Halifax utility company thrives after diversification

- David Mann, chief executive officer of Halifax-based Emera Inc., knew there would be culture shock when he transformed his good, grey electrical utility company into a diversified international energy firm.

The Halifax utility company is thriving after the challenge of diversification, VIRGINIA GALT writes So he brought in a team of industrial psychologists to ease the transition and help Emera's managers think more like free enterprisers.

As the company moved beyond its traditional power base in Nova Scotia, acquiring Bangor Hydro-Electric Co. in Maine and picking up a 12.5-per-cent stake in Maritimes & Northeast Pipeline, Mr. Mann realized his managers -- accustomed to operating a provincial electrical utility in a monopoly situation -- would need new skills and knowledge.

The electrical utility Nova Scotia Power Inc. is still Emera's major subsidiary, but Mr. Mann also wanted to position his "home-grown" talent to take advantage of new opportunities posed by diversification.

"He felt they were a strong enough group that they could learn these skills and he didn't have to bring in a bunch of outsiders," said psychologist Michael Seitchik, who set up a series of workshops on critical thinking, negotiation, "scenario planning," decision making and execution.

The sessions, which started in November, 2002, are continuing, but the initiative already appears to be paying off: Emera recently reported profit of $129.2-million or $1.20 a share for the year ended Dec. 31, up 54 per cent from $83.6-million or 85 cents in 2002.

"We worked hard to return Emera to an acceptable level of profitability in 2003," said Mr. Mann, who attributed the improvement primarily to the company's sharper focus on its core electricity business.

"We controlled costs, streamlined activities and capitalized on high natural gas prices, all of which helped restore our earnings."

Nova Scotia Power and Bangor Hydro-Electric Co., acquired in 2001, are regulated, wholly owned subsidiaries of Emera.

Maritimes & Northeast Pipeline delivers Sable Island natural gas to markets in the Maritimes and northeastern United States and Emera also owns a full-service fuel oil company, which serves residential, commercial and industrial companies in Nova Scotia, New Brunswick and Prince Edward Island.

Emera recently sold its 8.4-per-cent stake in the offshore Sable Island gas production project because the risk is beyond the company's comfort level, particularly now that the reserves appear to be lower than previously estimated, Mr. Mann said. "We very carefully decided to exit that side of the business."

Dr. Seitchik, of the Illinois-based consulting firm RHR International Co., said the Emera management team has become much more adept at detecting "patterns and shifts in the external environment."

The risks posed by weather, commodity prices, interest rates, foreign exchange, regulatory requirements, political climate and general economic conditions all have to be factored into the strategic planning process, he said.

Emera's long-term success and competitiveness will depend, very much, on its ability to anticipate various scenarios and make decisions in "a rapidly changing, ambiguous environment."

What are the political, technological and economic trends? What are the competitors up to? Where are the Canadian and U.S. governments going with environmental protection initiatives? What might this mean, in the long run, for Nova Scotia Power, which is heavily dependent on coal to fuel its generating plants?

For Emera's management team, Dr. Seitchik said, the challenge has become how do you make good decisions more rapidly, without complete information?

"Most of them come from an engineering mindset, where you tend to work it and hone it until it's the best it can be," Dr. Seitchik said.

The Emera workshops led participants through a process that helped them analyze how much information they actually need to act.

"They practised in a safe environment. They did role-playing and things," said Dr. Seitchik, who added that the managers were not expected to apply their new decision-making methods to any key strategic initiatives until they felt comfortable with the process.

"That would be like teaching someone a new golf swing, and the next day putting them in a tournament."

What is Emera?

Based in Halifax, Emera is a diversified energy company that works with Nova Scotia's offshore natural gas resources and serves northeastern North America. The company has 550,000 customers and $4-billion in assets.

Nova Scotia Power: Principal operating subsidiary. NSPI has an 80-year history of supplying generation, transmission and distribution of electricity to Nova Scotians.

Bangor Hydro-Electric: A transmission and distribution company located in Maine.

Emera Energy: Focuses on energy investments and energy-related lines of business created by natural gas development.

Maritimes & Northeast Pipeline: Emera has a 12.5-per-cent equity interest in the pipeline, which transports natural gas from Nova Scotia to markets in the northeastern United States.

Emera Fuels: A full-service fuel oil company.

Source: http://www.emera.com