Q4 2019 Earnings Call
Good day and welcome to the fourth quarter 29 chain earnings Conference call. Today's conference is being recorded at this time I'd like to turn the call Barbara Tuckfield. Please go ahead.
Good morning, everyone before we get started I would like to remind everyone should read the safe Harbor statement on page two of the presentation, including the reference to forward looking statement.
Our presentation also includes references to operating earnings which is a non-GAAP financial measure.
Please refer to the reconciliation of GAAP earnings operating earnings provided in the appendix of today's presentation.
With us this morning, our Jerry nurse Ya, President and CEO, and Peter Oleksiak, Senior Vice President and CFO.
Now I'll turn it over to Jerry start the call. This morning.
Well, thanks, Barbara Good morning, everyone and thanks for joining us this.
This morning, I'm Gonna give you a recap like 2019 business performance and provide you highlight how we are well positioned for features like.
I'll turn it over to Peter because I don't actually year over year and wrap things up before we take any questions, let's start on slide four.
Thousand 19 was another successful year, many great accomplishments to eating strong operational and financial performance.
Thanks, all of our employees for their hard work so that they contributed to a tremendous success.
We achieved strong financial results in 2019.
Do you need P.S. at $6.30.
We're able to increase our guidance twice in 2019 and still be.
Last updated guidance midpoint.
2019 bps results provided 9% growth from our original 2018 guidance.
2019 was the 11th consecutive year exceeding our operating U.P.S. original guidance.
We also increased our dividend by 7% for do you have a role and we are targeting 7% dividend growth through 2021.
When it was announced that I was taking over as CEO role I said that we will continue to sharpen our focus on the priorities during an extra cash.
And I'm talking and our ability to continue to focus your employee engagement culture that drives service excellence, what's your children helps us deliver distinctive shareholder returns.
Our next slide all sort of my focus between 20 and B.
Well, that's strong 2019 behind us I'm confident that twice what is going to be another successful year.
2020 guidance provides a shipping in half percent increase over 2019 original guidance.
Including the benefit of recent midstream acquisition.
Our 2020, you feel skytouch standpoint, it's $6.61, which would be the base for our 5% to 7% long term growth.
And we continue our commitment to a long term business makes up 70, 75% utilities.
Going back to 80% of our capital in our two utilities over the next five years, which will continue to provide our customers leaner and more reliable energy.
And deliver high quality operating earnings would increase certainty.
These goals are attainable strong culture, we have here are the G.
As you can see other next slide this marks the 11th consecutive year, we've exceeded our original guidance.
This does not come easily and as result of a rigorous planning model like to talk to you about a little more on slide six.
As I mentioned, we exceed or do you have guy that's really love consecutive year of 2019.
We attribute this continued its Josh floor planning process, which included detailed five year plan earnings contingency across portfolio.
Any number of central scenarios.
The first two years it applied our worked in detail weekly reviews by the management team.
Gold is weekly meetings, which I chair, it's understandable to high level of detail Oh, we seize opportunities and address challenges in the plan.
These reviews provide us real time information to help make plans to allow us to stay on track financially.
As I said, we have to change the across all our business lives while much of it can since she was based on addressing weather conditions, where utilities that are lean to the best plans.
We also have contingencies planned it allowed utilities.
This allows us manage the entire D. P portfolio businesses to react to any number of developments that may occur guarantee or in many times over deliver our financial goals.
We have successfully employed this later the best approach over the years long has pulled back expenses when needed and to invest back into business when the opportunity presented itself.
I'll turn over to slide seven I'll talk about our employee customer community successes.
Our employee focus on customers and really just makes me proud to be part of the de family.
A key area of focus here at DPL safety.
Proud to say that we had another safety or for the second time at a role BP was ranked in the top 2% and safety culture by the National Safety Council.
Safety is a great indicator it employs level of focus and discipline.
It's all thing a strong safety culture with engaged employees.
It's a gauge that leads to a customer focus environment.
Although I would say there's always more we can do think employee safety.
We're currently driving new leadership competencies acute indications in an effort to make another step change every employee safety.
Well ranks in the top 3% or the worlds like Yelp for high employee engagement and everyday I see evidence that goes through the distinctive works our team goes around service excellence.
You can feel the high energy of our employees at all our facilities in our headquarters and in our field operations I'm often approach by employees unsold how much they loved working at D. P energy.
We also received several executive Gallup rate workplace Award.
Only utility company ever received this award a confident we'll continue our focus their memories award and 2040.
Our strong focus on service excellence, such as both of our utilities high customer satisfaction rankings.
Electric and gas companies, both ranking of top Cortile JD powers residential customer satisfaction study.
He was also one of the country stop corporate citizens by points a light JD power.
I'm proud of all the accomplishments our team has made this past year and I'm looking for more successes in 2020 and beyond.
Before I turn over to the business update I just want to let you know how the local economy is good.
Michigan's economy remains strong.
Employment continues to be at the lowest rate since 2000, and the population continues to grow.
Yeah recently announced that it would invest $2.2 billion in Detroit the plant world produce all electric trucks and sport utility vehicles, you may have seen the commercials.
Super Bowl, where they're going to build a new hummer electric summer here in Detroit very exciting.
Yeah, Chrysler is planning to spend $20 billion to update several betray plants, along the company to start making electric versions of it's cheap models.
For motors is converting to ban and train station Detroit Center for economists driving innovation and investing in $740 million.
All of these are examples revitalization of Detroit, Michigan as a whole.
Turning over to the business update all our businesses achieved successes in 2019.
Which positions us for continued growth in years to come.
As you remember from last year's the Guy who mentioned that we're going to best $19 billion between 2020 and 2024.
Our utilities and utilities with 80% of these investments going into our utilities.
Starting off with dielectric on slide eight as a leader in the March towards clean energy and more reliable energy.
Due to invest heavily in clean energy infrastructure renewal and technology innovation.
In 2019, we announced we were accelerating our carbon emissions reduction by a full decade.
Getting 80% reduction by 40, 40, and reaching that zero emissions by 2050.
Achieving these milestones will help us shape, our bar, but for all future generations.
Our blue water Energy Center, which is a natural gas plants that were building is also progressing quite well or nearly 40% complete well then expected spring of 22 in service date. It supports our carbon reduction plan by reducing our carbon emissions by 70%.
The three coal plants that were retiring.
Early in 2019 de electric received approval for our charging for program for electric vehicles.
This program is bringing the benefits of east the more Michigan residents and businesses through incentives customer education and charging infrastructure growth.
We have also part of what the number of groups, including a city Detroit and general Motors by installing charging stations near headquarters here in Detroit.
There's a step to promote the visa, Michigan and it goes hand in hand, with our charging sport program I'm looking forward to seeing many more charging stations here to stay at Michigan.
Additionally, the T. electric is progressing out as voluntary renewable program very nicely.
2019 over 400 megawatts committed by commercial customers, including for General Motors University of Michigan, and the Detroit do Additionally, about 10000 residential customer so committed balterio renewable power I could tell you that every day, we're rolling new customers under this program.
We're also upgrading circuits to improve reliability redesigning substations to avoid overload and enhancing remote monitoring and operating capabilities to detect them resolve outages much more quickly.
Do you items I know it includes the completion of two substation upgrade projects and one news station.
And over the next five years they'll be 18, new were upgraded substation there will be planned it built.
The city Detroit surrounding area is about 128 miles overhead lives or upgrade in 2019 with over a thousand miles planned to be upgraded over the next five years.
And we began construction of our new electric system operations Center, we should expect that in 2021.
Overall, our electric utility had a very successful year I don't feel confident we're well positioned.
<unk> and beyond.
Moving to slide nine I'll talk about somebody accomplishments that our gas company.
We made progress where the accelerated main radio program in 2019 renewed 180 miles a bare steel and cast iron we're looking to complete 200 miles and twice what it keeping us on track to replace all cast iron and bare steel over the next 15 years.
We're also seeing it was all plants with best in additional system improvements, including a gas transmission aneel projects to be completed 2021.
For the growth integrity and reliability of our system in northern Michigan.
This new program, along with our main real for Rep firms, our commitments provide safe and reliable service to our customers.
Can you make progress our commitment to reduce methane emissions from our gas business by 80% and by 24.
Overall, we're looking forward to another strong year from our gas company.
And I'll turn it over to our non utilities on slide 10.
Our gas storage and pipeline business, we did three acquisitions into organic expansion in 2019.
You significantly increased our ownership in links the acquired a generation lifeline.
We completed the acquisition of the Blue Union at least pipelines in the Haynesville base.
Leap Constructional seems remobilize in December and they're currently clearing the right away along the pipeline wrote I would say construction is progressing as planned and on schedule.
We expect this pipeline to be in service in the third quarter. This year.
This is a 150 mile 36 inch pipeline living in the southeast Interstate systems, and the Gulf Coast LNG export markets.
For the well Union system, we're on track.
Actual goals.
As we acquired these assets we discussed how much due diligence was down to confirm that all of these assets were highly accretive connected to large demand centers and supported by strong resources.
Next and Fred.
Yes, just provide contracted long term growth and go to deliver compelling value for shareholders.
Along with these acquisitions, we also executed an expansion millennium and continue to build out our link asset and accretive way.
Recently, we have been getting questions about the low gas prices I mean, how this will affect us.
There has been a softening in the market, we have planned for that and twice what it.
I also have the benefit of diversifications real portfolio of businesses, along as the weather different business cycles. Let me reassure you, 85% GSP as revenues terabyte fixed demand based revenue contracts and flowing gas.
Our producers are significantly hedged in 2020, what's attractive pricing. It's a matter of fact their producers are 80% hedged in 2020, and an average price up to 75.
And we view their credit and cash flows weekly I feel good about their condition.
Most importantly, we're going to every year with contingency and lean and investment as across our whole portfolio of companies.
No development. These plants has provided us a history of consistent success. This year is no exception more conservative nature when it comes the planet.
Going forward, we have significant contracted growth portfolio have focusing on additional organic broke around these assets.
Well, let's talk about our power and industrial business on slide 11.
As we mentioned on earlier calls, we acquired three industrial energy services projects and to R&D projects in 2019.
Particularly proud of the progress made in the energy space one of RG projects in Wisconsin was named Dairy project did everybody American Biogas counsel work is important to continue down the path toward a cleaner environment on multiple fronts.
Our GE is an attractive source of pipeline quality gas from renewable sources, the benefits customers and the environment.
Along with NRG cogeneration is the other main focus are up you know I guess.
This business has attracted to our customers in times of rising electricity rates low natural gas costs have been successful and growing our cogen business due to our ability to find a secure long term projects in contracts with repeat customers.
Gulfport will continue to develop additional utility like RMG and cogeneration projects.
So I'm feeling great about the progress we're making it all of our business lines 2019 will strong that we have many successes to be proud of.
So what might seem last Friday as I do every week the review in detail the opportunities and risks in our 2020 point I came away feeling confident that we're going to nail our 2020 goals.
Also the quality of our workforce and our leadership team gives me great confidence in our ability to Liberty is high growth or utilities and 90 affiliated with a goal that 5% to 7% if you have stroke or better.
And our tracker here has been better.
What that I'm going to turn it over to Peter to share our financial results.
Thanks, Jerry and good morning, everyone.
We get into the financials I always like to give an update on my Detroit Tigers.
First update I gave us that this year is winning Super Bowl quarterback was drafted by the Tigers I guess my hope that the Tigers know how to pick a winner.
And that's been over the past few years. This is the best time of year from my tired I went to start ups spring training just a few weeks away.
Although my Tigers finish in last place this past season, I still have hope for the future.
This year will be a turning point into rebuilding process, but top prospects find a way to the nature of the clock.
Unlike my Tigers GE has been very consistent and delivering strong financials and 29 seem was no exception.
I will start to 2019 review on slide 12.
<unk> earnings for the year were 1.166 billion. This translates into 6030 cents per share for the year <unk>.
You can find a detailed breakdown of EPS by segment, including a reconciliation to GAAP reported earnings and the appendix.
Let me start my review at the top of the page with our utilities.
<unk> Electric earnings were 716 million for the year. This was 47 million higher than 2018.
Our two due to the impact a new rates implemented in May and 2018 items not repeated and 29 team.
This is partially offset by rate base growth cost and cooler weather in 2019.
As you remember, we experienced a significant about a weather favorability and 2018.
And much of this favorability was reinvested system reliability.
<unk> operating earnings were 22 million higher 2019, the earnings increase is driven primarily by the implementation of new rates in the fourth quarter of 2018, and colder weather and 29 team.
This was partially offset by rate base growth.
Let's move down the page two or gas storage and pipeline business on the third world.
Operating earnings for a GSP segment were 213 million for the year.
Which is right on top of the midpoint of guidance for 2019.
In 2018, GST experienced higher earnings related to a if you do see at an exit.
Higher than planned volumes across the portfolio.
2019 has normalized earnings at Nexus and volumes were on plan.
As a result, 2019 is down 20 million versus 2018, which was contemplated in our 2019 guidance for this segment.
On the next ROE you can see our power and industrial business segment operating earnings were 133 million.
Earnings were 30 million lower than 2018, which like the GSP business, what's contemplated and our 2019 Guy.
This decrease is due mainly to the are you have tax equity transactions that occurred in the fourth quarter of 2018.
As we communicated previously we entered into equity partnerships and our RF unit and accelerated cash flows to support other projects.
I mean extra you can see or operating earnings that are energy trading business, where 30 million.
Thanks were 10 million lower in 2019 compared to 2018 due to realize result, and the gas portfolio.
Our trading company had another solid year in 2019, but strong accounting and economic income.
The appendix contains a standard energy trading reconciliation struggle economic and accounting performance.
Finally, corporate and other was favorable 15 million in 2019 or 2018, and this was due primarily to lower taxes, a onetime items in 2018 offset by higher interest expense.
Overall D to your into $6.30 per share in 2019.
Now, let's move to slide 13 to wrap up before we open the lines for questions.
2019 was a strong year financially and operationally, we're planning for another strong year and 2020.
Going forward, we'll continue to target by the 7% bps grow with 2020 guidance at the base for that girl.
Our seven per cent dividend increase or 2020 demonstrates our confidence in the company's performance and long term strategic plan.
The 2020 operating EPS midpoint of $6. If you want that provides 7.5% growth from our 2019 original got.
It's high growth rate is driven by strong performance at all of our business units how their growth at our two utilities your true EPS accretion for my GST acquisitions, and organic growth and continued business development at Ti and I.
We're committed to maintaining the strong balance sheet and credit profile that investors have come to expect from GE.
Finally, we remain committed to a business mix, 70% to 75% utilities.
A good portion of our nonutility earnings coming from regulated for a long term contracts.
With that I'll like to thank everyone for joining us this morning.
Operator, we can now open the line for questions.
Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask a question well pause for just a moment to allow everyone an opportunity to signal for questions.
Our first question will come from sharp Lisa with Guggenheim Partners. Please go ahead your question.
Hi, good morning, guys.
Furniture Morningstar.
So maybe just touch a little bit on on on the non utility. The recent acquisition you guys did kind of highlighted two dollar gas is still being economical.
Obviously, we continue to trend below this week skewed a little bit of the status on your thinking there and given you know weakening fundamentals, but really more importantly is there any impact with your prior guide it's like two to 3 billion incremental accretive growth opportunities you highlighted for this segment in lets say prolong week, we gas price environment, especially.
For sort of the opportunity that you guys highlighted in the past is being in early to mid phases. I mean, we see some of that capital being diverted to other areas.
So I'll say this that are for 2020, our forecast for indigo is right on top of our fixed fee charges in demand charges. So we are highly confident delivering 2020.
Also as we mentioned prior our girls on assess it is also contracted.
On a 90% level for the first three years. So we're really confident in the girls that we're forecasting or was this asset.
<unk> <unk> I guess the question is just more of a longer term beats allocated some you know, obviously accretive or incremental growth opportunities for just the gathering and storage and product segment I'm. Just curious like the two to 3 billion that could be incremental opportunities that are.
Sort of in the the early phases of spend.
In a weakening gas price environment is there a potential that you could we deploy capital somewhere else or even projects that are in the early phase will <unk> <unk> will continue.
[noise] all of the projects that we plan for this year, we're confident they're going to continue sharp and a longer term as as we look at our assets you know multiple platforms. All here in the northeast as was the Midwest than in Louisiana.
We feel that we've got a great resource you don't behind those pipelines and extremely well connected to markets and one thing that we do know is that a science supply and demand are currently rebalancing. We saw this happened in 2015 and 16.
Happening now so longer term.
Demand growth in the natural gas sector, which continues at a pretty robust clip.
We see that our resources are really our pipelines are well positioned I, what these resources in market stuff to deliver on our growth. So we're not seeing anything right now that long term would give us pause.
In terms of girls.
Our assets in the space.
Okay perfect. That's that was the first question and then just and then just second I'm clear just shifted the regulated and talk a little bit about the IR p. and and sort of the recent Lj recommendation, how we should sort of thinking about the general generation needs. There, maybe some I framed perspective.
Sure So I would say that staff position.
Any RP has been quite supportive, but also say that most of our assets are in flight to deliver on our five year plan. So I would say there the bulk of our renewable asset build has been approved the ready by the Commission then of course, our combined cycle plant.
Has been approved by the commission and is well under construction is 40% complete in addition to that or you know the heavy investment that we're making our wires business is getting.
Very good support from the staff from from the commissioning in the last rate case, and also signals that they're sending with her testimony industry case.
Terrific. Thanks, guys congrats.
Thank you.
Thank you for the next question will come from Michael Weinstein with Credit Suisse. Please go ahead with your question.
Hi, guys and you know just to.
With Sars questioning there.
I understand 2020 is it seems pretty locked in with hedging and to go to 75, but going forward beyond that how far out are they hedged about $2 or you know in that 275 range.
It's important them supporting the contracts they have with you.
[noise], Michael I'd say several things one is that this is our hedged beyond 2020, and no significant way that we're dealing with a in addition to that our contracts are solid with them in terms of 85% of our contracts moving forward.
For.
In the five year time, horizon, or 85% fixed fee and demand charge.
So we also look at their credit more modern their credit on a regular basis with basis, which we've always done and looking at their liquidity and we feel at this point based on their current hedges that Oh that you've got the ability to furnish on those contracts.
Great and then on the piano business.
Three projects that are under construction for the aren't on the R&D side is that a is that the origination that you need for this year that makes it to achieve the 15 million or.
You know without any additional origination.
We're we're a in the process originating an incremental $50 million. This year and we have some really good prospects. The 15 million you referred to was fully brought in house last year. So we've got three years and rolled out where weve.
Locked in 15 million years of net income growth. So we've gotten told about $45 million new net income that's been already originated and we're looking to originate and incremental 50 million this year.
Well good prospects.
In and around the boat fuel.
Great and the California plan, a county, California is rules, so with that program and they are there any changes contemplated there at all there.
That's been a really robust program and we.
It's really high confidence through 20 2030 in that construction is providing really solid basis for the unlevered I ours are inherently space for us So were feel real good about California.
Right and also just just remind me what when do they supposed to give you a final approval on the RFP.
In February.
2020, I suggest that they were targeting attached.
Great. Thank you very much.
Thank you for this.
Thank you for the question. The next question will come from Julien Dumoulin Smith with Bank of America. Please go ahead.
Hey, good morning team.
Good morning, one giant.
Excellent so I want to come back some of the early Cody commentary I you talked about nailing. It this year I suppose coming off in two years and strong whether they get the upper end of the range on Sunday 19, how do you think about trend even within the utilities for 2020 and more specifically you think about being able to do use some of the over them work.
At a time given some of the the weather trends you've already seen just could you could you elaborate as to sort of the positioning beyond just quote nailing it.
So julien.
As I mentioned, you know, we look at our financial condition.
Both opportunities and risks every week and we've been doing that for about seven or eight years. So I would say that an early last year.
Already we were already working on building contingency for 2020, and so we entered 2020 with.
A significant amount of contingency.
That positions us to deliver on our results and that's how we deliver on our results each and every year. If we see any that convinced the being threatened a we immediately start to work on tactics to hold that consistency and ER and deliberate for our shareholders at the end of the year. So when I say nail. It that's the reason I feel kind of.
And I never going to nail it is because of all the work that we do weekly at a very senior level and we walk through every line item.
Of the opportunity in risk in the goal of those discussions is to seize the opportunity and killed the risks and we've done quite well in the past and are confident we're going to do that future I.
I, just I stand and what Jerry Garcia, saying, you know and you mentioned the whether we are seeing warmer weather here first quarter, but they'll be go into each year with three plans and one thing I've learned my career that weather normal usually doesn't happen.
So when we came and we haven't plan around lean whether comes in a little bit lighter. So we've already are deploying those plans.
As well as we came into your line is good really good contingency levels. The jury nurse you mentioned.
All right excellent and then a little bit of cleanup on the last couple of.
Question, Mike Nannizzi side, just long term targets unchanged I know you kept the consolidated numbers.
Just want to make sure on the GSP segment. That's indeed, the case and then also to elaborate just quickly on on the or other question on the IR P. just the process. If you can elaborate a little bit more in the last question there as well.
[noise] <unk>, yeah for the non utility our capital guidance hasn't changed from E. <unk>, we have the whole portfolios $19 billion 15 billion or that's going into utility. So 4 billion they've gone to the non utilities and there was questions on the the midstream segment that you had 3 billion. Just a reminder of billion, though that is tied to sit.
Indigo and do the Haynesville acquisition milestone payment as well as kind of building out that system. There. So we're still feeling really good what they've begun prospects the sound they add on to the play existing platforms and midstream and Jerry Nursing mentioned.
We've been nailing or 15 years million for your originations Olympian I'm feeling good about continued its like capital.
And that space as well.
Integrated resource plan, we're in really in the final stages right now, it's really no right with the L. Jay decision you know, it's going to be right for an order and there's a commission meeting I February Twentyth, that's when we're expecting and we're spending a construction a constructive outcome. That's it from that it's been a great process part of the 2016 legislation was to do this dollar.
Stakeholders got their voice.
And that process and as such our networks get mentioned, we don't really have capital tied to this program is it really goes through our renewable energy plan as well as the certificate of need a that we entered our or gas plant, but we're looking forward to having a constructive order.
From RFP.
Excellent. Thank you all that's.
Thanks.
Thank you for the question. The next question will come from Greg Gordon with Evercore ISI. Please go ahead.
My first one is is it going to be a bounce back year next year for the Red wings too.
[laughter] don't show with Eiserman down we also do that and then I'm feeling good.
They make the Rangers looked like Stanley Cup champions, which is hard to do deal [laughter].
So I'm sorry to beat a dead horse on the GE S&P segment, but it really has been.
An intense focus for investors.
That to sit first that to 75 number that was across all your counterparties not just indigo. When you said you talked about where they are hedged I just wanted to cleared that up.
That's correct Greg.
Okay, and I think you've been pretty clear that the indigo relationship has not just demand payments, but minimum volume commitments.
On 90% or related to 90% of your expected.
Financial.
Outlook, but I think the concern is also I'm not in the Marcellus on the Lincoln Bluestone systems in on throughput on Nexus and you talk about you know having contractual protection, but do you also have volumetric protection as you look out past 2020 into 2021 and 22.
Yeah.
And if volumes if you don't end volumes, where dish fall short of your baseline.
Forecast.
Given the Jerry that you're you're very proud of how you you you model for contingencies in your five year plan what might be.
The.
The contingencies you could you could fall back on to still.
Yeah achieved a remarkable success you've had over the last 10 15 years of being at the high end the earnings guidance.
Well I would say start with this Greg So first of all our fixed fees and demand charges across our whole portfolio.
For a 2020 and beyond or at approximately 85%.
Of our revenues in our in our plan.
So that we give you an indication of Oh, the quality of the contracts that we have for.
Medium term in long term on our assets. So that gives us good comfort. We also in many of our contracts.
Credit provisions that helps secure.
Those payments as well and as I mentioned, we look at.
The quality upsided liquidity on a very regular basis.
So we feel real good long term.
Where we stand with their quality resources or a pipelines are connected to and of course, we are going through a a readjustment between supply and demand, but a the last time that happened in 15 and 16, it's about a nine month process before corrected itself and I think we're in the middle of that now we.
We plan for that for this year conservatively I think we Oh described that in our past discussion. So I feel real good about 2020, and a long term I feel a that our pipes or are well positioned.
I guess the resources in the markets are they serve and what the quality of contracts, we have being 85% fixed fee and demand charges.
Yeah, I get I get that but if you're wrong you know when I'm sure you probably do some continued contingency planning around what would happen. If you were wrong on those assumptions are there other areas in the business, where you can pivot I mean, as the RMG business or potentially larger than what your.
Currently budgeting I mean, where are the opportunities in the plan.
Well, the they really pear shaped on the on the on the on the U.P. side for longer.
That's great question, Greg and the value of our portfolios that we've got really strong utilities that are very strong growth prospects and I think we mentioned that he I.
We've got capital sitting on the sidelines that we're working on everyday to get into the plan from the affordability perspective, so opportunity there for sure.
RP United Business is also rifles, many opportunities and I still feel confident that we've got really strong opportunities inside or DSD business were working smaller highly accretive transactions inside just each and everyday so when you take our portfolio in total.
And <unk> in addition to our conservative contingency planning each and every year feel confident over deliver five to seven onboard.
Thanks Jerry.
Thanks, Greg.
Thank you. The next question will come from Chris Turner with JP Morgan. Please go ahead.
Good morning, guys or smaller part of your business, but could you give us some color on maybe to the end of 2019 performance for the trading business.
What you're thinking for your 2020 Guy just kind of what's underlying that.
And just remind us of the maybe geographic profile and customer profile of that [noise].
Three business had a really solid year no we had.
Performance economic we really measure that economic income for economic income contribution was $40 million that translated into 30 million up operating we do talk typically target 30 to 40 million to economic contribution every year.
So we're feeling there really good with that and we do plan conservatively in terms of operating guidance is a lot of this.
The economic contribution will flow sometimes in the current years, sometimes in future years. So we always come and year, what terms of our guidance to be a little more conservative. So we do have a midpoint of guidance of $20 million for 25.
[noise], Okay, and no kind of color there on on the current state of the market and how things are trying to do in recent years.
No we make our money there across the portfolio businesses no we have ever arrest contracts that we do household.
Turning company supports our GST business.
In terms of marketing those as well as we also have a credit renewable business lines within that as well so we'd have between power and gas renewables and supporting our midstream business. So we have a lot of products kind of create some stability of earnings year on year out there yeah, we we rely on it.
Trading business really outburst steady cash flow you know, we would generate between 30 and $50 million year of cash from that business.
The fact that supports our pipeline business as well as R&D business I was viewed as strategic in that way, but we don't count on it for growth.
Going forward.
Okay, and then switching gears to the balance sheet. The 100 to 300 million of equity. This year I think it's all internal programs, but can you remind us of how you're thinking about.
[noise] contributions here and then maybe you know if you're just closing this a share count.
Or FFO expectation for 2020.
[noise], Yeah, we're gonna be issuing though our.
There has not changed the de Icer, we're going to planning and issuing $1 million to $300 million equity here in 2020, there will be internal sources a lot that is through our pension entered contributions.
We are.
Planning on over the next probably three to four years to be fully funded out there you know next year $1 million to $400 million and that'll probably be good portion of that through our pension contribution.
As well, we do target an 18% f. all that really positions us well in terms of our current credit ratings, but the S&P and Moody's and Fitch.
Okay and can you think you can hear that if it though this year or is that more of a target into next year.
The target, but we do with it you know that even in 19, we that we achieved 18% I thought, though so that's our target and we had been to be able to achieve that you're in the euro.
Great. Thank you guys very much.
[noise] [noise]. Thank you. The next question will come from Jonathan Arnold with vertical research. Please go ahead.
Good morning, guys.
[noise] quick question on the Capex guidance for Twentytwenty will you give the billion to 2 billion fool than on utility, which isn't gives a new new disclosure could you break that down a little bit for us between pipelines I believe a good chunk of it with the expansion project.
And then yeah, and then and then the <unk>.
Yeah close to 1 billion up that is does GSP and that is tied to the milestone payment we have a $40 million milestone payment at $600 million of capital to build out the leap system as well as the gathering.
So some down there so good bulk of this is the midstream then the remaining amount will be.
<unk> power and industrial and it really is tied to the origination another 15 million per year goal that we have there.
It's a billions U.S. and piece the right right right then maybe some incremental went above that.
Great and set the capital another potential origination, but the bulk of that is gonna be that new acquisition the billion dollars.
[laughter], thanks, very much better.
Thank you. The next question will come from David Fishman, What's Golden's Goldman Sachs. Please go ahead.
Good morning, I think it's taking my call.
Martin David Martin David.
Sorry.
He's a little bit here, but I just want to give them or context, I believe you said I'm a nine month collection process and the natural gas sector I just want to know kind of broadly what what does that look like for and the haynesville or the north east and 2020 kind of parse your multi year production growth expectation.
Well the a reference I made a nine month process is what we saw happen in 2015 and 16.
I mean every cycle will be different of course.
And it's hard to predict what it will look like but.
The correction has started to happen, where we've seen producers start to slow activity and we think that's the beginning of a have a correction.
Okay.
Better balanced supply and demand not demand continues to grow as I mentioned.
As it relates specifically to our portfolio, 85% of our growth is contracted going forward.
And with good contracts good resources strong resources that will dispatch at the front ended up dispatch stack to bring incremental supply to the market going forward.
And we're also connected to really good markets. So I.
That's what gives us confidence in the into GST girls.
For the long term.
Okay, and then sort of thinking a little bit more longer time, and maybe the haynesville, but I guess broadly speaking when you mentioned being kind of front ended the dispatch stack that so it's you know indigo or another piece was on the heads and you would have a situation where maybe the haynesville was flat or even slightly down what.
To put a substantial amount of financial distress or or wouldn't be something that they could do economically to continue to grow a inline with the nbcs even in a situation where are the broader basin isn't really.
Well, we saw that Ah you know when we looked at.
They're drilling plans for for the long term like what we saw was that they had very economic resources and at the two dollar price range.
For over a decade.
And you know with 15% Unlevered returns and Ah you know, we modeled that as well as a three independent reserve consultants that looked at that with us because we got on the inside of what indigo is able to do so a very high quality resource that's dispatchable.
Obviously in a significant way at $2 and above.
With strong contracts.
I also have no very strong balance sheet do met all their commitments to de leverage your balance sheet and there's a.
Got it milestone payments tied to further de leverage where they'll be a water.
I want to this balance sheets and industry, if you're well going forward. So feel good about the contracts feel good about the resource and feel great about other markets interconnecting too one of the advantage that from a market perspective is there proximity.
While our fastest growing markets, which is the you know industrial and chemical complex in the southeast and the Gulf region as well as the LNG export markets so that the proximity.
And cost to get into those markets matters and other in really good position with us to do that.
[noise] that makes sense. Thank you and then still actually Steve, but just kind of a broader question I think in the past Twain I didn't mean, you mentioned potential opportunities.
With laterals with natural gas power plants in the northeast, Ohio area, I think you've done Pennsylvania in the past I was just wondering since a a number of things that actually kind of change with no, Ohio subsidies expanded mode, where there's been PJM auction delays the now how much cheaper natural gas in the region I just wonder how some of those conversations.
With some of these power plant developers may have evolved over the past six months.
They are the conversations continue in earnest a you know because natural gas is readily available.
Really economically priced a there is incentive in the Midwest they convert natural gas from coal. So we're still seeing continued.
Version opportunities in and around all our assets. So that's positive. We were also seeing yeah. We're working on expansion several expansions honor link assets.
We're looking at connecting the generation pipeline through Nexus.
That's progressing.
We're also oh looking a unique optimization opportunities with our vector asset and and our bluestone NASA. So lots of activities all small.
But nicely accretive exactly where we'd like it.
Okay that makes sense and and sorry, just one more on the regulated side I was just wondering if you could kind of frame the new towers medium term growth rate.
You know, especially when looking at kind of the recent gas rate case filing where the rate base I'm, taking over two years with double digits.
Kinda in the context of here recently raised from eight to 9% to 9% net income growth that segment I have that kind of looks near term versus the medium term five years.
Over the next five years, though we're highly confident in a growth rates are projected for a full star gas utility electric utility coal to gas utilities are in around 9% a income growth and we've got 70% at all that's your company. So those are lots of good capital a that will drive improved reliability.
Okay and efficiencies in safety for our customers all pointed at that and near term.
But I think anybody here, if you're seeing on electric segment, a little bit higher growth as we have a renewable investment I'm significant real new investment year over year, I 2020, as close like $550 million more Oh, there's some new projects that we have coming out and have been pre approved part of our renewable energy plants. So we are seeing kind of near term higher growth rate, but we are confident long term to 70%.
At such a company in the 9% for gas utility.
Okay, great. Thanks.
Good.
Thank you for the question. The next question will come from Greg oral with yes. Please go ahead.
Yeah. Thank you good morning.
Good morning buying.
Was wondering if you could touch a bit more on the development.
Backlog for the R&D.
Business beyond.
2020, and how you think about.
Committing capital around.
Around that.
Sure.
We've provided a forecast over the five years in terms of growth.
For the ours, you space and the Cogen space there, we're seeing a lot of activity on both fronts. So we.
Or looking to originate and $15 million in new as net income.
Each and every year going forward.
[noise] feel that the last three years, we delivered on that and we've got nice portfolio of opportunities that gives us confidence to deliver on that for this year and are looking obviously every time, we deliver $15 million and your net income that travels across the next five years and each year. We start we keep she never know for good prospects both.
And our Angie and Cogen with low gas price environment in electricity rates, you named Us March up slightly across the Midwest and other parts of the U.S. Other cogen business is very active as well.
Thank you.
<unk>.
Thank you that has all the time, we have for questions I'll now turn the call over to Jerry North Sea up for closing remarks.
[noise] well wrap up by thanking everyone for joining the call as we already mentioned multiple times, we had a great year at 19, I feel really good about the position we're in a continuous all her track record of delivering premium results for our shareholders.
Got one of the highest historical growth rates in the industry at 75% Ed will deliver a growth rate of 7.5%. This year 19 over 20 and have great confidence that this will continue into the future and deliver it to 5% to 7% if yes girls and in the future as well. So thank you very much a look forward provide you updates as a news release.
Here and I look forward to talk near senior soon.
[noise]. Thank you ladies and gentlemen. This concludes today's event you may now disconnect your lines.
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