Good morning, ladies and gentlemen, and welcome to the Emera Inc. Q1 2023 Analyst Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we'll conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Friday, May 12, 2023. I would now like to turn the conference over to Dave Bezanson, VP of Investor Relations. Please go ahead.

Thank you, Colin and thank you all for joining us this morning for Emera's first quarter 2023 conference call and live webcast. Emera's first quarter earnings release was distributed this morning via Newswire and the financial statements, management's discussion and analysis, and the presentation being referenced on this call are available on our website at emera.com. Joining me for this morning's call are Scott Balfour, Emera's President and Chief Executive Officer; Greg Blunden, Emera's Chief Financial Officer; and other members of Emera's management team. Before we begin, I would like to take a moment to advise you that this morning's discussion will include forward-looking information, which is subject to the cautionary statement contained in the supporting slide. Today's discussion and presentation will also include references to non-GAAP financial measures. You should refer to the appendix for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. And now I will turn things over to Scott.

Thank you, Dave and good morning, everyone. Emera reported strong first quarter results this morning, with $0.99 of adjusted earnings per share and a 36% increase in operating cash flow before working capital compared to the first quarter of 2022. The 8% increase in adjusted earnings per share year-over-year was primarily driven by higher earnings from our marketing and trading business and the impact of new rates, and the impact of the new rates and asset management agreement at New Mexico Gas. The benefit of new rates at Tampa Electric and Nova Scotia Power were offset by the impact of higher interest rates, as well as milder weather in both Florida and Nova Scotia. In addition, results at Nova Scotia Power were negatively impacted by the requirement to recognize the full provision for the $10 million penalty related to the province's renewable energy standards. As a result of the delays in the commissioning of the Labrador Island Link and the ongoing testing in 2022, a we received less renewable energy from Newfoundland Labrador, which put Nova Scotia Power modestly below the 40% renewable energy requirement. However, I'm pleased to say that with flows of energy from the block this year continuing to stabilize and increase, Nova Scotia Power's energy supply year-to-date has exceeded the 40% renewable requirement. While accounting rules required us to recognize the penalty in the quarter, we respectfully disagree with the penalty and intend to appeal to the regulator and we would anticipate a decision on that before the end of the year. Last month, Newfoundland and Labrador Hydro successfully completed high-power testing on the Labrador Island Link and as such, received the confirmation of commissioning from the independent engineer. Nova Scotia Power customers have already received more than 1 million-megawatt hours of clean hydro energy over…

Thank you, Scott and thank you all for joining us. This morning, we reported first quarter adjusted earnings of $268 million and adjusted earnings per share of $0.99. Compared to $242 million and $0.92 in 2022, representing an 8% increase in adjusted earnings per share year-over-year. This quarter's results continue to demonstrate the value of our diverse portfolio. We saw stronger contributions from Emera Energy and New Mexico Gas, which was able to more than offset the lower contributions from Tampa Electric and Nova Scotia Power, whose results were somewhat weaker due to higher interest rates and milder weather conditions. And of course, Nova Scotia Power booked a $10 million penalty that Scott referenced a few moments ago. Operating cash flow before changes in working capital increased by 36% year-over-year despite the unfavorable weather in the quarter. Excluding the impact of fuel deferrals, operating cash flow increased by $56 million or 10% over Q1 2022, in line with our expectations. At our Investor Day in March, we outlined the step changes in cash flow and debt reduction we expect to achieve in 2023 that will result in meaningful improvement in our key credit metrics. This included new rate agreements at Tampa Electric Nova Scotia Power, and New Mexico Gas, all of which went into effect in Q1. It also included cash contributions from the Labrador Island Link whose AFUDC earnings converted to cash earnings in April with the commissioning of the Will. And finally, it included the recovery of storm and fuel cost at Tampa Electric, the recovery of which was approved as filed by the Florida Public Service Commission during the quarter and the recovery began on April 1st. Perhaps more importantly, fuel costs have stabilized. And where last year, we were under recovery non-fuel so far in 2023,…

Thank you, Greg. This concludes the presentation. We would now like to open the call for questions.

Thank you. [Operator Instructions] And your first question comes from Rob Hope from Scotiabank. Rob, please go ahead.

Good morning everyone. First is on the financing plan. At the Temper Investor Day a couple of weeks ago, you highlighted a number of other levers you could pull to strengthen metrics in 2023, including deferring some CapEx as well as optimizing some working capital. Can you maybe give us an update on those items? And I guess, as well. It seems like your cash flow was strong or in line with expectations in Q1. I would imagine this wouldn't take into account the fuel over recovery, and that would be additive.

Yes, that's -- first of all, good morning Rob, it's Greg. On the first part of your question, obviously, given the timing of the little commissioning, and we're quite pleased that is now fully commissioned. It looks like the $240-ish million of true-up capital will likely be in early next year as opposed to this year. Absent that, we're still looking through our capital plans, but nothing definitive at this point that we're ready to communicate to you. We'll certainly refresh our capital plan as we go through the year and of course, in November. Provide an updated three-year forecast at that point in time. In terms of we're viewing cash flow. Certainly, if you recall at Investor Day, we were expecting on a fuel normalized basis to have our cash flow increase 10% on a year-over-year basis and we achieved that in the first quarter of this year. And that was obviously not incorporating any incremental cash from Labrador Island Link because that commission didn't start to April certainly, on a non-fuel adjusted cash flow was significantly stronger than we would have expected. In large part because of the softening commodity prices, and I referenced that at this point in time, we're actually over recovering fuel costs at Tampa Electric. And of course, the 36% increase in cash flow quarter-over-quarter. That is obviously before starting to collect cash and Labrador Island Link and also before collecting the unrecovered fuel costs and storm costs at Tampa Electric that did not start until April 1. So, yes, I guess in summary, we're feeling really, really good with how cash flow has started the year and our forecast going forward.

Excellent. And then maybe just reading between the lines here. On the Atlantic Loop project, the commentary or tone surrounding it seems more positive than in prior quarters. Could you maybe give us an update of the gates that have to be achieved to get clarity towards the summer as well as when could capital. Or how far out can you push out capital deployment on that project?

Yes, Rob, it's Scott. I'll let Peter answer most of this. Let me sort of the back part of that question in terms of capital, we'd still be in a place where we're not expecting to invest any material capital in the project itself. We're looking to support from engagement from other parties in terms of that. So, we're still at this point, not looking for -- at capital deployment other than projects inside province of Nova Scotia inside Nemesis Power proper, -- but let me let Peter answer the substance of your question.

Sure Scott. Hi Rob. So, yes, I think it's fair to say how you're reading twin the lines is that discussions with the federal government and other parties involved. Remember this is complex multi-stakeholder project, have intensified, I would say, over the last number of weeks. So, we're having productive discussions with the federal government. We've always said that this project to work, our customers in Nova Scotia need direct federal support to help with the transition. I think you've seen public comments from the federal government that sounds like they're very committed to this project, and we're pleased so far with the activity around the negotiation table but I'd probably leave it there for now. But other than to reinforce Scott's point that we really hit the 2030 target. There's a lot to do. And so we really need clarity on the path forward. The biggest piece of that, what is the federal funding support that we would need that clarity sometime this summer.

Thank you.

Your next question comes from Maurice Choy from RBC Capital Markets. Maurice, please go ahead.

Thank you very much and good morning. Maybe just sticking with the credit metrics theme here. You mentioned that you're feeling really good with your cash flow generation so far in Q1. Yet you've reconfirmed 11.5% target for this year. Were there any headwinds that you're -- that we should be aware of that might be preventing you from accelerating past 11.5% by the end of this year? And also with regards to deferring CapEx, maybe be a little bit more direct here, given where the market uncertainty is, is there a motivation to perhaps consider that even more forcefully despite being having good cash flow generation just in case and then reaccelerate next year?

Yes, I think, Maurice, it's important to remember when I mentioned and referred to the 11.5% cash flow debt metrics, we're talking on a fuel normalized basis. so on a fuel normalized basis, cash flow is unfolding pretty much exactly as we would have expected. Remember the catalyst to drive that were the three rate cases at rate increases at Nova Scotia Power, Tampa Electric and New Mexico Gas, which are now completed and the course of Labrador Island Link commissioning, which is also complete. So, we're feeling really good on that path. We are seeing, though, is obviously a reversal of what we saw last year in terms of commodity prices and the time and the recovery of fuel cost. So, that will help on an overall basis. But when we look at it on a normalized basis, it's been pretty much consistent with where we expect it to be. In terms of capital, again, just following up on my comments a few minutes ago, Maurice, there's nothing at this point, material that would be worthy of disclosing to you. But I think it's also important to remember that our capital is being deployed in our utilities for the benefit of our customers. And when we're seeing large customer growth, quite frankly, not just in Tampa Electric but in Peoples Gas, we're seeing customer growth here in Nova Scotia Power. Requirements to continue to storm harden the system. That doesn't -- on our core business doesn't necessarily give us a lot of flexibility with capital, but we're still looking at the timing of the execution of that capital. And so there might be some capital move between years, but I would say at this point in time, we're not expecting anything material above and beyond the Labrador Island Link true-up investment that I mentioned earlier.

Thanks. And maybe just a quick follow-up. Your expectation of how the rating agencies will respond to these? And any recent engagement with them about changing the outlook back to stable.

Yes, I mean that's an ongoing conversation, Maurice. I mean, generally, they look through the fuel cost recovery side of it. So, looking through maybe the cash flow perspective, but I think it's -- they're fairly consistent across the board. They don't normalize for the associated debt with respect to those fuel cost recoveries. Obviously, with the majority of our under recoveries in 2022 of Tampa Electric and now having regulatory approval for that. That's helpful, seeing an accelerated recovery of those costs, which does mean we're reducing our debt. So, given that they don't normalize for the debt, that will certainly be a positive. But having said all of that, I'm not anticipating that we'll see a shift back to stable outlooks anytime soon.

Thanks. And maybe just finishing up here on Emera Energy. Back at the Investor Day, obviously, we heard that Judy highlighted that the business outperformed the normal range in five out of the last nine years. And in this quarter, results were clearly strong thoughts on your normal range of $15 million to $30 million and if this probably should be updated.

Hi there it's Judy. Well, we're -- we said we're sticking with our guidance for the year, and we are everybody here, I think, on the call understands the phenomenon we have where our gas transportation costs are amortized evenly through the year. So, we have to bear the burden effect of the summer months. When we come off of a period of high pricing, the reality is we can hedge that up in the winter and make a little bit of money, but the cost that we have to absorb over the summer are higher. So, when we look at our forecast now, and it's only a forecast that we have -- we do have volatile earnings, we're still comfortable for this year in the $15 million to $30 million range. As the summer unfolds, that could change. And if it does, we'll provide updated guidance. But at this juncture, we're still -- that's the range that still feels right to us.

Great. Thank you for the color.

Your next question comes from Ben Pham from BMO. Ben, please go ahead.

Hi thanks. Good morning. Maybe back to the credit metrics and the float debt targets. I guess with the way you're framing it, you're excluding the -- or normalizing for the fuel cost recovery, but assuming like the Q1 trend continues through year-end, is it correct to say on a GAAP basis that you're going to be well above the 11.5%?

Yes, Ben, it's Greg. It's probably too early to tell that, but I think there's a strong possibility of that. But look, as I've said before, I don't think we should be penalized when we under-recover fuel costs and have to finance with that short-term debt, nor do I necessarily believe we should get the benefit of that. But certainly from a GAAP perspective, it's trending in a fairly material positive way on the upside. And so just to follow up on a couple of the other questions. We're feeling really good about it. Don't anticipate that there'll be any change in outlook in the near-term, near-term being the next quarter or so. But I think if this trend continues, I think we'll be well positioned later in the year on a GAAP basis with both quite frankly, with all four rating HCCs.

Can you remind me on gas hedging at the utilities, are you restricted from doing that?

We are at people's gas at New Mexico Gas. We hedge our firm baseload gas -- so what we expect to have as a base load requirement for our customers. But in Florida, like the gas -- or like the electric utility, there's no hedging.

Maybe just one cleanup on the 10 million [ph] is that - -are you reflecting that in your pressure reflected in the ROE? Or is that outside of the rate base calculation?

I would expect that, that would be excluded from the ROE calculation.

Okay, got it. Thank you.

You're welcome.

Your next question comes from Dariusz Lozny from Bank of America. Please go ahead.

Hey guys. Good morning. Thanks for taking the question. Maybe just starting off on the Peoples Gas rate case, acknowledging it's early days still. It's recently filed. But how do you feel about prospects for settling there? I know there's been some of opportunities for that in the past at the other Florida utilities. And maybe just in the past, you framed it as largely being about catching up with customer growth, OpEx, things like that, which seems fairly standard. But any other puts and takes as far as the context of the filing that you could elaborate on?

Helen?

Good morning. So, with respect to the first part of your question, our intention at this point is to continue through with a full hearing process, both FPUC and Florida City Gas had their rate cases proceed in that way and had some very good results. And with respect to -- your other question about framing, yes, you've got it absolutely right. It's largely about capital and going back to what Greg said, that's in response to very, very strong customer demand. And then outside of that, it's really trying to ensure that we have the organizational capacity to continue to serve that demand and then obviously effects of inflation and interest expense are the other factors.

Okay, excellent. Thanks for the color. One more, if I can, on New Mexico gas now. Just maybe following up on those AMAs obviously gave you a strong start to the year, $27 million back to customers. I imagine the regulator is very happy about -- what about the part of that $38 million gain that goes to the utility. Is that do you view us giving you additional flexibility to perhaps derisk O&M either later in the year or into future periods? Just curious how you're thinking about effectively using that additional gain from the AMA's

Yes, Darius, it's Greg. I mean I think it's important to maybe take a step back and think about it. So, we a requirement to purchase pipeline capacity to service our customers. We've entered into asset management agreements so that when we don't need that capacity, we can utilize it and have a third party to manage that for us and create some value, the majority of which goes to customers. So, I just want to start with that is -- the benefit is largely going to customers, and it's a very constructive thing. To the extent that we have an opportunity to create that benefit for customers and there's some residual value to shareholders. We don't necessarily look at that as anything that provides us with flexibility in terms of how we manage our day-to-day operations. It's nice to have. We appreciated it is real earnings, it's cash, all of those kinds of things. But as a outcome of that, we wouldn't be adjusting any of our operational plans at the utility.

Okay, got it. Thank you for that. I'll leave it here.

Thanks Dariusz.

Your next question comes from Linda Ezergailis from TD Securities. Linda, please go ahead.

Thank you. Just wondering when you reflect on the learnings from Maritime Link and Labrador Island Link, how Emera might approach participation Atlantic Loop beyond requiring direct federal support for NSPI customers. If it were to proceed, how would you ideally see either the revenue model, construction or operations. Like what would translate well what would ideally be adjusted if you can share any reflections that would be appreciated.

Yes, Linda, I'd say it's still a bit early to frame a lot of that up. Really, the focus that Peter and the team have had in working with the province and the federal government and the other stakeholders is how to enable the Loop as a part of a solution path to achieve the closure of coal plants and 80% renewable by 2030. The Loop is certainly a key enabler of that. It's what we consider to be what we believe is the best path forward for Nova Scotia, of course, in addition to that, there's still a lot of things that have to happen in Nova Scotia, a stronger inner time between the province of Nova Scotia and New Brunswick more wind needs to be built. Batteries are likely part of solution, other forms of providing backstop capacity as more and more intermittent renewables and wind is brought on to the system. But we see -- continue to see the Loop, this transmission interconnect between Nova Scotia and Quebec through New Brunswick as a key enabler. As to what Emera or Nova Scotia Power's role is into Loop, as we said, we continue to support the negotiations between the parties and part of the ongoing conversation with the federal government is how they can assist in enabling that without -- or reducing the cost pressure that would impact Nova Scotia Power customers and that involves the -- that includes the involvement of Canada Infrastructure Bank, which may create some innovative solutions that allows for their participation without the need for Nova Scotia or New Brunswick to directly invest in instead relying upon some financing techniques from CIB. This is all still very much in motion, in discussion until we sort of further advance these conversations to know as to whether this is a workable path or alternative paths without the Loop need to be addressed. This is all part of the reference that Peter had to the ongoing discussions that need to be sorted through the summer in order to create a clear pathway forward to achieve those 2030 goals.

Thank you. And maybe just turning to Emera Energy Services. If we think about the capacity that you've committed to for the balance of the year, is that related to typical prior opportunities just getting more expensive? Or are you adding some scope and contracting more capacity related to doing a little bit more doing things differently?

It's mostly that it's more expensive, Linda. As you know, it's kind of run typically a bit. If the market gets heated, then we're bidding into these kind of short-term capacity assignments every year. So, if you're doing that in a relatively hot market, everybody can look and see the value of the transport and they adjust their bids accordingly. And so it winds up, you pay a little bit more, but of course, you're able to hedge it out at higher value. So it's a wash -- a bit of a wash there. That's a cyclical phenomenon. So, this -- if prices stay where they are currently, kind of the next round of bidding will be a materially lower amount. So, we've been through that cycle before. We'll be through it again. So, there is some -- we do have a little bit more activity in the Southeast. That's something that we're picking away at building that business, but most of this would be our what we still consider our core area in the Northeast US and transportation associated with that.

That's helpful context. Thank you, Judy. And just a quick follow-up question. Energy is losing a little bit less money this year than last. It looks like. When is your path to getting to breakeven and how large a contribution do you think it can make once it reaches scale?

Yes, I'd say it's too early to frame that up at any clarity. I'd say, Linda, we continue to be excited about the prospect of block energy. We continue to support it, fund it, obviously, as you see and continue to be encouraged by the reaction that we're seeing from prospective customers from existing customers where that product is deployed and also in the advancement of the technology to the commercial version of that technology. But it's still early days with this. So, wouldn't want to get ahead of ourselves in terms of framing a timing for breakeven or framing up what -- how bright the future might be for Block Energy. It's one that we continue to advance be excited about, but we're also cautious and realistic at the same time. So, stay tuned.

Thank you.

Your next question comes from Mark Jarvi from CIBC Capital Markets. Mark, please go ahead.

Thanks. Morning everyone. Wanted to touch on the at the market program as far as I can tell, it seems like it seems like you guys used it in Q1. Is that a reflection the share prints or just the strong fuel recovery in Emera Energy? And assuming that the fuel recoveries track well through the balance of this year, does that change at all your sort of usage of the ATM this year?

Yes, hi Mark, it's Greg. Yes, nothing's changed from our financing plan. As you know, we often access that program at different levels in different quarters. To be quite frank, it's actually often more about timing. So, if you think of we were relatively late in the cycle, releasing our annual results in February. So, in effect, we were out of the market in January and February because of lockout. And we spent quite a bit of time kind of in the March, early April timeframe, meeting with credit rating agencies and given the sensitivity around there. At that point, just didn't feel it was comfortable. Obviously, it's hard not to look at the share price that have that weight on the decision. But I'd say it's more of the mechanics of the timing and market access than anything else.

Okay. Makes sense. And then there's been some more press releases from different consortiums talking about offshore wind and exports on transmission down in the US from Atlantic Canada, other [Indiscernible] green ammonia. Any thoughts in terms of getting involved there? I mean, why exports to other markets when obviously, there's a decarbonization need in the province and Nova Scotia sort of updated views on how those consortiums are property and there's any fit to try to keep more stuff local?

Yes, I mean I'd say, Mark, that Nova Scotia Power is certainly been engaged in supporting a number of developers in terms of their efforts to create both hydrogen and offshore wind development opportunities here in the province. And I know -- that continues to be a focus of one. In fact -- Peter, maybe I'll let you sort of carry on with the question. I could talk a little bit about self-onboard.

Sure Mark. Just to reinforce that, we're in regular discussions collaboration with a number of hundred developments here. We see the potential that the development of hydrogen economy presents for the Nova Scotia economy. And so very supportive of that and being very supportive of the needs of hydrogen developers as they get up to scale. So, we'll continue to work with them in supportive of the general direction. That's really the Nova Scotia Power role at this point. Beyond that, we're looking at our capital is really based on reliability investments inside the business. But I guess just to sum it up supportive of the activities of the hydrogen economy here in Nova Scotia.

Yes. And then as relates to the prospect of transmission of wind energy from Atlantic Canada South. As you know, we've participated and had a number of efforts of that in the past. We're not actively engaged in that today, but there are skill sets that we've got and to the extent that, that kind of opportunities develop and become more meaningful than would be something certainly that we'd be looking at and considering, but nothing that we're actively involved with today.

And just a follow-up on that, like the Atlantic Link project that you did, I think, a handful of years back, but that's not something that has an update here with what that consortium won't be.

It's a little different in terms of start point and end point, Mark. But certainly, it's sort of the reference I made earlier that we've been engaged in a number of projects, that as well as overland transmission initiatives. It's a space we understand well. We understand the complexities of it. Obviously, we've had some success with subsea electric transmission cables in the past. And so beyond the opportunities to assist any offshore wind developers that do progress in terms of interconnection into the Nova Scotia Power system to the extent that those opportunities also look for a transmission path down to the US, we'll certainly engage in discussions and explore to the extent that there is a role or an opportunity of interest or fit for us. But I'd say we're not actively involved in any of those discussions today.

Okay, all right. Thanks Scott.

Your next question comes from David Quezada from Raymond James. David, please go ahead.

Thanks. Morning everyone. Maybe just starting up with a question, Peoples Gas it seems like Bill 1162 has been moving forward in Florida. I'm wondering if that, I guess, maybe could bring forward or change the size of any opportunities or investments you might be able to make there in either RNG or hydrogen.

Helen?

I missed -- I'm sorry. I just need to make sure I'm talking about the same thing you are, but Bill 1162, if you're talking about the RNG and hydrogen cost recovery, Bill [ph], can I just confirm?

That's correct, yes.

Perfect. Thanks. Yes. So I mean, it's interesting. We've been studying it closely and are tracking it and making sure that we're well positioned to advocate for that. It's possible that it will have some positive effects for us. But at this stage, it's still reasonably early and we're just evaluating it.

Okay, excellent. Thank you for that. And then maybe just wondering if there's any update on the plan that you rolled out at the Investor Day, a Polk Power station, any upcoming milestones that we should be look out there for some of the big projects that you had moving forward there?

Archie?

Good morning. No real update on our plans at Power Station. We continue to work through the engineering analysis, the business cases. In Q1, I am pleased to say that we did successfully negotiate an agreement with the US Department of Energy on the first tranche of funding, which they provided to us in 2022. And actually just a week or so ago, we were informed by the US Department of Energy that we have successfully -- we applied for and were successful in a second tranche of funding that supports the engineering studies at POC. But we're still -- this is -- this will -- there's a year's worth of effort just working through all of the detailed engineering that's needed to finalize our plans there and that's what the team is very focused on.

Excellent. Thanks. I'll turn it over.

Your next question comes from Andrew Kuske from Credit Suisse. Andrew, please go ahead.

Thanks. Good morning. [Technical Difficulty]

Sorry, Andrew, unfortunately, you're breaking up and we can't quite hear you.

Sorry, is that better?

It is.

Okay. Sorry about that. Is it fair to say the learnings from the Atlantic Link project a number of years ago is transmission, frankly, just takes a long time to get approved? You had a good idea, but it's just challenging. And so are you sort of stepping back a little bit, focusing on what you can control to a greater degree on the onshore and then seeing opportunities to connect with offshore wind and more of like a backing in kind of fashion should those projects proceed?

Yes, if I'm understanding you correct -- your question, Andrew, if it's in relation to our role or participation in offshore, wind. Yes, I think the way you framed it would be correct, where the reality is for Nova Scotia Power in serving its customers onshore wind is far less expensive, far more cost effective than offshore wind. And there continues to be significant onshore wind development opportunities. And so that's been the focus for both the province of Nova Scotia in its procurements. And for Nova Scotia Power and its integrated resource plan is continuing to advance and support onshore wind. The offshore wind developments offshore wind continues to get more economic as size of turbines continue to increase to impressive scale. And the offshore wind, I think, has been an area of particular interest when looking at hydrogen development in the province as being an enabler and a supporter of the significant energy requirements that are needed for production of hydrogen, particularly in green hydrogen form. And so we continue to be here, trying to be as helpful as we can to hydrogen and offshore wind developers to the extent that Nova Scotia Power participates in the interconnection and system support components of that. It will obviously be doing so. If and when we see opportunities from an Emera perspective to be exploring investment and participation. We'll continue to assess that the same way we always have in terms of ensuring that it's makes sense for us from a financial and risk perspective. And so it's -- these are files that we continue to actively watch to we are building relationships. We're not specifically engaged in investment or advancement of any of those particular developments currently, but it certainly files that we're watching and we'll engage if and when it seems to make sense.

Okay, appreciate that. And then maybe just not completely obscured, but it's gaining a lot more popularity recently, just on pump storage and your bare swap exposure. If you could just maybe just give us a brief highlight of the contractual length around Bear Swamp and just what your expectations are of the asset.

Andrew, it's Judy. So, Bear Swamp doesn't really have -- it's a market facility now. It has -- it's entitled to capacity payments from ISO New England and then it basically -- Brookfield is the -- is a commercial manager, and they manage it on a daily basis in the market. Years ago, it had a long-term supply agreement with Life, but that ended I think, April of 2021. So, it's a market-facing facility, just had a big upgrade on both units so it's in excellent condition. I would say it's the biggest refer to it as the largest battery in New England. And there. It's challenged and we try -- we're working it every day as we feel it should be paid a little bit more for the value we provide in terms of its callability and that kind of thing. But that's -- that's a long process with the -- with ISO New England to try to get that properly recognized. But in the meantime, it's basically a market facility.

Appreciate that. Thank you.

Thanks.

Your next question comes from Patrick Kenny from National Bank Financial. Patrick, please go ahead.

Yes, good morning. Just wanted to come back to the fuel cost over recoveries in the quarter. The $81 million at Tampa Electric makes sense. But can you just walk us through the drivers of the $33 million of under recovery at NSPI and I guess if commodity prices stay where they are, if you expect NSPI to switch to over recoveries for the balance of the year? And if so, wondering if there might be any mechanism within the new regulatory framework where you could reallocate some of those over recoveries towards non-fuel rate increases, say, above the 1.8% cap that might allow you to bring forward some capital projects in Nova Scotia? Thanks.

Yes, Patrick, it's Greg. We're not expecting -- because we have a fairly extensive hedging program at Nova Scotia Power, we're not expecting to have any over recovery of fuel cost this year. And if you think of the rate settlement, the majority of the rate increase in 2023 was directed to non-fuel and then that effectively flips in 2024. So, the under recovery that we're experiencing is kind of by design. And then that will get largely collected in 2024. You may recover -- or may recall as well that the agreement that we have with the customer groups that the UARB is approved, that we'll be filing later this year as well for any incremental change that we need on fuel rates for 2024. But at this point in time, we wouldn't expect that profile to reverse at all.

Got it. Okay. Thanks for that.

Sorry, Patrick, I would say it generally is higher in terms of total dollars in Q1 just because that's where the majority of our load is over the course of the year as well.

Makes sense, okay. Thank you. And then at New Mexico Gas, again, just given the lower natural gas price outlook, wondering if there's been any change in thinking around the need for LNG storage or perhaps any delay in development of that project, at least until you have maybe more certainty on the macro commodity price environment?

Ryan, do you want to answer that one, please?

Yes, I'm happy to take that. No, I think our view on LNG is still very good for customers. It's not only a pricing play but a reliability play here in New Mexico. We believe if we own the storage ourselves that it's a much more reliable asset. We can get our gas quicker and it's under our control. So, we still feel it's an important asset for the business for the long term. I understand that gas prices have moderated here and in the last month or so, but we certainly don't know in the future where gas prices will be. So we still think it's a very positive investment for customers.

Okay, perfect. Thanks for that. And then last one, maybe for Greg as well. So, just back to your commitment to the investment-grade credit rating, and I know your metrics are moving in the right direction, but just wanted to confirm that your commitment to your -- commitment is to an IG rating across all rating agencies? Or is it more of an average IG rating? In other words, if one rating from one agency slipped one notch to non-IG but the other stayed intact, would you be okay with not taking any action unless more than one of your ratings fell to non-IG? Thanks.

Yes, Patrick, it's probably a hypothetical question. I mean we're committed to investment-grade are typically in line with each other on their views. We're happy with the progress we're on the path that we have in front of us. And so we don't believe we're going to be in a situation where we're going to have to contemplate that.

Excellent. I'll leave it there guys. Thank you.

Thanks Patrick.

[Operator Instructions] Okay, and there are no further questions at this time. I'll turn it back to Dave for closing remarks.

Thank you, Colin. That concludes our call for today. Please reach out to Investor Relations if you have any questions. Thank you very much, and have a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.