Emera and Canadian Utilities Are Merging: What It Means for the Preferred Shares
On October 6, Emera and Canadian Utilities announced a merger of equals that would create one of the largest utility companies in North America: roughly $72 billion in combined enterprise value, a $45 billion rate base, and about six million customers across Canada, the United States and Australia. The combined company will operate as Emera, headquartered in Halifax, with existing Emera shareholders owning about 60% and Canadian Utilities shareholders about 40%.
For common shareholders, the headline is the expected ~20% dividend increase for CU holders. For preferred shareholders on both sides, the announcement raises a more technical question: what happens to more than a dozen outstanding preferred series when their issuers fuse?
The two preferred share families today
Emera has seven active series and Canadian Utilities has ten (plus one cross-listed CIU series). Here is the full board as of this week:
| Series | Type | Price | Current Yield | Fixed-rate base |
|---|---|---|---|---|
| EMA.PR.A | Rate reset | $22.53 | 5.49% | 5YR + 184bp |
| EMA.PR.C | Rate reset | $25.99 | 6.19% | 5YR + 265bp |
| EMA.PR.E | Perpetual | $20.28 | 5.55% | Perpetual, 4.50% |
| EMA.PR.F | Rate reset | $25.80 | 5.57% | 5YR + 263bp |
| EMA.PR.H | Min-rate reset | $26.28 | 6.02% | 5YR + 254bp, 4.9% floor |
| EMA.PR.J | Min-rate reset | $27.55 | 5.76% | 5YR + 328bp, 4.25% floor |
| EMA.PR.L | Perpetual | $20.42 | 5.63% | Perpetual, 4.60% |
Reset dates: EMA.PR.C and EMA.PR.H in August 2028, EMA.PR.F in February 2030, EMA.PR.A in August 2030, EMA.PR.J in May 2031.
On the Canadian Utilities side, the ten active series (CU.PR.C through CU.PR.K, plus CIU.PR.A) are overwhelmingly perpetuals: most carry a fixed coupon with no reset date, yielding between roughly 5.2% and 5.7% at current prices.
| Series | Price | Current Yield |
|---|---|---|
| CU.PR.C | $25.16 | 5.16% |
| CU.PR.D | $22.40 | 5.47% |
| CU.PR.E | $22.45 | 5.46% |
| CU.PR.F | $20.98 | 5.36% |
| CU.PR.G | $20.52 | 5.48% |
| CU.PR.H | $23.15 | 5.67% |
| CU.PR.J | $21.49 | 5.53% |
| CU.PR.K | $24.68 | 5.67% |
| CIU.PR.A | $20.60 | 5.58% |
Why this merger matters more for CU holders than EMA holders
The two families face very different situations.
EMA preferreds are already obligations of the surviving entity. Emera is the acquirer in name and structure: the combined company keeps the Emera name, its dividend policy, and its existing preferred share terms. A reset preferred like EMA.PR.C (6.50% until August 2028) will reset exactly as its prospectus says, off the five-year Government of Canada yield plus its stated spread, with no change to the formula. The merger does not amend the coupon mathematics of any existing series.
CU preferreds are a different story. Canadian Utilities is a subsidiary of ATCO, controlled through dual-class shares by the Southern family. A merger of equals in which the ATCO holding structure ends up with about 40% of a much larger company means CU preferred holders will end up with claims on a different corporate entity than the one they bought into. Three questions follow.
1. Does the preferred paper stay outstanding, or get called? Utility preferred shares are typically redeemable at the issuer's option at $25.00 plus accrued dividends. A combined company executing a $32 billion capital plan through 2030 may find outstanding redeemable paper with 5.4-5.7% coupons either too cheap to retire or worth refinancing; the answer depends on where yields sit relative to those coupons when redemption decisions get made.
2. Does the credit improve? The announcement leans heavily on this: the combined company expects "improved credit rating thresholds" and "greater financial flexibility." Both Emera and CU series currently carry P-2 (low) ratings from S&P. If the merged utility lands meaningful notch upgrades, long-duration perpetual paper (most of the CU stack, plus EMA.PR.E and EMA.PR.L) gets a direct price tailwind, since perpetual preferreds trade heavily on credit quality.
3. What happens at reset dates? For the EMA resets in 2028-2031, the same math applies as before: 5YR GoC plus the original spread, subject to statutory floors. With the five-year Canada yield at about 3.5%, every EMA formula spread (185-330bp) plus the current five-year base produces coupons well below what most of these series would need to keep their current prices at reset; holders should not expect automatic magic at repricing. For CU resets, the surviving entity's forward spreads determine new coupons.
The spread picture right now
The current yield gap between the two families is small: the CU perpetuals average about 5.5%, the EMA family about 5.7%. But the structure differs meaningfully every EMA reset series has a defined repricing date (2028-2031), while most CU series are perpetuals with no scheduled coupon update. That is why the EMA resets trade closer to par ($25.80-$27.55) than the CU perpetuals ($20.52-$24.68), which carry the full duration discount.
What should holders actually do?
Nothing needs to change today. The merger has not closed, no shareholder vote date has been set, and no redemption or exchange offers have been announced affecting preferred series. The right move is to read the proxy materials when they arrive, specifically for:
The merger is expected to take time to close; regulatory approvals across multiple jurisdictions are required. Between announcement and closing, preferred prices will mostly track interest rates, not merger news. But the combination of a larger, more diversified rate base and the stated intent to strengthen credit metrics is, on balance, constructive for the P-2-rated paper in both families: the perpetuals most of all.
This article is general information and does not constitute financial advice or a recommendation to buy or sell any security. Preferred shares carry risks including interest rate risk, credit risk and call risk. Verify all data against official company disclosures before acting.