Topic:"Financing Alternatives" 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.

9 3.4 Debt Financing Costs 10 11 Debt financing costs consist of two components: (i) annual net interest costs and (ii) 12 amortization of deferred financing charges. These debt financing arrangements were 13 reviewed by the NSEB and confi...

AI summary Debt financing costs are composed of annual net interest costs and amortization of deferred financing charges. The NSEB reviewed these arrangements and confirmed their prudence in the Final Costs Decision.

15 3.4.1 Annual Net Interest Costs 16 The requested recovery of annual net interest costs in 2026 is $37.7 million. This represents total coupon interest costs of $37.5 million, Letter of Credit fees of $0.4 million, interest on long-term...

AI summary The document discusses the requested recovery of annual net interest costs in 2026, totaling $37.7 million, including coupon interest, letter of credit fees, and interest on long-term debt, partially offset by interest revenue and disallowed interest. It also references outstanding close-out matters and financing considerations for the NSPML Cable Protection Project.

5.0 FEDERAL LOAN GUARANTEE 2 ("FLG2") In 2024, NSPML completed a $500 million federally guaranteed ("FLG2") bond offering. The FLG2 was provided to assist in management of a large negative balance in the Fuel Adjustment Mechanism (FAM) acc...

AI summary In 2024, NSPML issued a $500 million FLG2 bond to address a large negative balance in the FAM account, caused by delayed NS Block deliveries and increased fuel costs due to the war in Ukraine. A refund of $485.9 million was transferred to NS Power's FAM account, with the remainder refunded in May 2025. NSPML excludes the loan from its regulated capital structure and has requested a $39.7 million recovery for 2026, including interest, principal, and guarantee fees.

7.1 Analysis of Capital Structure NSPML's capital structure of 70/30 was initially set in 2013, with the lower capital structure supported by the Federal Load Guarantee ("FLG"). The benefits of such a capital structure as supported by the...

AI summary NSPML's capital structure was initially set at 70/30 in 2013 with support from the Federal Loan Guarantee. However, with the removal of FLG2, NSPML's debt-to-equity ratio increased to 78% debt and 22% equity, leading to higher financial risk. NSPML argues that aligning with the T&D proxy group's average of 49% equity would help improve its capital structure and future borrowing costs.

generation. It was also intended to help meet Canadian federal 9 regulations requiring a 50% reduction in coal emissions by 2030 and Nova Scotia regulations 10 requiring 40% renewable energy by 2020. 11 The authorized ROE for NSPML has his...

AI summary The document discusses the Maritime Link project and its financing, including the use of a federal loan guarantee, the authorized return on equity (ROE) for NSPML, and the need to estimate the cost of capital for rate-making purposes. The ROE for NSPML has historically been linked to that of NS Power.

1 C. Flotation Costs and Financing Flexibility 2 It is common practice for Canadian regulators to approve an adjustment for flotation costs and 3 financing flexibility, with 50 basis points being the norm (as discussed below). The adjustme...

AI summary The document discusses the common practice of Canadian regulators approving flotation costs and financing flexibility adjustments, typically 50 basis points, to compensate equity holders and ensure financial flexibility. It also highlights variations in this practice across jurisdictions, with examples from Nova Scotia, Manitoba, Saskatchewan, and British Columbia.

NSPML Responses to Industrial Group Information Requests 1 Request IR-10: 19 result of the additional debt related to FLG2 in December 2024 to meet the amended DSRA 20 requirements. 1 Request IR-12: 2 3 Reference: Section 3.5 2026 Equity F...

AI summary The document outlines NSPML's responses to information requests regarding the impact of FLG2-related debt in December 2024 and equity financing costs for 2026. It references Section 3.5 of the 2026 Equity Financing Costs and directs the requester to NSEB IR-022 (d) for further details.

13.4 No Breakage or Other Similar Financing Costs Permitted Notwithstanding any other provision of this Agreement, neither Party shall be entitled to claim from the other Party any breakage fees or other similar fees or charges by a lender...

AI summary This section prohibits either party from claiming breakage or similar financing costs from the other party, particularly in cases where a lender calls for early repayment of debt related to the Formal Agreements or energy sales by Nalcor or its affiliates.

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.

14.5 No Breakage Or Other Similar Financing Costs Permitted Notwithstanding any other provision of this Agreement, neither Party shall be entitled to claim from the other Party any breakage fees or other similar fees or charges by a lender...

AI summary Section 14.5 prohibits either party from claiming breakage or similar financing costs from the other party, even if a lender calls for early repayment of debt related to the Formal Agreements or Energy sales by Nalcor or its affiliates.

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.

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.

16 i. Please see table below for the original FLG 2026 debt requirement and principal 17 balance. Interest expense relating to the original FLG loan is highlighted below 18 ($18.9m + $18.6m = $37.5m).

AI summary The text references the original FLG 2026 debt requirement and principal balance, highlighting interest expenses totaling $37.5m from the original FLG loan.

1 Request IR-05: 2 3 Refer to the Application, Exhibit N-1, page 20 of 29 and respond to the following: 4 5 a) Please provide the full amortization schedule for FLG2 principal and interest from 6 2025 onward, including guarantee fees, and...

AI summary The document requests the full amortization schedule for FLG2 principal and interest from 2025 onward, including guarantee fees, and specifically asks for an explanation of how the $39.7M cost for 2026 is calculated.

9 Response IR-05: 10 11 a) Please see FLG2 amortization schedule below, with 2026 items highlighted in green, and 12 the amounts included in the 2026 assessment bolded ($18,715,527+ $18,534,539 + 13 $2,414,376 = $39,664,442).

AI summary The response provides an amortization schedule for FLG2, highlighting 2026 items in green and bolding the amounts included in the 2026 assessment, totaling $39,664,442.

SCHEDULE 1 (FINAL) ESTIMATED INTEREST AND PRINCIPAL BOND REPAYMENTS COUPON RATE 4.048% Scheduled Bond Payment Dates Opening Principal Balance Interest Payment Principal Payment Total Debt Payment Ending Principal Balance Guarantee Fee (0.5...

AI summary This schedule outlines the estimated interest and principal bond repayments for a loan with a coupon rate of 4.048%, including dates, balances, and guarantee fees. The table provides a detailed breakdown of payments from December 2024 through June 2029, with a total guarantee fee of $39,664,442.15 noted for 2026.

NON-CONFIDENTIAL 1 Request IR-06: 2 3 Refer to the Application, Exhibit N-1, pages 25-27 and respond to the following: 4 5 a) Please provide all calculations and supporting workpapers used to determine the 6 proposed 60/40 debt-to-equity r...

AI summary The response to Request IR-06 outlines NSPML's calculations and assumptions regarding the proposed 60/40 debt-to-equity ratio, including its impact on WACC, debt service coverage, financing costs, revenue requirements, and credit ratings, referencing supporting documents and studies.

6.5 Summary Overall, this section highlights that NS Power is a low-risk Canadian utility; however, it is slightly riskier than the average A-rated Canadian operating utility. This conclusion is consistent with the following main points re...

AI summary The summary highlights that NS Power is a low-risk Canadian utility, though slightly riskier than average A-rated utilities. Its debt ratings are stable, and its financial risk profile is reasonable. A 40% allowed equity ratio is deemed reasonable despite lower debt ratings compared to some utilities, partly due to its parent company Emera Inc.'s higher ratings and the low-risk financing of the Maritime Link project.

NSPML 2026 Assessment Application - Appendix A - Concentric Rebuttal Evidence - Page 48 of 49 JAMES M. COYNE AND JOHN P. TROGONOSKI REBUTTAL EVIDENCE PREPARED FOR NSP MARITIME LINK INC. 1 Cleary that the FLG lowers the risk for equity inve...

AI summary The rebuttal evidence discusses the Federal Loan Guarantee (FLG) and its impact on equity risk for NSPML. It argues that FLG benefits debt investors only, and that NSPML should have a 40% deemed equity ratio for sustaining capital, similar to NS Power, as it does not benefit from the FLG.

24110-D01-2020: 2021 Generic Cost of Capital, Proceeding 24110, October 13, 2020, paragraphs 5, 7. Decision 26212-D01-2021: 2022 Generic Cost of Capital, Proceeding 26212, March 4, 2021, paragraph 18. procedure letter, 58 the Commission as...

AI summary The Commission is considering whether ERP-based formulaic approaches, similar to those used by the Ontario Energy Board and the EUB, are appropriate for reintroducing a formulaic approach to setting the Rate of Return on Equity (ROE) in Alberta.

Proxy Group Canadian Utilities 9.71% U.S. Electric Utilities 10.69% North American Electric Utilities 10.32% 8 C. Flotation Costs and Financing Flexibility

AI summary The section discusses flotation costs and financing flexibility, which are important considerations in the financial planning and capital structure decisions of utility companies.

e ten jurisdictions examined, seven have 25 historically granted the 50-basis point adjustment. Only Quebec deviates from 50 basis points by 1 allowing 30 to 40 basis points, and Manitoba and Saskatchewan, which have only Crown utilities,...

AI summary The text discusses flotation costs and financing flexibility in various jurisdictions, noting that seven out of ten historically granted a 50-basis point adjustment. Nova Scotia's February 2023 order did not specify if flotation costs were included in the ROE for Nova Scotia Power. The BCUC and OEB have made adjustments to flotation costs and financing flexibility, with differing approaches.

his view. SEC further stated that Nexus did not propose that customers receive a rebate for the benefits investors gain from share buybacks, which increase share value and are the inverse of dilution. The EDA stated that Nexus did not addr...

AI summary The document discusses various perspectives on financial flexibility and flotation costs in the context of utility regulation. SEC, EDA, OEA, and other entities argue about the appropriate methods to account for financial flexibility and flotation costs, with differing opinions on whether and how these should be incorporated into the ROE.

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.

ized treasury operations at the holding company level for all of the utility's subsidiaries. • The DLTDR shall not apply as a ceiling for external prudently incurred marketbased debt for any utility. The DLTDR will not be applied as a firm...

AI summary The document discusses the application of the Deemed Long-Term Debt Rate (DLTDR) and the Office of the Energy Board's (OEB) role in assessing the prudence of debt incurred by utilities. The OEB agrees with the Office of Energy Affairs (OEA) that utilities should recover prudently incurred debt costs and will evaluate their debt management processes.

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.

[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.

Question: - (a) Please explain Concentric's assertion that " Some may argue that the debt used to finance the Maritime Link project cost of $1.7 billion issued by the Maritime Link Financing Trust and guaranteed by the government of Canada...

AI summary The question addresses Concentric's assertions regarding the Maritime Link project's financing, including the impact of a government loan guarantee on NSPML's risk, bond yields, equity ratio calculations, and the rationale behind Concentric's proposed higher equity ratio requirements for NSPML.

or risk profile. In response to Information Requests from Board staff, NSPML confirmed that taking on this new debt would have no impact on its ROE or its ability to finance future capital projects". - a) Please confirm, or explain otherwi...

AI summary The text presents a series of questions directed at NSPML regarding the impact of new debt under FLG2 on its ROE, credit rating, and capital structure. It also asks whether the Board should rely on NSPML's representations in its decision on the FLG2 transaction.

Request IR-29: - a) Please describe the guarantee provisions of the FLG and FLG2. - b) Excluding risk associated with capital structure, please explain how these provisions impact NSPML's financial risk.

AI summary The request seeks clarification on the guarantee provisions of FLG and FLG2 and their impact on NSPML's financial risk, excluding capital structure-related risks.

Request IR-30: - Page 26 - NSPML states: "NSPML is requesting that the Board grant flexibility in NSPML's equity thickness - using a range of +/-1.5 percent which results in a range of 28.5-31.5 percent equity and 68.5-71.5 - percent debt...

AI summary NSPML requests flexibility in its equity thickness range, from 28.5% to 31.5%, and explains that it would use quarterly equity thickness data for calculation. The request is questioned due to a prior requirement to maintain a minimum of 30% equity thickness under the Federal Loan Guarantee.

Request IR-40: Page 45 to 46: Flotation Costs and Financing Flexibility - a) Mr. Coyne states that seven of ten jurisdictions in Canada have historically granted a 50- basis point adjustment for flotation costs. Please confirm that Mr. Coy...

AI summary The document contains a series of questions regarding flotation costs and financing flexibility, particularly focusing on Nova Scotia Power Marketing Limited (NSPML). It asks for confirmation on flotation cost adjustments, investor behavior, the nature of flotation costs, financial implications, and historical cost data.

Request IR-44: - 19 Page 57 states: "Some may argue that the debt used to finance the Maritime Link project cost of - $1.7 billion issued by the Maritime Link Financing Trust and guaranteed by the government of - 21 Canada lowers NSPML's r...

AI summary The text discusses concerns about the Maritime Link project's financing, specifically the impact of a government-guaranteed debt on NSPML's risk and equity investors. It raises questions about whether disallowances by the Board would be due to NSPML's imprudence and whether these disallowances are fully assigned to shareholders.

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

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

Request IR-6: Refer to the Application, Exhibit N-1, pages 25-27 and respond to the following: - a) Please provide all calculations and supporting workpapers used to determine the proposed 60/40 debt-to-equity ratio, and quantify its proje...

AI summary Request IR-6 asks for calculations and supporting workpapers related to the proposed 60/40 debt-to-equity ratio, including its impact on WACC, debt service coverage, financing costs, revenue requirements, and credit ratings, as well as benchmarking studies used to justify the ratio.