Hydroelectric

Appeals court overturns decision on Nova Scotia Power’s tax case

HALIFAX, Jan. 28, 2003 — Nova Scotia Power Inc. (NSPI) said Monday it is seeking leave to appeal to the Supreme Court of Canada the recent Federal Court ruling that overturned a Tax Court of Canada decision in the company’s favor. Nova Scotia Power is a wholly owned subsidiary of Emera Inc.

The case arose when NSPI claimed deductions related to capitalized interest on assets constructed by its predecessor, Nova Scotia Power Corporation (NSPC). The assets were purchased by NSPI in the course of privatizing NSPC in 1992. The deductions created substantial tax depreciation that was used to reduce income taxes payable by approximately $130 million through 2002.

The Canada Customs and Revenue Agency (CCRA) disallowed the deductions claimed, and NSPI pursued the issue successfully through the Tax Court. CCRA appealed the decision to the Federal Court of Appeal, which has overturned the January 2002 Tax Court ruling.

“We are disappointed with this decision,” said David Mann, President and Chief Executive Officer of Nova Scotia Power. “We will seek leave to appeal to the Supreme Court of Canada.”

Nova Scotia Power will work with its regulator, the Nova Scotia Utility and Review Board to determine an appropriate mechanism to recover the costs of these taxes should the appeal process prove unsuccessful.

The total potential liability through 2002 is approximately $160 million, including interest charges. The company expects to deposit the balance with CCRA in the near future to avoid further interest charges. The total payment will be recoverable should the issue be finally resolved in the company’s favor.

About Emera Inc.

Emera Inc. (EMA-TSX) is a diversified energy and services company, with 550,000 customers and $4.0 billion in assets. The company has two wholly-owned regulated electric utility subsidiaries, Nova Scotia Power Inc. and Bangor Hydro-Electric Company.

Nova Scotia Power supplies over 95% of the electric generation, transmission and distribution in Nova Scotia. Bangor Hydro provides electricity transmission and distribution service to 110,000 customers in eastern Maine. It is a member of the New England Power Pool, and is interconnected with the other New England utilities to the south and with New Brunswick Power to the north.

In addition, Emera Energy manages Emera’s growing gas infrastructure investment portfolio, including its 12.5% interest in the Maritimes & Northeast Pipeline, which delivers Sable natural gas to markets in Maritime Canada and the northeastern United States; and an 8.4% interest in the Sable Offshore Energy Project offshore platforms and sub-sea field gathering lines. Emera Energy also incorporates Emera Energy Services, Emera Fuels, and Emera’s business development activities. Visit Emera on the web at www.Emera.com.