Q4 2019 Earnings Call
Welcome to the Fortis Q4, 2019 conference call in web cast.
During the call all participants will be in listen only mode. There will be a question and answer session. Following the presentation.
At that time, those with questions should press star followed by one on their telephone if it anytime during the conference you need to reach an operator, Please press star zero.
At this time I would like to turn the conference Overcast Stephanie Mimo. Please go ahead massive mimo.
I think we thought and good morning, everyone and welcome to Florida Since 2019 fourth quarter results Conference call I'm joined by buried Terry President and CEO, and Joslin Perry Executive VP and CFO. Other members of the senior management team as well as CEO. Some certain subsidiaries before we begin today's call I would I want to remind you that the discussion.
Include forward looking information.
Which is subject to the cautionary statement contained in this important.
All non-GAAP financial measures referenced in our prepared remarks are reconciled to the related U.S. GAAP financial measures in our 2018 annual Indiana.
Unless otherwise specified all financial information references in Canadian dollars with that I will turn the call over to Barry.
I'm going to start again.
Thank you Stephanie good morning, everyone before providing details on our 2019 results I would like to take a moment to say that we're deeply saddened by the recent passing of either boudreau ought to serve as chair of our governance and nomination committee afford Us board and as chair of the board afford us B C.
She wasn't international business leader, a mentor cherish colleagues, who provided years of thoughtful leadership to Florida.
I will be greatly missed by the afford us family.
Now turning to our annual results to the 2019 was another strong year for Fortis.
Our energy delivery businesses invested approximately $4 billion in our system.
These investments enhanced the service, we provide to our customers, while focusing on delivering cleaner energy and it's safe reliable and affordable manner.
These investments supported earnings of 1.1 billion or $2, a 55 cents per common share on an adjusted basis were 29 team.
Earnings were impacted by Fercs are we decision received in the fourth quarter.
I also will spend more time discussing this decision in her prepared remarks.
Additionally, in the fourth quarter, the quarterly dividend paid increased by 6.1% marketing 46 consecutive years of increases they record we're very proud off.
On the sustainability front, we advanced our plans to deliver energy that's cleaners, we can as fast as we can with customer affordability top of mind.
In British Columbia, Fortisbc set a new target to reduce greenhouse gas emissions associated with its customers energy use by 30% by 2030.
Arizona our team secured the 250 megawatt also granted they wind project, which will become Tucson electric powers largest renewable resource.
This project will help the utility to reaches goal of delivering 30% renewable power to customers by 2030.
T. P is expected to approach this level as early as 2021 nine years ahead of schedule.
In addition, we issued our sustained <unk> sustainability update in the second quarter, which included information on the performance of our utilities as well as new indicators.
Specifically, we included disclosure around our efforts to advance the United Nations sustainable development goals.
Our improvements on the system sustainability front, we're validated in late 2019, when we received an upgrade from a key E.S.G. rating agency M. A C.
We're pleased to share that we're now rate at a double a company this positions us in the top quartile Imperva <unk> profiles off as a leader on the S.G. front.
Our focus efforts in this area over the past five years have resulted in significant improvements in our rating as shown on slide four.
Even with this strong position, we aim to do better in 2020, M.B. on keeping sustainability core to the success afford us.
2020, we're focused on furthering our efforts by advancing the shift a cleaner energy and improving our disclosures.
We also executed on our funding plans in 2019. This was accomplished with the sale of the Juanita expansion hydroelectric project in British Columbia for $1 billion and the successful 1.2 billion dollar common equity issuance completed in the fourth quarter.
Overall these two items position the balance sheet nicely as we look to deploy our capital plan and 2020 and beyond.
Before we get into our operational performance, we want to discuss our efforts surrounding talent management and the development of our team.
Over the last several years borders and our utilities have placed significant focus on these initiatives.
2019 was no exception.
During the year, we broaden the responsibilities are the following executives importing into me.
First Jim Legals role was expanded in 2019 to include oversight of our information technology Cyber security and innovation function, serving as our executive Vice President of business development and Chief Technology Officer.
And more recently, David Hutchens was appointed to Chief operating Officer, and this newly created roll days responsibilities abroad and to include operational oversight over 10 utilities across Canada, United States in the Caribbean as we look to strengthen our energy networks and execute on our large capital plan.
When we reflect on the past five years, we closed our largest utility acquisition shifted our focus to an organic growth strategy, all while performing well operationally.
Operational excellence is a key pillar of our long term success on the safety and reliability front, we have consistently outperformed our Canadian and U.S. peers on leading industry indicators.
Recently system reliability was tested at Newfoundland power the city, you'll see John's experience a record blizzard, bringing over 75 centimeters of snow and Hurricane force wins, and a 24 hours stretch.
Fortunately our system held up extremely well despite the city being in a state of emergency four week.
In fact less than 10% of Newport empowers customers lost power during the storm.
Reliability of our system highlights the operational expertise of our teams, but also underscores the importance and the need for further investments to harden the systems in our footprint, especially as we think about the impacts of climate change.
As we look forward to the next five years, our teams will strive for continued strong operational performance and look to improve our safety and reliability metrics.
Our long history of achieving strong shareholder returns continued in 2019 with a one year total shareholder return of 22.7%.
Looking back over a 20 year timeframe for does is delivered superior average annual total shareholder returns, a 14.3% or over 1300% in total.
As shown on slide six this far exceeds the returns generated by the benchmark indices.
All in all 2019 maintained our track record of delivering strong total returns to our shareholders.
Turning to slide seven and our five year capital outlook, we are increasing to 2020 to 2024 capital plan from 18.3 billion to 18.8 billion or 500 million more to account for capital that shifted from 2019 into 2020 and 2021.
Specifically 300 million of expected investment in 29 team has shifted to January 2020, driven by the timing of payments on the owes a ground a wind project.
Remaining 200 million was shifted to 2021 to account for changes in time of other projects in Arizona.
As a reminder of the capital plan is focused on our regulated businesses and consists of a diverse mix of highly executable low risk projects needed to maintain an upgrade or existing infrastructure only 10 projects in our five year capital plan have a value of $200 million or more.
Over the next five years as we execute on the capital plan, we expect a rate base will grow by approximately $10 billion or by 1 billion every six months.
2019 rate base of 28 billion is expected to grow to 38 billion by 2024. This yields three and five year compound annual growth rates of approximately 7%, which is consistent with our prior rate base growth guidance.
As mentioned 2019 was our 46 consecutive year of dividend increases.
The strength and durability of our locally operated energy delivery businesses.
Well with our diverse geographic and regulatory footprint.
Positions us well to continue this record into the future.
Looking ahead, we remain committed to our 6% five year average annual dividend growth guidance through 2024.
Now I'll turn the call over the Joslin for an update on our fourth quarter and 2019 annual results.
Thank you Barry and good morning, everyone.
Turning to slide 11 reported earnings for the fourth quarter 2019 were $346 million were 77 cents per common share, which were significantly higher than 61 cents per common share in the fourth quarter 2018.
Earnings in the quarter reflect the impact of perks, our OE decision received this past November.
In disorder.
The rise the babies R O <unk> up 9.8% up to a maximum of 12.24% with incentive matters.
Including our OEM incentive matters. This implies an all in going forward are only up 10.63% for ITC compared to the previous on in our ROE of 11.7%.
In the order also dismiss complaint number two as you might recall ITC had previously accrued amounts related to the expected reap on for the our ROE complaint.
Overall net favorable earnings impact of $63 million was recognized in the corner.
These favorable impact was comprised of the reversal prior period accruals of $83 million, which were tempered by $20 million related to the reduce our ROE for 2019 that I just to Scott.
I'll get into the order a little more in the next couple of fine.
On an adjusted basis for the quarter EPS was 62 cents six cents higher compared to the previous year and this reflects rate base growth in a regulated businesses, partially offset by the lower early at ITC.
On an annual basis reported earnings of approximately $1.7 billion or $3.79 per common share were significantly higher than last year. This was driven by the 484 million dollar net gain on the sale of our 51% interest in the Juanita expansion recorded in the second.
Quarter and the impact of the FERC order.
Adjusted EPS for 2019 was $2.55 per common share four cents higher than 2018.
Again rate based growth at our regulated businesses was partially offset by the FERC decision at ITC as well as weather impacts in Belize and Arizona.
Now on slide 12, I'll walk through the details of the P.S. drivers for the quarter.
Rate based growth at our regulated utility businesses was led by our Western Canadian utilities, which contributed four cents increase the need P.S. during the quarter <unk>.
<unk> earnings were also favorably impacted by lower operating costs.
In Arizona, you want us energy increased by three cents during the quarter lower operating costs associated with scheduled outages and maintenance along with lower taxes were the main driver.
This increase was partially offset by higher cost associated with rate based growth not yet included in <unk> due to the historical test year.
Whether it was not a significant driver of results for the fourth quarter.
In New York Central Hudson increase TPS segment, driven by rate based growth.
And rate based growth at ITC was tempered by the approximate four cents annual impact of the lower.
All of which was recognized in the fourth quarter of 2019.
And that I regularly nonregulated energy infrastructure businesses EPA has decreased by one cents for the quarter. This was mainly driven by lower production anybody's as a country continues to experience drought like conditions.
With the lower rainfall production in the fourth quarter was 14 gigawatt hours compared to 53 gigawatt hours in the previous year.
Now turning to 2019 annual results on slide 13.
Adjusted 2019 earnings per share increase four cents to $2.55 compared to 2018.
Our western Canadian utilities improve dps by five cents, largely reflecting weak based growth at Fortisbc enforced, Alberta, coupled with lower operating expenses at board is Alberta.
Hi, Tc our largest utility improve dps by four cents, driven mainly by strong rate based growth and lower business development costs.
This was partially offset by the on favorable four cents annual impact of the 2019 FERC order.
A higher U.S. dollar to Canadian dollar foreign exchange rate for 2019 resulted in a four cents EPS increase.
The 2019 average rate was $1.33 compared to $1.30 last year.
Central Hudson contributed two cents to eat P.S. over last year. This was driven by rate base growth and lower storm restoration costs in 2019.
The non regulated energy infrastructure businesses reduced annual EPS by six cents again lower rainfall into these resulting in lower production reduced EPS by five cents for 2019.
With the drought like conditions production for 2019 was 64 gigawatt hours compared to 233 gigawatt hours for 2018.
EPS contribution from you when asked was two cents lower compared to last year. This was largely driven by higher costs associated with rate base growth not yet im rate due to the story could test year and cooler temperatures in Arizona during the second quarter.
The decrease was partially offset by higher at beauties, D. and lower operating costs associated with scheduled outages and maintenance.
And lastly, the three cents EPS decreased in the corporate another segment was driven by a higher number of weighted average common shares partially offset by lower corporate costs.
Yeah, our average common shares we like the $1.2 billion equity issuance completed in the fourth quarter accompanies dividend reinvestment plan and the ATM program and I'll discuss the recent equity issuance in a couple of slide.
Absent the on favorable impacts of the lower or are we at ITC and whether in believes and Arizona 2000, Nineteens adjusted EPS increased by approximately 6% over 2018.
Turning now to our regulatory outlook at ITC. We previously mentioned that we received an order from park on the base our OE in November 2019.
In December the transmission owners in the MISO region, including ITC filed a request for rehearing on the basis that among other things the order will not allow utilities to earn a reasonable rate of return on investment.
Last month, <unk> issued an order granting the rehearing for further consideration effectively extending Fercs review.
Currently there was no designated time for Fourq to act on this particular matter.
With regard to the two notices of inquiry issued in March 2019 by FERC, we still awaiting a decision as you'll recall the first in a lysaght comment on how could improve its transmission incentive policy and the second unhealthy Brooks policies for determining the early use.
Setting rate should be modified.
And lastly, ITC still wait to response from the U.S. Court of Appeals regarding its appeal of for 2018 order, which reduced the independence Adder again, there is no specified timeframe for the court to decide on this matter.
Moving to our business in Arizona TP filed its rate case early in 2019, using 2018 as attached here.
<unk> current rates are based on a mid 2015 test year, and we have invested an additional U.S. $700 million of rate base same thing.
The filing request rate that recognize these additional investments.
Intervenor testimony, including Da's de staff testimony was filed in October 2019.
<unk> revised its application in November which now we question allowed ROE, we increase of 25 basis points to 10%.
And increased equity thickness to 53%.
Hearings commenced in January we anticipate a decision by mid year.
As discussed last quarter Fortisbc filed its multi year rate plan last March as the current term expired at the end of 2019. The proposed plan seeks approval for a rate setting framework for Twentytwenty through 2024.
Now moving to Alberta back in September the Alberta Utilities Commission issued a decision proposing to change how the Alberta electric system operators customer contribution policy is accounted for between distribution owners, including Fortisalberta and transmission owners.
The decision would prevent these transmission related investments by Fortis, Alberta into future and direct set the on amortize balance of approximately $400 million, which forms part of Fortisalberta. Its current rate base, we transferred to the transmission facility owner.
We immediately filed a request for a review and variant and stay on implementation of the decision which was granted.
The matters on hold pending a review by the you see.
We received notice in December that the agencies decision would be delayed into twentytwenty as additional information was requested before they reach a decision.
And lastly expert evidence was filed in the U.S. These ongoing generic cost of capital proceeding in January this proceeding will establish the allowed our leaves and capital structures for 2021, and Twentytwenty too and we expect this proceeding to conclude leader in Twentytwenty.
In the fourth quarter, we completed the issuance of $1.2 billion of common shares. The net proceeds of the equity issue, we're used to repay debt, including the redemption of Usfive hundred million on secured notes and the repayment of credit facility boring.
Equity instruments accelerated our funding needs to support our capital plan as a result, we terminated both our ATM program and the 2% discount previously offered under our dividend reinvestment plan.
Last year, we indicated that we expected to meet all credit rating agency thresholds in 2019 and stated our commitment to improve our metrics over the five year plan.
In 2019, we achieved our objective by significantly improving both our cash flow to debt and our holding company debt metrics.
This improvement is reflective of our funding plan, particularly the recent equity issuance and the sale of the Juanita expansion into second quarter.
For this is low business risk profile, driven by the geographic and regulatory diversity of our subsidiary coupled with our credit metrics support our investment grade credit rating.
For this is well positioned to execute on our five year capital plan and maintain our strong credit profile. This concludes my remarks, and I'll now turn the call back to Barry.
Thank you Joslin to summarize 2019 was another great year for Ford is that couldn't have been made possible without the hard work dedication of our 9000 employees. So thank you to our teams across North America.
We kick off 2020, we're focused on continuing to deliver safe reliable and affordable energy to our customers. Our goals are to execute our capital plan obtain constructive regulatory outcomes pursue operational excellence and explore new ways to embrace the delivery of cleaner energy I'll now turn the call back to Stephanie.
Thank you Barry This concludes the presentation at this time, we'd like to open the call to address questions on the investment community.
Ladies and gentlemen, we will now conduct a question and answer period, if he would like to now Register a question. Please press the star followed by one on your telephone. If your question has been answered and you would like to withdraw your registration. Please press the pound sign if you're using a speaker phone. Please lift your handset before entering your recur.
Yes, one moment please for the first question.
And our first question today will come from the line of Robert Kwan from RBC capital markets. Your line is open.
Thank you good morning, maybe if I can start on sustainability in U.S.G. topics and specifically just how its guiding some of your business decisions you. Barry you talked about this kind of clean as you can as fast as you can.
You talked about that.
From the perspective of how you're just viewing gas distribution businesses in general and in the existential risks to those businesses with potential exit <unk> existential risks.
Thank you Robert So first of all Robert from afford US perspective, you know our our footprint is in the sort of energy deliveries. So we're already you know where it strongly position from a sustainability perspective, but clearly we're you know we're still doing.
Doing work to improve in the two areas of focus I would say is our Arizona business, where we do have some some thermal generation and David and his team are really great path to to the to reduce their coal generation overtime and the other areas its British Columbia, and Roger and his team out there you know really I've been working with.
Oh, the BC government and the regulator to really clean up the the gas supply frankly, and if said some really aggressive targets now to reduce the amount of GE and customers a gas by 2030, but we do think about 30% actually as you know that target is not an easy target to get too but.
It's what's required I think the really maintained a momentum in our gas business to find ways to grow and I'm pretty excited about about where that's headed frankly clearly there was a lot of conversation that's going on about natural gas, but you only remains a critical fuel in the energy mix and Ah you know if you look at British Columbia I still believe.
<unk> natural gas is the number one source of energy in that in that province. So you know really it's it's it's irreplaceable frankly and Ah. So I you know I think Roger and his team have done a great way great great job of finding ways to grow the business, a working with a regulator and the government cleaning up a gas going to renewable now.
Oh Gosh, you know gas were transportation you know all all of those things and and Bunkering vessels. So these are kind of an issue said natural gas.
He's had to do now to be able to two to succeed I would say our regulator and the government British Columbia are very progressive on these issues probably the most in all of North America and that you know we're happy that we do have that business in British Columbia, We have a couple of smaller gas businesses in the U.S., but our primary exposure there would be would be NBC.
[music].
Got it.
I can just finish with.
Two questions just chair on on the funding plan, you've obviously done the equity issue I'm. Just wondering if he is you look at where you are today and back to Investor day, yet that 3%, ATM, which plus the drip. So I guess the first question is do you haven't updated number where.
The drip participation has now shaking out now that you've taken a discount.
Got it out and just generally how you're looking at funding moving forward.
One other aspect is this just on are you looking out any potential asset monetizations, particularly given some of your smaller Canadian electric utilities or some of the slowest growing.
In the portfolio and you've previously commented that you're not particularly in to split the cost of capital parameters.
Robert This is jostling all the I'll take the drip part of that question. So we right now I'd <unk> participation is pushing 40%, we do expect to see a drop in that participation is it's hard to quantify exactly but we all know more as we go forward to March 2nd would be our first.
Drip participation under the new terms of the drip program, but we do expect to see see a decrease and when we look to you know our funding plan back to the Investor Day, I mean, we've accelerated the equity that we talked about at Investor day. It clearly.
He sets us up well from a.
Credit profile perspective, we you know we met our credit metrics per se a couple of years prior to when we figured we would that clearly is a credit positive. When we are have engaging and having conversations with our credit rating agencies, which we anticipate to do a in the upcoming weeks.
No I think it positions us nicely and for the growth program that we have we don't see any further discrete equities required and and will position we're positioned well.
Robert I got to say I'm not interested in.
Selling any of our utilities, all I don't like the idea afford us getting smaller on a regulated perspective that being said if someone makes us a great offer for a business we have to consider it you know so so but don't really don't really getting many great offers for our Canadian businesses frankly, so you in terms of growth yet.
You're right. The these businesses are probably growing a little slower I would say except for our gas business in British Columbia that business grows on par with a with our U.S. businesses <unk>.
Hi, I'm hopeful overtime with all the efforts around hardening of the systems preparing for climate change or all of that that we'll see some stronger growth in our Canadian business. You know I just know recently I think Canadian standard associations are talking about what needs to be done on the electrical systems in Canada to prepay.
Pair for Ah you know more intensity I guess on on storms and all of that and no I think that's going to drive some capital in the business here. So overall I. You know we are we're focused on keeping our Canadian and U.S. businesses that we have you. All the returns are still a problem I think we're still much lower in Canada, then in the U.S.
Oh that that is a a lingering material issue for Ford is that we have to have to make progress on overtime in my view and it's just it's not just afford us issue it to the industry wide issue frankly to have such disparity between between the two countries. It's just not good for.
Or for any one over the long haul.
Great thank very much.
[noise] and our next question comes from the line of Ben Pham from BMO. Your line is sometimes.
Okay. Thanks morning, and they're just just maybe to to your comments around.
<unk> monetization and your continued utilities maybe not.
<unk>.
Fantastic offer is relative to your hold.
Could you comment generally on just.
What do you think about some of the but take up multiples. So you've seen in North America loyalty guests, Canada, El Paso relative to that.
Laid off or that you characterize it hadn't and who's who's a bar here that you.
You've tended to do that conversations with as this strategic or financial players.
I I'm sorry <unk>.
Ben I didn't say, we're having conversations with about offers and stuff, but clearly the utility industry as a.
The values that are being transacted at our had been up from where they were historically or you know I think as a sign that you'll notice a shortage of good utility businesses to buy out there to spend a lot of consolidation happening a the businesses are continuing to grow in North America. You know you see six and 7% growth rates in these big.
Businesses, you'll that's pretty pretty good good growth and you know that that the stability of cash flow and and the regulation generally is made these businesses very attractive to a lot of parties and Ah I don't see that changing frankly, I think the growth rates for the industry are gonna remains strong for four other.
Foreseeable future given all the challenges and big trends that we're dealing with in our sector as we move to cleaner energy and reduce greenhouse gases well. These are these things are going to continue to drive growth for for a long time and I think now that's becoming reflective in the values of these businesses and you know I fully expect that we're going to see that continue for them.
Next few years here.
Oh, I'm, sorry about that very much mis surgery. So just just just to clarify clarified and just as for it to record you're you're saying.
That that really if someone comes along with a very attract offer production and utilities you you would look at it but you didn't necessarily say that.
So you're getting really any and balance.
No exactly and you know clearly a as a public company ban anytime we see a.
And a strong offer for a business, we're obligated to review that that offer and if it makes sense from a shareholder perspective that you know we have two we have to execute on that so so you know that's that's just a message we've been preaching for a for a long time, you'll capital allocation.
In our business is very very important we have a very large capital plan. You know the days are gone when you're just a you know the only source of capital is the equity capital markets. You know that's not a that's now we looked at it anymore. We look at our balance sheet. We look at the assets that we have and we review them on a regular basis to determine what's appropriate fundings.
Rather g. for a company.
Okay and it may just just the slip it on the M&A side of the de side have you have you thought notwithstanding to.
Lofty valuations just the water utility.
Business and is that something that.
In a radar screen and would that figure core competencies.
No we're not looking at water.
Okay.
Alright, thank you.
Our next question comes from the line as Julien Dumoulin Smith from Bank of America. Your light has often hey, good morning, Tim how are you.
Good morning.
Morning, So a couple of questions here first Arizona, so start there.
In terms of some of the latest headlines in the state there's talk of a moving to an appointed commission or some talk about like by a bipartisan legislation here any initial perhaps preliminary thoughts about that and then separately and perhaps somewhat related.
How are you thinking about prospects for settlement I know that theres been some talk amongst peers into the commission again here too, but just want to hear your thoughts a more broadly.
So Julian I got David here, David Hutchens, so instead of repeating ourselves I'm, just gonna, let David deal with those two questions right right off the start here.
So on the appointed Commission a we really don't have any comment on that we think we get good commissioners either way, we think that there's it's a good balance of commissioners, we don't think it makes.
That much difference, whether they're appointed or whether they're elected I'm. So we don't really have a position on that at all and then.
What was your other question.
Oh settlement about settlement and where we stand in the state a in terms of just policy even.
Yeah, I think I think the whole anti settlement policy is going to be pretty short term. It was I think.
Hello.
One settlements that the commissioners are a big fan of and so they sort of put a pause on having settlements dawn.
And they want to have more fully litigated they want to have for more formally litigated processes. So I think that after our rate case, which of course, we couldn't do a settlement and because of that I think and I'm hopeful that we'll be able to get back to that because I think settlements provide a much more balance.
Results for all the stakeholders, then litigating that a topic like topic.
Got it alright excellent and then and then just quickly if I can perhaps more of a macro question Woodfibre. How are you thinking about prospects there I listen I know, it's several years out et cetera, just.
Sort of in consideration of the macro environment.
For lunch and great great Great question, Julien I would say that you know we continue to have that project in our five year plan. It's about $350 million. You know the main reason is you know wood fiber is a customer really wear out you know we're building a pipe to supply a customer with a with natural gas.
Yes, and Ah you know obviously, they're building a small scale LNG export terminal yeah, we're still spending money on behalf of that cover customer you know there for providing US cash you know as we as we sort of get ready to build that line. So so what's missing obviously as a final decision by that party to move forward with their projects.
But there is still fair amount of activity going on related to the work that needs to be done not for us to commence the the pipeline. So it is something that we monitor and we sort of review as we head into September I guess period, when we do our new five year plan, we will have to consider whether this is still something that we feel confident.
That should be included in our plan.
And you will consult with that customer over that period of time and you'll make a decision at that point, but based on information. We have today. It is something that we still expect will be completed a in that five year period.
Thank you guys very much of the patients from the question.
Thank you.
Our next question comes from the line of Rob Hope from Scotiabank. Your line is open.
Good morning, everyone couple of follow up questions. Just when you look at Arizona, and I know you're going to hit that 30% renewables ahead of schedule and this could be a couple of years out but what's the path forward to further increase singer renewables in the state there for you.
Yeah. Rob. This is a this is Dave again, we're really evaluating that right now and are integrated resource planning process. We brought on a lot of stakeholders together customers government et cetera.
We're using climate experts from the University of Arizona, and we're really focused on trying to develop the greenhouse gas reduction goal because we think that's the most important targets I have.
We're in the process of running though it seems like a million different scenarios related on input.
From those stakeholders and we plan on rolling that out sometime later this year. So a standby for that so obviously the 30 by 30 is gonna be hit early so I can I can tell you, we're not going down on those goals.
No we focused on trying to get to as Barry mentioned to get that a clean energy as fast as we possibly can and making sure that we're managing the reliability and affordability effects of what we're doing.
All right. That's helpful. And then you know a bit of a broader question Joe a the MISO, our OE reassuring, but have a certain process right now how do you think it plays out and kind of what timeline or what do you think are the key.
How how indefinitely thinker will go.
Thanks, Rob. So some are folks are sander kids will be through high school in college before it's all done but Linda maybe you can just provide some more flavor on that for Rob.
Yeah, Rob Good morning, I look I wish I could look into my Crystal ball and answer those questions I'm went a little bit more clarity, but look I think the commission understands I think they signals pretty quickly that they were willing to raise your their order I take that as a positive signal a the obviously there was a strong.
You know vocal industry response to their order and so I remain I would say cautiously optimistic that Tom you know they are going to.
You know undertake the review of the matter seriously I think they understand you don't we're you know probably one of the most transformative points in in the utility industry in terms of where we're going.
Over the course at the next 20 to 30 years and they understand that transmission plays a vital part and realizing our future energy composition in this country.
And I think they know they understand that are always are important component of that so I remain cautiously optimistic that they're going to <unk> you know seriously review the matter.
To look at their methodology not not only you know kind of from you know in terms of how old it quite under the Purion under consideration, but obviously, how it also applies prospectively and you don't want in terms of timeline I'm hopeful.
That perhaps with maybe the you know sort of decision with Commissioner Mcnamee, leaving the commission I'm under you know at least the his current term at the end of June However, he could stay true to the end of the congressional session, which presumably will be December yeah, I'm hopeful that they will act.
Sooner rather than later, while they know they have a quorum.
But again I'm you know I don't have any particular knowledge or insight that that suggests what they might do or when.
Alright, thank you for the color.
And our next question comes from the line I gave it 'cause data from Raymond James Your line is open.
Thanks. Good morning, everyone. My first question here I understand there's legislation proposed in New York they couldn't enable regulated utilities to invest in renewable generation I'm wondering if that's an opportunity you could potentially look out and if you see that is being something realistic over your from your kind of five year outlook.
I guess, David anything is possible, although I find it difficult.
Difficult you know with us in terms of competing.
Some of this sort of bidding processes on renewable energy.
You know, it's you have some of the bigger players that are that are sort of almost owning that space. A you know their supply chains have been develop and all of that but clearly these are the things would always look at and I know Charlie's on the on the phone Charlie you know anything else you want to offer around that area.
I mean, I think first of all legislation is probably a bit it with a long shot and getting through.
You know, we've often said that you know if the market doesn't deliver we want the opportunity to deliver or if we could delivered at a lower cost we want that opportunity.
And so you know what they consider that Barry said, it's not as who I think we're going to go out was kind of compete for these projects, but you know where there is opportunity for us to be able to serve segment a market. That's not being served we think we can do that best.
Okay, great. Thank you I appreciate that and then maybe just one other question.
On the on the MISO and the next round of the mines the MISO MVP.
Projects any thoughts on timing and how those might be awarded.
Linda you want to provide some color.
Sure.
You know I continue to be more and more optimistic in terms of you know when you understand what's needed in terms of various state Rps standards or particular utility I renewable goals. They cannot be met a without a you know kind of what I'd say, it's a large regional build out.
I think there's a lot of recognition you know went from state governors from state commissions to other utility industry at large that we do need another NBP like portfolio I think there's a lot of people that would agree that the last round of NBP projects, how that was accomplished.
What's a good model for us choose to try to replicate.
My so right now is currently in the process of doing a regional study I'm that would sort of help identify based on all the known variables and goals from each of those respective states. So I think the industry await sort of the outcome of MISO study process.
But I do think sorta is on a sort of a parallel path you know the biggest issue and the one that we have to get solved is sort of the cost allocation that continues to remain the biggest barrier.
But I do think there is increasing recognition that we do need to sort of move forward and this approach I put my time line perspective again. This is just my opinion a perspective I do think you know we will hopefully see progress on that front a probable.
Within the next 12 to 24 months, a but you know obviously there are large I've known as large variables you know, particularly when it comes to who pays and that's really does I think the focus of the effort once the actual sort of wines and plan is identified that will be the biggest focus for salt.
Great. That's that's great color. Thank you very much.
And our next question comes from the line of Michael Sullivan from Wolfe Research. Your line is something.
Yeah, Hey wrong good morning.
My first question was just on the.
The now that you guys have done the equity issuance late last year and I think you mentioned meeting with a the credit rating agencies in the next couple of weeks not to get too far in front of that but just thoughts on the potential for action from from Moody's given the spread in reading I think previously that it seemed like a more.
Longer term type deal, but any chances that second shift up given the equity acceleration.
Just a comment Michael from me and then Joslin can provide some more color, but clearly we've made a.
Great strides in improving our balance sheet, we listen to the input of our rating agencies and you know we wanted to make sure that there was no doubt that sport is intent was to have a stronger set of credit metrics and we've acted on that and we're looking forward to engaging with these agencies in the next few.
Weeks here to really tell them the story and a get further input from them.
Barry I agree with that conclusion, I mean, we would look certainly to with S&P to.
Removal of the negative outlooks and with Moody's We've always said that we are not a or.
Not pleased with it'd be a three and we're always looking to improve that we do have a good story. The recent equity instruments, certainly again as a credit positive that I think it's gonna bode well when my having these discussions but so we look forward to having those discussions and hopefully we can make progress in that area.
Great. Thanks, and then my other on just a.
Shifting to Alberta first just any more specifics on the potential timing regarding the a transmission issue and their review and variance there and then maybe just also expectations a what we can expect out of the cost capital for sheeting, that's going to go on this year.
Michael you do you want to comment on this sort of process a little bit.
As a more flavor on the Oh, the ISO issue.
Sure the only thing Barry. Thank you are the only thing we have out of the commission was the ruling at the end of December which really indicated that there was still a lot of uncertainty with respect to elements required for them to.
Reconsider their decision show they you know tendered some way arch to a parties here.
But we don't have any visibility into the timeline in expected. It may go beyond the end of the first quarter and even into the second quarter.
Yesterday, we filed a motion where do you see.
Seeking additional information and clarity onto the pro as to the process.
And requesting an oral hearing on several of the matters.
And I guess.
On a cost of capital wanted just to add on that as well yeah no cost of capital.
That proceeding we expect we filed the evidence and a January will have a hearing in April any intention is to have the commission decision before year end to set new.
Well I knew what are always and capital structure for the next year of PBR and there has been a short of a.
Signaling that there may be a desire to return to a formula for the 2022 period.
Okay, great. Thanks, a lot.
Yes.
And our next question comes from the line up Mark Jarvi from C.I.B.C. capital markets. Your line itself then.
Thanks, Good morning Irwin.
Maybe start with my though as you go through this process of the rehearing.
Sure sit here your thoughts on whether or not you think the second complaint gets revisited and the dismissal could be potentially reversed.
Well, there's any visitors there's any a group of Ah possible outcome. So we really can't be judge.
What are what will happen there clearly a from a from our perspective, we did under the accounting rules book the refund in the fourth quarter.
We did remove it in terms of our adjusted earnings. So you know that that's that was the correct way of handling it but it has been I guess for lack of better word appealed as well as well as much as where appealing the order their appealing. The fact that wasn't the refund ground granted on on a complaint too. So I just think there's just give me a lot.
More conversations around that over the course of the next the next 12 months.
Okay.
A couple questions on D.C., one would be just mechanics around the interim rates, while you wait for the final decision as it kind of just sort of flattish year over year, and then essentially a retroactive trip. Once you. Your final decision later on in 2020.
Roger do you want to add some color on the sort of mechanisms Yeah, you bet Morgan.
On the interim rates it's.
Ties to both the natural gas company as well as electric is saying, 2% increase on gaps in 1% electric.
It does have traits for the year once we get the decision when should we expect.
Mid 2020 independent of the outcome of that decision hi, there likely being adjustment starting the following year and either an increase or decrease to adjust or whatever the final decision us.
So no adjustment in 2020 that could come with 2021, yeah. If it's happening later in the year just for convenience.
No quality do the rate adjustment Jagger first other than to rate changes because you're also then have to set rates for 2021. So it's going to be really a question of one in 2020 that decision is receiving a what's most expedient. So compute that customers are dealing with two rate changes.
Okay. That's helpful. And then my second question. Obviously, we're just very very can extend your thoughts on your commentary around wood fiber to children and just a your view or even in the concept of.
SG principles as well as just the LNG.
And right now.
We're very excited about the Tilbury facility generally you know that that facility is acting currently has a you know, peaking facility as well as a storage facility for natural gas that we're using for local transportation fielding to ferries and heavy duty trucking and that that kind of thing. We are we are also.
So looking at the possibility of expanding that facility to increase the stories capability to provide some resiliency for the for the natural gas networks in a in British Columbia.
And and the you know as you mentioned the possibility of a small scale export terminal or these are longer term projects you do other work through various processes to to make them happened and we are we're starting on those pads or you know clearly the spot price of LNG and in Asia I haven't looked at it today, but over the last few.
A week's given everything that's happening in the world has dropped a dramatically not that helpful for for LNG exports, but these are temporary things in my view and you know. These these are projects you look out over very long periods of time, what we do know is that there's tremendous amount of natural gas in British Columbia that gas does have to get out.
For the province, and any any sort of avenue that that could be available to allow that to happen is attractive to the owners of that gas and you know we do have that possibility without tilbury facility to play a small role in export of LNG and we continue to a two would you know.
Examined that opportunity.
So to summarize just if you take a long term view really nothing's really changed the last few months from what you guys would have had maybe at Investor day in.
In terms of outlook for the Yeah, I would say we're further along on the on our work you know regards to the resiliency conversation for example, as well as a you know we are working on getting.
The jetty approved for for the sites that we can bring vessels up to the up to the plants. So that has has to go through an environmental process. We're working on that so were you know we're knocking things off. So we are further ahead.
In terms of making a final decision I can't say, when we're gonna be including it in our capital plans, but we're definitely you know putting a lot of effort into progressing to the the opportunities that are that are there.
Okay. Thanks for that.
And our next question comes from the line of Linda Ezergailis from TD Securities. Your line is open.
Thank you.
I'm wondering if you could maybe give us a sense of the nature of the resiliency standards. CSC is is looking at implementing for Canadian utilities, and and when might for to start incorporating that into your Canadian utility plans and what might be the magnitude.
And timing of the investments that might be required for that.
So Linda I do have my Guru here, Gary Smith on all things related to standards in the electricity industry in Canada.
And Gary you want to just a comment on that sure Linda.
Couple of years ago Canadian Standards Association on which the project with the National Research Council to review the affects of climate change up or Canada.
And the open to that as a document that was published last year.
And it hardly significant changes required and standards for overhead systems and the to the next year or so those standards will be reviewed by the industry, an updated and it will likely lead to additional requirements increase the strength of the U.S. It.
And so it wouldn't be included in your five year capital budgets. This september potential, but potentially next September.
I think what will happen Linda is it'll take probably a year were so.
The go through these standards.
And to make the revisions.
When you deal with the so you'll see standard as a balloting process that the industry needs to look good.
So, we'll probably pick a year to 18 months to revise the standards.
And then once that's happened it will then filter into you shouldn't be budget.
And would these be incremental or quite significant in their nature.
Versus prior revisions.
I think that remains to be seen Linda the areas that are looked at of course is when loading or use loading.
You fix some poll streams conductor streams.
Oh, so I think it remains to be see what the output will be.
There's no doubt that these signals that were sent for the measure research Council that are captured in the document that was published last year. The signals that significant changes are required.
Okay. That's helpful context, Thank you and maybe I'm just more from an operational perspective, when we look at across your North American utilities, 2019, and factoring in weather and and timing of operating expenses et cetera can you.
Comment on kind of what you're achieved or are we was versus so loud and how we might think of that a in 2020.
So so Linda as Barry you know, obviously, there's with with 10 utility businesses. It's I don't I don't have the list in front of me, but we actually from a from a a cheap perspective.
Generally have done pretty well actually a at our at our businesses and you know the businesses that have Ford test years, frankly, obviously, a we typically achieve our allowed returns maybe a little more.
And you know the Arizona business at a reasonable year last year as well so did did pretty well ITC, where this formulaic rates at for clearly earns its allowed return you know, it's it's a true up process and that is the oh the strength of that for a FERC formula rates. So that's very very positive.
Our Caribbean businesses are still I would say a little light, but they had a reasonable year, what's need in the Caribbean now is that we're seeing a fair bit of growth coming and Ah you know the economies of strengthen their so I'm I'm excited to even though they're small im excited about those businesses for the next a number of here so.
So so overall from a are we perspective in terms of what we were allowed to earn I think we we really did a pretty reasonable job last year.
Thank you and maybe also just to help us that look forward a little bit in your energy infrastructure segment I realize it's not a big part of your business, but there is some variability there year over year at can you comment on what the rainfall. So far has done this year and any sort of outlook I'm. If if you can either.
And.
See forward or what that might to what sort of forecast it might be locally and then a margin. So far this year in eight can creek and what 2020 might to hold Freaking Creek as well.
Thank you Linda I really would be helpful. If everyone on this call did a raindance for us because we [laughter], we do need rain and believes yeah. We are in the dry season now going it you know in into sort of lead the beginning part of it so I'm not expecting any real improvement in believes until you know mid year.
As we as we go back into the rainy season, hopefully we get to fill those reservoirs quickly and we have a good second half a related to that.
You know what's interesting is sort of 10 years that we've held those assets. In believes this is really sort of an off the chart kind of cut this past year was like it was aberration frankly, because we've tended to generate you know pretty well around the normal in that a in that business. So definitely a a strange year there for sure.
I'm going to allow Roger to comment on the Aching Creek facility in a and B C and I don't think there's probably any big trends. We can you can comment on right now, but Roger you want to just maybe a offer comment on the year there.
Yeah, Thanks, Barry as far as are the first quarter against its too soon we're still at a fairly low cost environment out there. So were strong inventory levels and I will take care.
Opportunities based on market shifts here as we move forward. So we're not seeing.
Hi, fairly consistent with what we saw as we ended 2000 2019.
Too early to say really go like 2020.
Okay. Thank you.
And our next question comes from the line of Andrew Kuske from Credit Suisse. Your line is something.
Thank you I'm, probably quick one for me and congrats on navigating your way through the state of emergency and the province or earlier this year.
You know given what's happened with Nalcor and Muskrat falls in the federal government did you see any longer term opportunities.
Arising out of Nalcor and just some of the assets are they hold.
I would say I hope, so, but I wouldn't be counting on it too much a you know we tried to play a bigger role in the province, and it's just not been <unk> not not been available frankly, so so we obviously have nuclear power is it's a great business. Our people there do a great job we saw that in the state of emergency.
We're very open to doing more maybe we can be part of some solution in the future, but it doesn't look like that that's that's it that's possible at this point.
Okay, I will leave it at that.
[noise] and our next question comes from a line of Patrick Kenny from National Bank. Your line is open.
Hi, Good morning, everyone I'm, just a quick follow up year on me the rehearing on the Mysore, we just wondering what depending on the outcome whenever that is I know you've quantified the impact on EPS for every 100 basis points.
Downside to the 10.6% but.
Also wondering if if there is any reduction in or are we like that have an impact on the five your capital plan for ITC or that.
6% to 7% rate based CAGR over the next five years.
Yes.
Patrick listen clearly if we have to see what FERC does here you know if I always our gold dramatically lower than any I think any business has to evaluate its its plans and we would we would have to do that at ITC clearly, we're always going to do our jobs with making sure the system has relied.
All in all of that but.
This is caught this conversation on our OE is very very important to to the industry and and to all the things that need to be done in terms of moving to clean energy and reliability of the system. So this is why it's so important for FERC to get this right and you know we believe they will frankly at the end of the day and we're going to work.
Hard to play our part and making sure that that that happens.
Great appreciate that and then you'll see fronts with respect to.
You mean.
[noise] sort any any land use agreements you may have was first nations communities across Canada.
I know you guys have done a great job over the years managing relationships, but no I just wanted to confirm if there any near term negotiations we should be keeping on the radar your or perhaps you know very any any comments you might have on just navigating the broader indigenous sensitivity right now around and.
Energy infrastructure in general.
Well for any Canadian business involved in infrastructure. This has been a matter that that's been with us for some time in case afford US you know, we we have been working with our first nation partners for a very long time, and you know British Columbia, especially Oh, you know since we've owned the company, but even beat.
For that or whether it be.
You know the terrorists and business when we bought at those folks have developed a really strong relationship with many of their first nation partners.
We've actually utilize a lot of that that sort of expertise as we looked at our nor are they are northern Ontario transmission project watching the kiddie up and you know that projects off and running at this point in time and the relationship. There are strong we like you would expect obviously do have a lot of infrastructure on.
On first nation.
Sort of lands for lack of a better description and but have just been pretty normal working relationship with this point in time, there's no that that I can recall Patrick no.
No sort of current issues from our perspective, there and <unk>, but it's something you know we got to continue to work on to make sure that we're listening and that and have a great relationships with a with the with the indigenous folks so.
Okay, that's great. Thanks Barry.
And we have no further questions in queue I'd like to turn the call back to Stephanie I am I'm all for any closing remarks. Thank.
Thank you Lisa we have nothing further at this time.
Participating in our fourth quarter 2019 results call.
Please contact investor relation to eat anything further.
Time and have a great.
[noise]. Thank you for participating ladies and gentlemen. This concludes today's conference you may now disconnect.
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