Q4 2019 Earnings Call
Please standby robots began.
Good day and welcome to the Duke Energy fourth quarter earnings call. Today's conference is being recorded not this sounds like turn the conference over to Brian Butler, Vice President Investor Relations. Please go ahead Sir.
Great. Thank you Dare good morning, everyone and welcome to Duke Energys fourth quarter 2000, a night gene earnings review on business update.
We didn't our call today is one good chairman President and Chief Executive Officer, along with Steve Young Executive Vice President and CFO.
They just got should include the uses non-GAAP financial measures and forward looking information.
Actually it presents our safe Harbor statement.
A reconciliation of non-GAAP financial measures can be found in today's materials and all you can abhey dotcom.
Please note the appendix what today's presentation at least supplemental information and additional disclosures.
Let me turn the call over the one.
Brian Thank you and good morning, everyone. Today, we announced 2019 adjusted earnings per share a $5.
Representing 7% growth over last year, and solidly within 4% to 6% earnings guidance range.
The 2017 base year.
The Nike also marked a 93rd consecutive year paying quarterly dividends to our shareholders. We recognize that consistent growth in earnings and dividends are important to our investors and we arguably.
I'm very proud of our employees commitment and hard work throughout the year, we achieved a deep financial results, while maintaining our focus on the customer.
Reliability statistics, and fruits like 15% and our internal customer satisfaction metrics improved 25% a clear indication that we are enhancing the customer experience.
The foundation of outstanding service territories, and ample low risk investment opportunities to benefit our customers because that's great color.
The strength of our business into 2020 and beyond.
Just to do the guidance range of $5.05 to $5.45.
The midpoint of slide 25, reflecting solid 5% growth into 2020.
And your ultimate standards or EPS growth target of 46% for 2024 built on an expanded capital program.
Well I for outlines the drivers and opportunities for expanding infrastructure and our jurisdiction or service territories on Friday.
Well I got the Florida lead the east coast and population brands, driving strong economies and energy infrastructure needs.
GDP projections for those areas as well as Nashville, Tennessee also exceeded the national average to meet the needs of our customers. In these regions. We have a 56 billion dollar capital plan over the next five years, 90% of which will be deployed on regulated electric and gas LDC businesses and drive earnings face for transparent.
Why would indicate.
Appeared to have previously on the new plan represents a 12% increase.
Jack in the 6 billion dollar increase an old learning phase quite 2024.
Capital investments like we've had an excellent foundation to stand up 46% growth rates for 2024.
Steve will provide more detail and the five year capital plans on that.
We are proud of the work we did how was the lives of our customers. We support the health of course, the already the community some sort of not only two investments and our infrastructure, but also to live work and economic development community leadership at Foundation together.
We also recognize the importance of maintaining competitive electric and gas rate and obviously that our rates are well below the national average driven by top Cortile Island and performance and a diverse generation that.
The strong important jurisdictions, we sort of Duke energy set us apart and we will continue investing in our bread and player generation, where new York customers, the affordable and reliable sort of a fixed flexible.
Maybe just like fiber focus remains unchanged and is grounded in our vision to lead the way to clear smarter energy solutions to our customers value.
Like our customers at the center of everything we do know vision guides, our actions and Oregon.
We believe a customer focused strategy will also deliver superior returns to our investors overtime.
Strategy is likely underpinned by two foundational elements first excellence in operation.
If we didnt ask ourselves and also needed these with fire.
Secondly, excellence and stakeholder engagement.
19, marking another year of strong results in our operations and important progress and stakeholder engagement I wanted to share a few examples of our important work with stakeholders in 2019.
We reached an important settlement with the North Carolina Department of environmental quality and T. community. Good on closure plans all remaining coal ash sites in the state.
I also agreed that clarifies the methodology and timeframe to address all after the basin and enables us to move forward as we transition to planar generation.
We believe it or some reasonable and constructive approach that protects communities in the environmental saving our customers over a billion dollars and Paul.
In addition, North Carolina, we successfully advocated platform securitization legislation, which became law in November and reach constructive outcomes and or Piedmont rate cases in both north and South Carolina.
We also announced our comprehensive plan to reduce carbon emissions targeting at least a 50% reduction by 2030 net zero emissions like 2050.
Our updated goals are supported by our announced plans to the operating licenses for all of our nuclear units.
These units what can be vital to meeting a carbon goals and she was the capacity factor about 90% for the 21st consecutive year.
We understand the importance of accelerating the path to do a carbon and look forward and working with stakeholders in each of our state attorneys falls into reality.
If we turn to slide six cylinder superior returns to our investors drives up and it's a commitment of our team at Duke energy increasingly our investors will also looking at our result on environment. So full responsibility and governance matters. We're very proud of our track record here and consistent with our vision or committed to lead.
From a catalyst <unk> industry, leading carbon reduction goals through announcing more than 1500 megawatts that new wind and solar projects and how many 19, you're making significant progress.
Last year alone, we further reduced carbon emissions, an additional 8% from 2000 inside levels, bringing our total decreased to 39%.
Additionally, our broad array of energy efficiency programs in the Carolinas have created significant savings for our customers well ahead of national averages for these types of programs, while further reducing our carbon footprint.
These energy was also committed to social responsibility sound governance and transparent disclosures, we issued a first climate report analyzing the two degrees scenario in 2018 I plan to make sure. The updated report this year.
E.S.G. ratings reflect a walk over more than the decade.
Staying at below the initiatives and our ratings continue to increase.
Many of our investors have an interest and yes, you topic and we understand the importance of achieving excellent in these areas. It will move into the next decade.
We will be hosting an E.S.G. investor day in day and I'm excited to update all of you on the passive work we're doing it just got object.
Let me close on slide seven looking beyond or five your play into the strength of our business in or future investment opportunities, we see great potential in the three investment priorities. We've shared with you over the last few years modernizing the energy grid generating cleaner energy and expanding natural gas infrastructure.
You cannot be PND grid across a regulated footprint represents the largest system in the nation with more than 300000 wind miles of infrastructure in support of a long term strategy. We will continue to advance modernization improvement projects to enable renewable.
I think that Swanson security threats and so the rapidly going help populations in or service areas.
Transaction to claytor generation, all supervise the multi decade investment opportunity or 2030 commitment to reduce carbon emissions by at least 50% includes operating all existing carbon free resources retiring certain lots sufficient plans and investing in renewables and natural gas infrastructure.
As an example, the appetite for utility scale solar in Florida continues to rise and we expect to bring more than 1700 50 megawatts online for 2030 in the Carolinas in the Midwest significant investments needed as we transition kneisley away from coal fired generation.
Our LTC business will also continue to produce opportunities for investment in natural gas infrastructure, we see tremendous value creation from our Piedmont in mid west gas utilities, which are expected to grow net income at a 12% cagar through 2024 population and economic growth in the southeast coupled with the important role of natural gas and.
Transforming our generation that will drive incremental investment opportunities for years to call.
The Atlantic Coast pipeline also represents important infrastructure for our customers in the Carolinas. We have included slide 17 in the appendix.
Right and update 'em opponents data and financial considerations around the pipeline.
We continue to work towards securing the required permits for the project as we await the Supreme Court's decision on the Appalachian Trail crossing.
We also continue to advance discussions with customers on the project status timeline in Clos and are working toward opting to customer ugliness balancing value to customers in a fair return for the project owners. Our expectation is that we will have a more comprehensive update on HCP midyear.
Investing in the bread generating cleaner energy and expanding natural gas infrastructure are critical to the customers and communities, we serve animal pretty meaningful shareholder value for the next decade and beyond.
So I look ahead I'm more confident than I've heard that we will deliver strong long term returns for our shareholders and provide industry, leading service to our customers.
With that I'll turn the call over that.
Thanks, Wayne and good morning, everyone 2019 was an outstanding year of execution for the company. That's shown on slide eight fold your reported and adjusted earnings per share for those and six shows it's above the midpoint of our original and we've always 29 to guidance range, which represents 5% CAGR since.
Our portfolio true transition in 27th gene and 7% or image grew over 28.
During the third and fourth quarters, we recognized or exceptional year to date financial results.
The opportunity to reinvest some of our business deploying additional on in dollars as a customer service and funding charitable contributions to the Duke Energy Foundation.
Well, Joe will be positions the company world to deliver on our financial targets for 220 and 20 before the war.
Since we do have been 27th June 28, gene and 29 too.
Oh strong results were driven that you're really.
Each of our operating segments electric utilities and infrastructure growth was approximately 25 cents per share.
Good bar, Florida operations, which benefited from the first year bubble, so you're right and so on those.
We also saw solid growth in North Carolina shoppers with strong rider revenues for more best in class energy efficiency program generally cases.
These favorable causes for the segment were partially offset by regulatory was primarily a material.
Shifting to gas utilities and infrastructure, we saw higher results and those or LDC businesses on the Atlantic Coast pipeline.
The gas Ldcs continue to provide strong earnings driven by customer additions investments and integrity management and cogeneration infrastructure as well as a constructive outcome in the Piedmont's North Carolina like she's in the fourth quarter.
For commercial renewables business delivered approximately 200 million of income in 29 change going forward. We expect this segment to continue delivering between 200 and 250 million of net income per year over the five year plan.
Overall, Duke energy delivered outstanding results from 20 million CE, marking another year of achieving a financial commitments.
Portfolio. They play since late 2016 has consistently performed well in this position for 2020, M.B. Youre turning to slide momentum as we look to 2020.
Lonestar adjusted earnings per share guidance range, but those and five cents close those and 45 cents with a 525 midpoint.
First I was 5% growth over the midpoint of our original 29 chain earnings per share guidance range with $5. We put together a strong financial plan for 2020 and local utilities will continue to drive that bridge earnings trajectory for electric utilities and infrastructure was will come from their critical investment programs.
Floor similar to 2019, you expect very strong earnings contributions as we move into the second year of or multiple you're right.
Results from Florida will be further supported by the weapons deployment of solar generation.
The Carolinas, we will see full your contributions from the 20 like gene South Carolina rate cases, and expect and retail wage to become effective in North Carolina. During the third quarter of 22 and finally in addition to the city income when it comes from one Midwest TV and infrastructure investments, we expect new rigs for Duke.
Energy, Indiana by mid year.
Okay last long term annual load growth and a half percent range and expect 2020 to be even stronger given the recent encouraging signs with our industrial customers and the benefit of leap year.
The most significant 2020 growth driver for gas utilities and infrastructure would be the full year earnings impact with the Piedmont North Carolina leakage in the new rates were factors in November 29.
Or L.D.C. businesses continue to experience, increasing customer group driving year over year margin improved.
We're also heavily investing and integrity management programs across our footprint recovering lesion fourq investments' annual rider mechanism.
And our gas midstream business, we expect higher if you do see on Atlantic Coast pipeline. The full construction activities beginning in the second half of the year.
However, 2020 overall, we see P. results will be relatively flat.
Given 2090 benefited from a tax true up.
In commercial removal, we expect the slight uptick in shows this year because when production returns to normal and that's or 60 megawatt Palmer Solar project will now go into commercial operation in 2020, otherwise the segment's results remain relatively consistent over the five year plan.
Slide 10 provides a view of our primary U.P.S. road drivers for 2021.
Which were similar to the 2020 drugs.
Florida continues to be a major contributor 2021 net income bolstered by the third year of the multiyear rate plan and I were 700 megawatt solar investment program. We expect solid contributions from other core operations in the Carolinas and Midwest, because we are investing needed infrastructure or LDC businesses will experience.
Rapid growth as we deploy capital to serve new customers and increase the integrity of the existing system.
And as I discussed during our November coal fire Atlantic Coast pipeline earnings in 2021 will fully offset the dilution from the 2.5 billion equity forward that would be settled later this year.
Lastly, I'd like to point, you to our appendix slides, which highlight Duke Energys top quartile leadership and all in cost per customer.
We're still early in our German or industry, leading innovation centers hitting its stride both scale digital capabilities, such as mobile tools for field workers artificial intelligence usage drones that automation to transform our operations and back office processes will continue to leverage these capabilities to drive.
She sees and productivity across the enterprise.
Turning to slide 11, I'd like to reiterate some of the page then shared earlier regarding the rapidly expanding infrastructure needs of our operations and communities.
We have responded by increasing or five your capital plan by over 6 billion to benefit or customers and deliver value for shareholders. The vitality of our communities translates into long term growth opportunities, because we make significant investments and position our cities and communities to remain competitive for jobs and business development.
We turn our communities rely more than ever and our ability to attract low cost capital to make these investments are unique industrial growth proposition coupled with a long history of constructive regulatory outcomes provide the right balance to lead Duke energy and its communities into the next chapter of our energy future.
The Florida capital plan is underscored by solar investments in grid improvements, including targeted underground.
Store protection plan legislation supports the deployment and recoveries written business driving our increased capital we expect to flower SPP plans in the first half of this year with the program taking effect in late 2021, well early 22.
In the Carolinas, we see significant needs for T.D. capacity and improvement projects to support the expansion of renewables as well as rapid population and economic.
Turning to our gas LDC strong economic growth gloves tremendous need for interim infrastructure investments, including or integrity management programs further as we transition to energy cleaner energy solutions, we have dual fuel capital projects with existing coal plants, which moves us closer to achieving our coffee.
And targets.
Highlights the complimentary nature of or electric and gas physicians.
Turning to slide 12 or ability to execute on our robust capital program was underpinned burst strengthened balance sheet and solid credit ratings, which are stable both S&P and Moody's. We continue to expect issued 500 million of equity per year through 2022 via the drip and ATM programs and as we've discussed.
Last quarter, let's say C.T. comes online, we have the balance sheet flexibility to moderate or eliminate annual equity issues.
As a reminder plan to settle the 2.5 billion dollar equity forward related to last year's issuance in December 2020, resulting in minimal dilution this year.
Shifting to slide 13, we understand the value of the dividend to our investors 40% of.
<unk> retail shareholders.
2020 will mark the 94 consecutive year of paying a quarterly cash dividends.
We remain a top tier dividend yields investment we're committed to continue rolling the dividend in the future and finished 2019 with a dividend payout ratio of 74%.
I've said previously our objective is to reduce that payout ratio over time more of our peers, particularly given our robust capital. Please.
Over the near term will set our dividend growth to better position ourselves within a payout ratio range, 65% to 75% trending to the low end of this range over the five year pure.
Before we open it up for questions. Let me turn to slide 14 are attractive dividend yield earnings growth from investments in a regulated utilities provides a compelling risk adjusted return for shareholders, we're positioned to deliver results for both customers and shareholders.
Confidence in the plan they have for 2020 and deal.
With that we'll open the line three request.
Thank you, ladies and gentlemen, if you'd like to ask a question at this time. Please signal by pressing star one on your telephone keypad and if you are using a speakerphone. Please make sure immune function has turned off July or signal to reach our equipment again that a star one signal for question.
And we'll first take sharp reserve with Guggenheim Partners. Please go ahead.
Hey, good morning Gosh.
Morning.
So a big jump in Capex and the rate base is obviously up six going in and 23, we talk a bit more on serve the higher numbers and maybe even focusing on 23, especially in Florida, where I think you're expecting to fall the formal GR. She's later this year I mean, <unk> base assumption in the upcoming GRC versus the.
Plan, you kind of presented today and could we see some further upside if the outcome and just a little bit more constructive, especially that support from sort of your healthy macro backdrop you highlighted.
Sure. Okay. Thank you for the question, we did a lay out in the slide deck. The underlying investments around 6 billion a billion of half of that is in Florida for believing the Carolinas and then we pay incremental investment in our gas I'll be season, the going on but I think to your point the recent lunch.
Flaishon in Florida represents a longer term opportunity and we'd see up to 5 billion over a decade or so of investment in that infrastructure and as we move through the process of finalizing our existing multiyear plan and resetting that into the future I do believe there will be ongoing potash.
Control for investment in Florida, and the way that adds a lot of value to customers and investors.
Got it and then just one last free on North Carolina cost, it's obviously kind of a fluid situation. So is there any read through to dominion's recent notice a decision, which essentially extended the recovery period for draft spend but with no return on that spend prospectively I mean, assuming this is kind of applicable to you can you kind of break.
Yes, I'll come down relative to your NAV billion total CCR costs, if we sort of a pie that same method methodology as we did with them in.
Sure.
Sure. The first point I would make on this which I think is really important is the dominion order did provide recovery of the costs.
And that is a significant outcome, which we of course believe makes sense given its decommissioning of coal plants that have provided great value to our customers over generations.
We have a web the notice of decision, but I also think it's important to recognize that we had not yet seen order.
So we don't understand all of the elements, we don't understand the rationale I think it's fair to say that the order will be specific to the facts and circumstances in this case and although we'll learn from it I I'm not prepared to say, how it will impact us directly.
But I.
We will be presenting our case and the D.C., a case and in March and D. P and Mary and hopefully have the opportunity to learn more from the order as we prepare to enter into those are those proceedings.
Got it but just just to follow up but just given the sort of your capex outlook and sort of how you know healthy. It is is it fair to assume that you couldn't work whatever outcome that does come about in that case, assuming there for instance in their return on that spend.
Oh, you know sharp when we put together a five year plan, we do so assuming a range of outcomes.
So that would include amortization that would include various assumptions around cost recovery, but I also want to emphasize that we believe a lack of a return over an extended amortization period detrimental to our balance sheet into customers over the long term and therefore.
We believe these costs ought to earn a return there is a cost of financing associated with anything that of this nature and their cost of financing should be considered as part of the cost of service.
So we will be made on this point part of the case.
Got it congrats I went excuse me.
When almost occasion thanks.
Thank you Sir.
Thank you. Our next question comes from Julien Dumoulin Smith with Bank of America. Please go ahead.
Hey, good morning good.
All right long and how are Ya.
Good. Thank you for the time, perhaps just just to follow up on the Carolinas here, if you don't like I'm sure almost.
Possibilities here on just reiki settlement and just.
Aspects on timeline, if you will and then related to that RBC lead at a pretty impressive updated outlook. How do you think about this tying in to some of the updates moving in flight in parallel at the state level on on sort of the grid Mod side of the equation I think it would be acute side.
Oh, you know on the first question Julien on settlement you know, we always explore opportunities for settlement. In every case I think you think about the numbers issues and the rate case, if we can get to resolution of any of them in advance. We'll certainly look to do that did that in the Carolinas cases.
You may recall, the last time around at least as it pertains to early in cap structure. So I can't forecast with certainty how that will occur or if it will occur, but we'll certainly explore those opportunities.
On your second question around how it relates to each of the jurisdictions and capital take a shot and maybe some clarity of the question would be helpful.
Here are wanting to sit victories.
Sure. So we believe we've made the case soundly and all of our jurisdictions about the importance of the energy delivery system to be the backbone of the transition of you know renewable generation.
Storm hardening in Minnesota, and Cds had hurricane exposure and all of our southeastern jurisdictions over the last four years, and then cyber and physical.
Security threats or something that are not unique to Duke energy, but certainly important for our industry. So we feel like weve laid the groundwork for that I think you know Julian will be involved in stakeholder meetings throughout 2020 in the Carolinas to further discussions around the clean energy plan.
And it's part of data will be not only advancement of how to achieve for the carbon reduction, but also are gonna methods to modernize regulation and performance base rate, making and other things that would fit quite nicely with our strategy around clean generation and quit investment. So as the stakeholder process is progressing 2020 and into 20.
21, I will look for opportunities to you know continue to pursue regulatory modernization that fits with these investments.
Got it and then separately if I could just follow up on omni higher levels rate base. How do you think about the financing just I know you guys did the equity last year, you haven't projected athletic that metric here, but I just want to try to have it all back together wouldn't you choices about <unk> allocated stable projection.
Sure as I alluded to we priced out the two and half billion of equity.
Several that Italy, twentytwenty that plus the drip ATM equity through 2022 or the equity needs that we see a will finance the rest of or needs.
We fundings.
Combination of holding company and operating company debt issuances, and we feel comfortable about that financing plan and maintaining the credit ratings.
Got it maybe just is it if I can rephrase that slightly and you tell me if I'm not thinking right.
The equity forward.
The effective lead pays for the incremental capex such if your metrics are largely unchanged.
And then I know that that was previously you conversation on HCP and providing some buffer.
Do you want to use reconciled the HCP conversation versus the Capex plan I'm personally it sounds like you've effectively use that incremental equity now to two to pay for the planned this year, but I just want also make sure. We we've addressed the prior commentary about HCP outcomes.
Right, let me give some clarity here the the incremental equity.
Dealt with Atlantic Coast pipeline and delays associated with that in the cash flows that therefore delayed we.
Determine the project needed to go in one phase and 20 to 22 as opposed to having cash flows coming in and 2021.
And that equity you dealt with a number ranges of outcomes with HCP and it still does.
The incremental capex spend that we've gotten to play a we can deal with over that same amount of equity. We've got other tools that we've utilized we issued a billion dollars equity constant securities and 2019 at very attractive wage.
We have continued to find operational efficiencies through over them and that we described earlier that helps the balance sheet.
Well, we executed on the John Hancock transaction could envision dropping other assets into mechanisms like that but should provide some liquidity. So the the equity a two point filled 5 billion dollar equity has not them.
So.
For for the incremental Capex, we can deal with it with the equity I described.
Thanks for clarification of the time grants.
Thanks early on.
Thank you we'll next go to Steve Flashman with Wolfe Research. Please go ahead.
Hi, good morning.
I live.
So a couple of questions first just a technical want be 2019.
It looks like a lot of the beat versus your segment guidance came in the gas utilities and infrastructure.
Segment can you just explain what drove that.
So we had a couple of things there Steve a force on results on capital deployment, a rate case outcomes et cetera Atlantic Coast pipeline is in there and we also had a classic just funds on working mission of the way allowance for funds had been recorded on the pipeline, which.
Of the RBC businesses as well.
Would you add to that yeah, I would say you know looking at 29 seen we had strong growth across all or segments, you look at the electric utilities.
We had a full year the 2018, North Carolina rate cases, we had a partial year of the 29 team South Carolina rate cases.
We saw Midwest grid continue to roll through a we had.
You go higher rate case that added a few cents or energy efficiency writer, particularly in the Carolinas added several cents. So we saw good solid growth on the electric side.
Okay. So I would have that okay. I'll just looking at slide 21 word your shows our coal versus original assumptions and it looks like gas utilities be by you know a lot. So that's why not.
Curious does it turns out to the beat versus that Oh, yeah.
So that was okay I can follow up on an additive.
So growth in electric a bit and gas a bit more that pushes above of over.
Okay, either prepare them gas OVC and MVP and the tax adjustment around allowance for funds those are the three drivers.
Okay, and then just wondering CP at a high level in the unfortunate event that it somehow pleasant.
<unk> Dod how would you characterize the how to think about your 4% to 6%.
And it seems all I would characterize the five year period as having great flexibility.
And by that I mean, the robust capital plan that we have outlined for the utilities positions and utilities very solidly within a 46% guidance range.
And that gives us confidence that those utilities are going to continue to grow them quite well and we have demonstrated the growth in those utilities over several years and hopefully that gives you confidence as well and our ability to deliver.
I think on Atlantic Coast pipeline legal work our way through it as we spoke about a moment ago, we've taken a step and strengthen the balance sheet to absorb a range of options.
Have flexibility with our capital plans to make adjustments to put in a plan b. If one is required to build gas infrastructure to meet the needs that HCP would have met.
Also have the opportunity to expand or accelerate good investment and the number about jurisdictions and then the ongoing productivity and flexibility around owing represents another a level that we have in the dressing returns over a five year period.
We have demonstrated the ability to achieve redemptions and flexibility you know one m. across.
Diverse businesses and we see further opportunities over the five year period.
So we're committed to driving low risk regulated growth in earnings and dividends.
And we you know believes that we have the capability of doing that.
But we will work our way through HCP and I think 2020, it's an important year to hit some of these milestones and we'll update all along the way.
Great one just yet.
Steve I just wanted to go to go past. Good question. Just also let you know for 2019.
We have a beat of our original target by six cents, but I'd also want to highlight that we accelerated a four cents of or Onea for future years for foundation contributions. We also accelerated several cents for goods management from future years in this particular calendar year. So we had a lot.
Out of optimization around 29 team as well absent those things would be would have been larger.
That's all but one other yeah.
That's great and then one other just quick thing.
The 4 billion up incremental spending in the Carolinas.
Is that it sounds like it's mainly PND spending just is there any coal ash related spend of.
New plant and mirrors that caught pass that period.
So there's no incremental coal ash spending that that number though.
First as a comparable levels of what we've had in the past.
Okay, great. Thank you.
Thank you see.
Thank you we'll next go to Stephen Byrd with Morgan Stanley. Please go ahead.
Hi, good morning.
Morning.
Perhaps on a constructive Ah update I wanted to English to talk about a Florida, a little bit solar economics continue to trend favorably and you've highlighted Florida is one area of incremental growth.
Over time, I guess longer term, if we continue to see solar costs drop.
There are a fairly significant opportunities to make even bigger changes to your generation mix in the state are there other reasons why that that wouldn't be the case of solar cost dropped further.
Yes, Stephen I believe there are increasing opportunities and we will watch those economics, all along the way and as I think backing over you know even the last two to three years every time, we set a forward forecast is increasing in France, and I think that will be the case into the 2020.
Understood. The number that you've laid out is essential sort of I know you haven't specifically laid out the amount of solar use you sort of put Florida, together, but we'll be seeing a resource plan that you all way out in a believe in April in Florida, which which could could show.
Further progress in terms of moving towards renewable says that per se.
Yeah, and you know at this point, we're forecasting 17 other than 50 megawatts of shoulder season.
And well continue to update that as we go but I think to your point. It gives you think out over a decade.
Bias is that number is going to go up.
That's helpful. And then just lastly, going to start to hit on the financing needs just wanted to kind of thing through scenarios.
In the unfortunate an outcome if if it ends up to be Atlantic Coast pipeline project is.
Not able to move forward either because of the Supreme Court.
Ruling or the biological opinion, how how would that sort of that single.
The impact sort of your overall equity needs in another words is the sort of financing plan fairly flexible and you don't you wouldn't envision incremental equity in that scenario or how do you. How do you think about that that's sort of outcome.
And as Steve I believe we've taken care of the range of outcomes on HCP with the two and half a billion dollars.
You know the one thing in the financing plan that we would evaluate as we have the drip an ATM on through I believe 20.2.
With an idea that we potentially could moderate and 20 324 at HCP is on.
We will evaluate whether or not the grew up an ATM should be a part of the financing plan a in all of them for 20 324, depending on outcome, but I think that's the only thing I would point to its something that all will have ongoing evaluation. So we feel like that we put in front of view with the equity that we've issued and maintaining the.
For 2022 with additional capital is as follows plan that will meet our credit metrics, our earnings guidance and absorb outcomes around a city.
Very clear thank you very much.
Thank you again.
Thank you won't we'll next go to Michael Weinstein with Credit Suisse. Please go ahead.
Hi, Stephen Lynch.
Hi, I'm alike.
We talk often about commercial renewables and one thing for US plan is for that going forward.
You had some projects pushed out to 2020.
$40 million functions.
Six cents.
19 cents for 2020 is that sort of the new level going forward or is that kind of grow.
Beyond that how many megawatts is required to keep that off anyway.
Oh sure Mike we're looking at Uh Huh haven't commercial removals contribute between 200, and 250 million a year ago. The plan. It looked at on the timing of projects, but that's keeping pretty level, a pretty flat with the level that they got to in 2019. So we're not sure.
Thanks, a lot of growth there we did a shift the polymer solar project to 2020 that was another optimization move as we got late in the year that will help to 2020 earnings but they'll be between 200 250 million here through our plan.
You know, we've got a oh 2020 lined up and locked up when we got 60% of the net income over the five year period.
In hands as well so a rough number that you're thinking about is roughly landing 300 megawatts a year of projects to keep it going.
And between.
The markets that we're in them that crispy programs in the in North Carolina, and so forth. We think that's a very attained [laughter].
Got it and.
Said that you don't expect any dilution from there.
Oh firepower.
As result of earnings.
After the pipeline goes in service and I'm. Just wondering is that as a result of higher rates on the pipeline going forward or is it higher.
Hang on higher volumes through compression.
Lag between.
Surface trade and the lack of dilution or is there.
In between there.
And like we have given you some financial considerations on slide 17 on allowance for funds and 20, and then full year in service you know in 22 and beyond what you can expect in terms of the contribution of they CP.
The dilution that we will experience in 2021 will be absorbed by incremental allowance for funds in that you have all the project is still under construction and so you know I would think about putting that equity into the plan and 2021 and then the combination of the utility results. We've shared with you today as well as what we're sure.
Airing on HCP is the earning platform with financing, but you can expect of inside your period.
One last question just to confirm how much is or how much.
How much financing have you already committed.
To the project at this point, if it gets around 2 billion, including.
And if you do see at this point.
Oh, yeah that the a good gross project cost or about to building 2 billion on our books now we've got about eight or 900 million love.
Construction financing against that.
And would you expect that to pick up I guess once the Supreme Court rules for that.
Uh huh.
I'm, sorry, Mike I couldn't hear that question.
Helpful form into additional spending starts rolling significantly as I can.
After the Supreme Court rules.
So the gating item on construction is the biological opinion and they just don't take statement. So the restoration of the environmental impact study. So if you look again at slide 17 or forecasting that we issuance of the permits.
In the middle part of 2020 can you should think about construction is being in the latter restart of construction, making the latter half of 2020.
Thank you very much.
Thank you like yours.
Thank you will next take Andrew Weisel with Scotia Bank. Please go ahead.
Thanks, Good morning, everybody.
Hi, and order.
So first question, you're very impressive Capex update.
For 19 to 23, it looks like you're spending is up roughly 15% or so but when I look at the earnings base outlook increases more modest spend around 5% depending on the year. We'd please help me reconcile bones and what are some of the offsets.
Yeah, I think are a rate base growth.
Gross.
He is at the.
6% level over the over the period of time, there and Capex.
It may vary in terms of pellets loaded through the type of cap ex but I'd have to look in more detail on that others too and the IR team can help you with.
Okay. I'm wondering if you look at the capital even in times, you're probably I don't give you a sense of the growth in each of the utilities so on average.
You know every utility is growing within the 4% to 6% range some are higher.
Then that's a and gas of course is higher than that but the combination the average of all the utilities together or at the 6% CAGR.
Right I understand that I'm not talking about year over year girls I'm talking about your annual guidance first the prior guidance I should've been more Claire.
So we have laid out I'm on slide 11 kind of how this comes in and I think we could spend some time with the IR team to give you some specifics on what it looks like in 2020 122, I think the combination of that chart in the detailed the appendix we'd be happy to walk you through.
Okay I'll follow up offline. My next question is can you talk a bit about the industrial demand. Obviously, you know, it's not you're not the only when Siemens, but it's been pretty soft last year fourth quarter in particular, a and then I think you mentioned the uplifting 2020 from the leap, but maybe just talk about Justin expectations over the next few quarters.
Sure 2019 was Oh, so rough you your for the economy as a whole that translated to our industry at lower kilowatt hour sales we saw that.
But in many of our peers as well.
The good news for US is that we see tremendous customer customer growth. We saw the best customer growth in 2019, saying in many years, particularly in the Carolinas in Florida.
We look forward, we'll see or something like a customer growth translate.
To some favorable growth. We believe we also think that there'll be some rebound as we look at some of our industrial customers. If you have had some singular a issues with the outages supply chain issues and so forth. So we think they may get some traction as we move forward in 2020.
To help rebound off a bad year or overall growth expectation load growth expectation is one half of 1% and they'll be years like 28 teams that are very strong years, followed by some years that are there were a little weaker but we think that's a reasonable place to be over the five year period.
We do expect to see some growth over 19 and 2020 as 19 was kind of a low year and again, we're seeing some favorable indicators from some of or industrials and or service territories.
The only thing I would add to that as you know all of our jurisdictions continue to perform with GDP that Bob National average the weakness we saw in industrial was largely driven by some of the uncertainties around tariffs.
But you know surface in 2019, but as Steve said, we we are beginning to see some signs of rebound in that specific customer circumstances, and oh for a stronger 2020.
Okay. Great. That's helpful. Then I'm, even in Steve did I hear you say that you're targeting the low end of the 60, 575% range in the outer years.
Why would that be and why not the midpoint.
Well, that's just where it tracks they saw the assumptions, we put there which are really monitor that as we go forward. It's nice to have the flexibility to look at the dividends as it gets to the lower end of the range although we.
I have that flexibility so we're not.
Committing to anything on that but it's nice to be tracking in that direction.
And I think candor is we more solidly positioned the dividend within the payout range our longer term goal is to grow the dividend at the same pace of earnings and this moderation we're experiencing here in the short team will give us the flexibility to do that over the longer term.
Got it very good and then if I could squeeze one last one in here.
Our ways in the Carolinas, you're guiding to a moderately lower return in 2020 versus the past few years is that primarily related to last years reduction in the allowed ROI. We are there other factors there I know, it's tough to discussing the middle of rate case is fine.
Any kind of directional commentary.
You know a couple of factors that come in you as your bills investment base.
For the upcoming rate case, you will incur some lag as I referred to and then you'll catch that up a when you have a rate case. So some of those returns will move around depend depending upon the rate case tightening and I think that's one of the factors, that's if think about as well.
Okay. Thank you very much.
Thank you.
Thank you and ladies and gentlemen that does conclude or time for questions and answers today I'd like to turn the conference back over to Lynn good for any additional for closing remarks.
Well I want to thank everyone for joining the call today, we're proud of our accomplishments in 2019 and believes that the company is well positioned not only to deliver industry, leading service our customers, but also results strong results for our shareholders. In the years ahead, we look forward to saying you at our E.S.G. Investor day in May.
And also look forward to any follow up questions that you have our IR team will be available. So thanks again for joining us.
Thank you again that does conclude today's call. We didn't you again for your participation you may now disconnect.
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