2007. Highlights of the changes are
summarized in the following table:

                                                    Three months  Six months
                                                           ended       ended
    millions of dollars                                  June 30     June 30
    -------------------------------------------------------------------------
    Consolidated net earnings - 2007                       $34.1       $73.8
    -------------------------------------------------------------------------
    Increased net earnings in NSPI due to
     decreased fuel expense, an electricity
     price increase on April 1, 2007,
     and decreased tax expense                               7.1        38.9
    -------------------------------------------------------------------------
    Decreased net earnings in Bangor Hydro
     due mainly to a stronger Canadian dollar               (0.3)       (1.7)
    -------------------------------------------------------------------------
    Increased net earnings in Other due mainly
     to a favourable commodity price position
     in Bear Swamp                                           2.0         1.3
    -------------------------------------------------------------------------
    Consolidated net earnings - 2008                       $42.9      $112.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic earnings per share were $0.39 in Q2 2008 compared to $0.30 in
Q2 2007; and $1.01 year-to-date in 2008 compared to $0.66 in 2007.

    Significant Items

    Bear Swamp

    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. A contract with 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 June 30, 2008, the fair value of the net derivative
asset was $21.2 million (December 31, 2007 - $10.5 million), 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             Three months ended        Six months ended
     per common share)                       June 30                 June 30
    -------------------------------------------------------------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Mark-to-market gain             $5.6        $3.1       $10.3        $4.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    After-tax mark-to-market gain   $3.3        $1.8        $6.1        $2.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per common share
     - basic                       $0.39       $0.30       $1.01       $0.66
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per common share
     - basic, absent the
     after-tax mark-to-market
     adjustment                    $0.35       $0.28       $0.95       $0.64
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    NOVA SCOTIA POWER INC.

    Overview

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

    Appointments

    On June 18, 2008 Robert Bennett was appointed President & Chief Executive
Officer of NSPI. Mr. Bennett, who was most recently Executive Vice President,
Revenue and Sustainability, succeeds Ralph Tedesco as part of a planned
leadership transition. Mr. Tedesco, who was Nova Scotia Power's President and
Chief Executive Officer, has been appointed Vice Chair of Nova Scotia Power's
Board of Directors.

    2009 Rate Application

    On May 27, 2008 NSPI filed a rate application with the Nova Scotia Utility
and Review Board requesting an overall rate increase of 11.9% effective
January 1, 2009. The rate increase consists of a fuel adjustment of 8.1% and
3.8% for reliability and customer service improvements and recovery of
previously approved costs. Volatile world prices for coal, oil and natural gas
are the reason for the requested rate increase. The application also seeks a
change to the allowed earnings band to 9.1% to 9.6% with 9.35% used to set
rates as previously agreed to in the Fuel Adjustment Mechanism ("FAM")
settlement agreement. The hearings are scheduled to take place in September
2008.

    2007 Rate Decision

    In February 2007 the UARB approved an average increase in electricity
rates of 3.8% effective April 1, 2007. The rate increase was part of a first
ever rate settlement agreement between NSPI and key stakeholders. NSPI's
return on equity range was unchanged at 9.3% to 9.8%.
    In December 2007 the UARB issued a decision that provided conditional
approval and establishes achievable conditions for the implementation of a
FAM, effective January 1, 2009. Upon approval of the requested FAM, NSPI's
allowed return on equity will be reduced by 0.2% beginning in 2009, changing
its allowed earnings band to 9.1% to 9.6%.

    Review of 2008

    NSPI Q2 Net Earnings
    millions of dollars
     (except earnings             Three months ended        Six months ended
     per common share)                       June 30                 June 30
    -------------------------------------------------------------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Electric revenue              $256.8      $268.4      $579.8      $569.7
    -------------------------------------------------------------------------
    Fuel for generation and
     purchased power                88.1        98.0       198.9       228.9
    -------------------------------------------------------------------------
    Operating, maintenance and
     general                        51.2        50.3        99.0       100.6
    -------------------------------------------------------------------------
    Provincial grants and taxes     10.4        10.0        20.5        20.1
    -------------------------------------------------------------------------
    Depreciation                    33.3        32.6        66.5        65.2
    -------------------------------------------------------------------------
    Regulatory amortization          3.8         5.6         7.6         7.1
    -------------------------------------------------------------------------
    Other revenue                   (5.2)       (2.7)       (8.3)       (4.8)
    -------------------------------------------------------------------------
    Earnings from operations        75.2        74.6       195.6       152.6
    -------------------------------------------------------------------------
    Financing charges               31.8        32.2        62.2        63.6
    -------------------------------------------------------------------------
    Earnings before income taxes    43.4        42.4       133.4        89.0
    -------------------------------------------------------------------------
    Income taxes                    12.4        18.5        44.5        39.0
    -------------------------------------------------------------------------
    Contribution to consolidated
     net earnings                  $31.0       $23.9       $88.9       $50.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Contribution to consolidated
     earnings per common share     $0.28       $0.21       $0.80       $0.45
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    NSPI's contribution to consolidated net earnings increased $7.1 million to
$31.0 million in Q2 2008 compared to $23.9 million in Q2 2007. Year-to-date
("YTD"), NSPI's contribution to consolidated net earnings increased
$38.9 million to $88.9 million in 2008 compared to $50.0 million in 2007.
Highlights of the earnings changes are summarized in the following table:

                                                    Three months  Six months
                                                           ended       ended
    millions of dollars                                  June 30     June 30
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2007       $23.9       $50.0
    -------------------------------------------------------------------------
    Decreased electric revenue in Q2 due to
     decreased sales volume; YTD increase due to
     an electricity price increase on April 1, 2007        (11.6)       10.1
    -------------------------------------------------------------------------
    Decreased fuel expense                                   9.9        30.0
    -------------------------------------------------------------------------
    Increased other revenue due to reduced
     securitization fees and settlement proceeds
     from a contract dispute                                 2.5         3.5
    -------------------------------------------------------------------------
    Decreased income taxes due to a lower effective
     tax rate offset YTD by higher taxable income            6.1        (5.5)
    -------------------------------------------------------------------------
    Other                                                    0.2         0.8
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2008       $31.0       $88.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Electric Revenue

    Q2 Electric Sales Volume             Q2 Electric Sales Revenues
    Gigawatt hours ("GWh")               millions of dollars
    ----------------------------------   ------------------------------------
                  2008    2007    2006                  2008    2007    2006
    ----------------------------------   ------------------------------------
    Residential    902     980     890   Residential  $108.6  $117.4  $103.3
    ----------------------------------   ------------------------------------
    Commercial     720     752     701   Commercial     71.0    74.3    67.6
    ----------------------------------   ------------------------------------
    Industrial   1,027   1,044     638   Industrial     66.4    66.9    42.4
    ----------------------------------   ------------------------------------
    Other           86      80     202   Other          10.8     9.8    15.8
    ----------------------------------   ------------------------------------
    Total        2,735   2,856   2,431   Total        $256.8  $268.4  $229.1
    ----------------------------------   ------------------------------------
    ----------------------------------   ------------------------------------


    Year-to-Date ("YTD") Electric
     Sales Volume                        YTD Electric Sales Revenues
    GWh                                  millions of dollars
    ----------------------------------   ------------------------------------
                  2008    2007    2006                  2008    2007    2006
    ----------------------------------   ------------------------------------
    Residential  2,300   2,310   2,148   Residential  $269.4  $264.1  $234.3
    ----------------------------------   ------------------------------------
    Commercial   1,585   1,621   1,538   Commercial    154.8   156.4   143.2
    ----------------------------------   ------------------------------------
    Industrial   2,076   2,056   1,274   Industrial    134.5   129.1    81.5
    ----------------------------------   ------------------------------------
    Other          174     173     385   Other          21.1    20.1    31.1
    ----------------------------------   ------------------------------------
    Total        6,135   6,160   5,345   Total        $579.8  $569.7  $490.1
    ----------------------------------   ------------------------------------
    ----------------------------------   ------------------------------------

    Q2 Average Revenue /
     Megawatt hour ("MWh")
    ----------------------------------
                  2008    2007    2006
    ----------------------------------
    Dollars per
     MWh           $94     $94     $94
    ----------------------------------
    ----------------------------------

    YTD Average Revenue /
     MWh
    ----------------------------------
                  2008    2007    2006
    ----------------------------------
    Dollars per
     MWh           $95     $92     $92
    ----------------------------------
    ----------------------------------

    Electric revenues decreased by $11.6 million to $256.8 million in Q2 2008
compared to $268.4 million in Q2 2007 due to decreased sales volume.
    Year-to-date, electric revenues increased by $10.1 million to
$579.8 million in 2008 from $569.7 million in 2007 due to a 3.8% rate increase
effective April 1, 2007.

    Fuel for Generation and Purchased Power

    Q2 Production Volume                 YTD Production Volume
    GWh                                  GWh
    ----------------------------------   ------------------------------------
                  2008    2007    2006                  2008    2007    2006
    ----------------------------------   ------------------------------------
    Coal &                               Coal &
     petcoke     2,218   2,263   2,188    petcoke      4,679   4,750   4,639
    ----------------------------------   ------------------------------------
    Natural gas    254     251      69   Natural gas     688     409     140
    ----------------------------------   ------------------------------------
    Oil             23      37      38   Oil              94     466     257
    ----------------------------------   ------------------------------------
    Renewable      260     241     244   Renewable       630     541     560
    ----------------------------------   ------------------------------------
    Purchased                            Purchased
     power         147     166      71    power          424     360     147
    ----------------------------------   ------------------------------------
    Total        2,902   2,958   2,610   Total         6,515   6,526   5,743
    ----------------------------------   ------------------------------------
    ----------------------------------   ------------------------------------
    Purchased power includes 31 GWh of   Purchased power includes 79 GWh of
     renewables in Q2 2008                renewables in 2008
     (2007 - 34 GWh; 2006 - 26 GWh).      (2007 - 84 GWh; 2006 - 56 GWh).

    Q2 Average Unit Fuel Costs
    ----------------------------------
                  2008    2007    2006
    ----------------------------------
    Dollars per
     MWh           $30     $33     $22
    ----------------------------------
    ----------------------------------

    YTD Average Unit Fuel Costs
    ----------------------------------
                  2008    2007    2006
    ----------------------------------
    Dollars per
     MWh           $31     $35     $24
    ----------------------------------
    ----------------------------------


    Fuel for generation and purchased power decreased $9.9 million to
$88.1 million in Q2 2008 compared to $98.0 million in Q2 2007. Year-to-date,
fuel for generation and purchased power decreased $30.0 million to
$198.9 million in 2008 compared to $228.9 million in 2007. Highlights of the
changes are summarized in the following table:

                                                    Three months  Six months
                                                           ended       ended
    millions of dollars                                  June 30     June 30
    -------------------------------------------------------------------------
    Fuel for generation and purchased power - 2007         $98.0      $228.9
    -------------------------------------------------------------------------
    Increased commodity prices in Q2 primarily due
     to increased coal prices; YTD decrease also
     due to the economic use of natural gas and
     favourable hedge positions as a result of
     this fuel switch                                        7.4       (15.8)
    -------------------------------------------------------------------------
    (Increased) decreased net proceeds from the
     resale of natural gas                                  (2.5)        4.3
    -------------------------------------------------------------------------
    Increased valuation of the long-term receivable
     (see discussion below)                                (14.7)      (14.9)
    -------------------------------------------------------------------------
    Decreased sales volume                                 (11.9)       (4.8)
    -------------------------------------------------------------------------
    Increased hydro production                              (1.7)       (6.7)
    -------------------------------------------------------------------------
    Changes in generation mix                                8.3         5.2
    -------------------------------------------------------------------------
    Other                                                    5.2         2.7
    -------------------------------------------------------------------------
    Fuel for generation and purchased power - 2008         $88.1      $198.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The valuation of the long-term receivable from a natural gas supplier
requires NSPI to utilize a combination of historical and future natural gas
prices. NSPI uses market based forward indices when determining future prices.
Future prices can change from period to period which will cause a
corresponding change in the value of the long-term receivable.

    Outlook

    One of NSPI's fuel suppliers provided notice in December 2007 that it was
suspending shipments pending a review of the contract. NSPI has initiated
arbitration proceedings against the fuel supplier to enforce its rights under
the contract and continues to work on a commercial resolution of the dispute.
Fuel costs are expected to be higher in the second half of 2008 compared to
2007.
    The company's outlook is to earn within its allowed return on equity range
for 2008 given the company's favourable YTD results and consistent with NSPI's
2007 rate settlement agreement.

    BANGOR HYDRO-ELECTRIC COMPANY

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

    Overview

    BHE's core business is the transmission and distribution ("T&D") of
electricity. Electricity generation is deregulated in Maine, and several
suppliers compete to provide customers with the commodity that is delivered
through the BHE T&D network. BHE is a cost of service utility.

    Review of 2008


    Bangor Hydro Q2 Net Earnings
    millions of dollars
     (except earnings per         Three months ended        Six months ended
     common share)                           June 30                 June 30
    -------------------------------------------------------------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    T&D electric revenues          $21.7       $23.9       $46.5       $50.5
    -------------------------------------------------------------------------
    Resale of purchased power        4.9         4.2        10.1         7.8
    -------------------------------------------------------------------------
    Transmission pool revenue        4.5         2.0         9.2         2.0
    -------------------------------------------------------------------------
    Total revenue                   31.1        30.1        65.8        60.3
    -------------------------------------------------------------------------
    Purchased power and fuel
     for generation                  7.7         8.0        16.8        16.4
    -------------------------------------------------------------------------
    Operating, maintenance and
     general                         7.2         6.7        13.7        12.0
    -------------------------------------------------------------------------
    Property taxes                   1.2         1.6         2.7         3.0
    -------------------------------------------------------------------------
    Depreciation                     3.8         3.2         7.6         6.5
    -------------------------------------------------------------------------
    Regulatory amortization          2.1         3.8         5.2         6.4
    -------------------------------------------------------------------------
    Other                           (1.1)       (0.3)       (2.3)       (0.9)
    -------------------------------------------------------------------------
    Earnings from operations        10.2         7.1        22.1        16.9
    -------------------------------------------------------------------------
    Financing charges                2.9         0.8         5.8         1.5
    -------------------------------------------------------------------------
    Earnings before income taxes     7.3         6.3        16.3        15.4
    -------------------------------------------------------------------------
    Income taxes                     2.8         1.9         6.3         5.1
    -------------------------------------------------------------------------
    Contribution to consolidated
     net earnings - USD             $4.5        $4.4       $10.0       $10.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Contribution to consolidated
     net earnings - CAD             $4.5        $4.8       $10.0       $11.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Contribution to consolidated
     earnings per common share
     - CAD                         $0.04       $0.04       $0.09       $0.10
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings weighted average
     foreign exchange rate
     - CAD/USD                     $1.00       $1.09       $1.00       $1.14
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Bangor Hydro's contribution to consolidated net earnings increased by $0.1
million to $4.5 million in Q2 2008 compared to $4.4 million in Q2 2007.
Year-to-date, Bangor Hydro's contribution to consolidated net earnings
decreased by $0.3 million to $10.0 million in 2008 compared to $10.3 million
in 2007. Highlights of the earnings changes are summarized in the following
table:

                                                    Three months  Six months
                                                           ended       ended
    millions of dollars                                  June 30     June 30
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2007        $4.4       $10.3
    -------------------------------------------------------------------------
    Increased transmission pool revenue associated
     with the recovery of the NRI transmission line
     from the New England Power Pool beginning in
     June 2007                                               2.5         7.2
    -------------------------------------------------------------------------
    Decreased overheads and allowance for funds used
     during construction ("AFUDC") capitalized primarily
     as a result of completing the NRI transmission line
     in Q4 2007                                             (2.6)       (5.2)
    -------------------------------------------------------------------------
    Increased interest expense and depreciation primarily
     related to the NRI transmission line                   (0.7)       (1.8)
    -------------------------------------------------------------------------
    Other                                                    0.9        (0.5)
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2008        $4.5       $10.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Bangor Hydro's decreased contribution to consolidated net earnings in CAD
was due to the $0.5 million effect of the stronger Canadian dollar in the
quarter and the $1.4 million effect of the stronger Canadian dollar
year-to-date.

    Electric Revenue

    Q2 Electric Sales Volume             Q2 Electric Sales Revenues
    GWh                                  millions of dollars
    ----------------------------------   ------------------------------------
                  2008    2007    2006                  2008    2007    2006
    ----------------------------------   ------------------------------------
    Residential    134     136     136   Residential   $10.2   $11.6   $11.5
    ----------------------------------   ------------------------------------
    Commercial     144     144     142   Commercial      7.7     8.8     8.5
    ----------------------------------   ------------------------------------
    Industrial      87      85      93   Industrial      2.2     2.6     2.7
    ----------------------------------   ------------------------------------
    Other            3       3       3   Other           1.6     0.9     1.2
    ----------------------------------   ------------------------------------
    Total          368     368     374   Total         $21.7   $23.9   $23.9
    ----------------------------------   ------------------------------------
    ----------------------------------   ------------------------------------

    YTD Electric Sales Volume            YTD Electric Sales Revenues
    GWh                                  millions of dollars
    ----------------------------------   ------------------------------------
                  2008    2007    2006                  2008    2007    2006
    ----------------------------------   ------------------------------------
    Residential    292     296     290   Residential   $22.8   $24.9   $24.1
    ----------------------------------   ------------------------------------
    Commercial     299     296     293   Commercial     16.5    18.0    17.5
    ----------------------------------   ------------------------------------
    Industrial     167     174     188   Industrial      4.2     5.7     5.9
    ----------------------------------   ------------------------------------
    Other            5       6       6   Other           3.0     1.9     2.3
    ----------------------------------   ------------------------------------
    Total          763     772     777   Total         $46.5   $50.5   $49.8
    ----------------------------------   ------------------------------------
    ----------------------------------   ------------------------------------

    Q2 Average Revenue / MWh
    ----------------------------------
                  2008    2007    2006
    ----------------------------------
    Dollars per
     MWh           $59     $65     $64
    ----------------------------------
    ----------------------------------

    YTD Average Revenue / MWh
    ----------------------------------
                  2008    2007    2006
    ----------------------------------
    Dollars per
     MWh           $61     $65     $64
    ----------------------------------
    ----------------------------------

    The decrease in average revenue per MWh in 2008 compared to 2007 reflects
the July 1, 2007 reduction in transmission rates and the March 1, 2008
reduction in stranded cost rates, partially offset by the January 1, 2008
increase in distribution rates.

    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.

    - Emera Energy Services, a 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 and electricity markets
      usually results in increased opportunities for Emera Energy Services.

    - Brunswick Pipeline, a 145 kilometer pipeline currently under
      construction that will deliver natural gas from the Canaport(TM)
      Liquefied Natural Gas import terminal, also under construction, near
      Saint John, New Brunswick, to markets in Canada and the US northeast.
      Capital costs for the pipeline are expected to be approximately
      $465 million, an increase from $400 million as previously disclosed in
      Q4 2007. This increase is caused by delays in accessing the required
      rights of way, which in turn necessitated changes to the construction
      plan. Higher costs are also due to encountering more rock than
      expected; industry conditions which have generally increased labour and
      material costs; and additional effort in working with stakeholders and
      regulatory agencies. These additional costs have been incurred to
      maintain the construction schedule and the company continues to expect
      the pipeline to be in service as targeted during Q4 2008. The higher
      cost will not materially change the company's expected return on this
      investment.

    - A 12.9% interest in the $2 billion, 1,400 kilometer
      Maritimes & Northeast Pipeline that transports Nova Scotia's offshore
      natural gas to markets in Maritime Canada and the northeastern
      United States.

    - A 19% interest in Lucelec, a vertically integrated electric utility on
      the Caribbean Island of St. Lucia, which was acquired in January 2007.

    - 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, and corporate governance; and financing for the
      corporation's business outside of its regulated electric utilities.

    Appointment

    On April 25, 2008 Wayne O'Connor was appointed Chief Operating Officer of
Emera Energy Services. Prior to his appointment, Mr. O'Connor served as Vice
President of Operations.

    Review of 2008

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

    Other Q2 Earnings
    millions of dollars
     (except earnings             Three months ended        Six months ended
     per common share)                       June 30                 June 30
    -------------------------------------------------------------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Bear Swamp - operational        $4.9        $3.2        $8.5        $5.8
    -------------------------------------------------------------------------
    Bear Swamp - mark-to-market      5.6         3.1        10.3         4.2
    -------------------------------------------------------------------------
    Emera Energy Services            1.8         2.9         5.0         8.0
    -------------------------------------------------------------------------
    M&NP                             2.7         2.0         5.2         5.9
    -------------------------------------------------------------------------
    Lucelec                          0.6         0.6         0.9         0.8
    -------------------------------------------------------------------------
    Brunswick Pipeline               3.4           -         4.2           -
    -------------------------------------------------------------------------
    Corporate costs and other       (5.2)       (3.7)       (8.7)       (7.3)
    -------------------------------------------------------------------------
                                    13.8         8.1        25.4        17.4
    -------------------------------------------------------------------------
    Interest expense                 3.1         2.1         6.3         4.2
    -------------------------------------------------------------------------
    Earnings before income taxes    10.7         6.0        19.1        13.2
    -------------------------------------------------------------------------
    Income taxes                     3.3         0.6         5.7         1.1
    -------------------------------------------------------------------------
    Contribution to consolidated
     net earnings                   $7.4        $5.4       $13.4       $12.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Contribution to consolidated
     earnings per common share     $0.07       $0.05       $0.12       $0.11
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The contribution of Other to consolidated net earnings increased
$2.0 million to $7.4 million in Q2 2008 compared to $5.4 million in Q2 2007.
Year-to-date, the contribution of Other to consolidated net earnings increased
$1.3 million to $13.4 million in 2008 compared to $12.1 million in 2007.
Highlights of the earnings changes are summarized in the following table:

                                                    Three months  Six months
                                                           ended       ended
    millions of dollars                                  June 30     June 30
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2007        $5.4       $12.1
    -------------------------------------------------------------------------
    Increased Bear Swamp - operational due to increased
     energy and capacity sales                               1.7         2.7
    -------------------------------------------------------------------------
    Increased Bear Swamp - mark-to-market due to a
     favourable commodity price position                     2.5         6.1
    -------------------------------------------------------------------------
    Decreased Emera Energy Services EBIT in Q2 due
     to non-recurring and other expenses; YTD decrease
     also reflects reduced activity in Q1, and the
     impact of a stronger Canadian dollar                   (1.1)       (3.0)
    -------------------------------------------------------------------------
    Increased Brunswick Pipeline due to AFUDC on
     construction of the pipeline                            3.4         4.2
    -------------------------------------------------------------------------
    Increased corporate costs                               (1.5)       (1.4)
    -------------------------------------------------------------------------
    Increased interest due to increased debt used to
     finance the construction of Brunswick Pipeline         (1.0)       (2.1)
    -------------------------------------------------------------------------
    Increased income taxes                                  (2.7)       (4.6)
    -------------------------------------------------------------------------
    Other                                                    0.7        (0.6)
    -------------------------------------------------------------------------
    Contribution to consolidated net earnings - 2008        $7.4       $13.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Balance Sheets

    Significant changes in the consolidated balance sheets between June 30,
2008 and December 31, 2007 include:

                          Increase
    millions of dollars  (Decrease)  Explanation
    -------------------------------------------------------------------------
    Assets
    -------------------------------------------------------------------------
    Cash                     $82.3   Primarily due to posted margin received
                                      from counterparties. Posted margin is
                                      also reflected in accounts payable.
    -------------------------------------------------------------------------
    Accounts receivable       15.2   Reduction in accounts receivable
                                      securitization.
    -------------------------------------------------------------------------
    Inventory                 31.1   Increased fuel inventory levels.
    -------------------------------------------------------------------------
    Prepaid expenses          27.6   Timing of provincial grants in lieu of
                                      taxes and insurance payments, and
                                      increased posted margin paid to
                                      counterparties.
    -------------------------------------------------------------------------
    Derivatives in a valid   166.5   Favourable USD and commodity price
     hedging relationship             positions. The effective portion of the
     (including long-term             change is recognized in accumulated
     portion)                         other comprehensive income.
    -------------------------------------------------------------------------
    Held-for-trading          45.7   Favourable USD and commodity price
     derivatives (including           positions. The portion related to
     long-term portion)               NSPI's regulatory liabilities is
                                      recognized in deferred credits.
    -------------------------------------------------------------------------
    Long-term receivable      42.2   Higher receivable from a natural gas
                                      supplier.
    -------------------------------------------------------------------------
    Deferred charges         (19.0)  Reduction in accounts receivable
                                      securitization, pension asset, and
                                      ongoing regulatory amortizations
                                      partially offset by increase in
                                      deferred fuel switching derivatives.
    -------------------------------------------------------------------------
    Investments subject       20.7   Primarily additional investment in MN&P
     to significant                   and equity earnings.
     influence
    -------------------------------------------------------------------------
    Available-for-sale        15.5   Q1 2008 investment in OpenHydro.
     investments
    -------------------------------------------------------------------------
    Property, plant &        162.9   Primarily capital spending in Brunswick
     equipment and                    Pipeline.
     construction work in
     progress
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity
    -------------------------------------------------------------------------
    Accounts payable          88.1   Increased posted margin received from
                                      counterparties.
    -------------------------------------------------------------------------
    Derivatives in a         (32.2)  Favourable USD positions. The effective
     valid hedging                    portion of the change is recognized in
     relationship (including          accumulated other comprehensive income.
     long-term portion)
    -------------------------------------------------------------------------
    Future income tax         18.5   Higher taxable earnings.
     liabilities
    -------------------------------------------------------------------------
    Deferred credits          28.3   Increased held-for-trading natural gas
                                      contracts regulatory liability
                                      partially offset by settlement of fuel
                                      switching derivatives.
    -------------------------------------------------------------------------
    Short-term debt and      187.4   Primarily increased debt to finance
     long-term debt                   Brunswick Pipeline.
     (including current
     portion)
    -------------------------------------------------------------------------
    Accumulated other        206.4   Primarily represents favourable
     comprehensive income             derivative positions for foreign
                                      exchange and commodity hedges, and the
                                      favourable effect of the Canadian
                                      dollar on the company's investment in
                                      Bangor Hydro.
    -------------------------------------------------------------------------
    Retained earnings         56.0   Net earnings in excess of dividends
                                      paid.
    -------------------------------------------------------------------------


    Outstanding Share Data
                                                                Common Share
                                                                     Capital
                                                       Millions     millions
                                                              of          of
    Issued and Outstanding:                               Shares     dollars
    -------------------------------------------------------------------------
    December 31, 2006                                     110.93    $1,055.2
    -------------------------------------------------------------------------
    Issued for cash under purchase plans                    0.45         9.0
    -------------------------------------------------------------------------
    Options exercised under senior management share
     option plan                                            0.09         1.7
    -------------------------------------------------------------------------
    Share-based compensation                                   -         0.3
    -------------------------------------------------------------------------
    December 31, 2007                                     111.47    $1,066.2
    -------------------------------------------------------------------------
    Issued for cash under purchase plans                    0.20         4.1
    -------------------------------------------------------------------------
    Options exercised under senior management share
     option plan                                            0.24         4.3
    -------------------------------------------------------------------------
    Share-based compensation                                   -         0.5
    -------------------------------------------------------------------------
    June 30, 2008                                         111.91    $1,075.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at July 18, 2008 the number of issued and outstanding common shares was
111.94 million.


    Liquidity and Capital Resources

    In Q1 2008, Emera and Nova Scotia Power completed final filings of debt
shelf prospectuses in the amount of $400 million for each company that will
provide the companies with access to long-term debt. The company also has
access to equity capital markets for both common and preferred shares.

    Consolidated Cash Flow Highlights

    Significant changes in the consolidated cash flow statements between
June 30, 2008 and 2007 include:

    Three months ended June 30
    millions of dollars          2008    2007   Explanation
    -------------------------------------------------------------------------
    Cash and cash equivalents,  $26.8    $9.3
     beginning of period
    -------------------------------------------------------------------------
    Provided by (used in):
    Operating activities        168.3    82.6   In 2008, cash earnings and
                                                increased posted margin
                                                received from counterparties.
                                               ------------------------------
                                                In 2007, cash earnings and
                                                decreased non-cash working
                                                capital.
    -------------------------------------------------------------------------
    Investing activities       (108.2)  (57.1)  In 2008, capital spending,
                                                including Brunswick Pipeline.
                                               ------------------------------
                                                In 2007, capital spending,
                                                including the NRI
                                                transmission line and
                                                Brunswick Pipeline.
    -------------------------------------------------------------------------
    Financing activities         21.8   (26.5)  In 2008, increased debt
                                                levels, partially offset by
                                                dividends on common shares.
                                               ------------------------------
                                                In 2007, dividends on common
                                                shares and decreased accounts
                                                receivable securitized,
                                                partially offset by increased
                                                debt levels.
    -------------------------------------------------------------------------
    Cash and cash equivalents, $108.7    $8.3
      end of period
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Six months ended June 30
    millions of dollars          2008    2007   Explanation
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     beginning of period        $26.4   $19.5
    -------------------------------------------------------------------------
    Provided by (used in):
    Operating activities        214.2    64.1   In 2008, cash earnings
                                                partially offset by increased
                                                posted margin received from
                                                counterparties.
                                               ------------------------------
                                                In 2007, cash earnings
                                                partially offset by increased
                                                non-cash working capital.
    -------------------------------------------------------------------------
    Investing activities       (238.6) (123.2)  In 2008, capital spending,
                                                including Brunswick Pipeline,
                                                and acquisition of a 7.35%
                                                interest in OpenHydro.
                                               ------------------------------
                                                In 2007, capital spending,
                                                including the NRI
                                                transmission line and
                                                Brunswick Pipeline, and
                                                acquisition of a 19% interest
                                                in Lucelec.
    -------------------------------------------------------------------------
    Financing activities        106.7    47.9   In 2008, increased debt
                                                levels, partially offset by
                                                dividends on common shares
                                                and decreased accounts
                                                receivable securitized.
                                               ------------------------------
                                                In 2007, increased debt
                                                levels, partially offset by
                                                dividends on common shares
                                                and decreased accounts
                                                receivable securitized.
    -------------------------------------------------------------------------
    Cash and cash equivalents, $108.7    $8.3
     end of period
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Financial and Commodity Instruments

    The company enters into swap contracts on commodities to limit exposure to
(hedge) fluctuations in natural gas and oil prices; foreign exchange forwards,
options and swap contracts to hedge currency rate fluctuations; and interest
rate contracts to hedge interest rate fluctuations. In addition, the company
has contracts for physical purchases and sales of natural gas. Collectively,
these contracts are referred to as derivatives.
    Derivatives that meet stringent documentation requirements, and can be
proven to be effective hedges both at the inception and over the term of the
derivative qualify for hedge accounting. That enables amounts paid or received
to be deferred and recognized in earnings in the same period that the related
hedged item is realized.
    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.
    Held-for-trading 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:

    -------------------------------------------------------------------------
                                                         June 30 December 31
    millions of dollars                                     2008        2007
    -------------------------------------------------------------------------
    Inventory                                               $6.4        $7.6
    Derivatives in a valid hedging relationship            144.7       (54.0)
    Long-term debt                                           0.5         0.6
    -------------------------------------------------------------------------
                                                          $151.6      $(45.8)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Hedging Impact Recognized in Earnings

    For the three and six month periods ended June 30, the impacts of
derivatives in valid hedging relationships recognized in earnings were
recorded in the following categories:

                                   Thee months ended        Six months ended
                                             June 30                 June 30
    millions of dollars             2008        2007        2008        2007
    -------------------------------------------------------------------------
    Fuel and purchased power
     decrease (increase)            $1.6       $(0.5)      $13.1       $(5.1)
    -------------------------------------------------------------------------
    Hedging earnings impact         $1.6       $(0.5)      $13.1       $(5.1)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Held-for-trading Items Recognized on the Balance Sheet

    The company has recognized a net unrealized fair value of held-for-trading
derivatives asset of $148.9 million as at June 30, 2008 (December 31, 2007 -
$110.7 million) 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 held-for-trading derivatives in earnings:

                                  Three months ended        Six months ended
    millions of dollars                      June 30                 June 30
    -------------------------------------------------------------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Electric revenue                $1.7        $1.2        $2.5        $2.4
    Other revenue                    9.9         5.3        18.4        13.1
    Fuel and purchased power        (0.8)        1.7         1.2        (2.6)
    Interest                        (0.1)        0.1        (0.3)          -
    -------------------------------------------------------------------------
    Held-for-trading derivatives
     gains                         $10.7        $8.3       $21.8       $12.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Transactions with Related Parties

    In the ordinary course of business, Emera purchased natural gas
transportation capacity totaling $9.6 million (2007 - $7.6 million) during the
three months ended June 30, 2008 and $14.3 million (2007 - $14.4 million)
during the six months ended June 30, 2008 from the Maritimes & Northeast
Pipeline, an investment under significant influence of the company. The amount
is recognized in fuel for generation and purchased power or netted against
energy marketing margin in other revenue, and is measured at the exchange
amount. As at June 30, 2008 the amount payable to the related party is
$4.7 million (December 31, 2007 - $4.5 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 standards 1535 Capital Disclosures, 3031 Inventories,
3862 Financial Instruments - Disclosures, and 3863 Financial Instruments -
Presentation which are applicable to Emera's 2008 fiscal year. The following
provides more information on each new accounting standard.

    Capital Disclosures: This new standard requires disclosure of the
company's objectives, policies, and processes for managing capital;
quantitative data about what the company regards as capital; whether the
company has complied with any externally imposed capital requirements; and, if
the company has not complied, the consequences of such non-compliance. The new
accounting standard covers disclosure only and had no effect on the financial
results of the company. Further information can be found in note 8 to the
financial statements.

    Financial Instruments - Disclosures, and Financial Instruments -
Presentation: These new standards replace accounting standard 3861 Financial
Instruments - Disclosure and Presentation. Presentation requirements have not
changed. Enhanced disclosure is required to assist users of the financial
statements in evaluating the significance of financial instruments on the
company's financial position and performance, including qualitative and
quantitative information about the company's exposure to risks arising from
financial instruments. The new accounting standards cover disclosure only and
had no effect on the financial results of the company. Further information can
be found in note 9 to the financial statements.

    Inventories: The new standard provides more guidance on the measurement
and disclosure requirements for inventories than the previous standard,
3030 Inventories. Specifically, the new standard requires that inventories be
measured at the lower of cost and net realizable value, and provides more
guidance on the determination of cost and its subsequent recognition as an
expense, including any write-down to net realizable value. The company
previously measured inventories at the lower of cost and market. The company
uses the weighted average method to determine the cost of inventory.

    The company has applied the new standard retrospectively without
restatement, which resulted in a decrease to inventory and retained earnings
of $3.3 million as at January 1, 2008.

    The change in inventory is due to the following:

                                      Fuel inventory     Materials inventory
                                    Six months ended        Six months ended
                                             June 30                 June 30
    -------------------------------------------------------------------------
    millions of dollars             2008        2007        2008        2007
    -------------------------------------------------------------------------
    Inventory, beginning of
     period                        $67.7       $81.2       $32.1       $32.4
    -------------------------------------------------------------------------
    Accounting policy change           -           -        (3.3)          -
    -------------------------------------------------------------------------
    Purchases                      193.3       178.2        18.8        19.1
    -------------------------------------------------------------------------
    Write-down of inventory to
     net realizable value              -           -        (0.8)          -
    -------------------------------------------------------------------------
    Inventories expensed          (158.9)     (184.5)       (8.1)       (7.9)
    -------------------------------------------------------------------------
    Inventories capitalized            -           -       (10.9)      (10.4)
    -------------------------------------------------------------------------
    Other                              -           -         0.9         0.9
    -------------------------------------------------------------------------
    Inventory, end of period      $102.1       $74.9       $28.7       $34.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The company has not pledged inventory as security for liabilities.


    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.

    Goodwill and Intangible Assets: In February 2008, the CICA issued Section
3064 Goodwill and Intangible Assets ("3064") applicable to Emera's 2009 fiscal
year, replacing Section 3062 Goodwill and Other Intangible Assets. The
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; probably generate future
economic benefits; and have a reliably measurable cost. The Company is
currently assessing the effect of 3064 on its financial statements but does
not expect a material change.

    Dividends

    In January 2008, the Board of Directors approved a quarterly dividend
increase to $0.2375 per common share, reflecting an increase on an annualized
basis to $0.95 per common share.

    Summary of Quarterly Reports

    For the quarter ended
    millions of dollars (except earnings per common share)
    -------------------------------------------------------------------------
                  Q2      Q1      Q4      Q3      Q2      Q1      Q4      Q3
                2008    2008    2007    2007    2007    2007    2006    2006
    -------------------------------------------------------------------------
    Total
     revenues $317.6  $381.2  $343.9  $310.3  $325.4  $359.9  $307.0  $272.4
    -------------------------------------------------------------------------
    Net
     earnings
     applicable
     to common
     shares     42.9    69.4    36.6    40.9    34.1    39.7    33.5    19.5
    -------------------------------------------------------------------------
    Earnings
     per common
     share -
     basic      0.39    0.62    0.33    0.37    0.30    0.36    0.30    0.18
    -------------------------------------------------------------------------
    Earnings
     per common
     share -
     diluted    0.37    0.58    0.32    0.35    0.30    0.35    0.30    0.18
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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


    Financial Statements

    Consolidated Statements of Earnings (Unaudited)

    -------------------------------------------------------------------------
    For the
    millions of dollars (except   Three months ended        Six months ended
     earnings per common share)              June 30                 June 30
    -------------------------------------------------------------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Revenue
      Electric                    $294.7      $309.4      $656.7      $657.2
      Other                         22.9        13.9        42.1        26.0
    -------------------------------------------------------------------------
                                   317.6       323.3       698.8       683.2
    -------------------------------------------------------------------------
    Cost of operations
      Fuel for generation and
       purchased power             101.1       110.6       224.7       258.9
      Operating, maintenance
       and general                  68.0        65.2       129.1       128.4
      Provincial, state, and
       municipal taxes              12.4        12.3        24.5        24.5
      Depreciation                  37.5        37.4        74.8        74.4
      Regulatory amortization        6.0         9.8        12.8        14.4
    -------------------------------------------------------------------------
                                   225.0       235.3       465.9       500.6
    -------------------------------------------------------------------------
    Earnings from operations        92.6        88.0       232.9       182.6
    Financing charges (note 6)      34.6        35.2        70.2        69.5
    Equity earnings                  3.2         2.6         6.1         6.7
    -------------------------------------------------------------------------
    Earnings before income taxes    61.2        55.4       168.8       119.8
    Income taxes                    18.3        21.3        56.5        46.0
    -------------------------------------------------------------------------
    Net earnings applicable to
     common shares                 $42.9       $34.1      $112.3       $73.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per common share -
     basic                         $0.39       $0.30       $1.01       $0.66
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per common share -
     diluted                       $0.37       $0.30       $0.95       $0.65
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the unaudited consolidated financial
    statements.

    Weighted average number of common
     shares outstanding (millions)
    - basic                        111.8       111.2       111.7       111.1
    - diluted (note 10)            124.6       124.4       124.7       124.3


    Consolidated Balance Sheets (Unaudited)
    -------------------------------------------------------------------------
    As at                                                June 30 December 31
    millions of dollars                                     2008        2007
    -------------------------------------------------------------------------
    Assets
    Current assets
      Cash and cash equivalents                           $108.7       $26.4
      Restricted cash                                        0.5         1.0
      Accounts receivable                                  289.4       274.2
      Income tax receivable                                  7.1        13.7
      Inventory (note 3)                                   130.8        99.7
      Prepaid expenses                                      84.5        56.9
      Future income tax assets                               4.6         6.7
      Derivatives in a valid hedging relationship          100.9        12.2
      Held-for-trading derivatives                         110.2        76.2
    -------------------------------------------------------------------------
                                                           836.7       567.0
    -------------------------------------------------------------------------
    Long-term receivable                                    49.9         7.7
    -------------------------------------------------------------------------
    Derivatives in a valid hedging relationship             88.8        11.0
    -------------------------------------------------------------------------
    Held-for-trading derivatives                            75.3        63.6
    -------------------------------------------------------------------------
    Deferred charges                                       343.1       362.1
    -------------------------------------------------------------------------
    Future income tax assets                                14.1        16.2
    -------------------------------------------------------------------------
    Goodwill                                                85.0        82.8
    -------------------------------------------------------------------------
    Investments subject to significant influence           145.2       124.5
    -------------------------------------------------------------------------
    Available-for-sale investments                          17.3         1.8
    -------------------------------------------------------------------------
    Property, plant and equipment                        2,828.6     2,820.0
    -------------------------------------------------------------------------
    Construction work in progress                          263.5       109.2
    -------------------------------------------------------------------------
                                                         3,092.1     2,929.2
    -------------------------------------------------------------------------
                                                        $4,747.5    $4,165.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity
    Current liabilities
      Current portion of long-term debt                   $245.3      $121.0
      Short-term debt                                      226.4       104.6
      Accounts payable and accrued charges                 370.8       282.7
      Income tax payable                                    13.5         3.2
      Dividends payable                                      3.2         3.2
      Future income tax liabilities                         16.3         2.0
      Derivatives in a valid hedging relationship           29.1        44.1
      Held-for-trading derivatives                          21.2        22.0
    -------------------------------------------------------------------------
                                                           925.8       582.8
    -------------------------------------------------------------------------
    Derivatives in a valid hedging relationship             15.9        33.1
    -------------------------------------------------------------------------
    Held-for-trading derivatives                            15.4         7.1
    -------------------------------------------------------------------------
    Future income tax liabilities                           87.1        82.9
    -------------------------------------------------------------------------
    Asset retirement obligations                            86.0        83.8
    -------------------------------------------------------------------------
    Deferred credits                                       183.9       155.6
    -------------------------------------------------------------------------
    Long-term debt (note 7)                              1,541.5     1,600.2
    -------------------------------------------------------------------------
    Preferred shares issued by subsidiary                  260.0       260.0
    -------------------------------------------------------------------------
    Non-controlling interest                                 0.6         0.6
    -------------------------------------------------------------------------
    Shareholders' equity
      Common shares (note 10)                            1,075.1     1,066.2
      Contributed surplus                                    3.2         3.0
      Accumulated other comprehensive income                (2.6)     (209.0)
      Retained earnings (note 3)                           555.6       499.6
    -------------------------------------------------------------------------
                                                         1,631.3     1,359.8
    -------------------------------------------------------------------------
                                                        $4,747.5    $4,165.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Commitments (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                        Christopher Huskilson
    Chairman                           President and Chief Executive Officer



    Consolidated Statements of Cash Flow (Unaudited)

    -------------------------------------------------------------------------
    For the                       Three months ended        Six months ended
    millions of dollars                      June 30                 June 30
    -------------------------------------------------------------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Operating activities
    Net earnings applicable to
     common shares                 $42.9       $34.1      $112.3       $73.8
    Non-cash items:
      Depreciation                  37.5        37.4        74.8        74.4
      Amortization of deferred
       charges                       3.6         3.5         7.0         7.0
      Equity earnings               (3.2)       (2.6)       (6.1)       (6.7)
      Regulatory amortization        6.0         9.8        12.8        14.4
      Allowance for funds used
       during construction          (4.7)       (3.0)       (6.3)       (5.6)
      Future income taxes            5.7        (0.3)       12.8         3.9
      Post-retirement benefits       2.6         3.8         5.0         7.1
      Other non-cash operating
       items                        (6.3)       (8.7)      (16.2)       (6.9)
    Other cash operating items      (1.0)       (0.8)       (0.5)        1.4
    -------------------------------------------------------------------------
                                    83.1        73.2       195.6       162.8
    Change in non-cash operating
     working capital (note 11)      85.2         9.4        18.6       (98.7)
    -------------------------------------------------------------------------
    Net cash provided by operating
     activities                    168.3        82.6       214.2        64.1
    -------------------------------------------------------------------------
    Investing activities
      Property, plant and
       equipment                   (99.6)      (55.2)     (212.0)      (95.0)
      Acquisition (note 12)            -           -       (15.4)      (25.7)
      Retirement spending net of
       salvage                      (1.6)       (0.9)       (2.6)       (1.5)
      Decrease in restricted cash    0.3        (1.0)        0.5        (1.0)
      Investments                   (7.3)          -        (9.1)          -
    -------------------------------------------------------------------------
    Net cash used in investing
     activities                   (108.2)      (57.1)     (238.6)     (123.2)
    -------------------------------------------------------------------------
    Financing activities
      Retirement of long-term
       debt                         (0.3)       (0.4)       (1.0)       (1.0)
      Issuance of long-term debt       -        66.8           -        66.8
      Increase (decrease) in
       short-term debt              44.4       (46.2)      177.6        81.4
      Issuance of common shares      5.5         3.4         8.4         6.2
      Dividends on common shares   (26.5)      (24.7)      (53.0)      (49.4)
      Accounts receivable
       securitization                  -       (25.0)      (25.0)      (55.0)
      Other financing               (1.3)       (0.4)       (0.3)       (1.1)
    -------------------------------------------------------------------------
    Net cash provided by (used in)
     financing activities           21.8       (26.5)      106.7        47.9
    -------------------------------------------------------------------------
    Increase (decrease) in cash
     and cash equivalents           81.9        (1.0)       82.3       (11.2)
    Cash and cash equivalents,
     beginning of period            26.8         9.3        26.4        19.5
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                $108.7        $8.3      $108.7        $8.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents
     consists of:
    Cash                           $81.9        $4.8        $6.0        $4.8
    Cash equivalents                26.8         3.5       102.7         3.5
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                $108.7        $8.3      $108.7        $8.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental disclosure of
     cash paid:
    Interest                       $32.8       $30.0       $64.7       $60.7
    Income and capital taxes       $14.7       $34.3       $33.5       $81.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the unaudited consolidated financial
    statements.


    Consolidated Statements of Changes in Shareholders' Equity (Unaudited)

    -------------------------------------------------------------------------
                                                  Accumu-
    For the six months                             lated
     ended June 30, 2008                           Other
    millions of dollars                           Compre-              Total
                                        Contri-  hensive            AOCI and
                              Common     buted    Income  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 (note 3)               -         -         -      (3.3)     (3.3)
    -------------------------------------------------------------------------
    Comprehensive Income:
    Net earnings applicable
     to common shares              -         -         -     112.3     112.3
    Net gain on derivatives
     in a valid hedging
     relationship                  -         -     206.6         -     206.6
    Reclassification of
     hedging gains
     included in income            -         -     (12.1)        -     (12.1)
    Reclassification of
     hedging losses
     included in inventory         -         -       1.2         -       1.2
    Reclassification of
     hedging gains included
     in construction work
     in progress                   -         -      (2.0)        -      (2.0)
    Unrealized gain on
     translation of
     self-sustaining foreign
     operations                    -         -      12.8         -      12.8
    Other                          -         -      (0.1)        -      (0.1)
    -------------------------------------------------------------------------
    Total comprehensive
     income                        -         -     206.4     112.3     318.7
    -------------------------------------------------------------------------
    Dividends declared on
     common shares                 -         -         -     (53.0)    (53.0)
    Common shares issued under
     purchase plans              4.1         -         -         -         -
    Senior management stock
     options exercised           4.3      (0.3)        -         -         -
    Stock option expense           -       0.5         -         -         -
    Other share-based
     compensation                0.5         -         -         -         -
    -------------------------------------------------------------------------
    Balance,
     June 30, 2008          $1,075.1      $3.2     $(2.6)   $555.6    $553.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    For the six months                                                 Total
     ended June 30, 2007                Contri-                     AOCI and
    millions of dollars       Common     buted            Retained  Retained
                              Shares   Surplus      AOCI  Earnings  Earnings
    -------------------------------------------------------------------------
    Balance,
     December 31, 2006      $1,055.2      $2.2   $(100.2)   $450.9    $350.7
    -------------------------------------------------------------------------
    Accounting policy
     change                        -         -      (5.3)     (2.7)     (8.0)
    -------------------------------------------------------------------------
    Comprehensive Income:
    Net earnings applicable
     to common shares              -         -         -      73.8      73.8
    Net loss on derivatives
     in a valid hedging
     relationship                  -         -     (40.1)        -     (40.1)
    Reclassification of
     hedging gains
     included in income            -         -      (0.4)        -      (0.4)
    Reclassification of
     hedging losses
     included in inventory         -         -       4.9         -       4.9
    Unrealized loss on
    translation of
     self-sustaining
     foreign operations            -         -     (34.5)        -     (34.5)
    Other                          -         -       0.1         -       0.1
    -------------------------------------------------------------------------
    Total comprehensive
     income                        -         -     (70.0)     73.8       3.8
    -------------------------------------------------------------------------
    Dividends declared on
     common shares                 -         -         -     (49.1)    (49.1)
    Common shares issued
     under purchase plans        4.9         -         -         -         -
    Senior management stock
     options exercised           1.3         -         -         -         -
    Stock option expense           -       0.3         -         -         -
    Other share-based
     compensation                0.2         -         -         -         -
    -------------------------------------------------------------------------
    Balance,
     June 30, 2007          $1,061.6      $2.5   $(175.5)   $472.9    $297.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the unaudited consolidated financial
    statements.


    Notes to the Interim Unaudited Consolidated Financial Statements

    June 30, 2008

    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,
2007.
    "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,
2007, 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 standards 1535 Capital Disclosures, 3031 Inventories,
3862 Financial Instruments - Disclosures, and 3863 Financial Instruments -
Presentation which are applicable to Emera's 2008 fiscal year. The following
provides more information on each new accounting standard.

    Capital Disclosures: This new standard requires disclosure of the
Company's objectives, policies, and processes for managing capital;
quantitative data about what the Company regards as capital; whether the
Company has complied with any externally imposed capital requirements; and, if
the Company has not complied, the consequences of such non-compliance. The new
accounting standard covers disclosure only and had no effect on the financial
results of the Company. Further information can be found in note 8.

    Financial Instruments - Disclosures, and Financial Instruments -
Presentation: These new standards replace accounting standard 3861 Financial
Instruments - Disclosure and Presentation. Presentation requirements have not
changed. Enhanced disclosure is required to assist users of the financial
statements in evaluating the significance of financial instruments on the
Company's financial position and performance, including qualitative and
quantitative information about the Company's exposure to risks arising from
financial instruments. The new accounting standards cover disclosure only and
had no effect on the financial results of the Company. Further information can
be found in note 9.

    Inventories

    The new standard provides more guidance on the measurement and disclosure
requirements for inventories than the previous standard, 3030 Inventories.
Specifically, the new standard requires that inventories be measured at the
lower of cost and net realizable value, and provides more guidance on the
determination of cost and its subsequent recognition as an expense, including
any write-down to net realizable value. The Company previously measured
inventories at the lower of cost and market. The Company uses the weighted
average method to determine the cost of inventory.
    The Company has applied the new standard retrospectively without
restatement, which resulted in a decrease to inventory and retained earnings
of $3.3 million as at January 1, 2008.

    The change in inventory is due to the following:

                                      Fuel inventory     Materials inventory
                                    Six months ended        Six months ended
    For the                                  June 30                 June 30
    -------------------------------------------------------------------------
    millions of dollars             2008        2007        2008        2007
    -------------------------------------------------------------------------
    Inventory, beginning of
     period                        $67.7       $81.2       $32.1       $32.4
    Accounting policy change           -           -        (3.3)          -
    Purchases                      193.3       178.2        18.8        19.1
    Write-down of inventory
     to net realizable value           -           -        (0.8)          -
    Inventories expensed          (158.9)     (184.5)       (8.1)       (7.9)
    Inventories capitalized            -           -       (10.9)      (10.4)
    Other                              -           -         0.9         0.9
    -------------------------------------------------------------------------
    Inventory, end of period      $102.1       $74.9       $28.7       $34.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Company has not pledged inventory as security for liabilities.

    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.

    Goodwill and Intangible Assets: In February 2008, the CICA issued Section
3064 Goodwill and Intangible Assets ("3064") applicable to Emera's 2009 fiscal
year, replacing Section 3062 Goodwill and Other Intangible Assets. The
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; probably generate future
economic benefits; and have a reliably measurable cost. The Company is
currently assessing the effect of 3064 on its financial statements but does
not expect a material change.

    4. Segment Information

    -------------------------------------------------------------------------
                             Nova Scotia      Bangor
    millions of dollars            Power       Hydro       Other(*)    Total
    -------------------------------------------------------------------------
    For the three months
     ended June 30, 2008:
    Revenues from external
     customers                    $262.0       $32.7       $22.9      $317.6
    Net inter-segment
     revenues (expenses)            36.0        (0.2)      (35.8)          -
    Net earnings applicable
     to common shares               31.0         4.5         7.4        42.9
    For the six months
     ended June 30, 2008:
    Revenues from external
     customers                     588.0        68.6        42.2       698.8
    Net inter-segment
     revenues (expenses)            47.7        (0.4)      (47.3)          -
    Net earnings applicable
     to common shares               88.9        10.0        13.4       112.3
    As at June 30, 2008
    Total assets                 3,477.8       631.7       638.0     4,747.5
    -------------------------------------------------------------------------

    For the three months
     ended June 30, 2007:
    Revenues from external
     customers                    $271.1       $31.5       $20.7      $323.3
    Net inter-segment
     revenues (expenses)            22.5        (0.7)      (21.8)          -
    Net earnings applicable
     to common shares               23.9         4.8         5.4        34.1
    For the six months
     ended June 30, 2007:
    Revenues from external
     customers                     574.5        67.6        41.1       683.2
    Net inter-segment
     revenues (expenses)            57.3        (1.0)      (56.3)          -
    Net earnings applicable
     to common shares               50.0        11.7        12.1        73.8
    As at June 30, 2007
    Total assets                 3,264.1       613.5       350.0     4,227.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*)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
June 30, 2008 is $8.3 million (2007 - $10.3 million), and for the six month
period ended June 30, 2008 is $16.8 million (2007 - $21.0 million).

    6. Financing Charges

    Financing charges consist of the following:

                                  Three months ended        Six months ended
    For the                                  June 30                 June 30
    -------------------------------------------------------------------------
    millions of dollars             2008        2007        2008        2007
    -------------------------------------------------------------------------
    Interest - long-term debt      $26.5       $26.2       $53.5       $51.9
             - short-term debt       5.5         6.1         9.6        11.0
    Preferred share dividends
     paid by subsidiary              3.5         3.5         7.0         7.0
    Amortization of defeasance
     cost                            3.1         3.1         6.2         6.3
    Amortization of debt
     financing costs                 0.4         0.4         0.8         0.9
    Allowance for funds used
     during construction            (4.6)       (3.0)       (6.2)       (5.6)
    Foreign exchange losses
     (gains)                         0.2        (1.1)       (0.7)       (2.0)
    -------------------------------------------------------------------------
                                   $34.6       $35.2       $70.2       $69.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    7. Long-Term Debt

    As of June 30, 2008, long-term debt includes $1.8 million (December 31,
2007 - $1.5 million) in capital lease obligations.

    8. Capital Management

    The Company includes shareholders' equity (excluding AOCI), short-term and
long-term debt, preferred shares issued by subsidiary, non-controlling
interest, securitized receivables, and cash and cash equivalents in the
definition of capital as follows:

    As at                                                June 30 December 31
    millions of dollars                                     2008        2007
    -------------------------------------------------------------------------
    Shareholder's equity, excluding AOCI                $1,640.9    $1,568.8
    Debt                                                 2,013.2     1,825.8
    Preferred shares issued by subsidiary                  260.0       260.0
    Non-controlling interest                                 0.6         0.6
    Securitized accounts receivable                            -        25.0
    Cash and cash equivalents                             (108.7)      (26.4)
    -------------------------------------------------------------------------
                                                        $3,806.0    $3,653.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Company's objectives when managing capital are to ensure sufficient
liquidity and ongoing access to capital in order to allow the Company to
acquire, build and maintain its regulated electric utilities, low risk
unregulated generation and energy infrastructure businesses. The Company has a
strategy of managing its capital structure through its various wholly-owned
subsidiaries, while ensuring it is in compliance with its debt covenants. This
strategy is managed by the Company through the issuance from time to time of
shares, bonds, medium-term notes, preferred shares, or other indebtedness, and
sales of receivables through the Company's securitization program. The
securitization program was suspended in January 2008 due to increased pricing
and limitations of supply in the market.
    NSPI is subject to regulation by the Utility and Review Board with an
allowed maximum common equity component of 40%. BHE is subject to regulation
by the Maine Public Utilities Commission with an allowed maximum common equity
component of 50% for rate-making purposes. The Federal Energy Regulatory
Commission does not specify an allowed common equity component for BHE. The
Company is in compliance with these requirements.
    Emera Inc.'s syndicated bank credit agreement provides that the Company's
debt can not exceed 70% of the Company's capitalization. NSPI's trust
indentures, applicable to the senior unsecured debenture and senior unsecured
medium-term notes, provide that NSPI's funded debt cannot exceed 75% of total
capitalization as defined in the credit agreements. NSPI's syndicated bank
credit facility limits its debt to capitalization ratio to no greater than
0.65:1. BHE has short-term and long-term financing agreements that limit the
amount of debt to 65% of capitalization, limit priority debt to 15% of net
worth, limit earnings before interest, taxes, depreciation and amortization to
interest to 2:1, and requires net worth of at least $150 million. The Company
is in compliance with all of its financial debt covenants.

    9. Financial Instruments

    This note should be read in conjunction with Emera Inc.'s annual financial
statements' notes 1 and 22 as at and for the year ended December 31, 2007.

    RISK MANAGEMENT

    Market Risk

    Market risks associated with derivatives are related to exposure to
movement in commodity prices and foreign exchange rates. Market risk
associated with short-term debt is related to movement in interest rates.
Market risk associated with the long-term receivable and HFT natural gas
contracts is related to movements in commodity prices and foreign exchange
rates.

    As at June 30, 2008 the Company determined that market risk exposure would
affect the Company's financial results as follows:

                $1 per one
                   million                         $0.01       100
                   British    $5 per            decrease     basis
                   Thermal    barrel   $15 per    in the     point    $1 per
                      Unit  increase    metric  strength  increase  megawatt
                  increase    in the     tonne    of the    in the      hour
                    in the  price of  increase  Canadian   central  increase
                     price     heavy    in the  relative      bank    in the
    millions    of natural      fuel  price of    to the  interest  price of
     of dollars        gas       oil      coal US dollar     rates     power
    -------------------------------------------------------------------------
    Derivatives
     in a valid
     hedging
     relationship
     - net asset
     increase         $9.5      $6.7     $15.3     $12.4         -         -
    Held-for-
     trading
     derivatives
     - net asset
     increase
     (decrease)       23.3     (19.5)        -       1.2         -      $0.9
    Long-term
     receivable
     increase          2.5       0.8         -       0.5         -         -
    Accounts
     payable
     and accrued
     charges
     increase            -         -         -       0.5     $(0.2)        -
    Deferred
     credits
     (increase)
     decrease        (23.7)     19.5         -      (1.2)        -         -
    Accumulated
     other
     comprehensive
     income
     increase         (9.5)     (6.7)    (15.3)    (12.4)        -         -
    Other
     revenue
     decrease
     (increase)        0.4         -         -      (0.5)        -      (0.9)
    Fuel expense
     decrease         (2.5)     (0.8)        -      (0.5)        -         -
    Interest
     expense
     increase            -         -         -         -       0.2         -
    -------------------------------------------------------------------------

    After-tax
     net earnings
     increase
     (decrease)       $1.3      $0.5         -      $0.6     $(0.1)     $0.5
    -------------------------------------------------------------------------

    The above table illustrates the effect on the Company's financial results
due to a certain fixed price change on the entire portfolio of financial
instruments as at the end of the quarter. The results disclosed in the above
table cannot be extrapolated linearly to determine the effect on the Company's
financial results due to varying price changes.

    Credit risk

    As at June 30, 2008, the maximum exposure the Company has to credit risk
is $597.6 million, which includes accounts receivable, long-term receivable,
and the assets related to derivatives in a valid hedging relationship, and
held-for-trading derivatives, excluding NSPI's natural gas contracts.
    The Company transacts with counterparties as part of its risk management
strategy for managing commodity price, foreign exchange and interest rate
risk. Counterparties that exceed established credit limits can provide a cash
deposit or letter of credit to the Company for the value in excess of the
credit limit where contractually required. The Company also obtains cash
deposits from electric customers. The total cash deposits and letters of
credit on hand as at June 30, 2008 was $110.1 million, which mitigates the
Company's maximum credit risk exposure. The Company uses the cash as payment
for the amount receivable or returns the cash deposit to the counterparty
where the credit limit is no longer exceeded or where the customer is no
longer considered a high risk account.
    The Company generally considers the credit quality of financial assets
that are neither past due nor impaired to be good. The Company monitors
collection performance to ensure payments are received on a timely basis.
    The Company does not have any financial assets that would be considered to
be impaired.
    As at June 30, 2008, the Company had $46.8 million in financial assets
considered to be past due, which have been outstanding for an average of
70 days. The fair value of these financial assets is $41.6 million, the
difference of which is included in the allowance for doubtful accounts. These
assets primarily relate to accounts receivable from electric revenue.

    Concentration risk
    ------------------

    The Company's concentrations of risk as at June 30, 2008 is as follows:

                                             As at June 30, 2008  % of total
                                             millions of dollars    exposure
    -------------------------------------------------------------------------
    Accounts receivable
    Regulated utilities
    Residential                                           $109.0          15%
    Commercial                                              52.5           7%
    Industrial                                              33.0           5%
    Other                                                   20.1           3%
    -------------------------------------------------------------------------
                                                           214.6          30%
    -------------------------------------------------------------------------
    Trading group
    Credit rating of A- or above                            48.0           7%
    Credit rating of BBB- to BBB+                           10.0           2%
    Creditworthy counterparties that are not rated           8.0           1%
    Speculative grade                                        1.3           -
    -------------------------------------------------------------------------
                                                            67.3          10%
    -------------------------------------------------------------------------
    Other accounts receivable                                7.5           1%
    -------------------------------------------------------------------------
                                                           289.4          41%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Long-term receivable                                    49.9           7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Derivatives (in a valid hedging relationship and
     held-for-trading; current and long-term portions)
    Credit rating of A- or above                           315.9          44%
    Credit rating of BBB- to BBB+                            1.5           -
    Credit worthy counterparties that are not rated         57.7           8%
    Speculative grade                                        0.1           -
    -------------------------------------------------------------------------
                                                           375.2          52%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                          $714.5         100%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liquidity risk

    The Company has available the following credit facilities as at June 30,
2008 for the management of liquidity risk:

    millions of dollars                            Available    Used  Unused
    -------------------------------------------------------------------------
    Bank operating, overdraft and commercial
     paper                                          $1,161.1  $453.9  $707.2
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------

    AVAILABLE-FOR-SALE INVESTMENTS

    Available-for-sale investments includes the Company's investment in
OpenHydro Group Limited ("OpenHydro"). The investment is recognized at its
cost of $15.4 million. The fair value of OpenHydro has not been recognized or
disclosed because its shares are not actively traded in an open market. The
Company does not intend to dispose of the investment in the near term. The
market for any disposition of OpenHydro shares would be with an existing
shareholder or a new private investor.

    10. Common Shares

    As at June 30, 2008 there were 111.9 million (December 31, 2007 -
111.5 million) issued and outstanding common shares, 4.6 million (December 31,
2007 - 4.8 million) common shares reserved and available for issuance under
the senior management stock option plan, and 0.9 million (December 31, 2007 -
1.0 million) common shares reserved and available for issuance under the
employee common share purchase plan.
    During the six months ended June 30, 2008, the Company issued
0.4 million (2007 - 0.3 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.

    11. Cash Flow Information

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

                                  Three months ended        Six months ended
    For the                                  June 30                 June 30
    -------------------------------------------------------------------------
    millions of dollars             2008        2007        2008        2007
    -------------------------------------------------------------------------
    Decrease in accounts
     receivable                    $36.1       $35.4       $15.3        $0.2
    Decrease (increase) in
     inventory                      (7.3)        3.2       (31.0)        4.7
    Increase in prepaid
     expenses                      (10.8)       (2.5)      (26.1)       (4.8)
    Increase in long-term
     receivables                   (26.6)       (7.1)      (42.2)      (19.1)
    Increase in posted margin
     included in accounts
     payable and accrued charges    95.2         2.7        88.5         6.0
    Decrease in other accounts
     payable and accrued charges    (3.6)      (12.0)       (2.7)      (52.0)
    Increase (decrease) in income
     tax payable                     2.2       (10.3)       16.8       (33.7)
    -------------------------------------------------------------------------
                                   $85.2        $9.4       $18.6      $(98.7)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    12. Acquisition

    In February 2008 Emera acquired a 7.35% interest in OpenHydro, an Irish
renewable tidal energy company for (euro)10.2 million ($15.4 million CAD).
OpenHydro designs and manufactures marine turbines for harnessing energy from
tidal currents in the world's oceans.
    The acquisition has been accounted for as an available-for-sale investment
as Emera has determined it does not have significant influence over the
investment, and accordingly, the investment was initially recorded at cost.
Any dividends received or receivable since acquisition will be recognized as
dividend income. OpenHydro is included in the segment "Other" in Note 4
Segment Information.

    13. Commitments

    During the six months ended June 30, 2008, NSPI made commitments to
purchase 711 GWh of electricity from independent power producers beginning in
Q4 2009 with varying contract lengths ranging from 20 to 25 years.

    14. Comparative Information

    Certain of the comparative figures have been reclassified to conform to
the consolidated financial statement presentation adopted for 2008.
    




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

Organization Profile

Emera Inc.

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