Q3 2019 Earnings Call
At this time all participant lines are in listen only mode.
After the speakers presentation, there will be a question answer session.
Last question. During this session you will need to press star one of your telephone.
As a reminder, this call is being recorded.
I would now like to introduce your host for today's conference Mr. Omar job It Vice President Investor Relations at Hydro one. Please go ahead.
Good morning, everyone and thank you for joining us I'm here in Toronto, with our President and CEO Mark for Wesco.
And our Chief financial Officer personal coach.
First Mark will share an overview of hydro ones five years strategy in a few highlights from the quarter.
We will then turn it over to Chris to review the financial results.
Following these remarks, we will spend the remaining time answering as many of your questions as time permits. There also several slides that illustrate our corporate strategy as well as some of the points will go over in a moment.
They should be up on the webcast no worker dialed into the call. You can also find them or tighter ones website in the Investor Relations section under events and presentations.
Todays discussions will likely touch on estimates and other forward looking information.
You should review the cautionary language in today's earnings release, and our Mdna, which we filed this morning regarding the various factors assumptions and risk.
That could cause our actual results to differ as they applied to this call.
With that I turn the call over to our President and CEO Mark West though.
Thank you Omar and thank you to everyone for joining us today on the call I am delighted to have the opportunity to speak to you today about my vision for the company a higher one that is customer driven sustainable safe efficient and growing I believe we have a lot to be optimistic vote in Ontario, and I look forward to walking you through the.
Priorities of our corporate strategy.
So after starting in May I spent my first weeks and months in the role listening to people employees customers industry partners government 10 investors what I've learned in those conversations were foundational to charting a clear course for the company.
I learned the where an amazing company with so much to be proud of and with so many opportunities for growth and success right here in Ontario.
Since 2015 Hydra one has been on the right uh-huh achieving significant performance improvements on nearly every front.
We have the highest residential and small business customer satisfaction in a decade, we've achieved nearly $250 million and productivity savings since 2015, and we have made significant improvements to our system to improve reliability for our distribution customers.
In fact, I'm pleased to say that we saw residential and small business consumer satisfaction scores rise again in the third quarter to reach a new high 87%.
The strides were taken to put our customers first also earned us towards earlier. This month, we were recognized for customer service as like for customer service, if and as a contributor of the year 2019, Ontario Energy Association Awards.
I highlight these things because they represent some of the many achievements and I believe Hyder one should be proud of.
They also set the stage for evolution and are the foundation for future success.
What I learned from listening to shareholders and others only confirmed what I suspected having long watch the hydro one story from BC, we became distracted by opportunities beyond our borders.
So weren't focused narrowed our minds to the great opportunities that exist here at home.
It's time for hydro want to focus in on the things a matter, it's time for us to build on our strengths and seize opportunities right here in Ontario.
For the next five years, we will not actively pursue any mergers or acquisitions outside of Ontario.
Ontario was a prosperous growing province that its et cetera, but activity for Canada. This economic engine is geographically larger than Texas in more than doubled the size of California. It accounts for 40% of Canada's economy with a vibrant young and diverse population that is growing faster than some.
I'm countries Ontarios education system produces high quality talent with over 40000 stem graduates annually to.
To continue this rapid pace of development. It requires an electricity grid that is safe reliable and sustainable significant investment is required to maintain an upgrade our systems that were built in the 19 fifties and fostered the traditional industries that is our opportunity and our responsibility.
With input from our stakeholders and in collaboration with our board of Directors My executive team and I have developed a clear new strategy to ensure the long term success applied to one.
Having received board approval, we will now beginning executing on five strategic priorities that will make us a best in class North American utility by 2024 or five year strategy, we'll keep an intense focus on what matters most to our investors.
Customers employees, and our partners, which has strong results in safety efficiency reliability customer satisfaction and growth.
This strategy will enhance our ability to deliver value to shareholders and customers alike and shore up the growth rate, we have achieved in the past.
We're going to plan design build a grid that meets the needs of Ontario, and today and into the future. This means improving reliability through best in class asset management and investments in new technology that will allow us to automate our distribution network.
Sustainability will be central to our strategy as we prepare for more severe storms climate change will be taken into consideration in our planning processes to increase resilience and lower or environmental footprint.
Just over a month ago, we reaffirmed our commitment to transparent public sustainability disclosures with the submission of our 2018 carbon disclosure project report.
We will also aspire to be the seats and most sufficient utility.
Our focus on safety is core to me on a personal level and it's something I'm deeply committed to.
Each one of our employees must come home safe after a fulfilling their work.
I'm passionate about our safety culture, because I care deeply about the wellbeing of every hydro on employee and of every public member.
I'm also passion about it because it something remarkable happens when we adopt steadfast focus on safety.
A mindset of ownership and accountability takes hold in every part of our organization.
We become a company that's more careful more systematic more driven by proven repeatable process.
And this makes us a better managed business and I believe it will make some more efficient business. Good safety is good business.
Focusing on efficiency means that we will continue to apply private sector disciplined to our business, we will introduce new processes and technologies to enable our field and corporate staff to maximize productivity and efficiency the productivity savings we've already delivered a powerful examples of this disciplined approach.
And you will see a big even further to generate efficiencies and bolt on M&A costs as well as our capital delivery expenditures.
We must become one of the most efficient utilities, because I want hydro one to be the utility of choice for customers employees investors and all Ontario.
We will be a trusted partner to indigenous peoples industry stakeholders government communities customers and voluntary and we will put a renewed focus on building and growing relationships to deliver greater value for customers and shareholders.
A terrific example of this is the completion of the $135 million Niagara reinforcement project, along with our equity partners. Six nations are the Grand River Development Corporation, and Mississauga said the credit first nation.
This 70 call it six kilometers double circuit Tothirty kv transmission line with brought to completion by 86 in an indigenous own contractor.
In September locally elected representatives in or really a partnered with us to announcer plans to build our new Ontario grid control center in the area. This 150 million dollar investment will provide a new stated the our facility, which will serve as one of our one of the company's technology hubs. These are just a few exam.
Both of our renewed focus on building trust and strong partnerships.
We will also advocate for customers and help them make informed decisions to optimize the customer experience, we will build and enhanced digital capabilities and offer new products and services to meet their energy needs.
We also know that we must challenge ourselves to compete in an industry that is in disrupted by new technologies like distributed energy resources, our artificial intelligence and regulatory modernization.
With change comes opportunity and we will innovate compete in our involving marketplace.
While we continue to invest responsibly responsibly in our core transmission and distribution business, we will pursue incremental regulated and unregulated business opportunities through our focus on Ontario.
This will start with our hydro one telecom, which will transition from focusing on commoditized connectivity to a suite of value added services enterprise customers.
So in conclusion, we will continue to build on the positive momentum started after the IPO.
What's new is an intense focus on what matters, most to our customers employees and stakeholders in Ontario.
By executing against our five strategic priorities, we will be able to enhance our ability to deliver value to shareholders and customers alike and shore up our growth rate.
I would also like to announce that we will hold at Investor day in the first quarter 2020 to give you an update on our progress as well as showcased the team executing the strategy.
Before I pass it over I want to say that we look forward to answering your questions. After Chris detailed financial highlights from the quarter. If you don't get a chance to ask a question then please keep in mind that Omar and his team will remain available to you at all times.
Chris over to you.
Thank you, Matt and good morning, everyone.
We're all excited about division of hundred one that Mark has just laid out we believe Ontario focus strategy would deliver the outcomes that will benefit all stakeholders.
In terms of our financial results for the quarter. The fundamentals of the business continued to be strong and we're seeing the results of that focus on capturing efficiencies and operational costs.
Earnings per share and adjusted earnings per share in the third quarter increased to 40 cents compared to the third quarter last year.
And 33, and 58 cents respectively.
The increase was related to higher distribution rights low operation maintenance and administrative costs lower financing charges and low income taxes, which were partially offset by net favorable weather.
And lower revenue due to the deferred tax asset sharing as mandated by the OE b and accelerated tax depreciation.
Revenues in the purchase power were lower year over year by 1.9%.
While we had an uplift in revenue from the updated 2019 distribution rights less favorable weather affected overall revenues.
Milder weather led to the decline in average peak demand in Ontario by 7.9% when compared to the same quarter last year.
In addition, there was a decline of 2.8% electricity distributed to Hodja one customers.
Apart from the weather effects revenues were also affected by the deferred tax asset Sharon and accelerated tax depreciation was introduced in the 2019 federal and provincial budgets and enacted during second quarter.
As a reminder, booties impact on net income neutral as there is a corresponding offset to tax expense.
I'm pleased to report that operating costs were lower by 4.4% in this quarter versus the comparable quarter last year.
The reasons for the decline were lower corporate support costs and operational improvements, which were partially offset by insurance proceeds that we have received last year as well as higher vegetation management costs.
Similar to last quarter, we took advantage of them all the weather to enhance the reliability of the electricity infrastructure.
This additional work is delivering results and we are seeing ongoing improvements in reliability.
Our financing charges this quarter increased 7.3% year over year, when adjusting for the onetime merger related financing cost related to the convertible debentures and foreign exchange contract for Vista last year.
This was primarily due to an increase in financing expense, resulting from a high weighted average long term debt balance outstanding following the 1.5 billion issuance.
This year.
The accelerated tax depreciation was enacted in the second quarter as well as incremental tax deductions from deferred tax assets sharing as mandated by the only be resulted in a decrease to income tax expense year over year.
While these factors when they become neutral combined with low income taxes income before.
Texas in the quota they resulted in a decrease in income tax by 27 million.
As a result, the effective tax rate for the quarter was 5.4% versus 17.1%.
Quarter of last year.
At this stage, we're not changing our previous guidance of approximately 2% the effective tax rate for the 2019 year.
Over the next five years, we continue to expect the effective tax rate will be in the range of 8% to 11%.
Well the decrease in effective tax rate will be net income neutral. It may have an impact on the timing of future cash flows.
Moving onto investing activities capital investments and assets placed in service were inline with expectations and attracting a similar to last year.
The increase in assets placed in service for the quarter was primarily due to the completion of major development work on the Nag reinforcement project, which accounted for 135 million in the quota as referenced by month earlier on this call.
On the regulatory fronts, the oral hearings for our transmission rate application.
Transmission rights for the 2020 to 22 period on the incentive rate, making framework ended on that in before.
We made a powerful case of investing in the grid to ensure our customers continue to receive victory city that believe it safely reliably and efficiently.
Oh aging as do require additional investment and we're confident that we have presented a strong case.
For that investment.
The process is proceeding according to schedule and we anticipate having a ruling in the first half of 2020 .
The only be released the cost of capital update for 2020 on October 31st.
Based on the formulaic methodology that used to prevailing interest rates and the credit spreads for the month of September the resulting return on equity came out at 8.52%.
To be clear this era, we will only impact the transmission rate application as the I really for the distribution business was previously said at 9% for the duration of the right.
As a reminder, with respect to the deferred Texas. It we have filed an appeal with the Ontario divisional quote and the hearing is expected to take place on the 21st.
We expect the decision sometime in the first half of 2020.
On the pension cost appeal, we made final arguments in July and the decision on the motion is currently pending.
Finally, we continue to work through but you really a power distribution impeded by distribution merger applications.
Nickel conferences were held fairly in October and an oral hearing will commence on December four.
I'll stop there and we'd be pleased to take your questions.
Thank you Mark and Chris we ask the operator to explain how she'd like to organize accumulate building process. Please go ahead Chen.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, we'll we'll compiled the Q any roster.
Our first question comes from Rob Ho with Scotiabank. Your line is open.
Good morning, everyone.
Just want to start off on a on the relationship with the Ontario governments have you socialized, the new strategy with them and any updates on how they're looking at electricity price increasing in the context to hydro and.
Yes, it's mark here. So we we have socialize and seek to them, where we were going with strategy with our focus on Ontario, and on operational excellence and and that does align obviously with with that desires of the government as well as with our customers and and other stakeholders. So so they.
They are they are aware not the details, but there are aware of the direction we were going.
For the part on safe efficient execution, obviously aligns with the desire the government on finding cost effective ways to too.
Help customers with portability across province, so so as we've said before I believe there is a good alignment between what we're doing in our strategy and and what all our stakeholders are looking for.
Alright and.
And then just moving over to your longer term capital plan as well as your balance sheet did the strategic review alter how you're looking at the balance sheet or where you want to devote capital.
So you know we were still the primary focuses our investment in rate base and maintaining our current investment grade credit rating.
So there is no change.
To the allocation we have highlighted the fact that we will look good.
Unregulated assets, but that I'll remind everybody is going to be a very small part of the investment going forward.
Alright, thank you.
Thank you. Our next question comes from Robert Kwan with RBC capital markets. Your line is open.
Great Good morning.
Chris just maybe I'll start by following up on your on regulated investment commentary that it would be very small going forward is that related to.
Sure Good telecom commentary that that market is making earlier or would you also be looking at.
Unregulated.
Assets.
Core kind of.
Electric either team well I guess, my BTD electric business and would you be looking for contracts.
So it's mark here I'll I'll take that person Chris can weigh in.
There were appropriate so so the primary focus on the unregulated business is on the telecom side, we do see there's an opportunity that we've really been.
Operating the core services with our telecom assets, where we have but there's an opportunity to to add the more value added services. There. So most of the unregulated growth. We're looking at coming from there there is an opportunity for us to partner with with others on energy management services tight.
Services for our larger industrial customers and we'll be looking at that as well.
Got it and then with the Ontario focus part of the commentary.
Is there any contemplation.
Colin.
The five year period of.
Investing outside of Ontario, and would that be in India or could you be looking unregulated as well.
No our focus is on Ontario, and our strategies all built around to focus on Ontario.
That's great I can just finished with the commentary around greater the future.
Some commentary in around storm hardening.
And do you see kind of the investments there as being a material driver.
Potential increase in rate base growth or do you see the you also talked about technology do you see it as being capital light.
So so the the investment in the grid of the future to make it more resilient a lot of that's already built into our Dx enter TX filing. So it's not looking for new money to do that and it's really leveraging technology to harden the system as opposed to.
Spending larger amounts of money on hardening, the actual poles and wires. So so things like sexualizing, the the distribution system.
Technology to to give us visibility into where we have fall. So we can quickly there are more quickly respond. So so the the investment in the grid that the future isn't looking for new capital outside of what we're asking for already in our Dx filing at our teeth.
Great. Thanks very much.
Thank you. Our next question comes from Linda Ezergailis with TD Securities. Your line is open.
Thank you.
I'm wondering if.
You can help us understand the potential magnitude.
Your.
Partnerships with indigenous people.
Following your successes in the Niagara reinforcement line.
Yes, so reflect so weve, sorry, sorry, and would that already be reflected net of your rate base growth or would that be.
Gross number your rate base growth.
So I'll start with the.
With the magnitude of the partnerships and and a recognition that.
The indigenous peoples of this province have unique rates.
And there is obligations on us as a company to recognize those into work with the nation's as we develop new projects and new products throughout the province, as well as recognizing that our assets.
Cross over almost all 133 nations within in this province, so the the projects we've done to date, where we've done equity partnerships with them.
Which is.
Bruce Milton and also our recently completed NRP.
The growth the growth in.
Those project.
He is already in our growth. So so its net of their equity contribution.
Yes that help Linda yes. Thank you and just further on your new strategy I'm wondering if you can help us understand how youre LDC.
Consolidation initiatives with Ontario, Mike.
Part of that or might change and would that be dependent on the outcome potentially of youre really.
Hearing process.
Yeah, So from an Ontario perspective, I believed that there is there is a good opportunity for consolidation of the sector to two drybulk costs in the sector and help rate peers. Overall, so we will continue to look at that and to pursue opportunities to consolidate.
The ones were doing right now, they're taking longer than we would expect and part of the OE be reform is to look at the Matt process, which I think will help enable.
The ability to consolidate so it is part of our of our strategy going forward part of our growth strategy, but also part of what I believe we need to do to help repairs of this province, and and we will continue to pursue that where it makes economic sense for hydro one.
Do you think there's an opportunity to potentially accelerate that.
Well attended by the only be reform or other.
Approaches that you might take or do you think you'll be similar to the cadence we saw in the past.
Yes, we're hopeful that theres ability to to accelerate that through the only be reform as well as in alignment with there is a desire.
Provincially to see that consolidation for the benefit of the rate payers. So so we will be.
Working with all the stakeholders to try and accelerate that.
Again, I believe that it is the right thing for the for the repairs and the people the province, and it's an opportunity for for us.
Thank you and this is just a question regarding the quarter would it be possible to get some sort of sense of an approximation of the weather effect on the quarter's earnings.
I know that it's temporal but that it would help us and our.
Casting.
I think when the team we're talking about can take it offline. After the call that we can point to again the major driver being the change in the peak that published and we can probably give you a.
Going to some data that you can use to calculate that.
Thank you.
Thank you once again, ladies gentlemen, if you wish to ask the question at this time. Please press Star then one are you touched on telephone.
Our next question comes from David Causata with Raymond James Your line is open.
Great. Thanks morning, everyone. So my first question here just on the on the topic of electricity rates in Ontario.
They seem to be going a little higher more recently I'm certainly appreciate that hydro on portion adults pretty small I'm. Just curious if you have any recent discussions.
With the government or or.
So on respect to reducing bills.
Potential obviously, the global adjustment being a big part of that the blend and extend option with the IP piece is something that's been floated any thoughts there.
Yes, so we haven't had a direct discussions or I havent with with government on it other than.
To to share our strategy, which is a focus on the front efficiency and doing our part and ensuring we're taking costs out of the system as much as we can.
There was the fall economic statements that came out yesterday from the government, which points to the things that does that they've done so far to achieve it as well as they have directed the DSO to look at the at the contract from the energy side to see if theres an opportunity as part of those.
To to drive out some costs.
As you as you knowing you're aware.
This is an industry wide problem were 14% of the $20 billion to to run this electricity system.
And we're doing our part to try and reduce that but it is an industry wide Carl.
And and as I said that the fall economic statement yesterday point some of things that governments are doing.
But we expect they're also going to engage the industry going forward to look for solutions.
Okay, great. Thank you that's helpful. And then just my only other question here I guess, maybe more broadly when you look over the next three to five years wondering if you could have any.
The bidding you're seeing now for I think about eight months and you've got to new strategy now.
Any any high level thoughts could give us on where you see the biggest opportunities for for cost savings.
Across your footprint.
Sure sure six month anniversary yesterday so.
As I look I wouldn't I look at the company in the areas, where we're focusing on at least in that in the shorter term three to five years on reducing costs. There's couple areas. One is to continue to build on the savings were getting through Kurt procurement organization. We're also looking at our properties in how we can.
That or consolidate our property assets that we own to drive on some cost savings, but the biggest area of focus for us in in the near future is around.
How do we how do we use innovation technology and process improvement to make us more productive as a company and remove barriers, particularly for field people. So that we can increase or tool time. So that they can do more of the thinks that we hired him to doing that they love to do and less less administrative type work. So we have some good ideas on how we can.
How we can drive out some of that administrative burden than some of those barriers and increase the the capabilities of our field crews as well as our corporate support.
And so it's really through rolling up our sleeves and process improvement investing in technology and innovation to make us more productive.
I just had to that with Mark is that our productivity push which we said already said $250 million.
Since the IPO is really focused on absorbing the impact of inflation.
We've done that since the IPO and believe we can continue to do that through the use of technology and improved work processes. If we do that pretty extended period of time, the real cost out service will come down and that's really what we challenge ourselves to do and I think when we look at how do you control electricity prices will try and hold them play.
Yes, that's one of the tools that we have now back to two achievement.
That's great. Thanks, guys appreciate that commentary ill get back in the Q.
Thanks.
Our next question comes from Patrick Kennedy with National Bank. Your line is open.
Hi, Good morning, guys look and see a the DG appeal as being heard on November 21st I'm, just curious when we might expect the decision there.
Then given the initial impact on it and FFO.
From that decision.
And now with the reduced or are we on transmission.
Just wanted to get your thoughts on how we should be thinking about dividend growth into 2020.
Yes, thanks, Pat So the hearing as you said was under the 21st will be and if it's when you first we expect a decision in the first half of 2020.
A copy more specifics in that they don't really layer those timelines.
So first half the 2020, if we're successful I'll remind everybody. We've already written this asset off so if we're successful. It will result in a onetime write up of 885 million and an employee benefit of 50 to 60 billion per year. Thereafter. So it is all upside from here on that particular item.
How would that affect the dividend.
It would certainly make our financing ratios more comfortable we are targeting to maintain our investment grade credit rating at the current level. So it will provide a little more space for growth today I don't see it affecting the dividend payout at this point in time, we are comfortable in the range that weve highlighted which is we growing rate base at 5%.
We are growing earnings of 5% and by the dividend per share position all things that we've done since the IPO and they will continue.
Okay. That's great and then just on the corporate strategy here.
I was wondering if we can get a bit more color on incorporating the a distributed energy resources and how that might.
Have an impact on rate base growth going forward.
Yes, we recognize that distributed energy resources as part of the grid of the future for Ontario, and many jurisdictions and what we're looking at their is how do we how do we facilitate enabling.
Companies to two to bring distributed resources onto the system and and how do we make sure that where we're placing these things and where were where were.
Adding new resources the system served more than one purpose more than just supply and energy so tends to help improve reliability of the system.
Can help prove improve both sport things like that so for example, putting.
A de are on the end of a radio line can help with with reliability in case of an outage that you have.
And supply at the end of that line. So our focus is really around making sure that we're working with the industry and other partners who were adding the parts of the system to make sure. There. They are in the rate locations in the provided broader broader sports the system than just adding new resources.
Okay. That's great. Thank you.
Thank you our last question comes from Mark Chardy with see IVC capital markets. Your line is open.
Hi, good morning, everyone.
Maybe just one for mark.
Any kind of cumulative fresh eyes, how would you say that corporate strategy was defined given the fact you've come in.
The new perspective, and sort of things that you really brought to the table in terms of define this corporate strategy.
Yes, so I would say that.
The the focus on operational excellence.
Has been part of the DNA of Hydro one for the last several years and it's representative in the cost savings we brought the reliability improvements in customer improvements.
As I said in my opening that we got distracted with with trying to go outside of the province, and we took write off of the things we need to do here at home, including the relationships with our partners in the electric sector and.
And.
But this strategy the boat as a refocus on Ontario, refocus on building those relationships are reestablishing, those and and doubling down on the operational excellence. So that sets. So that we can deliver for all our stakeholders.
Okay, and maybe just any commentary guys in say around testimony and hearings for the transmission rate case in terms of what you guys provided we're always before if any any surprises or how you guys think on form the decision would be.
Yes, the the hearings were done the oral hearings now and the the next steps are really going to final arguments and that during the oral hearing I think team did a great job put the good case for for the things that we need to do to invest in the system.
I would say there was no real surprises in the late in the questions. The the standard thinks that you would expect from Interveners and from the from the regulator, which is is expected in and needed as part of the process. So so.
I don't see.
I didn't see anything significant I think there is some wide acceptance on our need to invest in are aging infrastructure that we have from the transmission grid and the fact that were 98% to the transmission of the province and that that our transmission customers in particular are looking for or confidence.
In the reliability that system necessitates investments. So I would say that there is there was no real big surprises during the oral clearance.
I would echo mikes comments and I'd say that when you go through a distribution hearing or transmission here in the very different to the ldcs hearing because they have very routine in nature. So the interveners, notably we we know what is important to them and to our customers. So they tend to go a lot more as expected.
And we work together in a very collaborative and I think away that works for the electricity system in.
Ontario overall, so I think the matts comments it was as expected and we expect the positive outcome in the near future.
Okay and my last question is when you talk about.
Safety and efficiency because there are certain benchmarks you guys can provide us with how we should think about how we're going to deliver against that one of your pillars of your corporate strategy in terms of how we should evaluate you are what you guys are internally measured yourself.
Yes, so so on on safety, we measure ourselves against that.
The normal things that you see other industries on recordable injuries, and we're also going to have a focus on serious injuries, because we've seen an increase in serious injuries, even though were first quartile in all injuries and and efficiency, we're going to continue to focus on productivity in driving costs out of the system.
Okay. Thanks.
Thank you and we have a question from Ben Pham with BMO capital markets. Your line is open.
Okay. Thanks, good morning.
Just some of your commentary on.
Acquisition landscape, focusing on Ontario, I think.
I think even kind a lot of support for for that.
Thoughts on that focus on but I guess.
When you think about acquisitions outside of.
Ontario, I'm curious to that.
You don't want to go there I guess is that more.
Look at that'd be so transaction, just just a lot of the regulatory friction you face for the government.
Ontario is that does that why you're not looking.
Outside Ontario, and just kind of flip. The question is kind of get your thoughts on on why not outside Ontario.
No I would say, we see opportunities right here in Ontario that we don't need to go outside of Ontario and.
Where we see nice steady low risk growth by focusing on what weve outlined in the strategy right here in Ontario. So so we don't see at the table tighter.
Yeah.
And would you say then that year.
I get BD team now, it's really kind of us stripped down team where.
Not necessarily keeping an eye on acquisitions out, Ontario, or something really compelling comes out that you. It may be considered as that is.
And is that the right way of thinking about it.
No I would say our BD team really is going to focus on things, we outlined which is the opportunities in the province on LDC acquisitions, where we might be able to partner on energy management services and.
And really focusing on on the strategy you'll see.
In the top level or or chart, we don't have.
At the.
Corporate development team on my direct reports that is representative of the fact that hits the prioritize from US and we don't have big team. This can be looking outside of the the province here.
Okay, and then lastly, just just on.
Commentary about unregulated keeping at small any it really just wondering.
A position that you have now I mean, I think it's 1% of your business now and is there any sort of.
Percentages you have in mind that you want to be below like below 5% unregulated or is it.
Is there something that you've really been down there.
Yes, I think.
It will always be as small as part of our business less than 10% about net income at all times.
And then is five few period out to just it's going to be less than that so yes under 5%. So.
Yes, we already have telecom today, it's 1% of revenues.
We are going to focus on that will growing so it will grow from one to potentially two or three.
And then Mike just outlined.
Some adjacent energy management services that makes sense that you would bring us pool by customers today and a more aligned to the transmission business. It is not in the regulated space at this point in time, we'll have a look at those but again, it's going to be a very small part of the business.
Compared to our rate base.
Okay, sorry, I just wanted to clarify so so it's really when you think about a small portion of up to 10% Asus from your from your definition I sell small portion.
Yes, so that's really driven by the fact that we a transmission lines and distribution company first and foremost.
On a regulated one at that so we will stay day.
Less than 10% of our net income and really affiliated debt is the is the main targeted.
To maintain the right credit rating that we have targeted.
Uhhuh will be focused so thats. The reason we have that.
So I'd like to it but in this five year period, we will not approach that limit or anywhere close to that it'll be on deposits.
All right makes a lot of thanks, thanks guys.
Thank you and that does conclude archeo any session for today I'd like to turn the call back over to Omar Jahvid for any further remarks.
Thanks, Jen the management team and hydro one thanks, everyone for their time of the this morning during what is a busy period in a busy day.
We appreciate your interest and your ownership if you have any questions that weren't address on the call. Please feel free to reach out and we'll get them answer for you. Thank you again enjoy the rest of your day.
Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program you may all disconnect everyone have a great.