Q3 2019 Earnings Call
Ladies and Gentleman York are shown on hold for today's Q3 2019 earnings call.
Your weight to the rival up additional participants they should be starting shortly thank you for your patience and piece continues to hold.
Good day and welcome to the de <unk> Energy Q3's went to 19 earnings Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Barbara Tuxedo. Please go ahead.
Thank you and good morning, everyone before we get started I would like to remind everyone to read the safe Harbor statement on page two of the presentation, including the reference to forward looking statements.
Our presentation also includes references operating earnings which is a non-GAAP financial measure.
Please refer to the reconciliation of GAAP earnings operating earnings provided in the appendix of today's presentation.
With us this morning are Jerry Norcia, <unk>, President and CEO , and Peter Oleksiak, Senior Vice President and CEO . So.
And now I'll turn it over to Jerry to start the call. This morning.
Thanks, Bob Good morning, everyone and thanks for joining us today.
I'm going to give you a recap.
Performance from third quarter 2019.
Sure that update to provide the overview for the 2020 early outlook early thoughts on our long term growth.
I will provide a deeper review of our long term growth plans and strategies.
Then finally I'll turn it over to Peter will provide a financial review the quarter updates to cash cap on equity.
The details on our 2019 guidance and 2020 early outlook, then all wrap things up before we take your questions.
So let's start on slide four you need to make great progress on number of key fronts.
Our third quarter financial results are solidly on track with our plan.
Given the strength, we have experienced the first three quarters of a year.
Okay and increase throughout 2019 operating EPS guidance, we are increasing our 2019 guidance midpoint three cents to 6.3.
This represents GBS girls from.
Regional guidance of 18 to 19 of 8%.
Which was quite a [noise].
Quite impressive at this point.
Increase was due to strong performance at all of our business segments and the fact that we will have continued to build contingency that will carry us through other fourth quarter.
Peter will provide more details on that front in a few minutes.
Today, we're also providing the points were only early outlook for operating EPS guidance for the range of 647.
75.
I'm pleased to say that this is a 7.5% increase over our 2019 original guidance and includes the impact to the recent midstream acquisition, we announced earlier this month.
Longer term through 2024 or using the higher 2020 early outlook as a new base for our 5% to 7% operating East Coast Girls right.
I'm also pleased to announce a 7% dividend increase it was just approved by our board the new analyzed dividend per share as oral five oh from 378.
Continues to meet the energy is consistent dividend history, having issued a cash dividend for more than 100 years.
This increase reflects the company strong performance and ability to consistently achieve our goals.
The boards approval it increase Jim signals confidence in the company's performance and long term strategic plan.
Turning over to the business update all of our businesses of accomplishing men's to note this quarter.
The T. electric recently announced our gold achieved net zero carbon emissions by 2050.
As bold new goal sets the framework go beyond our existing commitment to reduce carbon emissions, 50% by 2030 and 80% by 24.
Viki electrics medium to long term plans to align with the scientific consensus around the importance of achieving carbon emission reductions.
Really committed to dramatically reduce carbon emissions the right thing to do for our customers.
Our business and the environment.
We are doing as much as we can as fast as you can provide our customers and the state of Michigan clean energy as affordable and reliable.
Additionally, BP electric is progressing and its voluntary renewable energy program.
Were 400 megawatts have been committed by commercial customers, including Ford General Motors University of Michigan, and most recently the Detroit.
Additionally, nearly 10000 residential customers have committed to a portion of their monthly bills to renewable power.
[noise], along with our carbon reduction plan, our natural gas plant Blue water Energy Center is also progressing on plan, we broke ground last year and received all the necessary permits a plant as little over 30% complete with the turbans already on site and expected in service date of the spring a 2022.
Moving onto our gas company, we're continuing to progress with our accelerated main renewal program, we already renewed a significant number of miles. This year, we will complete 180 miles by yearend.
We're also continue to develop plans investing additional system improvements, including a transmission renewal program.
The growth integrity and reliability of our system.
This new program along with our main real program.
Showcases de gases commitment to provide safe.
Rob will serve us through our customers.
Projects, we described in more detail our rate case filing later this fall.
Now I'll turn over to our nine utilities.
At our gas storage and pipeline business, we recently announced the acquisition of midstream assets in the Haynesville basin.
These assets include an existing gathering system and a 150 mile gather pipeline that is currently under construction.
Set of assets complements our GSP portfolio provides a new platform for value creation.
Which will enable strong growth opportunities for years to come.
It has a strong strategic and financial rationale delivering compelling value to our shareholders.
Underpinned by high quality resource as well positioned on the North American gas supply stack, we believe the natural gas will play an increasingly important role in meeting energy demand as we all seek to mitigate climate change in the coming years.
The economics are sound and the transaction as EPS accretive.
Salary achievement of our five year growth plan, while maintaining a strong balance sheet and credit profile.
And this transaction is one of those drivers into some of it half percent increase in our 2020 outlook.
As we mentioned on the call, we're committed to maintaining a 70% to 75% utility mix.
We will provide details on how this fits into our five year plan.
Let me turn over to power and industrial we also had some major milestones this quarter.
September our Pete I business announced the opening of its first find dairy RMG processing and Interstate injection facility.
The site processes, Rob biogas from nearby partner firms into renewable natural gas.
I find quality is then injected directly into an interstate pipeline.
Morning, Rob Bio gaskets RMG as a win win both for dairy farms and the environment.
Capturing as gas reduces the overall greenhouse gas footprint provides the farms will another revenue stream.
Help creates a queen sustainable vehicle fuel that displaces fossil based gasoline or diesel fuel.
We've made great progress in NRG space over the past few years, which will enable few nod to achieve its long term goals.
So I feel really good about the progress we're making all of our business lines now moving on to slide five I'll discuss our 2020 early outlook and long term plan.
Today, we are providing the 2020 early outlook for operating EPS guidance with a range of 647 a 675.
This is a 7.5% increase over 2019 original guidance and includes the as I mentioned the impact of the recent midstream acquisition, we announced earlier this month.
Longer term were increasing our base and growing from the higher 2020, our early outlook through 2024.
It will be the new base for our 5% to 7% operating EPS growth rates.
We believe grown often you base provides shareholders with incremental near and long term value.
We'll provide additional details by segments when we see you Andy.
With that I want to turn it over to Peter to share our financial results and give you more details in a 2020 early outlook.
Thanks, Jerry and good morning, everyone before I get into financial the I always like to give an update on my Detroit Tigers.
Tires. They commented last at the last place this year.
But the good news with that last place finish it they get a first draft pick next year and I'm, hoping they find another Justin Verlander.
So overall, our bookings of future fuel at pretty good about it.
I'll, let Mike Tiger the financials Arts consistently strong here for D. ill, let me turn your attention to the financial results.
I will start to review on slide six.
Earnings for the third quarter were 351 million.
This translates into $1.91 per share for the quarter.
And you can find a detailed breakdown of EPS by segment, including a reconciliation to GAAP reported earnings and the appendix.
Let me start my review at the tough the page with our utilities dielectric earnings were 307 million for the quarter.
This was 3 million higher than 2018, largely due to the impact a new rates implemented in may.
Offset by rate base growth cost and cooler weather in 2019.
As a reminder, that third quarter 2018 was one of the hottest quarters on record in our region.
GAAP operating earnings were $10 million lower than last year. The earnings changes driven primarily by rate base growth and higher on them expenses.
Partially offset by rate implementation.
But keep in mind only a small portion of this new rate was attributed to third quarter. As a result of typically low volumes in the third quarter.
Let's move down the pace or gas storage and pipeline business on the third row.
Operating earnings for our DSD segment, where 60 million for the quarter.
Last year, just the experience higher earnings related to AFUDC, Nexus and higher than planned volumes across the portfolio.
This year, we have normalized earnings that Nexus and volumes are up plan.
As a result, this quarter is 4 million lower versus the third quarter of 2018.
GSPC is performing according to plan through the third quarter, and we will continue to see that benefit and the remainder of the year from the volumes on links that continue to ramp up.
And the impact the recent expansions and acquisitions.
The next ROE you can see our power and industrial business segment operating earnings were 49 billion.
These are 14 billion lower than the third quarter 2018, and this decrease is due mainly to the ARIA tax equity transactions that occurred in the fourth quarter of last year.
As we communicated previously we entered into equity partnerships in our area up units and if celebrated cash flows around 100 million per year for three years to support our growth projects. This lowered earnings this year on 40 million versus 2018.
Our energy trading business had a strong quarter with operating earnings up 18 billion.
Earnings are higher this quarter compared to the third quarter last year due to the higher power portfolio earnings.
Trading company is having another solid year.
Year to date economic earnings are on plan and Atlanta with guidance.
The appendix contains our standard energy trading reconciliation, showing both economic and accounting performance.
And finally, corporate and other without favorable 15 million this year compared to the third quarter last year and this was due primarily to the timing of Texas.
So overall did see earned $1.91 per share in the third quarter 2019.
Let's move on to slide seven.
Jerry mentioned, we are increasing our 2019 earnings guidance.
As you remember we increased guidance at both ditty electric and gas under second quarter call.
So this is the second increase we provided this year.
We are experiencing favorability and all the segments with particular strength and electric segment power and industrial and energy trading.
Detailed metric is benefiting from warmer than normal weather.
It's favorable to the optimization of our EPS units.
The trading earnings came in strong third quarter.
We feel really good about how strong 2019 is coming in so we are confident and achieving the increased guidance range.
Now I will transition to 2020 to discuss our early outlook.
And the right side of the slide we are providing 2020 esprit outlooks that point of $6, a 61 cents per share.
The midpoint of this early outlook for by 7.5% EPS growth from the 2019 original guidance.
The next two slides I'll be going over the early outlook for our fourth largest business units, but before I move out of those slides to discuss the year over year drivers I mentioned that NRG Tradings 2020 operating earnings range of 15 million to 25 million.
Which is the economic country contribution range, we typically target for this business.
Also our corporate <unk> other segment grows in 2020 with the interest on the equity converts and this returns to a lower steady state when they are converted to equity.
So now let them semi move on to slide nine.
And I'll start on the left hand side of the page 2020 early outlook midpoint for TTM Electric segment is 766 million.
This provides earnings growth of 8.7% over 2019 original guidance.
The outlook includes distribution and generation investment growth.
Longer term dielectrics Cemig segment will continue to grow by 7% to 8%.
Moving to the right hand side of the page head our DC guess segment. The 2020 early outlook midpoint is 189 million.
2019 original guidance midpoint was 175 million.
The early outlet provides earnings growth of 8% of the 2019 original guidance.
So this year over year increases in line with a long term growth target for gas and is driven by the continuation of our salaried at main renewal program.
Longer term, we expect to get segment to grow at the higher end over eight and 9% growth rate.
Now I'll move on to slide 10 to review our early outlook for non utilities.
Again, starting on the left hand side of the page or their gas storage and pipeline business original guidance for 2019 for this segment. It was 213 billion and increases at 285 million at 2020.
This is Robert represents an increase of 34%.
That increases mainly due to the acquisition of the midstream assets and the prolific Haynesville basin.
Previously we set the annual increase to our GSP segment earnings would be approximately 12%. So we've essentially accelerated growth into 2020.
DSP at active year in 2019 acquiring generation pipeline.
Additional 30% stake in the link ESG and of course that low Union and leap assets. All these will contribute to what we expect to be another strong year at GSP in 2020.
We have plenty carefully at 2020, given the market conditions were seeing and these new platforms will allow us to.
Growth objectives, and Rebase, the whole company at a higher growth rate.
Now moving it to right size the page our PNM segment is 14 million higher in 2020 versus 2019.
This segment continues to drive earnings and value for the company.
This earnings increase is from the work we've been doing over the last few years as we originate new projects and income to replace area when it fully subsets.
We have secured additional areas units that will generate strong cash flows for the next two years, reducing equity needs.
As you look out too when area of sunsets at the end to 2021, we remain confident that the backfill RF will occur between these two non utility segment and the total portfolio.
And we'll be well within our targeted 70% to 75% utility mix.
As you can see these two non utilities at bringing a good lift up earnings here in 2020.
Well, we will be providing a detailed update.
Lease.
Now on to slide 11 to cover the balance sheet.
We expect to issue a total of 500 million up in equity here in 2019, including 300 million of acquisition equity financing and 200 million has already been issued through internal mechanisms.
For the three years 2020 to 2022 will be issuing 1.5 to 2 billion of equity.
Including convertible equity units related to the acquisition.
And then 2020 will be issuing 300 million of equity using internal mechanism.
The 2019, we are increasing or cash and capital guidance for this for the year due to the investment and a new midstream assets and you can find the updated cash and capital guidance.
Thanks.
We have a strong credit rating at all three agencies, which is very important to us SMP is a strong triple b with an excellent business risk profile, and Moody's and Fitch or one notch above S&P.
We have reviewed our recent midstream transaction with all agencies and expect to maintain a strong credit rating.
SMP as indicated that we will hold strong triple B and also our excess business risk profile. So a great outcome there.
But your Moody's did take some action on the current rating Moody's has revised the rate into it.
The delay to which falls in line with S&P.
We will have plenty of balance sheet cushion with a ratings of both agencies.
Our goal is to continue to maintain a strong investment grade credit ratings.
That wraps up my section that 2019, earning earnings guidance at the 2020 early outlook not going to turn it back over to Jerry to wrap things up thanks, Peter I'll wrap up on Slide 12, and then open up the lines for questions.
2019 is shaping up to be a strong year as evidenced by our guidance increase so we expect and continue our pattern of exceeding original guidance for over a decade.
You can tell from our 2020 or early outlook that we're planning for another strong year next year. The 2020 operating EPS midpoint of 61 provide 7.5% growth from our 2019 original guidance the size growth rate is driven by strong performance, but all of our business units.
The growth at our two utilities continued business development.
In the near term EPS accretion from our recent GSP.
Stream acquisition.
2020, GSP EPS growth is more than double what we had anticipated.
Going forward, we'll continue to target of 5% to 7% EPS growth with 2020 outlook as the base of that growth or 7% dividend increase for 2020 demonstrates our confidence in the company's performance and long term strategic plan.
Our utilities continue to focus on necessary infrastructure investments, specifically for investments to improve reliability and customer experience, our non utilities senior position us for long term growth.
Finally, I feel great about our ability to continue to deliver the premium total shareholder returns we have delivered over the past decade.
And with that I'd like to thank everyone for joining us. This morning answer again, you can open the lines for questions.
Thank you, Sir ladies and gentlemen, if you wish to ask a question at this time. Please press star one on your telephone keypad. Please make sure thing is function on your phone is switched dovetail signal to each of equipment.
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First question comes from the line of Praful Mehta of Citi. Please go ahead.
Thanks, So much high guys.
Good morning, good morning.
Morning, So maybe just first starting with the equity that you pointed out on slide 11, the 1.5 to 2 billion 20 to 22 I'm, assuming in 22 year, including the proximately, one 825 of mandatory converts.
They do include the mandatory converts it will be approximately $1 billion related to the acquisition with a 1.5 to 2 billion does include.
It was covers.
Okay got you that's helpful and that 2020 guidance that you provide all that includes an additional 300 million of equity and 20 trendy. So just wanted to understand the shack found that you're using some that 2020 guide.
Yes, we have $300 million that we will be issuing next year in 2020 and here in 2019 will be issuing the $500 million that we previously disclosed.
Gotcha and just finally, just want to stay on the credit theme I guess.
You mentioned that couple of the agencies Guinea expressed some concern on do you see any scenario, where there is additional need to issue equity in a particular.
Business business, I guess, how the business kind of moves forward from here or do you expect expect any need to do the issue additional equity to kinda satisfied the rating agency consent.
No I do not the S&P rating in particular, our strong triple B, an excellent business risk profile, we were really targeting that so we're very happy.
With that outcome.
It gives us as we have a lot of cushion even within that current rating and profile Moody's does fall in line with S&P a part of the the issue with Moody's is they do not recognize that covers is equity. So that was one of the reasons behind the action that took but with their new rating, we have a lot of cushion as well.
We feel really good where we're at where the rating agencies at this point.
Alright, great. Thanks, so much guys.
Our next question from Julien Dumoulin Smith of Bank of America Merrill Lynch. Please go ahead.
Hey, good morning, Jay.
Hey, good morning.
Got it.
Perhaps if I can come back to just the transaction last we help clarify just a quick quick follow up here I mean, as you think about that 45 cents in the organic growth that business just again to come back to off of the run rate 20, 120, 210 times multiple how do you think about that that's a neat how do you think about the growth to the five year.
First off just reconcile that I got to follow up.
Well I think Julien the the first thing is that the transaction supports the 7.5% growth.
19 over 20, and as we've mentioned we reestablished.
2020, as the base for the 5% to 7% growth going forward long term.
So we view the transaction not only is providing a lift 19 over 20, but certainly a provided an outlook on uplift long term as well in the plan.
And filled all the growth needs that we have it a GSP I think just to add on as well as this segment, specifically, referring to really good weather growth rate going forward.
We will be talk in more detail.
About this.
Well, you, though that we have a previous disclosure out there are 2023, we're going to be more than achieving that.
Got it okay, but just for from a planning perspective as you think about the other investments that have been talked about before the nexus laterals linking expansion expansion capital.
Perhaps generator connections what are you thinking about and I know, we're getting ahead of the GSP disclosure, perhaps coming up here in a couple weeks, but I just want to clarify what else are you thinking about out there on Tuesday.
Julien.
Again, I'll repeat that it's certainly supports the 75% growth 19 over 20, and if you lock in growth and then.
Growth, 5% to 7% from there this transaction as well as the other investments and GSV.
And let's not forget that the bulk of our investment is going into our two utilities those high growth rates from our utilities high growth rate from GSV as well as the strong growth Boston base will support.
5% to 7% growth over the new 2020 base.
And I will provide a lot more detail by business segment of the yes, we will and in this segment in particular, we have some great growth platforms down. So we're not looking for any big new acquisitions.
So we have a lot of opportunities you mentioned a few just in your and your question there.
So between link.
Nexus and now this new Blue Union and leap asset, we're going to have a lot of organic growth opportunities, but well get more updates here already.
Got it if I can clarify quickly that the early 20 outlook.
It looks like it implies even ex the latest transaction a pretty healthy degree of growth off the 2019 base for GSP can you talk about what's driving that I mean, as you say it seems like 12% type growth number.
Well two things the other transaction as we mentioned is providing significant accretion next year.
So it is filling a portion of the growth objective GSP, but I can tell you also planning very carefully for the balance of the platform at GST in light of market conditions.
Thanks specific though.
Net for next year.
For next year, that's for next year correct. So we're working very closely with all the producers.
So our plans reflects as everyone.
The very careful got it.
All right well I look forward the seeing guys here more than a couple weeks cheers.
We'll now take our next question from Michael Sullivan.
Research. Please go ahead.
Hey, good morning.
Morning.
Yes, So first I just wanted to follow up on on that last question. So is there any more detail that you can give us as to how the.
Base Midstream business is growing sorta ex the transaction you just did and then I think also the upping the stake in link and the generation pipe just kind of what what the base business is doing and how that stacks up to what you were previously anticipating.
Well, we can say is that if you look at all those investments and that drives the 30%, 34% growth year over year and the GSP segment.
Overall allowed us to lift our corporate growth of 7.5% year over year and sets us up really nicely.
Long term that meet our 5% to 7% growth corporately, along with our growth at our utility so.
We typically don't describe each platform, but what I can tell you repeat as at the balance or platforms. We're planning for.
Very carefully next year in light of the market conditions.
So the 34% reflects that and supports our seven and a 5% growth year over year.
Okay. Thanks, and then switching over to Pete and I.
Can you just.
You have any color around the.
Recently acquired Ref units that you mentioned, how much of a contribution that was towards 2020 and and when those will will roll off.
Yeah, we did acquire some new units here in the late summer and we did redeploy those at existing sites, where we did some units were or something so are we up is flat the way think about his area of this flat year over year.
So the growth we're seeing is really around the origination that we've been doing over the last.
Few years. These additional units and area will contribute about $30 million over the next couple of years, which is really nice shovel cash it really helps reduce equity needs over the next three years.
Right.
Okay, and when when do those roll off.
The new ones that you just acquired the new ones is the wells out existing as the end of 2021.
Sunset at that point.
Great. Okay. Thank you very much.
Our next question comes from Andrew Vice.
She has over 12. Please go ahead.
Hey, good morning, everybody.
Good morning, what Andrew.
Just one quick one obviously a nice dividend increase today. My question is going forward is there any begins to the dividend policy given the mix shifts with 35% of next years earnings come from coming from the non utilities and all the credit updates that you've talked about earlier, how do we think about the dividend policy going forward.
Well typically we Oh, we have said and continue to maintain it will grow dividends in line with earnings growth, but we'll be able to provide a little more color in detail. It on that idea as to how will it look going forward.
But certainly it will be on line.
General and we haven't really changed that philosophy Andrew.
Okay.
Policy will continue going forward that.
Yes, that's correct that's correct.
Okay, Great. That's all I had thank you.
Our next question comes from Shire.
Okay Guggenheim partners. Please go ahead.
Hey, guys.
My sharp morning.
I apologize I jumped on a second late.
The comment that you, Matt just around planning in light of market conditions silica, 33.8% includes that is that can you just elaborate what you mean by that and is that tied to a specific asset in the producer or some kind of curious if you can just touch a little bit on what you mean by that.
Well, we're looking at all our platform shirt and certainly we're operating in a low price environment. So as we continue our conversations and discussions with our partners we are forecasting earnings.
Earnings growth of 34% in this business line in light of US these market conditions.
If the market conditions improve.
Things could change, but certainly we're planning carefully for this business segment at this point in time. In addition to the balance of our portfolio, which we feel very comfortable will help us to deliver to 7.5% growth year over year.
So this isn't really tied to credit quality or.
Financial conditions of the actual producers, but more of a pricing environment, which sport pricing in production.
That's correct.
And then just as you guys look at the contracts with remains with Nexus.
There is a portion of it obviously thats still under short term contracts is that.
These market conditions do they continue to dictate that you will remain within that kind of the tenor of these contracts or is there an opportunity to the actually contract longer term.
Sure we have started to see interest then.
And terming out longer than we've seen in the past so we find that as an encouraging signals from the market that there is desire.
Two contracts somewhat slight slightly longer term and so we continue to move our contract portfolio Nexus in that direction.
So we are seeing positive there.
Got it got let me just asking last one this is the signals that you're seeing as far as longer term contracts is that predicated on the delay of two to existing pipe projects.
Certainly we think that could be having an impact okay and of course production continues to grow and the Appalachian at this point in time. So we we believe that it's a combination of those factors as credit more interest.
Perfect. Thanks, guys congrats.
Thank you.
Our next question comes from the line Angie.
Scheme of Macquarie. Please go ahead.
Good morning.
My questions have been asked and answered a question about your renewable natural gas.
Both plans and investments I mean, we've seen.
Sharp decline in the RIN prices and I'm just wondering if you guys have a view.
We'll go and how it's being depicted in your guidance.
So thank you for that question the bulk of our returns from R&D asset investments are in the dairy sector and most of the value from that comes from the.
Low carbon fuel standard that exist in California the displays.
Essentially.
Total and gasoline in the CNG markets.
We have seen a decline in the RIN pricing, but we've seen it also start to recover recently, but as forms a small portion.
Of our forecast for these assets and these investments, which with the L. CFS are they still remain very attractive.
That's a very attractive returns.
Our outlook you asked how do we feel ball, how it's looking feel that EPA will issue a volume obligation there'll be more in line with.
The supply that's available and I believe that's why we're starting to see somewhat of a recovery and the pricing for the Rins.
Great. Thank you.
Our next question comes from.
Keybanc. Please go ahead.
Hi, good morning.
Okay.
Question so.
Just trying to come back real quick to the midstream segment and the 15 cents accretion that you talked about on the whole earlier.
And on deal.
Is that fair to think about this thing is 16 cents constant growth comes from that and the rest from our their organic opportunity set that at this time.
Yes, definitely that's a good way of thinking about it yet the 15% part of that seven that percentage was that 15%.
Sure.
Vincent.
15 cents.
Okay. Thank you and then I wanted to dig a little more into the to the earnings so being roughly flat year over year in their electronic right and I understand there's been a weather volatility last year and this year, but just sort of.
The way you describe it if we stripped away the weather impacts completely would that have grown in line with youre kind of long term rate.
Okay Acton and.
These are something that generate implantation.
And of course that.
Unusual this year.
Thats correct. We had last year was when the hottest we've had here a record here in Michigan in the region. So you take that away and normalized weather. This year, we had positive weather this year of 27 million.
Last year was it was much higher.
That it was over 60.
That when you take that away kind of look at the rate base growth it as being in line with a 70%.
We expect from this segment.
Alright, thank you.
Our next question comes from David Fishman of Goldman Sachs. Please go ahead.
Hey, good morning.
Okay.
I, just going back to the Haynesville acquisition and thinking about the 600 million of growth Capex I was just wondering I apologize. If you said this on the call couple of weeks ago, but when you think about the 600 million I know part of its related to the lead growth, but is there something that effectively guarantees that growth happening or is that just based on your.
Station for expansions based on.
Where you think demand will be.
Actually all of that growth is fully contracted with within they go and so the 600 million plus the other 400 million that we've talked about approximately about a billion dollars is fully contracted growth over the next 18 to 24 months.
Okay. So that's something we already have contracts in place for and that will be achieved.
That's correct.
Okay, and then I'm going back to the equity guidance. So I think you discuss is all that but it's one of the half 2 billion and then a 1 billion of that is the convert and than it says you can do about 300 million internally is that are you able to do that kind of level.
Every year of 200 to 300 million of equity internally can you do around the midpoint or higher end if needed yes. David for next few years, we should be able to do a $2 million to $300 million. There's a lot of that is going into the funding or pension which were a few years away from doing that.
Okay.
And then my last question I think you alluded a little bit too in excess maybe there's some other.
Parties, who are looking to potentially kind of term out those contracts, which is good.
But also just thinking about a generation pipeline in connection with there could you remind us what those contracts kind of looked like if there are they five years or are they in the end the double digits and then.
Also if you were to contract with them would it likely be the offtaker side or would it be a producer looking at the contract on Nexus.
Well the generation pipeline just to remind everyone.
Yeah, so very proximal to the Nexus pipeline and stands on its all of us on long term contracts and gives us a nice nice return a nice accretion. The plan is that connect that asset on several miles of pipe to Nexus and a little provide.
Approximately four to 500 million a day outlet for that pipeline.
But again just to repeat we do have long term contracts. So they are about 13 years in line.
So a very nicely contracted.
He is a pipe with demand charges.
Okay.
Great. Thank you appreciate congrats again.
Our next question comes from Paul Fremont musical. Please go ahead.
Hey, good morning, guys, it's Anthony Crowdell.
Anthony morning, Hi, how are you may have addressed.
On the actual call maybe two weeks ago, but wondering is just.
What makes you confident on the competitiveness of the Haynesville and then second.
If you could help me understand it can be seen minimum volume commitment Chargers and also what demand charge.
Let's start with the competitiveness of the Haynesville, we had the opportunity through this transaction.
To review, all 1700 or their proposed a drilling locations and we did that ourselves as long as along with two reserved consultants and we can tell you. After that analysis, we felt that the resources extremely strong whereby there at least 10 years of drilling available at sub two dollar prices. So that's one.
Number two.
Applying as being constructed creates great interconnectivity with the Gulf Coast markets.
Including the industrial power and the emerging LNG markets and the proximity to those markets provides a very large basis advantage that other resource basins don't enjoy so we felt that the the quality of the resource interconnectivity of the resource with a growing markets and.
Three the positioning of the resource which provides it with a basis advantage.
Great a really nice package of high returns and strong cash flows.
In terms of Nbcs in demand charges, there essentially the same thing nvcs, our monthly demand charges just that in the gathering business. They call. It at a minimum volume commitment and in our pipeline businesses, including the pipeline that we're building for this asset they call it a demand charge, but they're essentially equivalent in nature.
Great. Thanks.
Thanks for taking my question.
Thank you.
Our next question comes from.
Greg.
Yes. Please go ahead.
Yes. Thank you Paula Jones, if Youve said this.
Already but.
How much are you issuing new converts related to the acquisition.
And when.
You will be issuing approximately $1 billion, if we're going to finalize the.
Dollar amount.
Here, shortly but will be about $1 billion.
And when would that be.
It will be here in the and the fourth quarter are we want to close this transaction early December .
So we're gonna be looking at the market American conditions, but it'll be between now and then.
Thank you Peter.
Our next question comes from Charles Fishman of Morningstar Research. Please go ahead.
Good morning, I only had one layoffs.
On the penalize segment, the I didn't hear you talk.
Or give any update on industrial projects I think the last one you had was before complex or is that something you want to wait the high for anything you can talk about mouth.
We are essentially have secured three cogens. This year. One we were two Republic about still go in Ontario with their I'll take your reworks facility, we signed a long term arrangement with them to develop a cogen facility and a then we also have a commercial customer that we haven't yet disclosed.
It was signed they.
Purchase agreement West the purchase of Cogen facility.
Lastly, we signed an operating agreement with Wayne County for their Correctional facility operate their.
Industrial services assets. In addition to that we also closed two LNG projects in Wisconsin. This year, so three cogens and to R&D projects, which gives us the approximately 50 million dollar.
The nation target that we are pursuing this year.
So the I guess.
Gas price somewhat bearish outlook.
People have that that is little bit of a tailwind for these cogen projects correct.
Yeah, there's really two factors one is the fact that oh gas prices continue to be a.
Low levels and secondly, a electric rates continue to rise so the spread between gas and electric.
Bruce power continues to widen and that creates an attractive opportunity for customers that have long a large electric need into our usually a typically of steam host as well.
I was wondering when a customer has that thermal need is where you see the opportunity just yes, guys, hi, thermal and hi, thermal need and and a large electricity needs a those two factors make cogens very attractive.
Okay got it thank you.
Okay.
Thank you and now I would like to turn the call back over to sharing their CEO for any additional or closing remarks.
Well I'll wrap up by thanking everyone for joining the call. A 2019 again is shaping up to be another very successful year. We look forward to seen many of you any I and a few weeks, where we will describe in more detail our growth strategies and our five year outlook for each business line.
We'll also describe our financing and dividend strategies in more detail.
Do you story will continue to be a strong one into the future that will deliver premium shareholder returns. So thanks again for joining us and have a great day.
Yes.
Thank you Thats will conclude today's conference call. Thank you for your participation ladies and gentlemen, you may now disconnect.