Q1 2020 Earnings Call
[music].
Please standby we're about to begin.
Good day, everyone and welcome to the essential Utilities Q1, 2020 earnings Conference call. As a reminder, today's conference is being recorded at this time I would like to turn the conference over to Mr. Prior Dingerdissen. Please go ahead Sir.
Thank you Melinda. Thanks, Good morning, everyone. Thank you for joining us for essentially utilities, formerly Aqua America's first quarter 2020 earnings call.
Hi, Brian Dingerdissen, Vice President Chief of staff.
And head of Investor Relations in Communications. If you did not received a copy of the press release, you can find get by visiting the Investor Relations section of our web site at a central Daqo Thislife. It will be referencing in a webcast of this event can also be found on the site.
As a reminder, some of the matters discussed during this call may include forward looking statements that involve risks uncertainties and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward looking statements. Please refer to our most recent 10-Q 10-K and other FCC filings for a description of such risks.
In uncertainties.
During the course of this call reference may be made a certain non-GAAP financial measures.
Conciliation of these non-GAAP to GAAP financial measures is included at the end of the presentation and also posted in the Investor Relations section of the company's website.
After the presentation, we will open the call for questions.
Our call, we'll start with Chris Franklin, our chairman and CEO, who will discuss the highlights from the year to date and provide an update on the Companys co bid 19 actions.
To ensure our CFO will then discuss our financial results and our recent financing activity.
Dan will be followed by Rick Fox, Our Chief operating officer, who will provide an update on our operations including at peoples.
Finally, Chris Franklin will conclude the call with a review of our 2020 guidance and open the call for questions with that I would like to turn the call over to Chris frankly.
Thanks, Brian and good morning, everyone.
I'll start right in and we had a strong and eventful first quarter that had an end that I don't think any of us would have predicted but lets start back in January with the final regulatory approval in Pennsylvania of the People's transaction, a very strong start to the year. After we close the transaction and introduced a new ERP.
Parent company name essential.
Nobody knew how appropriate that name would be when we chose it and then we changed our ticker symbol to W. TRG.
And after that we quickly followed up with a filing with the IRS to begin using the tax repair at People's in Pennsylvania.
We also filed our application with the Pennsylvania Public utility Commission for approval of the Delcor, a transaction largest Trent municipal transaction we've ever done.
Then before the quarter ended.
We had to react to the cobot 19 pandemic by activating our business continuity plan.
Our primary objective was of course to preserve and ensure the health and the safety of are essential employees, our customers and the communities we serve.
You have to excuse me, but I have to brag for a minute about our essential employees their dedication to our mission has never shown brighter than it has over the past eight weeks. Our people have continued to provide high quality water wastewater and natural gas service that our customers.
Depend on.
Many of our people have the same challenges as their neighbors children out of school caring for family members and concerns about their own personal health, but despite these challenges our people have continued to get the job done and I'm very proud of our essential team.
Let's take a look at the first quarter highlights.
Since the beginning of the year, we invested 172.2 million in capital to improve the infrastructure in the communities we serve.
That 172 million.
110.6 million was spent.
Regulated water segment.
Ill note that this number includes 53.5 million that was invested by People's in the first quarter pre closing.
In the text box and the next box or you'll see that on a non-GAAP basis adjusted income per share rose, 114.3% over last year's first quarter of course, most of that resulted from the acquisition of People's Dan's going to give you more detail on that in just a few moments.
We remain on track for another strong year municipal acquisitions.
I'll I'll talk about that in a moment as well and I'll review our list of signed acquisitions, which includes over 327 million in expected rate base.
More than 205000, new customers.
Finally, as many of you know we announced the closing of the 750 million dollar investment from the Canada pension plan investment Board CPP IB.
And the completion of the acquisition of People's on March 16th.
In addition, upon the closing of the and financing of the acquisition. We've added Wendy Franks from CPP I'd be to our board of directors.
With the addition of Wendy Franks, Our board is now 30% women.
Yesterday was our annual meeting of shareholders and I'm pleased to report that all of the items on the ballot were voted according to managements recommendations.
Should also note that if you haven't had a chance try to review our proxy and I encourage you to do so we revamped it and this year. It's I think is a lot easier to read and we provided significant updates to our various disclosures and policies.
At this point.
All of you know how important fair market value legislation is.
As we offer our companies as a solution to municipal leaders. This is always a key part of the discussion.
This map indicates the states where fair market value legislation has been passed.
And Youll recall that the Investor day, we noted that seven of our eight states, where we did where we had water wastewater operations had already implemented fair market value and I'm happy to report that this legislation has now been passed in the state that which is Virginia.
So fair market value is now available in all eight states, where we currently serve water customers. This is great news.
[music].
Now based on our experience. It typically takes a couple of years to get a robust pipeline of opportunities to develop after we passed the fair market value legislation. So we're starting to see this materialize in states like Ohio, and Texas and for example, we recently completed the municipal acquisition of Campbell.
In Ohio, which is here on the next slide.
Okay.
This slide represents acquisitions for our regulated water segment segment.
So far this year, we've closed Campbell in Ohio, and continue to move toward closing New Garden East Norton and Delcor all in Pennsylvania.
At this time, we don't expect major delays in the regulatory process.
Due to the cobot 19 crisis, but the longer everybody works from home.
The likelihood of delays could could be it could increase and those proceedings could take a little longer.
Now during this could 19 crisis, we've ramped up communications with our regulators.
So we can work together as best we can to keep our regulatory activities on track.
We continue to see a strong pipeline of acquisitions in our municipal strategy, especially given the passage of fair market value loss and now with the economic pressures that are undoubtedly arising from the cobot 19 crisis. We are anticipating that many more municipalities, we'll be looking for solutions to their financial problems.
And we stand ready to partner with these towns and cities on their utilities. So that they can focus on their other vital municipal programs and community projects and we can focus on their water and wastewater.
Issues.
I think that's a good segue to next slide that discusses our response to the covert 19 crisis.
As I mentioned, we activated our business continuity plan on March 16th and immediately implemented a work from home policy for any of our employees, who could actually work from their home and get their jobs done.
Within days, we had nearly a third of our workforce working from home.
The really challenging decision was to send the People's natural gas employees to work from home on the very same day that we closed the transaction Thats right on March 16th we close the People's transaction and that same day, we sent employees home to work.
As difficult as that decision was.
Now in hindsight I will tell you it was the right decision.
So far only four of our employees have tested positively for the virus three of those employees are already back safely at work and we're hoping the fourth we'll be back soon.
Now I will say there is a silver lining to this koby crisis, it really accelerated the development of relationships between the two organizations awkward and peoples.
And we truly are a stronger company for it.
Since mid March we have altered many of our health and safety procedures to adapt to state and federal guidance.
We've also enhanced our communications to keep our employees and our customers and regulators up to date with the latest information.
And as part of this effort.
We.
We've invited all employees to participate in weekly town Hall meetings.
Each week nearly a 1000 employees have participated live really impressive the engagement.
Lastly, we held virtual meetings with representatives from each of the public utility commissions from the states, where we operate.
During these meetings we updated the.
Officials, both staff and commissioners on the impact of the covert 19 on the company and the company's response and I have say all of the meetings were very constructive.
So at this point in time, nearly a third of our employees are still working from home, but as states began to soften restrictions.
We expect to implement a very thoughtful plan to slowly return to more normal work practices.
With that let's turn it over to Dan to update you on the financial results debt.
Thank you Chris good morning, everyone.
First reviewing the financials for the quarter. We ended the first quarter with revenues of 255.6 million up 27.1%.
The recently acquired natural gas utility contributed 38, and a half million of this revenue growth while the remainder was largely due to rate increases in the regulated water segment.
As a result of People's closing on March 16th we are reporting People's operating results since the acquisition date in our GAAP numbers.
Oh in EMEA increased to 106.6 million in the first quarter up 34.4% from $79.3 million last year.
This was primarily a result of an increase in People's transaction related expenses and the addition of the regulated natural gas segment were down expenses.
Net income was up 206% year over year from 16.9 million to 51.8 million and gap as sorry, GAAP EPS was up by 122.2%.
As we discussed at our Investor Day in February we are providing an adjusted income non-GAAP measure for 2020 guidance.
Let me to demonstrate the earnings power of the company going forward.
This metric includes pro forma results for People's as if we don't the People's for a full normalized first quarter.
Well continue providing this throughout the year and believe it best compares the.
That's compares the combined company with the legacy Aqua company in terms of both earnings power and financial results.
Looking at the adjusted income and adjusted income per share lines, which exclude people's related transaction expenses and include the pro forma adjustment for People's operating results for the period on January 1st to March 15. This shows that adjusted income was up 209.1% and adjusted in.
Come per share was up from 28 cents to 60 cents. This.
This pro forma income per share result, aligns with the guidance we provided in February but dollar 53 to $1.58 for the full year.
We had not seen impact of cobot 19 on our Q1 financials, but we're closely monitoring a number of metrics, including consumption and billing collections and capital expenditures some of which will discuss later in the presentation.
In terms of share count both to GAAP EPS and the adjusted income per share are based on approximately 255 million shares which reflects the nearly 21.7 million shares issued to CPP IB for the pipe.
Plus the to use on an as converted basis, considering the share price at quarter end.
Next we'll walk through the details in the following waterfall slide starting with revenue.
Breaking down to 27.1% revenue increase for Q1, you'll see that new revenue related to our natural gas segment and rates in surcharges from our water segment were the main drivers providing over 51 million of the roughly 54 and a half million revenue increase.
Remember this is gas segment revenue for the 16 day period of our ownership during the quarter.
Regulated water growth added an additional almost 3.8 million, which was offset by volume, which was down about 1.1 million.
Next we'll discuss the OEM waterfall on slide 13.
The biggest drivers of the 27.3 million increase in on expenses, where the 18.8 million increase in the People's transaction costs.
And the 8.8 million in People's Nm expenses for the two weeks of ownership.
On a same system basis pulling them would have been about flat year over year, if not for the People's transaction.
The segment reporting in the 10-Q, which we expect to file tomorrow will clarify that.
Next we'll spend some time in the earnings per share waterfall.
Similar to the slide we showed at Investor Day. This presentation bridges between GAAP and adjusted figures for both 2019 and 2020.
GAAP EPS in the first quarter 2019 was nine cents, but adjusting out the people's transaction costs, which include the mark to market impact to the interest rate swap brought us to 28 cents on an adjusted basis for Q1 2019.
For Q1, 2020 growth primarily from the People's acquisition and rates in surcharges were the biggest contributors, adding an additional almost 33 cents per share.
These were slightly offset by volume and other bringing us to 60 cents for the adjusted income per share for the first quarter of 2020.
Continuing on to the right to 60 cents is then impacted negatively by eight cents of People's related transaction expenses, and almost 32 cents related to the pro forma adjustment of the People's operating results for that period between January Onest end March 15th.
Resulting in GAAP EPS of 20 cents for the first quarter of Twentytwenty.
In late March the company elected to repair tax accounting method change as Chris mentioned this is permitted under IRS regulations, we we adopted that for People's natural gas or PNG, our largest natural gas subsidiary with about 633000 of our 700.
47000 total gas connections.
This change provides a tax deduction for qualifying infrastructure investments that were formerly capitalized for tax purposes. The company is using floater accounting for the repair benefit, allowing the tax impact to be reflected on our financial statements.
In terms of its impact the tax repair election reduced income tax expense by 5.9 million for the first quarter of 2020.
This ongoing tax accounting change supports PNG infrastructure investment program benefiting customers the community and shareholders. It. It should also benefit customers by providing more time between rate cases, and should mitigate future rate increases.
Also as discussed at Investor Day. This summer, we'll be asking the Pennsylvania PC for guidance and how to treat the catch up deduction.
Results from the repair eligible capital that had been invested prior to essentially ownership of peoples.
Lastly, I'll note that the winter in Pittsburgh was fairly mild with 20 421 heating degree days for the first quarter compared to a normal winter with 2800 44 days.
April however was colder than normal with 515 heating degree days versus 387.
Please keep in mind that the pro forma results are for a normalized first quarter with 2800 44 heating degree days more similar to last years 2900 heating degree days.
People as you May recall does not currently have weather normalization in Pennsylvania or West Virginia.
Moving on to rate activity in 2020, so far we completed rate cases are surcharges for our regulated water segment in Illinois, Virginia, Ohio, and North Carolina totaling annualized revenue of 5.2 million.
And our regulated natural gas segment, we have completed surcharge filings in Kentucky, and Pennsylvania with total annualized revenue of 977000.
In the coming months, we expect to receive new base rates are surcharges in Indiana, New Jersey, North Carolina, and Ohio for our regulated water segment.
At this point in the year, we do not have any pending base rates or surcharges for our natural gas segment.
Let's spend a few minutes on the financing activities, which were disclosed in eight case over the last month or so.
In the early days of Cobot 19, we were facing uncertain economic and capital markets conditions, and we wanted to ensure that we had adequate liquidity to continue to continue to operate the business as normally as possible and maintain our capital investment program.
So like many of our fellow utilities, we secured a 364 day term loan and put the proceeds $500 million in our case on deposit with well capitalized members of our bank group.
In April once the investment grade credit markets has stabilized and credit spreads have narrowed we completed a $1.1 billion public debt offering which was attractively priced with a weighted average interest rate of 3.06%.
And a weighted average tenor of 20.9 years.
And with those proceeds we paid off that PNG 181 billion dollar term loan that was put in place in February to cover maturing long term notes.
We also paid off the essential $150 million term loan put in place concurrent with the People's closing and finally, we paid down the essential $1 billion revolving credit facility to a balance of less than $50 million.
Just after the public debt offering we priced 175 million of Aqua, Pennsylvania first mortgage bonds, which closed on May Onest. This three traunch offering has a weighted average coupon of 3.52% and a weighted average tenor of 33 and a half years.
The proceeds of these bonds were used to pay off short term borrowings and will be used to fund a pending acquisition.
As of May Onest after considering the effect of these financing the company had $1.1 billion of capacity to borrow on various credit facilities.
With respect to the $500 million term loan, we anticipate paying down 300 million of that next week and then we will determine the right time to pay off the remainder based on cobot 19 progression and essential as revenue and cash collection activity.
And then finally at the equity markets recover we'll look for the appropriate time to issue approximately 300 million of equity later this year that equity as you may recall from Investor day is necessary to appropriately capitalized core and other acquisitions in the pipeline.
In light of Cobot, 19, and its potential impacts on both consumption and bad debt, we've been receiving questions about our water and gas customer bases to address these questions. We added this slide illustrating the number of customers and revenue by customer class for full year 2019.
As you can see both of our utilities are largely residential businesses.
While we have limited data that is April and are still in the process of evaluating it as expected we're seeing increased water consumption in residential and decreased usage in the commercial industrial and public customer classes.
Given the shuttering of non essential businesses.
At this point, we don't expect immaterial impact on our financials, but we will gain more insight into this impact as we move forward.
And of course, it depends on how long stay at home orders and business shutdowns remain in place.
Keep in mind that also keep in mind that were already passed the main heating season in the gas business and thus the impact there over the summer is expected to be minimal.
As you can imagine we're closely watching the customer usage patterns given the cobot 19 situation, we're analyzing things like re connections and payment arrangements and looking at collections and bad debt expenses.
As you May recall, we do not have decoupling in most of our states and our bad debt has historically been quite low so for Rockwood thats been about 0.5% and for People's about 2%.
And those levels have largely been recovered in rates.
Given the unemployment levels and the much moratoria on gas shut ops in water shut off across our state we expect those levels to increase but it's difficult to say by how much.
While this is a unique recession relative to what we've experienced before for comparison Aqua bad debt only rose to 1.1% in 2008 2009.
Additionally, we continue to track expensive related expenses related to the pandemic, but as of now those expenses appear to be relatively immaterial think of these as reached things like reconnection costs cleaning expenses masks and other pp any overtime for certain roles. So we're tracking those for potential recovery.
Through the regulatory process.
And as you might expect we have seen some savings from activities that are not being performed like business travel to help offset those.
Some public utility commissions are issuing guidance for utilities to defer cobot 19 expenses in anticipation of seeking recovery in future rate proceeding and we're currently evaluating the impact of that guidance.
And that's a good segue for Rick Fox to speak about some of our responses to covert 19, and Rick with that I'll hand, it over to you.
Well, thanks, Dan and good morning, everyone.
Today I'd like to provide to import updates force on our operation for spots for with 19.
Second an update on our safety review of our gas business what was recently completed party.
Before we get into those topics they still pools.
It's really important convey what our water and wastewater treatment processes renewals and actively traded Nite TV.
This falls as much whilst resistant.
To treatment and the other pathogens.
What we TV treats.
All fully.
Based on all of its own take it might be but I will share some additional details.
First.
I think you Toby will work with leaky is essential.
Please recognize that.
And multiple Forbes exceptional wall.
As you might expect we have taken measures to ensure employee all customer safety across up.
On this slide you can see some exalt examples of what he gets done.
The blended offer interaction loyalty database.
Started work from home all of them walls.
In the walls, one employee per vehicle.
The adjusted work practices to ensure that it can be done safely using social distancing.
And of course, we provided the new necessary personal protective equipment, such as masks walls associates.
As Chris indicated only four out of our 4100 employees have tested positive for my team.
None of these employees work together.
And as a company transmission.
Equally.
We typically about these employees all samples and we believe our proactive measure salt and continue to help prevent more employees from become infected.
Turning to the next slide you can see that we reviewed what types of.
Lots to food until after the coolest IP price subsides.
On the water side.
Any other agencies are handled some adjustments to serve our customers, while ensuring the safety for employees.
All compliance work is being conducted in maintained.
But our ability to collect song routine samples in customer holes or closed businesses has been challenging.
And.
Construction work to replace aging infrastructure continues.
On the gas side situation is similar.
All gas emergency use or handled normally.
But with some adjustments procedures to keep our hospitals and deploy space.
And leak surveys and inspections of Copel operating cost will continue as normal.
Lastly, in both gas and water, we did have a period of about two weeks in Pennsylvania.
And those are more toward.
Capital project work.
We estimate we're only about $40 million behind on our nearly $1 billion capital budget.
And we expect to catch up we'll miss work during the rest of year.
And stay on track to meet our commitments infrastructure replacement.
And our financial projections to rate base.
With that let's turn to the next slide what they want to gas pipeline safety's initiatives.
As discussed at the Investor Day in February.
Essentially it's always requested.
People's engaged black and veatch, an industry leader in pipeline safety and integrity views.
To provide an independent examination of people's or pressure risk exposure.
This included a review of existing modified overpressure mitigation programs.
Industry best practices in a detailed review sleek management and only single gas litigation programs.
The black and Veatch, we view resulted in a report that was just issued on April.
Very happy to say that could result efficient pool.
At a solid validation of peoples overpressure catchy mitigation steps as well with existing management and only thoughtful desperate games.
It also provides various recommendations for additional litigation measures.
These include.
Installation of additional pressure sensing equipment.
Use of a regulating station this ranking model to prioritize updates.
Hi, golf model of low pressure systems for their strategic placement of additional pressure.
Yes.
Only implementation of the GPS Nappy project to precisely located existing service lines.
Vehicles is currently evaluating the results of this report.
Depending an action plan for the adoption of these recommendations.
Now I'll handle that David this cycle.
Thank you Rick and thanks for the update on that New report to US, which was really good news on People's safety.
In closing I just wanted to cover a couple of learnings from the first quarter first the I think it's fair to say Theres no substitute for true dedication to the mission. We recognized that our company provides essential services to our customers that allows them the simple coverage like cooking and baiding in the warmed in their homes.
As challenging times like this I wish every company could experienced the knowledge expertise and commitment to the mission that I've witnessed from the employees at essential during this crisis.
Second you can successfully close up train a major transaction in the middle of a pandemic.
While idle recommended the events, resulting from a pandemic have actually accelerated the integration of our two companies. It forced the teams to immediately begin working together to create standard operating policies like I T policies cleaning policies.
Operating policies that I could go on and on so far the results have been impressive, though and I believe signal. The overall success that lies ahead for the combined company.
And third and finally communication is critical for the first day, we began to work from home the top 35 managers across the gas and water utilities met every single evening at five PM to coordinate the response and ensure we were communicating on critical issues, while the calls no longer exists.
Daily strong and regular communications continue as we address any salient issues that arise.
Steady communication with our regulators continues to be a staple of our work.
And our weekly town Hall meetings via video technology, there aren't where our employee base has provided us with an important feedback loop as we adjust to this new work environment.
It's my hope that if we look back on this time.
Probably many years from now that we can be proud of the actions. We took during this time clearly reflected our corporate values of integrity respect and excellence and our commitment to our customers communities and do each other.
I'm very proud of the work we've done and continue to do at to keep our company strong and our people healthy.
As investors. Please know that we remain committed and excited about our strategy and we're confident that essential best days still lie ahead.
Now in closing I want to reiterate our confidence in the 2020 guidance that we provided at the Investor day in February.
Recognizing that information, resulting from a pandemic is still unfolding.
We believe the company's strength will allow us to continue to deliver strong results for the year.
We expected adjusted income to be $1.53 to $1.58 per share on a pro forma basis.
That earnings growth of 5% to 7% along with our dividend yield of about 2% should lead to shareholder return.
About 7% to 9%, which is pretty good for utility with our profile.
We remain on track to spend approximately $550 million on regulated water segment infrastructure investments and also approximately 400 million on regulated natural gas segment.
Which as previously mentioned includes the capital invested during the first quarter of 2020 prior to our ownership.
We anticipate investing approximately 2.8 billion across the essential platform through 2022.
Which we expect will drive rate base growth in our regulated water segment of 6% to 7%.
And and drive rate base growth in our regulated natural gas segment of 8% to 10%.
Lastly, we expect annual customer growth in water to be between two and 3% on average for our regulated water segment.
And with that let's open the line for questions.
Thank you Sir if he would like to ask a question. Please take note 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.
Once again that is star one to ask a question.
And we'll go first Q, Ryan Connors of spending and Scattergood.
Great. Thanks for taking my questions.
So I wanted to actually drilled out on the rate pipeline a little bit rate.
Great activity pipeline I mean looking through the slide information there it looks like you've either been in recently or or are already.
With a pending.
Through rate action in every state maybe with the exception of Texas. So I mean, obviously the optics aren't great right now to be having a file a rate case. So you just talk about is there anywhere what's the situation in Texas is there any other place where you're getting the cycles getting along with two that you'd have to go in June.
Well, let's let's start with North Carolina, right, we're in North Carolina and.
We.
Discussions continue despite a lot of people are working from home, Ryan and and but we still have have not heard or anticipate any lengthy delays in that process.
And so that's that's one of the ones in flight currently Dan you want to talk about the others, Yes, I think Brian you've kind of pinpointed, the one where we've been obviously sort of out for the longest period of time and I would say that we continue to drive capital in rate base growth in Texas and.
We do see a time that.
In the not too distant future, where we will be filing a rating a rate case in Texas.
As of this moment.
Need one, but we foresee one in the in the coming.
All of years.
Okay. So it's not it's not necessarily imminent in weeks or months okay.
No Thats fair, Okay now now in terms of.
Derek.
These are not part of the base rates, obviously, so maybe maybe.
You are for someone to argue hey, let's pull that off for a while while things there.
Rate payers and facing stress has there been any talk about that.
In any of the states to sort of temporary lovely repeal.
The second surcharges.
None that I'm aware of Brian.
I think I think everybody is.
Scrambling to see what what bad debt expense might look like ultimately what are the consumption issues and then what are the what constraints to do that people have to the unemployment rates and but up but I've not heard any any pull backs in the using the distribution system improvement charge at this.
Point.
Okay.
One more just on.
Certainly agree with your comment that.
Local governments are going to be seeing the budget pressures and you could see some more.
Acquisition opportunities there.
With that said what do you think is the timing of that obviously, you've always got presumably a pretty good number of deals that are being worked on have some of those already started to accelerate towards the goal liners.
Or is that more of a.
It was that.
In the future.
Now I'll tell you our board met yesterday after the shareholder meeting and we went through the acquisition pipeline and what's been active I would say in the last eight weeks since we've been working from home at least the majority of the office people here.
I would say.
Third of the time for a lot of us of has still been focused on growth.
Given the activity so although there can be public meetings and group meetings.
A lot of discussions continue and I would say, we've advanced a number of things that that hopefully we can talk about.
In the near term here I would say to Ryan that the activity that were that we're seeing and we're working on our.
With that continue to be larger opportunities than than had been in the past so.
I think the what you will see is some longer term issues that that'll bubble up as a result of.
Financial constraints that are that come from coded, but others, probably that will be immediately because of because of the crunched people or some of these municipals are under.
Got it okay.
Just one last more of a housekeeping item I mean, obviously, it's a much smaller line item it used to be but.
Relative to the size of the company, but the pipeline JV.
You know, obviously energy price situation, maybe at the news shell pulling out of Pennsylvania. This week, they announced I mean, what's the outlook for that.
Assets within this energy price environment.
Yes, Thats one Ryan you saw that we talked about it a little bit at the Investor day that it's something that we're considering strategic options with respect to that.
Yes, we continue to we've continued to have that pipeline operating when there's demand for water.
And we're looking for someone those sensitive that small line item for us.
We are looking to make a change there and.
Sell that asset.
That's probably probably the best place to.
Yes, and the good news is Ryan it's not even our bread today.
It's on our books for.
A fairly low number we wrote it down in a number of years ago. It by $5 million on our books something like that $6 million on our books. So it's really not any bread. So as we as we look for.
Essential a new owner.
It's not really hurting our numbers and the last couple of years Ryan have been really strong for it relet in terms of just volume sold relative to what we had been seeing in.
Call. It 2015 16 17.
Got it Okay, hey, thanks for your time.
Absolutely.
Next we'll hear from Travis Miller of Morningstar.
Good morning, Thank you.
Good morning Travis.
At all quick follow up to the municipal acquisition question earlier.
Are there any in the pipeline.
It's would require some kind of public.
Input some kind of scenario, where you'd have to have public meetings with some time that might get delayed or canceled.
The short answer is.
Yes.
So one of the ones that Thats been public is in the city of Chester Chester Water authority.
It's a it's a little bit of them of a messy situation there the city believes that they own it the authority believes that they on own it cities put it out for for an RFP or been a number of bidders and we were one of the ones who have responded narrowed down I think to three bidders at this point.
And that will go through a.
What I call a public process I wouldn't expect public hearings, but nevertheless, the city Council meets a couple of times a month and there have been activities at those public meetings. So that's certainly one that we'll we'll see some public activity in some press on it.
And there might be a couple of others that are probably too early to talk about at this point that may go through a public process.
These things are always call. It you know a.
Gestation period of the year too so that that's not unusual.
And at this point, we don't have any any pending transactions that require a referendum. So.
We wouldn't have that that type of public input as a concern.
Okay, Okay, and then sorry, if I missed that this earlier, but.
What were your water usage levels that we think about.
Post Corona virus shutdowns shelter in home type of.
Events late March.
In April.
On the residential and then just non residential I know you've got a lot of different customer classes that are nonresidential and just generally.
Thank you said.
Yes, well, let me give you a little bit of guidance. There. So you know like like other utilities, what we've experienced and it's easier to talk about the water cycles gas is more driven by by weather obviously.
On the water side, though we saw pickup in residential consumption, but people staying at home and then as expected we saw a falloff in commercial industrial and public and public think of that as as you know schools and government buildings, which really emptied out right. So thats, probably that's where you see the biggest decline, but I think.
No.
Our view was going into this that we would it we would expect that residential pickup to be helpful. In offsetting the declines and in fact, we just got our flash numbers for the water business for April and they really show that is occurring as our April numbers. Our April actuals came in right at budget. So.
We are seeing that offsetting occur as as projected.
Okay, and then just real quick how much do have decoupling.
Many of the if any.
We really only happened.
We don't have decoupling to any great degree we have it in the state of Illinois.
And that that's really about it.
Okay.
Great. Thank you very much appreciate it.
Yes, Thanks Travis.
And moving on to Richard Verdi of Coker and Palmer.
Hi, Good morning, guys and thanks for taking my call and also agree job navigating the company here through the started as coded crisis I just wanted.
Excuse me follow up on the last one of the last call as inquiries on what volumes.
Looking back.
Looking at Slide 12, it was a little line this quarter, but if you think about it.
You have the Colby crisis.
And then.
Commercial industrial that were down within if you look back at January too.
Our Liberty electric had one of our calls down.
It was 17 or 20 some days.
So I'm wondering.
How much of that for the quarter could into from that down claim at liberty versus Colgate and.
He will continue to feel for how cold it will impact.
Just talk a little.
Well I would say.
For the for the first quarter, we we wouldn't.
We wouldn't really see any coal bid related financial impact on that first quarter. So in ounces that I was talking about a moment ago was was really just where we're able to look at April year over year last year, No Cove and this year Cove. It what are we seeing in terms of those consumption differentials in those various customer classes.
And.
To your point.
And industrials and interesting one because as we keep in touch with all of our states. There are certain states, where we see plants are still up and running at capacity and so no no real impact, but there have been some locations, including here in Pennsylvania, where their industrial customers that have dramatically reduced production of there.
Or product and thus consumption of our product on the water side.
Okay. Okay. Thank you for that and norm.
Excuse me the last question here, focusing kind of on the acquisition frontier. If you look at the on cool.
For the.
Perfect.
And we look at.
That data point, obviously feisty days as well.
Some of your small ups or where you kind of growing on the top.
Hello, Twaddle, let's call it.
And that creates.
Okay, well, we're encore will boost the actions you could call rate is set forth on totals.
The other home.
It creates a situation where.
Please state schools.
Okay.
Okay, well equipped to slow.
And so.
Yes.
Is it seems like approach there you could look at it will say, okay, well, we want to grow more pencil anymore.
So you would negatively impact for multi rate case that backing.
I will say back or you could pursue acquisition demos.
All.
Thank you Rick will impact potential, let's say only people walking actual sit back.
In the near term growth picking up acquisitions, and then I think globe programmable future.
You have a positive impact so I'm just wondering if you could maybe talk to strategy will flow through most were so.
Yeah.
The acquisition from how you kind of.
Issues both strategy.
Yeah, It's a lot lot to digest there let me start with the fact that we are we still do business in.
States, where the regulatory climate is strong so I.
I think well, we'll we've been very sensitive and we're not shutting people off for example would turn people back on who have asked to be turned back on tried to be very sensitive we ramped up our.
Our programs to help customers that are struggling pay their bills. We've done all those things. So I think we end the regulators have have cooperated nicely. So far I wouldn't expect to see it and then I'll maybe you didnt.
A stronger word a punishment in rate cases.
I think theres a desire in constructive regulatory states to say, there's a balance here we've got to keep the company is strong and we've got to keep the customers in a situation where it's affordable for their bills. So I do think long term you know, let's talk talk about the next couple of years that we will see a balance there I don't expect there anything to be.
And in terms of regulatory reaction.
On rate cases, and in that and the sort.
The good news is and I think you know this rich the vast amount of the company's rate base is in the state of Pennsylvania, and we just came out of rates in Pennsylvania, both in gas and in water. So we're not theres no immediate term need to go in for rates to it to keep the company strong so.
That's good news now there as it relates to growth.
We're going to continue to look and we think of bars about ourselves really in the the as a solution rather than just strictly we're doing M&A, we really look for towns and cities and municipalities, where we can help be a solution and so I.
I believe and if you know our current list of opportunities as an example, I believe we'll have more opportunities to grow than we had hands to handle the the opportunities and so I really believe that you will see both a steady.
And of the regulator and I think you'll see nice steady growth because of generally the need and our opportunity to be a solution. So I hope that answers your question.
Thats great color really appreciate it. Thank you. Thank you for the time horizons appreciated.
You bet rich taking a rich.
And once again as a reminder that is star one if you would like to ask a question next we'll hear from Jonathan writer of Wells Fargo.
Hey, guys kind of enormous.
Okay, how about you.
Oh hanging in.
Good call good upgrade appreciate the color there.
Just wanted to verify.
The adjusted Q1 results 60 cents reflect all weather for the gas operations.
People's doesn't.
Harmonization causes.
Before in West, Virginia, and letter was below normal is that right.
Yes, yes, you're absolutely right, that's what we've reflected in and.
And I actually as I talk to it there and you will have picked up in the transcript you'll see the heating degree days that actually occurred during the first quarter two the normal heating degree days and if then I, even quoted kind of last year being a little bit above what we call normal.
What we did as we were going through the the budgeting process and that the planning process for the Investor Day, as we said you know.
We're not going to own the business for this first quarter or for very much of this first quarter and the most appropriate thing for us to do to give view and ourselves a view to what a whole year looks like is to use those normalized results for that period of ownership before we own peoples gas so.
The way the results work in even that pro forma is if 75 days at our normalized and then about 15 16 days that are the actual results for the period of time during which we've owned people's in that first quarter.
Yes.
Nick.
Sense and helpful for your show it to us that way.
Hi, good sense going forward, Mike what to expect on all basis, but yes, just on yet on that.
And then stay on the gas on the Black and Veatch report.
I can result, and potentially like meaningful acceleration in like Capex needs.
Last summer.
Doug.
Or is it gets further validation of the plan.
Kind of previously articulated in terms of.
Good luck, 8% to 10% rate base growth there.
Yep Yep, I want to I'm going to give Rick a crack at this so so.
Let me just start by saying there you know as we think about the capital.
There is clearly opportunity to spend more capital to improve the system as a result, the black and Veatch report that the one of the key takeaways is that we're doing really well People's is doing a really nice job, especially when you compare them to others in the industry.
So it's not like the list of recommendations that Rick provided would say Oh my gosh, there's some real urgency and we need to get to a met massive capital spenders as a result to report that's not the case, but there is opportunity for more capital to be spent and Rick why don't I kick it to you for Matt.
Yes, Chris sold to get to fall off some of these items were looking at all just that we find that.
All the focus that it was things it has been done anyways. Thanks.
Okay. So that's the prior authorization.
[music].
And also some opportunities in here and needs to spend some additional capital and goal that would be addressed and future plans or some of that is in here.
Modest falls in.
I'll point to the GPS project, which is important project.
Senses.
Thats a latches inaudible.
It is an opportunity going forward.
I think stronger by investing capital.
So John I wouldn't think about a step change.
Okay. So yes.
No you're working through to plan and based on rate affordability.
You can still keep I guess the rate impact manageable and you could see some acceleration or I guess in the near term.
With that in mind.
Yep.
Okay, and then what do you expect to get clarity from from the Pennsylvania regulators regarding.
Patrick compelling when you make that mid summer kind of filing.
Well, we are we through the covert process by then Jonathan.
Yes.
It is.
A little bit hard to know didn't go ahead, yes, and I think thats exactly right Chris that.
You know as we said, we'll we'll file it in the summer but.
Where the PTC is in terms of the number of cases before them yet to be seen and thus how long it takes for that to play out.
Just hard to tell right now.
Play at the next call level, a little more detail around that for you.
Okay great.
It might progress more along the timeline.
So I mean, we could be thank you, Mike you know nine months or a year type.
Oh, I hope not I hope, it's not that long for sure I will that be if the fed it back and forth absolutely.
Okay, Okay, maybe around okay. Great. Thanks, how much are taking on taking my questions and stay safe.
Yes, thanks, Jonathan.
And there appear to be no further questions at this time, Mr. Franklin, We'll turn the conference back over to you for any additional for closing remarks.
We appreciate your joining us today and obviously, we're always available for follow up questions. After the meeting and you have Brian's numbers Rnase Dan's in mind, we look forward to catching up with you please stay safe and healthy.
Joining us.
That does conclude today's conference we do thank you for your participation you may now disconnect.
[music].
[music].
[music].
[music].