Q3 2019 Earnings Call
At this time each of your line is that I listen only mode.
At the conclusion of today's presentation, we will open the floor for questions instructions will be given where the procedure to follow if you like to ask a question I would now like to turn the call over to Steven Bridge, Vice President Investor Relations.
Good morning welcome.
I encourage you to visit our Investor Relations website to view the earnings release Kid presentation that accompanies this morning's prepared remarks, an additional quarterly disclosures.
Mr Relations team will be available after today's call to answer any questions regarding this quarter's results.
Earnings materials, including our prayer prepared remarks today, making.
James forward looking statements and estimates that are subject to various risks and uncertainties. Please refer to our FCC filings, including our most recent annual reports on Form 10-K quarterly reports on Form 10-Q for discussion of factors that may cause results to differ from managements projections forecasts estimates.
Expectation.
This morning, we will discuss some measures of our company's performance that differ from those recognized by gap.
Reconciliations for non-GAAP measures the most directly comparable GAAP financial measures, which we're able to calculate are contained in the earnings release kit.
Joining today's call or Tom Farrell, Chairman, President and Chief Executive.
Sure, Jim Chapman Executive Vice President, Chief Financial Officer, and Treasurer, as well and other members of the executive management team I will now turn the call over to Jim.
Thanks, Steve Good morning.
Before I walk to the quarterly results, which were above the midpoint of our guidance range.
One of the highlight Dominion Dominion energy.
Key investment teams all of which are consistent with the messaging from our Investor day in March.
At the highest level, we delivered exceptional value to our customers our communities.
He's our shareholders.
We do this by providing affordable reliable and sustainable energy to our.
Customers.
Approximately two thirds of our operating income comes from our state regulated utility operations.
Customer center around five states.
Oh demand for utility center, FERC transmission and storage customers account for most of the rest we're operating income.
Together these regulated and regulated like customers comprise approximately 95% of our total operating income.
2019 to 2023, we plan to invest $26 billion in growth capital programs that will modernize strengthen and improve sustainability more systems to the benefit of.
These customers.
Further we do this by engaging with the communities in which we live in work.
Being responsible stewards of the environment.
And my focus really focusing relentlessly on the safety or nearly 20000 employees.
Tom will touch on these three topics more extensively.
Remark.
Finally, we use by my delivering financial results that are consistently within our guidance for earnings and dividend growth.
As an example, this quarter's results represent the 15th consecutive quarter of delivering weather normalized operating earnings per share that are at or above.
Oh, the midpoint of our quarterly guidance range.
And also the 15th consecutive quarter.
Being in Wearables the range without weather normal normalizing.
[noise] today, we were also reaffirming our annual and long term growth Guy.
[noise] turning on a quarterly.
The results on slide four.
Today, we reported third quarter 2019 operating earnings of $1.18 cents per share.
Compared to our guidance range of one dollar.
$1.20 cents per share.
[noise] strong performance across our segments was aided by better than normal weather, which increased utility earnings by.
Five cents per share.
Adjusted for normal weather operating earnings for the quarter were $1.13 cents per share, which is also above the midpoint of our guidance range.
GAAP earnings for the quarter were $1.17 cents per share.
A reconciliation of operating earnings to reported earnings.
Can be found on schedule to.
Earnings release kit.
On slide five we've summarized several milestones achieved since our last call.
First.
Millstone began to sell electricity.
I'm going to zero carbon power contract with Connecticut Utilities October 1st.
The 10 year contract.
Millstone will sell 9 million megawatt hours electricity per year, representing 55% the plant output.
The fixed price 40 999 per megawatt hour.
[noise] this contract the financial impact of which is incorporated into our existing guidance.
Recognizes the tremendous value of millstones environmental and other attributes for the state and the region.
But it can't help but not covered by the contract we will continue to employ a prudent hedging strategy.
Note that the contract does not cover capacity does the entire plant is expected to continue to be compensated.
In the via the existing regional capacity program.
We're pleased with this agreement as ensures the ongoing financial viability of the plant.
I wish that the Governor's office de.
Sure and electric utilities, working a collaborative and thoughtful fashion to safeguard the state's.
<unk>.
The economy employment.
Energy security.
Next we continue to achieve constructive results across our various in normal course state level regulatory proceedings.
In North Carolina, we reached a nearly complete settlement with commission staff.
I forgot.
Operations in the state with interim rates based on a 9.75% or are we to be effective this month.
In Utah, our gas distribution business as filed its first post merger base rate proceeding, which we expect will conclude early next year.
Finally, we expect resolution Virginia are are we.
Seating later this month.
The updated aren't we will impact in the near term approximately $4 billion a rate base currently earning right what turns of 9.2%.
There are some up to 1%.
We estimate that every 50 basis point change in or are we would impact near term rider earnings.
My between one and two cents per share per year.
Next we expect to complete the transition to our newly up new operating segments by the end of this year.
As a reminder, and as shown on slide six.
We are reorganizing the way, we manage and report or operating segments Tomorrow.
Mostly aligned with their customer and regulatory profile.
During our fourth quarter earnings call early next year, we expect to provide our 2019 full year results and 2020 garden in conformity with these updated segment.
As discussed previously we believe that this new reporting structure will make.
Our company more accessible and we'll highlight a premium nature each of our businesses.
Turning to slide seven.
Two between first we announced that as part of our previously communicated intention to establish a permanent capital structure for the Cove point facility, we reached an agreement with the financial Investor affiliated with Brookfield.
To participate in an equity recapitalization that asset.
This transaction the financial impacts of which are already included in our existing earnings growth earnings growth guidance accomplishes several key objectives, including.
Highlighting the intrinsic value created.
You did minions five.
Your development efforts within implied enterprise value of nearly $800 billion.
Compared to a construction cost at the time of liquefaction completion of just over $4 billion.
[noise] redeploying capital from the low growth annuity type area into our robust regulated growth capital program.
Preserving full operational control, it's building with no impact on existing customer contracts or employees.
And reducing dominion's annual common equity financing needs in the coming years levels described in our March Investor Day.
Immediately upon close expected later this year, we will use 100% the.
To retire parent level debt.
This transaction, which is attractively addresses the equity portion that's still these long term capital structure is step one of two.
As we intend to finalize long term debt related to the asset in the near future.
[noise] moving quickly to credit.
Turning to you.
20 aging, we took major steps to improve our balance sheet, while also reducing our business risk profile.
We expect that our full year 2019 credit metrics will be supported our existing credit ratings.
With debt coverage ratios normalize for merger related charges in the mid teen.
[noise] moving out.
Operating earnings guidance on slide eight.
As usual our operating earnings guidance range assumes normal weather variations from which could cause results to be towards the top or the bottom of these ranges.
For the fourth quarter, we're initiating guidance of $1.10 cents to $1.25 cents per share.
Yeah.
Positive factors as compared to last year include the absence of the Millstone refueling outage.
Growth from regulated investment across electric and gas utility programs.
Contribution from the Southeast Energy group.
Commencement of the Millstone zero carbon contract.
Net capacity expense improvement.
And the impact of aluminum initiatives.
Negative factors as compared to last year include the impact of 2018 assets sale share issuance issuance.
Returning to normal weather.
This fourth quarter guidance implies a narrowing about 29 team full year guidance range to $4 15th.
To $4.30 per share.
No change to the midpoint of our original guidance.
Unfortunately, there were just Tom let me summarize it today, we reported our 15th consecutive quarter.
The weather normalized operating EEP yeah.
Well the midpoint of our guidance range.
Weird.
Assuming the midpoint and narrowing or guidance range between 19 full year operating EPA.
And we are reiterating our long term dps growth expectation of approximately 5% next year and 5% plus thereafter.
I'll now turn call over to Tom.
Thank you Jim and good morning.
<unk>.
A reminder, that safety is our first core value I'm pleased to report that our year to date safety performance is consistent with a record setting results. We have achieved in the last few years were focused on continuing that trend over the last two months of 29 change [noise].
Turning to slide nine I.
I will now address the topics Jim mentioned.
In his remarks first three weeks ago, we released our latest sustainability corporate responsibility for.
It's our most comprehensive report today.
And it delivers on the company's commitment to complete transparency.
Good embraces yes, GE disclose your best practices in.
Includes information.
Corporate governance, and stakeholder engagement, social and workforce metrics and indices that map to standard global reporting initiative and the sustainability accounting standards for as well as the United Nations Sustainable development goals.
Highlights for include.
Dominion has reduced carbon.
Excited emissions by 52% since 2000 spot.
We've also preventive more than 250000 metric tons methinks entering the atmosphere more gas infrastructure assets in the past decade.
Which is equivalent planting more than 100 million treats.
The company has raised its.
Its diverse hiring right, 27% to 42% <unk> 2013 to 28 came.
And one in every five new hires is about.
In 2018 Dominion contributed nearly $35 million, social betterment and employees volunteered more than 126000 hours.
[noise] community service.
In August we announced plans to the largest Electra School bus initiative in the nation.
Innovative effort aims to replace 100% of the approximately 13000 diesel powered school buses and our Virginia Electric utility service territory by 23rd.
Which would be the equivalent in emission reductions of removing 65000 cars on the road.
The vehicle to grid technology allows the bus batteries store and then released energy out of the grid I'm curious high demand.
On the buses or not he is.
Finally last week, we announced that we are expanding.
Our 50 50 partnership with Smithfield foods to become the largest renewable natural gas supplier nation.
Total we're doubling our combined investment over the next 10 years to half a billion dollars, which will allow us to capture orangey that reduces greenhouse gas emissions that are equivalent to taking 500000 cars.
Off the road.
We're planning 40 million new treats.
We are one of the most sustainable and innovative energy companies in the United States, and we believe that our customers and shareholders will benefit from our efforts.
Turning to slide since we have several important initiatives underway in Virginia.
First offshore wind.
Last month, we received key approvals from the Bureau of Ocean Energy management foam regarding new design fabrication and installation of our 12 megawatt pilot project, which is under construction and scheduled to enter service late next year.
The knowledge.
Parents, we obtained from the permitting construction and operation pilot will be invaluable as we embark on our programs to develop 2.6 gigawatts of utility scale offshore wind.
In support of government no governor ignore them recent executive order number 43.
That order provided clear direction to policymakers and.
Agencies regarding the state sustainable energy future.
As well as a challenge the Dominion energy to accelerate the time slot timeline more renewables our system.
We embrace.
Our attention to spring the project, which is located 27 miles off the coast to Virginia Beach online in.
The phases of 880 megawatts each.
The three phases water service and 2024, 2025, 2026 and taken together will be the largest offshore wind inflation in the United States.
I, just would be developed and Oh by Dominion Energy, Virginia.
What's regulated cost recovery subject to approval by the Virginia State Corporation Commission.
Our current five your capital plan provided at our Investor Day identifies $1.1 billion for offshore wind inclusive of $300 million for the pot.
Well the memory cost estimates, which we will work hard to.
The interest of customer savings.
Total an additional $7 billion.
We anticipate capital expenditures to ramp up in the latter part of our current five year plan with the most significant investment to take place.
2024 through 2026.
We look forward to working.
Mostly with policymakers regulators and other stakeholders to establish Virginia as the center of the United States offshore wind industry.
Efforts presently underway include Ocean survey work and the development of the construction operations plant, which is targeted for some metal to bomb late next year.
We will make additional.
Final details available as we continue to make progress.
Offshore wind is just one of the many investment program, we continue to execute on for the benefit of our customers.
And in accordance with the grid transformation and security.
Four weeks ago, we filed for a second phase of great transmission investments to complement the cyber.
Physical security telecommunication investments [noise].
Already approved by the FCC This past January [noise].
The second phase, which calls for over $500 million capital investment through 2021.
Well enhance service to customers through implementation of new technologies in a series of new programs.
Belt with input from stakeholders and customers over the past several months.
As well as a thorough third party cost benefit analysis.
That analysis concluded the planned investments will deliver significant benefit to all customers across a wide range of areas. While also driving down we're driving reductions.
House gas emissions, increasing economic growth in the Commonwealth and providing savings to electric vehicle owners.
This phase includes the installation of nearly 1 billion smart meters as well as the new customer information platform, which allows customers to digitally manage their energy is.
I wouldn't see determination is.
Expected in about six months, where the recovery determination thereafter.
Overall, we expect our grid transmission investment programs totaled nearly $3 billion over a 10 year period.
Finally, two weeks ago, we announced an agreement with the Commonwealth, Virginia that combined with previously announced contracts.
Produced no.
Renewable power to be roughly 40, 545% of the state governments annual energy use which is the largest state renewable energy procurement in the country.
To accomplish this diminutive along approximately 345 megawatts, new solar facilities and sell the output of the state.
Under a long term power purchase agreement.
The balance of the megawatts will come from a third party on wind farm.
With these projects, we're nearly halfway filling the commitment we made the governor nor them. They have 3000 megawatts of solar and wind resources and service or under development of Virginia by 20.
22.
Turning to slide 11.
We have provided a brief summary of capital investment related to the GE asset.
As you can see we're taking significant steps in successfully implementing programs that have been identified by state policy makers is crucial for our stake.
Over the last several months.
She has approved approximately $1.6 billion of capital investment with an additional $800 million file and pending approval.
During the third quarter the commission approved rider.
Recovery for nearly $300 million of our rider E request, which was related to environmental upgrade.
Generating.
Since the last statewide election that took place two years ago Virginia's policymakers have supported on a bipartisan base.
Hi, This is common sense utility legislation it puts the Commonwealth firmly on a sustainable and modernize path to continue delivering low carbon affordable resilient power.
No.
Well examples include the grid transformation and security at 28 he.
Comprehensive coal Ash rural broadband solutions in 29.
As we execute on these policy priorities remain vigilant customer fill impacts.
We intend to keep rates reasonable and competitive in the future just as they are.
Today.
Turning to slide 12.
We continue to see very strong customer growth across our dad gas distribution franchise.
Spending our rider investment programs, including pipeline replacement is tracking in line with a five year approximately $2 billion Capex plans highlighted.
At our Investor day.
Last week, where she received approval from Utah Public Service Commission to proceed with our investment in a regulated reliability driven LNG, peaking facility.
And in West Virginia regulators recently approved the plan there will allow us to double our annual investment replacing infrastructure.
2023.
In South Carolina, our integration efforts and focus on operational excellence continues to proceed successfully.
Early September as Hurricane Dorian swept up the east coast, nearly 300000, arson, South Carolina electric customers as well as over 170.
Thousands of our North Carolina in Virginia customers experienced service disruptions.
Our crews worked around the clock hazardous conditions to quickly and safely restore power.
In fact in all three states, including South Carolina, where nearly 40% of our customers lost power service was restored.
Yes, Dan.
Three days.
As part of our commitment to relief efforts across Virginia, North and South Carolina. We also donated $250000 to the American Red Cross support the purchase supplies.
Small shelter for those neat.
Turning next to the Atlantic Coast pipeline on Slide 13.
Consistent with our expectations United State Supreme Court granted our appeal of the fourth circuits count faster decision, which relates to 80 piece crossing underneath the Appalachian Trail.
We expect the Supreme Court will schedule arguments to occur late winter or early spring of next year with a final decision no late.
In June 2020.
We're confident in our legal position and believe that the four circuits ruling.
Well be overturn.
Our focus remains on the Supreme Court appeal, but all other options remain avail.
Let me also dress to other points.
Regarding the project biological opinion.
I will reiterate our commentary from last quarter.
But there's nothing in the courts opinion on the four species that we expect we prevent a biological opinion from being reissue during this winter's tree felling wind up.
Even if the timing of the be out reissuance prevents us from taking full advantage of the window, including through.
The end of the first half of next year.
We do not expect the existing project cost estimate $7.3 billion to $7.8 billion to change.
This cost range, which we provided early this year.
Incorporated a variety of potential permit resolution in construction commencement timelines.
Including the successful 80 Supreme Court appeal.
We continue to expect project construction to be completed completed by the end of 2021 full commissioning to conclude in early 2022 [noise].
This past Tuesday, or store can hurt arguments regarding an appeal of our Buckingham compressor station minor.
<unk> Airport.
We remain confident that the extraordinary protections undertaken at the site as adapted to address yes, and as adapted to address beauty import more than satisfied about the process and stops as required by applicable law.
The permit provide for the most stringent controls for any compressor station in the United States.
We have demonstrated that admissions measured added beyond the station fence line will meet the highest public health standards as plot, even the most sense the populations and environments.
We expect the court issued a ruling within the next three months.
We expect the project will be able to deliver significant volumes to customers under our current time line even if its.
Permit needs more time to be resolved.
I'll also note that since the last quarterly call. We have continued to advance discussions with Atlantic coast pipeline customers regarding equitable resolution project cost increases.
We expect to reach an agreement in principle by the end up this year and we are confident that the result was satisfactory.
Bounced customer rates with project returns our customers demand for this critical and commonsense energy infrastructure is unwavering.
Turning to slide 14.
Early last month, we announced several leadership changes to better reflect the new financial and operating reporting structure that will take effect.
Later this year.
<unk> <unk> currently CEO power deliberate group will assume responsibility for Dominion energy, Virginia, and Dominion energy contracted generation.
<unk> currently see all the gas infrastructure group will assume responsibility for Dominion energy, South Carolina gas transmission and storage gas distribution.
In addition, Bob and diameter, each assume the title of Coke Chief operating officer.
Current rate currently chief administrative and compliance officer will become a chief of staff for Dominion Energy President of Dominion Energy services.
Bob Diane Carter, and Jim Chapman, Chief Financial Officer, Treasurer will continue to report directly to me.
These leaders are exceptionally well qualified to play important roles and the execution of our long term strategy and I congratulate them.
I also want to thank Paul Koonce will retire that coming months for his many years of dedicated service to our company is contributions will be missed and we wish him all the very best in his future endeavors.
With that I will summarize.
Today's release as follows.
We are on track to achieve full year safety results that are consistent with a record setting performance recent years.
We continue to take industry, leading innovative steps to demonstrate our leadership on environmental social and governance matters.
We achieved weather normalized operating earnings.
Exceeded the midpoint of our guidance range for the 15th consecutive quarter.
We're narrowing our full year 2019 operating earnings per share guidance and affirming our original midpoint.
We are reiterating our long term MPS growth expectation.
Approximately 5% next year and 5% plus thereafter.
And we're making significant progress the cap across our capital investment program. So the benefit of our customers. We will now be happy to answer your question [noise].
[noise]. Thank you [noise] at this time, we will open the floor for questions. If you would like to ask a question. Please proceed.
Starkey followed by the one key like your Touchtone phone now.
If at any time, you would like to yourself in the question you can do so by pressing star to again to ask a question at this time. Please press star one now when selected please limit your inquiry to one question plus one follow up.
Well take our first question and that is premised sharp <unk> with Guggenheim Partners. Please go ahead.
Hey, good morning, guys.
Morning.
So Tom you you know you obviously highlighted a couple of.
Since you're you obviously highlighted you know the huge opportunity set you guys have would offshore wind right.
We know the development cycle could be kind of long we've seen it within yard I'm curious if you could talk a little bit around how you're thinking about contingencies around permitting construction.
And then as the project starts to go through construction, maybe just a little bit on financing I mean should we think about the first tranche of the projects self funding future.
Future projects, where the cash flows are generating so maybe how we should think about sort of the financing of what could be a very large capital outlay.
Thanks, I'll start and then Oh turn it over all consists of a spent an enormous amount of time work on this development.
Yeah, and and Jim Chapman can answer any further questions on the financing I would.
Mentioned, we are expecting rider recovery.
We'll seek brighter approval.
For all three phases.
Yep.
We've been working on this project for a six year.
We are bought the right lease option at least rights in 2013 auction.
Are there was run by ball.
And.
Ever since that time, we've been working with a variety of stakeholders.
<unk> make sure we had the right plan and we had the right.
Folks to help us to the pilot we got approval from the State Corporation Commission, it's been through phone we have the permits from one of things to keep in mind.
That differentiates us from the new England situation.
As we all the entire lease.
Our coastal region of Virginia.
Is 26 miles offshore it is not in.
Fishing grounds.
And it is not visible from the short.
So it's a very significant differentiating aspects of what's going on.
Here in Virginia, and what you've seen happen in new England, but with some of the macro level and that will turn it over to Paul to answer the balance your question [noise].
Thanks, Tom sorry, good morning, as Tom mentioned, we've been at for quite some time you know we expect as Tom mentioned in his prepared remarks to follow the construction operating permit.
About this time next year, a we've got a ample time to get the bone permit a in place in order to meet the first phase construction.
We will be starting the work now or the ocean mapping the geotech work the environmental studies, a and that will take place over the course of about 20.
20.
And having as Tom mentioned, having just gone through it on the Steve out project well that was our research area permit and this is a commercial and operating permit a the process is identical. So we know the stakeholders. We know the process and we feel really pretty good about it I'll ask Jim to comment on financing.
Two things one is as.
As Tom mentioned in his prepared remarks in our existing plan that we walk through into detail back in March.
We we highlighted 1.1 billion.
Being an offshore wind in our plan from 2019 to 23.
So obviously recent announcements are much larger dollars now, but the vast majority.
The increase is going to come in those years and completion 20 420 526.
So the majority of the spending to calm in our current planning horizon is already in our plans to walk through and the rest will update over time, it's time comes closer but given what Tom.
And just described this is all in a regulatory construct.
To be financed at that go.
No. It's a certainly achievable, but the details will come in the next a period.
Got it that's helpful. I mean, just around the GRP. The retirement plan is there any.
Stat, its and then I know you're past comments is supportive of your growth, maybe just a little bit of a sense on you know how that programs going how it's shaping own m. profile and in sort of bigger picture is you know VR P. offshore wind you know the rate plans you have in Virginia is.
There you point in time, when you can change the way you guy to grow like E. Moving from five plus more of a range, especially as we're trying to model what became commenced accretion is from offshore wind. It seems like between Cove point. Your plan is becoming much more visible so is there.
Oh point in time, when you can start to layer in more of the definitive growth range versus five plus.
Sure you leave clients that brings it to one question, Matt good job [laughter] Lucky.
And you know what does your guidance I mean.
A five year planning.
<unk>.
So are they spending and then he associated earnings.
So I just walked through the 1.1 billion, including the pilot I mean in our planet and earnings guidance. There. There are no. There's no chickens for now on that on that front.
On the VIP, you're right that's kinda.
Tom and touched it Oh early this earlier this year, we've talked about that as being a savings of five to six cents. This year, maybe double that my full run rate next year and diminishing over time as it's just getting back to two customers.
[laughter], we talked about that is being available.
<unk>.
Savings.
Offset unforeseen headwind and that's still the case.
Update you as this year as you know the vast majority of our business, 95% of our business is not commodity exposed anyway, the 5% I'm just not regulators are regulated like.
Yeah.
And we do not 5% of operating earnings there's a couple of things one is obviously the gas commodity environment is weak.
And our business is largely immune to that we have a little bit exposure, mostly around a single remaining processing plant, which is in west Virginia.
And that's a little bit of a headwind as those businesses go from like very small to even smaller this year. So that's a little bit of headwind.
[laughter] more materially, though this farm out program.
There has been very successful as you know char this monetizing anchorage and mineral resources I blow our store in steel.
We announced that program in early 2015, we give guidance to the into the decade of 450 to 500 million a pre tax earnings and we've been ticking along that kinda like clockwork were 75% do that.
<unk>.
But given the pricing given the commodity environment and the pricing that's available to us today.
Okay.
We're choosing not to transact on farm out this year.
No we're going to <unk>, we're going to hold acreage not value for pharma transactions in future periods.
When there's an improvement in the commodity pricing environment. So what that means it's obviously, we've just reiterated our guidance.
The.
That means we've overcome any.
Any unforeseen headwind.
Previously unforeseen relating to our decision not to transact on a farm out this year.
So that's basically ERP savings, which were using a pretty much as we described we would.
VIP savings and other other initiatives to overcome that.
Decision.
No change over time, Brett <unk> art.
Perfect guys. Thank you so much.
Q.
Thank you we will take our next question from Steve Fleishman with Wolfe Research. Please go ahead.
Yeah, Hey, good morning.
No.
Hey, Tom so the.
Your offshore wind is obviously different from really any other so far in that it's going to be done planned to be done at a regulated business. How do how do you know that that.
<unk> must be approved or.
Could there be people that want to try to bid for it et.
Cetera could you talk about that.
Sure well, we're the only one that owns the offshore lease.
We own 100% of the offshore at least we pay for it and the auction nobody else can build a wind farm.
Offer Virginia.
Governor nor them.
A few.
I guess a couple of months ago now.
Call for.
The construction of this wind farm.
Because it is intention to help Virginia develops into the center of the offshore wind industry, along the east coast.
And that's a challenge that we embrace.
Yes.
And he specifically said that he recognized that there maybe some who I.
I want to push back on that.
Our weather was necessary required or a good thing for Virginia that he was going to work very hard to ensure that the public policy and regulatory support what's in place.
To carry out.
[noise].
This plant and it was only after those statements that we went ahead with our announcement.
The full deployment, although we had been working obviously, because we filed for the PGM.
PJM and interconnection agreement. So there's obviously a process in front of US we are.
Highly confident.
There will be.
Carried out to fruition there is a lot of public support from us for this project, including from Oh.
Political leaders on both sides of the political fats, both Democrats and Republicans want to see this.
[noise] thing.
Happened. So we have all obviously there are there.
Long way to go on it, but we have high confidence level and it going for it'll be the only.
Offshore wind farm in federal waters.
Not be visible from shoreline.
So you don't have any of these visual impacts of concern people.
Environmental community is very supportive of the project going forward.
The economic development people in Tidewater, Virginia are very supportive <unk> 0.4, so.
Obviously, we don't have any guarantees that Steve we have a very high confidence level any outcome.
Okay, great. Thank you.
Thank you.
Thank you well take our next question from Julien Dumoulin Smith with Bank of America. Please go ahead.
Good morning team.
Morning, learning and Doug Congratulations to all those are receiving promotions here another number.
Perhaps just a pile on on this offshore wind question and perhaps to compliment that you talk about pets, finding ways to mitigate costa consumers can you talk a little bit more basically about the game plan first for qualifying [noise].
On the tax credit front.
Just given the.
Longevity of the plan, but if if you're starting today theory, you should qualify the some of it and then and then separately you know when you when you come out with some more defensive and filings except maybe following the last question here.
The actually pursue the at the edge FCC level.
[laughter].
Well first let me just gives you a macro answer Julia ER and the folks who.
Got to promotions or in the room they hurt your congratulations.
On a macro based smelter over to Paul cuts.
We are very concerned here a about customer rates.
Ah, it's something we focus on all the time.
ER and because our goal is to ensure that our customer rates stay very competitive well below national averages below the regional averages and they are now and we intend for them to stay that way.
Including a with a construction.
Oh this one form so we will be working very hard with fabricators developers installers, we won't be the operators.
To ensure that we get a this the cost down as low as we can as we go ahead, which will be important for everybody involved are helping us with the project.
With that I'll turn it over to Paul Thanks, Tom Good morning, Julien again, just to follow up on Tom's comments about cost I think that's one of the key reasons why we broke the project up and three phases. So that we could.
Continue to let the supply chain mature I, let costs continue to come down so that the.
Packed a rates or minimize or just in terms of ITC and safe Harbor and of course as you know in order to qualify for ITC a treatment for an offshore wind farm you have to began construction this year.
We're looking at that we don't have any thing to comment about that but were.
Aware of that timing.
There maybe some things that we can do the safe harbor certain of those costs. So we're exploring that more to come on that that in 2020.
In terms of plans and filings were not as Tom said, we're going to fall for the phone application. This time next year.
We're not.
Prepared to say exactly when we're going to fall for the FCC application.
But I can tell you that Oh, we will be Kentucky, we will be conducting a mini public meetings over the course of 2020 as we are making environmental assessment, obviously marine life, a plant and not birds.
I will be doing ocean mapping it will be doing geotech analysis or subsurface analysis. So you'll begin to see all that sort of play out in 2020, and a I think that will be a good way to sort of pace when we might expect to make an FCC violent.
Got it but just to clarify that last question too.
How much of this isn't the five your windows you see it probably probably phase one if you will.
Drilling where are you guys mentioned, we've got through early on.
1.1 billion in total in our five year plan as we walked in March and for now.
The number.
It's something.
Additive to that that's right everything else comes in 20 420 526.
Okay, Alright fair enough ex <unk> and then just to clarify the prior one on 40, the the order <unk> does that change the criteria <unk> he's gonna be apply.
And that process [noise].
[noise] be Julien this is Paul.
The GTS say finds that offshore wind as in the public interest now the FCC process is well known.
Whether they are and how they conduct a market test anytime we bill generation for the benefit of benefit of our rate payers or there's a certain process that we follow.
And that's a process, we know well and we'll just stepped through that when that time comes.
Thanks for the patients got.
Thank you.
Thank you we will take our next question from Greg Gordon with Evercore. Please go ahead.
Thanks, guys I'm sure as question was like a the question from back to school one question, but in 27 parts right [noise].
[laughter] Oh.
Our <unk> when I first read the release I felt like it was kind of my first reaction was though this is kind of negative.
You know it looks like there could be slippage in the.
Biological permit, but now that I'm hearing your your your your commentary on it I feel less.
I guess, we should feel less concerned because you feel like even if the.
Even if the permit comes in after the turn of the year.
You've scrubbed your construction.
Cost forecasted you still feel like you can move the schedule around and comment on budget.
Thanks, Greg I'll turn it over to Diane Leopold who spends a lot of or like working on the Atlantic Coast pipeline.
Right.
Hi, yes.
When we looked at it I think you have it exactly right I mean, when we gave guidance earlier. This year, we looked at a lot of different scenarios and a lot of different contingencies to try to capture a variety of outcomes, including going to the Supreme Court, including when we would we start construction.
And so just given looking at the different segments of the pipeline, we feel comfortable with that we are well within what we've incorporated for both cost and schedule at this point.
Can you can you can you give us some some sense of why the permit may have slipped a few more months.
Is it just that are there being extra careful to make sure that they comply with all the nuances of the of the remained and don't get another stay or is there something else going on.
Greg I don't think we're trying to imply that we think that permit it slipped what we're trying to say, yes, even if it does.
We're still on schedule and cost.
Okay, Great. My last question I think what.
Okay, sorry, I'm, sorry, if I misconstrue that the <unk> last last part of my question.
You you you you talked to negotiations with the off takers on the pipe who are mainly.
Only utilities I'm you know this is a demand driven pipe they need the gas.
Which is why you're building it its not a it's not a supply push.
Situation.
I think investors are concerned that with the cost overruns. This winds up being a pipe that doesn't earn its cost of capital.
But you seem to be.
Positioning it in such a way that you should be able to potentially share the burden of those unexpected cost increases with the with because with the with the utilities who are taking the capacity. So can you can you talk through like how much of that.
You are you think you'll be able to share given.
The unforeseen.
Delays in the pipe and what type of return we should expect on the pipe if you're successful.
Yeah, I did see Diane Leopold again.
I don't get into the actual expected project returns I will tell you as Tom said.
In the actual scrapped.
Customers very much need this pipeline up for regional security for their own customers need that's clearly a gun NAND DRAM many pipeline and we are in very constructive negotiations with the customer for.
You're right to their customers as well as fan returns for us and more comfortable with the returns I won't get for the pipeline.
Okay. Thank you very much.
Thank you Greg.
Thank you we will take our next question from Christopher Turnure with JP Morgan.
Please go ahead.
Good morning, guys.
I think you spent a lot of time in your prepared remarks on the political environment in Virginia.
And kind of you know how you guys are thinking about that and that the legislation from last year, but could you give us an update to both.
The South Carolina, and North Carolina, or pardon Me, South Carolina, Virginia regulatory environment right now in political environments and also just the latest on your South Carolina regulatory strategy for next year.
Sure.
The yes.
We announced the south.
Carolina Scana merger.
I guess late and I guess it was 17 and then.
But the year 18 going through the process and it was a.
Relatively a hot political climate in South Carolina over because the scana, saying he cooper's cancellation.
Of the expansion of the summer.
Yes.
We want went through that whole process very transparently answered all the questions. Once all the meetings or and then as we close the transaction.
We said to a policy makers that our intention.
Was to stay out of the headlines youre blocking and tackling provides reliable.
Service, both gas and electric at reasonable and much reduced electric rates.
And just be part of the community.
As our goal and that's exactly what's happened in the state of South Carolina things are.
Barry.
So moving along very well, they're progressing well.
We're out of the headlines except when we do things a in the communities we serve.
Including the ER.
Extraordinarily propped restoration of the loss of electricity for 40% of our cost.
First got all are life's back on in three days.
All that.
Helps.
Oh community understand a their new names.
We will be filing or rate case next year, we are under earning in South Carolina, it's well known to everybody and Oh well formulating.
Completing that regulatory strategy now, but we will be filing or and I can win is a threat may got pop for may want before may want a 20 twond.
Yeah, I'm, sorry in North Carolina.
We have we have a rate case brought in North Carolina, we settle all but one or two we.
Returns to be relatively small issues gotta agreed on 9.75% or are we very constructive regulatory environment and economic development environment North Carolina.
[noise] [noise] [noise] and in Virginia, if the.
Yes, we'd sure stays Republican would that change some of the plans that you've been talking about today, we're kind of shift your capital spending at all and a different direction.
No.
We are long history at working with whatever parties in the majority.
Yeah and whatever.
For the two houses.
Democratic Governors Republican Governors Democratic leaders and Republican leaders.
So no I don't expect any changes to our plan.
Okay and then my second question is just on equity needs going forward I I think you partially addressed this in your prepared remarks.
Will be sale [laughter] stake in Cove point, meaning that you will not need any equity internal or external for the next several years.
Yeah going back to our its Jim will go back to our guidance from our analyst day back in a in March we had shown a projection through 21.
It had equity component to support our regulated capital spending.
300 million hours of drip.
As long and $3 million to $500 million per year, ATM to all done or programs.
I'm with the coal financing.
We are using 100% as is.
Proceeds by year end $2 billion to pay down parent level debt as I mentioned.
Well, we will effectively offset.
The ATM portion of that prior guidance and 20 and 21.
Taking a midpoint of that three to 500 million already is 400, so that that goes to zero, but in the drip drip.
It was just always onto that will be the only remaining program, it's active or equity in those years.
Okay, that's clear.
Thank you.
[noise]. Thank you we'll take our next question from Michael Weinstein with.
Credit Suisse. Please go ahead.
Hi, guys.
Hey, good morning.
Good morning.
Is there any interest in selling an additional state can call point. This client or is this now you are now at the minimum desired level of ownership Ah. Thank you. Thank you for that question, we Ah Theres no interest in that were at our desired.
Outcome.
Okay and.
In the discussions with the CP customers.
I just wanted to be clear that talks or cost increases above.
6.25 billion. That's currently in the agreement.
Yes.
Yes, it's a alone.
Well as anything in the contract, but it's basically negotiating cost increases up to the current anticipated level.
And is there anything you can say about what those contracts obligate each party.
You know on the face it at this point before negotiations.
No no we don't want.
Hi, Thanks.
Okay and.
And just one last question I had is about the renewable tariff.
Some major seen I customers, Virginia, and what can do.
Part of suppliers and have you guys has Virginia.
The Virginia utility received permission to have its own.
Well tariff at this point so they can compete against these renewable suppliers.
Well I stop load answer that question.
Michael Let's ask Bob we have pending application for a 100%.
Renewable energy tariff as you know and Virginia law.
Customers.
And I see service from a competitive service provider on less utility has a 100% renewable tariffs we filed for one earlier this year well I'm hearing on that in November but.
[laughter] Stink Corporation Commission staff all their testimony yesterday I did not raise significant objections to our proposal and one that we had.
While.
As modeled closely on one it was approved earlier by the commission. So we feel very good about where that will go.
Okay, great. Thank you.
Thank you.
Thank you [laughter]. This does conclude this morning's conference call.
You may now disconnect your lines and enjoy your day.
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