Q1 2020 Earnings Call
[music].
His time all participants are in almost one on one mode. After the speakers presentations there will be unfortunate exercise.
You asked a question during the session you will need to press star one on your telephone.
Please be advised today's conference is being recorded.
If you require any further assistance please press star zero.
The conference over to your Speaker today, Scott These things senior director capital markets. Thank you. Please go ahead.
Thank you Chris and thank you all for joining US this morning for Americas first quarter 2020 conference call and lives lets call.
Yeah.
The Americas first quarter earnings release was distributed this morning, Yeah newswire, the financial statements management's discussion and analysis in the presentation being reference on this call are available on our website at <unk> Dot com.
Joining me from this morning's call or Scott felt for America's President and Chief Executive Officer, right plugged in Americas, Chief Financial Officer, and other members of the management team.
Before you get and I'd like to take a moment to advise you that this morning's discussion will include forward looking information, which is subject to the cautionary statements contained in the supporting slides.
Today's discussion and presentation also include references to non-GAAP financial measures.
You should refer to the appendix for definition information a reconciliation from historical non-GAAP measures to the closest GAAP financial measure.
Now I'll turn things over to Scott Gulfport.
Thank you Scott and good morning, everyone.
I'd like to begin my remarks by taking a woman to reflect on not only.
The loss of lives through to covert 19, but also to acknowledge two additional tragedies that have hit us here and Nova Scotia.
We were all incredibly shaken by the mass shootings on April 18th and 19th to claim to 22 victims in a pretty much.
Senseless acts of violence in it and imaginable loss of life.
And then less than two weeks later six members of kit candidates armed forces were killed when they're helicopter crash off the coast degrees. The single largest day loss of life foreign military more than a decade.
Six were based here in Nova Scotia, and three six where native Nova Scotia.
As you can imagine he's tragedies are deeply affected her close knit community at an already difficult time, when we cannot physically come together to support one another.
On behalf of the entire mirror team, we extend or hurt help condolences to everyone impacted by these events.
I would ask him to join me in a moment of science to honor those whose lives have been lost.
[laughter].
No.
The business or the calling turning to our quarterly uptick.
We're all facing the impacts of the global Cobot 19 pandemic.
On a mirror, we're very fortunate.
You are only experiencing relatively modest short term impact tumors business and our long term outlook remains positive.
Our response to covert 19 has been grounded in our relentless focus on the health and safety ever employees customers and communities, while continuing to deliver the critical energy to the customers rely on now more than ever.
Our teams are committed to providing a reliable and affordable energy either health systems shoot suppliers technology providers businesses governments and every single customer within the regions we serve need.
For them themselves to continue to function.
In which we were all ourselves relying upon.
During this pandemic.
We understand that we truly are essential service during this critical and challenging time.
And so we activated our integrated pandemic and business continuity plans in early March to ensure that we can continue to deliver are essential services to our customers regardless of the degree and the duration of their spend.
I'm extremely proud of our team.
Quite frankly, they're doing what they do best adapting and delivering.
Our customers.
Demonstrating an incredible amount of resiliency commitment and professionalism.
I'm pleased that we're able to work from home have been safely doing so since early March.
For many of our employees and critical roles in are generating facilities field operations working from home is not an option.
We implemented new protocols and P. standards.
For example, we established health screening processes and or control centers have been split between primary and backup locations.
We've been staggering shifts from please.
We are taking every precaution to keep our people our customer.
Our community you see.
And I'm very grateful that her efforts today are working well.
We are fortunate that the direct impact 14, so far has been minimal.
With only two employees and one contractor diagnosed with covert 19 to date across our more than 7000 person team in Canada, the U.S. and the Caribbean and.
And I'm pleased to say that they were all covering well.
Well, we plan for the next phase where governments and health officials begin we're continuing to lift some restrictions across her jurisdictions, we will remain relentlessly focused on health and safety and the reliable delivery of energy throughout this unprecedented period.
We know that this pandemic is creating significant challenges for the most vulnerable in our communities.
We're committed to doing our part to help.
Our utilities have taken steps to assist our customers during these difficult time.
Those customers most hit by the but then we've been spending disconnections facilitating access to resources, providing financial support that should it be necessary wanting to work directly with customers on flexible payment plans.
Temple electric we'd also like somebody accelerated if youre refund, thus, reducing monthly customer bills for the remainder of 2020.
In addition, the Amerigroup of companies have donated approximately 4 million Canadian dollars to various corporate relief programs to assist those most in need in our communities.
We continue to collaborate with community partners and government officials like that identify emerging needs.
We are grateful to be in a position to help our communities true this devastating time.
That's great will discuss in a minute.
Given the timing of coking 19 or customer profile.
Demick had minimal impact to our Q1 financial results.
Well, it's challenging to predict all the potential future impacts of coking 19, as we look forward into the second quarter and beyond we do know that America is well positioned to respond to the needs of all our stakeholders.
Amir's customer mix is heavily weighted towards residential customers.
It means that not only a small portion of its fixed cost contribution comes from industrial and commercial customers.
To date, most of our utilities have experienced reductions to weather adjusted load in the range of 4% to 6%.
However, the related earnings impacts for the remainder of the deal will be dependent on several factors, including the length of a pandemic customer composition composition of the load and the actual weather we experienced going forward.
The closing of the mere main transaction has provided additional strength to our balance sheet and has bolstered our liquidity position.
Well these proceeds have sufficient.
These proceeds we have sufficient liquidity to manage through the content.
And beyond.
Historically, there has been very successful working with customers during times of economic stress.
During 2008 in 2009 financial crisis Mirror, and Chico only experienced a small increase in uncollectible accounts.
This was managed through the application of existing customer deposits developing payment plans for customers and facilitating financial aid for local state and national programs.
I remember, we understand the long term value ever customer relationships and we're committed to doing the right thing for our customers as they managed through this financially challenging time.
[noise] various capital program continues to advance with additional health and safety procedures in place where necessary.
And we're pleased to our major projects continue without any significant supply disruptions or delays at this time.
This includes both the Big Bend modernization project and Arsenal solar development in Florida.
We remain committed to our capital program, which will contribute to the recovery of our local economies to employment that support for local businesses.
In addition, many of mirrors capital projects will provide significant cost savings as we reduce the cost of fuel component of customers pills.
We're confident in our long term value proposition to shareholders because of the resiliency of our people and our strategy.
Our proven strategy, which is rooted in customer affordability and the transition from higher to lower carbon energy continues to be relevant despite the temporary impacts of the pandemic.
At the corporate responses to covert 19 has been our people.
Their unwavering commitment to keeping each other our customers in or community say, well delivering essential energy our customers need has been inspiring.
And we know there are more challenges ahead as governments look towards economic recovery.
And we remain committed to doing our part not only to continuing to provide the cleaner affordable and reliable energy your customers and communities rely on but to help with community support and the economic restarts in all ever jurisdictions.
And with that I'll turn it over to Greg to take you through our financial results for the quarter Greg.
Thank you Scott and thank you all for joining us this morning.
Earlier. This morning, we reported first quarter to adjusted earnings of $193 million, an adjusted earnings per share of 79 cents.
Although the Q1 2020 results were lower than Q1 20, Nike is important to remember that last year included earnings for emerging gas plants in the gain on the sale of a Florida property.
Actively these items totaled $34 million or 14 cents per share.
When excluding these two items the results for Q1 2020 are consistent with those of Q1 2019.
Well consolidated results are down compared to Q1 19, the core of our business a portfolio of regulated utilities remained strong at performed very well delivering adjusted earnings growth of 7% for the quarter.
We're very pleased with this level of growth, which was primarily driven by strong earnings from Tampa Electric.
A regulated utilities earned premium jurisdictions with supportive regulatory relationships and we continued to see the quality upper overall earnings improved.
It's going to some details book a quarter.
In the first quarter of 2019, we delivered adjusted earnings per share of 95 cents or 81 cents on a normalized basis.
Gross from that normalized Q1, 2019 base of 81 cents was largely driven by very strong performance by Tampa Electric.
During the quarter TANF electric contributed $79 million of earnings an increase of $18 million over the first quarter of last year.
Jim Electrics growth was driven by higher base revenues as a result, the favorable weather customer growth and revenues related to our solar generation projects.
First quarter earnings for a mirror Energy's marketing training business were $9 million lower than Q1, 2019 or four cents per share.
This decrease was driven by less favorable market marketing conditions quarter over quarter, reflecting a very mild winter, particularly in the northeast.
We also recorded two tax related adjustments in the quarter. The first was related to the reduction in the potential corporate tax rate in Nova Scotia, a good development in the long run, but wishes substituted a revaluation of deferred tax balances, resulting in a onetime noncash earnings impact of $14 million or six cents per share.
Partially offsetting this was the reversal of the corporate income tax regulatory liability appropriate us light and power, which increased earnings by $10 million or four cents per share.
Collectively these two onetime items negatively impacted earnings by $4 million or two cents per share.
Moving to adjusted EBITDA and cash flow quarter over quarter. The EBITDA, that's earnings before interest taxes, depreciation and amortization was lower decreasing by $46 million or 7% most of the decline related to the sale of the gas plants in Q1 of 20 Nike.
Operating cash flow for Q1, 2020 was up $84 million or 20% compared to the first quarter of last year. The growth was led by temple electric which experienced an increase of $88 million or 10% increase quarter over quarter.
The increase in the regulated cash flows is a further signal about improving cashel quality, which remains a priority for our team.
Q1, 2020 marked the completion of the sale of Mermaid and backs.
The closing this transaction, we have transformed our portfolio, while significantly improving our balance sheet and liquidity. This transaction was a critical component of or funding plan. The backbone of the asset sales program, which we highlighted in 2018.
2018 asset sales program has now raised more than $2.2 billion that will be used to fund future capital programs and to repay holding company debt.
Looking forward, we will have the earnings contributions or a mirror me, which contributed $27 million in the last three quarters of last year.
On behalf of the mirror I would like to extend my gratitude to the employees only mirror me and wish them in ENMAX all the best in the future.
With the timing of the American main proceeds and our ongoing access to capital markets. Our liquidity is very strong at the ended the quarter, we had approximately $3.2 billion available liquidity.
We have no significant short term debt maturities and toy.
And as of year end or pension plans were well funded with no significant short term funding requirements.
The liquidity position was further improved by the 300 million dollar to especially power issuance that was completed in April.
This 30 year issuance had the lowest rate of any of those especially powers outstanding debt instruments and is illustrated upper continued access to the capital markets.
We continue to access the capital needs of our business. In currently believed that there are no changes required to a previously communicated funding program.
This includes equity needs being met through the existing dividend reinvestment plan and that the market programs and the potential for a hybrid preferred share equity preferred share equity issuance over the forecast period.
[noise] there continues to assess the potential impacts of cobot, Nike, but we are reassured by the strength of our business and the makeup of our customer profile.
It appears to large utilities are primarily made up of residential customers with very low contributions from industrial customers mirror expects the load profile of these two utilities to change during the pandemic with increases in consumption by residential customers and reductions in the industrial commercial customer classes.
And that's shown on the slide in 2019 residential customers made up the largest percentage contribution to the fixed cost recoveries utilities.
The increase in revenue from these residential customers well at least partially offset the cobot 19 really to reductions in the commercial and industrial revenues.
In addition to the customer mix the current foreign exchange environment creates a tailwind to help mitigate some of the potential impacts the cobot 19.
And then moving to mirror main from a 2019 results approximately 60% of our earnings are reported in U.S. currency.
Given the recent movement in FX rates, we are taking advantage of some limited FX hedges for 2020 and 2021.
We'll continue to review the foreign exchange environment to determinant incremental hedges.
Our required to further reduce earnings volatility.
We also updating or FX sensitivity reflect the sale of me and the FX hedges put in place.
Once and change in the U.S., Canada FX rate would result in an approximately half a cent to once that change any P. S.
It's important to note that this change in the FX rate would have to old for an entire 12 month period.
In closing Amir's twice, what it get off to a solid start which is helpful. As we faced the cobot 19 crisis.
There's balance sheet and liquidity positions are strong and this will allow the business demands true covert 19.
The potential impacts of the pandemic are difficult to determine our customer mix and exposure the U.S. denominator Greens offer mitigating factors.
With that I'll turn the presentation back over to Scott.
Thank you Greg. This concludes the presentation, we would now like to open the call for questions from analysts.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Your first question comes from Linda Ezergailis.
TD Securities Your line is open.
Thank you I appreciate the update today and glad to hear that Tim organization is doing well and your employees are safe.
I'm wondering with respect to your your load profile shifting a little bit in terms of customer mix and everything I'm. Just wondering if it's possible that regulators in your key jurisdictions would be open to reassessing your revenue allocation across your customer classes a in the event that.
The industrial load doesn't recover in certain jurisdictions very quickly and maybe even shifting more of your bill component to a fixed or variable component and I guess further to that are you still your update indicated that some of your regulatory process is might be delayed I'm just wondering if.
You're still planning on fire filing your Tampa Electric general rate application for 2021.
Or might you do that sooner and can you comment specifically on Tampa electric and the potential to accelerate some of the Oh retiring applications potentially.
Hey, good Linda Scott. Thank you for the question, let me take the first part of that and then let Nancy address the specific temple electric question.
So look I think you know would be fair to say that where we're looking at.
Our regulatory options in relation to.
To the impacts of Copel 19 of course, you know we've been watching you approach has been taken by many utilities in the sector and and also reflective of the you know the progressive history I think we've had in in working with regulators and all of our jurisdictions to address change if circumstances.
And and issues and impacts that come up in so I think would be just to most appropriate to say those are those are all things that were that we're looking at and and of course, a at a point in time, where we decide to proceed with the with any particular regulatory purchase like like that's goes we'll obviously become matters. Its good to talk about my.
Right.
Yes, if you wanted to address the the intentions around the plans for the re filing in INTECH locker.
Right and yes, hi, Linda good morning, and our intention is still to filed the timing of that would be in April of 2021. So we are moving ahead.
With that timeline and expect.
We would not delay that that's our that's a thought at this point.
Linda perhaps I'll also address.
The load and.
Maybe specifically our focus hearing Tampa electric so what we're seeing currently is that our resident because we are so heavily residential we're seeing a residential load offset essentially.
The loss, we're seeing from industrial and so at this point and you can see for <unk> from our revenues. Although there were certainly is from wet weather in there and we can see from April that we're not expecting a significant impact if things continue on as they did say in April.
The bad debt perspective.
Again looking back at what happened in 2008, nine we would not at this point I expect the material impact where earnings from that.
Hard to tell this early but we are we're seeing small uptick in bad debt, but we're also seeing just recently an uptick in customers, making payment arrangements. So you know at this point we are.
Moving along cautiously.
And keeping our eyes on it we are also accumulating any costs at this point related to call. It 90.
And we haven't closed any doors in terms of thought that we might ask for relief on some of that but again, we're not seeing anything material at this point.
Thank you and just to clarify I comment you made Scott about assessing.
Options regarding regulatory.
Lever is for for changed circumstances.
Mike you also a across all of your utilities record accumulated costs and potentially your estimate of of lost revenues and consider a requesting onetime relief on losses incurred to date not just prospect is shifting revenue allocation.
[music].
Yes, I think I'd, just say it Linda that that you know, we're we're continuing to assess what the impacts or our two businesses. Nancy says just like in Tampa Electric where we're keeping a vibrant recording that the cost and the impacts that relate to.
To the to the pandemic and has as the the clarity if that continues to build with.
With the passage of time, we'll be at a better position then to to make a determination as to what if any regulatory support to request has to do we look to make but at this point in time I'd say, we're mostly just a this following that there has been a a joint filing it has been made in new Mexico the to the next.
So gas is part of together with the other utilities in a in that state, but I've been in other jurisdictions at this point, where are we just continuing to monitor and and assessing our options.
Okay, and maybe I, just as a follow up a as well with respect to door financing plans being unchanged.
I don't know if you're still an ongoing discussions with the rating agencies, but at what point might you consider potentially additional asset sales to bolster.
Your financial outlook and what my.
When do you expect I guess S&P to potentially.
What's your outlook from negative on your rating.
Greg you want to tackle that one.
So the second part.
S&P has done that so they they did a couple of things in April the the downgraded a mirror and went back to stable, but at the same time and interestingly enough. They they broke apart from the grew pretty methodology and took all of our operating a utilities back to stable, which which quite frankly was the more.
Portal change that they made up the too.
On a broader perspective, Linda I mean, we're always in contact a regular basis with all the rating agencies and sensitive to what they're seeing in and making sure that I like remains open as a specific relates to asset sales we had identified.
As part of our funding plan some required asset sale that piece of it is complete so we're not in a position where we need to sell anything or nor position, where we're planning to sell anything but as we have always done we'll continually look at their portfolio to determine whether.
There are certain components of our portfolio that you know might make sense to two not hold over the long term, but no plans to do anything at this point in time.
Thank you I'll jump back into queue.
Your next question comes from Rob Hope of Scotiabank. Your line is over.
Good morning, everyone.
First question just on your capital outlook for 2020, several we saw that you maintained the Florida.
A number it around the U.S. billion dollars I, just want to get a sense of whether or not you're seeing any supply chain delays and some of the larger items, such as solar panels or Ah Ah items related to big Bend, which could push out some spend there potentially add some delays.
[noise] Robert's it's Scott.
I'll answer but to Nancy.
You have any.
Additional.
Color or different perspective. Please please share it no at this at this point, Rob as it relates to.
Both both those projects in fact.
Most of her well all of the capital projects that I can pick up.
At this point, we have not been negatively impacted as to schedule or or cost for that matter as it relates to supply or other coated related.
Matters, and the progress and advancement of those projects.
All right appreciate that.
And then just taking a look at muskrat falls on the pause I construction there and.
Further delay there are you.
Are you looking at some sort of relief from the regulator to allow you to earn cash a little quicker or what avenues or you're exploring there.
[noise], Greg you want to join tackle that one is right that the cash effects.
Yes, so Robert we don't we.
The arrangements that we had in front of us, which we don't think will change is that we fully expect a cash in particular, the depreciation and muskrat falls to kind of flow as originally expected primarily because there's some debt service requirements.
Starting to materialize at the end of this year and the regulator is well aware that.
Important too to meet those as planned.
So.
Well, we see maybe some slightly by maybe a quarter or so from loved or only possibly.
But we're not more collectively between the two or not seen any material change based on the timing of their construction over there.
Alright, thank you.
Thanks, Rob.
Your next question comes from Robert Kwan of RBC capital markets. Your line is over.
Good morning.
Just asking about what you're seeing.
S 4% to 6%.
Reduction load across the utilities are you able to provide.
Sensitivity to 1% changing lotus across utilities.
Hi spaces for monthly basis.
Right.
Yeah, I'll take that Robert.
I wish it was that simple, but unfortunately, it's not and <unk> and the reason being this with so many different utilities. So somebody some different rate designs. So many different customer classes and the contribution.
It's it's quite frankly difficult to roll that up into a single thing and have it be it all meaningful I can't tell you and Nancy reinforce it that what we've seen to date, given our customer mix that are to electric utilities that.
With a shift from commercial industrial.
Two residential customers and the contributions on a relative basis between those classes.
And some whether that quite frankly its continued through to the end of April we haven't seen any kind of overall material impact.
Because you know game not all load is is equal.
Happy to to go through in more detail with you and and an offer for you know all the analysts and investors that are on the phone to try to get through and a little bit more detail off like but we just don't think is meaningful to roll it up into us to a single percent across their entire business, we actually think that would be misleading from.
Our portfolios later.
Maybe then are you able to.
4% to 6% holds or just whatever you can you talk about what your expectations.
Not that might persist and maybe something it is more quantitative is you outlined your assets.
Sensitivity so.
Suming dollar stays where it is.
Maybe three quarters of this year, thats, probably going to Threed eight cents a share tailwind.
When you wrap that together with the coast 19 impact does.
Thanks, [noise], becoming mitigating factor do you expect impacter.
Just two questions could actually be it.
Yes, I think.
The increase in residential customers are usage or by residential customers and the weaker Canadian dollar certainly helpful.
I mean, we just don't always is you know the 4% to 6% that we're experiencing to date, which again has been more than offset.
Probably the mix of sales as well as weather how long will that continue for is we're fortunate enough that we're starting to see the jurisdictions that we're operating in start to open up slowly.
Which I think is helpful. But it's I think it's just too early to speculate what the impacts could be if if if if we have a second wave of this and it's deeper than the first wave and lots longer.
Okay.
Thank you just initiated the question.
NSPI.
And if you have to go out and purchased power and meet the Rps is there any exposure outside Sam.
Scott you want me take that are.
Sure only only because I wasn't sure. It got the question. So if you if you did them in a teacher.
Yeah, no any incremental costs, Robert would flow through the fuel adjustment mechanism.
Yes, that's perfect. Thank you.
Your next question comes from Ben Pham of BMO. Your line is.
Thanks, Good morning on on the U.S. dollar movement, and and you mentioned that that benefit on an earnings and that hasn't made again, how how should we think about that's volunteer your capex.
Budget and to you.
You see more situation, where at its got Capex budgets that just sampling is higher because of FX you use as a way to trim and reprofile here and there. So your financing program is on tranche.
Yeah, Ben Greg I, you know all things being equal yes, if it's if you took our capital program. That's basically must dollars and FX rate was higher than and stayed that way over the forecast period.
Then, yes, you would see a higher capital profile in terms of kinda tweaking a re profiling, we'd we'd do that all the time just as a matter of normal course business, there's always things that pop up that require priorities or other things for whatever reason resource requirements that.
That move that's you know I'd say, there's probably.
5% to 7% of our capital plan, that's always kind of moving around anyway, just for normal business reasons I wouldn't see any changes in foreign currency to be causing a different.
Any different profile into that and then we would normally what.
Okay. That's it sounds like it grew up a couple of hundred knowing that you had the right balance sheet.
A draft crap access to capital on the credit rating that you can absorb that.
Yeah and of course, you also get you know with with a significant amount over cash flows coming to us they get translated into higher value as well. So if you think from a pure hedging perspective, the cash component of it meaning the cash we're generating in the U.S. and what we're reinvesting in the U.S. utilities.
Yeah, those are effectively moving in the same direction, where the weaker Canadian dollar.
Okay that makes less sense, then and then they maybe lastly, you mentioned some common Kerry I.
I remember Smith, you, Greg or Scott on on.
And proven Cashel quality and as that is that just smart reaffirming what you guys have been doing <unk> 12 month.
Getting to 95% plus or is there is there messaging on more to go on I'm getting at even higher.
[noise] if I understand your question Ben Yes, certainly having more of the business regulated which you know is is a function of two things it's.
Very concerted effort.
To to grow or regulated utilities.
And those are obviously growing at a pace faster than that or unregulated business. We've gotten rid of some on regulated businesses in particular merchant gas plants over the last year.
Obviously, the cash contribution from America energy has been a little bit softer, although that's probably not as material. So I.
I think the first part of the second part is are regulated utilities are are performing really well and the cash flow coming out in this really strong. So the earnings that you're seeing no Scotia power peoples gas, new Mexico gas and tip electric.
Our cash earnings, they're not being driven by regulatory deferrals, we had virtually no regulatory deferrals.
Across any of those for utilities.
Which you know it's not always the case with other utilities in our sector. So I think it's both the approach inside the utilities and then from an overall portfolio perspective.
Yes, I can just it just it just to add onto that I think it's also you know if you think back to the.
Investor Day that we had in in a in Florida and you know starting to talk about just the overall quality of the of the portfolio to with you know between between Florida, and Atlanta, Canada, Nova Scotia is roughly 80% of.
I've earnings and therefore cash flow profiling and.
New Mexico ended that list and and well over 85% in a in total just amongst those those jurisdictions. So just you know the good quality the predictability.
Of those businesses and therefore, the the cash flow positive that come from now Alpert all wrapped up into like.
Your your question to answer to your question, including everything Gregg said.
Okay. That's great. Thank you.
Thanks.
Your next question comes from March RV of see I'd be seed capital markets. Your line is open.
Good morning, everyone. Just wanted a mini clarify it and parcel parts of that commentary on on the table electric.
Results. We've seen recently so are you, saying that residential has essentially offset a pick up and CNO eye and then that whether they were weather has been pushed you above.
On loan is that kind of what you're saying can those comments to Nancy and Craig.
Yes, yes, it's now that's what we're that that is what we're seeing.
So even with weather normalized you think revvy higher revenue rates and increased low and there isn't it could offset that commercial drop.
We believe based on what we've seen the last couple of months that the residential we're seeing the uptick in residential and and.
Decrease obviously in commercial and industrial but it seems to be offsetting.
And so with the benefit of some what their it as as we thought the end of March we're going to we've seen some benefit to the revenues.
Okay, Great and then Greg maybe a question on on the cash is still say on the balance sheet and repaid some of the tickle finance debt outstanding what's the plan there going forward you pay more or do you want a bit of higher cashcall given some of the uncertainty that we're facing right now.
Yeah, we find ourselves a personal mark welcome back [laughter] effect, we find ourselves in a situation, where we'd probably be has some cash that that we would otherwise.
Utilized to pay down some debt. The next significant maturity. We have is not so June next year, although we have some.
I'm, a very modest term loan that we could pay off if we so choose but at this point in time, just given all the uncertainty although how we feel today is probably very different than how we so you know three four weeks ago. We just think it's prudent just to hang onto the cash for for another quarter or so before we start to look at a scenario. So we've redeployed.
Okay, and then I know, it's a small segment, but the Caribbean with a 4% to 6% mode. A part of that utilities as well or are you seeing bigger drop given a drop in tourism.
So.
As I think you know, we're really in two Caribbean Islands, Grand Bahamas, and Barbados in Grand Bahamas, It's it's much more weighted to the industrial sector and that sector still been operating.
So.
They're low change hasn't been quite frankly that.
As material and we wouldn't expect that the change, albeit that's a smaller part of our business.
We're seeing that so far this kind of those levels, maybe maybe at the high end of that range in Barbados, and it's difficult to see that not continuing for a period of time, it's difficult to see the tourism industry rebelling anytime soon in 2019.
So you know that's clearly one where we'll have some work to do over the balance here.
So your internal forecast I assume it's sort of high.
Single digit load decrease there.
Yes, that's correct.
Thank you.
Your next question comes from David Kizomba of Raymond James Your line is.
Thanks. Good morning, everyone. My first question, maybe on the topic of a.
Kind of a longer term question on storage in Florida, It sounds like some of your peers in the state.
I have recently rolled out some fairly big plans are wondering if you have any recent thoughts on on that opportunity in the future.
Yeah I'd say.
If I, if I think about or two businesses in Florida combined David you know, we're looking at to when looking at storage.
In in that market you know nothing.
Nothing specific to talk about today, but it's certainly an area that we're looking.
Okay Fair enough and then maybe just one quick confirmation do you expect to see any effect to cash flow on the lower corporate tax rate in Nova Scotia.
Right.
I'm not I'm not in the short term.
Business that we have that is post impact to the with the lower tax rate is not especially power and it's on a cash tax basis. So over time, obviously, the cash tax component of rates will change but.
On the short term it will it wouldn't have any impact at all.
Okay Fair enough. Thank you that's it for me.
Excellent.
[noise]. Your next question comes from Ryan Greenwald with Bank of America. Your line is.
Good morning, guys.
Right right.
So I appreciate the disclosure around E, 4% to 6% impact for most of the utilities. So far could you just provide a little more color on what your internal assumptions are going forward the rest of the year.
Yeah, Ryan it's Greg.
I'd say it we're it's less of a deterministic.
Forecasting that you know we think we're on track to to deliver what we otherwise would've expected you wouldn't see in our disclosure that there's a couple of businesses.
Like our marketing trading business, because the market conditions in new England that probably will get the lower end.
But you know reconfirmed that we expect earn within the latter we bands for for Nova Scotia power in Tampa Electric just as two examples of that.
And then what we're kind of overall laying with that and it's still working progresses, you know what if what is the impacts of covert 19 extend beyond.
Quite frankly is our Q2, but you know beyond 2020, and that's still work in progress and I think it's also important to know through all of this is as we talk about low changes and fixed cost contributions. These these are all with the exception of Marins you regulated utilities, whether it's.
A long history of having.
In all jurisdictions and in particular and ours, where there's always always regulatory ER opportunities to two you don't manage these de situation. So that utilities continued or kind of in and around there are we bet.
Fair enough.
Obviously the <unk>.
Sorry, I was just I was just going to say right only to state the obvious, but but you know the difficult, but if I'm thinking. This is really is really understanding what the with the duration of the.
The restrictions imposed a crossover jurisdictions, our and frankly the answer to that is not going to be uniform across a across all the all the regions that that we operate obviously, Florida is starting to relax some of those some of those now that hasn't yet happened in a in some of the other jurisdictions so that.
That's the other get a question in in all of this as well that makes it.
A difficult to fully understand what the Oh, what the impacts of her but to but I think the important and important messages within how we're seeing within that environment, well well, many commercial customers and industrial cost customers, obviously or are challenged in terms of their operation what we're seeing as it relates.
To.
The residential usage and how that how it impacts on our business is one of the keep it again crackers.
Got it and then on the bad debt can you just provide a little more color there seems like pretty modest uptick so far but any additional color there around your expectations and if you've had initial conversations with regulators and ultimate confidence around.
Favorable treatment there.
Greg you want.
Want to start with at least yes.
Yes, I mean, we haven't really seen much would change in bad debt at this point, obviously, we're seeing some starting to see some.
Weakness or for their aging of our accounts receivable not unexpected because we have made the decision.
Not to disconnect customers for non payment so those that would otherwise.
Paid their bill for fear of disconnection are but that quite frankly, this small part portion of our customers. We would expect that net bad debt will be higher this year than than it was last year as a percent, but when we go back and look at the experience in 2008 in 2009 and <unk>.
It won't be the same whether it's better or worse it remains to be seen.
It it's not a material amount of money, but it is something that we are keeping track of.
And that you know if we feel it's it's an appropriate amount of money to have the conversation with with our regulators as they already have started in new Mexico, then we will do so.
Great. Thanks for the time.
Your next question comes from Andrew Kuske <unk> of Credit Suisse. Your line is.
Thank you good morning, and given the Kogut 19 related demand destruction across your footprint does that allow you to state that coal on a more accelerated basis across the portfolio and then what kind of positive impact as it up on your carbon footprint.
Yeah, Andrew it's it's Scott so how many really the you know that is an important the premise within the question is really what what.
The demand destruction, how how permanent is that and so what you will gathered from the answer so far is or or load actually is is not down meaningfully and so really when you think about you know the the decarbonization past.
We're on yeah. That's it that's the pads, we're on regardless of all of short term impacts and what we all hope to be short term impacts from from something like like this this pandemic and obviously that's been a core part of our strategy for a long time. It continues to be you know.
We're working through our plans around.
How we continue to.
Two decarbonize in particular in a in temp electric and and Nova Scotia Power I would note you know during during this period as the temp electric team was working through at a major planned outage to their <unk> one of their largest stations big Penn station.
For the last number weeks since it was originally commission Big Ben has has not been operating has not been burning coal through that period, while they have been doing some.
Retrofit work within that important generation unit and and that in fact helped to assist in terms of a very complex set of work to be done well, while keeping the team safe and along that work to advance or.
Productively and efficiently and successfully but I think you know the bigger the bigger part two important question is you know the de carbonization decarbonization efforts the efforts to.
Eliminate coal generation within the next is.
It's very much a front and center component of our strategy.
And and we don't see the the short term impact relatively speaking of of.
Coded as soon as challenging as they are for everyone. A we really don't see to eat that taking or the path that a that we're on.
There are two to continue to drive towards the cleaner energy future the to the wheel strike, when we know where customers want to.
I appreciate that color in context, and then maybe just an extension of that I think it was named DNA you highlighted the gas utilities are expected to under earned given the pandemic situation. We're in.
I guess your fundamental confidence in that business on a longer term basis is really enhanced as you transition towards solar into this greater natural gas usage across portions of your utility portfolio under footprint.
Yeah, I think I think that's rates I think you know there's a there's an element too.
Those ldcs that that.
That's very efficient use of energy with direct.
And at the at the need a in terms of its overall efficiency. There's a there's an enabling aspect of that enables the.
The continued de carbonization on the on the electric side and so we see those businesses continuing to play an important role in the de carbonization of the of the sector overall, and obviously you know the under under earning an element of it is it's also frankly reflective of the fact that book.
Those businesses are in the process of securing rates in.
Response to the fact that to there's been investments made on behalf of of customers that.
That need some rate rates in order to support.
Those advancements in both.
Improving reliability and enhance integrity.
Integrity related investments, but also to some extent expansion, particularly in that in Florida has peoples gas continues to.
We could do need from a growing list of customers for for natural gas supply and so.
Both booked orders you cover these are in the process of a break filings or or related or.
Requests as we speak obviously.
That's great for me thank you.
Your next question comes from Patrick Kenny of National Bank Financial Your line is open.
Hi, Good morning, everybody I'm, just with respect to your industrial and I guess commercial customer base as well.
In both Nova Scotia in Tampa.
Are you seeing some of these customers being able to sustain a certain level of operating capacity.
Or perhaps pivot from one business line to another over the past couple of months.
Just curious how meaningful this trend could be and potentially offsetting a certain portion of the.
Initial demand destruction.
Under normalized weather of course.
Yeah, Patrick It's got to me what to do is linked to the first first Nancy and then a and then Wayne gets a little bit of color from the the Tampa and Nova Scotia perspective, respectively Nancy.
Sure from an industrial customer perspective.
We've seen that continue on.
Interesting here on our commercial sector. One of the thing you know so lots of restaurants in retail and that sort of thing people still need to keep the air conditioning on to put the premise even if they're not operating so I think that's part of the reason why we haven't seen so much demand destruction.
And I and we do believe that some of the increase in people, calling in arranging payment is because the economies starting to open up and in in a small way in our phase one is the governor's called it so.
We.
So I think that's part of the the delay in the land in terms of how or what were seeing in our revenues. If that's helpful.
And its weight Dell I would only add that we're seeing a similar.
Thing here in Nova Scotia, where some of our industrial and commercial customers are are closed store operating at a lower levels well, while others have adjusted their activities and other a few here that has shifted their production to make things like a surgical masks and at that kind of.
Activity. So so it's a mixed bag, but you know there are there are industries that are doing better and actually running more at this time, so that all goes into the overall load low numbers that we would have.
Given you in R&D.
[noise], okay perfect. Thanks for that.
And then on the bad debt expenses that she maybe just provide an overview on.
Some of the financial aid programs for the residential customers down in Tampa and.
You know how meaningful these programs could be in mitigating some of your bad debt expense over the coming months without needing to rely on the regulatory mechanisms.
Sure. So we have we have a variety of programs some of the local charities as well as our own program that we call share that's administered through the Salvation Army here, there's federal programs as you know.
So just.
Perhaps put it in perspective weve year to date we've.
9700 of our customers have received some kind of eight at about a little over $200 on average in terms of ER in terms of that eight so that has certainly been helpful. We have a we've done a lot of work in terms of assisting our customers and and.
Trying to to help them get access to these programs and so that the that hard work by our.
You know by our staff in the contact centers certainly helped so you know again, when I say small uptick I do means small uptick currently in terms of our bad debt. So it's hard to see what's coming but.
Nothing alarming so far.
Okay. Thank you and maybe just a final cleanup question here for Greg on the.
The FX hedges you may have touched on it already but the $200 million in place for 2020.
The target zone on an annual basis or expect to move that up further through the back half of the year and and also maybe your comments on when you might look to to move the 2021 hedges up as well.
Yeah Patrick.
I think theres necessarily a target per se, although you know probably two to 250 would probably feel about reasonable.
And so obviously, if we wanted to do something additional and 2021 or we could we have been over the last couple of weeks. The dollar has appeared to have stabilized although at least per se I find it difficult to two to address the thesis, where it's going to get stronger anytime soon or or very quickly anyway. So.
So you could you know probably see us for 2021 for kind of any.
Similar type of a.
Sub one place.
That we have in for for the current year, maybe slightly higher than that.
Okay, great. That's it for me. Thanks, Thanks, guys.
Thanks, Patrick.
[noise] there are no further questions at this time I will now turn the call the mysteries.
Thank you very much for your interest in America, and I Hope you enjoy the rest of the day.
[noise], ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
[music].