Q3 2019 Earnings Call

Well actually Q3 2019 earnings Conference call. My name is Adrian and now the operator for today's call.

Hi, all participants are in others and only not.

Later, well conduct question answer session. During the question answer session. If he has a question. Please press Star then one on your Touchtone phone. Please note. This conference is Canaccord <unk> I'll now turn the call like which I will Cox Investor Relations manager can Wilcox you may begin.

Thanks, Andrea and good morning, everyone and welcome to investors third quarter 2019 earnings Conference call earnings were released pre market. This morning and are available on our website.

Joining me this morning, or just a core president and CEO , Dennis Gremillion Executive Vice President Treasurer, and CFO , Mark Ses Senior Vice President External Affairs, Chief customer Officer, Kevin Christie.

Thanks, Crescent controller, and principal accounting officer rank Brasil.

I would like to remind everyone that some of the statements that will be made today are forward looking statements involve assumptions risks and uncertainties, which are subject to change.

For reference to the various factors, which could cause actual results to differ materially from those discussed on today's call. Please refer to our 10-K for 2018 and 10-Q for the third quarter 2019, which are available on our website.

To begin this presentation I would like to recap the financial results presented in today's press release, our consolidated earnings for the third quarter of 2019 or eight cents per diluted share compared to 15 cents for the third quarter of 2018.

For the year to date consolidated earnings were two dogs and 21 cents per diluted share for 2019 compared to $1.37 last year.

Now I'll turn the discussion over to Dennis.

Thanks, John and good morning, everyone I'm very excited to be here today, and I'm deeply humbled by the honor and privilege to serve as a best as chief Executive I've been or does this stuff for 34 years and that's probably the best as President for the last 10 years I've worked closely alongside Scott. He has been a great friend and mentor to me and he.

As a cheap so much for our shareholders customers employees and communities, we serve and I know everyone. It. It just is grateful for his leadership.

I want to thank Scott for all that he has achieved throughout his career his career for our company and we all wish him well in his retirement, we will miss him greatly as he is no longer involved on the day to day operations of the company, but of course, we look forward to continuing our work with him on the board of directors.

At a time of great change on the energy industry I'm excited to meet the future head on and I am confident that a best is prepared to meet the challenges ahead, including achieving our clean energy goals that we proactively sat.

Turning our attention to our quarterly result, our earnings at each of our segments met our expectations for the third quarter and we remain on track to meet our consolidated guidance for the full year.

Regarding regulatory matters in October the Oregon Commission approved our natural gas general rate case settlement and new rates will go into effect January 15, 2020 in Idaho, we were able to reach at all party settlement agreement, where if approved new rates would take effect on December Onest 2009.

Team.

[noise] outcome is inline with our expectations.

And Washington, a settlement in principle has been reached in the current general rate cases, with all parties and all issues with the exception of decoupling and energy recovery mechanism related issues.

The settlement stipulation is engrafting stage and the parties, including the public Council unit of the Washington, or Attorney General's office, and the Sierra club, our securing the necessary approvals in their respective organizations.

The settlement stipulation is anticipated to be filed on or about November onest or excuse me November 21 or 2019.

And we'll require commission approval, we believe that the terms of the settlement and principal or fair for our customers and shareholders.

And finally, we continue to work through the regulatory process are related to the 2015 remained cases.

And then finally based on our 2019 results to date for the full year of 2019, we are confirming our earnings guidance with a consolidated range of $2.83 to two to $3.03 per diluted share. This includes one dollar and one cents per diluted share for the termination fee.

So you from hydro one in the first quarter, which was partially offset by the payment of related transaction costs and now I'll turn this presentation over to Mark.

Thank you Dennis good morning, everyone.

My usual obligatory Blackhawks comment we think you have not started out the season, very well and need to turn it around but fortunately it when we go to he I. This weekend I will not be worrying arrangers tie because we have played them yet.

For the third quarter of 2019, the Vista utilities contributed nine cents per diluted share compared to 18 cents in 2018 decrease over the prior years due to an increase in operating cost increased depreciation and power supply costs, mainly related to the or.

On a year to date basis of Mystic utilities contributed $2, an 11 cents per diluted share an increase from $1.39 last year and again, primarily due to the receipt of the termination fee from hydro one as well as a positive impact from general rate increases and customer growth.

These increases were partially offset by transaction costs related to the hydro one transaction.

Taxes associated with termination fee also increased transmission.

Distribution and all of them costs and increased depreciation and amortization.

In addition in the second quarter, we announced a $7 million donation commitment.

That impacted our results the energy recover messenger met mechanism in Washington was a pre tax expense of 2.4 million in the third quarter compared to the pre tax expense of <unk> point 2 million last year.

And year to date, we have a benefit of 1.1 million compared to a benefit of 5.6 million last year.

We continue to be committed to investing in the necessary capital in our utility infrastructure and we expect the Vista utilities capital expenditures to total about 435 million for 2019.

Regarding liquidity.

At the end of September we had $179 million available liquidity under our committed line of credit and in September we entered into a bond purchase agreement to issue a $180 million a first mortgage bonds in November of 2019.

No further long term debt issuances are expected for this year.

During 2019, we expect issue up to $65 million of equity of which 42.9 million has been issued at the nine months ended September thirtyth.

We intend to use the proceeds from our issuances to refinance maturing long term debt, we have a $90 million maturity in December .

Plan funded our fund our planned Ics capital expenditures and maintain an appropriate capital structure.

As Dennis mentioned earlier, we are confirming our 2019 guidance with the consolidated range of $2.83 to $3.03 per diluted share, which includes a dollar one for the termination fee and the payment of related transaction costs.

Going forward, we expect to continue to strive to reduce or regulatory timing lag and more closely align our.

Returns with those authorized by 2022.

Achieved this we anticipate an annual earnings growth of 9% to 10% from 2022 to 2012 from 2020 to 2022.

The return to our normal four or 5% growth rate. Following 2022, and this is consistent with the with the expectations, we set out all year.

The earnings growth radar based on the midpoint of our original 2019 earnings guidance as a starting point and exclude the dollar one per diluted share related to the hydro one transaction.

These growth rates also assume timely in appropriate rate relief in our jurisdictions.

We expect Divesture utilities to contribute in the range of $2 or 72 cents to $2.86 in 2019, including the dollar one for the termination fee.

The midpoint of our Vista utilities guidance does not include any expense or benefit under the arm and our current expectation is to be in a benefit position within the 75%, 25% company sharing van which is expected to add approximately five cents per diluted share.

Our outlook for this to utilities assumes among other variables normal precipitation temperatures and below normal hydro electric generation for the remainder of the year.

For 2019, we expect the LP to contribute in the range of nine to 13 cents per per diluted share in our outlook for them includes among other variables normal precipitation and hydro electric generation for the remainder of the year.

We expect our other businesses to contribute earnings in the range of two to four cents per diluted share.

Our guidance generally includes normal operating conditions and does not include unusual items as settlement discussions acquisitions or dispositions until the effects or no.

I'll now turn the call back over to John .

Thanks, Mark we'd now like tilt up this call for questions.

Thank you well now begin the question and answer session.

If you have a question. Please press Star then one on your Touchtone phone.

We wish to business MCU. Please press the Tom signed would hash key.

If you see a speaker phone you may need to pickup to answer first the suppressing the numbers. Once again if you have a question. Please press Star then one on your Touchtone phone and their first question comes in Richard.

Two trulia from Bank of America. Your line is open.

Hey, good morning, how you guys then.

Hi, good morning.

Hey, just curious if you can provide a little bit more details on the Washington rate case settlement.

Potentially around return parameters and that includes any forward looking attrition adjustments and what your expectations are for the for regulatory approval and timeline now.

Hi, This is Kevin Christy. Thanks for the question, we have a settlement in principle and the details art per not available until we file our stipulation.

On or about the 20 Onest of November .

The details that you're looking for would be found there I can say that we.

No the Washington to 11 month approval period state. So we would expect to have final approval on the settlement assuming that they approve it.

In April .

Got it.

Thanks, a lot and then just.

Curious why the the remained case was pushed back.

I guess December six for the hearing and let has been the receptiveness, thus far to the at $3 million settlement proposed.

This is Kevin.

Date was moved back at the.

Election of the Commission and.

I don't know exactly why but my suspicion is that they need more time to consider the arguments.

Can you remind me of the second question you asked there.

Yeah, just the receptiveness to the.

The $3 million settlement that was supposed to Mckay.

No that was just what we provided in testimony.

As a potential compromise position with the parties.

Got it but no commentary.

On.

That we.

I wouldn't expect commentary in the process given where it's at we've we're moving towards the hearing and litigation.

All right makes sense. Thanks.

Yes.

Your next question comes in fill and Cavallo from this point your line is helping.

Hi, guys. Thanks for taking my question.

Morning.

My prior question was actually just asked but I just wanted one follow up on the settlement stipulation.

I guess, how confident are you that the commission would uphold and eventual.

Settlement.

In the last several rate cases.

There have been a few alterations or.

Ultimately rejections of.

Settlements, so just trying to get a sense of your expectation there and how we might think about that.

So this is this is mark the.

Typically in our history. When we've had all party settlements with respect to general rate cases. The commission has been has has historically been favorable and approve those the ones that you're referring to a won't really general rate cases, those were the the transaction around the hydro one transaction and with all of the different things that have.

Kurt around the hydro and transaction that commission ruled against the all party settlement they did that and in in each of the jurisdictions. When we had them, but that was a completely different case historically in general rate cases, where we're talking about changing our rates with respect to our capital deployment in our expenses they have been.

Historically approved that doesn't mean that in the future theyre automatically approve they're not the commission has to wait the facts and circumstances of the case, but thats whats historically happened.

Okay. Thanks, guys.

And as a reminder tend to the Q. Please press Star then one and you touched on some under next question comes from David Amani from duration. Your line is open.

Hey, Thank you.

Congrats guys on the settlement Mrs. Each positive I'm, just not sure. If you can share any more color, but if it's possible, but I'd be interested to hear that more and how to settlement kind of came around because you know reading the intervenor testimony I had to mid I'm pleasantly surprised you guys are able to reached an all party settlement. It seemed like there was.

Kind of quite a spread in the bid ask there.

Yes, and that happens from time to time and and the parties always when we have a process like this the parties always get together and look to see if there's a way that we could compromise and reach a settlement and sometimes we're able to and and so.

Sometimes we're not in this case it it took a couple of times. This was I think the second time around of having settlement discussions and and the parties were able to come together and the details of that did they just really can't come out until we file and so that will be on or about like Kevin said 20 Onest of November so a couple of weeks, but we were able.

To get the all the parties together and reach a settlement. So we did because we felt that it made sense for like we said in our release, our customers and our shareholders. So.

We believe that's a positive.

Okay awesome. Thank you I agree, but thank you.

As a reminder, attached to the Q. Please press Star then one and you touched on time, we're standing back my question.

And we have never quit we have no further questions I will turn call back over to the speakers.

I want to thank everyone for joining us today, we certainly appreciate your interest in our company have a great day.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for your TV you may now disconnect.