Topic:"Financial Instruments" in M12394

8 TABLE 1 Description $M Operating & Maintenance 22.0 Depreciation 57.2 Debt Financing Costs • Interest (Net) 37.7 • Amortization of Deferred Financing Costs 1.4 Equity Financing Costs 40.7 FLG2 39.7 Total Costs 198.7 9

AI summary Table 1 outlines various cost categories, including operating and maintenance, depreciation, debt and equity financing costs, and FLG2, with total costs amounting to $198.7 million.

18 The DCF results are shown in Exhibits CEA-3 and CEA-4. To mitigate any concern that short-term 19 EPS growth rates may not be sustainable, we have relied on the results of the Multi-Stage DCF 20 model, which tempers the short-term growt...

AI summary The document discusses the use of a Multi-Stage DCF model to calculate the average cost of common equity, which is 9.28 percent for the proxy group companies, with an adjustment of 50 basis points for flotation costs and financial flexibility. This approach mitigates concerns about the sustainability of short-term EPS growth rates by aligning them with projected GDP growth over a longer period.

5 2. Financial Risk 6 NSPML has a deemed equity ratio of 30%. As a point of comparison, NS Power has a deemed 7 equity ratio of 40%, and the U.S. average authorized equity ratio is slightly over 50% for electric 8 T&D utilities. The financ...

AI summary NSPML has a deemed equity ratio of 30%, significantly lower than NS Power's 40% and the U.S. average of over 50% for T&D utilities. This higher leverage increases financial risk for NSPML, potentially requiring equity investors to demand a higher ROE.

13 Figure 28: Authorized Equity Ratios for T&D Proxy Group Operating Utility Jurisdiction Equity Ratio Canadian Utilities, Inc. ATCO Electric Alberta 37.0% Hydro One Inc. Hydro One Networks Ontario 40.0% Consolidated Edison, Inc. Consolida...

AI summary The text discusses the authorized equity ratios for transmission and distribution (T&D) proxy groups in various jurisdictions, highlighting the relatively thin equity ratio of NSPML and the risks associated with the debt guarantee for the Maritime Link project, which could disproportionately affect equity investors.

NSPML Responses to Nova Scotia Energy Board Information Requests 1 Request IR-03: Canadian investors had a domestic allocation for fixed income of approximately 84%3 If not confirmed, please explain and provide empirical support for any su...

AI summary NSPML responds to Nova Scotia Energy Board information requests regarding investor allocation and borrowing preferences. The response addresses claims about Canadian investors' domestic allocation, U.S. vs. Canadian bond yields, and whether NSPML would prefer borrowing in the U.S. despite higher rates and currency risk.

Long-Term Forecast for 10-Year Government Bond Yields[4](#page-41-0) 2026 2027 2028 2029 2030 2031- 2035 Canada 3.1% 3.5% 3.5% 3.5% 3.5% 3.5% U.S. 4.1% 4.1% 4.1% 4.0% 4.0% 4.0% d) NSPML's borrowing costs are not addressed in Concentric's r...

AI summary The document discusses long-term forecasts for 10-year government bond yields in Canada and the U.S., noting that NSPML's borrowing costs are not addressed in Concentric's report. The Company requests a continuation of its existing authorized ROE of 9.0%, despite market data suggesting a higher return.

III. THE SAMPLE AND ITS PROPERTIES The sample was taken from the updated Price Relative File of the Center for Research in Security Prices at the Graduate School of Business, University of Chicago. This file contains the monthly investment...

AI summary The text discusses a sample taken from the Price Relative File, detailing the analysis of investment relatives and market link relatives over six time periods from 1926 to 1968. The analysis includes regression results showing the average coefficient of determination and beta coefficients, with references to academic studies and methodologies used.

REDACTED 1 b) Regarding the second quote, please provide the yield that some of NS Power's 2 bonds of similar maturity date were yielding at the time this debt was issued as 3 4.04%. 4 c) Please provide all details used by Concentric to es...

AI summary The document includes information requests related to NS Power's bond yields and Concentric's assessment of NSPML's equity ratio. It also includes a response from NSPML regarding the Maritime Link Financing Trust and bond spreads at the time of FLG2 debt issuance in December 2024.

NSPML Responses to Industrial Group Information Requests 1 Request IR-10: 5 In total, the outstanding project costs are no more than $6 million, on a total approved Project cost 6 of $1.752 million (approximately .3% of the approved starti...

AI summary NSPML responds to industrial group information requests regarding project costs and letter of credit fees. The outstanding project costs are below 0.3% of the approved rate base, and letter of credit fees are tied to both the original FLG and FLG2, justified by the Amended and Restated ML Credit Agreement and DSRA requirements.

REDACTED 1 (f) Of the two key considerations which led to NSPML's request to expense 2 the complete amount of this and future marine surveys, which of the 3 FAM account and WACC impact carries more weight? 4 (g) Please explain specifically...

AI summary NSPML responds to information requests regarding the expensing of marine surveys, discussing normalization of costs, cyclical inspection frequencies, and the limitation of their application to 2026 assessment costs. The response also acknowledges the Board's potential consideration of additional factors in its decision-making.

10 Description Total FLG2 Issuance 500,000,000 Refund to NSPI (December 2024) 485,900,000 Remaining Funds 14,100,000 Total financing costs (3,501,884) Interest earned on bank account 159,578 Refund to NSPI May 2025 10,757,694 11

AI summary The text provides a summary of financial transactions related to FLG2 issuance, including the refund to NSPI, remaining funds, financing costs, interest earned, and a subsequent refund in May 2025.

Table 2 – Budgeted positions for 2025 and Actual for 2024 Title Proposed FTEs in 2025; Actual in 2024 Position Description Administrative Assistant 1.00 Provide administrative support to ENL team members. CONA Student (1 at each site for 6...

AI summary The document outlines budgeted positions for 2025 and actual figures for 2024, including roles such as Administrative Assistant, Contracts Supervisor, and Director of Regulatory Affairs & Governance. These positions support operations, procurement, finance, and regulatory processes related to the Maritime Link transmission project and ENLH.

Schedule 1 - Scheduling Protocol Schedule 2 - Nalcor Master Agreement Schedule 3 - Nalcor Master Agreement Modifications Schedule 4 - Description of Nalcor Progress Report Schedule 5 - Form of Balancing Service Agreement Schedule 6 - Form...

AI summary This document outlines the schedules and key components of an Energy Access Agreement, effective April 13, 2015. It includes protocols, master agreements, progress reports, service agreements, and dispute resolution procedures.

Email: [email protected] the following provisions as provided for in the General Terms and Conditions: The Parties hereby agree that the General Terms and Conditions are incorporated herein, and to Party A Tariff Tariff N/A Dated Doc...

AI summary The document outlines terms and conditions of a tariff agreement between two parties, including provisions related to cross-default amounts, remedies for failure to deliver, and credit protection requirements. It specifies financial information requirements, including the delivery of audited financial statements and quarterly reports in accordance with GAAP or IFRS.

CALCULATION OF SUPPLEMENTAL ENERGY - 1. Supplemental Energy, if any, is a component of the Nova Scotia Block and is calculated in accordance with the provisions of this Schedule 4 . - 2. Prior to each submission to the UARB made before Fir...

AI summary This section outlines the calculation of Supplemental Energy as part of the Nova Scotia Block, including the methodology for determining unit energy costs, the role of financial models, and the timeline for final determination. Adjustments to amortization periods and financial inputs are specified, along with procedures for scheduling and delivering Supplemental Energy.

Input Source (all to equal the amounts contained in the Application) amount of annual energy to be delivered 0.986 TWh transmission losses The then most current estimate of transmission losses as determined pursuant to Schedule 3 of this A...

AI summary The document outlines inputs required for an application, specifying how various financial and operational parameters are determined based on current estimates and agreements. It details the calculation of energy delivery, transmission losses, capital costs, AFUDC rates, operating and maintenance costs, tax rates, and capital cost allowance classes. The process involves Emera preparing a draft for Nalcor's review.

NON-CONFIDENTIAL 1 Request IR-27: 2 3 IR-2 to IR-31 Reference Exhibit N-1 Pages 4 -29 4 5 Page 23 6 NSPML refers at several points in the application to the impact of the FLG2 which changed 7 NSPML's capital structure to about 78/22 debt t...

AI summary NSPML discusses the impact of FLG2 on its capital structure, which has shifted to approximately 78% debt and 22% equity, increasing its financial risk compared to typical T&D utilities. This change has resulted in higher financing costs and increased risk exposure.

REDACTED 1 The Maritime Link submarine cables, compared to more traditional HVAC assets, have a 5 a) Please describe the guarantee provisions of the FLG and FLG2. 6 b) Excluding risk associated with capital structure, please explain how th...

AI summary The text discusses the guarantee provisions of FLG and FLG2 related to the Maritime Link submarine cables, including subordination of additional debt, DSCR and DER thresholds, and revenue waterfall provisions. It also notes that these provisions do not directly impact NSPML's financial risk but may influence perceptions of borrowing costs.

NSPML Responses to Nova Scotia Energy Board Information Requests 1 Request IR-39: 20 21 To clarify, our use of an average market risk premium in the CAPM analysis, we are not 22 saying that specific companies in our proxy group apply eithe...

AI summary NSPML clarifies the use of an average market risk premium in the CAPM analysis, stating that a reasonable investor would not apply different premiums due to similar country risks and integrated capital markets. It also corrects a reference in Exhibit CEA-7 to use the Canadian government bond yield instead of a U.S. Treasury bond yield. The response addresses flotation costs and financing flexibility, referencing Mr. Coyne's claims about Canadian jurisdictions and investor behavior.

3 Refer to the Application, Exhibit N-1, pages 15-16 of 29 and respond to the following: 4 5 a) Please provide supporting calculations for the $37.7M net interest cost, showing 6 principal balances, repayment schedule, and interest rates u...

AI summary The document requests supporting calculations for a $37.7M net interest cost, including principal balances, repayment schedules, and interest rates, as well as sensitivity analysis on financing costs if market interest rates in 2026 differ from current assumptions.

14 Description Total ($m) Interest Expense Original FLG (1) 37.5 LC Fees (2) 0.4 Interest on additional debt (3) 0.5 Less: Estimated bank interest earned (4) (0.5) Less: Unrecoverable interest (5) (0.2) Total per application 37.7 15

AI summary The table outlines various financial components related to interest expenses, including original FLG, LC fees, interest on additional debt, and adjustments for estimated bank interest earned and unrecoverable interest, totaling 37.7 million dollars.

REDACTED 1 Scheduled Bond Payment Dates Opening Principal Balance Interest Payment Principal Payment Total Payment Ending Principal Balance 01-Jun-26 1,080,000,000 18,900,000 20,000,000 38,900,000 1,060,000,000 01-Dec-26 1,060,000,000 18,5...

AI summary The text presents a table showing scheduled bond payments, including dates, opening and ending principal balances, interest and principal payments, and total payments. It outlines financial obligations related to bonds.

NON-CONFIDENTIAL Scheduled Bond Payment Dates Opening Principal Balance Interest Payment Principal Payment Total Debt Payment Ending Principal Balance Guarantee Fee (0.5%) 01-Dec-41 205,669,068 4,162,742 8,942,133.37 13,104,875.30 196,726,...

AI summary The document presents a table showing scheduled bond payments, including opening and ending principal balances, interest payments, principal payments, total debt payments, and guarantee fees for a financial liability guarantee. The data spans from December 2041 to December 2052.

NON-CONFIDENTIAL Sep 2024 44% 61% 105% $3.7M · Oct 2024 83% 88% 121% $1.4M Nov 2024 98% 105% 115% - Dec 2024 99% 163% 221% - Jan 2025 88% 96% 134% $1.1M Feb 2025 99% 103% 150% - Mar 2025 99% 100% 142% - Apr 2025 77% 92% 165% $0.7M May 2025...

AI summary The document presents financial data from September 2024 to August 2025, including percentages and revenue figures. It mentions a Board decision in January 2024 that led to the reversal of a holdback previously recorded as unearned in 2023, resulting in additional revenue for NSPML in 2024.

5.2.3 Expected Market Returns and Estimating the Market Risk Premium (MRP) The next CAPM input is the MRP that is measured by the expected long-term return on the Ibid., page 25. Ibid., page 32. equity market less the long-term government...

AI summary The text discusses estimating the Market Risk Premium (MRP) using expected long-term returns on the equity market and long-term government bond yields. It references historical returns and current forecasts from finance professionals, emphasizing the relevance of these forecasts to determining a fair Return on Equity (ROE) for regulated utilities. The Alberta Utility Commission's position is cited, supporting the use of market participant expectations as a benchmark.

Response: (a) Using the total bond return to determine market risk premiums (MRPs) is the default in widely cited academic and finance practitioner research, such as the widely cited study by Dimson et al. (2016), which is the source for F...

AI summary The response argues that using total bond returns, which include both income and capital gain/loss components, is the standard approach in academic and finance research. It highlights that considering only income returns neglects the capital gain/loss component, which is crucial for accurately assessing bond returns over time.

SPONSOR DATE CASE/APPLICANT DOCKET SUBJECT Alberta Utilities Commission ENMAX Power Corp. 2022 ENMAX Power Corp. Application No. 27084 Generic Cost of Capital (electric and gas) Beverage Container Management Board (Alberta) Beverage Contai...

AI summary The document lists various regulatory proceedings related to cost of capital, rate adjustments, and other utility-related matters across different jurisdictions, including Alberta and Colorado. It includes information on applicants, dates, docket numbers, and subjects under review.

Financial model ROE (%) range Base forecast ERPs (%) range including flotation allowance (ROE less 3.10% risk-free rate) Low High Low High CAPM 5.7 11.76 2.6 8.66 Constant growth DCF 6.85 13.29 3.75 10.19 Multi-stage DCF 7.51 12.31 4.41 9....

AI summary The table presents notional ROE and base forecast ERP from various financial models, highlighting a wide range of results due to varying data sources, forecasts, and assumptions. The Commission acknowledges that these models provide guidance but do not yield a single correct number for fair return.

Table 12. Credit metrics compared to equity ratios – Commission calculations – distribution utilities – income tax rate of zero EBIT coverage FFO coverage FFO/debt (%) Equity ratio (%) 2023 GCOC decision 2018 GCOC decision 2023 GCOC decisi...

AI summary The table compares credit metrics such as EBIT coverage, FFO coverage, and FFO/debt (%) for different equity ratios under the 2023 and 2018 GCOC decisions, with and without an income tax rate of zero. It provides a detailed comparison of financial performance indicators across various equity ratios.

T. A. Loski, Commissioner EXECU JTIVE SU UMMARY i 1.0 INTRODUCTION 1.1 Background 1 1.2 Purpose and Scope of the Generic Cost of Capital Proceeding 1 1.3 Regulatory Process 2.0 KEY P KEY PRINCIPLES AND DECISION FRAMEWORK 2.1 Legislative Re...

AI summary This document outlines the structure and key considerations of a generic cost of capital proceeding, including legislative requirements, peer data analysis, credit ratings, financial models, and determinations on capital structure and return on equity. It discusses the use of various financial models like CAPM and DCF, as well as considerations related to business risk and flotation costs.

3 The DCF results are shown i[n Figure 19](#page-69-1) and in Exhibits CEA-4 and CEA-5. To mitigate any concern 4 that short-term EPS growth rates may not be sustainable, we have relied on the results of the 5 Multi-Stage DCF model, which...

AI summary The text discusses the use of a Multi-Stage DCF model to calculate the average cost of common equity for various utility proxy groups, including adjustments for flotation costs and financial flexibility, with results shown in Figure 19 and Exhibits CEA-4 and CEA-5.

We have employed several methods of measuring the beta coefficient for the Canadian and U.S. proxy group companies using estimates from both Value Line and Bloomberg. Value Line publishes the historical beta for each company based on five...

AI summary The text discusses methods used to measure the beta coefficient for Canadian and U.S. proxy group companies using estimates from Value Line and Bloomberg. Both sources use different market indices and timeframes for their calculations.

1 beta to revert toward the market mean of 1.0 over time. The betas used in our CAPM analyses for 2 the proxy groups are shown i[n Figure 22](#page-72-0) . 3 Figure 22: Value Line and Bloomberg Betas Value Line Bloomberg Canadian Group 0.8...

AI summary The text discusses the adjustment of betas in CAPM analyses, explaining that betas should revert toward the market mean of 1.0 over time due to statistical errors and empirical evidence. Adjustments are necessary to improve forecast accuracy and reflect investors' expectations of future risk.

Dr. Marshall Blume was among the first to study beta. Specifically, he studied four groups of betas, ranging from a very low beta group (averaging 0.50, and similar to the utility industry) to a very high beta group. Dr. Blume found that h...

AI summary This text discusses Dr. Marshall Blume's research on beta migration, showing that betas tend to move toward the grand mean of 1.0 over time. The findings are relevant to the Capital Asset Pricing Model (CAPM) and the forward-looking estimation of the cost of capital, as highlighted in studies cited and referenced in a cost of capital report for Nova Scotia Power Inc.

9 It is common practice for Canadian regulators to approve an adjustment for flotation costs and financing flexibility, with 50 basis points being the norm (as discussed below). The adjustment for flotation costs compensates the equity hol...

AI summary The document discusses the practice of Canadian regulators approving a 50-basis point adjustment for flotation costs and financing flexibility. This adjustment compensates equity holders for costs associated with issuing new equity and ensures financial flexibility for utilities to access capital markets under various conditions.

Credit Metric NSPI Canadian U.S. Electric Debt to Capital Ratio 67.3% 55.8% 58.2% FFO / Debt (%) 9.3% 13.1% 15.0% Debt / EBITDA 7.01 5.78 5.28 EBITDA to Interest Coverage 3.05 3.90 4.26 FFO to Interest Coverage 2.87 4.19 4.82 4 As shown in...

AI summary The document compares NSPI's credit metrics with Canadian and U.S. electric proxy groups, showing that NSPI has weaker financial ratios, including a lower FFO/Debt ratio, higher Debt/EBITDA ratio, and lower interest coverage ratios, indicating potentially weaker financial health compared to the proxy groups.

OPG OPG's current approved equity ratio is 45%. The current OEB-approved capital structure is based on a deemed 45% equity component, with the remaining 55% financed through short-term and long-term debt. As with Enbridge Gas, the deemed c...

AI summary OPG's current approved equity ratio is 45%, with the remaining 55% financed through short-term and long-term debt. The OEB finds that the current approach for determining debt costs is appropriate, ensuring regulatory stability and compliance with FRS. Short-term debt is used to true up the deemed capital structure to OPG's actual capitalization.

Table 2 – Summary of Revised Methodology – Cost of Capital Electricity Natural Gas Distributors OPG's Prescribed Distributors and Generation Assets Transmitters Enbridge Gas Inc. EPCOR Natural Gas LP

AI summary Table 2 outlines the revised methodology for calculating the cost of capital, focusing on electricity and natural gas distributors. It includes entities such as OPG, Enbridge Gas Inc., and EPCOR Natural Gas LP, highlighting the different approaches for various utility types.

3 TABLE 3 2026 Description (Amounts in $millions) Original Assessment Compliance Filing O&M 22.0 22.0 Depreciation 57.2 57.2 Debt Financing Costs (Net)1 • Interest 37.7 37.8 • Amortization of Deferred Financing Costs 1.4 1.4 Equity Financi...

AI summary Table 3 provides a comparison of original assessment and compliance filing figures for various cost categories in 2026, including O&M, depreciation, debt and equity financing costs, and total costs, with minor variations between the two columns.

3 TABLE 3 2026 Description (Amounts in $millions) Original Assessment Compliance Filing O&M 22.0 22.0 Depreciation 57.2 57.2 Debt Financing Costs (Net)1 • Interest 37.7 37.8 • Amortization of Deferred Financing Costs 1.4 1.4 Equity Financi...

AI summary Table 3 presents a comparison of original assessment and compliance filing figures for various financial categories in 2026, including operating and maintenance costs, depreciation, debt and equity financing costs, and total costs, with minor variations between the two assessments.

5 On December 23, 2025, the Board issued an interim order approving NSPML's 6 Assessment amount of $198.7 million. NSPML invoiced NS Power in equal monthly 7 instalments of $13.25 million per month for recovery of its 2026 Assessment, base...

AI summary The Nova Scotia Energy Board approved an interim order for NSPML's 2026 Assessment, allowing recovery through monthly instalments. Adjustments resulted in a revised instalment amount and a cumulative over-recovery, which will be credited in the June 2026 invoice. The interest costs and equity financing costs are also discussed, including changes in the DER ratio and the impact on sustaining capital.

[3] NSPML's cost assessment request is broken down as follows: Description $M Operating & Maintenance 22.0 Depreciation 57.2 Debt Financing Costs • Interest (Net) 37.7 Amortization of Deferred Financing Costs 1.4 Equity Financing Costs 40....

AI summary NSPML's cost assessment request is detailed in a table listing various cost categories, including operating and maintenance, depreciation, debt and equity financing costs, and FLG2, with a total of $198.7 million.

5.2 Return on Equity [53] The assessment of an appropriate return on equity typically relies on the application of several established financial models, including, but not limited to, the Discounted Cash Flow (DCF) Model; Capital Asset Pri...

AI summary The assessment of return on equity for NSPML involves multiple financial models, including DCF, CAPM, and Risk Premium. Concentric analyzed proxy companies and adjusted for risks, concluding a return on equity of 9.35% before adjusting for NSPML's subsea cable operations, which increased the range to 10.10% to 10.35%.

- 5 (b) Please update Table 2 with additional columns showing Forecasted, 6 Approved, (to the extent it differs from Forecasted) and Actual for each of 7 2021, 2022, 2023, 2024, and for 2025 Forecasted to year-end, Approved 8 and Actual to...

AI summary The text requests an update to Table 2 with additional columns for Forecasted, Approved, and Actual figures for the years 2021 through 2025, along with explanations for any material differences between these figures.

- 25 expedite finalization of each remaining matter. 1 Request IR-11: 2 Reference: Section 3.4 Annual Net Interest Costs, Page 15, lines 17-21. 3 4 5 6 7 This represents total coupon interest costs of $37.5 million, Letter of Credit fees o...

AI summary The text discusses requests for clarification and re-evaluation of financial costs related to NSPML, including letter of credit fees, equity financing costs, and marine survey cost recovery. The Board emphasizes the need for normalization of survey costs over a multi-year period rather than rate-based recovery.

expenses in a multi-year assessment. The Board understands that NSPML expects to address this in its application next year and directs it to do so. 1 2 (b) Are marine surveys expected to be cyclical going forward, i.e. required every 3 to...

AI summary The text includes a series of questions and requests directed at NSPML regarding the expensing of marine surveys, the reconciliation of financial transfers, and the implications of a requested 9% return on equity. The Board has directed NSPML to address these issues in its application for a multi-year assessment.

[3] NSPML's cost assessment request is broken down as follows: Description $M Operating & Maintenance 22.0 Depreciation 57.2 Debt Financing Costs • Interest (Net) 37.7 Amortization of Deferred Financing Costs 1.4 Equity Financing Costs 40....

AI summary NSPML's cost assessment request includes operating and maintenance costs, depreciation, debt and equity financing costs, and a federal loan guarantee. The total requested costs amount to $198.7 million.

icly-traded utilities. He applied averages and medians of historical data to estimate sustainable growth rates. Using an estimated sustainable growth rate of 1.64% produced an implied return of 7.01%. [100] Due to a negative average return...

AI summary Dr. Cleary estimated a sustainable growth rate of 1.64% for North American utilities, leading to an implied return of 7.01%. Concentric rebutted, arguing that growth rates were unreasonably low and did not reflect actual historical and projected earnings and dividends. They also noted that Dr. Cleary's model implied negative growth when considering 2% inflation and that the Alberta Utilities Commission previously rejected similar rates as unreasonable.