Q3 2019 Earnings Call
Thank you for your patience the Black Hills Corporation earnings Conference call will begin shortly again, thank you for standing by.
Good day, ladies and gentlemen, and Woken City Black Hills Corporation third quarter 2019 earnings Conference call. My name is Daniel when I will be your coordinator for today at this time all participants are in listen only mode. Following his prepared remarks, there will be a question and answer session. If you'd like to participate in this portion of the call. Please press star followed by one.
He time during the conference if assistance as needed a anytime during the call. Please press star followed by zero coordinator, we'll be happy to assist you. As a reminder, this conference is being recorded for replay purposes I would now like to turn the presentation over to Mr. Jerome Nichols director of Investor Relations Blackrock Black Hills Corporation. Please proceed sir.
Thank you Daniel Good morning, everyone. Welcome to Black Hills Corporation third quarter 2019 earnings Conference call before we begin today, we would like to know the Black Hills will be attending the E. I Financial conference starting November 10th in Orlando, Florida.
Our leadership will be making the presentation after conference and the materials and webcast information will be posted on our website at www Dot Black Hills, <unk> Dot com under the Investor Relations heading.
Leading our quarterly earnings discussion today, our might Evans, President and Chief Executive Officer.
And rich Kinzley, senior Vice President and Chief Financial Officer.
During our earnings discussion today some of the comments, we may or may contain forward looking statements as defined by the Securities and Exchange Commission and there are a number of uncertainties inherent in such comments, although we believe that our expectations and beliefs are based on reasonable assumptions actual.
Results may differ materially.
We direct you to our earnings release slide two of the Investor presentation on our website.
And our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission from West to somewhat the factors that could cause future results to differ materially from our expectations.
I'll turn the call over to lend Avon's. Thank you Jerome good morning, everyone. Thank you for joining US this morning and for your interest in Black Hills.
Before I dive into the quarter's results I'd like to start this meeting as we do own meetings, the Black Hills, what the safety focus first I'd like to personally think the teams within maintaining an hardening our infrastructure systems over the past several years. This winter is already hit much of our service territory in the past several weeks.
In a recent snowstorm for system sustain some pretty stiff headwinds here in South Dakota with wind gusts greater than 80 miles per hour at one point, it's noteworthy that despite those conditions, we did not experience a single customer outage related to the storm ugliness says a lot about the team of men and women who are designing.
Constructing and maintaining our systems. Many that team are listening to this call today or won't later on and I want to take a moment. So thank you for your focus on safety well you maintain a persistent focus on keeping yourself your fellow team mates and our customers in our community Safe every day well done.
I'll start on slide five.
Oh I am pleased with our solid third quarter results earnings, but our expectations. Our operations team performed well and we made excellent progress executing our strategy to grow long term value for both for customers and our shareholders.
On the left side to the slide being ready for our customers is what we focus on every day.
We continue to de lever for the safety reliability and the growth needs of our customers and the communities we serve.
We are focused on the safety and integrity of our infrastructure systems using long term programmatic approach to continuously upgrade our systems our teams across the company advance these programs on schedule.
One of the most important focus as we have each day, the safety of our employee team and our customers and ensuring the integrity of our electric and natural gas infrastructure systems.
As I indicated in my opening comments, we take great pride in our electric reliability results in this clearly demonstrates our ready to serve commitment notably.
All three of our electric utilities have achieved our extra billing metrics in the top 15% for reliability.
This accomplishment reflects our thoughtful investment approach, our proactive planning and strong employee engagement to be ready when our customers flip the switch unexpected likes to turn on.
I'm proud of our teams continued execution on capital projects for customers, particularly when you consider the weather adversities, we faced this year.
We have nearly completed construction on two key strategic projects during the quarter, which will enhance customer reliability and capacity, enabling economic growth and the communities that we surge.
In addition to safety and reliability, we are delivering for our customers renewable energy needs.
Within weeks of commissioning 60 megawatt Busch Ranch to wind project I will talk more about this smartcore do one project later on.
We continue to transform the customer experience, we receive recently upgraded or web site, and we continue to identify and implement ways to make it easier for customers to do business with us.
While rich will discuss in earnings in detail, let me see I'm pleased we met our expectations. Despite another quarter of weather related challenges, our third quarter in year to date finance results of giving us confidence that we're narrowing our guidance range for both 2019 and for 2020 .
Let me now take your attention to the right sorry, the slides five.
Our team has executed well deploying a record level of customer focus capital this year.
Given our strong execution this year and given our improving clarity into long term project opportunities.
Releasing our current year in five years forecasts, but more than 5%.
We now expect to deploy a total $820 million in 2019 and at least $2.9 billion through 20 Twond two three.
We also continue to make strides in several key regulatory initiatives, particularly on our jurisdiction consolidation efforts, which will help us streamlining our business and our processes, while decreasing the number of go forward regulatory filings we were required.
And finally, our Gordon approved an increase to our dividend last week that increase conclude completes our 49.
Consecutive year of increasing or in the.
All in all we had a great third quarter before I move on I want to point out that we had an estimated rate base by state and buy fuel type.
Of year end 2018, you'll find that new disclosure in the slide deck appendix.
Moving to slide six.
I'll start with our notable accomplishments within the electric utilities.
In September we finished a multiyear multi segment project on behalf the South Dakota metrics, we placed in service the final leg of a 175 mile electric transmission line.
From rapid city, South Dakota Spiegel, Nebraska.
This project is a key strategic component to it enhances electric reliability.
Help us retain our industry, leading system realized right reliability metrics I mentioned, a few moments ago.
[noise] in Colorado and loyalty, we recorded new all time peak loads in July demonstrating continued overall customer demand Willis who both of those states.
In South Dakota, and Wyoming, our renewable ready subscription based program continued to advance very well.
We completed the subscription period in September and had strong customer interest exceeding the 40 megawatts of available energy from Macquarie Gitlin project.
Last Friday in response to that demand, we filed an amended renewable ready tariff with the South Dakota Public Utilities Commission to increase the capacity of the program.
The 40 megawatt Torija wind project, which is located near Cheyenne, Wyoming will be jointly owned by our South Dakota in Wyoming Electric utilities and remains on track to be placed in service next year.
Now moving to our natural gas utilities, we have nearly completed construction of our $54 million were 35 mile natural rich pipeline projects, where our Wyoming gas customers.
We expect the pipeline to be placed in service in mid November .
We continue to advance efforts to consolidate and simplify or natural gas jurisdictions in Colorado, Nebraska, and one thing to better and more efficiently serve our customers.
Wyoming, we recently reached the stipulation and settlement agreements in the consolidated rate review case.
A final settlement agreement with while controlling service Commission.
Stipulation and agreement are subject to review and approval by the Commission and we anticipate a decision from them by year end.
In Colorado, we continue to advance the pending consolidated rate review case, and we now expect to decision by the commission wholesale first quarter 2020 .
No Tober 29 in Nebraska Public Utilities Commission approved our application.
Request for legal consolidation.
We expect to consolidate our Nebraska gas utilities effective January one 2020.
Plenty to file a consolidation rate review in midyear 2020.
Moving on to slide seven now.
As we noted last quarter on August section, we submitted a request to FERC seeking approval of our do for power purchase agreement between Black Hills, Wyoming and its affiliate Wyoming electric.
Relating to decision from for now.
Construction is essentially complete on our $71 million 60 megawatts Busch Ranch to wind project, that's located near well blow Colorado.
We expect all turbines and the entire project to be in service by the middle of this month.
During the quarter, our mining segment completed negotiations the price reopener with Rocky Mountain power for the fuel supply contracts with wireless power plants.
The prices now reset to 17 doctors 94 cents per ton, which is effective July one 2019.
And this price is slightly lower compared to our last reset price.
$18 in 25 cents per ton.
Per ton, which was set in July of 2014.
And our corporate segment, our board recently declared a quarterly dividend of 53 in one have since per share.
Which represents a 5.9% increase over last quarter's dividend.
During the quarter, we completed our 2019 equity issuance, we issued approximately 389000 shares of common stock under our aftermarket equity offering program with net proceeds of approximately $30 billion.
During 2019, but yes, you net proceeds of $99 billion, new equity using our 18.
Shifting to debt financing, what you issued a total of $700 million and 10 year and 30 year notes to refinance upcoming maturities.
Fitch reaffirmed our corporate credit rating of Triple B, plus and maintaining a stable outlook during the quarter, we are committed to maintaining our solid investment grade credit risk.
And finally I'm excited about the two new appointments to our board of Directors you can review Kathleen Mcallister Simponi Gensets outstanding backgrounds, and our recent news release announcing their additions to our board.
Excellent additions to our board.
Now I'll turn it over Haaretz replenishment.
Thank you and good morning, everyone.
Excuse me.
I'm going to start on slide nine as noted we delivered solid third quarter financial performance that met our expectations.
We remain on track to hit our earnings targets for 2019, and 2020, and we narrowed our guidance range for both years by five cents on each end.
Updated assumptions for 2019 2020 guidance are included on appendix slides 45, and 46 of this presentation.
Third quarter EPS as adjusted was 44 cents compared to 42 cents in Q3 2018.
We estimate that weather negatively impacted results by two cents compared to last year's third quarter and by six cents compared to normal weather for the quarter I'll talk in more detail about weather impacts when I discuss business segments in a few slides.
Aside from weather results were strong for the quarter with net income as adjusted increasing by 16% compared to last year.
We're coming 11% dilution from increased share count.
[noise] on slide 10, we reconcile GAAP earnings to earnings as adjusted non-GAAP measure, we do this to isolate special items and communicate earnings a better represent our ongoing performance.
This slide displays the last five quarters and trailing 12 months as of September Thirtyth, 2018, and 29 team.
For the first half of 2019, we had no special items in the third quarter of 29 team. We recorded a noncash pretax impairment of $20 million or 25 cents per share after tax related to an investment in a privately held company.
27 team, we elected to discontinue our oil and gas business. We sold the vast majority of the assets of that business during 2018.
As part of the divestiture in early 2018, we contributed certain assets valued at 20 million into a third party oil and gas company for a minority ownership in that company.
The impairment was triggered in the third quarter. This year by an adverse change in future natural gas prices in a deterioration in earnings performance over the third Party company.
After the impairment only 8 million remains on our books related to that investment and it represents our only remaining oil and gas investment.
[noise] special items in 2018, not reflective of our ongoing performance, we're all income tax related.
First item reflected the impact of the tax cuts and jobs Act during 2018.
The second and larger item related to tax benefits of legal restructurings completed in 2018.
The impairment in 2019, and the tax related items in 2018 are not indicative of our ongoing performance and accordingly, we reflect them on an as adjusted basis.
Slide 11 is a waterfall chart illustrating the primary differences of our earnings results from Q3 2018 to Q3 2018.
All amounts on this chart, our net of income taxes.
I'll add more detail by segment on the next slide but at a very high level, our electric utilities had a strong quarter compared to last year, while our gas utilities overcame weather challenges to post a modest in gross margin increase.
Nonregulated margins were slightly lower than last year, and total AUM increased by less than 2%, reflecting solid cost management during the quarter.
Depreciation increased as a result of increased plant and service from our customer focused Capex program.
Interest expense and other income were slightly favorable to last year.
We experienced unfavorability in our effective income tax rate in Q3 2018 compared to the prior year when excluding the special items I discussed on the previous slide.
For the full year, our effective tax rate. This year is expected to be approximately 14% compared to approximately 18% last year again, excluding the special items.
The reduced effective tax rate in 2019 is driven by federal renewable energy production tax credits and onetime state and back investment tax credits for wind projects that we added this year.
On Slide 12 segment operating income results for the third quarter or compared to the prior year.
A few comments here and you can find additional details on Q3 year over year changes in gross margin operating expenses in our earnings release.
In our 10-Q, we will issue this afternoon.
And our electric utilities operating income for Q3, 2018 increased by $7.3 million compared to Q3 2018.
Gross margins increased by $9.6 million driven by warm summer weather.
Higher industrial demand and.
Our capacity charges the electric utility margins also compared favorably to prior year due to a regulatory settlement in Q3 2018.
I mean electric.
Cooling degree days were 27% Smartwan third quarter in this positively impacted margins electric utilities by an estimated 1.8 million compared to prior year end by 1.3 million compared to normal.
Operating expenses increased 2.4 million over Q3 last year, primarily due to higher employee costs outside services and depreciation expense.
And our gas utilities operating income for Q3 2019 increased by half a million dollars compared to Q3 2018.
Gross margins increased by 2.1 billion benefiting from new rates rider recovery customer growth in our service territories.
These benefits were partially offset by unfavorable weather, which impacted margin in two ways first we normally get some heating load in September but this year heating degree days were 62% below normal in the third quarter.
Second excessive precipitation negatively impacted irrigation modes for agricultural customers and our Nebraska gas service territory.
In total for the third quarter, we estimate weather adversely impacted margins gas utilities by 3.4 million compared to prior year in by 5.8 billion compared to normal.
Operating expenses increased by 1.7, primarily from higher outside services employee costs depreciation.
Okay, and I'll remind everyone that second third quarters are seasonally low income quarters for the gas utilities as most of our income segment has generated in the first and fourth quarters during the heating season.
On the bottom half that slide 12 at our power generation segment operating income for Q3, 2018 decreased 1.3 million compared to Q3 2018.
Revenue increased in the current year due to higher contract prices received it increased wind generation, but that was more than offset by higher operating expenses due to higher depreciation and property taxes from new wind assets.
The earnings benefit from our new when projects come through reduced income tax expense due to the federal production tax credits, we get from these projects.
Operating income in our mining segment decreased by 1.2.
Currently due to an unplanned and planned generation outages at the white power plant, which negatively impacted sales for the quarter.
Slide 13 shows our financial position through the lens and capital structure credit ratings and financial flexibility our credit ratings remain a triple b plus at both Fitch and S&P.
Beat up late two at Moody's, where the stable outlook in all three agencies.
We remain committed to maintaining our strong investment credit create ratings.
Given low interest rates in favor of favorable market conditions as Lynn mentioned, we issued 700 million new long term public debt in early October to pay out maturities, we had upcoming 2020 2021.
Good shape from a debt mature liquidity perspective.
At September Thirtyth, our net debt to capitalization ratio is 58.9%, which is consistent with where we weren't last year end.
Mainly due to a record 2019 capital spending program over 800 million.
We issued $100 million of equity through our at the market offering program. During the first three quarters. This year to help fund that capex.
We don't anticipate issue any further equity in the fourth quarter.
You'll note in our 2020 guidance assumptions on slide 46 in the appendix that we expect issue age to 100 million of equity through the ATM program in 2020.
This is an increase from prior guidance as we increased our Capex for 2019 2020 by 83 million from previous disclosures by 140 million total for 2019 through 2023.
It's going to speak to Capex program here shortly.
Excuse me.
Debt to total capitalization will likely remain under 50% to 59% range through 2020, we continue to target a debt to total cap ratio in the mid fiftys over the longer term.
Slide 14 illustrates our dividend track record, we've grown the dividends and faster rate. The past few years with 12 cents increases in 2013 in 2018, demonstrating our confidence in our future earnings growth potential.
We maintain our dividend payout ratio target of 50% to 60% bps.
Ill turn it back to one now through the strategic overview.
Thank you rich moving on slide 16.
Growing earnings as we invest in our customers' needs were centered on system safety integrity.
Building customer growth.
Based on the current opportunities across our expensive infrastructure systems, we expect to deliver long term earnings growth above the utility average, we also expect to realize incremental growth opportunities from generation and other projects.
Slide 17 illustrates how we think about executing our customer focused strategy, we work to align our people our processes and use of technology and analytics to meet and support our customers growing energy needs.
Slide 18.
Illustrates the strategic diversity of our utility business in the seasonality of earnings.
Note that our third quarter earnings were driven by the electric utilities.
Expect the fourth and first quarters to have much stronger gas utility results.
Slide 19 illustrates our expansive electric and natural gas infrastructure systems. These systems across eight states provide a strong base of organic opportunities to invest in maintaining and modernizing our red for customer needs.
Moving to slide 20.
Our capital plan over the next five years is focused primarily on projects and initiatives that maintain safety and reliability and fosters customer growth.
You will know that our forecasted investment far exceeds depreciation, which will translate to future earnings opportunities.
We have refreshed our five year capital investment forecast and have added $148 million of investment opportunities with the largest portion of the increase in the gas utilities.
So now we plan to get complete $820 million of capital investment in 2019 in $2.9 billion through 2023.
Beyond 2023, we expect the base of at least $375 million and recurring utility capital opportunities.
Included that detail by utility in the Appendix tour slide deck.
We take a relatively conservative approach to our capital forecast. We include opportunities. We are relatively certain to occur and then we had capital as we gain more clarity in comfort around projects, we anticipate that additional capital opportunities are likely over the full plan period.
Well provide an additional year of capital forecast at our Q4 earnings call.
To help maintain a five year rolling forecast.
Slide 21.
This slide illustrates our capital plan as a utility focus plant with timely recovery most of these investments.
Slide 22.
We added this slide last quarter and that helps illustrate our commitment to managing our environment and social impacts while we maintain strong governance and ensure we continued to deliver a sustainable and strong future for all of our stakeholders.
Slide 23.
Our focus on operational excellence allows us to deliver stable consistent results for customers and our investors.
Our employee safety performance continues to be positive.
I mentioned earlier, all three of our electric utilities rank among the top 15% of all utilities with a lowest customer outage minutes during 2018, something we're quite proud of.
Also our Black Hills employee team has a highly engaged team in September we were recognizes the top 50, most engaged workplace.
Slide 24, this slide illustrates the results of executing our customer focused strategy delivering strong long term total shareholder returns.
Slide 25 is our 2019 scorecard, we we publish this to hold ourselves accountable to you our shareholders.
We published our major initiatives scorecard, each year, we've been doing that for awhile.
Made strong progress during the quarter checking off several items, including.
Second we completed the rapid city to Steagall transmission line, and we'll be able to check off the bush rents to went farmland next week or so.
We obtained approval to provide tax reform benefits to Wyoming utility customers.
So enhanced or web based customer options with the rollout with an upgraded web sites and we anticipate checking off many more items during our Q4 earnings call. It an update.
To quickly recap the quarter, we delivered earnings growth that met our expectations, we had strong operational performance.
We also completed several important capital projects despite challenging weather during the year.
Yes, we refined our long term capital investment forecast.
Making excellent progress on key regulatory and growth initiatives going on a good quarter.
That concludes our prepared remarks, and we're happy to entertain questions.
Ladies and gentlemen, we are ready to open the lines for questions.
Wish to ask a question. Please press star followed by one on your touched on telephone. If your question has been answered or you wish to withdraw your question press the pound key again press star one to ask your question. Please standby for your first question.
Our first question comes from Julien Dumoulin Smith with Bank of America. Your line is now.
Hey, good morning, Tim.
Turning Julien.
Howdy, so perhaps first it can you comment a little bit on the Y. Gen process than just in terms of the potential.
Pathways here to just coming to resolution here I know you, perhaps we've talked about over the past, but just given where we stand today with FERC. Just can you elaborate a little bit on the potential pathways and how you see things as they stand today, a little bit more detail and then I've got a follow up on the numbers.
Sure.
We filed as we stated as you know what's referred to approve the of method PPNR, a new pp a between the new affiliate companies.
Received a request for further information from FERC staff.
Solidifying are asking for verification of lit a new PPA would start and so we filed we submitted our response to that which then re initiated.
Same period for them to decide that particular application. So we are literally just simply waiting for you make the decision as we speak.
Got it or maybe I should have asked in the context, if FERC doesn't act or what are the other avenues here.
To clarify.
No we simply wait for them at this point.
They have a statutory I believe time frame within which they make that decision.
Tenda statutory timeframe is not run ins were waiting for that decision.
Okay fair enough.
Can I turn back to some of the 2020 guidance updated or can you just clarify a little bit further just the thought process on the higher equity.
Clearly raising capex in tandem I suppose I, probably understand that just to elaborate a little bit further on on just the uptake is that simply to fund the that Capex are you thinking about shoring up the balance sheet, where did that data this point.
That's probably the best way to ask that about the increased.
Equity I suppose.
Yes, I mean, clearly, it's the increasing Capex Julien.
Increasing this year at next year's Capex by 83 million Bucks.
To be equity needs that were in the prior guidance at 48 million up to 80 to 100 million ties to that Capex increase in and just our continued effort to.
Not only shore up the balance sheet, but make sure.
For regulatory proceedings were getting net debt to total cap moving right direction.
Got it right so with respect to the actual voted debt metric that you're thinking about nothing really moving around you're not really shoring up the balance sheet, but for funding incremental growth you're right.
Exactly.
Okay excellent anything else with respect to jurisdictions that we should be focused on here, obviously seeing the stock under a certain amount of pressure today. So I just want to perhaps provide a little bit of a platform to make sure we're not missing anything on any other jurisdictions.
No. We've got the pending rate cases, which we just went through those are going well from our perspective, taking risk off the table with each one as we reach a settlement for example in Wyoming, We had a one day hearing.
Not too long ago in Colorado, and we're not waiting for the A.J. decision, which will then go to the commission or approval and Nebraska, we received approval to consolidate the two utilities there.
So now we're set up well to consider filing our rate case in mid 2020, so things are going quite well there.
I'll leave it there thank you guys.
Thanks jokes Julien.
Thank you as a reminder, ladies and gentlemen that Star then one to ask a question. Our next question comes from Michael Weinstein with Credit Suisse. Your line is now open.
Hi, good morning.
Good morning, Michael.
Maybe you could just go through.
Some of the priorities you see going forward.
<unk> increased the capital program, our capital plans and the outer years.
Kinds of projects that goes for.
Kinds of programs do you think will start to ramp up throughout the mid 20 Twentys head into the next decade.
And.
What do you see the need for capital spending.
Thank you.
As we indicated in our confidence, we're seeing quite a bit of opportunity and natural gas utilities.
As we did Sourcegas acquisition and combined our two systems together assistance, we acquired from equivalent box, a decade ago and system in Cheyenne and source test system, we're finding lots of opportunity with respect to mitigating risk.
Shoring up in improving our system. For example, we have at risk meters and several of our states where meters were installed near St. Snow Lake from homes, and things and buildings and things of that nature. We've got then wont pipe that we have identified across our territory.
Hasn't bare steel we continue to too.
Refresh and replace.
Contests, and many of our state so we've inherited a number of arm task.
That have challenges with risk, but with that are related to them.
With respect to customers safety. So we have worked very diligently with our commissions and have programs in place now replacements fire arm tabs and that's going to take this for a couple of years to complete. There. Then we also have some cathartic steel opportunities that we're focused on so we've got opportunity to continue to make state and continue to keep.
Well, our natural gas utilities, while also as we've mentioned we've got the opportunity for the additional capex.
As we add renewables.
The project.
Or Corey jail, so while we haven't started construction of our oversubscribed.
So thats given us an opportunity to take advantage of some procedural rules with our South Dakota Convention to asked for an increase the that tariff, which will allow us to match additional capital spending with respect that project and of course Busch Ranch to represents the opportunity to continue to me the renewable portfolio standards.
Hello.
So I think at a high level. That's the things were focused on Mike Yes, continuing for that was we call that programmatic spending as we continue to appreciate understand.
The system that were responsible for maintaining.
Great and just a quick follow up I'm going to Juliens question.
Do you see the 80 to 100 million of equity next year as sort of an ongoing number beyond that.
Recurring annual type number or do you think it will decline because remember in the last.
Earlier before are used to think that it would be 80 100 million in this year and then down.
Down to a lower number for next year I'm just wondering if it does decline just to declines in 2021 now since 2020 more detail.
Yes based on the Capex, we've disclosed in 2021 beyond Michael I would expect some decrease in equity needs. After this year.
The 100.
For 2020, clearly is a reflection of the.
Three.
Crease that we disclosed for 2019 and 2020.
So yes, it if we find more projects and that Capex goes out up in 2021 and beyond which.
Certainly happens we'll be happy to continue issue 80 to 100 million of equity each year, if the capex numbers are higher but again based on what we've disclosed at this point I would expect that to decrease after 2020.
And the FX, Mike that we have.
Disclose this morning.
Not included in special project sizes, which I think there's no.
So I'm going to current spending that we are we are justified.
As an example, and talked about the potential expansion of course, now that additional capex, which would probably be close to $20 million in our disclose number until we get that shored up.
Right understood.
As they say those are good problems to have thanks, a lot has a good day.
Thank you Mikes Mike.
Thank you again to ask a question. Please press star one.
Our next question comes from Andrew Weisel with Scotiabank. Your line is now open.
Hey, good morning, everybody.
Morning, Andrew My first question. My first question, it's sort of I want to get into their long term S. Comment that you made that you expect growth to be above utility average.
I want to ask that it in an indirect way, though so obviously the dividend increase of 6%.
As shown on this slide that's taking your payout ratio up toward the higher end of the of the targeted 50% to 60% range should we take that to mean that you would think your future EPS growth will be 6% if not faster or are you just more indicating that you're comfortable at the high end of that payout range.
Well, certainly indicating allowed us we're comfortable with that range and we can stay within 50, 60% given where we see earnings going so I'd say, yes to the latter part of the question.
Okay fair enough.
Then if you could just quickly remind us the impact of their why that coal contract repricing.
About 30 cents lower I believe on the last call you said, you're expecting an impact of about a dollar to $1.50. So obviously, a pretty big change. There. If you could just talk about what what caused that numbers to kind of shake out where they did and how thats going to flow through that would be pretty helpful.
Well.
We've talked about how that repricing mechanism works in the past its got three factors one yes.
Pardon coal prices.
Yeah.
The cost to transport coal into that site and the third is the levelized cost of an offloading facility that would have to be built there again to keep the locational advantage that that we have with the mine mouth coal at that site.
So.
Some of Thats fairly mechanical and somewhat set up in 2014 repricing.
Yeah.
Excuse me what powder River prices were almost 12 months proceeding negotiation impacted that as well, but yes good outcome.
It's a quarter glass or roughly 30 cents less.
4 million according to a million tons get delivered to that plant each year. So.
Okay. Thank you very much good outcome. Thank you Andrew.
Thank you with no further questions I will return the call back over to lend Evans for closing remarks go ahead Sir.
Well. Thank you. Thank you very much for joining us today. We appreciate your interest in discussing what we think was a real solid quarter.
Look forward to seeing many of you.
Yes, We're conference next week.
All of your safe travels to Orlando lots. So look forward to updating you on our progress than about three months time, thanks very much for joining us today.
Thank you for your participation in today's conference. This concludes the presentation you may now disconnect good day.